Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | Apr. 25, 2018 | |
Document And Entity Information | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 | |
Entity Current Reporting Status | Yes | |
Entity Registrant Name | Walker & Dunlop, Inc. | |
Entity Central Index Key | 1,497,770 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 31,030,419 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Assets | ||
Cash and cash equivalents | $ 193,695 | $ 191,218 |
Restricted cash | 16,991 | 6,677 |
Pledged securities, at fair value | 102,059 | 97,859 |
Loans held for sale, at fair value | 787,552 | 951,829 |
Loans held for investment, net | 59,886 | 66,510 |
Servicing fees and other receivables, net | 30,829 | 41,693 |
Derivative assets | 20,417 | 10,357 |
Mortgage servicing rights | 631,031 | 634,756 |
Goodwill and other intangible assets | 124,526 | 124,543 |
Other assets | 84,291 | 82,985 |
Total assets | 2,051,277 | 2,208,427 |
Liabilities | ||
Accounts payable and other liabilities | 184,079 | 238,538 |
Performance deposits from borrowers | 16,717 | 6,461 |
Derivative liabilities | 7,455 | 1,850 |
Guaranty obligation, net of accumulated amortization | 41,424 | 41,187 |
Allowance for risk-sharing obligations | 3,058 | 3,783 |
Warehouse notes payable | 802,496 | 937,769 |
Note payable | 163,781 | 163,858 |
Total liabilities | 1,219,010 | 1,393,446 |
Equity | ||
Preferred shares, authorized 50,000; none issued. | ||
Common stock, $0.01 par value. Authorized 200,000; issued and outstanding 30,148 shares at March 31, 2018 and 30,016 shares at December 31, 2017 | 301 | 300 |
Additional paid-in capital | 226,332 | 229,080 |
Accumulated other comprehensive income (loss) ("AOCI") | (34) | 93 |
Retained earnings | 600,257 | 579,943 |
Total stockholders' equity | 826,856 | 809,416 |
Noncontrolling interests | 5,411 | 5,565 |
Total equity | 832,267 | 814,981 |
Commitments and contingencies (NOTE 10) | ||
Total liabilities and equity | $ 2,051,277 | $ 2,208,427 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Condensed Consolidated Balance Sheets | ||
Preferred shares, authorized | 50,000 | 50,000 |
Preferred shares, issued | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized | 200,000 | 200,000 |
Common stock, issued | 30,148 | 30,016 |
Common stock, outstanding | 30,148 | 30,016 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income and Comprehensive Income - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Revenues | ||
Gains from mortgage banking activities | $ 81,509 | $ 96,432 |
Servicing fees | 48,040 | 41,525 |
Net warehouse interest income | 1,857 | 6,620 |
Escrow earnings and other interest income | 7,348 | 3,292 |
Other | 8,698 | 10,643 |
Total revenues | 147,452 | 158,512 |
Expenses | ||
Personnel | 55,273 | 56,172 |
Amortization and depreciation | 33,635 | 32,338 |
Provision (benefit) for credit losses | (477) | (132) |
Interest expense on corporate debt | 2,179 | 2,403 |
Other operating expenses | 12,951 | 11,608 |
Total expenses | 103,561 | 102,389 |
Income from operations | 43,891 | 56,123 |
Income tax expense | 7,184 | 13,063 |
Net income before noncontrolling interests | 36,707 | 43,060 |
Less: net income (loss) from noncontrolling interests | (154) | (161) |
Walker and Dunlop net income | 36,861 | 43,221 |
Other comprehensive income (loss), net of tax: | ||
Net change in unrealized gains and losses on pledged available-for-sale securities | (127) | |
Walker and Dunlop comprehensive income | $ 36,734 | $ 43,221 |
Basic earnings per share | $ 1.23 | $ 1.45 |
Diluted earnings per share | 1.16 | $ 1.35 |
Cash dividends declared per common share | $ 0.25 | |
Basic weighted average shares outstanding | 29,982 | 29,809 |
Diluted weighted average shares outstanding | 31,865 | 32,006 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Cash flows from operating activities | ||
Net income before noncontrolling interests | $ 36,707 | $ 43,060 |
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 | (32,693) | (45,535) |
Change in the fair value of premiums and origination fees | 945 | 3,878 |
Amortization and depreciation | 33,635 | 32,338 |
Provision (benefit) for credit losses | (477) | (132) |
Other operating activities, net | 138,920 | 610,509 |
Net cash provided by (used in) operating activities | 177,037 | 644,118 |
Cash flows from investing activities | ||
Capital expenditures | (516) | (844) |
Purchase of pledged available-for-sale securities | (18,634) | |
Funding of preferred equity investments | (1,100) | (4,052) |
Distributions from Interim Program JV | 1,055 | |
Acquisitions, net of cash received | (15,000) | |
Originations of loans held for investment | (7,319) | (139,442) |
Principal collected on loans held for investment upon payoff | 14,126 | 48,400 |
Net cash provided by (used in) investing activities | (12,388) | (110,938) |
Cash flows from financing activities | ||
Borrowings (repayments) of warehouse notes payable, net | (124,705) | (650,492) |
Borrowings of interim warehouse notes payable | 102,377 | |
Repayments of interim warehouse notes payable | (10,594) | (36,300) |
Repayments of note payable | (276) | (276) |
Proceeds from issuance of common stock | 4,851 | 2,884 |
Repurchase of common stock | (21,400) | (17,541) |
Cash dividends paid | (7,838) | |
Payment of contingent consideration | (5,150) | 0 |
Debt issuance costs | (1,086) | (325) |
Net cash provided by (used in) financing activities | (166,198) | (599,673) |
Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents (NOTE 2) | (1,549) | (66,493) |
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period | 286,680 | 211,359 |
Total of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period | 285,131 | 144,866 |
Supplemental Disclosure of Cash Flow Information: | ||
Cash paid to third parties for interest | 10,500 | 11,739 |
Cash paid for income taxes | $ 805 | $ 12,632 |
ORGANIZATION
ORGANIZATION | 3 Months Ended |
Mar. 31, 2018 | |
ORGANIZATION | |
Organization | 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 do not include all of the information and footnotes required by GAAP for complete financial statements. Because the accompanying condensed consolidated financial statements do not include all of the information and footnotes required by GAAP, they 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, 2017 (“2017 Form 10-K”). In the opinion of management, all adjustments (consisting only of normal recurring accruals except as otherwise noted herein) 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 months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018 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 multifamily and other commercial real estate financing products and provides multifamily investment sales brokerage services. 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”). The Company also offers a proprietary loan program offering interim loans (the “Interim Program”). |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Summary of Significant Accounting Policies | NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation —The condensed consolidated financial statements include the accounts of Walker & Dunlop, Inc., its wholly owned subsidiaries, and its majority owned subsidiaries. All intercompany transactions have been eliminated in consolidation. When the Company has significant influence over operating and financial decisions for an entity but does not have control over the entity or own a majority of the voting interests, the Company accounts for the investment using the equity method of accounting. Subsequent Events —The Company has evaluated the effects of all events that have occurred subsequent to March 31, 2018. There have been no material events that would require recognition in the condensed consolidated financial statements. The Company has made certain disclosures in the notes to the condensed consolidated financial statements of events that have occurred subsequent to March 31, 2018. No other material subsequent events have occurred that would require disclosure. Use of Estimates —The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, including allowance for risk-sharing obligations, capitalized mortgage servicing rights, derivative instruments, and the disclosure of contingent liabilities. Actual results may vary from these estimates. Contracts with Customers —Substantially all 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 immaterial and derived from contracts with customers. The Company’s contracts with customers do not require significant judgment or estimates that affect the determination of the transaction price (including consideration of variable consideration), the allocation of the transaction price to performance obligations, and the determination of the timing of satisfaction of performance obligations. Additionally, the earnings process for the Company’s contracts with customers is not complicated and is completed in a short period of time. Revenue derived from contracts with customers is included as a component of Other revenues and totaled $4.3 million and $4.9 million for the three months ended March 31, 2018 and 2017, respectively. The Company had no contract assets or liabilities as of March 31, 2018. Loans Held for Investment, net — Loans held for investment are multifamily loans originated by the Company through the Interim Program for properties that currently do not qualify for permanent GSE or HUD (collectively, the “Agencies”) financing. These loans have terms of up to three years and are all multifamily loans with similar risk characteristics. As of March 31, 2018, Loans held for investment, net consisted of four loans with an aggregate $60.2 million of unpaid principal balance less $0.2 million of net unamortized deferred fees and costs and $0.1 million of allowance for loan losses. As of December 31, 2017, Loans held for investment, net consisted of five loans with an aggregate $67.0 million of unpaid principal balance less $0.4 million of net unamortized deferred fees and costs and $0.1 million of allowance for loan losses. None of the loans held for investment was delinquent, impaired, or on non-accrual status as of March 31, 2018 or December 31, 2017. Additionally, we have not experienced any delinquencies related to these loans or charged off any loan held for investment since the inception of the Interim Program in 2012. The allowances for loan losses recorded as of March 31, 2018 and December 31, 2017 were based on the Company’s collective assessment of the portfolio. Provision (Benefit) for Credit Losses— The Company records the income statement impact of the changes in the allowance for loan losses and the allowance for risk-sharing obligations within Provision (benefit) for credit losses in the Condensed Consolidated Statements of Income. NOTE 5 contains additional discussion related to the allowance for risk-sharing obligations. Provision (benefit) for credit losses consisted of the following activity for the three months ended March 31, 2018 and 2017: For the three months ended March 31, (in thousands) 2018 2017 Provision (benefit) for loan losses $ $ 25 Provision (benefit) for risk-sharing obligations (157) Provision (benefit) for credit losses $ (477) $ (132) Net Warehouse Interest Income— The Company presents warehouse interest income net of warehouse interest expense. Warehouse interest income is the interest earned from loans held for sale and loans held for investment. Substantially all loans that are held for sale are financed with matched borrowings under our warehouse facilities incurred to fund a specific loan held for sale. A portion of all loans that are held for investment is financed with matched borrowings under our warehouse facilities. The portion of loans held for sale or investment not funded with matched borrowings is financed with the Company’s 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 during the period of time the loan is outstanding. Included in Net warehouse interest income for the three months ended March 31, 2018 and 2017 are the following components: For the three months ended March 31, (in thousands) 2018 2017 Warehouse interest income - loans held for sale $ 8,763 $ 11,939 Warehouse interest expense - loans held for sale (7,655) (8,264) Net warehouse interest income - loans held for sale $ 1,108 $ 3,675 Warehouse interest income - loans held for investment $ 1,422 $ 4,678 Warehouse interest expense - loans held for investment (673) (1,733) Net warehouse interest income - loans held for investment $ 749 $ 2,945 Total net warehouse interest income $ 1,857 $ 6,620 Income Taxes —The Company records the excess tax benefits from stock compensation as a reduction to income tax expense. The Company recorded excess tax benefits of $4.1 million and $8.7 million during the three months ended March 31, 2018 and 2017, respectively. Pledge Securities, at Fair Value — Pledged securities, at fair value consisted of the following balances as of March 31, 2018 and 2017 and December 31, 2017 and 2016: March 31, December 31, (in thousands) 2018 2017 2017 2016 Pledged cash and cash equivalents: Cash $ 2,630 $ 1,524 $ 2,201 $ 4,358 Money market funds 71,815 83,284 86,584 78,384 Total pledged cash and cash equivalents $ 74,445 $ 84,808 $ 88,785 $ 82,742 Agency debt securities 27,614 2,092 9,074 2,108 Total pledged securities, at fair value $ 102,059 $ 86,900 $ 97,859 $ 84,850 The money market funds invest in short-term Federal Government and Agency debt securities and have no stated maturity date. The investments in Agency debt securities consist of multifamily Agency mortgage-backed securities (“Agency MBS”) and have maturity dates ranging primarily from 2024 to 2030. As of March 31, 2018 and December 31, 2017, the fair value of the Agency debt securities approximated their amortized cost. As of March 31, 2018 and December 31, 2017, the total gains for securities with net gains in AOCI was $0.1 million and $0.1 million, respectively. As of March 31, 2018 and December 31, 2017, the total losses for securities with net losses in AOCI were $0.1 million and zero, respectively. As of March 31, 2018, the Company does not intend to sell any of the Agency debt securities, 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. Statement of Cash Flows —For presentation in the Condensed Consolidated Statements of Cash Flows, the Company considers pledged cash and cash equivalents (as detailed above) to be restricted cash and restricted cash equivalents. The following table, in conjunction with the detail of Pledged securities, at fair value presented above, presents a reconciliation of the total of cash, cash equivalents, restricted cash, and restricted cash equivalents as presented in the Condensed Consolidated Statements of Cash Flows to the related captions in the Condensed Consolidated Balance Sheets as of March 31, 2018 and 2017 and December 31, 2017 and 2016. March 31, December 31, (in thousands) 2018 2017 2017 2016 Cash and cash equivalents $ 193,695 $ 50,745 $ 191,218 $ 118,756 Restricted cash 16,991 9,313 6,677 9,861 Pledged cash and cash equivalents 74,445 84,808 88,785 82,742 Total cash, cash equivalents, restricted cash, and restricted cash equivalents $ 285,131 $ 144,866 $ 286,680 $ 211,359 Recently Adopted and Recently Announced Accounting Pronouncement s —The Company adopted Accounting Standards Update 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers (Topic 606) in the first quarter of 2018 without an impact to the Company or its financial statements. Substantially all of the Company’s revenue streams are related to loans, derivatives, financial instruments, and transfers and servicing, all of which are outside the scope of the new standard. The Company used the full retrospective method for adopting ASU 2014-09. However, there was no change to the revenue amounts recorded or an adjustment to the opening balance of retained earnings as the adoption of ASU 2014-09 did not result in a difference in the amount or timing of the Company’s revenues. Additionally, the Company did not recognize any contract assets or contract liabilities. The Company adopted Accounting Standards Update 2016-01 (“ASU 2016-01”), Financial Instruments – Overall – Recognition and Measurement of Financial Assets and Financial Liabilities in the first quarter of 2018 with no impact to the Company’s reported financial results as the Company does not have any equity investments not accounted for under the equity method. In the first quarter of 2016, Accounting Standards Update 2016-02 (“ASU 2016-02”), Leases (Topic 842) was issued. ASU 2016-02 represents a significant reform to the accounting for leases. Lessees initially recognize a lease liability for the obligation to make lease payments and a right-of-use (“ROU”) asset for the right to use the underlying asset for the lease term. The lease liability is measured at the present value of the lease payments over the lease term. The ROU asset is measured at the lease liability amount, adjusted for lease prepayments, lease incentives received, and the lessee’s initial direct costs. Lessees generally recognize lease expense for these leases on a straight-line basis, which is similar to the accounting treatment today. ASU 2016-02 requires additional disclosures and is effective for the Company January 1, 2019. It also requires entities to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements with a cumulative-effect adjustment to retained earnings recorded at the earliest comparative period. The Financial Accounting Standards Board (“FASB”) recently issued a proposed update to ASU 2016-02 that would provide companies with the option to apply a practical expedient that allows adoption of the provisions of ASU 2016-02 prospectively with a cumulative-effect adjustment recorded to retained earnings upon the date of adoption. The Company intends to adopt the standard when required on January 1, 2019 and to elect the available practical expedients, including the proposed practical expedient discussed in the previous paragraph, if approved by the FASB. The Company has completed its analysis of the new standard and has begun to adapt its accounting systems for adoption. The Company expects to have its accounting systems ready in time for the adoption next year. The Company is also in the process of analyzing the disclosures that will be required for the new standard. We expect ASU 2016-02 to have an impact on the Consolidated Balance Sheets as quantified in the 2017 Form 10-K when we recognize ROU assets and the corresponding lease liability. We expect an immaterial impact on the statements of income. There will be no change to the classification of the Company’s leases, which are all currently classified as operating leases. In the second quarter of 2016, Accounting Standards Update 2016-13 (“ASU 2016-13”), Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments was issued. ASU 2016-13 ("the Standard") represents a significant change to the incurred loss model currently used to account for credit losses. The Standard requires an entity to estimate the credit losses expected over the life of the credit exposure upon initial recognition of that exposure. The expected credit losses consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments. Exposures with similar risk characteristics are required to be grouped together when estimating expected credit losses. The initial estimate and subsequent changes to the estimated credit losses are required to be reported in current earnings in the income statement and through an allowance in the balance sheet. ASU 2016-13 is applicable to financial assets subject to credit losses and measured at amortized cost and certain off-balance-sheet credit exposures. The Standard will modify the way the Company estimates its allowance for risk-sharing obligations and its allowance for loan losses. ASU 2016-13 requires modified retrospective application to all outstanding, in-scope instruments, with a cumulative-effect adjustment recorded to opening retained earnings as of the beginning of the period of adoption. The Company plans on adopting ASU 2016-13 when the standard is required to be adopted, January 1, 2020. The Company is in the preliminary stages of implementation as it is still in the process of determining the significance of the impact the Standard will have on its financial statements and the timing of when it will adopt ASU 2016-13. The Company expects its allowance for risk-sharing obligations to increase when ASU 2016-13 is adopted. There are no other accounting pronouncements previously issued by the FASB but not yet effective or not yet adopted by the Company that have the potential to materially impact the Company’s condensed consolidated financial statements. There have been no material changes to the accounting policies discussed in NOTE 2 of the Company’s 2017 Form 10-K. Reclassifications — The Company has made certain immaterial reclassifications to prior-year balances to conform to current-year presentation . |
GAINS FROM MORTGAGE BANKING ACT
GAINS FROM MORTGAGE BANKING ACTIVITIES | 3 Months Ended |
Mar. 31, 2018 | |
GAINS FROM MORTGAGE BANKING ACTIVITIES | |
Gains from mortgage banking activities | NOTE 3—GAINS FROM MORTGAGE BANKING ACTIVITIES Gains from mortgage banking activities consisted of the following activity for the three months ended March 31, 2018 and 2017: For the three months ended March 31, (in thousands) 2018 2017 Contractual loan origination related fees, net $ 48,816 $ 50,897 Fair value of expected net cash flows from servicing recognized at commitment 35,228 48,677 Fair value of expected guaranty obligation recognized at commitment (2,535) (3,142) Total gains from mortgage banking activities $ 81,509 $ 96,432 The origination fees shown in the table are net of co-broker fees of $5.6 million and $3.7 million for the three months ended March 31, 2018 and 2017, respectively. |
MORTGAGE SERVICING RIGHTS
MORTGAGE SERVICING RIGHTS | 3 Months Ended |
Mar. 31, 2018 | |
MSRs | |
Mortgage Servicing Rights | |
Mortgage Servicing Rights | NOTE 4—MORTGAGE SERVICING RIGHTS Mortgage servicing rights (“MSRs”) represent the carrying value of the servicing rights retained by the Company for mortgage loans originated and sold. The initial capitalized amount is equal to the estimated fair value of the expected net cash flows associated with the servicing rights. MSRs are amortized using the interest method over the period that servicing income is expected to be received. The fair values of the MSRs at March 31, 2018 and December 31, 2017 were $841.4 million and $834.5 million, respectively. The Company uses a discounted static cash flow valuation approach, and the key economic assumption is the discount rate. For example, see the following sensitivities: The impact of a 100 - basis point increase in the discount rate at March 31, 2018 is a decrease in the fair value of $19.9 million. The impact of a 200 - basis point increase in the discount rate at March 31, 2018 is a decrease in the fair value of $38.4 million. These sensitivities are hypothetical and should be used with caution. These estimates do not include interplay among assumptions and are estimated as a portfolio rather than individual assets. Activity related to capitalized MSRs for the three months ended March 31, 2018 and 2017 is shown in the table below: For the three months ended March 31, (in thousands) 2018 2017 Beginning balance $ 634,756 $ 521,930 Additions, following the sale of loan 30,922 72,925 Amortization (32,161) (28,900) Pre-payments and write-offs (2,486) (3,425) Ending balance $ 631,031 $ 562,530 The following tables summarize the components of the net carrying value of the Company’s acquired and originated MSRs as of March 31, 2018 and December 31, 2017: As of March 31, 2018 Gross Accumulated Net (in thousands) carrying value amortization carrying value Acquired MSRs $ 183,715 $ (125,237) $ 58,478 Originated MSRs 839,745 (267,192) 572,553 Total $ 1,023,460 $ (392,429) $ 631,031 As of December 31, 2017 Gross Accumulated Net (in thousands) carrying value amortization carrying value Acquired MSRs $ 183,715 $ (121,643) $ 62,072 Originated MSRs 820,137 (247,453) 572,684 Total $ 1,003,852 $ (369,096) $ 634,756 The expected amortization of MSRs recorded as of March 31, 2018 is shown in the table below. Actual amortization may vary from these estimates. Originated MSRs Acquired MSRs Total MSRs (in thousands) Amortization Amortization Amortization Nine Months Ending December 31, 2018 $ 84,201 $ 8,575 $ 92,776 Year Ending December 31, 2019 $ 100,069 $ 10,517 $ 110,586 2020 87,958 9,091 97,049 2021 76,770 7,466 84,236 2022 63,527 5,639 69,166 2023 52,262 4,960 57,222 Thereafter 107,766 12,230 119,996 Total $ 572,553 $ 58,478 $ 631,031 |
GUARANTY OBLIGATION AND ALLOWAN
GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS | 3 Months Ended |
Mar. 31, 2018 | |
GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS | |
Guaranty Obligation and Allowance for Risk-Sharing Obligations | NOTE 5—GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS When a loan is sold under the Fannie Mae Delegated Underwriting and Servicing TM (“DUS”) program, the Company typically agrees to guarantee a portion of the ultimate loss incurred on the loan should the borrower fail to perform. The compensation for this risk is a component of the servicing fee on the loan. The guaranty is in force while the loan is outstanding. The Company does not provide a guaranty for any other loan product it sells or brokers. Activity related to the guaranty obligation for the three months ended March 31, 2018 and 2017 is presented in the following table: For the three months ended March 31, (in thousands) 2018 2017 Beginning balance $ 41,187 $ 32,292 Additions, following the sale of loan 1,783 4,689 Amortization (1,808) (1,580) Other 262 (90) Ending balance $ 41,424 $ 35,311 Activity related to the allowance for risk-sharing obligations for the three months ended March 31, 2018 and 2017 is shown in the following table: For the three months ended March 31, (in thousands) 2018 2017 Beginning balance $ 3,783 $ 3,613 Provision (benefit) for risk-sharing obligations (463) (157) Write-offs — — Other (262) 90 Ending balance $ 3,058 $ 3,546 When the Company places a loan for which it has a risk-sharing obligation on its watch list, the Company transfers the remaining unamortized balance of the guaranty obligation to the allowance for risk-sharing obligations. When a loan for which the Company has a risk-sharing obligation is removed from the watch list, the loan’s reserve is transferred from the allowance for risk-sharing obligations back to the guaranty obligation, and the amortization of the remaining balance over the remaining estimated life is resumed. This net transfer of the unamortized balance of the guaranty obligation from a noncontingent classification to a contingent classification (and vice versa) is presented in the guaranty obligation and allowance for risk-sharing obligations tables above as “Other.” The Allowance for risk-sharing obligations as of March 31, 2018 is based primarily on the Company’s collective assessment of the probability of loss related to the loans on the watch list as of March 31, 2018. As of March 31, 2018, the maximum quantifiable contingent liability associated with the Company’s guarantees under the Fannie Mae DUS agreement was $5.9 billion. The maximum quantifiable contingent liability is not representative of the actual loss the Company would incur. The Company would be liable for this amount only if all of the loans it services for Fannie Mae, for which the Company retains some risk of loss, were to default and all of the collateral underlying these loans were determined to be without value at the time of settlement. |
SERVICING
SERVICING | 3 Months Ended |
Mar. 31, 2018 | |
Loans and Other Servicing Accounts | |
Servicing | |
Servicing | NOTE 6—SERVICING The total unpaid principal balance of the Company’s servicing portfolio was $76.0 billion as of March 31, 2018 compared to $74.5 billion as of December 31, 2017. |
WAREHOUSE NOTES PAYABLE
WAREHOUSE NOTES PAYABLE | 3 Months Ended |
Mar. 31, 2018 | |
WAREHOUSE NOTES PAYABLE | |
Warehouse Notes Payable | NOTE 7—WAREHOUSE NOTES PAYABLE At March 31, 2018, to provide financing to borrowers, the Company has arranged for warehouse lines of credit. In support of the Agencies’ programs, the Company has committed and uncommitted warehouse lines of credit in the amount of $3.2 billion with certain national banks and a $1.5 billion uncommitted facility with Fannie Mae (collectively, the “Agency Warehouse Facilities”). The Company has pledged substantially all of its loans held for sale against the Agency Warehouse Facilities. The Company has arranged for warehouse lines of credit in the amount of $0.3 billion with certain national banks to assist in funding loans held for investment under the Interim Program (“Interim Warehouse Facilities”). The Company has pledged substantially all of its loans held for investment against these Interim Warehouse Facilities. The maximum amount and outstanding borrowings under the warehouse notes payable at March 31, 2018 are shown in the table below: March 31, 2018 (dollars in thousands) Committed Uncommitted Temporary Total Facility Outstanding Facility 1 Amount Amount Increase Capacity Balance Interest rate Agency Warehouse Facility #1 $ 425,000 $ 300,000 $ — $ 725,000 $ 120,903 30-day LIBOR plus 1.30% Agency Warehouse Facility #2 500,000 300,000 — 800,000 177,577 30-day LIBOR plus 1.30% Agency Warehouse Facility #3 480,000 — — 480,000 102,541 30-day LIBOR plus 1.25% Agency Warehouse Facility #4 350,000 — — 350,000 228,680 30-day LIBOR plus 1.30% Agency Warehouse Facility #5 30,000 — — 30,000 19,017 30-day LIBOR plus 1.80% Agency Warehouse Facility #6 250,000 250,000 — 500,000 — 30-day LIBOR plus 1.35% Agency Warehouse Facility #7 250,000 100,000 — 350,000 63,547 30-day LIBOR plus 1.30% Fannie Mae repurchase agreement, uncommitted line and open maturity — 1,500,000 — 1,500,000 56,984 30-day LIBOR plus 1.15% Total Agency Warehouse Facilities $ 2,285,000 $ 2,450,000 $ — $ 4,735,000 $ 769,249 Interim Warehouse Facility #1 $ 85,000 $ — $ — $ 85,000 $ 10,290 30-day LIBOR plus 1.90% Interim Warehouse Facility #2 100,000 — — 100,000 24,662 30-day LIBOR plus 2.00% Interim Warehouse Facility #3 75,000 — — 75,000 — 30-day LIBOR plus 2.00% to 2.50% Total Interim Warehouse Facilities $ 260,000 $ — $ — $ 260,000 $ 34,952 Debt issuance costs — — — — (1,705) Total warehouse facilities $ 2,545,000 $ 2,450,000 $ — $ 4,995,000 $ 802,496 1 Agency Warehouse Facilities, including the Fannie Mae repurchase agreement are used to fund loans held for sale, while Interim Warehouse Facilities are used to partially fund loans held for investment. During the second quarter of 2018, the Company executed the ninth amendment to the warehouse agreement related to Agency Warehouse Facility #3. The amendment extended the maturity date to April 30, 2019, increased the permanent committed borrowing capacity to $500.0 million, and established additional uncommitted borrowing capacity of $265.0 million. The uncommitted borrowing capacity expires on January 30, 2019. No other material modifications have been made to the agreement during 2018. During the first quarter of 2018, the Company executed the first amendment to the warehouse credit and security agreement related to Agency Warehouse Facility #5 that extended the maturity date to July 12, 2019. The amendment also provides the Company the unilateral option to extend the agreement for one additional year. No other material modifications have been made to the agreement during 2018. During the first quarter of 2018, the Company executed a warehousing and security agreement to establish Agency Warehouse Facility #7. The warehouse facility has a committed $250.0 million maximum borrowing amount and is scheduled to mature on February 2, 2019. The Company can fund Fannie Mae, Freddie Mac, HUD, and FHA loans under the facility. Advances are made at 100% of the loan balance, and the borrowings under the warehouse agreement bear interest at a rate of LIBOR plus 130 basis points. The agreement provides $100.0 million of uncommitted borrowing capacity that bears interest at the same rate as the committed facility. No material modifications have been made to the agreement during 2018. During the second quarter of 2018, the Company executed the eighth amendment to the credit and security agreement related to Interim Warehouse Facility #1 that extended the maturity date to April 30, 2019. No other material modifications have been made to the agreement during 2018. During the second quarter of 2018, the Company exercised its option to extend the maturity date of Interim Warehouse Facility #3 to May 19, 2019. No other material modifications have been made to the agreement during 2018. The warehouse notes payable are subject to various financial covenants, all of which the Company was in compliance with as of the current period end. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2018 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
Goodwill and Other Intangible Assets | NOTE 8—GOODWILL AND OTHER INTANGIBLE ASSETS Activity related to goodwill for the three months ended March 31, 2018 and 2017 follows: Three Months Ended March 31, (in thousands) 2018 2017 Beginning balance $ 123,767 $ 96,420 Additions from acquisitions — 27,347 Impairment — — Ending balance $ 123,767 $ 123,767 As of March 31, 2018, the Company has fully amortized all material intangible assets obtained from acquisitions. During the three months ended March 31, 2018, the Company paid $5.2 million to settle the contingent consideration liability from the first of three annual earn-out periods. No payments were made during the three months ended March 31, 2017. The balance of contingent consideration liabilities as of March 31, 2018 and 2017 was $9.2 million and $13.7 million, respectively, and consisted primarily of the amount initially recorded upon acquisition in the first quarter of 2017. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
Mar. 31, 2018 | |
FAIR VALUE MEASUREMENTS | |
Fair Value Measurements | NOTE 9—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, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means. · Level 3 —Financial assets and liabilities whose values are based on inputs that are both unobservable and significant to the overall valuation. The Company's MSRs are measured at fair value on a nonrecurring basis. That is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The Company's MSRs do not trade in an active, open market with readily observable prices. While sales of multifamily MSRs do occur on occasion, precise terms and conditions vary with each transaction and are not readily available. Accordingly, the estimated fair value of the Company’s MSRs was developed using discounted cash flow models that calculate the present value of estimated future net servicing income. The model considers contractually specified servicing fees, prepayment assumptions, delinquency status, late charges, other ancillary revenue, costs to service, and other economic factors. The Company periodically reassesses and adjusts, when necessary, the underlying inputs and assumptions used in the model to reflect observable market conditions and assumptions that a market participant would consider in valuing an MSR asset. 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. These valuation methodologies were applied to all of the Company's assets and liabilities carried at fair value: · Derivative Instruments —The derivative positions consist of interest rate lock commitments and forward sale agreements. These instruments are valued 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 — Loans held for sale 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. Therefore, the Company classifies these loans held for sale as Level 2 . · Pledged Securities —Investments in cash and 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 investments in Agency debt securities using discounted cash flows that incorporate observable inputs from market participants. Consequently, the Company classifies this portion of pledged securities as Level 2. The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of March 31, 2018, and December 31, 2017, segregated by the level of the valuation inputs within the fair value hierarchy used to measure fair value: Quoted Prices in Significant Significant Active Markets Other Other For Identical Observable Unobservable Assets Inputs Inputs Balance as of (in thousands) (Level 1) (Level 2) (Level 3) Period End March 31, 2018 Assets Loans held for sale $ — $ 787,552 $ — $ 787,552 Pledged securities 74,445 27,614 — 102,059 Derivative assets — — 20,417 20,417 Total $ 74,445 $ 815,166 $ 20,417 $ 910,028 Liabilities Derivative liabilities $ — $ — $ 7,455 $ 7,455 Total $ — $ — $ 7,455 $ 7,455 December 31, 2017 Assets Loans held for sale $ — $ 951,829 $ — $ 951,829 Pledged securities 88,785 9,074 — 97,859 Derivative assets — — 10,357 10,357 Total $ 88,785 $ 960,903 $ 10,357 $ 1,060,045 Liabilities Derivative liabilities $ — $ — $ 1,850 $ 1,850 Total $ — $ — $ 1,850 $ 1,850 There were no transfers between any of the levels within the fair value hierarchy during the three months ended March 31, 2018. 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 months ended March 31, 2018 and 2017: Fair Value Measurements Using Significant Unobservable Inputs: Derivative Instruments For the three months ended March 31, (in thousands) 2018 2017 Derivative assets and liabilities, net Beginning balance $ 8,507 $ 57,428 Settlements (77,054) (147,863) Realized gains recorded in earnings (1) 68,547 90,435 Unrealized gains recorded in earnings (1) 12,962 5,997 Ending balance $ 12,962 $ 5,997 (1) Realized and unrealized gains from derivatives are recognized in Gains from mortgage banking activities 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 March 31, 2018: Quantitative Information about Level 3 Measurements (in thousands) Fair Value Valuation Technique Unobservable Input (1) Input Value (1) Derivative assets $ 20,417 Discounted cash flow Counterparty credit risk — Derivative liabilities $ 7,455 Discounted cash flow Counterparty credit risk — (1) Significant increases in this input may lead to significantly lower fair value measurements. The carrying amounts and the fair values of the Company's financial instruments as of March 31, 2018 and December 31, 2017 are presented below: March 31, 2018 December 31, 2017 Carrying Fair Carrying Fair (in thousands) Amount Value Amount Value Financial assets: Cash and cash equivalents $ 193,695 $ 193,695 $ 191,218 $ 191,218 Restricted cash 16,991 16,991 6,677 6,677 Pledged securities 102,059 102,059 97,859 97,859 Loans held for sale 787,552 787,552 951,829 951,829 Loans held for investment, net 59,886 60,157 66,510 66,963 Derivative assets 20,417 20,417 10,357 10,357 Total financial assets $ 1,180,600 $ 1,180,871 $ 1,324,450 $ 1,324,903 Financial liabilities: Derivative liabilities $ 7,455 $ 7,455 $ 1,850 $ 1,850 Warehouse notes payable 802,496 804,201 937,769 939,500 Note payable 163,781 165,947 163,858 166,223 Total financial liabilities $ 973,732 $ 977,603 $ 1,103,477 $ 1,107,573 The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: 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 the mortgage loan is funded and are valued using discounted cash flow models that incorporate observable inputs from market participants. Loans Held f or Investment —Consist of originated interim loans which the Company expects to hold for investment for the term of the loan, which is three years or less, and are valued using discounted cash flow models that incorporate primarily observable inputs from market participants and also credit-related adjustments, if applicable (Level 3). As of March 31, 2018 and December 31, 2017, no credit-related adjustments were required. Derivative Instruments — Consist of interest rate lock commitments and forward sale agreements. These instruments are valued using discounted cash flow models developed based on changes in the U.S. Treasury rate and other observable market data. The value is determined after considering the potential impact of collateralization, adjusted to reflect nonperformance risk of both the counterparty and the Company . Warehouse Notes Payable —Consist of borrowings outstanding under warehouse line agreements. The borrowing rates on the warehouse lines are based upon 30-day LIBOR plus a margin. The unpaid principal balance of warehouse notes payable approximates fair value because of the short maturity of these instruments and the monthly resetting of the index rate to prevailing market rates (Level 2). Note Payable —Consists of borrowings outstanding under a term note agreement. The borrowing rate on the note payable is based upon 30-day LIBOR plus an applicable margin. The Company estimates the fair value by discounting the future cash flows at market rates (Level 2). Fair Value of Derivative Instruments and Loans Held for Sale — In the normal course of business, the Company enters into contractual commitments to originate and sell multifamily mortgage loans at fixed prices with fixed expiration dates. The commitments become effective when the borrowers "lock-in" 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's policy is to enter into a sale commitment with the investor simultaneous with the rate lock commitment with the borrower. The sale contract with the investor locks in an interest rate and price for the sale of the loan. The terms of the contract with the investor and the rate lock with the borrower are matched in substantially all respects, with the objective of eliminating interest rate risk to the extent practical. Sale commitments with the investors have an expiration date that is longer than our related commitments to the borrower to allow, among other things, for the closing of the loan and processing of paperwork to deliver the loan into the sale commitment . Both the rate lock commitments to borrowers and the forward sale contracts to buyers are undesignated derivatives and, accordingly, are marked to fair value through Gains on mortgage banking activities 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 from 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 loan sale (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 MSRs (Level 2). The fair value of the Company's derivative instruments and loans held for sale considers the effects of the market price movement of the same type of security due to interest rate movements between the trade date and the balance sheet date. To calculate the effects of interest rate movements, the Company uses applicable published U.S. Treasury prices, and multiplies the price movement between the rate lock date or loan origination date and the balance sheet date by the notional amount of the derivative instruments or loans held for sale (Level 2). 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 not been significant (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 March 31, 2018 and December 31, 2017. Fair Value Adjustment Components Balance Sheet Location Fair Value Notional or Estimated Total Adjustment Principal Gain Interest Rate Fair Value Derivative Derivative To Loans (in thousands) Amount on Sale Movement Adjustment Assets Liabilities Held for Sale March 31, 2018 Rate lock commitments $ 627,068 $ 16,801 $ 2,778 $ 19,579 $ 19,638 $ (59) $ — Forward sale contracts 1,397,240 — (6,617) (6,617) 779 (7,396) — Loans held for sale 770,172 13,541 3,839 17,380 — — 17,380 Total $ 30,342 $ — $ 30,342 $ 20,417 $ (7,455) $ 17,380 December 31, 2017 Rate lock commitments $ 241,760 $ 7,587 $ (678) $ 6,909 $ 6,909 $ — $ — Forward sale contracts — 1,598 1,598 3,448 (1,850) — Loans held for sale 933,432 19,317 (920) 18,397 — — 18,397 Total $ 26,904 $ — $ 26,904 $ 10,357 $ (1,850) $ 18,397 |
LITIGATION, COMMITMENTS, AND CO
LITIGATION, COMMITMENTS, AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2018 | |
LITIGATION, COMMITMENTS, AND CONTINGENCIES | |
Litigation, Commitments, and Contingencies | NOTE 10—LITIGATION, COMMITMENTS, AND CONTINGENCIES Fannie Mae DUS Related Commitments —Commitments for the origination and subsequent sale and delivery of loans to Fannie Mae represent those mortgage loan transactions where the borrower has locked an interest rate and scheduled closing and the Company has entered into a mandatory delivery commitment to sell the loan to Fannie Mae. As discussed in NOTE 9, 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. The amount of collateral required by Fannie Mae is a formulaic calculation at the loan level and considers the balance of the loan, the risk level of the loan, the age of the loan, and the level of risk-sharing. Fannie Mae requires restricted liquidity for Tier 2 loans of 75 basis points, which is funded over a 48-month period that begins upon delivery of the loan to Fannie Mae. Restricted liquidity 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 restricted liquidity requirements. As of March 31, 2018, the Company held the majority of its restricted liquidity in money market funds holding U.S. Treasuries. NOTE 2 provides a detail of the types of financial assets pledged to Fannie Mae to meet the restricted liquidity requirements. Substantially all of the loans for which the Company has risk sharing are Tier 2 loans. The Company is in compliance with the March 31, 2018 collateral requirements as outlined above. As of March 31, 2018, reserve requirements for the DUS loan portfolio will require the Company to fund $64.8 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 periodically reassesses the DUS Capital Standards and may make changes to these standards in the future. The Company generates sufficient cash flow from its operations to meet these capital standards and does not expect any future changes to have a material impact on its future operations; however, any future changes to collateral requirements may adversely impact the Company’s available cash. Fannie Mae has established 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 March 31, 2018. The net worth requirement is derived primarily from unpaid balances on Fannie Mae loans and the level of risk sharing. At March 31, 2018, the net worth requirement was $157.9 million, and the Company's net worth, as defined in the requirements, was $745.6 million, as measured at our wholly owned operating subsidiary, Walker & Dunlop, LLC. As of March 31, 2018, the Company was required to maintain at least $31.1 million of liquid assets to meet operational liquidity requirements for Fannie Mae, Freddie Mac, HUD, and Ginnie Mae . As of March 31, 2018, the Company had operational liquidity, as defined in the requirements, of $206.3 million , as measured at our wholly owned operating subsidiary, Walker & Dunlop, LLC . Litigation — In the ordinary course of business, the Company may be party to various claims and litigation, none of which the Company believes is material. The Company cannot predict the outcome of any pending litigation and may be subject to consequences that could include fines, penalties, and other costs, and the Company’s reputation and business may be impacted. The Company believes that any liability that could be imposed on the Company in connection with the disposition of any pending lawsuits would not have a material adverse effect on its business, results of operations, liquidity, or financial condition. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Mar. 31, 2018 | |
EARNINGS PER SHARE | |
Earnings Per Share | NOTE 11—EARNINGS PER SHARE The following weighted average shares and share equivalents are used to calculate basic and diluted earnings per share for the three months ended March 31, 2018 and 2017: For the three months ended March 31, (in thousands) 2018 2017 Weighted average number of shares outstanding used to calculate basic earnings per share 29,982 29,809 Dilutive securities Unvested restricted shares and restricted share units 1,084 1,541 Stock options 799 656 Weighted average number of shares and share equivalents outstanding used to calculate diluted earnings per share 31,865 32,006 The assumed proceeds used for calculating the dilutive impact of restricted stock awards under the treasury method includes the unrecognized compensation costs associated with the awards. The following table presents any average outstanding options to purchase shares of common stock and average restricted shares that were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive (the exercise price of the options or the grant date market price of the restricted shares was greater than the average market price of the Company’s shares during the periods presented). For the three months ended March 31, (in thousands) 2018 2017 Average options 113 55 Average restricted shares 5 101 |
TOTAL EQUITY
TOTAL EQUITY | 3 Months Ended |
Mar. 31, 2018 | |
TOTAL EQUITY. | |
Total Equity | NOTE 12—TOTAL EQUITY A summary of changes in total equity is presented below: Stockholders' Equity Additional Common Stock Paid-In Retained Noncontrolling Total (in thousands) Shares Amount Capital AOCI Earnings Interests Equity Balance at December 31, 2017 30,016 $ 300 $ 229,080 $ 93 $ 579,943 $ 5,565 $ 814,981 Walker & Dunlop net income — — — — 36,861 — 36,861 Net income (loss) from noncontrolling interests — — — — — (154) (154) Other comprehensive income (loss), net of tax — — — (127) — — (127) Stock-based compensation - equity classified — — 5,093 — — — 5,093 Issuance of common stock in connection with equity compensation plans 567 5 4,846 — — — 4,851 Repurchase and retirement of common stock (435) (4) (12,687) — (8,709) — (21,400) Cash dividends paid — — — — (7,838) — (7,838) Balance at March 31, 2018 30,148 $ 301 $ 226,332 $ (34) $ 600,257 $ 5,411 $ 832,267 During the first quarter of 2018, the Company repurchased under a 2017 share repurchase program 244 thousand shares of its common stock at a weighted average price of $46.77 per share and immediately retired the shares, reducing stockholders’ equity by $11.4 million. During the first quarter of 2018, the Company’s Board of Directors authorized the Company to repurchase up to $50.0 million of its common stock over a 12-month period. The Company had the full $50.0 million of authorized share repurchase capacity remaining as of March 31, 2018. In February 2018, the Company’s Board of Directors declared a cash dividend of $0.25 per share for the first quarter of 2018. The dividend was paid during the first quarter of 2018 to all holders of record of our restricted and unrestricted common stock and restricted stock units. This dividend was the first such dividend payment since the Company’s initial public offering in December 2010. In May 2018, the Company’s Board of Directors declared a dividend of $0.25 per share for the second quarter of 2018. The dividend will be paid June 5, 2018 to all holders of record of our restricted and unrestricted common stock and restricted stock units as of May 18, 2018. The Company expects the dividends paid during 2018 to be an insignificant portion of the Company’s net income, retained earnings, and cash and cash equivalents. The Company’s note payable 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. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2018 | |
SUBSEQUENT EVENTS | |
Subsequent Events | NOTE 13—SUBSEQUENT EVENTS On March 14, 2018, the Company executed a purchase agreement to acquire 100% of the equity interests of JCR Capital Investment Corporation and subsidiaries (“JCR”), the operator of a private commercial real estate investment adviser, for a purchase price of $32.0 million cash. JCR is engaged in the management of investments in commercial real estate funds. The acquisition closed on April 12, 2018, at which time JCR became a wholly-owned subsidiary of the Company. The Company has not c ompleted the accounting for the JCR acquisition as of the issuance date of these financial statements. Therefore, disclosures relating to the goodwill recognized, if any, and the fair value of the assets acquired and liabilities assumed could not be presented. |
SUMMARY OF SIGNIFICANT ACCOUN19
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Consolidation | Consolidation —The condensed consolidated financial statements include the accounts of Walker & Dunlop, Inc., its wholly owned subsidiaries, and its majority owned subsidiaries. All intercompany transactions have been eliminated in consolidation. When the Company has significant influence over operating and financial decisions for an entity but does not have control over the entity or own a majority of the voting interests, the Company accounts for the investment using the equity method of accounting. |
Subsequent Events | Subsequent Events —The Company has evaluated the effects of all events that have occurred subsequent to March 31, 2018. There have been no material events that would require recognition in the condensed consolidated financial statements. The Company has made certain disclosures in the notes to the condensed consolidated financial statements of events that have occurred subsequent to March 31, 2018. No other material subsequent events have occurred that would require disclosure. |
Use of Estimates | Use of Estimates —The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, including allowance for risk-sharing obligations, capitalized mortgage servicing rights, derivative instruments, and the disclosure of contingent liabilities. Actual results may vary from these estimates. |
Contracts with Customers | Contracts with Customers —Substantially all 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 immaterial and derived from contracts with customers. The Company’s contracts with customers do not require significant judgment or estimates that affect the determination of the transaction price (including consideration of variable consideration), the allocation of the transaction price to performance obligations, and the determination of the timing of satisfaction of performance obligations. Additionally, the earnings process for the Company’s contracts with customers is not complicated and is completed in a short period of time. Revenue derived from contracts with customers is included as a component of Other revenues and totaled $4.3 million and $4.9 million for the three months ended March 31, 2018 and 2017, respectively. The Company had no contract assets or liabilities as of March 31, 2018. |
Loans Held for Investment, net | Loans Held for Investment, net — Loans held for investment are multifamily loans originated by the Company through the Interim Program for properties that currently do not qualify for permanent GSE or HUD (collectively, the “Agencies”) financing. These loans have terms of up to three years and are all multifamily loans with similar risk characteristics. As of March 31, 2018, Loans held for investment, net consisted of four loans with an aggregate $60.2 million of unpaid principal balance less $0.2 million of net unamortized deferred fees and costs and $0.1 million of allowance for loan losses. As of December 31, 2017, Loans held for investment, net consisted of five loans with an aggregate $67.0 million of unpaid principal balance less $0.4 million of net unamortized deferred fees and costs and $0.1 million of allowance for loan losses. None of the loans held for investment was delinquent, impaired, or on non-accrual status as of March 31, 2018 or December 31, 2017. Additionally, we have not experienced any delinquencies related to these loans or charged off any loan held for investment since the inception of the Interim Program in 2012. The allowances for loan losses recorded as of March 31, 2018 and December 31, 2017 were based on the Company’s collective assessment of the portfolio. |
Provision (Benefit) for Credit Losses | Provision (Benefit) for Credit Losses— The Company records the income statement impact of the changes in the allowance for loan losses and the allowance for risk-sharing obligations within Provision (benefit) for credit losses in the Condensed Consolidated Statements of Income. NOTE 5 contains additional discussion related to the allowance for risk-sharing obligations. Provision (benefit) for credit losses consisted of the following activity for the three months ended March 31, 2018 and 2017: For the three months ended March 31, (in thousands) 2018 2017 Provision (benefit) for loan losses $ $ 25 Provision (benefit) for risk-sharing obligations (157) Provision (benefit) for credit losses $ (477) $ (132) |
Net Warehouse Interest Income | Net Warehouse Interest Income— The Company presents warehouse interest income net of warehouse interest expense. Warehouse interest income is the interest earned from loans held for sale and loans held for investment. Substantially all loans that are held for sale are financed with matched borrowings under our warehouse facilities incurred to fund a specific loan held for sale. A portion of all loans that are held for investment is financed with matched borrowings under our warehouse facilities. The portion of loans held for sale or investment not funded with matched borrowings is financed with the Company’s 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 during the period of time the loan is outstanding. Included in Net warehouse interest income for the three months ended March 31, 2018 and 2017 are the following components: For the three months ended March 31, (in thousands) 2018 2017 Warehouse interest income - loans held for sale $ 8,763 $ 11,939 Warehouse interest expense - loans held for sale (7,655) (8,264) Net warehouse interest income - loans held for sale $ 1,108 $ 3,675 Warehouse interest income - loans held for investment $ 1,422 $ 4,678 Warehouse interest expense - loans held for investment (673) (1,733) Net warehouse interest income - loans held for investment $ 749 $ 2,945 Total net warehouse interest income $ 1,857 $ 6,620 |
Income Taxes | For the three months ended March 31, (in thousands) 2018 2017 Warehouse interest income - loans held for sale $ 8,763 $ 11,939 Warehouse interest expense - loans held for sale (7,655) (8,264) Net warehouse interest income - loans held for sale $ 1,108 $ 3,675 Warehouse interest income - loans held for investment $ 1,422 $ 4,678 Warehouse interest expense - loans held for investment (673) (1,733) Net warehouse interest income - loans held for investment $ 749 $ 2,945 Total net warehouse interest income $ 1,857 $ 6,620 Income Taxes —The Company records the excess tax benefits from stock compensation as a reduction to income tax expense. The Company recorded excess tax benefits of $4.1 million and $8.7 million during the three months ended March 31, 2018 and 2017, respectively |
Statement of Cash Flows | Statement of Cash Flows —For presentation in the Condensed Consolidated Statements of Cash Flows, the Company considers pledged cash and cash equivalents (as detailed above) to be restricted cash and restricted cash equivalents. The following table, in conjunction with the detail of Pledged securities, at fair value presented above, presents a reconciliation of the total of cash, cash equivalents, restricted cash, and restricted cash equivalents as presented in the Condensed Consolidated Statements of Cash Flows to the related captions in the Condensed Consolidated Balance Sheets as of March 31, 2018 and 2017 and December 31, 2017 and 2016. March 31, December 31, (in thousands) 2018 2017 2017 2016 Cash and cash equivalents $ 193,695 $ 50,745 $ 191,218 $ 118,756 Restricted cash 16,991 9,313 6,677 9,861 Pledged cash and cash equivalents 74,445 84,808 88,785 82,742 Total cash, cash equivalents, restricted cash, and restricted cash equivalents $ 285,131 $ 144,866 $ 286,680 $ 211,359 |
Pledged Securities, at Fair Value | Pledge Securities, at Fair Value — Pledged securities, at fair value consisted of the following balances as of March 31, 2018 and 2017 and December 31, 2017 and 2016: March 31, December 31, (in thousands) 2018 2017 2017 2016 Pledged cash and cash equivalents: Cash $ 2,630 $ 1,524 $ 2,201 $ 4,358 Money market funds 71,815 83,284 86,584 78,384 Total pledged cash and cash equivalents $ 74,445 $ 84,808 $ 88,785 $ 82,742 Agency debt securities 27,614 2,092 9,074 2,108 Total pledged securities, at fair value $ 102,059 $ 86,900 $ 97,859 $ 84,850 The money market funds invest in short-term Federal Government and Agency debt securities and have no stated maturity date. The investments in Agency debt securities consist of multifamily Agency mortgage-backed securities (“Agency MBS”) and have maturity dates ranging primarily from 2024 to 2030. As of March 31, 2018 and December 31, 2017, the fair value of the Agency debt securities approximated their amortized cost. As of March 31, 2018 and December 31, 2017, the total gains for securities with net gains in AOCI was $0.1 million and $0.1 million, respectively. As of March 31, 2018 and December 31, 2017, the total losses for securities with net losses in AOCI were $0.1 million and zero, respectively. As of March 31, 2018, the Company does not intend to sell any of the Agency debt securities, 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. |
Recently Adopted and Recently Announced Accounting Pronouncements | Recently Adopted and Recently Announced Accounting Pronouncement s —The Company adopted Accounting Standards Update 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers (Topic 606) in the first quarter of 2018 without an impact to the Company or its financial statements. Substantially all of the Company’s revenue streams are related to loans, derivatives, financial instruments, and transfers and servicing, all of which are outside the scope of the new standard. The Company used the full retrospective method for adopting ASU 2014-09. However, there was no change to the revenue amounts recorded or an adjustment to the opening balance of retained earnings as the adoption of ASU 2014-09 did not result in a difference in the amount or timing of the Company’s revenues. Additionally, the Company did not recognize any contract assets or contract liabilities. The Company adopted Accounting Standards Update 2016-01 (“ASU 2016-01”), Financial Instruments – Overall – Recognition and Measurement of Financial Assets and Financial Liabilities in the first quarter of 2018 with no impact to the Company’s reported financial results as the Company does not have any equity investments not accounted for under the equity method. In the first quarter of 2016, Accounting Standards Update 2016-02 (“ASU 2016-02”), Leases (Topic 842) was issued. ASU 2016-02 represents a significant reform to the accounting for leases. Lessees initially recognize a lease liability for the obligation to make lease payments and a right-of-use (“ROU”) asset for the right to use the underlying asset for the lease term. The lease liability is measured at the present value of the lease payments over the lease term. The ROU asset is measured at the lease liability amount, adjusted for lease prepayments, lease incentives received, and the lessee’s initial direct costs. Lessees generally recognize lease expense for these leases on a straight-line basis, which is similar to the accounting treatment today. ASU 2016-02 requires additional disclosures and is effective for the Company January 1, 2019. It also requires entities to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements with a cumulative-effect adjustment to retained earnings recorded at the earliest comparative period. The Financial Accounting Standards Board (“FASB”) recently issued a proposed update to ASU 2016-02 that would provide companies with the option to apply a practical expedient that allows adoption of the provisions of ASU 2016-02 prospectively with a cumulative-effect adjustment recorded to retained earnings upon the date of adoption. The Company intends to adopt the standard when required on January 1, 2019 and to elect the available practical expedients, including the proposed practical expedient discussed in the previous paragraph, if approved by the FASB. The Company has completed its analysis of the new standard and has begun to adapt its accounting systems for adoption. The Company expects to have its accounting systems ready in time for the adoption next year. The Company is also in the process of analyzing the disclosures that will be required for the new standard. We expect ASU 2016-02 to have an impact on the Consolidated Balance Sheets as quantified in the 2017 Form 10-K when we recognize ROU assets and the corresponding lease liability. We expect an immaterial impact on the statements of income. There will be no change to the classification of the Company’s leases, which are all currently classified as operating leases. In the second quarter of 2016, Accounting Standards Update 2016-13 (“ASU 2016-13”), Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments was issued. ASU 2016-13 ("the Standard") represents a significant change to the incurred loss model currently used to account for credit losses. The Standard requires an entity to estimate the credit losses expected over the life of the credit exposure upon initial recognition of that exposure. The expected credit losses consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments. Exposures with similar risk characteristics are required to be grouped together when estimating expected credit losses. The initial estimate and subsequent changes to the estimated credit losses are required to be reported in current earnings in the income statement and through an allowance in the balance sheet. ASU 2016-13 is applicable to financial assets subject to credit losses and measured at amortized cost and certain off-balance-sheet credit exposures. The Standard will modify the way the Company estimates its allowance for risk-sharing obligations and its allowance for loan losses. ASU 2016-13 requires modified retrospective application to all outstanding, in-scope instruments, with a cumulative-effect adjustment recorded to opening retained earnings as of the beginning of the period of adoption. The Company plans on adopting ASU 2016-13 when the standard is required to be adopted, January 1, 2020. The Company is in the preliminary stages of implementation as it is still in the process of determining the significance of the impact the Standard will have on its financial statements and the timing of when it will adopt ASU 2016-13. The Company expects its allowance for risk-sharing obligations to increase when ASU 2016-13 is adopted. There are no other accounting pronouncements previously issued by the FASB but not yet effective or not yet adopted by the Company that have the potential to materially impact the Company’s condensed consolidated financial statements. There have been no material changes to the accounting policies discussed in NOTE 2 of the Company’s 2017 Form 10-K. |
Reclassifications | Reclassifications — The Company has made certain immaterial reclassifications to prior-year balances to conform to current-year presentation . |
SUMMARY OF SIGNIFICANT ACCOUN20
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of Provision (Benefit) for Credit Losses | For the three months ended March 31, (in thousands) 2018 2017 Provision (benefit) for loan losses $ $ 25 Provision (benefit) for risk-sharing obligations (157) Provision (benefit) for credit losses $ (477) $ (132) |
Schedule of Net Warehouse Interest Income | For the three months ended March 31, (in thousands) 2018 2017 Warehouse interest income - loans held for sale $ 8,763 $ 11,939 Warehouse interest expense - loans held for sale (7,655) (8,264) Net warehouse interest income - loans held for sale $ 1,108 $ 3,675 Warehouse interest income - loans held for investment $ 1,422 $ 4,678 Warehouse interest expense - loans held for investment (673) (1,733) Net warehouse interest income - loans held for investment $ 749 $ 2,945 Total net warehouse interest income $ 1,857 $ 6,620 |
Schedule of Pledged Securities at Fair Value | March 31, December 31, (in thousands) 2018 2017 2017 2016 Pledged cash and cash equivalents: Cash $ 2,630 $ 1,524 $ 2,201 $ 4,358 Money market funds 71,815 83,284 86,584 78,384 Total pledged cash and cash equivalents $ 74,445 $ 84,808 $ 88,785 $ 82,742 Agency debt securities 27,614 2,092 9,074 2,108 Total pledged securities, at fair value $ 102,059 $ 86,900 $ 97,859 $ 84,850 |
Schedule of Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents | March 31, December 31, (in thousands) 2018 2017 2017 2016 Cash and cash equivalents $ 193,695 $ 50,745 $ 191,218 $ 118,756 Restricted cash 16,991 9,313 6,677 9,861 Pledged cash and cash equivalents 74,445 84,808 88,785 82,742 Total cash, cash equivalents, restricted cash, and restricted cash equivalents $ 285,131 $ 144,866 $ 286,680 $ 211,359 |
GAINS FROM MORTGAGE BANKING A21
GAINS FROM MORTGAGE BANKING ACTIVITIES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
GAINS FROM MORTGAGE BANKING ACTIVITIES | |
Schedule of Gains from Mortgage Banking Activities | For the three months ended March 31, (in thousands) 2018 2017 Contractual loan origination related fees, net $ 48,816 $ 50,897 Fair value of expected net cash flows from servicing recognized at commitment 35,228 48,677 Fair value of expected guaranty obligation recognized at commitment (2,535) (3,142) Total gains from mortgage banking activities $ 81,509 $ 96,432 |
MORTGAGE SERVICING RIGHTS (Tabl
MORTGAGE SERVICING RIGHTS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
MORTGAGE SERVICING RIGHTS | |
Schedule of Activity Related to Capitalized MSRs | For the three months ended March 31, (in thousands) 2018 2017 Beginning balance $ 634,756 $ 521,930 Additions, following the sale of loan 30,922 72,925 Amortization (32,161) (28,900) Pre-payments and write-offs (2,486) (3,425) Ending balance $ 631,031 $ 562,530 |
Summary of Components of Net Carrying Value of Acquired and Originated MSRs | As of March 31, 2018 Gross Accumulated Net (in thousands) carrying value amortization carrying value Acquired MSRs $ 183,715 $ (125,237) $ 58,478 Originated MSRs 839,745 (267,192) 572,553 Total $ 1,023,460 $ (392,429) $ 631,031 As of December 31, 2017 Gross Accumulated Net (in thousands) carrying value amortization carrying value Acquired MSRs $ 183,715 $ (121,643) $ 62,072 Originated MSRs 820,137 (247,453) 572,684 Total $ 1,003,852 $ (369,096) $ 634,756 |
Schedule of Expected Amortization of MSRs | Originated MSRs Acquired MSRs Total MSRs (in thousands) Amortization Amortization Amortization Nine Months Ending December 31, 2018 $ 84,201 $ 8,575 $ 92,776 Year Ending December 31, 2019 $ 100,069 $ 10,517 $ 110,586 2020 87,958 9,091 97,049 2021 76,770 7,466 84,236 2022 63,527 5,639 69,166 2023 52,262 4,960 57,222 Thereafter 107,766 12,230 119,996 Total $ 572,553 $ 58,478 $ 631,031 |
GUARANTY OBLIGATION AND ALLOW23
GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS | |
Schedule of Activity Related to Guaranty Obligation | For the three months ended March 31, (in thousands) 2018 2017 Beginning balance $ 41,187 $ 32,292 Additions, following the sale of loan 1,783 4,689 Amortization (1,808) (1,580) Other 262 (90) Ending balance $ 41,424 $ 35,311 |
Summary of Allowance for Risk-Sharing Obligations | For the three months ended March 31, (in thousands) 2018 2017 Beginning balance $ 3,783 $ 3,613 Provision (benefit) for risk-sharing obligations (463) (157) Write-offs — — Other (262) 90 Ending balance $ 3,058 $ 3,546 |
WAREHOUSE NOTES PAYABLE (Tables
WAREHOUSE NOTES PAYABLE (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
WAREHOUSE NOTES PAYABLE | |
Schedule of Debt Obligations | March 31, 2018 (dollars in thousands) Committed Uncommitted Temporary Total Facility Outstanding Facility 1 Amount Amount Increase Capacity Balance Interest rate Agency Warehouse Facility #1 $ 425,000 $ 300,000 $ — $ 725,000 $ 120,903 30-day LIBOR plus 1.30% Agency Warehouse Facility #2 500,000 300,000 — 800,000 177,577 30-day LIBOR plus 1.30% Agency Warehouse Facility #3 480,000 — — 480,000 102,541 30-day LIBOR plus 1.25% Agency Warehouse Facility #4 350,000 — — 350,000 228,680 30-day LIBOR plus 1.30% Agency Warehouse Facility #5 30,000 — — 30,000 19,017 30-day LIBOR plus 1.80% Agency Warehouse Facility #6 250,000 250,000 — 500,000 — 30-day LIBOR plus 1.35% Agency Warehouse Facility #7 250,000 100,000 — 350,000 63,547 30-day LIBOR plus 1.30% Fannie Mae repurchase agreement, uncommitted line and open maturity — 1,500,000 — 1,500,000 56,984 30-day LIBOR plus 1.15% Total Agency Warehouse Facilities $ 2,285,000 $ 2,450,000 $ — $ 4,735,000 $ 769,249 Interim Warehouse Facility #1 $ 85,000 $ — $ — $ 85,000 $ 10,290 30-day LIBOR plus 1.90% Interim Warehouse Facility #2 100,000 — — 100,000 24,662 30-day LIBOR plus 2.00% Interim Warehouse Facility #3 75,000 — — 75,000 — 30-day LIBOR plus 2.00% to 2.50% Total Interim Warehouse Facilities $ 260,000 $ — $ — $ 260,000 $ 34,952 Debt issuance costs — — — — (1,705) Total warehouse facilities $ 2,545,000 $ 2,450,000 $ — $ 4,995,000 $ 802,496 1 Agency Warehouse Facilities, including the Fannie Mae repurchase agreement are used to fund loans held for sale, while Interim Warehouse Facilities are used to partially fund loans held for investment. |
GOODWILL AND OTHER INTANGIBLE25
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
Schedule of Goodwill | Three Months Ended March 31, (in thousands) 2018 2017 Beginning balance $ 123,767 $ 96,420 Additions from acquisitions — 27,347 Impairment — — Ending balance $ 123,767 $ 123,767 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
FAIR VALUE MEASUREMENTS | |
Summary of Financial Assets and Financial Liabilities Measured at Fair Value on a Recurring Basis | Quoted Prices in Significant Significant Active Markets Other Other For Identical Observable Unobservable Assets Inputs Inputs Balance as of (in thousands) (Level 1) (Level 2) (Level 3) Period End March 31, 2018 Assets Loans held for sale $ — $ 787,552 $ — $ 787,552 Pledged securities 74,445 27,614 — 102,059 Derivative assets — — 20,417 20,417 Total $ 74,445 $ 815,166 $ 20,417 $ 910,028 Liabilities Derivative liabilities $ — $ — $ 7,455 $ 7,455 Total $ — $ — $ 7,455 $ 7,455 December 31, 2017 Assets Loans held for sale $ — $ 951,829 $ — $ 951,829 Pledged securities 88,785 9,074 — 97,859 Derivative assets — — 10,357 10,357 Total $ 88,785 $ 960,903 $ 10,357 $ 1,060,045 Liabilities Derivative liabilities $ — $ — $ 1,850 $ 1,850 Total $ — $ — $ 1,850 $ 1,850 |
Schedule of Roll Forward of Derivative Instruments | Fair Value Measurements Using Significant Unobservable Inputs: Derivative Instruments For the three months ended March 31, (in thousands) 2018 2017 Derivative assets and liabilities, net Beginning balance $ 8,507 $ 57,428 Settlements (77,054) (147,863) Realized gains recorded in earnings (1) 68,547 90,435 Unrealized gains recorded in earnings (1) 12,962 5,997 Ending balance $ 12,962 $ 5,997 Realized and unrealized gains from derivatives are recognized in Gains from mortgage banking activities in the Condensed Consolidated Statements of Income. |
Schedule of Significant Unobservable Inputs Used in the Measurement of the Fair Value of Level 3 Assets and Liabilities | Quantitative Information about Level 3 Measurements (in thousands) Fair Value Valuation Technique Unobservable Input (1) Input Value (1) Derivative assets $ 20,417 Discounted cash flow Counterparty credit risk — Derivative liabilities $ 7,455 Discounted cash flow Counterparty credit risk — (1) Significant increases in this input may lead to significantly lower fair value measurements. |
Schedule of Carrying Amounts and the Fair Values of the Company's Financial Instruments | March 31, 2018 December 31, 2017 Carrying Fair Carrying Fair (in thousands) Amount Value Amount Value Financial assets: Cash and cash equivalents $ 193,695 $ 193,695 $ 191,218 $ 191,218 Restricted cash 16,991 16,991 6,677 6,677 Pledged securities 102,059 102,059 97,859 97,859 Loans held for sale 787,552 787,552 951,829 951,829 Loans held for investment, net 59,886 60,157 66,510 66,963 Derivative assets 20,417 20,417 10,357 10,357 Total financial assets $ 1,180,600 $ 1,180,871 $ 1,324,450 $ 1,324,903 Financial liabilities: Derivative liabilities $ 7,455 $ 7,455 $ 1,850 $ 1,850 Warehouse notes payable 802,496 804,201 937,769 939,500 Note payable 163,781 165,947 163,858 166,223 Total financial liabilities $ 973,732 $ 977,603 $ 1,103,477 $ 1,107,573 |
Schedule of Fair Value of Derivative Instruments and Loans Held for Sale | Fair Value Adjustment Components Balance Sheet Location Fair Value Notional or Estimated Total Adjustment Principal Gain Interest Rate Fair Value Derivative Derivative To Loans (in thousands) Amount on Sale Movement Adjustment Assets Liabilities Held for Sale March 31, 2018 Rate lock commitments $ 627,068 $ 16,801 $ 2,778 $ 19,579 $ 19,638 $ (59) $ — Forward sale contracts 1,397,240 — (6,617) (6,617) 779 (7,396) — Loans held for sale 770,172 13,541 3,839 17,380 — — 17,380 Total $ 30,342 $ — $ 30,342 $ 20,417 $ (7,455) $ 17,380 December 31, 2017 Rate lock commitments $ 241,760 $ 7,587 $ (678) $ 6,909 $ 6,909 $ — $ — Forward sale contracts — 1,598 1,598 3,448 (1,850) — Loans held for sale 933,432 19,317 (920) 18,397 — — 18,397 Total $ 26,904 $ — $ 26,904 $ 10,357 $ (1,850) $ 18,397 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
EARNINGS PER SHARE | |
Schedule of Weighted Average Shares and Share Equivalents that are Used to Calculate Basic and Diluted Earnings Per Share | For the three months ended March 31, (in thousands) 2018 2017 Weighted average number of shares outstanding used to calculate basic earnings per share 29,982 29,809 Dilutive securities Unvested restricted shares and restricted share units 1,084 1,541 Stock options 799 656 Weighted average number of shares and share equivalents outstanding used to calculate diluted earnings per share 31,865 32,006 |
Schedule of Outstanding Options to Purchase Shares of Common Stock and Average Restricted Shares that were not Included in Computation of Diluted Earnings per Share | For the three months ended March 31, (in thousands) 2018 2017 Average options 113 55 Average restricted shares 5 101 |
TOTAL EQUITY (Tables)
TOTAL EQUITY (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
TOTAL EQUITY. | |
Summary of Changes in Total Equity | Stockholders' Equity Additional Common Stock Paid-In Retained Noncontrolling Total (in thousands) Shares Amount Capital AOCI Earnings Interests Equity Balance at December 31, 2017 30,016 $ 300 $ 229,080 $ 93 $ 579,943 $ 5,565 $ 814,981 Walker & Dunlop net income — — — — 36,861 — 36,861 Net income (loss) from noncontrolling interests — — — — — (154) (154) Other comprehensive income (loss), net of tax — — — (127) — — (127) Stock-based compensation - equity classified — — 5,093 — — — 5,093 Issuance of common stock in connection with equity compensation plans 567 5 4,846 — — — 4,851 Repurchase and retirement of common stock (435) (4) (12,687) — (8,709) — (21,400) Cash dividends paid — — — — (7,838) — (7,838) Balance at March 31, 2018 30,148 $ 301 $ 226,332 $ (34) $ 600,257 $ 5,411 $ 832,267 |
SUMMARY OF SIGNIFICANT ACCOUN29
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Contracts with Customers (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Contracts with Customers | ||
Contract assets with customers | $ 0 | |
Contract liabilities with customers | 0 | |
Other | ||
Contracts with Customers | ||
Revenue from contracts with customer | $ 4.3 | $ 4.9 |
SUMMARY OF SIGNIFICANT ACCOUN30
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Loans Held-for-Investment, Net (Detail) - Loans Held for Investment $ in Millions | 3 Months Ended | |
Mar. 31, 2018USD ($)loan | Dec. 31, 2017USD ($)loan | |
Loans Held-for-Investment, Net | ||
Number of loans held for investment | loan | 4 | 5 |
Unpaid principal balance of loans held for investment | $ 60.2 | $ 67 |
Net unamortized deferred fees and costs | 0.2 | 0.4 |
Allowance for loan losses | 0.1 | 0.1 |
Loans held for investment, delinquent | 0 | 0 |
Loans held for investment, impaired | 0 | 0 |
Loans, non-accrual status | $ 0 | $ 0 |
Maximum | ||
Loans Held-for-Investment, Net | ||
Loan term (in years) | 3 years |
SUMMARY OF SIGNIFICANT ACCOUN31
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Provision (Benefit) for Credit Losses (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Provision (Benefit) for Credit Losses | ||
Provision (benefit) for loan losses | $ (14) | $ 25 |
Provision for risk-sharing obligations | (463) | (157) |
Provision (benefit) for credit losses | $ (477) | $ (132) |
SUMMARY OF SIGNIFICANT ACCOUN32
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Net Warehouse Interest Income (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Net Warehouse Interest Income | ||
Net warehouse interest income | $ 1,857 | $ 6,620 |
Loans Held for Sale | ||
Net Warehouse Interest Income | ||
Warehouse interest income | 8,763 | 11,939 |
Warehouse interest expense | (7,655) | (8,264) |
Net warehouse interest income | 1,108 | 3,675 |
Loans Held for Investment | ||
Net Warehouse Interest Income | ||
Warehouse interest income | 1,422 | 4,678 |
Warehouse interest expense | (673) | (1,733) |
Net warehouse interest income | $ 749 | $ 2,945 |
SUMMARY OF SIGNIFICANT ACCOUN33
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Income Taxes (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Excess tax benefits recognized | $ 4.1 | $ 8.7 |
SUMMARY OF SIGNIFICANT ACCOUN34
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Pledged Securities at Fair Value (Detail) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | |
Pledged cash and cash equivalents | ||||
Cash | $ 2,630 | $ 2,201 | $ 1,524 | $ 4,358 |
Money market funds | 71,815 | 86,584 | 83,284 | 78,384 |
Total pledged cash and cash equivalents | 74,445 | 88,785 | 84,808 | 82,742 |
Agency debt securities | 27,614 | 9,074 | 2,092 | 2,108 |
Pledged securities, at fair value | 102,059 | 97,859 | $ 86,900 | $ 84,850 |
Total gains for securities with net gains in AOCI | 100 | 100 | ||
Total losses for securities with net losses in AOCI | $ 100 | $ 0 | ||
Minimum | ||||
Pledged cash and cash equivalents | ||||
Agency debt securities maturity date | Dec. 31, 2024 | |||
Maximum | ||||
Pledged cash and cash equivalents | ||||
Agency debt securities maturity date | Dec. 31, 2030 |
SUMMARY OF SIGNIFICANT ACCOUN35
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Cash Flows (Detail) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2017 | Dec. 31, 2016 |
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents | ||||
Cash and cash equivalents | $ 193,695 | $ 191,218 | $ 50,745 | $ 118,756 |
Restricted cash | 16,991 | 6,677 | 9,313 | 9,861 |
Pledged cash and cash equivalents | 74,445 | 88,785 | 84,808 | 82,742 |
Total cash, cash equivalents, restricted cash, and restricted cash equivalents | $ 285,131 | $ 286,680 | $ 144,866 | $ 211,359 |
GAINS FROM MORTGAGE BANKING A36
GAINS FROM MORTGAGE BANKING ACTIVITIES (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
GAINS FROM MORTGAGE BANKING ACTIVITIES | ||
Contractual loan origination related fees, net | $ 48,816 | $ 50,897 |
Fair value of expected net future cash flows from servicing recognized at commitment | 35,228 | 48,677 |
Fair value of expected guaranty obligation recognized at commitment | (2,535) | (3,142) |
Total gains from mortgage banking activities | 81,509 | 96,432 |
Co Brokers Fees | $ 5,600 | $ 3,700 |
MORTGAGE SERVICING RIGHTS - Fai
MORTGAGE SERVICING RIGHTS - Fair Value Disclosures (Detail) - MSRs - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Dec. 31, 2017 | |
Servicing | ||
Fair value of the MSRs | $ 841.4 | $ 834.5 |
Sensitivity Analysis of Fair Value, example 1, impact of percent adverse change in discount rate, percent | 1.00% | |
Decrease in fair value as a result of 100 basis point increase in discount rate | $ 19.9 | |
Sensitivity Analysis of Fair Value, example 2, impact of percent adverse change in discount rate, percent | 2.00% | |
Decrease in fair value as a result of 200 basis point increase in discount rate | $ 38.4 |
MORTGAGE SERVICING RIGHTS - Sch
MORTGAGE SERVICING RIGHTS - Schedule of Activity Related to Capitalized MSRs (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Mortgage Servicing Rights | ||
Beginning balance | $ 634,756 | |
Ending balance | 631,031 | |
MSRs | ||
Mortgage Servicing Rights | ||
Beginning balance | 634,756 | $ 521,930 |
Additions, following the sale of loan | 30,922 | 72,925 |
Amortization | (32,161) | (28,900) |
Pre-payments and write-offs | (2,486) | (3,425) |
Ending balance | $ 631,031 | $ 562,530 |
MORTGAGE SERVICING RIGHTS - Sum
MORTGAGE SERVICING RIGHTS - Summary of Components of Net Carrying Value of Acquired and Originated MSRs (Detail) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
MSRs | ||
Mortgage Servicing Rights Acquired and Originated | ||
Gross carrying value | $ 1,023,460 | $ 1,003,852 |
Accumulated amortization | (392,429) | (369,096) |
Net carrying value | 631,031 | 634,756 |
Acquired MSRs | ||
Mortgage Servicing Rights Acquired and Originated | ||
Gross carrying value | 183,715 | 183,715 |
Accumulated amortization | (125,237) | (121,643) |
Net carrying value | 58,478 | 62,072 |
Originated MSRs | ||
Mortgage Servicing Rights Acquired and Originated | ||
Gross carrying value | 839,745 | 820,137 |
Accumulated amortization | (267,192) | (247,453) |
Net carrying value | $ 572,553 | $ 572,684 |
MORTGAGE SERVICING RIGHTS - S40
MORTGAGE SERVICING RIGHTS - Schedule of Expected Amortization of MSRs (Detail) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
MSRs | ||
Future amortization | ||
Nine Months Ending December 31, 2018 | $ 92,776 | |
2,019 | 110,586 | |
2,020 | 97,049 | |
2,021 | 84,236 | |
2,022 | 69,166 | |
2,023 | 57,222 | |
Thereafter | 119,996 | |
Net carrying value | 631,031 | $ 634,756 |
Originated MSRs | ||
Future amortization | ||
Nine Months Ending December 31, 2018 | 84,201 | |
2,019 | 100,069 | |
2,020 | 87,958 | |
2,021 | 76,770 | |
2,022 | 63,527 | |
2,023 | 52,262 | |
Thereafter | 107,766 | |
Net carrying value | 572,553 | 572,684 |
Acquired MSRs | ||
Future amortization | ||
Nine Months Ending December 31, 2018 | 8,575 | |
2,019 | 10,517 | |
2,020 | 9,091 | |
2,021 | 7,466 | |
2,022 | 5,639 | |
2,023 | 4,960 | |
Thereafter | 12,230 | |
Net carrying value | $ 58,478 | $ 62,072 |
GUARANTY OBLIGATION AND ALLOW41
GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS - Schedule of Activity Related to Guaranty Obligation (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS | ||
Guaranty obligation, net of accumulated amortization - beginning balance | $ 41,187 | $ 32,292 |
Additions, following the sale of loan | 1,783 | 4,689 |
Amortization | (1,808) | (1,580) |
Other | 262 | (90) |
Guaranty obligation, net of accumulated amortization - ending balance | $ 41,424 | $ 35,311 |
GUARANTY OBLIGATION AND ALLOW42
GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS - Summary of Allowance for Risk-Sharing Obligations (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Allowance for Risk-Sharing Contracts | ||
Beginning balance | $ 3,783 | $ 3,613 |
Provision for risk-sharing obligations | (463) | (157) |
Other | (262) | 90 |
Ending balance | 3,058 | $ 3,546 |
Fannie Mae DUS program | ||
Allowance for Risk-Sharing Contracts | ||
Maximum quantifiable contingent liability associated with guarantees | $ 5,900,000 |
SERVICING - (Detail)
SERVICING - (Detail) - USD ($) $ in Billions | Mar. 31, 2018 | Dec. 31, 2017 |
Loans serviced | ||
Servicing | ||
Servicing portfolio loans unpaid principal balance | $ 76 | $ 74.5 |
WAREHOUSE NOTES PAYABLE - Summa
WAREHOUSE NOTES PAYABLE - Summary Information (Detail) - USD ($) $ in Thousands | 3 Months Ended | ||
Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | |
Warehouse notes payable | |||
Committed Amount | $ 2,545,000 | ||
Uncommitted Amount | 2,450,000 | ||
Total Facility Capacity | 4,995,000 | ||
Outstanding Balance | 802,496 | $ 937,769 | |
Debt issuance costs | $ (1,705) | ||
Agency Warehouse Facility #1 | Agency Warehouse Facility | LIBOR | |||
Warehouse notes payable | |||
Reference rate for variable interest on the line of credit | 30-day LIBOR | ||
Basis points added to reference rate | 1.30% | ||
Agency Warehouse Facility #2 | Agency Warehouse Facility | LIBOR | |||
Warehouse notes payable | |||
Reference rate for variable interest on the line of credit | 30-day LIBOR | ||
Basis points added to reference rate | 1.30% | ||
Agency Warehouse Facility #3 | Agency Warehouse Facility | |||
Warehouse notes payable | |||
Uncommitted Amount | $ 265,000 | ||
Total Facility Capacity | $ 500,000 | ||
Maturity date | Apr. 30, 2019 | ||
Expiration date of the uncommitted borrowing capacity | Jan. 30, 2019 | ||
Agency Warehouse Facility #3 | Agency Warehouse Facility | LIBOR | |||
Warehouse notes payable | |||
Reference rate for variable interest on the line of credit | 30-day LIBOR | ||
Basis points added to reference rate | 1.25% | ||
Agency Warehouse Facility #4 | Agency Warehouse Facility | LIBOR | |||
Warehouse notes payable | |||
Reference rate for variable interest on the line of credit | 30-day LIBOR | ||
Basis points added to reference rate | 1.30% | ||
Agency Warehouse Facility #5 | Agency Warehouse Facility | |||
Warehouse notes payable | |||
Term of facility extension option | 1 year | ||
Maturity date | Jul. 12, 2019 | ||
Agency Warehouse Facility #5 | Agency Warehouse Facility | LIBOR | |||
Warehouse notes payable | |||
Reference rate for variable interest on the line of credit | 30-day LIBOR | ||
Basis points added to reference rate | 1.80% | ||
Agency Warehouse Facility #6 | Agency Warehouse Facility | LIBOR | |||
Warehouse notes payable | |||
Reference rate for variable interest on the line of credit | 30-day LIBOR | ||
Basis points added to reference rate | 1.35% | ||
Agency Warehouse Facility #7 | Agency Warehouse Facility | |||
Warehouse notes payable | |||
Maturity date | Feb. 2, 2019 | ||
Advances made as a percentage of the loan balance | 100.00% | ||
Agency Warehouse Facility #7 | Agency Warehouse Facility | LIBOR | |||
Warehouse notes payable | |||
Reference rate for variable interest on the line of credit | 30-day LIBOR | ||
Basis points added to reference rate | 1.30% | ||
Interim Warehouse Facility #1 | Interim Warehouse Facility | |||
Warehouse notes payable | |||
Maturity date | Apr. 30, 2019 | ||
Interim Warehouse Facility #1 | Interim Warehouse Facility | LIBOR | |||
Warehouse notes payable | |||
Reference rate for variable interest on the line of credit | 30-day LIBOR | ||
Basis points added to reference rate | 1.90% | ||
Interim Warehouse Facility #2 | Interim Warehouse Facility | LIBOR | |||
Warehouse notes payable | |||
Reference rate for variable interest on the line of credit | 30-day LIBOR | ||
Basis points added to reference rate | 2.00% | ||
Interim Warehouse Facility #3 | Interim Warehouse Facility | |||
Warehouse notes payable | |||
Maturity date | May 19, 2019 | ||
Interim Warehouse Facility #3 | Interim Warehouse Facility | LIBOR | |||
Warehouse notes payable | |||
Reference rate for variable interest on the line of credit | 30-day LIBOR | ||
Interim Warehouse Facility #3 | Interim Warehouse Facility | LIBOR | Minimum | |||
Warehouse notes payable | |||
Basis points added to reference rate | 2.00% | ||
Interim Warehouse Facility #3 | Interim Warehouse Facility | LIBOR | Maximum | |||
Warehouse notes payable | |||
Basis points added to reference rate | 2.50% | ||
Loans Held for Sale | Agency Warehouse Facility | |||
Warehouse notes payable | |||
Committed Amount | $ 2,285,000 | ||
Uncommitted Amount | 2,450,000 | ||
Total Facility Capacity | 4,735,000 | ||
Outstanding Balance | 769,249 | ||
Loans Held for Sale | Agency Warehouse Facility #1 | Agency Warehouse Facility | |||
Warehouse notes payable | |||
Committed Amount | 425,000 | ||
Uncommitted Amount | 300,000 | ||
Total Facility Capacity | 725,000 | ||
Outstanding Balance | 120,903 | ||
Loans Held for Sale | Agency Warehouse Facility #2 | Agency Warehouse Facility | |||
Warehouse notes payable | |||
Committed Amount | 500,000 | ||
Uncommitted Amount | 300,000 | ||
Total Facility Capacity | 800,000 | ||
Outstanding Balance | 177,577 | ||
Loans Held for Sale | Agency Warehouse Facility #3 | Agency Warehouse Facility | |||
Warehouse notes payable | |||
Committed Amount | 480,000 | ||
Total Facility Capacity | 480,000 | ||
Outstanding Balance | 102,541 | ||
Loans Held for Sale | Agency Warehouse Facility #4 | Agency Warehouse Facility | |||
Warehouse notes payable | |||
Committed Amount | 350,000 | ||
Total Facility Capacity | 350,000 | ||
Outstanding Balance | 228,680 | ||
Loans Held for Sale | Agency Warehouse Facility #5 | Agency Warehouse Facility | |||
Warehouse notes payable | |||
Committed Amount | 30,000 | ||
Total Facility Capacity | 30,000 | ||
Outstanding Balance | 19,017 | ||
Loans Held for Sale | Agency Warehouse Facility #6 | Agency Warehouse Facility | |||
Warehouse notes payable | |||
Committed Amount | 250,000 | ||
Uncommitted Amount | 250,000 | ||
Total Facility Capacity | 500,000 | ||
Loans Held for Sale | Agency Warehouse Facility #7 | Agency Warehouse Facility | |||
Warehouse notes payable | |||
Committed Amount | 250,000 | ||
Uncommitted Amount | 100,000 | ||
Total Facility Capacity | 350,000 | ||
Outstanding Balance | 63,547 | ||
Loans Held for Investment | Interim Warehouse Facility | |||
Warehouse notes payable | |||
Committed Amount | 260,000 | ||
Total Facility Capacity | 260,000 | ||
Outstanding Balance | 34,952 | ||
Loans Held for Investment | Interim Warehouse Facility #1 | Interim Warehouse Facility | |||
Warehouse notes payable | |||
Committed Amount | 85,000 | ||
Total Facility Capacity | 85,000 | ||
Outstanding Balance | 10,290 | ||
Loans Held for Investment | Interim Warehouse Facility #2 | Interim Warehouse Facility | |||
Warehouse notes payable | |||
Committed Amount | 100,000 | ||
Total Facility Capacity | 100,000 | ||
Outstanding Balance | 24,662 | ||
Loans Held for Investment | Interim Warehouse Facility #3 | Interim Warehouse Facility | |||
Warehouse notes payable | |||
Committed Amount | 75,000 | ||
Total Facility Capacity | 75,000 | ||
National Banks | Agency Warehouse Facility | |||
Warehouse notes payable | |||
Total Facility Capacity | 3,200,000 | ||
National Banks | Interim Warehouse Facility | |||
Warehouse notes payable | |||
Total Facility Capacity | $ 300,000 | ||
Fannie Mae | Uncommitted Agency Warehouse Facility | Agency Warehouse Facility | LIBOR | |||
Warehouse notes payable | |||
Reference rate for variable interest on the line of credit | 30-day LIBOR | ||
Basis points added to reference rate | 1.15% | ||
Fannie Mae | Loans Held for Sale | Uncommitted Agency Warehouse Facility | Agency Warehouse Facility | |||
Warehouse notes payable | |||
Uncommitted Amount | $ 1,500,000 | ||
Total Facility Capacity | 1,500,000 | ||
Outstanding Balance | $ 56,984 |
GOODWILL AND OTHER INTANGIBLE45
GOODWILL AND OTHER INTANGIBLE ASSETS - Schedule of Goodwill (Detail) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018USD ($)period | Mar. 31, 2017USD ($) | |
Goodwill activity | ||
Beginning balance | $ 123,767 | $ 96,420 |
Additions from acquisitions | 27,347 | |
Ending balance | 123,767 | 123,767 |
Contingent liability | ||
Payment of contingent consideration | $ (5,150) | 0 |
Number of annual contingent consideration earn-out periods | period | 3 | |
Contingent consideration | $ 9,200 | $ 13,700 |
FAIR VALUE MEASUREMENTS - Summa
FAIR VALUE MEASUREMENTS - Summary of Financial Assets and Financial Liabilities Measured at Fair Value on a Recurring Basis (Detail) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2017 | Dec. 31, 2016 |
Assets | ||||
Loans held for sale | $ 787,552 | $ 951,829 | ||
Pledged securities | 102,059 | 97,859 | $ 86,900 | $ 84,850 |
Derivative assets | 20,417 | 10,357 | ||
Liabilities | ||||
Derivative liabilities | 7,455 | 1,850 | ||
Recurring | ||||
Assets | ||||
Loans held for sale | 787,552 | 951,829 | ||
Pledged securities | 102,059 | 97,859 | ||
Derivative assets | 20,417 | 10,357 | ||
Total financial assets | 910,028 | 1,060,045 | ||
Liabilities | ||||
Derivative liabilities | 7,455 | 1,850 | ||
Total financial liabilities | 7,455 | 1,850 | ||
Level 1 | Recurring | ||||
Assets | ||||
Pledged securities | 74,445 | 88,785 | ||
Total financial assets | 74,445 | 88,785 | ||
Level 2 | Recurring | ||||
Assets | ||||
Loans held for sale | 787,552 | 951,829 | ||
Pledged securities | 27,614 | 9,074 | ||
Total financial assets | 815,166 | 960,903 | ||
Level 3 | Recurring | ||||
Assets | ||||
Derivative assets | 20,417 | 10,357 | ||
Total financial assets | 20,417 | 10,357 | ||
Liabilities | ||||
Derivative liabilities | 7,455 | 1,850 | ||
Total financial liabilities | $ 7,455 | $ 1,850 |
FAIR VALUE MEASUREMENTS - Addit
FAIR VALUE MEASUREMENTS - Additional Information (Detail) $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Fair Value Measurements | |
Amount of transfers between any of the levels within the fair value hierarchy | $ 0 |
Maximum | |
Fair Value Measurements | |
Contract term | 60 days |
FAIR VALUE MEASUREMENTS - Sched
FAIR VALUE MEASUREMENTS - Schedule of Roll Forward of Derivative Instruments (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Derivative assets and liabilities, net | ||
Beginning balance | $ 8,507 | $ 57,428 |
Settlements | (77,054) | (147,863) |
Realized gains recorded in earnings | 68,547 | 90,435 |
Unrealized gains recorded in earnings | 12,962 | 5,997 |
Ending balance | $ 12,962 | $ 5,997 |
FAIR VALUE MEASUREMENTS - Sch49
FAIR VALUE MEASUREMENTS - Schedule of Significant Unobservable Inputs Used in the Measurement of the Fair Value of Level 3 Assets and Liabilities (Detail) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Fair Value Measurements | ||
Derivative assets | $ 20,417 | $ 10,357 |
Derivative liabilities | 7,455 | $ 1,850 |
Level 3 | Discounted Cash Flow | Derivative Assets | ||
Fair Value Measurements | ||
Derivative assets | 20,417 | |
Level 3 | Derivative Liabilities | Discounted Cash Flow | ||
Fair Value Measurements | ||
Derivative liabilities | $ 7,455 |
FAIR VALUE MEASUREMENTS - Sch50
FAIR VALUE MEASUREMENTS - Schedule of Carrying Amounts and the Fair Values of the Company's Financial Instruments (Detail) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2017 | Dec. 31, 2016 |
Financial assets: | ||||
Cash and cash equivalents | $ 193,695 | $ 191,218 | $ 50,745 | $ 118,756 |
Restricted cash | 16,991 | 6,677 | 9,313 | 9,861 |
Pledged securities | 102,059 | 97,859 | $ 86,900 | $ 84,850 |
Loans held for sale | 787,552 | 951,829 | ||
Loans held for investment, net | 59,886 | 66,510 | ||
Derivative assets | 20,417 | 10,357 | ||
Financial liabilities: | ||||
Derivative liabilities | 7,455 | 1,850 | ||
Warehouse notes payable | 802,496 | 937,769 | ||
Note payable | 163,781 | 163,858 | ||
Carrying Amount | ||||
Financial assets: | ||||
Cash and cash equivalents | 193,695 | 191,218 | ||
Restricted cash | 16,991 | 6,677 | ||
Pledged securities | 102,059 | 97,859 | ||
Loans held for sale | 787,552 | 951,829 | ||
Loans held for investment, net | 59,886 | 66,510 | ||
Derivative assets | 20,417 | 10,357 | ||
Total financial assets | 1,180,600 | 1,324,450 | ||
Financial liabilities: | ||||
Derivative liabilities | 7,455 | 1,850 | ||
Warehouse notes payable | 802,496 | 937,769 | ||
Note payable | 163,781 | 163,858 | ||
Total financial liabilities | 973,732 | 1,103,477 | ||
Fair Value | ||||
Financial assets: | ||||
Cash and cash equivalents | 193,695 | 191,218 | ||
Restricted cash | 16,991 | 6,677 | ||
Pledged securities | 102,059 | 97,859 | ||
Loans held for sale | 787,552 | 951,829 | ||
Loans held for investment, net | 60,157 | 66,963 | ||
Derivative assets | 20,417 | 10,357 | ||
Total financial assets | 1,180,871 | 1,324,903 | ||
Financial liabilities: | ||||
Derivative liabilities | 7,455 | 1,850 | ||
Warehouse notes payable | 804,201 | 939,500 | ||
Note payable | 165,947 | 166,223 | ||
Total financial liabilities | $ 977,603 | $ 1,107,573 |
FAIR VALUE MEASUREMENTS - Gener
FAIR VALUE MEASUREMENTS - General information (Detail) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Loans Held for Sale | ||
Other information | ||
Period of originated loans within which they are transferred or sold | 60 days | |
Maximum | Pledged securities | ||
Other information | ||
Maximum term of maturity of investments | 90 days | |
Maximum | Loans Held for Investment | ||
Other information | ||
Investment period for loans held for investment | 3 years | |
Level 3 | Loans Held for Investment | ||
Other information | ||
Credit-related adjustments | $ 0 | $ 0 |
FAIR VALUE MEASUREMENTS - Sch52
FAIR VALUE MEASUREMENTS - Schedule of Fair Value of Derivative Instruments and Loans Held for Sale (Detail) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Derivative notional amount and balance sheet location | ||
Estimated Gain on Sale | $ 30,342 | $ 26,904 |
Total Fair Value Adjustment | 30,342 | 26,904 |
Derivative assets | 20,417 | 10,357 |
Derivative Liabilities | (7,455) | (1,850) |
Fair Value Adjustment To Loans Held for Sale | 17,380 | 18,397 |
Loans Held for Sale | ||
Derivative notional amount and balance sheet location | ||
Notional or Principal Amount | 770,172 | 933,432 |
Estimated Gain on Sale | 13,541 | 19,317 |
Interest Rate Movement | 3,839 | (920) |
Total Fair Value Adjustment | 17,380 | 18,397 |
Fair Value Adjustment To Loans Held for Sale | 17,380 | 18,397 |
Rate Lock Commitments | ||
Derivative notional amount and balance sheet location | ||
Notional or Principal Amount | 627,068 | 241,760 |
Estimated Gain on Sale | 16,801 | 7,587 |
Interest Rate Movement | 2,778 | (678) |
Total Fair Value Adjustment | 19,579 | 6,909 |
Derivative assets | 19,638 | 6,909 |
Derivative Liabilities | (59) | |
Forward Sale Contracts | ||
Derivative notional amount and balance sheet location | ||
Notional or Principal Amount | 1,397,240 | 1,175,192 |
Interest Rate Movement | (6,617) | 1,598 |
Total Fair Value Adjustment | (6,617) | 1,598 |
Derivative assets | 779 | 3,448 |
Derivative Liabilities | $ (7,396) | $ (1,850) |
LITIGATION, COMMITMENTS, AND 53
LITIGATION, COMMITMENTS, AND CONTINGENCIES - Commitments (Detail) - DUS Risk-Sharing Obligations - Fannie Mae $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($) | |
LITIGATION, COMMITMENTS, AND CONTINGENCIES | |
Period of funding for collateral requirement | 48 months |
Amount of additional capital required to be funded over the next 48 months | $ 64.8 |
Net worth | 745.6 |
Minimum liquid assets to be maintained to meet operational liquidity requirements | 31.1 |
Operational liquidity | 206.3 |
Minimum | |
LITIGATION, COMMITMENTS, AND CONTINGENCIES | |
Net worth requirement | $ 157.9 |
New Tier 2 loans | |
LITIGATION, COMMITMENTS, AND CONTINGENCIES | |
Collateral requirements percentage (as a percent) | 0.75% |
Period of funding for collateral requirement | 48 months |
New Tier 2 loans | Money Market Funds Holding US Treasuries | |
LITIGATION, COMMITMENTS, AND CONTINGENCIES | |
Restricted liquidity collateral reduction percentage | 5.00% |
New Tier 2 loans | Agency Mortgage Backed Securities | |
LITIGATION, COMMITMENTS, AND CONTINGENCIES | |
Restricted liquidity collateral reduction percentage | 4.00% |
EARNINGS PER SHARE - Schedule o
EARNINGS PER SHARE - Schedule of Weighted Average Shares and Share Equivalents that are Used to Calculate Basic and Diluted Earnings Per Share (Detail) - shares shares in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Earnings per share | ||
Weighted average number of shares outstanding used to calculate basic earnings per share | 29,982 | 29,809 |
Dilutive securities | ||
Weighted average number of shares and share equivalents outstanding used to calculate diluted earnings per share | 31,865 | 32,006 |
Restricted shares and restricted share units | ||
Dilutive securities | ||
Dilutive securities | 1,084 | 1,541 |
Stock options | ||
Dilutive securities | ||
Dilutive securities | 799 | 656 |
EARNINGS PER SHARE - Antidiluti
EARNINGS PER SHARE - Antidilutive securities (Detail) - shares shares in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Stock options | ||
Antidilutive Securities | ||
Shares outstanding excluded from computation of earnings per share | 113 | 55 |
Restricted shares | ||
Antidilutive Securities | ||
Shares outstanding excluded from computation of earnings per share | 5 | 101 |
TOTAL EQUITY - Summary of Chang
TOTAL EQUITY - Summary of Changes in Total Equity (Details) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Change in Stockholders' Equity | ||
Balances at the beginning of the period | $ 814,981 | |
Balance at the beginning of the period (in shares) | 30,016 | |
Walker and Dunlop net income | $ 36,861 | $ 43,221 |
Other comprehensive income (loss), net of tax | (127) | |
Net income (loss) from noncontrolling interests | (154) | $ (161) |
Stock-based compensation - equity classified | 5,093 | |
Issuance of common stock in connection with equity compensation plans | 4,851 | |
Repurchase and retirement of common stock | (21,400) | |
Cash dividends paid | (7,838) | |
Balances at the end of the period | $ 832,267 | |
Balance at the end of the period (in shares) | 30,148 | |
Common Stock | ||
Change in Stockholders' Equity | ||
Balances at the beginning of the period | $ 300 | |
Balance at the beginning of the period (in shares) | 30,016 | |
Issuance of common stock in connection with equity compensation plans | $ 5 | |
Issuance of common stock in connection with equity compensation plans (in shares) | 567 | |
Repurchase and retirement of common stock | $ (4) | |
Repurchase and retirement of common stock (in shares) | (435) | |
Balances at the end of the period | $ 301 | |
Balance at the end of the period (in shares) | 30,148 | |
Additional Paid-In Capital | ||
Change in Stockholders' Equity | ||
Balances at the beginning of the period | $ 229,080 | |
Stock-based compensation - equity classified | 5,093 | |
Issuance of common stock in connection with equity compensation plans | 4,846 | |
Repurchase and retirement of common stock | (12,687) | |
Balances at the end of the period | 226,332 | |
AOCI | ||
Change in Stockholders' Equity | ||
Balances at the beginning of the period | 93 | |
Other comprehensive income (loss), net of tax | (127) | |
Balances at the end of the period | (34) | |
Retained Earnings | ||
Change in Stockholders' Equity | ||
Balances at the beginning of the period | 579,943 | |
Walker and Dunlop net income | 36,861 | |
Repurchase and retirement of common stock | (8,709) | |
Cash dividends paid | (7,838) | |
Balances at the end of the period | 600,257 | |
Noncontrolling Interests | ||
Change in Stockholders' Equity | ||
Balances at the beginning of the period | 5,565 | |
Net income (loss) from noncontrolling interests | (154) | |
Balances at the end of the period | $ 5,411 |
TOTAL EQUITY - Share Repurchase
TOTAL EQUITY - Share Repurchase (Details) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($)$ / sharesshares | |
Repurchases of common stock | |
Reduction of equity for retirement of repurchased shares | $ 21,400 |
Common shares | |
Repurchases of common stock | |
Repurchased and retired shares | shares | 244 |
Weighted average market price of shares repurchased and retired (in dollars per share) | $ / shares | $ 46.77 |
Reduction of equity for retirement of repurchased shares | $ 11,400 |
Share repurchase program, period for repurchases | 12 months |
Authorized share repurchase capacity remaining | $ 50,000 |
Common shares | Maximum | |
Repurchases of common stock | |
Repurchase authorization | $ 50,000 |
TOTAL EQUITY - Dividends (Detai
TOTAL EQUITY - Dividends (Details) - $ / shares | 1 Months Ended | 3 Months Ended | |
May 31, 2018 | Feb. 28, 2018 | Mar. 31, 2018 | |
Dividends | |||
Cash dividends declared per common share | $ 0.25 | $ 0.25 | $ 0.25 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - Subsequent Event - JCR $ in Millions | Apr. 12, 2018USD ($) |
Subsequent events | |
Ownership interest acquired | 100.00% |
Purchase consideration paid in cash | $ 32 |