Dramatic Growth in Debt Brokerage and Property Sales Drives Walker & Dunlop's Q4 Results

Rhea-AI Summary

Walker & Dunlop reported record total revenues of $407.2 million for Q4 2021, a 16% increase year over year. Total transaction volume reached $27.1 billion, up 91% from Q4 2020, while net income was $79.9 million, down 4%. The adjusted EBITDA surged 89% to $109.7 million. In 2021, the company completed the acquisition of Alliant Capital and increased its quarterly dividend by 20% to $0.60 per share. The servicing portfolio grew to $115.7 billion, marking an 8% increase from the previous year.

Positive

• Record total revenues of $407.2 million, up 16% from Q4 2020.
• Record total transaction volume of $27.1 billion, an increase of 91% year over year.
• Adjusted EBITDA of $109.7 million, up 89% from Q4 2020.
• Acquisition of Alliant Capital completed.
• Quarterly dividend increased by 20% to $0.60 per share.
• Servicing portfolio expanded to $115.7 billion, up 8% from the previous year.

Negative

• Net income decreased to $79.9 million, down 4% from last year.
• Diluted EPS fell to $2.42, down 7% year over year.
• GSE debt financing volumes declined by 37% compared to Q4 2020.
• Operating margin decreased to 27%, from 34% in Q4 2020.

BETHESDA, Md., Feb. 3, 2022 /PRNewswire/ --

FOURTH QUARTER 2021 HIGHLIGHTS

• Record total transaction volume of $27.1 billion, up 91% from Q4'20
• Record total revenues of $407.2 million, up 16% from Q4'20
• Net income of $79.9 million and diluted earnings per share of $2.42, down 4% and 7%, respectively, from Q4'20
• Record adjusted EBITDA¹ of $109.7 million, up 89% from Q4'20
• Servicing portfolio of $115.7 billion at December 31, 2021, up 8% from December 31, 2020
• Completed the acquisition of Alliant Capital ("Alliant")
• Increased quarterly dividend by 20% to $0.60 per share

FULL-YEAR 2021 HIGHLIGHTS

• Record total transaction volume of $68.2 billion, up 66% from 2020
• Record total revenues of $1.3 billion, up 16% from 2020
• Record net income of $265.8 million, up 8% from 2020 and diluted earnings per share of $8.15 up 6% from 2020
• Record adjusted EBITDA¹ of $309.3 million, up 43% from 2020

Walker & Dunlop, Inc. (NYSE: WD) (the "Company") reported record total revenues of $407.2 million for the fourth quarter of 2021, an increase of 16% year over year. Net income for the fourth quarter of 2021 was $79.9 million or $2.42 per diluted share, down 4% and 7%, respectively, from the fourth quarter of 2020. Fourth quarter 2021 adjusted EBITDA¹ was a record of $109.7 million, up 89% over the same period in 2020. Total transaction volume in the fourth quarter of 2021 was also a record of $27.1 billion, up 91% from the fourth quarter of 2020. The Company's Board of Directors authorized a 20% increase in the quarterly dividend to $0.60 per share.

"Our continued investments in people, brand, and technology produced exceptional fourth quarter and full year financial performance for Walker & Dunlop," commented Willy Walker, Chairman and CEO. "Record quarterly financial results, including total transaction volume of $27 billion, up 91% year over year, and total revenues of $407 million, up 16%, were driven by the continued strength of our debt brokerage and property sales operations, reflecting the transformation of Walker & Dunlop from a mortgage-centric finance company into a technology-enabled financial services firm. This resulted in dramatic adjusted EBITDA growth of 89% to $110 million, a record by a wide margin."

Mr. Walker continued, "On top of generating incredible financial results, we made three highly strategic investments during 2021 in TapCap, Zelman & Associates, and Alliant Capital, further expanding the breadth of our platform to make significant progress towards our Drive to '25 objectives. We are carrying strong momentum into 2022 with our expectation that the talented professionals we have recruited to W&D, the brand we have built, and the implementation of valuable technology solutions will allow us to continue to grow even faster in the future."

FOURTH QUARTER 2021 OPERATING RESULTS

TRANSACTION VOLUMES
(dollars in thousands)			Q4 2021			Q4 2020		$ Variance			% Variance
Fannie Mae		$	2,585,100		$	3,891,649		$	(1,306,549)		(34)	%
Freddie Mac			1,546,883			2,685,359			(1,138,476)		(42)
Ginnie Mae - HUD			523,899			844,221			(320,322)		(38)
Brokered (2)			12,684,294			3,768,689			8,915,605		237
Principal Lending and Investing (3)			474,873			152,831			322,042		211
Debt financing volume		$	17,815,049		$	11,342,749		$	6,472,300		57	%
Property sales volume			9,287,312			2,846,276			6,441,036		226
Total transaction volume		$	27,102,361		$	14,189,025		$	12,913,336		91	%

Discussion of Results:

• Record brokered volume in the fourth quarter of 2021 reflects the significant growth in our team of bankers, continued market demand for all commercial real estate property types, and the impacts of our investments in people, brand and technology. We continue to see a benefit from our investments in acquiring and recruiting commercial mortgage bankers and the significant amount of capital being invested into U.S. commercial real estate.
• The increase in principal lending and investing volume, which includes interim loans, originations for Walker & Dunlop Investment Partners ("WDIP") separate accounts, and interim lending for our joint venture with Blackstone Mortgage Trust, was due to a more positive view of the credit markets in Q4 2021 compared to the pandemic-impacted market of Q4 2020 and our team working closely with our capital partners to deploy capital.
• Record property sales volume increased 226% in the fourth quarter of 2021 due to the significant growth in our property sales team over the past year in key markets and strong investor appetite for multifamily assets.
• GSE debt financing volumes decreased by 37% in the fourth quarter of 2021 compared to the fourth quarter of 2020, driven by an overall decrease in GSE lending activity in the market. Despite the overall lower GSE lending volumes during the quarter, our GSE market share has remained consistent with historical levels at 11.6%.

MANAGED PORTFOLIO
(dollars in thousands)			Q4 2021			Q4 2020		$ Variance			% Variance
Fannie Mae		$	53,401,457		$	48,818,185		$	4,583,272		9	%
Freddie Mac			37,138,836			37,072,587			66,249		-
Ginnie Mae - HUD			9,889,289			9,606,506			282,783		3
Brokered			15,035,439			11,419,372			3,616,067		32
Principal Lending and Investing			235,543			295,322			(59,779)		(20)
Total Servicing Portfolio		$	115,700,564		$	107,211,972		$	8,488,592		8	%
Assets under management			16,437,865			1,816,421			14,621,444		805
Total Managed Portfolio		$	132,138,429		$	109,028,393		$	23,110,036		21	%
Weighted-average servicing fee rate (basis points)			24.9			24.0
Weighted-average remaining servicing portfolio term (years)			9.2			9.4

Discussion of Results:

• Our servicing portfolio continues to grow steadily due to our Agency debt financing volumes and the increase in brokered debt.
• During the fourth quarter of 2021, we added $1.8 billion of net loans to our servicing portfolio, and over the past 12 months, we added $8.5 billion of net loans to our servicing portfolio, 55% of which were Fannie Mae and Freddie Mac loans.
• Only $5.4 billion of Agency loans in our servicing portfolio, representing 5% of the total portfolio, with a relatively low weighted-average servicing fee of 19.5 basis points, are scheduled to mature over the next two years.
• The increase in the overall weighted-average servicing fee was primarily due to an increase in Fannie Mae loans as a percentage of the overall servicing portfolio year over year, coupled with a higher weighted-average servicing fee on Fannie Mae debt financing volumes over the past year.
• We added net mortgage servicing rights ("MSRs") from originations of $24.9 million in the quarter and $91.9 million over the past 12 months.
• The MSRs associated with our servicing portfolio had a fair value of $1.3 billion as of December 31, 2021, compared to $1.1 billion as of December 31, 2020.
• Assets under management ("AUM") as of December 31, 2021 consisted of $14.3 billion of assets managed by Alliant, $1.3 billion of loans and funds managed by WDIP and $848.2 million of loans in our interim lending joint venture. The year-over-year increase in AUM is driven by the addition of Alliant's AUM to our portfolio upon closing the acquisition in December 2021.

REVENUES
(dollars in thousands)			Q4 2021			Q4 2020		$ Variance			% Variance
Loan origination and debt brokerage fees, net ("origination fees")		$	139,421		$	120,956		$	18,465		15	%
Fair value of expected net cash flows from servicing, net ("MSR income")			77,879			121,566			(43,687)		(36)
Servicing fees			72,808			63,240			9,568		15
Property sales broker fees			54,808			18,180			36,628		201
Net warehouse interest income, LHFS			5,330			5,261			69		1
Net warehouse interest income, LHFI			2,010			1,611			399		25
Escrow earnings and other interest income			2,178			2,566			(388)		(15)
Other revenues			52,755			16,329			36,426		223
Total revenues		$	407,189		$	349,709		$	57,480		16	%
Key revenue metrics (as a percentage of debt financing volume):
Origination fee margin (4)			0.80	%		1.08	%
MSR margin (5)			0.45			1.09
Agency MSR margin (6)			1.67			1.64

Discussion of Results:

• The increase in origination fees was driven by the substantial increase in overall debt financing volume, which was offset by the decrease in the origination fee margin as shown above. The decrease in origination fee margin was due to a shift in the mix of debt financing volume from 65% Agency loans in the fourth quarter of 2020 to 26% Agency loans in the fourth quarter of 2021. Agency loans typically carry higher origination fees than brokered loans.
• The decreases in MSR income and MSR margin were primarily related to a 37% decrease in Agency debt financing volume year over year.
• The $8.5 billion net increase in the servicing portfolio over the past 12 months was the principal driver of the growth in servicing fees year over year, combined with the increase in the servicing portfolio's weighted-average servicing fee.
• The increase in property sales broker fees was driven by the 226% increase in property sales volume year over year.
• Other revenues increased principally due to the additions of fee income from Alliant and Zelman & Associates, with no comparable activity in the prior year. Additionally, prepayment fees increased substantially due to an increase in prepayment activity year over year.

EXPENSES
(dollars in thousands)			Q4 2021			Q4 2020		$ Variance			% Variance
Personnel		$	195,670		$	157,826		$	37,844		24	%
Amortization and depreciation			61,405			45,013			16,392		36
Provision (benefit) for credit losses			1,093			5,450			(4,357)		(80)
Interest expense on corporate debt			2,690			1,826			864		47
Other operating expenses			36,484			22,258			14,226		64
Total expenses		$	297,342		$	232,373		$	64,969		28	%
Key expense metrics (as a percentage of total revenues):
Personnel expenses			48	%		45	%
Other operating expenses			9			6

Discussion of Results:

• The increase in personnel expenses was primarily the result of increased commissions expense due to the increases in origination fees and property sales broker fees during the fourth quarter of 2021.
• Amortization and depreciation increased as a result of the growth in the average balance of MSRs outstanding year over year and an increase in prepayment activity.
• The decrease in the provision (benefit) for credit losses was primarily attributable to a decrease in our forecasted loss rate year over year as a result of improved forecasted unemployment rates as of December 31, 2021 compared to December 31, 2020.
• The increase in other operating expenses was primarily related to two significant one-time charges in the fourth quarter of 2021: (i) a $2.7 million write-off of deferred issuance costs related to the payoff of our existing long-term debt in connection with the debt refinancing, and (ii) a $6.9 million accelerated earnout payment related to the 2020 acquisition of the non-controlling interest in Walker & Dunlop Investment Sales. Additional increases were in (i) travel and entertainment due to the overall growth of the Company and lower comparable costs in these areas in the fourth quarter of 2020 due to the pandemic and (ii) professional fees driven primarily by the Alliant acquisition. These increases were partially offset by the write-off in the fourth quarter of 2020 of previously capitalized software implementation costs related to a planned servicing system conversion that was terminated, which had no comparable activity in 2021.

KEY PERFORMANCE METRICS
(dollars in thousands, except per share amounts)			Q4 2021			Q4 2020		$ Variance			% Variance
Walker & Dunlop net income		$	79,931		$	83,099		$	(3,168)		(4)	%
Adjusted EBITDA			109,667			58,161			51,506		89
Diluted EPS		$	2.42		$	2.59		$	(0.17)		(7)	%
Operating margin			27	%		34	%
Return on equity			23			29

Discussion of Results:

• The decrease in net income was a result of a 6% decrease in income from operations, driven by the increase in total expenses year over year, partially offset by a lower effective tax rate in the fourth quarter of 2021 compared to the fourth quarter of 2020.
• The significant increase in adjusted EBITDA was a result of higher origination fees, property sales broker fees, servicing fees and other revenues. These increases were partially offset by increases in personnel expense and other operating expenses.
• The decrease in operating margin was due primarily to the increase in total expenses outpacing the growth in total revenues year over year.
• The decrease in return on equity was primarily due to the decrease in Walker & Dunlop net income.

KEY CREDIT METRICS
(dollars in thousands)			Q4 2021			Q4 2020		$ Variance			% Variance
At-risk servicing portfolio (7)		$	49,573,263		$	44,483,676		$	5,089,587		11	%
Maximum exposure to at-risk portfolio (8)			10,056,584			9,032,083			1,024,501		11
Defaulted loans		$	78,659		$	48,481		$	30,178		62	%
Key credit metrics (as a percentage of the at-risk portfolio):
Defaulted loans			0.16	%		0.11	%
Allowance for risk-sharing			0.13			0.17
Key credit metrics (as a percentage of maximum exposure):
Allowance for risk-sharing			0.62	%		0.83	%

Discussion of Results:

• Our at-risk servicing portfolio, which is comprised of loans subject to a defined risk-sharing formula, increased due to the significant level of Fannie Mae loans added to the portfolio during the past 12 months. As of December 31, 2021, there were two defaulted loans that were provisioned for in 2019 and one loan that was provisioned for in 2021. The two properties that defaulted in 2019 have been foreclosed on and final settlement of any losses will occur in the future upon disposition of the assets by Fannie Mae.
• The on-balance sheet interim loan portfolio, which is comprised of loans for which we have full risk of loss, was $235.5 million at December 31, 2021 compared to $295.3 million at December 31, 2020. There was one defaulted loan in our interim loan portfolio at December 31, 2021, which defaulted and was provisioned for in the third quarter of 2020. All other loans in the on-balance sheet interim loan portfolio are current and performing as of December 31, 2021. The interim loan joint venture holds $848.2 million of loans as of December 31, 2021, compared to $484.8 million as of December 31, 2020. We share in a small portion of the risk of loss, and as of December 31, 2021, all loans in the interim loan joint venture are current and performing.

FULL-YEAR 2021 OPERATING RESULTS

YEAR-TO-DATE OPERATING RESULTS AND KEY PERFORMANCE METRICS
(dollars in thousands)			Q4 2021			Q4 2020		$ Variance			% Variance
Debt financing volume		$	48,911,120		$	34,954,307		$	13,956,813		40	%
Property sales volume			19,254,697			6,129,739			13,124,958		214
Total transaction volume		$	68,165,817		$	41,084,046		$	27,081,771		66	%
Total revenues			1,259,178			1,083,707			175,471		16
Total expenses			907,120			753,441			153,679		20
Net income		$	265,762		$	246,177		$	19,585		8	%
Adjusted EBITDA			309,278			215,849			93,429		43
Diluted EPS		$	8.15		$	7.69		$	0.46		6	%
Operating margin			28	%		30	%
Return on equity			21			23

Discussion of Results:

The 16% increase in total revenues was largely driven by:

Significant Increases

• Origination fees (24%), primarily from the overall increase in debt financing volume;
• Servicing fees (18%), related to growth in our servicing portfolio and the weighted-average servicing fee of the portfolio;
• Property sales broker fees (215%), due to the increase in property sales volume; and
• Other revenues (116%), mostly derived from the additions of fee income from Alliant and Zelman & Associates, with no comparable activity in the prior year. Additionally, prepayment fees increased substantially due to an increase in prepayment activity year over year.

Significant Decreases (partially offsetting the increases noted above)

• MSR income (20%), largely the result of a decrease in Fannie Mae debt financing volume. The decline in Fannie Mae debt financing volume was largely the result of a Fannie Mae portfolio of over $2 billion originated in 2020, with no comparable activity in 2021;
• Warehouse interest income (25%), due to decreases in LHFS and LHFI outstanding and net spreads; and
• Escrow earnings and other interest income (55%), primarily from a year-over-year decline in short-term interest rates, partially offset by an increase in the average balance of escrow accounts outstanding.

The 20% increase in total expenses was primarily driven by:

Significant Increases

• Personnel expense (29%), primarily due to (i) higher commissions expense resulting from higher origination fees and property sales broker fees and (ii) increased salaries and benefits expenses resulting from a rise in average headcount due to strategic acquisitions and hiring initiatives;
• Amortization and depreciation costs (24%), largely due to an increase in the average balance of MSRs outstanding year over year; and
• Other operating expenses (42%), primarily resulting from the previously mentioned one-time costs associated with our debt refinancing and accelerated earnout payment. In addition, the acquisition of Alliant added to our other operating expenses coupled with increases in travel and entertainment, professional fees, marketing costs, and office expenses, all of which are primarily attributable to the overall growth of the Company over the past year and low costs in these areas in 2020 due to the pandemic. These increases were partially offset by the write-off in 2020 of previously capitalized software implementation costs related to a planned servicing system conversation that was terminated, which had no comparable activity in 2021.

Significant Decreases (partially offsetting the increases noted above)

• Provision (benefit) for credit losses (135%), primarily due to a decrease in the loss rate used for the forecast period to three basis points as of December 31, 2021 from six basis points as of December 31, 2020 principally due to forecasted low unemployment rates. During 2020, we recorded a significant provision expense as a result of the COVID-19 pandemic and its expected impacts on future losses in the at-risk servicing portfolio under the new CECL accounting standard in addition to provision expense for a defaulted interim loan.

Net income for the years ended December 31, 2021 and 2020 was $265.8 million and $246.2 million, respectively. The 8% increase in net income was primarily a result of a 7% increase in income from operations and a reduction in the effective tax rate year over year.

Adjusted EBITDA for the years ended December 31, 2021 and 2020 was $309.3 million and $215.8 million, respectively. The 43% increase was largely driven by the significant increases in origination fees, servicing fees, and property sales broker fees, partially offset by the decreases in escrow earnings and other interest income and warehouse interest income and increases in personnel expenses and other operating expenses.

The decrease in operating margin was due to the increase in total expenses outpacing the growth in total revenues year over year.

The decrease in return on equity was related to an increase in retained earnings as a result of our strong financial performance over the past year, partially offset by the increase in Walker & Dunlop net income and the impact of dividend payments.

CAPITAL SOURCES AND USES

On February 2, 2022, our Board of Directors declared a dividend of $0.60 per share for the first quarter of 2022, a 20% increase from the quarterly dividend declared in 2021. The dividend will be paid on March 10, 2022 to all holders of record of our restricted and unrestricted common stock as of February 22, 2022.

During the first quarter of 2021, our Board of Directors authorized the repurchase of up to $75 million of our outstanding common stock over a one-year period. We have not repurchased any shares of common stock under the 2021 share repurchase program.

On February 2, 2022, our Board of Directors authorized the repurchase of up to $75 million of the Company's outstanding common stock over the coming one-year period ("2022 Share Repurchase Program").

Any future purchases made pursuant to the 2022 Share Repurchase Program will be made in the open market or in privately negotiated transactions from time to time as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The repurchase program may be suspended or discontinued at any time.

On December 16, 2021, we refinanced our senior secured term loan and increased the aggregate principal amount to $600 million. The debt carries an interest rate of SOFR plus a 10 basis point credit spread adjustment (with a floor of 50 basis points) plus a 225 basis point spread. We used the proceeds from the loan to fund repayment of our existing senior secured term loan and to fund the acquisition of Alliant.

____________________
(1)	Adjusted EBITDA is a non-GAAP financial measure the Company presents to help investors better understand our operating performance. For a reconciliation of adjusted EBITDA to net income, refer to the sections of this press release below titled "Non-GAAP Financial Measures" and "Adjusted Financial Metric Reconciliation to GAAP."
(2)	Brokered transactions for life insurance companies, commercial banks, and other capital sources.
(3)	Includes debt financing volumes from our interim loan program, our interim loan joint venture, and WDIP separate accounts.
(4)	Loan origination and debt brokerage fees, net as a percentage of debt financing volume. Excludes the income and debt financing volume from Principal Lending and Investing.
(5)	MSR income as a percentage of debt financing volume. Excludes the income and debt financing volume from Principal Lending and Investing.
(6)	MSR income as a percentage of Agency debt financing volume.
(7)	At-risk servicing portfolio is defined as the balance of Fannie Mae DUS loans subject to the risk-sharing formula described below, as well as a small number of Freddie Mac loans on which we share in the risk of loss. Use of the at-risk portfolio provides for comparability of the full risk-sharing and modified risk-sharing loans because the provision and allowance for risk-sharing obligations are based on the at-risk balances of the associated loans. Accordingly, we have presented the key statistics as a percentage of the at-risk portfolio.
	For example, a $15 million loan with 50% risk-sharing has the same potential risk exposure as a $7.5 million loan with full DUS risk sharing. Accordingly, if the $15 million loan with 50% risk-sharing were to default, we would view the overall loss as a percentage of the at-risk balance, or $7.5 million, to ensure comparability between all risk-sharing obligations. To date, substantially all of the risk-sharing obligations that we have settled have been from full risk-sharing loans.
(8)	Represents the maximum loss we would incur under our risk-sharing obligations if all of the loans we service, for which we retain some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement. The maximum exposure is not representative of the actual loss we would incur.

Conference Call Information

The Company will host a conference call to discuss its quarterly results on Thursday, February 3, 2022 at 8:30 a.m. Eastern time. Listeners can access the webcast via the link: https://walkerdunlop.zoom.us/webinar/register/WN_kkSYuskaR72b9mTMnaBVaQ or by dialing +1 408 901 0584, Webinar ID 812 3353 1425, Password 596588. Presentation materials related to the conference call will be posted to the Investor Relations section of the Company's website prior to the call. An audio replay will also be available on the Investor Relations section of the Company's website, along with the presentation materials.

About Walker & Dunlop

Walker & Dunlop (NYSE: WD) is the largest provider of capital to the multifamily industry in the United States and the fourth largest lender on all commercial real estate including industrial, office, retail, and hospitality. Walker & Dunlop enables real estate owners and operators to bring their visions of communities — where Americans live, work, shop, and play — to life. The power of our people, premier brand, and industry-leading technology enables us to meet any client need – including financing, research, property sales, valuation, and advisory services. With over 1,000 employees across every major U.S. market, Walker & Dunlop has consistently been named one of Fortune's Great Places to Work® and is committed to making the commercial real estate industry more inclusive and diverse while creating meaningful social, environmental, and economic change in our communities.

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with United States generally accepted accounting principles ("GAAP"), the Company uses adjusted EBITDA, a non-GAAP financial measure. The presentation of adjusted EBITDA is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. When analyzing our operating performance, readers should use adjusted EBITDA in addition to, and not as an alternative for, net income. Adjusted EBITDA represents net income before income taxes, interest expense on our term loan facility, and amortization and depreciation, adjusted for provision (benefit) for credit losses net of write-offs, stock-based incentive compensation charges, and the fair value of expected net cash flows from servicing, net. Because not all companies use identical calculations, our presentation of adjusted EBITDA may not be comparable to similarly titled measures of other companies. Furthermore, adjusted EBITDA is not intended to be a measure of free cash flow for our management's discretionary use, as it does not reflect certain cash requirements such as tax and debt service payments. The amounts shown for adjusted EBITDA may also differ from the amounts calculated under similarly titled definitions in our debt instruments, which are further adjusted to reflect certain other cash and non-cash charges that are used to determine compliance with financial covenants.

We use adjusted EBITDA to evaluate the operating performance of our business, for comparison with forecasts and strategic plans and for benchmarking performance externally against competitors. We believe that this non-GAAP measure, when read in conjunction with the Company's GAAP financials, provides useful information to investors by offering:

• the ability to make more meaningful period-to-period comparisons of the Company's on-going operating results;
• the ability to better identify trends in the Company's underlying business and perform related trend analyses; and
• a better understanding of how management plans and measures the Company's underlying business.

We believe that adjusted EBITDA has limitations in that it does not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP and that adjusted EBITDA should only be used to evaluate the Company's results of operations in conjunction with net income. For more information on adjusted EBITDA, refer to the section of this press release below titled "Adjusted Financial Metric Reconciliation to GAAP."

Forward-Looking Statements

Some of the statements contained in this press release may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans, or intentions.

The forward-looking statements contained in this press release reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause actual results to differ significantly from those expressed or contemplated in any forward-looking statement.

While forward-looking statements reflect our good faith projections, assumptions and expectations, they are not guarantees of future results. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes, except as required by applicable law. Factors that could cause our results to differ materially include, but are not limited to: (1) general economic conditions and multifamily and commercial real estate market conditions, (2) regulatory and/or legislative changes to Freddie Mac, Fannie Mae or HUD, (3) our ability to retain and attract loan originators and other professionals, (4) risks related to our recently completed acquisitions, including our ability to integrate and achieve the expected benefits of such acquisitions, and (5) changes in federal government fiscal and monetary policies, including any constraints or cuts in federal funds allocated to HUD for loan originations.

For a further discussion of these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements, see the section titled "Risk Factors" in our most recent Annual Report on Form 10-K and any updates or supplements in subsequent Quarterly Reports on Form 10-Q and our other filings with the SEC. Such filings are available publicly on our Investor Relations web page at www.walkerdunlop.com.

 

Walker & Dunlop, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
Unaudited
	December 31,			September 30,			June 30,			March 31,			December 31,
	2021			2021			2021			2021			2020
(in thousands)
Assets
Cash and cash equivalents	$	305,635		$	318,188		$	326,518		$	277,277		$	321,097
Restricted cash		42,812			34,875			15,842			14,805			19,432
Pledged securities, at fair value		148,996			148,774			146,548			139,570			137,236
Loans held for sale, at fair value		1,811,586			2,711,900			1,718,444			1,048,385			2,449,198
Loans held for investment, net		269,125			233,685			272,033			281,788			360,402
Mortgage servicing rights		953,845			929,825			915,519			909,884			862,813
Goodwill		718,393			333,249			266,465			261,189			248,958
Other intangible assets		151,059			8,454			1,553			1,717			1,880
Derivative assets		37,364			85,486			36,751			58,130			49,786
Receivables, net		212,019			106,228			80,196			59,526			65,735
Other assets, net		397,918			206,198			163,252			151,694			134,438
Total assets	$	5,048,752		$	5,116,862		$	3,943,121		$	3,203,965		$	4,650,975
Liabilities
Warehouse notes payable	$	1,941,572		$	2,848,579		$	1,823,982		$	1,112,340		$	2,517,156
Notes payable		740,174			289,763			290,498			291,045			291,593
Allowance for risk-sharing obligations		62,636			61,607			60,329			64,580			75,313
Guaranty obligation, net		47,378			49,060			50,369			51,836			52,306
Deferred tax liabilities		225,240			185,916			185,863			185,606			185,658
Derivative liabilities		6,403			13,263			30,411			9,250			5,066
Performance deposits from borrowers		15,720			28,717			10,374			9,442			14,468
Other liabilities		429,412			256,021			197,800			234,734			313,193
Total liabilities	$	3,468,535		$	3,732,926		$	2,649,626		$	1,958,833		$	3,454,753
Stockholders' Equity
Common stock	$	320		$	312		$	310		$	310		$	307
Additional paid-in capital		393,022			271,562			255,676			248,069			241,004
Accumulated other comprehensive income (loss)		2,558			2,737			2,578			1,810			1,968
Retained earnings		1,154,252			1,090,506			1,034,931			994,943			952,943
Total stockholders' equity	$	1,550,152		$	1,365,117		$	1,293,495		$	1,245,132		$	1,196,222
Noncontrolling interests		30,065			18,819			—			—			—
Total equity	$	1,580,217		$	1,383,936		$	1,293,495		$	1,245,132		$	1,196,222
Commitments and contingencies		—			—			—			—			—
Total liabilities and stockholders' equity	$	5,048,752		$	5,116,862		$	3,943,121		$	3,203,965		$	4,650,975

 

Walker & Dunlop, Inc. and Subsidiaries
Condensed Consolidated Statements of Income and Comprehensive Income
Unaudited
	Quarterly Trends															Years ended
																December 31,
(in thousands, except per share amounts)	Q4 2021			Q3 2021			Q2 2021			Q1 2021			Q4 2020			2021			2020
Revenues
Loan origination and debt brokerage fees, net	$	139,421		$	123,242		$	107,472		$	75,879		$	120,956		$	446,014		$	359,061
Fair value of expected net cash flows from servicing, net ("MSR income")		77,879			89,482			61,849			57,935			121,566			287,145			358,000
Servicing fees		72,808			70,628			69,052			65,978			63,240			278,466			235,801
Property sales broker fees		54,808			33,677			22,454			9,042			18,180			119,981			38,108
Net warehouse interest income		7,340			5,583			4,630			4,555			6,872			22,108			29,326
Escrow earnings and other interest income		2,178			2,032			1,823			2,117			2,566			8,150			18,255
Other revenues		52,755			21,646			14,131			8,782			16,329			97,314			45,156
Total revenues	$	407,189		$	346,290		$	281,411		$	224,288		$	349,709		$	1,259,178		$	1,083,707
Expenses
Personnel	$	195,670		$	170,181		$	141,421		$	96,215		$	157,826		$	603,487		$	468,819
Amortization and depreciation		61,405			53,498			48,510			46,871			45,013			210,284			169,011
Provision (benefit) for credit losses		1,093			1,266			(4,326)			(11,320)			5,450			(13,287)			37,479
Interest expense on corporate debt		2,690			1,766			1,760			1,765			1,826			7,981			8,550
Other operating expenses		36,484			24,836			19,748			17,587			22,258			98,655			69,582
Total expenses	$	297,342		$	251,547		$	207,113		$	151,118		$	232,373		$	907,120		$	753,441
Income from operations	$	109,847		$	94,743		$	74,298		$	73,170		$	117,336		$	352,058		$	330,266
Income tax expense		30,117			22,953			18,240			15,118			34,237			86,428			84,313
Net income before noncontrolling interests	$	79,730		$	71,790		$	56,058		$	58,052		$	83,099		$	265,630		$	245,953
Less: net income (loss) from noncontrolling interests		(201)			69			—			—			—			(132)			(224)
Walker & Dunlop net income	$	79,931		$	71,721		$	56,058		$	58,052		$	83,099		$	265,762		$	246,177
Net change in unrealized gains (losses) on pledged available-for-sale securities, net of taxes		(179)			159			768			(158)			500			590			1,231
Walker & Dunlop comprehensive income	$	79,752		$	71,880		$	56,826		$	57,894		$	83,599		$	266,352		$	247,408
Basic earnings per share	$	2.46		$	2.23		$	1.75		$	1.82		$	2.63		$	8.27		$	7.85
Diluted earnings per share		2.42			2.21			1.73			1.79			2.59			8.15			7.69
Cash dividends paid per common share		0.50			0.50			0.50			0.50			0.36			2.00			1.44
Basic weighted-average shares outstanding		31,343			31,064			31,019			30,823			30,635			31,081			30,444
Diluted weighted-average shares outstanding		31,956			31,459			31,370			31,276			31,227			31,533			31,083

 

SUPPLEMENTAL OPERATING DATA
Unaudited
	Quarterly Trends															Years ended
																December 31,
(dollars in thousands, except per share data)	Q4 2021			Q3 2021			Q2 2021			Q1 2021			Q4 2020			2021			2020
Transaction Volume:
Components of Debt Financing Volume
Fannie Mae	$	2,585,100		$	3,271,765		$	1,911,976		$	1,533,024		$	3,891,649		$	9,301,865		$	12,803,046
Freddie Mac		1,546,883			2,591,906			1,003,319			1,012,720			2,685,359			6,154,828			8,588,748
Ginnie Mae - HUD		523,899			522,093			672,574			622,133			844,221			2,340,699			2,212,538
Brokered (1)		12,684,294			6,402,862			6,280,578			4,302,492			3,768,689			29,670,226			10,969,615
Principal Lending and Investing (2)		474,873			472,142			318,237			178,250			152,831			1,443,502			380,360
Total Debt Financing Volume	$	17,815,049		$	13,260,768		$	10,186,684		$	7,648,619		$	11,342,749		$	48,911,120		$	34,954,307
Property Sales Volume		9,287,312			5,230,093			3,341,532			1,395,760			2,846,276			19,254,697			6,129,739
Total Transaction Volume	$	27,102,361		$	18,490,861		$	13,528,216		$	9,044,379		$	14,189,025		$	68,165,817		$	41,084,046
Key Performance Metrics:
Operating margin		27	%		27	%		26	%		33	%		34	%		28	%		30	%
Return on equity		23			22			18			19			29			21			23
Walker & Dunlop net income	$	79,931		$	71,721		$	56,058		$	58,052		$	83,099		$	265,762		$	246,177
Adjusted EBITDA (3)		109,667			72,430			66,514			60,667			58,161			309,278			215,849
Diluted EPS		2.42			2.21			1.73			1.79			2.59			8.15			7.69
Key Expense Metrics (as a percentage of total revenues):
Personnel expenses		48	%		49	%		50	%		43	%		45	%		48	%		43	%
Other operating expenses		9			7			7			8			6			8			6
Key Revenue Metrics (as a percentage of debt financing volume):
Origination fee margin (4)		0.80	%		0.95	%		1.07	%		1.02	%		1.08	%		0.93	%		1.04	%
MSR margin (5)		0.45			0.70			0.63			0.78			1.09			0.60			1.04
Agency MSR margin (6)		1.67			1.40			1.72			1.83			1.64			1.61			1.52
Other Data:
Market capitalization at period end	$	4,835,508		$	3,540,501		$	3,239,332		$	3,182,606		$	2,822,970
Closing share price at period end	$	150.88		$	113.50		$	104.38		$	102.74		$	92.02
Average headcount		1,128			1,084			1,027			974			928
Components of Servicing Portfolio (end of period):
Fannie Mae	$	53,401,457		$	52,317,953		$	51,077,660		$	50,113,076		$	48,818,185
Freddie Mac		37,138,836			38,039,014			37,887,969			37,695,462			37,072,587
Ginnie Mae - HUD		9,889,289			9,894,893			9,904,246			9,754,667			9,606,506
Brokered (7)		15,035,439			13,429,801			13,129,969			12,090,825			11,419,372
Principal Lending and Investing (8)		235,543			238,713			276,738			213,240			295,322
Total Servicing Portfolio	$	115,700,564		$	113,920,374		$	112,276,582		$	109,867,270		$	107,211,972
Assets under management (9)		16,437,865			2,309,332			1,801,577			1,836,086			1,816,421
Total Managed Portfolio	$	132,138,429		$	116,229,706		$	114,078,159		$	111,703,356		$	109,028,393
Key Servicing Portfolio Metrics:
Custodial escrow account balance (in billions)	$	3.7		$	3.0		$	3.0		$	2.5		$	3.1
Weighted-average servicing fee rate (basis points)		24.9			24.6			24.5			24.3			24.0
Weighted-average remaining servicing portfolio term (years)		9.2			9.2			9.2			9.2			9.4

____________________
(1)	Brokered transactions for life insurance companies, commercial banks, and other capital sources.
(2)	Includes debt financing volumes from our interim lending platform, our interim lending joint venture, and WDIP separate accounts.
(3)	This is a non-GAAP financial measure. For more information on adjusted EBITDA, refer to the section above titled "Non-GAAP Financial Measures."
(4)	Loan origination and debt brokerage fees, net as a percentage of debt financing volume. Excludes the income and debt financing volume from Principal Lending and Investing.
(5)	MSR income as a percentage of debt financing volume. Excludes the income and debt financing volume from Principal Lending and Investing.
(6)	MSR income as a percentage of Agency debt financing volume.
(7)	Brokered loans serviced primarily for life insurance companies.
(8)	Consists of interim loans not managed for our interim loan joint venture.
(9)	Alliant & WDIP assets under management and interim loans serviced for our interim loan joint venture.

 

KEY CREDIT METRICS
Unaudited
	December 31,			September 30,			June 30,			March 31,			December 31,
(dollars in thousands)	2021			2021			2021			2021			2020
Risk-sharing servicing portfolio:
Fannie Mae Full Risk	$	45,581,476		$	44,069,885		$	42,444,569		$	41,152,790		$	39,835,534
Fannie Mae Modified Risk		7,807,853			8,235,475			8,617,020			8,941,234			8,948,472
Freddie Mac Modified Risk		33,195			36,883			36,894			37,006			37,018
Total risk-sharing servicing portfolio	$	53,422,524		$	52,342,243		$	51,098,483		$	50,131,030		$	48,821,024
Non-risk-sharing servicing portfolio:
Fannie Mae No Risk	$	12,127		$	12,593		$	16,071		$	19,052		$	34,180
Freddie Mac No Risk		37,105,641			38,002,131			37,851,075			37,658,456			37,035,568
GNMA - HUD No Risk		9,889,289			9,894,893			9,904,246			9,754,667			9,606,506
Brokered		15,035,438			13,429,801			13,129,969			12,090,825			11,419,372
Total non-risk-sharing servicing portfolio	$	62,042,495		$	61,339,418		$	60,901,361		$	59,523,000		$	58,095,626
Total loans serviced for others	$	115,465,019		$	113,681,661		$	111,999,844		$	109,654,030		$	106,916,650
Interim loans (full risk) servicing portfolio		235,543			238,713			276,738			213,240			295,322
Total servicing portfolio unpaid principal balance	$	115,700,562		$	113,920,374		$	112,276,582		$	109,867,270		$	107,211,972
Interim Loan Joint Venture Managed Loans (1)	$	848,196		$	918,518		$	629,532		$	660,999		$	558,161
At-risk servicing portfolio (2)	$	49,573,263		$	48,209,532		$	46,866,767		$	45,796,952		$	44,483,676
Maximum exposure to at-risk portfolio (3)		10,056,584			9,784,054			9,517,609			9,304,440			9,032,083
Defaulted loans		78,659			48,481			48,481			48,481			48,481
Defaulted loans as a percentage of the at-risk portfolio		0.16	%		0.10	%		0.10	%		0.11	%		0.11	%
Allowance for risk-sharing as a percentage of the at-risk portfolio		0.13			0.13			0.13			0.14			0.17
Allowance for risk-sharing as a percentage of maximum exposure		0.62			0.63			0.63			0.69			0.83

____________________
(1)	Includes $73.3 million as of March 31, 2021 and December 31, 2020 of loans managed directly for our interim loan joint venture partner in addition to interim loan joint venture managed loans. We indirectly share in a portion of the risk of loss associated with interim loan joint venture managed loans through our 15% equity ownership in the joint venture. We had no exposure to risk of loss for the loans serviced directly for our interim loan joint venture partner. The balance of this line is included as a component of assets under management in the Supplemental Operating Data table.
(2)	At-risk servicing portfolio is defined as the balance of Fannie Mae DUS loans subject to the risk-sharing formula described below, as well as a small number of Freddie Mac loans on which we share in the risk of loss. Use of the at-risk portfolio provides for comparability of the full risk-sharing and modified risk-sharing loans because the provision and allowance for risk-sharing obligations are based on the at-risk balances of the associated loans. Accordingly, we have presented the key statistics as a percentage of the at-risk portfolio. For example, a $15 million loan with 50% risk-sharing has the same potential risk exposure as a $7.5 million loan with full DUS risk sharing. Accordingly, if the $15 million loan with 50% risk-sharing were to default, we would view the overall loss as a percentage of the at-risk balance, or $7.5 million, to ensure comparability between all risk-sharing obligations. To date, substantially all of the risk-sharing obligations that we have settled have been from full risk-sharing loans.
(3)	Represents the maximum loss we would incur under our risk-sharing obligations if all of the loans we service, for which we retain some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement. The maximum exposure is not representative of the actual loss we would incur.

 

ADJUSTED FINANCIAL METRIC RECONCILIATION TO GAAP
Unaudited
	Quarterly Trends															Years ended
																December 31,
(in thousands)	Q4 2021			Q3 2021			Q2 2021			Q1 2021			Q4 2020			2021			2020
Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA
Walker & Dunlop Net Income	$	79,931		$	71,721		$	56,058		$	58,052		$	83,099		$	265,762		$	246,177
Income tax expense		30,117			22,953			18,240			15,118			34,237			86,428			84,313
Interest expense on corporate debt		2,690			1,766			1,760			1,765			1,826			7,981			8,550
Amortization and depreciation		61,405			53,498			48,510			46,871			45,013			210,284			169,011
Provision (benefit) for credit losses		1,093			1,266			(4,326)			(11,320)			5,450			(13,287)			37,479
Net write-offs		—			—			—			—			—			—			—
Stock-based compensation expense		9,637			10,708			8,121			8,116			10,102			36,582			28,319
Unamortized issuance costs from corporate debt retirement		2,673			—			—			—			—			2,673			—
Fair value of expected net cash flows from servicing, net		(77,879)			(89,482)			(61,849)			(57,935)			(121,566)			(287,145)			(358,000)
Adjusted EBITDA	$	109,667		$	72,430		$	66,514		$	60,667		$	58,161		$	309,278		$	215,849

 

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SOURCE Walker & Dunlop, Inc.

FAQ

What were Walker & Dunlop's revenues for Q4 2021?

Walker & Dunlop reported total revenues of $407.2 million for Q4 2021, a 16% increase from Q4 2020.

What was the total transaction volume for Walker & Dunlop in Q4 2021?

The total transaction volume reached $27.1 billion in Q4 2021, up 91% year over year.

How did net income change for Walker & Dunlop in Q4 2021?

Net income decreased to $79.9 million in Q4 2021, down 4% from the previous year.

What was the adjusted EBITDA for Walker & Dunlop in Q4 2021?

The adjusted EBITDA for Q4 2021 was $109.7 million, reflecting an 89% increase compared to Q4 2020.

Did Walker & Dunlop increase its dividend in 2022?

Yes, Walker & Dunlop increased its quarterly dividend by 20% to $0.60 per share.

What was the status of the servicing portfolio for Walker & Dunlop at the end of 2021?

The servicing portfolio grew to $115.7 billion at December 31, 2021, marking an 8% increase from the prior year.

How did GSE debt financing volumes perform in Q4 2021 for Walker & Dunlop?

GSE debt financing volumes decreased by 37% in Q4 2021 compared to Q4 2020.