Walker & Dunlop Reports 20% Growth in Diluted Earnings Per Share to $1.79
Walker & Dunlop reported Q1 2021 revenues of $224.3 million, a 4% decline YoY, with a net income of $58.1 million and diluted EPS of $1.79, up 20% from Q1 2020. Total transaction volume was $9.0 billion, down 20% due to decreased multifamily financing. The adjusted EBITDA was $60.7 million. The company declared a quarterly dividend of $0.50 per share for Q2 2021. Despite a strong start to 2021, there was a noted decrease in agency debt financing volumes, particularly with Fannie Mae.
- Net income increased 21% YoY to $58.1 million
- Diluted EPS rose 20% YoY to $1.79
- Maintained a strong servicing portfolio growth, 16% increase YoY to $109.9 billion
- 27% of total transaction volume from new customers in Q1 2021
- Total transaction volume decreased 20% YoY to $9.0 billion
- Agency debt financing volumes dropped 43% YoY, with Fannie Mae volumes down 63%
- Adjusted EBITDA decreased 5% YoY to $60.7 million
BETHESDA, Md., May 6, 2021 /PRNewswire/ --
FIRST QUARTER 2021 HIGHLIGHTS
- Total revenues of
$224.3 million - Total transaction volume of
$9.0 billion - Net income of
$58.1 million and diluted earnings per share of$1.79 - Benefit for credit losses of
$11.3 million resulted in a$0.25 benefit to diluted earnings per share - Servicing portfolio of
$109.9 billion at March 31, 2021 - Adjusted EBITDA1 of
$60.7 million - Declared quarterly dividend of
$0.50 per share for the second quarter
Walker & Dunlop, Inc. (NYSE: WD) (the "Company") reported first quarter net income of
Willy Walker, Chairman and CEO, commented, "Walker & Dunlop is today the largest provider of capital to the multifamily industry and the fourth largest lender on commercial real estate in the United States thanks to our investments in people, brand, and technology.
Mr. Walker continued, "We had a great start to the year and see a lot of opportunity ahead of us. There is over
FIRST QUARTER 2021 OPERATING RESULTS
TRANSACTION VOLUMES | ||||||||||||
(dollars in thousands) | Q1 2021 | Q1 2020 | $ Variance | % Variance | ||||||||
Fannie Mae | $ | 1,533,024 | $ | 4,171,491 | $ | (2,638,467) | (63) | % | ||||
Freddie Mac | 1,012,720 | 997,796 | 14,924 | 1 | ||||||||
Ginnie Mae - HUD | 622,133 | 354,687 | 267,446 | 75 | ||||||||
Brokered | 4,302,492 | 3,993,885 | 308,607 | 8 | ||||||||
Principal Lending and Investing (2) | 178,250 | 107,950 | 70,300 | 65 | ||||||||
Debt financing volume | $ | 7,648,619 | $ | 9,625,809 | $ | (1,977,190) | (21) | % | ||||
Property sales volume | 1,395,760 | 1,730,617 | (334,857) | (19) | ||||||||
Total transaction volume | $ | 9,044,379 | $ | 11,356,426 | $ | (2,312,047) | (20) | % | ||||
Discussion of Results:
- Our investments in people, brand and technology continue to drive strong debt financing and property sales volumes as the commercial real estate industry continues to rebound from the effects of the COVID-19 pandemic. During the quarter,
27% of our total transaction volume came from new customers, and79% of our refinancing volumes were new loans to our servicing portfolio.
- Agency debt financing volumes decreased by
43% in the first quarter of 2021 compared to the first quarter of 2020, driven by the significant decline in Fannie Mae volume. In the prior year, we originated the largest transaction in our history, a portfolio of$2.1 billion , driving record Fannie Mae volume. Fannie Mae and Freddie Mac had a slow start to the year but have become more active in the market during the second quarter, with$105 billion of combined lending capacity available to be used during the remainder of 2021. Our HUD debt financing volume increased significantly from the prior year as the HUD product continues to be a favorable source of financing for multifamily properties.
- Increased brokered volume of
8% reflects the growth of our team of bankers across the country and increasing demand from private capital providers.
- The increase in principal lending and investing volume, which includes interim loans, originations for WDIP separate accounts, and joint venture interim lending, was primarily due to a year-over-year increase in interim loans originated for our interim lending joint venture and our interim loan program. We saw increased demand for interim lending as the rebound from the impacts of the COVID-19 pandemic continued during the quarter.
- Property sales volume decreased in the first quarter of 2021; however, the multifamily acquisitions market continues to steadily recover, with a significant amount of capital targeting multifamily assets.
MANAGED PORTFOLIO | ||||||||||||
(dollars in thousands) | Q1 2021 | Q1 2020 | $ Variance | % Variance | ||||||||
Fannie Mae | $ | 50,113,076 | $ | 41,166,040 | $ | 8,947,036 | 22 | % | ||||
Freddie Mac | 37,695,462 | 32,191,699 | 5,503,763 | 17 | ||||||||
Ginnie Mae - HUD | 9,754,667 | 9,750,696 | 3,971 | - | ||||||||
Brokered | 12,090,825 | 11,326,492 | 764,333 | 7 | ||||||||
Principal Lending and Investing | 213,240 | 387,314 | (174,074) | (45) | ||||||||
Total servicing portfolio | $ | 109,867,270 | $ | 94,822,241 | $ | 15,045,029 | 16 | % | ||||
Assets under management | 1,836,086 | 2,001,984 | (165,898) | (8) | ||||||||
Total Managed Portfolio | $ | 111,703,356 | $ | 96,824,225 | $ | 14,879,131 | 15 | % | ||||
Weighted-average servicing fee rate (basis points) | 24.3 | 23.3 | ||||||||||
Weighted-average remaining servicing portfolio term (years) | 9.2 | 9.5 | ||||||||||
Discussion of Results:
- Our servicing portfolio continues to experience impressive growth due to our significant Agency debt financing volumes and limited maturities and prepayments over the past year.
- During the first quarter of 2021, we added
$2.7 billion of net loans to our servicing portfolio, and over the past 12 months, we added$15.0 billion of net loans to our servicing portfolio,96% of which were Fannie Mae and Freddie Mac loans.
- Only
$6.9 billion of Agency loans in our servicing portfolio, with a weighted-average servicing fee of 19.8 basis points, are scheduled to mature over the next two years.
- The increase in the 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 high weighted-average servicing fee on Fannie Mae debt financing volume over the past year.
- We added net mortgage servicing rights ("MSRs") from originations of
$47.1 million in the quarter and$187.4 million over the past 12 months.
- The MSRs associated with our servicing portfolio had a fair value of
$1.2 billion as of March 31, 2021, compared to$868.4 million as of March 31, 2020.
- Assets under management ("AUM") as of March 31, 2021 consisted of
$1.2 billion of loans and funds managed by WDIP and$0.6 billion of loans in our interim lending joint venture. The year-over-year decrease in AUM is principally related to payoffs outpacing originations in our interim lending joint venture partially offset by WDIP's fundraising activity.
REVENUES | ||||||||||||
(dollars in thousands) | Q1 2021 | Q1 2020 | $ Variance | % Variance | ||||||||
Loan origination and debt brokerage fees, net | $ | 75,879 | $ | 76,373 | $ | (494) | (1) | % | ||||
Fair value of expected net cash flows from servicing, net ("MSR income") | 57,935 | 68,000 | (10,065) | (15) | ||||||||
Servicing fees | 65,978 | 55,434 | 10,544 | 19 | ||||||||
Net warehouse interest income, LHFS | 2,459 | 1,492 | 967 | 65 | ||||||||
Net warehouse interest income, LHFI | 2,096 | 4,003 | (1,907) | (48) | ||||||||
Escrow earnings and other interest income | 2,117 | 10,743 | (8,626) | (80) | ||||||||
Property sales broker fees | 9,042 | 9,612 | (570) | (6) | ||||||||
Other revenues | 8,782 | 8,500 | 282 | 3 | ||||||||
Total revenues | $ | 224,288 | $ | 234,157 | $ | (9,869) | (4) | % | ||||
Key revenue metrics: | ||||||||||||
Origination fee margin (3) | 1.02 | % | 0.79 | % | ||||||||
MSR margin (4) | 0.78 | 0.71 | ||||||||||
Agency MSR margin (5) | 1.83 | 1.23 | ||||||||||
Discussion of Results:
- The decrease in loan origination and debt brokerage fees, net was driven by the decrease in overall debt financing volume, largely offset by the increase in the origination fee margin shown above. The origination fee margin in the first quarter of 2020 was lower due to the
$2.1 billion portfolio transaction. We typically receive much lower origination fee margins on large portfolios compared to regular debt financing volumes. Additionally, we received significantly more securitization fee income from Freddie Mac debt financing volume in the first quarter of 2021 compared to the first quarter of 2020.
- The decrease in MSR income was primarily related to the decrease in Agency debt financing volume year over year, partially offset by an increase in the MSR and Agency MSR margins year over year as shown above.
- An increase in HUD debt financing volume and the weighted-average servicing fee on Fannie Mae debt financing volume led to the increases in the MSR and Agency MSR margins.
- The
$15.0 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, coupled with the significant increase in the servicing portfolio's weighted-average servicing fee.
- The increase in net warehouse interest income from loans held for sale ("LHFS") was due to an
89% increase in the average balance of LHFS outstanding, offset by a partial decrease in the net spread from 75 basis points in 2020 to 65 basis points in 2021.
- The decrease in net warehouse interest income from loans held for investment ("LHFI") was due to a smaller average balance of loans outstanding and a decrease in the net spread. During 2020, we held a larger balance of loans that were fully funded with corporate cash, resulting in an overall higher net spread. During 2021, a much smaller balance of loans was fully funded with corporate cash.
- Escrow earnings and other interest income decreased primarily due to a significant year-over-year decrease in short-term interest rates, upon which our earnings rates are based.
- The decrease in property sales broker fees was driven by the decrease in property sales volume year over year, partially offset by an increase in the profitability of property sales in 2021.
EXPENSES | ||||||||||||
(dollars in thousands) | Q1 2021 | Q1 2020 | $ Variance | % Variance | ||||||||
Personnel | $ | 96,215 | $ | 89,525 | $ | 6,690 | 7 | % | ||||
Amortization and depreciation | 46,871 | 39,762 | 7,109 | 18 | ||||||||
Provision (benefit) for credit losses | (11,320) | 23,643 | (34,963) | (148) | ||||||||
Interest expense on corporate debt | 1,765 | 2,860 | (1,095) | (38) | ||||||||
Other operating expenses | 17,587 | 18,090 | (503) | (3) | ||||||||
Total expenses | $ | 151,118 | $ | 173,880 | $ | (22,762) | (13) | % | ||||
Key expense metrics (as a percentage of total revenues): | ||||||||||||
Personnel expenses | 43 | % | 38 | % | ||||||||
Other operating expenses | 8 | 8 | ||||||||||
Discussion of Results:
- The increase in personnel expenses was primarily the result of a
16% increase in average headcount and associated salaries and benefits, as we continue to scale our business through strategic acquisitions and hiring.
- Amortization and depreciation increased as a result of the growth in the average balance of MSRs outstanding year over year.
- The change in the provision (benefit) for credit losses was primarily related to allowance for risk-sharing obligations. During the first quarter of 2020, the loss rate used for the forecast period increased from one basis point upon implementation of CECL to seven points as of March 31, 2020 due to forecasted high unemployment rates associated with the onset of the COVID-19 pandemic, resulting in a significant increase in the allowance for risk-sharing obligations with a corresponding provision for credit losses. During the first quarter of 2021, the loss rate used for the forecast period decreased from six basis points at December 31, 2020 to four basis points as of March 31, 2021 due to forecasted low unemployment rates, resulting in a significant decrease in the allowance for risk-sharing obligations with a corresponding benefit for credit losses.
- The decrease in the interest expense on corporate debt was driven by the substantial decrease in the average 30-day LIBOR upon which our corporate debt interest was based.
KEY PERFORMANCE METRICS | ||||||||||||
(dollars in thousands, except per share amounts) | Q1 2021 | Q1 2020 | $ Variance | % Variance | ||||||||
Walker & Dunlop net income | $ | 58,052 | $ | 47,829 | $ | 10,223 | 21 | % | ||||
Adjusted EBITDA | 60,667 | 64,129 | (3,462) | (5) | ||||||||
Diluted EPS | $ | 1.79 | $ | 1.49 | $ | 0.30 | 20 | % | ||||
Operating margin | 33 | % | 26 | % | ||||||||
Return on equity | 19 | 19 | ||||||||||
Discussion of Results:
- The increase in net income was the result of a
21% increase in income from operations, as total expenses decreased at a higher rate than total revenues year over year due to the change in the provision for credit losses noted above.
- Adjusted EBITDA decreased year over year largely due to lower escrow interest income and an increase in personnel expense, partially offset by an increase in servicing fees.
KEY CREDIT METRICS | ||||||||||||
(dollars in thousands) | Q1 2021 | Q1 2020 | $ Variance | % Variance | ||||||||
At-risk servicing portfolio (6) | $ | 45,796,952 | $ | 37,864,262 | $ | 7,932,690 | 21 | % | ||||
Maximum exposure to at-risk portfolio (7) | 9,304,440 | 7,729,120 | 1,575,320 | 20 | ||||||||
Defaulted loans | $ | 48,481 | $ | 48,481 | $ | — | - | % | ||||
Key credit metrics (as a percentage of the at-risk portfolio): | ||||||||||||
Defaulted loans | 0.11 | % | 0.13 | % | ||||||||
Allowance for risk-sharing | 0.14 | 0.17 | ||||||||||
Key credit metrics (as a percentage of maximum exposure): | ||||||||||||
Allowance for risk-sharing | 0.69 | % | 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 volume originated during the past 12 months. As of March 31, 2021, there were two defaulted loans that were provisioned for in 2019. Both properties have been foreclosed on and final settlement of any losses will occur in the future upon disposition of the assets by Fannie Mae.
- To date, we have not experienced any defaults or a significant deterioration in the overall credit quality of the at-risk servicing portfolio due to the COVID-19 pandemic.
- The on-balance sheet interim loan portfolio, which is comprised of loans that we have full risk of loss, was
$213.2 million at March 31, 2021 compared to$387.3 million at March 31, 2020. There was one defaulted loan in our interim loan portfolio at March 31, 2021, which defaulted and was provisioned for in prior years. All other loans in the on-balance sheet interim loan portfolio are current and performing as of March 31, 2021. The interim loan joint venture holds$587.7 million of loans as of March 31, 2021, for which we indirectly share in a small portion of the risk of loss. All loans in the interim loan joint venture are current and performing as of March 31, 2021.
DIVIDENDS AND SHARE REPURCHASES
On May 5, 2021, our Board of Directors declared a dividend of
On February 3, 2021, our Board of Directors authorized the repurchase of up to
Any future purchases made pursuant to the 2021 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.
(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) | Includes debt financing volumes from our interim loan program, our interim loan joint venture, and WDIP separate accounts. | ||||
(3) | Origination-related fees as a percentage of debt financing volume. Excludes the income and debt financing volume from Principal Lending and Investing. | ||||
(4) | MSR income 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 Agency debt financing volume. | ||||
(6) | 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 | |||||
(7) | 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, May 6, 2021 at 8:30 a.m. Eastern time. Listeners can access the webcast via the link: https://walkerdunlop.zoom.us/webinar/register/WN_ZGFl6bFwQDSXmf2SoAMrCg or by dialing +1 408 901 0584, Webinar ID 929 2886 4465, Password 545167. 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), headquartered in Bethesda, Maryland, is one of the largest commercial real estate finance companies in the United States. The Company provides a comprehensive range of capital solutions for all commercial real estate asset classes, as well as investment sales brokerage services to owners of multifamily properties. Walker & Dunlop is included on the S&P SmallCap 600 Index and was ranked as one of FORTUNE Magazine's Fastest Growing Companies in 2014, 2017, and 2018. Walker & Dunlop's 1,000+ professionals in 38 offices across the nation have an unyielding commitment to client satisfaction.
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) the impact of the COVID-19 pandemic on the Company's business, results of operations, and financial condition, including due to its principal and interest advance obligations on Fannie Mae and Ginnie Mae loans it services, and the domestic economy, (2) general economic conditions and multifamily and commercial real estate market conditions, (3) regulatory and/or legislative changes to Freddie Mac, Fannie Mae or HUD, (4) our ability to retain and attract loan originators and other professionals, 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 | ||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||
2021 | 2020 | 2020 | 2020 | 2020 | ||||||||||
(in thousands) | ||||||||||||||
Assets | ||||||||||||||
Cash and cash equivalents | $ | 277,277 | $ | 321,097 | $ | 294,873 | $ | 275,202 | $ | 205,309 | ||||
Restricted cash | 14,805 | 19,432 | 12,383 | 10,894 | 30,745 | |||||||||
Pledged securities, at fair value | 139,570 | 137,236 | 134,295 | 128,296 | 121,495 | |||||||||
Loans held for sale, at fair value | 1,048,385 | 2,449,198 | 3,227,287 | 1,733,598 | 1,186,577 | |||||||||
Loans held for investment, net | 281,788 | 360,402 | 342,056 | 404,527 | 454,213 | |||||||||
Mortgage servicing rights | 909,884 | 862,813 | 805,655 | 778,269 | 722,486 | |||||||||
Goodwill and other intangible assets | 262,906 | 250,838 | 251,002 | 251,165 | 247,257 | |||||||||
Derivative assets | 58,130 | 49,786 | 37,290 | 27,085 | 158,233 | |||||||||
Receivables, net | 59,526 | 65,735 | 51,837 | 50,188 | 52,185 | |||||||||
Other assets | 151,694 | 134,438 | 143,025 | 133,825 | 133,475 | |||||||||
Total assets | $ | 3,203,965 | $ | 4,650,975 | $ | 5,299,703 | $ | 3,793,049 | $ | 3,311,975 | ||||
Liabilities | ||||||||||||||
Warehouse notes payable | $ | 1,112,340 | $ | 2,517,156 | $ | 3,328,327 | $ | 1,863,654 | $ | 1,305,846 | ||||
Note payable | 291,045 | 291,593 | 292,272 | 292,819 | 293,371 | |||||||||
Allowance for risk-sharing obligations | 64,580 | 75,313 | 70,495 | 69,191 | 64,110 | |||||||||
Guaranty obligation, net | 51,836 | 52,306 | 53,474 | 54,872 | 55,758 | |||||||||
Derivative liabilities | 9,250 | 5,066 | 3,858 | 13,739 | 172,623 | |||||||||
Other liabilities | 429,782 | 513,319 | 436,152 | 408,223 | 376,952 | |||||||||
Total liabilities | $ | 1,958,833 | $ | 3,454,753 | $ | 4,184,578 | $ | 2,702,498 | $ | 2,268,660 | ||||
Equity | ||||||||||||||
Preferred shares | $ | — | $ | — | $ | — | $ | — | $ | — | ||||
Common stock | 310 | 307 | 306 | 304 | 303 | |||||||||
Additional paid-in capital | 248,069 | 241,004 | 230,302 | 238,094 | 236,007 | |||||||||
Accumulated other comprehensive income (loss) | 1,810 | 1,968 | 1,468 | 249 | (1,181) | |||||||||
Retained earnings | 994,943 | 952,943 | 883,049 | 851,904 | 801,139 | |||||||||
Total stockholders' equity | $ | 1,245,132 | $ | 1,196,222 | $ | 1,115,125 | $ | 1,090,551 | $ | 1,036,268 | ||||
Noncontrolling interests | — | — | — | — | 7,047 | |||||||||
Total equity | $ | 1,245,132 | $ | 1,196,222 | $ | 1,115,125 | $ | 1,090,551 | $ | 1,043,315 | ||||
Commitments and contingencies | — | — | — | — | — | |||||||||
Total liabilities and equity | $ | 3,203,965 | $ | 4,650,975 | $ | 5,299,703 | $ | 3,793,049 | $ | 3,311,975 | ||||
Walker & Dunlop, Inc. and Subsidiaries Condensed Consolidated Statements of Income and Comprehensive Income Unaudited | |||||||||||||||
Quarterly Trends | |||||||||||||||
(in thousands, except per share amounts) | Q1 2021 | Q4 2020 | Q3 2020 | Q2 2020 | Q1 2020 | ||||||||||
Revenues | |||||||||||||||
Loan origination and debt brokerage fees, net | $ | 75,879 | $ | 120,956 | $ | 83,825 | $ | 77,907 | $ | 76,373 | |||||
Fair value of expected net cash flows from servicing, net | 57,935 | 121,566 | 78,065 | 90,369 | 68,000 | ||||||||||
Servicing fees | 65,978 | 63,240 | 60,265 | 56,862 | 55,434 | ||||||||||
Net warehouse interest income | 4,555 | 6,872 | 7,558 | 9,401 | 5,495 | ||||||||||
Escrow earnings and other interest income | 2,117 | 2,566 | 2,275 | 2,671 | 10,743 | ||||||||||
Property sales broker fees | 9,042 | 18,180 | 6,756 | 3,561 | 9,612 | ||||||||||
Other revenues | 8,782 | 16,329 | 8,272 | 12,054 | 8,500 | ||||||||||
Total revenues | $ | 224,288 | $ | 349,709 | $ | 247,016 | $ | 252,825 | $ | 234,157 | |||||
Expenses | |||||||||||||||
Personnel | $ | 96,215 | $ | 157,826 | $ | 114,548 | $ | 106,920 | $ | 89,525 | |||||
Amortization and depreciation | 46,871 | 45,013 | 41,919 | 42,317 | 39,762 | ||||||||||
Provision (benefit) for credit losses | (11,320) | 5,450 | 3,483 | 4,903 | 23,643 | ||||||||||
Interest expense on corporate debt | 1,765 | 1,826 | 1,786 | 2,078 | 2,860 | ||||||||||
Other operating expenses | 17,587 | 22,258 | 16,165 | 13,069 | 18,090 | ||||||||||
Total expenses | $ | 151,118 | $ | 232,373 | $ | 177,901 | $ | 169,287 | $ | 173,880 | |||||
Income from operations | $ | 73,170 | $ | 117,336 | $ | 69,115 | $ | 83,538 | $ | 60,277 | |||||
Income tax expense | 15,118 | 34,237 | 15,925 | 21,479 | 12,672 | ||||||||||
Net income before noncontrolling interests | $ | 58,052 | $ | 83,099 | $ | 53,190 | $ | 62,059 | $ | 47,605 | |||||
Less: net income (loss) from noncontrolling interests | — | — | — | — | (224) | ||||||||||
Walker & Dunlop net income | $ | 58,052 | $ | 83,099 | $ | 53,190 | $ | 62,059 | $ | 47,829 | |||||
Net change in unrealized gains (losses) on pledged available-for-sale securities, net of taxes | (158) | 500 | 1,219 | 1,430 | (1,917) | ||||||||||
Walker & Dunlop comprehensive income | $ | 57,894 | $ | 83,599 | $ | 54,409 | $ | 63,489 | $ | 45,912 | |||||
Basic earnings per share | $ | 1.82 | $ | 2.63 | $ | 1.69 | $ | 1.98 | $ | 1.53 | |||||
Diluted earnings per share | 1.79 | 2.59 | 1.66 | 1.95 | 1.49 | ||||||||||
Cash dividends paid per common share | 0.50 | 0.36 | 0.36 | 0.36 | 0.36 | ||||||||||
Basic weighted-average shares outstanding | 30,823 | 30,635 | 30,560 | 30,352 | 30,226 | ||||||||||
Diluted weighted-average shares outstanding | 31,276 | 31,227 | 31,074 | 30,860 | 31,160 | ||||||||||
SUPPLEMENTAL OPERATING DATA Unaudited | |||||||||||||||
Quarterly Trends | |||||||||||||||
(dollars in thousands, except per share data) | Q1 2021 | Q4 2020 | Q3 2020 | Q2 2020 | Q1 2020 | ||||||||||
Transaction Volume: | |||||||||||||||
Components of Debt Financing Volume | |||||||||||||||
Fannie Mae | $ | 1,533,024 | $ | 3,891,649 | $ | 1,977,607 | $ | 2,762,299 | $ | 4,171,491 | |||||
Freddie Mac | 1,012,720 | 2,685,359 | 3,136,313 | 1,769,280 | 997,796 | ||||||||||
Ginnie Mae - HUD | 622,133 | 844,221 | 373,480 | 640,150 | 354,687 | ||||||||||
Brokered (1) | 4,302,492 | 3,768,689 | 1,711,541 | 1,495,500 | 3,993,885 | ||||||||||
Principal Lending and Investing (2) | 178,250 | 152,831 | 105,488 | 14,091 | 107,950 | ||||||||||
Total Debt Financing Volume | $ | 7,648,619 | $ | 11,342,749 | $ | 7,304,429 | $ | 6,681,320 | $ | 9,625,809 | |||||
Property Sales Volume | 1,395,760 | 2,846,276 | 1,106,162 | 446,684 | 1,730,617 | ||||||||||
Total Transaction Volume | $ | 9,044,379 | $ | 14,189,025 | $ | 8,410,591 | $ | 7,128,004 | $ | 11,356,426 | |||||
Key Performance Metrics: | |||||||||||||||
Operating margin | 33 | % | 34 | % | 28 | % | 33 | % | 26 | % | |||||
Return on equity | 19 | 29 | 20 | 23 | 19 | ||||||||||
Walker & Dunlop net income | $ | 58,052 | $ | 83,099 | $ | 53,190 | $ | 62,059 | $ | 47,829 | |||||
Adjusted EBITDA (3) | 60,667 | 58,161 | 45,165 | 48,394 | 64,129 | ||||||||||
Diluted EPS | 1.79 | 2.59 | 1.66 | 1.95 | 1.49 | ||||||||||
Key Expense Metrics (as a percentage of total revenues): | |||||||||||||||
Personnel expenses | 43 | % | 45 | % | 46 | % | 42 | % | 38 | % | |||||
Other operating expenses | 8 | 6 | 7 | 5 | 8 | ||||||||||
Key Revenue Metrics: | |||||||||||||||
Origination fee margin (4) | 1.02 | % | 1.08 | % | 1.15 | % | 1.17 | % | 0.79 | % | |||||
MSR margin (5) | 0.78 | 1.09 | 1.08 | 1.36 | 0.71 | ||||||||||
Agency MSR margin (6) | 1.83 | 1.64 | 1.42 | 1.75 | 1.23 | ||||||||||
Other Data: | |||||||||||||||
Market capitalization at period end | $ | 3,182,606 | $ | 2,822,970 | $ | 1,657,545 | $ | 1,580,183 | $ | 1,250,860 | |||||
Closing share price at period end | $ | 102.74 | $ | 92.02 | $ | 53.00 | $ | 50.81 | $ | 40.27 | |||||
Average headcount | 974 | 928 | 887 | 860 | 837 | ||||||||||
Components of Servicing Portfolio: | |||||||||||||||
Fannie Mae | $ | 50,113,076 | $ | 48,818,185 | $ | 46,224,549 | $ | 45,160,004 | $ | 41,166,040 | |||||
Freddie Mac | 37,695,462 | 37,072,587 | 35,726,109 | 33,222,090 | 32,191,699 | ||||||||||
Ginnie Mae - HUD | 9,754,667 | 9,606,506 | 9,639,820 | 9,749,888 | 9,750,696 | ||||||||||
Brokered (7) | 12,090,825 | 11,419,372 | 11,513,521 | 11,519,629 | 11,326,492 | ||||||||||
Principal Lending and Investing (8) | 213,240 | 295,322 | 273,754 | 336,473 | 387,314 | ||||||||||
Total Servicing Portfolio | $ | 109,867,270 | $ | 107,211,972 | $ | 103,377,753 | $ | 99,988,084 | $ | 94,822,241 | |||||
Assets under management (9) | 1,836,086 | 1,816,421 | 1,936,679 | 1,884,673 | 2,001,984 | ||||||||||
Total Managed Portfolio | $ | 111,703,356 | $ | 109,028,393 | $ | 105,314,432 | $ | 101,872,757 | $ | 96,824,225 | |||||
Key Servicing Portfolio Metrics (end of period): | |||||||||||||||
Weighted-average servicing fee rate (bps) | 24.3 | 24.0 | 23.4 | 23.3 | 23.3 | ||||||||||
Weighted-average remaining term (years) | 9.2 | 9.4 | 9.4 | 9.5 | 9.5 | ||||||||||
(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) | Origination-related fees 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) | Interim loans serviced for our interim loan joint venture and WDIP assets under management. | |||
KEY CREDIT METRICS Unaudited | |||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||
(dollars in thousands) | 2021 | 2020 | 2020 | 2020 | 2020 | ||||||||||
Risk-sharing servicing portfolio: | |||||||||||||||
Fannie Mae Full Risk | $ | 41,152,790 | $ | 39,835,534 | $ | 37,018,792 | $ | 35,707,326 | $ | 34,148,159 | |||||
Fannie Mae Modified Risk | 8,941,234 | 8,948,472 | 9,165,490 | 9,411,097 | 6,973,167 | ||||||||||
Freddie Mac Modified Risk | 37,006 | 37,018 | 52,685 | 52,696 | 52,706 | ||||||||||
Total risk-sharing servicing portfolio | $ | 50,131,030 | $ | 48,821,024 | $ | 46,236,967 | $ | 45,171,119 | $ | 41,174,032 | |||||
Non-risk-sharing servicing portfolio: | |||||||||||||||
Fannie Mae No Risk | $ | 19,052 | $ | 34,180 | $ | 40,267 | $ | 41,581 | $ | 44,715 | |||||
Freddie Mac No Risk | 37,658,456 | 37,035,568 | 35,673,424 | 33,169,394 | 32,138,992 | ||||||||||
GNMA - HUD No Risk | 9,754,667 | 9,606,506 | 9,639,820 | 9,749,888 | 9,750,696 | ||||||||||
Brokered | 12,090,825 | 11,419,372 | 11,513,521 | 11,519,629 | 11,326,492 | ||||||||||
Total non-risk-sharing servicing portfolio | $ | 59,523,000 | $ | 58,095,626 | $ | 56,867,032 | $ | 54,480,492 | $ | 53,260,895 | |||||
Total loans serviced for others | $ | 109,654,030 | $ | 106,916,650 | $ | 103,103,999 | $ | 99,651,611 | $ | 94,434,927 | |||||
Interim loans (full risk) servicing portfolio | 213,240 | 295,322 | 273,754 | 336,473 | 387,314 | ||||||||||
Total servicing portfolio unpaid principal balance | $ | 109,867,270 | $ | 107,211,972 | $ | 103,377,753 | $ | 99,988,084 | $ | 94,822,241 | |||||
Interim Loan Joint Venture Managed Loans (1) | $ | 660,999 | $ | 558,161 | $ | 639,466 | $ | 695,267 | $ | 802,559 | |||||
At-risk servicing portfolio (2) | $ | 45,796,952 | $ | 44,483,676 | $ | 41,848,548 | $ | 40,640,024 | $ | 37,864,262 | |||||
Maximum exposure to at-risk portfolio (3) | 9,304,440 | 9,032,083 | 8,497,807 | 8,266,261 | 7,729,120 | ||||||||||
Defaulted loans | 48,481 | 48,481 | 48,481 | 48,481 | 48,481 | ||||||||||
Defaulted loans as a percentage of the at-risk portfolio | 0.11 | % | 0.11 | % | 0.12 | % | 0.12 | % | 0.13 | % | |||||
Allowance for risk-sharing as a percentage of the at-risk portfolio | 0.14 | 0.17 | 0.17 | 0.17 | 0.17 | ||||||||||
Allowance for risk-sharing as a percentage of maximum exposure | 0.69 | 0.83 | 0.83 | 0.84 | 0.83 | ||||||||||
(1) | Includes | |||
(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 | |||
(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 | |||||||||||||||
(in thousands) | Q1 2021 | Q4 2020 | Q3 2020 | Q2 2020 | Q1 2020 | ||||||||||
Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA | |||||||||||||||
Walker & Dunlop Net Income | $ | 58,052 | $ | 83,099 | $ | 53,190 | $ | 62,059 | $ | 47,829 | |||||
Income tax expense | 15,118 | 34,237 | 15,925 | 21,479 | 12,672 | ||||||||||
Interest expense on corporate debt | 1,765 | 1,826 | 1,786 | 2,078 | 2,860 | ||||||||||
Amortization and depreciation | 46,871 | 45,013 | 41,919 | 42,317 | 39,762 | ||||||||||
Provision (benefit) for credit losses | (11,320) | 5,450 | 3,483 | 4,903 | 23,643 | ||||||||||
Net write-offs | — | — | — | — | — | ||||||||||
Stock compensation expense | 8,116 | 10,102 | 6,927 | 5,927 | 5,363 | ||||||||||
Fair value of expected net cash flows from servicing, net | (57,935) | (121,566) | (78,065) | (90,369) | (68,000) | ||||||||||
Adjusted EBITDA | $ | 60,667 | $ | 58,161 | $ | 45,165 | $ | 48,394 | $ | 64,129 | |||||
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SOURCE Walker & Dunlop, Inc.
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