Walker & Dunlop Reports Third Quarter 2024 Financial Results

36% Increase in Total Transaction Volume Drives 33% Increase in Diluted Earnings Per Share

THIRD QUARTER 2024 HIGHLIGHTS

Total transaction volume of $11.6 billion, up 36% from Q3’23
Total revenues of $292.3 million, up 9% from Q3’23
Net income of $28.8 million and diluted earnings per share of $0.85, up 34% and 33%, respectively, from Q3’23
Adjusted EBITDA(1) of $78.9 million, up 7% from Q3’23
Adjusted core EPS(2) of $1.19, up 7% from Q3’23
Servicing portfolio of $134.1 billion as of September 30, 2024, up 4% from September 30, 2023
Declared quarterly dividend of $0.65 per share for the fourth quarter 2024

YEAR-TO-DATE 2024 HIGHLIGHTS

Total transaction volume of $26.5 billion, up 12% from 2023
Total revenues of $791.0 million, up 1% from 2023
Net income of $63.3 million and diluted earnings per share of $1.87, down 16% and 17%, respectively, from 2023
Adjusted EBITDA(1) of $234.0 million, up 10% from 2023
Adjusted core EPS(2) of $3.60, up 11% from 2023

Walker & Dunlop, Inc. (NYSE: WD) (the “Company,” or “Walker & Dunlop”) reported quarterly total transaction volume of $11.6 billion, up 36% from the third quarter of 2023, which drove total revenues of $292.3 million, up 9% year over year. Net income for the third quarter of 2024 was up 34% year over year to $28.8 million, while diluted earnings per share of $0.85 was up 33%. Adjusted EBITDA increased 7% to $78.9 million, reflecting the growth in transaction volumes year over year. Adjusted core EPS, which removes primarily non-cash revenues and expenses, was up 7% year over year to $1.19. The Company’s Board of Directors declared a dividend of $0.65 per share for the fourth quarter 2024.

“The commercial real estate market continues to improve, supported by strong fundamentals that are attracting capital to the market and driving an increase in acquisition and financing activity,” commented Walker & Dunlop Chairman and CEO Willy Walker. “As a result, nearly all of our key financial results improved in the third quarter, including a 33% year-over-year increase in diluted earnings per share to $0.85 driven by $11.6 billion of total transaction volume, up 36% year over year and 37% sequentially from Q2’24.”

“We carried the market’s momentum into the fourth quarter, and while rate movements and the presidential election have been headwinds, it is our belief that we are at the beginning of the next commercial real estate cycle where profits will be harvested, loans will be refinanced, and capital will be deployed – all generating demand for Walker & Dunlop’s capital and services,” continued Walker. “Our scaled servicing and asset management business will continue to generate strong recurring cash revenues as our Capital Markets business recovers and grows in the next cycle. Our continued investments in the people of Walker & Dunlop, our brand, and our technology position us extremely well to grow our financial results on the top and bottom line over the next several years.”

_______________

(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,” “Adjusted Financial Measure Reconciliation to GAAP” and “Adjusted Financial Measure Reconciliation to GAAP by Segment.”

(2)

Adjusted core EPS is a non-GAAP financial measure the Company presents to help investors better understand our operating performance. For a reconciliation of Adjusted core EPS to Diluted EPS, refer to the sections of this press release below titled “Non-GAAP Financial Measures” and “Adjusted Core EPS Reconciliation.”

CONSOLIDATED THIRD QUARTER 2024

OPERATING RESULTS

TRANSACTION VOLUMES

(in thousands)

Q3 2024

Q3 2023

$ Variance

% Variance

Fannie Mae

2,001,356

1,739,332

262,024

Freddie Mac

1,545,939

1,072,048

473,891

Ginnie Mae - HUD

272,054

86,557

185,497

214

Brokered (1)

4,028,208

3,149,457

878,751

Principal Lending and Investing (2)

165,875

N/A

Debt financing volume

8,013,432

6,047,394

1,966,038

Property sales volume

3,602,675

2,508,073

1,094,602

Total transaction volume

11,616,107

8,555,467

3,060,640

(1)

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

(2)

Includes debt financing volumes from our interim loan program, our interim loan joint venture, and Walker & Dunlop Investment Partners, Inc. (“WDIP”) separate accounts.

DISCUSSION OF QUARTERLY RESULTS:

As interest rates stabilized during the third quarter of 2024, capital flows increased causing a surge in multifamily property sales this quarter. Consequently, our property sales volume increased dramatically to $3.6 billion, a 44% increase over the third quarter of 2023.
The acceleration of multifamily property sales activity caused an increased need for debt financing, as many sales transactions rely on debt financing. Fannie Mae and Freddie Mac are the largest providers of capital to the multifamily sector, and we are the largest Fannie Mae lender and third largest Freddie Mac lender. Consequently, our lending volumes with the GSE’s grew to a combined $3.5 billion during the third quarter of 2024, an increase of 26% over the same quarter last year.
The year-over-year increase in HUD financing volume solidified Walker & Dunlop as the 2nd largest HUD lender for their fiscal year ended September 30, 2024, up from 5th in 2023.
The 28% increase in brokered volume was primarily the result of an expanding supply of capital from life insurance companies, banks, CMBS and other private capital providers, highlighted by a $1.2 billion refinancing of a marquee mixed-use property in the current quarter.

MANAGED PORTFOLIO

(dollars in thousands, unless otherwise noted)

Q3 2024

Q3 2023

$ Variance

% Variance

Fannie Mae

66,068,212

62,850,853

3,217,359

Freddie Mac

40,090,158

38,656,136

1,434,022

Ginnie Mae - HUD

10,727,323

10,320,520

406,803

Brokered

17,156,810

17,091,925

64,885

Principal Lending and Investing

38,043

40,000

(1,957

)

Total Servicing Portfolio

134,080,546

128,959,434

5,121,112

Assets under management

18,210,452

17,334,877

875,575

Total Managed Portfolio

152,290,998

146,294,311

5,996,687

Custodial escrow account balance at period end (in billions)

3.1

2.8

Weighted-average servicing fee rate (basis points)

24.1

24.2

Weighted-average remaining servicing portfolio term (years)

7.7

8.4

DISCUSSION OF QUARTERLY RESULTS:

Our servicing portfolio continues to expand as a result of additional Agency debt financing volumes over the past 12 months, partially offset by principal paydowns and loan payoffs.
During the third quarter of 2024, we added $1.3 billion of net loans to our servicing portfolio, and over the past 12 months, we added $5.1 billion of net loans to our servicing portfolio, almost all of which were Agency loans.
$11.4 billion of Agency loans in our servicing portfolio are scheduled to mature over the next two years. These loans, with a lower weighted-average servicing fee of 22.6 basis points, represent only 10% of the total Agency loans in our portfolio.
The mortgage servicing rights (“MSRs”) associated with our servicing portfolio had a fair value of $1.4 billion as of both September 30, 2024 and 2023.
Assets under management as of September 30, 2024 consisted of $15.8 billion of low-income housing tax credit (“LIHTC”) funds, $1.5 billion of debt funds, and $1.0 billion of equity funds managed by Walker & Dunlop Investment Partners, Inc. The 5% increase in assets under management was due to increases in all three categories.

KEY PERFORMANCE METRICS

(in thousands, except per share amounts)

Q3 2024

Q3 2023

$ Variance

% Variance

Walker & Dunlop net income

28,802

21,458

7,344

Adjusted EBITDA

78,905

74,065

4,840

Diluted EPS

0.85

0.64

0.21

Adjusted core EPS

1.19

1.11

0.08

Operating margin

Return on equity

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

Personnel expenses

Other operating expenses

DISCUSSION OF QUARTERLY RESULTS:

Net income and diluted EPS increased 34% and 33%, respectively, in the third quarter of 2024 compared to the same period in 2023, primarily driven by higher origination fees and non-cash MSR income from increased Agency debt financing volume year over year. The increase in net income also drove the increase in return on equity to 7% for the third quarter of 2024.
The 7% increase in adjusted EBITDA was largely due to higher origination fees, servicing fees, and property sale broker fees, partially offset by decreases in investment management fees, and other revenues and increases in variable personnel expenses tied to higher transaction activity, and other operating expenses.
Adjusted core EPS, which excludes, among other items, the impacts of non-cash MSR income and amortization, the provision for credit losses, and acquisition-related costs, such as amortization of intangible assets, rose to $1.19 from $1.11 in the third quarter of 2024. The increase was largely due to the same factors causing the increase in adjusted EBITDA.
The operating margin increase in the third quarter of 2024 was largely due to the growth in total transaction volume that drove a 33% increase to our income from operations.

KEY CREDIT METRICS

(in thousands)

Q3 2024

Q3 2023

$ Variance

% Variance

At-risk servicing portfolio (1)

61,237,535

57,857,659

3,379,876

Maximum exposure to at-risk portfolio (2)

12,454,158

11,750,068

704,090

Defaulted loans (3)

59,645

—

N/A

Key credit metrics (as a % of the at-risk portfolio):

Defaulted loans

0.10

0.00

Allowance for risk-sharing

0.05

Key credit metrics (as a % of maximum exposure):

Allowance for risk-sharing

0.24

0.26

_______________

(1)

At-risk servicing portfolio is defined as the balance of Fannie Mae Delegated Underwriting and Servicing (“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.

(2)

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.

(3)

Defaulted loans represent loans in our Fannie Mae at-risk portfolio that are probable of foreclosure or that have foreclosed and for which we have recorded a collateral-based reserve (i.e., loans where we have assessed a probable loss). Other loans that are delinquent but not foreclosed or that are not probable of foreclosure are not included here. Additionally, loans that have foreclosed or are probable of foreclosure but are not expected to result in a loss to us are not included here.

DISCUSSION OF QUARTERLY RESULTS:

Our at-risk servicing portfolio, which is comprised of loans subject to a defined risk-sharing formula, increased primarily due to the level of Fannie Mae loans added to the portfolio during the past 12 months. We take credit risk exclusively on loans backed by multifamily assets and have no credit exposure to losses in any other sector of the commercial real estate lending market.
As of September 30, 2024, seven at-risk loans were in default with an aggregate unpaid principal balance (“UPB”) of $59.6 million compared to none as of September 30, 2023. The collateral-based reserves on defaulted loans were $6.5 million and zero as of September 30, 2024 and September 30, 2023, respectively. The approximately 3,000 remaining loans in the at-risk servicing portfolio continue to exhibit strong credit quality, with low levels of delinquencies and strong operating performance of the underlying properties in the portfolio.
During the first quarter of 2024, we repurchased a Fannie Mae loan for $13.5 million in cash. We have an immaterial reserve for credit losses related to this loan. In 2023, we received repurchase requests from Freddie Mac related to two loans with UPBs of $11.4 million and $34.8 million, respectively. In the first quarter of 2024, we entered into forbearance and indemnification agreements with Freddie Mac that, among other things, delayed the repurchases of these loans and transferred the risk of loss for both loans from Freddie Mac to Walker & Dunlop. The forbearance and indemnification agreement for one of the loans was extended during the third quarter of 2024, and both now expire in March 2025. As of September 30, 2024, the aggregate UPB of repurchased and indemnified loans totaled $61.8 million, and we have recorded collateral based reserves of $8.4 million for those loans.
During the third quarter of 2024, we recorded a provision for credit losses of $3.0 million, primarily related to an increase in the estimated losses associated with the portfolio of repurchased and indemnified assets described in the previous bullet point.

THIRD QUARTER 2024 FINANCIAL RESULTS BY SEGMENT

Interest expense on corporate debt is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment’s use of that corporate debt. Income tax expense is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment’s income from operations, except for significant, one-time tax activities, which are allocated entirely to the segment impacted by the tax activity. The following details explain the changes in these expense items at a consolidated corporate level:

Interest expense on corporate debt increased 4% from the third quarter of 2023, primarily due to an increase in interest expense on borrowings to support our LIHTC operations, which is included as a component of interest expense on corporate debt.
Income tax expense increased $1.8 million, or 25%, from the third quarter of 2023, primarily as a result of the 33% increase in income from operations, partially offset by a decrease in the effective tax rate from 25% to 24% year over year. The decrease in the effective tax rate was primarily due to a $1.1 million tax adjustment to our international tax accruals due to a lower than estimated amount of taxes in our 2022 return, which was recently filed timely.

FINANCIAL RESULTS – CAPITAL MARKETS

(in thousands)

Q3 2024

Q3 2023

$ Variance

% Variance

Loan origination and debt brokerage fees, net ("origination fees")

72,723

56,149

16,574

Fair value of expected net cash flows from servicing, net ("MSR income")

43,426

35,375

8,051

Property sales broker fees

19,322

16,862

2,460

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

(2,798

)

(2,565

)

(233

)

Other revenues

11,039

11,875

(836

)

Total revenues

143,712

117,696

26,016

Personnel

104,987

97,973

7,014

Amortization and depreciation

1,137

—

Interest expense on corporate debt

4,888

4,874

Goodwill impairment

—

14,000

(14,000

)

(100

)

Fair value adjustments to contingent consideration liabilities

(1,366

)

(14,000

)

12,634

Other operating expenses

5,137

4,193

944

Total expenses

114,783

108,177

6,606

Income (loss) from operations

28,929

9,519

19,410

204

Income tax expense (benefit)

7,073

2,386

4,687

196

Net income (loss) before noncontrolling interests

21,856

7,133

14,723

206

Less: net income (loss) from noncontrolling interests

(57

)

(69

)

Walker & Dunlop net income (loss)

21,830

7,050

14,780

210

Key revenue metrics (as a % of debt financing volume):

Origination fee rate (1)

0.93

MSR rate (2)

0.55

0.58

Agency MSR rate (3)

1.14

1.22

Key performance metrics:

Operating margin

Adjusted EBITDA

(4,601

)

(15,704

)

11,103

_______________

(1)

Origination fees as a percentage of debt financing volume. Excludes the income and debt financing volume from Principal Lending and Investing.

(2)

MSR income as a percentage of debt financing volume. Excludes the income and debt financing volume from Principal Lending and Investing.

(3)

MSR income as a percentage of Agency debt financing volume.

CAPITAL MARKETS – DISCUSSION OF QUARTERLY RESULTS:

The Capital Markets segment includes our Agency lending, debt brokerage, property sales, appraisal and valuation services, investment banking, and housing market research businesses.

Origination fees increased in the third quarter of 2024 primarily because of the increase in debt financing volume. MSR income increased primarily due to 32% growth in Agency financing volume that was partially offset by a decline in the Agency MSR rate, largely driven by a decrease in FNMA loans as a percentage of Agency debt financing volume during the quarter.
Property sales broker fees increased year over year as a result of the 44% increase in property sales volumes, partially offset by a decrease in the fee margin.
Personnel expense increased in the third quarter of 2024 primarily due to an increase in commission expenses related to higher origination fees and property sales broker fees, and an increase in subjective bonus expense tied to overall company performance.
During the third quarter of 2024, the fair value adjustments made to contingent consideration liabilities were associated with a much smaller acquisition than those made in the prior year, leading to the change year over year. Additionally, the fair value adjustments made in the third quarter of 2024 did not trigger a goodwill impairment consideration event, while the adjustments in the third quarter of 2023 did, resulting in the decrease in goodwill impairment year over year.

FINANCIAL RESULTS – SERVICING & ASSET MANAGEMENT

(in thousands)

Q3 2024

Q3 2023

$ Variance

% Variance

Origination fees

823

—

823

N/A%

Servicing fees

82,222

79,200

3,022

Investment management fees

11,744

13,362

(1,618

)

(12

)

Net warehouse interest income, loans held for investment ("LHFI")

651

534

117

Placement fees and other interest income

40,299

39,475

824

Other revenues

9,145

15,569

(6,424

)

(41

)

Total revenues

144,884

148,140

(3,256

)

Personnel

20,951

17,139

3,812

Amortization and depreciation

54,668

54,375

293

Provision (benefit) for credit losses

2,850

421

2,429

577

Interest expense on corporate debt

11,711

11,096

615

Other operating expenses

6,611

5,039

1,572

Total expenses

96,791

88,070

8,721

Income (loss) from operations

48,093

60,070

(11,977

)

(20

Income tax expense (benefit)

10,756

15,040

(4,284

)

(28

)

Net income (loss) before noncontrolling interests

37,337

45,030

(7,693

)

(17

Less: net income (loss) from noncontrolling interests

(145

)

(397

)

252

Walker & Dunlop net income (loss)

37,482

45,427

(7,945

)

(17

Key performance metrics:

Operating margin

Adjusted EBITDA

117,455

124,849

(7,394

)

SERVICING & ASSET MANAGEMENT – DISCUSSION OF QUARTERLY RESULTS:

The Servicing & Asset Management segment includes loan servicing, principal lending and investing, management of third-party capital invested in tax credit equity funds focused on the affordable housing sector and other commercial real estate, and real estate-related investment banking and advisory services.

The $5.1 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, partially offset by a slight decrease in the weighted-average servicing fee year over year.
Investment management fees decreased primarily due to a decline in the accrual for investment management fees from our LIHTC funds resulting from lower anticipated revenues for the year.
Other revenues primarily decreased as a result of lower syndication and other revenues related to a 78% decline in gross equity raised year over year, as the closing of one of our LIHTC funds was delayed in the third quarter of 2024.
Personnel expense increased primarily due to increased salaries and benefits resulting from an 8% increase in average segment headcount year over year combined with an increase in variable compensation costs.
The provision for credit losses in 2024 was primarily attributable to the $3.0 million increase in the fair value of the forbearance and indemnification agreements with Freddie Mac, as noted above in our Key Credit Metrics, with no comparable activity in the prior year.
Other operating expenses increased primarily as a result of costs associated with operating properties controlled through loan repurchase or indemnification, with no comparable activity in the prior year.

FINANCIAL RESULTS – CORPORATE

(in thousands)

Q3 2024

Q3 2023

$ Variance

% Variance

Other interest income

3,258

3,525

(267

)

Other revenues

450

(618

)

1,068

173

Total revenues

3,708

2,907

801

Personnel

19,600

21,395

(1,795

)

Amortization and depreciation

1,756

1,967

(211

)

(11

)

Interest expense on corporate debt

1,633

1,624

Other operating expenses

20,236

19,297

939

Total expenses

43,225

44,283

(1,058

)

Income (loss) from operations

(39,517

)

(41,376

)

1,859

Income tax expense (benefit)

(9,007

)

(10,357

)

1,350

Walker & Dunlop net income (loss)

(30,510

)

(31,019

)

509

Key performance metric:

Adjusted EBITDA

(33,949

)

(35,080

)

1,131

CORPORATE – DISCUSSION OF QUARTERLY RESULTS:

The Corporate segment consists of corporate-level activities including accounting, information technology, legal, human resources, marketing, internal audit, and various other corporate groups (“support functions”). The Company does not allocate costs from these support functions to its other segments in presenting segment operating results.

Other revenues, which primarily consist of gains and losses on equity-method investments, shifted from a loss in the third quarter of 2023 to a gain in the third quarter of 2024.
The decrease in personnel expense was primarily driven by a decrease in subjective bonus expenses tied to company performance, principally for our executive officers. This decrease was partially offset by an increase in salaries and benefits from a 2% higher average segment headcount year over year.

YEAR-TO-DATE 2024 CONSOLIDATED OPERATING RESULTS

Interest expense on corporate debt increased $3.9 million, or 8%, from 2023, primarily as a result of an increase in interest rates on our term loan year over year, as our term loan carries a floating interest rate. Additionally, interest expense on borrowings to support our LIHTC operations, which is also included as a component of interest expense on corporate debt, increased year over year as the amount of borrowings increased.
Income tax expense decreased $5.1 million, or 21%, from 2023, primarily as a result of the 20% decrease in income from operations and the aforementioned decrease in international tax accruals.

OPERATING RESULTS AND KEY PERFORMANCE METRICS

(in thousands)

YTD Q3 2024

YTD Q3 2023

$ Variance

% Variance

Debt financing volume

20,158,458

17,781,027

2,377,431

Property sales volume

6,300,609

5,907,138

393,471

Total transaction volume

26,459,067

23,688,165

2,770,902

Total revenues

791,039

780,104

10,935

Total expenses

711,658

681,274

30,384

Walker & Dunlop net income

63,331

75,758

(12,427

)

(16

Adjusted EBITDA

233,972

212,541

21,431

Diluted EPS

1.87

2.25

(0.38

)

(17

Adjusted core EPS

3.60

3.25

0.35

Operating margin

Return on equity

DISCUSSION OF YEAR-TO-DATE RESULTS:

The 12% increase in total transaction volume was primarily driven by the 27% increase in brokered debt financing volume and 7% increase in property sales financing volume, partially offset by a 17% decline in Fannie Mae debt financing volume.
The 16% decrease in Walker & Dunlop net income was primarily as a result of a 20% decrease in income from operations driven by: (i) a 9% decline in non-cash MSR income from lower Fannie Mae debt financing volume, (ii) a 16% decrease in other revenues, (iii) a net provision for credit losses in 2024 compared to a net benefit in 2023, and (iv) a 12% increase in other operating expenses. These factors driving income from operations down were partially offset by a (i) 9% increase in origination fees due to the increase in debt financing volume, partially offset by a decrease in Agency debt financing volume as a percentage of overall debt financing volume; (ii) 5% growth in servicing fees, and (iii) a 13% increase in placement fees and other interest income primarily due to elevated earnings rates on deposits tied to short-term interest rates.
The decrease in other revenues was primarily attributable to (i) a decrease in investment banking revenues year over year, as we closed the largest investment banking transaction in our history in 2023 with no similar transaction in the current year, (ii) a decline in syndication and other revenues related to a decline in gross equity raised year over year as the closing of one of our LIHTC funds was delayed in the third quarter of 2024, and (iii) the write-off of debt premium related to the payoff of fixed-rate debt in 2023 with no comparable activity in 2024.
The provision for credit losses in 2024 was primarily related to a $7.6 million provision for other credit losses related to repurchased and indemnified loans discussed above in our Key Credit Metrics, with no comparable activity in 2023. The net benefit for credit losses in 2023 related primarily an annual update of our historical loss rate.
The increase in other operating expenses was primarily related to increases in expenses associated with multi-year software and data contracts that are used throughout our business, and miscellaneous expenses, including the costs associated with operating properties noted above.
Adjusted EBITDA increased 10% primarily due to increased origination fees, servicing fees, and placement fees and other interest income and a decrease in net write-offs, partially offset by decreases in investment management fees and other revenues and increases in personnel and other operating expenses.
Diluted EPS decreased 17% year over year, compared to an 11% increase in our adjusted core EPS year over year. The main drivers of the difference between diluted EPS and adjusted core EPS relate to a decrease in non-cash MSR income and an increase to non-cash provision for credit loss expenses, which are removed from adjusted core EPS. Diluted EPS incorporates the impact of those items, while adjusted core EPS excludes those items and reflects the year-over-year growth of our recurring revenue streams. Additionally, net write-offs, a cash-related reduction for adjusted core EPS decreased, resulting in increased adjusted core EPS. This cash-related reduction for adjusted core EPS is not included in diluted EPS.
Operating margin decreased primarily due to changes in our non-cash activity, including: (i) a decline of MSR income due to lower Fannie Mae debt financing volume, (ii) a change from a large benefit for credit losses in 2023 to a provision for credit losses in 2024, and (iii) other changes as noted above describing the decrease in income from operations.

YEAR-TO-DATE 2024 FINANCIAL RESULTS BY SEGMENT

FINANCIAL RESULTS – CAPITAL MARKETS

(in thousands)

YTD Q3 2024

YTD Q3 2023

$ Variance

% Variance

Origination fees

180,264

167,679

12,585

MSR income

97,673

107,446

(9,773

)

Property sales broker fees

39,408

38,831

577

Net warehouse interest income (expense), LHFS

(6,322

)

(7,006

)

684

Other revenues

32,756

40,735

(7,979

)

(20

)

Total revenues

343,779

347,685

(3,906

)

Personnel

276,655

281,502

(4,847

)

Amortization and depreciation

3,412

—

Interest expense on corporate debt

15,038

13,870

1,168

Goodwill impairment

—

14,000

(14,000

)

(100

)

Fair value adjustments to contingent consideration liabilities

(1,366

)

(14,000

)

12,634

Other operating expenses

14,831

15,037

(206

)

Total expenses

308,570

313,821

(5,251

)

Income (loss) from operations

35,209

33,864

1,345

Income tax expense (benefit)

8,689

8,462

227

Net income (loss) before noncontrolling interests

26,520

25,402

1,118

Less: net income (loss) from noncontrolling interests

353

1,741

(1,388

)

(80

)

Walker & Dunlop net income (loss)

26,167

23,661

2,506

Key revenue metrics (as a % of debt financing volume):

Origination fee rate

0.91

0.94

MSR rate

0.49

0.60

Agency MSR rate

1.14

1.20

Key performance metrics:

Operating margin

Adjusted EBITDA

(32,431

)

(44,725

)

12,294

CAPITAL MARKETS – DISCUSSION OF YEAR-TO-DATE RESULTS:

The increase in origination fees was largely driven by a 13% increase in debt financing volume year over year, partially offset by a slight decline in our origination fee rate due to the shift in the mix of our debt financing volume towards brokered debt financing volume.
The decreases in our MSR income and Agency MSR rate were primarily attributable to a decline in Fannie Mae debt financing volume in 2024. Fannie Mae volume as a percentage of total debt financing volume decreased from 30% to 22% year over year. Fannie Mae loans produce higher MSR income compared to our other product types, due to their higher weighted average servicing fees.
The decrease in other revenues was primarily related to the closing of the largest investment banking deal in the Company’s history, a $7.5 million transaction, which closed in the first quarter of 2023, with no comparable transaction in 2024.
Personnel expense decreased year over year primarily as a result of a 7% lower average segment headcount, partially offset by increased commission costs related to higher origination fees in 2024.
During 2024, the fair value adjustments made to contingent consideration liabilities were associated with a much smaller acquisition than those made in the prior year, leading to the change year over year. Additionally, the fair value adjustments made in 2024 did not trigger a goodwill impairment consideration event, while the adjustments in 2023 did, resulting in the decrease in goodwill impairment year over year.

FINANCIAL RESULTS – SERVICING & ASSET MANAGEMENT

(in thousands)

YTD Q3 2024

YTD Q3 2023

$ Variance

% Variance

Origination fees

2,356

522

1,834

351

Servicing fees

242,683

232,027

10,656

Investment management fees

40,086

44,844

(4,758

)

(11

)

Net warehouse interest income, LHFI

1,475

3,450

(1,975

)

(57

)

Placement fees and other interest income

113,072

100,636

12,436

Other revenues

34,679

42,697

(8,018

)

(19

)

Total revenues

434,351

424,176

10,175

Personnel

59,083

53,669

5,414

Amortization and depreciation

160,912

161,935

(1,023

)

Provision (benefit) for credit losses

6,310

(11,088

)

17,398

157

Interest expense on corporate debt

33,848

31,385

2,463

Other operating expenses

18,462

16,465

1,997

Total expenses

278,615

252,366

26,249

Income (loss) from operations

155,736

171,810

(16,074

)

Income tax expense (benefit)

38,430

42,931

(4,501

)

(10

)

Net income (loss) before noncontrolling interests

117,306

128,879

(11,573

)

Less: net income (loss) from noncontrolling interests

(3,891

)

(3,364

)

(527

)

(16

)

Walker & Dunlop net income (loss)

121,197

132,243

(11,046

)

Key performance metrics:

Operating margin

Adjusted EBITDA

361,614

346,283

15,331

SERVICING & ASSET MANAGEMENT – DISCUSSION OF YEAR-TO-DATE RESULTS:

The $5.1 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, partially offset by a slight decrease in the weighted average servicing fee.
Investment management fees decreased primarily due to a decline in the accrual for investment management fees from our LIHTC funds due to lower anticipated revenues for the year.
Placement fees and other interest income increased largely as a result of higher placement fees earned on deposits due to higher short-term interest rates. Additionally, the average escrow balance increased in 2024.
The decrease in other revenues was primarily related to a decline in syndication and other revenues related to a decline in gross equity raised year over year as the closing of one of our LIHTC funds was delayed in the third quarter of 2024.
Personnel expense increased primarily due to increased salaries and benefits due to a 5% increase in average segment headcount year over year.
The provision for credit losses in 2024 was primarily related to a $7.6 million provision for credit losses related to repurchased and indemnified loans, as noted in our Key Credit Metrics, with no comparable activity in 2023. The benefit for credit losses in 2023 related primarily to the update of our historical loss rate.

FINANCIAL RESULTS – CORPORATE

(in thousands)

YTD Q3 2024

YTD Q3 2023

$ Variance

% Variance

Other interest income

10,927

8,674

2,253

Other revenues

1,982

(431

)

2,413

560

Total revenues

12,909

8,243

4,666

Personnel

54,330

53,254

1,076

Amortization and depreciation

5,171

5,390

(219

)

Interest expense on corporate debt

4,879

4,623

256

Other operating expenses

60,093

51,820

8,273

Total expenses

124,473

115,087

9,386

Income (loss) from operations

(111,564

)

(106,844

)

(4,720

)

Income tax expense (benefit)

(27,531

)

(26,698

)

(833

)

Walker & Dunlop net income (loss)

(84,033

)

(80,146

)

(3,887

)

Key performance metric:

Adjusted EBITDA

(95,211

)

(89,017

)

(6,194

)

CORPORATE – DISCUSSION OF YEAR-TO-DATE RESULTS:

Total revenues increased as a result of higher interest income earned on our corporate and fund cash balances and an increase in income from equity-method investments.
The increase in other operating expenses was primarily the result of increased travel and entertainment, software, and miscellaneous expenses year over year.

CAPITAL SOURCES AND USES

On November 6, 2024, the Company’s Board of Directors declared a dividend of $0.65 per share for the fourth quarter of 2024. The dividend will be paid on December 6, 2024, to all holders of record of the Company’s restricted and unrestricted common stock as of November 22, 2024.

In May 2024, the Company entered into a second amendment to the existing credit agreement that, among other things, decreased the interest rate of the incremental $200 million borrowing by 0.75% per annum, to Term SOFR plus 2.25% per annum, and combined the incremental term loan with the initial term loan to create a single fungible $800 million senior secured term loan.

On February 14, 2024, our Board of Directors authorized the repurchase of up to $75.0 million of the Company’s outstanding common stock over a 12-month period ending February 23, 2025 (the “2024 Share Repurchase Program”). We have not repurchased any shares of common stock under the 2024 Share Repurchase Program.

Any purchases made pursuant to the 2024 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.

CONFERENCE CALL INFORMATION

Listeners can access the Company’s quarterly conference call for more information regarding our financial results via the dial-in number and webcast link below. 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.

Earnings Call:

Thursday, November 7, 2024 at 8:30am EST

Phone:

(888) 256-1007 from within the United States; (773) 305-6853 from outside the United States

Confirmation Code:

1186507

Webcast Link:

https://event.webcasts.com/viewer/event.jsp?ei=1655311&tp_key=70e4b5c240

ABOUT WALKER & DUNLOP

Walker & Dunlop (NYSE: WD) is one of the largest commercial real estate finance and advisory services firms in the United States. Our ideas and capital create communities where people live, work, shop, and play. The diversity of our people, breadth of our brand and technological capabilities make us one of the most insightful and client-focused firms in the commercial real estate industry.

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, adjusted core net income, and adjusted core EPS, which are non-GAAP financial measures. The presentation of these non-GAAP financial measures 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, adjusted core net income, and adjusted core EPS in addition to, and not as an alternative for, net income and diluted EPS.

Adjusted core net income and adjusted core EPS represent net income adjusted for amortization and depreciation, provision (benefit) for credit losses, net write-offs, the fair value of expected net cash flows from servicing, net, the income statement impact from periodic revaluation and accretion associated with contingent consideration liabilities related to acquired companies, and other one-time adjustments, such as goodwill impairment. Adjusted EBITDA represents net income before income taxes, interest expense on our corporate debt, and amortization and depreciation, adjusted for provision (benefit) for credit losses, net write-offs, stock-based compensation expense, the fair value of expected net cash flows from servicing, net, the write-off of the unamortized balance of premium associated with the repayment of a portion of our corporate debt, goodwill impairment, and contingent consideration liability fair value adjustments when the fair value adjustment is a triggering event for a goodwill impairment assessment. 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. Because not all companies use identical calculations, our presentation of adjusted EBITDA, adjusted core net income and adjusted core EPS may not be comparable to similarly titled measures of other companies.

We use adjusted EBITDA, adjusted core net income, and adjusted core EPS 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 these non-GAAP measures, when read in conjunction with the Company’s GAAP financial information, provide 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 these non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and that these non-GAAP financial measures should only be used to evaluate the Company’s results of operations in conjunction with the Company’s GAAP financial information. For more information on adjusted EBITDA, adjusted core net income, and adjusted core EPS, refer to the section of this press release below titled “Adjusted Financial Measure Reconciliation to GAAP” and “Adjusted Financial Measure Reconciliation to GAAP By Segment.”

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) changes in interest rates, (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, (5) success of our various investments funded with corporate capital, and (6) 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

September 30,

June 30,

March 31,

December 31,

September 30,

2024

2023

(in thousands)

Assets

Cash and cash equivalents

179,759

208,095

216,532

328,698

236,321

Restricted cash

39,827

35,460

21,071

21,422

17,768

Pledged securities, at fair value

203,945

197,936

190,679

184,081

177,509

Loans held for sale, at fair value

1,024,984

814,883

497,933

594,998

758,926

Mortgage servicing rights

836,896

850,831

881,834

907,415

921,746

Goodwill

901,710

949,710

Other intangible assets

170,713

174,467

178,221

181,975

185,927

Receivables, net

307,407

272,827

250,406

233,563

265,234

Committed investments in tax credit equity

333,713

151,674

122,332

154,028

212,296

Other assets

580,277

567,515

565,194

544,457

552,414

Total assets

4,579,231

4,175,398

3,825,912

4,052,347

4,277,851

Liabilities

Warehouse notes payable

1,019,850

810,114

521,977

596,178

790,742

Notes payable

769,376

770,707

772,037

773,358

774,677

Allowance for risk-sharing obligations

29,859

30,477

30,124

31,601

30,957

Commitments to fund investments in tax credit equity

289,250

134,493

114,206

140,259

196,250

Other liabilities

724,543

695,813

651,660

764,822

754,234

Total liabilities

2,832,878

2,441,604

2,090,004

2,306,218

2,546,860

Stockholders' Equity

Common stock

332

331

329

328

Additional paid-in capital

412,570

407,426

427,184

425,488

420,062

Accumulated other comprehensive income (loss)

1,466

415

(492

)

(479

)

(1,864

)

Retained earnings

1,295,459

1,288,728

1,288,313

1,298,412

1,287,653

Total stockholders’ equity

1,709,827

1,696,900

1,715,336

1,723,750

1,706,179

Noncontrolling interests

36,526

36,894

20,572

22,379

24,812

Total equity

1,746,353

1,733,794

1,735,908

1,746,129

1,730,991

Commitments and contingencies

—

Total liabilities and stockholders' equity

4,579,231

4,175,398

3,825,912

4,052,347

4,277,851

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income

Unaudited

Quarterly Trends

Nine months ended

September 30,

(in thousands, except per share amounts)

Q3 2024

Q2 2024

Q1 2024

Q4 2023

Q3 2023

2024

2023

Revenues

Origination fees

73,546

65,334

43,740

66,208

56,149

182,620

168,201

MSR income

43,426

33,349

20,898

34,471

35,375

97,673

107,446

Servicing fees

82,222

80,418

80,043

79,887

79,200

242,683

232,027

Property sales broker fees

19,322

11,265

8,821

15,135

16,862

39,408

38,831

Investment management fees

11,744

14,822

13,520

537

13,362

40,086

44,844

Net warehouse interest income (expense)

(2,147

)

(1,584

)

(1,116

)

(2,077

)

(2,031

)

(4,847

)

(3,556

)

Placement fees and other interest income

43,557

41,040

39,402

45,210

43,000

123,999

109,310

Other revenues

20,634

26,032

22,751

34,965

26,826

69,417

83,001

Total revenues

292,304

270,676

228,059

274,336

268,743

791,039

780,104

Expenses

Personnel

145,538

133,067

111,463

125,865

136,507

390,068

388,425

Amortization and depreciation

57,561

56,043

55,891

56,015

57,479

169,495

170,737

Provision (benefit) for credit losses

2,850

2,936

524

636

421

6,310

(11,088

)

Interest expense on corporate debt

18,232

17,874

17,659

18,598

17,594

53,765

49,878

Goodwill impairment

—

48,000

14,000

—

14,000

Fair value adjustments to contingent consideration liabilities

(1,366

)

—

(48,500

)

(14,000

)

(1,366

)

(14,000

)

Other operating expenses

31,984

32,559

28,843

34,355

28,529

93,386

83,322

Total expenses

254,799

242,479

214,380

234,969

240,530

711,658

681,274

Income from operations

37,505

28,197

13,679

39,367

28,213

79,381

98,830

Income tax expense

8,822

7,902

2,864

10,331

7,069

19,588

24,695

Net income before noncontrolling interests

28,683

20,295

10,815

29,036

21,144

59,793

74,135

Less: net income (loss) from noncontrolling interests

(119

)

(2,368

)

(1,051

)

(2,563

)

(314

)

(3,538

)

(1,623

)

Walker & Dunlop net income

28,802

22,663

11,866

31,599

21,458

63,331

75,758

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

1,051

907

(13

)

1,385

(399

)

1,945

(296

)

Walker & Dunlop comprehensive income

29,853

23,570

11,853

32,984

21,059

65,276

75,462

Effective Tax Rate

Basic earnings per share

0.85

0.67

0.35

0.94

0.64

1.87

2.26

Diluted earnings per share

0.85

0.67

0.35

0.93

0.64

1.87

2.25

Cash dividends paid per common share

0.65

0.63

1.95

1.89

Basic weighted-average shares outstanding

33,169

33,121

32,978

32,825

32,737

33,090

32,654

Diluted weighted-average shares outstanding

33,203

33,154

33,048

32,941

32,895

33,135

32,853

SUPPLEMENTAL OPERATING DATA

Unaudited

Quarterly Trends

Nine months ended

September 30,

(in thousands, except per share data and unless otherwise noted)

Q3 2024

Q2 2024

Q1 2024

Q4 2023

Q3 2023

2024

2023

Transaction Volume:

Components of Debt Financing Volume

Fannie Mae

2,001,356

1,510,804

903,368

1,692,405

1,739,332

4,415,528

5,328,992

Freddie Mac

1,545,939

1,153,190

974,926

1,308,263

1,072,048

3,674,055

3,260,672

Ginnie Mae - HUD

272,054

185,898

14,140

316,960

86,557

472,092

361,929

Brokered (1)

4,028,208

3,852,851

3,319,074

2,885,454

3,149,457

11,200,133

8,829,434

Principal Lending and Investing (2)

165,875

214,975

15,800

218,750

—

396,650

—

Total Debt Financing Volume

8,013,432

6,917,718

5,227,308

6,421,832

6,047,394

20,158,458

17,781,027

Property Sales Volume

3,602,675

1,530,783

1,167,151

2,877,399

2,508,073

6,300,609

5,907,138

Total Transaction Volume

11,616,107

8,448,501

6,394,459

9,299,231

8,555,467

26,459,067

23,688,165

Key Performance Metrics:

Operating margin

Return on equity

Walker & Dunlop net income

28,802

22,663

11,866

31,599

21,458

63,331

75,758

Adjusted EBITDA (3)

78,905

80,931

74,136

87,582

74,065

233,972

212,541

Diluted EPS

0.85

0.67

0.35

0.93

0.64

1.87

2.25

Adjusted core EPS (4)

1.19

1.23

1.19

1.42

1.11

3.60

3.25

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

Personnel expenses

Other operating expenses

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

Origination fee rate (5)

0.93

0.95

0.84

1.05

0.93

0.91

0.94

MSR rate (6)

0.55

0.50

0.40

0.56

0.58

0.49

0.60

Agency MSR rate (7)

1.14

1.17

1.10

1.04

1.22

1.14

1.20

Other Data:

Market capitalization at period end

3,834,715

3,311,629

3,406,853

3,719,589

2,433,494

Closing share price at period end

113.59

98.20

101.06

111.01

74.24

Average headcount

1,356

1,321

1,323

1,341

1,344

Components of Servicing Portfolio (end of period):

Fannie Mae

66,068,212

64,954,426

64,349,886

63,699,106

62,850,853

Freddie Mac

40,090,158

39,938,411

39,665,386

39,330,545

38,656,136

Ginnie Mae - HUD

10,727,323

10,619,764

10,595,841

10,460,884

10,320,520

Brokered (8)

17,156,810

17,239,417

17,312,513

16,940,850

17,091,925

Principal Lending and Investing (9)

38,043

25,893

40,139

40,000

Total Servicing Portfolio

134,080,546

132,777,911

131,963,765

130,471,524

128,959,434

Assets under management (10)

18,210,452

17,566,666

17,465,398

17,321,452

17,334,877

Total Managed Portfolio

152,290,998

150,344,577

149,429,163

147,792,976

146,294,311

Key Servicing Portfolio Metrics (end of period):

Custodial escrow deposit balance (in billions)

3.1

2.7

2.3

2.7

2.8

Weighted-average servicing fee rate (basis points)

24.1

24.0

24.1

24.2

Weighted-average remaining servicing portfolio term (years)

7.7

7.9

8.0

8.2

8.4

_______________

(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)

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

(5)

Origination fees 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 debt financing volume. Excludes the income and debt financing volume from Principal Lending and Investing.

(7)

MSR income as a percentage of Agency debt financing volume.

(8)

Brokered loans serviced primarily for life insurance companies.

(9)

Consists of interim loans not managed for our interim loan joint venture.

(10)

Walker & Dunlop Affordable Equity assets under management, commercial real estate loans and funds managed by WDIP, and interim loans serviced for our interim loan joint venture.

KEY CREDIT METRICS

Unaudited

September 30,

June 30,

March 31,

December 31,

September 30,

(dollars in thousands)

2024

2023

Risk-sharing servicing portfolio:

Fannie Mae Full Risk

57,032,839

55,915,670

55,236,618

54,583,555

53,549,966

Fannie Mae Modified Risk

9,035,373

9,038,756

9,113,268

9,115,551

9,295,368

Freddie Mac Modified Risk

69,400

69,510

23,415

Total risk-sharing servicing portfolio

66,137,612

65,023,936

64,419,396

63,722,521

62,868,749

Non-risk-sharing servicing portfolio:

Fannie Mae No Risk

—

5,519

Freddie Mac No Risk

40,020,758

39,868,901

39,595,876

39,307,130

38,632,721

GNMA - HUD No Risk

10,727,323

10,619,764

10,595,841

10,460,884

10,320,520

Brokered

17,156,810

17,239,417

17,312,513

16,940,850

17,091,925

Total non-risk-sharing servicing portfolio

67,904,891

67,728,082

67,504,230

66,708,864

66,050,685

Total loans serviced for others

134,042,503

132,752,018

131,923,626

130,431,385

128,919,434

Interim loans (full risk) servicing portfolio

38,043

25,893

40,139

40,000

Total servicing portfolio unpaid principal balance

134,080,546

132,777,911

131,963,765

130,471,524

128,959,434

Interim Loan Joint Venture Managed Loans (1)

424,774

570,299

711,541

710,041

736,320

At-risk servicing portfolio (2)

61,237,535

60,122,274

59,498,851

58,801,055

57,857,659

Maximum exposure to at-risk portfolio (3)

12,454,158

12,222,290

12,088,698

11,949,041

11,750,068

Defaulted loans(4)

59,645

48,560

63,264

27,214

—

Defaulted loans as a percentage of the at-risk portfolio

0.10

0.08

0.11

0.05

0.00

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

0.05

Allowance for risk-sharing as a percentage of maximum exposure

0.24

0.25

0.26

_______________

(1)

This balance consists entirely of 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.

(3)

(4)

Defaulted loans represent loans in our Fannie Mae at-risk portfolio that are probable of foreclosure or that have foreclosed and for which we have recorded a collateral-based reserve (i.e. loans where we have assessed a probable loss). Other loans that are delinquent but not foreclosed or that are not probable of foreclosure are not included here. Additionally, loans that have foreclosed or are probable of foreclosure but are not expected to result in a loss to us are not included here.

ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP

Unaudited

Quarterly Trends

Nine months ended

September 30,

(in thousands)

Q3 2024

Q2 2024

Q1 2024

Q4 2023

Q3 2023

2024

2023

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA

Walker & Dunlop Net Income

28,802

22,663

11,866

31,599

21,458

63,331

75,758

Income tax expense

8,822

7,902

2,864

10,331

7,069

19,588

24,695

Interest expense on corporate debt

18,232

17,874

17,659

18,598

17,594

53,765

49,878

Amortization and depreciation

57,561

56,043

55,891

56,015

57,479

169,495

170,737

Provision (benefit) for credit losses

2,850

2,936

524

636

421

6,310

(11,088

)

Net write-offs(1)

(468

)

—

(2,008

)

(468

)

(8,041

)

Stock-based compensation expense

6,532

6,862

6,230

5,374

7,427

19,624

22,468

MSR income

(43,426

)

(33,349

)

(20,898

)

(34,471

)

(35,375

)

(97,673

)

(107,446

)

Write-off of unamortized premium from corporate debt repayment

—

(4,420

)

Goodwill impairment, net of contingent consideration liability fair value adjustments(2)

—

(500

)

—

Adjusted EBITDA

78,905

80,931

74,136

87,582

74,065

233,972

212,541

_______________

(1)

The net write-offs for the nine months ended September 30, 2023 includes the $6.0 million write-off of a collateral-based reserve related to a loan held for investment during the second quarter of 2023.

(2)

For the three and nine months ended September 30, 2023, includes goodwill impairment of $14.0 million and contingent consideration liability fair value adjustment of $14.0 million. For the three and nine months ended September 30, 2024, there was no goodwill impairment or contingent consideration liability fair value adjustments that resulted in a triggering event for a goodwill impairment assessment.

ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP BY SEGMENT

Unaudited

Capital Markets

Three months ended September 30,

Nine months ended September 30,

(in thousands)

2024

2023

2024

2023

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA

Walker & Dunlop Net Income (Loss)

21,830

7,050

26,167

23,661

Income tax expense (benefit)

7,073

2,386

8,689

8,462

Interest expense on corporate debt

4,888

4,874

15,038

13,870

Amortization and depreciation

1,137

3,412

Stock-based compensation expense

3,897

4,224

11,936

13,316

MSR income

(43,426

)

(35,375

)

(97,673

)

(107,446

)

Goodwill impairment, net of contingent consideration liability fair value adjustments(1)

—

Adjusted EBITDA

(4,601

)

(15,704

)

(32,431

)

(44,725

)

Servicing & Asset Management

Three months ended September 30,

Nine months ended September 30,

(in thousands)

2024

2023

2024

2023

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA

Walker & Dunlop Net Income (Loss)

37,482

45,427

121,197

132,243

Income tax expense (benefit)

10,756

15,040

38,430

42,931

Interest expense on corporate debt

11,711

11,096

33,848

31,385

Amortization and depreciation

54,668

54,375

160,912

161,935

Provision (benefit) for credit losses

2,850

421

6,310

(11,088

)

Net write-offs(2)

(468

)

(2,008

)

(468

)

(8,041

)

Stock-based compensation expense

456

498

1,385

1,338

Write-off of unamortized premium from corporate debt repayment

—

(4,420

)

Adjusted EBITDA

117,455

124,849

361,614

346,283

Corporate

Three months ended September 30,

Nine months ended September 30,

(in thousands)

2024

2023

2024

2023

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA

Walker & Dunlop Net Income (Loss)

(30,510

)

(31,019

)

(84,033

)

(80,146

)

Income tax expense (benefit)

(9,007

)

(10,357

)

(27,531

)

(26,698

)

Interest expense on corporate debt

1,633

1,624

4,879

4,623

Amortization and depreciation

1,756

1,967

5,171

5,390

Stock-based compensation expense

2,179

2,705

6,303

7,814

Adjusted EBITDA

(33,949

)

(35,080

)

(95,211

)

(89,017

)

_______________

(1)

For the three and nine months ended September 30, 2023, includes goodwill impairment of $14.0 million and contingent consideration liability fair value adjustment of $14.0 million. For the three and nine months ended September 30, 2024, there was no goodwill impairment or contingent consideration liability fair value adjustment that resulted in a triggering event for a goodwill impairment assessment.

(2)

ADJUSTED CORE EPS RECONCILIATION

Unaudited

Quarterly Trends

Nine months ended

September 30,

(in thousands)

Q3 2024

Q2 2024

Q1 2024

Q4 2023

Q3 2023

2024

2023

Reconciliation of Walker & Dunlop Net Income to Adjusted Core Net Income

Walker & Dunlop Net Income

28,802

22,663

11,866

31,599

21,458

63,331

75,758

Provision (benefit) for credit losses

2,850

2,936

524

636

421

6,310

(11,088

)

Net write-offs(1)

(468

)

—

(2,008

)

(468

)

(8,041

)

Amortization and depreciation

57,561

56,043

55,891

56,015

57,479

169,495

170,737

MSR income

(43,426

)

(33,349

)

(20,898

)

(34,471

)

(35,375

)

(97,673

)

(107,446

)

Goodwill impairment

—

48,000

14,000

—

14,000

Contingent consideration accretion and fair value adjustments

(1,204

)

822

512

(47,637

)

(13,426

)

130

(13,073

)

Income tax expense adjustment(2)

(3,602

)

(7,413

)

(7,543

)

(5,916

)

(5,285

)

(19,196

)

(11,267

)

Adjusted Core Net Income

40,513

41,702

40,352

48,226

37,264

121,929

109,580

Reconciliation of Diluted EPS to Adjusted core EPS

Walker & Dunlop Net Income

28,802

22,663

11,866

31,599

21,458

63,331

75,758

Diluted weighted-average shares outstanding

33,203

33,154

33,048

32,941

32,895

33,135

32,853

Diluted EPS

0.85

0.67

0.35

0.93

0.64

1.87

2.25

Adjusted Core Net Income

40,513

41,702

40,352

48,226

37,264

121,929

109,580

Diluted weighted-average shares outstanding

33,203

33,154

33,048

32,941

32,895

33,135

32,853

Adjusted Core EPS

1.19

1.23

1.19

1.42

1.11

3.60

3.25

_______________

(1)

(2)

Income tax impact of the above adjustments to adjusted core net income. Uses quarterly or annual effective tax rate as disclosed in the Condensed Consolidated Statements of Income and Comprehensive Income in this “press release.”

Category: Earnings

View source version on businesswire.com: https://www.businesswire.com/news/home/20241107957729/en/

Headquarters: 7272 Wisconsin Avenue, Suite 1300 Bethesda, Maryland 20814 Phone 301.215.5500 info@walkeranddunlop.com

Investors: Kelsey Duffey Senior Vice President, Investor Relations Phone 301.202.3207 investorrelations@walkeranddunlop.com

Media: Carol McNerney Chief Marketing Officer Phone 301.215.5515 info@walkeranddunlop.com

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