Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-35000 Walker & Dunlop, Inc. (Exact name of registrant as specified in its charter) Maryland 80-0629925 (State or other jurisd ...

Walker & Dunlop Inc. (NYSE:WD) Q4 2021 Results Conference Call February 3, 2022 8:30 AM ET Company Participants Kelsey Duffey - VP, IR William Walker - Chairman, CEO Stephen Theobald - EVP, CFO Conference Call Participants Henry Coffey - Wedbush Securities Jade Rahmani - KBW Steven Delaney - JMP Kelsey Duffey Good morning, everyone. I'm Kelsey Duffey, Vice President of Investor Relations at Walker & Dunlop, and I'd like to welcome you to Walker & Dunlop's Fourth Quarter and Full Year 2021 Earnings Conferenc ...

Walker & Dunlop Inc. (NYSE:WD) Q3 2021 Earnings Conference Call November 4, 2021 8:30 AM ET Company Participants Kelsey Duffey - Vice President of Investor Relations William Walker - Chairman and CEO Stephen Theobald - Chief Financial Officer Conference Call Participants Henry Coffey - Wedbush Securities Jade Rahmani - Keefe, Bruyette, & Woods Steven Delaney - JMP Securities Kelsey Duffey Good morning, everyone. I'm Kelsey Duffey, Vice President of Investor Relations at Walker & Dunlop, and I'd like to wel ...

| --- | --- | --- | |------------------------------|-------|-------| | | | | | | | | | THIRD QUARTER 2021 EARNINGS | | | | November 4, 2021 | | | Forward-Looking Statements Some of the statements contained in this presentation 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 ...

[PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Walker & Dunlop's condensed consolidated financial statements, including balance sheets, income statements, statements of changes in equity, and cash flow statements, along with detailed notes on accounting policies, specific assets (MSRs, goodwill), liabilities (guaranty obligations, warehouse notes), fair value measurements, and pending acquisition activities [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | September 30, 2021 | December 31, 2020 | Change (%) | | :-------------------------- | :------------------- | :------------------ | :--------- | | Total Assets | $5,116,862 | $4,650,975 | 10.0% | | Loans held for sale, at fair value | $2,711,900 | $2,449,198 | 10.7% | | Mortgage servicing rights | $929,825 | $862,813 | 7.8% | | Total Liabilities | $3,732,926 | $3,454,753 | 8.0% | | Total Equity | $1,383,936 | $1,196,222 | 15.7% | [Condensed Consolidated Statements of Income and Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) Condensed Consolidated Statements of Income Highlights (in thousands, except per share data) | Metric | 3 months ended Sep 30, 2021 | 3 months ended Sep 30, 2020 | Change (%) | 9 months ended Sep 30, 2021 | 9 months ended Sep 30, 2020 | Change (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------- | :-------------------------- | :-------------------------- | :--------- | | Total revenues | $346,290 | $247,016 | 40.2% | $851,989 | $733,998 | 16.1% | | Total expenses | $251,547 | $177,901 | 41.4% | $609,778 | $521,068 | 17.0% | | Walker & Dunlop net income | $71,721 | $53,190 | 34.8% | $185,831 | $163,078 | 13.9% | | Diluted earnings per share | $2.21 | $1.66 | 33.1% | $5.73 | $5.11 | 12.1% | [Consolidated Statements of Changes in Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Equity) Consolidated Statements of Changes in Equity Highlights (in thousands) | Metric | September 30, 2021 | December 31, 2020 | September 30, 2020 | | :-------------------------- | :------------------- | :------------------ | :------------------- | | Total Stockholders' Equity | $1,365,117 | $1,196,222 | $1,115,125 | | Noncontrolling interests | $18,819 | $0 | $0 | | Total Equity | $1,383,936 | $1,196,222 | $1,115,125 | | Cash dividends paid (9 months) | $48,268 | N/A | $33,984 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | 9 months ended Sep 30, 2021 | 9 months ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net cash provided by (used in) operating activities | $(196,979) | $(2,296,868) | $2,099,889 | (91.4)% | | Net cash provided by (used in) investing activities | $49,325 | $147,624 | $(98,299) | (66.6)% | | Net cash provided by (used in) financing activities | $194,265 | $2,341,258 | $(2,146,993) | (91.7)% | | Total cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period | $404,613 | $328,580 | $76,033 | 23.1% | [NOTE 1—ORGANIZATION AND BASIS OF PRESENTATION](index=8&type=section&id=NOTE%201%E2%80%94ORGANIZATION%20AND%20BASIS%20OF%20PRESENTATION) - Walker & Dunlop is a leading commercial real estate services and finance company in the U.S., operating through various products including agency lending, debt brokerage, principal lending and investing, property sales brokerage, and automated multifamily valuation services[22](index=22&type=chunk)[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) - In Q3 2021, the Company acquired a **75% interest** in Zelman Holdings, LLC, expanding into housing market research and real estate-related investment banking and advisory services[27](index=27&type=chunk) [NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=NOTE%202%E2%80%94SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - The Company consolidates entities where it holds a controlling financial interest, applying either the variable interest entity (VIE) or voting interest model, and accounts for noncontrolling interests separately[29](index=29&type=chunk) - Loan commitments and forward sale commitments that qualify as derivatives are recorded at fair value, incorporating origination fees, premiums, expected servicing cash flows, and interest rate movements[32](index=32&type=chunk) Provision (Benefit) for Credit Losses (in thousands) | Components | 3 months ended Sep 30, 2021 | 3 months ended Sep 30, 2020 | 9 months ended Sep 30, 2021 | 9 months ended Sep 30, 2020 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Loan losses | $(12) | $2,179 | $(674) | $3,107 | | Risk-sharing obligations | $1,278 | $1,304 | $(13,706) | $28,922 | | Total | $1,266 | $3,483 | $(14,380) | $32,029 | Net Warehouse Interest Income Components (in thousands) | Components | 3 months ended Sep 30, 2021 | 3 months ended Sep 30, 2020 | 9 months ended Sep 30, 2021 | 9 months ended Sep 30, 2020 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Loans held for sale | $3,723 | $4,869 | $9,066 | $12,675 | | Loans held for investment | $1,860 | $2,689 | $5,702 | $9,779 | | Total | $5,583 | $7,558 | $14,768 | $22,454 | Revenues from Contracts with Customers (in thousands) | Description | 3 months ended Sep 30, 2021 | 3 months ended Sep 30, 2020 | 9 months ended Sep 30, 2021 | 9 months ended Sep 30, 2020 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Certain loan origination fees | $46,527 | $10,731 | $113,650 | $40,769 | | Property sales broker fees | $33,677 | $6,756 | $65,173 | $19,928 | | Investment management fees, etc. | $10,936 | $4,532 | $25,114 | $14,632 | | Total | $91,140 | $22,019 | $203,937 | $75,329 | [NOTE 3—MORTGAGE SERVICING RIGHTS](index=12&type=section&id=NOTE%203%E2%80%94MORTGAGE%20SERVICING%20RIGHTS) - The fair value of Mortgage Servicing Rights (MSRs) increased to **$1.2 billion** as of September 30, 2021, from **$1.1 billion** as of December 31, 2020[49](index=49&type=chunk) - A **100-basis point increase** in the discount rate would decrease the fair value of MSRs by **$37.2 million** as of September 30, 2021[49](index=49&type=chunk) MSR Activity Roll Forward (in thousands) | Metric | 9 months ended Sep 30, 2021 | 9 months ended Sep 30, 2020 | | :-------------------------- | :-------------------------- | :-------------------------- | | Beginning balance | $862,813 | $718,799 | | Additions | $224,035 | $215,288 | | Amortization | $(130,868) | $(110,243) | | Pre-payments and write-offs | $(26,155) | $(18,189) | | Ending balance | $929,825 | $805,655 | [NOTE 4—GUARANTY OBLIGATION and ALLOWANCE FOR RISK-SHARING OBLIGATIONS](index=13&type=section&id=NOTE%204%E2%80%94GUARANTY%20OBLIGATION%20AND%20ALLOWANCE%20FOR%20RISK-SHARING%20OBLIGATIONS) Guaranty Obligation Roll Forward (in thousands) | Metric | 9 months ended Sep 30, 2021 | 9 months ended Sep 30, 2020 | | :-------------------------- | :-------------------------- | :-------------------------- | | Beginning balance | $52,306 | $54,695 | | Additions | $4,023 | $4,346 | | Amortization | $(7,269) | $(7,035) | | Ending balance | $49,060 | $53,474 | Allowance for Risk-Sharing Obligations Roll Forward (in thousands) | Metric | 9 months ended Sep 30, 2021 | 9 months ended Sep 30, 2020 | | :-------------------------- | :-------------------------- | :-------------------------- | | Beginning balance | $75,313 | $11,471 | | Provision (benefit) for risk-sharing obligations | $(13,706) | $28,922 | | Ending balance | $61,607 | $70,495 | - The CECL reserve for the **$47.0 billion** at-risk Fannie Mae servicing portfolio decreased to **$54.0 million** as of September 30, 2021, from **$67.0 million** as of December 31, 2020, primarily due to improved economic conditions and unemployment forecasts[58](index=58&type=chunk)[57](index=57&type=chunk) - The maximum quantifiable contingent liability for Fannie Mae DUS guaranties was **$9.8 billion** as of September 30, 2021[60](index=60&type=chunk) [NOTE 5—SERVICING](index=14&type=section&id=NOTE%205%E2%80%94SERVICING) - The total unpaid principal balance of loans serviced increased to **$113.9 billion** as of September 30, 2021, from **$107.2 billion** as of December 31, 2020[61](index=61&type=chunk) - Custodial escrow accounts totaled **$3.0 billion** as of September 30, 2021, down from **$3.1 billion** as of December 31, 2020[62](index=62&type=chunk) [NOTE 6—WAREHOUSE NOTES PAYABLE](index=15&type=section&id=NOTE%206%E2%80%94WAREHOUSE%20NOTES%20PAYABLE) Warehouse Facilities Summary (in thousands) as of September 30, 2021 | Facility Type | Total Facility Capacity | Outstanding Balance | | :-------------------------- | :---------------------- | :------------------ | | Agency Warehouse Facilities | $5,590,000 | $2,717,745 | | Interim Warehouse Facilities| $454,810 | $131,627 | | Total | $6,044,810 | $2,849,372 | - The Company was in compliance with all financial covenants for its warehouse notes payable as of September 30, 2021[80](index=80&type=chunk) - Debt agreements have been updated to include fallback language for the transition from LIBOR to an alternative reference rate[80](index=80&type=chunk) [NOTE 7—GOODWILL AND OTHER INTANGIBLE ASSETS](index=17&type=section&id=NOTE%207%E2%80%94GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) Goodwill Roll Forward (in thousands) | Metric | 9 months ended Sep 30, 2021 | 9 months ended Sep 30, 2020 | | :-------------------------- | :-------------------------- | :-------------------------- | | Beginning balance | $248,958 | $180,424 | | Additions from acquisitions | $84,291 | $68,534 | | Ending balance | $333,249 | $248,958 | - Additions to goodwill in 2021 include **$66.8 million** from the acquisition of a **75% controlling interest** in Zelman Holdings, LLC[82](index=82&type=chunk) Contingent Consideration Liabilities Roll Forward (in thousands) | Metric | 9 months ended Sep 30, 2021 | 9 months ended Sep 30, 2020 | | :-------------------------- | :-------------------------- | :-------------------------- | | Beginning balance | $28,829 | $5,752 | | Additions | $7,504 | $27,645 | | Payments | $(6,080) | $(5,800) | | Ending balance | $31,658 | $28,423 | [NOTE 8—FAIR VALUE MEASUREMENTS](index=18&type=section&id=NOTE%208%E2%80%94FAIR%20VALUE%20MEASUREMENTS) - Financial assets and liabilities measured at fair value are categorized into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable and significant inputs)[90](index=90&type=chunk) Financial Assets and Liabilities Measured at Fair Value (in thousands) as of September 30, 2021 | Category | Level 1 | Level 2 | Level 3 | Total | | :-------------------------- | :------ | :------ | :------ | :------ | | Assets: Loans held for sale | $0 | $2,711,900 | $0 | $2,711,900 | | Assets: Pledged securities | $51,550 | $97,224 | $0 | $148,774 | | Assets: Derivative assets | $0 | $0 | $85,486 | $85,486 | | Liabilities: Derivative liabilities | $0 | $0 | $13,263 | $13,263 | Derivative Instruments (Level 3) Roll Forward (in thousands) | Metric | 9 months ended Sep 30, 2021 | 9 months ended Sep 30, 2020 | | :-------------------------- | :-------------------------- | :-------------------------- | | Beginning balance | $44,720 | $15,532 | | Settlements | $(488,356) | $(456,639) | | Realized gains | $443,636 | $441,107 | | Unrealized gains (losses) | $72,223 | $33,432 | | Ending balance | $72,223 | $33,432 | [NOTE 9—FANNIE MAE COMMITMENTS AND PLEDGED SECURITIES](index=22&type=section&id=NOTE%209%E2%80%94FANNIE%20MAE%20COMMITMENTS%20AND%20PLEDGED%20SECURITIES) - The Company is required to secure Fannie Mae DUS risk-sharing obligations by assigning restricted cash and securities as collateral[111](index=111&type=chunk) - As of September 30, 2021, the Company was in compliance with Fannie Mae's collateral requirements, maintaining a net worth of **$1.1 billion** (required **$250.2 million**) and operational liquidity of **$254.7 million** (required **$49.5 million**)[113](index=113&type=chunk) Pledged Securities (in thousands) as of September 30, 2021 | Category | Amount | | :-------------------------- | :----- | | Restricted cash | $10,596 | | Money market funds | $40,954 | | Agency MBS | $97,224 | | Total | $148,774 | [NOTE 10—EARNINGS PER SHARE AND STOCKHOLDERS' EQUITY](index=23&type=section&id=NOTE%2010%E2%80%94EARNINGS%20PER%20SHARE%20AND%20STOCKHOLDERS'%20EQUITY) Earnings Per Share (EPS) (in thousands, except per share amounts) | Metric | 3 months ended Sep 30, 2021 | 3 months ended Sep 30, 2020 | 9 months ended Sep 30, 2021 | 9 months ended Sep 30, 2020 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic EPS | $2.23 | $1.69 | $5.80 | $5.21 | | Diluted EPS | $2.21 | $1.66 | $5.73 | $5.11 | - The Board approved a stock repurchase program of up to **$75.0 million** over 12 months starting February 12, 2021, with **$75.0 million** of authorized capacity remaining as of September 30, 2021[123](index=123&type=chunk) - The Company paid a quarterly dividend of **$0.50 per share** in each of the first three quarters of 2021 and declared a **$0.50 per share** dividend for Q4 2021[124](index=124&type=chunk) [NOTE 11—PENDING ACQUISITION ACTIVITIES](index=24&type=section&id=NOTE%2011%E2%80%94PENDING%20ACQUISITION%20ACTIVITIES) - The Company entered into a purchase agreement to acquire Alliant Capital, Ltd., an alternative investment manager focused on affordable housing, for a total enterprise value of **$696 million**, with closing expected in Q4 2021[126](index=126&type=chunk)[128](index=128&type=chunk) - The acquisition consideration includes **$361 million** in cash, **$90 million** in Walker & Dunlop common stock, and **$100 million** in earn-out structured as participating interest in future cash flows[130](index=130&type=chunk) - To fund the Alliant acquisition, the Company is refinancing and upsizing its existing Note payable to **$600 million**, expected to close simultaneously with the acquisition in Q4 2021[129](index=129&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition, discussing forward-looking statements, business operations, critical accounting policies, the current business environment, detailed results of operations (revenues and expenses), non-GAAP financial measures, and an in-depth analysis of cash flows, liquidity, capital resources, and credit quality [Forward-Looking Statements](index=26&type=section&id=Forward-Looking%20Statements) - The report contains forward-looking statements related to expectations, projections, plans, and strategies, which are subject to numerous known and unknown risks and uncertainties[132](index=132&type=chunk)[133](index=133&type=chunk) - Risks include the future of Fannie Mae and Freddie Mac (GSEs), changes in interest rates, growth strategy, liquidity, dividend payments, personnel retention, competition, regulatory changes, and the ability to complete and integrate acquisitions (e.g., Alliant)[133](index=133&type=chunk)[134](index=134&type=chunk) - Statements are not guarantees of future results, and the Company disclaims any obligation to publicly update or revise them, except as required by law[133](index=133&type=chunk)[134](index=134&type=chunk) [Business](index=27&type=section&id=Business) - Walker & Dunlop is a leading commercial real estate services and finance company, primarily focused on multifamily lending, debt brokerage, and property sales, leveraging technology for customer experience and new business identification[135](index=135&type=chunk) - **Agency Lending and Loan Servicing:** Originates, sells, and services loans for Fannie Mae, Freddie Mac, and HUD, retaining servicing rights and asset management responsibilities[136](index=136&type=chunk)[138](index=138&type=chunk)[140](index=140&type=chunk)[146](index=146&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) - **Debt Brokerage:** Brokers loans for institutional lenders, earning origination and servicing fees[136](index=136&type=chunk)[138](index=138&type=chunk)[140](index=140&type=chunk)[146](index=146&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) - **Principal Lending and Investing:** Offers interim loans through a joint venture (Interim Program JV) and its own Interim Loan Program, and manages investments through Walker & Dunlop Investment Partners, Inc. (WDIP) with **$1.4 billion** in AUM[136](index=136&type=chunk)[138](index=138&type=chunk)[140](index=140&type=chunk)[146](index=146&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) - **Property Sales:** Provides brokerage services for multifamily property sales through Walker & Dunlop Investment Sales, LLC (WDIS)[136](index=136&type=chunk)[138](index=138&type=chunk)[140](index=140&type=chunk)[146](index=146&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) - **Appraisal Services:** Operates Apprise by Walker & Dunlop, a **50% owned joint venture**, offering automated multifamily appraisal services[136](index=136&type=chunk)[138](index=138&type=chunk)[140](index=140&type=chunk)[146](index=146&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) - **Housing Market Research and Real Estate Investment Banking Services:** Acquired a **75% interest** in Zelman & Associates in Q3 2021, providing housing market research and investment banking/advisory services[136](index=136&type=chunk)[138](index=138&type=chunk)[140](index=140&type=chunk)[146](index=146&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) [Basis of Presentation](index=30&type=section&id=Basis%20of%20Presentation) - The condensed consolidated financial statements include all accounts of Walker & Dunlop, Inc. and its wholly-owned and majority-owned subsidiaries, prepared in accordance with U.S. GAAP, with all intercompany transactions eliminated[155](index=155&type=chunk)[156](index=156&type=chunk) [Critical Accounting Policies and Estimates](index=30&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - **Mortgage Servicing Rights (MSRs):** Recorded at fair value at loan sale or purchase, based on estimated net cash flows, prepayment assumptions, discount rates (**8-14% in 2021**), and servicing costs[157](index=157&type=chunk)[158](index=158&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[163](index=163&type=chunk) - **Allowance for Risk-Sharing Obligations:** Estimated using the Current Expected Credit Losses (CECL) standard and the Weighted-Average Remaining Maturity (WARM) method for the Fannie Mae at-risk servicing portfolio, with a one-year reasonable and supportable forecast period[157](index=157&type=chunk)[158](index=158&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[163](index=163&type=chunk) [Overview of Current Business Environment](index=31&type=section&id=Overview%20of%20Current%20Business%20Environment) - **Macroeconomic Recovery:** U.S. unemployment rate improved to **4.8%** in September 2021 from **6.7%** in December 2020, with the Federal Funds Rate maintained at **0-0.25%**[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[177](index=177&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) - **Multifamily Market Strength:** Occupancy rates reached **97.3%** in September 2021, and residential retention rates hit an all-time high of **58.0%** in Q3 2021, indicating a robust market[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[177](index=177&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) - **Property Sales & Debt Brokerage:** Experienced strong growth in Q3 2021, driven by active acquisitions and increased demand from private capital providers[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[177](index=177&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) - **Agency Lending:** Fannie Mae and Freddie Mac's 2022 loan origination caps increased by **11%** to **$78 billion** each, with at least **50%** targeted towards affordable housing[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[177](index=177&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) - **HUD Lending:** Loan volumes increased **40%** in Q3 2021 and **33%** for the nine months ended September 30, 2021, driven by strong demand for long-term, fully amortizing debt[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[177](index=177&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) - **Interim Lending:** Interim Program JV originated **$314.9 million** in Q3 2021 (vs. none in Q3 2020), and the Interim Loan Program originated **$157.2 million** (vs. **$37.0 million** in Q3 2020)[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[177](index=177&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) - **Affordable Housing Initiatives:** The pending acquisition of Alliant Capital, Ltd. and new White House/FHFA initiatives are expected to create significant growth opportunities in the affordable housing sector[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[177](index=177&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Total Transaction Volume (in thousands) | Metric | 3 months ended Sep 30, 2021 | 3 months ended Sep 30, 2020 | 9 months ended Sep 30, 2021 | 9 months ended Sep 30, 2020 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Debt Financing Volume | $13,260,768 | $7,304,429 | $31,096,071 | $23,611,558 | | Property Sales Volume | $5,230,093 | $1,106,162 | $9,967,385 | $3,283,463 | | Total Transaction Volume | $18,490,861 | $8,410,591 | $41,063,456 | $26,895,021 | Key Performance Metrics | Metric | 3 months ended Sep 30, 2021 | 3 months ended Sep 30, 2020 | 9 months ended Sep 30, 2021 | 9 months ended Sep 30, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating margin | 27% | 28% | 28% | 29% | | Return on equity | 22% | 20% | 20% | 21% | | Diluted EPS | $2.21 | $1.66 | $5.73 | $5.11 | Managed Portfolio (in thousands) as of September 30 | Portfolio | 2021 | 2020 | | :----------------------- | :------------ | :------------ | | Total Servicing Portfolio| $113,920,374 | $103,377,753 | | Assets under management | $2,309,332 | $1,936,679 | | Total Managed Portfolio | $116,229,706 | $105,314,432 | [Overview](index=37&type=section&id=Overview) - **Revenues (Q3 2021 vs Q3 2020):** Total revenues increased by **$99.3 million** (**40%**), driven by significant growth in loan origination and debt brokerage fees (**+47%**), MSR Income (**+15%**), servicing fees (**+17%**), property sales broker fees (**+398%**), and other revenues (**+162%**)[192](index=192&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk) - **Revenues (9M 2021 vs 9M 2020):** Total revenues increased by **$118.0 million** (**16%**), with increases in origination fees (**+29%**), servicing fees (**+19%**), property sales broker fees (**+227%**), and other revenues (**+55%**), partially offset by decreases in MSR Income (**-11%**), net warehouse interest income (**-34%**), and escrow earnings (**-62%**)[192](index=192&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk) - **Expenses (Q3 2021 vs Q3 2020):** Total expenses increased by **$73.6 million** (**41%**), primarily due to higher personnel expenses (**+49%**), amortization and depreciation (**+28%**), and other operating expenses (**+54%**)[192](index=192&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk) - **Expenses (9M 2021 vs 9M 2020):** Total expenses increased by **$88.7 million** (**17%**), mainly from personnel expenses (**+31%**), amortization and depreciation (**+20%**), and other operating expenses (**+31%**), partially offset by a shift to a benefit for credit losses in 2021 from a provision in 2020[192](index=192&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk) [Revenues](index=38&type=section&id=Revenues) - **Loan origination and debt brokerage fees, net (Q3 2021):** Increased due to **65% growth** in Fannie Mae and **274% growth** in brokered debt financing volume, partially offset by a **17% decrease** in the origination fee rate due to a shift in transaction mix[192](index=192&type=chunk)[194](index=194&type=chunk)[202](index=202&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[213](index=213&type=chunk) - **MSR Income (Q3 2021):** Increased due to a **16% increase** in Agency debt financing volume, despite a **35% decrease** in the MSR Rate[192](index=192&type=chunk)[194](index=194&type=chunk)[202](index=202&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[213](index=213&type=chunk) - **MSR Income (9M 2021):** Declined due to a **19% decrease** in Agency debt financing volumes (Fannie Mae down **25%**), partially offset by a **9% increase** in the Agency MSR Rate[192](index=192&type=chunk)[194](index=194&type=chunk)[202](index=202&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[213](index=213&type=chunk) - **Servicing Fees (Q3 & 9M 2021):** Increased by **17%** and **19%** respectively, driven by an **11-13% increase** in the average servicing portfolio and a **4.7-5.1% increase** in the average servicing fee rate[192](index=192&type=chunk)[194](index=194&type=chunk)[202](index=202&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[213](index=213&type=chunk) - **Property sales broker fees (Q3 & 9M 2021):** Increased significantly (**398%** and **227%** respectively) due to substantial increases in property sales volumes[192](index=192&type=chunk)[194](index=194&type=chunk)[202](index=202&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[213](index=213&type=chunk) - **Net Warehouse Interest Income (Q3 & 9M 2021):** Decreased due to lower net spreads and average outstanding balances for both loans held for sale (LHFS) and loans held for investment (LHFI)[192](index=192&type=chunk)[194](index=194&type=chunk)[202](index=202&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[213](index=213&type=chunk) - **Other Revenues (Q3 & 9M 2021):** Increased primarily due to higher prepayment fees (**$6.6 million** and **$4.1 million** respectively) and **$4.5 million** in new revenues from the Zelman acquisition in Q3 2021[192](index=192&type=chunk)[194](index=194&type=chunk)[202](index=202&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[213](index=213&type=chunk) [Expenses](index=40&type=section&id=Expenses) - **Personnel Expenses (Q3 2021):** Increased by **$55.6 million** (**49%**) due to higher commission costs (**$40.9 million**), salaries and benefits (**$6.9 million** from **22% headcount increase**), subjective bonuses (**$3.6 million**), and stock-based compensation (**$3.8 million**)[192](index=192&type=chunk)[194](index=194&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk) - **Personnel Expenses (9M 2021):** Increased by **$96.8 million** (**31%**) due to higher commission costs (**$66.0 million**), salaries and benefits (**$18.4 million** from **16% headcount increase**), and stock-based compensation (**$8.7 million**)[192](index=192&type=chunk)[194](index=194&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk) - **Amortization and Depreciation (Q3 & 9M 2021):** Increased by **28%** and **20%** respectively, primarily due to growth in the average MSR balance, with **$124.2 million** of MSRs added net of amortization and write-offs over the past 12 months[192](index=192&type=chunk)[194](index=194&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk) - **Provision (Benefit) for Credit Losses (9M 2021):** Shifted to a **$14.4 million benefit** from a **$32.0 million provision** in 2020, driven by improvements in forecasted unemployment rates and sustained multifamily operating fundamentals, leading to a decrease in the CECL reserve[192](index=192&type=chunk)[194](index=194&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk) - **Other Operating Expenses (Q3 2021):** Increased by **$8.7 million** (**54%**), including **$3.8 million** in professional fees (**$2.9 million** for Alliant acquisition due diligence), **$1.4 million** in travel/entertainment, and **$1.4 million** in marketing[192](index=192&type=chunk)[194](index=194&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk) - **Other Operating Expenses (9M 2021):** Increased by **$14.8 million** (**31%**), including **$6.1 million** in professional fees (**$2.9 million** for Alliant acquisition due diligence), **$2.1 million** in marketing, **$1.8 million** in office expenses, and **$3.3 million** in miscellaneous expenses[192](index=192&type=chunk)[194](index=194&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk) - **Income Tax Expense (9M 2021):** Increased by **$6.2 million** (**12%**) due to a **14% increase** in income from operations and a **$1.2 million increase** in realizable excess tax benefits[192](index=192&type=chunk)[194](index=194&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk) [Non-GAAP Financial Measures](index=41&type=section&id=Non-GAAP%20Financial%20Measures) - Adjusted EBITDA is a non-GAAP financial measure used to evaluate operating performance, providing more meaningful period-to-period comparisons and better identification of business trends[226](index=226&type=chunk)[227](index=227&type=chunk) Adjusted EBITDA (in thousands) | Metric | 3 months ended Sep 30, 2021 | 3 months ended Sep 30, 2020 | Change ($) | Change (%) | 9 months ended Sep 30, 2021 | 9 months ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Adjusted EBITDA | $72,430 | $45,165 | $27,265 | 60.4% | $199,611 | $157,687 | $41,924 | 26.6% | [Financial Condition](index=43&type=section&id=Financial%20Condition) [Cash Flows from Operating Activities](index=43&type=section&id=Cash%20Flows%20from%20Operating%20Activities) - Net cash used in operating activities significantly decreased to **$(196.9) million** for the nine months ended September 30, 2021, from **$(2.3) billion** in the prior year, primarily due to a decrease in originations outpacing sales of loans held for sale[240](index=240&type=chunk) [Cash Flows from Investing Activities](index=44&type=section&id=Cash%20Flows%20from%20Investing%20Activities) - Net cash provided by investing activities decreased to **$49.3 million** for the nine months ended September 30, 2021, from **$147.6 million** in the prior year, driven by increased investments in loans held for investment, acquisitions, and joint ventures[241](index=241&type=chunk) [Cash Flows from Financing Activities](index=44&type=section&id=Cash%20Flows%20from%20Financing%20Activities) - Net cash provided by financing activities decreased to **$194.3 million** for the nine months ended September 30, 2021, from **$2.3 billion** in the prior year, mainly due to decreased net warehouse borrowings and repayment of secured borrowings, partially offset by increased interim warehouse notes payable and decreased stock repurchases[242](index=242&type=chunk)[244](index=244&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) - Key liquidity uses include funding loans, paying cash dividends, equity contributions to joint ventures, meeting working capital needs, and satisfying collateral requirements for Fannie Mae DUS risk-sharing and operational liquidity[245](index=245&type=chunk)[246](index=246&type=chunk)[249](index=249&type=chunk)[257](index=257&type=chunk)[280](index=280&type=chunk)[283](index=283&type=chunk) - As of September 30, 2021, the Company's net worth was **$1.1 billion** (required **$250.2 million**) and operational liquidity was **$254.7 million** (required **$49.5 million**), both in compliance with Fannie Mae requirements[245](index=245&type=chunk)[246](index=246&type=chunk)[249](index=249&type=chunk)[257](index=257&type=chunk)[280](index=280&type=chunk)[283](index=283&type=chunk) - The Company has **$75.0 million** of authorized capacity remaining under its 2021 stock repurchase program as of September 30, 2021[245](index=245&type=chunk)[246](index=246&type=chunk)[249](index=249&type=chunk)[257](index=257&type=chunk)[280](index=280&type=chunk)[283](index=283&type=chunk) - Total warehouse facilities capacity was **$6.045 billion** (**$5.59 billion** Agency, **$454.8 million** Interim) as of September 30, 2021, with **$2.849 billion** outstanding[245](index=245&type=chunk)[246](index=246&type=chunk)[249](index=249&type=chunk)[257](index=257&type=chunk)[280](index=280&type=chunk)[283](index=283&type=chunk) - The outstanding Term Loan (Note payable) was **$292.5 million** as of September 30, 2021, maturing November 7, 2025[245](index=245&type=chunk)[246](index=246&type=chunk)[249](index=249&type=chunk)[257](index=257&type=chunk)[280](index=280&type=chunk)[283](index=283&type=chunk) - The Company is refinancing and upsizing its Note payable to **$600 million** to fund the **$361 million** cash portion of the Alliant acquisition, expected to close in Q4 2021[245](index=245&type=chunk)[246](index=246&type=chunk)[249](index=249&type=chunk)[257](index=257&type=chunk)[280](index=280&type=chunk)[283](index=283&type=chunk) [Credit Quality and Allowance for Risk-Sharing Obligations](index=50&type=section&id=Credit%20Quality%20and%20Allowance%20for%20Risk-Sharing%20OBLIGATIONS) Key Credit Metrics (in thousands) as of September 30 | Metric | 2021 | 2020 | | :-------------------------- | :------------ | :------------ | | Risk-sharing servicing portfolio | $52,342,243 | $46,236,967 | | Total servicing portfolio unpaid principal balance | $113,920,374 | $103,377,753 | | At risk servicing portfolio | $48,209,532 | $41,848,548 | | Maximum exposure to at risk portfolio | $9,784,054 | $8,497,807 | | Allowance for risk-sharing | $61,607 | $70,495 | | Allowance for risk-sharing as a percentage of the at-risk portfolio | 0.13% | 0.17% | - The allowance for risk-sharing obligations decreased to **$61.6 million** as of September 30, 2021, from **$75.3 million** as of December 31, 2020, primarily due to improved unemployment forecasts and sustained strength in multifamily operating fundamentals[294](index=294&type=chunk) [New/Recent Accounting Pronouncements](index=52&type=section&id=New/Recent%20Accounting%20Pronouncements) - There have been no material changes to accounting policies discussed in the 2020 Form 10-K, and no recently announced but not yet effective accounting pronouncements are expected to have a material impact as of September 30, 2021[298](index=298&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=53&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section assesses the company's exposure to market risks, specifically interest rate risk and market value risk, and discusses the impact of potential changes in interest rates on various financial components, as well as the ongoing LIBOR transition [Interest Rate Risk](index=53&type=section&id=Interest%20Rate%20Risk) - A **100-basis point increase** in 30-day LIBOR would increase annual escrow earnings by **$29.8 million** as of September 30, 2021[301](index=301&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk) - A **100-basis point increase** in 30-day LIBOR would decrease annual net warehouse interest income by **$26.2 million** as of September 30, 2021[301](index=301&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk) - A **100-basis point increase** in 30-day LIBOR would decrease annual income from operations by **$2.9 million** based on the note payable balance as of September 30, 2021[301](index=301&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk) [LIBOR Transition](index=53&type=section&id=LIBOR%20Transition) - The 30-day LIBOR, the Company's primary reference rate, is scheduled to cease publication on **June 30, 2023**, with an expected transition to the Secured Overnight Financing Rate (SOFR)[304](index=304&type=chunk) - The Company is actively monitoring its LIBOR exposure, reviewing legal contracts, assessing fallback language impacts, and engaging with stakeholders regarding the transition[304](index=304&type=chunk) [Market Value Risk](index=53&type=section&id=Market%20Value%20Risk) - A **100-basis point increase** in the weighted-average discount rate would decrease the fair value of Mortgage Servicing Rights (MSRs) by approximately **$37.2 million** as of September 30, 2021[305](index=305&type=chunk) - **89% of servicing fees** are protected from prepayment risk through prepayment provisions as of September 30, 2021[306](index=306&type=chunk) [Item 4. Controls and Procedures](index=54&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the principal executive and financial officers, evaluated the effectiveness of the company's disclosure controls and procedures, concluding they were effective as of September 30, 2021, and reported no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of September 30, 2021, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[307](index=307&type=chunk)[308](index=308&type=chunk) - There have been no material changes in internal control over financial reporting during the quarter ended September 30, 2021[309](index=309&type=chunk) [PART II OTHER INFORMATION](index=54&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various claims and litigation in the ordinary course of business, none of which are considered material, and management believes any potential liability would not have a material adverse effect on its business or financial condition - The Company is party to various claims and litigation in the ordinary course of business, none of which are believed to be material[311](index=311&type=chunk) - Management believes that any liability from pending lawsuits would not have a material adverse effect on the Company's business, results of operations, liquidity, or financial condition[311](index=311&type=chunk) [Item 1A. Risk Factors](index=54&type=section&id=Item%201A.%20Risk%20Factors) This section highlights specific risks related to the pending acquisition of Alliant, including the uncertainty of its completion, potential failure to realize anticipated benefits, significant transaction costs, and challenges associated with integrating Alliant's businesses into the Company - The acquisition of Alliant may not be completed on the terms or timeline currently contemplated, or at all, due to conditions such as regulatory approvals and consents[313](index=313&type=chunk) - Risks include not realizing potential benefits, liability for significant transaction costs (including a **$20.0 million** termination fee if the Purchase Agreement is terminated), and diversion of management attention[313](index=313&type=chunk)[316](index=316&type=chunk)[318](index=318&type=chunk) - Integration challenges for Alliant's businesses may include diverting management attention, significant IT resource allocation, difficulties integrating financial accounting systems and controls, managing expanded operations, retaining key personnel, and addressing cultural differences[313](index=313&type=chunk)[316](index=316&type=chunk)[318](index=318&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=55&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports on equity security transactions, including shares purchased to satisfy tax withholding obligations for grantees and the issuance of common stock as partial consideration for the Zelman acquisition, noting no repurchases under its approved stock repurchase program during Q3 2021 - The Company purchased **13,713 shares** of common stock in Q3 2021 at an average price of **$108.21** to satisfy grantee tax withholding obligations on share-vesting events[319](index=319&type=chunk) - No shares were repurchased under the **$75.0 million** stock repurchase program during Q3 2021, leaving the full **$75.0 million** capacity remaining as of September 30, 2021[317](index=317&type=chunk)[319](index=319&type=chunk) - **50,219 shares** of common stock were issued on **July 13, 2021**, as partial consideration for the Zelman acquisition, with transfer restrictions until **July 13, 2022**[319](index=319&type=chunk) [Item 3. Defaults Upon Senior Securities](index=56&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[320](index=320&type=chunk) [Item 4. Mine Safety Disclosures](index=56&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable[321](index=321&type=chunk) [Item 5. Other Information](index=56&type=section&id=Item%205.%20Other%20Information) The company reported no other information - No other information to report[322](index=322&type=chunk) [Item 6. Exhibits](index=57&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including various agreements, corporate documents, and certifications, providing supporting documentation for the report - Exhibit 2.5: Purchase Agreement for Alliant Capital, Ltd., dated August 30, 2021[323](index=323&type=chunk) - Exhibits 31.1, 31.2, and 32: Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002[323](index=323&type=chunk) [Signatures](index=58&type=section&id=Signatures) This section contains the official signatures of the company's Chairman and Chief Executive Officer, and Executive Vice President and Chief Financial Officer, certifying the filing of the Form 10-Q - The report was signed by William M. Walker, Chairman and Chief Executive Officer, and Stephen P. Theobald, Executive Vice President and Chief Financial Officer, on November 4, 2021[330](index=330&type=chunk)

SECOND QUARTER 2021 EARNINGS August 5, 2021 Q2 Forward-Looking Statements Some of the statements contained in this presentation 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 s ...

Walker & Dunlop Inc. (NYSE:WD) Q2 2021 Earnings Conference Call August 5, 2021 8:30 AM ET Company Participants Kelsey Duffey - Vice President of Investor Relations Willy Walker - Chairman and CEO Steve Theobald - Chief Financial Officer Conference Call Participants Steve Delaney - JMP Jade Rahmani - KBW Henry Coffey - Wedbush Securities Kelsey Duffey Good morning, everyone. I'm Kelsey Duffey, Vice President of Investor Relations at Walker & Dunlop, and I would like to welcome you to our second quarter 2021 ...

PART I FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company presents its unaudited condensed consolidated financial statements for the period ending June 30, 2021 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $3.94 billion while stockholders' equity grew to $1.29 billion by June 30, 2021 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $326,518 | $321,097 | | Loans held for sale, at fair value | $1,718,444 | $2,449,198 | | Mortgage servicing rights | $915,519 | $862,813 | | **Total assets** | **$3,943,121** | **$4,650,975** | | **Liabilities** | | | | Warehouse notes payable | $1,823,982 | $2,517,156 | | **Total liabilities** | **$2,649,626** | **$3,454,753** | | **Total stockholders' equity** | **$1,293,495** | **$1,196,222** | [Condensed Consolidated Statements of Income and Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) Q2 2021 revenues rose 11% YoY to $281.4 million, though net income declined to $56.1 million Q2 2021 vs Q2 2020 Performance (in thousands, except per share data) | Metric | Q2 2021 | Q2 2020 | | :--- | :--- | :--- | | Total revenues | $281,411 | $252,825 | | Property sales broker fees | $22,454 | $3,561 | | Fair value of expected net cash flows from servicing, net | $61,849 | $90,369 | | Provision (benefit) for credit losses | $(4,326) | $4,903 | | Total expenses | $207,113 | $169,287 | | Walker & Dunlop net income | $56,058 | $62,059 | | Diluted earnings per share | $1.73 | $1.95 | [Consolidated Statements of Changes in Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Equity) Stockholders' equity increased to $1.29 billion, driven by net income and offset by dividend payments - Key drivers for the change in equity in the first six months of 2021 include **net income of $114.1 million**, cash dividends of $32.1 million ($1.00 per share), and stock-based compensation of $15.7 million[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow was a positive $759.3 million, a reversal from the prior year due to loan sale activity Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $759,342 | $(822,643) | | Net cash provided by investing activities | $75,411 | $73,971 | | Net cash provided by (used in) financing activities | $(802,999) | $903,974 | | **Net increase in cash** | **$31,754** | **$155,302** | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail key accounting policies for MSRs, risk-sharing, debt, and recent strategic acquisitions - The company originates, sells, and services commercial real estate debt and equity financing products, primarily through Fannie Mae, Freddie Mac, and HUD programs[21](index=21&type=chunk)[22](index=22&type=chunk) - The allowance for risk-sharing obligations **decreased to $60.3 million** as of June 30, 2021, from $75.3 million at year-end 2020, driven by an improved economic outlook and a reduction in the forecast period loss rate[52](index=52&type=chunk)[53](index=53&type=chunk) - Total warehouse facility capacity was **$5.8 billion** as of June 30, 2021, with an outstanding balance of $1.8 billion[61](index=61&type=chunk) - The company acquired a controlling interest in Zelman, a housing market research and investment banking firm, for **$53.6 million in cash** and $5.3 million in stock[72](index=72&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong transaction volume recovery, revenue growth, and strategic initiatives Total Transaction Volume (in millions) | Period | Q2 2021 | Q2 2020 | Change | | :--- | :--- | :--- | :--- | | Debt Financing Volume | $10,187 | $6,681 | +52% | | Property Sales Volume | $3,342 | $447 | +648% | | **Total Transaction Volume** | **$13,528** | **$7,128** | **+90%** | - The business environment in H1 2021 was characterized by recovering macroeconomic conditions, low interest rates, and strong multifamily property fundamentals[149](index=149&type=chunk)[154](index=154&type=chunk) - **Adjusted EBITDA**, a non-GAAP measure, **increased 37% to $66.5 million** in Q2 2021 from $48.4 million in Q2 2020, driven by higher cash revenues[213](index=213&type=chunk)[215](index=215&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Q2 2021 revenue grew 11% YoY, but higher expenses led to an 11% decline in income from operations Q2 2021 vs Q2 2020 Financial Results (in thousands) | Line Item | Q2 2021 | Q2 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Total revenues** | **$281,411** | **$252,825** | **$28,586** | **11%** | | Loan origination and debt brokerage fees, net | $107,472 | $77,907 | $29,565 | 38% | | Fair value of expected net cash flows from servicing, net | $61,849 | $90,369 | $(28,520) | -32% | | Property sales broker fees | $22,454 | $3,561 | $18,893 | 531% | | **Total expenses** | **$207,113** | **$169,287** | **$37,826** | **22%** | | Personnel | $141,421 | $106,920 | $34,501 | 32% | | Provision (benefit) for credit losses | $(4,326) | $4,903 | $(9,229) | -188% | | **Income from operations** | **$74,298** | **$83,538** | **$(9,240)** | **-11%** | - The increase in origination fees was driven by a **320% growth in brokered debt financing volume**, which offset a lower origination fee rate[186](index=186&type=chunk) - The benefit for credit losses in 2021 was due to improvements in the forecasted unemployment rate, reversing a significant provision made at the onset of the pandemic[201](index=201&type=chunk)[202](index=202&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with $5.8 billion in warehouse capacity and exceeds all capital requirements - The company's **net worth of $1.1 billion** significantly exceeded the Fannie Mae requirement of $245.4 million as of June 30, 2021[230](index=230&type=chunk) - A quarterly dividend of **$0.50 per share** was paid in Q1 and Q2 2021, a 39% increase from the prior year[231](index=231&type=chunk) - As of June 30, 2021, the company had **$75.0 million of authorized capacity** remaining under its share repurchase program[233](index=233&type=chunk) Warehouse Facility Capacity (in thousands) | Facility Type | Total Capacity | Outstanding Balance | | :--- | :--- | :--- | | Agency Warehouse Facilities | $5,390,000 | $1,639,577 | | Interim Warehouse Facilities | $404,810 | $184,835 | | **Total** | **$5,794,810** | **$1,824,412** | [Credit Quality and Allowance for Risk-Sharing Obligations](index=47&type=section&id=Credit%20Quality%20and%20Allowance%20for%20Risk-Sharing%20Obligations) The at-risk servicing portfolio grew to $46.9 billion, while the allowance for risk-sharing decreased - The at-risk servicing portfolio, primarily Fannie Mae DUS loans, was **$46.9 billion** as of June 30, 2021, with a maximum potential loss exposure of $9.5 billion[267](index=267&type=chunk) - The allowance for risk-sharing as a percentage of the at-risk portfolio **decreased from 0.17% to 0.13%** at June 30, 2021, reflecting improved credit conditions[267](index=267&type=chunk)[277](index=277&type=chunk) - The company has **never been required to repurchase a loan** under its risk-sharing agreements[279](index=279&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate and MSR valuation, with active management of the LIBOR transition - A **100-basis point increase** in the MSR discount rate would **decrease the fair value of MSRs by approximately $36.9 million** as of June 30, 2021[288](index=288&type=chunk) Annualized Impact of a 100 Basis Point Increase in 30-day LIBOR (as of June 30, 2021) | Impacted Area | Change in Income (in thousands) | | :--- | :--- | | Escrow earnings | $30,204 | | Net warehouse interest income | $(15,928) | | Income from operations (corporate debt) | $(2,933) | - The company is preparing for the cessation of LIBOR publication, scheduled for June 30, 2023, and expects to transition legacy contracts to SOFR[287](index=287&type=chunk) [Item 4. Controls and Procedures](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes in internal controls - The CEO and CFO certified that disclosure controls and procedures were effective to ensure timely and accurate reporting as required by the SEC[291](index=291&type=chunk) - **No material changes** to internal control over financial reporting occurred during the quarter ended June 30, 2021[292](index=292&type=chunk) PART II OTHER INFORMATION [Item 1. Legal Proceedings](index=50&type=section&id=Item%201.%20Legal%20Proceedings) The company is not party to any material litigation and expects no material adverse financial impact from pending suits - In the ordinary course of business, the Company may be party to various claims and litigation, **none of which management believes is material**[294](index=294&type=chunk) [Item 1A. Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) Key risks include cybersecurity threats and new regulatory exposures from the Zelman broker-dealer acquisition - The company faces risks from increasingly sophisticated **cyber-attacks** that could lead to data loss, operational disruption, and reputational harm[296](index=296&type=chunk)[300](index=300&type=chunk) - The acquisition of Zelman, a registered broker-dealer, subjects the company to **extensive regulation by the SEC and FINRA**, covering all aspects of the securities business[301](index=301&type=chunk)[302](index=302&type=chunk) - **Failure to comply with broker-dealer regulations** or anti-money laundering (AML) requirements could result in sanctions, fines, and limitations on business activities[304](index=304&type=chunk)[307](index=307&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company purchased shares for tax withholding but made no repurchases under its public buyback program Issuer Purchases of Equity Securities - Q2 2021 | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Publicly Announced Program | | :--- | :--- | :--- | :--- | | April 1-30, 2021 | 2,872 | $105.28 | — | | May 1-31, 2021 | 2,675 | $110.98 | — | | June 1-30, 2021 | 1,988 | $101.83 | — | | **2nd Quarter** | **7,535** | **$106.39** | **—** | - As of June 30, 2021, the company had **$75.0 million of authorized share repurchase capacity** remaining under its 2021 program[309](index=309&type=chunk) [Item 6. Exhibits](index=53&type=section&id=Item%206.%20Exhibits) This section lists filed exhibits, including credit agreement amendments and required CEO/CFO certifications - Exhibits filed include amendments to warehousing credit agreements and **CEO/CFO certifications** pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[313](index=313&type=chunk)

Walker & Dunlop, Inc. (NYSE:WD) Q1 2021 Earnings Conference Call May 6, 2021 8:30 AM ET Company Participants Kelsey Duffey - Vice President of Investor Relations Willy Walker - Chairman & Chief Executive Officer Steve Theobald - Executive Vice President & Chief Financial Officer Conference Call Participants Henry Coffey - Wedbush Securities Jade Rahmani - KBW Steve Delaney - JMP Kelsey Duffey Good morning, everyone. I'm Kelsey Duffey, Vice President of Investor Relations at Walker & Dunlop, and I would like ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q | (Mark One) | | | | --- | --- | --- | | ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | | For the quarterly period ended March 31, 2021 | | | | OR | | | | ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | | For the transition period from | to | | | Commission File Number: 001-35000 | | | | Walker | & Dunlop,Inc. | ...