Loan Origination and Transaction Volumes - In Q1 2022, new loans represented 68% of refinancing volumes and 25% of total transaction volumes from new customers [136]. - Total transaction volumes increased by 56% in the first half of 2022 compared to the same period in 2021, with multifamily property sales up 141% [182]. - Fannie Mae and Freddie Mac had multifamily origination volumes of $34.7 billion and $29.6 billion for the six months ended June 30, 2022, representing increases of 7.1% and 9.2% respectively from the first half of 2021 [184]. - Total debt financing volume for the three months ended June 30, 2022, was $14.65 billion, up from $10.19 billion in the same period in 2021 [193]. - Property sales volume for the six months ended June 30, 2022, was $11.42 billion, compared to $4.74 billion in the same period in 2021 [193]. Company Acquisitions and Subsidiaries - The company acquired GeoPhy B.V. on February 28, 2022, to enhance its small-balance lending platform and technology-enabled appraisal services [139]. - Apprise, a subsidiary of the company, has seen rapid revenue growth and increased volume of appraisal reports generated [150]. - Zelman & Associates, a subsidiary owned 75% by the company, enhances market insight in housing trends and generates revenue through the sale of research data and investment banking services [162]. Financial Performance and Revenue Growth - Total revenues for the three months ended June 30, 2022, increased by 21% to $340,848,000 compared to $281,411,000 in the same period of 2021 [198]. - For the six months ended June 30, 2022, total revenues increased by 31% to $660,292,000 compared to $505,699,000 in the same period of 2021 [200]. - Adjusted EBITDA for the three months ended June 30, 2022, was $94,844,000, an increase of 43% compared to $66,514,000 for the same period in 2021 [218]. - The company reported a net income of $70,236,000 for the six months ended June 30, 2022, a 40% increase from $50,125,000 in 2021 [269]. Expenses and Cost Management - Total expenses for the three months ended June 30, 2022, rose by 29% to $267,238,000 compared to $207,113,000 in the same period of 2021 [198]. - The company experienced a 23% increase in personnel expenses for the three months ended June 30, 2022, totaling $138,913 compared to $119,994 in 2021 [238]. - Other operating expenses for the three months ended June 30, 2022, increased by $3.9 million, primarily due to higher professional fees and costs from acquired subsidiaries [277]. Risk Management and Credit Losses - The company has risk-sharing obligations on nearly all loans originated under the Fannie Mae DUS program, absorbing losses on the first 5% of the unpaid principal balance, with a maximum loss capped at 20% of the original unpaid principal balance [154]. - The calculated CECL reserve for the company's $51.2 billion at-risk Fannie Mae servicing portfolio as of June 30, 2022, was $37.7 million, down from $52.3 million as of December 31, 2021 [324]. - Defaulted loans as a percentage of the at-risk portfolio increased to 0.15% as of June 30, 2022, compared to 0.10% in the previous year [316]. Technology and Operational Efficiency - The company leverages technology and data analytics to improve the consistency and speed of multifamily property appraisals [150]. - The company’s growth strategy includes strategic investments in technology to enhance customer experience and operational efficiencies [136]. Shareholder Returns and Dividends - The company paid a cash dividend of $0.60 per share for Q2 2022, which is 20% higher than the dividend paid in Q2 2021 [304]. - Cash dividends paid increased by 25% to $40,143,000 in 2022, up from $32,122,000 in 2021 [231]. Market Conditions and Economic Indicators - Multifamily occupancy rates and demand for new leases reached record highs, with overall vacancy rates at 3.7% [179]. - The loss rate used in the forecast period was updated from three basis points to 2.2 basis points in Q2 2022, reflecting expectations of economic conditions [169].

JOIN US AS WE CONTINUE THE DRIVE TO 25 WALKER DUNLOP VIRTUAL INVESTOR D May 19, 2022 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 th ...

Walker & Dunlop, Inc. (NYSE:WD) Q1 2022 Earnings Conference Call May 5, 2022 8:30 AM ET Company Participants Kelsey Duffey - VP, IR Willy Walker - Chairman, CEO Steve Theobald - EVP, CFO Conference Call Participants Jade Rahmani - KBW Steven Delaney - JMP Jay McCanless - Wedbush Securities Kelsey Duffey Good morning, everyone. I'm Kelsey Duffey, Senior Vice President of Investor Relations at Walker & Dunlop, and I'd like to welcome you to Walker & Dunlop's first quarter 2022 earnings conference call and web ...

| --- | --- | --- | |-----------------------------|-------|-------| | | | | | | | | | FIRST QUARTER 2022 EARNINGS | | | | May 5, 2022 | | | 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 c ...

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited Q1 2022 consolidated financial statements, detailing revenue and net income growth, and asset changes Condensed Consolidated Balance Sheet Highlights (As of March 31, 2022 vs. December 31, 2021) | Account | March 31, 2022 ($ thousands) | December 31, 2021 ($ thousands) | Change (%) | | :--- | :--- | :--- | :--- | | **Total Assets** | **4,339,631** | **5,205,989** | **(16.6%)** | | Loans held for sale, at fair value | 703,629 | 1,811,586 | (61.2%) | | Goodwill | 908,744 | 698,635 | 30.1% | | **Total Liabilities** | **2,702,460** | **3,627,782** | **(25.5%)** | | Warehouse notes payable | 924,280 | 1,941,572 | (52.4%) | | **Total Equity** | **1,637,171** | **1,578,207** | **3.7%** | Condensed Consolidated Statement of Income Highlights (For the three months ended March 31) | Account | 2022 ($ thousands) | 2021 ($ thousands) | Change (%) | | :--- | :--- | :--- | :--- | | **Total Revenues** | **319,444** | **224,288** | **42.4%** | | Loan origination and debt brokerage fees, net | 82,310 | 75,879 | 8.5% | | Property sales broker fees | 23,398 | 9,042 | 158.8% | | Other revenues | 81,749 | 8,782 | 830.9% | | **Total Expenses** | **229,454** | **151,118** | **51.8%** | | Personnel | 144,181 | 96,215 | 49.9% | | **Walker & Dunlop Net Income** | **71,209** | **58,052** | **22.7%** | | **Diluted EPS** | **$2.12** | **$1.79** | **18.4%** | Condensed Consolidated Statement of Cash Flows Highlights (For the three months ended March 31) | Cash Flow Activity | 2022 ($ thousands) | 2021 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | 971,928 | 1,315,692 | | Net cash used in investing activities | (44,440) | 81,179 | | Net cash used in financing activities | (1,096,656) | (1,423,259) | | **Net (decrease) in cash** | **(169,168)** | **(26,388)** | - In Q1 2022, the company transitioned to three new operating segments: Capital Markets (CM), Servicing & Asset Management (SAM), and Corporate, reflecting management's evaluation post-growth and acquisitions[112](index=112&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Discusses Q1 2022 financial performance, market conditions, segment changes, liquidity, and capital resources Total Transaction Volume (For the three months ended March 31) | Volume Type | 2022 ($ thousands) | 2021 ($ thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Total Debt Financing Volume | 9,135,017 | 7,826,869 | 16.7% | | Property Sales Volume | 3,531,690 | 1,395,760 | 153.0% | | **Total Transaction Volume** | **12,666,707** | **9,222,629** | **37.3%** | - The company acquired **GeoPhy** on February 28, 2022, to accelerate growth in its small balance lending and appraisal platforms[130](index=130&type=chunk) - The Federal Reserve's increase in its target Federal Funds Rate has led to higher long-term mortgage interest rates, impacting the company's lending basis[172](index=172&type=chunk) - The Board approved a new **$75.0 million** stock repurchase program and declared a **$0.60 per share** Q1 2022 dividend, a **20%** increase YoY[109](index=109&type=chunk)[110](index=110&type=chunk)[262](index=262&type=chunk) [Business and Segments](index=32&type=section&id=Business%20and%20Segments) Describes the company's commercial real estate services and its Q1 2022 reorganization into three new operating segments - The Capital Markets segment offers commercial real estate finance products, including Agency lending, debt brokerage, property sales, and appraisal services[134](index=134&type=chunk) - The Servicing & Asset Management segment focuses on loan servicing, managing third-party capital, and providing housing market research[143](index=143&type=chunk) - The Corporate segment includes treasury operations, corporate debt management, strategic investments, and various support functions[133](index=133&type=chunk) [Consolidated Results of Operations](index=42&type=section&id=Consolidated%20Results%20of%20Operations) Details Q1 2022 consolidated financial performance, including 42% revenue growth, 52% expense increase, and 23% net income rise Consolidated Financial Results (For the three months ended March 31) | Account | 2022 ($ thousands) | 2021 ($ thousands) | Change (%) | | :--- | :--- | :--- | :--- | | **Total Revenues** | **319,444** | **224,288** | **42%** | | Property sales broker fees | 23,398 | 9,042 | 159% | | Other revenues | 81,749 | 8,782 | 831% | | **Total Expenses** | **229,454** | **151,118** | **52%** | | Personnel | 144,181 | 96,215 | 50% | | **Income from operations** | **89,990** | **73,170** | **23%** | | **Walker & Dunlop net income** | **71,209** | **58,052** | **23%** | - The significant increase in 'Other revenues' was primarily due to a **$39.6 million** one-time gain from the revaluation of the Apprise investment[189](index=189&type=chunk)[190](index=190&type=chunk) Adjusted EBITDA Reconciliation (For the three months ended March 31) | Account | 2022 ($ thousands) | 2021 ($ thousands) | | :--- | :--- | :--- | | Walker & Dunlop Net Income | 71,209 | 58,052 | | Adjustments | (8,573) | 2,615 | | **Adjusted EBITDA** | **62,636** | **60,667** | [Segment Results](index=51&type=section&id=Segment%20Results) Presents Q1 2022 operational results by segment, showing Capital Markets decline, Servicing & Asset Management growth, and reduced Corporate loss Income from Operations by Segment (For the three months ended March 31) | Segment | 2022 ($ thousands) | 2021 ($ thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Capital Markets | 59,407 | 70,733 | (16.0%) | | Servicing & Asset Management | 40,876 | 34,743 | 17.6% | | Corporate | (10,293) | (32,306) | (68.1%) | | **Total Income from Operations** | **89,990** | **73,170** | **23.0%** | - Capital Markets' debt financing volume increased to **$9.0 billion**, but MSR income rate on Agency volume declined from **1.83%** to **1.56%**[215](index=215&type=chunk)[224](index=224&type=chunk) - Servicing & Asset Management's total managed portfolio grew to **$132.9 billion** from **$111.7 billion** YoY, with AUM increasing to **$16.7 billion** due to the Alliant acquisition[236](index=236&type=chunk) - The Corporate segment's revenue was positively impacted by a **$39.6 million** gain from remeasuring its Apprise equity investment to fair value upon acquisition[252](index=252&type=chunk) [Liquidity and Capital Resources](index=61&type=section&id=Liquidity%20and%20Capital%20Resources) Details the company's strong liquidity and capital position, exceeding regulatory requirements, and outlines key cash uses and debt structure - The company satisfied its Fannie Mae net worth requirement with **$704.8 million** against a required **$261.2 million** as of March 31, 2022[261](index=261&type=chunk) - A new stock repurchase program was approved in February 2022, authorizing up to **$75.0 million** in common stock repurchases, with no shares repurchased in Q1 2022[264](index=264&type=chunk) - The company's at-risk servicing portfolio was **$50.2 billion**, with defaulted loans at **0.16%** and maximum potential loss exposure of **$10.2 billion**[275](index=275&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=65&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Discusses exposure to interest rate and market value risks, detailing the impact of rate changes on earnings, expenses, and MSR fair value Annualized Impact of a 100 Basis Point Interest Rate Increase (as of March 31, 2022) | Item | Impact ($ thousands) | | :--- | :--- | | Increase in escrow earnings | 24,807 | | Increase in net warehouse interest expense | (8,929) | | Increase in interest expense on corporate debt | (4,728) | - The fair value of MSRs is sensitive to discount rate changes; a **100-basis point** increase would decrease fair value by approximately **$39.1 million** as of March 31, 2022[292](index=292&type=chunk) - The company is managing the transition from LIBOR to SOFR, having already transitioned its Term Loan and several warehouse facilities to SOFR-based rates[294](index=294&type=chunk) [Item 4. Controls and Procedures](index=66&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal controls - The principal executive and financial officers concluded that the company's disclosure controls and procedures were effective as of the period end[296](index=296&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter[297](index=297&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=66&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, none of which are considered material or expected to have an adverse effect - In the ordinary course of business, the company may be party to various claims and litigation, none of which management believes is material[299](index=299&type=chunk) [Item 1A. Risk Factors](index=66&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred regarding the risk factors previously disclosed in the company's 2021 Annual Report on Form 10-K - No material changes have occurred regarding the Risk Factors disclosed in the company's 2021 Form 10-K[300](index=300&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=68&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details Q1 2022 equity security transactions, including shares purchased for tax withholding and shares issued as earnout consideration - The company purchased **195,431** shares at an average price of **$138.28 per share** to satisfy grantee tax withholding obligations[301](index=301&type=chunk) - As of March 31, 2022, the company had **$75.0 million** of authorized capacity remaining under its stock repurchase program[301](index=301&type=chunk) [Item 6. Exhibits](index=69&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the Form 10-Q, including agreements, corporate documents, and required CEO/CFO certifications

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)