Walker & Dunlop(WD) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Presents the company's unaudited condensed consolidated financial statements and related notes for the reported periods Item 1. Financial Statements Presents unaudited condensed consolidated financial statements, including balance sheets, income, cash flows, equity, and detailed notes Condensed Consolidated Balance Sheets Provides a summary of the company's assets, liabilities, and equity at key reporting dates Balance Sheet Summary (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total Assets | $4,675,040 | $4,381,993 | $293,047 | 6.7% | | Total Liabilities | $2,913,242 | $2,622,130 | $291,112 | 11.1% | | Total Stockholders' Equity | $1,750,018 | $1,747,863 | $2,155 | 0.1% | | Total Equity | $1,761,798 | $1,759,863 | $1,935 | 0.1% | Condensed Consolidated Statements of Income and Comprehensive Income Details the company's revenues, expenses, and net income for the three and six months ended June 30 Income Statement Summary (Three Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Total Revenues | $319,240 | $270,676 | $48,564 | 17.9% | | Total Expenses | $272,866 | $242,479 | $30,387 | 12.5% | | Income from Operations | $46,374 | $28,197 | $18,177 | 64.5% | | Walker & Dunlop Net Income | $33,952 | $22,663 | $11,289 | 49.8% | | Basic EPS | $1.00 | $0.67 | $0.33 | 49.3% | | Diluted EPS | $0.99 | $0.67 | $0.32 | 47.8% | Income Statement Summary (Six Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Total Revenues | $556,607 | $498,735 | $57,872 | 11.6% | | Total Expenses | $504,989 | $456,859 | $48,130 | 10.5% | | Income from Operations | $51,618 | $41,876 | $9,742 | 23.3% | | Walker & Dunlop Net Income | $36,706 | $34,529 | $2,177 | 6.3% | | Basic EPS | $1.08 | $1.02 | $0.06 | 5.9% | | Diluted EPS | $1.07 | $1.02 | $0.05 | 4.9% | Consolidated Statements of Changes in Equity Outlines the changes in total equity, including net income, dividends, and stock transactions - Total Equity increased from $1,759,863 thousand at December 31, 2024, to $1,761,798 thousand at June 30, 2025. Walker & Dunlop net income contributed $36,706 thousand, while cash dividends paid totaled $45,859 thousand. Stock-based compensation added $12,059 thousand, and common stock repurchases reduced equity by $9,232 thousand[16] Condensed Consolidated Statements of Cash Flows Summarizes cash flows from operating, investing, and financing activities for the reported periods Cash Flow Summary (Six Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------ | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Net cash provided by (used in) operating activities | $(519,560) | $(199,449) | $(320,111) | 160.5% | | Net cash provided by (used in) investing activities | $(61,926) | $(29,611) | $(32,315) | 109.1% | | Net cash provided by (used in) financing activities | $546,356 | $119,147 | $427,209 | 358.6% | | Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents | $(35,130) | $(109,913) | $74,783 | (68.0)% | | Total cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period | $292,768 | $281,490 | $11,278 | 4.0% | Notes to Condensed Consolidated Financial Statements Provides detailed explanations of significant accounting policies and financial statement items NOTE 1—ORGANIZATION AND BASIS OF PRESENTATION Describes the company's structure, operations, and the basis for financial statement presentation - Walker & Dunlop, Inc. is a holding company operating primarily through Walker & Dunlop, LLC, a leading commercial real estate services and finance company in the U.S[22] - The Company originates, sells, and services commercial real estate debt and equity financing products, provides multifamily property sales brokerage and valuation, engages in commercial real estate investment management (focused on affordable housing via LIHTC syndication), offers housing market research, and delivers real estate-related investment banking and advisory services[22] - Agency lending products are offered through Fannie Mae, Freddie Mac (GSEs), Ginnie Mae, and HUD (Agencies). Debt brokerage products are for life insurance companies, commercial banks, and other institutional investors[23] NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Details the company's key accounting policies, including credit loss provisions and revenue recognition Provision (Benefit) for Credit Losses (Three Months Ended June 30) | Component | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :------- | | Provision (benefit) for loan losses | $500 | $(17) | $517 | N/A | | Provision (benefit) for risk-sharing obligations | $1,320 | $353 | $967 | 273.9% | | Provision (benefit) for loan credit losses | $1,820 | $336 | $1,484 | 441.7% | | Provision (benefit) for other credit losses | $0 | $2,600 | $(2,600) | (100.0)% | | Total Provision (benefit) for credit losses | $1,820 | $2,936 | $(1,116) | (38.0)% | Provision (Benefit) for Credit Losses (Six Months Ended June 30) | Component | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :------- | | Provision (benefit) for loan losses | $500 | $(16) | $516 | N/A | | Provision (benefit) for risk-sharing obligations | $5,032 | $(1,124) | $6,156 | N/A | | Provision (benefit) for loan credit losses | $5,532 | $(1,140) | $6,672 | N/A | | Provision (benefit) for other credit losses | $0 | $4,600 | $(4,600) | (100.0)% | | Total Provision (benefit) for credit losses | $5,532 | $3,460 | $2,072 | 59.9% | - The Company has credit risk exclusively on loans secured by multifamily real estate, with no exposure to other commercial real estate sectors[26] - The Company is obligated to repurchase GSE loans if certain representations and warranties are breached. As of June 30, 2025, four loans were repurchased, and one loan with an outstanding balance of $23.2 million must be repurchased by March 29, 2026. All repurchased/indemnified loans are delinquent and non-accrual[28] - Net warehouse interest income (expense) for the three months ended June 30, 2025, was $(1,760) thousand, compared to $(1,584) thousand in 2024. For the six months, it was $(2,546) thousand in 2025, compared to $(2,700) thousand in 2024[33] - Co-broker fees netted against Loan origination and debt brokerage fees were $4.5 million (Q2 2025) vs $2.0 million (Q2 2024) and $6.5 million (YTD 2025) vs $4.6 million (YTD 2024)[34] - Total revenues derived from contracts with customers increased to $77.7 million for Q2 2025 (from $68.4 million in Q2 2024) and $135.7 million for YTD 2025 (from $120.8 million in YTD 2024)[36] NOTE 3—MORTGAGE SERVICING RIGHTS Explains the valuation, changes, and sensitivities of mortgage servicing rights - The fair value of Mortgage Servicing Rights (MSRs) was $1.4 billion as of both June 30, 2025, and December 31, 2024[39] MSR Key Economic Assumptions Sensitivities (June 30, 2025) | Assumption Change | Decrease in Fair Value (in millions) | | :---------------------- | :--------------------------------- | | 100 bps increase in Discount Rate | $40.3 | | 200 bps increase in Discount Rate | $77.9 | | 50 bps decrease in Placement Fee Rate | $49.1 | | 100 bps decrease in Placement Fee Rate | $98.3 | Roll Forward of MSRs (in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :---------------------- | :-------- | :-------- | :--------- | :--------- | | Beginning balance | $825,761 | $881,834 | $852,399 | $907,415 | | Additions | $47,068 | $21,172 | $73,911 | $47,582 | | Amortization | $(53,264) | $(50,495) | $(105,086) | $(101,026) | | Pre-payments & write-offs | $(1,751) | $(1,680) | $(3,410) | $(3,140) | | Ending balance | $817,814 | $850,831 | $817,814 | $850,831 | - Net carrying value of MSRs was $817.8 million as of June 30, 2025, down from $852.4 million as of December 31, 2024[40] NOTE 4—ALLOWANCE FOR RISK-SHARING OBLIGATIONS Discusses the allowance for credit losses on risk-sharing obligations and related portfolio details - The Company records an estimate for Current Expected Credit Losses (CECL) for its Fannie Mae at-risk servicing portfolio and Freddie Mac SBLs[42] Roll Forward of Allowance for Risk-Sharing Obligations (in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :-------- | :-------- | :--------- | :--------- | | Beginning balance | $31,871 | $30,124 | $28,159 | $31,601 | | Provision (benefit) for risk-sharing obligations | $1,320 | $353 | $5,032 | $(1,124) | | Ending balance | $33,191 | $30,477 | $33,191 | $30,477 | - The at-risk Fannie Mae servicing portfolio UPB was $64.7 billion as of Q2 2025, up from $59.5 billion in Q2 2024[43] - Collateral-based reserves for individually evaluated loans (5 Fannie Mae DUS, 3 Freddie Mac SBLs) totaled $8.6 million as of June 30, 2025, compared to $4.0 million as of December 31, 2024[44] - Maximum quantifiable contingent liability for Fannie Mae DUS guaranties was $13.4 billion as of June 30, 2025, up from $12.2 billion in 2024[45] NOTE 5—SERVICING Provides information on the total loan servicing portfolio and custodial deposit accounts - Total UPB of loans serviced for institutional investors was $137.3 billion as of June 30, 2025, an increase from $135.3 billion as of December 31, 2024[46] - Custodial deposit accounts (escrow deposits) totaled $2.7 billion as of both June 30, 2025, and December 31, 2024[47] NOTE 6—DEBT Details the company's various debt instruments, facilities, and covenant compliance - As of June 30, 2025, the Company had $5.3 billion in total Agency Warehouse Facilities capacity ($1.65 billion committed, $3.65 billion uncommitted) with an outstanding balance of $1.157 billion. Interest rates are based on SOFR plus a spread[49] - Maturity dates for Agency Warehouse Facilities 2, 3, and 4 were extended to April 10, 2026, May 15, 2026, and June 22, 2026, respectively[51][52][53] - The Company has a $450.0 million Term Loan (balance $448.9 million as of June 30, 2025) and a $50.0 million revolving credit facility (no outstanding balance)[54] - The Company also has $400.0 million aggregate principal amount of Senior Unsecured Notes as of June 30, 2025[54] - The Company is in compliance with all financial covenants for warehouse facilities and notes payable as of June 30, 2025[55] NOTE 7—GOODWILL AND OTHER INTANGIBLE ASSETS Presents the balances and changes in goodwill and other intangible assets - Goodwill balance was $868.7 million as of June 30, 2025, unchanged from December 31, 2024. Accumulated goodwill impairment was $95.0 million as of June 30, 2025, up from $62.0 million as of June 30, 2024[10][56] - Net carrying value of other intangible assets was $149.4 million as of June 30, 2025, down from $156.9 million as of December 31, 2024[57][58] - Contingent consideration liabilities decreased to $19.7 million as of June 30, 2025, from $30.5 million as of December 31, 2024, due to payments. The last earnout period for contingent consideration ends in Q3 2027[60] NOTE 8—FAIR VALUE MEASUREMENTS Explains the fair value hierarchy and valuation of financial assets and liabilities - The Company uses a fair value hierarchy (Level 1, 2, 3) for valuation inputs, with MSRs measured at fair value at inception and thereafter on a nonrecurring basis[62][65] - The Company entered into an interest rate swap for its Senior Notes in Q1 2025, converting fixed interest payments to variable (SOFR-based) and designating it as a fair value hedge[64] Financial Assets and Liabilities Measured at Fair Value (June 30, 2025, in thousands) | Category | Level 1 | Level 2 | Level 3 | Total | | :-------------------------- | :-------- | :---------- | :-------- | :---------- | | Assets: | | | | | | Loans held for sale | — | $1,177,837 | — | $1,177,837 | | Pledged securities | $17,966 | $200,469 | — | $218,435 | | Derivative assets | — | $52,370 | — | $52,370 | | Liabilities: | | | | | | Derivative liabilities | — | $16,208 | — | $16,208 | | Notes payable — Senior Notes | — | $399,572 | — | $399,572 | | Contingent consideration liabilities | — | — | $19,664 | $19,664 | - Contingent consideration liabilities (Level 3) are valued using a Monte Carlo Simulation with a weighted-average probability of earnout achievement of 8%[74] - Total financial assets at fair value were $1,755.8 million (June 30, 2025) vs $1,355.1 million (Dec 31, 2024). Total financial liabilities at fair value were $2,077.0 million (June 30, 2025) vs $1,651.3 million (Dec 31, 2024)[75] NOTE 9—FANNIE MAE COMMITMENTS AND PLEDGED SECURITIES Outlines Fannie Mae commitments, pledged securities, and liquidity requirements - The Company is required to secure Fannie Mae DUS risk-sharing obligations by assigning restricted cash and pledged securities[87] - As of June 30, 2025, the Company held $218.4 million in pledged securities ($18.0 million in pledged cash/cash equivalents, $200.5 million in Agency MBS)[90] - Reserve requirements for the DUS loan portfolio will require funding $75.9 million in additional restricted liquidity over the next 48 months[88] - The Company's net worth was $1.0 billion (vs $337.4 million requirement) and operational liquidity was $220.2 million (vs $67.2 million requirement) as of June 30, 2025, both in compliance[89] - Agency MBS fair value was $200.5 million (June 30, 2025) vs $183.4 million (Dec 31, 2024)[92] NOTE 10—EARNINGS PER SHARE AND STOCKHOLDERS' EQUITY Details the calculation of earnings per share and changes in stockholders' equity EPS Calculation (Three Months Ended June 30) | Metric | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Walker & Dunlop Net Income | $33,952 | $22,663 | | Net Income applicable to common stockholders | $33,162 | $22,149 | | Basic EPS | $1.00 | $0.67 | | Diluted EPS | $0.99 | $0.67 | EPS Calculation (Six Months Ended June 30) | Metric | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Walker & Dunlop Net Income | $36,706 | $34,529 | | Net Income applicable to common stockholders | $35,829 | $33,719 | | Basic EPS | $1.08 | $1.02 | | Diluted EPS | $1.07 | $1.02 | - The Board approved a $75.0 million stock repurchase program in February 2025, with $75.0 million remaining capacity as of June 30, 2025. No shares were repurchased under this program in the first six months of 2025[98][281] - Quarterly cash dividend of $0.67 per share paid in Q1 and Q2 2025. A $0.67 per share dividend was declared for Q3 2025[99][280] NOTE 11—SEGMENTS Describes the company's operating segments and their financial performance contributions - The Company operates through three reportable segments: Capital Markets (CM), Servicing & Asset Management (SAM), and Corporate[102] - Capital Markets (CM) provides commercial real estate finance products (Agency lending, debt brokerage, property sales, appraisal, valuation, investment banking, housing market research). It temporarily funds loans held for sale and earns net interest income, recognizing the fair value of expected net cash flows from servicing[102] - Servicing & Asset Management (SAM) services and asset-manages loan portfolios (Agency, brokered, principal lending) and manages third-party capital in tax credit equity funds and other commercial real estate, earning servicing fees and asset management fees[102] - Corporate primarily handles treasury operations, liquidity and funding management, corporate debt, equity-method investments, and various support functions (accounting, IT, legal, HR, marketing, internal audit). Costs from support functions are not allocated to CM or SAM[102] Segment Net Income (Three Months Ended June 30, 2025) | Segment | Net Income (loss) (in thousands) | | :---------------------- | :------------------------------- | | Capital Markets | $33,142 | | Servicing & Asset Management | $37,541 | | Corporate | $(36,731) | | Consolidated | $33,952 | Segment Net Income (Six Months Ended June 30, 2025) | Segment | Net Income (loss) (in thousands) | | :---------------------- | :------------------------------- | | Capital Markets | $35,502 | | Servicing & Asset Management | $56,667 | | Corporate | $(55,463) | | Consolidated | $36,706 | Segment Total Assets (June 30, 2025) | Segment | Total Assets (in thousands) | | :---------------------- | :-------------------------- | | Capital Markets | $1,851,055 | | Servicing & Asset Management | $2,337,205 | | Corporate | $486,780 | | Consolidated | $4,675,040 | NOTE 12—VARIABLE INTEREST ENTITIES Discusses the company's involvement with consolidated and nonconsolidated variable interest entities - The Company is involved with Variable Interest Entities (VIEs) for tax credit funds and affordable housing development[114] Consolidated VIEs Assets & Liabilities (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Total assets of consolidated VIEs | $37,117 | $76,264 | | Total liabilities of consolidated VIEs | $10,523 | $55,527 | Nonconsolidated VIEs Interests (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Total interests in nonconsolidated VIEs | $246,012 | $363,822 | | Total commitments to fund nonconsolidated VIEs | $168,863 | $274,975 | | Maximum exposure to losses | $246,012 | $363,822 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's analysis of financial condition, operations, segment performance, market factors, strategic focus, and accounting estimates Forward-Looking Statements Highlights statements about future events and strategies, subject to various risks and uncertainties - The report contains forward-looking statements regarding future events, trends, and strategies, which are subject to numerous known and unknown risks and uncertainties[119][120] - Key forward-looking subjects include the future of GSEs, interest rate environment, growth strategy, financial condition, funding arrangements, dividend payments, personnel retention, competition, governmental regulations, commercial real estate market trends, and capital market volatility[121] Business Overview Describes the company's core services, market position, and strategic use of technology - Walker & Dunlop is a leading commercial real estate services, finance, and technology company in the U.S., offering multifamily lending, property sales, appraisal, valuation, research, debt brokerage, investment management, and affordable housing services[122] - The Company leverages technology to enhance customer experience, identify opportunities, and drive internal efficiencies, resulting in 58% of refinancing volumes from new loans and 17% of total transaction volumes from new customers for the six months ended June 30, 2025[122] - It is one of the largest service providers to multifamily operators, originating, selling, and servicing loans through Agencies (GSEs, HUD) and brokering loans to institutional investors[123] - Strategic focus areas include growing the small-balance multifamily lending platform and appraisal platform (Apprise) through technology and acquisitions[124] Segments Details the activities, revenue streams, and risk profiles of the Capital Markets and Servicing & Asset Management segments - Capital Markets (CM) offers Agency lending (multifamily, manufactured housing, student, affordable, seniors, small-balance loans), debt brokerage, property sales, housing market research (Zelman & Associates), and appraisal/valuation services (Apprise)[127][128][134][136][138][139] - Servicing & Asset Management (SAM) manages loan servicing for Agency and brokered loans, and third-party capital in tax credit equity funds (LIHTC syndication) and other commercial real estate. Earns servicing fees, placement fees on escrow deposits, and asset management fees[140][141][144][145] - Corporate handles treasury operations, liquidity and funding management, corporate debt, equity-method investments, and various support functions (accounting, IT, legal, HR, marketing, internal audit)[147] - The Company retains servicing rights and asset management responsibilities for most Agency loans, generating cash revenues from servicing fees and placement fees on escrow deposits[141] - Risk-sharing obligations exist for Fannie Mae DUS loans, where the Company absorbs losses on a tiered formula, typically up to 20% of the original UPB, with higher servicing fees compensating for this risk[142][143] Basis of Presentation Explains the preparation of condensed consolidated financial statements in accordance with GAAP - Condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q instructions[21][149] - All accounts of the Company and its wholly-owned subsidiaries are included, with intercompany transactions eliminated[148] Critical Accounting Estimates Discusses key accounting estimates for MSRs, risk-sharing obligations, and goodwill impairment - Mortgage Servicing Rights (MSRs) are recorded at fair value at loan sale, based on estimated net cash flows, discount rates (8-14%), placement fees, prepayment speeds, and servicing costs. The model assumes no prepayment before expiration of provisions and full prepayment thereafter[150] - Allowance for Risk-Sharing Obligations is a reserve liability for Fannie Mae at-risk and Freddie Mac SBL servicing portfolios, estimated using the Current Expected Credit Losses (CECL) model. Key inputs include runoff rate, weighted-average annual loss rate (10-year look-back), and a one-year forecast period[153][154][155][156] - Goodwill is reviewed for impairment annually (October 1) and between annual analyses if events indicate fair value is below carrying value, requiring management judgments and assumptions on projected cash flows and discount rates[160] - Goodwill impairment of $33.0 million was attributed to the Capital Markets segment in Q4 2024 due to challenging macroeconomic conditions[160] Overview of Current Business Environment Analyzes macroeconomic factors, interest rate trends, and their impact on the commercial real estate market - The Commercial Real Estate (CRE) sector has experienced a challenging environment shaped by uncertain, and at times volatile, interest rates that have directly impacted the cost and availability of capital over the last three years[162] - Broad tariffs announced on April 2, 2025 ("Liberation Day") caused market turmoil, with the S&P 500 falling and Treasury yields fluctuating. Tariffs were paused on April 9, 2025, but market caution remains[163] - The FOMC began decreasing its target Federal Funds Rate in September 2024, lowering it to 4.25%-4.50% by December 2024. Rates are expected to remain elevated, stabilizing interest rates and accelerating transaction activity in Q2 2025[164] - GSEs deployed $120 billion in 2024 (up from $101 billion in 2023), with combined lending caps of $146 billion for 2025 (22% increase). Fannie Mae lending volumes are up 52% YTD, and Freddie Mac is up 9%[165] - Multifamily rent growth slowed to approximately 2% in 2024 due to record unit completions, but absorption remained strong. Property values declined 19.6% from their peak but are 11.9% above pre-COVID levels. New construction starts have fallen dramatically[166] - The national unemployment rate remained low at 4.1% at June 30, 2025, and multifamily vacancies stabilized around 4.4%. Transaction volumes increased by 65% in Q2 2025 compared to the same quarter last year[167][168][169] - Capital Markets segment net income increased 200% to $33.1 million in Q2 2025. Servicing & Asset Management managed portfolio grew 4% to $156.0 billion, but revenues declined 5% due to lower short-term interest rates impacting placement fees[169][170] Consolidated Results of Operations Presents a consolidated view of the company's revenues, expenses, and key performance metrics Key Performance Metrics (Three Months Ended June 30) | Metric | 2025 | 2024 | Change | % Change | | :---------------------- | :----- | :----- | :----- | :------- | | Total Transaction Volume | $13,951,810 | $8,448,501 | $5,503,309 | 65.1% | | Operating Margin | 15% | 10% | 5% | 50.0% | | Return on Equity | 8% | 5% | 3% | 60.0% | | Walker & Dunlop Net Income | $33,952 | $22,663 | $11,289 | 49.8% | | Diluted EPS | $0.99 | $0.67 | $0.32 | 47.8% | | Personnel expenses (% of total revenues) | 51% | 49% | 2% | 4.1% | Key Performance Metrics (Six Months Ended June 30) | Metric | 2025 | 2024 | Change | % Change | | :---------------------- | :----- | :----- | :----- | :------- | | Total Transaction Volume | $20,987,742 | $14,842,960 | $6,144,782 | 41.4% | | Operating Margin | 9% | 8% | 1% | 12.5% | | Return on Equity | 4% | 4% | 0% | 0.0% | | Walker & Dunlop Net Income | $36,706 | $34,529 | $2,177 | 6.3% | | Diluted EPS | $1.07 | $1.02 | $0.05 | 4.9% | | Personnel expenses (% of total revenues) | 51% | 49% | 2% | 4.1% | - Total revenues increased by $48.6 million (18%) in Q2 2025, driven by increases in loan origination and debt brokerage fees (+44%), fair value of expected net cash flows from servicing (+59%), servicing fees (+4%), and property sales broker fees (+33%). This was partially offset by decreases in investment management fees (-49%) and placement fees and other interest income (-12%)[178] - Total expenses increased by $30.4 million (13%) in Q2 2025, primarily due to a 22% increase in personnel expense (driven by higher commission costs) and a 5% increase in amortization and depreciation. Interest expense on corporate debt decreased by 6% due to lower average interest rates[179] - Income tax expense increased 57% year-over-year in Q2 2025, driven by a 64% increase in income from operations and a $0.1 million tax shortfall (compared to a $0.4 million benefit in Q2 2024)[180] Non-GAAP Financial Measure (Adjusted EBITDA) Defines and reconciles Adjusted EBITDA, a non-GAAP measure used for performance evaluation - Adjusted EBITDA is a non-GAAP measure used to evaluate operating performance, compare with forecasts, and benchmark against competitors[189] - It represents net income before income taxes, corporate debt interest expense, amortization and depreciation, adjusted for credit losses, net write-offs, stock-based compensation, MSR income, write-off of unamortized issuance costs, goodwill impairment, and contingent consideration liability fair value adjustments[188] Adjusted EBITDA (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :---------------------- | :-------------------- | :-------------------- | :-------------------- | :------- | | Adjusted EBITDA | $76,811 | $80,931 | $(4,120) | (5.1)% | Adjusted EBITDA (Six Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :---------------------- | :-------------------- | :-------------------- | :-------------------- | :------- | | Adjusted EBITDA | $141,777 | $155,067 | $(13,290) | (8.6)% | - Adjusted EBITDA decreased 5% for Q2 2025 and 9% for YTD 2025, primarily due to lower investment management fees and placement fees, and higher personnel expenses, partially offset by increased origination and property sales broker fees[194][197] Financial Condition Discusses the sources and uses of cash flows from operating, investing, and financing activities - Cash flows from operating activities are generated from loan sales, servicing fees, placement fees, net warehouse interest income (expense), property sales broker fees, investment management fees, research subscription fees, investment banking advisory fees, and other income, net of loan origination and operating costs[198] - Cash flows from investing activities include the funding and repayment of loans held for investment, contributions to and distributions from joint ventures, purchases of equity-method investments, cash paid for acquisitions, and the purchase of available-for-sale ("AFS") securities pledged to Fannie Mae[199] - Cash flows from financing activities involve using warehouse loan facilities and corporate cash to fund loan closings, funding large acquisitions, repurchasing shares, paying cash dividends, making long-term debt principal payments, and repaying short-term borrowings[200] - Net cash used in operating activities increased by $320.1 million (160%) for the six months ended June 30, 2025, primarily due to originations outpacing sales by $567.6 million[203][205] - Net cash used in investing activities increased by $32.3 million (109%) due to increased cash paid for Agency loan repurchases and purchases of equity-method investments[203][204][206] - Net cash provided by financing activities increased by $427.2 million (359%) due to increased warehouse notes payable borrowings and issuance of Senior Notes, partially offset by repayments of notes payable and debt issuance costs[203][207] Segment Results Provides a detailed breakdown of financial performance for each operating segment Capital Markets Reviews the performance of the Capital Markets segment, including transaction volumes and revenue drivers Transaction Volume (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------- | :-------------------- | :-------------------- | :------- | | Total Debt Financing Volume | $11,490,425 | $6,702,743 | $4,787,682 | 71% | | Property Sales Volume | $2,313,585 | $1,530,783 | $782,802 | 51% | | Total Transaction Volume | $13,804,010 | $8,233,526 | $5,570,484 | 68% | Transaction Volume (Six Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------- | :-------------------- | :-------------------- | :------- | | Total Debt Financing Volume | $16,511,567 | $11,914,251 | $4,597,316 | 39% | | Property Sales Volume | $4,152,875 | $2,697,934 | $1,454,941 | 54% | | Total Transaction Volume | $20,664,442 | $14,612,185 | $6,052,257 | 41% | - Net income for CM increased 200% to $33.1 million for Q2 2025 and 718% to $35.5 million for YTD 2025[210][213][215] - Origination fees increased due to higher debt financing volume (especially Agency debt financing), despite declines in the origination fee rate due to a competitive environment and a large Fannie Mae portfolio with lower rates[218] - MSR income increased due to higher Agency debt financing volumes, partially offset by decreases in the weighted-average servicing fee (WASF) on Fannie Mae debt financing volume, also due to competition and large portfolios[219] - Property sales broker fees increased due to higher property sales volumes, partially offset by decreases in the broker fee rate due to competition[220] - Personnel expenses increased due to higher commission costs from increased origination and property sales broker fees, increased salaries/benefits (5-7% headcount increase), and severance expense[222][223] Servicing & Asset Management Analyzes the Servicing & Asset Management segment's portfolio growth and revenue trends Managed Portfolio (June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------- | :-------------------- | :-------------------- | :------- | | Total Servicing Portfolio | $137,349,124 | $132,777,911 | $4,571,213 | 3% | | Assets Under Management | $18,623,451 | $17,566,666 | $1,056,785 | 6% | | Total Managed Portfolio | $155,972,575 | $150,344,577 | $5,627,998 | 4% | - Net income for SAM decreased 7% to $37.5 million for Q2 2025 and 32% to $56.7 million for YTD 2025[236][238][241] - Servicing fees increased due to growth in the average servicing portfolio (driven by Fannie Mae loans) and small increases in the average servicing fee rate[242] - Investment management fees declined primarily due to an $8.5 million (Q2) and $11.9 million (YTD) decrease from LIHTC operations, attributed to lower expected asset dispositions in 2025[243] - Placement fees and other interest income decreased due to lower average placement fee rates on escrow deposits, influenced by a lower short-term interest rate environment[244][246] - Other revenues increased in Q2 2025 due to a $4.2 million increase in syndication fees (45% increase in equity syndication volume), partially offset by lower income from equity method investments[247] - Personnel expenses increased due to higher salaries, benefits, and bonus accruals, and a 7% increase in average segment headcount[248][249] Corporate Examines the financial results of the Corporate segment, including revenues and expenses - Net loss for Corporate increased to $(36.7) million for Q2 2025 (from $(28.8) million) and to $(55.5) million for YTD 2025 (from $(53.5) million)[260][262] - Other revenues increased in Q2 2025 due to $1.1 million interest income on invested capital and a $1.5 million increase from the deferred compensation plan[263] - Personnel expenses increased due to higher salaries and benefits (7-8% headcount increase) and deferred compensation plan expenses, partially offset by decreased subjective bonus accruals[264][265][274][275] Item 3. Quantitative and Qualitative Disclosures About Market Risk Details exposure to market risks, including interest rate and MSR fair value sensitivities, and their potential financial impact Interest Rate Risk Quantifies the potential impact of interest rate changes on various revenue and expense items - The Company is not exposed to unhedged interest rate risk for loans held for sale to Fannie Mae, Freddie Mac, and HUD, as sale/placement is negotiated prior to closing and coupon rates are set concurrently[306] Impact of 100 bps EFFR Change on Annual Placement Fee Revenue (in thousands) | Scenario | June 30, 2025 | June 30, 2024 | | :-------------------------- | :-------------- | :-------------- | | 100 bps increase in EFFR | $26,725 | $26,619 | | 100 bps decrease in EFFR | $(26,725) | $(26,619) | Impact of 100 bps SOFR Change on Annual Net Warehouse Interest Income (in thousands) | Scenario | June 30, 2025 | June 30, 2024 | | :-------------------------- | :-------------- | :-------------- | | 100 bps increase in SOFR | $(11,791) | $(8,077) | | 100 bps decrease in SOFR | $11,791 | $8,077 | Impact of 100 bps SOFR Change on Annual Income from Operations (in thousands) | Scenario | June 30, 2025 | June 30, 2024 | | :-------------------------- | :-------------- | :-------------- | | 100 bps increase in SOFR | $(8,489) | $(7,825) | | 100 bps decrease in SOFR | $8,489 | $7,825 | Market Value Risk Discusses the sensitivity of Mortgage Servicing Rights fair value to changes in market assumptions - The fair value of Mortgage Servicing Rights (MSRs) is subject to market-value risk. A 100-basis point increase/decrease in the weighted average discount rate would decrease/increase MSR fair value by approximately $40.3 million as of June 30, 2025[311] - A 50-basis point increase/decrease in placement fee rates would increase/decrease MSR fair value by approximately $49.1 million as of June 30, 2025[311] - 90% of loans for which the Company earns servicing fees are protected from prepayment risk through provisions like prepayment premiums, loan defeasance, or yield maintenance fees[311] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025[312][313] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[314] PART II OTHER INFORMATION Presents other non-financial information and disclosures required for the reporting period Item 1. Legal Proceedings The company is involved in ordinary course legal proceedings, with no material adverse effects expected on its financial condition - The Company is party to various claims and litigation in the ordinary course of business, none of which are considered material[316] - Management believes any liability from pending lawsuits would not materially adversely affect business, results of operations, liquidity, or financial condition[316] Item 1A. Risk Factors No material changes to previously disclosed risk factors from the 2024 Form 10-K - No material changes to the risk factors disclosed in the 2024 Form 10-K[317] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details share repurchases for tax obligations and the status of the $75.0 million stock repurchase program - The Company repurchased 8,632 shares of common stock at an average price of $73.94 per share during Q2 2025 to satisfy grantee tax withholding obligations[318][320] - A $75.0 million stock repurchase program was approved in February 2025, but no shares were repurchased under this program during the six months ended June 30, 2025, leaving $75.0 million of authorized capacity remaining[319][281] Item 3. Defaults Upon Senior Securities Confirms no defaults occurred upon senior securities during the reported period - No defaults upon senior securities[321] Item 4. Mine Safety Disclosures This disclosure item is not applicable to the company's operations - Not applicable[322] Item 5. Other Information No Rule 10b5-1 or non-Rule 10b5-1 trading agreements were adopted or terminated by directors or officers - No Rule 10b5-1 or non-Rule 10b5-1 trading agreements were adopted or terminated by directors or officers during Q2 2025[323] Item 6. Exhibits Lists all exhibits filed with the Form 10-Q, including agreements, corporate documents, and certifications - Exhibits include Contribution Agreements, Purchase Agreements, Articles of Amendment, Bylaws, Registration Rights Agreements, Voting Agreements, Indenture, Warehousing Credit and Security Agreement Amendment, and Certifications (302 and 906)[325] Signatures The report is officially signed by the Chairman and CEO, and the Executive Vice President and CFO - Report signed by William M. Walker (Chairman and CEO) and Gregory A. Florkowski (EVP and CFO) on August 7, 2025[330]