Walker & Dunlop Q4 Revenues up 61% to $350 Million and Net Income up 94% to $83 Million

BETHESDA, Md., Feb. 4, 2021 /PRNewswire/ --

FOURTH QUARTER 2020 HIGHLIGHTS

  • Total revenues of $349.7 million, up 61% from Q4'19
  • Total transaction volume of $14.2 billion, up 45% from Q4'19
  • Net income of $83.1 million, up 94% from Q4'19 and diluted earnings per share of $2.59, up 93% from Q4'19
  • Servicing portfolio of $107.2 billion at December 31, 2020, up 15% from December 31, 2019
  • Increased quarterly dividend by 39% to $0.50 per share

FULL-YEAR 2020 HIGHLIGHTS

  • Record total revenues of $1.1 billion, up 33% from 2019
  • Total transaction volume of $41.1 billion, up 29% from 2019
  • Net income of $246.2 million, up 42% from 2019 and diluted earnings per share of $7.69, up 41% from 2019

Walker & Dunlop, Inc. (NYSE: WD) (the "Company") reported fourth quarter 2020 total revenues of $349.7 million, an increase of 61% over the fourth quarter of 2019. Net income for the fourth quarter of 2020 was $83.1 million, or $2.59 per diluted share, up 94% and 93%, respectively, from the fourth quarter of 2019. Fourth quarter 2020 adjusted EBITDA(1) was $58.2 million, down 9% over the same period in 2019. Fourth quarter total transaction volume increased 45% from the fourth quarter of 2019 to $14.2 billion, with debt financing and property sales volume up 45% and 44%, respectively. The Company's Board of Directors authorized an increase in the quarterly dividend by 39% to $0.50 per share.

Willy Walker, Chairman and CEO commented, "Our fourth-quarter financial performance was exceptional, closing out a transformative year for Walker & Dunlop, with our people, brand, and technology coming together to produce fantastic results for our clients and shareholders. These same growth drivers also contributed to our success in capturing new clients and loans to the company – in 2020, 66% of the loans we refinanced were new to Walker & Dunlop, and 23% of our total transaction volume was with new clients who had never worked with us before. Further, we ended the year with record volumes across the board, generating total debt financing and property sales volume of $41.1 billion, up 29% from 2019, which pushed annual total revenues to $1.1 billion, exceeding the target we established in 2015 to double revenues in five years. All of these achievements during the year contributed to record diluted earnings per share of $7.69, up 41% over 2019."

Mr. Walker continued, "Despite the many challenges that 2020 presented, our team continued to deliver for our clients, our communities, and one another every single day. As we move into 2021 and focus on our new five-year growth plan, the Drive to '25, we will continue to attract top talent to the platform, expand our brand through innovative marketing solutions, and use technology to be more insightful to clients, all helping us in our pursuit to become the premier commercial real estate finance company in the United States."

FOURTH QUARTER 2020 OPERATING RESULTS














TRANSACTION VOLUMES

(dollars in thousands)



Q4 2020



Q4 2019


$ Variance


% Variance

Fannie Mae


$

3,891,649


$

1,692,839


$

2,198,810


130

%

Freddie Mac



2,685,359



1,526,321



1,159,038


76


Ginnie Mae - HUD



844,221



197,350



646,871


328


Brokered



3,768,689



3,884,101



(115,412)


(3)


Principal Lending and Investing (2)



152,831



532,434



(379,603)


(71)


Debt financing volume


$

11,342,749


$

7,833,045


$

3,509,704


45

%

Property sales volume



2,846,276



1,979,010



867,266


44


Total transaction volume


$

14,189,025


$

9,812,055


$

4,376,970


45

%

Discussion of Results:

  • Agency volumes increased by 117% in the fourth quarter of 2020 compared to the fourth quarter of 2019, reflecting continued strong demand for multifamily assets by commercial real estate investors, and the Company's investments in people, brand and technology.
  • Brokered volume was down slightly in the fourth quarter of 2020 compared to the fourth quarter of 2019 but has increased significantly from the second and third quarters of 2020. Although private capital providers continue to be cautious as a result of the market uncertainty related to the COVID-19 pandemic, financing on asset classes outside of multifamily and industrial picked up in the quarter compared to earlier in the year.
  • Property sales volume grew year over year due to the strong growth in our investment sales business and an overall healthy multifamily acquisitions market.













MANAGED PORTFOLIO

(dollars in thousands)



Q4 2020



Q4 2019


$ Variance


% Variance

Fannie Mae


$

48,818,185


$

40,049,095


$

8,769,090


22

%

Freddie Mac



37,072,587



32,583,842



4,488,745


14


Ginnie Mae - HUD



9,606,506



9,972,989



(366,483)


(4)


Brokered



11,419,372



10,151,120



1,268,252


12


Principal Lending and Investing



295,322



468,123



(172,801)


(37)


Total servicing portfolio


$

107,211,972


$

93,225,169


$

13,986,803


15

%

Assets under management



1,816,421



1,958,078



(141,657)


(7)


Total Managed Portfolio


$

109,028,393


$

95,183,247


$

13,845,146


15

%

Weighted-average servicing fee rate (basis points)



24.0



23.2







Weighted-average remaining servicing portfolio term (years)



9.4



9.6







Discussion of Results:

  • Our servicing portfolio continues to experience steady growth due to our significant Agency debt financing volumes and relatively few maturities and prepayments over the past year.
  • During the fourth quarter of 2020, we added $3.8 billion of net loans to our servicing portfolio, and over the past 12 months, we added $14.0 billion of net loans to our servicing portfolio, 95% of which were Fannie Mae and Freddie Mac loans.
  • Only $5.1 billion of Agency loans in our servicing portfolio, with a weighted-average servicing fee of 22.4 basis points, are scheduled to mature over the next two years.
  • The increase in the weighted-average servicing fee was due primarily to an increase in Fannie Mae loans as a percentage of the overall servicing portfolio year over year.
  • We added net mortgage servicing rights ("MSRs") from originations of $57.2 million in the quarter and $144.0 million over the past 12 months.
  • The MSRs associated with our servicing portfolio had a fair value of $1.1 billion as of December 31, 2020, compared to $910.5 million as of December 31, 2019.
  • Assets under management ("AUM") as of December 31, 2020 primarily consisted of $1.3 billion of loans and funds managed by WDIP and $558.1 million of loans in our interim lending joint venture. The year over year decrease in AUM is principally related to payoffs outpacing originations in our interim lending joint venture partially offset by WDIP's fundraising activity over the past 12 months.













REVENUES

(dollars in thousands)



Q4 2020



Q4 2019


$ Variance


% Variance

Loan origination and debt brokerage fees, net


$

120,956


$

69,921


$

51,035


73

%

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



121,566



47,771



73,795


154


Servicing fees



63,240



55,126



8,114


15


Net warehouse interest income, LHFS



5,261



769



4,492


584


Net warehouse interest income, LHFI



1,611



5,326



(3,715)


(70)


Escrow earnings and other interest income



2,566



12,988



(10,422)


(80)


Property sales broker fees



18,180



11,065



7,115


64


Other revenues



16,329



14,224



2,105


15


Total revenues


$

349,709


$

217,190


$

132,519


61

%

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













Origination related fees (3)



1.08

%


0.93

%






MSR income (3)



1.09



0.65







MSR income - Agency loans (4)



1.64



1.40







Discussion of Results:

  • The increase in loan origination and debt brokerage fees was driven by the 45% increase in overall debt financing volume and an increase in the volume of Agency loans as a percentage of overall debt financing volume.
  • An increase in the volume of Fannie Mae loans as a percentage of Agency debt financing volumes, coupled with increases in the weighted average servicing fee on Fannie Mae loans led to the increase in MSR income from Agency loans as a percentage of debt financing volume.
  • The $14.0 billion net increase in the servicing portfolio over the past 12 months was the principal driver of the growth in servicing fees year over year, coupled with the increase in the servicing portfolio's weighted-average servicing fee.
  • The increase in net warehouse interest income from loans held for sale ("LHFS") was due to a 131% increase in the average balance of LHFS outstanding and an increase in the net spread from 30 basis points in 2019 to 89 basis points in 2020 as the rate on mortgage loans from which we receive interest income declined at a slower rate than the short-term interest rates we pay for our warehouse borrowings.
  • The decrease in net warehouse interest income from loans held for investment ("LHFI") was due to a smaller average balance of loans outstanding and a substantial decrease in the net spread. During 2019, the Company held a larger balance of loans that were fully funded with corporate cash, resulting in an overall higher net spread. During 2020, a much smaller balance of loans was fully funded with corporate cash.
  • Escrow earnings and other interest income decreased due to a substantial year over year decrease in short-term interest rates, upon which our earnings rates are based.
  • The increase in property sales broker fees was driven by the increase in property sales volume year over year.













EXPENSES

(dollars in thousands)



Q4 2020



Q4 2019


$ Variance


% Variance

Personnel


$

157,826


$

97,082


$

60,744


63

%

Amortization and depreciation



45,013



39,552



5,461


14


Provision (benefit) for credit losses



5,450



4,409



1,041


24


Interest expense on corporate debt



1,826



3,292



(1,466)


(45)


Other operating expenses



22,258



14,881



7,377


50


Total expenses


$

232,373


$

159,216


$

73,157


46

%

Key expense metrics (as a percentage of total revenues):













Personnel expenses



45

%


45

%






Other operating expenses



6



7







Discussion of Results:

  • The increase in personnel expenses was largely the result of (i) an increase in commissions expense driven by the increase in loan origination and debt brokerage fees, (ii) an increase in the annual bonus expense driven by our record financial performance, and (iii) an increase in salaries and benefits resulting from an increase in average headcount as we continue to scale our business through strategic acquisitions and organic hiring.
  • Amortization and depreciation increased primarily due to growth in the average balance of MSRs outstanding year over year.
  • The increase in provision for credit losses in the fourth quarter of 2020 was primarily a result of the implementation of the current expected credit loss ("CECL") accounting standard in the first quarter of 2020, where the allowances are calculated based on an expected lifetime credit loss methodology as compared to the incurred loss methodology. The CECL implementation resulted in higher allowance balances in 2020, despite continued strong credit performance of our at-risk and balance sheet portfolios. Additionally, in 2019 we had an elevated provision expense of $4.4 million as a result of one defaulted loan. We have not experienced a significant deterioration in the overall credit quality of the at-risk servicing or balance sheet portfolios due to the COVID-19 pandemic.
  • The decrease in the interest expense on corporate debt was driven by the decrease in the average 30-day LIBOR upon which our long-term debt interest was based and the repricing of the debt in the fourth quarter of 2019.
  • The increase in other operating expenses is primarily related to the write-off of previously capitalized software implementation costs related to a planned servicing system conversion that was terminated in the quarter.













KEY PERFORMANCE METRICS

(dollars in thousands, except per share amounts)



Q4 2020



Q4 2019


$ Variance


% Variance

Walker & Dunlop net income


$

83,099


$

42,916


$

40,183


94

%

Adjusted EBITDA



58,161



64,076



(5,915)


(9)


Diluted EPS


$

2.59


$

1.34


$

1.25


93

%

Operating margin



34

%


27

%






Return on equity



29



17







Discussion of Results:

  • The increase in net income was the result of a 102% increase in income from operations, as the growth in total revenues outpaced the increase in total expenses during the fourth quarter. MSR income was one of the primary drivers in the increase in revenues with a 154% year over year increase.
  • Adjusted EBITDA decreased year over year due to lower escrow interest income and increases in personnel and other operating costs outpacing increases in loan origination and debt brokerage fees, servicing fees, and property sales broker fees.













KEY CREDIT METRICS

(dollars in thousands)



Q4 2020



Q4 2019


$ Variance


% Variance

At-risk servicing portfolio (5)


$

44,483,676


$

36,699,969


$

7,783,707


21

%

Maximum exposure to at-risk portfolio (6)



9,032,083



7,488,985



1,543,098


21


Defaulted loans


$

48,481


$

48,481


$


-

%

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













Defaulted loans



0.11

%


0.13

%






Allowance for risk-sharing



0.17



0.03







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













Allowance for risk-sharing



0.83

%


0.15

%






Discussion of Results:

  • Our at-risk servicing portfolio, which is comprised of loans subject to a defined risk-sharing formula, increased due to the significant level of Fannie Mae volume during the past 12 months. As of December 31, 2020, there were two defaulted loans that were provisioned for during the first and fourth quarters of 2019. Both properties have been foreclosed on and final settlement of any losses will occur in the future upon disposition of the assets by Fannie Mae.
  • Pursuant to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Fannie Mae instituted a mortgage forbearance program in April 2020 in response to the COVID-19 crisis. Under the terms of the forbearance program, borrowers impacted by COVID-19 can request that debt service payments be deferred for a period of up to three months, after which the deferred payments must be repaid over a 12-month period. As of December 31, 2020, we had granted COVID-19-related forbearance on 14 loans in our at-risk servicing portfolio with three loans totaling $50.0 million in unpaid principal balance still in forbearance at the end of the quarter.
  • The allowance for risk-sharing as a percentage of the at-risk portfolio increased due to the implementation of CECL during 2020 and due to our forecast of an increase in short-term future losses as a result of the COVID-19 pandemic. To date, we have not experienced a significant deterioration in the overall credit quality of the at-risk servicing portfolio due to the COVID-19 pandemic.
  • The on-balance sheet interim loan portfolio, which is comprised of loans that the Company has full risk of loss, was $295.3 million at December 31, 2020 compared to $476.1 million at December 31, 2019. There was one defaulted loan in our interim loan portfolio at December 31, 2020, which defaulted and was partially provisioned for during 2019. We increased the allowance on that loan during the third and fourth quarters of 2020. All other loans in the on-balance sheet interim loan portfolio are current and performing as of December 31, 2020. The interim loan joint venture holds $484.8 million of loans as of December 31, 2020, for which the Company indirectly shares in a small portion of the risk of loss. All loans in the interim loan joint venture are current and performing as of December 31, 2020.

FULL-YEAR 2020 OPERATING RESULTS














YEAR-TO-DATE KEY PERFORMANCE METRICS

(dollars in thousands)



2020



2019


$ Variance


% Variance

Total revenues


$

1,083,707


$

817,219


$

266,488


33

%

Total expenses



753,441



586,868



166,573


28


Net income



246,177



173,373



72,804


42


Adjusted EBITDA



215,849



247,907



(32,058)


(13)


Transaction Volume



41,084,046



31,967,064



9,116,982


29

%

Operating margin



30

%


28

%






Return on equity



23



18







Discussion of Results:

  • The increase in total revenues was largely driven by:
    • Loan origination and debt brokerage fees increasing by 39%, which was largely related to an increase in debt financing volume;
    • MSR income increasing by 98%, which was attributable to the overall increase in Agency lending volume and an increase in the weighted-average servicing fee on Fannie Mae loan volume;
    • Servicing fees increasing by 10% related to growth in our servicing portfolio and net warehouse interest income increasing 14% as a result of a substantially larger average balance of loans held for sale and a sharp increase in the spread on these loans; and
    • The increases were partially offset by a 68% decline in escrow earnings and other interest income due to a substantial decline in short-term interest rates.
  • The increase in total expenses was primarily driven by:
    • Personnel expense increasing by 35% due to (i) an increase in commissions expense resulting from higher loan origination and debt brokerage fees due to the growth in debt financing volume, (ii) an increase in the annual bonus expense driven by our record Company financial performance year over year, (iii) higher salaries and benefits expenses resulting from a rise in average headcount due to the continued growth of our business, and (iv) higher retention costs due to the hiring of bankers and brokers over the past year. Personnel expenses as a percentage of total revenues increased only slightly to 43% from 42% year over year despite the increased expenses;
    • Amortization and depreciation costs increasing by 11% due to an increase in the average balance of MSRs outstanding and an increase in write offs due to prepayments year over year;
    • Provision for credit losses increasing mainly from the impact of CECL implementation in the first quarter of 2020. During the first quarter of 2020, the Company recorded a provision expense of $23.6 million as a result of an increase in expected losses in the at-risk servicing portfolio due to the COVID-19 related deterioration in economic conditions. The Company has recorded additional provision expense of $13.8 million during the subsequent quarters in 2020, primarily related to the increase in the at-risk servicing portfolio balance and a defaulted interim loan for which we recorded additional expense in the third and fourth quarters of 2020.
  • Net income for the years ended December 31, 2020 and 2019 was $246.2 million and $173.4 million, respectively. The 42% increase in net income was primarily a result of a 43% increase in income from operations.
  • Adjusted EBITDA for the years ended December 31, 2020 and 2019 was $215.9 million and $247.9 million, respectively. The 13% decrease was largely driven by the decrease in escrow earnings and an increase in personnel and other operating expenses, partially offset by increases in loan origination and debt brokerage fees and servicing fees.
  • Total transaction volume for the years ended December 31, 2020 was $41.1 billion, a 29% increase from the same period last year.
  • Operating margin for the years ended December 31, 2020 and 2019 was 30% and 28%, respectively. The increase in operating margin was due to a 33% increase in total revenues compared to a 28% increase in total expenses year over year.
  • For the year ended December 31, 2020 and 2019, return on equity was 23% and 18%, respectively.

DIVIDENDS AND SHARE REPURCHASES

On February 3, 2021, our Board of Directors declared a dividend of $0.50 per share for the first quarter of 2021, a 39% increase from the quarterly dividends declared in 2020. The dividend will be paid March 11, 2021 to all holders of record of our restricted and unrestricted common stock as of February 22, 2021.

During the first quarter of 2020, the Company's Board of Directors approved a stock repurchase program that permits the repurchase of up to $50.0 million of the Company's common stock over a 12-month period beginning on February 11, 2020. During the year ended December 31, 2020, the Company repurchased 459 thousand shares of its common stock under the share repurchase program at a weighted-average price of $56.77 per share. As of December 31, 2020, the Company had $23.9 million of authorized share repurchase capacity remaining under the 2020 share repurchase program.

On February 3, 2021, the Company's Board of Directors authorized the repurchase of up to $75 million of the Company's outstanding common stock over the coming one-year period ("2021 Share Repurchase Program").

Any future purchases made pursuant to the 2021 Share Repurchase Program will be made in the open market or in privately negotiated transactions from time to time as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The repurchase program may be suspended or discontinued at any time.

_______________

(1)

Adjusted EBITDA is a non-GAAP financial measure the Company presents to help investors better understand our operating performance.  For a reconciliation of adjusted EBITDA to net income, refer to the sections of this press release below titled "Non-GAAP Financial Measures" and "Adjusted Financial Metric Reconciliation to GAAP."

(2)

Includes debt financing volumes from our interim loan platform, our interim loan joint venture, and WDIP separate accounts.

(3)

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

(4)

MSR income as a percentage of Agency volume.

(5)

At-risk servicing portfolio is defined as the balance of Fannie Mae DUS loans subject to the risk-sharing formula described below, as well as a small number of Freddie Mac loans on which we share in the risk of loss. Use of the at-risk portfolio provides for comparability of the full risk-sharing and modified risk-sharing loans because the provision and allowance for risk-sharing obligations are based on the at-risk balances of the associated loans. Accordingly, we have presented the key statistics as a percentage of the at-risk portfolio.


For example, a $15 million loan with 50% risk-sharing has the same potential risk exposure as a $7.5 million loan with full DUS risk sharing. Accordingly, if the $15 million loan with 50% risk-sharing were to default, we would view the overall loss as a percentage of the at-risk balance, or $7.5 million, to ensure comparability between all risk-sharing obligations. To date, substantially all of the risk-sharing obligations that we have settled have been from full risk-sharing loans. 

(6)

Represents the maximum loss we would incur under our risk-sharing obligations if all of the loans we service, for which we retain some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement. The maximum exposure is not representative of the actual loss we would incur.

Conference Call Information

The Company will host a conference call to discuss its quarterly results on Thursday, February 4, 2021 at 8:30 a.m. Eastern time. Listeners can access the webcast via the link: https://walkerdunlop.zoom.us/webinar/register/WN_AuDjEvllR9i14yD-GIYm6w or by dialing +1 408 901 0584, Webinar ID 950 5361 4334, Password 857934. Presentation materials related to the conference call will be posted to the Investor Relations section of the Company's website prior to the call. An audio replay will also be available on the Investor Relations section of the Company's website, along with the presentation materials.

About Walker & Dunlop

Walker & Dunlop (NYSE: WD), headquartered in Bethesda, Maryland, is one of the largest commercial real estate finance companies in the United States. The Company provides a comprehensive range of capital solutions for all commercial real estate asset classes, as well as investment sales brokerage services to owners of multifamily properties. Walker & Dunlop is included on the S&P SmallCap 600 Index and was ranked as one of FORTUNE Magazine's Fastest Growing Companies in 2014, 2017, and 2018. Walker & Dunlop's 950+ professionals in 41 offices across the nation have an unyielding commitment to client satisfaction.

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with United States generally accepted accounting principles ("GAAP"), the Company uses adjusted EBITDA, a non-GAAP financial measure. The presentation of adjusted EBITDA is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. When analyzing our operating performance, readers should use adjusted EBITDA in addition to, and not as an alternative for, net income. Adjusted EBITDA represents net income before income taxes, interest expense on our term loan facility, and amortization and depreciation, adjusted for provision (benefit) for credit losses net of write-offs, stock-based incentive compensation charges, and non-cash revenues such as the fair value of expected net cash flows from servicing, net. Because not all companies use identical calculations, our presentation of adjusted EBITDA may not be comparable to similarly titled measures of other companies. Furthermore, adjusted EBITDA is not intended to be a measure of free cash flow for our management's discretionary use, as it does not reflect certain cash requirements such as tax and debt service payments. The amounts shown for adjusted EBITDA may also differ from the amounts calculated under similarly titled definitions in our debt instruments, which are further adjusted to reflect certain other cash and non-cash charges that are used to determine compliance with financial covenants.

We use adjusted EBITDA to evaluate the operating performance of our business, for comparison with forecasts and strategic plans and for benchmarking performance externally against competitors. We believe that this non-GAAP measure, when read in conjunction with the Company's GAAP financials, provides useful information to investors by offering:

  • the ability to make more meaningful period-to-period comparisons of the Company's on-going operating results;
  • the ability to better identify trends in the Company's underlying business and perform related trend analyses; and
  • a better understanding of how management plans and measures the Company's underlying business.

We believe that adjusted EBITDA has limitations in that it does not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP and that adjusted EBITDA should only be used to evaluate the Company's results of operations in conjunction with net income. For more information on adjusted EBITDA, refer to the section of this press release below titled "Adjusted Financial Metric Reconciliation to GAAP."

Forward-Looking Statements

Some of the statements contained in this press release may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans, or intentions.

The forward-looking statements contained in this press release reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause actual results to differ significantly from those expressed or contemplated in any forward-looking statement.

While forward-looking statements reflect our good faith projections, assumptions and expectations, they are not guarantees of future results. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes, except as required by applicable law. Factors that could cause our results to differ materially include, but are not limited to: (1) the impact of the COVID-19 pandemic on the Company's business, results of operations, and financial condition, including due to its principal and interest advance obligations on Fannie Mae and Ginnie Mae loans it services, and the domestic economy, (2) general economic conditions and multifamily and commercial real estate market conditions, (3) regulatory and/or legislative changes to Freddie Mac, Fannie Mae or HUD, (4) our ability to retain and attract loan originators and other professionals, and (5) changes in federal government fiscal and monetary policies, including any constraints or cuts in federal funds allocated to HUD for loan originations.

For a further discussion of these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements, see the section titled "Risk Factors" in our most recent Annual Report on Form 10-K and any updates or supplements in subsequent Quarterly Reports on Form 10-Q and our other filings with the SEC. Such filings are available publicly on our Investor Relations web page at www.walkerdunlop.com.

 


Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

Unaudited

















December 31, 


September 30,


June 30,


March 31,


December 31, 


2020


2020


2020


2020


2019

(in thousands)










Assets















Cash and cash equivalents

$

321,097


$

294,873


$

275,202


$

205,309


$

120,685

Restricted cash


19,432



12,383



10,894



30,745



8,677

Pledged securities, at fair value


137,236



134,295



128,296



121,495



121,767

Loans held for sale, at fair value


2,449,198



3,227,287



1,733,598



1,186,577



787,035

Loans held for investment, net


360,402



342,056



404,527



454,213



543,542

Mortgage servicing rights


862,813



805,655



778,269



722,486



718,799

Goodwill and other intangible assets


250,838



251,002



251,165



247,257



182,959

Derivative assets


49,786



37,290



27,085



158,233



15,568

Receivables, net


65,735



51,837



50,188



52,185



52,146

Other assets


134,438



143,025



133,825



133,475



124,021

Total assets

$

4,650,975


$

5,299,703


$

3,793,049


$

3,311,975


$

2,675,199
















Liabilities















Warehouse notes payable

$

2,517,156


$

3,328,327


$

1,863,654


$

1,305,846


$

906,128

Note payable


291,593



292,272



292,819



293,371



293,964

Guaranty obligation, net


52,306



53,474



54,872



55,758



54,695

Allowance for risk-sharing obligations


75,313



70,495



69,191



64,110



11,471

Derivative liabilities


5,066



3,858



13,739



172,623



36

Performance deposits from borrowers


14,468



9,079



11,696



29,575



7,996

Other liabilities


498,851



427,073



396,527



347,377



358,624

Total liabilities

$

3,454,753


$

4,184,578


$

2,702,498


$

2,268,660


$

1,632,914
















Equity















Preferred shares

$


$


$


$


$

Common stock


307



306



304



303



300

Additional paid-in capital


241,004



230,302



238,094



236,007



237,877

Accumulated other comprehensive income (loss)


1,968



1,468



249



(1,181)



737

Retained earnings


952,943



883,049



851,904



801,139



796,775

Total stockholders' equity

$

1,196,222


$

1,115,125


$

1,090,551


$

1,036,268


$

1,035,689

Noncontrolling interests








7,047



6,596

Total equity

$

1,196,222


$

1,115,125


$

1,090,551


$

1,043,315


$

1,042,285

Commitments and contingencies










Total liabilities and equity

$

4,650,975


$

5,299,703


$

3,793,049


$

3,311,975


$

2,675,199

 

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income

Unaudited























Quarterly Trends


Years ended

















December 31, 

(in thousands, except per share amounts)

Q4 2020


Q3 2020


Q2 2020


Q1 2020


Q4 2019


2020


2019

Revenues





















Loan origination and debt brokerage fees, net

$

120,956


$

83,825


$

77,907


$

76,373


$

69,921


$

359,061


$

258,471

Fair value of expected net cash flows from servicing, net


121,566



78,065



90,369



68,000



47,771



358,000



180,766

Servicing fees


63,240



60,265



56,862



55,434



55,126



235,801



214,550

Net warehouse interest income


6,872



7,558



9,401



5,495



6,095



29,326



25,699

Escrow earnings and other interest income


2,566



2,275



2,671



10,743



12,988



18,255



56,835

Other revenues


34,509



15,028



15,615



18,112



25,289



83,264



80,898

Total revenues

$

349,709


$

247,016


$

252,825


$

234,157


$

217,190


$

1,083,707


$

817,219






















Expenses





















Personnel

$

157,826


$

114,548


$

106,920


$

89,525


$

97,082


$

468,819


$

346,168

Amortization and depreciation


45,013



41,919



42,317



39,762



39,552



169,011



152,472

Provision for credit losses


5,450



3,483



4,903



23,643



4,409



37,479



7,273

Interest expense on corporate debt


1,826



1,786



2,078



2,860



3,292



8,550



14,359

Other operating expenses


22,258



16,165



13,069



18,090



14,881



69,582



66,596

Total expenses

$

232,373


$

177,901


$

169,287


$

173,880


$

159,216


$

753,441


$

586,868

Income from operations

$

117,336


$

69,115


$

83,538


$

60,277


$

57,974


$

330,266


$

230,351

Income tax expense


34,237



15,925



21,479



12,672



15,019



84,313



57,121

Net income before noncontrolling interests

$

83,099


$

53,190


$

62,059


$

47,605


$

42,955


$

245,953


$

173,230

Less: net income (loss) from noncontrolling interests








(224)



39



(224)



(143)

Walker & Dunlop net income

$

83,099


$

53,190


$

62,059


$

47,829


$

42,916


$

246,177


$

173,373

Net change in unrealized gains and losses on pledged
available-for-sale securities


500



1,219



1,430



(1,917)



(278)



1,232



812

Walker & Dunlop comprehensive income

$

83,599


$

54,409


$

63,489


$

45,912


$

42,638


$

247,409


$

174,185






















Basic earnings per share

$

2.63


$

1.69


$

1.98


$

1.53


$

1.38


$

7.85


$

5.61

Diluted earnings per share


2.59



1.66



1.95



1.49



1.34



7.69



5.45

Cash dividends declared per common share


0.36



0.36



0.36



0.36



0.30



1.44



1.20






















Basic weighted-average shares outstanding


30,635



30,560



30,352



30,226



29,996



30,444



29,913

Diluted weighted-average shares outstanding


31,227



31,074



30,860



31,160



30,976



31,083



30,815

 

SUPPLEMENTAL OPERATING DATA

Unaudited
























Quarterly Trends


Years ended


















December 31, 


(dollars in thousands, except per share data)

Q4 2020


Q3 2020


Q2 2020


Q1 2020


Q4 2019


2020


2019


Transaction Volume:






















Components of Debt Financing Volume

















Fannie Mae

$

3,891,649


$

1,977,607


$

2,762,299


$

4,171,491


$

1,692,839


$

12,803,046


$

8,045,499


Freddie Mac


2,685,359



3,136,313



1,769,280



997,796



1,526,321



8,588,748



6,380,210


Ginnie Mae - HUD


844,221



373,480



640,150



354,687



197,350



2,212,538



848,359


Brokered (1)


3,768,689



1,711,541



1,495,500



3,993,885



3,884,101



10,969,615



10,363,953


Principal Lending and Investing (2)


152,831



105,488



14,091



107,950



532,434



380,360



935,941


Total Debt Financing Volume

$

11,342,749


$

7,304,429


$

6,681,320


$

9,625,809


$

7,833,045


$

34,954,307


$

26,573,962


Property Sales Volume


2,846,276



1,106,162



446,684



1,730,617



1,979,010



6,129,739



5,393,102


Total Transaction Volume

$

14,189,025


$

8,410,591


$

7,128,004


$

11,356,426


$

9,812,055


$

41,084,046


$

31,967,064
























Key Performance Metrics:






















Operating margin


34

%


28

%


33

%


26

%


27

%


30

%


28

%

Return on equity


29



20



23



19



17



23



18


Walker & Dunlop net income

$

83,099


$

53,190


$

62,059


$

47,829


$

42,916


$

246,177


$

173,373


Adjusted EBITDA (3)


58,161



45,165



48,394



64,129



64,076



215,849



247,907


Diluted EPS


2.59



1.66



1.95



1.49



1.34



7.69



5.45
























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

















Personnel expenses


45

%


46

%


42

%


38

%


45

%


43

%


42

%

Other operating expenses


6



7



5



8



7



6



8


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

















Origination related fees (4)


1.08

%


1.15

%


1.17

%


0.79

%


0.93

%


1.04

%


1.00

%

Gains attributable to MSRs (5)


1.09



1.08



1.36



0.71



0.65



1.04



0.71


Gains attributable to MSRs - Agency (6)


1.64



1.42



1.75



1.23



1.40



1.52



1.18
























Other Data:






















Market capitalization at period end

$

2,822,970


$

1,657,545


$

1,580,183


$

1,250,860


$

1,995,236








Closing share price at period end

$

92.02


$

53.00


$

50.81


$

40.27


$

64.68








Average headcount


870



887



860



837



815






























Components of Servicing Portfolio:

















Fannie Mae

$

48,818,185


$

46,224,549


$

45,160,004


$

41,166,040


$

40,049,095








Freddie Mac


37,072,587



35,726,109



33,222,090



32,191,699



32,583,842








Ginnie Mae - HUD


9,606,506



9,639,820



9,749,888



9,750,696



9,972,989








Brokered (7)


11,419,372



11,513,521



11,519,629



11,326,492



10,151,120








Principal Lending and Investing (8)


295,322



273,754



336,473



387,314



468,123








Total Servicing Portfolio

$

107,211,972


$

103,377,753


$

99,988,084


$

94,822,241


$

93,225,169








Assets under management (9)


1,816,421



1,936,679



1,884,673



2,001,984



1,958,078








Total Managed Portfolio

$

109,028,393


$

105,314,432


$

101,872,757


$

96,824,225


$

95,183,247






























Key Servicing Portfolio Metrics (end of period):

















Weighted-average servicing fee rate (bps)


24.0



23.4



23.3



23.3



23.2








Weighted-average remaining term (years)


9.4



9.4



9.5



9.5



9.6








_____________

(1)

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

(2)

Includes debt financing volumes from our interim lending platform, our interim lending joint venture, and WDIP separate accounts.

(3)

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

(4)

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

(5)

The fair value of the expected net cash flows associated with the servicing of the loan, net of any guaranty obligations retained. Excludes the income and debt financing volume from Principal Lending and Investing.

(6)

The fair value of the expected net cash flows associated with the servicing of the loan, net of any guaranty obligations retained, as a percentage of Agency volume.

(7)

Brokered loans serviced primarily for life insurance companies.

(8)

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

(9)

Interim loans serviced for our interim loan joint venture and WDIP assets under management.

 

KEY CREDIT METRICS

Unaudited


















December 31, 


September 30,


June 30,


March 31,


December 31, 


(dollars in thousands)

2020


2020


2020


2020


2019


Risk-sharing servicing portfolio:
















Fannie Mae Full Risk

$

39,835,534


$

37,018,792


$

35,707,326


$

34,148,159


$

33,063,130


Fannie Mae Modified Risk


8,948,472



9,165,490



9,411,097



6,973,167



6,939,349


Freddie Mac Modified Risk


37,018



52,685



52,696



52,706



52,817


Total risk-sharing servicing portfolio

$

48,821,024


$

46,236,967


$

45,171,119


$

41,174,032


$

40,055,296


















Non-risk-sharing servicing portfolio:
















Fannie Mae No Risk

$

34,180


$

40,267


$

41,581


$

44,715


$

46,616


Freddie Mac No Risk


37,035,568



35,673,424



33,169,394



32,138,992



32,531,025


GNMA - HUD No Risk


9,606,506



9,639,820



9,749,888



9,750,696



9,972,989


Brokered


11,419,372



11,513,521



11,519,629



11,326,492



10,151,120


Total non-risk-sharing servicing portfolio

$

58,095,626


$

56,867,032


$

54,480,492


$

53,260,895


$

52,701,750


Total loans serviced for others

$

106,916,650


$

103,103,999


$

99,651,611


$

94,434,927


$

92,757,046


Interim loans (full risk) servicing portfolio


295,322



273,754



336,473



387,314



468,123


Total servicing portfolio unpaid principal balance

$

107,211,972


$

103,377,753


$

99,988,084


$

94,822,241


$

93,225,169


















Interim Loan Joint Venture Managed Loans (1)

$

558,161


$

639,466


$

695,267


$

802,559


$

741,000


















At-risk servicing portfolio (2)

$

44,483,676


$

41,848,548


$

40,640,024


$

37,864,262


$

36,699,969


Maximum exposure to at-risk portfolio (3)


9,032,083



8,497,807



8,266,261



7,729,120



7,488,985


Defaulted loans


48,481



48,481



48,481



48,481



48,481


Specifically identified at-risk loan balances associated with

allowance for risk-sharing obligations


48,481



48,481



48,481



48,481



48,481


















Defaulted loans as a percentage of the at-risk portfolio


0.11

%


0.12

%


0.12

%


0.13

%


0.13

%

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


0.17



0.17



0.17



0.17



0.03


Allowance for risk-sharing as a percentage of maximum exposure


0.83



0.83



0.84



0.83



0.15


_____________

(1)

Includes $73.3 million as of December 31, 2020 and September 30, 2020, $71.1 million as of June 30, 2020 and March 31 2020, and $70.5 million as of December 31, 2019 of loans managed directly for our interim loan joint venture partner and interim loan joint venture managed loans. We indirectly share in a portion of the risk of loss associated with interim loan joint venture managed loans through our 15% equity ownership in the joint venture. We have no exposure to risk of loss for the loans serviced directly for our interim loan joint venture partner. The balance of this line is included as a component of assets under management in the Supplemental Operating Data table.

(2)

At-risk servicing portfolio is defined as the balance of Fannie Mae DUS loans subject to the risk-sharing formula described below, as well as a small number of Freddie Mac loans on which we share in the risk of loss. Use of the at-risk portfolio provides for comparability of the full risk-sharing and modified risk-sharing loans because the provision and allowance for risk-sharing obligations are based on the at-risk balances of the associated loans. Accordingly, we have presented the key statistics as a percentage of the at-risk portfolio. For example, a $15 million loan with 50% risk-sharing has the same potential risk exposure as a $7.5 million loan with full DUS risk sharing. Accordingly, if the $15 million loan with 50% risk-sharing were to default, we would view the overall loss as a percentage of the at-risk balance, or $7.5 million, to ensure comparability between all risk-sharing obligations. To date, substantially all of the risk-sharing obligations that we have settled have been from full risk-sharing loans.

(3)

Represents the maximum loss we would incur under our risk-sharing obligations if all of the loans we service, for which we retain some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement. The maximum exposure is not representative of the actual loss we would incur.


 

ADJUSTED FINANCIAL METRIC RECONCILIATION TO GAAP

Unaudited
























Quarterly Trends


Years ended


















December 31, 


(in thousands)

Q4 2020


Q3 2020


Q2 2020


Q1 2020


Q4 2019


2020


2019


Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA

















Walker & Dunlop Net Income

$

83,099


$

53,190


$

62,059


$

47,829


$

42,916


$

246,177


$

173,373


Income tax expense


34,237



15,925



21,479



12,672



15,019



84,313



57,121


Interest expense on corporate debt


1,826



1,786



2,078



2,860



3,292



8,550



14,359


Amortization and depreciation


45,013



41,919



42,317



39,762



39,552



169,011



152,472


Provision (benefit) for credit losses


5,450



3,483



4,903



23,643



4,409



37,479



7,273


Net write-offs















Stock compensation expense


10,102



6,927



5,927



5,363



6,659



28,319



24,075


Fair value of expected net cash flows from servicing, net


(121,566)



(78,065)



(90,369)



(68,000)



(47,771)



(358,000)



(180,766)


Adjusted EBITDA

$

58,161


$

45,165


$

48,394


$

64,129


$

64,076


$

215,849


$

247,907


 

Cision View original content:http://www.prnewswire.com/news-releases/walker--dunlop-q4-revenues-up-61-to-350-million-and-net-income-up-94-to-83-million-301221814.html

SOURCE Walker & Dunlop, Inc.

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