BETHESDA, Md., Aug. 5, 2021 /PRNewswire/ --

SECOND QUARTER 2021 HIGHLIGHTS

Total transaction volume of $13.5 billion, up 90% from Q2'20
Total revenues of $281.4 million, up 11% from Q2'20
Net income of $56.1 million and diluted earnings per share of $1.73, down 10% and 11%, respectively, from Q2'20
Adjusted EBITDA¹of $66.5 million, up 37% from Q2'20
Servicing portfolio of $112.3 billion at June 30, 2021, up 12% from June 30, 2020
Benefit for credit losses of $4.3 million resulted in a $0.10 benefit to diluted earnings per share
Declared quarterly dividend of $0.50 per share for the third quarter

YEAR-TO-DATE 2021 HIGHLIGHTS

Total transaction volume of $22.6 billion, up 22% from 2020
Total revenues of $505.7 million, up 4% from 2020
Net income of $114.1 million and diluted earnings per share of $3.52, up 4% and 2%, respectively, from 2020
Adjusted EBITDA¹of $127.2 million, up 13% from 2020

Walker & Dunlop, Inc. (NYSE:WD) (the "Company") reported second quarter 2021 total revenues of $281.4 million, an increase of 11% year over year. Net income for the second quarter of 2021 was $56.1 million, or $1.73 per diluted share, down 10% and 11%, respectively, from the second quarter of 2020. Second quarter total transaction volume of $13.5 billion was up 90% from the second quarter of 2020, driven by record volumes of brokered debt and property sales, which increased 320% and 648%, respectively. Second quarter 2021 adjusted EBITDA¹ was $66.5 million, up 37% over the same period in 2020. The Company held $326.5 million of cash and cash equivalents as of June 30, 2021.

Willy Walker, Chairman and CEO, commented, "We generated total revenues of $281 million, up 11% from the second quarter of 2020, with a dramatic increase in the cash component of our revenues due to record debt brokerage and property sales volumes in the quarter. As a result, adjusted EBITDA was up 37% year-over year to $67 million."

Mr. Walker continued, "The investments we are making to hire the very best people, expand our brand, and apply innovative technology to our business are resulting in broader capabilities at Walker & Dunlop, reflected in the 90% increase in transaction volume in Q2. These investments in people, brand and technology are transforming our business from a mortgage-focused specialty finance company into a technology-enabled real estate services firm that executes and delivers capital solutions better, faster, and cheaper. As the fourth largest lender on commercial real estate in the United States, yet with only 1,100 employees, W&D is uniquely positioned to combine our people, brand and technology to scale our lending and services businesses into new markets, as we are doing today in small balance lending and appraisals, and accelerate our growth."

SECOND QUARTER 2021 OPERATING RESULTS


TRANSACTION VOLUMES
(dollars in thousands)		Q2 2021		Q2 2020	$ Variance		% Variance
Fannie Mae	$	1,911,976	$	2,762,299	$	(850,323)	(31)	%
Freddie Mac		1,003,319		1,769,280		(765,961)	(43)
Ginnie Mae - HUD		672,574		640,150		32,424	5
Brokered ⁽²⁾		6,280,578		1,495,500		4,785,078	320
Principal Lending and Investing ⁽³⁾		318,237		14,091		304,146	2,158
Debt financing volume	$	10,186,684	$	6,681,320	$	3,505,364	52	%
Property sales volume		3,341,532		446,684		2,894,848	648
Total transaction volume	$	13,528,216	$	7,128,004	$	6,400,212	90	%

Discussion of Results:

Agency debt financing volumes decreased by 31% in the second quarter of 2021 compared to the second quarter of 2020, driven by a decline in the overall lending volumes of Fannie Mae and Freddie Mac. Our year to date GSE market share has remained strong at 11%. HUD debt financing volume increased 5% from the prior year as the HUD product continues to be a favorable source of financing for multifamily properties, and our team continues to execute well for our clients.
The increase in brokered loan originations to a quarterly record reflects the growth in our team of mortgage bankers, low demand in the second quarter of 2020 due to the pandemic, continued market demand from private capital providers and strong deal flow from our customers.
The significant increase in principal lending and investing volume, which includes interim loans, originations for WDIP separate accounts, and joint venture interim lending, was primarily due to a year-over-year increase in loans originated for our interim loan program and our interim lending joint venture as we paused our interim lending operations in the second quarter of 2020 due to the pandemic.
Property sales volume increased 648% in the second quarter of 2021 due to an extremely active multifamily acquisitions market, low demand in the second quarter of 2020 due to the pandemic, and the strong growth in our investment sales team, including additions of brokers in seven strategic markets over the past twelve months.


MANAGED PORTFOLIO
(dollars in thousands)		Q2 2021		Q2 2020	$ Variance		% Variance
Fannie Mae	$	51,077,660	$	45,160,004	$	5,917,656	13	%
Freddie Mac		37,887,969		33,222,090		4,665,879	14
Ginnie Mae - HUD		9,904,246		9,749,888		154,358	2
Brokered		13,129,969		11,519,629		1,610,340	14
Principal Lending and Investing		276,738		336,473		(59,735)	(18)
Total servicing portfolio	$	112,276,582	$	99,988,084	$	12,288,498	12	%
Assets under management		1,801,577		1,884,673		(83,096)	(4)
Total managed portfolio	$	114,078,159	$	101,872,757	$	12,205,402	12	%
Weighted-average servicing fee rate (basis points)		24.5		23.3
Weighted-average remaining servicing portfolio term (years)		9.2		9.5

Discussion of Results:

Our servicing portfolio continues to experience impressive growth due to our significant Agency debt financing volumes and limited maturities and prepayments over the past year.
During the second quarter of 2021, we added $2.4 billion of net loans to our servicing portfolio, and over the past 12 months, we added $12.3 billion of net loans to our servicing portfolio, 86% of which were Fannie Mae and Freddie Mac loans.
Only $6.8 billion of Agency loans in our servicing portfolio, with a weighted-average servicing fee of 18.5 basis points, are scheduled to mature over the next two years.
The increase in the weighted-average servicing fee was primarily due to an increase in Fannie Mae loans as a percentage of the overall servicing portfolio year over year, coupled with a higher weighted-average servicing fee on Fannie Mae debt financing volumes over the past year.
We added net mortgage servicing rights ("MSRs") from originations of $5.6 million in the quarter and $137.3 million over the past 12 months.
The MSRs associated with our servicing portfolio had a fair value of $1.2 billion as of June 30, 2021, compared to $959.0 million as of June 30, 2020.
Assets under management ("AUM") as of June 30, 2021 consisted of $1.2 billion of loans and funds managed by WDIP and $629.5 million of loans in our interim lending joint venture. The year-over-year decrease in AUM is principally related to an $73.3 million portfolio of loans that we directly serviced for our interim JV partner that matured in the second quarter of 2021.


REVENUES
(dollars in thousands)		Q2 2021			Q2 2020		$ Variance		% Variance
Loan origination and debt brokerage fees, net	$	107,472		$	77,907		$	29,565	38	%
Fair value of expected net cash flows from servicing, net ("MSR income")		61,849			90,369			(28,520)	(32)
Servicing fees		69,052			56,862			12,190	21
Property sales broker fees		22,454			3,561			18,893	531
Net warehouse interest income, LHFS		2,884			6,313			(3,429)	(54)
Net warehouse interest income, LHFI		1,746			3,088			(1,342)	(43)
Escrow earnings and other interest income		1,823			2,671			(848)	(32)
Other revenues		14,131			12,054			2,077	17
Total revenues	$	281,411		$	252,825		$	28,586	11	%
Key revenue metrics (as a percentage of debt financing volume):
Origination fee margin ⁽⁴⁾		1.07	%		1.17	%
MSR margin ⁽⁵⁾		0.63			1.36
Agency MSR margin ⁽⁶⁾		1.72			1.75

Discussion of Results:

The increase in loan origination and debt brokerage fees, net was driven by the substantial increase in overall debt financing volume, partially offset by the slight decrease in the origination fee margin as shown above.
The decrease in MSR income was primarily related to the decrease in Agency debt financing volume year over year.
The increase in brokered loan originations led to decreases in our origination fee and MSR margins in the second quarter of 2021. The slight decrease in Agency MSR margin was a result of a decrease in Fannie Mae debt financing volume.
The $12.3 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, combined with the significant increase in the servicing portfolio's weighted-average servicing fee.
The decrease in net warehouse interest income from loans held for sale ("LHFS") was due to a 59% decrease in the average balance of LHFS outstanding, partially offset by a 12% increase in the net spread.
The decrease in net warehouse interest income from loans held for investment ("LHFI") was primarily due to a 28% lower average balance of loans outstanding.
Escrow earnings and other interest income decreased primarily due to a significant year-over-year decrease in short-term interest rates, upon which our earnings rates are based, partially offset by an increase in the average balance of escrow accounts.
The increase in property sales broker fees was driven by the significant increase in property sales volume year over year.
Other revenues increased principally due to increases in investment management fees.


EXPENSES
(dollars in thousands)		Q2 2021			Q2 2020		$ Variance		% Variance
Personnel	$	141,421		$	106,920		$	34,501	32	%
Amortization and depreciation		48,510			42,317			6,193	15
Provision (benefit) for credit losses		(4,326)			4,903			(9,229)	(188)
Interest expense on corporate debt		1,760			2,078			(318)	(15)
Other operating expenses		19,748			13,069			6,679	51
Total expenses	$	207,113		$	169,287		$	37,826	22	%
Key expense metrics (as a percentage of total revenues):
Personnel expenses		50	%		42	%
Other operating expenses		7			5

Discussion of Results:

The increase in personnel expenses was primarily the result of increased commissions expense due to the increase in loan origination and debt brokerage fees, net and property sales revenues during the second quarter of 2021. In addition, strategic acquisitions and hiring initiatives contributed to a 19% increase in average headcount and associated salaries and benefits.
Amortization and depreciation increased as a result of the growth in the average balance of MSRs outstanding year over year.
The benefit for credit losses in the second quarter is related to the allowance for risk-sharing obligations. The loss rate used for the forecast period decreased to three basis points as of June 30, 2021 from four basis points as of March 31, 2021 due to further improvements in unemployment rates, resulting in a reduction in the allowance for risk-sharing obligations, with a corresponding benefit for credit losses. In 2020, the loss rate used for the forecasted period remained constant from March 31, 2020 to June 30, 2020, resulting in a small provision for credit losses from the growth of the at-risk servicing portfolio.
The increase in other operating expenses was largely attributable to increases in travel and entertainment, professional fees, and miscellaneous expenses, all of which are attributable to the overall growth of the Company over the past year and low costs in these areas in the second quarter of 2020 due to the pandemic.


KEY PERFORMANCE METRICS
(dollars in thousands, except per share amounts)		Q2 2021			Q2 2020		$ Variance		% Variance
Walker & Dunlop net income	$	56,058		$	62,059		$	(6,001)	(10)	%
Adjusted EBITDA		66,514			48,394			18,120	37
Diluted EPS	$	1.73		$	1.95		$	(0.22)	(11)	%
Operating margin		26	%		33	%
Return on equity		18			23

Discussion of Results:

The decrease in net income was the result of an 11% decrease in income from operations, as total expenses increased at a higher rate than total revenues year over year, partially offset by a lower effective income tax rate due to an increase in excess tax benefits recognized year over year due to a significant number of options exercised during the second quarter of 2021.
Adjusted EBITDA increased year over year largely due to higher loan origination and debt brokerage fees, net, servicing fees, and property sales revenues. These increases were partially offset by the increases in personnel expense and other operating expenses and the decrease in warehouse interest income.


KEY CREDIT METRICS
(dollars in thousands)		Q2 2021			Q2 2020		$ Variance		% Variance
At-risk servicing portfolio ⁽⁷⁾	$	46,866,767		$	40,640,024		$	6,226,743	15	%
Maximum exposure to at-risk portfolio ⁽⁸⁾		9,517,609			8,266,261			1,251,348	15
Defaulted loans	$	48,481		$	48,481		$	—	-	%
Key credit metrics (as a percentage of the at-risk portfolio):
Defaulted loans		0.10	%		0.12	%
Allowance for risk-sharing		0.13			0.17
Key credit metrics (as a percentage of maximum exposure):
Allowance for risk-sharing		0.63	%		0.84	%

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 loans added to the portfolio during the past 12 months. As of June 30, 2021, there were two defaulted loans that were provisioned for in 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.
The on-balance sheet interim loan portfolio, which is comprised of loans that we have full risk of loss, was $276.7 million at June 30, 2021 compared to $336.5 million at June 30, 2020. There was one defaulted loan in our interim loan portfolio at June 30, 2021, which defaulted and was provisioned for in prior years. All other loans in the on-balance sheet interim loan portfolio are current and performing as of June 30, 2021. The interim loan joint venture holds $629.5 million of loans as of June 30, 2021, for which we indirectly share in a small portion of the risk of loss, compared to $624.1 million as of June 30, 2020. All loans in the interim loan joint venture are current and performing as of June 30, 2021.

YEAR-TO-DATE 2021 OPERATING RESULTS


YEAR-TO-DATE OPERATING RESULTS AND KEY PERFORMANCE METRICS
(dollars in thousands)		Q2 2021			Q2 2020		$ Variance		% Variance
Debt financing volume	$	17,835,303		$	16,307,129		$	1,528,174	9	%
Property sales volume		4,737,292			2,177,301			2,559,991	118
Total transaction volume	$	22,572,595		$	18,484,430		$	4,088,165	22	%
Total revenues		505,699			486,982			18,717	4
Total expenses		358,231			343,167			15,064	4
Net income	$	114,110		$	109,888		$	4,222	4	%
Adjusted EBITDA		127,181			112,522			14,659	13
Diluted EPS	$	3.52		$	3.44		$	0.08	2	%
Operating margin		29	%		30	%
Return on equity		19			21

Discussion of Results:

The 4% increase in total revenues was largely driven by:

Significant Increases

Loan origination and debt brokerage fees, net (19%), primarily from the overall increase in debt financing volume
Servicing fees (20%) related to growth in our servicing portfolio and the weighted-average servicing fee of the portfolio
Property sales broker fees (139%), due to the increase in property sales volume
Other revenues (11%), mostly from investment management fees

Significant Decreases (partially offsetting the increases noted above)

MSR income (24%), largely the result of a decrease in Fannie Mae debt financing volume
Warehouse interest income (38%), due to decreases in LHFS and LHFI outstanding and net spreads
Escrow earnings and other interest income (71%), primarily from a substantial year-over-year decline in short-term interest rates, partially offset by an increase in the average balance of escrow accounts outstanding

The 4% increase in total expenses was primarily driven by:

Significant Increases

Personnel expense (21%), primarily due to (i) higher commissions expense resulting from higher loan origination and debt brokerage fees, net and property sales revenues, and (ii) increased salaries and benefits expenses resulting from a rise in average headcount due to strategic acquisitions and hiring initiatives
Amortization and depreciation costs (16%), largely due to an increase in the average balance of MSRs outstanding year over year
Other operating expenses (20%), primarily resulting from increases in travel and entertainment, professional fees, and miscellaneous expenses, all of which are primarily attributable to the overall growth of the Company over the past year and low costs in these areas in 2020 due to the pandemic

Significant Decreases (partially offsetting the increases noted above)

Benefit for credit losses (155%), primarily due to a decrease in the loss rate used for the forecast period to three basis points as of June 30, 2021 from six basis points as of December 31, 2020 due to forecasted low unemployment rates, resulting in a significant benefit for credit losses for the six months ended June 30, 2021. For the six months ended June 30, 2020, the loss rate used for the forecast period increased from one basis point at the beginning of the year to seven basis points as of June 30, 2020 due to the pandemic, resulting in a large provision for credit losses

Net income for the six months ended June 30, 2021 and 2020 was $114.1 million and $109.9 million, respectively. The 4% increase in net income was primarily a result of a 3% increase in income from operations, combined with a lower effective tax rate due to increased excess tax benefits recognized year over year.

Adjusted EBITDA for the six months ended June 30, 2021 and 2020 was $127.2 million and $112.5 million, respectively. The 13% increase was largely driven by the increases in loan origination and debt brokerage fees, net, servicing fees and property sales revenues, partially offset by the decreases in escrow earnings and other interest income and warehouse interest income and the increases in personnel expenses and other operating expenses.

Operating margin for the six months ended June 30, 2021 and 2020 was 29% and 30%, respectively. The slight decrease in operating margin was due to the increase in total expenses outpacing the growth in total revenues year over year.

DIVIDENDS AND SHARE REPURCHASES

On August 4, 2021, our Board of Directors declared a dividend of $0.50 per share for the third quarter of 2021. The dividend will be paid on September 3, 2021 to all holders of record of our restricted and unrestricted common stock as of August 19, 2021.

On February 3, 2021, our Board of Directors authorized the repurchase of up to $75 million of our outstanding common stock over a one-year period ("2021 Share Repurchase Program"). We have not repurchased any shares of common stock under the 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)	Brokered transactions for life insurance companies, commercial banks, and other capital sources.

(3)	Includes debt financing volumes from our interim loan program, our interim loan joint venture, and WDIP separate accounts.

(4)	Loan origination and debt brokerage fees, net as a percentage of debt financing volume. Excludes the income and debt financing volume from Principal Lending and Investing.

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

(6)	MSR income as a percentage of Agency debt financing volume.

(7)	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.

(8)	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, August 5, 2021 at 8:30 a.m. Eastern time. Listeners can access the webcast via the link: https://walkerdunlop.zoom.us/webinar/register/WN_GUUdAlHzQAK02TFYgzWoew or by dialing +1 408 901 0584, Webinar ID 997 6568 1703, Password 625376. 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) is the largest provider of capital to the multifamily industry in the United States and the fourth largest lender on all commercial real estate including industrial, office, retail, and hospitality. Walker & Dunlop enables real estate owners and operators to bring their visions of communities — where Americans live, work, shop, and play — to life. The power of our people, premier brand, and industry-leading technology enables us to meet any client need – including financing, research, property sales, valuation, and advisory services. With over 1,000 employees across every major U.S. market, Walker & Dunlop has consistently been named one of Fortune's Great Places to Work® and is committed to making the commercial real estate industry more inclusive and diverse while creating meaningful social, environmental, and economic change in our communities.

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 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) general economic conditions and multifamily and commercial real estate market conditions, (2) regulatory and/or legislative changes to Freddie Mac, Fannie Mae or HUD, (3) our ability to retain and attract loan originators and other professionals, and (4) 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*

	June 30,		March 31,		December 31,		September 30,		June 30,
	2021		2021		2020		2020		2020
(in thousands)
Assets
Cash and cash equivalents	$	326,518	$	277,277	$	321,097	$	294,873	$	275,202
Restricted cash		15,842		14,805		19,432		12,383		10,894
Pledged securities, at fair value		146,548		139,570		137,236		134,295		128,296
Loans held for sale, at fair value		1,718,444		1,048,385		2,449,198		3,227,287		1,733,598
Loans held for investment, net		272,033		281,788		360,402		342,056		404,527
Mortgage servicing rights		915,519		909,884		862,813		805,655		778,269
Goodwill and other intangible assets		268,018		262,906		250,838		251,002		251,165
Derivative assets		36,751		58,130		49,786		37,290		27,085
Receivables, net		80,196		59,526		65,735		51,837		50,188
Other assets		163,252		151,694		134,438		143,025		133,825
Total assets	$	3,943,121	$	3,203,965	$	4,650,975	$	5,299,703	$	3,793,049

Liabilities
Warehouse notes payable	$	1,823,982	$	1,112,340	$	2,517,156	$	3,328,327	$	1,863,654
Note payable		290,498		291,045		291,593		292,272		292,819
Allowance for risk-sharing obligations		60,329		64,580		75,313		70,495		69,191
Guaranty obligation, net		50,369		51,836		52,306		53,474		54,872
Derivative liabilities		30,411		9,250		5,066		3,858		13,739
Other liabilities		394,037		429,782		513,319		436,152		408,223
Total liabilities	$	2,649,626	$	1,958,833	$	3,454,753	$	4,184,578	$	2,702,498

Stockholders' Equity
Common stock	$	310	$	310	$	307	$	306	$	304
Additional paid-in capital		255,676		248,069		241,004		230,302		238,094
Accumulated other comprehensive income (loss)		2,578		1,810		1,968		1,468		249
Retained earnings		1,034,931		994,943		952,943		883,049		851,904
Total stockholders' equity	$	1,293,495	$	1,245,132	$	1,196,222	$	1,115,125	$	1,090,551
Commitments and contingencies		—		—		—		—		—
Total liabilities and stockholders' equity	$	3,943,121	$	3,203,965	$	4,650,975	$	5,299,703	$	3,793,049

Walker & Dunlop, Inc. and Subsidiaries Condensed Consolidated Statements of Income and Comprehensive Income *Unaudited*

	Quarterly Trends										Six months ended
											June 30,
(in thousands, except per share amounts)	Q2 2021		Q1 2021		Q4 2020		Q3 2020		Q2 2020		2021		2020
Revenues
Loan origination and debt brokerage fees, net	$	107,472	$	75,879	$	120,956	$	83,825	$	77,907	$	183,351	$	154,280
Fair value of expected net cash flows from servicing, net ("MSR Income")		61,849		57,935		121,566		78,065		90,369		119,784		158,369
Servicing fees		69,052		65,978		63,240		60,265		56,862		135,030		112,296
Property sales broker fees		22,454		9,042		18,180		6,756		3,561		31,496		13,173
Net warehouse interest income		4,630		4,555		6,872		7,558		9,401		9,185		14,896
Escrow earnings and other interest income		1,823		2,117		2,566		2,275		2,671		3,940		13,414
Other revenues		14,131		8,782		16,329		8,272		12,054		22,913		20,554
Total revenues	$	281,411	$	224,288	$	349,709	$	247,016	$	252,825	$	505,699	$	486,982

Expenses
Personnel	$	141,421	$	96,215	$	157,826	$	114,548	$	106,920	$	237,636	$	196,445
Amortization and depreciation		48,510		46,871		45,013		41,919		42,317		95,381		82,079
Provision (benefit) for credit losses		(4,326)		(11,320)		5,450		3,483		4,903		(15,646)		28,546
Interest expense on corporate debt		1,760		1,765		1,826		1,786		2,078		3,525		4,938
Other operating expenses		19,748		17,587		22,258		16,165		13,069		37,335		31,159
Total expenses	$	207,113	$	151,118	$	232,373	$	177,901	$	169,287	$	358,231	$	343,167
Income from operations	$	74,298	$	73,170	$	117,336	$	69,115	$	83,538	$	147,468	$	143,815
Income tax expense		18,240		15,118		34,237		15,925		21,479		33,358		34,151
Net income before noncontrolling interests	$	56,058	$	58,052	$	83,099	$	53,190	$	62,059	$	114,110	$	109,664
Less: net income (loss) from noncontrolling interests		—		—		—		—		—		—		(224)
Walker & Dunlop net income	$	56,058	$	58,052	$	83,099	$	53,190	$	62,059	$	114,110	$	109,888
Net change in unrealized gains (losses) on pledged available-for-sale securities, net of taxes		768		(158)		500		1,219		1,430		610		(487)
Walker & Dunlop comprehensive income	$	56,826	$	57,894	$	83,599	$	54,409	$	63,489	$	114,720	$	109,401

Basic earnings per share	$	1.75	$	1.82	$	2.63	$	1.69	$	1.98	$	3.57	$	3.52
Diluted earnings per share		1.73		1.79		2.59		1.66		1.95		3.52		3.44
Cash dividends paid per common share		0.50		0.50		0.36		0.36		0.36		1.00		0.72

Basic weighted-average shares outstanding		31,019		30,823		30,635		30,560		30,352		30,922		30,288
Diluted weighted-average shares outstanding		31,370		31,276		31,227		31,074		30,860		31,322		30,960

SUPPLEMENTAL OPERATING DATA *Unaudited*

	Quarterly Trends															Six months ended
																June 30,
(dollars in thousands, except per share data)	Q2 2021			Q1 2021			Q4 2020			Q3 2020			Q2 2020			2021			2020
Transaction Volume:
Components of Debt Financing Volume
Fannie Mae	$	1,911,976		$	1,533,024		$	3,891,649		$	1,977,607		$	2,762,299		$	3,445,000		$	6,933,790
Freddie Mac		1,003,319			1,012,720			2,685,359			3,136,313			1,769,280			2,016,039			2,767,076
Ginnie Mae - HUD		672,574			622,133			844,221			373,480			640,150			1,294,707			994,837
Brokered ⁽¹⁾		6,280,578			4,302,492			3,768,689			1,711,541			1,495,500			10,583,070			5,489,385
Principal Lending and Investing ⁽²⁾		318,237			178,250			152,831			105,488			14,091			496,487			122,041
Total Debt Financing Volume	$	10,186,684		$	7,648,619		$	11,342,749		$	7,304,429		$	6,681,320		$	17,835,303		$	16,307,129
Property Sales Volume		3,341,532			1,395,760			2,846,276			1,106,162			446,684			4,737,292			2,177,301
Total Transaction Volume	$	13,528,216		$	9,044,379		$	14,189,025		$	8,410,591		$	7,128,004		$	22,572,595		$	18,484,430

Key Performance Metrics:
Operating margin		26	%		33	%		34	%		28	%		33	%		29	%		30	%
Return on equity		18			19			29			20			23			19			21
Walker & Dunlop net income	$	56,058		$	58,052		$	83,099		$	53,190		$	62,059		$	114,110		$	109,888
Adjusted EBITDA ⁽³⁾		66,514			60,667			58,161			45,165			48,394			127,181			112,522
Diluted EPS		1.73			1.79			2.59			1.66			1.95			3.52			3.44

Key Expense Metrics (as a percentage of total revenues):
Personnel expenses		50	%		43	%		45	%		46	%		42	%		47	%		40	%
Other operating expenses		7			8			6			7			5			7			6
Key Revenue Metrics (as a percentage of debt financing volume):
Origination fee margin ⁽⁴⁾		1.07	%		1.02	%		1.08	%		1.15	%		1.17	%		1.04	%		0.95	%
MSR margin ⁽⁵⁾		0.63			0.78			1.09			1.08			1.36			0.69			0.98
Agency MSR margin ⁽⁶⁾		1.72			1.83			1.64			1.42			1.75			1.77			1.48

Other Data:
Market capitalization at period end	$	3,239,332		$	3,182,606		$	2,822,970		$	1,657,545		$	1,580,183
Closing share price at period end	$	104.38		$	102.74		$	92.02		$	53.00		$	50.81
Average headcount		1,027			974			928			887			860

Components of Servicing Portfolio:
Fannie Mae	$	51,077,660		$	50,113,076		$	48,818,185		$	46,224,549		$	45,160,004
Freddie Mac		37,887,969			37,695,462			37,072,587			35,726,109			33,222,090
Ginnie Mae - HUD		9,904,246			9,754,667			9,606,506			9,639,820			9,749,888
Brokered ⁽⁷⁾		13,129,969			12,090,825			11,419,372			11,513,521			11,519,629
Principal Lending and Investing ⁽⁸⁾		276,738			213,240			295,322			273,754			336,473
Total Servicing Portfolio	$	112,276,582		$	109,867,270		$	107,211,972		$	103,377,753		$	99,988,084
Assets under management ⁽⁹⁾		1,801,577			1,836,086			1,816,421			1,936,679			1,884,673
Total Managed Portfolio	$	114,078,159		$	111,703,356		$	109,028,393		$	105,314,432		$	101,872,757

Key Servicing Portfolio Metrics (end of period):
Weighted-average servicing fee rate (bps)		24.5			24.3			24.0			23.4			23.3
Weighted-average remaining term (years)		9.2			9.2			9.4			9.4			9.5



(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)	Loan origination and debt brokerage fees, net as a percentage of debt financing volume. Excludes the income and debt financing volume from Principal Lending and Investing.
(5)	MSR income as a percentage of debt financing volume. Excludes the income and debt financing volume from Principal Lending and Investing.
(6)	MSR income as a percentage of Agency debt financing 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*

	June 30,			March 31,			December 31,			September 30,			June 30,
(dollars in thousands)	2021			2021			2020			2020			2020
Risk-sharing servicing portfolio:
Fannie Mae Full Risk	$	42,444,569		$	41,152,790		$	39,835,534		$	37,018,792		$	35,707,326
Fannie Mae Modified Risk		8,617,020			8,941,234			8,948,472			9,165,490			9,411,097
Freddie Mac Modified Risk		36,894			37,006			37,018			52,685			52,696
Total risk-sharing servicing portfolio	$	51,098,483		$	50,131,030		$	48,821,024		$	46,236,967		$	45,171,119

Non-risk-sharing servicing portfolio:
Fannie Mae No Risk	$	16,071		$	19,052		$	34,180		$	40,267		$	41,581
Freddie Mac No Risk		37,851,075			37,658,456			37,035,568			35,673,424			33,169,394
GNMA - HUD No Risk		9,904,246			9,754,667			9,606,506			9,639,820			9,749,888
Brokered		13,129,969			12,090,825			11,419,372			11,513,521			11,519,629
Total non-risk-sharing servicing portfolio	$	60,901,361		$	59,523,000		$	58,095,626		$	56,867,032		$	54,480,492
Total loans serviced for others	$	111,999,844		$	109,654,030		$	106,916,650		$	103,103,999		$	99,651,611
Interim loans (full risk) servicing portfolio		276,738			213,240			295,322			273,754			336,473
Total servicing portfolio unpaid principal balance	$	112,276,582		$	109,867,270		$	107,211,972		$	103,377,753		$	99,988,084

Interim Loan Joint Venture Managed Loans ⁽¹⁾	$	629,532		$	660,999		$	558,161		$	639,466		$	695,267

At-risk servicing portfolio ⁽²⁾	$	46,866,767		$	45,796,952		$	44,483,676		$	41,848,548		$	40,640,024
Maximum exposure to at-risk portfolio ⁽³⁾		9,517,609			9,304,440			9,032,083			8,497,807			8,266,261
Defaulted loans		48,481			48,481			48,481			48,481			48,481

Defaulted loans as a percentage of the at-risk portfolio		0.10	%		0.11	%		0.11	%		0.12	%		0.12	%
Allowance for risk-sharing as a percentage of the at-risk portfolio		0.13			0.14			0.17			0.17			0.17
Allowance for risk-sharing as a percentage of maximum exposure		0.63			0.69			0.83			0.83			0.84


(1)	Includes $73.3 million as of March 31, 2021, December 31, 2020 and September 30, 2020, and $71.1 million as of June 30, 2020, of loans managed directly for our interim loan joint venture partner in addition to interim loan joint venture managed loans. We indirectly share in a portion of the risk of loss associated with interim loan joint venture managed loans through our 15% equity ownership in the joint venture. We had no exposure to risk of loss for the loans serviced directly for our interim loan joint venture partner. The balance of this line is included as a component of assets under management in the Supplemental Operating Data table.

(2)	At-risk servicing portfolio is defined as the balance of Fannie Mae DUS loans subject to the risk-sharing formula described below, as well as a small number of Freddie Mac loans on which we share in the risk of loss. Use of the at-risk portfolio provides for comparability of the full risk-sharing and modified risk-sharing loans because the provision and allowance for risk-sharing obligations are based on the at-risk balances of the associated loans. Accordingly, we have presented the key statistics as a percentage of the at-risk portfolio. 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										Six months ended
											June 30,
(in thousands)	Q2 2021		Q1 2021		Q4 2020		Q3 2020		Q2 2020		2021		2020
Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA
Walker & Dunlop Net Income	$	56,058	$	58,052	$	83,099	$	53,190	$	62,059	$	114,110	$	109,888
Income tax expense		18,240		15,118		34,237		15,925		21,479		33,358		34,151
Interest expense on corporate debt		1,760		1,765		1,826		1,786		2,078		3,525		4,938
Amortization and depreciation		48,510		46,871		45,013		41,919		42,317		95,381		82,079
Provision (benefit) for credit losses		(4,326)		(11,320)		5,450		3,483		4,903		(15,646)		28,546
Net write-offs		—		—		—		—		—		—		—
Stock compensation expense		8,121		8,116		10,102		6,927		5,927		16,237		11,289
Fair value of expected net cash flows from servicing, net		(61,849)		(57,935)		(121,566)		(78,065)		(90,369)		(119,784)		(158,369)
Adjusted EBITDA	$	66,514	$	60,667	$	58,161	$	45,165	$	48,394	$	127,181	$	112,522

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SOURCE Walker & Dunlop, Inc.

Walker & Dunlop Revenues Increase 11% to $281 Million as Services Businesses Expand Dramatically