Exhibit 99.1

Picture 2

Walker & Dunlop Caps Strong 2019 Performance with

Record Quarterly Transaction Volume of $9.8 Billion

 

FOURTH QUARTER 2019 HIGHLIGHTS

·

Record total transaction volume of $9.8 billion

·

Record total revenues of $217.2 million

·

Net income of $42.9 million  and diluted earnings per share of $1.34 

·

Adjusted EBITDA1 of $64.1 million

·

Servicing portfolio of $93.2 billion at December 31, 2019

·

Increased quarterly dividend to $0.36 per share

FULL-YEAR 2019 HIGHLIGHTS

·

Record total transaction volume of $32.0 billion

·

Record total revenues of $817.2 million

·

Net income of $173.4 million and diluted earnings per share of $5.45

·

Adjusted EBITDA of $247.9 million

Bethesda, MD – February 5, 2020Walker & Dunlop, Inc. (NYSE: WD) (the “Company”) reported fourth quarter 2019 total revenues of  $217.2 million, a quarterly record and an increase of 1% over the fourth quarter of 2018. Net income for the fourth quarter of 2019 was $42.9 million, or $1.34 per diluted share, down 6% and 5% from the fourth quarter of last year, respectively. Adjusted EBITDA of $64.1 million was up 7% over last year’s fourth quarter. Fourth quarter total transaction volume grew 5% from the prior-year quarter to $9.8 billion, a quarterly record, with debt financing volume down 6% and property sales volume up 96%. The Company’s Board of Directors voted to increase the quarterly dividend by 20% to $0.36 per share.

Willy Walker, Chairman and CEO commented, “During 2019 we generated record total transaction volume of $32 billion and delivered fantastic financial results while investing heavily in new banking and brokerage talent as well as innovative technology solutions that will set the foundation for future growth. We generated diluted earnings per share of $5.45, up 10% from 2018, and adjusted EBITDA of $248 million, up 13% from the previous year.”

Mr. Walker continued, “During the year, we successfully recruited 26 bankers and brokers to Walker & Dunlop, expanding our salesforce by 16%.  This growth allowed us to build upon our leadership position in the multifamily financing market, finishing the year as the #1 Fannie Mae DUS lender and the #3 Freddie Mac Optigo lender. As we look to 2020 and beyond, we will carry on recruiting the very best bankers and brokers in the industry to expand our client base and core revenues, while also continuing to invest in new businesses such as asset management and appraisals to expand our service offering and relevance to our clients.”

 

1

 

Picture 6

Fourth quarter 2019 Earnings Release

 

FOURTH QUARTER 2019 OPERATING RESULTS

 

 

 

 

 

 

 

 

 

 

 

 

TRANSACTION VOLUMES

(dollars in thousands)

 

Q4 2019

 

 

Q4 2018

 

$ Variance

 

% Variance

Fannie Mae

$

1,692,839

 

$

2,598,306

 

$

(905,467)

 

(35)

%

Freddie Mac

 

1,526,321

 

 

2,110,741

 

 

(584,420)

 

(28)

 

Ginnie Mae - HUD

 

197,350

 

 

218,447

 

 

(21,097)

 

(10)

 

Brokered

 

3,884,101

 

 

2,771,613

 

 

1,112,488

 

40

 

Principal Lending and Investing2

 

532,434

 

 

644,464

 

 

(112,030)

 

(17)

 

Debt financing volume

$

7,833,045

 

$

8,343,571

 

$

(510,526)

 

(6)

%

Property sales volume

 

1,979,010

 

 

1,009,885

 

 

969,125

 

96

 

Total transaction volume

$

9,812,055

 

$

9,353,456

 

$

458,599

 

 5

%

Discussion of Results:

·

We continue to see high demand for debt financing due to the strength of the U.S. commercial real estate market, strong macro conditions, and low interest rates. In addition, steady household formation and a lack of supply of single-family housing is driving persistent demand for multifamily rental properties. For the last two years, multifamily debt financing activity has represented at least 80% of our debt financing volumes.

·

In addition, a 16% year-over-year increase in the number of bankers and brokers on the platform has fueled growth in total transaction volume.

·

Fannie Mae and Freddie Mac origination volumes were lower than a typical fourth quarter but in line with our expectations heading into the quarter, as the GSEs pulled back on their lending at the beginning of the quarter, resulting in lower market wide GSE volumes.

·

The quarterly decline in HUD volume is not indicative of any broad market trends or weakening demand for HUD loans. We remain focused on increasing the number of bankers on our platform with HUD expertise, particularly in affordable and seniors housing. 

·

Record brokered volume in the fourth quarter of 2019 reflects the growth in our team of bankers, continued market demand for all commercial real estate property types, and strong execution by our team.

·

The decrease in principal lending and investing volume, which includes interim loans, originations for JCR separate accounts, and joint venture equity investments, was primarily due to a year-over-year decrease in interim loans originated for our balance sheet. During the fourth quarter of 2018, we originated our largest interim loan ever, a $150.0 million short-term loan to a large institutional investor, with no similar activity in 2019.

·

Record property sales volume was the result of the investments we have made to expand the number of property sales brokers on the platform, coupled with strong fundamentals supporting the multifamily market and continued investor demand for multifamily assets.

2

 

Picture 6

Fourth quarter 2019 Earnings Release

 

The substantial increase in property sales volume was the result of the investments we have made to expand the number of property sales brokers on the platform, coupled with strong fundamentals supporting the multifamily market and continued investor appetite for multifamily assets.

 

 

 

 

 

 

 

 

 

 

 

MANAGED PORTFOLIO

(dollars in thousands)

 

Q4 2019

 

 

Q4 2018

 

$ Variance

 

% Variance

Fannie Mae

$

40,049,095

 

$

35,983,178

 

$

4,065,917

 

11

%

Freddie Mac

 

32,583,842

 

 

30,350,724

 

 

2,233,118

 

 7

 

Ginnie Mae - HUD

 

9,972,989

 

 

9,944,222

 

 

28,767

 

 -

 

Brokered

 

10,151,120

 

 

9,127,640

 

 

1,023,480

 

11

 

Principal Lending and Investing

 

468,123

 

 

283,498

 

 

184,625

 

65

 

Total servicing portfolio

$

93,225,169

 

$

85,689,262

 

$

7,535,907

 

 9

%

Assets under management

 

1,958,078

 

 

1,422,735

 

 

535,343

 

38

 

Total Managed Portfolio

$

95,183,247

 

$

87,111,997

 

$

8,071,250

 

 9

%

Weighted-average servicing fee rate (basis points)

 

23.2

 

 

24.3

 

 

 

 

 

 

Weighted-average remaining servicing portfolio term (years)

 

9.6

 

 

9.8

 

 

 

 

 

 

Discussion of Results:

·

Our servicing portfolio has experienced steady growth over the past year due to our significant debt financing volumes and relatively few maturities and prepayments.

·

During the fourth quarter of 2019, we added $1.5 billion of net loans to our servicing portfolio, and over the past 12 months, we added $7.5 billion of net loans to our servicing portfolio, 84% of which were Fannie Mae and Freddie Mac loans.

·

Only $4.1 billion of Agency loans in our servicing portfolio with a weighted-average servicing fee of 24.6 basis points are scheduled to mature over the next two years. 

·

The decrease in the weighted-average servicing fee was primarily because the weighted-average servicing fee on our new Fannie Mae originations was less than the weighted-average servicing fee of Fannie Mae loans that have matured or prepaid over the past year. However, this impact was slightly offset by an increase in the servicing fee margin on Fannie Mae debt financing volume originated during the fourth quarter of 2019.

·

We added net mortgage servicing rights (“MSRs”) of $21.4 million during the quarter and $48.7 million over the past 12 months. 

·

The MSRs associated with our servicing portfolio had a fair value of $910.5 million as of December 31, 2019, compared to $858.7 million as of December 31, 2018.

·

Assets under management (AUM) as of December 31, 2019 consisted of $1.2 billion of loans and funds managed by our registered investment adviser, JCR Capital Investment Corporation, and $0.7 billion of loans we manage for our interim lending joint venture and for an affiliate of Blackstone Mortgage Trust. The year-over-year increase in AUM is related to JCR Capital’s fundraising activity over the past 12 months and growth in the interim lending joint venture.  

3

 

Picture 6

Fourth quarter 2019 Earnings Release

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES

(dollars in thousands)

 

Q4 2019

 

 

Q4 2018

 

$ Variance

 

% Variance

Loan origination and debt brokerage fees, net

$

69,921

 

$

71,078

 

$

(1,157)

 

(2)

%

Fair value of expected net cash flows from servicing, net

 

47,771

 

 

53,088

 

 

(5,317)

 

(10)

 

Servicing fees

 

55,126

 

 

52,092

 

 

3,034

 

 6

 

Net warehouse interest income, LHFS

 

769

 

 

1,108

 

 

(339)

 

(31)

 

Net warehouse interest income, LHFI

 

5,326

 

 

4,794

 

 

532

 

11

 

Escrow earnings and other interest income

 

12,988

 

 

14,423

 

 

(1,435)

 

(10)

 

Property sales broker fees

 

11,065

 

 

5,467

 

 

5,598

 

102

 

Other revenues

 

14,224

 

 

12,883

 

 

1,341

 

10

 

Total revenues

$

217,190

 

$

214,933

 

$

2,257

 

 1

%

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

 

 

 

 

 

 

 

 

 

 

 

Origination related fees3

 

0.93

%

 

0.91

%

 

 

 

 

 

Gains attributable to MSRs3

 

0.65

 

 

0.68

 

 

 

 

 

 

Gains attributable to MSRs - Agency loans4

 

1.40

 

 

1.08

 

 

 

 

 

 

Discussion of Results:

·

The decrease in loan origination fees was primarily the result of the 6%  decrease in overall debt financing volume.

·

In addition to the overall decrease in debt financing volume, a decrease in Fannie Mae loans originated as a percentage of overall debt financing volume led to the decrease in gains attributable to MSRs.

·

The increase in gains attributable to MSRs for Agency loans was due to the aforementioned increase in the servicing fee margin on Fannie Mae debt financing volume during the fourth quarter of 2019.

·

The $7.5 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, partially offset by the decline 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 decrease in the average balance of LHFS outstanding.

·

The increase in net warehouse interest income from loans held for investment (“LHFI”) was due to a significantly larger average balance of loans outstanding, partially offset by a decrease in the spread. 

·

Escrow earnings and other interest income decreased due to a year-over-year decrease in short-term interest rates, upon which our earnings rates are based, partially offset by an increase in the average escrow balance.

·

The increase in property sales broker fees was primarily the result of the large increase in property sales volume year over year.

·

The increase in other revenues was principally due to an increase in prepayment fees.

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Picture 6

Fourth quarter 2019 Earnings Release

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

(dollars in thousands)

 

Q4 2019

 

 

Q4 2018

 

$ Variance

 

% Variance

Personnel

$

97,082

 

$

90,828

 

$

6,254

 

 7

%

Amortization and depreciation

 

39,552

 

 

36,271

 

 

3,281

 

 9

 

Provision (benefit) for credit losses

 

4,409

 

 

(34)

 

 

4,443

 

(13,068)

 

Interest expense on corporate debt

 

3,292

 

 

3,179

 

 

113

 

 4

 

Other operating expenses

 

14,881

 

 

19,359

 

 

(4,478)

 

(23)

 

Total expenses

$

159,216

 

$

149,603

 

$

9,613

 

 6

%

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

 

 

 

 

 

 

 

 

 

 

 

Personnel expenses

 

45

%

 

42

%

 

 

 

 

 

Other operating expenses

 

 7

 

 

 9

 

 

 

 

 

 

Discussion of Results:

·

The growth in personnel expenses was largely the result of a 15% increase in average headcount and associated salaries and benefits, as we continue to scale our business through strategic acquisitions and organic hiring, and an  increase in commissions expense driven by a significant increase in property sales volume.

·

Amortization and depreciation increased primarily due to the growth in the average balance of MSRs outstanding year over year.

·

During the fourth quarter of 2019, we experienced one default on a $28 million loan in our Fannie Mae at risk portfolio that resulted in a net provision expense of $4.4 million compared to a net benefit of $34 thousand last year. The credit quality in the remainder of our at risk servicing portfolio remains strong, as seen in the credit quality statistics shown in the Key Credit Metrics section below.

·

The decrease in other operating expenses was primarily due to a $2.1 million loss on extinguishment of debt related to unamortized debt issuance costs and debt discount and a contingent consideration expense of $1.9 million in 2018, for which there were no comparable expenses in 2019.

 

 

 

 

 

 

 

 

 

 

 

 

KEY PERFORMANCE METRICS

(dollars in thousands, except per share amounts)

 

Q4 2019

 

 

Q4 2018

 

$ Variance

 

% Variance

Walker & Dunlop net income

$

42,916

 

$

45,750

 

$

(2,834)

 

(6)

%

Adjusted EBITDA

 

64,076

 

 

59,639

 

 

4,437

 

 7

 

Diluted EPS

$

1.34

 

$

1.41

 

$

(0.07)

 

(5)

%

Operating margin

 

27

%

 

30

%

 

 

 

 

 

Return on equity

 

17

 

 

20

 

 

 

 

 

 

Discussion of Results:

·

The decrease in net income was the result of an 11%  decrease in income from operations as the growth in total expenses outpaced the growth in total revenues,  partially offset by a decrease in the effective tax rate from 30% in 2018 to 26% in 2019. In the fourth quarter of 2018, we recognized a $2.8 million expense related to a 100% valuation allowance placed on deferred tax assets related to certain compensation agreements for our executives, with no comparable activity in 2019.

·

The increase in adjusted EBITDA was primarily driven by the increase in  servicing fees, property sales broker fees, and other revenues, partially offset by the decreases in loan origination fees and escrow and other interest income.

·

The decrease in return on equity was largely the result of the year-over-year decrease in net income and an increase in stockholders’ equity of $133.6 million over the past year.

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Picture 6

Fourth quarter 2019 Earnings Release

 

 

 

 

 

 

 

 

 

 

 

 

 

KEY CREDIT METRICS

(dollars in thousands)

 

Q4 2019

 

 

Q4 2018

 

$ Variance

 

% Variance

At risk servicing portfolio5

$

36,699,969

 

$

32,533,838

 

$

4,166,131

 

13

%

Maximum exposure to at risk portfolio6

 

7,488,985

 

 

6,666,082

 

 

822,903

 

12

 

Defaulted loans

$

48,481

 

$

11,103

 

$

37,378

 

337

%

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

 

 

 

 

 

 

 

 

 

 

 

Defaulted loans

 

0.13

%

 

0.03

%

 

 

 

 

 

Allowance for risk-sharing

 

0.03

 

 

0.01

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

Allowance for risk-sharing

 

0.15

%

 

0.07

%

 

 

 

 

 

Allowance for risk-sharing and guaranty obligation

 

0.88

 

 

0.77

 

 

 

 

 

 

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. There were two defaulted loans in our at risk servicing portfolio as of December 31, 2019 which defaulted and were provisioned for during the first and fourth quarters of 2019. All other loans in the at risk portfolio are current and performing as of December 31, 2019.

·

The on-balance sheet interim loan portfolio, which is comprised of loans for which the Company has full risk of loss, was $476.1 million at December 31, 2019 compared to $433.5 million at December 31, 2018. There was one defaulted loan in our interim loan portfolio at December 31, 2019, which defaulted and was provisioned for during the first quarter of 2019. All other loans in the on-balance sheet interim loan portfolio are current and performing as of December 31, 2019. The interim loan joint venture holds $670.5 million of loans as of December 31, 2019, 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, 2019.

FULL-YEAR 2019 OPERATING RESULTS

Total transaction volume for the year ended December 31, 2019 was $32.0 billion, a 14% increase from 2018.

Total revenues for the year ended December 31, 2019 were $817.2 million compared to $725.2 million last year, a 13% increase. The change in total revenues was largely driven by (i) a 10% increase in loan origination fees and a 5% increase in gains attributable to MSRs, both from a 5% increase in debt financing volume, (ii) a 7% increase in servicing fees related to growth in our servicing portfolio, (iii) a 32% increase in escrow earnings and other interest income resulting from an increase in the average balance of escrow accounts and a higher average escrow earnings rate during the first nine months of 2019, (iv) a 196% increase in net warehouse interest income from loans held for investment as a result of a corresponding increase in the average balance of loans held for investment, (v) 79% growth in property sales broker fees, due to a nearly doubling of property sales volume year over year, and (vi) a 14% increase in other revenues due to increases in asset management fees, income from our interim loan JV, and prepayment fees.

Total expenses for the year ended December 31, 2019 and 2018 were $586.9 million and $512.4 million, respectively. The 15% increase in total expenses was due to increases in all expense types. Personnel expense increased 16% year over year primarily due to increases in (i) salaries and benefits expenses resulting from a rise in average headcount due to the continued growth of our business, (ii) commissions expense resulting from growth in total transaction volume, and (iii) bonus expense resulting from improved company financial performance year over year and higher average headcount. Amortization and depreciation costs increased 7% 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 increased year over year as we experienced three defaults during 2019 on loans for which we have credit risk: two loans in our at risk servicing portfolio totaling $48.5 million and a $14.7 million loan in our interim lending portfolio. The credit quality in the remainder of our at risk servicing and interim loan portfolios remains strong, as seen in the credit quality statistics shown in the Key Credit Metrics section above. Interest expense on corporate debt increased 42% as the average balance of our long-term debt

6

 

Picture 6

Fourth quarter 2019 Earnings Release

 

increased following the refinance and upsize of the debt in the fourth quarter of 2018,  partially offset by a decrease in the spread and underlying base rate. Other operating expenses increased 7% largely due to increases in office costs due to the increase in average headcount year over year and other professional expenses related to recruiting new bankers and brokers, partially offset by the aforementioned decreases in loss on extinguishment and contingent consideration expense year over year as these expenses were unique to 2018.

Operating margin for the year ended December 31, 2019 decreased slightly from 29% in 2018 to 28%.

Net income for the year ended December 31, 2019 was $173.4 million compared to net income of $161.4 million in 2018, a 7% increase. The increase in net income was the result of an 8% increase in income from operations, as total revenues increased more than total expenses, partially offset by a slight increase in the effective tax rate from 24% during 2018 to 25% for 2019.

For the year ended December 31, 2019 and 2018, adjusted EBITDA was $247.9 million and $220.1 million, respectively. The 13% year-over-year increase was driven by growth in nearly all areas of revenues, partially offset by increases in personnel expense and other operating expenses.

 

For the year ended December 31, 2019 and 2018, return on equity was 18% and 19%, respectively. The decrease is due to a 15% year-over-year increase in stockholders’ equity, partially offset by the 7% increase in net income.  

DIVIDENDS AND SHARE REPURCHASES

On February 4, 2020, our Board of Directors declared a quarterly dividend of $0.36 per share, a 20% increase from the quarterly dividends declared in 2019. The dividend will be paid March 9, 2020 to all holders of record of our restricted and unrestricted common stock and restricted stock units as of February 21, 2020.

During the fourth quarter of 2019, we did not repurchase any shares. During the year ended December 31, 2019, we repurchased 135 thousand shares of our common stock at a weighted average price of $48.52 per share for a total cost of $6.6 million.  As of December 31, 2019, we  had $45.8 million of share repurchase capacity remaining under our 2019 share repurchase program.

On February 4, 2020, the Company’s Board of Directors authorized the repurchase of up to $50 million of the Company’s outstanding common stock over the coming one-year period.  

Purchases made pursuant to the 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 JCR separate accounts.

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

4  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.

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. 

7

 

Picture 6

Fourth quarter 2019 Earnings Release

 

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 Wednesday, February 5, 2020 at 8:30 a.m. Eastern time. Analysts and investors interested in participating are invited to call (877)  876-9173 from within the United States or (785) 424-1667 from outside the United States and are asked to reference the Conference ID: WDQ419. A simultaneous webcast of the call will be available on the Investor Relations section of the Walker & Dunlop website at http://www.walkerdunlop.com. 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 800+ professionals in 39 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 gains attributable to MSRs. Additionally, adjusted EBITDA further excludes other significant activities that are not part of our ongoing operations. 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

8

 

Picture 6

Fourth quarter 2019 Earnings Release

 

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 our most-recent Quarterly Report 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.

Contacts:

 

 

Investors:

Media:

Kelsey Duffey

Susan Weber

Vice President, Investor Relations

Chief Marketing Officer

Phone 301.202.3207

Phone 301.215.5515

investorrelations@walkeranddunlop.com

info@walkeranddunlop.com

 

Phone  301.215.5500

7501 Wisconsin Avenue, Suite 1200E

Bethesda, Maryland 20814

 

 

9

 

Picture 6

Fourth quarter 2019 Earnings Release

 

Picture 3

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 

    

September 30,

    

June 30,

    

March 31,

    

December 31, 

 

2019

 

2019

 

2019

 

2019

 

2018

(in thousands)

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

120,685

 

$

65,641

 

$

74,184

 

$

109,862

 

$

90,058

Restricted cash

 

8,677

 

 

9,138

 

 

15,454

 

 

17,561

 

 

20,821

Pledged securities, at fair value

 

121,767

 

 

120,302

 

 

119,289

 

 

117,566

 

 

116,331

Loans held for sale, at fair value

 

787,035

 

 

1,259,075

 

 

1,302,938

 

 

1,226,380

 

 

1,074,348

Loans held for investment, net

 

543,542

 

 

454,430

 

 

432,593

 

 

471,561

 

 

497,291

Mortgage servicing rights

 

718,799

 

 

697,350

 

 

688,027

 

 

677,946

 

 

670,146

Goodwill and other intangible assets

 

182,959

 

 

183,122

 

 

183,286

 

 

183,449

 

 

177,093

Derivative assets

 

15,568

 

 

25,554

 

 

22,420

 

 

27,605

 

 

35,536

Receivables, net

 

52,146

 

 

56,149

 

 

51,982

 

 

52,643

 

 

50,419

Other assets

 

119,222

 

 

110,240

 

 

104,044

 

 

84,320

 

 

50,014

Total assets

$

2,670,400

 

$

2,981,001

 

$

2,994,217

 

$

2,968,893

 

$

2,782,057

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warehouse notes payable

$

906,128

 

$

1,263,036

 

$

1,313,955

 

$

1,335,461

 

$

1,161,382

Note payable

 

293,964

 

 

294,255

 

 

294,840

 

 

295,425

 

 

296,010

Guaranty obligation, net

 

54,695

 

 

52,656

 

 

51,414

 

 

49,376

 

 

46,870

Allowance for risk-sharing obligations

 

11,471

 

 

7,256

 

 

7,964

 

 

6,682

 

 

4,622

Derivative liabilities

 

36

 

 

17,726

 

 

35,122

 

 

29,891

 

 

32,697

Performance deposits from borrowers

 

7,996

 

 

8,711

 

 

14,737

 

 

17,471

 

 

20,335

Other liabilities

 

353,825

 

 

335,119

 

 

311,950

 

 

306,515

 

 

312,949

Total liabilities

$

1,628,115

 

$

1,978,759

 

$

2,029,982

 

$

2,040,821

 

$

1,874,865

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred shares

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

 —

Common stock

 

300

 

 

300

 

 

300

 

 

300

 

 

295

Additional paid-in capital

 

237,877

 

 

231,297

 

 

227,621

 

 

223,742

 

 

235,152

Accumulated other comprehensive income (loss)

 

737

 

 

1,015

 

 

892

 

 

226

 

 

(75)

Retained earnings

 

796,775

 

 

763,195

 

 

730,562

 

 

698,894

 

 

666,752

Total stockholders’ equity

$

1,035,689

 

$

995,807

 

$

959,375

 

$

923,162

 

$

902,124

Noncontrolling interests

 

6,596

 

 

6,435

 

 

4,860

 

 

4,910

 

 

5,068

Total equity

$

1,042,285

 

$

1,002,242

 

$

964,235

 

$

928,072

 

$

907,192

Commitments and contingencies

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Total liabilities and equity

$

2,670,400

 

$

2,981,001

 

$

2,994,217

 

$

2,968,893

 

$

2,782,057

10

 

Picture 6

Fourth quarter 2019 Earnings Release

 

Picture 1

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 2019

 

Q3 2019

 

Q2 2019

 

Q1 2019

 

Q4 2018

 

2019

 

2018

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan origination and debt brokerage fees, net

$

69,921

 

$

65,144

 

$

65,610

 

$

57,797

 

$

71,078

 

$

258,471

 

$

234,681

Fair value of expected net cash flows from servicing, net

 

47,771

 

 

50,785

 

 

41,271

 

 

40,938

 

 

53,088

 

 

180,766

 

 

172,401

Servicing fees

 

55,126

 

 

54,219

 

 

53,006

 

 

52,199

 

 

52,092

 

 

214,550

 

 

200,230

Net warehouse interest income

 

6,095

 

 

6,172

 

 

6,411

 

 

7,021

 

 

5,902

 

 

25,699

 

 

14,031

Escrow earnings and other interest income

 

12,988

 

 

15,163

 

 

14,616

 

 

14,068

 

 

14,423

 

 

56,835

 

 

42,985

Other

 

25,289

 

 

20,784

 

 

19,411

 

 

15,414

 

 

18,350

 

 

80,898

 

 

60,918

Total revenues

$

217,190

 

$

212,267

 

$

200,325

 

$

187,437

 

$

214,933

 

$

817,219

 

$

725,246

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel

$

97,082

 

$

93,057

 

$

84,398

 

$

71,631

 

$

90,828

 

$

346,168

 

$

297,303

Amortization and depreciation

 

39,552

 

 

37,636

 

 

37,381

 

 

37,903

 

 

36,271

 

 

152,472

 

 

142,134

Provision for credit losses

 

4,409

 

 

(772)

 

 

961

 

 

2,675

 

 

(34)

 

 

7,273

 

 

808

Interest expense on corporate debt

 

3,292

 

 

3,638

 

 

3,777

 

 

3,652

 

 

3,179

 

 

14,359

 

 

10,130

Other operating expenses

 

14,881

 

 

19,393

 

 

16,830

 

 

15,492

 

 

19,359

 

 

66,596

 

 

62,021

Total expenses

$

159,216

 

$

152,952

 

$

143,347

 

$

131,353

 

$

149,603

 

$

586,868

 

$

512,396

Income from operations

$

57,974

 

$

59,315

 

$

56,978

 

$

56,084

 

$

65,330

 

$

230,351

 

$

212,850

Income tax expense

 

15,019

 

 

15,246

 

 

14,832

 

 

12,024

 

 

19,885

 

 

57,121

 

 

51,908

Net income before noncontrolling interests

$

42,955

 

$

44,069

 

$

42,146

 

$

44,060

 

$

45,445

 

$

173,230

 

$

160,942

Less: net income (loss) from noncontrolling interests

 

39

 

 

26

 

 

(50)

 

 

(158)

 

 

(305)

 

 

(143)

 

 

(497)

Walker & Dunlop net income

$

42,916

 

$

44,043

 

$

42,196

 

$

44,218

 

$

45,750

 

$

173,373

 

$

161,439

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

(278)

 

 

123

 

 

666

 

 

301

 

 

(4)

 

 

812

 

 

(168)

Walker & Dunlop comprehensive income

$

42,638

 

$

44,166

 

$

42,862

 

$

44,519

 

$

45,746

 

$

174,185

 

$

161,271

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

1.38

 

$

1.42

 

$

1.36

 

$

1.44

 

$

1.47

 

$

5.61

 

$

5.15

Diluted earnings per share

 

1.34

 

 

1.39

 

 

1.33

 

 

1.39

 

 

1.41