Contingent Consideration Liabilities

A summary of the Company’s contingent consideration liabilities, which are included in Otherliabilities in the Condensed Consolidated Balance Sheets, as of and for the nine months ended September 30, 2023 and 2022 follows:


	For the nine months ended
	September 30,
Roll Forward of Contingent Consideration Liabilities (in thousands)	2023		2022
Beginning balance	$	200,346	$	125,809
Additions		—		119,955
Accretion		927		3,767
Fair value adjustments		(14,000)		—
Payments		(26,090)		(28,547)
Ending balance	$	161,183	$	220,984

The contingent consideration liabilities presented in the table above relate to (i) acquisitions of debt brokerage and investment sales brokerage companies completed over the past several years, (ii) the purchase of noncontrolling interests in 2020 that was fully earned as of December 31, 2021 and paid in 2022, (iii) the Alliant acquisition, and (iv) the GeoPhy acquisition. The contingent consideration for each of the acquisitions may be earned over various lengths of time after each acquisition, with a maximum earnout period of five years, provided certain revenue targets and other metrics have been met. The last of the earnout periods related to the contingent consideration ends in the third quarter of 2027. In each case, the Company estimated the initial fair value of the contingent consideration using a Monte Carlo simulation.

As noted in the table above, the fair value adjustment recorded during the nine months ended September 30, ~~2017 shown~~2023 was related to the GeoPhy acquisition. The probability of achievement for the contingent consideration declined due to short-term macroeconomic and commercial real estate market conditions and the reduced likelihood that those conditions will recover for the business to achieve the maximum contingent consideration targets.

The recognition of the contingent consideration liability for the GeoPhy acquisition in the first quarter of 2022 is non-cash, and thus not reflected in the amount of cash consideration paid on the Condensed Consolidated Statements of Cash Flows. In addition, $8.8 millionof the payments settling contingent consideration liabilities included in the table above ~~relates to an immaterial acquisition completed during~~for the ~~first quarter~~nine months ended September 30, 2022 were from the issuance of ~~2017 as more fully disclosed in~~ the Company’s ~~Q1 2017 10-Q. As of September 30, 2017, the Company has fully amortized all material intangible assets obtained from acquisitions.~~common stock, a non-cash transaction.

NOTE 9—8—FAIR VALUE MEASUREMENTS

The Company uses valuation techniques that are consistent with the market approach, the income approach, and/or the cost approach to measure assets and liabilities that are measured at fair value. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, accounting standards establish a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

●

Level 1—Financial assets and liabilities whose values are based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

●

Level 2—Financial assets and liabilities whose values are based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, discount rates, volatilities, prepayment speeds, earnings rates, credit ~~risks,~~risk, etc.) or inputs that are derived principally from, or corroborated by, market data by correlation or other means.

●

Level 3—Financial assets and liabilities whose values are based on inputs that are both unobservable and significant to the overall valuation.

Table of Contents

The Company's MSRs are measured at fair value at inception, and thereafter on a nonrecurring basis. That is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value ~~adjustments in certain circumstances (for example,~~measurement when there is ~~evidence of impairment)~~impairment and for disclosure purposes (NOTE 3). The Company's MSRs do not trade in an active, open market with readily observable prices. ~~While sales of multifamily MSRs do occur, precise terms and conditions vary with each transaction and are not readily available.~~ Accordingly, the estimated fair value of the Company’s MSRs was developed using discounted cash flow models that calculate the present value of estimated future net servicing income. The model considers contractually specified servicing fees, prepayment assumptions, ~~delinquency status, late charges, other ancillary~~estimated placement fee revenue from escrow deposits, costs to service, and other economic factors. The Company periodically reassesses and adjusts, when necessary, the underlying inputs and assumptions used in the model to reflect observable market conditions and assumptions that a market ~~participant would~~participants consider in valuing an MSR ~~asset.~~assets. MSRs are carried at the lower of amortized cost or fair ~~value (measured at the portfolio level).~~value.

A description of the valuation methodologies used for assets and liabilities measured at fair value, ~~on a recurring basis,~~ as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. ~~These valuation methodologies were applied to all of the Company's assets and liabilities carried at fair value on a recurring basis:~~

●

Derivative Instruments—The derivative ~~instruments used by the Company~~positions consist of interest rate lock commitments with borrowers and forward sale ~~agreements.~~ ~~These~~agreements to the Agencies. The fair value of these instruments ~~are valued~~is estimated using a discounted cash flow model developed based on changes in the

~~Table of Contents~~

applicable U.S. Treasury rate and other observable market data. The value was determined after considering the potential impact of collateralization, adjusted to reflect nonperformance risk of both the counterparty and the Company, and are classified within Level 3 of the valuation hierarchy.

●

Loans Held for Sale—~~Loans~~All loans held for sale presented in the Condensed Consolidated Balance Sheets are reported at fair value. The Company determines the fair value of the loans held for sale using discounted cash flow models that incorporate quoted observable ~~prices~~inputs from market ~~participants.~~participants, such as changes in the U.S. Treasury rate. Therefore, the Company classifies these loans held for sale as Level 2.

●

Pledged Securities—~~The pledged securities~~Investments in money market funds are valued using quoted market prices from recent trades. Therefore, the Company classifies this portion of pledged securities as Level 1.

The Company determines the fair value of its AFS investments in Agency debt securities using discounted cash flows that incorporate observable inputs from market participants and then compares the fair value to broker estimates of fair value. Consequently, the Company classifies this portion of pledged securities as Level 2.

●

Contingent Consideration Liabilities—Contingent consideration liabilities from acquisitions are recognized at fair value and subsequently remeasured using a Monte Carlo simulation that uses updated management forecasts and current valuation assumptions and discount rates. The Company determines the fair value of each contingent consideration liability based on probability of achievement, which incorporates management estimates. As a result, the Company classifies these liabilities as Level 3.

Table of Contents

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of September 30, ~~2017,~~2023 and December 31, ~~2016,~~2022, segregated by the level of the valuation inputs within the fair value hierarchy used to measure fair value:

Quoted Prices in

Significant

Significant



Active Markets

Other

Other

For Identical

Observable

Unobservable

Assets

Inputs

Inputs

Balance as of

(in thousands)

(Level 1)

(Level 2)

(Level 3)

Period End

September 30, 2017

Assets

Loans held for sale

$
—

$
3,275,761

$
—

$
3,275,761

Pledged securities

95,102

—

—

95,102

Derivative assets

—

—

43,853

43,853

Total

$
95,102

$
3,275,761

$
43,853

$
3,414,716

Liabilities

Derivative liabilities

$
—

$
—

$
175

$
175

Total

$
—

$
—

$
175

$
175

December 31, 2016

Assets

Loans held for sale

$
—

$
1,858,358

$
—

$
1,858,358

Pledged securities

84,850

—

—

84,850

Derivative assets

—

—

61,824

61,824

Total

$
84,850

$
1,858,358

$
61,824

$
2,005,032

Liabilities

Derivative liabilities

$
—

$
—

$
4,396

$
4,396

Total

$
—

$
—

$
4,396

$
4,396


							Balance as of
(in thousands)	Level 1		Level 2		Level 3		Period End
September 30, 2023
Assets
Loans held for sale	$	—	$	758,926	$	—	$	758,926
Pledged securities		46,558		130,951		—		177,509
Derivative assets		—		—		33,617		33,617
Total	$	46,558	$	889,877	$	33,617	$	970,052

Liabilities
Derivative liabilities	$	—	$	—	$	2,065	$	2,065
Contingent consideration liabilities		—		—		161,183		161,183
Total	$	—	$	—	$	163,248	$	163,248

December 31, 2022
Assets
Loans held for sale	$	—	$	396,344	$	—	$	396,344
Pledged securities		14,658		142,624		—		157,282
Derivative assets		—		—		17,636		17,636
Total	$	14,658	$	538,968	$	17,636	$	571,262

Liabilities
Derivative liabilities	$	—	$	—	$	2,076	$	2,076
Contingent consideration liabilities		—		—		200,346		200,346
Total	$	—	$	—	$	202,422	$	202,422

There were no transfers between any of the levels within the fair value hierarchy during the nine months ended September 30, ~~2017.~~

~~Table of Contents~~

2023.

Derivative instruments (Level 3) are outstanding for short periods of time (generally less than 60 days). A roll forward of derivative instruments is presented below for the three and nine months ended September 30, ~~2017~~2023 and ~~2016:~~2022:


	For the three months ended				For the nine months ended
	September 30,				September 30,
Derivative Assets and Liabilities, net (in thousands)	2023		2022		2023		2022
Beginning balance	$	20,241	$	42,634	$	15,560	$	30,961
Settlements		(80,213)		42,458		(259,655)		(235,463)
Realized gains (losses) recorded in earnings⁽¹⁾		59,972		(85,092)		244,095		204,502
Unrealized gains (losses) recorded in earnings⁽¹⁾		31,552		231,241		31,552		231,241
Ending balance	$	31,552	$	231,241	$	31,552	$	231,241

Fair Value Measurements

Using Significant Unobservable Inputs:

Derivative Instruments

For the three months ended

For the nine months ended

September 30,

September 30,

(in thousands)

2017

2016

2017

2016

Derivative assets and liabilities, net

Beginning balance

$
24,491

$
600

$
57,428

$
10,345

Settlements

(92,117)

(71,250)

(323,662)

(229,178)

Realized gains recorded in earnings (1)

67,626

70,650

266,234

218,833

Unrealized gains recorded in earnings (1)

43,678

31,156

43,678

31,156

Ending balance

$
43,678

$
31,156

$
43,678

$
31,156

(1)

Realized and unrealized gains (losses) from derivatives are recognized in ~~Gains~~Loan origination and debt brokerage fees, net and Fair value of expected net cash flows from ~~mortgage banking activities~~servicing, net in the Condensed Consolidated Statements of Income.

Table of Contents

The following table presents information about significant unobservable inputs used in the recurring measurement of the fair value of the Company’s Level 3 assets and liabilities as of September 30, ~~2017:~~2023:


	Quantitative Information about Level 3 Fair Value Measurements
(in thousands)	Fair Value		Valuation Technique	Unobservable Input⁽¹⁾	Input Range ⁽¹⁾	Weighted Average ⁽²⁾
Derivative assets	$	33,617	Discounted cash flow	Counterparty credit risk	—	—
Derivative liabilities	$	2,065	Discounted cash flow	Counterparty credit risk	—	—
Contingent consideration liabilities	$	161,183	Monte Carlo Simulation	Probability of earnout achievement	48% - 100%	66%

Quantitative Information about Level 3 Measurements

(in thousands)

Fair Value

Valuation Technique

Unobservable Input (1)

Input Value (1)

Derivative assets

$
43,853

Discounted cash flow

Counterparty credit risk

—

Derivative liabilities

$
175

Discounted cash flow

Counterparty credit risk

—

(1)

~~(1)~~

Significant ~~increases~~changes in this input may lead to ~~significantly lower~~significant changes in the fair value measurements.

(2)	Contingent consideration weighted based on maximum gross earnout amount.

The carrying amounts and the fair values of the Company's financial instruments as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022 are presented below:


	September 30, 2023				December 31, 2022
	Carrying		Fair		Carrying		Fair
(in thousands)	Amount		Value		Amount		Value
Financial Assets:
Cash and cash equivalents	$	236,321	$	236,321	$	225,949	$	225,949
Restricted cash		17,768		17,768		17,676		17,676
Pledged securities		177,509		177,509		157,282		157,282
Loans held for sale		758,926		758,926		396,344		396,344
Loans held for investment, net⁽¹⁾		39,891		40,000		200,247		200,900
Derivative assets⁽¹⁾		33,617		33,617		17,636		17,636
Total financial assets	$	1,264,032	$	1,264,141	$	1,015,134	$	1,015,787

Financial Liabilities:
Derivative liabilities⁽²⁾	$	2,065	$	2,065	$	2,076	$	2,076
Contingent consideration liabilities⁽²⁾		161,183		161,183		200,346		200,346
Warehouse notes payable		790,742		791,178		537,531		538,134
Notes payable		774,677		788,500		704,103		708,546
Total financial liabilities	$	1,728,667	$	1,742,926	$	1,444,056	$	1,449,102

September 30, 2017

December 31, 2016


Carrying

Fair

Carrying

Fair

(in thousands)

Amount

Value

Amount

Value

Financial assets:

Cash and cash equivalents

$
85,363

$
85,363

$
118,756

$
118,756

Restricted cash

17,179

17,179

9,861

9,861

Pledged securities

95,102

95,102

84,850

84,850

Loans held for sale

3,275,761

3,275,761

1,858,358

1,858,358

Loans held for investment, net

152,050

152,764

220,377

222,313

Derivative assets

43,853

43,853

61,824

61,824

Total financial assets

$
3,669,308

$
3,670,022

$
2,354,026

$
2,355,962

Financial liabilities:

Derivative liabilities

$
175

$
175

$
4,396

$
4,396

Warehouse notes payable

3,305,589

3,305,807

1,990,183

1,992,111

Note payable

163,935

166,499

164,163

167,327

Total financial liabilities

$
3,469,699

$
3,472,481

$
2,158,742

$
2,163,834

(1)

Included as a component of Other Assets in the Condensed Consolidated Balance Sheets.

(2)

Included as a component of Other Liabilities in the Condensed Consolidated Balance Sheets.

~~Table of Contents~~

The following methods and assumptions were used ~~to estimate the~~for recurring fair value measurements as of ~~each class of financial instruments for which it is practicable to estimate that value:~~September 30, 2023 and December 31, 2022.

Cash and Cash Equivalents and Restricted Cash—The carrying amounts approximate fair value because of the short maturity of these instruments (Level 1).

Pledged Securities—Consist of cash, highly liquid investments in money market accounts invested in government securities, and investments in ~~government guaranteed~~Agency debt securities. ~~Investments~~The investments of the money market funds typically have maturities of 90 days or less and are valued using quoted market prices from recent trades. The fair value of the Agency debt securities incorporates the contractual cash flows of the security discounted at market-rate, risk-adjusted yields.

Loans Held for Sale—Consist of originated loans that are generally transferred or sold within 60 days from the date that ~~the~~a mortgage loan is funded and are valued using discounted cash flow models that incorporate observable ~~inputs~~prices from market participants.

~~Loans Held~~ f~~or Investment—Consist~~21

Table of ~~originated interim loans which the Company expects to hold for investment for the term~~Contents

Contingent Consideration Liabilities—Consists of the ~~loan, which is three years or less, and~~estimated fair values of expected future earnout payments related to acquisitions completed over the past few years. The earnout liabilities are valued using ~~discounted~~a Monte Carlo simulation analysis. The fair value of the contingent consideration liabilities incorporates unobservable inputs, such as the probability of earnout achievement, volatility rates, and discount rate, to determine the expected earnout cash ~~flow models that incorporate primarily observable inputs from market participants~~flows. The probability of the earnout achievement is based on management’s estimate of the expected future performance and ~~also credit-related adjustments, if applicable (Level 3). As~~other financial metrics of ~~September 30, 2017 and December 31, 2016, no credit-related adjustments were required.~~each of the acquired entities, which are subject to significant uncertainty.

Derivative Instruments—~~Consist~~Consists of interest rate lock commitments and forward sale agreements. These instruments are valued using discounted cash flow models developed based on changes in the U.S. Treasury rate and other observable market data. The value is determined after considering the potential impact of collateralization, adjusted to reflect nonperformance risk of both the counterparty and the ~~Company~~.Company.

~~Warehouse Notes Payable~~—Consist of borrowings outstanding under warehouse line agreements. The borrowing rates on the warehouse lines are based upon 30-day LIBOR plus a margin. The unpaid principal balance of warehouse notes payable approximates fair value because of the short maturity of these instruments and the monthly resetting of the index rate to prevailing market rates (Level 2).

~~Note Payable~~—Consists of borrowings outstanding under a term note agreement. The borrowing rate on the note payable is based upon 30-day LIBOR plus an applicable margin. The Company estimates the fair value by discounting the future cash flows at market rates (Level 2).

Fair Value of Derivative Instruments and Loans Held for Sale—In the normal course of business, the Company enters into contractual commitments to originate and sell multifamily mortgage loans at fixed prices with fixed expiration dates. The commitments become effective when the borrowers "lock-in" a specified interest rate within time frames established by the Company. All mortgagors are evaluated for creditworthiness prior to the extension of the commitment. Market risk arises if interest rates move adversely between the time of the "lock-in" of rates by the borrower and the sale date of the loan to an ~~investor~~.investor.

To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, the ~~Company's policy is to enter~~Company enters into a sale commitment with the investor ~~simultaneous~~simultaneously with the rate lock commitment with the borrower. The sale contract with the investor locks in an interest rate and price for the sale of the loan. The terms of the contract with the investor and the rate lock with the borrower are matched in substantially all respects, with the objective of eliminating interest rate risk to the extent practical. Sale commitments with the investors have an expiration date that is longer than our related commitments to the borrower to allow, among other things, for the closing of the loan and processing of paperwork to deliver the loan into the sale ~~commitment~~.commitment.

Both the rate lock commitments to borrowers and the forward sale contracts to buyers are undesignated derivatives and, accordingly, are marked to fair value through ~~Gains on mortgage banking activities~~Loan origination and debt brokerage fees, net in the Condensed Consolidated Statements of Income. The fair value of the Company's rate lock commitments to borrowers and loans held for sale and the related input levels includes, as ~~applicable~~:applicable:

●

the estimated gain ~~from~~of the expected loan sale to the investor (Level 2);

●

the expected net cash flows associated with servicing the loan, net of any guaranty obligations retained (Level 2);

●

the effects of interest rate movements between the date of the rate lock and the balance sheet date (Level 2); and

●

the nonperformance risk of both the counterparty and the Company (Level 3; derivative instruments only).

The estimated gain considers the origination fees the Company expects to collect upon loan closing (derivative instruments only) and premiums the Company expects to receive upon sale of the loan ~~sale~~ (Level 2). The fair value of the expected net cash flows associated with servicing

~~Table of Contents~~

the loan is calculated pursuant to the valuation techniques applicable to ~~MSRs (Level 2).~~

~~The~~the fair value of ~~the Company's derivative instruments and loans held for~~future servicing, net at loan sale ~~considers the effects of the market price movement of the same type of security due to interest rate movements between the trade date and the balance sheet date.~~ (Level 2).

To calculate the effects of interest rate movements, the Company uses applicable published U.S. Treasury prices, and multiplies the price movement between the rate lock date ~~or loan origination date~~ and the balance sheet date by the notional loan commitment amount of ~~the derivative instruments or loans held for sale~~ (Level 2).

The fair value of the Company's forward sales contracts to investors considers effects of interest rate movements between the trade date and the balance sheet date (Level 2). The market price changes are multiplied by the notional amount of the forward sales contracts to measure the fair value.

The fair value of the Company’s interest rate lock commitments and forward sales contracts is adjusted to reflect the risk that the agreement will not be fulfilled. The Company’s exposure to nonperformance in interest rate lock commitments and forward sale contracts is represented by the contractual amount of those instruments. Given the credit quality of our counterparties and the short duration of interest rate lock commitments and forward sale contracts, the risk of nonperformance by the Company’s counterparties has historically ~~not~~ been ~~significant~~minimal (Level 3).

Table of Contents

The following table presents the components of fair value and other relevant information associated with the Company’s derivative instruments and loans held for sale as of September 30, ~~2017~~2023 and December 31, ~~2016.~~2022:


			Fair Value Adjustment Components						Balance Sheet Location
													Fair Value
	Notional or		Estimated				Total						Adjustment
	Principal		Gain		Interest Rate		Fair Value		Derivative		Derivative		To Loans

																	Fair Value Adjustment Components						Balance Sheet Location
																											Fair Value
															Notional or		Estimated				Total						Adjustment
															Principal		Gain		Interest Rate		Fair Value		Derivative		Derivative		to Loans
(in thousands)	Amount		on Sale		Movement		Adjustment		Assets		Liabilities		Held for Sale		Amount		on Sale		Movement		Adjustment		Assets		Liabilities		Held for Sale
September 30, 2017
September 30, 2023
Rate lock commitments	$	688,375	$	19,292	$	(4,987)	$	14,305	$	14,305	$	—	$	—	$	349,336	$	10,990	$	(6,049)	$	4,941	$	5,142	$	(201)	$	—
Forward sale contracts		3,963,275		—		29,373		29,373		29,548		(175)		—		1,120,941		—		26,611		26,611		28,475		(1,864)		—
Loans held for sale		3,274,900		25,247		(24,386)		861		—		—		861		771,605		7,883		(20,562)		(12,679)		—		—		(12,679)
Total			$	44,539	$	—	$	44,539	$	43,853	$	(175)	$	861			$	18,873	$	—	$	18,873	$	33,617	$	(2,065)	$	(12,679)

December 31, 2016

December 31, 2022
Rate lock commitments	$	395,462	$	15,844	$	(2,275)	$	13,569	$	14,482	$	(913)	$	—	$	376,870	$	12,349	$	(4,495)	$	7,854	$	7,854	$	—	$	—
Forward sale contracts		2,248,385		—		43,859		43,859		47,342		(3,483)		—		769,585		—		7,706		7,706		9,782		(2,076)		—
Loans held for sale		1,852,923		47,019		(41,584)		5,435		—		—		5,435		392,715		6,840		(3,211)		3,629		—		—		3,629
Total			$	62,863	$	—	$	62,863	$	61,824	$	(4,396)	$	5,435			$	19,189	$	—	$	19,189	$	17,636	$	(2,076)	$	3,629

NOTE ~~10—LITIGATION,~~9—FANNIE MAE COMMITMENTS AND ~~CONTINGENCIES~~PLEDGED SECURITIES

Fannie Mae DUS Related Commitments—Commitments for the origination and subsequent sale and delivery of loans to Fannie Mae represent those mortgage loan transactions where the borrower has locked an interest rate and scheduled closing, and the Company has entered into a mandatory delivery commitment to sell the loan to Fannie Mae. As discussed in NOTE 9,8, the Company accounts for these commitments as derivatives recorded at fair value.

The Company is generally required to share the risk of any losses associated with loans sold under the Fannie Mae DUS program. The Company is required to secure these obligations by assigning restricted cash balances and securities to Fannie ~~Mae.~~Mae, which are classified as Pledged securities, at fair value on the Condensed Consolidated Balance Sheets. The amount of collateral required by Fannie Mae is a formulaic calculation at the loan level and considers the balance of the loan, the risk level of the loan, the age of the loan, and the level of risk-sharing. Fannie Mae requires restricted liquidity for Tier 2 loans of 75 basis points, which is funded over a 48-month period that begins upon delivery of the loan to Fannie Mae. ~~Restricted liquidity~~Pledged securities held in the form of money market funds holding U.S. Treasuries isare discounted 5%, and Agency mortgage-backed securities (“Agency MBS”) are discounted 4% for purposes of calculating compliance with the restricted liquidity requirements. As seen below, the Company held the majority of its pledged securities in Agency MBS as of September 30, ~~2017, the Company held substantially all of its restricted liquidity in money market funds holding U.S. Treasuries. Additionally, substantially all~~2023. The majority of the loans for which the Company has risk sharing are Tier 2 loans.

The Company is in compliance with the September 30, ~~2017~~2023 collateral requirements as outlined above. As of September 30, ~~2017,~~2023, reserve requirements for the DUS loan portfolio will require the Company to fund ~~$61.3~~$79.6 million in additional restricted liquidity over the next 48 months, assuming no further principal paydowns, prepayments, or defaults within the ~~at risk~~at-risk portfolio. Fannie Mae ~~periodically reassesses~~has reassessed the DUS Capital Standards in the past and may make changes to these standards in the future. The Company generates sufficient cash flow from its operations to meet these capital standards and does not expect any future changes to have a material impact on its future operations; however, any future ~~changes~~increases to collateral requirements may adversely impact the Company’s available cash.

~~Table of Contents~~

Fannie Mae has established benchmark standards for capital adequacy and reserves the right to terminate the Company's servicing authority for all or some of the portfolio if, at any time, it determines that the Company's financial condition is not adequate to support its obligations under the DUS agreement. The Company is required to maintain acceptable net worth, as defined in the agreement, and the Company satisfied the requirements as of September 30, ~~2017.~~2023. The net worth requirement is derived primarily from unpaid principal balances on Fannie Mae loans and the level of risk sharing. AtAs of September 30, ~~2017,~~2023, the ~~minimum~~ net worth requirement was ~~$145.7~~$301.6 million, and the Company's net worth, as defined in the requirements, was ~~$634.5 million,~~$1.0 billion, as measured at our ~~wholly owned~~wholly-owned operating subsidiary, Walker & Dunlop, LLC. As of September 30, ~~2017,~~2023, the Company was required to maintain at least ~~$28.6~~$60.0 million of liquid assets to meet operational liquidity requirements for Fannie Mae, Freddie Mac, HUD, and Ginnie Mae,~~. As of September 30, 2017,~~ and the Company had operational liquidity, as defined in the requirements, of ~~$145.1~~$186.4 million, as of September 30, 2023, as measured at our ~~wholly owned~~wholly-owned operating subsidiary, Walker & Dunlop, ~~LLC~~.LLC.

~~Litigation~~—~~In the ordinary course~~23

Table of business, the Company may be party to various claims and litigation, none of which the Company believes is material. The Company cannot predict the outcome of any pending litigation and may be subject to consequences that could include fines, penalties, and other costs, and the Company’s reputation and business may be impacted. The Company believes that any liability that could be imposed on the Company in connection with the disposition of any pending lawsuits would not have a material adverse effect on its business, results of operations, liquidity, or financial condition.Contents

Pledged Securities, at Fair Value—Pledged securities, at fair value consisted of the following balances as of September 30, 2023 and 2022 and December 31, 2022 and 2021:


	September 30,				December 31,
Pledged Securities (in thousands)	2023		2022		2022		2021
Restricted cash	$	10,523	$	8,454	$	5,788	$	3,779
Money market funds		36,035		4,170		8,870		40,954
Total pledged cash and cash equivalents	$	46,558	$	12,624	$	14,658	$	44,733
Agency MBS		130,951		138,789		142,624		104,263
Total pledged securities, at fair value	$	177,509	$	151,413	$	157,282	$	148,996

The information in the preceding table is presented to reconcile beginning and ending cash, cash equivalents, restricted cash, and restricted cash equivalents in the Condensed Consolidated Statements of Cash Flows as more fully discussed in NOTE ~~11—EARNINGS PER SHARE~~2.

The Company’s investments included within Pledged securities, at fair value consist primarily of money market funds and Agency debt securities. The investments in Agency debt securities consist of multifamily Agency MBS and are all accounted for as AFS securities. When the fair value of Agency MBS is lower than the carrying value, the Company assesses whether an allowance for credit losses is necessary. The Company does not record an allowance for credit losses for its AFS securities, including those whose fair value is less than amortized cost, when the AFS securities are issued by the GSEs. The contractual cash flows of these AFS securities are guaranteed by the GSEs, which are government-sponsored enterprises under the conservatorship of the Federal Housing Finance Agency. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of these securities. The Company does not intend to sell any of the Agency MBS whose fair value is less than the carrying value, nor does the Company believe that it is more likely than not that it would be required to sell these investments before recovery of their amortized cost basis, which may be at maturity. The following table provides additional information related to the Agency MBS as of September 30, 2023 and December 31, 2022:


Fair Value and Amortized Cost of Agency MBS (in thousands)	September 30, 2023		December 31, 2022
Fair value	$	130,951	$	142,624
Amortized cost		133,421		144,801
Total gains for securities with net gains in AOCI		381		797
Total losses for securities with net losses in AOCI		(2,851)		(2,974)
Fair value of securities with unrealized losses		115,337		118,565

Pledged securities with a fair value of $99.2 million, an amortized cost of $102.0 million, and a net unrealized loss of $2.8 million have been in a continuous unrealized loss position for more than 12 months, with the unrealized losses driven primarily by widening investor spreads as a result of the rapid increase in interest rates and related market uncertainty over the last 12 months. All securities that have been in a continuous loss position are Agency debt securities that carry a guarantee of the contractual payments. The Company concluded that an allowance for credit losses is not warranted, as the Company does not intend to sell the securities and does not believe it would be required to sell the securities, and as they carry the guarantee of payment from the Agencies.

The following ~~weighted average shares~~table provides contractual maturity information related to Agency MBS. The money market funds invest in short-term Federal Government and Agency debt securities and have no stated maturity date.


	September 30, 2023
Detail of Agency MBS Maturities (in thousands)	Fair Value		Amortized Cost
Within one year	$	—	$	—
After one year through five years		18,045		18,132
After five years through ten years		92,267		93,322
After ten years		20,639		21,967
Total	$	130,951	$	133,421

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NOTE 10—EARNINGS PER SHARE AND STOCKHOLDERS’ EQUITY

Earnings per share ~~equivalents are used~~(“EPS”) is calculated under the two-class method. The two-class method allocates all earnings (distributed and undistributed) to ~~calculate~~each class of common stock and participating securities based on their respective rights to receive dividends. The Company grants share-based awards to various employees and nonemployee directors under the 2020 Equity Incentive Plan that entitle recipients to receive nonforfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of common stock. These unvested awards meet the definition of participating securities.

The following table presents the calculation of basic and diluted ~~earnings per share~~EPS for the three and nine months ended September 30, ~~2017~~2023 and ~~2016:~~2022 under the two-class method. Participating securities were included in the calculation of diluted EPS using the two-class method, as this computation was more dilutive than the treasury-stock method.

For the three months ended

For the nine months ended

September 30,

September 30,

(in thousands)

2017

2016

2017

2016

Weighted average number of shares outstanding used to calculate basic earnings per share

30,085

29,374

30,009

29,417

Dilutive securities

Unvested restricted shares and restricted share units

1,404

1,068

1,394

1,024

Stock options

823

351

767

302

Weighted average number of shares and share equivalents outstanding used to calculate diluted earnings per share

32,312

30,793

32,170

30,743


	For the three months ended September 30,				For the nine months ended September 30,
EPS Calculations (in thousands, except per share amounts)	2023		2022		2023		2022
Calculation of basic EPS
Walker & Dunlop net income	$	21,458	$	46,833	$	75,758	$	172,328
Less: dividends and undistributed earnings allocated to participating securities		534		1,296		1,942		4,984
Net income applicable to common stockholders	$	20,924	$	45,537	$	73,816	$	167,344
Weighted-average basic shares outstanding		32,737		32,290		32,654		32,300
Basic EPS	$	0.64	$	1.41	$	2.26	$	5.18

Calculation of diluted EPS
Net income applicable to common stockholders	$	20,924	$	45,537	$	73,816	$	167,344
Add: reallocation of dividends and undistributed earnings based on assumed conversion		—		7		2		34
Net income allocated to common stockholders	$	20,924	$	45,544	$	73,818	$	167,378
Weighted-average basic shares outstanding		32,737		32,290		32,654		32,300
Add: weighted-average diluted non-participating securities		158		330		199		345
Weighted-average diluted shares outstanding		32,895		32,620		32,853		32,645
Diluted EPS	$	0.64	$	1.40	$	2.25	$	5.13

The assumed proceeds used for calculating the dilutive impact of restricted stock awards under the ~~treasury~~treasury-stock method includes the unrecognized compensation costs associated with the awards. ~~The following table presents any average outstanding options to purchase shares of common stock~~For the three and nine months ended September 30, 2023, 169 thousand average restricted shares ~~that~~and 343 thousand average restricted shares, respectively, were ~~not included in~~excluded from the computation of diluted ~~earnings per share~~EPS under the treasury-stock method. For the three and nine months ended September 30, 2022, 218 thousand average restricted shares and 111 thousand average restricted shares, respectively, were excluded from the computation. These average restricted shares were excluded from the computation of diluted EPS under the treasury method because the effect would have been anti-dilutive, ~~(the exercise price of the options or~~as the grant date market price of the restricted shares was greater than the average market price of the Company’s shares of common stock during the periods ~~presented).~~presented.

For the three months ended

For the nine months ended

September 30,

September 30,

(in thousands)

2017

2016

2017

2016

Average options

113

207

94

172

Average restricted shares

3

—

5

211

The following non-cash transactions did not impact the amount of cash paid on the Condensed Consolidated Statements of Cash Flows. During 2022, the operating agreement of three of the Company’s tax credit-related joint ventures changed. The Company reconsidered its consolidation conclusion based on these changes and concluded that the joint ventures should be consolidated, resulting in a $3.7 million increase in APIC and $6.8 million of noncontrolling interests consolidated as shown on the Consolidated Statements of Changes in Equity for the nine months ended September 30, 2022. The consolidation also resulted in a $35.0 million increase in Receivables, net, a $21.3 million reduction in Other assets, and a $3.6 million increase in Other liabilities.

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~~NOTE 12—TOTAL EQUITY~~

~~A summary of changes in total equity is presented below:~~

Stockholders' Equity

Additional

Common Stock

Paid-In

Retained

Noncontrolling

Total

(in thousands)

Shares

Amount

Capital

Earnings

Interests

Equity

Balance at December 31, 2016

29,551

$
296

$
228,889

$
381,031

$
4,858

$
615,074

Walker & Dunlop net income

—

—

—

112,166

—

112,166

Net income from noncontrolling interests

—

—

—

—

114

114

Stock-based compensation - equity classified

—

—

14,948

—

—

14,948

Issuance of common stock in connection with equity compensation plans

1,077

10

2,877

—

—

2,887

Repurchase and retirement of common stock

(679)

(7)

(20,622)

(8,234)

—

(28,863)

Other

—

—

6

—

—

6

Balance at September 30, 2017

29,949

$
299

$
226,098

$
484,963

$
4,972

$
716,332

~~During the first quarter of 2017,~~In February 2023, the Company’s Board of Directors ~~authorized~~approved a stock repurchase program that permits the ~~Company to~~ repurchase of up to $75.0 million of ~~its~~the Company’s common stock over a 12-month ~~period.~~ period beginning on February 23, 2023. During ~~2017,~~the first nine months of 2023, the Company ~~has repurchased 228 thousand~~did not repurchase any shares of its common stock under the share repurchase ~~program at a weighted average price~~program. As of ~~$47.07 per share and immediately retired~~September 30, 2023, the ~~shares, reducing stockholders’ equity by $10.8 million. The~~ Company had ~~$64.2~~$75.0 million of authorized share repurchase capacity remaining under the 2023 share repurchase program.

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During each of the first three quarters of 2023, the Company paid a dividend of $0.63 per share. On November 8, 2023, the Company’s Board of Directors declared a dividend of $0.63 per share for the fourth quarter of 2023. The dividend will be paid on December 8, 2023 to all holders of record of the Company’s restricted and unrestricted common stock as of November 24, 2023.

The Company’s Note Payable (“Term Loan”) contains direct restrictions on the amount of dividends the Company may pay, and the warehouse debt facilities and agreements with the Agencies contain minimum equity, liquidity, and other capital requirements that indirectly restrict the amount of dividends the Company may pay. The Company does not believe that these restrictions currently limit the amount of dividends the Company can pay for the foreseeable future.

NOTE 11—SEGMENTS

The Company’s executive leadership team, which functions as the Company’s chief operating decision making body, makes decisions and assesses performance based on the following three reportable segments. The reportable segments are determined based on the product or service provided and reflect the manner in which management is currently evaluating the Company’s financial information.

(i)

Capital Markets (“CM”)—CM provides a comprehensive range of commercial real estate finance products to its customers, including Agency lending, debt brokerage, property sales, and appraisal and valuation services. The Company’s long-established relationships with the Agencies and institutional investors enable CM to offer a broad range of loan products and services to the Company’s customers, including first mortgage, second trust, supplemental, construction, mezzanine, preferred equity, and small-balance loans. CM provides property sales services to owners and developers of multifamily properties and commercial real estate and multifamily property appraisals for various investors. CM also provides real estate-related investment banking and advisory services, including housing market research.

As part of Agency lending, CM temporarily funds the loans it originates (loans held for sale) before selling them to the Agencies and earns net interest income on the spread between the interest income on the loans and the warehouse interest expense. For Agency loans, CM recognizes the fair value of expected net cash flows from servicing, which represents the right to receive future servicing fees. CM also earns fees for origination of loans for both Agency lending and debt brokerage, fees for property sales, appraisals, and investment banking and advisory services, and subscription revenue for its housing market research. Direct internal, including compensation, and external costs that are specific to CM are included within the results of this reportable segment.

(ii)

Servicing & Asset Management (“SAM”)—SAM’s activities include: (i) servicing and asset-managing the portfolio of loans the Company (a) originates and sells to the Agencies, (b) brokers to certain life insurance companies, and (c) originates through its principal lending and investing activities, (ii) managing third-party capital invested in commercial real estate assets through senior secured debt or limited partnership equity instruments; e.g., preferred equity, mezzanine debt, etc. either through funds or direct investments, and (iii) managing third-party capital invested in tax credit equity funds focused on the low-income housing tax credit (“LIHTC”) sector and other commercial real estate.

SAM earns revenue through (i) fees for servicing and asset-managing the loans in the Company’s servicing portfolio, (ii) asset management fees for managing third-party capital, and (iii) net interest income on the spread between the interest income on the loans and the warehouse interest expense for loans held for investment. Direct internal, including compensation, and external costs that are specific to SAM are included within the results of this reportable segment.

(iii)

Corporate—The Corporate segment consists primarily of the Company’s treasury operations and other corporate-level activities. The Company’s treasury activities include monitoring and managing liquidity and funding requirements, including corporate debt. Other corporate-level activities include equity-method investments, accounting, information technology, legal, human resources, marketing, internal audit, and various other corporate groups (“support functions”). The Company does not allocate costs from these support functions to the CM or SAM segments in presenting segment operating results. The Company does allocate interest expense and income tax expense. Corporate debt and the related interest expense are allocated first based on specific acquisitions where debt was directly used to fund the acquisition and then based on the remaining segment assets. Income tax expense is allocated proportionally based on income from operations at each segment, except for significant, one-time tax activities, which are allocated entirely to the segment impacted by the tax activity.

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The following tables provide a summary and reconciliation of each segment’s results for the three months ended September 30, 2023 and 2022.


Segment Results (in thousands)	For the three months ended September 30, 2023
Revenues		CM		SAM		Corporate		Consolidated
Loan origination and debt brokerage fees, net	$	56,149	$	—	$	—	$	56,149
Fair value of expected net cash flows from servicing, net		35,375		—		—		35,375
Servicing fees		—		79,200		—		79,200
Property sales broker fees		16,862		—		—		16,862
Investment management fees		—		13,362		—		13,362
Net warehouse interest income (expense)		(2,565)		534		—		(2,031)
Placement fees and other interest income		—		39,475		3,525		43,000
Other revenues		11,875		15,569		(618)		26,826
Total revenues	$	117,696	$	148,140	$	2,907	$	268,743

Expenses
Personnel	$	97,973	$	17,139	$	21,395	$	136,507
Amortization and depreciation		1,137		54,375		1,967		57,479
Provision (benefit) for credit losses		—		421		—		421
Interest expense on corporate debt		4,874		11,096		1,624		17,594
Other operating expenses		4,193		5,039		19,297		28,529
Total expenses	$	108,177	$	88,070	$	44,283	$	240,530
Income (loss) from operations	$	9,519	$	60,070	$	(41,376)	$	28,213
Income tax expense (benefit)		2,386		15,040		(10,357)		7,069
Net income (loss) before noncontrolling interests	$	7,133	$	45,030	$	(31,019)	$	21,144
Less: net income (loss) from noncontrolling interests		83		(397)		—		(314)
Walker & Dunlop net income (loss)	$	7,050	$	45,427	$	(31,019)	$	21,458

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Segment Results (in thousands)	For the three months ended September 30, 2022
Revenues		CM		SAM		Corporate		Consolidated
Loan origination and debt brokerage fees, net	$	89,752	$	1,106	$	—	$	90,858
Fair value of expected net cash flows from servicing, net		55,291		—		—		55,291
Servicing fees		—		75,975		—		75,975
Property sales broker fees		30,308		—		—		30,308
Investment management fees		—		16,301		—		16,301
Net warehouse interest income (expense)		2,178		1,802		—		3,980
Placement fees and other interest income		—		17,760		369		18,129
Other revenues		11,011		16,378		(2,620)		24,769
Total revenues	$	188,540	$	129,322	$	(2,251)	$	315,611

Expenses
Personnel	$	128,981	$	18,728	$	9,350	$	157,059
Amortization and depreciation		1,052		57,139		1,655		59,846
Provision (benefit) for credit losses		—		1,218		—		1,218
Interest expense on corporate debt		2,430		6,324		552		9,306
Other operating expenses		6,869		5,237		21,885		33,991
Total expenses	$	139,332	$	88,646	$	33,442	$	261,420
Income (loss) from operations	$	49,208	$	40,676	$	(35,693)	$	54,191
Income tax expense (benefit)		12,468		10,204		(15,140)		7,532
Net income (loss) before noncontrolling interests	$	36,740	$	30,472	$	(20,553)	$	46,659
Less: net income (loss) from noncontrolling interests		277		(451)		—		(174)
Walker & Dunlop net income (loss)	$	36,463	$	30,923	$	(20,553)	$	46,833

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The following tables provide a summary and reconciliation of each segment’s results for the nine months ended September 30, 2023 and 2022 and total assets as of September 30, ~~2017.~~2023 and 2022.


Segment Results and Total Assets (in thousands)	As of and for the nine months ended September 30, 2023
Revenues		CM		SAM		Corporate		Consolidated
Loan origination and debt brokerage fees, net	$	167,679	$	522	$	—	$	168,201
Fair value of expected net cash flows from servicing, net		107,446		—		—		107,446
Servicing fees		—		232,027		—		232,027
Property sales broker fees		38,831		—		—		38,831
Investment management fees		—		44,844		—		44,844
Net warehouse interest income (expense)		(7,006)		3,450		—		(3,556)
Placement fees and other interest income		—		100,636		8,674		109,310
Other revenues		40,735		42,697		(431)		83,001
Total revenues	$	347,685	$	424,176	$	8,243	$	780,104

Expenses
Personnel	$	281,502	$	53,669	$	53,254	$	388,425
Amortization and depreciation		3,412		161,935		5,390		170,737
Provision (benefit) for credit losses		—		(11,088)		—		(11,088)
Interest expense on corporate debt		13,870		31,385		4,623		49,878
Other operating expenses		15,037		16,465		51,820		83,322
Total expenses	$	313,821	$	252,366	$	115,087	$	681,274
Income (loss) from operations	$	33,864	$	171,810	$	(106,844)	$	98,830
Income tax expense (benefit)		8,462		42,931		(26,698)		24,695
Net income (loss) before noncontrolling interests	$	25,402	$	128,879	$	(80,146)	$	74,135
Less: net income (loss) from noncontrolling interests		1,741		(3,364)		—		(1,623)
Walker & Dunlop net income (loss)	$	23,661	$	132,243	$	(80,146)	$	75,758

Total assets	$	1,424,270	$	2,361,245	$	492,336	$	4,277,851

2029

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Segment Results and Total Assets (in thousands)	As of and for the nine months ended September 30, 2022
Revenues		CM		SAM		Corporate		Consolidated
Loan origination and debt brokerage fees, net	$	273,660	$	2,113	$	—	$	275,773
Fair value of expected net cash flows from servicing, net		159,970		—		—		159,970
Servicing fees		—		222,916		—		222,916
Property sales broker fees		100,092		—		—		100,092
Investment management fees		—		47,345		—		47,345
Net warehouse interest income (expense)		9,415		4,606		—		14,021
Placement fees and other interest income		—		26,166		517		26,683
Other revenues		29,838		57,624		41,641		129,103
Total revenues	$	572,975	$	360,770	$	42,158	$	975,903

Expenses
Personnel	$	372,656	$	53,211	$	43,741	$	469,608
Amortization and depreciation		2,191		170,501		4,409		177,101
Provision (benefit) for credit losses		—		(13,120)		—		(13,120)
Interest expense on corporate debt		5,488		15,388		1,247		22,123
Other operating expenses		19,943		15,535		66,922		102,400
Total expenses	$	400,278	$	241,515	$	116,319	$	758,112
Income (loss) from operations	$	172,697	$	119,255	$	(74,161)	$	217,791
Income tax expense (benefit)		41,878		28,919		(24,302)		46,495
Net income (loss) before noncontrolling interests	$	130,819	$	90,336	$	(49,859)	$	171,296
Less: net income (loss) from noncontrolling interests		995		(2,027)		—		(1,032)
Walker & Dunlop net income (loss)	$	129,824	$	92,363	$	(49,859)	$	172,328

Total assets	$	3,093,803	$	2,543,730	$	365,480	$	6,003,013

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NOTE 12—VARIABLE INTEREST ENTITIES

The Company, through its subsidiary Walker & Dunlop Affordable Equity (“WDAE”), formerly known as “Alliant,” provides alternative investment management services through the syndication of tax credit funds and the joint development of affordable housing projects. To facilitate the syndication and development of affordable housing projects, the Company is involved with the acquisition and/or formation of limited partnerships and joint ventures with investors, property developers, and property managers that are VIEs.

A detailed discussion of the Company’s accounting policies regarding the consolidation of VIEs and significant transactions involving VIEs is included in NOTE 2 and NOTE 17 of the 2022 Form 10-K.

As of September 30, 2023 and December 31, 2022, the assets and liabilities of the consolidated tax credit funds were immaterial.

The table below presents the assets and liabilities of the Company’s consolidated joint development VIEs included in the Condensed Consolidated Balance Sheets:


Consolidated VIEs (in thousands)		September 30, 2023		December 31, 2022
Assets:
Cash and cash equivalents	$	379	$	201
Restricted cash		2,828		1,532
Receivables, net		31,948		33,593
Other Assets		50,501		49,768
Total assets of consolidated VIEs	$	85,656	$	85,094

Liabilities:
Other liabilities	$	44,745	$	39,148
Total liabilities of consolidated VIEs	$	44,745	$	39,148

The table below presents the carrying value and classification of the Company’s interests in nonconsolidated VIEs included in the Condensed Consolidated Balance Sheets:


Nonconsolidated VIEs (in thousands)		September 30, 2023		December 31, 2022
Assets
Committed investments in tax credit equity	$	212,296	$	254,154
Other assets: Equity-method investments		60,188		57,981
Total interests in nonconsolidated VIEs	$	272,484	$	312,135

Liabilities
Commitments to fund investments in tax credit equity	$	196,250	$	239,281
Total commitments to fund nonconsolidated VIEs	$	196,250	$	239,281

Maximum exposure to losses⁽¹⁾⁽²⁾	$	272,484	$	312,135

(1)

Maximum exposure determined as Total interests in nonconsolidated VIEs. The maximum exposure for the Company’s investments in tax credit equity is limited to the carrying value of its investment, as there are no funding obligations or other commitments related to the nonconsolidated VIEs other than the amounts presented in the table above.

(2)

Based on historical experience and the underlying expected cash flows from the underlying investment, the maximum exposure of loss is not representative of the actual loss, if any, that the Company may incur.

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Item 2. ��~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the historical financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q (“Form 10-Q”). The following discussion contains, in addition to historical information, forward-looking statements that include risks and uncertainties. Our actual results may differ materially from those expressed or contemplated in those forward-looking statements as a result of certain factors, including those set forth under the headings “Forward-Looking Statements” and “Risk Factors” ~~elsewhere in this Form 10-Q~~below and in ~~the~~our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2022 (“~~2016~~2022 Form 10-K”).

Forward-Looking Statements

Some of the statements in this Quarterly Report on Form 10-Q of Walker & Dunlop, Inc. and subsidiaries (the “Company,” “Walker & Dunlop,” “we,” ~~“us”~~“us,” or “our”), 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 which 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 Form 10-Q 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. Statements regarding the following subjects, among others, may be forward-looking:

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the future of the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac,” and together with Fannie Mae, the “GSEs”), including their existence, relationship to the U.S. federal government, origination capacities, and their impact on our business;

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changes to and trends in the interest rate environment and its impact on our business;

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our growth ~~strategy, which includes a focus on building direct access to capital we control;~~

strategy;

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our projected financial condition, liquidity, and results of operations;

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our ability to obtain and maintain warehouse and other loan funding arrangements;

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our ability to make future dividend payments or repurchase shares of our common stock;

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availability of and our ability to attract and retain qualified personnel and our ability to develop and retain relationships with borrowers, key principals, and lenders;

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degree and nature of our competition;

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changes in governmental regulations, policies, and ~~policies,~~programs, tax laws and rates, and similar matters and the impact of such regulations, policies, and actions;

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our ability to comply with the laws, rules, and regulations applicable to ~~us;~~

us, including additional regulatory requirements for broker-dealer and other financial services firms;

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trends in the commercial real estate finance market, ~~interest rates,~~ commercial real estate values, the credit and capital markets, or the general ~~economy;~~

economy, including demand for multifamily housing and rent growth;

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general volatility of the capital markets and the market price of our common stock; and

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other risks and uncertainties associated with our business described in our ~~2016~~2022 Form 10-K and our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the Securities and Exchange Commission.

While forward-looking statements reflect our ~~good faith~~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. 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 “Risk Factors.”

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Business

Overview

We are a leading commercial real estate (i) services, (ii) finance, and (iii) technology company in the United States. Through investments in people, brand, and technology, we have built a diversified suite of commercial real estate services to meet the needs of our customers. Our services include (i) multifamily lending, property sales, appraisal, valuation, and research, (ii) commercial real estate debt brokerage and advisory services, (iii) investment management, and (iv) affordable housing lending, tax credit syndication, development, and investment. We leverage our technological resources and investments to (i) provide an enhanced experience for our customers, (ii) identify refinancing and other financial and investment opportunities for new and existing customers, and (iii) drive efficiencies in our internal processes. We believe our people, brand, and technology provide us with a competitive advantage, as evidenced by 65% of refinancing volumes coming from new loans to us and 21% of total transaction volumes coming from new customers for the nine months ended September 30, 2023.

We are one of the ~~leading commercial real estate services and finance companies~~largest service providers to multifamily operators in the ~~United States, with a primary focus on multifamily lending.~~country. We originate, sell, ~~broker,~~ and service a range of multifamily and other commercial real estate financing products, ~~and provide multifamily investment sales brokerage services.~~ ~~Our clients are owners and developers of commercial real estate across the country. We originate and sell~~including loans through the programs of the GSEs, and ~~HUD~~the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (together with Ginnie Mae, “HUD”) (collectively, the “Agencies”)~~, with which we have long-established~~

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~~relationships.~~. We retain servicing rights and asset management responsibilities on substantially all loans that we originate ~~through~~for the Agencies’ programs. We ~~are approved as a Fannie Mae Delegated Underwriting~~broker, and ~~Servicing™ ("DUS") lender nationally, a Freddie Mac Multifamily Approved Seller/Servicer~~occasionally service, loans to commercial real estate operators for Conventional Loans (“Freddie Mac seller/servicer”) in 23 states and the District of Columbia, a Freddie Mac Approved Seller/Servicer for Seniors Housing and Targeted Affordable Housing nationwide, a HUD Multifamily Accelerated Processing lender nationally, a HUD LEAN lender nationally, and a Ginnie Mae issuer. We also broker loans for a number ofmany life insurance companies, commercial banks, and other institutional investors, in which cases we do not fund the loan but rather act as a loan broker.

We ~~service~~provide multifamily property sales brokerage and appraisal and valuation services and engage in commercial real estate investment management activities, including a focus on the affordable housing sector through low-income housing tax credit (“LIHTC”) syndication. We engage in the development and preservation of affordable housing projects through joint ventures with real estate developers and the management of funds focused on affordable housing. We provide housing market research and real estate-related investment banking and advisory services, which provide our clients and us with market insight into many areas of the housing market. Our clients are owners and developers of multifamily properties and other commercial real estate assets across the country, some of whom are the largest owners and developers in the industry. We also underwrite, service, and asset-manage shorter-term loans on commercial real estate. Most of these shorter-term interim loans are closed through a joint venture or through separate accounts managed by our investment management subsidiary, Walker & Dunlop Investment Partners, Inc. (“WDIP”). Some of these interim loans are closed and retained by us through our Interim Program JV or Interim Loan Program (as defined below in Principal Lending and Investing). We are a leader in commercial real estate technology, developing and acquiring technology resources that (i) provide innovative solutions and a better experience for our customers and (ii) allow us to drive efficiencies across our internal processes.

We acquired GeoPhy B.V. (“GeoPhy”), a leading commercial real estate technology company based in the Netherlands, in the first quarter of 2022. We are using GeoPhy’s data analytics and technology development capabilities to accelerate the growth of our small-balance lending platform and our technology-enabled appraisal and valuation platform, Apprise, by providing data analytics and other technology capabilities.

Walker & Dunlop, Inc. is a holding company. We conduct the majority of our operations through Walker & Dunlop, LLC, our operating company.

Segments

Our executive leadership team, which functions as our chief operating decision making body, makes decisions and assesses performance based on the following three reportable segments: (i) Capital Markets (“CM”), (ii) Servicing & Asset Management (“SAM”), and (iii) Corporate. The reportable segments are determined based on the product or service provided and reflect the manner in which management is currently evaluating the Company’s financial information. The segments and related services are described in the following paragraphs.

Capital Markets

Capital Markets provides a comprehensive range of commercial real estate finance products to our customers, including Agency lending, debt brokerage, property sales, appraisal and valuation services, and real estate related investment banking and advisory services, including housing market research. Our long-established relationships with the Agencies and institutional investors enable us to offer a broad range of loan products and services to our customers. We provide property sales services to owners and developers of multifamily properties and

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commercial real estate and multifamily property appraisals for various investors. Additionally, we ~~act as a loan broker.~~earn subscription fees for our housing related research. The primary services within CM are described below.

Agency Lending

We ~~fund loans for~~are one of the leading lenders with the Agencies, ~~generally through warehouse facility financings,~~where we originate and sell ~~them~~multifamily, manufactured housing communities, student housing, affordable housing, seniors housing, and small-balance multifamily loans. For additional information on our Agency Lending services, refer to ~~investors~~Item 1. Business in accordance with the related loan sale commitment, which we obtain prior to rate lock. Proceeds from the sale of the loan are used to pay off the warehouse borrowing. The sale of the loan is typically completed within 60 days after the loan is closed.our 2022 Form 10-K.

We recognize ~~gains~~loan origination and debt brokerage fees, net and the fair value of expected net cash flows from ~~mortgage banking activities~~servicing, net from our lending with the Agencies when we commit to both originate a loan with a borrower and sell that loan to an investor. The ~~gains~~loan origination and debt brokerage fees, net and the fair value of expected net cash flows from ~~mortgage banking activities~~servicing, net for these transactions reflect the fair value attributable to loan origination fees, premiums on the sale of loans, net of any co-broker fees, and the fair value of the expected net cash flows associated with servicing the loans, net of any guaranty obligations retained.

We ~~also generate revenue~~generally fund our Agency loan products through warehouse facility financing and sell them to investors in accordance with the related loan sale commitment, which we obtain concurrent with rate lock. Proceeds from ~~(i) net~~the sale of the loan are used to pay off the warehouse ~~interest income we earn while~~facility borrowing. The sale of the loan is ~~held for sale through one of our warehouse facilities, (ii)~~typically completed within 60 days after the loan is closed. We earn net warehouse interest income from loans held for ~~investment~~sale while they are outstanding ~~and (iii) sales commissions for brokering~~equal to the ~~sale of multifamily properties.~~

~~We retain servicing rights~~difference between the note rate on substantially all of the loans we originate and sell and generate revenues from the fees we receive for servicing the loans, from the interest income on escrow deposits held on behalf of borrowers, and from other ancillary fees relating to servicing the loans. Servicing fees, which are based on servicing fee rates set at the time an investor agrees to purchase the loan and the cost of borrowing of the warehouse facility. On occasion, our cost of borrowing can exceed the note rate on the ~~unpaid principal balance of the~~ loan, ~~are generally paid monthly~~resulting in a net interest expense.

Our loan commitments and loans held for the duration of the loan. Our Fannie Mae and Freddie Mac servicing arrangements generally provide for prepayment fees to us in the event of a voluntary prepayment. For loans serviced outside of Fannie Mae and Freddie Mac, we typically do not share in any such payments.

Wesale are currently not exposed to unhedged interest rate risk during the loan commitment, closing, and delivery ~~process for our Agency activities.~~process. The sale or placement of each loan to an investor is negotiated ~~prior to establishing~~at the same time we establish the coupon rate for the loan. We also seek to mitigate the risk of a loan not closing. We have agreements in place with the Agencies that specify the cost of a failed loan delivery, also known as a pair off fee, in the event we fail to deliver the loan to the investor. To protect us against such pair off fees, we require a depositclosing by collecting good faith deposits from the ~~borrower at rate lock that is typically more than the potential pair off fee.~~borrower. The deposit is returned to the borrower only once the loan is closed. Any potential loss from a catastrophic change in the property condition while the loan is held for sale using warehouse facility financing is mitigated through property insurance equal to replacement cost. We are also protected contractually from an investor’s failure to purchase the loan. We have experienced an immaterial number of failed deliveries in our history and have incurred immaterial losses on such failed deliveries.

As part of our overall growth strategy, we are focused on significantly growing and investing in our small-balance multifamily lending platform, which involves a high volume of transactions with smaller loan balances. In ~~cases where~~support of this strategy, we ~~do not fund the loan, we act~~acquired GeoPhy as ~~a loan broker and retain the right to service some of the loans.~~ noted above.

Debt Brokerage

Our ~~loan originators~~mortgage bankers who focus on ~~loan~~debt brokerage are engaged by borrowers to work with a variety of institutional lenders and banks to find the most appropriate ~~loan instrument~~debt and/or equity solution for the ~~borrowers'~~borrowers’ needs. These ~~loans~~financing solutions are then funded directly by the ~~institutional~~ lender, and we receive an origination fee for ~~placing~~our services.

Property Sales

We offer property sales brokerage services to owners and developers of multifamily properties that are seeking to sell these properties. We seek to maximize proceeds and certainty of closure for our clients using our knowledge of the commercial real estate and capital markets and relying on our experienced transaction professionals. We receive a sales commission for brokering the sale of these multifamily assets on behalf of our clients, and we often are able to provide financing to the purchaser of the properties through our Agency or debt brokerage teams. Our property sales services are offered across the United States. We have increased the number of property sales brokers and the geographical reach of our investment sales platform over the past several years through hiring and acquisitions and intend to continue this expansion in support of our growth strategy. To further support our growth strategy, we acquired an investment sales brokerage company during the third quarter of 2022, which expands our investment sales service offerings to include land sales.

Housing Market Research and Real Estate Investment Banking Services

We own a 75% interest in a subsidiary doing business as Zelman & Associates (“Zelman”). Zelman is a nationally recognized housing market research and investment banking firm that will enhance the information we provide to our clients and increase our access to high-quality

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market insight in many areas of the housing market, including construction trends, demographics, housing demand and mortgage finance. Zelman generates revenues through the sale of its housing market research data and related publications to banks, investment banks and other financial institutions. Zelman is also a leading independent investment bank providing comprehensive M&A advisory services and capital markets solutions to our clients within the housing and commercial real estate sectors. As part of our growth strategy, we have increased the number of investment bankers to broaden our reach and expertise within the residential housing, building products, multifamily and commercial real estate sectors.

Appraisal and Valuation Services

We offer multifamily appraisal and valuation services though our subsidiary, Apprise by Walker & Dunlop (“Apprise”). Apprise leverages technology and data science to dramatically improve the consistency, transparency, and speed of multifamily property appraisals in the U.S. through our proprietary technology and provides appraisal services to a client list that includes many national commercial real estate lenders. Apprise also provides quarterly and annual valuation services to some of the largest institutional commercial real estate investors in the country. Prior to the GeoPhy acquisition, we and GeoPhy each owned a 50% interest in Apprise, and we accounted for the interest as an equity-method investment. Subsequent to the GeoPhy acquisition, Apprise is a wholly-owned subsidiary of Walker & Dunlop. We have increased the number of valuation specialists and the geographical reach of our appraisal platform over the past several years through hiring and recruiting in support of our long-term growth strategy.

Servicing & Asset Management

Servicing & Asset Management focuses on servicing and asset-managing the portfolio of loans we originate and sell to the Agencies, broker to certain life insurance companies, and originate through our principal lending and investing activities, and managing third-party capital invested in tax credit equity funds focused on the affordable housing sector and other commercial real estate. We earn servicing fees for overseeing the loans in our servicing portfolio and asset management fees for the capital invested in our funds. Additionally, we earn revenue through net interest income on the loans and the warehouse interest expense for loans held for investment. The primary services within SAM are described below.

Loan Servicing

We retain servicing rights and asset management responsibilities on substantially all of our Agency loan products that we originate and sell and generate cash revenues from the fees we receive for servicing the loans, from the placement fees on escrow deposits held on behalf of borrowers, and from other ancillary fees relating to servicing the loans. Servicing fees, which are based on servicing fee rates set at the time an investor agrees to purchase the loan and on the unpaid principal balance of the loan, are generally paid monthly for ~~those brokered~~the duration of the loan. Our Fannie Mae and Freddie Mac servicing arrangements generally provide for prepayment protection to us in the event of a voluntary prepayment. For loans serviced outside of Fannie Mae and Freddie Mac, we typically do not have similar prepayment protections. For most loans we service under the Fannie Mae Delegated Underwriting and Servicing (“DUS”) program, we ~~collect ongoing servicing~~are required to advance the principal and interest payments and guarantee fees for four months should a borrower cease making payments under the terms of their loan, including while that loan is in forbearance. After advancing for four months, we may request reimbursement by Fannie Mae for the principal and interest advances, and Fannie Mae will reimburse us for these advances within 60 days of the request. Under the Ginnie Mae program, we are obligated to advance the principal and interest payments and guarantee fees until the HUD loan is brought current, fully paid or assigned to HUD. We are eligible to assign a loan to HUD once it is in default for 30 days. If the loan is not brought current, or the loan otherwise defaults, we are not reimbursed for our advances until such time as we assign the loan to HUD or work out a payment modification for the borrower. For loans in default, we may repurchase those loans ~~remain in~~out of the Ginnie Mae security, at which time our advance requirements cease, and we may then modify and resell the loan or assign the loan back to HUD and be reimbursed for our advances. We are not obligated to make advances on the loans we service under the Freddie Mac Optigo® program and our bank and life insurance company servicing ~~portfolio. The servicing fees we typically earn on brokered loan transactions are substantially lower than the servicing fees we earn for servicing Agency loans.~~agreements.

We have risk-sharing obligations on substantially all loans we originate under the Fannie Mae DUS program. When a Fannie Mae DUS loan is subject to full risk-sharing, we absorb losses on the first 5% of the unpaid principal balance of a loan at the time of loss settlement, and above 5% we share a percentage of the loss with Fannie Mae, with our maximum loss capped at 20% of the original unpaid principal balance of the loan (subject to doubling or tripling if the loan does not meet specific underwriting criteria or if the loan defaults within 12 months of its sale to Fannie Mae). We may, however, request modified risk-sharing at the time of origination, which reduces our potential risk-sharing losses from the levels described above. We occasionally request modified risk-sharing based on the size of the loan. We may also request modified risk-sharing on large transactions if we do not believe that we are being fully compensated for the risks of the transactions or to manage overall risk levels. Our ~~current credit management policy is to cap each loan balance subject to~~ full risk-sharing ~~at $60.0 million. Accordingly, we generally elect~~is currently limited to ~~use modified risk-sharing for~~ loans ~~of more than $60.0~~up to $300 million, ~~in order~~which equates to ~~limit our~~a maximum loss ~~exposure on any one~~per loan ~~to $12.0~~of $60 million (such exposure would occur in the event that the underlying collateral is determined to be completely without value at the time of loss). ~~However,~~For loans in excess of $300 million, we receive modified risk-sharing. We also may request modified risk-sharing at the time of origination on ~~occasion elect to originate a loan with full risk sharing even when~~loans below $300 million, which reduces our potential risk-sharing losses from the ~~loan balance is greater than $60.0 million~~levels described above if we do not believe ~~the loan characteristics support such an approach.~~

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fully compensated for the risks of the transaction. The full risk-sharing limit prior to June 30, 2021 was less than $300 million. Accordingly, loans originated prior to then may have been subject to modified risk-sharing at much lower levels.

Our servicing fees for risk-sharing loans include compensation for the risk-sharing obligations and are larger than the servicing fees we would receive from Fannie Mae for loans with no risk-sharing obligations. We receive a lower servicing fee for modified risk-sharing than for full risk-sharing. For brokered loans we also service, we collect ongoing servicing fees while those loans remain in our servicing portfolio. The servicing fees we typically earn on brokered loan transactions are substantially lower than the servicing fees we earn on Agency loans.

~~We have~~Investment Management and Principal Lending and Investing

Investment Management—Through our subsidiary, Walker & Dunlop Investment Partners (“WDIP”), we function as the operator of a private commercial real estate investment advisor focused on the management of debt, preferred equity, and mezzanine equity investments in middle-market commercial real estate funds. WDIP’s current regulatory assets under management (“AUM”) of $1.4 billion primarily consist of six sources: Fund III, Fund IV, Fund V, Fund VI, and Fund VII (collectively, the “Funds”), and separate accounts managed primarily for life insurance companies. AUM for the Funds and for the separate accounts consists of both unfunded commitments and funded investments. Unfunded commitments are highest during the fundraising and investment phases. WDIP receives management fees based on both unfunded commitments and funded investments. Additionally, with respect to the Funds, WDIP receives a percentage of the return above the fund return hurdle rate specified in the fund agreements.

Through a joint venture with an ~~interim loan program offering~~affiliate of Blackstone Mortgage Trust, Inc., WDIP also offers short-term senior secured debt financing products that provide floating-rate, interest-only loans for terms of generally up to three years to experienced borrowers seeking to acquire or reposition multifamily properties that do not currently qualify for permanent financing (the “Interim Program”). We underwrite and originate all loans held for investment closed through the Interim Program and assume the full risk of loss on the loans while they are outstanding. In addition, we service and asset-manage loans originated through the Interim Program, with the ultimate goal of providing permanent Agency financing on the properties. We have not experienced any delinquencies or charged off any loans originated under the Interim Program, which began operations in 2012. As of September 30, 2017, we had seven loans held for investment under the Interim Program with an aggregate outstanding unpaid principal balance of $152.8 million.

During the second quarter of 2017, we formed a joint venture with an affiliate of one of the world’s largest owners of commercial real estate to originate, hold, and finance loans that previously met the criteria of the Interim Program (the “Interim Program JV” or the “joint venture”). The ~~Interim Program JV assumes full risk~~joint venture funds its operations using a combination of ~~loss while the loans it originates are outstanding.~~equity contributions from its owners and third-party credit facilities. We hold a 15% ownership interest in the Interim Program JV and are responsible for sourcing, underwriting, servicing, and asset-managing the loans originated by the joint venture. The ~~joint venture funds its operations using~~Interim Program JV assumes full risk of loss while the loans it originates are outstanding, while we assume risk commensurate with our 15% ownership interest.

Principal Lending and Investing—Using a combination of ~~equity contributions from its owners~~our own capital and ~~third-party credit facilities. We expect~~warehouse debt financing, we offer interim loans that ~~substantially all loans satisfying~~do not meet the criteria ~~for~~of the Interim Program ~~will be originated by the joint venture going forward; however, we may opportunistically originate~~JV (the “Interim Loan Program”). We underwrite, service, and asset-manage all loans ~~held for investment~~executed through the Interim Loan Program. We originate and hold these Interim Loan Program loans for investment, which are included on our balance sheet, and during the time that these loans are outstanding, we assume the full risk of loss. The ultimate goal of the Interim Loan Program is to provide permanent Agency financing on these transitional properties. We believe third-party capital solutions, in the ~~future. During the third quarter~~form of ~~2017,~~direct real estate investment or commingled funds, are a long-term growth opportunity for our servicing and asset management businesses, and we ~~sold $119.8 million of~~have steadily reduced our reliance on our own capital and warehouse debt financing to fund interim loans ~~from~~in order to focus on raising third-party capital solutions to meet market demand and pursue our ~~interim loan portfolio to the joint venture at par.~~ asset management growth strategy.

Affordable Housing Real Estate Services

We ~~do not expect to sell additional loans held for~~provide affordable housing investment ~~to the joint venture.~~

~~Through~~management and real estate services through our subsidiary, Walker & Dunlop ~~Investment Sales, LLC~~Affordable Equity (“~~WDIS”~~WDAE”), ~~we offer~~formerly known as Alliant Capital, Ltd. and its affiliates (“Alliant”). WDAE is one of the largest tax credit syndicators and affordable housing developers in the U.S. and provides alternative investment ~~sales brokerage~~management services focused on the affordable housing sector through LIHTC syndication, development of affordable housing projects through joint ventures, and affordable housing preservation fund management. Our affordable housing investment management team works with our developer clients to ~~owners~~identify properties that will generate LIHTCs and meet our affordable investors’ needs, and forms limited partnership funds (“LIHTC funds”) with third-party investors that invest in the limited partnership interests in these properties. WDAE serves as the general partner of these LIHTC funds, and it receives fees, such as asset management fees, and a portion of refinance and disposition proceeds as compensation for its work as the general partner of the fund. Additionally, WDAE earns a syndication fee from the LIHTC funds for the identification, organization, and acquisition of affordable housing projects that generate LIHTCs.

We invest, as the managing or non-managing member of joint ventures, with developers of ~~multifamily~~affordable housing projects that generate LIHTCs. These joint ventures earn developer fees and sale/refinance proceeds from the properties ~~that are seeking to sell these properties. Through our investment sales services,~~they develop, and we ~~seek to maximize proceeds and certainty of closure for our clients using our knowledge~~receive the portion of the ~~commercial real estate and capital markets and our experienced transaction professionals. Our~~economic benefits commensurate with its investment ~~sales services are offered primarily~~ in the ~~eastern United States,~~joint ventures. Additionally, WDAE also invests with third-party investors (either in a ~~particular focus in the southeastern United States. Our goal is to add other investment sales brokerage talent,~~fund or joint-venture structure) with the goal of ~~expanding~~preserving affordability on multifamily properties coming out of the LIHTC 15-year compliance period or on which market forces are unlikely to keep the properties affordable. Through these ~~brokerage services nationally.~~preservation funds, WDAE

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may receive acquisition and asset management fees and will receive a portion of the operating cash and capital appreciation upon sale through a promote structure.

Corporate

~~Under certain limited circumstances, we may make preferred equity investments in entities controlled by certain~~The Corporate segment consists primarily of our ~~borrowers that will assist those borrowers to acquire~~treasury operations and ~~reposition properties.~~other corporate-level activities. Our treasury operations include monitoring and managing our liquidity and funding requirements, including our corporate debt. The ~~terms of such~~major other corporate-level functions include our equity-method investments, ~~are negotiated with each investment. As of September 30, 2017, we have funded $41.2~~ ~~million of such investments. We expect these preferred equity investments to be repaid to us within the next two years.~~

~~During the first quarter of 2017, we~~ ~~completed the purchase of certain assets~~accounting, information technology, legal, human resources, marketing, internal audit, and assumption of certain liabilities of Deerwood Real Estate Capital, LLC (“Deerwood”), a regional commercial mortgage banking company based in the greater New York City area. Prior to the acquisition, Deerwood engaged in commercial real estate loan brokerage services across the United States, with a primary focus in the Greater New York City area. The acquisition expands our network of loan originators and provides further diversification to our loan origination platform.various other corporate groups.

Basis of Presentation

The accompanying condensed consolidated financial statements include all of the accounts of the Company and its ~~wholly owned~~wholly-owned subsidiaries, and all intercompany transactions have been eliminated. ~~Additionally, we consolidate the activities of WDIS and present the portion of WDIS that we do not control as~~ ~~Noncontrolling interests~~ ~~in the Condensed Consolidated Balance Sheets and~~ ~~Net income from noncontrolling interests~~ ~~in the Condensed Consolidated Statements of Income.~~

Critical Accounting ~~Policies~~Estimates

Our condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which ~~require~~requires management to make estimates based on certain judgments and assumptions that are inherently uncertain and affect reported amounts. The estimates and assumptions are based on historical experience and other factors management believes to be reasonable. Actual results may differ from those estimates and ~~assumptions. We believe~~assumptions and the use of different judgments and assumptions may have a material impact on our results. The following critical accounting estimates involve significant estimation uncertainty that may have or are reasonably likely to have a material impact on our financial condition or results of operations. Additional information about our critical accounting estimates and other significant accounting policies ~~represent~~are discussed in NOTE 2 of the ~~areas where more significant judgments and estimates are used in the preparation of our condensed~~ consolidated financial ~~statements.~~statements in our 2022 Form 10-K.

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Mortgage Servicing Rights (“MSRs”).MSRs are recorded at fair value at loan ~~sale or upon purchase. The fair value of MSRs acquired through a stand-alone servicing portfolio purchase is equal to the purchase price paid.~~sale. The fair value at loan sale (“MSR”) is based on estimates of expected net cash flows associated with the servicing rights and takes into consideration an estimate of loan prepayment. Initially, the fair value amount is included as a component of the derivative asset fair value at the loan commitment date. The estimated net cash flows from servicing, which includes assumptions for discount rate, placement fees, prepayment speed, and servicing costs, are discounted at a rate that reflects the credit and liquidity risk of the MSR over the estimated life of the underlying loan. The discount rates used throughout the periods presented for all MSRs ~~recognized at loan sale~~ were between ~~10-15%~~8-14% and varied based on the loan type. The life of the underlying loan is estimated giving consideration to the prepayment provisions in the ~~loan.~~loan and assumptions about loan behaviors around those provisions. Our model for MSRs assumes no prepayment prior to the expiration of the prepayment provisions and full prepayment of the loan at or near the point ~~where~~when the prepayment provisions have expired. The estimated net cash flows also include cash flows related to the future placement fees on deposit accounts associated with servicing the loans that are based on an earnings rate assumption. We include a servicing cost assumption to account for our expected costs to service a loan. The servicing cost assumption has had a de minimis impact on the estimate historically. We record an individual MSR asset ~~(or liability)~~ for each loan at loan sale. For purchased stand-alone servicing portfolios, we record and amortize a portfolio-level MSR asset based on the estimated remaining life of the portfolio using the prepayment characteristics of the portfolio. We have had only one stand-alone servicing portfolio purchase, which occurred in the second quarter of 2016.

The assumptions used to estimate the fair value of capitalized MSRs ~~at loan sale~~ are ~~based on internal models~~developed internally and are periodically compared to assumptions used by other market participants. Due to the relatively few transactions in the multifamily MSR market and the lack of significant changes in assumptions by market participants, we have experienced ~~little~~limited volatility in the assumptions ~~we use during the periods presented,~~historically, including the ~~most-significant~~ assumption –that most significantly impacts the estimate: the discount rate. ~~Additionally, we~~We do not expect to see ~~much~~significant volatility in the assumptions for the foreseeable future. ~~Management~~We actively ~~monitors~~monitor the assumptions used and ~~makes~~make adjustments to those assumptions when market conditions change, or other factors indicate such adjustments are warranted. ~~We carry originated~~Over the past two years, we have adjusted the placement fee assumption related to escrow deposits several times to reflect the current and ~~purchased MSRs~~expected future earnings rate projected for the life of the MSR. Additionally, we adjusted the discount rate at the ~~lower~~beginning of ~~amortized cost or fair value and evaluate the carrying value for impairment quarterly. We test for impairment on the purchased stand-alone servicing portfolio separately~~2021 to mirror changes observed from ~~our other MSRs. The MSRs from both stand-alone portfolio purchases and from loans sales are tested for impairment at the portfolio level.~~market participants. We engage a third party to assist in determining an estimated fair value of our existing and outstanding MSRs on at least a semi-annual basis.

Gains from mortgage banking activities income is recognized when we record a derivative asset upon the simultaneous commitments to originate a loan with a borrower and sell the loan to an investor. The commitment asset related to the loan origination is recognized at fair value, which reflects Changes in our discount rate assumptions may materially impact the fair value of the ~~contractual loan origination related fees and sale premiums, net of any co-broker fees, and the estimated fair value~~MSRs (NOTE 3 of the ~~expected net cash flows associated with~~consolidated financial statements details the ~~servicing~~portfolio-level impact of the loan, net of the estimated net future cash flows associated with any risk-sharing obligations (the “servicing component of the commitment asset”). Upon loan sale, we derecognize the servicing component of the commitment asset and recognize an MSR. All MSRs are amortized into expense over the estimated life of the loan and presented as a ~~component of~~ ~~Amortization and depreciation~~change in the ~~Condensed Consolidated Statements of Income.~~discount rate).

All MSRs are amortized using the interest method over the period that servicing income is expected to be received. For MSRs recognized at loan sale, the individual loan-level MSR is written off through a charge to ~~Amortization and depreciation~~ when a loan prepays, defaults, or is probable of default. For MSRs related to purchased stand-alone servicing portfolios, a constant rate of prepayments and defaults is included in the determination of the portfolio’s estimated life (and thus included as a component of the portfolio’s amortization). Accordingly, prepayments and defaults of individual MSRs do not change the level of amortization expense recorded for the portfolio unless the pattern of actual prepayments and defaults varies significantly from the estimated pattern. When such a significant difference in the pattern of estimated and actual prepayments and defaults occurs, we prospectively adjust the estimated life of the portfolio (and thus future amortization) to approximate the actual pattern observed. We have not adjusted the estimated life of our one purchased stand-alone servicing portfolio as the actual prepayment experience has not differed materially from the expected prepayment experience.

Allowance for ~~Risk-sharing~~Risk-Sharing Obligations. ~~The allowance~~This reserve liability (referred to as “allowance”) for risk-sharing obligations relates to our ~~at risk~~Fannie Mae at-risk servicing portfolio and is presented as a separate liability ~~within the Condensed Consolidated Balance Sheets. The amount of this allowance considers~~on our ~~assessment~~balance sheets. We record an estimate of the ~~likelihood~~loss reserve for the current expected credit losses (“CECL”) for all loans in our Fannie Mae at-risk servicing portfolio using the weighted-average remaining maturity method (“WARM”). WARM uses an average annual loss rate that contains loss content over multiple vintages and loan terms and is

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used as a foundation for estimating the ~~borrower or key principal(s),~~CECL reserve. The average annual loss rate is applied to the ~~risk characteristics~~estimated unpaid principal balance over the contractual term, adjusted for estimated prepayments and amortization to arrive at the CECL reserve for the entire current portfolio as described further below. We currently use one year for our reasonable and supportable forecast period (“forecast period”) as we believe forecasts beyond one year are inherently less reliable. During the forecast period we apply an adjusted loss factor based on economic and unemployment forecasts from a market survey and a blended loss rate from historical periods that we believe reflect the forecast from the survey. We revert to the historical loss rate over a one-year period on a straight-line basis. Over the past couple of years, the loss rate used in the forecast period has been updated to reflect our expectations of the ~~loan,~~economic conditions over the ~~loan’s risk rating,~~coming year in relation to the historical period. For example, in the first quarter of 2023, we updated the loss rate used in the forecast period from 2.1 basis points to 2.3 basis points. This change resulted in our forecast-period loss rate increasing from 1.8 times to 3.8 times the historical loss ~~experience, adverse situations affecting individual loans, the estimated disposition value~~rate factor to reflect our current expectations of the ~~underlying collateral,~~evolving and uncertain macroeconomic conditions facing the multifamily sector. We made multiple revisions to the loss rate used in the forecast period in the past, most notably related to the COVID-19 pandemic, and those changes in the loss rates have significantly impacted the estimate.

One of the key components of a WARM calculation is the runoff rate, which is the expected rate at which loans in the current portfolio will amortize and prepay in the future based on our historical prepayment and amortization experience. We group loans by similar origination dates (vintage) and contractual maturity terms for purposes of calculating the runoff rate. We originate loans under the DUS program with various terms generally ranging from several years to 15 years; each of these various loan terms has a different runoff rate. The runoff rates applied to each vintage and contractual maturity term are determined using historical data; however, changes in prepayment and amortization behavior may significantly impact the estimate. We have not experienced significant changes in the runoff rate since we implemented CECL in 2020.

The weighted-average annual loss rate is calculated using a 10-year look-back period, utilizing the average portfolio balance and settled losses for each year. A 10-year period is used as we believe that this period of time includes sufficiently different economic conditions to generate a reasonable estimate of expected results in the future, given the relatively long-term nature of the current portfolio. As the weighted-average annual loss rate utilizes a rolling 10-year look-back period, the loss rate used in the estimate will change as loss data from earlier periods in the look-back period continue to fall off and as new loss data are added. For example, in the first quarter of 2023, loss data from earlier periods in the look-back period with significantly higher losses fell off and were replaced with more recent loss data with significantly lower losses, resulting in the weighted-average annual loss rate changing from 1.2 basis points to 0.6 basis points. Changes in our expectations and forecasts have materially impacted, and in the future may materially impact, the estimate. In 2022, we had our first loss settlement in six years. We settled another immaterial loss in July 2023.

NOTE 4 of the consolidated financial statements outlines adjustments made in the loss rates used to account for the expected economic conditions as of a given period and the ~~level of risk sharing. Historically, initial loss recognition occurs at or before a loan becomes 60 days delinquent.~~ related impact on the estimate.

We ~~regularly monitor the allowance on all applicable loans and update loss estimates as current information is received.~~ ~~Provision (benefit) for credit losses~~ ~~in the Condensed Consolidated Statements of Income reflects the income statement impact of changes to both the allowance for risk-sharing obligations and allowance for loan losses.~~

~~We perform a quarterly evaluation of all of~~evaluate our risk-sharing loans on a quarterly basis to determine whether ~~a loss is probable. Our process for identifying which risk-sharing~~there are loans ~~may be~~that are probable of ~~loss consists of an assessment of several~~foreclosure. Specifically, we assess a loan’s qualitative and quantitative risk factors, ~~including~~such as payment status, property financial performance, local real estate market conditions, loan-to-value ratio, debt-service-coverage ratio, and property condition. When ~~we believe~~ a loan is determined to be probable of foreclosure ~~or when a loan is in foreclosure, we record an allowance for that loan (a “specific reserve”). The specific reserve is~~ based on these factors, we remove the ~~estimate of~~loan from the WARM calculation and individually assess the loan for potential credit loss. This assessment requires certain judgments and assumptions to be made regarding the property ~~fair value less selling~~values and property preservation costs and considers the loss-sharing requirements detailed below in the “Credit Quality and Allowance for Risk-Sharing Obligations” section. The estimate of property fair value at initial recognition of the allowance for risk-sharing obligations is based on ~~appraisals, broker opinions of~~

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~~value, or net operating income and market capitalization rates, whichever we believe is the best estimate of the net disposition value.~~ ~~The allowance for risk-sharing obligations for such loans is updated as any additional information is received until the loss is settled with Fannie Mae. The settlement with Fannie Mae is based on the~~other factors, which may differ significantly from actual ~~sales price of the property less selling and property preservation costs and considers the Fannie Mae loss-sharing requirements.~~results. Loss settlement with Fannie Mae has historically concluded within 18 to 36 months after foreclosure. Historically, the initial ~~specific~~collateral-based reserves have not varied significantly from the final settlement.

We actively monitor the judgments and assumptions used in our Allowance for Risk-Sharing Obligation estimate and make adjustments to those assumptions when market conditions change, or when other factors indicate such adjustments are ~~uncertain whether such~~warranted. We believe the level of Allowance for Risk-Sharing Obligation is appropriate based on our expectations of future market conditions; however, changes in one or more of the judgments or assumptions used above could have a ~~trend will continue~~significant impact on the estimate.

Contingent Consideration Liabilities. The Company typically includes an earnout as part of the consideration paid for acquisitions to align the long-term interests of the acquiree with the Company. These earnouts contain milestones for achievement, which typically are revenue, revenue-like, or productivity measurements. If the milestone is achieved, the acquiree is paid the additional consideration. Upon acquisition, the Company is required to estimate the fair value of the earnout and include that fair value measurement as a component of the total consideration paid in the ~~future.~~

~~In addition~~calculation of goodwill. The fair value of the earnout is recorded as a contingent consideration liability and is included within Other liabilities in the Consolidated Balance Sheet and adjusted to the ~~specific reserves discussed above, we also record an allowance~~estimated fair value at the end of each reporting period.

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The determination of the fair value of contingent consideration liabilities requires significant management judgment and unobservable inputs to (i) determine forecasts and scenarios of future revenues, net cash flows and certain other performance metrics, (ii) assign a probability of achievement for ~~risk-sharing obligations related~~the forecasts and scenarios, and (iii) select a discount rate. A Monte Carlo simulation analysis is used to ~~all risk-sharing loans on our watch list (“general reserves”). Such loans are not probable~~determine many iterations of ~~foreclosure but are probable of loss as the characteristics~~potential fair values. The average of these ~~loans~~iterations is then used to determine the estimated fair value. We typically obtain the assistance of third-party valuation specialists to assist with the fair value estimation. The probability of the earnout achievement is based on management’s estimate of the expected future performance and other financial metrics of each of the acquired entities, which are subject to significant uncertainty. Changes to the aforementioned inputs impact the estimate; for example, in the fourth quarter of 2022, we recorded a net $13.5 million reduction to the fair value of our contingent consideration liabilities based primarily on revised management forecasts of the financial performance of the entities over the remaining earnout period. During the third quarter of 2023, we recorded a reduction of $14.0 million to the fair value of our contingent consideration liabilities based on revised management forecasts, scenarios, and other valuation inputs.

The aggregate fair value of our contingent consideration liabilities as of September 30, 2023 was $161.2 million. This fair value represents management’s best estimate of the discounted cash payments that will be made in the future for all of our contingent consideration arrangements. The maximum remaining undiscounted earnout payments as of September 30, 2023 was $292.9 million. Over the past two years, we have made two large acquisitions that included significant amounts of contingent consideration to maximize alignment of the key principals and management teams. The earnouts completed prior to 2021 involved businesses that operated in our core debt financing business and involved substantially smaller amounts of contingent consideration as compared to the two aforementioned acquisitions.

Goodwill. As of September 30, 2023 and December 31, 2022, we reported goodwill of $949.7 million and $959.7 million, respectively. Goodwill represents the excess of cost over the identifiable net assets of businesses acquired. Goodwill is assigned to the reporting unit to which the acquisition relates. Goodwill is recognized as an asset and is reviewed for impairment annually as of October 1. Between annual impairment analyses, we perform an evaluation of recoverability, when events and circumstances indicate that it is ~~probable~~more-likely-than not that ~~these loans~~the fair value of a reporting unit is below its carrying value. Impairment testing requires an assessment of qualitative factors to determine if there are indicators of potential impairment, followed by, if necessary, an assessment of quantitative factors. These factors include, ~~some losses even though~~but are not limited to, whether there has been a significant or adverse change in the ~~loss cannot~~business climate that could affect the value of an asset and/or significant or adverse changes in cash flow projections or earnings forecasts. These assessments require management to make judgments, assumptions, and estimates about projected cash flows, discount rates and other factors.

We recorded goodwill impairment during the third quarter of 2023 in conjunction with the aforementioned reassessment of contingent consideration liabilities. The fair value adjustment reduced the contingent consideration liability associated with our 2022 acquisition of GeoPhy, and we recorded a corresponding and offsetting impairment to the goodwill associated with the acquisition since a substantial portion of the goodwill originally recorded was directly related to the contingent consideration liability. We attributed this goodwill impairment to one of the two reporting units to which the GeoPhy operations and goodwill are assigned, both of which are components of the Capital Markets segment. The period over which the contingent consideration can be ~~attributed~~earned (approximately two more years) is much shorter than the period of time considered in a fair value assessment of a reporting unit, and we believe the macroeconomic and commercial real estate market conditions that led to ~~a specific loan. For all other risk-sharing loans not on our watch list,~~the fair value adjustment related to the continent consideration liability are short term in nature. As of September 30, 2023, we continue to ~~carry~~believe the remaining goodwill at each of our other reporting units is not impaired. However, if the volatile macroeconomic and commercial real estate market conditions continue, the fair value of our contingent consideration liabilities may decline further in the coming quarters, resulting in a ~~guaranty obligation. We calculate~~corresponding and offsetting goodwill impairment similar to the ~~general reserves based on a migration analysis~~one we recorded during the three months ended September 30, 2023, as discussed above.

Overview of Current Business Environment

Higher and volatile interest rates continue to disrupt many sectors of the ~~loans on our historical watch lists, adjusted for qualitative factors.~~ ~~When we place a risk-sharing loan on our watch list, we cease to amortize~~capital markets, causing significant volatility and uncertainty, including: (a) disruption in the ~~guaranty obligation~~commercial real estate lending and ~~transfer~~transactions environment, (b) volatility in pricing of commercial real estate assets, (c) challenges in the ~~remaining unamortized balance~~banking sector which are significantly constraining the supply of ~~the guaranty obligation~~capital, and (d) uncertainty amongst owners, operators, and developers of commercial real estate assets. Due to the ~~general reserves. If~~disruption and uncertainties, our total transaction volumes decreased 54% from the first nine months of 2022, with the largest decreases in our debt brokerage (59%) and multifamily property sales (64%) executions. The decrease in total transaction volumes also included a ~~risk-sharing loan is subsequently removed from~~decrease in our ~~watch list due to improved financial performance, we transfer~~GSE lending (34%) and HUD originations (61%).

To combat the ~~unamortized balance~~high rate of ~~the guaranty obligation back to the guaranty obligation classification on the balance sheet and amortize the remaining unamortized balance evenly~~inflation over the ~~remaining estimated life.~~ ~~For each loan for which we have a risk-sharing obligation, we record one of~~past two years the following liabilities associated with that loan as discussed above: guaranty obligation, general reserve, or specific reserve. Although the liability type may change over the life of the loan, at any particular point in time, only one such liability is associatedFederal Reserve increased its target Federal Funds Rate by 5.25% since December 2021, with a ~~loan for which we have a risk-sharing obligation.~~ ~~The~~ ~~Allowance for risk-sharing obligations~~target range of 5.25% to 5.50% as of September 30, ~~2017 is based primarily~~2023. Following the September 2023 meeting, the Federal Reserve signaled a slower pace of increases, but that rates would need to remain higher for longer to bring inflation down toward the Federal Reserve’s long-term target. The actions of the Federal Reserve resulted in an increase in medium to long-term mortgage interest rates, which form the

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basis of most of our lending. The increase in the Federal Funds Rate has increased our placement fee revenue on ~~general reserves related~~escrow deposits and cash and cash equivalents but also increased our borrowing costs for both our warehouse lines and corporate debt.

As the Federal Reserve continues to combat inflation through higher interest rates and with the turmoil in the banking sector from earlier in the year, we expect commercial real estate debt and property sales transaction activity to be depressed in 2023 from the levels we achieved in 2022. Certain of our products are impacted more than others, with property sales volumes and debt brokerage executions in non-multifamily asset classes being impacted the most during the first nine months of the year, as banks and other third-party capital sources reduced their lending activities significantly and increased capital reserves. We also saw a significant slowdown in lending activity from the GSEs in the first quarter, as overall demand for new loans was down sharply as the market adjusted to the ~~loans on~~macroeconomic environment early in the ~~watch list~~year. However, as ~~of September 30, 2017.~~

~~Overview of Current Business Environment~~

~~The fundamentals of~~ the ~~commercial~~market adjusted, the GSEs saw a 68% and multifamily real estate market remain strong. Multifamily occupancy rates and effective rents continue to remain at historical highs based upon strong rental market demand while delinquency rates remain at historic lows, all of which aid loan performance and loan origination volumes due to81% increase in their importance to the cash flows of the underlying properties. Additionally, the single-family home ownership level remains at historical lows while new household formation grows, resulting in increased demand for multifamily housing. The Mortgage Bankers Association (“MBA”) recently reported that the amount of commercial and multifamily mortgage debt outstanding continued to growlending activity in the second ~~quarter~~and third quarters of ~~2017, reaching $3.1 trillion by the end of the second quarter of 2017, an increase of 1.6% from~~2023, respectively, compared to the first quarter of ~~2017. Multifamily mortgage debt outstanding rose~~2023. We expect the GSEs’ lending terms to ~~$1.2 trillion,~~remain competitive and supply much needed countercyclical capital to the multifamily sector for the rest of 2023. When the broader capital markets tighten, the GSEs historically increase their lending activity to provide liquidity to the multifamily borrowing community as they did throughout 2020 and the second half of 2021. As the largest GSE multifamily lender by volume in 2022, we remain well positioned to originate loans for the GSEs. As interest rates increased rapidly, and liquidity in the capital markets tightened, we have experienced declines in credit spreads to offset a portion of the interest rate increases on the total cost of borrowing. This has resulted in lower average servicing fees on our new GSE lending over the past year, and we do not anticipate that changing in the near term.

The Federal Housing Finance Agency (“FHFA”) establishes loan origination caps for both Fannie Mae and Freddie Mac each year. In November 2022, the FHFA established Fannie Mae’s and Freddie Mac’s 2023 loan origination caps at $75 billion each for all multifamily business, a 4% decrease from the 2022 caps, but an increase over actual 2022 lending volumes for both Agencies. During the three months ended September 30, 2023, Fannie Mae and Freddie Mac had multifamily origination volumes of ~~1.8%~~$16.5 billion, up 3.8%, and $13.3 billion, down 9.5%, from the ~~first quarter~~same period in 2022, respectively. During the nine months ended September 30, 2023, Fannie Mae and Freddie Mac had multifamily origination volumes of 2017. The majority of this growth in multifamily mortgage debt outstanding was related to Agency lending. The MBA also recently reported that multifamily loan originations during the second quarter of 2017 increased 21%$41.7 billion and $32.4 billion, respectively, down 17.6% and 26.9%, from the ~~second quarter~~nine months ended September 30, 2022, respectively, leaving a combined $75.9 billion of ~~2016~~available lending capacity for the remainder of 2023. A decline in our GSE originations negatively impacts our financial results, as our non-cash MSR revenues decrease disproportionately with debt financing volume and ~~25% from~~future servicing revenue would be constrained or decline.

Despite the ~~first quarter of 2017.~~

~~The increase~~higher interest rate environment and declines in ~~rental housing demand~~commercial real estate lending and ~~gaps~~property sales, macroeconomic conditions impacting multifamily property fundamentals remained healthy in housing production have led to continued steady rising rents in multifamily properties in most markets. The positive performance has boosted the value of many multifamily properties towards the high end of historical ranges. However, during the second quarter of 2017, the pace of multifamily rent growth slowed to the lowest rate in six years. This slower rate of multifamily rent growth continued into the third quarter of ~~2017,~~2023, with the national unemployment rate remaining low at 3.8% as ~~effective rents grew 0.9% from the second quarter~~ of ~~2017, as reported by Reis,~~September 2023. According to RealPage, a provider of commercial real estate data and ~~analytics. Additionally,~~analytics, vacancies have risen from their historical low of 2.4% in February 2022 and stabilized at 5.6% as of September 2023. The recent historically low vacancy rates were largely considered to be unsustainable from a long-term perspective, and the ~~level of multifamily properties under construction is at~~current vacancy rate represents a ~~nearly 40-year high, which has led~~return to normal that matches the pre-pandemic decade-long average. Despite the increase in vacancies and an increase in supply of multifamily units, national ~~vacancy rates~~rent growth remains flat indicating continued healthy demand for multifamily units.

Our multifamily property sales volumes decreased 64% in the first nine months of ~~40 basis points from~~2023. We continue to compete for market share in the ~~third quarter of 2016,~~multifamily property sales sector, as ~~reported by Reis, as newly constructed~~customers increasingly look to experienced brokers to maximize value in this uncertain environment. Long term, we believe the market fundamentals will continue to be positive for multifamily properties, ~~continue~~and we are beginning to ~~come online. We believe~~see an increase in assets brought to market as we enter the second half of the year. Over the last several years, household formation and a dearth of supply of entry-level single-family homes led to strong demand for rental housing in many geographical areas. Consequently, the fundamentals of the multifamily assets were strong prior to the pandemic, and, when combined with high occupancy and elevated real-estate prices, we expect that ~~the~~ market demand for multifamily ~~housing~~assets in the ~~upcoming quarters~~long-term will ~~absorb most of the capacity created by these properties currently under construction and that vacancy rates will remain at historic lows, making multifamily properties~~return as this asset class remains an attractive investment option.

~~In addition~~Our debt brokerage platform had lower volumes the first nine months of 2023 compared to same period in 2022 due to the ~~improved property fundamentals, for the last several years, the U.S. commercial~~volatile interest rate environment and ~~multifamily mortgage market has experienced historically low interest rates, leading many borrowers to seek refinancing prior to the scheduled maturity date~~constrained supply of ~~their loans.~~capital from banks, securitization markets, and other specialty finance lenders. As ~~borrowers have sought to take advantage of~~ the interest rate environment and ~~improved property fundamentals, the number of lenders and amount of~~banking sector begin to stabilize, we expect to see capital ~~available to lend have increased. According~~slowly return to the ~~Mortgage Bankers Association, commercial~~market.

As noted above, our debt financing operations with HUD declined compared to 2022. HUD loan volumes accounted for 1.4% and ~~multifamily loan maturities are expected~~2.0% of our total debt financing volumes for the three and nine months ended September 30, 2023, respectively, compared to ~~remain at elevated levels through~~2.8% and 2.6% of our total debt financing volumes for the ~~end~~three and nine months ended September 30, 2022, respectively. The decline in HUD debt financing volumes as a percentage of ~~2017. All~~our total debt financing volumes was driven by lower aggregate HUD lending volumes industry-wide, as the ongoing high interest-rate environment discussed above more acutely impacted the HUD product given the longer lead times associated with HUD executions.

Table of ~~these factors have benefited~~Contents

We entered into the Interim Program JV to expand our ~~origination volumes~~capacity to originate Interim Program loans beyond the use of our own balance sheet. Demand for transitional lending was strong over the ~~past~~last several ~~years. We expect the multifamily market to experience record origination volumes in 2017 due to the underlying strength of the multifamily market as labor markets are strong~~years and ~~demand increases~~drove increased competition from ~~new household formation. Competition for lending on commercial and multifamily~~lenders, specifically banks, private debt funds, mortgage real estate ~~among commercial real estate services firms, banks,~~investment trusts, and life insurance ~~companies, and the GSEs remains fierce.~~

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The Federal Reserve has raised its targeted Fed Funds Rate by 75 basis points over the past year. We have not experienced a significant decline in origination volume or profitability as long-term mortgage interest rates have remained at historically low levels as the yield curve has flattened throughout most of 2017. Reis recently reported that in spite of these recent interest-rate increases and slowing rent growth, multifamily cap rates decreased 30 basis points to 5.7% during the second quarter of 2017 from 6.0% in the fourth quarter of 2016. We cannot be certain that these trends will continue as the number, timing, and magnitude of any future increases bycompanies. Since the Federal Reserve ~~taken together with previous~~began increasing interest ~~rate increases and combined with other macroeconomic factors, may have a different effect on~~rates, the ~~commercial real estate market.~~

~~We are a market-leading originator with Fannie Mae and Freddie Mac, and the GSEs remain the most significant providers~~supply of capital to transitional lending decreased substantially due to constraints in lending from banks, as well as tightening credit standards for transitional assets. For the ~~multifamily market. The Federal Housing Finance Agency (“FHFA”) 2017 GSE Scorecard (“2017 Scorecard”) established Fannie Mae’s~~nine months ended September 30, 2023, we did not originate any Interim Program JV loans, compared to $86.3 million of originations for the same period last year. Given the volatile macroeconomic conditions discussed above, we continue to approach our lending activity on transitional assets cautiously. We expect our lending volumes for transitional assets to remain low until economic conditions normalize. As of September 30, 2023, all the loans in our portfolio and ~~Freddie Mac’s 2017~~in the Interim Program JV continue to perform according to their terms.

We provide alternative investment management services focused on the affordable housing sector through LIHTC syndication, joint venture development, and community preservation fund management through our subsidiary, WDAE. We remain the 6^th largest LIHTC syndicator despite the volatile and uncertain economic conditions mentioned above. We continue to approach the affordable housing space with a combined LIHTC syndication and affordable housing service offering that we believe will generate significant long-term financing, property sales, and syndication opportunities. Additionally, as part of FHFA’s 2023 loan origination caps of $150 billion announced in November 2022, at ~~$36.5 billion each for market-rate apartments (“2017 Caps”). Affordable housing loans, loans to small~~least 50% of the GSEs’ multifamily ~~properties, green, and manufactured housing rental community loans continue~~business is required to be ~~excluded from the 2017 Caps. Additionally, the definition of the~~targeted towards affordable ~~loan exclusion continues to encompass~~housing. We expect these initiatives will create additional growth opportunities for both WDAE and our debt financing and property sales teams focused on affordable housing, ~~in high- and very-high cost markets and to allow for an exclusion from~~as evidenced by the ~~2017 Caps for the pro-rata portion~~$461 million of any loan on a multifamily property that includes affordable units. The 2017 Scorecard provides the FHFA with the flexibility to review the estimated size of the multifamily loan origination market on a quarterly basis and proactively adjust the 2017 Caps upward should the market be larger than expected in 2017, which has not occurred in 2017 but did happen twice in 2016. The 2017 Scorecard also provides exclusions for loans to properties located in underserved markets including rural, small multifamily, and senior assisted living and for loans to finance energy or water efficiency improvements.

~~Our GSE loan origination volume~~equity syndicated by WDAE for the nine months ended September 30, ~~2017 increased 52% over the same period in 2016 as demand~~2023, putting them on pace for ~~multifamily lending remained strong as borrowers continue to focus on locking in interest rates ahead~~their strongest year of a potential rising interest rate environment. We expect the GSEs to maintain their historical market share in a multifamily market that is projected by Freddie Mac to be $290.0 billion in 2017. The GSEs reported a combined loan origination volume of $92.6 billion during the first nine months of 2017 compared to $79.9 billion during the first nine months of 2016; however, we do not expect the 2017 Caps to adversely impact our fourth quarter 2017 GSE loan origination volume. As seen from our GSE loan origination volumes for the nine months ended September 30, 2017, we believe our market leadership with the GSEs positions us to be a significant lender with the GSEs for the foreseeable future. Our originations with the GSEs are some of our most profitable executions as they provide significant non-cash gains from mortgage servicing rights, and cash revenue streams in the future. A decline in our GSE originations would negatively impact our financial results as our non-cash revenues would decrease disproportionately with loan origination volume and future servicing fee revenue would be constrained or decline. We do not know whether the FHFA will impose stricter limitations on GSE multifamily production volume beyond 2017.syndicated equity ever.

We continue to grow our capital markets platform to take advantage of the ongoing wave of loan maturities and gain greater access to capital, deal flow, and borrower relationships. The apparent appetite for debt funding within the broader commercial real estate market, along with the additions of brokered loan originators over the past several years, has resulted in significant growth in our brokered originations, as evidenced by the 89% year-over-year growth in brokered originations from the first nine months of 2016 to the first nine months of 2017. Our outlook for our capital markets platform is positive as we expect continued growth in non-bank commercial and multifamily markets in the near future.

Over the last few years, HUD has reduced the cost of borrowing, making HUD loans more competitive and returning them to relevance for our core multifamily borrowers in 2016 and into 2017, as evidenced by a 41% increase in HUD loan originations from the nine months ended September 30, 2016 to the nine months ended September 30, 2017. HUD remains a strong source of capital for new construction loans and healthcare facilities. We expect that HUD will continue to be a meaningful supplier of capital to our borrowers. We remain committed to the HUD multifamily business, adding resources and scale to our HUD lending platform, particularly in the area of seniors housing and skilled nursing, where HUD remains a dominant provider of capital in the current business environment.

Many of our borrowers continue to seek higher returns by identifying and acquiring the transitional properties that the Interim Program and Interim Program JV are designed to address. We created the Interim Program JV to both increase the overall capital available to the opportunity and dramatically expand our capacity to originate new interim loans. The demand for transitional lending has brought increased competition from lenders, specifically banks, mortgage REITs, and life insurance companies. All are actively pursuing transitional properties by leveraging their low cost of capital and desire for short-term, high-yield commercial real estate investments. We originated $189.6 million of interim loans in the first nine months of 2017 compared to $235.0 million in the first nine months of 2016.

Finally, as we have stated, multifamily property values are at near historic highs on the back of positive fundamentals across the industry. As a result, we saw increased activity within the investment sales business throughout 2016. ~~However, we experienced a decline in our investment sales volume year over year during the first half of 2017 due to a year-over-year decline of 16% in multifamily investment~~

2641

Table of Contents

sales transactions in the broader market. The investment sales market improved during the third quarter of 2017, with a 5% year-over-year increase in multifamily investment sales transactions. This improvement in the overall market, along with the additions we have made to our investment sales team over the past year, resulted in a 19% increase in our investment sales volume from the third quarter of 2016 to the third quarter of 2017. We continue our efforts to expand our investment sales platform more broadly across the United States and to increase the size of our investment sales team to capture what we believe will be strong multifamily investment sales activity over the coming quarters.

During the third quarter of 2017, Hurricanes Harvey and Irma made landfall in the United States, causing substantial damage to the affected areas. Although we have operations in affected areas, none of our operating assets was materially affected by the natural disasters. Located within the affected areas are multiple properties collateralizing loans for which we have risk-sharing obligations. Based on our preliminary assessment of these properties, we believe that few, if any, of these properties incurred significant damage, and those that did have adequate insurance coverage. Additionally, we have not experienced an increase in late payments from risk-sharing loans collateralized by properties in the affected areas. Accordingly, based on information currently available, we do not believe that these natural disasters will have a material impact on the ~~Allowance for risk-sharing obligations~~. The damage in the affected areas continues to be assessed. The impact to borrowers from such natural disasters may not be known by the Company for months after the occurrence of the disaster; therefore, over the coming months, we may experience an increase in late payments or defaults of loans for which we have risk-sharing obligations that are collateralized by properties in the affected areas.

Consolidated Results of Operations

~~Following~~The following is a discussion of our consolidated results of operations for the three and nine months ended September 30, ~~2017~~2023 and ~~2016.~~2022. The financial results are not necessarily indicative of future results. Our quarterly results have fluctuated in the past and are expected to fluctuate in the future, reflecting the ~~interest-rate~~interest rate environment, the volume of transactions, business acquisitions, regulatory actions, industry trends, and general economic conditions. ~~Please refer to the~~The table below ~~which~~ provides supplemental data regarding our financial performance.

SUPPLEMENTAL OPERATING DATA

CONSOLIDATED


	For the three months ended						For the nine months ended
	September 30,						September 30,
(dollars in thousands; except per share data)	2023			2022			2023			2022
Transaction Volume:
Components of Debt Financing Volume
Total Debt Financing Volume	$	6,047,394		$	11,925,593		$	17,781,027		$	35,711,568
Property Sales Volume		2,508,073			4,993,615			5,907,138			16,417,367
Total Transaction Volume	$	8,555,467		$	16,919,208		$	23,688,165		$	52,128,935

Key Performance Metrics:
Operating margin		10	%		17	%		13	%		22	%
Return on equity		5			11			6			14
Walker & Dunlop net income	$	21,458		$	46,833		$	75,758		$	172,328
Adjusted EBITDA⁽¹⁾		74,065			74,990			212,541			232,470
Diluted EPS		0.64			1.40			2.25			5.13

Key Expense Metrics (as a percentage of total revenues):
Personnel expenses		51	%		50	%		50	%		48	%
Other operating expenses		11			11			11			10


	As of September 30,
Managed Portfolio:	2023		2022
Total Servicing Portfolio	$	128,959,434	$	120,778,424
Assets under management		17,334,877		17,017,355
Total Managed Portfolio	$	146,294,311	$	137,795,779

For the three months ended

For the nine months ended

September 30,

September 30,

(dollars in thousands)

2017

2016


2017

2016

Transaction Volume:

Loan Origination Volume by Product Type

Fannie Mae

$
1,389,451

$
1,565,915

$
5,467,228

$
4,727,563

Freddie Mac

4,040,985

1,296,045

6,315,369

3,002,305

Ginnie Mae - HUD

263,714

382,602

874,727

618,737

Brokered (1)

1,893,047

922,969

5,172,263

2,884,392

Interim Loans

26,375

76,475

189,562

235,040

Total Loan Origination Volume

$
7,613,572

$
4,244,006

$
18,019,149

$
11,468,037

Investment Sales Volume

935,960

788,232

1,574,515

1,569,177

Total Transaction Volume

$
8,549,532

$
5,032,238

$
19,593,664

$
13,037,214

Key Performance Metrics:

Operating margin

30
%

31
%

33
%

31
%
Return on equity

20

22

23

20

Walker & Dunlop net income

$
34,378

$
29,628

$
112,166

$
77,107

Adjusted EBITDA (2)

45,000

36,227

146,293

95,734

Diluted EPS

1.06

0.96

3.49

2.51

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

Personnel expenses

44
%

42
%

39
%

39
%
Other operating expenses

6

6

7

7

Key Revenue Metrics (as a percentage of loan origination volume):

Origination related fees

0.79
%

1.23
%

0.94
%

1.06
%
Gains attributable to MSRs

0.67

1.14

0.78

1.11

Gains attributable to MSRs, as a percentage of Agency loan origination volume (3)

0.89

1.49

1.11

1.53

~~Table of Contents~~

~~SUPPLEMENTAL OPERATING DATA - continued~~

As of September 30,

Servicing Portfolio by Product:

2017

2016

Fannie Mae

$
30,005,596

$
25,875,684

Freddie Mac

25,930,819

19,702,477

Ginnie Mae - HUD

8,878,899

9,254,830

Brokered (1)

5,170,479

4,024,490

Interim Loans

298,889

264,508

Total Servicing Portfolio

$
70,284,682

$
59,121,989

Key Servicing Metrics (end of period):

Weighted-average servicing fee rate (basis points)

25.7

25.6

Weighted-average remaining term (years)

9.9

10.5

(1)

~~Brokered transactions for commercial mortgage backed securities, life insurance companies, commercial banks, and other capital sources.~~

~~(2)~~

This is a non-GAAP financial measure. For more information on adjusted EBITDA, refer to the section below titled “Non-GAAP Financial ~~Measures.~~Measure.”

~~(3)~~

~~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.~~

Table of Contents

The following tables present a period-to-period ~~comparison~~comparisons of our financial results for the three and nine months ended September 30, ~~2017~~2023 and ~~2016.~~2022.

FINANCIAL RESULTS – THREE MONTHS

For the three months ended

September 30,

Dollar

Percentage

(dollars in thousands)

2017

2016

Change

Change

Revenues

Gains from mortgage banking activities

$
111,304

$
100,630

$
10,674

11
%

Servicing fees

44,900

37,134

7,766

21

Net warehouse interest income

5,358

5,614

(256)

(5)

Escrow earnings and other interest income

5,804

2,630

3,174

121

Other

12,370

8,778

3,592

41

Total revenues

$
179,736

$
154,786

$
24,950

16

Expenses

Personnel

$
78,469

$
64,377

$
14,092

22
%

Amortization and depreciation

32,343

29,244

3,099

11

Provision for credit losses

9

283

(274)

(97)

Interest expense on corporate debt

2,555

2,485

70

3

Other operating expenses

11,664

9,685

1,979

20

Total expenses

$
125,040

$
106,074

$
18,966

18

Income from operations

54,696

48,712

5,984

12

Income tax expense

19,988

18,851

1,137

6

Net income before noncontrolling interests

$
34,708

$
29,861

$
4,847

16

Less: net income from noncontrolling interests

330

233

97

42

Walker & Dunlop net income

$
34,378

$
29,628

$
4,750

16

CONSOLIDATED


	For the three months ended
	September 30,				Dollar		Percentage
(dollars in thousands)	2023		2022		Change		Change
Revenues
Loan origination and debt brokerage fees, net	$	56,149	$	90,858	$	(34,709)	(38)	%
Fair value of expected net cash flows from servicing, net		35,375		55,291		(19,916)	(36)
Servicing fees		79,200		75,975		3,225	4
Property sales broker fees		16,862		30,308		(13,446)	(44)
Investment management fees		13,362		16,301		(2,939)	(18)
Net warehouse interest income (expense)		(2,031)		3,980		(6,011)	(151)
Placement fees and other interest income		43,000		18,129		24,871	137
Other revenues		26,826		24,769		2,057	8
Total revenues	$	268,743	$	315,611	$	(46,868)	(15)

Expenses
Personnel	$	136,507	$	157,059	$	(20,552)	(13)	%
Amortization and depreciation		57,479		59,846		(2,367)	(4)
Provision (benefit) for credit losses		421		1,218		(797)	(65)
Interest expense on corporate debt		17,594		9,306		8,288	89
Other operating expenses		28,529		33,991		(5,462)	(16)
Total expenses	$	240,530	$	261,420	$	(20,890)	(8)
Income from operations	$	28,213	$	54,191	$	(25,978)	(48)
Income tax expense		7,069		7,532		(463)	(6)
Net income before noncontrolling interests	$	21,144	$	46,659	$	(25,515)	(55)
Less: net income (loss) from noncontrolling interests		(314)		(174)		(140)	80
Walker & Dunlop net income	$	21,458	$	46,833	$	(25,375)	(54)

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Table of Contents

FINANCIAL RESULTS – NINE MONTHS

For the nine months ended

September 30,

Dollar

Percentage

(dollars in thousands)

2017

2016

Change

Change

Revenues

Gains from mortgage banking activities

$
309,912

$
249,406

$
60,506

24
%

Servicing fees

129,639

101,554

28,085

28

Net warehouse interest income

17,778

15,925

1,853

12

Escrow earnings and other interest income

13,610

6,225

7,385

119

Other

33,716

23,775

9,941

42

Total revenues

$
504,655

$
396,885

$
107,770

27

Expenses

Personnel

$
198,157

$
154,365

$
43,792

28
%

Amortization and depreciation

97,541

80,824

16,717

21

Provision (benefit) for credit losses

(216)

166

(382)

(230)

Interest expense on corporate debt

7,401

7,419

(18)

(0)

Other operating expenses

34,871

29,511

5,360

18

Total expenses

$
337,754

$
272,285

$
65,469

24

Income from operations

166,901

124,600

42,301

34

Income tax expense

54,621

47,295

7,326

15

Net income before noncontrolling interests

$
112,280

$
77,305

$
34,975

45

Less: net income from noncontrolling interests

114

198

(84)

(42)

Walker & Dunlop net income

$
112,166

$
77,107

$
35,059

45

~~Overview~~CONSOLIDATED


	For the nine months ended
	September 30,				Dollar		Percentage
(dollars in thousands)	2023		2022		Change		Change
Revenues
Loan origination and debt brokerage fees, net	$	168,201	$	275,773	$	(107,572)	(39)	%
Fair value of expected net cash flows from servicing, net		107,446		159,970		(52,524)	(33)
Servicing fees		232,027		222,916		9,111	4
Property sales broker fees		38,831		100,092		(61,261)	(61)
Investment management fees		44,844		47,345		(2,501)	(5)
Net warehouse interest income (expense)		(3,556)		14,021		(17,577)	(125)
Placement fees and other interest income		109,310		26,683		82,627	310
Other revenues		83,001		129,103		(46,102)	(36)
Total revenues	$	780,104	$	975,903	$	(195,799)	(20)

Expenses
Personnel	$	388,425	$	469,608	$	(81,183)	(17)	%
Amortization and depreciation		170,737		177,101		(6,364)	(4)
Provision (benefit) for credit losses		(11,088)		(13,120)		2,032	(15)
Interest expense on corporate debt		49,878		22,123		27,755	125
Other operating expenses		83,322		102,400		(19,078)	(19)
Total expenses	$	681,274	$	758,112	$	(76,838)	(10)
Income from operations	$	98,830	$	217,791	$	(118,961)	(55)
Income tax expense		24,695		46,495		(21,800)	(47)
Net income before noncontrolling interests	$	74,135	$	171,296	$	(97,161)	(57)
Less: net income (loss) from noncontrolling interests		(1,623)		(1,032)		(591)	57
Walker & Dunlop net income	$	75,758	$	172,328	$	(96,570)	(56)

~~For both the three and nine~~

Overview

Three months ended September 30, ~~2017, the increases~~2023 compared to three months ended September 30, 2022

The decrease in revenues ~~were~~was primarily ~~attributable to increases in gains from mortgage banking activities and servicing fees. The increases in gains from mortgage banking activities were largely related to the substantial increase~~driven by decreases in loan origination ~~volume. The~~and debt brokerage fees, net (“origination fees”), the fair value of expected net cash flows from servicing, net (“MSR income”), property sales broker fees, investment management fees, and net warehouse interest income (expense), partially offset by increases in servicing fees, ~~were mainly~~placement fees and other interest income, and other revenues. Origination fees and MSR income decreased largely as a result of a 49% decline in overall debt financing volume. Property sales broker fees decreased primarily due to a 50% decline in property sales volume. Investment management fees decreased primarily as a result of a decline in LIHTC investment management fees. Net warehouse interest income (expense) decreased from a net revenue position in 2022 to a net expense position in 2023 due to short-term rates remaining higher than long-term rates (“inverted yield curve”) during the third quarter of 2023. Servicing fees increased largely from an increase in the average servicing portfolio outstanding. Placement fees and other interest income increased primarily as a result of a higher placement fee rate due to rising short-term interest rates. Other revenues increased largely as a result of an increase in assumption fee income.

The decrease in expenses was due to decreases in personnel costs, amortization and depreciation, and other operating expenses, partially offset by an increase in interest expense on corporate debt. Personnel costs decreased largely due to decreases in commission costs as a result of our lower transaction volumes. Amortization and depreciation expense decreased primarily due to a decline in write-offs of MSRs due to lower prepayments in the servicing portfolio. Other operating expenses decreased as a direct result of our cost-reduction initiatives across a variety of general and administrative cost categories. Interest expense on corporate debt increased due to increases in (i) the ~~average servicing portfolio. Our revenues also benefitted from the increases in~~interest rate as our corporate debt’s floating rate is tied to short-term interest rates, ~~over~~(ii) the ~~past 12 months, which increased our escrow interest earnings when compared to the same periods last year. The increases in expenses were primarily the result~~outstanding principal balance of ~~increased (i) commission costs due to an increase in origination fees, (ii) salaries expense due to rises in average headcount,~~corporate debt, and (iii) ~~bonus expense due to~~ the ~~Company’s strong financial performance and the rises in average headcount. Headcount increased due to acquisition activity and hiring to support the growth~~principal balance of our ~~business. Additionally, amortization and depreciation expense increased~~corporate debt subject to floating interest rates, as we replaced the ~~average MSR balances increased period over period.~~fixed-rate debt at one of our subsidiaries with floating-rate debt.

~~Revenues~~

~~Gains from Mortgage Banking Activities.~~ ~~The following tables provide additional information that helps explain changes in gains from mortgage banking activities period over period:~~

Loan Origination Volume by Product Type

For the three months ended

For the nine months ended

September 30,

September 30,

2017

2016

2017

2016

Fannie Mae

18
%

37
%

30
%

41
%
Freddie Mac

53

31

35

26

Ginnie Mae - HUD

3

9

5

5

Brokered

26

21

29

26

Interim Loans (1)

-

2

1

2

~~(1)~~

~~Interim loan origination volume as a percentage of total loan origination volume for the three months ended September 30, 2017 was less than 1%.~~

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Table of Contents

Gains from Mortgage Banking Activities Detail

For the three months ended

For the nine months ended

September 30,

September 30,

(dollars in thousands)
2017

2016

2017

2016

Origination Fees
$
60,523

$
52,401

$
168,927

$
121,682

Dollar Change
$
8,122

$
47,245

Percentage Change

15
%

39
%

MSR Income (1)
$
50,781

$
48,229

$
140,985

$
127,724

Dollar Change
$
2,552

$
13,261

Percentage Change

5
%

10
%

Origination Fee Rate (2) (basis points)

79

123

94

106

Basis Point Change

(44)

(12)

Percentage Change

(36)
%

(11)
%

MSR Rate (3) (basis points)

67

114

78

111

Basis Point Change

(47)

(33)

Percentage Change

(41)
%

(30)
%

Agency MSR Rate (4) (basis points)

89

149

111

153

Basis Point Change

(60)

(42)

Percentage Change

(40)
%

(27)
%

~~(1)~~

~~The fair value of the expected net cash flows associated with the servicing of the loan, net of any guaranty obligations retained.~~

~~(2)~~

~~Origination fees as a percentage of total loan origination volume~~.

~~(3)~~

~~MSR~~

Income Tax Expense. The decrease in income tax expense primarily relates to a 48% decrease in income ~~as a percentage of total loan origination volume~~.

~~(4)~~

~~MSR income as a percentage of Agency loan origination volume~~.

~~Gains~~ from mortgage banking activities reflect the fair value of loan origination fees, the fair value of loan premiums, net of any co-broker fees, and MSR income. For both the three and nine months ended September 30, 2017, the increases in origination fees and MSR income wereoperations, largely ~~attributable to the substantial increases in loan origination volume, partially~~ offset by ~~decreases in the origination fee rate and the Agency MSR rate.~~

~~For~~a one-time tax benefit during the three months ended September 30, ~~2017,~~2022 totaling $6.3 million resulting from (i) the ~~decrease~~dissolution of a joint venture that we acquired full ownership of earlier in ~~the origination fee rate was principally due~~2022 and (ii) intellectual property (“IP”) transfer tax related to the ~~increase in brokered loan origination volume~~IP intangible assets we acquired as ~~a percentage~~part of ~~total loan origination volume and~~ the ~~origination of a $1.9 billion portfolio of Freddie Mac loans, the largest transaction in the Company’s history with~~2022 GeoPhy acquisition. There was no comparable ~~activity in 2016.~~ We receive lower origination fees on brokered loans than we do for Agency loans. Additionally, we generally receive lower origination fee rates on large Agency portfolio transactions than we do on typical Agency transactions. The decrease in the Agency MSR rate was primarily attributable to ~~the increase~~ in Freddie Mac loan origination volume coupled with the decrease in Fannie Mae loan origination volume and a 100% increase in floating-rate loan origination volume. Freddie Mac loan origination volume as a percentage of total loan origination volume increased significantly from 2016 to 2017 as seen in the table above. Additionally, Freddie Mac loan origination volume as a percentage of Agency loan origination volume increased from 40%one-time tax benefit during 2016 to 71% during 2017. We record relatively less MSR income on floating-rate loan originations as their estimated life is substantially shorter than fixed-rate loan originations. We record less MSR income on Freddie Mac loans as their servicing fees are less than other Agency products.

For the nine months ended September 30, 2017, the decrease in the origination fee rate was principally due to the increase in brokered loan origination volume as a percentage of total loan origination volume and an increase in the number of portfolio transactions from 2016 to 2017, including the aforementioned origination of a $1.9 billion portfolio of Freddie Mac loans in the third quarter of 2017. ~~The decrease in the Agency MSR rate was primarily attributable to~~ ~~the increase~~ in Freddie Mac loan origination volume as a percentage of Agency loan origination volume and a 68% increase in floating-rate loan origination volume. Freddie Mac loan origination volume as a percentage of total loan origination volume increased from 2016 to 2017 as seen in the table above. Additionally, Freddie Mac loan origination volume as a percentage of Agency loan origination volume increased from 36% during 2016 to 50% during 2017.

~~See the “Overview of Business Environment” section above for a detailed discussion of the factors driving the increases in loan origination volumes~~.

~~Servicing Fees.~~ For both the three and nine months ended September 30, 2017, the increases were primarily attributable to increases in the average servicing portfolio from 2016 to 2017 as shown below due to new loan originations and relatively few payoffs. ~~Additionally,~~

~~Table of Contents~~

~~the servicing portfolio’s weighted average servicing fee increased as shown below due to an increase in the Fannie Mae servicing portfolio~~.

Servicing Fees Details

For the three months ended

For the nine months ended

September 30,

September 30,

(dollars in thousands)
2017

2016

2017

2016

Average Servicing Portfolio
$
67,685,503

$
58,181,130

$
65,438,795

$
53,820,305

Dollar Change
$
9,504,373

$
11,618,490

Percentage Change

16
%

22
%

Average Servicing Fee (basis points)

26.3

25.3

26.3

25.1

Basis Point Change

1.0

1.2

Percentage Change

4
%

5
%

~~Net Warehouse Interest Income.~~ For the nine months ended September 30, 2017, the increase was primarily related to a $3.0 million increase in net warehouse interest income from loans held for investment (“LHFI”), partially offset by a decrease in net warehouse interest income from loans held for sale (“LHFS”) of $1.2 million. ~~The increase in net warehouse interest income from loans held for investment was due to increases in the average outstanding balance and net spread period over period as shown below~~. The decrease in net warehouse interest income from loans held for sale is primarily attributable to a decrease in the net spread of loans held for sale in 2017 compared to 2016 as shown below. The decrease in the net spread was a result of a greater increase in the short-term interest rates on which our borrowings are based than in the long-term interest rates on which the majority of our loans held for sale are based. If the yield curve continues to flatten following future increases in short-term rates, a tightening of the net spread may continue. We expect to see a decrease in net warehouse interest income from LHFI going forward as most of our future Interim Program loan originations are expected to be completed by the Interim Program JV, reducing the balance of LHFI as the existing portfolio matures. This decrease in net warehouse interest income from LHFI is expected to be partially offset by our portion of the net income generated by the Interim Program JV.

Net Warehouse Interest Income Details

For the three months ended

For the nine months ended

September 30,

September 30,

(dollars in thousands)
2017

2016

2017

2016

Average LHFS Outstanding Balance
$
1,633,976

$
1,366,356

$
1,289,861

$
1,212,304

Dollar Change
$
267,620

$
77,557

Percentage Change

20
%

6
%

LHFS Net Spread (basis points)

85

102

99

119

Basis Point Change

(17)

(20)

Percentage Change

(17)
%

(17)
%

Average LHFI Outstanding Balance
$
192,244

$
240,431

$
254,421

$
214,608

Dollar Change
$
(48,187)

$
39,813

Percentage Change

(20)
%

19
%

LHFI Net Spread (basis points)

389

356

429

320

Basis Point Change

33

109

Percentage Change

9
%

34
%

~~Escrow Earnings and Other Interest Income.~~ ~~For both the three and nine months ended September 30, 2017, t~~he increases were due to increases in both the average balances of escrow accounts and the average earnings rates from 2016 to 2017. The increases in the average balances were due to the increases in the average servicing portfolio. The increases in the average earnings rates were due to the increases in short-term interest rates over the past 12 months as discussed above in the “Overview of Business Environment” section.

~~Other Revenues.~~ ~~For both the three and nine months ended September 30, 2017, t~~he increases were primarily attributable to increases in investment sales placement fees and prepayment fee income from 2016 to 2017. The increase in investment sales placement fees for the three-month period was largely driven by the increase in investment sales volume period over period. The increase in investment sales placement fees for the year-to-date period was principally attributable to an increase in the average placement fee. The increases in prepayment fee income were due to increases in the payoff of prepayment-protected loans.

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~~Expenses~~

~~Personnel.~~ ~~For~~ the three months ended September 30, ~~2017, the increase was principally the result of higher loan originator commission costs and increased salaries and bonus expenses.~~ ~~Commission costs increased substantially due~~2023.

Nine months ended September 30, 2023 compared to ~~the large increase in origination fee income. Salaries expense increased~~ ~~due to a rise in average headcount~~ ~~from 521 in 2016 to 609 in 2017~~ ~~as a result of acquisitions and organic growth of the Company to support our expanding operations~~. ~~The increase in bonus expense is due to the Company’s improved financial performance year over year and the increase in the average headcount.~~

~~For the~~ nine months ended September 30, ~~2017, the increase~~2022

The decrease in revenues was ~~largely the result of higher commission costs and increased salaries expense, bonus expense, and stock compensation expense.~~ ~~Commission costs increased substantially due to the large increase~~primarily driven by decreases in origination ~~fee~~fees, MSR income, property sales broker fees, net warehouse interest income (expense), and other revenues, partially offset by increases in servicing fees and placement fees and other interest income. ~~Salaries expense increased~~ ~~due to a rise in average headcount~~ ~~from 511 in 2016 to 591 in 2017~~ ~~as a result of acquisitions~~Origination fees and ~~organic growth of the Company to support our expanding operations~~. ~~The increase in bonus expense is due to the Company’s improved financial performance year over year and the increase in the average headcount. Finally, stock compensation expense increased~~MSR income decreased largely as a result of ~~performance-based stock awards. The costs associated with these awards increased~~a 50% decline in overall debt financing volume. Property sales broker fees decreased primarily due to a 64% decline in property sales volume. Net warehouse interest income (expense) decreased from a net revenue position in 2022 to a net expense position in 2023 due to the ~~Company’s improved financial performance year over year.~~

~~Amortization and Depreciation.~~ ~~For both~~inverted yield curve throughout 2023. Other revenues decreased primarily due to a $39.6 million one-time gain from the ~~three and nine months ended September 30, 2017, the increases were primarily attributable to loan origination~~revaluation of our previously held equity-method investment in Apprise in the first quarter of 2022, with no comparable activity ~~and the resulting growth~~in 2023, combined with a decline in prepayment fees. Servicing fees increased largely from an increase in the average ~~MSR balances during the three~~servicing portfolio outstanding. Placement fees and ~~nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016. Over the past 12 months, we have added $91.2 million~~other interest income increased primarily as a result of ~~MSRs, net of write offs~~a higher placement fee rate due to ~~prepayment.~~rising short-term interest rates.

~~Income Tax Expense.~~ ~~For the three months ended September 30, 2017, the increase is primarily related~~The decrease in expenses was due to ~~the change~~decreases in ~~income from operations period over period,~~personnel costs, amortization and depreciation, and other operating expenses, partially offset by an increase in ~~excess tax benefits from share-based payments that reduced income tax~~interest expense ~~by an additional $0.3 million~~on corporate debt. Personnel costs decreased, largely due to decreases in commission costs as a result of our lower transaction volumes. Amortization and depreciation decreased, largely due to a ~~decrease~~decline in write-offs of MSRs due to lower prepayments in the ~~estimated annual effective tax rate.~~

~~For the nine months ended September 30, 2017, the substantial decrease in the effective income tax rate was related to excess tax benefits and a decrease in the estimated annual effective tax rate.~~ Excess tax benefits recognized during the nine months ended September 30, 2016 reduced income tax expense by $0.5 million compared to $9.1 million during the same period in 2017. The reduction to income tax expense due to excess tax benefits in 2017 was substantially largerservicing portfolio. Other operating expenses decreased primarily as a result of the ~~significant increase~~write off of unamortized debt premium as we paid off a note payable at one of our subsidiaries, and other decreases as a result of our cost-reduction initiatives. Interest expense on corporate debt increased due to increases in (i) the interest rate as our ~~stock price over~~corporate debt’s floating rate is tied to short-term interest rates, (ii) the ~~past year~~outstanding principal balance of corporate debt, and ~~an increase~~(iii) the principal balance of our corporate debt subject to floating interest rates, as we replaced the fixed-rate debt at one of our subsidiaries with a floating-rate debt.

Income Tax Expense. The decrease in ~~the number of shares that vested in 2017, reducing the effective~~income tax ~~rate significantly. The increase in the number of shares that vested was largely attributable~~expense primarily relates to a ~~performance share plan that vested~~55% decrease in ~~the first quarter of 2017 as we achieved each of the performance targets at or near the high end of the payout range. The performance share plan vesting was the first of its kind~~income from operations, partially offset by a $3.3 million decrease in ~~the Company’s history. No other performance share plans are scheduled to vest in 2017 or 2018. We expect the reduction to income taxes related to~~realizable excess tax benefits ~~to be substantially less~~and the one-time tax benefit recognized in 2022 and not 2023 as more fully described above.

A discussion of the financial results for ~~the remainder of 2017 than it was for the first nine months of 2017.~~our segments is included further below.

Non-GAAP Financial ~~Measures~~Measure

To supplement our financial statements presented in accordance with GAAP, we use 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,~~corporate debt, and amortization and depreciation, adjusted for provision (benefit) for credit losses, net of write-offs, stock-based incentive compensation charges, the fair value of expected net cash flows from servicing, net, the write off of the unamortized balance of premium associated with the repayment of a portion of our corporate debt, goodwill impairment, and ~~non-cash revenues such~~the gain from revaluation of a previously held equity-method investment. The goodwill impairment that is incorporated into the calculation of Adjusted EBITDA includes goodwill impairment resulting from our annual goodwill impairment test and the quarterly evaluations of recoverability. Goodwill impairment that results from a downward fair value adjustment to contingent consideration liabilities is not included as ~~gains attributable~~an adjustment to ~~MSRs and unrealized gains and losses from commercial mortgage backed securities (“CMBS”) activities.~~GAAP net income to arrive at Adjusted EBITDA, since the goodwill impairment is offset by the downward fair value adjustment to the contingent consideration liability, resulting in no net impact to GAAP net income. 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.

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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 ~~adjusted EBITDA,~~this non-GAAP measure, when read in conjunction with our GAAP financials, provides useful information to investors by offering:

●

the ability to make more meaningful period-to-period comparisons of our ~~on-going~~ongoing operating results;

●

the ability to better identify trends in our underlying business and perform related trend analyses; and

~~Table of Contents~~

●

a better understanding of how management plans and measures our underlying business.

We believe that adjusted EBITDA has limitations in that it does not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that adjusted EBITDA should only be used to evaluate our results of operations in conjunction with net ~~income.~~income on both a consolidated and segment basis. Adjusted EBITDA is ~~calculated~~reconciled to net income as ~~follows.~~follows:

ADJUSTED FINANCIAL ~~METRIC~~MEASURE RECONCILIATION TO GAAP

CONSOLIDATED


	For the three months ended				For the nine months ended
	September 30,				September 30,
(in thousands)	2023		2022		2023		2022
Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA
Walker & Dunlop Net Income	$	21,458	$	46,833	$	75,758	$	172,328
Income tax expense		7,069		7,532		24,695		46,495
Interest expense on corporate debt		17,594		9,306		49,878		22,123
Amortization and depreciation		57,479		59,846		170,737		177,101
Provision (benefit) for credit losses		421		1,218		(11,088)		(13,120)
Net write-offs⁽¹⁾		(2,008)		—		(8,041)		—
Share-based compensation expense		7,427		5,546		22,468		27,154
Gain from revaluation of previously held equity-method investment		—		—		—		(39,641)
Write off of unamortized premium from corporate debt repayment		—		—		(4,420)		—
Fair value of expected net cash flows from servicing, net		(35,375)		(55,291)		(107,446)		(159,970)
Adjusted EBITDA	$	74,065	$	74,990	$	212,541	$	232,470

For the three months ended

For the nine months ended

September 30,

September 30,

(in thousands)

2017

2016

2017

2016

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA

Walker & Dunlop Net Income

$
34,378

$
29,628

$
112,166

$
77,107

Income tax expense

19,988

18,851

54,621

47,295

Interest expense on corporate debt

2,555

2,485

7,401

7,419

Amortization and depreciation

32,343

29,244

97,541

80,824

Provision (benefit) for credit losses

9

283

(216)

166

Net write-offs

—

(2,567)

—

(2,567)

Stock compensation expense

6,508

5,270

15,765

12,784

Gains attributable to mortgage servicing rights (1)

(50,781)

(48,229)

(140,985)

(127,724)

Unrealized (gains) losses from proprietary CMBS mortgage banking activities

—

1,262

—

430

Adjusted EBITDA

$
45,000

$
36,227

$
146,293

$
95,734

(1)

The net write-off for the nine months ended September 30, 2023 includes the write off of collateral-based reserves related to a loan held for investment.

~~Represents the fair value of the expected net cash flows from servicing recognized at commitment, net of any expected guaranty obligation.~~

The following tables present a period-to-period ~~comparison~~comparisons of the components of adjusted EBITDA for the three and nine months ended September 30, ~~2017~~2023 and ~~2016~~2022.

ADJUSTED EBITDA – THREE MONTHS

For the three months ended

September 30,

Dollar

Percentage

(dollars in thousands)
2017

2016

Change

Change

Origination fees
$
60,523

$
53,663

$
6,860

13
%
Servicing fees

44,900

37,134

7,766

21

Net warehouse interest income

5,358

5,614

(256)

(5)

Escrow earnings and other interest income

5,804

2,630

3,174

121

Other revenues

12,040

8,545

3,495

41

Personnel

(71,961)

(59,107)

(12,854)

22

Net write-offs

—

(2,567)

2,567

(100)

Other operating expenses

(11,664)

(9,685)

(1,979)

20

Adjusted EBITDA
$
45,000

$
36,227

$
8,773

24

CONSOLIDATED


	For the three months ended
	September 30,				Dollar		Percentage
(dollars in thousands)	2023		2022		Change		Change
Loan origination and debt brokerage fees, net	$	56,149	$	90,858	$	(34,709)	(38)	%
Servicing fees		79,200		75,975		3,225	4
Property sales broker fees		16,862		30,308		(13,446)	(44)
Investment management fees		13,362		16,301		(2,939)	(18)
Net warehouse interest income (expense)		(2,031)		3,980		(6,011)	(151)
Placement fees and other interest income		43,000		18,129		24,871	137
Other revenues		27,140		24,943		2,197	9
Personnel		(129,080)		(151,513)		22,433	(15)
Net write-offs		(2,008)		—		(2,008)	N/A
Other operating expenses		(28,529)		(33,991)		5,462	(16)
Adjusted EBITDA	$	74,065	$	74,990	$	(925)	(1)

3346

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ADJUSTED EBITDA – NINE MONTHS

CONSOLIDATED


	For the nine months ended
	September 30,				Dollar		Percentage
(dollars in thousands)	2023		2022		Change		Change
Loan origination and debt brokerage fees, net	$	168,201	$	275,773	$	(107,572)	(39)	%
Servicing fees		232,027		222,916		9,111	4
Property sales broker fees		38,831		100,092		(61,261)	(61)
Investment management fees		44,844		47,345		(2,501)	(5)
Net warehouse interest income (expense)		(3,556)		14,021		(17,577)	(125)
Placement fees and other interest income		109,310		26,683		82,627	310
Other revenues		84,624		90,494		(5,870)	(6)
Personnel		(365,957)		(442,454)		76,497	(17)
Net write-offs⁽¹⁾		(8,041)		—		(8,041)	N/A
Other operating expenses		(87,742)		(102,400)		14,658	(14)
Adjusted EBITDA	$	212,541	$	232,470	$	(19,929)	(9)

For the nine months ended

September 30,

Dollar

Percentage

(dollars in thousands)
2017

2016

Change

Change

Origination fees
$
168,927

$
122,112

$
46,815

38
%
Servicing fees

129,639

101,554

28,085

28

Net warehouse interest income

17,778

15,925

1,853

12

Escrow earnings and other interest income

13,610

6,225

7,385

119

Other revenues

33,602

23,577

10,025

43

Personnel

(182,392)

(141,581)

(40,811)

29

Net write-offs

—

(2,567)

2,567

(100)

Other operating expenses

(34,871)

(29,511)

(5,360)

18

Adjusted EBITDA
$
146,293

$
95,734

$
50,559

53

~~See the tables above for the components of the change in adjusted EBITDA~~

(1)

The net write-off for the nine months ended September 30, 2023 includes the write off of collateral-based reserves related to a loan held for investment.

Three and nine months ended September 30, 2023 compared to three and nine months ended September 30, ~~2017. For the three months ended September 30, 2017, the increase~~2022

Origination fees decreased primarily due to declines in ~~origination fees was largely related to the increase in loan origination volume period over period.~~overall debt financing volumes. Servicing fees increased largely due to ~~an increase~~growth in the average servicing portfolio period over ~~period~~period. Property sales broker fees decreased principally due to declines in property sales volumes. Investment management fees decreased primarily as a result of ~~new loan originations. Escrow earnings~~a decline in LIHTC investment management fees. Net warehouse interest income (expense) decreased from a net revenue position in 2022 to a net expense position in 2023 primarily due to the inverted yield curve throughout much of 2023. Placement fees and other interest income increased largely as a result of ~~increases in the average escrow balance outstanding and the average earnings rate following the increases in~~higher placement fee rates due to rising short-term interest rates over the past year. Other revenues increased primarily due to an increase in investment sales placement fees and prepayment fee income. The increase in personnel expense was primarily due to (i) increased commission costs due to the increase in origination fees, (ii) increased salaries expense due to a rise in headcount, and (iii) increased bonus expense due to the Company’s improved financial performance and rise in headcount. We settled the risk-sharing losses on one loan in the third quarter of 2016, while we have settled no risk-sharing losses in 2017.

rates. For the nine months ended September 30, ~~2017, the increase~~2023 only, other revenues decreased primarily due to declines in ~~origination~~prepayment fees, ~~was largely related~~partially offset by increases in investment banking revenues and miscellaneous revenues. The decreases in personnel expenses were primarily due to ~~the increase~~decreases in ~~loan origination volume period over period. Servicing fees~~commission costs due to our lower transaction volumes. Net write-offs increased due to the charge off of an ~~increase~~Interim Program loan that defaulted in 2019 that was settled in the ~~average servicing~~second quarter of 2023 and a loss settlement in our at-risk portfolio ~~period over period~~during the third quarter of 2023 with no comparable activity in 2022. Other operating expenses decreased largely as a result of ~~new loan originations. Net warehouse interest income increased largely~~ ~~due to increases~~decreases in ~~the average outstanding balance~~travel and ~~net spread of loans held for investment. Escrow earnings~~entertainment costs and ~~other interest income increased~~professional fees as a result of increases in the average escrow balance outstanding and the average earnings rate following the increases in short-term interest rates over the past year. Other revenues increased primarily due to an increase in investment sales placement fees and prepayment fee income. The increase in personnel expense was primarily due to (i) increased commission costs due to the increase in origination fees, (ii) increased salaries expense due to a rise in headcount, (iii) increased bonus expense due to the Company’s improved financial performance and rise in headcount. We settled the risk-sharing losses on one loan in the third quarter of 2016, while we have settled no risk-sharing losses in 2017.our cost-reduction initiatives.

Financial Condition

Cash Flows from Operating Activities

Our cash flows from ~~operations~~operating activities are generated from loan sales, servicing fees, placement fees from escrow ~~earnings,~~deposits, net warehouse interest income, property sales broker fees, investment management fees, research subscription fees, investment banking advisory fees, and other income, net of loan originations and operating costs. Our cash flows from operations are impacted by the fees generated by our loan originations and property sales, the timing of loan closings, and the period of time loans are held for sale in the warehouse loan facility prior to delivery to the investor.

Cash ~~Flow~~Flows from Investing Activities

We usually lease facilities and equipment for our operations. ~~However, when necessary and cost effective, we invest cash in property, plant, and equipment.~~ Our cash flows from investing activities also include the funding and repayment of loans held for investment, contributions to and distributions from joint ventures, purchases of equity-method investments, and the ~~funding~~purchase of ~~preferred equity investments.~~available-for-sale (“AFS”) securities pledged to Fannie Mae. We opportunistically invest cash for ~~acquisitions and MSR portfolio purchases.~~acquisitions.

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Cash ~~Flow~~Flows from Financing Activities

We use our warehouse loan facilities and, when necessary, our corporate cash to fund loan ~~closings.~~closings, both for loans held for sale and loans held for investment. We also use warehouse facilities to assist in funding investments in tax credit equity before transferring them to a tax credit fund. We believe that our current warehouse loan facilities are adequate to meet our ~~increasing~~ loan origination needs. Historically, we have used a combination of long-term

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debt and cash ~~flows from operations~~on hand to fund ~~acquisitions,~~large acquisitions. Additionally, we repurchase shares, pay cash dividends, make long-term debt principal payments, and ~~fund~~repay short-term borrowings on a ~~portion~~regular basis. We issue stock primarily in connection with the exercise of ~~loans held~~stock options (cash inflow) and for ~~investment.~~acquisitions (non-cash transactions).

~~We currently do not pay dividends on our common stock and have never paid a dividend.~~

Nine Months Ended September 30, ~~2017~~2023 Compared to Nine Months Ended September 30, ~~2016~~2022

The following table presents a period-to-period comparison of the significant components of cash flows for the nine months ended September 30, ~~2017~~2023 and ~~2016.~~ Certain prior-year balances have been adjusted for the adoption of a new accounting standard relating to the presentation of cash flows associated with restricted cash and restricted cash equivalents during the fourth quarter of 2016 as more fully described in NOTE 2 of the 2016 Form 10-K.2022.

SIGNIFICANT COMPONENTS OF CASH FLOWS


	For the nine months ended September 30,				Dollar		Percentage

									For the nine months ended September 30,				Dollar		Percentage
(dollars in thousands)	2017		2016		Change		Change		2023		2022		Change		Change
Net cash provided by (used in) operating activities	$	(1,328,432)	$	1,300,257	$	(2,628,689)	(202)	%	$	(332,412)	$	(466,766)	$	134,354	(29)	%
Net cash provided by (used in) investing activities		27,406		(92,260)		119,666	(130)			146,569		(170,990)		317,559	(186)
Net cash provided by (used in) financing activities		1,285,203		(1,242,291)		2,527,494	(203)			228,207		449,634		(221,427)	(49)
Total of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period		197,644		180,190		17,454	10

Cash flows from operating activities
Total of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period ("Total cash")										300,647		205,058		95,589	47

Cash flows from (used in) operating activities
Net receipt (use) of cash for loan origination activity	$	(1,421,977)	$	1,238,428	$	(2,660,405)	(215)	%	$	(378,891)	$	(594,506)	$	215,615	(36)	%
Net cash provided by (used in) operating activities, excluding loan origination activity		93,545		61,829		31,716	51			46,479		127,740		(81,261)	(64)

Cash flows from investing activities
Funding of preferred equity investments	$	(16,321)	$	(15,538)	$	(783)	5	%
Capital invested in Interim Program JV		(6,184)		—		(6,184)	N/A

Cash flows from (used in) investing activities
Purchases of pledged AFS securities									$	—	$	(51,302)	$	51,302	(100)	%
Purchases of equity-method investments										(15,062)		(25,098)		10,036	(40)
Acquisitions, net of cash received		(15,000)		—		(15,000)	N/A			—		(114,163)		114,163	(100)
Purchase of mortgage servicing rights		—		(42,705)		42,705	(100)

Originations of loans held for investment		(167,680)		(218,958)		51,278	(23)
Total principal collected on loans held for investment		237,229		187,820		49,409	26
Capital expenditures										(13,880)		(19,302)		5,422	(28)
Net payoff of (investment in) loans held for investment	$	69,549	$	(31,138)	$	100,687	(323)			160,801		22,728		138,073	608

Cash flows from financing activities

Cash flows from (used in) financing activities
Borrowings (repayments) of warehouse notes payable, net	$	1,360,969	$	(1,239,677)	$	2,600,646	(210)	%	$	387,109	$	593,685	$	(206,576)	(35)	%
Borrowings of interim warehouse notes payable		128,661		148,478		(19,817)	(13)			—		36,459		(36,459)	(100)
Repayments of interim warehouse notes payable		(175,934)		(138,898)		(37,036)	27			(119,835)		(26,000)		(93,835)	361
Repayments of notes payable										(120,046)		(29,487)		(90,559)	307
Borrowings of notes payable										196,000		—		196,000	N/A
Payment of contingent consideration										(26,090)		(19,720)		(6,370)	32
Repurchase of common stock		(28,863)		(12,374)		(16,489)	133			(18,928)		(40,675)		21,747	(53)

~~Changes~~The decrease in net cash ~~flows from operations were~~used in operating activities was driven primarily by loans ~~acquired~~originated and sold. Such loans are held for short periods of time, generally less than 60 days, and impact cash flows presented as of a point in ~~time.~~time due to the timing difference between the date of origination and date of delivery. The decrease in cash flows ~~from operations~~used in loan origination activities is primarily attributable to originations outpacing sales by $378.9 million in 2023 compared to $594.5 million in 2022. The decline in the ~~use~~amount of ~~$1.4 billion for the funding of loan~~ originations ~~net~~in excess of sales ~~of loans~~was due to ~~third parties during 2017~~a decline in our total origination activity in 2023 compared to ~~the receipt of $1.2 billion for the funding of loan originations, net of sales to third parties during 2016.~~2022. Excluding cash used for the origination and sale of loans, ~~net~~ cash flows provided by ~~operations was $93.5~~operating activities were $46.5 million ~~during 2017 compared to net cash provided by operations~~in 2023, down from $127.7 million in 2022. The decrease is primarily the result of ~~$61.8~~a $97.2 million ~~during 2016. The significant components of the change included an increase of $35.0 million~~decrease in net income before noncontrolling interests anand a $70.0 million increase ~~of $16.7~~in cash used for other operating activities, net, partially offset by a $46.2 million net increase in ~~the adjustment to net income~~non-cash adjustments for MSRs and amortization and depreciation and a ~~greater increase~~$39.6 million non-cash adjustment for the Apprise revaluation gain in 2022 with no comparable activity in 2023.

The change from net cash used in investing activities in 2022 to net income related to the change in the fair value of premiums and origination fees of $22.3 million, partially offset by a greater reduction to net income related to gains attributable to future servicing rights of $13.3 million during 2017, a greater reduction to cash related to accounts payable and other liabilities of $20.7 million, and a greater use of cash for performance deposits from borrowers of $2.7 million.

~~The increase in~~ cash provided by ~~(used in)~~ investing activities ~~is primarily attributable~~in 2023 was due to ~~decreases~~(i) a decrease in ~~the net investment in loans held for investment and cash used for~~ the purchase of ~~mortgage servicing rights, partially offset~~AFS securities, which was impacted by ~~increases~~the elevated payoffs of pledged AFS securities leading up to 2022 and no purchases in ~~net~~2023 as the market interest rates on pledged securities AFS were not substantially higher than the short-term rate earned on uninvested cash

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due to the inverted yield curve, (ii) a decrease in purchases of equity-method investments, as we made fewer capital contributions in our LIHTC investments and other equity-method investments, (iii) a significant reduction in cash used for acquisitions ~~and~~

~~Table~~in 2023 compared to 2022, as we had no acquisitions in 2023, (iv) a decrease in capital expenditures due to elevated capital expenditures in 2022 related to the build out of ~~Contents~~

~~cash used to invest~~our new headquarters, and (v) an increase in ~~the Interim Program JV. The~~ net ~~payoff~~payoffs of loans held for investment ~~during 2017 was $69.5 million compared~~in 2023 due to ~~net investment~~(a) contractual maturities and the refinancing of these transitional bridge loans to permanent debt structures and (b) no originations in ~~loans held for investment of $31.1 million during 2016. Of~~2023 as we have shifted away from the ~~$69.5 million of~~Interim Loan Program over the net payoff of loans held for investment during 2017, $47.3 million was funded using interim warehouse borrowings (included in cash flows from financing activities), with the other $22.2 million funded using corporate cash. Of the $31.1 million of the net investment in loans held for investment during 2016, $9.6 million was funded using interim warehouse borrowings, with the remaining $21.5 million funded using corporate cash. Net cash paid for acquisitions increased by $15.0 million as the Company did not execute any acquisitions during the first nine months of 2016. Cash paidpast year to invest in the Interim Program JV increased by $6.2 million as the Interim Program JV began operations in the third quarter of 2017. Lastly, cash paid for purchases of mortgage servicing rights decreased by $42.7 million as we did not purchase any mortgage servicing rights in 2017.other endeavors.

The ~~substantial change~~decrease in cash provided by ~~(used in)~~ financing activities in 2023 was ~~primarily~~largely attributable to ~~the significant change~~(i) a decrease in net warehouse borrowings ~~period~~due to ~~period, partially offset by increases~~the aforementioned decrease in ~~net~~loan origination activity, (ii) a decrease in borrowings of interim warehouse notes payable due to the aforementioned reduction in Interim Loan Program loan originations in 2023, (iii) an increase in repayments of interim warehouse notes payable due to the aforementioned maturities and ~~cash used to repurchase~~refinancings mentioned above, (iv) an increase in repayments of notes payable, and ~~retire shares~~(v) an increase in the payment of ~~our~~contingent consideration liabilities (“earnouts”), partially offset by (a) an increase in borrowings of notes payable and (b) a decrease in repurchases of common stock. The ~~change~~increase in ~~net borrowings (repayments) of warehouse borrowings during 2017~~earnout payments was due to a ~~large~~larger payment in 2023 compared to 2022 for one of our acquisitions. The increase in borrowings of notes payable was due to borrowings under our Incremental Term Loan (defined in Liquidity and Capital Resources below), a portion of which was used to repay notes payable at one of our subsidiaries, resulting in an increase in the ~~unpaid principal balance~~repayments of notes payable. The decrease in repurchases of common stock was related to a decrease in the number and value of employee stock vesting events related to previously issued equity grants under our various share-based compensation plans due to both our financial performance and the substantially lower stock price at which these vesting events occurred.

Segment Results

The Company is managed based on our three reportable segments: (i) Capital Markets, (ii) Servicing & Asset Management, and (iii) Corporate. The segment results below are intended to present each of the reportable segments on a stand-alone basis.

Capital Markets

SUPPLEMENTAL OPERATING DATA

CAPITAL MARKETS


	For the three months ended
	September 30,						Dollar		Percentage
(in thousands; except per share data)	2023			2022			Change		Change
Transaction Volume:
Components of Debt Financing Volume
Fannie Mae	$	1,739,332		$	3,038,788		$	(1,299,456)	(43)	%
Freddie Mac		1,072,048			1,885,492			(813,444)	(43)
Ginnie Mae ̶ HUD		86,557			338,054			(251,497)	(74)
Brokered⁽¹⁾		3,149,457			6,601,244			(3,451,787)	(52)
Total Debt Financing Volume	$	6,047,394		$	11,863,578		$	(5,816,184)	(49)	%
Property sales volume		2,508,073			4,993,615			(2,485,542)	(50)
Total Transaction Volume	$	8,555,467		$	16,857,193		$	(8,301,726)	(49)	%

Key Performance Metrics:
Net income	$	7,050		$	36,463			(29,413)	(81)
Adjusted EBITDA⁽²⁾		(15,704)			1,302			(17,006)	(1,306)
Operating margin		8	%		26	%

Key Revenue Metrics (as a percentage of debt financing volume):
Origination fees		0.93	%		0.76	%
MSR income		0.58			0.47
MSR income, as a percentage of Agency debt financing volume		1.22			1.05

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	For the nine months ended
	September 30,						Dollar		Percentage
(in thousands; except per share data)	2023			2022			Change		Change
Transaction Volume:
Components of Debt Financing Volume
Fannie Mae	$	5,328,992		$	8,955,562		$	(3,626,570)	(40)	%
Freddie Mac		3,260,672			4,014,375			(753,703)	(19)
Ginnie Mae ̶ HUD		361,929			931,230			(569,301)	(61)
Brokered⁽¹⁾		8,829,434			21,502,815			(12,673,381)	(59)
Total Debt Financing Volume	$	17,781,027		$	35,403,982		$	(17,622,955)	(50)	%
Property sales volume		5,907,138			16,417,367			(10,510,229)	(64)
Total Transaction Volume	$	23,688,165		$	51,821,349		$	(28,133,184)	(54)	%

Key Performance Metrics:
Net income	$	23,661		$	129,824			(106,163)	(82)	%
Adjusted EBITDA⁽²⁾		(44,725)			32,666			(77,391)	(237)
Operating margin		10	%		30	%

Key Revenue Metrics (as a percentage of debt financing volume):
Origination fees		0.94	%		0.77	%
MSR income		0.60			0.45
MSR income, as a percentage of Agency debt financing volume		1.20			1.15

(1)

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

(2)

This is a non-GAAP financial measure. For more information on adjusted EBITDA, refer to the section below titled “Non-GAAP Financial Measure.”

FINANCIAL RESULTS – THREE MONTHS

CAPITAL MARKETS


	For the three months ended
	September 30,				Dollar		Percentage
(dollars in thousands)	2023		2022		Change		Change
Revenues
Origination fees	$	56,149	$	89,752	$	(33,603)	(37)	%
MSR Income		35,375		55,291		(19,916)	(36)
Property sales broker fees		16,862		30,308		(13,446)	(44)
Net warehouse interest income (expense), loans held for sale		(2,565)		2,178		(4,743)	(218)
Other revenues		11,875		11,011		864	8
Total revenues	$	117,696	$	188,540	$	(70,844)	(38)

Expenses
Personnel	$	97,973	$	128,981	$	(31,008)	(24)	%
Amortization and depreciation		1,137		1,052		85	8
Interest expense on corporate debt		4,874		2,430		2,444	101
Other operating expenses		4,193		6,869		(2,676)	(39)
Total expenses	$	108,177	$	139,332	$	(31,155)	(22)
Income from operations	$	9,519	$	49,208	$	(39,689)	(81)
Income tax expense		2,386		12,468		(10,082)	(81)
Net income before noncontrolling interests	$	7,133	$	36,740	$	(29,607)	(81)
Less: net income (loss) from noncontrolling interests		83		277		(194)	(70)
Net income	$	7,050	$	36,463	$	(29,413)	(81)

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FINANCIAL RESULTS – NINE MONTHS

CAPITAL MARKETS


	For the nine months ended
	September 30,				Dollar		Percentage
(dollars in thousands)	2023		2022		Change		Change
Revenues
Origination fees	$	167,679	$	273,660	$	(105,981)	(39)	%
MSR Income		107,446		159,970		(52,524)	(33)
Property sales broker fees		38,831		100,092		(61,261)	(61)
Net warehouse interest income (expense), loans held for sale		(7,006)		9,415		(16,421)	(174)
Other revenues		40,735		29,838		10,897	37
Total revenues	$	347,685	$	572,975	$	(225,290)	(39)

Expenses
Personnel	$	281,502	$	372,656	$	(91,154)	(24)	%
Amortization and depreciation		3,412		2,191		1,221	56
Interest expense on corporate debt		13,870		5,488		8,382	153
Other operating expenses		15,037		19,943		(4,906)	(25)
Total expenses	$	313,821	$	400,278	$	(86,457)	(22)
Income from operations	$	33,864	$	172,697	$	(138,833)	(80)
Income tax expense		8,462		41,878		(33,416)	(80)
Net income before noncontrolling interests	$	25,402	$	130,819	$	(105,417)	(81)
Less: net income (loss) from noncontrolling interests		1,741		995		746	75
Net income	$	23,661	$	129,824	$	(106,163)	(82)

Revenues

Origination fees and MSR income. The following tables provide additional information that helps explain changes in origination fees and MSR income period over period:


	For the three months ended				For the nine months ended
	September 30,				September 30,
Debt Financing Volume by Product Type	2023		2022		2023		2022
Fannie Mae	29	%	25	%	30	%	25	%
Freddie Mac	18		16		18		11
Ginnie Mae ̶ HUD	1		3		2		3
Brokered	52		56		50		61


	For the three months ended					For the nine months ended
	September 30,					September 30,
Mortgage Banking Details (basis points)	2023			2022		2023			2022
Origination Fee Rate ⁽¹⁾		93			76		94			77
Basis Point Change		17					17
Percentage Change		22	%				22	%
MSR Rate ⁽²⁾		58			47		60			45
Basis Point Change		11					15
Percentage Change		23	%				33	%
Agency MSR Rate ⁽³⁾		122			105		120			115
Basis Point Change		17					5
Percentage Change		16	%				4	%

(1)

Origination fees as a percentage of total debt financing volume.

(2)

MSR Income as a percentage of total debt financing volume, excluding the income and debt financing volume from principal lending and investing.

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(3)

MSR Income as a percentage of Agency debt financing volume.

For the three and nine months ended September 30, 2023, the decreases in origination fees were primarily the result of a 49% and 50% decrease in debt financing volume, respectively, partially offset by a 17-basis-point increase in our origination fee rate for both the three and nine-month periods. The increases in the origination fee rate were driven by increases in GSE debt financing volume as a percentage of total debt financing volume as seen above. GSE debt financing volume has higher origination fees than brokered debt financing volume. Additionally, during the nine months ended September 30, 2022, our Fannie Mae debt financing volumes included a $1.9 billion Fannie Mae loan portfolio, for which we received a much lower origination fee than is typical for individual loans.

For the three months ended September 30, 2023, the decrease in MSR income was attributable to a 45% decrease in Agency debt financing volume, partially offset by a 17-basis point increase in the Agency MSR Rate seen above. For the nine months ended September 30, 2023, the decrease in MSR income was attributable to a 36% decrease in Agency debt financing volume, partially offset by a five-basis point increase in the Agency MSR Rate seen above. The increases in the Agency MSR Rate were primarily the result of increases in Fannie Mae debt financing volumes as a percentage of total debt financing volumes. Additionally, we had a $1.9 billion Fannie Mae portfolio that closed in the second quarter of 2022, which had a very low servicing fee rate that is typical of such a portfolio. There was no comparable portfolio in 2023. Our Fannie Mae products have higher weighted-average servicing fee (“WASF”) than our other products.

See the “Overview of Current Business Environment” section above for a detailed discussion of the factors driving the change in debt financing volumes.

Property sales broker fees.For the three and nine months ended September 30, 2023, the decreases in property sales broker fees were driven principally by the 50% and 64% decreases, respectively, in the property sales volumes period over period.

See the “Overview of Current Business Environment” section above for a detailed discussion of the factors driving the change in property sales volume.

Net warehouse interest income (expense). For both the three and nine months ended September 30, 2023, the decreases in net warehouse interest income from a net revenue position in 2022 to a net expense position in 2023 were primarily attributable to an inverted yield curve during much of 2023. Short-term interest rates, upon which we incur interest expense, were higher than the long-term mortgage rates, upon which we earn interest income, during 2023. Partially reducing the negative impact of the inverted yield curve and resulting negative net spreads shown below were the lower average balances of loans held for sale ~~funded~~outstanding in 2023 compared to 2022, which were driven by ~~Agency Warehouse Facilities (as defined below) from December 31, 2016 to~~reductions in the number of days loans were held before delivery and lower debt financing volumes.


	For the three months ended					For the nine months ended
	September 30,					September 30,
Net Warehouse Interest Income (Expense) Details (dollars in thousands)	2023			2022		2023			2022
Average LHFS Outstanding Balance	$	764,615		$	1,325,419	$	669,878		$	1,338,784
Dollar Change	$	(560,804)				$	(668,906)
Percentage Change		(42)	%				(50)	%
LHFS Net Spread (basis points)		(134)			66		(139)			94
Basis Point Change		(200)					(233)
Percentage Change		(303)	%				(248)	%

Other revenues. For the nine months ended September 30, ~~2017. During 2017,~~ 2023, the ~~unpaid principal balance~~increase was due to a $6.9 million increase in investment banking revenues and smaller increases in various other revenues categories. The increase in investment banking revenues was primarily due to the closing of ~~loans held~~the largest investment banking advisory transaction in Company history.

Expenses

Personnel. For the three months ended September 30, 2023, the decrease was primarily the result of a $25.2 million decrease in commission costs due to lower origination fees and property sales broker fees noted above, combined with a $6.1 million decrease in salaries and bonuses due to lower headcount and our financial performance. Our lower headcount was due to a workforce reduction undertaken in the second quarter of 2023.

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For the nine months ended September 30, 2023, the decrease was primarily the result of an $89.4 million decrease in commission costs due to lower origination fees and property sales broker fees.

Interest expense on corporate debt. Interest expense on corporate debt is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment’s use of that corporate debt. The discussion of our consolidated results above has additional information related to the increase in interest expense on corporate debt.

Other operating expenses. For the three and nine months ended September 30, 2023, the decreases were primarily a result of cost-reduction initiatives across a variety of cost categories, with the most prominent decreases in professional fees and travel and entertainment costs.

Income Tax Expense. Income tax expense is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment’s income from operations, except for ~~sale funded~~significant, one-time tax activities, which are allocated entirely to the segment impacted by ~~Agency Warehouse Facilities increased $1.4 billion from their December 31, 2016 balance~~the tax activity.

Non-GAAP Financial Measure

A reconciliation of adjusted EBITDA for our CM segment is presented below. Our segment-level adjusted EBITDA represents the segment portion of consolidated adjusted EBITDA. A detailed description and reconciliation of consolidated adjusted EBITDA is provided above in our Consolidated Results of Operations—Non-GAAP Financial Measure. CM adjusted EBITDA is reconciled to net income as follows:

ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP

CAPITAL MARKETS


	For the three months ended				For the nine months ended
	September 30,				September 30,
(in thousands)	2023		2022		2023		2022
Reconciliation of Net Income to Adjusted EBITDA
Net Income	$	7,050	$	36,463	$	23,661	$	129,824
Income tax expense		2,386		12,468		8,462		41,878
Interest expense on corporate debt		4,874		2,430		13,870		5,488
Amortization and depreciation		1,137		1,052		3,412		2,191
Share-based compensation expense		4,224		4,180		13,316		13,255
MSR Income		(35,375)		(55,291)		(107,446)		(159,970)
Adjusted EBITDA	$	(15,704)	$	1,302	$	(44,725)	$	32,666

The following tables present period-to-period comparisons of the components of CM adjusted EBITDA for the three and nine months ended September 30, 2023 and 2022.

ADJUSTED EBITDA – THREE MONTHS

CAPITAL MARKETS


	For the three months ended
	September 30,				Dollar		Percentage
(dollars in thousands)	2023		2022		Change		Change
Origination fees	$	56,149	$	89,752	$	(33,603)	(37)	%
Property sales broker fees		16,862		30,308		(13,446)	(44)
Net warehouse interest income (expense), loans held for sale		(2,565)		2,178		(4,743)	(218)
Other revenues		11,792		10,734		1,058	10
Personnel		(93,749)		(124,801)		31,052	(25)
Other operating expenses		(4,193)		(6,869)		2,676	(39)
Adjusted EBITDA	$	(15,704)	$	1,302	$	(17,006)	(1,306)

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ADJUSTED EBITDA – NINE MONTHS

CAPITAL MARKETS


	For the nine months ended
	September 30,				Dollar		Percentage
(dollars in thousands)	2023		2022		Change		Change
Origination fees	$	167,679	$	273,660	$	(105,981)	(39)	%
Property sales broker fees		38,831		100,092		(61,261)	(61)
Net warehouse interest income (expense), loans held for sale		(7,006)		9,415		(16,421)	(174)
Other revenues		38,994		28,843		10,151	35
Personnel		(268,186)		(359,401)		91,215	(25)
Other operating expenses		(15,037)		(19,943)		4,906	(25)
Adjusted EBITDA	$	(44,725)	$	32,666	$	(77,391)	(237)

Three months ended September 30, 2023 compared to ~~a decrease of $1.2 billion during the same period in 2016. The change in net borrowings of interim warehouse notes payable was principally~~three months ended September 30, 2022

Origination fees decreased due to a decrease in our overall debt financing volume, partially offset by an increase in our origination fee rate. Property sales broker fees decreased as a result of the decline in property sales volumes. Net warehouse interest income (expense) decreased largely due to the inverted yield curve. The decrease in personnel expense was primarily due to decreased commission costs due to the decrease in origination fees and property sales broker fees. Other operating expenses decreased largely as a result of our cost-reduction initiatives.

Nine months ended September 30, 2023 compared to nine months ended September 30, 2022

Origination fees decreased due to a decrease in our overall debt financing volume, partially offset by an increase in our origination fee rate. Property sales broker fees decreased as a result of the decline in property sales volumes. Net warehouse interest income (expense) decreased primarily due to the inverted yield curve. Other revenues increased largely due to increased investment banking revenues. The decrease in personnel expense was primarily due to decreased commission costs due to the decrease in origination fees. Other operating expenses decreased primarily as a result of our cost-reduction initiatives.

Table of Contents

Servicing & Asset Management

SUPPLEMENTAL OPERATING DATA

SERVICING & ASSET MANAGEMENT


(dollars in thousands)	As of September 30,				Dollar		Percentage
Managed Portfolio:	2023		2022		Change		Change
Components of Servicing Portfolio
Fannie Mae	$	62,850,853	$	58,426,446	$	4,424,407	8	%
Freddie Mac		38,656,136		37,241,471		1,414,665	4
Ginnie Mae - HUD		10,320,520		9,634,111		686,409	7
Brokered ⁽¹⁾		17,091,925		15,224,581		1,867,344	12
Principal Lending and Investing ⁽²⁾		40,000		251,815		(211,815)	(84)
Total Servicing Portfolio	$	128,959,434	$	120,778,424	$	8,181,010	7	%
Assets under management		17,334,877		17,017,355		317,522	2
Total Managed Portfolio	$	146,294,311	$	137,795,779	$	8,498,532	6	%


	For the three months ended
	September 30,						Dollar		Percentage
Key Volume and Performance Metrics:	2023			2022			Change		Change
Equity syndication volume⁽³⁾	$	54,119		$	43,880		$	10,239	23	%
Principal Lending and Investing debt financing volume⁽⁴⁾		—			62,015			(62,015)	(100)
Net income		45,427			30,923			14,504	47
Adjusted EBITDA⁽⁵⁾		124,849			106,281			18,568	17
Operating margin		41	%		31	%


		For the nine months ended
		September 30,					Dollar		Percentage
Key Volume and Performance Metrics:	2023			2022			Change		Change
Equity syndication volume⁽³⁾	$	461,212		$	405,170		$	56,042	14	%
Principal Lending and Investing debt financing volume⁽⁴⁾		—			307,586			(307,586)	(100)
Net income		132,243			92,363			39,880	43
Adjusted EBITDA⁽⁵⁾		346,283			295,888			50,395	17
Operating margin		41	%		33	%


	As of September 30,
Key Servicing Portfolio Metrics:	2023		2022
Custodial escrow deposit balance (in billions)	$	2.8	$	3.1
Weighted-average servicing fee rate (basis points)		24.2		24.7
Weighted-average remaining servicing portfolio term (years)		8.4		8.9


		As of September 30,
Components of assets under management (in thousands)	2023		2022
LIHTC	$	15,248,530	$	14,692,962
Investment funds		1,350,027		1,424,356
Interim Program JV Managed Loans		736,320		900,037
Total assets under management	$	17,334,877	$	17,017,355

(1)

Brokered loans serviced primarily for life insurance companies.

(2)

Consists of interim loans not managed for the Interim Program JV.

(3)

Amount of equity called and syndicated into LIHTC funds.

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(4)

For the three months ended September 30, 2022, comprised solely of WDIP separate account originations. For the nine months ended September 30, 2022, includes $86.3 million from the Interim Program JV, $113.6 million from the Interim Loan Program, and $107.7 million from WDIP separate accounts.

(5)

This is a non-GAAP financial measure. For more information on adjusted EBITDA, refer to the section below titled “Non-GAAP Financial Measure”.

FINANCIAL RESULTS – THREE MONTHS

SERVICING & ASSET MANAGEMENT


	For the three months ended
	September 30,				Dollar		Percentage
(dollars in thousands)	2023		2022		Change		Change
Revenues
Origination fees	$	—	$	1,106	$	(1,106)	(100)	%
Servicing fees		79,200		75,975		3,225	4
Investment management fees		13,362		16,301		(2,939)	(18)
Net warehouse interest income (expense), loans held for investment		534		1,802		(1,268)	(70)
Placement fees and other interest income		39,475		17,760		21,715	122
Other revenues		15,569		16,378		(809)	(5)
Total revenues	$	148,140	$	129,322	$	18,818	15

Expenses
Personnel	$	17,139	$	18,728	$	(1,589)	(8)	%
Amortization and depreciation		54,375		57,139		(2,764)	(5)
Provision (benefit) for credit losses		421		1,218		(797)	(65)
Interest expense on corporate debt		11,096		6,324		4,772	75
Other operating expenses		5,039		5,237		(198)	(4)
Total expenses	$	88,070	$	88,646	$	(576)	(1)
Income from operations	$	60,070	$	40,676	$	19,394	48
Income tax expense		15,040		10,204		4,836	47
Income before noncontrolling interests	$	45,030	$	30,472	$	14,558	48
Less: net income (loss) from noncontrolling interests		(397)		(451)		54	(12)
Net income	$	45,427	$	30,923	$	14,504	47

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FINANCIAL RESULTS – NINE MONTHS

SERVICING & ASSET MANAGEMENT


	For the nine months ended
	September 30,				Dollar		Percentage
(dollars in thousands)	2023		2022		Change		Change
Revenues
Origination fees	$	522	$	2,113	$	(1,591)	(75)	%
Servicing fees		232,027		222,916		9,111	4
Investment management fees		44,844		47,345		(2,501)	(5)
Net warehouse interest income (expense), loans held for investment		3,450		4,606		(1,156)	(25)
Placement fees and other interest income		100,636		26,166		74,470	285
Other revenues		42,697		57,624		(14,927)	(26)
Total revenues	$	424,176	$	360,770	$	63,406	18

Expenses
Personnel	$	53,669	$	53,211	$	458	1	%
Amortization and depreciation		161,935		170,501		(8,566)	(5)
Provision (benefit) for credit losses		(11,088)		(13,120)		2,032	(15)
Interest expense on corporate debt		31,385		15,388		15,997	104
Other operating expenses		16,465		15,535		930	6
Total expenses	$	252,366	$	241,515	$	10,851	4
Income from operations	$	171,810	$	119,255	$	52,555	44
Income tax expense		42,931		28,919		14,012	48
Income before noncontrolling interests	$	128,879	$	90,336	$	38,543	43
Less: net income (loss) from noncontrolling interests		(3,364)		(2,027)		(1,337)	66
Net income	$	132,243	$	92,363	$	39,880	43

Revenues

Servicing Fees. For the three and nine months ended September 30, 2023, the increases were primarily attributable to increases in the average servicing portfolio period over period as shown below, slightly offset by declines in the average servicing fee rates. The increases in the average servicing portfolio were driven by the $4.4 billion increase in Fannie Mae and the $1.4 billion increase in Freddie Mac loans serviced. The decreases in the average servicing fee rates were the result of decreases in the WASF on our new Fannie Mae debt financing volume over the past year as the volatility in the interest rate environment compressed the spread on our debt financing volume and reduced the servicing fee rates on loans originated in 2023. The WASF on new debt financing volume was lower than the loans paid off in the portfolio over the past year.


	For the three months ended					For the nine months ended
	September 30,					September 30,
Servicing Fees Details (dollars in thousands)	2023			2022		2023			2022
Average Servicing Portfolio	$	127,971,088		$	119,551,659	$	125,741,670		$	117,798,975
Dollar Change	$	8,419,429				$	7,942,695
Percentage Change		7	%				7	%
Average Servicing Fee (basis points)		24.2			24.8		24.3			24.9
Basis Point Change		(0.6)					(0.6)
Percentage Change		(2)	%				(2)	%

Placement fees and other interest income. For the three and nine months ended September 30, 2023, the increases were driven primarily by increases in our placement fees on escrow deposits of $21.5 million and $70.4 million, respectively, coupled with increases in interest income from our pledged securities investments of $1.3 million and $4.3 million, respectively. The placement fee rates on escrow deposits increased significantly as a result of the higher short-term interest rate environment in 2023 compared to same period in 2022.

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Other Revenues. For the nine months ended September 30, 2023, the decrease was primarily due to a $21.7 million decline in prepayment fees, partially offset by increases in syndication and other miscellaneous fees from our LIHTC operations of $6.0 million. The decrease in prepayment fees was due to the aforementioned reduction in the volume of loans prepaying and the amount of prepayment fees. Syndication fees increased due to the higher volume of capital syndicated into our LIHTC funds.

Expenses

Amortization and Depreciation. For thethree and nine months ended September 30, 2023, the decreases were primarily due to reductions in the amortization expense related to write-offs of MSRs due to declines in the prepayment of MSRs, partially offset by increases in the amortization expense of existing MSRs.

Provision (benefit) for credit losses. For both the nine months ended September 30, 2023 and 2022, the benefit for credit losses was primarily attributable to updates to our historical loss rate factor. The updates resulted in the loss data from earlier periods within the historical lookback period falling off and being replaced with a period with significantly lower loss data, resulting in the historical loss rate decreasing by 0.6 basis points for both the nine months ended September 30, 2023 and 2022.

Income Tax Expense. Income tax expense is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment’s income from operations, except for significant, one-time tax activities, which are allocated entirely to the segment impacted by the tax activity.

Non-GAAP Financial Measure

A reconciliation of adjusted EBITDA for our SAM segment is presented below. Our segment-level adjusted EBITDA represents the segment portion of consolidated adjusted EBITDA. A detailed description and reconciliation of consolidated adjusted EBITDA is provided above in our Consolidated Results of Operations—Non-GAAP Financial Measure. SAM adjusted EBITDA is reconciled to net income as follows:

ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP

SERVICING & ASSET MANAGEMENT


	For the three months ended				For the nine months ended
	September 30,				September 30,
(in thousands)	2023		2022		2023		2022
Reconciliation of Net Income to Adjusted EBITDA
Net Income	$	45,427	$	30,923	$	132,243	$	92,363
Income tax expense		15,040		10,204		42,931		28,919
Interest expense on corporate debt		11,096		6,324		31,385		15,388
Amortization and depreciation		54,375		57,139		161,935		170,501
Provision (benefit) for credit losses		421		1,218		(11,088)		(13,120)
Net write-offs⁽¹⁾		(2,008)		—		(8,041)		—
Write off of unamortized premium from corporate debt repayment		—		—		(4,420)		—
Share-based compensation expense		498		473		1,338		1,837
Adjusted EBITDA	$	124,849	$	106,281	$	346,283	$	295,888

(1)

The net write-off for the nine months ended September 30, 2023 includes the write off of collateral-based reserves related to a loan held for investment.

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The following tables present period-to-period comparisons of the components of SAM adjusted EBITDA for the three and nine months ended September 30, 2023 and 2022.

ADJUSTED EBITDA – THREE MONTHS

SERVICING & ASSET MANAGEMENT


	For the three months ended
	September 30,				Dollar		Percentage
(dollars in thousands)	2023		2022		Change		Change
Origination fees	$	—	$	1,106	$	(1,106)	(100)	%
Servicing fees		79,200		75,975		3,225	4
Investment management fees		13,362		16,301		(2,939)	(18)
Net warehouse interest income (expense), loans held for investment		534		1,802		(1,268)	(70)
Placement fees and other interest income		39,475		17,760		21,715	122
Other revenues		15,966		16,829		(863)	(5)
Personnel		(16,641)		(18,255)		1,614	(9)
Net write-offs		(2,008)		—		(2,008)	N/A
Other operating expenses		(5,039)		(5,237)		198	(4)
Adjusted EBITDA	$	124,849	$	106,281	$	18,568	17

ADJUSTED EBITDA – NINE MONTHS

SERVICING & ASSET MANAGEMENT


	For the nine months ended
	September 30,				Dollar		Percentage
(dollars in thousands)	2023		2022		Change		Change
Origination fees	$	522	$	2,113	$	(1,591)	(75)	%
Servicing fees		232,027		222,916		9,111	4
Investment management fees		44,844		47,345		(2,501)	(5)
Net warehouse interest income (expense), loans held for investment		3,450		4,606		(1,156)	(25)
Placement fees and other interest income		100,636		26,166		74,470	285
Other revenues		46,061		59,651		(13,590)	(23)
Personnel		(52,331)		(51,374)		(957)	2
Net write-offs⁽¹⁾		(8,041)		—		(8,041)	N/A
Other operating expenses		(20,885)		(15,535)		(5,350)	34
Adjusted EBITDA	$	346,283	$	295,888	$	50,395	17

(1)

The net write-off for the nine months ended September 30, 2023 includes the write off of collateral-based reserves related to a loan held for investment.

Three and nine months ended September 30, 2023 compared to three and nine months ended September 30, 2022

Servicing fees increased due to growth in the average servicing portfolio period over period as a result of loan originations, partially offset by a decrease in the average servicing fee rate. Placement fees and other interest income increased primarily due to increases in placement fee rates. Other revenues decreased primarily due to decreases in prepayment fees.Net write-offs increased due to the write-off of a loan held for investment during the second quarter of 2023 and the settlement of a risk-sharing obligation in the third quarter of 2023, with no comparable activity in 2022. For the nine months ended September 30, 2023 only, other operating expenses increased largely due to professional fees and various other expense categories.

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Corporate

FINANCIAL RESULTS – THREE MONTHS

CORPORATE


	For the three months ended
	September 30,				Dollar		Percentage
(dollars in thousands)	2023		2022		Change		Change
Revenues
Other interest income	$	3,525	$	369	$	3,156	855	%
Other revenues		(618)		(2,620)		2,002	(76)
Total revenues	$	2,907	$	(2,251)	$	5,158	(229)

Expenses
Personnel	$	21,395	$	9,350	$	12,045	129	%
Amortization and depreciation		1,967		1,655		312	19
Interest expense on corporate debt		1,624		552		1,072	194
Other operating expenses		19,297		21,885		(2,588)	(12)
Total expenses	$	44,283	$	33,442	$	10,841	32
Income (loss) from operations	$	(41,376)	$	(35,693)	$	(5,683)	16
Income tax expense (benefit)		(10,357)		(15,140)		4,783	(32)
Net income (loss)	$	(31,019)	$	(20,553)	$	(10,466)	51

Adjusted EBITDA	$	(35,080)	$	(32,593)	$	(2,487)	8	%

FINANCIAL RESULTS – NINE MONTHS

CORPORATE


	For the nine months ended
	September 30,				Dollar		Percentage
(dollars in thousands)	2023		2022		Change		Change
Revenues
Other interest income	$	8,674	$	517	$	8,157	1,578	%
Other revenues		(431)		41,641		(42,072)	(101)
Total revenues	$	8,243	$	42,158	$	(33,915)	(80)

Expenses
Personnel	$	53,254	$	43,741	$	9,513	22	%
Amortization and depreciation		5,390		4,409		981	22
Interest expense on corporate debt		4,623		1,247		3,376	271
Other operating expenses		51,820		66,922		(15,102)	(23)
Total expenses	$	115,087	$	116,319	$	(1,232)	(1)
Income (loss) from operations	$	(106,844)	$	(74,161)	$	(32,683)	44
Income tax expense (benefit)		(26,698)		(24,302)		(2,396)	10
Net income (loss)	$	(80,146)	$	(49,859)	$	(30,287)	61

Adjusted EBITDA	$	(89,017)	$	(96,084)	$	7,067	(7)	%

Revenues

Other interest income. For the three and nine months ended September 30, 2023, the increases were due to increases in the interest rates we earn on our cash deposits held by our corporate segment combined with an increase in ~~payoffs~~the average balance concentrated in interest-earning accounts.

Other revenues. For the three months ended September 30, 2023, the increase was largely due increases in miscellaneous fees and income from equity-method investments.

Table of ~~loans~~Contents

For the nine months ended September 30, 2023, the decrease was primarily due to the $39.6 million gain from revaluation of previously held ~~for~~equity-method investment, ~~year over year. The~~which was a one-time transaction recognized in 2022, and a $5.2 million decrease in income from equity-method investments, partially offset by a $3.3 million increase in ~~share repurchase activity~~revenues from our deferred compensation plan.

Expenses

Personnel. For the three months ended September 30, 2023, the increase was ~~principally~~primarily due to a $9.6 million increase in subjective bonus expense and a $1.8 million increase in stock compensation expense. The increases in subjective bonuses and stock compensation were due to a lower bonus and stock compensation expense in the third of quarter of 2022 compared to the third quarter of 2023, resulting from downward adjustments to the annual accruals made in the third quarter of 2022 due to our financial performance for the year-to-date period ended September 30, 2022 and the expected performance for the remainder of 2022.

For the nine months ended September 30, 2023, the increase was primarily the result of a $7.4 million increase in subjective bonuses, a $3.4 million increase in salaries, and a $3.3 million increase in deferred compensation costs, partially offset by a $4.2 million decrease in stock compensation expense as we are accruing performance-based stock compensation at an overall lower rate this year than last. An increase in the corporate average headcount during 2023 was the primary driver for the increased subjective bonus and salaries and benefits expenses. The corporate average headcount for the nine months ended September 30, 2023 does not fully reflect the impact of our workforce reduction that we announced in April and that was effective at the beginning of May.

Other operating expenses. For the three and nine months ended September 30, 2023, the decreases were primarily driven by decreases in professional fees, travel and entertainment, and miscellaneous expense categories, partially offset by a small increase in office expenses. Professional fees decreased $2.0 million and $8.2 million for the three and nine months ended September 30, 2023, respectively. The decreases in professional fees were primarily due to elevated professional fees in 2022 related to acquisition costs. Travel and entertainment decreased $0.7 million and $2.4 million for the three and nine months ended September 30, 2023, respectively. Miscellaneous expenses for the three and nine-month periods decreased $1.1 million and $6.5 million, respectively. The decreases in travel and entertainment and miscellaneous expenses were primarily due to our cost-reduction initiatives. Office expenses increased $0.7 million and $2.3 million for the three and nine months ended September 30, 2023, respectively, due primarily to increases in software costs.

Income Tax Expense. Income tax expense is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment’s income from operations, except for significant, one-time tax activities, which are allocated entirely to the segment impacted by the tax activity.

Non-GAAP Financial Measure

A reconciliation of adjusted EBITDA for our Corporate segment is presented below. Our segment-level adjusted EBITDA represents the segment portion of consolidated adjusted EBITDA. A detailed description and reconciliation of consolidated adjusted EBITDA is provided above in our Consolidated Results of Operations—Non-GAAP Financial Measure. Corporate adjusted EBITDA is reconciled to net income as follows:

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ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP

CORPORATE


	For the three months ended				For the nine months ended
	September 30,				September 30,
(in thousands)	2023		2022		2023		2022
Reconciliation of Net Income (Loss) to Adjusted EBITDA
Net Income (Loss)	$	(31,019)	$	(20,553)	$	(80,146)	$	(49,859)
Income tax expense (benefit)		(10,357)		(15,140)		(26,698)		(24,302)
Interest expense on corporate debt		1,624		552		4,623		1,247
Amortization and depreciation		1,967		1,655		5,390		4,409
Share-based compensation expense		2,705		893		7,814		12,062
Gain from revaluation of previously held equity-method investment		—		—		—		(39,641)
Adjusted EBITDA	$	(35,080)	$	(32,593)	$	(89,017)	$	(96,084)

The following tables present period-to-period comparisons of the components of Corporate adjusted EBITDA for the three and nine months ended September 30, 2023 and 2022.

ADJUSTED EBITDA – THREE MONTHS

CORPORATE


	For the three months ended
	September 30,				Dollar		Percentage
(dollars in thousands)	2023		2022		Change		Change
Other interest income	$	3,525	$	369	$	3,156	855	%
Other revenues		(618)		(2,620)		2,002	(76)
Personnel		(18,690)		(8,457)		(10,233)	121
Other operating expenses		(19,297)		(21,885)		2,588	(12)
Adjusted EBITDA	$	(35,080)	$	(32,593)	$	(2,487)	8

ADJUSTED EBITDA – NINE MONTHS

CORPORATE


	For the nine months ended
	September 30,				Dollar		Percentage
(dollars in thousands)	2023		2022		Change		Change
Other interest income		8,674		517		8,157	1,578	%
Other revenues		(431)		2,000		(2,431)	(122)
Personnel		(45,440)		(31,679)		(13,761)	43
Other operating expenses		(51,820)		(66,922)		15,102	(23)
Adjusted EBITDA	$	(89,017)	$	(96,084)	$	7,067	(7)

Three months ended September 30, 2023 compared to three months ended September 30, 2022

Other interest income increased primarily due to an increase in the ~~repurchase of shares~~interest rates on our cash deposits and increased balances. Other revenues increased due to ~~settle employee tax obligations for restricted~~increases in miscellaneous fees and ~~performance-based share awards along with a substantial~~income from equity method investments. The increase in personnel expense was primarily due to lower subjective bonus expense in the ~~fair value~~third quarter of 2022 than the ~~Company’s stock, which increased the taxable compensation~~third quarter of 2023 due to ~~employees upon vesting. No performance-based awards vested during 2016~~our expected financial performance for 2022.

Nine months ended September 30, 2023 compared to ~~0.6 million shares~~nine months ended September 30, 2022

Other interest income increased primarily due to an increase in interest earned on our cash deposits and increased balances. Other revenues decreased, largely due to a decline in income from equity-method investments. The increase in personnel expense was primarily due to increased

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subjective bonus and salaries and benefits expense due to an increase in corporate average headcount during ~~2017. Additionally, we repurchased 0.2 million shares~~2023. Other operating expenses decreased as a result of ~~our own stock under~~ a ~~repurchase program~~decline in professional fees and other operating expenses as ~~more fully discussed below in the “Uses~~a result of ~~Liquidity, Cash and Cash Equivalents” section.~~cost-reduction initiatives.

Liquidity and Capital Resources

Uses of Liquidity, Cash and Cash Equivalents

Our significant recurring cash flow requirements consist of ~~(i) short-term~~ liquidity ~~necessary~~ to (i) fund loans held for sale; (ii) ~~liquidity necessary to fund loans held for investment under the Interim Program;~~pay cash dividends; (iii) ~~liquidity necessary to fund our preferred equity investments; (iv) liquidity necessary to~~ fund our portion of the equity necessary ~~for the operations of the Interim Program JV;~~to support equity-method investments; (iv) fund investments in properties to be syndicated to LIHTC investment funds that we will asset-manage; (v) make payments related to earnouts from acquisitions, (vi) meet working capital needs to support our day-to-day operations, including debt service payments, ~~servicing advances consisting of principal and interest~~joint venture development partnerships contributions, advances for ~~Fannie Mae or HUD loans that become delinquent, advances on insurance~~servicing and ~~tax payments if the escrow funds are insufficient,~~loan repurchases and payments for salaries, commissions, and income ~~taxes;~~taxes, and ~~(vi)~~(vii) meet working capital to satisfy collateral requirements for our Fannie Mae DUS risk-sharing obligations and to meet the operational liquidity requirements of Fannie Mae, Freddie Mac, HUD, Ginnie Mae, and our warehouse facility lenders.

Fannie Mae has established benchmark standards for capital adequacy and reserves the right to terminate our servicing authority for all or some of the portfolio if, at any time, it determines that our financial condition is not adequate to support our obligations under the DUS agreement. We are required to maintain acceptable net worth as defined in the standards, and we satisfied the requirements as of September 30, ~~2017 requirements.~~2023. The net worth requirement is derived primarily from unpaid balances on Fannie Mae loans and the level of risk-sharing. AtAs of September 30, ~~2017,~~2023, the ~~minimum~~ net worth requirement was ~~$145.7~~$301.6 million, and our net worth ~~as defined in the requirements,~~ was ~~$634.5 million,~~$1.0 billion, as measured at our ~~wholly owned~~wholly-owned operating subsidiary, Walker & Dunlop, LLC. As of September 30, ~~2017,~~2023, we were required to maintain at least ~~$28.6~~$60.0 million of liquid assets to meet our operational liquidity requirements for Fannie Mae, Freddie Mac, HUD, Ginnie Mae and our warehouse facility lenders. As of September 30, ~~2017,~~2023, we had operational liquidity ~~as defined in the requirements,~~ of ~~$145.1~~$186.4 million, as measured at our ~~wholly owned~~wholly-owned operating subsidiary, Walker & Dunlop, LLC.

~~As noted previously, under certain limited circumstances, we may make preferred equity investments~~We paid a cash dividend of $0.63 per share during the third quarter of 2023, which is 5% higher than the quarterly dividend paid in ~~entities controlled by certain~~the third quarter of 2022. On November 8, 2023, the Company’s Board of Directors declared a dividend of $0.63 per share for the fourth quarter of 2023. The dividend will be paid on December 8, 2023 to all holders of record of our ~~borrowers that will assist those borrowers to acquire~~restricted and ~~reposition properties. The terms of such investments are negotiated with each investment. As of September 30, 2017, we have funded $41.2~~ ~~million of such investments. We expect these preferred equity investments to be repaid to us within the next two years~~.

We currently retain all future earnings for the operation and expansion of our business and therefore do not pay cash dividends on our common stock. Since the beginning of 2014, we have repurchased 5.5 million shares of ourunrestricted common stock ~~from large stockholders for an aggregate cost~~as of ~~$82.3 million, invested $93.3 million of cash in acquisitions and the purchase of mortgage servicing rights, and funded $41.2 million of preferred equity investments.~~ November 24, 2023.

On occasion, we may use cash to fully fund ~~Agency~~some loans held for investment or loans held for sale instead of using our warehouse ~~line.~~lines. As of September 30, ~~2017,~~2023, we ~~used corporate cash to~~did not fully fund ~~Agency~~any loans held for ~~sale with an unpaid principal balance~~investment, and we funded a de minimis amount of ~~$64.3 million. During~~loans held for sale. We continually seek opportunities to complete additional acquisitions if we believe the ~~first quarter of 2017,~~economics are favorable.

In February 2023, our Board of Directors ~~authorized us to~~approved a stock repurchase program that permits the repurchase of up to $75.0 million of shares of our common stock over a 12-month period ~~ending~~beginning February ~~10, 2018. We~~23, 2023. Through September 30, 2023, we have not repurchased ~~228 thousand~~any shares under the 2023 stock repurchase program and have $75.0 million of ~~our stock with an aggregate cost of $10.8~~

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~~million~~remaining capacity under ~~this~~that program.

Historically, our cash flows from operations and warehouse facilities have been sufficient to enable us to meet our short-term liquidity needs and other funding requirements. We believe that cash flows from operations will continue to be sufficient for us to meet our current obligations for the foreseeable future.

Restricted Cash and Pledged Securities

Restricted cash consists primarily of good faith deposits held on behalf of borrowers between the time we enter into a loan commitment with the borrower and the ~~borrower closes~~investor purchases the loan. We are generally required to share the risk of any losses associated with loans sold under the Fannie Mae DUS ~~program.~~program, our only off-balance sheet arrangement. We are required to secure this obligation by assigning collateral to Fannie Mae. We meet this obligation by assigning pledged securities to Fannie Mae. The amount of collateral required by Fannie Mae is a formulaic calculation at the loan level and considers the balance of the loan, the risk level of the loan, the age of the loan, and the level of risk-sharing. Fannie Mae requires collateral for Tier 2 loans of 75 basis points, which is funded over a 48-month period that begins upon delivery of the loan to Fannie Mae. Collateral held in the form of money market funds holding U.S. Treasuries is discounted 5%, and Agency MBS are discounted 4% for purposes of calculating compliance with the collateral requirements. As of September 30, ~~2017,~~2023, we held substantially all of our restricted liquidity in ~~money market funds holding U.S. Treasuries~~Agency MBS in the aggregate amount of ~~$91.0~~$131.0 million. Additionally, ~~substantially all~~the majority of the loans for which we have ~~risk sharing~~risk-sharing are Tier 2 loans. We fund any growth in our Fannie Mae required operational liquidity and collateral requirements from our working capital.

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We are in compliance with the September 30, ~~2017~~2023 collateral requirements as outlined above. As of September 30, ~~2017,~~2023, reserve requirements for the September 30, 2023 DUS loan portfolio will require us to fund ~~$61.3~~$79.6 million in additional restricted liquidity over the next 48 months, assuming no further principal paydowns, prepayments, or defaults within our ~~at risk~~at-risk portfolio. Fannie Mae ~~periodically reassesses~~has assessed the DUS Capital Standards in the past and may make changes to these standards in the future. We generate sufficient cash ~~flow~~flows from our operations to meet these capital standards and do not expect any future changes to have a material impact on our future operations; however, any future changes to collateral requirements may adversely impact our available cash.

Under the provisions of the DUS agreement, we must also maintain a certain level of liquid assets referred to as the operational and unrestricted portions of the required reserves each year. We satisfied these requirements as of September 30, ~~2017.~~2023.

Sources of Liquidity: Warehouse Facilities and Notes Payable

~~The following table provides information related to our~~Warehouse Facilities

We use a combination of warehouse facilities ~~as of September 30, 2017.~~

September 30, 2017

(dollars in thousands)

Committed

Uncommitted

Temporary

Total Facility

Outstanding


Facility

Amount

Amount

Increase

Capacity

Balance

Interest rate
Agency Warehouse Facility #1

$
425,000

$
—

$
—

$
425,000

$
190,054

30-day LIBOR plus 1.40%
Agency Warehouse Facility #2

500,000

—

2,066,000

2,566,000

2,228,837

30-day LIBOR plus 1.30%
Agency Warehouse Facility #3

480,000

—

400,000

880,000

424,714

30-day LIBOR plus 1.25%
Agency Warehouse Facility #4

350,000

—

—

350,000

285,170

30-day LIBOR plus 1.40%
Agency Warehouse Facility #5

30,000

—

—

30,000

5,797

30-day LIBOR plus 1.80%
Agency Warehouse Facility #6

250,000

250,000

—

500,000

—

30-day LIBOR plus 1.35%
Fannie Mae repurchase agreement, uncommitted line and open maturity

—

1,500,000

—

1,500,000

75,391

30-day LIBOR plus 1.15%
Total Agency Warehouse Facilities

$
2,035,000

$
1,750,000

$
2,466,000

$
6,251,000

$
3,209,963

Interim Warehouse Facility #1

$
85,000

$
—

$
—

$
85,000

$
43,440

30-day LIBOR plus 1.90%
Interim Warehouse Facility #2

200,000

—

—

200,000

23,272

30-day LIBOR plus 2.00%
Interim Warehouse Facility #3

75,000

—

—

75,000

29,132

30-day LIBOR plus 2.00% to 2.50%
Total Interim Warehouse Facilities

$
360,000

$
—

$
—

$
360,000

$
95,844

Total warehouse facilities

$
2,395,000

$
1,750,000

$
2,466,000

$
6,611,000

$
3,305,807

~~Agency Warehouse Facilities~~

~~At September 30, 2017,~~and notes payable to provide ~~financing~~funding for our operations. We use warehouse facilities to ~~borrowers under the Agencies’ programs, we have six committed~~fund our Agency Lending and ~~uncommitted~~

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warehouse lines of credit in the amount of $4.8 billion with certain national banks and a $1.5 billion uncommitted facility with Fannie Mae (collectively, the “Agency Warehouse Facilities”). Five of these facilities are revolving commitments we expect to renew annually (consistent with industry practice), one we expect to renew every 18 months, and the other facility is provided on an uncommitted basis without a specific maturity date.Interim Loan Program. Our ability to originate Agency mortgage loans ~~intended to be sold under an Agency execution~~and loans held for investments depends upon our ability to secure and maintain these types of ~~short-term~~ financing agreements on acceptable terms.

~~Agency Warehouse Facility #1~~

~~We have~~ For a warehousing credit and security agreement with a national bank for a $425.0 million committed warehouse line. The warehousing credit and security agreement provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans. Advances are made at 100%detailed description of the ~~loan balance, and borrowings under this line bear interest at the 30-day London Interbank Offered Rate (“LIBOR”) plus 140 basis points. During the fourth quarter~~terms of ~~2017, we executed the 13~~th ~~amendment to the~~each warehouse agreement, ~~that extended the maturity date~~refer to ~~November 30, 2017~~. ~~No other material modifications have been made to the agreement during 2017.~~

~~Agency Warehouse Facility #2~~

~~We have a warehousing credit and security agreement with a national bank for a $2.6 billion committed warehouse line.~~ ~~The total commitment amount of $2.6 billion as of September 30, 2017 consists of a base committed amount of $500.0 million and a temporary increase of $2.1 billion, as more fully described below.~~ ~~The committed warehouse facility provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans.Advances are made at 100% of the loan balance, and borrowings under this line bear interest at 30-day LIBOR plus 130 basis points.~~ During the third quarter of 2017, we executed the Second Amended and Restated Warehousing Credit and Security Agreement (the “Second Amended Agreement”). The Second Amended Agreement removed one of the lenders under the prior agreement, which reduced the maximum committed borrowing capacity to $500.0 million. It also extended the maturity date to September 10, 2018 and reduced the interest rate to the 30-day LIBOR plus 130 basis points. In addition to the committed borrowing capacity, the Second Amended Agreement provides $300.0 million of uncommitted borrowing capacity that bears interest at the same rate as the committed facility. Concurrent with the execution of the Second Amended Agreement, we executed ~~a new, separate warehousing credit agreement with one of the lenders under the prior facility, which is referred to as Agency Warehouse Facility #6 and is more fully described below~~. Also during the third quarter of 2017, we executed the first amendment to the Second Amended Agreement that provides a temporary increase of $2.1 billion to fund a specific portfolio of loans. The temporary increase expires the sooner of the sale of the portfolio of loans, or February 28, 2018. The uncommitted borrowing capacity is reduced to zero while the temporary increase is outstanding. No other material modifications have been made to the agreement during 2017.

~~Agency Warehouse Facility #3~~

~~We have a warehousing credit and security agreement with a national bank for a $880.0 million committed warehouse line.~~ ~~The total commitment amount of $880.0 million as of September 30, 2017 consists of a base committed amount of $480.0 million and a temporary increase of $400.0 million, as more fully described below.~~ The committed warehouse facility provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans. Advances are made at 100% of the loan balance, and the borrowings under the warehouse agreement bear interest at a rate of 30-day LIBOR plus 125 basis points. During the second quarter of 2017, we executed the seventh amendment to the warehouse agreement. The amendment reduced the interest rate to the 30-day LIBOR plus 125 basis points, extended the maturity date to April 30, 2018, and increased the permanent borrowing capacity to $480.0 million. During the third quarter of 2017, we executed the eighth amendment to the warehouse agreement that provided for a temporary increase to the borrowing capacity of $400.0 million that expires January 30, 2018. No other material modifications have been made to the agreement during 2017.

~~Agency Warehouse Facility #4~~

We have a warehousing credit and security agreement with a national bank for a $350.0 million committed warehouse line. The committed warehouse facility provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans. Advances are made at 100% of the loan balance, and borrowings under this line bear interest at 30-day LIBOR plus 130 basis points. During the fourth quarter of 2017, we executed the third amendment to the warehouse agreement that extended the maturity date to October 5, 2018 and reduced the interest rate to 30-day LIBOR plus 130 basis points. ~~No other material modifications have been made to the agreement during 2017.~~

~~Agency Warehouse Facility #5~~

~~We have a $30.0 million committed warehouse credit and security agreement with a national bank that is scheduled to mature~~“Warehouse Facilities” in ~~January 2018. The committed warehouse facility provides us with the ability to fund defaulted HUD and FHA loans. The borrowings under~~

~~Table of Contents~~

~~the warehouse agreement bear interest at a rate of 30-day LIBOR plus 180 basis points. No material modifications have been made to the agreement during 2017.~~

~~Agency Warehouse Facility #6~~

During the third quarter of 2017, we executed a warehousing and security agreement that established Agency Warehouse Facility #6. The warehouse facility has a $250.0 million maximum committed borrowing capacity, provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans, and matures September 18, 2018. The borrowings under the warehouse agreement bear interest at a rate of 30-day LIBOR plus 135 basis points. In addition to the committed borrowing capacity, the agreement provides $250.0 million of uncommitted borrowing capacity that bears interest at the same rate as the committed facility.

~~Uncommitted Agency Warehouse Facility~~

We have a $1.5 billion uncommitted facility with Fannie Mae under its As Soon As Pooled funding program. After approval of certain loan documents, Fannie Mae will fund loans after closing and the advances are used to repay the primary warehouse line. Fannie Mae will advance 99% of the loan balance, and borrowings under this program bear interest at 30-day LIBOR plus 115 basis points, with a minimum 30-day LIBOR rate of 35 basis points. There is no expiration date for this facility. ~~No changes have been made to the uncommitted facility during 2017.~~ ~~The uncommitted facility has no specific negative or financial covenants.~~

~~Interim Warehouse Facilities~~

~~To assist in funding loans held for investment under the Interim Program, we have three warehouse facilities with certain national banks~~NOTE 6 in the ~~aggregate amount of $0.4 billion~~consolidated financial statements in our 2022 Form 10-K, as of September 30, 2017 (“Interim Warehouse Facilities”). Consistent with industry practice, two of these facilities are revolving commitments we expect to renew annually and one is a revolving commitment we expect to renew every two years. Our ability to originate loans held for investment depends upon our ability to secure and maintain these types of short-term financings on acceptable terms.updated in NOTE 6 in the condensed consolidated financial statements in this Form 10-Q.

~~Interim Warehouse Facility #1~~Notes Payable

We have an $85.0 million committed warehouse line agreement that provides us with the ability to fund first mortgage loans on multifamily real estate properties for periods of up to three years, using available cash in combination with advances under the facility. Borrowings under the facility are full recourse to the Company and bear interest at 30-day LIBOR plus 190 basis points. Repayments under the credit agreement are interest-only, with principal repayments made upon the earlier of the refinancing of an underlying mortgage or the maturity of an advance under the credit agreement. During the second quarter of 2017, we executed the seventh amendment to the credit and security agreement that extended the maturity date to April 30, 2018. No other material modifications have been made to the agreement during 2017.

~~Interim Warehouse Facility #2~~

We have a $200.0 million committed warehouse line agreement that is scheduled to mature on December 13, 2017. The agreement provides us with the ability to fund first mortgage loans on multifamily real estate properties for periods of up to three years, using available cash in combination with advances under the facility. All borrowings bear interest at 30-day LIBOR plus 200 basis points. The lender retains a first priority security interest in all mortgages funded by such advances on a cross-collateralized basis. Repayments under the credit agreement are interest-only, with principal repayments made upon the earlier of the refinancing of an underlying mortgage or the maturity of an advance under the credit agreement. No material modifications have been made to the agreement during 2017.

~~Interim Warehouse Facility #3~~

We have a $75.0 million repurchase agreement that provides us with the ability to fund first mortgage loans on multifamily real estate properties for periods of up to three years, using available cash in combination with advances under the facility. The borrowings under the agreement bear interest at a rate of 30-day LIBOR plus 200 basis points to 250 basis points (“the spread”). The spread varies according to the type of asset the borrowing finances. Repayments under the credit agreement are interest-only, with principal repayments made upon the earlier of the refinancing of an underlying mortgage or the maturity of an advance under the credit agreement. ~~During the second quarter of 2017, we exercised our option to extend the maturity date to May 19, 2018. No other material modifications have been made to the agreement during 2017.~~

~~Table of Contents~~

As a result of the aforementioned amendments and new agreements, we have increased our aggregate borrowing capacity, including temporary increases, from $4.0 billion at December 31, 2016 to $6.6 billion at September 30, 2017.

The Agency and Interim Warehouse Facility agreements above contain cross-default provisions, such that if a default occurs under any of those debt agreements, generally the lenders under our other Agency and Interim debt agreements could also declare a default. We were in compliance with all covenants as of September 30, 2017.

~~We believe that the combination of our capital and warehouse facilities is adequate to meet our loan origination needs.~~

~~Debt Obligations~~

We have a senior secured ~~term loan~~ credit agreement (the ~~“Term Loan~~“Credit Agreement”)~~. The Term Loan Agreement~~ that provides for a ~~$175.0~~$600 million term loan ~~that was issued at a discount of 1.0%~~ (the “Term Loan”)~~. At any time, we may also elect to request the establishment~~ that bears interest at Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus 225 basis points with a floor of one or more incremental term loan commitments to make up to three additional term loans (any such additional term loan, an “Incremental Term Loan”) in an aggregate principal amount for all such Incremental Term Loans not to exceed $60.0 million.

~~We are obligated to repay the aggregate outstanding principal amount~~50 basis points and has a stated maturity date of the Term Loan in consecutive quarterly installments equal to $0.3 million on the last business day of each quarter. The Term Loan also requires other prepayments in certain circumstances pursuant to the terms of the Term Loan Agreement. The final principal installment of the Term Loan is required to be paid in full on December ~~20, 2020 (or,~~16, 2028 (or, if earlier, the date of acceleration of the Term Loan pursuant to the ~~terms~~term of the Credit Agreement).

On January 12, 2023, we entered into a lender joinder agreement and amendment to the Credit Agreement that provided for an incremental term loan (“Incremental Term Loan”) with a principal amount of $200.0 million, modified the ratio thresholds related to mandatory prepayments, and included a provision that allows additional types of indebtedness. The Incremental Term Loan ~~Agreement)~~was issued at a 2.0% discount and ~~will be~~contains similar repayment terms as the Term Loan. The Incremental Term Loan bears interest at Adjusted Term SOFR plus 300 basis points and matures on December 16, 2028. We are obligated to make principal payments on the Incremental Term Loan in ~~an amount~~consecutive quarterly installments equal to 0.25% of the aggregate ~~outstanding~~original principal amount of the Incremental Term Loan on ~~such date (together with all~~the last business day of each March, June, September, and December, which began on June 30, 2023. We used approximately $115.9 million of the proceeds to pay off the Alliant note payable principal balance and related accrued interest ~~thereon).~~

~~At our election, the Term Loan will bear interest at either (i) the “Base Rate” plus an applicable margin or (ii) the LIBOR Rate plus an applicable margin, subject to adjustment if an event~~and other fees of ~~default under the Term Loan Agreement has occurred and is continuing with~~ a minimum LIBOR Rate of 1.0%. The “Base Rate” means the highest of (a) the administrative agent’s “prime rate,” (b) the federal funds rate plus 0.50% and (c) LIBOR for an interest period of one month plus 1%. In each case, the applicable margin is determined by our Consolidated Corporate Leverage Ratio (as defined in the Term Loan Agreement). If such Consolidated Corporate Leverage Ratio is greater than 2.50 to 1.00, the applicable margin will be 4.50% for LIBOR Rate loans and 3.50% for Base Rate loans, and if such Consolidated Corporate Leverage Ratio is less than or equal to 2.50 to 1.00, the applicable margin will be 4.25% for LIBOR Rate loans and 3.25% for Base Rate loans. The applicable margin is 4.25% for LIBOR Rate loans and 3.25% for Base Rate loans as of September 30, 2017.

Our obligations under the Term Loan Agreement are guaranteed by Walker & Dunlop Multifamily, Inc., Walker & Dunlop, LLC, Walker & Dunlop Capital, LLC, and W&D BE, Inc., each of which is a direct or indirect wholly owned subsidiary of the Company (together with the Company, the “Loan Parties”), pursuant to a Guarantee and Collateral Agreement entered into on December 20, 2013 among the Loan Parties and the Agent. subsidiary. As of September 30, ~~2017,~~2023, the aggregate outstanding principal balance of the original Term Loan ~~was $166.5 million.~~

~~The~~and Incremental Term Loan (“Corporate Debt”) was $788.5 million.

For a detailed description of the terms of the Credit Agreement, refer to “Notes Payable – Term Loan Note Payable” in NOTE 6 in the consolidated financial statements in our 2022 Form 10-K.

The note payable and the warehouse facilities are senior obligations of the Company. ~~The Term Loan Agreement contains affirmative and negative covenants, including financial covenants.~~ As of September 30, ~~2017,~~2023, we were in compliance with all ~~such covenants.~~covenants related to the Credit Agreement.

4064

Table of Contents

Credit Quality and Allowance for Risk-Sharing Obligations

The following table sets forth certain information useful in evaluating our credit performance.


	September 30,
(dollars in thousands)	2023			2022
Key Credit Metrics
Risk-sharing servicing portfolio:
Fannie Mae Full Risk	$	53,549,966		$	49,241,243
Fannie Mae Modified Risk		9,295,368			9,177,094
Freddie Mac Modified Risk		23,415			23,615
Total risk-sharing servicing portfolio	$	62,868,749		$	58,441,952

Non-risk-sharing servicing portfolio:
Fannie Mae No Risk	$	5,519		$	8,109
Freddie Mac No Risk		38,632,721			37,217,856
GNMA - HUD No Risk		10,320,520			9,634,111
Brokered		17,091,925			15,224,581
Total non-risk-sharing servicing portfolio	$	66,050,685		$	62,084,657
Total loans serviced for others	$	128,919,434		$	120,526,609
Interim loans (full risk) servicing portfolio		40,000			251,815
Total servicing portfolio unpaid principal balance	$	128,959,434		$	120,778,424

Interim Program JV Managed Loans ⁽¹⁾		736,320			900,037

At risk servicing portfolio ⁽²⁾	$	57,857,659		$	53,430,615
Maximum exposure to at risk portfolio ⁽³⁾		11,750,068			10,826,654
Defaulted loans⁽⁴⁾		—			78,203

Defaulted loans as a percentage of the at-risk portfolio		0.00	%		0.15	%
Allowance for risk-sharing as a percentage of the at-risk portfolio		0.05			0.09
Allowance for risk-sharing as a percentage of maximum exposure		0.26			0.46

September 30,

(dollars in thousands)

2017

2016

Key Credit Metrics

Risk-sharing servicing portfolio:

Fannie Mae Full Risk

$
22,966,583

$
19,411,757

Fannie Mae Modified Risk

6,858,310

5,784,275

Freddie Mac Modified Risk

53,217

53,377

Interim Program JV Modified Risk (1)

146,125

—

Total risk-sharing servicing portfolio

$
30,024,235

$
25,249,409

Non-risk-sharing servicing portfolio:

Fannie Mae No Risk

$
180,703

$
679,652

Freddie Mac No Risk

25,877,602

19,649,100

GNMA - HUD No Risk

8,878,899

9,254,830

Brokered

5,170,479

4,024,490

Total non-risk-sharing servicing portfolio

$
40,107,683

$
33,608,072

Total loans serviced for others

$
70,131,918

$
58,857,481

Interim loans (full risk) servicing portfolio

152,764

264,508

Total servicing portfolio unpaid principal balance

$
70,284,682

$
59,121,989

At risk servicing portfolio (2)

$
26,556,339

$
22,384,966

Maximum exposure to at risk portfolio (3)

5,420,386

4,602,118

60+ day delinquencies, within at risk portfolio (4)

5,962

—

Specifically identified at risk loan balances associated with allowance for risk-sharing obligations

5,962

—

60+ day delinquencies as a percentage of the at risk portfolio

0.02
%

0.00
%
Allowance for risk-sharing as a percentage of the at risk portfolio

0.01

0.02

Allowance for risk-sharing as a percentage of the specifically identified at risk loan balances

63.22

N/A

Allowance for risk-sharing as a percentage of maximum exposure

0.07

0.07

Allowance for risk-sharing and guaranty obligation as a percentage of maximum exposure

0.78

0.75

(1)

~~(1)~~

As of September 30, 2023 and 2022, this balance consists entirely of Interim Program JV managed loans. We indirectly share in a portion of the risk of loss associated with ~~these~~Interim Program JV managed loans through our 15% equity ownership in the Interim Program JV.

We have no exposure to risk of loss for the loans serviced directly for the Interim Program JV partner. The balance of this line is included as a component of assets under management in the Supplemental Operating Data table above.

(2)

~~(2)~~

~~At risk~~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~~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~~at-risk balances of the associated loans. Accordingly, we have presented the key statistics as a percentage of the ~~at risk~~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~~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)

~~(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.

(4)

~~(4)~~

~~Includes~~Defaulted loans represent loans in our Fannie Mae at-risk portfolio which are probable of foreclosure or that have foreclosed and for which the Company has recorded a collateral-based reserve (i.e. loans where we have assessed a probable loss). Other loans that have defaulted but not foreclosed or that are not ~~60+ days delinquent~~probable of foreclosure are not included here. Additionally, loans that have foreclosed or are probable of foreclosure but ~~have defaulted.~~

are not expected to result in a loss to the Company are not included here.

Table of Contents

Fannie Mae DUS risk-sharing obligations are based on a tiered formula and represent substantially all of our risk-sharing activities. The risk-sharing tiers and the amount of the risk-sharing obligations we absorb under full risk-sharing are provided below. Except as described

~~Table of Contents~~

in the following paragraph, the maximum amount of risk-sharing obligations we absorb at the time of default is generally 20% of the origination unpaid principal balance (“UPB”) of the loan.


Risk-Sharing Losses
~~Risk-Sharing Losses~~		Percentage Absorbed by Us
First 5% of UPB at the time of loss settlement		100%
Next 20% of UPB at the time of loss settlement		25%
Losses above 25% of UPB at the time of loss settlement		10%
Maximum loss		20% of origination UPB

Fannie Mae can double or triple our risk-sharing obligation if the loan does not meet specific underwriting criteria or if a loan defaults within 12 months of its sale to Fannie Mae. We may request modified risk-sharing at the time of origination, which reduces our potential risk-sharing obligation from the levels described above.

We use several techniques to manage our risk exposure under the Fannie Mae DUS risk-sharing program. These techniques include maintaining a strong underwriting and approval process, evaluating and modifying our underwriting criteria given the underlying multifamily housing market fundamentals, limiting our geographic market and borrower exposures, and electing the modified risk-sharing option under the Fannie Mae DUS program.

~~We may request modified risk-sharing based on such factors as the size~~The Segments - Capital Markets section of “Item 1. Business” in our 2022 Form 10-K contains a discussion of the ~~loan, market conditions and loan pricing. Our current credit management policy is to cap the loan balance subject to full~~ risk-sharing ~~at $60.0 million. Accordingly,~~caps we currently elect to use modified risk-sharing for loans of more than $60.0 million in order to limit our maximum loss on any loan to $12.0 million (such exposure would occur in the event that the underlying collateral is determined to be completely without value at the time of loss). However, we occasionally elect to originate a loanhave with ~~full risk sharing even when the loan balance is greater than $60.0 million if we believe the loan characteristics support such an approach.~~Fannie Mae.

We regularly monitor the credit quality of all loans for which we have a risk-sharing obligation. Loans with indicators of underperforming credit are placed on a watch ~~lists,~~list, assigned a numerical risk rating based on our assessment of the relative credit weakness, and subjected to additional evaluation or loss mitigation. Indicators of underperforming credit include poor financial performance, poor physical condition, poor management, and delinquency. A ~~specific~~collateral-based reserve is recorded when it is probable that a risk-sharing loan will foreclose or has foreclosed, and a ~~general~~ reserve ~~is recorded~~ for ~~other risk-sharing loans on the watch list,~~estimated credit losses and a guaranty obligation isare recorded for all other risk-sharing ~~loans that are not on the watch list.~~loans.

The ~~allowance~~calculated CECL reserve for the Company’s $57.4 billion at-risk Fannie Mae servicing portfolio as of September 30, 2023 was $31.0 million compared to $39.7 million as of December 31, 2022. The significant decrease in the CECL reserve was principally related to a reduction in our historical loss rate factor, which decreased from 1.2 basis points as of December 31, 2022 to 0.6 basis points as of March 31, 2023 (with no change from March 31, 2023 to September 30, 2023), as a year with significant losses in our 10-year lookback period was replaced with a year with significantly fewer losses.

As of September 30, 2023, no at-risk loans were in default compared to three at-risk loans with an aggregate UPB of $78.2 million as of September 30, 2022. The collateral-based reserve on defaulted loans was zero and $10.8 million as of September 30, 2023 and September 30, 2022, respectively. We had a provision for risk-sharing obligations ~~has been primarily~~of $0.6 million for ~~Fannie Mae loans with full risk-sharing. The amount~~the three months ended September 30, 2023 compared to a provision for risk-sharing obligations of $1.2 million for the ~~provision considers our assessment~~three months ended September 30, 2022. We had a benefit for risk-sharing obligations of the likelihood of payment by the borrower, the value of the underlying collateral and the level of risk-sharing. Historically, the loss recognition occurs at or before the loan becoming 60 days delinquent. Our estimates of value are determined considering broker opinions, appraisals, and other sources of market value information relevant to the underlying property and collateral. Risk-sharing obligations are written off against the allowance at final settlement with Fannie Mae.

~~For~~$11.1 million for the nine months ended September 30, ~~2017 and 2016 the provision~~2023, compared to a benefit for risk-sharing obligations ~~was $74 thousand and $453 thousand, respectively. As there is currently only one defaulted loan in~~of $13.0 million for the ~~at risk servicing portfolio, the~~ ~~Allowance for risk-sharing obligations~~ ~~as of~~nine months ended September 30, ~~2017 is based primarily on our collective assessment of~~2022.

We are obligated to repurchase loans that are originated for the ~~probability of loss related to the loans on the watch list as of September 30, 2017. The~~ ~~Allowance for risk-sharing obligations~~ ~~as of September 30, 2016 was based entirely on our collective assessment of the probability of loss related to the loans on the watch list as of September 30, 2016.~~

Agencies’ programs if certain representations and warranties that we provide in connection with such originations are breached. We have never been required to repurchase a ~~loan.~~

~~Off-Balance Sheet Arrangements~~

~~Other than the risk-sharing obligations under the~~loan; however, in October 2023, we received a repurchase request from each of Freddie Mac and Fannie Mae ~~DUS Program disclosed previously~~relating to loans with an outstanding principal balance totaling $24.8 million. We appealed the repurchase request from Freddie Mac and are awaiting a final determination on the appeal. Our appeal request may not be honored, resulting in ~~this Quarterly Report~~a repurchase during the fourth quarter of 2023. The repurchase request from Fannie Mae will result in the repurchase of the loan in the first quarter of 2024. Based on ~~Form 10-Q,~~the value of the underlying collateral, we do not ~~have any off-balance-sheet arrangements.~~believe we will realize a material loss for the repurchase of either loan.

~~Table of Contents~~

New/Recent Accounting Pronouncements

~~See~~As seen in NOTE 2 toin the condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q, ~~for a table that presents the~~there are no accounting pronouncements that the Financial Accounting Standards Board has issued and that have the potential to impact us but have not yet been adopted by ~~us. Although we do not believe any~~us as of ~~the accounting pronouncements listed in that table will have a significant impact on our business activities or compliance with our debt covenants, we are still in the process~~September 30, 2023.

Table of ~~determining the impact some of the new pronouncements may have on our financial results and operating activities~~.Contents

Item 3. Quantitative and Qualitative ~~Disclosure~~Disclosures About Market Risk

Interest Rate Risk

For loans held for sale to ~~the Agencies,~~Fannie Mae, Freddie Mac, and HUD, we are not currently exposed to unhedged interest rate risk during the loan commitment, closing, and delivery processes. The sale or placement of each loan to an investor is negotiated prior to closing on the loan with the borrower, and the sale or placement is typically effectuated within 60 days of closing. The coupon rate for the loan is set at the same time we establish the interest rate with the investor.

Some of our assets and liabilities are subject to changes in interest rates. ~~Earnings~~Placement fee revenue from ~~escrows are~~escrow deposits generally ~~based on LIBOR. 30-day LIBOR~~track the effective Federal Funds Rate (“EFFR”). The EFFR was 533 basis points and 308 basis points as of September 30, ~~2017~~2023 and ~~2016 was 123 basis points and 53 basis points,~~2022, respectively. The following table shows the impact on our ~~annual escrow earnings~~placement fee revenue due to a 100-basis point increase and decrease in ~~30-day LIBOR~~EFFR based on our escrow balances outstanding at each period end. A portion of these changes in earnings as a result of a 100-basis point increase in the ~~30-day LIBOR~~EFFR would be delayed by several months due to the negotiated nature of some of our ~~escrow~~placement arrangements.

As of September 30,

Change in annual escrow earnings due to (in thousands):

2017

2016

100 basis point increase in 30-day LIBOR

$
17,856

$
16,734

100 basis point decrease in 30-day LIBOR (1)

(17,856)

(8,413)


	As of September 30,
Change in annual placement fee revenue due to: (in thousands)	2023		2022
100 basis point increase in EFFR	$	28,164	$	30,790
100 basis point decrease in EFFR		(28,164)		(30,628)

The borrowing cost of our warehouse facilities used to fund loans held for sale and ~~loans held for investment~~investments in tax credit equity is based on ~~LIBOR.~~SOFR. The base SOFR was 531 basis points and 298 basis points as of September 30, 2023 and 2022, respectively. The interest income on our loans held for investment is based on ~~LIBOR.~~SOFR. The ~~LIBOR~~SOFR reset date for loans held for investment is the same date as the ~~LIBOR~~SOFR reset date for the corresponding warehouse facility. The following table shows the impact on our annual net warehouse interest income due to a 100-basis point increase and decrease in ~~30-day LIBOR~~Adjusted Term SOFR, based on our warehouse borrowings outstanding at each period end. In the table below, the large decrease in absolute value for 2023 is due to a significant decline in the outstanding Agency Warehouse balances as of September 30, 2023. The changes shown below do not reflect ~~the assumption that there is a corresponding 100-basis point~~an increase or decrease in the interest rate earned on our loans held for sale.


	As of September 30,
Change in annual net warehouse interest income due to: (in thousands)	2023		2022
100 basis point increase in SOFR	$	(7,822)	$	(23,630)
100 basis point decrease in SOFR		7,822		23,630

As of September 30,

Change in annual net warehouse interest income due to (in thousands):

2017

2016

100 basis point increase in 30-day LIBOR

$
(9,765)

$
(6,702)

100 basis point decrease in 30-day LIBOR (1)

9,765

3,534

~~All of our corporate debt~~Our Corporate Debt is based on ~~30-day LIBOR, with a 30-day LIBOR floor~~Adjusted Term SOFR as of ~~100 basis points.~~September 30, 2023. In January 2023, our Corporate Debt increased by $200 million. The following table shows the impact on our annual ~~net warehouse interest income~~earnings due to a 100-basis point increase and decrease in ~~30-day LIBOR~~SOFR as of September 30, 2023 and September 30, 2022, respectively, based on ~~our~~the note payable balance outstanding at each period end. The Alliant note payable as of September 30, 2022 was a fixed-rate note; therefore, there was no impact to our earnings related to this debt when interest rates change as of September 30, 2022.


	As of September 30,
Change in annual income from operations due to: (in thousands)	2023		2022
100 basis point increase in SOFR	$	(7,885)	$	(5,955)
100 basis point decrease in SOFR		7,885		5,955

As of September 30,

Change in annual corporate debt interest expense due to (in thousands):

2017

2016

100 basis point increase in 30-day LIBOR (2)

$
(1,665)

$
(884)

100 basis point decrease in 30-day LIBOR (3)

383

—

~~(1)~~

~~The decrease in 2016 was to zero as 30-day LIBOR was less than 100 basis points~~.

~~(2)~~

~~The increase in 2016 was 53 basis points due to the 30-day LIBOR floor.~~

~~(3)~~

~~There was no impact in 2016 as 30-day LIBOR at the time was less than the 30-day LIBOR floor~~. ~~The decrease in 2017 was 23 basis points due to the 30-day LIBOR floor.~~

~~Table of Contents~~

Market Value Risk

The fair value of our MSRs is subject to ~~market~~market-value risk. A 100-basis point increase or decrease in the weighted average discount rate would decrease or increase, respectively, the fair value of our MSRs by approximately ~~$24.6~~$43.2 million as of September 30, ~~2017,~~2023 compared to ~~$19.4~~$40.6 million as of September 30, ~~2016.~~2022. Our Fannie Mae and Freddie Mac ~~servicing arrangements provide for make-whole payments in~~loans include economic deterrents that reduce the ~~event~~risk of ~~a voluntary~~loan prepayment prior to the expiration of the prepayment protection ~~period.~~period, including prepayment premiums, loan defeasance, or yield maintenance fees. These prepayment protections generally extend the duration of a loan compared to a loan without similar protections. If a loan is prepaid prior to the expiration of the prepayment protection period, and the customer is obligated to incur a prepayment premium, our servicing contacts with Fannie Mae and Freddie Mac allow us to receive a portion of the prepayment premium. Our servicing ~~contracts~~contract with institutional investors

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and HUD do not require ~~payment of a make-whole amount.~~them to provide us with prepayment fees. As of September 30, ~~2017~~2023 and ~~2016, 87%~~2022, 90% and 89% of the loans for which we earn servicing fees are protected from the risk of prepayment through ~~make-whole requirements; given~~prepayment provisions, respectively. Given this significant level of prepayment protection, we do not hedge our servicing portfolio for prepayment risk. As interest rates have risen rapidly over the past 18 months, we have experienced a significant reduction in prepayment activity within our loan servicing portfolio, which in turn has significantly reduced the volume and amount of prepayment premium revenues we receive.

London Interbank Offered Rate (“LIBOR”) Transition

On June 30, 2023, the United Kingdom’s Financial Conduct Authority, the regulator for the administration of LIBOR, stopped publishing LIBOR rates, including the 30-day LIBOR (previously our primary reference rate). All of our legacy GSE LIBOR-based loans transitioned to SOFR effective July 1, 2023, after providing formal notice to all impacted borrowers. All of our debt agreements with our warehouse facilities have transitioned to SOFR as of June 30, 2023.

Item 4. Controls and Procedures

As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of our management, including the principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934.

Based on that evaluation, the principal executive officer and principal financial officer concluded that the design and operation of these disclosure controls and procedures as of the end of the period covered by this report were effective to provide reasonable assurance that information required to be disclosed in our reports under the Securities and Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, we may be party to various claims and litigation, none of which we believe is material. We cannot predict the outcome of any pending litigation and may be subject to consequences that could include fines, penalties and other costs, and our reputation and business may be impacted. Our management believes that any liability that could be imposed on us in connection with the disposition of any pending lawsuits would not have a material adverse effect on our business, results of operations, liquidity, or financial condition.

Item 1A. Risk Factors

We have included in Part I, Item 1A of our ~~2016~~2022 Form 10-K descriptions of certain risks and uncertainties that could affect our business, future performance, or financial condition (the “Risk Factors”). There have been no material changes from the disclosures provided in ~~the 2016~~our 2022 Form 10-K, ~~with respect to~~except as provided in Part II, Item 1A of our quarterly report on Form 10-Q for the ~~Risk Factors.~~quarterly period ended March 31, 2023. Investors should consider the Risk Factors prior to making an investment decision with respect to the Company’s stock.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Under the ~~2015~~2020 Equity Incentive Plan, subject to the Company’s approval, grantees have the option of electing to satisfy minimum tax withholding obligations at the time of vesting or exercise by allowing usthe Company to withhold and purchase ~~at the prevailing market price~~ the shares of stock otherwise

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issuable to the grantee. During the quarter ended September 30, ~~2017,~~2023, we purchased 10ten thousand shares to satisfy grantee tax withholding obligations on share-vesting events. ~~Additionally, we announced~~During the first quarter of 2023, the Company’s Board of Directors approved a share repurchase program inthat permits the ~~first quarter~~repurchase of ~~2017. The repurchase program authorized by our Board of Directors permits us to repurchase~~ up to $75.0 million of ~~shares of our~~the Company’s common stock

~~Table of Contents~~

over a 12-month period ~~ending~~beginning on February ~~10, 2018.~~23, 2023. During the quarter ended September 30, 2023 we did not repurchase any shares under this share repurchase program. The Company had ~~$64.2~~$75.0 million of authorized share repurchase capacity remaining as of September 30, ~~2017.~~2023. The following table provides information regarding common stock repurchases for the quarter ended September 30, ~~2017:~~2023:

Total Number of

Approximate

Shares Purchased as

Dollar Value

Total Number

Average

Part of Publicly

of Shares that May


of Shares

Price Paid

Announced Plans

Yet Be Purchased Under

Period

Purchased

per Share

or Programs

the Plans or Programs

July 1-31, 2017

10,487

48.83

—

75,000,000

August 1-31, 2017

188,419

47.18

188,419

66,105,030

September 1-30, 2017

40,000

46.59

40,000

64,240,362

Total

238,906

$
47.15

228,419

$
64,240,362


				Total Number of	Approximate
				Shares Purchased as	Dollar Value
	Total Number	Average		Part of Publicly	of Shares that May
	of Shares	Price Paid		Announced Plans	Yet Be Purchased Under
Period	Purchased	per Share		or Programs	the Plans or Programs
July 1-31, 2023	923	$	79.09	—		75,000,000
August 1-31, 2023	4,872		90.53	—		75,000,000
September 1-30, 2023	4,205		84.87	—		75,000,000
3rd Quarter	10,000	$	87.09	—

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Rule 10b5-1 Trading Arrangements

During the quarter ended September 30, 2023, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading agreement” or “non-Rule 10b5-1 trading agreement,” as each term is defined in Item 408 of Regulation S-K.

~~None.~~

Item 6. Exhibits

(a) Exhibits:

2.1		Contribution Agreement, dated as of October 29, 2010, by and among Mallory Walker, Howard W. Smith, William M. Walker, Taylor Walker, Richard C. Warner, Donna Mighty, Michael ~~Yavinsky,~~Alinksy, Edward B. Hermes, Deborah A. Wilson and Walker & Dunlop, Inc. (incorporated by reference to Exhibit 2.1 to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (File No. 333-168535) filed on December 1, 2010)
2.2		Contribution Agreement, dated as of October 29, 2010, between Column Guaranteed LLC and Walker & Dunlop, Inc. (incorporated by reference to Exhibit 2.2 to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (File No. 333-168535) filed on December 1, 2010)
2.3		Amendment No. 1 to Contribution Agreement, dated as of December 13, 2010, by and between Walker & Dunlop, Inc. and Column Guaranteed LLC (incorporated by reference to Exhibit 2.3 to Amendment No. 6 to the Company’s Registration Statement on Form S-1 (File No. 333-168535) filed on December 13, 2010)
2.4		Purchase Agreement, dated June 7, 2012, by and among Walker & Dunlop, Inc., Walker & Dunlop, LLC, CW Financial Services LLC and CWCapital LLC (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K/A filed on June 15, 2012)
2.5		Purchase Agreement, dated as of August 30, 2021, by and among Walker & Dunlop, Inc., WDAAC, LLC, Alliant Company, LLC, Alliant Capital, Ltd., Alliant Fund Asset Holdings, LLC, Alliant Asset Management Company, LLC, Alliant Strategic Investments II, LLC, ADC Communities, LLC, ADC Communities II, LLC, AFAH Finance, LLC, Alliant Fund Acquisitions, LLC, Vista Ridge 1, LLC, Alliant, Inc., Alliant ADC, Inc., Palm Drive Associates, LLC, and Shawn Horwitz (incorporated by reference to Exhibit 2.5 of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021)

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2.6		Share Purchase Agreement dated February 4, 2022 by and among Walker & Dunlop, Inc., WD-GTE, LLC, GeoPhy B.V. (“GeoPhy”), the several persons and entities constituting the holders of all of GeoPhy’s issued and outstanding shares of capital stock, and Shareholder Representative Services LLC, as representative of the Shareholders (incorporated by reference to Exhibit 2.6 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021)
3.1		Articles of Amendment and Restatement of Walker & Dunlop, Inc. (incorporated by reference to Exhibit 3.1 to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (File No. 333-168535) filed on December 1, 2010)
3.2		Amended and Restated Bylaws of Walker & Dunlop, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on February ~~21, 2017)~~10, 2023)
4.1		Specimen Common Stock Certificate of Walker & Dunlop, Inc. (incorporated by reference to Exhibit 4.1 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (File No. 333-168535) filed on September 30, 2010)
4.2		Registration Rights Agreement, dated December 20, 2010, by and among Walker & Dunlop, Inc. and Mallory Walker, Taylor Walker, William M. Walker, Howard W. Smith, III, Richard C. Warner, Donna Mighty, Michael Yavinsky, Ted Hermes, Deborah A. Wilson and Column Guaranteed LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 27, 2010)
4.3		Stockholders Agreement, dated December 20, 2010, by and among William M. Walker, Mallory Walker, Column Guaranteed LLC and Walker & Dunlop, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 27, 2010)
4.4		Piggy-Back Registration Rights Agreement, dated June 7, 2012, by and among Column Guaranteed, LLC, William M. Walker, Mallory Walker, Howard W. Smith, III, Deborah A. Wilson, Richard C. Warner, CW Financial Services LLC and Walker & Dunlop, Inc. (incorporated by reference to Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012 filed on August 9, 2012)

~~Table of Contents~~

4.5		Voting Agreement, dated as of June 7, 2012, by and among Walker & Dunlop, Inc., Walker & Dunlop, LLC, Mallory Walker, William M. Walker, Richard Warner, Deborah Wilson, Richard M. Lucas, and Howard W. Smith, III, and CW Financial Services LLC (incorporated by reference to Annex C of the Company’s proxy statement filed on July 26, 2012)
4.6		Voting Agreement, dated as of June 7, 2012, by and among Walker & Dunlop, Inc., Walker & Dunlop, LLC, Column Guaranteed, LLC and CW Financial Services LLC (incorporated by reference to Annex D of the Company’s proxy statement filed on July 26, 2012)
10.1		~~Eighth~~ Amendment No. 6 to Warehousing Credit and Security Agreement, dated as of August 9, 2017, by and between Walker & Dunlop, LLC, as Borrower, the various financial institutions and other Persons parties thereto, as Lenders, and TD Bank, N.A., as Credit Agent ~~(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 9, 2017).~~
~~10.2~~		~~Second Amended and Restated Warehousing Credit and Security~~Master Repurchase Agreement, dated as of September ~~11, 2017,~~12, 2023, by and among Walker & Dunlop, LLC, Walker & Dunlop, ~~Inc.~~Inc, and ~~PNC Bank, National Association, as Lender~~ ~~(incorporated~~JPMorgan Chase bank, N.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September ~~13, 2017).~~15, 2023)
~~10.3~~10.2		~~Second~~Amendment No. 2 to Amended and Restated ~~Guaranty and Suretyship Agreement,~~Letter, dated as of September ~~11, 2017,~~12, 2023, by and among Walker & Dunlop, LLC, Walker & Dunlop, Inc. ~~in favor of PNC~~, and JPMorgan Chase Bank, ~~National Association, as Lender~~ ~~(incorporated~~N.A. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September ~~13, 2017)~~.15, 2023)
10.3	*†	Amendment One to the Walker & Dunlop, Inc, Deferred Compensation Plan
10.4	*	~~First Amendment to Second Amended and Restated Warehousing Credit and Security~~Form of Trust Agreement ~~dated as of September 15, 2017, by and among Walker~~  ~~Dunlop, LLC, Walker~~  ~~Dunlop, Inc. and PNC Bank, National Association, as Lender~~ ~~(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 20, 2017)~~.
31.1	*	Certification of Walker & Dunlop, Inc.'s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	*	Certification of Walker & Dunlop, Inc.'s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	**	Certification of Walker & Dunlop, Inc.'s Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
~~101.1~~101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	*	~~XBRL Instance Document~~
~~101.2~~	*	Inline XBRL Taxonomy Extension Schema Document
~~101.3~~101.CAL	*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
~~101.4~~101.DEF	*	Inline XBRL Taxonomy Extension Definition Linkbase Document
~~101.5~~101.LAB	*	Inline XBRL Taxonomy Extension Label Linkbase Document
~~101.6~~101.PRE	*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

†:Denotes a management contract or compensation plan, contract or arrangement.

*: Filed herewith.

**: Furnished herewith. Information in this Quarterly Report on Form 10-Q furnished herewith shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act��) or otherwise subject to the liabilities of that Section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

4670

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~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Walker & Dunlop, Inc.
Date: November ~~8, 2017~~9, 2023	By:	/s/ William M. Walker
		William M. Walker
		Chairman and Chief Executive Officer


Date: November ~~8, 2017~~9, 2023	By:	/s/ ~~Stephen P. Theobald~~Gregory A. Florkowski
		~~Stephen P. Theobald~~Gregory A. Florkowski
		Executive Vice President and Chief Financial Officer ~~and Treasurer~~

4771


(Mark One)
~~(Mark One)~~☒
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Maryland		80-0629925
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 Par Value Per Share	WD	New York Stock Exchange


		Page

PART I	FINANCIAL INFORMATION		3
		~~Page~~

~~PART I~~Item 1.	~~FINANCIAL INFORMATION~~Financial Statements	2 3

Item 1.2.	~~Financial Statements~~	2

~~Item 2.~~	Management's Discussion and Analysis of Financial Condition and Results of Operations	21 32

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43 67

Item 4.	Controls and Procedures	44 68

PART II	OTHER INFORMATION	44 68

Item 1.	Legal Proceedings	44 68

Item 1A.	Risk Factors	44 68

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44 68

Item 3.	Defaults Upon Senior Securities	45 69

Item 4.	Mine Safety Disclosures	45 69

Item 5.	Other Information	45 69

Item 6.	Exhibits	45
		69

	Signatures	47 71


	For the nine months ended September 30,
	2023		2022
Supplemental Disclosure of Non-Cash Activity:
Issuance of common stock to settle compensation liabilities		2,953		6,551
Issuance of common stock to settle contingent consideration liabilities (NOTE 7)		—		8,750
Net increase in total equity due to consolidations of tax credit entities (NOTE 10)		—		10,447
Net increase in total assets due to consolidations of tax credit entities (NOTE 10)		—		13,700
Net increase in total liabilities due to consolidations of tax credit entities (NOTE 10)		—		3,559
Forgiveness of receivables related to acquisitions		—		5,460
Allowance charge-off of loan held for investment		(6,033)		—
Additions of contingent consideration liabilities from acquisitions (NOTE 7)		—		119,955


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	For the three months ended				For the nine months ended
	September 30,				September 30,
	2017		2016		2017		2016
Revenues
Gains from mortgage banking activities	$	111,304	$	100,630	$	309,912	$	249,406
Servicing fees		44,900		37,134		129,639		101,554
Net warehouse interest income		5,358		5,614		17,778		15,925
Escrow earnings and other interest income		5,804		2,630		13,610		6,225
Other		12,370		8,778		33,716		23,775
Total revenues	$	179,736	$	154,786	$	504,655	$	396,885

Expenses
Personnel	$	78,469	$	64,377	$	198,157	$	154,365
Amortization and depreciation		32,343		29,244		97,541		80,824
Provision (benefit) for credit losses		9		283		(216)		166
Interest expense on corporate debt		2,555		2,485		7,401		7,419
Other operating expenses		11,664		9,685		34,871		29,511
Total expenses	$	125,040	$	106,074	$	337,754	$	272,285
Income from operations	$	54,696	$	48,712	$	166,901	$	124,600
Income tax expense		19,988		18,851		54,621		47,295
Net income before noncontrolling interests	$	34,708	$	29,861	$	112,280	$	77,305
Less: net income from noncontrolling interests		330		233		114		198
Walker & Dunlop net income	$	34,378	$	29,628	$	112,166	$	77,107

Basic earnings per share	$	1.14	$	1.01	$	3.74	$	2.62
Diluted earnings per share	$	1.06	$	0.96	$	3.49	$	2.51

Basic weighted average shares outstanding		30,085		29,374		30,009		29,417
Diluted weighted average shares outstanding		32,312		30,793		32,170		30,743


	For the three and nine months ended September 30, 2023
		Stockholders' Equity
	Common Stock							Retained		Noncontrolling		Total
	Shares	Amount		APIC		AOCI		Earnings		Interests		Equity
Balance at December 31, 2022	32,396	$	323	$	412,636	$	(1,568)	$	1,278,035	$	27,403	$	1,716,829
Walker & Dunlop net income	—		—		—		—		26,665		—		26,665
Net income (loss) from noncontrolling interests	—		—		—		—		—		805		805
Other comprehensive income (loss), net of tax	—		—		—		(53)		—		—		(53)
Stock-based compensation - equity classified	—		—		6,664		—		—		—		6,664
Issuance of common stock in connection with equity compensation plans	468		5		3,397		—		—		—		3,402
Repurchase and retirement of common stock	(185)		(1)		(17,394)		—		—		—		(17,395)
Distributions to noncontrolling interest holders	—		—		—		—		—		(600)		(600)
Cash dividends paid ($0.63 per common share)	—		—		—		—		(21,221)		—		(21,221)
Other activity	—		—		—		—		(2,360)		2,360		—
Balance at March 31, 2023	32,679	$	327	$	405,303	$	(1,621)	$	1,281,119	$	29,968	$	1,715,096
Walker & Dunlop net income	—		—		—		—		27,635		—		27,635
Net income (loss) from noncontrolling interests	—		—		—		—		—		(2,114)		(2,114)
Other comprehensive income (loss), net of tax	—		—		—		156		—		—		156
Stock-based compensation - equity classified	—		—		7,541		—		—		—		7,541
Issuance of common stock in connection with equity compensation plans	33		—		—		—		—		—		—
Repurchase and retirement of common stock	(9)		—		(662)		—		—		—		(662)
Distributions to noncontrolling interest holders	—		—		—		—		—		(1,735)		(1,735)
Cash dividends paid ($0.63 per common share)	—		—		—		—		(21,180)		—		(21,180)
Other activity	—		—		—		—		(240)		—		(240)
Balance at June 30, 2023	32,703	$	327	$	412,182	$	(1,465)	$	1,287,334	$	26,119	$	1,724,497
Walker & Dunlop net income	—		—		—		—		21,458		—		21,458
Net income (loss) from noncontrolling interests	—		—		—		—		—		(314)		(314)
Other comprehensive income (loss), net of tax	—		—		—		(399)		—		—		(399)
Stock-based compensation - equity classified	—		—		7,015		—		—		—		7,015
Issuance of common stock in connection with equity compensation plans	86		1		1,736		—		—		—		1,737
Repurchase and retirement of common stock	(10)		—		(871)		—		—		—		(871)
Distributions to noncontrolling interest holders	—		—		—		—		—		(993)		(993)
Cash dividends paid ($0.63 per common share)	—		—		—		—		(21,139)		—		(21,139)
Balance at September 30, 2023	32,779	$	328	$	420,062	$	(1,864)	$	1,287,653	$	24,812	$	1,730,991


	September 30,				December 31,
(in thousands)	2017		2016		2016		2015
Cash and cash equivalents	$	85,363	$	83,887	$	118,756	$	136,988
Restricted cash		17,179		14,370		9,861		5,306
Pledged securities, at fair value (restricted cash equivalents)		95,102		81,933		84,850		72,190
Total cash, cash equivalents, restricted cash, and restricted cash equivalents	$	197,644	$	180,190	$	213,467	$	214,484


~~Standard~~	~~Issue Date~~	~~Description~~	~~Effective Date~~	~~Expected Financial Statement Impact~~
~~Accounting Standards Update ("ASU") 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~	~~Q2 2016~~	ASU 2016-13 ("the Standard") represents a significant change to the incurred loss model currently used to account for credit losses. The Standard requires an entity to estimate the credit losses expected over the life of the credit exposure upon initial recognition of that exposure. The expected credit losses consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments. Exposures with similar risk characteristics are required to be grouped together when estimating expected credit losses. The initial estimate and subsequent changes to the estimated credit losses are required to be reported in current earnings in the income statement and through an allowance in the balance sheet. ASU 2016-13 is applicable to financial assets subject to credit losses and measured at amortized cost and certain off-balance-sheet credit exposures. The Standard will modify the way the Company estimates its allowance for risk-sharing obligations and its allowance for loan losses. ASU 2016-13 requires modified retrospective application to all outstanding, in-scope instruments, with a cumulative-effect adjustment recorded to opening retained earnings as of the beginning of the period of adoption.	~~January 1, 2020 (early adoption permitted January 1, 2019)~~	The Company is in the preliminary stages of implementation and is still in the process of determining the significance of the impact the Standard will have on its financial statements and the timing of when it will adopt ASU 2016-13. The Company expects its Allowance for risk-sharing obligations to increase when ASU 2016-13 is adopted. The magnitude of the impacts will not be known until closer to the adoption date.
~~ASU 2016-02,~~ ~~Leases (Topic 842)~~	~~Q1 2016~~	ASU 2016-02 represents a significant reform to the accounting for leases. Lessees initially recognize a lease liability for the obligation to make lease payments and a right-of-use (“ROU”) asset for the right to use the underlying asset for the lease term. The lease liability is measured at the present value of the lease payments over the lease term. The ROU asset is measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee’s initial direct costs. Lessees generally recognize lease expense for these leases on a straight-line basis, which is similar to what they do today. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements.	~~January 1, 2019 (early adoption is permitted)~~	The Company is in the preliminary stages of implementation and is still in the process of determining the significance of the impact ASU 2016-02 will have on its financial statements. The Company will adopt ASU 2016-02 when required in 2019.
~~ASU 2016-01,~~ ~~Financial Instruments – Overall – Recognition and Measurement of Financial Assets and Financial Liabilities~~	~~Q1 2016~~	The guidance requires that unconsolidated equity investments not accounted for under the equity method be recorded at fair value, with changes in fair value recorded through net income. The accounting principles that permitted available-for-sale classification with unrealized holding gains and losses recorded in other comprehensive income for equity securities will no longer be applicable. The guidance is not applicable to debt securities and loans and requires minor changes to the disclosure and presentation of financial instruments. ASU 2016-01 generally requires a cumulative-effect adjustment to opening retained earnings as of the beginning of the period of adoption.	~~January 1, 2018 (early adoption permitted for certain parts)~~	~~The Company does not believe that ASU 2016-01 will have a material impact on its reported financial results.~~


	As of September 30, 2017
	Gross		Accumulated		Net
(in thousands)	carrying value		amortization		carrying value
Acquired MSRs	$	175,934	$	(117,861)	$	58,073
Originated MSRs		760,795		(230,959)		529,836
Total	$	936,729	$	(348,820)	$	587,909


	As of December 31, 2016
	Gross		Accumulated		Net
(in thousands)	carrying value		amortization		carrying value
Acquired MSRs	$	175,934		(104,264)	$	71,670
Originated MSRs		642,030		(191,770)		450,260
Total	$	817,964	$	(296,034)	$	521,930


Components of MSRs (in thousands)	September 30, 2023		December 31, 2022
Gross value	$	1,710,517	$	1,659,185
Accumulated amortization		(788,771)		(683,959)
Net carrying value	$	921,746	$	975,226


	Originated MSRs		Acquired MSRs		Total MSRs
(in thousands)	Amortization		Amortization		Amortization
Three Months Ending December 31,
2017	$	26,528	$	3,065	$	29,593
Year Ending December 31,
2018	$	98,640	$	11,310	$	109,950
2019		84,761		10,119		94,880
2020		76,136		8,536		84,672
2021		66,589		6,821		73,410
2022		53,579		4,918		58,497
Thereafter		123,603		13,304		136,907
Total	$	529,836	$	58,073	$	587,909


	Expected
(in thousands)	Amortization
Three Months Ending December 31,
2023	$	49,384
Year Ending December 31,
2024	$	187,062
2025		164,837
2026		139,019
2027		118,031
2028		95,632
Thereafter		167,781
Total	$	921,746


		2023
CECL Calculation Details and Provision Impact		Q1		Q2		Q3		Total
Forecast-period loss rate (in basis points)		2.3		2.3		2.3		N/A
Reversion-period loss rate (in basis points)		1.5		1.5		1.5		N/A
Historical loss rate (in basis points)		0.6		0.6		0.6		N/A
At-risk Fannie Mae servicing portfolio UPB (in billions)	$	54.5	$	55.7	$	57.4		N/A
CECL allowance (in millions)	$	28.7	$	28.9	$	31.0		N/A
Provision (benefit) for risk-sharing obligations (in millions)	$	(11.0)	$	(0.7)	$	0.6	$	(11.1)


	September 30, 2023
(dollars in thousands)	Committed		Uncommitted		Total Facility		Outstanding
Facility	Amount		Amount		Capacity		Balance		Interest rate⁽¹⁾
Agency Warehouse Facility #1	$	325,000	$	250,000	$	575,000	$	92,872	SOFR plus 1.30%
Agency Warehouse Facility #2		700,000		300,000		1,000,000		133,366	SOFR plus 1.30%
Agency Warehouse Facility #3		600,000		265,000		865,000		106,856	SOFR plus 1.35%
Agency Warehouse Facility #4		200,000		225,000		425,000		124,934	SOFR plus 1.30% to 1.35%
Agency Warehouse Facility #5		—		1,000,000		1,000,000		94,755	SOFR plus 1.45%
Total National Bank Agency Warehouse Facilities	$	1,825,000	$	2,040,000	$	3,865,000	$	552,783
Fannie Mae repurchase agreement, uncommitted line and open maturity		—		1,500,000		1,500,000		212,811
Total Agency Warehouse Facilities	$	1,825,000	$	3,540,000	$	5,365,000	$	765,594


	September 30, 2017
(dollars in thousands)	Committed		Uncommitted		Temporary		Total Facility		Outstanding
Facility1	Amount		Amount		Increase		Capacity		Balance		Interest rate
Agency Warehouse Facility #1	$	425,000	$	—	$	—	$	425,000	$	190,054	30-day LIBOR plus 1.40%
Agency Warehouse Facility #2		500,000		—		2,066,000		2,566,000		2,228,837	30-day LIBOR plus 1.30%
Agency Warehouse Facility #3		480,000		—		400,000		880,000		424,714	30-day LIBOR plus 1.25%
Agency Warehouse Facility #4		350,000		—		—		350,000		285,170	30-day LIBOR plus 1.40%
Agency Warehouse Facility #5		30,000		—		—		30,000		5,797	30-day LIBOR plus 1.80%
Agency Warehouse Facility #6		250,000		250,000		—		500,000		—	30-day LIBOR plus 1.35%
Fannie Mae repurchase agreement, uncommitted line and open maturity		—		1,500,000		—		1,500,000		75,391	30-day LIBOR plus 1.15%
Total Agency Warehouse Facilities	$	2,035,000	$	1,750,000	$	2,466,000	$	6,251,000	$	3,209,963

Interim Warehouse Facility #1	$	85,000	$	—	$	—	$	85,000	$	43,440	30-day LIBOR plus 1.90%
Interim Warehouse Facility #2		200,000		—		—		200,000		23,272	30-day LIBOR plus 2.00%
Interim Warehouse Facility #3		75,000		—		—		75,000		29,132	30-day LIBOR plus 2.00% to 2.50%
Total Interim Warehouse Facilities	$	360,000	$	—	$	—	$	360,000	$	95,844
Debt issuance costs		—		—		—		—		(218)
Total warehouse facilities	$	2,395,000	$	1,750,000	$	2,466,000	$	6,611,000	$	3,305,589


	Nine Months Ended September 30,
(in thousands)	2017		2016

					For the nine months ended
					September 30,
Roll Forward of Goodwill (in thousands)					2023		2022
Beginning balance	$	96,420	$	90,338	$	959,712	$	698,635
Additions from acquisitions		27,347		—		—		222,670
Measurement-period and other adjustments						3,998		26,859
Impairment		—		—		(14,000)		—
Ending balance	$	123,767	$	90,338	$	949,710	$	948,164


	As of		As of
Goodwill by Reportable Segment (in thousands)	September 30, 2023		December 31, 2022
Capital Markets	$	510,189	$	520,191
Servicing & Asset Management		439,521		439,521
Ending balance	$	949,710	$	959,712


		For the nine months ended
		September 30,
Roll Forward of Other Intangible Assets (in thousands)		2023		2022
Beginning balance		$	198,643	$	183,904
Additions from acquisitions			—		31,000
Amortization	��		(12,716)		(12,070)
Ending balance		$	185,927	$	202,834


Components of Other Intangible Assets (in thousands)	September 30, 2023		December 31, 2022
Gross value	$	220,682	$	220,682
Accumulated amortization		(34,755)		(22,039)
Net carrying value	$	185,927	$	198,643


	Quoted Prices in		Significant		Significant
	Active Markets		Other		Other
	For Identical		Observable		Unobservable
	Assets		Inputs		Inputs		Balance as of
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Period End
September 30, 2017
Assets
Loans held for sale	$	—	$	3,275,761	$	—	$	3,275,761
Pledged securities		95,102		—		—		95,102
Derivative assets		—		—		43,853		43,853
Total	$	95,102	$	3,275,761	$	43,853	$	3,414,716

Liabilities
Derivative liabilities	$	—	$	—	$	175	$	175
Total	$	—	$	—	$	175	$	175

December 31, 2016
Assets
Loans held for sale	$	—	$	1,858,358	$	—	$	1,858,358
Pledged securities		84,850		—		—		84,850
Derivative assets		—		—		61,824		61,824
Total	$	84,850	$	1,858,358	$	61,824	$	2,005,032

Liabilities
Derivative liabilities	$	—	$	—	$	4,396	$	4,396
Total	$	—	$	—	$	4,396	$	4,396


	Fair Value Measurements
	Using Significant Unobservable Inputs:
	Derivative Instruments
	For the three months ended				For the nine months ended
	September 30,				September 30,
(in thousands)	2017		2016		2017		2016
Derivative assets and liabilities, net
Beginning balance	$	24,491	$	600	$	57,428	$	10,345
Settlements		(92,117)		(71,250)		(323,662)		(229,178)
Realized gains recorded in earnings (1)		67,626		70,650		266,234		218,833
Unrealized gains recorded in earnings (1)		43,678		31,156		43,678		31,156
Ending balance	$	43,678	$	31,156	$	43,678	$	31,156


	September 30, 2017				December 31, 2016
	Carrying		Fair		Carrying		Fair
(in thousands)	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	$	85,363	$	85,363	$	118,756	$	118,756
Restricted cash		17,179		17,179		9,861		9,861
Pledged securities		95,102		95,102		84,850		84,850
Loans held for sale		3,275,761		3,275,761		1,858,358		1,858,358
Loans held for investment, net		152,050		152,764		220,377		222,313
Derivative assets		43,853		43,853		61,824		61,824
Total financial assets	$	3,669,308	$	3,670,022	$	2,354,026	$	2,355,962

Financial liabilities:
Derivative liabilities	$	175	$	175	$	4,396	$	4,396
Warehouse notes payable		3,305,589		3,305,807		1,990,183		1,992,111
Note payable		163,935		166,499		164,163		167,327
Total financial liabilities	$	3,469,699	$	3,472,481	$	2,158,742	$	2,163,834


		Stockholders' Equity
				Additional
	Common Stock			Paid-In		Retained		Noncontrolling		Total
(in thousands)	Shares	Amount		Capital		Earnings		Interests		Equity
Balance at December 31, 2016	29,551	$	296	$	228,889	$	381,031	$	4,858	$	615,074
Walker & Dunlop net income	—		—		—		112,166		—		112,166
Net income from noncontrolling interests	—		—		—		—		114		114
Stock-based compensation - equity classified	—		—		14,948		—		—		14,948
Issuance of common stock in connection with equity compensation plans	1,077		10		2,877		—		—		2,887
Repurchase and retirement of common stock	(679)		(7)		(20,622)		(8,234)		—		(28,863)
Other	—		—		6		—		—		6
Balance at September 30, 2017	29,949	$	299	$	226,098	$	484,963	$	4,972	$	716,332


	As of September 30,
Servicing Portfolio by Product:	2017		2016
Fannie Mae	$	30,005,596	$	25,875,684
Freddie Mac		25,930,819		19,702,477
Ginnie Mae - HUD		8,878,899		9,254,830
Brokered (1)		5,170,479		4,024,490
Interim Loans		298,889		264,508
Total Servicing Portfolio	$	70,284,682	$	59,121,989

Key Servicing Metrics (end of period):
Weighted-average servicing fee rate (basis points)		25.7		25.6
Weighted-average remaining term (years)		9.9		10.5


	Loan Origination Volume by Product Type
	For the three months ended				For the nine months ended
	September 30,				September 30,
	2017		2016		2017		2016
Fannie Mae	18	%	37	%	30	%	41	%
Freddie Mac	53		31		35		26
Ginnie Mae - HUD	3		9		5		5
Brokered	26		21		29		26
Interim Loans (1)	-		2		1		2


	Servicing Fees Details
	For the three months ended					For the nine months ended
	September 30,					September 30,
(dollars in thousands)	2017			2016		2017			2016
Average Servicing Portfolio	$	67,685,503		$	58,181,130	$	65,438,795		$	53,820,305
Dollar Change	$	9,504,373				$	11,618,490
Percentage Change		16	%				22	%
Average Servicing Fee (basis points)		26.3			25.3		26.3			25.1
Basis Point Change		1.0					1.2
Percentage Change		4	%				5	%


	Net Warehouse Interest Income Details
	For the three months ended					For the nine months ended
	September 30,					September 30,
(dollars in thousands)	2017			2016		2017			2016
Average LHFS Outstanding Balance	$	1,633,976		$	1,366,356	$	1,289,861		$	1,212,304
Dollar Change	$	267,620				$	77,557
Percentage Change		20	%				6	%
LHFS Net Spread (basis points)		85			102		99			119
Basis Point Change		(17)					(20)
Percentage Change		(17)	%				(17)	%
Average LHFI Outstanding Balance	$	192,244		$	240,431	$	254,421		$	214,608
Dollar Change	$	(48,187)				$	39,813
Percentage Change		(20)	%				19	%
LHFI Net Spread (basis points)		389			356		429			320
Basis Point Change		33					109
Percentage Change		9	%				34	%


	As of September 30,
Change in annual escrow earnings due to (in thousands):	2017		2016
100 basis point increase in 30-day LIBOR	$	17,856	$	16,734
100 basis point decrease in 30-day LIBOR (1)		(17,856)		(8,413)


	As of September 30,
Change in annual net warehouse interest income due to (in thousands):	2017		2016
100 basis point increase in 30-day LIBOR	$	(9,765)	$	(6,702)
100 basis point decrease in 30-day LIBOR (1)		9,765		3,534


	As of September 30,
Change in annual corporate debt interest expense due to (in thousands):	2017		2016
100 basis point increase in 30-day LIBOR (2)	$	(1,665)	$	(884)
100 basis point decrease in 30-day LIBOR (3)		383		—



				Total Number of	Approximate
				Shares Purchased as	Dollar Value
	Total Number	Average		Part of Publicly	of Shares that May
	of Shares	Price Paid		Announced Plans	Yet Be Purchased Under
Period	Purchased	per Share		or Programs	the Plans or Programs
July 1-31, 2017	10,487		48.83	—		75,000,000
August 1-31, 2017	188,419		47.18	188,419		66,105,030
September 1-30, 2017	40,000		46.59	40,000		64,240,362
Total	238,906	$	47.15	228,419	$	64,240,362