UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~March 31,~~June 30, 2022


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

For the transition period from to

Commission File Number: 001-35000

Walker && Dunlop, Inc.

~~(Exact~~(Exact name of registrant as specified in its charter)

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

7272 Wisconsin Avenue, Suite 1300

Bethesda, Maryland 20814

(301) 215-5500

(Address of principal executive offices and ~~registrant’s~~registrant’s telephone number, including area code)

Not Applicable

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒☒ No ☐☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒☒ No ☐☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of ~~“large~~“large accelerated filer,~~” “accelerated~~” “accelerated filer,~~” “smaller~~” “smaller reporting company,”” and ~~“emerging~~“emerging growth ~~company”~~company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒☒

Smaller Reporting Company ☐☐

Accelerated Filer ☐☐

Emerging Growth Company ☐☐

Non-accelerated Filer ☐☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐☐ No ☒☒

As of ~~April~~July 28, 2022, there were ~~33,130,194~~33,030,266 total shares of common stock outstanding.

Table of Contents

Walker && Dunlop, Inc.

Form 10-Q

INDEX


		Page

PART I	FINANCIAL INFORMATION	3

Item 1.	Financial Statements	3

Item 2.	~~Management's~~Management's Discussion and Analysis of Financial Condition and Results of Operations	2832

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5665

Item 4.	Controls and Procedures	5767

PART II	OTHER INFORMATION	5767

Item 1.	Legal Proceedings	5767

Item 1A.	Risk Factors	5767

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5867

Item 3.	Defaults Upon Senior Securities	5868

Item 4.	Mine Safety Disclosures	5868

Item 5.	Other Information	5868

Item 6.	Exhibits	5969

	Signatures	6070

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

Walker && Dunlop, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)


		March 31, 2022	December 31, 2021

						June 30, 2022	December 31, 2021
Assets
Cash and cash equivalents	$	141,375	$	305,635	$	151,252	$	305,635
Restricted cash		41,584		42,812		34,361		42,812
Pledged securities, at fair value		148,647		148,996		149,560		148,996
Loans held for sale, at fair value		703,629		1,811,586		931,516		1,811,586
Loans held for investment, net		216,620		269,125		247,243		269,125
Mortgage servicing rights		976,554		953,845		978,745		953,845
Goodwill		908,744		698,635		937,881		698,635
Other intangible assets		211,405		183,904		207,024		183,904
Derivative assets		112,023		37,364		59,810		37,364
Receivables, net		249,305		212,019		236,786		212,019
Committed investments in tax credit equity		223,771		177,322		187,393		177,322
Other assets		405,974		364,746		413,201		364,746
Total assets	$	4,339,631	$	5,205,989	$	4,534,772	$	5,205,989


Liabilities
Warehouse notes payable	$	924,280	$	1,941,572	$	1,125,677	$	1,941,572
Notes payable		726,555		740,174		719,210		740,174
Allowance for risk-sharing obligations		53,244		62,636		48,475		62,636
Derivative liabilities		12,400		6,403		17,176		6,403
Commitments to fund investments in tax credit equity		206,605		162,747		173,740		162,747
Other liabilities		779,376		714,250		784,719		714,250
Total liabilities	$	2,702,460	$	3,627,782	$	2,868,997	$	3,627,782

Stockholders' Equity

Stockholders' Equity
Preferred stock (authorized 50,000 shares; NaN issued)	$	—	$	—	$	—	$	—
Common stock ($0.01 par value; authorized 200,000 shares; issued and outstanding 32,398 shares at March 31, 2022 and 32,049 shares at December 31, 2021)		324		320
Additional paid-in capital ("APIC")		387,009		393,022
Accumulated other comprehensive income ("AOCI")		1,588		2,558
Common stock ($0.01 par value; authorized 200,000 shares; issued and outstanding 32,322 shares at June 30, 2022 and 32,049 shares at December 31, 2021)						323		320
Additional paid-in capital ("APIC")						403,668		393,022
Accumulated other comprehensive income ("AOCI")						(222)		2,558
Retained earnings		1,205,384		1,154,252		1,229,712		1,154,252
Total stockholders’ equity	$	1,594,305	$	1,550,152
Total stockholders’ equity					$	1,633,481	$	1,550,152
Noncontrolling interests		42,866		28,055		32,294		28,055
Total equity	$	1,637,171	$	1,578,207	$	1,665,775	$	1,578,207
Commitments and contingencies (NOTES 2 and 9)		—		—		—		—
Total liabilities and equity	$	4,339,631	$	5,205,989	$	4,534,772	$	5,205,989

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Walker && Dunlop, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income

(In thousands, except per share data)

(Unaudited)

For the three months ended

March 31,

2022

2021

Revenues

Loan origination and debt brokerage fees, net

$
82,310

$
75,879

Fair value of expected net cash flows from servicing, net

52,730

57,935

Servicing fees

72,681

65,978

Property sales broker fees

23,398

9,042

Net warehouse interest income

4,773

4,555

Escrow earnings and other interest income

1,803

2,117

Other revenues

81,749

8,782

Total revenues

$
319,444

$
224,288

Expenses

Personnel

$
144,181

$
96,215

Amortization and depreciation

56,152

46,871

Provision (benefit) for credit losses

(9,498)

(11,320)

Interest expense on corporate debt

6,405

1,765

Other operating expenses

32,214

17,587

Total expenses

$
229,454

$
151,118

Income from operations

$
89,990

$
73,170

Income tax expense

19,460

15,118

Net income before noncontrolling interests

$
70,530

$
58,052

Less: net income (loss) from noncontrolling interests

(679)

—

Walker & Dunlop net income

$
71,209

$
58,052

Net change in unrealized gains (losses) on pledged available-for-sale securities, net of taxes

(970)

(158)

Walker & Dunlop comprehensive income

$
70,239

$
57,894

Basic earnings per share (NOTE 10)

$
2.14

$
1.82

Diluted earnings per share (NOTE 10)

$
2.12

$
1.79

Basic weighted-average shares outstanding

32,219

30,823

Diluted weighted-average shares outstanding

32,617

31,276


	For the three months ended				For the six months ended
	June 30,				June 30,
	2022		2021		2022		2021
Revenues
Loan origination and debt brokerage fees, net	$	102,605	$	107,472	$	184,915		183,351
Fair value of expected net cash flows from servicing, net		51,949		61,849		104,679		119,784
Servicing fees		74,260		69,052		146,941		135,030
Property sales broker fees		46,386		22,454		69,784		31,496
Investment management fees		10,282		3,815		22,930		6,551
Net warehouse interest income		5,268		4,630		10,041		9,185
Escrow earnings and other interest income		6,751		1,823		8,554		3,940
Other revenues		43,347		10,316		112,448		16,362
Total revenues	$	340,848	$	281,411	$	660,292	$	505,699

Expenses
Personnel	$	168,368	$	141,421	$	312,549		237,636
Amortization and depreciation		61,103		48,510		117,255		95,381
Provision (benefit) for credit losses		(4,840)		(4,326)		(14,338)		(15,646)
Interest expense on corporate debt		6,412		1,760		12,817		3,525
Other operating expenses		36,195		19,748		68,409		37,335
Total expenses	$	267,238	$	207,113	$	496,692	$	358,231
Income from operations	$	73,610	$	74,298	$	163,600	$	147,468
Income tax expense		19,503		18,240		38,963		33,358
Net income before noncontrolling interests	$	54,107	$	56,058	$	124,637	$	114,110
Less: net income (loss) from noncontrolling interests		(179)		—		(858)		—
Walker & Dunlop net income	$	54,286	$	56,058	$	125,495	$	114,110
Net change in unrealized gains (losses) on pledged available-for-sale securities, net of taxes		(1,810)		768		(2,780)		610
Walker & Dunlop comprehensive income	$	52,476	$	56,826	$	122,715	$	114,720

Basic earnings per share (NOTE 10)	$	1.63	$	1.75	$	3.77	$	3.57
Diluted earnings per share (NOTE 10)	$	1.61	$	1.73	$	3.73	$	3.52

Basic weighted-average shares outstanding		32,388		31,019		32,304		30,922
Diluted weighted-average shares outstanding		32,694		31,370		32,657		31,322

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Walker && Dunlop, Inc. and Subsidiaries

Consolidated Statements of Changes in Equity

(In thousands, except per share data)

(Unaudited)

For the three months ended March 31, 2022

Stockholders' Equity

Common Stock

Retained

Noncontrolling

Total Stockholders'


Shares

Amount

APIC

AOCI

Earnings

Interests

Equity

Balance at December 31, 2021

32,049

$
320

$
393,022

$
2,558

$
1,154,252

$
28,055

$
1,578,207

Walker & Dunlop net income

—

—

—

—

71,209

—

71,209

Net income (loss) from noncontrolling interests

—

—

—

—

—

(679)

(679)

Other comprehensive income (loss), net of tax

—

—

—

(970)

—

—

(970)

Stock-based compensation - equity classified

—

—

10,812

—

—

—

10,812

Issuance of common stock in connection with equity compensation plans

544

5

15,526

—

—

—

15,531

Repurchase and retirement of common stock

(195)

(1)

(27,048)

—

—

—

(27,049)

Noncontrolling interests added due to new consolidations

—

—

(5,303)

—

—

15,490

10,187

Cash dividends paid ($0.60 per common share)

—

—

—

—

(20,077)

—

(20,077)

Balance at March 31, 2022

32,398

$
324

$
387,009

$
1,588

$
1,205,384

$
42,866

$
1,637,171

For the three months ended March 31, 2021

Stockholders' Equity

Common Stock

Retained

Total Stockholders'


Shares

Amount

APIC

AOCI

Earnings

Equity

Balance at December 31, 2020

30,678

$
307

$
241,004

$
1,968

$
952,943

$
1,196,222

Walker & Dunlop net income

—

—

—

—

58,052

58,052

Other comprehensive income (loss), net of tax

—

—

—

(158)

—

(158)

Stock-based compensation - equity classified

—

—

7,836

—

—

7,836

Issuance of common stock in connection with equity compensation plans

430

4

12,602

—

—

12,606

Repurchase and retirement of common stock

(131)

(1)

(13,373)

—

—

(13,374)

Cash dividends paid ($0.50 per common share)

—

—

—

—

(16,052)

(16,052)

Balance at March 31, 2021

30,977

$
310

$
248,069

$
1,810

$
994,943

$
1,245,132

~~See accompanying notes to condensed consolidated financial statements.~~

~~Table of Contents~~

~~Walker & Dunlop, Inc. and Subsidiaries~~

~~Condensed Consolidated Statements of Cash Flows~~

~~(In thousands)~~

~~(Unaudited)~~


	For the three and six months ended June 30, 2022
		Stockholders' Equity
	Common Stock							Retained		Noncontrolling		Total
	Shares	Amount		APIC		AOCI		Earnings		Interests		Equity
Balance at December 31, 2021	32,049	$	320	$	393,022	$	2,558	$	1,154,252	$	28,055	$	1,578,207
Walker & Dunlop net income	—		—		—		—		71,209		—		71,209
Net income (loss) from noncontrolling interests	—		—		—		—		—		(679)		(679)
Other comprehensive income (loss), net of tax	—		—		—		(970)		—		—		(970)
Stock-based compensation - equity classified	—		—		10,812		—		—		—		10,812
Issuance of common stock in connection with equity compensation plans	544		5		15,526		—		—		—		15,531
Repurchase and retirement of common stock	(195)		(1)		(27,048)		—		—		—		(27,049)
Cash dividends paid ($0.60 per common share)	—		—		—		—		(20,077)		—		(20,077)
Other activity (NOTE 10)	—		—		(5,303)		—		—		15,490		10,187
Balance at March 31, 2022	32,398	$	324	$	387,009	$	1,588	$	1,205,384	$	42,866	$	1,637,171
Walker & Dunlop net income	—		—		—		—		54,286		—		54,286
Net income (loss) from noncontrolling interests	—		—		—		—		—		(179)		(179)
Other comprehensive income (loss), net of tax	—		—		—		(1,810)		—		—		(1,810)
Stock-based compensation - equity classified	—		—		9,980		—		—		—		9,980
Issuance of common stock in connection with equity compensation plans	43		—		110		—		—		—		110
Repurchase and retirement of common stock	(119)		(1)		(2,409)		—		(9,892)		—		(12,302)
Distributions to noncontrolling interest holders	—		—		—		—		—		(1,675)		(1,675)
Cash dividends paid ($0.60 per common share)	—		—		—		—		(20,066)		—		(20,066)
Other activity (NOTE 10)	—		—		8,978		—		—		(8,718)		260
Balance at June 30, 2022	32,322	$	323	$	403,668	$	(222)	$	1,229,712	$	32,294	$	1,665,775

For the three months ended March 31,

2022

2021

Cash flows from operating activities

Net income before noncontrolling interests

$
70,530

$
58,052

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Gains attributable to the fair value of future servicing rights, net of guaranty obligation

(52,730)

(57,935)

Change in the fair value of premiums and origination fees

2,883

21,562

Amortization and depreciation

56,152

46,871

Provision (benefit) for credit losses

(9,498)

(11,320)

Gain from revaluation of previously held equity-method investment

(39,641)

—

Originations of loans held for sale

(3,185,019)

(3,577,153)

Proceeds from transfers of loans held for sale

4,198,206

4,917,187

Other operating activities, net

(68,955)

(81,572)

Net cash provided by (used in) operating activities

$
971,928

$
1,315,692

Cash flows from investing activities

Capital expenditures

$
(11,790)

$
(1,794)

Purchases of equity-method investments

(5,941)

(1,124)

Purchases of pledged available-for-sale ("AFS") securities

(7,010)

(2,000)

Proceeds from prepayment and sale of pledged AFS securities

1,672

20,884

Investments in joint ventures

(5,040)

(18,445)

Distributions from joint ventures

9,241

11,419

Acquisitions, net of cash received

(78,465)

(7,506)

Originations of loans held for investment

(107)

(33,750)

Principal collected on loans held for investment

53,000

113,495

Net cash provided by (used in) investing activities

$
(44,440)

$
81,179

Cash flows from financing activities

Borrowings (repayments) of warehouse notes payable, net

$
(1,006,545)

$
(1,400,704)

Borrowings of interim warehouse notes payable

—

25,313

Repayments of interim warehouse notes payable

(11,200)

(29,534)

Repayments of notes payable

(13,759)

(745)

Proceeds from issuance of common stock

153

12,606

Repurchase of common stock

(27,049)

(13,374)

Cash dividends paid

(20,077)

(16,052)

Payment of contingent consideration

(17,612)

—

Debt issuance costs

(567)

(769)

Net cash provided by (used in) financing activities

$
(1,096,656)

$
(1,423,259)

Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents (NOTE 2)

$
(169,168)

$
(26,388)

Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period

393,180

358,002

Total of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period

$
224,012

$
331,614

Supplemental Disclosure of Cash Flow Information:

Cash paid to third parties for interest

$
13,037

$
9,621

Cash paid for income taxes

1,290

—


	For the three and six months ended June 30, 2021
		Stockholders' Equity
	Common Stock							Retained		Total
	Shares	Amount		APIC		AOCI		Earnings		Equity
Balance at December 31, 2020	30,678	$	307	$	241,004	$	1,968	$	952,943	$	1,196,222
Walker & Dunlop net income	—		—		—		—		58,052		58,052
Other comprehensive income (loss), net of tax	—		—		—		(158)		—		(158)
Stock-based compensation - equity classified	—		—		7,836		—		—		7,836
Issuance of common stock in connection with equity compensation plans	430		4		12,602		—		—		12,606
Repurchase and retirement of common stock	(131)		(1)		(13,373)		—		—		(13,374)
Cash dividends paid ($0.50 per common share)	—		—		—		—		(16,052)		(16,052)
Balance at March 31, 2021	30,977	$	310	$	248,069	$	1,810	$	994,943	$	1,245,132
Walker & Dunlop net income	—		—		—		—		56,058		56,058
Other comprehensive income (loss), net of tax	—		—		—		768		—		768
Stock-based compensation - equity classified	—		—		7,892		—		—		7,892
Issuance of common stock in connection with equity compensation plans	64		1		530		—		—		531
Repurchase and retirement of common stock	(7)		(1)		(815)		—		—		(816)
Cash dividends paid ($0.50 per common share)	—		—		—		—		(16,070)		(16,070)
Balance at June 30, 2021	31,034	$	310	$	255,676	$	2,578	$	1,034,931	$	1,293,495

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	For the six months ended June 30,
	2022		2021
Cash flows from operating activities
Net income before noncontrolling interests	$	124,637	$	114,110
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Gains attributable to the fair value of future servicing rights, net of guaranty obligation		(104,679)		(119,784)
Change in the fair value of premiums and origination fees		7,852		9,047
Amortization and depreciation		117,255		95,381
Provision (benefit) for credit losses		(14,338)		(15,646)
Gain from revaluation of previously held equity-method investment		(39,641)		—
Originations of loans held for sale		(8,805,659)		(7,293,128)
Proceeds from transfers of loans held for sale		9,637,859		8,024,903
Other operating activities, net		(69,417)		(55,541)
Net cash provided by (used in) operating activities	$	853,869	$	759,342

Cash flows from investing activities
Capital expenditures	$	(11,902)	$	(3,800)
Purchases of equity-method investments		(12,029)		(3,248)
Purchases of pledged available-for-sale ("AFS") securities		(46,395)		(2,000)
Proceeds from prepayment and sale of pledged AFS securities		6,101		22,092
Investments in joint ventures		(5,040)		(38,805)
Distributions from joint ventures		11,359		22,113
Acquisitions, net of cash received		(78,465)		(10,507)
Originations of loans held for investment		(49,057)		(116,087)
Principal collected on loans held for investment		71,500		205,653
Net cash provided by (used in) investing activities	$	(113,928)	$	75,411

Cash flows from financing activities
Borrowings (repayments) of warehouse notes payable, net	$	(826,454)	$	(744,281)
Borrowings of interim warehouse notes payable		36,459		84,766
Repayments of interim warehouse notes payable		(26,000)		(34,174)
Repayments of notes payable		(21,244)		(1,490)
Repayment of secured borrowings		—		(73,312)
Proceeds from issuance of common stock		263		13,137
Repurchase of common stock		(39,380)		(14,190)
Cash dividends paid		(40,143)		(32,122)
Payment of contingent consideration		(17,612)		—
Distributions to noncontrolling interest		(1,675)		—
Debt issuance costs		(1,573)		(1,333)
Net cash provided by (used in) financing activities	$	(937,359)	$	(802,999)

Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents (NOTE 2)	$	(197,418)	$	31,754
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period		393,180		358,002
Total of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period	$	195,762	$	389,756

Supplemental Disclosure of Cash Flow Information:
Cash paid to third parties for interest	$	28,023	$	16,708
Cash paid for income taxes		45,300		26,723

Table of Contents

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (CONTINUED)

(In thousands)

(Unaudited)


	For the six months ended June 30,
	2022		2021
Supplemental Disclosure of Non-Cash Activity:
Issuance of common stock to settle compensation liabilities	$	6,551	$	9,589
Issuance of common stock to settle contingent consideration liabilities (NOTE 7)		8,750		—
Net increase (decrease) in total equity due to consolidations of tax credit entities (NOTE 10)		10,447		—
Net increase (decrease) in total assets due to consolidations of tax credit entities (NOTE 10)		13,700		—
Net increase (decrease) in total liabilities due to consolidations of tax credit entities (NOTE 10)		3,559		—
Forgiveness of a receivable the Company had with an acquired joint venture (NOTE 7)		5,460		—
Additions of contingent consideration liabilities from acquisitions (NOTE 7)		117,000		7,504
Increase in Goodwill (NOTE 7)		29,695		—

See accompanying notes to condensed consolidated financial statements.

Table of Contents

NOTE 1—1—ORGANIZATION AND BASIS OF PRESENTATION

These financial statements represent the condensed consolidated financial position and results of operations of Walker && Dunlop, Inc. and its subsidiaries. Unless the context otherwise requires, references to ~~“we,” “us,” “our,” “Walker & Dunlop”~~“we,” “us,” “our,” “Walker & Dunlop” and the ~~“Company”~~“Company” mean the Walker && Dunlop consolidated companies. The statements have been prepared in conformity with U.S. generally accepted accounting principles ~~(“GAAP”~~(“GAAP”) for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they may not include certain financial statement disclosures and other information required for annual financial statements. The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the ~~Company’s~~Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (“(“2021 Form ~~10-K”~~10-K”). In the opinion of management, all adjustments considered necessary for a fair presentation of the results for the Company in the interim periods presented have been included. Results of operations for the three and six months ended ~~March 31,~~June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 or thereafter.

Walker && Dunlop, Inc. is a holding company and conducts the majority of its operations through Walker && Dunlop, LLC, the operating company. Walker && Dunlop is one of the leading commercial real estate services and finance companies in the United States. The Company originates, sells, and services a range of commercial real estate debt and equity financing products, provides multifamily property sales brokerage and valuation services, engages in commercial real estate investment management activities with a particular focus on the affordable housing sector through low-income housing tax credit ~~(“LIHTC”~~(“LIHTC”) syndication, provides housing market research, and delivers real estate-related investment banking and advisory services.

Through its agency lending products, the Company originates and sells loans pursuant to the programs of the Federal National Mortgage Association (“(“Fannie ~~Mae”~~Mae”), the Federal Home Loan Mortgage Corporation (“(“Freddie ~~Mac”~~Mac” and, together with Fannie Mae, the ~~“GSEs”~~“GSEs”), the Government National Mortgage Association (“(“Ginnie ~~Mae”~~Mae”), and the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (together with Ginnie Mae, ~~“HUD”~~“HUD”). Through its debt brokerage products, the Company brokers, and in some cases services, loans for various life insurance companies, commercial banks, commercial mortgage-backed securities issuers, and other institutional investors.

The Company also provides a variety of commercial real estate debt and equity solutions through its principal lending and investing products. Interim loans on multifamily properties are offered (i) through the Company and recorded on the Company’s balance sheet (the “Interim Loan Program”) and (ii) through a joint venture with an affiliate of Blackstone Mortgage Trust, Inc., in which the Company holds a 15% ownership interest (the “Interim Program JV”).

NOTE 2—2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation——The condensed consolidated financial statements include the accounts of Walker && Dunlop, Inc., its ~~wholly owned~~wholly-owned subsidiaries, and its majority owned subsidiaries. All intercompany balances and transactions are eliminated in consolidation. The Company consolidates entities in which it has a controlling financial interest based on either the variable interest entity ~~(“VIE”~~(“VIE”) or the voting interest model. The Company is required to first apply the VIE model to determine whether it holds a variable interest in an entity, and if so, whether the entity is a VIE. If the Company determines it holds a variable interest in a VIE and has a controlling financial interest and therefore is considered the primary beneficiary, the Company consolidates the entity. In instances where the Company holds a variable interest in a VIE but is not the primary beneficiary, the Company uses the equity-method of accounting.

If the Company determines it does not hold a variable interest in a VIE, it then applies the voting interest model. Under the voting interest model, the Company consolidates an entity when it holds a majority voting interest in an entity. If the Company does not have a majority voting interest but has significant influence, it uses the equity method of accounting. In instances where the Company owns less than 100% of the equity interests of an entity but holds a controlling financial interest and is the primary beneficiary or owns a majority of the voting interests, ~~or has control over an entity,~~ the Company accounts for the portion of equity not attributable to Walker && Dunlop, Inc. as Noncontrolling interests on the Condensed Consolidated Balance Sheets and the portion of net income not attributable to Walker && Dunlop, Inc. as Net income (loss) from noncontrolling interests in the Condensed Consolidated Statements of Income.

Subsequent Events——The Company has evaluated the effects of all events that have occurred subsequent to ~~March 31,~~June 30, 2022. The Company has made certain disclosures in the notes to the condensed consolidated financial statements of events that have occurred subsequent to ~~March~~

~~Table of Contents~~

~~31,~~June 30, 2022. There have been no other material subsequent events that would require recognition in the condensed consolidated financial statements.

Use of Estimates——The preparation of condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ~~(“GAAP”~~(“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, including the allowance for risk-sharing obligations, initial fair value of capitalized mortgage servicing

Table of Contents

rights, asset management fee receivable related to LIHTC funds, derivative instruments, estimation of contingent consideration for business combinations, estimation of the fair value of the Apprise joint venture (as discussed in NOTE 7), and the disclosure of contingent assets and liabilities. Actual results may vary from these estimates.

Co-broker ~~Fees—~~Fees—Co-broker fees, which are netted against Loan origination and debt brokerage fees, net in the Condensed Consolidated Statements of Income, were ~~$5.9~~$4.4 million and ~~$5.3~~$3.6 million for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively and $10.3 million and $8.9 million for the six months ended June 30, 2022 and 2021, respectively.

Loans Held for Investment, net——Loans held for investment are multifamily interim loans originated by the Company ~~through the Interim Loan Program~~ for properties that currently do not qualify for permanent GSE or HUD (collectively, the ~~“Agencies”~~“Agencies”) ~~financing.~~financing (“Interim Loan Program”). These loans have terms of up to three years and are all adjustable-rate, interest-only, multifamily loans with similar risk characteristics and no geographic concentration. The loans are carried at their unpaid principal balances, adjusted for net unamortized loan fees and costs, and net of any allowance for loan losses.

As of ~~March 31,~~June 30, 2022, Loans held for investment, net consisted of 109 loans with an aggregate ~~$221.6~~$252.1 million of unpaid principal balance less $0.9 million of net unamortized deferred fees and costs and ~~$4.1~~$4.0 million of allowance for loan losses. As of December 31, 2021, Loans held for investment, net consisted of 12 loans with an aggregate $274.5 million of unpaid principal balance less $1.2 million of net unamortized deferred fees and costs and $4.2 million of allowance for loan losses.

The Company assesses the credit quality of loans held for investment in the same manner as it does for the loans in the Fannie Mae at-risk portfolio and records an allowance for these loans as necessary. The allowance for loan losses is estimated collectively for loans with similar characteristics. The collective allowance is based on the same methodology that the Company uses to estimate its allowance for risk-sharing obligations under the Current Expected Credit Losses ~~(“CECL”~~(“CECL”) standard for at-risk Fannie Mae Delegated Underwriting and Servicing ~~(“DUS”~~(“DUS”) loans (with the exception of a reversion period) because the nature of the underlying collateral is the same, and the loans have similar characteristics, except they are significantly shorter in maturity. The reasonable and supportable forecast period used for the CECL allowance for loans held for investment is one year.

The loss rate for the forecast period was 11 basis points and 15 basis points as of ~~both March 31,~~June 30, 2022 and December 31, ~~2021.~~2021, respectively. The loss rate for the remaining period until maturity was 6 basis points and 9 basis points as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively.

NaN loan held for investment with an unpaid principal balance of $14.7 million was delinquent and on non-accrual status as of ~~March 31,~~June 30, 2022 and December 31, 2021. The Company had $3.7 million in collateral-based reserves for this loan as of both ~~March 31,~~June 30, 2022 and December 31, 2021 and has not recorded any interest related to this loan since it went on non-accrual ~~status.~~status in 2019. All other loans were current as of ~~March 31,~~June 30, 2022 and December 31, 2021. The amortized cost basis of loans that were current as of ~~March 31,~~June 30, 2022 and December 31, 2021 was ~~$206.0~~$236.3 million and $258.6 million, respectively. As of ~~March 31,~~June 30, 2022, ~~$178.6~~$48.6 million, $160.5 million, and $28.3 million of the loans that were current were originated in 2022, 2021, and 2019, respectively. Other than the defaulted loan noted above, the Company has not experienced any delinquencies related to loans held for investment.

Provision (Benefit) for Credit Losses——The Company records the income statement impact of the changes in the allowance for loan losses and the allowance for risk-sharing obligations within Provision (benefit) for credit losses in the Condensed Consolidated Statements of Income. NOTE 4 contains additional discussion related to the allowance for risk-sharing obligations. Provision (benefit) for credit losses consisted of the following activity for the three and six months ended ~~March 31,~~June 30, 2022 and 2021:


	For the three months ended				For the six months ended
	June 30,				June 30,
Components of Provision (Benefit) for Credit Losses (in thousands)	2022		2021		2022		2021
Provision (benefit) for loan losses	$	(71)	$	(75)	$	(177)	$	(662)
Provision (benefit) for risk-sharing obligations		(4,769)		(4,251)		(14,161)		(14,984)
Provision (benefit) for credit losses	$	(4,840)	$	(4,326)	$	(14,338)	$	(15,646)

Table of Contents

For the three months ended

March 31,

Components of Provision (Benefit) for Credit Losses (in thousands)

2022

2021

Provision (benefit) for loan losses

$
(106)

$
(587)

Provision (benefit) for risk-sharing obligations

(9,392)

(10,733)

Provision (benefit) for credit losses

$
(9,498)

$
(11,320)

Net Warehouse Interest ~~Income—~~Income—The Company presents warehouse interest income net of warehouse interest expense. Warehouse interest income is the interest earned from loans held for sale and loans held for investment. Generally, a substantial portion of the ~~Company’s~~Company’s loans is financed with matched borrowings under one of its warehouse facilities. The remaining portion of loans not funded with matched borrowings is financed with the ~~Company’s~~Company’s own cash. The Company also occasionally fully funds a small number of loans held for sale or loans held for investment with its own cash. Warehouse interest expense is incurred on borrowings used to fund loans solely while they are held for sale or for investment. Warehouse interest income and expense are earned or incurred on loans held for sale after a loan is closed and before a loan is sold. Warehouse interest income and expense are earned or incurred on loans held for investment after a loan is closed and before a loan is repaid. The Company had a portfolio of participating interests in loans held for investment that was accounted for as a secured borrowing and paid off inat the end of the second quarter of 2021. The Company recognized Net warehouse interest income on the unpaid principal balance of the loans and secured borrowing for the three and six months ended ~~March 31,~~June 30, 2021. Included in Net warehouse interest income for the three and six months ended ~~March 31,~~June 30, 2022 and 2021 are the following components:


	For the three months ended
	March 31,

					For the three months ended				For the six months ended
					June 30,				June 30,
Components of Net Warehouse Interest Income (in thousands)	2022		2021		2022		2021		2022		2021
Warehouse interest income - loans held for sale	$	8,863	$	9,118	$	12,175	$	7,863	$	21,038	$	16,981
Warehouse interest expense - loans held for sale		(5,333)		(6,659)		(8,468)		(4,979)		(13,801)		(11,638)
Net warehouse interest income - loans held for sale	$	3,530	$	2,459	$	3,707	$	2,884	$	7,237	$	5,343


Warehouse interest income - loans held for investment	$	2,350	$	3,228	$	3,015	$	2,962	$	5,365	$	6,190
Warehouse interest expense - loans held for investment		(1,107)		(1,132)		(1,454)		(1,216)		(2,561)		(2,348)
Warehouse interest income - secured borrowings		—		865		—		883		—		1,748
Warehouse interest expense - secured borrowings		—		(865)		—		(883)		—		(1,748)
Net warehouse interest income - loans held for investment	$	1,243	$	2,096	$	1,561	$	1,746	$	2,804	$	3,842


Total net warehouse interest income	$	4,773	$	4,555	$	5,268	$	4,630	$	10,041	$	9,185

Statement of Cash Flows——For presentation in the Condensed Consolidated Statements of Cash Flows, the Company considers pledged cash and cash equivalents (as detailed in NOTE 9) to be restricted cash and restricted cash equivalents. The following table presents a reconciliation of the total cash, cash equivalents, restricted cash, and restricted cash equivalents as presented in the Condensed Consolidated Statements of Cash Flows to the related captions in the Condensed Consolidated Balance Sheets as of ~~March 31,~~June 30, 2022 and 2021 and December 31, 2021 and 2020.


	March 31,				December 31,

									June 30,				December 31,
(in thousands)	2022		2021		2021		2020		2022		2021		2021		2020
Cash and cash equivalents	$	141,375	$	277,277	$	305,635	$	321,097	$	151,252	$	326,518	$	305,635	$	321,097
Restricted cash		41,584		14,805		42,812		19,432		34,361		15,842		42,812		19,432
Pledged cash and cash equivalents (NOTE 9)		41,053		39,532		44,733		17,473		10,149		47,396		44,733		17,473
Total cash, cash equivalents, restricted cash, and restricted cash equivalents	$	224,012	$	331,614	$	393,180	$	358,002	$	195,762	$	389,756	$	393,180	$	358,002

Income Taxes——The Company records the realizable excess tax benefits from stock-based compensation as a reduction to income tax expense. The realizable excess tax benefits were ~~$4.9~~$0.3 million and ~~$4.1~~$1.2 million for the three months ended ~~March 31,~~June 30, 2022 and 2021, ~~respectively.~~respectively, and $5.2 million for each of the six months ended June 30, 2022 and 2021.

Contracts with Customers—A majority of the Company’s revenues are derived from the following sources, all of which are excluded from the accounting provisions applicable to contracts with customers: (i) financial instruments, (ii) transfers and servicing, (iii) derivative transactions, and (iv) investments in debt securities/equity-method investments. The remaining portion of revenues is derived from contracts with customers. The majority of the Company’s contracts with customers do not require significant judgment or material estimates that affect the determination of the transaction price (including the assessment of variable consideration), the allocation of the transaction price to performance obligations, and the determination of the timing of the satisfaction of performance obligations. Additionally, the earnings process for the majority all of the Company’s contracts with customers is not complicated and is generally completed in a short period of time. The following table presents information about the Company’s contracts with customers for the three and six months ended June 30, 2022 and 2021:

910

Table of Contents

~~Contracts with Customers~~—A majority of the Company’s revenues are derived from the following sources, all of which are excluded from the accounting provisions applicable to contracts with customers: (i) financial instruments, (ii) transfers and servicing, (iii) derivative transactions, and (iv) investments in debt securities/equity-method investments. The remaining portion of revenues is derived from contracts with customers. Substantially all of the Company’s contracts with customers do not require significant judgment or material estimates that affect the determination of the transaction price (including the assessment of variable consideration), the allocation of the transaction price to performance obligations, and the determination of the timing of the satisfaction of performance obligations. Additionally, the earnings process for substantially all of the Company’s contracts with customers is not complicated and is generally completed in a short period of time. The following table presents information about the Company’s contracts with customers for the three months ended March 31, 2022 and 2021:


	For the three months ended				For the six months ended
	June 30,				June 30,
Description (in thousands)	2022		2021		2022		2021		Statement of income line item
Certain loan origination fees	$	53,281	$	43,222	$	90,646	$	67,123	Loan origination and debt brokerage fees, net
Property sales broker fees		46,386		22,454		69,784		31,496	Property sales broker fees
Investment management fees		10,282		3,815		22,930		6,551	Investment management fees
Application fees, subscription revenues, other revenues from LIHTC operations, and other revenues		35,198		4,113		50,855		7,627	Other revenues
Total revenues derived from contracts with customers	$	145,147	$	73,604	$	234,215	$	112,797

For the three months ended

March 31,

Description (in thousands)

2022

2021

Statement of income line item
Certain loan origination fees

$
37,365

$
23,901

Loan origination and debt brokerage fees, net
Property sales broker fees

23,398

9,042

Property sales broker fees
Investment management fees, application fees, subscription revenues, other revenues from LIHTC operations, and other

28,305

6,250

Other revenues
Total revenues derived from contracts with customers

$
89,068

$
39,193

Litigation——In the ordinary course 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~~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.

Recently Adopted and Recently Announced Accounting Pronouncements——There have been no material changes to the accounting policies discussed in NOTE 2 of the ~~Company’s~~Company’s 2021 Form 10-K. There are no recently announced but not yet effective accounting pronouncements that are expected to have a material impact to the Company as of ~~March 31,~~June 30, 2022.

Reclassifications——The Company has made certain immaterial reclassifications to prior-year balances to conform to current-year presentation.

NOTE 3—3—MORTGAGE SERVICING RIGHTS

The fair value of the mortgage servicing rights ~~(“MSRs”~~(“MSRs”) was ~~$1.3~~$1.3 billion as of both ~~March 31,~~June 30, 2022 and December 31, 2021. The Company uses a discounted static cash flow valuation approach, and the key economic assumption is the discount rate. For example, see the following sensitivities related to the discount rate:

The impact of a ~~100~~-~~basis~~100-basis point increase in the discount rate at ~~March 31,~~June 30, 2022 would be a decrease in the fair value of ~~$39.1~~$40.6 million to the MSRs outstanding as of ~~March 31,~~June 30, 2022.

The impact of a ~~200~~-~~basis~~200-basis point increase in the discount rate at ~~March 31,~~June 30, 2022 would be a decrease in the fair value of ~~$75.6~~$78.6 million to the MSRs outstanding as of ~~March 31,~~June 30, 2022.

These sensitivities are hypothetical and should be used with caution. These estimates do not include interplay among assumptions and are estimated as a portfolio rather than individual assets.

Activity related to MSRs for the three and six months ended June 30, 2022 and 2021 follows:


	For the three months ended				For the six months ended
	June 30,				June 30,
Roll Forward of MSRs (in thousands)	2022		2021		2022		2021
Beginning balance	$	976,554	$	909,884	$	953,845	$	862,813
Additions, following the sale of loan		60,445		57,300		137,299		153,940
Amortization		(47,098)		(43,914)		(93,455)		(86,466)
Pre-payments and write-offs		(11,156)		(7,751)		(18,944)		(14,768)
Ending balance	$	978,745	$	915,519	$	978,745	$	915,519

1011

Table of Contents

~~Activity related to MSRs for the three months ended March 31, 2022 and 2021 follows:~~

For the three months ended

March 31,

Roll Forward of MSRs (in thousands)

2022

2021

Beginning balance

$
953,845

$
862,813

Additions, following the sale of loan

76,854

96,640

Amortization

(46,357)

(42,552)

Pre-payments and write-offs

(7,788)

(7,017)

Ending balance

$
976,554

$
909,884

The following table summarizes the gross value, accumulated amortization, and net carrying value of the ~~Company’s~~Company’s MSRs as of ~~March 31,~~June 30, 2022 and December 31, 2021:



Components of MSRs (in thousands)	March 31, 2022		December 31, 2021		June 30, 2022		December 31, 2021
Gross value	$	1,598,350	$	1,548,870	$	1,617,975	$	1,548,870
Accumulated amortization		(621,796)		(595,025)		(639,230)		(595,025)
Net carrying value	$	976,554	$	953,845	$	978,745	$	953,845

The expected amortization of MSRs shown in the Condensed Consolidated Balance Sheet as of ~~March 31,~~June 30, 2022 is shown in the table below. Actual amortization may vary from these estimates.


	Expected

			Expected
(in thousands)	Amortization		Amortization
Nine Months Ending December 31,
Six Months Ending December 31,
2022	$	135,495	$	92,455
Year Ending December 31,
2023	$	171,194	$	177,502
2024		152,155		159,556
2025		129,694		136,593
2026		109,489		115,353
2027		92,535		97,384
Thereafter		185,992		199,902
Total	$	976,554	$	978,745

NOTE ~~4—GUARANTY OBLIGATION AND~~ 4—ALLOWANCE FOR RISK-SHARING OBLIGATIONS AND GUARANTY OBLIGATION

When a loan is sold under the Fannie Mae DUS program, the Company typically agrees to guarantee a portion of the ultimate loss incurred on the loan should the borrower fail to perform. The compensation for this risk is a component of the servicing fee on the loan. The guaranty is in force while the loan is outstanding. The Company does not provide a guaranty for any other loan product it sells or brokers. ~~The guaranty obligation is presented as a component of~~ ~~Other liabilities~~ ~~on the Condensed Consolidated Balance Sheets. Activity related to the guaranty obligation for the three months ended March 31, 2022 and 2021 is presented in the following table:~~

For the three months ended

March 31,

Roll Forward of Guaranty Obligation (in thousands)

2022

2021

Beginning balance

$
47,378

$
52,306

Additions, following the sale of loan

1,551

1,721

Amortization and write-offs

(2,439)

(2,191)

Ending balance

$
46,490

$
51,836

~~Table of Contents~~

Substantially all loans sold under the Fannie Mae DUS program contain partial or ~~full risk-sharing~~full-risk sharing guaranties that are based on the credit performance of the loan. The Company records an estimate of the loss reserve for CECL for all loans in its Fannie Mae at-risk servicing portfolio and presents this loss reserve as Allowance for risk-sharing obligations on the Condensed Consolidated Balance Sheets. Additionally, a guaranty obligation is presented as a component of Other liabilities on the Condensed Consolidated Balance Sheets.

Activity related to the allowance for risk-sharing obligations for the three and six months ended ~~March 31,~~June 30, 2022 and 2021 follows:


	For the three months ended
	March 31,

					For the three months ended				For the six months ended
					June 30,				June 30,
Roll Forward of Allowance for Risk-Sharing Obligations (in thousands)	2022		2021		2022		2021		2022		2021
Beginning balance	$	62,636	$	75,313	$	53,244	$	64,580	$	62,636	$	75,313
Provision (benefit) for risk-sharing obligations		(9,392)		(10,733)		(4,769)		(4,251)		(14,161)		(14,984)
Write-offs		—		—		—		—		—		—
Ending balance	$	53,244	$	64,580	$	48,475	$	60,329	$	48,475	$	60,329

During the first quarter of 2022, the Company updated its historical loss rate factor calculation to the current 10-year rolling ~~period.~~period, with no change during the three months ended June 30, 2022. The historical loss rate used for the calculation of the CECL reserve was 1.2 basis points as of ~~March 31,~~June 30, 2022 compared to 1.8 basis points as of December 31, 2021, ~~resulting~~contributing to the benefit for risk-sharing obligations for the six months ended June 30, 2022 presented above. During the second quarter of 2022, the Company updated its estimate of the forecast-period loss rate to 2.2 basis points from 3 basis points as of March 31, 2022, based on (i) the projected unemployment rate, (ii) overall health of the multifamily market, and (iii) other information expected during the forecast-period and reverted over a one-year period to the

Table of Contents

aforementioned 1.2 basis points historical loss rate. The change in the forecast-period loss rate led to the benefit for risk-sharing obligations for the three months ended ~~March 31,~~June 30, 2022, ~~seen above. The loss rates~~presented above, and contributed to the benefit for the ~~forecast period and the reversion period did not change from December 31, 2021.~~ six months ended June 30, 2022 presented above.

During the first ~~quarter~~half of 2021, reported and forecasted unemployment rates significantly improved compared to December 31, 2020. In response to improving unemployment statistics and the expected continued overall health of the multifamily market, the Company reduced the loss rate for the forecast period to 4 basis points as of March 31, 2021 and 3 basis points as of June 30, 2021 from 6 basis points as of December 31, 2020, resulting in the benefit for risk-sharing obligations for the three and six months ended ~~March 31,~~June 30, 2021, as ~~seen~~presented above.

The calculated CECL reserve for the ~~Company’s $49.7~~Company’s $51.2 billion at-risk Fannie Mae servicing portfolio as of ~~March 31,~~June 30, 2022 was ~~$42.5~~$37.7 million compared to $52.3 million as of December 31, 2021. The weighted-average remaining life of the at-risk Fannie Mae servicing portfolio as of ~~March 31,~~June 30, 2022 was ~~7.4~~7.3 years compared to 7.5 years as of December 31, 2021.

NaN loans had aggregate collateral-based reserves of $10.8 million and $10.3 million as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively.

Activity related to the guaranty obligation for the three and six months ended June 30, 2022 and 2021 is presented in the following table:


	For the three months ended				For the six months ended
	June 30,				June 30,
Roll Forward of Guaranty Obligation (in thousands)	2022		2021		2022		2021
Beginning balance	$	46,490	$	51,836	$	47,378	$	52,306
Additions, following the sale of loan		1,759		853		3,310		2,574
Amortization and write-offs		(2,600)		(2,320)		(5,039)		(4,511)
Ending balance	$	45,649	$	50,369	$	45,649	$	50,369

As of ~~March 31,~~June 30, 2022 and 2021, the maximum quantifiable contingent liability associated with the ~~Company’s~~Company’s guaranties for the at-risk loans serviced under the Fannie Mae DUS agreement was ~~$10.2~~$10.5 billion and ~~$9.3~~$9.5 billion, respectively. This maximum quantifiable contingent liability relates to the at-risk loans serviced for Fannie Mae at the specific point in time indicated. The maximum quantifiable contingent liability is not representative of the actual loss the Company would incur. The Company would be liable for this amount only if all of the loans it services for Fannie Mae, for which the Company retains some risk of loss, were to default and all of the collateral underlying these loans were determined to be without value at the time of settlement.

NOTE 5—5—SERVICING

The total unpaid principal balance of loans the Company was servicing for various institutional investors was ~~$116.3~~$119.0 billion as of ~~March 31,~~June 30, 2022 compared to $115.7 billion as of December 31, 2021.

As of ~~March 31,~~June 30, 2022 and December 31, 2021, custodial escrow accounts relating to loans serviced by the Company totaled ~~$2.5~~$2.3 billion and $3.7 billion, respectively. These amounts are not included in the Condensed Consolidated Balance Sheets as such amounts are not Company assets; however, the Company is entitled to earn ~~interest income~~fees on these escrow balances, presented as a component of Escrow earnings and other interest income in the Condensed Consolidated Statements of Income. Certain cash deposits at other financial institutions exceed the Federal Deposit Insurance Corporation insured limits. The Company places these deposits with financial institutions that meet the requirements of the Agencies and where it believes the risk of loss to be minimal.

1213

Table of Contents

NOTE 6—6—WAREHOUSE NOTES PAYABLE

As of ~~March 31,~~June 30, 2022, to provide financing to borrowers under the ~~Agencies’~~Agencies’ programs, the Company has committed and uncommitted warehouse lines of credit in the amount of ~~$3.8~~$3.9 billion with certain national banks and a $1.5 billion uncommitted facility with Fannie Mae (collectively, the ~~“Agency~~“Agency Warehouse ~~Facilities”~~Facilities”). In support of these Agency Warehouse Facilities, the Company has pledged substantially all of its loans held for sale under the ~~Company’s~~Company’s approved programs. The ~~Company’s~~Company’s ability to originate mortgage loans for sale depends upon its ability to secure and maintain these types of ~~short-term~~ financings on acceptable terms.

Additionally, as of ~~March 31,~~June 30, 2022, the Company has arranged for warehouse lines of credit in the amount of $0.5 billion with certain national banks to assist in funding loans held for investment under the Interim Loan Program (“(“Interim Warehouse ~~Facilities”~~Facilities”). The Company has pledged substantially all of its loans held for investment against these Interim Warehouse Facilities. The ~~Company’s~~Company’s ability to originate loans held for investment depends upon its ability to secure and maintain these types of ~~short-term~~ financings on acceptable terms.

The Company also has a warehouse line of credit in the amount of $30.0 million with a national bank to assist in funding the Company’s Committed investments in tax credit equity before transferring them to a tax credit fund (“Tax Credit Equity Warehouse Facility”).

The maximum amount and outstanding borrowings under Warehouse notes payable at ~~March 31,~~June 30, 2022 ~~follow:~~ follows.


	March 31, 2022

										June 30, 2022
(dollars in thousands)	Committed		Uncommitted		Total Facility		Outstanding			Committed		Uncommitted		Total Facility		Outstanding
Facility⁽¹⁾	Amount		Amount		Capacity		Balance		Interest rate⁽²⁾	Amount		Amount		Capacity		Balance		Interest rate⁽¹⁾
Agency Warehouse Facility #1	$	425,000	$	—	$	425,000	$	49,860	Adjusted Term SOFR plus 1.30%	$	425,000	$	—	$	425,000	$	105,286	Adjusted Term SOFR plus 1.30%
Agency Warehouse Facility #2		700,000		300,000		1,000,000		46,647	30-day LIBOR plus 1.30%		700,000		300,000		1,000,000		272,369	Adjusted Term SOFR plus 1.30%
Agency Warehouse Facility #3		600,000		265,000		865,000		274,690	30-day LIBOR plus 1.30%		600,000		265,000		865,000		287,275	Adjusted Term SOFR plus 1.35%
Agency Warehouse Facility #4		350,000		—		350,000		128,298	30-day LIBOR plus 1.30%		200,000		225,000		425,000		128,251	Adjusted Term SOFR plus 1.30%
Agency Warehouse Facility #5		—		1,000,000		1,000,000		135,453	Adjusted Term SOFR plus 1.45%		—		1,000,000		1,000,000		68,804	Adjusted Term SOFR plus 1.45%
Agency Warehouse Facility #6		150,000		50,000		200,000		24,800	30-day LIBOR plus 1.30%		150,000		50,000		200,000		—	30-day LIBOR plus 1.30%
Total National Bank Agency Warehouse Facilities	$	2,225,000	$	1,615,000	$	3,840,000	$	659,748		$	2,075,000	$	1,840,000	$	3,915,000	$	861,985
Fannie Mae repurchase agreement, uncommitted line and open maturity		—		1,500,000		1,500,000		91,330			—		1,500,000		1,500,000		71,119
Total Agency Warehouse Facilities	$	2,225,000	$	3,115,000	$	5,340,000	$	751,078		$	2,075,000	$	3,340,000	$	5,415,000	$	933,104


Interim Warehouse Facility #1	$	135,000	$	—	$	135,000	$	—	30-day LIBOR plus 1.90%	$	135,000	$	—	$	135,000	$	—	Adjusted Term SOFR plus 1.80%
Interim Warehouse Facility #2		100,000		—		100,000		—	Adjusted Term SOFR plus 1.35% to 1.85%		100,000		—		100,000		—	Adjusted Term SOFR plus 1.35% to 1.85%
Interim Warehouse Facility #3		200,000		—		200,000		141,809	30-day LIBOR plus 1.75% to 3.25%		200,000		—		200,000		163,468	30-day LIBOR plus 1.75% to 3.25%
Interim Warehouse Facility #4		19,810		—		19,810		19,810	30-day LIBOR plus 3.00%		19,810		—		19,810		19,810	30-day LIBOR plus 3.00%
Total National Bank Interim Warehouse Facilities	$	454,810	$	—	$	454,810	$	161,619		$	454,810	$	—	$	454,810	$	183,278
Alliant Warehouse Facility	$	30,000	$	—	$	30,000	$	12,005	Daily LIBOR plus 3.00%
Tax Credit Equity Warehouse Facility										$	30,000	$	—	$	30,000	$	9,777	Adjusted Daily SOFR plus 3.00%
Debt issuance costs		—		—		—		(422)			—		—		—		(482)
Total warehouse facilities	$	2,709,810	$	3,115,000	$	5,824,810	$	924,280		$	2,559,810	$	3,340,000	$	5,899,810	$	1,125,677

(1)	~~Agency Warehouse Facilities, including the Fannie Mae repurchase agreement are used to fund loans held for sale, while Interim Warehouse Facilities are used to fund loans held for investment.~~

~~(2)~~

Interest rate presented does not include the effect of any applicable interest rate floors.

During 2022, the following amendments to the Warehouse Facilities were executed in the normal course of business to support the growth of the ~~Company’s~~Company’s business.

Table of Contents

Agency Warehouse Facilities

During the second quarter of 2022, the Company executed an ~~amended and restated agreement related~~amendment to Agency Warehouse Facility #2 that extended the maturity date to April 13, 2023 and transitioned the interest rate from 30-day LIBOR to Adjusted Term SOFR plus 130 basis points. No other material modifications have been made to the agreement during 2022.

During the second quarter of 2022, the Company executed an amendment related to Agency Warehouse Facility #3 that extended the maturity date to May 15, 2023 and transitioned the interest rate from 30-day LIBOR to Adjusted Term SOFR plus 135 basis points with an Adjusted Term SOFR floor of 15 basis points. No other material modifications have been made to the agreement during 2022.

During the second quarter of 2022, the Company executed an amendment related to Agency Warehouse Facility #4 that extended the maturity date to June 22, 2023, increased the total borrowing capacity to $425 million from $350 million, and transitioned the interest rate from 30-day LIBOR to Adjusted Term SOFR plus 130 basis points. No other material modifications have been made to the agreement during 2022.

Interim Warehouse Facilities

During the second quarter of 2022, the Company executed an amendment related to Interim Warehouse Facility #1 that extended the maturity date to May 15, 2023 and transitioned the interest rate from 30-day LIBOR to Adjusted Term SOFR plus 180 basis points. No other material modifications have been made to the agreement during 2022.

During the first quarter of 2022, the Company executed an ~~amended and restated agreement~~amendment related to Interim Warehouse Facility #2 that extended the maturity date to December 13, 2023 and transitioned the interest rate from 30-day LIBOR ~~floor~~ to Adjusted Term SOFR plus 135 to 185 basis points. No other material modifications have been made to the agreement during 2022.

13Tax Credit Equity Warehouse Facility

~~Table of Contents~~

During ~~the second quarter of~~ 2022, the Company executed ~~an amendment~~amendments related to the ~~Alliant~~Tax Credit Equity Warehouse Facility that extended the maturity date to ~~July 31,~~August 30, 2022. Additionally, the ~~amendment~~amendments transitioned the interest rate from Daily LIBOR plus 300 basis points to Adjusted Daily SOFR plus 300 basis points, with a SOFR floor of 150 basis points. No other material modifications have been made to the agreement during 2022.

During the first quarter of 2022, an Agency Warehouse Facility with a $150.0 million maximum committed borrowing capacity expired according to its terms. The Company believes that the 6 remaining committed and uncommitted credit facilities from nation banks, the uncommitted credit facility from Fannie Mae, and the Company’s corporate cash provide the Company with sufficient borrowing capacity to conduct is Agency lending operations without this facility.

The warehouse notes payable are subject to various financial covenants, all of which the Company was in compliance with as of ~~March 31,~~June 30, 2022. Interest on the ~~Company’s~~Company’s warehouse notes payable is based on 30-day LIBOR, Adjusted Term SOFR, or Adjusted ~~Term~~Daily SOFR. As a result of the expected transition from LIBOR, the Company has updated its debt agreements to include fallback language to govern the transition from 30-day LIBOR to an alternative reference rate.

NOTE 7—7—GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and Acquisition Activities

A summary of the ~~Company’s~~Company’s goodwill for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021 follows:

For the three months ended

March 31,

Roll Forward of Goodwill (in thousands)

2022

2021

Beginning balance

$
698,635

$
248,958

Additions from acquisitions

213,874

12,231

Measurement-period adjustments

(3,765)

—

Impairment

—

—

Ending balance

$
908,744

$
261,189


	For the six months ended
	June 30,
Roll Forward of Goodwill (in thousands)	2022		2021
Beginning balance	$	698,635	$	248,958
Additions from acquisitions		213,874		17,507
Measurement-period adjustments		25,372		—
Impairment		—		—
Ending balance	$	937,881	$	266,465

The addition to goodwill from acquisitions during 2022 shown in the table above during the ~~three~~six months ended ~~March 31,~~June 30, 2022 relates to the ~~Company’s~~Company’s February 28, 2022 acquisition of 100% of the equity interests of GeoPhy B.V. ~~(“GeoPhy”~~(“GeoPhy”), a Netherlands-based commercial real-estate technology company. As part of the acquisition, the Company also obtained ~~GeoPhy’s~~GeoPhy’s 50% interest in the ~~Company’s~~Company’s appraisal joint

Table of Contents

venture, Apprise. The Company now owns 100% of Apprise and consolidates its balances and its operating results post acquisition. Prior to the acquisition, the Company accounted for its investment in Apprise under the equity method. The fair value of the consideration was ~~$212.0~~$210.1 million and consisted of $87.6 million of cash, ~~$5.4~~$5.5 million of forgiveness of a receivable the Company had with the joint venture (non-cash activity not reflected in the Condensed Consolidated Statements of Cash Flows), and ~~$119.0~~$117.0 million of contingent consideration.

~~GeoPhy’s~~GeoPhy’s data analytics and technology development capabilities are expected to ~~dramatically~~ accelerate the growth of the ~~Company’s~~Company’s lending, brokerage, and appraisal operations. The GeoPhy acquisition is also expected to allow the Company to meet its goal of $5 billion of annual ~~small balance~~small-balance lending volume and appraisal revenue of $75 million by 2025 as part of the ~~Company’s~~Company’s overall growth targets. A significant portion of the value associated with the GeoPhy acquisition was related to the assembled workforces with their combined expertise in information technology, data science, and commercial real estate. The Company believes that the combination of ~~GeoPhy’s~~GeoPhy’s personnel, appraisal technology platform, and the future development of technology to accelerate growth in the origination of ~~small balance~~small-balance commercial loans, along with Walker ~~& Dunlop’s~~& Dunlop’s financial resources will (i) drive a significant increase in the identification and retention of borrowers in the small-balance segment of the multifamily market and (ii) continue to drive significant growth in appraisal revenues over the next five years. GeoPhy’s financial results since the acquisition and pro-forma information as if the acquisition occurred January 1, 2021 were immaterial.

The contingent consideration noted above is contingent on achieving certain Apprise revenue and productivity milestones and ~~small balance~~small-balance loan volume and revenue milestones over a four-year period. The maximum earnout included as part of the GeoPhy acquisition is $205.0 million. The Company estimated that ~~$182.5~~$132.7 million, or ~~89%,~~65% of the maximum earnout, is achievable based on management forecasts. The discounted balance of ~~$119.0~~$117.0 million is ~~58%~~57% of the maximum earnout amount. The Company estimated the fair value of this contingent consideration using a Monte Carlo simulation. The ~~discount rate~~weighted average cost of capital (“WACC”) used for the valuation of the contingent consideration was 17.0% for the

~~Table of Contents~~

Apprise portion of the earnout and 14.5% for the small-balance portion of the earnout. The ~~discount rates reflect~~WACC reflects the additional risk inherent in the Apprise performance estimates as it is still in the startup stage of its development. The estimated achievable earnout amount was discounted using a forward curve for a Company-specific subordinated debt rating.

The calculation of goodwill of ~~$213.9~~$211.9 million included the fair value of the consideration transferred of ~~$212.0~~$210.1 million and the acquisition-date fair value of the ~~Company’s~~Company’s previously-held equity-method investment in Apprise of $58.5 million. The book value of the ~~Company~~Company’s equity-method investment in Apprise prior to the acquisition date was $18.9 million, resulting in a $39.6 million gain from remeasuring to fair value. The gain is included as a component of Other revenues in the Condensed Consolidated Statements of Income. The Company used a discounted cash flow model to estimate the acquisition-date fair value of Apprise, with the discount rate and ~~management’s~~management’s forecast of future revenues and cash flows as the most-significant inputs for the estimate. The discount rate used was 17.0%, and a control premium was not included in the estimate.

The Company expects a large portion of the goodwill to be tax deductible, with the tax-deductible amount of goodwill related to the contingent consideration to be determined once the cash payments to settle the contingent consideration are made. The goodwill resulting from the GeoPhy acquisition was allocated to the ~~Company’s~~Company’s Capital Markets reportable segment. The other assets primarily consisted of technology intangible assets of $31.0 million and deferred tax assets of $9.4 million. The technology intangible assets will be amortized over a 10-year period. Immaterial liabilities were assumed. The operations of GeoPhy have since been merged into the Company’s existing operations. The financial results since the GeoPhy acquisition were immaterial. The revenues and earnings of Walker & Dunlop for the three months ended March 31, 2022 as if the GeoPhy acquisition had occurred as of January 1, 2021 would not be materially different from the amounts presented in the Condensed Consolidated Statements of Income.

As of ~~March 31,~~June 30, 2022, the amounts recorded for the GeoPhy acquisition were provisional as the Company had not completed the purchase accounting for the GeoPhy ~~acquisition.~~ acquisition as it awaits additional tax information.

The ~~immaterial~~ measurement-period adjustments above primarily relate to the ~~Company’s~~Company’s acquisition of Alliant Capital ~~Limited (“Alliant”~~Ltd. (“Alliant”), an acquisition completed in December of 2021, as more fully described in the ~~Company’s~~Company’s 2021 Form 10-K. The measurement-period adjustments consist of (i) $29.7 million additional purchase price consideration related to the settlement of working capital adjustments and (ii) immaterial other adjustments. The additional consideration was paid during the third quarter of 2022. The Company has ~~not~~substantially completed the purchase accounting for the Alliant acquisition as ~~the working capital adjustments have not been agreed upon. The Company expects the accounting to be completed in the second quarter~~ of June 30, 2022.

As discussed in NOTE 11 below ~~the Company transitioned to segment reporting during~~and beginning in the first quarter of ~~2022.~~2022, the Company now has 3 reportable segments. The following table shows goodwill by reportable segments as of ~~March 31,~~June 30, 2022. As the Company did not have segment reporting as of December 31, 2021, all of the goodwill ~~balances were~~balance was allocated to the ~~Company’s~~Company’s 1 reportable segment as of December 31, 2021. As noted above, the additions in the first quarter of 2022 were allocated to Capital Markets, and the measurement-period adjustments relate to both Capital Markets and Servicing && Asset Management.


	~~As of March 31,~~
~~Goodwill by Reportable Segment~~ ~~(in thousands)~~	~~2022~~
~~Capital Markets~~	$	~~449,992~~
~~Servicing & Asset Management~~		~~458,752~~
~~Corporate~~		—
~~Ending balance~~	$	~~908,744~~

~~Other Intangible Assets~~

~~Activity related to other intangible assets for the three months ended March 31, 2022 and 2021 follows:~~

For the three months ended

March 31,
Roll Forward of Other Intangible Assets (in thousands)

2022

2021
Beginning balance

$
183,904

$
1,880
Additions from acquisitions

31,000

504
Amortization

(3,499)

(667)
Ending balance

$
211,405

$
1,717

1516

Table of Contents


Goodwill by Reportable Segment (in thousands)	As of June 30, 2022
Capital Markets	$	448,048
Servicing & Asset Management		489,833
Corporate		—
Ending balance	$	937,881

Other Intangible Assets

Activity related to other intangible assets for the six months ended June 30, 2022 and 2021 follows:


	For the six months ended
	June 30,
Roll Forward of Other Intangible Assets (in thousands)	2022		2021
Beginning balance	$	183,904	$	1,880
Additions from acquisitions		31,000		504
Amortization		(7,880)		(831)
Ending balance	$	207,024	$	1,553

The following table summarizes the gross value, accumulated amortization, and net carrying value of the ~~Company’s~~Company’s other intangible assets as of ~~March 31,~~June 30, 2022 and December 31, 2021:


Components of Other Intangible Assets (in thousands)	June 30, 2022		December 31, 2021
Gross value	$	220,682	$	189,682
Accumulated amortization		(13,658)		(5,778)
Net carrying value	$	207,024	$	183,904

As of March 31,
Components of Other Intangible Assets (in thousands)

2022

2021
Gross value

$
220,682

$
189,682
Accumulated amortization

(9,277)

(5,778)
Net carrying value

$
211,405

$
183,904

The expected amortization of other intangible assets shown in the Condensed Consolidated Balance Sheet as of ~~March 31,~~June 30, 2022 is shown in the table below. Actual amortization may vary from these estimates.


	Expected
(in thousands)	Amortization
Six Months Ending December 31,
2022	$	8,870
Year Ending December 31,
2023	$	17,303
2024		16,246
2025		16,206
2026		16,206
2027		16,206
Thereafter		115,987
Total	$	207,024

Expected
(in thousands)

Amortization
Nine Months Ending December 31,

2022

$
13,496
Year Ending December 31,

2023

$
16,246
2024

16,246
2025

16,206
2026

16,206
2027

16,206
Thereafter

116,799
Total

$
211,405

Table of Contents

Contingent Consideration Liabilities

A summary of the ~~Company’s~~Company’s contingent consideration liabilities, which are included in Other liabilities in the Condensed Consolidated Balance Sheets, as of and for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021 follows:

For the three months ended

March 31,

Roll Forward of Contingent Consideration Liabilities (in thousands)

2022

2021

Beginning balance

$
125,808

$
28,829

Additions

119,000

5,229

Accretion and revaluation

359

430

Payments

(26,438)

—

Ending balance

$
218,729

$
34,488


	For the six months ended
	June 30,
Roll Forward of Contingent Consideration Liabilities (in thousands)	2022		2021
Beginning balance	$	125,808	$	28,829
Additions		117,000		7,504
Accretion and revaluation		1,823		906
Payments		(26,439)		—
Ending balance	$	218,192	$	37,239

The contingent consideration liabilities presented in the table above relate to (i) acquisitions of debt brokerage companies and an investment sales brokerage company 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 earn-out period of five years,, provided certain revenue targets and other metrics have been met. The last of the earn-out periods related to the contingent consideration ends in the first quarter of 2026. In each case, thethe Company estimated the initial fair value of the contingent consideration using a Monte Carlo simulation.

The recognition of the contingent consideration liability for the GeoPhy acquisition 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 for the six months ended June 30, 2022 were from the issuance of the Company’s common stock, a non-cash transaction.

~~Table of Contents~~

NOTE 8—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~~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 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.

The ~~Company's~~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 measurement when there is evidence of impairment and for disclosure purposes (NOTE 3). The ~~Company's~~Company's MSRs do not trade in an active, open market with readily observable prices. Accordingly, the estimated

Table of Contents

fair value of the ~~Company’s~~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, estimated revenue from escrow accounts, 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 market participants consider in valuing MSR assets. MSRs are carried at the lower of amortized cost or fair value.

A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

●●

Derivative Instruments——The derivative positions consist of interest rate lock commitments with borrowers and forward sale agreements to the Agencies. The fair value of these instruments is estimated using a discounted cash flow model developed based on changes in the 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——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 inputs from market participants such as changes in the U.S. Treasury rate. Therefore, the Company classifies these loans held for sale as Level 2.

●●

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 initially recognized at fair value at acquisition and subsequently remeasured based on the change in probability of achievement of the performance objectives and fair value accretion. The remeasurement and fair value accretion are recognized as Other operating expenses in the Condensed Consolidated Statements of Income. The Company determines the fair value of each contingent consideration liability based on a combination of Monte Carlo simulations and probability of achievement estimates, which incorporates management estimates. As a result, the Company classifies these liabilities as Level 3.

1719

Table of Contents

fair value accretion. The Company determines the fair value of each contingent consideration liability based on a probability of achievement, which incorporates management estimates. As a result, the Company classifies these liabilities as Level 3.

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of ~~March 31,~~June 30, 2022 and December 31, 2021, segregated by the level of the valuation inputs within the fair value hierarchy used to measure fair value:


							Balance as of

															Balance as of
(in thousands)	Level 1		Level 2		Level 3		Period End		Level 1		Level 2		Level 3		Period End
March 31, 2022
June 30, 2022
Assets
Loans held for sale	$	—	$	703,629	$	—	$	703,629	$	—	$	931,516	$	—	$	931,516
Pledged securities		41,053		107,594		—		148,647		10,149		139,411		—		149,560
Derivative assets		—		—		112,023		112,023		—		—		59,810		59,810
Total	$	41,053	$	811,223	$	112,023	$	964,299	$	10,149	$	1,070,927	$	59,810	$	1,140,886


Liabilities
Derivative liabilities	$	—	$	—	$	12,400	$	12,400	$	—	$	—	$	17,176	$	17,176
Contingent consideration liabilities		—		—		218,729		218,729		—		—		218,192		218,192
Total	$	—	$	—	$	231,129	$	231,129	$	—	$	—	$	235,368	$	235,368


December 31, 2021
Assets
Loans held for sale	$	—	$	1,811,586	$	—	$	1,811,586	$	—	$	1,811,586	$	—	$	1,811,586
Pledged securities		44,733		104,263		—		148,996		44,733		104,263		—		148,996
Derivative assets		—		—		37,364		37,364		—		—		37,364		37,364
Total	$	44,733	$	1,915,849	$	37,364	$	1,997,946	$	44,733	$	1,915,849	$	37,364	$	1,997,946


Liabilities
Derivative liabilities	$	—	$	—	$	6,403	$	6,403	$	—	$	—	$	6,403	$	6,403
Contingent consideration liabilities		—		—		125,808		125,808		—		—		125,808		125,808
Total	$	—	$	—	$	132,211	$	132,211	$	—	$	—	$	132,211	$	132,211

There were 0 transfers between any of the levels within the fair value hierarchy during the ~~three~~six months ended ~~March 31,~~June 30, 2022.

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 six months ended ~~March 31,~~June 30, 2022 and 2021:


	For the three months ended
	March 31,

					For the three months ended				For the six months ended
					June 30,				June 30,
Derivative Assets and Liabilities, net (in thousands)	2022		2021		2022		2021		2022		2021
Beginning balance	$	30,961	$	44,720	$	99,623	$	48,880	$	30,961	$	44,720
Settlements		(66,378)		(129,655)		(211,543)		(211,771)		(277,921)		(341,515)
Realized gains recorded in earnings⁽¹⁾		35,417		84,935		111,920		162,891		246,960		296,795
Unrealized gains (losses) recorded in earnings⁽¹⁾		99,623		48,880		42,634		6,340		42,634		6,340
Ending balance	$	99,623	$	48,880	$	42,634	$	6,340	$	42,634	$	6,340

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

1820

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~~Company’s Level 3 assets and liabilities as of ~~March 31,~~June 30, 2022:


	Quantitative Information about Level 3 Fair Value Measurements

							Quantitative Information about Level 3 Fair Value Measurements
(in thousands)	Fair Value		Valuation Technique	Unobservable Input⁽¹⁾	Input Range ⁽¹⁾	Weighted Average ⁽³⁾	Fair Value		Valuation Technique	Unobservable Input⁽¹⁾	Input Range ⁽¹⁾	Weighted Average ⁽³⁾
Derivative assets	$	112,023	Discounted cash flow	Counterparty credit risk	—	—	$	59,810	Discounted cash flow	Counterparty credit risk	—	—
Derivative liabilities	$	12,400	Discounted cash flow	Counterparty credit risk	—	—	$	17,176	Discounted cash flow	Counterparty credit risk	—	—
Contingent consideration liabilities	$	218,729	Various⁽²⁾	Probability of earn-out achievement	88% - 100%	90%	$	218,192	Various⁽²⁾	Probability of earn-out achievement	65% - 100%	76%

(1)	Significant increases in this input may lead to significantly lower fair value measurements.

(2)	Primary valuation technique used was a Monte Carlo simulation analysis.

(3)	Contingent consideration weighted based on maximum gross earn-out amount.

The carrying amounts and the fair values of the ~~Company's~~Company's financial instruments as of ~~March 31,~~June 30, 2022 and December 31, 2021 are presented below:


	March 31, 2022				December 31, 2021
	Carrying		Fair		Carrying		Fair

									June 30, 2022				December 31, 2021
									Carrying		Fair		Carrying		Fair
(in thousands)	Amount		Value		Amount		Value		Amount		Value		Amount		Value
Financial Assets:
Cash and cash equivalents	$	141,375	$	141,375	$	305,635	$	305,635	$	151,252	$	151,252	$	305,635	$	305,635
Restricted cash		41,584		41,584		42,812		42,812		34,361		34,361		42,812		42,812
Pledged securities		148,647		148,647		148,996		148,996		149,560		149,560		148,996		148,996
Loans held for sale		703,629		703,629		1,811,586		1,811,586		931,516		931,516		1,811,586		1,811,586
Loans held for investment, net		216,620		217,932		269,125		270,826		247,243		248,383		269,125		270,826
Derivative assets		112,023		112,023		37,364		37,364		59,810		59,810		37,364		37,364
Total financial assets	$	1,363,878	$	1,365,190	$	2,615,518	$	2,617,219	$	1,573,742	$	1,574,882	$	2,615,518	$	2,617,219


Financial Liabilities:
Derivative liabilities	$	12,400	$	12,400	$	6,403	$	6,403	$	17,176	$	17,176	$	6,403	$	6,403
Contingent consideration liabilities		218,729		218,729		125,808		125,808		218,192		218,192		125,808		125,808
Warehouse notes payable		924,280		924,702		1,941,572		1,942,448		1,125,677		1,126,159		1,941,572		1,942,448
Notes payable		726,555		731,416		740,174		745,175		719,210		723,931		740,174		745,175
Total financial liabilities	$	1,881,964	$	1,887,247	$	2,813,957	$	2,819,834	$	2,080,255	$	2,085,458	$	2,813,957	$	2,819,834

The following methods and assumptions were used for recurring fair value measurements as of ~~March 31,~~June 30, 2022 and December 31, 2021.

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 Agency debt securities. 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 a mortgage loan is funded and are valued using discounted cash flow models that incorporate observable prices from market participants.

1921

Table of Contents

Contingent Consideration Liability——Consists of the estimated fair values of expected future earn-out payments related to acquisitions completed over the past several years, including 2022. The earn-out liabilities are valued using a Monte Carlo simulation analysis. The fair value of the contingent consideration liabilities incorporates unobservable inputs, such as the probability of earn-out achievement, volatility rates, and discount rate, to determine the expected earn-out cash flows. The probability of the earn-out achievement is based on ~~management’s~~management’s estimate of the expected future performance and other financial metrics of each of the acquired entities, which are subject to significant uncertainty.

Derivative Instruments——Consist 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.

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"~~"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"~~"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 enters into a sale commitment with the investor 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 Loan origination and debt brokerage fees, net in the Condensed Consolidated Statements of Income. The fair value of the ~~Company's~~Company's rate lock commitments to borrowers and loans held for sale and the related input levels includes, as ~~applicable~~:applicable:

●●

the estimated gain 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~~(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 (Level 2). The fair value of the expected net cash flows associated with servicing the loan is calculated pursuant to the valuation techniques applicable to the fair value of future servicing, net at loan sale (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 and the balance sheet date by the notional loan commitment amount (Level 2).

The fair value of the ~~Company's~~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~~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~~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~~Company’s counterparties has historically been minimal (Level 3).

2022

Table of Contents

The following table presents the components of fair value and other relevant information associated with the ~~Company’s~~Company’s derivative instruments and loans held for sale as of ~~March 31,~~June 30, 2022 and December 31, 2021:


			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
March 31, 2022
June 30, 2022
Rate lock commitments	$	1,179,917	$	36,930	$	(10,360)	$	26,570	$	33,564	$	(6,994)	$	—	$	820,439	$	20,105	$	12,556	$	32,661	$	33,386	$	(725)	$	—
Forward sale contracts		1,932,125		—		73,053		73,053		78,459		(5,406)		—		1,753,635		—		9,973		9,973		26,424		(16,451)		—
Loans held for sale		752,208		14,114		(62,693)		(48,579)		—		—		(48,579)		933,196		20,849		(22,529)		(1,680)		—		—		(1,680)
Total			$	51,044	$	—	$	51,044	$	112,023	$	(12,400)	$	(48,579)			$	40,954	$	—	$	40,954	$	59,810	$	(17,176)	$	(1,680)


December 31, 2021
Rate lock commitments	$	1,115,829	$	29,837	$	(4,604)	$	25,233	$	26,526	$	(1,293)	$	—	$	1,115,829	$	29,837	$	(4,604)	$	25,233	$	26,526	$	(1,293)	$	—
Forward sale contracts		2,881,224		—		5,728		5,728		10,838		(5,110)		—		2,881,224		—		5,728		5,728		10,838		(5,110)		—
Loans held for sale		1,765,395		47,315		(1,124)		46,191		—		—		46,191		1,765,395		47,315		(1,124)		46,191		—		—		46,191
Total			$	77,152	$	—	$	77,152	$	37,364	$	(6,403)	$	46,191			$	77,152	$	—	$	77,152	$	37,364	$	(6,403)	$	46,191

NOTE 9—9—FANNIE MAE COMMITMENTS AND 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 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, 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. Pledged securities held in the form of money market funds holding U.S. Treasuries are discounted 5%, and Agency mortgage-backed securities (“(“Agency ~~MBS”~~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 ~~March 31,~~June 30, 2022. The majority of the loans for which the Company has risk sharing are Tier 2 loans.

The Company is in compliance with the ~~March 31,~~June 30, 2022 collateral requirements as outlined above. As of ~~March 31,~~June 30, 2022, reserve requirements for the DUS loan portfolio will require the Company to fund ~~$68.2~~$70.4 million in additional restricted liquidity over the next 48 months, assuming no further principal paydowns, prepayments, or defaults within the at-risk portfolio. Fannie Mae has in the past reassessed the DUS Capital Standards 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 increases to collateral requirements may adversely impact the ~~Company’s~~Company’s available cash.

Fannie Mae has established benchmark standards for capital adequacy and reserves the right to terminate the ~~Company's~~Company's servicing authority for all or some of the portfolio if, at any time, it determines that the ~~Company's~~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 ~~March 31,~~June 30, 2022. The net worth requirement is derived primarily from unpaid principal balances on Fannie Mae loans and the level of risk sharing. At ~~March 31,~~June 30, 2022, the net worth requirement was ~~$261.2~~$266.2 million, and the ~~Company's~~Company's net worth, as defined in the requirements, was ~~$704.8~~$621.6 million, as measured at our ~~wholly owned~~wholly-owned operating subsidiary, Walker && Dunlop, LLC. As of ~~March 31,~~June 30, 2022, the Company was required to maintain at least ~~$51.8~~$52.8 million of liquid assets to meet operational liquidity requirements for Fannie Mae, Freddie Mac, HUD, and Ginnie Mae, and the Company had operational liquidity, as defined in the requirements, of ~~$98.6~~$116.0 million as of ~~March 31,~~June 30, 2022, as measured at our ~~wholly owned~~wholly-owned operating subsidiary, Walker && Dunlop, LLC.

2123

Table of Contents

Pledged Securities, at Fair Value——Pledged securities, at fair value consisted of the following balances as of ~~March 31,~~June 30, 2022 and 2021 and December 31, 2021 and 2020:


	March 31,				December 31,

									June 30,				December 31,
Pledged Securities (in thousands)	2022		2021		2021		2020		2022		2021		2021		2020
Restricted cash	$	4,099	$	24,578	$	3,779	$	4,954	$	5,979	$	7,442	$	3,779	$	4,954
Money market funds		36,954		14,954		40,954		12,519		4,170		39,954		40,954		12,519
Total pledged cash and cash equivalents	$	41,053	$	39,532	$	44,733	$	17,473	$	10,149	$	47,396	$	44,733	$	17,473
Agency MBS		107,594		100,038		104,263		119,763		139,411		99,152		104,263		119,763
Total pledged securities, at fair value	$	148,647	$	139,570	$	148,996	$	137,236	$	149,560	$	146,548	$	148,996	$	137,236

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 2.

The ~~Company’s~~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 ~~March 31,~~June 30, 2022 and December 31, 2021:



Fair Value and Amortized Cost of Agency MBS (in thousands)	March 31, 2022		December 31, 2021		June 30, 2022		December 31, 2021
Fair value	$	107,594	$	104,263	$	139,411	$	104,263
Amortized cost		105,484		100,847		139,737		100,847
Total gains for securities with net gains in AOCI		2,743		3,636		1,242		3,636
Total losses for securities with net losses in AOCI		(633)		(220)		(1,568)		(220)
Fair value of securities with unrealized losses		38,964		4,757		104,433		4,757

An immaterial amount of the pledged securities has been in a continuous unrealized loss position for more than 12 months.

The following 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.


	March 31, 2022

					June 30, 2022
Detail of Agency MBS Maturities (in thousands)	Fair Value		Amortized Cost		Fair Value		Amortized Cost
Within one year	$	—	$	—	$	—	$	—
After one year through five years		2,253		2,248		13,901		13,903
After five years through ten years		78,112		77,631		100,704		100,835
After ten years		27,229		25,605		24,806		24,999
Total	$	107,594	$	105,484	$	139,411	$	139,737

NOTE ~~10—~~10—EARNINGS PER SHARE AND ~~STOCKHOLDERS’~~STOCKHOLDERS’ EQUITY

Earnings per share ~~(“EPS”~~(“EPS”) is calculated under the two-class method. The two-class method allocates all earnings (distributed and undistributed) to 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.

2224

Table of Contents

The following table presents the calculation of basic and diluted EPS for the three and six months ended ~~March 31,~~June 30, 2022 and 2021 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 March 31,

					For the three months ended June 30,				For the six months ended June 30,
EPS Calculations (in thousands, except per share amounts)	2022		2021		2022		2021		2022		2021
Calculation of basic EPS
Walker & Dunlop net income	$	71,209	$	58,052
Walker & Dunlop net income					$	54,286	$	56,058	$	125,495	$	114,110
Less: dividends and undistributed earnings allocated to participating securities		2,172		1,967		1,554		1,831		3,708		3,798
Net income applicable to common stockholders	$	69,037	$	56,085	$	52,732	$	54,227	$	121,787	$	110,312
Weighted-average basic shares outstanding		32,219		30,823		32,388		31,019		32,304		30,922
Basic EPS	$	2.14	$	1.82	$	1.63	$	1.75	$	3.77	$	3.57


Calculation of diluted EPS
Net income applicable to common stockholders	$	69,037	$	56,085	$	52,732	$	54,227	$	121,787	$	110,312
Add: reallocation of dividends and undistributed earnings based on assumed conversion		19		20		9		14		27		34
Net income allocated to common stockholders	$	69,056	$	56,105	$	52,741	$	54,241	$	121,814	$	110,346
Weighted-average basic shares outstanding		32,219		30,823		32,388		31,019		32,304		30,922
Add: weighted-average diluted non-participating securities		398		453		306		351		353		400
Weighted-average diluted shares outstanding		32,617		31,276		32,694		31,370		32,657		31,322
Diluted EPS	$	2.12	$	1.79	$	1.61	$	1.73	$	3.73	$	3.52

The assumed proceeds used for calculating the dilutive impact of restricted stock awards under the treasury-stock method includes the unrecognized compensation costs associated with the awards. For the three and six months ended June 30, 2022, 136 thousand average restricted shares and 87 thousand average restricted shares, respectively, were excluded. An immaterial number of average restricted shares were excluded from the computation of diluted ~~earnings per share~~EPS under the treasury-stock method for the three and six months ended ~~March 31, 2022 and March 31, 2021, respectively,~~June 30, 2021. These average restricted shares were excluded from the computation of diluted EPS under the treasury method because the effect would have been anti-dilutive, as the grant date market price of the restricted shares was greater than the average market price of the ~~Company’s~~Company’s shares of common stock during the periods presented.

The following non-cash transactions did not impact the amount of cash paid on the Condensed Consolidated Statements of Cash Flows. ~~For the three months ended March 31, 2022, the Company issued shares of common stock totaling $6.6 million to settle compensation liabilities.~~ During ~~the three months ended March 31,~~ 2022, the operating agreement of 13 of the ~~Company’s~~Company’s tax-credit-related joint ventures changed. The Company reconsidered its consolidation conclusion based on ~~this change~~these changes and concluded that the joint ~~venture~~ventures should be consolidated, resulting in a ~~$5.3~~$3.7 million ~~reduction~~increase in APIC and ~~$15.5~~$6.8 million of noncontrolling interests consolidated as shown on the Consolidated Statements of Changes in ~~Equity.~~Equity for the six months ended June 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. ~~$8.8 million of the payments settling contingent consideration liabilities included in NOTE 7 for the three months ended March 31, 2022 were from the issuance of the Company’s common stock.~~

In February 2022, the ~~Company’s~~Company’s Board of Directors approved a stock repurchase program that permits the repurchase of up to ~~$75.0~~$75.0 million of the ~~Company’s~~Company’s common stock over a 12-month period beginning on February 13, 2022. During the first quarter of 2022, the Company did 0t0t repurchase any shares of its common stock under the share repurchase program. During the second quarter of 2022, the Company repurchased 109 thousand shares of its common stock under the 2022 share repurchase program at a weighted-average price of $101.77 per share and immediately retired the shares, reducing stockholders’ equity by $11.1 million. As of ~~March 31,~~June 30, 2022, the Company had ~~$75.0~~$63.9 million of authorized share repurchase capacity remaining under the 2022 share repurchase program.

~~In February~~During each of the first and second quarters of 2022, ~~our~~the Company paid a dividend of $0.60 per share. On August 3, 2022, the Company’s Board of Directors declared a dividend of ~~$0.60~~$0.60 per share for the ~~first quarter of 2022, which the Company paid during the first quarter of 2022. On May 4, 2022, the Company’s Board of Directors declared a dividend of~~ ~~$0.60~~ ~~per share for the second~~third quarter of 2022. The dividend will be paid on ~~June 3,~~September 2, 2022 to all holders of record of the ~~Company’s~~Company’s restricted and unrestricted common stock as of ~~May 19,~~August 18, 2022.

The ~~Company’s~~Company’s Note Payable (“(“Term ~~Loan”~~Loan”) contains direct restrictions to 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.

2325

Table of Contents

NOTE ~~11—~~11—SEGMENTS

In the first quarter of 2022, as a result of the ~~Company’s~~Company’s growth and recent acquisitions, the ~~Company’s~~Company’s executive leadership team, which functions as the Company’s chief operating decision ~~maker~~making body, began making decisions and assessing performance based on the following 3 operating segments. The operating segments are determined based on the product or service provided and reflect the manner in which management is currently evaluating the ~~Company’s~~Company’s financial information.

(i)

Capital Markets ~~(“CM”~~(“CM”)——CM provides a comprehensive range of commercial real estate finance products to our customers, including Agency lending, debt brokerage, property sales, and appraisal and valuation services. The ~~Company’s~~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~~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.

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 and fees for property sales and appraisals. Direct internal, including compensation, and external costs that are specific to CM are included within the results of this operating ~~segments.~~ segment.

(ii)

Servicing && Asset Management ~~(“SAM”~~(“SAM”)~~—SAM’s~~—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 tax credit equity funds focused on the affordable housing sector and other commercial real estate, and (iii) real estate-related investment banking and advisory services, ~~include~~including housing market research.

SAM earns revenue through (i) fees for servicing the loans in the ~~Company’s~~Company’s servicing portfolio, (ii) asset management fees for managing third-party capital invested in funds, primarily LIHTC tax credit funds, (iii) subscription revenue for its housing market research, and (iv) 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 operating segment.

(iii)

Corporate——The Corporate segment consists primarily of the ~~Company’s~~Company’s treasury operations and other corporate-level activities. The ~~Company’s~~Company’s treasury activities include monitoring and managing liquidity and funding requirements, including corporate debt. Other corporate-level activities include strategic equity-method investments, accounting, information technology, legal, human resources, marketing, ~~accounting,~~ internal audit, and various other corporate groups (“(“support ~~functions”~~functions”). The Company does not allocate costs from these support functions to the CM or SAM segments in presenting segment operating results, other than income tax expense, which is allocated proportionally based on income from operations at each segment.

2426

Table of Contents

The following tables provide a summary and reconciliation of each segment’s results for the three months ended June 30, 2022 and 2021.


	For the three months ended June 30, 2022
Segment Results					Servicing &
(in thousands)			Capital		Asset
			Markets		Management		Corporate		Consolidated
Revenues
Loan origination and debt brokerage fees, net		$	102,085	$	520	$	—	$	102,605
Fair value of expected net cash flows from servicing, net			51,949		—		—		51,949
Servicing fees			—		74,260		—		74,260
Property sales broker fees			46,386		—		—		46,386
Investment management fees			—		10,282		—		10,282
Net warehouse interest income			3,707		1,561		—		5,268
Escrow earnings and other interest income			—		6,648		103		6,751
Other revenues			3,895		39,280		172		43,347
Total revenues		$	208,022	$	132,551	$	275	$	340,848

Expenses
Personnel		$	138,913	$	21,881	$	7,574	$	168,368
Amortization and depreciation			810		58,760		1,533		61,103
Provision (benefit) for credit losses			—		(4,840)		—		(4,840)
Interest expense on corporate debt			—		—		6,412		6,412
Other operating expenses			4,583		6,559		25,053		36,195
Total expenses		$	144,306	$	82,360	$	40,572	$	267,238
Income from operations		$	63,716	$	50,191	$	(40,297)	$	73,610
Income tax expense			16,476		12,850		(9,823)		19,503
Net income before noncontrolling interests		$	47,240	$	37,341	$	(30,474)	$	54,107
Less: net income (loss) from noncontrolling interests			—		(179)		—		(179)
Walker & Dunlop net income		$	47,240	$	37,520	$	(30,474)	$	54,286

Table of Contents


	For the three months ended June 30, 2021
Segment Results					Servicing &
(in thousands)			Capital		Asset
			Markets		Management		Corporate		Consolidated
Revenues
Loan origination and debt brokerage fees, net		$	105,583	$	1,889	$	—	$	107,472
Fair value of expected net cash flows from servicing, net			61,849		—		—		61,849
Servicing fees			—		69,052		—		69,052
Property sales broker fees			22,454		—		—		22,454
Investment management fees			—		3,815		—		3,815
Net warehouse interest income			2,884		1,746		—		4,630
Escrow earnings and other interest income			—		1,768		55		1,823
Other revenues			3,135		6,885		296		10,316
Total revenues		$	195,905	$	85,155	$	351	$	281,411

Expenses
Personnel		$	119,994	$	9,447	$	11,980	$	141,421
Amortization and depreciation			18		47,395		1,097		48,510
Provision (benefit) for credit losses			—		(4,326)		—		(4,326)
Interest expense on corporate debt			—		—		1,760		1,760
Other operating expenses			3,598		2,604		13,546		19,748
Total expenses		$	123,610	$	55,120	$	28,383	$	207,113
Income from operations		$	72,295	$	30,035	$	(28,032)	$	74,298
Income tax expense			17,739		7,475		(6,974)		18,240
Net income before noncontrolling interests		$	54,556	$	22,560	$	(21,058)	$	56,058
Less: net income (loss) from noncontrolling interests			—		—		—		—
Walker & Dunlop net income		$	54,556	$	22,560	$	(21,058)	$	56,058

Table of Contents

The following tables provide a summary and reconciliation of each segment’s results for the six months ended June 30, 2022 and 2021 and total assets as of June 30, 2022 and 2021.


	As of and for the six months ended June 30, 2022
Segment Results and Total Assets					Servicing &
(in thousands)			Capital		Asset
			Markets		Management		Corporate		Consolidated
Revenues
Loan origination and debt brokerage fees, net		$	183,908	$	1,007	$	—	$	184,915
Fair value of expected net cash flows from servicing, net			104,679		—		—		104,679
Servicing fees			—		146,941		—		146,941
Property sales broker fees			69,784		—		—		69,784
Investment management fees			—		22,930		—		22,930
Net warehouse interest income			7,237		2,804		—		10,041
Escrow earnings and other interest income			—		8,406		148		8,554
Other revenues			6,658		61,529		44,261		112,448
Total revenues		$	372,266	$	243,617	$	44,409	$	660,292

Expenses
Personnel		$	237,639	$	40,519	$	34,391	$	312,549
Amortization and depreciation			810		113,691		2,754		117,255
Provision (benefit) for credit losses			—		(14,338)		—		(14,338)
Interest expense on corporate debt			—		—		12,817		12,817
Other operating expenses			10,694		12,678		45,037		68,409
Total expenses		$	249,143	$	152,550	$	94,999	$	496,692
Income from operations		$	123,123	$	91,067	$	(50,590)	$	163,600
Income tax expense			29,323		21,689		(12,049)		38,963
Net income before noncontrolling interests		$	93,800	$	69,378	$	(38,541)	$	124,637
Less: net income (loss) from noncontrolling interests			—		(858)		—		(858)
Walker & Dunlop net income		$	93,800	$	70,236	$	(38,541)	$	125,495

Total assets		$	1,611,951	$	2,607,990	$	314,831	$	4,534,772

Table of Contents

~~The following table provides a summary and reconciliation of each segment’s results for the three months ended March 31, 2022 and 2021 and total assets as of March 31, 2022 and 2021.~~


	As of and for the six months ended June 30, 2021
Segment Results and Total Assets					Servicing &
(in thousands)			Capital		Asset
			Markets		Management		Corporate		Consolidated
Revenues
Loan origination and debt brokerage fees, net		$	180,878	$	2,473	$	—	$	183,351
Fair value of expected net cash flows from servicing, net			119,784		—		—		119,784
Servicing fees			—		135,030		—		135,030
Property sales broker fees			31,496		—		—		31,496
Investment management fees			—		6,551		—		6,551
Net warehouse interest income			5,343		3,842		—		9,185
Escrow earnings and other interest income			—		3,767		173		3,940
Other revenues			5,695		11,657		(990)		16,362
Total revenues		$	343,196	$	163,320	$	(817)	$	505,699

Expenses
Personnel		$	192,629	$	16,558	$	28,449	$	237,636
Amortization and depreciation			539		92,773		2,069		95,381
Provision (benefit) for credit losses			—		(15,646)		—		(15,646)
Interest expense on corporate debt			—		—		3,525		3,525
Other operating expenses			7,000		4,857		25,478		37,335
Total expenses		$	200,168	$	98,542	$	59,521	$	358,231
Income from operations		$	143,028	$	64,778	$	(60,338)	$	147,468
Income tax expense			32,354		14,653		(13,649)		33,358
Net income before noncontrolling interests		$	110,674	$	50,125	$	(46,689)	$	114,110
Less: net income (loss) from noncontrolling interests			—		—		—		—
Walker & Dunlop net income		$	110,674	$	50,125	$	(46,689)	$	114,110

Total assets		$	2,070,549	$	1,404,895	$	467,677	$	3,943,121

As of and for the three months ended March 31, 2022
Segment Results and Total Assets

Servicing &

(in thousands)

Capital

Asset

Markets

Management

Corporate

Consolidated
Revenues

Loan origination and debt brokerage fees, net

$
81,823

$
487

$
—

$
82,310
Fair value of expected net cash flows from servicing, net

52,730

—

—

52,730
Servicing fees

—

72,681

—

72,681
Property sales broker fees

23,398

—

—

23,398
Net warehouse interest income, loans held for sale

3,530

—

—

3,530
Net warehouse interest income, loans held for investment

—

1,243

—

1,243
Escrow earnings and other interest income

—

1,758

45

1,803
Other revenues

2,763

34,897

44,089

81,749
Total revenues

$
164,244

$
111,066

$
44,134

$
319,444

Expenses

Personnel

$
98,726

$
18,638

$
26,817

$
144,181
Amortization and depreciation

—

54,931

1,221

56,152
Provision (benefit) for credit losses

—

(9,498)

—

(9,498)
Interest expense on corporate debt

—

—

6,405

6,405
Other operating expenses

6,111

6,119

19,984

32,214
Total expenses

$
104,837

$
70,190

$
54,427

$
229,454
Income from operations

$
59,407

$
40,876

$
(10,293)

$
89,990
Income tax expense

12,847

8,839

(2,226)

19,460
Net income before noncontrolling interests

$
46,560

$
32,037

$
(8,067)

$
70,530
Less: net income (loss) from noncontrolling interests

—

(679)

—

(679)
Walker & Dunlop net income

$
46,560

$
32,716

$
(8,067)

$
71,209

Total assets

$
1,398,272

$
2,573,112

$
368,247

$
4,339,631

~~Table of Contents~~

As of and for the three months ended March 31, 2021
Segment Results and Total Assets

Servicing &

(in thousands)

Capital

Asset

Markets

Management

Corporate

Consolidated
Revenues

Loan origination and debt brokerage fees, net

$
75,295

$
584

$
—

$
75,879
Fair value of expected net cash flows from servicing, net

57,935

—

—

57,935
Servicing fees

—

65,978

—

65,978
Property sales broker fees

9,042

—

—

9,042
Net warehouse interest income, loans held for sale

2,459

—

—

2,459
Net warehouse interest income, loans held for investment

—

2,096

—

2,096
Escrow earnings and other interest income

—

1,999

118

2,117
Other revenues

2,560

7,508

(1,286)

8,782
Total revenues

$
147,291

$
78,165

$
(1,168)

$
224,288

Expenses

Personnel

$
72,635

$
7,111

$
16,469

$
96,215
Amortization and depreciation

521

45,378

972

46,871
Provision (benefit) for credit losses

—

(11,320)

—

(11,320)
Interest expense on corporate debt

—

—

1,765

1,765
Other operating expenses

3,402

2,253

11,932

17,587
Total expenses

$
76,558

$
43,422

$
31,138

$
151,118
Income from operations

$
70,733

$
34,743

$
(32,306)

$
73,170
Income tax expense

14,615

7,178

(6,675)

15,118
Net income before noncontrolling interests

$
56,118

$
27,565

$
(25,631)

$
58,052
Less: net income (loss) from noncontrolling interests

—

—

—

—
Walker & Dunlop net income

$
56,118

$
27,565

$
(25,631)

$
58,052

Total assets

$
1,394,741

$
1,402,627

$
406,597

$
3,203,965

NOTE ~~12—~~12—VARIABLE INTEREST ENTITIES

The Company, through its subsidiary 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. The Company’s continuing involvement in the VIEs usually includes either serving as the manager of the VIE (as is the case in the tax credit funds) or as a majority investor in the VIE with a third-party property developer or property manager serving as the manager of the VIE.

A detailed discussion of the ~~Company’s~~Company’s accounting policies regarding the consolidation of VIEs and significant transactions involving VIEs is included in NOTE 2 and NOTE 17 of the ~~Company’s~~Company’s 2021 Form 10-K.

During ~~the first quarter of~~ 2022, the operating agreement of ~~one~~3 of the ~~Company’s~~Company’s joint ventures changed, resulting in the Company gaining the power to direct the activities that most significantly impact the economic performance of the joint venture; previously, the Company only held rights to receive the significant economic benefits of the joint venture. The Company reassessed its consolidation conclusion and determined that it was the primary beneficiary and as a result consolidated the joint venture as of as March 31, 2022. As of ~~March 31,~~June 30, 2022 and December 31, 2021, the assets and liabilities of the consolidated tax credit funds were immaterial.

2630

Table of Contents

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


Consolidated VIEs (in thousands):		March 31, 2022		December 31, 2021

Consolidated VIEs (in thousands)						June 30, 2022		December 31, 2021
Assets:
Cash and cash equivalents	$	321	$	—	$	1,101	$	—
Restricted cash		849		—		1,049		—
Receivables, net		35,675		—		34,051		—
Other Assets		59,283		54,880		49,224		54,880
Total assets of consolidated VIEs	$	96,128	$	54,880	$	85,425	$	54,880


Liabilities:
Other liabilities	$	40,778	$	36,480	$	33,662	$	36,480
Total liabilities of consolidated VIEs	$	40,778	$	36,480	$	33,662	$	36,480

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


Nonconsolidated VIEs (in thousands):		March 31, 2022		December 31, 2021

Nonconsolidated VIEs (in thousands)						June 30, 2022		December 31, 2021
Assets
Committed investments in tax credit equity	$	223,771	$	177,322	$	187,393	$	177,322
Other assets: Equity-method investments		54,335		74,997		55,970		74,997
Total interests in nonconsolidated VIEs	$	278,106	$	252,319	$	243,363	$	252,319


Liabilities
Commitments to fund investments in tax credit equity		206,605		162,747		173,740		162,747
Total commitments to fund nonconsolidated VIEs	$	206,605	$	162,747	$	173,740	$	162,747


Maximum exposure to losses⁽¹⁾⁽²⁾	$	278,106	$	252,319	$	243,363	$	252,319

(1)

Maximum exposure determined as Total interests in nonconsolidated VIEs. The maximum exposure for the ~~Company’s~~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.

2731

Table of Contents

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”~~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”~~“Forward-Looking Statements” and ~~“Risk Factors”~~“Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 (“(“2021 Form ~~10-K”~~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 &~~“Company,” “Walker & Dunlop,~~” “we,”~~” “we,” or ~~“us”~~“us”), 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,”~~“may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or ~~“potential”~~“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:

●●

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

●

the general volatility and global economic disruption caused by the ongoing impacts of the COVID-19 pandemic and its potential impact on our business operations, financial results and cash flows and liquidity;

●●

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

●●

our growth strategy;

●●

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

●●

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

●●

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

●●

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;

●●

degree and nature of our competition;

●●

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

●●

our ability to comply with the laws, rules, and regulations applicable to us, including additional regulatory requirements for broker-dealer and other financial services firms;

●●

our ability to successfully integrate ~~Alliant’s~~Alliant’s and ~~GeoPhy’s~~GeoPhy’s (each as defined below) employees and operations;

●●

trends in the commercial real estate finance market, commercial real estate values, the credit and capital markets, or the general economy, including demand for multifamily housing and rent growth;

●●

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

●

~~our and our service providers’ ability to prevent, detect, and mitigate cybersecurity risks; and~~

~~Table of Contents~~

●●

other risks and uncertainties associated with our business described in our 2021 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 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

Table of Contents

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~~“Risk Factors.””

Business

Overview

We are a leading commercial real estate (i) services, (ii) finance, and (iii) technology company in the United States. Through strategic 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, (iii) investment management, and (iv) affordable housing lending, 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 ~~61% of refinancing volumes in the quarter being~~ new loans to us representing 68% of refinancing volumes and ~~19%~~25% of total transaction volumes coming from new ~~customers.~~customers in the quarter.

We are one of the largest lenders to multifamily properties and commercial real estate in the country. We originate, sell, and service a range of multifamily and other commercial real estate financing products, including loans through the programs of ~~Fannie Mae and Freddie Mac (the “~~the GSEs,~~”),~~ and the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (together with Ginnie Mae, ~~“HUD”~~“HUD”) (collectively, the ~~“Agencies”~~“Agencies”). We retain servicing rights and asset management responsibilities on substantially all loans that we originate for the ~~Agencies’~~Agencies’ programs. We broker, and occasionally service, loans for many 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 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”~~(“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 provides 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”~~(“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 reach a broader customer base.

On February 28, 2022, we acquired GeoPhy B.V. ~~(“GeoPhy”~~(“GeoPhy”), a leading commercial real estate technology company based in the Netherlands. We plan to use ~~GeoPhy’s~~GeoPhy’s data analytics and technology development capabilities to accelerate the growth of our ~~small balance~~small-balance lending platform and our technology-enabled appraisal and valuation platform, Apprise.

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

Segments

In the first quarter of 2022, as a result of the ~~Company’s~~Company’s growth and recent acquisitions, our executive leadership team, which functions as our chief operating decision ~~maker~~making body, began making decisions and assessing performance based on the following three operating segments: (i) Capital Markets ~~(“CM”~~(“CM”), (ii) Servicing && Asset Management ~~(“SAM”~~(“SAM”), and (iii) Corporate. The operating segments are determined based on the product or service provided and reflect the

~~Table of Contents~~

manner in which management is currently evaluating the ~~Company’s~~Company’s financial information. The CM and SAM segments and related services are described in the following paragraphs.

Table of Contents

Corporate

The Corporate segment consists primarily of our treasury operations and other corporate-level activities. Our treasury operations include monitoring and managing our liquidity and funding requirements, including our corporate debt. The major other corporate-level functions include our strategic equity-method investments, accounting, information technology, legal, human resources, marketing, ~~accounting,~~ internal audit, and various other corporate groups.

Capital Markets

Capital Markets provides a comprehensive range of commercial real estate finance products to our customers, including Agency lending, debt brokerage, property sales, and appraisal and valuation services. 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 commercial real estate and multifamily property appraisals for various investors. The primary services within CM are described below.

Agency Lending

We are one of the leading lenders with the Agencies, where we originate and sell ~~to the Agencies~~ multifamily, manufactured housing communities, student housing, affordable housing, seniors housing, and ~~small balance~~small-balance multifamily loans. For additional information on our Agency Lending services, refer to Item 1. Business in our 2021 Form 10-K.

We recognize loan origination and debt brokerage fees, net and the fair value of expected net cash flows from 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 loan origination and debt brokerage fees, net and the fair value of expected net cash flows from 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 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 the sale of the loan are used to pay off the warehouse facility borrowing. The sale of the loan is typically completed within 60 days after the loan is closed. We earn net warehouse interest income from loans held for sale while they are outstanding equal to the difference between the note rate on the loan and the cost of borrowing of the warehouse facility.

Our loan commitments and loans held for sale are currently not exposed to unhedged interest rate risk during the loan commitment, closing, and delivery process. The sale or placement of each loan to an investor is negotiated at the same time we establish the coupon rate for the loan. We also seek to mitigate the risk of a loan not closing by collecting good faith deposits from the 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~~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 support of this product, we acquired a small technology company ~~named TapCap~~ during the second quarter of ~~2021. TapCap has~~2021, that had a technology platform that streamlines and accelerates the quoting, processing, and underwriting of small-balance, multifamily loans. Additionally, the technology platform provides the borrower with a web-based, user-friendly interface, enhancing the ~~borrower’s~~borrower’s experience during the origination process. ~~As noted above,~~To further this strategy, we acquired GeoPhy during the first quarter of 2022, ~~we acquired GeoPhy,~~ a leading commercial real estate technology company based in the Netherlands, to support our small-balance lending platform inwith data analytics and to further advance our technology development capabilities in this area.

3034

Table of Contents

Debt Brokerage

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

Property Sales

We offer property sales brokerage services to owners and developers of multifamily properties that are seeking to sell these properties through our subsidiary Walker && Dunlop Investment Sales, LLC ~~(“WDIS”~~(“WDIS”). Through these property sales brokerage services, 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 ~~in various regions throughout~~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.

Appraisal and Valuation Services

We offer multifamily appraisal and valuation services though our subsidiary Apprise by Walker && Dunlop ~~(“Apprise”~~(“Apprise”). Apprise leverages technology and data science to dramatically improve the consistency, transparency, and speed of multifamily property appraisals in the U.S. through ~~the licensing of~~ our proprietary technology and leveraging of our expertise in the commercial real estate industry. 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~~’s operations~~ is a wholly-owned subsidiary of Walker & Dunlop. Apprise’s revenues continue to rapidly grow, with significant increases in the volume of appraisal reports generated and a client list that includes several national commercial real estate lenders.

Servicing && Asset Management

Servicing && Asset Management focuses on (i) servicing and asset-managing the portfolio of loans we originate and sell to the Agencies, we service for certain life insurance companies, and we originate through our principal lending and investing activities, (ii) managing of third-party capital invested in tax credit equity funds focused on the affordable housing sector and other commercial real estate, and (iii) real estate-related investment banking and advisory services, including housing market research. 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 subscription fees for our housing related research, and 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 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 on the unpaid principal balance of the loan, are generally paid monthly for 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 DUS program, we 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 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

3135

Table of Contents

HUD and be reimbursed for our advances. We are not obligated to make advances on the loans we service under the Freddie Mac ~~Optigo®~~Optigo® program and our bank and life insurance company servicing 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). Our full risk-sharing is currently limited to loans up to $300 million, which equates to a maximum loss per loan 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). 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 loans below $300 million, which reduces our potential risk-sharing losses from the levels described above if we do not believe that we are being 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.

Principal Lending and Investing

Our ~~Interim Program~~principal lending and investing operation is composed of the loans held by the Interim Program JV and the Interim Loan Program as described ~~below.~~below (collectively the “Interim Program”). Through a joint venture with an affiliate of Blackstone Mortgage Trust, Inc., we offer 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~~“Interim Program ~~JV”~~JV” or the ~~“joint venture”~~“joint venture”). The joint venture funds its operations using a combination of 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 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.

Using a combination of our own capital and warehouse debt financing, we offer interim loans that do not meet the criteria of the Interim Program JV (the ~~“Interim~~“Interim Loan ~~Program”~~Program”). We underwrite, service, and asset-manage all loans 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.

Affordable Housing and Other Commercial Real Estate-related Investment Management Services

We provide affordable housing investment management services through our subsidiary, Alliant Capital, Ltd and its affiliates ~~(“Alliant”~~(“Alliant”). Alliant is one of the largest tax credit syndicators and affordable housing developers in the U.S. and provides alternative investment 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 ~~services~~team works with our developer clients to identify properties that will generate LIHTCs and meet our affordable ~~investors’~~investors’ needs, and forms limited partnership funds (“(“LIHTC ~~funds”~~funds”) with third-party investors that invest in the limited partnership interests in these properties. Alliant 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, Alliant 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 affordable housing projects that generate LIHTCs. These joint ventures earn developer fees, operating cash and sale / refinance proceeds from the properties they develop, and we receive the portion of the economic benefits commensurate with its investment in the joint ventures. Additionally, Alliant also invests with third-party investors (either in a fund or joint-venture structure) with the goal of preserving affordability on multifamily properties coming out of the LIHTC 15-year compliance period or on which market forces are ~~likely~~unlikely to keep the properties affordable. Through these preservation funds,

3236

Table of Contents

Alliant 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.

Through our subsidiary, ~~WDIP and its subsidiaries,~~Walker & Dunlop Investment Partners, we function as the operator of a private commercial real estate investment adviser focused on the management of debt, preferred equity, and mezzanine equity investments in middle-market commercial real estate funds. ~~WDIP’s~~WDIP’s current assets under management ~~(“AUM”~~(“AUM”) of $1.3 billion primarily consist of five sources: Fund III, Fund IV, Fund V, and Fund VI (collectively, the ~~“Funds”~~“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.

Housing Market Research and Real Estate Investment Banking Services

We own a 75% interest in a subsidiary doing business as Zelman && Associates ~~(“Zelman”~~(“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 market insight in many areas of the housing market, including construction trends, demographics, mortgage finance, and real estate technology and services. Zelman generates revenues through the sale of its housing market research data and related publications to banks, investment banks and other financial institutions, and through its offering of real estate-related investment banking and advisory services.

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.

Critical Accounting Estimates

Our condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ~~(“GAAP”~~(“GAAP”), which 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 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 are discussed in NOTE 2 of the consolidated financial statements in our 2021 Form 10-K.

Mortgage Servicing Rights ~~(“MSRs”~~(“MSRs”). MSRs are recorded at fair value at loan sale or upon purchase. The fair value at loan sale ~~(“OMSR”~~(“OMSR”) 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, escrow earnings, prepayment speed, and servicing costs, are discounted at a rate that reflects the credit and liquidity risk of the OMSR over the estimated life of the underlying loan. The discount rates used throughout the periods presented for all OMSRs were between 8-14% ~~during 2022 and 2021~~ and varied based on the loan type. The life of the underlying loan is estimated giving consideration to the prepayment provisions in the loan and assumptions about loan behaviors around those provisions. Our model for OMSRs assumes no prepayment prior to the expiration of the prepayment provisions and full prepayment of the loan at or near the point when the prepayment provisions have expired. The estimated net cash flows also include cash flows related to the future earnings on the escrow accounts associated with servicing the loans that are based on an escrow earnings rate assumption. We include a servicing cost assumption to account for our expected costs to service a loan. The servicing cost assumption has not had a material impact on the estimate. We record an individual OMSR asset (or liability) for each loan at loan sale. The fair value of MSRs acquired through a stand-alone servicing portfolio purchase ~~(“PMSR”~~(“PMSR”) is equal to the purchase price paid. For PMSRs, 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.

The assumptions used to estimate the fair value of capitalized OMSRs are 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 limited volatility in the assumptions historically, including the significant assumption that most significantly impacts the estimate –– the discount rate. We do not expect to see significant volatility in the assumptions for

3337

Table of Contents

the foreseeable future. We actively monitor the assumptions used and make adjustments to those assumptions when market conditions change, or other factors indicate such adjustments are warranted. During the first quarter of 2021, we reduced the discount rate and escrow earnings rate assumptions for our OMSRs. 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. Changes in our discount rate assumptions may materially impact the fair value of the MSRs (NOTE 3 of the condensed consolidated financial statements details the portfolio-level impact of a change in the discount rate).

For PMSRs, a constant rate of prepayments and defaults is included in the determination of the ~~portfolio’s~~portfolio’s estimated life at purchase (and thus included as a component of the ~~portfolio’s~~portfolio’s amortization). Accordingly, prepayments and defaults of individual loans 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 made adjustments to the estimated life of our PMSRs in the past when the actual experience of prepayments differed materially from the estimated prepayments.

Allowance for Risk-Sharing Obligations. This reserve liability (referred to as ~~“allowance”~~“allowance”) for risk-sharing obligations relates to our Fannie Mae at-risk servicing portfolio and is presented as a separate liability on our balance sheets. We record an estimate of the loss reserve for the current expected credit losses ~~(“CECL”~~(“CECL”) for all loans in our Fannie Mae at-risk servicing portfolio using the weighted-average remaining maturity method ~~(“WARM”~~(“WARM”). WARM uses an average annual loss rate that contains loss content over multiple vintages and loan terms and is used as a foundation for estimating the CECL reserve. The average annual loss rate is applied to the 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”~~period”) as we believe forecasts beyond one year are inherently less reliable. During the forecast period, we apply an adjusted loss factor based on loss rates ~~form~~from a historical period that we believe is similar. 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 economic ~~conditions.~~conditions over the coming year in relation to the historical period. For example, in the second quarter of 2022, we updated the loss rate used in the forecast period from three basis points to 2.2 basis points. Changes in the loss rate used in the forecast period have ~~materially~~significantly impacted the estimate in the past.

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 isare 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 rolling 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 2022, loss data from earlier periods in the look-back period fell off and were replaced with more recent loss data, resulting in the weighted-average annual loss rate changing from 1.8 basis points to 1.2 basis points. Changes in our expectations and forecasts have materially impacted, and in the future may materially impact, the estimate. We have not had a loss settlement in nearly six years.

We evaluate our risk-sharing loans on a quarterly basis to determine whether there are loans that are probable of default. Specifically, we assess a ~~loan’s~~loan’s qualitative and quantitative risk factors, such as payment status, property financial performance, local real estate market conditions, loan-to-value ratio, debt-service-coverage ratio, and property condition. When a loan is determined to be probable of default based on these factors, we remove the 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 values and other factors that may differ significantly from actual results. Loss settlement with Fannie Mae has historically concluded within 18 to 36 months after foreclosure. Historically, the initial 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~~Obligations estimate and make adjustments to those assumptions when market conditions change, or when other factors indicate such adjustments are warranted. We believe the level of

Table of Contents

Allowance for Risk-Sharing ~~Obligation~~Obligations 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 significant impact on the estimate.

~~Table of Contents~~

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 calculation of goodwill. The fair value of the earnout is recorded as a contingent consideration liability and included within Other liabilities in the Condensed Consolidated Balance Sheets. We are also required to continue to record the contingent consideration at fair value at each reporting period.

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 the forecasts and scenarios, and (iii) select a discount rate. A Monte Carlo simulation analysis is used to determine many iterations of potential fair values. The average of these 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 earn-out achievement is based on ~~management’s~~management’s estimate of the expected future performance and other financial metrics of each of the acquired entities, which are subject to significant uncertainty. On occasion, we may also use a probability weighted estimated return model to (i) provide an additional data point for a Monte Carlo simulation and (ii) to calculate the fair value of contingent consideration for immaterial acquisitions.

Over the past ~~two quarters,~~year, we have made two large acquisitions that included significant portions of contingent consideration. The aggregate fair value of our contingent consideration liabilities as of ~~March 31,~~June 30, 2022 was ~~$218.7~~$218.2 million. This fair value represents ~~management’s~~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 ~~March 31,~~June 30, 2022 was $323.8 million. Historically, all of the contingent consideration arrangements have paid out at the maximum achievable amount. We are uncertain whether this trend will continue in the future. Additionally, the earnouts completed prior to 2021 have involved businesses that operated in ~~the past have~~our core debt financing business and involved substantially smaller amounts of contingent consideration as compared to the two recent acquisitions.

Goodwill. As of ~~March 31,~~June 30, 2022 and December 31, 2021, we reported goodwill of ~~$908.7~~$937.9 million and $698.6 million, respectively. Goodwill represents the excess of cost over the identifiable net assets of businesses acquired. Goodwill is assigned to the segment to which the acquisition relates. Goodwill is recognized as an asset and is reviewed for impairment annually in the fourth quarter. Between the annual evaluation time, we will perform an evaluation of recoverability, when events and circumstances indicate that ~~that~~ it is more-likely-than not that 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, but are not limited to, whether there has been a significant or adverse change in the 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 judgements, assumptions, and estimates about projected cash flows, discount rates and other factors. As of ~~March 31,~~June 30, 2022, we continue to believe our goodwill is not impaired.

Overview of Current Business Environment

The fundamentals of the commercial real estate market ~~continue to remain~~remained strong through the first half of 2022, particularly ~~multifamily.~~multifamily, which is the vast majority of our transaction volumes. Over the past two years, multifamily property fundamentals showed strength, with multifamily occupancy rates, demand for new leases, and retention rates at record highs. According to RealPage, a provider of commercial real estate data and analytics, ~~occupancy~~overall vacancy rates ~~have increased to 97.6% as~~remain historically low at 3.7%. Overall demand for multifamily rental units, coupled with a lack of ~~March~~supply has resulted in double-digit rent growth in most markets during the first half of 2022. Robust rent growth in the first half of 2022 ~~compared to 95.8% as of December 2019, prior to the start of the pandemic. Additionally, the continued demand combined with limited supply of multifamily units drove rental rates higher~~ for both new leases and renewals ~~with~~has helped offset the impacts of inflation on multifamily properties. Low vacancy rates and stabilizing rent growth ~~increasing by 15.2% year over year as of March 2022. Higher occupancy rates coupled with limited supply and rent growth~~still indicate a ~~robust and~~ healthy multifamily market.

Macroeconomic conditions impacting multifamily markets ~~have stabilized~~remained stable in the ~~first~~second quarter of 2022, with the national unemployment rate falling to pre-pandemic lows of 3.6% as of ~~both March 2022 and December 2019.~~June 2022. The ~~low unemployment~~high rate ~~coupled with higher~~of inflation ~~rates seen~~ during ~~2021 and into~~ the first ~~quarter~~half of 2022 resulted in the Federal Reserve increasing its target Federal Funds Rate by ~~0.25%~~1.50% from December 2021, with a target range of ~~0.25%~~1.50% to ~~0.50%~~1.75% as of June 30, 2022, with an additional 0.75% increase to 2.25% to 2.50% following its July 2022 meeting. The Federal Reserve continues to signal that it anticipates additional increases in the target range and ~~an acceleration of~~will continue the reduction of its holdings in Treasury securities and Agency mortgage-backed securities (“(“Agency ~~MBS”~~MBS”). until the inflation rate returns to the Federal Reserve’s long-term target. Both of these actions by the Federal

Table of Contents

Reserve have resulted in an increase in long-term mortgage interest rates, which form the basis of most of our lending.

~~Our Agency multifamily~~The market’s transition from a historically low interest rate environment to a rising interest rate environment disrupted certain sectors of the lending market, with the most acute impact felt in the consumer lending sector (e.g., residential mortgages, auto lending, consumer credit, etc). Although volatility in long-term interest rates also disrupted certain segments of the commercial real estate lending environment at times during the first half of 2022, the commercial real estate debt ~~financing operations have~~and property sales markets remained ~~very active~~active. As a result, our total transaction volumes increased 56% over the ~~past year.~~ first half of 2021, with the largest increases in multifamily property sales (141%), debt brokerage (41%), and Fannie Mae (72%) volumes. The product we offer that was most significantly impacted by rising interest rates was our HUD product, which declined 54% when compared to the first half of 2021. As the Federal Reserve continues to combat inflation by increasing interest rates, we expect commercial real estate debt and property sales transaction activity to slow down from second quarter peaks, but still remain quite active overall. As with the first half of 2022, we expect certain products to be impacted more than others, with debt brokerage executions in non-multifamily assets classes being impacted the most, as banks and life insurance companies pull back and potentially increase capital reserves in the second half of 2022. However, we anticipate Agency lending volumes to accelerate in the second half of 2022. As the broader capital markets tighten, the Agencies historically step in to provide liquidity to the multifamily borrowing community as they did throughout 2020 and the second half of last year, and as one of the largest providers of capital to the multifamily sector, we are well positioned. As interest rates increased over the last several months, we have experienced declines in credit spreads to offset a portion of the interest rate increases. Although our lending activity with the Agencies may remain strong in the second half of 2022, the servicing fees and associated profitability of those executions may decline.

We are a market-leading originator with

~~Table of Contents~~

the Agencies, and we believe our market leadership positions us well to continue gaining market share and remain a significant lender with the Agencies for the foreseeable future. ~~We expect strength in our Agency operations to continue despite the return of other capital sources.~~

The FHFA establishes loan origination caps for both Fannie Mae and Freddie Mac each year. In October 2021, the FHFA established Fannie ~~Mae’s~~Mae’s and Freddie ~~Mac’s~~Mac’s 2022 loan origination caps at $78 billion each for all multifamily business. InDuring the ~~first quarter of~~three months ended June 30, 2022, Fannie Mae and Freddie Mac had multifamily origination volumes of ~~$16.0~~$18.7 billion and ~~$14.9~~$14.7 billion, respectively, ~~down 25.6%~~up 71.6% and ~~up 6.4%~~12.2%, respectively, from the same period in 2021. During the six months ended June 30, 2022, Fannie Mae and Freddie Mac had multifamily origination volumes of $34.7 billion and $29.6 billion, respectively, up 7.1% and 9.2% from the first ~~quarter~~half of ~~2021.~~ 2021, respectively, leaving a combined $91.7 billion of available lending capacity for the remainder of the year, or 43% more lending volume than the GSEs delivered to the multifamily market in the first half of 2022.

As part ~~FHFA’s~~of FHFA’s 2022 loan origination caps, at least 50% of the ~~GSEs’~~GSEs’ multifamily business is required to be targeted towards affordable housing. Additionally, in 2021 the FHFA raised the ~~GSEs’~~GSEs’ combined LIHTC investment cap to $1.7 billion, up 70% from the previous cap of $1.0 billion. We intend to leverage our affordable debt financing and our newly acquired LIHTC syndication platforms to create additional growth opportunities for our debt financing, property sales, and LIHTC syndication platforms.

~~Our~~As noted above, our debt financing operations with HUD ~~fell~~declined during the first ~~quarter~~half of ~~2022, as we had strong HUD originations during the first quarter of 2021.~~2022. HUD loan volumes accounted for 4%1.4% and 2.5% of our total debt financing volumes for the ~~quarter~~three and six months ended ~~March 31,~~June 30, 2022, respectively, compared to 8%6.8% and 7.5% for the ~~quarter~~three and six months ended ~~March 31, 2021.~~June 30, 2021, respectively. The decline in HUD debt financing volumes as a percentage of our total debt financing volumes was driven by a combination of higher HUD debt financing volumes in the first ~~quarter~~half of 2021 and ~~growth in our other debt financing products.~~ the increasing interest-rate environment discussed above.

Our originations with the Agencies are our most profitable executions as they provide significant non-cash gains from MSRs that turn into significant cash revenue streams from future servicing fees. During the ~~first quarter of~~three and six months ended June 30, 2022, servicing fees were up ~~10%~~7.5% and 8.8%, respectively, compared to the same ~~quarter~~periods in 2021, due to the ~~continued~~ growth in our Agency servicing ~~portfolio.~~portfolio over the last year. A decline in our Agency originations would negatively impact our financial results as our non-cash revenues would decrease disproportionately with debt financing volume and future servicing fee revenue would be constrained or decline.

Our multifamily property sales volumes continued to grow significantly in 2022, as (i) the multifamily acquisitions market continues to be very active ~~during the year~~ and (ii) we continue to ~~leverage the expanded~~expand the number of property sales brokers and ~~the~~ geographical reach of our property sales platform. Long term, we believe the market fundamentals will continue to be positive for multifamily property sales. Over the last several years, and throughout the pandemic, household formation and a dearth of supply of entry-level single-family homes led to strong demand for rental housing in most geographic areas. Consequently, the fundamentals of the multifamily property sales market were strong prior to the pandemic, and, when combined with ~~high occupancy and~~low vacancies, rent growth and rising real-estate prices, it is our expectation that market demand for multifamily property sales will continue to grow as this asset class remains an attractive investment option.

Our debt brokerage platform continued its growth from 2021, with brokered volume increasing during the ~~first quarter of 2022.~~year. The increase in volume

Table of Contents

in 2022 reflects the continued demand from private capital providers, with activity focused not only on multifamily but also on other commercial real estate assets such as office, retail, and ~~retail. We~~hospitality. Although lending activity in the non-multifamily asset classes may slow in the short-term, we expect non-multifamily debt financing volumes to continue to ~~recover over time~~remain attractive in the long-term as other commercial real estate asset classes stabilize post-pandemic.

We entered into the Interim Program JV to ~~both increase the overall capital available to transitional multifamily properties and to dramatically~~ expand our capacity to originate Interim Program ~~loans.~~loans beyond the use of our own balance sheet. The demand for transitional lending has brought increased competition from lenders, specifically banks, private debt funds, mortgage real estate investment trusts, and life insurance companies. For the ~~quarter~~six months ended ~~March 31,~~June 30, 2022, we originated $86.3 million of Interim Program JV loans, compared to ~~$144.5~~$351.0 million of originations for the same period last year. ~~In 2020, we had few originations of new Interim Program loans as a result of the pandemic.~~ Except for one loan that defaulted in early 2019, the loans in our portfolio and in the Interim Program JV continue to perform as ~~agreed~~. agreed.

Consolidated Results of Operations

The following is a discussion of our consolidated results of operations for the three and six months ended ~~March 31,~~June 30, 2022 and 2021. 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 environment, the volume of transactions, business acquisitions, regulatory actions, industry trends, and general economic conditions. The table below provides supplemental data regarding our financial performance.

~~Table of Contents~~

SUPPLEMENTAL OPERATING DATA

CONSOLIDATED


	For the three months ended
	March 31,

							For the three months ended						For the six months ended
							June 30,						June 30,
(dollars in thousands; except per share data)	2022			2021			2022			2021			2022			2021
Transaction Volume:
Total Debt Financing Volume	$	9,135,017		$	7,826,869		$	14,650,958		$	10,186,684		$	23,785,975		$	17,835,303
Property Sales Volume		3,531,690			1,395,760			7,892,062			3,341,532			11,423,752			4,737,292
Total Transaction Volume	$	12,666,707		$	9,222,629		$	22,543,020		$	13,528,216		$	35,209,727		$	22,572,595


Key Performance Metrics:
Operating margin		28	%		33	%		22	%		26	%		25	%		29	%
Return on equity		19			19			14			18			16			19
Walker & Dunlop net income	$	71,209		$	58,052
Walker & Dunlop net income							$	54,286		$	56,058		$	125,495		$	114,110
Adjusted EBITDA⁽¹⁾		62,636			60,667			94,844			66,514			157,480			127,181
Diluted EPS		2.12			1.79			1.61			1.73			3.73			3.52


Key Expense Metrics (as a percentage of total revenues):
Personnel expenses		45	%		43	%		49	%		50	%		47	%		47	%
Other operating expenses		10			8			11			7			10			7

	As of March 31,
Managed Portfolio:	2022			2021
Total Servicing Portfolio	$	116,257,265		$	109,867,270
Assets under management		16,687,112			1,836,086
Total Managed Portfolio	$	132,944,377		$	111,703,356


	As of June 30,
Managed Portfolio:	2022		2021
Total Servicing Portfolio	$	119,021,507	$	112,276,582
Assets under management		16,692,556		1,801,577
Total Managed Portfolio	$	135,714,063	$	114,078,159

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

3741

Table of Contents

The following ~~table presents a~~tables present period-to-period ~~comparison~~comparisons of our financial results for the three and six months ended ~~March 31,~~June 30, 2022 and 2021.

FINANCIAL RESULTS –– THREE MONTHS

CONSOLIDATED


	For the three months ended
	March 31,				Dollar		Percentage

									For the three months ended
									June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change		2022		2021		Change		Change
Revenues
Loan origination and debt brokerage fees, net	$	82,310	$	75,879	$	6,431	8	%	$	102,605	$	107,472	$	(4,867)	(5)	%
Fair value of expected net cash flows from servicing, net		52,730		57,935		(5,205)	(9)			51,949		61,849		(9,900)	(16)
Servicing fees		72,681		65,978		6,703	10			74,260		69,052		5,208	8
Property sales broker fees		23,398		9,042		14,356	159			46,386		22,454		23,932	107
Investment management fees										10,282		3,815		6,467	170
Net warehouse interest income		4,773		4,555		218	5			5,268		4,630		638	14
Escrow earnings and other interest income		1,803		2,117		(314)	(15)			6,751		1,823		4,928	270
Other revenues		81,749		8,782		72,967	831			43,347		10,316		33,031	320
Total revenues	$	319,444	$	224,288	$	95,156	42		$	340,848	$	281,411	$	59,437	21


Expenses
Personnel	$	144,181	$	96,215	$	47,966	50	%	$	168,368	$	141,421	$	26,947	19	%
Amortization and depreciation		56,152		46,871		9,281	20			61,103		48,510		12,593	26
Provision (benefit) for credit losses		(9,498)		(11,320)		1,822	(16)			(4,840)		(4,326)		(514)	12
Interest expense on corporate debt		6,405		1,765		4,640	263			6,412		1,760		4,652	264
Other operating expenses		32,214		17,587		14,627	83			36,195		19,748		16,447	83
Total expenses	$	229,454	$	151,118	$	78,336	52		$	267,238	$	207,113	$	60,125	29
Income from operations	$	89,990	$	73,170	$	16,820	23		$	73,610	$	74,298	$	(688)	(1)
Income tax expense		19,460		15,118		4,342	29			19,503		18,240		1,263	7
Net income before noncontrolling interests	$	70,530	$	58,052	$	12,478	21		$	54,107	$	56,058	$	(1,951)	(3)
Less: net income (loss) from noncontrolling interests		(679)		—		(679)	N/A			(179)		—		(179)	N/A
Walker & Dunlop net income	$	71,209	$	58,052	$	13,157	23
Walker & Dunlop net income									$	54,286	$	56,058	$	(1,772)	(3)

Table of Contents

FINANCIAL RESULTS – SIX MONTHS

CONSOLIDATED


	For the six months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Revenues
Loan origination and debt brokerage fees, net	$	184,915	$	183,351	$	1,564	1	%
Fair value of expected net cash flows from servicing, net		104,679		119,784		(15,105)	(13)
Servicing fees		146,941		135,030		11,911	9
Property sales broker fees		69,784		31,496		38,288	122
Investment management fees		22,930		6,551		16,379	250
Net warehouse interest income		10,041		9,185		856	9
Escrow earnings and other interest income		8,554		3,940		4,614	117
Other revenues		112,448		16,362		96,086	587
Total revenues	$	660,292	$	505,699	$	154,593	31

Expenses
Personnel	$	312,549	$	237,636	$	74,913	32	%
Amortization and depreciation		117,255		95,381		21,874	23
Provision (benefit) for credit losses		(14,338)		(15,646)		1,308	(8)
Interest expense on corporate debt		12,817		3,525		9,292	264
Other operating expenses		68,409		37,335		31,074	83
Total expenses	$	496,692	$	358,231	$	138,461	39
Income from operations	$	163,600	$	147,468	$	16,132	11
Income tax expense		38,963		33,358		5,605	17
Net income before noncontrolling interests	$	124,637	$	114,110	$	10,527	9
Less: net income (loss) from noncontrolling interests		(858)		—		(858)	N/A
Walker & Dunlop net income	$	125,495	$	114,110	$	11,385	10

Overview

~~Other revenues~~ ~~for the~~Three months ended June 30, 2022 compared to three months ended March 31, 2022 primarily consisted of the following: (i) $39.6 million of Apprise revaluation gain (as defined below), (ii) $12.7 million of investment management fees, (iii) $9.8 million of prepayment and application fees, and (iv) $4.5 million of research subscription fees. Other revenues for the three months ended March 31,June 30, 2021 ~~primarily consisted of $5.5 million of prepayment and application fees and $2.7 million of investment management fees.~~

The increase in revenues was primarily driven by increases in servicing fees, property sales broker fees, investment management fees, escrow earnings and other interest income, and other revenues, partially offset by decreases in loan origination and debt brokerage fees, net (“(“origination ~~fees”~~fees”)~~, servicing fees, property sales broker fees,~~ and ~~other revenues, partially offset by a decrease in~~ the fair value of expected net cash flows from servicing, net (“(“MSR ~~Income”~~income”). ~~The increase in origination fees was primarily related to an overall increase in debt financing volume, particularly in our Fannie Mae and brokered debt financing volumes.~~ Servicing fees increased largely from an increase in the average servicing portfolio outstanding. The increase in property sales broker fees was a result of a substantial increase in property sales volume. Investment management fees increased due to the addition of investment management fees from our LIHTC operations acquired in the fourth quarter of 2021. Escrow earnings and other interest income increased as a result of higher escrow earnings rate due to rising interest rates. Other revenues increased primarily as a result of increases in: (i) ~~a one-time gain from the revaluation of our previously held equity-method investment in Apprise (“Apprise revaluation gain”), (ii)~~ prepayment fees, (ii) other revenues from our LIHTC operations, and (iii) ~~asset management and~~ research subscription fees from ~~our subsidiaries~~a subsidiary acquired in the second half of 2021. The decreases in origination fees and MSR ~~Income decreased due~~income this quarter were primarily related to a ~~decrease~~substantial decline in our HUD debt financing volume, partially offset by increases in other debt financing volumes. Additionally, during the ~~MSR Rate (defined below in~~second quarter of 2022, we closed a $1.9 billion portfolio of loans with Fannie Mae. Consistent with large portfolio transactions, the ~~discussion~~origination fee and servicing fee we earn as a percentage of the total transaction size was lower than our ~~capital markets segment results) resulting from a change in the transaction mix and a decrease in the profitability of our~~typical Fannie Mae originations.

Other revenues for the three months ended June 30, 2022 primarily consisted of the following: (i) $20.7 million in other revenues related to our LIHTC operations, (ii) $10.3 million of prepayment and ~~HUD products.~~ application fees, (iii) $7.5 million of research subscription fees, and (iv) $4.8 million of miscellaneous revenues. Other revenues for the three months ended June 30, 2021 primarily consisted of (i) $7.2 million of prepayment and application fees and (ii) $3.4 million of assumption and other revenues.

Table of Contents

The increase in expenses was due to ~~a decrease in the benefit for credit losses and~~ increases in ~~all other~~most expense categories. The increase in personnel expenses was primarily a result of increases in commission costs due to the ~~increases~~increase in ~~origination fees and~~ property sales brokers fees and salaries and benefits costs driven by an increase in the average headcount. Amortization and depreciation expense increased primarily due to an increase in the average MSR ~~balance.~~balance and an increase in intangible asset amortization resulting from acquisitions over the past year. Interest expense on corporate debt increased primarily due to the increase in the size of the debt outstanding and the assumption of Alliant’s note payable in the fourth quarter of 2021. Other operating expenses increased largely as a result of (i) the overall growth of the Company over the past year including expenses from acquired subsidiaries and (ii) an increase in travel and entertainment costs compared to 2021 when our travel and entertainment expenses were depressed due to the on-going effects of the pandemic.

Income Tax Expense. The increase in income tax expense relates primarily to an increase in the estimated annual effective tax rate due to a significant increase in nondeductible executive compensation and a $0.9 million decrease in realizable excess tax benefits, partially offset by a decrease in income from operations.

Six months ended June 30, 2022 compared to six months ended June 30, 2021

The increase in revenues was primarily driven by increases in servicing fees, property sales broker fees, investment management fees, escrow earnings and other interest income, and other revenues, partially offset by a decrease in MSR income. Servicing fees increased largely from an increase in the average servicing portfolio outstanding. The increase in property sales broker fees was a result of a substantial increase in property sales volume. Investment management fees increased due to the addition of investment management fees from our LIHTC operations acquired in the fourth quarter of 2021. Escrow earnings and other interest income increased as a result of higher escrow earnings rates due to rising interest rates. Other revenues increased primarily as a result of increases in: (i) a one-time gain from the revaluation of our previously held equity-method investment in Apprise (“Apprise revaluation gain”), (ii) prepayment fees, (iii) other revenues from our LIHTC operations, and (iv) research subscription fees from a subsidiary acquired in the second half of 2021. MSR Income decreased primarily as a result of a significant decrease in HUD debt financing volumes.

Other revenues for the six months ended June 30, 2022 primarily consisted of the following: (i) $39.6 million of Apprise revaluation gain (as defined above), (ii) $19.9 million of prepayment and application fees, (iii) $28.5 million in other revenues related to our LIHTC operations, iv) $12.0 million of research subscription fees, and (v) $12.4 million of miscellaneous revenues. Other revenues for the six months ended June 30, 2021 primarily consisted of (i) $12.0 million of prepayment and application fees and (ii) $4.4 million of miscellaneous revenue.

The increase in expenses was due to increases in all expense categories. The increase in personnel expenses was primarily a result of increases in commission costs due to the increase in property sales brokers fees and salaries and benefits costs driven by an increase in the average headcount. Amortization and depreciation expense increased primarily due to an increase in the average MSR balance and an increase in intangible asset amortization resulting from acquisitions over the past year. Interest expense on corporate debt largely increased due to the increase in the size of the debt outstanding and the assumption of ~~Alliant’s~~Alliant’s note payable the fourth quarter of 2021. Other operating expenses increased largely as a result of (i) the overall growth of the Company over the past year including expenses from acquired subsidiaries and (ii) an increase in travel and entertainment costs compared to 2021 when our travel and entertainment

~~Table of Contents~~

expenses were depressed due to the on-going effects of the ~~pandemic, and (iii) acquisition related costs. The decrease in the benefit for credit losses was due to a lower reduction to one of the loss rates used to calculate our CECL reserves.~~pandemic.

Income Tax Expense. The increase in income tax expense relates primarily to the ~~23%~~11% increase in income from operations and ~~a 70-basis point~~an increase in the estimated annual effective tax rate ~~partially offset by~~due to a ~~$0.8 million~~significant increase in ~~realizable excess tax benefits.~~nondeductible executive compensation.

We do not expect our annual estimated effective tax rate to differ significantly from the ~~26.9%~~27.2% rate estimated for the three and six months ended ~~March 31,~~June 30, 2022. Accordingly, we expect an estimated effective tax rate of between approximately 26.5% and 27.5% for the remainder of the year. The effective tax rate increased year over year from ~~20.7%~~22.6% in 2021 to ~~21.6%~~23.8% in 2022 due to the factors noted above.

A discussion of the financial results for 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

Table of Contents

to, and not as an alternative for, net income. Adjusted EBITDA represents net income before income taxes, interest expense on our term loan and ~~Alliant’s~~Alliant’s note payable, 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, and the gain from revaluation of a previously held equity-method investment. 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~~management’s discretionary use, as it does not reflect certain cash requirements such as tax and debt service payments. The amounts shown for adjusted EBITDA may also differ from the amounts calculated under similarly titled definitions in our debt instruments, which are further adjusted to reflect certain other cash and non-cash charges that are used to determine compliance with financial covenants.

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

●●

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

●●

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

●●

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 on both a consolidated and segment basis.Adjusted EBITDA is reconciled to net income as follows:

ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP

CONSOLIDATED


	For the three months ended				For the six months ended
	June 30,				June 30,
(in thousands)	2022		2021		2022		2021
Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA
Walker & Dunlop Net Income	$	54,286	$	56,058	$	125,495	$	114,110
Income tax expense		19,503		18,240		38,963		33,358
Interest expense on corporate debt		6,412		1,760		12,817		3,525
Amortization and depreciation		61,103		48,510		117,255		95,381
Provision (benefit) for credit losses		(4,840)		(4,326)		(14,338)		(15,646)
Net write-offs		—		—		—		—
Share-based compensation expense		10,329		8,121		21,608		16,237
Gain from revaluation of previously held equity-method investment		—		—		(39,641)		—
Fair value of expected net cash flows from servicing, net		(51,949)		(61,849)		(104,679)		(119,784)
Adjusted EBITDA	$	94,844	$	66,514	$	157,480	$	127,181

3945

Table of Contents

~~ADJUSTED FINANCIAL METRIC RECONCILIATION TO GAAP~~

~~CONSOLIDATED~~

For the three months ended

March 31,

(in thousands)

2022

2021

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA

Walker & Dunlop Net Income

$
71,209

$
58,052

Income tax expense

19,460

15,118

Interest expense on corporate debt

6,405

1,765

Amortization and depreciation

56,152

46,871

Provision (benefit) for credit losses

(9,498)

(11,320)

Net write-offs

—

—

Share-based compensation expense

11,279

8,116

Gain from revaluation of previously held equity-method investment

(39,641)

—

Fair value of expected net cash flows from servicing, net

(52,730)

(57,935)

Adjusted EBITDA

$
62,636

$
60,667

The following ~~table presents a~~tables present period-to-period ~~comparison~~comparisons of the components of adjusted EBITDA for the three and six months ended ~~March 31,~~June 30, 2022 and 2021.

ADJUSTED EBITDA –– THREE MONTHS

CONSOLIDATED


	For the three months ended
	March 31,				Dollar		Percentage

									For the three months ended
									June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change		2022		2021		Change		Change
Loan origination and debt brokerage fees, net	$	82,310	$	75,879	$	6,431	8	%	$	102,605	$	107,472	$	(4,867)	(5)	%
Servicing fees		72,681		65,978		6,703	10			74,260		69,052		5,208	8
Property sales broker fees		23,398		9,042		14,356	159			46,386		22,454		23,932	107
Investment management fees										10,282		3,815		6,467	170
Net warehouse interest income		4,773		4,555		218	5			5,268		4,630		638	14
Escrow earnings and other interest income		1,803		2,117		(314)	(15)			6,751		1,823		4,928	270
Other revenues		42,787		8,782		34,005	387			43,526		10,316		33,210	322
Personnel		(132,902)		(88,099)		(44,803)	51			(158,039)		(133,300)		(24,739)	19
Net write-offs		—		—		—	N/A			—		—		—	N/A
Other operating expenses		(32,214)		(17,587)		(14,627)	83			(36,195)		(19,748)		(16,447)	83
Adjusted EBITDA	$	62,636	$	60,667	$	1,969	3		$	94,844	$	66,514	$	28,330	43

ADJUSTED EBITDA – SIX MONTHS

CONSOLIDATED


	For the six months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Loan origination and debt brokerage fees, net	$	184,915	$	183,351	$	1,564	1	%
Servicing fees		146,941		135,030		11,911	9
Property sales broker fees		69,784		31,496		38,288	122
Investment management fees		22,930		6,551		16,379	250
Net warehouse interest income		10,041		9,185		856	9
Escrow earnings and other interest income		8,554		3,940		4,614	117
Other revenues		73,665		16,362		57,303	350
Personnel		(290,941)		(221,399)		(69,542)	31
Net write-offs		—		—		—	N/A
Other operating expenses		(68,409)		(37,335)		(31,074)	83
Adjusted EBITDA	$	157,480	$	127,181	$	30,299	24

Three and six months ended June 30, 2022 compared to three and six months ended June 30, 2021

~~Loan origination and debt brokerage~~Origination fees ~~net~~ ~~increased~~decreased for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 due to ~~increases~~a significant decrease in ~~overall~~HUD debt financing ~~volumes, particularly in our Fannie Mae~~volume. For both the three and ~~brokered debt financing volumes. Servicing~~six months ended June 30, 2022, servicing fees increased due to growth in the average servicing portfolio period over period. ~~Property~~For both the three and six months ended June 30, 2022, property sales broker fees increased as a result of the ~~increase~~increases in property sales volumes. ~~Other~~For both the three and six months ended June 30, 2022, investment management fees increased due to the addition of investment management fees from our LIHTC operations acquired in the fourth quarter of 2021. For both the three and six months ended June 30, 2022, escrow earnings and other interest income increased as a result of higher escrow earnings rate due to rising interest rates. For both the three and six months ended June 30, 2022, other revenues increased primarily due to ~~an increase~~increases in ~~asset management~~(i) prepayment and application fees and (ii) other revenues from our LIHTC operations and research subscription fees generated from our acquired subsidiaries in the second half of 2021. ~~The~~For both the three and six months ended June 30, 2022, the increases in personnel expense were primarily due to increased commission costs due to the increases in ~~total transaction volumes~~property sales broker fees and salaries and benefits resulting from growth in average headcount. ~~Other~~For both the three and six months ended June 30, 2022, other operating expenses increased as a result of the overall growth of the Company over the past year, increased travel and entertainment costs, and increased ~~acquisition related costs.~~ costs from acquired companies.

Table of Contents

Financial Condition

Cash Flows from Operating Activities

Our cash flows from operating activities are generated from loan sales, servicing fees, escrow earnings, 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, 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.

~~Table of Contents~~

Cash Flows from Investing Activities

We usually lease facilities and equipment for our operations. 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 purchase of available-for-sale ~~(“AFS”~~(“AFS”) securities pledged to Fannie Mae. We opportunistically invest cash for acquisitions and MSR portfolio purchases.

Cash Flows from Financing Activities

We use our warehouse loan facilities and, when necessary, our corporate cash to fund loan 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 debt and cash on hand to fund large acquisitions. Additionally, we repurchase shares, pay cash dividends, make long-term debt principal payments, and repay short-term borrowings on a regular basis. We issue stock primarily for exercise of stock options (cash inflow) and for acquisitions (non-cash transactions).

~~Three~~

Table of Contents

Six Months Ended ~~March 31,~~June 30, 2022 Compared to ~~Three~~Six Months Ended ~~March 31,~~June 30, 2021

The following table presents a period-to-period comparison of the significant components of cash flows for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021.

~~Table of Contents~~

SIGNIFICANT COMPONENTS OF CASH FLOWS


	For the three months ended March 31,				Dollar		Percentage

									For the six months ended June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change		2022		2021		Change		Change
Net cash provided by (used in) operating activities	$	971,928	$	1,315,692	$	(343,764)	(26)	%	$	853,869	$	759,342	$	94,527	12	%
Net cash provided by (used in) investing activities		(44,440)		81,179		(125,619)	(155)			(113,928)		75,411		(189,339)	(251)
Net cash provided by (used in) financing activities		(1,096,656)		(1,423,259)		326,603	(23)			(937,359)		(802,999)		(134,360)	17
Total of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period ("Total cash")		224,012		331,614		(107,602)	(32)

Total of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period ("Total cash")										195,762		389,756		(193,994)	(50)

Cash flows from (used in) operating activities
Net receipt (use) of cash for loan origination activity	$	1,013,187	$	1,340,034	$	(326,847)	(24)	%	$	832,200	$	731,775	$	100,425	14	%
Net cash provided by (used in) operating activities, excluding loan origination activity		(41,259)		(24,342)		(16,917)	69			21,669		27,567		(5,898)	(21)


Cash flows from (used in) investing activities
Purchases of pledged AFS securities	$	(7,010)	$	(2,000)	$	(5,010)	251	%	$	(46,395)	$	(2,000)	$	(44,395)	2,220	%
Proceeds from the prepayment/sale of pledged AFS securities		1,672		20,884		(19,212)	(92)			6,101		22,092		(15,991)	(72)
Purchase of equity-method investments		(5,941)		(1,124)		(4,817)	429			(12,029)		(3,248)		(8,781)	270
Acquisitions, net of cash received		(78,465)		(7,506)		(70,959)	945			(78,465)		(10,507)		(67,958)	647
Capital expenditures		(11,790)		(1,794)		(9,996)	557			(11,902)		(3,800)		(8,102)	213
Net payoff of (investment in) loans held for investment		52,893		79,745		(26,852)	(34)			22,443		89,566		(67,123)	(75)
Net distributions from (investments in) joint ventures		4,201		(7,026)		11,227	160			6,319		(16,692)		23,011	138


Cash flows from (used in) financing activities
Borrowings (repayments) of warehouse notes payable, net	$	(1,006,545)	$	(1,400,704)	$	394,159	(28)	%	$	(826,454)	$	(744,281)	$	(82,173)	11	%
Borrowings of interim warehouse notes payable		—		25,313		(25,313)	(100)			36,459		84,766		(48,307)	(57)
Repayments of interim warehouse notes payable		(11,200)		(29,534)		18,334	(62)			(26,000)		(34,174)		8,174	(24)
Repayments of notes payable		(13,759)		(745)		(13,014)	1,747			(21,244)		(1,490)		(19,754)	1,326
Payment of contingent consideration		(17,612)		—		(17,612)	N/A			(17,612)		—		(17,612)	N/A
Repurchase of common stock		(27,049)		(13,374)		(13,675)	102			(39,380)		(14,190)		(25,190)	178
Borrowings (repayments) of secured borrowings										—		(73,312)		73,312	(100)
Cash dividends paid		(20,077)		(16,052)		(4,025)	25			(40,143)		(32,122)		(8,021)	25

The ~~change~~increase in net cash ~~flows from~~provided by operating activities was driven primarily by loans 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. The ~~decrease~~increase in cash flows received in loan origination activities is primarily attributable to a net ~~decrease~~increase in sales (net cash received) outpacing originations by ~~$1.0 billion~~$832.2 million in 2022 compared to ~~$1.3 billion~~$731.8 million in 2021. Our Agency debt financing activity decreased in 2021, which resulted in a lower loan held for sale balance as of December 31, 2021 compared to December 31, 2020 resulting in fewer loans transferred in 2022 compared to 2021. Excluding cash used for the origination and sale of loans, cash flows ~~used in~~provided by operating activities were ~~$41.3~~$21.7 million in 2022, updown from ~~$24.3~~$27.6 million in 2021. The ~~increase~~decrease is primarily the result of a $13.9 million higher use for other operating activities, net, and a $39.6 million ~~reduction~~increase in non-cash adjustments for the Apprise revaluation gain in 2022 with no comparable activity in 2021, partially offset by a ~~$12.6 million lower use for other operating activities, net, and a $12.5~~$10.5 million increase in net income before noncontrolling ~~interest.~~interest and a $37.0 million net reduction in non-cash adjustments for MSRs and amortization and depreciation. The significant decrease in Total cash over the past year is largely attributable to acquisition activity, partially offset by an increase in our long-term debt.

The change infrom net cash ~~flows~~ provided by investing activities in 2021 to net cash used in investing activities in 2022 was due to (i) an increase in the cash used in acquisitions due to an increase in the size of the acquisition in 2022 compared to 2021, (ii) a decrease in the net payoff of loans held for investment, (iii), a decrease in the payoff of pledged AFS securities, which is unpredictable, (iv) an increase in capital expenditures due to the build out of our new corporate headquarters, (v) an increase in the purchase of equity-method investments as capital calls for capital commitments increased year over year, and (vi) an increase in the purchase of AFS securities, partially offset by ~~a reduction~~the change from net investments in ~~the~~joint ventures to net ~~investment in~~distributions from joint ventures. In the first ~~quarter~~half of 2021, we had ~~one~~two small ~~acquisition~~acquisitions compared to the GeoPhy acquisition, which was substantially larger, resulting in an increase in cash used for acquisitions. Net payoff of loans held for

Table of Contents

investment decreased, as there were fewer payoffs and originations in 2022 than in 2021. Our purchases of AFS securities increased in 2022, as we reinvested the funds from the payoff of AFS securities that occurred late in 2021.

The ~~decrease~~increase in cash used byin financing ~~activity~~activities was ~~primarily~~ attributable to ~~a decrease in~~increases in: (i) net warehouse repayments, ~~partially offset by increases in (i) the net repayment of interim warehouse notes payables,~~ (ii) repayments of notes payable, (iii) ~~repurchase~~repurchases of common stock, (iv)

~~Table of Contents~~

dividends paid, and (v) cash payments of contingent consideration ~~liabilities.~~liabilities, partially offset by (a) a decrease in net borrowings of interim warehouse notes payables and (b) a decrease in repayments of secured borrowings. The ~~decrease~~increase in the net ~~repayment in~~repayments of warehouse notes payable was due to the aforementioned ~~decrease~~increase in cash received ~~from~~for loan origination activity. The ~~increase~~decrease in net cash ~~repayments~~borrowings of interim warehouse notes payable was primarily due to a reduction in ~~borrowings.~~borrowings as we had fewer originations in 2022. The increase in repayments of notes payable was due to the quarterly paydowns of a note payable at our subsidiary, Alliant. The Alliant note payable requires much more significant paydowns than our corporate debt. The increase in cash paid for repurchases of common stock was related to significant vesting events in our various share-based compensation ~~plans.~~plans and the $11.1 million repurchase of common stock through our 2022 stock repurchase program compared to no repurchases under the 2021 stock repurchase program. Cash dividends paid increased largely as a result of the increase in our dividend to $0.60 per share in 2022 compared to $0.50 per share in 2021.

Segment Results

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

Capital Markets

SUPPLEMENTAL OPERATING DATA

CAPITAL MARKETS


	For the three months ended
	March 31,

								For the three months ended						For the six months ended
								June 30,						June 30,
(in thousands; except per share data)	2022			2021				2022			2021			2022			2021
Transaction Volume:
Components of Debt Financing Volume
Fannie Mae	$	1,998,374		$	1,533,024			$	3,918,400		$	1,911,976		$	5,916,774		$	3,445,000
Freddie Mac		987,849			1,012,720				1,141,034			1,003,319			2,128,883			2,016,039
Ginnie Mae ̶ HUD		391,693			622,133
Ginnie Mae ̶ HUD									201,483			672,574			593,176			1,294,707
Brokered⁽¹⁾		5,643,081			4,302,492				9,258,490			6,280,578			14,901,571			10,583,070
Total Debt Financing Volume	$	9,020,997		$	7,470,369			$	14,519,407		$	9,868,447		$	23,540,404		$	17,338,816
Property Sales Volume		3,531,690			1,395,760				7,892,062			3,341,532			11,423,752			4,737,292
Total Transaction Volume	$	12,552,687		$	8,866,129			$	22,411,469		$	13,209,979		$	34,964,156		$	22,076,108


Key Performance Metrics:
Adjusted EBITDA⁽²⁾								$	16,880		$	14,215		$	28,136		$	31,346
Operating Margin		36	%		48	%			31	%		37	%		33	%		42	%
Adjusted EBITDA⁽²⁾	$	11,256		$	17,131


Key Revenue Metrics (as a percentage of debt financing volume):							Key Revenue Metrics (as a percentage of debt financing volume):
Origination related fees⁽³⁾		0.90	%		1.02	%			0.71	%		1.07	%		0.78	%		1.04	%
MSR income⁽⁴⁾		0.58			0.78				0.36			0.63			0.44			0.69
MSR income, as a percentage of Agency debt financing volume⁽⁴⁾		1.56			1.83				0.99			1.72			1.21			1.77

(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~~“Non-GAAP Financial ~~Measures”~~Measures”.

(3)

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

(4)

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

4349

Table of Contents

FINANCIAL RESULTS –– THREE MONTHS

CAPITAL MARKETS


	For the three months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Revenues
Loan origination and debt brokerage fees, net	$	102,085	$	105,583	$	(3,498)	(3)	%
Fair value of expected net cash flows from servicing, net		51,949		61,849		(9,900)	(16)
Property sales broker fees		46,386		22,454		23,932	107
Net warehouse interest income, loans held for sale		3,707		2,884		823	29
Other revenues		3,895		3,135		760	24
Total revenues	$	208,022	$	195,905	$	12,117	6

Expenses
Personnel	$	138,913	$	119,994	$	18,919	16	%
Amortization and depreciation		810		18		792	4,400
Other operating expenses		4,583		3,598		985	27
Total expenses	$	144,306	$	123,610	$	20,696	17
Income from operations	$	63,716	$	72,295	$	(8,579)	(12)
Income tax expense		16,476		17,739		(1,263)	(7)
Net income	$	47,240	$	54,556	$	(7,316)	(13)

FINANCIAL RESULTS – SIX MONTHS

CAPITAL MARKETS


	For the three months ended
	March 31,				Dollar		Percentage

									For the six months ended
									June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change		2022		2021		Change		Change
Revenues
Loan origination and debt brokerage fees, net	$	81,823	$	75,295	$	6,528	9	%	$	183,908	$	180,878	$	3,030	2	%
Fair value of expected net cash flows from servicing, net		52,730		57,935		(5,205)	(9)			104,679		119,784		(15,105)	(13)
Property sales broker fees		23,398		9,042		14,356	159			69,784		31,496		38,288	122
Net warehouse interest income, loans held for sale		3,530		2,459		1,071	44			7,237		5,343		1,894	35
Other revenues		2,763		2,560		203	8			6,658		5,695		963	17
Total revenues	$	164,244	$	147,291	$	16,953	12		$	372,266	$	343,196	$	29,070	8


Expenses
Personnel	$	98,726	$	72,635	$	26,091	36	%	$	237,639	$	192,629	$	45,010	23	%
Amortization and depreciation		—		521		(521)	(100)			810		539		271	50
Other operating expenses		6,111		3,402		2,709	80			10,694		7,000		3,694	53
Total expenses	$	104,837	$	76,558	$	28,279	37		$	249,143	$	200,168	$	48,975	24
Income from operations	$	59,407	$	70,733	$	(11,326)	(16)		$	123,123	$	143,028	$	(19,905)	(14)
Income tax expense		12,847		14,615		(1,768)	(12)			29,323		32,354		(3,031)	(9)
Net income	$	46,560	$	56,118	$	(9,558)	(17)		$	93,800	$	110,674	$	(16,874)	(15)

Table of Contents

Revenues

Loan origination and debt brokerage fees, net (“(“origination ~~fees”~~fees”) and Fair value of expected net cash flows from servicing, net (“(“MSR ~~Income”~~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
	March 31,

					For the three months ended				For the six months ended
					June 30,				June 30,
Debt Financing Volume by Product Type	2022		2021		2022		2021		2022		2021
Fannie Mae	22	%	21	%	27	%	19	%	25	%	20	%
Freddie Mac	11		14		8		10		9		12
Ginnie Mae ̶ HUD	4		8
Ginnie Mae ̶ HUD					1		7		3		7
Brokered	63		57		64		64		63		61


	For the three months ended
	March 31,

						For the three months ended					For the six months ended
						June 30,					June 30,
Mortgage Banking Details (basis points)	2022			2021		2022			2021		2022			2021
Origination Fee Rate ⁽¹⁾		90			102		71			107		78			104
Basis Point Change		(12)					(36)					(26)
Percentage Change		(12)	%				(34)	%				(25)	%
MSR Rate ⁽²⁾		58			78		36			63		44			69
Basis Point Change		(20)					(27)					(25)
Percentage Change		(26)	%				(43)	%				(36)	%
Agency MSR Rate ⁽³⁾		156			183		99			172		121			177
Basis Point Change		(27)					(73)					(56)
Percentage Change		(15)	%				(42)	%				(32)	%

(1)	Loan origination and debt brokerage fees, net as a percentage of total mortgage banking volume.

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

(3)	MSR Income as a percentage of Agency debt financing volume.

For the three months ended June 30, 2022, the decrease in origination fees was the result of a 36-point decrease in our origination fee rate, partially offset by the increase in overall debt financing volume. The decline in the origination fee rate was largely due to the significant decline in HUD debt financing volume and the $1.9 billion Fannie Mae portfolio, which comprised just under 50% of our Fannie Mae debt financing volume for the quarter and had a very low origination fee rate. The portfolio was the primary driver of the 105% increase in our Fannie Mae debt financing volume and was 13% of our total debt financing volume for the quarter. Large portfolios such as the $1.9 billion Fannie Mae portfolio typically have small origination fee rate. HUD loans are our most profitable loan product.

For the six months ended June 30, 2022, the increase in origination fees was ~~driven by the~~primarily due to an increase in overall debt financing volume, particularly the substantial growth in brokered and Fannie Mae debt financing volume. Our brokered loan volumes grew 40.8% year over year. Excluding the aforementioned large Fannie Mae portfolio, our Fannie Mae ~~and brokered~~ debt financing ~~volume, which~~volumes grew ~~by 30% and 31%, respectively, from 2021.~~17.7% year over year. The increase in origination fees ~~due~~

~~Table of Contents~~

tofrom the ~~increase~~overall growth in debt financing volume was partially offset by a significant reduction in our HUD debt financing volume and an overall decrease in the origination fee rate ~~resulting from~~for many of the ~~shift in transaction mix from 43% Agency loans in 2021 to 37% Agency loans in 2022, and specifically from lower HUD volumes in~~same reasons discussed for the ~~first quarter of 2022 as compared to the first quarter of 2021. We typically earn higher origination fees on Agency loans than brokered loans.~~ three months ended June 30, 2022.

The decrease in MSR ~~Income~~income for the three months ended June 30, 2022 is attributable to the decrease in our MSR and Agency MSR Rates, partially offset by the increase in overall debt financing volume. The decline in the Agency MSR Rate was primarily athe result of a 56% decrease in the weighted-average servicing fee (“WASF”) for Fannie Mae debt financing volume. The decline in the WASF was related to the $1.9 billion Fannie Mae portfolio, which had a very low servicing fee that is typical of such a portfolio, and a decline in the WASF for our non-portfolio Fannie Mae debt financing volume. Additionally, our HUD debt financing volume declined significantly in 2022. The decrease in the MSR Rate was the result of the decrease in the Agency MSR Rate coupled with an increase in our brokered debt financing volume.

For the six months ended June 30, 2022, the decrease in MSR income was due to ~~the aforementioned change in transaction mix and~~ a 32% decline in the Agency MSR Rate, partially offset by a ~~7% percent~~27.9% increase in Agency debt financing volume. The decrease in Agency MSR rate was the result of the large Fannie Mae portfolio originated in the second quarter of 2022 combined with a significant decline in HUD debt financing volume as HUD loans have the highest MSR ~~margins~~rate of all our products. ~~Additionally,~~The impacts to the ~~weighted-average servicing fee~~Agency MSR Rate discussed above for ~~our Fannie Mae debt financing volume decreased 25% year over year.~~ the three months ended June 30, 2022 also impacted the six months ended June 30, 2022.

Table of Contents

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

Property sales broker fees. ~~The~~For the three months and six months ended June 30, 2022, the increase in property sales broker fees was driven by significant increases in the property sales volumes year over ~~year.~~year, partially offset by declines in the property sales broker fee margin. See the ~~“Overview~~“Overview of Current Business ~~Environment”~~Environment” section above for a detailed discussion of the factors driving the changes in property sales volumes.

~~Net Warehouse Interest Income, loans held for sale.~~ The increase in net warehouse interest income was primarily due to the increase in the net spread shown below, as the short-term interest rates upon which we incur interest expense increased at a slower rate than the mortgage rates upon which we earn interest income. The increase in net warehouse interest income was partially offset by a lower average balance of loans held for sale outstanding in 2022 compared to 2021.

For the three months ended

March 31,
Net Warehouse Interest Income Details (dollars in thousands)
2022

2021
Average LHFS Outstanding Balance
$
1,145,882

$
1,503,204
Dollar Change
$
(357,322)

Percentage Change

(24)
%

LHFS Net Spread (basis points)

123

65
Basis Point Change

58

Percentage Change

89
%

Expenses

Personnel. ~~The~~For the three months ended June 30, 2022, the increase was primarily the result of (i) a ~~$15.7~~$14.3 million increase in property sales commission costs due to higher property sales broker fees and (ii) a $7.0 million increase in salaries and benefits due to a higher average headcount due to (i) the GeoPhy acquisition and corresponding consolidation of Apprise and (ii) hiring initatives to increase the number of bankers and brokers, partially offset by decreases in (i) debt financing commissions due to lower origination fees and (ii) accrual for subjective bonuses.

For the six months ended June 30, 2022, the increase was primarily the result of (i) a $27.6 million increase in overall commission costs due to higher origination fees and property sales broker fees, (ii) ~~a $4.5~~an $11.5 million increase in salaries and benefits due to ~~a higher average headcount~~(i) the GeoPhy acquisition and corresponding consolidation of Apprise, (ii) hiring initatives to ~~support our growth efforts,~~increase the number of bankers and brokers, and (iii) a ~~$5.0~~$4.0 million net increase in ~~the accrual for subjective~~ bonuses due to the ~~increase in average headcount and the Company’s~~Company’s financial performance.

Other Operating Expenses. ~~The~~For the six months ended June 30, 2022, the increase primarily stemmed from a ~~$2.3~~$3.9 million increase in travel and entertainment costs associated with the growth of the Company and increased travel costs as our bankers and brokers attended more in person meetings compared to ~~the first quarter of 2021.~~2021, partially offset by a slight decrease in other expenses.

Income Tax Expense. Income tax expense is determined at a consolidated corporate level and allocated to each segment proportionally based on each ~~segment’s~~segment’s income from operations.

Non-GAAP Financial ~~Measures~~ 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—~~Operations—Non-GAAP Financial ~~Measures.~~Measure. CM adjusted EBITDA is reconciled to net income as follows:

4552

Table of Contents

ADJUSTED FINANCIAL ~~METRIC~~MEASURE RECONCILIATION TO GAAP

CAPITAL MARKETS


	For the three months ended
	March 31,

						For the three months ended				For the six months ended
						June 30,				June 30,
(in thousands)	2022		2021			2022		2021		2022		2021
Reconciliation of Net Income to Adjusted EBITDA					Reconciliation of Net Income to Adjusted EBITDA
Net Income	$	46,560	$	56,118		$	47,240	$	54,556	$	93,800	$	110,674
Income tax expense		12,847		14,615			16,476		17,739		29,323		32,354
Amortization and depreciation		—		521			810		18		810		539
Share-based compensation expense		4,579		3,812			4,303		3,751		8,882		7,563
Fair value of expected net cash flows from servicing, net		(52,730)		(57,935)			(51,949)		(61,849)		(104,679)		(119,784)
Adjusted EBITDA	$	11,256	$	17,131		$	16,880	$	14,215	$	28,136	$	31,346

The following tables present period-to-period comparisons of the components of CM adjusted EBITDA for the three and six months ended June 30, 2022 and 2021.

ADJUSTED EBITDA –– THREE MONTHS

CAPITAL MARKETS


	For the three months ended
	March 31,				Dollar		Percentage

									For the three months ended
									June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change		2022		2021		Change		Change
Loan origination and debt brokerage fees, net	$	81,823	$	75,295	$	6,528	9	%	$	102,085	$	105,583	$	(3,498)	(3)	%
Property sales broker fees		23,398		9,042		14,356	159			46,386		22,454		23,932	107
Net warehouse interest income, loans held for sale		3,530		2,459		1,071	44			3,707		2,884		823	29
Other revenues		2,763		2,560		203	8			3,895		3,135		760	24
Personnel		(94,147)		(68,823)		(25,324)	37			(134,610)		(116,243)		(18,367)	16
Other operating expenses		(6,111)		(3,402)		(2,709)	80			(4,583)		(3,598)		(985)	27
Adjusted EBITDA	$	11,256	$	17,131	$	(5,875)	(34)		$	16,880	$	14,215	$	2,665	19

ADJUSTED EBITDA – SIX MONTHS

CAPITAL MARKETS


	For the six months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Loan origination and debt brokerage fees, net	$	183,908	$	180,878	$	3,030	2	%
Property sales broker fees		69,784		31,496		38,288	122
Net warehouse interest income, loans held for sale		7,237		5,343		1,894	35
Other revenues		6,658		5,695		963	17
Personnel		(228,757)		(185,066)		(43,691)	24
Net write-offs		—		—		—	N/A
Other operating expenses		(10,694)		(7,000)		(3,694)	53
Adjusted EBITDA	$	28,136	$	31,346	$	(3,210)	(10)

Three months ended June 30, 2022 compared to three months ended June 30, 2021

Loan origination and debt brokerage fees, net decreased due to a decrease in our origination fee rate and decreases in our HUD debt financing volumes, partially offset by an increase in overall debt financing volume. Property sales broker fees increased as a result of the significant increases in property sales volumes, partially offset by a decrease in the property sales broker fee margin. The increase in personnel expense was primarily due to increased (i) commission costs due to the increase in property sales broker fees and (ii) salaries and benefits resulting from increases in average headcount from strategic acquisitions and hiring initiatives.

Table of Contents

Six months ended June 30, 2022 compared to six months ended June 30, 2021

Loan origination and debt brokerage fees, net increased due to increases in overall debt financing ~~volumes.~~volumes, partially offset by reductions in our HUD debt financing volume. Property sales broker fees increased as a result of the significant increases in property sales ~~volumes. Net warehouse interest income, loans held for sale increased primarily due to an increase in the net spread,~~volumes, partially offset by a decrease in the ~~average balance outstanding.~~property sales broker fee margin. The ~~increases~~increase in personnel expense ~~were~~was primarily due to increased (i) commission costs due to ~~the increases in total transaction volumes,~~higher origination fees and property sales broker fees, (ii) salaries and benefits resulting from increases in average headcount from strategic acquisitions and hiring initiatives, and (iii) ~~accrual~~accruals for subjective bonuses due to the increase in the average headcount and the ~~Company’s~~Company’s financial performance. Other operating expenses increased as a result of the increased travel and marketing costs.

Servicing & Asset Management

~~Table of Contents~~

~~Servicing & Asset Management~~

SUPPLEMENTAL OPERATING DATA

SERVICING && ASSET MANAGEMENT

(dollars in thousands)

As of March 31,

Managed Portfolio:

2022

2021

Components of Servicing Portfolio

Fannie Mae

$
54,000,550

$
50,113,076

Freddie Mac

36,965,185

37,695,462

Ginnie Mae - HUD

9,954,262

9,754,667

Brokered ⁽¹⁾

15,115,619

12,090,825

Principal Lending and Investing ⁽²⁾

221,649

213,240

Total Servicing Portfolio

$
116,257,265

$
109,867,270

Assets under management

16,687,112

1,836,086

Total Managed Portfolio

$
132,944,377

$
111,703,356

For the three months ended

March 31,

Key Volume and Performance Metrics:

2022

2021

Principal Lending and Investing Origination Volume⁽³⁾

$
114,020

$
178,250

Adjusted EBITDA⁽⁴⁾

87,773

69,419

Operating Margin

37
%

44
%

As of March 31,

Key Servicing Portfolio Metrics:

2022

2021

Custodial escrow account balance (in billions)

$
2.5

$
2.5

Weighted-average servicing fee rate (basis points)

25.0

24.3

Weighted-average remaining servicing portfolio term (years)

9.1

9.2

As of March 31,

Components of assets under management (in thousands)

2022

2021

Alliant⁽⁵⁾

Syndication

$
13,928,089

$
—

Real Estate Investment

557,475

—

Total Alliant assets under management

$
14,485,564

$
—

WDIP

Funds

$
609,717

$
670,872

Separate accounts

661,535

504,215

Total WDIP assets under management

$
1,271,252

$
1,175,087

Interim Program JV Managed Loans⁽⁶⁾

$
930,296

$
660,999

Total assets under management

$
16,687,112

$
1,836,086


(dollars in thousands)	As of June 30,
Managed Portfolio:	2022		2021
Components of Servicing Portfolio
Fannie Mae	$	57,122,414	$	51,077,660
Freddie Mac		36,886,666		37,887,969
Ginnie Mae - HUD		9,570,012		9,904,246
Brokered ⁽¹⁾		15,190,315		13,129,969
Principal Lending and Investing ⁽²⁾		252,100		276,738
Total Servicing Portfolio	$	119,021,507	$	112,276,582
Assets under management		16,692,556		1,801,577
Total Managed Portfolio	$	135,714,063	$	114,078,159


	For the three months ended						For the six months ended
	June 30,						June 30,
Key Volume and Performance Metrics:	2022			2021			2022			2021
Principal Lending and Investing Origination Volume⁽³⁾	$	131,551		$	318,237		$	245,571		$	496,487
Adjusted EBITDA⁽⁴⁾		105,062			73,703			192,835			143,122
Operating Margin		38	%		35	%		37	%		40	%


	As of June 30,
Key Servicing Portfolio Metrics:	2022		2021
Custodial escrow account balance (in billions)	$	2.3	$	3.0
Weighted-average servicing fee rate (basis points)		24.9		24.5
Weighted-average remaining servicing portfolio term (years)		8.9		9.2


		As of June 30,
Components of assets under management (in thousands)	2022		2021
Alliant⁽⁵⁾	$	14,495,126	$	—
WDIP		1,298,143		1,172,045
Interim Program JV Managed Loans⁽⁶⁾		899,287		629,532
Total assets under management	$	16,692,556	$	1,801,577

(1)	Brokered loans serviced primarily for life insurance companies.

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

(3)

For the three months ended ~~March 31,~~June 30, 2022, includes $113.6 million from the Interim Loan Program and $17.9 million from WDIP separate accounts. For the six months ended June 30, 2022, includes $86.3 million from the Interim Program JV, $113.6 million from the Interim Loan Program and ~~$27.7~~$45.7 million from WDIP separate accounts. For the three months ended ~~March 31,~~June 30, 2021, includes ~~$144.5~~$206.5 million from the Interim Program JV, ~~and $33.8~~$95.7 million from the Interim Loan ~~Program.~~Program,

4754

Table of Contents

and $16.0 million from WDIP separate accounts. For the six months ended June 30, 2021, includes $351.0 million from the Interim Program JV, $129.5 million from the Interim Loan Program and $16.0 million from WDIP separate accounts.

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

(5)	Alliant assets under management were acquired in December 2021.

(6)	As of ~~March 31,~~June 30, 2022 and 2021, only comprised of Interim Program JV managed loans. ~~As of March 31, 2021, includes $587.7 million of Interim Program JV managed loans and $73.3 million of loans serviced directly for the Interim Program JV partner.~~

FINANCIAL RESULTS –– THREE MONTHS

SERVICING && ASSET MANAGEMENT


	For the three months ended
	March 31,				Dollar		Percentage

									For the three months ended
									June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change		2022		2021		Change		Change
Revenues
Loan origination and debt brokerage fees, net	$	487	$	584	$	(97)	(17)	%	$	520	$	1,889	$	(1,369)	(72)	%
Servicing fees		72,681	$	65,978		6,703	10			74,260		69,052		5,208	8
Investment management fees										10,282		3,815		6,467	170
Net warehouse interest income, loans held for investment		1,243		2,096		(853)	(41)			1,561		1,746		(185)	(11)
Escrow earnings and other interest income		1,758		1,999		(241)	(12)			6,648		1,768		4,880	276
Other revenues		34,897		7,508		27,389	365			39,280		6,885		32,395	471
Total revenues	$	111,066	$	78,165	$	32,901	42		$	132,551	$	85,155	$	47,396	56


Expenses
Personnel	$	18,638	$	7,111	$	11,527	162	%	$	21,881	$	9,447	$	12,434	132	%
Amortization and depreciation		54,931		45,378		9,553	21			58,760		47,395		11,365	24
Provision (benefit) for credit losses		(9,498)		(11,320)		1,822	(16)			(4,840)		(4,326)		(514)	12
Other operating expenses		6,119		2,253		3,866	172			6,559		2,604		3,955	152
Total expenses	$	70,190	$	43,422	$	26,768	62		$	82,360	$	55,120	$	27,240	49
Income from operations	$	40,876	$	34,743	$	6,133	18		$	50,191	$	30,035	$	20,156	67
Income tax expense		8,839		7,178		1,661	23			12,850		7,475		5,375	72
Income before noncontrolling interests	$	32,037	$	27,565	$	4,472	16		$	37,341	$	22,560	$	14,781	66
Less: net income (loss) from noncontrolling interests		(679)		—		(679)	N/A			(179)		—		(179)	N/A
Net income	$	32,716	$	27,565	$	5,151	19		$	37,520	$	22,560	$	14,960	66

Table of Contents

FINANCIAL RESULTS – SIX MONTHS

SERVICING & ASSET MANAGEMENT


	For the six months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Revenues
Loan origination and debt brokerage fees, net	$	1,007	$	2,473	$	(1,466)	(59)	%
Servicing fees		146,941		135,030		11,911	9
Investment management fees		22,930		6,551		16,379	250
Net warehouse interest income, loans held for investment		2,804		3,842		(1,038)	(27)
Escrow earnings and other interest income		8,406		3,767		4,639	123
Other revenues		61,529		11,657		49,872	428
Total revenues	$	243,617	$	163,320	$	80,297	49

Expenses
Personnel	$	40,519	$	16,558	$	23,961	145	%
Amortization and depreciation		113,691		92,773		20,918	23
Provision (benefit) for credit losses		(14,338)		(15,646)		1,308	(8)
Other operating expenses		12,678		4,857		7,821	161
Total expenses	$	152,550	$	98,542	$	54,008	55
Income from operations	$	91,067	$	64,778	$	26,289	41
Income tax expense		21,689		14,653		7,036	48
Income before noncontrolling interests	$	69,378	$	50,125	$	19,253	38
Less: net income (loss) from noncontrolling interests		(858)		—		(858)	N/A
Net income	$	70,236	$	50,125	$	20,111	40

Revenues

Servicing Fees. ~~The~~For the three and six months ended June 30, 2022, the increase was primarily attributable to an increase in the average servicing portfolio period over period as shown below, primarily due to a ~~$3.9~~$6.0 billion net increase in Fannie Mae serviced loans and a ~~$3.0~~$2.1 billion net increase in brokered loans serviced over the past year, coupled with ~~an increase~~increases in the servicing ~~portfolio’s~~portfolio’s average servicing fee ~~rate~~rates as shown below. The ~~increase~~increases in the average servicing fee isrates are the result of the large volume of Fannie Mae debt financing volume over the past year.


	For the three months ended
	March 31,

						For the three months ended					For the six months ended
						June 30,					June 30,
Servicing Fees Details (dollars in thousands)	2022			2021		2022			2021		2022			2021
Average Servicing Portfolio	$	116,137,461		$	108,568,268	$	117,628,010		$	110,949,226	$	116,972,088		$	109,736,658
Dollar Change		7,569,193				$	6,678,784				$	7,235,430
Percentage Change		7	%				6	%				7	%
Average Servicing Fee (basis points)		24.9			24.2		24.9			24.4		24.9			24.3
Basis Point Change		0.8					0.5					0.6
Percentage Change		3	%				2	%				2	%

Investment Management Fees. For the three and six months ended June 30, 2022, the increases were primarily driven by the addition of investment management fees from our LIHTC operations that were acquired late in the fourth quarter of 2021, which added $7.9 million and $18.7 million in additional fees, respectively.

Escrow earnings and other interest income. For the three and six months ended June 30, 2022, the increase was driven primarily by increases in our escrow earnings of $2.9 million and $3.7 million, respectively. The earnings rates on escrow earnings and other interest income increased as a result of rising interest rates over the past six months.

Table of Contents

Other Revenues. ~~The~~For the three months ended June 30, 2022, the increase was primarily attributable to: (i) ~~an $18.5~~a $20.7 million increase in ~~asset management fees and~~ other ~~Alliant~~ revenues from our LIHTC operations, (ii) a ~~$4.1~~$7.5 million increase in research subscription fees, and (iii) a ~~$5.0~~$3.5 million increase in prepayment penalties. For the six months ended June 30, 2022, the increase was primarily attributable to: (i) a $28.5 million increase in other revenues from our LIHTC operations, (ii) a $12.0 million increase in research subscription fees, and (iii) an $8.6 million increase in prepayment penalties. The increase in ~~asset management fees and~~ other ~~Alliant~~ revenues from LIHTC operations was driven by our subsidiary Alliant, ~~LIHTC operations,~~ and the research subscription fees increase was driven by Zelman, both of which were acquired in the second half of 2021. The increase in prepayment fees was due to a substantial increase in the volume of loans that prepaid year over year due to anticipated changes in the interest rate environment.

~~Table of Contents~~

Expenses

Personnel. ~~The increase was~~For the three and six months ended June 30, 2022, the increases were primarily the result of ~~an $11.4~~a $12.3 million increase and a $23.6 million increase, respectively, in salaries and benefits due to growth in headcount as a result of strategic acquisitions that occurred during the second half of 2021.

Amortization and Depreciation. ~~The increase was~~For the three and six months ended June 30, 2022, the increases were primarily attributed to loan origination activity and the resulting growth in the average MSR ~~balance.~~balance and due to an increase in intangible asset amortization. Over the past 12 months, we have added ~~$66.7~~$125.3 million of MSRs, net of ~~amortization and write offs due~~disposals. Due to ~~prepayment. Additionally,~~strategic investments over the past year, we ~~had a $3.3~~have added $175.3 million ~~increase~~in intangible assets to SAM, resulting in increases in amortization expense of ~~intangible assets from our strategic investments in 2021.~~

~~Provision (Benefit) for Credit Losses.~~ The benefit for credit losses for first quarter of 2022 was primarily attributable to the update in our historical loss rate factor that is based on a 10-year rolling period. The historical loss rate decreased to 1.2 basis points as of March 31, 2022 compared to 1.8 basis points as of December 31, 2021. In response to improving unemployment statistics$3.4 million and ~~the expected continued overall health of the multifamily market, we adjusted the loss rate~~$6.8 million for the ~~forecast period downwards to four basis points as of March 31, 2021 from~~three and six ~~basis points as of December 31, 2020, resulting in the benefit for risk-sharing obligations for the first quarter of 2021.~~ months ended June 30, 2022, respectively.

Other Operating Expenses. ~~The increase~~For the three and six months ended June 30, 2022, the increases primarily stemmed from ~~a $2.5 million increase in office and other expenses and a $1.2 million~~an increase in professional fees ~~to support growth~~of $1.2 million and $2.4 million, respectively. Additionally, there were increases in ~~our operations.~~ other costs across all expense categories. The increases in professional fees and other costs primarily stemmed from additional operating expenses incurred at subsidiaries acquired in the second half of 2021.

Income Tax Expense. Income tax expense is determined at a consolidated corporate level and allocated to each segment ~~proportional-ly~~proportionally based on each ~~segment’s~~segment’s income from operations.

Non-GAAP Financial ~~Measures~~ 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—~~Operations—Non-GAAP Financial ~~Measures.~~Measure. SAM adjusted EBITDA is reconciled to net income as follows:

ADJUSTED FINANCIAL ~~METRIC~~MEASURE RECONCILIATION TO GAAP

SERVICING && ASSET MANAGEMENT


	For the three months ended
	March 31,

						For the three months ended				For the six months ended
						June 30,				June 30,
(in thousands)	2022		2021			2022		2021		2022		2021
Reconciliation of Net Income to Adjusted EBITDA					Reconciliation of Net Income to Adjusted EBITDA
Net Income	$	32,716	$	27,565		$	37,520	$	22,560	$	70,236	$	50,125
Income tax expense		8,839		7,178			12,850		7,475		21,689		14,653
Amortization and depreciation		54,931		45,378			58,760		47,395		113,691		92,773
Provision (benefit) for credit losses		(9,498)		(11,320)			(4,840)		(4,326)		(14,338)		(15,646)
Net write-offs		—		—			—		—		—		—
Share-based compensation expense		785		618			772		599		1,557		1,217
Adjusted EBITDA	$	87,773	$	69,419		$	105,062	$	73,703	$	192,835	$	143,122

The following tables present period-to-period comparisons of the components of SAM adjusted EBITDA for the three and six months ended June 30, 2022 and 2021.

4957

Table of Contents

ADJUSTED EBITDA –– THREE MONTHS

SERVICING && ASSET MANAGEMENT


	For the three months ended
	March 31,				Dollar		Percentage

								For the three months ended
								June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change	2022		2021		Change		Change
Loan origination and debt brokerage fees, net	$	487	$	584	$	(97)	(17)	$	520	$	1,889	$	(1,369)	(72)	%
Servicing fees		72,681		65,978		6,703	10		74,260		69,052		5,208	8
Investment management fees									10,282		3,815		6,467	170
Net warehouse interest income, loans held for investment		1,243		2,096		(853)	(41)		1,561		1,746		(185)	(11)
Escrow earnings and other interest income		1,758		1,999		(241)	(12)		6,648		1,768		4,880	276
Other revenues		35,576		7,508		28,068	374		39,459		6,885		32,574	473
Personnel		(17,853)		(6,493)		(11,360)	175		(21,109)		(8,848)		(12,261)	139
Net write-offs		—		—		—	N/A		—		—		—	N/A
Other operating expenses		(6,119)		(2,253)		(3,866)	172		(6,559)		(2,604)		(3,955)	152
Adjusted EBITDA	$	87,773	$	69,419	$	18,354	26	$	105,062	$	73,703	$	31,359	43

ADJUSTED EBITDA – SIX MONTHS

SERVICING & ASSET MANAGEMENT


	For the six months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Loan origination and debt brokerage fees, net	$	1,007	$	2,473	$	(1,466)	(59)	%
Servicing fees		146,941		135,030		11,911	9
Investment management fees		22,930		6,551		16,379	250
Net warehouse interest income, loans held for investment		2,804		3,842		(1,038)	(27)
Escrow earnings and other interest income		8,406		3,767		4,639	123
Other revenues		62,387		11,657		50,730	435
Personnel		(38,962)		(15,341)		(23,621)	154
Net write-offs		—		—		—	N/A
Other operating expenses		(12,678)		(4,857)		(7,821)	161
Adjusted EBITDA	$	192,835	$	143,122	$	49,713	35

Three and six months ended June 30, 2022 compared to three and six months ended June 30, 2021

Servicing fees increased due to growth in the average servicing portfolio period over period as a result of loan originations and ~~relatively few payoffs~~an increase in the ~~quarter.~~average servicing fee rate. Investment management fees increased due to the addition of our LIHTC operations. Other revenues increased primarily due to the addition of ~~asset management and~~ other ~~fees~~revenues from our LIHTC operations and research subscription fees resulting from our acquisitions in the second of half of 2021 and an increase in prepayment penalties. Personnel and ~~Other~~other operating expenses increased due to growth in headcount and operations from the aforementioned acquisitions.

Table of Contents

Corporate

FINANCIAL RESULTS –– THREE MONTHS

CORPORATE


	For the three months ended
	March 31,				Dollar		Percentage

									For the three months ended
									June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change		2022		2021		Change		Change
Revenues
Other interest income	$	45	$	118	$	(73)	(62)	%	$	103	$	55	$	48	87	%
Other revenues		44,089		(1,286)		45,375	(3,528)			172		296		(124)	(42)
Total revenues	$	44,134	$	(1,168)	$	45,302	(3,879)		$	275	$	351	$	(76)	(22)


Expenses
Personnel	$	26,817	$	16,469	$	10,348	63	%	$	7,574	$	11,980	$	(4,406)	(37)	%
Amortization and depreciation		1,221		972		249	26			1,533		1,097		436	40
Interest expense on corporate debt		6,405		1,765		4,640	263			6,412		1,760		4,652	264
Other operating expenses		19,984		11,932		8,052	67			25,053		13,546		11,507	85
Total expenses	$	54,427	$	31,138	$	23,289	75		$	40,572	$	28,383	$	12,189	43
Income from operations	$	(10,293)	$	(32,306)	$	22,013	(68)		$	(40,297)	$	(28,032)	$	(12,265)	44
Income tax expense		(2,226)		(6,675)		4,449	(67)			(9,823)		(6,974)		(2,849)	41
Net income	$	(8,067)	$	(25,631)	$	17,564	(69)		$	(30,474)	$	(21,058)	$	(9,416)	45


Adjusted EBITDA	$	(36,393)	$	(25,883)	$	(10,510)	41	%	$	(27,098)	$	(21,404)	$	(5,694)	27	%

FINANCIAL RESULTS – SIX MONTHS

CORPORATE


	For the six months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Revenues
Other interest income	$	148	$	173	$	(25)	(14)	%
Other revenues		44,261		(990)		45,251	(4,571)
Total revenues	$	44,409	$	(817)	$	45,226	(5,536)

Expenses
Personnel	$	34,391	$	28,449	$	5,942	21	%
Amortization and depreciation		2,754		2,069		685	33
Interest expense on corporate debt		12,817		3,525		9,292	264
Other operating expenses		45,037		25,478		19,559	77
Total expenses	$	94,999	$	59,521	$	35,478	60
Income from operations	$	(50,590)	$	(60,338)	$	9,748	(16)
Income tax expense		(12,049)		(13,649)		1,600	(12)
Net income	$	(38,541)	$	(46,689)	$	8,148	(17)

Adjusted EBITDA	$	(63,491)	$	(47,287)	$	(16,204)	34	%

5059

Table of Contents

Revenues

Other Revenues. TFor the six months ended June 30, 2022, the increase was primarily due to the $39.6 million Apprise revaluation ~~gain.~~gain, which was recognized in the first quarter fo 2022. As part of our acquisition of GeoPhy, we acquired ~~the other~~its 50% interest in Apprise. The revaluation of our existing 50% ownership interest with a carrying value of $18.9 million to a fair value of $58.5 million resulted in a $39.6 million gain. The remaining increase was primarily due to a ~~$6.0~~$4.6 million increase in income from our other equity-method ~~investments.~~ investments, mostly related to the first quarter of 2022.

Expenses

Personnel. ~~The~~For the three months ended June 30, 2022, the decrease was primarily the result of a $5.1 million decrease to the accrual for subjective bonuses and a $2.1 million decrease in compensation expense related to the Company’s deferred compensation plan, partially offset by a $1.2 million increase in salaries and benefits due to an increase in the average headcount and $1.5 million increase in stock compensation.

For the six months ended June 30, 2022, the increase was primarily the result of (i) a ~~$8.2~~$4.8 million increase in salaries and benefits ~~and~~due to an increase in the ~~accrual for subjective bonuses due to the increase in~~ average headcount and ~~the Company’s financial performance and~~(ii) a ~~$2.2~~$3.7 million increase in ~~stock-based~~stock compensation expense, ~~due to higher stock-based~~partially offset by a $2.5 million decrease in compensation expense ~~associated with our performance share plans due~~related to the ~~Company’s financial performance.~~ Company’s deferred compensation plan

Interest expense on corporate debt. ~~The increase was~~For the three and six months ended June 30, 2022, the increases were driven by ~~an increase of slightly more than 100%~~a doubling in the size of our corporate debt during the fourth quarter of 2021 and ~~an increase~~increases in interest expense related to a note payable at our subsidiary, Alliant, which we assumed in the fourth quarter of 2021.

Other Operating Expenses. ~~The~~For the three months ended June 30, 2022, the increase was primarily ~~due to:~~driven by: (i) a ~~$5.3~~$6.5 million increase in office expenses, (ii) a $1.8 million increase in professional fees, and (iii) a $1.4 million increase in marketing costs. The increases in expenses were attributable to the growth of the Company, especially from acquired subsidiaries.

For the six months ended June 30, 2022, the increase was primarily driven by: (i) a $7.2 million increase in professional fees largely due to increases in legal and other professional fees related to our acquisitions and growth of the Company, (ii) a ~~$1.2~~$7.5 million increase in office expenses related to the growth of the ~~company~~Company and acquired offices, ~~and~~ (iii) a ~~$1.1~~$1.8 million increase in travel and entertainment costs attributable to the growth of the Company and as travel and entertainment costs in 2021 were depressed due to the ~~pandemic.~~pandemic, and (iv) a $1.7 million increase in marketing costs related to the growth of the Company, especially from acquisition subsidiaries.

Non-GAAP Financial ~~Measures~~ 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—~~Operations—Non-GAAP Financial ~~Measures.~~Measure. Corporate adjusted EBITDA is reconciled to net income as follows:

ADJUSTED FINANCIAL ~~METRIC~~MEASURE RECONCILIATION TO GAAP

CORPORATE

For the three months ended

March 31,
(in thousands)

2022

2021
Reconciliation of Net Income to Adjusted EBITDA

Net Income

$
(8,067)

$
(25,631)
Income tax expense

(2,226)

(6,675)
Interest expense on corporate debt

6,405

1,765
Amortization and depreciation

1,221

972
Share-based compensation expense

5,915

3,686
Gain from revaluation of previously held equity-method investment

(39,641)

—
Adjusted EBITDA

$
(36,393)

$
(25,883)


	For the three months ended				For the six months ended
	June 30,				June 30,
(in thousands)	2022		2021		2022		2021
Reconciliation of Net Income to Adjusted EBITDA
Net Income	$	(30,474)	$	(21,058)	$	(38,541)	$	(46,689)
Income tax expense		(9,823)		(6,974)		(12,049)		(13,649)
Interest expense on corporate debt		6,412		1,760		12,817		3,525
Amortization and depreciation		1,533		1,097		2,754		2,069
Share-based compensation expense		5,254		3,771		11,169		7,457
Gain from revaluation of previously held equity-method investment		—		—		(39,641)		—
Adjusted EBITDA	$	(27,098)	$	(21,404)	$	(63,491)	$	(47,287)

5160

Table of Contents

The following ~~table presents a~~tables present period-to-period ~~comparison~~comparisons of the components of Corporate adjusted EBITDA for the three and six months ended ~~March 31,~~June 30, 2022 and 2021.

ADJUSTED EBITDA –– THREE MONTHS

CORPORATE


	For the three months ended
	March 31,				Dollar		Percentage

								For the three months ended
								June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change	2022		2021		Change		Change
Other interest income		45		118		(73)	(62)		103		55		48	87	%
Other revenues		4,448		(1,286)		5,734	(446)		172		296		(124)	(42)
Personnel		(20,902)		(12,783)		(8,119)	64		(2,320)		(8,209)		5,889	(72)
Other operating expenses		(19,984)		(11,932)		(8,052)	67		(25,053)		(13,546)		(11,507)	85
Adjusted EBITDA	$	(36,393)	$	(25,883)	$	(10,510)	41	$	(27,098)	$	(21,404)	$	(5,694)	27

ADJUSTED EBITDA – SIX MONTHS

CORPORATE


	For the six months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Other interest income		148		173		(25)	(14)	%
Other revenues		4,620		(990)		5,610	(567)
Personnel		(23,222)		(20,992)		(2,230)	11
Other operating expenses		(45,037)		(25,478)		(19,559)	77
Adjusted EBITDA	$	(63,491)	$	(47,287)	$	(16,204)	34

Three months ended June 30, 2022 compared to three months ended June 30, 2021

The decrease in personnel expense was primarily due to the decreases in accruals for subjective bonuses and expenses related to the Company’s deferred compensation plan, partially offset by increased salaries and benefits resulting from increases in average headcount. Other operating expenses increased as a result of the overall growth of the Company over the past year and from increased professional costs associated with acquisitions.

Six months ended June 30, 2022 compared to six months ended June 30, 2021

Other revenues increased primarily due to our equity method investments generating income in 2022 compared to losses in 2021. The increase in personnel expense ~~were~~was primarily due to increased salaries and benefits resulting from increases in average headcount, ~~and the Company’s financial performance.~~partially offset by a decrease in deferred compensation costs. Other operating expenses increased as a result of the overall growth of the Company over the past year and from increased professional costs associated with acquisitions.

Liquidity and Capital Resources

Uses of Liquidity, Cash and Cash Equivalents

Our significant recurring cash flow requirements consist of liquidity to (i) fund loans held for sale; (ii) fund loans held for investment under the Interim Loan Program; (iii) pay cash dividends; (iv) fund our portion of the equity necessary for the operations of the Interim Program JV, ~~our appraisal JV,~~ and other equity-method investments; (v) fund investments in properties to be syndicated to LIHTC investment funds that we will asset-manage;(vi) make payments related to earnouts from acquisitions, (vii) meet working capital needs to support our day-to-day operations, including debt service payments, joint venture development partnerships contributions, servicing advances and payments for salaries, commissions, and income taxes,; and (viii) 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.

Table of Contents

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 ~~March 31,~~June 30, 2022. The net worth requirement is derived primarily from unpaid balances on Fannie Mae loans and the level of risk-sharing. As of ~~March 31,~~June 30, 2022, the net worth requirement was ~~$261.2~~$266.2 million, and our net worth was ~~$704.8~~$621.6 million, as measured at our ~~wholly owned~~wholly-owned operating subsidiary, Walker && Dunlop, LLC. As of ~~March 31,~~June 30, 2022, we were required to maintain at least ~~$51.8~~$52.8 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 ~~March 31,~~June 30, 2022, we had operational liquidity of ~~$98.6~~$116.0 million, as measured at our ~~wholly owned~~wholly-owned operating subsidiary, Walker && Dunlop, LLC.

We paid a cash dividend of $0.60 per share for the ~~first~~second quarter of 2022, which is 20% higher than the quarterly dividend paid in the ~~first~~second quarter of 2021. On ~~May 4,~~August 3, 2022, the ~~Company’s~~Company’s Board of Directors declared a dividend of $0.60 per share for the ~~second~~third quarter of 2022. The dividend will be paid on ~~June 3,~~September 2, 2022 to all holders of record of our restricted and unrestricted common stock as of ~~May 19,~~August 18, 2022.

Over the past three years, we have returned ~~$188.3~~$208.5 million to investors ~~in the form of~~through the repurchase of ~~0.5~~0.6 million shares of our common stock under share repurchase programs for a cost of ~~$30.5~~$39.9 million and cash dividend payments of ~~$157.8~~$168.6 million. Additionally, we have invested ~~$834.9~~$649.1 million in ~~acquisitions.~~acquisitions, $300.0 million of which was financed by an increase in our Term Debt. On occasion, we may use cash to fully fund some loans held for investment or loans held for sale instead of using our warehouse lines. As of ~~March 31,~~June 30, 2022, we did not fully fund any such loans. We continually seek opportunities to complete additional acquisitions if we believe the economics are favorable.

~~Table of Contents~~

In February 2022, our Board of Directors 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 beginning February 13, 2022. Through ~~March 31,~~June 30, 2022 we have ~~not~~ repurchased ~~any~~109 thousand shares under the 2022 stock repurchase program and have ~~$75.0~~$63.9 million of remaining capacity under 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 investor purchases the loan and cash held in collection accounts to be used to fund the repayment of the Alliant note payable. We are generally required to share the risk of any losses associated with loans sold under the Fannie Mae DUS 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 ~~March 31,~~June 30, 2022, we held substantially all of our restricted liquidity in Agency MBS in the aggregate amount of ~~$107.6~~$139.4 million. Additionally, the majority of the loans for which we have risk-sharing are Tier 2 loans. We fund any growth in our Fannie Mae required operational liquidity and collateral requirements from our working capital.

We are in compliance with the ~~March 31,~~June 30, 2022 collateral requirements as outlined above. As of ~~March 31,~~June 30, 2022, reserve requirements for the ~~March 31,~~June 30, 2022 DUS loan portfolio will require us to fund ~~$68.2~~$70.4 million in additional restricted liquidity over the next 48 months, assuming no further principal paydowns, prepayments, or defaults within our at-risk portfolio. Fannie Mae has assessed the DUS Capital Standards in the past and may make changes to these standards in the future. We generate sufficient cash 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 ~~March 31,~~June 30, 2022.

Table of Contents

Sources of Liquidity: Warehouse Facilities and Notes Payable

Warehouse Facilities

We utilize a combination of warehouse facilities and notes payable to provide funding for our operations. We utilize warehouse facilities to fund our Agency Lending, Interim Loan Program, and LIHTC operations. Our ability to originate Agency mortgage loans and loans held for investments depends upon our ability to secure and maintain these types of ~~short-term~~ financing agreements on acceptable terms. For a detailed description of the terms of each warehouse agreement including the affirmative and negative covenants, refer to ~~“Warehouse Facilities”~~“Warehouse Facilities” in NOTE 6 in the consolidated financial statements in our 2021 Form 10-K, as updated in NOTE 6 in the condensed consolidated financial statements in this Form 10-Q.

Notes Payable

We have a senior secured credit agreement (the ~~“Credit Agreement”~~“Credit Agreement”) that provides for a $600 million term loan (the ~~“Term Loan”~~“Term Loan”) that bears interest at Adjusted Term SOFR plus 225 basis points with a floor of 50 basis points and has a stated maturity date of December 16, 2028 (or, if earlier, the date of acceleration of the Term Loan pursuant to the term of the Credit Agreement). At any time, we may also elect to request one or more incremental term loan commitments not to exceed the lesser of $230 million and 100% of trailing four-quarter Consolidated Adjusted EBITDA, provided that total indebtedness would not cause the leverage ratio to exceed 3.00 to 1.00. As of ~~March 31,~~June 30, 2022, the

~~Table of Contents~~

outstanding principal balance of the Term Loan was ~~$598.5~~$597.0 million. The note payable and the warehouse facilities are senior obligations of the Company. As of ~~March 31,~~June 30, 2022, we were in compliance with all covenants related to the Credit Agreement.

For a detailed description of the terms of the Credit Agreement, refer to ~~“Notes~~“Notes Payable –– Term Loan Note ~~Payable”~~Payable” in NOTE 6 in the consolidated financial statements in our 2021 Form 10-K. There have been no changes to the Credit Agreement in 2022.

We have a note payable through our ~~wholly owned~~wholly-owned subsidiary Alliant, which has an outstanding balance of ~~$132.9~~$126.9 million as of ~~March 31,~~June 30, 2022 and bears interest at a fixed rate of 4.75%. The note has a stated maturity of January 15, 2035 and requires quarterly payments of principal, interest, and other required priority items shortly after the beginning of each quarter as further detailed in ~~“Notes~~“Notes Payable –– Alliant Note ~~Payable”~~Payable” in NOTE 6 in the consolidated financial statements in our 2021 Form 10-K. There have been no changes to the terms of the note payable during 2022.

Table of Contents

Credit Quality and Allowance for Risk-Sharing Obligations

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


	March 31,

							June 30,
(dollars in thousands)	2022			2021			2022			2021
Key Credit Metrics
Risk-sharing servicing portfolio:
Fannie Mae Full Risk	$	46,194,756		$	41,152,790		$	47,461,520		$	42,444,569
Fannie Mae Modified Risk		7,794,710			8,941,234			9,651,421			8,617,020
Freddie Mac Modified Risk		23,715			37,006			23,715			36,894
Total risk-sharing servicing portfolio	$	54,013,181		$	50,131,030		$	57,136,656		$	51,098,483


Non-risk-sharing servicing portfolio:
Fannie Mae No Risk	$	11,084		$	19,052		$	9,473		$	16,071
Freddie Mac No Risk		36,941,470			37,658,456			36,862,951			37,851,075
GNMA - HUD No Risk		9,954,262			9,754,667			9,570,012			9,904,246
Brokered		15,115,619			12,090,825			15,190,315			13,129,969
Total non-risk-sharing servicing portfolio	$	62,022,435		$	59,523,000		$	61,632,751		$	60,901,361
Total loans serviced for others	$	116,035,616		$	109,654,030		$	118,769,407		$	111,999,844
Interim loans (full risk) servicing portfolio		221,649			213,240			252,100			276,738
Total servicing portfolio unpaid principal balance	$	116,257,265		$	109,867,270		$	119,021,507		$	112,276,582


Interim Program JV Managed Loans ⁽¹⁾		930,296			660,999			899,287			629,532


At risk servicing portfolio ⁽²⁾	$	50,176,521		$	45,796,952		$	51,905,985		$	46,866,767
Maximum exposure to at risk portfolio ⁽³⁾		10,178,454			9,304,440			10,525,093			9,517,609
Defaulted loans		78,659			48,481			78,659			48,481


Defaulted loans as a percentage of the at-risk portfolio		0.16	%		0.11	%		0.15	%		0.10	%
Allowance for risk-sharing as a percentage of the at-risk portfolio		0.11			0.14			0.09			0.13
Allowance for risk-sharing as a percentage of maximum exposure		0.52			0.69			0.46			0.63

(1)

As of ~~March 31,~~June 30, 2022 and 2021, this balance consists entirely of Interim Program JV managed loans.~~As of March 31, 2021, this balance consists of $73.3 million of loans serviced directly for the Interim Program JV partner and $587.7 million of Interim Program JV managed loans.~~ We indirectly share in a portion of the risk of loss associated with 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)

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

~~Table of Contents~~

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

(3)

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

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 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”~~(“UPB”) of the loan.

Table of Contents


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.

The ~~“Business”~~“Business” section of ~~“Item~~“Item 2. ~~Management’s~~Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations”~~Operations” contains a discussion of the risk-sharing caps we have with 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 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 collateral-based reserve is recorded when it is probable that a risk-sharing loan will foreclose or has foreclosed, and a reserve for estimated credit losses and a guaranty obligation are recorded for all other risk-sharing loans.

The calculated CECL reserve for the ~~Company’s $49.7~~Company’s $51.2 billion at-risk Fannie Mae servicing portfolio as of ~~March 31,~~June 30, 2022 was ~~$42.5~~$37.7 million compared to $52.3 million as of December 31, 2021. The significant decrease in the CECL reserve was principally related to a reduction in our historical loss ~~factor.~~factor used for both the three and six months ended June 30, 2022 and the forecast-period loss rate for the three months ended June 30, 2022.

As of ~~March 31,~~June 30, 2022, three at-risk loans with an aggregate UPB of $78.7 million were in default compared to two loans with an aggregated UPB of $48.5 million as of ~~March 31,~~June 30, 2021. The collateral-based reserve on defaulted loans was $10.8 million and $7.6 million as of ~~March 31,~~June 30, 2022 and ~~March 31,~~June 30, 2021, respectively. We had a benefit for risk-sharing obligations of ~~$9.4~~$4.8 million for the three months ended ~~March 31,~~June 30, 2022 compared to a benefit for risk-sharing obligations of ~~$10.7~~$4.3 million for the three months ended ~~March 31,~~June 30, 2021. We had a benefit for risk-sharing obligations of $14.2 million for the six months ended June 30, 2022 compared to a benefit for risk-sharing obligations of $15.0 million for the six months ended June 30, 2021.

We have never been required to repurchase a loan.

New/Recent Accounting Pronouncements

As seen in NOTE 2 in the condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q, 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 as of ~~March 31,~~June 30, 2022.

~~Table of Contents~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

For loans held for sale to 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.

Table of Contents

Some of our assets and liabilities are subject to changes in interest rates. Earnings from escrows generally track 30-day LIBOR. 30-day LIBOR as of ~~March 31,~~June 30, 2022 and 2021 was 45179 basis points and 1110 basis points, respectively. The following table shows the impact on our annual escrow earnings due to a 100-basis point increase and decrease in 30-day LIBOR 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 would be delayed several months due to the negotiated nature of some of our escrow arrangements.


	As of March 31,

					As of June 30,
Change in annual escrow earnings due to: (in thousands)	2022		2021		2022		2021
100 basis point increase in 30-day LIBOR	$	24,807	$	25,292	$	23,499	$	30,204
100 basis point decrease in 30-day LIBOR⁽¹⁾		(4,543)		(2,594)		(23,265)		(2,996)

The borrowing cost of our warehouse facilities used to fund loans held for sale, loans held for investment, and investments in tax credit equity is based on LIBOR or Adjusted Term Secured Overnight Financing Rate ~~(“SOFR”~~(“SOFR”). The base SOFR was 29150 basis points as of ~~March 31,~~June 30, 2022. The interest income on our loans held for investment is based on ~~LIBOR.~~LIBOR or SOFR. The LIBOR or SOFR reset date for loans held for investment is the same date as the LIBOR or 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 LIBOR or Adjusted Term SOFR, based on our warehouse borrowings outstanding at each period end. The changes shown below do not reflect an increase or decrease in the interest rate earned on our loans held for sale.


	As of March 31,

					As of June 30,
Change in annual net warehouse interest income due to: (in thousands)	2022		2021		2022		2021
100 basis point increase in SOFR or 30-day LIBOR	$	(8,929)	$	(8,744)	$	(11,262)	$	(15,928)
100 basis point decrease in SOFR or 30-day LIBOR ⁽¹⁾⁽²⁾		3,295		540		11,030		1,147

Our Term Loan is based on Adjusted Term SOFR as of ~~March 31,~~June 30, 2022. In December 2021, we fully paid the prior $300 million term loan agreement, which was based on interest at 30-day LIBOR and entered into a $600 million note payable with an interest based Adjusted Term SOFR and a SOFR floor of 50 basis points. The following table shows the impact on our annual earnings due to a 100-basis point increase and decrease in SOFR or 30-day LIBOR as of ~~March 31,~~June 30, 2022 and ~~March 31,~~June 30, 2021, respectively, based on our current and previous notes payable balance outstanding at each period end. The Alliant note payable is fixed-rate debt; therefore, there is no impact to our earnings related to this debt when interest rates change.


	As of March 31,

					As of June 30,
Change in annual income from operations due to: (in thousands)	2022		2021		2022		2021
100 basis point increase in SOFR or 30-day LIBOR	$	(4,728)	$	(2,940)	$	(5,970)	$	(2,933)
100 basis point decrease in SOFR or 30-day LIBOR ⁽³⁾⁽²⁾		—		327		5,970		295

(1)

The decrease as of ~~March 31,~~June 30, 2021 is limited to 30-day LIBOR as of ~~March 31,~~June 30, 2021, as it was less than 100 basis points, or the interest rate floor, if applicable.

(2)

The decrease as of ~~March 31,~~June 30, 2022 is limited to 30-day LIBOR or SOFR as of ~~March 31,~~June 30, 2022, as they were less than 100 basis points, or the interest rate floor, if applicable.

~~(3)~~

~~As of March 31, 2022, the SOFR floor of 50 basis points was in effect, resulting in no impact from a 100-basis point decrease in SOFR.~~

Market Value Risk

The fair value of our MSRs is subject to 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 ~~$39.1~~$40.6 million as of ~~March 31,~~June 30, 2022 compared to ~~$36.0~~

~~Table of Contents~~

$36.9 million as of ~~March 31,~~June 30, 2021. Our Fannie Mae and Freddie Mac servicing engagements provide for prepayment fees in the event of a voluntary prepayment prior to the expiration of the prepayment protection period. Our servicing contracts with institutional investors and HUD do not require them to provide us with prepayment fees. As of ~~March 31,~~June 30, 2022, ~~and March 31, 2021, 85%~~88% of the servicing fees are protected from the risk of prepayment through prepayment ~~provisions; given~~provisions, compared to 89% as of June 30, 2021. Given this significant level of prepayment protection, we do not hedge our servicing portfolio for prepayment risk.

London Interbank Offered Rate ~~(“LIBOR”~~(“LIBOR”) Transition

In the first quarter of 2021, the United ~~Kingdom’s~~Kingdom’s Financial Conduct Authority, the regulator for the administration of LIBOR, announced specific dates for its intention to stop publishing LIBOR rates, including the 30-day LIBOR (our primary reference rate) which is scheduled for

Table of Contents

June 30, 2023. It is expected that legacy LIBOR-based loans will transition to Secured Overnight Financing Rate ~~(“SOFR”~~(“SOFR”) on or before June 30, 2023. With respect to the loans we underwrite and service, we have been working closely with the GSEs on this matter through our participation on subcommittees and advisory councils. We continue to monitor our LIBOR exposure, review legal contracts and assess fallback language impacts, engage with our clients and other stakeholders, and monitor developments associated with LIBOR alternatives. We have also updated our debt agreements with warehouse facility providers to include fallback language governing the transition and have already transitioned our Term Loan and ~~three~~five of our warehouse facilities to ~~SOFR, and a fourth warehouse facility in the second quarter of 2022.~~SOFR.

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~~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 ~~March 31,~~June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We ~~acquired Alliant on December 16, 2021~~have integrated and ~~GeoPhy on February 28, 2022. We have integrated~~continue to enhance the accounting processes and internal controls over financial reporting for Alliant and its affiliates into our internal control over financial reporting environment. ~~The operations of GeoPhy are immaterial.~~

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 2021 Form 10-K descriptions of certain risks and uncertainties that could affect our business, future performance, or financial condition (the ~~“Risk Factors”~~“Risk Factors”). There have been no material changes from the disclosures provided in the 2021 Form 10-K with respect to the Risk Factors. Investors should consider the Risk Factors prior to making an investment decision with respect to the ~~Company’s~~Company’s stock.

~~Table of Contents~~

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

Issuer Purchases of Equity Securities

Under the 2020 Equity Incentive Plan, subject to the ~~Company’s~~Company’s approval, grantees have the option of electing to satisfy minimum tax withholding obligations at the time of vesting or exercise by allowing the Company to withhold and purchase the shares of stock otherwise issuable to the grantee. During the quarter ended ~~March 31,~~June 30, 2022, we purchased ~~195~~10 thousand shares to satisfy grantee tax withholding obligations on share-vesting events. During the first quarter of 2022, the ~~Company’s~~Company’s Board of Directors approved a stock repurchase program that permits the repurchase of up to $75.0 million of the ~~Company’s~~Company’s common stock over a 12-month period beginning on February 13, 2022. During the

Table of Contents

quarter ended ~~March 31,~~June 30, 2022, we ~~did not repurchase any~~ repurchased 109 thousand shares under this share repurchase program. The Company had ~~$75.0~~$63.9 million of authorized share repurchase capacity remaining as of ~~March 31,~~June 30, 2022. The following table provides information regarding common stock repurchases for the quarter ended ~~March 31,~~June 30, 2022:

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

January 1-31, 2022

5,985

138.18

—

75,000,000

February 1-28, 2022

156,391

139.75

—

75,000,000

March 1-31, 2022

33,055

131.32

—

75,000,000

1st Quarter

195,431

$
138.28

—


				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
April 1-30, 2022	5,380	$	128.05	—		75,000,000
May 1-31, 2022	39,928		103.01	39,928		70,885,840
June 1-30, 2022	73,995		101.32	69,124		63,901,743
2nd Quarter	119,303	$	103.09	109,052

On January 31, 2022, we issued 66,667 shares (the “Shares”) of our common stock as earnout consideration for our purchase of the noncontrolling interest from one of the members of WDIS in August 2020. The Shares are prohibited from being transferred until January 31, 2023. The issuance of the Shares was deemed to be exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

5868

Table of Contents

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, 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~~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~~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~~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~~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~~Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021)
2.6		Share Purchase Agreement dated February 4, 2022 by and among Walker && Dunlop, Inc., WD-GTE, LLC, GeoPhy B.V. ~~(“GeoPhy”~~(“GeoPhy”), the several persons and entities constituting the holders of all of ~~GeoPhy’s~~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~~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~~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~~Company’s Current Report on Form 8-K filed on November 8, 2018)
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~~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~~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~~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~~Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012 filed on August 9, 2012)
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~~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~~Company’s proxy statement filed on July 26, 2012)
10.1	†*	Amended and Restated Employment Agreement, dated May 4, 2022, by and between Walker & Dunlop, Inc. and Stephen P. Theobald
10.2	†*	Amended and Restated Employment Agreement, dated May 4, 2022, by and between Walker & Dunlop, Inc. and Gregory A. Florkowski
10.3	†*	Indemnification Agreement, dated May 4, 2022, by and among Walker & Dunlop, Inc. and Gregory A. Florkowski
10.4	†*	Non-Executive Director Compensation Rates
10.5		Eleventh Amendment to Second Amended and Restated Warehousing Credit and Security Agreement, dated as of April 7, 2022, 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 April 12, 2022)
10.6		Twelfth Amendment to Second Amended and Restated Warehousing Credit and Security Agreement, dated as of May 12, 2022, 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 May 16, 2022)
31.1	*	Certification of Walker && Dunlop, Inc.'s's Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	*	Certification of Walker && Dunlop, Inc.'s's Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	**	Certification of Walker && Dunlop, Inc.'s's Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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	*	Inline XBRL Taxonomy Extension Schema Document

Table of Contents

101.CAL	*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained anin Exhibit 101)

*: Filed herewith.

**: Furnished herewith. Information in this Quarterly Report on Form 10-Q furnished herewith shall not be deemed to be ~~“filed”~~“filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the ~~“Exchange Act”~~“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

~~Table of Contents~~

such a filing.

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

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: ~~May 5,~~August 4, 2022	By:	/s/ William M. Walker
		William M. Walker
		Chairman and Chief Executive Officer


Date: ~~May 5,~~August 4, 2022	By:	/s/ ~~Stephen P. Theobald~~Gregory A. Florkowski
		~~Stephen P. Theobald~~Gregory A. Florkowski
		Executive Vice President and Chief Financial Officer

6070


	For the three months ended
	March 31,
Net Warehouse Interest Income Details (dollars in thousands)	2022			2021
Average LHFS Outstanding Balance	$	1,145,882		$	1,503,204
Dollar Change	$	(357,322)
Percentage Change		(24)	%
LHFS Net Spread (basis points)		123			65
Basis Point Change		58
Percentage Change		89	%