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Graphic

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

    (Mark One)

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

For the quarterly period ended September 30, 2022

OR

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 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 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 accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth 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 October 31, 2022, there were 33,012,082 total shares of common stock outstanding.

Walker & Dunlop, Inc.
Form 10-Q
INDEX

Page

PART I

 

FINANCIAL INFORMATION

3

 

 

 

Item 1.

 

Financial Statements

3

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

31

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

65

Item 4.

Controls and Procedures

66

PART II

OTHER INFORMATION

67

Item 1.

Legal Proceedings

67

Item 1A.

Risk Factors

67

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

67

Item 3.

Defaults Upon Senior Securities

67

Item 4.

Mine Safety Disclosures

67

Item 5.

Other Information

67

Item 6.

Exhibits

68

Signatures

70

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

September 30, 2022

December 31, 2021

Assets

 

Cash and cash equivalents

$

152,188

$

305,635

Restricted cash

 

40,246

 

42,812

Pledged securities, at fair value

 

151,413

 

148,996

Loans held for sale, at fair value

 

2,180,117

 

1,811,586

Loans held for investment, net

 

247,106

 

269,125

Mortgage servicing rights

 

967,770

 

953,845

Goodwill

948,164

698,635

Other intangible assets

 

202,834

 

183,904

Derivative assets

 

255,295

 

37,364

Receivables, net

 

216,963

 

212,019

Committed investments in tax credit equity

214,430

177,322

Other assets

 

426,487

 

364,746

Total assets

$

6,003,013

$

5,205,989

Liabilities

Warehouse notes payable

$

2,545,406

$

1,941,572

Notes payable

 

711,107

 

740,174

Allowance for risk-sharing obligations

 

49,658

 

62,636

Derivative liabilities

 

24,054

 

6,403

Commitments to fund investments in tax credit equity

198,073

162,747

Other liabilities

780,012

714,250

Total liabilities

$

4,308,310

$

3,627,782

Stockholders' Equity

Preferred stock (authorized 50,000 shares; none issued)

$

$

Common stock ($0.01 par value; authorized 200,000 shares; issued and outstanding 32,344 shares at September 30, 2022 and 32,049 shares at December 31, 2021)

 

323

 

320

Additional paid-in capital ("APIC")

 

407,417

 

393,022

Accumulated other comprehensive income (loss) ("AOCI")

(1,460)

2,558

Retained earnings

 

1,256,663

 

1,154,252

Total stockholders’ equity

$

1,662,943

$

1,550,152

Noncontrolling interests

 

31,760

 

28,055

Total equity

$

1,694,703

$

1,578,207

Commitments and contingencies (NOTES 2 and 9)

 

 

Total liabilities and equity

$

6,003,013

$

5,205,989

See accompanying notes to condensed consolidated financial statements.

3

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

For the nine months ended

September 30, 

September 30, 

    

2022

    

2021

    

2022

    

2021

 

Revenues

Loan origination and debt brokerage fees, net

$

90,858

$

123,242

$

275,773

306,593

Fair value of expected net cash flows from servicing, net

55,291

89,482

159,970

209,266

Servicing fees

 

75,975

 

70,628

 

222,916

205,658

Property sales broker fees

30,308

33,677

100,092

65,173

Investment management fees

16,301

2,564

47,345

9,115

Net warehouse interest income

 

3,980

 

5,583

 

14,021

14,768

Escrow earnings and other interest income

 

18,129

 

2,032

 

26,683

5,972

Other revenues

 

24,769

 

19,082

 

129,103

35,444

Total revenues

$

315,611

$

346,290

$

975,903

$

851,989

Expenses

Personnel

$

157,059

$

170,181

$

469,608

407,817

Amortization and depreciation

59,846

53,498

177,101

148,879

Provision (benefit) for credit losses

 

1,218

 

1,266

 

(13,120)

(14,380)

Interest expense on corporate debt

 

9,306

 

1,766

 

22,123

5,291

Other operating expenses

 

33,991

 

24,836

 

102,400

62,171

Total expenses

$

261,420

$

251,547

$

758,112

$

609,778

Income from operations

$

54,191

$

94,743

$

217,791

$

242,211

Income tax expense

 

7,532

 

22,953

 

46,495

56,311

Net income before noncontrolling interests

$

46,659

$

71,790

$

171,296

$

185,900

Less: net income (loss) from noncontrolling interests

 

(174)

 

69

 

(1,032)

 

69

Walker & Dunlop net income

$

46,833

$

71,721

$

172,328

$

185,831

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

(1,238)

159

(4,018)

769

Walker & Dunlop comprehensive income

$

45,595

$

71,880

$

168,310

$

186,600

Basic earnings per share (NOTE 10)

$

1.41

$

2.23

$

5.18

$

5.80

Diluted earnings per share (NOTE 10)

$

1.40

$

2.21

$

5.13

$

5.73

Basic weighted-average shares outstanding

 

32,290

 

31,064

 

32,300

 

30,969

Diluted weighted-average shares outstanding

 

32,620

 

31,459

32,645

 

31,367

See accompanying notes to condensed consolidated financial statements.

4

Walker & Dunlop, Inc. and Subsidiaries

Consolidated Statements of Changes in Equity

(In thousands, except per share data)

(Unaudited)

For the three and nine months ended September 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

Walker & Dunlop net income

46,833

46,833

Net income (loss) from noncontrolling interests

(174)

(174)

Other comprehensive income (loss), net of tax

(1,238)

(1,238)

Stock-based compensation - equity classified

5,185

5,185

Issuance of common stock in connection with equity compensation plans

36

Repurchase and retirement of common stock

(14)

(1,436)

(1,436)

Distributions to noncontrolling interest holders

(360)

(360)

Cash dividends paid ($0.60 per common share)

(19,882)

(19,882)

Balance at September 30, 2022

32,344

$

323

$

407,417

$

(1,460)

$

1,256,663

$

31,760

$

1,694,703

5

For the three and nine months ended September 30, 2021

Stockholders' Equity

Common Stock

Retained

Noncontrolling

Total

  

Shares

  

Amount

  

APIC

  

AOCI

  

Earnings

  

Interests

  

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

Walker & Dunlop net income

71,721

71,721

Net income (loss) from noncontrolling interests

69

69

Other comprehensive income (loss), net of tax

159

159

Stock-based compensation - equity classified

10,426

10,426

Issuance of common stock in connection with equity compensation plans

124

2

1,706

1,708

Issuance of common stock in connection with acquisitions

50

1

5,249

5,250

Repurchase and retirement of common stock

(14)

(1)

(1,495)

(1,496)

Noncontrolling interests from acquisition

18,750

18,750

Cash dividends paid ($0.50 per common share)

(16,146)

(16,146)

Balance at September 30, 2021

31,194

$

312

$

271,562

$

2,737

$

1,090,506

$

18,819

$

1,383,936

See accompanying notes to condensed consolidated financial statements.

6

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

For the nine months ended September 30, 

 

    

2022

    

2021

 

Cash flows from operating activities

Net income before noncontrolling interests

$

171,296

$

185,900

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