BETHESDA, Md., May 6, 2020 /PRNewswire/ --
FIRST QUARTER 2020 HIGHLIGHTS
Walker & Dunlop, Inc. (NYSE: WD) (the "Company") reported first quarter 2020 total revenues of $234.2 million, a quarterly record and an increase of 25% over the first quarter of 2019. Net income for the first quarter of 2020 was $47.8 million, or $1.49 per diluted share, up 8% and 7%, respectively, from the first quarter of last year. During the quarter, the Company recorded a provision expense of $23.6 million related to the COVID-19 pandemic and its expected impacts on future losses in the servicing portfolio, resulting in a $0.54 reduction in diluted earnings per share. First quarter total transaction volume grew 91% from the prior-year quarter to a record $11.4 billion, including the largest transaction in Company history, with debt financing volume up 84% and property sales volume up 148%.
Willy Walker, Chairman and CEO commented, "The investments we have made over the past several years all came together in the first quarter of 2020 to produce outstanding financial results, including record total transaction volume of $11.4 billion, up 91% over the first quarter of last year, and diluted earnings per share of $1.49, up 7% over last year, even after accounting for a $0.54 per share charge related to our provision for potential future losses."
Mr. Walker continued, "The COVID-19 pandemic has dramatically changed the underlying fundamentals of the U.S. economy, and since the crisis began to take hold in the U.S., we have been actively managing the risks to our business. While property sales activity has slowed significantly and many commercial real estate capital sources have pulled out of the market, Fannie Mae, Freddie Mac, and HUD remain very active, and we continue to benefit from a strong pipeline of transactions. Just last week we closed the largest transaction in Walker & Dunlop's history, a credit facility of over $2 billion on a portfolio of workforce housing properties in the Mid-Atlantic region. Walker & Dunlop is one of the very largest Agency lenders in the country, and our team has not skipped a beat in closing financings and guiding our clients through this challenging period. We feel very good about the credit risk in our portfolio ? it is 100% multifamily properties, and almost all loans were low leverage with significant cash flow prior to the crisis. Vision 2020, our plan to build the premier commercial real estate finance company in the United States, is very much still intact, and we will continue to execute on that plan while meeting the needs of our clients over the coming months and quarters."
FIRST QUARTER 2020 OPERATING RESULTS
TRANSACTION VOLUMES | |||||||||||
(dollars in thousands) | Q1 2020 | Q1 2019 | $ Variance | % Variance | |||||||
Fannie Mae | $ | 4,171,491 | $ | 1,982,810 | $ | 2,188,681 | 110 | % | |||
Freddie Mac | 997,796 | 1,573,634 | (575,838) | (37) | |||||||
Ginnie Mae - HUD | 354,687 | 178,258 | 176,429 | 99 | |||||||
Brokered | 3,993,885 | 1,434,129 | 2,559,756 | 178 | |||||||
Principal Lending and Investing2 | 107,950 | 75,862 | 32,088 | 42 | |||||||
Debt financing volume | $ | 9,625,809 | $ | 5,244,693 | $ | 4,381,116 | 84 | % | |||
Property sales volume | 1,730,617 | 696,611 | 1,034,006 | 148 | |||||||
Total transaction volume | $ | 11,356,426 | $ | 5,941,304 | $ | 5,415,122 | 91 | % |
Discussion of Results:
MANAGED PORTFOLIO | |||||||||||
(dollars in thousands) | Q1 2020 | Q1 2019 | $ Variance | % Variance | |||||||
Fannie Mae | $ | 41,166,040 | $ | 36,835,756 | $ | 4,330,284 | 12 | % | |||
Freddie Mac | 32,191,699 | 31,367,939 | 823,760 | 3 | |||||||
Ginnie Mae - HUD | 9,750,696 | 9,986,488 | (235,792) | (2) | |||||||
Brokered | 11,326,492 | 9,227,409 | 2,099,083 | 23 | |||||||
Principal Lending and Investing | 387,314 | 274,090 | 113,224 | 41 | |||||||
Total servicing portfolio | $ | 94,822,241 | $ | 87,691,682 | $ | 7,130,559 | 8 | % | |||
Assets under management | 2,001,984 | 1,427,334 | 574,650 | 40 | |||||||
Total Managed Portfolio | $ | 96,824,225 | $ | 89,119,016 | $ | 7,705,209 | 9 | % | |||
Weighted-average servicing fee rate (basis points) | 23.3 | 24.0 | |||||||||
Weighted-average remaining servicing portfolio term (years) | 9.5 | 9.8 |
Discussion of Results:
REVENUES | |||||||||||
(dollars in thousands) | Q1 2020 | Q1 2019 | $ Variance | % Variance | |||||||
Loan origination and debt brokerage fees, net | $ | 76,373 | $ | 57,797 | $ | 18,576 | 32 | % | |||
Fair value of expected net cash flows from servicing, net | 68,000 | 40,938 | 27,062 | 66 | |||||||
Servicing fees | 55,434 | 52,199 | 3,235 | 6 | |||||||
Net warehouse interest income, LHFS | 1,492 | 29 | 1,463 | 5,045 | |||||||
Net warehouse interest income, LHFI | 4,003 | 6,992 | (2,989) | (43) | |||||||
Escrow earnings and other interest income | 10,743 | 14,068 | (3,325) | (24) | |||||||
Property sales broker fees | 9,612 | 4,541 | 5,071 | 112 | |||||||
Other revenues | 8,500 | 10,873 | (2,373) | (22) | |||||||
Total revenues | $ | 234,157 | $ | 187,437 | $ | 46,720 | 25 | % | |||
Key revenue metrics (as a percentage of debt financing volume): | |||||||||||
Origination related fees3 | 0.79 | % | 1.11 | % | |||||||
Gains attributable to MSRs3 | 0.71 | 0.79 | |||||||||
Gains attributable to MSRs - Agency loans4 | 1.23 | 1.10 |
Discussion of Results:
EXPENSES | |||||||||||
(dollars in thousands) | Q1 2020 | Q1 2019 | $ Variance | % Variance | |||||||
Personnel | $ | 89,525 | $ | 71,631 | $ | 17,894 | 25 | % | |||
Amortization and depreciation | 39,762 | 37,903 | 1,859 | 5 | |||||||
Provision (benefit) for credit losses | 23,643 | 2,675 | 20,968 | 784 | |||||||
Interest expense on corporate debt | 2,860 | 3,652 | (792) | (22) | |||||||
Other operating expenses | 18,090 | 15,492 | 2,598 | 17 | |||||||
Total expenses | $ | 173,880 | $ | 131,353 | $ | 42,527 | 32 | % | |||
Key expense metrics (as a percentage of total revenues): | |||||||||||
Personnel expenses | 38 | % | 38 | % | |||||||
Other operating expenses | 8 | 8 |
Discussion of Results:
KEY PERFORMANCE METRICS | |||||||||||
(dollars in thousands, except per share amounts) | Q1 2020 | Q1 2019 | $ Variance | % Variance | |||||||
Walker & Dunlop net income | $ | 47,829 | $ | 44,218 | $ | 3,611 | 8 | % | |||
Adjusted EBITDA | 64,129 | 66,684 | (2,555) | (4) | |||||||
Diluted EPS | $ | 1.49 | $ | 1.39 | $ | 0.10 | 7 | % | |||
Operating margin | 26 | % | 30 | % | |||||||
Return on equity | 19 | 20 |
Discussion of Results:
KEY CREDIT METRICS | |||||||||||
(dollars in thousands) | Q1 2020 | Q1 2019 | $ Variance | % Variance | |||||||
At risk servicing portfolio5 | $ | 37,864,262 | $ | 33,438,052 | $ | 4,426,210 | 13 | % | |||
Maximum exposure to at risk portfolio6 | 7,729,120 | 6,985,874 | 743,246 | 11 | |||||||
Defaulted loans | $ | 48,481 | $ | 20,981 | $ | 27,500 | 131 | % | |||
Key credit metrics (as a percentage of the at risk portfolio): | |||||||||||
Defaulted loans | 0.13 | % | 0.06 | % | |||||||
Allowance for risk-sharing | 0.17 | 0.02 | |||||||||
Key credit metrics (as a percentage of maximum exposure): | |||||||||||
Allowance for risk-sharing | 0.83 | % | 0.10 | % |
Discussion of Results:
DIVIDENDS AND SHARE REPURCHASES
Based upon our first quarter 2020 financial performance, strong cash position, and projected future liquidity needs, on May 5, 2020, our Board of Directors declared a dividend of $0.36 per share for the second quarter of 2020. The dividend will be paid June 5, 2020 to all holders of record of our restricted and unrestricted common stock as of May 20, 2020.
During the first quarter of 2020, the Company's Board of Directors approved a new stock repurchase program that permits the repurchase of up to $50.0 million of the Company's common stock over a 12-month period beginning on February 11, 2020. During the first quarter of 2020, the Company repurchased 0.2 million shares of its common stock under the share repurchase program at a weighted average price of $63.58 per share and immediately retired the shares, reducing stockholders' equity by $10.2 million. As of March 31, 2020, the Company had $39.8 million of authorized share repurchase capacity remaining under the 2020 share repurchase program. The first quarter share repurchases were made prior to the escalation of the COVID-19 crisis and future purchases are unlikely until the impacts of the crisis on the economy and the Company's liquidity are better understood.
Any future purchases made pursuant to the share repurchase program will be made in the open market or in privately negotiated transactions from time to time as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The repurchase program may be suspended or discontinued at any time.
__________________________________________
1 Adjusted EBITDA is a non-GAAP financial measure the Company presents to help investors better understand our operating performance. For a reconciliation of adjusted EBITDA to net income, refer to the sections of this press release below titled "Non-GAAP Financial Measures" and "Adjusted Financial Metric Reconciliation to GAAP."
2 Includes debt financing volumes from our interim loan platform, our interim loan joint venture, and JCR separate accounts.
3 Excludes the income and debt financing volume from Principal Lending and Investing.
4 The fair value of the expected net cash flows associated with the servicing of the loan, net of any guaranty obligations retained, as a percentage of Agency volume.
5 At risk servicing portfolio is defined as the balance of Fannie Mae DUS loans subject to the risk-sharing formula described below, as well as a small number of Freddie Mac loans on which we share in the risk of loss. Use of the at risk portfolio provides for comparability of the full risk-sharing and modified risk-sharing loans because the provision and allowance for risk-sharing obligations are based on the at risk balances of the associated loans. Accordingly, we have presented the key statistics as a percentage of the at risk portfolio.
For example, a $15 million loan with 50% risk-sharing has the same potential risk exposure as a $7.5 million loan with full DUS risk sharing. Accordingly, if the $15 million loan with 50% risk-sharing were to default, we would view the overall loss as a percentage of the at risk balance, or $7.5 million, to ensure comparability between all risk-sharing obligations. To date, substantially all of the risk-sharing obligations that we have settled have been from full risk-sharing loans.
6 Represents the maximum loss we would incur under our risk-sharing obligations if all of the loans we service, for which we retain some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement. The maximum exposure is not representative of the actual loss we would incur.
Conference Call Information
The Company will host a conference call to discuss its quarterly results on Wednesday, May 6, 2020 at 8:30 a.m. Eastern time. Listeners can access the webcast via the link: https://walkerdunlop.zoom.us/webinar/register/WN_c3hs7keESvKlooPmRbzrKQ or by dialing +1 408 901 0584, Webinar ID 927 4787 6710, Password 976334. Presentation materials related to the conference call will be posted to the Investor Relations section of the Company's website prior to the call. An audio replay will also be available on the Investor Relations section of the Company's website, along with the presentation materials.
About Walker & Dunlop
Walker & Dunlop (NYSE: WD), headquartered in Bethesda, Maryland, is one of the largest commercial real estate finance companies in the United States. The Company provides a comprehensive range of capital solutions for all commercial real estate asset classes, as well as investment sales brokerage services to owners of multifamily properties. Walker & Dunlop is included on the S&P SmallCap 600 Index and was ranked as one of FORTUNE Magazine's Fastest Growing Companies in 2014, 2017, and 2018. Walker & Dunlop's 850+ professionals in 40 offices across the nation have an unyielding commitment to client satisfaction.
Non-GAAP Financial Measures
To supplement our financial statements presented in accordance with United States generally accepted accounting principles ("GAAP"), the Company uses adjusted EBITDA, a non-GAAP financial measure. The presentation of adjusted EBITDA is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. When analyzing our operating performance, readers should use adjusted EBITDA in addition to, and not as an alternative for, net income. Adjusted EBITDA represents net income before income taxes, interest expense on our term loan facility, and amortization and depreciation, adjusted for provision (benefit) for credit losses net of write-offs, stock-based incentive compensation charges, and non-cash revenues such as the fair value of expected net cash flows from servicing, net. Because not all companies use identical calculations, our presentation of adjusted EBITDA may not be comparable to similarly titled measures of other companies. Furthermore, adjusted EBITDA is not intended to be a measure of free cash flow for our management's discretionary use, as it does not reflect certain cash requirements such as tax and debt service payments. The amounts shown for adjusted EBITDA may also differ from the amounts calculated under similarly titled definitions in our debt instruments, which are further adjusted to reflect certain other cash and non-cash charges that are used to determine compliance with financial covenants.
We use adjusted EBITDA to evaluate the operating performance of our business, for comparison with forecasts and strategic plans and for benchmarking performance externally against competitors. We believe that this non-GAAP measure, when read in conjunction with the Company's GAAP financials, provides useful information to investors by offering.
We believe that adjusted EBITDA has limitations in that it does not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP and that adjusted EBITDA should only be used to evaluate the Company's results of operations in conjunction with net income. For more information on adjusted EBITDA, refer to the section of this press release below titled "Adjusted Financial Metric Reconciliation to GAAP."
Forward-Looking Statements
Some of the statements contained in this press release may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans, or intentions.
The forward-looking statements contained in this press release reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause actual results to differ significantly from those expressed or contemplated in any forward-looking statement.
While forward-looking statements reflect our good faith projections, assumptions and expectations, they are not guarantees of future results. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes, except as required by applicable law. Factors that could cause our results to differ materially include, but are not limited to: (1) the impact of the COVID-19 pandemic on the Company's business, results of operations, and financial condition, including due to its principal and interest advance obligations on Fannie Mae and Ginnie Mae loans it services, and the domestic economy, (2) general economic conditions and multifamily and commercial real estate market conditions, (3) regulatory and/or legislative changes to Freddie Mac, Fannie Mae or HUD, (4) our ability to retain and attract loan originators and other professionals, and (5) changes in federal government fiscal and monetary policies, including any constraints or cuts in federal funds allocated to HUD for loan originations.
For a further discussion of these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements, see the section titled ''Risk Factors" in our most recent Annual Report on Form 10-K and any updates or supplements in our most-recent Quarterly Report on Form 10-Q and our other filings with the SEC. Such filings are available publicly on our Investor Relations web page at www.walkerdunlop.com.
Walker & Dunlop, Inc. and Subsidiaries | ||||||||||||||
Condensed Consolidated Balance Sheets | ||||||||||||||
Unaudited | ||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||
2020 | 2019 | 2019 | 2019 | 2019 | ||||||||||
(in thousands) | ||||||||||||||
Assets | ||||||||||||||
Cash and cash equivalents | $ | 205,309 | $ | 120,685 | $ | 65,641 | $ | 74,184 | $ | 109,862 | ||||
Restricted cash | 30,745 | 8,677 | 9,138 | 15,454 | 17,561 | |||||||||
Pledged securities, at fair value | 121,495 | 121,767 | 120,302 | 119,289 | 117,566 | |||||||||
Loans held for sale, at fair value | 1,186,577 | 787,035 | 1,259,075 | 1,302,938 | 1,226,380 | |||||||||
Loans held for investment, net | 454,213 | 543,542 | 454,430 | 432,593 | 471,561 | |||||||||
Mortgage servicing rights | 722,486 | 718,799 | 697,350 | 688,027 | 677,946 | |||||||||
Goodwill and other intangible assets | 247,257 | 182,959 | 183,122 | 183,286 | 183,449 | |||||||||
Derivative assets | 158,233 | 15,568 | 25,554 | 22,420 | 27,605 | |||||||||
Receivables, net | 52,185 | 52,146 | 56,149 | 51,982 | 52,643 | |||||||||
Other assets | 133,475 | 124,021 | 110,240 | 104,044 | 84,320 | |||||||||
Total assets | $ | 3,311,975 | $ | 2,675,199 | $ | 2,981,001 | $ | 2,994,217 | $ | 2,968,893 | ||||
Liabilities | ||||||||||||||
Warehouse notes payable | $ | 1,305,846 | $ | 906,128 | $ | 1,263,036 | $ | 1,313,955 | $ | 1,335,461 | ||||
Note payable | 293,371 | 293,964 | 294,255 | 294,840 | 295,425 | |||||||||
Guaranty obligation, net | 55,758 | 54,695 | 52,656 | 51,414 | 49,376 | |||||||||
Allowance for risk-sharing obligations | 64,110 | 11,471 | 7,256 | 7,964 | 6,682 | |||||||||
Derivative liabilities | 172,623 | 36 | 17,726 | 35,122 | 29,891 | |||||||||
Performance deposits from borrowers | 29,575 | 7,996 | 8,711 | 14,737 | 17,471 | |||||||||
Other liabilities | 347,377 | 358,624 | 335,119 | 311,950 | 306,515 | |||||||||
Total liabilities | $ | 2,268,660 | $ | 1,632,914 | $ | 1,978,759 | $ | 2,029,982 | $ | 2,040,821 | ||||
Equity | ||||||||||||||
Preferred shares | $ | ? | $ | ? | $ | ? | $ | ? | $ | ? | ||||
Common stock | 303 | 300 | 300 | 300 | 300 | |||||||||
Additional paid-in capital | 236,007 | 237,877 | 231,297 | 227,621 | 223,742 | |||||||||
Accumulated other comprehensive income (loss) | (1,181) | 737 | 1,015 | 892 | 226 | |||||||||
Retained earnings | 801,139 | 796,775 | 763,195 | 730,562 | 698,894 | |||||||||
Total stockholders' equity | $ | 1,036,268 | $ | 1,035,689 | $ | 995,807 | $ | 959,375 | $ | 923,162 | ||||
Noncontrolling interests | 7,047 | 6,596 | 6,435 | 4,860 | 4,910 | |||||||||
Total equity | $ | 1,043,315 | $ | 1,042,285 | $ | 1,002,242 | $ | 964,235 | $ | 928,072 | ||||
Commitments and contingencies | ? | ? | ? | ? | ? | |||||||||
Total liabilities and equity | $ | 3,311,975 | $ | 2,675,199 | $ | 2,981,001 | $ | 2,994,217 | $ | 2,968,893 |
Walker & Dunlop, Inc. and Subsidiaries | |||||||||||||||
Condensed Consolidated Statements of Income and Comprehensive Income | |||||||||||||||
Unaudited | |||||||||||||||
Quarterly Trends | |||||||||||||||
(in thousands, except per share amounts) | Q1 2020 | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 | ||||||||||
Revenues | |||||||||||||||
Loan origination and debt brokerage fees, net | $ | 76,373 | $ | 69,921 | $ | 65,144 | $ | 65,610 | $ | 57,797 | |||||
Fair value of expected net cash flows from servicing, net | 68,000 | 47,771 | 50,785 | 41,271 | 40,938 | ||||||||||
Servicing fees | 55,434 | 55,126 | 54,219 | 53,006 | 52,199 | ||||||||||
Net warehouse interest income | 5,495 | 6,095 | 6,172 | 6,411 | 7,021 | ||||||||||
Escrow earnings and other interest income | 10,743 | 12,988 | 15,163 | 14,616 | 14,068 | ||||||||||
Other revenues | 18,112 | 25,289 | 20,784 | 19,411 | 15,414 | ||||||||||
Total revenues | $ | 234,157 | $ | 217,190 | $ | 212,267 | $ | 200,325 | $ | 187,437 | |||||
Expenses | |||||||||||||||
Personnel | $ | 89,525 | $ | 97,082 | $ | 93,057 | $ | 84,398 | $ | 71,631 | |||||
Amortization and depreciation | 39,762 | 39,552 | 37,636 | 37,381 | 37,903 | ||||||||||
Provision for credit losses | 23,643 | 4,409 | (772) | 961 | 2,675 | ||||||||||
Interest expense on corporate debt | 2,860 | 3,292 | 3,638 | 3,777 | 3,652 | ||||||||||
Other operating expenses | 18,090 | 14,881 | 19,393 | 16,830 | 15,492 | ||||||||||
Total expenses | $ | 173,880 | $ | 159,216 | $ | 152,952 | $ | 143,347 | $ | 131,353 | |||||
Income from operations | $ | 60,277 | $ | 57,974 | $ | 59,315 | $ | 56,978 | $ | 56,084 | |||||
Income tax expense | 12,672 | 15,019 | 15,246 | 14,832 | 12,024 | ||||||||||
Net income before noncontrolling interests | $ | 47,605 | $ | 42,955 | $ | 44,069 | $ | 42,146 | $ | 44,060 | |||||
Less: net income (loss) from noncontrolling interests | (224) | 39 | 26 | (50) | (158) | ||||||||||
Walker & Dunlop net income | $ | 47,829 | $ | 42,916 | $ | 44,043 | $ | 42,196 | $ | 44,218 | |||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Net change in unrealized gains and losses on pledged available- | (1,917) | (278) | 123 | 666 | 301 | ||||||||||
Walker & Dunlop comprehensive income | $ | 45,912 | $ | 42,638 | $ | 44,166 | $ | 42,862 | $ | 44,519 | |||||
Basic earnings per share | $ | 1.53 | $ | 1.38 | $ | 1.42 | $ | 1.36 | $ | 1.44 | |||||
Diluted earnings per share | 1.49 | 1.34 | 1.39 | 1.33 | 1.39 | ||||||||||
Cash dividends declared per common share | 0.36 | 0.30 | 0.30 | 0.30 | 0.30 | ||||||||||
Basic weighted average shares outstanding | 30,226 | 29,996 | 29,987 | 29,985 | 29,680 | ||||||||||
Diluted weighted average shares outstanding | 31,160 | 30,976 | 30,782 | 30,744 | 30,684 |
SUPPLEMENTAL OPERATING DATA | |||||||||||||||
Unaudited | |||||||||||||||
Quarterly Trends | |||||||||||||||
(dollars in thousands, except per share data) | Q1 2020 | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 | ||||||||||
Transaction Volume: | |||||||||||||||
Components of Debt Financing Volume | |||||||||||||||
Fannie Mae | $ | 4,171,491 | $ | 1,692,839 | $ | 2,012,291 | $ | 2,357,560 | $ | 1,982,810 | |||||
Freddie Mac | 997,796 | 1,526,321 | 1,747,316 | 1,532,939 | 1,573,634 | ||||||||||
Ginnie Mae - HUD | 354,687 | 197,350 | 281,249 | 191,502 | 178,258 | ||||||||||
Brokered (1) | 3,993,885 | 3,884,101 | 3,100,717 | 1,945,006 | 1,434,129 | ||||||||||
Principal Lending and Investing (2) | 107,950 | 532,434 | 149,800 | 177,844 | 75,862 | ||||||||||
Total Debt Financing Volume | $ | 9,625,809 | $ | 7,833,045 | $ | 7,291,373 | $ | 6,204,851 | $ | 5,244,693 | |||||
Property Sales Volume | 1,730,617 | 1,979,010 | 1,615,963 | 1,101,518 | 696,611 | ||||||||||
Total Transaction Volume | $ | 11,356,426 | $ | 9,812,055 | $ | 8,907,336 | $ | 7,306,369 | $ | 5,941,304 | |||||
Key Performance Metrics: | |||||||||||||||
Operating margin | 26 | % | 27 | % | 28 | % | 28 | % | 30 | % | |||||
Return on equity | 19 | 17 | 18 | 18 | 20 | ||||||||||
Walker & Dunlop net income | $ | 47,829 | $ | 42,916 | $ | 44,043 | $ | 42,196 | $ | 44,218 | |||||
Adjusted EBITDA (3) | 64,129 | 64,076 | 54,539 | 62,609 | 66,684 | ||||||||||
Diluted EPS | 1.49 | 1.34 | 1.39 | 1.33 | 1.39 | ||||||||||
Key Expense Metrics (as a percentage of total revenues): | |||||||||||||||
Personnel expenses | 38 | % | 45 | % | 44 | % | 42 | % | 38 | % | |||||
Other operating expenses | 8 | 7 | 9 | 8 | 8 | ||||||||||
Key Revenue Metrics (as a percentage of debt financing volume): | |||||||||||||||
Origination related fees (4) | 0.79 | % | 0.93 | % | 0.91 | % | 1.08 | % | 1.11 | % | |||||
Gains attributable to MSRs (4) | 0.71 | 0.65 | 0.71 | 0.68 | 0.79 | ||||||||||
Gains attributable to MSRs - Agency (5) | 1.23 | 1.40 | 1.26 | 1.01 | 1.10 | ||||||||||
Other Data: | |||||||||||||||
Market capitalization at period end | $ | 1,250,860 | $ | 1,995,236 | $ | 1,772,272 | $ | 1,636,483 | $ | 1,564,461 | |||||
Closing share price at period end | $ | 40.27 | $ | 64.68 | $ | 55.93 | $ | 53.21 | $ | 50.91 | |||||
Average headcount | 837 | 815 | 775 | 735 | 732 | ||||||||||
Components of Servicing Portfolio: | |||||||||||||||
Fannie Mae | $ | 41,166,040 | $ | 40,049,095 | $ | 39,429,007 | $ | 38,236,807 | $ | 36,835,756 | |||||
Freddie Mac | 32,191,699 | 32,583,842 | 32,395,360 | 31,811,145 | 31,367,939 | ||||||||||
Ginnie Mae - HUD | 9,750,696 | 9,972,989 | 9,998,018 | 10,066,874 | 9,986,488 | ||||||||||
Brokered (6) | 11,326,492 | 10,151,120 | 9,628,896 | 9,535,470 | 9,227,409 | ||||||||||
Principal Lending and Investing (7) | 387,314 | 468,123 | 303,218 | 246,729 | 274,090 | ||||||||||
Total Servicing Portfolio | $ | 94,822,241 | $ | 93,225,169 | $ | 91,754,499 | $ | 89,897,025 | $ | 87,691,682 | |||||
Assets under management (8) | 2,001,984 | 1,958,078 | 1,620,603 | 1,595,446 | 1,427,334 | ||||||||||
Total Managed Portfolio | $ | 96,824,225 | $ | 95,183,247 | $ | 93,375,102 | $ | 91,492,471 | $ | 89,119,016 | |||||
Key Servicing Portfolio Metrics (end of period): | |||||||||||||||
Weighted-average servicing fee rate (bps) | 23.3 | 23.2 | 23.3 | 23.4 | 24.0 | ||||||||||
Weighted-average remaining term (years) | 9.5 | 9.6 | 9.6 | 9.8 | 9.8 | ||||||||||
(1) | Brokered transactions for life insurance companies, commercial mortgage backed securities, commercial banks, and other capital sources. |
(2) | Includes debt financing volumes from our interim lending platform, our interim lending joint venture, and JCR separate accounts. |
(3) | This is a non-GAAP financial measure. For more information on adjusted EBITDA, refer to the section above titled "Non-GAAP Financial Measures." |
(4) | Excludes the income and debt financing volume from Principal Lending and Investing. |
(5) | 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. |
(6) | Brokered loans serviced primarily for life insurance companies. |
(7) | Consists of interim loans not managed for our interim loan joint venture. |
(8) | Interim loans serviced for our interim loan joint venture and JCR assets under management. |
KEY CREDIT METRICS | |||||||||||||||
Unaudited | |||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||
(dollars in thousands) | 2020 | 2019 | 2019 | 2019 | 2019 | ||||||||||
Risk-sharing servicing portfolio: | |||||||||||||||
Fannie Mae Full Risk | $ | 34,148,159 | $ | 33,063,130 | $ | 32,291,310 | $ | 30,996,641 | $ | 29,810,556 | |||||
Fannie Mae Modified Risk | 6,973,167 | 6,939,349 | 7,067,397 | 7,180,234 | 6,958,339 | ||||||||||
Freddie Mac Modified Risk | 52,706 | 52,817 | 52,828 | 52,938 | 52,948 | ||||||||||
Total risk-sharing servicing portfolio | $ | 41,174,032 | $ | 40,055,296 | $ | 39,411,535 | $ | 38,229,813 | $ | 36,821,843 | |||||
Non-risk-sharing servicing portfolio: | |||||||||||||||
Fannie Mae No Risk | $ | 44,715 | $ | 46,616 | $ | 70,300 | $ | 59,932 | $ | 66,861 | |||||
Freddie Mac No Risk | 32,138,992 | 32,531,025 | 32,342,532 | 31,758,207 | 31,314,991 | ||||||||||
GNMA - HUD No Risk | 9,750,696 | 9,972,989 | 9,998,018 | 10,066,874 | 9,986,488 | ||||||||||
Brokered | 11,326,492 | 10,151,120 | 9,628,896 | 9,535,470 | 9,227,409 | ||||||||||
Total non-risk-sharing servicing portfolio | $ | 53,260,895 | $ | 52,701,750 | $ | 52,039,746 | $ | 51,420,483 | $ | 50,595,749 | |||||
Total loans serviced for others | $ | 94,434,927 | $ | 92,757,046 | $ | 91,451,281 | $ | 89,650,296 | $ | 87,417,592 | |||||
Interim loans (full risk) servicing portfolio | 387,314 | 468,123 | 303,218 | 246,729 | 274,090 | ||||||||||
Total servicing portfolio unpaid principal balance | $ | 94,822,241 | $ | 93,225,169 | $ | 91,754,499 | $ | 89,897,025 | $ | 87,691,682 | |||||
Interim Loan Joint Venture Managed Loans (1) | $ | 802,559 | $ | 741,000 | $ | 607,769 | $ | 574,430 | $ | 413,421 | |||||
At risk servicing portfolio (2) | $ | 37,864,262 | $ | 36,699,969 | $ | 36,005,403 | $ | 34,795,771 | $ | 33,438,052 | |||||
Maximum exposure to at risk portfolio (3) | 7,729,120 | 7,488,985 | 7,360,037 | 7,118,314 | 6,985,874 | ||||||||||
Defaulted loans | 48,481 | 48,481 | 20,981 | 20,981 | 20,981 | ||||||||||
Specifically identified at risk loan balances associated with allowance for risk- | 48,481 | 48,481 | 20,981 | 20,981 | 20,981 | ||||||||||
Defaulted loans as a percentage of the at risk portfolio | 0.13 | % | 0.13 | % | 0.06 | % | 0.06 | % | 0.06 | % | |||||
Allowance for risk-sharing as a percentage of the at risk portfolio | 0.17 | 0.03 | 0.02 | 0.02 | 0.02 | ||||||||||
Allowance for risk-sharing as a percentage of maximum exposure | 0.83 | 0.15 | 0.10 | 0.11 | 0.10 | ||||||||||
(1) | Consists of $71.1 million as of March 31, 2020, $70.5 as of December 31, 2019 and $70.1 million for the remaining periods of loans managed directly for our interim loan joint venture partner and interim loan joint venture managed loans. We indirectly share in a portion of the risk of loss associated with interim loan joint venture managed loans through our 15% equity ownership in the joint venture. We have no exposure to risk of loss for the loans serviced directly for our interim loan joint venture partner. The balance of this line is included as a component of assets under management in the Supplemental Operating Data table. |
(2) | At risk servicing portfolio is defined as the balance of Fannie Mae DUS loans subject to the risk-sharing formula described below, as well as a small number of Freddie Mac loans on which we share in the risk of loss. Use of the at risk portfolio provides for comparability of the full risk-sharing and modified risk-sharing loans because the provision and allowance for risk-sharing obligations are based on the at risk balances of the associated loans. Accordingly, we have presented the key statistics as a percentage of the at risk portfolio. For example, a $15 million loan with 50% risk-sharing has the same potential risk exposure as a $7.5 million loan with full DUS risk sharing. Accordingly, if the $15 million loan with 50% risk-sharing were to default, we would view the overall loss as a percentage of the at risk balance, or $7.5 million, to ensure comparability between all risk-sharing obligations. To date, substantially all of the risk-sharing obligations that we have settled have been from full risk-sharing loans. |
(3) | Represents the maximum loss we would incur under our risk-sharing obligations if all of the loans we service, for which we retain some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement. The maximum exposure is not representative of the actual loss we would incur. |
ADJUSTED FINANCIAL METRIC RECONCILIATION TO GAAP | |||||||||||||||
Unaudited | |||||||||||||||
Quarterly Trends | |||||||||||||||
(in thousands) | Q1 2020 | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 | ||||||||||
Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA | |||||||||||||||
Walker & Dunlop Net Income | $ | 47,829 | $ | 42,916 | $ | 44,043 | $ | 42,196 | $ | 44,218 | |||||
Income tax expense | 12,672 | 15,019 | 15,246 | 14,832 | 12,024 | ||||||||||
Interest expense on corporate debt | 2,860 | 3,292 | 3,638 | 3,777 | 3,652 | ||||||||||
Amortization and depreciation | 39,762 | 39,552 | 37,636 | 37,381 | 37,903 | ||||||||||
Provision (benefit) for credit losses | 23,643 | 4,409 | (772) | 961 | 2,675 | ||||||||||
Net write-offs | ? | ? | ? | ? | ? | ||||||||||
Stock compensation expense | 5,363 | 6,659 | 5,533 | 4,733 | 7,150 | ||||||||||
Fair value of expected net cash flows from servicing, net (1) | (68,000) | (47,771) | (50,785) | (41,271) | (40,938) | ||||||||||
Adjusted EBITDA | $ | 64,129 | $ | 64,076 | $ | 54,539 | $ | 62,609 | $ | 66,684 | |||||
(1) | Represents the fair value of the expected net cash flows from servicing recognized at commitment, net of the expected guaranty obligation. |
SOURCE Walker & Dunlop, Inc.
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