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Section 1: 8-K

wd_Current_Folio_8K_ER

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 8-K 

 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 

 

Date of Report (Date of earliest event reported):  February 8, 2017

 

 

Walker & Dunlop, Inc.

 

 

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

Maryland

  

001-35000

  

80-0629925

(State or other Jurisdiction of Incorporation)

 

(Commission File Number)

 

(IRS Employer Identification No.)

 

 

 

 

7501 Wisconsin Avenue
Suite 1200E
Bethesda, MD

  

20814

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (301) 215-5500

 

 

                                         Not applicable                                   

(Former name or former address if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 


 

Item 2.02.  Results of Operations and Financial Condition.

 

On February 8, 2017, Walker & Dunlop, Inc. (the “Company”) issued a press release reporting its financial results for the quarter and year-to-date period ended December 31, 2016. A copy of this press release is furnished herewith as Exhibit 99.1 and is hereby incorporated by reference into this Item 2.02.

 

The information contained in this current report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the Company under the Securities Act of 1933, as amended.

 

Item 9.01.  Financial Statements and Exhibits. 

 

(d)Exhibits.

 

The exhibit contained in this current report on Form 8-K shall not be deemed “filed” with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the Company under the Securities Act of 1933, as amended.

 

 

 

 

Exhibit Number

   

Description

 

 

 

99.1

 

Press Release dated February 8, 2017

 

2


 

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 hereunto duly authorized.

 

 

 

 

 

 

 

 

Walker & Dunlop, Inc.

 

 

 

(Registrant)

 

 

 

 

 

 

 

 

Date: February 8, 2017

 

By:

/s/ Stephen P. Theobald

 

 

 

Executive Vice President, Chief Financial Officer and Treasurer

 

3


 

EXHIBIT INDEX

 

Ovember 4

 

 

 

 

 

Exhibit Number

    

Description

 

 

 

99.1

 

Press Release dated February 8, 2017

 

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Section 2: EX-99.1

wd_EX_99_1

Exhibit 99.1

 

Picture 2

 

 

Walker & Dunlop Caps Record Year with 80% Growth in Fourth Quarter Earnings

2016 Marks the Third Straight Year of Greater Than 30% Growth in Diluted EPS

 

 

 

 

 

 

 

 

FOURTH QUARTER 2016 HIGHLIGHTS

C:\Users\charvey\AppData\Local\Microsoft\Windows\Temporary Internet Files\Content.Outlook\B2SOPSAG\Q4 2016 Earnings Infographic-with border and outlines-01 (003).png

 

 

Total revenues of $178.4 million, up 47% from Q4’15

Net income of $36.8 million, or $1.16 per diluted share, up 80% from Q4’15

Adjusted EBITDA1 of $34.6 million, up 19% from Q4’15

Total transaction volume of $6.3 billion, up 34% from Q4’15

 

 

FULL YEAR 2016 HIGHLIGHTS

 

 

Total revenues of $575.3 million, up 23% over 2015

Net income of $113.9 million or $3.65 per diluted share, up 39% over 2015

Total transaction volume of $19.3 billion, up 9% over 2015

Operating Margin of 32% compared to 29% in 2015

Increased number of mortgage bankers and investment sales brokers by 29% since Q1’16

Servicing portfolio of $63.1 billion at December 31, 2016, up 26% from December 31, 2015

Repurchased $9.2 million of stock during 2016; Board reauthorized share repurchases of up to $75 million over the next 12 months

 

 

Bethesda, MD – February 8, 2017Walker & Dunlop, Inc. (NYSE: WD) (the “Company”) reported fourth quarter and full-year 2016 results, adding $1.00 in earnings per diluted share year over year. Total revenues were $178.4 million for the fourth quarter 2016, a 47% increase over the fourth quarter 2015.  Net income increased 80% from the fourth quarter 2015 to $36.8 million, or $1.16 per diluted share.    Adjusted EBITDA for the fourth quarter 2016 was $34.6 million compared to $29.0 million for the fourth quarter 2015, a 19% increase. Net income for 2016 increased 39% to $113.9 million, or $3.65 per diluted share, from $82.1 million, or $2.65 per diluted share, for 2015.  Total revenues were $575.3 million, a 23% increase from 2015 and well above the Company’s goal of $500 million. Adjusted EBITDA for 2016 was $129.9 million compared to $124.3 million in 2015, a 5% increase.

 

1


 

"Walker & Dunlop's growth and financial performance continue to outpace the market by broad margins," commented Willy Walker, Chairman and CEO.  "This was the second consecutive year adding $1.00 or more in EPS, reflective of the highly profitable business model that underpins Walker & Dunlop's growth.   Over the past three years, our origination volumes have increased at a compound annual growth rate of 26%, twice the rate of the commercial real estate financing market, resulting in annual growth in revenues and earnings of 22% and 40%, respectively. Our team of financing professionals, national platform, well-known brand and loyal client base are building off one another, creating new growth opportunities and generating fantastic financial performance."

 

FOURTH QUARTER 2016 OPERATING RESULTS

 

TOTAL REVENUES were $178.4 million for the fourth quarter 2016 compared to $121.4 million for the fourth quarter 2015. The 47%  increase was driven by the mix of loans originated during the quarter, which included increased lending with Fannie Mae and HUD, and increased servicing fees due to the growth in our servicing portfolio. Fannie Mae and HUD loan originations, our most profitable executions, comprised 48% of loan origination volume in the fourth quarter 2016 compared to 33% in the fourth quarter 2015, which drove the growth in gains from mortgage banking activities.

 

GAINS FROM MORTGAGE BANKING ACTIVITIES for the fourth quarter 2016 were $117.8 million compared to $77.0 million for the fourth quarter 2015, a 53%  increase.  GAINS ATTRIBUTABLE TO MORTGAGE SERVICING RIGHTS (“MSRs”) were $65.1 million for the fourth quarter 2016, an 80% increase from $36.1 million for the fourth quarter 2015.    LOAN ORIGINATION FEES were $52.7 million for the fourth quarter 2016 compared to $40.8 million for the fourth quarter 2015, a 29%  increase.      

 

SERVICING FEES were $39.4 million for the fourth quarter 2016 compared to $30.5 million for the fourth quarter 2015. The 29% increase in servicing fees was driven by the continued growth of the portfolio resulting from strong loan origination activity and the acquisition of a large HUD servicing portfolio in the second quarter 2016.

 

NET WAREHOUSE INTEREST INCOME, which includes net interest earned on loans held for sale and loans held for investment (the Company’s on balance sheet interim loan portfolio), was $7.8 million for the fourth quarter 2016,  a 27% increase from  $6.1 million for the fourth quarter 2015.  The increase in net warehouse interest income was a result of an increase in the average balance of loans held for sale from $1.1 billion for the fourth quarter 2015 to $1.7 billion for the fourth quarter 2016. 

 

TOTAL EXPENSES were $117.2 million for the fourth quarter 2016 compared to $87.5 million for the fourth quarter 2015, a 34%  increase, which was primarily driven by a 49%  increase in personnel costs due to increased average headcount and increased variable compensation costs, a product of the Company’s record financial performance.  As a percentage of total revenues, personnel expense was 41% during the fourth quarter 2016, in line with the prior year fourth quarter. Additionally, amortization and depreciation costs increased 25% due to the growth of the servicing portfolio year over year.

 

PROVISION FOR CREDIT LOSSES was a  benefit of $0.8 million for the fourth quarter 2016 compared to an expense of  $1.1  million for the fourth quarter 2015. The benefit is due to the receipt of a $0.8 million cash recovery that reduced the losses on two previously settled defaults. NET WRITE-OFFS during the fourth quarter 2016 was a benefit of $0.8 million due to the recovery payment noted above compared to zero in the fourth quarter 2015. We had no loans delinquent or in default in our at-risk portfolio at December 31, 2016.

 

OPERATING MARGIN was 34% for the fourth quarter 2016, up from 28% for the fourth quarter 2015.  The increase in operating margin was driven by the scale of our transaction and servicing platform and efficient operation of the business, which drove total revenues up 47%, while total expenses grew only 34%. 

 

NET INCOME was $36.8 million, or $1.16 per diluted share, for the fourth quarter 2016 compared to net income of $20.4 million, or $0.67 per diluted share, for the fourth quarter 2015. The 80% increase in net income was driven by increased gains from mortgage banking activities and growth in servicing fees, partially offset by increases in personnel costs and amortization and depreciation.

2


 

 

ADJUSTED EBITDA was $34.6  million for the fourth quarter 2016 compared to $29.0 million for the fourth quarter 2015. The 19%  increase was driven by increases in loan origination and servicing fees, partially offset by the increase in personnel costs.

 

ANNUALIZED RETURN ON EQUITY was 25% for the fourth quarter 2016, up from 17% for the fourth quarter 2015.  In the fourth quarter 2016, return on equity benefitted from increased total revenues and net income.

 

2016 OPERATING RESULTS

 

TOTAL REVENUES were $575.3 million for 2016 compared to $468.2 million for 2015, a 23% increase.  The increase in total revenues was largely driven by a 44% increase in MSRs,  an 11% increase in origination fees, and a  23% increase in servicing fees.

 

GAINS FROM MORTGAGE BANKING ACTIVITIES increased 26% to $367.2 million in 2016 compared to $290.5 million for the prior year, as the mix and type of loans originated changed, and the volume of loan originations increased.  MSRs were $192.8 million for 2016 compared to $133.6 million for 2015, a 44% increase.  LOAN ORIGINATION FEES were $174.4 million for 2016 compared to $156.8 million for the prior year, an 11% increase. 

 

SERVICING FEES were $140.9 million in 2016, up 23% from $114.8 million the prior year, as a result of the 26% growth in the servicing portfolio.

 

NET WAREHOUSE INTEREST INCOME for 2016 was $23.7 million, down slightly from $24.0 million due to a 20% decrease in the average unpaid principal balance of loans held for investment from 2015 to 2016.

 

TOTAL EXPENSES for 2016 were $389.5 million compared to $332.8 million for the prior year, a 17% increase.  The increase in total expenses was due primarily to increased personnel costs and amortization and depreciation expense. Personnel expense as a percentage of total revenues for 2016 was 40% compared to 39% in 2015.  

 

PROVISION FOR CREDIT LOSSES was a benefit of  $0.6 million in 2016 compared to a charge of $1.6 million in 2015.

 

OPERATING MARGIN for 2016 was 32% compared to an operating margin of 29% for 2015. The lift in operating margin was driven by significant growth in gains from mortgage servicing rights, which are not subject to our variable compensation arrangements, and growth in our servicing portfolio and related servicing fee income, which is a highly scalable component of our business. As a result, total revenues grew 23% while total expenses increased only 17%.

 

NET INCOME was $113.9 million, or $3.65 per diluted share, for 2016 compared to net income of $82.1 million, or $2.65 per diluted share for 2015. The 39% increase in net income was driven by increased gains from mortgage banking activities and growth in servicing fees, partially offset by increases in personnel costs and amortization and depreciation.

 

ADJUSTED EBITDA was $129.9  million for 2016 compared to $124.3 million for 2015, a 5% increase.  The increase was driven by growth in cash earnings such as servicing fees, investment sales revenues, and escrow income, offset by the increase in personnel expenses.

 

RETURN ON EQUITY was 21% for 2016, up from 19% for 2015, driven by the year-over-year increase in total revenues and net income. 

3


 

FOURTH QUARTER AND FULL YEAR 2016 TOTAL TRANSACTION VOLUME

 

TOTAL TRANSACTION VOLUME for the fourth quarter 2016 was $6.3 billion, up 34% from $4.7 billion for the fourth quarter 2015.  Total transaction volume includes loan origination and investment sales volumes.  LOAN ORIGINATION VOLUME was up 22% from the fourth quarter 2015 to $5.3 billion. Loan originations with Fannie Mae were $2.3 billion, an increase of 81% from the fourth quarter 2015.  Brokered loan originations totaled $1.3 billion, a 38%  increase from the fourth quarter 2015.  Loan originations with Freddie Mac were $1.2 billion, a 35% decrease from the fourth quarter 2015.  HUD loan originations totaled $261.2 million, a 49% increase from the fourth quarter 2015.  Interim loan originations were $184.6 million, a 360% increase from the fourth quarter 2015. INVESTMENT SALES VOLUME was $1.0 billion for the fourth quarter 2016 compared to $376.3 million for the fourth quarter 2015, a 167% increase.

 

TOTAL TRANSACTION VOLUME for 2016 was $19.3 billion, up 9% from $17.8 billion for 2015. LOAN ORIGINATION VOLUME for 2016 was $16.7  billion, up 3% from $16.2 billion in 2015.  The $485.0 million increase in loan origination volume was driven primarily by a 40% increase in lending with Fannie Mae, a 49% increase in lending with HUD, and a 127% increase in interim lending, partially offset by a  33% decrease in lending with Freddie Mac. INVESTMENT SALES VOLUME of $2.6 billion in 2016 was an increase of 69% from $1.5 billion for the eight months we operated our investment sales business in 2015.

 

STOCK BUYBACK PROGRAM

 

On February 9, 2016, the Company's Board of Directors authorized the repurchase of up to $75.0 million of its outstanding common stock over a one-year period.  During this one-year period, the company repurchased 396,357 shares for $9.2 million.  On February 7, 2017, the Company’s Board of Directors reauthorized the repurchase of up to $75.0 million of the Company’s outstanding common stock over the coming one-year period.

 

Purchases made pursuant to the program will be made in the open market or in privately negotiated transactions from time to time as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The repurchase program may be suspended or discontinued at any time.

 

SERVICING PORTFOLIO

 

The SERVICING PORTFOLIO totaled $63.1 billion at December 31, 2016, an increase of 26% from $50.2 billion at December 31, 2015.  During the fourth quarter 2016, there were $4.0 billion of net loan additions to the servicing portfolio.  At December 31, 2016, the weighted average remaining term of the portfolio increased to 10.3 years, compared to 9.6 years in the fourth quarter 2015, and the WEIGHTED AVERAGE SERVICING FEE increased to 26 basis points from 25 basis points at December 31, 2015.  

 

CREDIT QUALITY

 

The Company’s AT RISK SERVICING PORTFOLIO, which is comprised of loans subject to a defined risk-sharing formula, was $24.1 billion at December 31, 2016 compared to $19.5 billion at December 31, 2015.  There were no 60+ DAY DELINQUENCIES or defaults in the Company’s at risk servicing portfolio at December 31, 2016.  

 

The on-balance sheet INTERIM LOAN PORTFOLIO, which is comprised of loans for which Walker & Dunlop has full risk of loss, was $222.3 million at December 31, 2016 compared to $233.4 million at December 31, 2015.  All of the Company’s interim loans are current and performing at December 31, 2016.  

 

 

 

 

 

4


 

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.”

 

Conference Call Information

 

The Company will host a conference call to discuss its quarterly results on Wednesday, February 8, 2017 at 8:30 a.m. Eastern time. Analysts and investors interested in participating are invited to call (888)  632-3381 from within the United States or (785) 424-1678 from outside the United States and are asked to reference the Conference ID: WDQ416. A simultaneous webcast of the call will be available on the Investor Relations section of the Walker & Dunlop website at http://www.walkerdunlop.com. Presentation materials, related to the conference call, will be posted to the Investor Relations section of the Company’s website prior to the call.

 

A telephonic replay of the call will also be available from approximately 11:00 a.m. Eastern time February 8, 2017 through February 22, 2017. Please call (800) 688-7036 from the United States or (402) 220-1346 from outside the United States. 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 providing financing and investment sales to owners of multifamily and commercial properties. Walker & Dunlop, which is included in the S&P SmallCap 600 Index, has over 500 professionals in over 25 offices across the nation with 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 for credit losses net of write-offs, stock-based incentive compensation charges, and non-cash revenues such as gains attributable to MSRs. Because not all companies use identical calculations, our presentation of adjusted EBITDA may not be comparable to similarly titled measures of other companies. Furthermore, adjusted EBITDA is not intended to be a measure of free cash flow for our management's discretionary use, as it does not reflect certain cash requirements such as tax and debt service payments. The amounts shown for adjusted EBITDA may also differ from the amounts calculated under similarly titled definitions in our debt instruments, which are further adjusted to reflect certain other cash and non-cash charges that are used to determine compliance with financial covenants.

 

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

 

·

the ability to make more meaningful period-to-period comparisons of the Company's on-going operating results;

·

the ability to better identify trends in the Company's underlying business and perform related trend analyses; and

·

a better understanding of how management plans and measures the Company's underlying business.

5


 

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) general economic conditions and multifamily and commercial real estate market conditions, (2) regulatory and or legislative changes to Freddie Mac, Fannie Mae or HUD, (3)  our ability to retain and attract loan originators and other professionals, and (4) changes in federal government fiscal and monetary policies, including any constraints or cuts in federal funds allocated to HUD for loan originations. 

 

For a further discussion of these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements, see the section titled ''Risk Factors" in our most recent Annual Report on Form 10-K, as it may be updated or supplemented by our Quarterly Reports on Form 10-Q and our other filings with the SEC.  Such filings are available publicly on our Investor Relations web page at www.walkerdunlop.com.

 

Contacts:

 

 

 

Investors:

Media:

Claire Harvey

Susan Weber

Vice President, Investor Relations

Chief Marketing Officer

Phone  301.634.2143

Phone  301.215.5515

investorrelations@walkeranddunlop.com

info@walkeranddunlop.com

 

Phone  301.215.5500

 

7501 Wisconsin Avenue, Suite 1200E

Bethesda, Maryland 20814

 

 

 

 

 

 

6


 

 

 

Walker & Dunlop, Inc. and Subsidiaries

Consolidated Balance Sheets

December 31, 2016 and 2015

(In thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

    

December 31, 

 

 

 

2016

(Unaudited)

 

2015

 

 

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

118,756

 

$

136,988

 

Restricted cash

 

 

9,861

 

 

5,306

 

Pledged securities, at fair value

 

 

84,850

 

 

72,190

 

Loans held for sale, at fair value

 

 

1,858,358

 

 

2,499,111

 

Loans held for investment, net

 

 

220,377

 

 

231,493

 

Servicing fees and other receivables, net

 

 

29,459

 

 

23,844

 

Derivative assets

 

 

61,824

 

 

11,678

 

Mortgage servicing rights

 

 

521,930

 

 

412,348

 

Goodwill and other intangible assets

 

 

97,372

 

 

91,488

 

Other assets

 

 

49,645

 

 

30,545

 

Total assets

 

$

3,052,432

 

$

3,514,991

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Accounts payable and other liabilities

 

$

93,211

 

$

67,684

 

Performance deposits from borrowers

 

 

10,480

 

 

5,112

 

Derivative liabilities

 

 

4,396

 

 

1,333

 

Guaranty obligation, net of accumulated amortization

 

 

32,292

 

 

27,570

 

Allowance for risk-sharing obligations

 

 

3,613

 

 

5,586

 

Deferred tax liabilities, net

 

 

139,020

 

 

101,425

 

Warehouse notes payable

 

 

1,990,183

 

 

2,649,470

 

Note payable

 

 

164,163

 

 

164,462

 

Total liabilities

 

$

2,437,358

 

$

3,022,642

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

Preferred shares, 50,000 authorized, none issued.

 

$

 —

 

$

 —

 

Common stock, $0.01 par value. Authorized 200,000; issued and outstanding 29,551 shares at December 31, 2016 and 29,466 shares at December 31, 2015

 

 

296

 

 

295

 

Additional paid-in capital

 

 

228,889

 

 

215,575

 

Retained earnings

 

 

381,031

 

 

272,030

 

Total stockholders’ equity

 

$

610,216

 

$

487,900

 

Noncontrolling interests

 

 

4,858

 

 

4,449

 

Total equity

 

$

615,074

 

$

492,349

 

Commitments and contingencies

 

 

 —

 

 

 —

 

Total liabilities and equity

 

$

3,052,432

 

$

3,514,991

 

 

7


 

Walker & Dunlop, Inc. and Subsidiaries

Consolidated Statements of Income

(In thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

For the year ended

 

 

 

December 31,

 

December 31,

 

 

    

2016

(Unaudited)

    

2015

(Unaudited)

    

2016

(Unaudited)

    

2015

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains from mortgage banking activities

 

$

117,779

 

$

76,986

 

$

367,185

 

$

290,466

 

Servicing fees

 

 

39,370

 

 

30,530

 

 

140,924

 

 

114,757

 

Net warehouse interest income, loans held for sale

 

 

5,465

 

 

3,477

 

 

16,245

 

 

14,541

 

Net warehouse interest income, loans held for investment

 

 

2,337

 

 

2,659

 

 

7,482

 

 

9,419

 

Escrow earnings and other interest income

 

 

2,943

 

 

1,350

 

 

9,168

 

 

4,473

 

Other

 

 

10,497

 

 

6,363

 

 

34,272

 

 

34,542

 

Total revenues

 

$

178,391

 

$

121,365

 

$

575,276

 

$

468,198

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel

 

$

73,126

 

$

49,224

 

$

227,491

 

$

184,590

 

Amortization and depreciation

 

 

30,603

 

 

24,385

 

 

111,427

 

 

98,173

 

Provision (benefit) for credit losses

 

 

(778)

 

 

1,068

 

 

(612)

 

 

1,644

 

Interest expense on corporate debt

 

 

2,432

 

 

2,485

 

 

9,851

 

 

9,918

 

Other operating expenses

 

 

11,827

 

 

10,331

 

 

41,338

 

 

38,507

 

Total expenses

 

$

117,210

 

$

87,493

 

$

389,495

 

$

332,832

 

Income from operations

 

$

61,181

 

$

33,872

 

$

185,781

 

$

135,366

 

Income tax expense

 

 

24,175

 

 

13,592

 

 

71,470

 

 

52,771

 

Net income before noncontrolling interests

 

$

37,006

 

$

20,280

 

$

114,311

 

$

82,595

 

Less: net income from noncontrolling interests

 

 

216

 

 

(131)

 

 

414

 

 

467

 

Walker & Dunlop net income

 

$

36,790

 

$

20,411

 

$

113,897

 

$

82,128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

1.25

 

$

0.70

 

$

3.87

 

$

2.76

 

Diluted earnings per share

 

$

1.16

 

$

0.67

 

$

3.65

 

$

2.65

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

 

29,477

 

 

29,310

 

 

29,432

 

 

29,754

 

Diluted weighted average shares outstanding

 

 

31,701

 

 

30,610

 

 

31,172

 

 

30,949

 

8


 

SUPPLEMENTAL OPERATING DATA

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

For the year ended

 

 

 

December 31, 

 

December 31, 

 

(in thousands; except per share data)

    

2016

    

2015

    

2016

    

2015

  

Transaction Volume:

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan Origination Volume by Product Type

 

 

 

 

 

 

 

 

 

 

 

 

 

Fannie Mae

 

$

2,273,379

 

$

1,254,692

 

$

7,000,942

 

$

5,012,790

 

Freddie Mac

 

 

1,231,766

 

 

1,896,245

 

 

4,234,071

 

 

6,326,471

 

Ginnie Mae - HUD

 

 

261,204

 

 

175,133

 

 

879,941

 

 

592,026

 

Brokered (1)

 

 

1,304,724

 

 

943,774

 

 

4,189,116

 

 

4,122,307

 

Interim Loans

 

 

184,560

 

 

40,125

 

 

419,600

 

 

185,075

 

Total Loan Origination Volume

 

$

5,255,633

 

$

4,309,969

 

$

16,723,670

 

$

16,238,669

 

Investment Sales Volume

 

 

1,005,265

 

 

376,314

 

 

2,574,442

 

 

1,520,079

 

Total Transaction Volume

 

$

6,260,898

 

$

4,686,283

 

$

19,298,112

 

$

17,758,748

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key Performance Metrics:

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

 

34

%  

 

28

%  

 

32

%  

 

29

%  

Return on equity

 

 

25

%  

 

17

%  

 

21

%  

 

19

%  

Walker & Dunlop net income

 

$

36,790

 

$

20,411

 

$

113,897

 

$

82,128

 

Adjusted EBITDA (2)

 

$

34,625

 

$

28,988

 

$

129,928

 

$

124,279

 

Diluted EPS

 

$

1.16

 

$

0.67

 

$

3.65

 

$

2.65

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel expenses

 

 

41

%  

 

41

%  

 

40

%  

 

39

%  

Other operating expenses

 

 

7

%  

 

9

%  

 

7

%  

 

8

%  

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Origination related fees

 

 

1.00

%  

 

0.95

%  

 

1.04

%  

 

0.97

%  

Gains attributable to MSRs

 

 

1.24

%  

 

0.84

%  

 

1.15

%  

 

0.82

%  

Gains attributable to MSRs, as a percentage of GSE and HUD origination volume (3)

 

 

1.73

%  

 

1.09

%  

 

1.59

%  

 

1.12

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 

 

Servicing Portfolio by Product:

  

2016

    

2015

    

2014

 

Fannie Mae

 

$

27,728,164

 

$

22,915,088

 

$

20,521,425

 

Freddie Mac

 

 

20,688,410

 

 

17,810,007

 

 

12,916,705

 

Ginnie Mae - HUD

 

 

9,155,794

 

 

5,657,809

 

 

5,828,981

 

Brokered (1)

 

 

5,286,473

 

 

3,595,990

 

 

4,539,461

 

Interim Loans

 

 

222,313

 

 

233,370

 

 

225,318

 

Total Servicing Portfolio

 

$

63,081,154

 

$

50,212,264

 

$

44,031,890

 

 

 

 

 

 

 

 

 

 

 

 

Key Servicing Metric (end of period):

 

 

 

 

 

 

 

 

 

 

Weighted-average servicing fee rate (basis points)

 

 

26.1

 

 

24.8

 

 

24.4

 


(1)

Brokered transactions for commercial mortgage backed securities, life insurance companies, and commercial banks.

(2)

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

(3)

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

9


 

 

 

 

 

ADJUSTED FINANCIAL METRIC RECONCILIATION TO GAAP

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

For the year ended

 

 

 

December 31, 

 

December 31, 

(in thousands)

    

 

2016

    

 

2015

    

2016

    

2015

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

Walker & Dunlop Net Income

 

$

36,790

 

$

20,411

 

$

113,897

 

$

82,128

Income tax expense

 

 

24,175

 

 

13,592

 

 

71,470

 

 

52,771

Interest expense

 

 

2,432

 

 

2,485

 

 

9,851

 

 

9,918

Amortization and depreciation

 

 

30,603

 

 

24,385

 

 

111,427

 

 

98,173

Provision (benefit) for credit losses

 

 

(778)

 

 

1,068

 

 

(612)

 

 

1,644

Net recoveries (write-offs)

 

 

810

 

 

 —

 

 

(1,757)

 

 

(808)

Stock compensation expense

 

 

5,693

 

 

3,187

 

 

18,477

 

 

14,084

Gains attributable to mortgage servicing rights (1)

 

 

(65,100)

 

 

(36,140)

 

 

(192,825)

 

 

(133,631)

Adjusted EBITDA

 

$

34,625

 

$

28,988

 

$

129,928

 

$

124,279

 


(1)

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

 

10


 

Key Credit Metrics

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended December 31, 

 

(dollars in thousands)

    

2016

    

2015

    

2014

 

Key Credit Metrics

 

 

 

 

 

 

 

 

 

 

Risk-sharing servicing portfolio:

 

 

 

 

 

 

 

 

 

 

Fannie Mae Full Risk

 

$

20,669,404

 

$

17,180,577

 

$

15,116,490

 

Fannie Mae Modified Risk

 

 

6,396,812

 

 

4,970,569

 

 

4,747,015

 

Freddie Mac Modified Risk

 

 

53,368

 

 

53,506

 

 

53,635

 

GNMA - HUD Full Risk

 

 

4,431

 

 

4,585

 

 

4,728

 

Total risk-sharing servicing portfolio

 

$

27,124,015

 

$

22,209,237

 

$

19,921,868

 

 

 

 

 

 

 

 

 

 

 

 

Non risk-sharing servicing portfolio:

 

 

 

 

 

 

 

 

 

 

Fannie Mae No Risk

 

$

661,948

 

$

763,942

 

$

657,920

 

Freddie Mac No Risk

 

 

20,635,042

 

 

17,756,501

 

 

12,863,070

 

GNMA - HUD No Risk

 

 

9,151,363

 

 

5,653,224

 

 

5,824,253

 

Brokered

 

 

5,286,473

 

 

3,595,990

 

 

4,539,461

 

Total non risk-sharing servicing portfolio

 

$

35,734,826

 

$

27,769,657

 

$

23,884,704

 

 

 

 

 

 

 

 

 

 

 

 

Total loans serviced for others

 

$

62,858,841

 

$

49,978,894

 

$

43,806,572

 

 

 

 

 

 

 

 

 

 

 

 

Interim loans (full risk) servicing portfolio

 

 

222,313

 

 

233,370

 

 

225,318

 

 

 

 

 

 

 

 

 

 

 

 

Total servicing portfolio unpaid principal balance

 

$

63,081,154

 

$

50,212,264

 

$

44,031,890

 

 

 

 

 

 

 

 

 

 

 

 

At risk servicing portfolio (1)

 

$

24,072,347

 

$

19,544,422

 

$

17,393,870

 

Maximum exposure to at risk portfolio (2)

 

 

4,921,802

 

 

4,062,971

 

 

4,072,911

 

60+ day delinquencies, within at risk portfolio

 

 

 —

 

 

 —

 

 

16,610

 

At risk loan balances associated with allowance for risk-sharing obligations

 

$

 —

 

$

16,884

 

$

25,609

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

0.00

%  

 

0.00

%  

 

0.10

%

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

 

 

0.02

%  

 

0.03

%  

 

0.02

%

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

 

 

N/A

 

 

33.08

%  

 

15.24

%

Allowance for risk-sharing as a percentage of maximum exposure

 

 

0.07

%  

 

0.14

%  

 

0.10

%

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

 

 

0.73

%  

 

0.82

%  

 

0.71

%

 


(1)

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 an immaterial balance of Freddie Mac and GNMA-HUD 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% DUS 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% DUS risk-sharing was to default, the Company 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.

 

(2)

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.

11


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