EXHIBIT 99.1
Walker & Dunlop Reports
Second Quarter 2011 Results
SECOND QUARTER 2011 HIGHLIGHTS
· Total Loan Originations of $1.3 Billion, Highest Quarterly Originations in Company History
· Revenue of $42.4 Million, up 38% over Q2 2010
· Income from operations of $18.2 million, up 55% over Q2 2010
· Operating Margin of 43%, up from 38% in Q2 2010
· 60 Day Delinquencies Down to 0.14%
· Continued Execution of Strategic Growth Plan
Bethesda, MD — August 11, 2011 — Walker & Dunlop, Inc. (NYSE: WD) (the “Company”) announced today record revenue for the second quarter of $42.4 million, generating $18.2 million of income from operations and net income of $11.1 million, or $0.51 per diluted share.
“This strong quarter was emblematic of our Company’s ability to capitalize on the favorable macro-economic conditions and consistent improvement in the commercial real estate sector during the second quarter. We originated over $1.3 billion of loans which produced record revenues and income from operations,” commented chairman and chief executive officer, Willy Walker. “The favorable market conditions and our ability to execute have led to expansion of our loan origination platform, additional servicing revenues, and completion of several strategic initiatives. Our origination pipeline remains robust which allows us to establish third quarter 2011 guidance of $750 million to $1.1 billion and to reaffirm our loan origination guidance of $3.5 billion to $4.25 billion for the year.”
OPERATING RESULTS
NET INCOME for the second quarters of 2011 and 2010 were $11.1 million or $0.51 per diluted share and $11.7 million or $0.80 per diluted share respectively. Net income for the second quarter of 2011
should be compared to the second quarter 2010 pro forma net income of $7.2 million or $0.49, a 55% increase, due to the changes in corporate tax structure relating to the Company’s initial public offering.
LOAN ORIGINATIONS were $1.3 billion for the second quarter of 2011 compared to $672 million for the second quarter of 2010, a 95% increase.
TOTAL REVENUES were $42.4 million for the second quarter of 2011 compared to $30.7 million for the second quarter of 2010, a 38% increase.
GAINS FROM MORTGAGE BANKING ACTIVITIES were $31.3 million for the second quarter of 2011 compared to $21.2 million for the second quarter of 2010, a 48% increase. The increase was due to the increase in loan origination volume as well as the mix of loans originated. Gains from mortgage banking activities as a percentage of loan origination volumes were 239 basis points in the second quarter of 2011, compared to 315 basis points in the second quarter of 2010, a 24% decrease. The decrease in gains from mortgage banking activities as a percentage of loan volume is due to the origination of several large loans during the quarter that carried lower aggregate fees. While fees on large loans affected the overall fee rate (as expressed in basis points), pricing in the marketplace remained relatively stable.
Gains from mortgage banking activities are the revenues recognized through the loan origination and sale process and are comprised of two components: loan origination fees, and gains attributable to mortgage servicing rights. LOAN ORIGINATION FEES were $15.3 million for the second quarter of 2011 compared to $8.9 million for the second quarter of 2010, a 73% increase. GAINS ATTRIBUTABLE TO MORTGAGE SERVICING RIGHTS (“MSRs”) were $16.0 million in the second quarter of 2011, compared to $12.3 million in the second quarter of 2010, a 30% increase.
TOTAL EXPENSES were $24.2 million for the second quarter of 2011 compared to $19.0 million for the second quarter of 2010, a 28% increase. Personnel expense was $12.9 million in the second quarter of 2011 compared to $8.1 million in the second quarter of 2010, a 60% increase. The increase is primarily due to commission expense related to higher origination volumes. Personnel expense as a percent of revenues was 30% for the second quarter of 2011 compared to 26% for the second quarter of 2010.
INCOME FROM OPERATIONS was $18.2 million for the second quarter of 2011, compared to $11.7 million for the second quarter of 2010, a 55% increase. The Company’s OPERATING MARGIN was 43% for the second quarter of 2011 compared to 38% in the second quarter of 2010. The expansion in margin is primarily due to the increase in loan origination volume along with the increase in servicing income as a result of the growth of the servicing portfolio.
SERVICING PORTFOLIO
SERVICING FEES were $8.0 million for the second quarter of 2011 compared to $6.6 million for the second quarter of 2010, a 23% increase. The increase in servicing fees was due to the growth in the
servicing portfolio coupled with growth of the weighted average servicing fees associated with newly originated loans.
THE SERVICING PORTFOLIO was $15.4 billion at June 30, 2011 compared to $13.7 billion at June 30, 2010, a 13% increase. The Company retains servicing rights on most of the loans it originates and generates revenues from the fees it receives for servicing the loans.
The WEIGHTED-AVERAGE SERVICING FEE of the aggregate servicing portfolio was 22 basis points at June 30, 2011 up from 19 basis points at June 30, 2010, a 16% increase.
CREDIT QUALITY AND RISK-SHARING OBLIGATIONS
The Company’s AT RISK SERVICING PORTFOLIO, which is the balance of Fannie Mae DUS loans subject to a defined risk-sharing formula, was $7.0 billion at June 30, 2011 compared to $6.4 billion at June 30, 2010, a 10% increase. Credit quality within the Company’s at-risk servicing portfolio remains very strong. There were no NET WRITE-OFFS for the second quarter of 2011.
60 DAY DELINQUENCIES were $9.5 million, or 0.14% of the at risk servicing portfolio at June 30, 2011, compared to $104.2 million, or 1.64% of the at risk servicing portfolio, at June 30, 2010, a 91% decrease. On a quarter-to-quarter basis, 60 day delinquencies decreased 71% from $32.5 million at March 31, 2011 to $9.5 million at June 30, 2011.
PROVISION FOR RISK-SHARING OBLIGATIONS was $1.8 million for the second quarter of 2011 compared to $2.7 million for the second quarter of 2010, a 34% decrease.
YEAR-TO-DATE RESULTS
Loan origination volume for the six months ended June 30, 2011 totaled $1.8 billion compared to $1.7 billion for the same period last year, a 10% increase. Total revenues for the six months ended June 30, 2011 were $71.4 million compared to $63.6 million for the same period last year, a 12% increase. The increase in total revenue is primarily due to the increased loan production, an increase in servicing fees, and a $2.5 million assumption fee received in the first quarter of 2011. Total gains on mortgage banking activities, as a percentage of loan origination volume, for the six months ended June 30, 2011 were 265 basis points, compared to 279 for the period last year. The decrease in total gains on mortgage banking activities as a percentage of loan origination is due to the relative mix of loans originated. Total expenses for the six months ended June 30, 2011 were $42.3 million compared to $41.1 million for the same period last year, a 3% increase. The increase in total expenses was due to general increases resulting from organic growth in the Company and increased costs attributable to being a public registrant. Personnel expense as a percentage of total revenue for the six months ended June 30, 2011 was 31%, compared to 37% for the same period last year. Operating margin was 41% for the six months ended June 30, 2011 compared to 35% for the same period last year. Net income for the six months ended June 30, 2011 was $17.8 million and net income for the same period last year was $22.5 million. Net income for the six months ended June 30, 2011 should be compared to the pro
forma net income of $13.7 million for the same period last year, a 29% increase, due to the changes in corporate tax structure relating to the Company’s initial public offering.
TAX
The Company reported tax expense of $7.1 million for the second quarter of 2011 and recorded no tax expense for the second quarter of 2010. Concurrent with the closing of its initial public offering in December 2010 the Company’s tax status changed from a pass-through entity to a C-Corporation. Prior to its change in tax status the tax liability on the Company’s earnings had been the obligation of its owners, resulting in insignificant corporate federal and state tax expense during the comparative period in 2010. Pro-forma tax expense would have been $4.6 million for the second quarter of 2010 had the Company’s income from operations been subject to corporate federal and state income tax.
CONFERENCE CALL INFORMATION
The Company will host a conference call to discuss the quarterly results on Thursday, August 11, 2011 at 8:30 a.m. EDT. Analysts and investors interested in participating are invited to call (800) 768-2878 from within the United States or (212) 231-2929 from outside the United States. A simultaneous webcast of the call will be available on the Investor Relations section of the Company’s 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. EDT August 11, 2011 through November 9, 2011. Please call (800) 633-8284 from within the United States or (402) 977-9140 from outside the United States with passcode 21534042. An audio replay will also be available on the Investor Relations section of the Company’s website, along with the conference call presentation materials.
About Walker & Dunlop
Through its subsidiary Walker & Dunlop, LLC, Walker & Dunlop, Inc. (NYSE: WD) is one of the leading providers of commercial real estate financial services in the United States, with a primary focus on multifamily lending. As a Fannie Mae DUS™, Freddie Mac Program Plus® and MAP- and LEAN-approved FHA lender, the Multifamily and FHA Finance groups of Walker & Dunlop are focused on lending to property owners, investors, and developers of multifamily properties across the country. The Capital Markets group specializes in financing commercial real estate for owners and investors across the United States. Capital for this financing comes from large institutions such as life insurance companies, commercial banks, CMBS lenders, pension funds, and specialty finance companies. The Principal Investment group provides institutional advisory, asset management, and investment management services with respect to debt, structured debt and equity.
Use of Financial Measures
To supplement the financial statements presented in accordance with United States generally accepted accounting principles (GAAP) for interim financial information, Walker & Dunlop, Inc. uses pro forma net income per diluted share, which is a non-GAAP financial measure. The presentation of this financial information 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. For more information on this non-GAAP financial measure, refer to the reconciliation of income from operations to pro forma net income, included at the base of the Condensed Consolidated Statements of Income. Pro forma net income adjusts income from operations, as reported, by applying the Company’s effective federal and state income tax rates as if it were a corporate tax payer for the comparable periods in 2010. Management uses this non-GAAP measure in comparing Walker & Dunlop Inc.’s operating results with historical performance and believes it provides meaningful and comparable information to management and investors to assist in their review of Walker & Dunlop Inc.’s performance relative to prior periods and its competitors.
Forward Looking Statements
Some of the statements contained in this press release 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 that 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 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. 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 entitled ‘‘Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010.
Contacts:
|
Investors: |
Media: |
|
Claire Harvey |
Susan Weber |
|
Vice President, Investor Relations |
Vice President, Marketing |
|
Phone: 301/634-2143 |
Phone: 301/215-5515 |
|
charvey@walkerdunlop.com |
sweber@walkerdunlop.com |
Walker & Dunlop, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
June 30, 2011 and December 31, 2010
(In thousands, except share and per share data)
|
|
|
June 30 |
|
December 31, |
| ||
|
|
|
2011 |
|
2010 |
| ||
|
|
|
(unaudited) |
|
|
| ||
|
Assets |
|
|
|
|
| ||
|
Cash and cash equivalents |
|
$ |
38,234 |
|
$ |
33,285 |
|
|
Restricted cash |
|
3,008 |
|
4,580 |
| ||
|
Pledged securities, at fair value |
|
16,156 |
|
14,281 |
| ||
|
Loans held for sale |
|
462,930 |
|
302,851 |
| ||
|
Servicing fees and other receivables, net |
|
21,116 |
|
13,829 |
| ||
|
Derivative assets |
|
15,365 |
|
6,354 |
| ||
|
Mortgage servicing rights |
|
118,597 |
|
106,189 |
| ||
|
Intangible assets |
|
1,231 |
|
1,266 |
| ||
|
Other assets |
|
4,153 |
|
2,985 |
| ||
|
Total assets |
|
$ |
680,790 |
|
$ |
485,620 |
|
|
|
|
|
|
|
| ||
|
Liabilities and Stockholders’ Equity |
|
|
|
|
| ||
|
|
|
|
|
|
| ||
|
Liabilities |
|
|
|
|
| ||
|
Accounts payable and other accrued expenses |
|
$ |
58,594 |
|
$ |
57,713 |
|
|
Performance deposits from borrowers |
|
10,598 |
|
5,970 |
| ||
|
Derivative liabilities |
|
5,673 |
|
1,454 |
| ||
|
Guaranty obligation, net of accumulated amortization |
|
9,398 |
|
8,928 |
| ||
|
Allowance for risk-sharing obligations |
|
13,383 |
|
10,873 |
| ||
|
Warehouse notes payable |
|
411,967 |
|
248,419 |
| ||
|
Notes payable |
|
25,669 |
|
27,621 |
| ||
|
Total liabilities |
|
$ |
535,282 |
|
$ |
360,978 |
|
|
|
|
|
|
|
| ||
|
Stockholders’ Equity |
|
|
|
|
| ||
|
Stockholders’ equity: |
|
|
|
|
| ||
|
Preferred shares. Authorized 50,000,000, none issued. |
|
$ |
— |
|
$ |
— |
|
|
Common stock, $0.01 par value. Authorized 200,000,000; issued and outstanding 21,629,463 shares in 2011 and 21,408,171 shares in 2010. |
|
216 |
|
214 |
| ||
|
Additional paid-in capital |
|
80,141 |
|
77,047 |
| ||
|
Retained earnings |
|
65,151 |
|
47,381 |
| ||
|
Total stockholders’ equity |
|
$ |
145,508 |
|
$ |
124,642 |
|
|
Commitments and contingencies |
|
|
|
|
| ||
|
Total liabilities and stockholders’ equity |
|
$ |
680,790 |
|
$ |
485,620 |
|
Walker & Dunlop, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(In thousands, except share and per share data)
(Unaudited)
|
|
|
For the three months ended June 30, |
|
For the six months ended June 30, |
| ||||||||
|
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||
|
Revenues |
|
|
|
|
|
|
|
|
| ||||
|
Gains from mortgage banking activities |
|
$ |
31,289 |
|
$ |
21,173 |
|
$ |
48,116 |
|
$ |
46,213 |
|
|
Servicing fees |
|
8,047 |
|
6,561 |
|
15,760 |
|
12,780 |
| ||||
|
Net warehouse interest income |
|
1,059 |
|
1,606 |
|
1,776 |
|
2,173 |
| ||||
|
Escrow earnings and other interest income |
|
403 |
|
619 |
|
773 |
|
1,114 |
| ||||
|
Other |
|
1,608 |
|
719 |
|
4,978 |
|
1,335 |
| ||||
|
Total revenues |
|
$ |
42,406 |
|
$ |
30,678 |
|
$ |
71,403 |
|
$ |
63,615 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Expenses |
|
|
|
|
|
|
|
|
| ||||
|
Personnel |
|
$ |
12,863 |
|
$ |
8,064 |
|
$ |
22,070 |
|
$ |
23,413 |
|
|
Amortization and depreciation |
|
5,084 |
|
4,719 |
|
9,991 |
|
8,163 |
| ||||
|
Provision for risk-sharing obligations |
|
1,764 |
|
2,656 |
|
2,510 |
|
2,580 |
| ||||
|
Interest expense on corporate debt |
|
214 |
|
344 |
|
466 |
|
697 |
| ||||
|
Other operating expenses |
|
4,263 |
|
3,167 |
|
7,283 |
|
6,293 |
| ||||
|
Total expenses |
|
$ |
24,188 |
|
$ |
18,950 |
|
$ |
42,320 |
|
$ |
41,146 |
|
|
Income from operations |
|
$ |
18,218 |
|
$ |
11,728 |
|
$ |
29,083 |
|
$ |
22,469 |
|
|
Income tax expense |
|
7,087 |
|
— |
|
11,313 |
|
— |
| ||||
|
Net income |
|
$ |
11,131 |
|
$ |
11,728 |
|
$ |
17,770 |
|
$ |
22,469 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Basic and diluted earnings per share |
|
$ |
0.51 |
|
$ |
0.80 |
|
$ |
0.82 |
|
$ |
1.52 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Basic weighted average shares outstanding |
|
21,629,463 |
|
14,741,504 |
|
21,606,233 |
|
14,741,504 |
| ||||
|
Diluted weighted average shares outstanding |
|
21,742,912 |
|
14,741,504 |
|
21,695,826 |
|
14,741,504 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Pro forma net income data |
|
|
|
|
|
|
|
|
| ||||
|
Income from operations, as reported |
|
|
|
$ |
11,728 |
|
|
|
$ |
22,469 |
| ||
|
Pro forma adjustments for income tax expense |
|
|
|
4,562 |
|
|
|
8,740 |
| ||||
|
Pro forma net income |
|
|
|
$ |
7,166 |
|
|
|
$ |
13,729 |
| ||
|
Pro forma basic and diluted earnings per share |
|
|
|
$ |
0.49 |
|
|
|
$ |
0.93 |
| ||
OPERATING DATA
(dollars in thousands)
|
|
|
For the three months ended June 30, |
|
For the six months ended June 30, |
| ||||||||
|
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||
|
Origination Data: |
|
|
|
|
|
|
|
|
| ||||
|
Origination Volumes by Investor |
|
|
|
|
|
|
|
|
| ||||
|
Fannie Mae |
|
$ |
555,263 |
|
$ |
419,291 |
|
$ |
859,088 |
|
$ |
837,472 |
|
|
Freddie Mac |
|
213,025 |
|
118,684 |
|
264,431 |
|
306,264 |
| ||||
|
Ginnie Mae - HUD |
|
282,269 |
|
25,711 |
|
364,585 |
|
394,156 |
| ||||
|
Other (1) |
|
258,825 |
|
108,277 |
|
328,775 |
|
119,636 |
| ||||
|
Total |
|
$ |
1,309,382 |
|
$ |
671,963 |
|
$ |
1,816,879 |
|
$ |
1,657,528 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Key Metrics (as a percentage of total revenues) |
|
|
|
|
|
|
|
|
| ||||
|
Personnel expenses |
|
30 |
% |
26 |
% |
31 |
% |
37 |
% | ||||
|
Other operating expenses |
|
10 |
% |
10 |
% |
10 |
% |
10 |
% | ||||
|
Operating margin |
|
43 |
% |
38 |
% |
41 |
% |
35 |
% | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Key Origination Metrics (as a percentage of origination volume): |
|
|
|
|
|
|
|
|
| ||||
|
Origination related fees |
|
1.17 |
% |
1.32 |
% |
1.25 |
% |
1.50 |
% | ||||
|
Fair value of MSRs created, net |
|
1.22 |
% |
1.83 |
% |
1.40 |
% |
1.29 |
% | ||||
|
|
|
As of June 30, |
| ||||
|
|
|
2011 |
|
2010 |
| ||
|
Servicing Portfolio by Type |
|
|
|
|
| ||
|
Fannie Mae |
|
$ |
9,922,926 |
|
$ |
9,072,264 |
|
|
Freddie Mac |
|
2,556,343 |
|
2,164,930 |
| ||
|
Ginnie Mae - HUD |
|
1,073,400 |
|
466,967 |
| ||
|
Other (1) |
|
1,873,235 |
|
1,988,186 |
| ||
|
Total |
|
$ |
15,425,904 |
|
$ |
13,692,347 |
|
|
|
|
|
|
|
| ||
|
Key Servicing Metrics (end of period): |
|
|
|
|
| ||
|
Weighted-average servicing fee rate |
|
0.22 |
% |
0.19 |
% | ||
(1) CMBS, life insurance companies and commercial banks
KEY CREDIT METRICS
(dollars in thousands)
|
|
|
As of and for the three months |
|
As of and for the six months |
| ||||||||
|
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||
|
Key Credit Metrics |
|
|
|
|
|
|
|
|
| ||||
|
Unpaid principal balance: |
|
|
|
|
|
|
|
|
| ||||
|
Total servicing portfolio |
|
$ |
15,425,904 |
|
$ |
13,692,347 |
|
$ |
15,425,904 |
|
$ |
13,692,347 |
|
|
Fannie Mae servicing portfolio: |
|
|
|
|
|
|
|
|
| ||||
|
Fannie Mae Full Risk |
|
6,122,892 |
|
5,600,846 |
|
6,122,892 |
|
5,600,846 |
| ||||
|
Fannie Mae Modified Risk |
|
2,109,525 |
|
1,548,620 |
|
2,109,525 |
|
1,548,620 |
| ||||
|
Fannie Mae No Risk |
|
1,690,509 |
|
1,922,798 |
|
1,690,509 |
|
1,922,798 |
| ||||
|
Total Fannie Mae |
|
$ |
9,922,926 |
|
$ |
9,072,264 |
|
$ |
9,922,926 |
|
$ |
9,072,264 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Fannie Mae at risk servicing portfolio (1) |
|
$ |
7,019,060 |
|
$ |
6,355,207 |
|
$ |
7,019,060 |
|
$ |
6,355,207 |
|
|
60 Day delinquencies, within at risk portfolio |
|
9,535 |
|
104,173 |
|
9,535 |
|
104,173 |
| ||||
|
At risk loan balances associated with allowance for risk-sharing obligations (2) |
|
$ |
153,746 |
|
$ |
73,677 |
|
$ |
153,746 |
|
$ |
73,677 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Allowance for risk-sharing obligations: |
|
|
|
|
|
|
|
|
| ||||
|
Beginning balance |
|
$ |
11,619 |
|
$ |
3,328 |
|
$ |
10,873 |
|
$ |
5,552 |
|
|
Provision for risk-sharing obligations |
|
1,764 |
|
2,656 |
|
2,510 |
|
2,580 |
| ||||
|
Net write-offs |
|
— |
|
— |
|
— |
|
(2,148 |
) | ||||
|
Ending balance |
|
$ |
13,383 |
|
$ |
5,984 |
|
$ |
13,383 |
|
$ |
5,984 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
60 Day delinquencies as a percentage of the at risk portfolio |
|
0.14 |
% |
1.64 |
% |
0.14 |
% |
1.64 |
% | ||||
|
Provision for risk-sharing as a percentage of the at risk portfolio |
|
0.03 |
% |
0.04 |
% |
0.04 |
% |
0.04 |
% | ||||
|
Allowance for risk-sharing as a percentage of the at risk portfolio |
|
0.19 |
% |
0.09 |
% |
0.19 |
% |
0.09 |
% | ||||
|
Net write-offs as a percentage of the at risk portfolio |
|
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.03 |
% | ||||
|
Allowance for risk-sharing as a percentage of the specifically identified at risk balances |
|
8.70 |
% |
8.12 |
% |
8.70 |
% |
8.12 |
% | ||||
(1) At risk servicing portfolio is defined as the balance of Fannie Mae DUS loans subject to the risk-sharing formula described below. 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, all of the Company’s risk-sharing obligations that we have settled have been from full risk-sharing loans.
(2) There are loans within our servicing portfolio which are greater than 60 days delinquent, and are included in 60 day delinquencies, within at risk portfolio, for which no allowance has been recorded because our estimate of the fair value of the underlying collateral is greater than the unpaid principal balance of the associated loan. Accordingly, we do not anticipate recognizing a loss for these loans upon settlement of our risk-sharing obligation with Fannie Mae.