UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2021

OR

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

For the transition period from                      to

Commission File Number: 001-35000

Walker & Dunlop, Inc.

(Exact name of registrant as specified in its charter)

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

7501 Wisconsin Avenue, Suite 1200E

Bethesda, Maryland 20814

(301) 215-5500

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

Not Applicable

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

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

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 Par Value Per Share	WD	New York Stock Exchange

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

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

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

Large Accelerated Filer ☒  ​ Smaller Reporting Company ☐ Accelerated Filer ☐ ​ Emerging Growth Company ☐ Non-accelerated Filer ☐

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

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

As of October 28, 2021, there were 32,038,216 total shares of common stock outstanding.

Walker & Dunlop, Inc.
Form 10-Q
INDEX

		Page
PART I	FINANCIAL INFORMATION	3
Item 1.	Financial Statements	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	54
PART II	OTHER INFORMATION	54
Item 1.	Legal Proceedings	54
Item 1A.	Risk Factors	54
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3.	Defaults Upon Senior Securities	56
Item 4.	Mine Safety Disclosures	56
Item 5.	Other Information	56
Item 6.	Exhibits	57
	Signatures	58

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

		September 30, 2021	December 31, 2020
Assets
Cash and cash equivalents	$	318,188	$	321,097
Restricted cash		34,875		19,432
Pledged securities, at fair value		148,774		137,236
Loans held for sale, at fair value		2,711,900		2,449,198
Loans held for investment, net		233,685		360,402
Mortgage servicing rights		929,825		862,813
Goodwill and other intangible assets		341,703		250,838
Derivative assets		85,486		49,786
Receivables, net		106,228		65,735
Other assets		206,198		134,438
Total assets	$	5,116,862	$	4,650,975
Liabilities
Warehouse notes payable	$	2,848,579	$	2,517,156
Note payable		289,763		291,593
Allowance for risk-sharing obligations		61,607		75,313
Guaranty obligation, net		49,060		52,306
Derivative liabilities		13,263		5,066
Other liabilities		470,654		513,319
Total liabilities	$	3,732,926	$	3,454,753
Stockholders' Equity
Preferred stock (authorized 50,000; none issued)	$	—	$	—
Common stock ($0.01 par value; authorized 200,000 shares; issued and outstanding 31,194 shares at September 30, 2021 and 30,678 shares at December 31, 2020)		312		307
Additional paid-in capital ("APIC")		271,562		241,004
Accumulated other comprehensive income ("AOCI")		2,737		1,968
Retained earnings		1,090,506		952,943
Total stockholders’ equity	$	1,365,117	$	1,196,222
Noncontrolling interests		18,819		—
Total equity	$	1,383,936	$	1,196,222
Commitments and contingencies (NOTES 2 and 9)		—		—
Total liabilities and equity	$	5,116,862	$	4,650,975

See accompanying notes to condensed consolidated financial statements.

3

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income

(In thousands, except per share data)

(Unaudited)

	For the three months ended				For the nine months ended
	September 30,				September 30,
	2021		2020		2021		2020
Revenues
Loan origination and debt brokerage fees, net	$	123,242	$	83,825	$	306,593	$	238,105
Fair value of expected net cash flows from servicing, net		89,482		78,065		209,266		236,434
Servicing fees		70,628		60,265		205,658		172,561
Property sales broker fees		33,677		6,756		65,173		19,928
Net warehouse interest income		5,583		7,558		14,768		22,454
Escrow earnings and other interest income		2,032		2,275		5,972		15,689
Other revenues		21,646		8,272		44,559		28,827
Total revenues	$	346,290	$	247,016	$	851,989	$	733,998
Expenses
Personnel	$	170,181	$	114,548	$	407,817	$	310,993
Amortization and depreciation		53,498		41,919		148,879		123,998
Provision (benefit) for credit losses		1,266		3,483		(14,380)		32,029
Interest expense on corporate debt		1,766		1,786		5,291		6,724
Other operating expenses		24,836		16,165		62,171		47,324
Total expenses	$	251,547	$	177,901	$	609,778	$	521,068
Income from operations	$	94,743	$	69,115	$	242,211	$	212,930
Income tax expense		22,953		15,925		56,311		50,076
Net income before noncontrolling interests	$	71,790	$	53,190	$	185,900	$	162,854
Less: net income (loss) from noncontrolling interests		69		—		69		(224)
Walker & Dunlop net income	$	71,721	$	53,190	$	185,831	$	163,078
Net change in unrealized gains (losses) on pledged available-for-sale securities, net of taxes		159		1,219		769		731
Walker & Dunlop comprehensive income	$	71,880	$	54,409	$	186,600	$	163,809
Basic earnings per share (NOTE 10)	$	2.23	$	1.69	$	5.80	$	5.21
Diluted earnings per share (NOTE 10)	$	2.21	$	1.66	$	5.73	$	5.11
Basic weighted-average shares outstanding		31,064		30,560		30,969		30,379
Diluted weighted-average shares outstanding		31,459		31,074		31,367		30,995

See accompanying notes to condensed consolidated financial statements.

4

Walker & Dunlop, Inc. and Subsidiaries

Consolidated Statements of Changes in Equity

(In thousands, except per share data)

(Unaudited)

	For the three and nine months ended September 30, 2021
	Common Stock							Retained		Noncontrolling		Total Stockholders'
	Shares	Amount		APIC		AOCI		Earnings		Interests		Equity
Balance at December 31, 2020	30,678	$	307	$	241,004	$	1,968	$	952,943	$	—	$	1,196,222
Walker & Dunlop net income	—		—		—		—		58,052		—		58,052
Other comprehensive income (loss), net of tax	—		—		—		(158)		—		—		(158)
Stock-based compensation - equity classified	—		—		7,836		—		—		—		7,836
Issuance of common stock in connection with equity compensation plans	430		4		12,602		—		—		—		12,606
Repurchase and retirement of common stock	(131)		(1)		(13,373)		—		—		—		(13,374)
Cash dividends paid ($0.50 per common share)	—		—		—		—		(16,052)		—		(16,052)
Balance at March 31, 2021	30,977	$	310	$	248,069	$	1,810	$	994,943	$	—	$	1,245,132
Walker & Dunlop net income	—		—		—		—		56,058		—		56,058
Other comprehensive income (loss), net of tax	—		—		—		768		—		—		768
Stock-based compensation - equity classified	—		—		7,892		—		—		—		7,892
Issuance of common stock in connection with equity compensation plans	64		1		530		—		—		—		531
Repurchase and retirement of common stock	(7)		(1)		(815)		—		—		—		(816)
Cash dividends paid ($0.50 per common share)	—		—		—		—		(16,070)		—		(16,070)
Balance at June 30, 2021	31,034	$	310	$	255,676	$	2,578	$	1,034,931	$	—	$	1,293,495
Walker & Dunlop net income	—		—		—		—		71,721		—		71,721
Net income (loss) from noncontrolling interests	—		—		—		—		—		69		69
Other comprehensive income (loss), net of tax	—		—		—		159		—		—		159
Stock-based compensation - equity classified	—		—		10,426		—		—		—		10,426
Issuance of common stock in connection with equity compensation plans	124		2		1,706		—		—		—		1,708
Issuance of common stock in connection with acquisitions	50		1		5,249								5,250
Repurchase and retirement of common stock	(14)		(1)		(1,495)		—		—		—		(1,496)
Noncontrolling interests from acquisitions	—		—		—		—		—		18,750		18,750
Cash dividends paid ($0.50 per common share)	—		—		—		—		(16,146)		—		(16,146)
Balance at September 30, 2021	31,194	$	312	$	271,562	$	2,737	$	1,090,506	$	18,819	$	1,383,936

5

Walker & Dunlop, Inc. and Subsidiaries

Consolidated Statements of Changes in Equity

(In thousands, except per share data)

(Unaudited)

	For the three and nine months ended September 30, 2020
		Stockholders' Equity
	Common Stock							Retained		Noncontrolling		Total
	Shares	Amount		APIC		AOCI		Earnings		Interests		Equity
Balance at December 31, 2019	30,035	$	300	$	237,877	$	737	$	796,775	$	6,596	$	1,042,285
Cumulative-effect adjustment for adoption of ASU 2016-13, net of tax	—		—		—		—		(23,678)		—		(23,678)
Walker & Dunlop net income	—		—		—		—		47,829		—		47,829
Net loss from noncontrolling interests	—		—		—		—		—		(224)		(224)
Contributions from noncontrolling interests											675		675
Other comprehensive income (loss), net of tax	—		—		—		(1,918)		—		—		(1,918)
Stock-based compensation - equity classified	—		—		5,061		—		—		—		5,061
Issuance of common stock in connection with equity compensation plans	675		7		11,362		—		—		—		11,369
Repurchase and retirement of common stock	(380)		(4)		(18,293)		—		(8,440)		—		(26,737)
Cash dividends paid ($0.36 per common share)	—		—		—		—		(11,347)		—		(11,347)
Balance at March 31, 2020	30,330	$	303	$	236,007	$	(1,181)	$	801,139	$	7,047	$	1,043,315
Walker & Dunlop net income	—		—		—		—		62,059		—		62,059
Purchase of noncontrolling interests	—		—		(3,295)		—		—		(7,047)		(10,342)
Other comprehensive income (loss), net of tax	—		—		—		1,430		—		—		1,430
Stock-based compensation - equity classified	—		—		5,592		—		—		—		5,592
Issuance of common stock in connection with equity compensation plans	50		1		195		—		—		—		196
Repurchase and retirement of common stock	(11)		—		(405)		—		—		—		(405)
Cash dividends paid ($0.36 per common share)	—		—		—		—		(11,294)		—		(11,294)
Balance at June 30, 2020	30,369	$	304	$	238,094	$	249	$	851,904	$	—	$	1,090,551
Walker & Dunlop net income	—		—		—		—		53,190		—		53,190
Purchase of noncontrolling interests	—		—		(21,635)		—		—		—		(21,635)
Other comprehensive income (loss), net of tax	—		—		—		1,219		—		—		1,219
Stock-based compensation - equity classified	—		—		6,598		—		—		—		6,598
Issuance of common stock in connection with equity compensation plans and purchase of noncontrolling interests	574		5		11,923		—		—		—		11,928
Repurchase and retirement of common stock	(324)		(3)		(4,678)		—		(10,702)		—		(15,383)
Cash dividends paid ($0.36 per common share)	—		—		—		—		(11,343)		—		(11,343)
Balance at September 30, 2020	30,619	$	306	$	230,302	$	1,468	$	883,049	$	—	$	1,115,125

See accompanying notes to condensed consolidated financial statements.

6

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	For the nine months ended September 30,
	2021		2020
Cash flows from operating activities
Net income before noncontrolling interests	$	185,900	$	162,854
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Gains attributable to the fair value of future servicing rights, net of guaranty obligation		(209,266)		(236,434)
Change in the fair value of premiums and origination fees		6,909		(24,393)
Amortization and depreciation		148,879		123,998
Provision (benefit) for credit losses		(14,380)		32,029
Originations of loans held for sale		(12,761,432)		(15,923,846)
Proceeds from transfers of loans held for sale		12,459,511		13,517,432
Other operating activities, net		(13,100)		51,492
Net cash provided by (used in) operating activities	$	(196,979)	$	(2,296,868)
Cash flows from investing activities
Capital expenditures	$	(5,507)	$	(2,050)
Purchases of equity-method investments		(8,029)		(974)
Purchases of pledged available-for-sale ("AFS") securities		(7,250)		(14,130)
Proceeds from prepayment and sale of pledged AFS securities		28,781		15,531
Investments in joint ventures		(58,065)		(16,215)
Distributions from joint ventures		34,012		12,677
Acquisitions, net of cash received		(62,208)		(46,784)
Originations of loans held for investment		(269,737)		(36,950)
Principal collected on loans held for investment		397,328		236,519
Net cash provided by (used in) investing activities	$	49,325	$	147,624
Cash flows from financing activities
Borrowings (repayments) of warehouse notes payable, net	$	333,887	$	2,497,627
Borrowings of interim warehouse notes payable		154,661		34,028
Repayments of interim warehouse notes payable		(157,277)		(109,860)
Repayments of note payable		(2,234)		(2,234)
Repayment of secured borrowings		(73,312)		—
Proceeds from issuance of common stock		5,256		12,587
Repurchase of common stock		(15,686)		(42,525)
Purchase of noncontrolling interests		—		(10,400)
Cash dividends paid		(48,268)		(33,984)
Payment of contingent consideration		—		(1,641)
Debt issuance costs		(2,762)		(2,340)
Net cash provided by (used in) financing activities	$	194,265	$	2,341,258
Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents (NOTE 2)	$	46,611	$	192,014
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period		358,002		136,566
Total of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period	$	404,613	$	328,580
Supplemental Disclosure of Cash Flow Information:
Cash paid to third parties for interest	$	24,906	$	33,116
Cash paid for income taxes		38,728		21,437

See accompanying notes to condensed consolidated financial statements.

7

NOTE 1—ORGANIZATION AND BASIS OF PRESENTATION

These financial statements represent the condensed consolidated financial position and results of operations of Walker & Dunlop, Inc. and its subsidiaries. Unless the context otherwise requires, references to “we,” “us,” “our,” “Walker & Dunlop” and the “Company” mean the Walker & Dunlop consolidated companies. The statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they may not include certain financial statement disclosures and other information required for annual financial statements. The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”). In the opinion of management, all adjustments considered necessary for a fair presentation of the results for the Company in the interim periods presented have been included. Results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or thereafter.

Walker & Dunlop, Inc. is a holding company and conducts the majority of its operations through Walker & Dunlop, LLC, the operating company. Walker & Dunlop is one of the leading commercial real estate services and finance companies in the United States. The Company originates, sells, and services a range of commercial real estate debt and equity financing products, provides multifamily property sales brokerage and valuation services, engages in commercial real estate investment management activities, provides housing market research, and delivers real estate-related investment banking and advisory services.

Through its agency lending products, the Company originates and sells loans pursuant to the programs of the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac” and, together with Fannie Mae, the “GSEs”), the Government National Mortgage Association (“Ginnie Mae”), and the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (together with Ginnie Mae, “HUD”). Through its debt brokerage products, the Company brokers, and in some cases services, loans for various life insurance companies, commercial banks, commercial mortgage-backed securities issuers, and other institutional investors, in which cases the Company does not fund the loan.

The Company also provides a variety of commercial real estate debt and equity solutions through its principal lending and investing products, including interim loans, and preferred and joint venture equity on commercial real estate properties. Interim loans on multifamily properties are offered (i) through the Company and recorded on the Company’s balance sheet (the “Interim Loan Program”) and (ii) through a joint venture with an affiliate of Blackstone Mortgage Trust, Inc., in which the Company holds a 15% ownership interest (the “Interim Program JV”). Interim loans on all commercial real estate property types are also offered through separate accounts managed by the Company’s subsidiary, Walker & Dunlop Investment Partners, Inc. (“WDIP”). Preferred and joint venture equity products on commercial real estate properties are offered through funds managed by WDIP.

The Company brokers the sale of multifamily properties through its wholly owned subsidiary, Walker & Dunlop Investment Sales, LLC. In some cases, the Company also provides the debt financing for the property sale.

The Company has a joint venture, branded as “Apprise by Walker & Dunlop,” with an international technology services company to offer automated multifamily valuation and appraisal services (the “Appraisal JV”). The Appraisal JV leverages technology and data science to dramatically improve the consistency, transparency, and speed of multifamily appraisals in the U.S. through the licensing of the partner’s technology and leveraging of the Company’s expertise in the commercial real estate industry. The Company owns a 50% interest in the Appraisal JV and accounts for the interest as an equity-method investment. The operations of the Appraisal JV for the three and nine months ended September 30, 2021 and 2020 were immaterial.

During the third quarter of 2021, the Company acquired certain assets and assumed certain liabilities of Zelman Holdings, LLC (“Zelman”) through a 75% interest in a newly formed entity, which does business as Zelman & Associates. Zelman & Associates provides housing market research and real estate-related investment banking and advisory services.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation—The condensed consolidated financial statements include the accounts of Walker & Dunlop, Inc., its wholly owned subsidiaries, and its majority owned subsidiaries. All intercompany balances and transactions are eliminated in consolidation. The Company consolidates entities in which it has a controlling financial interest based on either the variable interest entity (“VIE”) or the voting

8

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

Subsequent Events—The Company has evaluated the effects of all events that have occurred subsequent to September 30, 2021. The Company has made certain disclosures in the notes to the condensed consolidated financial statements of events that have occurred subsequent to September 30, 2021. There have been no other material subsequent events that would require recognition in the condensed consolidated financial statements.

Use of Estimates—The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, allowance for risk-sharing obligations, capitalized mortgage servicing rights, derivative instruments, and the disclosure of contingent liabilities. Actual results may vary from these estimates.

Derivative Assets and Liabilities—Loan commitments that meet the definition of a derivative are recorded at fair value on the Condensed Consolidated Balance Sheets upon the executions of the commitments to originate a loan with a borrower and to sell the loan to an investor, with a corresponding amount recognized as revenue in the Condensed Consolidated Statements of Income. The estimated fair value of loan commitments includes (i) the fair value of loan origination fees and premiums on the anticipated sale of the loan, net of co-broker fees (included in Derivative assets on the Condensed Consolidated Balance Sheets and as a component of Loan origination and debt brokerage fees, net in the Condensed Consolidated Statements of Income), (ii) the fair value of the expected net cash flows associated with the servicing of the loan, net of any estimated net future cash flows associated with the guaranty obligation (included in Derivative assets on the Condensed Consolidated Balance Sheets and in Fair value of expected net cash flows from servicing, net in the Condensed Consolidated Statements of Income), and (iii) the effects of interest rate movements between the trade date and balance sheet date. Loan commitments are generally derivative assets but can become derivative liabilities if the effects of the interest rate movement between the trade date and the balance sheet date are greater than the combination of (i) and (ii) above. Forward sale commitments that meet the definition of a derivative are recorded as either derivative assets or derivative liabilities depending on the effects of the interest rate movements between the trade date and the balance sheet date. Adjustments to the fair value are reflected as a component of income within Loan origination and debt brokerage fees, net in the Condensed Consolidated Statements of Income.

Co-broker fees, which are netted against Loan origination and debt brokerage fees, net in the Condensed Consolidated Statements of Income, were $6.3 million and $5.1 million for the three months ended September 30, 2021 and 2020, respectively, and $15.2 million and $20.4 million for the nine months ended September 30, 2021 and 2020, respectively.

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

As of September 30, 2021, Loans held for investment, net consisted of nine loans with an aggregate $238.7 million of unpaid principal balance less $0.9 million of net unamortized deferred fees and costs and $4.1 million of allowance for loan losses. As of December 31, 2020, Loans held for investment, net consisted of 18 loans with an aggregate $366.3 million of unpaid principal balance less $1.1 million of net unamortized deferred fees and costs and $4.8 million of allowance for loan losses.

During the third quarter of 2018, the Company transferred a portfolio of participating interests in loans held for investment to a third party that was paid off in the second quarter of 2021. The Company accounted for the transfer as a secured borrowing, with the aggregate unpaid principal balance of the loans of $81.5 million presented as a component of Loans held for investment, net and the secured borrowing of $73.3 million presented within Other liabilities on the Condensed Consolidated Balance Sheets as of December 31, 2020.

9

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

The loss rate for the forecast period was 15 basis points and 36 basis points as of September 30, 2021 and December 31, 2020, respectively. The loss rate for the remaining period until maturity was nine basis points as of both September 30, 2021 and December 31, 2020.

One loan held for investment with an unpaid principal balance of $14.7 million that was originated in 2017 was delinquent and on non-accrual status as of September 30, 2021 and December 31, 2020. The Company had a $3.7 million reserve for this loan based on its collateral fair value as of September 30, 2021 and December 31, 2020 and has not recorded any interest related to this loan since it went on non-accrual status in 2019. All other loans were current as of September 30, 2021 and December 31, 2020. The amortized cost basis of loans that were current as of September 30, 2021 and December 31, 2020 was $223.1 million and $350.5 million, respectively. As of September 30, 2021, $195.7 million and $28.3 million of the loans that were current were originated in 2021 and 2019, respectively. No loans originated in 2020 were outstanding as of September 30, 2021. Prior to 2019, the Company had not experienced any delinquencies related to loans held for investment.

Provision (Benefit) for Credit Losses—The Company records the income statement impact of the changes in the allowance for loan losses and the allowance for risk-sharing obligations within Provision (benefit) for credit losses in the Condensed Consolidated Statements of Income. NOTE 4 contains additional discussion related to the allowance for risk-sharing obligations. Provision (benefit) for credit losses consisted of the following activity for the three and nine months ended September 30, 2021 and 2020:

	For the three months ended				For the nine months ended
	September 30,				September 30,
Components of Provision (Benefit) for Credit Losses (in thousands)	2021		2020		2021		2020
Provision (benefit) for loan losses	$	(12)	$	2,179	$	(674)	$	3,107
Provision (benefit) for risk-sharing obligations		1,278		1,304		(13,706)		28,922
Provision (benefit) for credit losses	$	1,266	$	3,483	$	(14,380)	$	32,029

Net Warehouse Interest Income—The Company presents warehouse interest income net of warehouse interest expense. Warehouse interest income is the interest earned from loans held for sale and loans held for investment. Generally, a substantial portion of the Company’s loans is financed with matched borrowings under one of its warehouse facilities. The remaining portion of loans not funded with matched borrowings is financed with the Company’s own cash. The Company also occasionally fully funds a small number of loans held for sale or loans held for investment with its own cash. Warehouse interest expense is incurred on borrowings used to fund loans solely while they are held for sale or for investment. Warehouse interest income and expense are earned or incurred on loans held for sale after a loan is closed and before a loan is sold. Warehouse interest income and expense are earned or incurred on loans held for investment after a loan is closed and before a loan is repaid. Included in Net warehouse interest income for the three and nine months ended September 30, 2021 and 2020 are the following components:

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	For the three months ended				For the nine months ended
	September 30,				September 30,
Components of Net Warehouse Interest Income (in thousands)	2021		2020		2021		2020
Warehouse interest income - loans held for sale	$	11,334	$	12,649	$	28,315	$	37,150
Warehouse interest expense - loans held for sale		(7,611)		(7,780)		(19,249)		(24,475)
Net warehouse interest income - loans held for sale	$	3,723	$	4,869	$	9,066	$	12,675
Warehouse interest income - loans held for investment	$	3,108	$	4,015	$	9,298	$	15,083
Warehouse interest expense - loans held for investment		(1,248)		(1,326)		(3,596)		(5,304)
Warehouse interest income - secured borrowings		—		869		1,748		2,564
Warehouse interest expense - secured borrowings		—		(869)		(1,748)		(2,564)
Net warehouse interest income - loans held for investment	$	1,860	$	2,689	$	5,702	$	9,779
Total net warehouse interest income	$	5,583	$	7,558	$	14,768	$	22,454

Statement of Cash Flows—For presentation in the Condensed Consolidated Statements of Cash Flows, the Company considers pledged cash and cash equivalents (as detailed in NOTE 9) to be restricted cash and restricted cash equivalents. The following table presents a reconciliation of the total cash, cash equivalents, restricted cash, and restricted cash equivalents as presented in the Condensed Consolidated Statements of Cash Flows to the related captions in the Condensed Consolidated Balance Sheets as of September 30, 2021 and 2020 and December 31, 2020 and 2019.

	September 30,				December 31,
(in thousands)	2021		2020		2020		2019
Cash and cash equivalents	$	318,188	$	294,873	$	321,097	$	120,685
Restricted cash		34,875		12,383		19,432		8,677
Pledged cash and cash equivalents (NOTE 9)		51,550		21,324		17,473		7,204
Total cash, cash equivalents, restricted cash, and restricted cash equivalents	$	404,613	$	328,580	$	358,002	$	136,566

        Income Taxes—The Company records the realizable excess tax benefits from stock-based compensation as a reduction to income tax expense. The realizable excess tax benefits were $2.1 million and $3.0 million for the three months ended September 30, 2021 and 2020, respectively, and $7.3 million and $6.0 million during the nine months ended September 30, 2021 and 2020, respectively.

Contracts with Customers—A majority of the Company’s revenues are derived from the following sources, all of which are excluded from the accounting provisions applicable to contracts with customers: (i) financial instruments, (ii) transfers and servicing, (iii) derivative transactions, and (iv) investments in debt securities/equity-method investments. The remaining portion of revenues is derived from contracts with customers. The Company’s contracts with customers do not require significant judgment or material estimates that affect the determination of the transaction price (including the assessment of variable consideration), the allocation of the transaction price to performance obligations, and the determination of the timing of the satisfaction of performance obligations. Additionally, the earnings process for the Company’s contracts with customers is not complicated and is generally completed in a short period of time. The following table presents information about the Company’s contracts with customers for the three and nine months ended September 30, 2021 and 2020:  

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	For the three months ended				For the nine months ended
	September 30,				September 30,
Description (in thousands)	2021		2020		2021		2020		Statement of income line item
Certain loan origination fees	$	46,527	$	10,731	$	113,650	$	40,769	Loan origination and debt brokerage fees, net
Property sales broker fees		33,677		6,756		65,173		19,928	Property sales broker fees
Investment management fees, application fees, subscription revenues, and other		10,936		4,532		25,114		14,632	Other revenues
Total revenues derived from contracts with customers	$	91,140	$	22,019	$	203,937	$	75,329

Litigation—In the ordinary course of business, the Company may be party to various claims and litigation, none of which the Company believes is material. The Company cannot predict the outcome of any pending litigation and may be subject to consequences that could include fines, penalties, and other costs, and the Company’s reputation and business may be impacted. The Company believes that any liability that could be imposed on the Company in connection with the disposition of any pending lawsuits would not have a material adverse effect on its business, results of operations, liquidity, or financial condition.

Recently Adopted and Recently Announced Accounting Pronouncements—There have been no material changes to the accounting policies discussed in NOTE 2 of the Company’s 2020 Form 10-K. There are no recently announced but not yet effective accounting pronouncements that are expected to have a material impact to the Company as of September 30, 2021.

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

NOTE 3—MORTGAGE SERVICING RIGHTS

The fair value of the mortgage servicing rights (“MSRs”) as of September 30, 2021 and December 31, 2020 was $1.2 billion and $1.1 billion, respectively. The Company uses a discounted static cash flow valuation approach, and the key economic assumption is the discount rate. For example, see the following sensitivities:

The impact of a 100-basis point increase in the discount rate at September 30, 2021 would be a decrease in the fair value of $37.2 million to the MSRs outstanding as of September 30, 2021.

The impact of a 200-basis point increase in the discount rate at September 30, 2021 would be a decrease in the fair value of $72.0 million to the MSRs outstanding as September 30, 2021.

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

Activity related to MSRs for the three and nine months ended September 30, 2021 and 2020 follows:

	For the three months ended				For the nine months ended
	September 30,				September 30,
Roll Forward of MSRs (in thousands)	2021		2020		2021		2020
Beginning balance	$	915,519	$	778,269	$	862,813	$	718,799
Additions, following the sale of loan		70,095		71,485		224,035		215,288
Amortization		(44,402)		(38,319)		(130,868)		(110,243)

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Pre-payments and write-offs		(11,387)		(5,780)		(26,155)		(18,189)
Ending balance	$	929,825	$	805,655	$	929,825	$	805,655

The following table summarizes the gross value, accumulated amortization, and net carrying value of the Company’s MSRs as of September 30, 2021 and December 31, 2020:

Components of MSRs (in thousands)	September 30, 2021		December 31, 2020
Gross value	$	1,521,190	$	1,394,901
Accumulated amortization		(591,365)		(532,088)
Net carrying value	$	929,825	$	862,813

The expected amortization of MSRs held in the Condensed Consolidated Balance Sheet as of September 30, 2021 is shown in the table below. Actual amortization may vary from these estimates.

	Expected
(in thousands)	Amortization
Three Months Ending December 31,
2021	$	43,927
Year Ending December 31,
2022	$	167,770
2023		155,112
2024		134,111
2025		113,562
2026		93,833
Thereafter		221,510
Total	$	929,825

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

When a loan is sold under the Fannie Mae DUS program, the Company typically agrees to guarantee a portion of the ultimate loss incurred on the loan should the borrower fail to perform. The compensation for this risk is a component of the servicing fee on the loan. The guaranty is in force while the loan is outstanding. The Company does not provide a guaranty for any other loan product it sells or brokers. Activity related to the guaranty obligation for the three and nine months ended September 30, 2021 and 2020 is presented in the following table:

	For the three months ended				For the nine months ended
	September 30,				September 30,
Roll Forward of Guaranty Obligation (in thousands)	2021		2020		2021		2020
Beginning balance	$	50,369	$	54,872	$	52,306	$	54,695
Additions, following the sale of loan		1,449		876		4,023		4,346
Amortization		(2,758)		(2,274)		(7,269)		(7,035)
Other		—		—		—		1,468
Ending balance	$	49,060	$	53,474	$	49,060	$	53,474

Substantially all loans sold under the Fannie Mae DUS program contain partial or full risk-sharing guaranties that are based on the credit performance of the loan. The Company records an estimate of the loss reserve for CECL for all loans in its Fannie Mae at-risk servicing portfolio and presents this loss reserve as Allowance for risk-sharing obligations on the Condensed Consolidated Balance Sheets. The Company utilizes the weighted-average remaining maturity (“WARM”) method to calculate the CECL reserve and one year for the reasonable and supportable forecast period (the “forecast period”), as the Company currently believes forecasts beyond one year are inherently less reliable. The WARM method uses an average annual charge-off rate that contains loss content over multiple vintages and loan terms and is used as a foundation for estimating the CECL reserve. The Company reverts to a historical loss rate over a one-year period. For all remaining years until

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maturity, the Company uses the historical weighted-average annual charge-off rate to estimate losses. The average annual charge-off rate is applied to the unpaid principal balance over the contractual term, further adjusted for estimated prepayments and amortization to arrive at the CECL reserve for the entire current portfolio.

Activity related to the allowance for risk-sharing obligations for the three and nine months ended September 30, 2021 and 2020 follows:

	For the three months ended				For the nine months ended
	September 30,				September 30,
Roll Forward of Allowance for Risk-Sharing Obligations (in thousands)	2021		2020		2021		2020
Beginning balance	$	60,329	$	69,191	$	75,313	$	11,471
Adjustment related to adoption of CECL		—		—		—		31,570
Provision (benefit) for risk-sharing obligations		1,278		1,304		(13,706)		28,922
Write-offs		—		—		—		—
Other		—		—		—		(1,468)
Ending balance	$	61,607	$	70,495	$	61,607	$	70,495

As a result of the onset of the pandemic and the resulting forecasts for significant unemployment rates during 2020, the Company’s loss rate for the forecast period was seven basis points as of September 30, 2020, resulting in the substantial provision for risk-sharing obligations for the nine months ended September 30, 2020 and an increase in the allowance for risk-sharing obligations as of September 30, 2020 as seen above. During the first three quarters of 2021, economic conditions have improved significantly compared to the same period in 2020, with reported and forecast unemployment rates significantly better compared to both December 31, 2020 and September 30, 2020. In response to improving unemployment statistics and the current and expected overall health of the multifamily market, the Company adjusted the loss rate for the forecast period from six basis points as of December 31, 2020 to three basis points as of both June 30, 2021 and September 30, 2021. The decrease in the loss rate resulted in the benefit for risk-sharing obligations seen above for the nine months ended September 30, 2021. The provision for risk-sharing obligations for the three months ended September 30, 2021 was a result of growth in the at-risk servicing portfolio. For the remaining expected life of the portfolio, the Company reverted over a one-year period on a straight-line basis to a historical loss rate of just under two basis points for all periods shown in the roll forward above.

The calculated CECL reserve for the Company’s $47.0 billion at-risk Fannie Mae servicing portfolio as of September 30, 2021 was $54.0 million compared to $67.0 million as of December 31, 2020. The weighted-average remaining life of the at-risk Fannie Mae servicing portfolio as of September 30, 2021 was 7.5 years. The at-risk Fannie Mae servicing portfolio does not include at-risk loans held for sale.

Two loans that defaulted in 2019 had aggregate collateral-based reserves of $7.6 million and $8.3 million as of September 30, 2021 and December 31, 2020, respectively.

As of September 30, 2021, the maximum quantifiable contingent liability associated with the Company’s guaranties for the at-risk loans serviced under the Fannie Mae DUS agreement was $9.8 billion. The maximum quantifiable contingent liability is not representative of the actual loss the Company would incur. The Company would be liable for this amount only if all of the loans it services for Fannie Mae, for which the Company retains some risk of loss, were to default and all of the collateral underlying these loans were determined to be without value at the time of settlement.

NOTE 5—SERVICING

The total unpaid principal balance of loans the Company was servicing for various institutional investors was $113.9 billion as of September 30, 2021 compared to $107.2 billion as of December 31, 2020.

As of September 30, 2021 and December 31, 2020, custodial escrow accounts relating to loans serviced by the Company totaled $3.0 billion and $3.1 billion, respectively. These amounts are not included in the Condensed Consolidated Balance Sheets as such amounts are not Company assets; however, the Company is entitled to earn interest income on these escrow balances, presented as a component of Escrow earnings and other interest income in the Condensed Consolidated Statements of Income. Certain cash deposits at other financial institutions

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exceed the Federal Deposit Insurance Corporation insured limits. The Company places these deposits with financial institutions that meet the requirements of the Agencies and where it believes the risk of loss to be minimal.

NOTE 6—WAREHOUSE NOTES PAYABLE

As of September 30, 2021, to provide financing to borrowers under the Agencies’ programs, the Company has committed and uncommitted warehouse lines of credit in the amount of $4.1 billion with certain national banks and a $1.5 billion uncommitted facility with Fannie Mae (collectively, the “Agency Warehouse Facilities”). In support of these Agency Warehouse Facilities, the Company has pledged substantially all of its loans held for sale under the Company’s approved programs. The Company’s ability to originate mortgage loans for sale depends upon its ability to secure and maintain these types of short-term financings on acceptable terms.

Additionally, as of September 30, 2021, the Company has arranged for warehouse lines of credit in the amount of $0.5 billion with certain national banks to assist in funding loans held for investment under the Interim Loan Program (“Interim Warehouse Facilities”). The Company has pledged substantially all of its loans held for investment against these Interim Warehouse Facilities. The Company’s ability to originate loans held for investment depends upon its ability to secure and maintain these types of short-term financings on acceptable terms.  

The maximum amount and outstanding borrowings under Warehouse notes payable at September 30, 2021 follows:  

	September 30, 2021
(dollars in thousands)	Committed		Uncommitted		Total Facility		Outstanding
Facility(1)	Amount		Amount		Capacity		Balance		Interest rate(2)
Agency Warehouse Facility #1	$	425,000	$	—	$	425,000	$	277,872	30-day LIBOR plus 1.30%
Agency Warehouse Facility #2		700,000		300,000		1,000,000		346,047	30-day LIBOR plus 1.30%
Agency Warehouse Facility #3		600,000		265,000		865,000		378,624	30-day LIBOR plus 1.30%
Agency Warehouse Facility #4		350,000		—		350,000		136,616	30-day LIBOR plus 1.30%
Agency Warehouse Facility #5		—		1,000,000		1,000,000		885,308	30-day LIBOR plus 1.45%
Agency Warehouse Facility #6		150,000		100,000		250,000		118,124	30-day LIBOR plus 1.40%
Agency Warehouse Facility #7		150,000		50,000		200,000		92,293	30-day LIBOR plus 1.30%
Total National Bank Agency Warehouse Facilities	$	2,375,000	$	1,715,000	$	4,090,000	$	2,234,884
Fannie Mae repurchase agreement, uncommitted line and open maturity		—		1,500,000		1,500,000		482,861
Total Agency Warehouse Facilities	$	2,375,000	$	3,215,000	$	5,590,000	$	2,717,745
Interim Warehouse Facility #1	$	135,000	$	—	$	135,000	$	—	30-day LIBOR plus 1.90%
Interim Warehouse Facility #2		100,000		—		100,000		—	30-day LIBOR plus 1.65% to 2.00%
Interim Warehouse Facility #3		200,000		—		200,000		111,817	30-day LIBOR plus 1.75% to 3.25%
Interim Warehouse Facility #4		19,810		—		19,810		19,810	30-day LIBOR plus 3.00%
Total National Bank Interim Warehouse Facilities	$	454,810	$	—	$	454,810	$	131,627
Debt issuance costs		—		—		—		(793)
Total warehouse facilities	$	2,829,810	$	3,215,000	$	6,044,810	$	2,848,579

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

(2) Interest rate presented does not include the effect of interest rate floors.

The following amendments to the Agency Warehouse Facilities were executed in the normal course of business to support the growth of the Company’s Agency business.  

During the second quarter of 2021, the Company executed an amendment to the agreement related to Agency Warehouse Facility #1 that decreased the borrowing rate to 30-day London Interbank Offered Rate (“LIBOR”) plus 130 basis points from 30-day LIBOR plus 140 basis points and decreased the 30-day LIBOR floor to zero from 25 basis points. In October 2021, the Company executed an amendment to the agreement that extended the maturity date to December 24, 2021. No other material modifications have been made to the agreement during 2021.

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During the second quarter of 2021, the Company executed amendments to the agreement related to Agency Warehouse Facility #2 that extended the maturity date to April 14, 2022 and decreased the borrowing rate to 30-day LIBOR plus 130 basis points from 30-day LIBOR plus 140 basis points. No other material modifications have been made to the agreement during 2021.

During the second quarter of 2021, the Company executed amendments to the agreement related to Agency Warehouse Facility #3 that extended the maturity date to May 14, 2022, increased the borrowing rate to 30-day LIBOR plus 130 basis points from 30-day LIBOR plus 115 basis points, and decreased the 30-day LIBOR floor to zero basis points from 50 basis points. No other material modifications have been made to the agreement during 2021.

During the second quarter of 2021, the Company executed an amendment to the agreement related to Agency Warehouse Facility #4 that extended the maturity date to June 22, 2022, decreased the borrowing rate to 30-day LIBOR plus 130 basis points from 30-day LIBOR plus 140 basis points, and decreased the 30-day LIBOR floor to five basis points from 25 basis points. No other material modifications have been made to the agreement during 2021.

During the third quarter of 2021, the Company executed amendments to the agreement related to Agency Warehouse Facility #5 that extended the maturity date to September 15, 2022. No other material modifications have been made to the agreement during 2021.

During the first quarter of 2021, the Company executed an agreement to establish Agency Warehouse Facility #6. The warehouse facility has a $150.0 million maximum committed borrowing capacity, provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans, and matures on March 5, 2022. Advances are made at 100% of the loan balance, and the borrowings under the warehouse agreement bear interest at a rate of 30-day LIBOR plus 140 basis points with a 30-day LIBOR floor of 25 basis points. In addition to the committed borrowing capacity, the agreement provides $100.0 million of uncommitted borrowing capacity that bears interest at the same rate as the committed facility. The facility agreement requires the Company’s compliance with the same financial covenants as provided in the facility agreement for Agency Warehouse Facility #1, as described in the Company’s 2020 Form 10-K. No material modifications have been made to the agreement during 2021.

During the third quarter of 2021, the Company executed an agreement to establish Agency Warehouse Facility #7. The warehouse facility has a $150.0 million maximum committed borrowing capacity, provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans, and matures on August 24, 2022. Advances are made at 100% of the loan balance, and the borrowings under the warehouse agreement bear interest at a rate of 30-day LIBOR plus 130 basis points. In addition to the committed borrowing capacity, the agreement provides $50.0 million of uncommitted borrowing capacity that bears interest at the same rate as the committed facility. The facility agreement requires the Company’s compliance with the same financial covenants as provided in the facility agreement for Agency Warehouse Facility #1, as described in the Company’s 2020 Form 10-K. No material modifications have been made to the agreement during 2021.

During the second quarter of 2021, the Company executed amendments to the agreement related to Interim Warehouse Facility #1 that extended the maturity date to May 14, 2022 and decreased the 30-day LIBOR floor to zero basis points from 50 basis points. No other material modifications have been made to the agreement during 2021.

During the third quarter of 2021, the Company executed an amendment to the agreement related to Interim Warehouse Facility #3 that extended the maturity date to September 29, 2022, increased the committed borrowing capacity to $200.0 million, and eliminated the uncommitted borrowing capacity. No other material modifications have been made to the agreement during 2021.

In October 2021, the Company executed an amendment related to Interim Warehouse Facility #4 that extended the stated maturity date to October 1, 2022. No other material modifications have been made to the agreement during 2021.

The warehouse notes payable are subject to various financial covenants, all of which the Company was in compliance with as of September 30, 2021.

Interest on the Company’s warehouse notes payable is based on 30-day LIBOR. As a result of the expected transition from LIBOR, the Company has updated its debt agreements to include fallback language to govern the transition from 30-day LIBOR to an alternative reference rate.  

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NOTE 7—GOODWILL AND OTHER INTANGIBLE ASSETS

A summary of the Company’s goodwill for the nine months ended September 30, 2021 and 2020 follows:

	For the nine months ended
	September 30,
Roll Forward of Goodwill (in thousands)	2021		2020
Beginning balance	$	248,958	$	180,424
Additions from acquisitions		84,291		68,534
Impairment		—		—
Ending balance	$	333,249	$	248,958

The additions to goodwill from acquisitions during 2021 shown in the table above during the nine months ended September 30, 2021 relate to the following immaterial acquisitions:

Detail of Acquisition Activity (in thousands)
	Acquisition		Purchase Consideration								Assets	Liabilities		Noncontrolling		Goodwill
Acquisition	Date	Cash		Stock		Contingent		Total			Acquired	Assumed		Interest		Recognized
Acquisition #1	Q1 2021	$	7,506	$	—	$	5,229	$	12,735	$	504	$	—	$	—	$	12,231
Acquisition #2	Q2 2021		3,000		—		2,275		5,275		—		—		—		5,275
Acquisition #3	Q3 2021		53,420		5,250		—		58,670		16,521		5,886		18,750		66,785
Total		$	63,926	$	5,250	$	7,504	$	76,680	$	17,025	$	5,886	$	18,750	$	84,291

The assets acquired and liabilities assumed presented above were recorded at fair value. Acquisition #1 relates to a property sales brokerage company. Acquisition #2 relates to a company with a technology platform that streamlines and accelerates the quoting, processing, and underwriting of small-balance multifamily loans while providing the borrower with a web-based, user-friendly interface. The acquisition is part of the Company’s overall strategy to significantly increase its small-balance lending volumes using technology. Acquisition #3 relates to the purchase of a 75% controlling interest in Zelman, which specializes in housing market research and real estate-related investment banking and advisory services. The assets acquired for Acquisition #3 include $8.2 million of intangible assets. As of September 30, 2021, the Company completed the purchase accounting for Acquisitions #1 and #2. The purchase accounting for Acquisition #3 is pending the finalization of working capital adjustments in the fourth quarter of 2021, which are expected to be immaterial.

The stock consideration shown above is a non-cash transaction not impacting the amount of cash consideration paid on the Condensed Consolidated Statements of Cash Flows.

As of September 30, 2021 and December 31, 2020, the remaining balance of intangible assets from acquisitions totaled $8.5 million and $1.9 million, respectively. As of September 30, 2021, the weighted-average period over which the Company expects these intangible assets to be amortized is 5.4 years.

A summary of the Company’s contingent consideration liabilities, which are included in Other liabilities in the Condensed Consolidated Balance Sheets, as of and for the nine months ended September 30, 2021 and 2020 follows:

	For the nine months ended
	September 30,
Roll Forward of Contingent Consideration Liabilities (in thousands)	2021		2020
Beginning balance	$	28,829	$	5,752
Additions		7,504		27,645
Accretion		1,405		826
Payments		(6,080)		(5,800)
Ending balance	$	31,658	$	28,423

The contingent consideration liabilities above relate to (i) acquisitions of debt brokerage companies and an investment sales brokerage company completed over the past several years, including 2021, (ii) the purchase of noncontrolling interests in 2020 and (iii) the aforementioned

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technology company acquired in 2021. The contingent consideration for each of the acquisitions may be earned over various lengths of time after each acquisition, with a maximum earn-out period of five years, provided certain revenue targets and other metrics have been met. The last of the earn-out periods related to the contingent consideration ends in the first quarter of 2026. In each case, the Company estimated the initial fair value of the contingent consideration using a probability-based, discounted cash flow model.

The contingent consideration included for the acquisitions and purchase of noncontrolling interests is non-cash and thus not reflected in the amount of cash consideration paid on the Condensed Consolidated Statements of Cash Flows.

NOTE 8—FAIR VALUE MEASUREMENTS

The Company uses valuation techniques that are consistent with the market approach, the income approach, and/or the cost approach to measure assets and liabilities that are measured at fair value. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, accounting standards establish a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

● Level 1—Financial assets and liabilities whose values are based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

● Level 2—Financial assets and liabilities whose values are based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, discount rates, volatilities, prepayment speeds, earnings rates, credit risk, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

● Level 3—Financial assets and liabilities whose values are based on inputs that are both unobservable and significant to the overall valuation.

The Company's MSRs are measured at fair value at inception, and thereafter on a nonrecurring basis. That is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value measurement when there is evidence of impairment and for disclosure purposes (NOTE 3). The Company's MSRs do not trade in an active, open market with readily observable prices. While sales of multifamily MSRs do occur on occasion, precise terms and conditions vary with each transaction and are not readily available. Accordingly, the estimated fair value of the Company’s MSRs was developed using discounted cash flow models that calculate the present value of estimated future net servicing income. The model considers contractually specified servicing fees, prepayment assumptions, estimated revenue from escrow accounts, costs to service, and other economic factors. The Company periodically reassesses and adjusts, when necessary, the underlying inputs and assumptions used in the model to reflect observable market conditions and assumptions that market participants consider in valuing MSR assets. During the first quarter of 2021, the Company reduced the discount rate and escrow earnings rate assumptions for its capitalized MSRs based on market participant data. MSRs are carried at the lower of amortized cost or fair value.

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

● Derivative Instruments—The derivative positions consist of interest rate lock commitments with borrowers and forward sale agreements to the Agencies. The fair value of these instruments is estimated using a discounted cash flow model developed based on changes in the applicable U.S. Treasury rate and other observable market data. The value was determined after considering the potential impact of collateralization, adjusted to reflect nonperformance risk of both the counterparty and the Company, and are classified within Level 3 of the valuation hierarchy.

● Loans Held for Sale—All loans held for sale presented in the Condensed Consolidated Balance Sheets are reported at fair value. The Company determines the fair value of the loans held for sale using discounted cash flow models that incorporate quoted

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observable inputs from market participants such as changes in the U.S. Treasury rate. Therefore, the Company classifies these loans held for sale as Level 2.

● Pledged Securities—Investments in money market funds are valued using quoted market prices from recent trades. Therefore, the Company classifies this portion of pledged securities as Level 1. The Company determines the fair value of its AFS investments in Agency debt securities using discounted cash flows that incorporate observable inputs from market participants and then compares the fair value to broker estimates of fair value. Consequently, the Company classifies this portion of pledged securities as Level 2.

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020, segregated by the level of the valuation inputs within the fair value hierarchy used to measure fair value:

							Balance as of
(in thousands)	Level 1		Level 2		Level 3		Period End
September 30, 2021
Assets
Loans held for sale	$	—	$	2,711,900	$	—	$	2,711,900
Pledged securities		51,550		97,224		—		148,774
Derivative assets		—		—		85,486		85,486
Total	$	51,550	$	2,809,124	$	85,486	$	2,946,160
Liabilities
Derivative liabilities	$	—	$	—	$	13,263	$	13,263
Total	$	—	$	—	$	13,263	$	13,263
December 31, 2020
Assets
Loans held for sale	$	—	$	2,449,198	$	—	$	2,449,198
Pledged securities		17,473		119,763		—		137,236
Derivative assets		—		—		49,786		49,786
Total	$	17,473	$	2,568,961	$	49,786	$	2,636,220
Liabilities
Derivative liabilities	$	—	$	—	$	5,066	$	5,066
Total	$	—	$	—	$	5,066	$	5,066

There were no transfers between any of the levels within the fair value hierarchy during the nine months ended September 30, 2021.

Derivative instruments (Level 3) are outstanding for short periods of time (generally less than 60 days). A roll forward of derivative instruments is presented below for the three and nine months ended September 30, 2021 and 2020:

	Level 3 Fair Value Measurements:
	Derivative Instruments
	For the three months ended				For the nine months ended
	September 30,				September 30,
Derivative Assets and Liabilities, net (in thousands)	2021		2020		2021		2020
Beginning balance	$	6,340	$	13,346	$	44,720	$	15,532
Settlements		(146,841)		(141,804)		(488,356)		(456,639)
Realized gains recorded in earnings(1)		140,501		128,458		443,636		441,107
Unrealized gains (losses) recorded in earnings(1)		72,223		33,432		72,223		33,432
Ending balance	$	72,223	$	33,432	$	72,223	$	33,432

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

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The following table presents information about significant unobservable inputs used in the recurring measurement of the fair value of the Company’s Level 3 assets and liabilities as of September 30, 2021:

	Quantitative Information about Level 3 Fair Value Measurements
(in thousands)	Fair Value		Valuation Technique	Unobservable Input (1)	Input Value (1)
Derivative assets	$	85,486	Discounted cash flow	Counterparty credit risk	—
Derivative liabilities	$	13,263	Discounted cash flow	Counterparty credit risk	—

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

The carrying amounts and the fair values of the Company's financial instruments as of September 30, 2021 and December 31, 2020 are presented below:

	September 30, 2021				December 31, 2020
	Carrying		Fair		Carrying		Fair
(in thousands)	Amount		Value		Amount		Value
Financial Assets:
Cash and cash equivalents	$	318,188	$	318,188	$	321,097	$	321,097
Restricted cash		34,875		34,875		19,432		19,432
Pledged securities		148,774		148,774		137,236		137,236
Loans held for sale		2,711,900		2,711,900		2,449,198		2,449,198
Loans held for investment, net		233,685		234,996		360,402		362,586
Derivative assets		85,486		85,486		49,786		49,786
Total financial assets	$	3,532,908	$	3,534,219	$	3,337,151	$	3,339,335
Financial Liabilities:
Derivative liabilities	$	13,263	$	13,263	$	5,066	$	5,066
Secured borrowings		—		—		73,314		73,314
Warehouse notes payable		2,848,579		2,849,372		2,517,156		2,518,101
Note payable		289,763		292,539		291,593		294,773
Total financial liabilities	$	3,151,605	$	3,155,174	$	2,887,129	$	2,891,254

The following methods and assumptions were used for recurring fair value measurements as of September 30, 2021 and December 31, 2020.

Cash and Cash Equivalents and Restricted Cash—The carrying amounts approximate fair value because of the short maturity of these instruments (Level 1).

Pledged Securities—Consist of cash, highly liquid investments in money market accounts invested in government securities, and investments in Agency debt securities. The investments of the money market funds typically have maturities of 90 days or less and are valued using quoted market prices from recent trades. The fair value of the Agency debt securities incorporates the contractual cash flows of the security discounted at market-rate, risk-adjusted yields.

Loans Held for Sale—Consist of originated loans that are generally transferred or sold within 60 days from the date that a mortgage loan is funded and are valued using discounted cash flow models that incorporate observable prices from market participants.

Derivative Instruments—Consist of interest rate lock commitments and forward sale agreements. These instruments are valued using discounted cash flow models developed based on changes in the U.S. Treasury rate and other observable market data. The value is determined after considering the potential impact of collateralization, adjusted to reflect nonperformance risk of both the counterparty and the Company.

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Fair Value of Derivative Instruments and Loans Held for Sale—In the normal course of business, the Company enters into contractual commitments to originate and sell multifamily mortgage loans at fixed prices with fixed expiration dates. The commitments become effective when the borrowers "lock-in" a specified interest rate within time frames established by the Company. All mortgagors are evaluated for creditworthiness prior to the extension of the commitment. Market risk arises if interest rates move adversely between the time of the "lock-in" of rates by the borrower and the sale date of the loan to an investor.

To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, the Company enters into a sale commitment with the investor simultaneously with the rate lock commitment with the borrower. The sale contract with the investor locks in an interest rate and price for the sale of the loan. The terms of the contract with the investor and the rate lock with the borrower are matched in substantially all respects, with the objective of eliminating interest rate risk to the extent practical. Sale commitments with the investors have an expiration date that is longer than our related commitments to the borrower to allow, among other things, for the closing of the loan and processing of paperwork to deliver the loan into the sale commitment.

Both the rate lock commitments to borrowers and the forward sale contracts to buyers are undesignated derivatives and, accordingly, are marked to fair value through Loan origination and debt brokerage fees, net in the Condensed Consolidated Statements of Income. The fair value of the Company's rate lock commitments to borrowers and loans held for sale and the related input levels includes, as applicable:

● the estimated gain of the expected loan sale to the investor (Level 2);

● the expected net cash flows associated with servicing the loan, net of any guaranty obligations retained (Level 2);

● the effects of interest rate movements between the date of the rate lock and the balance sheet date (Level 2); and

● the nonperformance risk of both the counterparty and the Company (Level 3; derivative instruments only).

The estimated gain considers the origination fees the Company expects to collect upon loan closing (derivative instruments only) and premiums the Company expects to receive upon sale of the loan (Level 2). The fair value of the expected net cash flows associated with servicing the loan is calculated pursuant to the valuation techniques applicable to the fair value of future servicing, net at loan sale (Level 2).

To calculate the effects of interest rate movements, the Company uses applicable published U.S. Treasury prices, and multiplies the price movement between the rate lock date and the balance sheet date by the notional loan commitment amount (Level 2).

The fair value of the Company's forward sales contracts to investors considers effects of interest rate movements between the trade date and the balance sheet date (Level 2). The market price changes are multiplied by the notional amount of the forward sales contracts to measure the fair value.

The fair value of the Company’s interest rate lock commitments and forward sales contracts is adjusted to reflect the risk that the agreement will not be fulfilled. The Company’s exposure to nonperformance in interest rate lock commitments and forward sale contracts is represented by the contractual amount of those instruments. Given the credit quality of our counterparties and the short duration of interest rate lock commitments and forward sale contracts, the risk of nonperformance by the Company’s counterparties has historically been minimal (Level 3). The following table presents the components of fair value and other relevant information associated with the Company’s derivative instruments and loans held for sale as of September 30, 2021 and December 31, 2020:

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			Fair Value Adjustment Components						Balance Sheet Location
													Fair Value
	Notional or		Estimated				Total						Adjustment
	Principal		Gain		Interest Rate		Fair Value		Derivative		Derivative		to Loans
(in thousands)	Amount		on Sale		Movement		Adjustment		Assets		Liabilities		Held for Sale
September 30, 2021
Rate lock commitments	$	1,979,035	$	52,838	$	(31,638)	$	21,200	$	32,111	$	(10,911)	$	—
Forward sale contracts		4,667,125		—		51,023		51,023		53,375		(2,352)		—
Loans held for sale		2,688,090		43,195		(19,385)		23,810		—		—		23,810
Total			$	96,033	$	—	$	96,033	$	85,486	$	(13,263)	$	23,810
December 31, 2020
Rate lock commitments	$	1,374,784	$	45,581	$	(1,697)	$	43,884	$	43,895	$	(11)	$	—
Forward sale contracts		3,760,953		—		836		836		5,891		(5,055)		—
Loans held for sale		2,386,169		62,167		861		63,028		—		—		63,028
Total			$	107,748	$	—	$	107,748	$	49,786	$	(5,066)	$	63,028

NOTE 9—FANNIE MAE COMMITMENTS AND PLEDGED SECURITIES

Fannie Mae DUS Related Commitments—Commitments for the origination and subsequent sale and delivery of loans to Fannie Mae represent those mortgage loan transactions where the borrower has locked an interest rate and scheduled closing, and the Company has entered into a mandatory delivery commitment to sell the loan to Fannie Mae. As discussed in NOTE 8, the Company accounts for these commitments as derivatives recorded at fair value.

The Company is generally required to share the risk of any losses associated with loans sold under the Fannie Mae DUS program. The Company is required to secure these obligations by assigning restricted cash balances and securities to Fannie Mae, which are classified as Pledged securities, at fair value on the Condensed Consolidated Balance Sheets. The amount of collateral required by Fannie Mae is a formulaic calculation at the loan level and considers the balance of the loan, the risk level of the loan, the age of the loan, and the level of risk-sharing. Fannie Mae requires restricted liquidity for Tier 2 loans of 75 basis points, which is funded over a 48-month period that begins upon delivery of the loan to Fannie Mae. Pledged securities held in the form of money market funds holding U.S. Treasuries are discounted 5%, and Agency mortgage-backed securities (“Agency MBS”) are discounted 4% for purposes of calculating compliance with the restricted liquidity requirements. As seen below, the Company held the majority of its pledged securities in Agency MBS as of September 30, 2021. The majority of the loans for which the Company has risk sharing are Tier 2 loans.

The Company is in compliance with the September 30, 2021 collateral requirements as outlined above. As of September 30, 2021, reserve requirements for the DUS loan portfolio will require the Company to fund $64.2 million in additional restricted liquidity over the next 48 months, assuming no further principal paydowns, prepayments, or defaults within the at-risk portfolio. Fannie Mae has in the past reassessed the DUS Capital Standards and may make changes to these standards in the future. The Company generates sufficient cash flow from its operations to meet these capital standards and does not expect any future changes to have a material impact on its future operations; however, any future increases to collateral requirements may adversely impact the Company’s available cash.

Fannie Mae has established benchmark standards for capital adequacy and reserves the right to terminate the Company's servicing authority for all or some of the portfolio if, at any time, it determines that the Company's financial condition is not adequate to support its obligations under the DUS agreement. The Company is required to maintain acceptable net worth as defined in the agreement, and the Company satisfied the requirements as of September 30, 2021. The net worth requirement is derived primarily from unpaid principal balances on Fannie Mae loans and the level of risk sharing. At September 30, 2021, the net worth requirement was $250.2 million, and the Company's net worth, as defined in the requirements, was $1.1 billion, as measured at our wholly owned operating subsidiary, Walker & Dunlop, LLC. As of September 30, 2021, the Company was required to maintain at least $49.5 million of liquid assets to meet operational liquidity requirements for Fannie Mae, Freddie Mac, HUD, and Ginnie Mae, and the Company had operational liquidity, as defined in the requirements, of $254.7 million as of September 30, 2021, as measured at our wholly owned operating subsidiary, Walker & Dunlop, LLC.

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Pledged Securities, at Fair Value—Pledged securities, at fair value consisted of the following balances as of September 30, 2021 and 2020 and December 31, 2020 and 2019:

	September 30,				December 31,
Pledged Securities (in thousands)	2021		2020		2020		2019
Restricted cash	$	10,596	$	13,370	$	4,954	$	2,150
Money market funds		40,954		7,954		12,519		5,054
Total pledged cash and cash equivalents	$	51,550	$	21,324	$	17,473	$	7,204
Agency MBS		97,224		112,971		119,763		114,563
Total pledged securities, at fair value	$	148,774	$	134,295	$	137,236	$	121,767

The information in the preceding table is presented to reconcile beginning and ending cash, cash equivalents, restricted cash, and restricted cash equivalents in the Condensed Consolidated Statements of Cash Flows as more fully discussed in NOTE 2.

The Company’s investments included within Pledged securities, at fair value consist primarily of money market funds and Agency debt securities. The investments in Agency debt securities consist of multifamily Agency MBS and are all accounted for as AFS securities. When the fair value of Agency MBS is lower than the carrying value, the Company assesses whether an allowance for credit losses is necessary. The Company does not record an allowance for credit losses for its AFS securities, including those whose fair value is less than amortized cost, when the AFS securities are issued by the GSEs. The contractual cash flows of these AFS securities are guaranteed by the GSEs, which are government-sponsored enterprises under the conservatorship of the Federal Housing Finance Agency. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of these securities. The Company does not intend to sell any of the Agency MBS whose fair value is less than the carrying value, nor does the Company believe that it is more likely than not that it would be required to sell these investments before recovery of their amortized cost basis, which may be at maturity. The following table provides additional information related to the Agency MBS as of September 30, 2021 and December 31, 2020:

Fair Value and Amortized Cost of Agency MBS (in thousands)	September 30, 2021		December 31, 2020
Fair value	$	97,224	$	119,763
Amortized cost		93,570		117,136
Total gains for securities with net gains in AOCI		3,796		2,669
Total losses for securities with net losses in AOCI		(142)		(42)
Fair value of securities with unrealized losses		2,139		12,267

None of the pledged securities has been in a continuous unrealized loss position for more than 12 months.

The following table provides contractual maturity information related to Agency MBS. The money market funds invest in short-term Federal Government and Agency debt securities and have no stated maturity date.

	September 30, 2021
Detail of Agency MBS Maturities (in thousands)	Fair Value		Amortized Cost
Within one year	$	—	$	—
After one year through five years		5,720		5,697
After five years through ten years		61,939		61,056
After ten years		29,565		26,817
Total	$	97,224	$	93,570

NOTE 10—EARNINGS PER SHARE AND STOCKHOLDERS’ EQUITY

Earnings per share (“EPS”) is calculated under the two-class method. The two-class method allocates all earnings (distributed and undistributed) to each class of common stock and participating securities based on their respective rights to receive dividends. The Company grants share-based awards to various employees and nonemployee directors under the 2020 Equity Incentive Plan that entitle recipients to receive nonforfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of common stock. These unvested awards meet the definition of participating securities.

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The following table presents the calculation of basic and diluted EPS for the three and nine months ended September 30, 2021 and 2020 under the two-class method. Participating securities were included in the calculation of diluted EPS using the two-class method, as this computation was more dilutive than the treasury-stock method.

	For the three months ended September 30,				For the nine months ended September 30,
EPS Calculations (in thousands, except per share amounts)	2021		2020		2021		2020
Calculation of basic EPS
Walker & Dunlop net income	$	71,721	$	53,190	$	185,831	$	163,078
Less: dividends and undistributed earnings allocated to participating securities		2,364		1,528		6,163		4,923
Net income applicable to common stockholders	$	69,357	$	51,662	$	179,668	$	158,155
Weighted-average basic shares outstanding		31,064		30,560		30,969		30,379
Basic EPS	$	2.23	$	1.69	$	5.80	$	5.21
Calculation of diluted EPS
Net income applicable to common stockholders	$	69,357	$	51,662	$	179,668	$	158,155
Add: reallocation of dividends and undistributed earnings based on assumed conversion		23		19		57		75
Net income allocated to common stockholders	$	69,380	$	51,681	$	179,725	$	158,230
Weighted-average basic shares outstanding		31,064		30,560		30,969		30,379
Add: weighted-average diluted non-participating securities		395		514		398		616
Weighted-average diluted shares outstanding		31,459		31,074		31,367		30,995
Diluted EPS	$	2.21	$	1.66	$	5.73	$	5.11

The assumed proceeds used for calculating the dilutive impact of restricted stock awards under the treasury-stock method includes the unrecognized compensation costs associated with the awards. For the three and nine months ended September 30, 2021, an immaterial number of average restricted shares were excluded from the computation of diluted earnings per share under the treasury method. For the three and nine months ended September 30, 2020, 175 thousand and 142 thousand average restricted shares, respectively, were excluded. These average restricted shares were excluded from the computation of diluted earnings per share under the treasury method because the effect would have been anti-dilutive, as the grant date market price of the restricted shares was greater than the average market price of the Company’s shares of common stock during the periods presented. For the nine months ended September 30, 2021, the Company issued shares of common stock totaling $9.6 million to settle compensation liabilities; these are non-cash transactions that do not impact the amount of cash paid on the Condensed Consolidated Statements of Cash Flows.

The Company’s Board of Directors approved a stock repurchase program that permits the repurchase of up to $75.0 million of the Company’s common stock over a 12-month period beginning on February 12, 2021. During the first three quarters of 2021, the Company did not repurchase any shares of its common stock under the share repurchase program. As of September 30, 2021, the Company had $75.0 million of authorized share repurchase capacity remaining under the 2021 share repurchase program.

During each of the first three quarters of 2021, the Company paid a dividend of $0.50 per share. On November 3, 2021, the Company’s Board of Directors declared a dividend of $0.50 per share for the fourth quarter of 2021. The dividend will be paid on November 29, 2021 to all holders of record of the Company’s restricted and unrestricted common stock as of November 19, 2021.

The Company’s Term Loan contains direct restrictions on the amount of dividends the Company may pay, and the warehouse debt facilities and agreements with the Agencies contain minimum equity, liquidity, and other capital requirements that indirectly restrict the amount of dividends the Company may pay. The Company does not believe that these restrictions currently limit the amount of dividends the Company can pay for the foreseeable future.

NOTE 11—PENDING ACQUISITION ACTIVITIES

During the third quarter of 2021, the Company entered into a purchase agreement to acquire Alliant Capital, Ltd. and certain of its affiliates (“Alliant”). Alliant provides alternative investment management services focused on the affordable housing sector through low-income housing tax credit syndication, joint venture development, and community preservation fund management.

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Under the terms of the purchase agreement, the Company will acquire Alliant at a total enterprise value of $696 million, comprised of:

● $361 million of cash and the assumption of Alliant’s securitized debt facility, which had an outstanding balance of $145 million as of October 4, 2021, is rated A2 by Moody’s and carries a 4.75% interest rate (with the value of cash subject to adjustment based on the actual balance of the assumed securitized debt facility at closing and for customary net working capital);

● $90 million of Walker & Dunlop common stock, with the number of shares to be determined at closing; and

● $100 million of earn-out structured as participating interest in future cash flows over the next four years

The transaction is expected to close during the fourth quarter of 2021. Closing is subject to certain regulatory approvals and consents of Alliant’s investors and lender partners.

To allow it to fund the acquisition of Alliant, the Company is currently in the process of refinancing and upsizing its Note payable (“existing term loan”) to $600 million. The Company has received commitments well in excess of the $600 million targeted amount. The new term loan is expected to close during the fourth quarter of 2021 simultaneously with the close of the acquisition of Alliant. The proceeds from the new term loan will be used to repay the Company’s existing term loan and to fund a significant amount of the $361 million cash payment due at the closing of the acquisition of Alliant. The new term loan is expected to have a term of seven years.

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

The following discussion should be read in conjunction with the historical financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q (“Form 10-Q”). The following discussion contains, in addition to historical information, forward-looking statements that include risks and uncertainties. Our actual results may differ materially from those expressed or contemplated in those forward-looking statements as a result of certain factors, including those set forth under the headings “Forward-Looking Statements” and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”).

Forward-Looking Statements

Some of the statements in this Quarterly Report on Form 10-Q of Walker & Dunlop, Inc. and subsidiaries (the “Company,” “Walker & Dunlop,” “we,” or “us”), may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans, or intentions.

The forward-looking statements contained in this Form 10-Q reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions, and changes in circumstances that may cause actual results to differ significantly from those expressed or contemplated in any forward-looking statement. Statements regarding the following subjects, among others, may be forward-looking:

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

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

● our growth strategy;

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

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

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

● availability of and our ability to attract and retain qualified personnel and our ability to develop and retain relationships with borrowers, key principals, and lenders;

● degree and nature of our competition;

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

● our ability to comply with the laws, rules, and regulations applicable to us, including additional regulatory requirements for broker-dealer and other financial services firms that became applicable to us upon our acquisition of Zelman (as defined below);

● our ability to complete the acquisition of Alliant (as defined below) and successfully integrate Alliant’s employees and businesses;

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

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

● our ability to prevent, detect, and mitigate cybersecurity risks; and

● other risks and uncertainties associated with our business described in our 2020 Form 10-K and our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the Securities and Exchange Commission.

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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 “Risk Factors.”

Business

We are one of the leading commercial real estate services and finance companies in the United States, with a primary focus on multifamily lending, debt brokerage, and property sales. We were the largest lender to multifamily properties and the fourth largest overall commercial real estate lender in the country in 2020. We leverage our technological resources and investments to (i) provide an enhanced experience for our customers, (ii) identify refinancing and other financial opportunities for our existing customers, and (iii) identify potential new customers. We believe our people, brand, and technology provide us with a competitive advantage, as evidenced by the fact that 76% of refinancing volumes in the quarter were new loans to us and 27% of total transaction volumes were from new customers.

We have been in business for more than 80 years; a Fannie Mae Delegated Underwriting and Servicing™ ("DUS") lender since 1988, when the DUS program began; a lender with the Government National Mortgage Association (“Ginnie Mae”) and the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (together with Ginnie Mae, “HUD”) since acquiring a HUD license in 2009; and a Freddie Mac Multifamily approved seller/servicer for Conventional Loans. We originate, sell, and service a range of multifamily and other commercial real estate financing products, provide multifamily property sales brokerage and appraisal services, and engage in commercial real estate investment management activities. We provide housing market research and real estate-related investment banking and advisory services, which provides our clients and us with market insight into many areas of the housing market. Our clients are owners and developers of multifamily properties and other commercial real estate assets across the country, some of whom are the largest owners and developers in the industry. We originate and sell multifamily loans through the programs of Fannie Mae, Freddie Mac, and HUD (collectively, the “Agencies”). We retain servicing rights and asset management responsibilities on substantially all loans that we originate for the Agencies’ programs. We are approved as a Fannie Mae DUS lender nationally, an approved Freddie Mac Multifamily Optigo® Seller/Servicer (“Freddie Mac lender”) nationally for Conventional, Seniors Housing, Targeted Affordable Housing, and small balance loans, a HUD Multifamily Accelerated Processing (“MAP”) lender nationally, a HUD Section 232 LEAN (“LEAN”) lender nationally, and a Ginnie Mae issuer. We broker, and occasionally service, loans for many life insurance companies, commercial banks, and other institutional investors, in which cases we do not fund the loan but rather act as a loan broker. We also underwrite, service, and asset-manage interim loans. Most of these interim loans are closed through a joint venture or through separate accounts managed by our investment management subsidiary, Walker & Dunlop Investment Partners, Inc. (“WDIP”). Those interim loans not closed by the joint venture or WDIP are originated by us and presented on our balance sheet as loans held for investment.

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

Agency Lending and Loan Servicing

We recognize loan origination and debt brokerage fees, net and the fair value of expected net cash flows from servicing, net from our lending with the Agencies when we commit to both originate a loan with a borrower and sell that loan to an investor. The loan origination and debt brokerage fees, net and the fair value of expected net cash flows from servicing, net for these transactions reflect the fair value attributable to loan origination fees, premiums on the sale of loans, net of any co-broker fees, and the fair value of the expected net cash flows associated with servicing the loans, net of any guaranty obligations retained.

We generally fund our Agency loan products through warehouse facility financing and sell them to investors in accordance with the related loan sale commitment, which we obtain concurrent with rate lock. Proceeds from the sale of the loan are used to pay off the warehouse borrowing. The sale of the loan is typically completed within 60 days after the loan is closed. We earn net warehouse interest income from loans held for sale while they are outstanding equal to the difference between the note rate on the loan and the cost of borrowing of the warehouse facility.

We retain servicing rights and asset management responsibilities on substantially all of our Agency loan products that we originate and sell and generate cash revenues from the fees we receive for servicing the loans, from the interest income on escrow deposits held on behalf of

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borrowers, and from other ancillary fees relating to servicing the loans. Servicing fees, which are based on servicing fee rates set at the time an investor agrees to purchase the loan and on the unpaid principal balance of the loan, are generally paid monthly for the duration of the loan. Our Fannie Mae and Freddie Mac servicing arrangements generally provide for prepayment protection to us in the event of a voluntary prepayment. For loans serviced outside of Fannie Mae and Freddie Mac, we typically do not have similar prepayment protections. For most loans we service under the Fannie Mae DUS program, we are required to advance the principal and interest payments and guarantee fees for four months should a borrower cease making payments under the terms of their loan, including while that loan is in forbearance. After advancing for four months, we may request reimbursement by Fannie Mae for the principal and interest advances, and Fannie Mae will reimburse us for these advances within 60 days of the request. Under the Ginnie Mae program, we are obligated to advance the principal and interest payments and guarantee fees until the HUD loan is brought current, fully paid or assigned to HUD. We are eligible to assign a loan to HUD once it is in default for 30 days. If the loan is not brought current, or the loan otherwise defaults, we are not reimbursed for our advances until such time as we assign the loan to HUD or work out a payment modification for the borrower. For loans in default, we may repurchase those loans out of the Ginnie Mae security, at which time our advance requirements cease and we may then modify and resell the loan or assign the loan back to HUD and be reimbursed for our advances. We are not obligated to make advances on the loans we service under the Freddie Mac Optigo® program, and our bank and life insurance company servicing agreements.

Our loan commitments and loans held for sale are currently not exposed to unhedged interest rate risk during the loan commitment, closing, and delivery process. The sale or placement of each loan to an investor is negotiated at the same time we establish the coupon rate for the loan. We also seek to mitigate the risk of a loan not closing by collecting good faith deposits from the borrower. The deposit is returned to the borrower only once the loan is closed. Any potential loss from a catastrophic change in the property condition while the loan is held for sale using warehouse facility financing is mitigated through property insurance equal to replacement cost. We are also protected contractually from an investor’s failure to purchase the loan. We have experienced an immaterial number of failed deliveries in our history and have incurred immaterial losses on such failed deliveries.

We have risk-sharing obligations on substantially all loans we originate under the Fannie Mae DUS program. When a Fannie Mae DUS loan is subject to full risk-sharing, we absorb losses on the first 5% of the unpaid principal balance of a loan at the time of loss settlement, and above 5% we share a percentage of the loss with Fannie Mae, with our maximum loss capped at 20% of the original unpaid principal balance of the loan (subject to doubling or tripling if the loan does not meet specific underwriting criteria or if the loan defaults within 12 months of its sale to Fannie Mae). Our full risk-sharing is currently limited to loans up to $300 million, which equates to a maximum loss per loan of $60 million (such exposure would occur in the event that the underlying collateral is determined to be completely without value at the time of loss). For loans in excess of $300 million, we receive modified risk-sharing. We also may request modified risk-sharing at the time of origination on loans below $300 million, which reduces our potential risk-sharing losses from the levels described above if we do not believe that we are being fully compensated for the risks of the transaction. The full risk-sharing limit prior to June 30, 2021 was less than $300 million. Accordingly, loans originated prior to then may be subject to modified risk-sharing at much lower levels.

Our servicing fees for risk-sharing loans include compensation for the risk-sharing obligations and are larger than the servicing fees we would receive from Fannie Mae for loans with no risk-sharing obligations. We receive a lower servicing fee for modified risk-sharing than for full risk-sharing.

As part of our overall growth strategy, we are focused on significantly growing and investing in our small-balance lending platform, which involves a high volume of transactions with smaller loan balances. In support of this product, we acquired a company with a technology platform that streamlines and accelerates the quoting, processing, and underwriting of small-balance, multifamily loans. Additionally, the technology platform provides the borrower with a web-based, user-friendly interface, enhancing the borrower’s experience during the origination process.

Debt Brokerage

Our mortgage bankers who focus on debt brokerage are engaged by borrowers to work with a variety of institutional lenders to find the most appropriate loan instrument for the borrowers' needs. These loans are then funded directly by the institutional lender, and we receive an origination fee for placing the loan. For those brokered loans we also service, we collect ongoing servicing fees while those loans remain in our servicing portfolio. The servicing fees we typically earn on brokered loan transactions are substantially lower than the servicing fees we earn for servicing loans with the Agencies.

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Principal Lending and Investing

Our Interim Program is composed of the loans held by the Interim Program JV and the Interim Loan Program as described below. Through a joint venture with an affiliate of Blackstone Mortgage Trust, Inc., we offer short-term senior secured debt financing products that provide floating-rate, interest-only loans for terms of generally up to three years to experienced borrowers seeking to acquire or reposition multifamily properties that do not currently qualify for permanent financing (the “Interim Program JV” or the “joint venture”). The joint venture funds its operations using a combination of equity contributions from its owners and third-party credit facilities. We hold a 15% ownership interest in the Interim Program JV and are responsible for sourcing, underwriting, servicing, and asset-managing the loans originated by the joint venture. The Interim Program JV assumes full risk of loss while the loans it originates are outstanding, while we assume risk commensurate with our 15% ownership interest.

Using a combination of our own capital and warehouse debt financing, we offer interim loans that do not meet the criteria of the Interim Program JV (the “Interim Loan Program”). We underwrite, service, and asset-manage all loans executed through the Interim Loan Program. We originate and hold these Interim Loan Program loans for investment, which are included on our balance sheet, and during the time that these loans are outstanding, we assume the full risk of loss. The ultimate goal of the Interim Loan Program is to provide permanent Agency financing on these transitional properties.

WDIP and its subsidiaries function as the operator of a private commercial real estate investment adviser focused on the management of debt, preferred equity, and mezzanine equity investments in middle-market commercial real estate funds. The activities of WDIP, a wholly owned subsidiary of the Company, are part of our strategy to grow and diversify our operations by growing our investment management platform. WDIP’s current assets under management (“AUM”) of $1.4 billion primarily consist of five sources: Fund III, Fund IV, Fund V, Fund VI (collectively, the “Funds”), and separate accounts managed for life insurance companies. AUM for the Funds and for the separate accounts consists of both unfunded commitments and funded investments. Unfunded commitments are highest during the fund raising and investment phases. WDIP receives management fees based on both unfunded commitments and funded investments. Additionally, with respect to the Funds, WDIP receives a percentage of the return above the fund return hurdle rate specified in the fund agreements.

Property Sales

We offer property sales brokerage services to owners and developers of multifamily properties that are seeking to sell these properties through our subsidiary Walker & Dunlop Investment Sales, LLC (“WDIS”). Through these property sales brokerage services, we seek to maximize proceeds and certainty of closure for our clients using our knowledge of the commercial real estate and capital markets and relying on our experienced transaction professionals. We receive a sales commission for brokering the sale of these multifamily assets on behalf of our clients, and we often are able to provide financing to the purchaser of the properties through our Agency or debt brokerage teams. Our property sales services are offered in various regions throughout the United States. We have increased the number of property sales brokers and the geographical reach of our investment sales platform over the past several years through hiring and acquisitions and intend to continue this expansion in support of our growth strategy.

Appraisal Services

We have a joint venture branded Apprise by Walker & Dunlop with an international technology services company to offer automated multifamily appraisal services (“Appraisal JV”). The Appraisal JV leverages technology and data science to dramatically improve the consistency, transparency, and speed of multifamily property appraisals in the U.S. through the licensing of our partner’s technology and leveraging of our expertise in the commercial real estate industry. We own a 50% interest in the Appraisal JV and account for the interest as an equity-method investment. While the operations of the Appraisal JV for the quarter ended September 30, 2021 were immaterial, the Appraisal JV’s operations continue to rapidly grow with significant increases in the volume of appraisal reports generated and a client list that includes several national commercial real estate lenders.

Housing Market Research and Real Estate Investment Banking Services

During the third quarter of 2021, we closed on the acquisition of certain assets and the assumption of certain liabilities of Zelman Holdings, LLC (“Zelman”) through a 75% interest in a newly formed entity, which does business as Zelman & Associates. Zelman is a nationally recognized housing market research and investment banking firm that will enhance the information we provide to our clients and increase our access to high-quality market insight in many areas of the housing market, including construction trends, demographics, mortgage

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finance, and real estate technology and services. Zelman generates revenues through the sale of its housing market research data and related publications to banks, investment banks and other financial institutions, and through its offering of real estate-related investment banking and advisory services.

Basis of Presentation

The accompanying condensed consolidated financial statements include all of the accounts of the Company and its wholly owned subsidiaries, and all intercompany transactions have been eliminated.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which requires management to make estimates based on certain judgments and assumptions that are inherently uncertain and affect reported amounts. The estimates and assumptions are based on historical experience and other factors management believes to be reasonable. Actual results may differ from those estimates and assumptions and the use of different judgments and assumptions may have a material impact on our results. We believe the following critical accounting estimates represent the areas where more significant judgments and estimates are used in the preparation of our condensed consolidated financial statements. Additional information about our critical accounting estimates and other significant accounting policies are discussed in NOTE 2 of the consolidated financial statements in our 2020 Form 10-K.

Mortgage Servicing Rights (“MSRs”). MSRs are recorded at fair value at loan sale or upon purchase. The fair value at loan sale (“OMSR”) is based on estimates of expected net cash flows associated with the servicing rights and takes into consideration an estimate of loan prepayment. Initially, the fair value amount is included as a component of the derivative asset fair value at the loan commitment date. The estimated net cash flows from servicing, which includes assumptions for discount rate, escrow earnings, prepayment speed, and servicing costs, are discounted at a rate that reflects the credit and liquidity risk of the OMSR over the estimated life of the underlying loan. The discount rates used for all OMSRs were between 8-14% during 2021 and between 10-15% during 2020 and varied based on the loan type. The life of the underlying loan is estimated giving consideration to the prepayment provisions in the loan and assumptions about loan behaviors around those provisions. Our model for OMSRs assumes no prepayment prior to the expiration of the prepayment provisions and full prepayment of the loan at or near the point when the prepayment provisions have expired. We record an individual OMSR asset (or liability) for each loan at loan sale. The fair value of MSRs acquired through a stand-alone servicing portfolio purchase (“PMSR”) is equal to the purchase price paid. For PMSRs, we record and amortize a portfolio-level MSR asset based on the estimated remaining life of the portfolio using the prepayment characteristics of the portfolio.

The assumptions used to estimate the fair value of capitalized OMSRs are developed internally and are periodically compared to assumptions used by other market participants. Due to the relatively few transactions in the multifamily MSR market and the lack of significant changes in assumptions by market participants, we have experienced limited volatility in the assumptions historically, including the most significant assumption – the discount rate. We do not expect to see significant volatility in the assumptions for the foreseeable future. We actively monitor the assumptions used and make adjustments to those assumptions when market conditions change, or other factors indicate such adjustments are warranted. During the first quarter of 2021, we reduced the discount rate and escrow earnings rate assumptions for our OMSRs. We engage a third party to assist in determining an estimated fair value of our existing and outstanding MSRs on at least a semi-annual basis. Changes in our discount rate assumptions may materially impact the fair value of the MSRs (NOTE 3 of the condensed consolidated financial statements details the portfolio-level impact of a change in the discount rate).

For PMSRs, a constant rate of prepayments and defaults is included in the determination of the portfolio’s estimated life at purchase (and thus included as a component of the portfolio’s amortization). Accordingly, prepayments and defaults of individual loans do not change the level of amortization expense recorded for the portfolio unless the pattern of actual prepayments and defaults varies significantly from the estimated pattern. When such a significant difference in the pattern of estimated and actual prepayments and defaults occurs, we prospectively adjust the estimated life of the portfolio (and thus future amortization) to approximate the actual pattern observed. We have made adjustments to the estimated life of our PMSRs in the past when the actual experience of prepayments differed materially from the estimated prepayments.

Allowance for Risk-Sharing Obligations. This reserve liability (referred to as “allowance”) for risk-sharing obligations relates to our Fannie Mae at-risk servicing portfolio and is presented as a separate liability on our balance sheets. We record an estimate of the loss reserve for the current expected credit losses (“CECL”) for all loans in our Fannie Mae at-risk servicing portfolio using the weighted-average remaining maturity method (“WARM”). WARM uses an average annual loss rate that contains loss content over multiple vintages and loan terms and is

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used as a foundation for estimating the CECL reserve. The average annual loss rate is applied to the estimated unpaid principal balance over the contractual term, adjusted for estimated prepayments and amortization to arrive at the CECL reserve for the entire current portfolio as described further below. We currently use one year for our reasonable and supportable forecast period (“forecast period”) as we believe forecasts beyond one year are inherently less reliable. During the forecast period, we apply an adjusted loss factor associated with a similar historical period. We revert to the historical loss rate over a one-year period on a straight-line basis.

One of the key components of a WARM calculation is the runoff rate, which is the expected rate at which loans in the current portfolio will amortize and prepay in the future. We group loans by similar origination dates (vintage) and contractual maturity terms for purposes of calculating the runoff rate. We originate loans under the DUS program with various terms generally ranging from several years to 15 years; each of these various loan terms has a different runoff rate. The runoff rates applied to each vintage and contractual maturity term is determined using historical data; however, changes in prepayment and amortization behavior may significantly impact the estimate.

The weighted-average annual loss rate is calculated using a 10-year look-back period, utilizing the average portfolio balance and settled losses for each year. A 10-year period is used as we believe that this period of time includes sufficiently different economic conditions to generate a reasonable estimate of expected results in the future, given the relatively long-term nature of the current portfolio. Changes in our expectations and forecasts may materially impact the estimate.

We evaluate our risk-sharing loans on a quarterly basis to determine whether there are loans that are probable of default. Specifically, we assess a loan’s qualitative and quantitative risk factors, such as payment status, property financial performance, local real estate market conditions, loan-to-value ratio, debt-service-coverage ratio, and property condition. When a loan is determined to be probable of default based on these factors, we remove the loan from the WARM calculation and individually assess the loan for potential credit loss. This assessment requires certain judgments and assumptions to be made regarding the property values and other factors that may differ significantly from actual results. Loss settlement with Fannie Mae has historically concluded within 18 to 36 months after foreclosure. Historically, the initial collateral-based reserves have not varied significantly from the final settlement.

We actively monitor the judgments and assumptions used in our Allowance for Risk-Sharing Obligation estimate and make adjustments to those assumptions when market conditions change, or when other factors indicate such adjustments are warranted. We believe the level of Allowance for Risk-Sharing Obligation is appropriate based on our expectations of future market conditions; however, changes in one or more of the judgments or assumptions used above could have a significant impact on the estimate.  

Overview of Current Business Environment

Entering 2021, the pandemic continued to impact macroeconomic conditions with U.S. unemployment rates at elevated levels but significantly improved compared to the middle of 2020. Congress passed three pandemic stimulus packages to provide funding for government programs directly supporting households and businesses, which included a total of $47 billion in renter assistance. In the second and third quarters of 2021, vaccination programs across the U.S. accelerated and became widely available to the public, resulting in most jurisdictions eliminating or significantly curtailing economic restrictions. With the lifting of economic restrictions, macroeconomic conditions continue to recover with the reported unemployment rate falling to 4.8% as of September 2021 from 6.7% as of December 2020.

To support the economic recovery, the Federal Reserve set the Federal Funds Rate at a target of 0% to 0.25% at the beginning of the pandemic and has maintained that rate through the first nine months of 2021. The Federal Reserve also indicated in its September 2021 meeting that it intends to keep rates at these low levels as the economy continues to recover and until the economy reaches what it believes is full employment. The Federal Reserve also has noted that although the reported unemployment rates have improved significantly, it will monitor and determine whether full employment has been achieved based on a number of factors, including participation rate and wage growth. Although the Federal Reserve has indicated it will begin reducing its purchase of Treasury securities and Agency mortgage-backed securities (“Agency MBS”), the overall improvements in the economy coupled with the low Federal Fund Rate target have kept long-term mortgage interest rates very low, which form the basis for most of our lending.

Multifamily property fundamentals continue to show strength during the ongoing recovery, with multifamily occupancy rates, demand for new multifamily residential leases, and residential retention rates at record highs. According to RealPage, a provider of commercial real estate data and analytics, occupancy rates have increased to 97.3% as of September 2021, compared to 95.8% as of December 2019, prior to the start of the pandemic. Additionally, residential retention rates reached all-time highs at 58.0% during the third quarter of 2021. Low vacancy rates coupled with high retention rates and demand for new leases indicate a robust and healthy multifamily market.

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Our multifamily property sales volumes continued their strong growth into the third quarter of 2021, as (i) the multifamily acquisitions market was very active the past few quarters, including the third quarter of 2021, (ii) we have expanded the number of property sales brokers and the geographical reach of our property sales platform, and (iii) our volume in the third quarter of 2020 was lower due to the pandemic. Long term, we believe the market fundamentals will continue to be positive for multifamily property sales. Over the last several years, and in the months leading up to the pandemic, household formation and a dearth of supply of entry-level single-family homes led to strong demand for rental housing in most geographic areas. Consequently, the fundamentals of the multifamily property sales market were strong prior to the pandemic, and, when combined with high occupancy and retention rates and rising real-estate prices, it is our expectation that market demand for multifamily property sales will continue to grow as this asset class remains an attractive investment option.

Our debt brokerage platform continued its strong growth into the third quarter of 2021, with brokered volume increasing significantly during the year. The increases in volume for the three and nine months ended September 30, 2021 reflect the continued demand from private capital providers, with activity focused not only on multifamily but other commercial real estate assets such as office and retail. Additionally, our debt brokerage volumes in the third quarter of 2020 were unusually low due to the pandemic. We expect the non-multifamily debt financing volumes to continue to recover over time as other commercial real estate asset classes stabilize post-pandemic.

Our Agency multifamily debt financing operations have remained very active over the past year. We are a market-leading originator with the Agencies, and we believe our market leadership positions us well to continue gaining market share and remain a significant lender with the Agencies for the foreseeable future.

The Federal Housing Finance Agency (“FHFA”) establishes loan origination caps for both Fannie Mae and Freddie Mac each year. In November 2020, FHFA established Fannie Mae’s and Freddie Mac’s 2021 loan origination caps at $70 billion each for all multifamily business. During the three months ended September 30, 2021, Fannie Mae and Freddie Mac had multifamily origination volumes of $16.3 billion and $17.7 billion, respectively, up 6.5% and down 2.2%, respectively, from the same period in 2020. During the nine months ended September 30, 2021, Fannie Mae and Freddie Mac had multifamily origination volumes of $48.7 billion and $44.8 billion, respectively, down 0.6% and 7.4%, respectively, from the first nine months of 2020, leaving a combined $46.5 billion of available lending capacity for the remainder of the year. GSE lending volume slowed in the first half of 2021, as the GSEs’ pricing on multifamily debt was less competitive as other capital sources reentered the market, and as the GSEs managed their originations under their lending caps. In the third quarter of 2021, GSE lending accelerated with combined lending up 10.1% in September 2021 compared to the same period in 2020. With a combined $46.5 billion or 33% of available lending capacity remaining, we expect the GSEs’ lending to continue to accelerate in the fourth quarter of 2021. In October 2021, FHFA established Fannie Mae’s and Freddie Mac’s 2022 loan origination caps at $78 billion each for all multifamily business, an 11% increase from the 2021 caps.

Our debt financing operations with HUD remained strong during the first nine months of 2021, with HUD loan volumes increasing 40% and 33% for the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. The increase in HUD debt financing volumes were driven by continued strong demand for HUD’s multifamily lending product, which provides borrowers with favorable economics on long-term, fully amortizing debt.

We expect strength in our Agency operations to continue despite the return of other capital sources. An additional positive factor influencing multifamily financing volumes is the historically low interest rate environment, which is incentivizing some borrowers to refinance their properties in spite of the prepayment penalty fees they may incur. We continue to seek additional resources and to scale our Agency lending platform.

Our originations with the Agencies are our most profitable executions as they provide significant non-cash gains from MSRs that turn into significant cash revenue streams from future servicing fees. During the three and nine months ended September 30, 2021, servicing fees are up 17% and 19%, respectively, over the same periods last year due to the record amount of MSRs we generated in 2020. A decline in our Agency originations would negatively impact our financial results as our non-cash revenues would decrease disproportionately with debt financing volume and future servicing fee revenue would be constrained or decline.

We entered into the Interim Program JV to both increase the overall capital available to transitional multifamily properties and to dramatically expand our capacity to originate Interim Program loans. The demand for transitional lending has brought increased competition from lenders, specifically banks, mortgage real estate investment trusts, and life insurance companies. For the third quarter of 2021, we originated $314.9 million of Interim Program JV loans, compared to no originations in the third quarter of 2020. In the third quarter of 2020, we did not originate any new Interim Program loans as a result of the pandemic. Except for one loan that defaulted in early 2019, the loans in our portfolio and in the Interim Program JV continue to perform as agreed. Our Interim Loan Program has similarly rebounded in the third quarter of 2021, with originations of $157.2 million compared to $37.0 million in the third quarter of 2020.

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In the third quarter of 2021, we entered into a purchase agreement to acquire Alliant Capital, Ltd. and certain of its affiliates (“Alliant”), a privately held alternative investment manager focused on the affordable housing sector through low-income housing tax credit (“LIHTC”) syndication, joint venture development, and community preservation fund management. The transaction is expected to close in the fourth quarter of 2021, and we expect the combination of Alliant and our existing strong position in the affordable housing space to generate significant financing and property sales opportunities.

In September 2021, the White House announced plans to increase the affordable housing supply across the country. These plans include the relaunching and expansion of programs designed to increase the available capital for the development of affordable housing projects. In conjunction with the announcement, the FHFA raised the GSEs’ combined LIHTC investment cap to $1.7 billion, up 70% from the previous cap of $1.0 billion. Additionally, as part of FHFA’s 2022 loan origination caps of $156 billion announced in October 2021, at least 50% of the GSEs’ multifamily business is required to be targeted towards affordable housing. We expect these initiatives will create additional growth opportunities for both Alliant and our debt financing and property sales teams focused on affordable housing.

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Results of Operations

The following is a discussion of our results of operations for the three and nine months ended September 30, 2021 and 2020. The financial results are not necessarily indicative of future results. Our quarterly results have fluctuated in the past and are expected to fluctuate in the future, reflecting the interest-rate environment, the volume of transactions, business acquisitions, regulatory actions, industry trends, and general economic conditions. The table below provides supplemental data regarding our financial performance.

SUPPLEMENTAL OPERATING DATA

	For the three months ended						For the nine months ended
	September 30,						September 30,
(in thousands; except per share data)	2021			2020			2021			2020
Transaction Volume:
Components of Debt Financing Volume
Fannie Mae	$	3,271,765		$	1,977,607		$	6,716,765		$	8,911,397
Freddie Mac		2,591,906			3,136,313			4,607,945			5,903,389
Ginnie Mae ̶ HUD		522,093			373,480			1,816,800			1,368,317
Brokered(1)		6,402,862			1,711,541			16,985,932			7,200,926
Principal Lending and Investing(2)		472,142			105,488			968,629			227,529
Total Debt Financing Volume	$	13,260,768		$	7,304,429		$	31,096,071		$	23,611,558
Property Sales Volume		5,230,093			1,106,162			9,967,385			3,283,463
Total Transaction Volume	$	18,490,861		$	8,410,591		$	41,063,456		$	26,895,021
Key Performance Metrics:
Operating margin		27	%		28	%		28	%		29	%
Return on equity		22			20			20			21
Walker & Dunlop net income	$	71,721		$	53,190		$	185,831		$	163,078
Adjusted EBITDA(3)		72,430			45,165			199,611			157,687
Diluted EPS		2.21			1.66			5.73			5.11
Key Expense Metrics (as a percentage of total revenues):
Personnel expenses		49	%		46	%		48	%		42	%
Other operating expenses		7			7			7			6
Key Revenue Metrics (as a percentage of debt financing volume):
Origination related fees(4)		0.95	%		1.15	%		1.00	%		1.01	%
MSR income(5)		0.70			1.08			0.69			1.01
MSR income, as a percentage of Agency debt financing volume(6)		1.40			1.42			1.59			1.46

(dollars in thousands)	As of September 30,
Managed Portfolio:	2021		2020
Components of Servicing Portfolio
Fannie Mae	$	52,317,953	$	46,224,549
Freddie Mac		38,039,014		35,726,109
Ginnie Mae - HUD		9,894,893		9,639,820
Brokered (7)		13,429,801		11,513,521
Principal Lending and Investing (8)		238,713		273,754
Total Servicing Portfolio	$	113,920,374	$	103,377,753
Assets under management (9)		2,309,332		1,936,679
Total Managed Portfolio	$	116,229,706	$	105,314,432

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SUPPLEMENTAL OPERATING DATA (continued)

	As of September 30,
Key Servicing Portfolio Metrics (end of period):	2021		2020
Custodial escrow account balance (in billions)	$	3.0	$	2.8
Weighted-average servicing fee rate (basis points)		24.6		23.4
Weighted-average remaining servicing portfolio term (years)		9.2		9.4

The following tables present WDIP’s AUM as of September 30, 2021 and 2020:

	As of September 30, 2021
	Unfunded		Funded
Components of WDIP assets under management (in thousands)	Commitments		Investments		Total
Fund III	$	37,781	$	65,975	$	103,756
Fund IV		88,827		106,498		195,325
Fund V		273,853		45,064		318,917
Fund VI		30,498		2,478		32,976
Separate accounts		150,000		589,840		739,840
Total assets under management	$	580,959	$	809,855	$	1,390,814

	As of September 30, 2020
	Unfunded		Funded
Components of WDIP assets under management (in thousands)	Commitments		Investments		Total
Fund III	$	56,072	$	123,818	$	179,890
Fund IV		165,294		139,657		304,951
Fund V		192,113		10,036		202,149
Separate accounts		—		610,223		610,223
Total assets under management	$	413,479	$	883,734	$	1,297,213

(1) Brokered transactions for life insurance companies, commercial banks, and other capital sources.

(2) For the three months ended September 30, 2021, includes $314.9 million from the Interim Program JV and $157.2 million from the Interim Loan Program. For the nine months ended September 30, 2021, includes $665.9 million from the Interim Program JV, $286.7 million from the Interim Loan Program and $16.0 million from WDIP separate accounts. For the three months ended September 30, 2020, includes $37.0 million from the Interim Program and $68.5 million from WDIP separate accounts. For the nine months ended September 30, 2020, includes $37.0 million from the Interim Program, $86.2 million from the Interim Program JV and $104.4 million from WDIP separate accounts.

(3) This is a non-GAAP financial measure. For more information on adjusted EBITDA, refer to the section below 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. Excludes the income and debt financing volume from Principal Lending and Investing.

(6) 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.

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

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

(9) As of September 30, 2021, includes $918.5 million of Interim Program JV managed loans and WDIP assets under management of $1.4 billion. As of September 30, 2020, includes $566.1 million of Interim Program JV managed loans, $73.3 million of loans serviced directly for the Interim Program JV partner, and WDIP assets under management of $1.3 billion.

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The following tables present a period-to-period comparison of our financial results for the three and nine months ended September 30, 2021 and 2020.

FINANCIAL RESULTS – THREE MONTHS

	For the three months ended
	September 30,				Dollar		Percentage
(dollars in thousands)	2021		2020		Change		Change
Revenues
Loan origination and debt brokerage fees, net	$	123,242	$	83,825	$	39,417	47	%
Fair value of expected net cash flows from servicing, net		89,482		78,065		11,417	15
Servicing fees		70,628		60,265		10,363	17
Property sales broker fees		33,677		6,756		26,921	398
Net warehouse interest income		5,583		7,558		(1,975)	(26)
Escrow earnings and other interest income		2,032		2,275		(243)	(11)
Other revenues		21,646		8,272		13,374	162
Total revenues	$	346,290	$	247,016	$	99,274	40
Expenses
Personnel	$	170,181	$	114,548	$	55,633	49	%
Amortization and depreciation		53,498		41,919		11,579	28
Provision (benefit) for credit losses		1,266		3,483		(2,217)	(64)
Interest expense on corporate debt		1,766		1,786		(20)	(1)
Other operating expenses		24,836		16,165		8,671	54
Total expenses	$	251,547	$	177,901	$	73,646	41
Income from operations	$	94,743	$	69,115	$	25,628	37
Income tax expense		22,953		15,925		7,028	44
Net income before noncontrolling interests	$	71,790	$	53,190	$	18,600	35
Less: net income (loss) from noncontrolling interests		69		—		69	N/A
Walker & Dunlop net income	$	71,721	$	53,190	$	18,531	35

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FINANCIAL RESULTS – NINE MONTHS

	For the nine months ended
	September 30,				Dollar		Percentage
(dollars in thousands)	2021		2020		Change		Change
Revenues
Loan origination and debt brokerage fees, net	$	306,593	$	238,105	$	68,488	29	%
Fair value of expected net cash flows from servicing, net		209,266		236,434		(27,168)	(11)
Servicing fees		205,658		172,561		33,097	19
Property sales broker fees		65,173		19,928		45,245	227
Net warehouse interest income		14,768		22,454		(7,686)	(34)
Escrow earnings and other interest income		5,972		15,689		(9,717)	(62)
Other revenues		44,559		28,827		15,732	55
Total revenues	$	851,989	$	733,998	$	117,991	16
Expenses
Personnel	$	407,817	$	310,993	$	96,824	31	%
Amortization and depreciation		148,879		123,998		24,881	20
Provision (benefit) for credit losses		(14,380)		32,029		(46,409)	(145)
Interest expense on corporate debt		5,291		6,724		(1,433)	(21)
Other operating expenses		62,171		47,324		14,847	31
Total expenses	$	609,778	$	521,068	$	88,710	17
Income from operations	$	242,211	$	212,930	$	29,281	14
Income tax expense		56,311		50,076		6,235	12
Net income before noncontrolling interests	$	185,900	$	162,854	$	23,046	14
Less: net income (loss) from noncontrolling interests		69		(224)		293	(131)
Walker & Dunlop net income	$	185,831	$	163,078	$	22,753	14

Overview

Three months ended September 30, 2021 compared to three months ended September 30, 2020

The increase in revenues was primarily driven by increases in loan origination and debt brokerage fees, net (“origination fees”), fair value of expected net cash flows from servicing, net (“MSR Income”), servicing fees, property sales broker fees and other revenues. The increase in origination fees was primarily related to an overall increase in debt financing volume, particularly in our Fannie Mae and brokered debt financing volumes. MSR Income increased as a result of an overall increase in Agency debt financing volume. Servicing fees increased largely from an increase in the average servicing portfolio outstanding. The increase in property sales broker fees was a result of a substantial increase in property sales volume. Other revenues increased primarily as a result of increases in prepayment fees and research subscription fees.

The increase in expenses was largely attributable to increases in personnel expenses, amortization and depreciation, and other operating expenses. The increase in personnel expenses was primarily a result of increases in (i) commission costs due to the increases in origination fees and property sales brokers fees, (ii) salaries and benefits costs driven by an increase in the average headcount, and (iii) stock compensation expense due to increases in costs for our 2020 broad-based employee stock grant and costs associated with our performance plan for executives. Amortization and depreciation expense increased due to an increase in the average MSR balance. Other operating expenses increased largely as a result of the overall growth of the Company over the past year and acquisition activity.

Nine months ended September 30, 2021 compared to nine months ended September 30, 2020

The increase in revenues was driven by increases in origination fees, servicing fees, property sales broker fees and other revenues, partially offset by decreases in MSR Income, net warehouse interest income, and escrow earnings and other interest income. The increase in

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origination fees was primarily related to an overall increase in debt financing volume, particularly in our brokered and HUD loan origination volumes. Servicing fees increased largely from an increase in the average servicing portfolio outstanding. The increase in property sales broker fees was a result of the significant increase in property sales volume. Other revenues increased primarily due to increases in prepayment fees and research subscription fees. MSR Income decreased as a result of a decrease in Agency debt financing volume. Net warehouse interest income decreased due to decreases in the average balances and net spreads for both LHFS and LHFI. Escrow earnings and other interest income decreased largely due to a substantial decrease in the average earnings rate.

The increase in expenses was mainly driven by increases in personnel expenses, amortization and depreciation, and other operating expenses, partially offset by a change in provision (benefit) for credit losses. The increase in personnel expenses was primarily due to increases in (i) commission costs due to the increases in origination fees and property sales broker fees, (ii) salaries and benefits costs due primarily to an increase in the average headcount, and (iii) stock-based compensation expense due to increases in costs for our 2020 broad-based employee stock grant and costs associated with our performance plan for executives. Amortization and depreciation expense increased due to an increase in the average MSR balance. Other operating expenses increased as a result of the overall growth of the Company over the past year and acquisition activity. The change to a benefit for credit losses in 2021 from a provision for credit losses in 2020 was driven primarily by a decrease in our CECL reserve.

Revenues

Loan origination and debt brokerage fees, net and Fair value of expected net cash flows from servicing, net. The following tables provide additional information that helps explain changes in origination fees and MSR Income period over period:

	For the three months ended				For the nine months ended
	September 30,				September 30,
Debt Financing Volume by Product Type	2021		2020		2021		2020
Fannie Mae	25	%	27	%	22	%	38	%
Freddie Mac	20		43		15		25
Ginnie Mae ̶ HUD	4		5		6		6
Brokered	47		24		54		30
Principal Lending and Investing	4		1		3		1

	For the three months ended					For the nine months ended
	September 30,					September 30,
Mortgage Banking Details (basis points)	2021			2020		2021			2020
Origination Fee Rate (1)		95			115		100			101
Basis Point Change		(20)					(1)
Percentage Change		(17)	%				(1)	%
MSR Rate (2)		70			108		69			101
Basis Point Change		(38)					(32)
Percentage Change		(35)	%				(32)	%
Agency MSR Rate (3)		140			142		159			146
Basis Point Change		(2)					13
Percentage Change		(1)	%				9	%

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

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

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

For the three months ended September 30, 2021, the increase in origination fees was driven by the increase in overall debt financing volume, particularly the substantial growth in our Fannie Mae and brokered debt financing volume, which grew by 65% and 274%, respectively, from the three months ended September 30, 2020. The increase in origination fees due to the increase in volume was partially offset by a decrease in the origination fee rate resulting from the shift in transaction mix from 75% Agency loans in 2020 to 49% Agency loans in 2021. We typically earn higher origination fees on Agency loans than brokered loans.

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MSR Income increased for the three months ended September 30, 2021, primarily as a result of a 16% increase in Agency debt financing volume. The decrease in the MSR Rate was attributable to the same shift in transaction mix noted above.

For the nine months ended September 30, 2021, the increase in origination fees was driven by the increase in overall debt financing volume from the nine months ended September 30, 2020, partially offset by a small decline in the Origination Fee Rate.

MSR Income declined for the nine months ended September 30, 2021, as a result of a 19% decrease in Agency debt financing volumes, particularly our Fannie Mae debt financing volume, which decreased 25%. Partially offsetting the decline due to volume was an increase in the Agency MSR Rate. The decline in Fannie Mae debt financing volume was primarily the result of a portfolio of loans originated in 2020 with over $2 billion in volume, with no comparable large portfolio transaction in 2021. The Agency MSR Rate increased year over year due primarily to this large portfolio, which had a lower than average servicing fee.

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

Servicing Fees. For both the three and nine months ended September 30, 2021, the increases were primarily attributable to increases in the average servicing portfolio period over period as shown below, primarily due to higher loan originations and relatively few payoffs over the last 12 months, coupled with increases in the servicing portfolio’s average servicing fee rates as shown below. The increases in the average servicing fee are the result of the large volume of Fannie Mae debt financing volume with high servicing fees over the past year.

	For the three months ended					For the nine months ended
	September 30,					September 30,
Servicing Fees Details (dollars in thousands)	2021			2020		2021			2020
Average Servicing Portfolio	$	112,308,470		$	101,551,127	$	110,516,000		$	97,914,210
Dollar Change		10,757,343					12,601,790
Percentage Change		11	%				13	%
Average Servicing Fee (basis points)		24.6			23.4		24.4			23.3
Basis Point Change		1.2					1.1
Percentage Change		5.1	%				4.7	%

Property sales broker fees. For the three and nine months ended September 30, 2021, the increases in property sales broker fees were driven by significant increases in the property sales volumes year over year. See the “Overview of Current Business Environment” section above for a detailed discussion of the factors driving the changes in property sales volumes.

Net Warehouse Interest Income. For the three and nine months ended September 30, 2021, the decreases in net warehouse interest income were the result of decreases in net warehouse interest income from both LHFS and LHFI. The decreases in net warehouse interest income from LHFS were primarily due to the decreases in the net spreads shown below, as the short-term interest rates upon which we incur interest expense decreased at a slower rate than the mortgage rates upon which we earn interest income. Additionally, the average balances of loans outstanding were lower in 2021 than in 2020 as seen below.

The decreases in net warehouse interest income from LHFI were primarily due to decreases in the average outstanding balances and the net spreads shown below. The average outstanding balances decreased due to low origination activity during the year ended December 31, 2020, as the market for interim loans was interrupted due to the pandemic. The payoffs we had in 2020 were not fully replaced with new originations, resulting in a lower starting balance in 2021 than in 2020. We have seen an increase in our interim loan volume in 2021; however, payoffs continue to outpace originations as more production volume is going to our Interim Program JV, contributing to the lower average outstanding balances in LHFI. The decreases in net spreads were the result of having a larger balance of LHFI funded with corporate cash in 2020 than 2021.

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	For the three months ended					For the nine months ended
	September 30,					September 30,
Net Warehouse Interest Income Details (dollars in thousands)	2021			2020		2021			2020
Average LHFS Outstanding Balance	$	1,780,594		$	1,845,687	$	1,458,110		$	1,759,594
Dollar Change	$	(65,093)				$	(301,484)
Percentage Change		(4)	%				(17)	%
LHFS Net Spread (basis points)		84			106		83			96
Basis Point Change		(22)					(13)
Percentage Change		(21)	%				(14)	%
Average LHFI Outstanding Balance	$	274,338		$	329,559	$	278,181		$	379,249
Dollar Change	$	(55,221)				$	(101,068)
Percentage Change		(17)	%				(27)	%
LHFI Net Spread (basis points)		271			326		273			344
Basis Point Change		(55)					(71)
Percentage Change		(17)	%				(21)	%

Escrow Earnings and Other Interest Income. For the nine months ended September 30, 2021, the decrease was primarily due to a significant decrease in average earnings rate on our escrow accounts resulting from a decrease in short-term interest rates in the broader market, slightly offset by an increase in the average balance of escrow accounts due to an increase in the average servicing portfolio.  

Other Revenues. For the three and nine months ended September 30, 2021, the increases were driven primarily by increases in prepayment fees and research subscription fees. Prepayment fees increased $6.6 million and $4.1 million for the three and nine months ended September 30, 2021, respectively. We acquired Zelman in July 2021, which resulted in the addition of $4.5 million in new revenues for both the three and nine months ended September 30, 2021.

Expenses

Personnel. For the three months ended September 30, 2021, the increase was primarily the result of (i) a $40.9 million increase in commission costs due to higher origination fees and property sales broker fees, (ii) a $6.9 million increase in salaries and benefits due to a 22% increase in average headcount to support our growth efforts, (iii) a $3.6 million increase in the accrual for subjective bonuses due to the increase in average headcount and the Company’s financial performance, and (iv) a $3.8 million increase in stock-based compensation expense due to a higher expense associated with a stock grant provided to the vast majority of our non-executive employee base in the fourth quarter of 2020 and stock-based compensation expense associated with our performance share plans due to the Company’s improved financial performance for the third quarter of 2021 compared to the same period in 2020.

For the nine months ended September 30, 2021, the increase was primarily the result of (i) a $66.0 million increase in commission costs due to higher origination fees and property sales broker fees, (ii) an $18.4 million increase in salaries and benefits due to a 16% increase in average headcount to support our growth efforts, and (iii) an $8.7 million increase in stock-based compensation expense due to higher expense associated with a stock grant provided to the vast majority of our non-executive employee base in the fourth quarter of 2020 and stock-based compensation expense associated with our performance share plans due to the Company’s improved financial performance in 2021 compared to 2020.

Amortization and Depreciation. For the three and nine months ended September 30, 2021, the increase was primarily attributed to loan origination activity and the resulting growth in the average MSR balance. Over the past 12 months, we have added $124.2 million of MSRs, net of amortization and write offs due to prepayment.

Provision (Benefit) for Credit Losses. For the three months ended September 30, 2021, the decrease in the provision for credit losses was primarily attributable to $2.4 million in additional reserves recorded in the third quarter of 2020 for a loan that defaulted in 2019, with no comparable activity in the third quarter of 2021.  

For the nine months ended September 30, 2021, the change in the provision (benefit) for credit losses was due to improvements in the forecasted unemployment rate and sustained strength in multifamily operating fundamentals. The forecasted loss rate for our March 31, 2020 CECL reserve calculation was seven basis points compared to one basis point upon implementation at January 1, 2020 as a result of the expected

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negative economic impacts of the COVID-19 pandemic, resulting in a significant provision expense for the nine months ended September 30, 2020, primarily during the first quarter of 2020. With the economic improvements noted above, we lowered our forecast-period loss rate from six basis points at December 31, 2020 to three basis points for our June 30, 2021 CECL reserve calculation, resulting in a large benefit for the first six months of 2021. We maintained the loss rate at September 30, 2021, resulting in a small provision for credit losses in the third quarter of 2021, but an overall benefit for credit losses for the nine months ended September 30, 2021.  

We have not experienced any defaults and minimal delinquencies in our at-risk servicing portfolio since the onset of the pandemic.

Other Operating Expenses. The increase for the three months ended September 30, 2021, primarily stemmed from a $3.8 million increase in professional fees largely due to $2.9 million of due diligence costs for our pending acquisition of Alliant, a $1.4 million increase in travel and entertainment costs as our bankers and brokers resumed traveling for in person meetings, and a $1.4 million increase in marketing costs to support our growth initiatives.

The increase for the nine months ended September 30, 2021 was largely attributable to a $6.1 million increase in professional fees largely due to $2.9 million of due diligence costs for our pending acquisition of Alliant, a $2.1 million increase in marketing costs to support our growth initiatives, a $1.8 million increase in office expenses due to the increased average headcount year over year and increased technology costs to support our growth, and a $3.3 million increase in miscellaneous expenses.

Income Tax Expense. For the three months ended September 30, 2021, the increase in income tax expense relates primarily to the 37% increase in income from operations and a decrease in the absolute and relative realizable excess tax benefits recognized year over year as the number of stock options exercised decreased year over year.

For the nine months ended September 30, 2021, the increase in income tax expense relates primarily to a 14% increase in income from operations and a $1.2 million absolute increase in realizable excess tax benefits recognized year over year due to a substantial increase in the number of shares of restricted stock vested and an increase in the price at which these awards vested.

We do not expect our annual estimated effective tax rate to differ significantly from the 26.3% rate estimated for the three months ended September 30, 2021 as we do not have significant permanent differences. Accordingly, we expect an estimated effective tax rate of between approximately 25.5% and 26.5% for the remainder of the year. The effective tax rate decreased year over year from 23.5% in 2020 to 23.2% in 2021 due to the aforementioned decreases in the absolute and relative realizable excess tax benefits, partially offset by a slightly lower estimated annual effective tax rate in 2021 compared to 2020.

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with GAAP, we use adjusted EBITDA, a non-GAAP financial measure. The presentation of adjusted EBITDA is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. When analyzing our operating performance, readers should use adjusted EBITDA in addition 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 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 our GAAP financials, provides useful information to investors by offering:

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

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

● a better understanding of how management plans and measures our underlying business.

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We believe that adjusted EBITDA has limitations in that it does not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that adjusted EBITDA should only be used to evaluate our results of operations in conjunction with net income. Adjusted EBITDA is reconciled to net income as follows:

ADJUSTED FINANCIAL METRIC RECONCILIATION TO GAAP

	For the three months ended				For the nine months ended
	September 30,				September 30,
(in thousands)	2021		2020		2021		2020
Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA
Walker & Dunlop Net Income	$	71,721	$	53,190	$	185,831	$	163,078
Income tax expense		22,953		15,925		56,311		50,076
Interest expense on corporate debt		1,766		1,786		5,291		6,724
Amortization and depreciation		53,498		41,919		148,879		123,998
Provision (benefit) for credit losses		1,266		3,483		(14,380)		32,029
Net write-offs		—		—		—		—
Stock-based compensation expense		10,708		6,927		26,945		18,216
Fair value of expected net cash flows from servicing, net		(89,482)		(78,065)		(209,266)		(236,434)
Adjusted EBITDA	$	72,430	$	45,165	$	199,611	$	157,687

The following table presents a period-to-period comparison of the components of adjusted EBITDA for the three and nine months ended September 30, 2021 and 2020.

ADJUSTED EBITDA – THREE MONTHS

	For the three months ended
	September 30,				Dollar		Percentage
(dollars in thousands)	2021		2020		Change		Change
Loan origination and debt brokerage fees, net	$	123,242	$	83,825	$	39,417	47	%
Servicing fees		70,628		60,265		10,363	17
Property sales broker fees		33,677		6,756		26,921	398
Net warehouse interest income		5,583		7,558		(1,975)	(26)
Escrow earnings and other interest income		2,032		2,275		(243)	(11)
Other revenues		21,577		8,272		13,305	161
Personnel		(159,473)		(107,621)		(51,852)	48
Net write-offs		—		—		—	N/A
Other operating expenses		(24,836)		(16,165)		(8,671)	54
Adjusted EBITDA	$	72,430	$	45,165	$	27,265	60

ADJUSTED EBITDA – NINE MONTHS

	For the nine months ended
	September 30,				Dollar		Percentage
(dollars in thousands)	2021		2020		Change		Change
Loan origination and debt brokerage fees, net	$	306,593	$	238,105	$	68,488	29	%
Servicing fees		205,658		172,561		33,097	19
Property sales broker fees		65,173		19,928		45,245	227
Net warehouse interest income		14,768		22,454		(7,686)	(34)
Escrow earnings and other interest income		5,972		15,689		(9,717)	(62)
Other revenues		44,490		29,051		15,439	53
Personnel		(380,872)		(292,777)		(88,095)	30
Net write-offs		—		—		—	N/A

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Other operating expenses		(62,171)		(47,324)		(14,847)	31
Adjusted EBITDA	$	199,611	$	157,687	$	41,924	27

Three and nine months ended September 30, 2021 compared to three and nine months ended September 30, 2020

Loan origination and debt brokerage fees, net increased due to significant increases in overall debt financing volumes. Servicing fees increased due to increases in the average servicing portfolio period over period as a result of the substantial loan originations and relatively few payoffs over the last 12 months and increases in the average servicing fee. Property sales broker fees increased as a result of the increases in property sales volumes. Net warehouse interest income decreased primarily due to decreases in the net spreads and average outstanding balances. Escrow earnings and other interest income decreased primarily as a result of declines in the average earnings rates. The increases in personnel expense were primarily due to increased commission costs due to the increases in total transaction volumes and salaries and benefits resulting from increases in average headcount. Other operating expenses increased as a result of the overall growth of the Company over the past year and from increased costs associated with due diligence for acquisitions.

Financial Condition

Cash Flows from Operating Activities

Our cash flows from operating activities are generated from loan sales, servicing fees, escrow earnings, net warehouse interest income, property sales broker fees, research subscription fees, investment banking advisory fees, and other income, net of loan originations and operating costs. Our cash flows from operations are impacted by the fees generated by our loan originations, the timing of loan closings, and the period of time loans are held for sale in the warehouse loan facility prior to delivery to the investor.

Cash Flows from Investing Activities

We usually lease facilities and equipment for our operations. Our cash flows from investing activities also include the funding and repayment of loans held for investment, contributions to and distributions from joint ventures, purchases of equity-method investments, and the purchase of AFS securities pledged to Fannie Mae. We opportunistically invest cash for acquisitions and MSR portfolio purchases.

Cash Flows from Financing Activities

We use our warehouse loan facilities and, when necessary, our corporate cash to fund loan closings, both for loans held for sale and loans held for investment. We believe that our current warehouse loan facilities are adequate to meet our increasing loan origination needs. Historically, we have used a combination of long-term debt and cash on hand to fund large acquisitions. Additionally, we repurchase shares, pay cash dividends, make long-term debt principal payments, and repay short-term borrowings on a regular basis. We issue stock primarily for exercise of stock options (cash inflow) and for acquisitions (non-cash transactions).

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

The following table presents a period-to-period comparison of the significant components of cash flows for the nine months ended September 30, 2021 and 2020.

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SIGNIFICANT COMPONENTS OF CASH FLOWS

	For the nine months ended September 30,				Dollar		Percentage
(dollars in thousands)	2021		2020		Change		Change
Net cash provided by (used in) operating activities	$	(196,979)	$	(2,296,868)	$	2,099,889	(91)	%
Net cash provided by (used in) investing activities		49,325		147,624		(98,299)	(67)
Net cash provided by (used in) financing activities		194,265		2,341,258		(2,146,993)	(92)
Total of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period ("Total cash")		404,613		328,580		76,033	23
Cash flows from (used in) operating activities
Net receipt (use) of cash for loan origination activity	$	(301,921)	$	(2,406,414)	$	2,104,493	(87)	%
Net cash provided by (used in) operating activities, excluding loan origination activity		104,942		109,546		(4,604)	(4)
Cash flows from (used in) investing activities
Purchases of pledged AFS securities	$	(7,250)	$	(14,130)	$	6,880	(49)	%
Proceeds from the prepayment/sale of pledged AFS securities		28,781		15,531		13,250	85
Purchase of equity-method investments		(8,029)		(974)		(7,055)	724
Acquisitions, net of cash received		(62,208)		(46,784)		(15,424)	33
Net payoff of (investment in) loans held for investment		127,591		199,569		(71,978)	(36)
Net distributions from (investments in) joint ventures	$	(24,053)	$	(3,538)	$	(20,515)	580
Cash flows from (used in) financing activities
Borrowings (repayments) of warehouse notes payable, net	$	333,887	$	2,497,627	$	(2,163,740)	(87)	%
Borrowings of interim warehouse notes payable		154,661		34,028		120,633	355
Repayments of interim warehouse notes payable		(157,277)		(109,860)		(47,417)	43
Repurchase of common stock		(15,686)		(42,525)		26,839	(63)
Repayment of secured borrowings		(73,312)		—		(73,312)	N/A
Cash dividends paid		(48,268)		(33,984)		(14,284)	42

The change in cash flows from operating activities was driven primarily by loans originated and sold. Such loans are held for short periods of time, generally less than 60 days, and impact cash flows presented as of a point in time. The decrease in cash flows used in loan origination activities is primarily attributable to a decrease in originations outpacing sales of loans held for sale (net cash used) by $301.9 million in 2021 compared to $2.4 billion in 2020. Our Agency debt financing activity decreased year over year, which resulted in less cash used in originations during the first nine months of 2021. Excluding cash used for the origination and sale of loans, cash flows provided by operations were $104.9 million in 2021, down from $109.5 million in 2020. The decrease is primarily the result of a $64.6 million higher adjustment for other operating activities, net, partially offset by a lower adjustment for gains attributable to the fair value of future servicing rights, net of guaranty obligation of $27.2 million and a lower adjustment for change in the fair value of premiums and origination fees of $31.3 million.

The decrease in cash provided by investing activities is primarily attributable to (i) a greater increase in the originations of loans held for investments than the payoffs of these loans as our origination volume for 2020 was low due to the COVID-19 pandemic, (ii) an increase in the cash used in acquisitions due to an increase in the average size of acquisitions in 2021 than 2020, (iii) an increase in net investments in joint ventures as our joint ventures have been growing in 2021, and (iv) an increase in the purchase of equity-method investments, partially offset by (i) an increase in the prepayment of pledged AFS securities and (ii) a reduction in the purchases of pledged AFS securities. Pledged AFS securities prepay at unpredictable times. Our purchases were less in 2021 as several prepayments occurred close to the end of the third quarter of 2021, resulting in little time to reinvest prior to September 30, 2021. We have increased our investments in equity-method investments as we continue to invest in small strategic investments.

The decrease in cash provided by financing activity was primarily attributable to a decrease in the net warehouse borrowings, the repayment of our secured borrowings, and an increase in cash dividends paid, partially offset by an increase in net borrowings of interim warehouse notes payables and a decrease in cash paid for stock repurchases. The decrease in net borrowings of warehouse notes payable during 2021 was largely due to the decrease in cash used for loan origination activity, as noted above. The repayment of secured borrowings was the

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result of the repayment of the secured borrowing in the second quarter of 2021, a unique transaction. Cash dividends paid increased as a result of the increase in our dividend to $0.50 per share in 2021 compared to $0.36 per share in 2020. Net borrowings of interim warehouse notes payable increased due to the increase in originations of loans held for investments noted above. The decrease in cash paid for repurchases of common stock was related to repurchases under approved stock repurchase programs. In 2021, we did not repurchase any shares under approved repurchase programs, while in 2020 we repurchased $23.7 million of shares under such programs.

Liquidity and Capital Resources

Uses of Liquidity, Cash and Cash Equivalents

Our significant recurring cash flow requirements consist of liquidity to (i) fund loans held for sale; (ii) fund loans held for investment under the Interim Loan Program; (iii) pay cash dividends; (iv) fund our portion of the equity necessary for the operations of the Interim Program JV, the Appraisal JV, and other equity-method investments; (v) meet working capital needs to support our day-to-day operations, including debt service payments, servicing advances and payments for salaries, commissions, and income taxes; and (vi) meet working capital needs to satisfy collateral requirements for our Fannie Mae DUS risk-sharing obligations and to meet the operational liquidity requirements of Fannie Mae, Freddie Mac, HUD, Ginnie Mae, and our warehouse facility lenders.

Fannie Mae has established benchmark standards for capital adequacy and reserves the right to terminate our servicing authority for all or some of the portfolio if, at any time, it determines that our financial condition is not adequate to support our obligations under the DUS agreement. We are required to maintain acceptable net worth as defined in the standards, and we satisfied the requirements as of September 30, 2021. The net worth requirement is derived primarily from unpaid balances on Fannie Mae loans and the level of risk-sharing. As of September 30, 2021, the net worth requirement was $250.2 million, and our net worth was $1.1 billion, as measured at our wholly owned operating subsidiary, Walker & Dunlop, LLC. As of September 30, 2021, we were required to maintain at least $49.5 million of liquid assets to meet our operational liquidity requirements for Fannie Mae, Freddie Mac, HUD, Ginnie Mae and our warehouse facility lenders. As of September 30, 2021, we had operational liquidity of $254.7 million, as measured at our wholly owned operating subsidiary, Walker & Dunlop, LLC.

We paid a cash dividend of $0.50 per share in each of the first three quarters of 2021, which is 39% higher than the quarterly dividend paid in each of the first three quarters of 2020. On November 3, 2021, our Board of Directors declared a dividend of $0.50 per share for the fourth quarter of 2021. The dividend will be paid on November 29, 2021 to all holders of record of the Company’s restricted and unrestricted common stock as of November 19, 2021.

Over the past three years, we have returned $210.7 million to investors in the form of the repurchase of 1.5 million shares of our common stock under share repurchase programs for a cost of $72.0 million and cash dividend payments of $138.7 million. Additionally, we have invested $179.0 million in acquisitions. On occasion, we may use cash to fully fund some loans held for investment or loans held for sale instead of using our warehouse lines. As of September 30, 2021, we used corporate cash to fully fund loans held for investment with an unpaid principal balance of $53.0 million. We continually seek opportunities to complete additional acquisitions if we believe the economics are favorable.  

In February 2021, our Board of Directors approved a stock repurchase program that permits the repurchase of up to $75 million of shares of our common stock over a 12-month period beginning February 12, 2021. Through September 30, 2021 we have not repurchased any shares under the 2021 repurchase program and have $75.0 million of remaining capacity under that program.

Historically, our cash flows from operations and warehouse facilities have been sufficient to enable us to meet our short-term liquidity needs and other funding requirements. We believe that cash flows from operations will continue to be sufficient for us to meet our current obligations for the foreseeable future.

Restricted Cash and Pledged Securities

Restricted cash consists primarily of good faith deposits held on behalf of borrowers between the time we enter into a loan commitment with the borrower and the investor purchases the loan. We are generally required to share the risk of any losses associated with loans sold under the Fannie Mae DUS program, our only off-balance sheet arrangement. We are required to secure this obligation by assigning collateral to Fannie Mae. We meet this obligation by assigning pledged securities to Fannie Mae. The amount of collateral required by Fannie Mae is a formulaic calculation at the loan level and considers the balance of the loan, the risk level of the loan, the age of the loan, and the level of risk-sharing. Fannie Mae requires collateral for Tier 2 loans of 75 basis points, which is funded over a 48-month period that begins upon delivery

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of the loan to Fannie Mae. Collateral held in the form of money market funds holding U.S. Treasuries is discounted 5%, and Agency MBS are discounted 4% for purposes of calculating compliance with the collateral requirements. As of September 30, 2021, we held substantially all of our restricted liquidity in Agency MBS in the aggregate amount of $97.2 million. Additionally, the majority of the loans for which we have risk-sharing are Tier 2 loans. We fund any growth in our Fannie Mae required operational liquidity and collateral requirements from our working capital.

We are in compliance with the September 30, 2021 collateral requirements as outlined above. As of September 30, 2021, reserve requirements for the September 30, 2021 DUS loan portfolio will require us to fund $64.2 million in additional restricted liquidity over the next 48 months, assuming no further principal paydowns, prepayments, or defaults within our at-risk portfolio. Fannie Mae has assessed the DUS Capital Standards in the past and may make changes to these standards in the future. We generate sufficient cash flows from our operations to meet these capital standards and do not expect any future changes to have a material impact on our future operations; however, any future changes to collateral requirements may adversely impact our available cash.

Under the provisions of the DUS agreement, we must also maintain a certain level of liquid assets referred to as the operational and unrestricted portions of the required reserves each year. We satisfied these requirements as of September 30, 2021.

Sources of Liquidity: Warehouse Facilities

The following table provides information related to our warehouse facilities as of September 30, 2021.

	September 30, 2021
(dollars in thousands)	Committed		Uncommitted		Total Facility		Outstanding
Facility(1)	Amount		Amount		Capacity		Balance		Interest rate(2)
Agency Warehouse Facility #1	$	425,000	$	—	$	425,000	$	277,872	30-day LIBOR plus 1.30%
Agency Warehouse Facility #2		700,000		300,000		1,000,000		346,047	30-day LIBOR plus 1.30%
Agency Warehouse Facility #3		600,000		265,000		865,000		378,624	30-day LIBOR plus 1.30%
Agency Warehouse Facility #4		350,000		—		350,000		136,616	30-day LIBOR plus 1.30%
Agency Warehouse Facility #5		—		1,000,000		1,000,000		885,308	30-day LIBOR plus 1.45%
Agency Warehouse Facility #6		150,000		100,000		250,000		118,124	30-day LIBOR plus 1.40%
Agency Warehouse Facility #7		150,000		50,000		200,000		92,293	30-day LIBOR plus 1.30%
Total National Bank Agency Warehouse Facilities	$	2,375,000	$	1,715,000	$	4,090,000	$	2,234,884
Fannie Mae repurchase agreement, uncommitted line and open maturity	$	—	$	1,500,000	$	1,500,000	$	482,861
Total Agency Warehouse Facilities		2,375,000		3,215,000		5,590,000		2,717,745
Interim Warehouse Facility #1	$	135,000	$	—	$	135,000	$	—	30-day LIBOR plus 1.90%
Interim Warehouse Facility #2		100,000		—		100,000		—	30-day LIBOR plus 1.65% to 2.00%
Interim Warehouse Facility #3		200,000		—		200,000		111,817	30-day LIBOR plus 1.75% to 3.25%
Interim Warehouse Facility #4		19,810		—		19,810		19,810	30-day LIBOR plus 3.00%
Total National Bank Interim Warehouse Facilities		454,810		—		454,810		131,627
Total warehouse facilities	$	2,829,810	$	3,215,000	$	6,044,810	$	2,849,372

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

(2) Interest rate presented does not include the effect of interest rate floors.

Agency Warehouse Facilities

As of September 30, 2021, we had seven warehouse lines of credit in the aggregate amount of $4.1 billion with certain national banks and a $1.5 billion uncommitted facility with Fannie Mae (collectively, the “Agency Warehouse Facilities”) that we use to fund substantially all of our loan originations. The seven warehouse facilities are revolving commitments we expect to renew annually (consistent with industry practice), and the Fannie Mae facility is provided on an uncommitted basis without a specific maturity date. Our ability to originate mortgage loans depends upon our ability to secure and maintain these types of short-term financing agreements on acceptable terms.

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Agency Warehouse Facility #1:

We have a warehousing credit and security agreement with a national bank for a $425.0 million committed warehouse line that is scheduled to mature on December 24, 2021. The agreement provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans. Advances are made at 100% of the loan balance and borrowings under this line bear interest at the 30-day London Interbank Offered Rate (“LIBOR”) plus 130 basis points. During the second quarter of 2021, we executed an amendment that decreased the borrowing rate to 30-day LIBOR plus 130 basis points from 30-day LIBOR plus 140 basis points and decreased the 30-day LIBOR floor to zero from 25 basis points. In October 2021, we executed an amendment to the agreement that extended the maturity date to December 24, 2021. No other material modifications have been made to the agreement in 2021.

Agency Warehouse Facility #2:

We have a warehousing credit and security agreement with a national bank for a $700.0 million committed warehouse line that is scheduled to mature on April 14, 2022. The committed warehouse facility provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans. Advances are made at 100% of the loan balance, and borrowings under this line bear interest at the 30-day LIBOR plus 130 basis points. In addition to the committed borrowing capacity, the agreement provides $300.0 million of uncommitted borrowing capacity that bears interest at the same rate as the committed facility. During the second quarter of 2021, we executed amendments that extended the maturity date thereunder until April 14, 2022 and decreased the borrowing rate to 30-day LIBOR plus 130 basis points from 30-day LIBOR plus 140 basis points. No other material modifications have been made to the agreement during 2021.

Agency Warehouse Facility #3:

We have a $600.0 million committed warehouse credit and security agreement with a national bank that is scheduled to mature on May 14, 2022. The committed warehouse facility provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans. Advances are made at 100% of the loan balance, and the borrowings under the warehouse agreement bear interest at a rate of 30-day LIBOR plus 130 basis points. During the second quarter of 2021, we executed amendments that extended the maturity date to May 14, 2022 for the committed borrowing capacity. Additionally, the amendments increased the borrowing rate to 30-day LIBOR plus 130 basis points from 30-day LIBOR plus 115 basis points and decreased the 30-day LIBOR floor to zero basis points from 50 basis points. No other material modifications have been made to the agreement during 2021.

Agency Warehouse Facility #4:

We have a $350.0 million committed warehouse credit and security agreement with a national bank that is scheduled to mature on June 22, 2022. The warehouse facility provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, FHA, and defaulted HUD and FHA loans and has a sublimit of $75.0 million to fund defaulted HUD and FHA loans. Advances are made at 100% of the loan balance, and the borrowings under the warehouse agreement bear interest at a rate of 30-day LIBOR plus 130 basis points. During the second quarter of 2021, we executed an amendment that extended the maturity date thereunder until June 22, 2022, decreased the borrowing rate to 30-day LIBOR plus 130 basis points from 30-day LIBOR plus 140 basis points, and decreased the 30-day LIBOR floor to five basis points from 25 basis points. No other material modifications have been made to the agreement during 2021.

Agency Warehouse Facility #5:

We have a master repurchase agreement with a national bank for a $1.0 billion uncommitted advance credit facility that is scheduled to mature on September 15, 2022. The facility provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans. Advances are made at 100% of the loan balance, and the borrowings under the repurchase agreement bear interest at a rate of 30-day LIBOR plus 145 basis points. During the third quarter of 2021, we executed amendments to the agreement related to Agency Warehouse Facility #5 that extended the maturity date to September 15, 2022. No other material modifications have been made to the agreement during 2021.

Agency Warehouse Facility #6:

During the first quarter of 2021, we entered into an agreement with a national bank to establish Agency Warehouse Facility #6. The facility has a $150.0 million committed borrowing capacity and provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans under the facility. Advances are made at 100% of the loan balance, and the borrowings under the warehouse agreement bear interest at a

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rate of LIBOR plus 140 basis points. The agreement also provides $100.0 million of uncommitted borrowing capacity that bears interest at the same rate as the committed facility. The negative and financial covenants of the warehouse agreement substantially conform to those of the warehouse agreement for Agency Warehouse Facility #1, as described in our 2020 Form 10-K. No material modifications have been made to the agreement during 2021.

         Agency Warehouse Facility #7:

During the third quarter of 2021, we entered into an agreement to establish Agency Warehouse Facility #7. The warehouse facility has a $150.0 million maximum committed borrowing capacity, provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans, and matures on August 24, 2022. Advances are made at 100% of the loan balance, and the borrowings under the warehouse agreement bear interest at a rate of 30-day LIBOR plus 130 basis points. In addition to the committed borrowing capacity, the agreement provides $50.0 million of uncommitted borrowing capacity that bears interest at the same rate as the committed facility. The negative and financial covenants of the warehouse agreement substantially conform to those of the warehouse agreement for Agency Warehouse Facility #1, as described in our 2020 Form 10-K. No material modifications have been made to the agreement during 2021.

Uncommitted Agency Warehouse Facility:

We have a $1.5 billion uncommitted facility with Fannie Mae under its ASAP funding program. After approval of certain loan documents, Fannie Mae will fund loans after closing, and the advances are used to repay the primary warehouse line. Fannie Mae will advance 99% of the loan balance. There is no expiration date for this facility. The uncommitted facility has no specific negative or financial covenants.

Interim Warehouse Facilities

To assist in funding loans held for investment under the Interim Loan Program, we have four warehouse facilities with certain national banks in the aggregate amount of $454.8 million as of September 30, 2021 (“Interim Warehouse Facilities”). Consistent with industry practice, three of these facilities are revolving commitments we expect to renew annually or bi-annually, and one is a commitment that matures according to the maturity date of the underlying loan it finances. Our ability to originate loans held for investment depends upon our ability to secure and maintain these types of short-term financings on acceptable terms.

Interim Warehouse Facility #1:

We have a $135.0 million committed warehouse line agreement that is scheduled to mature on May 14, 2022. The facility provides us with the ability to fund first mortgage loans on multifamily real estate properties for periods of up to three years, using available cash in combination with advances under the facility. Borrowings under the facility are full recourse to the Company and bear interest at 30-day LIBOR plus 190 basis points. Repayments under the credit agreement are interest-only, with principal repayments made upon the earlier of the refinancing of an underlying mortgage or the maturity of an advance under the credit agreement. During the second quarter of 2021, we executed amendments that extended the maturity date to May 14, 2022 and decreased the 30-day LIBOR floor to zero basis points from 50 basis points. No other material modifications have been made to the agreement during 2021.

Interim Warehouse Facility #2:

We have a $100.0 million committed warehouse line agreement that is scheduled to mature on December 13, 2021. The agreement provides us with the ability to fund first mortgage loans on multifamily real estate properties for periods of up to three years, using available cash in combination with advances under the facility. Borrowings under the facility are full recourse to the Company. All borrowings originally bear interest at 30-day LIBOR plus 165 to 200 basis points (“the spread”). The spread varies according to the type of asset the borrowing finances. The lender retains a first priority security interest in all mortgages funded by such advances on a cross-collateralized basis. Repayments under the credit agreement are interest-only, with principal repayments made upon the earlier of the refinancing of an underlying mortgage or the maturity of an advance under the credit agreement. No material modifications have been made to the agreement during 2021.

Interim Warehouse Facility #3:

We have a $200.0 million repurchase agreement with a national bank that is scheduled to mature on September 29, 2022. The agreement provides us with the ability to fund first mortgage loans on multifamily real estate properties for periods of up to three years, using available

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cash in combination with advances under the facility. Borrowings under the facility are full recourse to the Company. The borrowings under the agreement bear interest at a rate of 30-day LIBOR plus 175 to 325 basis points. The spread varies according to the type of asset the borrowing finances. Repayments under the credit agreement are interest-only, with principal repayments made upon the earlier of the refinancing of an underlying mortgage or the maturity of an advance under the credit agreement. During the third quarter of 2021, we executed amendments to the agreement related to Interim Warehouse Facility #3 that extended the maturity date to September 29, 2022, increased the committed borrowing capacity to $200.0 million, and eliminated the uncommitted borrowing capacity. No other material modifications have been made to the agreement during 2021.

Interim Warehouse Facility #4:

We have a $19.8 million committed warehouse loan and security agreement with a national bank that funds one specific loan. The agreement provides for a maturity date to coincide with the earlier of the maturity date for the underlying loan or the stated maturity date of October 1, 2022. Borrowings under the facility are full recourse and bear interest at 30-day LIBOR plus 300 basis points, with a floor of 450 basis points. Repayments under the credit agreement are interest-only, with principal repayments made upon the earlier of the refinancing of an underlying mortgage or the maturity of an advance under the credit agreement. The committed warehouse loan and security agreement has only two financial covenants, both of which are similar to the other Interim Warehouse Facilities. We may request additional capacity under the agreement to fund specific loans. In October 2021, we executed an amendment related to Interim Warehouse Facility #4 that extended the stated maturity date to October 1, 2022. No other material modifications have been made to the agreement during 2021.

The warehouse agreements above contain cross-default provisions, such that if a default occurs under any of our warehouse agreements, generally the lenders under our other warehouse agreements could also declare a default. As of September 30, 2021, we were in compliance with all of our warehouse line covenants.

We believe that the combination of our capital and warehouse facilities is adequate to meet our loan origination needs.

Note Payable

On November 7, 2018, we entered into a senior secured credit agreement (the “Credit Agreement”) that amended and restated our prior credit agreement and provided for a $300.0 million term loan (the “Term Loan”). The Term Loan was issued at a 0.5% discount, has a stated maturity date of November 7, 2025, and bears interest at 30-day LIBOR plus 200 basis points. At any time, we may also elect to request one or more incremental term loan commitments not to exceed $150.0 million, provided that the total indebtedness would not cause the leverage ratio (as defined in the Credit Agreement) to exceed 2.00 to 1.00.

We are obligated to repay the aggregate outstanding principal amount of the Term Loan in consecutive quarterly installments equal to $0.7 million on the last business day of each of March, June, September, and December. The Term Loan also requires certain other prepayments in certain circumstances pursuant to the terms of the Credit Agreement. The final principal installment of the Term Loan is required to be paid in full on November 7, 2025 (or, if earlier, the date of acceleration of the Term Loan pursuant to the terms of the Credit Agreement) and will be in an amount equal to the aggregate outstanding principal of the Term Loan on such date (together with all accrued interest thereon).

Our obligations under the Credit Agreement are guaranteed by Walker & Dunlop Multifamily, Inc., Walker & Dunlop, LLC, Walker & Dunlop Capital, LLC, and W&D BE, Inc., each of which is a direct or indirect wholly owned subsidiary of the Company (together with the Company, the “Loan Parties”), pursuant to the Amended and Restated Guarantee and Collateral Agreement entered into on November 7, 2018 among the Loan Parties and Wells Fargo Bank, National Association, as administrative agent (the “Guarantee and Collateral Agreement”). Subject to certain exceptions and qualifications contained in the Credit Agreement, the Company is required to cause any newly created or acquired subsidiary, unless such subsidiary has been designated as an Excluded Subsidiary (as defined in the Credit Agreement) by the Company in accordance with the terms of the Credit Agreement, to guarantee the obligations of the Company under the Credit Agreement and become a party to the Guarantee and Collateral Agreement. The Company may designate a newly created or acquired subsidiary as an Excluded Subsidiary, so long as certain conditions and requirements provided for in the Credit Agreement are met. As of September 30, 2021, the outstanding unpaid principal balance of the Term Loan was $292.5 million.

The note payable and the warehouse facilities are senior obligations of the Company. As of September 30, 2021, we were in compliance with all such covenants related to the Credit Agreement.

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To allow us to fund the acquisition of Alliant, we are currently in the process of refinancing and upsizing our Note payable (“existing term loan”) to $600 million. We have received commitments well in excess of the $600 million targeted amount. The new term loan is expected to close during the fourth quarter of 2021 simultaneously with the closing of the acquisition of Alliant. The proceeds from the new term loan will be used to repay the existing term loan and to fund a significant amount of the $361 million cash due at the closing of the acquisition of Alliant. The new term loan is expected to have a term of seven years.

Credit Quality and Allowance for Risk-Sharing Obligations

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

	September 30,
(dollars in thousands)	2021			2020
Key Credit Metrics
Risk-sharing servicing portfolio:
Fannie Mae Full Risk	$	44,069,885		$	37,018,792
Fannie Mae Modified Risk		8,235,475			9,165,490
Freddie Mac Modified Risk		36,883			52,685
Total risk-sharing servicing portfolio	$	52,342,243		$	46,236,967
Non-risk-sharing servicing portfolio:
Fannie Mae No Risk	$	12,593		$	40,267
Freddie Mac No Risk		38,002,131			35,673,424
GNMA - HUD No Risk		9,894,893			9,639,820
Brokered		13,429,801			11,513,521
Total non-risk-sharing servicing portfolio	$	61,339,418		$	56,867,032
Total loans serviced for others	$	113,681,661		$	103,103,999
Interim loans (full risk) servicing portfolio		238,713			273,754
Total servicing portfolio unpaid principal balance	$	113,920,374		$	103,377,753
Interim Program JV Managed Loans (1)		918,518			639,466
At risk servicing portfolio (2)	$	48,209,532		$	41,848,548
Maximum exposure to at risk portfolio (3)		9,784,054			8,497,807
Defaulted loans		48,481			48,481
Defaulted loans as a percentage of the at-risk portfolio		0.10	%		0.12	%
Allowance for risk-sharing as a percentage of the at-risk portfolio		0.13			0.17
Allowance for risk-sharing as a percentage of maximum exposure		0.63			0.83

(1) As of September 30, 2021, this balance consists entirely of Interim Program JV managed loans. As of September 30, 2020, this balance consists of $73.3 million of loans serviced directly for the Interim Program JV partner and $566.1 million of Interim Program JV managed loans. We indirectly share in a portion of the risk of loss associated with Interim Program JV managed loans through our 15% equity ownership in the Interim Program JV. We have no exposure to risk of loss for the loans serviced directly for the Interim Program JV partner. The balance of this line is included as a component of assets under management in the Supplemental Operating Data table above.

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

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.

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

Fannie Mae DUS risk-sharing obligations are based on a tiered formula and represent substantially all of our risk-sharing activities. The risk-sharing tiers and the amount of the risk-sharing obligations we absorb under full risk-sharing are provided below. Except as described in the following paragraph, the maximum amount of risk-sharing obligations we absorb at the time of default is generally 20% of the origination unpaid principal balance (“UPB”) of the loan.

Risk-Sharing Losses	Percentage Absorbed by Us
First 5% of UPB at the time of loss settlement	100%
Next 20% of UPB at the time of loss settlement	25%
Losses above 25% of UPB at the time of loss settlement	10%
Maximum loss	20% of origination UPB

Fannie Mae can double or triple our risk-sharing obligation if the loan does not meet specific underwriting criteria or if a loan defaults within 12 months of its sale to Fannie Mae. We may request modified risk-sharing at the time of origination, which reduces our potential risk-sharing obligation from the levels described above.

We use several techniques to manage our risk exposure under the Fannie Mae DUS risk-sharing program. These techniques include maintaining a strong underwriting and approval process, evaluating and modifying our underwriting criteria given the underlying multifamily housing market fundamentals, limiting our geographic market and borrower exposures, and electing the modified risk-sharing option under the Fannie Mae DUS program.

The “Business” section of “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains a discussion of the risk-sharing caps we have with Fannie Mae.

We regularly monitor the credit quality of all loans for which we have a risk-sharing obligation. Loans with indicators of underperforming credit are placed on a watch list, assigned a numerical risk rating based on our assessment of the relative credit weakness, and subjected to additional evaluation or loss mitigation. Indicators of underperforming credit include poor financial performance, poor physical condition, poor management, and delinquency. A collateral-based reserve is recorded when it is probable that a risk-sharing loan will foreclose or has foreclosed, and a reserve for estimated credit losses and a guaranty obligation are recorded for all other risk-sharing loans.

As a result of the onset of the pandemic and the resulting forecasts for significant unemployment rates for the remainder of 2020, we adjusted the loss rate for the forecast period CECL reserve, resulting in a total allowance for risk-sharing obligation of $70.5 million as of September 30, 2020, or 17 basis points of the at-risk balance. During the first three quarters of 2021, economic conditions improved significantly, with reported unemployment rates and forecasts for future unemployment rates at improved rates compared to both December 31, 2020 and September 30, 2020. In response to the improving unemployment statistics, we adjusted the loss rate for the forecast period downwards during 2021, contributing $13.0 million of the $13.7 million benefit for risk-sharing obligations and a decrease in the allowance for risk-sharing obligations to $61.6 million as of September 30, 2021 from $75.3 million as of December 31, 2020, or 13 basis points and 17 basis points of the at-risk balance as of September 30, 2021 and December 31, 2020, respectively.

As of September 30, 2021, and 2020, two loans with an aggregate UPB of $48.5 million in our at-risk portfolio were in default. We had a provision for risk-sharing obligations of $1.3 million for both the three months ended September 30, 2021 and 2020. For the three months ended September 30, 2021 and 2020, the provision was entirely the result of increases in the balance of the at-risk servicing portfolio. We had a benefit for risk-sharing obligations of $13.7 million for the nine months ended September 30, 2021 compared to a provision for risk-sharing obligations of $28.9 million for the nine months ended September 30, 2020. For the nine months ended September 30, 2021, the majority of the benefit for risk-sharing obligations was the result of a decrease in the CECL reserve due to improved unemployment forecasts partially offset by increases in the balance of the at-risk servicing portfolio. For the nine months ended September 30, 2020, the majority of the provision was the result of an increase in the forecasted losses resulting from the pandemic.

We have never been required to repurchase a loan.

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New/Recent Accounting Pronouncements

As seen in NOTE 2 in the financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q, there are no accounting pronouncements that the Financial Accounting Standards Board has issued and that have the potential to impact us but have not yet been adopted by us as of September 30, 2021.

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Item 3. Quantitative and Qualitative Disclosure About Market Risk

Interest Rate Risk

For loans held for sale to Fannie Mae, Freddie Mac, and HUD, we are not currently exposed to unhedged interest rate risk during the loan commitment, closing, and delivery processes. The sale or placement of each loan to an investor is negotiated prior to closing on the loan with the borrower, and the sale or placement is typically effectuated within 60 days of closing. The coupon rate for the loan is set at the same time we establish the interest rate with the investor.

Some of our assets and liabilities are subject to changes in interest rates. Earnings from escrows generally track LIBOR. 30-day LIBOR as of September 30, 2021 and 2020 was eight basis points and 15 basis points, respectively. The following table shows the impact on our annual escrow earnings due to a 100-basis point increase and decrease in 30-day LIBOR based on our escrow balances outstanding at each period end. A portion of these changes in earnings as a result of a 100-basis point increase in the 30-day LIBOR would be delayed several months due to the negotiated nature of some of our escrow arrangements.

	As of September 30,
Change in annual escrow earnings due to: (in thousands)	2021		2020
100 basis point increase in 30-day LIBOR	$	29,824	$	27,521
100 basis point decrease in 30-day LIBOR(1)		(2,357)		(3,500)

The borrowing cost of our warehouse facilities used to fund loans held for sale and loans held for investment is based on LIBOR. The interest income on our loans held for investment is based on LIBOR. The LIBOR reset date for loans held for investment is the same date as the LIBOR reset date for the corresponding warehouse facility. The following table shows the impact on our annual net warehouse interest income due to a 100-basis point increase and decrease in 30-day LIBOR, based on our warehouse borrowings outstanding at each period end. The changes shown below do not reflect an increase or decrease in the interest rate earned on our loans held for sale.

	As of September 30,
Change in annual net warehouse interest income due to: (in thousands)	2021		2020
100 basis point increase in 30-day LIBOR	$	(26,212)	$	(29,530)
100 basis point decrease in 30-day LIBOR (1)		1,684		3,695

All of our corporate debt is based on 30-day LIBOR. The following table shows the impact on our annual earnings due to a 100-basis point increase and decrease in 30-day LIBOR based on our note payable balance outstanding at each period end.

	As of September 30,
Change in annual income from operations due to: (in thousands)	2021		2020
100 basis point increase in 30-day LIBOR	$	(2,925)	$	(2,955)
100 basis point decrease in 30-day LIBOR (1)		235		433

(1) The decrease is limited to the 30-day LIBOR rate as of period end as 30-day LIBOR was less than 100 basis points.

LIBOR Transition

In the first quarter of 2021, the United Kingdom’s Financial Conduct Authority, the regulator for the administration of LIBOR, announced specific dates for its intention to stop publishing LIBOR rates, including the 30-day LIBOR (our primary reference rate) which is scheduled for   June 30, 2023. It is expected that legacy LIBOR-based loans will transition to Secured Overnight Financing Rate (“SOFR”) before June 30, 2023. We continue to monitor our LIBOR exposure, review legal contracts and assess fallback language impacts, engage with our clients and other stakeholders, and monitor developments associated with LIBOR alternatives.  

Market Value Risk

The fair value of our MSRs is subject to market risk. A 100-basis point increase or decrease in the weighted-average discount rate would decrease or increase, respectively, the fair value of our MSRs by approximately $37.2 million as of September 30, 2021, compared to $29.1

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million as of September 30, 2020. Our Fannie Mae and Freddie Mac servicing engagements provide for prepayment fees in the event of a voluntary prepayment prior to the expiration of the prepayment protection period. Our servicing contracts with institutional investors and HUD do not require them to provide us with prepayment fees. As of September 30, 2021, 89% of the servicing fees are protected from the risk of prepayment through prepayment provisions compared to 87% as of September 30, 2020. Given this significant level of prepayment protection, we do not hedge our servicing portfolio for prepayment risk.

Item 4. Controls and Procedures

As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of our management, including the principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934.

Based on that evaluation, the principal executive officer and principal financial officer concluded that the design and operation of these disclosure controls and procedures as of the end of the period covered by this report were effective to provide reasonable assurance that information required to be disclosed in our reports under the Securities and Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, we may be party to various claims and litigation, none of which we believe is material. We cannot predict the outcome of any pending litigation and may be subject to consequences that could include fines, penalties and other costs, and our reputation and business may be impacted. Our management believes that any liability that could be imposed on us in connection with the disposition of any pending lawsuits would not have a material adverse effect on our business, results of operations, liquidity, or financial condition.

Item 1A. Risk Factors

We have included in Part I, Item 1A of our 2020 Form 10-K and in Part II, Item 1A of our Form 10-Q for the quarterly period ended June 30, 2021, descriptions of certain risks and uncertainties that could affect our business, future performance, or financial condition (the “Risk Factors”). Except as described below, there have been no material changes from the disclosures provided in the 2020 Form 10-K or our Form 10-Q for the quarterly period ended June 30, 2021 with respect to the Risk Factors. Investors should consider the Risk Factors prior to making an investment decision with respect to the Company’s stock.

Our acquisition of Alliant may not be completed on the terms or timeline currently contemplated, or at all.

On August 30, 2021, we entered into a Purchase Agreement to acquire Alliant and certain of its affiliates (the “Acquisition”).  The closing of the Acquisition is subject to certain conditions, including required regulatory approvals and consents of Alliant’s investor and lender partners. It is not certain that these conditions will be met or waived, that the required approvals will be obtained, or that we will be able to successfully consummate the Acquisition as provided for in the Purchase Agreement, or at all. We face risks and uncertainties due both to the pendency of the Acquisition as well as the potential failure to consummate the Acquisition, including:

● We may not realize any or all of the potential benefits of the Acquisition that could result from acquiring Alliant’s businesses;

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● We will remain liable for significant transaction costs, including legal, financial advisory, accounting, and other costs relating to the Acquisition, even if it is not consummated;

● If the Purchase Agreement is terminated before we complete the Acquisition, under some circumstances, we may have to pay a termination fee of $20.0 million; and

● The attention of our management and employees may be diverted from day-to-day operations.

The occurrence of any of these events individually or in combination could have a material adverse effect on our stock price, business and cash flows, results of operations and financial position.

We may not be able to successfully integrate Alliant’s businesses into the Company in a timely fashion or at all and may encounter significant unexpected difficulties in integrating the businesses.

The Company and Alliant are independent organizations, each utilizing different systems, controls, processes and procedures. Following completion of the Acquisition, our ability to fully realize the anticipated benefits of the Acquisition will depend, to a large extent, on our ability to integrate Alliant’s businesses into the Company. The overall integration may result in unanticipated problems, expenses, liabilities, loss of client relationships, expenditure of resources and distraction of management and other employees. The difficulties of combining the operations include:

● Management’s attention may be diverted to integration matters;

● We may devote significant resources to integration, including relating to information technology;

● Alliant is a privately held company and we may have difficulties integrating financial accounting systems, internal controls and standards, procedures and policies;

● We may have difficulties managing the expanded operations of a larger and more complex company;

● We may be unable to retain key personnel; and

● We may have difficulties addressing the differences in the corporate cultures and management philosophies of the two companies while assimilating Alliant’s employees.

Therefore, there can be no assurance that the integration of Alliant’s businesses will result in the realization of the full benefits anticipated from the Acquisition.

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

Issuer Purchases of Equity Securities

Under the 2020 Equity Incentive Plan, subject to the Company’s approval, grantees have the option of electing to satisfy minimum tax withholding obligations at the time of vesting or exercise by allowing the Company to withhold and purchase the shares of stock otherwise issuable to the grantee. During the quarter ended September 30, 2021, we purchased 14 thousand shares to satisfy grantee tax withholding obligations on share-vesting events. During the first quarter of 2021, the Company’s Board of Directors approved a stock repurchase program that permits the repurchase of up to $75.0 million of the Company’s common stock over a 12-month period beginning on February 12, 2021. During the quarter ended September 30, 2021 we did not repurchase any shares under this share repurchase program. The Company had $75.0 million of authorized share repurchase capacity remaining as of September 30, 2021. The following table provides information regarding common stock repurchases for the quarter ended September 30, 2021:

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				Total Number of	Approximate
				Shares Purchased as	Dollar Value
	Total Number	Average		Part of Publicly	of Shares that May
	of Shares	Price Paid		Announced Plans	Yet Be Purchased Under
Period	Purchased	per Share		or Programs	the Plans or Programs
July 1-31, 2021	4,447		104.46	—	$	75,000
August 1-31, 2021	661		103.48	—		75,000
September 1-30, 2021	8,605		110.50	—		75,000
3rd Quarter	13,713	$	108.21	—		75,000

On July 13, 2021, we issued 50,219 shares (the “Shares”) of our common stock as partial consideration for our purchase of the controlling interest of Zelman. All of the Shares are prohibited from being transferred until July 13, 2022. The issuance of the Shares was deemed to be exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

(a) Exhibits:

2.1		Contribution Agreement, dated as of October 29, 2010, by and among Mallory Walker, Howard W. Smith, William M. Walker, Taylor Walker, Richard C. Warner, Donna Mighty, Michael Yavinsky, Edward B. Hermes, Deborah A. Wilson and Walker & Dunlop, Inc. (incorporated by reference to Exhibit 2.1 to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (File No. 333-168535) filed on December 1, 2010)
2.2		Contribution Agreement, dated as of October 29, 2010, between Column Guaranteed LLC and Walker & Dunlop, Inc. (incorporated by reference to Exhibit 2.2 to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (File No. 333-168535) filed on December 1, 2010)
2.3		Amendment No. 1 to Contribution Agreement, dated as of December 13, 2010, by and between Walker & Dunlop, Inc. and Column Guaranteed LLC (incorporated by reference to Exhibit 2.3 to Amendment No. 6 to the Company’s Registration Statement on Form S-1 (File No. 333-168535) filed on December 13, 2010)
2.4		Purchase Agreement, dated June 7, 2012, by and among Walker & Dunlop, Inc., Walker & Dunlop, LLC, CW Financial Services LLC and CWCapital LLC (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K/A filed on June 15, 2012)
2.5	*†	Purchase Agreement, dated as of August 30, 2021, by and among Walker & Dunlop, Inc., WDAAC, LLC, Alliant Company, LLC, Alliant Capital, Ltd., Alliant Fund Asset Holdings, LLC, Alliant Asset Management Company, LLC, Alliant Strategic Investments II, LLC, ADC Communities, LLC, ADC Communities II, LLC, AFAH Finance, LLC, Alliant Fund Acquisitions, LLC, Vista Ridge 1, LLC, Alliant, Inc., Alliant ADC, Inc., Palm Drive Associates, LLC, and Shawn Horwitz
3.1		Articles of Amendment and Restatement of Walker & Dunlop, Inc. (incorporated by reference to Exhibit 3.1 to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (File No. 333-168535) filed on December 1, 2010)
3.2		Amended and Restated Bylaws of Walker & Dunlop, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 8, 2018)
4.1		Specimen Common Stock Certificate of Walker & Dunlop, Inc. (incorporated by reference to Exhibit 4.1 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (File No. 333-168535) filed on September 30, 2010)
4.2		Registration Rights Agreement, dated December 20, 2010, by and among Walker & Dunlop, Inc. and Mallory Walker, Taylor Walker, William M. Walker, Howard W. Smith, III, Richard C. Warner, Donna Mighty, Michael Yavinsky, Ted Hermes, Deborah A. Wilson and Column Guaranteed LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 27, 2010)
4.3		Stockholders Agreement, dated December 20, 2010, by and among William M. Walker, Mallory Walker, Column Guaranteed LLC and Walker & Dunlop, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 27, 2010)
4.4		Piggy-Back Registration Rights Agreement, dated June 7, 2012, by and among Column Guaranteed, LLC, William M. Walker, Mallory Walker, Howard W. Smith, III, Deborah A. Wilson, Richard C. Warner, CW Financial Services LLC and Walker & Dunlop, Inc. (incorporated by reference to Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012 filed on August 9, 2012)
4.5		Voting Agreement, dated as of June 7, 2012, by and among Walker & Dunlop, Inc., Walker & Dunlop, LLC, Mallory Walker, William M. Walker, Richard Warner, Deborah Wilson, Richard M. Lucas, and Howard W. Smith, III, and CW Financial Services LLC (incorporated by reference to Annex C of the Company’s proxy statement filed on July 26, 2012)
4.6		Voting Agreement, dated as of June 7, 2012, by and among Walker & Dunlop, Inc., Walker & Dunlop, LLC, Column Guaranteed, LLC and CW Financial Services LLC (incorporated by reference to Annex D of the Company’s proxy statement filed on July 26, 2012)
10.1		Amendment No. 2 to Master Repurchase Agreement, dated as of August 23, 2021, by and among Walker & Dunlop, LLC, Walker & Dunlop, Inc., and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 26, 2021).
10.2		Amendment No. 3 to Master Repurchase Agreement, dated as of September 30, 2021, by and among Walker & Dunlop, LLC, Walker & Dunlop, Inc., and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 5, 2021).
10.3		Amended and Restated Letter, dated as of September 30, 2021, by and among Walker & Dunlop, LLC, Walker & Dunlop, Inc., and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 5, 2021).
31.1	*	Certification of Walker & Dunlop, Inc.'s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	*	Certification of Walker & Dunlop, Inc.'s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	**	Certification of Walker & Dunlop, Inc.'s Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	*	Inline XBRL Taxonomy Extension Schema Document
101.CAL	*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained an Exhibit 101)

*: Filed herewith.

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**: Furnished herewith. Information in this Form 10-Q furnished herewith shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that Section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

†: Schedules (or similar attachments) have been omitted from this exhibit pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish copies of any such schedules (or similar attachments) to the Securities and Exchange Commission upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Walker & Dunlop, Inc.
Date: November 4, 2021	By:	/s/ William M. Walker
		William M. Walker
		Chairman and Chief Executive Officer
Date: November 4, 2021	By:	/s/ Stephen P. Theobald
		Stephen P. Theobald
		Executive Vice President and Chief Financial Officer

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