Walker & Dunlop Inc.
11/06/2025 | Press release | Distributed by Public on 11/06/2025 05:21
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
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, 2024 ("2024 Form 10-K").
Forward-Looking Statements
Some of the statements in this Form 10-Q of Walker & Dunlop, Inc. and subsidiaries (the "Company," "Walker & Dunlop," "we," "us," or "our") may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and 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, recapitalization, 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, policies, and programs, tax laws and rates, tariffs and global trade policies, 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; |
| ● | trends in the commercial real estate finance market, commercial real estate values, the credit and capital markets, or the general economy, including rent growth and demand for multifamily housing and low-income housing tax credits; |
| ● | general volatility of the capital markets and the market price of our common stock; and |
| ● | other risks and uncertainties associated with our business described in our 2024 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. |
While forward-looking statements reflect our good-faith projections, assumptions, and expectations, they do not guarantee 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 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 Part I, Item 1A. Risk Factors in our 2024 Form 10-K.
Business
Overview
We are a leading commercial real estate (i) services, (ii) finance, and (iii) technology company in the United States. Through investments in people, brand, and technology, we have built a diversified suite of commercial real estate services to meet the needs of our customers. Our services include (i) multifamily lending, property sales, appraisal, valuation, and research, (ii) commercial real estate debt brokerage and advisory services, (iii) investment management, and (iv) affordable housing lending, property sales, tax credit syndication, development, and investment. We leverage our technological resources and investments to (i) provide an enhanced experience for our customers, (ii) identify refinancing and other financial and investment opportunities for new and existing customers, and (iii) drive efficiencies in our internal processes. We believe our people, brand, and technology provide us with a competitive advantage, as evidenced by 68% of refinancing volumes coming from new loans to us and 16% of total transaction volumes coming from new customers for the nine months ended September 30, 2025.
We are one of the largest service providers to multifamily operators in the country. We originate, sell, and service a range of multifamily and other commercial real estate financing products, including loans through the programs of the GSEs, and the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (together with Ginnie Mae, "HUD") (collectively, the "Agencies"). We retain servicing rights and asset management responsibilities on substantially all loans that we originate for the Agencies' programs. We broker, and occasionally service, loans to commercial real estate operators 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 provide multifamily property sales brokerage and appraisal and valuation services and engage in commercial real estate investment management activities, including a focus on the affordable housing sector through low-income housing tax credit ("LIHTC") syndication. We engage in the development of affordable housing projects through joint ventures with real estate developers. We provide housing market research and real estate-related investment banking and advisory services, which provide 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. We also underwrite, service, and asset-manage shorter-term loans on transitional commercial real estate. Most of these shorter-term loans are closed through a joint venture or through separate accounts managed by our investment management subsidiary, Walker & Dunlop Investment Partners, Inc. ("WDIP"). We are a leader in commercial real estate technology through developing and acquiring technology resources that (i) provide innovative solutions and a better experience for our customers, (ii) allow us to drive efficiencies across our internal processes, and (iii) allow us to accelerate growth of our small-balance lending business and our appraisal platform, Apprise by Walker & Dunlop ("Apprise").
Walker & Dunlop, Inc. is a holding company. We conduct the majority of our operations through Walker & Dunlop, LLC, our operating company.
Segments
Our executive leadership team, which functions as our chief operating decision making body, makes decisions and assesses performance based on the following three reportable segments: (i) Capital Markets, (ii) Servicing & Asset Management, and (iii) Corporate. The reportable segments are determined based on the product or service provided and reflect the manner in which management is currently evaluating the Company's financial information. The segments and related services are described in the following paragraphs.
Capital Markets ("CM")
CM provides a comprehensive range of commercial real estate finance products to our customers, including Agency lending, debt brokerage, property sales, appraisal and valuation services, and real estate-related investment banking and advisory services, including housing market research. Our long-established relationships with the Agencies and institutional investors enable us to offer a broad range of loan products and services to our customers. We provide property sales services to owners and developers of multifamily and hospitality properties and commercial real estate appraisals for various lenders and investors. Additionally, we earn subscription fees for our housing related research. The primary services within CM are described below. For additional information on our CM services, refer to Item 1. Business in our 2024 Form 10-K.
Agency Lending
We are one of the leading lenders with the Agencies, where we originate and sell multifamily, manufactured housing communities, student housing, affordable housing, seniors housing, and small-balance multifamily loans.
We recognize Loan origination and debt brokerage fees, net and the Fair value of expected net cash flows from servicing, net of guaranty obligation 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 of guaranty obligation 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 facility borrowing. The sale of the loan is typically completed within 60 days after the loan is closed. We earn net warehouse interest income or expense 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. Our cost of borrowing can exceed the note rate on the loan, resulting in a net interest expense.
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 as 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 after 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 insignificant number of failed deliveries in our history and have incurred insignificant losses on such failed deliveries.
We may be obligated to repurchase loans that are originated for the Agencies' programs if certain representations and warranties that we provide in connection with such originations are breached. NOTE 2 contains disclosures regarding our repurchase activities.
As part of our overall growth strategy, we are focused on significantly growing and investing in our small-balance multifamily lending platform, which involves a high volume of transactions with smaller loan balances. We have supported our small-balance lending platform with acquisitions in the past that have provided data analytics, software development, and technology products in this area.
Debt Brokerage
Our mortgage bankers who focus on debt brokerage are engaged by borrowers to work with banks and various other institutional lenders to find the most appropriate debt and/or equity solution for the borrowers' needs. These financing solutions are funded directly by the lender, and we receive an origination fee for our services. On occasion, we service the loans after they are originated by the lender.
Private Client (Small Balance) Lending
We generally define private clients in the multifamily sector as customers that operate fewer than 2,000 units. Private clients make up a substantial portion of the ownership of multifamily assets in the United States. As part of our overall growth strategy, we are focused on significantly growing and investing in our private client, or small-balance, multifamily lending platform, which involves a high volume of transactions with smaller loan balances. We have supported our small-balance lending platform with acquisitions in the past that have pro-vided data analytics, software development, and technology products to this customer segment. These acquisitions have advanced our technology development capabilities in this area, and our expectation is that the products we develop will be used in our middle market and institutional lending businesses when the products are mature and proven successful.
Property Sales
Through our subsidiary Walker & Dunlop Investment Sales, LLC ("WDIS"), we offer property sales brokerage services to owners and developers of multifamily and hospitality properties that are seeking to sell these properties. 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 assets on behalf of our
clients, and we often are able to provide financing for the purchaser of the properties through the Agencies or debt brokerage entities. 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, geographical reach, and service offerings. Our geographical reach now covers many major markets in the United States, and our service offerings now include sales of land, student, senior housing, hospitality, and affordable properties.
Housing Market Research and Real Estate Investment Banking Services
Our subsidiary Zelman & Associates ("Zelman") is a nationally recognized housing market research and investment banking firm that enhances the information we provide to our clients and increases our access to high-quality market insights in many areas of the housing market, including construction trends, demographics, housing demand and mortgage finance. Zelman generates revenues through the sale of its housing market research data and related publications to banks, investment banks and other financial institutions. Zelman is also a leading independent investment bank providing comprehensive M&A advisory services and capital markets solutions to our clients within the housing and commercial real estate sectors. Prior to the fourth quarter of 2024, we owned a 75% controlling interest in Zelman. During the fourth quarter of 2024, we purchased the remaining 25% interest in Zelman.
Appraisal and Valuation Services
We offer multifamily appraisal and valuation services though our subsidiary, Apprise. Apprise leverages technology and data science to dramatically improve the consistency, transparency, and speed of multifamily property appraisals in the U.S. through our proprietary technology and provides appraisal services to a client list that includes many national commercial real estate lenders. Apprise also provides quarterly and annual valuation services to some of the largest institutional commercial real estate investors in the country. The growth strategy has resulted in an increase in our market share of the appraisal market over the past several years. Additionally, these valuation specialists provide support for and insight to our Agency lending and property sales professionals.
Servicing & Asset Management ("SAM")
SAM focuses on servicing and asset-managing the portfolio of loans we originate and sell to the Agencies, broker to certain life insurance companies, and originate through our principal lending and investing activities, and managing third-party capital invested in tax credit equity funds focused on the affordable housing sector and other commercial real estate. We earn servicing fees for overseeing the loans in our servicing portfolio and asset management fees for the capital invested in our funds. Additionally, we earn revenue through net interest income on the loans held for investment and the associated warehouse interest expense. The primary services within SAM are described below. For additional information on our SAM services, refer to Item 1. Business in our 2024 Form 10-K.
Loan Servicing
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 placement fees on escrow deposits held on behalf of 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 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 Delegated Underwriting and Servicing ("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 and file a claim for mortgage insurance benefits 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.
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 transactions. The full risk-sharing limit in prior years was less than $300 million. Accordingly, loans originated in prior years were subject to risk-sharing at lower levels. In limited circumstances we have agreed, and may in the future agree, with Fannie Mae to increase our loss sharing up to 100% of a loan's UPB in lieu of the risk-sharing agreement described above.
Our servicing fees for risk-sharing loans include compensation for the risk-sharing obligations and are substantially 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. For brokered loans that 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 lower than the servicing fees we earn on Agency loans.
Investment Management
Through our investment management subsidiary, WDIP, we function as the operator of a private commercial real estate investment adviser focused on the management of debt, joint venture ("JV") equity, and preferred equity investments in middle-market commercial real estate. WDIP's current regulatory assets under management ("AUM") of $2.7 billion primarily consist of four equity investment vehicles: Fund IV, Fund V, Fund VI, and Fund VII (the "Equity Funds") and two credit funds, Debt Fund I and Debt Fund II (the "Debt Funds"), as well as separate accounts managed primarily for life insurance companies and a preferred equity JV with a large Canadian pension fund. AUM for the Equity Funds consists of both unfunded commitments and funded investments. WDIP receives management fees based on both unfunded commitments and funded investments in the Equity Funds and on funded investments for the Debt Funds and the other investment vehicles. Additionally, with respect to the Equity Funds and Debt Funds and the preferred equity JV, WDIP receives a percentage of the return above the fund return hurdle rate specified in the fund agreements. We are a co-investor in the Equity Funds, Debt Funds, and certain separate accounts.
Affordable Housing Real Estate Services
We provide affordable housing investment management and real estate services through our subsidiaries, collectively known as Walker & Dunlop Affordable Equity ("WDAE"). WDAE is one of the largest tax credit syndicators and affordable housing developers in the U.S. and provides alternative investment management services focused on the affordable housing sector through LIHTC syndication and development of affordable housing projects through joint ventures. Our affordable housing investment management team works with our developer clients to identify properties that will generate LIHTCs and meet our affordable investors' needs, and forms limited partnership funds ("LIHTC funds") with third-party investors that invest in the limited partnership interests in these properties and earns a syndication fee for these services. WDAE serves as the general partner of these LIHTC funds, and it receives fees, such as asset management fees, and a portion of refinance and disposition proceeds as compensation for its work as the general partner of the fund.
We invest, as the managing or non-managing member of joint ventures, with developers of affordable housing projects that are partially funded through LIHTCs. When possible, WDAE syndicates the LIHTC investment necessary to build properties through these joint venture partnerships. The joint ventures earn developer fees, and we receive the portion of the economic benefits commensurate with our investment in the joint ventures, including cash flows from operating activities and sales/refinancing. Additionally, WDAE invests with third-party investors (either in a fund or joint-venture structure) with the goal of preserving affordability on multifamily properties coming out of the LIHTC 15-year compliance period or on which market forces are unlikely to keep the properties affordable.
Corporate
The Corporate segment consists primarily of our treasury operations and other corporate-level activities. Our treasury operations include monitoring and managing our liquidity and funding requirements, including our corporate debt. Other major corporate-level functions include our equity-method investments, accounting, information technology, legal, human resources, marketing, internal audit, and various other corporate groups. For additional information on our Corporate segment, refer to Item 1. Business in our 2024 Form 10-K.
Basis of Presentation
The accompanying condensed consolidated financial statements include all the accounts of the Company and its wholly owned subsidiaries, and all intercompany transactions have been eliminated.
Critical Accounting Estimates
Our condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), which require 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. The following critical accounting estimates involve significant estimation uncertainty that may have or is reasonably likely to have a material impact on our financial condition or results of operations. Additional information about our critical accounting estimates and other significant accounting policies is discussed in NOTE 2 of the consolidated financial statements in our 2024 Form 10-K.
Mortgage Servicing Rights ("MSRs"). MSRs are recorded at fair value at loan sale. The fair value at loan sale 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, placement fees on escrow accounts ("placement fees"), prepayment speeds, and servicing costs, are discounted using a discounted cash flow model at a rate that reflects the credit and liquidity risk of the MSR over the estimated life of the underlying loan. The discount rates used throughout the periods presented for all MSRs were between 8-14% 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 MSRs assumes no prepayment prior to the expiration of the prepayment provisions and full prepayment of the loan at the point when the prepayment provisions have expired. The estimated net cash flows also include cash flows related to the future earnings from placement of escrow accounts associated with servicing the loans. We include a servicing cost assumption to account for our expected costs to service a loan. The estimated placement fee rate associated with servicing the loan increases estimated cash flows, and the estimated future cost to service the loan decreases estimated future cash flows. The servicing cost assumption has had a de minimis impact on the estimate historically. We record an individual MSR asset for each loan at loan sale.
The assumptions used to estimate the fair value of capitalized MSRs 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 and do not expect to observe significant changes in the foreseeable future, including the assumption that most significantly impacts the estimate: the discount rate. We actively monitor the assumptions used and make adjustments when market conditions change, or other factors indicate such adjustments are warranted. Over the past several years, we have adjusted the placement fee rate assumption several times to reflect the current and expected future earnings rate projected for the life of the MSR, as the interest rate environment has experienced significant volatility over the past several years.
Subsequent to loan origination, the carrying value of the MSR is amortized over the expected life of the loan. 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, primarily for financial statement disclosure purposes. Changes in our discount rate and placement fee rate assumptions on existing and outstanding MSRs may materially impact the fair value of our MSRs (NOTE 3 of the condensed consolidated financial statements details the portfolio-level impact of hypothetical changes in the discount rate and placement fee rate).
Allowance for Risk-Sharing Obligations. This reserve liability (referred to as "allowance") for risk-sharing obligations relates to our Fannie Mae at-risk and an insignificant number of Freddie Mac small balance pre-securitized loans ("SBL") servicing portfolios 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 these servicing portfolios. For those loans that are collectively evaluated, we use 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 used as a foundation for estimating the collective reserves. 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 allowance on loans that are collectively evaluated ("CECL Allowance"). 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 Allowance for the portion of the portfolio collectively evaluated as described further below.
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 based on our historical prepayment and amortization experience. 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 are determined using historical data; however, changes in prepayment and amortization behavior may significantly impact the estimate. We have not experienced significant changes in the runoff rate since we implemented CECL in 2020.
The weighted-average annual loss rate is calculated using a ten-year look-back period, utilizing the average portfolio balance and settled losses for each year. A ten-year lookback period is used as we believe 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. As the weighted-average annual loss rate utilizes a rolling ten-year look-back period, the loss rate used in the estimate often changes as loss data from earlier periods in the look-back period continue to roll off as new loss data are added. For example, in the first quarter of 2024, loss data from earlier periods in the look-back period with significantly higher losses rolled off and were replaced with more recent loss data with fewer losses, resulting in the weighted-average historical annual loss rate changing from 0.6 basis points to 0.3 basis points.
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 based on generally available economic and unemployment forecasts and a blended loss rate from historical periods that we believe reflect the forecasts. We revert to the historical loss rate over a one-year period on a straight-line basis. Over the past couple of years, the loss rate used in the forecast period reflects our expectations of the economic conditions impacting the multifamily sector over the coming year in relation to the historical period. For example, despite our historical loss rate declining from 0.6 basis points as of December 31, 2023 to 0.3 basis points as of March 31, 2024, our forecast-period loss rate remained relatively unchanged from 2.4 basis points as of December 31, 2023, to 2.3 basis points as of March 31, 2024.
NOTE 4 of the condensed consolidated financial statements outlines adjustments made in the loss rates used to account for the expected economic conditions as of a given period and the related impact on the CECL Allowance.
Changes in our expectations and forecasts have materially impacted, and in the future may materially impact, these inputs and the CECL Allowance.
We evaluate our risk-sharing loans on a quarterly basis to determine whether there are loans that are probable of foreclosure. 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 foreclosure based on these factors (or has foreclosed), 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, which 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.
Goodwill. As of both September 30, 2025 and December 31, 2024, we reported goodwill of $868.7 million. Goodwill represents the excess of cost over the identifiable net assets of businesses acquired. Goodwill is assigned to the reporting unit to which the acquisition relates. Goodwill is recognized as an asset and is reviewed for impairment annually as of October 1. Between annual impairment analyses, we perform an evaluation of recoverability, when events and circumstances indicate that it is more likely than not that the fair value of a reporting unit is below its carrying value. Impairment testing requires an assessment of qualitative factors to determine if there are indicators of potential impairment, followed by, if necessary, an assessment of quantitative factors. These factors include, but are not limited to, whether there has been a significant or adverse change in the business climate that could affect the value of an asset and/or significant or adverse changes in cash flow projections or earnings forecasts. These assessments require management to make judgments, assumptions, and estimates about projected cash flows, discount rates and other factors. Due to the challenging macroeconomic conditions in 2024, the projected cash flows for some of our reporting units declined, resulting in goodwill impairment in the fourth quarter of 2024 of $33.0 million that was attributed to reporting
units within the Capital Markets segment. Despite volatility in the financial markets and uncertainty in overall macroeconomic conditions, macroeconomic conditions impacting the multifamily markets remain stable and our multifamily transaction volumes continue to improve.
Overview of Current Business Environment
The Commercial Real Estate ("CRE") sector has experienced a challenging environment shaped by uncertain, and at times volatile, interest rates that have directly impacted the cost and availability of capital over the last three years. Uncertainty impacted growth expectations and asset valuations during the last three years. Macroeconomic uncertainties also impacted overall demand for transactions. Many macroeconomic inputs that impact CRE showed meaningful signs of improvement in the second half of 2024 and thus far in 2025, indicating a recovery may be underway. Each of these factors impacted the CRE transactions market differently thus far in 2025 as follows:
Tariffs and Global Trade Policy. The Trump Administration announced broad tariffs on April 2, 2025 ("Liberation Day"), impacting a wide range of imports. This led to immediate turmoil in the markets, with the S&P 500 falling sharply in the first week following the announcement. The initial reaction was a flight to safety, and yields on US Treasuries fell rapidly, but yields quickly retreated as markets feared the impacts to inflation and global GDP growth. Tariffs were paused a week later, on April 9, 2025, and over the last six months the Trump Administration has renegotiated trade agreements with its trade partners around the globe, stabilizing the immediate fears and easing the uncertainty and volatility introduced into the markets in the immediate aftermath of Liberation Day. While the effects of renegotiated trade agreements and tariffs on inflation and other macroeconomic indicators are still being evaluated by policy markets, Treasury yields-the index rates for CRE debt transactions-have stabilized, with 10-year bonds settling into a range of 4.0% to 4.4% during the third quarter of 2025.
Monetary Policy & Cost of Capital. The Federal Open Market Committee ("FOMC") hiked interest rates aggressively beginning in 2022, materially increasing Treasury yields and the cost of capital for CRE operators. Higher borrowing costs reduced leverage, pressured debt service coverage ratios, and led to valuation declines as cap rates adjusted. Beginning in September 2024, the FOMC began slowly decreasing its target Federal Funds Rate, lowering the target rate four times over the last 12 months to where it sits today at 3.75% to 4.00%. The FOMC has indicated that it is balancing its mandates of maintaining a healthy employment market while controlling inflation, and its actions will be data driven as they seek to understand the impact of tariffs on global trade policy, inflation, job growth, and economic growth. The FOMC has indicated further action may be taken slowly, and markets now expect rates will remain elevated for longer, with significant uncertainty around whether the FOMC will implement another rate cut in December 2025. This has had the effect of stabilizing interest rates, albeit at higher levels than many investors in commercial real estate hoped. Continued stability of interest rates will be a key driver of transaction volume and capital markets. As interest rates stabilized in the weeks after Liberation Day, we began seeing a steady acceleration in transaction activity, as evidenced by the growth in our second and third quarter transaction volumes.
Capital Availability & Lending Markets. The supply of capital to the CRE sector remains abundant, but many investors and borrowers of capital remain selective while the cost of capital remains elevated. Banks, life insurance companies, conduits (CMBS), and debt funds are actively lending to the sector but are selective, with a preference for high-quality assets and well-capitalized sponsors. The GSEs, the predominant suppliers of capital to the multifamily market, deployed $120 billion of capital to the industry in 2024, up from $101 billion in 2023. Entering 2025, the GSEs' lending caps were set at a combined $146 billion, providing them a 22% increase in capacity over 2024 volumes. Both GSEs have been actively deploying their capital in 2025, particularly compared to the same period last year, with Fannie Mae lending volumes up 48% year to date, and Freddie Mac up 35%, and it appears the GSEs may approach their lending caps in 2025, which has not happened since 2022. The GSEs supply consistent capital to the multifamily sector during cyclical and countercyclical markets, and they continue to do so throughout the market disruptions experienced in the early part of 2025. As Fannie Mae's largest partner for six consecutive years, and Freddie Mac's fourth largest partner in 2024, their participation in the market is a significant driver of our financial performance and a sustained increase in their lending activity would enhance our business and results from operations.
Multifamily Rent Growth & Asset Values. Over 80% of our transaction volume takes place in the multifamily sector. Rent growth slowed considerably in 2024, particularly in high-supply Sun Belt markets, primarily as a result of record completions of 590,000 units last year. Yet absorption remained strong, at nearly 640,000 units for the trailing-12 months ended September 30, 2025, outpacing supply for the sixth consecutive quarter. The significant amount of absorption has limited rent growth, with Zelman, our housing research arm, reporting expected 2025 national rent growth of 1.8%, a pace that was far below the aggressive rent growth seen in 2021 and 2022. According to MSCI, in December 2024, multifamily property values remained stable month-over-month but were down 4.2% compared to the previous year. Notably, multifamily prices have declined by 19.6% from their peak, but remain 11.9% above pre-COVID January 2020 levels. Importantly, new construction starts have fallen dramatically, to only 234,000 for the 12-months ending September 30, 2025, and the cost of owning a single-family home has skyrocketed as a result of aforementioned elevated interest rates, limited supply of seller inventory, and a strong labor market. That sets up well for a return to rent growth and an improvement in operating fundamentals for the multifamily sector, which would improve
both rent growth and asset values, likely increasing the volume of multifamily asset sales in the coming quarters, and the associated need for debt to leverage those transactions.
Other Macroeconomic Considerations. The national unemployment rate remained low at 4.3% as of September 30, 2025, consistent with the unemployment rate of 4.1% as of December 31, 2024. According to RealPage, vacancies in the multifamily sector stabilized around 4.6% as of September 30, 2025, down from 5.2% in December 2024. The Trump Administration's global trade policies, and their impact on inflation, GDP, and interest rates will continue to weigh on the labor markets as companies adjust growth expectations and hiring plans. Deterioration of the employment markets could adversely impact many of the aforementioned macroeconomic indicators supporting CRE investors and lenders. Thus far, employment markets remain strong, and the transaction activity is steadily improving as many investors in CRE are in a position that they must transact due to fund lives expiring or debt financing maturing.
Multifamily remains one of the most resilient asset classes in CRE, and the GSEs continue to supply capital to the sector. During the third quarter of 2025, we saw transaction volumes increase by 34% compared to the same quarter last year, with notable increases in Freddie Mac lending (137%) and brokered lending (12%). Consequently, our Capital Markets segment produced net income of $27.9 million in the third quarter of 2025, up 28% compared to the year ago quarter.
Our SAM segment is less correlated to the transaction markets than our Capital Markets segment. The SAM segment's managed portfolio totaled $157.9 billion as of September 30, 2025, up 4% compared to the same quarter last year, and included our $139.3 billion loan servicing portfolio and our $18.5 billion of AUM. As our total managed portfolio increased, revenues for the segment increased by 4%, to $150.6 million, for the third quarter of 2025 compared to the same quarter last year. Over the past two years, we have focused on scaling our AUM, and in the fourth quarter of 2024 we successfully closed a first round of $200 million of equity capital for Debt Fund II from life insurance companies, pension funds, high net worth investors and Walker & Dunlop. Debt Fund II will provide our investment management team with over $500 million of levered capital to deploy into transitional multifamily assets, and year to date, our team deployed $395 million of that capital. Our investment management team was also awarded a mandate to deploy up to $2.0 billion of capital, on a non-discretionary basis, from a large life insurance company during 2025, all of which has yet to be deployed. We expect the revenues of our investment management business to grow as capital is raised and deployed. This segment also includes the activities of WDAE, an alternative investment manager focused on affordable housing, including LIHTC syndication and joint venture development. We ranked as the eighth largest LIHTC syndicator in 2024 and continue to pursue combined LIHTC syndication and affordable housing services to generate significant long-term financing, property sales, and syndication opportunities. Our LIHTC syndication activity started slowly, but we expect the team to grow syndication volumes from the $404 million syndicated in 2024. In April 2025, the team syndicated its largest fund ever, a $240 million multi-investor fund invested in affordable assets across the country. We also earn revenues on the disposition of historical LIHTC investments in the form of investment management fees. Over the last several years, the aforementioned macroeconomic challenges have impacted the number of affordable investment sales as well as asset values, significantly decreasing the amount of revenues earned from these sales. We expect investment management fees from disposition activity to remain low in the near term as a result of these factors, and to likely recover more slowly than the market rate multifamily market.
Consolidated Results of Operations
The following is a discussion of our consolidated results of operations for the three and nine months ended September 30, 2025 and 2024. 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
CONSOLIDATED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
For the nine months ended |
|
||||||||
|
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
2025 |
2024 |
|
2025 |
2024 |
||||||||
|
Transaction Volume (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Financing Volume |
|
$ |
10,842,620 |
|
$ |
8,013,432 |
|
$ |
27,677,487 |
|
$ |
20,158,458 |
|
|
Property Sales Volume |
|
4,672,875 |
|
3,602,675 |
|
8,825,750 |
|
6,300,609 |
|
||||
|
Total Transaction Volume |
|
$ |
15,515,495 |
|
$ |
11,616,107 |
|
$ |
36,503,237 |
|
$ |
26,459,067 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Performance Metrics (dollars in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating margin |
|
|
14 |
% |
|
13 |
% |
|
11 |
% |
|
10 |
% |
|
Return on equity |
|
|
8 |
|
|
7 |
|
|
5 |
|
|
5 |
|
|
Walker & Dunlop net income |
|
$ |
33,452 |
|
$ |
28,802 |
|
$ |
70,158 |
|
$ |
63,331 |
|
|
Adjusted EBITDA(1) |
|
|
82,084 |
|
|
78,905 |
|
|
223,861 |
|
|
233,972 |
|
|
Diluted EPS |
|
|
0.98 |
|
|
0.85 |
|
|
2.05 |
|
|
1.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Expense Metrics (as a percentage of total revenues) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel expenses |
|
|
53 |
% |
|
50 |
% |
|
52 |
% |
|
49 |
% |
|
Other operating expenses |
|
|
11 |
|
|
11 |
|
|
12 |
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, |
||||
|
Managed Portfolio (in thousands) |
2025 |
2024 |
||||
|
Servicing Portfolio |
|
$ |
139,331,678 |
|
$ |
134,080,546 |
|
Assets under management |
|
|
18,521,907 |
|
|
18,210,452 |
|
Total Managed Portfolio |
|
$ |
157,853,585 |
|
$ |
152,290,998 |
| (1) | This is a non-GAAP financial measure. For more information on adjusted EBITDA, refer to the section below titled "Non-GAAP Financial Measure." |
The following tables present period-to-period comparisons of our financial results for thethree and nine months ended September 30, 2025 and 2024.
FINANCIAL RESULTS - THREE MONTHS
CONSOLIDATED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
|
|
|
||||||
|
|
|
September 30, |
|
Dollar |
|
Percentage |
|
||||||
|
(in thousands) |
2025 |
2024 |
Change |
Change |
|
||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan origination and debt brokerage fees, net |
|
$ |
97,845 |
|
$ |
73,546 |
|
$ |
24,299 |
|
33 |
% |
|
|
Fair value of expected net cash flows from servicing, net of guaranty obligation |
|
|
48,657 |
|
|
43,426 |
|
|
5,231 |
|
12 |
|
|
|
Servicing fees |
|
85,189 |
|
82,222 |
|
2,967 |
|
4 |
|
|
|||
|
Property sales broker fees |
|
|
26,546 |
|
|
19,322 |
|
|
7,224 |
|
37 |
|
|
|
Investment management fees |
|
|
6,178 |
|
|
11,744 |
|
|
(5,566) |
|
(47) |
|
|
|
Net warehouse interest income (expense) |
|
(2,035) |
|
(2,147) |
|
112 |
|
(5) |
|
|
|||
|
Placement fees and other interest income |
|
46,302 |
|
43,557 |
|
2,745 |
|
6 |
|
|
|||
|
Other revenues |
|
28,993 |
|
20,634 |
|
8,359 |
|
41 |
|
|
|||
|
Total revenues |
|
$ |
337,675 |
|
$ |
292,304 |
|
$ |
45,371 |
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel |
|
$ |
177,418 |
|
$ |
145,538 |
|
$ |
31,880 |
|
22 |
% |
|
|
Amortization and depreciation |
|
60,041 |
|
57,561 |
|
2,480 |
|
4 |
|
|
|||
|
Provision (benefit) for credit losses |
|
949 |
|
2,850 |
|
(1,901) |
|
(67) |
|
|
|||
|
Interest expense on corporate debt |
|
16,451 |
|
18,232 |
|
(1,781) |
|
(10) |
|
|
|||
|
Fair value adjustments to contingent consideration liabilities |
|
|
- |
|
|
(1,366) |
|
|
1,366 |
|
(100) |
|
|
|
Other operating expenses |
|
36,879 |
|
31,984 |
|
4,895 |
|
15 |
|
|
|||
|
Total expenses |
|
$ |
291,738 |
|
$ |
254,799 |
|
$ |
36,939 |
|
14 |
|
|
|
Income from operations |
|
$ |
45,937 |
|
$ |
37,505 |
|
$ |
8,432 |
|
22 |
|
|
|
Income tax expense |
|
12,516 |
|
8,822 |
|
3,694 |
|
42 |
|
|
|||
|
Net income before noncontrolling interests |
|
$ |
33,421 |
|
$ |
28,683 |
|
$ |
4,738 |
|
17 |
|
|
|
Less: net income (loss) from noncontrolling interests |
|
(31) |
|
(119) |
|
88 |
(74) |
|
|
||||
|
Walker & Dunlop net income |
|
$ |
33,452 |
|
$ |
28,802 |
|
$ |
4,650 |
|
16 |
|
|
The increase in revenues was primarily driven by increases in loan origination and debt brokerage fees, net ("origination fees"), the fair value of expected net cash flows from servicing, net of guaranty obligation ("MSR income"), servicing fees, property sales broker fees, placement fees and other interest income, and other revenues, partially offset by a decrease in investment management fees. Origination fees and MSR income increased primarily due to the increase in our total debt financing volumes, partially offset by declines in their margins. Servicing fees increased primarily due to the increase in the average servicing portfolio. The increase in property sales broker fees was largely driven by an increase in property sales volume. The increase in placement fees and other interest income was driven by an increase in interest income from short-term loans to our affordable joint ventures, partially offset by a decrease in placement fees on escrow deposits. Other revenues increased primarily due to increases in income from equity-method investments, prepayment fees, and other miscellaneous revenues. Investment management fees decreased largely as a result of a decline in asset management fees from our LIHTC operations and a reduction in carried interest revenues from our private credit investment management strategies.
The increase in expenses was primarily due to increases in personnel expense, amortization and depreciation, and other operating expenses and a decline in fair value adjustments to contingent consideration liabilities ("CCL FV adjustments"), partially offset by a decrease in provision for credit losses and interest expense on corporate debt. Personnel expense increased primarily due to an increase in commission costs mainly due to the aforementioned increases in origination fees and property sales broker fees combined with an increase in salaries and benefits due to an increase in average headcount. The increase in amortization and depreciation was primarily driven by increases in the amortization of MSRs and write-offs due to prepayments. Other operating expenses increased primarily due to an increase in operating costs related to the assets underlying the loans repurchased from and indemnified with the GSEs. During the third quarter of 2024, we reduced the expected payout of an earnout for one of our debt brokerage acquisitions, resulting in a benefit for CCL FV adjustments, with no comparable activity in 2025. Provision for credit losses decreased primarily due to elevated credit losses in the third quarter of 2024. Interest expense on
corporate debt decreased due to lower average interest rates during the third quarter of 2025 compared to the third quarter of 2024, partially offset by an increase in the balance outstanding from the refinancing of our debt in the first quarter of 2025.
Income tax expense increased $3.7 million, or 42% year over year, driven by a (i) 22% increase in income from operations, (ii) a decrease in excess tax benefits and (iii) one-time benefits of $1.1 million related to international taxes in the third quarter of 2024. During the third quarter of 2025, we had $0.1 million in excess tax benefits compared to $0.7 million in the third quarter of 2024. The decline resulted from a smaller change between the grant date and vesting date fair values of share-based compensation that vested during 2025 compared to 2024.
FINANCIAL RESULTS - NINE MONTHS
CONSOLIDATED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended |
|
|
|
|
|
||||||
|
|
|
September 30, |
|
Dollar |
|
Percentage |
|
||||||
|
(in thousands) |
2025 |
2024 |
Change |
Change |
|||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan origination and debt brokerage fees, net |
|
$ |
238,535 |
|
$ |
182,620 |
|
$ |
55,915 |
|
31 |
% |
|
|
Fair value of expected net cash flows from servicing, net of guaranty obligation |
|
|
129,621 |
|
|
97,673 |
|
|
31,948 |
|
33 |
|
|
|
Servicing fees |
|
251,103 |
|
242,683 |
|
8,420 |
|
3 |
|
|
|||
|
Property sales broker fees |
|
|
55,031 |
|
|
39,408 |
|
|
15,623 |
|
40 |
|
|
|
Investment management fees |
|
|
23,437 |
|
|
40,086 |
|
|
(16,649) |
|
(42) |
|
|
|
Net warehouse interest income (expense) |
|
(4,581) |
|
(4,847) |
|
266 |
|
(5) |
|
|
|||
|
Placement fees and other interest income |
|
115,499 |
|
123,999 |
|
(8,500) |
|
(7) |
|
|
|||
|
Other revenues |
|
85,637 |
|
69,417 |
|
16,220 |
|
23 |
|
|
|||
|
Total revenues |
|
$ |
894,282 |
|
$ |
791,039 |
|
$ |
103,243 |
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel |
|
$ |
460,696 |
|
$ |
390,068 |
|
$ |
70,628 |
|
18 |
% |
|
|
Amortization and depreciation |
|
|
176,598 |
|
|
169,495 |
|
|
7,103 |
|
4 |
|
|
|
Provision (benefit) for credit losses |
|
6,481 |
|
6,310 |
|
171 |
|
3 |
|
|
|||
|
Interest expense on corporate debt |
|
48,732 |
|
53,765 |
|
(5,033) |
|
(9) |
|
|
|||
|
Fair value adjustments to contingent consideration liabilities |
|
|
- |
|
|
(1,366) |
|
|
1,366 |
|
(100) |
|
|
|
Other operating expenses |
|
104,220 |
|
93,386 |
|
10,834 |
|
12 |
|
|
|||
|
Total expenses |
|
$ |
796,727 |
|
$ |
711,658 |
|
$ |
85,069 |
|
12 |
|
|
|
Income from operations |
|
$ |
97,555 |
|
$ |
79,381 |
|
$ |
18,174 |
|
23 |
|
|
|
Income tax expense |
|
27,460 |
|
19,588 |
|
7,872 |
|
40 |
|
|
|||
|
Net income before noncontrolling interests |
|
$ |
70,095 |
|
$ |
59,793 |
|
$ |
10,302 |
|
17 |
|
|
|
Less: net income (loss) from noncontrolling interests |
|
(63) |
|
(3,538) |
|
3,475 |
(98) |
|
|
||||
|
Walker & Dunlop net income |
|
$ |
70,158 |
|
$ |
63,331 |
|
$ |
6,827 |
|
11 |
|
|
The increase in revenues was primarily driven by increases in origination fees, MSR income, servicing fees, property sales broker fees, and other revenues, partially offset by decreases in investment management fees and placement fees and other interest income. Origination fees and MSR income increased primarily due to the increase in our total debt financing volumes, partially offset by declines in the margins for both origination fees and MSR income. Servicing fees increased primarily due to the increase in the average servicing portfolio. The increase in property sales broker fees was driven by an increase in property sales volume. Other revenues increased primarily due to increases in investment banking revenues, appraisal revenues, LIHTC syndication fees, prepayment fees, and miscellaneous revenues, partially offset by decreases in income from equity-method investments and application fees. Investment management fees decreased largely as a result of a decline in asset management fees from our LIHTC operations. Placement fees and other interest income declined primarily due to lower average placement fee rates during 2025 compared to 2024, partially offset by an increase in interest income from short-term loans to affordable joint ventures.
The increase in expenses was primarily due to increases in personnel expense, amortization and depreciation and other operating expenses, partially offset by a decrease in interest expense on corporate debt. Personnel expense increased primarily due to an increase in commission costs mainly due to the aforementioned increases in origination fees, property sales broker fees, and investment banking revenues, increased salaries and benefits due to an increase in average headcount, and increased severance expense. The increase in amortization and
depreciation was primarily driven by increases in amortization of MSRs and write-offs due to prepayment. Other operating expenses increased primarily due to the write-off of unamortized debt issuance costs resulting from the partial paydown of one of our corporate debt instruments in 2025 with no comparable activity in 2024 and due to increases in operating expenses related to repurchased and indemnified loans, software costs, and other miscellaneous expenses. Interest expense on corporate debt decreased due to lower average interest rates during 2025 compared to 2024, partially offset by an increase in the balance outstanding from the aforementioned refinancing of our debt.
Income tax expense increased $7.9 million, or 40% year over year, driven by (i) a 23% increase in income from operations, (ii) a decrease in excess tax benefits, and (iii) one-time benefits of $1.1 million related to international taxes in the third quarter of 2024. During the nine months ended September 30, 2025, we had $1.4 million shortfalls in excess tax benefits compared to $1.7 million benefits for the nine months ended September 30, 2024. The shortfall resulted from the change between the grant date and vesting date fair values of share-based compensation that vested during the year. Partially offsetting the aforementioned increases was a reduction in losses from noncontrolling interests year over year. Losses from noncontrolling interest increase operating income upon which tax expense is calculated.
Non-GAAP Financial Measure
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 corporate debt, and amortization and depreciation, adjusted for provision (benefit) for credit losses, net write-offs based on the final resolution of the defaulted loans or collateral, stock-based compensation, the fair value of expected net cash flows from servicing, net, the write-off of the unamortized balance of deferred issuance costs associated with the repayment of a portion of our corporate debt, goodwill impairment, and contingent consideration liability fair value adjustments when the fair value adjustment is a triggering event for a goodwill impairment assessment. In cases where the fair value adjustment of contingent consideration liabilities is a trigger for goodwill impairment, the goodwill impairment is netted against the fair value adjustment of contingent consideration liabilities and included as a net number. 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. |
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 on both a consolidated and segment basis. Adjusted EBITDA is reconciled to net income as follows:
ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP
CONSOLIDATED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
For the nine months ended |
|
||||||||
|
|
|
September 30, |
|
September 30, |
|
||||||||
|
(in thousands) |
2025 |
2024 |
2025 |
2024 |
|||||||||
|
Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|||
|
Walker & Dunlop Net Income |
|
$ |
33,452 |
|
$ |
28,802 |
|
$ |
70,158 |
|
$ |
63,331 |
|
|
Income tax expense |
|
12,516 |
|
8,822 |
|
27,460 |
|
19,588 |
|
||||
|
Interest expense on corporate debt |
|
16,451 |
|
18,232 |
|
48,732 |
|
53,765 |
|
||||
|
Amortization and depreciation |
|
60,041 |
|
57,561 |
|
176,598 |
|
169,495 |
|
||||
|
Provision (benefit) for credit losses |
|
949 |
|
2,850 |
|
6,481 |
|
6,310 |
|
||||
|
Net write-offs |
|
- |
|
(468) |
|
- |
|
(468) |
|
||||
|
Stock-based compensation expense |
|
7,332 |
|
6,532 |
|
19,838 |
|
19,624 |
|
||||
|
MSR income |
|
(48,657) |
|
(43,426) |
|
(129,621) |
|
(97,673) |
|
||||
|
Write-off of unamortized issuance costs from corporate debt paydown |
|
|
- |
|
|
- |
|
|
4,215 |
|
|
- |
|
|
Adjusted EBITDA |
|
$ |
82,084 |
|
$ |
78,905 |
|
$ |
223,861 |
|
$ |
233,972 |
|
The following tables present period-to-period comparisons of the components of adjusted EBITDA for the three and nine months ended September 30, 2025 and 2024.
ADJUSTED EBITDA - THREE MONTHS
CONSOLIDATED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
|
|
|
|||||
|
|
September 30, |
|
Dollar |
|
Percentage |
||||||
|
(in thousands) |
2025 |
2024 |
Change |
Change |
|||||||
|
Loan origination and debt brokerage fees, net |
$ |
97,845 |
|
$ |
73,546 |
|
$ |
24,299 |
|
33 |
% |
|
Servicing fees |
85,189 |
|
82,222 |
|
2,967 |
|
4 |
|
|||
|
Property sales broker fees |
|
26,546 |
|
|
19,322 |
|
|
7,224 |
|
37 |
|
|
Investment management fees |
|
6,178 |
|
|
11,744 |
|
|
(5,566) |
|
(47) |
|
|
Net warehouse interest income (expense) |
(2,035) |
|
(2,147) |
|
112 |
|
(5) |
|
|||
|
Placement fees and other interest income |
46,302 |
|
43,557 |
|
2,745 |
|
6 |
|
|||
|
Other revenues |
29,024 |
|
20,753 |
|
8,271 |
|
40 |
|
|||
|
Personnel |
(170,086) |
|
(139,006) |
|
(31,080) |
|
22 |
|
|||
|
Net write-offs |
- |
|
(468) |
|
468 |
|
(100) |
|
|||
|
Other operating expenses |
(36,879) |
|
(30,618) |
|
(6,261) |
|
20 |
|
|||
|
Adjusted EBITDA |
$ |
82,084 |
|
$ |
78,905 |
|
$ |
3,179 |
|
4 |
|
Origination fees increased largely due to the increase in debt financing volume. Servicing fees increased largely due to growth in the average servicing portfolio. Property sales broker fees increased as a result of the growth in property sales volume. Investment management fees decreased primarily due to declines in asset management fees from our LIHTC operations and a reduction in carried interest revenues from our private credit investment management business. Placement fees and other interest income increased primarily due to interest income from short-term loans to affordable joint ventures, partially offset by a decrease in placement fees on escrow deposits. Other revenues increased primarily due to an increase in income from equity-method investments and application fees, prepayment fees, and other miscellaneous revenues. Personnel expense increased primarily due to an increase in commission costs mainly due to the aforementioned increases in origination fees combined with an increase in salaries and benefits due to an increase in average headcount. Other operating expenses increased primarily due to an increase in operating costs related to loans repurchased from and indemnified with the GSEs.
ADJUSTED EBITDA - NINE MONTHS
CONSOLIDATED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended |
|
|
|
|
|
|||||
|
|
September 30, |
|
Dollar |
|
Percentage |
||||||
|
(in thousands) |
2025 |
2024 |
Change |
Change |
|||||||
|
Loan origination and debt brokerage fees, net |
$ |
238,535 |
|
$ |
182,620 |
|
$ |
55,915 |
|
31 |
% |
|
Servicing fees |
251,103 |
|
242,683 |
|
8,420 |
|
3 |
|
|||
|
Property sales broker fees |
|
55,031 |
|
|
39,408 |
|
|
15,623 |
|
40 |
|
|
Investment management fees |
|
23,437 |
|
|
40,086 |
|
|
(16,649) |
|
(42) |
|
|
Net warehouse interest income (expense) |
(4,581) |
|
(4,847) |
|
266 |
|
(5) |
|
|||
|
Placement fees and other interest income |
115,499 |
|
123,999 |
|
(8,500) |
|
(7) |
|
|||
|
Other revenues |
85,700 |
|
72,955 |
|
12,745 |
|
17 |
|
|||
|
Personnel |
(440,858) |
|
(370,444) |
|
(70,414) |
|
19 |
|
|||
|
Net write-offs |
- |
|
(468) |
|
468 |
|
(100) |
|
|||
|
Other operating expenses |
(100,005) |
|
(92,020) |
|
(7,985) |
|
9 |
|
|||
|
Adjusted EBITDA |
$ |
223,861 |
|
$ |
233,972 |
|
$ |
(10,111) |
|
(4) |
|
Origination fees increased largely due to the increase in debt financing volume, partially offset by a decline in the margin. Servicing fees increased largely due to growth in the average servicing portfolio. Property sales broker fees increased as a result of the growth in property sales volume. Investment management fees decreased primarily due to adecline in asset management fees from our LIHTC operations. Placement fees and other interest income decreased primarily due to lower average placement fee rates, partially offset by an increase in interest income from short-term loans to affordable joint ventures. Other revenues increased primarily due to increases in investment banking revenues, appraisal revenues, LIHTC syndication fees, prepayment fees, and miscellaneous revenues, partially offset by decreases in income from equity-method investments and application fees. Personnel expense increased primarily due to (i) an increase in commission costs mainly due to the aforementioned increases in origination fees, property sales broker fees, and investment banking revenues, (ii) increased salaries and benefits due to increased average headcount, and (iii) increased severance expense. Other operating expenses increased primarily due to increased operating expenses related to repurchased and indemnified loans, software costs, and other miscellaneous expenses.
Financial Condition
Cash Flows from Operating Activities
Our cash flows from operating activities are generated from loan sales, servicing fees, placement fees, net warehouse interest income (expense), property sales broker fees, investment management fees, research subscription fees, investment banking advisory fees, and other income, net of loan origination and operating costs. Our cash flows from operating activities are impacted by the fees generated by our loan originations and property sales, 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 include the funding and repayment of loans held for investment, including repurchased loans, contributions to and distributions from joint ventures, purchases of equity-method investments, cash paid for acquisitions, and the purchase of available-for-sale ("AFS") securities pledged to Fannie Mae.
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 loan origination needs. Historically, we used a combination of long-term debt and cash flows from operating activities 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 in connection with the exercise of stock options and occasionally for acquisitions (non-cash transactions).
Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024
The following table presents a period-to-period comparison of the significant components of cash flows for the nine months ended September 30, 2025 and 2024.
SIGNIFICANT COMPONENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, |
|
Dollar |
|
Percentage |
||||||
|
(in thousands) |
2025 |
2024 |
Change |
Change |
||||||||
|
Net cash provided by (used in) operating activities |
|
$ |
(1,467,679) |
|
$ |
(401,458) |
|
$ |
(1,066,221) |
|
266 |
% |
|
Net cash provided by (used in) investing activities |
|
(64,835) |
|
(37,143) |
|
(27,692) |
|
75 |
|
|||
|
Net cash provided by (used in) financing activities |
|
1,542,482 |
|
313,838 |
|
1,228,644 |
|
391 |
|
|||
|
Total of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period ("Total cash") |
|
|
337,866 |
|
|
266,640 |
|
|
71,226 |
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from (used in) operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net receipt (use) of cash for loan origination activity |
|
$ |
(1,593,663) |
|
$ |
(441,774) |
|
$ |
(1,151,889) |
|
261 |
% |
|
Net cash provided by (used in) operating activities, excluding loan origination activity |
|
|
125,984 |
|
|
40,316 |
|
|
85,668 |
|
212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from (used in) investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital invested in equity-method investments |
|
$ |
(17,919) |
|
$ |
(14,503) |
|
$ |
(3,416) |
|
24 |
% |
|
Principal collected on loans held for investment |
|
- |
|
17,659 |
|
(17,659) |
|
(100) |
|
|||
|
Purchases of pledged AFS securities, net of proceeds from prepayments |
|
|
(20,289) |
|
|
(13,747) |
|
|
(6,542) |
|
48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from (used in) financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings (repayments) of warehouse notes payable, net |
|
$ |
1,580,848 |
|
$ |
452,497 |
|
$ |
1,128,351 |
|
249 |
% |
|
Repayments of interim warehouse notes payable |
|
- |
|
|
(13,884) |
|
13,884 |
|
(100) |
|
||
|
Borrowings of note payable |
|
|
398,875 |
|
|
- |
|
|
398,875 |
|
N/A |
|
|
Repayments of notes payable |
|
|
(330,731) |
|
|
(6,013) |
|
|
(324,718) |
|
5,400 |
|
|
Payment of contingent consideration |
|
|
(10,954) |
|
|
(34,317) |
|
|
23,363 |
|
(68) |
|
|
Debt issuance costs |
|
|
(15,661) |
|
|
- |
|
|
(15,661) |
|
N/A |
|
Operating Activities
Net cash provided by (used in) operating activities changed primarily due to:
| (i) | Loan origination activity. Agency loans originated are held for short periods of time, generally less than 60 days, and impact cash flows presented as of a point in time due to the timing difference between the date of origination and date of delivery. The increase in net cash used in loan origination activities is primarily attributable to originations outpacing sales by $1.6 billion in 2025 compared to $441.8 million in 2024. |
| (ii) | Other activities. Cash flows provided by other operating activities were $126.0 million in 2025, up from $40.3 million in 2024. The increase was primarily due to a $10.3 million increase in net income before noncontrolling interests, a $7.1 million increase in the adjustment for amortization and depreciation, a $108.1 million increase in adjustment for other operating activities such as receivables, other assets, and other liabilities, partially offset by a $31.9 million increase in the adjustment for MSR income and a $7.6 million change in the adjustment for the change in the fair value of premiums and origination fees. |
Investing Activities
Net cash provided by (used in) investing activities changed primarily due to:
| (i) | Purchases of equity-method investments.The increase was primarily due to increased capital calls on our co-investments in debt funds managed by our investment management services. |
| (ii) | Principal collected of loans held for investment. The decrease in cash received was due to our collection of the last of the outstanding balances under our interim loan program in 2024, leaving no loans from which to collect principal in 2025. |
| (iii) | Purchases of pledged AFS securities, net of proceeds from prepayment.The increase in cash used was primarily driven by a $11.1 million increase in purchases of pledged AFS securities, partially offset by a $4.5 million increase in proceeds from prepayment of AFS securities. The increase in purchases was due to a shift in pledged collateral from money market funds to AFS securities due to the decline in interest rates for money market funds compared to interest paid on AFS securities. |
Financing Activities
Net cash provided by (used in) financing activities changed primarily due to:
(i) Net borrowings of warehouse notes payable. The increase was due to the aforementioned increase in cash used in loan origination activity.
(ii) Repayments of interim warehouse notes payable. The change in repayments of interim warehouse notes payable was related to the aforementioned decrease in principal collected on loans held for investment as we use borrowings to fund interim loan program loans held for investment. Due to no loans held for investment under our interim loan program outstanding in 2025, we also had no outstanding borrowings to repay.
(iii)Borrowings of note payable. The increase was attributable to the issuance of our Senior Notes in 2025 to pay down our Term Loan, with no comparable activity in 2024.
| (iv) | Payment of contingent consideration. The decrease was due to lower achievement of performance-based earnouts related to historical acquisitions in 2025 compared to 2024. |
Partially offsetting the aforementioned changes that increased cash were the following activities that decreased cash:
| (i) | Repayments of notes payable. The increase was largely due to using $328.5 million of the $400.0 million proceeds from the issuance of our Senior Notes to pay down our Term Loan in 2025, with no comparable activity in 2024. |
(ii) Debt issuance costs. The increase in debt issuance costs paid was driven by the aforementioned issuance of the Senior Notes and amendment of the Term Loan, with no comparable activity in 2024.
Segment Results
The Company is managed based on our three reportable segments: (i) Capital Markets, (ii) Servicing & Asset Management, and (iii) Corporate. The segment results below are intended to present each of the reportable segments on a stand-alone basis.
Capital Markets
SUPPLEMENTAL OPERATING DATA
CAPITAL MARKETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
For the three months ended |
|
|
|
|
|
|
|||||
|
Transaction Volume |
|
September 30, |
|
Dollar |
Percentage |
|||||||
|
Components of Debt Financing Volume |
|
2025 |
2024 |
|
Change |
|
Change |
|||||
|
Fannie Mae |
|
$ |
2,141,092 |
|
$ |
2,001,356 |
|
$ |
139,736 |
|
7 |
% |
|
Freddie Mac |
|
3,664,380 |
|
1,545,939 |
|
|
2,118,441 |
|
137 |
|
||
|
Ginnie Mae ̶ HUD |
|
325,169 |
|
272,054 |
|
|
53,115 |
|
20 |
|
||
|
Brokered(1) |
|
4,512,729 |
|
4,028,208 |
|
484,521 |
|
12 |
|
|||
|
Total Debt Financing Volume |
|
$ |
10,643,370 |
|
$ |
7,847,557 |
|
$ |
2,795,813 |
|
36 |
% |
|
Property sales volume |
|
|
4,672,875 |
|
|
3,602,675 |
|
|
1,070,200 |
|
30 |
|
|
Total Transaction Volume |
|
$ |
15,316,245 |
|
$ |
11,450,232 |
|
$ |
3,866,013 |
|
34 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Performance Metrics (dollars in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
27,930 |
|
$ |
21,830 |
|
|
6,100 |
|
28 |
|
|
Adjusted EBITDA(2) |
|
|
(764) |
|
|
(4,601) |
|
|
3,837 |
|
(83) |
|
|
Diluted EPS |
|
|
0.81 |
|
|
0.64 |
|
|
0.17 |
|
27 |
|
|
Operating margin |
|
|
21 |
% |
|
20 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Revenue Metrics (as a percentage of debt financing volume) |
|
|
|
|
|
|
|
|
|
|||
|
Origination fees |
|
|
0.90 |
% |
|
0.93 |
% |
|
|
|
|
|
|
MSR income, as a percentage of Agency debt financing volume |
|
|
0.79 |
|
|
1.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended |
|
|
|
|
|
|
||||
|
Transaction Volume (in thousands) |
|
September 30, |
|
Dollar |
Percentage |
|||||||
|
Components of Debt Financing Volume |
|
2025 |
2024 |
Change |
|
Change |
||||||
|
Fannie Mae |
|
$ |
6,767,194 |
|
$ |
4,415,528 |
|
$ |
2,351,666 |
|
53 |
% |
|
Freddie Mac |
|
6,225,224 |
|
3,674,055 |
|
|
2,551,169 |
|
69 |
|
||
|
Ginnie Mae ̶ HUD |
|
761,776 |
|
472,092 |
|
|
289,684 |
|
61 |
|
||
|
Brokered(1) |
|
13,400,743 |
|
11,200,133 |
|
2,200,610 |
|
20 |
|
|||
|
Total Debt Financing Volume |
|
$ |
27,154,937 |
|
$ |
19,761,808 |
|
$ |
7,393,129 |
|
37 |
% |
|
Property sales volume |
|
|
8,825,750 |
|
|
6,300,609 |
|
|
2,525,141 |
|
40 |
|
|
Total Transaction Volume |
|
$ |
35,980,687 |
|
$ |
26,062,417 |
|
$ |
9,918,270 |
|
38 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Performance Metrics (dollars in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
63,432 |
|
$ |
26,167 |
|
|
37,265 |
|
142 |
% |
|
Adjusted EBITDA(2) |
|
|
(12,768) |
|
|
(32,431) |
|
|
19,663 |
|
(61) |
|
|
Diluted EPS |
|
|
1.85 |
|
|
0.77 |
|
|
1.08 |
|
140 |
|
|
Operating margin |
|
|
19 |
% |
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Revenue Metrics (as a percentage of debt financing volume) |
|
|
|
|
|
|
|
|
|
|||
|
Origination fees |
|
|
0.87 |
% |
|
0.91 |
% |
|
|
|
|
|
|
MSR income, as a percentage of Agency debt financing volume |
|
|
0.94 |
|
|
1.14 |
|
|
|
|
|
|
| (1) | Brokered transactions for life insurance companies, commercial banks, and other capital sources. |
| (2) | This is a non-GAAP financial measure. For more information on adjusted EBITDA, refer to the section below titled "Non-GAAP Financial Measure." |
FINANCIAL RESULTS - THREE MONTHS
CAPITAL MARKETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
For the three months ended |
|
|
|
|
||||||
|
(in thousands) |
September 30, |
|
Dollar |
|
Percentage |
|||||||
|
Revenues |
|
2025 |
|
2024 |
|
Change |
|
Change |
|
|||
|
Origination fees |
|
$ |
96,147 |
|
$ |
72,723 |
|
$ |
23,424 |
|
32 |
% |
|
MSR income |
|
|
48,657 |
|
|
43,426 |
|
|
5,231 |
|
12 |
|
|
Property sales broker fees |
|
|
26,546 |
|
|
19,322 |
|
|
7,224 |
|
37 |
|
|
Net warehouse interest income (expense), loans held for sale |
|
(2,035) |
|
(2,798) |
|
763 |
|
(27) |
|
|||
|
Other revenues |
|
11,439 |
|
11,039 |
|
400 |
|
4 |
|
|||
|
Total revenues |
|
$ |
180,754 |
|
$ |
143,712 |
|
$ |
37,042 |
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel |
|
$ |
131,113 |
|
$ |
104,987 |
|
$ |
26,126 |
|
25 |
% |
|
Amortization and depreciation |
|
1,146 |
|
1,137 |
|
9 |
|
1 |
|
|||
|
Interest expense on corporate debt |
|
|
4,535 |
|
|
4,888 |
|
|
(353) |
|
(7) |
|
|
Fair value adjustments to contingent consideration liabilities |
|
|
- |
|
|
(1,366) |
|
|
1,366 |
|
(100) |
|
|
Other operating expenses |
|
5,647 |
|
5,137 |
|
510 |
|
10 |
|
|||
|
Total expenses |
|
$ |
142,441 |
|
$ |
114,783 |
|
$ |
27,658 |
|
24 |
|
|
Income (loss) from operations |
|
$ |
38,313 |
|
$ |
28,929 |
|
$ |
9,384 |
|
32 |
|
|
Income tax expense (benefit) |
|
10,383 |
|
7,073 |
|
3,310 |
|
47 |
|
|||
|
Net income (loss) before noncontrolling interests |
|
$ |
27,930 |
|
$ |
21,856 |
|
$ |
6,074 |
|
28 |
|
|
Less: net income (loss) from noncontrolling interests |
|
- |
|
26 |
|
(26) |
(100) |
|
||||
|
Net income (loss) |
|
$ |
27,930 |
|
$ |
21,830 |
|
$ |
6,100 |
|
28 |
|
FINANCIAL RESULTS - NINE MONTHS
CAPITAL MARKETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
For the nine months ended |
|
|
|
|
||||||
|
(in thousands) |
September 30, |
Dollar |
Percentage |
|||||||||
|
Revenues |
|
2025 |
2024 |
|
Change |
|
Change |
|
||||
|
Origination fees |
|
$ |
235,208 |
|
$ |
180,264 |
|
$ |
54,944 |
|
30 |
% |
|
MSR income |
|
|
129,621 |
|
|
97,673 |
|
|
31,948 |
|
33 |
|
|
Property sales broker fees |
|
|
55,031 |
|
|
39,408 |
|
|
15,623 |
|
40 |
|
|
Net warehouse interest income (expense), loans held for sale |
|
(4,581) |
|
(6,322) |
|
1,741 |
|
(28) |
|
|||
|
Other revenues |
|
40,836 |
|
32,756 |
|
8,080 |
|
25 |
|
|||
|
Total revenues |
|
$ |
456,115 |
|
$ |
343,779 |
|
$ |
112,336 |
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel |
|
$ |
334,020 |
|
$ |
276,655 |
|
$ |
57,365 |
|
21 |
% |
|
Amortization and depreciation |
|
3,433 |
|
3,412 |
|
21 |
|
1 |
|
|||
|
Interest expense on corporate debt |
|
|
13,190 |
|
|
15,038 |
|
|
(1,848) |
|
(12) |
|
|
Fair value adjustments to contingent consideration liabilities |
|
|
- |
|
|
(1,366) |
|
|
1,366 |
|
(100) |
|
|
Other operating expenses |
|
17,191 |
|
14,831 |
|
2,360 |
|
16 |
|
|||
|
Total expenses |
|
$ |
367,834 |
|
$ |
308,570 |
|
$ |
59,264 |
|
19 |
|
|
Income (loss) from operations |
|
$ |
88,281 |
|
$ |
35,209 |
|
$ |
53,072 |
|
151 |
|
|
Income tax expense (benefit) |
|
24,849 |
|
8,689 |
|
16,160 |
|
186 |
|
|||
|
Net income (loss) before noncontrolling interests |
|
$ |
63,432 |
|
$ |
26,520 |
|
$ |
36,912 |
|
139 |
|
|
Less: net income (loss) from noncontrolling interests |
|
- |
|
353 |
|
(353) |
(100) |
|
||||
|
Net income (loss) |
|
$ |
63,432 |
|
$ |
26,167 |
|
$ |
37,265 |
|
142 |
|
Revenues
Origination fees and MSR income. 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 |
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
|
Fannie Mae |
|
21 |
% |
|
26 |
% |
|
25 |
% |
|
22 |
% |
|
Freddie Mac |
|
34 |
|
|
20 |
|
|
23 |
|
|
19 |
|
|
Ginnie Mae ̶ HUD |
|
3 |
|
|
3 |
|
|
3 |
|
|
2 |
|
|
Brokered |
|
42 |
|
|
51 |
|
|
49 |
|
|
57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
For the nine months ended |
||||||||
|
|
September 30, |
|
September 30, |
||||||||
|
Mortgage Banking Details (basis points) |
2025 |
|
2024 |
|
2025 |
|
2024 |
||||
|
Origination Fee Rate (1) |
|
90 |
|
|
93 |
|
|
87 |
|
|
91 |
|
Basis Point Change |
|
(3) |
|
|
|
|
|
(4) |
|
|
|
|
Percentage Change |
|
(3) |
% |
|
|
|
|
(4) |
% |
|
|
|
Agency MSR Rate (2) |
|
79 |
|
|
114 |
|
|
94 |
|
|
114 |
|
Basis Point Change |
|
(35) |
|
|
|
|
|
(20) |
|
|
|
|
Percentage Change |
|
(31) |
% |
|
|
|
|
(18) |
% |
|
|
| (1) | Origination fees as a percentage of total debt financing volume. |
| (2) | MSR income as a percentage of Agency debt financing volume. |
For both the three and nine months ended September 30, 2025, the increases in origination fees were largely the result of the 36% and 37% increases, respectively, in total debt financing volume, partially offset by declines in our origination fee rate for both the three and nine months ended September 30, 2025. Although there was a favorable change in the mix of debt financing volume, the competitive environment in the multifamily debt financing market throughout the first nine months of 2025 resulted in a reduction in the origination fee rate for Agency originations and the overall origination fee rate. For the nine months ended September 30, 2025 only, we originated a large Fannie Mae portfolio during the second quarter of 2025, with no comparable activity in 2024, contributing to the decline in origination fee rates. Large portfolios typically have lower origination fee rates than non-portfolio transactions.
The increases in our MSR income were similarly driven by the increases in Agency debt financing volumes for both the three and nine months ended September 30, 2025, partially offset by 14% and 21% decreases in the weighted-average servicing fee ("WASF") on Fannie Mae debt financing volume for the three and nine months ended September 30, 2025, respectively. The decreases in the WASF were driven by the aforementioned competitive environment. Additionally, the loan term has decreased as more of our borrowers are opting for shorter loan terms in light of the volatility and uncertainty surrounding long-term interest rates, reducing the Agency MSR Rate. We expect this trend to continue for the foreseeable future. For the three months ended September 30, 2025 only, the decrease in the Agency MSR rate was also due to a reduction in Fannie Mae debt financing volume as a percentage of overall volume. Fannie Mae debt financing transactions lead to the highest MSR income of all our products. For the nine months ended September 30, 2025 only, the aforementioned large Fannie Mae portfolio originated during the second quarter of 2025 also impacted the Agency MSR rate as large portfolios typically have lower servicing fees than non-portfolio transactions.
Property sales broker fees. The increases were the result of the 30% and 40% increase in property sales volumes for the three and nine months ended September 30, 2025, respectively, combined with an increase in the property sales broker fee rate during the three months ended September 30, 2025. The property sales broker fee rate was flat for the nine months ended September 30, 2025.
Other revenues. For the nine months ended September 30, 2025, the increasewas principally due to a $5.9 million increase in investment banking revenues and a $3.2 million increase in appraisal revenues due primarily to increased market activity, partially offset by a $1.5 million decrease in application fees. Investment banking revenues increased primarily due to several M&A transactions that closed during the first quarter of 2025 compared to fewer transactions in the first quarter of 2024.
Expenses
Personnel. For the three months ended September 30, 2025, the increase was primarily due to a $21.8 million increase in commission costs resulting from increased origination and property sales broker fees and a $4.4 million increase in salaries and benefits and subjective bonus largely related to a 6% increase in average segment headcount.
For the nine months ended September 30, 2025, the increase was primarily due to (i) a $47.7 million increase in commission costs resulting from increased origination fees, property sales broker fees, and investment banking revenues, (ii) a $5.6 million increase in salaries and benefits largely related to a 4% increase in average segment headcount, and (iii) a $2.8 million increase in severance expense largely as a result of the separation of several underperforming producers.
Fair value adjustments to contingent consideration liabilities. During the third quarter of 2024, we reduced the expected payout of an earnout associated with one of our previous brokerage acquisitions, resulting in a benefit for CCL FV adjustments, with no comparable activity in 2025.
Interest expense on corporate debt. Interest expense on corporate debt is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment's use of that corporate debt. The discussion of our consolidated results above has additional information related to the decrease in interest expense on corporate debt.
Other operating expenses. For the nine months ended September 30, 2025, the increase was due to small increases in various expense categories, such as marketing, professional fees, travel and entertainment, and miscellaneous expenses.
Income tax expense (benefit). Income tax expense (benefit) is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment's income from operations, except for significant, one-time tax activities, which are allocated entirely to the segment impacted by the tax activity.
Non-GAAP Financial Measure
A reconciliation of adjusted EBITDA for our CM segment is presented below. Our segment-level adjusted EBITDA represents the segment portion of consolidated adjusted EBITDA. A detailed description and reconciliation of consolidated adjusted EBITDA is provided above in our Consolidated Results of Operations-Non-GAAP Financial Measure. CM adjusted EBITDA is reconciled to net income as follows:
ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP
CAPITAL MARKETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
For the nine months ended |
||||||||
|
|
|
September 30, |
|
September 30, |
||||||||
|
(in thousands) |
2025 |
2024 |
2025 |
2024 |
||||||||
|
Reconciliation of Net Income (Loss) to Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|||
|
Net income (loss) |
|
$ |
27,930 |
|
$ |
21,830 |
|
$ |
63,432 |
|
$ |
26,167 |
|
Income tax expense (benefit) |
|
10,383 |
|
7,073 |
|
24,849 |
|
8,689 |
||||
|
Interest expense on corporate debt |
|
|
4,535 |
|
|
4,888 |
|
|
13,190 |
|
|
15,038 |
|
Amortization and depreciation |
|
|
1,146 |
|
|
1,137 |
|
|
3,433 |
|
|
3,412 |
|
MSR income |
|
(48,657) |
|
(43,426) |
|
(129,621) |
|
(97,673) |
||||
|
Stock-based compensation expense |
|
|
3,899 |
|
|
3,897 |
|
|
10,685 |
|
|
11,936 |
|
Write-off of unamortized issuance costs from corporate debt paydown |
|
|
- |
|
|
- |
|
|
1,264 |
|
|
- |
|
Adjusted EBITDA |
|
$ |
(764) |
|
$ |
(4,601) |
|
$ |
(12,768) |
|
$ |
(32,431) |
The following tables present period-to-period comparisons of the components of CM adjusted EBITDA for the three and nine months ended September 30, 2025 and 2024.
ADJUSTED EBITDA - THREE MONTHS
CAPITAL MARKETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
|
|
|
|||||
|
|
September 30, |
|
Dollar |
|
Percentage |
||||||
|
(in thousands) |
2025 |
2024 |
Change |
Change |
|||||||
|
Origination fees |
$ |
96,147 |
|
$ |
72,723 |
|
$ |
23,424 |
|
32 |
% |
|
Property sales broker fees |
|
26,546 |
|
|
19,322 |
|
|
7,224 |
|
37 |
|
|
Net warehouse interest income (expense), loans held for sale |
(2,035) |
|
(2,798) |
|
763 |
|
(27) |
|
|||
|
Other revenues |
11,439 |
|
11,013 |
|
426 |
|
4 |
|
|||
|
Personnel |
(127,214) |
|
(101,090) |
|
(26,124) |
|
26 |
|
|||
|
Other operating expenses |
(5,647) |
|
(3,771) |
|
(1,876) |
|
50 |
|
|||
|
Adjusted EBITDA |
$ |
(764) |
|
$ |
(4,601) |
|
$ |
3,837 |
|
(83) |
|
ADJUSTED EBITDA - NINE MONTHS
CAPITAL MARKETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended |
|
|
|
|
|
|||||
|
|
September 30, |
|
Dollar |
|
Percentage |
||||||
|
(in thousands) |
2025 |
2024 |
Change |
Change |
|||||||
|
Origination fees |
$ |
235,208 |
|
$ |
180,264 |
|
$ |
54,944 |
|
30 |
% |
|
Property sales broker fees |
|
55,031 |
|
|
39,408 |
|
|
15,623 |
|
40 |
|
|
Net warehouse interest income (expense), loans held for sale |
(4,581) |
|
(6,322) |
|
1,741 |
|
(28) |
|
|||
|
Other revenues |
40,836 |
|
32,403 |
|
8,433 |
|
26 |
|
|||
|
Personnel |
(323,335) |
|
(264,719) |
|
(58,616) |
|
22 |
|
|||
|
Other operating expenses |
(15,927) |
|
(13,465) |
|
(2,462) |
|
18 |
|
|||
|
Adjusted EBITDA |
$ |
(12,768) |
|
$ |
(32,431) |
|
$ |
19,663 |
|
(61) |
|
Three and nine months ended September 30, 2025 compared to three and nine months ended September 30, 2024
Origination fees increased due principally to increases in debt financing volumes, partially offset by decreases in our origination fee rate. Property sales broker fees increased largely due to the increases in property sales volumes. For the nine months ended September 30, 2025, other revenues increased primarily due to increases in investment banking revenues and appraisal revenues, partially offset by a decrease in application fees. Personnel expense increased primarily due to increased commission costs, salaries and benefits, and severance expense. For the nine months ended September 30, 2025, the increase in other operating expenses was due to small increases in various expense categories, such as marketing, professional fees, travel and entertainment, and miscellaneous expenses.
Servicing & Asset Management
SUPPLEMENTAL OPERATING DATA
SERVICING & ASSET MANAGEMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, |
|
Dollar |
Percentage |
|||||||
|
Managed Portfolio (in thousands) |
2025 |
2024 |
Change |
|
Change |
|||||||
|
Components of Servicing Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
$ |
71,006,342 |
|
$ |
66,068,212 |
|
$ |
4,938,130 |
|
7 |
% |
|
Freddie Mac |
|
40,473,401 |
|
40,090,158 |
|
|
383,243 |
|
1 |
|
||
|
Ginnie Mae-HUD |
|
11,298,108 |
|
10,727,323 |
|
|
570,785 |
|
5 |
|
||
|
Brokered(1) |
|
16,553,827 |
|
17,156,810 |
|
(602,983) |
|
(4) |
|
|||
|
Principal Lending and Investing(2) |
|
- |
|
38,043 |
|
|
(38,043) |
|
(100) |
|
||
|
Total Servicing Portfolio |
|
$ |
139,331,678 |
|
$ |
134,080,546 |
|
$ |
5,251,132 |
|
4 |
% |
|
Assets under management |
|
|
18,521,907 |
|
|
18,210,452 |
|
|
311,455 |
|
2 |
|
|
Total Managed Portfolio |
|
$ |
157,853,585 |
|
$ |
152,290,998 |
|
$ |
5,562,587 |
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
|
|
|
|
||||
|
(dollars in thousands, except per share data) |
|
September 30, |
|
Dollar |
Percentage |
|||||||
|
Key Volume and Performance Metrics |
|
2025 |
|
2024 |
|
Change |
|
Change |
||||
|
Equity syndication volume(3) |
|
$ |
21,853 |
|
$ |
12,155 |
|
$ |
9,698 |
|
80 |
% |
|
Principal Lending and Investing debt financing volume(4) |
|
|
199,250 |
|
|
165,875 |
|
|
33,375 |
|
20 |
|
|
Net income |
|
|
36,963 |
|
|
37,482 |
|
|
(519) |
|
(1) |
|
|
Adjusted EBITDA(5) |
|
|
119,423 |
|
|
117,455 |
|
|
1,968 |
|
2 |
|
|
Diluted EPS |
|
|
1.09 |
|
|
1.11 |
|
|
(0.02) |
|
(2) |
|
|
Operating margin |
|
|
34 |
% |
|
33 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended |
|
|
|
|
|
|
||||
|
(dollars in thousands, except per share data) |
|
September 30, |
|
Dollar |
Percentage |
|||||||
|
Key Volume and Performance Metrics |
|
2025 |
|
2024 |
|
Change |
|
Change |
||||
|
Equity syndication volume(3) |
|
$ |
288,096 |
|
$ |
232,170 |
|
$ |
55,926 |
|
24 |
% |
|
Principal Lending and Investing debt financing volume(4) |
|
|
522,550 |
|
|
396,650 |
|
|
125,900 |
|
32 |
|
|
Net income |
|
|
93,630 |
|
|
121,197 |
|
|
(27,567) |
|
(23) |
|
|
Adjusted EBITDA(5) |
|
|
339,256 |
|
|
361,614 |
|
|
(22,358) |
|
(6) |
|
|
Diluted EPS |
|
|
2.74 |
|
|
3.58 |
|
|
(0.84) |
|
(23) |
|
|
Operating margin |
|
|
31 |
% |
|
36 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, |
||||
|
Key Servicing Portfolio Metrics |
|
2025 |
2024 |
|||
|
Custodial escrow deposit balance (in billions) |
|
$ |
2.8 |
|
$ |
3.1 |
|
Weighted-average servicing fee rate (basis points) |
|
|
24.0 |
|
|
24.1 |
|
Weighted-average remaining servicing portfolio term (years) |
|
|
7.4 |
|
|
7.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, |
||||||||||
|
(in thousands) |
|
2025 |
|
2024 |
||||||||
|
Components of equity and assets under management |
|
|
Equity under management |
|
|
Assets under management |
|
|
Equity under management |
|
|
Assets under management |
|
LIHTC |
|
$ |
6,797,955 |
|
|
15,795,365 |
|
$ |
6,838,113 |
|
$ |
15,772,089 |
|
Equity funds |
|
|
960,956 |
|
|
960,956 |
|
|
975,964 |
|
|
975,964 |
|
Debt funds(6) |
|
|
903,009 |
|
|
1,765,586 |
|
|
782,436 |
|
|
1,462,399 |
|
Total |
|
$ |
8,661,920 |
|
$ |
18,521,907 |
|
$ |
8,596,513 |
|
$ |
18,210,452 |
| (1) | Brokered loans serviced primarily for life insurance companies, commercial banks, and other capital sources. |
| (2) | Consists of interim loans not managed for the Interim Program JV. |
| (3) | Amount of equity called and syndicated into LIHTC funds. |
| (4) | Comprised solely of WDIP separate account originations. |
| (5) | This is a non-GAAP financial measure. For more information on adjusted EBITDA, refer to the section below titled "Non-GAAP Financial Measure." |
| (6) | As of September 30, 2025, included $44.7 million of equity under management and $76.2 million of assets under management of Interim program JV loans. The remainder consisted of WDIP debt funds. As of September 30, 2024, included $105.4 million of equity under management and $424.8 million of assets under management of Interim program JV loans. The remainder consisted of WDIP debt funds. |
FINANCIAL RESULTS - THREE MONTHS
SERVICING & ASSET MANAGEMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
|
|
||||||
|
|
|
September 30, |
|
Dollar |
|
Percentage |
||||||
|
(in thousands) |
2025 |
2024 |
Change |
Change |
||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
Origination fees |
|
$ |
1,698 |
|
$ |
823 |
|
$ |
875 |
|
106 |
% |
|
Servicing fees |
|
|
85,189 |
|
|
82,222 |
|
|
2,967 |
|
4 |
|
|
Investment management fees |
|
|
6,178 |
|
|
11,744 |
|
|
(5,566) |
|
(47) |
|
|
Net warehouse interest income, loans held for investment |
|
- |
|
651 |
|
(651) |
|
(100) |
|
|||
|
Placement fees and other interest income |
|
42,123 |
|
40,299 |
|
1,824 |
|
5 |
|
|||
|
Other revenues |
|
15,440 |
|
9,145 |
|
6,295 |
|
69 |
|
|||
|
Total revenues |
|
$ |
150,628 |
|
$ |
144,884 |
|
$ |
5,744 |
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel |
|
$ |
23,304 |
|
$ |
20,951 |
|
$ |
2,353 |
|
11 |
% |
|
Amortization and depreciation |
|
56,991 |
|
54,668 |
|
2,323 |
|
4 |
|
|||
|
Provision (benefit) for credit losses |
|
|
949 |
|
|
2,850 |
|
|
(1,901) |
|
(67) |
|
|
Interest expense on corporate debt |
|
|
10,404 |
|
|
11,711 |
|
|
(1,307) |
|
(11) |
|
|
Other operating expenses |
|
8,470 |
|
6,611 |
|
1,859 |
|
28 |
|
|||
|
Total expenses |
|
$ |
100,118 |
|
$ |
96,791 |
|
$ |
3,327 |
|
3 |
|
|
Income (loss) from operations |
|
$ |
50,510 |
|
$ |
48,093 |
|
$ |
2,417 |
|
5 |
|
|
Income tax expense (benefit) |
|
13,578 |
|
10,756 |
|
2,822 |
|
26 |
|
|||
|
Net income (loss) before noncontrolling interests |
|
$ |
36,932 |
|
$ |
37,337 |
|
$ |
(405) |
|
(1) |
|
|
Less: net income (loss) from noncontrolling interests |
|
(31) |
|
(145) |
|
114 |
(79) |
|
||||
|
Net income (loss) |
|
$ |
36,963 |
|
$ |
37,482 |
|
$ |
(519) |
|
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL RESULTS - NINE MONTHS
SERVICING & ASSET MANAGEMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended |
|
|
|
|
||||||
|
|
|
September 30, |
|
Dollar |
|
Percentage |
||||||
|
(in thousands) |
2025 |
2024 |
Change |
Change |
||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
Origination fees |
|
$ |
3,327 |
|
$ |
2,356 |
|
$ |
971 |
|
41 |
% |
|
Servicing fees |
|
|
251,103 |
|
|
242,683 |
|
|
8,420 |
|
3 |
|
|
Investment management fees |
|
|
23,437 |
|
|
40,086 |
|
|
(16,649) |
|
(42) |
|
|
Net warehouse interest income, loans held for investment |
|
- |
|
1,475 |
|
(1,475) |
|
(100) |
|
|||
|
Placement fees and other interest income |
|
104,396 |
|
113,072 |
|
(8,676) |
|
(8) |
|
|||
|
Other revenues |
|
41,003 |
|
34,679 |
|
6,324 |
|
18 |
|
|||
|
Total revenues |
|
$ |
423,266 |
|
$ |
434,351 |
|
$ |
(11,085) |
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel |
|
$ |
65,593 |
|
$ |
59,083 |
|
$ |
6,510 |
|
11 |
% |
|
Amortization and depreciation |
|
167,371 |
|
160,912 |
|
6,459 |
|
4 |
|
|||
|
Provision (benefit) for credit losses |
|
|
6,481 |
|
|
6,310 |
|
|
171 |
|
3 |
|
|
Interest expense on corporate debt |
|
|
31,145 |
|
|
33,848 |
|
|
(2,703) |
|
(8) |
|
|
Other operating expenses |
|
22,452 |
|
18,462 |
|
3,990 |
|
22 |
|
|||
|
Total expenses |
|
$ |
293,042 |
|
$ |
278,615 |
|
$ |
14,427 |
|
5 |
|
|
Income (loss) from operations |
|
$ |
130,224 |
|
$ |
155,736 |
|
$ |
(25,512) |
|
(16) |
|
|
Income tax expense (benefit) |
|
36,657 |
|
38,430 |
|
(1,773) |
|
(5) |
|
|||
|
Net income (loss) before noncontrolling interests |
|
$ |
93,567 |
|
$ |
117,306 |
|
$ |
(23,739) |
|
(20) |
|
|
Less: net income (loss) from noncontrolling interests |
|
(63) |
|
(3,891) |
|
3,828 |
(98) |
|
||||
|
Net income (loss) |
|
$ |
93,630 |
|
$ |
121,197 |
|
$ |
(27,567) |
|
(23) |
|
Revenues
Servicing fees. As seen below, for the three and nine months ended September 30, 2025, the increases were primarily attributable to increases in the average servicing portfolio period over period combined with a slight increase in the average servicing fee rate for the nine months ended September 30, 2025, only. The increases in the average servicing portfolio were driven primarily by the $4.9 billion increase in Fannie Mae loans serviced, resulting in an increase in Fannie Mae loans as a percentage of the overall servicing portfolio. Servicing fee rates for Fannie Mae loans are higher than other products in the servicing portfolio, offsetting the aforementioned decrease in weighted-average servicing fees from new originations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
|
For the nine months ended |
|
||||||||||||
|
|
September 30, |
|
|
|
September 30, |
|
||||||||||||
|
Servicing Fees Details (in thousands) |
2025 |
|
|
|
2024 |
|
|
|
2025 |
|
|
|
2024 |
|
||||
|
Average Servicing Portfolio |
$ |
137,901,148 |
|
|
|
$ |
133,563,794 |
|
|
|
$ |
136,596,407 |
|
|
|
$ |
132,381,836 |
|
|
Dollar Change |
$ |
4,337,354 |
|
|
|
|
|
|
|
|
$ |
4,214,571 |
|
|
|
|
|
|
|
Percentage Change |
|
3 |
% |
|
|
|
|
|
|
|
|
3 |
% |
|
|
|
|
|
|
Average Servicing Fee (basis points) |
|
24.1 |
|
|
|
|
24.1 |
|
|
|
|
24.2 |
|
|
|
|
24.1 |
|
|
Basis Point Change |
|
0.0 |
|
|
|
|
|
|
|
|
|
0.1 |
|
|
|
|
|
|
|
Percentage Change |
|
0 |
% |
|
|
|
|
|
|
|
|
0 |
% |
|
|
|
|
|
Investment management fees. For the three and nine months ended September 30, 2025, investment management fees declined primarily as a result of $3.5 million and $15.4 million declines, respectively, in investment management fees from our LIHTC operations, primarily due to lower expected asset dispositions in 2025 than in 2024 within the LIHTC funds. The decline in expected asset dispositions was driven by the sustained challenging market dynamics in the LIHTC space. For the three months ended September 30, 2025, only, the decrease was also attributed to a $2.1 million reduction in carried interest revenues from our private credit investment strategies due to one-time activity during 2025.
Placement fees and other interest income.For the three months ended September 30, 2025, the increase was primarily driven by a $5.1 million increase in interest income from short-term loans to our affordable joint ventures, partially offset by a $3.2 million decrease in our placement fees on escrow deposits. The primary driver in the decrease in placement fees was a decline in the placement fee rates on escrow deposits as a result of a lower short-term interest rate environment in 2025 compared to 2024, partially offset by an increase in the average escrow balance period over period.
For the nine months ended September 30, 2025, the decrease was primarily driven by a decrease in placement fees on escrow deposits of $14.8 million, partially offset by a $6.2 million increase in interest income from short-term loans to our affordable joint ventures. The primary driver in the decrease in placement fees was a decline in the placement fee rates on escrow deposits as a result of lower short-term interest rate environment in 2025 compared to 2024, partially offset by an increase in the average escrow balance period over period.
Other revenues. For the three months ended September 30, 2025, the increase was primarily due to a $3.1 million increase in syndication and other fees, a $1.9 million increase in prepayment fees and a $1.3 million increase in income from equity-method investments. The increase in syndication fees and other fees was primarily driven by the 80% increase in equity syndication volume during the three months ended September 30, 2025. Prepayment fees increased due to an increase in prepayment activity due to the interest rate environment during the quarter. Income from equity method investments increased due to improved performance from our equity method investments.
For the nine months ended September 30, 2025, the increase was driven by a $6.6 million increase in syndication and other fees driven by the 24% increase in equity syndication volume during the nine months ended September 30, 2025, primarily due to a large fund syndicated in the second quarter of 2025.
Expenses
Personnel. For the three months ended September 30, 2025, the increase was primarily attributable to a $1.5 million increase in severance costs combined with smaller increases in various types of costs such as salaries and benefits, commissions, and bonus accruals.
For the nine months ended September 30, 2025, the increase was largely due to (i) a $3.3 million increase in salaries and benefits and bonus accruals resulting primarily from a 4% increase in average segment headcount, (ii) a $1.9 million increase in severance costs, and (iii) a $1.5 million increase in production bonuses due to the increased syndication volume.
Amortization and depreciation.For both the three and nine months ended September 30, 2025, the increase was primarily driven by increases in amortization of MSRs and write-offs due to prepayment.
Provision (benefit) for credit losses. For the three months ended September 30, 2025, the decrease was primarily driven by a reduction in collateral-based reserves for indemnified and defaulted loans year over year.
Other operating expenses. For the three months ended September 30, 2025, the increase was due primarily attributable to a $1.7 million increase in the operating costs related to indemnified and repurchased loans.
For the nine months ended September 30, 2025, the increase was largely the result of increases of $2.9 million in the operating costs related to indemnified and repurchased loans and $3.0 million in miscellaneous expenses for our LIHTC operations, partially offset by a $1.8 million decrease in other professional fees.
Interest expense on corporate debt. Interest expense on corporate debt is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment's use of that corporate debt. The discussion of our condensed consolidated results above has additional information related to the decrease in interest expense on corporate debt.
Income tax expense (benefit). Income tax expense is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment's income from operations, except for significant, one-time tax activities, which are allocated entirely to the segment impacted by the tax activity.
Non-GAAP Financial Measure
A reconciliation of adjusted EBITDA for our SAM segment is presented below. Our segment-level adjusted EBITDA represents the segment portion of consolidated adjusted EBITDA. A detailed description and reconciliation of consolidated adjusted EBITDA is provided above in our Consolidated Results of Operations-Non-GAAP Financial Measure. SAM adjusted EBITDA is reconciled to net income as follows:
ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP
SERVICING & ASSET MANAGEMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
For the nine months ended |
||||||||
|
|
|
September 30, |
|
September 30, |
||||||||
|
(in thousands) |
2025 |
2024 |
2025 |
2024 |
||||||||
|
Reconciliation of Net Income (loss) to Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|||
|
Net income (loss) |
|
$ |
36,963 |
|
$ |
37,482 |
|
$ |
93,630 |
|
$ |
121,197 |
|
Income tax expense (benefit) |
|
13,578 |
|
10,756 |
|
36,657 |
|
38,430 |
||||
|
Interest expense on corporate debt |
|
|
10,404 |
|
|
11,711 |
|
|
31,145 |
|
|
33,848 |
|
Amortization and depreciation |
|
56,991 |
|
54,668 |
|
167,371 |
|
160,912 |
||||
|
Provision (benefit) for credit losses |
|
|
949 |
|
|
2,850 |
|
|
6,481 |
|
|
6,310 |
|
Net write-offs |
|
|
- |
|
|
(468) |
|
|
- |
|
|
(468) |
|
Stock-based compensation expense |
|
538 |
|
456 |
|
1,443 |
|
1,385 |
||||
|
Write-off of unamortized issuance costs from corporate debt paydown |
|
|
- |
|
|
- |
|
|
2,529 |
|
|
- |
|
Adjusted EBITDA |
|
$ |
119,423 |
|
$ |
117,455 |
|
$ |
339,256 |
|
$ |
361,614 |
The following tables present period-to-period comparisons of the components of SAM adjusted EBITDA for the three and nine months ended September 30, 2025 and 2024.
ADJUSTED EBITDA - THREE MONTHS
SERVICING & ASSET MANAGEMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
|
|
|
|||||
|
|
September 30, |
|
Dollar |
|
Percentage |
||||||
|
(in thousands) |
2025 |
2024 |
Change |
Change |
|||||||
|
Origination fees |
$ |
1,698 |
|
$ |
823 |
|
$ |
875 |
|
106 |
% |
|
Servicing fees |
85,189 |
|
82,222 |
|
2,967 |
|
4 |
|
|||
|
Investment management fees |
|
6,178 |
|
|
11,744 |
|
|
(5,566) |
|
(47) |
|
|
Net warehouse interest income (expense), loans held for investment |
- |
|
651 |
|
(651) |
|
(100) |
|
|||
|
Placement fees and other interest income |
42,123 |
|
40,299 |
|
1,824 |
|
5 |
|
|||
|
Other revenues |
15,471 |
|
9,290 |
|
6,181 |
|
67 |
|
|||
|
Personnel |
(22,766) |
|
(20,495) |
|
(2,271) |
|
11 |
|
|||
|
Net write-offs |
|
- |
|
|
(468) |
|
|
468 |
|
(100) |
|
|
Other operating expenses |
(8,470) |
|
(6,611) |
|
(1,859) |
|
28 |
|
|||
|
Adjusted EBITDA |
$ |
119,423 |
|
$ |
117,455 |
|
$ |
1,968 |
|
2 |
|
ADJUSTED EBITDA - NINE MONTHS
SERVICING & ASSET MANAGEMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended |
|
|
|
|
|
|||||
|
|
September 30, |
|
Dollar |
|
Percentage |
||||||
|
(in thousands) |
2025 |
2024 |
Change |
Change |
|||||||
|
Origination fees |
$ |
3,327 |
|
$ |
2,356 |
|
$ |
971 |
|
41 |
% |
|
Servicing fees |
251,103 |
|
242,683 |
|
8,420 |
|
3 |
|
|||
|
Investment management fees |
|
23,437 |
|
|
40,086 |
|
|
(16,649) |
|
(42) |
|
|
Net warehouse interest income (expense), loans held for investment |
- |
|
1,475 |
|
(1,475) |
|
(100) |
|
|||
|
Placement fees and other interest income |
104,396 |
|
113,072 |
|
(8,676) |
|
(8) |
|
|||
|
Other revenues |
41,066 |
|
38,570 |
|
2,496 |
|
6 |
|
|||
|
Personnel |
(64,150) |
|
(57,698) |
|
(6,452) |
|
11 |
|
|||
|
Net write-offs |
- |
|
(468) |
|
468 |
|
(100) |
|
|||
|
Other operating expenses |
(19,923) |
|
(18,462) |
|
(1,461) |
|
8 |
|
|||
|
Adjusted EBITDA |
$ |
339,256 |
|
$ |
361,614 |
|
$ |
(22,358) |
|
(6) |
|
Three months ended September 30, 2025 compared to three months ended September 30, 2024
Servicing fees increased primarily due to growth in the average servicing portfolio period over period. Investment management fees declined principally due to a decrease in investment management fees from our LIHTC operations and a reduction in carried interest revenues from our private credit investment management strategies. Placement fees and other interest income increased mainly due to an increase in interest income from short-term loans to our affordable joint ventures, partially offset by a decrease in placement fees on escrow deposits. Other revenues increased due to an increase in syndication and other fees, prepayment fees, and income from equity method investments. Personnel expense increased principally as a result of an increase in severance costs.
Nine months ended September 30, 2025 compared to nine months ended September 30, 2024
Servicing fees increased primarily due to growth in the average servicing portfolio period over period. Investment management fees declined principally due to a decrease in investment management fees from our LIHTC operations. Placement fees and other interest income decreased mainly due to a decrease in placement fees on escrow deposits, partially offset by an increase in interest income from short-term loans to our affordable joint ventures. Other revenues increased primarily due to an increase in syndication and other fees. Personnel expense increased principally as a result of increases in salaries and benefits expense, severance costs, and production bonuses.
Corporate
FINANCIAL RESULTS - THREE MONTHS
CORPORATE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
|
|
||||||
|
|
|
September 30, |
|
Dollar |
|
Percentage |
||||||
|
(in thousands) |
2025 |
2024 |
Change |
Change |
||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other interest income |
|
$ |
4,179 |
|
$ |
3,258 |
|
$ |
921 |
|
28 |
% |
|
Other revenues |
|
2,114 |
|
450 |
|
1,664 |
|
370 |
|
|||
|
Total revenues |
|
$ |
6,293 |
|
$ |
3,708 |
|
$ |
2,585 |
|
70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel |
|
$ |
23,001 |
|
$ |
19,600 |
|
$ |
3,401 |
|
17 |
% |
|
Amortization and depreciation |
|
1,904 |
|
1,756 |
|
148 |
|
8 |
|
|||
|
Interest expense on corporate debt |
|
1,512 |
|
1,633 |
|
(121) |
|
(7) |
|
|||
|
Other operating expenses |
|
22,762 |
|
20,236 |
|
2,526 |
|
12 |
|
|||
|
Total expenses |
|
$ |
49,179 |
|
$ |
43,225 |
|
$ |
5,954 |
|
14 |
|
|
Income (loss) from operations |
|
$ |
(42,886) |
|
$ |
(39,517) |
|
$ |
(3,369) |
|
9 |
|
|
Income tax expense (benefit) |
|
(11,445) |
|
(9,007) |
|
(2,438) |
|
27 |
|
|||
|
Net income (loss) |
|
$ |
(31,441) |
|
$ |
(30,510) |
|
$ |
(931) |
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS |
|
|
(0.92) |
|
|
(0.90) |
|
|
(0.02) |
|
2 |
|
|
Adjusted EBITDA(1) |
|
$ |
(36,575) |
|
$ |
(33,949) |
|
$ |
(2,626) |
|
8 |
% |
FINANCIAL RESULTS - NINE MONTHS
CORPORATE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended |
|
|
|
|
||||||
|
|
|
September 30, |
|
Dollar |
|
Percentage |
||||||
|
(in thousands) |
2025 |
2024 |
Change |
Change |
||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other interest income |
|
$ |
11,103 |
|
$ |
10,927 |
|
$ |
176 |
|
2 |
% |
|
Other revenues |
|
3,798 |
|
1,982 |
|
1,816 |
|
92 |
|
|||
|
Total revenues |
|
$ |
14,901 |
|
$ |
12,909 |
|
$ |
1,992 |
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel |
|
$ |
61,083 |
|
$ |
54,330 |
|
$ |
6,753 |
|
12 |
% |
|
Amortization and depreciation |
|
5,794 |
|
5,171 |
|
623 |
|
12 |
|
|||
|
Interest expense on corporate debt |
|
4,397 |
|
4,879 |
|
(482) |
|
(10) |
|
|||
|
Other operating expenses |
|
64,577 |
|
60,093 |
|
4,484 |
|
7 |
|
|||
|
Total expenses |
|
$ |
135,851 |
|
$ |
124,473 |
|
$ |
11,378 |
|
9 |
|
|
Income (loss) from operations |
|
$ |
(120,950) |
|
$ |
(111,564) |
|
$ |
(9,386) |
|
8 |
|
|
Income tax expense (benefit) |
|
(34,046) |
|
(27,531) |
|
(6,515) |
|
24 |
|
|||
|
Net income (loss) |
|
$ |
(86,904) |
|
$ |
(84,033) |
|
$ |
(2,871) |
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS |
|
|
(2.54) |
|
|
(2.48) |
|
|
(0.06) |
|
2 |
|
|
Adjusted EBITDA |
|
$ |
(102,627) |
|
$ |
(95,211) |
|
$ |
(7,416) |
|
8 |
% |
| (1) | This is a non-GAAP financial measure. For more information on adjusted EBITDA, refer to the section below titled "Non-GAAP Financial Measure". |
Revenues
Other revenues. For the three months ended September 30, 2025, the increase was primarily due to a $1.5 million increase in income from equity method investments due to their improved performance.
For the nine months ended September 30, 2025, the increase was due to (i) a $1.1 million increase in interest income on invested capital outstanding during the first half of the year, with no comparable activity in the prior year, and (ii) a $0.6 million increase in income from equity method investments.
Expenses
Personnel. For the three months ended September 30, 2025, the increase was primarily due to a $2.3 million increase in salaries and benefits due to an 11% increase in average segment headcount in support of the overall growth in transaction activity and business volumes.
For the nine months ended September 30, 2025, the increase was driven by a $7.5 million increase in salaries and benefits due to a 10% increase in average segment headcount, partially offset by a $1.3 million decrease in subjective bonus accrual.
Interest expense on corporate debt. Interest expense on corporate debt is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment's use of that corporate debt. The discussion of our consolidated results above has additional information related to the increase in interest expense on corporate debt.
Other operating expense. For the three months ended September 30, 2025, the increase was due to a $1.0 million increase in software expense in support of the Company's growth in 2025, a $0.8 million increase in marketing due to a change in the timing of company events, and a $0.6 million increase in professional fees mostly due to increased compliance costs.
For the nine months ended September 30, 2025, the increase was driven by a $2.7 million increase in professional fees largely as a result of increased compliance costs and a $1.6 million increase in software expense to support the Company's growth in 2025.
Income tax expense (benefit). Income tax expense (benefit) is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment's income from operations, except for significant, one-time tax activities, which are allocated entirely to the segment impacted by the tax activity.
Non-GAAP Financial Measure
A reconciliation of adjusted EBITDA for our Corporate segment is presented below. Our segment-level adjusted EBITDA represents the segment portion of consolidated adjusted EBITDA. A detailed description and reconciliation of consolidated adjusted EBITDA is provided above in our Consolidated Results of Operations-Non-GAAP Financial Measure. Corporate adjusted EBITDA is reconciled to net income as follows:
ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP
CORPORATE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
For the nine months ended |
||||||||
|
|
|
September 30, |
|
September 30, |
||||||||
|
(in thousands) |
2025 |
2024 |
2025 |
2024 |
||||||||
|
Reconciliation of Net Income (loss) to Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|||
|
Net income (loss) |
|
$ |
(31,441) |
|
$ |
(30,510) |
|
$ |
(86,904) |
|
$ |
(84,033) |
|
Income tax expense (benefit) |
|
(11,445) |
|
(9,007) |
|
(34,046) |
|
(27,531) |
||||
|
Interest expense on corporate debt |
|
1,512 |
|
1,633 |
|
4,397 |
|
4,879 |
||||
|
Amortization and depreciation |
|
1,904 |
|
1,756 |
|
5,794 |
|
5,171 |
||||
|
Stock-based compensation expense |
|
2,895 |
|
2,179 |
|
7,710 |
|
6,303 |
||||
|
Write-off of unamortized issuance costs from corporate debt paydown |
|
|
- |
|
|
- |
|
|
422 |
|
|
- |
|
Adjusted EBITDA |
|
$ |
(36,575) |
|
$ |
(33,949) |
|
$ |
(102,627) |
|
$ |
(95,211) |
The following tables present period-to-period comparisons of the components of Corporate adjusted EBITDA forthe three and nine months ended September 30, 2025 and 2024.
ADJUSTED EBITDA - THREE MONTHS
CORPORATE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
|
|
|
|||||
|
|
September 30, |
|
Dollar |
|
Percentage |
||||||
|
(in thousands) |
2025 |
2024 |
Change |
Change |
|||||||
|
Other interest income |
$ |
4,179 |
|
$ |
3,258 |
|
$ |
921 |
|
28 |
% |
|
Other revenues |
2,114 |
|
450 |
|
1,664 |
|
370 |
|
|||
|
Personnel |
(20,106) |
|
(17,421) |
|
(2,685) |
|
15 |
|
|||
|
Other operating expenses |
(22,762) |
|
(20,236) |
|
(2,526) |
|
12 |
|
|||
|
Adjusted EBITDA |
$ |
(36,575) |
|
$ |
(33,949) |
|
$ |
(2,626) |
|
8 |
|
ADJUSTED EBITDA - NINE MONTHS
CORPORATE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended |
|
|
|
|
|
|||||
|
|
September 30, |
|
Dollar |
|
Percentage |
||||||
|
(in thousands) |
2025 |
2024 |
Change |
Change |
|||||||
|
Other interest income |
$ |
11,103 |
|
$ |
10,927 |
|
$ |
176 |
|
2 |
% |
|
Other revenues |
3,798 |
|
1,982 |
|
1,816 |
|
92 |
|
|||
|
Personnel |
(53,373) |
|
(48,027) |
|
(5,346) |
|
11 |
|
|||
|
Other operating expenses |
(64,155) |
|
(60,093) |
|
(4,062) |
|
7 |
|
|||
|
Adjusted EBITDA |
$ |
(102,627) |
|
$ |
(95,211) |
|
$ |
(7,416) |
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2025 compared to three months ended September 30, 2024
Other revenues increased primarily due to an increase in income from equity method investments. The increase in personnel expense was primarily due to higher salaries and benefit costs. Other operating expenses increased due to increased software expense, marketing costs, and professional fees.
Nine months ended September 30, 2025 compared to nine months ended September 30, 2024
Other revenues increased primarily due to an increase in income from invested capital that was outstanding during the year. The increase in personnel expense was primarily due to higher salaries and benefit costs, partially offset by a decrease in subjective bonuses tied to company performance. Other operating expenses increased due to professional fees and software expense.
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) pay cash dividends; (iii) fund our portion of the equity necessary to support equity-method investments; (iv) fund investments in properties to be syndicated to LIHTC investment funds that we will asset-manage; (v) make payments related to earnouts from acquisitions; (vi) meet working capital needs to support our day-to-day operations, including debt service payments, joint venture development partnership contributions, advances for servicing, loan repurchases and payments for salaries, commissions, and income taxes; and (vii) meet working capital 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, 2025. The net worth requirement is derived primarily from unpaid balances on Fannie Mae loans and the level of risk-sharing. As of September 30, 2025, the net worth requirement was $337.9 million, and our net worth was $1.1 billion, as measured at our wholly owned operating subsidiary, Walker & Dunlop, LLC. As of September 30, 2025, we were required to maintain at least $67.2 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, 2025, we had operational liquidity of $273.7 million, as measured at our wholly owned operating subsidiary, Walker & Dunlop, LLC.
The aggregate fair value of our contingent consideration liabilities as of September 30, 2025 was $19.3 million. This fair value represents management's best estimate of the discounted cash payments that will be made in the future related to contingent consideration arrangements. The maximum remaining undiscounted earnout payments as of September 30, 2025 was $245.5 million, with the vast majority of the undiscounted payments related to the acquisition of Geophy B.V. in 2022, and is not expected to be achieved and thus paid.
We paid a cash dividend of $0.67 per share during the third quarter of 2025, which is 3% higher than the quarterly dividend paid in the third quarter of 2024. On November 5, 2025, the Company's Board of Directors declared a dividend of $0.67 per share for the fourth quarter of 2025. The dividend will be paid on December 5, 2025 to all holders of record of our restricted and unrestricted common stock as of November 21, 2025.
In February 2025, our Board of Directors approved a stock repurchase program that permits the repurchase of up to $75.0 million of shares of our common stock over a 12-month period beginning February 21, 2025 (the "2025 Stock Repurchase Program"). During the nine months ended September 30, 2025, we did not repurchase any shares under the 2025 Stock Repurchase Program, and we had $75.0 million of remaining capacity under the 2025 Stock Repurchase Program as of September 30, 2025.
Historically, our cash flows from operating activities 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 operating activities 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 when 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, which is an 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 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, 2025, we held substantially all of our restricted liquidity in Agency MBS in the aggregate amount of $203.2 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, 2025 collateral requirements as outlined above. As of September 30, 2025, reserve requirements for the September 30, 2025 DUS loan portfolio will require us to fund $74.7 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, 2025.
Sources of Liquidity: Warehouse Facilities and Notes Payable
Warehouse Facilities
We use a combination of warehouse facilities and notes payable to provide funding for our operations. We use warehouse facilities to fund our Agency Lending and Interim Loan Program. Our ability to originate Agency mortgage loans and loans held for investments depends upon our ability to secure and maintain these types of financing agreements on acceptable terms. For a detailed description of the terms of each warehouse agreement, refer to "Warehouse Facilities" in NOTE 6 in the consolidated financial statements in our 2024 Form 10-K, as updated in NOTE 6 in the condensed consolidated financial statements in this Form 10-Q.
Notes Payable
For a detailed description of the terms of our various corporate debt instruments and related amendments, refer to "Notes Payable - Term Loan Note Payable" in NOTE 6 in the consolidated financial statements in our 2024 Form 10-K and "Notes Payable" in NOTE 6 in the condensed consolidated financial statements in our Form 10-Q for the quarterly period ending March 31, 2025.
The warehouse facilities and notes payable are subject to various financial covenants. The Company is in compliance with all of these financial covenants as of September 30, 2025.
Credit Quality, Allowance for Risk-Sharing Obligations, and Loan Repurchases
The following table sets forth certain information useful in evaluating our credit performance.
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|||||
|
|
2025 |
2024 |
|||||
|
Key Credit Metrics (in thousands) |
|
|
|
|
|
|
|
|
Risk-sharing servicing portfolio: |
|
|
|
|
|
|
|
|
Fannie Mae Full Risk |
|
$ |
63,382,256 |
|
$ |
57,032,839 |
|
|
Fannie Mae Modified Risk |
|
7,624,086 |
|
9,035,373 |
|
||
|
Freddie Mac Modified Risk |
|
10,000 |
|
69,400 |
|
||
|
Total risk-sharing servicing portfolio |
|
$ |
71,016,342 |
|
$ |
66,137,612 |
|
|
|
|
|
|
|
|
|
|
|
Non-risk-sharing servicing portfolio: |
|
|
|
|
|
|
|
|
Freddie Mac No Risk |
|
$ |
40,463,401 |
|
$ |
40,020,758 |
|
|
GNMA - HUD No Risk |
|
11,298,108 |
|
10,727,323 |
|
||
|
Brokered |
|
16,553,827 |
|
17,156,810 |
|
||
|
Total non-risk-sharing servicing portfolio |
|
$ |
68,315,336 |
|
$ |
67,904,891 |
|
|
Total loans serviced for others |
|
$ |
139,331,678 |
|
$ |
134,042,503 |
|
|
|
|
|
|
|
|
|
|
|
Loans held for investment (full risk) |
|
$ |
36,926 |
|
$ |
38,043 |
|
|
Interim Program JV Managed Loans(1) |
|
|
76,215 |
|
|
424,774 |
|
|
|
|
|
|
|
|
|
|
|
At-risk servicing portfolio(2) |
|
$ |
66,946,180 |
|
$ |
61,237,535 |
|
|
Maximum exposure to at-risk portfolio(3) |
|
13,704,585 |
|
12,454,158 |
|
||
|
Defaulted loans(4) |
|
139,020 |
|
59,645 |
|
||
|
|
|
|
|
|
|
|
|
|
Defaulted loans as a percentage of the at-risk portfolio |
|
|
0.21 |
% |
|
0.10 |
% |
|
Allowance for risk-sharing as a percentage of the at-risk portfolio |
|
|
0.05 |
|
|
0.05 |
|
|
Allowance for risk-sharing as a percentage of maximum exposure |
|
|
0.25 |
|
|
0.24 |
|
| (1) | As of September 30, 2025 and 2024, this balance consisted 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.
| (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. |
| (4) | Defaulted loans represent loans in our Fannie Mae at-risk portfolio or Freddie Mac SBLs pre-securitized portfolio that are probable of foreclosure or that have foreclosed and for which the Company has recorded a collateral-based reserve(i.e., loans where we have assessed a probable loss). Other loans that are delinquent but not foreclosed or that are not probable of foreclosure are not included here. Additionally, loans that have foreclosed or are probable of foreclosure but are not expected to result in a loss to the Company are not included here. |
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 UPB of the loan.
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Risk-Sharing Losses |
Percentage Absorbed by Us |
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First 5% of UPB at the time of loss settlement |
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100% |
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Next 20% of UPB at the time of loss settlement |
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25% |
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Losses above 25% of UPB at the time of loss settlement |
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10% |
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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. At times, we may agree to a higher risk-sharing percentage (up to 100% of UPB) after origination and under limited circumstances.
We have a loss-sharing arrangement with Freddie Mac related to SBLs that is only applicable to SBLs that are pre-securitized and outstanding for more than 12 months. If a loan defaults prior to securitization, we are required to share the losses with Freddie Mac. Our loss-sharing arrangement is a 10% top loss, meaning that we are responsible for the first 10% of the losses incurred on such defaulted loans. We have never incurred a loss on a Freddie Mac SBL; however, we have three defaulted loans with allowances in our portfolio that are awaiting final resolution.
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 Segments - Capital Markets section of "Item 1. Business" in our 2024 Form 10-K 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. For loans that are individually evaluated, a reserve for estimated credit losses is recorded when it is probable that a risk-sharing loan will foreclose or has foreclosed ("collateral-based reserves"), and a reserve for estimated credit losses and a guaranty obligation are recorded for all other risk-sharing loans. We do not record a collateral-based reserve when it is probable that a risk sharing loan will foreclose or has foreclosed, and the disposition proceeds are expected to be higher than the UPB, resulting in no losses for the Company.
The allowance for risk-sharing obligations related to the Company's $66.0 billion at-risk Fannie Mae servicing portfolio and our Freddie Mac defaulted SBLs that is based on a collective evaluation as of September 30, 2025 was $24.8 million compared to $24.2 million as of December 31, 2024.
As of September 30, 2025, ten loans (seven Fannie Mae loans and three Freddie Mac SBLs) were in default with an aggregate UPB of $139.0 million compared to seven Fannie Mae loans with an aggregate UPB of $59.6 million that were in default as of September 30, 2024. The collateral-based reserve on defaulted loans was $9.4 million and $6.5 million as of September 30, 2025 and 2024, respectively. We had a provision for risk-sharing obligations of $0.9 million for the three months ended September 30, 2025 compared to a benefit for risk-sharing obligations of $0.2 million for the three months ended September 30, 2024. We had a provision for risk-sharing obligations of $6.0 million for the nine months ended September 30, 2025 compared to a benefit for risk-sharing obligations of $1.3 million for the nine months ended September 30, 2024.
We are obligated to repurchase loans that are originated for the Agencies' programs if certain representations and warranties that we provide in connection with such originations are breached. NOTE 2 in the condensed consolidated financial statements has additional details regarding our repurchase obligations.
New/Recent Accounting Pronouncements
As seen in NOTE 2 in the condensed consolidated financial statements in Item 1 of Part I of this Form 10-Q, our preliminary conclusion is that there are no accounting pronouncements that the Financial Accounting Standards Board has issued that have the potential to materially impact us as of September 30, 2025.
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