Walker & Dunlop’s Servicing Portfolio Tops $75 Billion

Bethesda, Maryland – February 1, 2018

Walker & Dunlop, Inc. (NYSE: WD) (the “Company”) announced today that its servicing portfolio has surpassed $75 billion, driven by strong origination volume and the recent acquisition of a $590 million commercial mortgage servicing portfolio. The acquired portfolio is comprised of 56 loans insured by the U.S. Department of Housing and Urban Development (HUD). Walker & Dunlop has now added another $5 billion to its servicing portfolio in less than four months.

Jim Schroeder, senior vice president, stated, “We are well on our way to building a $100 billion servicing portfolio by 2020. The dramatic and rapid growth in mortgage servicing rights (MSRs) we’ve seen is due to the size and scale of our loan origination platform and the opportunistic acquisitions of portfolios we have made over the past few years. Over 85% of our servicing fees are prepayment protected, meaning the servicing revenues due to Walker & Dunlop are contractually obligated through loan maturity, or are paid in full if a loan is paid-off.”

Walker & Dunlop’s servicing portfolio has grown by 69% over the past three years, driving a substantial increase in servicing-related revenues, cash flow, and adjusted EBITDA. For example, the Company’s adjusted EBITDA for the first three quarters of 2017 was $146 million, compared to $96 million for the same period in 2016. The $590 million HUD servicing portfolio acquisition closed on December 20, 2017 and brings Walker & Dunlop’s HUD portfolio to $9.6 billion as of year-end 2017. The escrow balances related to the servicing portfolio, much of which come from the HUD portfolio, totaled $2 billion at the end of 2017.

About Walker & Dunlop

Walker & Dunlop (NYSE: WD), headquartered in Bethesda, Maryland, is one of the largest commercial real estate services and finance companies in the United States providing financing and investment sales to owners of multifamily and commercial properties. Walker & Dunlop, which is included in the S&P SmallCap 600 Index, has over 600 professionals in 28 offices across the nation with an unyielding commitment to client satisfaction.

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with United States generally accepted accounting principles (“GAAP”), the Company uses adjusted EBITDA, a non-GAAP financial measure. The presentation of adjusted EBITDA is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. When analyzing our operating performance, readers should use adjusted EBITDA in addition to, and not as an alternative for, net income. Adjusted EBITDA represents net income before income taxes, interest expense on our term loan facility, and amortization and depreciation, adjusted for provision for credit losses net of write-offs, stock-based incentive compensation charges, and non-cash revenues such as gains attributable to MSRs and unrealized gains and losses from CMBS activities. Because not all companies use identical calculations, our presentation of adjusted EBITDA may not be comparable to similarly titled measures of other companies. Furthermore, adjusted EBITDA is not intended to be a measure of free cash flow for our management’s discretionary use, as it does not reflect certain cash requirements such as tax and debt service payments. The amounts shown for adjusted EBITDA may also differ from the amounts calculated under similarly titled definitions in our debt instruments, which are further adjusted to reflect certain other cash and non-cash charges that are used to determine compliance with financial covenants.

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

• the ability to make more meaningful period-to-period comparisons of the Company’s on-going operating results;
• the ability to better identify trends in the Company’s underlying business and perform related trend analyses; and
• a better understanding of how management plans and measures the Company’s underlying business.

We believe that adjusted EBITDA has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and that adjusted EBITDA should only be used to evaluate the Company’s results of operations in conjunction with net income. For more information on adjusted EBITDA, refer to the section of this press release below titled “Adjusted Financial Metric Reconciliation to GAAP.”

Forward-Looking Statements

The statements contained in this press release regarding reaching a $100 billion servicing portfolio by 2020 may constitute forward-looking statements within the meaning of the federal securities laws

The forward-looking statements reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause actual results to differ significantly from those expressed or contemplated in any forward-looking statement.

While the forward-looking statements reflect our good faith projections, assumptions and expectations, they are not guarantees of future results. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes, except as required by applicable law. Factors that could cause our results to differ materially include, but are not limited to: (1) general economic conditions and multifamily and commercial real estate market conditions, (2) regulatory and or legislative changes to Freddie Mac, Fannie Mae or HUD, (3) our ability to retain and attract loan originators and other professionals, and (4) changes in federal government fiscal and monetary policies, including any constraints or cuts in federal funds allocated to HUD for loan originations.

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