8th largest commercial loan servicer added $10 billion in just 10 months
Bethesda, Maryland – October 12, 2017
Walker & Dunlop, Inc. (NYSE: WD) (the “Company”), the 8th largest commercial mortgage servicer in the United States as ranked by the Mortgage Bankers Association, announced today that its commercial mortgage servicing portfolio has grown by $10 billion in just ten months, surpassing $70 billion.
Stephen Theobald, Walker & Dunlop’s Chief Financial Officer, commented, “What’s really exciting is that as we have dramatically grown the servicing portfolio over the past five years, from just over $30 billion in 2012 to $70 billion in 2017, the rate of growth has accelerated and the average servicing fee has continued to increase.”
As the corresponding graph shows, Walker & Dunlop added each incremental $10 billion of portfolio volume in less time, while steadily expanding the weighted average servicing fee from 23 to 26.5 basis points (as of June 30, 2017).
Walker & Dunlop’s servicing portfolio is a very durable, long-term financial asset, similar to asset management fees or licensing fees in other industries. More than 85% of the Company’s commercial mortgage servicing rights (MSRs) recognized are prepayment protected, meaning their value is unaffected by changes in interest rates and the servicing revenues due to Walker & Dunlop are contractually obligated until the loans mature – or are paid in full if a loan is pre-paid before maturity.
“The current servicing portfolio has an average life of 10 years, which represents nearly $1 billion of contractual future revenues to Walker & Dunlop,” continued Mr. Theobald. “Growth in the portfolio since 2012, when Walker & Dunlop generated $41 million in servicing revenues, has translated into an annualized run rate of nearly $170 million of servicing fees in the first half of 2017. This explosive growth in servicing revenues has propelled our increase in adjusted EBITDA from just $29 million in 2012 to an annualized run rate of over $200 million in the first half of 2017. At the current rates of growth in both our loan origination and loan servicing businesses, our loan portfolio is well on pace to reach our established goal of $100 billion by 2020.”
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, non-cash revenues such as gains attributable to MSRs. In addition, adjusted EBITDA further excludes severance and deal-related expenses from the acquisition of CW Capital, LLC in 2012. 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.”
Some of the statements contained in this press release may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.
The forward-looking statements contained in this press release reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause actual results to differ significantly from those expressed or contemplated in any forward-looking statement.
While forward-looking statements reflect our good faith projections, assumptions and expectations, they are not guarantees of future results. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes, except as required by applicable law. Factors that could cause our results to differ materially include, but are not limited to: (1) general economic conditions and multifamily and commercial real estate market conditions, (2) regulatory and or legislative changes to Freddie Mac, Fannie Mae or HUD, (3) our ability to retain and attract loan originators and other professionals, and (4) changes in federal government fiscal and monetary policies, including any constraints or cuts in federal funds allocated to HUD for loan originations.
For a further discussion of these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements, see the section titled “Risk Factors” in our most recent Annual Report on Form 10-K, as it may be updated or supplemented by our Quarterly Reports on Form 10-Q and our other filings with the SEC. Such filings are available publicly on our Investor Relations web page at www.walkerdunlop.com.