BETHESDA, Md., Nov. 8, 2012 /PRNewswire/ —

THIRD QUARTER 2012 HIGHLIGHTS

• Closed acquisition of CWCapital on September 4, 2012; integration on track
• Loan originations of $2.2 billion, up 141% over third quarter 2011
• Total revenues of $70.1 million, up 110% over third quarter 2011
• Servicing portfolio of $33.9 billion at September 30, 2012, up 113% over September 30, 2011
• Servicing fees of $13.3 million, up 52% over third quarter 2011
• Adjusted net income of $14.3 million or $0.56 per diluted share, up 135% over third quarter 2011
• GAAP net income of $7.1 million or $0.28 diluted share, up 17% over the third quarter 2011

Walker & Dunlop, Inc. (NYSE: WD) (the “Company”) announced today exceptional third quarter earnings and dramatic growth in loan originations, revenue and adjusted net income that reflect the growth of Walker & Dunlop and the successful acquisition of CWCapital. Revenues for the third quarter totaled $70.1 million, an increase of 110% from $33.4 million in the third quarter 2011. The increase in revenues was driven by a 141% increase in loan originations and a 52% increase in servicing fee income. Adjusted net income, which excludes selected expenses¹ relating to the acquisition of CWCapital, increased 135% to $14.3 million, or $0.56 per diluted share, from $6.1 million, or $0.28 per diluted share, for the third quarter 2011. GAAP net income for the third quarter 2012 improved 17% from the third quarter 2011 to $7.1 million, or $0.28 per diluted share.

“Seventy-five years ago today, Walker & Dunlop was founded by my grandfather and great uncle. It is a true thrill to be announcing fantastic third quarter results that reflect our firm’s market position and dramatic growth on this monumental anniversary,” stated Willy Walker, Walker & Dunlop’s Chairman, President and Chief Executive Officer. “Walker & Dunlop is now one of the largest commercial real estate finance companies in the United States. The combination of our vastly expanded origination network, along with our growing servicing portfolio, provides Walker & Dunlop with the market presence and financial wherewithal to achieve our goal of becoming the premier commercial real estate finance company in the United States.”

“The acquisition of CWCapital in September is yet another transformative strategic move for our company. Although the third quarter results reflect only one month of the combined entity’s financial performance, the impact from CWCapital has been immediate and profound. We worked tirelessly throughout the summer to begin integrating the two firms, and although not complete, we are well on our way to bringing these two great firms together in a rapid and effective manner.”

“Our third quarter financial performance shows that we are executing on our strategic business plan exceptionally well. We continue to gain scale and market share in our core commercial loan origination business, with loan originations up 141% over the third quarter 2011. Our servicing portfolio has also grown dramatically, now totaling $33.9 billion, up 113% from the third quarter 2011. The growth in originations and servicing income produced a 110% increase in revenues resulting in 135% growth in adjusted net income over the third quarter 2011.”

“After Tuesday’s election, the debate over the future of the GSEs begins again, with a re-elected but new Obama Administration, Treasury Department, Congress, and Senate. We expect GSE reform to be a hot topic of debate, and are hopeful a clear path forward for the GSEs is established during the next Congress. What the election did not change is the significant demand for capital to refinance the trillions of dollars of commercial real estate loans that mature between now and 2018. Walker & Dunlop expects to originate between $6.7 billion and $7.4 billion of commercial mortgages in 2012 and between $8 billion and $10 billion of commercial mortgages in 2013, making us one of the largest commercial mortgage lenders in the country. We will use this market position, access to deal flow, and financial expertise to meet the needs of our customers and capitalize on the massive refinancing market opportunity.”

OPERATING RESULTS

LOAN ORIGINATIONS for the third quarter 2012 increased $1.3 billion, or 141%, to $2.2 billion when compared to the third quarter 2011. During the month of September, the newly integrated CWCapital platform contributed approximately $1.0 billion to our third quarter loan originations. On a standalone basis, Walker & Dunlop’s loan originations grew by $247.0 million, or 27%, over the third quarter 2011.

GAINS FROM MORTGAGE BANKING ACTIVITIES were $53.4 million for the third quarter 2012 compared to $21.6 million for the third quarter 2011, a 148% increase. Gains from mortgage banking activities are the revenues recognized through the loan origination and sale process (“loan origination fees”), and gains attributable to mortgage servicing rights (“MSRs”). LOAN ORIGINATION FEES were $27.7 million for the third quarter 2012 compared to $9.7 million for the third quarter 2011, a 187% increase. MSRs were $25.7 million for the third quarter 2012 compared to $11.9 million for the third quarter 2011, a 116% increase. Gains from mortgage banking activities as a percentage of loan originations were 245 basis points for the third quarter 2012, compared to 238 basis points in the third quarter 2011, a 3% increase, primarily due to the increase in average loan origination fees.

TOTAL EXPENSES were $58.3 million for the third quarter 2012 compared to $23.7 million for the third quarter 2011, an increase of $34.6 million, or 146%. Personnel expense increased $20.8 million due to commission costs associated with the higher volume of loan originations, new salaries due to the growth of the Company, and the acquisition of CWCapital which included severance expense of $1.1 million. Total expenses for the third quarter 2012 include $11.7 million of selected expenses attributable to the acquisition of CWCapital, comprised of $7.4 million in amortization of the loan origination pipeline acquired, $2.3 million in legal and banking fees, $1.0 million for transition services paid to the seller, and the aforementioned severance costs. Adjusted total expenses, which excludes selected expenses, were $46.6 million for the third quarter 2012, an increase of 97% from the third quarter of 2011.

ADJUSTED INCOME FROM OPERATIONS, which excludes selected expenses, was $23.5 million for the third quarter 2012, an increase of 144% over the third quarter 2011, resulting in a 34% ADJUSTED OPERATING MARGIN compared to 29% for the same period last year. GAAP income from operations was $11.8 million for the third quarter 2012, an increase of 22% over the third quarter 2011, resulting in a GAAP operating margin of 17% compared to 29% for the same period last year.

SERVICING PORTFOLIO

The SERVICING PORTFOLIO totaled $33.9 billion at September 30, 2012, a 113% increase from $15.9 billion at September 30, 2011. Walker & Dunlop acquired the right to service $14.5 billion of mortgage loans from CWCapital, with an estimated acquisition date fair value of $130.5 million.

SERVICING FEES were $13.3 million for the third quarter 2012 compared to $8.8 million for the third quarter 2011, a 52% increase. The increase in servicing fees was due to the organic growth of the servicing portfolio over the past year, as well as one month of servicing fees from the portfolio acquired from CWCapital.

The WEIGHTED AVERAGE SERVICING FEE was 23 basis points at September 30, 2012, compared to 22 basis points at September 30, 2011.

CREDIT QUALITY AND RISK-SHARING OBLIGATIONS

The Company’s AT RISK SERVICING PORTFOLIO, which is comprised of loans subject to a defined risk-sharing formula, was $12.9 billion at September 30, 2012, compared to $7.2 billion at September 30, 2011, a 79% increase.

60+ DAY DELINQUENCIES were $19.1 million, or 0.15% of the at risk servicing portfolio, at September 30, 2012. No loans in the at risk servicing portfolio were 60+ days delinquent at September 30, 2011.

PROVISION FOR RISK-SHARING OBLIGATIONS for the third quarter 2012 was a recovery of $(0.8) million compared to a charge of $0.9 million in the third quarter 2011, a $1.8 million or 191% decrease. During the third quarter 2012, a previously recognized loss was reversed due to a property being sold at a greater value than anticipated.

The Company had no NET WRITE-OFFS in the third quarter 2012, compared to $0.7 million or 0.01% of the Company’s at risk portfolio in the third quarter 2011. Write-offs represent the cash settlement of provisions for losses recognized in prior periods.

Credit quality within the Company’s at risk portfolio remains very strong following the acquisition of CWCapital.

YEAR-TO-DATE RESULTS

Due to the CWCapital acquisition, year-to-date results include eight months of standalone Walker & Dunlop earnings and one month of the combined enterprise. Total revenues for the nine months ended September 30, 2012 were $151.2 million compared to $104.8 million for the same period last year, a 44% increase. The increase in total revenues was largely driven by a 54% increase in loan originations, from $2.7 billion to $4.2 billion, and a 113% increase in the aggregate servicing portfolio, from $15.9 billion to $33.9 billion, since September 30, 2011.

Adjusted total expenses for the nine months ended September 30, 2012, which excludes selected expenses, were $102.1 million, compared to $66.0 million for the same period last year, a 55% increase. Total GAAP expenses for the nine months ended September 30, 2012 were $114.9 million, a 74% increase over the same period last year. Personnel expense as a percentage of total revenues for the nine months ended September 30, 2012 was 40%, compared to 32% for the same period last year.

Adjusted net income, which excludes selected expenses, increased 26% to $30.0 million, or $1.30 per diluted share, for the nine months ended September 30, 2012, compared to $23.8 million, or $1.10 per diluted share, for the nine months ended September 30, 2011. GAAP net income decreased 7% to $22.2 million for the nine months ended September 30, 2012, or $0.96 per diluted share. Adjusted operating margin, which excludes selected expenses, was 32% for the nine months ended September 30, 2012, compared to 37% for the same period last year. Our GAAP operating margin was 24% for the nine months ended September 30, 2012, compared to 37% for the same period last year.

¹ Selected expenses include acquisition and integration costs related specifically to the CWCapital acquisition, and amortization of customer contracts acquired from CWCapital. For details of these selected expenses, and a reconciliation of adjusted net income, adjusted earnings per diluted share, adjusted total expenses, adjusted income from operations, and adjusted operating margin, see “Adjusted Financial Metrics Reconciliation to GAAP” and “Non-GAAP Financial Measures”.

Conference Call Information

The Company will host a conference call to discuss its quarterly results on Thursday, November 8, 2012 at 8:30 a.m. Eastern time. Analysts and investors interested in participating are invited to call (866) 952-1907 from within the United States or (785) 424-1826 from outside the United States and are asked to reference the Conference ID: WDQ312. A simultaneous webcast of the call will be available on the Investor Relations section of the Walker & Dunlop website at http://www.walkerdunlop.com. Presentation materials, related to the conference call, will be posted to the Investor Relations section of the Company’s website prior to the call.

A telephonic replay of the call will also be available from approximately 11:00 a.m. Eastern time November 8, 2012 through November 22, 2012. Please call (800) 695-2533 from the United States or (402) 530-9029 from outside the United States. An audio replay will also be available on the Investor Relations section of the Company’s website, along with the presentation materials.

About Walker & Dunlop

Through its subsidiary Walker & Dunlop, LLC, Walker & Dunlop, Inc. (NYSE: WD) is one of the leading commercial real estate finance companies in the United States, with a primary focus on multifamily lending. As a Fannie Mae DUS, Freddie Mac Program Plus and MAP- and LEAN-approved FHA lender, the Multifamily and FHA Finance groups are focused on lending to property owners, investors, and developers of multifamily properties across the country. The Capital Markets group specializes in financing commercial real estate for owners and investors across the United States, securing capital from large institutions such as life insurance companies, commercial banks, CMBS lenders, pension funds, and specialty finance companies. The Principal Investments group provides institutional advisory, asset management, and investment management services with respect to debt, structured debt and equity, including interim financing. Walker & Dunlop, LLC has over 400 employees located in 21 offices nationwide. More information about the Company can be found at www.walkerdunlop.com.

Non-GAAP Financial Measures

To supplement the financial statements presented in accordance with United States generally accepted accounting principles (GAAP), the Company presents the following non-GAAP financial measures, each of which excludes selected expenses related to the CWCapital acquisition: adjusted net income, adjusted earnings per diluted share, adjusted total expenses, adjusted income from operations and adjusted operating margin.

These supplemental measures exclude acquisition and integration costs specifically related to the CWCapital acquisition, and amortization of customer contracts and other intangible assets acquired from CWCapital. The Company believes that these non-GAAP measures facilitate a review of the comparability of the Company’s operating performance on a period-to-period basis because such costs are not, in our view, related to the Company’s ongoing operational performance. We use these non-GAAP measures to evaluate the operating performance of our business, for comparison with forecasts and strategic plans, and for benchmarking performance externally against competitors. Since we find these measures to be useful, we believe that investors benefit from seeing results “through the eyes” of management in addition to seeing GAAP results. We believe that these non-GAAP measures, when read in conjunction with the Company’s GAAP financials, provide 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.

These non-GAAP measures are not in accordance with or an alternative for GAAP, and may be different from non-GAAP measures used by other companies. We believe that these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. We compensate for the limitations of non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance.

For more information on these non-GAAP financial measures, refer to the section of this press release titled “Adjusted Financial Metrics Reconciliation to GAAP.”

Forward-Looking Statements

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. For a further discussion of these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements, see the section entitled ”Risk Factors” in our most recent Annual Report on Form 10-K and in our subsequent SEC filings.

SOURCE Walker & Dunlop, Inc.