2015 ANNUAL REPORT 2015 Walker & Dunlop 2015 Annual Report As one of the largest commercial real estate lenders in the United States, Walker & Dunlop has differentiated itself from the competition through its deep industry knowledge, experienced team of financing professionals, scaled lending platform, and exceptional customer service. Since going public at the end of 2010, we have delivered strong, consistent shareholder returns and outperformed the broader markets. The past five years have brought significant changes to Walker & Dunlop that have made us a larger and more dynamic firm today, but our customer-centric approach and commitment to delivering shareholder value are still at the heart of all we do. 5 Years Publicly Held Company 25 Offices +500 Employees Walker&Dunlop 2015 Annual Report We successfully integrated four companies, which allowed us to meet the needs of the market, expand our client base, and grow our footprint without compromising the culture and expertise that our clients have come to expect from Walker & Dunlop. William M. Walker Chairman & CEO DEAR FELLOW SHAREHOLDERS: I joined Walker & Dunlop in 2003, just as the com- acquire certain assets of Column Guaranteed from mercial real estate industry was at the beginning of Credit Suisse, doubling the size of Walker & Dunlop a multi-year run—heavy investment and strong and making us one of the largest multifamily lenders growth created excellent market conditions for in the country. owners, developers, and service providers. Yet the In 2010, we raised capital through our Initial Public firms with scaled national platforms generally grew Offering, and between 2010 and 2015, we carefully faster, and benefitted more, from the robust market strengthened, scaled and diversified our lending plat- environment. It was during this period that we saw form with a focus on recruiting talented professionals the impact of scale, and determined that building and acquiring great businesses. We successfully a larger national real estate financing company integrated four companies, which allowed us to meet was fundamental to reaping the maximum rewards in the needs of the market, expand our client base, and an expanding market. grow our footprint without compromising the culture We also saw, with the financial crisis of 2008, the and expertise that our clients had come to expect value of counter-cyclical capital sources such as from Walker & Dunlop. Fannie Mae, Freddie Mac, and HUD (the “Agencies”) By 2015 Walker & Dunlop had a national platform as other capital sources fled the market. So with the with the people, expertise, and brand to benefit fully desire to grow and understanding of the value of from strong market fundamentals. Our clients and Agency capital, we made the bold move in 2009 to This Annual Report contains forward-looking statements within the meaning of federal securities law. Please see page 3 of our 2015 Form 10-K filed with the Securities and Exchange Commission for additional information regarding forward-looking statements. 1 18000 18000 500000 500000 15000 15000 400000 400000 12000 12000 300000 300000 9000 9000 200000 200000 6000 6000 100000 100000 3000 3000 0 0 Walker&Dunlop 2015 Annual Report0 0 2011 20122011 20132012 20142013 20152014 2015 2011 20122011 20132012 20142013 20152014 2015 TOTALTOTAL TRANSACTION TRANSACTION VOLUMES VOLUMES TOTALTOTAL REVENUES REVENUES ($ IN MILLIONS)($ IN MILLIONS) ($ IN THOUSANDS)($ IN THOUSANDS) $17,759$17,759 $468,198$468,198 $18,000 $18,000 $500,000 $500,000 $15,000 $15,000 $400,000 $400,000 $12,000 $12,000 $300,000 $300,000 $9,000 $9,000 $200,000 $200,000 $6,000 $6,000 $100,000 $100,000 $3,000 $3,000 0 0 0 0 2011 20122011 20132012 20142013 20152014 2015 2011 20122011 20132012 20142013 20152014 2015 shareholders benefitted tremendously as the scale (WDCPF), the CMBS lending platform we formed we created brought great value to every financing. with an affiliate of Fortress Investment Group, LLC in 2013. With hundreds of billions of dollars of CMBS Our core Fannie Mae, Freddie Mac, and HUD loan loans coming up for refinancing in 2016 and 2017, origination businesses are now some of the largest in our 100% ownership of WDCPF should benefit both the country. Beyond our Agency financing business, our borrowers and our shareholders. Our balance we have grown our capital markets platform to include sheet and CMBS lending operations give us signifi- a wide variety of capital sources to meet the financing cant amounts of capital to meet the borrowing needs needs of owners of office buildings, retail centers, of our clients and leverage the loan origination and hotels across the United States. We originated platform we have built over the past decade. just under $4 billion of loans in this business in 2015, and intend to continue growing it as the In 2015, we acquired Engler Financial Group and volume of commercial loan maturities balloons in formed Walker & Dunlop Investment Sales (WDIS), 2016 and 2017. adding multifamily investment sales to our scaled commercial real estate finance platform and making Our growth and success provided the financial Walker & Dunlop more than just a debt provider to strength to begin originating loans for our balance our clients. The investment sales business creates sheet in 2012. We have grown this business nicely tremendous synergies with our financing business over the past several years, and generated almost and allows us to deepen our existing client relation- $10 million of net interest income in 2015. At the ships and foster new ones. We will make further beginning of 2016, we assumed full ownership of investments in the investment sales business to scale Walker & Dunlop Commercial Property Funding the platform on a national level. 2 3.0 140000 120000 2.5 100000 2.0 80000 1.5 60000 1.0 40000 0.5 20000 0.0 0 Walker&Dunlop 2015 Annual Report 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 DILUTED EARNINGS PER SHARE ADJUSTED EBITDA(1) (GAAP) ($ IN THOUSANDS) $3.00 $140,000 As we scale our brokerage and lending $2.65 $124,279 $120,000 businesses, our servicing portfolio $2.50 $100,000 will continue to grow in size and value, $2.00 providing us with a steady stream $80,000 $1.50 of cash flows that will increase our $60,000 $1.00 financial stability and flexibility for $40,000 years to come. $0.50 $20,000 0 0 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 (1) Adjusted EBITDA is not calculated in accordance with GAAP. A reconciliation of Adjusted EBITDA to net income is located beginning on page 46 of our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the Securities and Exchange Commission on February 26, 2016. Behind Walker & Dunlop’s loan origination businesses streams throughout all market cycles. Over the com- sits a $50 billion servicing portfolio filled with almost ing years, we will continue to expand our lending 5,000 mortgages, predominantly on multifamily platform by lending on other commercial real estate properties with high debt service coverage and plenty asset classes beyond multifamily, and providing our of equity ahead of Walker & Dunlop’s debt. Inside borrowers with additional financing solutions beyond the $50 billion portfolio, we have retained credit just first trust mortgages. The commercial real estate risk on $22 billion of loans. The average loan-to- market is constantly changing, and we will use Walker value of these loans when they were originated was & Dunlop’s consistent and growing cash flows to 67%, and the current debt-service-coverage on these invest in people and businesses that meet the needs loans is 1.9 times. As we scale our brokerage and of the market and our customers. We ended 2015 lending businesses, our servicing portfolio will con- with $137 million in cash on our balance sheet and tinue to grow in size and value, providing us with a only $168 million of debt while generating $124 mil- steady stream of cash flows that will increase our lion of adjusted EBITDA1, giving us the flexibility to financial stability and flexibility for years to come. take advantage of growth opportunities that will enhance the overall profitability of our company while Our mission to create the premier commercial real continuing to generate strong shareholder returns. estate finance company in the United States remains. We have grown to be one of the largest commercial Since going public at the end of 2010, Walker & real estate lenders in the country, but we are still pre- Dunlop’s talented professionals have worked tirelessly dominantly a multifamily, first-lien lender. Our core to deliver strong, consistent results, and I would like multifamily lending business will fuel the growth of to thank the entire W&D team for five incredible years. our servicing portfolio and provide consistent revenue Over that five-year span we grew revenues from 1Adjusted EBITDA is not calculated in accordance with GAAP. A reconciliation of Adjusted EBITDA to net income is located beginning on page 45 of our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the Securities and Exchange Commission on February 26, 2016. 3 3.0 140000 120000 2.5 100000 2.0 80000 1.5 60000 1.0 40000 0.5 20000 0.0 Walker&Dunlop 2015 Annual Report 0 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 DILUTED EARNINGS PER SHARE ADJUSTED EBITDA(1) (GAAP) ($ IN THOUSANDS) Our significant growth has brought $3.00 $140,000 $2.65 with it plenty of change as well as $124,279 $120,000 $2.50 challenges. Yet our core mission, and $100,000 $2.00 culture, have not changed.