Good day, and welcome to the Q4 2025 Walker & Dunlop, Inc. Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Kelsey Duffey. Please go ahead.

Thank you, Cynthia. Good morning, everyone. Thank you for joining Walker & Dunlop's Fourth Quarter and Full Year 2025 Earnings Call. I have with me this morning our Chairman and CEO, Willy Walker; and our CFO, Greg Florkowski. This call is being webcast live on our website, and a recording will be available later today. Both our earnings press release and website provide details on accessing the archived webcast. This morning, we posted our earnings release and presentation to the Investor Relations section of our website, www.walkerdunlop.com. These slides serve as a reference point for some of what Willy and Greg will touch on during the call. Please also note that we will reference the non-GAAP financial metrics, adjusted EBITDA and adjusted core EPS during the course of this call. Please refer to the appendix of the earnings presentation for a reconciliation of these non-GAAP financial metrics. Investors are urged to carefully read the forward-looking statements language in our earnings release. Statements made on this call, which are not historical facts, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements describe our current expectations, and actual results may differ materially. Walker & Dunlop is under no obligation to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, and we expressly disclaim any obligation to do so. More detailed information about risk factors can be found in our annual and quarterly reports filed with the SEC. I'll now turn the call over to Willy.

Thank you, Kelsey, and good morning, everyone, and thank you for joining us. Walker & Dunlop's fourth quarter and full year results demonstrate continued success in our real estate capital markets business with significant and sustained growth in transaction volumes. Our people and brand are winning, demonstrated by transaction volumes, market share and year-end league tables. At the same time, our Q4 and annual results were impacted by loan buybacks and valuation marks on our real estate owned portfolio. Notwithstanding the charges, W&D's core business and market presence is extremely strong. We have an incredible team and brand that is meeting our clients' needs and winning. W&D's capital markets transaction volumes grew throughout the year from $7 billion in Q1 to $18 billion in Q4. That 161% growth in transaction volumes was due to a recovering market and the strength of W&D's team and brand. And we start 2026 with an extremely strong pipeline of both flow business as well as some very large portfolio financings. W&D is very well positioned to benefit from increased deal flow across the commercial real estate industry as the down cycle of the great tightening wanes and the up cycle of an expansionary macro economy sets in. Walker & Dunlop's multifamily property sales volumes grew from $1.8 billion in Q1 2025 to $4.5 billion in Q4, up 146%. Our team increased their share of institutional multifamily sales from 8.7% in 2024 to 10.2% in 2025, ending the year as the fourth largest multifamily broker according to Real Estate Alert. The breadth of W&D's service offering allowed us to finance 42% of our 2025 multifamily property sales for the buyer. This collaboration between our sales and financing teams was an important part of how we ended 2025 as the largest Fannie Mae DUS lender for…

Thank you, Willy. As you outlined, we took action to address repurchases in the affordable assets. And given the consistent strength of our core business over the last 3 quarters, those actions position the company for stronger performance going forward. I'll begin by walking through the financial impact of those decisions and then discuss the performance and outlook for our core business. In total, we recognized $66 million of impairments and credit losses this quarter related to loan repurchases and our strategic decision to exit the affordable assets. And we added two new line items to our income statement titled Indemnified & Repurchased Loan Expenses and Asset Impairments & Other Expenses to capture these charges. I'll start with the indemnified and repurchased loan expenses. Since 2024, we have either indemnified or repurchased $222 million of loans from the GSEs, including all the loans from the investigation. In the fourth quarter, we recognized charges totaling $38 million related to these assets, including $29 million of charges related to the loans subject to the investigation. We are now evaluating the most efficient path to disposition and expect to execute over the next few quarters. Although there was underlying borrower fraud, many of the loans remain current, and we do not expect significant carry costs as we prepare to sell them. The remaining $9 million of charges -- $9 million of charges this quarter relate to our shift in strategy for previously repurchased loans. Since taking control of those assets in 2024, they have cost between $2 million and $3 million per quarter to operate. While we believe we could recover a portion of the lost value over time, doing so would take several years and the ongoing cost of operating them dilutes near-term earnings and understates the performance of our core platforms.…

Thank you, Greg. I know it's been an extremely busy and challenging year-end close, and I'm very appreciative of all the time and effort you and your team have invested in making sure our results are transparent and exact. As I said earlier, we begin 2026 with a very healthy pipeline and an improving macroeconomic environment. Given W&D's significant volume growth in 2025, we have confidence that 2026 will generate both top and bottom line results for our investors. During my tenure as CEO of Walker & Dunlop, we have been fortunate to develop and execute on several bold, highly ambitious 5-year business plans. We did not achieve The Drive to '25 due in large part to interest rate spikes and challenging market conditions from 2022 to 2025. So, we begin 2026 with the Journey to '30, another bold plan that has everyone at Walker & Dunlop excited about where we are going and how we get there. As you can see on Slide 12, Walker & Dunlop competes with some of the world's largest and most successful real estate finance and services firms. We have plotted on this graph where we believe Walker & Dunlop and its competitive set sit with regard to real estate capital markets capabilities on the Y-axis and real estate services capabilities on the X-axis. The Journey to '30 will drive W&D up the Y-axis deeper into commercial real estate capital markets. We will add talent, diversify our service offerings and invest in businesses to become the very best commercial real estate capital markets company in the world. How do we get there? Let's first focus on our top line and where we see strength in 2026. Our Q1 2026 pipeline currently sits at $15 billion, over 2x our Q1 2025 production total and includes…

[Operator Instructions] We will take our first question from Jade Rahmani with KBW.

To start off with just on credit, it sounds to me like you took an approach to be proactive and comprehensive with respect to the Freddie Mac potential fraudulent loans. And while there are no guarantees, the body language suggests that you feel pretty good about the overall portfolio. Could you just comment on the credit trends you're seeing and provide any additional color?

Jade, thanks for joining us. We obviously gave as much specificity and color to the credit portfolio in both Greg's remarks and my remarks as we could. I would reiterate what you just said is that we feel extremely good about the credit portfolio, the scale it has. And while as we both said, the buybacks and loan losses associated with those this quarter were disappointing, we have acted very proactively on this with full transparency. And while we can never guarantee that we won't have further loan losses or fraudulent borrowers who we lend to, we feel like we are extremely well positioned and a better company today, having gone through all this than we were before.

Secondly, just looking at the adjusted EBITDA outlook for 2026 of $300 million to $350 million and comparing it to the $316 million, excluding charges, could you just quantify the amount of nonrecurring operating cost headwinds in 2026 relative to that ex-charges number so that we can ascertain how much of an overhang that component is?

Sure, Kate. I'll take that one. So, look, our guidance this year certainly does include continued carry costs for those repurchased assets and affordable assets. We're not going to exit them immediately. So, we will continue to incur those costs for -- that I mentioned on the call, about $4 million to $5 million a quarter, at least in the near term because we're not expecting that immediate resolution. So, there is going to be a gradual reduction over the course of the year, but it will be heavier in the first half and obviously lighter in the second half and should fully realize most of those quarterly costs by late this year.

We will take our next question from Steven Delaney with Citizens Capital Markets.

Willy, I heard loud and clear, I think, when you were going through the impairments and the losses. It sounded like you were intentionally trying to communicate to us that you and Greg feel that you look deep into all the corners and closets and that you feel that you're presenting to us as of year-end of 2025 as clean of a balance sheet in terms of write-downs and fair value marks, litigation, whatever. Is it accurate for me to view that, that you have accomplished that as you sit there today and you look at -- look in the rearview mirror and the problems you have that we can look at those as being in the rearview mirror?

Sure, Steve, and thank you for joining us this morning. So, the challenge is that sort of you don't know what you don't know, and we have an extremely scaled portfolio that we feel extremely good about how we underwrote those loans and the performance of those loans. As I mentioned in my comments, the proactive work that we did on the portfolio of loans that we look into at our own initiative and presented to Freddie Mac that we would indemnify them on one other portfolio. Freddie Mac is doing their own analysis of that one portfolio of loans. And as I said, we believe that we'll hear back from Freddie Mac in the next 90 days as it relates to whether they concur with us that there's nothing else in that portfolio of loans. So, we scrub that portfolio of loans as deeply as we possibly could, and we feel very good about what we presented to Freddie Mac and our findings on it. And at the same time, you can never sort of say we're done because of the size and scale of what we do. We're a lender. We take credit risk every single day. And while these incidences as it relates to borrower fraud are both, we believe, isolated and also -- isolated from both an origination team as well as a time standpoint. And we have significantly enhanced, we and other actors in the market, our competitor firms as well as the agencies have all stepped up our underwriting processes, procedures and protocols. I would just say that we are diligent. We're on it every single day, and we feel extremely good about both the loans that we are originating every day as well as our historic portfolio.

That's great. And I mean, I think what we all want to get a handle on is what is the upside going forward. But obviously, you have to make sure you're starting with that rock-solid foundation, and it sounds like that was certainly what you intended to do. I'm looking at the, I guess, Page 5 in your deck. So, you held on with Fannie Mae as #1 in 2025, down at #3 in Freddie. I guess, looking forward in 2026 and beyond, is this kind of -- should this be kind of static? How far are you ahead of Wells Fargo with Fannie? And do you have the possibility to move up from #3 at Freddie to a higher level there?

So, as you saw, we had over 50% growth in loan origination volumes in 2025 with Freddie Mac from 2024. We grew our originations with Fannie Mae as well in 2025. We take our position in the league tables very seriously as do our competitive firms. And it is an honor and a privilege for everyone at Walker & Dunlop to be able to sell our exceptional track record and growth and market position with both Fannie Mae and Freddie Mac to our client base. I do believe that there is the opportunity for us to continue to gain market share. And I think one of the reasons that we walked you through in such a detail the strength of our financing platform and our sales platform, combined with our research platform and our appraisal platform that all add a tremendous amount of value to our client engagement and our ability to win future financing work as well as sales work. The growth in our investment sales group in 2025, as I said, was spectacular. Jumping over the 4 competitor firms that I mentioned in my prepared remarks is, quite honestly, when we started and entered that business in 2015, if you told me that we would leapfrog over those 4 firms in 2025, I would have said that will be quite an accomplishment because those are fantastic firms with fantastic people. But it is the combination of investment sales and debt financing and research and appraisals, along with a fantastic underwriting team and servicing portfolio that allow us to be positioned in the market where we are today. And we plan to continue to work extremely hard to both maintain our #1 positioning with Fannie Mae and continue to grow with Freddie Mac. It's an expanding market. As I said, we all know that the regulator Director Pulte increased the 2025 lending caps for Fannie Mae and Freddie Mac by over 20%, and that presents us as well as our competition with a huge opportunity in 2026 and beyond to continue to grow both market share with the GSEs and overall multifamily financing.

We will take our next question from Matthew Hurwit with Jefferies.

So, can you walk us through the key market assumptions embedded in the 2026 guidance, specifically volume growth, margins and capital markets activity. What needs to get right to land at the midpoint of the guidance?

Greg, do you want to jump in there?

Sure. Yes. Look, I think this is your first official one. That's welcome to the call. Thanks for joining us. Look, I think as I've said in my remarks, we're expecting the market to be up similarly outside of particularly -- I'll put the GSEs off to the side, but the market in general to be up similarly in '26 compared to '25. We also have the GSEs caps, multifamily caps were expanding close to 20% for 2026. It looks like at least in January, Fannie is already off to a very strong start from a delivery perspective and Freddie is kind of on top of where they were a year ago, but they're certainly pricing deals and starting the year off very competitively. And you heard our pipeline expectations for the first quarter, just our pipeline outlook. So, I think the expectation for us is that we're going to continue to hold the market leadership position that Willy and Steve were just talking about on Slide 5, and if not continue to advance forward where we can and certainly continue to capture market share wherever possible, whether that's through investment sales opportunities or more GSE originations with both Fannie and Freddie or non-multifamily transactions. We've got a lot of different bankers and brokers across the platform going to market every single day to do just that. So, look, our expectation is to beat or exceed our performance in '25 and '26 with the continued growth in the market. And I think if we can do that, we'll put ourselves around that midpoint, just like you asked.

Great. Okay. And then, with the dividend increase, how should we think about the dividend sustainability and payout policy within the 2026 framework?

Yes. Look, I think, again, same thing mentioned, almost $300 million of cash at the end of the year. The Board certainly looked at not only the capital position at the end of the year, but our outlook throughout 2026. Our recommendation and their decision was grounded in a strong foundation and fundamental ability to continue to generate cash. I think the EBITDA expectations and EBITDA outlook for 2026 are a good reflection of that. And importantly, we are beyond some of the earn-out periods that we had for a couple of our transactions in 2021. So those will fall away from a capital use perspective, and we feel very good about our ability to not only sustain but grow the dividend in the years ahead. So, I think very positive throughout this year.

We will take a follow-up question from Jade Rahmani with KBW.

I wanted to ask you about AI, which has taken the market by storm this year, but maybe not in the way many anticipated. The so-called AI scare trade has played out in the commercial real estate services sector. And yesterday, FHFA Director Pulte posted that he wants Fannie, Freddie and their providers to lean into AI. So the question is, what potential impact, positive and negative, you think AI presents to W&D's business?

So, Jade, we put in a number of places in our prepared remarks where we see technology and our people coming together to provide our clients with more insight and streamline loan origination, property sales and valuation work. I think that one of the reasons we put the competitive new graph up with where Walker & Dunlop believes it sits as it relates to our competitive set on commercial real estate capital markets on the Y-axis and commercial real estate services on the X-axis is to underscore that we're moving towards more engagement with our clients on very large transactions where the people and the technology and the processes and the capital of Walker & Dunlop differentiate. There are plenty of commercial real estate services out the X-axis that we believe technology can have a big impact on and potentially, in some instances, do what some of those firms today do in a much, much more streamlined and potentially just a technology interface. And so, our strategy going up the Y-axis, going deeper into real estate capital markets, given the size of our average transaction and the type of customers that we work with, we believe that, that is an extremely good space for us to be in as it relates to the additional use of AI and how AI can both enable us as well as make us more relevant to our customers. I guess the final piece to it is just that we acquired GeoPhy back in 2021 when AI was not anything that you would have asked on this earnings call, and quite honestly, back when AI was called machine learning. And we have had GeoPhy inside of Walker & Dunlop for the past 4 years using their technology to streamline our processes to be able to digest information and do analytics on that information. And we feel extremely good that we are -- I wouldn't say ahead of the curve because this is moving so fast that I think it's exceedingly hard for anyone other than the largest and most capable technology firms to truly be ahead of the curve. But we feel very well positioned in our industry that we are using the technology and its implications and applications to make Walker & Dunlop a better firm every day.

And are there practical ways in which you think the GSEs will use AI or will -- or W&D will use AI and how it interacts with them?

So, first of all, I take what Director Pulte said yesterday with the full seriousness of everything that comes out of FHFA. And if his intention is to get Fannie and Freddie focused on it, they are very much going to get focused on it, thought the question comes into play, at what level of their involvement in the secondary market? And the other question that I would have would be, how much of that's going to be on the single-family side, where the size of the loans is much smaller, where the underwriting is algorithmic and where -- the single-family business of Fannie and Freddie today is really an algorithm business. You have conforming loans. They come from originators across the country. And as long as that loan fits their underwriting box, if you will, that loan is taken by Fannie and Freddie and securitized and pooled and insured. The multifamily business is a wildly different business. The multifamily business is a client relationship business. It is dealing with some of the largest both real estate developers, owners and private equity firms on the face of the planet. Every asset is underwritten uniquely. The loan size and sales size of those assets, as I said in my prepared remarks, is dramatically larger. And so, I would look at AI and the application of AI and think that the first place that, that would be really focused on inside the agencies would be in their single-family business. That is not to say that there is an opportunity for its use in the multifamily business. But given the deal size, given the bespoke nature of every single loan, it is a different business, and it is able to use technology as it has ever since we started working with Fannie and Freddie. Every year, there's new technological innovation, new technological applications. But I would think that the original or first place that they focus inside of the agencies is on the single-family business.

There are no further questions at this time. I will turn the conference back to Mr. Walker for any additional or closing remarks.

I'd like to thank Greg and Kelsey and their teams for all the work that they have done to close out 2025 and get us focused on 2026. I'd like to thank the W&D team for all you do every day to make this firm so great. And I want to thank everyone who joined us on the call this morning for your time and your focus on Walker & Dunlop. I hope everyone has a great day, and thanks for joining us.

This concludes today's call. Thank you for your participation. You may now disconnect.