Walker & Dunlop, Inc. (WD) FY 2022 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the historical financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K. The following discussion contains, in addition to historical information, forward-looking statements that include risks and uncertainties. Our actual results may differ materially from those expressed or contemplated in those forward-looking statements as a result of certain factors, including those set forth under the headings “Forward-Looking Statements” and “Risk Factors” elsewhere in this Annual Report on Form 10-K.

Business

Walker & Dunlop, Inc. is a holding company, and we conduct the majority of our operations through Walker & Dunlop, LLC, our primary operating company.

We are one of the leading commercial real estate services and finance companies in the United States, with a primary focus on multifamily lending and property sales, commercial real estate debt brokerage, and affordable housing investment management. We originate, sell, and service a range of multifamily and other commercial real estate financing products to owners and developers of commercial real estate across the country, provide multifamily property sales brokerage and appraisal services in various regions throughout the United States, and engage in commercial real estate and affordable housing investment management activities. We are a leader in commercial real estate technology, developing and acquiring technology resources that (i) provide innovative solutions and a better experience for our customers and (ii) allow us to reach a broader customer base.

We originate and sell multifamily loans through the programs of Fannie Mae, Freddie Mac, Ginnie Mae, and HUD, with which we have licenses and long-established relationships. We retain servicing rights and asset management responsibilities on nearly all loans that we originate for the Agencies’ programs. We are approved as a Fannie Mae DUS lender nationally, a Freddie Mac Optigo lender nationally for Conventional, Seniors Housing, Targeted Affordable Housing and Small Balance Loans, a HUD MAP lender nationally, a HUD LEAN lender nationally, and a Ginnie Mae issuer. We broker and service loans for many life insurance companies, commercial banks, and other institutional investors, in which cases we do not fund the loan but rather act as a loan broker. Fannie Mae recently announced that we ranked as its largest DUS lender in 2022, by loan deliveries, for the fourth consecutive year, and Freddie Mac recently announced that we ranked as its 3rd largest Freddie Mac lender in 2022, by loan deliveries. Our market share with Fannie Mae and Freddie Mac grew to 12.7% on a combined basis, by loan deliveries, elevating us to the largest lender with the GSEs for the first time in our Company’s history. Additionally, we were the 2nd largest overall lender for HUD in 2022 based on initial endorsements.

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We fund loans for the Agencies’ programs, generally through warehouse facility financings, and sell them to investors in accordance with the related loan sale commitment, which we obtain at rate lock. Proceeds from the sale of the loan are used to pay off the warehouse facility. The sale of the loan is typically completed within 60 days after the loan is closed, and we retain the right to service substantially all of these loans. In cases where we do not fund the loan, we act as a loan broker and service some of the loans. Our mortgage bankers who focus on loan brokerage are engaged by borrowers to work with a variety of institutional lenders to find the most appropriate loan. These loans are then funded directly by the institutional lender, and for those brokered loans we service, we collect ongoing servicing fees while those loans remain in our servicing portfolio. The servicing fees we typically earn on brokered loan transactions are substantially lower than the servicing fees we earn on Agency loans.

We recognize revenue when we make simultaneous commitments to originate a loan to a borrower and sell that loan to an investor. The revenues earned reflect the fair value attributable to loan origination fees, premiums on the sale of loans, net of any co-broker fees, and the fair value of the expected net cash flows associated with servicing the loans, net of any guaranty obligations retained. We also recognize revenue when we receive the origination fee from a brokered loan transaction. Other transaction-related sources of revenue include (i) net warehouse interest income we earn while the loan is held for sale, (ii) net warehouse interest income from loans held for investment while they are outstanding, (iii) sales commissions for brokering the sale of multifamily properties, and (iv) syndication and transaction-based asset management fees from our investment management activities.

We retain servicing rights on substantially all the loans we originate and sell and generate revenues from the fees we receive for servicing the loans, from the interest income on escrow deposits held on behalf of borrowers, and from other ancillary fees. Servicing fees set at the time an investor agrees to purchase the loan are generally paid monthly for the duration of the loan and are based on the unpaid principal balance of the loan. Our Fannie Mae and Freddie Mac servicing arrangements generally provide for prepayment to us in the event of a voluntary prepayment. For loans serviced outside of Fannie Mae and Freddie Mac, we typically do not have similar prepayment protections.

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We are currently not exposed to unhedged interest rate risk during the loan commitment, closing, and delivery process. The sale or placement of each loan to an investor is negotiated concurrently with establishing the coupon rate for the loan. We also seek to mitigate the risk of a loan not closing. We have agreements in place with the Agencies that specify the cost of a failed loan delivery in the event we fail to deliver the loan to the investor. To protect us against such fees, we require a deposit from the borrower at rate lock that is typically more than the potential fee. The deposit is returned to the borrower only once the loan is closed. Any potential loss from a catastrophic change in the property condition while the loan is held for sale using warehouse facility financing is mitigated through property insurance equal to replacement cost. We are also protected contractually from an investor’s failure to purchase the loan. We have experienced a de minimis number of failed deliveries in our history and have incurred immaterial losses on such failed deliveries.

We have risk-sharing obligations on substantially all loans we originate under the Fannie Mae DUS program. When a Fannie Mae DUS loan is subject to full risk-sharing, we absorb losses on the first 5% of the unpaid principal balance of a loan at the time of loss settlement, and above 5% we share a percentage of the loss with Fannie Mae, with our maximum loss capped at 20% of the original unpaid principal balance of the loan (subject to doubling or tripling if the loan does not meet specific underwriting criteria or if the loan defaults within 12 months of its sale to Fannie Mae). Our full risk-sharing is currently limited to loans up to $300 million, which equates to a maximum loss per loan of $60 million (such exposure would occur in the event that the underlying collateral is determined to be completely without value at the time of loss). For loans in excess of $300 million, we receive modified risk-sharing. We also may request modified risk-sharing at the time of origination on loans below $300 million, which reduces our potential risk-sharing losses from the levels described above if we do not believe that we are being fully compensated for the risks of the transactions. The full risk-sharing limit in prior years was less than $300 million. Accordingly, loans originated in those prior years were subject to risk-sharing at much lower levels. Our servicing fees for risk-sharing loans include compensation for the risk-sharing obligations and are larger than the servicing fees we receive from Fannie Mae for loans with no risk-sharing obligations.

Our Interim Program offers floating-rate, interest-only loans for terms of generally up to three years to experienced borrowers seeking to acquire or reposition multifamily properties that do not currently qualify for permanent financing. We underwrite, asset-manage, and service all loans executed through the Interim Program. The ultimate goal of the Interim Program is to provide permanent Agency financing on these transitional properties. The Interim Program has two distinct executions: the Interim Program JV and the Interim Loan Program.

The Interim Program JV assumes full risk of loss while the loans it originates are outstanding. We hold a 15% ownership interest in the Interim Program JV and are responsible for sourcing, underwriting, servicing, and asset-managing the loans originated by the joint venture. The joint venture funds its operations using a combination of equity contributions from its owners and third-party credit facilities.

We originate and hold the Interim Loan Program loans for investment, which are included on our balance sheet. During the time that these loans are outstanding, we assume the full risk of loss. As of December 31, 2022, we had nine loans held for investment under the Interim Loan Program with an aggregate outstanding unpaid principal balance of $206.8 million. One loan with a balance of $14.7 million is currently in default.

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During the year ended December 31, 2022, $86.3 million of the $339.1 million of interim loan originations were executed through the joint venture, with the remainder originated through our Interim Loan Program. During the year ended December 31, 2021, $860.0 million of the $1.4 billion of interim loan originations were executed through the joint venture. As of December 31, 2022 and 2021, we asset-managed $892.8 million and $848.2 million, respectively, of interim loans on behalf of the Interim Program JV.

Through WDIS, we offer property sales brokerage services to owners and developers of multifamily properties that are seeking to sell these properties. Through these property sales brokerage services, we seek to maximize proceeds and certainty of closure for our clients using our knowledge of the commercial real estate and capital markets and relying on our experienced transaction professionals. Our property sales services are offered in various regions throughout the United States. We have added several property sales brokerage teams over the past few years and continue to seek to add other property sales brokers, with the goal of continuing to expand the depth and number of regions covered by our brokerage services.

WDIP, a wholly owned subsidiary of the Company, is part of our strategy to grow and diversify the Company by growing our investment management platform. WDIP is a registered investment adviser and general partner of private commercial real estate investment funds focused on the management of debt, preferred equity, and mezzanine equity investments through private middle-market commercial real estate funds and separately managed accounts. WDIP’s current AUM of $1.4 billion primarily consist of four sources: Fund III, Fund IV, Fund V, and Fund VI (collectively, the “Funds”), and separate accounts managed for life insurance companies. AUM for the Funds and for the separate accounts consists of both unfunded commitments and funded investments. Unfunded commitments are highest during the fund raising and investment phases. AUM disclosed in this Annual Report on Form 10-K may differ from regulatory assets under management disclosed on WDIP’s Form ADV.

WDIP typically receives management fees based on limited partner capital commitments, unfunded investment commitments, and funded investments. Additionally, with respect to Fund III, Fund IV, Fund V and Fund VI, WDIP receives a percentage of the profits above the fund expenses and preferred return specified in the fund offering agreements.

Through Alliant, we are the 6th largest tax credit syndicator in the U.S., and an affordable housing developer. Alliant is part of our strategy to grow our investment management platform and to strengthen our position in the affordable housing space. Alliant manages $14.5 billion of affordable AUM and has an established tax syndication and affordable housing development platform from which we earn investment management, syndication, and other LIHTC related fees.

As of December 31, 2022, our servicing portfolio was $123.1 billion, up 6% from December 31, 2021, which was the 8th largest commercial/multifamily primary and master servicing portfolio in the nation according to the Mortgage Bankers’ Association’s (“MBA”) 2022 year-end survey (the “Survey”). Our servicing portfolio includes $59.2 billion of loans serviced for Fannie Mae and $37.8 billion for Freddie Mac, making us the 1st and 4th largest servicer of Fannie Mae and Freddie Mac multifamily loans in the nation, respectively, according to the Survey. Also included in our servicing portfolio is $9.9 billion of multifamily HUD loans, the 4th largest HUD primary and master servicing portfolio in the nation according to the Survey.

The average number of our mortgage bankers decreased from 163 during 2021 to 161 during 2022 due to voluntary turnover and a slowing in hiring initiatives in line with the slowdown in our debt financing volumes due to the macroeconomic conditions, from a total of $48.9 billion during 2021 to a total of $43.7 billion during 2022.

Basis of Presentation

The accompanying consolidated financial statements include all of the accounts of the Company and its wholly owned subsidiaries, and all intercompany transactions have been eliminated.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with GAAP, which requires management to make estimates based on certain judgments and assumptions that are inherently uncertain and affect reported amounts. The estimates and assumptions are based on historical experience and other factors management believes to be reasonable. Actual results may differ from those estimates and assumptions and the use of different judgments and assumptions may have a material impact on our results. The following critical accounting estimates involve significant estimation uncertainty that may have or are reasonably likely to have a material impact on our financial condition or results of operations. Additional information about our critical accounting estimates and other significant accounting policies are discussed in NOTE 2 of the consolidated financial statements.

Mortgage Servicing Rights (“MSRs”). MSRs are recorded at fair value at loan sale. The fair value at loan sale (“MSR”) is based on estimates of expected net cash flows associated with the servicing rights and takes into consideration an estimate of loan prepayment. Initially,

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the fair value amount is included as a component of the derivative asset fair value at the loan commitment date. The estimated net cash flows from servicing, which includes assumptions for discount rate, escrow earnings, prepayment speed, and servicing costs, are discounted at a rate that reflects the credit and liquidity risk of the MSR over the estimated life of the underlying loan. The discount rates used throughout the periods presented for all MSRs were between 8-14% during 2022 and 2021 and 10-15% during 2020 and varied based on the loan type. The life of the underlying loan is estimated giving consideration to the prepayment provisions in the loan and assumptions about loan behaviors around those provisions. Our model for MSRs assumes no prepayment prior to the expiration of the prepayment provisions and full prepayment of the loan at or near the point when the prepayment provisions have expired. The estimated net cash flows also include cash flows related to the future earnings on the escrow accounts associated with servicing the loans that are based on an escrow earnings rate assumption. We include a servicing cost assumption to account for our expected costs to service a loan. The servicing cost assumption has had a de minimus impact on the estimate historically. We record an individual MSR asset (or liability) for each loan at loan sale.

The assumptions used to estimate the fair value of capitalized MSRs are developed internally and are periodically compared to assumptions used by other market participants. Due to the relatively few transactions in the multifamily MSR market and the lack of significant changes in assumptions by market participants, we have experienced limited volatility in the assumptions historically, including the assumption that most significantly impacts the estimate: the discount rate. We do not expect to see significant volatility in the assumptions for the foreseeable future. We actively monitor the assumptions used and make adjustments to those assumptions when market conditions change, or other factors indicate such adjustments are warranted. Over the past two years, we have adjusted the escrow earnings rate assumption several times to reflect the current and expected future earnings rate projected for the life of the MSR. Additionally, we adjusted the discount rate at the beginning of 2021 to mirror changes observed from market participants. We engage a third party to assist in determining an estimated fair value of our existing and outstanding MSRs on at least a semi-annual basis. Changes in our discount rate assumptions may materially impact the fair value of the MSRs (NOTE 3 of the consolidated financial statements details the portfolio-level impact of a change in the discount rate).

Allowance for Risk-Sharing Obligations. This reserve liability (referred to as “allowance”) for risk-sharing obligations relates to our Fannie Mae at-risk servicing portfolio and is presented as a separate liability on our balance sheets. We record an estimate of the loss reserve for the current expected credit losses (“CECL”) for all loans in our Fannie Mae at-risk servicing portfolio using the weighted-average remaining maturity method (“WARM”). WARM uses an average annual loss rate that contains loss content over multiple vintages and loan terms and is used as a foundation for estimating the CECL reserve. The average annual loss rate is applied to the estimated unpaid principal balance over the contractual term, adjusted for estimated prepayments and amortization to arrive at the CECL reserve for the entire current portfolio as described further below. We currently use one year for our reasonable and supportable forecast period (“forecast period”) as we believe forecasts beyond one year are inherently less reliable. During the forecast period we apply an adjusted loss factor based on economic and unemployment forecasts from a market survey and a blended loss rate from historical periods that we believe reflect the forecast from the survey. We revert to the historical loss rate over a one-year period on a straight-line basis. Over the past couple of years, the loss rate used in the forecast period has been updated to reflect our expectations of the economic conditions over the coming year in relation to the historical period. For example, in the second quarter of 2022, we updated the loss rate used in the forecast period from three basis points to 2.2 basis points and made multiple revisions after the onset of the pandemic in 2020. Changes in the loss rate used in the forecast period have significantly impacted the estimate in the past.

One of the key components of a WARM calculation is the runoff rate, which is the expected rate at which loans in the current portfolio will amortize and prepay in the future based on our historical prepayment and amortization experience. We group loans by similar origination dates (vintage) and contractual maturity terms for purposes of calculating the runoff rate. We originate loans under the DUS program with various terms generally ranging from several years to 15 years; each of these various loan terms has a different runoff rate. The runoff rates applied to each vintage and contractual maturity term is determined using historical data; however, changes in prepayment and amortization behavior may significantly impact the estimate. We have not experienced significant changes in the runoff rate since we implemented CECL in 2020.

The weighted-average annual loss rate is calculated using a 10-year look-back period, utilizing the average portfolio balance and settled losses for each year. A 10-year period is used as we believe that this period of time includes sufficiently different economic conditions to generate a reasonable estimate of expected results in the future, given the relatively long-term nature of the current portfolio. As the weighted-average annual loss rate utilizes a rolling 10-year look-back period, the loss rate used in the estimate will change as loss data from earlier periods in the look-back period continue to fall off and as new loss data are added. For example, in the first quarter of 2022, loss data from earlier periods in the look-back period fell off and were replaced with more recent loss data, resulting in the weighted-average annual loss rate changing from 1.8 basis points to 1.2 basis points. Changes in our expectations and forecasts have materially impacted, and in the future may materially impact, the estimate. Based on our historical loss data, our historical loss rate will decrease again in 2023, which may result in lower CECL reserves. In 2022, we had our first loss settlement in six years.

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NOTE 4 of the consolidated financial statements outlines adjustments made in the loss rates used to account for the expected economic conditions as of a given period and the related impact on the estimate.

We evaluate our risk-sharing loans on a quarterly basis to determine whether there are loans that are probable of default. Specifically, we assess a loan’s qualitative and quantitative risk factors, such as payment status, property financial performance, local real estate market conditions, loan-to-value ratio, debt-service-coverage ratio, and property condition. When a loan is determined to be probable of default based on these factors, we remove the loan from the WARM calculation and individually assess the loan for potential credit loss. This assessment requires certain judgments and assumptions to be made regarding the property values and other factors, that may differ significantly from actual results. Loss settlement with Fannie Mae has historically concluded within 18 to 36 months after foreclosure. Historically, the initial collateral-based reserves have not varied significantly from the final settlement.

We actively monitor the judgments and assumptions used in our Allowance for Risk-Sharing Obligation estimate and make adjustments to those assumptions when market conditions change, or when other factors indicate such adjustments are warranted. We believe the level of Allowance for Risk-Sharing Obligation is appropriate based on our expectations of future market conditions; however, changes in one or more of the judgments or assumptions used above could have a significant impact on the estimate.

Contingent Consideration Liabilities. The Company typically includes an earnout as part of the consideration paid for acquisitions to align the long-term interests of the acquiree with the Company. These earnouts contain milestones for achievement, which typically are revenue, revenue-like, or productivity measurements. If the milestone is achieved, the acquiree is paid the additional consideration. Upon acquisition, the Company is required to estimate the fair value of the earnout and include that fair value measurement as a component of the total consideration paid in the calculation of goodwill. The fair value of the earnout is recorded as a contingent consideration liability and included within Other liabilities in the Consolidated Balance Sheet and adjusted to the estimated fair value at the end of each reporting period.

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The determination of the fair value of contingent consideration liabilities requires significant management judgment and unobservable inputs to (i) determine forecasts and scenarios of future revenues, net cash flows and certain other performance metrics, (ii) assign a probability of achievement for the forecasts and scenarios, and (iii) select a discount rate. A Monte Carlo simulation analysis is used to determine many iterations of potential fair values. The average of these iterations is then used to determine the estimated fair value. We typically obtain the assistance of third-party valuation specialists to assist with the fair value estimation. The probability of the earnout achievement is based on management’s estimate of the expected future performance and other financial metrics of each of the acquired entities, which are subject to significant uncertainty. Changes to the aforementioned inputs impact the estimate; for example, in the fourth quarter of 2022, we recorded a net $13.5 million reduction to the fair value of our contingent consideration liabilities based primarily on revised management forecasts of the financial performance of the entities over the remaining earnout period.

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The aggregate fair value of our contingent consideration liabilities as of December 31, 2022 was $200.3 million. This fair value represents management’s best estimate of the discounted cash payments that will be made in the future for all of our contingent consideration arrangements. The maximum remaining undiscounted earnout payments as of December 31, 2022 was $319 million. Over the past two years, we have made two large acquisitions that included significant amounts of contingent consideration to maximize alignment of the key principals and management teams. The earnouts completed prior to 2021 involved businesses that operated in our core debt financing business and involved substantially smaller amounts of contingent consideration as compared to the two aforementioned acquisitions.

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Goodwill. As of December 31, 2022 and December 31, 2021, we reported goodwill of $959.7 million and $698.6 million, respectively. Goodwill represents the excess of cost over the identifiable net assets of businesses acquired. Goodwill is assigned to the reporting unit to which the acquisition relates. Goodwill is recognized as an asset and is reviewed for impairment annually on October 1. Between the annual evaluation time, we will perform an evaluation of recoverability, when events and circumstances indicate that it is more-likely-than not that the fair value of a reporting unit is below its carrying value. Impairment testing requires an assessment of qualitative factors to determine if there are indicators of potential impairment, followed by, if necessary, an assessment of quantitative factors. These factors include, but are not limited to, whether there has been a significant or adverse change in the business climate that could affect the value of an asset and/or significant or adverse changes in cash flow projections or earnings forecasts. These assessments require management to make judgments, assumptions, and estimates about projected cash flows, discount rates and other factors. As of December 31, 2022, we continue to believe the goodwill at each of our reporting units is not impaired.

Overview of Current Business Environment

The market’s transition from a historically low interest rate environment to a rising interest rate environment disrupted certain sectors of the lending market, with the most acute impacts felt initially in the consumer lending sector (e.g., residential mortgages, auto lending, and consumer credit). Although the commercial real estate debt and property sales markets began the year strong, volatility in long-term interest

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rates disrupted certain segments of the commercial real estate lending environment during the second half of 2022, particularly during the fourth quarter. Despite this volatility, our total transaction volumes only decreased 7% from 2021, with the largest decreases in our debt brokerage (13%) and HUD originations (52%). The decrease in total transaction volumes was partially offset by an increase in our GSE lending (5%) and multifamily property sales (2%).

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Beginning in May 2022, the Federal Reserve’s stance on inflation became more aggressive with seven consecutive increases in the Federal Funds Rate totaling 4.25%, which brought the rate to a target range of 4.50% to 4.75% as of January 2023. The Federal Reserve continues to signal that it anticipates additional increases in the target range and will continue the reduction of its holdings in Treasury securities and Agency mortgage-backed securities (“Agency MBS”) until the inflation rate returns to the Federal Reserve’s long-term target. Both of these actions by the Federal Reserve have resulted in a significant increase in medium to long-term mortgage interest rates, which form the basis of most of our lending.

As the Federal Reserve continues to combat inflation by increasing interest rates, we expect commercial real estate debt and property sales transaction activity to slow down from peaks earlier in the year 2022. Certain products were impacted more than others, with debt brokerage executions in non-multifamily assets classes being impacted the most, as banks and life insurance companies continued to pull back and potentially increase capital reserves in the short-term. However, we anticipate Agency lending volumes to remain steady going into 2023 as the Agencies provide liquidity in countercyclical markets. When the broader capital markets tighten, the Agencies historically step in to provide liquidity to the multifamily borrowing community as they did throughout 2020 and the second half of 2021, and as one of the largest providers of capital to the multifamily sector, we are well positioned. As interest rates increased rapidly over the last several months, and liquidity in the capital markets tightened, we have experienced declines in credit spreads to offset a portion of the interest rate increases. Although our lending activity with the Agencies is expected to remain stable going into 2023, the servicing fees on new loans and associated profitability of those executions is expected to remain at relatively lower than historical levels, consistent with the second half of 2022. We are a market-leading originator with the Agencies, and we believe our market leadership positions us well to continue gaining market share and remain a significant lender with the Agencies for the foreseeable future.

Despite significant market volatility caused by geopolitical risks, high inflation rate, rapidly rising interest rates, multifamily property fundamentals remain healthy. According to RealPage, a provider of commercial real estate data and analytics, vacancies have risen from their March 2022 lows to 5.0% as of December 2022 and are expected to increase in the coming months; however, national vacancy rates still remain below historical averages. Additionally, rent collections remain strong at pre-pandemic levels and increased year-over-year, despite inflationary pressures and high rent growth over the past two years. Also, the national unemployment rate continues to fall, reaching a pre-pandemic low of 3.5% as of December 2022. We believe the unemployment rate is an important determinant of future multifamily property performance.

The FHFA establishes loan origination caps for both Fannie Mae and Freddie Mac each year. In November 2022, the FHFA established Fannie Mae’s and Freddie Mac’s 2023 loan origination caps at $75 billion each for all multifamily business, a 4% decrease from the 2022 caps. During 2022, Fannie Mae and Freddie Mac had multifamily origination volumes of $69.2 billion and $72.8 billion, respectively, down 0.3% and up 3.7%, respectively, from 2021. The decline in the GSEs’ origination volumes was primarily driven by the volatile and uncertain macroeconomic conditions in 2022. The decrease to the GSEs’ lending caps in 2023 is not expected to have a material impact on the competitiveness of either Fannie Mae or Freddie Mac, as they continue to have sufficient capital to meet market demand.

Our multifamily property sales volumes grew slightly during the year as we had strong volumes during the first half of 2022 as (i) the multifamily acquisitions market was very active during the first half of the year, and (ii) we expanded the number of property sales brokers and the geographical reach of our property sales platform. The strong volumes in the first half were offset by slowdowns in volumes during the second half of 2022, due to the macroeconomic conditions discussed above. Long term, we believe the market fundamentals will continue to be positive for multifamily property sales. Over the last several years, household formation and a dearth of supply of entry-level single-family homes led to strong demand for rental housing in many geographic areas. Consequently, the fundamentals of the multifamily property sales market were strong prior to the pandemic, and, when combined with high occupancy and retention rates and rising real-estate prices, it is our expectation that market demand for multifamily property sales will remain strong as this asset class remains an attractive investment option.

Our debt brokerage platform had lower volumes in 2022 compared to 2021 due to a substantial decrease in the transaction volume in the second half of the year because of the volatile interest rate environment that in turn drove a pullback of liquidity from banks, life insurance companies, and securitization markets. As the interest rate environment begins to stabilize, we expect liquidity to slowly return to the market.

As noted above, our debt financing operations with HUD declined during 2022. HUD loan volumes accounted for 2.6% total debt financing volumes in 2022 compared to 4.8% in 2021. The decline in HUD debt financing volumes as a percentage of our total debt financing volumes was driven by lower aggregate HUD lending volumes industry-wide, as the increasing interest-rate environment discussed above more acutely impacted the HUD product given the longer lead times associated with HUD executions.

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Our originations with the Agencies are our most profitable executions as they provide significant non-cash gains from MSRs that turn into significant cash revenue streams from future servicing fees. During the year ended December 31, 2022, servicing fees were up 8% compared to the year ended December 31, 2021, due to the $7.4 billion increase in the servicing portfolio unpaid principal balance (“UPB”). A decline in our Agency originations would negatively impact our financial results, as our non-cash revenues would decrease disproportionately with debt financing volume and future servicing fee revenue would be constrained or decline.

We entered into the Interim Program JV to both increase the overall capital available to transitional multifamily properties and to dramatically expand our capacity to originate Interim Program loans. The demand for transitional lending has brought increased competition from lenders, specifically banks, mortgage real estate investment trusts, and life insurance companies. For the year ended December 31, 2022, we originated $86.3 million of Interim Program JV loans, compared to $860.0 million of originations in 2021. The volatile macroeconomic conditions led us to reduce our lending activity on transitional assets. We expect our lending volumes for transitional assets to remain low until economic conditions normalize. Except for one loan that defaulted in early 2019, the loans in our portfolio and in the Interim Program JV continue to perform as agreed.

Our subsidiary, Alliant, which provides alternative investment management services focused on the affordable housing sector through LIHTC syndication, joint venture development, and community preservation fund management remains the 6th largest LIHTC syndicator despite the economic challenges mentioned above. We continue to approach the affordable housing space with a combined LIHTC syndication and affordable housing service offering that we believe will generate significant financing, property sales, and syndication opportunities. Additionally, as part of FHFA’s 2023 loan origination caps of $150 billion announced in November 2022, at least 50% of the GSEs’ multifamily business is required to be targeted towards affordable housing. We expect these initiatives will create additional growth opportunities for both Alliant and our debt financing and property sales teams focused on affordable housing.

Factors That May Impact Our Operating Results

We believe that our results are affected by a number of factors, including the items discussed below.

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Revenues

Loan Origination and Debt Brokerage Fees, net. Loan origination fee revenue is recognized when we record a derivative asset upon the simultaneous commitments to originate a loan with a borrower and sell to an investor or when a loan that we broker closes with the institutional lender. The commitment asset related to the loan origination fee is recognized at fair value, which reflects the fair value of the contractual loan origination related fees and any sale premiums, net of co-broker fees. Also included in revenues from loan origination activities are changes to the fair value of loan commitments, forward sale commitments, and loans held for sale that occur during their respective holding periods. Upon sale of the loans, no gains or losses are recognized as these loans are recorded at fair value during their holding periods.

Brokered loans tend to have lower origination fees because they often require less time to execute, there is more competition for brokerage assignments, and because the borrower will also have to pay an origination fee to the institutional lender.

Premiums received on the sale of a loan result when a loan is sold to an investor for more than its face value. There are various reasons investors may pay a premium when purchasing a loan. For example, the fixed rate on the loan may be higher than the rate of return required by an investor or the characteristics of a particular loan may be desirable to an investor. We do not receive premiums on brokered loans.

Fair Value of Expected Net Cash Flows from Servicing, net. Revenue related to expected net cash flows from servicing is recognized at the loan commitment date, similar to the loan origination fees, as described above. The derivative asset is recognized at fair value, which reflects the estimated fair value of the expected net cash flows associated with the servicing of the loan, reduced by the estimated fair value of any guaranty obligations to be assumed. MSRs and guaranty obligations are recognized as assets and liabilities, respectively, upon the sale of the loans.

MSRs are recorded at fair value upon loan sale. The fair value is based on estimates of expected net cash flows associated with the servicing rights. The estimated net cash flows are discounted at a rate that reflects the credit and liquidity risk of the MSR over the estimated life of the loan.

The “Critical Accounting Policies and Estimates” section above and NOTE 2 of the consolidated financial statements provide additional details of the accounting for these revenues.

Servicing Fees.  We service nearly all loans we originate and some loans we broker. We earn servicing fees for performing certain loan servicing functions such as processing loan, tax, and insurance payments and managing escrow balances. Servicing generally also includes asset management functions, such as monitoring the physical condition of the property, analyzing the financial condition and liquidity of the borrower, and performing loss mitigation activities as directed by the Agencies.

Our servicing fees on loans we originate provide a stable revenue stream. They are based on contractual terms, are earned over the life of the loan, and are generally not subject to significant prepayment risk. Our Fannie Mae and Freddie Mac servicing agreements provide for prepayment fees in the event of a voluntary prepayment. Accordingly, we currently do not hedge our servicing portfolio for prepayment risk. Any prepayment fees received are included in Other revenues.

HUD has the right to terminate our current servicing engagements for cause. In addition to termination for cause, Fannie Mae and Freddie Mac may terminate our servicing engagements without cause by paying a termination fee. Institutional investors typically may terminate our servicing engagements for brokered loans at any time with or without cause, without paying a termination fee.

Property sales broker fees. We earn property broker sales fee revenue when our investment sales team completes the sale of a multifamily investment property or land real estate. The amount of the property sales brokers fees we earn is based upon a percentage of the final sale price of the investment sold.

Investment management fees. We manage invested capital from third-party investors through an investment fund structure. The capital placed into the investment fund is utilized to make investments in multifamily investment opportunities, primarily as equity in market-rate or LIHTC generating multifamily properties. We earn an investment management or asset management fee based on a contractual percentage of the invested capital. For market-rate investments, we earn and collect the investment management fees through the returns of the investment funds. For LIHTC investments, we collect the asset management fees (“AMF”) through the combination of current payments and asset dispositions. NOTE 2 of the consolidated financial statements provides additional details of the accounting for AMF revenues.

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Net Warehouse Interest Income—We earn warehouse interest income net of warehouse interest expense. Warehouse interest income is the interest earned from loans held for sale and loans held for investment. Generally, a substantial portion of our loans is financed with matched borrowings under one of our warehouse facilities. The remaining portion of loans not funded with matched borrowings is financed with our own cash. Occasionally, we also fully fund a small number of loans held for sale or loans held for investment with our own cash. Warehouse interest expense is incurred on borrowings used to fund loans solely while they are held for sale or for investment. Warehouse interest income and expense are earned or incurred on loans held for sale after a loan is closed and before a loan is sold. Warehouse interest income and expense are earned or incurred on loans held for investment after a loan is closed and before a loan is repaid.

Escrow Earnings and Other Interest Income.  We earn fee income on property-level escrow deposits in our servicing portfolio, generally based on a fixed or variable placement fee negotiated with the financial institutions that hold the escrow deposits. Escrow earnings reflect the placement fees net of interest paid to the borrower, if required. Also included with escrow earnings and other interest income are interest earnings from our cash and cash equivalents and interest income earned on our pledged securities.

Other Revenues.  Other revenues are comprised of fees for processing loan assumptions, prepayment fee income, application fees, property sales broker fees, appraisal revenues, income from equity-method investments, asset management fees, certain revenues from LIHTC operations, and other miscellaneous revenues related to our operations.

Costs and Expenses

Personnel.  Personnel expense includes the cost of employee compensation and benefits, which include fixed and discretionary amounts tied to company and individual performance, commissions, severance expense, signing and retention bonuses, and share-based compensation.

Amortization and Depreciation.  Amortization and depreciation is principally comprised of amortization of our MSRs, net of amortization of our guaranty obligations. The MSRs are amortized using the interest method over the period that servicing income is expected to be received. We amortize the guaranty obligations evenly over their expected lives. When the loan underlying an MSR prepays, we write off the remaining unamortized balance, net of any related guaranty obligation, and record the write off to Amortization and depreciation. Similarly, when the loan underlying an MSR defaults, we write the MSR off to Amortization and depreciation.  We depreciate property, plant, and equipment ratably over their estimated useful lives.

Amortization and depreciation also includes the amortization of intangible assets, principally related to the amortization, asset management fee contracts, research subscription contracts, intellectual property, and other intangible assets recognized in connection with acquisitions. For the years presented in the Consolidated Statements of Income, the amortization of intangible assets relates primarily to intangible assets associated with our acquisitions in 2021 and 2022.

Provision (Benefit) for Credit Losses.  The provision (benefit) for credit losses consists of two components: the provision associated with our risk-sharing loans and the provision associated with our loans held for investment. The provision (benefit) for credit losses associated with risk-sharing loans is estimated on a collective basis when a loan is sold to Fannie Mae and is based on our current expected credit losses on the current portfolio from loan sale to maturity. The provision (benefit) for credit losses associated with our loans held for investment is estimated similar to our risk-sharing loans at origination and is based on our current expected credit losses. For both our risk-sharing loans and loans held for investment, when a loan is probable of default, the loan is taken out of the collective evaluation and individually evaluated for credit losses. Our estimates of property fair value are based on appraisals, broker opinions of value, or net operating income and market capitalization rates, whichever we believe is the best estimate of the net disposition value.

The “Critical Accounting Policies and Estimates” section above and NOTE 2 of the consolidated financial statements provides additional details of the accounting for this expense.

Interest Expense on Corporate Debt.  Interest expense on corporate debt includes interest expense incurred and amortization of debt discount and deferred debt issuance costs related to our term loan facility.

Other Operating Expenses.  Other operating expenses include sub-servicing costs, facilities costs, travel and entertainment costs, marketing costs, professional fees, losses on debt extinguishment, accretion and revaluation of contingent consideration liabilities, corporate insurance premiums, and other administrative expenses.

Income Tax Expense.  The Company is a C-corporation subject to federal, state, and international corporate tax. Our estimated combined statutory federal, state, and international tax rate was 26.1%, 25.7%, and 25.2% for the years ended December 31, 2022, 2021, and 2020, respectively. Except for the effects of the Tax Cuts and Jobs Act of 2017 (“Tax Reform”), our combined statutory tax rate has historically not varied significantly as the only material difference in the calculation of the combined statutory tax rate from year to year is the apportionment of our taxable income amongst the various states where we are subject to taxation since our foreign operations are (i) immaterial and (ii) taxed

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at a rate similar to our blended federal and state tax rate. Absent additional significant legislative changes to statutory tax rates (particularly the federal tax rate), we expect low deviation from the 2022 combined statutory tax rate for future years. However, we do expect some variability in the effective tax rate going forward due to excess tax benefits recognized and limitations on the deductibility of certain book expenses as a result of Tax Reform, primarily related to executive compensation.

Excess tax benefits recognized in 2022, 2021, and 2020 reduced income tax expense by $6.1 million, $8.6 million, and $7.3 million, respectively. The changes in the excess tax benefits over the past three years is largely due to changes in the number of shares vested and the stock price at which the shares vested.

Consolidated Results of Operations

The following is a discussion of the comparison of our results of operations for the years ended December 31, 2022 and 2021. The financial results are not necessarily indicative of future results. Our annual results have fluctuated in the past and are expected to fluctuate in the future, reflecting the interest-rate environment, the volume of transactions, business acquisitions, regulatory actions, and general economic conditions. Discussions of our results of operations and comparisons between 2021 and 2020 can be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2021.

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SUPPLEMENTAL OPERATING DATA

CONSOLIDATED

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Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

The following table presents a period-to-period comparison of our financial results for the years ended December 31, 2022 and 2021.

FINANCIAL RESULTS –2022 COMPARED TO 2021

CONSOLIDATED

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Overview

Revenues decreased slightly as increases in servicing fees, investment management fees, escrow earnings and other interest income, and other revenues, were offset by decreases in loan origination and debt brokerage fees, net (“origination fees”) and the fair value of expected net cash flows from servicing, net (“MSR income”). Servicing fees increased largely from an increase in the average servicing portfolio outstanding. Investment management fees increased due to the addition of investment management fees from our LIHTC operations acquired in the fourth quarter of 2021. Escrow earnings and other interest income increased largely as a result of higher escrow earnings rates due to rising interest rates. Other revenues increased primarily as a result of a one-time gain from the revaluation of our previously held equity-method investment in Apprise (“Apprise revaluation gain”) in connection with the GeoPhy acquisition, and increases in (i) other revenues from our LIHTC operations, (ii) research subscription fees, and (iii) gains from equity-method investments, partially offset by a decline in prepayment fees. Origination fees and MSR income decreased primarily as a result of a decline in the earnings rate from our debt financing volumes due to market volatility and rising interest rates over the second half of the year and a decrease in Agency debt financing volume.

The increase in expenses was due to increases in all expense categories, primarily in amortization and depreciation, interest expense on corporate debt, and other operating expenses. Amortization and depreciation expense increased primarily due to an increase in the average MSR balance and an increase in intangible asset amortization resulting from acquisitions in 2021 and 2022. Interest expense on corporate debt increased due to the increase in the size of the debt outstanding, including the assumption of Alliant’s note payable in the fourth quarter of 2021, and the rising interest rate environment in 2022. Other operating expenses increased largely as a result of (i) the overall growth of the Company’s operations over the past year including expenses from acquired subsidiaries and (ii) an increase in travel and entertainment costs compared to 2021 when our travel and entertainment expenses were depressed due to the on-going effects of the pandemic. These substantial increases were partially offset by a benefit for the revaluation of contingent consideration liabilities.

Income Tax Expense. The decrease in income tax expense relates to a decrease in income from operations and the tax impacts of the

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$39.6 million Apprise revaluation gain. The gain is an unrealized, non-taxable gain. Accordingly, no income tax expense was recorded for this gain. Based on our blended statutory rate, the benefit to our income tax expense was $10.3 million.

A discussion of the financial results for our segments is included further below.

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with GAAP, we use 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, share-based incentive compensation charges, and the fair value of expected net cash flows from servicing, net. 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 our GAAP financials, provides useful information to investors by offering:

We believe that adjusted EBITDA has limitations in that it does not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that adjusted EBITDA should only be used to evaluate our results of operations in conjunction with net income.

Adjusted EBITDA is reconciled to net income as follows:

ADJUSTED FINANCIAL METRIC RECONCILIATION TO GAAP

CONSOLIDATED

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Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

The following table presents a period-to-period comparison of the components of our adjusted EBITDA for the years ended December 31, 2022 and 2021:

ADJUSTED EBITDA –2022 COMPARED TO 2021

CONSOLIDATED

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The decrease in origination fees was primarily related to decreases in both the earnings rate on our debt financing volumes and the overall debt financing volumes year over year. Servicing fees increased due to an increase in the average servicing portfolio. Investment management fees increased due to the addition of investment management fees from our LIHTC operations acquired in the fourth quarter of 2021. Net warehouse interest income decreased primarily due to decreases in the net spreads and average outstanding balances. Escrow earnings and other interest income increased primarily as a result of a higher escrow earnings rate due to rising interest rates. Other revenues increased primarily as a result of increases in: (i) other revenues from our LIHTC operations, (ii) research subscription fees (iii) gains from equity-method investments, partially offset by decreases in prepayment fees.

The increase in personnel expense was primarily due to increased salaries and benefits expense due to an increase in average headcount, partially offset by a decrease in commission costs due to lower debt financing volumes and a decrease in accruals for other performance-based compensation due to the Company’s performance. Net write-offs increased due to a loss settlement that occurred in the fourth quarter of 2022 with no comparable activity in 2021. Other operating expenses increased largely as a result of (i) the overall growth of the Company over the past year including expenses from acquired subsidiaries and (ii) an increase in travel and entertainment costs compared to 2021 when our travel and entertainment expenses were depressed due to the on-going effects of the pandemic. The increase in Other operating expenses was partially offset by a benefit for the revaluation of contingent consideration liabilities.

Financial Condition

Cash Flows from Operating Activities

Our cash flows from operations are generated from loan sales, servicing fees, escrow earnings, net warehouse interest income, property sales broker fees, investment management fees, research subscription fees, investment banking advisory fees, and other income, net of loan origination and operating costs. Our cash flows from operations are impacted by the fees generated by our loan originations and property sales, the timing of loan closings, and the period of time loans are held for sale in the warehouse loan facility prior to delivery to the investor.

Cash Flows from Investing Activities

We usually lease facilities and equipment for our operations. Our cash flows from investing activities also include the funding and repayment of loans held for investment, contributions to and distributions from joint ventures, purchases of equity-method investments, and the purchase of available-for-sale (“AFS”) securities pledged to Fannie Mae. We opportunistically invest cash for acquisitions and MSR portfolio purchases.

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Cash Flows from Financing Activities

We use our warehouse loan facilities and, when necessary, our corporate cash to fund loan closings, both for loans held for sale and loans held for investments. We also use warehouse facilities to assist in funding investments in tax credit equity before transferring them to a tax credit fund. We believe that our current warehouse loan facilities are adequate to meet our loan origination and tax credit equity syndication needs. Historically, we used a combination of long-term debt and cash flows from operations to fund large acquisitions, repurchase shares, pay cash dividends, make long-term debt principal payments, and repay short-term borrowings on a regular basis. We issue stock primarily in connection with exercise of stock options (cash inflow) and for acquisitions (non-cash transactions).

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

The following table presents a period-to-period comparison of the significant components of cash flows for the year ended December 31, 2022 and 2021.

SIGNIFICANT COMPONENTS OF CASH FLOWS – 2022 COMPARED TO 2021

CONSOLIDATED

The change in cash flows from operating activities was driven primarily by loans originated and sold. Such loans are held for short periods of time, generally less than 60 days, and impact cash flows presented as of a point in time. The increase in cash flows received in loan origination activities is primarily attributable to sales of loans held for sale outpacing originations by $1.4 billion in 2022 compared to $620.8 million in 2021. Excluding cash used for the origination and sale of loans, cash flows provided by operations were $210.0 million in 2022, down from $249.7 million in 2021. The decrease is primarily the result of a (i) $56.7 million decrease in net income before noncontrolling interest, (ii) a $39.6 million increase in a non-cash adjustment for the Apprise revaluation gain in 2022 with no comparable activity in 2021, and (iii) $58.5 million decrease in adjustments for other operating activities, partially offset by a $120.1 million change in non-cash adjustments for MSRs and amortization and depreciation. The significant decrease in Total cash over the past year is largely attributable to acquisition activity coupled with a decrease in cash provided by operating activities, excluding loan origination activity.

The decrease in cash used in investing activities in 2022 from 2021 was due to (i) a decrease in cash used in acquisitions in 2022 compared

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to 2021, (ii) a decrease in the purchase of equity-method investments as capital calls for capital commitments decreased year over year, and (iii) a change from net investments in joint ventures to net distributions from joint ventures, partially offset by (i) an increase in the net purchase of pledged AFS securities, as we reinvested prepayments from the prior year, (ii) an increase in capital expenditures due to the build out of our new corporate headquarters, and (iii) a decrease in the net payoff of loans held for investment. Cash used in acquisitions decreased, as in 2021, we had four acquisitions, including the Alliant acquisition, the largest acquisition in Company history, compared to two acquisitions, including GeoPhy, and a large payment for working capital adjustments for the Alliant acquisition in 2022. Our distributions from joint ventures outpaced our investments as our joint ventures originated fewer loans in 2022. Net payoff of loans held for investment decreased, as there were fewer payoffs and originations in 2022 than in 2021.

The increase in cash used in financing activities was attributable to (i) an increase in net warehouse repayments, (ii) a change to net repayments from net borrowings of interim warehouse notes payable, (iii) a change from net borrowings to net repayments of notes payable, (iv) an increase in the payment of contingent consideration as the Company made payments in 2022 for certain acquired entities in prior years, (v) an increase in repurchases of common stock, and (vi) an increase in dividends paid, partially offset by a decrease in repayments of secured borrowings. The increase in the net repayments of warehouse notes payable was due to the aforementioned increase in cash received for loan origination activity. The change to net cash repayments from net borrowings of interim warehouse notes payable was primarily due to an increase in net repayments of interim loans as we had fewer originations in 2022. The change from net borrowings to net repayments of notes payable was due to the refinancing and increase of our Term Loan in December 2021 with no comparable activity in 2022 and due to the required quarterly paydowns of a note payable at our subsidiary, Alliant. The increase in cash paid for repurchases of common stock was related to significant vesting events in our various share-based compensation plans and the $11.1 million repurchase of common stock through our 2022 stock repurchase program compared to no repurchases under the 2021 stock repurchase program. Cash dividends paid increased largely as a result of the increase in our dividend to $0.60 per share in 2022 compared to $0.50 per share in 2021

Segment Results

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The Company is managed based on our three reportable segments: (i) Capital Markets, (ii) Servicing & Asset Management, and (iii) Corporate. The segment results below are intended to present each of the reportable segments on a stand-alone basis.

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Capital Markets

Our Capital Markets segment provides a comprehensive range of commercial real estate finance products to our customers, including Agency lending, debt brokerage, property sales, and appraisal and valuation services. The Company’s long-established relationships with the Agencies and institutional investors enable our Capital Markets segment to offer a broad range of loan products and services to the Company’s customers, including first mortgage, second trust, supplemental, construction, mezzanine, preferred equity, and small-balance loans. This segment also provides property sales services to owners and developers of multifamily properties and commercial real estate and multifamily property appraisals for various investors. The Capital Markets segment also provides real estate-related investment banking and advisory services, including housing market research.

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SUPPLEMENTAL OPERATING DATA

CAPITAL MARKETS

FINANCIAL RESULTS –2022 COMPARED TO 2021

CAPITAL MARKETS

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Revenues

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Loan origination and debt brokerage fees, net and Fair value of expected net cash flows from servicing, net. The following tables provide additional information that helps explain changes in origination fees and MSR income period over period:

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The decrease in origination fees was the result of a 13-basis-point decrease in our origination fee rate and a 9% decrease in overall debt financing volume. The decline in the origination fee rate was driven by a combination of a decline in in our HUD debt financing volumes and a decline in the margins we earn on our debt financing products, particularly with our Fannie Mae volume. Our Fannie Mae volume in 2022 included a $1.9 billion portfolio of loans that had a relatively lower origination fee rate that is typical for transactions of that size. We had no such portfolio transactions in 2021.

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The decrease in MSR income was attributable to the 32% decrease in our Agency MSR Rate, coupled with a substantial decrease in our HUD debt financing volumes. The weighted-average servicing fees on new Fannie Mae debt financing volume declined 38% due to tightening of servicing fees due to large interest rate increases during 2022. Our Fannie Mae and HUD products are our most profitable products.

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See the “Overview of Current Business Environment” section above for a detailed discussion of the factors driving the changes in debt financing volumes.

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Net Warehouse Interest Income, Loans Held for Sale. The decrease was the result of decreases in the average balance outstanding and in the net spread between the rate on the originated loans and the interest costs associated with the warehouse facility as shown below. The decrease in the average balance was related to the overall decrease in our debt financing volume year over year, particularly our HUD originations. The decrease in the net spreads shown below was a result of the rapidly rising interest rate environment.

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Other Revenues. The increase was due to an increase in our research subscription revenues and appraisal revenues, partially offset by a decrease in miscellaneous revenues. Research subscription fees increased $13.1 million year over year primarily due to the acquisition of Zelman early in the third quarter of 2021. 2022 included a full year of revenue from research services compared to less than half a year in 2021. Appraisal revenues increased due to the consolidation of Apprise in the first quarter of 2022, resulting in $8.3 million of appraisal revenue recognized during 2022. The appraisal revenue was accounted for as income from equity method investments prior to the consolidation of Apprise.

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Expenses

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Personnel. The decrease was primarily the result of a $51.7 million decrease in debt financing commission costs as a result of the decrease in debt financing activity and the related origination fees, partially offset by a $26.3 million increase in salaries and benefits and an $8.9 million increase in other compensation costs. These increases in salaries and benefits and other compensation costs were due to higher

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average headcount resulting from (a) acquisitions and hiring initiatives and (b) the GeoPhy acquisition and corresponding consolidation of Apprise.

Interest expense on corporate debt. The increase was primarily driven by an increase in the interest rate on our corporate debt as the lockout on the cap of our floating interest rate expired.

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Other Operating Expenses. The decrease stemmed from an $18.0 million benefit for the revaluation of contingent consideration liabilities allocated to the Capital Markets segment, partially offset by increases in travel and entertainment costs of $5.8 million as our bankers and brokers attended more in person meetings compared to 2021 when the effects of the pandemic were still depressing business travel.

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Income Tax Expense. Income tax expense is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment’s income from operations, except for significant, one-time tax activities, which are allocated entirely to the segment impacted by the tax activity.

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Non-GAAP Financial Measure

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A reconciliation of adjusted EBITDA for our Capital Markets segment is presented below. Our segment level adjusted EBITDA represents the segment portion of consolidated adjusted EBITDA. A detailed description and reconciliation of consolidated adjusted EBITDA is provided above in our Consolidated Results of Operations—Non-GAAP Financial Measure. CM adjusted EBITDA is reconciled to net income as follows:

ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP

CAPITAL MARKETS

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The following tables present period-to-period comparisons of the components of CM adjusted EBITDA for the years ended December 31, 2022 and 2021.

ADJUSTED EBITDA – 2022 COMPARED TO 2021

CAPITAL MARKETS

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Loan origination and debt brokerage fees, net decreased due to a decrease in our origination fee rate and a decrease in our overall debt financing volume. Net warehouse interest income decreased due to decreases in the net spread and average outstanding balance. The decrease in personnel expense was primarily due to decreased commission costs due to the decrease in origination fees, partially offset by growth in salaries and benefits costs resulting from an increase in the average headcount from acquisitions and hiring initiatives. Other operating expenses

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decreased primarily due to a contingent consideration revaluation gain in 2022, partially offset by growth in the segment’s operations and increases in travel and entertainment costs as our bankers and brokers attended more in person meetings in 2022.

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Servicing & Asset Management

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The Servicing & Asset Management segment’s activities include: (i) servicing and asset-managing the portfolio of loans the Company (a) originates and sells to the Agencies, (b) brokers to certain life insurance companies, and (c) originates through its principal lending and investing activities, and (ii) managing third-party capital invested in tax credit equity funds focused on the affordable housing sector and other commercial real estate.

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SUPPLEMENTAL OPERATING DATA

SERVICING & ASSET MANAGEMENT

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FINANCIAL RESULTS – 2022 COMPARED TO 2021

SERVICNG & ASSET MANAGEMENT

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Revenues

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Loan origination and debt brokerage fees, net. The decrease was due to a 77% decrease in our principal lending and investing debt financing volumes. Debt financing volume for this segment includes loans made on transitional multifamily properties on our balance sheet or through the Interim Program JV. Due to the challenging macroeconomic conditions, we scaled back our lending on transitional assets in 2022.

Servicing Fees. The increase was primarily attributable to an increase in the average servicing portfolio period over period as shown below, primarily due to a $5.8 billion net increase in Fannie Mae serviced loans and a $977.7 million net increase in brokered loans serviced over the past year, coupled with the increase in the servicing portfolio’s average servicing fee rate as shown below. The increase in the average servicing fee rate is the result of the relatively large volume of Fannie Mae debt financing volume over the past year, resulting in Fannie Mae loans composing a higher percentage of the overall portfolio. Fannie Mae loans have the highest servicing fees of all our products.

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Investment Management Fees. The increase was primarily driven by the addition of investment management fees from our LIHTC operations due to our acquisition of Alliant late in the fourth quarter of 2021, which added an incremental $47.4 million of investment management fees from 2021.

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Escrow earnings and other interest income.  The increase was driven primarily by an increase in our escrow earnings of $37.7 million, coupled with an increase in interest income from pledged securities, cash balances, and other investments. The earnings rate on escrow balances and other interest-earning assets increased significantly as a result of rising interest rates over the past year, partially offset by a reduction in the average balance of escrows outstanding.

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Other Revenues. The increase was primarily due to a $35.9 million increase in other revenues from our LIHTC operations, partially offset by a $13.7 million decrease in prepayment fees. The increase in other revenues from LIHTC operations was driven by our subsidiary Alliant, which was acquired in the fourth quarter of 2021. The decrease in prepayment fees was due to a substantial decrease in the volume of loans that prepaid year over year due to the higher interest rate environment and the amount of prepayment fees earned on that volume.

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Expenses

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Personnel. The increase was primarily the result of increases in salaries and benefits of $24.0 million and bonus accruals by $8.7 million. Salaries and benefits and bonus accruals increased during the year ended December 31, 2022 primarily due to growth in headcount as a result of the Alliant acquisition that occurred late in the fourth quarter of 2021, partially offset by a decrease in the accrual rate due to the Company’s performance in 2022.

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Amortization and Depreciation. The increase was primarily attributed to loan origination activity and the resulting growth in the average MSR balance and due to an increase in intangible asset amortization. Over the past 12 months, we have added $110.3 million of MSRs, net of disposals. Due to the Alliant acquisition in December 2021, we added $170.8 million in intangible assets to SAM, resulting in an increase in amortization expense of $12.4 million for the year ended December 31, 2022.

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Interest expense on corporate debt. The increase was primarily driven by (i) an increase in the portion of corporate debt related to SAM, (ii) the assumption of a securitized debt instrument late in the fourth quarter of 2021 in connection with the Alliant acquisition, and (iii) an increase in the interest rate on our corporate debt as the lockout on the cap of our floating rate expired. The increase in corporate debt related to SAM was due to the $300.0 million of additional debt incurred to acquire Alliant. The increase in the interest rate was driven by rapidly rising interest rates during 2022.

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Other Operating Expenses. The increase primarily stemmed from relatively small increases in various expense types. For the year ended December 31, 2022, the increase was primarily due to a $16.7 million increase in other operating costs and a $2.3 million increase in professional fees. The increases in other operating costs and professional fees were primarily due to additional operating expenses at Alliant, which was acquired late in the fourth quarter of 2021, and a $4.5 million expense for the revaluation of contingent consideration liabilities in the fourth quarter of 2022 due to the performance of Alliant.

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Income Tax Expense. Income tax expense is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment’s income from operations, except for significant, one-time tax activities, which are allocated entirely to the segment impacted by the tax activity.

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Non-GAAP Financial Measure

A reconciliation of adjusted EBITDA for our Servicing & Asset Management segment is presented below. Our segment level adjusted EBITDA represents the segment portion of consolidated adjusted EBITDA. A detailed description and reconciliation of consolidated adjusted EBITDA is provided above in our Consolidated Results of Operations—Non-GAAP Financial Measure. SAM adjusted EBITDA is reconciled to net income as follows:

ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP

SERVICING & ASSET MANAGEMENT

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The following tables present period-to-period comparisons of the components of SAM adjusted EBITDA for the years ended December 31, 2022 and 2021.

ADJUSTED EBITDA – 2022 COMPARED TO 2021

SERVICING & ASSET MANAGEMENT

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Origination fees decreased primarily due to a decrease in our principal lending and investing origination volume. Servicing fees increased due to growth in the average servicing portfolio period over period as a result of loan originations and an increase in the average servicing fee rate. Investment management fees increased due to the addition of our LIHTC operations from our acquisition in the fourth quarter of 2021. Escrow earnings and other interest income increased primarily due to the rise in the escrow earnings rate. Other revenues increased primarily due to the addition of other revenues from our LIHTC operations, partially offset by a decrease in prepayment fees. Net write-offs increased due to a loss settlement that occurred in the fourth quarter of 2022 with no comparable activity in 2021. Personnel and other operating expenses increased due to growth in headcount and operations from the aforementioned acquisition. Additionally, other operating expenses increased due to a contingent consideration revaluation expense in 2022.

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Corporate

The Corporate segment consists primarily of the Company’s treasury operations and other corporate-level activities. Our treasury activities include monitoring and managing liquidity and funding requirements, including corporate debt. Other corporate-level activities include equity-method investments, accounting, information technology, legal, human resources, marketing, internal audit, and various other corporate groups (“support functions”). We do not allocate costs from these support functions to its other segments in presenting segment operating results. We do allocate interest expense and income tax expense. Corporate debt and the related interest expense are allocated first based on specific acquisitions where debt was directly used to fund the acquisition, such as the acquisition of Alliant, and then based on the remaining segment assets. Income tax expense is allocated proportionally based on income from operations at each segment, except for significant, one-time tax activities, which are allocated entirely to the segment impacted by the tax activity.

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FINANCIAL RESULTS – 2022 COMPARED TO 2021

CORPORATE

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Revenues

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Other Revenues. The increase was primarily due to the $39.6 million Apprise revaluation gain, which was recognized in the first quarter of 2022. As part of our acquisition of GeoPhy, we acquired its 50% interest in Apprise. The revaluation of our existing 50% ownership interest with a carrying value of $18.9 million to a fair value of $58.5 million resulted in a $39.6 million gain. The remaining increase was primarily due to a $6.1 million increase in income from our other equity-method investments, mostly related to the first quarter of 2022. Partially offsetting the increase in Other revenues was a $2.7 million decrease in investment income from the Company’s deferred compensation plan.

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Expenses

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Personnel. The decrease was primarily the result of (i) a $16.1 million decrease to the accrual for subjective bonuses, (ii) a $4.2 million decrease in stock compensation expense related to the Company’s performance share plan, and (iii) a $2.7 million decrease in compensation expense related to the Company’s deferred compensation plan, partially offset by a $6.8 million increase in salaries and benefits due to an increase in the average headcount. The decreases related to (i) and (ii) were due to the Company’s performance in 2022. The majority of the decrease came from a reduction in senior management compensation due to the Company’s performance in 2022.

Other Operating Expenses. For the year ended December 31, 2022, the increase was primarily driven by: (i) a $16.4 million increase in office expenses related to the growth of the Company and acquired offices, (ii) a $6.3 million increase in professional fees largely related to our acquisitions, (iii) a $2.2 million increase in travel and entertainment costs attributable to the growth of the Company and depressed travel and entertainment costs in 2021 due to the pandemic, and (iv) a $2.1 million increase in marketing costs related to the diversification of the Company, especially in support of acquired businesses and new business initiatives.

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Income Tax Expense. Income tax expense is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment’s income from operations, except for significant, one-time tax activities, which are allocated entirely to the segment impacted by the tax activity.

Non-GAAP Financial Measure

A reconciliation of adjusted EBITDA for our Corporate segment is presented below. Our segment level adjusted EBITDA represents the segment portion of consolidated adjusted EBITDA. A detailed description and reconciliation of consolidated adjusted EBITDA is provided above in our Consolidated Results of Operations—Non-GAAP Financial Measure. Corporate adjusted EBITDA is reconciled to net income as follows:

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ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP

CORPORATE

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The following tables present period-to-period comparisons of the components of Corporate adjusted EBITDA for the years ended December 31, 2022 and 2021.

ADJUSTED EBITDA – 2022 COMPARED TO 2021

CORPORATE

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The increase in other revenue was primarily due to an increase in income from our other equity-method investments, partially offset by a decrease in investment income from the Company’s deferred compensation plan. The decrease in personnel expense was primarily due to the decreases in accruals for subjective bonuses, stock compensation expense related to the Company’s performance share plan, and expenses related to the Company’s deferred compensation plan, partially offset by increased salaries and benefits resulting from an increase in average headcount. Other operating expenses increased as a result of the overall growth of the Company over the past year and from increased office costs from our acquisitions.

Liquidity and Capital Resources

Uses of Liquidity, Cash and Cash Equivalents

Our significant recurring cash flow requirements consist of liquidity to (i) fund loans held for sale; (ii) fund loans held for investment under the Interim Loan Program; (iii) pay cash dividends; (iv) fund our portion of the equity necessary for the operations of the Interim Program JV, and other equity-method investments; (v) fund investments in properties to be syndicated to LIHTC investment funds that we will asset-manage; (vi) make payments related to earnouts from acquisitions, (vii) meet working capital needs to support our day-to-day operations, including debt service payments, joint venture development partnership contributions, servicing advances and payments for salaries, commissions, and income taxes, and (viii) meet working capital to satisfy collateral requirements for our Fannie Mae DUS risk-sharing obligations and to meet the operational liquidity requirements of Fannie Mae, Freddie Mac, HUD, Ginnie Mae, and our warehouse facility lenders.

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Fannie Mae has established benchmark standards for capital adequacy and reserves the right to terminate our servicing authority for all or some of the portfolio if, at any time, it determines that our financial condition is not adequate to support our obligations under the DUS agreement. We are required to maintain acceptable net worth as defined in the standards, and we satisfied the requirements as of December 31, 2022. The net worth requirement is derived primarily from unpaid balances on Fannie Mae loans and the level of risk-sharing. As of December 31, 2022, the net worth requirement was $285.6 million, and our net worth was $692.8 million, as measured at our wholly owned operating subsidiary, Walker & Dunlop, LLC. As of December 31, 2022, we were required to maintain at least $56.9 million of liquid

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assets to meet our operational liquidity requirements for Fannie Mae, Freddie Mac, HUD, Ginnie Mae and our warehouse facility lenders. As of December 31, 2022, we had operational liquidity of $170.8 million, as measured at our wholly owned operating subsidiary, Walker & Dunlop, LLC.

We paid a cash dividend of $0.60 per share each quarter of 2022, which is 20% higher than the quarterly dividend paid in each quarter of 2021. On February 20, 2023, the Company’s Board of Directors declared a dividend of $0.63 per share for the first quarter of 2023. The dividend will be paid on March 23, 2023 to all holders of record of our restricted and unrestricted common stock as of March 8, 2023.

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Over the past three years, we have returned $227.1 million to investors through the repurchase of 568 thousand shares of our common stock under share repurchase programs for a cost of $37.2 million and cash dividend payments of $189.9 million. Additionally, we have invested $648.3 million in acquisitions, $300.0 million of which was financed by an increase in our Term Loan (as defined below). On occasion, we may use cash to fully fund some loans held for investment or loans held for sale instead of using our warehouse lines. As of December 31, 2022, we did not fully fund any such loans. We continually seek opportunities to complete additional acquisitions if we believe the economics are favorable.

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In February 2022, our Board of Directors approved a stock repurchase program that permitted the repurchase of up to $75.0 million of shares of our common stock over a 12-month period beginning February 13, 2022. Through December 31, 2022 we repurchased 109 thousand shares under the 2022 stock repurchase program and had $63.9 million of remaining capacity under that program. In February 2023, our Board of Directors approved a stock repurchase program that permits the repurchase of up to $75.0 million shares of our common stock over a 12-month period beginning February 23, 2023.

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We have contractual obligations to make future cash payments on lease agreements on our various offices of $79.6 million as of December 31, 2022. NOTE 14 in the consolidated financial statements contains additional details related to future lease payments. We have contractual obligations to repay short-term and long-term debt. The total principal balance for such debt is $1.2 billion as of December 31, 2022, of which $538.1 million will be repaid with the proceeds from the sale of loans held for sale and the repayments of loans held for investment. NOTE 6 in the consolidated financial statements contains additional details related to these future debt payments. The expected interest associated with these debt payments is $52.0 million in 2023, $40.2 million in 2024, $37.9 million in 2025, $37.5 million in 2026, and $37.1 million in 2027. The interest for long-term debt is based on a variable rate. Such interest is calculated based on the effective interest rate as of December 31, 2022. The amounts above do not include any payments related to the Alliant note payable since it was repaid in January 2023.

Historically, our cash flows from operations and warehouse facilities have been sufficient to enable us to meet our short-term liquidity needs and other funding requirements. We believe that cash flows from operations will continue to be sufficient for us to meet our current obligations for the foreseeable future.

Restricted Cash and Pledged Securities

Restricted cash consists primarily of good faith deposits held on behalf of borrowers between the time we enter into a loan commitment with the borrower and the investor purchases the loan and cash held in collection accounts to be used to fund the repayment of the Alliant note payable. We are generally required to share the risk of any losses associated with loans sold under the Fannie Mae DUS program, our only off-balance sheet arrangement. We are required to secure this obligation by assigning collateral to Fannie Mae. We meet this obligation by assigning pledged securities to Fannie Mae. The amount of collateral required by Fannie Mae is a formulaic calculation at the loan level and considers the balance of the loan, the risk level of the loan, the age of the loan, and the level of risk-sharing. Fannie Mae requires collateral for Tier 2 loans of 75 basis points, which is funded over a 48-month period that begins upon delivery of the loan to Fannie Mae. Collateral held in the form of money market funds holding U.S. Treasuries is discounted 5%, and Agency MBS are discounted 4% for purposes of calculating compliance with the collateral requirements. As of December 31, 2022, we held substantially all of our restricted liquidity in Agency MBS in the aggregate amount of $142.6 million. Additionally, the majority of the loans for which we have risk-sharing are Tier 2 loans. We fund any growth in our Fannie Mae required operational liquidity and collateral requirements from our working capital.

We are in compliance with the December 31, 2022 collateral requirements as outlined above. As of December 31, 2022, reserve requirements for the December 31, 2022 DUS loan portfolio will require us to fund $79.6 million in additional restricted liquidity over the next 48 months, assuming no further principal paydowns, prepayments, or defaults within our at-risk portfolio. Fannie Mae has assessed the DUS Capital Standards in the past and may make changes to these standards in the future. We generate sufficient cash flows from our operations to meet these capital standards and do not expect any future changes to have a material impact on our future operations; however, any future changes to collateral requirements may adversely impact our available cash.

Under the provisions of the DUS agreement, we must also maintain a certain level of liquid assets referred to as the operational and unrestricted portions of the required reserves each year. We satisfied these requirements as of December 31, 2022.

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Sources of Liquidity: Warehouse Facilities and Notes Payable

Warehouse Facilities

We utilize a combination of warehouse facilities and notes payable to provide funding for our operations. We utilize warehouse facilities to fund our Agency Lending, Interim Loan Program, and a small portion of our LIHTC operations. Our ability to originate Agency mortgage loans and loans held for investment depends upon our ability to secure and maintain these types of financing agreements on acceptable terms.  For a detailed description of the terms of each warehouse agreement including the affirmative and negative covenants, refer to “Warehouse Facilities” in NOTE 6 of the consolidated financial statements.

Notes Payable

We have a senior secured credit agreement (the “Credit Agreement”) that provides for a $600 million term loan (the “Term Loan”) that bears interest at Adjusted Term SOFR (“SOFR”) plus 225 basis points with a floor of 50 basis points and has a stated maturity date of December 16, 2028 (or, if earlier, the date of acceleration of the Term Loan pursuant to the term of the Credit Agreement). At any time, we may also elect to request one or more incremental term loan commitments not to exceed the lesser of $230 million and 100% of trailing four-quarter Consolidated Adjusted EBITDA, provided that total indebtedness would not cause the leverage ratio to exceed 3.00 to 1.00. As of December 31, 2022, the outstanding principal balance of the Term Loan was $594.0 million, and the effective interest rate was 6.55%. The note payable and the warehouse facilities are senior obligations of the Company. We were in compliance with all covenants related to the Credit Agreement.

For a detailed description of the terms of the Credit Agreement, refer to “Notes Payable – Term Loan Note Payable” in NOTE 6 of the consolidated financial statements. There have been no changes to the Credit Agreement in 2022.

We have a note payable through our wholly-owned subsidiary Alliant, which had an outstanding balance of $114.5 million as of December 31, 2022 and bore interest at a fixed rate of 4.75%. The note had a stated maturity of January 15, 2035 and required quarterly payments of principal, interest, and other required priority items shortly after the beginning of each quarter.

On January 12, 2023, we entered into a lender joinder agreement and amendment to the Credit Agreement that provided for an incremental term loan (“Incremental Term Loan”) with a principal amount of $200.0 million, and modified the ratio thresholds related to mandatory prepayments, and allow for incurrence of additional types of indebtedness. The Incremental Term Loan was issued at a 2.0% discount and contains similar repayment terms as the Term Loan. We used approximately $115.9 million of the proceeds to fully pay off the Alliant note payable, accrued interest, and other related fees.

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Credit Quality and Allowance for Risk-Sharing Obligations

The following table sets forth certain information useful in evaluating our credit performance.

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For example, a $15 million loan with 50% risk-sharing has the same potential risk exposure as a $7.5 million loan with full DUS risk sharing. Accordingly, if the $15 million loan with 50% risk-sharing were to default, we would view the overall loss as a percentage of the at-risk balance, or $7.5 million, to ensure comparability between all risk-sharing obligations. To date, substantially all of the risk-sharing obligations that we have settled have been from full risk-sharing loans.

Fannie Mae DUS risk-sharing obligations are based on a tiered formula and represent substantially all of our risk-sharing activities. The risk-sharing tiers and the amount of the risk-sharing obligations we absorb under full risk-sharing are provided below. Except as described in the following paragraph, the maximum amount of risk-sharing obligations we absorb at the time of default is generally 20% of the origination unpaid principal balance (“UPB”) of the loan.

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Fannie Mae can double or triple our risk-sharing obligation if the loan does not meet specific underwriting criteria or if a loan defaults within 12 months of its sale to Fannie Mae. We may request modified risk-sharing at the time of origination, which reduces our potential risk-sharing obligation from the levels described above.

We use several techniques to manage our risk exposure under the Fannie Mae DUS risk-sharing program. These techniques include maintaining a strong underwriting and approval process, evaluating and modifying our underwriting criteria given the underlying multifamily housing market fundamentals, limiting our geographic market and borrower exposures, and electing the modified risk-sharing option under the Fannie Mae DUS program.

The “Business” section of “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains a discussion of the risk-sharing caps we have with Fannie Mae.

We regularly monitor the credit quality of all loans for which we have a risk-sharing obligation. Loans with indicators of underperforming credit are placed on a watch list, assigned a numerical risk rating based on our assessment of the relative credit weakness, and subjected to additional evaluation or loss mitigation. Indicators of underperforming credit include poor financial performance, poor physical condition, poor management, and delinquency. A specific reserve is recorded when it is probable that a risk-sharing loan will foreclose or has foreclosed, and a reserve for estimated credit losses and a guaranty obligation are recorded for all other risk-sharing loans.

The calculated CECL reserve for the Company’s $54.0 billion at-risk Fannie Mae servicing portfolio as of December 31, 2022 was $39.7 million compared to $52.3 million as of December 31, 2021. The decrease in the CECL reserve was principally related to a reduction in our historical loss factor and the forecast-period loss rate used for the year ended December 31, 2022.

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As of December 31, 2022, two at-risk loans with an aggregate UPB of $37.0 million were in default compared to three loans with an aggregate UPB of $78.7 million as of December 31, 2021. The collateral-based reserve on defaulted loans was $4.4 million and $10.3 million as of December 31, 2022 and December 31, 2021, respectively. We had a benefit for risk-sharing obligations of $13.9 million and $12.7 million for the years ended December 31, 2022 and 2021, respectively.

For the ten-year period from January 1, 2013 through December 31, 2022, we recognized net write-offs of risk-sharing obligations of $22.0 million, or an average of less than two basis points annually of the average at risk Fannie Mae portfolio balance.

We have never been required to repurchase a loan.

New/Recent Accounting Pronouncements

NOTE 2 in the consolidated financial statements in Item 15 of Part IV in this Annual Report on Form 10-K contains a description of the accounting pronouncements that the Financial Accounting Standards Board has issued and that have the potential to impact us but have not yet been adopted by us. There were no other accounting pronouncements issued during 2022 that have the potential to impact our consolidated financial statements.