Q4 2020 Walker & Dunlop Inc Earnings Call
And combined with the what drives you advertising campaign thought leadership pieces and PR Outreach has propelled The Walker & Dunlop brand across every channel.
Our website traffic grew by 80% in 2020 our email list grew by over 500% and our PR media kits grew by over 400% last year wage loading an upswing in top-tier and broadcast media compared to last year. We are reaching an audience that is 8 times larger overall bolstering. Our brand is the Premier Commercial State finance company in the United States.
Finally our investments in actionable technology came to life in 2020. We began investing in databases several years ago been acquired a know do early in 2019 to apply machine learning to those databases and then we turn that data over to our bankers and Brokers and the results with regard to new clients and new transactions to Walker & Dunlop has been a truly amazing while many of our competitor firms were refinancing their own loan portfolios as interest rates dropped at the onset of the pandemic 66% off twenty-twenty refinancing volume was new loans to walk her and um up 66% and while technology and talented bankers and Brokers generated that growth with existing clients thought it was the combination of great bankers and Brokers technology and are expanding brand that allowed us to have 23% of our total transaction volume in 2020 be with dead.
Clients to Walker & Dunlop who had never worked with us before those are pretty astounding numbers during the year when face-to-face meetings and the traditional sales Channel and processes did not exist. That is the power of our people brand and technology and it sets us up exceedingly. Well for continued growth for many years to come I'm going to turn the call over to Steve to discuss our life for an annual financial performance in more detail and then I'll come back to discuss our drive to 25 and what investors should expect to see over the coming years Steve Jobs and good morning everyone. We ended 2020 with fantastic fourth quarter Financial results, including record total transaction volume of 14.2 billion dollars up 45% year-over-year and record earnings of $2.59 per share up an astounding 93% over Q4 2019.
I thought you were transaction volume of 41.1 billion dollars is 29% higher than 2019 while record full-year earnings per share of $7.65 increased 41% over the prior-year the fact that these incredible results came in the midst of a pandemic are a true Testament to the resiliency of our business model and the hard work dedication of our team are strong performance in the quarter and year shine through in our key metrics.
Operating margin in Q4 with 34% well above our target range of 27 to 30% leading to full-year operating margin of 30% for 2020.
return
Not Equity was 29% for the quarter and 23% for the full year Well above our annual goal of 18 to 20%
Personnel expense for the quarter was 45% of Revenue in line with Q4 of last year and was 43% for the full year just slightly higher than $2,019 42% due to growth in commission and bonus expense resulting from our phenomenal performance in 2020.
Total transaction volume for the quarter included two point eight billion dollars of property sales volume a 44% increase over last year and a quarterly record. This pickup has no turbo given the challenging market dynamics that this part of our business based in 2020 when the impacts of the pandemic cause buyers and sellers to accept the market for several months.
Record volume in the quarter is indicative of a return to a robust multi-family Acquisitions Market that has moved past the market disruption that began in mid-march, the attractiveness of multifamily assets will continue to drive investment into space and we expect to see a very healthy market and strong growth and multi-family property sales volume in 2021.
Fourth-quarter debt financing volume was led by agency financing including a record quarter of $844 of lending with hide that brokerage volume totaled three point eight billion dollars down through Thursday from 2 to 4:19, but up significantly from the second and third quarters of 2020. This is another notable pick up in an area of our business was very challenged for the better part of the year. We expect that brokerage business will continue to gain momentum as we move into 2021 and are excited for what our team can accomplish
Based on the strength of our debt financing volume in 2020, we grew our servicing portfolio by nearly $14 or 15% to 107 billion. As of December thirty. First name is the portfolios continue to grow the contractual cash servicing fees have grown along with it to 236 million in 2020 up 10% from 2019 month that growth rate accelerated is the year went on the q40 servicing fees increasing by 15% over last year to $63 for the quarter just acceleration was due in part volumes in the second half of the year, but it's primarily the result of a sizable increase in the average servicing fee for the portfolio to twenty four basis points from 23.2 basis points off at the beginning of the year.
This increases significant when you consider the overall size of our portfolio and is worth more than 8 and 1/2 million dollars of additional annual cash revenue on a portfolio of a hundred seven billion dollars on a combination of strong growth in both the portfolio and the weighted average servicing fee sets the stage for Accelerated cash servicing be growth in 20 21 in addition the mortgage servicing, but it's related to the portfolio now have a fair value of over 1 billion dollars reflective of the significant future cash flow streams. We will receive from the portfolio Beyond just the next year.
I also want to mention one other item.
Did you are servicing operation during the fourth quarter, we made the decision to remain with our existing servicing technology vendor consequently, we ended our plan conversion to a new servicing system resulting in the 5.8 million dollar charge to extent that we took during the quarter related to the right off of previously capitalized software costs and determination payment on the contract. You do not want to incur any additional costs associated with that contract going forward.
During the fourth quarter, we recorded additional provision for credit losses of 5 and 1/2 million dollars just more than half of that expense was driven by the strong growth in the at risk portfolio during the quarter off other half relates to an increase in the specific reserves associated with the two student housing loans. It defaulted in 2019 and our one interim loan that also defaulted in 2019.
We delivered record earnings in a year in which we have taken provision expense of $37 30 million more than in all of 2019.
We've always prided ourselves in our exceptional and relatively conservative credit culture in the overall performance of our portfolio and twenty20 with limited forbearance requests and no new defaults in our at risk report folios has been fantastic. However, COVID-19 to significant uncertainty with respect to its impact on future employment levels and overall economic performance as a result We Don't Belong any downward adjustment to our overall Reserve balance inappropriate at this time.
2020 adjusted ebitda of 215.8 million dollars was down 13% from 2019 primarily. Do you do a significant year over decrease in escrow range resulting from historically low interest rates during the year.
2020s low interest rate environment reduced our annual earnings to $18 compared to $57 in 2019.
As a reminder, we currently hold escrow deposit some loans. Are we serviced with an average balance of 2.8 billion dollars and we aren't interested in, tied to short-term rates on those deposits. Every twenty-five basis point increase in the deposit rate translates into approximately seven million dollars of additional pre-tax earnings per year.
We ended the year with 321 million of cash on the balance sheet the shareholders in Walker & Dunlop know we will continue to prioritize reinvest in our Capital into the business to drive future growth opportunities. As long as you will here shortly when Willie lays out, I drive to twenty-five objective maintaining our grocery directory and achieving these ambitious calls will require Investments and bankers and Brokers new business are young and Technology we feel that we are in a very strong financial position that will allow us to continue deploying Capital into our growth initiatives while also returning Capital to shareholders money to that end our board of directors voted yesterday to increase our quarterly dividend payment to fifty cents per share a 39% increase
This is our third annual increase since we initiated.
The dividend in February of 2018 at 25 cents per share.
This results in a cumulative increase of 100% since we started the dividend. This is a strong growth rate that reflects our fantastic financial performance during that period the current annualized dividend a $2 represents a payout ratio 26% on 2029 income and 29% on twenty-twenty adjusted ebitda a level that we feel is appropriate given our expectation for continued growth in earnings and strong cash flow going forward. Finally our board authorized a share repurchase plan in the amount of $75 to be executed over the next twelve months giving us the ability to continue opportunistically buying back our stock.
We feel very well positioned to keep growing our business in 2021 by continuing to hire great people leveraging our unique brand and making additional investments in technology and we've established ambitious Financial Target of the Year. We're again targeting double-digit growth in both earnings per share and adjusted ebitda in 2021. So we did not grow adjusted ebitda at this rate in 2020 the increase in our servicing portfolio and every servicing fee during 2020 and our expectations for stronger that brokerage and property sales volumes and 21 should positively impact Eva.
And while we believe the FED is likely to keep short-term interest rates low for the foreseeable future if there is any increase in short-term rates are adjusted ebitda will benefit from The increased interest. We would earn from our escrow deposit song.
We're raising our operating margin target range 229 to 32% for twenty Twenty-One and I'll return on Equity range 219 to 22% for the year during 2020. We saw operating margin expansion their business as we realize the economies of scale and continue to closely manage our people and expenses. Even while some parts of our business were not operating at full efficiency as a result raised the range for both metrics due to our expectations for continued growth and transaction volumes and particularly a return to normalcy in both dead brokerage and investment sales in 2021.
With respect to the first quarter of 2021. Remember the last year included two point 1 billion dollars of the Southern Management transaction absent that our pipeline compares favorably to Q one of 20 20 off the expected size of the market this year has this poised for another year of growth in financial success in 2021.
I'm extremely pleased with our financial performance this year and our team's ability to come together during a difficult year to generate incredible results, and I want to thank all of my colleagues for all you did to make this year's. We are moving into 2021 with a renewed sense of energy and purpose as we drive towards our next five year Financial targets. I'm not going to turn the call back over to willing to discuss these goals and long-term. Thank you, Steve.
We entered 2021 with strong momentum and confidence in our ability to deliver the ambitious Financial targets that Steve just ran through.
The family is continued to outperform other commercial real estate asset classes in the pandemic and during this economic cycle Americans feel more tied to their homes today than ever before and renters have gone to Great Lengths to continue making their rent payments and preserving their homes on a recent Walker webcast. Dr. Peter. Linneman. When asked where he would invest a hundred million dollars today said it's a golden age birth family.
And while Walker dunlop's Market position and multi-family financing and sales is extremely strong. We also finance places where people work shop and play when Owen Thomas C E. Boston properties was on the Walker webcast in December. He was quite bullish that people will begin returning to the to the office in Q2 of 2021 and the well work from home will impact work schedules. It will not do away with the need for office space. Stephanie linnartz group president of married International was on the Walker webcast in mid January and commented that hotel occupancy e2020 around 47% And that while the annual projection for 2021 is in line with twenty-twenty around 50% Leave your travel could snap back quickly once herd immunity is talked to be achieved. I would add that. We believe work travel will snap back much quicker than currently anticipated.
And just last week we had John furner president and CEO of Walmart us on the Walker webcast to discuss the retail market and while Walmart is working hard to compete with Amazon and online retail John underscored the fact that in Q2 of 2020 at the height of the pandemic shut down only 16% of total us retail sales were online and that 84% of sales reps still ran through brick-and-mortar stores online is growing fast, but the future of retail is clearly multi-channel not simply online.
As all of these commercial asset classes evolve and recover from the pandemic Walker & Dunlop bankers and Brokers will be there to assist owners and implementing the proper financing strategy.
We established the mission to become the Premier Commercial Real Estate Finance Company in the United States when we went public in 2010 with less than a hundred million dollars in revenues and a market capitalization of $200,000 million dollars ten years later later. We have revenues of over 1 billion dollars a market cap close to three billion dollars and yet the mission Remains the Same we are just off of a lot closer to achieving it.
We rolled out to wnd employees and investors in early December our next five year strategic plan titled the drive to twenty-five the components of the drive to 25,000 revenues to two billion dollars by expanding our annual debt financing volumes to $65 billion dollars go our servicing portfolio to over $160 gross annual product sales volume to $25 billion dollars grow our fund management business to over $10 billion dollars in assets under management and the continued development of three new growth businesses small blending our appraisal business surprise and investment banking.
and while
Publishing these highly ambitious business goals. We will continue to be a leader with our environmental social which includes a heavy emphasis on gender and racial diversity and inclusion and Gunther's efforts in order to achieve these goals. We will continue to bring on the very best people to our platform further expand our brand and invest in Innovative technology. That would make us more insightful and more efficient for our customers.
To achieve $65 billion dollars in annual debt financing. We will first become the largest multifamily lender in the country are $35 billion dollars of debt financing in 2020 included twenty four billion dollars of direct multifamily lending as shown on this slide in 2019. We held the number five spot in the multifamily lender rankings with sixteen point seven billion dollars as you can see our twenty-twenty volume of 24 billion. Would Advance us to the number one spot if the other lenders Stood Still or move back in their lending volumes during the year off the Mortgage Bankers Association rankings will be released in the next few weeks, but we do know from the release of the Fannie Mae and Freddie Mac league tables last week that we have jumped ahead of Arcadia and Wells Fargo bank and we'll wait to see what CBRE and JPMorgan did outside of the gses to see if we are number one number two or number three
Weather wherever we end up in the multifamily rankings for 2020 like all goals. We establish a wnd we remain focused on advancing to the number one position in the market.
We will also continue to grow our debt brokerage platform that provides financing on all commercial property types using capital from Banks life insurance companies cmbs conduits and debt funds long as you just heard from Steve, we expect strong contributions from this area of our business in 2021 as the market recovers.
Or Twenty twenty-five property sales goal of $25 billion dollars is very ambitious, but given the best-in-class platform. We have established over the past five years. We are very excited about the growth potential in this line of business. There are geographies such as Phoenix Denver and Seattle where we need to add the very best multi-family property brokers available as well as Specialty Products such as like the housing affordable housing and built for rent properties that will complete our national footprint and add significant volume. We have seen our property sales and financing teams collaborate with spectacular fashion over the past several years to deliver value to our customers and revenues to Walker & Dunlop and we expect to see this collaboration continue to grow over the coming years as volumes on both platforms expand dramatically.
Finally our brand is expanded and our customer relationships have deepened. Our clients have begun seeking new services that are complementary to our established commercial real estate finance and property sales capabilities to meet this demand. We plan to build out Investment Banking capabilities that will allow us.
help
Our clients value their platforms raise more complex actually Capital Solutions provide detailed market research or raise Equity that can be invested in their developments part of our investment Bank strategy will involve continuing to grow our asset management business Walker & Dunlop Investment Partners to $10 in AUM by 2025 our investment banking services and faith in our fund management business will provide us with both the expertise and access to Capital to meet virtually. Any request that comes our way making us a more valuable partner to our existing customer base wage attracting new clients along the way.
If we achieve the component parts of the drive to $25 over the next five years, we will grow revenues to $2 and diluted earnings per share from $13 to $15,000. It is incredibly exciting for me having worked with our team over fifteen years to establish three incredibly ambitious five-year growth plans that we all achieved to reset our sights on a new set of objectives that our team is already pursuing as I have said before history will not repeat itself, but with regard to Walker & Dunlop, achieving long-term business and financial goals, it usually rhymes
And as we pursue these Financial targets, we will continue to focus on environmental social and governance or EST issues. We take we take extremely seriously at Walker & Dunlop home and have invested for many years to be a leader in this space on environmental issues. We have been carbon-neutral for the past four years and have established concrete corporate goals to materially reduce our carbon emissions by 2025 on social we have an extremely diverse employee base have recruited from historically black colleges for many years and have established extremely ambitious agenda find diversity and equality goals for women and minority representation in both management and top wage earner positions by Twenty twenty-five, and we have tied those going to our senior Executives long-term compensation.
And finally, our governance has been exemplary. We have a very diverse board. It is provided consistent and exceptional governance over Walker & Dunlop since the company went public in two thousand and ten thousand have received the National Association of corporate directors highest-ranking with regard to board performance. We will remain extremely focused on our initiatives over the next five years Incorporated quantitative metrics surrounding ESG objectives that we plan to achieve as part of the drive to 25.
As we move into 2021 we feel very well positioned to continue growing and building out our platform to deliver double-digit growth in EPS. Once again, we remain focused on Highway top bankers and Brokers to the platform and expanding our client base as we were so successful in doing in 2020. We have every intention of maintaining our leadership position with the gses and our faith in that given the current low-interest-rate environment and attractiveness of multi-family. We will have another successful year of multifamily lending as the multi-family Acquisitions Market continues to recover wage and more and more Capital enters the space. We expect a previous investments in our property sales platform will drive significant volume growth in that business in the coming year.
and as other assets
Classes begin to rebound there will be a need for Capital to office retail and Hospitality properties and our debt brokerage platform will step up and meet the needs of our clients in these markets. I'm finally we will be investing heavily in our emerging businesses like our appraisal platform and small business lending that would be powered by technology and should become larger contributors to our top and bottom line over time. All of this should make investors in Walker & Dunlop very excited for the next year and our past two twenty twenty-five.
Before we conclude the call. I'd like to offer my sincerest gratitude to my 1000 colleagues at Walker & Dunlop for making 20/20 the incredibly successful year that it was dead are still in the midst of a pandemic family and friends still run the risk of suffering from this deadly virus and many people have been isolated from months Yearning For Life to return to something close to normal and yet we forward your head always focused on our customer and providing the best very best service possible. Thank you and may twenty Twenty-One provide all of us with hope and enjoy life things return to something much closer to the world. We once knew
Many thanks to the analysts investors clients and partners who joined us for this earnings call. I guess next week on The Walker webcast or Michael Bush from the great places to work Institute, and I think is from McKenzie to discuss what makes great companies great. I hope many of you will join us for what should be a very insightful discussion on that. Ask the operator open the line for questions. Thank you.
Floor is now open for questions this time. If you're on your phone and have a question, please press star nine or if you're on your computer, please click the raised hand icon at the bottom of your web cast screen.
Our first question comes from Jade rahmani at KBW.
Can't hear you yet.
Sorry, can you hear me now? Yes, we can. Okay. Thank you very much. What an interesting year twenty-twenty was and successful year for a walk or done that may be proving out the strength of the company's platform at this point on our estimates for the company's cash earnings and Apples to Apples the dialogue with some of the Serie brokerage firms We compare the company to We Believe Walker Dunlop is trading at a premium to its peers. So I was wondering will if you could provide any thoughts as to what this currency presents any interesting m&a opportunities or you know, given the spotty track record that we've seen in the Serie brokered space with respect to Eminem, whether you think investing in in internal growth opportunities strategic initiatives and other internal Walker & Dunlop capabilities is more of a priority.
So thanks for joining us this morning Jade. I would say given our
Growth rates which I ran through and quite some detail that for your used premium. Ugh multiple is very much warranted. I would say in comparison to the S&P Financial 500 which we are part of we're still trading it quite a significant discount too many of the financial services institutions in that index and our growth rates are wildly greater than the index average. So I would say we still have plenty of multiple expansion to come our way given how well we have performed the second part to your question is would we use our stock as currency in a in an m&a transaction. Look we'll use debt will use cash and we'll use equity to the to the degree that we need to depending on what the acquisition looks like and how big it is. That's what I would say to you is that we have watched competitor after competitor.
Come into this space try and bring together invest in sales and banking Investment Banking big banks with big balance sheets big brokerage firms with big brokerage volumes and walk seen as we've just continued to grow faster than all of them and many many of them had much much bigger Brands than worker in Dunlop did when we started this charge towards trying to get to the top of the league tables and then solidify our position as one of the very largest multifamily lenders in the country and as the slide that I showed showed we ended last year at number five. We may be number one. Maybe number two or maybe number three, but we're right up there with the biggest branch in the world in this line of business. So I think at the end of the day we feel great about where things are, but I would also reiterate the point that our growth numbers are outstanding and we will continue to drive growth that w&d to outperform and carry a multiple that is very much higher than the competition.
And and well, if you don't mind I'll jump in. The other thing. I would say is, you know, given the cash balances that we're tearing as you would expect, you know our biases going to be to use cash from an acquisition perspective as we have done, you know over the last many years and you know, where we use stock. It's 2 to drive alignment off with the the acquired company as opposed to because we need these stock to do the transactions.
Thank you very much. Jst volumes totaled close to $160 billion in 2020, which was up 7% But this did include the first quarter or third quarters, which declined on a year-over-year basis by Twenty 30% and then grow search by over 70% in the fourth quarter for Fannie Mae and Freddie Mac as a capital overall. What would you expect for 20 21, you did mention you expect property sales investment sales for 4WD to be up meaningfully. You mentioned that brokerage volume, which is non would be up meaningfully. What do you think the volumes 4WD will be up for twenty twenty one point. So as long as we came in number one with Fannie Mae by a very wide margin almost doubled the volume of the number to lender and we came in number four with Freddie Mac on a combined basis. We were the second
and largest lender with both fans
And Friday, we have firmly entrenched ourselves at the top of the league tables. Um, as we we came in four hundred million dollars behind CBRE CBRE did twenty billion wage 19.6 billion quite honestly, when I started in this business the idea that we would be four hundred million dollars behind CBRE in aggregate agency lending was little more than a dream. And so I don't I don't have a number for you Jade. What we do know is that we have a reputation and brand in this space as one of the very very bad if not the best agency lender in the country. And so as a result of that will continue to ride that brand and we will continue to meet our clients expectations as you well know the agencies have plenty of capital in 2021, and we feel very very good that not only with agency Capital but with HUD Capital with capital markets capital from cmbs and Banks and life insurance companies with cap off.
From our joint venture with Blackstone with capital from our balance sheet and from capital from third parties that we have raised at Walker no mop Investment Partners. We have all the capital. We need to meet pretty much any requirement that a multi-family borrow might have
and would you say as investors think about modeling coming earnings for the company as as we as analysts do do so as well. Should we be thinking about grown now accelerating and in the other business lines in The Brokerage business and investment sales some of these new initiatives Investment Banking single-family rental, which I believe you announced initiative in Bill to rent and and model the GS see volumes to be flattish may be some growth and Freddie Mac. Um, how do you think we should be thinking about that trajectory?
So I would say a couple of things. First of all our growth is outpaced you're asking for my analyst position. Our growth is outpaced our analysts expectations for years. So I don't really know how to respond to your question specifically because analysts have thought that we would grow slower than we have and we've grown significantly faster. The second thing is our birth and people and technology is a flywheel right now. We're seeing that accelerate we're seeing our growth. We we put up numbers today in the not only the financial performance but in the back of our brand and then the investments in technology that have eroded resulted in new clients to Walker & Dunlop and new loans to Walker & Dunlop that is unprecedented. So, yeah, I think the point that you're asking should we be thinking that Walker knob continues to grow Steve put up a slide Jade the talk through what we're expecting is it relates to ebitda growth EPS growth operation.
margin growth we took all of the metrics up as it relates to r o e and operating margins, so I'm not sure what more you or other analysts need to know as far as our outlooks other than our
A reiteration of double-digit growth in EPs and earnings and a rising in our operating metrics as it relates to operating margin and return on equity.
Okay, I guess I will get back in the queue just to make time for other folks to ask questions, but thanks so much. I really appreciate it. Thank you.
Thank you, Jay. Our next question comes from Henry coffee with wedbush.
Henry I think you're still in there you are. I know you're still on mute Henry I can see you're on the webcast, but you're muted right now because that that's it. You're all congratulations. What year great results?
Just the just an amazing transformation both in terms of earnings and culture and stock price and spend an amazing year, We look outside of the GSE core of you've got a whole bunch of businesses that are going to probably add to your diversity and add to the month durable side of some of these assets. Can you talk about things like expected growth in in the investment business the servicing platform the ability Hap's to expand this the servicing business, you know beyond what you do with the gse's those those more or less.
I guess I want to know what I'm talking about is the less transactional side of the business and I know that's been an important area of growth. But you know, can you kind of add some commentary there for us? But let me start and I'll turn it over to Steve in a second as it relates to the transactions out of the business. Cuz those first couple of questions were focused on that. Look Chris michelsen who runs our investment sales platform has done just a spectacular job of dealing that platform bringing on the very very best multifamily investment sales professionals and Craig Engler who's company we acquired back in 2015 has been a component part of all of that success and I'm deeply thankful to both of them and the way they built that platform the quality of people they brought on a loud as you saw Thursday, we ran through the growth numbers the business that grew the fastest over the last five years was that line of business from the second thing is on our deck brokerage business. Steve talked about it. I underscored it. You have to remember
The q1 of 2020 was our best Capital markets quarter ever and that's because we had not only expanded the platform across the country, but we brought across an exception in New York that really brought a huge amount of additional volume to us in q1 the market basically shut down in that line of businesses life insurance companies and cmbs and Banks whole back in Q2. They started to work back into the market in Q3 and we started to see something normalizing in Q4, but as Steve said we have great expectations that that line of business with the team that we have on the field will be able to grow dramatically in the coming years. And then as it relates to the size and scale of the servicing portfolio and our escrow earnings, I think I ran through that pretty clearly we don't service loans for third parties, but we have an incredible platform that could do that if we wanted to but all the all the collateral in that Services portfolio our loans that wage
ah pizz originated and then it's
Steve also pointed out escrow earnings were down very significantly in 2020 and as interest rates moved back up at some time. We will pick up the benefit of those escrow earnings coming into I'm Steve you want to talk about anything else from kind of non-transaction income. Yeah. I was going to just mention Henry. So whether it's not transaction or or otherwise, you know, the the businesses that were developing investing in growing right now such as a prize which is our appraisal joint venture in our small balance funding businesses wages are you know, very important to our five year growth plan. I wouldn't say they're you know critical to the the one year growth plan in 2021. But you know, we are both acting to make progress in you all of those areas and start to build those to the point where you know, by the time we, you know roll around to twenty twenty-five, they're more meaningful parts of our business.
And then government policy.
Thoughts about how much changes with the Biden Administration and how much stays the same? Oh.
So first of all, I think that I was a fan of Treasury secretary mnuchin. I thought he did an exceptional job with a very very difficult off hand. If you will particularly during the pandemic and I thought that he in and fed chairman Powell did a fantastic job at the onset of the pandemic to put liquidity into the market. I'm happy to see Janet Yellen and her position at Treasury and she obviously has very significant influence over housing policy broadly the gses more specifically off and what we will wait to see Henry is what happens with the Supreme Court case on the fhfa director and whether the fhfa director has a five-year tenure to be removed by cause or whether the fhfa director is at the pleasure of the president and if the Supreme Court rules on that as they did on the cfpb director, it would be our assumption.
That there's a new fhfa direct or sometime during 2021 and what he or she decides to do with. Fhfa we shall see but that's about as far as I want to get out there right now. It's it's nice quite honestly to see the discussions going on on Capitol Hill about the stimulus bill and I will tell you I'm very very surprised portfolio was held up the strongest it has during the pandemic given the lack of a of stimulus into the market since August of last year and am Steve went through and our credit stats, you know, we are back to 6.9% unemployment in America, which many people challenge saying they're four million workers furloughed their people exited the workforce and the 6 9 is not an actual number. It's actually higher than that, but I remind people often that Barack Obama was re-elected president United States in 2012 with 7.9% on home.
and at that time
And we weren't looking for stimulus bills at that time. The economy was actually functioning quite well many people would have criticized it not growing fast enough, but the bottom line is we weren't looking for trillion dollar stimulus bills back in 2012 when we had one percentage Point higher and unemployment the United States that statement is not to say that people aren't suffering that statement is not to say that a stimulus Bill isn't needed and I would say that if a stimulus bill is passed and direct box go out to American that will only help rent rolls across the country and make it so that we get through this pandemic in the similar State shape that we are in today.
Great. Thank you very much. And congratulations on an amazing year. Thank you Henry. Thanks for all your Insight Henry.
The next question will come from Steve Delaney at J&P. Good morning. Everyone and Willy, it's been said by Jaden Henry, but I must also extend my congratulations on a truly outstanding year right job first on the Caps, you know, fhfa came out I think November 17th, then clarified 70 billion month and then a couple of weeks ago. I think well before mnuchin left there was a change to the PSP agreements and Kelsey. Let us know that there was oil change indicated that the cat maybe eighty billion. Can you just give us Clarity on what is in effect today? And what else might need to happen for the eighty billion to become the actual phone number? Thank you. Yes. So here's what I know from discussions to The Mortgage Bankers Association and the National multifamily Housing Council have had with fhfa the adjustment to the dog.
S p a was to establish a limit on her GSE lending on multifamily and you know twelve month. And so that $80 billion is essentially a cap that says that they can expand out Beyond eighty billion and then they reiterated it for 2021. The Caps are at 70 billion per GSE. And so essentially what they were saying was we don't want them to expand out the fact that I would put forth to you that that is a reasonably dramatic change from The View that fhfa and the federal government large is had as it relates to the role that Canyon play in both the single family and the multi-family markets where they've always viewed the gses as counter-cyclical capital to be able to expand out in times of stress. And so I took back to my response to Henry if the Supreme Court rules that the fhfa director is at the pleasure of the president and if we have a new fhfa director in 2021 or at the end of doctor Calabria song
2023 it would be my assumption that the new fhfa director with uh a secretary Yellen, we'll sit down and look at those amendments with PSP and potentially either reverse them or men number. So we shall see on that. But for right now with seventy billion per GSE both gses have plenty of capital for 2021 sent money. Thanks for that color. Yep, you mentioned small balance in your remarks. And also in your your hand out today, you know, I'm hearing that more and more as a dead area from you as to where you can expand the w d platform now we know about that business from from other other lenders and it strikes me that you will need some new struck within w d in order to access the type of local market loan brokers who were probably wage.
between that deal with the
In Market borrower and and your balance your origination platform. You just simply kind of clarify exactly how you envision what are the pieces pieces within WD that has to be there for you to do a significant amount of small balance multifamily. Thanks sure. So I'm not going to give you the whole Playbook Steve as much as I might as much as I know you like it and I'm certain that there are other four hundred people on this call and a number of them are competitors of ours. So we're not going to give it all the way here, but I would I would say this.
If we wanted to enter the small balance lending business like many of our competitors operate in that business today, we would have already likely gone out and acquired an SPL lending platform and you know the names I don't need to mention them but there are several they're great companies and they have great businesses. So if we wanted to go about doing that business the same way they do it we would have probably just gone and bought it. We haven't and the reason we haven't is because to exactly your question. We think there's the opportunity here to use a new origination model new marketing model to gain access to clients and a new technology solution to truly change the way that sbl lending is done. And so to to to say that we are we are very much if you will in the laboratory right now and we're we're focused is not on origination platforms. That would do it the same way. We're focused on technology platforms. That would help us Revenue age.
Denies the way that we underwrite loans the way that we Market our capabilities and the way we basically step in between the current borrowers and their current condition. So I get your your off mute. And so, uh, that's the way we're thinking about doing it. And obviously as we have things to reveal as we pull that strategy together and start to implement it we will keep you updated that's helpful. And I love the forward-looking approach there. There are certainly some good case studies in the Residential Mortgage business where technology direct-to-consumer direct to local market broke or have really vaulted some companies to the you know up into the top three top-fives. It sounds like you're thinking something along those lines and look just one last quick thing. We noticed about a week ago and housingwire been an old friend of yours. I assume with friend David Brickman is dead.
Back in the multi-family game. We know that the group he's buying was probably that the shop that Todd Schuster bought six or seven years ago for a career. It looks like those dots connected on off on who the the company was. My real question is not about David or the fact that there's new management and an existing competitor, but generally Willy the multi families an amazing business. Okay, especially the agency program. Are you seeing any other signs of private-equity starting to come into the space to get behind some of these jobs are utilized licenses and and and trying to just basically to the point where people trying to come in and get the flights of the body, and that's my last question. Thank you.
so Steve
Volt David is a dear friend. I've worked with David for all Seventeen years. I've been in this industry and he is not only one of the most talented Executives. I know he's also a very very close friend and so I wish him great lock and he is a very talented CEO David has a huge lift.
And I mean a huge lift of all the places I would have liked to have seen David end up. This is a great place from a competitive standpoint because he has the challenge of pulling together to firms you mention the fact that the platform that he is now taking on from an agency standpoint is the old Schuster Aires platform. You can run through a very long list of very talented private equity and investment Banks including Aries and Guggenheim and Goldman Sachs and Credit Suisse and I can keep on going down who thought that they could enter this business and make a go of it off and all walked out by selling licenses and saying that was a lot harder than we thought it was going to be that's not to say that David and the combination of Meridian and bearings will not have long-term success, but it will take a long time for him to get that platform to any semblance of a real competitive force in the market. The second thing I would say. Is that sort of to your point dead.
You look at the competitive forces in this space and all the people who have focused on it. Cuz I just mentioned, you know, for really great investment Banks and private-equity firms. You can then go to the banks take a look at what happened to Wells Fargo in their agency lending business in 2020. They fell from number to number seven in the Fannie Mae League tables and I think they fell from number three to number eight with Freddie Mac take a look at the combination of BB&T, which was grandbridge and Sun Trust many people said, oh they're going to use the balance sheet. They're going to get really really competitive there I too I do not think the truest was in the top ten with either Fannie or Freddie in 2020. Take a look at cap one take a look at new Mark taking a r a and Berkeley point in bringing those two together and talking about how the combination of investment sales and banking was going to launch them. But the talk of the league tables.
None of that's happened.
So what I would say to you is it's always a competitive market and we go every single day and compete with some of the largest and most sophisticated and most talented bankers and Brokers on other platforms that wage and at the same time when I hear about a great private Equity Firm of Stone Point coming together with a great CEO of David Brickman on a platform of Meridian and bearings. I say with great people. Good luck.
That's great color. Thanks so much. Will it got lucky to play 21. Thank you. We now have a follow-up question from J Romani.
Thank you very much. Wanted to ask if you other questions. I think you mentioned that credit performance in the multifamily see multifamily servicing portfolio was tracking a lot better than what you would have expected and Freddie Mac puts out this nice forbearance report in which they show that about seven point six billion of loans about twelve hundred loans as of December 28th, totaling 2.8% of securitized upb and about 5% of loan popular package and was informed parents looking at WDS results, you know, it's clear that the credit and the at-risk servicing portfolio, which is the Fannie Mae portfolio is I think Deep Off loans are you know, one 1% something like that? So it seems that Fannie Mae's credit performance as indicated by by at least WDS portfolio birth
is outperforming
Freddie Mac and I was wondering if you have a view as to why that is.
So I would I would I would say one one key issue there. Jade is small balance and Freddy has been a large or small balance lender then Fannie Mae over the past several years and I do believe that the uh, a disproportionate number of those forbearance requests have been on small loans off, but I would also say that if you look at Arbors latest credits that they haven't published their queue for numbers yet. So I haven't looked at them but through Q3 a firm like Arbor that has exceptional credit and and the office space has done very very well and their credits that's haven't sort of followed that Trend that you just outlined and so I would say that, you know with great underwriting like Arbor does in small balance can have a very successful sbl program, but I think the the majority of those forbearance requested your sighting in the Freddy book Jade are on properties and it makes perfect sense dead.
You don't have economies of scale there. If you've got a four-unit multi-family property and one person loses their job you're now at 75% occupancy or 25% economic base wage. And so the bottom line is FPL just doesn't have a lot of buffer as it relates to people who aren't paying their rent whereas larger properties because they can have ten twenty Thirty people do not pay their rent and still be able to make their mortgage payments. That's what you get across the broader spectrum and a follow-on question to that would be to what extent do you think that the Fannie Mae risk-sharing model which provides requires a seller service or such as Walker Dunlop to be responsible for the first up to 5% of loss versus a securitization model which could be a fund, you know, that may not have skin in the game in terms of its own Capital. It's it's outside the capital they're managing to what month.
Do you think that that structural feature has any difference on credit performance they both work and both models I think are needed when markets are perfect and pricing is extremely tight the Freddie Mac model of having a larger pool of assets to be circular ties with private Capital taking the BPS risk is a model has shown over time to be very very price effective and a very very good business model the flip side to it is that when times are bad and people want to look through to whose original own and securitizing the loan and who's holding the risk. The Fannie Mae dust model has proven to be extremely helpful and good. I'm a big believer in the originator retaining the risk on loan. No, I didn't get a lines interest exceptionally well, and as you have seen over are thirty plus years as if any made us lender, we love that business model. We like taking the risk. We like holding the risk. I'm a big dog.
fan of that, but at the same time, I would also say that it's very clear that since Freddie Mac launched the K model back in 2009 that that
Dysfunction exceptionally, well as well.
Thank you for that a couple of specific WD questions. Do you know what what producer headcount was up? I think you gave the total headcount. And you said it's Eclipse a thousand a month. And I think the average head count for the fourth quarter was $900. But do you know what the producer had count was up either in the fourth quarter or maybe where it is now on a year-over-year basis could go over the year. We added $13.
That's correct. 1313 adds to the producer ranks in 2020 Jade.
And so what's the total just still have the number correct?
Total producers 200 and what county do you don't get it too? But it's like two or three. Okay. Okay, great in terms of capital deployment priorities clearly the dividend was materially increased. You also increase the size of the stock repurchase authorization. How do you expect to prioritize Capital deployment off between the dividend between stock repurchase and setting aside some pool of capital that could be used opportunistically. Well you can you can you can do the math on the on the dividend, right? And so that you then know what's left over the buyback authorization is nothing other than authorization. And as you have seen during Walker number of History Steve has stepped into the market at very opportune time and bought back stock. And so it's nice to have that authorization don't know if we'll use it in two thousand and twenty one month.
And then we had a board meeting yesterday where our board went through a very extensive Business Development pipeline of all, the things that were focused on putting Capital into which is along the lines of everything that we underscored in the earnings am continuing to attract the very best people to walk or no mop continuing to build our brand and most importantly continue invest in technology both in our own Technology Solutions that we've developed as worth buying new technology solutions that can help catapult certain business lines forward just like I just spoke to Steve about on small loans.
thank you on the
this the decision to remain with the existing service provider and the $6 charge. I'm not really concerned about the charge but curious about what it says, you know about the company's technology efforts and you know, the the risks and benefits to moving a hundred percent in house and how you evaluated that decision. Can you can you provide any comments on that wage jumped in on that one. So I was like, I think at the end of the day what we've done was I think D risked the technology platform little bit by remaining with our existing provider and and I think it's fair to say that the existing provider since we uh-huh told them that we were planning to leave wage is invested a significant amount in their own technology platform and brought it to a a much better place than it was three years ago. And so I think oh
from our perspective
It's going to give us the the benefits that we receive being in the meantime, we have, you know brought in house most of the activities over the course of this year, which should allow us to control the cost structure much better going forward as well.
Okay, I'm somewhat surprised that there's an there's a potential Improvement in margins on the servicing business as we currently estimate that the margins there somewhere in the house. I don't know sixty to seventy percent range. So but good good to hear that you were able to get some concessions on that potential change. I had gotten a couple of questions from investors. And since this is a webinar, I think I should ask. You know one investor has asked whether you're providing any guidance as to gain on sale margins for June 2021.
We have not, you know at the end of the day for us. It's all about operating margin because that's ultimately what you know leads to the bottom line and earnings-per-share off and they on sale margin is in, you know an output of the mix of our business.
So we're not really focused on on what that is right now, but just in terms of you know, mathematically speaking if we were to model growth in brokerage an investment sales to exceed that of Fannie Mae and Freddie Mac. There should be a diminution in Game notes down mountains or mathematically speaking. That's correct. And that has had that has had zero impact on our operating margin or earnings over time. So if you go run your models Jade and go back and take a look at what it's done. The gain on sale margin moving up or down is had zero correlation to our operating margin as long as our earnings. So it's just a people can track it. You can do it as you just said it's a mathematical computation. It is not impacted water envelops earnings growth or ability to continue to expand the platform.
Okay, great. And then last question is on adjusted ebitda. So I was wondering if you expect adjusted ebitda and twenty Twenty-One to Thursday. What you generated? What w degenerated in 2019 it totaled $248 million in 2019 for full year twenty-twenty. It came in at two hundred sixteen million. You're clearly there's an increase in Personnel expense in advance of future volume growth. We realize that there was also the uh, there are some other items including the month, you know, the right off with respected servicing business, you're talking about double-digit growth in 2021. And so if we just assume the low-end 10% growth in 2021, then you would still be you know, somewhere about 5% below what you achieved in 2019 and given how bullish you are on volumes. I was wondering.
She could apply as the weather.
You expect 2021 adjusted ebitda to exceed what occurred in 2019. I would just reiterate what Steve said in our prepared comments Jade. We're looking double digit EPS growth and double-digit growth and your model will tell you what your model is going to tell you, but we're very bullish about