Q1 2025 Walker & Dunlop Inc Earnings Call
John Hulbert: [music].
Please standby.
Speaker Change: Good day and welcome to the Q1, 'twenty twenty-five Walker and Dunlop, Inc. Earnings call. Today's conference is being recorded at this time I'd like to turn the conference over to Kelsey Duffey. Please go ahead.
Kelsey Duffey: Thank you Cynthia good morning, everyone. Thank you for joining Walker and Dunlop first quarter 2025 earnings call I have with me. This morning are chairman and CEO, Willy Walker and our CFO, Greg for Turkey. This call is being webcast live on our website and a recording will be available later today.
Kelsey Duffey: Our earnings press release and website provide details on accessing the archived webcast. This morning, we posted our earnings release and presentation to the Investor Relations section of our website Www Dot Walker Dunlop dotcom.
Kelsey Duffey: <unk> serve as a reference point for some of what we'll then Greg will touch on during the call.
Kelsey Duffey: Please also note that we will reference the non-GAAP financial metrics adjusted EBITDA and adjusted core EPS. During the course of this call. Please refer to the appendix of the earnings presentation for a reconciliation of these non-GAAP financial metrics and investors are urged to carefully read the forward looking statements language in our earnings release.
Kelsey Duffey: Statements made on this call, which are not a circle back maybe deemed forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 forward looking statements describe our current expectations and actual results may differ materially Walker and Dunlop is under no obligation to update or alter our forward looking statements, whether as a result of new information future events or other.
Kelsey Duffey: And we expressly disclaim any obligation to do so more detailed information about risk factors can be found in our annual and quarterly reports filed with the SEC I'll now turn the call over to Willie.
Willie: Thank you Kelsey and good morning, everyone.
Willie: We started the year with very little carryover business from 2024 after the momentum of rate cuts last September turned into rising long term interest rates and a wait and see attitude across the industry with regard to rates the economy and the Trump administration well rates came down throughout Q1 from 4.79.
Willie: 10% on January 13th% to 4.23% on March 31st.
Willie: Until it is due to policy announcements and market reaction kept many clients in wait and see mode.
Willie: In that context, our team delivered healthy Q1 total transaction volume of $7 billion up 10% from last year.
Willie: Drove total revenue growth of 4%.
Willie: Q1 is typically our slowest quarter of the year and with the political and economic backdrop in the quarter. We were pleased with our topline growth.
Willie: GAAP EPS was only eight cents on the quarter down significantly due to personnel costs to add new talent and remove underperforming ones fees associated with the debt offering and now provides us with wonderful financial flexibility to continue investing and growing our business and.
Willie: In additions to our loan loss reserve that while costly.
Willie: Normal expenses associated with our lending business.
In 2020, we laid out an ambitious five year growth plan called the drive to 'twenty five.
Willie: Quickly acquired or invested in the human capital business lines to achieve our goals and then the great tightening began pushing up interest rates and bring them down transaction volumes dramatically.
Willie: We cut costs maintained every business line, we invested in to achieve the drive the twenty-five knowing that when the market returned both suite of services would benefit wmd's customers we.
Willie: We saw transaction volumes improve in 2024 and into the first quarter of this year and there is a growing sense that the pent up demand for financing and need to deploy recycle capital is going to push 2025 volumes higher.
Willie: There's nearly $200 billion of equity dry powder looking to invest in north American commercial real estate.
Willie: With the belief that 2025 is the strategic entry point to achieve rent growth over the coming years, particularly in the multifamily sector.
Willie: 88% of our Q1 volume was in multifamily assets.
Willie: He may originations up 67% from exceedingly slow Q1 of last year.
Willie: Sales volume was also up 58% from a slow start last year.
Willie: The strength of the W brand as well as the beginnings of the next investment cycle.
Willie: As you can see in the bottom right of slide four well nowhere close to the sales volume, we saw coming out of the pandemic.
Willie: Multifamily investment sales volume over the past three quarters has been in line if not a little above pre pandemic volume from 2015 to 2020.
Willie: There is clearly changing sentiment in the multifamily sector with a significant desire to buy today.
Willie: Slide five clearly shows it.
Willie: If you recall the massive spike in sales volume just after the pandemic.
Willie: Look where investor sentiment was during that period solidly in the cell count because they saw fantastic rent growth and low cap rates to sell properties into.
Willie: So what will drive rent growth and cap rate compression to increase their desire to sell and create a more active acquisition market.
Willie: As you can see on slide six 2024 had historically high deliveries of multifamily units across the country.
Like 2022, and 2023, when the deliveries were met with tepid demand and negative absorption.
Willie: 2024 had positive absorption on record supply.
Willie: This glut of capacity is about to disappear, particularly if demand stays strong.
Willie: The record supply of multifamily units in 2024 was due to what you see on slide seven.
Willie: With construction starts hitting record levels in 2022 and peak deliveries hitting the market in 2024.
Willie: But as this slide clearly shows construction starts have plummeted over the past two years, which will make the upper blue line showing deliveries begin falling in 2025.
Willie: Under supplied market in 2026 and 2027.
Willie: The only way in under supply multifamily market doesn't turn into significant rent growth per apartment building owners in 2026, and 2027 is it single family housing presenting an abundant and affordable alternative which seems unlikely.
Willie: Slide eight is a clear presentation why single family housing has become so on affordable and therefore unlikely to compete with multifamily. Please.
Willie: Please look at the bottom left side of this graph.
Willie: Five years ago in February of 2020, the median priced home in America costs $285000.
Willie: If you follow the bar chart to the right in February of 2025, the median priced home costs $385000 $100000 more than it did in 2020.
Willie: Now I'll go back to the February 2020.
Willie: Right.
Willie: And look at the light Blue line.
Willie: It shows the average principal and interest cost of a mortgage on that 285000 dollar home and as you see it's below the Brown line showing the median cost of rented to the tune of 250 to $300 cheaper to service your mortgage versus pay rent on a monthly basis.
Willie: But now go back up to the upper right hand side look at the monthly cost of service your mortgage on the 385000 dollar home versus pay the median rent.
Willie: Upside down to the tune of $450 a month.
Willie: This data is why transaction volumes are increasing in the multifamily sector.
Willie: And as rents improve and rates hopefully stabilize or come down further the refinancing market will pick up.
Willie: We were discussing this data with our multifamily clients every day and they can very clearly see the coming opportunity.
Willie: They also see the headwinds to construction, both single family and multifamily due to existing and potentially higher tariffs, making only existing assets even more attractive.
Willie: Our debt brokerage team had a slow Q1 of $2 $6 billion of volume compared to $3 $3 billion in Q1 of 'twenty four.
Willie: The volume decline was primarily a timing issue as a meaningful portion of our pipeline was pushed into the second quarter.
Willie: Private capital providers are becoming more active with Q1 being the highest see MBS origination quarter since prior to the great financial crisis.
Willie: Brokerage team is very focused on growing volumes over the remainder of the year.
Willie: We have a deep foundation and brand recognition in the multifamily market sector with significant tailwind that I just described.
Willie: But we've also invested over time to diversify our capabilities to meet the needs of our expanding client base.
Willie: We recently made several important strategic moves that will drive transaction volumes across asset classes over the coming years.
Willie: First we added a senior banker to our New York capital markets team, who ran the capital markets business at one of <unk> largest competitors.
Willie: Second we entered the hospitality investment sales space at the end of 2024 and that team is gaining momentum on both the sales and financing from.
Willie: Third we opened a new office in London, England, focusing on the European and Middle Eastern markets. We spoke about this expansion during our last call and it's very important for W. Indeed to continue expanding outside the U S for both boring deal flow and to connect with investors looking to put money to work inside the United States.
Willie: Finally, the data center space has been exceedingly hot over the past several years and we brought on a fantastic banker to lead our growth in this area.
Willie: We have significant hiring momentum and are excited about where our business is headed in the coming quarters and years.
Willie: Transaction activity continues to steadily build.
Willie: One month into the second quarter, we have already closed 60% of our Q1 transaction activity.
Willie: We have seen almost no fallout in our pipeline in Q2 and with the 10 year at 417%, we see a promising market for the second quarter and beyond.
Willie: I'll now turn the call over to Greg to talk through our Q1 results in more detail Greg.
Greg: Thank you Willy and good morning, everyone.
Greg: Despite significant volatility in the broader capital markets throughout the first quarter Wmd's transaction activity increased across most products with the largest gains in our Fannie Mae and property sales execution.
Greg: Reflecting the strong fundamentals underlying the multifamily industry. It really just described.
Greg: As shown on slide 10 growth in transaction activity drove revenue growth of 4% during the first quarter.
Greg: However, due to specific increases in expenses and additions to our loan loss reserves diluted earnings per share declined to eight cents.
Greg: Adjusted EBITDA declined to $65 million and adjusted core earnings per share declined to 85 cents.
Greg: During the first quarter, we incurred $10 million of expenses associated with three discrete decisions or events.
Greg: We refinanced our corporate debt in March in the process, we extinguished a portion of our outstanding term loan and wrote off a portion of the deferred issuance costs totaling $4 million the.
Greg: The advantages of recapitalizing, our balance sheet at historically low spreads far outweighed the impact of the accelerated costs and sets us up with a balance sheet to continue investing in our business.
Greg: Second we.
Greg: We recognized a provision for loan losses of $4 million this quarter compared to $500000 a year ago.
Greg: The majority of that provision relates to a single loan.
Greg: All of our loan portfolio continues to perform extremely well.
Greg: What's happened.
Greg: Finally, we made the decision to separate several low performing salespeople during the quarter that will cost us around $5 million during the first half of the year with a little over $2 million expense in the first quarter.
Greg: The first quarter is typically our slowest of the year.
Greg: And while the credit expenses clearly unwelcome it as a part of our core business.
Greg: And the one time charges for the debt offering and personnel separations are expenses, we decided to take to make WD better.
Greg: And stronger.
Greg: With that backdrop in mind, let me now turn to segment results starting with capital markets.
Greg: Total revenues for the segment grew 25% to $103 million driven by stronger revenues year over year across nearly every area of the segment.
Greg: Note, our research and investment banking business Zelman grew revenues, 129% to $11 million.
Greg: As a result of closing several investment banking transactions during the quarter.
Greg: A 10% increase in total transaction volume to $7 billion.
Greg: Boosted origination fees.
<unk> income and property sales broker fees.
Greg: Fannie Mae lending volume was up significantly by 67% and total agency volumes were up 30% year over year, driving a $7 million or 33% year over year increase in noncash MSR revenues.
Greg: Capital market segment, net income totaled $2 million, a $9 million improvement from Q1, 24, and adjusted EBITDA grew by $6 million or <unk>, 31%.
Greg: First quarter transaction activity showed solid growth, but not the acceleration we anticipated as deal scheduled to close late in Q1 ended up slipping into the second quarter as a result of the market volatility in the days, leading up deliberation day.
Greg: But as Willie just stated our pipelines over the next 60 days, but our capital markets team on track for a very strong second quarter.
Speaker Change: While we do not yet have clarity around tariffs or near term monetary policy.
Speaker Change: Strength in multifamily fundamentals the stabilization of long term rates Central Liberation day, and the competitiveness competitiveness of agency capitals have enabled our clients to transact.
Speaker Change: We will react to changes that result from tariffs and resulting monetary policy, but it's clear that the investments we made over the past two years to add to our capital markets platform should allow us to capitalize on any market improvements this year.
Speaker Change: Our servicing and asset management or Sam segment continues to generate strong cash revenues from our growing servicing portfolio and assets under management.
Speaker Change: Despite a 3% year over year increase in servicing fees off our $136 billion portfolio.
Speaker Change: Total segment revenues declined 7% from Q1 24 for a few reasons that are not unexpected.
Speaker Change: First our investment management fees declined by $4 million or 28% due to lower capital raising and lower realizations.
Speaker Change: But this is a timing issue as both our investment management businesses were in the market in Q1, raising money and we feel very good about revenues moving forward.
Speaker Change: Second placement fees and other interest income decreased by $6 million or.
Speaker Change: Our 17% year over year due to the impact of a 100 basis point decline in the fed funds rate.
Speaker Change: Our placement fees are tied directly to fed funds.
Speaker Change: Pending on the movement in fed funds rates. The revenues for this segment will increase or decrease depending on federal reserve action.
Speaker Change: As a reminder, our corporate debt expense also moves with short term interest rates acting as a natural hedge against lower placement fees.
Speaker Change: Well, we would expect that any reduction in the fed funds rate would increase transaction activity as Walker and Dunlop clients decide to refinance and purchase properties.
Speaker Change: Turning to credit and our $64 billion at risk loan portfolio.
Speaker Change: Obviously highlighted the $4 million loss reserve, which primarily related to one large loan default in our portfolio.
Speaker Change: Out of the nearly 3200 loans in our at risk portfolio only eight are in default as at the end of the first quarter totaling 17 basis points of the at risk portfolio.
Speaker Change: Compared to six loans at the end of the fourth quarter.
Speaker Change: Higher interest rates and oversupply in some markets is impacting a small number of properties, which is natural to see at this point in the cycle.
Speaker Change: Our current debt risk portfolio was underwritten two and averaged 61% loan to value at origination and a minimum debt service coverage ratio of 125 times, reflecting the discipline in our underwriting.
Speaker Change: Turning to capital I.
Speaker Change: I mentioned the debt refinancing we closed in March when we launched that offering credit spreads were near historic lows, allowing us to reduce our weighted average cost of capital immediately while simultaneously negotiating a further 25 basis point reduction in the cost of our senior secured term loan stood our debt to EBITDA decrease below two to one it is currently at two seven.
Speaker Change: Times.
Speaker Change: Fortunately, we launched a debut bond in the unsecured market that was significantly oversubscribed.
Speaker Change: That debut bond provides us access to a new investor base, giving us financing alternatives to support our long term growth.
Speaker Change: One final benefit of the transaction was adding over $50 million of liquidity to the balance sheet and securing a $50 million working capital line.
Speaker Change: US balance sheet flexibility to support our growth objectives.
Speaker Change: Given the strength of our balance sheet yesterday, our board of directors approved a quarterly dividend of <unk> 67 per share.
Speaker Change: System with last quarter's dividend and payable to shareholders of record as of May 15th.
Speaker Change: Despite lower than expected Q1 earnings our goals for the year have not changed.
Speaker Change: We established annual guidance at the beginning of February shown on slide 14 that I expected a significant increase in financing and sales activity throughout the year.
Speaker Change: While market volatility has clearly been challenging to manage for our clients and WMD.
Speaker Change: We are seeing from our pipelines and business makes us comfortable reiterating our annual guidance.
Speaker Change: This quarter, we are outlining goals across our business lines. So investors can benchmark, our progress and clearly understand the expectations for our business lines.
Speaker Change: As you can see on slide 15.
Speaker Change: We have 226 bankers and brokers on our platform and our goal is for each banker in broker to originate an average of at least $200 million of transaction volume this year.
Speaker Change: They're all the volatility over the last year, we continue to invest in our platform.
Speaker Change: Adding 20 salespeople across business lines and in the process of establishing new products and entering new geographies.
Speaker Change: We expect significant contributions over the coming months and quarters from our new salespeople to help us meet our goal of increasing market share across our service and product offerings.
Speaker Change: Our evaluation and development teams are also expecting to grow with the goal of generating $40 million to $50 million of revenue. This year significant growth off last year, when the M&A and valuation market slowed considerably.
Speaker Change: Over the last year, we added to our core residential housing investment banking capabilities by adding a diary talent in the affordable and got it and infrastructure sectors.
Speaker Change: Those teams should help contribute to growth in 2025.
Speaker Change: Within our investment management business, we are also expecting growth.
Speaker Change: Last year, we made a leadership change in our affordable investment management business W. D E and our team is expected to return to raising at least $600 million of tax credit equity this year.
Speaker Change: Up from $400 million in 2024.
Speaker Change: WD IP, a real estate investment management platform platform is also expected to increase its capital deployment in 2025 to over $1 billion a level, we have not yet achieved since we've been in the business, but that is supported by follow on investments in our flagship debt fund that had its first close in Q4 of last year.
Speaker Change: Finally, we are launching WD suite next week, a web based software that we expect will engage and attract private clients that will ultimately transact through our service lines.
Speaker Change: We expect to prove this concept in 2025 and this will be a pillar of our long term growth goals for the private client business.
Speaker Change: As we think about our long term goals for private client lending you must also expand our product offering beyond Fannie and Freddie to meet that demand and investors should expect us to add new sources of capital to our product offering in this business.
Speaker Change: I'm excited about the goals, we have to grow our business in the coming quarters and get back on offense.
Speaker Change: He will touch on where we are with respect to each of our goals through the first quarter and the momentum we're seeing across markets as we enter the second quarter.
Speaker Change: With a strong April behind us I'm eager to see what our team is capable of delivering as market conditions, hopefully settle down and we get back to meeting the market's need for capital and investment properties.
Speaker Change: You for your time this morning, I will now turn the call back over to Willie.
Willie: Thank you Greg.
Willie: At the beginning of the year, we spoke about the tremendous amount of commercial real estate debt that needs to be refinanced and capital needs to be deployed this year.
Willie: And those underlying fundamentals remain intact.
Willie: As Greg just outlined our team is focused on specific business goals.
Willie: Across the platform that will allow us to continue meeting our clients' expanding needs and deliver strong financial results in 2025 and beyond.
Willie: We intend to grow market share with our largest lending partners Fannie Mae Freddie Mac and HUD in 2025, and we began the year by holding market share with the GSE is on a combined basis after a strong quarter with Fannie and an okay quarter with Freddie.
Speaker Change: I think Jeff a director Bill Pulte appears to be focused on growing the gse's and aggregating capital for potential privatization.
Willie: It is too soon to tell how or if the GSC is get spun out of conservatorship.
Willie: It is clear today is that the teams at Fannie and Freddie are reenergized and focused on hitting their 146 billion dollar multifamily caps in 2025.
Willie: Similarly, the new HUD Secretary Scott Turner has already made positive changes at HUD to streamline the origination process and refocus hard on providing additional much needed affordable housing in the United States.
Speaker Change: The second largest HUD multifamily lender in the country with a scaled affordable housing platform, we are extremely well positioned to benefit from any changes to the HUD product that make it more efficient and competitive.
Willie: As the housing market continues to heal.
Willie: Action volumes grow.
Willie: Loan originations and properties sold per banker broker will also expand.
Willie: As you can see on this slide we ended 2024 with an average production per banker broker of $172 million up by $35 million from 2023.
Willie: Our team has a 2025 goal of generating an average of $200 million transaction volume per bank or broker and we.
Willie: It made significant investments in and cuts to our capital markets team to make sure. We achieve this 2025 goal.
Willie: And while the macro market clearly impacts our industry and company, we sell into a large enough market to get to these numbers.
Willie: Our investment management businesses, Walker, and Dunlop affordable equity and Walker and Dunlop investment partners must grow faster.
Willie: He had a slow start to the year due to leadership changes, we implemented last year, but we just closed the largest multi investor fund we've ever closed at $240 million at the beginning of April.
Willie: We have a goal to reach $600 million and tax credit syndications in 2025, which would be 50% growth over 2024.
Willie: We are confident we have the team and addressable market to meet that goal.
Willie: W. D Ip's newest debt fund deployed $174 million in Q1, and as transaction activity picks up throughout the year, we expect to hit our full year goal of $1 billion in capital deployment.
Willie: This is a similarly large step up in volume from 2024 of 36%.
Willie: Our appraisal business surprise grew appraisal revenues, 50% in Q1 over last year.
Willie: We are using a prize the turnaround valuations quicker and more accurately on our own multifamily debt financing transactions and expect our valuation revenues to grow and drive positive earnings by the end of 2025.
Willie: Similarly, our small balance lending team grew volumes by 28% in Q1.
Willie: With 58% revenue growth.
As Greg mentioned that team is launching WD suite next week that will drive lead generation to give us touch points with new private clients.
Willie: Source deal flow across this fragmented market.
Willie: Been very successful building this business and moving up in the league tables, with Fannie Mae and Freddie Mac and as we continue to scale, we need to partner with another capital provider beyond the Gse's.
Willie: This is a fundamental goal that we've set for 2025, it should allow us to expand our small balance lending volumes dramatically over the next several years.
Willie: Our application of technology to both our appraisal and small balance lending businesses to make them more efficient user friendly and transparent.
Willie: It will benefit both our top and bottom lines over the coming years as we apply these technological innovations across all our businesses.
Willie: Our research and investment banking business Zelman had a great Q1 with revenues up 129%, primarily due to investment banking fees, putting the business on track to achieve its full year revenue target.
Willie: As real estate transactions and investment banking activities pick up we should see upside to revenues and margin at gentlemen.
Willie: As I showed at the top of the call the macro backdrop for commercial real estate and more specifically multifamily are strong.
Willie: As Greg said, we have confidence in achieving our original 2025 guidance due to what we're seeing in the market today and.
Willie: And our expectation that capital deployment and refinancing activity continues forward.
Willie: The deregulatory changes at our three largest capital partners should benefit our ability to deploy capital.
Willie: Particularly given our scale with Fannie Freddie and HUD.
Willie: The Trump administration is very focused on housing.
Speaker Change: From HUD Secretary Turner, FHFA director Pulte Theres.
Willie: A keen focus on cost cutting and efficiency.
Speaker Change: And deploying more capital to bring the cost of rental and single family housing downturn.
Speaker Change: That is the first time I've ever written or said something like that about the federal government and their role in the housing finance industry.
Speaker Change: Another first as far back as I can remember is the Treasury Secretary, who is focused on treasury rates to refinance trillions of dollars of U S debt and also bring down the cost of borrowing to U S consumers.
Speaker Change: We have strong momentum across our business and while the macro markets continue to gyrate.
Speaker Change: Our Q2 pipeline.
Speaker Change: Is holding together nicely, we will continue to focus on completing the drive to twenty-five knowing that they need the investments in the businesses and human capital to achieve its goals.
Speaker Change: Thank you for your time. This morning, I will now turn the call over to the operator to take any questions.
Speaker Change: Thank you.
Speaker Change: Like to ask a question. Please take note by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow the signal to reach our equipment again press star one to ask a question.
Speaker Change: We will take our first question from Jade Rahmani with K B W.
Speaker Change: Thank you very much.
Speaker Change: In todays current market I know you gave an intra quarter update as to the pipeline and volumes.
Speaker Change: But can you give any further insight in terms of what youre seeing from investors are they underwriting you know.
More conservative assumptions due to the macro outlook are they eager to do deals to lock in rates that have started to move lower and also you know behavior. Lee what are you seeing from Fannie Mae and Freddie Mac.
Speaker Change: Good morning, Jamie Nice to have you on.
Speaker Change: I would say the following as as I just mentioned, having closed 60% of our Q1 volume in the first month of Q2.
Speaker Change: We have not seen deal flow fallout.
Speaker Change: Due to market volatility, which quite honestly is a surprising statement to make given the massive gyrations in the 10 year treasury, particularly at the beginning of April.
Speaker Change: Where we are seeing questions right now is on larger transactions Jade.
Speaker Change: There.
Speaker Change: If someone is looking at taking out a larger portfolio.
Speaker Change: The question is do we want to launch it now or do we want to wait.
Speaker Change: And I would say I was in two large investment sales pitches last week and my comment to the owners of the assets was well unless you plan on waiting for years to do something with these assets you might as well go into the market today, because the volatility that we've seen in the first 100 days of the Trumpf.
Speaker Change: Australia is unlikely to subside there.
Speaker Change: There are some people who think that the 90 day pause on tariffs that once we're beyond that window.
Speaker Change: The market settle down and there will be sort of clarity in the markets.
Speaker Change: I'm not so sure.
Speaker Change: On that statement.
Speaker Change: As a result of it unless someone who is sitting there, saying I'm just going to take a pause for the next four years.
Speaker Change: There likely considering going into the market.
Speaker Change: The one other thing I would say to that degree is.
Speaker Change: As I mentioned, the 10 year moving from 480 at the beginning of January down to 417 yesterday.
Speaker Change: Obviously extremely important to the commercial real estate industry.
Speaker Change: And so while tariffs.
Speaker Change: Clearly present.
Speaker Change: The macro backdrop that is challenging for our business.
Speaker Change: More on a macro or more global view as it relates to commercial real estate, what happens to the 10 year Treasury is far more determined it too as it relates to volumes.
Speaker Change: Thanks very much.
Speaker Change: In terms of the GSE is do you expect them to hit their caps. This year. It sounded like in your comments you thought that was at least a possibility and.
Speaker Change: Would you care to.
Speaker Change: Say anything about what you think the odds are that they hit their caps.
Speaker Change: [laughter] I don't think I'll give you odds on that Jade, but I will give you. This.
Speaker Change: We have not seen Fannie and Freddie competing in the market.
Speaker Change: They have been for the last two months.
Speaker Change: In three years.
Speaker Change: So.
Speaker Change: As I as you saw in Q1, our Fannie volumes were up significantly, but I did point out that was off an exceedingly slow low volume in Q1 of 2024.
Speaker Change: What we are seeing right now is that both Fannie and Freddie are very engaged in the market.
Speaker Change: Both of them are working to win deals.
Speaker Change: And for the beginning of the year that is a very welcome sign.
Speaker Change: Okay.
Speaker Change: Great to hear thanks very much.
Speaker Change: Thank you.
Speaker Change: As a reminder, if you would like to ask a question. Please press star one we will take our next question from Steve Delaney with citizens JMP Securities.
Steve DeLaney: Good morning, everyone Hello Willi.
Speaker Change: Steve talked about.
Speaker Change: Payroll expenses and you mentioned specifically severance.
Speaker Change: It sounded like that was just the production pruning the low performers you did I didn't hear you mention that you exited any business lines is that correct.
Speaker Change: We did not and exited business lines and you were you were exactly right, but it was the there was the write off of some some signing bonuses and compensation expense.
Speaker Change: If you will.
Speaker Change: Get rid of Underperformers.
Speaker Change: Understood.
Speaker Change: Last two years when we.
Speaker Change: When we look at total operating expenses.
Speaker Change: Obviously youre building.
Speaker Change: Complex fully integrated business. So we get that you're you don't come in every day with.
Speaker Change: With the goal to have the lowest.
Speaker Change: Cost of operations you come in to have the best bottom line, including growth for your shareholders, but the last two years operating expenses non interest expenses have averaged right at 16% of total revenues.
Speaker Change: Can you give us that.
Speaker Change: For 2025, if we were to.
Speaker Change: This year going to be more expensive on that ratio of 60% or.
Speaker Change: What point do you see any potential for that 60% to dropped to a lower figure with a biotech.
Speaker Change: So it should be down and as you know from having covered us for as long as you have we have always focused on having that down in the sort of 48% to 50%.
Speaker Change: Personnel cost as a percentage of revenues and the fact that is up at 60 is directly related to volumes.
Speaker Change: And so.
Speaker Change: We are very focused as I mentioned and Greg mentioned in our call on driving producer on average producer production from 170 to 200 million per producer in 2025, you get to that Youre going to see that number dropped to that to that ratio.
Speaker Change: And so it really is a.
Speaker Change: It's a production.
Speaker Change: Volume.
Speaker Change: <unk> metric if you will and we have every confidence that the reason we've reiterated our guidance is because we see the volumes in 2025, we clearly did not expect the first hundred days of the Trump administration.
To present the challenges in the market volatility that we've seen.
Speaker Change: But the underlying theme is this.
Speaker Change: Commercial real estate owner operators have run out of time.
Speaker Change: On delaying refinancings delaying the return of capital and delaying the deployment of new capital and as a result of that because that clock is ticking.
Speaker Change: We are now, saying I may or may not law, the poor 17 tenure at <unk>.
Speaker Change: Need to go and sell that asset to return capital I need to buy that asset to deploy capital or I need to refinance that asset because I've gotten two one year extensions and it's now time to just go get permanent financing put on the asset and we are very clearly see that drive volumes.
Willy Walker: Thank you for the comments Willy.
Willy Walker: Thank you Steve.
Willy Walker: Once again, if you would like to ask a question at this time. Please press star one and we will pause for just a moment.
Willy Walker: Again star one for questions.
Speaker Change: It does appear there are no further questions at this time I will turn the conference back over to Mr. Walker for any additional or closing remarks.
Willy Walker: I appreciate everyone joining us this morning, and I appreciate all the hard work by the WNBA team in Q1, and I Hope everyone has a great day and thanks.
Thanks again.
Willy Walker: This concludes today's call. Thank you for your participation you may now disconnect.
Willy Walker: Yeah.
[music].
Willy Walker: Uh huh.
Willy Walker: Yes.
Willy Walker: [music].
Willy Walker: Uh huh.
Willy Walker: Yeah.
Willy Walker: [music].