Document and Entity Information - USD ($) $ in Millions |
12 Months Ended | ||
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Dec. 31, 2016 |
Jan. 31, 2017 |
Jun. 30, 2016 |
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Document And Entity Information | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2016 | ||
Document Fiscal Year Focus | 2016 | ||
Document Fiscal Period Focus | FY | ||
Entity Current Reporting Status | Yes | ||
Entity Registrant Name | Walker & Dunlop, Inc. | ||
Entity Central Index Key | 0001497770 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Public Float | $ 541.1 | ||
Entity Common Stock, Shares Outstanding | 30,816,755 |
Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
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Consolidated Balance Sheets | ||
Preferred shares, authorized | 50,000 | 50,000 |
Preferred shares, issued | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized | 200,000 | 200,000 |
Common stock, issued | 29,551 | 29,466 |
Common stock, outstanding | 29,551 | 29,466 |
ORGANIZATION |
12 Months Ended |
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Dec. 31, 2016 | |
ORGANIZATION | |
Organization |
These financial statements represent the consolidated financial position and results of operations of Walker & Dunlop, Inc. and its subsidiaries. Unless the context otherwise requires, references to “we,” “us,” “our,” “Walker & Dunlop” and the “Company” mean the Walker & Dunlop consolidated companies.
Walker & Dunlop, Inc. is a holding company and conducts the majority of its operations through Walker & Dunlop, LLC, the operating company. Walker & Dunlop is one of the leading commercial real estate services and finance companies in the United States. The Company originates, sells, and services a range of multifamily and other commercial real estate financing products and provides multifamily investment sales brokerage services. The Company originates and sells loans pursuant to the programs of the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac,” and together with Fannie Mae, the “GSEs”), the Government National Mortgage Association (“Ginnie Mae”) and the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (together with Ginnie Mae, “HUD”). The Company also offers a proprietary loan program offering interim loans.
Through the third quarter of 2016, we offered commercial mortgage-backed securities (“CMBS”) executions through our own proprietary CMBS platform (the “CMBS Program”). We terminated the CMBS Program in the fourth quarter of 2016. Prior to 2016, the CMBS Program was managed through a partnership with another entity in which we owned less than 50%. At the beginning of the first quarter of 2016, the other partner exited the CMBS Program, and we assumed full ownership of the CMBS Program. We consolidated the operations of the CMBS Program in our financial statements during 2016 and accounted for our investment in the partnership under the equity method of accounting prior to 2016. In connection with the termination of the CMBS Program in 2016, we recognized $2.0 million of severance and other termination costs. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies |
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation—The consolidated financial statements include the accounts of the Company and all of its consolidated entities. All intercompany transactions have been eliminated. When the Company has significant influence over operating and financial decisions for an entity but does not own a majority of the voting interests, the Company accounts for the investment using the equity method of accounting.
Subsequent Events—The Company has evaluated the effects of all events that have occurred subsequent to December 31, 2016. There have been no material events that would require recognition in the consolidated financial statements. The Company has made certain disclosures in the notes to the consolidated financial statements of events that have occurred subsequent to December 31, 2016. No other material subsequent events have occurred that would require disclosure.
Use of Estimates—The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, including guaranty obligations, allowance for risk-sharing obligations, allowance for loan losses, capitalized mortgage servicing rights, derivative instruments, and the disclosure of contingent assets and liabilities. Actual results may vary from these estimates.
Gains from Mortgage Banking Activities and Mortgage Servicing Rights—Gains from mortgage banking activities income is recognized when the Company records a derivative asset upon the commitment to originate a loan with a borrower and sell the loan to an investor. This commitment asset is recognized at fair value, which reflects the fair value of the contractual loan origination related fees and sale premiums, net of any co-broker fees, and the estimated fair value of the expected net cash flows associated with the servicing of the loan, net of the estimated net future cash flows associated with any guaranty obligations retained. For loans the Company brokers, gains from mortgage banking activities are recognized when the loan is closed and represent the origination fee earned by the Company. The co-broker fees for the years ended December 31, 2016, 2015, and 2014 were $35.8 million, $18.0 million, and $15.9 million, respectively. Transfer of financial assets is reported as a sale when (a) the transferor surrenders control over those assets, (b) the transferred financial assets have been legally isolated from the Company’s creditors, (c) the transferred assets can be pledged or exchanged by the transferee, and (d) consideration other than beneficial interests in the transferred assets is received in exchange. The transferor is considered to have surrendered control over transferred assets if, and only if, certain conditions are met. The Company determined that all loans sold during the periods presented met these specific conditions and accounted for all transfers of loans held for sale as completed sales. When a loan is sold, the Company retains the right to service the loan and initially recognizes an individual mortgage servicing right (“MSR”) for the loan sold at fair value. The initial capitalized amount is equal to the estimated fair value of the expected net cash flows associated with servicing the loans, net of the expected net cash flows associated with any guaranty obligations. The following describes the principal assumptions used in estimated capitalized MSRs: Discount rate—Depending upon loan type, the discount rate used is management's best estimate of market discount rates. The rates used for loans sold were 10% to 15% for each of the periods presented and varied based on loan type.
Estimated Life—The estimated life of the MSRs is derived based upon the stated yield maintenance and/or prepayment protection term of the underlying loan and may be reduced by 6 to 12 months based upon the expiration of various types of prepayment penalty and/or lockout provisions prior to that stated maturity date. The Company’s historical experience is that the prepayment provisions typically do not provide a significant deterrent to a borrower’s paying off the loan within 6 to 12 months of the expiration of the prepayment provisions.
Servicing Cost—The estimated future cost to service the loan for the estimated life of the MSR is subtracted from the estimated future cash flows.
The assumptions used to estimate the fair value of MSRs at loan sale are based on internal models and are compared to assumptions used by other market participants periodically. When such comparisons indicate that these assumptions have changed significantly, the Company adjusts its assumptions accordingly. Subsequent to the initial measurement date, MSRs are amortized using the interest method over the period that servicing income is expected to be received and presented as a component of Amortization and depreciation in the Consolidated Statements of Income. For MSRs recognized at loan sale, the individual loan-level MSR is written off through a charge to Amortization and depreciation when a loan prepays, defaults, or is probable of default. We evaluate MSRs for impairment quarterly. The Company tests for impairment on the purchased stand-alone servicing portfolio separately from the Company’s other MSRs. The MSRs from both stand-alone portfolio purchases and from loan sales are tested for impairment at the portfolio level. The Company engages a third party to assist in determining an estimated fair value of our existing and outstanding MSRs on at least a semi-annual basis. The fair value of MSRs acquired through a stand-alone servicing portfolio purchase is equal to the purchase price paid. For purchased stand-alone servicing portfolios, we record a portfolio-level MSR asset and determine the estimated life of the portfolio based on the prepayment characteristics of the portfolio. We subsequently amortize such MSRs and test for impairment quarterly as discussed in more detail above.
For MSRs related to purchased stand-alone servicing portfolios, a constant rate of prepayments and defaults is included in the determination of the portfolio’s estimated life (and thus included as a component of the portfolio’s amortization). Accordingly, prepayments and defaults of individual MSRs do not change the level of amortization expense recorded for the portfolio unless the pattern of actual prepayments and defaults varies significantly from the estimated pattern. When such a significant difference in the pattern of estimated and actual prepayments and defaults occurs, we prospectively adjust the estimated life of the portfolio (and thus future amortization) to approximate the actual pattern observed. Guaranty Obligation and Allowance for Risk-sharing Obligations—When a loan is sold under the Fannie Mae DUS program, the Company undertakes an obligation to partially guarantee the performance of the loan. Upon loan sale, a liability for the fair value of the obligation undertaken in issuing the guaranty is recognized and presented as Guaranty obligation, net of accumulated amortization. The recognized guaranty obligation is the greater of the fair value of the Company’s obligation to stand ready to perform over the term of the guaranty (the noncontingent guaranty) and the fair value of the Company’s obligation to make future payments should those triggering events or conditions occur (contingent guaranty). Historically, the fair value of the contingent guaranty at inception has been de minimis; therefore, the fair value of the noncontingent guaranty has been recognized. In determining the fair value of the guaranty obligation, the Company considers the risk profile of the collateral, historical loss experience, and various market indicators. Generally, the estimated fair value of the guaranty obligation is based on the present value of the cash flows expected to be paid under the guaranty over the estimated life of the loan (historically three to five basis points per year) discounted using a 12-15 percent discount rate. The discount rate used is consistent with what is used for the calculation of the MSR for each loan. The estimated life of the guaranty obligation is the estimated period over which the Company believes it will be required to stand ready under the guaranty. Subsequent to the initial measurement date, the liability is amortized over the life of the guaranty period using the straight-line method as a component of and reduction to Amortization and depreciation in the Consolidated Statements of Income, unless, as discussed more fully below, the loan defaults or management determines that the loan’s risk profile is such that amortization should cease.
The Company monitors the performance of each risk-sharing loan for events or conditions which may signal a potential default. Our process for identifying which risk-sharing loans may be probable of loss consists of an assessment of several qualitative and quantitative factors including payment status, property financial performance, local real estate market conditions, loan-to-value ratio, debt-service-coverage ratio, and property condition. Historically, initial loss recognition occurs at or before a loan becomes 60 days delinquent. In instances where payment under the guaranty on a specific loan is determined to be probable and estimable (as the loan is probable of foreclosure or in foreclosure), the Company records a liability for the estimated allowance for risk-sharing (a “specific reserve”) through a charge to the provision for risk-sharing obligations, which is a component of Provision (benefit) for credit losses in the Consolidated Statements of Income, along with a write-off of the associated loan-specific MSR. The amount of the allowance considers the Company’s assessment of the likelihood of repayment by the borrower or key principal(s), the risk characteristics of the loan, the loan’s risk rating, historical loss experience, adverse situations affecting individual loans, the estimated disposition value of the underlying collateral, and the level of risk sharing. The estimate of property fair value at initial recognition of the allowance for risk-sharing obligations is based on appraisals, broker opinions of value, or net operating income and market capitalization rates, depending on the facts and circumstances associated with the loan. We regularly monitor the specific reserves on all applicable loans and update loss estimates as current information is received. The settlement with Fannie Mae is based on the actual sales price of the property and selling and property preservation costs and considers the Fannie Mae loss-sharing requirements.
In addition to the specific reserves discussed above, the Company also records an allowance for risk-sharing obligations related to risk-sharing loans on its watch list (“general reserves”). Such loans are not probable of foreclosure but are probable of loss as the characteristics of these loans indicate that it is probable that these loans include some losses even though the loss cannot be attributed to a specific loan. For all other risk-sharing loans not on our watch list, the Company continues to carry a guaranty obligation. The Company calculates the general reserves based on a migration analysis of the loans on its historical watch lists, adjusted for qualitative factors. When the Company places a risk-sharing loan on its watch list, the Company ceases to amortize the guaranty obligation and transfers the remaining unamortized balance of the guaranty obligation to the general reserves. The Company recognizes a provision for risk-sharing obligations to the extent the calculated general reserve exceeds the remaining unamortized guaranty obligation. If a risk-sharing loan is subsequently removed from the watch list due to improved financial performance or other factors, the Company transfers the unamortized balance of the guaranty obligation back to the guaranty obligation classification on the balance sheet and amortizes the remaining unamortized balance evenly over the remaining estimated life. For each loan for which we have a risk-sharing obligation, we record one of the following liabilities associated with that loan as discussed above: guaranty obligation, general reserve, or specific reserve. Although the liability type may change over the life of the loan, at any particular point in time, only one such liability is associated with a loan for which we have a risk-sharing obligation. The total of the specific reserves and general reserves is presented as Allowance for risk-sharing obligations in the Consolidated Balance Sheets. Loans Held for Investment, net—The Company offers an interim loan program for floating-rate, interest-only loans for terms of up to three years to experienced borrowers seeking to acquire or reposition multifamily properties that do not currently qualify for permanent GSE or HUD (collectively, the “Agencies”) financing (the “Interim Program”). These loans are classified as held for investment on the Company’s consolidated balance sheet during such time that they are outstanding. The loans are carried at their unpaid principal balances, adjusted for net unamortized loan fees and costs, and net of any allowance for loan losses. Interest income is accrued based on the actual coupon rate, adjusted for the amortization of net deferred fees and costs, and is recognized as revenue when earned and deemed collectible. All loans held for investment are multifamily loans with similar risk characteristics with no geographic concentration. The Company uses the interest method to determine an effective yield to amortize the loan fees and costs on real estate loans held for investment. All loans held for investment are floating-rate loans; therefore, the Company uses the initial coupon interest rate of the loans (without regard to future changes in the underlying indices) and anticipated principal payments, if any, to determine periodic amortization. As of December 31, 2016, Loans held for investment, net consisted of 12 loans with an aggregate $222.3 million of unpaid principal balance less $1.5 million of net unamortized deferred fees and costs and $0.4 million of allowance for loan losses. As of December 31, 2015, Loans held for investment, net consisted of 13 loans with an aggregate $233.4 million of unpaid principal balance less $1.1 million of net unamortized deferred fees and costs and $0.8 million of allowance for loan losses. The Company will reclassify loans held for investment as loans held for sale if it determines that the loans will be sold or transferred to third parties. To date, the Company has not sold any of its loans held for investment. The allowance for loan losses is the Company’s estimate of credit losses inherent in the loan portfolio at the balance sheet date. The Company has established a process to determine the appropriateness of the allowance for loan losses that assesses the losses inherent in the portfolio. That process includes assessing the credit quality of each of the loans held for investment by monitoring the financial condition of the borrower and the financial trends of the underlying property. The allowance levels are influenced by the aggregate outstanding principal balance, delinquency status, historic loss experience, and other conditions influencing loss expectations, such as economic conditions. The allowance for loan losses is estimated collectively for loans with similar characteristics and for which there is no evidence of impairment. The collective allowance is based on recent historical loss probability and historical loss rates incurred in our risk-sharing portfolio, adjusted as needed for current market conditions. We use the loss experience from our risk-sharing portfolio as a proxy for losses incurred in our loans held for investment portfolio since (i) we have not experienced any actual losses related to our loans held for investment to date and (ii) the loans in the loans-held-for-investment portfolio have similar characteristics to loans held in the risk-sharing portfolio. The allowance for loan losses recorded as of December 31, 2016 and December 31, 2015 is based on the Company’s collective assessment of the portfolio. Loans held for investment are placed on non-accrual status when full and timely collection of interest or principal is not probable. Loans held for investment are considered past due when contractually required principal or interest payments have not been made on the due dates and are charged off when the loan is considered uncollectible. The Company evaluates all loans held for investment for impairment. A loan is considered impaired when the Company believes that the facts and circumstances of the loan suggest that the Company will not be able to collect all contractually due principal and interest. Delinquency status and property financial condition are key components of the Company’s consideration of impairment status. None of the loans held for investment was delinquent, impaired, or on non-accrual status as of December 31, 2016 or December 31, 2015. Additionally, we have not experienced any delinquencies related to these loans or charged off any loan held for investment since the inception of the Interim Program in 2012. Provision (Benefit) for Credit Losses—The Company records the income statement impact of the changes in the allowance for loan losses and the allowance for risk-sharing obligations within Provision (benefit) for credit losses in the Consolidated Statements of Income. Provision (benefit) for credit losses consisted of the following activity for the years ended December 31, 2016, 2015, and 2014:
Business Combinations—The Company accounts for business combinations using the acquisition method of accounting, under which the purchase price of the acquisition is allocated to the assets acquired and liabilities assumed using the fair values determined by management as of the acquisition date. The Company recognizes identifiable assets acquired and liabilities (both specific and contingent) assumed at their fair values at the acquisition date. Furthermore, acquisition-related costs, such as due diligence, legal and accounting fees, are not capitalized or applied in determining the fair value of the acquired assets. The excess of the purchase price over the assets acquired, identifiable intangible assets and liabilities assumed is recognized as goodwill. During the measurement period, the Company records adjustments to the assets acquired and liabilities assumed with corresponding adjustment to goodwill in the reporting period in which the adjustment is identified. After the measurement period, which could be up to one year after the transaction date, subsequent adjustments are recorded to the Company’s Consolidated Statements of Income.
Goodwill—The Company evaluates goodwill for impairment annually. In addition to the annual impairment evaluation, the Company evaluates at least quarterly whether events or circumstances have occurred in the period subsequent to the annual impairment testing which indicate that it is more likely than not an impairment loss has occurred. The Company currently has only one reporting unit; therefore, all goodwill is allocated to that one reporting unit. The Company performs its impairment testing annually as of October 1. The annual impairment analysis begins by comparing the Company’s market capitalization to its net assets. If the market capitalization exceeds the net asset value, further analysis is not required, and goodwill is not considered impaired. As of the date of our latest annual impairment test, October 1, 2016, the Company’s market capitalization exceeded its net asset value by $218.6 million, or 38.5%. As of December 31, 2016, there have been no events subsequent to that analysis that are indicative of an impairment loss.
Derivative Assets and Liabilities—Certain loan commitments and forward sales commitments meet the definition of a derivative and are recorded at fair value in the Consolidated Balance Sheets. The estimated fair value of loan commitments includes the fair value of loan origination fees and premiums on anticipated sale of the loan, net of co-broker fees, and the fair value of the expected net cash flows associated with the servicing of the loan, net of any estimated net future cash flows associated with the risk-sharing obligation. The estimated fair value of forward sale commitments includes the effects of interest rate movements between the trade date and balance sheet date. Adjustments to the fair value are reflected as a component of income within Gains on mortgage banking in the Consolidated Statements of Income.
Loans Held for Sale—Loans held for sale represent originated loans that are generally transferred or sold within 60 days from the date that a mortgage loan is funded. The Company initially measures all originated loans at fair value. Subsequent to initial measurement, the Company measures all mortgage loans at fair value, unless the Company documents at the time the loan is originated that it will measure the specific loan at the lower of cost or fair value for the life of the loan. Electing to use fair value allows a better offset of the change in fair value of the loan and the change in fair value of the derivative instruments used as economic hedges. During the period prior to its sale, interest income on a loan held for sale is calculated in accordance with the terms of the individual loan. There were no loans held for sale that were valued at the lower of cost or fair value or on a non-accrual status at December 31, 2016 and 2015.
Share-Based Payment—The Company recognizes compensation costs for all share-based payment awards made to employees and directors, including restricted stock, restricted stock units, and employee stock options based on the grant date fair value.
Restricted stock awards are granted without cost to the Company’s officers, employees, and non-employee directors, for which the fair value of the award was calculated as the fair value of the Company’s common stock on the date of grant.
Stock option awards are granted principally to executive officers, with an exercise price equal to the closing price of the Company’s common stock on the date of the grant, and are granted with a ten-year exercise period, vesting ratably over three years dependent solely on continued employment. To estimate the grant-date fair value of stock options, the Company uses the Black-Scholes pricing model. The Black-Scholes model estimates the per share fair value of an option on its date of grant based on the following inputs: the option’s exercise price, the price of the underlying stock on the date of the grant, the estimated option life, the estimated dividend yield, a “risk-free” interest rate, and the expected volatility. For each of the years presented, the Company used the simplified method to estimate the expected term of the options as the Company did not have sufficient historical exercise data to provide a reasonable basis for estimating the expected term. The Company uses an estimated dividend yield of zero as the Company has not historically issued dividends and does not currently pay dividends. For the “risk-free” rate, the Company uses a U.S. Treasury Bond due in a number of years equal to the option’s expected term. For all years presented in the Consolidated Statements of Income, the expected volatility was calculated based on the Company’s historical common stock volatility. The Company issues new shares from the pool of authorized but not yet issued shares when an employee exercises stock options.
Generally, the Company’s stock option and restricted stock awards for its officers and employees vest ratably over a three-year period based solely on continued employment. Restricted stock awards for non-employee directors fully vest after one year.
In 2014 and 2016, the Company offered a performance share plan (“PSP”) for the Company’s executives and certain other members of senior management. The performance period for each PSP is three full calendar years beginning on January 1 of the first year of the performance period. Participants in the PSP receive restricted stock units (“RSUs”) on the grant date for the PSP. If the performance targets are met at the end of the performance period and the participant remains employed by the Company, the participant fully vests in the RSUs, which immediately convert to unrestricted shares of common stock. If the performance targets are not met or the participant is no longer employed by the Company, the participant forfeits the RSUs. The performance targets for the 2014 PSP are based on meeting adjusted diluted earnings per share and total revenues goals. The performance targets for the 2016 PSP are based on meeting diluted earnings per share, return on equity, and total revenues goals. The Company records compensation expense for the PSP based on the grant-date fair value in an amount proportionate to the service time rendered by the participant when it is probable that the achievement of the goals will be met.
Compensation expense is adjusted for actual forfeitures and is recognized on a straight-line basis, for each separately vesting portion of the award as if the award were in substance multiple awards, over the requisite service period of the award. Share-based compensation is recognized within the income statement as Personnel, the same expense line as the cash compensation paid to the respective employees.
Net Warehouse Interest Income—The Company presents 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. For the periods presented in the Consolidated Balance Sheets, all loans that were held for sale were financed with matched borrowings under our warehouse facilities incurred to fund a specific loan held for sale. A portion of all loans that are held for investment is financed with matched borrowings under our warehouse facilities. The portion of loans held for investment not funded with matched borrowings is financed with the Company’s 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. Included in Net warehouse interest income for the three and year ended December 31, 2016 and 2015 are the following components:
Statement of Cash Flows—The Company records the fair value of premiums and origination fees as a component of the fair value of derivatives when a loan intended to be sold is rate locked and records the related income within Gains from mortgage banking activities within the Consolidated Statements of Income. The cash for the origination fee is received upon closing of the loan, and the cash for the premium is received upon loan sale, resulting in a mismatch of the recognition of income and the receipt of cash in a given period when the derivative or loan held for sale remains outstanding at period end.
The Company accounts for this mismatch by recording an adjustment called Change in the fair value of premiums and origination fees within the Consolidated Statements of Cash Flows. The amount of the adjustment reflects a reduction to cash provided by or used in operations for the amount of income recognized upon rate lock (i.e., non-cash income) for derivatives and loans held for sale outstanding at period end and an increase to cash provided by or used in operations for cash received upon loan origination or sale for derivatives and loans held for sale that were outstanding at prior period end. When income recognized upon rate lock is greater than cash received upon loan origination or sale, the adjustment is a negative amount. When income recognized upon rate lock is less than cash received upon loan origination or loan sale, the adjustment is a positive amount.
As noted below in greater detail, in 2016 the Company early adopted an accounting standard related to the presentation of the statement of cash flows that requires entities to show the change in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the statement of cash flows. For presentation in the Consolidated Statements of Cash Flows, the Company considers Pledged securities, at fair value to be restricted cash equivalents. The following table presents a reconciliation of the total of cash, cash equivalents, restricted cash, and restricted cash equivalents as presented in the Consolidated Statements of Cash Flows to the related captions in the Consolidated Balance Sheets as of December 31, 2016, 2015, 2014, and 2013.
Income Taxes—The Company files income tax returns in the applicable U.S. federal, state, and local jurisdictions and generally is subject to examination by the respective jurisdictions for three years from the filing of a tax return. The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in earnings in the period when the new rate is enacted.
Deferred tax assets are recognized only to the extent that it is more likely than not that they will be realizable based on consideration of available evidence, including future reversals of existing taxable temporary differences, projected future taxable income and tax planning strategies.
The Company had no accruals for tax uncertainties as of December 31, 2016 and 2015.
Comprehensive Income—For the years ended December 31, 2016, 2015, and 2014, comprehensive income equaled Net income before noncontrolling interests; therefore, a separate statement of comprehensive income is not included in the accompanying consolidated financial statements.
Pledged Securities—As collateral against its Fannie Mae risk-sharing obligations (NOTES 5 and 10), certain securities have been pledged to the benefit of Fannie Mae to secure the Company's risk-sharing obligations. The balance of securities pledged against Fannie Mae risk-sharing obligations and included as a component of Pledged securities, at fair value within the Consolidated Balance Sheets as of December 31, 2016 and 2015 was $80.5 million and $70.9 million, respectively. Additionally, the Company has pledged an immaterial amount of cash as collateral against its risk-sharing obligations with Fannie Mae and Freddie Mac. The pledged securities as of December 31, 2016 and 2015 consist primarily of a highly liquid investment valued using quoted market prices from recent trades, and are therefore considered restricted cash equivalents for presentation in the Consolidated Statements of Cash Flows.
Cash and Cash Equivalents—The term cash and cash equivalents, as used in the accompanying consolidated financial statements, includes currency on hand, demand deposits with financial institutions, and short-term, highly liquid investments purchased with an original maturity of three months or less. The Company had no cash equivalents as of December 31, 2016 and 2015.
Restricted Cash—Restricted cash represents primarily good faith deposits from borrowers. The Company records a corresponding liability for these good faith deposits from borrowers within Performance deposits from borrowers within the Consolidated Balance Sheets.
Servicing Fees and Other Receivables, Net—Servicing fees and other receivables, net represents amounts currently due to the Company pursuant to contractual servicing agreements, investor good faith deposits held in escrow by others, general accounts receivable, and advances of principal and interest payments and tax and insurance escrow amounts if the borrower is delinquent in making loan payments, to the extent such amounts are determined to be reimbursable and recoverable. Advances related to Fannie Mae at-risk loans may be used to reduce the amount of cash required to settle loan losses under the Company’s risk-sharing obligation with Fannie Mae.
Concentrations of Credit Risk—Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents, loans held for sale, and derivative financial instruments.
The Company places the cash and temporary investments with high-credit-quality financial institutions and believes no significant credit risk exists. The counterparties to the loans held for sale and funding commitments are owners of residential multifamily properties located throughout the United States. Mortgage loans are generally transferred or sold within 60 days from the date that a mortgage loan is funded. There is no material counterparty risk with respect to the Company's funding commitments as each potential borrower must make a non-refundable good faith deposit when the funding commitment is executed. The counterparty to the forward sale is Fannie Mae, Freddie Mac, or a broker-dealer that has been determined to be a credit-worthy counterparty by us and our warehouse lenders. There is a risk that the purchase price agreed to by the investor will be reduced in the event of a late delivery. The risk for non-delivery of a loan primarily results from the risk that a borrower does not close on the funding commitment in a timely manner. This risk is generally mitigated by the non-refundable good faith deposit.
Recently Adopted Accounting Pronouncements—In the second quarter of 2015, Accounting Standards Update 2015-05 (“ASU 2015-05”), Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, was issued. ASU 2015-05 provides entities with guidance on determining whether a cloud computing arrangement contains a software license that should be accounted for as internal-use software. ASU 2015-05 is effective for the annual and interim periods beginning January 1, 2016, with early adoption permitted. Entities may select retrospective or prospective adoption of ASU 2015-05. The Company prospectively adopted ASU 2015-05 in the first quarter of 2016. There was no impact to the Company as none of the Company’s cloud computing arrangements permits the Company the contractual right to take possession of the software.
In the first quarter of 2016, Accounting Standards Update 2016-09 (“ASU 2016-09”), Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, was issued. ASU 2016-09 includes the following changes to the accounting for share-based payments that have the potential to impact the Company’s reported financial results:
ASU 2016-09 is effective for the Company on January 1, 2017. Early adoption is permitted as long as the entire ASU is early adopted. The Company early adopted the entire ASU during the first quarter of 2016. In connection with the early adoption of ASU 2016-09, the Company changed its accounting policy related to forfeitures. The Company’s previous accounting policy was to adjust compensation expense for estimated forfeitures. With the adoption of ASU 2016-09, the Company changed its accounting policy to adjust compensation expense for actual forfeitures and recorded an immaterial cumulative-effect adjustment to beginning total equity as disclosed in the Consolidated Statements of Changes in Equity. The Company did not adjust any balances related to prior periods as a result of adopting ASU 2016-09.
In the fourth quarter of 2016, Accounting Standards Update 2016-18 (“ASU 2016-18”), Statement of Cash Flows (Topic 230) – Restricted Cash, was issued. ASU 2016-18 requires entities to show the changes in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the statement of cash flows. Previous guidance required the change in cash and cash equivalents be shown on the statement of cash flows, with cash used to fund restricted cash and restricted cash equivalents shown as a component of operating, investing, or financing activities. Entities are now also required to reconcile the total of cash, cash equivalents, restricted cash, and restricted cash equivalents as presented in the statement of cash flows to the related captions in the balance sheet when these balances are presented separately in the balance sheet. ASU 2016-18 is effective January 1, 2018 for the Company, with retrospective application required. The Company early adopted ASU 2016-18 as permitted in the fourth quarter of 2016. The adoption of ASU 2016-18 had the following impact on the Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014.
Recently Announced Accounting Pronouncements—The following table presents the accounting pronouncements that the Financial Accounting Standards Board (“FASB”) has issued and that have the potential to impact the Company but have not yet been adopted by the Company.
There were no other accounting pronouncements issued during 2017 or 2016 that have the potential to impact the Company’s consolidated financial statements.
Reclassifications—The Company has made certain immaterial reclassifications to prior-year balances to conform to current-year presentation. |
GAINS FROM MORTGAGE BANKING ACTIVITIES |
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Gains from mortgage banking activities | NOTE 3—GAINS FROM MORTGAGE BANKING ACTIVITIES
Gains from mortgage banking activities consist of the following activity for each of the years ended December 31, 2016, 2015, and 2014:
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MORTGAGE SERVICING RIGHTS |
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Mortgage Servicing Rights | NOTE 4—MORTGAGE SERVICING RIGHTS
The fair value of MSRs at December 31, 2016 and December 31, 2015 was $669.4 million and $510.6 million, respectively. The Company uses a discounted static cash flow valuation approach and the key economic assumption is the discount rate. See the following sensitivities related to the discount rate:
The impact of a 100 basis point increase in the discount rate at December 31, 2016 is a decrease in the fair value of $21.2 million to the MSRs outstanding as of December 31, 2016.
The impact of a 200 basis point increase in the discount rate at December 31, 2016 is a decrease in the fair value of $41.0 million to the MSRs outstanding as of December 31, 2016.
These sensitivities are hypothetical and should be used with caution. These estimates do not include interplay among assumptions and are estimated as a portfolio rather than individual assets.
Activity related to capitalized MSRs for the year ended December 31, 2016 and 2015 follows:
As shown in the table above, during 2016, the Company purchased the rights to service a HUD loan portfolio from a third-party servicer. The closing-date purchase price was $44.8 million of cash consideration. The amount in the ‘Purchases’ line in the table above consists of the closing amount of $44.8 million, net of purchase-price adjustments reducing the closing amount by $1.7 million, for a revised purchase amount of $43.1 million. The servicing portfolio, after consideration of purchase-price adjustments, consisted of approximately $3.6 billion of unpaid principal balance and had a weighted average estimated remaining life of 10.9 years.
The following summarizes the components of the net carrying value of the Company’s acquired and originated MSRs as of December 31, 2016 and 2015:
The expected amortization of MSRs recorded as of December 31, 2016 is shown in the table below. Actual amortization may vary from these estimates.
The Company recorded write-offs of MSRs related to loans that were repaid prior to the expected maturity and loans that defaulted. These write-offs are included as a component of Amortization and depreciation in the accompanying Consolidated Statements of Income and the MSR roll forward shown above and relate to MSRs recognized at loan sale only. Prepayment fees totaling $10.6 million, $15.0 million, and $9.3 million were collected for 2016, 2015, and 2014, respectively, and are included as a component of Other revenues in the Consolidated Statements of Income.
Management reviews the capitalized MSRs for temporary impairment quarterly by comparing the aggregate carrying value of the MSR portfolio to the aggregate estimated fair value of the portfolio. Additionally, MSRs related to Fannie Mae loans where the Company has risk-sharing obligations are assessed for permanent impairment on an asset-by-asset basis, considering factors such as debt service coverage ratio, property location, loan-to-value ratio, and property type. Except for defaulted or prepaid loans, no temporary or permanent impairment was recognized for the years ended December 31, 2016, 2015, and 2014.
The weighted average remaining life of the aggregate MSR portfolio is 7.4 years. |
GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS |
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Guaranty Obligation and Allowance for Risk-Sharing Obligations | NOTE 5—GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS
When a loan is sold under the Fannie Mae DUS program, the Company typically agrees to guarantee a portion of the ultimate loss incurred on the loan should the borrower fail to perform. The compensation for this risk is a component of the servicing fee on the loan. No guaranty is provided for loans sold under the Freddie Mac or HUD loan programs.
A summary of the Company’s guaranty obligation for the noncontingent portion of the guaranty obligation as of and for the years ended December 31, 2016 and 2015 follows:
A summary of the Company’s allowance for risk-sharing obligations for the contingent portion of the guaranty obligation as of and for the years ended December 31, 2016 and 2015 follows:
When the Company places a loan for which it has a risk-sharing obligation on its watch list, the Company ceases to amortize the guaranty obligation and transfers the remaining unamortized balance of the guaranty obligation to the allowance for risk-sharing obligations. When a loan for which the Company has a risk-sharing obligation is removed from the watch list, the loan’s reserve is transferred from the allowance for risk-sharing obligations to the guaranty obligation, and the amortization of the remaining balance over the remaining estimated life is resumed. This net transfer of the unamortized balance of the guaranty obligation from a noncontingent classification to a contingent classification (and vice versa) is presented in the guaranty obligation and allowance for risk-sharing obligations tables above as ‘Other.’
During 2016, the Company and Fannie Mae settled the loss sharing amounts related to the last three remaining previously defaulted at risk loans. As a result of these loss settlements, the Allowance for risk-sharing obligations as of December 31, 2016 is based entirely on the Company’s collective assessment of the probability of loss related to the loans on the watch list as of December 31, 2016. The write-offs in the table above are net of $0.8 million and $0 of recoveries for the years ended December 31, 2016 and 2015, respectively. The net benefit for risk-sharing obligations for the year ended December 31, 2016 is the result of the aforementioned recoveries.
As of December 31, 2016 and 2015, the maximum quantifiable contingent liability associated with the Company’s guarantees under the Fannie Mae DUS agreement was $4.9 billion. The maximum quantifiable contingent liability is not representative of the actual loss the Company would incur. The Company would be liable for this amount only if all of the loans it services for Fannie Mae, for which the Company retains some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement. |
SERVICING |
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Loans and Other Servicing Accounts | |
Servicing | |
Servicing | NOTE 6—SERVICING
The total unpaid principal balance of loans the Company was servicing for various institutional investors was $63.1 billion as of December 31, 2016 compared to $50.2 billion as of December 31, 2015. The December 31, 2016 balance includes the unamortized portion of the addition of $3.6 billion related to purchase activity as more fully discussed in NOTE 4.
As of December 31, 2016 and 2015, custodial escrow accounts relating to loans serviced by the Company totaled $1.6 billion and $1.1 billion, respectively. These amounts are not included in the accompanying consolidated balance sheets as such amounts are not Company assets. Certain cash deposits at other financial institutions exceed the Federal Deposit Insurance Corporation insured limits. The Company places these deposits with financial institutions that meet the requirements of the Agencies and where it believes the risk of loss to be minimal. |
DEBT |
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Debt | NOTE 7—DEBT
At December 31, 2016, to provide financing to borrowers under the Agencies’ programs, the Company has arranged for warehouse lines of credit in the amount of $2.1 billion with certain national banks and a $1.5 billion uncommitted facility with Fannie Mae (collectively, the “Agency Warehouse Facilities”). In support of these Agency Warehouse Facilities, the Company has pledged substantially all of its loans held for sale under the Company's approved programs. The Company’s ability to originate mortgage loans depends upon its ability to secure and maintain these types of short-term financings on acceptable terms.
Additionally, at December 31, 2016, the Company has arranged for warehouse lines of credit in the amount of $0.4 billion with certain national banks to assist in funding loans held for investment under the Interim Program (“Interim Warehouse Facilities”). The Company has pledged substantially all of its loans held for investment against these Interim Warehouse Facilities. The Company’s ability to originate loans held for investment depends upon its ability to secure and maintain these types of short-term financings on acceptable terms.
The maximum amount and outstanding borrowings under the warehouse notes payable at December 31, 2016 and 2015 follow:
30-day LIBOR was 0.77% as of December 31, 2016 and 0.43% as of December 31, 2015. Interest expense under the warehouse notes payable for the years ended December 31, 2016, 2015, and 2014 aggregated to $36.6 million, $29.2 million, and $18.2 million, respectively. Included in interest expense in 2016, 2015, and 2014 are the amortization of facility fees totaling $5.5 million, $4.5 million, and $3.4 million, respectively. The warehouse notes payable are subject to various financial covenants, and the Company was in compliance with all such covenants at December 31, 2016.
Warehouse Facilities
Agency Warehouse Facilities
The following section provides a summary of the key terms related to each of the Agency Warehouse Facilities.
Agency Warehouse Facility #1: The Company has a Warehousing Credit and Security Agreement with a national bank for a $425.0 million committed warehouse line that is scheduled to mature on October 30, 2017. The Warehousing Credit and Security Agreement provides the Company with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans. Advances are made at 100% of the loan balance and borrowings under this line bear interest at the 30-day London Interbank Offered Rate (“LIBOR”) plus 140 basis points. The Warehousing Credit and Security Agreement contains certain affirmative and negative covenants that are binding on the Company’s operating subsidiary, Walker & Dunlop, LLC (which are in some cases subject to exceptions), including, but not limited to, restrictions on its ability to assume, guarantee, or become contingently liable for the obligation of another person, to undertake certain fundamental changes such as reorganizations, mergers, amendments to the Company’s certificate of formation or operating agreement, liquidations, dissolutions or dispositions or acquisitions of assets or businesses, to cease to be directly or indirectly wholly owned by the Company, to pay any subordinated debt in advance of its stated maturity or to take any action that would cause Walker & Dunlop, LLC to lose all or any part of its status as an eligible lender, seller, servicer or issuer or any license or approval required for it to engage in the business of originating, acquiring, or servicing mortgage loans.
In addition, the Warehousing Credit and Security Agreement requires compliance with certain financial covenants, which are measured for the Company and its subsidiaries on a consolidated basis, as follows:
The Warehousing Credit and Security Agreement contains customary events of default, which are in some cases subject to certain exceptions, thresholds, notice requirements, and grace periods.
During the fourth quarter of 2016, the Company executed the 12th amendment to the credit and security agreement that extended the maturity date to October 30, 2017. No other material modifications were made to the agreement during 2016.
Agency Warehouse Facility #2:
The Company has a Warehousing Credit and Security Agreement with a syndicate of national banks for a $650.0 million committed warehouse line that is scheduled to mature on June 21, 2017. The committed warehouse facility provides the Company with the ability to fund Fannie Mae, Freddie Mac, HUD and FHA loans. Advances are made at 100% of the loan balance, and borrowings under this line bear interest at LIBOR plus 140 basis points. During the second quarter of 2016, the Company executed the eighth amendment to the amended and restated credit and security agreement that extended the maturity date to June 21, 2017. No other material modifications were made to the agreement during 2016.
The negative and financial covenants of the amended and restated warehouse agreement conform to those of the warehouse agreement for Agency Warehouse Facility #1, described above, with the exception of the leverage ratio covenant, which is not included in the warehouse agreement for Agency Warehouse Facility #2.
Agency Warehouse Facility #3:
The Company has a $680.0 million committed warehouse credit and security agreement with a national bank that is scheduled to mature on April 30, 2017. The total commitment amount of $680.0 million as of December 31, 2016 consists of a base committed amount of $280.0 million and a temporary increase of $400.0 million, as more fully described below. The committed warehouse facility provides the Company with the ability to fund Fannie Mae, Freddie Mac, HUD and FHA loans. Advances are made at 100% of the loan balance, and the borrowings under the warehouse agreement bear interest at a rate of LIBOR plus 135 basis points. During the second quarter of 2016, the Company executed the fourth amendment to the credit and security agreement that increased the committed amount to $280.0 million, decreased the interest rate to 30-day LIBOR plus 135 basis points, and extended the maturity date to April 30, 2017. Additionally, during the second and third quarters of 2016, the Company executed the fifth and sixth amendments to the credit and security agreement that provide temporary increases totaling $400.0 million to the maximum borrowing capacity that expire in January 2017. No other material modifications were made to the agreement during 2016.
The negative and financial covenants of the warehouse agreement conform to those of the warehouse agreement for Agency Warehouse Facility #1, described above. Agency Warehouse Facility #4:
The Company has a $350.0 million committed warehouse credit and security agreement with a national bank that is scheduled to mature on October 27, 2017. The committed warehouse facility provides the Company with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans. The borrowings under the warehouse agreement bear interest at a rate of 30-day LIBOR plus 140 basis points. During the fourth quarter of 2016, the Company executed the second amendment to the warehouse loan and security agreement that provided a $100.0 million permanent increase to the maximum borrowing capacity and extended the maturity date of the facility to October 27, 2017. No other material modifications were made to the agreement during 2016.
The negative and financial covenants of the warehouse agreement conform to those of the warehouse agreement for Agency Warehouse Facility #1, described above, with the exception of the leverage ratio covenant, which is not included in the warehouse agreement for Agency Warehouse Facility #4. Agency Warehouse Facility #5:
During the third quarter of 2016, the Company executed a warehousing credit and security agreement to establish Agency Warehouse Facility #5. The committed warehouse facility provides the Company with the ability to fund defaulted HUD and FHA loans. The warehouse agreement provides for a maximum borrowing amount of $30.0 million and is scheduled to mature in January 2018. The borrowings under the warehouse agreement bear interest at a rate of 30-day LIBOR plus 180 basis points. No material modifications were made to the agreement in 2016.
The negative and financial covenants of the warehouse agreement conform to those of the warehouse agreement for Agency Warehouse Facility #1, described above, with the exception of the leverage ratio covenant, which is not included in the warehouse agreement for Agency Warehouse Facility #5.
Uncommitted Agency Warehouse Facility:
The Company has a $1.5 billion uncommitted facility with Fannie Mae under its ASAP funding program. After approval of certain loan documents, Fannie Mae will fund loans after closing and the advances are used to repay the primary warehouse line. Fannie Mae will advance 99% of the loan balance, and borrowings under this program bear interest at LIBOR plus 115 basis points, with a minimum LIBOR rate of 35 basis points. There is no expiration date for this facility. During 2016, Fannie Mae increased the maximum borrowing capacity from $450.0 million to $1.5 billion. The uncommitted facility has no specific negative or financial covenants.
Interim Warehouse Facilities
The following section provides a summary of the key terms related to each of the Interim Warehouse Facilities.
Interim Warehouse Facility #1:
The Company has an $85.0 million committed warehouse line agreement that is scheduled to mature on April 30, 2017. The facility provides the Company with the ability to fund first mortgage loans on multifamily real estate properties for periods of up to three years, using available cash in combination with advances under the facility. Borrowings under the facility are full recourse to the Company. Repayments under the credit agreement are interest-only, with principal repayments made upon the earlier of the refinancing of an underlying mortgage or the maturity of an advance under the credit agreement. During the second quarter of 2016, the Company executed the sixth amendment to the credit and security agreement that extended the maturity date to April 30, 2017. No other material modifications were made to the agreement during 2016.
The facility agreement requires the Company’s compliance with the same financial covenants as Agency Warehouse Facility #1, described above, and also includes the following additional financial covenant:
Interim Warehouse Facility #2:
The Company has a $200.0 million committed warehouse line agreement that is scheduled to mature on December 13, 2017. The agreement provides the Company with the ability to fund first mortgage loans on multifamily real estate properties for periods of up to three years, using available cash in combination with advances under the facility. Borrowings under the facility are full recourse to the Company. All borrowings originally bear interest at LIBOR plus 200 basis points. The lender retains a first priority security interest in all mortgages funded by such advances on a cross-collateralized basis. Repayments under the credit agreement are interest-only, with principal repayments made upon the earlier of the refinancing of an underlying mortgage or the maturity of an advance under the credit agreement. No material modifications were made to the agreement during 2016.
The credit agreement, as amended and restated, requires the borrower and the Company to abide by the same financial covenants as Agency Warehouse Facility #1, described above, with the exception of the leverage ratio covenant, which is not included in the warehouse agreement for Interim Warehouse Facility #2. Additionally, Interim Warehouse Facility #2 has the following additional financial covenants:
Interim Warehouse Facility #3:
The Company has a $75.0 million repurchase agreement with a national bank that is scheduled to mature on May 19, 2017. The agreement provides the Company with the ability to fund first mortgage loans on multifamily real estate properties for periods of up to three years, using available cash in combination with advances under the facility. Borrowings under the facility are full recourse to the Company. The borrowings under the agreement bear interest at a rate of LIBOR plus 2.00% to 2.50% (“the spread”). The spread varies according to the type of asset the borrowing finances. Repayments under the credit agreement are interest-only, with principal repayments made upon the earlier of the refinancing of an underlying mortgage or the maturity of an advance under the credit agreement. During the second quarter of 2016, the Company exercised its option to extend the maturity date of the repurchase agreement to May 19, 2017. Additionally, the Company executed the second amendment to the repurchase agreement that provides the Company with an additional unilateral option to extend the maturity date one year. As a result of the amendment, the Company now has three remaining one-year options that, if exercised, extend the maturity date through May 19, 2020. No other material modifications were made to the agreement during 2016.
The Repurchase Agreement requires the borrower and the Company to abide by the following financial covenants:
The agreements above contain cross-default provisions, such that if a default occurs under any of the Company’s debt agreements, generally the lenders under the other debt agreements could also declare a default. As of December 31, 2016, the Company was in compliance with all of its warehouse line covenants.
Note Payable
On December 20, 2013, the Company entered into a $175.0 million senior secured term loan credit agreement (the “Term Loan Agreement”) that was issued at a discount of 1.0%. At any time, the Company may also elect to request the establishment of one or more incremental term loan commitments to make up to three additional term loans in an aggregate principal amount not to exceed $60.0 million.
The term loan requires certain mandatory prepayments in certain circumstances pursuant to the terms of the Term Loan Agreement. In April of 2015, the Company made a mandatory prepayment of $3.6 million. In connection with the mandatory prepayment, the Company’s quarterly principal installments were reduced to $0.3 million from $0.4 million, beginning with the June 30, 2015 principal payment. The final principal installment of the term loan is required to be paid in full on the maturity date of December 20, 2020 (or, if earlier, the date of acceleration of the term loan pursuant to the terms of the Term Loan Agreement) and will be in an amount equal to the aggregate outstanding principal of the term loan on such date (together with all accrued interest thereon).
At the Company’s election, the term loan will bear interest at either (i) the “Base Rate” plus an applicable margin or (ii) the London Interbank Offered Rate (“LIBOR Rate”) plus an applicable margin, subject to adjustment if an event of default under the Term Loan Agreement has occurred and is continuing with a minimum LIBOR Rate of 1.0%. The “Base Rate” means the highest of (a) the Agent’s “prime rate,” (b) the federal funds rate plus 0.50% and (c) LIBOR for an interest period of one month plus 1%. In each case, the applicable margin is determined by the Company’s Consolidated Corporate Leverage Ratio (as defined in the Term Loan Agreement). If such Consolidated Corporate Leverage Ratio is greater than 2.50 to 1.00, the applicable margin will be 4.50% for LIBOR Rate loans and 3.50% for Base Rate loans, and if such Consolidated Corporate Leverage Ratio is less than or equal to 2.50 to 1.00, the applicable margin will be 4.25% for LIBOR Rate loans and 3.25% for Base Rate loans. The calculated Consolidated Corporate Leverage Ratio dropped to below 2.50 in 2014. Consequently, the applicable margin is 4.25% for LIBOR Rate loans and 3.25% for Base Rate loans as of December 31, 2016.
The obligations of the Company under the Term Loan Agreement are guaranteed by Walker & Dunlop Multifamily, Inc.; Walker & Dunlop, LLC; Walker & Dunlop Capital, LLC; and W&D BE, Inc., each of which is a direct or indirect wholly owned subsidiary of the Company (together with the Company, the “Loan Parties”), pursuant to a Guarantee and Collateral Agreement entered into on December 20, 2013 among the Loan Parties and the Agent (the “Guarantee and Collateral Agreement”). Subject to certain exceptions and qualifications contained in the Term Loan Agreement, the Company is required to cause any newly created or acquired subsidiary, unless such subsidiary has been designated as an Excluded Subsidiary (as defined in the Term Loan Agreement) by the Company in accordance with the terms of the Term Loan Agreement, to guarantee the obligations of the Company under the Term Loan Agreement and become a party to the Guarantee and Collateral Agreement. The Company may designate a newly created or acquired subsidiary as an Excluded Subsidiary so long as certain conditions and requirements provided for in the Term Loan Agreement are met.
The Term Loan Agreement contains certain affirmative and negative covenants that are binding on the Loan Parties, including, but not limited to, restrictions (subject to specified exceptions and qualifications) on the ability of the Loan Parties to incur indebtedness, to create liens on their property, to make investments, to merge, consolidate or enter into any similar combination, or enter into any asset disposition of all or substantially all assets, or liquidate, wind-up or dissolve, to make asset dispositions, to declare or pay dividends or make related distributions, to enter into certain transactions with affiliates, to enter into any negative pledges or other restrictive agreements, to engage in any business other than the business of the Loan Parties as of the date of the Term Loan Agreement and business activities reasonably related or ancillary thereto, to amend certain material contracts or to enter into any sale leaseback arrangements.
In addition, the Term Loan Agreement requires the Company to abide by certain financial covenants calculated for the Company and its subsidiaries on a consolidated basis as follows:
The Term Loan Agreement contains customary events of default (which are in some cases subject to certain exceptions, thresholds, notice requirements and grace periods), including, but not limited to, non-payment of principal or interest or other amounts, misrepresentations, failure to perform or observe covenants, cross-defaults with certain other indebtedness or material agreements, certain change in control events, voluntary or involuntary bankruptcy proceedings, failure of the Term Loan Agreement or other loan documents to be valid and binding, and certain ERISA events and judgments. As of December 31, 2016, the Company was in compliance with all covenants related to the Term Loan Agreement.
The following table shows the components of the note payable as of December 31, 2016 and 2015:
The scheduled maturities, as of December 31, 2016, for the aggregate of the warehouse notes payable and the note payable is shown below. The warehouse notes payable obligations are incurred in support of the related loans held for sale and loans held for investment. Amounts advanced under the warehouse notes payable for loans held for sale are included in the subsequent year as the amounts are usually drawn and repaid within 60 days. The amounts included below related to the note payable include only the quarterly and final principal payments required by the related credit agreement (i.e., the non-contingent payments) and do not include any principal payments that are contingent upon Company cash flow, as defined in the credit agreement (i.e., the contingent payments). The maturities below are in thousands.
All of the debt instruments, including the warehouse facilities, are senior obligations of the Company. All warehouse notes payable balances associated with loans held for sale and outstanding as of December 31, 2016 were or will be repaid in 2017. |
GOODWILL AND OTHER INTANGIBLE ASSETS |
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Goodwill and Other Intangible Assets | NOTE 8—GOODWILL AND OTHER INTANGIBLE ASSETS
A summary of the Company’s goodwill as of and for the year ended December 31, 2016 and 2015 follows:
The addition from acquisitions shown in the table above relates to an immaterial acquisition completed on November 28, 2016. The Company purchased certain assets and assumed certain liabilities of George Elkins Mortgage Banking Company (“Elkins”), a small regional commercial mortgage banking company based in California, for $6.5 million in cash. Substantially all of the value associated with Elkins related to its assembled workforce and commercial lending platform, resulting in $6.1 million of goodwill. The goodwill is expected to be tax deductible over 15 years. The other assets acquired included an immaterial mortgage pipeline intangible asset and cash of $150 thousand, with no liabilities assumed. The operations of Elkins have been merged into the Company’s existing operations. As noted above in NOTE 2, all goodwill, including the goodwill resulting from the acquisition of Elkins, is allocated to the Company’s one reporting unit.
The fair value of consideration transferred was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date, with the remaining unallocated amount recognized as goodwill. The fair value assigned to the identifiable intangible assets acquired was determined using the market and income approaches.
As of December 31, 2016, the Company has fully amortized all intangible assets obtained from acquisitions. |
FAIR VALUE MEASUREMENTS |
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Fair Value Measurements | NOTE 9—FAIR VALUE MEASUREMENTS
The Company uses valuation techniques that are consistent with the market approach, the income approach, and/or the cost approach to measure assets and liabilities that are measured at fair value. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, accounting standards establish a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
The Company's MSRs are measured at fair value on a nonrecurring basis. That is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The Company's MSRs do not trade in an active, open market with readily observable prices. While sales of multifamily MSRs do occur on occasion, precise terms and conditions vary with each transaction and are not readily available. Accordingly, the estimated fair value of the Company’s MSRs was developed using discounted cash flow models that calculate the present value of estimated future net servicing income. The model considers contractually specified servicing fees, prepayment assumptions, delinquency rates, late charges, other ancillary revenue, costs to service, and other economic factors. The Company periodically reassesses and adjusts, when necessary, the underlying inputs and assumptions used in the model to reflect observable market conditions and assumptions that a market participant would consider in valuing an MSR asset. MSRs are carried at the lower of amortized cost or fair value.
A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company's assets and liabilities carried at fair value:
The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of December 31, 2016 and 2015, segregated by the level of the valuation inputs within the fair value hierarchy used to measure fair value:
There were no transfers between any of the levels within the fair value hierarchy during the years ended December 31, 2016 and 2015.
Derivative instruments (Level 3) are outstanding for short periods of time (generally less than 60 days). A roll forward of derivative instruments is presented below:
The following table presents information about significant unobservable inputs used in the recurring measurement of the fair value of the Company’s Level 3 assets and liabilities as of December 31, 2016:
The carrying amounts and the fair values of the Company's financial instruments as of December 31, 2016 and December 31, 2015 are presented below:
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and Cash Equivalents and Restricted Cash—The carrying amounts approximate fair value because of the short maturity of these instruments (Level 1).
Pledged Securities—Consist of highly liquid investments in money market accounts invested in government securities and investments in government guaranteed securities. Investments generally have maturities of 90 days or less and are valued using quoted market prices from recent trades.
Loans Held For Sale—Consist of originated loans that are generally transferred or sold within 60 days from the date that a mortgage loan is funded and are valued using discounted cash flow models that incorporate observable prices from market participants.
Loans Held For Investment—Consist of originated interim loans which the Company expects to hold for investment for the term of the loan, which is three years or less, and are valued using discounted cash flow models that incorporate primarily observable inputs from market participants and also credit-related adjustments, if applicable (Level 3). As of December 31, 2016 and December 31, 2015, no credit-related adjustments were required.
Derivative Instruments—Consist of interest rate lock commitments and forward sale agreements. These instruments are valued using discounted cash flow models developed based on changes in the U.S. Treasury rate and other observable market data. The value is determined after considering the potential impact of collateralization, adjusted to reflect nonperformance risk of both the counterparty and the Company.
Warehouse Notes Payable—Consist of borrowings outstanding under warehouse line agreements. The borrowing rates on the warehouse lines are based upon 30-day LIBOR plus a margin. The unpaid principal balance of warehouse notes payable approximates fair value because of the short maturity of these instruments and the monthly resetting of the index rate to prevailing market rates (Level 2).
Note Payable—Consists of borrowings outstanding under a term note agreement. The borrowing rate on the note payable is based upon 30-day LIBOR plus an applicable margin. The Company estimates the fair value by discounting the future cash flows at market rates (Level 2).
Fair Value of Derivative Instruments and Loans Held for Sale—In the normal course of business, the Company enters into contractual commitments to originate and sell multifamily mortgage loans at fixed prices with fixed expiration dates. The commitments become effective when the borrowers "lock-in" a specified interest rate within time frames established by the Company. All mortgagors are evaluated for creditworthiness prior to the extension of the commitment. Market risk arises if interest rates move adversely between the time of the "lock-in" of rates by the borrower and the sale date of the loan to an investor.
To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, the Company's policy is to enter into a sale commitment with the investor simultaneous with the rate lock commitment with the borrower. The sale contract with the investor locks in an interest rate and price for the sale of the loan. The terms of the contract with the investor and the rate lock with the borrower are matched in substantially all respects, with the objective of eliminating interest rate risk to the extent practical. Sale commitments with the investors have an expiration date that is longer than our related commitments to the borrower to allow, among other things, for the closing of the loan and processing of paperwork to deliver the loan into the sale commitment.
Both the rate lock commitments to borrowers and the forward sale contracts to buyers are undesignated derivatives and, accordingly, are marked to fair value through Gains on mortgage banking activities in the Consolidated Statements of Income. The fair value of the Company's rate lock commitments to borrowers and loans held for sale and the related input levels includes, as applicable:
The fair value of the Company's forward sales contracts to investors considers effects of interest rate movements between the trade date and the balance sheet date (Level 2). The market price changes are multiplied by the notional amount of the forward sales contracts to measure the fair value.
The assumed gain considers the amount that the Company has discounted the price to the borrower from par for competitive reasons, if at all, and the expected net cash flows from servicing to be received upon sale of the loan (Level 2). The fair value of the expected net cash flows associated with servicing the loan is calculated pursuant to the valuation techniques applicable to MSRs (Level 2).
To calculate the effects of interest rate movements, the Company uses applicable published U.S. Treasury prices, and multiplies the price movement between the rate lock date and the balance sheet date by the notional loan commitment amount (Level 2).
The fair value of the Company's forward sales contracts to investors considers the market price movement of the same type of security between the trade date and the balance sheet date (Level 2). The market price changes are multiplied by the notional amount of the forward sales contracts to measure the fair value.
The fair value of the Company’s interest rate lock commitments and forward sales contracts is adjusted to reflect the risk that the agreement will not be fulfilled. The Company’s exposure to nonperformance in interest rate lock commitments and forward sale contracts is represented by the contractual amount of those instruments. Given the credit quality of our counterparties and the short duration of interest rate lock commitments and forward sale contracts, the risk of nonperformance by the Company’s counterparties has historically not been significant (Level 3).
The following table presents the components of fair value and other relevant information associated with the Company’s derivative instruments and loans held for sale as of December 31, 2016 and 2015.
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LITIGATION, COMMITMENTS, AND CONTINGENCIES |
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Litigation, Commitments, and Contingencies | NOTE 10—LITIGATION, COMMITMENTS, AND CONTINGENCIES
Fannie Mae DUS Related Commitments—Commitments for the origination and subsequent sale and delivery of loans to Fannie Mae represent those mortgage loan transactions where the borrower has locked an interest rate and scheduled closing and the Company has entered into a mandatory delivery commitment to sell the loan to Fannie Mae. As discussed in NOTE 9, the Company accounts for these commitments as derivatives recorded at fair value.
The Company is generally required to share the risk of any losses associated with loans sold under the Fannie Mae DUS program. The Company is required to secure these obligations by assigning restricted cash balances and 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 restricted liquidity 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. Restricted liquidity held in the form of money market funds holding U.S. Treasuries is discounted 5% for purposes of calculating compliance with the restricted liquidity requirements. As of December 31, 2016, the Company held substantially all of its restricted liquidity in money market funds holding U.S. Treasuries. Additionally, substantially all of the loans for which the Company has risk sharing are Tier 2 loans.
The Company is in compliance with the December 31, 2016 collateral requirements as outlined above. As of December 31, 2016, reserve requirements for the December 31, 2016 DUS loan portfolio will require the Company to fund $54.0 million in additional restricted liquidity over the next 48 months, assuming no further principal paydowns, prepayments, or defaults within the at risk portfolio. Fannie Mae periodically reassesses the DUS Capital Standards and may make changes to these standards in the future. The Company generates sufficient cash flow from its operations to meet these capital standards and does not expect any future changes to have a material impact on its future operations; however, any future changes to collateral requirements may adversely impact the Company’s available cash.
Fannie Mae has established benchmark standards for capital adequacy, and reserves the right to terminate the Company's servicing authority for all or some of the portfolio if at any time it determines that the Company's financial condition is not adequate to support its obligations under the DUS agreement. The Company is required to maintain acceptable net worth as defined in the agreement, and the Company satisfied the requirements as of December 31, 2016. The net worth requirement is derived primarily from unpaid balances on Fannie Mae loans and the level of risk sharing. At December 31, 2016, the net worth requirement was $129.6 million, and the Company's net worth was $633.2 million, as measured at our wholly owned operating subsidiary, Walker & Dunlop, LLC. As of December 31, 2016, the Company was required to maintain at least $25.1 million of liquid assets to meet operational liquidity requirements for Fannie Mae, Freddie Mac, HUD, and Ginnie Mae. As of December 31, 2016, the Company had operational liquidity of $115.8 million, as measured at our wholly owned operating subsidiary, Walker & Dunlop, LLC.
Other Commitments—Under certain limited circumstances, the Company may make preferred equity investments in entities controlled by certain of its borrowers that will assist those borrowers to acquire and reposition properties. The terms of such investments are negotiated with each investment. As of December 31, 2016, the Company has made commitments to fund such preferred equity investments in monthly installments totaling $42.8 million, $24.8 million of which has been funded. The Company expects to fund the remaining commitment amount over the next 12 months.
Litigation—In the ordinary course of business, the Company may be party to various claims and litigation, none of which the Company believes is material. The Company cannot predict the outcome of any pending litigation and may be subject to consequences that could include fines, penalties, and other costs, and the Company’s reputation and business may be impacted. The Company believes that any liability that could be imposed on the Company in connection with the disposition of any pending lawsuits would not have a material adverse effect on its business, results of operations, liquidity, or financial condition.
Lease Commitments—In the normal course of business, the Company enters into lease arrangements for all of its office space. All such lease arrangements are accounted for as operating leases. Rent expense related to these lease agreements is recognized on the straight-line basis over the term of the lease. Rent expense was $6.4 million, $5.9 million, and $5.1 million for the years ended December 31, 2016, 2015, and 2014, respectively.
Minimum cash basis operating lease commitments follow (in thousands):
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Share-Based Payment | NOTE 11—SHARE-BASED PAYMENT
As of December 31, 2016, there were 8.5 million shares of stock authorized for issuance to directors, officers, and employees under the 2015 Equity Incentive Plan. At December 31, 2016, 2.9 million shares remain available for grant under the 2015 Equity Incentive Plan.
During 2016, 2015, and 2014, the Company granted stock options to executive officers under the 2015 Equity Incentive Plan and restricted shares to officers, employees, and non-employee directors, without cost to the grantee. During 2016, 2015, and 2014, the Company also granted 0.5 million, zero, and 0.6 million RSUs, respectively, to the officers and certain other employees in connection with PSPs. The Company granted the RSUs at the maximum performance thresholds for each metric each year. As of December 31, 2016, all of these RSUs are unvested and outstanding.
The performance period for the 2014 PSP concluded on December 31, 2016. The two performance goals related to the 2014 PSP were met at varying levels. Accordingly, 0.6 million shares related to the 2014 PSP vested in the first quarter of 2017. As of December 31, 2016, the Company concluded that the three performance targets related to the 2016 PSP were probable of achievement at varying levels.
The following table summarizes stock compensation expense for the years ended December 31, 2016, 2015, and 2014:
The restricted shares amounts in the table above include both equity-classified awards granted in restricted shares and liability-classified awards to be granted in restricted shares.
The following table summarizes restricted share activity for the year ended December 31, 2016:
The fair value of restricted share awards granted during 2016 was estimated using the closing price on the date of grant. The weighted average grant date fair values of restricted shares granted in 2015 and 2014 were $21.03 per share and $16.60 per share, respectively. The fair values of the restricted shares that vested during the years ended December 31, 2016, 2015, and 2014 were $10.3 million, $9.6 million, and $6.2 million, respectively.
As of December 31, 2016, the total unrecognized compensation cost for outstanding restricted shares was $17.5 million. As of December 31, 2016, the weighted-average period over which the unrecognized compensation cost will be recognized is 2.8 years.
The following table summarizes stock options activity for the year ended December 31, 2016:
The total intrinsic value of the stock options exercised during the years ended December 31, 2016, 2015, and 2014 was $0.2 million, $2.6 million, and less than $0.1 million, respectively. We received no cash from the exercise of options for each of the years ended December 31, 2016, 2015, and 2014.
As of December 31, 2016, the total unrecognized compensation cost for outstanding options was $1.7 million. As of December 31, 2016, the weighted-average period over which the unrecognized compensation cost will be recognized is 1.7 years.
The fair value of stock option awards granted during 2016, 2015, and 2014 were estimated on the grant date using the Black-Scholes option pricing model, based on the following inputs:
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EARNINGS PER SHARE |
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Earnings Per Share | NOTE 12—EARNINGS PER SHARE
The following weighted average shares and share equivalents are used to calculate basic and diluted earnings per share for years ended December 31, 2016, 2015, and 2014:
The assumed proceeds used for calculating the dilutive impact of restricted stock awards under the treasury method includes the unrecognized compensation costs associated with the awards. The following table presents any average outstanding options to purchase shares of common stock and average restricted shares that were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive (the exercise price of the options or the grant date market price of the restricted shares was greater than the average market price of the Company’s shares during the periods presented).
Under the 2015 Equity Incentive Plan, subject to the Company’s approval, grantees have the option of electing to satisfy tax withholding obligations at the time of vesting or exercise by allowing the Company to withhold and purchase the shares of stock otherwise issuable to the grantee. For the years ended December 31, 2016, 2015, and 2014, the Company repurchased and retired 0.2 million, 0.2 million, and 0.1 million restricted shares at a weighted average market price of $22.74, $20.11, and $15.53, upon grantee vesting, respectively.
In the first quarter of 2014, the Company repurchased 2.5 million shares of the Company’s common stock from one of its largest stockholders at the time at a price of $14.50 per share, which was below the quoted price at the time, and immediately retired the shares, reducing stockholders’ equity by approximately $35.5 million. In the first quarter of 2015, the Company repurchased 3.0 million shares of its common stock from one of its largest stockholders at the time at a price of $15.60 per share, which was below the quoted price at the time, and immediately retired the shares, reducing stockholders’ equity by $46.8 million. During the first quarter of 2016, the Company’s Board of Directors authorized the Company to repurchase up to $75.0 million of its common stock over a 12-month period. During 2016, the Company repurchased 0.4 million shares of its common stock under the share repurchase program at a weighted average price of $23.11 per share and immediately retired the shares, reducing stockholders’ equity by $9.2 million. The Company had $65.8 million of authorized share repurchase capacity remaining as of December 31, 2016. In February 2017, our Board for Directors approved a new stock repurchase program that permits the repurchase of up to $75.0 million of shares of our common stock over a 12-month period beginning on February 10, 2017. |
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INCOME TAXES | NOTE 13—INCOME TAXES
Income Tax Expense
The Company calculates its provision for federal and state income taxes based on current tax law. The reported tax provision differs from the amounts currently receivable or payable because some income and expense items are recognized in different time periods for financial reporting purposes than for income tax purposes. The following is a summary of income tax expense for the years ended December 31, 2016, 2015, and 2014:
As more fully described in NOTE 2, in 2016, the Company adopted a new accounting standard that requires excess tax benefits from stock compensation to be recorded as a reduction to income tax expense instead of being recorded directly to equity. Excess tax benefits recognized in 2016 reduced income tax expense by $0.6 million.
A reconciliation of the statutory federal tax expense to the income tax expense in the accompanying statements of income follows:
Deferred Tax Assets/Liabilities
The tax effects of temporary differences between reported earnings and taxable earnings consisted of the following:
The Company believes it is more likely than not that it will generate sufficient taxable income in future periods to realize the deferred tax assets.
Tax Uncertainties
The Company periodically assesses its liabilities and contingencies for all periods open to examination by tax authorities based on the latest available information. Where the Company believes it is more likely than not that a tax position will not be sustained, management records its best estimate of the resulting tax liability, including interest, in the consolidated financial statements. As of December 31, 2016, based on all known facts and circumstances and current tax law, management believes that there are no tax positions for which it is reasonably possible that the unrecognized tax benefits will significantly increase or decrease over the next 12 months, producing, individually or in the aggregate, a material effect on the Company’s results of operations, financial condition, or cash flows. |
SEGMENTS |
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Segments | NOTE 14—SEGMENTS
The Company is one of the leading commercial real estate services and finance companies in the United States, with a primary focus on multifamily lending. The Company originates a range of multifamily and other commercial real estate loans that are sold to the Agencies or placed with institutional investors. The Company also services nearly all of the loans it sells to the Agencies and some of the loans that it places with institutional investors. Substantially all of the Company’s operations involve the delivery and servicing of loan products for its customers. Management makes operating decisions and assesses performance based on an ongoing review of these integrated operations, which constitute the Company's only operating segment for financial reporting purposes.
The Company evaluates the performance of its business and allocates resources based on a single-segment concept. No one borrower/key principal accounts for more than 3% of our total risk-sharing loan portfolio.
An analysis of the product concentrations and geographic dispersion that impact the Company’s servicing revenue is shown in the following tables. This information is based on the distribution of the loans serviced for others. The principal balance of the loans serviced for others, by product, as of December 31, 2016, 2015, and 2014 follows:
The percentage of unpaid principal balance of the loans serviced for others as of December 31, 2016, 2015, and 2014 by geographical area, is as shown in the following table. No other state accounted for more than 5% unpaid principal balance and related servicing revenues in any of the years presented. The Company does not have any operations outside of the United States.
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OTHER OPERATING EXPENSES |
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Other Operating Expenses | NOTE 15—OTHER OPERATING EXPENSES
The following is a summary of the major components of other operating expenses for the years ended December 31, 2016, 2015, and 2014.
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QUARTERLY RESULTS (UNAUDITED) |
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Quarterly Results (Unaudited) | NOTE 16—QUARTERLY RESULTS (UNAUDITED)
The following table sets forth unaudited selected financial data and operating information on a quarterly basis as of and for the years ended December 31, 2016 and 2015:
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SUBSEQUENT EVENTS |
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SUBSEQUENT EVENTS | |
Subsequent Events | NOTE 17—SUBSEQUENT EVENTS
On January 30, 2017, the Company completed the acquisition of certain assets and assumption of certain liabilities of Deerwood Real Estate Capital, LLC (“Deerwood”), a regional commercial mortgage banking company based in the greater New York City area, for $15.0 million cash. Prior to the acquisition, Deerwood engaged in commercial real estate loan brokerage services across the United States, with a primary focus in the Greater New York City area. The acquisition expands the Company’s network of loan originators and provides further diversification to its loan origination platform by allowing the Company to significantly increase its commercial lending platform in the greater New York City area. The purchase agreement provides for an earnout over the three-year period following the acquisition if certain revenue targets are met.
The Company has not completed the accounting for the Deerwood acquisition as of the issuance date of these financial statements. Therefore, disclosures relating to the goodwill recognized, if any, the amount of contingent consideration recognized, if any, and the fair value of the assets acquired and liabilities assumed could not be presented. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Consolidation | Principles of Consolidation—The consolidated financial statements include the accounts of the Company and all of its consolidated entities. All intercompany transactions have been eliminated. When the Company has significant influence over operating and financial decisions for an entity but does not own a majority of the voting interests, the Company accounts for the investment using the equity method of accounting. |
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Subsequent Events | Subsequent Events—The Company has evaluated the effects of all events that have occurred subsequent to December 31, 2016. There have been no material events that would require recognition in the consolidated financial statements. The Company has made certain disclosures in the notes to the consolidated financial statements of events that have occurred subsequent to December 31, 2016. No other material subsequent events have occurred that would require disclosure. |
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Use of Estimates | Use of Estimates—The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, including guaranty obligations, allowance for risk-sharing obligations, allowance for loan losses, capitalized mortgage servicing rights, derivative instruments, and the disclosure of contingent assets and liabilities. Actual results may vary from these estimates. |
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Gains from Mortgage Banking Activities and Mortgage Servicing Rights | Gains from Mortgage Banking Activities and Mortgage Servicing Rights—Gains from mortgage banking activities income is recognized when the Company records a derivative asset upon the commitment to originate a loan with a borrower and sell the loan to an investor. This commitment asset is recognized at fair value, which reflects the fair value of the contractual loan origination related fees and sale premiums, net of any co-broker fees, and the estimated fair value of the expected net cash flows associated with the servicing of the loan, net of the estimated net future cash flows associated with any guaranty obligations retained. For loans the Company brokers, gains from mortgage banking activities are recognized when the loan is closed and represent the origination fee earned by the Company. The co-broker fees for the years ended December 31, 2016, 2015, and 2014 were $35.8 million, $18.0 million, and $15.9 million, respectively. Transfer of financial assets is reported as a sale when (a) the transferor surrenders control over those assets, (b) the transferred financial assets have been legally isolated from the Company’s creditors, (c) the transferred assets can be pledged or exchanged by the transferee, and (d) consideration other than beneficial interests in the transferred assets is received in exchange. The transferor is considered to have surrendered control over transferred assets if, and only if, certain conditions are met. The Company determined that all loans sold during the periods presented met these specific conditions and accounted for all transfers of loans held for sale as completed sales. When a loan is sold, the Company retains the right to service the loan and initially recognizes an individual mortgage servicing right (“MSR”) for the loan sold at fair value. The initial capitalized amount is equal to the estimated fair value of the expected net cash flows associated with servicing the loans, net of the expected net cash flows associated with any guaranty obligations. The following describes the principal assumptions used in estimated capitalized MSRs: Discount rate—Depending upon loan type, the discount rate used is management's best estimate of market discount rates. The rates used for loans sold were 10% to 15% for each of the periods presented and varied based on loan type.
Estimated Life—The estimated life of the MSRs is derived based upon the stated yield maintenance and/or prepayment protection term of the underlying loan and may be reduced by 6 to 12 months based upon the expiration of various types of prepayment penalty and/or lockout provisions prior to that stated maturity date. The Company’s historical experience is that the prepayment provisions typically do not provide a significant deterrent to a borrower’s paying off the loan within 6 to 12 months of the expiration of the prepayment provisions.
Servicing Cost—The estimated future cost to service the loan for the estimated life of the MSR is subtracted from the estimated future cash flows.
The assumptions used to estimate the fair value of MSRs at loan sale are based on internal models and are compared to assumptions used by other market participants periodically. When such comparisons indicate that these assumptions have changed significantly, the Company adjusts its assumptions accordingly. Subsequent to the initial measurement date, MSRs are amortized using the interest method over the period that servicing income is expected to be received and presented as a component of Amortization and depreciation in the Consolidated Statements of Income. For MSRs recognized at loan sale, the individual loan-level MSR is written off through a charge to Amortization and depreciation when a loan prepays, defaults, or is probable of default. We evaluate MSRs for impairment quarterly. The Company tests for impairment on the purchased stand-alone servicing portfolio separately from the Company’s other MSRs. The MSRs from both stand-alone portfolio purchases and from loan sales are tested for impairment at the portfolio level. The Company engages a third party to assist in determining an estimated fair value of our existing and outstanding MSRs on at least a semi-annual basis. The fair value of MSRs acquired through a stand-alone servicing portfolio purchase is equal to the purchase price paid. For purchased stand-alone servicing portfolios, we record a portfolio-level MSR asset and determine the estimated life of the portfolio based on the prepayment characteristics of the portfolio. We subsequently amortize such MSRs and test for impairment quarterly as discussed in more detail above.
For MSRs related to purchased stand-alone servicing portfolios, a constant rate of prepayments and defaults is included in the determination of the portfolio’s estimated life (and thus included as a component of the portfolio’s amortization). Accordingly, prepayments and defaults of individual MSRs do not change the level of amortization expense recorded for the portfolio unless the pattern of actual prepayments and defaults varies significantly from the estimated pattern. When such a significant difference in the pattern of estimated and actual prepayments and defaults occurs, we prospectively adjust the estimated life of the portfolio (and thus future amortization) to approximate the actual pattern observed. |
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Guaranty Obligation and Allowance for Risk-sharing Obligations | Guaranty Obligation and Allowance for Risk-sharing Obligations—When a loan is sold under the Fannie Mae DUS program, the Company undertakes an obligation to partially guarantee the performance of the loan. Upon loan sale, a liability for the fair value of the obligation undertaken in issuing the guaranty is recognized and presented as Guaranty obligation, net of accumulated amortization. The recognized guaranty obligation is the greater of the fair value of the Company’s obligation to stand ready to perform over the term of the guaranty (the noncontingent guaranty) and the fair value of the Company’s obligation to make future payments should those triggering events or conditions occur (contingent guaranty). Historically, the fair value of the contingent guaranty at inception has been de minimis; therefore, the fair value of the noncontingent guaranty has been recognized. In determining the fair value of the guaranty obligation, the Company considers the risk profile of the collateral, historical loss experience, and various market indicators. Generally, the estimated fair value of the guaranty obligation is based on the present value of the cash flows expected to be paid under the guaranty over the estimated life of the loan (historically three to five basis points per year) discounted using a 12-15 percent discount rate. The discount rate used is consistent with what is used for the calculation of the MSR for each loan. The estimated life of the guaranty obligation is the estimated period over which the Company believes it will be required to stand ready under the guaranty. Subsequent to the initial measurement date, the liability is amortized over the life of the guaranty period using the straight-line method as a component of and reduction to Amortization and depreciation in the Consolidated Statements of Income, unless, as discussed more fully below, the loan defaults or management determines that the loan’s risk profile is such that amortization should cease.
The Company monitors the performance of each risk-sharing loan for events or conditions which may signal a potential default. Our process for identifying which risk-sharing loans may be probable of loss consists of an assessment of several qualitative and quantitative factors including payment status, property financial performance, local real estate market conditions, loan-to-value ratio, debt-service-coverage ratio, and property condition. Historically, initial loss recognition occurs at or before a loan becomes 60 days delinquent. In instances where payment under the guaranty on a specific loan is determined to be probable and estimable (as the loan is probable of foreclosure or in foreclosure), the Company records a liability for the estimated allowance for risk-sharing (a “specific reserve”) through a charge to the provision for risk-sharing obligations, which is a component of Provision (benefit) for credit losses in the Consolidated Statements of Income, along with a write-off of the associated loan-specific MSR. The amount of the allowance considers the Company’s assessment of the likelihood of repayment by the borrower or key principal(s), the risk characteristics of the loan, the loan’s risk rating, historical loss experience, adverse situations affecting individual loans, the estimated disposition value of the underlying collateral, and the level of risk sharing. The estimate of property fair value at initial recognition of the allowance for risk-sharing obligations is based on appraisals, broker opinions of value, or net operating income and market capitalization rates, depending on the facts and circumstances associated with the loan. We regularly monitor the specific reserves on all applicable loans and update loss estimates as current information is received. The settlement with Fannie Mae is based on the actual sales price of the property and selling and property preservation costs and considers the Fannie Mae loss-sharing requirements.
In addition to the specific reserves discussed above, the Company also records an allowance for risk-sharing obligations related to risk-sharing loans on its watch list (“general reserves”). Such loans are not probable of foreclosure but are probable of loss as the characteristics of these loans indicate that it is probable that these loans include some losses even though the loss cannot be attributed to a specific loan. For all other risk-sharing loans not on our watch list, the Company continues to carry a guaranty obligation. The Company calculates the general reserves based on a migration analysis of the loans on its historical watch lists, adjusted for qualitative factors. When the Company places a risk-sharing loan on its watch list, the Company ceases to amortize the guaranty obligation and transfers the remaining unamortized balance of the guaranty obligation to the general reserves. The Company recognizes a provision for risk-sharing obligations to the extent the calculated general reserve exceeds the remaining unamortized guaranty obligation. If a risk-sharing loan is subsequently removed from the watch list due to improved financial performance or other factors, the Company transfers the unamortized balance of the guaranty obligation back to the guaranty obligation classification on the balance sheet and amortizes the remaining unamortized balance evenly over the remaining estimated life. For each loan for which we have a risk-sharing obligation, we record one of the following liabilities associated with that loan as discussed above: guaranty obligation, general reserve, or specific reserve. Although the liability type may change over the life of the loan, at any particular point in time, only one such liability is associated with a loan for which we have a risk-sharing obligation. The total of the specific reserves and general reserves is presented as Allowance for risk-sharing obligations in the Consolidated Balance Sheets. |
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Loans Held for Investment, net | Loans Held for Investment, net—The Company offers an interim loan program for floating-rate, interest-only loans for terms of up to three years to experienced borrowers seeking to acquire or reposition multifamily properties that do not currently qualify for permanent GSE or HUD (collectively, the “Agencies”) financing (the “Interim Program”). These loans are classified as held for investment on the Company’s consolidated balance sheet during such time that they are outstanding. The loans are carried at their unpaid principal balances, adjusted for net unamortized loan fees and costs, and net of any allowance for loan losses. Interest income is accrued based on the actual coupon rate, adjusted for the amortization of net deferred fees and costs, and is recognized as revenue when earned and deemed collectible. All loans held for investment are multifamily loans with similar risk characteristics with no geographic concentration. The Company uses the interest method to determine an effective yield to amortize the loan fees and costs on real estate loans held for investment. All loans held for investment are floating-rate loans; therefore, the Company uses the initial coupon interest rate of the loans (without regard to future changes in the underlying indices) and anticipated principal payments, if any, to determine periodic amortization. As of December 31, 2016, Loans held for investment, net consisted of 12 loans with an aggregate $222.3 million of unpaid principal balance less $1.5 million of net unamortized deferred fees and costs and $0.4 million of allowance for loan losses. As of December 31, 2015, Loans held for investment, net consisted of 13 loans with an aggregate $233.4 million of unpaid principal balance less $1.1 million of net unamortized deferred fees and costs and $0.8 million of allowance for loan losses. The Company will reclassify loans held for investment as loans held for sale if it determines that the loans will be sold or transferred to third parties. To date, the Company has not sold any of its loans held for investment. The allowance for loan losses is the Company’s estimate of credit losses inherent in the loan portfolio at the balance sheet date. The Company has established a process to determine the appropriateness of the allowance for loan losses that assesses the losses inherent in the portfolio. That process includes assessing the credit quality of each of the loans held for investment by monitoring the financial condition of the borrower and the financial trends of the underlying property. The allowance levels are influenced by the aggregate outstanding principal balance, delinquency status, historic loss experience, and other conditions influencing loss expectations, such as economic conditions. The allowance for loan losses is estimated collectively for loans with similar characteristics and for which there is no evidence of impairment. The collective allowance is based on recent historical loss probability and historical loss rates incurred in our risk-sharing portfolio, adjusted as needed for current market conditions. We use the loss experience from our risk-sharing portfolio as a proxy for losses incurred in our loans held for investment portfolio since (i) we have not experienced any actual losses related to our loans held for investment to date and (ii) the loans in the loans-held-for-investment portfolio have similar characteristics to loans held in the risk-sharing portfolio. The allowance for loan losses recorded as of December 31, 2016 and December 31, 2015 is based on the Company’s collective assessment of the portfolio. Loans held for investment are placed on non-accrual status when full and timely collection of interest or principal is not probable. Loans held for investment are considered past due when contractually required principal or interest payments have not been made on the due dates and are charged off when the loan is considered uncollectible. The Company evaluates all loans held for investment for impairment. A loan is considered impaired when the Company believes that the facts and circumstances of the loan suggest that the Company will not be able to collect all contractually due principal and interest. Delinquency status and property financial condition are key components of the Company’s consideration of impairment status. None of the loans held for investment was delinquent, impaired, or on non-accrual status as of December 31, 2016 or December 31, 2015. Additionally, we have not experienced any delinquencies related to these loans or charged off any loan held for investment since the inception of the Interim Program in 2012. |
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Provision (Benefit) for Credit Losses |
Provision (Benefit) for Credit Losses—The Company records the income statement impact of the changes in the allowance for loan losses and the allowance for risk-sharing obligations within Provision (benefit) for credit losses in the Consolidated Statements of Income. Provision (benefit) for credit losses consisted of the following activity for the years ended December 31, 2016, 2015, and 2014:
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Business Combinations | Business Combinations—The Company accounts for business combinations using the acquisition method of accounting, under which the purchase price of the acquisition is allocated to the assets acquired and liabilities assumed using the fair values determined by management as of the acquisition date. The Company recognizes identifiable assets acquired and liabilities (both specific and contingent) assumed at their fair values at the acquisition date. Furthermore, acquisition-related costs, such as due diligence, legal and accounting fees, are not capitalized or applied in determining the fair value of the acquired assets. The excess of the purchase price over the assets acquired, identifiable intangible assets and liabilities assumed is recognized as goodwill. During the measurement period, the Company records adjustments to the assets acquired and liabilities assumed with corresponding adjustment to goodwill in the reporting period in which the adjustment is identified. After the measurement period, which could be up to one year after the transaction date, subsequent adjustments are recorded to the Company’s Consolidated Statements of Income. |
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Goodwill | Goodwill—The Company evaluates goodwill for impairment annually. In addition to the annual impairment evaluation, the Company evaluates at least quarterly whether events or circumstances have occurred in the period subsequent to the annual impairment testing which indicate that it is more likely than not an impairment loss has occurred. The Company currently has only one reporting unit; therefore, all goodwill is allocated to that one reporting unit. The Company performs its impairment testing annually as of October 1. The annual impairment analysis begins by comparing the Company’s market capitalization to its net assets. If the market capitalization exceeds the net asset value, further analysis is not required, and goodwill is not considered impaired. As of the date of our latest annual impairment test, October 1, 2016, the Company’s market capitalization exceeded its net asset value by $218.6 million, or 38.5%. As of December 31, 2016, there have been no events subsequent to that analysis that are indicative of an impairment loss. |
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Derivative Assets and Liabilities | Derivative Assets and Liabilities—Certain loan commitments and forward sales commitments meet the definition of a derivative and are recorded at fair value in the Consolidated Balance Sheets. The estimated fair value of loan commitments includes the fair value of loan origination fees and premiums on anticipated sale of the loan, net of co-broker fees, and the fair value of the expected net cash flows associated with the servicing of the loan, net of any estimated net future cash flows associated with the risk-sharing obligation. The estimated fair value of forward sale commitments includes the effects of interest rate movements between the trade date and balance sheet date. Adjustments to the fair value are reflected as a component of income within Gains on mortgage banking in the Consolidated Statements of Income. |
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Loans Held for Sale | Loans Held for Sale—Loans held for sale represent originated loans that are generally transferred or sold within 60 days from the date that a mortgage loan is funded. The Company initially measures all originated loans at fair value. Subsequent to initial measurement, the Company measures all mortgage loans at fair value, unless the Company documents at the time the loan is originated that it will measure the specific loan at the lower of cost or fair value for the life of the loan. Electing to use fair value allows a better offset of the change in fair value of the loan and the change in fair value of the derivative instruments used as economic hedges. During the period prior to its sale, interest income on a loan held for sale is calculated in accordance with the terms of the individual loan. There were no loans held for sale that were valued at the lower of cost or fair value or on a non-accrual status at December 31, 2016 and 2015. |
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Share-Based Payment | Share-Based Payment—The Company recognizes compensation costs for all share-based payment awards made to employees and directors, including restricted stock, restricted stock units, and employee stock options based on the grant date fair value.
Restricted stock awards are granted without cost to the Company’s officers, employees, and non-employee directors, for which the fair value of the award was calculated as the fair value of the Company’s common stock on the date of grant.
Stock option awards are granted principally to executive officers, with an exercise price equal to the closing price of the Company’s common stock on the date of the grant, and are granted with a ten-year exercise period, vesting ratably over three years dependent solely on continued employment. To estimate the grant-date fair value of stock options, the Company uses the Black-Scholes pricing model. The Black-Scholes model estimates the per share fair value of an option on its date of grant based on the following inputs: the option’s exercise price, the price of the underlying stock on the date of the grant, the estimated option life, the estimated dividend yield, a “risk-free” interest rate, and the expected volatility. For each of the years presented, the Company used the simplified method to estimate the expected term of the options as the Company did not have sufficient historical exercise data to provide a reasonable basis for estimating the expected term. The Company uses an estimated dividend yield of zero as the Company has not historically issued dividends and does not currently pay dividends. For the “risk-free” rate, the Company uses a U.S. Treasury Bond due in a number of years equal to the option’s expected term. For all years presented in the Consolidated Statements of Income, the expected volatility was calculated based on the Company’s historical common stock volatility. The Company issues new shares from the pool of authorized but not yet issued shares when an employee exercises stock options.
Generally, the Company’s stock option and restricted stock awards for its officers and employees vest ratably over a three-year period based solely on continued employment. Restricted stock awards for non-employee directors fully vest after one year.
In 2014 and 2016, the Company offered a performance share plan (“PSP”) for the Company’s executives and certain other members of senior management. The performance period for each PSP is three full calendar years beginning on January 1 of the first year of the performance period. Participants in the PSP receive restricted stock units (“RSUs”) on the grant date for the PSP. If the performance targets are met at the end of the performance period and the participant remains employed by the Company, the participant fully vests in the RSUs, which immediately convert to unrestricted shares of common stock. If the performance targets are not met or the participant is no longer employed by the Company, the participant forfeits the RSUs. The performance targets for the 2014 PSP are based on meeting adjusted diluted earnings per share and total revenues goals. The performance targets for the 2016 PSP are based on meeting diluted earnings per share, return on equity, and total revenues goals. The Company records compensation expense for the PSP based on the grant-date fair value in an amount proportionate to the service time rendered by the participant when it is probable that the achievement of the goals will be met.
Compensation expense is adjusted for actual forfeitures and is recognized on a straight-line basis, for each separately vesting portion of the award as if the award were in substance multiple awards, over the requisite service period of the award. Share-based compensation is recognized within the income statement as Personnel, the same expense line as the cash compensation paid to the respective employees. |
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Net Warehouse Interest Income | Net Warehouse Interest Income—The Company presents 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. For the periods presented in the Consolidated Balance Sheets, all loans that were held for sale were financed with matched borrowings under our warehouse facilities incurred to fund a specific loan held for sale. A portion of all loans that are held for investment is financed with matched borrowings under our warehouse facilities. The portion of loans held for investment not funded with matched borrowings is financed with the Company’s 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. Included in Net warehouse interest income for the three and year ended December 31, 2016 and 2015 are the following components:
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Statement of Cash Flows | Statement of Cash Flows—The Company records the fair value of premiums and origination fees as a component of the fair value of derivatives when a loan intended to be sold is rate locked and records the related income within Gains from mortgage banking activities within the Consolidated Statements of Income. The cash for the origination fee is received upon closing of the loan, and the cash for the premium is received upon loan sale, resulting in a mismatch of the recognition of income and the receipt of cash in a given period when the derivative or loan held for sale remains outstanding at period end.
The Company accounts for this mismatch by recording an adjustment called Change in the fair value of premiums and origination fees within the Consolidated Statements of Cash Flows. The amount of the adjustment reflects a reduction to cash provided by or used in operations for the amount of income recognized upon rate lock (i.e., non-cash income) for derivatives and loans held for sale outstanding at period end and an increase to cash provided by or used in operations for cash received upon loan origination or sale for derivatives and loans held for sale that were outstanding at prior period end. When income recognized upon rate lock is greater than cash received upon loan origination or sale, the adjustment is a negative amount. When income recognized upon rate lock is less than cash received upon loan origination or loan sale, the adjustment is a positive amount.
As noted below in greater detail, in 2016 the Company early adopted an accounting standard related to the presentation of the statement of cash flows that requires entities to show the change in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the statement of cash flows. For presentation in the Consolidated Statements of Cash Flows, the Company considers Pledged securities, at fair value to be restricted cash equivalents. The following table presents a reconciliation of the total of cash, cash equivalents, restricted cash, and restricted cash equivalents as presented in the Consolidated Statements of Cash Flows to the related captions in the Consolidated Balance Sheets as of December 31, 2016, 2015, 2014, and 2013.
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Income Taxes | Income Taxes—The Company files income tax returns in the applicable U.S. federal, state, and local jurisdictions and generally is subject to examination by the respective jurisdictions for three years from the filing of a tax return. The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in earnings in the period when the new rate is enacted.
Deferred tax assets are recognized only to the extent that it is more likely than not that they will be realizable based on consideration of available evidence, including future reversals of existing taxable temporary differences, projected future taxable income and tax planning strategies.
The Company had no accruals for tax uncertainties as of December 31, 2016 and 2015. |
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Comprehensive Income | Comprehensive Income—For the years ended December 31, 2016, 2015, and 2014, comprehensive income equaled Net income before noncontrolling interests; therefore, a separate statement of comprehensive income is not included in the accompanying consolidated financial statements. |
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Pledged Securities | Pledged Securities—As collateral against its Fannie Mae risk-sharing obligations (NOTES 5 and 10), certain securities have been pledged to the benefit of Fannie Mae to secure the Company's risk-sharing obligations. The balance of securities pledged against Fannie Mae risk-sharing obligations and included as a component of Pledged securities, at fair value within the Consolidated Balance Sheets as of December 31, 2016 and 2015 was $80.5 million and $70.9 million, respectively. Additionally, the Company has pledged an immaterial amount of cash as collateral against its risk-sharing obligations with Fannie Mae and Freddie Mac. The pledged securities as of December 31, 2016 and 2015 consist primarily of a highly liquid investment valued using quoted market prices from recent trades, and are therefore considered restricted cash equivalents for presentation in the Consolidated Statements of Cash Flows. |
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Cash and Cash Equivalents | Cash and Cash Equivalents—The term cash and cash equivalents, as used in the accompanying consolidated financial statements, includes currency on hand, demand deposits with financial institutions, and short-term, highly liquid investments purchased with an original maturity of three months or less. The Company had no cash equivalents as of December 31, 2016 and 2015. |
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Servicing Fees and Other Receivables, Net | Servicing Fees and Other Receivables, Net—Servicing fees and other receivables, net represents amounts currently due to the Company pursuant to contractual servicing agreements, investor good faith deposits held in escrow by others, general accounts receivable, and advances of principal and interest payments and tax and insurance escrow amounts if the borrower is delinquent in making loan payments, to the extent such amounts are determined to be reimbursable and recoverable. Advances related to Fannie Mae at-risk loans may be used to reduce the amount of cash required to settle loan losses under the Company’s risk-sharing obligation with Fannie Mae. |
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Concentrations of Credit Risk | Concentrations of Credit Risk—Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents, loans held for sale, and derivative financial instruments.
The Company places the cash and temporary investments with high-credit-quality financial institutions and believes no significant credit risk exists. The counterparties to the loans held for sale and funding commitments are owners of residential multifamily properties located throughout the United States. Mortgage loans are generally transferred or sold within 60 days from the date that a mortgage loan is funded. There is no material counterparty risk with respect to the Company's funding commitments as each potential borrower must make a non-refundable good faith deposit when the funding commitment is executed. The counterparty to the forward sale is Fannie Mae, Freddie Mac, or a broker-dealer that has been determined to be a credit-worthy counterparty by us and our warehouse lenders. There is a risk that the purchase price agreed to by the investor will be reduced in the event of a late delivery. The risk for non-delivery of a loan primarily results from the risk that a borrower does not close on the funding commitment in a timely manner. This risk is generally mitigated by the non-refundable good faith deposit. |
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Recently Adopted and Recently Announced Accounting Pronouncements | Recently Adopted Accounting Pronouncements—In the second quarter of 2015, Accounting Standards Update 2015-05 (“ASU 2015-05”), Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, was issued. ASU 2015-05 provides entities with guidance on determining whether a cloud computing arrangement contains a software license that should be accounted for as internal-use software. ASU 2015-05 is effective for the annual and interim periods beginning January 1, 2016, with early adoption permitted. Entities may select retrospective or prospective adoption of ASU 2015-05. The Company prospectively adopted ASU 2015-05 in the first quarter of 2016. There was no impact to the Company as none of the Company’s cloud computing arrangements permits the Company the contractual right to take possession of the software.
In the first quarter of 2016, Accounting Standards Update 2016-09 (“ASU 2016-09”), Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, was issued. ASU 2016-09 includes the following changes to the accounting for share-based payments that have the potential to impact the Company’s reported financial results:
ASU 2016-09 is effective for the Company on January 1, 2017. Early adoption is permitted as long as the entire ASU is early adopted. The Company early adopted the entire ASU during the first quarter of 2016. In connection with the early adoption of ASU 2016-09, the Company changed its accounting policy related to forfeitures. The Company’s previous accounting policy was to adjust compensation expense for estimated forfeitures. With the adoption of ASU 2016-09, the Company changed its accounting policy to adjust compensation expense for actual forfeitures and recorded an immaterial cumulative-effect adjustment to beginning total equity as disclosed in the Consolidated Statements of Changes in Equity. The Company did not adjust any balances related to prior periods as a result of adopting ASU 2016-09.
In the fourth quarter of 2016, Accounting Standards Update 2016-18 (“ASU 2016-18”), Statement of Cash Flows (Topic 230) – Restricted Cash, was issued. ASU 2016-18 requires entities to show the changes in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the statement of cash flows. Previous guidance required the change in cash and cash equivalents be shown on the statement of cash flows, with cash used to fund restricted cash and restricted cash equivalents shown as a component of operating, investing, or financing activities. Entities are now also required to reconcile the total of cash, cash equivalents, restricted cash, and restricted cash equivalents as presented in the statement of cash flows to the related captions in the balance sheet when these balances are presented separately in the balance sheet. ASU 2016-18 is effective January 1, 2018 for the Company, with retrospective application required. The Company early adopted ASU 2016-18 as permitted in the fourth quarter of 2016. The adoption of ASU 2016-18 had the following impact on the Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014.
Recently Announced Accounting Pronouncements—The following table presents the accounting pronouncements that the Financial Accounting Standards Board (“FASB”) has issued and that have the potential to impact the Company but have not yet been adopted by the Company.
There were no other accounting pronouncements issued during 2017 or 2016 that have the potential to impact the Company’s consolidated financial statements. |
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Reclassifications |
Reclassifications—The Company has made certain immaterial reclassifications to prior-year balances to conform to current-year presentation. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Provision (Benefit) for Credit Losses |
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Schedule of Net Warehouse Interest Income |
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Schedule of Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents |
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Schedule of Impact of Prospective Adoption of ASU 2016-18 on the Consolidated Statements of Cash Flows |
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Summary of Expected Impact of Recently Announced Accounting Pronouncements |
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GAINS FROM MORTGAGE BANKING ACTIVITIES (Tables) |
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Schedule of Gains from Mortgage Banking Activities |
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MORTGAGE SERVICING RIGHTS (Tables) |
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Schedule of Activity Related to Capitalized MSRs |
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Summary of Components of Net Carrying Value of Acquired and Originated MSRs |
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Schedule of Expected Amortization of MSRs |
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GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS (Tables) |
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GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Activity Related to Guaranty Obligation |
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Summary of Allowance for Risk-Sharing Obligations |
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DEBT (Tables) |
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Schedule of Consolidated Corporate Leverage Ratio |
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Schedule of Maturities |
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Schedule of Debt Obligations |
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Schedule of Debt Obligations |
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GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) |
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Schedule of Goodwill |
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FAIR VALUE MEASUREMENTS (Tables) |
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Summary of Financial Assets and Financial Liabilities Measured at Fair Value on a Recurring Basis |
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Schedule of Roll Forward of Derivative Instruments |
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Schedule of Significant Unobservable Inputs Used in the Measurement of the Fair Value of Level 3 Assets and Liabilities |
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Schedule of Carrying Amounts and the Fair Values of the Company's Financial Instruments |
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Schedule of Fair Value of Derivative Instruments and Loans Held for Sale |
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LITIGATION, COMMITMENTS, AND CONTINGENCIES (Tables) |
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||
LITIGATION, COMMITMENTS, AND CONTINGENCIES | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Lease Payments |
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SHARE-BASED PAYMENT (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHARE-BASED PAYMENT | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock Compensation Expense |
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Schedule of Restricted Share Activity |
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Schedule of Stock Option Activity |
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Schedule of Stock Options Valuation Assumptions |
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EARNINGS PER SHARE (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Weighted Average Shares and Share Equivalents that are Used to Calculate Basic and Diluted Earnings Per Share |
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Schedule of Outstanding Options to Purchase Shares of Common Stock and Average Restricted Shares that were not Included in Computation of Diluted Earnings per Share |
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INCOME TAXES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Provision for Income Taxes |
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Schedule of Reconciliation of the Statutory Federal Tax Provision to Income Tax Provision |
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Schedule of Deferred Tax Assets and Liabilities |
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SEGMENTS (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Loans Serviced for Others, by Product |
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Schedule of Percentage of Unpaid Principal Balance of the Loans Serviced for Others |
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OTHER OPERATING EXPENSES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OTHER OPERATING EXPENSES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Major Components of Other Operating Expenses |
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QUARTERLY RESULTS (UNAUDITED) (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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QUARTERLY RESULTS (UNAUDITED) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Unaudited Selected Financial Data and Operating Information on a Quarterly Basis |
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ORGANIZATION (Details) - CMBS - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Consolidation | ||
Severance and other termination costs | $ 2.0 | |
Maximum | ||
Consolidation | ||
Percentage of ownership | 50.00% |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Loans Held-for-Investment, Net (Detail) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016
USD ($)
loan
|
Dec. 31, 2015
USD ($)
loan
|
|
Loans Held-for-Investment, Net | ||
Number of loans held for investment | loan | 12 | 13 |
Unpaid principal balance of loans held for investment | $ 222,300 | $ 233,400 |
Net unamortized deferred fees and costs | 1,500 | 1,100 |
Allowance for loan losses | $ 400 | 800 |
Floating Rate Loans | Maximum | ||
Loans Held-for-Investment, Net | ||
Loan term (in years) | 3 years | |
Loans Held for Investment | ||
Loans Held-for-Investment, Net | ||
Loans held for investment, delinquent | $ 0 | 0 |
Loans held for investment, impaired | 0 | 0 |
Loans, non-accrual status | $ 0 | $ 0 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Provision (Benefit) for Credit Losses (Detail) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Provision (Benefit) for Credit Losses | |||
Provision (benefit) for loan losses | $ (467) | $ (36) | $ 423 |
Provision (benefit) for risk-sharing obligations | (145) | 1,680 | 1,783 |
Provision (benefit) for credit losses | $ (612) | $ 1,644 | $ 2,206 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Goodwill (Detail) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2016
segment
|
Oct. 01, 2016
USD ($)
|
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Number of reporting units | segment | 1 | |
Market capitalization in excess net asset value | $ | $ 218.6 | |
Market capitalization in excess net asset value, percentage | 38.50% |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Loans Held-for-Sale (Detail) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Loans Held-for-Sale | ||
Loans held for sale carried at lower of cost or market. | $ 0 | $ 0 |
Loans Held for Sale | ||
Loans Held-for-Sale | ||
Period of originated loans within which they are transferred or sold | 60 days | |
Loans, non-accrual status | $ 0 | $ 0 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Share-Based Payment (Detail) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Stock options | |||
Fair value assumptions, Black-Scholes | |||
Expiration period | 10 years | ||
Vesting period | 3 years | ||
Expected dividend yield | 0.00% | 0.00% | 0.00% |
Stock options | Officers And Employees | |||
Fair value assumptions, Black-Scholes | |||
Vesting period | 3 years | ||
RSUs | 2014 PSP | |||
Fair value assumptions, Black-Scholes | |||
Vesting period | 3 years | ||
RSUs | 2016 PSP | |||
Fair value assumptions, Black-Scholes | |||
Vesting period | 3 years | ||
Restricted shares | Officers And Employees | |||
Fair value assumptions, Black-Scholes | |||
Vesting period | 3 years | ||
Restricted shares | Non-Employee Directors | |||
Fair value assumptions, Black-Scholes | |||
Vesting period | 1 year |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Net Warehouse Interest Income (Detail) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
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Loans Held for Sale | |||
Net Warehouse Interest Income | |||
Warehouse interest income | $ 47,523 | $ 37,675 | $ 24,615 |
Warehouse interest expense | (31,278) | (23,134) | (13,272) |
Net warehouse interest income | 16,245 | 14,541 | 11,343 |
Loans Held for Investment | |||
Net Warehouse Interest Income | |||
Warehouse interest income | 12,808 | 15,456 | 11,092 |
Warehouse interest expense | (5,326) | (6,037) | (4,941) |
Net warehouse interest income | $ 7,482 | $ 9,419 | $ 6,151 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Statement of Cash Flows (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
---|---|---|---|---|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||
Cash and cash equivalents | $ 118,756 | $ 136,988 | $ 113,354 | $ 170,563 |
Restricted cash | 9,861 | 5,306 | 13,854 | 5,427 |
Pledged securities, at fair value | 84,850 | 72,190 | 67,719 | 49,651 |
Total cash, cash equivalents, restricted cash, and restricted cash equivalents | $ 213,467 | $ 214,484 | $ 194,927 | $ 225,641 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Income Taxes and Pledged Securities (Detail) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
---|---|---|---|---|
Tax Uncertainties | ||||
Accruals for tax uncertainties | $ 0 | $ 0 | ||
Pledged Securities | ||||
Pledged securities, at fair value | 84,850 | 72,190 | $ 67,719 | $ 49,651 |
Fannie Mae DUS program | ||||
Pledged Securities | ||||
Pledged securities, at fair value | $ 80,500 | $ 70,900 |
GAINS FROM MORTGAGE BANKING ACTIVITIES (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
Sep. 30, 2015 |
Jun. 30, 2015 |
Mar. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
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GAINS FROM MORTGAGE BANKING ACTIVITIES | |||||||||||
Contractual loan origination related fees, net | $ 174,360 | $ 156,835 | $ 125,468 | ||||||||
Fair value of expected net future cash flows from servicing recognized at commitment | 205,311 | 142,420 | 103,410 | ||||||||
Fair value of expected guaranty obligation recognized at commitment | (12,486) | (8,789) | (6,895) | ||||||||
Total gains from mortgage banking activities | $ 117,779 | $ 100,630 | $ 102,453 | $ 46,323 | $ 76,986 | $ 70,810 | $ 69,950 | $ 72,720 | $ 367,185 | $ 290,466 | $ 221,983 |
MORTGAGE SERVICING RIGHTS - Fair Value Disclosures (Detail) - MSRs - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Servicing | ||
Fair value of the MSRs | $ 669.4 | $ 510.6 |
Sensitivity Analysis of Fair Value, example 1, impact of percent adverse change in discount rate, percent | 1.00% | |
Decrease in fair value as a result of 100 basis point increase in discount rate | $ 21.2 | |
Sensitivity Analysis of Fair Value, example 2, impact of percent adverse change in discount rate, percent | 2.00% | |
Decrease in fair value as a result of 200 basis point increase in discount rate | $ 41.0 |
MORTGAGE SERVICING RIGHTS - Summary of Components of Net Carrying Value of Acquired and Originated MSRs (Detail) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
MSRs | ||
Mortgage Servicing Rights Acquired and Originated | ||
Gross carrying value | $ 817,964 | $ 644,752 |
Accumulated amortization | (296,034) | (232,404) |
Net carrying value | 521,930 | 412,348 |
Acquired MSRs | ||
Mortgage Servicing Rights Acquired and Originated | ||
Gross carrying value | 175,934 | 132,837 |
Accumulated amortization | (104,264) | (84,754) |
Net carrying value | 71,670 | 48,083 |
Originated MSRs | ||
Mortgage Servicing Rights Acquired and Originated | ||
Gross carrying value | 642,030 | 511,915 |
Accumulated amortization | (191,770) | (147,650) |
Net carrying value | $ 450,260 | $ 364,265 |
MORTGAGE SERVICING RIGHTS - Schedule of Expected Amortization of MSRs (Detail) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
MSRs | ||
Future amortization | ||
2017 | $ 105,015 | |
2018 | 90,319 | |
2019 | 78,288 | |
2020 | 68,771 | |
2021 | 57,756 | |
Thereafter | 121,781 | |
Net carrying value | 521,930 | $ 412,348 |
Originated MSRs | ||
Future amortization | ||
2017 | 90,304 | |
2018 | 78,092 | |
2019 | 67,493 | |
2020 | 59,847 | |
2021 | 50,738 | |
Thereafter | 103,786 | |
Net carrying value | 450,260 | 364,265 |
Acquired MSRs | ||
Future amortization | ||
2017 | 14,711 | |
2018 | 12,227 | |
2019 | 10,795 | |
2020 | 8,924 | |
2021 | 7,018 | |
Thereafter | 17,995 | |
Net carrying value | $ 71,670 | $ 48,083 |
MORTGAGE SERVICING RIGHTS - Prepayment fees and Other information (Detail) - MSRs - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Servicing | |||
Expected amortization period for net carrying value | 7 years 4 months 24 days | ||
Other revenues | |||
Servicing | |||
Prepayment fees | $ 10.6 | $ 15.0 | $ 9.3 |
GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS - Schedule of Activity Related to Guaranty Obligation (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS | ||
Guaranty obligation, net of accumulated amortization - beginning balance | $ 27,570 | $ 24,975 |
Additions, following the sale of loan | 10,597 | 8,828 |
Amortization | (5,946) | (5,423) |
Other | 71 | (810) |
Guaranty obligation, net of accumulated amortization - ending balance | $ 32,292 | $ 27,570 |
GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS - Summary of Allowance for Risk-Sharing Obligations (Detail) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016
USD ($)
loan
|
Dec. 31, 2015
USD ($)
|
Dec. 31, 2014
USD ($)
|
|
Allowance for Risk-Sharing Contracts | |||
Beginning balance | $ 5,586 | $ 3,904 | |
Provision (benefit) for risk-sharing obligations | (145) | 1,680 | $ 1,783 |
Write-offs | (1,757) | (808) | |
Other | (71) | 810 | |
Ending balance | $ 3,613 | 5,586 | $ 3,904 |
Number of defaulted at risk loans on which loss sharing settlements were reached | loan | 3 | ||
Recoveries on risk-sharing obligations previously written off | $ 800 | 0 | |
Fannie Mae DUS program | |||
Allowance for Risk-Sharing Contracts | |||
Maximum quantifiable contingent liability associated with guarantees | $ 4,900,000 | $ 4,900,000 |
SERVICING - (Detail) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
Sep. 30, 2015 |
Jun. 30, 2015 |
Mar. 31, 2015 |
Dec. 31, 2014 |
---|---|---|---|---|---|---|---|---|---|
Servicing | |||||||||
Purchased servicing portfolio loans final unpaid principal balance | $ 63,081,154 | $ 59,121,989 | $ 57,321,824 | $ 51,040,752 | $ 50,212,264 | $ 47,794,561 | $ 47,713,739 | $ 46,066,660 | $ 44,031,890 |
Loans serviced | |||||||||
Servicing | |||||||||
Purchased servicing portfolio loans final unpaid principal balance | 63,100,000 | 50,200,000 | |||||||
Custodial escrow accounts | 1,600,000 | $ 1,100,000 | |||||||
HUD Loan Portfolio Acquired | |||||||||
Servicing | |||||||||
Purchased servicing portfolio loans final unpaid principal balance | $ 3,600,000 |
DEBT - Notes Payable - Summary (Detail) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2015 |
Mar. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Debt | ||||
Unpaid principal balance | $ 2,159,438 | |||
Debt issuance costs | (1,928) | $ (2,541) | ||
Carrying balance | 164,163 | 164,462 | ||
Term Loan Agreement | ||||
Debt | ||||
Quarterly equal installments | $ 300 | $ 400 | 300 | |
Unpaid principal balance | 167,327 | 168,431 | ||
Unamortized debt discount | (987) | (1,238) | ||
Debt issuance costs | (2,177) | (2,731) | ||
Carrying balance | $ 164,163 | $ 164,462 | ||
Period for amounts drawn and repaid | 60 days |
DEBT - Notes Payable - Maturities (Detail) $ in Thousands |
Dec. 31, 2016
USD ($)
|
---|---|
DEBT | |
2017 | $ 1,874,653 |
2018 | 115,048 |
2019 | 5,722 |
2020 | 164,015 |
Total | $ 2,159,438 |
GOODWILL AND OTHER INTANGIBLE ASSETS - Schedule of Goodwill (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Goodwill activity | ||
Beginning balance | $ 90,338 | $ 74,525 |
Additions from acquisitions | 6,082 | 15,713 |
Retrospective adjustments | 100 | |
Impairment | 0 | 0 |
Ending balance | $ 96,420 | $ 90,338 |
GOODWILL AND OTHER INTANGIBLE ASSETS - Additional Information (Detail) - USD ($) $ in Thousands |
Nov. 28, 2016 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|---|---|
Goodwill acquired | ||||
Goodwill. | $ 96,420 | $ 90,338 | $ 74,525 | |
Elkins Acquisition | ||||
Goodwill acquired | ||||
Purchase consideration paid in cash | $ 6,500 | |||
Goodwill. | $ 6,100 | |||
Period over which goodwill is expected to be deductible for tax purpose | 15 years | |||
Cash acquired | $ 150 |
FAIR VALUE MEASUREMENTS - Summary of Financial Assets and Financial Liabilities Measured at Fair Value on a Recurring Basis (Detail) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
---|---|---|---|---|
Assets | ||||
Loans held for sale | $ 1,858,358 | $ 2,499,111 | ||
Pledged securities | 84,850 | 72,190 | $ 67,719 | $ 49,651 |
Derivative assets | 61,824 | 11,678 | ||
Liabilities | ||||
Derivative liabilities | 4,396 | 1,333 | ||
Recurring | ||||
Assets | ||||
Loans held for sale | 1,858,358 | 2,499,111 | ||
Pledged securities | 84,850 | 72,190 | ||
Derivative assets | 61,824 | 11,678 | ||
Total financial assets | 2,005,032 | 2,582,979 | ||
Liabilities | ||||
Derivative liabilities | 4,396 | 1,333 | ||
Total financial liabilities | 4,396 | 1,333 | ||
Level 1 | Recurring | ||||
Assets | ||||
Pledged securities | 84,850 | 72,190 | ||
Total financial assets | 84,850 | 72,190 | ||
Level 2 | Recurring | ||||
Assets | ||||
Loans held for sale | 1,858,358 | 2,499,111 | ||
Total financial assets | 1,858,358 | 2,499,111 | ||
Level 3 | Recurring | ||||
Assets | ||||
Derivative assets | 61,824 | 11,678 | ||
Total financial assets | 61,824 | 11,678 | ||
Liabilities | ||||
Derivative liabilities | 4,396 | 1,333 | ||
Total financial liabilities | $ 4,396 | $ 1,333 |
FAIR VALUE MEASUREMENTS - Additional Information (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Fair Value Measurements | ||
Amount of transfers between any of the levels within the fair value hierarchy | $ 0 | $ 0 |
Maximum | ||
Fair Value Measurements | ||
Contract term | 60 days |
FAIR VALUE MEASUREMENTS - Schedule of Roll Forward of Derivative Instruments (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Derivative assets and liabilities, net | ||
Beginning balance | $ 10,345 | $ 9,658 |
Settlements | (320,102) | (289,779) |
Realized gains recorded in earnings | 309,757 | 280,121 |
Unrealized gains recorded in earnings | 57,428 | 10,345 |
Ending balance | $ 57,428 | $ 10,345 |
FAIR VALUE MEASUREMENTS - Schedule of Significant Unobservable Inputs Used in the Measurement of the Fair Value of Level 3 Assets and Liabilities (Detail) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Fair Value Measurements | ||
Derivative assets | $ 61,824 | $ 11,678 |
Derivative liabilities | 4,396 | 1,333 |
Recurring | ||
Fair Value Measurements | ||
Derivative assets | 61,824 | 11,678 |
Derivative liabilities | 4,396 | 1,333 |
Recurring | Level 3 | ||
Fair Value Measurements | ||
Derivative assets | 61,824 | 11,678 |
Derivative liabilities | 4,396 | $ 1,333 |
Recurring | Level 3 | Discounted Cash Flow | Derivative Assets | ||
Fair Value Measurements | ||
Derivative assets | 61,824 | |
Recurring | Level 3 | Derivative Liabilities | Discounted Cash Flow | ||
Fair Value Measurements | ||
Derivative liabilities | $ 4,396 |
FAIR VALUE MEASUREMENTS - Schedule of Carrying Amounts and the Fair Values of the Company's Financial Instruments (Detail) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
---|---|---|---|---|
Financial assets: | ||||
Cash and cash equivalents | $ 118,756 | $ 136,988 | $ 113,354 | $ 170,563 |
Restricted cash | 9,861 | 5,306 | 13,854 | 5,427 |
Pledged securities | 84,850 | 72,190 | $ 67,719 | $ 49,651 |
Loans held for sale | 1,858,358 | 2,499,111 | ||
Loans held for investment, net | 220,377 | 231,493 | ||
Derivative assets | 61,824 | 11,678 | ||
Financial liabilities: | ||||
Derivative liabilities | 4,396 | 1,333 | ||
Warehouse notes payable | 1,990,183 | 2,649,470 | ||
Note payable | 164,163 | 164,462 | ||
Carrying Amount | ||||
Financial assets: | ||||
Cash and cash equivalents | 118,756 | 136,988 | ||
Restricted cash | 9,861 | 5,306 | ||
Pledged securities | 84,850 | 72,190 | ||
Loans held for sale | 1,858,358 | 2,499,111 | ||
Loans held for investment, net | 220,377 | 231,493 | ||
Derivative assets | 61,824 | 11,678 | ||
Total financial assets | 2,354,026 | 2,956,766 | ||
Financial liabilities: | ||||
Derivative liabilities | 4,396 | 1,333 | ||
Warehouse notes payable | 1,990,183 | 2,649,470 | ||
Note payable | 164,163 | 164,462 | ||
Total financial liabilities | 2,158,742 | 2,815,265 | ||
Fair Value | ||||
Financial assets: | ||||
Cash and cash equivalents | 118,756 | 136,988 | ||
Restricted cash | 9,861 | 5,306 | ||
Pledged securities | 84,850 | 72,190 | ||
Loans held for sale | 1,858,358 | 2,499,111 | ||
Loans held for investment, net | 222,313 | 233,370 | ||
Derivative assets | 61,824 | 11,678 | ||
Total financial assets | 2,355,962 | 2,958,643 | ||
Financial liabilities: | ||||
Derivative liabilities | 4,396 | 1,333 | ||
Warehouse notes payable | 1,992,111 | 2,652,011 | ||
Note payable | 167,327 | 168,431 | ||
Total financial liabilities | $ 2,163,834 | $ 2,821,775 |
FAIR VALUE MEASUREMENTS - General information (Detail) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Loans Held for Sale | ||
Other information | ||
Period of originated loans within which they are transferred or sold | 60 days | |
Maximum | Pledged securities | ||
Other information | ||
Maximum term of maturity of investments | 90 days | |
Maximum | Loans Held for Investment | ||
Other information | ||
Investment period for loans held for investment | 3 years | |
Level 3 | Loans Held for Investment | ||
Other information | ||
Credit-related adjustments | $ 0 | $ 0 |
LITIGATION, COMMITMENTS, AND CONTINGENCIES - Commitments (Detail) - DUS Risk-Sharing Obligations - Fannie Mae $ in Millions |
12 Months Ended |
---|---|
Dec. 31, 2016
USD ($)
| |
LITIGATION, COMMITMENTS, AND CONTINGENCIES | |
Period of funding for collateral requirement | 48 months |
Amount of additional capital required to be funded over the next 48 months | $ 54.0 |
Net worth requirement | 129.6 |
Net worth | 633.2 |
Minimum liquid assets to be maintained to meet operational liquidity requirements | 25.1 |
Operational liquidity | $ 115.8 |
New Tier 2 loans | |
LITIGATION, COMMITMENTS, AND CONTINGENCIES | |
Collateral requirements percentage (as a percent) | 75.00% |
Period of funding for collateral requirement | 48 months |
New Tier 2 loans | Money Market Funds Holding US Treasuries | |
LITIGATION, COMMITMENTS, AND CONTINGENCIES | |
Restricted liquidity collateral reduction percentage | 5.00% |
LITIGATION, COMMITMENTS, AND CONTINGENCIES - Other Commitments (Detail) - Preferred Equity Investments - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2016 |
|
Other Commitments | ||
Investment commitments | $ 42.8 | |
Investment commitment, funded | $ 24.8 | |
Minimum | ||
Other Commitments | ||
Commitment funding period (in months) | 12 months |
LITIGATION, COMMITMENTS, AND CONTINGENCIES - Schedule of Future Minimum Lease Payments (Detail) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
LITIGATION, COMMITMENTS, AND CONTINGENCIES | |||
Rent expense | $ 6,404 | $ 5,943 | $ 5,077 |
Minimum cash basis operating lease commitments | |||
2017 | 5,328 | ||
2018 | 5,236 | ||
2019 | 4,554 | ||
2020 | 4,158 | ||
2021 | 3,743 | ||
Thereafter | 6,404 | ||
Total | $ 29,423 |
SHARE-BASED PAYMENT - Plan Information (Details) shares in Millions |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2017
shares
|
Dec. 31, 2016
item
shares
|
Dec. 31, 2015
shares
|
Dec. 31, 2014
shares
|
|
2015 Equity Incentive Plan | ||||
Share-Based Payment | ||||
Number of shares of stock authorized for issuance | 8.5 | |||
Number of shares remaining available for grant | 2.9 | |||
PSPs | RSUs | Officers And Employees | ||||
Share-Based Payment | ||||
Granted (in shares) | 0.5 | 0.0 | 0.6 | |
2014 PSP | RSUs | ||||
Share-Based Payment | ||||
Number of performance targets | item | 2 | |||
Performance shares vested | 0.6 | |||
2016 PSP | RSUs | ||||
Share-Based Payment | ||||
Number of performance targets | item | 3 |
SHARE-BASED PAYMENT - Compensation Costs (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Compensation costs | |||
Share-based compensation | $ 18,477 | $ 14,084 | $ 9,994 |
Excess tax benefit (shortfall) recognized | 631 | 1,410 | (38) |
Restricted shares | |||
Compensation costs | |||
Share-based compensation | 10,272 | 8,214 | 7,105 |
Stock options | |||
Compensation costs | |||
Share-based compensation | 1,768 | 1,957 | 1,878 |
2014 PSP | RSUs | |||
Compensation costs | |||
Share-based compensation | 3,625 | $ 3,913 | $ 1,011 |
2016 PSP | RSUs | |||
Compensation costs | |||
Share-based compensation | $ 2,812 |
SHARE-BASED PAYMENT - Fair Value Assumptions (Details) - Stock options - $ / shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Fair value assumptions, Black-Scholes | |||
Estimated option life | 6 years | 6 years | 6 years |
Risk free interest rate | 1.31% | 1.68% | 1.86% |
Expected volatility | 34.42% | 33.48% | 35.35% |
Expected dividend rate | 0.00% | 0.00% | 0.00% |
Weighted average grant date fair value per share of options granted | $ 7.21 | $ 5.90 | $ 6.35 |
EARNINGS PER SHARE - Schedule of Weighted Average Shares and Share Equivalents that are Used to Calculate Basic and Diluted Earnings Per Share (Detail) - shares shares in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Earnings per share | |||
Weighted average number of shares outstanding used to calculate basic earnings per share | 29,432 | 29,754 | 32,210 |
Dilutive securities | |||
Weighted average number of shares and share equivalents outstanding used to calculate diluted earnings per share | 31,172 | 30,949 | 32,624 |
Restricted shares and restricted share units | |||
Dilutive securities | |||
Dilutive securities | 1,403 | 952 | |
Stock options | |||
Dilutive securities | |||
Dilutive securities | 337 | 243 | 414 |
EARNINGS PER SHARE - Antidilutive securities (Detail) - shares shares in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Stock options | |||
Antidilutive Securities | |||
Shares outstanding excluded from computation of earnings per share | 181 | 611 | |
Restricted shares | |||
Antidilutive Securities | |||
Shares outstanding excluded from computation of earnings per share | 181 | 14 |
INCOME TAXES - Provision (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Current | |||
Federal | $ 28,699 | $ 29,117 | $ 19,309 |
State | 5,176 | 5,325 | 2,959 |
Total | 33,875 | 34,442 | 22,268 |
Deferred | |||
Federal | 32,159 | 14,571 | 8,862 |
State | 5,436 | 2,348 | 1,398 |
Total | 37,595 | 16,919 | 10,260 |
Items charged or credited directly to stockholders' equity | |||
Federal | 1,218 | (33) | |
State | 192 | (5) | |
Total | 1,410 | (38) | |
Income tax expense | 71,470 | $ 52,771 | $ 32,490 |
Decrease in income tax expense from recognized excess tax benefits | $ 600 |
INCOME TAXES - Statutory Reconciliation (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Statutory rate | |||
Statutory tax rate (as a percentage) | 35.00% | 35.00% | 35.00% |
Reconciliation | |||
Statutory federal expense (35%) | $ 65,023 | $ 47,378 | $ 29,369 |
Statutory state income tax expense, net of federal tax benefit | 6,714 | 4,611 | 2,805 |
Other | (267) | 782 | 316 |
Income tax expense | $ 71,470 | $ 52,771 | $ 32,490 |
INCOME TAXES - Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Deferred Tax Assets: | ||
Compensation related | $ 17,341 | $ 12,273 |
Credit losses | 1,269 | 1,994 |
Acquisition related | 1,929 | |
Other | 407 | 1,270 |
Total deferred tax assets | 19,017 | 17,466 |
Deferred Tax Liabilities: | ||
Mark-to-market of derivatives and loans held for sale | (19,934) | (9,745) |
Mortgage servicing rights related | (135,519) | (107,166) |
Acquisition related | (722) | |
Depreciation | (1,862) | (1,980) |
Total deferred tax liabilities | (158,037) | (118,891) |
Deferred tax liabilities, net | $ (139,020) | $ (101,425) |
INCOME TAXES - Tax Uncertainties (Details) |
Dec. 31, 2016
USD ($)
|
---|---|
Tax Uncertainties | |
Tax positions for which it is reasonably possible the unrecognized obligation will significantly increase or decrease over the next 12 months | $ 0 |
SEGMENTS - Concentration of Risk (Details) |
12 Months Ended |
---|---|
Dec. 31, 2016 | |
SEGMENTS | |
Maximum borrower/key principal exposure (as a percent) | 3.00% |
SEGMENTS - Product Concentration (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
Sep. 30, 2015 |
Jun. 30, 2015 |
Mar. 31, 2015 |
Dec. 31, 2014 |
---|---|---|---|---|---|---|---|---|---|
Product concentration | |||||||||
Purchased servicing portfolio loans final unpaid principal balance | $ 63,081,154 | $ 59,121,989 | $ 57,321,824 | $ 51,040,752 | $ 50,212,264 | $ 47,794,561 | $ 47,713,739 | $ 46,066,660 | $ 44,031,890 |
Fannie Mae | |||||||||
Product concentration | |||||||||
Purchased servicing portfolio loans final unpaid principal balance | 27,728,164 | 22,915,088 | 20,521,425 | ||||||
Freddie Mac | |||||||||
Product concentration | |||||||||
Purchased servicing portfolio loans final unpaid principal balance | 20,688,410 | 17,810,007 | 12,916,705 | ||||||
Ginnie Mae-HUD | |||||||||
Product concentration | |||||||||
Purchased servicing portfolio loans final unpaid principal balance | 9,155,794 | 5,657,809 | 5,828,981 | ||||||
Life insurance companies and other | |||||||||
Product concentration | |||||||||
Purchased servicing portfolio loans final unpaid principal balance | $ 5,508,786 | $ 3,829,360 | $ 4,764,779 |
OTHER OPERATING EXPENSES (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
OTHER OPERATING EXPENSES | |||
Professional fees | $ 12,089 | $ 10,936 | $ 11,117 |
Travel and entertainment | 7,004 | 6,461 | 4,267 |
Rent | 6,404 | 5,943 | 5,077 |
Marketing and preferred broker | 5,607 | 4,599 | 3,693 |
Office expenses | 4,539 | 4,103 | 3,537 |
All other | 5,695 | 6,465 | 7,140 |
Total | $ 41,338 | $ 38,507 | $ 34,831 |
QUARTERLY RESULTS (UNAUDITED) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
Sep. 30, 2015 |
Jun. 30, 2015 |
Mar. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Unaudited selected financial data and operating information | |||||||||||
Gains from mortgage banking activities | $ 117,779 | $ 100,630 | $ 102,453 | $ 46,323 | $ 76,986 | $ 70,810 | $ 69,950 | $ 72,720 | $ 367,185 | $ 290,466 | $ 221,983 |
Servicing fees | 39,370 | 37,134 | 32,771 | 31,649 | 30,530 | 29,328 | 28,058 | 26,841 | 140,924 | 114,757 | 98,414 |
Total revenues | 178,391 | 154,786 | 147,858 | 94,241 | 121,365 | 120,786 | 113,926 | 112,121 | 575,276 | 468,198 | 360,772 |
Personnel | 73,126 | 64,377 | 55,758 | 34,230 | 49,224 | 49,328 | 45,993 | 40,045 | 227,491 | 184,590 | 149,374 |
Amortization and depreciation | 30,603 | 29,244 | 26,425 | 25,155 | 24,385 | 25,644 | 23,470 | 24,674 | 111,427 | 98,173 | 80,138 |
Total expenses | 117,210 | 106,074 | 96,152 | 70,059 | 87,493 | 87,340 | 81,284 | 76,715 | 389,495 | 332,832 | 276,860 |
Operating income | 61,181 | 48,712 | 51,706 | 24,182 | 33,872 | 33,446 | 32,642 | 35,406 | 185,781 | 135,366 | 83,912 |
Walker & Dunlop net income | $ 36,790 | $ 29,628 | $ 32,021 | $ 15,458 | $ 20,411 | $ 20,251 | $ 20,153 | $ 21,313 | $ 113,897 | $ 82,128 | $ 51,422 |
Diluted earnings per share | $ 1.16 | $ 0.96 | $ 1.05 | $ 0.50 | $ 0.67 | $ 0.66 | $ 0.67 | $ 0.66 | $ 3.65 | $ 2.65 | $ 1.58 |
Total originations | $ 6,260,898 | $ 5,032,238 | $ 5,389,276 | $ 2,615,700 | $ 4,686,283 | $ 4,936,762 | $ 3,787,305 | $ 4,348,398 | |||
Servicing portfolio | $ 63,081,154 | $ 59,121,989 | $ 57,321,824 | $ 51,040,752 | $ 50,212,264 | $ 47,794,561 | $ 47,713,739 | $ 46,066,660 | $ 63,081,154 | $ 50,212,264 | $ 44,031,890 |
SUBSEQUENT EVENTS (Details) - Deerwood - Subsequent Event $ in Millions |
Jan. 30, 2017
USD ($)
|
---|---|
Acquisition | |
Purchase consideration paid in cash | $ 15.0 |
Earn-out period for contingent consideration | 3 years |