Good morning, everyone. I'm Kelsey Duffey, Vice President of Investor Relations at Walker & Dunlop. I'd like to welcome you to Walker & Dunlop's fourth quarter and full year 2021 earnings conference call and webcast. Hosting the call today is Willy Walker, Walker & Dunlop Chairman and CEO. He's joined by Steve Theobald, Chief Financial Officer. Today's webcast is being recorded, and a replay will be available via webcast on the Walker & Dunlop Investor Relations section of our website. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you have dialed into the call and would like to ask a question at that time, please press Star nine on your touch-tone phone.
If you are accessing the webcast on your computer, please click the raise hand icon on the bottom menu bar of the webcast screen. This morning, we posted our earnings release and presentation to the Investor Relations section of our website, www.walkerdunlop.com. These Slides serve as a reference point for some of what Willy and Steve will touch on during the call. Please also note that we will reference the non-GAAP financial metric, adjusted EBITDA and adjusted diluted earnings per share during the course of this call. Please refer to the appendix of the earnings presentation for a reconciliation of these non-GAAP financial metrics. Investors are urged to carefully read the forward-looking statements language in our earnings release. Statements made on this call, which are not historical facts, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements describe our current expectations, and actual results may differ materially. Walker & Dunlop is under no obligation to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise, and we expressly disclaim any obligation to do so. More detailed information about risk factors can be found in our annual and quarterly reports filed with the SEC. I will now turn the call over to Willy.
Thank you, Kelsey, and good morning, everyone. It's a pleasure to be doing this earnings call from Walker & Dunlop's new offices in New York City. We just held our quarterly board meeting in our new corporate headquarters in Bethesda, Maryland. The building, our space, and the sense of community are truly spectacular. We decided to sign both leases in the depths of the pandemic when few others were committing to physical office space, and we are now benefiting from the collaboration, creativity, and teamwork that are happening daily in these two offices. Our continued investment in people, brand, and technology produced fantastic Q4 and full-year financial results. We generated total transaction volume of $27 billion, up 91% from last year.
Record transaction volume led to record quarterly revenues of $408 million, up 16% over last year, and diluted earnings per share of $2.42. What a quarter. Yet amongst those fantastic results, the most noteworthy is adjusted EBITDA, up 89% to $110 million on the quarter due to our continued transformation of Walker & Dunlop from a mortgage-centric finance company into a technology-enabled financial services firm. The services businesses we have been investing in over the past five years grew dramatically in Q4. Debt brokerage, where Walker & Dunlop acts as an intermediary between lenders and borrowers, increased total transaction volume by 237% in the quarter to $12.7 billion. Our largest debt brokerage quarter in W&D's history by a wide margin.
Property sales, where Walker & Dunlop acts as a broker between buyers and sellers of multifamily properties, grew to $9.3 billion during the quarter, up 226% over last year and more volume in one quarter than we did in all of 2020. These two services businesses accounted for over $20 billion of transaction volume in Q4, an incredible accomplishment and reflective of the talented professionals we have recruited to W&D, the brand we have built, and the implementation of valuable technology solutions. Since we launched our Galaxy database in early 2020, we have been reporting to investors how this data tool has helped us grow both existing and new client relationships.
This technology has given our bankers and brokers a true sales advantage and contributed to 75% of our refinancings in Q4 being new loans to Walker & Dunlop and 37% of our total transaction volume in Q4 being done with new clients to W&D. For the full year, these technology FXC numbers tell a similar story, with 71% of our refinancing being new loans to our portfolio and 30% of total transaction volume being done with new clients to Walker & Dunlop. It is the combination of our talented bankers and brokers, brand, and technology solutions that have driven these amazing results. We have grown our services businesses dramatically. We continue lending throughout the year and finished 2021 once again as Fannie Mae's largest multifamily lender and Freddie Mac's fourth-largest partner.
We ended the year neck and neck with CBRE as two of the largest providers of capital to the multifamily industry. With HUD, we had a strong fourth quarter and record year of lending, originating $2.3 billion in mortgages, largely on affordable properties. Beyond the fantastic results of our core lending and services businesses, we made three highly strategic acquisitions during the year. Zelman & Associates is our entry into market research and investment banking. Zelman's industry-leading, housing-focused research provides our bankers and brokers with market insights and intelligence that enhances their client relationships. It has been a true pleasure to have Ivy Zelman and her colleagues as part of the WD team. TapCap was acquired to lay the foundation for automating our small balance loan quoting, underwriting, and closing processes.
We rolled out our small loan quote app in Q4 and are very pleased with TapCap's technology and our client engagement with the new app. Since its launch, our site has received over 18,000 views, and we now have an email subscription list with nearly 50,000 current and prospective small loan customers. Finally, Alliant Capital is the largest and 14th acquisition in WD's history that closed right at the end of 2021. We now have the full suite of services to be a powerhouse in the affordable housing industry, one of the fastest-growing and most underserved sectors of the multifamily market. Shawn Horwitz and the Alliant team have just started working at WD, and it is a pleasure to have them with us. We are constantly focused on where we are going at Walker & Dunlop.
In a moment, I will run through the fantastic progress we have made in just one year towards achieving our five-year strategic growth plan called the Drive to '25. Given the changing economic landscape and investor questions about rising interest rates, inflation, and major macroeconomic changes and how they will impact our business, I thought it would be instructive to look back for a moment. Over the past ten years, we have had the 10-year Treasury at a low of 52 basis points and a high of 3.24%. We have had the Dow Jones Industrial Average close at a low of 10,655 and a high of 36,489. We have had three distinct presidential administrations, four acting and permanent directors of the Federal Housing Finance Agency, and three chairs of the Federal Reserve.
Yet, as you can see on this Slide, we have grown revenues at Walker & Dunlop from $152 million to $1.26 billion. Earnings per share from $1.60 to $8.15, and adjusted EBITDA from $32 million to $309 million over the past decade in a continuous, dramatic, and wildly consistent manner. By investing in new services and technology-enabled businesses, we have a business model that allows us to grow dramatically in up markets and also provide countercyclical capital when the markets dislocate. This has allowed revenues to grow at a compound annual growth rate of 24% over the past decade. EPS at a compound annual growth rate of 18%, and EBITDA at a compound annual growth rate of 25%.
We have seen plenty of change over the past decade, including a pandemic that radically changed all of our lives. Yet throughout, WD's performance has been both incredibly consistent and dramatic in terms of growth and financial performance. Now looking forward, the five-year highly ambitious strategic growth plans we launched last year, the Drive to '25, has an overreaching goal of doubling revenues from $1 billion in 2020 to $2 billion by 2025. Our progress towards the Drive to '25 after only one year is simply fantastic. We set a goal to grow our debt financing volumes to $65 billion by 2025, and in 2021, we increased it by 40% to $49 billion.
In property sales, we set a goal to grow to $25 billion by 2025, and in just one year, grew volumes by 214% to $19 billion. Our loan servicing portfolio ended 2020 at $107 billion, and we finished 2021 at $116 billion, 8% growth, which is what we need to maintain to achieve our Drive to '25 goal of $160 billion. Finally, we ended 2020 with $1.8 billion of assets under management. We set the ambitious goal to grow AUM to $10 billion by 2025, and with the acquisition of Alliant Capital, added $14 billion of assets under management and achieved our Drive to '25 goal in 2021.
Beyond these financial metrics, the Drive to '25 contains ambitious environmental, social, and governance goals, including quantitative goals to increase diversity, equity, and inclusion at W&D. W&D is in a select group of companies that published ambitious quantitative DE&I goals which are tied to senior executive compensation in our 2021 proxy statement. W&D was also just added to the 2022 Bloomberg Gender-Equality Index, which puts us among only 418 publicly traded companies in the world to be featured on this prestigious gender-focused index. While we still have a long way to go to make W&D and our industry more diverse and equitable, we were ranked number 13 on the Washington Business Journal's Corporate Diversity Index for large companies, putting us high in the ranks with some incredibly large and diverse D.C.-based companies that share our commitment to diversity and inclusion.
Finally, WD, once again, was recognized as a great place to work by Fortune Magazine, making that eight out of the last ten years we've made that list. I have always said being a great place to work is the most important honor we can receive, for if you have a great place to work, the financial results will follow, and follow they have. I'll now turn the call over to Steve to provide more detail on our fourth quarter and full-year financial performance, and I'll then come back to discuss our outlook for the future. Steve?
Thank you, Willy, and good morning, everyone. 2021 ended with very strong transaction volumes, solid earnings, and record adjusted EBITDA. In the fourth quarter, we recognized record total transaction volume of $27 billion, up 91% year over year, which drove a 16% increase in total revenues to $407 million. For the full year, total transaction volume was $68 billion, up a phenomenal 66% from 2020. 2021 revenues totaled $1.3 billion, an increase of 16% over the prior year. As we look ahead to 2022, the strength of the commercial real estate market and growth in the W&D brand and sales force set the stage for the continued growth and diversification of our business.
Q4 transaction volume was driven by debt brokerage and property sales volumes, which were up 237% and 226% respectively from the same quarter last year. The growth in our servicing portfolio, which ended the year with $116 billion of loans and a weighted average servicing fee of 24.9 basis points, generated $73 million of cash servicing fees in the fourth quarter, up 15% over Q4 2020. The increase in cash fees generated by debt brokerage, property sales, and servicing drove quarterly adjusted EBITDA to $110 million, up 89% year-over-year.
For the full year, loan origination, property sales, and servicing fees were up a combined 33% from 2020, driving 43% growth in adjusted EBITDA to $309 million, crushing our goal of double-digit EBITDA growth for the year. Q4 diluted earnings per share of $2.42 was down 7% year-over-year, reflecting the decline from last year's massive quarter of GSE lending volume. 2021 diluted EPS of $8.15 was up 6% over 2020, slightly higher than the projections we provided during our last two earnings calls. Due to the significant growth in EBITDA, we shift our business mix from lending-centric to services-centric. We are introducing an adjusted EPS metric this quarter that excludes the impacts on earnings of non-cash MSR gains, amortization and depreciation, provision for credit losses and stock compensation.
This non-GAAP metric should be useful in evaluating the cash generation capabilities of our business by eliminating the impact of the revenues and expenses associated with mortgage servicing rights. For Q4 of 2021, the adjusted earnings per share was $2.25 compared to $0.69 in the fourth quarter of last year. For all of 2021, adjusted earnings per share was $6.51 compared to $3.84 in 2020. Historically, as you can see on Slide 11, adjusted EPS has tracked closely with our adjusted EBITDA and is strongest in years with high cash revenues, including loan origination and property sales fees, escrow earnings, and servicing fees. Q4 personnel expense as a percentage of revenues was 48%, up from 45% in the fourth quarter of 2020, largely due to increases in commission expense.
Commissions represented 62% of all personnel expenses in Q4 of 2021, compared to just 53% of all personnel expenses in Q4 of last year due to our dramatic growth in transaction volumes. For the full year, personnel expense as a percentage of revenues was 48%, up from 43% in 2020. Along with the year-over-year increase in commissions expense, our elevated 2021 personnel expense ratio reflects our investments in people to launch and acquire new businesses and continue expanding our product offerings. Staying with expenses, fourth quarter other operating expenses increased year-over-year by $14.3 million, primarily due to two one-time charges. The first was a $2.7 million write-off of the deferred issuance costs related to our original senior secured term loan that we paid off in mid-December in conjunction with the Alliant acquisition.
The second one-time expense was a $7 million earn out related to the acquisition of the non-controlling interest in Walker & Dunlop Investment Sales. Due to the incredible performance of our investment sales team, this earn out was achieved well ahead of schedule. There will be no additional expense for this earn out going forward as the team has earned the entire amount. Q4 operating margin was 27%, down from 34% in the prior year due to the shift from a huge quarter of non-cash mortgage servicing rights last year to cash revenues from our servicing businesses this year, as well as the previously mentioned one-time expenses incurred during the quarter. Those one-time expenses accounted for 200 basis points of operating margin. Without them, the operating margin would have been 29% in the quarter.
Full-year operating margin was 28%, just outside of our annual target range of 29%-32%. Return on equity for the quarter was 23%, bringing our ROE to 21% for the year within our annual target range of 19%-22%. With the strong growth in our core products and the acquisitions we have completed over the past year, we are establishing 2022 financial guidance of double-digit revenue growth, double-digit earnings per share growth, and double-digit growth in adjusted EBITDA. Due to the transition of our business from lending centric to more services driven and the investments we are making in our emerging technology-enabled platforms, we are establishing an operating margin range of 26%-29% for the coming year. We are establishing an annual return on equity target range at 19%-22%.
There are several factors in our 2022 outlook that are important to mention. As we saw in 2021, the growth in our services businesses is driving cash revenues and cash earnings, pushing EBITDA to record levels. This trend should continue in 2022, yet if our GSE lending volumes expand significantly due to the increased lending caps, we could see increased non-cash revenues from mortgage servicing rights and as a result in an increase in operating margin. There's also revenue and margin upside from increases in the earnings rates on our $3.7 billion of escrows. In 2019, prior to the pandemic, we earned $56 million on our escrow deposits. Due to the dramatic drop in rates over the past two years, we only earned $8 million on these deposits in 2021. As rates move back up, we will earn more from our escrows.
Every 25 basis point increase in the deposit rate translates into approximately $9 million of additional pre-tax earnings per year. We ended the year with $306 million of cash on the balance sheet. As we saw from the market receptivity to our new debt offering in December, our current strong capital position and cash generation give us the ability to supplement our cash on hand with additional debt to continue pursuing acquisitions and recruiting top banking and brokerage talent to WD. We ended the year with a debt to adjusted EBITDA ratio of 2.4 times. Based on our expectations for EBITDA growth and deleveraging, we expect that this will drop below 2 sometime in 2022. Our strong results also allow us to continue increasing the quarterly dividend.
Yesterday, our board of directors approved a quarterly dividend of $0.60 per share, a 20% increase. This is our 4th annual increase since we initiated the dividend in February 2018 at $0.25 per share. That's a cumulative increase of 140%. The current annualized dividend of $2.40 per share represents a payout ratio of 29% on 2021 net income and 25% of 2021 adjusted EBITDA, levels that enable us to continue growing the dividend while retaining sufficient capital to continue investing in the future growth of the company. 2021 was a transformative year for Walker & Dunlop.
As we continued investing in people, brand, and technology, we saw the investments we have made in debt brokerage and property sales grow dramatically, more dramatically than ever, and made tremendous progress towards the achievement of the Drive to '25. Our current financial position is extremely strong, giving us the ability to continue investing in our new businesses to expand our product offerings while leveraging our leadership position in the debt financing and property sales markets to deliver strong financial results in 2022 and beyond. Thank you for your time this morning, and I'll now turn the call back over to Willy.
Thank you, Steve. As Steve just outlined, our financial performance and transition from a mortgage-centric finance company into a technology-enabled financial services firm is driving cash earnings, strong EBITDA growth, and the ability to continue investing in our people, brand, and technology. More and more clients are looking to WD to meet their wide range of commercial real estate needs. As huge amounts of global capital look to invest in U.S. commercial real estate, the growth opportunities for our fantastic company are almost limitless. During a recent Walker webcast, Dr. Peter Linneman stated, quote, "We are in a golden age for multifamily," unquote. We expect strong macro market dynamics in multifamily for the next several years. Limited new supply, strong rent growth, an active buyer and seller market, and relatively low interest rates to support the refinancing and acquisitions markets.
Multifamily, after enduring the great financial crisis and global pandemic exceptionally well, is viewed by many as a proxy for fixed income, with the opportunity to generate alpha from operational excellence and potential cap rate compression. In a yield-Starved world, with inflationary pressures, investing in multifamily assets and, more broadly, commercial real estate, is at the top of every large institutional investor's wish list. As one of the largest lenders and service providers to the multifamily industry, Walker & Dunlop is very well-positioned to grow transaction volumes and revenues over the coming years. The acquisition of Alliant Capital expands our presence in the affordable housing industry dramatically, giving us confidence that we will grow our lending volumes with the GSEs in 2022.
The GSE should have a new permanent FHFA director soon, and she has increased their annual lending caps and allowed the GSEs to get back to business, albeit with a continued focus on affordable lending. With the ability to now syndicate tax credits and continue providing GSE and HUD debt, Walker & Dunlop's affordable bankers and brokers now have a full suite of services to meet our clients' needs and grow transaction volumes. Alliant's development and investment partners over the past 20 years provide a wealth of new relationships that should become W&D clients. The growth in our multifamily property sales business in 2021 was simply astounding. Its leader, Kris Mikkelsen, has built piece by piece the very best multifamily investment sales team in the industry. Yet Kris Mikkelsen and his team aren't done yet.
We currently have multifamily investment sales teams in 18 of the 20 most actively traded MSAs in the United States, having just added talent in Michigan and Northern California. We will continue growing into new MSAs while also adding brokers and specialty products such as the FourPoint team we acquired in 2021 for student housing, the seniors housing team we added last year in Chicago, and our current focus on affordable and manufactured housing. As we have shown by being Fannie Mae's largest multifamily lending partner for seven of the last 10 years, there is always the opportunity to add talented bankers and brokers to expand market share in the vast multifamily landscape. Outside of multifamily, the opportunities for growth are numerous. While our mortgage banking volumes in 2021 were truly fantastic, we need to do more in office, retail, industrial, and hospitality.
There are two main reasons our expanded team of mortgage bankers doesn't do more commercial lending. The Walker & Dunlop brand in multifamily is exceedingly strong and drives outsized multifamily origination volumes, and our lack of investment sales capabilities in the other asset classes. We will focus over the coming years in expanding our lending activities on non-multifamily commercial assets and building out investment sales groups in office, retail, hospitality, and industrial. While nothing is easy, these are logical expansions of Walker & Dunlop's service offering that will drive increased transaction volumes and revenues. Technology is driving the growth of Walker & Dunlop, as well as two of our emerging businesses, our automated appraisal business Apprise and our small balance lending platform WD Express.
We continue to work closely with our dynamic and insightful joint venture partner GeoPhy to grow Apprise and apply their technology and data analytics capabilities to other areas of our business, including WD Express. We continue to develop technology that underpins these two emerging businesses, which are both extremely important to our future growth. Before I wrap up the call, I wanna put W&D's fantastic growth into a broader context. In a recent Washington Business Journal ranking of D.C.-based companies, Walker & Dunlop was listed as the 37th largest company based on total revenues. Yet our five-year total shareholder return is No. 1 for the top 50 public companies on that list. Better than Marriott, better than Lockheed Martin, better than Carlyle, and even better than CoStar. If you look at Walker & Dunlop's five-year total shareholder return compared to the 5 FAANG stocks, only Apple beats W&D.
Think about that for a moment. Those five stocks are the most technologically sophisticated mega-cap companies on Earth, and yet W&D has outperformed four of the five over a five-year period due to our team's track record of delivering consistent outperforming growth year in and year out. What is most exciting is that W&D now has the brand and scale to grow even faster. 2021 was an exceptional year. The year began with investors and capital returning to the commercial real estate markets with a vengeance, and our investments in people, brand, and technology generated record transaction volume, record revenues, and record earnings, and explosive EBITDA growth due to the transformation of our business from lending-centric to services-centric.
All this for a firm of only 1,300 people with average revenue per employee of over $1 million and the cash flow to continue investing in people, brand, technology, and growth. I often talk about the pride I take in leading this incredible company, and what amazes me is that when I reach a certain level of pride, the team invariably takes their game to the next level. Thank you to every member of the W&D team for such a successful 2021. The year was a fantastic start to the Drive to '25, and given the growth in our client base and brand, there's no reason we will not continue to knock down the various components of the plan and achieve our strategic and financial goals over the next four years.
I wanna thank everyone for joining us this morning, and I'll now turn the call over to Kelsey to open the lines for any questions.
The floor is now open for questions. At this time, if you have a question on the phone, please press Star nine, or if you're on your computer, please click the Raise Hand icon at the bottom of your webcast screen. The first question is coming from Henry Coffey of Wedbush Securities. Henry?
Henry, we don't have you yet.
There we go. Yeah, no, I just got the unmute signal. Yes, good morning. Congratulations on a great quarter and an insanely fantastic year. This is another one of those quarters where to really grab the growth, we need to jump over to the adjusted EBITDA number, and obviously your focus on adjusted earnings per share will help amplify that. When we look at the transaction volume and the brokerage, the brokerage part, how much of that was multifamily? How much of that was outside of the multifamily universe?
You know, I haven't drilled into that number, Henry, but I'm gonna swag it somewhere north of right around probably I would from its history. It's 75%-80% of that brokerage volume is multi. Steve, am I off on that? I think I'm directionally correct there.
Yeah, you are.
Yeah, we can get the actual number to you, Henry, but it's about three-quarters multi and about a quarter commercial.
Really to understand Alliant, in terms of the targeted goals, I'm assuming that factors in Alliant for this year as well or
For 2022, Henry?
Y-yes.
Yes, it does.
How does that business really work? Do the lending opportunities come at the front end of the transactions? Do the sales come at the back end? How does that business, in addition to generating tax-related credit commissions, I don't know if that's how they, what they describe them as, but in addition to any kind of commissions from the tax credit placements, how does the business work for WD in terms of loans and property sales opportunities?
Yeah, I think, Henry, there are two primary revenue streams for Alliant, as you point out, fees earned off the syndication process. As you know, new funds are raised and investments are closed into those funds. There are upfront fees paid to Alliant for providing that execution. Then asset management fees are earned over time, and a significant portion of them are collected, you know, on the back end as the properties are disposed of. That's the key component of the revenue base there.
In terms of, you know, benefit to our core business in the investment sales and the financing side, as we discussed in our initial call about Alliant back in the fall, in our, you know, model, we did not assume any synergies from, you know, on the revenue side from those opportunities in the first year. However, you know, we are building a pipeline of both debt financing opportunities as well as investment sales opportunities that we should be able to execute on in 2022. That's obviously backed into our guidance for the year. In addition, we've been able to send some opportunities, you know, to the Alliant side for new tax credit investments as well.
Just one more question. In the single family and build-to-rent and manufactured housing area, these are sort of two, you know, they're sort of new areas in the housing equation for you all. How are those businesses developing? What should we expect in the future? After that, I'll just get off and listen to the answer. Thank you again for a great year and taking my questions.
Henry, thanks for your interest. If you wanna go on your BFR, SFR, I can answer it, but go ahead.
You can take that.
Thought you were going there. Henry, I would put it this way. We have a great team, I think probably the best team in the industry focused on BFR, SFR financing. Coming out of 2020 into 2021, the pipeline was strong, but the number of deals that actually got funded during the year was less than anticipated. I would say with the growth of the pipeline, 2022 will be the year that the actual fee generation starts to happen. Feeling a lot better right now about our team that's focused on that space and the pipeline that they've built up. You accurately point out, SFR, BFR is an extremely hot space in the housing market, and a lot of our institutional clients are focused on it and putting money to work there.
Great. Our next question will come from Jade Rahmani of KBW. Jade?
Thank you very much. Can you hear me?
Yeah.
We can.
We can.
Okay, great. Solid quarter from my perspective, and pleased to see the introduction of adjusted EPS, which is a metric we've always looked at, just modeling the cash, or a proxy for cash earnings. I guess first question would be client sentiment, really, given that the you know, increasingly uncertain outlook with respect to the impact of rising rates and the magnitude of rising rates. Have institutional investors, to your sense, reacted at all to this? Has it changed people's outlook in terms of deploying capital?
Jade, all I can do is look at what we're seeing every day as it relates to our pipeline, as well as having been at the National Multifamily Housing Council meeting down in Orlando, Florida, a week before last, where I met with, you know, dozens of clients. It was from one suite to the next with, "We've got more capital deployed than we have opportunities to deploy it on. Show us product. We love the markets, we love the asset class, and we wanna put more capital to work." I can say unequivocally, there has not been a single investor that I've spoken with who has had any concern about either rates rising or the macro environment right now. Not one.
Thanks for that. That's good to hear. Would you say so far, one Q, the pipelines, it sounds like from the language in the press release and your comments you feel, you know, really, really strong.
Look, we don't. I mean, as you know, Jade, we don't manage the business from a Q to Q basis. The reason I went back to a five-year CAGR versus the bank stocks is because we have been very consistent in putting up annual returns time and time again. We don't look at this as a Q one versus Q two. We also, as you well know, don't give any numbers as it relates to what our pipeline looks like. With all that said, you can take from our earnings release and the tone of the comments that both Steve and I have made that we feel extremely good about our positioning in the market and the overall macro environment in which we are operating today.
Thank you very much. In my view, Walker & Dunlop, even though it's grown tremendously, is still somewhat underfollowed and at times misunderstood by investors. I get the sense the company, in times of rising rates, gets lumped in with residential mortgage companies, you know, which we know on the single family side, you know, there's a big difference with multifamily with, for example, prepayment protection and the longer duration. I suppose in terms of rate sensitivity, just looking for you to confirm that these are accurate. The main sensitivities to interest rates would be interest expense, both corporate and warehouse interest income, and escrow earnings, and then finally servicing assets the way it's valued, on a discounted cash flow basis. Is there anything else we're missing there in terms of sensitivity to interest rates?
Yeah. Jade, I would agree with you on the first two points. In terms of the MSR value, you know, I can't tell you it's not impacted. The value isn't impacted by interest rates, but it is a distant third in terms of the impact of rates on that valuation just because of the prepayment protections that are built into that. We don't see significant, you know, expansion in the value when rates go up, and nor do we see a significant contraction in value when rates go down.
Thank you very much. On the GSE side, sounds like some of the decline in volumes is timing related. You know, they hit their caps in the fourth quarter, and now they have 11% higher caps, so there should be an acceleration. Are there any other factors driving the lower volumes? You mentioned the focus on affordable housing. I know that the banks and GSEs use a trailing twelve-month underwriting, and we've seen a huge uptick in multifamily rents. If you're using trailing twelve, your debt service coverage ratios could be eclipsed. If you use more of a forward-looking metric and take into account, say, the last six months or three months of rent growth, you know, that underwriting could be improved. Any attributes to why the GSE volumes declined?
A lot of factors. A, they were capped in 2021 to a degree that they weren't capped in 2020. They played a counter-cyclical role in 2020 and put out a huge amount of capital, and then they were under new caps in 2021 that stepped down to $70 billion for both. As you know, Jade, that stepped back up to $78 billion for 2022. The second is that they were on a rolling 52-week look back as it relates to those caps in 2021. That look back into 2020 added to their, if you will, lack of competitiveness in the first half of 2021. Once Sandra Thompson came in as Acting Director, she removed the 52-week look back, so they don't have that 52-week look back right now, which means that they're back in the market.
As I underscored in my comment, they have a significant amount of affordable lending that they must do under their scorecard. As a result of it, if you bring a deal that doesn't have any affordability to it to the agencies, they are not likely to be the most competitive source of capital. If you have affordability in the asset, they likely will be the most competitive source of capital. One of the things that we are very actively doing and one of the reasons why Alliant is so valuable to Walker & Dunlop is that we are working very hard to underwrite and lend on affordable properties so that Fannie and Freddie can both meet their affordable goals and then shift their focus, if you will, back towards market rate.
It's a dynamic market. FHFA is trying to keep Fannie and Freddie very competitive in the market and supplying the capital that they need to supply and meeting their and our customers' needs. But they are all also more mission-focused than almost ever right now, and we're trying to figure out how to go find those deals that will meet with their mission.
I would add, Jade, specifically on the underwriting question you asked in terms of you're using T12 for underwriting. I, you know, I don't think that's having an impact on, you know, agency volumes or their desire to, you know, be in the market or not be in the market. Nor is that really a new issue. I think you've seen a secular shift in leverage levels for the past three years, where, you know, owners are levering deals, you know, more at the 60%-65% range rather than all the way up to 75% or 80%. That's not a new issue, and as I said, I don't think that's had any impact on the overall GSE volumes.
Thanks very much. I'll get back in the queue.
Thanks, Jade.
Thanks, Jade. Our next question comes from Steve DeLaney of JMP. Steve, you're on mute.
Good morning, everyone. Congratulations on yet another great year. You know, this is a corny analogy, but when I think back over the years and talking to clients, I like to tell people that, you know, W&D is just like a good old dependable train that just keeps rolling down the track and gaining momentum. Every now and then, you slow down, you stop, and you hitch on a shiny new rail car, like Alliant last year. I guess first thing, Willy, you think there are any more shiny rail cars to hitch on over the next year or two from the marketplace as you observe it?
Steve, first of all, great to have you on this morning. Second of all, thanks for all of your focus and coverage of W&D. Look, you know us too well, Steve. Alliant was our 14th acquisition. I would put forth to you that there will certainly be a 15th. We have an incredible business development team that is constantly out looking for opportunities. As you know, one of the ways we have built this company up so successfully is acquiring fantastic human capital and then having a company and a platform that brings them in and keeps that human capital at W&D.
The ability to go identify great companies, pay what we believe is market prices for them and then be able to leverage them on the broader Walker & Dunlop platform and get fantastic returns from them is something we've done time and time again. I would just say, yes, we'll have plenty more cars to hitch on. I would say one other thing though, Steve, which I think is important. Two things. One, Alliant was our largest acquisition ever. We have moved Sherry Thompson, who ran our HUD business over to working with Sean Horwitz to seamlessly integrate Alliant into Walker & Dunlop. That integration and leveraging the Alliant platform and Walker & Dunlop is super important. We need to make sure that very large and very valuable acquisition is, if you will, leveraged to the maximum that we possibly can.
The other thing is investments in technology. We have been, as we mentioned in the call, we acquired TapCap last year. We acquired Enodo the year before that. These technology investments are extremely important to W&D. While investors can see us go and invest in a mortgage banking company or affordable housing company and kind of easily understand the value and how we're going to buy them and integrate them into Walker & Dunlop, we must keep focused on technology companies and investing in technology. That has been a big differentiator of ours over the past several years, and we will continue to do that.
Thanks. You know, another obvious characteristic that we get from WD that some companies aren't comfortable with is your strategy of setting 5-year goals and then setting out and meeting those. Looking at Slide seven, I mean, you just set these goals within the last, you know, last quarter or two, and now the progress on debt financing, property sales has already taken you well towards your goal. Is this something, those two in particular, that you will consider revising? If so, would you maybe revise those as soon as on your first-quarter earnings call?
First of all, let us bask in the glory for a moment, Steve, before we go and totally reset it. I would say this. You know, we announced the Alliant acquisition in August of last year. We closed it at the end of 2021. Everybody in both our existing asset management business as well as at Alliant knows that by adding $14 billion to the existing almost $2 billion and getting ourselves to $16 billion of AUM, that we're not going to say, "Oh, great. We're beyond $10 billion. Let's just sit here." We've already gone and recast some of the goals for our existing asset management business as well as for Alliant.
I think I'm not sure whether we'll do it quarter-over-quarter, Steve, but your question is a fair one that as we move through 2022, and if we are getting close to achieving goals on debt brokerage or property sales or things of that nature, we probably need to stop and say, "Okay, great. Fantastic progress. What should you expect over the next couple of years?
Thanks, Willy. One quick one for Steve, if I may. Your new dividend rate of $2.40, if we look at that compared to 2021 EPS of $8.15, 29% payout, if we want to look at it that way. Does the board kind of look in the rear window and say, "Okay, that's we're gonna set it as a percentage of what numbers we've posted," or is there any forward-looking. Just a little comment on your dividend policy. I also assume that any adjustment to the dividend, we should continue to expect any adjustment that might come would be on an annual basis. Thanks, Steve.
Yeah, Steve, I'll go in reverse order here. Just to confirm, I mean, our pattern has been, you know, since we initiated the dividend in February 2018 to, you know, review the level of the dividend on an annual basis and make the change at that point. Obviously, you know, circumstances change. We talk about it every quarter with the board, but I think that's the pattern we've established. In terms of, you know, the conversation with the board, it's a combination of, you know, what have we done in the past.
To be honest, that conversation with the board is more about the future, because we're, you know, looking at our liquidity and our expected results and adjusted EBITDA generation on a go-forward basis because that's how we're paying for the dividend going forward. It is more of a forward look with the board.
Steve and Steve, I'll just jump in real quick on one quick point, which is just that Steve DeLaney, you just mentioned the point of 29% of earnings in the payout ratio. As you know, the big number to follow there is actually the cash earnings. In the past that 20, you know, high 20s was a lot of non-cash earnings in there. Now, with the, you know, growth in EBITDA and the growth in cash earnings, that payout ratio is actually on a percentage basis on cash earnings, a significantly lower number than it was in the past.
Yeah, understood. We'll go with the adjusted EPS going forward in that thought process. Thank you both for your comments.
Yeah, you bet. Thank you, Steve.
Thank you, Steve. We have another question from Jade Rahmani.
Thank you very much. Since the brokered loan business and the investment sales business have grown so dramatically, and at the same time, the fourth quarter is usually the high watermark for those businesses in terms of seasonality, at least for competitors, is there some kind of range that we should think about? In the brokered loan business, it was around $12.7 billion, so more than, you know, or close to double last quarter's amount. You know, I think maybe it makes sense to model growth on top of that for like the fourth quarter of 2022, and then a cadence toward that through the year. But we shouldn't really be assuming $12.7 billion as like a quarterly new run rate. And the same kind of question for investment sales.
Any, you know, qualitative commentary you could provide around that just to help, you know, make sure we have a level set projections.
Yeah. Jade, I'll jump in here. I think the way you're thinking about it is accurate in terms of the flow of business. I mean, typically, there's a lot of capital markets activity in the fourth quarter as folks are trying to clear the decks from a tax year standpoint. So, you know, if you go back and look at our volumes over history, you know, there are always exceptions to this. But typically, you know, Q4 would be the high water mark in terms of overall transaction volume, specifically on the debt brokerage and the property sales side. You know, it would come back down to a lower level in Q1 and then build up over the course of the year.
Okay. Thank you very much. On producer headcount, excluding Alliant and Zelman, could you talk to what the growth rate is, say, for the fourth quarter on a year-over-year basis?
Do you have that, Steve? I don't have that off the top of my head.
I don't.
We can get it for you.
I don't have that either, Willy.
Yeah. Jade, we can get that to you. I mean, as you know, we continuously add teams, but we're not, you know, we haven't done a major acquisition, and I think it's just astounding the growth we've seen from the existing team. I think it speaks a lot to not only a robust market, but the team and the brand that we've established. I'll be very interested to see some of our peer companies report and what kind of growth they've seen, because something tells me that the growth we've seen in debt brokerage and investment sales far outstrips the competition.
Okay. Just lastly, on the debt side, do you know what the mix of floating versus fixed is?
I don't have float to fixed right now. Jade, just by the way, by the end of the year, without Alliant, we're at 224 bankers and brokers at W&D. I wanna say I don't have the comparison to last year's Q4, but I think we were just up from yeah, ended last year at 205.
Okay.
Another 20, you know, 10% growth in broker and banker volume year-over-year by the end of the year. Obviously, 200%+ growth far outstrips the number of bodies that we put on the team. On float to fixed, I don't have that number on our Q4.
Yeah. The amount of floating rate business we've done in the last couple years, Jade, has been pretty de minimis.
Okay.
I think when we were smaller and more, call it Fannie/Freddie focused, that was a bigger issue in terms of, you know, overall margins, et cetera. That's become much less of an issue for us.
Okay. Just on the producer headcount, what would be your target for this year? Are we expecting double-digit growth in that?
At the beginning of every year, Jade, I have a conversation with Howard Smith, who's our president, as it relates to the number of bankers and brokers we wanna go out and hire. I'll just put it this way, I've been working with Howard now for 17 years, and Howard is yet to miss his hiring goal on an annual basis 'cause it's one of his goals and objectives, and he always hits it. I'm not gonna tell you what that number's gonna be, but to get to double digit revenue growth, earnings growth, and EBITDA growth on the year, we better go out and add, you know, 10%+ in broker and banker volume, as far as headcount.
At the same time, I think one of the things you're seeing right now is the leverage we're gaining from the brand and the platform. The collaboration that's going on between our investment sales team and our banking teams is unbelievable to see. that combination of people, the brand, and the technology all coming together is what's getting these outsized gains. while we clearly wanna be out there in the market recruiting the very best bankers and brokers to come to Walker & Dunlop, we're getting a lot of leverage from some other things right now too.
Okay. Thanks very much for taking the questions, and all the best.
Thank you, Jade.
Thank you, Jade. Appreciate it.
Thanks, Jade. We have no further questions at this time, so I will turn it back over to Willy to close us out.
Thank you everyone for joining us this morning. Thank you Kelsey and Jenna and the rest of the investor relations team for all your work in getting this done. Thank you to Steve and all of your team for all the work to get our financials done and ready for this call. Well, 2021 was an incredible year for our company. What's really exciting is that the macro backdrop and everything that we've done in the past is only leading to more strength at WD. Thank you everyone for joining us today. Hope you have a fantastic day, and thanks again to everyone on the WD team for the year and for all we're doing today.
Thanks everyone.