SUMMARY

         Below is a summary of the terms of the Share Acquisition Proposal and the Plan Amendment Proposal. This summary highlights selected information from this proxy statement, and may not contain all of the information that is important to you. To better understand the proposals described below, you should read this entire proxy statement carefully, as well as those additional documents to which we refer you. You may obtain the information incorporated by reference into this proxy statement by following the instructions set forth in "Where You Can Find More Information" on page 110 of this proxy statement.

Special Meeting (page 22)

        The Special Meeting will be held on August 30, 2012, at 9:00 a.m., Eastern Daylight Time, at the Hilton Garden Inn, 7301 Waverly Street, Bethesda, Maryland 20814. The Special Meeting of our stockholders is being held to consider and vote on proposals to:

1.

approve the Company's issuance of shares of our Common Stock, pursuant to the terms and conditions of the Purchase Agreement, in connection with the proposed acquisition of CWCapital by our indirect wholly owned operating subsidiary, the Purchaser, for aggregate consideration, net of certain expenses and adjustments, of approximately $220 million, consisting of $80 million paid in cash from the Purchaser and $140 million paid through the issuance of a number of shares expected to equal 11,647,255 shares of Common Stock (or approximately 34 percent of the Company on a fully diluted basis), subject to adjustment as described below under "The Purchase Agreement" on page 44;



2.

(i) approve amendments to the Equity Incentive Plan that would increase the number of shares reserved and individual limits of categories of awards under, add additional performance measures applicable to, extend the termination date of, and make certain other related technical amendments to, the Equity Incentive Plan, and (ii) re-approve material terms and conditions relating to performance-based compensation under the Equity Incentive Plan;



3.

adjourn the Special Meeting, for up to 20 additional days, solely to the extent necessary to solicit additional proxies if there are insufficient votes to approve the Share Issuance Proposal at the time of the Special Meeting; and



4.

transact such other business as may properly come before the Special Meeting or any adjournment thereof.

The Acquisition (page 26)

        On June 7, 2012, Walker & Dunlop and the Purchaser, an indirect subsidiary of Walker & Dunlop, entered into a Purchase Agreement with CWCapital, a Massachusetts limited liability company, and CW Financial, a Delaware limited liability company and the parent of CWCapital, pursuant to which the Purchaser will purchase all of the outstanding limited liability company interests of CWCapital.

        On the terms and subject to the conditions of the Purchase Agreement, a portion of the Acquisition will be paid through the issuance of a number of shares expected to equal 11,647,255 shares of Common Stock (which represents approximately 34 percent of the Company on a fully diluted basis), subject to adjustment as described below under "The Purchase Agreement" on page 44.

The Companies (page 26)

Walker & Dunlop

        Through its indirect operating subsidiary, the Purchaser, Walker & Dunlop is one of the leading commercial real estate finance companies in the United States, with a primary focus on multifamily lending. As Fannie Mae DUS™, Freddie Mac Program Plus® and MAP- and LEAN-approved FHA

 

lenders, the Multifamily and FHA Finance groups are focused on lending to property owners, investors, and developers of multifamily properties across the country. Walker & Dunlop's proprietary Interim Loan Program provides financing for multifamily properties that do not currently qualify for permanent financing. We also originate and service loans for a number of life insurance companies, commercial banks and other institutional investors, in which cases we do not fund the loan but rather act as a loan broker. Additionally, through our operating subsidiary entities, we provide institutional advisory, asset management and investment management services specializing in debt, structured debt and equity.

CWCapital

        CWCapital is one of the leading commercial real estate finance companies in the United States, with a primary focus on multifamily lending. CWCapital's clients are owners and developers of commercial real estate across the country. CWCapital has approximately 180 employees located in 14 offices across the United States. CWCapital originates and sells multifamily mortgage loans pursuant to the programs of Fannie Mae and Freddie Mac, Ginnie Mae and HUD, with which CWCapital has long-established relationships. CWCapital is approved as a Fannie Mae DUS ^TM lender nationally, a Freddie Mac Program Plus lender in Massachusetts, Georgia, Alaska, California, Idaho, Oregon, Washington, New Jersey, the New York City metro area, Fairfield and New Haven counties in Connecticut, and Bucks, Chester, Delaware, Montgomery and Philadelphia counties in Pennsylvania and an approved Freddie Mac Targeted Affordable Housing lender. CWCapital is also a MAP lender nationally, and a Ginnie Mae issuer. CWCapital is also a rated servicer and master servicer and services commercial loans for a number of CMBS trusts. CWCapital retains servicing rights and asset management responsibilities on substantially all loans that it sells to investors.

Board Recommendation (page 31)

         Our Board unanimously recommends that you vote FOR the Share Issuance Proposal authorizing the issuance of shares of our Common Stock in connection with our proposed acquisition of CWCapital; FOR the Plan Amendment Proposal to amend the Equity Incentive Plan; and FOR the Adjournment Proposal.

Reasons for the Acquisition (page 31)

        In evaluating the Acquisition, the Purchase Agreement and the related stock issuance, the Board consulted with our management and legal and financial advisors, and, in reaching its decision to approve the Acquisition and the Purchase Agreement, our Board discussed and considered a variety of factors weighing positively in favor of the Acquisition, including but not limited to, the following:

•

management's view that our purchase of CWCapital would result in a combined company with an enhanced national origination platform, significantly larger servicing portfolio and broader scale of operations than we have on a standalone basis;



•

CWCapital's loan origination capabilities, including its origination growth by loan product type since 2009;



•

the size and volume by product type of CWCapital's servicing portfolio;



•

CWCapital's quality employees;



•

the consideration, taking into account its total value and composition; and



•

the overall terms of the Purchase Agreement, including the parties' respective representations, warranties, covenants and conditions to their respective obligations in such agreement.

        See the section entitled "Reasons for the Acquisition" on page 31 for further discussion of our Board's reasons for the merger.

 

Opinion of Walker & Dunlop's Financial Advisor (page 34)

        On June 7, 2012, Keefe, Bruyette & Woods, Inc. ("KBW"), our financial advisor in connection with the Acquisition, delivered its oral opinion to the Board, which was subsequently confirmed by delivery of a written opinion, dated June 7, 2012, to the effect that, as of such date, subject to assumptions and qualifications described in the opinion, the consideration to be paid by Walker & Dunlop in the Acquisition was fair, from a financial point of view, to Walker & Dunlop.

        The full text of the KBW opinion is attached as Annex B to this proxy statement and incorporated by reference herein. The KBW opinion was provided to the Board for the use and benefit of the Board in its evaluation of the Acquisition. The KBW opinion is directed only to the fairness from a financial point of view to Walker & Dunlop of the consideration paid by Walker & Dunlop in connection with the Acquisition. The opinion does not address Walker & Dunlop's underlying business decision to acquire CWCapital or the relative merits of the Acquisition as compared to any alternative business strategies or transactions that might be available to Walker & Dunlop.

         The opinion does not constitute a recommendation to any shareholder of Walker & Dunlop as to how such shareholder should vote with respect to the Acquisition or any other matter. Walker & Dunlop encourages you to read KBW's opinion carefully in its entirety for a description of the assumptions made, procedures followed, matters considered and limitations on the review undertaken by KBW.

Risk Factors (page 69)

        The Acquisition involves several risks that you should carefully consider when deciding how to vote at the Special Meeting, including but not limited to the risks that:

•

The market price of our Common Stock may decline as a result of the Acquisition or the issuance of shares of our Common Stock;



•

The Acquisition will result in changes to our Board and management that may affect the strategy and operations of the Company;



•

The Acquisition is subject to a number of conditions, including the receipt of consents and clearances from domestic regulatory authorities that may not be obtained, may not be completed on a timely basis or may impose conditions that could have an adverse effect on us; and



•

Failure to complete the Acquisition could negatively impact our business, financial condition, results of operations or stock prices.

        For further information regarding these risks, please see the section entitled "Risk Factors."

Interests of Directors and Executive Officers in the Acquisition (page 40)

        None of the Company's directors or executive officers has any substantial financial interest, direct or indirect, in any matter to be acted upon, other than being a director or executive officer and a stockholder of the Company. Information regarding security ownership and equity compensation of our directors and executive officers is hereby incorporated by reference to the material appearing under the captions "Voting Securities of Certain Beneficial Owners and Management" and "Equity Compensation Plan Information" in the Company's 2012 annual stockholder meeting proxy statement, which was filed with the SEC on April 26, 2012.

Impact of the Stock Issuance on our Existing Stockholders (page 40)

        If approved and implemented, the Share Issuance Proposal will dilute the ownership and voting interests of our existing stockholders. Assuming the issuance of approximately 11.6 million shares of

 

Common Stock in connection with the Acquisition and no other issuances of shares of our Common Stock as of the date of approval by our stockholders, CW Financial would thereby receive approximately 34 percent, on a fully-diluted basis, of our Common Stock issued and outstanding immediately after the closing of such Acquisition (the "Closing"). Therefore, the ownership and voting interests of our existing stockholders will be proportionately reduced.

Material United States Federal Income Tax Consequences of the Acquisition to Walker & Dunlop and its Stockholders

        Because our stockholders do not participate in the Acquisition, our stockholders will not recognize gain or loss in connection with the Acquisition with respect to their stock in Walker & Dunlop. There will be no material federal income tax consequences to Walker & Dunlop as a result of the Acquisition.

Accounting Treatment of the Acquisition (page 40)

        We prepare our financial statements in accordance with U.S. generally accepted accounting principles ("GAAP"). Under GAAP, the Acquisition would be accounted for by applying the acquisition method, with Walker & Dunlop treated as the accounting acquirer.

No Appraisal Rights (page 41)

        None of our stockholders will be entitled to exercise appraisal rights or to demand payment for his, her or its shares of our Common Stock in connection with the Acquisition.

Regulatory Approvals and Clearances (page 41)

        The completion of the Acquisition is subject to various other conditions, including obtaining the approval of certain governmental and quasi-governmental authorities (including, but not limited to, Fannie Mae, Freddie Mac, Ginnie Mae, HUD and the Federal Housing Administration of HUD), and the termination and expiration of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). On July 25, 2012, Walker & Dunlop and CW Financial were notified that the U.S. Federal Trade Commission (the "FTC") and the U.S. Department of Justice (the "DOJ") had granted early termination of the waiting periods under the HSR Act applicable to the consummation of the Acquisition.

Purchase Agreement (page 44)

        On June 7, 2012, Walker & Dunlop, the Purchaser, CW Financial and CWCapital entered into the Purchase Agreement, providing for the acquisition of CWCapital by our subsidiary, the Purchaser.

        On the terms and subject to the conditions of the Purchase Agreement, the Purchaser will acquire all of CW Financial's interests in CWCapital, for approximately $220 million, net of certain expenses and adjustments. Of the $220 million, $80 million will be paid in cash from the Purchaser, through a combination of existing capital and debt financing (the "Financing") anticipated to be obtained by the Company. The remaining $140 million will be paid through the issuance of a number of shares expected to equal 11,647,255 shares of Common Stock (which represents approximately 34 percent of the Company on a fully diluted basis), subject to adjustment as described below under "The Purchase Agreement" on page 44.

        In connection with the transaction, CW Financial will be entitled to request an increase in the number of members of our Board from eight to eleven members, up to two of whom may be designated by CW Financial for each election of directors through the Company's annual meeting to be held in 2014. Our Board has adopted resolutions to automatically increase the number of members of our Board from eight to eleven members, effective as of the Closing.

 

Voting Agreements (page 58)

        Concurrently with the execution and delivery of the Purchase Agreement, William M. Walker, the Company's Chairman, President and Chief Executive Officer; Mallory Walker, Mr. Walker's father and the Company's second largest stockholder; Column Guaranteed LLC ("Column"), the Company's largest shareholder; Richard M. Lucas, Howard W. Smith, III, Richard C. Warner, and Deborah A. Wilson, all executive officers of the Company (together, the "Specified Stockholders"), have entered into voting agreements by which each has agreed to, among other things, vote in favor of the proposal to issue shares of the Company's stock in connection with the Purchase Agreement, against any proposal made to the stockholders of the Company that could reasonably be expected to result in any of the closing conditions in the Purchase Agreement not being fulfilled, and, other than Column, to appoint each executive officer of CW Financial as such Specified Stockholder's attorney-in-fact with respect to the voting for matters related to the Purchase Agreement. The voting agreements cover approximately 47 percent of the Common Stock. Further, the Specified Stockholders have agreed to certain customary restrictions on their ability to sell, encumber or otherwise dispose of their respective shares of Common Stock prior to the Closing (or, in the case of Column only, until the date of the Special Meeting or such earlier date on which the stockholder approval to issue shares of the Common Stock to CW Financial pursuant to the Purchase Agreement is obtained), subject to certain exceptions.

Registration Rights Agreement (page 60)

        On the date on which the transactions contemplated by the Purchase Agreement close (the "Closing Date"), the Company will enter into a Registration Rights Agreement with CW Financial, pursuant to which the Company will agree, as soon as practicable after the Closing Date, to file with the SEC a registration statement to register for resale the shares of Common Stock to be issued to CW Financial pursuant to the Purchase Agreement.

Closing Agreement (page 63)

        On the Closing Date, the Company will enter into a Closing Agreement with CW Financial and CWCapital. Under the terms of the Closing Agreement, CW Financial and its subsidiaries will generally be subject to "standstill" provisions for the period during which CW Financial has a right to appoint Board designees. In addition, each of the Company and its subsidiaries and CW Financial and its subsidiaries will be subject to restrictive covenants, including non-solicitation of employees, confidentiality and non-disparagement covenants, and, in the case of CW Financial and its subsidiaries, a non-competition covenant, for a period of two years after the Acquisition. The Closing Agreement also provides that CW Financial will not transfer any of the shares of Common Stock issued to it pursuant to the Purchase Agreement prior to the 180th day following the Closing Date, except for transfers to one or more of CW Financial's affiliates. See "Closing Agreement" beginning on page 63.

Summary Historical Financial Data (page 73)

Summary Historical Consolidated Financial Data of Walker & Dunlop

        The following table presents summary historical consolidated financial data for Walker & Dunlop as of and for the quarters ended March 31, 2012 and 2011 and as of and for the years ended December 31, 2011, 2010 and 2009, derived from our unaudited condensed consolidated interim financial statements included in our quarterly report on Form 10-Q for the quarter ended March 31, 2012 and our audited consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2011, which reports are incorporated by reference in this proxy statement. The summary financial data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical consolidated financial statements and notes thereto for 2011, 2010 and 2009, which are included in our annual report on Form 10-K for the year ended December 31, 2011 and incorporated

 

by reference in this proxy statement. The historical results do not necessarily indicate results expected for any future period.

		As of and for the Three Months Ended March 31,						As of and for the Year Ended December 31,
(in thousands except share and per share amounts)		2012			2011			2011			2010			2009
		(unaudited)			(unaudited)
Statement of Income Data(1)(2)
Revenues
Gains from mortgage banking activities		$	19,802		$	16,827		$	102,712		$	85,203		$	57,946
Servicing fees			9,379			7,713			33,581			27,024			20,981
Net warehouse interest income			937			717			4,198			3,586			4,186
Escrow earnings and other interest income			539			370			1,474			2,056			1,769
Other			3,745			3,370			10,385			3,965			3,879
Total Revenues		$	34,402		$	28,997		$	152,350		$	121,834		$	88,761
Expenses
Personnel		$	11,641		$	9,207		$	51,162		$	42,459		$	32,177
Amortization and depreciation			7,259			4,907			22,514			16,959			12,917
Provision for risk-sharing obligations, net			1,224			746			4,724			7,469			2,265
Interest expense on corporate debt			168			252			823			1,334			1,684
Other operating expenses			4,616			3,020			16,466			13,471			11,114
Total Expenses		$	24,908			18,132		$	95,689		$	81,692		$	60,157
Income from Operations		$	9,494		$	10,865		$	56,661		$	40,142		$	28,604
Gain on Bargain Purchase(3)		$	—		$	—		$	—		$	—		$	10,922
Income tax expense(1)(4)		$	3,655		$	4,226		$	21,797		$	31,915		$	—
Net income(1)(4)		$	5,839		$	6,639		$	34,864		$	8,227		$	39,526
Basic earnings per share(1)(4)		$	0.27		$	0.31		$	1.61		$	0.55
Diluted earnings per share(1)(4)		$	0.27		$	0.31		$	1.60		$	0.55
Weighted average basic number of shares(4)			21,750,573			21,582,746			21,621,534			15,033,741			14,306,873
Weighted average diluted number of shares(4)			21,848,280			21,651,192			21,747,672			15,036,411			14,306,873
Pro forma net income data (unaudited)
Income from operations, as reported											$	40,142		$	28,604
Pro forma income tax expense(1)(4)												15,535			11,070
Pro forma income from operations, net of tax(1)(4)											$	24,607		$	17,534
Bargain purchase gain												—			10,922
Pro forma net income(1)(4)											$	24,607		$	28,456
Pro forma basic and diluted earnings per share(1)(4)											$	1.64		$	1.99
Balance Sheet Data(1)
Cash and cash equivalents		$	40,811		$	53,817		$	53,817		$	33,285		$	10,390
Restricted cash and pledged securities			24,682			26,123			26,123			18,861			19,159
Mortgage servicing rights			142,621			137,079			137,079			106,189			81,427
Loans held for sale			268,207			268,167			268,167			302,851			101,939
Total Assets			517,456			522,596			522,596			485,620			243,732
Warehouse notes payable			236,685			218,426			218,426			248,419			96,612
Notes payable			22,969			23,869			23,869			27,621			32,961
Total Liabilities			347,407			358,944			358,944			360,978			173,921
Total Equity			170,049			163,652			163,652			124,642			69,811
Supplemental Data(2)
Operating margin			28	%		37	%		37	%		33	%		32	%
Total originations		$	674,465		$	507,497		$	4,025,917		$	3,171,618		$	2,229,772
Servicing portfolio		$	16,850,945		$	14,856,510		$	16,778,285		$	14,619,294		$	13,203,317

---

(1)

Our combined effective federal and state tax rate for the year ended December 31, 2011 was 38.5%. Our predecessor entities historically operated as pass-through tax entities (partnerships, LLCs and S-corporations). Accordingly, our historical earnings have resulted in only nominal federal and state corporate level expense. The tax liability has been the obligation of our owners. Upon closing of our initial public offering on December 20, 2010

 

Summary Historical Financial Data of CWCapital

        CWCapital is a wholly owned operating subsidiary of CW Financial. On September 1, 2010, Galaxy Acquisition LLC ("Galaxy") acquired all of the membership interests in CW Financial from the former members, which resulted in CWCapital becoming an indirect, wholly owned subsidiary of Galaxy. Galaxy is indirectly owned by funds managed by affiliates of Fortress Investment Group LLC ("Fortress"). Pursuant to a Transfer Agreement dated as of October 17, 2011, Galaxy transferred its interests in CW Financial to its wholly owned subsidiary, CWFS Holdings LLC. For purposes of the discussion herein, CWFS Holdings LLC is disregarded.

        The summary historical financial information of CWCapital has been derived from the unaudited and audited financial statements of CWCapital, which financial statements (other than the financial statements for the year ended November 30, 2007) are included in this proxy statement beginning on page F-2. The summary historical financial information and supplemental data as of December 31, 2011 and 2010, and for the year ended December 31, 2011, and the four-month period ended December 31, 2010, have been derived from the audited financial statements of CWCapital for the period as of and following the acquisition of CW Financial by Galaxy on September 1, 2010 (the "Successor"). The summary historical financial information and supplemental data as of August 31, 2010 and November 30, 2009, 2008 and 2007, and for the nine-month period ended August 31, 2010, and the years ended November 30, 2009, 2008, and 2007, have been derived from the audited historical financial statements of CWCapital for the period prior to the acquisition of CW Financial by Galaxy on September 1, 2010 (the "Predecessor"). For further information on the acquisition, see "CWCapital Management's Discussion and Analysis of Financial Condition and Results of Operations—Basis of Presentation."

 

        Certain financial statement items and the summary historical financial information of CWCapital have been presented below and in "CWCapital Management's Discussion and Analysis of Financial Condition and Results of Operations" to conform with the presentation contained in Walker & Dunlop's Annual Report on Form 10-K, incorporated by reference in this proxy statement. See "Selected Historical Financial Data of CWCapital LLC" for further details.

		Three Months Ended March 31,
		(in thousands)
		2012			2011
		(unaudited)			(unaudited)
Revenues
Gains from mortgage banking		$	24,852		$	17,748
Servicing fees			7,742			5,028
Net warehouse interest income			830			616
Escrow earnings and other interest income			351			490
Other revenue			1,207			842
Total Revenue		$	34,982		$	24,724
Expenses
Compensation expense			12,366			9,010
FV adjustments—MSRs, amortization and depreciation			13,165			3,681
Provision for risk-sharing obligations			(1,257	)		228
Other operating expenses			3,744			3,960
Total Expenses		$	28,018		$	16,879
Net income(1)		$	6,964		$	7,845

 

 

		Successor(1)						Predecessor(2)
		2011			2010			2010			2009			2008			2007
		(in thousands)						(in thousands)
Revenues
Gains from mortgage banking(3)		$	102,454		$	47,724		$	37,021		$	29,403		$	10,461		$	24,840
Servicing fees			22,869			6,200			11,713			13,901			10,924			12,097
Net warehouse interest income			2,886			921			713			2,451			6,214			4,826
Escrow earnings and other interest income			1,730			666			1,350			1,085			6,027			9,382
Other revenue			3,701			636			1,633			1,195			596			1,271
Total Revenue		$	133,640		$	56,147		$	52,430		$	48,035		$	34,222		$	52,416
Expenses
Compensation expense			48,429			15,128			20,647			17,337			18,757			23,322
FV adjustments—MSRs, amortization and depreciation(4)			40,279			957			11,066			12,112			10,808			13,270
Provision for risk-sharing obligations			1,689			25			2,992			1,605			372			(60	)
Other operating expenses			17,376			5,550			22,095			37,092			19,856			36,081
Total Expenses		$	107,773		$	21,660		$	56,800		$	68,146		$	49,793		$	72,613
Net income (loss)(5)		$	25,867		$	34,487		$	(4,370	)	$	(20,111	)	$	(15,571	)	$	(20,197	)
Balance Sheet Data
Cash and cash equivalents			21,773			32,812			25,542			12,240			27,920			38,802
Restricted cash			23,678			2,661			2,161			2,161			2,161			2,390
Mortgage servicing rights(4)			113,516			101,944			67,312			61,622			54,676			51,430
Loans held for sale			717,030			230,150			84,719			285,322			296,530			172,847
Other assets			61,685			43,798			44,599			9,093			7,342			11,181
Total Assets		$	937,682		$	411,365		$	224,333		$	370,438		$	388,629		$	276,650
Warehouse notes payable			695,216			232,552			82,452			285,303			296,027			173,959
Notes payable			—			—			—			2,138			—			10,000
Risk share liability			31,252			6,833			5,891			2,899			1,293			922
Other liabilities			67,637			39,706			46,453			13,557			26,158			44,802
Total Liabilities		$	794,105		$	279,091		$	134,796		$	303,897		$	323,478		$	229,683
Total equity		$	143,577		$	132,274		$	89,537		$	66,541		$	65,151		$	46,967

---

(1)

Summary financial data for the Successor includes balance sheet data as of December 31, 2011 and 2010, and income statement data for the year ended December 31, 2011 and for the four-month period September 1, 2010 through December 31, 2010.

(2)

The summary financial data for the Predecessor includes balance sheet data as of August 31, 2010, November 30, 2009, 2008 and 2007. The income statement data is for the nine-month period from December 1, 2009 through August 31, 2010, and years ended November 30, 2009, 2008, and 2007.

(3)

Effective December 1, 2009, CWCapital changed its accounting policy to recognize the fair value of rate lock agreements ("rate locks"), commitments to sell securities and commitments to sell loans at inception, which includes the fair value of all future cash flows. Please refer to "CWCapital Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies" for further information.

(4)

The Predecessor elected the amortization method to account for mortgage servicing rights ("MSRs") subsequent to initial recognition. The Successor elected to measure and carry its MSRs using the fair value option.

(5)

No provision has been made in CWCapital's financial statements for federal income taxes because CWCapital is a disregarded entity for federal tax purposes and its results are included in Galaxy's tax filings with the Internal Revenue Service.

 

Summary Unaudited Pro Forma Condensed Combined Financial Information (page 94)

        The following summary pro forma condensed combined financial information is based on the respective historical statements of Walker & Dunlop and CWCapital after giving effect to the Acquisition described below and elsewhere in this proxy statement and the assumptions and adjustments described in the section entitled "Unaudited Pro Forma Combined Financial Information" beginning on page 94.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(In thousands, except share and per share data)

		March 31, 2012
		Walker & Dunlop			CWCapital			Pro Forma Adjustments					March 31, 2012 Pro Forma Combined
Assets
Cash and cash equivalents		$	40,811		$	24,165		$	(27,440	)	A		$	37,536
Restricted cash			5,083			24,179								29,262
Pledged securities, at fair value			19,599			—								19,599
Loans held for sale, at fair value			268,207			267,585								535,792
Loans held for investment			6,947			—								6,947
Servicing fees and other receivables, net			15,140			6,622								21,762
Derivative assets			10,264			32,136								42,400
Mortgage servicing rights			142,621			115,052			5,598		B			263,271
Goodwill			—			—			75,211		F			75,211
Intangible assets—purchase related			—			—			3,402		D			3,402
Other assets			8,784			6,127			(1,800	)	E			13,111
Total assets		$	517,456		$	475,866		$	54,971				$	1,048,293
Liabilities and Stockholders' Equity
Liabilities
Accounts payable and other accrued expenses		$	56,216		$	10,907		$	75		D		$	67,198
Performance deposits from borrowers			5,806			3,195								9,001
Derivative liabilities			762			20,878								21,640
Guaranty obligation, net of accumulated amortization			10,447			—			5,598		B			16,045
Allowance for risk-sharing obligations			14,522			29,421								43,943
Warehouse notes payable			236,685			260,732								497,417
Notes payable			22,969			—			60,031		A			83,000
Total liabilities		$	347,407		$	325,133		$	65,704				$	738,244
Equity
Stockholders' equity:
Preferred share.		$	—		$	—		$					$	—
Common stock, $0.01 par value.			218			—			116		C			334
Additional paid-in capital			81,747			105,280			34,604		C			221,631
Retained earnings			88,084			45,453			(45,453	)	C			88,084
Total stockholders' equity		$	170,049		$	150,733		$	(10,733	)			$	310,049
Commitments and contingencies
Total liabilities and stockholders' equity		$	517,456		$	475,866		$	54,971				$	1,048,293

 

Notes to Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2012

A)

To reflect the planned financing and cash consideration payment of $80 million upon consummation of the Acquisition, as well as a $7.5 million increase to the cash consideration pursuant to the terms of the excess working capital adjustment outlined in the Purchase Agreement, as of March 31, 2012. The level of working capital held by CWCapital is expected to fluctuate significantly and is expected to more closely approximate the target working capital, as defined in the Purchase Agreement, at the time of the Acquisition closing. Additionally, in conjunction with the closing of the Acquisition, we plan to repay our existing term debt with proceeds obtained through the Commitment Letter, increasing the total term debt outstanding at the close of the Acquisition to $83 million.



B)

To reflect the gross presentation of the guaranty obligation associated with Fannie Mae DUS loans with risk-sharing obligations. CWCapital historically recorded the guaranty obligation as a component of the fair value of the associated mortgage servicing right ("MSR") resulting in a net MSR presentation; however, Walker & Dunlop records and presents the MSR and the guaranty obligation as an asset and a liability, respectively. The adjustment reflects the manner in which the MSRs and guaranty obligation will be presented following the consummation of the Acquisition.



C)

To reflect the value of the Common Stock to be issued to CW Financial as partial consideration ($140 million, based upon the preliminary purchase price consideration) and the elimination of CWCapital's member's net equity balances.



D)

To reflect the preliminary purchase price allocation recognition of certain intangible assets and liabilities—above market lease liability, below market lease asset and a mortgage pipeline asset. The above and below market lease asset and liability reflect our estimation of the fair value of certain leases that will be assumed upon closing of the Acquisition and, upon closing, are expected to be amortized over the remaining lives of the respective leases. The mortgage pipeline asset recognized reflects the estimated fair value of the origination related fees and MSRs related to the loan applications and leads currently being processed by CWCapital. Due to the short lifecycle from application through rate lock, loan funding and subsequent sale, significant fluctuation is expected in the underlying application pipeline, and as a result, the value attributed to this asset at consummation of the Acquisition and final purchase price allocation may differ materially from the estimate provided herein.



E)

To reflect the adjustment to values of certain intangible, prepaid and other assets based upon estimated fair value in the business combination.



F)

To reflect the establishment of goodwill of $75.2 million estimated as a result of the preliminary purchase price allocation detailed below.