Walker & Dunlop (WD) Q4 2023 Earnings Call Transcript

Walker & Dunlop (WD 1.18%)
Q4 2023 Earnings Call
Feb 15, 2024, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and welcome to the Q4 2023 Walker & Dunlop Inc. earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Kelsey Duffey, senior vice president of investor relations.

Please go ahead.

Kelsey Duffey -- Senior Vice President, Investor Relations

Thank you, Karen. Good morning, everyone. Thank you for joining Walker & Dunlop's fourth quarter and full year 2023 earnings call. I have with me this morning our chairman and CEO, Willy Walker; and our CFO, Greg Florkowski.

This call is being webcast live on our website and a recording will be available later today. Both our earnings press release and website provide details on accessing the archived webcast. This morning, we posted our earnings release and presentation to the investor relations section of our website, www.walkerdunlop.com. These slides serve as a reference point for some of what Willy and Greg will touch on during the call.

Please also note that we will reference the non-GAAP financial metrics, adjusted EBITDA, and adjusted core EPS during the course of this call. Please refer to the appendix of the earnings presentation for a reconciliation of these non-GAAP financial metrics. 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'll now turn the call over to Willy.

Willy Walker -- Chairman and Chief Executive Officer

Thank you, Kelsey, and good morning, everyone. 2023 was a challenging year for the commercial real estate industry, and the fourth quarter started out with the same headwinds that we saw throughout the year. But the lower-than-expected CPI print in November drove a 100-basis-point rally in rates, and the deals in our pipeline held together for the first time all year, resulting in $9.3 billion of total transaction volume in the quarter. This was still down 17% from Q4 of '22 but up sequentially from the third quarter and our highest quarterly volume of the year.

A nice way to end the year. As you can see on Slide 3, our Q4 financial performance was solid across the board, including total revenues of $274 million, down just 3% from Q4 of '22; and diluted earnings per share of $0.93. EPS was off more than other metrics largely due to two transaction-related adjustments unique to Q4 of last year. Adjusted core EPS, which strips out a good deal of noncash revenues and expenses, was up 1% from the same period last year.

Finally, reflecting the strength of the W&D business model, adjusted EBITDA grew each quarter throughout the year, from 68 million in Q1 to 88 million in Q4, down only 5% from Q4 of '22. Q4 results were a nice uptick after a very challenging 2023 when full year total transaction volume was down 48% to $33 billion. Yet due to our underlying business model, significant cost management, and the exceptional W&D team, full year adjusted EBITDA was $300 million, down only 8% from 2022. We are hopefully -- we are hopeful that we have effectively weathered the great tightening and that as rates stabilize and potentially head down, that we are extremely well-positioned to benefit from the market's eventual recovery.

The market's belief that the Fed is done tightening and will start to ease in 2024 is welcome news and very constructive for the commercial real estate industry, yet there are clearly questions around when and by how much the Fed will ease, and the answer to those questions will have a dramatic impact on the market. We are currently seeing a slow start to the year as investors and developers try to incorporate rate cuts or not into their business planning. As shown on this slide, we started 2023 with a 3.88% 10-year, which moved up to 5% over the subsequent three quarters, only to rally back down to 3.88% in Q4. That type of rate volatility makes it exceedingly difficult for buyers and sellers of commercial real estate to establish pricing, determine their cost of capital, and compute an IRR on the sale or acquisition of an asset.

If the Fed begins easing in Q2 and continues to ease, we would expect a nice uptick in transaction volume this year and also an improvement in the credit landscape. Our multifamily property sales team closed $2.9 billion of sales in the fourth quarter, bringing our full year volume to 8.8 billion, down 55% from 2022, slightly less than the broader market decline of 61%. As a result, we increased market share from 6.7% in 2022 to 7.4% in 2023. Yet, brokerage volume declined 34% in Q4 to $2.9 billion and was down 55% for the full year to $11.7 billion.

Our GSE volumes and market share remained strong, once again finishing the year as Fannie Mae's largest DUS lender for the fifth consecutive year at $6.6 billion and Freddie Mac's third largest partner at $4.6 billion of loan deliveries. Our focus on affordable housing and small balance lending added significant loan volume to our GSE totals. Our research arm, Zelman, provided W&D with stable subscription revenues as their research continues to be known as some of the very best covering the housing industry. We also expanded Zelman's investment banking capabilities into the commercial market in 2023.

And in the fourth quarter, the investment banking team closed three transactions, albeit all in the single-family sector, that boosted revenues and expanded the W&D brand significantly. I mentioned our small balance lending group's importance to our GSE volumes. And thanks to the team and technology we have invested in that business, we ended 2023 as the third largest small balance lender with Fannie Mae and the fourth largest with Freddie Mac, expanding market share nicely with both. And our other tech-enabled business, Apprise, grew faster than the market last year and in the year with 11% market share, up from 6% in 2022.

I'll now turn the call over to Greg to review our quarter and full year financial results in more detail. Greg.

Greg Florkowski -- Executive Vice President, Chief Financial Officer

Thank you, Willy, and good morning, everyone. This was a year of persistent volatile market conditions that depressed commercial real estate investment and transaction activity. However, the sharp decline in long-term rates during the fourth quarter and the positive sentiment that followed the Fed's November remarks led to increased transaction activity that drove improved performance in our capital markets segment. When coupled with the continued strength of our servicing and asset management segment, we delivered our strongest quarterly results for 2023.

I will spend a little time on our quarterly segment performance before recapping our annual consolidated financial performance and finish with our current outlook for 2024. Beginning with our capital markets segment on Slide 6. This segment delivered its strongest quarterly financial results of the year due to the sequential uptick in total transaction volume. Total revenues were $129 million, down 5% year over year, but up 10% from the third quarter of 2023.

Revenues benefited from a stronger gain on sale margin compared to the same quarter last year due to the mix of transaction activity that was weighted more heavily toward agency financing volume this quarter. Personnel expenses for the segment declined 17% year over year due to a decline in variable compensation. Our capital markets segment benefits from a high proportion of performance-based compensation. And in periods of lower transaction activity and associated revenues, we recognize lower variable compensation costs.

This is reflected in adjusted EBITDA, which improved to a loss of only $2 million this quarter, compared to a $16 million loss in Q3 '23, but down from positive adjusted EBITDA of $6 million in the fourth quarter last year. The servicing and asset management sector, or SAM, produced revenues of $140 million this quarter, as shown on Slide 7, driven by our $131 billion servicing portfolio and $17 billion of assets under management. Revenues this quarter were down $7 million compared to the same quarter last year. Typically, the fourth quarter is the strongest quarter of revenues for Walker & Dunlop Affordable Equity, formerly Alliant, due to the gains realized from the disposition of maturing tax credit deals.

The macroeconomic challenges caused the pace of dispositions to slow meaningfully at the end of this year compared to the last two years. And as a result, investment management revenues were down quarter over quarter. These deals remain in our portfolio, and we expect to dispose of the assets when market conditions become more favorable. Our Affordable Equity team did have its most successful year of equity originations in its history, though, syndicating $688 million of new equity during 2023.

Our servicing activities, including recurring servicing fees and related placement fees, generated Q4 revenues of $121 million, up 18% year over year, offsetting the majority of the decline from investment management fees. But operating margin for this segment was still down 4 percentage points to 30%, while adjusted EBITDA declined 3% to $111 million. Before I discuss our consolidated annual performance, I want to touch on credit, which continues to hold up well. As shown on Slide 8, we ended the year with three defaulted loans in our at-risk portfolio, totaling $27 million or just 5 basis points.

We are currently estimating losses of $3 million on the defaulted loans, which compares to our overall risk-sharing allowance of $32 million at year-end, leaving sufficient reserves to cover any other potential defaults that may materialize during the cycle. In addition to these defaulted loans, last quarter, we reported that Fannie Mae requested we repurchase a $13 million loan, and we expect to complete that repurchase in the first quarter. We do not expect to incur any loss on the loan, and our asset management team is working with the borrower to resolve the outstanding issues that led to the repurchase. We also carefully monitor loans that are more than 60 days delinquent.

And as of January 2024, we had only seven such loans, compared to three last year. The remainder of our at-risk portfolio is performing very well, as illustrated by the credit fundamentals on this slide. The weighted average debt service coverage ratio of the at-risk portfolio remains over two times, the underwritten loan to value was just over 60%, and only $3.4 billion of at-risk loans are maturing over the next two years. As it relates specifically to the maturing loans, the weighted average debt service coverage ratio of those loans is also over two times and only 12% are floating rate loans.

In short, we have maintained a consistent disciplined approach to credit for over 30 years as a DUS lender, and we continue to feel good about the broad credit fundamentals of our at-risk portfolio given where we are in the cycle. Turning back to our consolidated financial results. Full year total transaction volume of $33 billion was down 48% year over year. Our scaled servicing and asset management platform contributed significantly to our revenues, which totaled $1.1 billion, down only 16% from 2022.

Diluted earnings per share continues to be impacted by lower transaction activity and was $3.18 per share for the full year, down 50% from 2022. However, the durable recurring cashflows generated by the servicing and asset management segment supported our adjusted EBITDA and adjusted core EPS. 2023 adjusted EBITDA of $300 million was down 8% year over year, while adjusted core EPS totaled $4.68 per share, down 16%. Finally, operating margin was 13% and return on equity was 6%, compared to 21% and 13%, respectively, in 2022.

We have a fantastic business model that generates strong cash flow, and we ended the year with $329 million of cash on hand. Our cash position always decreases in the first quarter as we pay company bonuses, repurchase shares connected to employee stock vesting events, and settle our tax liabilities. This year, we will also pay another earnout installment to Alliant, that they have now achieved 47% of the aggregate earnout and remain on pace to achieve the full earnout amount over the next two years. Given the stability of our cash earnings, yesterday, our board approved a quarterly dividend of $0.65 per share, a 3% increase, and authorized the $75 million share repurchase program.

This is our sixth annual dividend increase since we initiated the dividend in February 2018 at $0.25 per share and represents a cumulative increase of 160% over the last six years. Our 2023 cash generation is a testament to the strength and durability of our business model in a downturn, giving us confidence to increase the dividend yet again while still retaining capital to support the business. Over the past year, we struck a cautious tone with respect to the market. We actively managed our business to withstand the sharp decline in transaction activity by cutting personnel and G&A costs, refinancing and upsizing our term loan, and preserving capital.

And while we exited 2023 in a strong financial position, we remain cautious entering 2024. For starters, Q1 is going to be slower than last year from an earnings perspective, likely in the range of $0.40 to $0.60 per diluted share as transaction activity is off to a slow start and we will not repeat the $11 million net benefit for credit losses resulting from the annual update to our CECL methodology, nor will we replicate the $7.5 million investment banking transaction we closed in Q1 last year. As it relates to our full year outlook, Fannie Mae and Freddie Mac has stated they expect their 2024 lending volumes to be similar to 2023. That would be a disappointing outcome given the potential for stable and maybe even declining interest rates this year.

But we cannot disregard the view of our two large partners. Finally, there are many macroeconomic drivers that we do not control, including interest rates, political elections, and inflation, that will undoubtedly impact our business this year. Those are the challenges. But there are opportunities.

There are over $450 billion of multifamily loans maturing over the next two years. We are leveraging our data and technology to understand those deals, meet with those customers, and win their business. We added 17 bankers and brokers to our platform in 2023 through our recruiting efforts, giving us a clear opportunity to gain market share this year. There are over half a million multifamily units under construction that are being delivered in 2024, and our team will assist many of those developers with selling or recapitalizing their assets.

Last year was also challenging for LIHTC dispositions, but we're focused on reviewing opportunities with our developers and evaluating ways to make 2024 a better year for our clients. Finally, we generate strong cash flow from operations and have a solid capital base that will allow us to invest in our business and raise capital to meet the market demand, just as we did when we announced the first close of our new debt fund in February that raised $150 million of capital and, when levered, will allow us to fund $0.5 billion of bridge business. We have a terrific team that has performed over the long term, and that team is focused on the opportunities that will help us return to growth in 2024. As a result, as shown on Slide 12, our full year guidance is for diluted earnings per share, adjusted EBITDA, and adjusted core EPS to increase in the mid-single digits to low teens this year.

While the challenges of 2023 are not in the rearview mirror, we move into 2024 with the business model and the people, brand, and technology to continue exceeding our client's expectations, executing on our long-term strategy, and generating extremely strong cash flows to set our business up for long-term success. Thank you for your time this morning. I will now turn the call back over to Willy.

Willy Walker -- Chairman and Chief Executive Officer

Thank you, Greg. As you just heard, our solid Q4 financial performance was thanks to the rally in the debt markets and the prospect of rate cuts in 2024. And while those two macro shifts drove top- and bottom-line performance in Q4, they do not explain why our balance sheet is so strong, why our credit book remains healthy, and why our brand and team are so exceptional. Performance in those metrics takes years of consistent investment and performance.

Our balance sheet and cash position are so strong because we have built a wonderful business model over decades that supplies us with durable revenues and earnings and we have continuously invested in businesses like Zelman and Alliant that have broadened our client offering and diversified our revenue and earnings away from our core debt finance and sales businesses. Our credit book is healthy because we have taken a conservative, thorough underwriting perspective throughout both bullish and bearish markets. Ninety-two percent of our at-risk portfolio is fixed-rate loans. We have no exposure to CLOs, and we have no credit risk on commercial real estate asset classes outside of multifamily.

And our brand and team are so strong because we are continually innovating and investing in them both. We take a long-term view of our business, and this long-term view has not only benefited our company and financial performance but also our investor returns. As you can see on Slide 13, over the past one, five, and 10 years, Walker & Dunlop has generated total shareholder returns greater than any of our direct competitors in the commercial real estate services, specialty finance, and real estate technology space. Note that we aren't cherry-picking here.

These are global firms and domestic firms, services firms and specialty finance firms, lenders, and technology companies. And we aren't selecting a convenient time period. W&D's outperformance is over the short, medium, and long term, thanks to establishing bold, highly ambitious business plans, focusing our exceptional team on achieving those goals, and then executing. We grow faster than the competition through cycles due to a business model that allows us to invest when others pull back.

We have scale and brand in the multifamily market that is a competitive advantage every day. And we have avoided making investments and taking balance sheet risk in the office, retail, and hospitality sectors. Long-term outlook: bold, highly ambitious business plans, never stop investing in people and technology, and be mindful that it is often equally as important what you didn't do as what you did do. That is what has made W&D such an exceptional company to invest in, and we'll continue to generate shareholder returns going forward.

The market run-up over the last few months reflected widespread views that the Fed tightening is over and that easing is near. And while we believe 2024 will be a better financing and sales environment than 2023, it is way too early to predict when market conditions return to normal. Just two weeks ago, we saw New York Community Bank dramatically increase their commercial real estate loan loss reserves and cut their dividend. Similarly, the publicly traded multifamily REIT saw average rent decline of 3.4% in Q4.

And while W&D's credit outlook is very solid and 3.4 negative rent growth in no way impairs any loan in our portfolio, these market data points clearly reflect a market in transition, not stabilized. Therefore, as Greg just outlined, our outlook for 2024 is optimistic, yet cautious. Yet, as we demonstrated in 2023 when our financing and sales volume fell by almost 50%, we have the business model, active management, and exceptional team to generate solid results, as in $300 million in adjusted EBITDA on the year, only 8% below 2022, in challenging markets. As we stated throughout 2023, we remain focused on our current five-year growth plan, the Drive to '25, including growing our debt and property sales volumes, scaling our servicing and asset management businesses, and scaling our newer businesses of small balance lending, appraisals, and investment banking.

Through 2022, we were on path to achieve the financial targets of the Drive to '25, including $2 billion of total revenues and $13 of diluted earnings per share. But the market conditions set off -- set us off course in 2023. And as we sit here today in a market that still has numerous headwinds, generating $13 of EPS in 2025 is going to be extremely challenging. Yet, we know we have the people, brand, and technology to achieve $13 a share of earnings in a robust market, which is very exciting.

We also have a long history of making significant strategic acquisitions, 18 in total, that have accelerated our growth such as when we acquired CWCapital in 2012, doubling the size of W&D and fully achieving our first five-year highly ambitious business plan. What is fundamental for investors to understand is that the business strategy underpinning the Drive to '25 is the right long-term strategy for W&D and that our team will continue to focus on achieving our ambitious goals with or without a strong macro environment. I'd like to finish this call with a couple of points on people and culture. Our president, Howard Smith, retired at the end of the year.

I want to once again thank Howard for all of his contributions to W&D and for being such an outstanding executive, steward of our culture, and partner to me over the past 20 years. Second, I want to reiterate my excitement about our current management team. We are blessed to have a wildly talented group of executives at W&D who love both what they do and the people they work with every day. Third, we've been fortunate to recruit some exceptional banking and brokerage talent to W&D over the past year from some of our largest and most formidable competitors, and their perspective on being part of W&D is super exciting.

One broker who joined W&D at the beginning of the year wrote, it's a -- "It's abundantly clear that the velocity, intentionality, level of energy, and spirit of growth at W&D is remarkable and unique in the industry. We joined the best platform and are thrilled about our new home." As I reflect back on 2023, I'm deeply thankful for all the hard work and results our team achieved. Walker & Dunlop is blessed to be a great company in the most dynamic commercial real estate market on Earth. We have the team, brand, and technology to continue delighting our clients, beating the competition, and growing, and we plan to do just that in 2024.

Thank you all for joining us this morning. I will now ask Karen to open the line for any questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] We'll take our first question from Jade Rahmani with KBW. Please go ahead.

Jade Rahmani -- Keefe, Bruyette and Woods -- Analyst

Thank you very much. I appreciate the balanced commentary about the outlook. I think that's the prudent thing to do. I wanted to ask about credit, how it's holding up.

I think, Greg, in your remarks, you did cite seven loans delinquent as of January 2024. How are you all feeling about the outlook and have you looked at the portfolio stratifying by 2021 to 2022 vintages and focusing on geographies with excess supply?

Greg Florkowski -- Executive Vice President, Chief Financial Officer

So -- yeah, Jade.

Willy Walker -- Chairman and Chief Executive Officer

I think --

Greg Florkowski -- Executive Vice President, Chief Financial Officer

Look -- go ahead, Willy.

Willy Walker -- Chairman and Chief Executive Officer

No, no, no. Greg, go.

Greg Florkowski -- Executive Vice President, Chief Financial Officer

Yeah. No, Jade, I was just going to say, look, I think that, as I said in my remarks and as we've said for the last few quarters, our credit is holding up well. I think seven delinquent loans in our at-risk book is on a book of close to 3,000 loans. So, we're feeling really good about how our borrowers are performing and how they're capitalized and how their assets are doing.

We are looking at different markets, but most of the loans we have are going to be longer term, longer duration. So, the '21 to '23 vintage that you cited there is really going to be, you know, maturing in five to 10 years. So, that's much farther out than the deals we're looking at that maturing in the next two years that are likely our focus just given where the macro is right now. So, again, I'd just reiterate what we said on the call and what we've been saying, which is we've got real cash-flowing assets with over two times debt service coverage ratio, low going in LTVs, and limited maturities over the next two years, and I think that that has us feeling good about where we're positioned at this point in the cycle.

Willy Walker -- Chairman and Chief Executive Officer

Yeah. I'd only jump in behind that, Jade, and just say 92% fixed rate. So, many of the problems that people are seeing right now are on floating rate debt. On our at-risk portfolio, 92% are fixed rate.

And as Greg just said, the '21 and '22 vintages are all longer-term fixed-rate loans. And then we only have three point -- what was it, $3.2 billion of loan maturities in the portfolio in '24 and '25. So, we don't even have significant refi risk in the portfolio, and a fixed-rate loan that was done at 3% needs to be redone at 6.5%. So, generally speaking, feeling extremely good.

But as you well know from covering the broader industry, the, you know, multifamily industry has credit concerns to it today and particularly deals that were financed in '21 and '22 with floating rate debt on them. And we are very fortunate to not have done a lot of that.

Jade Rahmani -- Keefe, Bruyette and Woods -- Analyst

OK. And then in terms of the CECL reserve, I know you have to factor in your current expectations, and, you know, the period of loss look-back is probably two decades, a period during which there's, you know, very strong multifamily credit performance for lots of different reasons. But then when you look at prior periods, you know, the '80s and early '90s, clearly, there was a lot of pressure there. So, is it reasonable to expect a general uptick in CECL reserves in the coming quarters? In 2023, there were a lot of releases that took place.

Greg Florkowski -- Executive Vice President, Chief Financial Officer

Yeah, Jade. I think I would say, I'll look back at the last 10 years, which included -- even during the GFC, actually looking over our entire history and these loss, our losses on defaulted loans totaled in that 30-year period $15 million. So, we've had an excellent track record of credit. That includes, you know, some of the cycles that you're talking about.

It included the GFC. It included, you know, what happened post-COVID. And I think, ultimately, our CECL reserve today is greater than that by 2x. So, we feel like we've got adequate reserves given history.

We're absolutely going to continue to monitor the market and the fundamentals. One of the reasons, you know, I gave the guidance for Q1 was that we aren't going to have a release of reserves like we've had the last two or three years and we're expecting to at least maintain that level of reserves on a forward-look basis. You know, we'll continue to take a forward look, as you said. Right now, I think our forward-look reserves for the next year or two are six or seven times our average historical loss rate.

So, we'll keep an eye on that, for sure. But right now, I don't see anything more than normal growth, absent some change in the credit fundamentals that we just went through -- you know, both Willy and I just talked through.

Jade Rahmani -- Keefe, Bruyette and Woods -- Analyst

Thank you very much.

Operator

We'll move to our next question from Kyle Joseph with Jefferies. Please go ahead.

Kyle Joseph -- Jefferies -- Analyst

Hey. Good morning, Willy and Greg. Thanks for taking my questions. First one is probably for Greg.

I just want to kind of get a little bit more on guidance. From what -- from your commentary, it sounds like you guys are baking in kind of flattish agency volumes. So, just want to get a sense for, you know, the incremental growth there in '24, is that, you know, a function of servicing, or is that kind of other channels of origination opening up more so than agency?

Greg Florkowski -- Executive Vice President, Chief Financial Officer

Yeah, I think -- Kyle, great to hear you. Thanks for joining us this morning. I think a couple of things. One is I mentioned we added 17 bankers and brokers last year.

So, even as the market was shifting on us, we were still bringing on talent and making sure that we were bolstering our bankers and brokers. So, we think we have an opportunity to gain share even in a flat environment. I think, importantly, there's a lot of deliveries coming online in 2024, and there's going to be an opportunity for our investment sales team to get involved in some of those deals for merchant builders and help them capitalize those assets. And I think there's likely to be more capital markets transactions this year than in prior years.

So, while Fannie and Freddie may not be as active, there's certainly market data -- the MBA is projecting the market to increase to 350 billion from multifamily perspective in '24. So, there's going to be transactions, you know, likely brokered or capital markets. Obviously, we have a very talented team there as well. So, we'll capture our share.

And I think there's many different ways for us to try to take the diversified platform we have and deliver those results to generate that growth even if Fannie and Freddie are flat year on year.

Willy Walker -- Chairman and Chief Executive Officer

Yeah.

Kyle Joseph -- Jefferies -- Analyst

Got it. Very helpful. And then --

Willy Walker -- Chairman and Chief Executive Officer

Sorry. Let me -- if I can just add one other quick thing, which is, as Greg said, I want to reiterate one thing that Greg said in his commentary. It is ridiculous that Fannie and Freddie are signaling to the market that their volumes are going to be flat between 2023 and 2024. They are in the market to provide countercyclical capital.

Their role is to provide countercyclical capital to the market, and their capital is needed in this market. So, while we are reflecting to everyone on this call what we are hearing from Fannie Mae and Freddie Mac as it relates to their outlook for 2024 and, as Greg said, we can't do anything about that outlook other than work with them, I just want to underscore the point that as Fannie's largest partner and Freddie Mac's third largest partner, seeing the opportunity in the market to meet refinancing needs in a year where refinancing is up dramatically in the multifamily market as it relates to demand, there is no reason that Fannie and Freddie's volumes should be the same in 2024 as they were in 2023.

Kyle Joseph -- Jefferies -- Analyst

Got it. That's helpful. That makes sense. But yeah, that's a good segue to my next question.

Just on Slide 11 in the maturity wall on multifamily, just, you know -- and given your knowledge of the market, any sort of color you can give us on the quality of this portfolio on whether it's floating versus fixed, Class A, Class B, and geographic areas? And then, you know, specifically, if there's any, I don't know, geographic areas you're looking to avoid or target as a result of this upcoming maturity wave?

Willy Walker -- Chairman and Chief Executive Officer

So, if you look at the overall maturities in 2024, per the Mortgage Bankers Association, in 2023, the '24 number for total commercial real estate refinancings was somewhere in the $600 billion number, $620 billion, and about $300 billion of loans that were scheduled to be refinanced in 2023 were pushed to 2024. So, the 2024 total commercial real estate refinancing volume is over $900 billion now. That's going to present a significant challenge to the market to find enough capital across the spectrum to meet that need for financing, particularly as we see banks pull back. CMBS had growth in 2023.

You'd probably expect to see continued growth in CMBS. Life insurance companies have been very, very consistent at doing about 10% of the market's volume through cycles, even in good times and bad times when they could actually expand out beyond 10%. And the interesting part about the 2024 refi is that the agencies, Fannie and Freddie, have a very small amount of deal flow in their own books that is maturing in '24. And so, the opportunity for us in '24 is to go out and take refinancing opportunities from the competition.

And to your specific question, Kyle, what those loans look like, how much new equity needs to go into them to refinance them or preferred equity or, you know, a recapitalization is the real question. And I think that we've got the team, we've got the capital as it relates to both first-trust financing, as well as anything above that, whether it'd be in a mezzanine or preferred equity position, to be able to meet borrowers' needs. But there's no doubt that a lot of those deals that are coming up for maturity in '24, fortunately not in our portfolio, but a lot of them are going to need some type of structured finance to get them refinanced out.

Kyle Joseph -- Jefferies -- Analyst

Really helpful color. Thanks for taking my questions.

Operator

[Operator instructions] We'll move to our next question from Steve Delaney with Citizens JMP. Please go ahead.

Steven Delaney -- JMP Securities -- Analyst

Thanks. Hey. Good morning, everyone, and great news on the dividend increase and the buyback. Willy, I was wondering on the buyback.

Looking back to the end of '21, you haven't repurchased any shares over that period. Obviously, the last year or so is sort of an uncertain environment. That's understandable. But as far as your execution, you know, as you're talking to the board, should we think about the buyback as being opportunistic or programmatic given where you sit today? Thank you.

Willy Walker -- Chairman and Chief Executive Officer

Good morning, Steve. Always nice to have you on the call.

Steven Delaney -- JMP Securities -- Analyst

Yes, sir.

Willy Walker -- Chairman and Chief Executive Officer

We talked about just this issue yesterday. As you know, Steve, because you've covered us for quite some time, we have a track record of being opportunistic in buying back stock. As Greg underscored in his comments, our cash position at the end of the year is very strong. And as he just reiterated in the response to Jade's question on credit, we feel very, very good as it relates to our credit provisions and our credit outlook.

So, with that said, the board said we will authorize $75 million of potential share buybacks. I would not think it will be programmatic, Steve, as we see how the year goes. I would also say to you that if we start to see the growth that we expect as rates come down and as transaction volume picks up, we could find ourselves in a more programmatic situation. But for now, the authorization, I would say, is more opportunistic than programmatic.

Steven Delaney -- JMP Securities -- Analyst

Got it. And, Greg, you gave a figure -- I probably didn't get these right. I know Willy commented on $13 of EPS by 2025. You mentioned 300 million, I believe, of earnings for 2024.

In both cases, are you referring to that -- to the earnings or the EPS on a GAAP basis as we, I think, all tried to convert to over the second half of this -- of last year? Just for clarity on if we're talking about GAAP or some other measure?

Greg Florkowski -- Executive Vice President, Chief Financial Officer

Yes, Steve. When we gave the Drive to -- yeah, we had not yet implemented adjusted core EPS, so we're trying to balance the transition from GAAP to adjusted core, but we're continuing to refer to GAAP as we give guidance. But in my remarks, I did give similar full year guidance for adjusted EBITDA and adjusted core EPS to GAAP diluted EPS, all in the mid-single -- or mid-single digits to low teens.

Steven Delaney -- JMP Securities -- Analyst

Got it. And just a final thing for clarity. When you define your at-risk portfolio, I assume that's your bridge book, as well as your Fannie Mae loss sharing. Is there anything else in there that I'm missing?

Greg Florkowski -- Executive Vice President, Chief Financial Officer

That's exclusively -- we have $40 million of bridge loans left on our balance sheet, and then the vast majority of our at-risk book is the Fannie Mae portfolio, nearly $60,000.

Steven Delaney -- JMP Securities -- Analyst

Got it. Willy, I know, you know, there's 20 some of these commercial mortgage REITs out there. Like everything in life, there's some really good and some really bad. Most of their problems are obviously office or maybe some hotel, not so much multifamily.

But I think both with the CM REITs and even the commercial banks, I think there'll be -- there's -- they're in kind of a pullback hunker down mode on anything other than residential real estate. Is this a year or the next two years for W&D to maybe step up a little bit in, you know, nonagency multifamily or single-family residential housing given the fact that capital flows from those two industry sectors are likely to be constrained?

Willy Walker -- Chairman and Chief Executive Officer

I would say, Steve, yes, but with a very significant asterisk or caveat to that statement, which is just that we've been super disciplined in the risk that we've been willing to take. And as, again, I'd reiterate, you know from watching us in various times over the past 13 years as a publicly traded company, there have been lots of opportunities for us to step in and do office loans, to do floating rate CLO loans. And at every turn, we've sort of said that's just not the risk profile of W&D, and it has paid massive benefits. And believe me, I met with, you know, plenty of investors in '21 and '22 who watch what some of the CLO originators were doing and said, oh, you're missing market share.

You're not growing fast enough. And we said that's fine. That's not a risk that we want to take. We don't like the fundamentals of that business when interest rates are this low and the credit loss that you would incur by doing those loans is that high.

So, I think the bottom line, as you well know, we're not going to not look at anything. We'll look at everything. And we have plenty of other capital providers coming to us saying, hey, you've got the distribution network, can we give you a pool of capital to go deploy? And depending on the risk-sharing agreement, depending on how much we're getting paid for the risk we're taking, we will obviously underwrite all of that and make decisions on what we will and won't do. But I think your general comment is exactly right.

I think there will be plenty of opportunities, but I would also reiterate to investors that you're invested in a company that takes a very conservative credit outlook. And while the opportunity may present itself, that does not necessarily mean that W&D is going to do it.

Steven Delaney -- JMP Securities -- Analyst

Great. Well, thank you both for the color, and congrats on a solid close to a difficult year for everyone. Thanks.

Greg Florkowski -- Executive Vice President, Chief Financial Officer

Thanks, Steve.

Willy Walker -- Chairman and Chief Executive Officer

Thanks, Steve.

Operator

We'll move to our next question with Jay McCanless from Wedbush Securities. Please go ahead.

Jay McCanless -- Wedbush Securities -- Analyst

Hey. Good morning, everyone. Thank you for taking my questions. Greg, could you talk to the -- I think you said potentially for 1Q somewhere between $0.40 to $0.60 in earnings.

Maybe talk about what would have to happen to get to the high end versus the low end of that range.

Greg Florkowski -- Executive Vice President, Chief Financial Officer

Yeah. Thanks for joining us this morning, Jay. Certainly. I think, look, ultimately, it's a matter of what transaction activity is going to look like in the first quarter and then whether some of our other businesses, you know, that -- whether it be investment banking can generate some fees in the first quarter, what our dispositions or syndication activity looks like in our affordable business.

So, there's a range there because we've got, you know, obviously different opportunities within the platform. But those are the big variables. I'd say it's transaction activity and then the likelihood of other revenue streams from either affordable or investment banking coming through.

Jay McCanless -- Wedbush Securities -- Analyst

OK. And then maybe just for the full year and underpinning some of the full year assumptions, maybe talk about where you guys think the 10-year ends up and are we going to continue to see some of this volatility we've seen? Just trying to get a sense of what your assumptions were for the full year guide regarding EPS and EBITDA.

Willy Walker -- Chairman and Chief Executive Officer

So, I'll jump in there, Greg. So, Jay, the -- a couple of things. First of all, I talked about this on the Walker webcast yesterday with some of my colleagues. We were out at NMHC, the National Multifamily Housing Council, meeting with a number of W&D clients who are sitting on a pile of capital, pile of capital.

There's so much equity capital sitting out there to be deployed. And in one of the meetings, one of the clients had said, you know, we're not active right now because we don't like negative leverage. And my question to the individual was, OK, let's play this out. We get a fed funds rate cut, the fed funds rate comes down.

Do you really think the 10-year rallies much from here if the fed starts to cut? The client sort of said maybe a little bit. I said great. So, do you think that cap rates are going to stay standstill when you get a rally in the short end of the curve, as well as the long end of the curve? And the client said to me no. And I said, so then when do you think you're going to get yourself back to a positive leverage position? And the client said, well, you know, you make a good point.

And then the client said we probably ought to be taking a look at acquisition based on IRR and on replacement cost and not so much on negative leverage. And I think that we're seeing more and more people realize that if you want to deploy capital into this market, that you should probably take it as an assumption that the 10-year sit somewhere in the band that it's been in for, you know, the last month and a half, which is obviously it's gotten down into the high 3s, but just say 4 to 4.25 to your specific question of where do you think the 10-year goes this year. Ten-year shouldn't move that much as the short end of the curve comes down. It really shouldn't.

I have a big bet with one of our clients. He thinks the 10-year is at 3.50 at the end of the year. I think it's closer to 4.50 at the end of the year. And as I said to him, I win both ways.

If you -- if it's at 3.50, we're going to be doing a ton of business and I'm happy to pay you my losses, and if it's 4.50, I win the bet. The point being there is I think that the amount of dry powder sitting on the sidelines, realizes that it needs to move, there is a dramatic amount of refinancing volume that is -- needs capital this year, which is why I underscore the point that Fannie and Freddie saying they think they're going to do the same amount of volume in '24 as '23, to us, is a ridiculous statement. And then the final piece to it is that if you do get rates coming down, it is going to provide some relief to floating rate borrowers, which will make the credit outlook better, which should then stabilize the sales market and get transaction volumes coming back there. But that is not a prerequisite to overall financing volumes picking up in '23 from -- in '24 from '23, just based on the volume of loans that need to be redone.

And so, the name of the game for '24 is refinancings and going out and getting them. And as we have underscored in these comments and in our public statements, we don't have a lot of refinancings in our portfolio. So, what we need to do and have done very consistently in the past is go out and refinance loans that are sitting in other people's portfolios. And in one instance, fortunately with banks, some of them don't want to redo those loans.

So, those aren't difficult in the sense of trying to pull them away. In other situations where there are other lenders who have as solid a company as Walker & Dunlop and as positive in outlook as Walker & Dunlop, there's stiff competition to win those deals away from them and we could be competing for them.

Jay McCanless -- Wedbush Securities -- Analyst

Great. Thank you, Willy. With all the buzz recently about rent-regulated properties in New York City, is there any exposure on Walker & Dunlop's balance sheet to those regulated entities, and/or are there going to be some potential opportunities with the debt fund you recently raised to get involved in that market?

Willy Walker -- Chairman and Chief Executive Officer

Number one, no as it relates to our -- first of all, we don't have a lot of exposure in New York in our agency portfolio. Agencies have never been terribly competitive in that market. So, as it relates to our Fannie Mae at-risk portfolio, I don't have an actual number in front of me, but I can tell you from having been in this company for a very long period of time, we do not have a lot -- anything in that. I can't say anything.

We have very limited exposure in our at-risk portfolio on Fannie Mae loans in New York City. And as it relates to our bridge portfolio, I'm quite certain we have none. So, no rent control risk as it relates to New York City. Is it a market that we'd like to dive into? Yeah, that's a good question.

In the affordable housing space, we actually love the affordable housing space. And with operators who understand how to work in a rent-controlled market, those are great loans. On more market-based deals, you got to make sure that you're lending to the proper operator who understands the market they're in. And so, while there's probably opportunities, I'd go back to what I said to Steve previously.

We're going to look at everything. If we like the risk-adjusted returns, we'll do the deal, but investors shouldn't expect Walker & Dunlop to back of the bus on risky deals in challenging markets just because we can do it alone.

Jay McCanless -- Wedbush Securities -- Analyst

Great. And then the last question I had, I think -- you know, when I've asked you about this before, Willy, you were kind of not as positive as some people, but office conversions continues to be a topic of conversation in the general press and looks like there's some funds being committed toward it. Would love to get your updated thoughts on that space, and are there opportunities for Walker & Dunlop to get involved there if you feel like -- if you have a more positive outlook on that now?

Willy Walker -- Chairman and Chief Executive Officer

Look, I mean, we did a deal in Q4, Jay, that was in LA. It was an office conversion and we did the takeout loan. Wells Fargo had done the actual construction conversion loan and we did a -- we did an agency takeout on the property. Fantastic property.

It had a couple of very unique things to it. The owner had owned it since the early 1990s, so the cost basis in the building was exceedingly low. The second is it was a small footprint. So, the conversion from office to multi was very, if you will, applicable or doable given the smaller footprint.

And the final piece to it is he had the zoning to be able to do it. And we love doing that, and we will continue to do that on people who are as talented and successful as that borrower has been in the office to multi conversion. I think the reason I've been somewhat, if you will, tempered on my comments about it is just that a lot of people are saying, oh, that's the solve for all this office inventory, and I don't believe that it is. There is a ton of office buildings that are impaired because of the footprint, because of the location, and because of the cost basis.

And so, what I'm just saying is people shouldn't think that this is the panacea for creating a whole bunch of new supply in multifamily by converting these office buildings into multifamily properties. But I do see an opportunity for us to do good loans like we did in Q4 on the one that I just outlined of a takeout loan of a very good conversion. And then the final thing is would we put construction debt into the actual conversion process? Sure. With the appropriate operator and with an asset that was primed for conversion, we'd find the capital and put it into that type of a deal to help someone get that done.

Jay McCanless -- Wedbush Securities -- Analyst

Great. Very helpful, guys. Appreciate it.

Willy Walker -- Chairman and Chief Executive Officer

Thank you, Jay.

Operator

It appears there are no further questions at this time. I'd like to turn the conference back over for any additional or closing remarks.

Willy Walker -- Chairman and Chief Executive Officer

I thank everyone, particularly those who asked questions this morning. Thank you very much for your time and interest in W&D. Congrats again to the W&D team on a very solid Q4 and 2023, and we look forward to talking to you all after Q1 2024. And I hope everyone has a great day.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Kelsey Duffey -- Senior Vice President, Investor Relations

Willy Walker -- Chairman and Chief Executive Officer

Greg Florkowski -- Executive Vice President, Chief Financial Officer

Jade Rahmani -- Keefe, Bruyette and Woods -- Analyst

Kyle Joseph -- Jefferies -- Analyst

Steven Delaney -- JMP Securities -- Analyst

Jay McCanless -- Wedbush Securities -- Analyst

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