Granite Point Mortgage Trust (GPMT) Q1 2025 Earnings Call May 07, 2025 11:00 AM ET Company Participants Chris Petta - Investor Relations OfficerJohn Taylor - CEO, President & DirectorStephen Alpart - VP, Chief Investment Officer & Co-Head of OriginationsBlake Johnson - VP, CFO & TreasurerSteve Delaney - Director of MortgageJade Rahmani - Managing Director Conference Call Participants Douglas Harter - Equity Research Analyst Operator Good morning. My name is Paul, and I will be your conference facilitator. A ...

Granite Point Mortgage Trust (GPMT) Q1 2025 Earnings Call May 07, 2025 11:00 AM ET Speaker0 Good morning. My name is Paul, and I will be your conference facilitator. At this time, I would like to welcome everyone to Granite Point Mortgage Trust First Quarter twenty twenty five Financial Results Conference Call. All participants will be in a listen only mode. After the speakers' remarks, there will be a question and answer period. Please note, today's call is being recorded. I would now like to turn the call ...

Legal Disclosures First Quarter 2025 Earnings Supplemental May 7, 2025 This presentation contains, or incorporates by reference, not only historical information, but also forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve numerous risks and uncertainties. Our actual results may differ from our beliefs, expectations, estimates, projections and illustrations and, consequently, you should not rely on these forward-looking st ...

Financial Performance - For the three months ended March 31, 2025, the company recorded a GAAP net loss of $(10.6) million, or $(0.22) per basic share[160]. - Distributable loss for the same period was $(27.7) million, or $(0.57) per basic share, which includes $(24.6) million in write-offs[160]. - GAAP net loss attributable to common stockholders was $(10.6) million in Q1 2025, an improvement from $(42.4) million in Q4 2024[240]. - Net interest income for the three months ended March 31, 2025, was $8.04 million, with a net interest rate spread of (0.8)%[217]. - Total interest income decreased to $35.14 million in Q1 2025 from $38.72 million in Q4 2024, primarily due to a lower average balance of interest-earning assets[235]. - Total interest expense decreased to $27.10 million in Q1 2025 from $31.15 million in Q4 2024, mainly due to a lower average balance of interest-bearing liabilities[236]. - Provision for credit losses was $(3.77) million in Q1 2025, significantly lower than $(37.19) million in Q4 2024, indicating improved credit quality[237]. - Revenue from REO operations was $3.1 million in Q1 2025, a slight decrease from $3.3 million in Q4 2024 due to lower variable rent income[238]. - Total operating expenses increased to $14.31 million in Q1 2025 from $12.50 million in Q4 2024, with compensation and benefits rising significantly[239]. Loan Portfolio - The company maintained a portfolio of 50 loan investments with an aggregate unpaid principal balance of $1.9 billion and total commitments of $2.0 billion[160]. - The total loan commitments as of March 31, 2025, were $2.037 billion, with an unpaid principal balance of $1.945 billion and unfunded loan commitments of $92.7 million[174]. - The carrying value of the loan portfolio was reported at $1.760 billion[174]. - The weighted average risk rating of the loan portfolio improved to 3.0 from 3.1 as of December 31, 2024[171]. - The average loan-to-value (LTV) ratio for the portfolio is 69.4%, with a stabilized LTV of 64.5%[178]. - The portfolio includes a total of 177.3 million in allowance for credit losses[178]. - The average term of the loans in the portfolio is 3.1 years[178]. - The portfolio consists of various property types, including multifamily, office, and industrial, with significant balances in each category[178]. Capitalization and Financing - As of March 31, 2025, the company had unrestricted cash of $85.7 million and $123.8 million of unlevered REO assets[157]. - The total debt-to-equity ratio was 2.2:1.0 as of March 31, 2025, with a recourse leverage ratio of 0.9:1.0[211]. - The company had secured repurchase facilities with outstanding borrowings of $0.5 billion, with a weighted average borrowing rate of 7.7%[198]. - The total capacity of the secured repurchase facilities was $1.23 billion, with $534.5 million outstanding and $693.4 million in unused capacity as of March 31, 2025[199]. - The company financed $0.8 billion through two CRE CLOs, which accounted for 48.8% of the total loan portfolio principal balance[203]. - The company has $92.7 million in unfunded loan commitments and must manage liquidity needs for interest and principal payments under $1.4 billion of outstanding borrowings[255]. Market Conditions and Challenges - The office property market is facing higher vacancies and slower leasing activity due to remote work arrangements, impacting property values[153]. - The company continues to face challenges from inflation, elevated interest rates, and geopolitical uncertainty, impacting loan repayments and originations[220]. - The Federal Reserve's interest rate adjustments in response to inflation have influenced the company's performance, with rates remaining elevated as of the second half of 2024[260]. - The company is actively exploring additional funding facilities to diversify its financing sources amid market volatility[221]. Cash Flow and Liquidity - Cash and cash equivalents decreased by approximately $14.0 million to $100.4 million as of March 31, 2025[258]. - Cash flows from operating activities decreased cash balances by approximately $5.7 million, primarily due to equity compensation and amortization[259]. - Cash flows from investing activities increased cash balances by approximately $80.1 million, mainly driven by repayments of loans held-for-investment[259]. - The company had unrestricted cash liquidity of $85.7 million, exceeding the required minimum of $30 million[210].

Facility Details - The Facility Amount is set at $250,000,000[10] - The Stated Facility Expiration Date is April 27, 2026[22] - The First Extension Period can extend the expiration date to April 26, 2027, and the Second Extension Period to April 24, 2028[25] Amendment Provisions - The Amendment includes a reaffirmation of the Guaranty by the Guarantor[37] - Seller must pay all reasonable legal fees and expenses related to this Amendment within ten business days of receipt of the invoice[41] - The Original Repurchase Agreement remains in full force and effect except as expressly amended[45] - Seller is required to notify Purchaser of its exercise of the Extension Option 30 to 90 days prior to the Stated Facility Expiration Date[26] - No monetary or material non-monetary Default or Event of Default shall have occurred as of the date notice is given[27] - The Amendment is governed by the laws of the State of New York[43] - Each Seller agrees to pay all reasonable out-of-pocket costs and expenses incurred by Purchaser in connection with this Amendment[46] - The Amendment, Repurchase Agreement, and other Transaction Documents constitute the entire agreement among the parties, superseding all prior agreements[49] - Each provision of the Amendment shall be interpreted to be effective under applicable law, ensuring the validity of the remaining provisions[50] - The Amendment and all covenants, agreements, representations, and warranties shall survive the consummation of the Transaction and remain in effect as long as obligations are outstanding[51] - The Amendment may be executed in counterparts, with electronic signatures having the same legal effect as manual signatures[52] - The headings in the Amendment are for convenience only and do not affect its interpretation[53] - The execution and effectiveness of the Amendment do not limit or impair any rights or remedies of the Purchaser under the Repurchase Agreement[55] - The Amendment is a Transaction Document executed pursuant to the Repurchase Agreement and shall be construed accordingly[53] Parties Involved - The parties involved in the Amendment include GP Commercial CB LLC, GP Commercial CB SL Sub LLC, Citibank, N.A., and Granite Point Mortgage Trust, Inc.[58][59][60]

Core Viewpoint - The article revisits Granite Point Mortgage Trust Inc. (NYSE: GPMT) after a 1.5-year hiatus, focusing on the preferred shares and their investment potential [1]. Company Overview - Granite Point Mortgage Trust Inc. is highlighted as a company of interest for investors, particularly in the context of preferred shares [1]. Investment Strategy - The investment group European Small Cap Ideas emphasizes high-quality small-cap investment opportunities, focusing on capital gains and dividend income for continuous cash flow [1]. - The group offers two model portfolios: the European Small Cap Ideas portfolio and the European REIT Portfolio, along with weekly updates and educational content [1]. Analyst Position - The analyst has a beneficial long position in GPMT.PR.A shares, indicating a personal investment interest in the company [1].

Financial Performance - For the year ended December 31, 2024, the company recorded a GAAP net loss attributable to common stockholders of $(221.5) million, or $(4.39) per basic common share[261]. - The company reported a net loss attributable to common stockholders of $221,452,000 for 2024, compared to a loss of $77,649,000 in 2023, representing a 184.5% increase in losses[413]. - The basic loss per share for 2024 was $4.39, compared to a loss of $1.50 per share in 2023[413]. - The company reported a net loss for the year ended December 31, 2024, of $207.051 million, compared to a net loss of $63.198 million in 2023, indicating a significant increase in losses[418]. - Total interest income for the year ended December 31, 2024, was $185.6 million, down from $263.7 million in 2023[311]. - Total interest income decreased to $185.6 million in 2024 from $263.7 million in 2023, mainly due to a higher average balance of nonaccrual loans[331]. - Total operating expenses rose to $50.1 million in 2024 from $43.3 million in 2023, with an increase in expenses from real estate owned operations due to acquisitions[335]. - Total expenses increased to $50,073,000 in 2024, up 15.6% from $43,290,000 in 2023[413]. - Provision for credit losses increased to $(201.4) million in 2024 from $(104.8) million in 2023, driven by an increase in the allowance for certain collateral-dependent loans[333]. - Provision for credit losses significantly rose to $201,412,000 in 2024, compared to $104,807,000 in 2023, indicating a 92.2% increase[413]. Dividends and Stockholder Equity - The company declared a cash dividend of $0.30 per share of common stock, totaling $16.1 million, compared to $0.80 per share in 2023[263]. - The company declared a total cash dividend of $0.30 per share for 2024, with $0.15 classified as ordinary dividends and $0.15 as qualified dividends[342]. - Stockholders' equity decreased to $619.1 million in 2024 from $858.9 million in 2023, a decline of about 28.0%[408]. - The total stockholders' equity as of December 31, 2024, was $619,217,000, down from $859,023,000 in 2023, reflecting a decline of 27.9%[415]. - The Company’s dividends payable decreased to $6.2 million in 2024 from $14.1 million in 2023, a reduction of about 56.0%[408]. Loan Portfolio and Credit Risk - The company maintained a portfolio of 54 loan investments with an aggregate unpaid principal balance of $2.1 billion and total commitments of $2.2 billion[261]. - The allowance for credit losses increased by $63.9 million, totaling $201.0 million, approximately 9.2% of total loan commitments of $2.2 billion[261]. - The loan portfolio consisted of 54 investments, with total loan commitments of $2.2 billion and an unpaid principal balance of $2.1 billion as of December 31, 2024[273]. - The weighted average risk rating of the loan portfolio increased to 3.1 as of December 31, 2024, compared to 2.8 at the end of 2023[273]. - The company actively manages loan investments and assesses credit risk quarterly, focusing on the performance of underlying collateral properties[283]. - The allowance for credit losses is reported at $199.7 million, reflecting the company's proactive risk management strategy[280]. - The company is exposed to credit risk due to the performance of its borrowers, which may be adversely affected by rising interest rates and inflation[368]. - The company has maintained its commitment to evaluating and adjusting its credit loss estimates based on macroeconomic conditions and loan-specific factors[401]. Financing and Debt - The company extended the Morgan Stanley financing facility to June 28, 2025, with a maximum borrowing capacity adjusted to $250 million[261]. - The company reported a total debt-to-equity ratio of 2.2:1.0 and a recourse leverage ratio of 1.0:1.0 as of December 31, 2024, reflecting an increase due to higher CECL reserves[306]. - The debt-to-equity ratio as of December 31, 2024, was 2.2:1.0, indicating a significant leverage position[339]. - As of December 31, 2024, the company had outstanding $0.8 billion in securitized debt obligations with a weighted average borrowing rate of 6.6%[338]. - The company had $8.0 million in restricted cash as of December 31, 2024, included in the calculations of collateral assets[302]. - The company had $1.5 billion in loan-level financing, which includes $0.6 billion in secured repurchase agreements and $0.8 billion in CRE CLO securitizations[344]. Cash Flow and Liquidity - The company’s cash and cash equivalents decreased by approximately $84.7 million to $114.5 million for the year ended December 31, 2024[355]. - Cash flows from operating activities increased cash balances by approximately $8.8 million, while financing activities decreased cash balances by approximately $528.7 million[359]. - As of December 31, 2024, the company had immediate liquidity sources totaling $87.8 million, primarily from cash and cash equivalents[349]. - The company has $90.6 million in unfunded loan commitments and plans to manage liquidity needs through various strategies, including potential asset sales[352]. - Cash, cash equivalents, and restricted cash at the end of the period were $114.470 million, down from $199.216 million at the end of 2023, a decrease of approximately 42.5%[418]. Market Conditions and Strategy - The company continues to monitor factors affecting its operating results, including interest rates, credit performance, and market conditions[315]. - The Federal Reserve raised its benchmark overnight interest rates multiple times in 2022 and 2023, impacting the company's interest expense and potentially leading to loan non-performance[372]. - The current macroeconomic environment has led to a decrease in prepayment rates and an increase in loan extension options, potentially impacting operational results[388]. - The company employs a long-term, fundamental value-oriented investment strategy, focusing on a diversified portfolio across property types and geographies[369]. - The company monitors market conditions and capital markets to inform decisions on capital raising, which is critical due to its REIT status[382]. Real Estate Owned (REO) and Asset Management - The company’s real estate owned, net increased to $42.8 million in 2024 from $16.9 million in 2023, reflecting a growth of approximately 153.3%[408]. - The company did not record any impairments of real estate for the years ended December 31, 2024, and 2023, indicating stable asset performance[446]. - As of December 31, 2024, real estate owned (REO) and related acquired assets are depreciated over useful lives ranging from 15 to 39 years[444].

Financial Data and Key Metrics Changes - For Q4 2024, the company reported a GAAP net loss of $42.4 million or negative $0.86 per basic common share, which includes a provision for credit losses of $37.2 million or negative $0.75 per basic common share [30] - The attributable loss for the quarter was $98.2 million or negative $1.98 per basic common share, including write-offs of $95.2 million or negative $1.92 per basic common share [31] - The book value at December 31 was $8.47 per common share, representing a decline of about $0.78 per share from Q3 [32] Business Line Data and Key Metrics Changes - The total loan portfolio commitments at the end of Q4 were $2.2 billion, with an outstanding principal balance of $2.1 billion [17] - The loan portfolio yield for Q4 was approximately 6.6% net of the impact of nonaccrual loans, estimated to be about 214 basis points [18] - The company resolved nine loans totaling about $344 million during 2024, with significant activity in the third and fourth quarters [11] Market Data and Key Metrics Changes - The commercial real estate market showed improved liquidity in the second half of 2024, with a consensus that real estate prices have bottomed out [10] - Liquidity in the floating rate transitional middle market sector remains less robust, particularly among regional and community banks [11] Company Strategy and Development Direction - The company aims to optimize economic outcomes through a balanced portfolio management approach, focusing on timing, profitability, and liquidity [13] - There is an expectation to return to new originations in the latter part of 2025, with a focus on growing the portfolio and improving run rate profitability [16] Management's Comments on Operating Environment and Future Outlook - Management noted that the operating environment remains challenging for the commercial real estate industry, but liquidity and transaction volume are expected to improve in 2025 [15] - The company anticipates that ongoing resolutions of nonperforming loans will exceed potential future credit events, leading to improved profitability over time [15] Other Important Information - The company repurchased about 2.4 million shares during 2024, reflecting confidence in the stock's undervaluation [14] - The aggregate CECL reserve at December 31 was about $201 million, down from $259 million in the previous quarter [32] Q&A Session Summary Question: Details on new five-rated assets and comfort on current ratings - Management expressed confidence in the current risk rankings and reserves, noting that the Louisville Student Housing Property was downgraded due to a lower-than-expected arbitration award [40][41] Question: Need for liquidity and rationale for leverage - Management indicated that maintaining liquidity is a priority, with no immediate targeted needs but a desire for flexibility [44] Question: Opportunities in the CLO market - Management acknowledged potential refinancing opportunities in the CLO market but indicated that such actions would not occur in the immediate term [50][52] Question: Concerns about asset management and credit downgrades - Management highlighted ongoing asset management efforts and the complexity of individual loan situations, particularly regarding the Kentucky asset [62][64] Question: Dividend policy and capital management strategy - Management discussed the decision to maintain the dividend while working towards covering it through resolutions and prepayments, emphasizing the importance of preserving valuable liabilities [72][74]

Q4 and Full Year 2024 Earnings Supplemental February 14, 2025 Legal Disclosures This presentation contains, or incorporates by reference, not only historical information, but also forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve numerous risks and uncertainties. Our actual results may differ from our beliefs, expectations, estimates, projections and illustrations and, consequently, you should not rely on these forward-l ...

Company Performance - Granite Point Mortgage Trust (GPMT) reported a quarterly loss of $1.98 per share, which was worse than the Zacks Consensus Estimate of a loss of $1.58, and a significant decline from earnings of $0.14 per share a year ago, indicating a negative earnings surprise of -25.32% [1] - The company posted revenues of $7.57 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 4.17%, and a decrease from year-ago revenues of $17.33 million [2] - Over the last four quarters, GPMT has surpassed consensus EPS estimates two times and topped consensus revenue estimates just once [2] Market Comparison - GPMT shares have increased approximately 10% since the beginning of the year, outperforming the S&P 500's gain of 2.9% [3] Future Outlook - The current consensus EPS estimate for the upcoming quarter is -$0.88 on revenues of $8.9 million, and for the current fiscal year, it is -$2.58 on revenues of $39.1 million [7] - The estimate revisions trend for GPMT is mixed, resulting in a Zacks Rank 3 (Hold), suggesting the shares are expected to perform in line with the market in the near future [6] Industry Context - The REIT and Equity Trust industry, to which GPMT belongs, is currently ranked in the bottom 46% of over 250 Zacks industries, indicating potential challenges ahead [8]