Granite Point Mortgage Trust(GPMT) - 2019 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements The financial statements for Q3 2019 reflect significant balance sheet growth, driven by increased loans and funded by borrowings, with net income rising but diluted EPS declining due to share issuances Condensed Consolidated Balance Sheets Balance Sheet Summary (in thousands) | Account | September 30, 2019 | December 31, 2018 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $4,307,612 | $3,361,881 | +28.1% | | Loans held-for-investment | $3,927,095 | $3,167,913 | +24.0% | | Cash and cash equivalents | $137,355 | $91,700 | +49.8% | | Total Liabilities | $3,283,372 | $2,533,350 | +29.6% | | Repurchase agreements | $1,724,912 | $1,500,543 | +15.0% | | Securitized debt obligations | $1,124,820 | $654,263 | +71.9% | | Total Stockholders' Equity | $1,023,240 | $827,531 | +23.6% | - The company's consolidated balance sheets include assets of consolidated variable interest entities (VIEs) totaling $1.47 billion at September 30, 2019, which can only be used to settle obligations of these VIEs[11] Condensed Consolidated Statements of Comprehensive Income Income Statement Highlights (in thousands, except per share data) | Metric | Q3 2019 | Q3 2018 | YTD 2019 | YTD 2018 | | :--- | :--- | :--- | :--- | :--- | | Total Interest Income | $63,444 | $47,560 | $181,553 | $131,046 | | Net Interest Income | $27,082 | $24,195 | $80,846 | $68,073 | | Net Income Attributable to Common Stockholders | $17,367 | $16,540 | $52,463 | $46,303 | | Diluted EPS | $0.32 | $0.37 | $1.00 | $1.04 | | Dividends Declared per Common Share | $0.42 | $0.42 | $1.26 | $1.20 | Condensed Consolidated Statements of Stockholders' Equity - Total stockholders' equity increased from $827.5 million at December 31, 2018, to $1.023 billion at September 30, 2019[16] - The increase in equity was primarily driven by the issuance of common stock, which provided net proceeds of approximately $207.4 million ($157.2 million in Q1 and $50.2 million in Q2), and net income of $52.5 million, partially offset by $68.0 million in common and preferred dividends declared during the nine-month period[16] Condensed Consolidated Statements of Cash Flows Cash Flow Summary for Nine Months Ended September 30 (in thousands) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $53,668 | $43,630 | | Net Cash used in Investing Activities | ($741,042) | ($383,147) | | Net Cash from Financing Activities | $870,115 | $382,347 | | Net Increase in Cash | $182,741 | $42,830 | - Investing activities primarily consisted of $1.22 billion in originations, acquisitions, and additional fundings of loans, offset by $468.5 million in loan repayments[17] - Financing activities were driven by net proceeds from repurchase agreements, issuance of securitized debt, and $207.4 million from the issuance of common stock, which more than funded investment activities and dividends[17] Notes to the Condensed Consolidated Financial Statements Notes detail accounting policies, the growing senior floating-rate commercial mortgage portfolio, diverse financing methods, and fees paid to the external manager Loan Portfolio by Property Type (Carrying Value) | Property Type | Sep 30, 2019 | % of Portfolio | Dec 31, 2018 | % of Portfolio | | :--- | :--- | :--- | :--- | :--- | | Office | $1,697,438 | 43.2% | $1,495,128 | 47.2% | | Multifamily | $962,810 | 24.5% | $569,259 | 18.0% | | Hotel | $588,639 | 15.0% | $427,611 | 13.5% | | Retail | $374,622 | 9.5% | $324,447 | 10.2% | | Industrial | $269,018 | 6.9% | $351,468 | 11.1% | | Total | $3,927,095 | 100.0% | $3,167,913 | 100.0% | - As of September 30, 2019, the company had unfunded commitments of $667.0 million on its loans held-for-investment[99] - For the nine months ended September 30, 2019, the company incurred $11.0 million in base management fees and $0.2 million in incentive fees payable to its external manager[126] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes performance to its strategy of originating senior floating-rate commercial mortgage loans, driving portfolio growth to $4.0 billion and increasing net interest income, with a debt-to-equity ratio of 3.0:1.0 - The company's primary target investments are directly originated floating-rate performing senior commercial mortgage loans, typically with terms of three to five years and sizes ranging from $25 million to $150 million[136] Portfolio Summary as of September 30, 2019 | Metric | Value | | :--- | :--- | | Total Loan Commitments | $4.66 billion | | Principal Balance | $3.99 billion | | Number of Loans | 116 | | Weighted Avg. All-in Yield | L+4.40% | | Weighted Avg. Initial LTV | 66.1% | | Weighted Avg. Stabilized LTV | 63.7% | - As of September 30, 2019, the debt-to-equity ratio (total debt, net of cash, divided by equity) was 3.0:1.0, with the company expecting leverage not to exceed a 3.5-to-1 ratio[195][201] - The company was in compliance with all financial covenants as of September 30, 2019, including minimum unrestricted cash, tangible net worth, leverage ratios, and interest coverage[207][209] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks include credit, interest rate, liquidity, and real estate, with a largely floating-rate portfolio benefiting from rising rates, and a 100 bps increase projected to boost annualized net interest income by $9.2 million - The company's portfolio is primarily composed of floating-rate assets (98.4% by carrying value), meaning rising interest rates generally increase net income, while declining rates decrease it[219] Interest Rate Sensitivity Analysis (in thousands) | Change in Interest Rates | Change in Annualized Net Interest Income | | :--- | :--- | | +100 bps | $9,163 | | +50 bps | $4,582 | | -50 bps | $184 | | -100 bps | $6,694 | - Key risks managed by the company include credit risk from borrower non-performance, liquidity risk associated with short-term financing of long-term assets, and capital markets risk related to the need to access debt and equity markets for financing[218][226][229] Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2019, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[231] - No material changes to the company's internal control over financial reporting occurred during the quarter ended September 30, 2019[232] PART II - OTHER INFORMATION Legal Proceedings The company is not currently party to any litigation or legal proceedings that would materially adversely affect its financial condition or operations - As of the filing date, the company is not party to any material litigation or legal proceedings[235] Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's 2018 Annual Report on Form 10-K - No material changes have been made to the risk factors disclosed in the company's 2018 Form 10-K[236] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[237]