Claros Mortgage Trust(US:CMTG)2022-05-09 16:00PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) Presents Claros Mortgage Trust, Inc.'s unaudited consolidated financial statements for Q1 2022, including balance sheets, operations, equity, cash flows, and detailed accounting notes Consolidated Balance Sheets Total assets rose to $8.07 billion, liabilities to $5.49 billion, and equity slightly declined to $2.58 billion by March 31, 2022 Consolidated Balance Sheet Summary (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $8,072,812 | $7,455,271 | | Cash and cash equivalents | $444,001 | $310,194 | | Loans receivable held-for-investment, net | $6,972,638 | $6,340,295 | | Real estate owned, net | $404,947 | $406,887 | | Total Liabilities | $5,493,516 | $4,851,004 | | Repurchase agreements | $4,019,910 | $3,489,511 | | Secured term loan, net | $738,928 | $739,762 | | Total Stockholders' Equity | $2,579,296 | $2,604,267 | Consolidated Statements of Operations Q1 2022 net income decreased to $29.4 million from $58.6 million in Q1 2021 due to lower interest income and higher expenses Consolidated Statements of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net interest income | $51,114 | $59,516 | | Total revenue | $57,927 | $60,567 | | Total expenses | $26,454 | $13,641 | | Net income | $29,371 | $58,575 | | Net income attributable to common stock | $29,412 | $58,608 | | Net income per share (basic and diluted) | $0.21 | $0.44 | Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity decreased to $2.58 billion by March 31, 2022, due to dividends and repurchases, partially offset by net income - Key changes in stockholders' equity for Q1 2022 include a net income of $29.4 million, offset by common stock dividends of $51.7 million and share repurchases of $3.2 million13 Consolidated Statements of Cash Flows Q1 2022 net cash from operations was $22.6 million, investing used $456.6 million, financing provided $567.0 million, resulting in a $133.0 million cash increase Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $22,620 | $32,646 | | Net cash used in investing activities | ($456,588) | ($90,701) | | Net cash provided by (used in) financing activities | $566,972 | ($4,165) | | Net increase (decrease) in cash | $133,004 | ($62,220) | Notes to Consolidated Financial Statements Provides detailed explanations of accounting policies, including REIT structure, CECL, loan portfolio, financing, equity, income taxes, and commitments - The company is a Maryland corporation formed in 2015, operating as a Real Estate Investment Trust (REIT) focused on income-producing loans collateralized by commercial real estate. It is externally managed by Claros REIT Management LP232425 - The company adopted ASU 2016-13 (CECL) on January 1, 2021, which requires estimating credit losses over the life of financial instruments. The CECL reserve is based on historical experience, current conditions, and reasonable forecasts33 - Effective Q1 2022, due to a change in the Chief Operating Decision Maker (CODM), the company determined it has one operating and one reportable segment, related to investing in income-producing commercial real estate loans. This change was applied retrospectively54 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2022 financial condition and results, covering key metrics, loan portfolio, financing, operating results, liquidity, capital, and critical accounting policies - The company focuses on originating senior and subordinate loans, typically ranging from $50 million to $300 million, on transitional commercial real estate assets in major U.S. markets159 Key Financial Indicators - Q1 2022 | Indicator | Value | | :--- | :--- | | Net Income per Share | $0.21 | | Dividends Declared per Share | $0.37 | | Distributable Earnings per Share | $0.24 | | Book Value per Share | $18.20 | | Adjusted Book Value per Share | $18.76 | | Net Debt-to-Equity Ratio | 1.9x | | Total Leverage Ratio | 2.3x | Portfolio Overview Loan portfolio as of March 31, 2022: $8.7 billion commitment, $7.2 billion unpaid balance, 96% senior loans, 37% multifamily, weighted average risk rating 3.0 Loan Portfolio Summary as of March 31, 2022 | Loan Type | Number of Loans | Loan Commitment ($ thousands) | Unpaid Principal Balance ($ thousands) | All-In Yield | | :--- | :--- | :--- | :--- | :--- | | Senior loans | 68 | $8,450,891 | $6,973,076 | 5.5% | | Subordinate loans | 5 | $264,012 | $260,697 | 10.5% | | Total / W.A. | 73 | $8,714,903 | $7,233,773 | 5.6% | - During Q1 2022, the company had net fundings of $631.0 million, comprising $684.8 million in initial fundings and $140.6 million in advances, offset by $194.4 million in loan repayments173 - The total Current Expected Credit Loss (CECL) reserve increased by $2.1 million during Q1 2022 to a total of $75.6 million, primarily due to the increase in the size of the portfolio and unfunded loan commitments183 Portfolio Financing Portfolio financing capacity was $6.5 billion with $5.4 billion outstanding as of March 31, 2022, utilizing various arrangements and aiming to match-fund floating-rate assets Portfolio Financing Summary as of March 31, 2022 (in thousands) | Financing Type | Capacity | Unpaid Principal Balance | | :--- | :--- | :--- | | Repurchase agreements | $4,765,000 | $3,798,423 | | Repurchase agreements - Side Car | $271,171 | $221,487 | | Loan participations sold | $168,322 | $168,322 | | Notes payable | $277,950 | $146,089 | | Secured Term Loan | $760,810 | $760,810 | | Debt related to real estate owned | $290,000 | $290,000 | | Total | $6,533,253 | $5,385,131 | - As of March 31, 2022, 97.0% of the company's loans by unpaid principal balance were floating rate, and 87.0% of these had interest rate floors, providing protection against falling rates202 Results of Operations Q1 2022 net income increased to $29.4 million from Q4 2021 but decreased from Q1 2021 due to varying impacts from expenses, interest income, and credit loss provisions Quarterly Results of Operations (in thousands) | Metric | Q1 2022 | Q4 2021 | Q1 2021 | | :--- | :--- | :--- | :--- | | Total Revenue | $57,927 | $70,924 | $60,567 | | Total Expenses | $26,454 | $39,318 | $13,641 | | Provision for credit loss | ($2,102) | ($8,451) | $185 | | Net Income | $29,371 | $16,989 | $58,575 | - The decrease in revenue from Q4 2021 was primarily due to lower net interest income ($7.4 million) and lower revenue from real estate owned ($5.6 million) due to seasonality211 - The decrease in net income from Q1 2021 was driven by lower net interest income ($8.4 million), higher operating expenses, and a $2.3 million negative swing in the provision for credit losses218226 Liquidity and Capital Resources Total available liquidity was $1.02 billion as of March 31, 2022, with a Net Debt-to-Equity ratio of 1.9x, primarily used for unfunded loan commitments and operational needs Sources of Liquidity (in thousands) | Source | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $444,001 | $310,194 | | Undrawn financing capacity | $564,649 | $584,311 | | Loan principal payments held by servicer | $8,350 | $67,100 | | Total Available Liquidity | $1,017,000 | $961,605 | - The company has $1.5 billion in aggregate unfunded loan commitments as of March 31, 2022, which are expected to be funded over a weighted-average period of 2.6 years234 Quantitative and Qualitative Disclosures About Market Risk Primary market risk is interest rate risk, with 97% floating-rate loans; a 100 bps rate increase would decrease annual net interest income by $11.4 million, alongside other credit and capital risks Interest Rate Sensitivity Analysis (Impact on Annual Net Interest Income) | Change in LIBOR/SOFR | Change in Net Interest Income ($ thousands) | Change per Share | | :--- | :--- | :--- | | to 0.00% | $2,047 | $0.01 | | +50 bps | ($5,484) | ($0.04) | | +100 bps | ($11,390) | ($0.08) | | +150 bps | ($11,648) | ($0.08) | - The company manages credit risk through extensive due diligence, conservative loan-to-value ratios, proactive asset management, and various lender protections in loan agreements265267 - The company is exposed to capital markets risk due to its REIT structure, which requires distributing most of its taxable income, thus necessitating debt or equity capital for growth. Margin call risk exists on repurchase facilities, but no margin calls have been received to date272 Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2022284 - No material changes were made to the internal control over financial reporting during the three months ended March 31, 2022284 PART II. OTHER INFORMATION Legal Proceedings The company was not involved in any material legal proceedings as of March 31, 2022 - The company reports no material legal proceedings as of March 31, 2022288 Risk Factors No material changes to the company's principal risk factors from those disclosed in its Annual Report on Form 10-K - No material changes to the risk factors disclosed in the Annual Report on Form 10-K have occurred289 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None290 Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None291 Other Information The company reported no other information required to be disclosed under this item - None293 Exhibits This section lists exhibits filed with Form 10-Q, including corporate governance, securities descriptions, management, financing agreements, and officer certifications - Exhibits filed include CEO and CFO certifications pursuant to the Sarbanes-Oxley Act of 2002 and various financing and management agreements294301302