Granite Point Mortgage Trust(GPMT) - 2022 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Granite Point Mortgage Trust Inc.'s unaudited condensed consolidated financial statements and detailed notes for Q2 2022 and FY 2021 Item 1. Financial Statements (unaudited) Unaudited condensed consolidated financial statements and explanatory notes for Granite Point Mortgage Trust Inc. for Q2 2022 and FY 2021 Condensed Consolidated Balance Sheets Presents the company's financial position, including assets, liabilities, and equity, as of June 30, 2022, and December 31, 2021 Balance Sheet Summary | ASSETS (in thousands) | June 30, 2022 | December 31, 2021 | | :---------------------- | :------------ | :---------------- | | Loans held-for-investment, net | $3,830,014 | $3,741,308 | | Cash and cash equivalents | $150,192 | $191,931 | | Restricted cash | $69,492 | $12,362 | | Total Assets | $4,097,046 | $3,988,518 | | LIABILITIES (in thousands) | June 30, 2022 | December 31, 2021 | | :----------------------- | :------------ | :---------------- | | Repurchase facilities | $1,271,659 | $677,285 | | Securitized debt obligations | $1,425,556 | $1,677,619 | | Convertible senior notes | $273,822 | $272,942 | | Senior secured term loan facilities | $— | $139,880 | | Total Liabilities | $3,052,212 | $2,974,335 | | Total Equity | $1,043,834 | $1,013,183 | Condensed Consolidated Statements of Comprehensive (Loss) Income Details the company's revenues, expenses, and net income or loss for the three and six months ended June 30, 2022 and 2021 Comprehensive (Loss) Income Summary | (in thousands, except share data) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total interest income | $49,279 | $49,453 | $96,600 | $103,592 | | Total interest expense | $27,344 | $26,674 | $51,153 | $53,039 | | Net interest income | $21,935 | $22,779 | $45,447 | $50,553 | | (Provision for) benefit from credit losses | $(13,627) | $193 | $(17,315) | $9,312 | | Loss on extinguishment of debt | $(13,032) | $— | $(18,823) | $— | | Net (loss) income attributable to common stockholders | $(17,356) | $14,244 | $(16,345) | $42,210 | | Basic (loss) earnings per weighted average common share | $(0.32) | $0.26 | $(0.30) | $0.77 | | Diluted (loss) earnings per weighted average common share | $(0.32) | $0.24 | $(0.30) | $0.71 | Condensed Consolidated Statements of Stockholders' Equity Outlines changes in stockholders' equity, including net income, stock issuance, repurchases, and dividends, for the period Stockholders' Equity Summary | (in thousands, except share data) | Balance, December 31, 2021 | Net (loss) income | Issuance of preferred stock, net | Repurchase of common stock | Dividends declared | Non-cash equity award compensation | Balance, June 30, 2022 | | :-------------------------------- | :------------------------- | :---------------- | :------------------------------- | :------------------------- | :----------------- | :--------------------------------- | :--------------------- | | Total Stockholders' Equity | $1,013,058 | $(13,731) | $87,521 | $(15,714) | $(27,007) | $1,906 | $1,043,709 | Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2022 and 2021 Cash Flow Summary | (in thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $22,780 | $30,722 | | Net cash (used in) provided by investing activities | $(99,874) | $295,807 | | Net cash provided by (used in) financing activities | $92,485 | $(416,692) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $15,391 | $(90,163) | | Cash, cash equivalents, and restricted cash at end of period | $219,684 | $239,030 | Notes to the Condensed Consolidated Financial Statements Provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. Organization and Operations Describes Granite Point Mortgage Trust Inc.'s business, focus, and status as a Real Estate Investment Trust (REIT) - Granite Point Mortgage Trust Inc. is an internally managed real estate finance company focused on originating, investing in, and managing senior floating-rate commercial mortgage loans and other debt-like commercial real estate investments[19] - The company operates as a Real Estate Investment Trust (REIT) for U.S. federal income tax purposes, aiming to preserve stockholder capital and generate attractive risk-adjusted returns primarily through dividends from current income[19][20] Note 2. Basis of Presentation and Significant Accounting Policies Outlines the financial statement preparation basis and key accounting policies, including management estimates and uncertainties - The interim unaudited condensed consolidated financial statements are prepared in accordance with SEC rules and GAAP, with certain information condensed or omitted[21] - Management's estimates, particularly for credit losses and fair value, are subject to uncertainty due to the ongoing COVID-19 pandemic, Federal Reserve interest rate actions, and geopolitical instability[24][26][27] Note 3. Loans Held-for-Investment, Net of Allowance for Credit Losses Details the company's loan portfolio, including carrying values, credit loss allowance, and activity for the periods Loans Held-for-Investment Details | (dollars in thousands) | June 30, 2022 | December 31, 2021 | | :--------------------- | :------------ | :---------------- | | Unpaid principal balance | $3,889,479 | $3,796,825 | | Allowance for credit losses | $(47,280) | $(40,897) | | Carrying value | $3,830,014 | $3,741,308 | | Unfunded commitments | $358,705 | $403,584 | | Number of loans | 104 | 105 | | Weighted average coupon | 4.6% | 4.5% | Loans Held-for-Investment Details | (dollars in thousands) | June 30, 2022 Carrying Value | % of Loan Portfolio | December 31, 2021 Carrying Value | % of Loan Portfolio | | :--------------------- | :----------------------------- | :------------------ | :------------------------------- | :------------------ | | Office | $1,663,577 | 43.4% | $1,703,951 | 45.5% | | Multifamily | $1,090,106 | 28.5% | $1,061,434 | 28.4% | | Hotel | $460,432 | 12.0% | $464,816 | 12.4% | | Retail | $347,287 | 9.1% | $341,834 | 9.1% | | Industrial | $181,871 | 4.7% | $118,564 | 3.2% | | Other | $86,741 | 2.3% | $50,709 | 1.4% | | Total | $3,830,014 | 100.0% | $3,741,308 | 100.0% | Loans Held-for-Investment Details | (in thousands) | June 30, 2022 Carrying Value | % of Loan Portfolio | December 31, 2021 Carrying Value | % of Loan Portfolio | | :--------------- | :----------------------------- | :------------------ | :------------------------------- | :------------------ | | Northeast | $976,965 | 25.5% | $917,029 | 24.5% | | Southwest | $869,316 | 22.7% | $836,955 | 22.4% | | West | $660,173 | 17.2% | $658,429 | 17.6% | | Midwest | $649,233 | 17.0% | $637,784 | 17.0% | | Southeast | $674,327 | 17.6% | $691,111 | 18.5% | | Total | $3,830,014 | 100.0% | $3,741,308 | 100.0% | - The Company pledged loans held-for-investment with a carrying value of $3.6 billion at June 30, 2022, and $3.7 billion at December 31, 2021, as collateral for various financing facilities[37] Loans Held-for-Investment Details | (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Originations, additional fundings, upsizing of loans and capitalized deferred interest | $212,245 | $197,838 | $385,110 | $239,615 | | Repayments | $(120,107) | $(422,969) | $(238,490) | $(524,557) | | Loan sales | $— | $— | $(43,714) | $— | | (Provision for) benefit from credit losses | $(13,126) | $1,762 | $(16,490) | $8,995 | | Balance at end of period | $3,830,014 | $3,577,644 | $3,830,014 | $3,577,644 | Allowance for Credit Losses Explains the methodology for estimating credit losses and changes in the allowance for loans held-for-investment - The Company uses a probability-weighted analytical model with quarterly updated macroeconomic forecasts to estimate allowance for credit losses, considering factors like DSCR, LTV, and property type[39][41] - As of June 30, 2022, the allowance for credit losses on loans held-for-investment increased by $13.1 million to $47.3 million, primarily due to a more conservative macroeconomic forecast and a $4.0 million increase for an office loan downgraded to risk rating '5'[42] Allowance for Credit Losses Movement | (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Balance at beginning of period | $34,154 | $59,433 | $40,897 | $66,666 | | Provision for (benefit from) credit losses | $13,638 | $(1,762) | $17,002 | $(8,995) | | Write-off | $— | $— | $(10,107) | $— | | Recoveries of amounts previously written off | $(512) | $— | $(512) | $— | | Balance at end of period | $47,280 | $57,671 | $47,280 | $57,671 | - Two senior loans with a total unpaid principal balance of $207.9 million and carrying value of $188.8 million were on nonaccrual status as of June 30, 2022[46] Loan Risk Ratings Describes the quarterly evaluation of loan credit quality and the distribution of loans across risk rating categories - The Company evaluates the credit quality of each loan quarterly, assigning a risk rating from '1' (lower risk) to '5' (loss likely) based on various factors including property type, cash flow, LTV, and sponsorship[49][50] Loan Portfolio Risk Ratings | (dollars in thousands) | June 30, 2022 Number of Loans | June 30, 2022 Unpaid Principal Balance | June 30, 2022 Carrying Value | December 31, 2021 Number of Loans | December 31, 2021 Unpaid Principal Balance | December 31, 2021 Carrying Value | | :--------------------- | :------------------------------ | :------------------------------------- | :----------------------------- | :-------------------------------- | :------------------------------------- | :----------------------------- | | Risk Rating 1 | 8 | $292,285 | $291,458 | 9 | $245,939 | $245,042 | | Risk Rating 2 | 59 | $2,083,389 | $2,060,713 | 58 | $2,002,008 | $1,983,615 | | Risk Rating 3 | 27 | $869,253 | $861,050 | 25 | $747,631 | $739,343 | | Risk Rating 4 | 8 | $436,641 | $427,954 | 11 | $633,153 | $627,938 | | Risk Rating