Granite Point Mortgage Trust(GPMT) - 2021 Q4 - Annual Report

PART I Item 1. Business Granite Point Mortgage Trust Inc. is an internally-managed REIT focused on originating and managing senior floating-rate commercial mortgage loans, with a $3.8 billion portfolio as of December 31, 2021 - The company is an internally-managed real estate finance company specializing in originating, investing in, and managing senior floating-rate commercial mortgage loans and other debt-like commercial real estate investments[19] Portfolio Summary as of December 31, 2021 | Metric | Value | | :--- | :--- | | Number of Investments | 105 | | Total Principal Balance | $3.8 billion | | Future Funding Obligations | $0.4 billion | | Portfolio Composition (by carrying value) | 98.8% floating rate | | Weighted Avg. Stabilized LTV | 63.5% | | Weighted Avg. All-in Yield | L+4.07% | - The company finances operations through equity, debt, repurchase facilities, term financing, and CRE CLOs, with a $2.1 billion maximum borrowing capacity as of December 31, 2021[32][33] - Operating as a REIT, the company must distribute substantially all net taxable income to stockholders to avoid federal income taxes and maintain Investment Company Act exclusion[21][54] Item 1A. Risk Factors The company faces significant risks from the COVID-19 pandemic, lending activities, financing, interest rate fluctuations, and the need to maintain REIT status - The COVID-19 pandemic poses significant risks to financial condition and loan portfolio value, leading to a $42.4 million CECL reserve as of December 31, 2021[62][66] - Exposure to debt-oriented real estate investments carries risks of borrower defaults, property value deterioration, and intense competition from other lenders[66][68] - Financing and hedging activities involve risks such as substantial debt, restrictive covenants, margin calls, and increased financing costs due to interest rate fluctuations[126][128][129] - Structural risks include maintaining REIT qualification and Investment Company Act exemption, with failure to qualify as a REIT leading to significant corporate tax liability[151][188] - The discontinuation of LIBOR and transition to SOFR poses risks, as 98.8% of loans and 100% of financing arrangements were LIBOR-indexed at year-end 2021, potentially increasing interest costs and creating mismatches[121][122] Item 1B. Unresolved Staff Comments The company has no unresolved staff comments from the Securities and Exchange Commission - No unresolved staff comments were reported[218] Item 2. Properties The company does not own real property, operating from sub-leased headquarters in New York and leased facilities in Minnesota - The company's principal executive office is in New York, with additional leased office space in St. Louis Park, Minnesota[219] - The company does not own any real property[219] Item 3. Legal Proceedings The company is not involved in any material litigation or legal proceedings that would adversely affect its financial condition - The company is not currently party to any material litigation or legal proceedings[220] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - This item is not applicable[221] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the NYSE, with a policy to distribute taxable income as dividends and a share repurchase program active in 2021 - The company's common stock is traded on the NYSE under the symbol "GPMT"[224] - The dividend policy aims to distribute substantially all annual taxable income to comply with REIT provisions, subject to board discretion[226] - In 2021, the company repurchased 1,301,612 shares of common stock at a weighted average price of $13.65 per share, totaling $17.8 million[233] - The share repurchase program was increased to 4,000,000 shares in December 2021, with 2,698,388 shares remaining authorized as of year-end[232][233] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations In 2021, the company achieved GAAP net income of $67.6 million, driven by CECL reserve release, active loan portfolio management, and a shift towards non-mark-to-market financing 2021 Key Financial Results | Metric | 2021 | 2020 | | :--- | :--- | :--- | | GAAP Net Income (loss) | $67.6 million | $(40.5) million | | GAAP EPS (basic) | $1.24 | $(0.73) | | Distributable Earnings | $54.3 million | $64.7 million | | Distributable EPS (basic) | $0.99 | $1.17 | | Book Value per Share | $16.70 | $16.92 | | Dividends Declared per Share | $1.00 | $0.65 | Loan Portfolio Activity (Year Ended Dec 31) | Activity (in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Loan originations | $673,638 | $125,169 | | Other loan fundings | $150,644 | $238,989 | | Loan repayments | $(960,330) | $(517,295) | | Loan write-offs | $(9,740) | $— | | Total loan activity, net | $(135,609) | $(355,585) | - The company significantly shifted to non-mark-to-market financing, comprising 73.2% of portfolio financing by year-end 2021, primarily through $1.4 billion in CRE CLO issuances[245][281] - The CECL reserve decreased by $20.0 million in 2021 to $42.4 million, due to high-risk loan repayments, improved forecasts, and a resolved loan write-off[275] - The company prepaid $75.0 million of senior secured term loans in December 2021, incurring an $8.9 million loss on early extinguishment of debt[335] Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company manages credit, interest rate, and liquidity risks, amplified by COVID-19, through portfolio diversification, matching floating-rate assets and liabilities, and diversifying funding sources - Primary market risks include credit, interest rate, liquidity, and real estate market risks, all exacerbated by the COVID-19 pandemic[387][388] - As of December 31, 2021, 98.8% of the loan portfolio earned a floating rate, mitigating interest rate risk by matching with floating-rate liabilities[393] Interest Rate Sensitivity Analysis (as of Dec 31, 2021) | Change in Interest Rates | Change in Annualized Net Interest Income (in thousands) | | :--- | :--- | | +100 bps | $(15,313) | | +50 bps | $(8,316) | | -50 bps | $2,286 | | -100 bps | $2,286 | - Liquidity risk arises from financing longer-maturity assets with shorter-term borrowings, with potential for margin calls from collateral value decreases or financing disruptions[405] Item 8. Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for 2021, including balance sheets, income statements, and cash flows, with an unqualified auditor's opinion from Ernst & Young LLP Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Loans held-for-investment, net | $3,741,308 | $3,847,803 | | Total Assets | $3,988,518 | $4,219,648 | | Total Liabilities | $2,974,335 | $3,284,802 | | Total Stockholders' Equity | $1,013,058 | $933,846 | Consolidated Income Statement Highlights (in thousands) | Account | 2021 | 2020 | | :--- | :--- | :--- | | Total Interest Income | $198,288 | $237,713 | | Total Interest Expense | $105,580 | $112,935 | | Net Interest Income | $92,708 | $124,778 | | Benefit from (provision for) credit losses | $20,027 | $(53,710) | | Net Income (Loss) Attributable to Common Stockholders | $67,560 | $(40,539) | - Ernst & Young LLP issued an unqualified opinion on financial statements and internal control effectiveness, identifying the allowance for credit losses as a critical audit matter[413][414][420] - As of December 31, 2021, two loans were on nonaccrual status, with an unpaid principal balance of $168.1 million and a carrying value of $145.4 million[513] Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures The company reports no changes in or disagreements with its accountants regarding accounting principles or disclosures - No changes in or disagreements with accountants were reported[633] Item 9A. Controls and Procedures Management and the independent auditor concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021 - Management concluded that disclosure controls and procedures were effective as of December 31, 2021[634] - Management assessed internal control over financial reporting as effective based on the COSO 2013 framework as of December 31, 2021[636][637] - No material changes to internal control over financial reporting occurred during the quarter ended December 31, 2021[635] Item 9B. Other Information The company reports no other information for this item - No other information was reported for this item[649] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - This item is not applicable[650] PART III Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement - Information for this item is incorporated by reference from the 2022 Annual Meeting of Stockholders Proxy Statement[652] Item 11. Executive Compensation Executive compensation details, including Compensation Discussion and Analysis, are incorporated by reference from the 2022 Proxy Statement - Information for this item is incorporated by reference from the 2022 Annual Meeting of Stockholders Proxy Statement[653] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership information for beneficial owners and management is incorporated by reference from the 2022 Proxy Statement - Information for this item is incorporated by reference from the 2022 Annual Meeting of Stockholders Proxy Statement[654] Item 13. Certain Relationships and Related Transactions, and Director Independence Details on related party transactions and director independence are incorporated by reference from the 2022 Proxy Statement - Information for this item is incorporated by reference from the 2022 Annual Meeting of Stockholders Proxy Statement[655] Item 14. Principal Accounting Fees and Services Principal accounting fees and services information is incorporated by reference from the 2022 Proxy Statement - Information for this item is incorporated by reference from the 2022 Annual Meeting of Stockholders Proxy Statement[656] PART IV Item 15. Exhibits, Financial Statement Schedules This section lists all exhibits and financial statement schedules filed with the Form 10-K, including consolidated financial statements and the auditor's report - This section includes consolidated financial statements, the auditor's report, and Schedule IV - Mortgage Loans on Real Estate[659] - A detailed Exhibit Index provides a comprehensive list of all filed documents, including corporate governance and material contracts[660][662] Item 16. Form 10-K Summary The company has not provided a summary for this Form 10-K - No summary has been provided for this Form 10-K[668]