Granite Point Mortgage Trust(US:GPMT)2024-08-06 19:17Financial Data and Key Metrics Changes - The company reported a GAAP net loss of $66.7 million or $1.31 per basic share for Q2 2024, which includes a provision for credit losses of $60.8 million or $1.19 per share [23] - Distributable loss for the quarter was $9.1 million or $0.18 per share, reflecting loan write-offs of $6.6 million or $0.13 per share and a decline in net interest income mainly driven by non-accrual loans [23] - Book value at June 30 was $9.84 per common share, a decline of about $1.30 per share from Q1, primarily due to loan loss provisions [23] Business Line Data and Key Metrics Changes - The loan portfolio commitments totaled $2.7 billion with an outstanding principal balance of about $2.6 billion, and about $118 million of future fundings, accounting for only about 4% of total commitments [21] - The realized loan portfolio yield for Q2 was about 7%, net of the impact of non-accrual loans, which was estimated to be approximately 229 basis points for the three months ended June 30 [21] Market Data and Key Metrics Changes - The commercial real estate market has shown signs of improvement with increased transaction activity and liquidity returning to transitional assets [6][15] - The company has visibility on approximately $200 million to $300 million of more loan resolutions expected by the end of 2024, indicating a potential recovery in the market [8] Company Strategy and Development Direction - The company is focused on proactive asset management and liquidity management while navigating through the current credit cycle [12] - A reduction in the quarterly common dividend to $0.05 per share was made to protect investors' capital considering the challenging credit environment [12] - The company intends to remain opportunistic regarding share repurchases, having repurchased about 1.5 million common shares at a deep discount during the second quarter [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for the Fed to begin reducing short-term rates, which could contribute to the recovery of the commercial real estate market [6][14] - The company anticipates that the run rate profitability will improve in the coming quarters as progress is made on resolving non-accrual loans [25] - Management acknowledged the ongoing challenges in the commercial real estate market but noted a slower pace of credit migration within the portfolio [11] Other Important Information - The CECL reserve at quarter end was about $267 million or $5.27 per share, representing 9.7% of portfolio commitments, an increase from the previous quarter [26] - The company ended the quarter with about $86 million of unrestricted cash, and total leverage increased modestly to 2.5 times in Q2 compared to 2.3 times in Q1 [27] Q&A Session Summary Question: Outlook on loan portfolio and distributable EPS - Management indicated that it is difficult to predict where the loan portfolio might bottom out, but resolutions will have a positive impact on run rate profitability [30] Question: Realized losses and impact on distributable EPS - Management confirmed an anticipation of over $100 million in write-offs over the next couple of quarters, which could impact distributable EPS [31] Question: Transparency around property pricing and loan resolutions - Management expressed confidence in resolving loans at or near the marks due to improving transparency in property pricing [34] Question: Current risk ratings and potential new problem assets - Management is comfortable with current risk ratings but remains cautious about potential new problem assets [35][36] Question: Financing on non-accrual loans - Management explained that financing varies by asset and that they intend to finance REO assets to increase liquidity [39] Question: Difference between non-accruals and collateral dependent loans - Management clarified that the difference is likely due to carrying value under non-accruals excluding reserves [42]