GPMT - Earnings call transcript Q2 2019 | Granite Point Mortgage Trust Inc.

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Operator

Good morning. My name is Anita and I will be your conference facilitator. At this time, I would like to welcome everyone to Granite Point Mortgage Trust's Second Quarter 2019 Financial Results Conference Call. All participants will be in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. is event this note, being recorded. Please

now to Chris would Mr. please like for to over call Petta, ahead. conference the go Petta Point. turn Granite I with Relations Investor

Chris Petta

you COO. Steve you President Marcin for our Granite Thank Steve and second financial call CEO; on XXXX Alpart, Urbaszek, and With quarter morning Plust, Jack this good everyone. morning Point's joining call are our to and CIO; our discuss me the CFO; results. our Thank Taylor, our

After Jack brief of of originations, the call today's will financial comments, from pipeline; my business market our yesterday financials. SEC. filed items first were key and our our Alpart and summary tables introductory and The a associated provide will highlight release with Marcin Steve activities with quarter recap and portfolio, discuss will our conditions; press

non-GAAP copy, you in our sec.gov. website may have being you measures. be on GAAP find have like them to location. I our mention in our also SEC's provided review website, which call In now not with earnings slides, If today's our the section at a of or financial Investor and Relations are in do may of on We a call. would to we website urge on the to this the same that this webcast reconciliation and information is you conjunction website release accessed posted

and would supporting to I during over the like remind forward-looking call I Before by call include statements. slides remarks the Jack, management you to turn this conference may that made

and not rely forward-looking and results or the may use materially caution We and events anticipate, other uncertainties We Forward-looking do consider SEC's with such differ statements. from actual risks of them associated expect, regarding events may not words. statements correct as reflect proved which future views imply forward-looking inaccurate. or later and our sec.gov. on described to typically our to to words unduly They obligation on believe, website be such with the estimate, are obtained expectations. any to urge in be risks update you the at We any the if carefully filings SEC statements undertake investors

will over I call the to Jack. now turn

Jack Taylor

like morning Chris you our you, call. and We good quarter all would thank everyone. XXXX welcome second for and you to joining Thank earnings

quarter very are and excited our We are of the first about and momentum estate with and fundamentals the to maintaining remain loans. seasonality, of for a a real owing strong both our pleased of progress After rest business of credit solid. volume over funding and XXXX historical pace the deployment year. market we environment second the return Commercial market the half volatility lower to very million the first our $XXX had in origination quarter, productive and

X% growth about Our funding versus loan in manageable quarter with billion funding's over inclusive second quarter over portfolio and prepayments, of $X.X resulted our $X.X commitments. future billion, last to combined of

quality flow of our generating volume Granite lending Point. Real though of lower Estate credit level, last attractive opportunities Market The than remains a healthy strong. year slightly at a strong assets for remains transaction

our on robust the closed resulting maintaining commitments, And attractive. our remains the low targets yields quarter. loan XX%. continued floating underwriting digit double weighted meet our their structuring, of quarter generated and pipeline are of The have current we of we credit originating was forward some The high of while of we As which ROI. senior rate loans a $XXX standards investment over this, evidence have new of origination of already new quality to credit million second investment LTV loan average in

the anticipate the and origination stable active from for year. year and well closed, earlier rest the for the loans we assets year, despite last competition all in market our Assuming pipeline to remain of in exceed our market conditions volatility

period our are to ability originate first and XX% capital This of of our high to quarters the on deploy loans up strong We new platform same into quality illustrates capabilities $X.X about over year. pace of assets. from billion XXXX, the one three last and through further currently the

to ATM funding our manage balance million We pace at additional sheets quarter, a for actively book in expectations and through forward sources. continue pipeline issued to strong support $XX during an the To multiple premium shares second common of program. and we active originations value later of our our an year, our the

million also and further as $XXX During mentioned our mix. diversifying of three financing specific on funding facilities term we a maturity on we closed extended we asset prior matched in our non-mark-to-market of April, the and a facility, fully new quarter call, financing

and As our efficiency diversification portfolio of continue stability, the focus our financings. to on grows, we

opportunities earlier, estate I environment mentioned capital estate choose. continues from which operating market for level. credit real a transaction somewhat there and fundamentals to the are Global commercial for financing Real remains offer positive. estate volume, for to continues This As vibrant. at high environment our and business. demand demand Borrower remain overall down all abundant a solid real is debt strong while

commercial generate loans continues provide active, for ample compression. adjusted estate our grow to opportunities generally the We The lending easing lending we estate find and attractive for for to real recently, remains spread returns and real competition business rational. more finance shareholders. risk markets standards us of While an market have floating our senior attractive seen rate

We for balance team, talented relationships respected are Points strong industry by confident and highly and Granite long-standing prospects about sheet. the our supported

year. successful XXXX forward first the We maintaining a for and to look have and of this performance busy half had of rest the

to over to portfolio will more activity our I discuss our Now call Steve detail. in investment and Alpart the turn

Steve Alpart

joining. all quarter I'll spend second for this our few And reviewing minutes you, forward our Thank appreciate morning. a thank our and We your you portfolio Jack. originations, time pipeline.

first and originations. allowed of in with second In in year-end slowdown second quarter overall to the activities $XXX the over quarter, total return volatility, our caused we pace new commitments of historical million. strong us XX the Following a saw the quarter, loans, by market in transaction we lending rebound which to close

were and preexisting $X.X our quarter upsized $XX sponsors. highly have assets, well-diversified over for characteristics loan consistent funding's initial our million, we new which of for These properties properties secured loans of with and property producing one about total accounting office by $XXX overall the experienced of loans, in credit geography are total strong with the second Our million are loan. with closed and portfolio high-quality comprised the commitments, for from million and $XXX by is generally funding income The over type, multi-family mix. million XX%

The large new first originations average yields and relatively selective yield as stable, the half opportunities. quality year our in average a Our and have lending LTV we XX%, second of on of of a originations the within quarter weighted universe of weighted plus have highly X.XX%. a LIBOR been remain credit

During about realized $XXX second on asset, office quarter, of of the driven the our an payoff $XXX by million largely located pre-payments a million second Northeast. amortization, were and largest we principal property which loan the in

the Driven of by $X.X balance strong over fully outstanding funding's, to portfolio billion billion committed the principal grew balance to and our at $X.X net quarter-end. over

floating yield Senior to portfolio plus weighted types XX% is over a and quality, of and XX% continues stabilize comprised loans with exhibit average over well-diversified LIBOR credit rate. average Our X.XX%. high and at investments, across LTV of asset and weighted a markets XX% property of are our origination overall

limiting portfolio government-related with to exposure Additionally, our diversification, regulations are portfolio investment our that programs, such minimal apartments the exposure emphasizing of consistent and New York. risks, subject new binary as has to rent philosophy to in

third new in that have Moving the of either initial includes generated our over reminder quarter over or process, pipeline, million closing commitments we the loan funding's. loans forward on already $XXX have to to with which $XXX closed a million, are in as of date,

of and point customary expect the So during fourth remaining subject loans of close far, at the though may most we the slip new have to $XXX quarter funded about to some quarter, closing third conditions. into we some loans, million

comprised pipeline and office continue and multifamily on our credit return target markets. general meet attributes of is properties mainly across our new investments And located exhibit strong Our the targets. to loans

before commit loan pipelines on over next potential about current in of two capital of market pre-payments, any new our estimate to one this we level and possibly Depending quarters. opportunities forward pre-payments. conditions capacity expect the We our be $XXX the to origination to to would million excess

turn to quarterly now detailed a review results. of for call will financial our more Marcin I the over

Marcin Urbaszek

Steve and you, Thank for joining morning good call. our everyone. Thank you

results the quarter. strong in second operating business produces Our

total Our benefited by which over X% grow quarter-over-quarter strong from a X% decline driven quarter and interest net costs. earnings growth income growth in financing portfolio in

were one-time from lower items as quarter prior the We also eliminated. certain operating realized expenses

we continue would capital less as However, of impact from temporary deploy EPS anticipate capital. the that significant our additional result impact our as call, this last numbers raising outstanding reflect in much activities. We as would a time the over the become our shares we to discussed

$XX.X million or the Turning at was GAAP per attractive per X.X%. $XX.X or yield million net per of $X.XX our which our common to And second income of specific offers share. our $X.XX were stock second results, current core declared share, an for earnings quarter price quarter We dividend share. $X.XX

largely at deployed. capital value $XX.XX the June book our per Our paid shares the dividends on fully XX, was is reflecting share, common being new before

impacted in in loans weeks of And the also the month. in closing the QX has funded of two those the Our over our last late origination is occurred dollars were $XXX majority by million earnings June. of quarter

quarter increased driven facilities of to of million. our over leverage, our the inclusive growth had by and portfolio. capacity on June our options upside $XXX of financing first over billion to $X.X billion At Regarding the $X.X XX, combined outstanding the borrowing total facilities our by of we from two balance credit

second upsized of the years. mentioned agreements million million to from all of our of we options $XXX facilities, ranging quarter, maturity. quarter-end, extended our the At earlier, Jack one of maturity three extended dollars $XXX and to facilities from of and our As extension we during one its the three

financing allowing its revolving We cost extended created an XX basis also it feature $XX and of upsize funds a high temporarily is provides times its XXXX, million attractive volume secured when This and structure at option facility. cost up We accordion of points, a our loans. us flexible by to to management with to liquidity amended and lowered maturity with close short-term million. facility $XXX tool us an a for we great us

to times including the non-recourse We a with ratio debt X.X leverage CLO total non-mark-to-market the ended equity quarter debt. second

to the CLOs, increase expect half into our the leverage would June in new as second capital our leverage to deploy of our Excluding We at we loans. year our only continue times X.X XX. was

funding June XX% of We at continue to and borrowings. emphasize of non-mark-to-market financing, utilization about increasing our which XX for our accounted the diversification of

you and the will now call operator ask to again for I open questions. us the Thank to joining today

Operator

Please Rahmani first Instructions] go question ahead. today from [Operator The Jade with comes KBW.

Jade Rahmani

exceed or originations back-end are the any the meet you you indication? robust quarter Thank or half the and give said the quarter third in you waiting back of the the dividend it, this very for quarter you much. year? very of earnings anticipating Inclusive the of pipeline, to Can

Marcin Urbaszek

for for Jade. Hi, Good the Thanks would Marcin, it anticipate It's closer to year. you we joining morning. towards the I the say level the question. will dividend of thank be end us.

$X.XX closings us earnings. I cost the think to probably the $X.XX in of late quarter

So obviously, reflected in numbers. that QX will in be

we launch LIBOR. close, what anticipate predict it's QX, higher be to quarter exact when will So, depending happens in the to number, new hard that on do but the

a We of will in higher. anticipate will of also sold that additional quarter, have the but little second we be the we some do shares recognition it bit

Jade Rahmani

or to New exposure you are one rent no suggest kind exposure? at Does saying minimal that control. there's some has City exposure least that said you have loan there's of that You York

Steve Alpart

Jade, it's us. for Steve, thank you joining

-- market of any think overall lot will the these of So, be people And that new very it market. market be the general the for impact negatively asset. market. regulations. the that for still I to view regs the of of particular positive will could with A impact specific impact We it is non-regulated it think subset a could guess the the actually units, is that the a actually absorbing

those and de our limited As specific earlier, far assets. New of minims both York dollar in very exposure, as risks it's the of exposure [ph] we mentioned City's to terms

apartments. only we Given limited underwrote apartments how well on with we these as we finance number loans the controlled there's apartments. of respect a multi-family business And New few the York stabilized or City have assets, of plans, types rent to as rent a

represents that small very flow on of those part So cash the a assets.

vintage that are not And in units on will those material any that I Brooklyn, we to underwriting where all recent stabilized. $XXX are property out rents do does have million to We rent transitioned way. assume want further, market in loan a be point the

any increases, However, to market and annual consistent we not assumes that point become of permitted that at units underwriting that on at only rent assume did asset those a our with stabilization growth, rented rent the levels. would level

this our example actually exposure credit a way investment great this, government that of legal to could of So or is avoiding changes overall regulatory philosophy have significant about the we by a values. then capital any these we on rent new believe I I significant guess impact with And saying our not negative portfolio loss. credit risk that will that do has conclude associated think

Jade Rahmani

clarify, above X% growth to in just the X%? what in business in include rents capital And does Okay. prior putting on plan improvements raise cap order from to now Brooklyn the is that

Steve Alpart

It did business medium-term. not. plan a and property associated CapEx with there's property is new vintage relatively that near in That the no

Jade Rahmani

And that in you You your mentioned there second property repaid. an repayments? repayments office largest moderate the loan do you to Does expect -- what for half? on was suggest expect

Steve Plust

this Steve Good is to Jade, from you. Plust. hear

run about we in a now, had quarters upon based with something $XXX XX% two expect the borrowers, per quarter. the a stabilized we're million ongoing Right to it many our year. a pre-repayments per portfolio repeatedly expecting level said dialogues million to over of As of we of next $XXX we've the on rate prepay past like

Jade Rahmani

for And give could on then finally, loans? rated an to update risk you

Steve Alpart

address that question. them. monitor material to no these. update on Sure Jade, really continuing We're I'll There's

year You of past payments. any five. credit is all point secured. in that on and other on business that we expect or write we're on that maintain to planned, monitoring someone loans. these we create the of four currently risk any current both of mentioned independent appraisals the We to in concerns well probably I assets have than want this the will perform, better third-party loans the for some loans We've or don't loans but feel have loans have do records also we're loans we we earlier Both rating QX. performance. out done Obviously, for will some ranked saw reserves nature that don't four any don't are that and the closely plan, will major loans these

Operator

The Securities. today Instructions] ahead. DeLaney JMP question next [Operator from comes with Steve go Please

Steve DeLaney

was up call I for on I tied minute. another apologize. a

If my But the you've addressed in I'm Fed that, curious, already play. is apologies. obviously

curious, impact money floors? receiving are there'll cuts your think before I'm how far that terms one pain, and floors done. for you're Fed we And does now with you just from they're while if to could short-term estimate, the need actually assuming not I the in Thank how be respect you are far in the and to go of actually on you. a floors, positive

Stephen Alpart

Steve, thanks for joining us. It's Stephen Alpart.

and lower, so some you weighted pipelines average floors; the the job of floor XXXX and a sense half XXXX we are it's is weighted a a XXXX originations loans of floor about average from give just between me which done that about loans great general part to XXX, our of Let have originated where driven we loans lower refinance also, of in XX% first of them average contributes floors. floor, portfolio LIBOR amending of That preventing have has average average about about LIBOR but floor the XXX. LIBOR when a portfolio. and XXX, us forward in significant have attractiveness early, the helped originations being is we've on The about to X.X. by weighted being weighted preserve portfolio of a we our relatively QX was

Steve DeLaney

to loans Aren't floors they low to going the as are seasoning the standpoint assume the and XX Steve. average for with to I helpful, going the is next XXXX/XXXX and to a going from at to probably. payoffs. reasonable the think then are be it those to that -- That's be months? degree over business not overall or And to XX would And months loans expect think you XX floor, greatest to away move the started months probably think with revert, not if weighted next months Would at the plans? Fed's a looking those year we -- I least just likely so, be X there's higher

Stephen Alpart

extended I expect rise. most would XX weighted and and say myself. these the the better to has which, is That's would that that fastest loans, we for been nature that right. months, couldn't These of basket likely the have that it be floor off that paying cohort business exactly said average level many the plans of be should

Steve DeLaney

much floors probably if the four modeling at down but you seems would really so a XXXX seem your XXXX. three not in more, So or as look we like it like we're help XXXX, goes it there's could -- Fed and for positive

for So, and that to morning, comments. cover wanted the was this you all thank I

Operator

Please The Rick Morgan. go with next questions JP ahead. from come Shane

Rick Shane

floor. on questions were My

I all the So appreciate details there.

combine sort XX basis related that sensitivity, conversation to and we've LIBOR June since you of Steve's say of the to $X.XX decline topics and that seen a looking guys the of from terms the $X.XX you of probably Just at interest to deployment fair $X.XX have second by XX, to sort declining the both guys pressure at timing? rate quarter, points described Jade looking the that described on end the rates about the back about offset about there's second quarter, in

Marcin Urbaszek

Hi think Marcin. Rick, it's Yes, fair a that's statement. I

Operator

ahead. from a Please next is question with Rahmani The go follow-up Jade KBW.

Jade Rahmani

common target your debt the need portfolio, equity year Thanks. pipeline? for in you Could to and the terms anticipate the based respect market in if you ratio with visibility, us consolidated part of to what is leverage equity to current remind on remaining your access any of the the

Marcin Urbaszek

again. Marcin It's Jade. Sure,

year, the we on we total end no is to the So, that loans pipeline three get that is with when the prepaid the depending level basis close. our on times target weird today, by again, to of should assuming around debt major equity anticipate our don't liquidity available

about today set accessing of market, liquidity for million. have at the $XXX terms the In we

million we rest the in see what that we million prepays a on do we once end runway the for mentioned, the $XXX till year, As if year, we anticipate to $XXX should have other of the another Steve decent the depending of market.

a which to In program, obviously we've second capital, quarter. we one of way terms access of ATM opportunities, in-time to markets, which of variety in can tools us have which of is very done potentially use the that raise our kind loan is efficient for we a the

the So as monitor market just the and for that decisions I we'll accessing long shareholders. make as discussed makes sense everything our appropriate

Operator

like to I any over remarks. concludes now Taylor our would back conference This question-and-answer turn the to closing for session. Jack

Jack Taylor

we'd us today everyone business, you, Thank and thank supporting appreciate you for And everyone we soon. it and for really speaking to again forward joining like with all our Thank you. we Anita. to look

Operator

This you for Thank conference has now today's attending concluded. presentation.

may disconnect. You now

Granite Point Mortgage Trust (GPMT) 6 Aug 192019 Q2 Earnings call transcript