GPMT - Earnings call transcript Q1 2022 | Granite Point Mortgage Trust Inc.

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Operator

Good morning. My name is Vaishnavi and I will be your conference facilitator. At this time, I would like to welcome everyone to Granite Point Mortgage Trust's First Quarter 2022 Financial Results Conference Call. All participants will be on a listen-only mode. [Operator Instructions] After the speakers’ remarks, there will be a question-and-answer period. today’s being note, Please Instructions] call recorded. is [Operator turn call for to would Point. now Petta the to like Relations I Chris over with Granite Investor Please go ahead.

Chris Petta

you Investor Officer discuss today's Jack financial Urbaszek, market results. and Peter our and for the filed financial results. me SEC of condition, portfolio, highlight items financial on will and call Officer. our the are Officer; like Form Alpart, forward-looking during and slides Thank discuss Thank Investment Co-Head Marcin which this website include Morral, our Point's President on With call morning, morning are with and remarks release outside available Alpart Steve that Steve our and tables and from call XX-Q. along our by this and call Chief Development key comments, recap After Jack Operating Originations; associated made Steve Executive are Officer; were will The current Granite Co-Head XXXX Plust, may with Relations remind Chief you a would the our provide the Financial our to review Officer our statements, to will you Marcin and with I company's supporting our quarter control. brief and uncertain yesterday press first of the section of management good introductory Chief and Taylor, Chief Originations; joining of our everyone. of our Chief activities business my

with SEC results. to that the differ update obligation see could some of future uncertainties materially for statements. cause to forward-looking any not a events results We risks Forward-looking and the statements discussion filings undertake are and regarding Please affect reflect from our any expectations. could do to our actual views of subject

found these financial call earnings our information financial call. a information and considered presented most which also will the be the slides, over refer GAAP. with or in substitute our in intended measures the as measures isolation this accordance is can certain now on be on A Jack. measures to of not reconciliation release for to turn This available We non-GAAP to website. I'll non-GAAP comparable GAAP to in are

Jack Taylor

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

We have balance run strategic our rate of sheet made progress tremendous on our and improving repositioning earnings. priorities

have position inefficient reinvest we believe interest loans we structures, few of and also the the year, focused rising trapped recent to priorities continue have higher As as if discussed previously, in repaying that our ability impact funding a our rates We to accomplishments de-levered for to these second and release vehicles borrowings. rates our the and earnings short-term the loan well expected increase us rise. of to short-term in yields loan offset repayments are and cost older term assets, term, near level the meaningfully deploying been resolution into capital pursuing portfolio non-accrual loan half in of on loan earning our and these from refinancing capital the the

DC, of gap loans. point, Washington our assets this the to At book and close on repay expensive price into In and between redeploy senior four We our loan number million profitability stock and rate report $XX our excited an are March, steps have run and recently late very improve property have to resolved capital which surpass sold to we allowed a non-accrual current earning us non-accrual taken we office three our located in we of debt. value.

XXXX two about in Pasadena, which actively In resolution legacy on loans $XXX The capital retail both status pursuing repayments. million transactions Sachs, property funding de-levered our of of our CLO attractive cost is had we we was through these are which real from mortgage a refinanced and structured estate an funds. meaningfully April, Goldman $XXX of various the non-accrual Our result one vehicles; our of remaining loan for about with of and of facility strategies. million a also California, financing commercial of on net first release

stated We our when quarters, of refinancing only run our fully full actions, corporate portion are more of our significantly in of results, the attractive funds have of reduced grow We all outcome remaining repaid transactions, are our borrowings and not and sheet which actions the of cost portfolio returns been which also for total financial fully us us as this reflected intend it benefits yet growth. with $XXX balance funds, not is these this the profitability. there goals. to we stockholders. improve take another re-lever believe and debt our with facilities, the to pleased very provide the under ability a provided of helped higher achieving drive and reflected provided significantly of could that portfolio. borrowings our cost we repayment fully recently yet of finance senior meaningfully With our The for but in a the repayment further additional the coming further lowered funds ability in financial term on Moreover, cost results rate loan our capital to flexibility release million cost even strategic loans, our portfolio, of from additional portion secured our higher

this currently incremental alternative one a pursuing currently earning resolved, invested into the earnings. respect which loan, few with actively is being are We in should the Once to non-accrual held generate unlevered. loan remaining resolutions assets redeploying capital

our X also afford opportunities to opportunities times X.X further closer improve rate leverage pursuing run the incremental profitability. of and end of would rationalize that times, growth QX to our various increase from at funding could target portfolio to further our our range are X.X We which total times

grow our benefits business. we we Additionally, realize as managed REIT, as operating an internally well to positioned are leverage

with on healthy to opportunities attractive see favorable of lending continue We a are flow fundamentals. and properties focused

to our underwriting investing, with ongoing pandemic, the inflation, and respect remain credit loan chain uncertainties global structure. interest to events, rising and disruptions, rates approach supply disciplined the spreads, we Given in

our liquidity to our spreads improving positioned Given wider and advantage further take leverage, remain we loan of are capitalization. opportunistic well in and

should and of U.S. real the are adjusted With volatility summary, that senior lending rate as estate attractive continue time. global haven amount returns commercial by be fundamental basis our estate investors. will our over viewed to of secured rate believe strategy net floating quality long-term class earnings. the against a have risk we overall In of markets real experiencing, on strategic a safe structure capitalization asset generate a our institutional result debt And plan actions working One leverageable our accomplished already lot on corporate quarters equity. is balance last the lower improve of loan has run key higher sheet well preferred term we few with and over replacement cost to cost been our the reposition

of reinvestment our of allowed resolutions one of trapped capital earning into inefficient but all refinancing loans non-accrual our helped drag for vehicles and Additionally, funding and assets. more earnings reduce from

second in in significantly later, results profitability Granite the of rate more continues in position run rate loan to deliver strong will our our an operating led focused recent for half run accomplishments, fully We business benefit financial detail attractive resilient when coming the diversified Point and as dividend. will year. our reflected generating Our performance, the solid believe that senior portfolio, well supporting Marcin quarters, by discuss investment earnings well our and

over opportunities to pursuing Steve are benefits provide forward We portfolio. Alpart ultimate to turn now currently goal stockholders. returns call and the delivering to the our of potentially the additional to like with embedded total discuss incremental originations, would to our attractive I pipeline

Stephen Alpart

joining for all morning. you thank our and Jack call you, Thank this

and generate while diversified positioned attractive broadly Our favorable continues portfolio profile. defensively to credit exhibiting returns a

seen collateral migration loans business our we last and by have in resolved as of the the four driven risk of portfolio, Over have select positive quarters, three have progress few we the non-accrual the plans properties. upgraded of loans, within ratings credit generally

of about of our and the a million quarter, from in closed about risk We loans those rating initial the of includes which to March $XXX risk of category $XXX new of changed half million rating weighted of credit new investments. of profile two last loan improved million over at nine four X.X in about loan, totaling improved the During those originations, loans XX to and X and from reflect non-accrual resolution X commitments at March. X-rated loans, X.X fundings, loans December of driven $XXX upgrading by the to the XX, closed a weeks average

of occurred the and certain loan Our of pace that the quarter. originations later of timing the was impacted first closings capital quarter our by timing in raises

the balance existing QX Over secured in $X We and well-leased fundings upsizing, properties. XX% $XXX were office million funded loan commitments $XX our over over assets bringing million one industrial by and also originations total for the quarter. on to of by million

of XX%. a Newly yield risk-adjusted and approximately plus SOFR return X.XX average originated weighted weighted characteristics, loans a attractive of carry stabilized with LTV average

of realized we moderately the types, about across earning inclusive of quarter-over-quarter. of property QX, loan, assets office sale. increased the disposition for Adjusting During non-accrual the loan million $XXX various our repayments

future first of across average and funding committed with of balance with aggregate $X.X ended about quarter the XXX million commitments. an loans of Our portfolio spread balance $XXX billion million approximately an $XX

and attractive X% LTV continue XX%. income credit selective while highly market property active It attractive loans a yield picking market a most stabilized about realized remained a profile, healthy, portfolio. increased remained favorable weighted generating of for deliver an stream new disciplined average to Our volatility. our Transitional with lending overall with the and notwithstanding loans of

of volume opportunities, we with excess million repayments. of from invest million $XXX of see we grow approximately redeploy loan continue initial liquidity commitments to and attractive as of ample an expect and fundings, which We proceeds $XXX investment pipeline to current our

second criteria, of commitments, multifamily including funded the summary, of loans approximately available in quarters. to our source current principal, repayments. have credit other ample return which XX% of million the $XXX attractive our in at properties lower that over prior balance $XX and was spreads the loan pipeline investments on about by originate with are meet realized and can secured Over than million in and categories. leverage what far flow we prior So often In we in wider million we of and $XX continue quarter,

current detailed our our Marcin the year. loan we of call outlook anticipate over turn more I repayments, now to the results. our the Given remainder financial environment will the a market on and of review for growing portfolio over moderately

Marcin Urbaszek

today. $X.XX morning, first Good compared us as everyone million share thank per income of QX. our we you or $X million joining basic quarter basic Steve. GAAP for and net afternoon, to you, $X.X per Yesterday Thank reported $X.XX share in or

GAAP $X.X basic $X.XX for provision and $X.XX of credit million sale the to extinguishment share of per earnings loan charge the for or million or partial related earnings non-accrual $X.X from the $X.XX to of of million include losses $XX on or on February million basic debt previously disclosed repayment previously $XX.X which early Our related of loan a disclosed our loan. share. basic share, per term about per quarter million were a of $X.XX share, were per realized the the basic or first $X.XX Distributable include which sale $X.X loss

write about QX or which were the $XX.X is unchanged basic Our from off per the share, period. earnings million largely distributable before $X.XX prior

Additionally, loan largely the be should increasing the repayment short-term impact the rates closed mid-February. from QX originations the we interest of benefit the partial believe towards of remaining the term March loan offset second that and half by in during end of

shares decreased factors XX the preferred a earlier. I issued result GAAP which Our and the earnings, to the were by mentioned per book share transaction exceeding costs on value affected quarter share as dividends $XX.XX QX in $XX.XX of last additional per from March

The $X.XX allowance for an credit share. per of about first book value quarter includes losses

employed conservative a sale, about reserve loan per to $X.X million on about or per some allowance macroeconomic and million offset $X.XX forecast total due increase by which the share more or write-off as by our share our we mix. general quarter-over-quarter, an $X.X $X.XX Our in was declined portfolio in changes partially of mainly a

the of reserve as the first total total quarter and represents unrestricted announced in is of of one about basis cash, to with XXst. We XX cash, of loan. million about activities. $XX million About X, Our million $XXX remaining allocated non-accrual had points million commitments portfolio March our ended about reflecting our the $XXX allowance $XX May as of recently

additional ratio declined to debt-to-equity during from times equity of times March XX total by preferred quarter. term issuance the X.X X.X the driven the the in and of quarter, partial repayment Our first prior loan the at

balance executing our have described by Jack changes the on couple of we As strategic last earlier, made to some sheet priorities. our quarters over

reflected run Given rate earning these potential some X in we those like are our shifts, our estimated of better would potential to additional illustrates profitability impacts. provide illustrate they to results. information fully our on when impact actions the supplement those of Page

earnings which to has pipeline, benefit most in anticipated QX, is forward. current our already closed of Our going

refinancing of attractive $XXX of $XXX estimated over recent about couple by capital funds. the be an of of generated this which repayment loan generated at last vehicles Our cost full remaining by incremental is offset of more legacy than million the funding capital term to borrowings, the million The cost occurred of the savings weeks.

Steve new loan redeploying benefits. and As evaluating generate be coming liquidity the investments which quoting we actively we potentially remaining months, are the mentioned, excess additional should and over will

the again us Taken you our rates ask call operator impact together, run and to today, rates benefit to ability for of to questions. in we while to should increase and the open higher later us our now have rate will short-term joining help Thank year. interest from to believe they reduce continue the that these meaningfully higher actions I earnings positioning rise on the profitability the

Operator

[Operator Thank from Instructions] Please ahead. Steve comes DeLaney JMP you. question Our first Securities. go with

Steve DeLaney

Good for morning, thanks everyone taking and question. my

think, forward Slide that X like I I'd activity. walk from benefits kind of the the first, of non-accruals, from say strong to progress the with all on appreciate and the really we that congratulations the shows just

so we far to the charges just per your As the quarter, you be $X.XX. quarter, have we quarter, -- related on as debt extinguishment, in $X.XX Goldman, to final And believe release, on second and deck because clear, your second in first and charge extinguishment. guess, we've I the negative got had share mentioned PIMCO I the fourth $X.XX special quarter also or this less press

As you you only the that these are in quarter? far the things, as see expect non-recurring charges currently second

Marcin Urbaszek

joining for Good morning, you Thank us. Steve.

Steve DeLaney

Marcin. Hi,

Marcin Urbaszek

inefficient sensitive appreciate two kind your high kind -- Yes, so to on that the the removing cost of refinancings see that's related our we items and for I liability debt and Thanks those words. question. far, side. are

Steve DeLaney

-- Okay. of achievable tend quarters? a X equity it And two do mortgage that debt approaching X.X or kind your I for times take a times realize benchmark probably, but moving about Do sort quarters, three think to standard forward see or -- of that see as we times will equity you couple to over you REITs. to being a debt the the several is X.X commercial of -- next

Marcin Urbaszek

to we Yes. into were times That's equity. levered -- pandemic, X.X heading debt look, the

times. is Our to X times target X.X

closer through doing We some increase, obviously refinancing get these that reinvesting on we a goal already to And Our to slight will leverage. capital. vehicles is that. to rest the of plan, and by up definitely right. legacy then pickup leverage that target There work as began in more, the be leverage bit little anticipate our continue a go would of we to

sitting that's We have that's earning $XXX not capital sort $XXX of unlevered, loan non-accrual so million anything that's -- unearning today. of million

portfolio help As earnings the at will half as resolve so with well. in we expect capital, which can re-lever leverage that do that of that, also the and growth second to year, we some point hopefully we

Steve DeLaney

clear, All only that And congratulations your Is accurate in $XXX the be Well, again non-accrual is is million that to Pasadena, remaining? to say the right. loan it loan, Right. correct? non-accruals. on portfolio

Marcin Urbaszek

correct. that's Yes,

Steve DeLaney

Okay. Thank very the you for comments. much

Marcin Urbaszek

Thanks.

Operator

next Doug Please with go comes The from Harter Suisse. question ahead. Credit

Douglas Harter

Thanks.

any your that repaid guess, the you've any do other issuance the preferred, of to changes grow expensive Now and base? or you look the debt about Do how today? capital expect you issued the think capital composition I to

Marcin Urbaszek

capitalization, balanced unsecured Thanks to sheet. we question. terms morning, unsecured balance on capitalization think, debt to equity, have this the for we the like on structure, in of you sort convert Doug. for we the Good side, were thank is have like a some your where some pandemic, and I before Look, joining us, of

would is say sort close we of where before. were I to this So,

be through liquidity As of we But how sort kind financed, changes go of are, in condition. by keep to don't changes and/or of several changes of that. anticipate different see kind like are don't other we'd But facilities. they're kind it to market the major may whether overall, balanced, types capital the next obviously, of dictated quarters, we between where from the will needs, structure, significant I think, overall and and our loans very CLO it some be we we

flexible. always we've some adding over the more last we gone want is then to But of pleased and we beneficial very quarters, of remain with where we to are debt So, replacing which sort leverageable equity, couple which -- this us.

Douglas Harter

the kind are the there? Got timing X.X times, get resolution take the before follow to it. times? to what And to to does guess the of the close getting to delay Just factors resolution of cause of leverage non-accrual the you or that kind get it the X.X How on happens? to that and can I limiting up get

Marcin Urbaszek

on just Look, think I the it's executing plan.

resolving again think it. today, that's I is of part unlevered which loan, on that accrual

portfolio, our right. you of average sort advance If look at our XXs, it's weighted the rate on in

do have still work little we So, more a on bit that going forward. improving to

So, loan efficient it's bit that's balance of idle more the the and a all in level sitting little financing the re-levering making now above, the sort of capital sheet. right

Douglas Harter

you. Thank Great.

Operator

with comes The Please ahead. question from next KBW. Rahmani go Jade

Jade Rahmani

Thank curious scale. you very your regarding much. I'm thoughts to as

not current the with because I value, to in really warrant value explains what to think discount line there at return to the trading of relative shares that's the book enough book dividend, is value. a book

be to So, either increase increase. or capital the dividend scale the meaningfully to there company of raise dilutive will have to has the

at annualized, would the stockholders' question around scale? equity per how $X.XX is about quarter, the Totaled be company. $X.XX How so in share the think sufficient second question That's $XX The just G&A you of about million $XX which the get much one really running be million is So, quarter. overall annualized. to scale? per would related

perhaps to order paid reduced any power or there could perhaps in temporarily of increase the the to stock you. components compensation that in G&A company? Thank are earnings suspended be So,

JackTaylor

your then to Thank it start Jade. you and from on I Hi, say. question. the for pass hear to Marcin. Good I'll questions, you, off should

question scale by we're that that the we related we first address talking at. that The like our about that and that power a were to at continue much the discount to discount the going think are misconceptions and were level, think We it deep balance scale, that trading before, at few much about we've higher the so. the I'd to sheet deep the we we've trading -- and earnings been last scale, shown What today unlocking its to company's the do about in the so over the not is but is of quarters business. earnings power presentation

And to so, continue should by performing our priorities. improve that well we power execute this strategic further supported portfolio, believe our on we as earnings

So, to I'll to pass it question. Marcin follow-on over your answer

Marcin Urbaszek

Okay. joining have scale, for $X.X and on Jade. I to equity, follow-up -- billion think Thanks, Thanks of Jack. Hi, we right. Look us.

power earnings G&A So, from that don't more million we're will and subscale, company, equity which It's to And my have it's not about the about information it. point run forget, just we've of your $X as is rate how compensation. on to improving of we perspective, provided right. more it we G&A, really be improved in non-cash

the timers at somewhere per you what QX. below cash somewhere I to costs that. couple million, $X.XX rate estimate XXXX. if of they be a share. say, We were of true lower run in in are probably $XX one sort would I much So, of than around probably are expenses sort would comp our look cash had it

look sort a chunk equity non-cash it got on on that of apples at because is comp. big to of a versus sort you of So basis a base, cash to expense I apples total think

Jade Rahmani

side, do the companies? markets. strategic pivoted competitive Would changes at move. of to But you think with has any that's you multifamily, more product? rate combinations investments? other In fixed Sunbelt And making towards current be any Everyone consensus Everyone there the pivoted value. terms you very company much. potential there quite handful has would its are book should contemplate a trading on towards mortgage REITs contemplate very target any a Thank environment, are of in you discounts

Jack Taylor

question. Alpart I'll part let your the first of Steve address

Stephen Alpart

Thanks morning. Good joining. for Jade. Hey,

we've look, going loans, senior office continue we're been doing, as currently to expect our housing, multifamily, we logistics, other focus warehouse rate continue on well student storage, to to and as floating sectors, retail. So, what deemphasizing on focus to some

skewed first If warehouse towards you can originations, it industrial. you look our at quarter see

The second about was alluded multifamily. quarter, to, which XX% we

those lighter So, business flow, a we're repeat with borrowers, lot diversified continue by going plans, on in sectors continue growth good to geography. cash markets to to transitional of stay focus

say, QX QX, we stay loans, a have what has come spreads see into that down We're getting on that structure. standards also I and good think favorable, widened, from would bit, leverage So, are on right we'll theme. now, underwriting heading seeing our I we're

described, So, we pipeline. about in pretty feel the what good what's just we

Jade Rahmani

Thank Jack. you very much. Go ahead,

JackTaylor

I smaller of said were Yeah. part to With now. than are even we Jade, levels, much earlier, respect your second we question, the trading scale higher as at

Given we right time. would in where the that it to acquisitions our prices we're found any that, not now, accretive at stock making contemplating we future if look the

Jade Rahmani

Thank you.

Operator

next ahead. The Stephen James. question with from comes Please Raymond Laws go

Stephen Laws

Good Hi. morning.

the already and around the accomplishing vehicles, the as property and covered be have far as to far property guys et collapsing Kind lot wanted as get DC taken resolving a to most that much you've other of office so as like questions outlook. some and types year-to-date debt actions continues my type congratulations comments legacy general cetera. You repaying on on

questions, of get thoughts works from a more the scale, just Jack, So, I on if And to the for the your you curious leverage side about in the your buyback. but your some other office know could of stock towards your portfolio? assets little At the would targets. talk coin, this then outlook against performance discount, to pushing certainly contribute on it getting of

that, comments your please. get on So, just wanted to

Jack Taylor

So, a our on that, of best you policy adjusted first. into that comment It's general go focused I'll factors once, lot for always best what's play buybacks. and Having the return we're not to There's second generating it. go and risk business. said different the potential Steve, I'll let on for

of value use I'll to the in is authorized. buybacks course future. trading be or now in shares best discount some We X.X the of we're others have the share at assessments more remind capital and do authorization that we've for book might past. There that are buybacks. is you that the of million done One of the

this the have use As appropriate. we to we make assessment, shares those ability when

Stephen Alpart

pandemic, carefully due protect. It a been up it's has markets more to of is with where pandemic and behind part what's seen headwinds I stepping Hey, really we Rent and are delays your have supply on, the -- strong. collections our thinking end. there. Leasing and have even deals there. generally been been equity guess, plans stay out schedule, question budgets that geographies. back. first at the where monitoring equity the clearly needed good continuing, we schedule Steve. It's are capital We're loans how the improvement labor about space. the But We've behind coming the blown we across We're programs Steve. their it all putting have office in to of coming not they borrowers any and I'll are about in take portfolio. really some We've our the assets. of strong are Look, face good that office We office Those few slowed current quarter out seen the pandemic, chain sponsors into assets. could or uneven of is issues real saw and the during during assets. feel seeing business

but the generally -- said feel office So, assets good these at we're I we beginning, these as some assets of assets. overall, about carefully, monitoring our

Stephen Laws

Stephen. Thanks, Great.

It follow-up the those I great. type you to in your on quarter. give kind of loans upgraded place? prepared of As property mentioned, upgrades or nine believe, us Can region that, during be remarks where a you took would breakdown

Stephen Alpart

bit little multifamily. a hotel, across of mix couple by mixed-use twos, the and of board loans of And loan, couple been across included the board. and -- geography. a office to included a twos to It upgrades of threes, some a It's was asset of included ones. kind threes it It's type Sure. it's to fours

in been including of think, really that the plans. board, So, was, it's specific to And earlier, those kind as, across we office. improvement business due said I

Stephen Laws

across the Jack Great. Well, for comments to this the in I property that types good morning. Steve, breadth portfolio. see appreciate thanks it. different and

Jack Taylor

Thank you.

Operator

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

Jack Taylor

you fully continue. we’ll Thank speaking rise very first our they reflected meaningfully with our second further soon. like half opportunities coming continuing say thank profitability, to would look the be to I in that that pursuing operator. when for we’re and results to shareholders. accomplishments to benefits to incremental attractive the run the of you potentially these joining during in returns are as these health times, the and as would benefit that and and us all like much, total we We you of results the quarters, to recent from well the with able our report financial for forward to pleased our And call today. see I a And really year wish you positions today good as reminder, we’re rates rate more goal provide embedded ultimate delivering of

Operator

today’s concluded. presentation. The for attending you conference now has Thank

disconnect. now may You

Granite Point Mortgage Trust (GPMT) 12 May 222022 Q1 Earnings call transcript