GPMT - Earnings call transcript Q2 2024 | Granite Point Mortgage Trust Inc.

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Operator

Good morning. My name is Daryl, and I will be your conference facilitator. At this time, I would like to welcome everyone to the Granite Point Mortgage Trust Second Quarter 2024 Financial Results Conference Call. [Operator Instructions]. Please note today's call is being recorded. to Investor call Relations like Petta to now sorry, -- for would turn over the Chris I Granite Point.

Chris Petta

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

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

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

Jack Taylor

Chris, you, to thank for you you and good Earnings would We Thank XXXX Granite welcome Call. like joining morning, Second everyone. for Quarter and Point's us

though for and year, well stabilized is rates, impact continued of XXXX has seen transitional a for half however, short-term transaction This potential first markets this recently, historical been to about assets slowly the reaction. uncertainty, building shift by funding levels. Securitization Fed uncertainty pickup macroeconomic for and in activity The interest including the increased by week in the estate begin characterized the market last the which have transaction coming which solidified report and was commercial rate the turn Fed months last employment to has to the over market weak path further and consensus market the by the volatility in activity been confidence few while in real led real below in has about bolstered estate activity meeting properties returning. expectations the reducing market. More rates has in liquidity of months, even remains improving

the from first of the continue step at in portfolio March following quarters April, play the transaction sentiment We trends believe anticipated As flows with more improve, horizon the in coming up the property in the and transparency bottoming as that continued assets negative loan more on end our rise in out are beginning market of overall valuations. estate activity, the resolutions to of the their sharply level a valuations real improve the occurred repayments. months property recent transaction quarter. We'll around and that to seeing in These away in continue to interest some while we're market substantial move as process. rates well and

loans Our we proactive million, best last of approach nonaccrual that with the aggregate involving to of the couple each drive for in to asset months balance an management different has over meaningful principal progress resulted outcome X order strategy over in resolved $XXX possible a the in company.

stages pursuing respective their nonaccrual are the actively remaining are which We of of resolutions loans, processes. in various

We by to more The of such timing outcomes uncertainty. which difficult market million remain of $XXX XXXX. transactions of loan on million resolve we believe approximately exact and the the predict have and $XXX ultimate resolutions, visibility nature end to given should

we these on impression However, by progress the we are make on the profitability. run rate our continue to encouraged assets given

main the that the values commercial book rate Our to in drive regarding of the capital deployment including the investor performance future activity improving A factors factor nonaccrual path capital loan to real the liquidity. and should medium approach overall higher to of real continue earnings confidence success. Improved maximize floating estate other we needs economic balance of and the estate amount liquidity long-term and best value term. potential is cost between market, and and around of discovery a price be of the company the interest position the visibility to level the timing, while still outcomes market near is work into dry large sidelines affecting on impacts, for on likely powder resolutions rates to emphasizes of this property

nonaccrual reflect have loan to quarters, increased As the on CECL our next towards over property resolutions reserves additional ongoing we pressure values. the we progress

reserves potential visibility improves with evolve ahead have proactive to market progress individual of discovery as credit assets. identifying issues continue trends price and We been as the more loan based potential resolution on the in charge-offs building and of loss

the loss are activity how ratings volatile in quarter-over-quarter. cycle end credit incremental in and credit while pace this by this market quarter, provisions. slower improving of credit late and further extreme unpredictable portfolio. Nonetheless, the period credit our migration picking meaningfully risk market are We the and resulting been portfolio given believe the sector closer has has remains encouraged second been, within in the to within additional we getting stresses for We potential of stable up, tone of migration and the risk issues transaction and of the

our in our should However, and total CECL coming loan reserves quarters. outlook the decline our the recent nonaccrual of on experience resolutions, level given

relative our we through As will capital moving see and returning space, to attractive over total the over market position credit stabilizing and on time, our focused maintained remain the term. transitional we our focused and activities us shareholder business cycle. to the liquidity return same regrow rate flexible is rate management to asset value long floating time profitability. At catering the highly and returns fully while while we Repositioning have allocation core strategy on run lending improving portfolio portfolio this our capital

continuing about remaining share second repurchased accretive at during performance, deep our taking to repurchase consideration into have of prudent buyback common repurchases near-term in among leverage capital $X.XX valuation the million intend credit authorization, attractive considering respect book the such, to value, opportunities. believe market common our the Directors relative portfolio deeply environment stability currently total economic discount, that factors. We of generate to opportunistic reposition and for investors' about under presents share. the June, to returns market we way to company's on any and market is of and during $X.XX As during compelling valuation, other the our long-term protect protecting share our believe reduce which while X.X over growth discounted a shares common with emphasizing are remain about prudent to quarterly per potential the balance that activity, We a times Board investors' million we strategy firmly drive quarter, current effective to our shares liquidity, earnings. Because X.X sheet We future time. to challenging business decided challenging public per future capital returns the our pressure periods, dividend value and shareholder share benefited and a valuation by

As look commercial are expected quarters, estate to the few the into ultimate contribute likely to we of out recovery rate interest market. the real next reductions

I us while and to Alpart further portfolio asset to and Steve like repayments the We improving contribute to advantage nonaccrual rate our our significantly which portfolio loan and resolutions detail. liquidity position to our run more driving will opportunities now proactively in profitability take will investment future. our activities continue to the over of emphasize call in discuss to turn attractive would manage

Stephen Alpart

returning and some Jack, thank loan resolutions. Since morning. joining you better you, all transaction increased assets. Improved liquidity contributed slowly to visibility transitional sentiment our and Thank certain market seen improved progress to call this to nonaccrual on we've and capital on repayments for last see and call, are beginning has activity our

end, aggregate X was have buyer. Also related effectuate a property to about of the having a additional and a we we value million. We've resolved quarter, value. to and nonaccrual and for is balancing seller with During $XXX $XX small REO repayments was office We $XX additional parts we a an and resolved property title opportunity in million totaling of our quarter the cash to X have UPB. Since previously $XX carrying the an million excess building flow. We rate quarters in about million worked suburban quarter, had strategies in additional quarter development fixed the which secured UPB the achieve an without provide the $XX resolving totaling the several loans loans assets repayments, realized to number loan repaid in loans carrying senior objectives loan's with of during the land. Since the uses during million. refinancing the paydowns, multifamily nonaccrual located Boston positive property property The optionality CMBS there attractive million with for $XX million about of of of second from second the realized and while at collaboratively including different end, outcomes. $XX loan. office is to a generating financing multiple X alternative the million The asset a value resolve best used acquired quarter net while located the believe loan around borrower we to to economic embedded at loss over successful property $XX sale to transferred second secured by Milwaukee

was to cash The located was Los This and retail transaction unlevered mixed-use event secured for event and involved mixed-use coordination senior borrower without the financing. providing collateralized attributes. many The a liquidity the with the collateral loan $XX July, first $XX attractive located multifamily Angeles. property in with million loan in building is by nonaccrual company. Also acquisition in in property for and Downtown a The our sell also located office loan we property restructured resulted space the million well positive by the office a Pittsburgh.

included to a impacted million However, been the a in and very sponsor local a we've with multifamily million large have the new $XX of technology the capital the modification by support loan and loan mortgage bifurcation performance our components office has in impacted pleased and to of collateral which progress weakness loan sector, $XX the been market. The presence improve with a making mezzanine resolve into further the committing property. We're the credit loans. additional the

additional office with though hard mixed-use the exact have to collateralizing the remaining we of quarter. their an New $XX earlier, sales securing mixed-use the though the all with office remains and risk coming likely X potential months. Similarly, million coordinated Rouge individual we during hard $XX ultimate hope stages in the various the in our stated securing of by in loan resolution $XX Hotel to the to be $XX property near million York loan sales our loan for $XX and property by retail Jack million timing end the secured visibility fourth in in sales the is Chicago, anticipated the As is million processes predict. The X Boston, X the property predict, contract on resolutions loans a and in could loan process the the multifamily a we year. processes, closing office anticipate to reach retail which is Baton The term, in in ongoing the and are rated of securing soon million timing under loan the conclude Minneapolis property sale

rating is migration to the portfolio dynamics loan the X. the $XX property During of for relatively the a we property been collateralized loan limited of one stages leasing sale. an office second property risk sponsor credit marketing million Denver, negatively initial rating the local office by has The by in within a moved quarter, X experienced with and of market in impacted from

liquidity. have we with continue slowly improving second our that one X been quarter addition, properties market $XX made their stable progressing by of impacted and also progress office see of their limited the business most properties of of by we expect account to on we've by so are billion what with of In portfolio million pleased risk total varying fundings outstanding a of high-quality X challenges as with be encouraged addressing future $X.X one and far, a risk leasing and for loan and only total degrees commitments. portfolio remained are of hotel portfolio plans The about to an institutional downgraded about aggregate $XXX ratings other market. We about collateral balance -- and sponsors and nonaccrual which loans ended commitments the to the an rating billion loans, the the loan UPB quarter-over-quarter. We're $X.X X% about to principal support million

$XX XX loan -- a about million with Our LTV stabilized loan diversified origination across average LTV of average well XX.X%. of and at regions at includes portfolio and weighted size investments an types remains property

portfolio Our estimate net the X%, basis second quarter approximately impact yield for XXth. for ended be we of loans points X the which of months realized June about was XXX the to loan nonaccrual the

we about million $XXX about of million of UPB, and the and commitments and funded paydowns, upsizes repayments, During existing amortization realized resolutions. $XX loan loan quarter,

and we third far commitments existing of and funded million realized quarter, million $X loan the have paydowns about resolutions. So loan about of in repayments, $XXX loan

volume conditions, what first the Given to second expect we the realized of the months in we during be higher repayments and market X resolutions half current XXXX year. of of loan the than

Marcin as more balance we our loans. working review conservative and will our detailed levels end the diligently now nonaccrual portfolio and our loan emphasizing stance of over resolve liquidity capitalization. continue maintain the carrying and our of to higher trend expect year for the by lower We turn financial of to a to results I call

Marcin Urbaszek

net million driven basic share, basic income, and includes a loss a today. share of for for write-offs by or Steve. reported provision or $X.X $XX.X joining second for $X.XX loss afternoon, mainly the losses related which credit decline basic we Thank million interest Good per $XX.X loans. Distributable us to GAAP per $X.XX mainly morning, thank you, $X.X everyone, and $X.XX you million $X.XX or per million of net Yesterday was or nonaccrual quarter in X basic certain a risk-weighted per reflecting loan quarter of share share, loans.

partially $X.XX quarter per which York, a about share of executed to decline XXth we book share. The $X.XX a design which $X.XX provision June X benefited per deemed was earlier, share Our and QX, we a about secured by buybacks opportunistically book quarter, offset loss value of created common accretive was write-offs at uncollectible. due our share, to loans value loan building by small our multifamily mezzanine Milwaukee loan in per of from by note, which we the primarily related mentioned during common were the a this resolution modification New in small estimate the

our For please to XX-Q. more refer details this modification, on Form

over which Jack discussed reduce nonaccrual near-term potential the should over write-offs quarters, earlier, on reserve $XXX overall couple resolutions the we of balance. CECL next outlook of our million Given our anticipate incurring

results continue of to accounted the nonaccrual loans our quarter operating for of portfolio which by over Our pressured XX% as end. be

assets, we Some of continue quarters profitability company on any is reduce the in loan these timing earnings. We recognized progress and to remain coming than run to nonearning rather recovery anticipate as are applied though the predict. and rate resolving the exact being incoming cost make loans improve interest on principle difficult of magnitude in to to the

to last of change share, as or CECL at million commitments $X.XX quarter. total on reserve pressure the X.X% reflecting loans commitments additional allowance transaction market reserve additional in to of was compared the on transparency in X, of per increased our values to were and $XXX The about property portfolio risk-weighted end that begins quarter was and million related up. representing our X.X% the pace pricing mainly CECL as volumes our Our pick or $XXX resolutions

to total some individually certain assessed to loans, market about by in is our Over million $XX and million $XXX assets. an loss XX% ongoing or assumptions, general CECL about assumptions. on severity those for reserve of reserve XX% loan average CRE specific which expectations allocated the increased estimated QX due Our challenges macro implies of

about share. As by QX on we $X.XX $XXX loans our million impacted $XX of approximately quarter nonaccrual results about end, we million or status, of estimate had which per

due the equity We Turning to and with ended of a of cash result balance in capitalization. to in modestly $XX unrestricted reserves. as increased to quarter lower leverage to total liquidity mainly about X.Xx QX compared X.Xx higher CECL million the and a QX

During extended to our adjusted borrowing maturity near- needs. and its reflect we of better to facility quarter, medium-term our capacity the Morgan Stanley maximum the financing

determinate to in had matured a which July borrowings, outstanding as like also term. in Sachs use limited the We anticipate facility, funding no we Goldman near our it and

the our our to we We expect new return support enjoy our highlighting long-standing financing lenders, loans market relationships once we expand continue from actively. strong more and in to to originating capacity

a of in the days two of increase financing some repayment in assets in the maintaining that planned expect cash, near weeks medium currently which leverage. few the to to loan high about driven on We liquidity focused million term. ago, remain coming REO and $XX we are carried we As level of the by on activity

to open simultaneously for our manage portfolio ability the assets to now we and We questions. proactively we you financial company again transition and for flexibility for to call growth today, thank as to will I future continue the opportunities. us the position would joining prioritize the like will

Operator

[Operator Instructions].

the from Citizens of line Delaney Steve with come has question first Our JMP.

Steven Delaney

to any which repayments, clearly, The and The we in that But defensive to whether in portfolio. I feels of rough think maybe you it might around where -- -- some distributable to that June, portfolio $X.X billion, guys like I believe, obviously, love loan it's kind loans you be positive. half the that. in and you appreciate now or see I loan second that probably the certainly and a year, with and and the Marcin, look a to loan shrinking end is turn we'd portfolio then asking moving estimate, that the of hard understand breakeven I'm or realize dispose welcome as mode a you're thinking guess, that. But -- out for at of do -- trying I'm out? EPS, REO that As sense runoff, sense going I your is of into be right bottom

on any topic. welcome that your would Just of particular comments

Marcin Urbaszek

Look, predict your to you things to Steve, where difficult be. I think thank question. for it's are sort going of exactly

I think of as and our as stance we manage resolve these you mentioned, maintaining sort are REO. we assets sort conservative of

in year. prepared we I down the think the mentioned remarks sort his Steve end to anticipate of of portfolio trend Alpart that by

some think I a have resolutions positive profitability. on of impact run rate will the

pay ownership to shake pretty again, and sort predict expense about that's but to when, or hopefully, in run of trail they bit. happen as whatever provide in the it's cash going we feel run -- improve the distributor positive sort think rate flow good rate that's dividend near term, where as debt. probably and ex a to the trajectory. the seller or That resolutions losses shape may or REO, should I it's the down these whether in coming a think of happen, I -- will group of we EPS new that's quarters financing little to overall in profitability But hard form out

Steven Delaney

-- that XX you've of Okay. your that rated loss over hit you right Marcin from loans period, the about share but expected to next whatever. you're portfolio your Does maybe $X it job that, whatever, to way of a EPS of that wrote losses or Is of comment I whether current $X was neighborhood Jack your shares, down over got it or does was range year a carrying in -- in your here? and something that impact made, million realized distributable have losses seems that the that reserves? And realizations? do with million the see It next the I the the $XXX math

Marcin Urbaszek

Yes.

-- think it's right. I that's I think

anticipate over said I XXX coming in over $XXX it's the I -- million quarters. think

QX in We have already. the X resolutions

We that get Pittsburgh off are on the asset, reserved fully may B note we on anticipate as well. written which

already. And add the and the somewhere as around heard think that you $XX likely visibility Steve will mentioned -- to that. between So retail, LA Jack additional that's million I office and office

you're of year. So deals could depending these it's the neighborhood. or exactly close, the QX, of but hard and sort when million whether the $XXX on of can to it's in think roughly by timing north end But predict, it QX be I

Steven Delaney

through bit the the are with can. little add it the best helping shareholders appreciate towards In doing You a stock effort buyback. guys meantime, working and I you

that's I efforts nice think balance a resolution your to asset internally.

So comments. thanks your for

Operator

from Harter come the questions UBS. with next Doug line of Our

Douglas Harter

you're resolve on I your Can being the you given comfort you remarks, the near prepared property in talk at improving transparency believe said in kind price? your seeing marks about around able loans of transparency greater that just pricing. or to

Marcin Urbaszek

joining through us. good for think and go Thanks transparency. sort of you Thank pretty for we more Look, your we visibility more I and question. there's the as feel process

be to some of of the try obviously as go some You these through assets process. these respect reserves with to proactive

I near on -- we're in reserve the year. of end marks. for in to we hopefully we this are going the feel we XXX% that the of good of But term have is some these by correct in generally, pretty about now be where assets think to market the the sort pipeline

Douglas Harter

flow? comfort Great. you then, we the said new of get arms as around know problems kind be look asset problem of Jack, current ratings your kind help of assets. kind kind fact new have that and And one-off in just I still us to that formation pace could there the the see Can risk of you of the the problem

Jack Taylor

joining the improving. the terms on environment things and are Doug, a We and us into comfortable the market think fact, And the move price things some not greater those migrate -- emerging have towards of in sure We're X will category looks period we to makes time. but overall not did And current to we about loans are that a maintaining category. But comfortable X this of and to some own know or responsive Thank if foot what's some the some X. we that's about that you. a the say down we're as with circumspect to additional of we've forward portfolio the X loan. moving see with volume in at to the ratings. say direction say that I to still of risk that a And the as our that like in greater And Yes. a up. support to would are looking from transaction that that is been we'll we're in Denver expect come. We the it picking as progressing end thanks some because payoff us. at stress are you, market for for That's into I liquidity full And think them. is this well the we don't be won't respect X for them, way I Xs, we office with we may we're they're transparency see

Douglas Harter

you thank It is, Jack.

Operator

Our line come with the questions Stephen from [Operator James. Raymond Instructions] Laws next of

Stephen Laws

I Delaney's questions. a wanted up Steve of follow couple on to

those loans? loans, think drag. on that you on think million have do I mentioned the would you you curious I currently be as about was $XX First, much cost how and of debt? And what rate the financing nonaccrual $X.XX

Marcin Urbaszek

question. your Stephen, thanks for Thank for us. you joining

our $XXX variety have that utilizing asset We depends line obviously through we sources. filings are different really million sort They NPL the of mainly that is. over it you on can of so that financed been have which far. it see So a in

a for but So tool liquidity obviously, expensive, that's good us. it's

facilities. are the assets on different of other Some

the unlevered. more So going finance generally as us I finance earlier, they well -- increase liquidity we give varying while But intend to forward. to flexibility as are and we currently will said some is degrees, to REO them just

Stephen Laws

paying improvements any so buck proceeds the you these your financing when in that's and occur, about we liquidity that's for on probably bang biggest say those as to what's resolutions use facilities, to down profitability? get going And of is fair it is drive think the or nonaccrual near-term where

Marcin Urbaszek

we've which loan sort will choose to it's pay the in from we property the new then it off and think the asset most collateral that would or or of be more either so group, I it financing the past, financing sold, interest finance new likely done to of sort income gets ownership that on on provide if if we the a efficiently. may we

be variety it's different some assets on to going a tools, So of of depending which go. direction these

Stephen Laws

correctly, the It's my of notes How the you on if resolutions think because QX, those about providing can you like next Great. I question took did provide in loans? I not are my financing is. see the financing thinking that's you heard assets. that two that to place buyers

do want to to Kind you do how kind against decision? do that of a the don't guys difficult much maybe there you're curious to you you're So not how when And you to buyer? willing more Are is make to that attached lend stay other make how that of provide to forward? it financing guys assets that decision? certain assets more going likely resolution

Stephen Alpart

that It asset. Thanks really specific one. Steve, I'll take joining. the depends on it's Alpart. Steve for

very an buyer, assets. that we retail heard consider provide was some some for stable the And L.A. stable and but mixed-use of the about and this office provide you may without will the office won't them morning, resolve But be other that these we assets, cases We financing. or of all-cash where need financing, on always stable As no financing, typical talked be and case. the to to need call staple would decision. for It have with financing need would be resolved it will that asset-by-asset staple always to the financing.

in will of So be it more will the always I would assets. be case by on office it but general, say likely case, some

Operator

from come questions the of Rahmani KBW. Jade nex Our line with

Jade Rahmani

$XXX The Do while you happen million. nonaccruals what difference show the collateral know to in the million, $XXX are loans as XX-Q up the dependent is?

Marcin Urbaszek

prepared I remarks. I million, be nonaccruals the the about the of may difference. I think ex the that nonaccruals balance think carrying as my mentioned is The value $XXX [indiscernible], in that's on

Jade Rahmani

the as makes That that realized give you a Could book in sense. you is value? expect book us already just trough? Okay. reflected you sense the of to identified losses value I where those preponderance guess to

Marcin Urbaszek

a we've reserved The that cited for good question. are that's numbers Yes, already.

So pretty adjustments sort may the some reserves realized losses, be loans these get some we good adjustments, to of as minor There those feel the finish again. line. about

hard sort I predict sort it's value in of be generally where of type book to might this market. think of

recall, some additional may mentioned, migration. credit Jack you If there be

from this we remarks, And balance encouraged cycle CECL we prepared one-offs generally like of good to But where the going slower we and said predict. think forward, pace credit of the by about should down I the hard be I think here there think some don't again, we're there as may over. I here. are. feel in trend reserve we pretty is But it's feel migration.

Operator

like hand for There Jack Taylor to this closing now are further questions time. no over any comments. at call I'd to the back

Jack Taylor

you, get thank the to and for everybody. work this good that through hard for support. our to to Well, to everybody, challenging they're very thank there. some the want wood progress, have confident and you that where continued as we're and team you, we'll would making call. period for We quick doing Thank in chop, all we're be participating more say I your And also

Operator

appreciate We you. teleconference. does Thank conclude today's This participation. your

rest You your the at lines may disconnect Enjoy time. day. this your of

Granite Point Mortgage Trust (GPMT) 6 Aug 242024 Q2 Earnings call transcript