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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 10-Q
______________________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: March 31, 2019

Commission File Number 001-38124
______________________________
GRANITE POINT MORTGAGE TRUST INC.
(Exact Name of Registrant as Specified in Its Charter)

Maryland
 
61-1843143
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
3 Bryant Park, Suite 2400A
New York, New York
 
10036
(Address of Principal Executive Offices)
 
(Zip Code)
(212) 364-3200
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
 
Accelerated filer o
Non-accelerated filer o
 
Smaller reporting company o
 
 
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class:
 
Trading Symbol(s)
 
Name of Exchange on Which Registered:
Common Stock, par value $0.01 per share
 
GPMT
 
New York Stock Exchange
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of May 3, 2019, there were 53,741,316 shares of outstanding common stock, par value $0.01 per share, issued and outstanding.
 
 
 
 
 


Table of Contents



GRANITE POINT MORTGAGE TRUST INC.
INDEX

 
 
Page
 
PART I - FINANCIAL INFORMATION
 
 
 
 
 
 
 
PART II - OTHER INFORMATION
 


i

Table of Contents



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
GRANITE POINT MORTGAGE TRUST INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
 
March 31,
2019
 
December 31,
2018
ASSETS
(unaudited)
 
 
Loans held-for-investment
$
3,292,989

 
$
3,167,913

Available-for-sale securities, at fair value
12,798

 
12,606

Held-to-maturity securities
25,815

 
26,696

Cash and cash equivalents
65,384

 
91,700

Restricted cash
55,051

 
31,723

Accrued interest receivable
10,595

 
10,268

Deferred debt issuance costs
2,333

 
3,924

Prepaid expenses
764

 
1,055

Other assets
21,659

 
15,996

Total Assets (1)
$
3,487,388

 
$
3,361,881

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Liabilities
 
 
 
Repurchase agreements
$
993,634

 
$
1,500,543

Securitized debt obligations
1,197,814

 
654,263

Revolving credit facilities

 
75,000

Convertible senior notes
268,484

 
268,138

Accrued interest payable
10,117

 
6,394

Unearned interest income
197

 
510

Dividends payable
21,938

 
18,346

Other liabilities
13,073

 
10,156

Total Liabilities 
2,505,257

 
2,533,350

10% cumulative redeemable preferred stock, par value $0.01 per share; 50,000,000 shares authorized and 1,000 and 1,000 shares issued and outstanding, respectively
1,000

 
1,000

Stockholders’ Equity
 
 
 
Common stock, par value $0.01 per share; 450,000,000 shares authorized and 52,171,921 and 43,621,174 shares issued and outstanding, respectively
522

 
436

Additional paid-in capital
994,592

 
836,288

Accumulated other comprehensive loss

 
(192
)
Cumulative earnings
108,831

 
91,875

Cumulative distributions to stockholders
(122,814
)
 
(100,876
)
Total Stockholders’ Equity
981,131

 
827,531

Total Liabilities and Stockholders’ Equity
$
3,487,388

 
$
3,361,881

____________________
(1)
The condensed consolidated balance sheets include assets of consolidated variable interest entities, or VIEs, that can only be used to settle obligations of these VIEs, and liabilities of the consolidated VIEs for which creditors do not have recourse to Granite Point Mortgage Trust Inc. At March 31, 2019 and December 31, 2018, assets of the VIEs totaled $1,547,626 and $829,147, and liabilities of the VIEs totaled $1,199,164 and $654,952, respectively. See Note 3 - Variable Interest Entities for additional information.
The accompanying notes are an integral part of these condensed consolidated financial statements.

1

Table of Contents



GRANITE POINT MORTGAGE TRUST INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
(in thousands, except share data)
 
Three Months Ended
 
March 31,
 
2019
 
2018
Interest income:
 
Loans held-for-investment
$
56,665

 
$
38,793

Available-for-sale securities
308

 
272

Held-to-maturity securities
661

 
885

Cash and cash equivalents
511

 
27

Total interest income
58,145

 
39,977

Interest expense:
 
 
 
Repurchase agreements
16,989

 
16,194

Securitized debt obligations
9,859

 

Convertible senior notes
4,465

 
2,179

Revolving credit facilities
695

 

Total interest expense
32,008

 
18,373

Net interest income
26,137

 
21,604

Other income:
 
 
 
Fee income
913

 
882

Total other income
913

 
882

Expenses:
 
 
 
Management fees
3,449

 
3,209

Incentive fees
244

 

Servicing expenses
773

 
458

General and administrative expenses
5,616

 
4,232

Total expenses
10,082

 
7,899

Income before income taxes
16,968

 
14,587

(Benefit from) provision for income taxes
(1
)
 
1

Net income
16,969

 
14,586

Dividends on preferred stock
25

 
25

Net income attributable to common stockholders
$
16,944

 
$
14,561

Basic earnings per weighted average common share
$
0.35

 
$
0.34

Diluted earnings per weighted average common share
$
0.34

 
$
0.33

Dividends declared per common share
$
0.42

 
$
0.38

Weighted average number of shares of common stock outstanding:
 
 
 
Basic
48,601,431

 
43,374,228

Diluted
62,256,595

 
50,467,978

Comprehensive income:
 
 
 
Net income attributable to common stockholders
$
16,944

 
$
14,561

Other comprehensive income, net of tax:
 
 
 
Unrealized gain on available-for-sale securities
192

 
16

Other comprehensive income
192

 
16

Comprehensive income attributable to common stockholders
$
17,136

 
$
14,577

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

Table of Contents



GRANITE POINT MORTGAGE TRUST INC. 
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)
(in thousands, except share data)
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
Shares
 
Amount
 
Additional Paid-in Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Cumulative Earnings
 
Cumulative Distributions to Stockholders
 
Total Stockholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2017
43,235,103

 
$
432

 
$
829,704

 
$

 
$
28,800

 
$
(30,315
)
 
$
828,621

Net income

 

 

 

 
14,586

 

 
14,586

Other comprehensive income before reclassifications

 

 

 
16

 

 

 
16

Amounts reclassified from accumulated other comprehensive income

 

 

 

 

 

 

Net other comprehensive income

 

 

 
16

 

 

 
16

Common dividends declared

 

 

 

 

 
(16,506
)
 
(16,506
)
Preferred dividends declared

 

 

 

 

 
(25
)
 
(25
)
Non-cash equity award compensation
201,956

 
2

 
662

 

 

 

 
664

Balance, March 31, 2018
43,437,059

 
$
434

 
$
830,366

 
$
16

 
$
43,386

 
$
(46,846
)
 
$
827,356

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2018
43,621,174

 
$
436

 
$
836,288

 
$
(192
)
 
$
91,875

 
$
(100,876
)
 
$
827,531

Cumulative effect of adoption of new accounting principle

 

 
13

 

 
(13
)
 

 

Adjusted balance, January 1, 2019
43,621,174

 
436

 
836,301

 
(192
)
 
91,862

 
(100,876
)
 
827,531

Net income

 

 

 

 
16,969

 

 
16,969

Other comprehensive income before reclassifications

 

 

 
192

 

 

 
192

Amounts reclassified from accumulated other comprehensive income

 

 

 

 

 

 

Net other comprehensive income

 

 

 
192

 

 

 
192

Issuance of common stock, net of offering costs
8,291,829

 
83

 
157,145

 

 

 

 
157,228

Common dividends declared

 

 

 

 

 
(21,913
)
 
(21,913
)
Preferred dividends declared

 

 

 

 

 
(25
)
 
(25
)
Non-cash equity award compensation
258,918

 
3

 
1,146

 

 

 

 
1,149

Balance, March 31, 2019
52,171,921

 
$
522

 
$
994,592

 
$

 
$
108,831

 
$
(122,814
)
 
$
981,131

The accompanying notes are an integral part of these condensed consolidated financial statements.


3

Table of Contents



GRANITE POINT MORTGAGE TRUST INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)
 
Three Months Ended
 
March 31,
 
2019
 
2018
Cash Flows From Operating Activities:
 
Net income
$
16,969

 
$
14,586

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Accretion of discounts and net deferred fees on loans held-for-investment
(3,822
)
 
(2,707
)
Amortization of deferred debt issuance costs on convertible senior notes and securitized debt obligations
2,029

 
184

Equity based compensation
1,149

 
664

Depreciation of fixed assets
39

 
1

Net change in assets and liabilities:
 
 
 
Increase in accrued interest receivable
(327
)
 
(536
)
Decrease in prepaid expenses
291

 
192

Increase in other assets
(5,702
)
 
(696
)
Increase in accrued interest payable
3,723

 
2,161

Decrease in unearned interest income
(313
)
 
(140
)
Increase (decrease) in other liabilities
2,917

 
(580
)
Net cash provided by operating activities
16,953

 
13,129

Cash Flows From Investing Activities:
 
 
 
Originations, acquisitions and additional fundings of loans held-for-investment, net of deferred fees
(276,574
)
 
(154,101
)
Proceeds from repayment of loans held-for-investment
155,320

 
96,427

Principal payments on held-to-maturity securities
881

 
4,793

Net cash used in investing activities
(120,373
)
 
(52,881
)
Cash Flows From Financing Activities:
 
 
 
Proceeds from repurchase agreements
225,261

 
140,731

Principal payments on repurchase agreements
(732,170
)
 
(137,883
)
Proceeds from issuance of securitized debt obligations
646,868

 

Principal payments on securitized debt obligations
(105,000
)
 

Proceeds from convertible senior notes

 
18,247

Proceeds from revolving credit facilities
48,697

 

Repayment of revolving credit facilities
(123,697
)
 

Decrease in deferred debt issuance costs
1,591

 
1,404

Proceeds from issuance of common stock, net of offering costs
157,228

 

Dividends paid on preferred stock
(25
)
 
(25
)
Dividends paid on common stock
(18,321
)
 
(16,372
)
Net cash provided by financing activities
100,432

 
6,102

Net decrease in cash, cash equivalents and restricted cash
(2,988
)
 
(33,650
)
Cash, cash equivalents and restricted cash at beginning of period
123,423

 
110,718

Cash, cash equivalents and restricted cash at end of period
$
120,435

 
$
77,068

Supplemental Disclosure of Cash Flow Information:
 
 
 
Cash paid for interest
$
28,284

 
$
16,212

Cash paid (received) for taxes, net
$

 
$
1

Noncash Activities:
 
 
 
Dividends declared but not paid at end of period
$
21,938

 
$
16,588

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

Table of Contents



GRANITE POINT MORTGAGE TRUST INC.
Notes to the Condensed Consolidated Financial Statements (unaudited)

Note 1. Organization and Operations
Granite Point Mortgage Trust Inc., or the Company, is a Maryland corporation that focuses primarily on directly originating, investing in and managing senior floating-rate commercial mortgage loans and other debt and debt-like commercial real estate investments. The Company is externally managed by Pine River Capital Management L.P., or the Manager. The Company’s common stock is listed on the New York Stock Exchange, or NYSE, under the symbol “GPMT”.
The Company was incorporated on April 7, 2017 and commenced operations as a publicly traded company on June 28, 2017, upon completion of an initial public offering, or the IPO. Concurrently with the closing of the IPO, the Company completed a formation transaction, or the Formation Transaction, pursuant to which the Company acquired the equity interests in TH Commercial Holdings LLC, or the Predecessor, from Two Harbors Investment Corp., or Two Harbors, a publicly traded hybrid mortgage real estate investment trust (NYSE: TWO). In exchange, the Company issued 33,071,000 shares of its common stock, representing approximately 76.5% of its outstanding common stock after the IPO, and 1,000 shares of its 10% cumulative redeemable preferred stock to Two Harbors. Upon the completion of the Formation Transaction, the Predecessor became the Company’s wholly owned indirect subsidiary. On November 1, 2017, Two Harbors distributed to its common stockholders the 33,071,000 shares of the Company’s common stock it had acquired in connection with the Formation Transaction, allowing the Company’s market capitalization to be fully floating.
The Company has elected to be treated as a real estate investment trust, or REIT, as defined under the Internal Revenue Code of 1986, as amended, or the Code, for U.S. federal income tax purposes. As long as the Company continues to comply with a number of requirements under federal tax law and maintains its qualification as a REIT, the Company generally will not be subject to U.S. federal income taxes to the extent that the Company distributes its taxable income to its stockholders on an annual basis and does not engage in prohibited transactions. However, certain activities that the Company may perform may cause it to earn income which will not be qualifying income for REIT purposes. The Company has designated one of its subsidiaries as a taxable REIT subsidiary, or TRS, as defined in the Code, to engage in such activities.

Note 2. Basis of Presentation and Significant Accounting Policies
Consolidation and Basis of Presentation
The interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or SEC. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, have been condensed or omitted according to such SEC rules and regulations. However, management believes that the disclosures included in these interim condensed consolidated financial statements are adequate to make the information presented not misleading. The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. In the opinion of management, all normal and recurring adjustments necessary to present fairly the financial condition of the Company at March 31, 2019 and results of operations for all periods presented have been made. The results of operations for the three months ended March 31, 2019 should not be construed as indicative of the results to be expected for future periods or the full year.
The condensed consolidated financial statements of the Company include the accounts of all subsidiaries; inter-company accounts and transactions have been eliminated. Certain prior period amounts have been reclassified to conform to the current period presentation.
All entities in which the Company holds investments that are considered VIEs for financial reporting purposes were reviewed for consolidation under the applicable consolidation guidance. Whenever the Company has both the power to direct the activities of an entity that most significantly impact the entity’s performance, and the obligation to absorb losses or the right to receive benefits of the entity that could be significant, the Company consolidates the entity.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make a number of significant estimates. These include estimates of fair value of certain assets and liabilities, amount and timing of allowances for loan losses and impairments and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of certain revenues and expenses during the reported period. It is likely that changes in these estimates (e.g., valuation changes to the underlying collateral of loans due to changes in capitalization rates, leasing, credit worthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders, overall economic conditions, the broader commercial real estate market, local geographic sub-markets or other factors) will occur in the near term. The Company’s estimates are inherently subjective in nature and actual results could differ from its estimates and the differences may be material.

5

Table of Contents

GRANITE POINT MORTGAGE TRUST INC.
Notes to the Condensed Consolidated Financial Statements (unaudited)

Significant Accounting Policies
Included in Note 2 to the Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 is a summary of the Company’s significant accounting policies.
Recently Issued and/or Adopted Accounting Standards
Lease Classification and Accounting
In February 2016, the FASB issued ASU No. 2016-02, which requires lessees to recognize on their balance sheets both a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. The ASU is effective for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2018, with early adoption permitted. The Company’s adoption of this ASU did not have a material impact on the Company’s financial condition, results of operations or financial statement disclosures.
Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued ASU No. 2016-13, which changes the impairment model for most financial assets and certain other instruments. Allowances for credit losses on available-for-sale, or AFS, and held-to-maturity, or HTM, debt securities will be recognized, rather than direct reductions in the amortized cost of the investments. The new model also requires the estimation of lifetime expected credit losses and corresponding recognition of allowance for losses on trade and other receivables, HTM debt securities, loans, and other instruments held at amortized cost. The ASU requires certain recurring disclosures and is effective for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2019, with early adoption permitted for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2018. The Company is evaluating the adoption of this ASU to determine the impact it may have on its condensed consolidated financial statements, which at the date of adoption, is expected to increase the allowance for credit losses with a resulting negative adjustment to retained earnings.
Accounting for Share-Based Payments to Nonemployees
In June 2018, the FASB issued ASU No. 2018-07 to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. Under the guidance, equity-classified nonemployee awards will be measured on and fixed at the grant date, rather than measured at fair value at each reporting date until the date at which the nonemployee’s performance is complete. The ASU is effective for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2018, with early adoption permitted. The Company’s adoption of this ASU was applied by recording a cumulative-effect adjustment to retained earnings as of January 1, 2019, which did not have a material impact on the Company’s financial condition, results of operations or financial statement disclosures.
SEC Disclosure Update and Simplification
In August 2018, the SEC adopted a final rule that amends certain disclosure requirements that have become duplicative, overlapping, or outdated in light of other SEC disclosure requirements, U.S. GAAP, or changes in the information environment. However, the guidance also added requirements for entities to include in their interim financial statements a reconciliation of changes in stockholders’ equity for each period for which an income statement is required (both year-to-date and quarterly periods). The final rule is effective for all filings made on or after November 5, 2018. However, the SEC staff said it would not object to a registrant waiting to comply with the new interim disclosure requirement until the filing of its Form 10-Q for the quarter that begins after the effective date. As a result, the Company adopted the new interim disclosure requirement during the current period. The Company’s adoption of this final rule did not have a material impact on the Company’s financial condition, results of operations or financial statement disclosures.

Note 3. Variable Interest Entities
The Company finances pools of its commercial real estate loans through collateralized loan obligations, or CLOs, which are considered VIEs for financial reporting purposes and, thus, are reviewed for consolidation under the applicable consolidation guidance. Because the Company has both the power to direct the activities of the CLOs that most significantly impact the entities’ performance, and the obligation to absorb losses or the right to receive benefits of the entities that could be significant, the Company consolidates the CLOs.

6

Table of Contents

GRANITE POINT MORTGAGE TRUST INC.
Notes to the Condensed Consolidated Financial Statements (unaudited)

The following table presents a summary of the assets and liabilities of all variable interest entities consolidated on the Company’s condensed consolidated balance sheets as of March 31, 2019 and December 31, 2018:
(in thousands)
March 31,
2019
 
December 31,
2018
Loans held-for-investment
$
1,488,891

 
$
795,259

Restricted cash
47,076

 
26,136

Accrued interest receivable
4,634

 
2,622

Other assets
7,025

 
5,130

Total Assets
$
1,547,626

 
$
829,147

Securitized debt obligations
$
1,197,814

 
$
654,263

Accrued interest payable
1,341

 
689

Other liabilities
9

 

Total Liabilities
$
1,199,164

 
$
654,952



The Company is not required to consolidate VIEs for which it has concluded it does not have both the power to direct the activities of the VIEs that most significantly impact the entities’ performance, and the obligation to absorb losses or the right to receive benefits of the entities that could be significant. The Company’s investments in these unconsolidated VIEs include CMBS, which are classified within available-for-sale securities, at fair value, and held-to-maturity securities on the condensed consolidated balance sheets. As of March 31, 2019 and December 31, 2018, the carrying value, which also represents the maximum exposure to loss, of all CMBS in unconsolidated VIEs was $38.6 million and $39.3 million, respectively.

Note 4. Loans Held-for-Investment
The Company originates and acquires commercial real estate debt and related instruments generally to be held as long-term investments. These assets are classified as loans held-for-investment on the condensed consolidated balance sheets. The Company also finances pools of its commercial real estate loans through CLOs, which are considered a VIEs for financial reporting purposes and, thus, are reviewed for consolidation under the applicable consolidation guidance. Because the Company has both the power to direct the activities of the CLOs that most significantly impact the entities’ performance, and the obligation to absorb losses or the right to receive benefits of the entities that could be significant, the Company consolidates the CLOs and classifies the underlying loans as loans held-for-investment. Loans held-for-investment are reported at cost, net of any unamortized acquisition premiums or discounts, loan fees and origination costs as applicable.
The following tables summarize the Company’s loans held-for-investment by asset type, property type and geographic location as of March 31, 2019 and December 31, 2018:
 
March 31,
2019
(dollars in thousands)
Senior
    Loans (1)
 
Mezzanine Loans
 
B-Notes
 
Total
Unpaid principal balance
$
3,289,035

 
$
14,381

 
$
14,600

 
$
3,318,016

Unamortized (discount) premium
(138
)
 

 

 
(138
)
Unamortized net deferred origination fees
(24,889
)
 

 

 
(24,889
)
Carrying value
$
3,264,008

 
$
14,381

 
$
14,600

 
$
3,292,989

Unfunded commitments
$
624,244

 
$

 
$

 
$
624,244

Number of loans
95

 
2

 
1

 
98

Weighted average coupon
6.4
%
 
11.9
%
 
8.0
%
 
6.4
%
Weighted average years to maturity (2)
1.9

 
3.0

 
7.8

 
1.9



7

Table of Contents

GRANITE POINT MORTGAGE TRUST INC.
Notes to the Condensed Consolidated Financial Statements (unaudited)

 
December 31,
2018
(dollars in thousands)
Senior
    Loans (1)
 
Mezzanine Loans
 
B-Notes
 
Total
Unpaid principal balance
$
3,147,310

 
$
31,679

 
$
14,652

 
$
3,193,641

Unamortized (discount) premium
(151
)
 

 

 
(151
)
Unamortized net deferred origination fees
(25,577
)
 

 

 
(25,577
)
Carrying value
$
3,121,582

 
$
31,679

 
$
14,652

 
$
3,167,913

Unfunded commitments
$
626,155

 
$

 
$

 
$
626,155

Number of loans
88

 
3

 
1

 
92

Weighted average coupon
6.4
%
 
11.4
%
 
8.0
%
 
6.5
%
Weighted average years to maturity (2)
2.0

 
1.9

 
8.1

 
2.0

____________________
(1)
Loans primarily secured by a first priority lien on commercial real property and related personal property and also includes, when applicable, any companion subordinate loans.
(2)
Based on contractual maturity date. Certain loans are subject to contractual extension options which may be subject to conditions as stipulated in the loan agreement. Actual maturities may differ from contractual maturities stated herein as certain borrowers may have the right to prepay with or without paying a prepayment fee. The Company may also extend contractual maturities in connection with loan modifications.

(dollars in thousands)
 
March 31,
2019
 
December 31,
2018
Property Type
 
Carrying Value
 
% of Loan Portfolio
 
Carrying Value
 
% of Loan Portfolio
Office
 
$
1,548,117

 
47.0
%
 
$
1,495,128

 
47.2
%
Multifamily
 
668,410

 
20.3
%
 
569,259

 
18.0
%
Hotel
 
483,553

 
14.7
%
 
427,611

 
13.5
%
Retail
 
329,430

 
10.0
%
 
324,447

 
10.2
%
Industrial
 
263,479

 
8.0
%
 
351,468

 
11.1
%
Total
 
$
3,292,989

 
100.0
%
 
$
3,167,913

 
100.0
%

(dollars in thousands)
 
March 31,
2019
 
December 31,
2018
Geographic Location
 
Carrying Value
 
% of Loan Portfolio
 
Carrying Value
 
% of Loan Portfolio
Northeast
 
$
1,126,245

 
34.3
%
 
$
1,171,691

 
37.0
%
West
 
707,379

 
21.5
%
 
694,223

 
21.9
%
Southwest
 
726,072

 
22.0
%
 
681,108

 
21.5
%
Southeast
 
360,193

 
10.9
%
 
369,961

 
11.7
%
Midwest
 
373,100

 
11.3
%
 
250,930

 
7.9
%
Total
 
$
3,292,989

 
100.0
%
 
$
3,167,913

 
100.0
%

 
At March 31, 2019 and December 31, 2018, the Company pledged loans held-for-investment with a carrying value of $3.0 billion and $2.9 billion, respectively, as collateral for repurchase agreements, revolving credit facilities and securitized debt obligations. See Note 10 - Repurchase Agreements, Note 12 - Revolving Credit Facilities and Note 13 - Securitized Debt Obligations.

8

Table of Contents

GRANITE POINT MORTGAGE TRUST INC.
Notes to the Condensed Consolidated Financial Statements (unaudited)

The following table summarizes activity related to loans held-for-investment for the three months ended March 31, 2019 and December 31, 2018.
 
Three Months Ended
March 31,
(in thousands)
2019
 
2018
Balance at beginning of period
$
3,167,913

 
$
2,304,266

Originations, acquisitions and additional fundings
279,694

 
156,186

Repayments
(155,320
)
 
(96,427
)
Net discount accretion (premium amortization)
13

 
14

Increase in net deferred origination fees
(3,120
)
 
(2,085
)
Amortization of net deferred origination fees
3,809

 
2,693

Allowance for loan losses

 

Balance at end of period
$
3,292,989

 
$
2,364,647



The Company evaluates each loan for impairment at least quarterly by assessing the risk factors of each loan and assigning a risk rating based on a variety of factors. Risk factors include property type, geographic and local market dynamics, physical condition, leasing and tenant profile, projected cash flow, loan structure and exit plan, loan-to-value ratio, project sponsorship, and other factors deemed necessary. Risk ratings are defined as follows:

1 –
Lower Risk
2 –
Average Risk
3 –
Acceptable Risk
4 –
Higher Risk: A loan that has exhibited material deterioration in cash flows and/or other credit factors, which, if negative trends continue, could be indicative of future loss.
5 –
Impaired/Loss Likely: A loan that has a significantly increased probability of default or principal loss.

The following table presents the number of loans, unpaid principal balance and carrying value (amortized cost) by risk rating for loans held-for-investment as of March 31, 2019 and December 31, 2018:
(dollars in thousands)
 
March 31,
2019
 
December 31,
2018
Risk Rating
 
Number of Loans
 
Unpaid Principal Balance
 
Carrying Value
 
Number of Loans
 
Unpaid Principal Balance
 
Carrying Value
1
 
8

 
$
359,595

 
$
358,113

 
9

 
$
354,791

 
$
353,583

2
 
86

 
2,845,949

 
2,823,057

 
78

 
2,680,297

 
2,656,679

3
 
2

 
75,052

 
74,619

 
3

 
121,133

 
120,496

4
 
2

 
37,420

 
37,200

 
2

 
37,420

 
37,155

5
 

 

 

 

 

 

Total
 
98

 
$
3,318,016

 
$
3,292,989

 
92

 
$
3,193,641

 
$
3,167,913



The Company has not identified any impaired loans and it has not recorded any allowances for losses as it is not deemed probable that the Company will not be able to collect all amounts due pursuant to the contractual terms of the loans.


9

Table of Contents

GRANITE POINT MORTGAGE TRUST INC.
Notes to the Condensed Consolidated Financial Statements (unaudited)

Note 5. Available-for-Sale Securities, at Fair Value
The following table presents the face value and carrying value (which approximates fair value) of AFS securities as of March 31, 2019 and December 31, 2018:
(in thousands)
March 31,
2019
 
December 31,
2018
Face value
$
12,798

 
$
12,798

Gross unrealized gains

 

Gross unrealized losses

 
(192
)
Carrying value
$
12,798

 
$
12,606



On March 31, 2019, the Company’s AFS securities had contractual maturities of less than one year.
At March 31, 2019 and December 31, 2018, the Company pledged AFS securities with a carrying value of $12.8 million and $12.6 million, respectively, as collateral for repurchase agreements. See Note 10 - Repurchase Agreements.
At March 31, 2019, the Company’s AFS securities had a carrying value equal to their face value. At December 31, 2018, the Company’s AFS securities were in an unrealized loss position for less than twelve months.
Evaluating AFS Securities for Other-Than-Temporary Impairments
In evaluating AFS securities for other-than-temporary impairments, or OTTI, the Company determines whether there has been a significant adverse quarterly change in the cash flow expectations for a security. The Company compares the amortized cost of each security in an unrealized loss position against the present value of expected future cash flows of the security. The Company also considers whether there has been a significant adverse change in the regulatory and/or economic environment as part of this analysis. If the amortized cost of the security is greater than the present value of expected future cash flows using the original yield as the discount rate, an other-than-temporary credit impairment has occurred. If the Company does not intend to sell and will not be more likely than not required to sell the security, the credit loss is recognized in earnings and the balance of the unrealized loss is recognized in other comprehensive income. If the Company intends to sell the security or will be more likely than not required to sell the security, the full unrealized loss is recognized in earnings. The Company did not record any other-than-temporary credit impairments during the three months ended March 31, 2019 and 2018 as expected cash flows were greater than amortized cost for all AFS securities held.

Note 6. Held-to-Maturity Securities
The following table presents the face value and carrying value of HTM securities by collateral type as of March 31, 2019 and December 31, 2018:
(in thousands)
March 31,
2019
 
December 31,
2018
Face value
$
25,815

 
$
26,696

Unamortized premium (discount)

 

Carrying value
$
25,815

 
$
26,696



On March 31, 2019, the Company’s HTM securities had contractual maturities of less than one year.
At March 31, 2019 and December 31, 2018, the Company pledged HTM securities with a carrying value of $25.8 million and $26.7 million, respectively, as collateral for repurchase agreements. See Note 10 - Repurchase Agreements.

10

Table of Contents

GRANITE POINT MORTGAGE TRUST INC.
Notes to the Condensed Consolidated Financial Statements (unaudited)

Evaluating HTM Securities for Other-Than-Temporary Impairments
In evaluating HTM securities for OTTI, the Company determines whether there has been a significant adverse quarterly change in the cash flow expectations for a security. The Company compares the amortized cost of each security against the present value of expected future cash flows of the security. The Company also considers whether there has been a significant adverse change in the regulatory and/or economic environment as part of this analysis. If the amortized cost of the security is greater than the present value of expected future cash flows using the original yield as the discount rate, an other-than-temporary credit impairment has occurred and the credit loss is recognized in earnings. The Company did not record any other-than-temporary credit impairments during the three months ended March 31, 2019 and 2018, as expected cash flows were greater than amortized cost for all HTM securities held.

Note 7. Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents include cash held in bank accounts and cash held in money market funds on an overnight basis.
The Company is required to maintain certain cash balances in restricted accounts as collateral for the Company’s repurchase agreements and with counterparties to support activities related to securities. As of March 31, 2019 and December 31, 2018, the Company had $8.0 million and $5.6 million, respectively, as collateral for repurchase agreements and by counterparties to support activities related to securities. In addition, as of March 31, 2019 and December 31, 2018, the Company held $47.1 million and $26.1 million, respectively, in restricted cash representing proceeds from principal paydowns of loans held in the CLOs.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the Company’s condensed consolidated balance sheets as of March 31, 2019 and December 31, 2018 that sum to the total of the same such amounts shown in the statements of cash flows:
(in thousands)
March 31,
2019
 
December 31,
2018
Cash and cash equivalents
$
65,384

 
$
91,700

Restricted cash
55,051

 
31,723

Total cash, cash equivalents and restricted cash
$
120,435

 
$
123,423



Note 8. Accrued Interest Receivable
The following table presents the Company’s accrued interest receivable by collateral type as of March 31, 2019 and December 31, 2018:
(in thousands)
March 31,
2019
 
December 31,
2018
Loans held-for-investment
$
10,419

 
$
10,089

Available-for-sale securities
57

 
57

Held-to-maturity securities
119

 
122

Total
$
10,595

 
$
10,268



Note 9. Fair Value
Fair Value Measurements
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 clarifies that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted prices available in active markets (i.e., observable inputs) and the lowest priority to data lacking transparency (i.e., unobservable inputs). Additionally, ASC 820 requires an entity to consider all aspects of nonperformance risk, including the entity’s own credit standing, when measuring fair value of a liability.

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GRANITE POINT MORTGAGE TRUST INC.
Notes to the Condensed Consolidated Financial Statements (unaudited)

ASC 820 establishes a three-level hierarchy to be used when measuring and disclosing fair value. An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation. Following is a description of the three levels:

Level 1
Inputs are quoted prices in active markets for identical assets or liabilities as of the measurement date under current market conditions. Additionally, the entity must have the ability to access the active market and the quoted prices cannot be adjusted by the entity.
Level 2
Inputs include quoted prices in active markets for similar assets or liabilities; quoted prices in inactive markets for identical or similar assets or liabilities; or inputs that are observable or can be corroborated by observable market data by correlation or other means for substantially the full-term of the assets or liabilities.
Level 3
Unobservable inputs are supported by little or no market activity. The unobservable inputs represent the assumptions that market participants would use to price the assets and liabilities, including risk. Generally, Level 3 assets and liabilities are valued using pricing models, discounted cash flow methodologies, or similar techniques that require significant judgment or estimation.

Following are descriptions of the valuation methodologies used to measure material assets and liabilities at fair value and details of the valuation models, key inputs to those models and significant assumptions utilized.
Available-for-sale securities. The Company holds AFS securities that are carried at fair value on the condensed consolidated balance sheet and are comprised of CMBS. In determining the fair value of the Company’s CMBS AFS, management judgment may be used to arrive at fair value that considers prices obtained from third-party pricing providers or broker quotes received using the bid price, which are both deemed indicative of market activity, and other applicable market data. The third-party pricing providers and brokers use pricing models that generally incorporate such factors as coupons, primary and secondary mortgage rates, rate reset period, issuer, prepayment speeds, credit enhancements and expected life of the security. If observable market prices are not available or insufficient to determine fair value due principally to illiquidity in the marketplace, then fair value is based upon internally developed models that are primarily based on observable market-based inputs but also include unobservable market data inputs (including prepayment speeds, delinquency levels, and credit losses). The Company classified its CMBS AFS as Level 2 fair value assets at March 31, 2019 and December 31, 2018.
Recurring Fair Value
The following tables display the Company’s assets measured at fair value on a recurring basis. The Company does not hold any liabilities measured at fair value on its condensed consolidated balance sheets.
 
Recurring Fair Value Measurements
 
March 31, 2019
(in thousands)
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
Available-for-sale securities
$

 
$
12,798

 
$

 
$
12,798

Total assets
$

 
$
12,798

 
$

 
$
12,798

 
Recurring Fair Value Measurements
 
December 31, 2018
(in thousands)
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
Available-for-sale securities
$

 
$
12,606

 
$

 
$
12,606

Total assets
$

 
$
12,606

 
$

 
$
12,606



The Company may be required to measure certain assets or liabilities at fair value from time to time. These periodic fair value measures typically result from application of certain impairment measures under U.S. GAAP. These items would constitute nonrecurring fair value measures under ASC 820. As of March 31, 2019 and December 31, 2018, the Company did not have any assets or liabilities measured at fair value on a nonrecurring basis in the periods presented. 

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GRANITE POINT MORTGAGE TRUST INC.
Notes to the Condensed Consolidated Financial Statements (unaudited)

Transfers between Levels are deemed to take place on the first day of the reporting period in which the transfer has taken place. The Company did not incur transfers between Levels for the three months ended March 31, 2019 and 2018.
Fair Value of Financial Instruments
In accordance with ASC 820, the Company is required to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized in the condensed consolidated balance sheets, for which fair value can be estimated.
The following describes the Company’s methods for estimating the fair value for financial instruments.
Loans held-for-investment are carried at cost, net of any unamortized acquisition premiums or discounts, loan fees and origination costs as applicable. The Company estimates the fair value of its loans held-for-investment by assessing any changes in market interest rates, shifts in credit profiles and actual operating results for mezzanine loans and senior loans, taking into consideration such factors as underlying property type, property competitive position within its market, market and submarket fundamentals, tenant mix, nature of business plan, sponsorship, extent of leverage and other loan terms. The Company categorizes the fair value measurement of these assets as Level 3.
AFS securities are recurring fair value measurements; carrying value equals fair value. See discussion of valuation methods and assumptions within the Fair Value Measurements section of this footnote.
HTM securities, which are comprised of CMBS, are carried at cost, net of any unamortized acquisition premiums or discounts. In determining the fair value of the Company’s CMBS HTM, management judgment may be used to arrive at fair value that considers prices obtained from third-party pricing providers or broker quotes received using the bid price, which are both deemed indicative of market activity, and other applicable market data. The third-party pricing providers and brokers use pricing models that generally incorporate such factors as coupons, primary and secondary mortgage rates, rate reset period, issuer, prepayment speeds, credit enhancements and expected life of the security. The Company categorizes the fair value measurement of these assets as Level 2.
Cash and cash equivalents and restricted cash have a carrying value which approximates fair value because of the short maturities of these instruments. The Company categorizes the fair value measurement of these assets as Level 1.
The carrying value of repurchase agreements that mature in less than one year generally approximates fair value due to the short maturities. As of March 31, 2019, the Company held $0.6 billion of repurchase agreements that are considered long-term. The Company’s long-term repurchase agreements have floating rates based on an index plus a spread and the credit spread is typically consistent with those demanded in the market. Accordingly, the interest rates on these borrowings are at market and thus carrying value approximates fair value. The Company categorizes the fair value measurement of these liabilities as Level 2.
Securitized debt obligations are recorded at outstanding principal, net of any unamortized deferred debt issuance costs. In determining the fair value of its securitized debt obligations, management judgment may be used to arrive at fair value that considers prices obtained from third-party pricing providers, broker quotes received and other applicable market data. If observable market prices are not available or insufficient to determine fair value due principally to illiquidity in the marketplace, then fair value is based upon internally developed models that are primarily based on observable market-based inputs but also include unobservable market data inputs (including prepayment speeds, delinquency levels, and credit losses). The Company categorizes the fair value measurement of these liabilities as Level 2.
Convertible senior notes are carried at their unpaid principal balance, net of any unamortized deferred issuance costs. The Company estimates the fair value of its convertible senior notes using the market transaction price nearest to March 31, 2019. The Company categorizes the fair value measurement of these assets as Level 2.

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GRANITE POINT MORTGAGE TRUST INC.
Notes to the Condensed Consolidated Financial Statements (unaudited)

The following table presents the carrying values and estimated fair values of assets and liabilities that are required to be recorded or disclosed at fair value at March 31, 2019 and December 31, 2018.
 
March 31, 2019
 
December 31, 2018
(in thousands)
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Assets
 
 
 
 
 
 
 
Loans held-for-investment
$
3,292,989

 
$
3,326,644

 
$
3,167,913

 
$
3,200,980

Available-for-sale securities
$
12,798

 
$
12,798

 
$
12,606

 
$
12,606

Held-to-maturity securities
$
25,815

 
$
25,995

 
$
26,696

 
$
26,611

Cash and cash equivalents
$
65,384

 
$
65,384

 
$
91,700

 
$
91,700

Restricted cash
$
55,051

 
$
55,051

 
$
31,723

 
$
31,723

Liabilities
 
 
 
 
 
 
 
Repurchase agreements
$
993,634

 
$
993,634

 
$
1,500,543

 
$
1,500,543

Securitized debt obligations
$
1,197,814

 
$
1,206,683

 
$
654,263

 
$
654,330

Revolving credit facilities
$

 
$

 
$
75,000

 
$
75,000

Convertible senior notes
$
268,484

 
$
277,025

 
$
268,138

 
$
270,731



Note 10. Repurchase Agreements
As of March 31, 2019 and December 31, 2018, the Company had outstanding $1.0 billion and $1.5 billion of repurchase agreements with a weighted average borrowing rate of 4.70% and 4.61% and weighted average remaining maturities of 0.8 and 0.9 years, respectively.
At March 31, 2019 and December 31, 2018, the repurchase agreement balances were as follows:
(in thousands)
March 31,
2019
 
December 31,
2018
Short-term
$
432,917

 
$
842,078

Long-term
560,717

 
658,465

Total
$
993,634

 
$
1,500,543



At March 31, 2019 and December 31, 2018, the repurchase agreements had the following characteristics and remaining maturities:
 
March 31, 2019
 
December 31, 2018
 
Collateral Type
 
 
 
Collateral Type
 
 
(dollars in thousands)
Loans
 
CMBS (1)
 
Total Amount Outstanding
 
Loans
 
CMBS (1)
 
Total Amount Outstanding
Within 30 days
$

 
$

 
$

 
$

 
$

 
$

30 to 59 days
133,600

 
24,391

 
157,991

 

 
25,854

 
25,854

60 to 89 days
274,926

 

 
274,926

 

 

 

90 to 119 days

 

 

 

 

 

120 to 364 days

 

 

 
816,224

 

 
816,224

One year and over
560,717

 

 
560,717

 
658,465

 

 
658,465

Total
$
969,243

 
$
24,391

 
$
993,634

 
$
1,474,689

 
$
25,854

 
$
1,500,543

Weighted average borrowing rate
4.70
%