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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 September 30, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, par value $0.01 per share
 
GPMT
 
New York Stock Exchange
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 No
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 No
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
 
Accelerated filer
Non-accelerated filer
 
Smaller reporting company
 
 
 
Emerging growth company
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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of November 4, 2019, there were 54,853,205 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 (unaudited)
GRANITE POINT MORTGAGE TRUST INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
 
September 30,
2019
 
December 31,
2018
ASSETS
(unaudited)
 
 
Loans held-for-investment
$
3,927,095

 
$
3,167,913

Available-for-sale securities, at fair value
12,830

 
12,606

Held-to-maturity securities
19,594

 
26,696

Cash and cash equivalents
137,355

 
91,700

Restricted cash
168,809

 
31,723

Accrued interest receivable
10,797

 
10,268

Deferred debt issuance costs
7,183

 
3,924

Prepaid expenses
1,313

 
1,055

Other assets
22,636

 
15,996

Total Assets (1)
$
4,307,612

 
$
3,361,881

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Liabilities
 
 
 
Repurchase agreements
$
1,724,912

 
$
1,500,543

Securitized debt obligations
1,124,820

 
654,263

Asset-specific financings
114,080

 

Revolving credit facilities

 
75,000

Convertible senior notes
269,241

 
268,138

Accrued interest payable
11,253

 
6,394

Unearned interest income
215

 
510

Dividends payable
23,063

 
18,346

Other liabilities
15,788

 
10,156

Total Liabilities (1)
3,283,372

 
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 54,853,205 and 43,621,174 shares issued and outstanding, respectively
549

 
436

Additional paid-in capital
1,047,200

 
836,288

Accumulated other comprehensive income (loss)
32

 
(192
)
Cumulative earnings
144,400

 
91,875

Cumulative distributions to stockholders
(168,941
)
 
(100,876
)
Total Stockholders’ Equity
1,023,240

 
827,531

Total Liabilities and Stockholders’ Equity
$
4,307,612

 
$
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 September 30, 2019 and December 31, 2018, assets of the VIEs totaled $1,472,564 and $829,147, and liabilities of the VIEs totaled $1,125,992 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
 
Nine Months Ended
 
September 30,
 
September 30,
 
2019
 
2018
 
2019
 
2018
Interest income:

 
 
Loans held-for-investment
$
61,796

 
$
46,424

 
$
176,594

 
$
127,576

Available-for-sale securities
308

 
294

 
927

 
851

Held-to-maturity securities
530

 
757

 
1,804

 
2,478

Cash and cash equivalents
810

 
85

 
2,228

 
141

Total interest income
63,444

 
47,560

 
181,553

 
131,046

Interest expense:
 
 
 
 
 
 
 
Repurchase agreements
17,951

 
14,304

 
48,469

 
45,432

Securitized debt obligations
12,467

 
6,693

 
35,880

 
10,568

Convertible senior notes
4,503

 
2,216

 
13,459

 
6,601

Asset-specific financings
1,119

 

 
1,717

 

Revolving credit facilities
322

 
152

 
1,182

 
372

Total interest expense
36,362

 
23,365

 
100,707

 
62,973

Net interest income
27,082

 
24,195

 
80,846

 
68,073

Other income:
 
 
 
 
 
 
 
Fee income

 

 
1,115

 
1,446

Total other income

 

 
1,115

 
1,446

Expenses:
 
 
 
 
 
 
 
Management fees
3,801

 
3,111

 
11,013

 
9,434

Incentive fees

 

 
244

 

Servicing expenses
1,013

 
616

 
2,671

 
1,568

General and administrative expenses
4,877

 
3,904

 
15,499

 
12,141

Total expenses
9,691

 
7,631

 
29,427

 
23,143

Income before income taxes
17,391

 
16,564

 
52,534

 
46,376

Benefit from income taxes
(1
)
 
(1
)
 
(4
)
 
(2
)
Net income
17,392

 
16,565

 
52,538

 
46,378

Dividends on preferred stock
25

 
25

 
75

 
75

Net income attributable to common stockholders
$
17,367

 
$
16,540

 
$
52,463

 
$
46,303

Basic earnings per weighted average common share
$
0.32

 
$
0.38

 
$
1.00

 
$
1.07

Diluted earnings per weighted average common share
$
0.32

 
$
0.37

 
$
1.00

 
$
1.04

Dividends declared per common share
$
0.42

 
$
0.42

 
$
1.26

 
$
1.20

Weighted average number of shares of common stock outstanding:
 
 
 
 
 
 
 
Basic
54,853,205

 
43,456,234

 
52,492,324

 
43,426,109

Diluted
54,853,205

 
50,651,612

 
52,492,324

 
50,616,264

Comprehensive income:
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
17,367

 
$
16,540

 
$
52,463

 
$
46,303

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

 
32

 
224

 
32

Other comprehensive income

 
32

 
224

 
32

Comprehensive income attributable to common stockholders
$
17,367

 
$
16,572

 
$
52,687

 
$
46,335

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

Net income

 

 

 

 
15,227

 

 
15,227

Other comprehensive loss before reclassifications

 

 

 
(16
)
 

 

 
(16
)
Amounts reclassified from accumulated other comprehensive income

 

 

 

 

 

 

Net other comprehensive loss

 

 

 
(16
)
 

 

 
(16
)
Common dividends declared

 

 

 

 

 
(17,383
)
 
(17,383
)
Preferred dividends declared

 

 

 

 

 
(25
)
 
(25
)
Non-cash equity award compensation
19,175

 
1

 
1,202

 

 

 

 
1,203

Balance, June 30, 2018
43,456,234

 
435

 
831,568

 

 
58,613

 
(64,254
)
 
826,362

Net income

 

 

 

 
16,565

 

 
16,565

Other comprehensive income before reclassifications

 

 

 
32

 

 

 
32

Amounts reclassified from accumulated other comprehensive income

 

 

 

 

 

 

Net other comprehensive income

 

 

 
32

 

 

 
32

Common dividends declared

 

 

 

 

 
(18,251
)
 
(18,251
)
Preferred dividends declared

 

 

 

 

 
(25
)
 
(25
)
Non-cash equity award compensation

 

 
967

 

 

 

 
967

Balance, September 30, 2018
43,456,234

 
$
435

 
$
832,535

 
$
32

 
$
75,178

 
$
(82,530
)
 
$
825,650

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 STOCKHOLDERS’ EQUITY (unaudited), continued
(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, 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

Net income

 

 

 

 
18,177

 

 
18,177

Other comprehensive income before reclassifications

 

 

 
32

 

 

 
32

Amounts reclassified from accumulated other comprehensive income

 

 

 

 

 

 

Net other comprehensive income

 

 

 
32

 

 

 
32

Issuance of common stock, net of offering costs
2,663,095

 
27

 
50,150

 

 

 

 
50,177

Common dividends declared

 

 

 

 

 
(23,039
)
 
(23,039
)
Preferred dividends declared

 

 

 

 

 
(25
)
 
(25
)
Non-cash equity award compensation
18,189

 

 
1,283

 

 

 

 
1,283

Balance, June 30, 2019
54,853,205

 
549

 
1,046,025

 
32

 
127,008

 
(145,878
)
 
1,027,736

Net income

 

 

 

 
17,392

 

 
17,392

Other comprehensive income before reclassifications

 

 

 

 

 

 

Amounts reclassified from accumulated other comprehensive income

 

 

 

 

 

 

Net other comprehensive income

 

 

 

 

 

 

Common dividends declared

 

 

 

 

 
(23,038
)
 
(23,038
)
Preferred dividends declared

 

 

 

 

 
(25
)
 
(25
)
Non-cash equity award compensation

 

 
1,175

 

 

 

 
1,175

Balance, September 30, 2019
54,853,205

 
$
549

 
$
1,047,200

 
$
32

 
$
144,400

 
$
(168,941
)
 
$
1,023,240

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

4

Table of Contents



GRANITE POINT MORTGAGE TRUST INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)
 
Nine Months Ended
 
September 30,
 
2019
 
2018
Cash Flows From Operating Activities:
 
Net income
$
52,538

 
$
46,378

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Accretion of discounts and net deferred fees on loans held-for-investment
(11,038
)
 
(9,282
)
Amortization of deferred debt issuance costs on convertible senior notes and securitized debt obligations
5,792

 
2,373

Equity based compensation
3,607

 
2,834

Depreciation of fixed assets
185

 
4

Net change in assets and liabilities:
 
 
 
Increase in accrued interest receivable
(529
)
 
(1,083
)
Increase in prepaid expenses
(258
)
 
(945
)
Increase in other assets
(6,825
)
 
(1,963
)
Increase in accrued interest payable
4,859

 
2,501

Decrease in unearned interest income
(295
)
 
(80
)
Increase in other liabilities
5,632

 
2,893

Net cash provided by operating activities
53,668

 
43,630

Cash Flows From Investing Activities:
 
 
 
Originations, acquisitions and additional fundings of loans held-for-investment, net of deferred fees
(1,216,678
)
 
(839,668
)
Proceeds from repayment of loans held-for-investment
468,534

 
444,878

Principal payments on held-to-maturity securities
7,102

 
11,643

Net cash used in investing activities
(741,042
)
 
(383,147
)
Cash Flows From Financing Activities:
 
 
 
Proceeds from repurchase agreements
1,014,802

 
871,608

Principal payments on repurchase agreements
(790,433
)
 
(1,111,961
)
Proceeds from issuance of securitized debt obligations
646,868

 
651,374

Principal payments on securitized debt obligations
(181,000
)
 

Proceeds from convertible senior notes

 
18,247

Proceeds from asset-specific financings
114,080

 

Proceeds from revolving credit facilities
164,598

 
49,394

Repayment of revolving credit facilities
(239,598
)
 
(49,394
)
(Increase) decrease in deferred debt issuance costs
(3,259
)
 
3,472

Proceeds from issuance of common stock, net of offering costs
207,405

 

Dividends paid on preferred stock
(75
)
 
(75
)
Dividends paid on common stock
(63,273
)
 
(50,318
)
Net cash provided by financing activities
870,115

 
382,347

Net increase in cash, cash equivalents and restricted cash
182,741

 
42,830

Cash, cash equivalents and restricted cash at beginning of period
123,423

 
110,718

Cash, cash equivalents and restricted cash at end of period
$
306,164

 
$
153,548

Supplemental Disclosure of Cash Flow Information:
 
 
 
Cash paid for interest
$
95,848

 
$
60,472

Cash paid (received) for taxes, net
$

 
$
(5
)
Noncash Activities:
 
 
 
Dividends declared but not paid at end of period
$
23,063

 
$
18,276

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

5

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 (now known as GP 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 unaudited 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 September 30, 2019 and results of operations for all periods presented have been made. The results of operations for the three and nine months ended September 30, 2019 should not be construed as indicative of the results to be expected for future periods or the full year.
The unaudited 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.

6

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. Provided below is a summary of additional accounting policies that are significant to the Company’s consolidated financial condition and results of operations for the three and nine months ended September 30, 2019.
Asset-Specific Financings
The Company finances certain of its loans held-for-investment through the use of an asset-specific financing facility. Borrowings under the asset-specific financing facility generally bear interest rates of a specified margin over one-month LIBOR. The asset-specific financings are treated as collateralized financing transactions and are carried at their contractual amounts, as specified in the respective agreements.
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, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard will replace the incurred loss impairment methodology pursuant to GAAP and significantly change how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The new model requires the estimation of lifetime expected credit losses and corresponding recognition of allowance for losses on loans, trade and other receivables, held-to-maturity (or HTM) debt securities and other instruments held at amortized cost while considering a broader range of reasonable and supportable information to inform such credit loss estimates. Additionally, this ASU will require recording allowances for available-for-sale debt securities rather than directly reducing the amortized cost carrying amount of such securities under the current other-than-temporary impairment model. 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. While the Company is evaluating the impact of adopting this ASU on its condensed consolidated financial statements, the Company expects that the adoption of ASU No. 2016-13 will result in an increased amount of the allowance for credit losses with a resulting negative adjustment to retained earnings. The Company currently does not have any allowance for credit losses recorded in its condensed consolidated financial statements. The Company is currently developing new processes, policies and controls to implement the standard, which it expects to have completed by the adoption date.
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.

7

Table of Contents

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

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 in connection with the Form 10-Q filing for the first quarter of 2019. 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.
The following table presents a summary of the assets and liabilities of all VIEs consolidated on the Company’s condensed consolidated balance sheets as of September 30, 2019 and December 31, 2018:
(in thousands)
September 30,
2019
 
December 31,
2018
Loans held-for-investment
$
1,305,469

 
$
795,259

Restricted cash
157,556

 
26,136

Accrued interest receivable
3,598

 
2,622

Other assets
5,941

 
5,130

Total Assets
$
1,472,564

 
$
829,147

Securitized debt obligations
$
1,124,820

 
$
654,263

Accrued interest payable
1,131

 
689

Other liabilities
41

 

Total Liabilities
$
1,125,992

 
$
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 AFS securities, at fair value, and HTM securities on the condensed consolidated balance sheets. As of September 30, 2019 and December 31, 2018, the carrying value, which also represents the maximum exposure to loss, of all CMBS in unconsolidated VIEs was $32.4 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. Interest income on loans held-for-investment is recognized at the loan coupon rate. Any premiums or discounts, loan fees,
contractual exit fees and origination costs are amortized or accreted into interest income over the lives of the loans using the
effective interest method. Loans are considered past due when they are 30 days past their contractual due date. Interest income
recognition is suspended when loans are placed on nonaccrual status. Generally, commercial mortgage loans are placed on
nonaccrual status when delinquent for more than 90 days or when determined not to be probable of full collection. Interest
accrued, but not collected, at the date loans are placed on nonaccrual is reversed and subsequently recognized only to the extent
it is received in cash or until it qualifies for return to accrual status. However, where there is doubt regarding the ultimate
collectability of loan principal, all cash received is applied to reduce the carrying value of such loans. Commercial mortgage
loans are restored to accrual status only when contractually current or the collection of future payments is reasonably assured.

8

Table of Contents

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

The Company also finances pools of its commercial real estate loans through CLOs, which are considered to be VIEs for financial reporting purposes and, thus, are reviewed for consolidation under the applicable consolidation guidance. 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, therefore 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 September 30, 2019 and December 31, 2018:
 
September 30,
2019
(dollars in thousands)
Senior
    Loans (1)
 
Mezzanine Loans
 
B-Notes
 
Total
Unpaid principal balance
$
3,927,513

 
$
13,806

 
$
14,501

 
$
3,955,820

Unamortized (discount) premium
(127
)
 

 

 
(127
)
Unamortized net deferred origination fees
(28,598
)
 

 

 
(28,598
)
Carrying value
$
3,898,788

 
$
13,806

 
$
14,501

 
$
3,927,095

Unfunded commitments
$
666,959

 
$

 
$

 
$
666,959

Number of loans
113

 
2

 
1

 
116

Weighted average coupon
5.9
%
 
12.1
%
 
8.0
%
 
5.9
%
Weighted average years to maturity (2)
1.8

 
2.4

 
7.3

 
1.8


 
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 with such conditions stipulated in the applicable loan documents. 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.


9

Table of Contents

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

(dollars in thousands)
 
September 30,
2019
 
December 31,
2018
Property Type
 
Carrying Value
 
% of Loan Portfolio
 
Carrying Value
 
% of Loan Portfolio
Office
 
$
1,697,438

 
43.2
%
 
$
1,495,128

 
47.2
%
Multifamily
 
962,810

 
24.5
%
 
569,259

 
18.0
%
Hotel
 
588,639

 
15.0
%
 
427,611

 
13.5
%
Retail
 
374,622

 
9.5
%
 
324,447

 
10.2
%
Industrial
 
269,018

 
6.9
%
 
351,468

 
11.1
%
Other
 
34,568

 
0.9
%
 

 
%
Total
 
$
3,927,095

 
100.0
%
 
$
3,167,913

 
100.0
%

(dollars in thousands)
 
September 30,
2019
 
December 31,
2018
Geographic Location
 
Carrying Value
 
% of Loan Portfolio
 
Carrying Value
 
% of Loan Portfolio
Northeast
 
$
1,217,385

 
31.1
%
 
$
1,171,691

 
37.0
%
Southwest
 
1,010,930

 
25.7
%
 
681,108

 
21.5
%
West
 
630,165

 
16.0
%
 
694,223

 
21.9
%
Midwest
 
566,120

 
14.4
%
 
250,930

 
7.9
%
Southeast
 
502,495

 
12.8
%
 
369,961

 
11.7
%
Total
 
$
3,927,095

 
100.0
%
 
$
3,167,913

 
100.0