gpmt-20210930

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, 2021


☐			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) 364-5500

(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 Exchange 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, 2021, there were 53,789,465 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
Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets at September 30, 2021 and December 31, 2020	1
	Condensed Consolidated Statements of Comprehensive Income (loss) for the Three and Nine Months Ended September 30, 2021 and 2020	2
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2021 and 2020	3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020	5
	Notes to the Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	56
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	57
Item 1A.	Risk Factors	57
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3.	Defaults Upon Senior Securities	57
Item 4.	Mine Safety Disclosures	57
Item 5.	Other Information	57
Item 6.	Exhibits	57
Index of Exhibits		58
Signatures		60

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, 2021		December 31, 2020
ASSETS
Loans held-for-investment	$	3,659,691	$	3,914,469
Allowance for credit losses	(45,480)		(66,666)
Loans held-for-investment, net	3,614,211		3,847,803


Cash and cash equivalents	154,916		261,419
Restricted cash	20,602		67,774
Accrued interest receivable	9,898		12,388



Other assets	99,563		30,264
Total Assets (1)	$	3,899,190	$	4,219,648
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Repurchase facilities	$	916,758	$	1,708,875
Securitized debt obligations	1,356,429		927,128
Asset-specific financings	44,752		123,091
Term financing facility	127,867		—
Convertible senior notes	272,512		271,250


Senior secured term loan facilities	208,785		206,448

Dividends payable	13,713		25,049

Other liabilities	25,140		22,961
Total Liabilities (1)	2,965,956		3,284,802
Commitments and Contingencies (see Note 10)
10% cumulative redeemable preferred stock, par value $0.01 per share; 50,000,000 shares authorized and 1,000 shares issued and outstanding ($1,000,000 liquidation preference)	1,000		1,000
Stockholders’ Equity
Common stock, par value $0.01 per share; 450,000,000 shares authorized and 53,789,465 and 55,205,082 shares issued and outstanding, respectively	538		552
Additional paid-in capital	1,037,395		1,058,298
Cumulative earnings	164,055		103,165
Cumulative distributions to stockholders	(269,879)		(228,169)
Total Granite Point Mortgage Trust, Inc. Stockholders’ Equity	932,109		933,846
Non-controlling interests	125		—
Total Equity	$	932,234	$	933,846
Total Liabilities and Stockholders’ Equity	$	3,899,190	$	4,219,648

____________________

(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, 2021 and December 31, 2020, assets of the VIEs totaled $1,824,173 and $1,255,932, respectively, and liabilities of the VIEs totaled $1,357,675 and $928,220, respectively. See Note 4 - Variable Interest Entities and Securitized Debt Obligations for additional information.

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

Table of Contents

GRANITE POINT MORTGAGE TRUST INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands, except share data)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Interest income:
Loans held-for-investment	$	48,312	$	56,783	$	151,701	$	180,341
Loans held-for-sale	—		774		—		895
Available-for-sale securities	—		119		—		646
Held-to-maturity securities	—		113		—		659
Cash and cash equivalents	95		57		298		424
Total interest income	48,407		57,846		151,999		182,965
Interest expense:
Repurchase facilities	5,451		12,791		20,449		46,742
Securitized debt obligations	8,777		5,431		20,523		21,367
Convertible senior notes	4,556		4,529		13,618		13,570
Term financing facility	1,453		—		6,208		—
Asset-specific financings	414		901		1,959		2,962
Revolving credit facilities	—		217		—		779
Senior secured term loan facilities	5,654		145		16,587		145
Total interest expense	26,305		24,014		79,344		85,565
Net interest income	22,102		33,832		72,655		97,400




Other income (loss):
Benefit from (provision for) credit losses	5,760		5,300		15,072		(62,241)

Realized losses on sales of loans held-for-sale	—		(10,019)		—		(16,913)
Fee income	—		595		—		1,117

Total other income (loss)	5,760		(4,124)		15,072		(78,037)
Expenses:
Base management fees	—		3,974		—		11,840
Compensation and benefits	5,634		—		16,111		—
Servicing expenses	1,323		914		3,763		3,025
Other operating expenses	2,276		5,808		6,967		24,421
Restructuring charges	—		43,682		—		43,682
Total expenses	9,233		54,378		26,841		82,968
Income (loss) before income taxes	18,629		(24,670)		60,886		(63,605)
Benefit from income taxes	(1)		(4)		(4)		(15)
Net income (loss)	18,630		(24,666)		60,890		(63,590)
Dividends on preferred stock	25		25		75		75
Net income (loss) attributable to common stockholders	$	18,605	$	(24,691)	$	60,815	$	(63,665)
Basic earnings (loss) per weighted average common share	$	0.34	$	(0.45)	$	1.11	$	(1.15)
Diluted earnings (loss) per weighted average common share	$	0.33	$	(0.45)	$	1.05	$	(1.15)
Dividends declared per common share	$	0.25	$	0.20	$	0.75	$	0.20
Weighted average number of shares of common stock outstanding:
Basic	54,453,546		55,205,082		54,864,456		55,140,163
Diluted	56,735,278		55,205,082		70,902,745		55,140,163
Comprehensive income (loss):
Net income (loss) attributable to common stockholders	$	18,605	$	(24,691)	$	60,815	$	(63,665)
Other comprehensive income (loss), net of tax:


Comprehensive income (loss)	$	18,605	$	(24,691)	$	60,815	$	(63,665)

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

GRANITE POINT MORTGAGE TRUST INC

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(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		Non-controlling Interests	Total Equity



































Balance, December 31, 2019	54,853,205	549		1,048,484		32		162,076		(192,005)		1,019,136		—	1,019,136
Cumulative effect of adoption of new accounting principle	—	—		—		—		(18,472)		—		(18,472)		—	(18,472)
Adjusted balance, January 1, 2020	54,853,205	549		1,048,484		32		143,604		(192,005)		1,000,664		—	1,000,664
Net loss	—	—		—		—		(37,191)		—		(37,191)		—	(37,191)
Other comprehensive loss before reclassifications	—	—		—		(4,511)		—		—		(4,511)		—	(4,511)
Amounts reclassified from accumulated other comprehensive income	—	—		—		767		—		—		767		—	767
Net other comprehensive loss	—	—		—		(3,744)		—		—		(3,744)		—	(3,744)



Preferred dividends declared, $25.00 per share	—	—		—		—		—		(25)		(25)		—	(25)

Non-cash equity award compensation	283,680	3		1,352		—		—		—		1,355		—	1,355
Balance, March 31, 2020	55,136,885	552		1,049,836		(3,712)		106,413		(192,030)		961,059		—	961,059
Net loss	—	—		—		—		(1,733)		—		(1,733)		—	(1,733)
Other comprehensive income before reclassifications	—	—		—		4,223		—		—		4,223		—	4,223
Amounts reclassified from accumulated other comprehensive income	—	—		—		(511)		—		—		(511)		—	(511)
Net other comprehensive income	—	—		—		3,712		—		—		3,712		—	3,712



Preferred dividends declared, $25.00 per share	—	—		—		—		—		(25)		(25)		—	(25)

Non-cash equity award compensation	68,197	—		1,323		—		—		—		1,323		—	1,323
Balance, June 30, 2020	55,205,082	552		1,051,159		—		104,680		(192,055)		964,336		—	964,336
Net loss	—	—		—		—		(24,666)		—		(24,666)		—	(24,666)
Issuance of warrants to purchase common stock	—	—		4,541		—		—		—		4,541		—	4,541
Common dividends declared, $0.20 per share	—	$	—	—		—		—		(11,040)		(11,040)		—	(11,040)
Preferred dividends declared, $25.00 per share	—	$	—	—		—		—		(25)		(25)		—	(25)
Non-cash equity award compensation	—	$	—	1,316		—		—		—		1,316		—	1,316
Balance, September 30, 2020	55,205,082	$	552	$	1,057,016	$	—	$	80,014	$	(203,120)	$	934,462	—	$	934,462

Table of Contents

GRANITE POINT MORTGAGE TRUST INC

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data) (Continued)


	Common Stock
	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Cumulative Earnings		Cumulative Distributions to Stockholders		Total Stockholders’ Equity		Non-controlling Interests		Total Equity
Balance, December 31, 2020	55,205,082	552		1,058,298		—		103,165		(228,169)		933,846		—		933,846


Net income	—	—		—		—		27,991		—		27,991		—



Restricted stock forfeiture	(97,425)	(1)		(918)		—		—		—		(919)		—		(919)
Common dividends declared, $0.25 per share	—	—		—		—		—		(14,008)		(14,008)		—		(14,008)
Preferred dividends declared, $25.00 per share	—	—		—		—		—		(25)		(25)		—		(25)
Non-cash equity award compensation	—	—		1,887		—		—		—		1,887		—		1,887
Contributions from non-controlling interests	—	—		—		—		—		—		—		125		125
Balance, March 31, 2021	55,107,657	551		1,059,267		—		131,156		(242,202)		948,772		125		948,897
Net income	—	—		—		—		14,269		—		14,269		—		14,269




Restricted stock forfeiture	(17,628)			(275)		—		—		—		(275)		—		(275)
Repurchase of common stock	(300,891)	(3)		(4,267)		—		—		—		(4,270)		—		(4,270)
Common dividends declared, $0.25 per share	—	—		—		—		—		(13,939)		(13,939)		—		(13,939)
Preferred dividends declared, $25.00 per share	—	—		—		—		—		(25)		(25)		—		(25)

Non-cash equity award compensation	1,048	—		1,639		—		—		—		1,639		—		1,639
Balance, June 30, 2021	54,790,186	548		1,056,364		—		145,425		(256,166)		946,171		125		946,296
Net income	—	—		—		—		18,630		—		18,630		—		18,630
Settlement of warrants to purchase common stock	—	—		(7,478)		—		—		—		(7,478)		—		(7,478)
Repurchase of common stock	(1,000,721)	(10)		(13,523)		—		—		—		(13,533)		—		(13,533)
Common dividends declared, $0.25 per share	—	—		—		—		—		(13,688)		(13,688)		—		(13,688)
Preferred dividends declared, $25.00 per share	—	—		—		—		—		(25)		(25)		—		(25)
Non-cash equity award compensation	—	—		2,032		—		—		—		2,032		—		2,032
Balance, September 30, 2021	53,789,465	$	538	$	1,037,395	$	—	$	164,055	$	(269,879)	$	932,109	$	125	$	932,234

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

GRANITE POINT MORTGAGE TRUST INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)


	Nine Months Ended
	September 30,
	2021		2020
Cash Flows From Operating Activities:
Net income (loss)	$	60,890	$	(63,590)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Accretion of discounts and net deferred fees on loans held-for-investment and deferred interest capitalized to loans held-for-investment	(20,310)		(12,557)
Amortization of deferred debt issuance costs on repurchase facilities, asset-specific financings, convertible senior notes, securitized debt obligations, senior secured term loan facilities and term financing facilities	9,692		4,646
(Benefit from) provision for credit losses	(15,072)		62,241


Realized losses on sales of loans held-for-sale	—		16,913



Amortization of equity-based compensation	5,558		3,994
Depreciation of fixed assets	—		—
Net change in assets and liabilities:
Decrease (increase) in accrued interest receivable	2,490		(610)



Increase in other assets	(4,069)		(19,899)




Increase in other liabilities	5,846		44,911

Net cash provided by operating activities	45,025		36,049
Cash Flows From Investing Activities:
Originations, acquisitions and additional fundings of loans held-for-investment, net of deferred fees	(549,705)		(314,722)

Proceeds from repayment of loans held-for-investment	815,054		290,838



Increase in other assets, due from servicer/trustee on repayments of loans held-for-investment	(66,944)		—
Principal payments on available-for-sale securities	—		12,798


Principal payments on held-to-maturity securities	—		18,076

Proceeds from sales of loans held-for-sale	—		193,538


Net cash provided by investing activities	198,405		200,528

Cash Flows From Financing Activities:
Proceeds from repurchase facilities	347,261		397,004
Principal payments on repurchase facilities	(1,139,378)		(470,180)
Proceeds from issuance of securitized debt obligations	685,766		—
Principal payments on securitized debt obligations	(254,647)		(115,853)
Proceeds from senior secured term loan facilities	—		205,647
Proceeds from asset-specific financings	2,785		6,626
Repayment of asset-specific financings	(81,123)		—
Proceeds from revolving credit facilities	—		38,361
Repayment of revolving credit facilities	—		(80,369)
Proceeds from term financing facility	349,291		—
Repayment of term financing facility	(219,311)		—
Payment of debt issuance costs	(8,353)		—
Proceeds from issuance of warrants to purchase common stock	—		4,541
Settlement of warrants to purchase common stock	(7,478)
Contributions from non-controlling interests	125		—
Tax withholding on restricted stock	(1,194)		—
Repurchase of common stock	(17,804)		—
Dividends paid on preferred stock	(75)		(75)
Dividends paid on common stock	(52,970)		(23,038)
Net cash used in financing activities	(397,105)		(37,336)
Net (decrease) increase in cash, cash equivalents and restricted cash	(153,675)		199,241
Cash, cash equivalents and restricted cash at beginning of period	329,193		159,764
Cash, cash equivalents and restricted cash at end of period	$	175,518	$	359,005
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	$	75,818	$	83,366
Cash paid for taxes	$	607	$	—
Noncash Activities:

Transfers of loans held-for-investment to loans held-for-sale	$	—	$	210,452
Dividends declared but not paid at end of period	$	13,713	$	11,065

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

GRANITE POINT MORTGAGE TRUST INC.

Notes to the Condensed Consolidated Financial Statements (unaudited)

Note 1. Organization and Operations

Granite Point Mortgage Trust Inc. is an internally managed real estate finance company 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. These investments are capitalized by accessing a variety of funding options, including borrowing under our bank credit facilities or other asset-specific financings, issuing commercial real estate collateralized loan obligations, or CRE CLOs, entering into term financing agreements, and issuing other forms of secured and unsecured debt and equity securities, depending on market conditions and our view of the most appropriate funding option available for our investments. Our investment objective is to preserve our stockholders’ capital while generating attractive risk-adjusted returns over the long term, primarily through dividends derived from current income produced by our investment portfolio. Our common stock is listed on the New York Stock Exchange, or NYSE, under the symbol “GPMT”. The Company operates its business in a manner that is intended to permit it to maintain its exclusion from registration under the Investment Company Act of 1940, as amended, or the Investment Company Act. The Company operates its business as one segment. The Company was incorporated in Maryland on April 7, 2017 and commenced operations as a publicly traded company on June 28, 2017.

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.

The Company was externally managed by Pine River Capital Management L.P., or the Former Manager, through December 31, 2020, at which time the Company internalized its management function, or the Internalization.

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 the SEC. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles, or 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, 2020. In the opinion of management, all normal and recurring adjustments necessary to present fairly the financial condition of the Company at September 30, 2021 and results of operations for all periods presented have been made. The results of operations for the three and nine months ended September 30, 2021 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 GAAP requires management to make a number of significant estimates. These include estimates of amount and timing of allowances for credit losses, fair value of certain assets and liabilities, 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 market capitalization rates, leasing, credit worthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders, overall economic and capital markets conditions, the broader commercial real estate market, local geographic sub-markets or other factors) will occur in the near term. As of September 30, 2021, the COVID-19

GRANITE POINT MORTGAGE TRUST INC.

Notes to the Condensed Consolidated Financial Statements (unaudited)

pandemic remains ongoing. Since the beginning of 2020, the pandemic has significantly impacted the global economy, created disruptions in the global supply chain, increased rates of unemployment and adversely impacted many industries, including those related to the real estate collateral underlying certain of our loans. So far in 2021, the global and U.S. economic activity has, to varying degrees, begun to improve, as wider distribution of the COVID-19 vaccines has continued. As a result, macroeconomic forecasts have improved over the last few quarters, including expectations for unemployment rates and overall economic output. Nonetheless, the ongoing pandemic may continue to adversely impact the macroeconomic recovery, particularly with respect to the emergence of new variants of the COVID-19 virus, the continued distribution and acceptance of vaccines and the effectiveness of such vaccines against new variants of the COVID-19 virus. Accordingly, given the ongoing nature of the outbreak, at this time the Company cannot reasonably estimate the magnitude of the long-term impact that COVID-19 may have on the economic activity and real estate market conditions, as well as the Company’s business, financial performance and operating results. The Company believes the estimates and assumptions underlying its condensed consolidated financial statements are reasonable and supportable based on the information available as of September 30, 2021. However, uncertainty over the ultimate impact the COVID-19 pandemic will have on the global economy generally, and the Company’s business in particular, makes any estimates and assumptions as of September 30, 2021 inherently less certain than they would be absent the current and potential impacts of the COVID-19 pandemic. The Company’s actual results could ultimately differ from its estimates and such differences may be material.

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, 2020 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 condensed consolidated financial condition and results of operations for the three and nine months ended September 30, 2021.

Term Financing Facility

The Company finances certain of its loans held-for-investment through the use of a term financing facility. Borrowings under the term financing facility bear an interest rate of a specified margin over the one-month London Interbank Offered Rate, or LIBOR. The term financing facility 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

Facilitation of the Effects of Reference Rate Reform on Financial Reporting

In March 2020, the Financial Accounting Standards Board, or FASB, issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, or ASU No. 2020-04, which provides optional expedients and exceptions for applying GAAP to debt instruments, derivatives, and other contracts that reference LIBOR or other reference rates expected to be discontinued as a result of reference rate reform. This guidance is optional and may be elected through December 31, 2022 using a prospective application on all eligible contract modifications. The Company has loan agreements, and debt agreements that incorporate LIBOR as a referenced interest rate. It is difficult to predict what effect, if any, the phase-out of LIBOR and the use of alternative benchmarks may have on the Company’s business or on the overall financial markets. The Company has not adopted any of the optional expedients or exceptions through September 30, 2021, but will continue to evaluate the possible adoption of any such expedients or exceptions.

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

In August 2020, FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in an Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, or ASU No. 2020-06. The intention of ASU No. 2020-06 is to address the complexities in accounting for certain financial instruments with a debt and equity component. Under ASU No. 2020-06, the number of accounting models for convertible notes will be reduced and entities that issue convertible debt will be required to use the if-converted method for the computation of diluted "Earnings per share" under ASC 260. ASC 2020-06 is effective for fiscal years beginning after December 15, 2021 and may be adopted through either a modified retrospective method of transition or a fully retrospective method of transition. The Company is currently assessing the impact this guidance will have on its condensed consolidated financial statements.

Note 3. Loans Held-for-Investment, Net of Allowance for Credit Losses

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. Loans held-for-investment are reported at cost, net of any unamortized acquisition premiums or discounts, loan fees, origination costs and allowance for credit losses, as applicable.

GRANITE POINT MORTGAGE TRUST INC.

Notes to the Condensed Consolidated Financial Statements (unaudited)

The following tables summarize the Company’s loans held-for-investment by asset type, property type and geographic location as of September 30, 2021 and December 31, 2020:


	September 30, 2021
(dollars in thousands)	Senior Loans (1)			Mezzanine Loans			B-Notes			Total
Unpaid principal balance	$	3,657,401		$	1,387		$	14,065		$	3,672,853
Unamortized (discount) premium	(67)			—			—			(67)
Unamortized net deferred origination fees	(13,095)			—			—			(13,095)
Allowance for credit losses	(40,897)			(1,387)			(3,196)			(45,480)
Carrying value	$	3,603,342		$	—		$	10,869		$	3,614,211
Unfunded commitments	$	430,105		$	—		$	—		$	430,105
Number of loans	98			1			1			100
Weighted average coupon	4.6		%	13.0		%	8.0		%