gpmt-20220331

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, 2022


☐			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

NYSE

7.00% Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per share

GPMTPrA

NYSE

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 May 9, 2022, there were 53,855,577 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 March 31 , 202 2 and December 31, 20 21	1
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended Mar ch 31 , 202 2 and 20 21	2
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31 , 202 2 and 2 021	3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 3 1 , 202 2 and 20 21	4
	Notes to the Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4.	Controls and Procedures	55
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 3.	Defaults Upon Senior Securities	56
Item 4.	Mine Safety Disclosures	56
Item 5.	Other Information	56
Item 6.	Exhibits	56
Index of Exhibits		57
Signatures		59

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)


	March 31, 2022		December 31, 2021
ASSETS
Loans held-for-investment	$	3,784,624	$	3,782,205
Allowance for credit losses	(34,154)		(40,897)
Loans held-for-investment, net	3,750,470		3,741,308


Cash and cash equivalents	148,162		191,931
Restricted cash	105,972		12,362
Accrued interest receivable	11,142		10,716



Other assets	31,067		32,201
Total Assets (1)	$	4,046,813	$	3,988,518
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Repurchase facilities	$	748,555	$	677,285
Securitized debt obligations	1,631,991		1,677,619
Asset-specific financings	43,622		43,622
Term financing facility	127,303		127,145
Convertible senior notes	273,369		272,942


Senior secured term loan facilities	93,589		139,880
Dividends payable	17,395		14,406
Other liabilities	21,495		21,436
Total Liabilities (1)	2,957,319		2,974,335
Commitments and Contingencies (see Note 10)
10.00% 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
7.00% Series A cumulative redeemable preferred stock, par value $0.01 per share; 8,280,000 shares authorized and 8,229,500 and 4,596,500 shares issued and outstanding, respectively; liquidation preference $25.00 per share	82		46
Common stock, par value $0.01 per share; 450,000,000 shares authorized and 53,855,577 and 53,789,465 shares issued and outstanding, respectively	539		538
Additional paid-in capital	1,213,274		1,125,241
Cumulative earnings	176,154		171,518
Cumulative distributions to stockholders	(301,680)		(284,285)
Total Granite Point Mortgage Trust Inc. Stockholders’ Equity	1,088,369		1,013,058
Non-controlling interests	125		125
Total Equity	$	1,088,494	$	1,013,183
Total Liabilities and Stockholders’ Equity	$	4,046,813	$	3,988,518

____________________

(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, 2022, and December 31, 2021, assets of the VIEs totaled $2,231,292 and $2,266,044, respectively, and liabilities of the VIEs totaled $1,634,241 and $1,679,435, 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

(in thousands, except share data)


	Three Months Ended
	March 31,
	2022		2021
Interest income:
Loans held-for-investment	$	47,298	$	54,039



Cash and cash equivalents	23		100
Total interest income	47,321		54,139
Interest expense:
Repurchase facilities	5,008		8,951
Securitized debt obligations	9,732		4,617
Convertible senior notes	4,546		4,518
Term financing facility	1,373		2,122
Asset-specific financings	282		877

Senior secured term loan facilities	2,868		5,280
Total interest expense	23,809		26,365
Net interest income	23,512		27,774




Other (loss) income:
(Provision for) benefit from credit losses	(3,688)		9,119
Loss on extinguishment of debt	(5,791)		—

Fee income	493		—

Total other (loss) income	(8,986)		9,119
Expenses:


Compensation and benefits	5,816		5,460
Servicing expenses	1,461		1,316
Other operating expenses	2,614		2,127

Total expenses	9,891		8,903
Income before income taxes	4,635		27,990
Benefit from income taxes	(1)		(1)
Net income	4,636		27,991
Dividends on preferred stock	3,625		25
Net income attributable to common stockholders	$	1,011	$	27,966
Basic earnings per weighted average common share	$	0.02	$	0.51
Diluted earnings per weighted average common share	$	0.02	$	0.45

Weighted average number of shares of common stock outstanding:
Basic	53,857,051		55,137,608
Diluted	53,961,497		71,834,396
Comprehensive income:
Net income attributable to common stockholders	$	1,011	$	27,966



Comprehensive income	$	1,011	$	27,966

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		Preferred Stock
	Shares	Amount	Shares	Amount	Additional Paid-in Capital	Accumulated Other Comprehensive Income	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	—	27,991


Restricted stock forfeiture	(97,425)	(1)	—	—	(918)	—	—	—	(919)	—	(919)

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

Common dividends declared, $0.25 per share	—	—	—	—	—	—	—	(14,008)	(14,008)	—	(14,008)

Contributions from non-controlling interests	—	—	—	—	—	—	—	—	—	125	125
Non-cash equity award compensation	—	—	—	—	1,887	—	—	—	1,887	—	1,887
Balance, March 31, 2021	55,107,657	551	—	—	1,059,267	—	131,156	(242,202)	948,772	125	948,897

Balance, December 31, 2021	53,789,465	538	4,596,500	46	1,125,241	—	171,518	(284,285)	1,013,058	125	1,013,183
Net income	—	—	—	—	—	—	4,636	—	4,636	—	4,636

Issuance of preferred stock, net of offering costs	—		3,633,000	36	87,485	—	—	—	87,521	—	87,521
Restricted stock forfeiture	(69,039)	—	—	—	(824)	—	—	—	(824)	—	(824)
Restricted Stock Unit (RSU) forfeiture	—	—	—	—	(798)	—	—	—	(798)	—	(798)
Preferred dividends declared, $25.00 per share	—	—	—	—	—	—	—	(25)	(25)	—	(25)
Preferred dividends declared, $0.4375 per share	—	—	—	—	—	—	—	(3,600)	(3,600)	—	(3,600)
Common dividends declared, $0.25 per share	—	—	—	—	—	—	—	(13,770)	(13,770)	—	(13,770)


Non-cash equity award compensation	135,151	1	—	—	2,170	—	—	—	2,171	—	2,171
Balance, March 31, 2022	53,855,577	539	8,229,500	82	1,213,274	—	176,154	(301,680)	1,088,369	125	1,088,494

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)


	Three Months Ended
	March 31,
	2022		2021
Cash Flows From Operating Activities:
Net income	$	4,636	$	27,991
Adjustments to reconcile net income 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	(4,531)		(9,130)
Amortization of deferred debt issuance costs	3,839		2,989
Provision for (benefit from) credit losses	3,688		(9,119)






Loss on extinguishment of debt	3,291		—
Amortization of equity-based compensation	2,171		1,887
Proceeds received from deferred interest capitalized to loans held-for-investment	284		—
Net change in assets and liabilities:
(Increase) decrease in accrued interest receivable	(426)		96



Decrease in other assets	542		354




Increase (decrease) in other liabilities	(265)		2,061

Net cash provided by operating activities	13,229		17,129
Cash Flows From Investing Activities:
Originations, acquisitions and additional fundings of loans held-for-investment, net of deferred fees	(170,091)		(37,258)
Proceeds from loan sales	43,714		—
Proceeds from repayment of loans held-for-investment	118,098		101,588




Increase in other assets, due from servicer on repayments of loans held-for-investment	(570)		—








Net cash (used in) provided by investing activities	(8,849)		64,330

Cash Flows From Financing Activities:
Proceeds from repurchase facilities	108,429		8,966
Principal payments on repurchase facilities	(37,159)		(479,300)

Principal payments on securitized debt obligations	(47,267)		(2,142)

Repayment of senior secured term loan facilities	(50,000)		—




Proceeds from term financing facility	—		349,291



Payment of debt issuance costs	(35)		(2,535)

Contributions from non-controlling interests	—		125

Proceeds from issuance of preferred stock, net of offering costs	87,521		—



Tax withholding on restricted stock and RSUs	(1,622)		(918)

Dividends paid on preferred stock	(718)		(25)
Dividends paid on common stock	(13,688)		(25,024)
Net cash provided by (used in) financing activities	45,461		(151,562)
Net increase (decrease) in cash, cash equivalents and restricted cash	49,841		(70,103)
Cash, cash equivalents, and restricted cash at beginning of period	204,293		329,193
Cash, cash equivalents, and restricted cash at end of period	$	254,134	$	259,090
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	$	19,347	$	21,926
Cash paid for taxes	$	291	$	610
Noncash Activities:

Dividends declared but not paid at end of period	$	17,395	$	14,033

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

Note 1. Organization and Operations

Granite Point Mortgage Trust Inc., or the Company, 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 the Company’s 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 the Company’s view of the most appropriate funding option available for the Company’s investments. The Company is not in the business of buying or trading securities, and the only securities it owns are the retained interests from its CRE CLOs. The Company’s investment objective is to preserve the Company’s stockholders’ capital while generating attractive risk-adjusted returns over the long term, primarily through dividends derived from current income produced by the Company’s investment portfolio. The Company’s 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.

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 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, 2021. In the opinion of management, all normal and recurring adjustments necessary to present fairly the financial condition of the Company at March 31, 2022, and results of operations for all periods presented, have been made. The results of operations for the three months ended March 31, 2022 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 the novel coronavirus, or COVID-19, pandemic has evolved from its emergence in early 2020, so has its global impact. The longer-term macroeconomic effects on

GRANITE POINT MORTGAGE TRUST INC.

Notes to the Condensed Consolidated Financial Statements

global supply chains, inflation, labor shortages and wage increases continue to impact many industries, including those related to the collateral underlying certain of the Company’s loans. Moreover, with the potential for new strains of COVID-19 to emerge, governments and businesses may re-impose aggressive measures to help slow its spread in the future. For this reason, among others, as the COVID-19 pandemic continues, the potential global impacts are uncertain and difficult to assess. The Company believes the estimates and assumptions underlying its condensed consolidated financial statements are reasonable and supportable based on the information available as of March 31, 2022. However, uncertainty over the ultimate impact COVID-19 will have on the global economy generally, and the Company’s business in particular, makes any estimates and assumptions as of March 31, 2022, inherently less certain than they would be absent the current and potential impacts of COVID-19. 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, 2021, 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 months ended March 31, 2022.

Recently Issued and/or Adopted Accounting Standards

Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures

In March 2022, the Financial Accounting Standards Board, or FASB, issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, or ASU 2022-02. The intention of ASU 2022-02 is to simplify the guidance surrounding loan modifications and restructurings and to eliminate the accounting guidance related to TDR. The new guidance deviates from TDR guidance as disclosures are now based on whether a modification or restructuring with a borrower experiencing financial difficulty results in principal forgiveness, an interest rate reduction, a significant payment delay or term extension as opposed to simply a concession. The new guidance requires disclosure by class of financing receivables, of the types of modifications, the financial effects of those modifications and the performance of those modified receivables in the last twelve months. As it relates to ASC 326-20 the Company is now allowed to use any acceptable method to determine credit losses as a result of modification or restructuring with a borrower experiencing financial difficulty. ASU 2022-02 also requires disclosure of gross write-offs recorded in the current period, on a year-to-date basis, by year of origination in the vintage disclosures. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022. Entities are able to early adopt these amendments and have the ability to early adopt the TDR enhancements separately from the vintage disclosures. The Company has not yet adopted this ASU and will continue to evaluate the effects of adoption.

Facilitation of the Effects of Reference Rate Reform on Financial Reporting

In March 2020, 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 the London Interbank Offered Rate, or 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 March 31, 2022, but will continue to evaluate the possible adoption of any such expedients or exceptions.

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

The following tables summarize the Company’s loans held-for-investment by asset type, property type and geographic location as of March 31, 2022, and December 31, 2021:


	March 31, 2022
(dollars in thousands)	Senior Loans (1)			Mezzanine Loans			B-Notes			Total
Unpaid principal balance	$	3,782,700		$	697		$	13,944		$	3,797,341
Unamortized (discount) premium	(61)			—			—			(61)
Unamortized net deferred origination fees	(12,656)			—			—			(12,656)
Allowance for credit losses	(32,667)			(697)			(790)			(34,154)
Carrying value	$	3,737,316		$	—		$	13,154		$	3,750,470
Unfunded commitments	$	372,333		$	—		$	—		$	372,333
Number of loans	101			1			1			103
Weighted average coupon	4.6		%	13.0		%	8.0		%	4.6		%
Weighted average years to maturity (2)	1.0			3.6			4.8			1.0


	December 31, 2021
(dollars in thousands)	Senior Loans (1)			Mezzanine Loans			B-Notes			Total
Unpaid principal balance	$	3,781,771		$	1,048		$	14,006		$	3,796,825
Unamortized (discount) premium	(70)			—			—			(70)
Unamortized net deferred origination fees	(14,550)			—			—			(14,550)
Allowance for credit losses	(38,719)			(1,048)			(1,130)			(40,897)
Carrying value	$	3,728,432		$	—		$	12,876		$	3,741,308
Unfunded commitments	$	403,584		$	—		$	—		$	403,584
Number of loans	103			1			1			105
Weighted average coupon	4.5		%	13.0		%	8.0		%	4.5		%
Weighted average years to maturity (2)	1.1			3.9			5.1			1.1

____________________

(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 certain loan modifications.


(dollars in thousands)	March 31, 2022				December 31, 2021
Property Type	Carrying Value		% of Loan Portfolio		Carrying Value		% of Loan Portfolio
Office	$	1,674,127	44.6	%	$	1,703,951	45.5	%
Multifamily	1,032,942		27.6	%	1,061,434		28.4	%
Hotel	466,030		12.4	%	464,816		12.4	%
Retail	346,821		9.2	%	341,834		9.1	%
Industrial	179,884		4.8	%	118,564		3.2	%
Other	50,666		1.4	%	50,709		1.4	%
Total	$	3,750,470	100.0	%	$	3,741,308	100.0	%

GRANITE POINT MORTGAGE TRUST INC.

Notes to the Condensed Consolidated Financial Statements


(dollars in thousands)	March 31, 2022				December 31, 2021
Geographic Location	Carrying Value		% of Loan Portfolio		Carrying Value		% of Loan Portfolio
Northeast	$	928,822	24.7	%	$	917,029	24.5	%
Southwest	820,034		21.9	%	836,955		22.4	%
West	663,818		17.7	%	658,429		17.6	%
Midwest	640,280		17.1	%	637,784		17.0	%
Southeast	697,516		18.6	%	691,111		18.5	%

Total	$	3,750,470	100.0	%	$	3,741,308	100.0	%

At March 31, 2022, and December 31, 2021, the Company pledged loans held-for-investment with a carrying value, net of allowance for credit losses, of $3.7 billion in both periods, as collateral under repurchase facilities, an asset-specific financing facility, a term financing facility and securitized debt obligations. See Note 4 - Variable Interest Entities and Securitized Debt Obligations and Note 5 - Secured Financing Agreements.

The following table summarizes activity related to loans held-for-investment, net of allowance for credit losses, for the three months ended March 31, 2022, and 2021:


	Three Months Ended March 31,
(in thousands)		2022		2021
Balance at beginning of period		$	3,741,308	$	3,847,803
Originations, additional fundings, upsizing of loans and capitalized deferred interest		172,865		41,777

Repayments		(118,383)		(101,588)
Loan sales		(43,714)		—
Net discount accretion (premium amortization)		9		7
Increase in net deferred origination fees		(2,240)		(34)
Amortization of net deferred origination fees		3,989		4,638

(Provision for) benefit from credit losses		(3,364)		7,233
Balance at end of period		$	3,750,470	$	3,799,836

Allowance for Credit Losses

Subsequent to the adoption of ASU 2016-13 on January 1, 2020, to estimate and recognize an allowance for credit losses on loans held-for-investment and the related unfunded commitments, the Company continues to use a third party licensed probability-weighted analytical model. The Company employs quarterly updated macroeconomic forecasts, which reflect expectations for overall economic output, interest rates, values of real estate properties and other factors, including the ongoing impact of the COVID-19 pandemic on the overall U.S. economy and commercial real estate markets generally. Significant inputs to the Company’s estimate of the allowance for credit losses include loan specific factors such as debt service coverage ratio, or DSCR, loan to value ratio, or LTV, remaining contractual loan term, property type and others. As part of the quarterly review of the portfolio, the Company assesses the expected repayment date of each loan, which is used to determine the contractual term for purposes of computing the CECL reserve. In certain instances, for loans with unique risk and credit characteristics, the Company may instead elect to employ different methods to estimate an allowance for credit losses that also conform to ASU 2016-13 and related guidance.

As of March 31, 2022, the Company recognized an allowance for credit losses related to its loans held-for-investment of $34.2 million, which reflects a write-off of $10.1 million on a loan held-for-investment and a total increase in the provision for credit losses of $3.4 million for the three months ended March 31, 2022. The increase of $3.4 million includes an additional $2.1 million of reserve on the loan prior to write-off. The remaining increase in the Company’s provision for credit losses was related to changes in the portfolio mix and implementing in its analysis a more conservative macroeconomic forecast driven by an elevated uncertainty for macroeconomic outlook due to inflationary pressures, continuing supply chain disruptions, interest rate volatility and other factors.

The allowance for credit losses related to the Company’s loans held-for-investment is deducted from the amortized cost basis of related loans, while the allowance for credit losses related to off-balance sheet unfunded commitments on existing loans

GRANITE POINT MORTGAGE TRUST INC.

Notes to the Condensed Consolidated Financial Statements

is recorded as a component of other liabilities on the Company’s condensed consolidated balance sheets. As of March 31, 2022, the Company recognized $1.8 million in other liabilities related to the allowance for credit losses on unfunded commitments and recorded a provision for credit losses of $0.3 million for the three months ended March 31, 2022. Changes in the provision for credit losses for both loans held-for-investment and their related unfunded commitments are recognized through net income on the Company’s condensed consolidated statements of comprehensive income.

The following table presents the changes for the three months ended March 31, 2022, and 2021 in the allowance for credit losses on loans held-for-investment:


	Three Months Ended March 31,
(in thousands)	2022		2021
Balance at beginning of period	$	40,897	$	66,666
Provision for (benefit from) credit losses	3,364		(7,233)
Write-off	(10,107)		—

Balance at end of period	$	34,154	$	59,433

Generally, loans held-for-investment are placed on nonaccrual status when delinquent for more than 90 days or earlier when determined not to be probable of full collection. Interest income recognition is suspended when loans are placed on nonaccrual status.

During the three months ended March 31, 2022, the Company resolved a senior loan that had an outstanding unpaid principal balance of $54.0 million. The loan had been previously placed on nonaccrual status. The Company recognized a write-off of $10.1 million on the sale of the loan.

As of March 31, 2022, the Company had one senior loan with a total unpaid principal balance of $114.1 million and carrying value of $99.5 million that is held on nonaccrual status. No other loans were considered past due and no other loans were held on nonaccrual status as of March 31, 2022.

The following table presents the carrying value of loans held-for-investment on nonaccrual status for the three months ended March 31, 2022, and 2021:


	Three Months Ended March 31,
(in thousands)	2022		2021
Nonaccrual loan carrying value at beginning of period	$	145,370	$	—
Addition of nonaccrual loan carrying value	$	11	$	19,264
Removal of nonaccrual loan carrying value	$	(45,854)	$	—
Nonaccrual loan carrying value at end of period	$	99,527	$	19,264

Loan Risk Ratings

The Company’s primary credit quality indicators are its risk ratings. The Company evaluates the credit quality of each loan 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, LTV, 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 probability of principal loss.

5 –Loss Likely: A loan that has a significantly increased probability of principal loss.

GRANITE POINT MORTGAGE TRUST INC.

Notes to the Condensed Consolidated Financial Statements

The following table presents the number of loans, unpaid principal balance and carrying value by risk rating for loans held-for-investment as of March 31, 2022, and December 31, 2021:


(dollars in thousands)	March 31, 2022					December 31, 2021
Risk Rating	Number of Loans	Unpaid Principal Balance		Carrying Value		Number of Loans	Unpaid Principal Balance		Carrying Value
1	10	$	341,548	$	340,122	9	$	245,939	$	245,042
2	62	2,147,019		2,129,438		58	2,002,008		1,983,615
3	21	659,843		652,376		25	747,631		739,343
4	9	534,803		529,007		11	633,153		627,938
5	1	114,128		99,527