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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2022
or
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☐ | 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)
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Maryland | | 61-1843143 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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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:
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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.
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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, 2022, there were 52,350,989 shares of outstanding common stock, par value $0.01 per share, issued and outstanding.
GRANITE POINT MORTGAGE TRUST INC.
INDEX
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| PART I - FINANCIAL INFORMATION | |
Item 1. | Financial Statements (unaudited) | |
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| PART II - OTHER INFORMATION | |
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
GRANITE POINT MORTGAGE TRUST INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
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| September 30, 2022 | | December 31, 2021 |
ASSETS | | | |
Loans held-for-investment | $ | 3,603,016 | | | $ | 3,782,205 | |
Allowance for credit losses | (82,611) | | | (40,897) | |
Loans held-for-investment, net | 3,520,405 | | | 3,741,308 | |
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Cash and cash equivalents | 168,414 | | | 191,931 | |
Restricted cash | 45,242 | | | 12,362 | |
Accrued interest receivable | 11,056 | | | 10,716 | |
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Other assets | 37,541 | | | 32,201 | |
Total Assets (1) | $ | 3,782,658 | | | $ | 3,988,518 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Liabilities | | | |
Repurchase facilities | $ | 1,195,965 | | | $ | 677,285 | |
Securitized debt obligations | 1,224,035 | | | 1,677,619 | |
Asset-specific financings | 44,913 | | | 43,622 | |
Term financing facility | — | | | 127,145 | |
Convertible senior notes | 274,289 | | | 272,942 | |
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Senior secured term loan facilities | — | | | 139,880 | |
Dividends payable | 17,023 | | | 14,406 | |
Other liabilities | 21,792 | | | 21,436 | |
Total Liabilities (1) | 2,778,017 | | | 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 52,350,989 and 53,789,465 shares issued and outstanding, respectively | 524 | | | 538 | |
Additional paid-in capital | 1,201,716 | | | 1,125,241 | |
Cumulative earnings | 136,919 | | | 171,518 | |
Cumulative distributions to stockholders | (335,725) | | | (284,285) | |
Total Granite Point Mortgage Trust Inc. Stockholders’ Equity | 1,003,516 | | | 1,013,058 | |
Non-controlling interests | 125 | | | 125 | |
Total Equity | $ | 1,003,641 | | | $ | 1,013,183 | |
Total Liabilities and Stockholders’ Equity | $ | 3,782,658 | | | $ | 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 September 30, 2022, and December 31, 2021, assets of the VIEs totaled $1,644,528 and $2,266,044, respectively, and liabilities of the VIEs totaled $1,225,758 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.
GRANITE POINT MORTGAGE TRUST INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in thousands, except share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | |
| Interest income: | | | |
| Loans held-for-investment | $ | 52,121 | | | $ | 48,312 | | | $ | 148,475 | | | $ | 151,701 | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Cash and cash equivalents | 714 | | | 95 | | | 960 | | | 298 | | | |
| Total interest income | 52,835 | | | 48,407 | | | 149,435 | | | 151,999 | | | |
| Interest expense: | | | | | | | | | |
| Repurchase facilities | 15,098 | | | 5,451 | | | 30,486 | | | 20,449 | | | |
| Securitized debt obligations | 14,416 | | | 8,777 | | | 34,992 | | | 20,523 | | | |
| Convertible senior notes | 4,585 | | | 4,556 | | | 13,703 | | | 13,618 | | | |
| Term financing facility | — | | | 1,453 | | | 1,713 | | | 6,208 | | | |
| Asset-specific financings | 442 | | | 414 | | | 1,046 | | | 1,959 | | | |
| | | | | | | | | | |
| Senior secured term loan facilities | — | | | 5,654 | | | 3,754 | | | 16,587 | | | |
| Total interest expense | 34,541 | | | 26,305 | | | 85,694 | | | 79,344 | | | |
| Net interest income | 18,294 | | | 22,102 | | | 63,741 | | | 72,655 | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Other (loss) income: | | | | | | | | | |
| (Provision for) benefit from credit losses | (35,442) | | | 5,760 | | | (52,757) | | | 15,072 | | | |
| Loss on extinguishment of debt | — | | | — | | | (18,823) | | | — | | | |
| | | | | | | | | | |
| Fee income | — | | | — | | | 954 | | | — | | | |
| | | | | | | | | | |
| Total other (loss) income | (35,442) | | | 5,760 | | | (70,626) | | | 15,072 | | | |
| Expenses: | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Compensation and benefits | 4,953 | | | 5,634 | | | 16,539 | | | 16,111 | | | |
| Servicing expenses | 1,336 | | | 1,323 | | | 4,297 | | | 3,763 | | | |
| Other operating expenses | 2,068 | | | 2,276 | | | 6,867 | | | 6,967 | | | |
| | | | | | | | | | |
| Total expenses | 8,357 | | | 9,233 | | | 27,703 | | | 26,841 | | | |
| (Loss) income before income taxes | (25,505) | | | 18,629 | | | (34,588) | | | 60,886 | | | |
| (Benefit from) provision for income taxes | (1) | | | (1) | | | 11 | | | (4) | | | |
| Net (loss) income | (25,504) | | | 18,630 | | | (34,599) | | | 60,890 | | | |
| Dividends on preferred stock | 3,626 | | | 25 | | | 10,876 | | | 75 | | | |
| Net (loss) income attributable to common stockholders | $ | (29,130) | | | $ | 18,605 | | | $ | (45,475) | | | $ | 60,815 | | | |
| Basic (loss) earnings per weighted average common share | $ | (0.56) | | | $ | 0.34 | | | $ | (0.85) | | | $ | 1.11 | | | |
| Diluted (loss) earnings per weighted average common share | $ | (0.56) | | | $ | 0.33 | | | $ | (0.85) | | | $ | 1.05 | | | |
| | | | | | | | | | |
| Weighted average number of shares of common stock outstanding: | | | | | | | | | |
| Basic | 52,350,989 | | | 54,453,546 | | | 53,234,498 | | | 54,864,456 | | | |
| Diluted | 52,350,989 | | | 56,735,278 | | | 53,234,498 | | | 70,902,745 | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Comprehensive (loss) income | $ | (29,130) | | | $ | 18,605 | | | $ | (45,475) | | | $ | 60,815 | | | |
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 | | | | 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 | |
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) | |
Preferred dividends declared, $25.00 per share | — | | | — | | | — | | | — | | | — | | | | | — | | | (25) | | | (25) | | | — | | | (25) | |
Common dividends declared, $0.25 per share | — | | | — | | | — | | | — | | | — | | | | | — | | | (13,939) | | | (13,939) | | | — | | | (13,939) | |
| | | | | | | | | | | | | | | | | | | | | |
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 | — | | | — | | | — | | | — | | | — | | | | | — | | 0 | (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 | |
| | | | | | | | | | | | | | | | | | | | | |
GRANITE POINT MORTGAGE TRUST INC
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data) (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Preferred Stock | | | | | | | | | | | | | | |
| Shares | | Amount | | Shares | | Amount | | Additional Paid-in Capital | | | | Cumulative Earnings | | Cumulative Distributions to Stockholders | | Total Stockholders’ Equity | | Non-controlling Interests | | Total Equity |
| | | | | | | | | | | | | | | | | | | | | |
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 | |
Net (loss) income | — | | | — | | | — | | | — | | | — | | | | | (13,731) | | | — | | | (13,731) | | | — | | | (13,731) | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Repurchase of common stock | (1,539,134) | | | (15) | | | — | | | — | | | (15,699) | | | | | — | | | — | | | (15,714) | | | — | | | (15,714) | |
Restricted Stock Unit (RSU) forfeiture | — | | | — | | | — | | | — | | | (114) | | | | | — | | | — | | | (114) | | | — | | | (114) | |
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 | — | | | — | | | — | | | — | | | — | | | | | — | | | (13,382) | | | (13,382) | | | — | | | (13,382) | |
Non-cash equity award compensation | 34,546 | | | — | | | — | | | — | | | 1,906 | | | | | — | | | — | | | 1,906 | | | — | | | 1,906 | |
Balance, June 30, 2022 | 52,350,989 | | | 524 | | | 8,229,500 | | | 82 | | | 1,199,367 | | | | | 162,423 | | | (318,687) | | | 1,043,709 | | | 125 | | | 1,043,834 | |
Net (loss) income | — | | | — | | | — | | | — | | | — | | | | | (25,504) | | | — | | | (25,504) | | | — | | | (25,504) | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Preferred dividends declared, $25.00 per share | — | | | — | | | — | | | — | | | — | | | | | — | | | (25) | | | (25) | | | — | | | (25) | |
Preferred dividends declared, $0.4375 per share | — | | | — | | | — | | | — | | | — | | | | | — | | | (3,601) | | | (3,601) | | | — | | | (3,601) | |
Common dividends declared, $0.25 per share | — | | | — | | | — | | | — | | | — | | | | | — | | | (13,412) | | | (13,412) | | | — | | | (13,412) | |
Non-cash equity award compensation | — | | | — | | | — | | | — | | | 2,349 | | | | | — | | | — | | | 2,349 | | | — | | | 2,349 | |
Balance, September 30, 2022 | 52,350,989 | | | 524 | | | 8,229,500 | | | 82 | | | 1,201,716 | | | | | 136,919 | | | (335,725) | | | 1,003,516 | | | 125 | | | 1,003,641 | |
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, |
| | 2022 | | 2021 | | |
| Cash Flows From Operating Activities: | | | |
| Net (loss) income | $ | (34,599) | | | $ | 60,890 | | | |
| Adjustments to reconcile net (loss) 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 | (10,014) | | | (20,310) | | | |
| Amortization of deferred debt issuance costs | 9,977 | | | 9,692 | | | |
| Provision for (benefit from) credit losses | 52,757 | | | (15,072) | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Loss on extinguishment of debt | 11,307 | | | — | | | |
| Amortization of equity-based compensation | 6,426 | | | 5,558 | | | |
| Proceeds received from deferred interest capitalized on loans held-for-investment | 4,069 | | | — | | | |
| Net change in assets and liabilities: | | | | | |
| (Increase) decrease in accrued interest receivable | (340) | | | 2,490 | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Decrease in other assets | 2,276 | | | (4,069) | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Increase (decrease) in other liabilities | (1,092) | | | 5,846 | | | |
| | | | | | |
| Net cash provided by operating activities | 40,767 | | | 45,025 | | | |
| Cash Flows From Investing Activities: | | | | | |
| Originations, acquisitions and additional fundings of loans held-for-investment, net of deferred fees | (449,844) | | | (549,705) | | | |
| Proceeds from loan sales | 43,714 | | | — | | | |
| Proceeds from repayment of loans held-for-investment | 581,669 | | | 815,054 | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Increase in other assets, due from servicer on repayments of loans held-for-investment | (4,248) | | | (66,944) | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Net cash provided by investing activities | 171,291 | | | 198,405 | | | |
| | | | | | |
| Cash Flows From Financing Activities: | | | | | |
| Proceeds from repurchase facilities | 746,713 | | | 347,261 | | | |
| Principal payments on repurchase facilities | (228,034) | | | (1,139,378) | | | |
| Proceeds from issuance of securitized debt obligations | — | | | 685,766 | | | |
| Principal payments on securitized debt obligations | (457,416) | | | (254,647) | | | |
| | | | | | |
| Repayment of senior secured term loan facilities | (150,000) | | | — | | | |
| Proceeds from asset-specific financings | 1,291 | | | 2,785 | | | |
| Repayment of asset-specific financings | — | | | (81,123) | | | |
| | | | | | |
| | | | | | |
| Proceeds from term financing facility | — | | | 349,291 | | | |
| Repayment of term financing facility | (129,099) | | | (219,311) | | | |
| | | | | | |
| | | | | | |
| Payment of debt issuance costs | (7,398) | | | (8,353) | | | |
| Settlement of warrants to purchase common stock | — | | | (7,478) | | | |
| 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 | (1,736) | | | (1,194) | | | |
| Repurchase of common stock | (15,714) | | | (17,804) | | | |
| Dividends paid on preferred stock | (7,968) | | | (75) | | | |
| Dividends paid on common stock | (40,855) | | | (52,970) | | | |
| Net cash used in financing activities | (202,695) | | | (397,105) | | | |
| Net increase (decrease) in cash, cash equivalents and restricted cash | 9,363 | | | (153,675) | | | |
| Cash, cash equivalents, and restricted cash at beginning of period | 204,293 | | | 329,193 | | | |
| Cash, cash equivalents, and restricted cash at end of period | $ | 213,656 | | | $ | 175,518 | | | |
| Supplemental Disclosure of Cash Flow Information: | | | | | |
| Cash paid for interest | $ | 83,391 | | | $ | 75,818 | | | |
| Cash paid for taxes | $ | 440 | | | $ | 607 | | | |
| Noncash Activities: | | | | | |
| | | | | | |
| Dividends declared but not paid at end of period | $ | 17,023 | | | $ | 13,713 | | | |
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 sources, including borrowing under the Company’s bank credit facilities or other asset-specific financings, issuing commercial real estate collateralized loan obligations, or CRE CLOs, 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 September 30, 2022, and results of operations for all periods presented, have been made. The results of operations for the three and nine months ended September 30, 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 interest and 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.
GRANITE POINT MORTGAGE TRUST INC.
Notes to the Condensed Consolidated Financial Statements
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, 2022. However, uncertainty over the ultimate impact COVID-19, Federal Reserve actions and geopolitical unrest will have on the global and U.S. economies generally, and the Company’s business in particular, makes any estimates and assumptions as of September 30, 2022, inherently less certain than they would be absent the current and potential impacts of these factors. 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 and nine months ended September 30, 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 troubled debt restructurings, or TDR. The new guidance deviates from current TDR guidance as disclosures will now be 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 September 30, 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 September 30, 2022, and December 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 |
(dollars in thousands) | Senior Loans (1) | | Mezzanine Loans | | B-Notes | | Total |
Unpaid principal balance | $ | 3,601,341 | | | $ | 10 | | | $ | 13,826 | | | $ | 3,615,177 | |
Unamortized (discount) premium | (51) | | | — | | | — | | | (51) | |
Unamortized net deferred origination fees | (12,110) | | | — | | | — | | | (12,110) | |
Allowance for credit losses | (81,921) | | | (10) | | | (680) | | | (82,611) | |
Carrying value | $ | 3,507,259 | | | $ | — | | | $ | 13,146 | | | $ | 3,520,405 | |
Unfunded commitments | $ | 312,649 | | | $ | — | | | $ | |