gpmt-20230930

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, 2023


☐			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 November 2, 2023, there were 51,577,841 shares of outstanding common stock, par value $0.01 per share, issued and outstanding.

GRANITE POINT MORTGAGE TRUST INC.

INDEX


		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets at September 30 , 2023, and December 31, 2022	1
	Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended September 30 , 2023, and 2022	2
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30 , 2023, and 2022	3
	Condensed Consolidated Statements of Cash Flows for the Three and Nine Months Ended September 30 , 2023, and 2022	4
	Notes to the Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	56
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	58
Item 1A.	Risk Factors	58
Item 2.	Unregistered Sales of Equity Securities a n d Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	58
Item 6.	Exhibits	58
Index of Exhibits		59
Signatures		61

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains, or incorporates by reference, not only historical information, but also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Exchange Act of 1934, as amended, or the Exchange Act, and that are subject to the safe harbors created by such sections. Forward-looking statements involve numerous risks and uncertainties. Our actual results may differ from our beliefs, expectations, estimates and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Forward-looking statements are not historical in nature and can be identified by words such as “anticipate,” “estimate,” “will,” “should,” “expect,” “target,” “believe,” “outlook,” “potential,” “continue,” “intend,” “seek,” “plan,” “goals,” “future,” “likely,” “may” and similar expressions or their negative forms, or by references to strategy, plans or intentions. By their nature, forward-looking statements speak only as of the date they are made, are not statements of historical facts or guarantees of future performance and are subject to risks, uncertainties, assumptions or changes in circumstances that are difficult to predict or quantify. Our expectations, beliefs and estimates are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management's expectations, beliefs and estimates will prove to be correct or be achieved and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

These forward-looking statements are subject to risks and uncertainties, including, among other things, those described in our Annual Report on Form 10-K for the year ended December 31, 2022, under the caption “Risk Factors.” Other risks, uncertainties and factors that could cause actual results to differ materially from those projected are described below and may be described from time to time in reports we file with the SEC, including our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise any such forward-looking statements, whether as a result of new information, future events or otherwise.

Important factors that may affect our actual results include, among others:

•the general political, economic and competitive conditions in the markets in which we invest, including with respect to the lagging effects of the COVID-19 pandemic on various subsectors of the real estate market and their impact on our loan portfolio, financial condition and business operations, such as the impact of work-from-home dynamics on office properties;

•inflationary trends, spurred by multiple factors including high commodity prices, a tight labor market, and low residential vacancy rates, may result further in interest rate increases and lead to increased market volatility;

•higher interest rates imposed by the Federal Reserve, which may lead to a decrease in prepayment timing and an increase in the number of our borrowers who exercise extension options, which could extend beyond the term of certain secured financing agreements we use to finance our loan investments;

•the economic and geopolitical impacts of the Hamas-Israel and Russia-Ukraine conflicts, including the adoption or expansion of economic sanctions or trade restrictions;

•reduced demand for office, multifamily or retail space, including as a result of hybrid work schedules which allow work from remote locations other than the employer's office premises;

•defaults by borrowers in paying debt service on outstanding indebtedness and borrowers' abilities to manage and stabilize properties;

•our ability to obtain or maintain financing arrangements on terms favorable to us or at all;

•the level and volatility of prevailing interest rates and credit spreads;

•reductions in the yield on our investments and increases in the cost of our financing;

•general volatility of the securities markets in which we participate and the potential need to post additional collateral on our financing arrangements;

•the return or impact of current or future investments;

•changes in our business, investment strategies or target investments;

•increased competition from entities investing in our target investments;

•effects of hedging instruments on our target investments;

•changes in governmental regulations, tax law and rates and similar matters;

•our ability to maintain our qualification as a real estate investment trust for U.S. federal income tax purposes and our exclusion from registration under the Investment Company Act of 1940, as amended;

•availability of desirable investment opportunities;

•threats to information security, including by way of cyber-attacks;

•availability of qualified personnel;

•operational failures by third parties on whom we rely in the conduct of our business;

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•estimates relating to our ability to make distributions to our stockholders in the future;

•natural disasters, such as hurricanes, earthquakes, wildfires and floods, including climate change-related risks; acts of war and/or terrorism; pandemics or outbreaks of infectious disease; and other events that may cause unanticipated and uninsured performance declines and/or losses to us or the owners and operators of the real estate securing our investments;

•deterioration in the performance of the properties securing our investments that may cause deterioration in the performance of our investments, risks in collection of contractual interest payments and, potentially, principal losses to us, including the risk of credit loss charges and any impact on our ability to satisfy the covenants and conditions in our debt agreements; and

•difficulty or delays in redeploying the proceeds from repayments of our existing investments.

This Quarterly Report on Form 10-Q may contain statistics and other data that, in some cases, have been obtained or compiled from information made available by loan servicers and other third-party service providers.

iii

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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)


	September 30, 2023		December 31, 2022
ASSETS
Loans held-for-investment	$	2,908,855	$	3,350,150
Allowance for credit losses	(145,297)		(82,335)
Loans held-for-investment, net	2,763,558		3,267,815


Loans held-for-sale, net	14,980		—
Cash and cash equivalents	257,592		133,132
Restricted cash	25,955		7,033
Real estate owned, net	17,527		—
Accrued interest receivable	12,964		13,413



Other assets	38,045		32,708
Total Assets (1)	$	3,130,621	$	3,454,101
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Repurchase facilities	$	921,348	$	1,015,566
Securitized debt obligations	999,536		1,138,749
Asset-specific financings	45,823		44,913
Secured credit facility	100,000		100,000

Convertible senior notes	131,600		130,918



Dividends payable	14,336		14,318
Other liabilities	27,233		24,967
Total Liabilities (1)	2,239,876		2,469,431
Commitments and Contingencies (see Note 10)
10.00% cumulative redeemable preferred stock, par value $0.01 per share; 50,000,000 shares authorized	—		1,000
Stockholders’ Equity
7.00% Series A cumulative redeemable preferred stock, par value $0.01 per share; 11,500,000 shares authorized, and 8,229,500 and 8,229,500 shares issued and outstanding, respectively; liquidation preference $25.00 per share	82		82
Common stock, par value $0.01 per share; 450,000,000 shares authorized, and 51,577,841 and 52,350,989 shares issued and outstanding, respectively	516		524
Additional paid-in capital	1,202,151		1,202,315
Cumulative earnings	80,968		130,693
Cumulative distributions to stockholders	(393,097)		(350,069)
Total Granite Point Mortgage Trust Inc. Stockholders’ Equity	890,620		983,545
Non-controlling interests	125		125
Total Equity	$	890,745	$	983,670
Total Liabilities and Stockholders’ Equity	$	3,130,621	$	3,454,101

____________________

(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, 2023, and December 31, 2022, assets of the VIEs totaled $1,240,229 and $1,551,936, respectively, and liabilities of the VIEs totaled $1,001,731 and $1,141,028, respectively. See Note 5 - Variable Interest Entities and Securitized Debt Obligations, for further detail.

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

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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,
	2023		2022		2023		2022
Interest income:
Loans held-for-investment	$	63,848	$	52,121	$	195,356	$	148,475



Cash and cash equivalents	2,839		714		6,876		960
Total interest income	66,687		52,835		202,232		149,435
Interest expense:
Repurchase facilities	21,986		15,098		64,630		30,486
Secured credit facility	3,178		—		9,182		—
Securitized debt obligations	18,414		14,416		54,353		34,992
Convertible senior notes	2,332		4,585		6,975		13,703
Term financing facility	—		—		—		1,713
Asset-specific financings	862		442		2,424		1,046

Senior secured term loan facilities	—		—		—		3,754
Total interest expense	46,772		34,541		137,564		85,694
Net interest income	19,915		18,294		64,668		63,741




Other (loss) income:
Revenue from real estate owned operations	1,056		—		1,518		—

Provision for credit losses	(31,008)		(35,442)		(83,236)		(52,757)
Gain (loss) on extinguishment of debt	—		—		238		(18,823)

Fee income	81		—		81		954

Total other (loss) income	(29,871)		(35,442)		(81,399)		(70,626)
Expenses:


Compensation and benefits	5,044		4,953		17,165		16,539
Servicing expenses	1,331		1,336		4,029		4,297
Expenses from real estate owned operations	2,233		—		3,897		—
Other operating expenses	2,358		2,068		7,809		6,867

Total expenses	10,966		8,357		32,900		27,703
Income (loss) before income taxes	(20,922)		(25,505)		(49,631)		(34,588)
Provision for (benefit from) income taxes	15		(1)		94		11
Net income (loss)	(20,937)		(25,504)		(49,725)		(34,599)
Dividends on preferred stock	3,600		3,626		10,850		10,876

Net income (loss) attributable to common stockholders	$	(24,537)	$	(29,130)	$	(60,575)	$	(45,475)
Basic earnings (loss) per weighted average common share	$	(0.48)	$	(0.56)	$	(1.17)	$	(0.85)
Diluted earnings (loss) per weighted average common share	$	(0.48)	$	(0.56)	$	(1.17)	$	(0.85)

Weighted average number of shares of common stock outstanding:
Basic	51,577,143		52,350,989		51,805,265		53,234,498
Diluted	51,577,143		52,350,989		51,805,265		53,234,498

Net income (loss) attributable to common stockholders	$	(24,537)	$	(29,130)	$	(60,575)	$	(45,475)



Comprehensive income (loss)	$	(24,537)	$	(29,130)	$	(60,575)	$	(45,475)

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

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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, 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, $0.20 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, $0.20 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










Balance, December 31, 2022	52,350,989	524	8,229,500	82	1,202,315	130,693	(350,069)	983,545	125	983,670
Net (loss) income	—	—	—	—	—	(33,829)	—	(33,829)	—	(33,829)

Repurchase of common stock	(1,001,338)	(10)	—	—	(5,108)	—	—	(5,118)	—	(5,118)
Restricted stock forfeiture	(36,916)	(1)	—	—	(236)	—	—	(237)	—	(237)
Restricted Stock Unit (RSU) forfeiture	—	—	—	—	(652)	—	—	(652)	—	(652)
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, $0.20 per share	—	—	—	—	—	—	(10,706)	(10,706)	—	(10,706)
Non-cash equity award compensation	213,304	2	—	—	1,953	—	—	1,955	—	1,955
Balance, March 31, 2023	51,526,039	515	8,229,500	82	1,198,272	96,864	(364,400)	931,333	125	931,458
Net income	—	—	—	—	—	5,041	—	5,041	—	5,041



Restricted Stock Unit (RSU) forfeiture	—	—	—	—	(77)	—	—	(77)	—	(77)
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, $0.20 per share	—	—	—	—	—	—	(10,736)	(10,736)	—	(10,736)
Non-cash equity award compensation	44,664	1	—	—	2,385	—	—	2,386	—	2,386
Balance, June 30, 2023	51,570,703	516	8,229,500	82	1,200,580	101,905	(378,761)	924,322	125	924,447
Net (loss) income	—	—	—	—	—	(20,937)	—	(20,937)	—	(20,937)





Preferred dividends declared, $0.4375 per share	—	—	—	—	—	—	(3,600)	(3,600)	—	(3,600)
Common dividends declared, $0.20 per share	—	—	—	—	—	—	(10,736)	(10,736)	—	(10,736)
Non-cash equity award compensation	7,138	—	—	—	1,571	—	—	1,571	—	1,571
Balance, September 30, 2023	51,577,841	516	8,229,500	82	1,202,151	80,968	(393,097)	890,620	125	890,745

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

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GRANITE POINT MORTGAGE TRUST INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)


	Nine Months Ended
	September 30,
	2023		2022
Cash Flows From Operating Activities:
Net loss	$	(49,725)	$	(34,599)
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	(6,954)		(10,014)
Amortization of deferred debt issuance costs	6,399		9,977
Provision for credit losses	83,236		52,757
(Gain) loss on extinguishment of debt	(274)		11,307






Amortization of equity-based compensation	5,912		6,426
Proceeds received from deferred interest capitalized on loans held-for-investment	359		4,069
Net change in assets and liabilities:
Decrease (increase) in accrued interest receivable	449		(340)



Decrease (increase) in other assets	(242)		2,276




Increase (decrease) in other liabilities	3,256		(1,092)

Net cash provided by operating activities	42,416		40,767
Cash Flows From Investing Activities:
Originations, acquisitions and additional fundings of loans held-for-investment, net of deferred fees	(54,787)		(449,844)
Proceeds from loan sales	—		43,714

Proceeds from repayment of loans held-for-investment	442,746		581,669




Increase in other assets, due from servicer on repayments of loans held-for-investment	—		(4,248)








Net cash provided by investing activities	387,959		171,291

Cash Flows From Financing Activities:
Proceeds from repurchase facilities	453,185		746,713
Principal payments on repurchase facilities	(547,641)		(228,034)

Principal payments on securitized debt obligations	(139,753)		(457,416)

Repayment of senior secured term loan facilities	—		(150,000)
Proceeds from asset-specific financings	910		1,291






Repayment of term financing facility	—		(129,099)


Payment of debt issuance costs	(3,600)		(7,398)



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



Tax withholding on restricted stock and RSUs	(966)		(1,736)
Repurchase of common stock	(5,118)		(15,714)
Redemption of cumulative redeemable preferred stock	(1,000)		—
Dividends paid on preferred stock	(10,851)		(7,968)
Dividends paid on common stock	(32,159)		(40,855)
Net cash used in financing activities	(286,993)		(202,695)
Net increase (decrease) in cash, cash equivalents and restricted cash	143,382		9,363
Cash, cash equivalents, and restricted cash at beginning of period	140,165		204,293
Cash, cash equivalents, and restricted cash at end of period	$	283,547	$	213,656
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	$	134,780	$	83,391

Cash paid for taxes	$	836	$	440
Noncash Activities:
Transfers of loans held-for-investment to loans held-for-sale	$	14,980	$	—
Dividends declared but not paid at end of period	$	14,336	$	17,023
Transfers from loans held-for-investment to real estate owned	$	24,000	$	—
Deferred financing costs, not yet paid	$	1,063	$	—

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

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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 commercial 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 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, 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 U.S. GAAP, have been condensed or omitted according to such SEC rules and regulations. However, management believes that the disclosures included in these interim condensed consolidated financial statements are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. In the opinion of management, all normal and recurring adjustments necessary to present fairly the financial condition of the Company at September 30, 2023, and results of operations for all periods presented have been made. The results of operations for the three and nine months ended September 30, 2023, 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 variable interest entities, or 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.

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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, 2023. However, 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, 2022, 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, 2023.

Real Estate Owned

As part of its portfolio management strategy to maximize an economic outcome from a defaulted loan, the Company may assume legal title or physical possession of the underlying collateral property through foreclosure or the execution of a deed-in-lieu of foreclosure. Real estate acquired through a foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned, or REO. The Company’s basis in REO and related acquired assets is equal to the estimated fair value of the collateral on the acquisition date and allocated within Real estate owned, Other assets and Other liabilities on the Company’s condensed consolidated balance sheets. The estimated fair value of REO is determined using generally accepted valuation techniques, including a discounted cash flow model and inputs that include the highest and best use for each asset, estimated future values based on discussions with local brokers, investors and other market participants, the estimated holding period for the asset, and discount rates that reflect estimated investor return requirements for the risks associated with the expected use of each asset. If the estimated fair value of REO is lower than the carrying value of the related loan upon acquisition, the difference is recorded through the provision for credit losses in the Company’s condensed consolidated statements of comprehensive income. Upon acquisition, the Company allocates the fair value of REO to land and land improvements, building and building improvements, tenant improvements, intangible assets and intangible liabilities, as applicable.

As of September 30, 2023, REO and related acquired assets, except for land, are depreciated using the straight-line method over estimated useful lives as follows:


Description						Depreciable Life
Building						39 years
Tenant improvements						Over lease terms
Lease intangibles						Over lease terms

Renovations and/or replacements that improve or extend the life of the REO are capitalized and depreciated over their estimated useful lives. The cost of ordinary repairs and maintenance are expensed as incurred in the Company’s condensed consolidated statements of comprehensive income.

REO is initially measured at fair value and is thereafter subject to an impairment assessment on a quarterly basis. Subsequent to a REO acquisition, events or circumstances may occur that may result in a material and sustained decrease in the cash flows generated from the property. REO is evaluated for recoverability when impairment indicators are identified. Any impairment losses and gains or losses on sale are included in the Company’s condensed consolidated statements of comprehensive income. Revenue and expenses from REO operations are included in the condensed consolidated statements of comprehensive income within Revenue from real estate owned operations and Expenses from real estate owned operations, as applicable.

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 Accounting Standards Update, or ASU, 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, or ASU 2022-02. The new guidance is 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 Accounting Standards Codification, or 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, and by year of origination in the vintage disclosures. On January 1, 2023, the Company adopted ASU 2022-02 on a prospective basis and the adoption did not have a material impact on the Company’s condensed consolidated financial statements.

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GRANITE POINT MORTGAGE TRUST INC.

Notes to the Condensed Consolidated Financial Statements

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848)

The London Interbank Offered Rate, or LIBOR, has been the subject of regulatory guidance and proposals for reform or replacement. The Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee composed of large U.S. financial institutions, identified the Secured Overnight Financing Rate, or SOFR, an index calculated using short-term repurchase agreements backed by U.S. Treasury securities, as its preferred alternative rate for LIBOR. As of September 30, 2023, all of the Company’s floating rate loans and outstanding related financings earned a rate of interest indexed to SOFR.

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.

The following tables summarize the Company’s loans held-for-investment by asset type, property type and geographic location as of September 30, 2023, and December 31, 2022:


	September 30, 2023
(dollars in thousands)	Senior Loans(1)			B-Notes			Total
Unpaid principal balance	$	2,904,156		$	13,573		$	2,917,729
Unamortized (discount) premium	(24)			—			(24)
Unamortized net deferred origination fees	(8,850)			—			(8,850)
Allowance for credit losses	(144,867)			(430)			(145,297)
Carrying value	$	2,750,415		$	13,143		$	2,763,558
Unfunded commitments	$	142,056		$	—		$	142,056
Number of loans	76			1			77
Weighted average coupon(2)	8.2		%	8.0		%	8.2		%
Weighted average years to maturity(3)	0.7			3.3			0.7


	December 31, 2022
(dollars in thousands)	Senior Loans(1)			B-Notes			Total
Unpaid principal balance	$	3,348,242		$	13,764		$	3,362,006
Unamortized (discount) premium	(48)			—			(48)
Unamortized net deferred origination fees	(11,808)			—			(11,808)
Allowance for credit losses	(81,768)			(567)			(82,335)
Carrying value	$	3,254,618		$	13,197		$	3,267,815
Unfunded commitments	$	229,607		$	—		$	229,607
Number of loans	89			1			90
Weighted average coupon(2)	6.3		%	8.0		%	6.3		%
Weighted average years to maturity(3)	1.0			4.1			1.0

____________________

(1)Loans primarily secured by a first priority lien on commercial real property and related personal property and also includes, when applicable, any companion subordinate loans.

(2)Weighted average coupon inclusive of the impact of nonaccrual loans.

(3)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.

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GRANITE POINT MORTGAGE TRUST INC.

Notes to the Condensed Consolidated Financial Statements


(dollars in thousands)	September 30, 2023				December 31, 2022
Property Type	Carrying Value		% of Loan Portfolio		Carrying Value		% of Loan Portfolio
Office	$	1,209,011	43.7	%	$	1,348,205	41.3	%
Multifamily	899,530		32.5	%	1,008,177		30.9	%
Hotel	181,080		6.6	%	337,264		10.3	%
Retail	272,768		9.9	%	303,266		9.3	%
Industrial	113,685		4.1	%	185,337		5.6	%
Other	87,484		3.2	%	85,566		2.6	%
Total	$	2,763,558	100.0	%	$	3,267,815	100.0	%


(dollars in thousands)	September 30, 2023				December 31, 2022
Geographic Location	Carrying Value		% of Loan Portfolio		Carrying Value		% of Loan Portfolio
Northeast	$	733,757	26.6	%	$	834,985	25.5	%
Southwest	581,431		21.0	%	675,288		20.7	%
West	345,232		12.5	%	519,244		15.9	%
Midwest	440,726		15.9	%	546,030		16.7	%
Southeast	662,412		24.0	%	692,268		21.2	%

Total	$	2,763,558	100.0	%	$	3,267,815	100.0	%

At September 30, 2023, and December 31, 2022, loans held-for-investment with a carrying value, net of allowance for credit losses, of $2.8 billion and $3.2 billion, respectively, collateralized the Company’s secured financing agreements and CRE CLOs. See Note 5 - Variable Interest Entities and Securitized Debt Obligations, and Note 6 - Secured Financing Agreements, for further detail.

Loan Portfolio Activity

During the three and nine months ended September 30, 2023, the Company funded $20.7 million and $56.1 million, respectively, of prior commitments and upsizings and did not originate any new mortgage loans. Additionally, the Company received $174.2 million and $396.6 million of full loan repayments, and partial paydowns and amortization of $3.3 million and $46.5 million, for total loan repayments, paydowns and amortization of $177.5 million and $443.1 million during the three and nine months ended September 30, 2023, respectively. During the three months ended September 30, 2023, the Company transferred to a loan to held-for-sale with an unpaid principal balance of $31.9 million, incurring a write-off of $(16.8) million at the time of transfer. During the nine months ended September 30, 2023, the Company converted a loan to REO with an unpaid principal balance of $28.2 million, incurring a write-off at the time of conversion of $(4.2) million.

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GRANITE POINT MORTGAGE TRUST INC.

Notes to the Condensed Consolidated Financial Statements

The following table summarizes activity related to loans held-for-investment, net of allowance for credit losses, for the three and nine months ended September 30, 2023, and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Balance at beginning of period	$	2,966,088	$	3,830,014	$	3,267,815	$	3,741,308
Originations, additional fundings, upsizing of loans and capitalized deferred interest	21,698		72,435		58,878		457,545

Repayments	(177,482)		(346,737)		(443,105)		(585,227)
Loan sales	—		—		—		(43,714)
Transfers to loans held-for-sale	(14,980)		—		(14,980)		—
Transfers to real estate owned	—		—		(