gpmt-20240930

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, 2024


☐			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 October 31, 2024, there were 49,957,557 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, 2024, and December 31, 2023	1
	Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2024, and 2023	2
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2024, and 2023	3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024, and 2023	4
	Notes to the Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4.	Controls and Procedures	51
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 3.	Defaults Upon Senior Securities	52
Item 4.	Mine Safety Disclosures	52
Item 5.	Other Information	52
Item 6.	Exhibits	52
Index of Exhibits		53
Signatures		55

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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 Securities 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, 2023, 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 Securities and Exchange Commission, or 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 and their impact on our investment portfolio, financial condition and business operations;

•inflationary trends which have led to higher interest rates and increased market volatility;

•reduced demand for office, multifamily or retail space, including as a result of increased 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, or REIT, for U.S. federal income tax purposes and our exclusion from registration under the Investment Company Act of 1940, as amended, or the Investment Company Act;

•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;

•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;

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•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, 2024		December 31, 2023
ASSETS
Loans held-for-investment	$	2,340,332	$	2,718,486
Allowance for credit losses	(256,770)		(134,661)
Loans held-for-investment, net	2,083,562		2,583,825



Cash and cash equivalents	113,461		188,370
Restricted cash	11,243		10,846
Real estate owned, net	42,736		16,939
Accrued interest receivable	9,168		12,380



Other assets	41,214		34,572
Total Assets (1)	$	2,301,384	$	2,846,932
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Repurchase facilities	$	705,590	$	875,442
Securitized debt obligations	816,103		991,698

Secured credit facility	85,192		84,000





Dividends payable	6,296		14,136
Other liabilities	20,291		22,633
Total Liabilities (1)	1,633,472		1,987,909
Commitments and Contingencies (see Note 10)

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 49,957,557 shares and 50,577,841 issued and outstanding, respectively	500		506
Additional paid-in capital	1,199,432		1,198,048
Cumulative earnings	(100,720)		67,495
Cumulative distributions to stockholders	(431,507)		(407,233)
Total Granite Point Mortgage Trust Inc. Stockholders’ Equity	667,787		858,898
Non-controlling interests	125		125
Total Equity	667,912		859,023
Total Liabilities and Stockholders’ Equity	$	2,301,384	$	2,846,932

______________________

(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, 2024, and December 31, 2023, assets of the VIEs totaled $982,440 and $1,233,821, respectively, and liabilities of the VIEs totaled $817,780 and $994,081, 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 (LOSS) INCOME

(in thousands, except share data)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Interest income:
Loans held-for-investment	$	43,031	$	63,848	$	141,878	$	195,356



Cash and cash equivalents	1,266		2,839		4,953		6,876
Total interest income	44,297		66,687		146,831		202,232
Interest expense:
Repurchase facilities	17,365		21,986		57,424		64,630
Secured credit facility	2,753		3,178		8,156		9,182
Securitized debt obligations	16,521		18,414		52,939		54,353
Convertible senior notes	—		2,332		—		6,975

Asset-specific financings	—		862		—		2,424


Total interest expense	36,639		46,772		118,519		137,564
Net interest income	7,658		19,915		28,312		64,668




Other income (loss):
Revenue from real estate owned operations	3,792		1,056		6,045		1,518

Provision for credit losses	(27,911)		(31,008)		(164,219)		(83,236)
Gain (loss) on extinguishment of debt	—		—		(786)		238

Fee income	—		81		—		81

Total other (loss)	(24,119)		(29,871)		(158,960)		(81,399)
Expenses:


Compensation and benefits	5,375		5,044		16,083		17,165
Servicing expenses	1,197		1,331		3,971		4,029
Expenses from real estate owned operations	4,827		2,233		8,822		3,897
Other operating expenses	3,166		2,358		8,695		7,809

Total expenses	14,565		10,966		37,571		32,900
(Loss) income before income taxes	(31,026)		(20,922)		(168,219)		(49,631)
(Benefit from) provision for income taxes	(2)		15		(4)		94
Net (loss) income	(31,024)		(20,937)		(168,215)		(49,725)
Dividends on preferred stock	3,600		3,600		10,800		10,850

Net (loss) income attributable to common stockholders	$	(34,624)	$	(24,537)	$	(179,015)	$	(60,575)
Basic (loss) earnings per weighted average common share	$	(0.69)	$	(0.48)	$	(3.53)	$	(1.17)
Diluted (loss) earnings per weighted average common share	$	(0.69)	$	(0.48)	$	(3.53)	$	(1.17)

Weighted average number of shares of common stock outstanding:
Basic	50,526,492		51,577,143		50,736,066		51,805,265
Diluted	50,526,492		51,577,143		50,736,066		51,805,265

Net (loss) income attributable to common stockholders	$	(34,624)	$	(24,537)	$	(179,015)	$	(60,575)



Comprehensive (loss) income	$	(34,624)	$	(24,537)	$	(179,015)	$	(60,575)

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, 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)
Repurchase of common stock for tax withholding on vestings of RSUs	(114,306)	(1)		—	—		(652)		—		—		(653)		—		(653)
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	327,610	3		—	—		1,953		—		—		1,956		—		1,956
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



Repurchase of common stock for tax withholding on vestings of RSUs	(15,234)	—		—	—		(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	59,898	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











Balance, December 31, 2023	50,577,841	$	506	8,229,500	$	82	$	1,198,048	$	67,495	$	(407,233)	$	858,898	$	125	$	859,023
Net (loss) income	—	—		—	—		—		(74,123)		—		(74,123)		—		(74,123)



Repurchase of common stock for tax withholding on vestings of RSUs	(233,454)	(2)		—	—		(1,185)		—		—		(1,187)		—		(1,187)

Preferred dividends declared, $0.4375 per share	—	—		—	—		—		—		(3,600)		(3,600)		—		(3,600)
Common dividends declared, $0.15 per share	—	—		—	—		—		—		(8,043)		(8,043)		—		(8,043)
Non-cash equity award compensation	690,413	6		—	—		2,167		—		—		2,173		—		2,173
Balance, March 31, 2024	51,034,800	$	510	8,229,500	$	82	$	1,199,030	$	(6,628)	$	(418,876)	$	774,118	$	125	$	774,243
Net (loss) income	—	—		—	—		—		(63,068)		—		(63,068)		—		(63,068)


Repurchase of common stock	(510,244)	(5)		—	—		(1,594)		—		—		(1,599)		—		(1,599)


Preferred dividends declared, $0.4375 per share	—	—		—	—		—		—		(3,600)		(3,600)		—		(3,600)
Common dividends declared, $0.05 per share	—	—		—	—		—		—		(2,735)		(2,735)		—		(2,735)
Non-cash equity award compensation	159,561	2		—	—		1,458		—		—		1,460		—		1,460
Balance, June 30, 2024	50,684,117	$	507	8,229,500	$	82	$	1,198,894	$	(69,696)	$	(425,211)	$	704,576	$	125	$	704,701
Net (loss) income	—	—		—	—		—		(31,024)		—		(31,024)		—		(31,024)
Repurchase of common stock	(726,560)	(7)		—	—		(1,996)		—		—		(2,003)		—		(2,003)


Preferred dividends declared, $0.4375 per share	—	—		—	—		—		—		(3,600)		(3,600)		—		(3,600)
Common dividends declared, $0.05 per share	—	—		—	—		—		—		(2,696)		(2,696)		—		(2,696)
Non-cash equity award compensation	—	—		—	—		2,534		—		—		2,534		—		2,534
Balance, September 30, 2024	49,957,557	$	500	8,229,500	$	82	$	1,199,432	$	(100,720)	$	(431,507)	$	667,787	$	125	$	667,912

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,
	2024		2023
Cash Flows From Operating Activities:
Net loss	$	(168,215)	$	(49,725)
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	(4,331)		(6,954)
Amortization of deferred debt issuance costs	4,335		6,399
Provision for credit losses	164,219		83,236
(Gain) loss on extinguishment of debt	423		(274)






Amortization of equity-based compensation	6,165		5,912
Proceeds received from deferred interest capitalized on loans held-for-investment	2,935		359
Depreciation and amortization on real estate owned	4,580		—
Net change in assets and liabilities:
Decrease (increase) in accrued interest receivable	3,212		449



Decrease (increase) in other assets	(1,963)		(242)




Increase (decrease) in other liabilities	(2,634)		3,256

Net cash provided by operating activities	8,726		42,416
Cash Flows From Investing Activities:
Originations, acquisitions and additional fundings of loans held-for-investment, net of deferred fees	(41,348)		(54,787)


Proceeds from repayment of loans held-for-investment	342,912		442,746




Increase in other assets, due from servicer on repayments of loans held-for-investment	(42)		—







Capital expenditures related to real estate owned	(1,966)		—
Purchases of preferred equity investments	(366)		—

Net cash provided by investing activities	299,190		387,959

Cash Flows From Financing Activities:
Proceeds from repurchase facilities	78,485		453,185
Principal payments on repurchase facilities	(247,914)		(547,641)

Principal payments on securitized debt obligations	(176,447)		(139,753)


Proceeds from asset-specific financings	—		910

Proceeds from secured credit facility	1,192		—








Payment of debt issuance costs	(843)		(3,600)







Tax withholding on restricted stock and RSUs	(1,185)		(966)
Repurchase of common stock	(3,602)		(5,118)
Redemption of cumulative redeemable preferred stock	—		(1,000)
Dividends paid on preferred stock	(10,801)		(10,851)
Dividends paid on common stock	(21,313)		(32,159)
Net cash used in financing activities	(382,428)		(286,993)
Net (decrease) increase in cash, cash equivalents and restricted cash	(74,512)		143,382
Cash, cash equivalents, and restricted cash at beginning of period	199,216		140,165
Cash, cash equivalents, and restricted cash at end of period	$	124,704	$	283,547
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	$	120,774	$	134,780

Cash paid for taxes	$	—	$	836
Noncash Activities:
Transfers of loans held-for-investment to loans held-for-sale	$	—	$	14,980
Dividends declared but not paid at end of period	$	6,296	$	14,336
Transfers from loans held-for-investment to real estate owned, other assets and other liabilities	$	35,659	$	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 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”. Our principal executive offices are located at 3 Bryant Park, 24th Floor, New York, New York 10036. 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. 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 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 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, 2023. In the opinion of management, all normal and recurring adjustments necessary to present fairly the financial condition of the Company at September 30, 2024, and results of operations for all periods presented have been made. The results of operations for the three and nine months ended September 30, 2024, 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. See Note 5 - Variable Interest Entities and Securitized Debt Obligations to the Company’s Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional details regarding consolidation of VIEs.

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

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Notes to the Condensed Consolidated Financial Statements

market, local geographic sub-markets or other factors) will occur in the near term.

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, 2024. 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, 2023, 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, 2024.

Recently Issued and/or Adopted Accounting Standards

Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, or ASU 2023-07. The new guidance requires a public entity with a single reportable segment to provide new disclosures surrounding segment expenses and other segment items on an annual and interim basis, with the intention of improving reportable segment disclosure requirements as well as enhancing interim disclosure requirements. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods with fiscal years beginning after December 15, 2024, with the guidance to be adopted retrospectively to all prior periods presented. The Company is currently evaluating the impact of this guidance but does not anticipate it will have a material impact on the Company’s condensed consolidated financial statements.

Income Taxes (Topic 740): Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, or ASU 2023-09. The new guidance requires entities to disclose the amount of income taxes paid, net of refunds received, disaggregated by federal, state and foreign jurisdiction, with the intention of improving the transparency of income tax disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and is to be adopted on a prospective basis with the option to apply retrospectively. The Company is currently evaluating the impact of this guidance but does not anticipate it will have a material impact on the Company’s condensed consolidated financial statements.

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

The following tables summarize the Company’s loans held-for-investment by asset type, property type and geographic location as of September 30, 2024, and December 31, 2023:


	September 30, 2024
(dollars in thousands)	Senior Loans(1)			B-Notes(2)			Total
Unpaid principal balance	$	2,335,744		$	13,308		$	2,349,052
Unamortized premium	77			—			77
Unamortized net deferred origination fees	(8,797)			—			(8,797)
Allowance for credit losses	(256,561)			(209)			(256,770)
Carrying value	$	2,070,463		$	13,099		$	2,083,562
Unfunded commitments	$	109,482		$	—		$	109,482
Number of loans	61			1			62
Weighted average coupon(3)	6.4		%	8.0		%	6.4		%
Weighted average years to maturity(4)	0.5			2.3			0.5

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Notes to the Condensed Consolidated Financial Statements


	December 31, 2023
(dollars in thousands)	Senior Loans(1)			B-Notes(2)			Total
Unpaid principal balance	$	2,713,672		$	13,507		$	2,727,179
Unamortized (discount) premium	(19)			—			(19)
Unamortized net deferred origination fees	(8,674)			—			(8,674)
Allowance for credit losses	(134,302)			(359)			(134,661)
Carrying value	$	2,570,677		$	13,148		$	2,583,825
Unfunded commitments	$	160,698		$	—		$	160,698
Number of loans	72			1			73
Weighted average coupon(3)	8.2		%	8.0		%	8.2		%
Weighted average years to maturity(4)	0.7			3.1			0.7

______________________

(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)A subordinate loan secured by the same mortgage as the senior loan.

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

(4)Based on contractual maturity date, including maturity defaulted loans with no remaining term. 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)	September 30, 2024				December 31, 2023
Property Type	Carrying Value		% of Loan Portfolio		Carrying Value		% of Loan Portfolio
Office	$	938,385	45.0	%	$	1,116,551	43.2	%
Multifamily	621,028		29.8	%	826,125		32.0	%
Hotel	127,991		6.2	%	180,891		7.0	%
Retail	216,868		10.4	%	257,945		10.0	%
Industrial	114,146		5.5	%	113,972		4.4	%
Other	65,144		3.1	%	88,341		3.4	%
Total	$	2,083,562	100.0	%	$	2,583,825	100.0	%


(dollars in thousands)	September 30, 2024				December 31, 2023
Geographic Location	Carrying Value		% of Loan Portfolio		Carrying Value		% of Loan Portfolio
Northeast	$	498,448	23.9	%	$	709,838	27.5	%
Southwest	463,863		22.3	%	495,133		19.2	%
West	298,622		14.3	%	328,547		12.7	%
Midwest	334,621		16.1	%	421,881		16.3	%
Southeast	488,008		23.4	%	628,426		24.3	%

Total	$	2,083,562	100.0	%	$	2,583,825	100.0	%

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Notes to the Condensed Consolidated Financial Statements

Loan Portfolio Activity

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, 2024, and 2023:


	Three Months Ended September 30, 2024						Nine Months Ended September 30, 2024
(in thousands)	Amortized Cost		Allowance for Credit Losses		Carrying Value		Amortized Cost		Allowance for Credit Losses		Carrying Value
Balance at beginning of period	$	2,616,884	$	(264,140)	$	2,352,744	$	2,718,486	$	(134,661)	2,583,825
Originations, additional fundings, upsizing of loans and capitalized deferred interest	9,894		—		9,894		45,762		—		45,762

Repayments	(240,145)		—		(240,145)		(337,028)		—		(337,028)


Transfers to real estate owned	—		—		—		(35,659)		—		(35,659)
Net discount accretion (premium amortization)	—		—		—		15		—		15
Increase (decrease) from net deferred origination fees	(2,508)		—		(2,508)		(3,360)		—		(3,360)
Amortization of net deferred origination fees	787		—		787		3,262		—		3,262


Provision for credit losses	—		(28,391)		(28,391)		—		(164,436)		(164,436)
Write-offs	$	(44,580)	$	44,580	—		$	(51,146)	$	51,146	—
Recoveries of previous write-offs	$	—	$	(8,819)	(8,819)		$	—	$	(8,819)	(8,819)
Balance at end of period	$	2,340,332	$	(256,770)	$	2,083,562	$	2,340,332	$	(256,770)	$	2,083,562


	Three Months Ended September 30, 2023						Nine Months Ended September 30, 2023
(in thousands)	Amortized Cost		Allowance for Credit Losses		Carrying Value		Amortized Cost		Allowance for Credit Losses		Carrying Value
Balance at beginning of period	$	3,096,500	$	(130,412)	$	2,966,088	$	3,350,150	$	(82,335)	3,267,815
Originations, additional fundings, upsizing of loans and capitalized deferred interest	21,698		—		21,698		58,878		—		58,878

Repayments	(177,482)		—		(177,482)		(443,105)		—		(443,105)
Transfers to loans held-for-sale, net of discount at time of transfer	(14,980)		—		(14,980)		(14,980)