Granite Point Mortgage Trust Inc. Q1 FY2025 earnings call

• Chief Operating Officer transition: Ethan Lebowitz took over from Steven Plust on May 1, with Ethan bringing broad industry expertise, real estate acumen, and leadership capabilities.
• Market conditions: Beginning of 2025 showed improved sentiment for commercial real estate, but tariffs introduced uncertainty about interest rates and recession impact. Commercial real estate is better positioned with lower reset basis and is a defensive asset class.
• Loan resolutions: Resolved two risk rated five loans in first quarter, two more in last week, reducing risk rated five loan count from 7 to 3. Resolved mixed use asset in Baton Rouge and modified hotel loan in Minneapolis. Expected loan portfolio balance to trend lower in coming quarters.
• Liquidity and capital: Extended repurchase facilities, repurchased 900,000 common shares in first quarter, book value at March 31 was $8.24 per common share, aggregate CECL reserve declined by $21 million due to write-offs.

Granite Point Mortgage Trust ended the first quarter with $2 billion in total loan portfolio commitments and $1.9 billion in outstanding principal balance, with about $93 million of future fundings (5% of total commitments). The realized loan portfolio yield for the first quarter was 6.8%, which excluding non-accrual loans would be 8.5%. The prior quarter realized loan portfolio yield was 6.6% and excluding non-accrual loans was 8.8%. There was an active first quarter of loan repayments, pay downs and resolutions totaling about $172 million, resulting in a net loan portfolio reduction of $161 million. The loan portfolio remains well diversified across regions and property types, with 50 investments, average UPB of about $39 million, and weighted average stabilized LTV of 64% at origination.

• Anticipate loan portfolio balance to trend lower in the coming quarters as they resolve non-accrual loans.
• Expect run rate profitability to improve as they resolve non-earning assets, repay expensive debt, and reinvest capital over time.
• Intend to return to new originations in the latter part of the year.

• Uncertainty from tariffs affecting interest rates and potential recession impacting commercial real estate.
• Potential negative credit migration for risk rated 4 loans.
• Difficulty in predicting exact timing and magnitude of improved profitability due to loan repayments and short-term interest rates.

Q: Doug Harter asked about potentially starting originations back up in the second half of the year and how to balance buyback versus originating new loans, and also about event risk on rated assets.

A: Jack Taylor said it's a balance, they've been active in buybacks with $3.9 million remaining authorization, and Steve Alpart said majority of portfolio performing well, watching risk rated 4 loans carefully with possibility of negative credit migration but comfortable with current marks.

Q: Steve DeLaney asked about clarifying write-offs of $22 million and $37 million and expected timing in distributable EPS.

A: Blake Johnson explained the $37 million relates to resolutions subsequent to quarter end, including $22 million and around $15.4 million from two resolutions, and there are three remaining risk rated five loans after these resolutions.

Q: Jade Rahmani asked about portfolio maturity, CECL reserves on risk rated 4 loans, and color on Miami REO asset.

A: Steve Alpart said over 20% of portfolio matures in 2025, Blake Johnson said risk rated 4 loans have $13.1 million reserve on $174 million balance, Steve Alpart gave color on Miami REO asset as high quality Class A in strong market with potential positive NOI but earnings affected by depreciation.