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GP

Granite Point Mortgage Trust Inc. (GPMT)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 showed continued portfolio de-risking and liquidity preservation: GAAP net loss to common was $(10.6)M ($0.22 per share), Distributable Loss was $(27.7)M ($0.57 per share), driven by nonaccrual loan resolutions and related write-offs .
  • Estimates context: EPS beat consensus (actual Primary EPS −$0.57 vs consensus −$0.71) while revenue missed (actual $4.27M vs consensus $8.73M); the EPS beat stems from fewer-than-expected distributable losses and timing of resolutions, while revenue definitions vary for mortgage REITs; treat “Revenue” with caution for this issuer’s model.*
  • Post-quarter progress is a catalyst: two additional risk-rated “5” loans resolved in May (hotel in Minneapolis and mixed-use in Baton Rouge) with ~$37M write-offs already reserved; 5-rated loans reduced from 5 at quarter-end to 3 currently .
  • Liquidity and funding improved: all repurchase facilities extended ~one year; unrestricted cash ~$85.7M at quarter-end and ~$86.3M as of May 5; total leverage 2.2x; no corporate debt maturities remaining .
  • Management reiterated opportunistic buybacks (0.9M shares at $2.84, accretive +$0.10 BV/share) and expects to return to originations later in 2025 as non-earning assets are resolved and costlier debt is repaid .

What Went Well and What Went Wrong

What Went Well

  • Accelerated de-risking: Resolved two nonaccrual loans in Q1 (UPB $97M) with write-offs largely reserved; subsequent resolutions in May further reduced risk-rated “5” loans to 3 ($223M UPB remaining) .
  • Funding stability and liquidity: Extended all repurchase facilities by ~one year; quarter-end unrestricted cash $85.7M; total leverage ratio 2.2x; no corporate debt maturities remaining .
  • Shareholder-friendly capital allocation: Repurchased ~0.9M shares at $2.84 for $2.5M, adding ~$0.10 to book value per share; reiterated view shares are undervalued and remaining authorization ~3.9M shares .
    • Quote: “We continue to believe that our stock is significantly undervalued, and, accordingly, we repurchased about 0.9 million of our common shares during the first quarter.”

What Went Wrong

  • Ongoing losses from nonaccrual resolutions: GAAP net loss $(10.6)M; Distributable Loss $(27.7)M including write-offs $(24.6)M; provision for credit losses $(3.8)M .
  • Book value pressure: BV/share declined to $8.24 from $8.47 in Q4 2024, primarily due to GAAP net loss despite buyback accretion; CECL reserve remains elevated at $180.2M (8.8% of commitments) .
  • Asset yields vs funding costs: Realized portfolio yield 6.8% vs cost of funds 7.6% implies a negative net spread (−0.8%), reflecting the drag from nonaccruals and higher funding costs .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Total Interest Income ($USD)$54.055M $38.720M $35.144M
Net Interest Income ($USD)$12.523M $7.571M $8.040M
GAAP Net (Loss) to Common ($USD)$(77.723)M $(42.437)M $(10.615)M
GAAP EPS ($USD)$(1.53) $(0.86) $(0.22)
Distributable Earnings (Loss) ($USD)N/A$(98.156)M $(27.676)M
Distributable EPS (Loss) ($USD)N/A$(1.98) $(0.57)
Realized Loan Portfolio Yield (%)7.0% (Q3 ref) 6.6% 6.8%
Cost of Funds (%)N/AN/A7.6%
Net Interest Income Spread (%)N/AN/A−0.8%

Segment/Exposure Snapshot (Q1 2025):

  • Property Type Composition (% of carrying value): Office 43.7%; Multifamily 31.5%; Retail 8.7%; Hotel 6.2%; Industrial 6.5%; Other 3.4% .
  • Regional Mix (% of carrying value): Northeast 24.9%; Southwest 22.2%; Southeast 20.4%; Midwest 16.9%; West 15.6% .
KPI (Q1 2025)Value
Total Loan Commitments$2.0B
UPB (loans)~$1.945B
CECL Reserve$180.2M (8.8% of commitments)
Book Value/Share$8.24
Unrestricted Cash$85.7M at 3/31; $86.3M at 5/5
Total Leverage Ratio2.2x
Risk-Rated “5” Loans5 at 3/31; 3 after May resolutions

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Common Dividend/ShareQ1 2025$0.05 (maintained from Q4) $0.05 declared Maintained
Repo Facilities Maturities2025N/AExtended all repurchase facilities by ~1 year Raised Duration
Originations Activity2H 2025N/AExpect to resume originations later in 2025 as resolutions free capital Qualitative Initiation
Expected Write-offs (Post Q1)Q2 2025N/A$37M expected from Baton Rouge ($21.5M) and Minneapolis hotel (~$15.4M); already reserved Recognition Timing Update
BuybacksOngoingAuthorization remaining (not quantified prior)~0.9M shares bought in Q1; ~3.9M shares remain under authorization Ongoing/Opportunistic

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3 2024)Previous Mentions (Q-1: Q4 2024)Current Period (Q1 2025)Trend
Nonaccrual ResolutionsMultiple resolutions; anticipated >$250M upcoming; CECL reserve 10.5% Significant Q4 write-offs ($95.2M); CECL 9.2% Q1 write-offs $24.6M; CECL 8.8%; 5-rated loans cut to 3 post-May Improving credit profile
Office ExposureResolved Los Angeles, Fort Lee; diversified office footprint; effort to reduce exposure Continued reduction and REO additions; Miami Beach office REO Further office loan repayments ($32.1M in Q2 to-date); Phoenix REO under contract Ongoing de-risking
Liquidity & FundingUnrestricted cash $113M; leverage 2.2x Cash $87.8M; leverage 2.2x Cash $85.7M; leverage 2.2x; repo facilities extended Stable liquidity, improved tenor
Share Repurchases0.7M shares at $2.73; BV accretion ~$0.10/share 1.2M shares at $3.45; BV accretion $0.13/share 0.9M shares at $2.84; BV accretion $0.10/share Continued undervaluation theme
Originations OutlookLooking to reposition to core lending next year Focus on resolutions first; originations post-de-risking “Return to originations later in 2025” Approaching restart
Macro/TariffsNANAManagement cites tariff-driven rate uncertainty; CRE compares favorably as hard assets Watchful caution

Management Commentary

  • Strategic progress: “We started 2025 on a strong note and made significant progress in achieving our objectives.” — Jack Taylor, CEO .
  • Buybacks underscoring valuation: “It is our view that the current market price does not reflect the value of the business… we repurchased about 900,000 of our common shares.” — Jack Taylor .
  • Macro lens: “In the past month following the tariff announcements, there has been renewed uncertainty about the path of interest rates… However… commercial real estate is better positioned today…” — Jack Taylor .
  • Portfolio specifics: “The modification restructured the [Minneapolis hotel] loan into a $37M senior and a $15M subordinate note… the resized senior loan will be classified as performing and the subordinate loan has been fully reserved.” — Stephen Alpart .
  • Earnings drivers: “Distributable loss… includes write-offs of $24.6M… largely previously reserved for.” — Blake Johnson .

Q&A Highlights

  • Capital allocation trade-offs: PMs asked about accelerating buybacks vs originations; management emphasized preserving liquidity and staying opportunistic, with originations likely later in 2025 .
  • Maturity profile clarity: Questions on remaining term; management clarified mix of maturities in ’25–’27+ and extension options affecting “contractual maturity” metrics .
  • Reserve depth on 4-rated loans: CECL reserve ~$13.1M on ~$174M of risk-rated 4 loans (~7.5%), indicating conservative provisioning vs peers .
  • Realized losses timing: ~$37M post-quarter write-offs split ~$22M (Baton Rouge) and ~$15.4M (Minneapolis hotel) .
  • REO earnings contribution: Combined REO produces positive NOI but GAAP shows loss due to depreciation; Miami Beach REO basis ~$72.5M and active leasing underway .

Estimates Context

Metric (Q1 2025)ConsensusActualBeat/Miss
Primary EPS Consensus Mean ($USD)−$0.71*−$0.57*Beat (less negative)
Revenue Consensus Mean ($USD)$8.73M*$4.27M*Miss

Notes:

  • For mortgage REITs, “Primary EPS” often aligns with normalized/distributable EPS, which the company reported at −$0.57; GAAP EPS was −$0.22 .
  • Revenue definitions differ vs “Total interest income” ($35.144M) in company reporting; use caution when comparing SPGI “Revenue” to issuer’s interest income .
  • Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Resolution momentum is the near-term stock driver: reduction of 5-rated loans from 5 at quarter-end to 3 post-May with ~$37M write-offs already reserved reduces uncertainty and should improve run-rate profitability as non-earning assets are resolved .
  • Funding tenor improved; liquidity preserved: extension of all repo facilities and cash ~$85–86M supports optionality for further resolutions, selective buybacks, and later 2025 originations .
  • EPS beat vs consensus on distributable basis was notable despite ongoing losses; however the negative asset–liability spread (−0.8%) underscores the urgency to resolve nonaccruals and repay higher-cost debt .
  • Continued office de-risking and REO monetization potential (Phoenix under contract; Miami Beach leasing) provide paths to cash generation and de-leveraging in 2025 .
  • Buybacks remain a tactical tool given management’s undervaluation view and remaining authorization (~3.9M shares); expect opportunistic activity to continue alongside balance sheet repair .
  • Estimate revisions likely: Analysts may recalibrate distributable EPS and revenue paths to reflect accelerated resolutions and timing of originations restart; monitor CECL trajectory as resolutions close .
  • Trading lens: Near-term catalysts include additional nonaccrual resolutions, REO sales, and clarity on originations timing; stock likely sensitive to further CECL reserve declines and confirmation of positive NII spread restoration .
Bolded beats/misses were identified in Estimates Context; all company-reported figures and quotes are documented above with citations.