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GP

Granite Point Mortgage Trust Inc. (GPMT)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 was dominated by portfolio cleanup and credit loss recognition: GAAP net loss was $42.4M ($0.86 per basic share) on a $37.2M CECL provision; Distributable Earnings (Loss) was $(98.2)M ($1.98/sh), with $(95.2)M of write‑offs .
  • Book value per common share fell to $8.47 (from $9.25 in Q3), while total CECL reserves declined to $201.0M (9.2% of commitments), reflecting realized write‑offs and targeted resolutions .
  • Liquidity and capital remained stable: $87.8M unrestricted cash; leverage 2.2x; accretive buybacks of ~1.2M shares at $3.45 added ~$0.13/sh to BV; dividend maintained at $0.05 .
  • Post-quarter, GPMT took Miami Beach office into REO (~$71.0M carrying value expected) and resolved a Boston office loan (expected $(16.6)M write‑off), supporting the roadmap to reduce nonearning assets and improve run-rate profitability over time .
  • Management aims to resume originations in the latter part of 2025 as resolutions, repayments and financing optionality improve; near-term stock drivers are the pace of 5‑rated loan resolutions and clarity on dividend sustainability versus run-rate earnings .

What Went Well and What Went Wrong

  • What Went Well

    • Accelerated asset resolutions: Four nonaccrual loans resolved in Q4 (UPB $175.6M), including one sale and two discounted payoffs; post-quarter two more office assets resolved/taken into REO .
    • CECL reserve decreased: Total CECL reserve fell to $201.0M (from $259.0M in Q3), with 77% ($154.7M) allocated to specific reserves, indicating progress in crystallizing losses and de-risking .
    • Capital actions and liquidity: $87.8M cash, 2.2x leverage, no corporate maturities; ~1.2M shares repurchased at $3.45, accreting ~$0.13/sh book value .
    • Management quote: “We have made substantial progress… resolving nonperforming loans totaling over $340 million in 2024…” (Jack Taylor, CEO) .

  • What Went Wrong

    • Earnings pressure: Q4 GAAP net loss $(42.4)M and Distributable Loss $(98.2)M driven by $(37.2)M CECL provision and $(95.2)M write‑offs; net interest spread remained negative .
    • Continued downgrades: During Q4, a $50M Louisville student housing loan was downgraded to 5‑rated; year-end had seven 5‑rated loans with $453.3M UPB, implying further resolution work ahead .
    • Book value decline: BVPS dropped to $8.47 from $9.25 in Q3, reflecting credit costs despite buyback accretion .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Interest Income ($USD Millions)$48.5 $44.3 $38.7
Interest Expense ($USD Millions)$40.3 $36.6 $31.1
Net Interest Income ($USD Millions)$8.1 $7.7 $7.6
GAAP Net (Loss) Attributable to Common ($USD Millions)$(66.7) $(34.6) $(42.4)
GAAP EPS (Basic) ($)$(1.31) $(0.69) $(0.86)
Distributable Earnings (Loss) per Share ($)$(0.18) $(0.75) $(1.98)
Distributable Earnings (Loss) before Realized Gains/Losses ($/sh)$(0.05) $(0.04) $(0.06)
CECL Provision ($USD Millions)$(60.8) $(27.9) $(37.2)
Net Interest Spread (%)(1.6)% (1.6)% (1.4)%
Balance Sheet & CapitalQ2 2024Q3 2024Q4 2024
Book Value per Common Share ($)$9.84 $9.25 $8.47
Unrestricted Cash ($USD Millions)$86 $113 $87.8
Total Loan Commitments ($USD Billions)$2.7 $2.5 $2.2
CECL Reserve ($USD Millions)$266.9 $259.0 $201.0
CECL Reserve (% of Commitments)9.7% 10.5% 9.2%
Total Leverage (x)2.5x 2.2x 2.2x
Dividend per Common Share ($)$0.05 $0.05 $0.05
Share Repurchases (Common, Millions)~0.5 ~0.7 ~1.2
Portfolio Composition by Property Type (%)Q2 2024Q3 2024Q4 2024
Office43.2% 45.0% 46.0%
Multifamily31.6% 29.8% 30.2%
Retail10.0% 10.4% 8.7%
Hotel7.7% 6.2% 6.0%
Industrial4.8% 5.5% 6.0%
Other2.7% 3.1% 3.1%
Risk-Rated “5” LoansQ2 2024Q3 2024Q4 2024
Count (#)10 9 7 (year-end)
UPB ($USD Millions)$545.2 $508.5 $453.3

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Common dividend per shareQ2–Q4 2024Not formally guided; historical quarterly declaration$0.05 per quarter declaredMaintained
Originations activity outlook2025 timingNot quantifiedTargeting resumption in latter part of 2025 (post portfolio turnover)New qualitative outlook
Share repurchase authorizationQ3 2024Added 3M authorization (5.9M total available)Executed ~1.2M repurchases in Q4Actioned (capital allocation)

Note: GPMT did not provide numeric guidance for revenue/EPS/margins/OpEx/tax; guidance consists of capital allocation, portfolio resolution trajectory, and qualitative originations timing .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Nonperforming loan resolutionsBegan accelerating; several modifications/REO conversions; CECL up as activity increased Multiple resolutions; >$280M of nonaccrual loans expected to resolve near term Four resolutions in Q4; two more post-quarter; active processes for remaining 5-rated loans Improving execution; backlog shrinking
Office exposure reductionOffice exposure cut >$555M since 2021 Reduction >$625M since 2021 Reduction >$700M since 2021; granular across markets Continued de-risking
Liquidity and leverage2.5x leverage; $86M cash; extended MS facility 2.2x leverage; $113M cash 2.2x leverage; $87.8M cash; ~$75M cash post 2/12/25 Stable leverage; cash fluctuating with resolutions
Dividend policyMaintained $0.05 despite negative distributable before realized losses Maintained $0.05 Maintained $0.05; management discussed rationale and timing to cover dividend Maintained; watch coverage trajectory
CLO/financing marketCLO noted as funding mix; non‑MTM share ~56% CLO capacity and non‑MTM mix; leverage at 2.2x CLO market resurgence noted; potential refinancing/combinations later in 2025 Improving optionality (medium term)
Risk-rated 4/5 loans10 loans rated 5; specifics outlined 9 loans rated 5; processes ongoing 7 loans rated 5 at YE; two resolved in Q1’25; one loan downgraded to 5 (Louisville student housing) Backlog down; some new downgrades
Legal/arbitrationN/AN/ALouisville student housing: multi‑year confidential arbitration concluded, driving downgrade One-off legal resolution affecting credit

Management Commentary

  • Strategic focus: “We have made substantial progress in successfully executing on our primary objective by resolving nonperforming loans totaling over $340 million in 2024… repurchasing 2.4 million of common shares, reflecting our strong belief that our stock continues to be undervalued.” — Jack Taylor, CEO .
  • Portfolio and outlook: “With the progress we have made… our current volume of nonperforming loan resolutions should continue to meaningfully exceed any potential future credit events… we will be positioned to return to new originations in the latter part of the year.” — Jack Taylor .
  • Credit and reserves: “Our aggregate CECL reserve at December 31 was about $201 million… we believe we are appropriately reserved… further resolutions should meaningfully reduce our total CECL reserve balance.” — Blake Johnson, CFO .
  • Financing strategy: “We intend to take advantage of [the resurging CLO market]… could be towards the end of the year and we intend on taking advantage… on a going-forward basis.” — Jack Taylor .
  • Dividend and REO approach: Management defended maintaining the dividend given expected coverage improvement and a strategy that balances taking REO where appropriate with preserving valuable financing on loans and negotiating upside participation in recoveries .

Q&A Highlights

  • Provisioning and downgrades: Analysts pressed for comfort on current 4/5-rated loans and provisioning; management reiterated quarterly risk review and explained Louisville student housing downgrade post arbitration outcome and extension to Nov 2025 .
  • CLO refinancing optionality: Discussion of potential refinancing/combinations of 2021-vintage CLOs later in 2025 to improve cost and leverage; not near-term .
  • Risk-rated 4 loan bucket: At YE, four loans rated 4 with UPB just under $170M, signaling mid-risk assets under active management .
  • Capital management debate: Analyst challenged dividend versus buybacks/REO strategy; management emphasized expected coverage improvement, selective REO, borrower collaboration, and preserving favorable liability structures .

Estimates Context

  • S&P Global Wall Street consensus for Q4 2024 EPS and revenue was unavailable at time of writing due to data access limits, so we cannot assess beat/miss. Estimates for forward periods were likewise unavailable. Without this, near-term estimate revisions will likely incorporate realized write-offs, CECL trends and resolution cadence (S&P Global consensus not retrieved due to request limit).

Key Takeaways for Investors

  • Resolution pace is the key near-term driver: Progress on the five remaining 5‑rated loans and additional office exposure reductions should support CECL reserve declines and run‑rate improvement .
  • Watch distributable earnings before realized gains/losses: The $(0.06)/sh in Q4 suggests near-coverage of the dividend once nonearning assets are reduced; timing hinges on resolutions and repayments .
  • Liquidity optionality intact: Stable 2.2x leverage, ~$88M cash at YE and potential to finance unlevered REO provide flexibility to bridge to originations in 2H 2025 .
  • CLO market improvement offers medium‑term funding tailwinds: Management sees scope to refinance/recombine assets into new CLOs later in 2025, potentially lowering funding costs and enhancing leverage efficiency .
  • Capital allocation remains accretive at deep discounts to book: Q4 buybacks accreted ~$0.13/sh; expect opportunistic repurchases balanced against liquidity and resolution needs .
  • Portfolio composition is trending healthier but office remains elevated: Office at 46% of carrying value; continued reductions and specific resolutions (Miami REO, Boston sale) are constructive .
  • Dividend maintained; monitor sustainability and signaling: $0.05 declared despite negative distributable EPS; coverage path depends on reducing nonearning assets and resuming originations .