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Granite Point Mortgage Trust Inc. (GPMT)

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Granite Point Mortgage Trust, Inc. (GPMT)

Q3 2018 Earnings Conference Call

November 06, 2018, 10:00 ET

Executives

John Taylor - President, CEO & Director

Stephen Alpart - CIO & Co-Head of Originations

Marcin Urbaszek - CFO & Treasurer

Steven Plust - COO

Analysts

Stephen Laws - Raymond James & Associates

Jade Rahmani - KBW

Christopher Muller - JMP Securities

Benjamin Zucker - BTIG

Presentation

Operator

Good morning. My name is Anita, and I will be your conference facilitator. At this time, I'd like to welcome everyone to Granite Point Mortgage Trust's Third Quarter 2018 Financial Results Conference Call. [Operator Instructions]. I would now like to turn the conference over to Chris Patta [ph] with Investor Relations for Granite Point. Mr. Patta, please go ahead.

Unidentified Company Representative

Thank you, and good morning, everyone. Thank you for joining our call to discuss Granite Point's third quarter 2018 financial results. With me on the call this morning are Jack Taylor, our President and CEO; Marcin Urbaszek, our CFO; Steve Alpart, our CIO; and Steve Plust, our COO. After my introductory comments, jack will provide a brief recap of market conditions and some business highlights; Steve Alpart will discuss our third quarter originations, portfolio and pipeline; and Marcin will highlight key items from our financials.

The press release and financial tables associated with today's call were filed yesterday with the SEC. If you do not have a copy, you may find them on our website or on the SEC's website at sec.gov.

In our earnings release and slides, which are now posted in the Investor Relations section of our website, we have provided a reconciliation of GAAP to non-GAAP financial measures. We urge you to review this information in conjunction with today's call.

I would also like to mention that this call is being webcast and maybe accessed on our website in the same location. Before I turn the call over to Jack, I would like to remind you that remarks made by management during this conference call and the supporting slides may include forward-looking statements. Forward-looking statements reflect our views regarding future events and are typically associated with the use of words such as anticipate, expect, estimate and believe or other such words. We caution investors not to rely unduly on forward-looking statements. They imply risks and uncertainties, and actual results may differ materially from expectations. We urge you to carefully consider the risks described in our filings with the SEC, which may be obtained on the SEC's website at sec.gov. We do not undertake any obligation to update or correct any forward-looking statements if later events prove them to be inaccurate.

I'll now turn the call over to Jack.

John Taylor

Thank you, Chris, and good morning, everyone. We would like to welcome you all, and thank you for joining us for our third quarter earnings call. We're excited to report another strong quarter for Granite Point. Our originations momentum from the second quarter has continued resulting in solid loan fundings in the third quarter and a healthy credit pipeline of loans that have either already closed or are expected to close over the next couple of months. We funded approximately $250 million of loans in the third quarter, which when combined with limited prepayments helped us to grow our investment portfolio and increase our earnings and the dividend. We've continued to sign up new loans at a vigorous pace and generated a pipeline of new senior floating rate loans of approximately $600 million in total commitments and $400 million of initial fundings. To date, in the quarter, we had funded over $130 million of loans. With our solid originations and the strong forward pipeline, we have committed most of our investable capital. As a result, we chose to access Capital Markets in early October successfully issuing over $130 million of 5-year convertible notes. The net proceeds from our offering provided us with new capital to further grow our portfolio and earnings. It also allowed us to take advantage of the fact that our differentiated origination strategy continues to produce a large volume of attractive investment opportunities across a wide variety of markets.

In the third quarter, we generated core earnings of $0.40 per share, an increase of $0.02 per share over the second quarter. We also increased our common dividend by $0.02 to $0.42 per share, which is the second such raise this year and which we believe provides an attractive current yield to our shareholders. We expect our earnings and dividend to benefit as we continue to grow our portfolio.

At quarter-end, our outstanding portfolio principal balance was $2.8 billion and $3.2 billion, including our future funding commitments. Our portfolio is 100% performing with a weighted average stabilized LTV of 63% and a weighted average asset yield of LIBOR plus 5%.

Senior loans comprise over 96% of our investments and our portfolio is 98% floating rate, which positions us well for rising short-term rates. Consistent with our investment strategy, our portfolio remains diversified across geographic markets, both major and nonmajor markets, as well as by property type and sponsorship. The portfolio remains weighted towards the office and multifamily sectors, and we don't foresee our overall property type allocation changing significantly in the near term. We continue to have ample sources of capital to finance our business. We benefit from an array of financing tools across market as well as from a diversified set of line financing counterparties. This all provides us with an attractive and very competitive mix of funding. We continue to evaluate all the options available when managing our funding mix and cost of capital.

Read the rest of this transcript on seekingalpha.com