Granite Point (GPMT) Q1 2026 Earnings Transcript

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DATE

Wednesday, May 6, 2026 at 11 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Jack Taylor
• Chief Financial Officer — Blake Johnson
• Chief Investment Officer and Co-Head of Originations — Steve Alpart
• Chief Development Officer and Co-Head of Originations — Peter Morale
• Chief Operating Officer — Ethan Leibowitz
• Managing Director, Head of Investor Relations — Chris Petta

TAKEAWAYS

• Total Loan Portfolio Commitments -- $1.6 billion at quarter end, including $1.5 billion of outstanding principal and $68 million of future fundings (4% of commitments).
• Net Loan Portfolio Change -- Portfolio was reduced by $175 million due to repayments, sales, paydowns, and amortization totaling $189 million offset by $14 million of new fundings and other investments.
• Realized Portfolio Yield -- 6.5% for the quarter; excluding nonaccrual loans, yield would be 7.9% (a 1.4% increase).
• GAAP Net Loss Attributable to Common Stockholders -- $6 million, or -$0.13 per share, with a credit loss benefit of $200,000 included.
• Distributable Loss -- $3 million, or -$0.06 per basic common share.
• Book Value -- $7.05 per share, a decline of $0.24 sequentially from Q4.
• Allowance for Credit Losses (CECL Reserve) -- $149 million at quarter end; subsequent Chicago retail loan resolution decreased the reserve by $30 million to $119 million.
• Portfolio Risk Ratings -- Average risk rating rose to 3.2 from 2.9; five loans rated five (highest risk) with $265 million UPB reduced to four loans totaling $189 million after the Chicago retail resolution.
• Nonaccrual and Risk-4 Loans -- Seven loans were on nonaccrual at quarter end; two loans totaling $69 million with risk ratings of four also on nonaccrual.
• Leverage -- Total leverage was lowered to 1.7x from 2.0x in the prior quarter as repayments and sales proceeds were used to reduce higher-cost borrowings and CLO bonds.
• Liquidity -- Unrestricted cash was $44 million at quarter end, with a post-quarter increase to $56 million.
• REO (Real Estate Owned) Assets -- Two assets held: a suburban Boston property (active leasing, value-enhancement strategies) and a Miami Beach office property (Class A, positive leasing, potential sale in 2026).
• Dividend Policy -- Company explicitly acknowledged, "[We] are under-earning," and will evaluate the dividend in future quarters as earnings improve through nonaccrual loan resolution.
• Origination Strategy -- New origination activity paused, with intention to restart in 2026 to redeploy proceeds and enhance net interest spread and earnings.
• Capital-Light Income Initiatives -- Management disclosed pursuit of joint venture strategies that could initially add $2 million to $4 million of annual earnings within the first year of launch.

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RISKS

• Average loan portfolio risk rating increased to 3.2, with post-quarter end four loans totaling $189 million at risk rating five, and management confirmed these "remains a top priority." for resolution, highlighting ongoing elevated credit risk.
• Book value per share declined by $0.24 sequentially, driven in part by realized credit losses, indicating continued pressure on shareholder equity.
• Nonaccrual loans and risk-4 assets persist, with seven nonaccrual loans at quarter end and management stating that some properties are "behind under business plans," resulting in further downgrades.
• CEO Taylor stated, "we are under-earning," confirming distributable earnings remain below the dividend, and continued underperformance could pressure future distributions.

SUMMARY

Management of Granite Point Mortgage Trust (NYSE:GPMT) outlined substantial progress in resolving legacy loans, with sales and repayments unlocking capital but also resulting in notable write-downs and persistent portfolio risk. The company completed the significant resolution of the Chicago retail loan, which led to a $30.2 million write-off mostly covered by the existing CECL allowance, and management anticipates further reductions in reserves with continued loan resolutions. Liquidity improved through portfolio downsizing and reduced leverage, supported by intentional loan paydowns and sale activities. Distributable earnings remained negative, and the company flagged that further progress on nonaccrual and risk-graded loans is necessary before earnings fully recover. Strategic priorities include re-entering the origination market and initiating capital-light joint venture structures to diversify income streams beyond balance sheet lending.

• The weighted average stabilized loan-to-value (LTV) at origination for the portfolio was 66%, reflecting the company's underwriting standards.
• Following the Chicago retail loan resolution, the company’s CECL reserve as a share of total commitments fell from 9.4% to 7.9%.
• Management stated the capital in collateral-dependent loans and REO generated a GAAP net loss (excluding credit losses) of about -$0.11 per share, with redeployment into new originations projected to increase quarterly EPS by $0.17 to $0.19.
• Management stated, "deals are all taking longer because of a higher degree of macro uncertainty, and especially with respect to rates," pointing to slower repayment and resolution timelines.
• The company’s funding mix remains stable with constructive relationships with financing counterparties, and management plans to expand financing capacity upon resuming origination activity.

INDUSTRY GLOSSARY

• CECL Reserve: Current Expected Credit Loss reserve—an accounting estimate of projected losses on financial assets, applied under U.S. GAAP.
• UPB: Unpaid Principal Balance—the outstanding principal amount owed on a loan, excluding accrued interest.
• REO: Real Estate Owned—properties held on the company’s balance sheet following foreclosure or deed-in-lieu actions, pending disposition.
• Risk Rating: Internal credit score for loan assets; higher numbers indicate increased impairment or likelihood of loss (with five being highest risk in this context).

Full Conference Call Transcript

Chris Petta: Thank you for joining our call to discuss Granite Point Mortgage Trust Inc.'s First Quarter 2026 Financial Results. With me on the call this morning are Jack Taylor, our President and Chief Executive Officer; Steve Alpart, Chief Investment Officer and Co-Head of Originations; Blake Johnson, our Chief Financial Officer; Peter Morale, our Chief Development Officer and Co-Head of Originations; and Ethan Leibowitz, our Chief Operating Officer. After my introductory comments, Jack will provide a brief recap of market conditions and review our current business activities, discuss our portfolio, and Blake will highlight key items from our financial results.

The press release, financial tables, and earnings supplemental associated with today's call were filed yesterday with the SEC along with our Form 10-Q and are available in the Investor Relations section of our website. I would like to remind you that remarks made by management during this call and the supporting slides may include forward-looking statements that are uncertain and outside of the company's control. Forward-looking statements reflect our views regarding future events and are subject to uncertainties that could cause actual results to differ materially from expectations. Please see our filings with the SEC for a discussion of some of the risks that could affect results. We do not undertake any obligation to update any forward-looking statements.

We also will refer to non-GAAP measures on this call. This information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in our earnings release and slides and are available on our website. I will now turn the call over to Jack.

Jack Taylor: Thank you, Chris, and good morning, everyone. We would like to welcome you and thank you for joining us for Granite Point Mortgage Trust Inc.'s First Quarter 2026 Earnings Call. U.S. commercial real estate markets continued their positive trajectory during the first quarter. However, recent geopolitical developments tied to the Iran conflict are influencing the U.S. capital markets, as rising energy prices have sharpened investors' focus on inflation trends and contributed to greater uncertainty about the timing of further interest rate cuts. Notwithstanding some of these headwinds, capital continued to flow into commercial real estate assets. Commercial real estate lending activity is expected to continue to improve through 2026, supported by steady demand and continued investor interest.

While securitization volumes may moderate due to broader economic uncertainty surrounding the conflict in Iran and a mixed U.S. outlook, and deals are taking longer to complete, the market has shown strong resilience. We believe that recent fluctuations in the CMBS and CRE CLO spreads, along with a temporary slowdown in unsecured bond issuance, primarily reflect a recalibrating of risk while investors continue to be engaged and constructive in the commercial real estate sector. For Granite Point Mortgage Trust Inc., our primary objective continues to be capitalizing on the improving environment to resolve legacy loans and to set the stage to begin regrowing our portfolio in 2026.

To that end, our accomplishments since the beginning of the year included two sizable full loan repayments, the sale of a B note secured by a hotel at a price somewhat above par, the final resolution on the Chicago retail loan above our carrying value, and the successful sale of a subordinate interest in debt secured by an office property located in Dallas, Texas. These actions furthered our goals of reducing higher-cost debt and setting the path for future growth.

Given the improved capital markets, and to continue to address our legacy loan portfolio and pending maturity dates, we have been less inclined to provide borrowers with additional time and are pushing further for repayments through property sales, refinancings, and recapitalizations, and we are also selectively looking at some loan sales. In some cases, this approach was a contributing factor in recent downgrades for certain loans in our portfolio. With respect to our two REO assets, we are investing capital where we believe it will improve our outcome and will then seek to exit and extract capital.

All of these initiatives will free up capital for us to optimize our balance sheet and set the stage for us to regrow our portfolio in future quarters. A restart of new origination activity is expected to improve our net interest spread and earnings, which has remained a key goal, which Blake will go into further shortly. I would now like to turn the call over to Steve Alpart to discuss our portfolio activities in more detail.

Steve Alpart: Thank you, Jack, and thank you all for joining our first quarter earnings call. We ended the quarter with 1.6 billion in total loan portfolio commitments, inclusive of 1.5 billion in outstanding principal balance and about 68 million of future fundings, which accounts for only about 4% of total commitments. Our loan portfolio remains diversified across regions and property types and includes 40 investments with an average UPB of about 38 million and a weighted average stabilized LTV of 66% at origination. As of March 31, our portfolio weighted average risk rating increased to 3.2 from 2.9 at December 31. Realized loan portfolio yield for the first quarter was 6.5%, which, excluding nonaccrual loans, would be 7.9%, or 1.4% higher.

We had an active quarter of loan repayments, paydowns, sales, and amortization totaling about 189 million. During the first quarter, we had two loan repayments totaling 174 million and sold a 13 million B note secured by a strong performing hotel in Hawaii at a price somewhat above par. We had about 14 million of future fundings and other investments, resulting in a net loan portfolio reduction of about 175 million for the first quarter. Post quarter-end, we achieved the final resolution on the 76 million Chicago retail loan via a property sale by the borrower after previously resolving the office component in 2025, also through a property sale. The loan had been risk-rated five and was on nonaccrual status.

As a result of this transaction and the prior resolution on the office component, the company expects to realize a write-off of approximately 30.2 million, which had been reserved for through a previously recorded 31.3 million allowance for credit losses as of December 31. During the second quarter, we sold a subordinate interest in debt secured by an office property located in Dallas, Texas. I will now provide some color on the remaining risk-rated five loans. At March 31, we had five such loans with a total UPB of about 265 million, which post quarter-end was reduced to four loans totaling 189 million following the resolution of the Chicago retail loan.

Three of the four are in active sales processes that we anticipate may be completed over the coming quarters. At quarter-end, we downgraded a 15 million loan collateralized by a 72-key hotel property from a risk rating of three to a risk rating of five. The hotel is well located and institutionally owned by a sponsor with a large amount of cash equity in the asset, who has also made substantial loan paydowns over time. The business plan had been well underway prior to the hotel becoming union [inaudible]. We are in discussions with the borrower and pursuing resolution alternatives, which we expect will involve the sale of the hotel over the coming quarters.

Regarding the 27 million Tempe hotel and retail loan and the 53 million Atlanta multifamily loan, which have been discussed in prior quarters, in each of these cases, we are in active dialogue with the borrower and are reviewing resolution alternatives we expect will involve the sale of each property over the next few quarters. Regarding the 93 million Minneapolis office loan, as previously disclosed, we anticipate a longer resolution timeline given the persistent local market challenges. Resolving these remaining five-rated loans remains a top priority. As of quarter-end, we had two loans with a combined UPB of 69 million which have risk ratings of four and are on nonaccrual status.

We are reviewing resolution alternatives for each of those loans and will provide additional information as the situations progress. Turning to the REO assets, we continue to have positive leasing successes at the suburban Boston property and remain actively engaged with our partner and the local jurisdiction and other third parties on several value-enhancing repositioning opportunities. We are continuing to invest capital into this property to maximize the outcome and are reviewing various alternatives. The Miami Beach office property is a Class A asset located in a strong submarket. We are having positive leasing discussions with a variety of existing and new tenants.

We will prudently invest in the property and continue to review alternatives, including a sale of the property during 2026. As we have shared in prior quarters, our plan is to remain focused on repayments and resolutions. We expect our portfolio balance will trend lower until we start our origination efforts in 2026 to take advantage of attractive investment opportunities and begin to regrow our portfolio. I will now turn the call over to Blake to discuss our financial results.

Blake Johnson: Thank you, Steve. Good morning, everyone, and thank you for joining us today. Turning to our financial results, for the first quarter, we reported a GAAP net loss attributable to common stockholders of 6 million, or -$0.13 per basic common share, which includes a benefit from credit losses of 200 thousand, and a distributable loss of 3 million, or -$0.06 per basic common share. Our book value at March 31 was $7.05, a decline of $0.24 from Q4. Our aggregate CECL reserve at March 31 was about 149 million, which is approximately 100 thousand higher than last quarter.

The net increase in our specific reserve on our seven collateral-dependent loans was largely offset by a decrease in our general reserve, resulting from improving macroeconomic forecasts in our CECL model and a decrease in the general reserve portfolio balance. Approximately 81% of our total allowance was allocated to individually assessed loans. As of quarter-end, we had about 334 million of principal balance on loans with specific CECL reserves of about 120 million, representing 36% of the unpaid principal balance. Subsequent to quarter-end, the resolution of the Chicago retail loan decreased our specific CECL reserves by approximately 30 million to 90 million and the principal balance for collateral-dependent loans by 76 million to 258 million.

The Chicago retail loan had a previously recorded 31.3 million specific reserve as of December 31, and the resolution was above our year-end carrying value, which resulted in a benefit from credit losses of approximately 1.1 million during the first quarter. As a result of this resolution, our CECL reserve as a percentage of our total commitments decreased from 9.4% at March 31 to 7.9%, assuming all else being equal. We believe we are properly reserved, and further resolutions should meaningfully reduce our total CECL reserve balance.

Turning to liquidity and capitalization, we ended the quarter with about 44 million of unrestricted cash, and our total leverage decreased relative to the prior quarter from 2.0 times to 1.7 times, as proceeds from the two full loan repayments and one loan sale were used to reduce our higher-cost borrowings and pay down our CLO bonds. As of a few days ago, we carried about 56 million in cash. Our funding mix remains well diversified and stable, and we continue to have very constructive relationships with our financing counterparties. We expect to expand our financing capacity once we return to originating new loans. As we look forward, we expect our earnings to meaningfully improve.

For example, our capital in our collateral-dependent loans and REO produced a GAAP net loss, excluding credit losses, of roughly $0.11 per common share during the first quarter, and once we redeploy our capital from these assets into new originations at target leverage, we expect to increase our quarterly EPS by approximately $0.17 to $0.19. In addition, improving our returns is not constrained by our existing capital, as we intend to further improve earnings through continued expense reduction initiatives and expand into new sources of capital-light income such as earning fees from joint venture structures with third-party investors.

Given the attractive market opportunity ahead and our earnings potential, we believe the best use of our capital is to continue paying down our higher-cost debt, resolve our remaining nonaccrual loans and REO, and regrow our investment portfolio through new originations beginning later this year. I will now ask the operator to open the line for questions.

Operator: Thank you. We will now open the call for questions. Our first question is from Jade Rahmani with KBW.

Analyst: Hi, this is Jason Shapshaw on for Jade. Thanks for taking the question. It would be helpful to hear more about the loans that were downgraded to risk four. Just some more color on what drove the negative migration in your view.

Steve Alpart: Hey, Jason. Good morning. It is Steve Alpart. Thanks for joining the call this morning. You are asking about the four-rated loans, I believe, in aggregate, if I heard the question correctly?

Analyst: It looked like there were a couple of loans that were downgraded to risk four. Is that correct?

Steve Alpart: That is correct. High level, we had seven nonaccrual loans at the end of the quarter. After we resolved the Chicago retail loan, that left six. After that loan was resolved, that left five rated-five loans, and there are two additional nonaccrual loans. With respect to the fours that are part of that cohort, high level, what I would say is that we are generally seeing improving markets, but it is uneven, and some of the markets are seeing a delayed recovery. These properties are behind under business plans, and that is why they have been downgraded to a four.

For each of these loans, we are in discussions with the borrowers, and we expect to have more color over the coming quarters.

Analyst: Great, thanks. And just on your multifamily book, do you have an expectation of getting higher repayments near term? Rent growth has been pretty muted overall for the sector, so it would be great to hear some color on overall performance for that part of your book.

Steve Alpart: Sure. It is Steve again. I will take that. Yes, we are seeing a pretty steady rate of multifamily loan repayments. We had one large multifamily loan payoff this quarter, so it has been a pretty steady pace. We like the multifamily sector. We are seeing generally stable fundamentals in most of the markets that we are in. It has been well reported that the new supply picture looks much better as we get out into the future. The trend line in certain markets, particularly in the Sun Belt, has been a little more sluggish than I think a lot of people were expecting. We are seeing the supply picture get better, but there are some ongoing headwinds.

The supply is different in every market. Declining immigration has been a factor. Generally, we are seeing improving fundamentals, but it is really asset by asset. We are seeing some borrowers in some markets have more pricing power on rents. Even in cases where borrowers are not getting rent bumps all the way to what they were expecting, the general trend is that we are seeing progress. We have seen a few assets fall behind on business plans, but that has not been the general trend, and where that does happen, we are expecting that, over time, borrowers will be able to push rents.

Going back to your question, there is good liquidity in the sector, sentiment is positive, we are seeing payoffs, and we are pushing hard for these older loans to pay off as well.

Analyst: Got it, thanks. Did you see any of the rate and geopolitical volatility have any impact on overall activity that may have impacted your book in the first quarter and so far in the second quarter? Have you seen that have any impact just overall?

Jack Taylor: Yes. Thank you for the question. I think the overall impact is just a higher degree of uncertainty in the market generally, and that has led to a delay in payments and in resolutions. Not a cessation, but deals are all taking longer because of a higher degree of macro uncertainty, and especially with respect to rates.

Analyst: Got it. That makes sense. And then just as my last question, it would be great to hear your current thoughts about the dividend. Given that DE has been below it, I understand that working through risk-five and some of the REO assets will be the main driver of earnings growth, but I wanted to hear your thoughts on the dividend.

Jack Taylor: Sure. It is a good question. We are always examining the overall market and what is happening in our loan book and our earnings and the like. Basically, we take a considered approach working with our Board. That is a Board decision and is made thinking about the long-term potential for the company. I would say with the burn-off of the nonaccrual loans, which has had a meaningful drag on our earnings, we expect that to be reduced as we work through them, and we will continue to evaluate the company dividend with respect to future quarters, and we are aware that we are under-earning, but we are looking at the longer-term prospects.

Analyst: Great. Thanks for taking the questions.

Operator: Thank you. Our next question is from Christopher Muller with Citizens Capital Markets.

Analyst: Hey, guys. Thanks for taking the questions. I guess on the subsequent resolution, and sorry if I missed this in your prepared remarks, but did that property move to REO or was it repaid? And then will the entire 30 million write-off come out of the specific reserve balance, so that balance is around 90 million, which I think I heard?

Blake Johnson: Hi, good morning, Chris. This is Blake. Thanks for your question. Yes, so this property was not moved to OREO. This was held as a loan as of quarter-end, and as of March 31, the balance of the loan was 76 million.

Jack Taylor: So when this resolved during early April, we did have that resulting write-off of around 30 million.

Analyst: Got it. And then just looking at the specific reserve balances quarter over quarter, it looks like it increased about 15 million. Was that due to just the New Haven hotel, or was that also the new four-rated loans that came up?

Blake Johnson: Yes. It is kind of interesting. I think it is best if you look at the entire reserve. It increased in total around 100 thousand. If you look at the primary drivers, we did have incremental losses on a certain number of collateral-dependent loans, and that was around 15 million in total. But it also included the shift of three of the loans from our general reserve in the previous quarter, which already had a substantial reserve as of December 31. So part of that shift included the balance that was previously in the general reserve.

Analyst: Got it. And then just the last one if I could squeeze it in. I hear your comments on looking at JVs and some other different ways to look at the business. Is there anything that you guys are looking at today that you could share? Just what type of JVs would you be interested in?

Blake Johnson: I can start first—do you want to take it, Jack? Okay. Thank you. So the point in our prepared remarks was we can introduce capital-light income and JVs, and this would actually help offset some of our operating expenses from an economic standpoint. If we started this today, for example, we would expect to see something between 2 million to 4 million in annual earnings in the first year. If you look at that on an EPS basis, it is around [inaudible] per share, quarterly. It really would increase from there because once you have the book JV start, you would see some momentum.

As far as the actual structure itself, I can pass it to Jack, and he can provide some color.

Jack Taylor: Yes, thank you. I would just add a couple of things. We have folks that we have known for a long time and some that are new acquaintances who have approached us, and they have a lot of capital. They would like to come into the market, and they know and trust us. So they are thinking and discussing with us what we are calling the capital-light strategies, which can take a number of forms: just originating for them directly where it is all their capital; it can be where it is part our capital and theirs; it could be a formal JV structure.

The main point is that we have the infrastructure and the team to originate loans of the sorts—various forms actually—that these counterparties are interested in accessing without having to build their own team. We have been very pleased about the reverse inquiry. Some of them are on pause, in part because it would require us, as it is foreign capital, to carry quite sizable loans in cash for a period of time, so we are not yet able to transact on that type of structure. But others are still under consideration.

Analyst: Got it. Very helpful, Jack. And great to hear you guys thinking outside the box and some different avenues you could take. I appreciate you taking the questions today.

Jack Taylor: Great. Thank you.

Operator: Our next question is from Gabriel Poggi with Raymond James.

Analyst: Hey, guys, it is David on for Gabe. I wanted to ask a question around the vintage of some of your larger loans outstanding. How are conversations going with borrowers and their plans for repayment? Just wanted to get a feel for the playbook on some of these legacy office loans. Thanks.

Steve Alpart: Hey, it is Steve. I will take that question, and thank you for joining the call this morning. Great question. It is a big point of focus for us. We have made a lot of progress reducing the balance of some of these older vintages loans, including the office loans. We have a very proactive asset management approach. We are in constant dialogue with these borrowers, and we are setting clear expectations. We are now in an improved commercial real estate market environment.

As we continue to think about addressing these pending maturity dates, as you heard us say earlier, we have been less inclined to provide borrowers with additional time, and we are pushing very hard for borrower repayments, whether that is through property sales, refinancings, or recaps. We are also selectively looking at some loan sales. We are in discussions with borrowers, delivering clear expectations about getting a process underway, whether that is a refinancing or an equity recap if it is an asset they want to hold; if not, a property sale. There are a few cases where, for credits that we like, we may consider modifying and extending a loan to keep it in the portfolio.

And, again, case by case, if we see some upside potential, we may selectively take back properties through either a deed in lieu or possibly through a foreclosure. This applies not just to the office, but it is particularly true for the office loans that you mentioned. We are pushing hard to turn over the portfolio. We will continue to do that over the next couple of quarters, and we are looking to unlock capital so we can redeploy into higher-earning assets.

Analyst: Great. Thanks for taking my question.

Operator: Thank you. There are no further questions at this time. I would like to hand the floor back over to Jack Taylor for closing comments.

Jack Taylor: Thank you, Paul. And thank you again to all that joined us for this call, for your time and attention, and for your support. We look forward to reporting further progress and moving towards the regrowth of our company. Thank you.

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.

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