Granite Point Mortgage Trust Inc.

Good morning. My name is Sarah, and I will be your conference facilitator. At this time, I would like to welcome everyone to Granite Point Mortgage Trust Second Quarter 2020 Financial Results Conference Call. All participants will be in listen-only mode. After the speaker's remarks, there will be a question and answer period. Please note this event is being recorded. I would now like to turn the call over to Chris Pettis, with investor relations for Granite Point. Please go ahead.

Thank you. And good morning, everyone. Thank you for joining our call to discuss Granite Point's second quarter 2020 financial results. With me on the call this morning are Jack Taylor, our president and CEO, Marcin Urbacic, our CFO, Steve Alpert, our CIO, and Steve Klotz, our COO. After my introductory comments, Jack will review our current business activities and provide a brief recap of market conditions. Steve Alpart will discuss our portfolio, and Marcin will highlight key items from our financial results. The press release and financial tables associated with today's call, as well as our Form 10-Q, 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 may be 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, including our most recent 10-K and 10-Q reports, 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 will now turn the call over to Jack.

Thank you, Chris, and good morning, everyone. We would like to welcome you all and thank you for joining our second quarter 2020 earnings call. These past months have presented historic challenges to our country, our industry, and our company. They do not change, but rather reinforce our core beliefs and approach. We emphasize preserving and ultimately expanding the value of our business for the benefit of our stockholders over the long term by actively managing both sides of our balance sheet. Through our extensive experience managing through multiple cycles, we understand that, at its core, this is a relationship business and that it is critical to maintain strong, productive ties to our borrowers and lenders. This approach best preserves and enhances our assets and stabilizes our liabilities. Maintaining liquidity to support our operational needs and goals is also our primary focus, which has led us to explore potential new funding sources to better position the company for this uncertain environment and to take advantage of what we believe will be attractive investment opportunities in the future. Upon the onset of the COVID-19 pandemic, we swiftly turned our attention to asset and liquidity management through a number of initiatives focused on preserving the value of our investments and the franchise value we have built. And I am happy to report that we have made significant progress in the second quarter and have continued our efforts since then. Our portfolio continues to perform very well through this period of uncertainty. At quarter end, we had no impairments or non-accruals, and our collections of debt service have been strong as over 99% of our borrowers have made their payments in accordance with the terms of their loans. Along with this strong payment performance, we have worked with a number of our borrowers to provide them with short-term relief from the impact of the pandemic on their properties. In the majority of those cases, that has meant a partial interest deferral in exchange for some form of further borrower capital commitment to their properties. Regarding our liabilities, and as we mentioned on our last call, we have been focused on creating additional balance sheet stability. We proactively reduce borrowings on our repurchase financing facilities by using about $100 million dollars of cash and uncovered collateral and entered into margin call holidays for a period of time with three lenders representing a combined total of $1.4 billion of outstanding balance. We maintained an active and constructive dialogue with all of our financing providers, are in compliance with all covenants, and don't have any outstanding margin demands. However, considering the market uncertainty caused by the pandemic, we continue to focus on improving our liquidity and further stabilizing our financing facilities. As an early first step to generate liquidity, we opportunistically divested a $20 million uncovered hotel loan that was previously risk-rated IV. Additionally, and as we discussed last quarter, we began a process with Evercore, our financial advisor, to explore various longer-term financing alternatives to better position the company for the current environment and for future opportunities. Our process has generated very strong interest from multiple sophisticated institutions who recognize the value of our business as well as our assets. Based on the progress we have achieved, we are optimistic that we will be in a position to further substantially strengthen our balance sheet by raising capital from a high-quality institutional partner. Since quarter end, we have also taken additional steps to improve our liquidity and balance sheet flexibilities. As we disclosed in our 8K filing in early July, we amended our financing facility with one of our largest lenders and increased our borrowing capacity for a period of time, which generated over $54 million of cash. Our ability to grow our partnership during this volatile period with one of our key financing counterparties speaks to the quality of our assets and the strength of our lender relationships. In addition, and to further strengthen our liquidity position, After quarter end, we completed a sale of six loans at attractive prices, with a principal balance of $191 million and total commitments of over $206 million, which generated about $40 million of additional proceeds. As a result of these actions, as of last Friday, our cash balance was approximately $145 million, providing us with ample liquidity to manage our operations in the near term, as we continue to progress with our longer-term financing initiative. Despite the higher provision for loan losses and a realized loss on the loan we opportunistically sold as part of our earlier liquidity efforts, our operating results in the second quarter showed the overall strength of our portfolio as our net interest income expanded significantly over the prior quarter, aided by the LIBOR floors in our loan portfolio. Steve Alpert will discuss the portfolio next, but in summary, we did not originate any new loans in the second quarter as our focus was on maintaining our liquidity. We funded about $71 million of our existing future funding commitments, which continued to be financed by our lending partners. We did not receive any full loan repayments in the second quarter, though since quarter end we have realized some repayment activity providing us with additional liquidity. We would anticipate seeing more repayments over the rest of the year. but the exact timing and volume is very hard to predict based on the current state of the markets. Although the performance of the major capital markets in the second quarter suggests that a degree of stability is returning, with lowly regional COVID-19 eruptions and shutdowns that may continue, a fundamental economic recovery will probably require large-scale implementation of major medical solutions like more effective treatments and vaccines. We accordingly are positioning ourselves to take advantage of new opportunities and protect our portfolio during further economic and market uncertainties. In summary, I am very pleased with and proud of the strong performance of our portfolio and our entire team in response to this market environment. We have accomplished a lot and made a lot of progress over the last few months to better position the company for the current environment and for future success and growth opportunities. We will continue to work on further enhancements with the overarching goal of protecting an increasing value for our stockholders over time. Now, before turning the call over to Steve Halpert, one final comment. On March 2nd, 2020, the company announced that it has agreed to a process with the manager to internalize the company's management function. In connection with this process, the company and the manager have ventured into a confidential binding arbitration to determine any amounts payable by the company to the manager, in consideration of the manager's agreement to terminate the management agreement and the manager's undertaking of other obligations pursuant to an internalization agreement to be entered into between the company and the manager following the conclusion of the arbitration process. The arbitral hearing has been delayed based on the COVID-19 pandemic. and the company currently expects that the hearing will take place during the third or fourth quarter of 2020. Because of the confidential nature of the arbitration, we will not be taking any questions on it or the internalization process. I would now like to turn the call over to Steve Alpark to discuss our portfolio and recent activities in more detail.