Granite Point Mortgage Trust Inc.

Good morning. My name is Chuck, and I'll be your conference facilitator today. At this time, I would like to welcome everyone to the Granite Point Mortgage Trust second quarter 2022 financial results conference call. All participants will be in a listen-only mode. After the speaker's remarks, there will be a question and answer period. Please note, today's call is being recorded. I would now like to turn the call over to Ms. Chris Pata with Investor Relations for Granite Point. Please go ahead, sir.

Thank you, and good morning, everyone. Thank you for joining our call to discuss Granite Point's second quarter 2022 financial results. With me on the call this morning are Jack Taylor, our president and chief executive officer, Marcin Urbacic, our chief financial officer, Steve Alport, our chief investment officer and co-head of originations, Peter Burrell, our chief development officer and co-head of originations, and Steve Ploss, our chief operating officer. And for introductory comments, Jack will review our current business activities and provide a brief recap of market conditions. Steve Alport will discuss our portfolio, Marcy will highlight key items from our financial results. Press release and financial tables associated with today's call were filed yesterday with the SEC and are available in the investor relations section of our website along with our form 10-Q. I would like to remind you that remarks made by management during this call and the supporting slides may include forward-looking statements, which 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. We see our filings with the SEC for discussion of some of the risks that could affect results. We do not undertake any obligation to update any forward-looking statements. We will also refer to certain 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. Reconciliation of these non-GAAP financial measures to most comparable gap measures can be found in our earnings release and slides, which are available on our website. I will now turn the call over to Jack.

Thank you, Chris, and good morning, everyone. We would like to welcome you all to our second quarter 2022 earnings call. Over the first half of 2022, we made significant progress on several aspects of our business. We refinanced two inefficient legacy funding vehicles, and repaid high-cost term loan borrowings, resulting in improved run rate earnings and greater balance sheet flexibility. We've also been deploying capital into attractive investment opportunities, mainly in the multifamily and industrial sectors. Through the first two quarters of 2022, our loan fundings of over $380 million exceeded the $290 million of repayments, resulting in modest growth in portfolio balance. In general, our portfolio has been performing well, despite the challenging market conditions. We've seen over prior economic cycles that U.S. commercial real estate is viewed favorably by institutional investors globally during periods of volatility and uncertainty. We're in one of those periods today, with elevated macroeconomic uncertainty and capital markets volatility, mainly driven by the rapid increase in interest rates over the last few months. which have reduced real estate transaction volume and impacted views on property values. Given the uncertain markets and volatility, we have substantially reduced our loan origination activities in the third quarter, while focusing on further building our liquidity levels for any additional market deterioration or unforeseen credit developments in our own loan portfolio. We believe the markets may stabilize over the coming months as new data should provide additional clarity on the likely forward path of macroeconomic trends and the Fed's monetary policy over the coming quarters. Our lending activity over the rest of the year will largely depend on capital availability and the overall market environment as we intend to maintain our measured approach. Given the uncertain macroeconomic landscape and broader market trends, During the second quarter, we increased our reserve for credit losses and downgraded one of our office loans to a risk rating of five. We continue to actively work on resolutions of our two risk-rated five loans, which we believe should resolve before the end of the year. Though, given the overall market uncertainty, the exact timing remains hard to predict. Since quarter end, we funded about $54 million in loan balances and realized over $155 million of repayments. The repayments year to date total approximately $450 million and have been spread across various property types, including over $185 million of office loans. Due to our measured approach to capital deployment and repayment expectations, we anticipate that the balance of our portfolio may modestly decline over the remainder of the year. though it is difficult to be precise in our projections given current market conditions. Our accomplishments over the first half of the year have benefited our business, improved our run rate profitability, and provided additional balance sheet flexibility. Repayment of the high-cost term loan borrowings in the second quarter helped to meaningfully offset the earnings impact of rising short-term rates. The current level of benchmark short-term interest rates is above all of the benchmark rate floors in our loans, and our portfolio is now positively correlated to additional increases in short-term interest rates going forward. We remain focused on prudently managing both sides of our balance sheet, improving our run rate earnings, and driving shareholder value by closing the gap between our current stock price and our book value. Consistent with this approach, given our liquidity position, low leverage, and the discounted valuation of our stock, During the second quarter, we creatively repurchased in the open market over 1.5 million common shares, totaling over $15 million, which benefited our second quarter book value by about 17 cents per share and helped meaningfully offset the charge related to the repayment of the term loan borrowings. We will remain opportunistic in further rationalizing our funding and capitalization to better position us for future growth as markets regain more stability over time. Despite unprecedented interest rate and overall market volatility, our business has delivered solid operating performance led by our well-diversified and resilient portfolio of senior loans generating good run rate earnings supporting an attractive dividend. Our seasoned team has successfully navigated multiple economic, credit, and interest rate cycles over their long careers, including periods of macroeconomic uncertainty and volatility. Our conservative approach to credit underwriting Risk management and protecting our investors' capital has been a key tenet of our strategy, and we believe it will deliver attractive risk-adjusted total returns to our stockholders over time. I would now like to turn the call over to Steve Halpert to discuss our portfolio activities in more detail.