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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes included elsewhere in this Annual Report on Form 10-K. In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those in this discussion as a result of various factors, including, but not limited to, those discussed in Part I - Item 1A Risk Factors, in this Annual Report on Form 10-K.

This section of this Annual Report on Form 10-K generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Our Company

Granite Point Mortgage Trust Inc. is an internally managed real estate finance company that focuses primarily on directly originating, investing in and managing senior floating-rate commercial mortgage loans and other debt and debt-like commercial real estate investments. Our investment objective is to preserve our stockholders’ capital while generating attractive risk-adjusted returns over the long term, primarily through dividends derived from current income produced by our investment portfolio. We operate as a real estate investment trust, or REIT, as defined under the Internal Revenue Code of 1986, as amended, or the Code. We also operate our business in a manner that will permit us to maintain our exclusion from registration under the Investment Company Act of 1940, as amended, or the Investment Company Act. We operate our business as one segment.

Recent Developments

COVID-19 Pandemic

As the novel coronavirus, or COVID-19, pandemic has evolved from its emergence in early 2020, so has its global impact. Many countries have reinstituted, or strongly encouraged, varying levels of quarantines and restrictions on travel and in some cases have at times limited operations of certain businesses and taken other restrictive measures designed to help slow the spread of COVID-19 and its variants. Governments and businesses have also instituted vaccine mandates and testing requirements for employees. While vaccine availability and uptake have increased, the longer-term macroeconomic effects on global supply chains, inflation, labor shortages and wage increases, as well as any potential fiscal and monetary policy responses, may continue to impact many industries, including those related to the collateral underlying certain of our loans. Moreover, with the potential for new strains of COVID-19 to emerge, governments and businesses may re-impose aggressive measures to help slow its spread in the future. For this reason, among others, as the COVID-19 pandemic continues, the potential global impacts are uncertain and difficult to assess.

LIBOR Transition

On March 5, 2021, the Financial Conduct Authority of the U.K., or the FCA, which regulates LIBOR, announced that all LIBOR tenors relevant to us will cease to be published or will no longer be representative after June 30, 2023. The FCA announcement coincides with the March 5, 2021, announcement of LIBOR’s administrator, the ICE Benchmark Administration Limited, or the IBA, indicating that, as a result of not having access to input data necessary to calculate LIBOR tenors relevant to us on a representative basis after June 30, 2023, the IBA would have to cease publication of such LIBOR tenors immediately after the last publication on June 30, 2023. The United States Federal Reserve has also advised banks to cease entering into new contracts that use U.S. dollar LIBOR as a reference rate. The Federal Reserve, in conjunction with the Alternative Reference Rate Committee, or the ARRC, a committee convened by the Federal Reserve that includes major market participants, has identified the Secured Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities, as its preferred alternative rate for LIBOR. There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured lending rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities. If our LIBOR-based borrowings are converted to SOFR, the differences between LIBOR and SOFR, and potential margin adjustments in connection with the transition, could result in higher interest costs for us, which could have a material adverse effect on our operating results. Although SOFR is the ARRC’s recommended replacement rate, it is also possible that lenders may instead choose alternative replacement rates that may differ from LIBOR in ways similar to SOFR or in other ways that would result in higher interest costs for us. We cannot predict the effect of the decision not to sustain LIBOR, or the potential transition to SOFR or another alternative reference rate as LIBOR’s replacement.

As of December 31, 2021, 98.8% of our loans by carry value earned a floating rate of interest indexed to LIBOR, and 100.0% of our outstanding financing arrangements (excluding our convertible notes and senior secured financing facilities) bear

interest indexed to LIBOR. All of these arrangements provide procedures for determining an alternative base rate in the event that LIBOR is discontinued. Regardless, there can be no assurances as to what alternative base rates may be and whether such base rate will be more or less favorable than LIBOR and any other unforeseen impacts of the potential discontinuation of LIBOR. We are monitoring the developments with respect to the potential phasing out of LIBOR and are working with our lenders and borrowers to minimize the impact of any LIBOR transition on our financial condition and results of operations, but can provide no assurances regarding the impact of the discontinuation of LIBOR.

2021 Activity

Operating Results:

•GAAP net income attributable to common stockholders of $67.6 million, or $1.24 per basic share, reflecting a release of CECL reserves of $20.0 million, a loss on early extinguishment of debt of $(8.9) million, and other factors.

•Distributable Earnings of $54.3 million, or $0.99 per basic share, which excludes the $20.0 million release of the CECL reserve, $7.6 million expense related to the amortization of non-cash equity compensation, the $(8.9) million of loss on early extinguishment of debt and includes the $(9.7) million realized loss on a loan held-for-investment, as further described below.

•Book value per share of common stock of $16.70 inclusive of $(0.79) per share of total CECL reserve.

•Declared aggregate common stock dividends of $55.3 million, or $1.00 per share of common stock, and preferred dividends of $0.7 million, or $0.15069 per share of Series A Preferred Stock.

Investment Portfolio Activity:

•Originated 22 loans with total commitments of $764.1 million and total principal balance of $673.6 million.

•Funded $142.7 million of principal balance on prior loan commitments and $8.0 million of principal balance on upsizing of loans.

•Received loan repayments and principal amortization of $960.3 million.

•Maintained a portfolio of 105 loan investments with a weighted-average stabilized loan to value ratio, or LTV, at origination of 63.5%, and a weighted-average all-in yield at origination of L+4.07%.

•Collected 100% of contractual interest payments during 2021, inclusive of loan modifications and two loans on nonaccrual status. Deferred, and added to the principal, $10.2 million of interest income related to certain loans that have been modified.

Portfolio Financing Activity:

•Issued two collateralized loan obligations totaling $1.4 billion, financing 45 existing senior loan investments, further diversifying our funding mix and significantly increasing the proportion of matched-term, non-recourse and non-mark-to-market borrowings.

•Closed a $349.3 million matched-term, non-recourse and non-mark-to-market financing facility.

•Extended maturities of three of our bank financing facilities totaling approximately $850.0 million of borrowing capacity.

Corporate Financing Activity:

•Issued approximately 4.6 million of Series A Preferred Stock, generating gross proceeds of $114.9 million and further expanding our permanent equity capital base to over $1.0 billion.

•Repaid $75.0 million of borrowings under the senior secured term loan facilities.

•Repurchased through open market transactions 1,301,612 shares of common stock at a weighted average price of $13.65 per share for an aggregate cost of $17.8 million, resulting in accretion of book value per share.

•Settled in cash all of the outstanding warrants to purchase approximately 4.55 million shares of our common stock for a net cash amount of approximately $32.1 million. No warrants remain outstanding.

Available Liquidity

•At December 31, 2021, we had unrestricted cash available for investments of $191.9 million, a portion of which is subject to certain liquidity covenants.

Key Financial Measures and Indicators

As a commercial real estate finance company, we believe the key financial measures and indicators for our business are earnings per share presented on a U.S. generally accepted accounting principles, or GAAP, basis, dividends declared on common stock, Distributable Earnings and book value per share of common stock. For the year ended December 31, 2021, we recorded earnings per basic share of $1.24, declared total cash dividends of $1.00 per share of common stock and reported

Distributable Earnings of $0.99 per basic share. Our book value as of December 31, 2021, was $16.70 per share of common stock, inclusive of $(0.79) of total Current Expected Credit Loss, or CECL, reserve.

As further described below, Distributable Earnings is a measure that is not prepared in accordance with GAAP. We use Distributable Earnings to evaluate our performance, excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations. In addition, Distributable Earnings is a performance metric we consider, along with other measures, when declaring our common stock dividends.

Earnings Per Share and Dividends Declared Per Common Share

The following table sets forth the calculation of basic and diluted earnings per share and dividends declared per share:

Year Ended

December 31,

Net income (loss) attributable to common stockholders $ 67,560 $ (40,539)

Basic earnings per basic common share $ 1.24 $ (0.73)

Diluted earnings per basic common share $ 1.23 $ (0.73)

Dividend declared per common share $ 1.00 $ 0.65

Distributable Earnings

In order to maintain our status as a REIT, we are required to distribute at least 90% of our taxable income as dividends. Distributable Earnings is intended to over time serve as a general, though imperfect, proxy for our taxable income. As such, Distributable Earnings is considered a key indicator of our ability to generate sufficient income to pay our common dividends, which is the primary focus of income-oriented investors who comprise a meaningful segment of our stockholder base. We believe providing Distributable Earnings on a supplemental basis to our net income (loss) and cash flow from operating activities, as determined in accordance with GAAP, is helpful to stockholders in assessing the overall run-rate operating performance of our business.

We use Distributable Earnings to evaluate our performance, excluding the effects of certain transactions and GAAP adjustments we believe are not necessarily indicative of our current loan portfolio and operations. For reporting purposes, we define Distributable Earnings as net income (loss) attributable to our stockholders, computed in accordance with GAAP, excluding: (i) non-cash equity compensation expenses; (ii) depreciation and amortization; (iii) any unrealized gains (losses) or other similar non-cash items that are included in net income for the applicable reporting period (regardless of whether such items are included in other comprehensive income (loss) or in net income for such period); and (iv) certain non-cash items and one-time expenses. Distributable Earnings may also be adjusted from time to time for reporting purposes to exclude one-time events pursuant to changes in GAAP and certain other material non-cash income or expense items approved by a majority of our independent directors. The exclusion of depreciation and amortization from the calculation of Distributable Earnings only applies to debt investments related to real estate to the extent we foreclose upon the property or properties underlying such debt investments.

While Distributable Earnings excludes the impact of the unrealized non-cash current provision for credit losses, we expect to only recognize such potential credit losses in Distributable Earnings if and when such amounts are deemed non-recoverable. This is generally at the time a loan is repaid, or in the case of foreclosure, when the underlying asset is sold, but non-recoverability may also be concluded if, in our determination, it is nearly certain that all amounts due will not be collected. The realized loss amount reflected in Distributable Earnings will equal the difference between the cash received, or expected to be received, and the carrying value of the asset, and is reflective of our economic experience as it relates to the ultimate realization of the loan. During the year ended December 31, 2021, we recorded a $20.0 million benefit from provision for credit losses, which has been excluded from Distributable Earnings consistent with other unrealized gains (losses) and other non-cash items pursuant to our existing policy for reporting Distributable Earnings referenced above. Pursuant to our existing policy for reporting Distributable Earnings referenced above, during the year ended December 31, 2021, we recorded a $(9.7) million realized loss on a loan held-for investment, which we included in Distributable Earnings because we did not collect all amounts due at the time the loan was repaid. During the year ended December 31, 2021, we recorded a $(8.9) million loss on early extinguishment of debt, which has been excluded from Distributable Earnings consistent with certain one-time expenses pursuant to our existing policy for reporting Distributable Earnings as a helpful indicator in assessing the overall run-rate operating performance of our business.

Distributable Earnings does not represent net income (loss) or cash flow from operating activities and should not be considered as an alternative to GAAP net income (loss), or an indication of our GAAP cash flows from operations, a measure of our liquidity, or an indication of funds available for our cash needs. In addition, our methodology for calculating

Distributable Earnings may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures, and, accordingly, our reported Distributable Earnings may not be comparable to the Distributable Earnings reported by other companies.

The following table provides a reconciliation of GAAP net income (loss) attributable to common stockholders to Distributable Earnings (in thousands, except share and per share data):

Year Ended

December 31,

Reconciliation of GAAP net income to Distributable Earnings: (unaudited)

GAAP net income (loss) attributable to common stockholders $ 67,560 $ (40,539)

Adjustments for non-distributable earnings:

(Benefit from) provision for credit losses (20,027) 53,710

Write-off of loan held-for-investment (9,740) —

Loss on extinguishment of debt 8,919 —

Restructuring charges — 46,252

Distributable Earnings per basic share of common stock $ 0.99 $ 1.17

Book Value Per Common Share

The following table provides the calculation of our book value per share of common stock:

Year Ended

December 31,

Book value per share of common stock $ 16.70 $ 16.92

Book value per share as of December 31, 2021, includes the impact of an estimated allowance for credit losses of $(42.4) million, or $(0.79) per common share. See Note 2 – Basis of Presentation and Significant Accounting Policies to our Consolidated Financial Statements included in this Annual Report on Form 10-K for a detailed discussion of allowance for credit losses.

Portfolio Overview

Interest-earning assets include our 100% loan investment portfolio. At December 31, 2021, our portfolio was comprised of 105 loans, of which 103 were senior first mortgage loans totaling $4.2 billion of commitments with an unpaid principal balance of $3.8 billion, and two were subordinated loans totaling $15.1 million in commitments and unpaid principal balance. During the year ended December 31, 2021, we collected 100% of the contractual interest payments that were due under our loan agreements, after taking into consideration certain loans that have been modified mainly due to the impact of the COVID-19 pandemic and two loans on nonaccrual status. At December 31, 2021, the weighted average risk rating of our loan portfolio was 2.6, weighted by total unpaid principal balance, as compared to 2.7 at December 31, 2020.

For the year ended December 31, 2021, we originated 22 loans with a total loan commitment amount of $764.1 million, of which $673.6 million was funded at origination. Other loan fundings included $142.7 million of additional fundings made under existing loan commitments and $8.0 million of upsizing of loans with total commitments of $14.5 million. Proceeds from loan repayments totaled $960.3 million. We generated interest income of $198.3 million and incurred interest expense of $105.6 million, which resulted in net interest income of $92.7 million. See Note 3 - Loans Held-for-Investment, Net of Allowance for Credit Losses to our Consolidated Financial Statements included in this Annual Report on Form 10-K for details.

The following table details our loan activity by unpaid principal balance for the year ended December 31, 2021, and 2020:

Year Ended Year Ended

December 31, December 31,

Deferred interest capitalized $ 10,179 $ 8,700

Loan write-offs $ (9,740) $ —

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(1) Additional fundings made under existing loan commitments and upsizing of loans.

The following table details overall statistics for our investment portfolio as of December 31, 2021:

Portfolio Summary

Number of loans 105

Unpaid principal balance $ 3,796,825

Unfunded loan commitments $ 403,584

Weighted-average cash coupon L+3.48%

Weighted-average all-in yield L+4.07%

Stabilized LTV at origination 63.5 %

The following table provides detail of our portfolio as of December 31, 2021:

(dollars in millions)

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(1)“Senior” means a loan primarily secured by a first priority lien on commercial real property and related personal property and also includes, when applicable, any companion subordinate loans.

(2)Cash coupon does not include origination or exit fees. Weighted average cash coupon excludes fixed rate loans.

(3)Yield includes net origination fees and exit fees, but does not include future fundings, and is expressed as a monthly equivalent. Weighted average yield excludes fixed rate loans.

(4)Original term (years) is the initial maturity date at origination and does not include any extension options and has not been updated to reflect any subsequent extensions or modifications, if applicable.

(5)Initial loan-to-value ratio, or initial LTV, is calculated as the initial loan amount (plus any financing that is pari passu with or senior to such loan) divided by the as is appraised value (as determined in conformance with the Uniform Standards of Professional Appraisal Practice, or USPAP) as of the date of the loan was originated set forth in the original appraisal.

(6)Stabilized loan-to-value ratio, or stabilized LTV, is calculated as the fully funded loan amount (plus any financing that is pari passu with or senior to such loan), including all contractually provided for future fundings, divided by the as stabilized value (as determined in conformance with USPAP) set forth in the original appraisal. As stabilized value may be based on certain assumptions, such as future construction completion, projected re-tenanting, payment of tenant improvement or leasing commissions allowances or free or abated rent periods, or increased tenant occupancies.

Most of our loans are structured with an initial maturity term, typically three years, and one or more (typically two) one-year extension options, which can be exercised by the borrower subject to meeting various extension conditions in accordance with the terms of the loan agreement. As part of our overall asset management strategy, we have in the past entered into, and may in the future enter into, loan modifications with some of our borrowers. These amendments may include, among other things, modifying or waiving certain performance or extension conditions as part of the overall agreement.

The map and charts below illustrate the geographic distribution and types of properties securing our portfolio as of December 31, 2021:

Portfolio Management and Credit Quality

We actively manage each loan investment from closing and initial funding through final repayment, and assess the risk of credit deterioration by quarterly evaluating the performance of the underlying collateral properties. We also evaluate the macroeconomic environment, prevailing real estate fundamentals and local property market dynamics. Typically, our loan documents allow us, among other things, to receive regular property, borrower and guarantor financial statements; approve

annual budgets and major tenant leases; and enforce loan covenants and remedies. In addition, we work with Trimont Real Estate Advisors LLC, one of the leading commercial real estate loan servicers, who provides us with a fully-dedicated and experienced team to increase efficiency and leverage our internal resources in servicing and asset managing our loan investments. Our internal team retains authority on all asset management decisions.

We maintain strong relationships and an active asset management dialogue with our borrowers. We have leveraged those strong relationships to minimize the negative impacts of the COVID-19 pandemic on our portfolio, particularly in respect of the properties securing loans in our portfolio experiencing COVID-19-related business interruptions and pressure on operating cash flows. While we generally believe that the principal amount of our loans is typically sufficiently protected by the underlying collateral value, there is a risk that we will not realize the entire principal amount of certain of our loan investments.

In addition to ongoing asset management, we review our entire portfolio quarterly, assess the performance of each loan and assign it a risk rating on a scale between “1” and “5,” from least risk to greatest risk, respectively. See Note 3 - Loans Held-for-Investment, Net of Allowance for Credit Losses to our consolidated financial statements included in this Annual Report on Form 10-K for a discussion regarding our risk rating methodology we use for our portfolio.

The following table allocates the unpaid principal balance and the carrying value balances based on our internal risk ratings:

Other Portfolio Developments

During the year ended December 31, 2021, we recorded a decrease of $20.0 million in the allowance for credit losses, which resulted in the overall CECL reserve of $42.4 million at December 31, 2021. The decrease in the allowance for credit losses reflects repayments of legacy loans with relatively higher credit reserves, improved performance and credit profile of our portfolio, a write-off of a prior credit reserve related to a resolution of a collateral-dependent loan, a release of a credit reserve on unfunded commitments on a collateral-dependent asset, and moderately improved expectations of macroeconomic conditions.

During the year ended December 31, 2021, we entered into a loan modification related to a retail asset located in Pasadena, CA, which is classified as troubled debt restructuring under GAAP. This modification included, among other changes, a partial deferral of the loan’s contractual interest payments due to the collateral property’s cash flows and operating performance being adversely affected by the ongoing effects of the COVID-19 pandemic. This loan had also been previously modified. At December 31, 2021, this first mortgage loan had an outstanding principal balance of $114.1 million, and during the year ended December 31, 2021, was assigned a risk rating of “5”. We determined that the recovery of the loan’s principal is collateral-dependent. Accordingly, this loan was assessed individually and we elected to apply a practical expedient in accordance with “Financial Instruments – Credit Losses - Measurement of Credit Losses on Financial Instruments (Topic 326),” or ASU 2016-13. At December 31, 2021, we recorded an allowance for credit loss of $14.1 million on this loan based on our estimate of fair value of the loan’s underlying collateral using the discounted cash flow method of valuation less the estimated cost to foreclose and sell the property. The estimation of the fair value of the collateral property also involved using various Level 3 inputs, which were in part developed based on discussions with various market participants and management’s best estimates as of the valuation date and required significant judgment. Additionally, during the year ended December 31, 2021, we placed this loan on nonaccrual status and reversed $0.3 million of interest income. This loan’s maturity date has passed without the loan being paid off. We are evaluating, and at any given time may be pursuing, a variety of potential options with respect to the resolution of this loan, which, among others, may include a foreclosure, negotiated deed-in-lieu of foreclosure, a sale of the underlying collateral property or a sale of the loan.

During the year ended December 31, 2021, a first mortgage loan with a principal balance of $54.0 million collateralized by an office property located in Washington, D.C., was downgraded to a risk rating of “5” as a result of the collateral property’s operating performance being adversely affected by the ongoing office leasing market challenges related to the COVID-19 pandemic. During the year ended December 31, 2021, we entered into a loan modification related to this asset, which included, among other changes, a reallocation of certain reserves. This loan had also been modified previously. We determined that the

recovery of the loan’s principal is collateral-dependent. Accordingly, this loan was assessed individually and we elected to apply a practical expedient in accordance with ASU 2016-13. At December 31, 2021, we recorded an allowance for credit loss of $8.0 million on this loan based on our estimate of fair value of the loan’s underlying collateral using the discounted cash flow method of valuation less the estimated cost to foreclose and sell the property. The estimation of the fair value of the collateral property also involved using various Level 3 inputs, which were in part developed based on discussions with various market participants and management’s best estimates as of the valuation date, and required significant judgment. Additionally, during the year ended December 31, 2021, we placed this loan on nonaccrual status and reversed $0.8 million of interest income. This loan’s maturity date of October 9, 2021, has passed without the loan being paid off. We are evaluating, and at any given time may be pursuing, a variety of potential options with respect to the resolution of this loan, which, among others, may include a foreclosure, a negotiated deed-in-lieu of foreclosure, a sale of the underlying collateral property or a sale of the loan.

During the year ended December 31, 2021, we resolved the nonaccrual status of a senior loan secured by a mixed-use office and retail property in New York City with an outstanding unpaid principal balance of $22.0 million. We received all interest that was previously due in the amount of approximately $1.6 million and had the borrower establish and fund additional reserves for debt service and operating expenses. Given these facts and our expectations for the loan performing in accordance with the terms of the loan agreement, the loan was reinstated to accrual status.

During the year ended December 31, 2021, we resolved a senior loan that had an outstanding unpaid principal balance of $68.1 million and had been nonaccrual status. The resolution involved a coordinated sale of the collateral property, a Minneapolis, MN hotel, and our providing the new ownership group with a new $45.3 million senior floating rate loan supported by capital invested in the property by the new sponsor. As a result of these transactions, we realized a write-off of approximately $(9.7) million.

Portfolio Financing

As of December 31, 2021, our portfolio financing consisted of repurchase facilities collateralized by loans held-for-investment, securitized debt obligations collateralized by pools of loans held-for-investment issued in CRE CLOs, an asset-specific financing facility collateralized by loans held-for-investment and a term financing facility collateralized by loans held-for-investment. Our non-mark-to-market financing sources accounted for approximately 73.2% of portfolio loan-level financing as of December 31, 2021.

The following table details our portfolio loan-level financing as of December 31, 2021, and December 31, 2020:

Term financing facility 127,145 —

The following table summarizes assets at carrying values that served as collateral for the future payment obligations of the repurchase facilities, the asset-specific financing facility, the term financing facility and the CRE CLOs as of December 31, 2021, and December 31, 2020:

Secured Repurchase Agreements

As of December 31, 2021, we had repurchase facilities in place with five counterparties (lenders) with aggregate outstanding borrowings of $0.7 billion, which financed a portion of our loans held-for-investment. As of December 31, 2021, the weighted average borrowing rate on our repurchase facilities was 2.2%, the weighted average advance rate was 62.8%, and the term to maturity ranged from 179 days to approximately 1.5 years, with a weighted average remaining maturity of 0.8 years.

The table below details our secured repurchase facilities as of December 31, 2021:

Repurchase facilities:

(1)The facilities are set to mature on the stated maturity date, unless extended pursuant to their terms.

(2)As of December 31, 2021, we retained an option to increase the maximum facility capacity amount up to $600 million, subject to customary terms and conditions.

(3)As of December 31, 2021, we retained an option to increase the maximum facility capacity amount up to $350 million, subject to customary terms and conditions.

(4)As of December 31, 2021, we retained an option to increase the maximum facility capacity amount up to $200 million, subject to customary terms and conditions.

Under our repurchase facilities, our counterparties may make margin calls because of a perceived decline in the value of our assets collateralizing the given secured financing arrangement due to a credit event or, under a limited number of our repurchase facilities, due to market events. To cover a margin call, we may transfer cash to such counterparty. At maturity, any cash on deposit as collateral is generally applied against the repurchase facility balance, thereby reducing the amount borrowed. Should the value of our assets suddenly decrease, significant margin calls on our repurchase facilities could result, causing an adverse change in our liquidity position.

Commercial Real Estate Collateralized Loan Obligations

We have financed certain pools of our loans through CRE CLOs. At December 31, 2021, we had four CRE CLOs outstanding, GPMT 2021-FL4, GPMT 2021-FL3, GPMT 2019-FL2 and GPMT 2018-FL1, totaling $1.7 billion of outstanding borrowings, financing 72 of our existing first mortgage loan investments with an aggregate principal balance of $2.3 billion. The CRE CLOs provide us with an attractive cost of funds and finance 59.7% of our total loan portfolio principal balance on a term-matched, non-recourse and non-mark-to-market basis.

The following table details our CRE CLO securitized debt obligations:

(in thousands) December 31,2021

Total

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(1)Calculations of all in yield on collateral assets at origination are based on a number of assumptions (some or all of which may not occur) and are expressed as monthly equivalent yields that include net origination fees and exit fees and exclude future fundings and any potential or completed loan amendments or modifications. Calculations of all in weighted average yield at origination exclude fixed rate loans. Calculations of cost of funds is the weighted average coupon of the CRE CLO, exclusive of any CRE CLO issuance costs.

(2)Includes $10.4 million of restricted cash.

Term Financing Facility

In February 2021, we entered into a term financing facility with Goldman Sachs Bank USA providing us with term-matched and non-mark-to-market financing to fund certain loans that were previously financed under the repurchase facility with Goldman Sachs Bank USA. The term financing facility is non-amortizing and may be voluntarily repaid, in whole, on any payment date, subject to a prepayment premium with certain exceptions if repaid prior to February 10, 2022. The term financing facility’s term is matched to that of the underlying commercial mortgage loans, not to exceed February 9, 2025. As of December 31, 2021, we had $129.1 million outstanding on the term financing facility with a weighted average borrowing rate of 3.70%.

The following table details the outstanding borrowings under our term financing facility as of December 31, 2021:

(in thousands) December 31,2021

GS Term Financing Facility

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(1) Calculations of all in yield on collateral assets at origination are based on a number of assumptions (some or all of which may not occur) and are expressed as monthly equivalent yields that include net origination fees and exit fees and exclude future fundings and any potential or completed loan amendments or modifications. Calculations of all in weighted average yield at origination exclude fixed rate loans. Calculations of cost of funds is the initial weighted average coupon of the term financing facility, exclusive of any term financing facility issuance costs.

Asset-Specific Financing

In April 2019, we entered into a $150 million loan financing facility with CIBC Bank USA to provide us with loan-based financing on a non-mark-to-market basis with a term matched to the underlying loan collateral and partial recourse to us.

The following table details the outstanding borrowings under our asset-specific financing facility as of December 31, 2021:

(in thousands) December 31,2021

CIBC Asset-Specific Financing Facility

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(1)Calculations of all in yield on collateral assets at origination are based on a number of assumptions (some or all of which may not occur) and are expressed as monthly equivalent yields that include net origination fees and exit fees and exclude future fundings and any potential or completed loan amendments or modifications. Calculations of all in weighted average yield at origination exclude fixed rate loans. Calculations of cost of funds is the initial weighted average coupon of the asset-specific financing facility, exclusive of any asset-specific financing facility issuance costs.

Corporate Financing

The following table details our outstanding corporate financing as of December 31, 2021:

(in thousands) December 31,2021

Corporate Financing Principal Balance

Senior secured term loan facilities $ 150,000

Convertible senior notes 275,350

Total Corporate Financing 425,350

Senior Secured Term Loan Facilities

As of December 31, 2021, the total outstanding amount due on the senior secured term loan facilities was $150.0 million, with a carrying value of $139.9 million, net of deferred issuance costs. The balance reflects a $75 million principal repayment made on December 9, 2021, which resulted in the $(8.9) million loss on early extinguishment of debt. Interest on the outstanding loans under the senior secured term loan facilities is payable quarterly in arrears and accrues at the rate of (i) 8.00% per annum for any period for which accrued interest is paid in cash or (ii) 9.00% per annum for any period for which the borrowers elect to pay up to 50% of accrued interest in kind by adding such interest to the principal amount of the loans. The senior secured term loan facilities will mature on September 25, 2025. The balance does not reflect the $50 million principal repayment made on February 16, 2022, which resulted in a $(5.8) million loss on early extinguishment of debt.

(in thousands) December 31,2021

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(1)In addition to cash coupon, average yield includes the amortization of deferred financing costs and initial estimated fair value assigned to warrants.

Convertible Senior Notes

As of December 31, 2021, the total outstanding amount due on convertible senior notes was $275.4 million. The notes are unsecured and pay interest semiannually at a rate of 5.625% per annum on the notes maturing in December 2022 and a rate of 6.375% per annum on the notes maturing in October 2023. As of December 31, 2021, these notes had a conversion rate of 51.9943 and 50.0894shares of common stock per $1,000 principal amount of the notes, respectively.

As of December 31, 2021, the following convertible senior notes were outstanding:

(in thousands) December 31,2021

____________________

(1)In addition to cash coupon, average yield includes the amortization of deferred financing costs.

The following table provides the quarterly average balances, the quarter-end balances and the maximum balances at any month-end within that quarterly period, of borrowings under our repurchase facilities, asset-specific financing facility, term financing facility, CRE CLOs, senior secured term loan facilities and convertible senior notes for the three months ended December 31, 2021, and the four immediately preceding quarters:

Financial Covenants

Our financial covenants and guarantees for outstanding borrowings related to our repurchase agreements, term financing facility, asset specific financing and senior secured term loan facilities generally require the Company to maintain compliance with the following most restrictive covenants across the agreements:

Financial Covenant Description Value as of December 31, 2021

We were in compliance with all financial covenants as of December 31, 2021.

Leverage Ratios

As of December 31, 2021, the total debt-to-equity ratio with respect to our loans held-for-investment was 2.7:1.0, and our recourse leverage ratio was 0.9:1.0.

The following table represents the Company’s recourse leverage ratio and total leverage ratio as of December 31, 2021, and December 31, 2020:

Recourse leverage ratio (1) 0.9 2.2

Total leverage ratio (2) 2.7 3.2

(1) The debt-to-equity ratio with respect to our loans held-for-investment, defined as recourse debt, net of cash, divided by total equity.

(2) The total debt-to-equity ratio with respect to our loans held-for-investment, defined as total debt, net of cash, divided by total equity.

Floating Rate Portfolio

Our business strategy seeks to minimize our exposure to changes in interest rates by matching benchmark indices on our assets with those on our asset level borrowings. Accordingly, our business model is such that, in general, rising interest rates will increase our net interest income, while declining interest rates will decrease our net interest income, subject to the impact of interest rate floors on our floating rate assets and certain liabilities. As of December 31, 2021, 98.8% of our loan investments by carrying value earned a floating rate of interest and were financed with liabilities that pay interest on a floating rate basis, which resulted in an amount of net equity that is positively correlated to rising interest rates, subject to the impact of interest rate floors on certain of our floating rate loan investments. As of December 31, 2021, the remaining 1.2% of our investments that earned a fixed rate of interest were financed with liabilities that pay interest on a floating rate basis, which resulted in a negative correlation to rising interest rates on that amount of our financing.

The following table details our loan portfolio’s net floating rate exposure as of December 31, 2021:

(in thousands) Net Exposure

Net floating rate exposure $ 1,213,542

(1) Floating rate assets and liabilities are indexed to the London Interbank Offered Rate, or LIBOR.

(2) Floating rate liabilities include our outstanding repurchase facilities, term financing facility, asset-specific financing facility and CRE CLOs.

Interest-Earning Assets and Interest-Bearing Liabilities

The following tables present the components of interest income and average annualized net asset yield earned by asset type, the components of interest expense and average annualized cost of funds on borrowings incurred by collateral type and net interest income and average annualized net interest rate spread for the year ended December 31, 2021, and 2020:

Interest-earning assets (2)

Loans held-for-investment

Interest-bearing liabilities

Borrowings collateralized by:

Loans held-for-investment

Other:

Net interest income/spread $ 92,708 1.8 %

Interest-earning assets (2)

Loans held-for-investment

Interest-bearing liabilities

Borrowings collateralized by:

Loans held-for-investment

Other:

Net interest income/spread $ 124,778 2.3 %

____________________

(1)Includes amortization of deferred debt issuance costs.

(2)Average balance represents average amortized cost on loans held-for-investment, available-for-sale, or AFS, securities and held-to-maturity securities.

(3)Loans primarily secured by a first priority lien on commercial real property and related personal property and also includes, when applicable, any companion subordinate loans.

Factors Affecting Our Operating Results

The results of our operations are affected by a number of factors and primarily depend on, among other things, the level of our net interest income, the availability and cost of financing for us, the market value of our assets, the credit performance of our assets and the supply of, and demand for, commercial real estate loans, other commercial real estate debt instruments and other financial assets available for investment in the market and available as a source of refinancing of our assets. Our net interest income, which reflects the amortization of origination fees and direct costs, is recognized based on the contractual rate and the outstanding principal balance of the loans we originate. The objective of the interest method is to arrive at periodic interest income that yields a level rate of return over the loan term. Interest rates vary according to the type of loan or security, conditions in the financial markets, credit worthiness of our borrowers, competition and other factors, none of which can be predicted with any certainty. Our operating results may also be impacted by credit losses in excess of initial anticipations or unanticipated credit events experienced by our borrowers. We continue to monitor the effects on each of these factors in light of the COVID-19 pandemic and how they will affect the results of our operations.

Loan Originations

Our business model is mainly focused on directly originating, investing in and managing senior floating-rate commercial mortgage loans and other debt and debt-like commercial real estate investments. As a result of this strategy, our operating performance is subject to overall market demand for commercial real estate loan products and other debt and debt-like commercial real estate investments. We manage originations and acquisitions of our target investments by diversifying our investment portfolio across geographical regions, local markets, property types, borrower types and loan structures. We do not limit our investments to any number of geographical areas or property types for our originations so that we develop a well-diversified investment portfolio. Additionally, our team has extensive experience originating and acquiring commercial real estate loans and other debt and debt-like commercial real estate investments, through a network of long-standing relationships with borrowers, sponsors and industry brokers. The COVID-19 pandemic has resulted in significant disruptions in financial markets, uncertainty about the overall macroeconomic outlook and a dislocation in the commercial real estate sector, including reduced borrower demand, higher lending rates, increased capitalization rates on properties and significantly lower transaction volume. The dislocation in capital markets and decline in real estate sale transaction and refinancing activities caused by the pandemic have negatively impacted, and will likely continue to negatively impact, the volume of loan repayments and prepayments on select property types, which are a significant source of our overall liquidity and could make it more difficult for us to originate new loan investments.

Financing Availability

We are subject to availability and cost of financing to successfully execute on our business strategy and generate attractive risk-adjusted returns to our stockholders. Much of our financing is in the form of repurchase agreements or other types of credit facilities provided to us by our lender counterparties. We mitigate this counterparty risk by seeking to diversify our lending partners, focusing on establishing borrowing relationships with strong counterparties and continuously monitoring them through a thoughtful approach to counterparty risk oversight. Additionally, as part of our broader risk management strategy, and to the extent available in the market, we finance our business through other means which may include, but not be limited to, securitizations, note sales and issuance of unsecured debt and equity instruments. We continue to actively explore additional types of funding facilities in order to further diversify our financing sources. The COVID-19 pandemic has resulted in significant disruptions in financial markets and uncertainty about the overall macroeconomic outlook. Declines in economic conditions could negatively impact real estate and real estate capital markets, which could make it more difficult for us to obtain or maintain financing.

We finance pools of our commercial real estate loans through collateralized loan obligations, or CRE CLOs, retaining the subordinate securities in our investment portfolio. Our CRE CLOs are accounted for as financings with the non-retained securitized debt obligations recognized on our consolidated balance sheets.

Credit Risk

We are subject to varying degrees of credit risk in connection with our target investments. The performance and value of our investments depend upon sponsors’ ability to operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us. In addition, we are exposed to the risks generally associated with the commercial real estate market, including variances in occupancy rates, capitalization rates, absorption rates and other macroeconomic factors beyond our control. We try to mitigate this risk by seeking to originate or acquire assets of higher quality at appropriate rates of return given anticipated and unanticipated losses, by employing a comprehensive review and selection process and by proactively monitoring originated or acquired investments. Nevertheless, unanticipated credit losses, including as a result of the COVID-19 pandemic, could occur that could adversely impact our operating results.

The ESG risks associated with our potential collateral and borrowers also pose credit risks to us. We try to mitigate these risks by incorporating diligence practices into our investment process to identify material ESG matters related to a given investment. The nature and scope of our ESG diligence will vary based on the investment but may include a review of, among other things, energy management, pollution and contamination, accounting standards and bribery and corruption.

The COVID-19 pandemic significantly impacted the commercial real estate markets, causing reduced occupancy, requests from tenants for rent deferral or abatement, and delays in construction and development projects currently planned or underway. While the economy has improved significantly, macroeconomic trends associated with the COVID-19 pandemic have persisted and could continue to persist and impair our borrowers’ ability to pay principal and interest due to us under our loan agreements.

Operating Expenses

Through December 31, 2020, we were externally managed by Pine River Capital Management L.P., or the Former Manager, through December 31, 2020, at which time we internalized our management function, or the Internalization. Prior to the Internalization, we paid the Former Manager a quarterly base management fee and, if earned, an incentive fee and reimbursed the Former Manager for all costs and expenses it incurred on our behalf in order to operate our business, including compensation costs for certain personnel that provided services to us under the Management Agreement. Subsequent to the Internalization, we no longer pay the Former Manager and we are responsible for paying all costs and expenses incurred to operate our business, including compensation costs for all of our employees. Our operating expenses, such as compensation costs and expenses related to managing our investment portfolio, may vary over time and are subject to a variety of factors, including overall economic and market environment, competitive market forces driving employee-related costs, and other related factors.

Allowance for Credit Losses

Our operating results are also impacted by the allowance for credit loss we record for loans held-for-investment using the Current Expected Credit Loss, or CECL, model pursuant ASU 2016-13. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Use of Estimates – Loans Held-For-Investment and Provision for Credit Losses” included in Item 7 of this Annual Report on Form 10-K for additional information regarding our allowance for credit losses.

Changes in the Fair Value of Our Investments

We intend to hold our target investments for the long-term and, as such, they are carried at an amortized cost on our consolidated balance sheets.

Although we intend to hold our target investments for the long-term, we may occasionally classify some of our debt securities as AFS. Investments classified as AFS are carried at their fair value, with changes in fair value recorded through accumulated other comprehensive (loss) income, a component of stockholders’ equity, rather than through earnings. We do not intend to hold any of our investments for trading purposes.

Changes in Market Interest Rates

Our primary interest rate exposures relate to the yield on our loans and other investments and the financing cost of our borrowings. Changes in interest rates may affect our net interest income from loans and other investments. Interest rate fluctuations resulting in our interest and related expense exceeding interest and related income would result in operating losses for us. To the extent that our financing costs are determined by reference to floating rates, such as LIBOR (or any replacement rate such as SOFR) or a Treasury index, the amount of such costs will depend on the level and movement of interest rates. Interest rates have remained at relatively low levels on a historical basis. There can be no assurance, however, that the Federal Reserve will not raise rates in 2022, and any such increase could adversely affect our results of operations and financial condition. In a period of rising interest rates, our interest expense on floating rate borrowings would increase, while any additional interest income we earn on our floating rate investments may be subject to caps and/or in-the-money floors that may limit the growth of our interest income until interest rates rise above such floors, or loans with such floors are repaid or refinanced, and may not compensate for such increase in interest expense. Any such scenario could adversely affect our results of operations, interest coverage ratio and financial condition.

Although our strategy is to primarily originate, invest in and manage senior floating-rate commercial mortgage loans, from time-to-time we may acquire fixed-rate investments, which exposes our operating results to the risks posed by fluctuations in interest rates. To the extent that this applies to us, we may choose to actively manage this risk through the use of hedging strategies.

Summary of Results of Operations and Financial Condition

Our GAAP net income (loss) attributable to common stockholders was $67.6 million (or $1.24 per basic weighted average share) for the year ended December 31, 2021, as compared to GAAP net income (loss) attributable to common stockholders of $(40.5) million (or $(0.73) per basic weighted average share) for the year ended December 31, 2020. The GAAP net income for the year ended December 31, 2021, benefited from a partial reversal of the provision for credit losses, which was related to loan prepayments, somewhat improved macroeconomic forecast and overall market conditions and a decrease in other operating expenses. The GAAP net loss for the year ended December 31, 2020, was primarily a result of an increase in the provision for credit losses related to the significant deterioration in the forecasts of macroeconomic conditions, overall market dislocation caused by the onset of the COVID-19 pandemic, one-time restructuring charges related to the Internalization and realized losses on the sale of select loans.

For a comparison and discussion of our results of operations and other operating and financial data for the fiscal years ended December 31, 2020, and December 31, 2019, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 5, 2021.

The following table presents the primary components of our consolidated balance sheets as of December 31, 2021, and 2020:

Balance Sheet Data:

Term financing facility $ 127,145 $ —

Net Interest Income

The following tables present the components of interest income and interest expense for the year ended December 31, 2021, and 2020:

(in thousands, except share data) Year Ended December 31,

Interest income:

Loans held-for-sale — 895 (895)

Available-for-sale securities — 646 (646)

Held-to-maturity securities — 659 (659)

Interest expense: —

Revolving credit facilities — 779 (779)

The majority of our interest-earning assets and liabilities have floating rates based on an index (e.g., one-month LIBOR) plus a credit spread. As a result, our asset yields and cost of funds are impacted by changes in market interest rates and credit spreads on investments and borrowings, as well as changes in the mix of our investment portfolio credit spreads due to new originations, amendments of existing investments, additional fundings, upsizings and repayments.

Interest Income

Interest income decreased from $237.7 million to $198.3 million for the year ended December 31, 2020, and December 31, 2021, respectively. The decrease is mainly due to a lower average portfolio balance and a decrease in average LIBOR.

Interest Expense

Interest expense decreased from $112.9 million to $105.6 million for the year ended December 31, 2020, and December 31, 2021, respectively. The decrease is mainly due to a lower average borrowings balance and a decrease in average LIBOR, offset by the addition of the senior secured term loan facilities and the term financing facility.

Provision for Credit Losses

Consistent with the methodology used during the adoption of ASU 2016-13 on January 1, 2020, we continue to use a probability-weighted analytical model to estimate and recognize an allowance for credit losses on loans held-for-investment and their related unfunded commitments. Additionally, in determining the allowance for credit losses estimate through December 31, 2021, we employed third party licensed macroeconomic forecasts, over the reasonable projection period. Significant inputs to our estimate of the allowance for credit losses include loan specific factors such as DSCR, LTV, remaining loan term, property type and others. In certain instances, for loans with unique risk characteristics, we may instead elect to employ different methods to estimate loan losses that also conform to ASU 2016-13 and related guidance.

Allowance for credit losses related to off-balance sheet future funding commitments is recorded as a component of other liabilities. Changes in the provision for credit losses for both the assets and their related unfunded commitments are recognized through net income on the consolidated statements of comprehensive income (loss). The following table presents the components of benefit from (provision for) credit losses for the year ended December 31, 2021, and 2020:

Year Ended December 31,

Benefit from (provision for) credit losses on:

Total benefit from (provision for) credit losses $ 20,027 $ (53,710)

During the year ended December 31, 2021, we recorded a benefit from the provision for credit losses of $20.0 million including a $(9.7) million realized loss on a write-off of a loan held-for-investment. The decrease in our estimate of allowance for credit losses was primarily driven by the loan write-off, improved macroeconomic forecasts employed in our loss estimation model and overall market conditions, and the changes in the composition of our investment portfolio as a result of loan repayments, partially offset by an increase in the provision related to the reserve on individually assessed loans.

Loss on Extinguishment of Debt

On December 9, 2021, we prepaid $75.0 million of borrowings under the senior secured term loan facilities, resulting in a total payment of approximately $79.9 million, inclusive of the principal amount, prepayment penalty and accrued interest. As a result of this repayment, the Company realized a charge on early extinguishment of debt of approximately $(8.9) million, or $(0.17) per share, comprised of the prepayment penalty and a pro-rata charge-off of unamortized discount including transaction costs.

Subsequent to December 31, 2021, on February 16, 2022, we prepaid an additional $50.0 million of borrowings under the senior secured term loan facilities, resulting in a total payment of approximately $53.0 million, inclusive of the principal amount, prepayment penalty and accrued interest. As a result of this repayment, we realized a charge on early extinguishment of debt of approximately $(5.8) million, or $(0.11) per share, comprised of the prepayment penalty and a pro-rata charge-off of unamortized discount including transaction costs.

Expenses

The following table presents the components of expenses for the year ended December 31, 2021, and 2020:

Year Ended

December 31,

(in thousands, except share data) 2021 2020

Base management fees $ — $ 15,786

Restructuring charges $ — $ 46,252

Annualized operating expense ratio (excl. restructuring charges) 3.7 % 5.1 %

Prior to the Internalization, we paid the Former Manager a base management fee and, when applicable, an incentive fee. The base management fee was calculated based on our equity with certain adjustments outlined in the Management Agreement. The incentive fee was calculated based on historical “core earnings,” as defined in the Management Agreement, as well as our equity with certain adjustments outlined in the Management Agreement. Following the Internalization, we no longer incur management or incentive fees, but we incur expenses associated with being an internally managed REIT, including compensation expenses previously borne by the Former Manager.

We also incur servicing expenses related to the servicing of commercial real estate loans and other operating expenses. The increase in servicing expenses during the year ended December 31, 2021, as compared to the same period in 2020, was primarily due to increased loan originations and increased CRE CLO trust fees incurred in 2021. The decrease in our operating expense ratio, adjusted for restructuring charges, during the year ended December 31, 2021, as compared to the same period in 2020, resulted primarily from the lack of management fees as a result of the Internalization and lower other operating expenses partially offset by an increase in expenses related to the compensation and infrastructure to support the operation and growth of our business and servicing fees.

For the year ended December 31, 2020, included in other operating expenses are direct and allocated costs incurred by the Former Manager on our behalf and reimbursed by us, including compensation paid to certain employees of the Former Manager. Also included in other operating expenses is compensation paid directly to certain of our executive officers pursuant to the terms of the employment agreements entered into with such executive officers in connection with the Internalization.

Financial Condition

As of December 31, 2021, our borrowings consisted of repurchase agreement facilities collateralized by loans held-for-investment, securitized debt obligations issued by CRE CLOs collateralized by pools of loans held-for-investment, a term financing facility collateralized by loans held-for-investment, an asset-specific financing facility collateralized by loans held-for-investment, long-term senior secured term loan facilities and long-term unsecured convertible senior notes.

As of December 31, 2021, we had outstanding $677.3 million of repurchase agreement facility borrowings, and the term to maturity ranged from 179 days to approximately 1.5 years. Our repurchase agreement facilities had a weighted average borrowing rate of 2.15% and weighted average remaining maturities of 0.78 years as of December 31, 2021.

As of December 31, 2021, we had outstanding $1.7 billion of securitized debt obligations with a weighted average borrowing rate of 1.8% and weighted average estimated remaining maturities of 1.2 years based on the maturities of the underlying collateral.

As of December 31, 2021, we had outstanding $43.6 million of asset-specific financing facility borrowings with a weighted average borrowing rate of 1.8% and weighted average estimated remaining maturities of 0.94 years based on the maturities of the underlying collateral.

As of December 31, 2021, we had outstanding $127.1 million of term loan financing facility borrowings with a weighted average borrowing rate of 3.7% and weighted average estimated remaining maturities of 3.1 years.

As of December 31, 2021, the total outstanding amount due on the senior secured term loan facilities was $150.0 million, with a carrying value of $139.9 million net of deferred issuance costs. Interest on the outstanding loans under the term loan facilities is payable quarterly in arrears and accrues at the rate of (i) 8.00% per annum for any period for which accrued interest is paid in cash or (ii) 9.00% per annum for any period for which the borrowers elect to pay up to 50% of accrued interest in kind by adding such interest to the principal amount of the loans. The term loan facilities will mature on September 25, 2025.

As of December 31, 2021, the total outstanding amount due on convertible senior notes was $272.9 million, net of deferred issuance costs. The notes are unsecured and pay interest semiannually at a rate of 5.625% per annum on the notes maturing in December 2022 and a rate of 6.375% per annum on the notes maturing in October 2023. As of December 31, 2021, these notes had a conversion rate of 51.9943 and 50.0894shares of common stock per $1,000 principal amount of the notes, respectively.

As of December 31, 2021, the debt-to-equity ratio with respect to our loans held-for-investment, defined as total debt, net of cash, divided by equity, was 2.7:1.0.

GAAP to Estimated Taxable Income

The following tables provide reconciliations of our GAAP net income (loss) to our estimated taxable income (loss) split between our REIT and taxable REIT subsidiaries for the year ended December 31, 2021, and December 31, 2020:

(dollars in millions) TRS REIT Consolidated

GAAP net income, pre-tax $ — $ 68.5 $ 68.5

Permanent differences

Other permanent differences — (1.9) (1.9)

Temporary differences

Net accretion of OID and market discount — (3.8) (3.8)

Income from significant modifications — 0.3 0.3

Other temporary differences 0.3 (16.5) (16.2)

Dividend declaration deduction — (46.6) (46.6)

Estimated taxable income post-dividend deduction $ 0.3 $ — $ 0.3

(dollars in millions) TRS REIT Consolidated

GAAP net income, pre-tax $ — $ 70.2 $ 70.2

Permanent differences

Other permanent differences — (0.7) (0.7)

Temporary differences

Net accretion of OID and market discount — 1.6 1.6

Income from significant modifications — 1.7 1.7

Other temporary differences — 4.6 4.6

Estimated taxable income — 77.4 77.4

Dividend declaration deduction — (77.4) (77.4)

Estimated taxable income post-dividend deduction $ — $ — $ —

The permanent tax differences recorded in 2021 and 2020 were principally related to recurring differences in compensation expense related to restricted stock dividends. Temporary differences were principally timing differences between GAAP and tax accounting related to restructuring charges, provision for credit losses and amendments to loans treated as “significant modifications” for tax under applicable Treasury regulations.

Dividends

For the year ended December 31, 2021, we declared dividends on our common stock totaling $1.00 per share. As a REIT, we are required to distribute at least 90% of our taxable income to stockholders, subject to certain distribution requirements. We plan to satisfy the REIT distribution requirements for the year ended December 31, 2021, in part with dividends paid in 2022. Furthermore, if we distribute less than the sum of: (a) 85% of our ordinary income for the calendar year; (b) 95% of our capital gain net income for the calendar year; and (c) any undistributed shortfall from our prior calendar year, or the Required Distribution, to our stockholders during any calendar year (including any distributions declared by the last day of the calendar year but paid in January of the subsequent year), then we are required to pay non-deductible excise tax equal to 4% of any shortfall between the Required Distribution and the amount that was actually distributed. Any of these taxes would decrease cash available for distribution to our stockholders. For the year ended December 31, 2021, we accrued an excise tax of $0.3 million. Excise tax payable is included in the line item “Other liabilities” in the consolidated balance sheets included in this Annual Report on Form 10-K. Excise tax expense is included in the line item “Provision for (benefit from) income taxes” in the consolidated statements of operations included in this Annual Report on Form 10-K. The following table presents cash dividends declared on our common stock since 2019:

Declaration Date Record Date Payment Date Cash Dividend Per Share

The following table summarizes dividends declared since 2019 and their related tax characterization (per share amounts):

Tax Characterization of Dividends

____________________

(1)A portion of the dividend declared in the fourth quarter of 2019 and paid in the first quarter of 2020 was treated as a 2020 distribution for federal income tax purposes.

(2)Beginning with the year ended December 31, 2018, and subsequent years,ordinary dividends (non-qualified) are also the portion of dividends that may be eligible for the 20% qualified business income deduction under Internal Revenue Code Section 199A.

Liquidity and Capital Resources

Capitalization

To date we have capitalized our business primarily through the issuance and sale of shares of our common and preferred stock, borrowings under our secured financing facilities, issuance of CRE CLOs, borrowings under our senior secured term loan facilities and the issuance and sale of convertible notes. As of December 31, 2021, our capitalization included $0.4 billion of corporate debt and $2.5 billion of loan-level financing. No portion of our corporate debt matures before December 2022 and our loan-level financing is generally term-matched or matures in 2022 or later. Our $2.5 billion of loan-level financing includes $677.3 million of secured repurchase agreements, $1.7 billion of CRE CLO securitizations, which are term-matched to the underlying assets, non-recourse and non-mark-to-market, $127.1 million of term financing facility and $43.6 million of asset-specific financing facility.

See Note 4 - Variable Interest Entities and Securitized Debt Obligations, Note 5 - Secured Financing Agreements, Note 6 - Convertible Senior Notes and Note 7 - Senior Secured Term Loan Facilities to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional details regarding our securitized debt obligations; our secured repurchase facilities, asset-specific financing facility, and term financing facility; our secured convertible senior notes; and our senior secured term loan facilities, respectively.

Leverage

From December 31, 2020, to December 31, 2021, our debt-to-equity ratio, defined as total debt, net of cash, divided by equity, decreased from 3.2:1.0 to 2.7:1.0. As part of our investment strategy, we plan to finance our target assets with a moderate amount of leverage, the level of which may vary based upon the particular characteristics of our portfolio and market conditions. To that end, subject to maintaining our qualification as a REIT and our exclusion from registration under the Investment Company Act, we intend to use borrowings to fund the origination or acquisition of our target investments. Given our focus on senior floating-rate mortgage loans, we currently expect that such leverage will be, on a total debt-to-equity ratio basis, within a range of 3.0:1.0 and 3.5:1.0; however, our leverage may vary and differ from our expectations depending on market conditions and any steps we may take to strengthen our balance sheet and enhance our liquidity position. The amount of leverage we deploy for our target investments depends upon our assessment of a variety of factors, which may include the anticipated liquidity and price volatility of the investments in our portfolio, the potential for losses in our portfolio, the gap between the duration of our assets and liabilities, the availability and cost of financing the investments, our opinion of the creditworthiness of our financing counterparties, the health of the U.S. economy and commercial real estate financing markets, our outlook for the level and volatility of interest rates, the slope of the yield curve, the credit quality of our investments, the collateral underlying our investments and our outlook for investment spreads relative to LIBOR.

Sources of Liquidity

Our primary sources of liquidity include cash and cash equivalents on our consolidated balance sheets, any approved but unused borrowing capacity under our financing facilities, the net proceeds of future public and private equity and debt offerings, payments of principal, including loan repayments and prepayments, loan sales, interest we receive on our portfolio of assets and cash generated from our operating results.

The following table sets forth our sources of liquidity as of December 31, 2021:

Year Ended

(in thousands) December 31, 2021

Cash and cash equivalents $ 191,931

Approved but unused borrowing capacity on financing facilities —

We have access to liquidity through public offerings of debt and equity securities. To facilitate such offerings, in August 2021, we filed a shelf registration statement with the SEC that is effective for a term of three years and expires in August 2024. The amount of securities to be issued pursuant to this shelf registration statement was not specified when it was filed and there is no specific dollar limit on the amount of securities we may issue. The securities covered by this registration statement include: (i) common stock, (ii) preferred stock, (iii) depositary shares representing preferred stock and (iv) debt securities. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.

We may also access liquidity through our at-the-market stock offering program, pursuant to which we may sell, from time to time, up to 4,757,636 additional shares of our common stock as of December 31, 2021. See Note 12 – Stockholders’ Equity to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional details.

Although we generally intend to hold our target investments as long-term investments, we have opportunistically sold, and may again in the future sell, certain of our assets in order to manage our liquidity needs, to meet other operating objectives and to adapt to market conditions. We cannot predict the timing and impact of future sales of our assets, if any. Since many of our

assets are financed with secured financing facilities and/or CRE CLOs, a significant portion of the proceeds from sales of our assets, prepayments and scheduled amortization would be used to repay balances under these financing arrangements.

We remain focused on actively managing our balance sheet and enhancing our liquidity position to best position us for the market environment, satisfy our loan future funding and financing obligations and to make new investments, which we expect will cause us to take, and in some instances has already caused us to take, some or all of the following actions: raise capital from offerings of equity and/or debt securities, on a public or private basis; borrow additional capital; post additional collateral; sell assets; and/or change our dividend policy, which we will continue to evaluate in respect of future quarters based upon customary considerations, including market conditions and distribution requirements to maintain our REIT status. At any given time and from time to time we may be evaluating or pursuing one or more transactions, including loan sales, capital markets activities and other sources of funding, to improve our liquidity or to refinance our debt or may otherwise seek transactions to reduce our interest expense or leverage and extend our debt maturities, which transactions, depending on market conditions and other factors, could result in actual losses and/or otherwise negatively impact our results of operations in one or more periods.

Liquidity Needs

In addition to our loan origination activities and general operating expenses, our primary liquidity needs include interest and principal payments under our $3.0 billion of outstanding borrowings under our repurchase facilities, collateralized loan obligations, term financing facility, asset-specific financing facility, senior secured term loan facilities, and convertible senior notes, $403.6 million of unfunded loan commitments, and dividend distributions to our preferred and common stockholders.

Financing Availability

We are subject to the availability and cost of financing to successfully execute on our business strategy and generate attractive risk-adjusted returns to our stockholders. Much of our financing is in the form of repurchase facilities or other types of credit facilities provided to us by our lender counterparties. We mitigate this counterparty risk by seeking to diversify our lending partners, focusing on establishing borrowing relationships with strong counterparties and continuously monitoring them through a thoughtful approach to counterparty risk oversight. Additionally, as part of our broader risk management strategy, and to the extent available in the market, we finance our business through other means which may include, but not be limited to, CRE CLOs, note sales and the issuance of unsecured debt and equity instruments. We continue to actively explore additional types of funding facilities in order to further diversify our financing sources. The COVID-19 pandemic has resulted in significant disruptions in financial markets and uncertainty about the overall macroeconomic outlook. Declines in economic conditions could negatively impact real estate and real estate capital markets, which could make it more difficult for us to obtain or maintain financing.

The following table provides the maturities of our repurchase facilities, asset-specific financing facility, term financing facility, securitized debt obligations, long-term senior secured term loan facilities and convertible senior notes, net of deferred debt issuance costs, as of December 31, 2021, and December 31, 2020:

Five years and over — —

Cash Flows

From December 31, 2020, to December 31, 2021, our restricted and unrestricted cash and cash equivalents balance decreased approximately $124.9 million, to $204.3 million. The cash movements can be summarized by the following:

•Cash flows from operating activities. For the year ended December 31, 2021, operating activities increased our cash balances by approximately $60.3 million, primarily driven by our financial results.

•Cash flows from investing activities. For the year ended December 31, 2021, investing activities increased our cash balances by approximately $139.8 million, primarily driven by repayments of loans held-for-investment, partially offset by originations of loans held-for-investment.

•Cash flows from financing activities. For the year ended December 31, 2021, financing activities decreased our cash balances by approximately $325.0 million, primarily driven by repayments of repurchase facilities, securitized debt obligations, asset-specific financings and term financing facilities, partially offset by proceeds from the issuance of securitized debt obligations, proceeds from the term financing facility and issuance of preferred stock.

Corporate Activities

Senior Secured Term Loan Facilities Paydown

On September 25, 2020, we, as a guarantor, and certain of our subsidiaries, as borrowers, entered into a five-year senior secured term loan credit agreement with certain investment vehicles managed by Pacific Investment Management Company LLC, or PIMCO, providing for up to $300.0 million of senior secured term loan facilities. On September 28, 2020, we borrowed $225.0 million under the initial term loan facility. We chose not to borrow the remaining $75.0 million of commitments under the senior secured term loan facilities, which were available to us on a delayed draw basis until September 25, 2021. Interest on the outstanding loans under the senior secured term loan facilities is payable quarterly in arrears and accrues at the rate of (i) 8.00% per annum for any period for which accrued interest is paid in cash or (ii) 9.00% per annum for any period for which the borrowers elect to pay up to 50% of accrued interest in kind by adding such interest to the principal amount of the loans. The senior secured term loan facilities will mature on September 25, 2025.

The loans outstanding under the senior secured term loan facilities are non-amortizing and may be voluntarily repaid, in whole or in part, at any time, subject to certain prepayment premiums if they are repaid prior to September 25, 2023.

On December 9, 2021, we prepaid $75.0 million of borrowings under the senior secured term loan facilities, resulting in a total payment of approximately $79.9 million, inclusive of the principal amount, prepayment penalty and accrued interest. As a result of this repayment, we realized a charge on early extinguishment of debt of approximately $(8.9) million, or $(0.17) per share, comprised of the prepayment penalty and a pro-rata charge-off of unamortized discount including transaction costs.

Subsequent to December 31, 2021, on February 16, 2022, we prepaid an additional $50.0 million of borrowings under the senior secured term loan facilities, resulting in a total payment of approximately $53.0 million, inclusive of the principal amount, prepayment penalty and accrued interest. As a result of this repayment, we realized a charge on early extinguishment of debt of approximately $(5.8) million, or $(0.11) per basic share, comprised of the prepayment penalty and a pro-rata charge-off of unamortized discount including transaction costs.

Cash Settlement of Warrants to Purchase Shares of Common Stock

In connection with the senior secured term loan facilities, on September 25, 2020, we issued warrants to purchase up to 6.066 million shares of our common stock, $0.01 par value per share to certain investment vehicles managed by PIMCO.

On September 25, 2021, the warrantholders forfeited unvested warrants exercisable for 1,516,455 shares of common stock because we chose not to borrow the $75.0 million of delayed draw commitments available under the senior secured term loan facilities.

On September 30, 2021, we settled warrants to purchase approximately 1.06 million shares of common stock at an exercise price of $6.47 per share of common stock for a net cash amount of approximately $7.5 million. On October 4, 2021, we settled the remaining warrants to purchase approximately 3.49 million shares of common stock at an exercise price of $6.47 per share of common stock for a net cash amount of approximately $24.7 million. We currently have no warrants outstanding.

See Note 7 - Senior Secured Term Loan Facilities and Warrants to Purchase Shares of Common Stock to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional details regarding the senior secured term loan facilities and warrants.

Issuance of 7.00% Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock

On November 30, 2021, and December 10, 2021, we received total net proceeds of $110.5 million from the sale of 4,596,500 shares of Series A Preferred Stock, after deducting the underwriting discount of $3.6 million and issuance costs of $0.8 million.

On January 18, 2022, and February 8, 2022, we received total net proceeds of $87.4 million from the sale of 3,633,000 additional shares of our Series A Preferred Stock after deducting the underwriting discount of $2.9 million and issuance costs of $0.5 million. See Note 11 – Preferred Stock to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional details regarding our Series A Preferred Stock.

Critical Accounting Policies and Use of Estimates

The preparation of financial statements in accordance with GAAP requires us to make certain judgments and assumptions, based on information available at the time, of our preparation of the financial statements, in determining accounting estimates used in preparation of the statements. Our significant accounting policies are described in Note 2 – Basis of Presentation and Significant Accounting Policies to our Consolidated Financial Statements included in this Annual Report on Form 10-K. Our most critical accounting policies involve decisions and assessments that could affect our reported assets and liabilities, as well as its reported revenues and expenses. We believe that all of the decisions and assessments used to prepare our financial statements are based upon reasonable assumptions given the information available at that time. The accounting policies and estimates that we believe are most critical to a stockholder’s understanding of our financial results and condition are discussed below.

Loans Held-for-Investment and Provision for Credit Losses

Loans held-for-investment are reported at cost, net of any provision for credit losses, unamortized acquisition premiums or discounts, loan fees and origination costs, as applicable.

We adopted ASU 2016-13, which replaced the incurred loss model under existing guidance with a CECL model for instruments measured at amortized cost, and requires entities to record allowances for AFS debt securities rather than reduce the carrying amount, as they did under the other-than-temporary impairment model. It also simplified the accounting model for purchased credit-impaired debt securities and loans. In addition, the new model applies to off-balance sheet credit exposures, such as unfunded loan commitments.

In connection with our adoption of ASU 2016-13, we implemented new processes, including the utilization of loan loss forecasting models, updates to our reserve policy documentation, changes to our internal reporting process and related internal controls. We have implemented loan loss forecasting models for estimating expected life-time credit losses, at the individual loan level, for our commercial mortgage loan portfolio. The CECL forecasting methods we use include (i) a probability of default and loss given default method using a third party CMBS/CRE loan database with historical loan loss data beginning in 1998 and (ii) probability weighted expected cash flow method, depending on the type of loan and the availability of relevant historical market loan loss data. We might use other acceptable alternative approaches in the future depending on, among other factors, the type of loan, underlying collateral and availability of relevant historical market loan loss data.

We estimate our CECL allowance for our loan portfolio at the individual loan level. Significant inputs to our forecasting methods include (i) key loan-specific inputs such as vintage year, loan-term, underlying property type, geographic location, and expected timing and amount of future loan fundings, (ii) performance against the underwritten business plan and our internal loan risk rating, and (iii) a macroeconomic forecast. In certain instances, we consider relevant loan-specific qualitative factors to certain loans to estimate our CECL allowance.

We consider loan investments that are both (i) expected to be substantially repaid through the operation or sale of the underlying collateral, and (ii) for which the borrower is experiencing financial difficulty, to be “collateral-dependent” loans. For such loans that we determine foreclosure of the collateral is probable, we measure the expected losses based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. For collateral-dependent loans that we determine foreclosure is not probable, we apply a practical expedient to estimate expected losses using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan. Our estimate of the fair value of the collateral property is sensitive to both the valuation methodology selected and inputs used in the analysis. As a result, the fair value of the collateral property used in determining the expected credit losses is subject to uncertainty and any actual losses, if incurred, could differ materially from the estimated provision for credit losses.

Our loans typically include commitments to fund incremental proceeds to our borrowers over the life of the loan. Those future funding commitments are also subject to a CECL reserve. The CECL reserve related to future loan fundings is recorded as a component of other liabilities on our consolidated balance sheets, and not as an offset to the related loan balance. This CECL reserve is estimated using the same process outlined above for our outstanding loan balances, and changes in this component of the CECL reserve will similarly flow through our consolidated statements of operations.

Credit performance of our portfolio is monitored regularly, with more intense analysis and oversight done on a quarterly basis, and each loan is evaluated by assessing the risk factors of each loan and assigning a risk rating based on a variety of factors. Risk ratings are defined as follows:

1 –Lower Risk

2 –Average Risk

3 –Acceptable Risk

4 –Higher Risk: A loan that has exhibited material deterioration in cash flows and/or other credit factors which, if negative trends continue, could be indicative of probability of principal loss.

5 –Loss Likely: A loan that has a significantly increased probability of principal loss.

Recently Issued Accounting Standards

Refer to Note 2 – Basis of Presentation and Significant Accounting Policies to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

Inflation

Virtually all of our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors influence our performance far more than inflation does. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. Our consolidated financial statements are prepared in accordance with GAAP and our distributions will be determined by our board of directors consistent with our obligation to distribute to our stockholders at least 90% of our REIT taxable income on an annual basis in order to maintain our REIT qualification; in each case, our activities and balance sheet are measured with reference to historical cost and/or fair market value without considering inflation.

Other Matters

We intend to conduct our business to maintain our exempt status under, and not to become regulated as, an investment company under the Investment Company Act. If we fail to maintain our exempt status under the Investment Company Act and become regulated as an investment company, our ability to, among other things, use leverage would be substantially reduced and, as a result, we would be unable to conduct our business as described in Item 1, “Business - Government Regulation” of this Annual Report on Form 10-K. Accordingly, we monitor our compliance with both the 55% Test and the 80% Tests of the Investment Company Act in order to maintain our exempt status. As of December 31, 2021, we determined that we maintained compliance with both the 55% Test and the 80% Test requirements.

We calculate that at least 75% of our assets were qualified REIT assets, as defined in the Code, for the year ended December 31, 2021. We also calculate that our revenue qualifies for the 75% source of income test and for the 95% source of income test rules for the year ended December 31, 2021. Consequently, we met the REIT income and asset tests. We also met all REIT requirements regarding the ownership of our common stock and the distribution of our net income. Therefore, for the year ended December 31, 2021, we believe that we qualified as a REIT under the Code.

Changes to the tax laws are likely to occur, and we intend to continue to monitor such changes.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We seek to manage our risks related to the credit quality of our investments, interest rates, liquidity and market value while, at the same time, seeking to generate attractive risk-adjusted returns to our stockholders. While we are exposed to certain types of market risk in our business, we seek to actively manage them using our risk management infrastructure and philosophy centered around quantifying and measuring various market risks on a continuous basis. We seek to be fairly compensated through the returns we earn on our investments for taking those risks and focus on maintaining liquidity and capital levels consistent with the risks to which we are exposed. However, many of those risks have been magnified by the continuing economic disruption and capital markets volatility resulting from the COVID-19 pandemic.

Recent Market Conditions

Due to the current COVID-19 pandemic in the United States and globally, most of our borrowers, sponsors, their tenants, the properties serving as collateral for our loan investments and the economy as a whole have been, and will likely continue to be, adversely affected. See “COVID-19 Pandemic” in Part II, Item 7 of this Annual Report on Form 10-K for further discussion of the impact of the COVID-19 pandemic on market conditions.

Credit Risk

We are subject to varying degrees of credit risk in connection with holding a portfolio of our target investments. The performance and value of our investments depend upon the sponsors’ ability to operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us. We seek to manage credit risk by performing deep fundamental credit analysis of our potential investments, as well as seeking to originate or acquire assets of higher quality at appropriate rates of return given anticipated and unanticipated losses, by employing a comprehensive review and selection process and by proactively monitoring our investments. Credit risk is also addressed through our ongoing review, and our investment portfolio is monitored for variance from underwritten and expected results on a monthly basis, with more intense analysis and oversight done on a quarterly basis. Nevertheless, unanticipated credit losses, including as a result of the COVID-19 pandemic, could occur that could adversely impact our operating results.

We employ a long-term, fundamental value-oriented investment strategy and we aim to, on a loan-by-loan basis, construct an investment portfolio that is well-diversified across property types, geographies and sponsors. However, any potential negative impacts on our business as a result of the COVID-19 pandemic may be heightened by the fact that we are not required to observe specific diversification criteria, which means that our investments may be relatively concentrated in certain property types, geographical areas or loan categories that may be more adversely affected by the pandemic than others. For example, certain of our loans are secured by office, industrial, multifamily, hotel and retail properties. Changes in how certain types of commercial properties are operated to facilitate social distancing and other measures intended to control the impact of the pandemic have impacted, and are likely to continue to impact, our investments secured by these properties.

The COVID-19 pandemic has significantly impacted the commercial real estate markets, causing reduced occupancy, requests from tenants for rent deferrals or abatement and delays in capital improvements on projects currently planned or underway. These negative conditions may persist into the future and impair our borrowers’ ability to pay principal and interest due to us under our loan agreements. We maintain an active dialogue and strong relationships with our borrowers as part of our overall asset management strategy. Through our asset management process, we focus on addressing potential impacts of the COVID-19 pandemic on our loans secured by properties experiencing cash flow strains. Certain of our borrowers have indicated that due to the impact of COVID-19 pandemic they will be unable to timely execute their business plans, have had to temporarily close their businesses or have experienced other business challenges. As a result, they have requested, and in certain instances we have granted, temporary deferrals of interest payments or forbearance, or other modifications of their loans. Discussions we have had with our borrowers have addressed potential near-term loan modifications including repurposing of funds in certain reserve accounts, temporary deferrals of interest or performance tests and certain covenant waivers on loans collateralized by properties impacted by the COVID-19 pandemic. While we generally believe that the principal amount of our loans is typically sufficiently protected by the underlying collateral value, there is a risk that we will not realize the entire principal amount of certain of our loan investments.

Interest Rate Risk

Our strategy is to primarily originate, invest in and manage a portfolio of senior floating-rate commercial mortgage loans. As a result, the composition of our investments in general is such that rising interest rates increase our net income, while declining interest rates will decrease our net income, subject to the impact of contractual interest rate floors. From time to time, we may originate or acquire fixed-rate investments, which may expose our operating results to the risks posed by fluctuations in interest rates, which we may choose to hedge, if we deem it prudent.

As of December 31, 2021, approximately 98.8% of our portfolio by carrying value earned a floating rate of interest. The remaining approximately 1.2% of our portfolio earned a fixed rate of interest. If interest rates were to decline, the value of these fixed-rate investments may increase, and if interest rates were to increase the value of these fixed-rate investments may fall; however, the interest income generated by these investments would not be affected by fluctuations in market interest rates. The interest rates we pay under our current repurchase facilities, asset-specific financing facility, term financing facility and CRE CLOs are primarily floating rate, which generally, and with limited exceptions, are not subject to contractual interest rate floors. Accordingly, our interest expense generally increases as interest rates increase and decreases as interest rates decrease.

Our analysis of risks is based on our experience, estimates, models and assumptions. These analyses rely on models which utilize estimates of fair value and interest rate sensitivity. Actual economic conditions or our implementation of decisions may produce results that differ significantly from the estimates and assumptions used in our models.

The information presented in the following interest rate sensitivity table projects the potential impact of sudden parallel changes in interest rates on our financial results and financial condition over the next 12 months, based on our interest sensitive financial instruments at December 31, 2021. All changes in value are measured as the change from our December 31, 2021 financial position. All projected changes in annualized net interest income are measured as the change from our projected annualized net interest income based off current performance returns.

Changes in Interest Rates (1)

Change in value of financial position:

Loans held-for-investment $ 4 $ 4 $ (184) $ (436)

Asset-specific financings (2) (2) 9 18

Term financing facility (5) (5) 27 54

____________________

(1)Changes in interest rates were limited to a decrease in rate to zero percent.

The interest rate sensitivity table quantifies the potential changes in annualized net interest income and portfolio value, should interest rates immediately change. The interest rate sensitivity table presents the estimated impact of interest rates instantaneously rising 50 and 100 basis points, and falling 50 and 100 basis points. The cash flows associated with the portfolio for each rate change are calculated based on assumptions, including yield on future originations and acquisitions, slope of the yield curve and size of the portfolio. Assumptions made on the interest rate sensitive liabilities include anticipated interest rates, collateral requirements as a percentage of borrowings and amount and term of borrowing.

Certain assumptions have been made in connection with the calculation of the information set forth in the foregoing interest rate sensitivity table and, as such, there can be no assurance that assumed events will occur or that other events will not occur that would affect the outcomes. The base interest rate scenario assumes interest rates at December 31, 2021. The analysis utilizes assumptions and estimates based on management’s judgment and experience. Furthermore, while we generally expect to retain such assets and the associated interest rate risk to maturity, future originations, acquisitions and sales of assets could materially change our interest rate risk profile.

The information set forth in the interest rate sensitivity table above and all related disclosures constitutes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Actual results could differ significantly from those estimated in the foregoing interest rate sensitivity table.

Market Value Risk

We intend to hold our target investments for the long-term and, as such, they are carried at an amortized cost on our consolidated balance sheets. However, we may occasionally classify some of our investments as AFS. Investments classified as AFS are carried at their fair value, with changes in fair value recorded through accumulated other comprehensive income (loss), a component of stockholders’ equity, rather than through earnings. The estimated fair value of such investments may fluctuate primarily due to changes in interest rates, overall market environment and liquidity, and other factors. As market volatility increases or liquidity decreases, the market value of the investments may be adversely impacted. We do not intend to hold any of our investments for trading purposes.

Borrower Performance

In addition to the risks related to fluctuations in cash flows and investment values associated with movements in interest rates, there is also the risk of borrower non-performance on our floating-rate investments. If interest rates were to significantly rise, it is possible that the increased debt service costs may negatively impact operating cash flows on properties securing our commercial real estate loan investments, resulting in potential non-performance of our borrowers or, in severe cases, default. This risk is partially mitigated by various factors we consider during our rigorous underwriting and loan structuring process, which in certain cases include a requirement for our borrower to purchase an interest rate cap contract.

Capital Markets Risk

As a REIT, we are required to distribute a significant portion of our taxable income annually, which constrains our ability to accumulate significant operating cash flow and therefore requires us to utilize capital markets, both debt and equity, to finance our business. As a result, we are exposed to risks related to the equity capital markets and our related ability to raise capital through the issuance of our common stock or other equity instruments. We are also exposed to risks related to the debt capital markets, and our related ability to finance our business through borrowings under credit facilities or other debt instruments, such as securitizations or unsecured debt. We seek to mitigate these risks by monitoring the debt and equity capital markets to inform our decisions on the amount, timing and terms of capital we raise.

Real Estate Risk

Our business strategy focuses on commercial real estate related debt investments. As a result, we will be exposed to the risks generally associated with the commercial real estate market, including occupancy rates, capitalization rates, absorption rates and other macroeconomic factors beyond our control, including, but not limited to, the impacts of the COVID-19 pandemic discussed above.

Additionally, commercial real estate debt investments may be affected by a number of factors, including, national, regional and local economic and real estate conditions, changes in business trends of specific industry segments, property construction characteristics, demographic factors and changes to laws and regulations, including additional restrictions or requirements on the development of commercial real estate intended to reduce greenhouse gas emissions and potential climate change. Any combination of these factors may affect the value of real estate collateral for investments within our investment portfolio and the potential proceeds available to a borrower to repay the underlying loans, which could cause us to suffer losses. We seek to manage these risks through our rigorous and fundamentally driven underwriting and investment management processes.

Liquidity Risk

Our liquidity risk is principally associated with our financing of longer-maturity investments with shorter-term borrowings, such as repurchase facilities, an asset-specific financing facility and a term loan facility. Should the value of our investments serving as collateral for our repurchase facilities significantly decrease, including, but not limited to, as a result of the impacts of the COVID-19 pandemic discussed above, our lenders may exercise their margin call rights, causing an adverse change in our liquidity position. If we fail to resolve such margin calls when due, the lenders may exercise their rights under such

repurchase facilities, including requiring payment by us of our aggregate outstanding financing obligations and/or taking ownership of the loans securing such obligations, potentially on an unfinanced basis, thereby reducing our available liquidity. Additionally, if one or more of our repurchase facilities or asset-specific financing facility counterparties should choose not to provide ongoing funding, including with respect to future funding obligations on existing loans financed with such counterparties, which such risks are increased as a result of the COVID-19 pandemic and its effects on the global and U.S. economies and commercial real estate markets, our ability to finance our investments and related future funding obligations would decline or exist at possibly less advantageous terms.

Extension Risk

We manage our assets based on a variety of assumptions and estimates, including among others, assumptions regarding the rate at which the borrowers will prepay our loans or extend. If prepayment rates decrease in a rising interest rate environment or extension options are exercised, the life of our loan investments could extend beyond the term of the secured financing agreements. The macroeconomic, commercial real estate and capital markets disruptions caused by the COVID-19 pandemic have resulted in, and will likely continue to result in, a decrease in prepayment rates and an increase in the number of our borrowers who exercise loan extension options. This could have a negative impact on our results of operations. In some situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur losses.

As part of our overall asset management strategy, we have in the past entered into, and may in the future enter into, loan modifications with some of our borrowers. These amendments may include, among other things, modifying or waiving certain performance or extension conditions as part of the overall agreement, which are often coupled with additional equity or other forms of credit support from the sponsor. We work closely with our lending counterparties when negotiating and entering into loan modifications with our borrowers to ensure we maintain financing on modified assets. There can be no assurance that going forward we will be able to maintain financing on modified loans.

Risk Management

To the extent consistent with maintaining our REIT qualification, we seek to manage risk exposure by closely monitoring our portfolio and actively managing the financing, interest rate, credit and other risks associated with holding a portfolio of our target investments. Generally, we:

•manage our portfolio with focus on diligent, investment-specific market review, enforcement of loan and security rights and timely execution of disposition strategies;

•actively employ portfolio-wide and investment-specific risk measurement and management processes in our daily operations, including utilizing risk management tools; and

•seek to manage credit risk through our rigorous underwriting due diligence process prior to origination or acquisition of our target investments, and through the use of nonrecourse financing when and where available and appropriate.

Item 8. Financial Statements and Supplementary Data

GRANITE POINT MORTGAGE TRUST INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

Page

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 71

Consolidated Balance Sheets at December 31, 2021 and December 31, 2020 72

Notes to the Consolidated Financial Statements 78

Schedule IV - Mortgage Loans on Real Estate 107

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors

of Granite Point Mortgage Trust Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Granite Point Mortgage Trust Inc. (the Company) as of December 31, 2021 and 2020, the related consolidated statements of comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 25, 2022 expressed an unqualified opinion thereon.

Adoption of New Accounting Standard

As discussed in Note 2 to the consolidated financial statements, the Company changed its method for accounting for credit losses in 2020. As explained below, auditing the Company’s allowance for credit losses was a critical audit matter.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.

Allowance for Credit Losses - Loans held-for-investment

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2017.

Minneapolis, Minnesota

February 25, 2022

GRANITE POINT MORTGAGE TRUST INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

ASSETS

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities

Term financing facility 127,145 —

Commitments and Contingencies (see Note 10)

Stockholders’ Equity

Total Granite Point Mortgage Trust, Inc. Stockholders’ Equity 1,013,058 933,846

Non-controlling interests 125 —

____________________

(1)The consolidated balance sheets include assets of consolidated variable interest entities, or VIEs, that can only be used to settle obligations of these VIEs, and liabilities of the consolidated VIEs for which creditors do not have recourse to Granite Point Mortgage Trust Inc. At December 31, 2021, and December 31, 2020, assets of the VIEs totaled $2,266,044 and $1,255,932, respectively, and liabilities of the VIEs totaled $1,679,435 and $928,220, respectively. See Note 4 - Variable Interest Entitiesand Securitized Debt Obligations for additional information.

The accompanying notes are an integral part of these consolidated financial statements.

GRANITE POINT MORTGAGE TRUST INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands, except share data)

Year Ended

December 31,

Interest income:

Loans held-for-sale — 895 —

Available-for-sale securities — 646 1,221

Held-to-maturity securities — 659 2,239

Interest expense:

Term financing facility 7,585 — —

Revolving credit facilities — 779 1,673

Senior secured term loan facilities 21,688 5,446 —

Other income (loss):

Benefit from (provision for) credit losses 20,027 (53,710) —

Loss on extinguishment of debt (8,919) — —

Realized losses on sales — (16,913) —

Expenses:

Incentive fees — — 244

Restructuring charges — 46,252 —

Provision for (benefit from) income taxes 192 593 (4)

Basic (loss) earnings per weighted average common share $ 1.24 $ (0.73) $ 1.32

Diluted (loss) earnings per weighted average common share $ 1.23 $ (0.73) $ 1.32

Weighted average number of shares of common stock outstanding:

Comprehensive income (loss):

Other comprehensive (loss) income, net of tax:

Unrealized (loss) gain on available-for-sale securities — (32) 224

Other comprehensive (loss) income — (32) 224

The accompanying notes are an integral part of these consolidated financial statements.

GRANITE POINT MORTGAGE TRUST INC

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

Common Stock Preferred Stock

Other comprehensive income before reclassifications — — — — — 224 — — 224 — 224

Net other comprehensive income — — — — — 224 — — 224 — 224

Amounts reclassifications — — — — — 256 — — 256 — 256

Net other comprehensive loss — — — — — (32) — — (32) — (32)

Issuance of warrants to purchase common stock — — — — 4,541 — — — 4,541 — 4,541

Table of Contents

GRANITE POINT MORTGAGE TRUST INC

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data) (Continued)

Common Stock Preferred Stock

Contributions from non-controlling interests — — — — — — — — — 125 125

The accompanying notes are an integral part of these consolidated financial statements.

GRANITE POINT MORTGAGE TRUST INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

Year Ended

December 31,

Cash Flows From Operating Activities:

(Benefit from) provision for credit losses (20,027) 53,710 —

Realized losses on sales of loans held-for-sale — 16,913 —

Loss on extinguishment of debt 5,169 — —

Net change in assets and liabilities:

Decrease (increase) in accrued interest receivable 1,672 (1,066) (1,055)

Cash Flows From Investing Activities:

Principal payments on available-for-sale securities — 12,798 —

Principal payments on held-to-maturity securities — 18,076 8,620

Proceeds from sales of loans held-for-sale — 193,538 —

Cash Flows From Financing Activities:

Proceeds from issuance of securitized debt obligations 1,188,330 — 646,868

Proceeds from senior secured term loan facilities — 205,647 —

Repayment of senior secured term loan facilities (75,000) — —

Repayment of asset-specific financings (82,532) — —

Proceeds from revolving credit facilities — 38,361 361,273

Repayment of revolving credit facilities — (80,369) (394,265)

Proceeds from term financing facility 349,291 — —

Repayment of term financing facility (220,192) — —

Payment of debt issuance costs (15,572) — —

Settlement of warrants to purchase common stock (32,138) — —

Contributions from non-controlling interests 125 — —

Proceeds from issuance of warrants to purchase common stock — 4,541 —

Proceeds from issuance of preferred stock, net of offering costs 110,519 — —

Proceeds from issuance of common stock, net of offering costs — — 207,514

Tax withholding on restricted stock (1,194) — —

Repurchase of common stock (17,803) — —

Dividends paid on preferred stock (100) (100) (100)

Supplemental Disclosure of Cash Flow Information:

Cash paid for taxes $ 599 $ — $ —

Noncash Activities:

Transfers of loans held-for-investment to loans held-for-sale $ — $ 210,452 $ —

The accompanying notes are an integral part of these consolidated financial statements.

GRANITE POINT MORTGAGE TRUST INC.

Notes to the Consolidated Financial Statements

Note 1. Organization and Operations

Granite Point Mortgage Trust Inc., or the Company, is an internally managed real estate finance company that focuses primarily on directly originating, investing in and managing senior floating-rate commercial mortgage loans and other debt and debt-like commercial real estate investments. These investments are capitalized by accessing a variety of funding options, including borrowing under the Company’s bank credit facilities or other asset-specific financings, issuing commercial real estate collateralized loan obligations, or CRE CLOs, entering into term financing agreements, and issuing other forms of secured and unsecured debt and equity securities, depending on market conditions and the Company’s view of the most appropriate funding option available for the Company’s investments. The Company is not in the business of buying or trading securities, and the only securities it owns are the retained interests from its CRE CLOs. The Company’s investment objective is to preserve the Company’s stockholders’ capital while generating attractive risk-adjusted returns over the long term, primarily through dividends derived from current income produced by the Company’s investment portfolio. The Company’s common stock is listed on the New York Stock Exchange, or NYSE, under the symbol “GPMT”. The Company operates its business in a manner that is intended to permit it to maintain its exclusion from registration under the Investment Company Act of 1940, as amended, or the Investment Company Act. The Company operates its business as one segment. The Company was incorporated in Maryland on April 7, 2017, and commenced operations as a publicly traded company on June 28, 2017.

The Company has elected to be treated as a real estate investment trust, or REIT, as defined under the Internal Revenue Code of 1986, as amended, or the Code, for U.S. federal income tax purposes. As long as the Company continues to comply with a number of requirements under federal tax law and maintains its qualification as a REIT, the Company generally will not be subject to U.S. federal income taxes to the extent that the Company distributes its taxable income to its stockholders on an annual basis and does not engage in prohibited transactions. However, certain activities that the Company may perform may cause it to earn income which will not be qualifying income for REIT purposes. The Company has designated one of its subsidiaries as a taxable REIT subsidiary, or TRS, as defined in the Code, to engage in such activities.

Note 2. Basis of Presentation and Significant Accounting Policies

Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of all subsidiaries; inter-company accounts and transactions have been eliminated. Certain prior period amounts have been reclassified to conform to the current period presentation. The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles, or GAAP.

All entities in which the Company holds investments that are considered variable interest entities, or VIEs, for financial reporting purposes were reviewed for consolidation under the applicable consolidation guidance. Whenever the Company has both the power to direct the activities of an entity that most significantly impact the entity’s performance, and the obligation to absorb losses or the right to receive benefits of the entity that could be significant, the Company consolidates the entity. See Note 4 - Variable Interest Entities and Securitized Debt Obligations to the Company’s Consolidated Financial Statements included in this Annual Report on Form 10-K for additional details regarding consolidation of VIEs.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make a number of significant estimates. These include estimates of amount and timing of allowances for credit losses, fair value of certain assets and liabilities, and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the consolidated financial statements and the reported amounts of certain revenues and expenses during the reported period. It is likely that changes in these estimates (e.g., valuation changes to the underlying collateral of loans due to changes in market capitalization rates, leasing, credit worthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders, overall economic and capital markets conditions, the broader commercial real estate market, local geographic sub-markets or other factors) will occur in the near term. As the novel coronavirus, or COVID-19, pandemic has evolved from its emergence in early 2020, so has its global impact. During the year ended December 31, 2021, many countries have re-instituted or strongly encouraged varying levels of quarantines and restrictions on travel, and in some cases have at times limited operations of certain businesses and taken other restrictive measures designed to help slow the spread of COVID-19 and its variants. Governments and businesses have also instituted vaccine mandates and testing requirements for employees. While vaccine availability and uptake have increased, the longer-term macroeconomic effects on global supply chains, inflation, labor shortages and wage increases continue to impact many industries, including those related to the collateral underlying certain of our loans. Moreover, with the potential for new strains of COVID-19 to emerge, governments and businesses may re-impose aggressive measures to help slow its spread in the future. For this reason, among others, as the COVID-19 pandemic continues, the potential global impacts are uncertain and difficult to assess. We believe the estimates and assumptions underlying our

GRANITE POINT MORTGAGE TRUST INC.

Notes to the Consolidated Financial Statements

consolidated financial statements are reasonable and supportable based on the information available as of December 31, 2021. However, uncertainty over the ultimate impact COVID-19 will have on the global economy generally, and the Company’s business in particular, makes any estimates and assumptions as of December 31, 2021, inherently less certain than they would be absent the current and potential impacts of COVID-19. The Company’s actual results could ultimately differ from its estimates and such differences may be material.

Significant Accounting Policies

Loans Held-for-Investment, Net

The Company originates and acquires commercial real estate debt and related instruments generally to be held as long-term investments. These assets are classified as loans held-for-investment on the consolidated balance sheets. Additionally, the Company finances pools of its commercial real estate loans through collateralized loan obligations, or CRE CLOs, which are considered VIEs for financial reporting purposes and, thus, are reviewed for consolidation under the applicable consolidation guidance. The Company has both the control to direct the activities of the CRE CLOs that most significantly impact the entities’ performance and the obligation to absorb losses or the right to receive benefits of the entities that could be significant, therefore, the Company consolidates the CRE CLOs and classifies the underlying loans as loans held-for-investment. Interest income on loans held-for-investment is recorded on the consolidated statements of comprehensive income (loss).

Loans held-for-investment are reported at cost, net of allowance for credit losses, any unamortized acquisition premiums or discounts, loan fees and origination costs, as applicable. The Company accounts for credit losses based on ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or ASU 2016-13. Subsequent to the adoption of ASU 2016-13 on January 1, 2020, to estimate and recognize an allowance for credit losses on loans held-for-investment and their related unfunded commitments, the Company continues to use probability-weighted analytical model. The Company employs quarterly updated macroeconomic forecasts, which reflect the ongoing impact of the COVID-19 pandemic on the overall U.S. economy and commercial real estate markets generally. Driven by the general progress around the development and distribution of the COVID-19 vaccines over the last few quarters, those macroeconomic forecasts have been improving, including expectations for unemployment rates, overall economic output, level of interest rates and values of real estate properties. Significant inputs to the Company’s estimate of the allowance for credit losses include loan specific factors such as debt service coverage ratio, or DSCR, loan to value ratio, or LTV, remaining contractual loan term, property type and others. In certain instances, for loans with unique risk and credit characteristics, the Company may instead elect to employ different methods to estimate an allowance for credit losses that also conform to ASU 2016-13 and related guidance.

GPMT US Equity

GPMT · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

GPMT US Equity☆

GPMT · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

GPMT US Equity