Granite Point Mortgage Trust Inc. (GPMT) Q4 2022 Earnings Call Transcript

Granite Point Mortgage Trust Inc. (NYSE:GPMT) Q4 2022 Earnings Conference Call February 24, 2023 11:00 AM ET

Company Participants

Chris Petta - IR

Jack Taylor - President and CEO

Steve Alpart - Chief Investment Officer and Co-Head of Originations

Marcin Urbaszek - CFO

Peter Morral - Chief Development Officer and Co-Head of Originations

Steve Plust - Chief Operating Officer

Conference Call Participants

Doug Harter - Credit Suisse

Steve Delaney - JMP Securities

Jade Rahmani - Keefe, Bruyette, & Woods

Operator

Good morning. My sanction is Diego, and I will beryllium your convention facilitator. At this time, I would for illustration to invited everyone to nan Granite Point Mortgage Trust Fourth Quarter and Full Year 2022 Financial Results Conference Call. [Operator Instructions] Please note, today's telephone is being recorded.

I would now for illustration to move nan telephone -- complete nan telephone to Chris Petta pinch Investor Relations for Granite Point.

Chris Petta

Thank you, and bully morning, everyone. Thank you for joining our telephone to talk Granite Point's 4th fourth and afloat twelvemonth 2022 financial results. With maine connected nan telephone this greeting are Jack Taylor, our President and Chief Executive Officer; Marcin Urbaszek, our Chief Financial Officer; Steve Alpart, our Chief Investment Officer and Co-Head of Originations; Peter Morral, our Chief Development Officer and Co-Head of Originations; and Steve Plust, our Chief Operating Officer.

After my introductory comments, Jack will supply a little recap of marketplace conditions and reappraisal of our existent business activities. Steve Alpart will talk our portfolio, and Marcin will item cardinal items from our financial results. The property merchandise and financial tables associated pinch today's telephone were revenge yesterday pinch nan SEC and are disposable successful nan Investor Relations conception of our website. We expect to record our Form 10-K adjacent week. I would for illustration to punctual you that remarks made by management during this telephone and nan supporting slides whitethorn see forward-looking statements, which are uncertain and extracurricular of nan company's control.

Forward-looking statements bespeak our views regarding early events and are taxable to uncertainties that could origin existent results to disagree materially from expectations. Please see our filings pinch nan SEC for a chat of immoderate of our risks that could impact results. We do not undertake immoderate responsibility to update immoderate forward-looking statements. We will besides mention to non-GAAP measures connected this call. This accusation is not intended to beryllium considered successful isolation aliases a substitute for nan financial accusation presented successful accordance pinch GAAP. A reconciliation of those non-GAAP financial measures to nan astir comparable GAAP measures tin beryllium recovered successful our net merchandise and slides, which are disposable connected our website.

I'll now move nan telephone complete to Jack.

Jack Taylor

Thank you, Chris, and bully morning, everyone. We would for illustration to invited you to our 4th fourth and afloat twelvemonth 2022 net call, and convey you for joining america today. Despite nan challenging marketplace backdrop and nan Fed's melodramatic actions successful raising liking rates, we successfully navigated this unstable situation and accomplished galore of our objectives complete nan people of 2022. Earlier successful nan year, we opportunistically grew our equity guidelines done nan $87.5 cardinal add-on preferred equity offering and repaid nan remainder of our higher costs word indebtedness borrowings. We refinanced 2 of our bequest delevered backing vehicles, releasing a important magnitude of capital, further strengthening our liquidity position.

During nan 2nd half of nan year, we closed connected 2 caller in installments accommodation pinch an aggregate borrowing capacity of up to $300 million, which are designed to money performing, subperforming and nonperforming loans connected a non-mark-to-market basis. These accommodation item our expertise to adhd to our already divers backing sources and supply america pinch much plus guidance and liquidity elasticity during nan existent volatile environment.

In anticipation of imaginable macroeconomic challenges and accordant pinch our blimpish attack to managing our business, early successful nan first half of 2022, we shifted our business objectives from originating caller loans and increasing our portfolio to preserving our liquidity to further bolster our equilibrium sheet. For example, we further emphasized proactive plus management, moving pinch our borrowers and driving indebtedness repayments done progressive speech good successful beforehand of indebtedness maturities. This contributed to a patient measurement of indebtedness repayments of astir $1 cardinal complete nan people of nan year. These and different actions allowed america to fortify our equilibrium expanse while besides redeeming nan $144 cardinal of convertible notes that matured successful December pinch rate connected manus without needing to entree nan costs successful nan superior markets, which were rather difficult astatine nan time.

As we person said successful nan past, we expect nan commercialized existent property and superior markets situation to stay challenging and uncertainty successful nan nearer term. It remains unclear erstwhile nan Fed will yet extremity raising short-term liking rates aliases for really agelong they will support them elevated erstwhile nan marketplace situation will stabilize aliases erstwhile nan commercialized existent property markets will improve. While we proceed to spot headwinds successful nan agency sector, they are impacting properties and markets very unevenly. In our portfolio, nan biggest effect has been connected those markets and properties much affected by nan pandemic and work-from-home trends. And we're a high-quality, well-located spot pinch a beardown sponsor that’s encountered a very reliable leasing market.

These trends, coupled pinch rising liking rates, person resulted successful a fewer borrowers electing to extremity backing further equity. However, these loans person been very overmuch nan exception. In general, we are seeing ongoing committedness by our borrowers to their properties and nan indebtedness assets successful our portfolio. We admit and are addressing nan challenges successful nan agency sector. And accordant pinch our intermediate word macro views, we person meaningfully accrued our CECL reserves complete nan past mates of quarters to astir 2.4% of our portfolio committedness arsenic of nan extremity of 2022.

In nan adjacent term, we will proceed to negociate our business successful a blimpish manner, protect our equilibrium expanse and support little leverage, while emphasizing liquidity and collaboratively moving pinch our borrowers to maximize outcomes. As we person seen during erstwhile world dislocations, nan U.S. commercialized existent property marketplace has ever been viewed arsenic a compelling spot to put complete nan agelong word and has attracted important amounts of superior complete time. Currently, a batch of superior is connected nan sidelines and is waiting for nan much intermediate clarity and superior marketplace stability. We judge that our importantly delevered equilibrium sheet, mixed pinch our team's proven expertise will let america to some mitigate nan effects connected our portfolio of nan marketplace uncertainty and yet return advantage of charismatic caller marketplace opportunities arsenic we normalize our levels of leverage.

We judge that our strategy of targeting mediate marketplace and moderately leveraged U.S. commercialized existent property loans pinch an mean indebtedness size of astir $37 cardinal pinch important borrower equity cushion is much resilient successful a marketplace for illustration this. As our indebtedness sizes are suited to a broader beingness of imaginable refinancing lenders and spot buyers. Given nan environment, we intend to support our cautious stance while drafting connected nan wide expertise and acquisition of our team, to successfully navigate nan challenges arsenic we person done complete our agelong careers successful existent property lending.

I would now for illustration to move nan telephone complete to Steve Alpart to talk our portfolio activities successful much detail.

Steve Alpart

Thank you, Jack, and convey you each for joining our telephone this morning. During 2022, we funded astir $565 cardinal of indebtedness balances pinch an mean equilibrium of $38 million. Our reduced origination gait for nan twelvemonth reflected our cautious attack to an uncertain marketplace situation and our extremity of expanding liquidity. We ended nan 4th pinch an aggregate committed equilibrium of $3.6 billion, and a main equilibrium of astir $3.4 billion, including $230 cardinal of early backing commitments, which accounts for astir 6% of our full commitments down from a precocious of complete $750 cardinal successful Q1 2020 and reflective of nan ray transitional quality of our loans.

Our portfolio continues to use from wide diversification crossed spot types and geographies pinch an mean indebtedness size of astir $37 million. Our loans proceed to present an charismatic income watercourse pinch a favorable wide in installments floor plan generating a output of astir 8.4% pinch a weighted mean stabilized LTV astatine origination of 63%. During nan 4th quarter, we funded astir $109 cardinal of full main consisting of astir $31 cardinal connected existing commitments and a $77 cardinal acquisition financing related to nan solution of nan Pasadena unit loan. We realized almost $1 cardinal from repayments and 2 indebtedness income during 2022, pinch astir 44% of that being agency loans. We judge this patient gait of repayments is owed to location being much liquidity successful nan mediate marketplace compared to nan ample indebtedness marketplace and validates our strategy of moving pinch our borrowers to let them clip to execute their business plans and waste nan spot aliases refinance our indebtedness while incrementally deleveraging our loans and/or enhancing our indebtedness economics aliases structure.

Our repayments continued passim nan twelvemonth pinch astir $362 cardinal of indebtedness repayments, paydowns and 1 indebtedness waste successful nan 4th quarter, pinch astir 47% of that being agency loans. The repayments outpaced indebtedness fundings successful nan 4th quarter, which resulted successful a astir $250 cardinal diminution successful our portfolio balance. As of December 31, our portfolio weighted mean consequence standing was 2.5, which was mostly unchanged from nan anterior 4th of 2.6. During nan quarter, we moved 1 of our agency loans pinch a UPB of $32 cardinal to a consequence ranking of 5 and spot it connected nonaccrual status. We are successful progressive discussions pinch nan borrower and are evaluating a assortment of imaginable solution alternatives, and we'll supply much accusation arsenic we person it.

With nan summation of this 5-rated indebtedness successful nan 4th quarter, and nan solution of nan Pasadena unit loan, astatine 12/31, we person 4 loans totaling $247 million, pinch a consequence standing of 5 and associated CECL reserves of astir $39 cardinal which were each secured by agency properties. We stay very focused connected pursuing various strategies connected these loans pinch nan nonstop timing and result being difficult to predict. We purpose to maximize economical outcomes, merchandise trapped superior and destruct nan meaningful resistance these loans imposed connected our net arsenic we successfully accomplished pinch nan Pasadena unit indebtedness during nan 4th quarter.

Apart from these 5-rated loans, our agency portfolio is very granular pinch 28 loans crossed complete 20 markets pinch an mean size of astir $34 million. Some of these properties are located successful markets pinch affirmative fundamentals for illustration Miami, Nashville, and nan able suburbs successful nan New York City Tri-State area. We're seeing superior betterment programs continuing and being completed. Rent collections person remained beardown and continued sponsored financial committedness arsenic exhibited by ongoing patient equity contributions. It's besides important to statement that nan immense mostly of nan agency properties successful our portfolio person been aliases are successful nan process of being substantially renovated and person aliases will person nan amenities and different beingness and locational features astir desired by tenants. We'll proceed to beryllium proactive and vigilant pinch our borrowers arsenic we negociate done nan year.

In ray of nan slowdown successful existent property transaction volume, unit connected spot values, marketplace uncertainty and our desire to summation liquidity, we expect to stay measured successful our attack to originations. We don't expect to lucifer nan robust repayment gait we knowledgeable successful 2022. However, we do expect repayments to outpace caller fundings. So arsenic a result, we do expect to spot a humble diminution successful our portfolio equilibrium complete nan adjacent term.

I will now move nan telephone complete to Marcin for a much elaborate reappraisal of our financial results.

Marcin Urbaszek

Thank you, Steve. Good morning, everyone, and convey you for joining america today. Yesterday afternoon, we reported a 4th fourth GAAP nett nonaccomplishment of $9.9 cardinal aliases $0.19 per basal share, which includes a proviso for in installments losses of $16.5 cardinal aliases $0.32 per stock and a nonaccomplishment connected a indebtedness waste of $1.7 cardinal aliases $0.03 per stock related to an opportunistic waste of a $22 cardinal mixed-use agency and unit loan. Distributable nonaccomplishment for nan 4th fourth was $8.2 cardinal aliases $0.16 per basal stock and includes a $15.5 cardinal realized nonaccomplishment related to nan solution of our unit indebtedness successful Pasadena, which we antecedently disclosed. Adjusted for nan realized losses, our Q4 distributable net were $9 cardinal aliases $0.17 per basal share. Our 4th fourth book worth declined by astir $0.38 per communal stock to $14.86 and was chiefly affected by nan summation successful our CECL reserves.

For nan afloat year, we reported GAAP nett nonaccomplishment of $55.3 cardinal aliases $1.04 per basal stock which was chiefly driven by a proviso for in installments losses of $69.3 cardinal aliases $1.32 per basal stock and nonaccomplishment connected early extinguishment of indebtedness of $18.8 cardinal aliases $0.36 per basal stock related to our repayment of nan word indebtedness borrowings earlier successful nan year. Our afloat twelvemonth 2022 distributable net were $14.7 cardinal aliases $0.28 per basal stock inclusive of $27.3 cardinal aliases $0.51 per basal stock realized losses related to nan resolutions of 2 nonaccrual loans and nan waste of 1 loan. Adjusted for nan realized losses, our afloat twelvemonth 2022 distributable net were $42 cardinal aliases $0.79 per basal share.

At 4th end, our CECL reserve totaled $86.6 cardinal aliases $1.65 per communal stock and represented astir 2.4% of our full indebtedness commitments. Our allowance for in installments losses includes astir $39 cardinal of reserves allocated to nan 4 risk-rated 5 nonaccrual loans. The $16.5 cardinal proviso for in installments losses successful nan 4th fourth was chiefly driven by much blimpish macroeconomic forecasts utilized successful our analysis.

Turning to our capitalization and liquidity, our 4th fourth full debt-to-equity ratio decreased to 2.3x from 2.6x astatine nan extremity of Q3, chiefly owed to nan repayment of our $144 cardinal convertible notes, which matured successful December, and continued repayments wrong our indebtedness portfolio. We ended nan 4th pinch astir $133 cardinal successful rate aft repaying nan convertible notes and proceed to actively negociate our liquidity and stress unchangeable funding.

During nan quarter, we added a caller $100 cardinal secured in installments facility, providing america pinch indebtedness level financing connected a non-mark-to-market ground and allowing for further backing flexibility, particularly pinch respect to nonperforming loans, giving america much optionality wrong our superior building arsenic we proceed to actively negociate our equilibrium expanse during this highly uncertain marketplace environment.

Thank you again for joining america today. And now, I would for illustration to unfastened nan telephone for questions.

Question-and-Answer Session

Operator

[Operator Instructions]. Our first mobility comes from Doug Harter pinch Credit Suisse.

Doug Harter

Hoping you could talk astir your plans to make much liquidity to grip nan person that comes owed successful nan 4th quarter?

Marcin Urbaszek

Sure. Thanks for joining us. Thanks for nan question. This is Marcin. Yes. Look, we will stay opportunistic vis-a-vis immoderate imaginable successful our superior markets transactions, obviously, that we did not do that owed successful nan 4th fourth to reside nan '22 maturities. We do person beautiful delevered portfolio. So we're looking astatine opportunities to perchance refinance immoderate of our backing vehicles, which would supply beautiful meaningful superior to thief america reside nan bond. So we whitethorn -- again, we'll stay opportunistic. We'll astir apt tally nan portfolio disconnected a small bit. But if there's an opportunity to refinance them, we'll measure that arsenic well.

Doug Harter

Just pursuing up connected that remark astir nan under-levered portfolio. Just looking astatine Slide 12. I -- tin you thief america pinch nan non-mark-to-market repurchase facility, nan secured in installments facility, what type of beforehand rates could you get connected those accommodation arsenic we benignant of deliberation astir nan imaginable for uncovering liquidity there?

Marcin Urbaszek

Sure. It really varies by different assets. These facilities, I mean, you tin spot connected this page, it's location betwixt 40% and 50% -- 55% beforehand complaint correct now. It really varies connected a peculiar loan. We group these accommodation up to really thief america pinch financing of immoderate of nan sub-performing and nonperforming loans, which we're very happy pinch that. It's a awesome instrumentality to thief america negociate wide liquidity. We spot a batch of opportunity to perchance refinance FL2 pinch nan 2nd CLO, which is beneath 40% precocious complaint correct now. So we're looking into that. But again, nan portfolio is beautiful delevered. So we judge we'll person immoderate opportunities to possibly switch immoderate of nan firm indebtedness for immoderate asset-related indebtedness complete time.

Jack Taylor

Doug, this is Jack Taylor. I would conscionable adhd 1 thing. I wouldn't usage this an operative presumption that immoderate refinancing of underlevered assets is put connected to nan $200 cardinal non-mark-to-market repurchase installation aliases nan secured in installments facility.

Doug Harter

Okay. I conjecture is that implying that refinancing -- aliases I guess, what is nan appetite aliases nan readiness to get caller financing facilities, secured financing accommodation successful nan marketplace today?

Jack Taylor

We're successful bully position pinch our existing banks and wouldn't request to scope retired to caller lenders. So we besides person enquiry from caller lenders arsenic well.

Operator

Our adjacent mobility comes from Steve Delaney pinch JMP Securities.

Steve Delaney

The caller 5-rated, I'm judge everyone connected nan telephone wants to study a small much astir nan caller 5-rated agency indebtedness successful Dallas. I'm not really acquainted pinch that market, but could you conscionable mostly picture what submarket, what portion of Dallas, it's located in? And possibly immoderate comments astir nan property of nan building, nan business scheme for nan sponsor and pinch nan existent occupancy and tenant operation looks like.

Steve Alpart

Steve, it's Steve Alpart. I'll support this precocious level. So this is simply a mini indebtedness secured by an agency spot successful Dallas, arsenic you know. We moved this 1 to a 5 successful nan 4th quarter. We person had different Dallas agency loans that person performed very well. We person different Dallas indebtedness correct now, which is adjacent and is besides performing very well. This 1 is -- has underperformed. The leasing has been sluggish. General area of Dallas is benignant of North Dallas. But we person to get to -- you've heard america talk a small spot astir really uneven capacity has been crossed markets, wrong markets, by buildings. This 1 conscionable underperformed. So we -- truthful those are nan reasons why we moved to 205. As acold arsenic imaginable outcomes here, it's nan accustomed mix, but we're looking astatine a imaginable waste of nan property. It could beryllium a deed successful lieu. The timing of nan solution is difficult to predict. But we're very focused connected resolving each nan 5-rated assets and expanding tally complaint earnings.

Steve Delaney

Understood. It was a 2017 loan. So I presume was it primitively for illustration 3 years and 1 one-year extension. So is it beautiful overmuch portion of nan determination is that they benignant of reached nan extremity of their 2nd extension.

Steve Alpart

Yes, that's a adjacent assumption. Most of these loans are -- location was a mates of hold options. This 1 is aft maturity. So those are each nan factors that went into moving this 1 to a 5, conscionable nan underperformance and nan maturity. But look, we're talking to nan borrower. The conversations for illustration almost each these deals are very cooperative. We person to conscionable benignant of conscionable look astatine nan scope of options.

Steve Delaney

Got it. Jack, a remark successful your opening remarks, we've seen -- each seen a batch of cycles complete nan years. A batch of existent property equity superior connected nan sidelines. I presume immoderate of that could beryllium considered distressed aliases rescue capital. I'm judge they're in installments costs that play successful that. As you spot nan marketplace and wherever we are correct now, what do we request arsenic a flash constituent to spot immoderate of that money travel in? Is it benignant of hold and spot nan Feds successful crippled and we cognize benignant of group do expect terminal rates. And conscionable if you could stock immoderate thoughts astir complete nan adjacent twelvemonth aliases more, erstwhile mightiness location beryllium immoderate superior coming into nan commercialized existent property marketplace from that type of source?

Jack Taylor

Well, convey you for nan question, and bully to speak pinch you. I deliberation it's an fantabulous question, and it goes to, I think, a very basal point, which is nan commercialized existent property marketplace is not monolithic. It is composed of galore different types of investors pinch different objectives and needs. So nan credit-oriented costs aliases superior that's been raised aliases is being raised we'll astir apt travel successful erstwhile there's much distressed trading and opportunities for them to recognize their higher yields aliases entree to nan properties done buying notes that will get to nan properties very quickly and past they tin run connected nan properties themselves and clasp connected for a longer play of time.

The bigger issue, I think, is nan inflection point. And my position is that nan superior driver for truthful overmuch of nan treatment successful nan superior markets and each will beryllium much clarity astir erstwhile rates are going to stop, being raised and really agelong they'll beryllium there. And that's a very iterative process. There's been a batch of caput fakes successful some directions complete nan past six months. You tin look astatine not only charismatic statements, but prognosticators. I deliberation that nan wide position is that erstwhile nan Fed pivots aliases nan marketplace believes they've pivoted location will beryllium a ratchet backmost up successful not only transaction measurement but superior moving into nan abstraction and leveling disconnected of nan [problems]. Most group can't entertain a longer-term clasp connected a spot aliases an acquisition if they don't cognize what their liabilities cost. And each liabilities are being driven by that uncertainty correct now.

Steve Delaney

And nan equity markets. I mean, nan 10-year is 50 ground points higher this greeting than it was connected February 2. So convey you, February. Appreciate everybody’s comments this morning.

Operator

[Operator Instructions] Our adjacent mobility comes from Stephen Laws pinch Raymond James.

Stephen Laws

A mates of things but I wanted to person a follow-up connected nan caller financing facility. Jack, tin you talk astir nan parameters for financing nan nonperforming loans, benignant of what type of beforehand complaint do you get connected that line? And what is nan costs of that financing to put that successful spot connected a non-marked 3-year basis?

Jack Taylor

I'll really move it complete to Marcin.

Marcin Urbaszek

Stephen, it's Martin. Good question. So erstwhile you look astatine our Page 12, it's 650 complete SOFR. And again, arsenic I mentioned to Doug earlier, nan beforehand rates will benignant of disagree based connected different loans, location betwixt 40% and 60%. But it really is asset-specific arsenic it is pinch immoderate type of financing connected immoderate type of facility. It's each really highly limited connected a peculiar plus that you're financing astatine nan time.

Operator

Our adjacent mobility comes from Jade Ramani pinch KBW.

Jade Rahmani

When we look astatine nan leverage of nan company, I'm puzzled arsenic to why location is much leverage available. Just looking astatine galore of your peers, rather a batch of them person connected nan plus level northbound of 4x leverage. And erstwhile I look astatine GPMT, nan leverage really ne'er sewage to those levels and now is among nan little appears yet it doesn't look that there's an contiguous root of liquidity speech from cash. So what do you deliberation nan main reasons are for that if nan in installments capacity is apt to beryllium resilient, fixed nan little mean indebtedness size versus those that play in, say, nan $100 cardinal positive range?

Marcin Urbaszek

Jade, it's Marcin. Thanks for nan question. Look, I deliberation erstwhile you look astatine nan wide leverage of nan company, obviously, there's a batch of factors that spell into it, and it's very backing root specific. So if you look astatine immoderate of our GLO financing, it's benignant of astatine 80% aliases northbound of 80% financing, right? So you tin get a batch of financing successful nan CLO market, which each of america have, right? And past arsenic nan CLO benignant of delever arsenic we person pinch nan 2nd CLO, it's beneath 40%. So erstwhile you person to look astatine it benignant of connected a circumstantial root of costs because of nan full leverage connected nan institution has evidently a summation of each of those. So we have, arsenic you conscionable benignant of say, we person readiness to lever up definite assets, and we intend to do truthful complete time. We are maintaining little leverage correct now arsenic owed to nan uncertainty successful nan markets, we evidently person nan bonds coming owed by nan extremity of nan year. So we're readying connected that. So it's a holistic approach, but we decidedly person sources of financing to relever nan company. We conscionable person to hold for immoderate markets expertise to do that.

Jade Rahmani

And pinch respect to nan existing repurchase accommodation that were successful place, excluding nan caller facility, that was added, nan $100 million, is location unused capacity that's presently disposable based connected nan existing collateral that's connected manus to get to for illustration a 75% beforehand rate?

Marcin Urbaszek

There is. We chose not to spell location yet, but there's opportunities to relever immoderate of those assets. But again, it's asset-specific and it evidently depends connected installation and a peculiar loan. So -- but we are -- arsenic Jack said earlier, we're successful bully opinionated pinch our lenders. And they really want to do much business pinch us. So we're evidently taking each that into consideration.

Jade Rahmani

How overmuch capacity do you deliberation location is? I don't person nan 10-K, I don't deliberation it's yet. But arsenic of September 30, it was thing astir $700 million.

Marcin Urbaszek

Yes, that hasn't really changed that much.

Jade Rahmani

Okay. But you said it's asset-specific. So not each of nan $700 cardinal would beryllium available. .

Marcin Urbaszek

Correct.

Jade Rahmani

Okay. And past nan 2nd mobility would conscionable beryllium astir much of a strategical attack to nan business. I've seen owe REITs waste and acquisition astatine these benignant of levels comparative to book value, and there's tons of reasons for that. One of nan reasons is investors are looking forward. So they're applying a discount to guardant book value, modeling successful CECL reserves, they would expect book worth to spell down and besides possibly nan dividend being supra earnings. But successful summation to that, it's wherever nan adjacent root of superior comes from to benignant of span immoderate spread nan institution has. Is location a chance to alteration nan speech to possibly buyback banal aliases partner pinch an extracurricular investor to possibly do immoderate benignant of imaginative financing that mightiness beryllium successful operation for illustration preferred and communal banal aliases possibly a person of immoderate sort, warrants, possibly that could really beryllium accretive to shareholders connected a book worth ground and supply leverageable superior to put nan institution successful a wholly different position.

Jack Taylor

Jade, this is Jack. Nice to speak pinch you. And truthful things for illustration banal buyback and different things, we don't remark connected that. So I won't spell to thing circumstantial aliases fundamental, but it is portion of our reasoning astir accretive superior raises, whether successful nan nationalist aliases backstage marketplace that could supply much momentum because we do judge we're assured that our trading worth astatine nan banal is not reflective of nan inherent worth of nan company. So we will beryllium analyzing these things, are analyzing them and will beryllium proceeding. But we can't remark specifically astir it, but of course, we deliberation astir our strategical early successful position of accessing much capital.

Jade Rahmani

And do you deliberation that -- spell ahead.

Marcin Urbaszek

Just to adhd to that conscionable successful position of profitability. We person a batch of superior and benignant of earnings, superior trap and net resistance from these nonaccrual loans, right? So I mean we estimate that nan nonaccruals costs america complete $4 cardinal successful liking income successful nan 4th quarter. So that's a beautiful important amount. So we are really evidently focused connected resolving these. And erstwhile we do that, you benignant of sewage a double use from releasing immoderate trapped capital, but besides turning them to earning assets. So nan tally complaint profitability tin amended dramatically erstwhile those loans are resolved and that tin beryllium past financed successful a much businesslike way. So it's benignant of a operation of nan two. And going into nan pandemic, we were 3.5x leveraged connected a full institution basis. So there's decidedly an opportunity to relever backmost up, but we're looking astatine each nan different imaginable outcomes here.

Jade Rahmani

But I deliberation erstwhile those loans are resolved, I mean, there's astir apt going to beryllium a pipeline of different loans that spell done issues I mean considering what's playing retired successful nan agency aft considering what's playing retired successful existent property much broadly and nan value correction. So I think, hopefully, immoderate benignant of superior scheme is privilege #1 alternatively than resolving those risk-5 rated loans and reasoning that, that will nutrient net and that will get nan banal up?

Jack Taylor

I person a mates of comments astir that. One, our CECL reserve process takes into relationship what we -- our existent thoughts are and we tin speak to that a small more. But nan -- successful position of nan pipeline, nan marketplace is very, very uncertain. But nan grade of nan problem loans that you're reasoning about, I think, is different than really we position it. And truthful our -- arsenic I responded to, we are looking astatine ways to bolster nan equilibrium expanse of each sorts, nan solution of nan nonaccruals doesn't mean that we're unsighted to nan truth that location mightiness beryllium immoderate much depending connected what goes connected successful nan market. We are rather alert of nan dynamics successful nan agency market. We deliberation our portfolio is mostly misunderstood because of nan thought that only bigger is better. And we deliberation that our portfolio is rather resilient arsenic we've said, though, we'll astir apt brushwood problems arsenic borrowers grapple pinch nan rising costs transportation and each these things. There will beryllium personification astir apt location who will attack america and say, "We request to widen pinch this different relief" thing for illustration that. We're not unsighted to those type of eventualities but we've categorized them successful our consequence rankings and successful our reserves. And moreover if we're disconnected by immoderate measure, it's not going to beryllium nan type of thing, I think, that you're reasoning of.

Jade Rahmani

Okay. And I wasn't pointing to GPMT's portfolio, successful particular, but conscionable nan biology overall. But I really admit you taking nan questions.

Operator

And location are nary further questions astatine this time. So I'll manus nan level backmost to Jack Taylor for closing remarks.

Jack Taylor

I would for illustration to convey everybody for participating successful nan telephone coming specifically want to see our team, not only successful nan C-suite, but passim nan institution for each nan difficult activity they're doing to support this institution and to move done these challenging markets. It's been superb efforts connected everybody's portion and a awesome execution being exhibited. Most importantly, I want to convey our shareholders for continuing to support our company. Thank you very much.

Operator

Thank you. And that concludes today's convention for today. All parties whitethorn disconnect. Have a bully day.