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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): August 3, 2023

GREAT AJAX CORP.
(Exact name of registrant as specified in charter)
Maryland
001-36844
46-5211870
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)

13190 SW 68th Parkway
Suite 110
Tigard, OR 97223
(Address of principal executive offices)

Registrant’s telephone number, including area code:
503-505-5670

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolsName of each exchange on which registered
Common stock, par value $0.01 per shareAJXNew York Stock Exchange
7.25% Convertible Senior Notes due 2024AJXANew York Stock Exchange
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).



Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02.Results of Operations and Financial Condition

On August 3, 2023, Great Ajax Corp., a Maryland corporation (the “Company”), issued a press release regarding its financial results for the second quarter ended June 30, 2023 (the “Press Release”). A copy of the Press Release is attached hereto as Exhibit 99.1 and is available on the Company’s website.

The information provided in Item 2.02 of this report, including Exhibit 99.1, shall be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Item 7.01.
Regulation FD Disclosure

On August 3, 2023, the Company will hold an investor conference call and webcast to discuss financial results for the second quarter ended June 30, 2023, including the Press Release and other matters relating to the Company.

The Company has also made available on its website presentation materials containing certain additional information relating to the Company and its financial results for the second quarter ended June 30, 2023 (the “Presentation Materials”). The Presentation Materials are furnished herewith as Exhibit 99.2, and are incorporated by reference in this Item 7.01. All information in Exhibit 99.2 is presented as of the particular date or dates referenced therein, and the Company does not undertake any obligation to, and disclaims any duty to, update any of the information provided.

The information provided in Item 7.01 of this report, including Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall the information or Exhibit 99.2 be deemed incorporated by reference in any filings under the Securities Act of 1933, as amended.

Item 9.01.Financial Statements and Exhibits

Exhibit
Description
99.1Press Release dated August 3, 2023
99.2August 2023 Presentation Materials
104Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document





EXHIBIT INDEX
Exhibit
Description
99.1
99.2
104Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
GREAT AJAX CORP.
By:/s/ Mary Doyle
Name:Mary Doyle
Title:Chief Financial Officer

Dated: August 3, 2023



Exhibit 99.1 
logoa15a.jpg
GREAT AJAX CORP. ANNOUNCES RESULTS FOR THE QUARTER
ENDED JUNE 30, 2023
 
Second Quarter Highlights

•Interest income of $18.3 million; net interest income of $3.3 million
•Net loss attributable to common stockholders of $(12.0) million
•Operating loss of $(2.5) million
•Earnings per share ("EPS") per basic common share was a loss of $(0.51)
•Operating loss per basic common share of $(0.11)
•Taxable loss of $(0.02) per share attributable to common stockholders after payment of dividends on our preferred stock
•Book value per common share of $11.86 at June 30, 2023
•Collected total cash of $49.5 million from loan payments, sales of real estate owned ("REO") properties and collections from investments in debt securities and beneficial interests
•Held $40.3 million of cash and cash equivalents at June 30, 2023; average daily cash balance for the quarter was $43.6 million
•As of June 30, 2023, approximately 82.1% of our portfolio (based on unpaid principal balance ("UPB") at the time of acquisition) made at least 12 out of the last 12 payments
•On June 30, 2023, we entered into a Merger Agreement (as defined below) with Ellington Financial Inc. (NYSE: EFC) (“EFC”), pursuant to which, subject to the terms and conditions therein, we will be merged with and into a subsidiary of EFC

New York, NY—August 3, 2023 —Great Ajax Corp. (NYSE: AJX), a Maryland corporation that is a real estate investment trust ("REIT"), announces its results of operations for the quarter ended June 30, 2023. We focus primarily on acquiring, investing in and managing a portfolio of re-performing mortgage loans ("RPLs") and non-performing loans ("NPLs") secured by single-family residences and commercial properties. In addition to our continued focus on RPLs and NPLs, we also originate and acquire small-balance commercial loans ("SBC loans") secured by multi-family retail/residential and mixed use properties.
 


Selected Financial Results (Unaudited)
($ in thousands except per share amounts)
For the three months ended
June 30, 2023March 31, 2023December 31, 2022September 30, 2022June 30, 2022
Loan interest income(1)
$12,929 $13,281 $13,520 $14,864 $15,402 
Earnings from debt securities and beneficial interests(2)
$4,480 $4,569 $4,562 $4,613 $5,303 
Other interest income$931 $606 $367 $544 $195 
Interest expense$(15,039)$(14,925)$(14,482)$(11,369)$(9,175)
Net interest income$3,301 $3,531 $3,967 $8,652 $11,725 
Net decrease in the net present value of expected credit losses$2,866 $621 $1,152 $1,935 $961 
Other income/(loss), loss from equity method investments and loss on joint venture refinancing on beneficial interests$(8,581)$(3,612)$(3,744)$(65)$(3,918)
Total (loss)/revenue, net(1,3)
$(2,414)$540 $1,375 $10,522 $8,768 
Consolidated net loss(1)
$(11,462)$(7,364)$(6,283)$(9,503)$(4,781)
Net loss per basic share$(0.51)$(0.34)$(0.30)$(0.71)$(0.40)
Average equity(1,4)
$324,089 $337,206 $343,112 $399,610 $466,847 
Average total assets(1)
$1,424,524 $1,463,529 $1,509,738 $1,559,584 $1,645,915 
Average daily cash balance
$43,609 $50,916 $47,196 $62,334 $60,609 
Average carrying value of RPLs(1)
$886,072 $882,018 $883,254 $897,947 $909,382 
Average carrying value of NPLs(1)
$68,459 $86,494 $99,160 $100,827 $114,775 
Average carrying value of SBC loans
$10,876 $12,159 $14,275 $15,546 $16,704 
Average carrying value of debt securities and beneficial interests$382,502 $401,240 $427,471 $435,849 $487,484 
Average asset backed debt balance(1)
$870,595 $897,279 $933,695 $987,394 $1,046,985 
____________________________________________________________
(1)Reflects the impact of consolidating the assets, liabilities and non-controlling interests of Ajax Mortgage Loan Trust 2017-D, which is 50% owned by third-party institutional investors.
(2)Interest income on investment in debt securities and beneficial interests issued by our joint ventures is net of servicing fees.
(3)Total revenue includes net interest income, loss from equity method investments, loss on joint venture refinancing on beneficial interests and other income.
(4)Average equity includes the effect of an aggregate of $34.6 million of preferred stock for the three months ended June 30, 2023, March 31, 2023, December 31, 2022 and September 30, 2022, and $93.0 million for the three months ended June 30, 2022.

For the quarter ended June 30, 2023, we had a GAAP consolidated net loss attributable to common stockholders of $(12.0) million or $(0.51) per common share after preferred dividends. Operating loss, a non-GAAP financial measure which adjusts GAAP earnings by removing gains and losses as well as certain other non-core income and expenses and preferred dividends, was $(2.5) million or $(0.11) per common share. We consider Operating loss/income to provide a useful measure for comparing the results of our ongoing operations over multiple quarters. For a reconciliation of Operating loss/income to consolidated net loss available to common stockholders, please refer to Appendix B.

Our net interest income for the quarter ended June 30, 2023, excluding any adjustment for expected credit losses was $3.3 million, a decrease of $0.2 million over the prior quarter. Gross interest income decreased $0.1 million as a result of slightly lower yields and lower average balance on our mortgage and beneficial interests portfolio. Our interest expense for the quarter ended June 30, 2023 increased $0.1 million compared to the prior quarter primarily as a result of rate increases on our floating rate repurchase financing. Interest earning assets declined $24.1 million during the quarter ended June 30, 2023.

We generally acquire loans at a discount and record an allowance for expected credit losses at acquisition. We update the allowance quarterly based on actual cash flow results and changing cash flow expectations in accordance with the current expected credit losses accounting standard, otherwise known as CECL. During the quarter ended June 30, 2023, we recorded
2

income of $2.9 million due to the decrease in the net present value of expected future credit losses partially driven by prepayments compared to $0.6 million of income recorded for the first quarter of fiscal year 2023.

We recorded an $8.8 million non-cash impairment on our Investments in beneficial interests due to the joint venture refinancing of eight Ajax Mortgage Loan Trusts joint ventures that were redeemed or partially paid down when the underlying loans were re-securitized to form Ajax Mortgage Loan Trust 2023-B ("2023-B") and Ajax Mortgage Loan Trust 2023-C ("2023-C") in July 2023 (See Subsequent events, below). Although we continue to own approximately the same interest in the underlying mortgage loans and related cash flows, we account for our beneficial interests in joint ventures as legal securities. Accordingly, we treat the re-securitization event as the sale of loans from the old trust to the new trust. Since loan prices have undergone significant disruption from year end and, the decline in loan prices resulted in the impairment of our Investments in beneficial interests being re-securitized. The non-cash impairment is expected to be a timing difference as our net investment in the underlying loan pools and the underlying loan pool cash flow expectations remain unchanged. By comparison, when we re-securitize our wholly-owned secured borrowings, we do not recognize any gain or loss because the transaction is treated as a refinancing through the redemption and issuance of the notes and the beneficial interest is not recorded on the consolidated balance sheet as a separate legal security.

We recorded a loss from our investments in affiliates of $0.3 million for the quarter ended June 30, 2023 compared to a loss of $0.1 million for the quarter ended March 31, 2023 due to a pass through of higher losses on our equity method investment of Gaea.

Our GAAP expenses increased on a quarter over quarter basis by $1.0 million primarily due to a $0.6 million increase in other expense due to impairment on our REO, discussed further below. Additionally our management fee expense increased by $0.2 million due to an update in the calculation to include our unsecured debt securities to the extent proceeds were used to repurchase our preferred stock and related warrants, effective as of March 1, 2023.

We recorded $0.7 million in impairment on our REO held-for-sale portfolio in other expense for the quarter ended June 30, 2023, primarily due to an additional assessment needed for one of our New York properties. We sold seven properties in the second quarter and recorded a loss of $18 thousand in other income. Three properties were added to REO held-for-sale through foreclosures.

For the quarter ended March 31, 2023, we transferred certain securities from AFS to HTM in compliance with the European Union risk retention requirement, which was a non-cash transaction and recorded at fair value. On the date of transfer, accumulated other comprehensive income ("AOCI") included unrealized losses of $10.9 million for these securities. This amount will be amortized out of AOCI over the remaining life of the respective securities, and has no net impact to interest income. For the quarter ended June 30, 2023, this amortization resulted in a recapture of book value of $1.1 million through the recovery of AOCI compared to $2.0 million for the quarter ended March 31, 2023.

We ended the quarter with a GAAP book value of $11.86 per common share, compared to a book value per common share of $12.58 for the quarter ended March 31, 2023. The decrease in book value is driven primarily by our GAAP loss for the quarter and dividends paid, partially offset by the recovery of a portion of the mark to market loss in debt securities recorded on the balance sheet through AOCI, and the $1.1 million amortization of the unrealized loss on debt securities transferred to HTM.

Our taxable loss for the quarter ended June 30, 2023 was $(0.02) per share of net income available to common stockholders, compared to $0.05 per share of taxable net income available to common stockholders for the quarter ended March 31, 2023. Additionally, we recorded income tax expense of $0.2 million comprised primarily of state and local income taxes.

We collected $49.5 million of cash during the second quarter as a result of loan payments, loan payoffs, sales of REO, and cash collections on our securities portfolio to end the quarter with $40.3 million in cash and cash equivalents.

We purchased 68 RPLs with UPB of $16.3 million at 48.0% of property value and 82.7% of UPB. These loans were acquired and included on our consolidated balance sheet for a weighted average of 56 days of the quarter.

On June 30, 2023, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with EFC and EF Acquisition I LLC, a Maryland limited liability company and a direct, wholly-owned subsidiary of EFC (“Merger Sub”). Pursuant to the Merger Agreement, subject to the terms and conditions therein, we will be merged with and into Merger Sub, with Merger Sub remaining as a wholly-owned subsidiary of EFC (such surviving company, the “Surviving Company,” and such transaction, the “Merger”). Under the terms of the Merger Agreement, each share of our common stock outstanding immediately prior to the effective time (the “Effective Time”) of the Merger will be automatically converted into the right to
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receive from EFC (i) a number of newly and validly issued, fully-paid and nonassessable shares of common stock, $0.001 par value per share, of EFC based on a fixed exchange ratio of 0.5308, subject to adjustment as provided in the Merger Agreement, including for certain dilutive or accretive share issuances by us or EFC prior to the Effective Time and (ii) if applicable, that amount of cash equal to an amount of cash that EFC has agreed, pursuant to the Merger Agreement, to pay to holders of our common stock depending upon certain potential repurchases of our securities prior to the closing of the Merger, divided by the aggregate number of shares of our common stock and restricted shares (which are any each share of our common stock issued under the Great Ajax Corp. 2014 Director Equity Plan and the Great Ajax Corp. 2016 Equity Incentive Plan and is unvested and/or subject to a repurchase option or obligation, risk of forfeiture or other lapse restriction) entitled to receive such consideration. We expect the transaction to close prior to the year-end.

The following table provides an overview of our portfolio at June 30, 2023 ($ in thousands):

No. of loans5,208 Weighted average coupon4.43 %
Total UPB(1)
$997,156 
Weighted average LTV(5)
56 %
Interest-bearing balance$911,742 Weighted average remaining term (months)292 
Deferred balance(2)
$85,414 No. of first liens5,161 
Market value of collateral(3)
$2,127,910 No. of second liens47 
Current purchase price/total UPB
81.6 %No. of REO held-for-sale28 
Current purchase price/market value of collateral42.5 %
Market value of REO held-for-sale(6)
$4,275 
RPLs89.0 %
Carrying value of debt securities and beneficial interests in trusts
$353,044 
NPLs10.2 %
Loans with 12 for 12 payments as an approximate percentage of acquisition UPB(7)
82.1 %
SBC loans(4)
0.8 %
Loans with 24 for 24 payments as an approximate percentage of acquisition UPB(8)
74.7 %
____________________________________________________________
(1)Our loan portfolio consists of fixed rate (60.4% of UPB), ARM (6.6% of UPB) and Hybrid ARM (33.0% of UPB) mortgage loans.
(2)Amounts that have been deferred in connection with a loan modification on which interest does not accrue. These amounts generally become payable at maturity.
(3)As of the reporting date.
(4)SBC loans includes both purchased and originated loans.
(5)UPB as of June 30, 2023 divided by market value of collateral and weighted by the UPB of the loan.
(6)Market value of other REO is the estimated expected gross proceeds from the sale of the REO less estimated costs to sell, including repayment of servicer advances.
(7)Loans that have made at least 12 of the last 12 payments, or for which the full dollar amount to cover at least 12 payments has been made in the last 12 months.
(8)Loans that have made at least 24 of the last 24 payments, or for which the full dollar amount to cover at least 24 payments has been made in the last 24 months.

Subsequent Events

Since quarter end, we have acquired one residential NPL in one transaction from a single seller with aggregate UPB of $0.2 million and coupon of 8.38%. The purchase price of the NPL was 94.0% of UPB and 63.8% of the estimated market value of the underlying collateral of $0.3 million.

We have agreed to acquire, subject to due diligence, one residential RPL in one transaction with aggregate UPB of $0.2 million and coupon of 5.75%. The purchase price of the residential RPL is 80.0% of UPB and 55.0% of the estimated market value of the underlying collateral of $0.3 million.

On July 11, 2023, we sold an unrated Class A senior bond in one of our joint ventures and recognized a loss of $0.4 million. A cumulative $0.4 million of this loss was already reflected in our book value calculation through AOCI at June 30, 2023. This cumulative loss was reclassified to loss on sale of securities on the sale date.

On July 24, 2023, we formed 2023-B and 2023-C, with an accredited institutional investor, by refinancing eight joint ventures and recorded an $8.8 million non-cash impairment on our Investments in beneficial interests during the second quarter of 2023. 2023-B retained $20.7 million or 20.0% of varying classes of securities and equity. 2023-B acquired 571 RPLs and NPLs with UPB of $121.7 million and an aggregate property value of $252.2 million. The senior securities represent 75.0% of
4

the UPB of the underlying mortgage loans and carry a 4.25% coupon. In addition, 2023-C retained $36.1 million or 20.0% of varying classes of agency rated securities and equity. 2023-C acquired 1,171 RPLs and NPLs with UPB of $203.6 million and an aggregate property value of $459.1 million. The AAA through A rated securities represent 72.4% of the UPB of the underlying mortgage loans and carry a weighted average coupon of 3.45%. Based on the structure of the transactions, we do not consolidate 2023-B and 2023-C under U.S. GAAP.

On August 3, 2023, our Board of Directors declared a cash dividend of $0.20 per share to be paid on August 31, 2023 to stockholders of record as of August 15, 2023.

Conference Call

Great Ajax Corp. will host a conference call at 5:00 p.m. EST on Thursday, August 3, 2023 to review our financial results for the quarter. A live Webcast of the conference call will be accessible from the Quarterly Reports section of our website www.greatajax.com. An archive of the Webcast will be available for 90 days.
 
About Great Ajax Corp.

Great Ajax Corp. is a Maryland corporation that is a REIT, that focuses primarily on acquiring, investing in and managing RPLs and NPLs secured by single-family residences and commercial properties. In addition to our continued focus on RPLs and NPLs, we also originate and acquire SBC loans secured by multi-family retail/residential and mixed use properties. We are externally managed by Thetis Asset Management LLC, an affiliated entity. Our mortgage loans and other real estate assets are serviced by Gregory Funding LLC, an affiliated entity. We have elected to be taxed as a REIT under the Internal Revenue Code.

Forward-Looking Statements

This press release contains certain forward-looking statements. Words such as “believes,” “intends,” “expects,” “projects,” “anticipates,” and “future” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions, many of which are beyond our control, including, without limitation and the risk factors and other matters set forth in our Annual Report on Form 10-K for the period ended December 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on March 3, 2023, when filed with the SEC, our Quarterly Report on Form 10-Q for the period ended June 30, 2023, and statements concerning our pending merger with EFC, including our failure to close the pending merger or developments on its expected terms. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.

 
CONTACT:Lawrence Mendelsohn
 Chief Executive Officer
 Or
 Mary Doyle
 Chief Financial Officer
 Mary.Doyle@aspencapital.com
 503-444-4224
5

GREAT AJAX CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share amounts)  

 
Three months ended
June 30, 2023March 31, 2023December 31, 2022September 30, 2022
(unaudited)(unaudited)(unaudited)(unaudited)
INCOME
Interest income$18,340 $18,456 $18,449 $20,021 
Interest expense(15,039)(14,925)(14,482)(11,369)
Net interest income3,301 3,531 3,967 8,652 
Net decrease in the net present value of expected credit losses2,866 621 1,152 1,935 
Net interest income after the impact of changes in the net present value of expected credit losses6,167 4,152 5,119 10,587 
Loss from equity method investments(265)(98)(349)(451)
Loss on joint venture refinancing on beneficial interests(8,814)(995)— — 
Other income/(loss)498 (2,519)(3,395)386 
Total (loss)/revenue, net(2,414)540 1,375 10,522 
EXPENSE
Related party expense - loan servicing fees1,827 1,860 1,911 1,952 
Related party expense - management fee2,001 1,828 1,722 1,948 
Professional fees989 934 621 667 
Fair value adjustment on put option liability1,839 1,622 1,431 2,917 
Other expense2,211 1,614 1,741 1,358 
Total expense8,867 7,858 7,426 8,842 
Acceleration of put option settlement— — — 8,813 
Gain on debt extinguishment— (47)— — 
Loss before provision for income taxes(11,281)(7,271)(6,051)(7,133)
Provision for income taxes 181 93 232 2,370 
Consolidated net loss(11,462)(7,364)(6,283)(9,503)
Less: consolidated net income/(loss) attributable to non-controlling interests24 30 5 (42)
Consolidated net loss attributable to the Company(11,486)(7,394)(6,288)(9,461)
Less: dividends on preferred stock548 547 547 1,053 
Less: discount on retirement of preferred stock— — — 5,735 
Consolidated net loss attributable to common stockholders$(12,034)$(7,941)$(6,835)$(16,249)
Basic loss per common share$(0.51)$(0.34)$(0.30)$(0.71)
Diluted loss per common share$(0.51)$(0.34)$(0.30)$(0.71)
Weighted average shares – basic23,250,725 22,920,943 22,778,652 22,538,891 
Weighted average shares – diluted23,565,351 22,920,943 22,778,652 22,833,465 

6

GREAT AJAX CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share amounts)
 
June 30, 2023December 31, 2022
ASSETS(Unaudited)
Cash and cash equivalents$40,316 $47,845 
Mortgage loans held-for-investment, net(1,2)
961,277 989,084 
Real estate owned properties, net(3)
3,745 6,333 
Investments in securities available-for-sale(4)
142,104 257,062 
Investments in securities held-to-maturity(5)
71,706 — 
Investments in beneficial interests(6)
127,474 134,552 
Receivable from servicer7,514 7,450 
Investments in affiliates30,028 30,185 
Prepaid expenses and other assets21,526 11,915 
Total assets$1,405,690 $1,484,426 
LIABILITIES AND EQUITY 
Liabilities: 
Secured borrowings, net(1,7)
$438,402 $467,205 
Borrowings under repurchase transactions413,125 445,855 
Convertible senior notes, net(7)
103,516 104,256 
Notes payable, net(7)
106,414 106,046 
Management fee payable1,999 1,720 
Put option liability15,614 12,153 
Accrued expenses and other liabilities9,780 9,726 
Total liabilities1,088,850 1,146,961 
Equity: 
Preferred stock $0.01 par value, 25,000,000 shares authorized
Series A 7.25% Fixed-to-Floating Rate Cumulative Redeemable, $25.00 liquidation preference per share, 424,949 shares issued and outstanding at both June 30, 2023 and December 31, 20229,411 9,411 
Series B 5.00% Fixed-to-Floating Rate Cumulative Redeemable, $25.00 liquidation preference per share, 1,135,590 shares issued and outstanding at both June 30, 2023 and December 31, 202225,143 25,143 
Common stock $0.01 par value; 125,000,000 shares authorized, 23,627,677 shares issued and outstanding at June 30, 2023 and 23,130,956 shares issued and outstanding at December 31, 2022247 241 
Additional paid-in capital326,279 322,439 
Treasury stock(9,557)(9,532)
Retained (deficit)/earnings(17,282)13,275 
Accumulated other comprehensive loss(19,530)(25,649)
Equity attributable to stockholders314,711 335,328 
Non-controlling interests(8)
2,129 2,137 
Total equity316,840 337,465 
Total liabilities and equity$1,405,690 $1,484,426 
____________________________________________________________
7

(1)Mortgage loans held-for-investment, net include $652.3 million and $675.8 million of loans at June 30, 2023 and December 31, 2022, respectively, transferred to securitization trusts that are variable interest entities (“VIEs”); these loans can only be used to settle obligations of the VIEs. Secured borrowings consist of notes issued by VIEs that can only be settled with the assets and cash flows of the VIEs. The creditors do not have recourse to the primary beneficiary (Great Ajax Corp.). Mortgage loans held-for-investment, net include $6.0 million and $6.1 million of allowance for expected credit losses at June 30, 2023 and December 31, 2022, respectively.
(2)As of both June 30, 2023 and December 31, 2022, balances for Mortgage loans held-for-investment, net include $0.9 million from a 50.0% owned joint venture, which we consolidate under U.S. GAAP.
(3)Real estate owned properties, net, are presented net of valuation allowances of $1.3 million and $0.7 million at June 30, 2023 and December 31, 2022, respectively.
(4)Investments in securities AFS are presented at fair value. As of June 30, 2023, Investments in securities AFS include an amortized cost basis of $153.9 million and a net unrealized loss of $11.8 million. As of December 31, 2022, Investments in securities AFS include an amortized cost basis of $282.7 million and net unrealized loss of $25.6 million.
(5)On January 1, 2023, we transferred certain of our Investments in securities AFS to HTM due to European risk retention regulations. As of June 30, 2023, Investments in securities HTM includes an allowance for expected credit losses of zero and remaining discount of $7.8 million related to the unamortized unrealized loss in AOCI.
(6)Investments in beneficial interests includes allowance for expected credit losses of zero at both June 30, 2023 and December 31, 2022.
(7)Secured borrowings, net are presented net of deferred issuance costs of $3.8 million at June 30, 2023 and $4.7 million at December 31, 2022. Convertible senior notes, net are presented net of deferred issuance costs of zero and $0.3 million at June 30, 2023 and December 31, 2022, respectively. Notes payable, net are presented net of deferred issuance costs and discount of $3.6 million at June 30, 2023 and $4.0 million at December 31, 2022.
(8)As of June 30, 2023, non-controlling interests includes $1.0 million from a 50.0% owned joint venture, $1.0 million from a 53.1% owned subsidiary and $0.1 million from a 99.9% owned subsidiary which the Company consolidates. As of December 31, 2022, non-controlling interests includes $1.0 million from a 50.0% owned joint venture, $1.1 million from a 53.1% owned subsidiary and $0.1 million from a 99.9% owned subsidiary which we consolidate under U.S. GAAP.
8

Appendix A - Earnings per share

The following table sets forth the components of basic and diluted EPS ($ in thousands, except per share):

Three months ended
June 30, 2023March 31, 2023December 31, 2022September 30, 2022
Income
(Numerator)		Shares
(Denominator)		Per Share
Amount		Income
(Numerator)		Shares
(Denominator)		Per Share
Amount		Income
(Numerator)		Shares
(Denominator)		Per Share
Amount		Income
(Numerator)		Shares
(Denominator)		Per Share
Amount
(unaudited)(unaudited)(unaudited)(unaudited)
Basic EPS
Consolidated net loss attributable to common stockholders$(12,034)23,250,725 $(7,941)22,920,943 $(6,835)22,778,652 $(16,249)22,538,891 
Allocation of loss to participating restricted shares161 — 111 — 97 — 210 — 
Consolidated net loss attributable to unrestricted common stockholders$(11,873)23,250,725 $(0.51)$(7,830)22,920,943 $(0.34)$(6,738)22,778,652 $(0.30)$(16,039)22,538,891 $(0.71)
Effect of dilutive securities(1)
Restricted stock grants and director fee shares(2)
(161)314,626 — — — — (210)294,574 
Amortization of put option(3)
— — — — — — — — 
Diluted EPS
Consolidated net loss attributable to common stockholders and dilutive securities$(12,034)23,565,351 $(0.51)$(7,830)22,920,943 $(0.34)$(6,738)22,778,652 $(0.30)$(16,249)22,833,465 $(0.71)
____________________________________________________________
(1)Our outstanding warrants and the effect of the interest expense and assumed conversion of shares from convertible notes would have an anti-dilutive effect on diluted earnings per share for all periods shown and have not been included in the calculation.
(2)The effect of restricted stock grants and manager and director fee shares on our diluted EPS calculation for the three months ended March 31, 2023 and December 31, 2022 would have been anti-dilutive and have been removed from the calculation.
(3)The effect of the amortization of put options on our diluted EPS calculation for the three months ended June 30, 2023, March 31, 2023, December 31, 2022 and September 30, 2022 would have been anti-dilutive and have been removed from the calculation.

9

Appendix B - Reconciliation of Operating (loss)/income to Consolidated net loss available to common stockholders
(Dollars in thousands except per share amounts)

Three months ended
June 30, 2023March 31, 2023December 31, 2022September 30, 2022
(unaudited)(unaudited)(unaudited)(unaudited)
INCOME
Interest income$18,340 $18,456 $18,449 $20,021 
Interest expense(15,039)(14,925)(14,482)(11,369)
Net interest income3,301 3,531 3,967 8,652 
Other income498 455 479 1,259 
Total revenue, net3,799 3,986 4,446 9,911 
EXPENSE
Related party expense - loan servicing fees1,827 1,860 1,911 1,952 
Related party expense - management fees2,001 1,828 1,722 1,948 
Professional fees989 934 621 667 
Other expense1,526 1,503 1,443 1,380 
  Total expense6,343 6,125 5,697 5,947 
Consolidated operating (loss)/income$(2,544)$(2,139)$(1,251)$3,964 
Basic operating (loss)/income per common share$(0.11)$(0.09)$(0.05)$0.17 
Diluted operating (loss)/income per common share$(0.11)$(0.09)$(0.05)$0.17 
Reconciliation to GAAP net loss
Consolidated operating (loss)/income$(2,544)$(2,139)$(1,251)$3,964 
Mark to market loss on joint venture refinancing(8,814)(995)— — 
Realized loss on sale of securities— (2,974)(3,836)(860)
Net decrease in the net present value of expected credit losses2,866 621 1,152 1,935 
Fair value adjustment on put option liability(1,839)(1,622)(1,431)(2,917)
Acceleration of put option settlement— — — (8,813)
Other adjustments(950)(162)(685)(442)
Loss before provision for income taxes(11,281)(7,271)(6,051)(7,133)
Provision for income taxes 181 93 232 2,370 
Consolidated net (income)/loss attributable to non-controlling interest(24)(30)(5)42 
Consolidated net loss attributable to the Company(11,486)(7,394)(6,288)(9,461)
Dividends on preferred stock(548)(547)(547)(1,053)
Discount on retirement of preferred stock— — — (5,735)
Consolidated net loss attributable to common stockholders$(12,034)$(7,941)$(6,835)$(16,249)
Basic loss per common share$(0.51)$(0.34)$(0.30)$(0.71)
Diluted loss per common share$(0.51)$(0.34)$(0.30)$(0.71)
10
Second Quarter Investor Presentation August 3, 2023

 
Safe Harbor Disclosure 2  We make forward-looking statements in this presentation that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, cash flow and plans and objectives. When we use the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may” or similar expressions, we intend to identify forward-looking statements.  Statements regarding the following subjects, among others, may be forward-looking: market trends in our industry, interest rates, real estate values, the debt financing markets or the general economy or the demand for and availability of residential and small-balance commercial real estate loans; our business and investment strategy; our projected operating results; actions and initiatives of the U.S. government and changes to U.S. government policies and the execution and impact of these actions, initiatives and policies; the state of the U.S. economy generally or in specific geographic regions; economic trends and economic recoveries; our ability to obtain and maintain financing arrangements; changes in the value of our mortgage portfolio; changes to our portfolio of properties; impact of and changes in governmental regulations, tax law and rates, accounting guidance and similar matters; our ability to satisfy the real estate investment trust qualification requirements for U.S. federal income tax purposes; availability of qualified personnel; estimates relating to our ability to make distributions to our stockholders in the future; general volatility of the capital markets and the market price of our shares of common stock; and the degree and nature of our competition.  The forward-looking statements included in this presentation are based on our current beliefs, assumptions and expectations of our future performance. Forward-looking statements are not predictions of future events. Our beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are currently known to us or reasonably expected to occur at this time. If a change in our beliefs, assumptions or expectations occurs, our business, financial condition, liquidity and results of operations may vary materially from the forward-looking statements included in this presentation. Forward-looking statements are subject to risks and uncertainties, including, among other things, those resulting from the pandemic caused by Covid-19 or one its variants and those described under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, which can be accessed through the link to our Securities and Exchange Commission ("SEC") filings on our website (www.greatajax.com) or at the SEC's website (www.sec.gov). Other risks, uncertainties and factors that could cause actual results to differ materially from the forward-looking statements included in this presentation may be described from time to time in reports we file with the SEC. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Unless stated otherwise, financial information included in this presentation is as of June 30, 2023. Past performance is neither indicative nor a guarantee of future results.

 
Business Overview 3  Leverage longstanding relationships to acquire mortgage loans through privately negotiated transactions from a diverse group of customers and in joint venture investments with institutional investors – Acquisitions made in 381 transactions since inception. Three transactions closed in Q2 2023  Use our manager’s proprietary analytics to price each mortgage pool on an asset-by-asset basis – We own 19.8% of our manager – Adjust individual loan bid price to accumulate clusters of loans in attractive demographic metropolitan areas  Our affiliated servicer services the loans asset-by-asset and borrower-by-borrower – We own 9.6% and hold warrants to purchase up to an additional 12% of our affiliated servicer – Analytics and processes of our manager and servicer enable us to broaden our reach through joint ventures with third-party institutional investors  We use modest mark to market leverage to fund our investments in debt securities and primarily non mark to market leverage to fund our mortgage portfolio  As of June 30, 2023, we own a 22.0% equity interest in Gaea Real Estate Corp. (“GAEA”), an equity REIT that invests in multifamily properties with a focus on property appreciation and triple net lease vet clinics

 
Highlights – Quarter Ended June 30, 2023 4  Interest income of $18.3 million; net interest income of $3.3 million  Net loss attributable to common stockholders of $(12.0) million  Operating loss of $(2.5) million  Earnings per share ("EPS") per basic common share was a loss of $(0.51)  Operating loss per basic common share of $(0.11)1  Taxable loss of $(0.02) per share attributable to common stockholders after payment of dividends on our preferred stock  Book value per common share of $11.86 at June 30, 2023  Collected total cash of $49.5 million from loan payments, sales of real estate owned ("REO") properties and collections from investments in debt securities and beneficial interests  Held $40.3 million of cash and cash equivalents at June 30, 2023; average daily cash balance for the quarter was $43.6 million  As of June 30, 2023, approximately 82.1% of our portfolio (based on UPB at the time of acquisition) made at least 12 out of the last 12 payments  On June 30, 2023, we entered into a Merger Agreement with Ellington Financial Inc. (NYSE: EFC) (“EFC”), pursuant to which, subject to the terms and conditions therein, we will be merged with and into a subsidiary of EFC 1 Operating loss, a non-GAAP financial measure which adjusts GAAP earnings by removing gains and losses as well as certain other non-core income and expenses and preferred dividends. We consider Operating loss to provide a useful measure for comparing the results of our ongoing operations over multiple quarters.

 
Loan Portfolio Overview – as of June 30, 2023 5 $997.2 MM RPL1,3,5: $891.7 MM NPL2,5 : $105.5 MM $2,132.2 MM RPL1,5: $ 1,924.1 MM NPL2,5: $ 203.8 MM REO & Rental4: $ 4.3 MM 1 Re-performing loans ("RPL") 2 Non-performing loans (“NPL") 3 Includes $0.9 million UPB in joint ventures with third party institutional accredited investors that are required to be consolidated for GAAP 4 REO and rental property value is presented at estimated property fair value less expected liquidation costs 5 RPL and NPL statuses remain constant based on initial purchase status 89% 11% Unpaid Principal Balance RPL NPL 90.2% 9.6% 0.2% Property Value RPL NPL REO

 
Loan Portfolio Growth 6  RPL UPB includes $10.5 million of SBC loans, which are performing loans  RPL status stays constant based on initial purchase status $1,299 $1,145 $977 $949 $892 $1,814 $1,845 $1,701 $1,981 $1,924 $1,127 $1,004 $862 $845 $809 0 500 1,000 1,500 2,000 2,500 6/30/2019 6/30/2020 6/30/2021 6/30/2022 6/30/2023 M ill io ns Re-performing Loans UPB Property Value Price

 
Loan Portfolio Growth 7  NPL status stays constant based on initial purchase status $35 $37 $43 $120 $106 $46 $52 $72 $216 $204 $26 $27 $34 $107 $95 0 50 100 150 200 250 6/30/2019 6/30/2020 6/30/2021 6/30/2022 6/30/2023 M ill io ns Non-performing Loans UPB Property Value Price

 
Portfolio Concentrated in Attractive Markets 8 Clusters of loans in attractive, densely populated markets Stable liquidity and home prices Approximately 78% of the portfolio in our target markets Target States Target Markets Los Angeles San Diego Dallas Portland Phoenix Washington DC Metro Area Atlanta Orlando Tampa Miami, Ft. Lauderdale, W. Palm Beach New York / New Jersey Metro Area REIT, Servicer & Manager Headquarters Property Management Business Management Houston Charlotte

 
Portfolio Migration 9  24 for 24: Loans that have made at least 24 of the last 24 payments, or for which the full dollar amount to cover at least 24 payments has been made in the last 24 months  12 for 12: Loans that have made at least 12 of the last 12 payments, or for which the full dollar amount to cover at least 12 payments has been made in the last 12 months  7 for 7: Loans that have made at least 7 of the last 7 payments, or for which the full dollar amount to cover at least 7 payments has been made in the last 7 months  NPL: <1 full payment in the last three months

 
Subsequent Events 10 1 While these acquisitions are expected to close, there can be no assurance that these acquisitions will close or that the terms thereof may not change.  Acquisitions Under Contract1  RPL  UPB: $187.5k  Collateral Value: $272.7k  Price/UPB: 80.0%  Price/Collateral Value: 55.0%  Coupon: 5.75%  1 loan in 1 transaction  Acquisitions Closed since 6/30/2023  NPL  UPB: $174.9k  Collateral Value: $257.9k  Price/UPB: 94.0%  Price/Collateral Value: 63.8%  Coupon: 8.38%  1 loan in 1 transaction  On July 11, 2023, we sold an unrated Class A senior bond in one of our joint ventures and recognized a loss of $0.4 million. A cumulative $0.4 million of this loss was already reflected in our book value calculation through Accumulated other comprehensive loss at June 30, 2023. This cumulative loss was reclassified to loss on sale of securities on the sale date  On July 24, 2023, we formed 2023-B and 2023-C, with an accredited institutional investor, by refinancing eight joint ventures and recorded an $8.8 million non-cash impairment on our Investments in beneficial interests during the second quarter of 2023. 2023-B retained $20.7 million or 20.0% of varying classes of securities and equity. 2023-B acquired 571 RPLs and NPLs with UPB of $121.7 million and an aggregate property value of $252.2 million. The senior securities represent 75.0% of the UPB of the underlying mortgage loans and carry a 4.25% coupon. In addition, 2023-C retained $36.1 million or 20.0% of varying classes of agency rated securities and equity. 2023-C acquired 1,171 RPLs and NPLs with UPB of $203.6 million and an aggregate property value of $459.1 million. The AAA through A rated securities represent 72.4% of the UPB of the underlying mortgage loans and carry a weighted average coupon of 3.45%. Based on the structure of the transactions, we do not consolidate 2023-B and 2023-C under U.S. GAAP  A dividend of $0.20 per share, to be paid on August 31, 2023 to common stockholders of record as of August 15, 2023

 
Financial Metrics 11 1Includes the impact of the credit loss expense 2Interest income on debt securities is net of servicing fee 3Includes the impact of the net decrease in the net present value of expected credit losses on mortgage loans 4Excludes the impact of convertible and unsecured debt

 
Securities and Loan Repurchase Agreement Funding 12 1As of June 30, 2023 and March 31, 2023 balances contain no bonds from consolidated joint ventures 2Securities retained from our wholly owned secured borrowings and eliminated in our consolidated balance sheet 3All debt securities repurchase agreement funding is mark to market

 
Consolidated Statements of Operations 13

 
Consolidated Balance Sheets 14

 
Consolidated Balance Sheets Footnotes 15 1. Mortgage loans held-for-investment, net include $652.3 million and $675.8 million of loans at June 30, 2023 and December 31, 2022, respectively, transferred to securitization trusts that are variable interest entities (“VIEs”); these loans can only be used to settle obligations of the VIEs. Secured borrowings consist of notes issued by VIEs that can only be settled with the assets and cash flows of the VIEs. The creditors do not have recourse to the primary beneficiary (Great Ajax Corp.). Mortgage loans held-for-investment, net include $6.0 million and $6.1 million of allowance for expected credit losses at June 30, 2023 and December 31, 2022, respectively. 2. As of both June 30, 2023 and December 31, 2022, balances for Mortgage loans held-for-investment, net include $0.9 million from a 50.0% owned joint venture, which we consolidate under U.S. Generally Accepted Accounting Principles ("U.S. GAAP"). 3. Real estate owned properties, net, are presented net of valuation allowances of $1.3 million and $0.7 million at June 30, 2023 and December 31, 2022, respectively. 4. Investments in securities available-for-sale (“AFS”) are presented at fair value. As of June 30, 2023, Investments in securities AFS include an amortized cost basis of $153.9 million and a net unrealized loss of $11.8 million. As of December 31, 2022, Investments in securities AFS include an amortized cost basis of $282.7 million and net unrealized loss of $25.6 million. 5. On January 1, 2023, we transferred certain of our Investments in securities AFS to HTM due to European risk retention regulations. As of June 30, 2023, Investments in securities HTM includes an allowance for expected credit losses of zero and remaining discount of $7.8 million related to the unamortized unrealized loss in AOCI. 6. Investments in beneficial interests includes allowance for expected credit losses of zero at both June 30, 2023 and December 31, 2022. 7. Secured borrowings, net are presented net of deferred issuance costs of $3.8 million at June 30, 2023 and $4.7 million at December 31, 2022. Convertible senior notes, net are presented net of deferred issuance costs of zero and $0.3 million at June 30, 2023 and December 31, 2022, respectively. Notes payable, net are presented net of deferred issuance costs and discount of $3.6 million at June 30, 2023 and $4.0 million at December 31, 2022. 8. $25.00 liquidation preference per share, 424,949 shares issued and outstanding at both June 30, 2023 and December 31, 2022. 9. $25.00 liquidation preference per share, 1,135,590 shares issued and outstanding at both June 30, 2023 December 31, 2022. 10. 125,000,000 shares authorized, 23,627,677 shares issued and outstanding at June 30, 2023 and 23,130,956 shares issued and outstanding at December 31, 2022. 11. As of June 30, 2023, non-controlling interests includes $1.0 million from a 50.0% owned joint venture, $1.0 million from a 53.1% owned subsidiary and $0.1 million from a 99.9% owned subsidiary which we consolidate under U.S. GAAP. As of December 31, 2022, non-controlling interests includes $1.0 million from a 50.0% owned joint venture, $1.1 million from a 53.1% owned subsidiary and $0.1 million from a 99.9% owned subsidiary which we consolidate under U.S. GAAP.

 
Consolidated Operating Income 16

 
Book Value Per Share 17

 
v3.23.2
Cover Page
Aug. 03, 2023
Document Information [Line Items]  
Document Type 8-K
Document Period End Date Aug. 03, 2023
Entity Registrant Name GREAT AJAX CORP.
Entity Incorporation, State or Country Code MD
Entity File Number 001-36844
Entity Tax Identification Number 46-5211870
Entity Address, Address Line One 13190 SW 68th Parkway
Entity Address, Address Line Two Suite 110
Entity Address, City or Town Tigard
Entity Address, State or Province OR
Entity Address, Postal Zip Code 97223
City Area Code 503
Local Phone Number 505-5670
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Entity Emerging Growth Company false
Entity Central Index Key 0001614806
Amendment Flag false
Common Stock  
Document Information [Line Items]  
Title of 12(b) Security Common stock, par value $0.01 per share
Trading Symbol AJX
Security Exchange Name NYSE
AJXA  
Document Information [Line Items]  
Title of 12(b) Security 7.25% Convertible Senior Notes due 2024
Trading Symbol AJXA
Security Exchange Name NYSE
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