Market Overview

Great Ajax Corp. Announces Results for the Quarter Ended March 31, 2018

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First Quarter Highlights

  • Purchased $17.6 million of re-performing mortgage loans ("RPLs") with
    an aggregate unpaid principal balance ("UPB") of $19.7 million and
    underlying collateral value of $32.4 million.
  • Interest income of $25.6 million; net interest income of $13.1 million.
  • Net income attributable to common stockholders of $7.7 million.
  • Basic earnings per share ("EPS") of $0.41.
  • Taxable income of $0.37 per share.
  • Book value per share of $15.53 at March 31, 2018.
  • Held $47.5 million of cash and cash equivalents at March 31, 2018.

Great Ajax Corp. (NYSE:AJX), a Maryland corporation that is a real
estate investment trust, today announces its results of operations for
the quarter ended March 31, 2018. We focus primarily on acquiring,
investing in and managing a portfolio of RPLs secured by single-family
residences and commercial properties and, to a lesser extent,
non-performing mortgage loans ("NPLs"). In addition to our continued
focus on residential RPLs, we also originate and acquire small balance
commercial loans ("SBC loans") secured by multi-family residential and
commercial mixed use retail/residential properties.

 

Financial Results (Unaudited)
($ in
thousands except per share amounts)

 

 

     

March 31,
2018

 

December 31,
2017

 

September 30,
2017

 

June 30,
2017

 

March 31,
2017

Loan interest income(1,2) $ 25,445 $ 24,231 $ 24,396 $ 21,682 $ 20,556
Total revenue(1,3) $ 14,743 $ 13,797 $ 14,226 $ 13,105 $ 13,667
Consolidated net income(1) $ 8,322 $ 6,638 $ 7,716 $ 7,102 $ 8,698
Net income per diluted share $ 0.38 $ 0.33 $ 0.38 $ 0.36 $ 0.46
Average equity(1) $ 318,839 $ 302,482 $ 292,640 $ 288,884 $ 284,872
Average total assets(1) $ 1,377,537 $ 1,230,026 $ 1,157,223 $ 1,050,108 $ 952,112
Average daily cash balance(4) $ 51,540 $ 47,717 $ 43,666 $ 47,705 $ 35,513
Average carrying value of RPLs(1) $ 1,199,638 $ 1,046,126 $ 998,692

(5)

$ 898,749

(5)

$ 810,166

(5)

Average carrying value of NPLs $ 40,593 $ 43,400 $ 44,919

(5)

$ 48,396

(5)

$ 52,770

(5)

Average carrying value of originated SBC loans $ 11,629 $ 11,273 $ 8,427

(5)

$ 5,493

(5)

$ 2,781

(5)

Average debt balance(1) $ 1,064,490 $ 943,329 $ 883,770 $ 775,717 $ 669,938

 

____________________________________________________________
 

(1) Reflects the impact of consolidating the assets, liabilities
and non-controlling interest of Ajax Mortgage Loan Trust 2017-D,
which is 50% owned by a third-party institutional investor.

(2) Loan interest income excludes interest income from debt
securities and bank account balances.
(3) Total revenue includes net interest income, income from
investments in our manager and other income.
(4) Average daily cash balance includes cash and cash equivalents,
and excludes cash held in trust.

(5) The 2017 quarterly average balances for mortgage loans were
calculated using daily ending balances. Prior quarters of 2017
have been restated to conform to the current quarter presentation.

 

Our consolidated net income increased $1.7 million for the quarter ended
March 31, 2018 compared to the quarter ended December 31, 2017,
primarily due to the acceleration of deferred issuance costs of $0.9
million in the fourth quarter of 2017 related to calling our 2015-B and
-C securitizations. Additionally, we realized an increase in fee income
from the Home Affordable Modification Program and a gain, net of
impairments, on real estate owned property ("REO") sales. Our net
interest income increased $0.1 million as a result of recording a full
quarter of acquisitions, net of funding costs, that were made in the
quarter ended December 31, 2017. Although we only hold a 50% interest in
the assets of Ajax Mortgage Loan Trust 2017-D, we are required to
consolidate 100% of its assets and record an offsetting liability and
non-controlling interest for the debt and equity, respectively, held by
our joint venture partner. Accordingly, our net interest income reflects
the impact of consolidating the joint venture.

On January 26, 2018, we agreed to acquire an 8% ownership interest in
Great Ajax Financial Services LLC ("GAFS"), the parent of our servicer,
Gregory Funding LLC. The acquisition will be completed in two steps. On
January 26, 2018, the initial closing, we acquired a 4.9% interest in
GAFS and three warrants, each exercisable for a 2.45% interest in GAFS
upon payment of additional consideration, in exchange for consideration
of $1.1 million of cash and 45,938 shares of our common stock. At the
date of an additional closing, expected to take place at the end of May,
2018, we expect to acquire the remaining 3.1% interest in GAFS and three
warrants, each exercisable for a 1.55% interest in GAFS, in exchange for
consideration of $0.7 million of cash and shares of our common stock
with a value of approximately $0.4 million, with the actual number of
shares dependent upon our common stock's public trading price at the
close of trading on the day immediately preceding the date of the
additional closing.

We collected $50.4 million on our mortgage loan and REO portfolios
through loan payments, loan payoffs and sales of REO during the quarter,
and ended the first quarter with $47.5 million in cash and cash
equivalents. We had an average cash balance of $51.5 million during the
quarter. We continue to see a high volume of payoffs in certain RPL
cohorts as borrowers continue to refinance or sell the underlying real
property. Additionally, we continue to experience duration extension in
other cohorts of our RPL portfolio resulting from materially lower than
expected delinquencies and higher expected future cash flows in the form
of interest and principal payments. This results in a significant
aggregate increase in expected future cash flows for these loans but a
lower current yield and lower expected current period income. The
increase in the quality of the portfolio has resulted in a lower cost of
funds on our securitization transactions.

We acquired $17.6 million of RPLs with an aggregate UPB of $19.7
million, and underlying collateral values of $32.4 million during the
quarter to end the period with $1,247.2 million of mortgage loans with
an aggregate UPB of $1,448.3 million. Mortgage loans purchased during
the first quarter and held as of quarter-end were on our consolidated
balance sheet for a weighted average of 56 days during the quarter.

 

Portfolio Acquisitions
($ in thousands)

 
     

March 31,
2018

 

December 31,
2017

 

September 30,
2017

 

June 30,
2017

 

March 31,
2017

RPLs
Count 87 1,211

(1)

109 1,218 24
UPB $ 19,699 $ 241,309 $ 32,718 $ 249,000 $ 3,445
Purchase price $ 17,566 $ 219,236 $ 26,645 $ 210,204 $ 3,143
Purchase price % of UPB 89.2 % 90.9 % 81.4 % 84.4 % 91.2 %
 
____________________________________________________________
 

(1) Includes the impact of 1,003 mortgage loans with a purchase
price of $177.3 million and UPB of $194.3 million acquired in the
fourth quarter of 2017 through a 50%-owned joint venture that we
consolidate.

 

The following table provides an overview of our portfolio at March 31,
2018 ($ in thousands):

 
No. of loans   6,840       Weighted average LTV(4)   87.5 %
Total UPB $ 1,448,313 Weighted average remaining term (months) 321
Interest-bearing balance $ 1,355,418 No. of first liens 6,819
Deferred balance(1) $ 92,895 No. of second liens 21
Market value of collateral(2) $ 1,942,170 No. of rental properties 15
Price/total UPB(3) 81.1 % Market value of rental properties $ 6,087
Price/market value of collateral 61.8 % Capital invested in rental properties $ 5,325
Re-performing loans 95.9 % Price/market value of rental properties 87.5 %
Non-performing loans 3.2 % No. of other REO 136
Originated SBC loans 0.9 % Market value of other REO(5) $ 26,816
Weighted average coupon 4.36 %
 
____________________________________________________________
 

(1) Amounts that have been deferred in connection with a loan
modification on which interest does not accrue. These amounts
generally become payable at maturity.

(2) As of date of acquisition.

(3) Our loan portfolio consists of fixed rate (58.5% of UPB), ARM
(10.0% of UPB) and Hybrid ARM (31.5% of UPB) mortgage loans.

(4) UPB as of March 31, 2018 divided by market value of collateral
and weighted by the UPB of the loan.

(5) 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.

 

Subsequent Events

On April 26, 2018 we closed Ajax Mortgage Loan Trust 2018-A ("2018-A"),
a joint venture with two independent third parties, which issued an
aggregate of $128.0 million of senior securities and retained $32.0
million of equity issued with respect to $160.0 million UPB of mortgage
loans. Ninety-four percent of the UPB was RPLs, and 6.0% was NPLs. The
senior securities represent 80% of the UPB of the underlying mortgage
loans. The securities may be sold by any party at a future date. We
retained a 9.4% interest and expect to account for 2018-A as an
equity-method investee. Subsequently, we acquired for the account of
2018-A, an additional 42 RPLs with an aggregate UPB of $13.2 million in
one transaction from a single seller. The loans were acquired at 87.5%
of UPB and 61.8% of the estimated market value of the underlying
collateral value of $18.7 million. We also agreed to acquire for the
account of 2018-A, subject to due diligence, 810 RPLs and 49 NPLs, with
UBP of $138.3 million and $5.8 million, respectively, in three
transactions from three different sellers. The RPL price equals 92.1% of
UPB and 57.1% of the underlying collateral value of $223.0 million. The
NPL price equals 57.5% of UPB and 39.6% of the underlying collateral
value of $8.5 million.

Additionally, we have also agreed to acquire, subject to due diligence,
85 RPLs and 504 NPLs with UPB of $18.1 million and $123.7 million,
respectively, in three transactions from three different sellers. The
purchase price of the RPLs equals 91.9% of UPB and 60.0% of the
estimated market value of the underlying collateral of $27.8 million.
The purchase price of the NPLs equals 79.5% of UPB and 63.2% of the
estimated market value of the underlying collateral of $155.6 million.
Some of these loans may be acquired through a joint venture with
institutional investors.

On April 23, 2018, our Board of Directors declared a dividend of $0.30
per share, to be paid on May 30, 2018 to common stockholders of record
as of May 15, 2018.

Conference Call

Great Ajax will host a conference call at 5:00 p.m. EDT, Tuesday, May 1,
2018 to review our financial results for the quarter. A live Webcast of
the conference call will be accessible from the Investor Relations
section of our website www.great-ajax.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 real estate
investment trust, that focuses primarily on acquiring, investing in and
managing RPLs secured by single-family residences and, to a lesser
extent, NPLs. We also originate in loans secured by multi-family
residential and smaller commercial mixed use retail/residential
properties, as well as in the properties directly. We are externally
managed by Thetis Asset Management LLC. 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 real estate investment trust
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 the control of Great Ajax, including, without limitation, the
risk factors and other matters set forth in our Annual Report on Form
10-K for the period ended December 31, 2017 filed with the SEC on March
8, 2018. Great Ajax undertakes 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.

 

GREAT AJAX CORP. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME

(Dollars in thousands except per
share amounts)

 
      Three months ended

March 31,
2018

 

December 31,
2017

 

September 30,
2017

 

June 30,
2017

(unaudited) (unaudited) (unaudited) (unaudited)

INCOME:

Interest income $ 25,591 $ 24,367 $ 24,529 $ 21,721
Interest expense (12,494 ) (11,382 ) (10,775 ) (9,293 )
Net interest income 13,097   12,985   13,754   12,428  
 
Income from investment in Manager 135 89 143 142
Other income 1,511   723   329   535  
Total income 14,743   13,797   14,226   13,105  
 

EXPENSE:

Related party expense - loan servicing fees 2,469 2,242 2,187 1,935
Related party expense - management fee 1,532 1,510 1,428 1,330
Loan transaction expense 355 214 290 442
Professional fees 609 856 497 507
Real estate operating expense 449 518 1,151 637
Other expense 991   871   910   886  
Total expense 6,405 6,211 6,463 5,737
Loss on debt extinguishment   913     218  
Income before provision for income tax 8,338 6,673 7,763 7,150
Provision for income tax 16   35   47   48  
Consolidated net income 8,322   6,638   7,716   7,102  
Less: consolidated net income attributable to non-controlling
interests
657   454   246   238  
Consolidated net income attributable to common stockholders $ 7,665   $ 6,184   $ 7,470   $ 6,864  
Basic earnings per common share $ 0.41   $ 0.34   $ 0.41   $ 0.38  
Diluted earnings per common share $ 0.38   $ 0.33   $ 0.38   $ 0.36  
 
Weighted average shares – basic 18,508,089   18,236,488   18,072,045   18,008,499  
Weighted average shares – diluted 26,395,158   26,111,202   25,246,764   23,026,679  
 
 

GREAT AJAX CORP. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS

(Dollars in thousands except per share
amounts)

 

ASSETS

      March 31, 2018   December 31, 2017
(Unaudited)
Cash and cash equivalents $ 47,459 $ 53,721
Cash held in trust 26 301
Mortgage loans, net(1,4) 1,247,213 1,253,541
Property held-for-sale, net(2) 23,769 24,947
Rental property, net 5,228 1,284
Investment in debt securities 6,218 6,285
Receivable from servicer 18,627 17,005
Investment in affiliates 8,727 7,020
Loans purchase deposit 26,740
Prepaid expenses and other assets 5,318   4,894  
Total assets $ 1,362,585   $ 1,395,738  
 

LIABILITIES AND EQUITY

Liabilities:
Secured borrowings, net(1,3,4) $ 662,494 $ 694,040
Borrowings under repurchase transactions 273,199 276,385
Convertible senior notes, net(3) 102,764 102,571
Management fee payable 762 750
Accrued expenses and other liabilities 3,723   4,554  
Total liabilities 1,042,942   1,078,300  
 
Equity:
Preferred stock $0.01 par value; 25,000,000 shares authorized, none
issued or outstanding
Common stock $0.01 par value; 125,000,000 shares authorized,
18,686,420 shares at March 31, 2018 and 18,588,228 shares at
December 31, 2017 issued and outstanding
187 186
Additional paid-in capital 256,512 254,847
Retained earnings 37,615 35,556
Accumulated other comprehensive loss (343 ) (233 )
Equity attributable to stockholders 293,971   290,356  
Non-controlling interests(5) 25,672   27,082  
Total equity 319,643   317,438  
Total liabilities and equity $ 1,362,585   $ 1,395,738  
 
____________________________________________________________
 

(1) Mortgage loans, net include $954,282 and $996,203 of loans at
March 31, 2018 and December 31, 2017, 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.).

(2) Property held-for-sale, net, includes valuation allowances of
$1,878 and $1,784 at March 31, 2018, and December 31, 2017,
respectively.

(3) Secured borrowings and convertible senior notes are presented
net of deferred issuance costs.

(4) As of March 31, 2018 and December 31, 2017, balances for
Mortgage loans, net includes $174.6 million and $177.1 million,
Secured borrowings, net of deferred costs includes $75.9 million
and $88.4 million, respectively, from a 50% owned joint venture,
which we consolidate under generally accepted accounting
principles in the United States, ("U.S. GAAP").

(5) Non-controlling interests includes $12.6 million and $14.0
million, respectively, from a 50% owned joint venture, which we
consolidate under U.S. GAAP.

 

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