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Great Ajax Corp. Announces Results for the Quarter Ended June 30, 2018

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Second Quarter Highlights

  • Purchased $14.3 million of re-performing mortgage loans ("RPLs") with
    an aggregate unpaid principal balance ("UPB") of $15.5 million and
    underlying collateral value of $24.8 million.
  • Interest income of $26.7 million; net interest income of $13.9 million.
  • Net income attributable to common stockholders of $7.5 million.
  • Basic earnings per share ("EPS") of $0.40.
  • Taxable income of $0.35 per share.
  • Book value per share of $15.60 at June 30, 2018.
  • Collected $56.5 million of cash on our portfolio and held $34.7
    million of cash and cash equivalents at June 30, 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 June 30, 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)

 
   

June 30,
2018

   

March 31,
2018

   

December 31,
2017

   

September 30,
2017

 

June 30,
2017

Loan interest income(1,2) $ 26,158 $ 25,445 $ 24,231 $ 24,396 $ 21,682
Total revenue(1,3) $ 14,777 $ 14,743 $ 13,797 $ 14,226 $ 13,105
Consolidated net income(1) $ 8,213 $ 8,322 $ 6,638 $ 7,716 $ 7,102
Net income per basic share $ 0.40 $ 0.41 $ 0.34 $ 0.41 $ 0.38
Average equity(1) $ 319,815 $ 318,839 $ 302,482 $ 292,640 $ 288,884
Average total assets(1) $ 1,362,843 $ 1,377,537 $ 1,230,026 $ 1,157,223 $ 1,050,108
Average daily cash balance(4) $ 41,617 $ 51,540 $ 47,717 $ 43,666 $ 47,705
Average carrying value of RPLs(1) $ 1,182,904 $ 1,199,638 $ 1,046,126 $ 998,692

(5)

$ 898,749

(5)

Average carrying value of NPLs $ 40,767 $ 40,593 $ 43,400 $ 44,919

(5)

$ 48,396

(5)

Average carrying value of originated SBC loans $ 11,784 $ 11,629 $ 11,273 $ 8,427

(5)

$ 5,493

(5)

Average debt balance(1) $ 1,044,364 $ 1,064,490 $ 943,329 $ 883,770 $ 775,717
____________________________________________________________
 
(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 equity
method investments 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 decreased $0.1 million for the quarter ended
June 30, 2018 compared to the quarter ended March 31, 2018, primarily
due to higher unrealized losses on our real estate owned ("REO")
portfolio and lower Home Affordable Modification Project ("HAMP") fees
offset by higher net interest income on our mortgage loan pools and
lower loan transaction expenses.

The average yield on our loan portfolio increased to 8.74% compared to
8.38% in the quarter ended March 31, 2018, resulting in a $1.1 million
increase in interest income as a result increasing cash flow velocity on
our mortgage loans. The prepayments also accelerated the amortization of
deferred issuance costs on our secured borrowings, effectively
increasing our interest expense by $0.3 million.

Our Other income was lower for the quarter ended June 30, 2018 compared
to the quarter ended March 31, 2018 due to higher unrealized losses on
our REO and lower HAMP fees received on HAMP eligible loans due to
seasonal timing differences.

We recorded $0.7 million in impairments on our REO portfolio in Real
estate operating expense for the quarter ended June 30, 2018 as compared
to $0.4 million for the quarter ended March 31, 2018. The increase is
primarily attributable to a single high value property that experienced
significant damage during the foreclosure and eviction timeline.

During the quarter we acquired an additional 3.1% interest in Great Ajax
FS LLC ("GAFS"), the parent of our servicer, and three warrants, each
exercisable for a 1.55% interest in GAFS, in exchange for consideration
of $0.7 million of cash and 29,063 shares of our common stock. This
takes our ownership in GAFS to 8.0% with total warrants exercisable for
an additional 12.0%. Income from our investment in GAFS is recorded
using the equity method and is included in Income from equity method
investments in our consolidated Statements of Income.

We collected $56.5 million on our mortgage loan and REO portfolios
through loan payments, loan payoffs and sales of REO during the quarter,
and ended the second quarter with $34.7 million in cash and cash
equivalents. Of the $56.5 million in cash collections, $27.2
million was from loans paying in full where we recovered the full amount
of principal, past due interest and charges.

We acquired $14.3 million of RPLs with an aggregate UPB of $15.5
million, and underlying collateral values of $24.8 million during the
quarter to end the period with $1,231.2 million of mortgage loans with
an aggregate UPB of $1,417.9 million. Mortgage loans purchased during
the second quarter and held as of quarter-end were on our consolidated
Balance Sheet for a weighted average of 34 days during the quarter.

During the quarter ended June 30, 2018, we co-invested with third-party
institutional investors in two transactions. We acquired 9.36% of each
class of Ajax Mortgage Loan Trust 2018-A ("2018-A"), which acquired 485
RPLs and 11 NPLs with UPB of $113.8 million and an aggregate property
value of $176.1 million. We also acquired 20.0% of each class of Ajax
Mortgage Loan Trust 2018-B ("2018-B"), which holds 312 NPLs and 74 RPLs
with UPB of $94.8 million and a property value of $118.8 million. The
remaining ownership interests in these transactions were acquired by the
third-party institutional investors. We do not consolidate 2018-A or
2018-B because, under the terms of the transactions, we are not the
primary beneficiary.

 
Portfolio Acquisitions

($ in thousands)

 
   

June 30,
2018

   

March 31,
2018

   

December 31,
2017

 

September 30,
2017

   

June 30,
2017

RPLs
Count 64 87 1,211

(1)

109 1,218
UPB $ 15,549 $ 19,699 $ 241,309 $ 32,718 $ 249,000
Purchase price $ 14,313 $ 17,566 $ 219,236 $ 26,645 $ 210,204
Purchase price % of UPB 92.1 % 89.2 % 90.9 % 81.4 % 84.4 %

____________________________________________________________

 
(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 June 30,
2018 ($ in thousands):

             
No. of loans 6,719 Weighted average LTV(4) 86.8 %
Total UPB $ 1,417,914 Weighted average remaining term (months) 319
Interest-bearing balance $ 1,326,910 No. of first liens 6,698
Deferred balance(1) $ 91,004 No. of second liens 21
Market value of collateral(2) $ 1,913,302 No. of rental properties 14
Price/total UPB(3) 81.2 % Market value of rental properties $ 6,009
Price/market value of collateral 61.8 % Capital invested in rental properties $ 5,661
Re-performing loans 96.0 % Price/market value of rental properties 94.2 %
Non-performing loans 3.0 % No. of other REO 130
Originated SBC loans 1.0 % Market value of other REO(5) $ 25,503
Weighted average coupon 4.41 %
____________________________________________________________
 
(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 (51.0% of UPB), ARM (10.8%
of UPB) and Hybrid ARM (38.2% of UPB) mortgage loans.
(4) UPB as of June 30, 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

Since the quarter end we acquired one residential RPL and nine SBC RPLs
with aggregate UPB of $0.1 million and $7.2 million, respectively, in
three transactions from three sellers. The residential RPL was acquired
at 85.4% of UPB and the estimated market value of the underlying
collateral is $0.2 million. The purchase price equaled 43.7% of the
estimated market value of the underlying collateral. The SBC RPLs were
acquired at 101.8% of UPB and the estimated market value of the
underlying collateral is $14.5 million. The purchase price equaled 51.2%
of the estimated market value of the underlying collateral. We also
acquired a 10-unit multi-family apartment building with a purchase price
of $1.6 million.

Additionally, we agreed to acquire, subject to due diligence, five
residential RPLs, nine SBC RPLs and 21 NPLs with UPB of $1.1 million,
$9.5 million and $3.0 million, respectively, in eight transactions from
eight different sellers. The purchase price of the residential RPLs
equals 80.9% of UPB and 53.1% of the estimated market value of the
underlying collateral of $1.6 million. The purchase price of the SBC
RPLs equals 102.0% of UPB and 42.0% of the estimated market value of the
underlying collateral of $23.1 million. The purchase price of the NPLs
equals 77.1% of UPB and 55.5% of the estimated market value of the
underlying collateral of $4.1 million.

On July 31, 2018, our Board of Directors declared a dividend of $0.30
per share, to be paid on August 30, 2018 to common stockholders of
record as of August 15, 2018.

Conference Call

Great Ajax Corp. will host a conference call at 5:00 p.m. EDT, Tuesday,
August 7, 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 Corp., 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 Corp. 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

June 30,
2018

   

March 31,
2018

   

December 31,
2017

   

September 30,
2017

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

INCOME:

Interest income $ 26,690 $ 25,591 $ 24,367 $ 24,529
Interest expense   (12,799 )   (12,494 )   (11,382 )   (10,775 )
Net interest income   13,891     13,097     12,985     13,754  
 
Income from equity method investments 197 192 163 157
Other income   689     1,454     649     315  
Total income   14,777     14,743     13,797     14,226  
 

EXPENSE:

Related party expense - loan servicing fees 2,672 2,469 2,242 2,187
Related party expense - management fee 1,440 1,532 1,510 1,428
Loan transaction expense 35 355 214 290
Professional fees 506 609 856 497
Real estate operating expense 944 449 518 1,151
Other expense   965     991     871     910  
Total expense 6,562 6,405 6,211 6,463
Loss on debt extinguishment           913      
Income before provision for income tax 8,215 8,338 6,673 7,763
Provision for income tax   2     16     35     47  
Consolidated net income   8,213     8,322     6,638     7,716  
Less: consolidated net income attributable to non-controlling
interests
  692     657     454     246  
Consolidated net income attributable to common stockholders $ 7,521   $ 7,665   $ 6,184   $ 7,470  
Basic earnings per common share $ 0.40   $ 0.41   $ 0.34   $ 0.41  
Diluted earnings per common share $ 0.37   $ 0.38   $ 0.33   $ 0.38  
 
Weighted average shares – basic   18,595,769     18,508,089     18,236,488     18,072,045  
Weighted average shares – diluted   26,476,817     26,395,158     26,111,202     25,246,764  
 
 
GREAT AJAX CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share amounts)
 

ASSETS

    June 30, 2018     December 31, 2017
(Unaudited)
Cash and cash equivalents $ 34,710 $ 53,721
Cash held in trust 25 301
Mortgage loans, net(1,4) 1,231,195 1,253,541
Property held-for-sale, net(2) 22,807 24,947
Rental property, net 5,540 1,284
Investment in debt securities 32,214 6,285
Receivable from servicer 16,473 17,005
Investment in affiliates 9,536 7,020
Loans purchase deposit 26,740
Prepaid expenses and other assets   6,856     4,894  
Total assets $ 1,359,356   $ 1,395,738  
 

LIABILITIES AND EQUITY

Liabilities:
Secured borrowings, net(1,3,4) $ 633,136 $ 694,040
Borrowings under repurchase transactions 295,655 276,385
Convertible senior notes, net(3) 102,961 102,571
Management fee payable 770 750
Accrued expenses and other liabilities   4,158     4,554  
Total liabilities   1,036,680     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,
18,770,071 shares at June 30, 2018 and 18,588,228 shares at December
31, 2017 issued and outstanding
188 186
Treasury stock (151 )
Additional paid-in capital 257,836 254,847
Retained earnings 39,620 35,556
Accumulated other comprehensive loss   (396 )   (233 )
Equity attributable to stockholders   297,097     290,356  
Non-controlling interests(5)   25,579     27,082  
Total equity   322,676     317,438  
Total liabilities and equity $ 1,359,356   $ 1,395,738  
___________________________________________________________
 
(1)     Mortgage loans, net include $930.4 million and $996.2 million of
loans at June 30, 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 $1.9
million and $1.8 million at June 30, 2018, and December 31, 2017,
respectively.
(3) Secured borrowings and convertible senior notes are presented net of
deferred issuance costs.
(4) As of June 30, 2018 and December 31, 2017, balances for Mortgage
loans, net include s $171.2 million and $177.1 million,
respectively, and Secured borrowings, net of deferred costs includes
$73.5 million and $88.4 million, respectively, from a 50% owned
joint venture, which we consolidate under U.S. GAAP.
(5) Non-controlling interests includes $12.5 million and $14.0 million,
at June 30, 2018 and December 31, 2017, respectively, from the 50%
owned joint venture, which we consolidate under U.S. GAAP.
 

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