Second Quarter Highlights

• Interest income of $20.9 million; net interest income of $11.7 million
• Net loss attributable to common stockholders of $(9.2) million
• Earnings per share ("EPS") per basic common share of $(0.40)
• Operating income of $5.7 million
• Operating income per basic common share of $0.25
• Taxable income of $0.36 per common share after payment of preferred dividends
• Book value per common share of $14.98 at June 30, 2022
• Repurchased and retired $25.0 million face amount of our preferred stock and associated warrants
• Repurchased 475,355 shares of common stock at an average purchase price of $9.77 per share
• Refinanced four joint ventures with $436.3 million in unpaid principal balance ("UPB") of mortgage loans with collateral values of $1.1 billion and retained $86.0 million of varying classes of related agency rated securities to end the quarter with $441.4 million of investments in debt securities and beneficial interests
• Collected total cash of $74.0 million from loan payments, sales of real estate owned ("REO") properties and collections from investments in debt securities and beneficial interests
• Held $51.6 million of cash and cash equivalents at June 30, 2022; average daily cash balance for the quarter was $60.6 million
• As of June 30, 2022, approximately 74.2% of portfolio based on acquisition UPB made at least 12 out of the last 12 payments

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, 2022. 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.

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For the quarter ended June 30, 2022, we had a GAAP consolidated net loss attributable to common stockholders of $(9.2) million or $(0.40) per common share after preferred dividends, Operating income, a non-GAAP financial measure which adjusts GAAP earnings by removing unrealized gains and losses as well as certain other non-core expenses and preferred dividends, was $5.7 million or $0.25 per common share. We consider Operating income to provide a useful measure for comparing the results of our ongoing operations over multiple quarters and believe this information will be useful to our investors as it is how management evaluates our performance.

During the quarter ended June 30, 2022, we repurchased and retired $25.0 million face amount of our preferred stock and associated warrants for our common stock in a series of repurchase transactions. The repurchase of the preferred stock caused the recognition of $2.5 million of GAAP deferred issuance costs and the repurchase of the warrants accelerated future GAAP accretion expense on the warrant's put option liability of $3.5 million for a total of $6.0 million in one-time charges. The repurchase of the preferred stock will save us approximately $1.7 million annually in preferred dividends while the repurchase of the warrants will reduce future put option accretion expense by $2.8 million annually for a total annual savings of $4.5 million. We funded these repurchases with cash on hand.

Our interest income for the quarter ended June 30, 2022 excluding any adjustment for expected credit losses was $11.7 million, a decrease of $2.9 million over the prior quarter. Gross interest income decreased $2.3 million as a result of a lower average balance of our mortgage loan portfolio during the quarter and lower yields on our beneficial interests due to duration extension from increased reperformance of previously delinquent underlying loans. Our interest expense for the quarter ended June 30, 2022 increased $0.6 million compared to the prior quarter primarily as a result of rate increases on our repurchase financing facilities.

We generally acquire loans at a discount and record an allowance for expected credit losses at acquisition. We update the allowance quarterly based on changing cash flow expectations in accordance with the current expected credit losses accounting standard, otherwise known as CECL. During the quarter ended June 30, 2022, we recorded a $1.0 million decrease in the net present value of expected future credit losses primarily driven by higher than expected payments received on our mortgage loan portfolio during the quarter compared to a $4.0 million decrease in the net present value of expected future credit losses for the first quarter.

Our Other loss/income line includes a charge of $2.1 million, or $0.09 per common share for a loss on the refinancing of Ajax Mortgage Loan Trusts 2019-A and 2019-B ("2019-A and -B"). The trusts were redeemed in the second quarter of 2022 and the underlying mortgage loans were re-securitized in Ajax Mortgage Loan Trust 2022-B (“2022-B”). 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. The beneficial interests were settled through receipt of a combination of the beneficial interest in 2022-B and cash received from the sale of the underlying loans to 2022-B. Loan prices have undergone significant disruption since year end and the decline in loan prices versus December 31, 2021 resulted in lower than expected current cash proceeds at redemption. The loss is effectively a cash flow timing difference. We expect to recover the loss as accretion on the beneficial interest in 2022-B as the underlying expected cash flows 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 only record an impairment on loans carried on our balance sheet if the carrying value exceeds fair value. Comparatively, for the quarter ended March 31, 2022 we recorded a mark to market loss of $4.0 million on the resecuritization of Ajax Mortgage Loan Trusts 2018-D and 2018-G ("2018-D and -G") into Ajax Mortgage Loan trust 2022-A ("2022-A") in anticipation of the April settlement.

Our Other loss/income line also includes a lower of cost or market adjustment of $1.8 million, or $0.08 per common share resulting from duration extension of certain loans in our portfolio that were purchased at a discount. Increased reperformance of previously delinquent loans that were purchased at a discount extends expected duration which lowers yield as increased borrower equity has changed payment patterns.

We recorded a loss from our investments in affiliates of $0.4 million for the quarter ended June 30, 2022 compared to a loss of $63 thousand for the quarter ended March 31, 2022. The loss is partially due to the flow through impact of mark to market losses on shares of our stock held by our Manager and our Servicer. We account for our investments in our Manager and our Servicer using the equity method of accounting.

Our operating expenses increased on a quarter over quarter basis by $0.7 million primarily due to a $0.4 million increase in amortization of our put option liability on our remaining outstanding warrants and $0.3 million in higher local tax expense.

We recorded $0.1 million in recoveries on our REO held-for-sale portfolio in real estate operating expense for the quarter ended June 30, 2022. We sold one property in the second quarter and seven properties were added to REO held-for-sale through foreclosures. We are seeing an increase in REO as COVID-19 foreclosure moratoriums have expired and foreclosures have resumed.

We ended the quarter with a GAAP book value of $14.98 per common share, compared to a book value per common share of $15.95 for the quarter ended March 31, 2022. The decrease in book value is driven primarily by a mark to market loss on our investments in debt securities, acceleration of deferred issuance costs on retirement of our preferred stock and warrants, and our GAAP loss for the quarter offset by the positive impact of a lower share count at the end of the quarter due to the repurchase of 475,355 shares of our common stock.

Our taxable income for the quarter ended June 30, 2022 was $0.43 per share before preferred dividends, compared to $0.49 per share before preferred dividends for the quarter ended March 31, 2022. Our taxable income for the quarter ended June 30, 2022 was $0.36 per share of net income available to common stockholders, compared to $0.40 per share of net income available to common stockholders for the quarter ended March 31, 2022.

On April 14, 2022, with an accredited institutional investor we refinanced our 2018-D and -G joint ventures into 2022-A and retained $49.2 million of varying classes of agency rated securities and equity. We acquired 23.28% of the securities and trust certificates from the trust. 2022-A acquired 811 RPLs and NPLs with UPB of $215.5 million and an aggregate property value of $518.8 million. The AAA through A rated securities represent 71.9% of the UPB of the underlying mortgage loans and carry a weighted average coupon of 3.47%. This is the first fully rated securitization structure to include a substantial amount of NPLs. Approximately 33.9% of loan UPB in 2022-A was 60 days or more delinquent. Based on the structure of the transaction we will not consolidate 2022-A under U.S. GAAP.

On June 9, 2022, with an accredited institutional investor we refinanced our 2019-A and -B joint ventures into 2022-B and retained $36.8 million of varying classes of agency rated securities and equity. We acquired 17.18% of the securities and trust certificates from the trust. 2022-B acquired 1,106 RPLs and NPLs with UPB of $220.8 million and an aggregate property value of $575.5 million. The AAA through A rated securities represent 76.9% of the UPB of the underlying mortgage loans and carry a weighted average coupon of 3.47%. Based on the structure of the transactions, we do not consolidate 2022-B under U.S. GAAP.

We collected $74.0 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 $51.6 million in cash and cash equivalents. Cash collections of $55.4 million were derived from our mortgage loan and REO portfolios as a result of loan payments, loan payoffs, and sales of REO during the quarter, and $18.6 million were derived from interest and principal payments on investments in debt securities and beneficial interests.

We purchased six RPLs with UPB of $1.2 million at 68.0% of property value and one NPL with UPB of $0.2 million at 44.1% of property value. These loans were acquired and included on our consolidated balance sheet for a weighted average of 44 days of the quarter.

The following table provides an overview of our portfolio at June 30, 2022 ($ in thousands):

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Subsequent Events

We repurchased $5.0 million face amount of our outstanding preferred stock and associated warrants for our common stock. The repurchase of the preferred stock will save us approximately $0.3 million annually in preferred dividends while the repurchase of the warrants will reduce future put option accretion expense by approximately $0.6 million annually for a total expected annual savings of $0.9 million.

Since quarter end, we have acquired 22 residential RPLs in four transactions from four different sellers with aggregate UPB of $5.7 million. The purchase price of the RPLs was 97.0% of UPB and 39.5% of the estimated market value of the underlying collateral of $14.1 million.

We have agreed to acquire, subject to due diligence, 16 residential RPLs in eight transactions, and three NPLs in one transaction, with aggregate UPB of $5.7 million and $0.4 million, respectively. The purchase price of the residential RPLs is 86.4% of UPB and 60.4% of the estimated market value of the underlying collateral of $8.2 million. The purchase price of the NPLs is 71.5% of UPB and 70.0% of the estimated market value of the underlying collateral of $0.4 million.

On August 4, 2022, our Board of Directors declared a cash dividend of $0.27 per share to be paid on August 31, 2022 to stockholders of record as of August 15, 2022.

Conference Call

Great Ajax Corp. will host a conference call at 5:00 p.m. EDT on Thursday, August 4, 2022 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 real estate investment trust, 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 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 our control, including, without limitation, risks relating to the impact of the COVID-19 outbreak and the risk factors and other matters set forth in our Annual Report on Form 10-K for the period ended December 31, 2021 filed with the Securities and Exchange Commissions (the "SEC") on March 4, 2022 and, when filed with the SEC, our Quarterly Report on Form 10-Q for the period ended June 30, 2022. The COVID-19 outbreak has caused significant volatility and disruption in the financial markets both globally and in the United States. If the COVID-19 outbreak continues to spread or the response to contain it is unsuccessful, we could experience material adverse effects on our business, financial condition, liquidity and results of operations. 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.

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Appendix A - Earnings per share

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

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