Third Quarter Highlights

• Interest income of $20.0 million; net interest income of $8.7 million
• Net loss attributable to common stockholders of $(16.2) million
• Earnings per share ("EPS") per basic common share of $(0.71)
• Operating income of $3.1 million
• Operating income per basic common share of $0.14
• Taxable income of $0.26 per share attributable to common stockholders after payment of dividends on our preferred stock
• Book value per common share of $13.75 at September 30, 2022
• Repurchased and retired $66.0 million face amount of our preferred stock and associated warrants
• Issued $110.0 million aggregate principal amount of 8.875% senior unsecured notes due 2027
• Collected total cash of $57.8 million from loan payments, sales of real estate owned ("REO") properties and collections from investments in debt securities and beneficial interests
• Held $72.9 million of cash and cash equivalents at September 30, 2022; average daily cash balance for the quarter was $62.3 million
• As of September 30, 2022, approximately 79.6% 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 ("REIT"), today announces its results of operations for the quarter ended September 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 September 30, 2022, we had a GAAP consolidated net loss attributable to common stockholders of $(16.2) million or $(0.71) 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 $3.1 million or $0.14 per common share. We consider Operating income to provide a useful measure for comparing the results of our ongoing operations over multiple quarters. For a reconciliation of Operating income to consolidated net loss/income available to common stockholders, please refer to Appendix B.

During the quarter ended September 30, 2022, we repurchased and retired $66.0 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 $5.7 million of GAAP preferred stock discount expense and the repurchase of the warrants accelerated future GAAP accretion expense on the warrant's put option liability of $8.8 million for a total of $14.5 million in charges related to the repurchases. The repurchase of the preferred stock will save us approximately $3.9 million annually in preferred dividends while the repurchase of the warrants will reduce future put option accretion expense by $8.0 million annually for a total annual savings of $11.9 million.

Our interest income for the quarter ended September 30, 2022 excluding any adjustment for expected credit losses was $8.7 million, a decrease of $3.1 million over the prior quarter. Gross interest income decreased $0.9 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 expansion as higher interest rates are expected to reduce prepayments from refinancing. Our interest expense for the quarter ended September 30, 2022 increased $2.2 million compared to the prior quarter primarily as a result of rate increases on our floating rate repurchase financing facilities and interest expense on our new unsecured debt deal.

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 September 30, 2022, we recorded income of $1.9 million due to the decrease in the net present value of expected future credit losses partially driven by higher than expected payments in full on our mortgage loan portfolio during the quarter compared to $1.0 million of income recorded for the second quarter.

We recorded a loss from our investments in affiliates of $0.5 million for the quarter ended September 30, 2022 compared to a loss of $0.4 million for the quarter ended June 30, 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 GAAP expenses decreased on a quarter over quarter basis by $1.2 million primarily due to a $0.7 million decrease in amortization of our put option liability on our remaining outstanding warrants. Additionally the repurchase of our preferred stock contributed to a decrease in our management fee expense by $0.4 million due to a decline in our average common and preferred equity.

We recorded $22.0 thousand in recoveries on our REO held-for-sale portfolio in real estate operating expense for the quarter ended September 30, 2022. We sold nine properties in the third quarter for a gain of $0.8 million and nine properties were added to REO held-for-sale through foreclosures or through direct purchase.

We ended the quarter with a GAAP book value of $13.75 per common share, compared to a book value per common share of $14.98 for the quarter ended June 30, 2022. The decrease in book value is driven primarily by a mark to market loss on our investments in debt securities, acceleration of discount on the retirement of our preferred stock and warrants, and our GAAP loss for the quarter.

Our taxable income for the quarter ended September 30, 2022 was $0.26 per share of net income available to common stockholders, compared to $0.36 per share of taxable net income available to common stockholders for the quarter ended June 30, 2022. Additionally, we recorded income tax expense of $2.4 million comprised of $1.7 million of income tax on our undistributed 2021 taxable income and $0.7 million of tax on income earned in our taxable REIT subsidiaries.

We collected $57.8 million of cash during the third quarter as a result of loan payments, loan payoffs, sales of REO, and cash collections on our securities portfolio to end the quarter with $72.9 million in cash and cash equivalents. Cash collections of $44.7 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 $13.1 million were derived from interest and principal payments on investments in debt securities and beneficial interests.

On August 26, 2022, we issued $110.0 million aggregate principal amount of 8.875% unsecured senior notes due 2027 in a private offering. We used the majority of the proceeds from the offering to repurchase and retire some of our outstanding Series A and Series B Fixed-to-Floating Rate Preferred Stock at a discount, as well as the associated warrants, and retained the remainder for general corporate purposes.

We purchased 34 RPLs with UPB of $9.1 million at 42.3% of property value and 90.4% of UPB and three NPLs with UPB of $0.4 million at 52.4% of property value and 69.2% of UPB. These loans were acquired and included on our consolidated balance sheet for a weighted average of 55 days of the quarter.

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

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Subsequent Events

Since quarter end, we have acquired three residential RPLs in one transaction from a single seller with aggregate UPB of $0.8 million. The purchase price of the RPLs was 78.5% of UPB and 58.2% of the estimated market value of the underlying collateral of $1.1 million.

We have agreed to acquire, subject to due diligence, two residential RPLs in two transactions with aggregate UPB of $0.6 million. The purchase price of the residential RPLs is 84.2% of UPB and 58.6% of the estimated market value of the underlying collateral of $0.9 million.

On October 26, 2022, we co-invested with third-party institutional investors to form 2022-RPL1 and acquired 17.5% of the securities and trust certificates from the trust. 2022-RPL1 acquired 1,948 RPLs with aggregate UPB of $293.6 million. The purchase price including joint venture expenses is 86.7% of UPB and 39.0% of the estimated market value of the underlying collateral of $653.1 million. Based on the structure of the transaction, we will not consolidate 2022-RPL1 under U.S. GAAP.

On November 3, 2022, our Board of Directors declared a cash dividend of $0.27 per share to be paid on November 29, 2022 to stockholders of record as of November 15, 2022.

Conference Call

Great Ajax Corp. will host a conference call at 5:00 p.m. EDT on Thursday, November 3, 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 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, risks relating to the impact of the COVID-19 pandemic 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 September 30, 2022. The COVID-19 outbreak has caused significant volatility and disruption in the financial markets both globally and in the United States. While lockdowns and restrictions have largely ended in the United States, a spike in COVID-19 cases and return to restrictions could cause 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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Appendix B - Reconciliation of Operating income to Consolidated net (loss)/income available to common stockholders

(Dollars in thousands except per share amounts)

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