Q3 2021 Great Ajax Corp Earnings Call

Yep <unk> expense will decrease by the corresponding offsetting amount.

An important part of discussing interest income is the payment performance of our loan portfolio.

That September 30, approximately 76, 6% of our loan portfolio by <unk> made at least 12 over the last 12 payments as compared to only 13% at the time, we purchased alone.

This is up from approximately $74, 2% at June 30th of 2021.

And our first quarter of 2020 Investor call. We mentioned that we expected to COVID-19 related economic environment with negatively impact the percentage of 12 12 borrowers in our portfolio. Thus far the impact on regular performance has been far less than expected and the percentage of our portfolio that is 12 of 12.

Has been stable and increasing since Q4 of 2020 and is now higher than Q4 of 2020.

Additionally, we have seen prepayment from materials subset of our Covid impacted borrowers that a significant absolute dollars of equity and we're in certain positive home price appreciation locations.

The continuing strong regular payments pattern and the prepayment pattern of certain previously delinquent loans, partially leads to the three $7 million increase in present value.

A borrower payments in excess of modeled expectations for the quarter.

Approximately 28% of our full loan payoffs in Q3 2021 were from loans over 180 days delinquent. This is up from approximately 20% in Q2 of 2021.

While regular paying loans produce higher total cash flows over the life of the loans on average.

They can extend duration and because we purchase loans of discounts. This can reduce percentage yield on the loan portfolio and interest income.

However, regular paying loans increase or.

Enable financing at a lower cost of funds and provide regular cash flow.

Loans that are not regular monthly pay status tend to have shorter duration. However, we generally expected that this duration reduction would be less than typical due to the impact of certain COVID-19 resolution extension requirements.

Second quarter.

We did pick up approximately 300000 other income primarily from recoveries and gains on the sale of Oreo, which is partially offset by an increase in real estate operating expense.

We would expect this trend to continue as the Oreo formation increases after having a continuing net reduction in Oreo since the second quarter of 2020.

Book value was $16 a share at September 32021 versus $15 86 at June 32021.

The difference in book value comes from our GAAP earnings in excess of our dividend and also an increase in the market values of certain debt securities.

Taxable income was <unk> 43 per share.

Taxable income in Q3 was primarily driven by lower interest expense increases in prepayments, especially for nonperforming loans and from continuing high cash flow velocity on performing loans.

We saw many delinquent loans prepay in full and generate tax gains.

Approximately 28% of all prepayments were nonperforming loans.

Additionally, as our cost of funds decreases further we would expect further reductions in interest expense, which increased the taxable income.

In Q3, we completed one rated securitization and a joint venture structure totaling $517 million in NPV with proceeds paying down two prior unrated securitizations.

The new Securitizations combined increased leverage on the related loans and reduced funding costs. We retained approximately 55 million <unk> in the form of debt securities and beneficial interest in the joint venture.

We purchased 87 5 million of nonperforming loans with <unk> of 91 million and total total owing balance of approximately $96 million.

One transaction was $82 $3 million with <unk> of $84 4 million and total owing balance of approximately $90 million.

All of the underlying properties in this transaction are in Miami Dade Broward and Palm Beach counties in Florida. This transaction closed in mid August.

In late July of 2021, we purchased $170 million of Npls into a joint venture securitization that was created in June of 2021, with the securitized pre funding structure to buy the loans.

We own 20% of this joint venture the purchase price of the loans was 98% of <unk>, but only 93% of the <unk> balance and 54% of the underlying property value.

This transaction is accounted for in debt securities and beneficial interests rather than loans.

At September 30, we had approximately $93 million of cash and for the third quarter. We had an average daily cash balance and cash equivalent balance of approximately $89 million.

These purchase our appeals and Npls resulted in an increase in the fair market value of the loans and decrease in the cost of funding those loans.

On page six.

We continue to buy and own lower LTV loans.

Our overall RPF purchase price is approximately 48% of the property value and 80, 85% of <unk>.

And on page seven.

Purchased Npls increased in the third quarter as we purchased almost $90 million in loans format.

Our mpls on our balance sheet, our overall purchase prices, 90% of <unk> and 57% of property value.

Purchase price represents approximately 84% of total owing balance including any rears.

As a result of the low loan to value and higher absolute dollars of equity on average for our Enfield portfolio. We have seen that rising home prices have significantly accelerated prepayments and regular payments velocity on our mpls as borrowers can capture significant and growing equity.

This leads to greater interest income from the acceleration of loan purchases count and the increase in present value of cash flow velocity.

Our target markets, California continues to represent the largest segment of our loan portfolio or California mortgage loans are primarily in Los Angeles, Orange and San Diego counties.

We've seen consistent payment and performance patterns from loans in these markets.

Performance in Southern California has far outperformed expert expectation during the Covid pandemic period. We have also seen consistently strong creepy prepayment patterns, even more so in the last three quarters.

Since may of 2020, California, prepayments represent nearly 40% of all prepayments in our portfolio.

Until may of 2020, we had been seeing material negative effects from the news from the tap and be salt provisions of the tax law.

In New York City Metro and in suburban New Jersey in Southern Connecticut home values in homes that liquidity.

However, since then we've seen a quick positive turn in liquidity in the suburban locations.

As positive as we have seen demand for homes in our targets markets increase cash flow velocity on the loans increase and prepayment in full impacted on our loans increase.

12 for 12 loans in today's loan market trade it materially higher prices in our cost basis well over part.

As a result, the fair market value of our loan portfolio and implied corporate net asset value estimates are materially higher than gap book value, which presents are loans at the lower of market or amortized cost.

Since Q3 ended we've agreed to purchase approximately $351 million <unk> is nonperforming loans and a joint venture structure subject to due diligence.

Class eight <unk> senior bonds in our joint ventures.

At September 30, we had 161 million face of unencumbered bonds as well as a 140 million <unk> of unencumbered equity beneficial interest certificates $59 million of unencumbered mortgage loans combined with $93 million of cash at September 30, we have significant resources for being on offense and defense.

And with that.

I'm happy to answer any questions that anybody might have.

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Okay.

No fair enough.