Great Ajax Corp. (NYSE:AJX) Q1 2023 Earnings Conference Call May 4, 2023 5:00 PM ET
Company Participants
Larry Mendelsohn – Chief Executive Officer
Mary Doyle – Chief Financial Officer
Conference Call Participants
Matt Howlett – B. Riley
Eric Hagen – BTIG
Operator
Good day, everyone, and welcome to the Great Ajax Corp. Q1 2023 Financial Results Conference Call.
At this time, I would like to hand things over to Mr. Larry Mendelsohn, CEO. Please go ahead, sir.
Larry Mendelsohn
Thank you. Thank you, everyone, for joining us for our first quarter 2023 investor call. Before we get started, I’d like to point out Page 2 the Safe Harbor disclosure, and for forward-looking statements. I apologize for my voice. The allergy season in Portland is wane right now.
Before we get started, I wanted to give you a little introduction. Q1 of 2023 was as expected and predominantly as we discussed on the March 2 call, a couple of things to note before we get into the details though. In the first quarter, loan performance continued to increase and loan cash flow velocity from reinstatements on delinquent loans and from sales of homes by borrowers, particularly in March. This continued into the second quarter of 2023 as well.
Prepayments from borrowers, refinancing their mortgages, however, continued their slower pace as you would expect. The regular payment performance of our mortgage loans and mortgage loans and our JV structures in excess of our modeled expectations at the time of acquisition, for loans purchased at a discount to UPB has increased previous GAAP income by accelerating the purchase discount accretion, because of the required application of CECL. This then reduces forward GAAP interest income and return on equity thereafter.
However, the increase in cash flow velocity in the first quarter, particularly in March has increased even the post-CECL GAAP yields a bit. We’ve seen this in the second quarter as well so far.
At March 31, we did approximately $49 million of cash as well as significant amount of undercover securities and loans, which I’ll point out later in the table.
On Page 3, business overview, our manager’s data science guides our analysis of loan characteristics and the geographic market metrics for performance and resolution probabilities and the ability to source these mortgage loans through long-standing relationships has enabled us to acquire loans that we believe have material probability of prepayment and/or long-term continuing re-performance.