Great Ajax Corp. (NYSE:AJX) Q3 2022 Earnings Conference Call November 3, 2022 5:00 PM ET

Company Participants

Larry Mendelsohn - Chief Executive Officer

Conference Call Participants

Brad Capuzzi - Piper Sandler

Matt Howlett - B. Riley

Operator

Please standby, we are about to begin. Good afternoon, ladies and gentlemen, welcome to the Great Ajax Corporation Q3 2022 Financial Results Call. At this time, all participants are in a listen-only mode. And please be advised that this call is being recorded. After the speakers' prepared remarks there will be a question-and-answer session. [Operator Instructions]

And now, I'd like to turn the call over to the Great Ajax, Chief Executive Officer, Mr. Larry Mendelsohn. Please go ahead sir.

Larry Mendelsohn

Thank you very much. Thank you very much everybody for joining us on the Great Ajax third quarter earnings call. I apologize for my voice. I'm getting over some laryngitis of the last few weeks. So it may come and go a little.

Before we get started I want to point you to Page 2 of the presentation, the Safe Harbor disclosure and disclosure regarding forward-looking statements. And with that we can get – jump to Page 3, the business overview and an introduction regarding the third quarter.

Q3 was what I would call a patient quarter. However, there is some noise in the Q3 income statement numbers, which makes it a bit confusing and we'll walk through this on today's call. Loan performance increased and loan cash flow velocity from property sales continued and has also continued into the fourth quarter of 2022. Repayments from borrower refinancing declined as you would expect.

The significant cash flow velocity from the mortgage loans and mortgage loan JV structures increases income acceleration through the requirements of CECL, but it also rapidly paid down our loan and securities portfolio as well as the associated asset-based financing, which can also reduce net interest income and the return on equity.

At September 30, we had approximately $73 million of cash as well as significant amount of unencumbered securities and loans. And in Q3, we repurchased $66 million face amount of our preferred shares and the associated warrants. While these repurchases create a one-time charge, it creates very significant savings going forward beginning in Q4.

Our managers' data science guides the analysis of loan characteristics and geographic market metrics, which you'll see later are really important for performance and resolution pathway probabilities and its ability to source these mortgage loans through the long-standing relationships it's developed really enables us to acquire mortgage loans that we believe have a material probability of prepayment and/or long-term continuing reperformance.