Great Ajax Corp. (NYSE:AJX) Q1 2022 Earnings Conference Call May 5, 2022 5:00 PM ET

Company Participants

Larry Mendelsohn – Chief Executive Officer

Conference Call Participants

Kevin Barker – Piper Sandler

Eric Hagen – BTIG

Operator

Good afternoon, ladies and gentlemen, and welcome to the Great Ajax Corporation First Quarter 2022 Financial Results Conference 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 at this time, I'll turn things over to our host, Mr. Larry Mendelsohn, Chief Executive Officer. Please go ahead, sir.

Larry Mendelsohn

Thank you very much. Thank you everybody for joining us for Great Ajax first quarter 2022 earnings call. I'd like to just have you take a quick look at Page 2, the Safe Harbor disclosures before we get into the meat of the call. Q1 2022 was a good quarter. There's some non-economic noise in the Q1 income statement numbers, which makes it a little confusing, but we'll walk through this on today's call. Our significant increase in loan performance and loan cash flow velocity continued and has also continued into the second quarter of 2022 so far.

This continuing increase in the present value of loan cash flow and the resulting decrease in unallocated reserve discount in excess of modeled expectations led to an additional acceleration of interest income on loans during the first quarter of $3.9 million. The significant cash flow velocity from our mortgage loans and our mortgage loan JV structures increases income acceleration through the application of CECL, but it also rapidly pays down our loan in securities portfolio leverage, which can reduce ROE.

At March 31, we had approximately $71 million of cash and more than $300 million of unencumbered bonds and loans. And the significant cash balance does create an earnings drag, but in today's environment, especially today in today's environment, we expect significant opportunities to invest in loans and related assets, as well as the repurchase of our shares and liabilities.

If we move to Page 3, a quick discussion business overview, our managers’ data science guides the analysis of loan characteristics and geographic market metrics for performance and resolution pathway probabilities and our managers ability to source these mortgage loans through longstanding relationships has enabled us to acquire loans that we believe have a material probability of long-term continuing reperformance and prepayment.