Great Ajax Corp

Previous wording

In this quarterly report on Form 10-Q (“report”), unless the context indicates otherwise, references to “Great Ajax,” “we,” “the Company,” “our” and “us” refer to the activities of and the assets and liabilities of the business and operations of Great Ajax Corp.; “operating partnership” refers to Great Ajax Operating Partnership L.P., a Delaware limited partnership; “our Manager” refers to Thetis Asset Management LLC, a Delaware limited liability company; “Aspen Capital” refers to the Aspen Capital group of companies; “Aspen” and “Aspen Yo” refers to Aspen Yo LLC, an Oregon limited liability company that is part of Aspen Capital; and “the Servicer” and “Gregory” refer to Gregory Funding LLC, an Oregon limited liability company and our affiliate, and an indirect subsidiary of Aspen Yo.

Current wording

In this quarterly report on Form 10-Q (“report”), unless the context indicates otherwise, references to “Great Ajax,” “we,” “the Company,” “our” and “us” refer to the activities of and the assets and liabilities of the business and operations of Great Ajax Corp.; “operating partnership” refers to Great Ajax Operating Partnership L.P., a Delaware limited partnership; “our Former Manager” refers to Thetis Asset Management LLC, a Delaware limited liability company; "our New Manager" refers to RCM GA LLC; “Aspen Capital” refers to the Aspen Capital group of companies; “the Servicer” or "Newrez" and “Gregory” or "our Former Manager" refer to Gregory Funding LLC, an Oregon limited liability company and our affiliate.

Previous wording

Great Ajax Corp. is a Maryland corporation that is organized and operated in a manner intended to allow us to qualify as a REIT. We primarily target acquisitions of (i) RPLs, which are residential mortgage loans on which at least five of the seven most recent payments have been made, or the most recent payment has been made and accepted pursuant to an agreement, or the full dollar amount, to cover at least five payments has been paid in the last seven months and (ii) NPLs, which are residential mortgage loans on which the most recent three payments have not been made. We may acquire RPLs and NPLs either directly or in joint ventures with institutional accredited investors. The joint ventures are structured as securitization trusts, of which we acquire debt securities and beneficial interests. We may also acquire or originate SBC loans. The SBC loans that we target through acquisitions generally have a principal balance of up to $5.0 million and are secured by multi-family residential and commercial mixed use retail/residential properties on which at least five of the seven most recent payments have been made, or the most recent payment has been made and accepted pursuant to an agreement, or the full dollar amount to cover at least five payments has been paid in the last seven months. Additionally, we invest in single-family and smaller commercial properties directly either through a foreclosure event of a loan in our mortgage portfolio, or, less frequently, through a direct acquisition. We own a 19.8% equity interest in our Manager and an 9.7% equity interest in the parent company of our Servicer through GA-TRS, a wholly-owned subsidiary of the Operating Partnership. We have elected to treat GA-TRS as a taxable REIT subsidiary under the Code. Our mortgage loans and real properties are serviced by the Servicer, also an affiliated company.

Current wording

Great Ajax Corp. is a Maryland corporation that is organized and operated in a manner intended to allow us to qualify as a REIT. Historically, we have primarily target acquisitions of (i) RPLs, which are residential mortgage loans on which at least five of the seven most recent payments have been made, or the most recent payment has been made and accepted pursuant to an agreement, or the full dollar amount, to cover at least five payments has been paid in the last seven months and (ii) NPLs, which are residential mortgage loans on which the most recent three payments have not been made. We acquired RPLs and NPLs either directly or in joint ventures with institutional accredited investors. The joint ventures are structured as securitization trusts, of which we acquire debt securities and beneficial interests. We also acquire or originate SBC loans. The SBC loans that we target through acquisitions generally have a principal balance of up to $5.0 million and are secured by multi-family residential and commercial mixed use retail/residential properties on which at least five of the seven most recent payments have been made, or the most recent payment has been made and accepted pursuant to an agreement, or the full dollar amount to cover at least five payments has been paid in the last seven months. We own a 19.8% equity interest in our Former Manager through GA-TRS, a wholly-owned subsidiary of the Operating Partnership. We have elected to treat GA-TRS as a taxable REIT subsidiary under the code. Our mortgage loans and real properties are serviced by Newrez, a Rithm affiliate.

Previous wording

On February 26, 2024, we entered into a $70.0 million term loan with NIC RMBS, an affiliate of Rithm. The term loan is accompanied by the issuance of a certain number of warrants to Rithm Capital Corp. (together with its subsidiaries, "Rithm") or one of its affiliates to purchase our common stock, which warrants will be detachable. Additionally, subject to receipt of approval of a majority of our stockholders and the satisfaction of certain other closing conditions, Rithm or one of its affiliates has agreed to purchase $14.0 million of our common stock at a price of $4.87 per share (which represents the trailing five-day average closing price of the common stock on the NYSE as of the date of the Securities Purchase Agreement), the proceeds of which would be used to pay down the amount outstanding under the term loan. In connection with the foregoing transaction and subject to receipt of approval of a majority of our stockholders, we have agreed to terminate our existing management contract with the Manager in exchange for approximately $15.5 million of our common stock and enter into a new management agreement with RCM GA Manager LLC, a Rithm affiliate, which would become our new external manager. In connection therewith, we delivered a termination notice to the Manager on February 26, 2024.

Current wording

On June 11, 2024, we completed our previously announced strategic transaction with Rithm. The Strategic Transaction was approved on May 20, 2024, by our stockholders of (i) the sale of $14.0 million of our common stock at a price of $4.87 per share (which represents the trailing five-day average closing price of our common stock on the NYSE as of the date of the Securities Purchase Agreement, entered into on February 26, 2024 by us, the Operating Partnership (as defined herein), Thetis Asset Management LLC and Rithm and (ii) a new Management Agreement with RCM GA, under which, RCM GA would become our new external manager. Additionally, on February 26, 2024, we entered into a $70.0 million Credit Agreement with NIC RMBS. For a full description of the Credit Agreement’s terms, conditions and covenants, see the section titled “The Transaction — Credit Agreement” in the Company’s Definitive Proxy Statement filed with the Securities and Exchange Commission on April 10, 2024. The term loan was accompanied by our agreement to issue a certain number of warrants to Rithm or one of its affiliates to purchase our common stock, which warrants are detachable. See Note 8 — Commitments and Contingencies. Concurrently with entry into the Credit Agreement with NIC RMBS, we terminated our existing management contract with the Former Manager primarily in exchange for approximately 3,174,645 shares of our common stock. We currently own 19.8% of the Former Manager. The Former Manager is expected to liquidate in the fourth quarter of 2024 and distribute its assets to its members, including us.

Previous wording

In 2014, we formed Great Ajax Funding LLC, a wholly-owned subsidiary of the Operating Partnership, to act as the depositor of mortgage loans into securitization trusts and to hold the subordinated securities issued by such trusts and any additional trusts we may form for additional secured borrowings. AJX Mortgage Trust I and AJX Mortgage Trust II are wholly-owned subsidiaries of the Operating Partnership formed to hold mortgage loans used as collateral for financings under our repurchase agreements. On February 1, 2015, we formed GAJX Real Estate Corp., as a wholly-owned subsidiary of the Operating Partnership, to own, maintain, improve and sell certain REOs purchased by us. We have elected to treat GAJX Real Estate Corp. as a TRS under the Code.

Current wording

In 2014, we formed Great Ajax Funding LLC, a wholly-owned subsidiary of the Operating Partnership, to act as the depositor of mortgage loans into securitization trusts and to hold the subordinated securities issued by such trusts and any additional trusts we may form for additional secured borrowings. AJX Mortgage Trust I and AJX Mortgage Trust II are wholly-owned subsidiaries of the Operating Partnership formed to hold mortgage loans used as collateral for financings under our repurchase agreements. On February 1, 2015, we formed GAJX, as a wholly-owned subsidiary of the Operating Partnership, to own, maintain, improve and sell certain REOs purchased by us. We have elected to treat GAJX as a TRS under the code.

Previous wording

We believe the consummation of this strategic transaction will have a number of strategic benefits as our stockholders will have an opportunity to benefit from a shift in our strategic direction. We will seek to capitalize on commercial real estate investment opportunities and will be managed by an affiliate of Rithm, which has an experienced team with a well-recognized track record of success in real estate investments.

Current wording

We believe the consummation of this strategic transaction will have a number of strategic benefits as our stockholders will have an opportunity to benefit from a shift in our strategic direction. We will seek to capitalize on commercial real estate investment opportunities and will be managed by RCM GA, which has an experienced team with a well-recognized track record of success in real estate investments.

Previous wording

Following the consummation of the strategic transaction, we expect to pursue a flexible real estate investment strategy. Our target assets are currently expected to be in the commercial real estate sector, including commercial real estate, as well as preferred equity or debt instruments secured by mortgages on these types of properties, small balance commercial loans, mezzanine loans secured by pledges of equity interests in entities that own these types of properties or other forms of subordinated debt in connection with these types of properties, as well as commercial mortgage servicing rights and operating businesses in the sector. The post-closing Company does not currently anticipate investing in residential mortgage loans, RPLs or NPLs. Given the change in focus of our business, we intend to, over time, reposition much of our existing portfolio. We believe commercial real estate offers an attractive investment opportunity given market dynamics that are creating significant refinancing challenges and funding gaps.

Current wording

We expect to pursue a flexible real estate investment strategy. Our target assets are currently expected to be in the commercial real estate sector, including commercial real estate, as well as preferred equity or debt instruments secured by mortgages on these types of properties, small balance commercial loans, mezzanine loans secured by pledges of equity interests in entities that own these types of properties or other forms of subordinated debt in connection with these types of properties, as well as commercial mortgage servicing rights and operating businesses in the sector. The post-closing Company does not currently anticipate investing in residential mortgage loans, RPLs or NPLs. Given the change in focus of our business, we intend to, over time, reposition much of our existing portfolio. We believe commercial real estate offers an attractive investment opportunity given market dynamics that are creating significant refinancing challenges and funding gaps.

Previous wording

We have incurred substantial operating losses as a result. We expect to continue to incur significant and increasing operating losses for the foreseeable future given current market conditions for our mortgage asset holdings. In particular, higher interest rates have had, and are expected to continue to have, significant negative effects on our loan assets. The interrelationships between various rates and interest rate volatility have had, and are expected to continue to have, negative effects on our earnings because it has extended duration. This has resulted in, and is expected to continue to result in, significant decreases in the fair market value of performing loans. It also may impact adversely our ability to securitize, re-securitize or sell our assets on attractive terms.

Current wording

We have incurred substantial operating losses as a result. We expect to continue to incur operating losses for the foreseeable future as we continue to reposition our portfolio into commercial real estate assets. In particular, higher interest rates have had, and are expected to continue to have, significant negative effects on our loan assets. The interrelationships between various rates and interest rate volatility have had, and are expected to continue to have, negative effects on our earnings because it has extended duration. This has resulted in, and is expected to continue to result in, significant decreases in the fair market value of performing loans. It also may impact adversely our ability to securitize, re-securitize or sell our assets on attractive terms.

Previous wording

Through the end of the first quarter, the recent trends noted below have continued, including:

Current wording

Through the end of the second quarter, the recent trends noted below have continued, including:

Previous wording

Rising mortgage rates have reduced the supply of residential mortgage loans and stronger payment performance has reduced the supply of NPLs.

Current wording

Rising mortgage rates have reduced the supply of residential mortgage loans and stronger payment performance has reduced the supply of NPLs. Additionally, rising interest rates have extended the duration of existing mortgages resulting in higher prices and lower yields.

Previous wording

We also believe that banks that have deposit outflows due to rising interest rates and significant commercial real estate loan exposure will begin to sell certain SBC loans to dispose of their inventory.

Current wording

We also believe that banks that have deposit outflows due to rising interest rates and significant commercial real estate loan exposure will begin to sell loans to dispose of their inventory.

Previous wording

Expenses. Our expenses primarily consist of the fees and expenses payable by us under the Management Agreement and the Servicing Agreement. Additionally, our Manager incurs direct, out-of-pocket costs related to managing our business, which are contractually reimbursable by us. Loan transaction expense is the cost of performing due diligence on pools of mortgage loans. Professional fees are primarily for legal, accounting and tax services. Real estate operating expense consists of the ownership and operating costs of our REO properties, and includes any charges for impairments to the carrying value of these assets, which may be significant. Interest expense, which is subtracted from our Interest income to arrive at Net interest income, consists of the costs to borrow money.

Current wording

Expenses. Our expenses primarily consist of the fees and expenses payable by us under the Management Agreement and the Servicing Agreements. Additionally, our Former Manager incurred and our New Manager incurs direct, out-of-pocket costs related to managing our business, which are contractually reimbursable by us. Loan transaction expense is the cost of performing due diligence on pools of mortgage loans. Professional fees are primarily for legal, accounting and tax services. Real estate operating expense consists of the ownership and operating costs of our REO properties, and includes any charges for impairments to the carrying value of these assets, which may be significant. Interest expense, which is subtracted from our Interest income to arrive at Net interest income, consists of the costs to borrow money.

Previous wording

Management Transition. We currently rely on Thetis as our manager, and on Gregory, as our servicer. Thetis provides the employees necessary in order to manage our assets, as well as to address our corporate and financial reporting obligations, among other things. In connection with our transaction with Rithm, we anticipate that Thetis will be replaced by an affiliate of Rithm as our manager, subject to obtaining approval from a majority of our stockholders and the satisfaction of certain other closing conditions. Additionally, Gregory expects in the near future to enter into a transaction to assign its servicing rights and obligations to a third-party servicer, subject to receipt of necessary consents. During the transition period, we may need to enter into transition services arrangements in order to ensure continuity. In addition, as a result of our announced strategic transaction, among other reasons, we have experienced some loss of personnel. We may incur expenses and transaction costs associated with the management transition to Rithm and the transfer of Gregory’s servicing contracts to a third-party servicer. If we or our existing manager cannot retain certain key personnel during the transition period, or the new manager does not make available additional employees to assist, it may give rise to potential risks for us, including the risk of a significant deficiency or material weakness in internal control over financial reporting.

Current wording

Management Transition. In connection with the Rithm Transaction, we entered into the Management Agreement with RCM GA, an affiliate of Rithm, on June 11, 2024. Additionally, we transferred our loan servicing to Newrez. During the transition period, we have entered into a transition services arrangements in order to ensure continuity. In addition, as a result of the Rithm Transaction, among other reasons, we have experienced some loss of personnel. We may incur expenses and transaction costs associated with the management transition to Rithm and the transfer of our servicing contracts to Newrez. If we cannot retain certain key personnel during the transition period, the New Manager does not make available additional employees to assist, it may give rise to potential risks for us, including the risk of a significant deficiency or material weakness in internal control over financial reporting.

Previous wording

We generated a consolidated net loss attributable to common stockholders under U.S. Generally Accepted Accounting Principles ("U.S. GAAP" or "GAAP") for the three months ended March 31, 2024 of $(74.3) million or $(2.41) per common share after preferred dividends, and Operating loss of $(4.8) million or $(0.16) per common share. Operating income is a non-GAAP financial measure which adjusts GAAP earnings by removing gains and losses as well as certain other non-core income and expenses and preferred dividends. We consider Operating income a useful measure for comparing the results of our ongoing operations over multiple quarters. Comparatively, our GAAP consolidated net loss attributable to common stockholders for the three months ended March 31, 2023 was $(7.9) million or $(0.34) per common share, and Operating income was $(2.1) million, or $(0.09) per common share.

Current wording

We generated a consolidated net loss attributable to common stockholders under U.S. Generally Accepted Accounting Principles ("U.S. GAAP" or "GAAP") for the three months ended June 30, 2024 of $(12.7) million or $(0.32) per diluted common share after preferred dividends, and Earnings Available for Distribution of $(9.6) million or $(0.24) per diluted common share. Earnings Available for Distribution is a non-GAAP financial measure which adjusts GAAP earnings by removing gains and losses as well as certain other non-core income and expenses and preferred dividends. We consider Earnings Available for Distribution a useful measure for comparing the results of our ongoing operations over multiple quarters. Comparatively, our GAAP Net Loss attributable to common stockholders for the three months ended June 30, 2023 was $(12.0) million or $(0.51) per common share, and Earnings Available for Distribution was $(2.5) million, or $(0.11) per common share.

Previous wording

At March 31, 2024, our book value decreased to $6.87 per common share from $9.99 at December 31, 2023, driven by the year to date net loss attributable to common stockholders of $74.3 million and dividends on our common stock of

Current wording

At June 30, 2024, our book value decreased to $5.56 per common share from $9.99 at December 31, 2023, driven by the year to date GAAP Net Loss attributable to common stockholders of $87.1 million, dividends on our common stock of $5.6 million and dilution caused by the issuance of shares to the Former Manager in connection with the termination of the Former Management Agreement, the exchange of preferred shares for common stock, and issued to Rithm in connection with the new Management Agreement.

Previous wording

Our primary source of income is accretion earned on our mortgage loan portfolio offset by the interest expense incurred to fund and hold portfolio acquisitions. Our gross interest income excluding the impact of credit losses decreased to $15.7 million for the three months ended March 31, 2024 from $18.5 million forthe three months ended March 31, 2023 primarily due tolower average balances of our mortgage loan, debt security and beneficial interest portfolios. This was partially offset by a$0.3 million increase in our bank interest income.

Current wording

Our primary source of income is accretion earned on our mortgage loan portfolio offset by the interest expense incurred to fund and hold portfolio acquisitions. Our gross interest income excluding the impact of credit losses decreased to $11.9 million for the three months ended June 30, 2024 from $18.3 million forthe three months ended June 30, 2023 primarily due tolower average balances of our mortgage loan, debt security and beneficial interest portfolios. This was partially offset by a$0.3 million increase in our bank interest income. For thesix months ended June 30, 2024, our gross interest income decreased to$27.7 million from$36.8 million for thesix months ended June 30, 2023 primarily due to lower average balances of our mortgage loan and debt security portfolios, which was partially offset by a$0.6 million increase in our bank interest income.

Previous wording

Interest expense for the three months ended March 31, 2024 decreasedto$14.1 million from $14.9 million for the three months ended March 31, 2023 due to decreases in the average balances and interest rates on our borrowings on repurchase lines of credit.

Current wording

Interest expense for the three months ended June 30, 2024 decreasedto$11.6 million from $15.0 million for the three months ended June 30, 2023 due to decreases in the average balances of our repurchase lines of credit. For the six months ended June 30, 2024, our interest expense decreased to $25.7 million from $30.0 million for the six months ended June 30, 2023 due to decreases in the average balances on our borrowings on repurchase lines of credit.

Previous wording

Net interest income after recording the impact of the net present value of increases/decreases in expected credit losses decreased to $2.6 million for the three months ended March 31, 2024 from $4.2 million for the three months ended March 31, 2023 primarily as a result of lower interest income and the net impact of a net $4.2 million increase in the net present value of expected credit losses for our mortgage loan and beneficial interest portfolio for the three months ended March 31, 2024 compared to a $0.6 million decrease for the three months ended March 31, 2023. Of the $4.2 million for the three months ended March 31, 2024, $1.1 million relates to our mortgage loan portfolio and $3.1 million relates to our investments in beneficial interests. Comparatively, of the $0.6 million for the three months ended March 31, 2023, the total $0.6 million relates to our mortgage loan portfolio.

Current wording

Net interest income after recording the impact of the net change in expected credit losses decreased to $0.3 million for the three months ended June 30, 2024 from $6.2 million for the three months ended June 30, 2023 primarily as a result of lower interest income and a net zero impact of the net increase expected credit losses for our mortgage loan and beneficial interest portfolio for the three months ended June 30, 2024 compared to a $2.9 million decrease for the three months ended June 30, 2023. Net interest income after recording the impact of the net changes in expected credit losses decreased to $2.3 million for the six months ended June 30, 2024 from $10.3 million for the six months ended June 30, 2023 primarily as a result of higher interest expense and a net $4.2 million impact of the net decrease in the net change in expected credit losses for the six months ended June 30, 2024 compared to a $3.5 million decrease for the six months ended June 30, 2023.

Previous wording

The interest income detail for the three months ended March 31, 2024 and 2023 are included in the table below ($ in thousands):

Current wording

The interest income detail for the three and six months ended June 30, 2024 and 2023 are included in the table below ($ in thousands):

Previous wording

The average carrying balance of our mortgage loan portfolio decreased for the three months ended March 31, 2024 versus the comparative period in 2023 primarily due to continued prepayments of our mortgage loan portfolio and fewer acquisitions. The average carrying balances of our debt securities, beneficial interests and debt outstanding decreased for the three months ended March 31, 2024 versus the comparative period in 2023 as paydowns and sales outpaced acquisitions. The average carrying balances for our portfolio are included in the table below ($ in thousands):

Current wording

The average carrying balance of our mortgage loan portfolio decreased for the three months ended June 30, 2024 versus the comparative period in 2023 primarily due to loan sales. Additionally, the average carrying balances of our debt securities, beneficial interests and debt outstanding decreased for the three months ended June 30, 2024 versus the comparative period in 2023 due to paydowns, sales and redemptions and no acquisitions. The average carrying balances for our portfolio are included in the table below ($ in thousands):

Previous wording

Income/Loss from Equity Method Investments

Current wording

Loss from Equity Method Investments

Previous wording

We recorded income from our investments in our Manager and Servicer of $3.1 million for the three months ended March 31, 2024. Comparatively, for the three months ended March 31, 2023, we recorded losses from our investments in our Manager and Servicer of $0.1 million. We account for our investments in our Manager and our Servicer using the equity method of accounting. We recorded income of $25 thousand in our other equity method investments for the three months ended March 31, 2024. Comparatively, for the three months ended March 31, 2023, we recorded a loss from our other equity method investments of $34 thousand.

Current wording

We recorded a (loss)/income from our investments in our Former Manager and Former Servicer of $0.8 million and $2.3 million for the three and six months ended June 30, 2024, respectively. Comparatively, for the three and six months ended June 30, 2023, we recorded losses from our investments in our Former Manager and Former Servicer of $49 thousand and $0.1 million, respectively. We account for our investments in our Former Manager and Former Servicer using the equity method of accounting. We recorded a loss of $0.1 million and $2.7 million in our other equity method investments for the three and six months ended June 30, 2024, respectively. Comparatively, for both the three and six months ended June 30, 2023, we recorded losses from our other equity method investments of $0.1 million. We recorded a loss from our investment in Gaea of $0.1 million for the three and six months ended June 30, 2024. Comparatively, for the three and six months ended June 30, 2023, we recorded a loss from our investment in Gaea of $0.3 million and $0.5 million, respectively.

Previous wording

During the three months ended March 31, 2023, we contributed an additional $0.7 million equity interest in Great Ajax FS LLC ("GAFS") to increase our total ownership of GAFS to 9.7%. During the three months ended March 31, 2024, we reduced the basis of GAFS to zero and recorded a write off of $2.6 million.

Current wording

During the three months ended March 31, 2024, we reduced the basis of GAFS to zero and recorded a write off of $2.6 million. We disposed of our investment during the three months ended June 30, 2024.

Previous wording

During the three months ended March 31, 2023, we recorded a $1.0 million loss on joint venture refinancing on beneficial interests due to other than temporary impairment. The $1.0 million relates to the re-securitization of Ajax Mortgage Loan Trusts 2019-E, 2019-G and 2019-H ("2019-E, -G, -H") into Ajax Mortgage Loan Trust 2023-A ("2023-A"). Although we retained a proportionate investment in the securities issued by the new joint ventures, the beneficial interests are accounted for as distinct legal securities and the loss recorded represents the mark to market adjustment on the sale of the underlying loans by the old joint ventures to the new joint ventures. Comparatively, no losses were recorded on joint venture refinancing on beneficial interests during the three months ended March 31, 2024.

Current wording

During the three and six months ended June 30, 2023, we recorded a $8.8 million and $9.8 million loss on joint venture refinancing on beneficial interests due to other than temporary impairment, respectively. The $8.8 million that was recorded during the three months ended June 30, 2023, was due to various joint ventures redeemed or partially paid down and the underlying loans being re-securitized to form Ajax Mortgage Loan Trusts 2023-B and 2023-C, which closed during the third quarter of 2023. The remaining $1.0 million of the $9.8 million loss on joint venture refinancing on beneficial interests due to other than temporary impairment occurred during the first quarter of 2023. The $1.0 million relates to the partial redemption of our beneficial interests in Ajax Mortgage Loan Trust 2019-H ("2019-H"), which became a realized loss when the transaction closed in February 2023. The 2019-H trust, along with Ajax Mortgage Loan Trusts 2019-E and 2019-G, were re-securitized and the underlying mortgage loans were used to form Ajax Mortgage Loan Trust 2023-A ("2023-A"). Although we retained a proportionate investment in the securities issued by the new joint ventures, the beneficial interests are accounted for as distinct legal securities and the loss recorded represents the mark to market adjustment on the sale of the underlying loans by the old joint ventures to the new joint ventures. Comparatively, no losses were recorded on joint venture refinancing on beneficial interests during the three and six months ended June 30, 2024.

Previous wording

Other income/loss increased for the three months ended March 31, 2024 by $2.5 million from the three months ended March 31, 2023 primarily due to a loss on sale of securities during the three months ended March 31, 2023. A breakdown of Other income/loss is provided in the table below ($ in thousands):

Current wording

Other loss/income decreased for the three months ended June 30, 2024 by $2.3 million from the three months ended June 30, 2023 primarily due to a loss on sale of mortgage loans during the three months ended June 30, 2023. Comparatively, other loss/income increased for the six months ended June 30, 2024 by $0.2 million from the six months ended June 30, 2023 primarily due to a gain on property held-for-sale during the six months ended June 30, 2024. A breakdown of Other loss/income is provided in the table below ($ in thousands):

Previous wording

Other expense increased for the three months ended March 31, 2024 over the comparable periods in 2023 primarily due to the amortization on deferred issuance costs for the warrants and an increase in real estate operating expense as a result of higher impairment on our REO. A breakdown of Other expense is provided in the table below ($ in thousands):

Current wording

Other expense increased for the three and six months ended June 30, 2024 over the comparable periods in 2023 primarily due to the amortization on deferred issuance costs for our Credit Agreement and an increase in employee and service provider share grants due to all restricted shares vesting on the transaction date. A breakdown of Other expense is provided in the table below ($ in thousands):

Previous wording

During the three months ended March 31, 2024, there was no gain on debt extinguishment. Comparatively, during the three months ended March 31, 2023, we recorded a $47 thousand gain related to the repurchase of $1.0 million aggregate principal of our 2024 Notes.

Current wording

During the three and six months ended June 30, 2024, there was no gain on debt extinguishment. Comparatively, during the three and six months ended June 30, 2023, we recorded zero and a $47 thousand gain related to the repurchase of $1.0 million aggregate principal of our 2024 Notes.

Previous wording

Our net book value per common share was $6.87 and $9.99 at March 31, 2024 and December 31, 2023, respectively. The decrease in book value was primarily due to the quarter to date net loss attributable to common stockholders of $74.3 million and the dividends on our common stock of $3.4 million, partially offset by the exchange of our preferred shares for common stock of $22.0 million and exchange of our warrants for common shares of $18.7 million, the amortization of $0.8 million of unrealized losses on our investments in debt securities AFS transferred to HTM, and the recovery of mark to market losses of $0.4 million on our investments in debt securities AFS. We believe our calculation is representative of our book value on a per share basis, and our Manager believes book value per share is a valuable metric for evaluating our business. The net book value per share is calculated by taking equity at the balance sheet date (i) less preferred stock and non-controlling interest, (ii) adjusted for any addition for potential conversion of our 2024 Notes, divided by outstanding shares at the balance sheet date adjusted to include (i) unvested restricted stock earned but unissued and (ii) any share equivalents for our 2024 Notes or our warrant liability as determined by the dilution requirements for our EPS calculation. A breakdown of our book value per share is set forth in the table below ($ in thousands except per share amounts):

Current wording

Our net book value per common share was $5.56 and $9.99 at June 30, 2024 and December 31, 2023, respectively. The decrease in book value was primarily due to the year to date net loss attributable to common stockholders of $87.1 million and the dividends on our common stock of $5.6 million and the dilution caused by the issuance of common stock as part of the strategic transaction. We believe our calculation is representative of our book value on a per share basis, and our New Manager believes book value per share is a valuable metric for evaluating our business. The net book value per share is calculated by taking equity at the balance sheet date (i) less preferred stock and non-controlling interest, (ii) adjusted for any addition for potential conversion of our 2024 Notes, divided by outstanding shares at the balance sheet date adjusted to include (i) unvested restricted stock earned but unissued and (ii) any share equivalents for our 2024 Notes or our warrant liability as determined by the dilution requirements for our EPS calculation. A breakdown of our book value per share is set forth in the table below ($ in thousands except per share amounts):

Previous wording

For the three months ended March 31, 2024, we purchased no RPLs. Comparatively, for the three months ended March 31, 2023, we purchased $0.6 million of RPLs with UPB of $0.8 million at 58.8% of property value and 72.9% of UPB. For both the three months ended March 31, 2024 and 2023, we purchased no NPLs. For both the three months ended March 31, 2024 and 2023, we purchased no SBC loans. We ended the period with $0.8 billion of mortgage loans with an aggregate UPB of $0.9 billion as of March 31, 2024 and $1.0 billion for both our net mortgage loans and aggregate UPB as of March 31, 2023.

Current wording

For the three and six months ended June 30, 2024, we purchased no RPLs. Comparatively, for the three and six months ended June 30, 2023, we purchased $13.5 million and $14.1 million of RPLs with UPB of $16.3 million and $17.1 million, respectively, at 48.0% and 48.4% of property value, respectively, and 82.7% and 82.2% of UPB, respectively. We ended the period with $522.8 million of mortgage loans with an aggregate UPB of $562.1 million as of June 30, 2024 and $1.0 billion for both our net mortgage loans and aggregate UPB as of June 30, 2023.

Previous wording

During the three months ended March 31, 2024, 62 mortgage loans, representing 0.9% of our ending UPB, were liquidated. Comparatively, during the three months ended March 31, 2023, 96 mortgage loans, representing 1.5% of our ending UPB, were liquidated. Our loan portfolio activity for the three months ended March 31, 2024 and 2023 is presented below ($ in thousands):

Current wording

Our loan portfolio activity for the three and six months ended June 30, 2024 and 2023 is presented below ($ in thousands):

Previous wording

(3)At March 31, 2024 and December 31, 2023, our loan portfolio consists of fixed rate (59.7% of UPB), ARM (6.0% of UPB) and Hybrid ARM (34.3% of UPB); and fixed rate (60.0% of UPB), ARM (6.4% of UPB) and Hybrid ARM (33.6% of UPB), respectively.

Current wording

(3)At June 30, 2024 and December 31, 2023, our loan portfolio consists of fixed rate (56.0% of UPB), ARM (7.0% of UPB) and Hybrid ARM (37.0% of UPB); and fixed rate (60.0% of UPB), ARM (6.4% of UPB) and Hybrid ARM (33.6% of UPB), respectively.

Previous wording

Table 13: Debt Securities and Trust Certificate Acquisitions

Current wording

Debt Securities and Trust Certificate Acquisitions

Previous wording

(1)The securities were received in exchange for our investments in Ajax Mortgage Loan Trust 2019-E, 2019-G and 2019-H for the three months ended March 31, 2023.

Current wording

For the six months ended June 30, 2023, we received securities in exchange for our investments in Ajax Mortgage Loan Trust 2019-E, 2019-G and 2019-H for $8.8 million of class A securities with a UPB of $9.6 million and 90.7% of UPB, $1.6 million of class M securities with UPB of $2.1 million and 74.1% of UPB, $2.8 million of class B securities with UPB of $4.1 million and 68.7% of UPB and trust certificates of $3.0 million.

Previous wording

During the three month ended March 31, 2024, our primary sources of cash have consisted of proceeds from loan sales. Historically, our primary sources of cash have also included proceeds from our securities offerings, our secured borrowings, repurchase agreements, principal and interest payments on our loan portfolio, principal paydowns on securities, and sales of properties held-for-sale. Depending on market conditions, we expect that our primary financing sources will continue to include secured borrowings, repurchase agreements, and securities offerings in addition to transaction or asset specific funding arrangements and credit facilities (including term loans and revolving facilities).

Current wording

During the six months ended June 30, 2024, our primary sources of cash have consisted of proceeds from loan sales. Historically, our primary sources of cash have also included proceeds from our securities offerings, our secured borrowings, repurchase agreements, principal and interest payments on our loan portfolio, principal paydowns on securities, and sales of properties held-for-sale. Depending on market conditions, we expect that our primary financing sources will continue to include secured borrowings, repurchase agreements, and securities offerings in addition to transaction or asset specific funding arrangements and credit facilities (including term loans and revolving facilities).

Previous wording

As of March 31, 2024 and December 31, 2023, substantially all of our invested capital was in RPLs, NPLs, SBC loans, debt securities, and beneficial interests. We also held approximately $100.1 million of cash and cash equivalents, an increase of $47.3 million from our balance of $52.8 million at December 31, 2023. Our average daily cash balance during the quarter was $65.3 million, an increase of $10.1 million from our average daily cash balance of $55.2 million during the three months ended December 31, 2023.

Current wording

As of June 30, 2024 and December 31, 2023, substantially all of our invested capital was in RPLs, NPLs, SBC loans, debt securities, and beneficial interests. We also held approximately $72.0 million of cash and cash equivalents, an increase of $19.3 million from our balance of $52.8 million at December 31, 2023. Our average daily cash balance during the quarter was $57.8 million, an increase of $2.6 million from our average daily cash balance of $55.2 million during the three months ended December 31, 2023.

Previous wording

Three Month Operating, Investing and Financing Cash Flows

Current wording

Six Month Operating, Investing and Financing Cash Flows

Previous wording

Our operating cash outflows for the three months ended March 31, 2024 were $8.2 million. Our operating cash outflows for the three months ended March 31, 2023 were $16.8 million. Our primary operating cash inflow is cash interest payments on our mortgage loan pools of $9.9 million and $11.6 million for the three months ended March 31, 2024 and 2023, respectively. Non-cash interest income accretion on our mortgage loans was $1.9 million and $1.7 million for the three months ended March 31, 2024 and 2023, respectively. Interest income on beneficial interests was $0.7 million and $2.1 million during the three months ended March 31, 2024 and 2023, respectively. Interest income on debt securities was $2.2 million and $2.5 million during the three months ended March 31, 2024 and 2023, respectively.

Current wording

Our operating cash inflow for the six months ended June 30, 2024 were $8.0 million. Our operating cash outflows for the six months ended June 30, 2023 were $23.6 million. Our primary operating cash inflow is cash interest payments on our mortgage loan pools of $7.8 million and $23.0 million for the six months ended June 30, 2024 and 2023, respectively. Non-cash interest income accretion on our mortgage loans was $2.4 million and $3.3 million for the six months ended June 30, 2024 and 2023, respectively. Non-cash interest income on beneficial interests was $1.5 million and $4.1 million during the six months ended June 30, 2024 and 2023, respectively. Interest income on debt securities was $2.7 million and $4.9 million during the six months ended June 30, 2024 and 2023, respectively.

Previous wording

For the three months ended March 31, 2024, our investing cash inflows of $92.7 million were driven by the sales of our mortgage loans of $50.1 million, principal and interest collections on our securities of $28.6 million, principal payments and payoffs of our mortgage loan portfolio of $13.5 million. For the three months ended March 31, 2023, our investing cash inflows of $63.5 million were driven by proceeds from refinancing and sale of our debt securities of $29.4 million, principal and interest collections on our securities of $29.0 million and principal payments on and payoffs of our mortgage loan portfolio of $21.5 million, partially offset by the purchase of securities of $16.3 million, the contribution of an additional $0.7 million equity interest in our GAFS affiliate and acquisitions of our mortgage loans of $0.6 million.

Current wording

For the six months ended June 30, 2024, our investing cash inflows of $383.1 million were driven by the net proceeds from the sales of our mortgage loans of $311.3 million, principal and interest collections on our securities of $39.7 million, principal payments and payoffs of our mortgage loan portfolio of $27.9 million. For the six months ended June 30, 2023, our investing cash inflows of $88.3 million were driven by payoffs of our mortgage loan portfolio of $48.5 million, principal and interest collections on our securities of $39.1 million and proceeds from refinancing and sale of our debt securities of $29.4 million, partially offset by the purchase of securities of $16.3 million and acquisitions of mortgage loans of $14.1 million and the contribution of an additional $0.7 million equity interest in our GAFS affiliate.

Previous wording

Our financing cash flows are driven primarily by funding used to acquire mortgage loan pools and debt securities. We fund our mortgage loan pools primarily through secured borrowings and repurchase agreements and we fund our debt securities primarily through repurchase agreements. For the three months ended March 31, 2024, we had net financing cash outflows of $37.2 million primarily driven by repayments of $54.9 million on repurchase transactions, pay downs of existing debt obligations of $11.8 million on secured borrowings, partially offset by additional borrowing through repurchase transactions of $33.2 million. For the three months ended March 31, 2023, we had net financing cash outflows of $45.1 million primarily driven by repayments of $40.6 million on repurchase transactions and pay downs of existing debt obligations of $13.0 million on secured borrowings, partially offset by additional borrowing through repurchase transactions of $13.4 million. For the three months ended March 31, 2024 and 2023, we paid $3.7 million and $6.5 million, respectively, in combined dividends and distributions.

Current wording

Our financing cash flows are driven primarily by funding used to acquire mortgage loan pools and debt securities as well as debt service on our 2024 Notes and 2027 Notes. We fund our mortgage loan pools primarily through secured borrowings and repurchase agreements and we fund our debt securities primarily through repurchase agreements. For the six months ended June 30, 2024, we had net financing cash outflows of $371.9 million primarily driven by the redemption of our 2024 Notes of $103.5 million, repayments of $220.7 million on repurchase transactions, pay downs of secured borrowings of $136.2 million, partially offset by additional borrowing through repurchase transactions of $91.5 million. For the six months ended June 30, 2023, we had net financing cash outflows of $72.2 million primarily driven by repayments of $56.8 million on repurchase transactions and pay downs of existing debt obligations of $29.6 million on secured borrowings, partially offset by additional borrowing through repurchase transactions of $24.1 million. For the six months ended June 30, 2024 and 2023, we paid $6.8 million and $11.7 million, respectively, in combined dividends and distributions.

Previous wording

On February 28, 2020, our Board of Directors approved a stock repurchase of up to $25.0 million of our common shares. The amount and timing of any repurchases depends on a number of factors, including but not limited to the price and availability of the common shares, trading volume and general circumstances and market conditions. As of March 31, 2024, we held 1,035,785 shares of treasury stock consisting of 148,834 shares received through distributions of our shares previously held by our Manager, 361,912 shares received through our Servicer and 525,039 shares acquired through open market purchases. As of March 31, 2023, we held 1,031,609 shares of treasury stock consisting of 144,658 shares received through distributions of our shares previously held by our Manager and 525,039 shares acquired through open market purchases.

Current wording

On February 28, 2020, our Board of Directors approved a stock repurchase of up to $25.0 million of our common shares. The amount and timing of any repurchases depends on a number of factors, including but not limited to the price and availability of the common shares, trading volume and general circumstances and market conditions. As of June 30, 2024 and 2023, we held 1,035,785 shares of treasury stock consisting of 148,834 shares received through distributions of our shares previously held by our Former Manager, 361,912 shares received through our Former Servicer and 525,039 shares acquired through open market purchases.

Previous wording

During the three months ended March 31, 2024, we exchanged the remaining 424,949 shares of our outstanding 7.25% Series A Fixed-to-Floating Rate Preferred Stock and 1,135,590 shares of our outstanding 5.00% Series B Fixed-to-Floating Rate Preferred Stock and the associated warrants for newly issued shares of our common stock. Of the 12,046,218 shares, 9,464,524 shares of our common stock were issued during the three months ended March 31, 2024 and the remaining 2,581,694 shares of our common stock will only be issued following the approval of a majority of our stockholders during our 2024 annual and special meeting of stockholders. We recorded a $12.6 million liability to account for the shares payable to the preferred holders. No preferred stock or warrants were exchanged during the three months ended March 31, 2023.

Current wording

During the six months ended June 30, 2024, we exchanged the remaining 424,949 shares of our outstanding 7.25% Series A Fixed-to-Floating Rate Preferred Stock and 1,135,590 shares of our outstanding 5.00% Series B Fixed-to-Floating Rate Preferred Stock and the associated warrants for newly issued shares of our common stock. A total of the 12,046,218 common shares were issued pursuant to the exchange with 9,464,524 shares of common stock exchanged during the quarter ended March 31, 2024 and 2,581,694 shares of common stock exchanged subsequent to the approval of the Company's shareholders on May 20, 2024. No preferred stock or warrants were exchanged during the three and six months ended June 30, 2023.