Great Ajax Corp. - Quarter Report: 2021 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

001-36844

(Commission file number)

GREAT AJAX CORP.

(Exact name of registrant as specified in its charter)


Maryland			46-5211870
State or other jurisdiction of incorporation or organization			(I.R.S. Employer Identification No.)

13190 SW 68th Parkway, Suite 110

Tigard, OR 97223

(Address of principal executive offices and Zip Code)

503-505-5670

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbols

Name of each exchange on which registered

Common stock, par value $0.01 per share

AJX

New York Stock Exchange

7.25% Convertible Senior Notes due 2024

AJXA

New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (check one):


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer (Do not check if a smaller reporting company)	☐	Smaller reporting company	☐
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 4, 2021, 23,142,946 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.

TABLE OF CONTENTS


PART I Financial Information

Item 1. Consolidated Interim Financial Statements			1

Cautionary Statement Regarding Forward-Looking Statements			49

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			50

Item 3. Quantitative and Qualitative Disclosures About Market Risk			80

Item 4. Controls and Procedures			81

PART II Other Information

Item 1. Legal Proceedings			82

Item 1A. Risk Factors			82

Item 2. Unregistered Sales of Securities			82

Item 3. Defaults Upon Senior Securities			82

Item 4. Mine Safety Disclosure			82

Item 5. Other Information			82

Item 6. Exhibits			82

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Interim Financial Statements

GREAT AJAX CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


($ in thousands except per share data)	June 30, 2021		December 31, 2020
ASSETS	(Unaudited)
Cash and cash equivalents	$	88,134	$	107,147
Cash held in trust	186		188
Mortgage loans, net(1,2)	955,628		1,119,372
Real estate owned properties, net(3)	4,768		8,526
Investments in securities at fair value(4)	424,632		273,834
Investments in beneficial interests(5)	133,484		91,418
Receivable from servicer	23,907		15,755
Investments in affiliates	27,929		28,616
Prepaid expenses and other assets	17,424		8,876
Total assets	$	1,676,092	$	1,653,732
LIABILITIES AND EQUITY
Liabilities:
Secured borrowings, net(1,2,6)	$	653,948	$	585,403
Borrowings under repurchase transactions	394,386		421,132
Convertible senior notes, net(6)	103,427		110,057
Management fee payable	2,267		2,247
Put option liability	18,350		14,205
Accrued expenses and other liabilities	6,222		6,197
Total liabilities	1,178,600		1,139,241
Commitments and contingencies – see Note 8
Equity:
Preferred stock, $0.01 par value, 25,000,000 shares authorized
Series A 7.25% Fixed-to-Floating Rate Cumulative Redeemable, $25.00 liquidation preference per share, 2,307,400 shares issued and outstanding at June 30, 2021 and 2,307,400 shares issued or outstanding at December 31, 2020	51,100		51,100
Series B 5.00% Fixed-to-Floating Rate Cumulative Redeemable, $25.00 liquidation preference per share, 2,892,600 shares issued and outstanding at June 30, 2021 and 2,892,600 shares issued and outstanding at December 31, 2020	64,044		64,044
Common stock $0.01 par value; 125,000,000 shares authorized, 22,993,246 shares issued and outstanding at June 30, 2021 and 22,978,339 shares issued and outstanding at December 31, 2020	231		231
Additional paid-in capital	315,131		317,424
Treasury stock	(1,405)		(1,159)
Retained earnings	62,502		53,346
Accumulated other comprehensive income	1,651		375
Equity attributable to stockholders	493,254		485,361
Non-controlling interests(7)	4,238		29,130
Total equity	497,492		514,491
Total liabilities and equity	$	1,676,092	$	1,653,732

(1)Mortgage loans, net include $821.6 million and $842.2 million of loans at June 30, 2021 and December 31, 2020, respectively, transferred to securitization trusts that are variable interest entities (“VIEs”); these loans can only be used to settle obligations of the VIEs. Secured borrowings consist of notes issued by VIEs that can only be settled with the assets and cash flows of the VIEs. The creditors do not have recourse to the primary beneficiary

The accompanying notes are an integral part of the consolidated financial statements.

(Great Ajax Corp.). See Note 9 — Debt. Mortgage loans, net include $9.8 million and $13.7 million of allowance for loan credit losses at June 30, 2021 and December 31, 2020, respectively.

(2)As of June 30, 2021, balances for Mortgage loans, net include $1.9 million from a 50.0% owned joint venture. As of December 31, 2020, balances for Mortgage loans, net include $307.1 million and Secured borrowings, net of deferred costs includes $250.6 million from 50.0% and 63.0% owned joint ventures, all of which the Company consolidates under U.S. Generally Accepted Accounting Principles ("U.S. GAAP"). The creditors do not have recourse to the primary beneficiary (Great Ajax Corp.). See Note 9 — Debt.

(3)Real estate owned properties, net, includes valuation allowances of $0.5 million and $1.4 million at June 30, 2021 and December 31, 2020, respectively.

(4)As of June 30, 2021 and December 31, 2020, Investments in securities at fair value include amortized cost basis of $423.0 million and $273.4 million, respectively, and net unrealized gains of $1.7 million and $0.4 million, respectively.

(5)Investments in beneficial interests includes allowance for credit losses of $3.0 million and $4.5 million at June 30, 2021 and December 31, 2020, respectively.

(6)Secured borrowings, net are presented net of deferred issuance costs of $9.5 million at June 30, 2021 and $5.4 million at December 31, 2020. Convertible senior notes, net are presented net of deferred issuance costs of $2.4 million at June 30, 2021 and $3.3 million at December 31, 2020.

(7)As of June 30, 2021 non-controlling interests includes $2.7 million from a 50.0% owned joint venture, $1.4 million from a 53.1% owned subsidiary and $0.1 million from a 99.9% owned subsidiary. As of December 31, 2020 non-controlling interests includes $27.4 million from the 50.0% and 63.0% owned joint ventures, $1.5 million from a 53.1% owned subsidiary and $0.2 million from a 99.9% owned subsidiary which the Company consolidates under U.S. GAAP.

The accompanying notes are an integral part of the consolidated interim financial statements.

GREAT AJAX CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three months ended				Six months ended
($ in thousands except per share data)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
INCOME
Interest income	$	23,048	$	23,171	$	47,083	$	50,059
Interest expense	(8,830)		(13,058)		(19,134)		(26,128)
Net interest income	14,218		10,113		27,949		23,931
Net increase in the net present value of expected cash flows(1)	4,733		4,862		10,249		151
Net interest income after the impact of changes in the net present value of expected cash flows	18,951		14,975		38,198		24,082
Income/(loss) from investments in affiliates	357		672		520		(440)
Other income	486		680		842		722
Total revenue, net	19,794		16,327		39,560		24,364
EXPENSE
Related party expense – loan servicing fees	1,699		1,936		3,532		3,950
Related party expense – management fee	2,270		2,143		4,543		3,942
Professional fees	763		732		1,403		1,537
Real estate operating expenses	88		188		273		1,100
Fair value adjustment on put option liability	2,201		1,250		4,145		1,250
Other expense	1,375		1,140		2,679		2,062
Total expense	8,396		7,389		16,575		13,841
Loss on debt extinguishment	161		—		1,072		408
Income before provision for income taxes	11,237		8,938		21,913		10,115
Provision for income taxes (benefit)	67		120		101		(199)
Consolidated net income	11,170		8,818		21,812		10,314
Less: consolidated net (loss)/income attributable to the non-controlling interest	(1,158)		735		531		1,831
Consolidated net income attributable to Company	12,328		8,083		21,281		8,483
Less: dividends on preferred stock	1,950		1,841		3,899		1,841
Consolidated net income attributable to common stockholders	$	10,378	$	6,242	$	17,382	$	6,642
Basic earnings per common share	$	0.45	$	0.27	$	0.76	$	0.29
Diluted earnings per common share	$	0.42	$	0.27	$	0.72	$	0.29
Weighted average shares – basic	22,825,804		22,808,943		22,821,416		22,439,648
Weighted average shares – diluted	30,198,696		22,929,849		30,341,638		22,559,916

(1)Net increase in the net present value of expected cash flows represents the net decrease to the allowance for losses resulting from changes in actual and expected cash flows during the quarter. It represents the net present value of cash flow increases over incremental provision expense on the Mortgage loan and Beneficial interest portfolios. Such amounts are calculated at the pool level for Mortgage loans and at the security level for Beneficial interests, and are recorded in the period in which the change occurs.

The accompanying notes are an integral part of the consolidated interim financial statements.

GREAT AJAX CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three months ended June 30,				Six months ended June 30,
($ in thousands)	2021		2020		2021		2020
Consolidated net income attributable to common stockholders	$	10,378	$	6,242	$	17,382	$	6,642
Other comprehensive income:
Net unrealized (loss)/income on investments in available-for-sale debt securities	(30)		23,231		1,276		(5,213)
Income tax expense related to items of other comprehensive income	—		—		—		—
Comprehensive income	$	10,348	$	29,473	$	18,658	$	1,429

The accompanying notes are an integral part of the consolidated interim financial statements.

GREAT AJAX CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six months ended
($ in thousands)	June 30, 2021		June 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income	$	21,812	$	10,314
Adjustments to reconcile net income to net cash from operating activities
Stock-based compensation expense	668		428
Non-cash interest income accretion on mortgage loans	(10,588)		(16,230)
Interest and discount accretion on investment in debt securities	(5,074)		(2,718)
Discount accretion on investment in beneficial interests	(8,213)		(5,104)
Loss on sale of mortgage loans	—		705
Gain on refinancing of securitization trust 2017-D	(122)		—
Loss on debt extinguishment	1,072		408
Gain on sale of property held-for-sale	(197)		(591)
Depreciation of property	6		16
Impairment of real estate owned	248		1,000
(Increase) decrease in net present value of expected loan cash flows	(8,240)		94
Credit loss expense on mortgage loans	593		503
(Increase) in net present value of expected cash flows from beneficial interests	(2,009)		(245)
Credit loss expense on beneficial interests	355		429
Amortization of debt discount and prepaid financing costs	3,285		2,589
Undistributed (income)/loss from investment in affiliates	(520)		440
Fair value adjustment on put option liability	4,145		1,250
Other non-cash loan charges	7		—
Net change in operating assets and liabilities
Prepaid expenses and other assets	(12,052)		(6,347)
Receivable from Servicer	(8,152)		1,588
Accrued expenses, management fee payable, and other liabilities	52		1,239
Net cash from operating activities	(22,924)		(10,232)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of mortgage loans and related balances	(40,410)		(1,391)
Principal paydowns on mortgage loans	102,178		60,812
Proceeds from sale of mortgage loans	—		25,412
Proceeds from refinancing of securitization trust	125,975		—
Draws on small balance commercial loans	(7,344)		—
Purchase of securities	(231,555)		(61,306)
Principal and interest collection on debt securities	35,533		25,503
Proceeds from sale of securities	20,612		—
Proceeds from sale of property held-for-sale	4,975		7,319
Renovations and recovery costs of rental property and property held-for-sale	—		7
Distribution from affiliates	961		627
Net cash from investing activities	10,925		56,983
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from repurchase transactions	243,631		145,250

The accompanying notes are an integral part of the consolidated interim financial statements.


Repayments on repurchase transactions	(270,377)		(159,329)
Proceeds from origination of secured borrowings	391,028		—
Repayments on secured borrowings	(312,506)		(44,478)
Payment of prepaid financing costs	(7,303)		(34)
Purchase of bonds of non-controlling interest in subsidiaries	(5,887)		—
Repurchase of the Company's senior convertible notes	(7,463)		(8,176)
Proceeds from issuance of preferred stock and warrants, net of offering costs	—		124,977
Sale of common stock pursuant to dividend reinvestment plan	95		41
Redemption of non-controlling interests in subsidiaries	(25,856)		—

Distribution to non-controlling interests	(253)		(150)
Issuance of non-controlling interests in subsidiaries	—		145
Dividends on common stock and preferred stock	(12,125)		(5,748)
Net cash from financing activities	(7,016)		52,498
NET CHANGE IN CASH, CASH EQUIVALENTS, AND CASH HELD IN TRUST	(19,015)		99,249
CASH, CASH EQUIVALENTS AND CASH HELD IN TRUST, beginning of period	107,335		64,363
CASH, CASH EQUIVALENTS AND CASH HELD IN TRUST, end of period	$	88,320	$	163,612
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest	$	14,923	$	22,810
Cash paid for income taxes	$	57	$	—
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Transfer of loans from mortgage held-for-investment, net to mortgage loans held-for-sale, net	$	131,719	$	—
Non-cash adjustments to basis in mortgage loans	$	3,193	$	35
Unrealized gain/(loss) on available for sale securities, net of non-controlling interest and tax	$	1,276	$	(5,213)
Net transfer of loans to rental property or property held-for-sale	$	1,274	$	912
Issuance of common stock for compensation expense	$	668	$	428
Treasury stock received through distributions from investment in Manager	$	246	$	94
Other non-cash loan charges	$	7	—
Issuance of common stock for dividends	$	—	$	7,097
Transfer of loans from mortgage loans held-for-sale, net to mortgage held-for-investment, net	$	2,949	$	—

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheet to the amount shown in the consolidated statements of cash flows as of June 30, 2021 and June 30, 2020 ($ in thousands):


	June 30, 2021		June 30, 2020
Cash and cash equivalents	$	88,134	$	163,422
Cash held in trust	186		190
Total cash and cash equivalents and restricted cash shown on the consolidated statements of cash flows	$	88,320	$	163,612

The accompanying notes are an integral part of the consolidated interim financial statements.

GREAT AJAX CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)


($ in thousands)	Preferred stock - Series A shares	Preferred stock - Series A amount		Preferred stock - Series B shares	Preferred stock - Series B amount		Common stock shares	Common stock amount		Treasury stock		Additional Paid-in Capital		Retained Earnings		Accumulated other comprehensive income/(loss)		Total Stockholders' Equity		Non-controlling Interest		Total Equity
Balance at December 31, 2019	—	$	—	—	$	—	22,142,143	$	222	$	(458)	$	309,395	$	49,446	$	1,277	$	359,882	$	24,202	$	384,084
Net income	—	—		—	—		—	—		—		—		400		—		400		1,096		1,496
Issuance of shares of subsidiary	—	—		—	—		—	—		—		145		—		—		145		—		145
Stock-based compensation expense	—	—		—	—		2,600	—		—		214		—		—		214		—		214
Dividends declared ($0.32 per share) and distributions	—	—		—	—		781,222	8		—		7,089		(7,097)		—		—		(84)		(84)
Convertible senior notes repurchase	—	—		—	—		—	—		—		(81)		—		—		(81)		—		(81)
Other comprehensive loss	—	—		—	—		—	—		—		—		—		(28,444)		(28,444)		—		(28,444)
Treasury stock	—	—		—	—		(4,030)	—		(56)		—		—		—		(56)		—		(56)
Balance at March 31, 2020	—	$	—	—	$	—	22,921,935	$	230	$	(514)	$	316,762	$	42,749	$	(27,167)	$	332,060	$	25,214	$	357,274
Net income	—	—		—	—		—	—		—		—		8,083		—		8,083		735		8,818
Preferred Stock	2,307,400	51,100		2,892,600	64,044		—	—		—		—		—		—		115,144		—		115,144
Issuance of shares under dividend reinvestment plan	—	—		—	—		5,057	—		—		41		—		—		41		—		41
Stock-based compensation expense	—	—		—	—		3,468	—		—		214		—		—		214		—		214

The accompanying notes are an integral part of the consolidated interim financial statements.


($ in thousands)	Preferred stock - Series A shares	Preferred stock - Series A amount		Preferred stock - Series B shares	Preferred stock - Series B amount		Common stock shares	Common stock amount		Treasury stock		Additional Paid-in Capital		Retained Earnings		Accumulated other comprehensive income/(loss)		Total Stockholders' Equity		Non-controlling Interest		Total Equity
Dividends declared ($0.17 per share) and distributions	—	—		—	—		—	—		—		—		(5,748)		—		(5,748)		(66)		(5,814)
Other comprehensive income	—	—		—	—		—	—		—		—		—		23,231		23,231		—		23,231
Treasury stock	—	—		—	—		(5,478)	—		(50)		12		—		—		(38)		—		(38)
Balance at June 30, 2020	2,307,400	$	51,100	2,892,600	$	64,044	22,924,982	$	230	$	(564)	$	317,029	$	45,084	$	(3,936)	$	472,987	$	25,883	$	498,870

Balance at December 31, 2020	2,307,400	$	51,100	2,892,600	$	64,044	22,978,339	$	231	$	(1,159)	$	317,424	$	53,346	$	375	$	485,361	$	29,130	$	514,491
Net income	—	—		—	—		—	—		—		—		8,953		—		8,953		1,689		10,642
Issuance of shares under dividend reinvestment plan	—	—		—	—		4,228	—		—		47		—		—		47		—		47
Acquisition of non-controlling interest in subsidiary	—	—		—	—		—	—		—		(3,056)		—		—		(3,056)		(8,306)		(11,362)
Stock-based compensation expense	—	—		—	—		6,280	—		—		294		—		—		294		—		294
Dividends declared ($0.17 per share) and distributions	—	—		—	—		—	—		—		—		(5,799)		—		(5,799)		(84)		(5,883)
Other comprehensive income	—	—		—	—		—	—		—		—		—		1,306		1,306		—		1,306
Balance at March 31, 2021	2,307,400	$	51,100	2,892,600	$	64,044	22,988,847	$	231	$	(1,159)	$	314,709	$	56,500	$	1,681	$	487,106	$	22,429	$	509,535
Net income	—	—		—	—		—	—		—		—		12,328		—		12,328		(1,158)		11,170

The accompanying notes are an integral part of the consolidated interim financial statements.


($ in thousands)	Preferred stock - Series A shares	Preferred stock - Series A amount		Preferred stock - Series B shares	Preferred stock - Series B amount		Common stock shares	Common stock amount		Treasury stock		Additional Paid-in Capital		Retained Earnings		Accumulated other comprehensive income/(loss)		Total Stockholders' Equity		Non-controlling Interest		Total Equity
Issuance of shares under dividend reinvestment plan	—	—		—	—		3,820	—		—		48		—		—		48		—		48
Distribution to non-controlling interest	—	—		—	—		—	—		—		—		—		—		—		(16,864)		(16,864)
Stock-based compensation expense	—	—		—	—		19,945	—		—		374		—		—		374		—		374
Dividends declared ($0.19 per share) and distributions	—	—		—	—		—	—		—		—		(6,326)		—		(6,326)		(169)		(6,495)
Other comprehensive loss	—	—		—	—		—	—		—		—		—		(30)		(30)		—		(30)
Treasury stock	—	—		—	—		(19,366)	—		(246)		—		—		—		(246)		—		(246)
Balance at June 30, 2021	2,307,400	$	51,100	2,892,600	$	64,044	22,993,246	$	231	$	(1,405)	$	315,131	$	62,502	$	1,651	$	493,254	$	4,238	$	497,492

The accompanying notes are an integral part of the consolidated interim financial statements.

GREAT AJAX CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)

Note 1 — Organization and Basis of Presentation

Great Ajax Corp., a Maryland corporation (the “Company”), is an externally managed real estate company formed on January 30, 2014, and capitalized on March 28, 2014, by its then sole stockholder, Aspen Yo (“Aspen”), a company affiliated with Aspen Capital, the trade name for the Aspen group of companies. The Company facilitates capital raising activities and operates as a mortgage real estate investment trust (“REIT”). The Company primarily targets acquisitions of re-performing loans (“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. The Company also acquires and originates small balance commercial loans (“SBC loans”). The SBC loans that the Company opportunistically targets, through acquisitions, or originations, 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, the Company invests in single-family and smaller commercial properties directly either through a foreclosure event of a loan in its mortgage portfolio or, less frequently, through a direct acquisition. Historically, the Company has also targeted investments in non-performing loans (“NPLs”). NPLs are loans on which the most recent three payments have not been made. The Company may acquire NPLs from time to time, either directly or with joint venture partners. The Company’s manager is Thetis Asset Management LLC (the “Manager” or “Thetis”), an affiliated company. The Company owns 19.8% of the Manager and 8.0% of Great Ajax FS LLC ("GAFS" or "The Parent of the Servicer") which owns substantially all of the interest in Gregory Funding LLC ("Gregory" or the "Servicer"), the Company's loan and real property servicer that is also an affiliated company. The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”).

The Company conducts substantially all of its business through its operating partnership, Great Ajax Operating Partnership L.P., a Delaware limited partnership (the “Operating Partnership”), and its subsidiaries. The Company, through a wholly owned subsidiary, is the sole general partner of the Operating Partnership. GA-TRS LLC ("GA-TRS") is a wholly owned subsidiary of the Operating Partnership that owns the equity interest in the Manager and the Parent of the Servicer. The Company elected to treat GA-TRS as a taxable REIT subsidiary (“TRS”) under the Code. Great Ajax Funding LLC is a wholly owned subsidiary of the Operating Partnership formed 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 the Company may form for additional secured borrowings. The Company generally securitizes its mortgage loans through securitization trusts and retains subordinated securities from the secured borrowings. These trusts are considered to be variable interest entities ("VIEs"), and the Company has determined that it is the primary beneficiary of many of these VIEs. 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 the Company’s repurchase agreements. In addition, the Company, through its Operating Partnership, holds real estate owned properties (“REO”) acquired upon the foreclosure or other settlement of its owned NPLs, as well as through outright purchases. GAJX Real Estate Corp. is a wholly owned subsidiary of the Operating Partnership formed to own, maintain, improve and sell REO properties purchased by the Company. The Company has elected to treat GAJX Real Estate Corp. as a TRS under the Code.

The Operating Partnership, through interests in certain entities, as of June 30, 2021, held 99.9% of Great Ajax II REIT Inc. which holds an interest in Great Ajax II Depositor LLC which acts as the depositor of mortgage loans into rated securitization trusts and holds the subordinated securities issued by such trusts and any additional trusts the Company may form for additional secured borrowings. The Company has securitized mortgage loans through securitization trusts and retained subordinated securities from the secured borrowings. These trusts are considered to be VIEs and the Company has determined that it is the primary beneficiary of these VIEs.

In 2018, the Company formed Gaea Real Estate Corp. ("Gaea"), a wholly owned subsidiary of the Operating partnership to hold investments in multi-family, mixed use commercial real estate. The Company had elected to treat Gaea as a TRS under the Code. Also during 2018, the Company formed Gaea Real Estate Operating Partnership LP, a wholly owned subsidiary of Gaea, to hold investments in commercial real estate assets. The Company also formed BFLD Holdings LLC, Gaea Commercial Properties LLC, Gaea Commercial Finance LLC and Gaea RE LLC as subsidiaries of Gaea Real Estate Operating Partnership. In 2019, the Company formed DG Brooklyn Holdings, LLC also as a subsidiary of Gaea Real Estate Operating Partnership LP, to hold investments in multi-family properties.

The accompanying notes are an integral part of the consolidated interim financial statements.

On November 22, 2019, Gaea completed a private capital raise transaction in which it raised $66.3 million from the issuance of 4,419,641 shares of its common stock to third parties to allow Gaea to continue to advance its investment strategy. The purchase price per share was $15.00. Upon completion of the private placement, the Company retained ownership of approximately 23.2% of Gaea with third party investors owning the remaining approximately 76.8%. Prior to the date of the capital raise, the Company consolidated Gaea's balance sheet and results of operations. At June 30, 2021 the Company owned approximately 22.9% of Gaea. From the date of the capital raise forward, the Company accounts for its investment in Gaea under the equity method.

Basis of Presentation and Use of Estimates

The consolidated interim financial statements should be read in conjunction with the Company's consolidated financial statements and the notes thereto for the period ended December 31, 2020, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on March 5, 2021.

Interim financial statements are unaudited and prepared in accordance with U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. In the opinion of management, all adjustments, consisting solely of normal recurring accruals considered necessary for the fair presentation of consolidated financial statements for the interim period presented, have been included. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending December 31, 2021. The consolidated interim financial statements have been prepared in accordance with U.S. GAAP, as contained within the Accounting Standards Codification (“ASC”) of the Financial Accounting Standards Board (“FASB”) and the rules and regulations of the SEC, as applied to interim financial statements.

The Company consolidates the results and balances of three subsidiaries with non-controlling ownership interests held by third parties. AS Ajax E II LLC ("AS Ajax E II") holds a 5.0% interest in a Delaware trust that owns residential mortgage loans and residential real estate assets; AS Ajax E II is 53.1% owned by the Company. Ajax Mortgage Loan Trust 2017-D ("2017-D") is a securitization trust that holds mortgage loans, REO property and secured borrowings; 2017-D is 50.0% owned by the Company. Great Ajax II REIT Inc. which holds an interest in Great Ajax II Depositor LLC which acts as the depositor of mortgage loans into securitization trusts and holds the subordinated securities issued by such trusts and any additional trusts the Company may form for additional secured borrowings and is 99.9% owned by the Company as of June 30, 2021 and December 31, 2020. The Company recognizes non-controlling interests in its consolidated financial statements for the amounts of the investments and income due to the third-party investors for its consolidated subsidiaries.

During the second quarter of 2021, the majority of loans held by 2017-D were resecuritized into Ajax Mortgage Loan Trust 2021-C ("2021-C"), a related party joint venture with third party institutional investors. The Company held a 50.0% ownership of the remaining loans held by 2017-D at June 30, 2021.

During the first quarter of 2021, the Company acquired the remaining ownership of Ajax Mortgage Loan Trusts 2018-C ("2018-C"), a subsidiary that previously had non-controlling ownership interest held by third parties and was 63.0% owned by the Company as of December 31, 2020 and consolidated in the Company's consolidated financial statements. As a result of the acquisition transaction in the first quarter of 2021, at June 30, 2021 the non-controlling ownership interest in 2018-C held by third parties is zero.

At inception, the Operating Partnership was a majority owned partnership that had a non-controlling ownership interest held by an unaffiliated third party included in non-controlling interests on the Company’s consolidated balance sheet. At December 31, 2018, the Company owned 96.8% of the outstanding operating partnership units ("OP Units") and the remaining 3.2% of the OP Units were owned by the unaffiliated holder. The OP units were exchangeable on a 1-for-1 basis with shares of the Company’s common stock. During the second quarter of 2019, all 624,106 OP units held by the unaffiliated holder were exchanged for shares of the Company’s common stock. As a result, at June 30, 2021, the Operating Partnership was 100% owned by the Company. All controlled subsidiaries are included in the Company's consolidated financial statements and all intercompany accounts and transactions have been eliminated in consolidation.

The Company’s 19.8% investment in the Manager and 8.0% investment in GAFS are accounted for using the equity method because the Company can exercise influence on the operations of these entities through common officers and directors. There is no traded or quoted price for the interests in the Manager or GAFS since each is privately held.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the

The accompanying notes are an integral part of the consolidated interim financial statements.

reporting periods. The Company considers significant estimates to include expected cash flows from its holdings of mortgage loans and beneficial interests in trusts, and their resolution methods and timelines, including foreclosure costs, eviction costs and property rehabilitation costs. Other significant estimates are fair value measurements, and the net realizable value of REO properties held-for-sale.

Note 2 — Summary of Significant Accounting Policies

Mortgage loans

Purchased Credit Deteriorated Loans ("PCD Loans")

As of their acquisition date, the loans acquired by the Company have generally suffered some credit deterioration subsequent to origination. As a result, the Company’s recognition of interest income for PCD loans is based upon its having a reasonable expectation of the amount and timing of the cash flows expected to be collected. When the timing and amount of cash flows expected to be collected are reasonably estimable, the Company uses expected cash flows to apply the effective interest method of income recognition. The Company adopted ASU 2016-13, Financial Instruments - Credit Losses, otherwise known as CECL using the prospective transition approach for PCD assets on January 1, 2020. At the time, $10.2 million of loan discount was reclassified to the allowance for credit losses with no net impact on the amortized cost basis of the portfolio.

Acquired loans may be aggregated and accounted for as a pool of loans if the loans have common risk characteristics. A pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. The Company may adjust its loan pools as the underlying risk factors change over time. The Company has re-aggregated its mortgage loan portfolio into loan pools based on similar risk factors. Excluded from the aggregate pools are loans that pay in full subsequent to the acquisition closing date but prior to pooling. Any gain or loss on these loans is recognized as interest income in the period the loan pays in full.

The Company’s accounting for PCD loans gives rise to an accretable yield and an allowance for credit losses. Upon the acquisition of PCD loans the Company records the acquisition as three separate elements for 1) the amount of purchase discount which the Company expects to recover through eventual repayment by the borrower, 2) an allowance for future expected credit loss and 3) the UPB of the loan. The purchase price discount which the Company expects at the time of acquisition to collect over the life of the loans is the accretable yield. Cash flows expected at acquisition include all cash flows directly related to the acquired loan, including those expected from the underlying collateral. The Company recognizes the accretable yield as interest income on a prospective level yield basis over the life of the pool. The Company’s expectation of the amount of undiscounted cash flows to be collected is evaluated at the end of each calendar quarter. The net present value of changes in expected cash flows, whether caused by timing or loan performance, is reported in the period in which they arise and are reflected as an increase or decrease in the provision for losses even if no provision expense was previously recorded due to the establishment of loss reserves upon loan acquisition. Management assesses the credit quality of the portfolio and the adequacy of loan loss reserves on a quarterly basis, or more frequently as necessary. Significant judgment is required in this analysis. Depending on the expected recovery of its investment, the Company considers the estimated net recoverable value of the loan pools as well as other factors, such as the fair value of the underlying collateral. Because these determinations are based upon projections of future economic events, which are inherently subjective, the amounts ultimately realized may differ materially from the carrying value as of the reporting date.

The Company’s mortgage loans are secured by real estate. The Company monitors the credit quality of the mortgage loans in its portfolio on an ongoing basis, principally by considering loan payment activity or delinquency status. In addition, the Company assesses the expected cash flows from the mortgage loans, the fair value of the underlying collateral and other factors, and evaluates whether and when it becomes probable that all amounts contractually due will not be collected.

Borrower payments on the Company’s mortgage loans are classified as principal, interest, payments of fees, or escrow deposits. Amounts applied as interest on the borrower account are similarly classified as interest for accounting purposes and are classified as operating cash flows in the Company’s consolidated Statement of Cash Flows. Amounts applied as principal on the borrower account including amounts contractually due from borrowers that exceed the Company’s basis in loans purchased at a discount, are similarly classified as principal for accounting purposes and are classified as investing cash flows in the consolidated Statement of Cash Flows as required under U.S. GAAP. Amounts received as payments of fees are recorded in Other income and classified as operating cash flows in the consolidated Statement of Cash Flows. Escrow deposits are recorded on the Servicer’s balance sheet and do not impact the Company’s cash flow.

Non-PCD Loans

The accompanying notes are an integral part of the consolidated interim financial statements.

While the Company generally acquires loans that have experienced deterioration in credit quality, it also acquires loans that have not experienced a deterioration in credit quality and originates SBC loans.

The Company accounts for its non-PCD loans by estimating any allowance for credit losses for its non-PCD loans based on historical experience and the risk characteristics of the individual loans. Impaired loans are carried at the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s market price, or the fair value of the collateral if the loan is collateral dependent. For individual loans, a troubled debt restructuring is a formal restructuring of a loan where, for economic or legal reasons related to the borrower’s financial difficulties, a concession that would not otherwise be considered is granted to the borrower. The concession may be granted in various forms, including providing a below-market interest rate, a reduction in the loan balance or accrued interest, an extension of the maturity date, or a combination of these. An individual loan that has had a troubled debt restructuring is considered to be impaired and is subject to the relevant accounting for impaired loans.

If necessary, an allowance for loan losses is established through a provision for loan losses charged to expenses. The allowance is the difference between the present value of the expected future cash flows from the loan and the contractual balance due.

Investments in Securities at Fair Value

The Company’s Investments in Securities at Fair Value consist of investments in senior and subordinate notes issued by joint ventures which the Company forms with third party institutional accredited investors. The Company recognizes income on the debt securities using the effective interest method. Additionally, the notes are classified as available for sale and are carried at fair value with changes in fair value reflected in the Company's consolidated statements of comprehensive income. The Company marks its investments to fair value using prices received from its financing counterparties and believes any unrealized losses on its debt securities to be temporary. Any other-than-temporary losses, which represent the excess of the amortized cost basis over the present value of expected future cash flows, are recognized in the period identified in the Company’s consolidated statements of income. Risks inherent in the Company's debt securities portfolio, affecting both the valuation of its securities as well as the portfolio's interest income and recovery of principal include the risk of default, delays and inconsistency in the frequency and amount of payments, risks affecting borrowers such as man-made or natural disasters and damage to or delay in realizing the value of the underlying collateral. The Company monitors the credit quality of the mortgage loans underlying its debt securities on an ongoing basis, principally by considering loan payment activity or delinquency status. In addition, the Company assesses the expected cash flows from the mortgage loans, the fair value of the underlying collateral and other factors, and evaluates whether and when it becomes probable that all amounts contractually due will not be collected.

Investments in Beneficial Interests

The Company’s Investments in beneficial interests consist of investments in the trust certificates issued by joint ventures which the Company forms with third party institutional accredited investors. The trust certificates represent the residual interest of any special purpose entity formed to facilitate certain investments. The Company adopted CECL with respect to its Investment in beneficial interests on January 1, 2020. The methodology is similar to that described in "Mortgage Loans" except that the Company only recognizes its ratable share of gain, loss, income or expense.

Real Estate

The Company acquires real estate properties directly through purchases, when it forecloses on the borrower and takes title to the underlying property, or the borrower surrenders the deed in lieu of foreclosure. Property is recorded at cost if purchased, or at the present value of future cash flows if obtained through foreclosure by the Company. Property that the Company expects to actively market for sale is classified as held-for-sale. Property held-for-sale is carried at the lower of its acquisition basis or net realizable value (fair market value less expected selling costs, and any additional costs necessary to prepare the property for sale). Fair market value is determined based on broker price opinions (“BPOs”), appraisals, or other market indicators of fair value including list price or contract price, if listed or under contract for sale at the balance sheet date. Net unrealized losses due to changes in market value are recognized through a valuation allowance by charges to income through real estate operating expenses. No depreciation or amortization expense is recognized on properties held-for-sale. Holding costs are generally incurred by the Servicer and are subtracted from the Servicer’s remittance of sale proceeds upon ultimate disposition of properties held-for-sale.

The accompanying notes are an integral part of the consolidated interim financial statements.

portfolio such as when a mortgage loan is foreclosed upon and the Company takes title to the property or the borrower surrenders the deed in lieu of foreclosure is generally held for investment as rental property if the cash flows from use as a rental exceed the present value of expected cash flows from a sale. The Company also acquires rental properties through direct purchases of properties for its rental portfolio. Depreciation is provided for using the straight-line method over the estimated useful lives of the assets of 27.5 years. The Company performs an impairment analysis for rental property using estimated cash flows if events or changes in circumstances indicate that the carrying value may be impaired, such as prolonged vacancy, identification of materially adverse legal or environmental factors, changes in expected ownership period or a decline in market value to an amount less than cost. This analysis is performed at the property level. The cash flows are estimated based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for rental properties, competition for customers, changes in market rental rates, costs to operate each property and expected ownership periods.

Renovations are performed by the Servicer, and those costs are then reimbursed to the Servicer. Any renovations on properties which the Company elects to hold as rental properties are capitalized as part of the property’s basis and depreciated over the remaining estimated useful life of the property. The Company may perform property renovations to maximize the value of a property for either its rental strategy or for resale.

Preferred Stock

During the quarter ended June 30, 2020, the Company issued an aggregate of $125.0 million, net of offering costs, of preferred stock in two series and warrants to third party institutional accredited investors in a series of private placements. The Company issued 2,307,400 shares of 7.25% Series A Fixed-to-Floating Rate Preferred Stock and 2,892,600 shares of 5.00% Series B Fixed-to-Floating Rate Preferred Stock, each at a purchase price per share of $25.00. The shares have a liquidation preference of $25.00 per share.

Put Option Liability

As part of the Company’s capital raise transactions during the quarter ended June 30, 2020, the Company issued two series of five-year warrants to purchase an aggregate of 6,500,000 shares of the Company's common stock at an exercise price of $10.00 per share. Each series of warrants includes a put option that allows the holder to sell the warrants to the Company at a specified put price on or after July 6, 2023. U.S. GAAP requires the Company to account for the outstanding warrants as if the put option will be exercised by the holders. The warrants were recorded as a liability in the Company's consolidated balance sheet as a put option liability with an original basis of $9.5 million. The Company is accreting the amount of the liability under the effective interest method to its expected future put value of $50.7 million and marks the obligation to market through earnings at each balance sheet date. The Company determines the fair value using a discounted cash flow method.

Secured Borrowings

The Company, through securitization trusts which are VIEs, issues callable debt secured by its mortgage loans in the ordinary course of business. The secured borrowings facilitated by the trusts are structured as debt financings, and the mortgage loans used as collateral remain on the Company’s consolidated balance sheet as the Company is the primary beneficiary of the securitization trusts. These secured borrowing VIEs are structured as pass through entities that receive principal and interest on the underlying mortgages and distribute those payments to the holders of the notes. The Company’s exposure to the obligations of the VIEs is generally limited to its investments in the entities; the creditors do not have recourse to the primary beneficiary. Coupon interest expense on the debt is recognized using the accrual method of accounting. Deferred issuance costs, including original issue discount and debt issuance costs, are carried on the Company’s consolidated balance sheets as a deduction from Secured borrowings, and are amortized to interest expense on an effective yield basis based on the underlying cash flow of the mortgage loans serving as collateral. The Company assumes the debt will be called at the specified call date for purposes of amortizing discount and issuance costs because the Company believes it will have the intent and ability to call the debt on the call date. Changes in the actual or projected underlying cash flows are reflected in the timing and amount of deferred issuance cost amortization. See Note 8 — Commitments and Contingencies.

Repurchase Facilities

The Company enters into repurchase financing facilities under which it nominally sells assets to a counterparty and simultaneously enters into an agreement to repurchase the sold assets at a price equal to the sold amount plus an interest factor. Despite being legally structured as sales and subsequent repurchases, repurchase transactions are generally accounted for as debt secured by the underlying assets. At the maturity of a repurchase financing, unless the repurchase financing is renewed, the Company is required to repay the borrowing including any accrued interest and concurrently receives back its pledged collateral

The accompanying notes are an integral part of the consolidated interim financial statements.

from the lender. The repurchase financings are treated as collateralized financing transactions; pledged assets are recorded as assets in the Company’s consolidated balance sheets, and the debt is recognized at the contractual amount. Interest is recorded at the contractual amount on an accrual basis. Costs associated with the set-up of a repurchasing contract are recorded as deferred issuance cost at inception and amortized over the contractual life of the agreement. Any draw fees associated with individual transactions and any facility fees assessed on the amounts outstanding are recorded as deferred costs when incurred and amortized over the contractual life of the related borrowing.

Convertible Senior Notes

On April 25, 2017, the Company completed the public offer and sale of $87.5 million in aggregate principal amount of its convertible senior notes (the “notes”) due 2024, with follow-on offerings of an additional $20.5 million and $15.9 million, respectively, in aggregate principal amount completed on August 18, 2017 and November 19, 2018, respectively, which, combined with the notes from the April offering form a single series of fungible securities. The notes bear interest at a rate of 7.25% per annum, payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year. The notes will mature on April 30, 2024, unless earlier repurchased, converted or redeemed. During certain periods and subject to certain conditions the notes will be convertible by their holders into shares of the Company’s common stock at a conversion rate of 1.7279 shares of common stock per $25.00 principal amount of the notes, which represents a conversion price of approximately $14.47 per share of common stock. The conversion rate, and thus the conversion price, may be subject to adjustment under certain circumstances.

Coupon interest on the notes is recognized using the accrual method of accounting. Discount and deferred issuance costs are carried on the Company’s consolidated balance sheets as a deduction from the notes, and are amortized to interest expense on an effective yield basis through April 30, 2023, the date at which the notes can be converted. The Company assumes the debt will be converted at the specified conversion date for purposes of amortizing issuance costs because the Company believes such conversion will be in the economic interest of the holders. A cumulative discount at issuance of $3.2 million, representing the fair value of the embedded conversion feature, was recorded to stockholder equity. No sinking fund has been established for redemption of the principal.

During the first and second quarters of 2021, the Company completed a series of convertible note repurchases for aggregate principal amounts of $2.5 million and $5.0 million, respectively, for total purchase prices of $2.4 million and $5.1 million, respectively. The carrying amounts of the equity component representing the embedded conversion feature reversed from Additional paid-in capital due to the first and second quarter of 2021 transactions were both zero. During the first and third quarters of 2020, the Company completed a series of convertible note repurchases for aggregate principal amounts of $8.0 million and $2.5 million, respectively, for total purchase prices of $8.2 million and $2.3 million, respectively. The carrying amounts of the equity component representing the embedded conversion feature reversed from Additional paid-in capital due to the first and third quarter of 2020 transactions were $0.1 million and zero, respectively.

Management Fee and Expense Reimbursement

The Company is a party to the Third Amended and Restated Management Agreement with the Manager (the "Management Agreement") by and between the Company and the Manager, dated as of May 1, 2020, expiring on March 5, 2034. Under the Management Agreement, the Manager implements the Company’s business strategy and manages the Company’s business and investment activities and day-to-day operations, subject to oversight by the Company’s Board of Directors. Among other services, the Manager provides the Company with a management team and necessary administrative and support personnel. Additionally, the Company pays directly for the internal audit function that reports directly to the Audit Committee and the Board of Directors. The Company does not currently have any employees that it pays directly and does not expect to have any employees that it pays directly in the foreseeable future. Each of the Company’s executive officers is an employee or officer, or both, of the Manager or the Servicer.

Under the Management Agreement, the Company pays a quarterly base management fee based on its stockholders’ equity, including equity equivalents such as the Company's issuance of convertible senior notes, and may be required to pay a quarterly incentive management fee based on its cash distributions to its stockholders, and has the option to pay up to 100% of the base and incentive fees in cash rather than in half cash and half shares of its common stock. Management fees are expensed in the quarter incurred and the portion payable in common stock (if any) is included in stockholders’ equity at quarter end. See Note 10 — Related party transactions.

Servicing Fees

The accompanying notes are an integral part of the consolidated interim financial statements.

The Company is also a party to a Servicing Agreement (the "Servicing Agreement"), expiring July 8, 2029, with the Servicer. Under the Servicing Agreement by and between the Company and the Servicer, the Servicer receives an annual servicing fee ranging from 0.65% annually of the unpaid principal balance (“UPB”) to 1.25% annually of UPB for loans that are non-performing at acquisition. Servicing fees are paid monthly. The total fees incurred by the Company for these services depend upon the UPB and type of mortgage loans that the Servicer services pursuant to the terms of the Servicing Agreement. The fees do not change if an RPL becomes non-performing or vice versa. Servicing fees for the Company’s real property assets are the greater of (i) the servicing fee applicable to the underlying mortgage loan prior to foreclosure, or (ii) 1.00% annually of the fair market value of the REO as reasonably determined by the Manager or 1.00% annually of the purchase price of any REO otherwise purchased by the Company. The Servicer is reimbursed for all customary, reasonable and necessary out-of-pocket costs and expenses incurred in the performance of its obligations, including the actual cost of any repairs and renovations undertaken on the Company’s behalf. The total fees incurred by the Company for these services will be dependent upon the UPB and the type of mortgage loans that the Servicer services, property values, previous UPB of the relevant loan, and the number of REO properties. The Servicing Agreement will automatically renew for successive one-year terms, subject to prior written notice of non-renewal. In certain cases, the Company may be obligated to pay a termination fee. The Management Agreement will automatically terminate at the same time as the Servicing Agreement if the Servicing Agreement is terminated for any reason. See Note 10 — Related party transactions.

Stock-based Payments

At least a portion of the management fee is payable in cash, and a portion of the management fee may be payable (at the Company's discretion) in shares of the Company’s common stock, which are issued to the Manager in a private placement and are restricted securities under the Securities Act of 1933, as amended (the “Securities Act”). The number of shares issued to the Manager (if any) are determined based on the higher of the most recently reported book value or the average of the closing prices of the Company's common stock on the New York Stock Exchange ("NYSE") on the five business days after the date on which the most recent regular quarterly dividend to holders of the common stock is paid. Any management fees paid in common stock are recognized as an expense in the quarter incurred and recorded in stockholders' equity at quarter end. The shares vest immediately upon issuance. The Manager has agreed to hold any shares of common stock received by it as payment of the base management fee for at least three years from the date such shares of common stock are received.

Under the Company’s 2014 Director Equity Plan (the “Director Plan”), the Company may make stock-based awards to its directors. The Director Plan is designed to promote the Company’s interests by attracting and retaining qualified and experienced individuals for service as non-employee directors. The Director Plan is administered by the Company’s Board of Directors. The total number of shares of common stock or other stock-based award, including grants of long-term incentive plan units (“LTIP Units”) from the Operating Partnership, available for issuance under the Director Plan is 60,000 shares. The Company issued to each of its independent directors restricted stock awards of 2,000 shares of its common stock upon joining the Board of Directors. The Company may also periodically issue additional restricted stock awards to its independent directors under the Director Plan. In addition, each of the Company’s independent directors receives an annual fee of $100,000, payable quarterly, 40% in shares of the Company’s common stock and 60% in cash. Stock-based expense for the directors’ annual fee is expensed as earned, in equal quarterly amounts during the year, and recorded in stockholders' equity at quarter end.

On June 7, 2016, the Company’s stockholders approved the 2016 Equity Incentive Plan (the “2016 Plan”) to attract and retain non-employee directors, executive officers, key employees and service providers, including officers and employees of the Company’s affiliates. The 2016 Plan authorized the issuance of up to 5% of the Company’s outstanding shares from time to time on a fully diluted basis (assuming, if applicable, the exercise of all outstanding options and the conversion of all warrants and convertible senior notes, including OP Units and any LTIP Units, into shares of common stock). Grants of restricted stock under the 2016 Plan use grant date fair value of the stock as the basis for measuring the cost of the grant. Forfeitures of granted shares are accounted for in the period in which they occur. The share grants vest over three years, with one third of the shares vesting on each of the first, second and third anniversaries of the grant date. The shares may not be sold until the third anniversary of the grant date.

Directors’ Fees

The expense related to directors’ fees is accrued, and the portion payable in common stock is reflected in consolidated Stockholders’ Equity in the period in which it is incurred.

Variable Interest Entities

In the normal course of business, the Company enters into various types of transactions with special purpose entities, which have primarily consisted of trusts established for the Company’s secured borrowings (see “Secured Borrowings” above

The accompanying notes are an integral part of the consolidated interim financial statements.

and Note 9 to the consolidated financial statements). Additionally, from time to time, the Company may enter into joint ventures with unrelated entities, which also generally involves the formation of a special purpose entity. The Company evaluates each transaction and its resulting beneficial interest to determine if the entity formed pursuant to the transaction should be classified as a VIE. If an entity created in a transaction meets the definition of a VIE and the Company determines that it or a consolidated subsidiary is the primary beneficiary, the Company will include the entity in its consolidated financial statements.

Cash and Cash Equivalents

Highly liquid investments with an original maturity of three months or less when purchased are considered cash equivalents. The Company generally maintains cash and cash equivalents at insured banking institutions with minimum assets of $1 billion. Certain account balances exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage.

Cash Held in Trust

Cash held in trust consists of restricted cash balances either legally due to lenders or held in trust for the benefit of the Company's secured borrowings, and is segregated from the Company’s other cash deposits. Cash held in trust is not available to the Company for any purpose other than the settlement of existing obligations.

Earnings per Share

The Company grants restricted shares which entitle the recipients to receive dividend equivalents during the vesting period on a basis equivalent to the dividends paid to holders of common shares. Unvested share-based compensation awards containing non-forfeitable rights to receive dividends or dividend equivalents (collectively, “dividends”) are classified as “participating securities” and are included in the basic earnings per share calculation using the two-class method.

Under the two-class method, all of the Company’s Consolidated net income attributable to common stockholders, consisting of Consolidated net income, less dividends on the Company’s Series A and Series B preferred stock, is allocated to common shares and participating securities, based on their respective rights to receive dividends. Basic earnings per share is determined by dividing Consolidated net income attributable to common stockholders, reduced by income attributable to the participating securities, by the weighted-average common shares outstanding during the period.

Diluted earnings per share is determined by dividing Consolidated net income attributable to diluted shareholders, which adds back to Consolidated net income attributable to common stockholders the interest expense and applicable portion of management fee expense, net of applicable income taxes, on the Company’s convertible senior notes, by the weighted-average common shares outstanding, assuming all dilutive securities, including stock grants, shares that would be issued in the event that warrants were redeemed for shares of common stock of the Company, shares issued in respect of the stock-based portion of the base fee payable to the Manager and independent directors, and shares that would be issued in the event of conversion of the Company’s outstanding convertible senior notes, were issued. In the event the Company were to record a net loss, potentially dilutive securities would be excluded from the diluted loss per share calculation, as their effect on loss per share would be anti-dilutive. The Company uses the Treasury Stock method of accounting for the outstanding warrants. Under the Treasury Stock method, the exercise of the warrants is assumed at the beginning of the period, and shares of common stock are assumed to have been issued. The proceeds from the exercise are assumed to be used by the Company to repurchase treasury stock, thereby reducing the assumed dilution from the warrant exercise. In applying the Treasury Stock method, all dilutive potential common shares, regardless of whether they are exercisable, are treated as if they had been exercised.

In the event that any of the adjustments normally included to arrive at diluted earnings per share were to produce an anti-dilutive result, one that either increased earnings or reduced the quantity of shares used in the calculation, the anti-dilutive adjustment would not be included in the diluted earnings per share calculation.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy has been established that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

•Level 1 — Quoted prices in active markets for identical assets or liabilities.

The accompanying notes are an integral part of the consolidated interim financial statements.

•Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The degree of judgment utilized in measuring fair value generally correlates to the level of pricing observability. Assets and liabilities with readily available actively quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of pricing observability and a lesser degree of judgment utilized in measuring fair value. Conversely, assets and liabilities rarely traded or not quoted will generally have little or no pricing observability and a higher degree of judgment utilized in measuring fair value. Pricing observability is impacted by a number of factors, including the type of asset or liability, whether it is new to the market and not yet established, and the characteristics specific to the transaction.

The fair value of mortgage loans is estimated using the Manager’s proprietary pricing model which estimates expected cash flows with the discount rate used in the present value calculation representing the estimated effective yield of the loans. The value of transfers of mortgage loans to REO is based upon the present value of future expected cash flows of the loans being transferred.

The Company values its investments in debt securities using estimates provided by its financing counterparties. The Company also relies on the Manager's proprietary pricing model to estimate the underlying cash flows expected to be collected on these investments as a comparison to the estimates received from financing counterparties. The Company also relies on its Manager's proprietary pricing model to estimate the underlying cash flows expected to be collected on its investments in beneficial interests.

The Company's investment in the Manager is valued by applying an earnings multiple to base fee revenue.

The Company's investments in AS Ajax E LLC and AS Ajax E II LLC are valued using estimates provided by financing counterparties and other publicly available information.

The fair value of the Company's investment in GAFS, including warrants, is determined by applying an earnings multiple to expected earnings.

The fair value of the Company's investment in Gaea is estimated using a projected net operating income for its property portfolio.

The fair value of the Company's investment in the loan pool LLCs is determined by using estimates of underlying assets and liabilities taken from its Manager's pricing model.

The fair value of secured borrowings is estimated using estimates provided by the Company's financing counterparties, which are compared for reasonableness to the Manager’s proprietary pricing model which estimates expected cash flows of the underlying mortgage loans collateralizing the debt. The Company is able to call the bonds issued in its secured borrowings at par value plus accrued interest pursuant to the terms of the offering document. The Company carries its secured borrowings net of deferred issuance cost. Accordingly, the difference between fair value and carrying value is largely driven by the deferred issuance costs.

The fair value of the Company's put option liability is adjusted to approximate market value through earnings. The put obligation is a fixed amount that may be settled in cash or shares of the Company’s common stock at the option of the Company. Fair value is determined using the discounted cash flow method using a rate to accrete the initial basis of $9.5 million to the future put obligation of $50.7 million over the 39-month term of the put option liability.

The Company’s borrowings under its repurchase agreements are short-term in nature, and the Manager believes it can renew the current borrowing arrangements on similar terms in the future. Accordingly, the carrying value of these borrowings approximates fair value.

The Company’s convertible senior notes are traded on the NYSE under the ticker symbol "AJXA" the debt’s fair value is determined from the closing price on the balance sheet date. The Convertible debt may be redeemable at par plus accrued interest beginning on April 30, 2022 subject to satisfying the conversion price trigger. The Company carries it

The accompanying notes are an integral part of the consolidated interim financial statements.

Convertible debt net of deferred issuance cost. Accordingly, the difference between fair value and carrying value is partially driven by the deferred issuance costs.

Property held-for-sale is carried at the lower of its acquisition basis or net realizable value. Net realizable value is determined based on broker price opinions, appraisals, or other market indicators of fair value, which are then reduced by anticipated selling costs. Net unrealized losses due to changes in market value are recognized through a valuation allowance by charges to income.

The carrying values of the Company's Cash and cash equivalents, Cash held in trust, Receivable from Servicer, Prepaid expenses and other assets, Management fee payable and Accrued expenses and other liabilities are equal to or approximate fair value.

Income Taxes

The Company elected REIT status upon the filing of its 2014 income tax return, and has conducted its operations in order to satisfy and maintain eligibility for REIT status. Accordingly, the Company does not believe it will be subject to U.S. federal income tax from the year ended December 31, 2014 forward on the portion of the Company’s REIT taxable income that is distributed to the Company’s stockholders as long as certain asset, income and stock ownership tests are met. If the Company fails to qualify as a REIT in any taxable year, it generally will not be permitted to qualify for treatment as a REIT for U.S. federal income tax purposes for the four taxable years following the year during which qualification is lost. In addition, notwithstanding the Company’s qualification as a REIT, it may also have to pay certain state and local income taxes, because not all states and localities treat REITs in the same manner that they are treated for U.S. federal income tax purposes.

The Company’s consolidated financial statements include the operations of two TRS entities, GA-TRS and GAJX Real Estate Corp., which are subject to U.S. federal, state and local income taxes on their taxable income. Income from these two entities and any other TRS that the Company forms in the future will be subject to U.S. federal and state income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences or benefits attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in the years in which management expects those temporary differences to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period in which the change occurs. Subject to the Company’s judgment, it reduces a deferred tax asset by a valuation allowance if it is “more-likely-than-not” that some or all of the deferred tax asset will not be realized. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in evaluating tax positions, and the Company recognizes tax benefits only if it is more likely than not that a tax position will be sustained upon examination by the appropriate taxing authority.

The Company evaluates tax positions taken in its consolidated financial statements under the interpretation for accounting for uncertainty in income taxes. As a result of this evaluation, the Company may recognize a tax benefit from an uncertain tax position only if it is “more-likely-than-not” that the tax position will be sustained on examination by taxing authorities.

The Company’s tax returns remain subject to examination and consequently, the taxability of the distributions and other tax positions taken by the Company may be subject to change. Distributions to stockholders generally will be primarily taxable as long-term capital gain, although a portion of such distributions may be designated as ordinary income or qualified dividend income, or may constitute a return of capital. The Company furnishes annually to each stockholder a statement setting forth distributions paid during the preceding year and their U.S. federal income tax treatment.

Reclassifications

The Company combined its Property held-for-sale, net and Rental property, net lines with balances of $7.8 million and $0.7 million, respectively, in its December 31, 2020 consolidated balance sheet into a single line, Real estate owned properties, net, to conform to the current period presentation. There was no effect on the Company's reported earnings or cash flows for the periods presented. The Company reclassified its put option liability of $14.2 million at December 31, 2020, from Accrued expenses and other liabilities on the consolidated balance sheets to a separate line, Put option liability, to conform to the current period presentation. There was no effect on the Company's reported earnings or cash flows for the periods presented. The Company also reclassified its loans and securities credit loss expenses of $0.5 million and $0.9 million for the three and six months ended June 30, 2020, respectively, from Net increase in the net present value of expected cash flows to Interest income on its consolidated statement of income to align the presentation with the method the Company uses to evaluate these results.

The accompanying notes are an integral part of the consolidated interim financial statements.

The Company reclassified its loss from loan settlement of $0.7 million for the six months ended June 30, 2020 from Loss on sale of mortgage loans to Other income on its consolidated statement of income to align the presentation with the method the Company uses to evaluate these results. The Company also reclassified its loan transaction expense of $65 thousand and $(38) thousand for the three and six months ended June 30, 2020, respectively, from Loan transaction expense to Other expense on its consolidated statement of income to align the presentation with the method the Company uses to evaluate these results.

Segment Information

The Company’s primary business is acquiring, investing in and managing a portfolio of mortgage loans. The Company operates in a single segment focused on re-performing mortgages, and to a lesser extent non-performing mortgages and real property.

Recently Adopted Accounting Standards

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes. The amendments in this update simplify the accounting for income taxes by removing certain exceptions and adding certain clarifications to rules and definitions used in the calculation of the income tax provision. This guidance is effective for interim and annual reporting periods beginning after December 15, 2020, with early adoption permitted, including adoption in any interim period. The Company adopted ASU 2019-12 in the first quarter of 2021 with no effect on its consolidated assets or liabilities, consolidated net income or equity or cash flows on the date of adoption.

In January 2020, the FASB issued ASU 2020-01, Investments – Equity Securities (Topic 321, Investments) – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). The amendments in this update clarify the interactions between Topic 321, Topic 323, and Topic 815, which clarifies aspects of accounting for investments in equity-method investees acquired through step acquisitions to require remeasurement of an investment immediately before adopting the equity method of accounting if the investor identifies observable price changes in orderly transactions for an identical or similar investment of the same issuer, and also requires such remeasurement upon discontinuance of the equity method. The amendments also clarify whether upon settlement of a forward contract or option the underlying security would be accounted for under the Equity Method (Topic 323) or the fair value option (Topic 825). This guidance is effective for interim and annual reporting periods beginning after December 15, 2020, with early adoption permitted, including adoption in any interim period. The Company adopted ASU 2020-01 in the first quarter of 2021 with no effect on its consolidated assets or liabilities, consolidated net income or equity or cash flows on the date of adoption.

Recently Issued Accounting Standards

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in an Entity’s Own Equity (Subtopic 815-40). The amendments in this update simplify the accounting for convertible instruments by removing certain accounting models that require separation of convertible instruments into debt and equity components with conversion features that are not required to be accounted for as derivatives or that do not result in substantial premiums. Consequently a convertible instrument will be accounted for as a single liability measured as its amortized cost and convertible preferred stock will be accounted for as a single instrument recorded at historical cost as long as no other features require bifurcation and recognition as derivatives. This guidance is effective for interim and annual reporting periods beginning after December 15, 2021, with early adoption permitted, including adoption in any interim period. The Company is currently evaluating the impact on its consolidated financial statements and related disclosures.

Note 3 — Mortgage Loans

The following table presents information regarding the carrying value for the Company's RPLs, NPLs and SBC loans as of June 30, 2021 and December 31, 2020 ($ in thousands):


Loan portfolio basis by asset type	June 30, 2021		December 31, 2020
Residential RPLs	$	897,516	$	1,057,454
Residential NPLs	36,820		38,724
SBC loans	21,292		23,194
Total	$	955,628	$	1,119,372

The accompanying notes are an integral part of the consolidated interim financial statements.

Included on the Company’s consolidated balance sheets as of June 30, 2021 and December 31, 2020 are approximately $955.6 million and $1.1 billion, respectively, of RPLs, NPLs, and SBCs. The categorization of RPLs, NPLs and SBCs is determined at acquisition. The carrying value of RPLs, NPLs and SBCs reflects the original investment amount, plus accretion of interest income and credit and non-credit discount, less principal and interest cash flows received. The carrying values at June 30, 2021 and December 31, 2020 for the Company's loans in the table above are presented net of a cumulative allowance for loan credit losses of $9.8 million and $13.7 million, respectively, reflected in the appropriate lines in the table by loan type. For the three and six months ended June 30, 2021, the Company recognized a $2.7 million and $8.2 million, respectively, of accelerated revenue during the three and six month periods due to an increase in the present value of the expected cash flows. For the three and six months ended June 30, 2020, the Company recognized $1.8 million and $(0.1) million, respectively, of income and expense, respectively. For the three and six months ended June 30, 2021, the Company accreted $18.4 million and $41.6 million, respectively, net of credit impairments and recoveries into interest income with respect to its RPL, NPL and SBC loans. For the three and six months ended June 30, 2020, the Company accreted $20.2 million and $39.8 million, respectively, net of credit impairments and recoveries into interest income with respect to its RPL, NPL and SBC loans.

Loss estimates are determined based on the net present value of the difference between the contractual cash flows and the expected cash flows over the expected life of the loans. Contractual cash flows are calculated based on the stated terms of the loans, and incorporate any prepayment assumptions utilized in the expected cash flows. Expected cash flows are based on the Manager's proprietary model, which includes factors such as resolution method, resolution timeline, foreclosure costs, rehabilitation costs and eviction costs. Additional variables bearing upon cash flow expectations include the specific location of the underlying property, loan-to-value ratio, property age and condition, change and rate of change of borrower credit rating, servicing notes, interest rate, monthly payment amount and neighborhood rents.

The Company's mortgage loans are secured by real estate. Risks inherent in the Company's mortgage loan portfolio, affecting both the valuation of its mortgage loans as well as the portfolio's interest income include the risk of default, delays and inconsistency in the frequency and amount of payments, risks affecting borrowers such as man-made or natural disasters, or the pandemic caused by the novel coronavirus ("COVID-19") outbreak, and damage to or delay in realizing the value of the underlying collateral. The Company monitors the credit quality of the mortgage loans in its portfolio on an ongoing basis, principally by considering loan payment activity or delinquency status. In addition, the Company assesses the expected cash flows from the mortgage loans, the fair value of the underlying collateral and other factors, and evaluates whether and when it becomes probable that all amounts contractually due will not be collected.

During the three and six months ended June 30, 2021, the Company purchased 38 and 237 RPLs with UPB of $5.2 million and $41.2 million, respectively. The Company had no loan acquisitions during the three months ended June 30, 2020, however, during the six months ended June 30, 2020 the Company purchased 26 RPLs with UPB of $2.0 million. The Company had no NPL acquisitions during the three months ended June 30, 2021; however, during the six months ended June 30, 2021, the Company purchased three NPLs with UPB of $0.7 million. During the three months ended June 30, 2020 no NPLs were purchased, however, during the six months ended June 30, 2020 one NPL was purchased with UPB of $0.2 million. The Company had no SBC acquisitions during the three months ended June 30, 2021; however, during the six months ended June 30, 2021, the Company acquired one SBC loan with UPB of $3.6 million. No SBC loans were acquired during the three and six months ended June 30, 2020.

During the three and six months ended June 30, 2021, the Company resecuritized 760 loans from 2017-D with a carrying value of $129.2 million and UPB of $133.8 million through a sale to a sponsored joint venture between the Company and a third party accredited institutional investor. The Company retained various classes of securities from the joint venture. Comparatively, during the three months ended June 30, 2020 the Company sold no mortgage loans; however, during the six months ended June 30, 2020, the Company sold 26 loans with a carrying value of $26.1 million and UPB of $26.2 million and collateral value of $44.2 million to Gaea, a related party. See Note 10 — Related Party Transactions.

The Company adopted CECL using the prospective transition approach for PCD assets on January 1, 2020. At the time, $10.2 million of loan discount was reclassified to the allowance for credit losses with no net impact on the amortized cost basis of the portfolio. The Company views its mortgage loan portfolio based on loan performance, or legal ownership for loans held by certain consolidated trusts, and used four and six pools at June 30, 2021 and December 31, 2020, respectively, to aggregate its portfolio of PCD loans, and one pool for its non-PCD loans as of both June 30, 2021 and December 31, 2020. Among the PCD loans, separate pools exist for loans that have been securitized in rated secured borrowings during 2019, 2020 and 2021 ("Great Ajax II REIT") and for loans that are consolidated under U.S. GAAP but where the Company did not own 100% of the loan pool (2017-D and 2018-C). During the quarter ending March 31, 2021 the Company acquired the non-controlling interest in securitization trust 2018-C previously held by its joint venture partner. As a result of the acquisition, the non-controlling interest was eliminated and the loans in securitization trust 2018-C were reclassified into new pools based on their payment status as of the acquisition date of the non-controlling interest. Subsequent to the acquisition date, a significant

The accompanying notes are an integral part of the consolidated interim financial statements.

portion of the loans from 2018-C were added to the Great Ajax II REIT pool as these loans became the collateral for a secured borrowing at that entity. As of March 31, 2021 the loans pooled under 2017-D were designated as held-for-sale. During the second quarter of 2021, 760 loans from 2017-D were resecuritized into a new joint venture, leaving 22 loans in the trust. The remaining loans were reclassified into new pools based on their payment status as of the sale date. A significant portion of the remaining loans from 2017-D were added to the 7f7 and better pool, and the remaining loans were added to the 4f4-6f6 and below pool. Since the criteria for pooling loans includes a combination of both performance and legal ownership by subsidiary trust, these factors are not always mutually exclusive. The following table presents information regarding the year of origination of the Company's mortgage loan portfolio by basis as of June 30, 2021 and December 31, 2020 ($ in thousands):


	June 30, 2021
	2021		2020		2019		2018		2017		2016		2009-2015		2006-2008		2005 and prior		Total
Great Ajax II REIT	$	—	$	755	$	180	$	707	$	488	$	2,010	$	50,595	$	374,493	$	137,438	$	566,666
California	—		1,714		—		635		368		—		4,408		45,819		11,527		64,471
7f7 and better	—		—		1,080		107		427		451		16,202		90,714		35,537		144,518
4f4-6f6 and below	—		110		1,733		2,060		195		146		23,445		89,161		34,687		151,537
Non-PCD	10,678		9,633		4,566		76		2,591		122		735		23		12		28,436
Total	$	10,678	$	12,212	$	7,559	$	3,585	$	4,069	$	2,729	$	95,385	$	600,210	$	219,201	$	955,628


	December 31, 2020
	2020		2019		2018		2017		2016		2009-2015		2006-2008		2005 and prior		Total
Great Ajax II REIT	$	—	$	—	$	257	$	488	$	1,991	$	41,746	$	280,606	$	99,909	$	424,997
2018-C	—		—		—		—		—		14,100		119,343		39,778		173,221
2017-D	—		—		—		121		—		6,826		94,711		32,238		133,896
California	2,221		952		1,484		362		—		5,292		60,393		18,084		88,788
7f7 and better	—		911		434		—		2,125		17,520		88,414		32,831		142,235
4f4-6f6 and below	872		1,397		2,054		336		305		13,409		78,202		30,239		126,814
Non-PCD	21,387		4,738		64		2,493		99		611		20		9		29,421
Total	$	24,480	$	7,998	$	4,293	$	3,800	$	4,520	$	99,504	$	721,689	$	253,088	$	1,119,372

The following table presents a reconciliation between the purchase price and par value for the Company's loan acquisitions and originations for the three and six months ended June 30, 2021 and 2020 ($ in thousands):


	Three months ended June 30,								Six months ended June 30,
	2021				2020				2021				2020
	PCD Loans		Non-PCD Loans		PCD Loans		Non-PCD Loans		PCD Loans		Non-PCD Loans		PCD Loans		Non-PCD Loans
Par	$	5,157	$	—	$	—	$	—	$	41,853	$	3,611	$	227	$	1,952
Discount	(390)		—		—		—		(3,319)		(8)		(37)		(747)
Allowance	6		—		—		—		(1,727)		—		(4)		—
Purchase Price	$	4,773	$	—	$	—	$	—	$	36,807	$	3,603	$	186	$	1,205

The Company performs an analysis of its expectation of the amount of undiscounted cash flows expected to be collected from its mortgage loan pools at the end of each calendar quarter. Under CECL, the Company adjusts its allowance for loan credit losses when there are changes in its expectation of future cash flows. An increase to the allowance for losses will occur when there is a reduction in the Company's expected future cash flows. Reduction to the allowance, or recovery, may occur if there is an increase in expected future cash flows that were previously subject to a provision for loss. A decrease in the

The accompanying notes are an integral part of the consolidated interim financial statements.

allowance is generally facilitated by reclassifying amounts from non-credit discount to the allowance and then recording the recovery. During the three and six months ended June 30, 2021 the Company recorded a $5.5 million and $3.8 million reclassification, respectively, from non-credit discount to the allowance for losses followed by a $2.7 million and $8.2 million reduction of the allowance for losses, respectively, due to increases in the net present value of expected cash flows and a $0.0 million and $0.0 million reclassification, respectively, from non-credit discount to the allowance to reflect the impact of dissolving pool 2018-C during the first quarter of 2021 and resecuritizing the majority of pool 2017-D through the set-up of a new joint venture during the second quarter of 2021 and moving any remaining loans to other pools. During the three and six months ended June 30, 2021 the Company also recorded a $6 thousand decrease and $1.7 million increase, respectively, in the allowance due to new acquisitions. Comparatively, during the three months ended June 30, 2020 the Company recorded no change in the allowance due to new acquisitions, however, during the six months ended June 30, 2020 the Company recorded a $4 thousand increase in the allowance due to new acquisitions. During the three and six months ended June 30, 2021, the Company recorded no reclassifications from non-credit discount to the allowance for losses. Comparatively, during the three and six months ended June 30, 2020, the Company recorded a reclassification from non-credit discount to the allowance for losses in the amount of $0.2 million and $1.7 million, respectively, and an incremental provision expense of $1.8 million and $0.1 million, respectively. An analysis of the balance in the allowance for loan losses account follows ($ in thousands):


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Allowance for loan credit losses, beginning of period	$	(17,890)	$	(16,136)	$	(13,712)	$	(1,960)
Beginning period adjustment for CECL adoption	—		—		—		(10,156)
Reclassification from non-credit discount to the allowance for changes in payment expectations	5,450		—		(3,782)		—
Decrease/(increase) in allowance for loan credit losses for loan acquisitions	6		—		(1,727)		(4)
Credit loss expense on mortgage loans	(139)		(274)		(593)		(503)
Reclassification from non-credit discount to the allowance for losses for increases in the net present value of expected cash flows	—		161		—		(1,733)
Reversal of/(increase in) provision for credit losses due to increases/(decreases) in the net present value of expected cash flows	2,740		1,799		8,240		(94)
Reversal of allowance for reclass of pool 2017-D to mortgage loans held-for-sale, net	—		—		1,741		—
Allowance for loan credit losses, end of period	$	(9,833)	$	(14,450)	$	(9,833)	$	(14,450)

The following table sets forth the carrying value of the Company’s mortgage loans by delinquency status as of June 30, 2021 and December 31, 2020 ($ in thousands):


	June 30, 2021
	Current		30		60		90		Foreclosure		Total
Great Ajax II REIT	$	505,442	$	19,500	$	8,650	$	31,676	$	1,398	$	566,666
California	22,095		5,956		5,280		25,756		5,384		64,471
7f7 and better	66,973		22,767		12,810		39,698		2,270		144,518
4f4-6f6 and below	22,274		4,634		6,844		81,621		36,164		151,537
Non-PCD	27,687		65		—		47		637		28,436
Total	$	644,471	$	52,922	$	33,584	$	178,798	$	45,853	$	955,628

The accompanying notes are an integral part of the consolidated interim financial statements.


	December 31, 2020
	Current		30		60		90		Foreclosure		Total
Great Ajax II REIT	$	311,941	$	48,266	$	19,559	$	43,364	$	1,867	$	424,997
2018-C	70,034		20,541		15,300		57,538		9,808		173,221
2017-D	58,198		24,906		12,437		36,106		2,249		133,896
California	42,214		7,660		5,519		29,343		4,052		88,788
7f7 and better	72,613		14,003		12,447		41,383		1,789		142,235
4f4-6f6 and below	13,976		10,773		7,157		68,677		26,231		126,814
Non-PCD	22,562		6,099		56		704		—		29,421
Total	$	591,538	$	132,248	$	72,475	$	277,115	$	45,996	$	1,119,372

Note 4 — Real Estate Assets, Net

The Company acquires real estate assets either through direct purchases of properties for its rental portfolio or through conversions of mortgage loans in its portfolio such as when a mortgage loan is foreclosed upon and the Company takes title to the property on the foreclosure date or the borrower surrenders the deed in lieu of foreclosure.

Property Held-for-Sale and Rental Property

The Company's REO property consists of property held-for-sale and rental property. REO property is considered held-for-sale if the REO is expected to be actively marketed for sale. As of June 30, 2021 and December 31, 2020, the Company’s net investments in real estate owned properties were $4.8 million and $8.5 million, respectively, which included balances relating to properties held-for-sale of $4.4 million and $7.8 million, respectively, and rental properties of $0.4 million and $0.7 million, respectively. Also, included in the properties held-for-sale balance for both periods as of June 30, 2021 and December 31, 2020, was $0.3 million for properties undergoing renovation or which are otherwise in the process of being brought to market. As of June 30, 2021 and December 31, 2020, the Company had a total of 25 and 38 real estate owned properties, respectively, which included 20 and 32 held-for-sale properties, respectively, and five and six rental properties, respectively. For the six months ended June 30, 2021 and 2020, all of the additions to REO held-for-sale were acquired through foreclosure or deed in lieu of foreclosure, and reclassified out of the mortgage loan portfolio and transfers from rental properties.

The following table presents the activity in the Company’s carrying value of property held-for-sale and rental property for the three and six months ended June 30, 2021 and 2020 ($ in thousands):


	Three months ended June 30,						Six months ended June 30,
	2021			2020			2021			2020
Property Held-for-sale and Rental Property	Count	Amount		Count	Amount		Count	Amount		Count	Amount
Balance at beginning of period	31	$	7,098	54	$	12,250	38	$	8,526	68	$	15,071
Net transfers from mortgage loans	5	1,046		2	98		7	1,274		7	912
Adjustments to record at lower of cost or fair value	—	(77)		—	(103)		—	(248)		—	(1,000)
Depreciation on rental properties	—	(3)		—	(8)		—	(6)		—	(16)
Disposals	(11)	(3,296)		(14)	(3,997)		(20)	(4,778)		(33)	(6,727)
Other	—	—		—	(7)		—	—		—	(7)
Balance at end of period	25	$	4,768	42	$	8,233	25	$	4,768	42	$	8,233

Dispositions

During the three and six months ended June 30, 2021, the Company sold 11 and 20 REO properties, respectively, realizing net gains of approximately $0.1 million and $0.2 million, respectively. Comparatively, for the three and six months ended June 30, 2020, the Company sold 14 and 33 REO properties, respectively, realizing net gains of approximately $0.4 million and $0.8 million, respectively. These amounts are included in Other income on the Company's consolidated statements of income. The Company recorded lower of cost or net realizable value adjustments in Real estate operating expense for the three and six months ended June 30, 2021 of $0.1 million and $0.2 million, respectively. Comparatively, for the three and six

The accompanying notes are an integral part of the consolidated interim financial statements.

months ended June 30, 2020, the Company recorded lower of cost or net realizable value adjustments of $0.1 million and $1.0 million, respectively.

Note 5 — Investments

The Company holds investments in various debt securities and beneficial interests which are the net residual interest of the Company’s investments in securitization trusts holding pools of mortgage loans. The Company's debt securities and beneficial interests are issued by securitization trusts, which are VIEs, that the Company has sponsored but which the Company does not consolidate since it has determined it is not the primary beneficiary. See Note 10 — Related party transactions. The Company marks its debt securities to fair value using prices provided by financing counterparties, and believes any unrealized losses to be temporary. Risks inherent in the Company's debt securities portfolio, affecting both the valuation of its securities as well as the portfolio's interest income include the risk of default, delays and inconsistency in the frequency and amount of payments, risks affecting borrowers such as man-made or natural disasters, or the COVID-19 pandemic, and damage to or delay in realizing the value of the underlying collateral. The Company monitors the credit quality of the mortgage loans underlying its debt securities on an ongoing basis, principally by considering loan payment activity or delinquency status. In addition, the Company assesses the expected cash flows from the mortgage loans, the fair value of the underlying collateral and other factors, and evaluates whether and when it becomes probable that all amounts contractually due will not be collected. The following table presents information regarding the Company's investments in debt securities and investments in beneficial interests ($ in thousands):


	As of June 30, 2021
	Basis(1)		Gross unrealized gains		Gross unrealized losses		Carrying value (fair value)
Debt securities	$	422,981	$	1,877	$	(226)	$	424,632
Beneficial interests in securitization trusts	133,484		—		—		133,484
Total investments	$	556,465	$	1,877	$	(226)	$	558,116

(1)Basis amount is net of amortized discount, allowance for credit losses, principal paydowns and interest receivable on securities of $0.3 million.


	As of December 31, 2020
	Basis(1)		Gross unrealized gains		Gross unrealized losses		Carrying value (fair value)
Debt securities	$	273,459	$	1,152	$	(777)	$	273,834
Beneficial interests in securitization trusts	91,418		—		—		91,418
Total investments	$	364,877	$	1,152	$	(777)	$	365,252

(1)Basis amount is net of amortized costs, principal paydowns and interest receivable on securities of $0.2 million.

The following table presents a breakdown of the Company's gross unrealized losses ($ in thousands):


	As of June 30, 2021
	Step-up date(1)	Basis(2)		Gross unrealized losses		Carrying value (fair value)
Debt securities due September 2059(3)	February 2023/April 2023	$	20,243	$	(213)	$	20,030
Debt securities due March 2060(4)	February 2025	43,231		(4)		43,227
Debt securities due January 2061(4)	September 2024	15,206		(1)		15,205
Debt securities due June 2061(5)	January 2025/February 2025	134,702		(8)		134,694
Total		$	213,382	$	(226)	$	213,156

(1)Step-up date is the date at which the coupon interest rate on the security increases. The Company expects the security to be called before the step-up date.

(2)Basis amount is net of any realized amortized costs and principal paydowns.

(3)This line is comprised of two securities that are both due in September 2059 and both have been in an unrealized loss position for 12 months or longer.

The accompanying notes are an integral part of the consolidated interim financial statements.

(4)This security has been in an unrealized loss position for less than 12 months.

(5)This line is comprised of two securities that are both due in June 2061 and both have been in an unrealized loss position for less than 12 months.


	As of December 31, 2020
	Step-up date(1)	Basis(2)		Gross unrealized losses		Carrying value (fair value)
Debt securities due September 2059(3)	February 2023/April 2023	$	22,216	$	(238)	$	21,978
Debt securities due November 2059(4)	April 2023	14,738		(61)		14,677
Debt securities due December 2059(4)	July 2023	47,270		(315)		46,955
Debt securities due September 2060(4)	March 2024	34,970		(44)		34,926
Debt securities due June 2060(4)	March 2024	35,127		(119)		35,008
Total		$	154,321	$	(777)	$	153,544

(1)Step-up date is the date at which the coupon interest rate on the security increases. The Company expects the security to be called before the step-up date.

(2)Basis amount is net of any realized amortized costs and principal paydowns.

(3)This line is comprised of two securities that are both due September 2059. One security with a balance of $0.2 million has been in an unrealized loss position for less than 12 months and has a step-up date in April 2023, and the other security of $0.1 million has been in a loss position for 12 months or longer and has a step-up date in February 2023.

(4)This security has been in an unrealized loss position for less than 12 months.

As of June 30, 2021, the Company recorded $1.9 million gross unrealized gains and a gross unrealized loss of $0.2 million in fair valuation adjustments in accumulated other comprehensive income on the consolidated balance sheet at a fair value of $424.6 million, which includes $0.3 million in interest receivable. As of December 31, 2020, the Company recorded $1.2 million gross unrealized gains and a gross unrealized loss of $0.8 million in fair valuation adjustments in accumulated other comprehensive income on the consolidated balance sheet at fair value of $273.8 million, which includes $0.2 million in interest receivable.

During both the three and six months ended June 30, 2021, the Company acquired $232.9 million of debt securities and beneficial interests issued by joint ventures between the Company and third party institutional accredited investors. Each joint venture issued senior notes and beneficial interests, which are trust certificates representing the residual investment in the trust. In certain transactions, the joint ventures also issued subordinated notes. Of the $232.9 million acquired in both the three and six months ended June 30, 2021, the Company acquired $170.0 million in senior notes, $23.5 million in subordinate notes and $39.5 million in beneficial interest issued by joint ventures. Comparatively during the three and six months ended June 30, 2020, the Company acquired zero and $61.3 million, respectively, in debt securities and beneficial interests issued by joint ventures between the Company and third party institutional accredited investors. Each joint venture issued senior notes and beneficial interests, which are trust certificates representing the residual investment in the trust. In certain transactions, the joint ventures also issued subordinated notes. Of the $61.3 million of debt securities acquired in the six months ended June 30, 2020, the Company acquired $49.6 million in senior notes, $4.6 million in subordinate notes and $7.1 million in beneficial interests issued by joint ventures. As of June 30, 2021, the investments in debt securities and beneficial interests were carried on the Company's consolidated balance sheet at $424.6 million and $133.5 million, respectively. At December 31, 2020, the investments in debt securities and beneficial interests were carried on the Company's consolidated balance sheet at $273.8 million and $91.4 million, respectively. As of June 30, 2021 and December 31, 2020, the Company had no securities that were past due.

The following table presents a reconciliation between the purchase price and par value for the Company's beneficial interests acquisitions for the three and six months ended June 30, 2021 and 2020 ($ in thousands):


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Par	$	46,485	$	—	$	46,485	$	11,970
Discount	(5,425)		—		(5,425)		(2,335)
Allowance	(1,593)		—		(1,593)		(2,553)
Purchase Price	$	39,467	$	—	$	39,467	$	7,082

The Company adopted CECL using the prospective transition approach for PCD assets for its beneficial interests on January 1, 2020, at the time $1.7 million was reclassified from discount to allowance for credit losses for its Investments in

The accompanying notes are an integral part of the consolidated interim financial statements.

beneficial interests. Under CECL, the Company recognizes increases and decreases in the net present value of expected cash flows in earnings in the period they occur. An expense will be recorded to increase the allowance for losses when there is a reduction in the Company’s expected future cash flows. Income will be recognized if there is an increase in expected future cash flows. A decrease in the allowance is generally facilitated by reclassifying amounts from non-credit discount to the allowance and then recording the reduction to the allowance. Management assesses the credit quality of the portfolio and the adequacy of loss reserves on a quarterly basis, or more frequently as necessary. During both the three and six months ended June 30, 2021, the Company recorded $2.0 million reversal of the allowance for losses for beneficial interests. During the three and six months ended June 30, 2020, the Company recorded reversals of the allowance for losses for beneficial interests of $3.1 million and $0.2 million, respectively. An analysis of the balance in the allowance for beneficial interest losses account follows ($ in thousands):


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Allowance for beneficial interests credit losses, beginning balance	$	(5,530)	$	(7,208)	$	(4,453)	$	—
Beginning period adjustment for CECL adoption	—		—		—		(1,668)
Incremental change in allowance for beneficial interests	2,388		—		1,435		—
Increase in allowance for beneficial interest credit losses for acquisitions	(1,593)		—		(1,593)		(2,553)
Credit loss expense on beneficial interests	(216)		(260)		(355)		(429)
Reclassification from non-credit discount to the allowance for losses for increases in the net present value of expected cash flows	—		(2,553)		—		(2,553)
Net reversal of provision for credit losses due to increases in actual and/or forecasted cash flows	1,992		3,062		2,007		244
Allowance for beneficial interests credit losses, end balance	$	(2,959)	$	(6,959)	$	(2,959)	$	(6,959)

Note 6 — Fair Value

Recurring financial assets and liabilities measured and carried at fair value by level within the fair value hierarchy as of June 30, 2021 and December 31, 2020 ($ in thousands):


			Level 1		Level 2		Level 3
June 30, 2021	Carrying Value		Quoted prices in active markets		Observable inputs other than Level 1 prices		Unobservable inputs
Recurring financial assets
Investment in debt securities at fair value	$	424,632	$	—	$	424,632	$	—
Recurring financial liabilities
Put option liability	$	18,350	$	—	$	—	$	18,350


			Level 1		Level 2		Level 3
December 31, 2020	Carrying Value		Quoted prices in active markets		Observable inputs other than Level 1 prices		Unobservable inputs
Recurring financial assets
Investment in debt securities at fair value	$	273,834	$	—	$	273,834	$	—
Recurring financial liabilities
Put option liability	$	14,205	$	—	$	—	$	14,205

The accompanying notes are an integral part of the consolidated interim financial statements.

The following tables set forth the fair value of financial instruments by level within the fair value hierarchy as of June 30, 2021 and December 31, 2020 ($ in thousands):


			Level 1		Level 2		Level 3
June 30, 2021	Carrying value		Quoted prices in active markets		Observable inputs other than Level 1 prices		Unobservable inputs
Financial assets
Mortgage loans, net	$	955,628	$	—	$	—	$	1,043,197
Investments in beneficial interests	$	133,484	$	—	$	—	$	133,484
Investment in Manager	$	1,571	$	—	$	—	$	11,794
Investment in AS Ajax E LLC	$	683	$	—	$	825	$	—
Investment in AS Ajax E II LLC	$	2,840	$	—	$	3,012	$	—
Investment in GAFS, including warrants	$	2,656	$	—	$	—	$	3,320
Investment in Gaea	$	19,818	$	—	$	—	$	19,991
Investment in Loan pool LLCs	$	361	$	—	$	—	$	724
Financial liabilities
Secured borrowings, net	$	653,948	$	—	$	667,565	$	—
Borrowings under repurchase transactions	$	394,386	$	—	$	394,386	$	—
Convertible senior notes, net	$	103,427	$	111,693	$	—	$	—


			Level 1		Level 2		Level 3
December 31, 2020	Carrying value		Quoted prices in active markets		Observable inputs other than Level 1 prices		Unobservable inputs
Financial assets
Mortgage loans, net	$	1,119,372	$	—	$	—	$	1,232,081
Investment in beneficial interests	$	91,418	$	—	$	—	$	91,418
Investment in Manager	$	1,366	$	—	$	—	$	11,709
Investment in AS Ajax E LLC	$	776	$	—	$	934	$	—
Investment in AS Ajax E II LLC	$	3,381	$	—	$	3,484	$	—
Investment in GAFS, including warrants	$	2,711	$	—	$	—	$	3,320
Investment in Gaea	$	20,001	$	—	$	—	$	19,150
Investment in Loan pool LLCs	$	381	$	—	$	—	$	701
Financial liabilities
Secured borrowings, net	$	585,403	$	—	$	586,419	$	—
Borrowings under repurchase agreement	$	421,132	$	—	$	421,132	$	—
Convertible senior notes, net	$	110,057	$	110,675	$	—	$	—

During the quarter ended June 30, 2021, the company refinanced its Ajax Mortgage Trust 2017-D secured borrowing and took back debt securities and beneficial interests in Ajax Mortgage Trust 2021-C (“2021-C”). 2021-C is not consolidated in the Company’s financial statements. Accordingly, the carrying value and fair value of Mortgage loans declined and the Investment in and fair value of debt securities and beneficial interests increased. The Investment in debt securities and beneficial interests are carried at fair value on the Company’s consolidated balance sheet.

The fair value of mortgage loans and beneficial interests is estimated using the Manager’s proprietary pricing model which estimates expected cash flows with the discount rate used in the present value calculation representing the estimated effective yield of the loan. The value of transfers of mortgage loans to REO is based upon the present value of future expected cash flows of the loans being transferred.

The accompanying notes are an integral part of the consolidated interim financial statements.

The Company values its investments in debt securities using estimates provided by its financing counterparties. The Company also relies on its Manager's proprietary pricing model to estimate the underlying cash flows expected to be collected on these investments as a comparison to the estimates received from financing counterparties. The Company also relies on its Manager's proprietary pricing model to estimate the underlying cash flows expected to be collected on its investments in beneficial interests.

The Company's investment in the Manager is valued by applying an earnings multiple to base fee revenue.

The Company’s investments in AS Ajax E LLC and AS Ajax E II LLC are valued using estimates provided by financing counterparties or other publicly available information.

The fair value of the Company's investment in GAFS, including warrants, is determined by applying an earnings multiple to expected earnings.

The fair value of the Company's investment in Gaea is estimated using a projected net operating income for its property portfolio.

The fair value of the Company's investment in the loan pool LLCs is determined by using estimates of underlying assets and liabilities taken from its Manager's pricing model.

The Company's put option liability is adjusted to approximate market value through earnings.The put obligation is a fixed amount that may be settled in cash or shares of the Company’s common stock at the option of the Company.

Fair value is determined using the discounted cash flow method using a rate to accrete the initial basis of $9.5 million to the future put obligation of $50.7 million over the 39-month term of the put option liability.

The Company’s borrowings under repurchase agreements are short-term in nature, and the Manager believes it can renew the current borrowing arrangements on similar terms in the future. Accordingly, the carrying value of these borrowings approximates fair value.

The Company’s convertible senior notes are traded on the NYSE; the debt’s fair value is determined from the NYSE closing price on the balance sheet date. The Convertible debt may be redeemable at par plus accrued interest beginning on April 30, 2022 subject to satisfying the conversion price trigger. The Company carries it Convertible debt net of deferred issuance cost. Accordingly, the difference between fair value and carrying value is partially driven by the deferred issuance costs.

The carrying values of its Cash and cash equivalents, Cash held in trust, Receivable from Servicer, Prepaid expenses and other assets, Management fee payable and Accrued expenses and other liabilities are equal to or approximate fair value.

Non-financial assets

Property held-for-sale is carried at the lower of its acquisition cost ("cost") or net realizable value. Net realizable value is determined based on appraisals, broker price opinions, or other market indicators of fair value less expected liquidation costs. The lower of cost or net realizable value for the Company’s REO Property is stated as it's carrying value. The following tables set forth the fair value of non-financial assets by level within the fair value hierarchy as of June 30, 2021 and December 31, 2020 ($ in thousands):

The accompanying notes are an integral part of the consolidated interim financial statements.


					Level 1		Level 2		Level 3
June 30, 2021	Carrying value		Six months ended fair value adjustment recognized in the consolidated statements of income		Quoted prices in active markets		Observable inputs other than Level 1 prices		Unobservable inputs
Non-financial assets
Property held-for-sale	$	4,409	$	(248)	$	—	$	—	$	4,409


					Level 1		Level 2		Level 3
December 31, 2020	Carrying value		Fair value adjustment recognized in the consolidated statements of income		Quoted prices in active markets		Observable inputs other than Level 1 prices		Unobservable inputs
Non-financial assets
Property held-for-sale	$	7,807	$	(1,359)	$	—	$	—	$	7,807

Note 7 — Affiliates

Unconsolidated Affiliates

On November 22, 2019, Gaea completed a private capital raise transaction in which it raised $66.3 million from the issuance of 4,419,641 shares of its common stock to third parties to allow it to continue to advance its investment strategy. Upon completion of the capital raise, the Company retained ownership of approximately 23.2% of Gaea with third party investors owning the remaining approximately 76.8%. The Company recognized no gain or loss on the transaction as Gaea's fair value at the date of the deconsolidation did not represent a material change from the fair values of its recently acquired assets and liabilities due to the limited lapse of time since their acquisitions. At June 30, 2021 the Company owned approximately 22.9% of Gaea with third party investors owning the remaining approximately 77.1%. The Company accounts for its investment in Gaea using the equity method.

During the year ended December 31, 2019, the Company acquired a cumulative 40.4% average ownership interest in three loan pool LLCs managed by the Servicer for $1.0 million, which hold investments in RPLs and NPLs. The Company accounts for its investment using the equity method.

During 2018, the Company acquired an 8.0% ownership interest in GAFS. The acquisition was completed in two transactions. On January 26, 2018, the Company in an initial closing acquired a 4.9% interest in GAFS and three warrants, each exercisable for a 2.45% interest in GAFS upon payment of additional consideration, in exchange for consideration of $1.1 million of cash and 45,938 shares of the Company’s common stock with a value of approximately $0.6 million. On May 29, 2018 the additional closing was completed wherein the Company acquired an additional 3.1% interest in GAFS and three warrants, each exercisable for a 1.55% interest in GAFS, in exchange for consideration of $0.7 million of cash and 29,063 shares of the Company's common stock with a value of approximately $0.4 million. The Company accounts for its investment in GAFS using the equity method.

On March 14, 2016, the Company formed AS Ajax E LLC to hold an equity interest in a Delaware trust formed to own residential mortgage loans and residential real estate assets. AS Ajax E LLC owns a 5% equity interest in Ajax E Master Trust which holds a portfolio of RPLs. At the time of the original investment, the Company held a 24.2% interest in AS Ajax E LLC. In October 2016, additional capital contributions were made by third parties, and the Company’s ownership interest in AS Ajax E was reduced to a lower percentage of the total. As of June 30, 2021 and December 31, 2020, the Company’s interest in AS Ajax E LLC was approximately 16.5%. The Company accounts for its investment using the equity method.

Upon the closing of the Company’s original private placement in July 2014, the Company received a 19.8% equity interest in the Manager, a privately held company for which there is no public market for its securities. The Company accounts for its investment in the Manager using the equity method.

The table below shows the net income, assets and liabilities for the Company’s unconsolidated affiliates at 100%, and at the Company’s share ($ in thousands):

Net income/(loss), assets and liabilities of unconsolidated affiliates at 100%

The accompanying notes are an integral part of the consolidated interim financial statements.


	Three months ended June 30,				Six months ended June 30,
Net income/(loss) at 100%	2021		2020		2021		2020
Thetis Asset Management LLC	$	1,429	$	2,662	$	2,280	$	(2,215)
Gaea Real Estate Corp.	$	181	$	245	$	259	$	260
Great Ajax FS LLC	$	89	$	900	$	(688)	$	(2,550)
AS Ajax E LLC	$	42	$	37	$	96	$	99
Loan pool LLCs	$	(35)	$	(57)	$	(51)	$	141


	June 30, 2021				December 31, 2020
Assets and Liabilities at 100%	Assets		Liabilities		Assets		Liabilities
Thetis Asset Management LLC	$	10,063	$	1,809	$	9,531	$	2,122
Gaea Real Estate Corp.	$	90,082	$	7,915	$	94,639	$	11,886
Great Ajax FS LLC	$	48,755	$	29,016	$	56,532	$	36,101
AS Ajax E LLC	$	4,235	$	2	$	4,808	$	2
Loan pool LLCs	$	2,221	$	3,809	$	2,423	$	3,961

Net income/(loss), assets and liabilities of unconsolidated affiliates at the Company's share


	Three months ended June 30,				Six months ended June 30,
Net income/(loss) at the Company's share	2021		2020		2021		2020
Thetis Asset Management LLC	$	283	$	527	$	451	$	(439)
Gaea Real Estate Corp.	$	42	$	56	$	60	$	60
Great Ajax FS LLC	$	7	$	72	$	(55)	$	(204)
AS Ajax E LLC	$	7	$	6	$	16	$	16
Loan pool LLCs	$	(14)	$	(23)	$	(21)	$	56


	June 30, 2021				December 31, 2020
Assets and Liabilities at the Company's share	Assets		Liabilities		Assets		Liabilities
Thetis Asset Management LLC	$	1,992	$	358	$	1,887	$	420
Gaea Real Estate Corp.	$	20,665	$	1,816	$	21,729	$	2,729
Great Ajax FS LLC	$	3,900	$	2,321	$	4,523	$	2,888
AS Ajax E LLC	$	697	$	—	$	791	$	—
Loan pool LLCs	$	891	$	1,534	$	973	$	1,595

Consolidated Affiliates

The Company consolidates the results and balances of certain securitization trusts which are established to provide debt financing to the Company by securitizing pools of mortgage loans. These trusts are considered to be VIEs, and the Company has determined that it is the primary beneficiary of certain of these VIEs. See Note 9 — Debt.

The Company also consolidates the activities and balances of its controlled affiliates, which include AS Ajax E II LLC, which was established to hold an equity interest in a Delaware trust formed to own residential mortgage loans and residential real estate assets. As of June 30, 2021, AS Ajax E II was 53.1% owned by the Company, with the remainder held by third-parties. 2017-D is a securitization trust formed to hold mortgage loans, REO property and secured borrowings. During the second quarter of 2021, the majority of loans held by 2017-D were resecuritized into 2021-C, a related party joint venture with third party institutional investors. The Company held 50.0% ownership of the remaining loans held by 2017-D at June 30, 2021. Great Ajax II REIT holds an interest in Great Ajax II Depositor LLC which acts as the depositor of mortgage loans into securitization trusts and holds the subordinated securities issued by such trusts and any additional trusts the Company may form for additional secured borrowings. Great Ajax II REIT was 99.9% owned by the Company as of June 30, 2021 and December 31, 2020.

The accompanying notes are an integral part of the consolidated interim financial statements.

During the first quarter of 2021, the Company acquired the remaining ownership of 2018-C, a subsidiary that previously had non-controlling ownership interest held by third parties and was 63.0% owned by the Company as of December 31, 2020. As of June 30, 2021, 2018-C was 100.0% owned by the Company and the previous non-controlling interest had been reduced to zero.

Note 8 — Commitments and Contingencies

The Company regularly enters into agreements to acquire additional mortgage loans and mortgage-related assets, subject to continuing diligence on such assets and other customary closing conditions. There can be no assurance that the Company will acquire any or all of the mortgage loans identified in any acquisition agreement as of the date of these consolidated financial statements, and it is possible that the terms of such acquisitions may change.

At June 30, 2021, the Company had commitments to purchase, subject to due diligence, 1,489 RPLs and NPLs secured by single-family residences with aggregated UPB of $287.6 million. The Company will only acquire loans that meet the acquisition criteria for its own portfolios or those of its third party institutional accredited co-investors. See Note 15 — Subsequent Events, for remaining open acquisitions as of the filing date.

During the quarter ended June 30, 2020, the Company issued an aggregate of $125.0 million, net of offering costs, of preferred stock in two series and warrants to institutional accredited investors in a series of private placements. The Company issued 2,307,400 shares of 7.25% Series A Fixed-to-Floating Rate Preferred Stock and 2,892,600 shares of 5.00% Series B Fixed-to-Floating Rate Preferred Stock, each at a purchase price per share of $25.00 and two series of five-year warrants to purchase an aggregate of 6,500,000 shares of the Company's common stock at an exercise price of $10.00 per share. Each series of warrants includes a put option that allows the holder to sell the warrants to the Company at a specified put price on or after July 6, 2023. U.S. GAAP requires the Company to account for the outstanding warrants as if the put option will be exercised by the holders. Accordingly, the Company has recognized a liability on its consolidated balance sheet within accrued expenses and other liabilities at June 30, 2021 for the present value of the put liability of $18.4 million. The Company is accreting the amount of the liability under the effective interest method to its expected future put value of $50.7 million and marks the obligation to market through earnings. The expense is recognized in the Fair value adjustment on put option liability line of the Company's consolidated statements of income. The following table sets forth the details of the Company's put option liability ($ in thousands):


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Beginning balance	$	16,149	$	—	$	14,205	$	—
Initial recognition of put option liability	—		9,472		—		9,472
Fair value adjustments during the period	2,201		1,250		4,145		1,250
Ending balance	$	18,350	$	10,722	$	18,350	$	10,722

The full extent of the impact of COVID-19 on the global economy generally, and the Company's business in particular, is uncertain. As of June 30, 2021, no contingencies have been recorded on the Company's consolidated balance sheet as a result of COVID-19, however as the global pandemic continues, it may have long-term adverse impacts on the Company's financial condition, results of operations, and cash flows.

Litigation, Claims and Assessments

From time to time, the Company may be involved in various claims and legal actions arising in the ordinary course of business. As of June 30, 2021, the Company was not a party to, and its properties were not subject to, any pending or threatened legal proceedings that individually or in the aggregate, are expected to have a material impact on its financial condition, results of operations or cash flows.

Note 9 — Debt

Repurchase Agreements

The Company has entered into two repurchase facilities whereby the Company, through two wholly owned Delaware trusts (the “Trusts”) acquires pools of mortgage loans which are then sold by the Trusts, as “Seller” to two separate

The accompanying notes are an integral part of the consolidated interim financial statements.

counterparties, the “buyer” or “buyers.” One facility has a ceiling of $250.0 million and the other $400.0 million at any one time. Upon the time of the initial sale to the buyer, the Trust, with a simultaneous agreement, also agrees to repurchase the pools of mortgage loans from the buyer. Mortgage loans sold under these facilities carry interest calculated based on a spread to one-month LIBOR, which is fixed for the term of the borrowing. The purchase price that the Trust realizes upon the initial sale of the mortgage loans to the buyer can vary between 70% and 85% of the asset’s acquisition price, depending upon the facility being utilized and/or the quality of the underlying collateral. The obligations of a Trust to repurchase these mortgage loans at a future date are guaranteed by the Company's Operating Partnership. The difference between the market value of the asset and the amount of the repurchase agreement is generally the amount of equity in the position and is intended to provide the buyer with some protection against fluctuations in the value of the collateral, and/or a failure by the Company to repurchase the asset and repay the borrowing at maturity. The Company has also entered into five repurchase facilities substantially similar to the mortgage loan repurchase facilities, but where the pledged assets are the class B bonds and certificates from the Company's secured borrowing transactions. These facilities have no effective ceilings. Each repurchase transaction represents its own borrowing. As such, the ceilings associated with these transactions are the amounts currently borrowed at any one time. The Company has effective control over the assets subject to all of these transactions; therefore, the Company’s repurchase transactions are accounted for as financing arrangements.

The Servicer services these mortgage loans pursuant to the terms of a Servicing Agreement by and between the Servicer and each Buyer. Each Servicing Agreement has the same fees and expenses terms as the Company’s Servicing Agreement described under Note 10 — Related party transactions. The Operating Partnership, as guarantor, will provide to the buyers a limited guaranty of certain losses incurred by the buyers in connection with certain events and/or the Seller’s obligations under the mortgage loan purchase agreement, following the breach of certain covenants by the Seller, the occurrence of certain bad acts by the Seller, the occurrence of certain insolvency events of the Seller or other events specified in the Guaranty. As security for its obligations under the Guaranty, the guarantor will pledge the Trust Certificate representing the Guarantor’s 100% beneficial interest in the Seller.

The following table sets forth the details of the Company’s repurchase transactions and facilities ($ in thousands):


				June 30, 2021
Maturity Date	Origination date	Maximum Borrowing Capacity		Amount Outstanding		Amount of Collateral		Percentage of Collateral Coverage		Interest Rate
July 6, 2021	April 6, 2021	$	7,267	$	7,267	$	9,419	130	%	1.40	%
July 6, 2021	April 6, 2021	4,420		4,420		5,531		125	%	1.40	%
July 6, 2021	April 6, 2021	3,336		3,336		4,667		140	%	1.80	%
July 9, 2021	July 10, 2020	250,000		14,688		22,228		151	%	2.59	%
July 12, 2021	April 12, 2021	5,535		5,535		6,938		125	%	1.39	%
July 15, 2021	April 15, 2021	6,135		6,135		7,372		120	%	1.23	%
July 20, 2021	April 20, 2021	11,629		11,629		14,505		125	%	1.24	%
July 30, 2021	April 30, 2021	11,123		11,123		13,635		123	%	1.39	%
July 30, 2021	April 30, 2021	10,997		10,997		13,532		123	%	1.39	%
July 30, 2021	April 30, 2021	2,754		2,754		3,541		129	%	1.39	%
July 30, 2021	April 30, 2021	1,133		1,133		1,607		142	%	1.79	%
August 12, 2021	May 12, 2021	3,108		3,108		4,428		142	%	1.77	%
August 24, 2021	May 24, 2021	28,635		28,635		38,294		134	%	1.35	%
August 24, 2021	May 24, 2021	3,532		3,532		5,106		145	%	1.75	%
September 3, 2021	June 4, 2021	23,554		23,554		30,884		131	%	1.13	%
September 3, 2021	June 4, 2021	23,042		23,042		30,303		132	%	1.13	%
September 17, 2021	June 17, 2021	44,701		44,701		59,986		134	%	1.13	%
September 17, 2021	June 17, 2021	8,236		8,236		10,322		125	%	1.32	%
September 17, 2021	June 17, 2021	7,229		7,229		9,510		132	%	1.32	%
September 17, 2021	June 17, 2021	4,331		4,331		6,232		144	%	1.38	%
September 17, 2021	June 17, 2021	1,176		1,176		1,687		143	%	1.72	%
September 23, 2021	September 24, 2020	400,000		42,153		63,220		150	%	2.60	%

The accompanying notes are an integral part of the consolidated interim financial statements.


September 24, 2021	June 24, 2021	46,819		46,819		62,815		134	%	1.33	%
September 24, 2021	June 24, 2021	4,535		4,535		6,526		144	%	1.73	%
September 24, 2021	June 24, 2021	2,431		2,431		3,148		129	%	1.33	%
October 5, 2021	April 9, 2021	31,326		31,326		39,811		127	%	1.41	%
October 22, 2021	April 26, 2021	7,899		7,899		9,279		117	%	1.11	%
October 22, 2021	April 26, 2021	6,231		6,231		7,276		117	%	1.11	%
October 22, 2021	April 26, 2021	5,123		5,123		6,063		118	%	1.11	%
December 13, 2021	June 15, 2021	14,148		14,148		20,151		142	%	1.35	%
December 13, 2021	June 15, 2021	7,160		7,160		9,409		131	%	1.15	%
Totals/weighted averages		$	987,545	$	394,386	$	527,425	134	%	1.48	%


				December 31, 2020
Maturity Date	Origination date	Maximum Borrowing Capacity		Amount Outstanding		Amount of Collateral		Percentage of Collateral Coverage		Interest Rate
January 6, 2021	October 9, 2020	$	35,635	$	35,635	$	46,120	129	%	2.33	%
January 6, 2021	September 28, 2020	7,697		7,697		10,075		131	%	2.33	%
January 6, 2021	September 28, 2020	6,311		6,311		9,038		143	%	2.48	%
January 6, 2021	September 28, 2020	4,755		4,755		6,114		129	%	2.33	%
January 6, 2021	September 28, 2020	4,666		4,666		6,044		130	%	2.33	%
January 6, 2021	September 28, 2020	3,213		3,213		4,667		145	%	2.48	%
January 11, 2021	September 29, 2020	5,879		5,879		7,575		129	%	2.32	%
January 14, 2021	October 29, 2020	6,991		6,991		8,738		125	%	2.35	%
January 20, 2021	October 20, 2020	13,263		13,263		16,582		125	%	2.22	%
January 29, 2021	October 30, 2020	7,762		7,762		9,702		125	%	2.21	%
January 29, 2021	October 30, 2020	7,153		7,153		9,537		133	%	2.21	%
February 1, 2021	December 1, 2020	12,258		12,258		16,052		131	%	1.88	%
February 1, 2021	December 1, 2020	12,015		12,015		15,794		131	%	1.88	%
February 1, 2021	December 1, 2020	5,298		5,298		6,895		130	%	1.88	%
February 1, 2021	December 1, 2020	3,985		3,985		5,136		129	%	1.88	%
February 1, 2021	December 1, 2020	2,887		2,887		3,790		131	%	1.88	%
February 1, 2021	December 1, 2020	2,332		2,332		3,360		144	%	2.03	%
February 1, 2021	December 1, 2020	1,132		1,132		1,607		142	%	2.03	%
February 12, 2021	November 13, 2020	2,945		2,945		4,428		150	%	2.02	%
March 5, 2021	December 7, 2020	24,946		24,946		33,348		134	%	1.78	%
March 5, 2021	December 7, 2020	24,312		24,312		32,571		134	%	1.78	%
March 17, 2021	December 17, 2020	10,219		10,219		13,172		129	%	1.78	%
March 17, 2021	December 17, 2020	8,381		8,381		10,872		130	%	1.78	%
March 17, 2021	December 17, 2020	3,894		3,894		5,193		133	%	1.78	%
March 17, 2021	December 17, 2020	1,145		1,145		1,687		147	%	1.93	%
March 24, 2021	December 24, 2020	7,016		7,016		10,024		143	%	1.94	%
March 24, 2021	December 24, 2020	5,008		5,008		6,637		133	%	1.79	%
March 24, 2021	December 24, 2020	2,577		2,577		3,367		131	%	1.79	%
April 9, 2021	October 13, 2020	33,084		33,084		43,069		130	%	2.35	%
July 9, 2021	July 10, 2020	250,000		53,256		84,337		158	%	2.64	%
September 23, 2021	September 24, 2020	400,000		101,117		160,068		158	%	2.65	%
Totals/weighted averages		$	916,759	$	421,132	$	595,599	141	%	2.29	%

The accompanying notes are an integral part of the consolidated interim financial statements.

The Guaranty establishes a master netting arrangement; however, the arrangement does not meet the criteria for offsetting within the Company’s consolidated balance sheets. A master netting arrangement derives from contractual agreements entered into by two parties to multiple contracts that provides for the net settlement of all contracts covered by the agreements in the event of default under any one contract. As of June 30, 2021 and December 31, 2020, the Company had $5.9 million and $4.7 million, respectively, of cash collateral on deposit with financing counterparties. This cash is included in Prepaid expenses and other assets on its consolidated balance sheets and is not netted against its Borrowings under repurchase agreements. The amount outstanding on the Company’s repurchase facilities and the carrying value of the Company’s loans pledged as collateral are presented as gross amounts in the Company’s consolidated balance sheets at June 30, 2021 and December 31, 2020 in the table below ($ in thousands):


	Gross amounts not offset in balance sheet
	June 30, 2021		December 31, 2020
Gross amount of recognized liabilities	$	394,386	$	421,132
Gross amount of loans and securities pledged as collateral	527,425		595,599
Other prepaid collateral	5,860		4,653
Net collateral amount	$	138,899	$	179,120

Secured Borrowings

From inception (January 30, 2014) to June 30, 2021, the Company has completed 18 secured borrowings for its own balance sheet, not including its off-balance sheet joint ventures in which it holds investments in various classes of securities, pursuant to Rule 144A under the Securities Act, five of which were outstanding at June 30, 2021. The secured borrowings are structured as debt financings and not sales through a real estate investment conduit (“REMIC”), and the loans included in the secured borrowings remain on the Company’s consolidated balance sheet as the Company is the primary beneficiary of the securitization trusts, which are VIEs. The securitization VIEs are structured as pass through entities that receive principal and interest on the underlying mortgages and distribute those payments to the holders of the notes. The Company’s exposure to the obligations of the VIEs is generally limited to its investments in the entities. The notes that are issued by the securitization trusts are secured solely by the mortgages held by the applicable trusts and not by any of the Company’s other assets. The mortgage loans of the applicable trusts are the only source of repayment and interest on the notes issued by such trusts. The Company does not guarantee any of the obligations of the trusts under the terms of the agreement governing the notes or otherwise.

The Company’s non-rated secured borrowings are generally structured with Class A notes, subordinated notes, and trust certificates, which have rights to the residual interests in the mortgages once the notes are repaid. The Company has retained the subordinate notes and the applicable trust certificates from one non-rated secured borrowing outstanding at June 30, 2021.

The Company’s rated secured borrowings are generally structured as “REIT TMP” transactions which allow the Company to issue multiple classes of securities without using a REMIC structure or being subject to an entity level tax. The Company’s rated secured borrowings generally issue classes of debt from AAA through mezzanine. The Company generally retains the mezzanine and residual certificates in the transactions. The Company has retained the applicable mezzanine and residual certificates from the other four rated secured borrowings at June 30, 2021. The Company’s rated secured borrowings are designated in the table below.

At March 31, 2021, the Company's 2017-D secured borrowing contained Class A notes and Class B certificates representing the residual interests in the mortgages held within the securitization trusts subsequent to repayment of the Class A notes. The Company had retained 50% of both the Class A notes and Class B certificates from 2017-D; and the assets and liabilities were consolidated on the Company's consolidated balance sheets. During the second quarter of 2021, the majority of the loans in 2017-D were refinanced in 2021-C. Based on the structure of the transaction the Company does not consolidate 2021-C under U.S. GAAP.

The Company's 2018-C secured borrowing was structured with Class A notes, Class B notes and trust certificates representing the residual interest in the mortgages held within the securitization trusts subsequent to repayment of the Class A debt. The Company had retained 5% of the Class A notes and 63% of the Class B notes and trust certificates. During the first quarter of 2021 the Company acquired the remaining 37% ownership of the Class B notes and trust certificates and settled the remaining 95% of the outstanding Class A notes.

The accompanying notes are an integral part of the consolidated interim financial statements.

The Company's secured borrowings carry no provision for a step-up in interest rate on any of the Class B notes, except for 2021-B.

The following table sets forth the original terms of all notes from the Company's secured borrowings outstanding at June 30, 2021 at their respective cutoff dates:

Issuing Trust/Issue Date

Interest Rate Step-up Date

Security

Original Principal

Interest Rate

Rated

Ajax Mortgage Loan Trust 2019-D/ July 2019

July 25, 2027

Class A-1 notes due 2065

$140.4 million

2.96

July 25, 2027

Class A-2 notes due 2065

$6.1 million

3.50

July 25, 2027

Class A-3 notes due 2065

$10.1 million

3.50

July 25, 2027

Class M-1 notes due 2065(1)

$9.3 million

3.50

None

Class B-1 notes due 2065(2)

$7.5 million

3.50

None

Class B-2 notes due 2065(2)

$7.1 million

variable(3)

None

Class B-3 notes due 2065(2)

$12.8 million

variable(3)

Deferred issuance costs

$(2.7) million

—

Rated

Ajax Mortgage Loan Trust 2019-F/ November 2019

November 25, 2026

Class A-1 notes due 2059

$110.1 million

2.86

November 25, 2026

Class A-2 notes due 2059

$12.5 million

3.50

November 25, 2026

Class A-3 notes due 2059

$5.1 million

3.50

November 25, 2026

Class M-1 notes due 2059(1)

$6.1 million

3.50

None

Class B-1 notes due 2059(2)

$11.5 million

3.50

None

Class B-2 notes due 2059(2)

$10.4 million

variable(3)

None

Class B-3 notes due 2059(2)

$15.1 million

variable(3)

Deferred issuance costs

$(1.8) million

—

Rated

Ajax Mortgage Loan Trust 2020-B/ August 2020

July 25, 2027

Class A-1 notes due 2059

$97.2 million

1.70

July 25, 2027

Class A-2 notes due 2059

$17.3 million

2.86

July 25, 2027

Class M-1 notes due 2059(1)

$7.3 million

3.70

None

Class B-1 notes due 2059(2)

$5.9 million

3.70

None

Class B-2 notes due 2059(2)

$5.1 million

variable(3)

None

Class B-3 notes due 2059(2)

$23.6 million

variable(3)

Deferred issuance costs

$(1.8) million

—

Rated

Ajax Mortgage Loan Trust 2021-A/ January 2021

January 25, 2029

Class A-1 notes due 2065

$146.2 million

1.07

January 25, 2029

Class A-2 notes due 2065

$21.1 million

2.35

January 25, 2029

Class M-1 notes due 2065(1)

$7.8 million

3.15

None

Class B-1 notes due 2065(2)

$5.0 million

3.80

None

Class B-2 notes due 2065(2)

$5.0 million

variable(3)

None

Class B-3 notes due 2065(2)

$21.5 million

variable(3)

Deferred issuance costs

$(2.5) million

—

The accompanying notes are an integral part of the consolidated interim financial statements.

Non-rated

Ajax Mortgage Loan Trust 2021-B/ February 2021

August 25, 2024

Class A notes due 2066

$215.9 million

2.24

February 25, 2025

Class B notes due 2066(2)

$20.2 million

4.00

Deferred issuance costs

$(4.3) million

—

(1)The Class M notes are subordinated, sequential pay, fixed rate notes. The Company has retained the Class M notes, with the exception of Ajax Mortgage Loan Trust ("AJAXM") 2021-A.

(2)The Class B notes are subordinated, sequential pay, with B-2 and B-3 notes having variable interest rates and subordinate to the Class B-1 notes. The Class B-1 notes are fixed rate notes. The Company has retained the Class B notes.

(3)The interest rate is effectively the rate equal to the spread between the gross average rate of interest the trust collects on its mortgage loan portfolio minus the rate derived from the sum of the servicing fee and other expenses of the trust.

Servicing for the mortgage loans in the Company’s secured borrowings is provided by the Servicer at servicing fee rates of between 0.65% of outstanding UPB and 1.25% of outstanding UPB at acquisition, and is paid monthly. The determination of RPL or NPL status, which determines the servicing fee rates, is based on the status of the loan at acquisition and does not change regardless of the loan's subsequent performance. The following table sets forth the status of the notes held by others at June 30, 2021 and December 31, 2020, and the securitization cutoff date ($ in thousands):


	Balances at June 30, 2021							Balances at December 31, 2020							Original balances at securitization cutoff date
Class of Notes	Carrying value of mortgages		Bond principal balance			Percentage of collateral coverage		Carrying value of mortgages		Bond principal balance			Percentage of collateral coverage		Mortgage UPB			Bond principal balance
2017-B	$	—	$	—		—	%	$	110,062	$	68,729		160	%	$	165,850		$	115,846
2017-D	—		—			—	%	133,897		51,256		(1)	261	%	203,870		(2)	88,903
2018-C	—		—			—	%	173,221		131,983		(3)	131	%	222,181		(4)	167,910
2019-D	133,598		109,891			122	%	148,641		125,008			119	%	193,301			156,670
2019-F	127,059		94,250			135	%	139,996		108,184			129	%	170,876			127,673
2020-B	127,515		97,540			131	%	136,360		105,601			129	%	156,468			114,534
2021-A	178,494		160,924			111	%	—		—			—	%	206,528			175,116
2021-B	254,917		200,801			127	%	—		—			—	%	287,895			215,912
	$	821,583	$	663,406	(5)	124	%	$	842,177	$	590,761	(5)	143	%	$	1,606,969		$	1,162,564

(1)The gross amount of senior bonds at December 31, 2020 was $102.6 million however, only $51.3 million is reflected in Secured borrowings as the remainder is owned by the Company.

(2)Includes $26.7 million of cash collateral intended for use in the acquisition of additional mortgage loans.

(3)2018-C contained notes held by the third party institutional investors for senior bonds and class B bonds. The gross amount of the senior and class B bonds at December 31, 2020 were $132.7 million and $15.9 million, however, only $126.1 million and $5.9 million are reflected in Secured borrowings as the remainder is owned by the Company, respectively.

(4)Includes $45.5 million of cash collateral intended for use in the acquisition of additional mortgage loans.

(5)This represents the gross amount of Secured borrowings and excludes the impact of deferred issuance costs of $9.5 million and $5.4 million as of June 30, 2021 and December 31, 2020.

Convertible Senior Notes

At June 30, 2021 and December 31, 2020, the Company had carrying values of $103.4 million and $110.1 million, respectively, for its convertible senior notes. The notes bear interest at a rate of 7.25% per annum, payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year. The notes will mature on April 30, 2024, unless earlier repurchased, converted or redeemed. During certain periods and subject to certain conditions the notes will be convertible by their holders into shares of the Company’s common stock at a conversion rate of 1.7279 shares of common stock per $25.00 principal amount of the notes, which represents a conversion price of approximately $14.47 per share of common stock. The conversion rate, and thus the conversion price, may be subject to adjustment under certain circumstances. As of June 30, 2021, the amount by which the if-converted value falls short of the principal value for the entire series is $10.9 million.

At June 30, 2021, the outstanding aggregate principal amount of the notes was $105.9 million, and discount and deferred expenses were $2.4 million. At December 31, 2020, the outstanding aggregate principal amount of the notes was $113.4 million, and discount and deferred expenses were $3.3 million. During the three and six months ended June 30, 2021 the

The accompanying notes are an integral part of the consolidated interim financial statements.

Company recognized interest expense on its outstanding convertible notes of $2.2 million and $4.6 million, respectively, which includes $0.4 million and $0.7 million of amortization of discount and deferred expenses, respectively. During the three and six months ended June 30, 2020 the Company recognized interest expense on its outstanding convertible notes of $2.5 million and $4.9 million, respectively, which includes $0.4 million and $0.7 million of amortization of discount and deferred expenses, respectively. The effective interest rates of the notes for the quarters ended June 30, 2021 and June 30, 2020 were 8.99% and 9.09%, respectively.

Coupon interest on the notes is recognized using the accrual method of accounting. Discount and deferred issuance costs are carried on the Company’s consolidated balance sheets as a deduction from the notes, and are amortized to interest expense on an effective yield basis through April 30, 2023, the date at which the notes can be converted. The Company assumes the debt will be converted at the specified conversion date for purposes of amortizing issuance costs because the Company believes such conversion will be in the economic interest of the holders. No sinking fund has been established for redemption of the principal.

Holders may convert their notes at their option prior to April 30, 2023 only under certain circumstances. In addition, the notes will be convertible irrespective of those circumstances from, and including, April 30, 2023 to, and including, the business day immediately preceding the maturity date. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company's election.

The Company may not redeem the notes prior to April 30, 2022, and may redeem for cash all or any portion of the notes, at its option, on or after April 30, 2022 if the last reported sale price of its common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No "sinking fund" will be provided for the notes.

Note 10 — Related Party Transactions

The Company’s consolidated statements of income included the following significant related party transactions ($ in thousands):


			Three months ended June 30,
Transaction	Consolidated Statement of Income location	Counterparty	2021		2020
Interest income on securities and beneficial interest and net increase in the net present value of expected cash flows on beneficial interests	Net interest income after the impact of changes in the net present value of expected cash flows	Various non-consolidated joint ventures	$	8,844	$	7,831
Management fee	Related party expense – management fee	Manager	$	2,267	$	2,143
Loan servicing fees	Related party expense – loan servicing fees	Servicer	$	1,699	$	1,936
Income from equity investment	Income/(loss) from investments in affiliates	Manager	$	283	$	527
Gain on refinancing of securitization trust	Other income	2021-C	$	122	$	—
Income from equity investment	Income/(loss) from investments in affiliates	Gaea	$	42	$	56

The accompanying notes are an integral part of the consolidated interim financial statements.


			Three months ended June 30,
Income from equity investment	Income/(loss) from investments in affiliates	Servicer	$	7	$	72
Income from equity investment	Income/(loss) from investments in affiliates	AS Ajax E LLC	$	7	$	6
Loss from equity investment	Income/(loss) from investments in affiliates	Loan pool LLCs	$	(14)	$	(23)


			Six months ended June 30,
Transaction	Consolidated Statement of Income location	Counterparty	2021		2020
Interest income on securities and beneficial interest and net increase in the net present value of expected cash flows on beneficial interests	Net interest income after the impact of changes in the net present value of expected cash flows	Various non-consolidated joint ventures	$	14,796	$	9,850
Management fee	Related party expense – management fee	Manager	$	4,537	$	3,942
Loan servicing fees	Related party expense – loan servicing fees	Servicer	$	3,532	$	3,950
Income/(loss) from equity investment	Income/(loss) from investments in affiliates	Manager	$	451	$	(439)
Gain on refinancing of securitization trust	Other income	2021-C	$	122	$	—
Income from equity investment	Income/(loss) from investments in affiliates	Gaea	$	60	$	60
Income from equity investment	Income/(loss) from investments in affiliates	AS Ajax E LLC	$	16	$	16
Loss on sale of mortgage loans	Loss on sale of mortgage loans	Gaea	$	—	$	(705)
(Loss)/income from equity investment	Income/(loss) from investments in affiliates	Loan pool LLCs	$	(21)	$	56
(Loss)/income from equity investment	Income/(loss) from investments in affiliates	Servicer	$	(55)	$	(204)

The Company’s consolidated balance sheets included the following significant related party balances ($ in thousands):

As of June 30, 2021

Transaction

Consolidated Balance Sheet location

Counterparty

Amount

Investment in beneficial interests

Various non-consolidated joint ventures

133,484

Receivables from Servicer

Receivable from servicer

Servicer

23,907

Affiliate loan receivable

Mortgage loans, net

Gaea

7,007

Management fee payable

Manager

2,267

Expense reimbursement receivable

Prepaid expenses and other assets

Various non-consolidated joint ventures

1,346

Expense reimbursement

Accrued expenses and other liabilities

Servicer

(80)

The accompanying notes are an integral part of the consolidated interim financial statements.

As of December 31, 2020

Transaction

Consolidated Balance Sheet location

Counterparty

Amount

Investment in beneficial interests

Various non-consolidated joint ventures

91,418

Receivables from Servicer

Receivable from servicer

Servicer

15,755

Affiliate loan receivable

Mortgage loans, net

Gaea

11,000

Management fee payable

Manager

2,247

Affiliate loan purchase

Mortgage loans, net

Servicer

1,838

Expense reimbursement receivable

Prepaid expenses and other assets

Various non-consolidated joint ventures

876

Expense reimbursement receivable

Prepaid expenses and other assets

Manager

Expense reimbursements

Accrued expenses and other liabilities

Servicer

(44)

On June 21, 2021, the Company became a party to a promissory note with Gaea under which Gaea can borrow up to $11.0 million on a revolving line of credit from the Company. Funds advanced to Gaea under the note carry an interest rate of 4.25% and are secured by a selection of Gaea's mortgage loans. The agreement expires on December 31, 2021 and can be extended to January 31, 2022 at Gaea’s option. At June 30, 2021, the amount outstanding under the note was $7.0 million, which was secured by 18 of Gaea's SBC loans. At December 31, 2020, the Company had a separate loan of $11.0 million outstanding loan to Gaea, which was secured by 20 of Gaea's SBC loans. The loan was repaid to the Company on April 5, 2021. At June 30, 2021 and December 31, 2020, these loans were included in Mortgage loans, net on the Company's consolidated balance sheets.

During the quarter ended December 31, 2020, the Company purchased 15 RPLs from GAFS, a related party, for $1.8 million with UPB of $2.1 million and collateral value of $3.7 million. The loans are all included in Mortgage loans, net on the Company's consolidated balance sheets.

During the three and six months ended June 30, 2021, as part of a refinancing transaction the Company sold 760 loans from 2017-D with a carrying value of $129.2 million and UPB of $133.8 million to a joint venture formed between the Company and a third party accredited institutional investor, and retained various classes of securities from the joint venture. During the three months ended June 30, 2020, the Company sold no mortgage loans, however, during the six months ended June 30, 2020, the Company sold 26 SBC mortgage loans with a carrying value of $26.1 million and UPB of $26.2 million to Gaea, a related party.

During both the three and six months ended June 30, 2021, the Company acquired $232.9 million debt securities and beneficial interests issued by joint ventures between the Company and third party institutional accredited investors. Each joint venture issued senior notes and beneficial interests, which are trust certificates representing the residual investment in the trust. In certain transactions, the joint ventures also issued subordinated notes. Of the $232.9 million of debt securities acquired in both the three and six months ended June 30, 2021, the Company acquired $170.0 million in senior notes, $23.5 million in subordinate notes and $39.5 million in beneficial interest issued by joint ventures. Comparatively during the three and six months ended June 30, 2020, the Company acquired zero and $61.3 million, respectively, in debt securities and beneficial interests issued by joint ventures between the Company and third party institutional accredited investors. Each joint venture issued senior notes and beneficial interests, which are trust certificates representing the residual investment in the trust. In certain transactions, the joint ventures also issued subordinated notes. Of the $61.3 million of debt securities acquired in the six months ended June 30, 2020, the Company acquired $49.6 million in senior notes, $4.6 million in subordinate notes and $7.1 million in beneficial interests issued by joint ventures. As of June 30, 2021, the investments in debt securities and beneficial interests were carried on the Company's consolidated balance sheet at $424.6 million and $133.5 million, respectively. At December 31, 2020, the investments in debt securities and beneficial interests were carried on the Company's consolidated balance sheet at $273.8 million and $91.4 million, respectively. As of June 30, 2021 and December 31, 2020, the Company had no securities that were past due.

In June 2019, the Company entered into an arrangement with the Servicer as the borrower and the Company as the lender to advance funds secured by real property to facilitate the purchase of real estate from certain of the Company's joint ventures. Such funds are repaid no later than the liquidation of the real estate. The maximum amount available to the Servicer is

The accompanying notes are an integral part of the consolidated interim financial statements.

$12.0 million. At June 30, 2021, and December 31, 2020, the Company had no advances outstanding to the Servicer. Interest on the arrangement accrues at 7.2% annually.

On November 22, 2019, Gaea completed a private capital raise transaction in which it raised $66.3 million from the issuance of 4,419,641 shares of its common stock to third parties to allow it to continue to advance its investment strategy. Upon completion of the capital raise, the Company retained ownership of approximately 23.2% of Gaea with third party investors owning the remaining approximately 76.8%. The Company recognized no gain or loss on the transaction as Gaea's fair value at the date of the deconsolidation did not represent a material change from the fair values of its recently acquired assets and liabilities due to the limited lapse of time since their acquisitions. At June 30, 2021 the Company owned approximately 22.9% of Gaea with third party investors owning the remaining approximately 77.1%. The Company accounts for its investment in Gaea using the equity method.

On March 14, 2016, the Company formed AS Ajax E LLC to hold an equity interest in a Delaware trust formed to own residential mortgage loans and residential real estate assets. AS Ajax E LLC owns a 5.0% equity interest in Ajax E Master Trust which holds a portfolio of RPLs. At the time of the original investment, the Company held a 24.2% interest in AS Ajax E LLC. In October 2016, additional capital contributions were made by third parties, and the Company’s ownership interest in AS Ajax E was reduced to a lower percentage of the total. As of June 30, 2021 and December 31, 2020, the Company’s interest in AS Ajax E LLC was approximately 16.5%. The Company accounts for its investment using the equity method.

Management Agreement

The Company is a party to the Amended and Restated Management Agreement with the Manager, which expires on March 5, 2034. Under the Management Agreement, the Manager implements the Company’s business strategy and manages the Company’s business and investment activities and day-to-day operations, subject to oversight by the Company’s Board of Directors. Among other services, the Manager, directly or through affiliates, provides the Company with a management team and necessary administrative and support personnel. The Company does not currently have any employees that it pays directly and does not expect to have any employees that it pays directly in the foreseeable future. Each of the Company’s executive officers is an employee or officer, or both, of the Manager or the Servicer.

Under the Management Agreement, the Company pays both a base management fee and an incentive fee to the Manager. The base management fee equals 1.5% of the Company's stockholders’ equity, including equity equivalents such as the Company's issuance of convertible senior notes, per annum and is calculated and payable quarterly in arrears. The Company has the option to pay its management fee with between 50% to 100% cash at its discretion, and pay the remainder in shares of its common stock.

In the event the Company elects to pay its Manager in shares of its common stock, the calculation to determine the number of shares of the Company's common stock to be issued to the Manager is outlined below. The initial $1.0 million of the quarterly base management fee will be payable at least 75% in cash and up to 25% in shares of the Company’s common stock (allocated at the Company's discretion). Any amount of the base management fee in excess of $1.0 million may be payable in shares of the Company’s common stock (at the Company's discretion) until payment is at least 50% in cash and up to 50% in shares (the “50/50 split”). Any remaining amount of the quarterly base management fee after the 50/50 split threshold is reached may be payable in equal amounts of cash and shares (at the Company's discretion). The base management fee currently exceeds the 50/50 split threshold. The Manager has agreed to hold any shares of common stock received by it as payment of the base management fee for at least three years from the date such shares of common stock are received.

The Manager is also entitled to an incentive fee, payable quarterly and calculated in arrears, which contains both a quarterly and annual component. A quarterly incentive fee is payable to the Manager if the sum of the Company’s dividends on its common stock and its increase in book value, all relative to the applicable quarter and calculated per-share on an annualized basis, exceed 8%. The Manager will also be entitled to an annual incentive fee if the sum of the Company’s quarterly cash dividends on its common stock, special cash dividends on its common stock within the applicable calendar year exceed 8% of the Company’s book value per share as of the end of the calendar year. However, no incentive fee will be payable to the Manager with respect to any calendar quarter unless the Company’s cumulative core earnings, defined as U.S. GAAP net income or loss less non-cash equity compensation, unrealized gains or losses from mark to market adjustments, one-time adjustments to earnings resulting from changes to U.S. GAAP, and certain other non-cash items, is greater than zero for the most recently completed eight calendar quarters. In the event that the payment of the quarterly base management fee has not

The accompanying notes are an integral part of the consolidated interim financial statements.

reached the 50/50 split, up to 100% of the incentive fee will be payable in shares of the Company’s common stock, at the Company's discretion, until the 50/50 split occurs. In the event that the total payment of the quarterly base management fee and the incentive fee has reached the 50/50 split, up to 20% of the remaining incentive fee is payable in shares of the Company’s common stock at the Company's discretion and the remaining incentive fee is payable in cash. During the three and six months ended June 30, 2021 and June 30, 2020, the Company did not record an incentive fee payable to the Manager.

The Company also reimburses the Manager for all third-party, out-of-pocket costs incurred by the Manager for managing its business, including third-party due diligence and valuation consultants, legal expenses, auditors and other financial services. The reimbursement obligation is not subject to any dollar limitation. Expenses are reimbursed in cash on a monthly basis.

The Company will be required to pay the Manager a termination fee in the event that the Management Agreement is terminated as a result of (i) a termination by the Company without cause, (ii) its decision not to renew the Management Agreement upon the determination of at least two-thirds of the Company’s independent directors for reasons including the failure to agree on revised compensation, (iii) a termination by the Manager as a result of the Company becoming regulated as an “investment company” under the Investment Company Act of 1940, as amended (the “Investment Company Act”) (other than as a result of the acts or omissions of the Manager in violation of investment guidelines approved by the Company’s Board of Directors), or (iv) a termination by the Manager if the Company defaults in the performance of any material term of the Management Agreement (subject to a notice and cure period). The termination fee will be equal to twice the combined base fee and incentive fees payable to the Manager during the 12-month period ended as of the end of the most recently completed fiscal quarter prior to the date of termination.

Servicing Agreement

The Company is also a party to the Servicing Agreement, expiring July 8, 2029, with the Servicer. The Company’s overall servicing costs under the Servicing Agreement will vary based on the types of assets serviced.

Servicing fees range from 0.65% to 1.25% annually UPB at acquisition (or the fair market value or purchase price of REO), and are paid monthly. The servicing fee is based upon the status of the loan at acquisition. A change in status from RPL to NPL does not cause a change in the servicing fee rate.

Servicing fees for the Company’s real property assets that were previously RPLs that are not held in joint ventures are the greater of (i) the servicing fee applicable to the underlying mortgage loan prior to foreclosure, or (ii) 1.00% annually of the fair market value of the REO as reasonably determined by the Manager or 1.00% annually of the purchase price of any REO otherwise purchased by the Company. The servicing fee for NPLs that convert to real property assets does not change.

The Servicer is reimbursed for all customary, reasonable and necessary out-of-pocket costs and expenses incurred in the performance of its obligations, including the actual cost of any repairs and renovations undertaken on the Company’s behalf. The total fees incurred by the Company for these services will be dependent upon the UPB and the type of mortgage loans that the Servicer services, property values, previous UPB of the relevant loan, and the number of REO properties.

If the Servicing Agreement has been terminated other than for cause and/or the Servicer terminates the servicing agreement, the Company will be required to pay a termination fee equal to the aggregate servicing fees payable under the servicing agreement for the immediate preceding 12-month period.

Trademark Licenses

Aspen has granted the Company a non-exclusive, non-transferable, non-sublicensable, royalty-free license to use the name “Great Ajax” and the related logo. The Company also has a similar license to use the name “Thetis.” The agreement has no specified term. If the Management Agreement expires or is terminated, the trademark license agreement will terminate within 30 days. In the event that this agreement is terminated, all rights and licenses granted thereunder, including, but not limited to, the right to use “Great Ajax” in its name will terminate. Aspen also granted to the Manager a substantially identical non-exclusive, non-transferable, non-sublicensable, royalty-free license use of the name “Thetis.”

Note 11 — Stock-based Payments and Director Fees

Pursuant to the terms of the Management Agreement, the Company may pay a portion of the base fee to the Manager in shares of its common stock with the number of shares determined based on the average of the closing prices of its common stock on the NYSE on the five business days preceding the date on which the most recent regular quarterly dividend to holders

The accompanying notes are an integral part of the consolidated interim financial statements.

of its common stock is paid. The Company recognized base management fees to the Manager for the three and six months ended June 30, 2021 of $2.3 million and $4.6 million, respectively, all of which was payable in cash. Comparatively, for the three and six months ended June 30, 2020, the Company recognized base management fees of $2.1 million and $3.9 million, all of which was payable in cash.

In addition, each of the Company’s independent directors received an annual retainer of $100,000, payable quarterly, 40% of which is payable in shares of the Company's common stock using the same valuation method as defined for the stock portion of the management fee payable to the Manager.

The following table sets forth the Company’s stock-based independent director fees ($ in thousands):

Stock-based Director Fees


	For the three months ended June 30,
	2021			2020
	Number of shares	Amount of expense recognized(1)		Number of shares	Amount of expense recognized(1)
Independent director fees	4,025	$	50	5,200	$	40
Totals	4,025	$	50	5,200	$	40


	For the six months ended June 30,
	2021			2020
	Number of shares	Amount of expense recognized(1)		Number of shares	Amount of expense recognized(1)
Independent director fees	7,970	$	100	8,668	$	80
Totals	7,970	$	100	8,668	$	80

(1)All independent director fees are fully expensed in the period in which the relevant service is received by the Company.

Restricted Stock

The Company periodically grants shares of its common stock to employees of its Manager and Servicer. The shares vest over three years, with one-third of the shares vesting on each of the first, second and third anniversaries of the grant date. The shares may not be sold until the third anniversary of the grant date. Grants of restricted stock use grant date fair value of the stock as the basis for measuring the cost of the grant.

Each independent member of the Company's Board of Directors is issued a restricted stock award of 2,000 shares of the Company’s common stock upon joining the Board. Additionally, the Company may issue grants of its shares of common stock from time to time to its directors.

The accompanying notes are an integral part of the consolidated interim financial statements.

Under the Company’s 2014 Director Equity Plan and 2016 Equity Incentive Plan the Company made grants of restricted stock to its Directors and to employees of its Manager and Servicer as set forth the table below:


	Employee and Service Provider Grants			Director Grants
	Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value
June 30, 2021 outstanding unvested share grants	163,083	$	11.07	8,000	$	12.60
Shares vested	—	—		(8,000)	12.60
Shares forfeited	—	—		—	—
Shares granted	—	—		16,000	12.60
March 31, 2021 outstanding unvested share grants	163,083	$	11.07	—	$	—
Shares vested	—	—		(2,000)	12.00
Shares forfeited	—	—		—	—
Shares granted	—	—		2,000	12.00
December 31, 2020 outstanding unvested share grants	163,083	$	11.07	—	$	—

June 30, 2020 outstanding unvested share grants	114,334	$	13.83	—	$	—
Shares vested	—	—		—	—
Shares forfeited	—	—		—	—
Shares granted	—	—		—	—
March 31, 2020 outstanding unvested share grants	114,334	$	13.83	—	$	—
Shares vested	—	—		—	—
Shares forfeited	—	—		—	—
Shares granted	—	—		—	—
December 31, 2019 outstanding unvested share grants	114,334	$	13.83	—	$	—

The following table presents the expenses for the Company's restricted stock plan for the years ended ($ in thousands):


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Restricted stock grants	$	207	$	174	$	414	$	348
Director grants	118		—		142		—
Total expenses for plan grants	$	325	$	174	$	556	$	348

Note 12 — Income Taxes

As a REIT, the Company must meet certain organizational and operational requirements including the requirement to distribute at least 90% of its annual REIT taxable income to its stockholders. And as a REIT, the Company generally will not be subject to U.S. federal income tax to the extent the Company distributes its REIT taxable income to its stockholders and provided the Company satisfies the REIT requirements including certain asset, income, distribution and stock ownership tests. If the Company fails to qualify as a REIT, and does not qualify for certain statutory relief provisions, it will be subject to U.S. federal, state and local income taxes and may be precluded from qualifying as a REIT for the subsequent four taxable years following the year in which it lost its REIT qualification.

For the three and six months ended June 30, 2021 the Company had consolidated taxable income of $7.7 million and $16.4 million, respectively; and provisions for income taxes of $67 thousand and $0.1 million, respectively. For the three and six months ended June 30, 2020, the Company had consolidated tax losses $2.0 million and $0.8 million, respectively; and

The accompanying notes are an integral part of the consolidated interim financial statements.

provisions for income taxes were $0.1 million and an income tax benefit of $0.2 million, respectively. The Company recognized no deferred income tax assets or liabilities on its consolidated balance sheets at June 30, 2021 or 2020. The Company also recorded no interest or penalties for the three and six months ended June 30, 2021 or 2020.

Note 13 — Earnings per Share

The following table sets forth the components of basic and diluted EPS ($ in thousands, except per share):


	Three months ended June 30, 2021					Three months ended June 30, 2020
	Income (Numerator)		Shares (Denominator)	Per Share Amount		Income (Numerator)		Shares (Denominator)	Per Share Amount
Basic EPS
Consolidated net income attributable to common stockholders	$	10,378	22,825,804			$	6,242	22,808,943
Allocation of earnings to participating restricted shares	(78)		—			(33)		—
Consolidated net income attributable to unrestricted common stockholders	$	10,300	22,825,804	$	0.45	$	6,209	22,808,943	$	0.27
Effect of dilutive securities(1)
Restricted stock grants and Manager and director fee shares(2)	—		—			33		120,906
Interest expense (add back) and assumed conversion of shares from convertible senior notes(3)	2,255		7,372,892			—		—
Diluted EPS
Consolidated net income attributable to common stockholders and dilutive securities	$	12,555	30,198,696	$	0.42	$	6,242	22,929,849	$	0.27

(1)The Company's outstanding warrants for an addition 6,500,000 shares of common stock and effect of the put option share settlement would have an anti-dilutive effect on diluted earnings per share for the three months ended June 30, 2021 and June 30, 2020, and have not been included in the calculation.

(2)The effect of restricted stock grants and manager and director fee shares on the Company's diluted EPS calculation for the three months ended June 30, 2021 would have been anti-dilutive and has been removed from the calculation.

(3)The effect of interest expense and assumed conversion of shares from convertible notes on the Company's diluted EPS calculation for the three months ended June 30, 2020 would have been anti-dilutive and has been removed from the calculation.

The accompanying notes are an integral part of the consolidated interim financial statements.


	Six months ended June 30, 2021					Six months ended June 30, 2020
	Income (Numerator)		Shares (Denominator)	Per Share Amount		Income (Numerator)		Shares (Denominator)	Per Share Amount
Basic EPS
Consolidated net income attributable to common stockholders	$	17,382	22,821,416			$	6,642	22,439,648
Allocation of earnings to participating restricted shares	(130)		—			(35)		—
Consolidated net income attributable to unrestricted common stockholders	$	17,252	22,821,416	$	0.76	$	6,607	22,439,648	$	0.29
Effect of dilutive securities(1)
Restricted stock grants and Manager and director fee shares(2)	—		—			35		120,268
Interest expense (add back) and assumed conversion of shares from convertible senior notes(3)	4,599		7,520,222			—		—
Diluted EPS
Consolidated net income attributable to common stockholders and dilutive securities	$	21,851	30,341,638	$	0.72	$	6,642	22,559,916	$	0.29

(1)The Company's outstanding warrants for an addition 6,500,000 shares of common stock and effect of the put option share settlement would have an anti-dilutive effect on diluted earnings per share for the six months ended June 30, 2021 and June 30, 2020, and have not been included in the calculation.

(2)The effect of restricted stock grants and manager and director fee shares on the Company's diluted EPS calculation for the six months ended June 30, 2021 would have been anti-dilutive and has been removed from the calculation.

(3)The effect of interest expense and assumed conversion of shares from convertible notes on the Company's diluted EPS calculation for the six months ended June 30, 2020 would have been anti-dilutive and has been removed from the calculation.

Note 14 — Equity

Common stock

As of June 30, 2021 and December 31, 2020, the Company had 22,993,246 and 22,978,339 shares, respectively, of $0.01 par value common stock outstanding with 125,000,000 shares authorized at each period end.

Preferred stock

During the quarter ended June 30, 2020, the Company issued to institutional accredited investors an aggregate of $130.0 million of preferred stock in two series and warrants in a series of private placements. The Company issued 2,307,400 shares of 7.25% Series A Fixed-to-Floating Rate Preferred Stock and 2,892,600 shares of 5.00% Series B Fixed-to-Floating Rate Preferred Stock, each at a purchase price per share of $25.00 and two series of five-year warrants to purchase an aggregate of 6,500,000 shares of the Company's common stock at an exercise price of $10.00 per share. Each series of warrants includes a put option that allows the holder to sell the warrants to the Company at a specified put price on or after July 6, 2023. The Company is using the net proceeds from the private placement to acquire mortgage loans and mortgage-related assets consistent with the Company's investment strategy.

The Company had 2,307,400 shares of Series A preferred stock and 2,892,600 shares of Series B preferred stock outstanding at June 30, 2021 and December 31, 2020. There were 25,000,000 shares, cumulative for all series, authorized as of both June 30, 2021 and December 31, 2020.

The accompanying notes are an integral part of the consolidated interim financial statements.

Treasury stock and Stock Repurchase Plan

On February 28, 2020, the Company's Board of Directors approved a stock repurchase of up to $25.0 million of its common shares. The amount and timing of any repurchases will depend 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, 2021, the Company held 126,609 shares of treasury stock consisting of 78,145 shares received through distributions of the Company's shares previously held by its Manager and 48,464 shares acquired through open market purchases in the fourth quarter of 2020 under the Company's approved stock repurchase plan. As of December 31, 2020, the Company held 107,243 shares of treasury stock consisting of 58,779 shares received through distributions of the Company's shares previously held by its Manager and 48,464 shares acquired through open market purchases in the fourth quarter of 2020 under the Company's approved stock repurchase plan.

Dividend Reinvestment Plan

The Company sponsors a dividend reinvestment plan through which stockholders may purchase additional shares of the Company’s common stock by reinvesting some or all of the cash dividends received on shares of the Company’s common stock. During the three and six months ended June 30, 2021 3,820 and 8,048 shares were issued, respectively, under the plan for total proceeds of approximately $48 thousand and $0.1 million, respectively. Comparatively, during both the three and six months ended June 30, 2020 5,057 shares were issued under the plan for total proceeds of approximately $41 thousand.

At the Market Offering

The Company has entered into an equity distribution agreement under which the Company may sell shares of its common stock having an aggregate offering price of up to $50.0 million from time to time in any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 under the Securities Act of 1933, as amended, or the Securities Act. During the three and six months ended June 30, 2021 and 2020, no shares were sold under the at the market program.

Accumulated Other Comprehensive Income

The Company recognizes unrealized gains or losses on its investment in debt securities as components of other comprehensive income. Total accumulated other comprehensive income on the Company’s balance sheet at June 30, 2021 and December 31, 2020 was as follows ($ in thousands):


Investments in securities:	June 30, 2021		December 31, 2020
Unrealized gains	$	1,877	$	1,152
Unrealized losses	(226)		(777)
Accumulated other comprehensive income	$	1,651	$	375

Non-controlling Interest

At December 31, 2020, the Company had non-controlling interests attributable to ownership interests for four legal entities. During the first quarter of 2021, the Company acquired the remaining ownership of 2018-C. This decreased the number of third party non-controlling interests as of June 30, 2021 to three legal entities. Legal entities consolidated by the Company which have non-controlling interests held by third parties are described below.

AS Ajax E II LLC was formed by the Company during 2017 to purchase and hold an investment in a Delaware trust which holds single family residential real estate loans, SBC loans and other real estate assets. AS Ajax E II LLC is 46.9% held by third parties. As of June 30, 2021 and December 31, 2020, the Company owned 53.1% of AS Ajax E II LLC and consolidated the assets, liabilities, revenues and expenses of the entity.

2017-D, a securitization trust, was formed by the Company during 2017, and is 50.0% held by an accredited institutional investor. During the second quarter of 2021, the majority of the loans in 2017-D were resecuritized into 2021-C, with 22 loans remaining in 2017-D. As of June 30, 2021 and December 31, 2020, the Company owned 50.0% of 2017-D and consolidated the assets, liabilities, revenues and expenses of the trust.

The accompanying notes are an integral part of the consolidated interim financial statements.

Great Ajax II REIT was formed by the Company during 2019 to hold an interest in Great Ajax II Depositor LLC, which acts as the depositor of mortgage loans into securitization trusts and holds the subordinated securities issued by such trusts and any additional trusts the Company may form for additional secured borrowings. As of June 30, 2021 and December 31, 2020, Great Ajax II REIT was 0.1% held by third parties. As of June 30, 2021 and December 31, 2020, the Company owned 99.9% of Great Ajax II REIT and consolidated the assets, liabilities, revenues and expenses of the entity.

2018-C, a securitization trust was formed by the Company during 2018 and was 37.0% held by an accredited institutional investor. The remaining 37.0% ownership was purchased by the Company during the first quarter of 2021. As of June 30, 2021 the Company owned 100.0% of 2018-C. Comparatively, as of December 31, 2020 the Company owned 63.0% of 2018-C and consolidated the assets, liabilities, revenues and expenses of the trust.

The following table sets forth the effects of changes in ownership of the Company's non-controlling interests due to transfers to or from non-controlling interest for the calendar preceding the Consolidated balance sheet dates ($ in thousands):


	June 30, 2021		December 31, 2020
Decrease from redemption of 2018-C	$	(8,306)	$	—
Decrease from the distribution resulting from the refinancing of substantially all of 2017-D	(16,864)		—
Change in non-controlling interest	$	(25,170)	$	—

Note 15 — Subsequent Events

The Company has acquired 1,016 residential NPLs with aggregate UPB of $173.0 million in two transactions from two different sellers. The purchase price equaled 97.9% of UPB and 54.2% of the estimated market value of the underlying collateral of $312.1 million. These loans were acquired by the joint venture that was formed in June 2021 with proceeds from the established prefunding account.

The Company has agreed to acquire, subject to due diligence, 31 residential RPLs in six transactions, and 412 NPLs in six transactions, with aggregate UPB of $4.7 million and $103.3 million, respectively. The purchase price of the residential RPLs equals 80.9% of UPB and 55.1% of the estimated market value of the underlying collateral of $6.9 million. The purchase price of the NPLs equals 97.1% of UPB and 64.4% of the estimated market value of the underlying collateral of $155.8 million.

On July 19, 2021, the Company co-invested with third-party institutional investors to form Ajax Mortgage Loan Trust 2021-E ("2021-E") and retained $53.1 million of varying classes of related securities. The Company acquired 10.01% of the class A securities, class B securities and class M securities from the trust, which acquired 3,142 RPLs and NPLs with UPB of $517.7 million and an aggregate property value of $968.6 million. The senior securities represent 83% of the UPB of the underlying mortgage loans and carry a weighted average coupon of 1.82%. Based on the structure of the transaction the Company will not consolidate 2021-E under U.S. GAAP. The assets included in the 2021-E securitization came from loan sales associated with the Company's 2020-C and 2020-D securitizations, all of which were joint ventures with third party institutional accredited investors.

On July 26, 2021, the Company's Board of Directors approved a grant of 152,700 shares of restricted stock to employees of its Manager and Servicer with a grant date of August 2, 2021. The shares will vest over four years, with one fourth of the shares vesting on each of the first, second, third and fourth anniversaries of the grant date.

On August 5, 2021, the Company’s Board of Directors declared a cash dividend of $0.21 per share to be paid on August 31, 2021 to stockholders of record as of August 16, 2021.

The accompanying notes are an integral part of the consolidated interim financial statements.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this quarterly report constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will” and “would” or the negatives of these terms or other comparable terminology.

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us or are within our control. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. You should carefully consider these risks, along with the following factors that could cause actual results to vary from our forward-looking statements:

•the impact of adverse real estate, mortgage or housing markets and changes in the general economy;

•changes in our business strategy;

•the impact of the global pandemic caused by the novel coronavirus ("COVID-19") outbreak;

•general volatility of the capital markets;

•the impact of adverse legislative or regulatory tax changes;

•our ability to obtain financing on favorable terms or at all;

•our ability to implement our business strategy;

•difficulties in identifying re-performing loans (“RPLs”), small balance commercial mortgage loans (“SBC loans”) and properties to acquire; and the impact of changes to the supply of, value of and the returns on RPLs and SBC loans;

•our ability to compete with our competitors;

•our ability to control our costs;

•the impact of changes in interest rates and the market value of the collateral underlying our RPL and non-performing loan (“NPL”) portfolios or of our other real estate assets;

•our ability to convert NPLs into performing loans or to modify or otherwise resolve such loans;

•our ability to convert NPLs to properties that can generate attractive returns either through sale or rental;

•our ability to retain our engagement of our Manager;

•the failure of the Servicer to perform its obligations under the Servicing Agreement;

•our failure to qualify or maintain qualification as a real estate investment trust (“REIT”); and

•our failure to maintain our exemption from registration under the Investment Company Act of 1940, as amended (the “Investment Company Act”).

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited interim consolidated financial statements and related notes included in Item 1. Consolidated interim financial statements of this report and in Item 8. Financial statements and supplementary data in our most recent Annual Report on Form 10-K, as well as the section entitled “Risk Factors” in Part II, Item 1A. of this report, as well as other cautionary statements and risks described elsewhere in this report and our most recent Annual Report on Form 10-K.

Overview

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 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. We also acquire and 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 also originate SBC loans that we believe will provide an appropriate risk-adjusted total return. Additionally, we invest in single-family and smaller commercial properties directly either through a foreclosure event of a loan in our mortgage portfolio or through a direct acquisition. We may also target investments in NPLs either directly or with joint venture partners. NPLs are loans on which the most recent three payments have not been made. We own a 19.8% equity interest in the Manager and an 8.0% equity interest in the parent company of our Servicer. GA-TRS is a wholly owned subsidiary of the Operating Partnership that owns the equity interest in the Manager and the Servicer. 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.

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.

Our Operating Partnership, through interests in certain entities as of June 30, 2021 and December 31, 2020, holds 99.9% of Great Ajax II REIT Inc. which holds an interest in Great Ajax II Depositor LLC which acts as the depositor of mortgage loans into securitization trusts and holds the subordinated securities issued by such trusts and any additional trusts we may form for additional secured borrowings. We have securitized mortgage loans through securitization trusts and retained subordinated securities from the secured borrowings. These trusts are considered to be VIEs, and we have determined that we are the primary beneficiary of the VIEs.

In 2018, we formed Gaea as a wholly owned subsidiary of the Operating Partnership. We elected to treat Gaea as a TRS under the Code for 2018, and we elected to treat Gaea as a REIT under the Code in 2019 and thereafter. Also during 2018, we formed Gaea Real Estate Operating Partnership LP, a wholly owned subsidiary of Gaea, to hold investments in commercial real estate assets. We also formed BFLD Holdings LLC, Gaea Commercial Properties LLC, Gaea Commercial Finance LLC and Gaea RE LLC as subsidiaries of Gaea Real Estate Operating Partnership. In 2019, we formed DG Brooklyn Holdings, LLC, also a subsidiary of Gaea Real Estate Operating Partnership LP, to hold investments in multi-family properties. On November 22, 2019, Gaea completed a private capital raise in which it raised $66.3 million from the issuance of 4,419,641 shares of its common stock to third parties to allow Gaea to continue to advance its investment strategy. We retained a 23.2% ownership interest in Gaea following the transaction. At June 30, 2021, we owned approximately 22.9% of Gaea.

We elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2014. Our qualification as a REIT depends upon our ability to meet, on a continuing basis, various complex requirements under the Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels and the diversity of ownership of our capital stock. We believe that we are organized in conformity with the requirements for qualification as a REIT under the Code, and that our current intended manner of operation enables us to meet the requirements for taxation as a REIT for U.S. federal income tax purposes.

Our Portfolio

The following table outlines the carrying value of our portfolio of mortgage loan assets and single-family and smaller commercial properties as of June 30, 2021 and December 31, 2020 ($ in millions):


	June 30, 2021		December 31, 2020
Residential RPLs	$	897.5	$	1,057.5
Residential NPLs	36.8		38.7
SBC loans	21.3		23.2
Real estate owned properties, net	4.8		8.5
Investments in securities at fair value	424.6		273.8
Investment in beneficial interests	133.5		91.4
Total mortgage related assets	$	1,518.5	$	1,493.1

We closely monitor the status of our mortgage loans and, through our Servicer, work with our borrowers to improve their payment records.

Market Trends and Outlook

COVID-19

The COVID-19 pandemic that began during the first quarter of 2020 created a global public-health crisis that resulted in widespread volatility and deteriorations in household, business, and economic market conditions, including in the United States, where we conduct all of our business. During 2020 many governmental and nongovernmental authorities directed their actions toward curtailing household and business activity in order to contain or mitigate the impact of the COVID-19 pandemic and deployed fiscal- and monetary-policy measures in order to seek to partially mitigate the adverse effects. These programs have had varying degrees of success and the extent of the long term impact on the mortgage market remains unknown.

The COVID-19 pandemic began to meaningfully impact our operations in late March 2020 and any continuing disruption was reflected in our results of operations for the quarter ended June 30, 2021. The pandemic has continued and continues to significantly and adversely impact certain areas of the United States. As a result, our forecast of macroeconomic conditions and expected lifetime credit losses on our mortgage loan and beneficial interest portfolios is subject to meaningful uncertainty. While the majority of our borrowers continue to make scheduled payments and we continue to receive payments in full, we have acted swiftly to support our borrowers with a mortgage forbearance program. While we generally do not hold loans guaranteed by GSEs or the US government, we, through our Servicer, are nonetheless offering a forbearance program under terms similar to those required for GSE loans. Borrowers who request COVID-19 related hardship assistance are asked to complete a standardized hardship questionnaire, including documentation to support the COVID-19 related hardship claim. The materials are reviewed, along with the borrower's monthly payment status, to determine if the borrower is eligible for the three-month forbearance plan. If the borrower is not eligible, they are encouraged to apply for loss mitigation. In the event the COVID-19 related hardship is continuing at the end of the forbearance period, it may be extended for an additional period. At the end of the forbearance plan, the borrower may repay the amounts in a lump sum, or our Servicer will work with the borrower on repayment options or traditional loan modification options. Notwithstanding the foregoing, to the extent special rules apply to a mortgagor because of the jurisdiction or type of the Mortgage Loan, the Servicer will comply with those rules. Our Servicer has extensive experience dealing with delinquent borrowers and we believe it is well positioned to react on our behalf to any increase in mortgage delinquencies. The following list shows the COVID-19 forbearance activity in our mortgage loan portfolio as of July 31, 2021 :

•Number of COVID-19 forbearance relief inquiries: 1,044

•Number of COVID-19 forbearance relief granted: 297

We expect continued volatility in the residential mortgage securities market in the short term and increased acquisition opportunities. Extended forbearance, foreclosure timelines and eviction timelines could result in lower yields and losses on our mortgage loan and beneficial interest portfolios and losses on our REO held-for-sale. Ongoing disruption in the credit markets could result in margin calls from our financing counterparties and additional mark downs on our Investments in debt securities, beneficial interests and mortgage loans.

We believe that certain cyclical trends continue to drive a significant realignment within the mortgage sector notwithstanding the impact of the pandemic. Through the end of the second quarter, the recent trends noted below have continued, including:

•historically low interest rates and elevated operating costs resulting from new regulatory requirements continue to drive sales of residential mortgage assets by banks and other mortgage lenders;

•declining home ownership in certain areas due to rising prices, low inventory, tighter lending standards and increased down payment requirements that have increased the demand for single-family and multi-family residential rental properties;

•rising home prices are increasing homeowner equity and reducing the incidence of strategic default;

•rising prices have resulted in millions of homeowners being in the money to refinance;

•the Dodd-Frank risk retention rules for asset backed securities have reduced the universe of participants in the securitization markets;

•the lack of a robust market for non-conforming mortgage loans will reduce the pool of buyers due to tighter credit standards as a result of the COVID-19 pandemic; and

The origination of subprime and alternative residential mortgage loans remains substantially below 2008 levels and the qualified mortgage and ability-to-repay rule requirements have put pressure on new originations. Additionally, many banks and other mortgage lenders have increased their credit standards and down payment requirements for originating new loans. Recent market disruption from the pandemic has sharply reduced financing alternatives for borrowers not eligible for financing programs underwritten by the GSEs or the federal government.

The combination of these factors has also resulted in a significant number of families that cannot qualify to obtain new residential mortgage loans. We believe the U.S. federal regulations addressing “qualified mortgages” based on, among other factors such as employment status, debt-to-income level, impaired credit history or lack of savings, limit mortgage loan availability from traditional mortgage lenders. In addition, we believe that many homeowners displaced by foreclosure or who either cannot afford to own or cannot be approved for a mortgage will prefer to live in single-family rental properties with similar characteristics and amenities to owned homes as well as smaller multi-family residential properties. In certain demographic areas, new households are being formed at a rate that exceeds the new homes being added to the market, which we believe favors future demand for non-federally guaranteed mortgage financing for single-family and smaller multi-family rental properties. For all these reasons, we believe that demand for single-family and smaller multi-family rental properties will increase in the near term and remain at heightened levels for the foreseeable future.

We believe that investments in residential RPLs with positive equity provide an optimal investment value. As a result, we are currently focusing on acquiring pools of RPLs, though we may acquire NPLs, either directly or with joint venture partners, if attractive opportunities exist. Through our Servicer, we work with our borrowers to improve their payment records. Once there is a period of continued performance, we expect that borrowers will typically refinance these loans at or near the estimated value of the underlying property.

We also believe there are significant attractive investment opportunities in the SBC loan and property markets and originate as well as purchase these loans, particularly in urban areas where there is a sustainable trend of young adults desiring to live near where they work. We focus on densely populated urban areas where we expect positive economic change based on certain demographic, economic and social statistical data. The primary lenders for smaller multi-family and mixed retail/residential properties are community banks and not regional and national banks and large institutional lenders. We believe the primary lenders and loan purchasers are less interested in these assets because they typically require significant commercial and residential mortgage credit and underwriting expertise, special servicing capability and active property management. It is also more difficult to create the large pools of these loans that primary banks, lenders and portfolio acquirers typically desire. We continually monitor opportunities to increase our holdings of these SBC loans and properties.

We also believe that banks and other mortgage lenders have strengthened their capital bases and are more aggressively foreclosing on delinquent borrowers or selling these loans to dispose of their inventory. Additionally, many NPL buyers are now interested in reducing their investment duration and are selling RPLs.

Factors That May Affect Our Operating Results

Acquisitions. Our operating results depend heavily on sourcing residential RPLs and SBC loans and, when attractive opportunities are identified, NPLs. We believe that there is generally a large supply of RPLs available to us for acquisition and we believe the available supply provides for a steady acquisition pipeline of assets since large institutions are active sellers in the market. However, we expect that our residential mortgage loan portfolio may grow at an uneven pace, as opportunities to acquire distressed residential mortgage loans may be irregularly timed and may involve large portfolios of loans, and the timing and extent of our success in acquiring such loans cannot be predicted. We also believe there may be increased opportunities to acquire NPLs due to the pandemic. In addition, for any given portfolio of loans that we agree to acquire, we typically acquire fewer loans than originally expected, as certain loans may be resolved prior to the closing date or may fail to meet our diligence standards. The number of loans not acquired typically constitutes a small portion of a particular portfolio. In any case where we do not acquire the full portfolio, we make appropriate adjustments to the applicable purchase price.

Financing. Our ability to grow our business by acquiring residential RPLs and SBC loans depends on the availability of adequate financing, including additional equity financing, debt financing or both in order to meet our objectives. We intend to leverage our investments with debt, the level of which may vary based upon the particular characteristics of our portfolio and on market conditions. We have funded and intend to continue to fund our asset acquisitions with non-recourse secured borrowings in which the underlying collateral is not marked to market and employ repurchase agreements without the obligation to mark to market the underlying collateral to the extent available. We securitize our whole loan portfolios, primarily as a financing tool, when economically efficient to create long-term, fixed rate, non-recourse financing with moderate leverage, while retaining one or more tranches of the subordinate MBS so created. The secured borrowings are structured as debt financings and not real estate investment conduit (“REMIC”) sales. We completed the securitization transactions pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), in which we issued notes primarily secured by seasoned, performing and non-performing mortgage loans primarily secured by first liens on one-to-four family residential properties. Currently there is substantial uncertainty in the securitization markets which could limit our access to financing.

To qualify as a REIT under the Code, we generally will need to distribute at least 90% of our taxable income each year (subject to certain adjustments) to our stockholders. This distribution requirement limits our ability to retain earnings and thereby replenish or increase capital to support our activities.

Resolution Methodologies. We, through the Servicer, or our affiliates, employ various loan resolution methodologies with respect to our residential mortgage loans, including loan modification, collateral resolution and collateral disposition. The manner in which an NPL is resolved will affect the amount and timing of revenue we will receive. Our preferred resolution methodology is to modify NPLs. Once successfully modified and there is a period of continued performance, we expect that borrowers will typically refinance these loans at or near the estimated value of the underlying property. We believe modification followed by refinancing generates near-term cash flows, provides the highest possible economic outcome for us and is a socially responsible business strategy because it keeps more families in their homes. In certain circumstances, we may also consider selling these modified loans. Through historical experience, we expect that many of our NPLs will enter into foreclosure or similar proceedings, ultimately becoming REO that we can sell or convert into single-family rental properties that we believe will generate long-term returns for our stockholders. Our REO properties may be converted into single-family rental properties or they may be sold through REO liquidation and short sale processes. We expect the timelines for each of the different processes to vary significantly. The exact nature of resolution will depend on a number of factors that are beyond our control, including borrower willingness, property value, availability of refinancing, interest rates, conditions in the financial markets, regulatory environment and other factors. To avoid the 100% prohibited transaction tax on the sale of dealer property by a REIT, we may dispose of assets that may be treated as held “primarily for sale to customers in the ordinary course of a trade or business” by contributing or selling the asset to a TRS prior to marketing the asset for sale.

The state of the real estate market and home prices will determine proceeds from any sale of real estate. We will opportunistically and on an asset-by-asset basis determine whether to rent any REO we acquire, whether upon foreclosure or otherwise. We may determine to sell such assets if they do not meet our investment criteria. In addition, while we seek to track real estate price trends and estimate the effects of those trends on the valuations of our portfolios of residential mortgage loans, future real estate values are subject to influences beyond our control.

Conversion to Rental Property. From time to time we will retain an REO property as a rental property and may acquire rental properties through direct purchases at attractive prices. The key variables that will affect our residential rental revenues

over the long-term will be the extent to which we acquire properties, which, in turn, will depend on the amount of our capital invested, average occupancy and rental rates in our owned rental properties. We expect the timeline to convert multi-family and single-family loans into rental properties will vary significantly by loan, which could result in variations in our revenue and our operating performance from period to period. There are a variety of factors that may inhibit our ability, through the Servicer, to foreclose upon a residential mortgage loan and get access to the real property within the time frames we model as part of our valuation process. These factors include, without limitation: state foreclosure timelines and the associated deferrals (including from litigation); unauthorized occupants of the property; U.S. federal, state or local legislative action or initiatives designed to provide homeowners with assistance in avoiding residential mortgage loan foreclosures that may delay the foreclosure process; U.S. federal government programs that require specific procedures to be followed to explore the non-foreclosure outcome of a residential mortgage loan prior to the commencement of a foreclosure proceeding; and declines in real estate values and high levels of unemployment and underemployment that increase the number of foreclosures and place additional pressure on the already overburdened judicial and administrative systems. We do not expect to retain a material number of single family residential properties for use as rentals. We do, however, intend to focus on retaining multi-unit residences derived from foreclosures or acquired through outright purchases as rentals.

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 under consideration for purchase. 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, both held-for-sale and as rentals, and includes any charges for impairments to the carrying value of these assets, which may be significant. Those expenses may increase due to extended eviction timelines caused by the pandemic. Interest expense, which is subtracted from our Interest income to arrive at Net interest income, consists of the costs to borrow money.

Changes in Home Prices. As discussed above, generally, rising home prices are expected to positively affect our results, particularly as this should result in greater levels of re-performance of mortgage loans, faster refinancing of those mortgage loans, more re-capture of principal on greater than 100% LTV (loan-to-value) mortgage loans and increased recovery of the principal of the mortgage loans upon sale of any REO. Conversely, declining real estate prices are expected to negatively affect our results, particularly if the home prices should decline below our purchase price for the loans and especially if borrowers determine that it is better to strategically default as their equity in their homes decline. While home prices have risen to, or in some cases beyond, pre-Great Recession levels in many parts of the United States, there are still significant regions where values have not materially increased. We typically concentrate our investments in specific urban geographic locations in which we expect stable or better property markets. However, when we analyze loan and property acquisitions we do not take HPA into account except for rural properties for which we model negative HPA related to our expectation of worse than expected property condition. The COVID-19 outbreak has not had as material of an impact on HPA on our markets as we initially expected. A significant decline in HPA will have an adverse impact on our operating results.

Changes in Market Interest Rates. With respect to our business operations, increases in existing interest rates, in general, may over time cause: (1) the value of our mortgage loan and MBS portfolio to decline; (2) coupons on our ARM and hybrid ARM mortgage loans and MBS to reset, although on a delayed basis, to higher interest rates; (3) prepayments on our mortgage loans and MBS portfolio to slow, thereby slowing the amortization of our purchase premiums and the accretion of our purchase discounts; (4) the interest expense associated with our borrowings to increase; and (5) to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to increase. Conversely, decreases in interest rates, in general, may over time cause: (a) prepayments on our mortgage loan and MBS portfolio to increase, thereby accelerating the accretion of our purchase discounts; (b) the value of our mortgage loan and MBS portfolio to increase; (c) coupons on our ARM and hybrid ARM mortgage loans and MBS to reset, although on a delayed basis, to lower interest rates; (d) the interest expense associated with our borrowings to decrease; and (e) to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to decrease. We currently expect the pace of loan prepayments to slow due to the COVID-19 outbreak.

Market Conditions. Due to the dramatic repricing of real estate assets that occurred during the 2008 financial crisis and the continuing uncertainty regarding the direction and strength of the real estate markets including as a result of the pandemic, we believe a void in the debt and equity capital available for investing in real estate exists as many financial institutions, insurance companies, finance companies and fund managers have determined to reduce or discontinue investment in debt or equity related to real estate. We believe the dislocations in the residential real estate market have resulted or will result in an “over-correction” in the repricing of real estate assets, creating a potential opportunity for us to capitalize on these market dislocations and capital void to the extent we are able to obtain financing for additional purchases.

We believe that in spite of the continuing uncertain market environment for mortgage-related assets, including as a result of the pandemic outbreak, current market conditions offer potentially attractive investment opportunities for us, even in the face of a riskier and more volatile market environment. We expect that market conditions will continue to impact our operating results and will cause us to adjust our investment and financing strategies over time as new opportunities emerge and risk profiles of our business change.

COVID-19 Pandemic. The pandemic has also impacted, and is likely to continue to impact, directly or indirectly, many of the other factors discussed above, as well as other aspects of our business. New developments continue to emerge and it is not possible for us to predict with certainty which factors will impact our business. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. In particular, it is difficult to fully assess the impact of the pandemic at this time due to, among other things, uncertainty regarding the severity and duration of the outbreak domestically and internationally and the effectiveness of federal, state and local government efforts to contain the spread of COVID-19, the effects of those efforts on our business, the indirect impact on the U.S. economy and economic activity and the impact on the mortgage markets and capital markets.

Critical Accounting Policies and Estimates

Mortgage Loans

Purchased Credit Deteriorated Loans ("PCD Loans") — As of their acquisition date, the loans we acquired have generally suffered some credit deterioration subsequent to origination. As a result, our recognition of interest income for PCD loans is based upon our having a reasonable expectation of the amount and timing of the cash flows expected to be collected. When the timing and amount of cash flows expected to be collected are reasonably estimable, we use expected cash flows to apply the effective interest method of income recognition. We adopted ASU 2016-13, Financial Instruments - Credit Losses, otherwise known as CECL using the prospective transition approach for PCD assets on January 1, 2020. At the time, $10.2 million of loan discount was reclassified to the allowance for credit losses with no net impact on the amortized cost basis of the portfolio.

Acquired loans may be aggregated and accounted for as a pool of loans if the loans have common risk characteristics. A pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. We may adjust our loan pools as the underlying risk factors change over time. We have re-aggregated our mortgage loan portfolio into loan pools based on similar risk factors. Excluded from the aggregate pools are loans that pay in full subsequent to the acquisition closing date but prior to pooling. Any gain or loss on these loans is recognized as interest income in the period the loan pays in full.

Our accounting for PCD loans gives rise to an accretable yield and an allowance for credit losses. Upon the acquisition of PCD loans we record the acquisition as three separate elements for 1) the amount of purchase discount which we expect to recover through eventual repayment by the borrower, 2) an allowance for future expected credit loss and 3) the UPB of the loan. The purchase price discount which we expect at the time of acquisition to collect over the life of the loans is the accretable yield. Cash flows expected at acquisition include all cash flows directly related to the acquired loan, including those expected from the underlying collateral. We recognize the accretable yield as interest income on a prospective level yield basis over the life of the pool. Our expectation of the amount of undiscounted cash flows to be collected is evaluated at the end of each calendar quarter. The net present value of changes in expected cash flows, whether caused by timing or loan performance, are reported in the period in which they arise and are reflected as an increase or decrease in the provision for losses even if no provision expense was previously recorded due to the establishment of loss reserves upon loan acquisitions. Management assesses the credit quality of the portfolio and the adequacy of loan loss reserves on a quarterly basis, or more frequently as necessary. Significant judgment is required in this analysis. Depending on the expected recovery of our investment, we consider the estimated net recoverable value of the loan pools as well as other factors, such as the fair value of the underlying collateral. Because these determinations are based upon projections of future economic events, which are inherently subjective, the amounts ultimately realized may differ materially from the carrying value as of the reporting date.

Our mortgage loans are secured by real estate. We monitor the credit quality of the mortgage loans in our portfolio on an ongoing basis, principally by considering loan payment activity or delinquency status. In addition, we assess the expected cash flows from the mortgage loans, the fair value of the underlying collateral and other factors, and evaluate whether and when it becomes probable that all amounts contractually due will not be collected.

Borrower payments on our mortgage loans are classified as principal, interest, payments of fees, or escrow deposits. Amounts applied as interest on the borrower account are similarly classified as interest for accounting purposes and are

classified as operating cash flows in our consolidated Statement of Cash Flows. Amounts applied as principal on the borrower account including amounts contractually due from borrowers that exceed our basis in loans purchased at a discount, are similarly classified as principal for accounting purposes and are classified as investing cash flows in the consolidated Statement of Cash Flows as required under U.S. Generally Accepted Accounting Principles ("U.S. GAAP"). Amounts received as payments of fees are recorded in Other income and classified as operating cash flows in the consolidated Statement of Cash Flows. Escrow deposits are recorded on the Servicer’s balance sheet and do not impact our cash flow.

Non-PCD Loans — While we generally acquire loans that have experienced deterioration in credit quality, we also acquire loans that have not experienced a deterioration in credit quality and originate SBC loans.

We account for our non-PCD loans by estimating any allowance for credit losses for our non-PCD loans based on historical experience and the risk characteristics of the individual loans. Impaired loans are carried at the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s market price, or the fair value of the collateral if the loan is collateral dependent. For individual loans, a troubled debt restructuring is a formal restructuring of a loan where, for economic or legal reasons related to the borrower’s financial difficulties, a concession that would not otherwise be considered is granted to the borrower. The concession may be granted in various forms, including providing a below-market interest rate, a reduction in the loan balance or accrued interest, an extension of the maturity date, or a combination of these. An individual loan that has had a troubled debt restructuring is considered to be impaired and is subject to the relevant accounting for impaired loans.

If necessary, an allowance for loan losses is established through a provision for loan losses charged to expenses. The allowance is the difference between the expected future cash flows from the loan and the contractual balance due.

Real Estate

Real estate owned Property — We acquire real estate properties directly through purchases, when we foreclose on the borrower and take title to the underlying property, or the borrower surrenders the deed in lieu of foreclosure. Property is recorded at cost if purchased, or at the present value of future cash flows if obtained through foreclosure. Property that we expect to actively market for sale is classified as held-for-sale. Property held-for-sale is carried at the lower of its acquisition basis or net realizable value (fair market value less expected selling costs, and any additional costs necessary to prepare the property for sale). Fair market value is determined based on broker price opinions (“BPOs”), appraisals, or other market indicators of fair value including list price or contract price, if listed or under contract for sale at the balance sheet date. Net unrealized losses due to changes in market value are recognized through a valuation allowance by charges to income through real estate operating expenses. No depreciation or amortization expense is recognized on properties held-for-sale. Holding costs are generally incurred by the Servicer and are subtracted from the Servicer’s remittance of sale proceeds upon ultimate disposition of properties held-for-sale.

Rental property is property not held-for-sale. Rental properties are intended to be held as long-term investments but may eventually be reclassified as held-for-sale. Property that arose through conversions of mortgage loans in our portfolio such as when a mortgage loan is foreclosed upon and we take title to the property or the borrower surrenders the deed in lieu of foreclosure is generally held for investment as rental property if the cash flows from use as a rental exceed the present value of expected cash flows from a sale. We also acquire rental properties through direct purchases of properties for our rental portfolio. Depreciation is provided for using the straight-line method over the estimated useful lives of the assets of 27.5 years. We perform an impairment analysis for rental property using estimated cash flows if events or changes in circumstances indicate that the carrying value may be impaired, such as prolonged vacancy, identification of materially adverse legal or environmental factors, changes in expected ownership period or a decline in market value to an amount less than cost. This analysis is performed at the property level. The cash flows are estimated based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for rental properties, competition for customers, changes in market rental rates, costs to operate each property and expected ownership periods.

Renovations are performed by the Servicer, and those costs are then reimbursed to the Servicer. Any renovations on properties which we elect to hold as rental properties are capitalized as part of the property’s basis and depreciated over the remaining estimated useful life of the property. We may perform property renovations to maximize the value of a property for either its rental strategy or for resale.

Investments in Securities at Fair Value

Our Investments in Securities at Fair Value consist of investments in senior and subordinated notes issued by joint ventures, which we form with third party institutional accredited investors. We recognize income on the debt securities using

the effective interest method. Additionally, the notes are classified as available-for-sale and are carried at fair value with changes in fair value reflected in our consolidated statements of comprehensive income. We mark our investments to fair value using prices received from our financing counterparties and believe any unrealized losses on our debt securities to be temporary. Any other-than-temporary losses, which represent the excess of the amortized cost basis over the present value of expected future cash flows, are recognized in the period identified in our consolidated statements of income. Risks inherent in our debt securities portfolio, affecting both the valuation of the securities as well as the portfolio’s interest income include the risk of default, delays and inconsistency in the frequency and amount of payments, risks affecting borrowers such as man-made or natural disasters, or the pandemic, and damage to or delay in realizing the value of the underlying collateral. We monitor the credit quality of the mortgage loans underlying our debt securities on an ongoing basis, principally by considering loan payment activity or delinquency status. In addition, we assess the expected cash flows from the mortgage loans, the fair value of the underlying collateral and other factors, and evaluate whether and when it becomes probable that all amounts contractually due will not be collected.

Investments in Beneficial Interests

Our Investments in beneficial interests consist of investments in the trust certificates issued by joint ventures which we form with third party institutional accredited investors. The trust certificates represent the residual interest of any special purpose entity formed to facilitate certain investments. We account for our Investments in beneficial interests under CECL, as discussed under Mortgage Loans. The methodology is similar to that described in “Mortgage Loans” except that we only recognize the ratable share of gain, loss income or expense.

Debt

Secured Borrowings — Through securitization trusts which are VIEs, we issue callable debt secured by our mortgage loans in the ordinary course of business. The secured borrowings facilitated by the trusts are structured as debt financings, and the mortgage loans used as collateral remain on our consolidated balance sheet as we are the primary beneficiary of the securitization trusts. These secured borrowing VIEs are structured as pass through entities that receive principal and interest on the underlying mortgages and distribute those payments to the holders of the notes. Our exposure to the obligations of the VIEs is generally limited to our investments in the entities; the creditors do not have recourse to the primary beneficiary. Coupon interest expense on the debt is recognized using the accrual method of accounting. Deferred issuance costs, including original issue discount and debt issuance costs, are carried on our consolidated balance sheets as a deduction from Secured borrowings, and are amortized to interest expense on an effective yield basis based on the underlying cash flow of the mortgage loans serving as collateral. We assume the debt will be called at the specified call date for purposes of amortizing discount and issuance costs because we believe it will have the intent and ability to call the debt on the call date. Changes in the actual or projected underlying cash flows are reflected in the timing and amount of deferred issuance cost amortization.

Repurchase Facilities — We enter into repurchase financing facilities under which we nominally sell assets to a counterparty and simultaneously enter into an agreement to repurchase the sold assets at a price equal to the sold amount plus an interest factor. Despite being legally structured as sales and subsequent repurchases, repurchase transactions are generally accounted for as debt secured by the underlying assets. At the maturity of a repurchase financing, unless the repurchase financing is renewed, we are required to repay the borrowing including any accrued interest and concurrently receive back our pledged collateral from the lender. The repurchase financings are treated as collateralized financing transactions; pledged assets are recorded as assets in our consolidated balance sheets, and debt is recognized at the contractual amount. Interest is recorded at the contractual amount on an accrual basis. Costs associated with the set-up of a repurchasing contract are recorded as deferred expense at inception and amortized over the contractual life of the agreement. Any draw fees associated with individual transactions and any facility fees assessed on the amounts outstanding are recorded as deferred expense when incurred and amortized over the contractual life of the related borrowing.

Fair Value

Fair Value of Financial Instruments — Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy has been established that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

•Level 1 — Quoted prices in active markets for identical assets or liabilities.

•Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

We value our investments in debt securities using estimates provided by our financing counterparties. We also rely on our Manager's proprietary pricing model to estimate the underlying cash flows expected to be collected on these investments as a comparison to the estimates received from financing counterparties. We also rely on our Manager's proprietary pricing model to estimate the underlying cash flows expected to be collected on our investments in beneficial interests.

Our investment in the Manager is valued by applying an earnings multiple to base fee revenue.

Our investments in AS Ajax E LLC and AS Ajax E II LLC are valued using estimates provided by financing counterparties and other publicly available information.

The fair value of our investment in GAFS, including warrants, is determined by applying an earnings multiple to expected earnings.

The fair value of our investment in Gaea is estimated using a projected net operating income for its property portfolio.

The fair value of our investment in the loan pool LLCs is determined by using estimates of underlying assets and liabilities taken from our Manager's pricing model.

The fair value of secured borrowings is estimated using estimates provided by our financing counterparties, which are compared for reasonableness to our Manager’s proprietary pricing model which estimates expected cash flows of the underlying mortgage loans collateralizing the debt. We are able to call the bonds issued in our secured borrowings at par value plus accrued interest pursuant to the terms of the offering document. We carry our secured borrowings net of deferred issuance cost. Accordingly, the difference between fair value and carrying value is largely driven by the deferred issuance costs.

Our put option liability is adjusted to approximate market value through earnings. The put obligation is a fixed amount that may be settled in cash or shares of our common stock at our option. Fair value is determined using the discounted cash flow method using a rate to accrete the initial basis of $9.5 million to the future put obligation of $50.7 million over the 39-month term of the put option liability.

Our borrowings under repurchase agreements are short-term in nature, and our Manager believes it can renew the current borrowing arrangements on similar terms in the future. Accordingly, the carrying value of these borrowings approximates fair value.

Our convertible senior notes are traded on the NYSE; the debt’s fair value is determined from the NYSE closing price on the balance sheet date. The Convertible debt may be redeemable at par plus accrued interest beginning on April 30, 2022 subject to satisfying the conversion price trigger. We carry the Convertible debt net of deferred issuance cost. Accordingly, the difference between fair value and carrying value is partially driven by the deferred issuance costs.

The carrying values of our Cash and cash equivalents, Cash held in trust, Receivable from Servicer, Prepaid expenses and other assets, Management fee payable and Accrued expenses and other liabilities are equal to or approximate fair value.

Recent Accounting Pronouncements

Refer to the notes to our interim financial statements for a description of relevant recent accounting pronouncements.

Results of Operations

For the three months ended June 30, 2021, we had net income attributable to common stockholders of $10.4 million, or $0.45 per share for basic and $0.42 per share for diluted common shares. For the three months ended June 30, 2020, we had net income attributable to common stockholders of $6.2 million, or $0.27 per share for basic and diluted common shares. Key items for the three months ended June 30, 2021 include:

•Interest income of $23.0 million; net interest income of $14.2 million

•Net income attributable to common stockholders of $10.4 million

•Basic earnings per common share of $0.45

•Book value per common share of $15.86 at June 30, 2021

•Taxable income of $0.34 per common share

•Formed four joint ventures that acquired $1.4 billion in UPB of mortgage loans with collateral values of $2.4 billion and retained $232.9 million of varying classes of related securities issued by the joint ventures to end the quarter with $558.1 million of investments in debt securities and beneficial interests

•Purchased $4.8 million RPLs, with UPB of $5.2 million at 60.7% of property value, to end the quarter with $955.6 million in net mortgage loans

•Collected total cash of $78.9 million, from loan payments, sales of REO and collections from investments in debt securities and beneficial interests

•Held $88.1 million of cash and cash equivalents at June 30, 2021; average daily cash balance for the quarter was $113.0 million

•At June 30, 2021, approximately 74.2% of portfolio based on UPB made at least 12 out of the last 12 payments

Our consolidated net income attributable to common stockholders increased $4.1 million for the quarter ended June 30, 2021 compared to the quarter ended June 30, 2020. The increase in our earnings compared to the quarter ended June 30, 2020 was primarily driven by a $4.2 million decrease in our interest expense. The increase in net interest income was primarily driven by the same decrease of $4.2 million in our interest expense of $8.8 million versus interest expense of $13.1 million in the second quarter of 2020. Our book value increased to $15.86 per common share from $15.59 at December 31, 2020.

We recorded $0.1 million in impairments on our REO held-for-sale portfolio in real estate operating expense for the quarter ended June 30, 2021 compared to $0.1 million for the quarter ended June 30, 2020. Impairments for the quarter were driven primarily by additional costs of holding the properties. We continue to liquidate our REO properties held-for-sale at a faster rate than we acquire properties, with 11 properties sold in the second quarter of 2021 while five were added to REO held-for-sale through foreclosures. Limited housing inventory has accelerated our REO liquidation timelines while we are continuing to experience some COVID-19 related delays in foreclosure proceedings. During the quarter ended June 30, 2020 we sold 14 REO properties while adding two through foreclosures.

Table 1: Results of Operations


	Three months ended June 30,				Six months ended June 30,
($ in thousands)	2021		2020		2021		2020
INCOME
Interest income	$	23,048	$	23,171	$	47,083	$	50,059
Interest expense	(8,830)		(13,058)		(19,134)		(26,128)
Net interest income	14,218		10,113		27,949		23,931
Net increase in the net present value of expected cash flows(1)	4,733		4,862		10,249		151
Net interest income after the impact of changes in the net present value of expected cash flows	18,951		14,975		38,198		24,082
Income/(loss) from investments in affiliates	357		672		520		(440)
Other income	486		680		842		722
Total revenue, net	19,794		16,327		39,560		24,364
EXPENSE
Related party expense – loan servicing fees	1,699		1,936		3,532		3,950
Related party expense – management fee	2,270		2,143		4,543		3,942
Professional fees	763		732		1,403		1,537
Real estate operating expenses	88		188		273		1,100
Fair value adjustment on put option liability	2,201		1,250		4,145		1,250
Other expense	1,375		1,140		2,679		2,062
Total expense	8,396		7,389		16,575		13,841
Loss on debt extinguishment	161		—		1,072		408
Income before provision for income taxes	11,237		8,938		21,913		10,115
Provision for income taxes (benefit)	67		120		101		(199)
Consolidated net income	11,170		8,818		21,812		10,314
Less: consolidated net (loss)/income attributable to the non-controlling interest	(1,158)		735		531		1,831
Consolidated net income attributable to Company	12,328		8,083		21,281		8,483
Less: dividends on preferred stock	1,950		1,841		3,899		1,841
Consolidated net income attributable to common stockholders	$	10,378	$	6,242	$	17,382	$	6,642

Interest Income

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. For the three months ended June 30, 2021 and 2020 net interest income after recording the impact of the net increase in the net present value of expected cash flows increased to $19.0 million from $15.0 million, respectively, primarily as a result of a $4.2 million decrease in interest expense as we have secured lower funding costs for our loan and debt security portfolios. Additionally, for the three months ended June 30, 2021 and 2020, we recorded income of $4.7 million and $4.9 million as a result of a net increase in the net present value of expected cash flows. Of the $4.7 million for the three months ended June 30, 2021, $2.7 million relates to our mortgage loan portfolio and $2.0 million to our investments in beneficial interests. Comparatively during the three months ended June 30, 2020, of the $4.9 million, $1.8 million relates to our mortgage loan portfolio and $3.1 million to our investments in beneficial interests. For the six months ended June 30, 2021 and 2020 net interest income after recording the impact of the net increase in the net present value of expected cash flows increased to $38.2 million from $24.1 million, respectively, primarily as a result of a net $10.2 million impact of the net increase in the net present value of expected cash flows for the six months ended June 30, 2021 compared to a $0.2 million impact of the net increase in the net present value of expected cash flows for the six months ended June 30, 2020.

Of the $10.2 million for the six months ended June 30, 2021, $8.2 million relates to our mortgage loan portfolio and $2.0 million to our investments in beneficial interests. Comparatively during the six months ended June 30, 2020, the entire amount of $0.2 million relates to our investments in beneficial interests. To date, the COVID-19 impact on cash flow extensions have not been as material as we initially expected.

Our gross interest income decreased by $0.2 million to $23.0 million in the quarter ended June 30, 2021 from $23.2 million in the quarter ended June 30, 2020 primarily due to a decrease in the average balance of our mortgage loan portfolio as paydowns and payoffs exceeded loan purchases. This was offset by a decrease in interest expense of $4.2 million to $8.8 million in the quarter ended June 30, 2021 from $13.1 million in the quarter ended June 30, 2020 primarily due to decreases in the average interest rates applicable to our borrowings. We expect our cost of funds to continue to remain low in the current interest rate and credit environment. Similarly, our gross interest income decreased by $3.0 million to $47.1 million in the six months ended June 30, 2021 from $50.1 million in the six months ended June 30, 2020 primarily due to a decrease in the average balance of our mortgage loan portfolio as paydowns and payoffs exceeded loan purchases. This was offset by a decrease in interest expense of $7.0 million to $19.1 million in the six months ended June 30, 2021 from $26.1 million in the six months ended June 30, 2020 similarly due to decreases in the average interest rates applicable to our borrowings.

During the second quarter of 2021, we collected $78.9 million in cash payments and proceeds on our mortgage loans, securities and REO held-for-sale compared to $57.8 million for the second quarter of 2020. The increase in cash collections in 2021 is due to a higher volume of payoffs as borrowers continued to refinance or sell the underlying property.

The interest income detail for the three and six months ended June 30, 2021 and 2020 are included in the table below ($ in thousands):

Table 2: Interest income detail


	Three months ended June 30,				Six months ended June 30,
	2021		2020(1,2)		2021		2020(1,2)
Accretable yield recognized on RPL, NPL and SBC loans	$	15,788	$	18,458	$	33,969	$	40,350
Interest income on beneficial interests	4,397		2,172		7,856		4,676
Interest income on debt securities	2,597		2,596		5,074		4,929
Other interest income/(loss)	153		(130)		5		(92)
Bank interest income	113		75		179		196
Interest income	$	23,048	$	23,171	$	47,083	$	50,059
Net increase in the present value of expected cash flows(3)	4,733		4,862		10,249		151
Interest income after the impact of changes in the net present value of expected cash flows	$	27,781	$	28,033	$	57,332	$	50,210

(1)Includes reclass of loan and beneficial interest credit losses from net increase in the present value of cash flows to accretable yield recognized on RPL, NPL and SBC loans and interest income on beneficial interests, respectively.

(2)Previously presented combination of interest income on securities and interest income on beneficial interests has been bifurcated to show each separately.

(3)Increases and decreases in the net present value of expected cash flows are recorded in the period in which the change occurs as a reduction or increase to the allowance for losses, respectively.

The average balance of our mortgage loan portfolio, debt securities, beneficial interests and debt outstanding for the three months ended June 30, 2021 and 2020 are included in the table below ($ in thousands). The decrease in the average mortgage loan portfolio is primarily driven by the refinancing of our loans in Ajax Mortgage Trust 2017-D (“2017-D”) in Ajax Mortgage Trust 2021-C ("2021-C"). 2017-D was consolidated on our Balance sheet and all items of income, expense, gain or loss were included in our Results of Operations. 2021-C is not consolidated in our financial statements. As a result, we reflected 100% of the loans offset by 50% of the senior bond outstanding in our consolidated financial statements. Accordingly, the loans subject to the refinancing, net of the senior bond that was retired, are now reflected in the Average carrying value of debt securities and the Average carrying value of beneficial interests.

Table 3: Average Balances


	Three months ended June 30,
	2021		2020(1)
Average mortgage loan portfolio	$	967,671	$	1,087,800
Average carrying value of debt securities	$	296,034	$	267,947
Average carrying value of beneficial interests	$	109,578	$	65,412
Total average asset level debt	$	992,122	$	1,041,673

(1)Previously presented combination of average carrying value of debt securities and beneficial interests has been bifurcated to show to average carrying value of debt securities and average carrying value of beneficial interests separately.

Other Income

Other income decreased for the three months ended June 30, 2021 over the comparable period in 2020 due to lower gain on sale for property held-for-sale and lower income from the federal government's Home Affordable Modification Program ("HAMP") as more loans reached the five-year threshold and no additional fees are earned. Other income increased for the six months ended June 30, 2021 over the comparable period in 2020 primarily a result of a loss on the sale of mortgage loans during the first quarter of 2020, combined with both an increase in late fee income and a gain on the refinancing of our 2017-D securitization trust in the second quarter of 2021. A breakdown of Other income is provided in the table below ($ in thousands):

Table 4: Other Income


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Late fee income	$	236	$	163	$	426	$	348
Other income	114		—		114		—
Net gain on sale of property held-for-sale	92		394		197		807
HAMP fees	31		114		79		252
Rental income	13		9		26		20
Loss on sale of mortgage loans	—		—		—		(705)
Total other income	$	486	$	680	$	842	$	722

Expenses

Total expenses increased for the three and six months ended June 30, 2021 over the comparable period in 2020 as a result of our put option amortization expense, and an increase in the Other expense category by an increase from a stock grant to certain members of our Board during the current quarter as well as an increase in insurance expense. These were partially offset by lower loan servicing fees, loan transaction expense driven by cost recoveries from joint venture partners and real estate operating expense due to lower REO impairments. A breakdown of expenses is provided in the table below ($ in thousands):

Table 5: Expenses


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Related party expense – management fee	$	2,270	$	2,143	$	4,543	$	3,942
Fair value adjustment on put option liability	2,201		1,250		4,145		1,250
Related party expense – loan servicing fees	1,699		1,936		3,532		3,950
Other expense	1,375		1,140		2,679		2,062
Professional fees	763		732		1,403		1,537
Real estate operating expenses	88		188		273		1,100
Total expenses	$	8,396	$	7,389	$	16,575	$	13,841

Other expense increased for the three and six months ended June 30, 2021 over the comparable period in 2020 primarily due to higher directors' fees and grants associated with an additional grant to certain members of our Board completed during the current quarter and insurance expense, offset by lower borrowing related expense. A breakdown of other expense is provided in the table below ($ in thousands):

Table 6: Other Expense


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Directors' fees and grants	$	251	$	109	$	420	$	218
Insurance	229		184		458		368
Employee and service provider share grants	207		174		414		348
Taxes and regulatory expense	183		151		244		197
Borrowing related expenses	146		218		333		388
Other expense	116		94		217		158
Lien release non due diligence	94		58		103		91
Software licenses and amortization	90		64		175		134
Travel, meals, entertainment	67		(12)		98		126
Internal audit services	39		35		77		72
Loan transaction expense	(47)		65		140		(38)
Total other expense	$	1,375	$	1,140	$	2,679	$	2,062

Equity and Net Book Value per Share

Our net book value per common share was $15.86 and $15.59 at June 30, 2021 and December 31, 2020, respectively. The increase in book value was primarily driven by our buyout of our joint venture partner's interest in 2018-C, and the repurchase of $7.5 million of our convertible senior notes and a recovery in common equity that resulted from net fair value adjustments of $1.3 million taken on our portfolio of debt securities recorded to Other comprehensive income since December 31, 2020. While U.S. GAAP does not specifically define the parameters for calculating book value, we believe our calculation is representative of our book value on a per share basis, and our Manager believes book value per share is a valuable metric for evaluating our business. The net book value per share is calculated by dividing equity, after adjusting for the anticipated conversion of the senior convertible notes into shares of common stock, the subtraction of non-controlling interests and preferred shares classified in equity, and shares for Manager and director fees that were approved but still unissued as of the date indicated, unvested employee and service provider stock grants and the common shares from assumed conversion of our senior convertible notes. A breakdown of our book value per share is set forth in the table below ($ in thousands except per share amounts):

Table 7: Book Value per Common Share


	June 30, 2021		December 31, 2020
Outstanding shares	22,993,246		22,978,339
Adjustments for:
Unvested grants of restricted stock, and Manager and director shares earned but not issued as of the date indicated	4,025		4,280
Conversion of convertible senior notes into shares of common stock	7,315,929		7,834,299
Settlement of put option in shares(1)	—		—
Total adjusted shares outstanding	30,313,200		30,816,918

Equity at period end	$	497,492	$	514,491
Net increase in equity from expected conversion of convertible senior notes(1)	102,762		110,250
Adjustment for equity due to preferred shares	(115,144)		(115,144)
Net adjustment for equity due to non-controlling interests	(4,238)		(29,130)
Adjusted equity	$	480,872	$	480,467
Book value per share	$	15.86	$	15.59

(1)The settlement of the put option in shares is not included in the calculation as it has an anti-dilutive effect on our earnings per share calculation.

Mortgage Loan Portfolio

For the three and six months ended June 30, 2021, we purchased $4.8 million and $36.4 million RPLs with UPB of $5.2 million and $41.2 million, respectively, at 60.7% and 57.7% of property value, respectively. Comparatively, for the three months ended June 30, 2020 we purchased no RPLs, however, for the six months ended June 30, 2020 we purchased $1.2 million RPLs with UPB of $2.0 million, at 38.6% of property value. For the three months ended June 30, 2021 we purchased no NPLs, however, for the six months ended June 30, 2021 we purchased $0.4 million NPLs with UPB of $0.7 million at 50.1% of property value. Comparatively, for the three months ended June 30, 2020 we purchased no NPLs, however, for the six months ended June 30, 2020 we purchased $0.2 million NPLs with UPB of $0.2 million, at 62.9% of property value. For the three months ended June 30, 2021 we purchased no SBC loans, however, for the six months ended June 30, 2021 we purchased $3.6 million SBC loans with UPB of $3.6 million at 36.5% of property value. Comparatively, for the three and six months ended June 30, 2020, we purchased no SBC loans. We ended the period with $955.6 million of net mortgage loans with an aggregate UPB of $1.0 billion as of June 30, 2021 and $1.1 billion of net mortgage loans with an aggregate UPB of $1.2 billion as of June 30, 2020.

The following table shows loan portfolio acquisitions for the three and six months ended June 30, 2021, and 2020 ($ in thousands):

Table 8: Loan Portfolio Acquisitions


	Three months ended June 30,						Six months ended June 30,
	2021			2020			2021			2020
RPLs
Count	38			—			237			26
UPB	$	5,157		$	—		$	41,188		$	1,952
Purchase price	$	4,773		$	—		$	36,360		$	1,205
Purchase price % of UPB	92.6		%	—		%	88.3		%	61.7		%
NPLs
Count	—			—			3			1
UPB	$	—		$	—		$	665		$	227
Purchase price	$	—		$	—		$	447		$	185
Purchase price % of UPB	—		%	—		%	67.2		%	81.5		%
SBC loans
Count	—			—			1			—
UPB	$	—		$	—		$	3,611		$	—
Purchase price	$	—		$	—		$	3,603		$	—
Purchase price % of UPB	—		%	—		%	99.8		%	—		%

During the three and six months ended June 30, 2021, 947 and 1,109 mortgage loans, respectively, representing 16.6% and 20.3% of our ending UPB, respectively, were liquidated. Comparatively, during the three and six months ended June 30, 2020, 112 and 263 mortgage loans, respectively, representing 1.7% and 6.3%, respectively, of our ending UPB, were liquidated. Our loan portfolio activity for the three and six months ended June 30, 2021 and 2020 is presented below ($ in thousands):

Table 9: Loan Portfolio Activity


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Beginning carrying value	$	1,123,530	$	1,098,629	$	1,119,372	$	1,151,469
RPL, NPL and SBC portfolio acquisitions, net cost basis	4,773		—		40,410		1,391
Draws on SBC loans	7,259		—		7,344		—
Accretion recognized	15,914		18,695		34,435		40,440
Payments received on loans, net	(69,803)		(38,138)		(126,024)		(85,098)
Reclassifications to REO	(1,046)		(98)		(1,274)		(912)
Sale of mortgage loans	—		—		—		(26,111)
Refinancing of 2017-D	(128,770)		—		(128,770)		—
Increase (decrease) in net present value of expected cash flows on mortgage loans	2,740		1,799		8,240		(94)
Mortgage loans credit loss expense	(139)		(274)		(593)		(503)
Other	1,170		4		2,488		35
Ending carrying value	$	955,628	$	1,080,617	$	955,628	$	1,080,617

Table 10: Portfolio Composition

As of June 30, 2021 and December 31, 2020, our portfolios consisted of the following ($ in thousands):


June 30, 2021				December 31, 2020(1,2)
No. of Loans	5,168			No. of Loans	6,031
Total UPB(3)	$	1,020,819		Total UPB(3)	$	1,204,804
Interest-Bearing Balance	$	947,523		Interest-Bearing Balance	$	1,127,499
Deferred Balance(4)	$	73,296		Deferred Balance(4)	$	77,305
Market Value of Collateral(5)	$	1,773,620		Market Value of Collateral(5)	$	1,967,419
Original Purchase Price/Total UPB	81.6		%	Original Purchase Price/Total UPB	82.2		%
Original Purchase Price/Market Value of Collateral	50.6		%	Original Purchase Price/Market Value of Collateral	53.7		%
Weighted Average Coupon	4.39		%	Weighted Average Coupon	4.44		%
Weighted Average LTV(6)	68.6		%	Weighted Average LTV(6)	72.8		%
Weighted Average Remaining Term (months)	291			Weighted Average Remaining Term (months)	297
No. of first liens	5,106			No. of first liens	5,973
No. of second liens	62			No. of second liens	58
No. of Rental Properties	5			No. of Rental Properties	6
Capital Invested in Rental Properties	$	408		Capital Invested in Rental Properties	$	710
RPLs	93.9		%	RPLs	94.4		%
NPLs	3.9		%	NPLs	3.5		%
SBC loans	2.2		%	SBC loans	2.1		%
No. of REO properties held-for-sale	20			No. of REO properties held-for-sale	32
Market Value of Other REO(7)	$	5,218		Market Value of Other REO(7)	$	8,105
Carrying value of debt securities and beneficial interests in trusts	$	559,424		Carrying value of debt securities and beneficial interests in trusts	$	369,330
Loans with 12 for 12 payments as an approximate percentage of UPB (8)	74.2		%	Loans with 12 for 12 payments as an approximate percentage of UPB (8)	71.9		%
Loans with 24 for 24 payments as an approximate percentage of UPB (9)	66.8		%	Loans with 24 for 24 payments as an approximate percentage of UPB (9)	65.1		%

(1)Includes the impact of 1,003 mortgage loans with a purchase price of $177.3 million, UPB of $194.3 million and collateral value of $295.3 million acquired in the fourth quarter of 2017 through a 50% owned joint venture which we consolidate.

(2)Includes the impact of 256 mortgage loans with a purchase price of $47.4 million, UPB of $52.8 million and collateral value of $68.1 million acquired in the third quarter of 2018 through a 63% owned joint venture which we consolidated as of December 31, 2020.

(3)At June 30, 2021 and December 31, 2020, our loan portfolio consists of fixed rate (56.1% of UPB), ARM (8.5% of UPB) and Hybrid ARM (35.4% of UPB); and fixed rate (53.5% of UPB), ARM (8.9% of UPB) and Hybrid ARM (37.6% of UPB), respectively.

(4)Amounts that have been deferred in connection with a loan modification on which interest does not accrue. These amounts generally become payable at the time of maturity.

(5)As of date of acquisition.

(6)UPB as of June 30, 2021 and December 31, 2020, divided by market value of collateral and weighted by the UPB of the loan.

(7)Market value of REO is based on net realizable value. Fair market value is determined based on appraisals, BPOs, or other market indicators of fair value including list price or contract price.

(8)Loans that have made at least 12 of the last 12 payments, or for which the full dollar amount to cover at least 12 payments has been made in the last 12 months.

(9)Loans that have made at least 24 of the last 24 payments, or for which the full dollar amount to cover at least 24 payments has been made in the last 24 months.

Table 11: Portfolio Characteristics

The following tables present certain characteristics about our mortgage loans by year of origination as of June 30, 2021 and December 31, 2020, respectively ($ in thousands):

Portfolio at June 30, 2021


	Years of Origination
	After 2008			2006 – 2008			2005 and prior
Number of loans	603			2,907			1,658
Unpaid principal balance	$	144,992		$	645,918		$	229,909
Mortgage loan portfolio by year of origination	14.2		%	63.3		%	22.5		%
Loan Attributes:
Weighted average loan age (months)	96.7			172.7			212.6
Weighted average loan-to-value	65.0		%	72.8		%	59.0		%
Delinquency Performance:
Current	67.3		%	66.9		%	66.9		%
30 days delinquent	4.8		%	5.7		%	5.1		%
60 days delinquent	2.9		%	2.9		%	5.5		%
90+ days delinquent	20.1		%	18.8		%	17.8		%
Foreclosure	4.9		%	5.7		%	4.7		%

Portfolio at December 31, 2020


	Years of Origination
	After 2008			2006 – 2008			2005 and prior
Number of loans	639			3,471			1,921
Unpaid principal balance	$	156,250		$	780,956		$	267,598
Mortgage loan portfolio by year of origination	13.0		%	64.8		%	22.2		%
Loan Attributes:
Weighted average loan age (months)	91.0			166.7			205.8
Weighted average loan-to-value	69.4		%	77.0		%	62.6		%
Delinquency Performance:
Current	53.0		%	51.9		%	53.3		%
30 days delinquent	13.6		%	11.4		%	10.9		%
60 days delinquent	3.8		%	6.7		%	6.8		%
90+ days delinquent	25.3		%	25.1		%	25.4		%
Foreclosure	4.3		%	4.9		%	3.6		%

Table 12: Loans by State

The following table identifies our mortgage loans by state, number of loans, loan value, collateral value and percentages thereof at June 30, 2021 and December 31, 2020 ($ in thousands):


June 30, 2021										December 31, 2020
State	Count	UPB		% UPB		Collateral Value(1)		% of Collateral Value		State	Count	UPB		% UPB		Collateral Value(1)		% of Collateral Value
CA	769	$	259,824	25.5	%	$	501,908	28.3	%	CA	947	$	329,725	27.4	%	$	589,225	30.0	%
FL	588	99,271		9.7	%	170,258		9.6	%	FL	655	108,293		9.0	%	174,849		8.9	%
TX	339	35,830		3.5	%	73,737		4.2	%	TX	410	42,432		3.5	%	81,810		4.2	%
NY	328	103,611		10.2	%	178,383		10.1	%	GA	352	45,817		3.8	%	71,586		3.7	%
NJ	289	66,670		6.5	%	93,230		5.3	%	NY	329	103,475		8.6	%	177,524		9.0	%
GA	265	32,668		3.2	%	58,387		3.2	%	NJ	287	65,764		5.5	%	89,389		4.5	%
MD	211	51,276		5.0	%	71,369		4.0	%	MD	248	60,082		5.0	%	77,693		4.0	%
IL	207	36,993		3.5	%	49,961		2.8	%	NC	240	33,146		2.8	%	52,217		2.7	%
NC	204	29,192		2.9	%	54,564		3.1	%	IL	227	41,410		3.5	%	54,379		2.8	%
PA	174	20,171		2.0	%	30,496		1.7	%	VA	205	43,563		3.6	%	63,132		3.2	%
VA	169	37,058		3.6	%	57,758		3.3	%	PA	185	21,294		1.8	%	31,248		1.6	%
MA	145	29,311		2.9	%	52,403		3.0	%	MA	177	35,454		2.9	%	61,220		3.1	%


AZ	116	22,268		2.2	%	39,356		2.2	%	AZ	150	29,765		2.5	%	47,835		2.4	%
SC	112	12,176		1.2	%	18,974		1.1	%	SC	129	14,206		1.2	%	22,213		1.1	%
TN	101	10,469		1.0	%	19,449		1.1	%	TN	115	12,721		1.1	%	22,690		1.2	%
OH	96	11,270		1.1	%	15,876		0.9	%	OH	110	12,929		1.1	%	17,843		0.9	%
IN	92	8,278		0.8	%	14,215		0.8	%	WA	104	23,874		2.0	%	43,784		2.2	%
WA	87	19,998		2.0	%	39,848		2.2	%	IN	98	9,180		0.8	%	14,476		0.7	%
NV	75	13,863		1.4	%	25,707		1.4	%	NV	97	18,614		1.5	%	30,344		1.5	%
MI	73	8,750		0.9	%	14,485		0.8	%	MI	97	13,103		1.1	%	19,832		1.0	%
CT	70	12,252		1.2	%	17,595		1.0	%	CT	77	13,529		1.1	%	18,115		0.9	%
LA	65	6,523		0.7	%	10,196		0.6	%	LA	76	7,631		0.6	%	11,910		0.6	%
MO	62	7,044		0.7	%	10,593		0.6	%	MO	75	9,383		0.8	%	12,545		0.6	%
OR	61	18,539		1.8	%	39,641		2.2	%	OR	70	24,303		2.0	%	46,279		2.4	%
AL	41	3,405		0.3	%	4,644		0.3	%	CO	54	10,450		0.9	%	22,665		1.2	%
CO	39	7,748		0.8	%	18,198		1.0	%	MN	49	9,121		0.8	%	13,242		0.7	%
WI	38	4,873		0.5	%	7,101		0.4	%	UT	44	6,895		0.6	%	14,932		0.8	%
MN	35	6,371		0.6	%	10,256		0.6	%	AL	44	3,670		0.3	%	4,891		0.2	%
UT	35	5,271		0.5	%	13,362		0.8	%	WI	37	4,696		0.4	%	6,385		0.3	%
KY	29	3,474		0.3	%	5,317		0.3	%	KY	36	4,158		0.3	%	6,032		0.3	%
DE	26	4,849		0.5	%	6,283		0.4	%	DE	34	6,509		0.5	%	7,999		0.4	%
NM	25	3,941		0.4	%	6,204		0.3	%	NM	30	4,450		0.4	%	6,207		0.3	%
MS	24	1,858		0.2	%	2,829		0.2	%	OK	27	2,511		0.2	%	3,827		0.2	%
OK	23	2,132		0.2	%	3,458		0.2	%	MS	26	2,149		0.2	%	3,168		0.2	%
KS	19	1,390		0.1	%	3,024		0.2	%	AR	20	1,447		0.1	%	2,016		0.1	%
AR	17	1,102		0.1	%	1,687		0.1	%	KS	19	1,379		0.1	%	2,897		0.1	%
NH	14	2,693		0.3	%	4,177		0.2	%	NH	18	3,223		0.3	%	5,087		0.3	%
WV	14	1,080		0.1	%	1,620		0.1	%	IA	18	1,736		0.1	%	2,267		0.1	%
DC	13	4,384		0.4	%	6,820		0.4	%	DC	17	5,131		0.4	%	8,138		0.4	%
IA	13	1,096		0.1	%	1,618		0.1	%	WV	17	1,258		0.1	%	1,830		0.1	%
HI	10	3,618		0.4	%	6,172		0.3	%	HI	16	6,456		0.5	%	9,305		0.5	%
RI	10	2,256		0.2	%	3,292		0.2	%	RI	14	3,084		0.3	%	4,481		0.2	%
ID	10	1,184		0.1	%	2,619		0.1	%	ID	12	1,496		0.1	%	2,971		0.2	%
ME	9	1,310		0.1	%	1,905		0.1	%	ME	10	1,372		0.1	%	1,801		0.1	%
MT	6	1,014		0.1	%	1,678		0.1	%	MT	6	803		0.1	%	1,336		0.1	%
PR	5	593		0.1	%	552		—	%	PR	5	518		—	%	592		—	%
SD	4	531		0.1	%	917		0.1	%	SD	4	537		—	%	872		—	%
ND	3	391		—	%	479		—	%	NE	4	528		—	%	603		—	%
NE	3	247		—	%	308		—	%	WY	3	438		—	%	356		—	%
VT	2	400		—	%	316		—	%	ND	3	395		—	%	472		—	%
WY	2	247		—	%	238		—	%	VT	2	452		—	%	518		—	%
AK	1	56		—	%	157		—	%	AK	2	249		—	%	391		—	%
	5,168	$	1,020,819	100.0	%	$	1,773,620	100.0	%		6,031	$	1,204,804	100.0	%	$	1,967,419	100.0	%

(1)As of date of acquisition.

Table 13: Debt Securities and Beneficial Interest Acquisitions


	Three months ended June 30,						Six months ended June 30,
	2021			2020			2021			2020
Class A securities
UPB	$	170,849		$	—		$	170,849		$	49,876
Purchase price	$	169,962		$	—		$	169,962		$	49,602
Purchase price % of UPB	99.5		%	—		%	99.5		%	99.5		%
Class B securities
UPB	$	23,661		$	—		$	23,661		$	4,656
Purchase price	$	23,508		$	—		$	23,508		$	4,623
Purchase price % of UPB	99.4		%	—		%	99.4		%	99.3		%
Beneficial interests
Purchase price	$	39,467		$	—		$	39,467		$	7,082

Liquidity and Capital Resources

Source and Uses of Cash

Our primary sources of cash have consisted of 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). We expect that these sources of funds will be sufficient to meet our short-term and long-term liquidity needs. As the local and global economies have weakened as a result of the COVID-19 pandemic, ensuring adequate liquidity is critical. We believe we have access to adequate resources to meet the needs of our existing operations, mandatory capital expenditures, dividend payments, and working capital, to the extent not funded by cash provided by operating activities. However, we expect the COVID-19 pandemic to adversely impact our future operating cash flows due to the inability of some of our borrowers to make scheduled payments on time or at all, and the potential for HPA decline. From time to time, we may invest with third parties and acquire interests in loans and other real estate assets through investments in joint ventures using special purpose entities that can result in investments at fair value and investments in beneficial interests, which are reflected on our consolidated balance sheet.

As of June 30, 2021 and December 31, 2020, substantially all of our invested capital was in RPLs, NPLs, SBC loans, property held-for-sale, debt securities, beneficial interests and rental properties. We also held approximately $88.1 million of cash and cash equivalents, a decrease of $19.0 million from our balance of $107.1 million at December 31, 2020. Our average daily cash balance during the quarter was $113.0 million, a decrease of $15.7 million from our average daily cash balance of $128.7 million during the three months ended December 31, 2020.

Our collections of principal and interest payments on mortgages and securities, payoffs and proceeds and on the sale of our property held-for-sale were $78.9 million and $149.1 million, respectively, for the three and six months ended June 30, 2021 and $57.8 million and $120.2 million, respectively, for the three and six months ended June 30, 2020.

Our operating cash outflows, including the effect of restricted cash, for the six months ended June 30, 2021 and 2020 were $22.9 million and $10.2 million, respectively. Our primary operating cash inflow is cash interest payments on our mortgage loan pools of $23.8 million and $24.2 million for the six months ended June 30, 2021 and 2020, respectively. Non-cash interest income accretion was $10.6 million and $16.2 million for the six months ended June 30, 2021 and 2020, respectively. Interest income on beneficial interests was $8.2 million and $5.1 million during the six months ended June 30, 2021 and 2020, respectively. Interest income on debt securities was $5.1 million and $2.3 million during the six months ended June 30, 2021 and 2020, respectively.

Though the ownership of mortgage loans and other real estate assets is our business, U.S. GAAP requires that operating cash flows do not include the portion of principal payments that are allocable to the discount we recognize on our mortgage loans including proceeds from loans that pay in full or are liquidated in a short sale or third party sale at foreclosure or the proceeds on the sales of our property held-for-sale. These activities are all considered to be investing activities under U.S. GAAP, and the cash flows from these activities are included in the investing section of our consolidated statements of cash

flows. We expect that the impact of the COVID-19 outbreak will put pressure on our cash flow from operations as we enter into loan modifications on certain of our loans permitting interest payments to be deferred.

For the six months ended June 30, 2021, our investing cash inflows of $10.9 million were driven by proceeds from the refinancing of our 2017-D mortgage loan trust of $126.0 million, principal payments on and payoffs of our mortgage loan portfolio of $102.2 million, principal payments on and payoffs of our debt securities and beneficial interests of $35.5 million and sale of our securities of $20.6 million, partially offset by the acquisitions of our debt securities and beneficial interests of $231.6 million and acquisitions of our mortgage loans of $40.4 million. For the six months ended June 30, 2020 our investing cash inflow of $57.0 million was primarily driven by principal payments on and payoffs of our mortgage loan portfolio of $60.8 million, principal payments on and payoffs on debt securities and beneficial interests held as investments of $25.5 million and the sale of 26 mortgage loans to Gaea, an affiliated entity, in the amount of $25.4 million, partially offset by the acquisitions of our debt securities and beneficial interests of $61.3 million.

Our financing cash flows are driven primarily by funding used to acquire mortgage loan pools. We fund our mortgage loan pool acquisitions primarily through secured borrowings, repurchase agreements and the proceeds from our convertible debt and equity offerings. For the six months ended June 30, 2021, we had net financing cash outflows of $7.0 million primarily driven by pay downs of existing debt obligations of $312.5 million on secured borrowings, and repayments of $270.4 million on repurchase transaction. We purchased the remaining 37% ownership of the Class B notes and trust certificates of 2018-C for a total of $17.2 million, and repurchased our senior convertible notes of $7.5 million, partially offset by additional borrowing through secured borrowings of $391.0 million and repurchase transactions of $243.6 million. For the six months ended June 30, 2020, we had net cash inflows from financing activities of $52.5 million primarily driven from our issuance of preferred stock and warrants, net of any offering costs, for $125.0 million in a series of private placements to institutional accredited investors as well as from additional borrowing through repurchase transactions of $145.3 million, partially offset by repayments of $159.3 million on repurchase transactions, pay downs of existing debt obligations of $44.5 million on secured borrowings and repurchased our senior convertible notes of $8.2 million. For the six months ended June 30, 2021 and 2020 we paid $12.4 million and $5.9 million, respectively, in combined dividends and distributions.

Financing Activities — Equity offerings

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 will depend 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, 2021 we held 126,609 shares of treasury stock consisting of 78,145 shares received through distributions of our shares previously held by our Manager and 48,464 shares acquired through open market purchases in the fourth quarter of 2020 under our approved stock repurchase plan. As of June 30, 2020 we held 37,278 shares of treasury stock received through distributions of our shares previously held by our Manager.

During 2020, we issued an aggregate of $130.0 million of preferred stock and warrants to institutional accredited investors in a series of private placements. We issued 2,307,400 shares of 7.25% Series A Fixed-to-Floating Rate Preferred Stock and 2,892,600 shares of 5.00% Series B Fixed-to-Floating Rate Preferred Stock, each at a purchase price per share of $25.00, and two series of five-year warrants to purchase an aggregate of 6,500,000 shares of our common stock at an exercise price of $10.00 per share. Each series of warrants includes a put option that allows the holder to sell the warrants to us at a specified put price on or after July 6, 2023. Under U.S. GAAP, we are required to allocate the proceeds between the Preferred stock and warrants. The allocation of the proceeds, net of all offering costs, resulted in the Preferred series A shares receiving an allocation of $51.1 million, the Preferred series B shares receiving an allocation of $64.0 million and the warrants an allocation of $9.5 million. We mark the obligation for the warrants and future put liability to market though earnings. We expect to use the net proceeds from the private placement to acquire mortgage loans and mortgage-related assets consistent with our investment strategy.

During the six months ended June 30, 2021 and June 30, 2020, we did not sell any shares of common stock under our At the Market program which we established in October 2016, to sell, through our agents, shares of common stock with an aggregate offering price of up to $50.0 million. In accordance with the terms of the agreements, we may offer and sell shares of our common stock at any time and from time to time through the sales agents. Sales of the shares, if any, will be made by means of ordinary brokers’ transactions on the NYSE or otherwise at market prices prevailing at the time of the sale.

Financing Activities — Secured Borrowings and Convertible Senior Notes

From inception (January 30, 2014) to June 30, 2021, we have completed 18 secured borrowings, not including borrowings we completed for our non-consolidated joint ventures (See Table 18: Investments in joint ventures), through

securitization trusts pursuant to Rule 144A under the Securities Act, five of which were outstanding at June 30, 2021. The secured borrowings are structured as debt financings and not REMIC sales, and the loans included in the secured borrowings remain on our consolidated balance sheet as we are the primary beneficiary of the secured borrowing trusts, which are VIEs. The secured borrowing VIEs are structured as pass through entities that receive principal and interest on the underlying mortgages and distribute those payments to the holders of the notes. Our exposure to the obligations of the VIEs is generally limited to our investments in the entities. The notes that are issued by the secured borrowing trusts are secured solely by the mortgages held by the applicable trusts and not by any of our other assets. The mortgage loans of the applicable trusts are the only source of repayment and interest on the notes issued by such trusts. We do not guarantee any of the obligations of the trusts under the terms of the agreement governing the notes or otherwise.

Our non-rated secured borrowings are generally structured with Class A notes, subordinated notes, and trust certificates, which have rights to the residual interests in the mortgages once the notes are repaid. We have retained the subordinate notes and the applicable trust certificates from one non-rated secured borrowing outstanding at June 30, 2021.

Our rated secured borrowings are generally structured as “REIT TMP” transactions which allow the Company to issue multiple classes of securities without using a REMIC structure or being subject to an entity level tax. Our rated secured borrowings generally issue classes of debt from AAA through mezzanine. We generally retain the mezzanine and residual certificates in the transactions. We have retained the applicable mezzanine and residual certificates from the other four rated secured borrowings outstanding at June 30, 2021. Our rated secured borrowings are designated in the table below.

At March 31, 2021, our 2017-D secured borrowing contained Class A notes and Class B certificates representing the residual interests in the mortgages held within the securitization trusts subsequent to repayment of the Class A debt. We had retained 50% of both the Class A notes and Class B certificates from 2017-D; and the assets and liabilities were included on our consolidated balance sheets. During the second quarter of 2021, the majority of the loans in 2017-D were refinanced in 2021-C. Based on the structure of the transaction we do not consolidate 2021-C under U.S. GAAP.

Our 2018-C secured borrowing was structured with Class A notes, Class B notes and trust certificates representing the residual interest in the mortgages held within the securitization trusts subsequent to repayment of the Class A debt. We had retained 5% of the Class A notes and 63% of the Class B notes and trust certificates. During the first quarter of 2021 we acquired the remaining 37% ownership of the Class B notes and trust certificates and settled the remaining 95% of the outstanding Class A notes.

The following table sets forth the original terms of all outstanding notes from our secured borrowings outstanding at June 30, 2021 at their respective cutoff dates:

Table 14: Secured Borrowings

Issuing Trust/Issue Date

Interest Rate Step-up Date

Security

Original Principal

Interest Rate

Rated

Ajax Mortgage Loan Trust 2019-D/ July 2019

July 25, 2027

Class A-1 notes due 2065

$140.4 million

2.96

July 25, 2027

Class A-2 notes due 2065

$6.1 million

3.50

July 25, 2027

Class A-3 notes due 2065

$10.1 million

3.50

July 25, 2027

Class M-1 notes due 2065(1)

$9.3 million

3.50

None

Class B-1 notes due 2065(2)

$7.5 million

3.50

None

Class B-2 notes due 2065(2)

$7.1 million

variable(3)

None

Class B-3 notes due 2065(2)

$12.8 million

variable(3)

Deferred issuance costs

$(2.7) million

—

Rated

Ajax Mortgage Loan Trust 2019-F/ November 2019

November 25, 2026

Class A-1 notes due 2059

$110.1 million

2.86

November 25, 2026

Class A-2 notes due 2059

$12.5 million

3.50

November 25, 2026

Class A-3 notes due 2059

$5.1 million

3.50

November 25, 2026

Class M-1 notes due 2059(1)

$6.1 million

3.50

None

Class B-1 notes due 2059(2)

$11.5 million

3.50

None

Class B-2 notes due 2059(2)

$10.4 million

variable(3)

None

Class B-3 notes due 2059(2)

$15.1 million

variable(3)

Deferred issuance costs

$(1.8) million

—

Rated

Ajax Mortgage Loan Trust 2020-B/ August 2020

July 25, 2027

Class A-1 notes due 2059

$97.2 million

1.70

July 25, 2027

Class A-2 notes due 2059

$17.3 million

2.86

July 25, 2027

Class M-1 notes due 2059(1)

$7.3 million

3.70

None

Class B-1 notes due 2059(2)

$5.9 million

3.70

None

Class B-2 notes due 2059(2)

$5.1 million

variable(3)

None

Class B-3 notes due 2059(2)

$23.6 million

variable(3)

Deferred issuance costs

$(1.8) million

—

Rated

Ajax Mortgage Loan Trust 2021-A/ January 2021

January 25, 2029

Class A-1 notes due 2065

$146.2 million

1.07

January 25, 2029

Class A-2 notes due 2065

$21.1 million

2.35

January 25, 2029

Class M-1 notes due 2065(1)

$7.8 million

3.15

None

Class B-1 notes due 2065(2)

$5.0 million

3.80

None

Class B-2 notes due 2065(2)

$5.0 million

variable(3)

None

Class B-3 notes due 2065(2)

$21.5 million

variable(3)

Deferred issuance costs

$(2.5) million

—

Non-rated

Ajax Mortgage Loan Trust 2021-B/ February 2021

August 25, 2024

Class A notes due 2066

$215.9 million

2.24

February 25, 2025

Class B notes due 2066(2)

$20.2 million

4.00

Deferred issuance costs

$(4.3) million

—

(1)The Class M notes are subordinated, sequential pay, fixed rate notes. We have retained the Class M notes, with the exception of Ajax Mortgage Loan Trust ("AJAXM") 2021-A.

Convertible Senior Notes

On April 25, 2017, we completed the public offer and sale of $87.5 million in aggregate principal amount of our convertible senior notes (the “notes”) due 2024, with follow-on offerings of an additional $20.5 million and $15.9 million, respectively, in aggregate principal amount completed on August 18, 2017 and November 19, 2018, respectively, which, combined with the notes from our April offering form a single series of fungible securities. The notes bear interest at a rate of 7.25% per annum, payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year. The notes will mature on April 30, 2024, unless earlier repurchased, converted or redeemed. During certain periods and subject to certain conditions the notes will be convertible by their holders into shares of our common stock at a conversion rate of 1.7279 shares of common stock per $25.00 principal amount of the notes, which represents a conversion price of approximately $14.47 per share of common stock. The conversion rate, and thus the conversion price, may be subject to adjustment under certain circumstances.

During the first and second quarter of 2021, we completed a series of convertible note repurchases for aggregate principal amounts of $2.5 million and $5.0 million, respectively, for total purchase prices of $2.4 million and $5.1 million, respectively. The carrying amounts of the equity component representing the embedded conversion feature reversed from Additional paid-in capital due to the first and second quarter of 2021 transactions were both zero. During the first and third quarter of 2020, we completed a series of convertible note repurchases for aggregate principal amounts of $8.0 million and $2.5 million, respectively, for total purchase prices of $8.2 million and $2.3 million, respectively. The carrying amounts of the equity component representing the embedded conversion feature reversed from Additional paid-in capital due to the first and third quarter of 2020 transactions were $0.1 million and zero, respectively.

Repurchase Transactions

We have two repurchase facilities whereby we, through two wholly owned Delaware trusts (the “Trusts”), acquire pools of mortgage loans, which are then sold by the Trusts, as “Seller” to two separate counterparties, the “buyer” or “buyers.” One facility has a ceiling of $250.0 million and the other $400.0 million at any one time. Upon the time of the initial sale to the buyer, each Trust, with a simultaneous agreement, also agrees to repurchase the pools of mortgage loans from the buyer. Mortgage loans sold under these facilities carry interest calculated based on a spread to one-month LIBOR, which are fixed for the term of the borrowing. The purchase price that the Trust realizes upon the initial sale of the mortgage loans to the buyer can vary between 70% and 85% of the asset’s acquisition price, depending upon the facility being utilized and/or the quality of the underlying collateral. The obligations of the Trust to repurchase these mortgage loans at a future date are guaranteed by the Operating Partnership. The difference between the market value of the asset and the amount of the repurchase agreement is generally the amount of equity we have in the position and is intended to provide the buyer with some protection against fluctuations in the value of the collateral, and/or a failure by us to repurchase the asset and repay the borrowing at maturity. We also have five repurchase facilities substantially similar to the mortgage loan repurchase facilities where the pledged assets are the class B bonds and certificates from our securitization transactions. These facilities have no effective ceilings. Each repurchase transaction represents its own borrowing. As such, the ceilings associated with these transactions are the amounts currently borrowed at any one time. We have effective control over the assets subject to all of these transactions; therefore, our repurchase transactions are accounted for as financing arrangements.

A summary of our outstanding repurchase transactions at June 30, 2021 and December 31, 2020 is as follows ($ in thousands):

Table 15: Repurchase Transactions by Maturity Date


				June 30, 2021
Maturity Date	Origination date	Maximum Borrowing Capacity		Amount Outstanding		Amount of Collateral		Percentage of Collateral Coverage		Interest Rate
July 6, 2021	April 6, 2021	$	7,267	$	7,267	$	9,419	130	%	1.40	%
July 6, 2021	April 6, 2021	4,420		4,420		5,531		125	%	1.40	%
July 6, 2021	April 6, 2021	3,336		3,336		4,667		140	%	1.80	%
July 9, 2021	July 10, 2020	250,000		14,688		22,228		151	%	2.59	%
July 12, 2021	April 12, 2021	5,535		5,535		6,938		125	%	1.39	%
July 15, 2021	April 15, 2021	6,135		6,135		7,372		120	%	1.23	%
July 20, 2021	April 20, 2021	11,629		11,629		14,505		125	%	1.24	%
July 30, 2021	April 30, 2021	11,123		11,123		13,635		123	%	1.39	%
July 30, 2021	April 30, 2021	10,997		10,997		13,532		123	%	1.39	%
July 30, 2021	April 30, 2021	2,754		2,754		3,541		129	%	1.39	%
July 30, 2021	April 30, 2021	1,133		1,133		1,607		142	%	1.79	%
August 12, 2021	May 12, 2021	3,108		3,108		4,428		142	%	1.77	%
August 24, 2021	May 24, 2021	28,635		28,635		38,294		134	%	1.35	%
August 24, 2021	May 24, 2021	3,532		3,532		5,106		145	%	1.75	%
September 3, 2021	June 4, 2021	23,554		23,554		30,884		131	%	1.13	%
September 3, 2021	June 4, 2021	23,042		23,042		30,303		132	%	1.13	%
September 17, 2021	June 17, 2021	44,701		44,701		59,986		134	%	1.13	%
September 17, 2021	June 17, 2021	8,236		8,236		10,322		125	%	1.32	%
September 17, 2021	June 17, 2021	7,229		7,229		9,510		132	%	1.32	%
September 17, 2021	June 17, 2021	4,331		4,331		6,232		144	%	1.38	%
September 17, 2021	June 17, 2021	1,176		1,176		1,687		143	%	1.72	%
September 23, 2021	September 24, 2020	400,000		42,153		63,220		150	%	2.60	%
September 24, 2021	June 24, 2021	46,819		46,819		62,815		134	%	1.33	%
September 24, 2021	June 24, 2021	4,535		4,535		6,526		144	%	1.73	%
September 24, 2021	June 24, 2021	2,431		2,431		3,148		129	%	1.33	%
October 5, 2021	April 9, 2021	31,326		31,326		39,811		127	%	1.41	%
October 22, 2021	April 26, 2021	7,899		7,899		9,279		117	%	1.11	%
October 22, 2021	April 26, 2021	6,231		6,231		7,276		117	%	1.11	%
October 22, 2021	April 26, 2021	5,123		5,123		6,063		118	%	1.11	%
December 13, 2021	June 15, 2021	14,148		14,148		20,151		142	%	1.35	%
December 13, 2021	June 15, 2021	7,160		7,160		9,409		131	%	1.15	%
Totals/weighted averages		$	987,545	$	394,386	$	527,425	134	%	1.48	%


				December 31, 2020
Maturity Date	Origination date	Maximum Borrowing Capacity		Amount Outstanding		Amount of Collateral		Percentage of Collateral Coverage		Interest Rate
January 6, 2021	October 9, 2020	$	35,635	$	35,635	$	46,120	129	%	2.33	%
January 6, 2021	September 28, 2020	7,697		7,697		10,075		131	%	2.33	%
January 6, 2021	September 28, 2020	6,311		6,311		9,038		143	%	2.48	%
January 6, 2021	September 28, 2020	4,755		4,755		6,114		129	%	2.33	%
January 6, 2021	September 28, 2020	4,666		4,666		6,044		130	%	2.33	%
January 6, 2021	September 28, 2020	3,213		3,213		4,667		145	%	2.48	%
January 11, 2021	September 29, 2020	5,879		5,879		7,575		129	%	2.32	%
January 14, 2021	October 29, 2020	6,991		6,991		8,738		125	%	2.35	%
January 20, 2021	October 20, 2020	13,263		13,263		16,582		125	%	2.22	%
January 29, 2021	October 30, 2020	7,762		7,762		9,702		125	%	2.21	%
January 29, 2021	October 30, 2020	7,153		7,153		9,537		133	%	2.21	%
February 1, 2021	December 1, 2020	12,258		12,258		16,052		131	%	1.88	%
February 1, 2021	December 1, 2020	12,015		12,015		15,794		131	%	1.88	%
February 1, 2021	December 1, 2020	5,298		5,298		6,895		130	%	1.88	%
February 1, 2021	December 1, 2020	3,985		3,985		5,136		129	%	1.88	%
February 1, 2021	December 1, 2020	2,887		2,887		3,790		131	%	1.88	%
February 1, 2021	December 1, 2020	2,332		2,332		3,360		144	%	2.03	%
February 1, 2021	December 1, 2020	1,132		1,132		1,607		142	%	2.03	%
February 12, 2021	November 13, 2020	2,945		2,945		4,428		150	%	2.02	%
March 5, 2021	December 7, 2020	24,946		24,946		33,348		134	%	1.78	%
March 5, 2021	December 7, 2020	24,312		24,312		32,571		134	%	1.78	%
March 17, 2021	December 17, 2020	10,219		10,219		13,172		129	%	1.78	%
March 17, 2021	December 17, 2020	8,381		8,381		10,872		130	%	1.78	%
March 17, 2021	December 17, 2020	3,894		3,894		5,193		133	%	1.78	%
March 17, 2021	December 17, 2020	1,145		1,145		1,687		147	%	1.93	%
March 24, 2021	December 24, 2020	7,016		7,016		10,024		143	%	1.94	%
March 24, 2021	December 24, 2020	5,008		5,008		6,637		133	%	1.79	%
March 24, 2021	December 24, 2020	2,577		2,577		3,367		131	%	1.79	%
April 9, 2021	October 13, 2020	33,084		33,084		43,069		130	%	2.35	%
July 9, 2021	July 10, 2020	250,000		53,256		84,337		158	%	2.64	%
September 23, 2021	September 24, 2020	400,000		101,117		160,068		158	%	2.65	%
Totals/weighted averages		$	916,759	$	421,132	$	595,599	141	%	2.29	%

As of June 30, 2021, we had $394.4 million outstanding under our repurchase transactions compared to $421.1 million as of December 31, 2020. The maximum month-end balance outstanding during the three months ended June 30, 2021 was $394.6 million, compared to a maximum month-end balance for the three months ended December 31, 2020, of $422.3 million. The following table presents certain details of our repurchase transactions for the three months ended June 30, 2021 and December 31, 2020 ($ in thousands):

Table 16: Repurchase Balances


	Three months ended
	June 30, 2021		December 31, 2020
Balance at the end of period	$	394,386	$	421,132
Maximum outstanding balance during the quarter	$	394,589	$	422,322
Average balance	$	290,670	$	417,973

The decrease in our average balance from $418.0 million for the three months ended December 31, 2020 to our average balance of $290.7 million for the three months ended June 30, 2021 was due to a net decrease in repurchase financing during the three months ended June 30, 2021.

As of June 30, 2021 and December 31, 2020, we did not have any credit facilities or other outstanding debt obligations other than the repurchase facilities, secured borrowings, put option liability and our senior convertible notes.

We are not required by our investment guidelines to maintain any specific debt-to-equity ratio, and we believe that the appropriate leverage for the particular assets we hold depends on the credit quality and risk of those assets, as well as the general availability and terms of stable and reliable financing for those assets.

Dividends

We may declare dividends based on, among other things, our earnings, our financial condition, our working capital needs, new opportunities, and distribution requirements imposed on REITs. The declaration of dividends to our stockholders and the amount of such dividends are at the discretion of our Board of Directors.

On August 5, 2021, our Board of Directors declared a dividend of $0.21 per share, to be paid on August 31, 2021 to stockholders of record as of August 16, 2021. Our Management Agreement with our Manager requires the payment of an incentive management fee above the amount of the base management fee if either, (1) for any quarterly incentive fee, the sum of cash dividends on our common stock plus any quarterly increase in book value, all calculated on an annualized basis, exceed 8% of our book value, or (2) for any annual incentive fee, the value of quarterly cash dividends on our common stock plus cash special dividends on our common stock, all paid out within the applicable calendar year, paid out of our taxable income, exceeds of 8% (on an annualized basis) of our stock’s book value. During the three and six months ended June 30, 2021 and June 30, 2020, we recorded no incentive fee payable to the Manager. Our dividend payments are driven by the amount of our taxable income, subject to IRS rules for maintaining our status as a REIT.

Our most recently declared quarterly dividend represents a payment of approximately 5.30% on an annualized basis of our book value of $15.86 per share at June 30, 2021. If our taxable income increases to the levels we experienced during 2019, we could exceed the threshold for paying an incentive fee to our Manager, and thereby trigger such payments. See Note 10 — Related party transactions.

Off-Balance Sheet Arrangements

Other than our investments in debt securities and beneficial interests issued by joint ventures, which are summarized below by securitization trust and our equity method investments discussed elsewhere in this report, we do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide funding to any such entities. As such, we are not materially exposed to any market, credit, liquidity or financing risk that could arise if we had engaged in such relationships.

Table 17: Investments in joint ventures

We form joint ventures with third party institutional accredited investors to purchase mortgage loans and other mortgage related assets. The debt securities and beneficial interests we carry on our consolidated balance sheets are issued by securitization trusts formed by these joint ventures, which are VIEs, that we have sponsored but which we do not consolidate since we have determined we are not the primary beneficiary.

A summary of our investments in joint ventures is presented below(1) ($ in thousands):


						Great Ajax Corp. Ownership
Issuing Trust/Issue Date	Security	Total Original Outstanding Principal		Coupon		Ownership Percent		Original Stated or Notional Principal Balance Retained		Current Owned Stated or Notional Principal Balance Retained
Ajax Mortgage Loan Trust 2018-A/ April 2018	Class A notes due 2058	$	91,036	3.85	%	—	%	$	—	$	—


	Trust certificates	$	22,759	—	%	9.36	%	$	2,130	$	149

Ajax Mortgage Loan Trust 2018-B/ June 2018	Class A notes due 2057	$	66,374	3.75	%	—	%	$	—	$	—
	Trust certificates	$	28,447	—	%	20.00	%	$	5,689	$	3,125

Ajax Mortgage Loan Trust 2018-D/ September 2018	Class A notes due 2058	$	80,664	3.75	%	20.00	%	$	16,133	$	12,567
	Trust certificates	$	20,166	—	%	20.00	%	$	4,033	$	3,915

Ajax Mortgage Loan Trust 2018-E/ December 2018	Class A notes due 2058	$	86,089	4.38	%	5.01	%	$	4,313	$	3,544
	Class B notes due 2058	$	8,035	5.25	%	20.00	%	$	1,607	$	1,605
	Trust certificates	$	20,662	—	%	20.00	%	$	4,132	$	4,130

Ajax Mortgage Loan Trust 2018-F/ December 2018	Class A notes due 2058	$	180,002	4.38	%	—	%	$	—	$	—
	Class B notes due 2058	$	16,800	5.25	%	—	%	$	—	$	—
	Trust certificates	$	43,201	—	%	20.00	%	$	8,640	$	3,997

Ajax Mortgage Loan Trust 2018-G/ December 2018	Class A notes due 2057	$	173,562	4.38	%	25.00	%	$	43,390	$	24,015
	Class B notes due 2057	$	16,199	5.25	%	25.00	%	$	4,050	$	4,050
	Trust certificates	$	41,655	—	%	25.00	%	$	10,414	$	10,585

Ajax Mortgage Loan Trust 2019-A/ March 2019	Class A notes due 2057	$	127,801	3.75	%	20.00	%	$	25,560	$	13,532
	Class B notes due 2057	$	11,928	5.25	%	20.00	%	$	2,386	$	2,388
	Trust certificates	$	30,672	—	%	20.00	%	$	6,134	$	6,137

Ajax Mortgage Loan Trust 2019-B/ March 2019	Class A notes due 2059	$	163,325	3.75	%	15.00	%	$	24,499	$	13,635
	Class B notes due 2059	$	15,244	5.25	%	15.00	%	$	2,287	$	2,287
	Trust certificates	$	39,198	—	%	15.00	%	$	5,880	$	5,976

Ajax Mortgage Loan Trust 2019-C/ May 2019	Class A notes due 2058	$	150,037	3.95	%	5.00	%	$	7,502	$	5,520
	Class B notes due 2058	$	14,003	5.25	%	34.00	%	$	4,761	$	4,761
	Trust certificates	$	36,009	—	%	34.00	%	$	12,243	$	12,417

Ajax Mortgage Loan Trust 2019-E/ September 2019	Class A notes due 2059	$	181,101	3.00	%	6.55	%	$	11,862	$	7,372
	Class B notes due 2059	$	16,903	4.88	%	20.00	%	$	3,381	$	3,381
	Trust certificates	$	43,464	—	%	20.00	%	$	8,693	$	8,558

Ajax Mortgage Loan Trust 2019-G/ December 2019	Class A notes due 2059	$	141,420	3.00	%	5.86	%	$	8,287	$	6,938
	Class B notes due 2059	$	13,199	4.25	%	20.00	%	$	2,640	$	2,640


	Trust certificates	$	33,941	—	%	20.00	%	$	6,788	$	6,820

Ajax Mortgage Loan Trust 2019-H/ December 2019	Class A notes due 2059	$	90,381	3.00	%	20.00	%	$	18,076	$	10,321
	Class B notes due 2059	$	8,435	4.25	%	20.00	%	$	1,687	$	1,687
	Trust certificates	$	21,692	—	%	20.00	%	$	4,338	$	4,375

Ajax Mortgage Loan Trust 2020-A/ March 2020	Class A notes due 2059	$	249,384	2.38	%	20.00	%	$	49,877	$	39,811
	Class B notes due 2059	$	23,276	3.50	%	20.00	%	$	4,655	$	4,428
	Trust certificates	$	59,852	—	%	20.00	%	$	11,970	$	11,934

Ajax Mortgage Loan Trust 2020-C/ September 2020	Class A notes due 2060	$	339,365	2.25	%	10.01	%	$	33,970	$	30,884
	Class B notes due 2060	$	21,754	5.00	%	10.01	%	$	2,178	$	2,178
	Trust certificates	$	73,964	—	%	10.01	%	$	7,404	$	7,393

Ajax Mortgage Loan Trust 2020-D/ September 2020	Class A notes due 2060	$	330,721	2.25	%	10.01	%	$	33,105	$	30,303
	Class B notes due 2060	$	30,867	5.00	%	10.01	%	$	3,090	$	3,090
	Trust certificates	$	79,373	—	%	10.01	%	$	7,945	$	7,934

Ajax Mortgage Loan Trust 2021-C/ April 2021	Class A notes due 2061	$	194,673	2.12	%	5.01	%	$	9,753	$	9,410
	Class B notes due 2061	$	18,170	3.72	%	31.90	%	$	5,796	$	5,796
	Trust certificates	$	46,722	—	%	31.90	%	$	14,904	$	14,860

Ajax Mortgage Loan Trust 2021-D/ May 2021	Class A notes due 2060	$	191,468	2.00	%	20.00	%	$	38,294	$	38,294
	Class B notes due 2060	$	25,529	4.00	%	20.00	%	$	5,106	$	5,106
	Trust certificates	$	38,293	—	%	20.00	%	$	7,659	$	7,659

Ajax Mortgage Loan Trust 2021-F/ June 2021	Class A notes due 2061	$	476,082	1.88	%	12.60	%	$	59,986	$	59,986
	Class B notes due 2061	$	49,463	3.75	%	12.60	%	$	6,232	$	6,232
	Trust certificates	$	92,743	—	%	12.60	%	$	11,686	$	11,686

Ajax Mortgage Loan Trust 2021-G/ June 2021	Class A notes due 2061	$	317,573	1.88	%	20.00	%	$	63,515	$	62,815
	Class B notes due 2061	$	32,995	3.75	%	20.00	%	$	6,599	$	6,526
	Trust certificates	$	61,864	—	%	20.00	%	$	12,373	$	12,237

Table 18: Contractual Obligations

A summary of our contractual obligations as of June 30, 2021 and December 31, 2020 is as follows ($ in thousands):


June 30, 2021	Payments Due by Period
	Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		More than 5 Years
Convertible senior notes	$	105,850	$	—	$	105,850	$	—	$	—
Borrowings under repurchase agreements	394,386		394,386		—		—		—
Interest on convertible senior notes	23,342		7,674		15,668		—		—
Interest on repurchase agreements	1,132		1,132		—		—		—
Put obligation on outstanding common stock warrants	50,707		—		50,707		—		—
Total	$	575,417	$	403,192	$	172,225	$	—	$	—


December 31, 2020	Payments Due by Period
	Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		More than 5 Years
Convertible senior notes	$	113,350	$	—	$	—	$	113,350	$	—
Borrowings under repurchase agreements	421,132		421,132		—		—		—
Interest on convertible senior notes	29,105		8,218		16,436		4,451		—
Interest on repurchase agreements	3,345		3,345		—		—		—
Put obligation on outstanding common stock warrants	50,707		—		—		50,707		—
Total	$	617,639	$	432,695	$	16,436	$	168,508	$	—

Our secured borrowings are not included in the table above as such borrowings are non-recourse to us and principal and interest are only paid to the extent that cash flows from mortgage loans (in the securitization trust) collateralizing the debt are received. Accordingly, a projection of contractual maturities over the next five years is inapplicable.

Subsequent Events

Since quarter end, we have acquired 1,016 residential NPLs with aggregate UPB of $173.0 million in two transactions from two different sellers. The purchase price equaled 97.9% of UPB and 54.2% of the estimated market value of the underlying collateral of $312.1 million. Some of these loans were acquired into the joint venture formed in June 2021 with proceeds from the established prefunding account.

We have agreed to acquire, subject to due diligence, 31 residential RPLs in six transactions, and 412 NPLs in six transactions, with aggregate UPB of $4.7 million and $103.3 million, respectively. The purchase price of the residential RPLs equals 80.9% of UPB and 55.1% of the estimated market value of the underlying collateral of $6.9 million. The purchase price of the NPLs equals 97.1% of UPB and 64.4% of the estimated market value of the underlying collateral of $155.8 million.

On July 19, 2021, we co-invested with third-party institutional investors to form Ajax Mortgage Loan Trust 2021-E ("2021-E") and retained $53.1 million of varying classes of related securities. We acquired 10.01% of the class A securities, class B securities and class M securities from the trust, which acquired 3,142 RPLs and NPLs with UPB of $517.7 million and an aggregate property value of $968.6 million. The senior securities represent 83% of the UPB of the underlying mortgage loans and carry a weighted average coupon of 1.82% coupon, respectively. Based on the structure of the transaction we will not consolidate 2021-E under U.S. GAAP. The assets included in the 2021-E securitization came from loan sales associated with our 2020-C and 2020-D securitizations, all of which were joint ventures with third party institutional accredited investors.

On July 26, 2021, our Board of Directors approved a grant of 152,700 shares of restricted stock to employees of our Manager and Servicer with a grant date of August 2, 2021. The shares will vest over four years, with one fourth of the shares vesting on each of the first, second, third and fourth anniversaries of the grant date.

On August 5, 2021, our Board of Directors declared a cash dividend of $0.21 per share to be paid on August 31, 2021 to stockholders of record as of August 16, 2021.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The primary components of our market risk are related to real estate risk, interest rate risk, prepayment risk and credit risk. We seek to actively manage these and other risks and to acquire and hold assets at prices that we believe justify bearing those risks, and to maintain capital levels consistent with those risks. The pandemic presents risks and uncertainties that we describe under “Risk Factors” and many of these are outside of our control.

Real Estate Risk

Residential property values are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns, public health crises and other factors); local real estate conditions (such as an oversupply of housing); construction quality, age and design; demographic factors; and retroactive changes to building or similar codes. Increases in interest rates will result in lower refinancing volume, and home price increases will slow. Decreases in property values could cause us to suffer losses.

Interest Rate Risk

We expect to continue to securitize our whole loan portfolios, primarily as a financing tool, when economically efficient to create long-term, fixed rate, non-recourse financing with moderate leverage, while retaining one or more tranches of the subordinate MBS so created. Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control. Changes in interest rates may affect the fair value of the mortgage loans and real estate underlying our portfolios as well as our financing interest rate expense. Additionally, rises in interest rates may result in a lower refinance volume of our portfolio.

We believe that a rising interest rate environment could have a positive effect on our operations to the extent we own rental real property or seek to sell real property. Rising interest rates could be accompanied by inflation and higher household incomes which generally correlate closely to higher rent levels and property values. It is possible that the value of our real estate assets and our net income could decline in a rising interest rate environment to the extent that our real estate assets are financed with floating rate debt and there is no accompanying increase in loan yield and rental yield or property values.

Prepayment Risk

Prepayment risk is the risk of change, whether an increase or a decrease, in the rate at which principal is returned in respect of the mortgage loans we own as well as the mortgage loans underlying our retained MBS, including both through voluntary prepayments and through liquidations due to defaults and foreclosures. This rate of prepayment is affected by a variety of factors, including the prevailing level of interest rates as well as economic, demographic, tax, social, legal and other factors. Prepayment rates, besides being subject to interest rates and borrower behavior, are also substantially affected by government policy and regulation. Changes in prepayment rates will have varying effects on the different types of assets in our portfolio. We attempt to take these effects into account. We will generally purchase RPLs and NPLs at discounts from UPB and underlying property values. An increase in prepayments would accelerate the repayment of the discount and lead to increased yield on our assets while also causing re-investment risk that we can find additional assets with the same interest and return levels. A decrease in prepayments would likely have the opposite effects. We currently expect the pace of loan prepayments to

slow due to the pandemic.

Credit Risk

We are subject to credit risk in connection with our assets. While we will engage in diligence on assets we will acquire, such due diligence may not reveal all of the risks associated with such assets and may not reveal other weaknesses in such assets, which could lead us to misprice acquisitions. Property values are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns, public health crises and other factors), local real estate conditions (such as an oversupply of

housing), changes or continued weakness in specific industry segments, construction quality, age and design, demographic factors and retroactive changes to building or similar codes.

There are many reasons borrowers will fail to pay including but not limited to, in the case of residential mortgage loans, reductions in personal income, job loss and personal events such as divorce or health problems, and in the case of commercial mortgage loans, reduction in market rents and occupancies and poor property management services by borrowers. We will rely on the Servicer to mitigate our risk. Such mitigation efforts may include loan modifications and prompt

foreclosure and property liquidation following a default. If a sufficient number of re-performing borrowers default, our results of operations will suffer and we may not be able to pay our own financing costs.

Inflation

Virtually all of our assets and liabilities are interest-rate sensitive in nature. As a result, interest rates and other factors influence our performance far more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. Our activities and consolidated balance sheet are measured with reference to historical cost and/or fair market value without considering inflation. It is possible, however, that inflation that is not accompanied by a corresponding wage increase could drive a decrease in disposable household income and increase the credit risk of certain borrowers.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report on Form 10-Q. The controls evaluation was conducted under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Disclosure controls and procedures are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such as this Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed to reasonably assure that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Based on the controls evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Form 10-Q, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the SEC, and that material information related to our company and our consolidated subsidiaries is made known to management, including the Chief Executive Officer and Chief Financial Officer, particularly during the period when our periodic reports are being prepared.

Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Neither we nor any of our subsidiaries are party to nor is any of our property the subject of any material pending legal or regulatory proceedings. We and our affiliates may be involved, from time to time, in legal proceedings that arise in the ordinary course of business.

Item 1A. Risk Factors

For information regarding factors that could affect our results of operations, financial condition, and liquidity, see the risk factors discussed under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes from these previously disclosed risk factors.

Item 2. Unregistered Sales of Securities

Unregistered Sales of Equity Securities

On May 10, 2021 we issued each of our five independent directors 789 shares of common stock in partial payment of their quarterly director fees for the first quarter of 2021. These shares were issued in reliance on the exemption from registration set forth in Section 4(a)(2) of the Securities Act.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The exhibits listed in the accompanying Exhibit Index are filed or furnished as part of this Quarterly Report on Form 10-Q.

EXHIBIT INDEX


Exhibit Number						Exhibit Description
31.1*						Rule 13a-14(a) Certification of Chief Executive Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Rule 13a-14(a) Certification of Chief Financial Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*						Section 1350 Certification of Chief Executive Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*						Section 1350 Certification of Chief Financial Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**						Inline XBRL Instance Document
101.SCH**						Inline XBRL Taxonomy Extension Schema Document
101.CAL**						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**						Inline XBRL Taxonomy Definition Linkbase Document
101.LAB**						Inline XBRL Taxonomy Definition Linkbase Document
101.PRE**						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104**						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		GREAT AJAX CORP.

Date: August 6, 2021	By:	/s/ Lawrence Mendelsohn
		Lawrence Mendelsohn
		Chairman and Chief Executive Officer (Principal Executive Officer)

Date: August 6, 2021	By:	/s/ Mary Doyle
		Mary Doyle
		Chief Financial Officer (Principal Financial and Accounting Officer)