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~~September 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,~~November 3, 2021, ~~23,142,946~~23,143,037 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Interim Financial Statements

GREAT AJAX CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


($ in thousands except per share data)	($ in thousands except per share data)	June 30, 2021		December 31, 2020		($ in thousands except per share data)	September 30, 2021		December 31, 2020
ASSETS	ASSETS	(Unaudited)				ASSETS	(Unaudited)
Cash and cash equivalents	Cash and cash equivalents	$	88,134	$	107,147	Cash and cash equivalents	$	92,843	$	107,147
Cash held in trust	Cash held in trust	186		188		Cash held in trust	2,534		188
Mortgage loans, net(1,2)		955,628		1,119,372
Mortgage loans held-for-investment, net(1,2)						Mortgage loans held-for-investment, net(1,2)	976,351		1,119,372
Mortgage loans held-for-sale, net						Mortgage loans held-for-sale, net	30,963		—
Real estate owned properties, net(3)	Real estate owned properties, net(3)	4,768		8,526		Real estate owned properties, net(3)	6,097		8,526
Investments in securities at fair value(4)	Investments in securities at fair value(4)	424,632		273,834		Investments in securities at fair value(4)	340,082		273,834
Investments in beneficial interests(5)	Investments in beneficial interests(5)	133,484		91,418		Investments in beneficial interests(5)	139,494		91,418
Receivable from servicer	Receivable from servicer	23,907		15,755		Receivable from servicer	18,128		15,755
Investments in affiliates	Investments in affiliates	27,929		28,616		Investments in affiliates	27,464		28,616
Prepaid expenses and other assets	Prepaid expenses and other assets	17,424		8,876		Prepaid expenses and other assets	14,132		8,876
Total assets	Total assets	$	1,676,092	$	1,653,732	Total assets	$	1,648,088	$	1,653,732
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Liabilities:	Liabilities:					Liabilities:
Secured borrowings, net(1,2,6)	Secured borrowings, net(1,2,6)	$	653,948	$	585,403	Secured borrowings, net(1,2,6)	$	612,592	$	585,403
Borrowings under repurchase transactions	Borrowings under repurchase transactions	394,386		421,132		Borrowings under repurchase transactions	399,340		421,132
Convertible senior notes, net(6)	Convertible senior notes, net(6)	103,427		110,057		Convertible senior notes, net(6)	103,754		110,057
Management fee payable	Management fee payable	2,267		2,247		Management fee payable	2,289		2,247
Put option liability	Put option liability	18,350		14,205		Put option liability	20,843		14,205
Accrued expenses and other liabilities	Accrued expenses and other liabilities	6,222		6,197		Accrued expenses and other liabilities	6,165		6,197
Total liabilities	Total liabilities	1,178,600		1,139,241		Total liabilities	1,144,983		1,139,241
Commitments and contingencies – see Note 8	Commitments and contingencies – see Note 8	0		0		Commitments and contingencies – see Note 8	0		0
Equity:	Equity:					Equity:
Preferred stock, $0.01 par value, 25,000,000 shares authorized	Preferred stock, $0.01 par value, 25,000,000 shares authorized					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
Series A 7.25% Fixed-to-Floating Rate Cumulative Redeemable, $25.00 liquidation preference per share, 2,307,400 shares issued and outstanding at September 30, 2021 and 2,307,400 shares issued or outstanding at December 31, 2020						Series A 7.25% Fixed-to-Floating Rate Cumulative Redeemable, $25.00 liquidation preference per share, 2,307,400 shares issued and outstanding at September 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 September 30, 2021 and 2,892,600 shares issued and outstanding at December 31, 2020						Series B 5.00% Fixed-to-Floating Rate Cumulative Redeemable, $25.00 liquidation preference per share, 2,892,600 shares issued and outstanding at September 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, 23,140,131 shares issued and outstanding at September 30, 2021 and 22,978,339 shares issued and outstanding at December 31, 2020						Common stock $0.01 par value; 125,000,000 shares authorized, 23,140,131 shares issued and outstanding at September 30, 2021 and 22,978,339 shares issued and outstanding at December 31, 2020	232		231
Additional paid-in capital	Additional paid-in capital	315,131		317,424		Additional paid-in capital	315,611		317,424
Treasury stock	Treasury stock	(1,405)		(1,159)		Treasury stock	(1,539)		(1,159)
Retained earnings	Retained earnings	62,502		53,346		Retained earnings	66,958		53,346
Accumulated other comprehensive income	Accumulated other comprehensive income	1,651		375		Accumulated other comprehensive income	3,418		375
Equity attributable to stockholders	Equity attributable to stockholders	493,254		485,361		Equity attributable to stockholders	499,824		485,361
Non-controlling interests(7)	Non-controlling interests(7)	4,238		29,130		Non-controlling interests(7)	3,281		29,130
Total equity	Total equity	497,492		514,491		Total equity	503,105		514,491
Total liabilities and equity	Total liabilities and equity	$	1,676,092	$	1,653,732	Total liabilities and equity	$	1,648,088	$	1,653,732

(1)Mortgage loans held-for-investment, net include ~~$821.6~~$790.9 million and $842.2 million of loans at ~~June~~September 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

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

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~~ (Great Ajax Corp.). See Note 9 — Debt. Mortgage loans held-for-investment, net include ~~$9.8~~$13.9 million and $13.7 million of allowance for ~~loan~~expected credit losses at ~~June~~September 30, 2021 and December 31, 2020, respectively.

(2)As of ~~June~~September 30, 2021, balances for Mortgage loans held-for-investment, net include ~~$1.9~~$1.5 million from a 50.0% owned joint venture. As of December 31, 2020, balances for Mortgage loans held-for-investment, 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~~are presented net of valuation allowances of ~~$0.5~~$0.4 million and $1.4 million at ~~June~~September 30, 2021 and December 31, 2020, respectively.

(4)As of ~~June~~September 30, 2021 and December 31, 2020, Investments in securities at fair value include amortized cost basis of ~~$423.0~~$336.7 million and $273.4 million, respectively, and net unrealized gains of ~~$1.7~~$3.4 million and $0.4 million, respectively.

(5)Investments in beneficial interests includes allowance for expected credit losses of ~~$3.0~~$0.6 million and $4.5 million at ~~June~~September 30, 2021 and December 31, 2020, respectively.

(6)Secured borrowings, net are presented net of deferred issuance costs of ~~$9.5~~$8.3 million at ~~June~~September 30, 2021 and $5.4 million at December 31, 2020. Convertible senior notes, net are presented net of deferred issuance costs of ~~$2.4~~$2.1 million at ~~June~~September 30, 2021 and $3.3 million at December 31, 2020.

(7)As of ~~June~~September 30, 2021 non-controlling interests includes ~~$2.7~~$1.8 million from a 50.0% owned joint venture, ~~$1.4~~$1.3 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					Three months ended				Nine months ended
($ in thousands except per share data)	($ in thousands except per share data)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020		($ in thousands except per share data)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
INCOME	INCOME									INCOME
Interest income	Interest income	$	23,048	$	23,171	$	47,083	$	50,059	Interest income	$	23,054	$	23,517	$	70,137	$	73,576
Interest expense	Interest expense	(8,830)		(13,058)		(19,134)		(26,128)		Interest expense	(8,609)		(11,727)		(27,743)		(37,855)
Net interest income	Net interest income	14,218		10,113		27,949		23,931		Net interest income	14,445		11,790		42,394		35,721
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
Net decrease in the net present value of expected credit losses(1)										Net decrease in the net present value of expected credit losses(1)	3,678		4,440		13,927		4,591
Net interest income after the impact of changes in the net present value of expected credit losses										Net interest income after the impact of changes in the net present value of expected credit losses	18,123		16,230		56,321		40,312
Income/(loss) from investments in affiliates	Income/(loss) from investments in affiliates	357		672		520		(440)		Income/(loss) from investments in affiliates	90		(25)		610		(465)
Other income	Other income	486		680		842		722		Other income	778		537		1,620		1,259
Total revenue, net	Total revenue, net	19,794		16,327		39,560		24,364		Total revenue, net	18,991		16,742		58,551		41,106
EXPENSE	EXPENSE									EXPENSE
Related party expense – loan servicing fees	Related party expense – loan servicing fees	1,699		1,936		3,532		3,950		Related party expense – loan servicing fees	1,743		1,848		5,275		5,798
Related party expense – management fee	Related party expense – management fee	2,270		2,143		4,543		3,942		Related party expense – management fee	2,292		2,264		6,835		6,206
Professional fees	Professional fees	763		732		1,403		1,537		Professional fees	526		576		1,929		2,113
Real estate operating expenses	Real estate operating expenses	88		188		273		1,100		Real estate operating expenses	(76)		173		197		1,273
Fair value adjustment on put option liability	Fair value adjustment on put option liability	2,201		1,250		4,145		1,250		Fair value adjustment on put option liability	2,493		1,766		6,638		3,016
Other expense	Other expense	1,375		1,140		2,679		2,062		Other expense	1,227		986		3,906		3,048
Total expense	Total expense	8,396		7,389		16,575		13,841		Total expense	8,205		7,613		24,780		21,454
Loss on debt extinguishment	Loss on debt extinguishment	161		0		1,072		408		Loss on debt extinguishment	—		253		1,072		661
Income before provision for income taxes	Income before provision for income taxes	11,237		8,938		21,913		10,115		Income before provision for income taxes	10,786		8,876		32,699		18,991
Provision for income taxes (benefit)	Provision for income taxes (benefit)	67		120		101		(199)		Provision for income taxes (benefit)	102		(16)		203		(215)
Consolidated net income	Consolidated net income	11,170		8,818		21,812		10,314		Consolidated net income	10,684		8,892		32,496		19,206
Less: consolidated net (loss)/income attributable to the non-controlling interest	Less: consolidated net (loss)/income attributable to the non-controlling interest	(1,158)		735		531		1,831		Less: consolidated net (loss)/income attributable to the non-controlling interest	(578)		1,662		(47)		3,493
Consolidated net income attributable to Company	Consolidated net income attributable to Company	12,328		8,083		21,281		8,483		Consolidated net income attributable to Company	11,262		7,230		32,543		15,713
Less: dividends on preferred stock	Less: dividends on preferred stock	1,950		1,841		3,899		1,841		Less: dividends on preferred stock	1,949		1,950		5,848		3,791
Consolidated net income attributable to common stockholders	Consolidated net income attributable to common stockholders	$	10,378	$	6,242	$	17,382	$	6,642	Consolidated net income attributable to common stockholders	$	9,313	$	5,280	$	26,695	$	11,922
Basic earnings per common share	Basic earnings per common share	$	0.45	$	0.27	$	0.76	$	0.29	Basic earnings per common share	$	0.40	$	0.23	$	1.16	$	0.53
Diluted earnings per common share	Diluted earnings per common share	$	0.42	$	0.27	$	0.72	$	0.29	Diluted earnings per common share	$	0.38	$	0.23	$	1.10	$	0.53
Weighted average shares – basic	Weighted average shares – basic	22,825,804		22,808,943		22,821,416		22,439,648		Weighted average shares – basic	22,862,429		22,844,192		22,835,237		22,575,480
Weighted average shares – diluted	Weighted average shares – diluted	30,198,696		22,929,849		30,341,638		22,559,916		Weighted average shares – diluted	30,407,649		22,989,616		30,286,613		22,575,480

(1)Net ~~increase~~decrease in the net present value of expected ~~cash flows~~credit losses represents the net decrease to the allowance ~~for losses~~ resulting from changes in actual and expected cash flows during both the ~~quarter.~~three and nine months ended September 30, 2021 and September 30, 2020, respectively. It represents the net increase of the present value of the expected cash ~~flow increases over~~flows in excess of contractual cash flows offset by any incremental provision expense on the Mortgage loan pools and Beneficial ~~interest portfolios. Such amounts are~~interests. The decrease is calculated at the pool level for Mortgage loans and at the security level for Beneficial ~~interests, and are~~ interests. To the extent a pool or Beneficial interest has an associated allowance, the decrease in expected credit losses is recorded in the period in which the change ~~occurs.~~occurs, otherwise it is recognized prospectively as an increase in yield.

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,					Three months ended September 30,				Nine months ended September 30,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2021		2020		2021		2020
Consolidated net income attributable to common stockholders	Consolidated net income attributable to common stockholders	$	10,378	$	6,242	$	17,382	$	6,642	Consolidated net income attributable to common stockholders	$	9,313	$	5,280	$	26,695	$	11,922
Other comprehensive income:	Other comprehensive income:									Other comprehensive income:
Net unrealized (loss)/income on investments in available-for-sale debt securities		(30)		23,231		1,276		(5,213)
Net unrealized income/(loss) on investments in available-for-sale debt securities										Net unrealized income/(loss) on investments in available-for-sale debt securities	1,767		4,337		3,043		(876)
Income tax expense related to items of other comprehensive income	Income tax expense related to items of other comprehensive income	0		0		0		0		Income tax expense related to items of other comprehensive income	—		—		—		—
Comprehensive income	Comprehensive income	$	10,348	$	29,473	$	18,658	$	1,429	Comprehensive income	$	11,080	$	9,617	$	29,738	$	11,046

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					Nine months ended
($ in thousands)	($ in thousands)	June 30, 2021		June 30, 2020		($ in thousands)	September 30, 2021		September 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES	CASH FLOWS FROM OPERATING ACTIVITIES					CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income	Consolidated net income	$	21,812	$	10,314	Consolidated net income	$	32,496	$	19,206
Adjustments to reconcile net income to net cash from operating activities	Adjustments to reconcile net income to net cash from operating activities					Adjustments to reconcile net income to net cash from operating activities
Stock-based compensation expense	Stock-based compensation expense	668		428		Stock-based compensation expense	979		650
Non-cash interest income accretion on mortgage loans	Non-cash interest income accretion on mortgage loans	(10,588)		(16,230)		Non-cash interest income accretion on mortgage loans	(15,495)		(22,765)
Interest and discount accretion on investment in debt securities	Interest and discount accretion on investment in debt securities	(5,074)		(2,718)		Interest and discount accretion on investment in debt securities	(8,159)		(5,074)
Discount accretion on investment in beneficial interests	Discount accretion on investment in beneficial interests	(8,213)		(5,104)		Discount accretion on investment in beneficial interests	(12,339)		(7,982)
Loss on sale of mortgage loans	Loss on sale of mortgage loans	0		705		Loss on sale of mortgage loans	—		705
Gain on refinancing of securitization trust 2017-D	Gain on refinancing of securitization trust 2017-D	(122)		0		Gain on refinancing of securitization trust 2017-D	(122)		—
Loss on debt extinguishment	Loss on debt extinguishment	1,072		408		Loss on debt extinguishment	1,072		661
Gain on sale of property held-for-sale	Gain on sale of property held-for-sale	(197)		(591)		Gain on sale of property held-for-sale	(572)		(957)
Gain on sale of securities						Gain on sale of securities	(201)		(145)
Depreciation of property	Depreciation of property	6		16		Depreciation of property	7		23
Impairment of real estate owned	Impairment of real estate owned	248		1,000		Impairment of real estate owned	170		1,155
(Increase) decrease in net present value of expected loan cash flows		(8,240)		94
Decrease in net present value of expected credit losses on loans						Decrease in net present value of expected credit losses on loans	(9,148)		(2,902)
Credit loss expense on mortgage loans	Credit loss expense on mortgage loans	593		503		Credit loss expense on mortgage loans	757		794
(Increase) in net present value of expected cash flows from beneficial interests		(2,009)		(245)
Decrease in net present value of expected credit losses on beneficial interests						Decrease in net present value of expected credit losses on beneficial interests	(4,779)		(1,688)
Credit loss expense on beneficial interests	Credit loss expense on beneficial interests	355		429		Credit loss expense on beneficial interests	440		570
Amortization of debt discount and prepaid financing costs	Amortization of debt discount and prepaid financing costs	3,285		2,589		Amortization of debt discount and prepaid financing costs	4,777		3,924
Undistributed (income)/loss from investment in affiliates	Undistributed (income)/loss from investment in affiliates	(520)		440		Undistributed (income)/loss from investment in affiliates	(610)		465
Fair value adjustment on put option liability	Fair value adjustment on put option liability	4,145		1,250		Fair value adjustment on put option liability	6,638		3,016
Other non-cash loan charges		7		0
Other non-cash charges						Other non-cash charges	(3)		—
Net change in operating assets and liabilities	Net change in operating assets and liabilities					Net change in operating assets and liabilities
Prepaid expenses and other assets	Prepaid expenses and other assets	(12,052)		(6,347)		Prepaid expenses and other assets	(8,759)		2,355
Receivable from Servicer	Receivable from Servicer	(8,152)		1,588		Receivable from Servicer	(2,373)		618
Accrued expenses, management fee payable, and other liabilities	Accrued expenses, management fee payable, and other liabilities	52		1,239		Accrued expenses, management fee payable, and other liabilities	12		1,316
Net cash from operating activities	Net cash from operating activities	(22,924)		(10,232)		Net cash from operating activities	(15,212)		(6,055)
CASH FLOWS FROM INVESTING ACTIVITIES	CASH FLOWS FROM INVESTING ACTIVITIES					CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of mortgage loans and related balances	Purchase of mortgage loans and related balances	(40,410)		(1,391)		Purchase of mortgage loans and related balances	(128,422)		(44,846)
Principal paydowns on mortgage loans	Principal paydowns on mortgage loans	102,178		60,812		Principal paydowns on mortgage loans	145,442		91,161
Proceeds from sale of mortgage loans	Proceeds from sale of mortgage loans	0		25,412		Proceeds from sale of mortgage loans	—		25,412
Proceeds from refinancing of securitization trust	Proceeds from refinancing of securitization trust	125,975		0		Proceeds from refinancing of securitization trust	125,975		—
Draws on small balance commercial loans	Draws on small balance commercial loans	(7,344)		0		Draws on small balance commercial loans	(10,366)		—
Purchase of securities	Purchase of securities	(231,555)		(61,306)		Purchase of securities	(286,461)		(144,682)
Principal and interest collection on debt securities	Principal and interest collection on debt securities	35,533		25,503		Principal and interest collection on debt securities	111,238		37,921
Proceeds from sale of securities		20,612		0
Proceeds from payoff and sale of securities						Proceeds from payoff and sale of securities	90,229		38,944
Proceeds from sale of property held-for-sale	Proceeds from sale of property held-for-sale	4,975		7,319		Proceeds from sale of property held-for-sale	5,835		9,101
Renovations and recovery costs of rental property and property held-for-sale	Renovations and recovery costs of rental property and property held-for-sale	0		7		Renovations and recovery costs of rental property and property held-for-sale	—		54
Distribution from affiliates	Distribution from affiliates	961		627		Distribution from affiliates	1,381		1,082
Net cash from investing activities	Net cash from investing activities	10,925		56,983		Net cash from investing activities	54,851		14,147
CASH FLOWS FROM FINANCING ACTIVITIES	CASH FLOWS FROM FINANCING ACTIVITIES					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.


Proceeds from repurchase transactions						Proceeds from repurchase transactions	376,301		270,019
Repayments on repurchase transactions	Repayments on repurchase transactions	(270,377)		(159,329)		Repayments on repurchase transactions	(398,093)		(268,714)
Proceeds from origination of secured borrowings	Proceeds from origination of secured borrowings	391,028		0		Proceeds from origination of secured borrowings	391,028		114,534
Repayments on secured borrowings	Repayments on secured borrowings	(312,506)		(44,478)		Repayments on secured borrowings	(354,990)		(153,932)
Payment of prepaid financing costs	Payment of prepaid financing costs	(7,303)		(34)		Payment of prepaid financing costs	(7,339)		(1,861)
Purchase of bonds of non-controlling interest in subsidiaries	Purchase of bonds of non-controlling interest in subsidiaries	(5,887)		0		Purchase of bonds of non-controlling interest in subsidiaries	(5,887)		—
Repurchase of the Company's senior convertible notes	Repurchase of the Company's senior convertible notes	(7,463)		(8,176)		Repurchase of the Company's senior convertible notes	(7,463)		(10,481)
Proceeds from issuance of preferred stock and warrants, net of offering costs	Proceeds from issuance of preferred stock and warrants, net of offering costs	0		124,977		Proceeds from issuance of preferred stock and warrants, net of offering costs	—		124,976
Sale of common stock, net of offering costs						Sale of common stock, net of offering costs	99		—
Sale of common stock pursuant to dividend reinvestment plan	Sale of common stock pursuant to dividend reinvestment plan	95		41		Sale of common stock pursuant to dividend reinvestment plan	166		86
Redemption of non-controlling interests in subsidiaries	Redemption of non-controlling interests in subsidiaries	(25,856)		0		Redemption of non-controlling interests in subsidiaries	(26,163)		—

Distribution to non-controlling interests	Distribution to non-controlling interests	(253)		(150)		Distribution to non-controlling interests	(325)		(227)
Issuance of non-controlling interests in subsidiaries	Issuance of non-controlling interests in subsidiaries	0		145		Issuance of non-controlling interests in subsidiaries	—		145
Dividends on common stock and preferred stock	Dividends on common stock and preferred stock	(12,125)		(5,748)		Dividends on common stock and preferred stock	(18,931)		(11,621)
Net cash from financing activities	Net cash from financing activities	(7,016)		52,498		Net cash from financing activities	(51,597)		62,924
NET CHANGE IN CASH, CASH EQUIVALENTS, AND CASH HELD IN TRUST	NET CHANGE IN CASH, CASH EQUIVALENTS, AND CASH HELD IN TRUST	(19,015)		99,249		NET CHANGE IN CASH, CASH EQUIVALENTS, AND CASH HELD IN TRUST	(11,958)		71,016
CASH, CASH EQUIVALENTS AND CASH HELD IN TRUST, beginning of period	CASH, CASH EQUIVALENTS AND CASH HELD IN TRUST, beginning of period	107,335		64,363		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	CASH, CASH EQUIVALENTS AND CASH HELD IN TRUST, end of period	$	88,320	$	163,612	CASH, CASH EQUIVALENTS AND CASH HELD IN TRUST, end of period	$	95,377	$	135,379
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION	SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION					SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest	Cash paid for interest	$	14,923	$	22,810	Cash paid for interest	$	22,151	$	32,511
Cash paid for income taxes	Cash paid for income taxes	$	57	$	0	Cash paid for income taxes	$	57	$	60
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES	SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES					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	$	0
Net transfer of loans from mortgage held-for-investment, net to mortgage loans held-for-sale, net						Net transfer of loans from mortgage held-for-investment, net to mortgage loans held-for-sale, net	$	159,733	$	—
Non-cash adjustments to basis in mortgage loans	Non-cash adjustments to basis in mortgage loans	$	3,193	$	35	Non-cash adjustments to basis in mortgage loans	$	3,193	$	43
Unrealized gain/(loss) on available for sale securities, net of non-controlling interest and tax	Unrealized gain/(loss) on available for sale securities, net of non-controlling interest and tax	$	1,276	$	(5,213)	Unrealized gain/(loss) on available for sale securities, net of non-controlling interest and tax	$	3,043	$	(876)
Net transfer of loans to rental property or property held-for-sale	Net transfer of loans to rental property or property held-for-sale	$	1,274	$	912	Net transfer of loans to rental property or property held-for-sale	$	3,013	$	1,515
Issuance of common stock for compensation expense	Issuance of common stock for compensation expense	$	668	$	428	Issuance of common stock for compensation expense	$	979	$	650
Treasury stock received through distributions from investment in Manager	Treasury stock received through distributions from investment in Manager	$	246	$	94	Treasury stock received through distributions from investment in Manager	$	380	$	164
Other non-cash loan charges		$	7	0
Issuance of common stock for dividends	Issuance of common stock for dividends	$	0	$	7,097	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	$	0

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~~September 30, 2021 and ~~June~~September 30, 2020 ($ in thousands):


		June 30, 2021		June 30, 2020			September 30, 2021		September 30, 2020
Cash and cash equivalents	Cash and cash equivalents	$	88,134	$	163,422	Cash and cash equivalents	$	92,843	$	135,190
Cash held in trust	Cash held in trust	186		190		Cash held in trust	2,534		189
Total cash and cash equivalents and restricted cash shown on the consolidated statements of cash flows	Total cash and cash equivalents and restricted cash shown on the consolidated statements of cash flows	$	88,320	$	163,612	Total cash and cash equivalents and restricted cash shown on the consolidated statements of cash flows	$	95,377	$	135,379

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 0 $ 0 0 $ 0 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 0 $ 0 0 $ 0 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


($ 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 nine months ended September 30, 2020
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)	($ 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		($ 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	Dividends declared ($0.17 per share) and distributions	—	—		—	—		—	—		—		—		(5,748)		—			(5,748)			(66)				(5,814)		Dividends declared ($0.17 per share) and distributions		—			—			—			—				—			—				—				—				(5,748)				—				(5,748)		(66)		(5,814)
Other comprehensive income	Other comprehensive income	—	—		—	—		—	—		—		—		—		23,231			23,231			—				23,231		Other comprehensive income		—			—			—			—				—			—				—				—				—				23,231				23,231		—		23,231
Treasury stock	Treasury stock	—	—		—	—		(5,478)	—		(50)		12		—		—			(38)			—				(38)		Treasury stock		—			—			—			—				(5,478)			—				(50)				12				—				—				(38)		—		(38)
Balance at June 30, 2020	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 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	Net income	—	—		—	—		—	—		—		—		8,953		—			8,953			1,689				10,642		Net income		—			—			—			—				—			—				—				—				7,230				—				7,230		1,662		8,892
Issuance of shares under dividend reinvestment plan	Issuance of shares under dividend reinvestment plan	—	—		—	—		4,228	—		—		47		—		—			47			—				47		Issuance of shares under dividend reinvestment plan		—			—			—			—				4,928			—				—				45				—				—				45		—		45
Acquisition of non-controlling interest in subsidiary		—	—		—	—		—	—		—		(3,056)		—		—			(3,056)			(8,306)				(11,362)
Stock-based compensation expense	Stock-based compensation expense	—	—		—	—		6,280	—		—		294		—		—			294			—				294		Stock-based compensation expense		—			—			—			—				111,950			1				—				221				—				—				222		—		222
Dividends declared ($0.17 per share) and distributions	Dividends declared ($0.17 per share) and distributions	—	—		—	—		—	—		—		—		(5,799)		—			(5,799)			(84)				(5,883)		Dividends declared ($0.17 per share) and distributions		—			—			—			—				—			—				—				—				(5,873)				—				(5,873)		(77)		(5,950)
Other comprehensive income	Other comprehensive income	—	—		—	—		—	—		—		—		—		1,306			1,306			—				1,306		Other comprehensive income		—			—			—			—				—			—				—				—				—				4,337				4,337		—		4,337
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
Treasury stock																			Treasury stock			—			—					—		—				(7,417)		—				(70)			—				—				—				(70)				—				(70)
Balance at September 30, 2020																			Balance at September 30, 2020			2,307,400			$	51,100				2,892,600		$	64,044			23,034,443		$	231			$	(634)		$	317,295			$	46,441			$	401			$	478,878			$	27,468			$	506,346

Balance at nine months ended September 30, 2021																			Balance at nine months ended September 30, 2021
Balance at December 31, 2020																			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	Net income	—	—		—	—		—	—		—		—		12,328		—			12,328			(1,158)				11,170		Net income		—			—			—			—				—			—				—				—				8,953				—				8,953		1,689		10,642

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


($ in thousands)	($ 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		($ 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																			Issuance of shares under dividend reinvestment plan			—			—					—		—			4,228		—			—			47			—			—			47			—			47
Acquisition of non-controlling interest in subsidiary																			Acquisition of non-controlling interest in subsidiary			—			—					—		—			—		—			—			(3,056)			—			—			(3,056)			(8,306)			(11,362)
Stock-based compensation expense																			Stock-based compensation expense			—			—					—		—			6,280		—			—			294			—			—			294			—			294
Dividends declared ($0.17 per share) and distributions																			Dividends declared ($0.17 per share) and distributions			—			—					—		—			—		—			—			—			(5,799)			—			(5,799)			(84)			(5,883)
Other comprehensive income																			Other comprehensive income			—			—					—		—			—		—			—			—			—			1,306			1,306			—			1,306
Balance at March 31, 2021																			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																			Net income			—			—					—		—			—		—			—			—			12,328			—			12,328			(1,158)			11,170
Issuance of shares under dividend reinvestment plan	Issuance of shares under dividend reinvestment plan	—	—		—	—		3,820	—		—		48		—		—			48			—				48		Issuance of shares under dividend reinvestment plan		—			—		—			—			3,820			—			—			48			—			—			48	—	48
Distribution to non-controlling interest	Distribution to non-controlling interest	—	—		—	—		—	—		—		0		—		—			0			(16,864)				(16,864)		Distribution to non-controlling interest		—			—		—			—			—			—			—			—			—			—			—	(16,864)	(16,864)
Stock-based compensation expense	Stock-based compensation expense	—	—		—	—		19,945	—		—		374		—		—			374			—				374		Stock-based compensation expense		—			—		—			—			19,945			—			—			374			—			—			374	—	374
Dividends declared ($0.19 per share) and distributions	Dividends declared ($0.19 per share) and distributions	—	—		—	—		—	—		—		—		(6,326)		—			(6,326)			(169)				(6,495)		Dividends declared ($0.19 per share) and distributions		—			—		—			—			—			—			—			—			(6,326)			—			(6,326)	(169)	(6,495)
Other comprehensive loss	Other comprehensive loss	—	—		—	—		—	—		—		—		—		(30)			(30)			—				(30)		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.


($ 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
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
Net income	—	—		—	—		—	—		—		—		11,262		—		11,262		(578)		10,684
Sale of shares	—	—		—	—		9,073	—		—		99		—		—		99		—		99
Issuance of shares under dividend reinvestment plan	—	—		—	—		5,049	—		—		71		—		—		71		—		71
Distribution to non-controlling interest	—	—		—	—		—	—		—		—		—		—		—		(307)		(307)
Stock-based compensation expense	—	—		—	—		142,557	1		—		310		—		—		311		—		311
Dividends declared ($0.21 per share) and distributions	—	—		—	—		—	—		—		—		(6,806)		—		(6,806)		(72)		(6,878)
Other comprehensive income	—	—		—	—		—	—		—		—		—		1,767		1,767		—		1,767
Treasury stock	—	—		—	—		(9,794)	—		(134)		—		—		—		(134)		—		(134)
Balance at September 30, 2021	2,307,400	$	51,100	2,892,600	$	64,044	23,140,131	$	232	$	(1,539)	$	315,611	$	66,958	$	3,418	$	499,824	$	3,281	$	503,105

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

910

GREAT AJAX CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

~~June~~September 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 5 of the 7 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 5 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 5 of the 7 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 5 payments has been paid in the last seven months. The Company may also opportunistically originate SBC loans with principal balances generally up to $5.0 million which are secured by multi-family residential and commercial mixed use retail/residential properties. 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~~The Company ~~has~~may also ~~targeted~~target investments in non-performing loans (“NPLs”). NPLs are loans on which the most recent 3 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~~and Great Ajax Depositor LLC are wholly owned ~~subsidiary~~subsidiaries 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~~September 30, 2021, held 99.9% of Great Ajax II REIT Inc. which ~~holds an interest in~~wholly owns Great Ajax II Depositor LLC which then 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 these 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"), as a wholly owned subsidiary of the Operating partnership to hold investments in multi-family, mixed use and 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 also 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.

1011

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~~September 30, 2021 the Company owned approximately ~~22.9%~~22.8% of Gaea. ~~From the date of~~Following the capital raise, ~~forward,~~ the Company ~~accounts~~has accounted for its ~~investment~~ownership interest 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 3 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~~wholly owns 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~~September 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~~third party investors for its consolidated subsidiaries.

During the second quarter of 2021, the majority of loans held by 2017-D were ~~resecuritized~~re-securitized 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~~September 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~~At September 30, 2021 ~~the~~there was no non-controlling ownership interest in 2018-C held by third ~~parties is 0.~~

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.parties.

The Company’s 19.8% ~~investment in~~ownership of the Manager and 8.0% ~~investment in~~ownership of 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.

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

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~~it 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 expected 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~~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 expected credit losses. Upon the acquisition of PCD loans the Company records the acquisition as three separate elements for 1)(i) the amount of purchase discount which the Company expects to recover through eventual repayment by the borrower, 2)(ii) an allowance for future expected credit loss and 3)(iii) 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~~it arises and ~~are~~is reflected as an increase or decrease in the provision for expected credit losses ~~even if~~to the extent a provision for expected credit losses is recorded against the pool of mortgage loans. If no provision ~~expense was previously~~for expected credit losses is recorded ~~due to~~against the ~~establishment~~pool of ~~loss reserves upon loan acquisition. Management assesses~~assets, the ~~credit quality of the portfolio and the adequacy of loan loss reserves on a quarterly basis, or more frequently~~increase in expected future cash flows is recognized prospectively as ~~necessary. Significant judgment is required~~an increase 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.yield.

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~~statement of ~~Cash Flows.~~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~~statement of ~~Cash Flows~~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~~statement of ~~Cash Flows.~~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 expected 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

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

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~~expected credit losses is established through a provision for loan ~~losses charged to expenses.~~losses. The allowance is the difference between the net 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 are expected 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.~~expense and each beneficial interest is accounted for independently.

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 may also ~~acquires~~acquire 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 up to 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

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

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~~expense when ~~incurred and amortized over the contractual life~~incurred.

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

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~~is 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 0.zero. There were no convertible note repurchases during the third quarter of 2021. 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 0,zero, respectively. There were no convertible note repurchases during the second quarter of 2020.

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

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

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~~preceding the record date ~~on which~~of the most recent regular quarterly dividend to holders of the common ~~stock is paid.~~stock. 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,~~awards, 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~~shares granted in 2021 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. The shares granted prior to 2021 vest over three years, with ~~one third~~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 or fourth anniversary of the grant ~~date.~~date, as determined by the contract.

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

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

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 periodically grants restricted common 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~~treasury stock method of accounting for ~~the~~its outstanding warrants. Under the ~~Treasury Stock~~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~~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.

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

•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's investments in beneficial interests are trust certificates representing the residual investment in securitization trusts the Company forms with joint venture partners. The trust certificates represent the residual investment in the trust. 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~~ownership interest in the Manager is valued by applying an earnings multiple to base fee revenue.

The Company's ~~investments~~ownership interests 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~~ownership interest in GAFS, including warrants, is determined by applying an earnings multiple to expected earnings.

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

The fair value of the Company's ~~investment~~ownership interest 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 fair value of the Company's put option liability is measured quarterly with adjustments posted to the Company's consolidated statements of income.

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.

1819

accrued interest beginning on April 30, 2022 subject to satisfying the conversion price trigger. The Company carries its 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,~~BPOs, 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 initially 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 ~~2 TRS entities,~~ GA-TRS and GAJX Real Estate Corp., and other TRS entities, which are subject to U.S. federal, state and local income taxes on their taxable income. Income from these 2 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~~in its 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~~$0.4 million and ~~$0.9~~$1.3 million for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively, from Net ~~increase~~decrease in the net present value of expected ~~cash flows~~credit losses 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~~nine months ended ~~June~~September 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~~$0.2 million for both the three and ~~six~~nine months ended ~~June~~September 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.

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

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~~or 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.~~permitted. 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~~September 30, 2021 and December 31, 2020 ($ in thousands):


							September 30, 2021				December 31, 2020
Loan portfolio basis by asset type	Loan portfolio basis by asset type	June 30, 2021		December 31, 2020		Loan portfolio basis by asset type	Mortgage loans held-for-investment, net		Mortgage loans held-for-sale, net		Mortgage loans held-for-investment, net		Mortgage loans held-for-sale, net
Residential RPLs	Residential RPLs	$	897,516	$	1,057,454	Residential RPLs	$	834,309	$	30,963	$	1,057,454	$	—
Residential NPLs	Residential NPLs	36,820		38,724		Residential NPLs	117,681		—		38,724		—
SBC loans	SBC loans	21,292		23,194		SBC loans	24,361		—		23,194		—
Total	Total	$	955,628	$	1,119,372	Total	$	976,351	$	30,963	$	1,119,372	$	—

Included on the Company’s consolidated balance sheets as of September 30, 2021 and December 31, 2020 are approximately $976.4 million and $1.1 billion, respectively, of RPLs, NPLs, and SBC loans that are held-for-investment and approximately $31.0 million and zero, respectively, of RPLs that are held-for-sale. At September 30, 2021 the Company reclassified $31.0 million of Mortgage loans held-for-investment to the Mortgage loans held-for-sale line in its consolidated

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

2021

~~Included on~~balance sheet. The Company intends to sell 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.~~ loans to a joint venture trust held with a third party institutional accredited investor.

The categorization of RPLs, NPLs and ~~SBCs~~SBC loans is determined at acquisition. The carrying value of RPLs, NPLs and ~~SBCs~~SBC loans 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~~September 30, 2021 and December 31, 2020 for the Company's loans in the table above are presented net of a cumulative allowance for ~~loan~~expected credit losses of ~~$9.8~~$13.9 million and $13.7 million, respectively, reflected in the appropriate lines in the table by loan type. For the three and ~~six~~nine months ended ~~June~~September 30, 2021, the Company recognized a ~~$2.7~~$0.9 million and ~~$8.2~~$9.1 million, respectively, of ~~accelerated~~ revenue during the three and ~~six~~nine month periods due to ~~an increase~~a net decrease in expected credit losses resulting from increases in the present value of the expected cash flows. For the three and ~~six~~nine months ended ~~June~~September 30, 2020, the Company recognized ~~$1.8~~$3.0 million and ~~$(0.1)~~$2.9 million, respectively, of ~~income and expense, respectively.~~revenue, respectively due to a net decrease in expected credit losses resulting from increases in the present value of the expected cash flows. For the three and ~~six~~nine months ended ~~June~~September 30, 2021, the Company accreted ~~$18.4~~$16.6 million and ~~$41.6~~$58.1 million, respectively, net of the impact of changes in expected credit ~~impairments and recoveries~~losses into interest income with respect to its RPL, NPL and SBC loans. For the three and ~~six~~nine months ended ~~June~~September 30, 2020, the Company accreted ~~$20.2~~$21.2 million and ~~$39.8~~$61.1 million, respectively, net of the impact of net changes in expected credit ~~impairments and recoveries~~losses 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~~using a constant prepayment ~~assumptions utilized in the expected cash flows.~~rate assumption. 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~~nine months ended ~~June~~September 30, 2021, the Company purchased 384 and ~~237~~241 RPLs with UPB of ~~$5.2~~$0.5 million and ~~$41.2~~$41.7 million, respectively. Comparatively, during the three and nine months ended September 30, 2020 the Company purchased 244 and 270 RPLs with UPB of $46.3 million and $48.2 million, respectively. During the three and nine months ended September 30, 2021, the Company purchased 364 and 367 NPLs with UPB of $90.9 million and $91.5 million, respectively. During the three and nine months ended September 30, 2020, 1 and 2 NPLs were purchased with UPB of $0.5 million and $0.7 million, respectively. The Company had 0 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 0 NPL acquisitions during the three months ended June 30, 2021; however, during the six months ended June 30, 2021, the Company purchased 3 NPLs with UPB of $0.7 million. During the three months ended June 30, 2020 0 NPLs were purchased, however, during the six months ended June 30, 2020 1 NPL was purchased with UPB of $0.2 million. The Company had 0no SBC acquisitions during the three months ended ~~June~~September 30, 2021; however, during the ~~six~~nine months ended ~~June~~September 30, 2021, the Company acquired 1 SBC loan with UPB of $3.6 million. ~~NaN~~Comparatively, during both the three and nine months ended September 30, 2020 2 SBC loans were acquired ~~during the three and six months ended June 30, 2020.~~with UPB of $1.9 million.

During the three ~~and six~~ months ended ~~June~~September 30, 2021, the Company ~~resecuritized~~sold no mortgage loans. During the nine months ended September 30, 2021, the Company re-securitized 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~~During the three months ended ~~June~~September 30, 2020 the Company sold 0no mortgage loans; however, during the ~~six~~nine months ended ~~June~~September 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 expected 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 45 and 6 pools at ~~June~~September 30, 2021 and December 31, 2020, respectively, to aggregate its portfolio of PCD loans, and 1 pool for its non-PCD loans as of both ~~June~~September 30, 2021 and December 31, 2020. Among the PCD loans, separate pools exist for loans that have been securitized in rated secured

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

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~~re-securitized 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. As of September 30, 2021 the loans pooled under Ajax N Trust were designated as held-for-sale while these loans were designated as held-for-investment as of June 30, 2021. 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~~September 30, 2021 and December 31, 2020 ($ in thousands):


		June 30, 2021																					September 30, 2021
		2021		2020		2019		2018		2017		2016		2009-2015		2006-2008		2005 and prior		Total
Mortgage loans held-for-investment, net																						Mortgage loans held-for-investment, net	2021		2020		2019		2018		2017		2016		2009-2015		2006-2008		2005 and prior		Total
Great Ajax II REIT	Great Ajax II REIT	$	0	$	755	$	180	$	707	$	488	$	2,010	$	50,595	$	374,493	$	137,438	$	566,666	Great Ajax II REIT	$	—	$	762	$	180	$	697	$	329	$	1,749	$	47,403	$	357,311	$	131,165	$	539,596
California	California	0		1,714		0		635		368		0		4,408		45,819		11,527		64,471		California	—		—		1,265		632		370		—		4,019		44,297		12,351		62,934
7f7 and better	7f7 and better	0		0		1,080		107		427		451		16,202		90,714		35,537		144,518		7f7 and better	—		—		933		108		435		449		14,274		95,403		32,125		143,727
4f4-6f6 and below	4f4-6f6 and below	0		110		1,733		2,060		195		146		23,445		89,161		34,687		151,537		4f4-6f6 and below	—		109		2,802		2,203		209		366		25,373		118,411		49,171		198,644
Non-PCD	Non-PCD	10,678		9,633		4,566		76		2,591		122		735		23		12		28,436		Non-PCD	13,686		9,621		4,580		78		2,592		124		733		24		12		31,450
Total	Total	$	10,678	$	12,212	$	7,559	$	3,585	$	4,069	$	2,729	$	95,385	$	600,210	$	219,201	$	955,628	Total	$	13,686	$	10,492	$	9,760	$	3,718	$	3,935	$	2,688	$	91,802	$	615,446	$	224,824	$	976,351

December 31, 2020
2020 2019 2018 2017 2016 2009-2015 2006-2008 2005 and prior Total
Great Ajax II REIT $ 0 $ 0 $ 257 $ 488 $ 1,991 $ 41,746 $ 280,606 $ 99,909 $ 424,997
2018-C 0 0 0 0 0 14,100 119,343 39,778 173,221
2017-D 0 0 0 121 0 6,826 94,711 32,238 133,896
California 2,221 952 1,484 362 0 5,292 60,393 18,084 88,788
7f7 and better 0 911 434 0 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


	September 30, 2021
Mortgage loans held-for-sale, net	2021		2020		2019		2018		2017		2016		2009-2015		2006-2008		2005 and prior		Total
Ajax N Trust	$	—	$	—	$	332	$	—	$	—	$	—	$	4,602	$	16,545	$	9,484	$	30,963
Total	$	—	$	—	$	332	$	—	$	—	$	—	$	4,602	$	16,545	$	9,484	$	30,963


	December 31, 2020
Mortgage loans held-for-investment, net	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 accompanying notes are an integral part of the consolidated interim financial statements.

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~~nine months ended ~~June~~September 30, 2021 and 2020 ($ in thousands):


		Three months ended June 30,								Six months ended June 30,									Three months ended September 30,								Nine months ended September 30,
		2021				2020				2021				2020					2021				2020				2021				2020
		PCD Loans		Non-PCD Loans		PCD Loans		Non-PCD Loans		PCD Loans		Non-PCD Loans		PCD Loans		Non-PCD Loans			PCD Loans		Non-PCD Loans		PCD Loans		Non-PCD Loans		PCD Loans		Non-PCD Loans		PCD Loans		Non-PCD Loans
Par	Par	$	5,157	$	0	$	0	$	0	$	41,853	$	3,611	$	227	$	1,952	Par	$	91,392	$	—	$	46,811	$	1,859	$	133,245	$	3,611	$	47,038	$	3,811
Discount		(390)		0		0		0		(3,319)		(8)		(37)		(747)
Premium/(discount)																		Premium/(discount)	2,582		—		(3,901)		(41)		(737)		(8)		(3,938)		(788)
Allowance	Allowance	6		0		0		0		(1,727)		0		(4)		0		Allowance	(5,962)		—		(1,272)		—		(7,689)		—		(1,276)		—
Purchase Price	Purchase Price	$	4,773	$	0	$	0	$	0	$	36,807	$	3,603	$	186	$	1,205	Purchase Price	$	88,012	$	—	$	41,638	$	1,818	$	124,819	$	3,603	$	41,824	$	3,023

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~~expected credit losses when there are changes in its expectation of future cash flows. An increase to the allowance for expected credit 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~~an allowance for expected credit loss. A decrease in the allowance for expected credit losses is generally facilitated by reclassifying amounts to non-credit discount from the allowance and then recording the recovery. During the three months ended September 30, 2021 the Company recorded a $1.2 million reclassification to non-credit discount from the allowance for expected credit losses, and during the nine months ended September 30, 2021 the Company recorded a $2.6 million reclassification from non-credit discount to the allowance for expected credit losses. This was followed by a $0.9 million and $9.1 million reduction of the allowance for expected credit losses, respectively, due to increases in the net present value of expected cash flows. During the three and nine months ended September 30, 2021, the Company also recorded a $6.0 million and $7.7 million increase, respectively, in the allowance for expected credit losses due to new acquisitions. Comparatively, during the three and nine months ended September 30, 2020 the Company recorded a $2.1 million and $3.9 million reclassification, respectively, from non-credit discount to the allowance for expected credit losses followed by a $3.0 million and $2.9 million reduction of allowance for expected credit losses, respectively, due to increases in the net present value of expected cash flows. During the three and nine months ended September 30, 2020, the Company also recorded a $1.3 million increase in the allowance for expected credit losses due to new acquisitions. An analysis of the balance in the allowance for expected credit losses account follows ($ in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Allowance for expected credit losses, beginning of period	$	(9,833)	$	(14,450)	$	(13,712)	$	(1,960)
Beginning period adjustment for CECL adoption	—		—		—		(10,156)
Reclassification to/(from) non-credit discount from/(to) the allowance for changes in payment expectations	1,175		(2,137)		(2,607)		(3,870)
Increase in allowance for expected credit losses for loan acquisitions	(5,962)		(1,272)		(7,689)		(1,276)
Credit loss expense on mortgage loans	(164)		(291)		(757)		(794)
Reversal of allowance for expected credit losses due to increases in the net present value of expected cash flows	908		2,996		9,148		2,902
Reversal of allowance upon reclass of pool 2017-D to mortgage loans held-for-sale, net	—		—		1,741		—
Allowance for expected credit losses, end of period	$	(13,876)	$	(15,154)	$	(13,876)	$	(15,154)

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

2224

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 0 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 0 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 0 0 0 (10,156)
Reclassification from non-credit discount to the allowance for changes in payment expectations 5,450 0 (3,782) 0
Decrease/(increase) in allowance for loan credit losses for loan acquisitions 6 0 (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 0 161 0 (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 0 0 1,741 0
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~~September 30, 2021 and December 31, 2020 ($ in thousands):


		June 30, 2021													September 30, 2021
		Current		30		60		90		Foreclosure		Total
Mortgage loans held-for-investment, net														Mortgage loans held-for-investment, net	Current		30		60		90		Foreclosure		Total
Great Ajax II REIT	Great Ajax II REIT	$	505,442	$	19,500	$	8,650	$	31,676	$	1,398	$	566,666	Great Ajax II REIT	$	474,914	$	22,649	$	11,594	$	28,018	$	2,421	$	539,596
California	California	22,095		5,956		5,280		25,756		5,384		64,471		California	28,456		4,880		5,270		17,436		6,892		62,934
7f7 and better	7f7 and better	66,973		22,767		12,810		39,698		2,270		144,518		7f7 and better	68,210		21,403		15,374		38,299		441		143,727
4f4-6f6 and below	4f4-6f6 and below	22,274		4,634		6,844		81,621		36,164		151,537		4f4-6f6 and below	24,164		4,271		5,331		113,691		51,187		198,644
Non-PCD	Non-PCD	27,687		65		0		47		637		28,436		Non-PCD	30,707		—		12		84		647		31,450
Total	Total	$	644,471	$	52,922	$	33,584	$	178,798	$	45,853	$	955,628	Total	$	626,451	$	53,203	$	37,581	$	197,528	$	61,588	$	976,351


	September 30, 2021
Mortgage loans held-for-sale, net	Current		30		60		90		Foreclosure		Total
Ajax N Trust	$	16,940	$	1,899	$	1,338	$	9,108	$	1,678	$	30,963
Total	$	16,940	$	1,899	$	1,338	$	9,108	$	1,678	$	30,963

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


		December 31, 2020													December 31, 2020
		Current		30		60		90		Foreclosure		Total
Mortgage loans held-for-investment, net														Mortgage loans held-for-investment, net	Current		30		60		90		Foreclosure		Total
Great Ajax II REIT	Great Ajax II REIT	$	311,941	$	48,266	$	19,559	$	43,364	$	1,867	$	424,997	Great Ajax II REIT	$	311,941	$	48,266	$	19,559	$	43,364	$	1,867	$	424,997
2018-C	2018-C	70,034		20,541		15,300		57,538		9,808		173,221		2018-C	70,034		20,541		15,300		57,538		9,808		173,221
2017-D	2017-D	58,198		24,906		12,437		36,106		2,249		133,896		2017-D	58,198		24,906		12,437		36,106		2,249		133,896
California	California	42,214		7,660		5,519		29,343		4,052		88,788		California	42,214		7,660		5,519		29,343		4,052		88,788
7f7 and better	7f7 and better	72,613		14,003		12,447		41,383		1,789		142,235		7f7 and better	72,613		14,003		12,447		41,383		1,789		142,235
4f4-6f6 and below	4f4-6f6 and below	13,976		10,773		7,157		68,677		26,231		126,814		4f4-6f6 and below	13,976		10,773		7,157		68,677		26,231		126,814
Non-PCD	Non-PCD	22,562		6,099		56		704		0		29,421		Non-PCD	22,562		6,099		56		704		—		29,421
Total	Total	$	591,538	$	132,248	$	72,475	$	277,115	$	45,996	$	1,119,372	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~~September 30, 2021 and December 31, 2020, the Company’s net investments in real estate owned properties were ~~$4.8~~$6.1 million and $8.5 million, respectively, which included balances relating to properties held-for-sale of ~~$4.4~~$6.1 million and $7.8 million, respectively, and rental properties of ~~$0.4 million~~zero and $0.7 million, respectively. Also, included in the properties held-for-sale balance for ~~both~~the periods as of ~~June~~September 30, 2021 and December 31, 2020, was $0.4 million and $0.3 million, respectively, for properties undergoing renovation or which are otherwise in the process of being brought to market. As of ~~June~~September 30, 2021 and December 31, 2020, the Company had a total of 2531 and 38 real estate owned properties, respectively, which included 2031 and 32 held-for-sale properties, respectively, and 5zero and 6 rental properties, respectively. For the ~~six~~nine months ended ~~June~~September 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 accompanying notes are an integral part of the consolidated interim financial statements.

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~~nine months ended ~~June~~September 30, 2021 and 2020 ($ in thousands):


		Three months ended June 30,						Six months ended June 30,							Three months ended September 30,						Nine months ended September 30,
		2021			2020			2021			2020				2021			2020			2021			2020
Property Held-for-sale and Rental Property		Count	Amount		Count	Amount		Count	Amount		Count	Amount
Property Held-for-Sale and Rental Property														Property Held-for-Sale and Rental Property	Count	Amount		Count	Amount		Count	Amount		Count	Amount
Balance at beginning of period	Balance at beginning of period	31	$	7,098	54	$	12,250	38	$	8,526	68	$	15,071	Balance at beginning of period	25	$	4,768	42	$	8,233	38	$	8,526	68	$	15,071
Net transfers from mortgage loans	Net transfers from mortgage loans	5	1,046		2	98		7	1,274		7	912		Net transfers from mortgage loans	10	1,739		5	603		17	3,013		12	1,515
Adjustments to record at lower of cost or fair value	Adjustments to record at lower of cost or fair value	0	(77)		0	(103)		0	(248)		0	(1,000)		Adjustments to record at lower of cost or fair value	—	78		—	(156)		—	(170)		—	(1,156)
Depreciation on rental properties	Depreciation on rental properties	0	(3)		0	(8)		0	(6)		0	(16)		Depreciation on rental properties	—	(1)		—	(7)		—	(7)		—	(23)
Disposals	Disposals	(11)	(3,296)		(14)	(3,997)		(20)	(4,778)		(33)	(6,727)		Disposals	(4)	(487)		(7)	(1,416)		(24)	(5,265)		(40)	(8,143)
Other	Other	0	0		0	(7)		0	0		0	(7)		Other	—	—		—	(49)		—	—		—	(56)
Balance at end of period	Balance at end of period	25	$	4,768	42	$	8,233	25	$	4,768	42	$	8,233	Balance at end of period	31	$	6,097	40	$	7,208	31	$	6,097	40	$	7,208

Dispositions

During the three and ~~six~~nine months ended ~~June~~September 30, 2021, the Company sold 114 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 3324 REO properties, respectively, realizing net gains of approximately $0.4 million and ~~$0.8~~$0.6 million, respectively. Comparatively, for the three and nine months ended September 30, 2020, the Company sold 7 and 40 REO properties, respectively, realizing net gains of approximately $0.2 million and $1.0 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~~nine months ended ~~June~~September 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.~~

nine months ended ~~June~~September 30, 2020, the Company recorded lower of cost or net realizable value adjustments of ~~$0.1~~$0.2 million and ~~$1.0~~$1.2 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									As of September 30, 2021
		Basis(1)		Gross unrealized gains		Gross unrealized losses		Carrying value (fair value)			Basis(1)		Gross unrealized gains		Gross unrealized losses		Carrying value
Debt securities	Debt securities	$	422,981	$	1,877	$	(226)	$	424,632	Debt securities	$	336,664	$	3,621	$	(203)	$	340,082
Beneficial interests in securitization trusts	Beneficial interests in securitization trusts	133,484		0		0		133,484		Beneficial interests in securitization trusts	139,494		—		—		139,494
Total investments	Total investments	$	556,465	$	1,877	$	(226)	$	558,116	Total investments	$	476,158	$	3,621	$	(203)	$	479,576

(1)Basis amount is net of amortized discount, allowance for expected credit losses, principal paydowns and interest receivable on securities of ~~$0.3~~$0.2 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 0 0 91,418
Total investments $ 364,877 $ 1,152 $ (777) $ 365,252

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


	As of December 31, 2020
	Basis(1)		Gross unrealized gains		Gross unrealized losses		Carrying 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


	As of September 30, 2021
	Step-up date(1)	Basis(2)		Gross unrealized losses		Carrying value
Debt securities due September 2059(3)	April 2023	$	9,159	$	(203)	$	8,956
Total		$	9,159	$	(203)	$	8,956

(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~~security has 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								As of December 31, 2020
		Step-up date(1)	Basis(2)		Gross unrealized losses		Carrying value (fair value)			Step-up date(1)	Basis(2)		Gross unrealized losses		Carrying value
Debt securities due September 2059(3)	Debt securities due September 2059(3)	February 2023/April 2023	$	22,216	$	(238)	$	21,978	Debt securities due September 2059(3)	February 2023/April 2023	$	22,216	$	(238)	$	21,978
Debt securities due November 2059(4)	Debt securities due November 2059(4)	April 2023	14,738		(61)		14,677		Debt securities due November 2059(4)	April 2023	14,738		(61)		14,677
Debt securities due December 2059(4)	Debt securities due December 2059(4)	July 2023	47,270		(315)		46,955		Debt securities due December 2059(4)	July 2023	47,270		(315)		46,955
Debt securities due September 2060(4)	Debt securities due September 2060(4)	March 2024	34,970		(44)		34,926		Debt securities due September 2060(4)	March 2024	34,970		(44)		34,926
Debt securities due June 2060(4)	Debt securities due June 2060(4)	March 2024	35,127		(119)		35,008		Debt securities due June 2060(4)	March 2024	35,127		(119)		35,008
Total	Total		$	154,321	$	(777)	$	153,544	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~~September 30, 2021, the Company recorded ~~$1.9~~$3.6 million of 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 aton investments with a fair value of ~~$424.6~~$340.1 million, which includes ~~$0.3~~$0.2 million in interest receivable. As of December 31, 2020, the Company recorded $1.2 million of 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 aton investments with a fair value of $273.8 million, which includes $0.2 million in interest receivable.

During ~~both~~ the three and ~~six~~nine months ended ~~June~~September 30, 2021, the Company acquired ~~$232.9~~$54.7 million and $287.6 million, respectively, in aggregate of debt securities and beneficial interests issued by joint ventures between the Company and third party institutional accredited investors. ~~Each~~The joint ~~venture~~ventures issued senior notes and beneficial ~~interests, which are trust certificates representing the residual investment in the trust.~~interests. In certain transactions, the joint ventures also issued subordinated notes. Of the ~~$232.9~~$54.7 million ~~acquired in both the three~~ and ~~six months ended June 30, 2021,~~$287.6 million, respectively, the Company acquired ~~$170.0~~$43.2 million and $213.1 million, respectively, in senior notes, ~~$23.5~~$8.3 million inand $31.8 million, respectively, of subordinate notes and ~~$39.5~~$3.2 million and $42.7 million, respectively, in beneficial ~~interest~~interests issued by joint ventures. Comparatively, during the three and ~~six~~nine months ended ~~June~~September 30, 2020, the Company acquired 0$83.4 million and ~~$61.3~~$144.7 million, respectively, in aggregate 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 ~~$61.3~~$83.4 million and $144.7 million, respectively, of debt securities acquired in the ~~six~~three and nine months ended ~~June~~September 30, 2020, respectively, the Company acquired ~~$49.6~~$66.0 million and $115.6 million, respectively, in

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

senior notes, ~~$4.6~~$5.2 million and $9.8 million, respectively, in subordinate notes and ~~$7.1~~$12.2 million and $19.3 million, respectively, in beneficial interests issued by joint ventures. As of ~~June~~September 30, 2021, the investments in debt securities and beneficial interests were carried on the Company's consolidated balance sheet at ~~$424.6~~$340.1 million and ~~$133.5~~$139.5 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~~September 30, 2021 and December 31, 2020, the Company had 0no 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~~nine months ended ~~June~~September 30, 2021 and 2020 ($ in thousands):


		Three months ended June 30,				Six months ended June 30,					Three months ended September 30,				Nine months ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Par	Par	$	46,485	$	0	$	46,485	$	11,970	Par	$	5,177	$	15,349	$	51,662	$	27,319
Discount	Discount	(5,425)		0		(5,425)		(2,335)		Discount	(1,346)		(2,899)		(6,771)		(5,234)
Allowance	Allowance	(1,593)		0		(1,593)		(2,553)		Allowance	(618)		(225)		(2,211)		(2,778)
Purchase Price(1)	Purchase Price(1)	$	39,467	$	0	$	39,467	$	7,082	Purchase Price(1)	$	3,213	$	12,225	$	42,680	$	19,307

(1)During the quarter ended September 30, 2021, the Company acquired Class XS, an interest only class, in Ajax Mortgage Loan Trust 2021-E. Class XS is entitled to receive the spread between the interest income on the underlying mortgage loans and the interest expense on the bonds outstanding. Because Class XS has no stated principal balance, the sum of the contractual cash flows is presented as par.

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 expected 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 generally 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 expected credit losses when there is a reduction in the Company’s expected future cash ~~flows.~~flows compared to contractual amounts due. Income will be recognized if there is an increase in expected future cash ~~flows.~~flows to the extent an allowance has been recorded against the beneficial interest. If there is no allowance for expected credit losses recorded against a beneficial interest, any increase in expected cash flows is recognized prospectively as a change in yield. A decrease in the allowance for expected credit losses is generally facilitated by reclassifying amounts ~~from~~to non-credit discount tofrom 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~~nine months ended ~~June~~September 30, 2021, the Company recorded ~~$2.0 million reversal~~reversals of the allowance for expected credit losses for beneficial ~~interests.~~interests of $2.8 million and $4.8 million, respectively. During the three and ~~six~~nine months ended ~~June~~September 30, 2020, the Company recorded reversals of the allowance for expected credit losses for beneficial interests of ~~$3.1~~$1.4 million and ~~$0.2~~$1.7 million, respectively. An analysis of the balance in the allowance for expected credit losses for beneficial ~~interest losses~~interests account follows ($ 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) $ 0
Beginning period adjustment for CECL adoption 0 0 0 (1,668)
Incremental change in allowance for beneficial interests 2,388 0 1,435 0
Increase in allowance for beneficial interest credit losses for acquisitions (1,593) 0 (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 0 (2,553) 0 (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)


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Allowance for expected credit losses, beginning balance	$	(2,959)	$	(6,959)	$	(4,453)	$	—
Beginning period adjustment for CECL adoption	—		—		—		(1,668)
Reclassification to/(from) non-credit discount from/(to) the allowance for changes in payment expectations	274		—		1,709		(2,553)
Increase in allowance for expected credit losses for acquisitions	(618)		(225)		(2,211)		(2,778)
Credit loss expense on beneficial interests	(85)		(141)		(440)		(570)
Reversal of allowance for expected credit losses due to increases in the net present value of expected cash flows	2,770		1,443		4,777		1,687
Allowance for expected credit losses, ending balance	$	(618)	$	(5,882)	$	(618)	$	(5,882)

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

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~~September 30, 2021 and December 31, 2020 ($ in thousands):


				Level 1		Level 2		Level 3					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
September 30, 2021										September 30, 2021	Carrying value		Quoted prices in active markets		Observable inputs other than Level 1 prices		Unobservable inputs
Recurring financial assets	Recurring financial assets									Recurring financial assets
Investment in debt securities at fair value	Investment in debt securities at fair value	$	424,632	$	0	$	424,632	$	0	Investment in debt securities at fair value	$	340,082	$	—	$	340,082	$	—
Recurring financial liabilities	Recurring financial liabilities									Recurring financial liabilities
Put option liability	Put option liability	$	18,350	$	0	$	0	$	18,350	Put option liability	$	20,843	$	—	$	—	$	20,843

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 $ 0 $ 273,834 $ 0
Recurring financial liabilities
Put option liability $ 14,205 $ 0 $ 0 $ 14,205

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


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


				Level 1		Level 2		Level 3					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
September 30, 2021										September 30, 2021	Carrying value		Quoted prices in active markets		Observable inputs other than Level 1 prices		Unobservable inputs
Financial assets	Financial assets									Financial assets
Mortgage loans, net		$	955,628	$	0	$	0	$	1,043,197
Investments in beneficial interests		$	133,484	$	0	$	0	$	133,484
Mortgage loans held-for-investment, net										Mortgage loans held-for-investment, net	$	976,351	$	—	$	—	$	1,059,040
Mortgage loans held-for-sale, net										Mortgage loans held-for-sale, net	$	30,963	$	—	$	—	$	33,429
Investment in beneficial interests										Investment in beneficial interests	$	139,494	$	—	$	—	$	139,494
Investment in Manager	Investment in Manager	$	1,571	$	0	$	0	$	11,794	Investment in Manager	$	1,569	$	—	$	—	$	12,379
Investment in AS Ajax E LLC	Investment in AS Ajax E LLC	$	683	$	0	$	825	$	0	Investment in AS Ajax E LLC	$	611	$	—	$	761	$	—
Investment in AS Ajax E II LLC	Investment in AS Ajax E II LLC	$	2,840	$	0	$	3,012	$	0	Investment in AS Ajax E II LLC	$	2,755	$	—	$	2,958	$	—
Investment in GAFS, including warrants	Investment in GAFS, including warrants	$	2,656	$	0	$	0	$	3,320	Investment in GAFS, including warrants	$	2,619	$	—	$	—	$	3,320
Investment in Gaea	Investment in Gaea	$	19,818	$	0	$	0	$	19,991	Investment in Gaea	$	19,670	$	—	$	—	$	20,287
Investment in Loan pool LLCs	Investment in Loan pool LLCs	$	361	$	0	$	0	$	724	Investment in Loan pool LLCs	$	240	$	—	$	—	$	672
Financial liabilities	Financial liabilities									Financial liabilities
Secured borrowings, net	Secured borrowings, net	$	653,948	$	0	$	667,565	$	0	Secured borrowings, net	$	612,592	$	—	$	624,743	$	—
Borrowings under repurchase transactions	Borrowings under repurchase transactions	$	394,386	$	0	$	394,386	$	0	Borrowings under repurchase transactions	$	399,340	$	—	$	399,340	$	—
Convertible senior notes, net	Convertible senior notes, net	$	103,427	$	111,693	$	0	$	0	Convertible senior notes, net	$	103,754	$	111,227	$	—	$	—

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 $ 0 $ 0 $ 1,232,081
Investment in beneficial interests $ 91,418 $ 0 $ 0 $ 91,418
Investment in Manager $ 1,366 $ 0 $ 0 $ 11,709
Investment in AS Ajax E LLC $ 776 $ 0 $ 934 $ 0
Investment in AS Ajax E II LLC $ 3,381 $ 0 $ 3,484 $ 0
Investment in GAFS, including warrants $ 2,711 $ 0 $ 0 $ 3,320
Investment in Gaea $ 20,001 $ 0 $ 0 $ 19,150
Investment in Loan pool LLCs $ 381 $ 0 $ 0 $ 701
Financial liabilities
Secured borrowings, net $ 585,403 $ 0 $ 586,419 $ 0
Borrowings under repurchase agreement $ 421,132 $ 0 $ 421,132 $ 0
Convertible senior notes, net $ 110,057 $ 110,675 $ 0 $ 0

~~During~~

The accompanying notes are an integral part of 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~~interim 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.~~


			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 held-for-investment, 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	$	—	$	—

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's ~~investment~~ownership interest in the Manager is valued by applying an earnings multiple to base fee revenue.

The Company’s ~~investments~~ownership interests 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~~ownership interest in GAFS, including warrants, is determined by applying an earnings multiple to expected earnings.

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

The fair value of the Company's ~~investment~~ownership interest 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 Company's put option liability is adjusted to approximate market value through ~~earnings.The~~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.

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

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 fair value of the Company's put option liability is measured quarterly with adjustments posted to the Company's consolidated statements of income.

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 itits 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,~~BPOs, 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~~September 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							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
September 30, 2021												September 30, 2021	Carrying value		Nine 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	Non-financial assets											Non-financial assets
Property held-for-sale	Property held-for-sale	$	4,409	$	(248)	$	0	$	0	$	4,409	Property held-for-sale	$	6,097	$	(170)	$	—	$	—	$	6,097


						Level 1		Level 2		Level 3							Level 1		Level 2		Level 3
December 31, 2020	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		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	Non-financial assets											Non-financial assets
Property held-for-sale	Property held-for-sale	$	7,807	$	(1,359)	$	0	$	0	$	7,807	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~~September 30, 2021 the Company owned approximately ~~22.9%~~22.8% of Gaea with third party investors owning the remaining approximately ~~77.1%~~77.2%. The Company accounts for its ~~investment~~ownership interest in Gaea using the equity method.

During the year ended December 31, 2019, the Company acquired a cumulative 40.4% average ownership interest in 3 loan pool LLCs managed by the Servicer for $1.0 million, which hold investments in RPLs and NPLs. The Company accounts for its ~~investment~~ownership interest using the equity method.

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

During 2018, the Company acquired an 8.0% ownership interest in GAFS. The acquisition was completed in 2 transactions. On January 26, 2018, the Company in an initial closing acquired a 4.9% interest in GAFS and 3 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 3 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~~ownership interest 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 LLC was reduced to a lower percentage of the total. As of ~~June~~September 30, 2021 and December 31, 2020, the Company’s ownership interest in AS Ajax E LLC was approximately 16.5%. The Company accounts for its ~~investment~~ownership interest 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~~ownership interest 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%


	Three months ended September 30,				Nine months ended September 30,
Net income/(loss) at 100%	2021		2020		2021		2020
Thetis Asset Management LLC	$	665	$	378	$	2,945	$	(1,837)
AS Ajax E LLC	$	66	$	52	$	162	$	151
Loan pool LLCs	$	(41)	$	(114)	$	(92)	$	27
Gaea Real Estate Corp.	$	(123)	$	60	$	136	$	320
Great Ajax FS LLC	$	(460)	$	(1,454)	$	(1,148)	$	(4,004)


	September 30, 2021				December 31, 2020
Assets and Liabilities at 100%	Assets		Liabilities		Assets		Liabilities
Thetis Asset Management LLC	$	10,524	$	2,378	$	9,531	$	2,122
AS Ajax E LLC	$	3,797	$	2	$	4,808	$	2
Loan pool LLCs	$	2,234	$	4,018	$	2,423	$	3,961
Gaea Real Estate Corp.	$	92,877	$	11,270	$	94,639	$	11,886
Great Ajax FS LLC	$	54,529	$	35,251	$	56,532	$	36,101

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

3032

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,					Three months ended September 30,				Nine months ended September 30,
Net income/(loss) at the Company's share	Net income/(loss) at the Company's share	2021		2020		2021		2020		Net income/(loss) at the Company's share	2021		2020		2021		2020
Thetis Asset Management LLC	Thetis Asset Management LLC	$	283	$	527	$	451	$	(439)	Thetis Asset Management LLC	$	132	$	75	$	583	$	(364)
AS Ajax E LLC										AS Ajax E LLC	$	11	$	9	$	27	$	25
Loan pool LLCs										Loan pool LLCs	$	(16)	$	(46)	$	(37)	$	10
Gaea Real Estate Corp.	Gaea Real Estate Corp.	$	42	$	56	$	60	$	60	Gaea Real Estate Corp.	$	(28)	$	14	$	32	$	74
Great Ajax FS LLC	Great Ajax FS LLC	$	7	$	72	$	(55)	$	(204)	Great Ajax FS LLC	$	(37)	$	(116)	$	(92)	$	(320)
AS Ajax E LLC		$	7	$	6	$	16	$	16
Loan pool LLCs		$	(14)	$	(23)	$	(21)	$	56


		June 30, 2021				December 31, 2020					September 30, 2021				December 31, 2020
Assets and Liabilities at the Company's share	Assets and Liabilities at the Company's share	Assets		Liabilities		Assets		Liabilities		Assets and Liabilities at the Company's share	Assets		Liabilities		Assets		Liabilities
Thetis Asset Management LLC	Thetis Asset Management LLC	$	1,992	$	358	$	1,887	$	420	Thetis Asset Management LLC	$	2,084	$	471	$	1,887	$	420
AS Ajax E LLC										AS Ajax E LLC	$	625	$	—	$	791	$	—
Loan pool LLCs										Loan pool LLCs	$	897	$	1,619	$	973	$	1,595
Gaea Real Estate Corp.	Gaea Real Estate Corp.	$	20,665	$	1,816	$	21,729	$	2,729	Gaea Real Estate Corp.	$	21,195	$	2,572	$	21,729	$	2,729
Great Ajax FS LLC	Great Ajax FS LLC	$	3,900	$	2,321	$	4,523	$	2,888	Great Ajax FS LLC	$	4,362	$	2,820	$	4,523	$	2,888
AS Ajax E LLC		$	697	$	0	$	791	$	0
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~~September 30, 2021, AS Ajax E II LLC was 53.1% owned by the Company, with the remainder held by ~~third-parties.~~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~~was re-securitized into 2021-C, a related party joint venture with third party institutional investors. ~~The~~At September 30, 2021, the Company held a 50.0% ownership ofin the remaining loans held by ~~2017-D at June 30, 2021.~~2017-D. Great Ajax II REIT ~~holds an interest in~~owns 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~~September 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~~September 30, 2021, 2018-C was 100.0% owned by the Company and the previous non-controlling interest had been reduced to 0.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~~September 30, 2021, the Company had commitments to purchase, subject to due diligence, ~~1,489~~161 RPLs and NPLs secured by single-family residences with aggregated UPB of ~~$287.6~~$49.0 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

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

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~~September 30, 2021 for the present value of the put liability of ~~$18.4~~$20.8 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,					Three months ended September 30,				Nine months ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Beginning balance	Beginning balance	$	16,149	$	0	$	14,205	$	0	Beginning balance	$	18,350	$	10,722	$	14,205	$	—
Initial recognition of put option liability	Initial recognition of put option liability	0		9,472		0		9,472		Initial recognition of put option liability	—		—		—		9,472
Fair value adjustments during the period	Fair value adjustments during the period	2,201		1,250		4,145		1,250		Fair value adjustments during the period	2,493		1,766		6,638		3,016
Ending balance	Ending balance	$	18,350	$	10,722	$	18,350	$	10,722	Ending balance	$	20,843	$	12,488	$	20,843	$	12,488

The full extent of the impact of the COVID-19 pandemic on the global economy generally, and the Company's business in particular, iscontinues to be uncertain. As of ~~June~~September 30, 2021, 0no contingencies have been recorded on the Company's consolidated balance sheet as a result of the COVID-19 pandemic, 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~~September 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 2 repurchase facilities whereby the Company, through 2 wholly owned Delaware trusts (the “Trusts”) acquires pools of mortgage loans which are then sold by the Trusts, as “Seller” to 2 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~~$150.0 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 5 repurchase facilities substantially similar to the mortgage loan repurchase facilities, but where the pledged assets are ~~the class B bonds and certificates~~securities retained from the Company's ~~secured borrowing~~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. 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.~~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

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

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 %


				September 30, 2021
Maturity Date	Origination Date	Maximum Borrowing Capacity		Amount Outstanding		Amount of Collateral		Percentage of Collateral Coverage		Interest Rate
October 5, 2021	April 9, 2021	$	31,326	$	31,326	$	37,953	121	%	1.41	%
October 6, 2021	July 6, 2021	7,073		7,073		8,745		124	%	1.34	%
October 6, 2021	July 6, 2021	4,150		4,150		5,057		122	%	1.34	%
October 6, 2021	July 6, 2021	3,343		3,343		4,761		142	%	1.74	%
October 12, 2021	July 12, 2021	5,242		5,242		6,572		125	%	1.32	%
October 15, 2021	July 15, 2021	5,553		5,553		6,627		119	%	1.18	%
October 20, 2021	July 20, 2021	10,879		10,879		12,889		118	%	1.18	%
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	%
October 29, 2021	July 30, 2021	9,984		9,984		12,436		125	%	1.33	%
October 29, 2021	July 30, 2021	9,840		9,840		11,851		120	%	1.33	%
November 12, 2021	August 12, 2021	3,110		3,110		4,428		142	%	1.72	%
November 19, 2021	August 19, 2021	9,747		9,747		12,635		130	%	1.33	%
November 24, 2021	August 24, 2021	3,543		3,543		5,106		144	%	1.73	%
December 7, 2021	September 7, 2021	5,825		5,825		7,444		128	%	1.12	%
December 7, 2021	September 7, 2021	2,311		2,311		2,848		123	%	1.12	%
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		8,682		121	%	1.15	%
December 16, 2021	September 16, 2021	44,200		44,200		57,815		131	%	1.12	%
December 16, 2021	September 16, 2021	4,333		4,333		6,232		144	%	1.37	%
December 17, 2021	September 17, 2021	7,333		7,333		9,556		130	%	1.32	%
December 17, 2021	September 17, 2021	6,687		6,687		8,451		126	%	1.32	%
December 17, 2021	September 17, 2021	1,179		1,179		1,687		143	%	1.72	%
December 20, 2021	September 20, 2021	35,153		35,153		37,867		108	%	0.57	%
December 20, 2021	September 20, 2021	2,918		2,918		3,421		117	%	0.87	%
December 20, 2021	September 20, 2021	1,570		1,570		1,943		124	%	1.07	%
December 20, 2021	September 20, 2021	1,400		1,400		2,047		146	%	1.47	%
December 20, 2021	September 20, 2021	1,341		1,341		1,788		133	%	1.32	%
December 27, 2021	September 24, 2021	16,643		16,643		21,720		131	%	1.33	%
December 27, 2021	September 24, 2021	4,482		4,482		6,413		143	%	1.73	%
December 27, 2021	September 24, 2021	2,277		2,277		2,923		128	%	1.33	%
July 8, 2022	July 9, 2021	150,000		14,085		21,232		151	%	2.58	%
September 22, 2022	September 23, 2021	400,000		103,252		144,774		140	%	2.58	%
Totals/weighted averages		$	832,003	$	399,340	$	518,672	130	%	1.60	%

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

3335

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.~~


				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 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~~September 30, 2021 and December 31, 2020, the Company had ~~$5.9~~$10.4 million and $4.7 million, respectively, of cash collateral on deposit with financing counterparties. This cash is included in Prepaid expenses and other assets on its consolidated balance sheets and is not netted against its Borrowings under repurchase agreements. The amount outstanding on the Company’s repurchase facilities and the carrying value of the Company’s loans pledged as collateral are presented as gross amounts in the Company’s consolidated balance sheets at ~~June~~September 30, 2021 and December 31, 2020 in the table below ($ 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

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


	Gross amounts not offset in balance sheet
	September 30, 2021		December 31, 2020
Gross amount of recognized liabilities	$	399,340	$	421,132
Gross amount of loans and securities pledged as collateral	518,672		595,599
Other prepaid collateral	10,377		4,653
Net collateral amount	$	129,709	$	179,120

Secured Borrowings

From its inception (January 30, 2014) to ~~June~~September 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, 5 of which were outstanding at ~~June~~September 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 1 non-rated secured borrowing outstanding at ~~June~~September 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 4 rated secured borrowings at ~~June~~September 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 accompanying notes are an integral part of the consolidated interim financial statements.

The following table sets forth the original terms of all notes from the Company's secured borrowings outstanding at ~~June~~September 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

0—

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

0—

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

0—

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

0—

Non-rated

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

3638

~~Non-rated~~Issuing Trust/Issue Date

Interest Rate Step-up Date

Security

Original Principal

Interest Rate

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

0—

(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 are 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~~September 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						Balances at September 30, 2021							Balances at December 31, 2020							Original balances at securitization cutoff date
Class of Notes	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		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	2017-B	$	0	$	0		0	%	$	110,062	$	68,729		160	%	$	165,850		$	115,846	2017-B	$	—	$	—		—	%	$	110,062	$	68,729		160	%	$	165,850		$	115,846
2017-D	2017-D	0		0			0	%	133,897		51,256		(1)	261	%	203,870		(2)	88,903		2017-D	—		—			—	%	133,897		51,256		(1)	261	%	203,870		(2)	88,903
2018-C	2018-C	0		0			0	%	173,221		131,983		(3)	131	%	222,181		(4)	167,910		2018-C	—		—			—	%	173,221		131,983		(3)	131	%	222,181		(4)	167,910
2019-D	2019-D	133,598		109,891			122	%	148,641		125,008			119	%	193,301			156,670		2019-D	126,893		102,367			124	%	148,641		125,008			119	%	193,301			156,670
2019-F	2019-F	127,059		94,250			135	%	139,996		108,184			129	%	170,876			127,673		2019-F	121,110		86,702			140	%	139,996		108,184			129	%	170,876			127,673
2020-B	2020-B	127,515		97,540			131	%	136,360		105,601			129	%	156,468			114,534		2020-B	123,544		91,203			135	%	136,360		105,601			129	%	156,468			114,534
2021-A	2021-A	178,494		160,924			111	%	0		0			0	%	206,528			175,116		2021-A	168,049		149,730			112	%	—		—			—	%	206,528			175,116
2021-B	2021-B	254,917		200,801			127	%	0		0			0	%	287,895			215,912		2021-B	251,303		190,920			132	%	—		—			—	%	287,895			215,912
		$	821,583	$	663,406	(5)	124	%	$	842,177	$	590,761	(5)	143	%	$	1,606,969		$	1,162,564		$	790,899	$	620,922	(5)	127	%	$	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, respectively, are reflected in Secured borrowings as the remainder is owned by the ~~Company, respectively.~~Company.

(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~~$8.3 million and $5.4 million as of ~~June~~September 30, 2021 and December 31, 2020.

Convertible Senior Notes

At ~~June~~September 30, 2021 and December 31, 2020, the Company had carrying values of ~~$103.4~~$103.8 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~~September 30, 2021, the amount by which the if-converted value falls short of the principal value for the entire series is ~~$10.9~~$7.2 million.

At ~~June~~September 30, 2021, the outstanding aggregate principal amount of the notes was $105.9 million, and discount and deferred expenses were ~~$2.4~~$2.1 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.

3739

$113.4 million, and discount and deferred expenses were $3.3 million. During the three and nine months ended September 30, 2021 the Company recognized interest expense on its outstanding convertible notes of $2.2 million and ~~$4.6~~$6.8 million, respectively, which includes ~~$0.4~~$0.3 million and ~~$0.7~~$1.0 million of amortization of discount and deferred expenses, respectively. During the three and ~~six~~nine months ended ~~June~~September 30, 2020 the Company recognized interest expense on its outstanding convertible notes of ~~$2.5~~$2.4 million and ~~$4.9~~$7.3 million, respectively, which includes ~~$0.4~~$0.3 million and ~~$0.7~~$1.0 million of amortization of discount and deferred expenses, respectively. The effective interest rates of the notes for the quarters ended ~~June~~September 30, 2021 and ~~June~~September 30, 2020 were ~~8.99%~~8.96% and ~~9.09%~~8.92%, 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 $ 0
Income from equity investment Income/(loss) from investments in affiliates Gaea $ 42 $ 56


			Three months ended September 30,
Transaction	Consolidated Statement of Income location	Counterparty	2021		2020
Interest income on securities and beneficial interest and net decrease in the net present value of expected credit losses on beneficial interests	Net interest income after the impact of changes in the net present value of expected credit losses	Various non-consolidated joint ventures	$	9,896	$	6,536
Management fee	Related party expense – management fee	Manager	$	2,289	$	2,264
Loan servicing fees	Related party expense – loan servicing fees	Servicer	$	1,743	$	1,848
Gain on sale of securities	Other income	Various non-consolidated joint ventures	$	201	$	145

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

3840


				Three months ended June 30,							Three months ended September 30,
Transaction								Transaction	Consolidated Statement of Income location	Counterparty	2021		2020
Income from equity investment	Income from equity investment	Income/(loss) from investments in affiliates	Servicer	$	7	$	72	Income from equity investment	Income/(loss) from investments in affiliates	Manager	$	132	$	75
Affiliate loan interest income								Affiliate loan interest income	Interest income	Gaea	$	74	$	—
Income from equity investment	Income from equity investment	Income/(loss) from investments in affiliates	AS Ajax E LLC	$	7	$	6	Income from equity investment	Income/(loss) from investments in affiliates	AS Ajax E LLC	$	11	$	9
Loss from equity investment	Loss from equity investment	Income/(loss) from investments in affiliates	Loan pool LLCs	$	(14)	$	(23)	Loss from equity investment	Income/(loss) from investments in affiliates	Loan pool LLCs	$	(16)	$	(46)
(Loss)/income from equity investment								(Loss)/income from equity investment	Income/(loss) from investments in affiliates	Gaea	$	(28)	$	14
Loss from equity investment								Loss from equity investment	Income/(loss) from investments in affiliates	Servicer	$	(37)	$	(116)


				Six months ended June 30,							Nine months ended September 30,
Transaction	Transaction	Consolidated Statement of Income location	Counterparty	2021		2020		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
Interest income on securities and beneficial interest and net decrease in the net present value of expected credit losses on beneficial interests								Interest income on securities and beneficial interest and net decrease in the net present value of expected credit losses on beneficial interests	Net interest income after the impact of changes in the net present value of expected credit losses	Various non-consolidated joint ventures	$	24,835	$	16,386
Management fee	Management fee	Related party expense – management fee	Manager	$	4,537	$	3,942	Management fee	Related party expense – management fee	Manager	$	6,826	$	6,206
Loan servicing fees	Loan servicing fees	Related party expense – loan servicing fees	Servicer	$	3,532	$	3,950	Loan servicing fees	Related party expense – loan servicing fees	Servicer	$	5,275	$	5,798
Income/(loss) from equity investment	Income/(loss) from equity investment	Income/(loss) from investments in affiliates	Manager	$	451	$	(439)	Income/(loss) from equity investment	Income/(loss) from investments in affiliates	Manager	$	583	$	(364)
Affiliate loan interest income								Affiliate loan interest income	Interest income	Gaea	$	203	$	—
Gain on sale of securities								Gain on sale of securities	Other income	Various non-consolidated joint ventures	$	201	$	145
Gain on refinancing of securitization trust	Gain on refinancing of securitization trust	Other income	2021-C	$	122	$	0	Gain on refinancing of securitization trust	Other income	2021-C	$	122	$	—
Income from equity investment	Income from equity investment	Income/(loss) from investments in affiliates	Gaea	$	60	$	60	Income from equity investment	Income/(loss) from investments in affiliates	Gaea	$	32	$	74
Income from equity investment	Income from equity investment	Income/(loss) from investments in affiliates	AS Ajax E LLC	$	16	$	16	Income from equity investment	Income/(loss) from investments in affiliates	AS Ajax E LLC	$	27	$	25
Loss on sale of mortgage loans	Loss on sale of mortgage loans	Loss on sale of mortgage loans	Gaea	$	0	$	(705)	Loss on sale of mortgage loans	Other income	Gaea	$	—	$	(705)
(Loss)/income from equity investment	(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	Loan pool LLCs	$	(37)	$	10
(Loss)/income from equity investment		Income/(loss) from investments in affiliates	Servicer	$	(55)	$	(204)
Loss from equity investment								Loss from equity investment	Income/(loss) from investments in affiliates	Servicer	$	(92)	$	(320)

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

As of ~~June~~September 30, 2021

Transaction

Consolidated Balance Sheet location

Counterparty

Amount

Investment in beneficial interests

Various non-consolidated joint ventures

~~133,484~~139,494

Receivables from Servicer

Receivable from servicer

Servicer

~~23,907~~18,128

Affiliate loan receivable

Mortgage loans held-for-investment, net

Gaea

~~7,007~~10,025

Management fee payable

Manager

~~2,267~~2,289

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

As of September 30, 2021

Transaction

Consolidated Balance Sheet location

Counterparty

Amount

Expense reimbursement receivable

Prepaid expenses and other assets

Various non-consolidated joint ventures

~~1,346~~1,354

~~Expense reimbursement~~Servicing fee payable

Accrued expenses and other liabilities

Servicer

~~(80)~~(92)

~~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 held-for-investment, net

Gaea

11,000

Management fee payable

Manager

2,247

Affiliate loan purchase

Mortgage loans held-for-investment, 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,~~30, 2022 at Gaea’s option. At ~~June~~September 30, 2021, the amount outstanding under the note was ~~$7.0~~$10.0 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~~September 30, 2021 and December 31, 2020, these loans were included in Mortgage loans held-for-investment, 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 held-for-investment, net on the Company's consolidated balance sheets.

During the three ~~and six~~ months ended ~~June~~September 30, 2021, the Company sold no mortgage loans; however, during the nine months ended September 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~~September 30, 2020, the Company sold 0no mortgage ~~loans,~~loans; however, during the ~~six~~nine months ended ~~June~~September 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~~nine months ended ~~June~~September 30, 2021, the Company acquired ~~$232.9~~$54.7 million and $287.6 million, respectively, in aggregate of debt securities and beneficial interests issued by joint ventures between the Company and third party institutional accredited investors. ~~Each~~The joint ~~venture~~ventures issued senior notes and beneficial ~~interests, which are trust certificates representing the residual investment in the trust.~~interests. In certain transactions, the joint ventures also issued subordinated notes. Of the ~~$232.9~~$54.7 million ~~of debt securities acquired in both the three~~ and ~~six months ended June 30, 2021,~~$287.6 million, respectively, the Company acquired ~~$170.0~~$43.2 million and $213.1 million, respectively, in senior notes, ~~$23.5~~$8.3 million inand $31.8 million, respectively, of subordinate notes and ~~$39.5~~$3.2 million and $42.7 million, respectively, in beneficial ~~interest~~interests issued by joint ventures. Comparatively, during the three and ~~six~~nine months ended ~~June~~September 30, 2020, the Company acquired 0$83.4 million and ~~$61.3~~$144.7 million, respectively, in aggregate 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 ~~$61.3~~$83.4 million and $144.7 million, respectively, of debt securities acquired in the ~~six~~three and nine months ended ~~June~~September 30, 2020, respectively, the Company acquired ~~$49.6~~$66.0 million and $115.6 million, respectively, in

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

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~~ $12.0 million. At ~~June~~September 30, 2021, and December 31, 2020, the Company had 0no 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~~September 30, 2021 the Company owned approximately ~~22.9%~~22.8% of Gaea with third party investors owning the remaining approximately ~~77.1%~~77.2%. The Company accounts for its ~~investment~~ownership interest 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 LLC was reduced to a lower percentage of the total. As of ~~June~~September 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 accompanying notes are an integral part of the consolidated interim financial statements.

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 8 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~~nine months ended ~~June~~September 30, 2021 and ~~June~~September 30, 2020, the Company did 0tnot record an incentive fee payable to the Manager.

The Company also reimburses the Manager for all ~~third-party,~~third party, out-of-pocket costs incurred by the Manager for managing its business, including ~~third-party~~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

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

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 management 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 record date ~~on which~~of 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.~~stock. The Company recognized base management fees to the Manager for the three and ~~six~~nine months ended ~~June~~September 30, 2021 of $2.3 million and ~~$4.6~~$6.9 million, respectively, all of which was payable in cash. Comparatively, for the three and ~~six~~nine months ended ~~June~~September 30, 2020, the Company recognized base management fees of ~~$2.1~~$2.3 million and ~~$3.9~~$6.2 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 iswas 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. This excludes additional compensation for committee chairs which is paid in cash.

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,							For the three months ended September 30,
		2021			2020				2021			2020
		Number of shares	Amount of expense recognized(1)		Number of shares	Amount of expense recognized(1)			Number of shares	Amount of expense recognized(1)		Number of shares	Amount of expense recognized(1)
Independent director fees	Independent director fees	4,025	$	50	5,200	$	40	Independent director fees	3,580	$	50	4,116	$	35
Totals	Totals	4,025	$	50	5,200	$	40	Totals	3,580	$	50	4,116	$	35


		For the six months ended June 30,							For the nine months ended September 30,
		2021			2020				2021			2020
		Number of shares	Amount of expense recognized(1)		Number of shares	Amount of expense recognized(1)			Number of shares	Amount of expense recognized(1)		Number of shares	Amount of expense recognized(1)
Independent director fees	Independent director fees	7,970	$	100	8,668	$	80	Independent director fees	11,550	$	150	12,784	$	115
Totals	Totals	7,970	$	100	8,668	$	80	Totals	11,550	$	150	12,784	$	115

(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 granted in 2021 vest over four years, with one-fourth of the shares vesting on the each of the first, second, third and fourth anniversaries of the grant date. The shares granted prior to 2021 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 or fourth anniversary of the grant ~~date.~~date, as determined by the contract. 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 iswas 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.

4345

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				Employee and Service Provider Grants			Director Grants
		Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value			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
Nine months ended September 30, 2021								Nine months ended September 30, 2021
December 31, 2020 outstanding unvested share grants								December 31, 2020 outstanding unvested share grants	163,083	$	11.07	—	$	—
Shares vested	Shares vested	0	0		(8,000)	12.60		Shares vested	—	—		(2,000)	12.00
Shares forfeited	Shares forfeited	0	0		0	0		Shares forfeited	—	—		—	—
Shares granted	Shares granted	0	0		16,000	12.60		Shares granted	—	—		2,000	12.00
March 31, 2021 outstanding unvested share grants	March 31, 2021 outstanding unvested share grants	163,083	$	11.07	0	$	0	March 31, 2021 outstanding unvested share grants	163,083	$	11.07	—	$	—
Shares vested	Shares vested	0	0		(2,000)	12.00		Shares vested	—	—		(8,000)	12.60
Shares forfeited	Shares forfeited	0	0		0	0		Shares forfeited	—	—		—	—
Shares granted	Shares granted	0	0		2,000	12.00		Shares granted	—	—		16,000	12.60
December 31, 2020 outstanding unvested share grants		163,083	$	11.07	0	$	0

June 30, 2020 outstanding unvested share grants		114,334	$	13.83	0	$	0
June 30, 2021 outstanding unvested share grants								June 30, 2021 outstanding unvested share grants	163,083	$	11.07	8,000	$	12.60
Shares vested	Shares vested	0	0		0	0		Shares vested	(65,305)	11.74		—	—
Shares forfeited	Shares forfeited	0	0		0	0		Shares forfeited	(14,168)	10.88		—	—
Shares granted	Shares granted	0	0		0	0		Shares granted	152,700	12.79		—	—
March 31, 2020 outstanding unvested share grants		114,334	$	13.83	0	$	0
Shares vested		0	0		0	0
Shares forfeited		0	0		0	0
Shares granted		0	0		0	0
December 31, 2019 outstanding unvested share grants		114,334	$	13.83	0	$	0
September 30, 2021 outstanding unvested share grants								September 30, 2021 outstanding unvested share grants	236,310	$	12.01	8,000	$	12.60


	Employee and Service Provider Grants			Director Grants
	Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value
Nine months ended September 30, 2020
December 31, 2019 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	—	—		—	—
June 30, 2020 outstanding unvested share grants	114,334	$	13.83	—	$	—
Shares vested	(50,334)	13.86		—	—
Shares forfeited	(2,000)	12.06		—	—
Shares granted	108,750	9.55		—	—
September 30, 2020 outstanding unvested share grants	170,750	$	11.11	—	$	—

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

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,					Three months ended September 30,				Nine months ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Restricted stock grants	Restricted stock grants	$	207	$	174	$	414	$	348	Restricted stock grants	$	230	$	187	$	644	$	535
Director grants	Director grants	118		0		142		0		Director grants	25		—		167		—
Total expenses for plan grants	Total expenses for plan grants	$	325	$	174	$	556	$	348	Total expenses for plan grants	$	255	$	187	$	811	$	535

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.

The Company’s consolidated financial statements include the operations of 2 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.

For the three and ~~six~~nine months ended ~~June~~September 30, 2021 the Company had consolidated taxable income of ~~$7.7~~$9.9 million and ~~$16.4~~$26.3 million, respectively; and provisions for income taxes of ~~$67 thousand~~$0.1 million and ~~$0.1~~$0.2 million, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2020, the Company had consolidated ~~tax losses $2.0~~taxable income $2.5 million and ~~$0.8~~$1.7 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 $16 thousand and $0.2 million, respectively. The Company recognized 0no deferred income tax assets or liabilities on its consolidated balance sheets at ~~June~~September 30, 2021 or 2020. The Company also recorded 0no interest or penalties for the three and ~~six~~nine months ended ~~June~~September 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						Three months ended September 30, 2021					Three months ended September 30, 2020
		Income (Numerator)		Shares (Denominator)	Per Share Amount		Income (Numerator)		Shares (Denominator)	Per Share Amount			Income (Numerator)		Shares (Denominator)	Per Share Amount		Income (Numerator)		Shares (Denominator)	Per Share Amount
Basic EPS	Basic EPS											Basic EPS
Consolidated net income attributable to common stockholders	Consolidated net income attributable to common stockholders	$	10,378	22,825,804			$	6,242	22,808,943			Consolidated net income attributable to common stockholders	$	9,313	22,862,429			$	5,280	22,844,192
Allocation of earnings to participating restricted shares	Allocation of earnings to participating restricted shares	(78)		0			(33)		0			Allocation of earnings to participating restricted shares	(92)		—			(33)		—
Consolidated net income attributable to unrestricted common stockholders	Consolidated net income attributable to unrestricted common stockholders	$	10,300	22,825,804	$	0.45	$	6,209	22,808,943	$	0.27	Consolidated net income attributable to unrestricted common stockholders	$	9,221	22,862,429	$	0.40	$	5,247	22,844,192	$	0.23
Effect of dilutive securities(1)	Effect of dilutive securities(1)											Effect of dilutive securities(1)
Restricted stock grants and Manager and director fee shares~~(2)~~	Restricted stock grants and Manager and director fee shares~~(2)~~	0		0			33		120,906			Restricted stock grants and Manager and director fee shares~~(2)~~	92		229,291			33		145,424
Interest expense (add back) and assumed conversion of shares from convertible senior notes~~(3)~~(2)	Interest expense (add back) and assumed conversion of shares from convertible senior notes~~(3)~~(2)	2,255		7,372,892			0		0			Interest expense (add back) and assumed conversion of shares from convertible senior notes~~(3)~~(2)	2,237		7,315,929			—		—
Diluted EPS	Diluted EPS											Diluted EPS
Consolidated net income attributable to common stockholders and dilutive securities	Consolidated net income attributable to common stockholders and dilutive securities	$	12,555	30,198,696	$	0.42	$	6,242	22,929,849	$	0.27	Consolidated net income attributable to common stockholders and dilutive securities	$	11,550	30,407,649	$	0.38	$	5,280	22,989,616	$	0.23

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

(1)The Company's outstanding warrants for an ~~addition~~additional 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~~September 30, 2021 and ~~June~~September 30, 2020, and have not been included in the calculation.

(2)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 September 30, 2020 would have been anti-dilutive and has been removed from the calculation.


	Nine months ended September 30, 2021					Nine months ended September 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	$	26,695	22,835,237			$	11,922	22,575,480
Allocation of earnings to participating restricted shares	(222)		—			(68)		—
Consolidated net income attributable to unrestricted common stockholders	$	26,473	22,835,237	$	1.16	$	11,854	22,575,480	$	0.53
Effect of dilutive securities(1,2)
Interest expense (add back) and assumed conversion of shares from convertible senior notes(3)	6,836		7,451,376			—		—
Diluted EPS
Consolidated net income attributable to common stockholders and dilutive securities	$	33,309	30,286,613	$	1.10	$	11,854	22,575,480	$	0.53

(1)The Company's outstanding warrants for an additional 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 nine months ended September 30, 2021 and September 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~~nine months ended ~~June~~September 30, 2021 and September 30, 2020 would have been anti-dilutive and ~~has~~have not been ~~removed from~~included in 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~~nine 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) 0 (35) 0
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)
0 0 35 120,268
Interest expense (add back) and assumed conversion of shares from convertible senior notes(3)
4,599 7,520,222 0 0
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~~September 30, 2020 would have been anti-dilutive and has been removed from the calculation.

Note 14 — Equity

Common ~~stock~~Stock

As of ~~June~~September 30, 2021 and December 31, 2020, the Company had ~~22,993,246~~23,140,131 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~~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~~continues to use 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~~September 30, 2021 and December 31, 2020. There were 25,000,000 shares, cumulative for all series, authorized as of both ~~June~~September 30, 2021 and December 31, 2020.

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

4648

Treasury ~~stock~~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~~September 30, 2021, the Company held ~~126,609~~136,403 shares of treasury stock consisting of ~~78,145~~87,939 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~~nine months ended ~~June~~September 30, 2021 ~~3,820~~5,049 and ~~8,048~~13,097 shares were issued, respectively, under the plan for total proceeds of approximately ~~$48 thousand~~$0.1 million and ~~$0.1~~$0.2 million, respectively. Comparatively, during ~~both~~ the three and ~~six~~nine months ended ~~June~~September 30, 2020 ~~5,057~~4,928 and 9,985 shares were issued, respectively, under the plan for total proceeds of approximately ~~$41 thousand.~~$45 thousand and $0.1 million, respectively.

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~~$100.0 million from time to time in any method permitted by law deemed to be an ~~“at~~“At the ~~market”~~Market” offering as defined in Rule 415 under the Securities Act of 1933, as amended, or the Securities Act. During both the three and ~~six~~nine months ended ~~June~~September 30, 2021, ~~and 2020, 0~~9,073 shares were sold under the atAt the ~~market~~Market program. Comparatively, no shares were sold under the At the Market program during the three and nine months ended September 30, 2020. The Company intends to use the net proceeds to acquire mortgage loans and mortgage-related assets consistent with its investment strategy.

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~~September 30, 2021 and December 31, 2020 was as follows ($ in thousands):


Investments in securities:	Investments in securities:	June 30, 2021		December 31, 2020		Investments in securities:	September 30, 2021		December 31, 2020
Unrealized gains	Unrealized gains	$	1,877	$	1,152	Unrealized gains	$	3,621	$	1,152
Unrealized losses	Unrealized losses	(226)		(777)		Unrealized losses	(203)		(777)
Accumulated other comprehensive income	Accumulated other comprehensive income	$	1,651	$	375	Accumulated other comprehensive income	$	3,418	$	375

Non-controlling Interest

At December 31, 2020, the Company had non-controlling interests attributable to ownership interests for 4 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~~September 30, 2021 to 3 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~~September 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~~re-securitized into 2021-C,

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

with 22 loans remaining in 2017-D. As of ~~June~~September 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~~own 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~~September 30, 2021 and December 31, 2020, Great Ajax II REIT was 0.1% held by third parties. As of ~~June~~September 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~~September 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):


							Three months ended September 30,				Nine months ended September 30,
		June 30, 2021		December 31, 2020			2021		2020		2021		2020
Decrease from redemption of 2018-C	Decrease from redemption of 2018-C	$	(8,306)	$	0	Decrease from redemption of 2018-C	$	—	$	—	$	(8,306)	$	—
Decrease from the distribution resulting from the refinancing of substantially all of 2017-D	Decrease from the distribution resulting from the refinancing of substantially all of 2017-D	(16,864)		0		Decrease from the distribution resulting from the refinancing of substantially all of 2017-D	(307)		—		(17,171)		—
Change in non-controlling interest	Change in non-controlling interest	$	(25,170)	$	0	Change in non-controlling interest	$	(307)	$	—	$	(25,477)	$	—

Note 15 — Subsequent Events

~~The~~Since September 30, 2021, the Company has acquired ~~1,016~~20 residential ~~NPLs~~RPLs in 2 transactions from 2 different sellers, and 1 NPL in 1 transaction from a single seller, with aggregate UPB of ~~$173.0~~$2.4 million ~~in two transactions from two different sellers.~~and $0.4 million, respectively. The purchase price ~~equaled 97.9%~~of the RPLs was 68.8% of UPB and ~~54.2%~~47.3% of the estimated market value of the underlying collateral of ~~$312.1~~$3.5 million. ~~These loans were acquired by~~The purchase price of the ~~joint venture that~~NPL was ~~formed in June 2021 with proceeds from~~97.4% of UPB and 84.4% of the ~~established prefunding account.~~estimated market value of the underlying collateral of $0.4 million.

The Company has agreed to acquire, subject to due diligence, 314 residential RPLs in 64 transactions, and ~~412~~3 NPLs in 62 transactions, with aggregate UPB of ~~$4.7~~$1.7 million and ~~$103.3~~$0.8 million, respectively. The purchase price of the residential RPLs ~~equals 80.9%~~is 96.5% of UPB and ~~55.1%~~70.3% of the estimated market value of the underlying collateral of ~~$6.9~~$2.4 million. The purchase price of the NPLs ~~equals 97.1%~~is 93.9% of UPB and ~~64.4%~~61.8% of the estimated market value of the underlying collateral of ~~$155.8~~$1.2 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%~~has agreed to acquire, subject to due diligence, 2,498 NPLs with aggregate UPB of $350.9 million in 1 transaction from a single seller. The purchase price is 103.5% of UPB and 49.4% 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~~estimated market value ~~of $968.6 million. The senior securities represent 83% of the UPB~~ of the underlying ~~mortgage~~collateral of $734.9 million. These loans ~~and carry~~are expected to be acquired through 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~~venture with third party institutional accredited investors. The Company expects its ownership percentage to be approximately 16.3%.

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,~~November 4, 2021, the Company’s Board of Directors declared a cash dividend of ~~$0.21~~$0.24 per share to be paid on ~~August 31,~~November 29, 2021 to stockholders of record as of ~~August 16,~~November 15, 2021.

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

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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”).

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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~~September 30, 2021 and December 31, 2020, ~~holds~~owns 99.9% of Great Ajax II REIT Inc. which holds an interest in Great Ajax II Depositor LLC which then 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 these securitization trusts and retained subordinated securities from the secured borrowings. These trusts are considered to be ~~VIEs,~~variable interest entities ("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~~September 30, 2021, we owned approximately ~~22.9%~~22.8% of Gaea.

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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~~September 30, 2021 and December 31, 2020 ($ in millions):


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Residential RPLs	Residential RPLs	$	897.5	$	1,057.5	Residential RPLs	$	865.3	$	1,057.5
Residential NPLs	Residential NPLs	36.8		38.7		Residential NPLs	117.7		38.7
SBC loans	SBC loans	21.3		23.2		SBC loans	24.4		23.2
Real estate owned properties, net	Real estate owned properties, net	4.8		8.5		Real estate owned properties, net	6.1		8.5
Investments in securities at fair value	Investments in securities at fair value	424.6		273.8		Investments in securities at fair value	340.1		273.8
Investment in beneficial interests	Investment in beneficial interests	133.5		91.4		Investment in beneficial interests	139.5		91.4
Total mortgage related assets	Total mortgage related assets	$	1,518.5	$	1,493.1	Total mortgage related assets	$	1,493.1	$	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~~September 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.~~uncertainty and volatility. 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~~government-sponsored enterprises ("GSEs") or the USU.S. 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,~~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 related forbearance activity in our mortgage loan portfolio as of ~~July 31,~~November 1, 2021 :

•Number of COVID-19 forbearance relief inquiries: ~~1,044~~1,208

•Number of COVID-19 forbearance relief granted: ~~297~~337

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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~~third 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; and

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

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 COVID-19 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 continue to 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~~focused 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~~home price appreciation ("HPA") into account except for rural properties for which we model negative HPA related to our expectation of worse than expected property condition. ~~The~~While we initially expected the COVID-19 outbreak ~~has not had as~~to have a material ~~of an impact~~downward effect on home prices, we are generally seeing increases in HPA on in our target markets ~~as we initially expected.~~. A significant decline in HPA ~~will~~could 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 COVID-19 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 expected 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~~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 expected credit losses. Upon the acquisition of PCD loans we record the acquisition as three separate elements for 1)(i) the amount of purchase discount which we expect to recover through eventual repayment by the borrower, 2)(ii) an allowance for future expected credit loss and 3)(iii) the ~~UPB~~unpaid principal balance (“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~~is reported in the period in which ~~they arise~~it arises and ~~are~~is reflected as an increase or decrease in the provision for expected credit losses ~~even if~~to the extent a provision for expected credit losses is recorded against the pool of mortgage loans. If no provision ~~expense was previously~~for expected credit losses is recorded ~~due to~~against the ~~establishment~~pool of ~~loss reserves upon loan acquisitions. Management assesses~~assets, the ~~credit quality of the portfolio and the adequacy of loan loss reserves on a quarterly basis, or more frequently~~increase in expected future cash flows is recognized prospectively as ~~necessary. Significant judgment is required~~an increase 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.yield.

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 expected 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.

~~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 are expected 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. We account for each beneficial interest individually.

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.~~incurred.

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.

Our investments in beneficial interests are trust certificates representing the residual investment in securitization trusts which we form with joint venture partners. The trust certificates represent the residual investment in the trust. 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~~ownership interest in the Manager is valued by applying an earnings multiple to base fee revenue.

Our ~~investments~~ownership interests 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~~ownership interest in GAFS, including warrants, is determined by applying an earnings multiple to expected earnings.

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

The fair value of our ~~investment~~ownership interest 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. The fair value of the put option liability is measured quarterly with adjustments posted to our consolidated statements of income.

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.

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 (“BPOs”), 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 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

Quarter Overview

For the three months ended ~~June~~September 30, 2021, we had net income attributable to common stockholders of ~~$10.4~~$9.3 million, or ~~$0.45~~$0.40 per share for basic and ~~$0.42~~$0.38 per share for diluted common shares. For the three months ended ~~June~~September 30, 2020, we had net income attributable to common stockholders of ~~$6.2~~$5.3 million, or ~~$0.27~~$0.23 per share for basic and diluted common shares. Key items for the three months ended ~~June~~September 30, 2021 include:

•Interest income of ~~$23.0~~$23.1 million; net interest income of ~~$14.2~~$14.4 million

•Net income attributable to common stockholders of ~~$10.4~~$9.3 million

•Basic earnings per common share of ~~$0.45~~$0.40

•Book value per common share of ~~$15.86~~$16.00 at ~~June~~September 30, 2021

•Taxable income of ~~$0.34~~$0.43 per common share

•Formed ~~four~~one joint ~~ventures~~venture that acquired ~~$1.4 billion~~$517.7 million in UPB of mortgage loans with collateral values of ~~$2.4 billion~~$968.6 million and retained ~~$232.9~~or acquired $54.7 million of varying classes of related securities issued by the joint ~~ventures~~venture to end the quarter with ~~$558.1~~$479.6 million of investments in debt securities and beneficial interests

•Purchased ~~$4.8~~$87.5 million of NPLs, with UPB of $90.9 million at 64.0% of property value, and $0.5 million of RPLs, with UPB of ~~$5.2~~$0.5 million at ~~60.7%~~61.7% of property value to end the quarter with ~~$955.6 million~~$1.0 billion in net mortgage loans

•In July 2021 we purchased $170.7 million of RPLs and NPLs into a joint venture securitization that was created in June 2021 with a securitized prefunding structure. We own 20.0% of this joint venture. The purchase price was 97.8% of UPB and 53.2% of underlying property value.

•Collected total cash of ~~$78.9~~$82.8 million, from loan payments, sales of REO and collections from investments in debt securities and beneficial interests

•Held ~~$88.1~~$92.8 million of cash and cash equivalents at ~~June~~September 30, 2021; average daily cash balance for the quarter was ~~$113.0~~$89.2 million

•~~At June~~As of September 30, 2021, approximately ~~74.2%~~76.6% 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~~$4.0 million for the quarter ended ~~June~~September 30, 2021 compared to the quarter ended ~~June~~September 30, 2020. The increase in our earnings compared to the quarter ended ~~June~~September 30, 2020 was primarily driven by a ~~$4.2~~$3.1 million decrease in our interest expense. The increase in net interest income was primarily driven by the same decrease of ~~$4.2~~$3.1 million in our interest expense of ~~$8.8~~$8.6 million versus interest expense of ~~$13.1~~$11.7 million in the ~~second~~third quarter of 2020. Our book value increased to ~~$15.86~~$16.00 per common share from $15.59 at December 31, 2020 driven by increases in our earnings and our acquisition of our joint venture partner's share of Ajax Mortgage Loan Trusts 2018-C ("2018-C") in the first quarter, the repurchase of $7.5 million of our convertible senior notes and an increase in common equity resulting from net fair value adjustments of $3.0 million on our portfolio of debt securities recorded to Other comprehensive income since December 31, 2020.

We recorded $0.1 million in recoveries from previous impairments on our REO held-for-sale portfolio in the real estate operating expense line of our consolidated statement of income for the ~~quarter~~three months ended ~~June~~September 30, 2021 compared to ~~$0.1~~$0.2 million of impairments for the ~~quarter~~three months ended ~~June~~September 30, 2020. ~~Impairments~~The recovery of impairments for the quarter were driven primarily by ~~additional costs~~increases in property values. Our quantity of ~~holding the properties. We continue to liquidate our~~ REO properties ~~held-for-sale at a faster rate than we acquire properties,~~increased during the quarter, with 11four properties sold in the ~~second~~third quarter of 2021 while ~~five~~10 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~~foreclosures or deed in ~~foreclosure~~lieu proceedings. ~~During~~Comparatively, during the ~~quarter~~three months ended ~~June~~September 30, 2020 we sold 14seven REO properties while adding ~~two~~five properties through ~~foreclosures.~~foreclosures or deed in lieu proceedings.

Table 1: Results of Operations


		Three months ended June 30,				Six months ended June 30,					Three months ended September 30,				Nine months ended September 30,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2021		2020		2021		2020
INCOME	INCOME									INCOME
Interest income	Interest income	$	23,048	$	23,171	$	47,083	$	50,059	Interest income	$	23,054	$	23,517	$	70,137	$	73,576
Interest expense	Interest expense	(8,830)		(13,058)		(19,134)		(26,128)		Interest expense	(8,609)		(11,727)		(27,743)		(37,855)
Net interest income	Net interest income	14,218		10,113		27,949		23,931		Net interest income	14,445		11,790		42,394		35,721
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
Net decrease in the net present value of expected credit losses(1)										Net decrease in the net present value of expected credit losses(1)	3,678		4,440		13,927		4,591
Net interest income after the impact of changes in the net present value of expected credit losses										Net interest income after the impact of changes in the net present value of expected credit losses	18,123		16,230		56,321		40,312
Income/(loss) from investments in affiliates	Income/(loss) from investments in affiliates	357		672		520		(440)		Income/(loss) from investments in affiliates	90		(25)		610		(465)
Other income	Other income	486		680		842		722		Other income	778		537		1,620		1,259
Total revenue, net	Total revenue, net	19,794		16,327		39,560		24,364		Total revenue, net	18,991		16,742		58,551		41,106
EXPENSE	EXPENSE									EXPENSE
Related party expense – loan servicing fees	Related party expense – loan servicing fees	1,699		1,936		3,532		3,950		Related party expense – loan servicing fees	1,743		1,848		5,275		5,798
Related party expense – management fee	Related party expense – management fee	2,270		2,143		4,543		3,942		Related party expense – management fee	2,292		2,264		6,835		6,206
Professional fees	Professional fees	763		732		1,403		1,537		Professional fees	526		576		1,929		2,113
Real estate operating expenses	Real estate operating expenses	88		188		273		1,100		Real estate operating expenses	(76)		173		197		1,273
Fair value adjustment on put option liability	Fair value adjustment on put option liability	2,201		1,250		4,145		1,250		Fair value adjustment on put option liability	2,493		1,766		6,638		3,016
Other expense	Other expense	1,375		1,140		2,679		2,062		Other expense	1,227		986		3,906		3,048
Total expense	Total expense	8,396		7,389		16,575		13,841		Total expense	8,205		7,613		24,780		21,454
Loss on debt extinguishment	Loss on debt extinguishment	161		—		1,072		408		Loss on debt extinguishment	—		253		1,072		661
Income before provision for income taxes	Income before provision for income taxes	11,237		8,938		21,913		10,115		Income before provision for income taxes	10,786		8,876		32,699		18,991
Provision for income taxes (benefit)	Provision for income taxes (benefit)	67		120		101		(199)		Provision for income taxes (benefit)	102		(16)		203		(215)
Consolidated net income	Consolidated net income	11,170		8,818		21,812		10,314		Consolidated net income	10,684		8,892		32,496		19,206
Less: consolidated net (loss)/income attributable to the non-controlling interest	Less: consolidated net (loss)/income attributable to the non-controlling interest	(1,158)		735		531		1,831		Less: consolidated net (loss)/income attributable to the non-controlling interest	(578)		1,662		(47)		3,493
Consolidated net income attributable to Company	Consolidated net income attributable to Company	12,328		8,083		21,281		8,483		Consolidated net income attributable to Company	11,262		7,230		32,543		15,713
Less: dividends on preferred stock	Less: dividends on preferred stock	1,950		1,841		3,899		1,841		Less: dividends on preferred stock	1,949		1,950		5,848		3,791
Consolidated net income attributable to common stockholders	Consolidated net income attributable to common stockholders	$	10,378	$	6,242	$	17,382	$	6,642	Consolidated net income attributable to common stockholders	$	9,313	$	5,280	$	26,695	$	11,922

(1)Net ~~increase~~decrease in the net present value of expected ~~cash flows~~credit losses represents the net decrease to the allowance ~~for losses~~ resulting from changes in actual and expected cash flows during both the ~~quarter.~~three and nine months ended September 30, 2021 and September 30, 2020, respectively. It represents the net increase of the present value of the expected cash ~~flow increases over~~flows in excess of contractual cash flows offset by any incremental provision expense on the Mortgage loan pools and Beneficial ~~interest portfolios. Such amounts are~~interests. The decrease is calculated at the pool level for Mortgage loans and at the security level for Beneficial ~~interests,~~interests. To the ~~and~~extent a pool or Beneficial interest has an associated allowance, the decrease in expected credit losses is ~~are~~ recorded in the period in which the change ~~occurs.~~occurs, otherwise it is recognized prospectively as an increase in yield.

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~~September 30, 2021 and 2020 net interest income after recording the impact of the net ~~increase in the net~~ present value of decreases in expected ~~cash flows~~credit losses increased to ~~$19.0~~$18.1 million from ~~$15.0~~$16.2 million, respectively, primarily as a result of a ~~$4.2~~$3.1 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~~September 30, 2021 and 2020, ~~we recorded~~our net income ~~of $4.7~~included $3.7 million and ~~$4.9~~$4.4 million ~~as a result of a~~from net ~~increase~~decreases in the net present value of expected ~~cash flows.~~credit losses. Of the ~~$4.7~~$3.7 million for the three months ended ~~June~~September 30, 2021, ~~$2.7~~$0.9 million relates to our mortgage loan portfolio and ~~$2.0~~$2.8 million to our investments in beneficial interests. Comparatively, during the three months ended ~~June~~September 30, 2020, of the ~~$4.9~~$4.4 million, ~~$1.8~~$3.0 million relates to our mortgage loan portfolio and ~~$3.1~~$1.4 million to our investments in beneficial interests. For the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 net interest income after recording the impact of the net ~~increase~~decrease in the net present value of expected ~~cash flows~~credit losses increased to ~~$38.2~~$56.3 million from ~~$24.1~~$40.3 million, respectively, primarily as a result of a net ~~$10.2~~$13.9 million impact of the net ~~increase~~decrease in the net present value of expected ~~cash flows~~credit losses for the ~~six~~nine months ended ~~June~~September 30, 2021 compared to a ~~$0.2~~$4.6 million impact of the net ~~increase~~decrease in the net present value of expected ~~cash flows~~credit losses for the ~~six~~nine months ended ~~June~~September 30, 2020.

Of the ~~$10.2~~$13.9 million for the ~~six~~nine months ended ~~June~~September 30, 2021, ~~$8.2~~$9.1 million relates to our mortgage loan portfolio and ~~$2.0~~$4.8 million to our investments in beneficial interests. Comparatively, ~~during~~of the ~~six~~$4.6 million for the nine months ended ~~June~~September 30, 2020, ~~the entire amount of $0.2~~$2.9 million relates to our mortgage loan portfolio and $1.7 million relates to our investments in beneficial interests. To date, the COVID-19 pandemic has not had a significant negative impact on our expected cash ~~flow extensions have not been as material as we initially expected.~~flows due to the continuing low rate environment and rising home prices.

Our gross interest income decreased by ~~$0.2~~$0.4 million to ~~$23.0~~$23.1 million in the quarter ended ~~June~~September 30, 2021 from ~~$23.2~~$23.5 million in the quarter ended ~~June~~September 30, 2020 primarily due to a decrease in ~~the~~ average ~~balance of our mortgage loan portfolio as paydowns and payoffs exceeded loan purchases.~~yield. This was offset by a decrease in interest expense of ~~$4.2~~$3.1 million to ~~$8.8~~$8.6 million in the quarter ended ~~June~~September 30, 2021 from ~~$13.1~~$11.7 million in the quarter ended ~~June~~September 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~~$3.5 million to ~~$47.1~~$70.1 million in the ~~six~~nine months ended ~~June~~September 30, 2021 from ~~$50.1~~$73.6 million in the ~~six~~nine months ended ~~June~~September 30, 2020 primarily due to a decrease in the average ~~balance of our mortgage loan portfolio as paydowns and payoffs exceeded loan purchases.~~yield. This was offset by a decrease in interest expense of ~~$7.0~~$10.2 million to ~~$19.1~~$27.7 million in the ~~six~~nine months ended ~~June~~September 30, 2021 from ~~$26.1~~$37.9 million in the ~~six~~nine months ended ~~June~~September 30, 2020 similarly due to decreases in the average interest rates applicable to our borrowings.

During the ~~second~~third quarter of 2021, we collected ~~$78.9~~$82.8 million in cash payments and proceeds on our mortgage loans, securities and REO held-for-sale compared to ~~$57.8~~$56.4 million for the ~~second~~third quarter of 2020. These amounts exclude cash proceeds from the sale of debt securities. 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~~nine months ended ~~June~~September 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,					Three months ended September 30,				Nine months ended September 30,
		2021		2020(1,2)		2021		2020(1,2)			2021		2020(1,2)		2021		2020(1,2)
Accretable yield recognized on RPL, NPL and SBC loans	Accretable yield recognized on RPL, NPL and SBC loans	$	15,788	$	18,458	$	33,969	$	40,350	Accretable yield recognized on RPL, NPL and SBC loans	$	15,772	$	18,311	$	49,741	$	58,661
Interest income on beneficial interests		4,397		2,172		7,856		4,676
Accretable yield recognized on beneficial interests										Accretable yield recognized on beneficial interests	4,041		2,737		11,897		7,413
Interest income on debt securities	Interest income on debt securities	2,597		2,596		5,074		4,929		Interest income on debt securities	3,084		2,356		8,158		7,285
Other interest income/(loss)	Other interest income/(loss)	153		(130)		5		(92)		Other interest income/(loss)	114		38		119		(54)
Bank interest income	Bank interest income	113		75		179		196		Bank interest income	43		75		222		271
Interest income	Interest income	$	23,048	$	23,171	$	47,083	$	50,059	Interest income	$	23,054	$	23,517	$	70,137	$	73,576
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
Net decrease in the present value of expected credit losses(3)										Net decrease in the present value of expected credit losses(3)	3,678		4,440		13,927		4,591
Interest income after the impact of changes in the net present value of expected credit losses										Interest income after the impact of changes in the net present value of expected credit losses	$	26,732	$	27,957	$	84,064	$	78,167

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

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

(3)~~Increases and decreases~~Net decrease in the net present value of expected credit losses represents the net decrease to the allowance resulting from changes in actual and expected cash flows ~~are~~ during both the three and nine months ended September 30, 2021 and September 30, 2020, respectively. It represents the net increase of the present value of the expected cash flows in excess of contractual cash flows offset by any incremental provision expense on the Mortgage loan pools and Beneficial interests. The decrease is calculated at the pool level for Mortgage loans and at the security level for Beneficial interests. To the extent a pool or Beneficial interest has an associated allowance, the decrease in expected credit losses is recorded in the period in which the change occurs, otherwise it is recognized prospectively as ~~a reduction or~~an increase ~~to the allowance for losses, respectively.~~in yield.

The decrease in the accretable yield recognized on RPL, NPL and SBC loans is primarily driven by a decrease in the average balance of our mortgage loan portfolio from payoffs and paydowns exceeding new loan acquisitions, and the refinancing of the loans from Ajax Mortgage Trust 2017-D (“2017-D”) into an off-balance sheet trust which issued debt securities and beneficial interests. 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. The average balance of our mortgage loan portfolio, debt securities, beneficial interests and debt outstanding for the three months ended ~~June~~September 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,					Three months ended September 30,
		2021		2020(1)			2021		2020(1)
Average mortgage loan portfolio	Average mortgage loan portfolio	$	967,671	$	1,087,800	Average mortgage loan portfolio	$	976,829	$	1,097,046
Average carrying value of debt securities	Average carrying value of debt securities	$	296,034	$	267,947	Average carrying value of debt securities	$	387,247	$	259,433
Average carrying value of beneficial interests	Average carrying value of beneficial interests	$	109,578	$	65,412	Average carrying value of beneficial interests	$	133,567	$	71,576
Total average asset level debt	Total average asset level debt	$	992,122	$	1,041,673	Total average asset level debt	$	1,044,125	$	1,038,406

(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~~increased for the three and nine months ended ~~June~~September 30, 2021 over the comparable period in ~~2020~~2020. The increase for the three months ended is due to ~~lower~~higher gain on sale for property held-for-sale and gain on sale of securities partially offset by 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~~nine months ended ~~June~~September 30, 2021 ~~over the comparable period in 2020~~ primarily as a result of a ~~loss~~Loss on ~~the~~ sale of mortgage loans ~~during the first quarter of~~in 2020, ~~combined with both an increase~~increases in late fee income and a gain on

the ~~refinancing~~sale of ~~our 2017-D securitization trust~~securities compared with the comparable period in ~~the second quarter of 2021.~~2020. 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,					Three months ended September 30,				Nine months ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Net gain on sale of property held-for-sale										Net gain on sale of property held-for-sale	$	375	$	150	$	572	$	957
Gain on sale of securities										Gain on sale of securities	201		145		201		145
Late fee income	Late fee income	$	236	$	163	$	426	$	348	Late fee income	182		177		608		525
Other income		114		—		114		—
Net gain on sale of property held-for-sale		92		394		197		807
HAMP fees	HAMP fees	31		114		79		252		HAMP fees	26		59		105		311
Rental income	Rental income	13		9		26		20		Rental income	5		6		31		26
Loss on sale of mortgage loans	Loss on sale of mortgage loans	—		—		—		(705)		Loss on sale of mortgage loans	—		—		—		(705)
Total other income		$	486	$	680	$	842	$	722
Other (loss)/income										Other (loss)/income	(11)		—		103		—
Total Other income										Total Other income	$	778	$	537	$	1,620	$	1,259

Expenses

Total expenses increased for the three and ~~six~~nine months ended ~~June~~September 30, 2021 over the comparable ~~period~~periods 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~~second quarter ~~as well as an increase in insurance expense.~~of 2021. These were partially offset by lower ~~loan servicing~~Professional fees ~~loan transaction expense driven by cost recoveries from joint venture partners~~ and ~~real~~a recovery of impairments on three REO properties within the Real estate operating ~~expense due to lower REO impairments.~~expenses line. A breakdown of expenses is provided in the table below ($ in thousands):

Table 5: Expenses


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Fair value adjustment on put option liability	$	2,493	$	1,766	$	6,638	$	3,016
Related party expense – management fee	2,292		2,264		6,835		6,206
Related party expense – loan servicing fees	1,743		1,848		5,275		5,798
Other expense	1,227		986		3,906		3,048
Professional fees	526		576		1,929		2,113
Real estate operating expenses	(76)		173		197		1,273
Total expenses	$	8,205	$	7,613	$	24,780	$	21,454

~~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

Other expense increased for the three and ~~six~~nine months ended ~~June~~September 30, 2021 over the comparable ~~period~~periods in 2020 primarily due to higher ~~directors'~~Insurance expense, Employee and service provider grants, and 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 cost recoveries from joint venture partners within Loan transaction expense, and lower ~~borrowing~~Borrowing related expenses and Taxes and regulatory expense. A breakdown of ~~other~~Other expense is provided in the table below ($ in thousands):

Table 6: Other Expense


		Three months ended June 30,				Six months ended June 30,					Three months ended September 30,				Nine months ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Directors' fees and grants		$	251	$	109	$	420	$	218
Insurance	Insurance	229		184		458		368		Insurance	$	253	$	238	$	711	$	606
Employee and service provider share grants	Employee and service provider share grants	207		174		414		348		Employee and service provider share grants	230		187		644		535
Directors' fees and grants										Directors' fees and grants	165		104		585		322
Other expense										Other expense	159		72		376		230
Borrowing related expenses										Borrowing related expenses	138		227		471		615
Taxes and regulatory expense	Taxes and regulatory expense	183		151		244		197		Taxes and regulatory expense	105		198		349		395
Borrowing related expenses		146		218		333		388
Other expense		116		94		217		158
Software licenses and amortization										Software licenses and amortization	86		90		261		224
Lien release non due diligence	Lien release non due diligence	94		58		103		91		Lien release non due diligence	64		13		167		104
Software licenses and amortization		90		64		175		134
Internal audit services										Internal audit services	46		35		123		107
Travel, meals, entertainment	Travel, meals, entertainment	67		(12)		98		126		Travel, meals, entertainment	15		—		113		126
Internal audit services		39		35		77		72
Loan transaction expense	Loan transaction expense	(47)		65		140		(38)		Loan transaction expense	(34)		(178)		106		(216)
Total other expense		$	1,375	$	1,140	$	2,679	$	2,062
Total Other expense										Total Other expense	$	1,227	$	986	$	3,906	$	3,048

Equity and Net Book Value per Share

Our net book value per common share was ~~$15.86~~$16.00 and $15.59 at ~~June~~September 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~~in the first quarter, the repurchase of $7.5 million of our convertible senior notes and ~~a recovery~~an increase in common equity ~~that resulted~~resulting from net fair value adjustments of ~~$1.3~~$3.0 million ~~taken~~ on our portfolio of debt securities recorded to Other comprehensive income since December 31, 2020. While U.S. GAAP does not specifically define the parameters for calculating book value, we believe our calculation is representative of our book value on a per share basis, and our Manager believes book value per share is a valuable metric for evaluating our business. The net book value per share is calculated by dividing equity, after adjusting for the anticipated conversion of the senior convertible notes into shares of common stock, the subtraction of non-controlling interests and preferred shares classified in equity, and shares for Manager and director fees that were approved but still unissued as of the date indicated, unvested employee and service provider stock grants and the common shares from assumed conversion of our senior convertible notes. A breakdown of our book value per share is set forth in the table below ($ in thousands except per share amounts):

6365

Table 7: Book Value per Common Share


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Outstanding shares	Outstanding shares	22,993,246		22,978,339		Outstanding shares	23,140,131		22,978,339
Adjustments for:	Adjustments for:					Adjustments for:
Unvested grants of restricted stock, and Manager and director shares earned but not issued as of the date indicated	Unvested grants of restricted stock, and Manager and director shares earned but not issued as of the date indicated	4,025		4,280		Unvested grants of restricted stock, and Manager and director shares earned but not issued as of the date indicated	3,580		4,280
Conversion of convertible senior notes into shares of common stock	Conversion of convertible senior notes into shares of common stock	7,315,929		7,834,299		Conversion of convertible senior notes into shares of common stock	7,315,929		7,834,299
Settlement of put option in shares(1)	Settlement of put option in shares(1)	—		—		Settlement of put option in shares(1)	—		—
Total adjusted shares outstanding	Total adjusted shares outstanding	30,313,200		30,816,918		Total adjusted shares outstanding	30,459,640		30,816,918

Equity at period end	Equity at period end	$	497,492	$	514,491	Equity at period end	$	503,105	$	514,491
Net increase in equity from expected conversion of convertible senior notes~~(1)~~	Net increase in equity from expected conversion of convertible senior notes~~(1)~~	102,762		110,250		Net increase in equity from expected conversion of convertible senior notes~~(1)~~	102,762		110,250
Adjustment for equity due to preferred shares	Adjustment for equity due to preferred shares	(115,144)		(115,144)		Adjustment for equity due to preferred shares	(115,144)		(115,144)
Net adjustment for equity due to non-controlling interests	Net adjustment for equity due to non-controlling interests	(4,238)		(29,130)		Net adjustment for equity due to non-controlling interests	(3,281)		(29,130)
Adjusted equity	Adjusted equity	$	480,872	$	480,467	Adjusted equity	$	487,442	$	480,467
Book value per share	Book value per share	$	15.86	$	15.59	Book value per share	$	16.00	$	15.59

(1)The settlement of the put option in shares isare 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~~nine months ended ~~June~~September 30, 2021, we purchased ~~$4.8~~$0.5 million and ~~$36.4~~$36.8 million of RPLs with UPB of ~~$5.2~~$0.5 million and ~~$41.2~~$41.7 million, respectively, at ~~60.7%~~61.7% and 57.7% of the underlying property value, respectively. Comparatively, for the three and nine months ended ~~June~~September 30, 2020 we purchased ~~no RPLs, however, for the six months ended June 30, 2020 we purchased $1.2~~$41.2 million and $42.4 million of RPLs with UPB of ~~$2.0~~$46.3 million and $48.2 million, respectively, at ~~38.6%~~63.0% and 61.9% of the underlying property ~~value.~~value, respectively. For the three and nine months ended ~~June~~September 30, 2021, we purchased ~~no NPLs, however, for the six months ended June 30, 2021 we purchased $0.4~~$87.5 million and $88.0 million of NPLs with UPB of ~~$0.7~~$90.9 million and $91.5 million, respectively, at ~~50.1%~~64.0% and 63.9% of the underlying property value. Comparatively, for the three and nine months ended ~~June~~September 30, 2020 we purchased ~~no NPLs, however, for the six months ended June 30, 2020 we purchased $0.2~~$0.5 million and $0.7 million of NPLs with UPB of ~~$0.2~~$0.5 million and $0.7 million, respectively, at ~~62.9%~~72.0% and 69.2% of the underlying property ~~value.~~value, respectively. For the three months ended ~~June~~September 30, 2021 we purchased no SBC ~~loans,~~loans; however, for the ~~six~~nine months ended ~~June~~September 30, 2021 we purchased $3.6 million of SBC loans with UPB of $3.6 million at 36.5% of the underlying property value. Comparatively, for both the three and ~~six~~nine months ended ~~June~~September 30, 2020, we purchased no$1.8 million of SBC ~~loans.~~loans with UPB of $1.9 million at 47.1% of the underlying property value. We ended the period with ~~$955.6 million~~$1.0 billion of net mortgage loans with an aggregate UPB of ~~$1.0~~$1.1 billion as of ~~June~~September 30, 2021 and $1.1 billion of net mortgage loans with an aggregate UPB of $1.2 billion as of ~~June~~September 30, 2020.

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

Table 8: Loan Portfolio Acquisitions


		Three months ended June 30,						Six months ended June 30,							Three months ended September 30,						Nine months ended September 30,
		2021			2020			2021			2020				2021			2020			2021			2020
RPLs	RPLs													RPLs
Count	Count	38			—			237			26			Count	4			244			241			270
UPB	UPB	$	5,157		$	—		$	41,188		$	1,952		UPB	$	530		$	46,291		$	41,718		$	48,243
Purchase price	Purchase price	$	4,773		$	—		$	36,360		$	1,205		Purchase price	$	475		$	41,170		$	36,835		$	42,375
Purchase price % of UPB	Purchase price % of UPB	92.6		%	—		%	88.3		%	61.7		%	Purchase price % of UPB	89.6		%	88.9		%	88.3		%	87.8		%
NPLs	NPLs													NPLs
Count	Count	—			—			3			1			Count	364			1			367			2
UPB	UPB	$	—		$	—		$	665		$	227		UPB	$	90,862		$	520		$	91,527		$	747
Purchase price	Purchase price	$	—		$	—		$	447		$	185		Purchase price	$	87,537		$	468		$	87,984		$	653
Purchase price % of UPB	Purchase price % of UPB	—		%	—		%	67.2		%	81.5		%	Purchase price % of UPB	96.3		%	90.0		%	96.1		%	87.4		%
SBC loans	SBC loans													SBC loans
Count	Count	—			—			1			—			Count	—			2			1			2
UPB	UPB	$	—		$	—		$	3,611		$	—		UPB	$	—		$	1,859		$	3,611		$	1,859
Purchase price	Purchase price	$	—		$	—		$	3,603		$	—		Purchase price	$	—		$	1,818		$	3,603		$	1,818
Purchase price % of UPB	Purchase price % of UPB	—		%	—		%	99.8		%	—		%	Purchase price % of UPB	—		%	97.8		%	99.8		%	97.8		%

During the three and ~~six~~nine months ended ~~June~~September 30, 2021, ~~947~~183 and ~~1,109~~1,292 mortgage loans, respectively, representing ~~16.6%~~3.7% and ~~20.3%~~23.1% of our ending UPB, respectively, were liquidated. Comparatively, during the three and ~~six~~nine months ended ~~June~~September 30, 2020, ~~112~~119 and ~~263~~382 mortgage loans, respectively, representing ~~1.7%~~2.0% and ~~6.3%~~8.3%, respectively, of our ending UPB, were liquidated. Our loan portfolio activity for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 is presented below ($ in thousands):

Table 9: Loan Portfolio Activity


											Three months ended September 30,
		Three months ended June 30,				Six months ended June 30,					2021				2020
		2021		2020		2021		2020			Mortgage loans held-for-investment, net		Mortgage loans held-for-sale, net		Mortgage loans held-for-investment, net		Mortgage loans held-for-sale, net
Beginning carrying value	Beginning carrying value	$	1,123,530	$	1,098,629	$	1,119,372	$	1,151,469	Beginning carrying value	$	955,628	$	—	$	1,080,617	$	—
RPL, NPL and SBC portfolio acquisitions, net cost basis	RPL, NPL and SBC portfolio acquisitions, net cost basis	4,773		—		40,410		1,391		RPL, NPL and SBC portfolio acquisitions, net cost basis	88,012		—		43,455		—
Draws on SBC loans	Draws on SBC loans	7,259		—		7,344		—		Draws on SBC loans	3,022		—		—		—
Accretion recognized	Accretion recognized	15,914		18,695		34,435		40,440		Accretion recognized	15,772		—		18,311		—
Payments received on loans, net	Payments received on loans, net	(69,803)		(38,138)		(126,024)		(85,098)		Payments received on loans, net	(54,292)		—		(42,424)		—
Net reclassifications to mortgage loans held-for-sale, net										Net reclassifications to mortgage loans held-for-sale, net	(30,963)		30,963		—		—
Reclassifications to REO	Reclassifications to REO	(1,046)		(98)		(1,274)		(912)		Reclassifications to REO	(1,739)		—		(603)		—
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)
Decrease in net present value of expected credit losses on mortgage loans										Decrease in net present value of expected credit losses on mortgage loans	908		—		2,996		—
Other	Other	1,170		4		2,488		35		Other	3		—		8		—
Ending carrying value	Ending carrying value	$	955,628	$	1,080,617	$	955,628	$	1,080,617	Ending carrying value	$	976,351	$	30,963	$	1,102,360	$	—


	Nine months ended September 30,
	2021				2020
	Mortgage loans held-for-investment, net		Mortgage loans held-for-sale, net		Mortgage loans held-for-investment, net		Mortgage loans held-for-sale, net
Beginning carrying value	$	1,119,372	$	—	$	1,151,469	$	—
RPL, NPL and SBC portfolio acquisitions, net cost basis	128,422		—		44,846		—
Draws on SBC loans	10,366		—		—		—
Accretion recognized	49,741		—		58,661		—
Payments received on loans, net	(180,443)		—		(127,935)		—
Net reclassifications to mortgage loans held-for-sale, net	(159,733)		159,733		—		—
Reclassifications to REO	(3,013)		—		(1,515)		—
Sale of mortgage loans	—		—		(26,111)		—
Refinancing of 2017-D	—		(128,770)		—		—
Decrease in net present value of expected credit losses on mortgage loans	9,148		—		2,902		—
Other	2,491		—		43		—
Ending carrying value	$	976,351	$	30,963	$	1,102,360	$	—

Table 10: Portfolio Composition

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


September 30, 2021				December 31, 2020(1,2)
No. of Loans	5,353			No. of Loans	6,031
Total UPB(3)	$	1,071,034		Total UPB(3)	$	1,204,804
Interest-Bearing Balance	$	985,282		Interest-Bearing Balance	$	1,127,499
Deferred Balance(4)	$	85,752		Deferred Balance(4)	$	77,305
Market Value of Collateral(5)	$	1,925,879		Market Value of Collateral(5)	$	1,967,419
Original Purchase Price/Total UPB	82.7		%	Original Purchase Price/Total UPB	82.2		%
Original Purchase Price/Market Value of Collateral	49.2		%	Original Purchase Price/Market Value of Collateral	53.7		%
Weighted Average Coupon	4.31		%	Weighted Average Coupon	4.44		%
Weighted Average LTV(6)	66.6		%	Weighted Average LTV(6)	72.8		%
Weighted Average Remaining Term (months)	296			Weighted Average Remaining Term (months)	297
No. of first liens	5,293			No. of first liens	5,973
No. of second liens	60			No. of second liens	58
No. of Rental Properties	—			No. of Rental Properties	6
Capital Invested in Rental Properties	$	—		Capital Invested in Rental Properties	$	710
RPLs	85.9		%	RPLs	94.4		%
NPLs	11.7		%	NPLs	3.5		%
SBC loans	2.4		%	SBC loans	2.1		%
No. of REO properties held-for-sale	31			No. of REO properties held-for-sale	32
Market Value of Other REO(7)	$	6,971		Market Value of Other REO(7)	$	8,105
Carrying value of debt securities and beneficial interests in trusts	$	476,158		Carrying value of debt securities and beneficial interests in trusts	$	369,330

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 %


September 30, 2021			December 31, 2020(1,2)
Loans with 12 for 12 payments as an approximate percentage of UPB (8)	76.6	%	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)	68.8	%	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~~September 30, 2021 and December 31, 2020, our loan portfolio consists of fixed rate ~~(56.1%~~(60.1% of UPB), ARM ~~(8.5%~~(7.5% of UPB) and Hybrid ARM ~~(35.4%~~(32.4% 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.~~the reporting date.

(6)UPB as of ~~June~~September 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~~September 30, 2021 and December 31, 2020, respectively ($ in thousands):

Portfolio at ~~June~~September 30, 2021


	Years of Origination
Mortgage loans held-for-investment, net	After 2008			2006 – 2008			2005 and prior
Number of loans	578			2,937			1,657
UPB	$	142,834		$	660,411		$	234,442
Mortgage loan portfolio by year of origination	13.8		%	63.6		%	22.6		%
Loan Attributes:
Weighted average loan age (months)	96.0			175.7			215.1
Weighted average loan-to-value	63.1		%	70.3		%	56.6		%
Delinquency Performance:
Current	66.1		%	64.0		%	62.6		%
30 days delinquent	5.6		%	5.2		%	5.8		%
60 days delinquent	2.1		%	3.9		%	4.5		%
90+ days delinquent	19.9		%	20.2		%	20.5		%
Foreclosure	6.3		%	6.7		%	6.6		%


		Years of Origination										Years of Origination
		After 2008			2006 – 2008			2005 and prior
Mortgage loans held-for-sale, net											Mortgage loans held-for-sale, net	After 2008			2006 – 2008			2005 and prior
Number of loans	Number of loans	603			2,907			1,658			Number of loans	27			83			71
Unpaid principal balance		$	144,992		$	645,918		$	229,909
UPB											UPB	$	5,121		$	17,918		$	10,308
Mortgage loan portfolio by year of origination	Mortgage loan portfolio by year of origination	14.2		%	63.3		%	22.5		%	Mortgage loan portfolio by year of origination	15.4		%	53.7		%	30.9		%
Loan Attributes:	Loan Attributes:										Loan Attributes:
Weighted average loan age (months)	Weighted average loan age (months)	96.7			172.7			212.6			Weighted average loan age (months)	118.5			175.8			213.9
Weighted average loan-to-value	Weighted average loan-to-value	65.0		%	72.8		%	59.0		%	Weighted average loan-to-value	64.3		%	85.5		%	76.6		%
Delinquency Performance:	Delinquency Performance:										Delinquency Performance:
Current	Current	67.3		%	66.9		%	66.9		%	Current	47.3		%	52.0		%	62.6		%
30 days delinquent	30 days delinquent	4.8		%	5.7		%	5.1		%	30 days delinquent	—		%	7.8		%	6.1		%
60 days delinquent	60 days delinquent	2.9		%	2.9		%	5.5		%	60 days delinquent	7.9		%	3.8		%	3.3		%
90+ days delinquent	90+ days delinquent	20.1		%	18.8		%	17.8		%	90+ days delinquent	44.8		%	29.2		%	24.1		%
Foreclosure	Foreclosure	4.9		%	5.7		%	4.7		%	Foreclosure	—		%	7.2		%	3.9		%

Portfolio at December 31, 2020


		Years of Origination										Years of Origination
		After 2008			2006 – 2008			2005 and prior
Mortgage loans held-for-investment, net											Mortgage loans held-for-investment, net	After 2008			2006 – 2008			2005 and prior
Number of loans	Number of loans	639			3,471			1,921			Number of loans	639			3,471			1,921
Unpaid principal balance		$	156,250		$	780,956		$	267,598
UPB											UPB	$	156,250		$	780,956		$	267,598
Mortgage loan portfolio by year of origination	Mortgage loan portfolio by year of origination	13.0		%	64.8		%	22.2		%	Mortgage loan portfolio by year of origination	13.0		%	64.8		%	22.2		%
Loan Attributes:	Loan Attributes:										Loan Attributes:
Weighted average loan age (months)	Weighted average loan age (months)	91.0			166.7			205.8			Weighted average loan age (months)	91.0			166.7			205.8
Weighted average loan-to-value	Weighted average loan-to-value	69.4		%	77.0		%	62.6		%	Weighted average loan-to-value	69.4		%	77.0		%	62.6		%
Delinquency Performance:	Delinquency Performance:										Delinquency Performance:
Current	Current	53.0		%	51.9		%	53.3		%	Current	53.0		%	51.9		%	53.3		%
30 days delinquent	30 days delinquent	13.6		%	11.4		%	10.9		%	30 days delinquent	13.6		%	11.4		%	10.9		%
60 days delinquent	60 days delinquent	3.8		%	6.7		%	6.8		%	60 days delinquent	3.8		%	6.7		%	6.8		%
90+ days delinquent	90+ days delinquent	25.3		%	25.1		%	25.4		%	90+ days delinquent	25.3		%	25.1		%	25.4		%
Foreclosure	Foreclosure	4.3		%	4.9		%	3.6		%	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~~September 30, 2021 and December 31, 2020 ($ in thousands):


June 30, 2021											December 31, 2020
September 30, 2021																			September 30, 2021																		December 31, 2020
State	State	Count	UPB		% UPB		Collateral Value(1)		% of Collateral Value		State	Count	UPB		% UPB		Collateral Value(1)			% of Collateral Value		State		Count		UPB				% UPB		Collateral Value(1)				% of Collateral Value		State		Count		UPB				% UPB		Collateral Value(1)				% of Collateral Value
CA	CA	769	$	259,824	25.5	%	$	501,908	28.3	%	CA	947	$	329,725	27.4	%	$	589,225		30.0	%	CA		737		$	246,860			23.0	%	$	505,390			26.2	%	CA		947		$	329,725			27.4	%	$	589,225			30.0	%
FL	FL	588	99,271		9.7	%	170,258		9.6	%	FL	655	108,293		9.0	%	174,849			8.9	%	FL		919		179,712				16.8	%	301,986				15.7	%	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	NY	328	103,611		10.2	%	178,383		10.1	%	GA	352	45,817		3.8	%	71,586			3.7	%	NY		319		99,916				9.3	%	174,212				9.0	%	NY		329		103,475				8.6	%	177,524				9.0	%
NJ	NJ	289	66,670		6.5	%	93,230		5.3	%	NY	329	103,475		8.6	%	177,524			9.0	%	NJ		284		65,676				6.1	%	96,021				5.0	%	NJ		287		65,764				5.5	%	89,389				4.5	%
MD																			MD				205		49,973			4.7	%		72,220			3.7	%		MD		248		60,082			5.0	%		77,693			4.0	%
VA																			VA				165		36,020			3.4	%		58,407			3.0	%		GA		352		45,817			3.8	%		71,586			3.7	%
IL																			IL				199		34,839			3.3	%		48,862			2.5	%		VA		205		43,563			3.6	%		63,132			3.2	%
TX																			TX				328		34,065			3.2	%		75,367			3.9	%		TX		410		42,432			3.5	%		81,810			4.2	%
GA	GA	265	32,668		3.2	%	58,387		3.2	%	NJ	287	65,764		5.5	%	89,389			4.5	%	GA		260		31,906				3.0	%	59,974				3.3	%	IL		227		41,410				3.5	%	54,379				2.8	%
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	%
MA																			MA				143		28,777			2.7	%		54,578			2.8	%		MA		177		35,454			2.9	%		61,220			3.1	%
NC	NC	204	29,192		2.9	%	54,564		3.1	%	IL	227	41,410		3.5	%	54,379			2.8	%	NC		195		28,010				2.6	%	56,514				2.9	%	NC		240		33,146				2.8	%	52,217				2.7	%
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	%

6770


September 30, 2021																			September 30, 2021																		December 31, 2020
State																			State				Count		UPB			% UPB			Collateral Value(1)			% of Collateral Value			State		Count		UPB			% UPB			Collateral Value(1)			% of Collateral Value
OR																			OR				62		22,910			2.1	%		41,406			2.1	%		AZ		150		29,765			2.5	%		47,835			2.4	%
AZ	AZ	116	22,268		2.2	%	39,356		2.2	%	AZ	150	29,765		2.5	%	47,835			2.4	%	AZ		109		21,168				2.0	%	40,717				2.1	%	OR		70		24,303				2.0	%	46,279				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	%
PA																			PA				171		19,813			1.8	%		31,144			1.6	%		WA		104		23,874			2.0	%		43,784			2.2	%
WA	WA	87	19,998		2.0	%	39,848		2.2	%	IN	98	9,180		0.8	%	14,476			0.7	%	WA		81		18,766				1.8	%	40,697				2.1	%	PA		185		21,294				1.8	%	31,248				1.6	%
NV	NV	75	13,863		1.4	%	25,707		1.4	%	NV	97	18,614		1.5	%	30,344			1.5	%	NV		71		13,304				1.2	%	26,469				1.4	%	NV		97		18,614				1.5	%	30,344				1.5	%
CT																			CT				70		12,162			1.1	%		18,409			1.0	%		SC		129		14,206			1.2	%		22,213			1.1	%
SC																			SC				110		11,838			1.1	%		19,674			1.0	%		CT		77		13,529			1.1	%		18,115			0.9	%
OH																			OH				91		10,810			1.0	%		15,903			0.8	%		MI		97		13,103			1.1	%		19,832			1.0	%
TN																			TN				96		9,767			0.9	%		19,256			1.0	%		OH		110		12,929			1.1	%		17,843			0.9	%
IN																			IN				91		8,112			0.8	%		14,888			0.8	%		TN		115		12,721			1.1	%		22,690			1.2	%
MI	MI	73	8,750		0.9	%	14,485		0.8	%	MI	97	13,103		1.1	%	19,832			1.0	%	MI		69		8,069				0.8	%	14,341				0.7	%	CO		54		10,450				0.9	%	22,665				1.2	%
CT		70	12,252		1.2	%	17,595		1.0	%	CT	77	13,529		1.1	%	18,115			0.9	%
CO																			CO				37		7,591			0.7	%		18,926			1.0	%		MO		75		9,383			0.8	%		12,545			0.6	%
MO																			MO				55		6,400			0.6	%		10,310			0.5	%		IN		98		9,180			0.8	%		14,476			0.7	%
LA	LA	65	6,523		0.7	%	10,196		0.6	%	LA	76	7,631		0.6	%	11,910			0.6	%	LA		64		6,269				0.6	%	10,229				0.5	%	MN		49		9,121				0.8	%	13,242				0.7	%
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	MN	35	6,371		0.6	%	10,256		0.6	%	AL	44	3,670		0.3	%	4,891			0.2	%	MN		33		5,813				0.5	%	9,778				0.5	%	LA		76		7,631				0.6	%	11,910				0.6	%
UT	UT	35	5,271		0.5	%	13,362		0.8	%	WI	37	4,696		0.4	%	6,385			0.3	%	UT		33		5,016				0.5	%	13,778				0.7	%	UT		44		6,895				0.6	%	14,932				0.8	%
WI																			WI				38		4,837			0.5	%		7,399			0.4	%		DE		34		6,509			0.5	%		7,999			0.4	%
DE																			DE				26		4,825			0.5	%		6,524			0.3	%		HI		16		6,456			0.5	%		9,305			0.5	%
DC																			DC				13		4,369			0.4	%		7,007			0.4	%		DC		17		5,131			0.4	%		8,138			0.4	%
NM																			NM				25		3,926			0.4	%		6,524			0.3	%		WI		37		4,696			0.4	%		6,385			0.3	%
HI																			HI				9		3,512			0.3	%		6,294			0.3	%		NM		30		4,450			0.4	%		6,207			0.3	%
KY	KY	29	3,474		0.3	%	5,317		0.3	%	KY	36	4,158		0.3	%	6,032			0.3	%	KY		29		3,452				0.3	%	5,527				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	%
AL																			AL				39		3,211			0.3	%		4,660			0.2	%		AL		44		3,670			0.3	%		4,891			0.2	%
NH																			NH				14		2,683			0.3	%		4,364			0.2	%		NH		18		3,223			0.3	%		5,087			0.3	%
RI																			RI				10		2,243			0.2	%		3,488			0.2	%		RI		14		3,084			0.3	%		4,481			0.2	%
OK																			OK				22		2,119			0.2	%		3,586			0.2	%		OK		27		2,511			0.2	%		3,827			0.2	%
MS	MS	24	1,858		0.2	%	2,829		0.2	%	OK	27	2,511		0.2	%	3,827			0.2	%	MS		24		1,850				0.2	%	2,949				0.2	%	MS		26		2,149				0.2	%	3,168				0.2	%
OK		23	2,132		0.2	%	3,458		0.2	%	MS	26	2,149		0.2	%	3,168			0.2	%
KS	KS	19	1,390		0.1	%	3,024		0.2	%	AR	20	1,447		0.1	%	2,016			0.1	%	KS		21		1,537				0.1	%	3,425				0.2	%	IA		18		1,736				0.1	%	2,267				0.1	%
ME																			ME				9		1,305			0.1	%		2,030			0.1	%		ID		12		1,496			0.1	%		2,971			0.2	%
ID																			ID				10		1,176			0.1	%		2,904			0.2	%		AR		20		1,447			0.1	%		2,016			0.1	%
IA																			IA				13		1,090			0.1	%		1,695			0.1	%		KS		19		1,379			0.1	%		2,897			0.1	%
WV																			WV				14		1,065			0.1	%		1,683			0.1	%		ME		10		1,372			0.1	%		1,801			0.1	%
MT																			MT				6		1,009			0.1	%		1,830			0.1	%		WV		17		1,258			0.1	%		1,830			0.1	%
AR	AR	17	1,102		0.1	%	1,687		0.1	%	KS	19	1,379		0.1	%	2,897			0.1	%	AR		15		869				0.1	%	1,493				0.1	%	MT		6		803				0.1	%	1,336				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	PR	5	593		0.1	%	552		—	%	PR	5	518		—	%	592			—	%	PR		5		588				0.1	%	554				0.1	%	SD		4		537				—	%	872				—	%
SD	SD	4	531		0.1	%	917		0.1	%	SD	4	537		—	%	872			—	%	SD		4		529				—	%	983				0.1	%	NE		4		528				—	%	603				—	%
VT																			VT				2		397			—	%		338			—	%		PR		5		518			—	%		592			—	%
ND	ND	3	391		—	%	479		—	%	NE	4	528		—	%	603			—	%	ND		3		390				—	%	492				0.1	%	VT		2		452				—	%	518				—	%
WY																			WY				2		246			—	%		231			—	%		WY		3		438			—	%		356			—	%
NE	NE	3	247		—	%	308		—	%	WY	3	438		—	%	356			—	%	NE		2		188				—	%	280				—	%	ND		3		395				—	%	472				—	%
VT		2	400		—	%	316		—	%	ND	3	395		—	%	472			—	%
WY		2	247		—	%	238		—	%	VT	2	452		—	%	518			—	%
AK	AK	1	56		—	%	157		—	%	AK	2	249		—	%	391			—	%	AK		1		56				—	%	163				—	%	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	%			5,353		$	1,071,034			100.0	%	$	1,925,879			100.0	%			6,031		$	1,204,804			100.0	%	$	1,967,419			100.0	%

(1)As of ~~date of acquisition.~~the reporting date.

6871

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
The following table shows our debt securities and beneficial interest acquisitions for the three and nine months ended September 30, 2021, and 2020 ($ in thousands):


	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020
Class A securities
UPB	$	43,120		$	67,076		$	213,969		$	116,952
Purchase price	$	43,115		$	65,956		$	213,077		$	115,558
Purchase price % of UPB	100.0		%	98.3		%	99.6		%	98.8		%
Class M securities
UPB	$	1,943		$	—		$	1,943		$	—
Purchase price	$	1,943		$	—		$	1,943		$	—
Purchase price % of UPB	100.0		%	—		%	100.0		%	—		%
Class B securities
UPB	$	9,561		$	5,267		$	33,222		$	9,923
Purchase price	$	6,399		$	5,194		$	29,907		$	9,817
Purchase price % of UPB	66.9		%	98.6		%	90.0		%	98.9		%
Beneficial interests
Purchase price	$	3,213		$	12,225		$	42,680		$	19,307

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 tomay 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~~included on our consolidated balance sheet.

As of ~~June~~September 30, 2021 and December 31, 2020, substantially all of our invested capital was in RPLs, NPLs, SBC loans, property held-for-sale, debt securities, and beneficial ~~interests and rental properties.~~interests. We also held approximately ~~$88.1~~$92.8 million of cash and cash equivalents, a decrease of ~~$19.0~~$14.3 million from our balance of $107.1 million at December 31, 2020. Our average daily cash balance during the quarter was ~~$113.0~~$89.2 million, a decrease of ~~$15.7~~$39.5 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~~$82.8 million and ~~$149.1~~$231.9 million, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and ~~$57.8~~$56.4 million and ~~$120.2~~$176.6 million, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2020.

Our operating cash outflows, including the effect of restricted cash, for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 were ~~$22.9~~$15.2 million and ~~$10.2~~$6.1 million, respectively. Our primary operating cash inflow is cash interest payments on our mortgage loan pools of ~~$23.8~~$34.8 million and ~~$24.2~~$36.2 million for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively. Non-cash interest income accretion was ~~$10.6~~$15.5 million and ~~$16.2~~$22.8 million for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively. Interest income on beneficial interests was ~~$8.2~~$12.3 million and ~~$5.1~~$8.0 million during the ~~six~~nine months ended ~~June~~

September 30, 2021 and 2020, respectively. Interest income on debt securities was ~~$5.1~~$8.2 million and ~~$2.3~~$7.3 million during the ~~six~~nine months ended ~~June~~September 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~~nine months ended ~~June~~September 30, 2021, our investing cash inflows of ~~$10.9~~$54.9 million were driven by principal payments on and payoffs of our mortgage loan portfolio of $145.4 million, 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~~$111.2 million and payoff and sale of our securities of ~~$20.6~~$90.2 million, partially offset by the acquisitions of our debt securities and beneficial interests of ~~$231.6~~$286.5 million and acquisitions of our mortgage loans of ~~$40.4~~$128.4 million. For the ~~six~~nine months ended ~~June~~September 30, 2020 our investing cash inflow of ~~$57.0~~$14.1 million was primarily driven by principal payments on and payoffs of our mortgage loan portfolio of ~~$60.8~~$91.2 million, principal payments on and payoffs on debt securities and beneficial interests held as investments of ~~$25.5~~$37.9 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~~$144.7 million and acquisitions of mortgage loans of $44.8 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~~nine months ended ~~June~~September 30, 2021, we had net financing cash outflows of ~~$7.0~~$51.6 million primarily driven by repayments of $398.1 million on repurchase transaction and pay downs of existing debt obligations of ~~$312.5~~$355.0 million on secured ~~borrowings, and repayments of $270.4 million on repurchase transaction.~~borrowings. 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~~$376.3 million. For the ~~six~~nine months ended ~~June~~September 30, 2020, we had net cash inflows from financing activities of ~~$52.5~~$62.9 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~~$270.0 million and secured debt of $114.5 million, partially offset by repayments of ~~$159.3~~$268.7 million on repurchase transactions, pay downs of existing debt obligations of ~~$44.5~~$153.9 million on secured borrowings and repurchased our senior convertible notes of ~~$8.2~~$10.5 million. For the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 we paid ~~$12.4~~$19.3 million and ~~$5.9~~$11.8 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~~September 30, 2021 we held ~~126,609~~136,403 shares of treasury stock consisting of ~~78,145~~87,939 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~~September 30, 2020 we held ~~37,278~~50,173 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~~are using the net proceeds from the private placement to acquire mortgage loans and mortgage-related assets consistent with our investment strategy.

During the ~~six~~nine months ended ~~June~~September 30, 2021, ~~and June~~we sold 9,073 shares of common stock for proceeds, net of issuance costs of $0.1 million under our At the Market program, which we sell, through our agents, shares of common stock with an aggregate offering price of up to $100.0 million. During the nine months ended September 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.~~program. 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 our inception (January 30, 2014) to ~~June~~September 30, 2021, we have completed 18 secured borrowings, not including borrowings we completed for our non-consolidated joint ventures (See Table ~~18:~~17: Investments in joint ventures), through

securitization trusts pursuant to Rule 144A under the Securities Act, five of which were outstanding at ~~June~~September 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~~September 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~~September 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.~~Ajax Mortgage Loan Trust 2021-C ("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~~September 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

Issuing Trust/Issue Date

Interest Rate Step-up Date

Security

Original Principal

Interest Rate

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.

(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. We have retained the Class B notes.

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. There were no convertible note repurchases during the third quarter of 2021. 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. There were no convertible note repurchases during the second quarter of 2020.

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~~$150.0 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~~securities retained 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~~September 30, 2021 and December 31, 2020 is as follows ($ in thousands):

Table 15: Repurchase Transactions by Maturity Date


				September 30, 2021
Maturity Date	Origination Date	Maximum Borrowing Capacity		Amount Outstanding		Amount of Collateral		Percentage of Collateral Coverage		Interest Rate
October 5, 2021	April 9, 2021	$	31,326	$	31,326	$	37,953	121	%	1.41	%
October 6, 2021	July 6, 2021	7,073		7,073		8,745		124	%	1.34	%
October 6, 2021	July 6, 2021	4,150		4,150		5,057		122	%	1.34	%
October 6, 2021	July 6, 2021	3,343		3,343		4,761		142	%	1.74	%
October 12, 2021	July 12, 2021	5,242		5,242		6,572		125	%	1.32	%
October 15, 2021	July 15, 2021	5,553		5,553		6,627		119	%	1.18	%
October 20, 2021	July 20, 2021	10,879		10,879		12,889		118	%	1.18	%


				September 30, 2021
Maturity Date	Origination Date	Maximum Borrowing Capacity		Amount Outstanding		Amount of Collateral		Percentage of Collateral Coverage		Interest Rate
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	%
October 29, 2021	July 30, 2021	9,984		9,984		12,436		125	%	1.33	%
October 29, 2021	July 30, 2021	9,840		9,840		11,851		120	%	1.33	%
November 12, 2021	August 12, 2021	3,110		3,110		4,428		142	%	1.72	%
November 19, 2021	August 19, 2021	9,747		9,747		12,635		130	%	1.33	%
November 24, 2021	August 24, 2021	3,543		3,543		5,106		144	%	1.73	%
December 7, 2021	September 7, 2021	5,825		5,825		7,444		128	%	1.12	%
December 7, 2021	September 7, 2021	2,311		2,311		2,848		123	%	1.12	%
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		8,682		121	%	1.15	%
December 16, 2021	September 16, 2021	44,200		44,200		57,815		131	%	1.12	%
December 16, 2021	September 16, 2021	4,333		4,333		6,232		144	%	1.37	%
December 17, 2021	September 17, 2021	7,333		7,333		9,556		130	%	1.32	%
December 17, 2021	September 17, 2021	6,687		6,687		8,451		126	%	1.32	%
December 17, 2021	September 17, 2021	1,179		1,179		1,687		143	%	1.72	%
December 20, 2021	September 20, 2021	35,153		35,153		37,867		108	%	0.57	%
December 20, 2021	September 20, 2021	2,918		2,918		3,421		117	%	0.87	%
December 20, 2021	September 20, 2021	1,570		1,570		1,943		124	%	1.07	%
December 20, 2021	September 20, 2021	1,400		1,400		2,047		146	%	1.47	%
December 20, 2021	September 20, 2021	1,341		1,341		1,788		133	%	1.32	%
December 27, 2021	September 24, 2021	16,643		16,643		21,720		131	%	1.33	%
December 27, 2021	September 24, 2021	4,482		4,482		6,413		143	%	1.73	%
December 27, 2021	September 24, 2021	2,277		2,277		2,923		128	%	1.33	%
July 8, 2022	July 9, 2021	150,000		14,085		21,232		151	%	2.58	%
September 22, 2022	September 23, 2021	400,000		103,252		144,774		140	%	2.58	%
Totals/weighted averages		$	832,003	$	399,340	$	518,672	130	%	1.60	%


				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	%

7477


					December 31, 2020												December 31, 2020
Maturity Date	Maturity Date	Origination date	Maximum Borrowing Capacity		Amount Outstanding		Amount of Collateral		Percentage of Collateral Coverage		Interest Rate		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	February 1, 2021	December 1, 2020	3,985��		3,985		5,136		129	%	1.88	%	February 1, 2021	December 1, 2020	3,985		3,985		5,136		129	%	1.88	%
February 1, 2021	February 1, 2021	December 1, 2020	2,887		2,887		3,790		131	%	1.88	%	February 1, 2021	December 1, 2020	2,887		2,887		3,790		131	%	1.88	%
February 1, 2021	February 1, 2021	December 1, 2020	2,332		2,332		3,360		144	%	2.03	%	February 1, 2021	December 1, 2020	2,332		2,332		3,360		144	%	2.03	%
February 1, 2021	February 1, 2021	December 1, 2020	1,132		1,132		1,607		142	%	2.03	%	February 1, 2021	December 1, 2020	1,132		1,132		1,607		142	%	2.03	%
February 12, 2021	February 12, 2021	November 13, 2020	2,945		2,945		4,428		150	%	2.02	%	February 12, 2021	November 13, 2020	2,945		2,945		4,428		150	%	2.02	%
March 5, 2021	March 5, 2021	December 7, 2020	24,946		24,946		33,348		134	%	1.78	%	March 5, 2021	December 7, 2020	24,946		24,946		33,348		134	%	1.78	%
March 5, 2021	March 5, 2021	December 7, 2020	24,312		24,312		32,571		134	%	1.78	%	March 5, 2021	December 7, 2020	24,312		24,312		32,571		134	%	1.78	%
March 17, 2021	March 17, 2021	December 17, 2020	10,219		10,219		13,172		129	%	1.78	%	March 17, 2021	December 17, 2020	10,219		10,219		13,172		129	%	1.78	%
March 17, 2021	March 17, 2021	December 17, 2020	8,381		8,381		10,872		130	%	1.78	%	March 17, 2021	December 17, 2020	8,381		8,381		10,872		130	%	1.78	%
March 17, 2021	March 17, 2021	December 17, 2020	3,894		3,894		5,193		133	%	1.78	%	March 17, 2021	December 17, 2020	3,894		3,894		5,193		133	%	1.78	%
March 17, 2021	March 17, 2021	December 17, 2020	1,145		1,145		1,687		147	%	1.93	%	March 17, 2021	December 17, 2020	1,145		1,145		1,687		147	%	1.93	%
March 24, 2021	March 24, 2021	December 24, 2020	7,016		7,016		10,024		143	%	1.94	%	March 24, 2021	December 24, 2020	7,016		7,016		10,024		143	%	1.94	%
March 24, 2021	March 24, 2021	December 24, 2020	5,008		5,008		6,637		133	%	1.79	%	March 24, 2021	December 24, 2020	5,008		5,008		6,637		133	%	1.79	%
March 24, 2021	March 24, 2021	December 24, 2020	2,577		2,577		3,367		131	%	1.79	%	March 24, 2021	December 24, 2020	2,577		2,577		3,367		131	%	1.79	%
April 9, 2021	April 9, 2021	October 13, 2020	33,084		33,084		43,069		130	%	2.35	%	April 9, 2021	October 13, 2020	33,084		33,084		43,069		130	%	2.35	%
July 9, 2021	July 9, 2021	July 10, 2020	250,000		53,256		84,337		158	%	2.64	%	July 9, 2021	July 10, 2020	250,000		53,256		84,337		158	%	2.64	%
September 23, 2021	September 23, 2021	September 24, 2020	400,000		101,117		160,068		158	%	2.65	%	September 23, 2021	September 24, 2020	400,000		101,117		160,068		158	%	2.65	%
Totals/weighted averages	Totals/weighted averages		$	916,759	$	421,132	$	595,599	141	%	2.29	%	Totals/weighted averages		$	916,759	$	421,132	$	595,599	141	%	2.29	%

As of ~~June~~September 30, 2021, we had ~~$394.4~~$399.3 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~~September 30, 2021 was ~~$394.6~~$434.3 million, compared to a maximum month-end balance for the three months ended December 31, 2020, of $422.3 million. The following table presents certain details of our repurchase transactions for the three months ended ~~June~~September 30, 2021 and December 31, 2020 ($ in thousands):

Table 16: Repurchase Balances


		Three months ended					Three months ended
		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Balance at the end of period	Balance at the end of period	$	394,386	$	421,132	Balance at the end of period	$	399,340	$	421,132
Maximum outstanding balance during the quarter	Maximum outstanding balance during the quarter	$	394,589	$	422,322	Maximum outstanding balance during the quarter	$	434,322	$	422,322
Average balance	Average balance	$	290,670	$	417,973	Average balance	$	399,380	$	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~~$399.4 million for the three months ended ~~June~~September 30, 2021 was due to ~~a net decrease in~~the securitization of certain assets previously on the repurchase ~~financing during the three months ended June 30, 2021.~~lines.

As of ~~June~~September 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,~~November 4, 2021, our Board of Directors declared a dividend of ~~$0.21~~$0.24 per share, to be paid on ~~August 31,~~November 29, 2021 to stockholders of record as of ~~August 16,~~November 15, 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~~nine months ended ~~June~~September 30, 2021 and ~~June~~September 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%~~6.00% on an annualized basis of our book value of ~~$15.86~~$16.00 per share at ~~June~~September 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												Great Ajax Corp. Ownership
Issuing Trust/Issue Date	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		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	Ajax Mortgage Loan Trust 2018-A/ April 2018	Class A notes due 2058	$	91,036	3.85	%	—	%	$	—	$	—	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	$	128

Ajax Mortgage Loan Trust 2018-B/ June 2018													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	$	2,860

Ajax Mortgage Loan Trust 2018-D/ September 2018													Ajax Mortgage Loan Trust 2018-D/ September 2018	Class A notes due 2058	$	80,664	3.75	%	20.00	%	$	16,133	$	11,667
														Trust certificates	$	20,166	—	%	20.00	%	$	4,033	$	3,915

Ajax Mortgage Loan Trust 2018-E/ December 2018													Ajax Mortgage Loan Trust 2018-E/ December 2018	Class A notes due 2058	$	86,089	4.38	%	—	%	$	—	$	—
														Class B notes due 2058	$	8,035	5.25	%	—	%	$	—	$	—
														Trust certificates	$	20,662	—	%	20.00	%	$	4,132	$	902

7679


		Trust certificates	$	22,759	—	%	9.36	%	$	2,130	$	149							Great Ajax Corp. Ownership

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

Issuing Trust/Issue Date													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-F/ December 2018	Ajax Mortgage Loan Trust 2018-F/ December 2018	Class A notes due 2058	$	180,002	4.38	%	—	%	$	—	$	—	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	%	—	%	$	—	$	—		Class B notes due 2058	$	16,800	5.25	%	—	%	$	—	$	—
		Trust certificates	$	43,201	—	%	20.00	%	$	8,640	$	3,997		Trust certificates	$	43,201	—	%	20.00	%	$	8,640	$	3,996

Ajax Mortgage Loan Trust 2018-G/ December 2018	Ajax Mortgage Loan Trust 2018-G/ December 2018	Class A notes due 2057	$	173,562	4.38	%	25.00	%	$	43,390	$	24,015	Ajax Mortgage Loan Trust 2018-G/ December 2018	Class A notes due 2057	$	173,562	4.38	%	25.00	%	$	43,390	$	21,340
		Class B notes due 2057	$	16,199	5.25	%	25.00	%	$	4,050	$	4,050		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		Trust certificates	$	41,655	—	%	25.00	%	$	10,414	$	10,585

Ajax Mortgage Loan Trust 2019-A/ March 2019	Ajax Mortgage Loan Trust 2019-A/ March 2019	Class A notes due 2057	$	127,801	3.75	%	20.00	%	$	25,560	$	13,532	Ajax Mortgage Loan Trust 2019-A/ March 2019	Class A notes due 2057	$	127,801	3.75	%	20.00	%	$	25,560	$	11,851
		Class B notes due 2057	$	11,928	5.25	%	20.00	%	$	2,386	$	2,388		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		Trust certificates	$	30,672	—	%	20.00	%	$	6,134	$	6,137

Ajax Mortgage Loan Trust 2019-B/ March 2019	Ajax Mortgage Loan Trust 2019-B/ March 2019	Class A notes due 2059	$	163,325	3.75	%	15.00	%	$	24,499	$	13,635	Ajax Mortgage Loan Trust 2019-B/ March 2019	Class A notes due 2059	$	163,325	3.75	%	15.00	%	$	24,499	$	12,436
		Class B notes due 2059	$	15,244	5.25	%	15.00	%	$	2,287	$	2,287		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		Trust certificates	$	39,198	—	%	15.00	%	$	5,880	$	5,976

Ajax Mortgage Loan Trust 2019-C/ May 2019	Ajax Mortgage Loan Trust 2019-C/ May 2019	Class A notes due 2058	$	150,037	3.95	%	5.00	%	$	7,502	$	5,520	Ajax Mortgage Loan Trust 2019-C/ May 2019	Class A notes due 2058	$	150,037	3.95	%	5.00	%	$	7,502	$	5,057
		Class B notes due 2058	$	14,003	5.25	%	34.00	%	$	4,761	$	4,761		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		Trust certificates	$	36,009	—	%	34.00	%	$	12,243	$	12,417

Ajax Mortgage Loan Trust 2019-E/ September 2019	Ajax Mortgage Loan Trust 2019-E/ September 2019	Class A notes due 2059	$	181,101	3.00	%	6.55	%	$	11,862	$	7,372	Ajax Mortgage Loan Trust 2019-E/ September 2019	Class A notes due 2059	$	181,101	3.00	%	6.55	%	$	11,862	$	6,627
		Class B notes due 2059	$	16,903	4.88	%	20.00	%	$	3,381	$	3,381		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		Trust certificates	$	43,464	—	%	20.00	%	$	8,693	$	8,558

Ajax Mortgage Loan Trust 2019-G/ December 2019	Ajax Mortgage Loan Trust 2019-G/ December 2019	Class A notes due 2059	$	141,420	3.00	%	5.86	%	$	8,287	$	6,938	Ajax Mortgage Loan Trust 2019-G/ December 2019	Class A notes due 2059	$	141,420	3.00	%	5.86	%	$	8,287	$	6,572
		Class B notes due 2059	$	13,199	4.25	%	20.00	%	$	2,640	$	2,640		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													Ajax Mortgage Loan Trust 2019-H/ December 2019	Class A notes due 2059	$	90,381	3.00	%	20.00	%	$	18,076	$	9,555
														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													Ajax Mortgage Loan Trust 2020-A/ March 2020	Class A notes due 2059	$	249,384	2.38	%	20.00	%	$	49,877	$	37,953

7780

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


							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
	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		$	2,848
	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		$	7,444
	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		$	8,683
	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	%		6.94	%	$	13,288		$	12,635
	Class B notes due 2060	$	25,529	4.00	%		20.00	%	$	5,106		$	5,106
	Trust certificates	$	38,293	—	%		20.00	%	$	7,659		$	7,630

Ajax Mortgage Loan Trust 2021-E/ July 2021(1)	Class A notes due 2060	$	430,760	1.82	%	(3)	10.01	%	$	43,119		$	41,288
	Class M notes due 2060(2)	$	19,415	2.94	%		10.01	%	$	1,943		$	1,943
	Class B-1 and B-2 notes due 2060	$	38,313	3.73	%		10.01	%	$	3,835		$	3,835
	Class B-3 notes due 2060	$	29,253	3.73	%		19.57	%	$	5,725		$	5,726
	Trust certificates	$	518,357	—	%		19.57	%	$	101,471	(4)	$	101,086

Ajax Mortgage Loan Trust 2021-F/ June 2021	Class A notes due 2061	$	476,082	1.88	%		12.60	%	$	59,986		$	57,815
	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	%		7.26	%	$	23,056		$	21,720
	Class B notes due 2061	$	32,995	3.75	%		20.00	%	$	6,599		$	6,413

7881


						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
	Trust certificates	$	61,864	—	%	20.00	%	$	12,373	$	11,894

(1)Ajax Mortgage Loan Trust 2021-E ("2021-E") was formed on July 19, 2021 which was subsequent to completing Ajax Mortgage Loan Trust 2021-F and 2021-G. The trust intends to make an election to be taxed as a REMIC however the residual class was placed with an unrelated third party.

(2)2021-E includes Class M notes.

(3)Weighted average of Class A notes.

(4)The trust certificate has no stated principal balance and is tied to the unpaid balance of the underlying mortgage loans.

Table 18: Contractual Obligations

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


June 30, 2021		Payments Due by Period
September 30, 2021												September 30, 2021	Payments Due by Period
		Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		More than 5 Years			Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		More than 5 Years
Convertible senior notes	Convertible senior notes	$	105,850	$	—	$	105,850	$	—	$	—	Convertible senior notes	$	105,850	$	—	$	105,850	$	—	$	—
Borrowings under repurchase agreements	Borrowings under repurchase agreements	394,386		394,386		—		—		—		Borrowings under repurchase agreements	399,340		399,340		—		—		—
Interest on convertible senior notes	Interest on convertible senior notes	23,342		7,674		15,668		—		—		Interest on convertible senior notes	21,423		7,674		13,749		—		—
Interest on repurchase agreements	Interest on repurchase agreements	1,132		1,132		—		—		—		Interest on repurchase agreements	3,353		3,353		—		—		—
Put obligation on outstanding common stock warrants	Put obligation on outstanding common stock warrants	50,707		—		50,707		—		—		Put obligation on outstanding common stock warrants	50,707		—		50,707		—		—
Total	Total	$	575,417	$	403,192	$	172,225	$	—	$	—	Total	$	580,673	$	410,367	$	170,306	$	—	$	—


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~~20 residential ~~NPLs with aggregate UPB of $173.0 million~~RPLs in two transactions from two different ~~sellers.~~sellers, and one NPL in one transaction from a single seller, with aggregate UPB of $2.4 million and $0.4 million, respectively. The purchase price of the RPLs equaled ~~97.9%~~was 68.8% of UPB and ~~54.2%~~47.3% of the estimated market value of the underlying collateral of ~~$312.1~~$3.5 million. ~~Some~~The purchase price of ~~these loans were acquired into~~ the ~~joint venture formed in June 2021 with proceeds from~~NPL was 97.4% of UPB and 84.4% of the ~~established prefunding account.~~estimated market value of the underlying collateral of $0.4 million.

We have agreed to acquire, subject to due diligence, 31four residential RPLs in ~~six~~four transactions, and ~~412~~three NPLs in ~~six~~two transactions, with aggregate UPB of ~~$4.7~~$1.7 million and ~~$103.3~~$0.8 million, respectively. The purchase price of the residential RPLs ~~equals 80.9%~~is 96.5% of UPB and ~~55.1%~~70.3% of the estimated market value of the underlying collateral of ~~$6.9~~$2.4 million. The purchase price of the NPLs ~~equals 97.1%~~is 93.9% of UPB and ~~64.4%~~61.8% of the estimated market value of the underlying collateral of ~~$155.8~~$1.2 million.

~~On July 19, 2021, we co-invested~~We have agreed to acquire, subject to due diligence, 2,498 NPLs with ~~third-party institutional investors to form Ajax Mortgage Loan Trust 2021-E ("2021-E")~~aggregate UPB of $350.9 million in one transaction from a single seller. The purchase price is 103.5% of UPB and ~~retained $53.1 million of varying classes of related securities. We acquired 10.01%~~49.4% 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~~estimated market value ~~of $968.6 million. The senior securities represent 83% of the UPB~~ of the underlying ~~mortgage~~collateral of $734.9 million. These loans ~~and carry~~are expected to be acquired through 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~~venture with third party institutional accredited investors. We expect our ownership percentage to be approximately 16.3%.

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,~~November 4, 2021, our Board of Directors declared a cash dividend of ~~$0.21~~$0.24 per share to be paid on ~~August 31,~~November 29, 2021 to stockholders of record as of ~~August 16,~~November 15, 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.

8184

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,~~August 9, 2021 we issued each of our five independent directors ~~789~~805 shares of common stock in partial payment of their quarterly director fees for the ~~first~~second 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.

8285

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.

8386

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,~~November 5, 2021	By:	/s/ Lawrence Mendelsohn
		Lawrence Mendelsohn
		Chairman and Chief Executive Officer (Principal Executive Officer)

Date: ~~August 6,~~November 5, 2021	By:	/s/ Mary Doyle
		Mary Doyle
		Chief Financial Officer (Principal Financial and Accounting Officer)

8487


PART I Financial Information

Item 1. Consolidated Interim Financial Statements			1

Cautionary Statement Regarding Forward-Looking Statements			4951

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			5052

Item 3. Quantitative and Qualitative Disclosures About Market Risk			8083

Item 4. Controls and Procedures			8184

PART II Other Information

Item 1. Legal Proceedings			8285

Item 1A. Risk Factors			8285

Item 2. Unregistered Sales of Securities			8285

Item 3. Defaults Upon Senior Securities			8285

Item 4. Mine Safety Disclosure			8285

Item 5. Other Information			8285

Item 6. Exhibits			8285


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	%


	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)		0			(35)		0
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)	0		0			35		120,268
Interest expense (add back) and assumed conversion of shares from convertible senior notes(3)	4,599		7,520,222			0		0
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