Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Great Ajax Corp. Fourth Quarter and Year-End Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will -- question-and-answer session. [Operator Instructions] Thank you. It is now my pleasure to turn today's call over to Mr. Larry Mendelsohn, Chief Executive Officer. Please, go ahead.

Thank you, Brent. Thank you, everyone, for joining us for Great Ajax’s fourth quarter and year-end 2022 conference call. Before we get started, I'd like to point out page two on the presentation and the safe harbor disclosure. With me here is Mary Doyle, our CFO; and also on the line is Russell Schaub, our President. A quick introduction before we get in. There's couple of things to note, before we get into the details. In Q4 2022, loan performance continued to increase and loan cash flow velocity from sales of homes by certain delinquent borrowers continued and has also continued in the first quarter of 2023. Prepayments from borrowers, refinancing continues to be slower, as you would probably expect. The regular payment performance of our mortgage loans and our mortgage loan JV structures in excess of our modeled expectations at the time of acquisition, for loans purchased at a discount to UPB, has increased previous GAAP income by accelerating purchase discount accretion, because of the required application of CECL. This then reduces forward GAAP interest income and ROE thereafter, but not taxable income. At September 30, we had approximately $47 million of cash as well as a significant amount of unencumbered securities loans, and I will go through that in more detail later on this call. With that, we jump to page three, for the business overview. Our managers data science guides the analysis of loan characteristics and geographic market metrics for performance and resolution pathway probabilities and its ability to source these mortgage loans through long-standing relationships enables us to require loans that we believe have a material probability of prepayment and/or long-term continuing reperformance. We've acquired loans in 375 different transactions since 2014 in 3 transactions and one larger ones in Q4 of 2022. We own 19.8%…

[Operator Instructions] Your first question comes from the line of Kevin Barker with Piper Sandler. Your line is open.

Hi, this is Brad Capuzzi on for Kevin Barker. Larry, considering the relative discount in the stock, do you have the flexibility to potentially buy in more stock, or could you explore some other strategic options?

The answer is we do. We want to be a little bit patient, though. We actually repurchased a little in first -- in the quarter and so far this quarter as well. We want to be patient though because we can smell an opportunity set of investments coming probably in sequentially commercial first and residential second. And we want to be -- make sure that we're always kind of ready to go for that. So, we wouldn't want to repurchase stock to the extent it didn't permit us to then take a jump for an opportunity set. But we can, both from a company perspective and from a capital perspective, do that.

Thank you, And then just one follow-up. I know you talked about this a little bit, but home prices have declined in some key areas of the country. Do you see any risk within your portfolio in those metro areas? And then do you see any potential opportunities as banks or other entities pull back in certain metro areas?

Yes, we've definitely seen community banks pull back. We've seen them being under some regulatory pressure, more so in the commercial area than in the residential area. We -- from our markets, we've seen some home price decline, but not necessarily in places where we have significant assets. For example, our California portfolio is primarily L.A., Orange, and San Diego counties, which have been significantly less affected than San Francisco. The -- that being said, because we own our loans at such huge discounts to property value on the -- for example, the portfolio we bought in October, the large joint venture, we bought 39% of property value, and we bought it a 15-point discount in a way it's basically a hedge against recession causing increased delinquency because of short duration and we recapture the discount faster. So, we actually, on purpose, have tried to buy very low LTV loans in markets where we think delinquency might increase. So it's -- as what I'll call it portfolio hedge or duration hedge for our portfolio. We actually have seen, modeled out that if you were to have really, really hard landing that caused a 20% across-the-board decline in home prices and a 100% portfolio default. It would increase unlevered yields by about 350 basis points.

Awesome. Thanks for taking the question.

Sure.

Your next question is from the line of Eric Hagen with BTIG. Your line is open.

You got Ethan [ph] on for Eric tonight. Thanks for taking my questions. Are you seeing any opportunities in special servicing either organically or by acquiring some smaller services?

So the answer is more complicated than you probably want to note, we're seeing two things. We're seeing more opportunities of being -- have our servicer apps to do special servicing and to bring in as a problem solver for other servicing. But we've also been reached out to by a number of private equity firms about seeing if we'd be willing to sell the servicers. So -- or could they make strategic investments to grow it because they want to go out and buy things or they have other things they can have the service to do as well and grow it. So it's kind of both fronts right now.

Got it. Thank you. I got one more. What's the lower bound for the amount of cash you feel comfortable carrying over the near term? And just on top of that, what would you need to materialize for you to raise your cash balance?

We probably don't want to be under the low 40s in cash. We have a significant number of Class A senior bonds in our joint ventures that we could sell if we wanted, which should effectively raise cash -- equivalent of raising capital to 6% cost, so it's cheaper than equity, as you can imagine. But we always want to have kind of enough cash available to play deep in. So we probably want to be at a minimum in the low 40s.

Got it. Okay. And just what's the most you've carried historically, if you don't mind me asking?

There's been a time that we've had $130 million, $140 million.

Got it. Okay. That’s all from me. Thanks, guys.

Sure.

There are no further questions at this time. I will now turn the call back over to the CEO, Mr. Larry Mendelsohn.

Thank you, everyone, for joining us on our Q4 and year-end 2022 conference call. Feel free to reach out with questions. To the extent you have additional questions that we haven't discussed on the call. And again, thank you for attending. We look forward to talking further in [indiscernible].

Ladies and gentlemen, thank you for participating. This concludes today's conference call. You may now disconnect.