ADAM — Adamas Trust, Inc.

Summary of Adamas Trust Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Net Income: $41.6 million or $0.46 per share.
• Earnings Available for Distribution (EAD): $0.23 per share, fully covering the dividend.
• Economic Return: 6.85% on GAAP book value and 4.62% on adjusted book value for Q4; 12.72% and 11.01% for the full year 2025, respectively.
• Investment Portfolio: Expanded to $3.1 billion, with a 44% year-over-year increase in EAD.
• Dividends: Common dividend increased by 15%.
• Book Value: GAAP book value rose by 4.3%, adjusted book value by 2.4%.

2. Strategic Updates and Business Highlights

• Acquisition of Constructive: Full acquisition of Constructive, a business purpose loan originator, is expected to enhance earnings through stable spread income and scalable origination economics.
• Agency RMBS Portfolio: Increased by 56% to $6.6 billion, now constituting 63% of the investment portfolio.
• BPL-Rental Loans: Grew significantly, with a focus on high-quality residential credit.
• Securitization: Completed four securitizations in 2025, with plans for one BPL-Rental deal per quarter in 2026.
• Credit Quality: Strong borrower metrics in the BPL-Rental portfolio, with low delinquency rates.

3. Forward Guidance and Outlook

• 2026 Expectations: Anticipate continued growth in EAD, particularly from Constructive's DSCR originations.
• Market Conditions: Favorable environment expected due to Fed easing and declining volatility, which may enhance housing affordability.
• Capital Allocation: Plans to maintain flexibility to capitalize on emerging opportunities, with a target of 60-70% of equity capital in Agency RMBS.

4. Bad News, Challenges, or Points of Concern

• Integration Costs: Ongoing integration of Constructive is expected to incur additional costs, impacting short-term earnings.
• EAD Decline: EAD decreased by $0.01 sequentially due to integration costs, although this is viewed as temporary.
• Market Valuation: Shares traded at a 31% discount to book value, indicating market skepticism about non-Agency and multifamily holdings.
• Competitive Pressures: Increased competition in the business purpose lending space, particularly in DSCR loans, could pressure margins.

5. Notable Q&A Insights

• Capital Deployment: Management indicated a balanced approach between scaling Constructive's originations and increasing Agency investments, with a focus on achieving mid- to high-teens returns.
• Integration Costs: G&A expenses related to Constructive are expected to stabilize as integration progresses, with about 40% of G&A being variable based on origination activity.
• Market Dynamics: The company is monitoring competition in the BPL-Rental space and believes that potential institutional bans on single-family rentals could benefit Constructive's business model.
• Share Repurchases: No share repurchases were made in Q4; management is cautious and evaluates share buybacks against other capital allocation opportunities.

Overall, Adamas Trust has shown strong financial performance in Q4 2025, driven by strategic acquisitions and portfolio growth, while also facing integration challenges and competitive pressures in the market. The outlook for 2026 remains optimistic, with expectations for continued earnings growth and a focus on disciplined capital allocation.