ADAMZ — Adamas Trust, Inc. 7.000% Series G Cumulative Redeemable Preferred Stock

Summary of ADAMZ 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.
• Investment Portfolio: Expanded to $3.1 billion, with a 44% year-over-year increase in EAD.
• Dividends: Increased by 15% year-over-year.
• Book Value: GAAP book value rose by 4.3% and adjusted book value by 2.4% in Q4.

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 $3.4 billion, now constituting 63% of the investment portfolio and 56% of equity capital.
• Operational Efficiency: Focus on disciplined capital allocation and active portfolio management, with a shift towards Agency RMBS and BPL-Rental loans.
• Integration of Constructive: Integration costs are anticipated to impact Q1 2026, but the platform is expected to contribute positively to EAD moving forward.

3. Forward Guidance and Outlook

• 2026 Expectations: Anticipate continued growth in EAD as Constructive scales operations. Adjusted book value is projected to increase by 3-4% in Q1 2026.
• Market Conditions: Favorable macro conditions with a Fed easing cycle and a focus on housing affordability are expected to support the residential asset market.
• Capital Allocation: Plans to maintain a balanced approach between Agency RMBS and residential credit, targeting 60-70% of equity capital in Agency investments.

4. Bad News, Challenges, or Points of Concern

• Integration Costs: The integration of Constructive may temporarily impact earnings due to upfront costs.
• EAD Decline: EAD decreased by $0.01 sequentially, attributed to the J-curve effect from Constructive's integration.
• 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 may pressure margins, although Constructive is positioned as a top-tier player.

5. Notable Q&A Insights

• Capital Deployment: Management emphasized a flexible approach to capital allocation based on market conditions, with a focus on achieving mid- to high-teens returns.
• Constructive's Competitive Landscape: Constructive is navigating competitive pressures well, with strong demand for loans, particularly in the BPL-Rental segment.
• Share Repurchases: No share repurchases occurred in Q4; management is cautious about using capital for buybacks versus investment opportunities.
• Borrower Profile: Constructive primarily serves individual investors, which may benefit from potential institutional bans on SFR purchases, enhancing market opportunities for their loans.

Overall, Adamas Trust reported strong financial growth and strategic positioning for 2026, despite facing integration challenges and competitive pressures in the lending market.