ADAM — Adamas Trust, Inc.

Summary of Adamas Trust Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• GAAP Earnings Per Share (EPS): $0.41, a 26% increase quarter-over-quarter.
• Earnings Available for Distribution (EAD): $0.29 per share, up 26% from the previous quarter and 45% year-over-year.
• Dividend: $0.23 per share, indicating a 6.35% economic return on GAAP book value.
• GAAP Book Value: Increased by 4% to $9.98, while adjusted book value rose 1.6% to $10.80.
• Net Interest Income: Increased to $48.2 million from $46.3 million in the previous quarter, with a net interest spread of 145 basis points.
• Total Investment Portfolio: Reached $10.9 billion, with significant capital deployment across residential strategies.

2. Strategic Updates and Business Highlights

• Market Environment: The quarter was marked by geopolitical volatility, particularly due to the Iran conflict, which affected monetary policy and market conditions.
• Investment Strategy: Focused on three pillars: Agency RMBS (56% of equity capital), growth in single-family credit through BPL rental loans, and scaling the Constructive platform.
• Capital Deployment: Over $1 billion in acquisitions, with $510 million in agency strategy and $502 million in residential credit, primarily BPL rental loans.
• Constructive Performance: Transitioned from integration to profitability, generating $15.3 million in mortgage banking income and achieving a return on equity (ROE) of approximately 13%.

3. Forward Guidance and Outlook

• Positive Outlook: Management maintains a favorable view on the fixed income environment, anticipating Fed rate cuts later in the year.
• Earnings Growth Focus: Plans to continue scaling the Constructive platform and expanding the loan investment portfolio to enhance recurring income.
• Share Repurchase Program: Ongoing efforts to address the stock's trading discount to intrinsic value, which was noted at a 32% discount to adjusted book value.

4. Bad News, Challenges, or Points of Concern

• Market Volatility: The geopolitical situation and its impact on interest rates and spreads present ongoing risks.
• Discount to Intrinsic Value: The common stock trades at a significant discount, raising concerns about market perception and valuation.
• Securitization Challenges: Increased spreads in the BPL rental securitization market indicate potential headwinds for future capital raising efforts.

5. Notable Q&A Insights

• Dividend Coverage: Management emphasized the importance of sustainable earnings growth while considering future dividend increases.
• Book Value Drivers: Gains from derivative instruments and a property sale contributed to the book value increase, highlighting the impact of both recurring and nonrecurring income.
• Constructive's Capital Efficiency: Future growth in mortgage banking income is expected to come from improved efficiencies rather than requiring additional capital.
• Securitization Pricing: Market conditions have influenced the pricing of securitizations, with recent deals reflecting wider spreads compared to earlier transactions.

Overall, Adamas Trust reported strong financial results in Q1 2026, driven by strategic capital deployment and operational improvements, while navigating a challenging market environment. The company remains focused on sustainable growth and addressing valuation discrepancies in its stock.