ADAMG — Adamas Trust, Inc. - 9.125% Senior Notes Due 2030

Summary of Adamas Trust Q3 2025 Earnings Call

1. Key Financial Results and Metrics

• Earnings Distribution Amount (EDA): Increased to $0.24 per share from $0.22 in Q2, marking the sixth consecutive quarterly rise.
• Dividend: Raised to $0.23 per share, reflecting strong capital rotation strategy.
• Investment Portfolio: Grew to $10.4 billion from $8.6 billion, a 20% increase, driven by a record $1.8 billion in net investment activity.
• Adjusted Net Interest Income: Rose 7% quarter-over-quarter and 47% year-over-year to $0.47 per share.
• Net Interest Spread: Stable at 150 basis points.
• GAAP and Adjusted Book Value: Ended the quarter at $9.20 and $10.38 per share, respectively, both up by approximately 1%.
• Leverage Ratios: Recourse leverage ratio increased to 5x; portfolio recourse leverage to 4.7x.

2. Strategic Updates and Business Highlights

• Rebranding: Transitioned to Adamas Trust, symbolizing a broader strategic vision beyond geographic affiliations.
• Agency RMBS Focus: Agency RMBS now represents 57% of total capital, nearly tripling from the previous year.
• Constructive Acquisition: Completed acquisition of the remaining 50% interest in Constructive, a business purpose loan platform, which is expected to enhance origination capabilities.
• BPL Rental Loans: Grew to $1.16 billion, a 24% increase quarter-over-quarter, with a focus on loans with strong debt service coverage ratios (DSCR).
• Securitization Activity: Successfully priced two securitizations totaling $645 million, benefiting from favorable market conditions.

3. Forward Guidance and Outlook

• Earnings Growth: Management anticipates continued improvement in recurring earnings, supported by a full quarter of interest income.
• Capital Allocation: Plans to maintain a balanced approach between agency and credit investments, with a focus on opportunistic allocation based on market conditions.
• Book Value: Expected to rise by 2.5% to 3% as of late October, driven by positive trends in both agency and credit portfolios.

4. Bad News, Challenges, or Points of Concern

• Increased G&A Expenses: Rose significantly due to the consolidation of Constructive and higher incentive compensation.
• Competitive Pressures: The BPL bridge market remains highly competitive, affecting acquisition volumes and pass-through rates.
• Regulatory Risks: Potential GSE reforms could impact the mortgage sector, though management remains cautious and does not plan for immediate changes.
• Integration Costs: Constructive reported a net loss of $3.8 million due to transitional integration costs, which are expected to decline over time.

5. Notable Q&A Insights

• Capital Allocation and GSE Developments: Management acknowledged the potential tailwinds from GSE reforms but emphasized a cautious approach without planning for immediate impacts.
• Leverage Strategy: Management indicated that leverage on the credit side is expected to remain below 1x, while agency leverage is targeted around 8x.
• Share Repurchase Strategy: While share repurchases were considered, management prioritized investment in asset portfolios given the current market conditions.
• Mezzanine Payoff Rates: Payoff rates for the mezzanine portfolio are expected to trend slightly higher than historical averages in the near term.

Overall, Adamas Trust reported strong financial growth and strategic advancements, particularly in agency RMBS and business purpose lending, while navigating challenges in competitive markets and regulatory uncertainties.