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

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 quarterly 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: 15% increase in common dividend.
• Book Value: GAAP book value increased by 4.3% and adjusted book value by 2.4% in Q4.

2. Strategic Updates and Business Highlights

• Acquisition of Constructive: Full acquisition of the business purpose loan originator, expected to enhance earnings through stable spread income and scalable origination.
• Agency RMBS Portfolio: Increased by $3.4 billion, now representing 63% of the investment portfolio and 56% of equity capital.
• Operational Efficiency: Focus on disciplined capital allocation and active portfolio management, with a notable shift towards Agency RMBS.
• Integration Costs: Initial integration costs from Constructive are expected to moderate, with a projected positive contribution to EAD in Q1 2026.

3. Forward Guidance and Outlook

• 2026 Expectations: Anticipated growth in EAD driven by Constructive's contributions and a favorable macroeconomic environment, including lower rates and tighter spreads.
• Market Positioning: Plans to maintain Agency RMBS allocation between 60% and 70% of equity capital, with an emphasis on balancing risk-adjusted returns.
• Cash Management: $206 million in available cash at year-end, with plans for opportunistic deployment in Agency and Constructive strategies.

4. Bad News, Challenges, or Points of Concern

• Slight Decline in EAD: Q4 EAD decreased by $0.01 sequentially due to integration costs from Constructive, although this was anticipated.
• Realized Losses: Recorded $14.9 million in realized losses related to nonperforming loans and foreclosed properties, reflecting ongoing credit resolution efforts.
• Market Competition: Increased competition in the business purpose lending space, particularly for DSCR loans, which may pressure margins.
• Share Repurchases: No shares were repurchased in Q4, indicating a cautious approach to capital allocation amid market conditions.

5. Notable Q&A Insights

• Capital Deployment: Management emphasized a balanced approach to capital allocation between scaling Constructive's originations and increasing Agency investments, with a focus on achieving mid- to high teens returns.
• Integration Costs: Ongoing integration costs from Constructive are expected to taper off, with a projected G&A run rate of approximately 7% of stockholders' equity.
• Borrower Profile: Constructive primarily serves individual investors, which may benefit from potential restrictions on institutional investors in the rental space, enhancing demand for their loans.
• Leverage Strategy: Current Agency leverage is at 7.7x, with management indicating a cautious approach to increasing leverage in light of tighter spreads.

Overall, Adamas Trust reported strong financial performance in Q4 2025, driven by strategic acquisitions and a focus on Agency RMBS, while also navigating challenges related to integration costs and competitive pressures in the lending market.