ADAMH — Adamas Trust, Inc.

Summary of Adamas Trust Q3 2025 Earnings Call

1. Key Financial Results and Metrics

• Earnings and Dividends: Earnings per share (EDA) rose to $0.24, up from $0.22 in Q2, marking the sixth consecutive quarterly increase. A dividend increase to $0.23 per share was announced.
• Investment Portfolio Growth: The investment portfolio expanded to $10.4 billion from $8.6 billion, a 20% increase.
• Net Interest Income: Adjusted net interest income per share increased by 7% quarter-over-quarter and 47% year-over-year to $0.47.
• Net Unrealized Gains: Recorded $54.9 million in net unrealized gains, primarily from Agency RMBS and residential loan portfolios.
• Book Value: GAAP and adjusted book value per share were $9.20 and $10.38, respectively, reflecting increases of 1% and 1.2% from the previous quarter.

2. Strategic Updates and Business Highlights

• Capital Rotation Strategy: The company has shifted capital from multifamily exposure to Agency RMBS, which now represents 57% of total capital, nearly tripling from the previous year.
• Acquisition of Constructive: Completed the acquisition of the remaining 50% interest in Constructive, enhancing its position in business purpose lending.
• Strong Investment Activity: Achieved record investment activity with $2.3 billion in residential investments, focusing on Agency RMBS and whole loans.
• BPL Rental Growth: BPL rental loans grew to $1.16 billion, reflecting a 24% quarter-over-quarter increase, and are seen as a core strategy with significant growth potential.

3. Forward Guidance and Outlook

• Earnings Growth: Management expects continued earnings growth driven by a full quarter of interest income and a strong portfolio of productive assets.
• Capital Allocation: Future capital allocation will be more measured, particularly in Agency RMBS, with a focus on maintaining a balanced approach between agency and credit investments.
• Securitization Market: Anticipates continued favorable conditions in the securitization market, supporting ongoing deal issuance and portfolio expansion.

4. Bad News, Challenges, or Points of Concern

• Integration Costs: Constructive reported a net loss of $3.8 million due to transitional integration costs, which are expected to decline over time.
• Competitive Pressures: The BPL bridge market is becoming increasingly competitive, impacting purchase volumes and pass-through rates.
• Interest Rate Environment: While the company benefited from lower financing costs, there are concerns about how future interest rate movements could affect earnings and asset yields.

5. Notable Q&A Insights

• GSE Developments: Management discussed the potential impact of GSE reform on capital allocation but emphasized a cautious approach, focusing on current business operations without planning for significant changes.
• Book Value Trends: As of late October, adjusted book value is expected to increase by 2.5% to 3%, driven by positive trends in both agency and credit sides.
• Leverage Strategy: The company aims to maintain agency leverage around 8x and is looking to utilize securitization markets for financing its credit book, which is currently below 1x leverage.

Overall, Adamas Trust reported strong financial results and strategic advancements in Q3 2025, with a focus on enhancing earnings stability and capital rotation. However, challenges in competitive markets and integration costs remain points of concern.