ADAMH — Adamas Trust, Inc.

Adamas Trust Q4 2025 Earnings Call Summary

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, respectively.
• Investment Portfolio: Expanded to $3.1 billion, with a 44% year-over-year increase in EAD.
• Dividends: 15% increase in common dividend.
• GAAP Book Value: Increased by 4.3%, adjusted book value up by 2.4%.

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 56% to $6.6 billion, now representing 63% of the investment portfolio.
• BPL-Rental Loans: Significant growth, with a portfolio increase from $770 million to $1.4 billion over 2025.
• Securitization Plans: On track for one BPL-Rental securitization per quarter, targeting mid- to high-teens levered returns.

3. Forward Guidance and Outlook:

• 2026 Expectations: Anticipate continued growth in adjusted book value (up 3-4% quarter-to-date) and positive contributions from Constructive's DSCR originations.
• Market Conditions: Favorable due to the Fed easing cycle and declining volatility, with a focus on maintaining flexibility for capital allocation.
• Dividend Sustainability: A priority, with a focus on balancing competitive yields and long-term capital preservation.

4. Bad News, Challenges, or Points of Concern:

• Integration Costs: Ongoing integration costs from the Constructive acquisition are expected to impact earnings in the short term.
• Slight Decline in EAD: Q4 EAD decreased by $0.01 sequentially due to integration-related costs, although this is viewed as temporary.
• Market Valuation Concerns: Shares traded at a 31% discount to book value, indicating market skepticism regarding non-Agency and multifamily holdings.
• Competitive Pressures: Increased competition in the business purpose lending space, particularly for DSCR loans, could pressure margins.

5. Notable Q&A Insights:

• Capital Deployment Strategy: Management indicated a balanced approach between Agency MBS and residential loans, with a preference for mid- to high-teens returns on a risk-adjusted basis.
• Constructive's Competitive Position: Constructive is positioned favorably against competitors, focusing on individual investors rather than institutional buyers, which may benefit from potential regulatory changes.
• Share Repurchases: No shares were repurchased in Q4; management remains cautious about using capital for share buybacks versus investment opportunities.
• Leverage Considerations: Current leverage is at 7.7x, with potential adjustments based on market conditions.

Overall, Adamas Trust demonstrated strong financial performance in Q4 2025, with significant strategic initiatives underway, particularly through the integration of Constructive. However, challenges related to integration costs and competitive pressures remain. The outlook for 2026 is optimistic, supported by favorable market conditions and a focus on sustainable growth.