ADAML — Adamas Trust, Inc. - 6.875% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, $0.01 par value per share

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.
• GAAP Book Value: Increased by 4% to $9.98; adjusted book value rose 1.6% to $10.80.
• Economic Return on GAAP Book Value: 6.35%; on adjusted book value, 3.76%.
• Net Interest Income: Increased to $48.2 million from $46.3 million in the previous quarter; net interest spread decreased to 145 basis points from 152 basis points.

2. Strategic Updates and Business Highlights

• The company is focusing on a diversified investment strategy, with 56% of equity capital in Agency RMBS and significant growth in the single-family credit portfolio, particularly BPL rental loans.
• Constructive, the origination platform, transitioned to profitability, contributing $2.5 million in profit for the quarter, a notable improvement from a loss in the prior quarter.
• The company successfully deployed over $1 billion in acquisitions during the quarter, with $510 million in agency strategy and $502 million in residential credit.
• A strong performance in hedging strategies contributed positively to returns, with $87.8 million in derivative gains reported.

3. Forward Guidance and Outlook

• Management maintains a positive outlook for the broader fixed income environment, anticipating Fed rate cuts later in the year despite near-term inflation pressures.
• The company aims to continue scaling the constructive platform and expanding its loan investment portfolio to drive recurring income and book value growth.
• There is a clear focus on closing the valuation gap between market price and intrinsic value through disciplined capital allocation and execution of strategic initiatives.

4. Bad News, Challenges, or Points of Concern

• The common stock trades at a significant discount (32%) to adjusted book value and 15% to the intrinsic value of equity capital invested in agencies, indicating a disconnect that management is keen to address.
• The agency market experienced volatility, with spreads widening significantly during the quarter, which could impact future performance.
• The multifamily portfolio saw a higher-than-average annualized payoff rate of 30%, which, while beneficial, raises concerns about capital reinvestment opportunities.

5. Notable Q&A Insights

• Management emphasized the importance of sustainable earnings growth while considering dividend increases, with ongoing discussions regarding distribution levels.
• The book value gains were attributed to both strong operational performance and significant derivative gains, indicating a robust hedging strategy.
• Questions regarding the origination platform highlighted a focus on aligning production with investment objectives, with expectations for improved efficiency rather than requiring additional capital.
• Management acknowledged that recent securitization pricing was affected by broader market conditions, and they remain optimistic about the functioning of the securitization market despite fluctuations.

Overall, Adamas Trust reported strong financial results and strategic progress in Q1 2026, while also navigating challenges in the market environment and maintaining a focus on sustainable growth and shareholder value.