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
• Earnings Available for Distribution (EAD): $0.29 per share, a 26% increase quarter-over-quarter and 45% year-over-year.
• Dividend: $0.23, indicating a 26% coverage by EAD.
• GAAP Book Value: Increased by 4% to $9.98; Adjusted Book Value rose 1.6% to $10.80.
• Economic Return: 6.35% on GAAP book value and 3.76% on adjusted book value.
• Net Interest Income: Increased to $48.2 million from $46.3 million in the previous quarter.
• G&A Expenses: Slight decrease to $24.5 million from $25.1 million.

2. Strategic Updates and Business Highlights

• Investment Strategy: Focused on three pillars: Agency RMBS (56% of equity), growth in single-family credit through BPL rental loans, and scaling the Constructive platform.
• Capital Deployment: Over $1 billion in acquisitions during Q1, with significant investments in both agency and residential credit strategies.
• Constructive Integration: Transitioned from a loss to profitability, contributing $2.5 million in profit for the quarter.
• Securitization Activity: Strong performance in BPL rental securitizations, with expectations to issue 5-6 securitizations in 2026.

3. Forward Guidance and Outlook

• Market Conditions: Positive outlook despite geopolitical volatility, with expectations of Fed rate cuts later in the year.
• EAD Growth: Focus on scaling the Constructive platform and loan investment portfolio to expand recurring income.
• Stock Valuation: Shares trading at a significant discount to intrinsic value, prompting share repurchases.
• Dividend Discussions: Ongoing discussions with the Board regarding potential increases in distributions, contingent on sustainable earnings growth.

4. Challenges and Points of Concern

• Market Volatility: Geopolitical tensions, particularly in the Middle East, could impact economic conditions and interest rates.
• Discount to Intrinsic Value: Common stock continues to trade at a 32% discount to adjusted book value, raising concerns about market perception.
• Securitization Spreads: Recent widening of spreads in the BPL rental market could affect future securitization pricing and profitability.
• G&A Ratio: Expected to fluctuate based on Constructive's origination volumes, indicating potential operational challenges.

5. Notable Q&A Insights

• Dividend Coverage: Management emphasized the importance of sustainable EAD growth before increasing dividends, with a focus on preserving book value.
• Book Value Drivers: Gains in derivatives and property sales contributed significantly to book value increases, indicating reliance on non-recurring items.
• Constructive's Production: Future growth in mortgage banking income is expected, with a focus on aligning origination with investment strategies.
• Securitization Pricing: Recent pricing movements attributed primarily to market conditions rather than specific deal quality, indicating a responsive strategy to market dynamics.

Overall, Adamas Trust's Q1 2026 results reflect strong operational performance amid challenging market conditions, with a strategic focus on growth and capital efficiency. However, ongoing market volatility and stock valuation concerns present potential headwinds.