Adamas Trust, Inc.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Adamas Trust First Quarter 2026 Results Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. If you have a question, please press the star followed by 11 on your touchtone phone. If you would like to withdraw your question, please press the star 11 again. If you are using speaker equipment, we do ask that you please lift the handset before making your selection. This conference is being recorded on Thursday, April 30, 2026. I would now like to turn the call over to Kristen Musilam, Investor Relations. Please go ahead.

Good morning and welcome to the first quarter 2026 earnings call for Adamus Trust. A PRESS RELEASE AND SUPPLEMENTAL FINANCIAL PRESENTATION WITH ADAMAS TRUST FIRST QUARTER 2026 RESULTS WAS RELEASED YESTERDAY. BOTH THE PRESS RELEASE AND SUPPLEMENTAL FINANCIAL PRESENTATION ARE AVAILABLE ON THE COMPANY'S WEBSITE AT WWW.ADAMASREIT.COM. ADDITIONALLY, WE ARE HOSTING A LIVE WEBCAST OF TODAY'S CALL, WHICH YOU CAN ACCESS IN THE EVENTS AND PRESENTATION SECTION OF THE COMPANY'S WEBSITE. At this time, management would like me to inform you that certain statements made during the conference call, which are not historical, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Adamus Trust believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors and risks that could cause actual results to differ materially from expectations are detailed in yesterday's press release and from time to time in the company's filings with the Securities and Exchange Commission. Now, at this time, I would like to introduce Jason Serrano, Chief Executive Officer. Jason, please go ahead.

Good morning. Thank you for joining us today to discuss our first quarter 2026 results. With me is our executive leadership team, President Nick Ma and CFO Kristi Nario. We entered 2026 with strong momentum following what we described last quarter as a strategic inflection point for the company. And I'm pleased to report that our first quarter results reflect both the continuation and acceleration of that trajectory. Let me begin within the macro environment. The first quarter was defined by heightened volatility defined by geopolitical developments in the Middle East resulting in increased rate volatility, periodic spread winding, and shifting monetary policy expectations. The Iran conflict introduces the potential for another supply-driven stagflation shock, further complicating the Fed's dual mandate as upside risk to both inflation and unemployment remain elevated. Despite this backdrop, we maintain a positive outlook on the broader fixed income environment. We continue to see a Fed bias towards rate cuts later this year, notwithstanding near-term inflation pressure. also improving technicals for agency MBS as volatility begins to normalize and attractive value across residential credit on a solid demand base. The current environment reinforces our strategy, pairing stability with scalable earnings growth. Against this volatile backdrop, we delivered strong performance across all aspects of our business, generating meaningful book value growth alongside solid earnings expansion, further validating the strength and durability of our business model. The earnings profile of the company continues to build. We delivered gap earnings per share of 41 cents and EDD of 29 cents per share, representing a 26% increase from prior quarter and well in excess of our 23% dividend. This reflects a clear step up in earnings power. Based on our earnings trend over the past year, we believe we are operating from a position where EDD is scaling ahead of distributions demonstrating the operating leverage of the company, durable long-term earnings capacity, and the potential for supporting future distribution growth. On the balance sheet side, in the first quarter, GAAP book value increased 4% quarter-to-quarter with adjusted book value of 1.6%. Despite wider spread into the quarter end, performance was supported by stable trends within our credit assets, improving profitability at Constructive, continued positive results and payoffs of our mezzanine lending portfolio, and strategic hedges that outperformed as macro conditions evolved in the quarter. Importantly, we were able to grow both earnings and book value in a challenging market environment. The outcome was by design. Our flexible capital allocation framework enables us to actively navigate volatility and optimize risk-adjusted returns relative to more static portfolio structures. Our investment strategy remains anchored in three core pillars. Agency RMBS representing 56% of the equity capital, providing stable earnings and strong downside protection. Continued growth in our single-family credit portfolio through BPL rental loans under a disciplined underwriting framework and scaling of our constructive platform. As anticipated, we have transitioned constructive to profitability from integration in the fourth quarter to an earnings contributor in the first quarter as operating efficiencies were realized. Our evolution from pairing agency exposure, mortgage credit assets, and now a scaled origination platform positions the company to perform through volatility while capturing value as conditions normalize. A diversified allocation strategy is a core strength of the company. Despite this performance and trajectory, our common stock continues to trade at a meaningful discount to what we consider its intrinsic value. Shares began the quarter trading at approximately a 32% discount to adjust the book value, and notably a 15% discount to the value of our equity capital invested in agencies alone. We believe this price disconnect fails to reflect the strength of our earnings growth over the past five quarters, represented by a 31% year-over-year increase in EAD, the scaling of origination platform for EAD expansion, and the durability of our portfolio as illustrated by book value growth. We believe continued execution of our strategy can drive convergence between market price and intrinsic value, which support our decision to repurchase shares during the quarter. We are highly optimistic about the year ahead. Our priorities remain clear. EAD growth through scaling the constructive platform and our loan investment portfolio to expand reoccurring income. Grow book value with disciplined investment selection and active portfolio management. And as just mentioned, we are focused on closing the valuation gap of Adamus' shares with consistent execution and disciplined capital allocation. We believe Adamus today is positioned for sustainable growth under a more diversified and stable earnings profile. We see several factors that are supportive of our capital allocation plan, which include a meaningful increase in demand for mortgage credit, particularly from insurance capital. alongside renewed GSE MBS purchase activity and a more accommodative capital framework supporting bank demand. Against this backdrop, our balance sheet flexibility positions us to capitalize on the strengths of the market to continue delivering exceptional value. I'll now turn the call over to Nick to discuss our portfolio investment activity.

Thank you, Jason. We took advantage of the first quarter's market volatility to deploy capital steadily across our residential investment strategies. surpassing $1 billion in acquisitions. In terms of product mix, we invested $510 million in our agency strategy and $502 million in residential credit, with BPL Rental making up the bulk of residential credit purchases at $400 million. Our quarterly investment activity in BPL Rental reached a record high, reinforcing the strategy's expanding role within our core asset portfolio. It also demonstrates the value of constructives integration into our broader organization with its origination and underwriting capabilities, providing a direct pipeline of investment. Under current market conditions, we expect to allocate a higher percentage share of capital to BPL rental given its relative value advantage. Our investment portfolio reached 10.9 billion at the end of the first quarter with further growth expected as we continue to deploy capital through the remainder of 2026. The agency market saw significant volatility in the first quarter. Agency current coupon spreads to treasuries reached multi-year tights of 94 basis points in late January, driven by the administration's mandate for the GFCs to ramp up MDS purchases. The dynamic reversed sharply in late February as the conflict with Iran came to the fore. Agency spreads peaked at 131 basis points in late March before settling back down to 124 basis points by quarter end. Our agency portfolio expanded from 6.6 billion to 6.8 billion. Agency leverage was at 7.8 times, slightly above the prior quarter's 7.7 times. Within our agency's spec pool investments, all purchases this quarter were in 6.0 coupon pools. We rotated up the coupon stack early in the quarter to reduce duration, taking a more defensive posture given especially tight spreads and low rates at the start of the year. That positioning benefited the agency book as rates backed up and spreads widened in the second half of the quarter. Going forward, we are returning to our original stance of adding current coupon spec pools at minimal payups. As Jason mentioned, our expectation is that volatility will eventually moderate but we aim to opportunistically increase our capital deployment during episodic bouts of price dislocation. At quarter end, agency MBS comprise roughly 56% of our investment portfolio's capital, and we expect that allocation to remain relatively stable in the near term. Following the rapid repricing of agency spreads quarter to date, our view on the agency basis has become more neutral. with more attractive relative value emerging in residential credit. We nonetheless anticipate continued agency purchases, albeit at a slower pace than in residential credit. From a hedge positioning perspective, we rotated out of longer tenor swaps into Treasury futures in January, a trade that contributed positively to returns under the developing macro backdrop in the quarter. Treasuries underperformed swaps during the quarter, driven by ongoing Treasury supply concerns alongside inflation fears. With swap spreads now tightening, we are reversing a meaningful portion of Treasury futures hedges back to swaps in the second quarter for more cost-efficient hedging. Alongside our rate hedges, we also employ a range of additional hedge strategies to protect book value against tail events. AMIDST SOFTENING STRUCTURAL DEMAND FOR U.S. TREASURIES AND ESCALATING GEOPOLITICAL TENSIONS, THESE HEDGES PERFORM FAVORABLY IN THE FIRST QUARTER. THE PRICE MOVEMENTS OF THESE HEDGES RESULTED IN POSITIVE REALIZED GAINS CONTRIBUTING TO THE COMPANY'S OVERALL QUARTERLY PERFORMANCE. BPL RENTAL REMAINS OUR LARGEST RESIDENTIAL CREDIT ASSET EXPOSURE AT $1.8 BILLION. THE PORTFOLIO IS BUILT ON THE STRONG UNDERWRITING STANDARDS THAT ANCHOR OUR PURCHASE PROGRAM. resulting in minimal tail risks across key credit metrics. Loans with DSCR below one times represent less than 2% of the portfolio, as do those with LTVs above 80%. FICOs below 675 account for less than 3% of the portfolio. Securitization execution was volatile during the quarter, moving in tandem with broader risk markets. Our first PPL rental deal of the year priced in January at around a 105 basis points blended AAA spread. Generic non-QM AAA spreads widened to as much as 145 basis points at the end of the first quarter before settling at 120 to 125 basis points today as volatility has since subsided. Despite these larger market fluctuations, the securitization markets have remained well-functioning throughout. with a broad investor base continuing to allocate capital into bonds backed by residential credit. We are taking advantage of stable capital markets to be on pace to issue five to six BPL rental securitizations this year, supported primarily by collateral originated by Constructiv. Our securitization program is supported by a deep and loyal investor base and is well recognized in the market for its underwriting discipline and consistent performance. Collectively, these factors have allowed us to price securitizations at the tighter end of the execution range. Moving to the origination business, Constructive originated $422 million of business-purpose loans in the first quarter, modestly below the $439 million produced in Q1 of last year. The slight decline reflects Atomos' influence of a more selective origination posture to better align with our investment programs rather than any pullback in capacity. Since onboarding Constructiv, we have focused on further aligning production with Atomos' underwriting standards, building on an existing foundation of strong credit quality while maximizing secondary market liquidity. In the quarter, Atomos purchased approximately two-thirds of Constructiv's overall loan production. We continue to balance the development of Constructiv's third-party distribution channels alongside Adamus's investment portfolio objectives. Constructiv's distribution model emphasizes locking loans with end investors early in the process rather than aggregating for bulk sale. This approach reduces monthly pricing risk and enhances our ability to adapt as market conditions evolve. Close coordination with Adamus's trading team to surmise real-time visibility into securitization execution and secondary pricing enables dynamic adjustment of forward pipeline coupons as the markets shift. This responsiveness proved particularly valuable amid the rate volatility experience during the quarter. As we are nearing the end of Constructiv's integration into Atomos, our focus has shifted from transition management to optimizing technology, capital, and processes across the Origination business. We expect these initiatives to translate to improved operating results over time. In the multifamily portfolio, the redemption activity has been substantial, with an annualized payoff rate of 30% experienced in the first quarter, higher than the historical average of 26%. During the quarter, one property in our cross-collateralized mezzanine lending portfolio sold and netted a realized gain of $13.8 million to Atomos, a successful execution outcome. Given the seasoning of the portfolio and the stable performance, we expect heightened resolution activity for the remainder of the year, providing us additional capital to reinvest into our core strategies. I will now turn it over to Christine for commentary on our quarterly financials.

Thank you, Nick, and good morning, everyone. Jason and Nick touched on some of the major items that contributed to our strong results this quarter, so I will focus on a few additional highlights. For the first quarter, we reported GAAP net income attributable to common stockholders of $36.9 million, or $0.41 per share, and earnings available for distribution of $0.29 per share, which increased by 26% quarter-over-quarter and 45% year-over-year. After accounting for a $0.23 dividend, we generated a 6.35% economic return on GAAP book value and a 3.76% economic return on adjusted book value. Our gap book value increased 4% to $9.98, and adjusted book value rose 1.6% to $10.80 during the quarter. These results reflect continued momentum across our investment portfolio and origination platform. Adjusted net interest income increased to $48.2 million in the first quarter from $46.3 million in the fourth quarter. AND NET INTEREST SPREAD WAS AT 145 BASIS POINTS, DOWN FROM 152 BASIS POINTS IN THE FOURTH QUARTER. THE CHANGE IN NET INTEREST SPREAD REFLECTS THE CONTINUED TRANSITION OF OUR PORTFOLIO TOWARD AGENCY RMBS AND BPL RENTAL LOANS, WHICH CARRY LOWER YIELDS AND HIGHER COUPON BPL BRIDGE LOANS THAT CONTINUE TO RUN OFF, PARTIALLY OFFSET BY IMPROVED FINANCING COSTS. TURNING TO CONSTRUCTIVE, THE PLATFORM DELIVERED A STRONG PERFORMANCE THIS QUARTER. Mortgage banking income was $15.3 million for the quarter, driven by $9.2 million in gains on residential loans held for sale and $6.1 million in loan origination and other fees. Constructive also generated net interest income of $0.5 million. After loan origination costs of $4 million and direct G&A expenses of $9.3 million, Constructive generated approximately $2.5 million profit for the quarter. ON A STAND-ALONE BASIS. THIS MARKS A MEANINGFUL IMPROVEMENT FROM APPROXIMATELY 2 MILLION STAND-ALONE LOSS IN THE PRIOR QUARTER AND REFLECTS THE NEAR COMPLETION OF OUR INTEGRATION EFFORTS. WE ARE PLEASED WITH CONSTRUCTIVE'S PROGRESS THIS QUARTER WITH ROE OF APPROXIMATELY 13%, REPRESENTING A SIGNIFICANT IMPROVEMENT FROM THE PRIOR PERIOD AND MOVING CLOSER TO OUR ORIGINAL UNDERWRITING TARGET OF 15%. Total Consolidated Atomos GNA were $24.5 million for the quarter, down slightly from $25.1 million the last quarter. We estimate our quarterly GNA ratio to be approximately 7% to 7.5% in 2026, depending on Constructa's origination volume. From a capital markets perspective, we continue to strengthen our balance sheet. During the quarter, We issued 90 million of senior unsecured notes due 2031 and redeemed our 100 million senior unsecured notes due 2026 at par, fully retiring the obligation ahead of maturity. We now have no near-term corporate debt maturities, which provides meaningful flexibility and positions us to focus our capital on growing the investment portfolio. At quarter end, We maintained 199 million of available cash and approximately 418 million of total liquidity capacity, including financing available on unencumbered assets and underlevered assets. Our company recourse leverage ratio was 5.2 times, and portfolio recourse leverage was 4.9 times, with leverage primarily concentrated on agency financing. Overall, our first quarter results reflect the continued execution of our strategy and our growing earnings power. We remain focused on disciplined portfolio growth, increasing constructives earnings contribution, and prudent capital allocation as we look to build on this momentum through the balance of 2026. We are committed to delivering sustainable long-term returns for our stockholders. That concludes our prepared remarks. Operator, please open the call for questions.

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Marissa Lobo of UBS. Your line is now open.

Thanks, and good morning. On your EAD trajectory, can you give us a framework on how you're thinking about dividend coverage relative to EAD going forward? And you mentioned increasing distributions, but is that on the table in your term, or will you continue accumulating retained earnings?

Yes, thanks for your question. This is Jason. Listen, we're pleased by the EAD performance exceeding dividend by 26% in the first quarter. We recognize dividend growth is a key priority for shareholders. With the board, we evaluate a range of factors in assessing appropriate distribution levels. And our focus is sustainably growing earnings while preserving book value. So we delivered on these objectives in the first quarter and look forward to continuing this momentum alongside with our ongoing board discussions regarding our distribution rate. Our goal is to keep stability and sustainably increase the AD, which is going to be the discussions that we have with the board on the discussion. That's about as far as I can go in that direction.

Appreciate that. And on the book value gain, what was the relative contribution from, was it mostly the multifamily sale or was it the strategic hedge performance? Just a little color on the drivers.

Yeah, we had a strong quarter across the board. The AD came in at 29 cents. up 26% quarter over quarter, which reflects really our earnings power through continued portfolio growth and improved financing costs in the quarter. On top of that, we benefited from two additional items that drove net income and book value higher. As you mentioned, we generated, as you've seen, we generated about 87.8 million in derivative gains, both from market to market, mark-to-market due to higher valuations on our hedges, as well as realized gains on settlement of derivative instruments during the period. We also recognize gain on sale on a property within our cross-collateralized mezzanine lending, of which, you know, 13.8 is attributable to Adamas. And it was a quarter where both, you know, recurring income or EAD and non-recurring items worked in our favor.

Got it. I appreciate the answers.

Thank you. Our next question comes from the line of Bose George of KBW. Your line is now open.

Hey, everyone. Good morning. Just to follow up on the book value question, what's any changes to the book value quarter to date?

We estimate just the book value being up between 2% to 2.5% quarter to date.

OK, great. Thanks. And then on the multifamily portfolio, Actually, how much is the capital that's remaining? I saw the assets, but I might have missed how much the capital is.

The capital and the assets are very similar. These assets are unlevered on our balance sheet. One of the back pages of our supplemental will show you those numbers. It's generally dollar for dollar.

Have you given a timeline in terms of the potential runoff of that portfolio?

Yeah, so, you know, we've mentioned this on previous calls where, you know, this is a very seasoned portfolio, and we control rights within many of the assets in the meshing loan portfolio to accelerate maturity. So, you know, in utilizing those rights, given the seasoning and the ability for the sponsors to pay off the loans through refinance or sell the property, we can help shorten our duration on these assets, which we've been effectively doing over the course of the last year, year and a half. Nick mentioned that the pre-payment rate was accelerating in the quarter, and we do expect to continue seeing that through the course of the year.

Okay, great. Thanks. Thank you. Our next question comes from the line of Jason Weaver of Jones Trady. Your line is now open.

Hi, guys. Good morning. I wanted to ask, as it pertains to constructive, what's sort of the right baseline for quarterly mortgage banking income for the rest of the year? How much of that is gain on sale versus origination fees?

Well, majority of it is going to be gain on sale, as you've seen, and that's always been the case for constructives. We are, you know, 13% return on a standalone basis. We're pleased with that performance. And as Jason mentioned, our priority is really to increase volume, to increase earnings. So that's really our goal for 2026.

Got it. That makes sense. And then on the BPL rental securitizations, I could be wrong on these numbers, but I think the one Q deal priced at about $490,000. and then subsequently the April deal priced at around 550, quite a bit wider. Is that just market volatility, or is it sort of deal-specific nature, pool quality? What can you tell me there?

Yeah, this is Nick. The majority of it is market movements, so rates were higher at the point that we executed the second transaction, as well as spreads. So in terms of AAA spreads, for example, in our first securitization, The weighted average AAA spread was around 105. I mentioned in my prepared remarks it went out to as much as 140, 145. We priced at a tighter end of that range. But still, it was more market conditions. But we were happy with the fact that there was still a well-functioning securitization market, number one. And number two, that our story resonated with the fact that we have strong underwriting quality and performance, which allowed us to price at a tighter end of the range.

Got it. I appreciate that, Keller. Thank you.

Thank you. Our next question comes from the line of Doug Harder of BTIG. Your line is now open.

Thanks. You mentioned looking to grow the volume at Constructive. Does that need more capital or can you be more efficient in turning over the existing capital for Constructive?

Hey, Doug. So Constructive, we expect the volumes to first stabilize and then continue to grow. As I mentioned in my remarks earlier, the decline year over year in terms of Q1 volume was really driven by our influence in terms of making sure that the credit box better aligns with what we put into our securitizations and what the market expects of us. Now, Constructiv already has a very, very strong collateral profile, which is why the differential wasn't that meaningful. On a go-forward basis, a lot of it has to do with better efficiencies. I would say capital is less of a concern. there. Constructive is at this point not even utilizing all the capital that is available to them to continue to grow. They continue to expand their broker network. They continue to expand their retail origination platform. They continue to drive more cost efficiencies through better processes. And then also the integration with Atomos has also been helpful in terms of just better capital efficiency in terms of the speed by which trades occur. But not only that, also setting up better financing lines and just improving their capital structure and the cost of capital just generally. So there's a few things that we're pushing on. We're going to continue to look at the overall makeup of their originations. The one thing that is very true today is that there is an exceptionally strong institutional demand for this paper. and not only the volume, but in particular, the stronger parts of the market and the better credit profiles get stronger bids. And there's going to be an opportunity for us to be able to deliver into that by us growing our platform. That's one of the reasons why we also believe that having a strong distribution network away from just selling to Atomos is an exceptionally important thing. And we hope to capitalize that more in the future.

Yes, just to follow up on that last point, as volume kind of ultimately grows there, how do you think about the right balance between retaining and selling the production?

Yeah, so it does fluctuate over time. Last quarter, we purchased about two-thirds of their overall production. I would say in the next couple of quarters, that's a good baseline in terms of where it will be. although obviously market conditions can change and obviously the volume can change as well. We expect to continue to sell to the market. We're going to be on the upper end above 50%, but there are other strong relationships that Constructiv has with the market, and those relationships have been important in the past and we believe will be important in the future, and we're going to make sure that there's some carve-out of volume that is available to them.

Great. Appreciate the answers. Thank you.

Thank you. I am showing no further questions at this time, so I would like to turn it back to Jason Serrano for closing remarks.

Yes. Thanks, everybody, for joining us today. We appreciate your time and continued support. We look forward to speaking with you on our July second quarter update. Have a great day.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.