管理層發言
Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Adamas Trust Fourth Quarter 2025 Results Conference Call. This conference is being recorded on Thursday, February 19, 2026. I would now like to turn the conference over to Kristi Mussallem, Investor Relations. Ma'am, please go ahead.
Good morning, and welcome to the Fourth Quarter 2025 Earnings Call for Adamas Trust. A press release and supplemental financial presentation with Adamas Trust's fourth quarter 2025 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 Presentations 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 Adamas 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.
Hello. Thank you for joining us today to discuss our 2025 fourth quarter results. With me this morning is Nick Mah, President; and Kristine Nario, our CFO. We are excited about entering a new year as 2025 represented a strategic inflection point for the company, characterized by significant balance sheet growth, accelerating profitability and a strategic expansion into Constructive, a leading business purpose loan originator. We exited 2025 stronger and larger than at any point in our history. The transformation of Adamas over the past year has been deliberate and decisive. We expanded scale, materially enhanced recurring earnings power, strengthened the balance sheet and positioned the company for durable long-term growth. Our Q4 results are another validation to our strategy, which reinforce our confidence in the trajectory ahead. Salient 2025 company performance highlights include: $3.1 billion investment portfolio expansion, a 44% increase to earnings available for distribution year-over-year, where we generated over $100 million of net income, leading to a 15% increase to our common dividend. All these factors contributed to generating a 36% cumulative total stockholder return, a transformational year where we also grew company book value. We stay firm with the disciplined capital allocation, active portfolio management and a clear strategic vision by meaningfully increasing our allocation to Agency RMBS. We improved liquidity, reduced credit volatility, enhanced financing flexibility and strengthened the trajectory of earnings. The balance sheet today is materially more resilient than it was a year ago and positioned well for 2026. The addition of a powerful new earnings engine in the full acquisition of Constructive strategically positioned Adamas to benefit from both stable spread income and scalable origination economics, a combination that we believe differentiates our platform. As an update to fourth quarter, GAAP book value and adjusted book value increased by 4.3% and 2.4%, respectively, continuing the positive momentum we generated throughout the year. Quarterly EAD of $0.23 per share fully covered our dividend but declined by $0.01 sequentially. This slight reduction from last quarter was anticipated and directly tied to the J-curve effect discussed in our third quarter communication related to the integration of Constructive. Importantly, this temporary negative impact reflects upfront integration and scaling costs, not structural earnings pressure. As we transition from integration to production, we expect Constructive to be a positive contributor to EAD in the first quarter. Throughout 2025, we found scaling Agency RMBS to be both an attractive investment on an absolute and relative basis, providing mid- to high-teens equity returns. We increased the company's Agency RMBS portfolio by $3.4 billion or 56% of company capital from 23% a year earlier at an attractive average spread to treasury interpolated between 5- to 10-year maturities of 139 basis points. The strategic reallocation of capital throughout the year enhanced liquidity and balance sheet flexibility, also lowered our credit exposure and tail risk as well as increased visibility into book value performance. Now against that base, Constructive's DSCR origination platform introduces a significant upside potential. As volume scales and efficiencies are realized, we believe the earnings contribution from the DSCR production from both a gain on sale as well as interest income from loans held can expand materially. We are excited to demonstrate the operating leverage embedded within our business model in the new year. Despite the transformation of the company, Adamas shares continue to trade at a substantial discount to intrinsic value. At year-end, the shares traded at a 31% discount to book value. Even more compelling, the market capitalization represents approximately a 14% discount to just the Agency capital held on our balance sheet alone. In practical terms, the market in 2025 and continuing in early 2026 is assigning limited to no value to our non-Agency and multifamily holdings, our scaled origination platform with an exciting embedded earnings growth track and our ability to grow book value. We believe the discount creates compelling upside potential as we continue to execute and expand earnings and demonstrate sustained book value accretion. We have entered 2026 with strong momentum. In the first quarter, we are off to an exceptional start as adjusted book value is up between 3% to 4%. At the same time, Constructive DSCR originations are beginning to contribute to earnings as expected. As acquisition efficiencies are realized, we see a clear path to expanding EAD in 2026. We are highly encouraged by the early results and increasingly confident in the earnings power of the platform. We approach 2026 with conviction and optimism in the macro backdrop. The progression of the Fed easing cycle, coupled with declining volatility has created a favorable environment of lower rates and tighter spreads. The current administration's policy focus of improving housing affordability and reducing mortgage rates further reinforces our positive outlook on the residential assets. Our goal is to maintain flexibility to capitalize emerging opportunities and to direct capital to the most attractive risk-adjusted returns in the residential mortgage market. Dividend sustainability remains a core priority. In the year, we are focused on balancing competitive yields to expand recurring earnings with robust coverage and long-term capital preservation. We are energized by the opportunity in front of us and confident in our ability to deliver long-term value for our stockholders. At this time, I'll pass the call over to Nick for a market and strategy update.
Thank you, Jason. As we close out 2025, we are excited to have delivered significant EAD expansion alongside book value growth. Looking forward, we are confident that our two-pronged approach of investing in Agency RMBS and high-quality residential credit remains the optimal strategy for the current market environment. In the quarter, we deployed $810 million into residential assets, reflecting another period of solid investment activity. Agency RMBS purchases totaled $347 million in the fourth quarter as tightening spreads moderated the pace of acquisitions. In residential credit, we invested in $276 million of BPL-Rental loans and $181 million of BPL-Bridge loans. This marks the first quarter where rental loan purchases exceeded bridge loan purchases, reflecting our deeper utilization of Constructive's origination capabilities in rental loans. We anticipate that this trend will continue. Our Agency portfolio ended the year at $6.6 billion, doubling in size over the course of 2025, constituting 63% of our investment portfolio and 56% of our equity capital; Agency RMBS now represents our single largest asset exposure. In the fourth quarter, our Agency purchases were concentrated entirely in 5% coupon spec pools. We have continued to target low pay-up spec pools at or slightly under the current coupon, where we see the best balance of positive net interest margin duration upside and a more favorable convexity profile. Agency leverage also declined slightly in the quarter, falling to 7.7x from 7.8x. The pace of Agency acquisitions was tempered by meaningful spread compression during the period. Current coupon agency spreads tightened by 16 basis points, narrowing from 126 basis points to 110 basis points. Interest rate volatility fell meaningfully in the fourth quarter and has steadily declined since the tariff announcement in April, providing the impetus for tightening spreads in agencies. Despite spreads normalizing toward longer-term averages, we continue to see value in Agency RMBS. Our capital allocation to Agency is expected to grow through 2026 to between 60% and 70% of equity capital. We will adjust the pace and magnitude of future acquisitions opportunistically in response to spread movements and broader market conditions over the course of the year. Our BPL-Rental portfolio has almost doubled over the course of 2025, growing from $770 million to $1.4 billion. This core strategy has benefited from the integration of Constructive's origination platform alongside our disciplined underwriting standards. Borrower metrics remain strong across the BPL-Rental portfolio with a 748 average FICO, 71% average LTV and 1.36x DSCR. Credit performance has been robust with delinquencies remaining low at 1.4%, a direct result of our focus on credit quality. In 2025, we completed 4 securitizations across our home loan portfolio. We continue to aggregate loans to execute securitizations, and we are on pace for executing one BPL-Rental deal a quarter, targeting a mid- to high-teens levered return. In the fourth quarter, non-QM AAA spreads remain range bound at around 130 basis points. Into the new year, however, we have seen meaningful spread compression as non-Agency AAA spreads have converged towards Agency levels, creating a favorable environment for us to grow our BPL-Rental loan securitization program. We continue to take a selective approach in BPL-Bridge, where the portfolio stands at $820 million of UPB, a decline from $1.2 billion at the beginning of the year. The proliferation of revolving securitizations across a myriad of issuers has intensified buyer competition, driving yields tighter. At this juncture, we see more compelling opportunities in agencies and BPL-Rental, and we expect the size of the BPL-Bridge portfolio to decline throughout 2026. Constructive continues to scale successfully, delivering its highest volume quarter of the year in Q4 with $474 million of originations. Constructive originated $1.8 billion worth of loans in 2025, with 93% of those originations in BPL-Rental, reflecting a strong alignment with our core credit strategy. Origination quality remains robust with a weighted average FICO of 751 and an average LTV of 74%. After our full acquisition of the platform, Constructive's loan production now matches closely with Adamas' investment criteria. We target strong borrower profiles in the stable segments of the credit spectrum. Beyond disciplined credit underwriting, we have deliberately minimized originations at the margins of securitization eligibility and shifting institutional buyer mandates, concentrating production where institutional sponsorship and secondary market liquidity are the strongest. Over the past 12 months, new construction loans have represented less than 2% and multifamily loans have represented less than 5% of Constructive's total origination. We expect Constructive to become a strategic earnings driver and sourcing engine for the firm. In the quarter, Adamas purchased 44% of Constructive's originations, deliberately striking a balance of investment portfolio growth and the cultivation of Constructive's third-party distribution network. Through Constructive, we benefit from a capital-light model that produces both gain on sale revenue and a proprietary investment pipeline. We have the flexibility to direct BPL-Rental originations to our portfolio or to the secondary markets as conditions warrant, and we expect a broadly balanced allocation between the two in 2026. In multifamily, we had another positive quarter of resolutions at an accelerated 39% annualized payoff rate. Performance has been strong throughout 2025 with only one delinquent and one restructured asset, both unchanged over the course of the year. As the portfolio seasons, we anticipate that the pace of payoffs to be higher than the historical average of 26%, and we will continue to redeploy the proceeds into our higher-yielding core strategies. Our diversified agency and credit portfolio, paired with Constructive's origination capabilities, provide us multiple avenues to grow earnings in this market environment. We are well positioned to extend this momentum in portfolio growth and earnings through 2026. I will now pass the call to Kristine to walk through our financial highlights.
Thank you, Nick, and good morning, everyone. For the fourth quarter, we reported GAAP net income attributable to common stockholders of $41.6 million or $0.46 per share and earnings available for distribution of $0.23 per share, which fully covered our quarterly dividend. After accounting for a $0.23 dividend, we generated a 6.85% economic return on GAAP book value and a 4.62% economic return on adjusted book value. For the full year 2025, the economic return on GAAP and adjusted book value was 12.72% and 11.01%, respectively. Our quarterly performance benefited from strong investment mark-to-market gains. We saw spread tightening across Agency RMBS and certain portions of our residential loan portfolio, which increased asset valuations and contributed meaningfully to earnings. In addition, gains on our interest rate swaps contributed to our results as swap spreads widened during the quarter. Adjusted net interest income increased to $46.3 million in the fourth quarter from $42.8 million in the third quarter, and net interest spread remained stable at 152 basis points. These results reflect our continued portfolio repositioning toward Agency RMBS and BPL-Rental loans, while also benefiting from improved financing costs. Partially offsetting the positive valuation impact that I mentioned earlier, we recorded $14.9 million of realized losses, primarily related to discounted payoffs and resolution activity on certain nonperforming residential loans and valuation adjustments on foreclosed properties, primarily related to our BPL-Bridge portfolio. These actions reflect ongoing active portfolio management and credit resolution efforts. In most cases, the realized losses have been substantially reflected in prior period marks. Turning to Constructive. The platform continued to demonstrate solid origination momentum during the quarter. Constructive generated $12.5 million in mortgage banking income, driven by higher origination volumes and related origination fees, partially offset by lower valuation on interest rate lock commitments and the prudent increase in loan repurchase reserves. Constructive incurred $4.3 million in direct loan origination costs and $10.2 million in direct G&A expenses, resulting in a $2 million loss for the quarter on a stand-alone basis. Direct G&A for Constructive increased in line with higher production volumes, the full quarter impact of consolidation and also continues to include expenses associated with integration. We view these items as part of normal progression of integrating and scaling the platform. Origination activity and pipeline trends remain healthy and as integration efforts moderate and production continue to grow, we expect a more consistent earnings contribution from Constructive. At acquisition, we estimated Constructive to generate approximately 15% annual equity return, and our current expectations remain aligned with that target. Total consolidated Adamas G&A expenses were $25.1 million for the quarter, up from $23.3 million last quarter, reflecting the full quarter consolidation of Constructive. From a capital markets perspective, we continue to strengthen our balance sheet. During the year, we issued $198 million senior unsecured notes to extend and diversify our funding profile. Subsequent to quarter end, we issued $90 million of 9.25% senior unsecured notes due 2031 and redeemed our $100 million 5.75% senior unsecured notes due 2026 at par, retiring that obligation ahead of its April maturity. As a result, we now have no corporate debt maturities for the next 3 years. This provides meaningful flexibility and positions us to focus our capital on growing the investment portfolio rather than addressing near-term refinancing needs. At year-end, we maintained $206 million of available cash and approximately $420 million of total liquidity capacity, including financing available on unencumbered and underlevered assets. Our company recourse leverage ratio was 5x and portfolio recourse leverage ratio was 4.7x, with leverage primarily concentrated in Agency financing. Overall, our strategic repositioning has strengthened the durability of our earnings profile and positioned the company for continued growth in recurring income. We remain focused on disciplined execution and delivering sustainable returns for our stockholders. That concludes our prepared remarks. Operator, please open it up for questions.
分析師問答
Our first question will come from Doug Harter with UBS.
It's Marissa Lobo on for Doug today. On the pace of deployment between Agency MBS and residential loans in 2026, how are you viewing the relative attractiveness of Agency MBS given the significant spread tightening year-to-date?
Yes. So from a levered return perspective, we do see a higher return on the non-Agency credit that we invest in, in particular, BPL-Rental. So for that particular asset class, we see somewhere in the mid- to high-teens type levered return compared to agencies today, somewhere in the mid-teens type return on a levered hedge basis. So we are still constructive on both. We still like both asset classes. We like the balance and the diversity that having both in our portfolio gives us. As I mentioned in my earlier remarks, we do expect the Agency portfolio to grow. So right now, it's at 56% of equity capital. We do expect it to grow into the 60s, assuming market conditions hold. We do think that the non-Agency part of our portfolio will stay about the same, but that's not because we are not increasing our BPL-Rental exposure. We're going to continue to increase that. But because BPL-Bridge does pay down relatively quickly and we find less opportunity there that effectively the mix within non-agencies will change, but we expect that the percentages in the non-Agency side to remain relatively static. So where does the additional equity capital come from? It comes from the continued resolutions in the multifamily portfolio and other non-core strategies.
That's very helpful. And looking at the expenses related to the Constructive acquisition, how should we think about the remaining integration costs and the 2026 run rate for operating expenses related to Constructive?
We still see in the first quarter partially some integration costs with Constructive. We've only been there for about 6 months. But in terms of G&A ratio, when you think about it, it's going to be approximately 77.5% of stockholders' equity, and really approximately 44% of that would be attributable to Constructive with the rest really Adamas. And if you think about Constructive, roughly 40% of their G&A is variable and directly tied to origination activity. And this really provides us meaningful expense flexibility as volumes fluctuate. So as I said, it's about 7% or 7.5% of stockholders' equity would be a run rate.
Got it. Could you expand on the comment regarding the change in gain on sale this quarter, which reflects lower commitment valuations and an increase in loan repurchase reserves? What are the implications for the valuation of loans on the balance sheet?
We believe it is transitional. Let's discuss the interest rate lock valuation, which was primarily influenced by a smaller pipeline compared to last quarter and a modestly lower pull-through rate due to pricing conditions. These changes align with typical quarter-to-quarter market fluctuations, and we are actively monitoring and managing the pipeline to adapt to current market conditions. Regarding purchase reserves, we felt it was wise to increase the repurchase reserves, which is tied to our acquisition of the 50% interest in Constructive. Nick can provide more details on this.
Yes. We effectively coordinated the timing and scale of some repurchases and their corresponding reserves in collaboration with our former equity partner in the Constructive business. These actions were primarily carried out in the fourth quarter to benefit from provisions and indemnities included in the Constructive purchase transaction. We do not interpret the repurchase loan loss reserves as an indication of rising loss trends or credit issues for 2026. We are quite confident in the credit underwriting currently in place for Constructive.
Our next question will come from the line of Bose George with KBW.
This is actually Frank Labetti on for Bose. I want to start with discussing the balancing between capital deployment between scaling Constructive originations versus increasing Agency deployment or share repurchases? And then is there like a preferred return threshold guiding that allocation going forward?
Yes, thank you for the question. We are aiming for mid- to high-teens returns on a risk-adjusted basis across the various avenues where we allocate capital. This can vary each quarter depending on market availability and underwriting trends. Regarding Constructive, we view it as a more capital-light model due to their wholesale origination business. We are focused on both earning on sales by selling to third parties and holding assets on our balance sheet for origination and securitization activities, expecting to handle one securitization per month. However, we do not anticipate a significant increase in capital allocation toward that strategy, even with a desire for origination volumes to grow. This was a key factor in our initial interest in Constructive several years ago, as their business model offers flexibility on costs, keeping them stable regardless of origination trends. We aim for a consistent capital allocation in that regard. As for our focus on different asset classes, Nick mentioned a target of 60% allocated to agencies, based on the current market value. The shifting dynamics between BPL-Bridge and rentals are also important, as we expect a reduction in BPL-Bridge on our balance sheet due to payoffs and fewer opportunities. On the rental side, we are committed to supporting efforts for Constructive and finding value there. Ultimately, our decisions will depend on market conditions, and we will make careful capital allocations accordingly.
One follow-on comment on Constructive. We are still in the transition process and there are still actions we can take to increase volume, enhance efficiencies, and lower costs without needing capital. For instance, we can improve their financing lines with better terms, such as using our captive capital to reduce the time their loans are in the warehouse. We are focused on these actions first before considering additional capital investments.
Great. That's very helpful. And then sticking on Constructive, can you just talk about the competition in the business purpose lending channel? Demand for the product is clearly very strong. Are you seeing any new entrants in the space and any pressure on margins there?
Yes, we have been involved in the DSCR loans sector for some time now and have observed the fluctuations in competition. Currently, it is quite a competitive market, but there is also strong demand for loans from institutional buyers in both non-QM and BPL-Rental/DSCR categories. As a result, originators are looking to expand in this area. From our viewpoint, Constructive remains a top-tier player with long-term relationships, and they are managing the competition effectively. We've noticed that some of the larger non-QM originators are directing a higher percentage of their originations toward BPL-Rental, a trend we expect to persist. Additionally, Constructive has partnered with some of these larger firms to increase volume. The market is evolving, and while there is significant demand, we are also very aware of the competitive landscape and are handling it successfully.
Great. And just one more question, have you provided an update on book value quarter-to-date?
Yes. In Jason's remarks, he mentioned that adjusted book value is up somewhere between 3% to 4% so far this quarter.
Our next question comes from the line of Matthew Erdner with JonesTrading.
There's been a lot of talk about institutionals or I guess, institutions being banned kind of from that rental space. Could you talk about just the profile of the borrower that you guys have? And if that were to occur, what impact it would have?
We believe that if this policy is implemented, it will benefit Constructive's business. Constructive primarily originates loans for individual investors rather than institutional ones. Each borrower who received a loan in 2025 owns fewer than 80 single-family properties, with the average being even lower. In contrast, institutional investors own thousands of SFR properties. Although we lack specific details at this time, the White House executive order aims to restrict purchases from Wall Street investors and large institutional investors. The exact definitions of these entities will be provided later, but they do not typically describe Constructive's client base. Overall, I think that if there is a ban on institutional ownership of SFR properties, it would be advantageous for Constructive, as it would likely boost the supply of homes and transactions while decreasing the demand for homes that our borrowers focus on.
Got it. Got it. That's helpful. And then apologies if I missed this on the last question, but could you kind of talk about share repurchases? If you did any during the quarter, I don't think you did and how you're viewing that going forward?
We evaluate share repurchases as a different method of allocating capital compared to the opportunities available in the broader market. We did not buy back any shares in the fourth quarter. Our focus is on the relationship between our price to book and the beneficial impact of using capital for share repurchases. Buying back shares results in a permanent reduction of capital since we cannot hold shares in treasury for future issuance. Therefore, we prioritize whether the capital designated for our investment programs will deliver more benefits compared to the permanent dilution caused by share repurchases. This is an area we continually assess and incorporate into our models regarding core capital allocations, and we will keep doing so. In past quarters, we have repurchased shares when market conditions were favorable, and we will keep considering this option as we move forward.
Got it. That's helpful. And then last one for me. How are you guys looking at Agency leverage given that we've kind of moved into a tighter spread range? Obviously, there's the GSE backstop, I guess, with their loan purchases. Just how are you guys thinking about leverage?
Yes. So in the quarter, leverage declined slightly. Right now, it's about 7.7x. Historically, we have run leverage up into 8, 8.5x leverage. For now, we are probably going to be trending on the lower end, so closer to the 7.7x. But depending on how market conditions, we could go higher.
Our next question will be from the line of Timothy D'Agostino with Equity Research.
With the comments on 60% to 70% of equity capital being Agency and potentially seeing a decline in BPL-Bridge in 2026, I was just wondering, the total investment portfolio size currently is at $1.5 billion. Do you have like a target size you or goal you're trying to reach? Or do you have any near-term percentage increases? Just thinking about what you're striving for in terms of the total portfolio size maybe at the end of '26 or at the end of 2027.
Yes. The goal is to maximize our overall return within our portfolio, which is fundamental to our approach to capital allocation. We will adjust our capital allocation in response to market fluctuations, whether in credit or any Agency. There isn't a specific target we aim to reach; our focus is on maximizing our recurring earnings. The reference to 60% is based on current market conditions and the roll-offs of noncore strategies on our balance sheet. We don't adhere to a capital allocation model targeting a specific portfolio size or percentage in either strategy. Our focus is on identifying the best risk-adjusted returns in the market and maximizing our earnings potential.
Okay. Great. For my second question, I'd like to discuss the available cash. You averaged about $170 million over the past five quarters, and at year-end, you have $206 million in available cash. Could you provide an overview of your plans for this cash? Will you continue to hold it, or are you considering rotating capital? Any details on the available cash at year-end and your intended usage would be appreciated.
Yes. As the Agency strategy and spreads tighten into year-end, it did impact our expectations for portfolio growth at the beginning of the quarter. Consequently, we ended the quarter with more cash than we anticipated, which was partly why we decided to mature our 5.75% notes due April 2026. We saw an opportunity based on our cash allocation and an upcoming near-term maturity and used the capital accordingly. Overall, we see continued opportunities for deployment in two areas. We discussed a capital-light model on the Constructive side and are looking for opportunities within Agency. As the market becomes quieter on the Agency side, we anticipate further deployment there and aim to pursue more opportunistic trades in the overall market rather than adhering to a scheduled deployment.
I am showing no further questions at this time. And I would now like to hand the conference back over to Jason Serrano for closing remarks.
Yes. We appreciate your continued support and look forward to discussing our first quarter results in April. Have a great day.
This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.