Adamas Trust Inc (ADAM) Q3 2026 Earnings Call Highlights: Book Value Slides 19. ...

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Release Date: October 29, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript .

Positive Points

• Adamas Trust Inc ( NASDAQ:ADAM ) increased available cash to $259 million, up 42% from the prior quarter, and total excess liquidity capacity to $447 million, providing significant financial flexibility.

• Earnings available for distribution (EAD) of $0.30 per share covered the quarterly dividend for the seventh consecutive quarter, with EAD up 25% year-over-year.

• Adamas Trust Inc ( NASDAQ:ADAM ) implemented a strategic $2.9 billion short TBA position that contributed $0.29 per share to book value, effectively mitigating spread widening and convexity risk.

• Credit performance remained solid, with 60-plus-day delinquencies in the BPL rental portfolio declining 10 basis points to 1.4%, reflecting high-quality underwriting.

• Adamas Trust Inc ( NASDAQ:ADAM ) reduced its agency duration gap from 1.4 years to 0.3 years by quarter-end and further adjusted positioning post-quarter, demonstrating active risk management.

• The company sees attractive investment opportunities with mid-to-high teens returns in core strategies, supported by improved entry levels after September's repricing.

Negative Points

• Adamas Trust Inc ( NASDAQ:ADAM ) reported a 19.6% decline in adjusted book value per share to $8.88, driven by mark-to-market losses on agency RMBS holdings amid sharp rate volatility.

• The agency portfolio accounted for 78% of the book value decline, with convexity and duration gap contributing 36% and 32% respectively, highlighting vulnerability to rate moves.

• GAAP net loss attributable to common stockholders was $171 million, or $1.89 per share, reflecting significant unrealized losses on the investment portfolio.

• Constructiv, the company's mortgage origination platform, reported a stand-alone entity loss of $1.7 million due to lower origination volumes and a $2.6 million reserve increase for a legacy borrower relationship.

• Net interest spread narrowed to 140 basis points from 148 basis points in the prior quarter, reflecting a shift toward lower-yielding agency assets and runoff of higher-yielding investments.

• Adamas Trust Inc ( NASDAQ:ADAM ) issued $90 million of 9.6% senior unsecured notes, increasing interest expense and potentially diluting earnings going forward.

Q & A Highlights

Q: Can you quantify the timing of the book value decline relative to when the TBA shorts were added, and how are you positioning hedges going forward given most shorts are now removed? A: President Nicholas Mah explained that the majority of TBA shorts were put on in September, though duration was rehedged throughout the quarter. The company maintained a larger duration gap going into September, expecting rate moves to be short-lived. The TBA shorts were removed because tail risk in spread and convexity has significantly declinedthe 10-year has moderated from highs of 5.35% to around 5.00%, the MOVE Index has come down, forced selling by leveraged players has dissipated, and duration extensions are mostly behind. However, the company still runs a tighter duration gap than mid-Q3 due to unresolved factors like the Iran conflict, elevated oil prices, and midterm election risk, using Treasury futures, macro and credit hedges, and remaining TBA shorts dynamically.

Q: Given where spreads are today, where are you looking to deploy capital and how do you think about total leverage on the portfolio? A: President Nicholas Mah stated that returns across core strategiesresi credit and agenciesare in the mid to high 10s, a very attractive profile. The fastest initial growth will come through the agency channel as TBA shorts are removed, with capital allocation to agencies increasing back to normal levels. After that, allocation should become roughly balanced over time. BPL rental deployment will take more time even though returns are attractive, as mortgage loan conditions may be challenged in Q4. Agencies are the first lever to pull, but the mix should become roughly balanced entering Q4.

Q: The October BPL rental securitization was priced 67 bps wider than Q3. Was that primarily due to spread widening or deal mix? A: President Nicholas Mah said the super-majority of the differential is due to base rates. On a net financing spread basis, the deal executed at 159 basis pointswider, but the bigger differential is on the rate side. He noted securitization markets continue to function well, and the Adamas shelf executes more efficiently than the average deal, benefiting from investor recognition of the program, historical performance, and prepayment protection.

Q: How should we think about leverage and capacity to maintain the investment portfolio size given the book value decline in Q3 and partial Q4 recovery? A: CEO Jason Serrano explained the company purposely reduced economic leverageagency leverage fell from 8.3 times in Q2 to 5.9 times in Q3as a deliberate risk reduction ahead of the late-September feedback loop. With TBA shorts being paired off, leverage is expected to return to levels run over the last few quarters, normalizing total agency asset size. Available cash and total excess liquidity increased in the quarter, providing flexibility to allocate between asset classes. On credit, higher rates may let the originator pick up market share as competitors face tougher financial conditions. The book value decline was an unrealized event that did not affect financial covenants or cash balances.

Q: Regarding the repurchase reserve tied to a legacy Constructiv relationship, what happened and what gives you comfort it's truly a one-off? A: CFO Kristine Nario-Eng said the increase was tied to a specific legacy borrower relationship involving loans originated before Adamas acquired Constructiv. The company views it as an isolated legacy issue, not reflective of current production. About $2.5 million of indemnification holdback was established at acquisition to cover such exposures; roughly $1.5 million was applied against it in the quarter, leaving about $1 million remaining. While repurchase obligations are a normal part of the origination business, management believes it has appropriately reserved based on current information and sees no signs of a broader issue.

Q: What drove the sharp book value decline in Q3, and how much came from the agency portfolio? A: President Nicholas Mah said the agency portfolio accounted for 78% of the adjusted book value decline, nearly all mark-to-market. Of the agency long-position decline, convexity was the largest contributor at 36%, followed by the duration gap at 32%, with the remainder from spread and portfolio changes. Agency current coupon spreads widened from 107 to 125 basis points over the quarter, nearly three-quarters in Septemberthe Bloomberg US MBS index's worst month and quarter since September 2022. The company did not sell any cash bonds, keeping the decline predominantly unrealized, and grew its spec pool balance from $6.4 billion to $6.9 billion.

Q: How did the TBA short position perform, and how has it been adjusted since quarter-end? A: President Nicholas Mah said the TBA short performed as intended, contributing a positive $0.29 per share to book value in the quarter. At quarter-end it totaled $2.9 billionabout 23% of the gross investment portfolio and 37% of the agency long portfoliowith an average coupon of 6.09%, concentrated in higher-coupon agencies with greater convexity risk. Since quarter-end, the position has been reduced almost 76% to $680 million as of October 26, and the agency duration gap has been widened to around 0.6 years as rate volatility eased and the 10-year retraced from its highs.

Q: What is the outlook for agency RMBS and the portfolio's ability to recover book value? A: CEO Jason Serrano said September repricing created one of the most attractive entry levels in recent quarters, with most extension risk already reflected in pricing. Higher rates improve the technical picturemortgage applications were down about 21% year-to-date through Q3 per the MBA, pointing to lower new issuance and better supply-demand balance. Early in Q4, adjusted book value is up approximately 4% as of October 26, showing early signs of recapturing the Q3 decline. The $1.20 annual dividend represents about 13.5% of September 30 adjusted book value, and management sees compelling investments exceeding that level with mid-to-high-teens returns without aggressive leverage assumptions.

Q: How did earnings and net interest income trend in Q3 despite the volatility? A: CEO Jason Serrano noted EAD was $0.30 per share, up 25% year-over-year and in line with the increased quarterly dividendthe seventh consecutive quarter EAD covered the dividend. Agency adjusted net interest income grew 7% to $39.3 million, and single-family credit adjusted net interest income rose 4% to $21

For the complete transcript of the earnings call, please refer to the full earnings call transcript .