8-K: Adamas Trust Reports Strong Q3 EAD Growth, Boosts Dividend

Adamas Trust, Inc. announced robust third-quarter 2025 financial results, driven by record investment activity and strategic acquisitions, leading to a significant increase in earnings available for distribution and a higher common stock dividend.

Summary

• Net income attributable to common stockholders was $32.7 million, or $0.36 per basic share, for the third quarter of 2025.
• Earnings Available for Distribution (EAD) attributable to common stockholders significantly increased to $22.0 million, or $0.24 per basic share, marking the sixth consecutive quarter of EAD growth.
• The company acquired approximately $1.8 billion of Agency investments with an average coupon of 5.27% and $525.7 million in residential loans with an average gross coupon of 8.81%.
• Adamas Trust exited its remaining joint venture equity investments at their approximate carrying value of $17.0 million.
• The company completed the acquisition of the outstanding 50% ownership interests in Constructive Loans, LLC, a business purpose loan origination platform.
• Financing activities included the issuance of $115.0 million in 9.875% Senior Notes due 2030 and two residential loan securitizations yielding $619.2 million in net proceeds.
• The common stock dividend declared in September 2025 increased to $0.23 per common share.
• The total investment portfolio expanded by $1.8 billion, a 20% increase quarter-over-quarter, reaching $10.4 billion.
• Book value per common share was $9.20, and adjusted book value per common share was $10.38 at September 30, 2025.
• Company Recourse Leverage Ratio increased to 5.0x, and Portfolio Recourse Leverage Ratio increased to 4.7x.

Sentiment

Score: 8

Explanation: The company reported strong growth in Earnings Available for Distribution (EAD) for the sixth consecutive quarter and increased its common stock dividend, indicating robust operational performance and a commitment to shareholder returns. Strategic acquisitions, particularly the full ownership of Constructive Loans, LLC, and significant investment activity in Agency RMBS and residential loans, demonstrate effective capital deployment. While book value per share saw a slight decline year-over-year and leverage ratios increased, the overall financial health and strategic execution appear very positive.

Positives

• Earnings Available for Distribution (EAD) per common share increased significantly to $0.24 in Q3 2025, up 140% year-over-year and 9% quarter-over-quarter, marking the sixth consecutive quarter of EAD growth.
• Common stock dividend increased to $0.23 per share, a 15% increase quarter-over-quarter.
• Highest level of quarterly investment activity since inception, expanding the investment portfolio by $1.8 billion to $10.4 billion.
• Strategic acquisition of the remaining 50% interest in Constructive Loans, LLC, a market-leading business purpose loan origination platform.
• Acquired $1.8 billion of Agency investments with an attractive average coupon of 5.27%.
• Acquired $525.7 million in residential loans with a strong average gross coupon of 8.81%.
• Net interest income significantly increased to $36.6 million in Q3 2025 from $20.2 million in Q3 2024.
• Net interest spread improved to 1.50% in Q3 2025 from 1.32% in Q3 2024.
• Excess liquidity capacity of $424 million, including $181 million in available cash and $243 million in additional financing.
• Exited remaining multi-family joint venture equity positions, streamlining focus and capital allocation.

Negatives

• Book value per common share decreased to $9.20 at September 30, 2025, from $9.83 at September 30, 2024.
• Adjusted book value per common share decreased to $10.38 at September 30, 2025, from $10.87 at September 30, 2024.
• Yield on average interest earning assets declined to 6.33% in Q3 2025 from 6.69% in Q3 2024, primarily due to higher allocation in lower-yielding Agency securities and business purpose rental loans.
• Company Recourse Leverage Ratio increased to 5.0x from 3.6x in Q2 2025.
• Portfolio Recourse Leverage Ratio increased to 4.7x from 3.4x in Q2 2025.
• Net loss from real estate increased to $(3.9) million in Q3 2025 from $(3.0) million in Q2 2025, driven by lower rental income due to property sales and fully recognized property-related expenses.
• Realized losses, net, were $(5.6) million in Q3 2025, primarily from foreclosed properties and discounted payoffs on non-performing business purpose bridge loans.
• Net losses on derivative instruments were $(13.0) million, primarily due to unrealized losses on interest rate swaps from decreasing interest rates and realized losses on derivative settlements.
• Impairment of real estate was $(1.6) million, driven by decreased fair value of single-family rental properties held for sale.

Risks

• Changes in the company's business and investment strategy.
• Inflation and changes in interest rates and the fair market value of assets, including negative changes resulting in margin calls relating to asset financing.
• Changes in credit spreads.
• Changes in the long-term credit ratings of the U.S., Fannie Mae, Freddie Mac, and Ginnie Mae.
• General volatility of the markets in which the company invests.
• Changes in prepayment rates on loans owned or underlying investment securities.
• Increased rates of default, delinquency or vacancy and/or decreased recovery rates on or at the company's assets.
• Ability to identify and acquire targeted assets, including assets in the investment pipeline.
• Ability to dispose of assets from time to time on terms favorable to the company.
• Changes in relationships with financing counterparties and the ability to borrow to finance assets and the terms thereof.
• Changes in relationships with and/or the performance of operating partners.
• Ability to predict and control costs.
• Changes in laws, regulations or policies affecting the business.
• Ability to make distributions to stockholders in the future.
• Ability to maintain REIT qualification for U.S. federal income tax purposes.
• Ability to maintain exemption from registration under the Investment Company Act of 1940.
• Impairments and declines in the value of the collateral underlying investments.
• Changes in the benefits anticipated from the acquisition of Constructive Loans, LLC.
• Ability to effectively integrate Constructive into the company and risks associated with its ongoing operation.
• Ability to manage or hedge credit risk, interest rate risk, and other financial and operational risks.
• Exposure to liquidity risk, risks associated with the use of leverage, and market risks.
• Risks associated with investing in real estate assets and/or operating companies, including changes in business conditions and the general economy, the availability of investment opportunities and conditions in markets for residential loans, mortgage-backed securities, structured multi-family investments and other assets.

Future Outlook

The company anticipates continued growth of its Agency RMBS portfolio, though at a lower pace than Q3 2025. Management is focused on continuing to increase earnings by deploying capital into Agency RMBS and business purpose loans to further advance its core strategy and will utilize excess liquidity to capitalize on opportunities during periods of volatility. Adamas expects redemptions of multi-family investments to continue to accelerate, allowing for rotation into higher yielding investments.

Management Comments

• "The third quarter was an active and strategically significant period for Adamas."
• "We marked the Company's recent rebranding with its highest level of quarterly investment activity since inception, expanding the investment portfolio by $1.8 billion."
• "The momentum generated from our disciplined and deliberate capital rotation that focuses on assets with greater earnings durability has allowed for a meaningful increase in the Company's quarterly dividend."
• "Additionally, we deepened relationships across the investment ecosystem in the quarter with our acquisition of the remaining 50% interest in a market leading business purpose loan origination platform."
• "Together, these initiatives drove earnings available for distribution higher for the sixth consecutive quarter, reinforcing our commitment to long-term value creation for our stockholders."

Industry Context

Adamas Trust operates as an internally managed REIT, strategically deploying capital across real estate and capital markets. The company's focus on Agency RMBS and business purpose loans (BPLs) aligns with a strategy to generate durable earnings. The reported tightening of current coupon mortgage spreads by 20 basis points to 126 basis points, coupled with falling interest rate volatility, suggests a normalizing market environment that could favor Agency RMBS investments. The acquisition of Constructive Loans, LLC, a BPL origination platform, positions Adamas to capitalize on the growing single-family investor market. The shift away from multi-family joint venture equity investments reflects a broader trend among some REITs to streamline portfolios and focus on core, higher-yielding strategies in the current economic climate.

Stakeholder Impact

• Shareholders: Positive impact due to increased common stock dividend ($0.23 per share) and strong EAD growth (up 140% YoY), reinforcing commitment to long-term value creation.
• Employees: Positive impact from the acquisition of the remaining 50% interest in Constructive Loans, LLC, potentially leading to integration and growth opportunities for Constructive's 159 personnel.
• Customers/Borrowers (of Constructive): Constructive continues to be a reliable and competitive capital provider in the single-family investor market, with over $5.6 billion in BPLs originated since 2017.
• Financing Counterparties: Strengthened relationships through new senior notes issuance and securitizations, but also risks related to changes in relationships and ability to borrow.

Next Steps

• Host a conference call and audio webcast on October 30, 2025, at 9:00 a.m. Eastern Time to discuss financial results.
• Post a supplemental financial presentation on the company's website.
• File the Quarterly Report on Form 10-Q for the quarter ended September 30, 2025, with the SEC.
• Continue to invest in core strategies (Agency RMBS, BPL-Rental, BPL-Bridge loans) and utilize excess liquidity to capitalize on opportunities during periods of volatility.
• Expect redemptions of multi-family investments to continue to accelerate, allowing for rotation into higher yielding investments.

Key Dates

Recommendation

The company demonstrated strong operational execution in Q3 2025, evidenced by a significant 140% year-over-year increase in Earnings Available for Distribution (EAD) per share and a 15% quarter-over-quarter increase in its common stock dividend. Strategic capital deployment into higher-yielding Agency RMBS and business purpose loans, coupled with the full acquisition of Constructive Loans, LLC, positions the company for continued earnings durability. While book value per share saw a modest decline and leverage ratios increased, the robust EAD growth, increased dividend, and strategic focus on core, profitable segments suggest a positive trajectory for future income generation and shareholder value. The current stock price trading at a 33% discount to Adjusted Book Value presents a compelling value upside for investors.

Keywords

REIT, Mortgage REIT, Adamas Trust, ADAM, Financial Results, Q3 2025, Earnings Available for Distribution, EAD, Dividend, Investment Portfolio, Agency RMBS, Residential Loans, Business Purpose Loans, Constructive Loans, Securitization, Senior Notes, Net Interest Income, Book Value, Leverage Ratio, Real Estate Investment