Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Adamas Trust Fourth Quarter 2025 Results Conference Call. [Operator Instructions] 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%,…

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…

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 full year 2025, 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. And 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…

[Operator Instructions] Our first question will come from the line of 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 -- 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 on 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 Agency -- 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 noncore 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 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 -- and 7.5% of stockholders' equity would be a run rate.

Got it. And finally, just on that comment about the gain on sale change this quarter, reflecting lower commitment valuations and the increase in loan repurchase reserves. Could you expand on that? Are there -- what are the implications to the valuation of loans on balance sheet?

We don't -- yes, we think it is transitional. And let's talk about the interest rate lock valuation. It was really primarily driven by a smaller pipeline compared to last quarter and modestly lower pull-through rate, reflecting pricing conditions -- during the period, these changes are consistent with kind of normal quarter-to-quarter market fluctuations, and we continue to actively monitor and manage the pipeline and align it with current market conditions. In terms of purchase reserves, we think it was prudent to increase the repurchase reserves, and it is really tied into our purchase of the 50% interest into Constructive, and Nick can go into a little bit more detail.

Yes. We effectively coordinated the magnitude and timing of some of these repurchases and the corresponding reserves with -- in collaboration with our former equity partner in the Constructive business. And primarily, these actions were executed in the fourth quarter to take advantage of provisions and indemnities that were provided as part of the Constructive purchase transaction. We don't see the repurchase loan loss reserves as an extrapolation of higher loss trends or credit concerns for 2026. We feel very comfortable with the credit underwriting that we currently have in 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 about 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. Thanks for the question. So ultimately, we're focusing on mid- to high teens returns on a risk-adjusted basis throughout the different avenues which we deploy capital into. The interchange of that does change per quarter based on what's available in the market and different underwriting trends that we're seeing. Going back to Constructive, we see it as more of a capital-light model given their wholesale origination business. Nick mentioned earlier that we're focused on both gain on sale through selling to third parties as well as holding on balance sheet for our origination activity, securitization activity, which we expect one securitization a month in the space. But we don't expect to have a significant increase of capital allocation towards that strategy even with origination volumes that would prefer to grow. That was one of the primary focuses that we looked at Constructive many years ago and why we were excited about their business model. It provides for flexibility on the cost side, keeping it flat with origination trends going up or down. So we think it will be consistent kind of capital allocation there. And then the trends of looking at different asset classes, again, it's really -- we're -- Nick mentioned a target of 60% on agencies, and that's just looking at where we see value in today's market, the interchange between BPL-Bridge and rental, the fact that BPL-Bridge, we think will start -- will be reduced on our balance sheet just due to payoffs that are happening there and a lack of opportunity that we're seeing. And on the Bridge -- on the rental side, continuing to support efforts there for Constructive and seeing value in that space. So ultimately, it really depends on what the market is giving us, and we're going to make the prudent capital allocations accordingly.

One follow-on comment on Constructive. So we're still in the process of transition, and there are still things that we can do to more -- to increase volume and increase efficiencies and reduce cost that does not require capital, like, for example, getting them better financing lines with better terms, whether it's providing our captive capital to reduce the time, the warehouse time that they have their loans under. So there's things that we can do that doesn't necessarily require additional capital, and we're actually focused on those things first before planning to put additional capital in.

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. On the competition in DSCR loans, in particular, yes, we -- this is a space that Constructive has been in for a while. So we have seen the ebbs and flows in terms of competition. Obviously, at this juncture, it is a relatively competitive business. There's also very strong demand for loans from institutional buyers across both non-QM as well as BPL-Rental/DSCR. So there's fortunately a strong demand there in terms of -- and therefore, originators have tried to grow in that particular space. I think from our perspective, Constructive has always been a top-tier player. They have very long-term relationships. They're navigating the competition very well. And I think one of the things that we are seeing is some of the larger non-QM originators having a higher percentage allocation of originations into BPL-Rental. That is a trend that we think will continue. In some cases, we have also or Constructive has partnered with some of these larger entities to grow volume as well. So the market continues to evolve and change. Fortunately, there's strong demand, but the competition is something that we have been mindful of and navigating very well.

Great. And just one more, if I can. Just if you guys -- did you guys provide an update on book value quarter-to-date?

Yes. So in Jason's remarks, he mentioned that book value -- adjusted book value is up somewhere between 3% to 4% thus far quarter-to-date.

[Operator Instructions] 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 borrower that you guys have? And if that were to occur, what impact it would have?

Sure. We think that if this policy ultimately goes through, that it will be positive for Constructive's business. So Constructive originates loans really to individual investors, not to institutional investors. Every single one of Constructive's borrowers of loans originated in 2025 owns less than 80 single-family properties and the average is significantly lower than that. So -- and institutional investors own SFR properties by the thousands. So we don't have a lot of details yet, but in the White House executive order, the policy is really looking to limit purchases and I quote from Wall Street investors and large institutional investors. So the definitions of which are forthcoming, but these are not necessarily descriptors of Constructive's client base. So overall, I think if there was a ban institutions owning SFR, positive for Constructive, it should increase the supply of homes and transactions and reduce the demand for homes that our borrowers target.

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?

Yes. So the way we look at share repurchases is just as a different capital allocation relative to the opportunities we see in the market as a whole. We did not repurchase shares in the quarter, in the fourth quarter. We do look at where our price to book is and the accretive value of actually utilizing capital for that. and share repurchases, it's a permanent capital reduction in retiring those shares. We don't get the ability to hold in treasury and try to issue later. So what we have to do is just -- we focus on whether or not the capital that we have allocated to and budgeted for our investment programs is accretive relative to using that capital and permanent dilution of that capital related to those share repurchases. So it's something that we consistently look at and we monitor. We throw in our models as it relates to core capital allocations, and we will continue doing that. We have, in previous quarters, repurchased shares as the market provided some opportunities there, and we'll continue to look at that going 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 like 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. So the goal is to maximize our total return within our portfolio. And that's the core -- that's where we start with looking at capital allocation. So in doing so, when the market has different moves and whether it's on credit or any Agency, we will look to change our capital allocation relative to those 2 different asset classes. So there is not a target that we are focused on reaching as a sense of just reaching the target versus maximizing our recurring earnings that we have in our portfolio. The comments that Nick made earlier on the targets around 60% is based on what we see the market giving us today and the different roll-offs of noncore strategies we have in our balance sheet. So yes, we don't have a capital allocation model that focuses on either investment portfolio size or a certain percent that we need to be in either strategy. It's really where we see the best risk-adjusted returns in the market and how do we maximize our earnings potential.

Okay. Great. And then just as a second question, regarding available cash, you probably averaged maybe around like $170 million over the trailing 5 quarters. And obviously, at year-end, you have $206 million available cash. I guess, could you just provide maybe an overview of how you plan to allocate that cash, whether you want to continue to hold stockpile, if you're going -- if you're just seeing kind of rotation of capital? I guess just any sort of color on the available cash at year-end would be great and how you plan to use it.

Yes. We -- as the Agency strategy and spreads tighten into year-end, we -- it did take away some of our expectations of what we could grow our portfolio in the beginning of that quarter. So we ended up the quarter with a little bit more cash than we would have expected, which was partially the reason why we ended up maturing our 5.75% notes due April 2026. We just saw an opportunity there given the cash allocation that we had and the fact that there was a near-term maturity coming up and utilize the capital in that way. But I think overall, the opportunity for us is continued deployment in 2 areas. We talked about a capital-light model on the Constructive side and then looking for opportunities within Agency. So to the extent that the market winds down on the Agency side, we expect to have further deployment there and looking for more opportunistic trades in the market as a whole versus kind of 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.