Adamas Inc Trust Stock

Thank you. Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the New York Mortgage Trust Second Quarter 2026 Results Conference Call. [Operator Instructions] The call is being recorded on Thursday, July 30, 2026.

I would now like to turn the call over to Kristi Mussallem, Investor Relations. Please go ahead.

Good morning, and welcome to the second quarter 2026 earnings call for New York Mortgage Trust. A press release and supplemental financial presentation with New York Mortgage Trust's second quarter 2026 results was released yesterday. Both the press release and supplemental financial presentation are available on the company's website at www.nymtrust.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 this 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 New York Mortgage 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, everyone, and thank you for joining us to discuss NYMT's second quarter 2026 results. Joining me this morning are President Nick Mah and Chief Financial Officer Kristine Nario. The past several quarters we've transformed NYMT into a more diversified mortgage REIT with multiple sources of recurring income. Today, our earnings are supported by three complementary businesses: a high-quality agency RMBS portfolio, a growing residential credit platform centered on business purpose lending, and an integrated origination platform.

Our objective is simple: make NYMT a stronger company each sequential quarter. If we continue improving earnings quality, book value stability, and operating efficiency quarter after quarter, we believe shareholder value will follow over the long term. As such, the second quarter continued NYMT's strong efficiency momentum and capped an excellent first half of 2026.

We delivered on another quarter of earnings growth, increased book value, expanded our investment portfolio, and continued to make progress on scaling Constructive into a larger contributor to recurring earnings. We accomplished this despite a volatile market environment, including a meaningful bear flattener of the Treasury curve. Through that backdrop, our portfolio continued to perform well, demonstrating the strength of our diversified platform.

During the quarter, we generated GAAP earnings of $0.48 per common share and EAD of $0.30 per share. This marks the ninth increase in EAD over the past 10 quarters, demonstrating the consistent earnings momentum we've built across the platform. EAD has grown 36% year-over-year and exceeds our recently increased quarterly dividend of $0.27 per share. GAAP book value increased 1.8%, while adjusted book value increased 2.3%, marking our fourth consecutive quarter of book value growth despite a challenging market backdrop.

We believe the ability to increase recurring earnings and book value through varying market conditions reflects the quality of our portfolio, the effectiveness of our capital and asset allocation strategy, and the long-term durability of our business model. Despite broader market rate volatility, the opportunity set remained robust throughout the quarter. We expanded our investment portfolio by more than $800 million to $11.7 billion, representing 36% growth from a year ago and providing an even stronger foundation to support future earnings.

Importantly, the growth has not come from chasing volume. Rather, it reflects the disciplined capital allocation approach we've developed over the last 20 years of institutional investment experience. At 61% of our investment portfolio at quarter end, agency RMBS remains the cornerstone of our balance sheet. Combined with supportive market technicals, the asset class currently provides an attractive carry profile and positions us to generate strong risk-adjusted returns over time.

In credit, we continue to see exceptionally strong institutional demand for Constructive's high-quality business purpose loans, particularly from insurance investors seeking durable cash flows with attractive structural protections. During the quarter, we added a record $632 million of business purpose loans, primarily sourced from Constructive's origination platform. As markets became more competitive with both whole loan and securitization bids, the value of our vertically integrated origination platform will become increasingly evident.

We are particularly encouraged by the market's increasing recognition of NYMT. During the quarter, our share price continued to narrow its discount to book value, extending the progress we've made in closing the valuation gap. Over the past year, our stock has significantly outperformed the broader mortgage REIT index by approximately 46% on a total return basis, as shown in our supplemental. While we are pleased with this progress, we believe our shares still do not reflect the intrinsic value of the company.

We look forward to continuing to demonstrate the strength of our business through disciplined execution and sustained financial performance during the second half of 2026. Our priorities remain clear: continue expanding recurring earnings through disciplined portfolio growth and further scaling of Constructive, continue growing book value through active portfolio management, and continue closing the valuation gap through consistent execution and transparent communication with our investors.

We are highly optimistic about the opportunities ahead and believe NYMT is well positioned to continue delivering attractive earnings growth, bringing long-term value. We appreciate the continued confidence of our stockholders and look forward to continuing to execute on our long-term strategy. With that, I'll turn the call over to Nick to discuss our investment portfolio and market activity in greater detail.

Thanks, Jason. We took advantage of the volatility in the second quarter to continue to build our investment portfolio. We purchased almost $1.5 billion of single-family assets, split across $798 million in agencies and $679 million in residential credit. The benefits of our integration with Constructive, paired with a robust origination pipeline, are becoming increasingly evident with a record quarter of business purpose loan purchases.

Given the tightening of agency spreads in the quarter, we see that residential credit has become more attractive on a relative value basis, and we expect that to be reflected in a growing share of our capital allocation into the strategy in the near future. More broadly, we believe that directing incremental capital to the best relative value opportunities across our core strategies, while also maintaining an overall diversified portfolio, will enhance book value stability over time.

In the second quarter, declining rate volatility and a broad-based demand for MBS supported a meaningful tightening in agency spreads. The bond coupon spreads to Treasuries tightened from 125 basis points to 107 basis points, and the agency portfolio increased from $6.8 billion to $7.2 billion, driven largely by growth in our TBA book. All purchases in spec pools in the quarter have been primarily in the 5% and 5.5% coupons.

Given current market spreads, we expect our 56% capital allocation to agencies to remain largely unchanged, with new purchases expected to generally offset paydowns in the strategy. Although our core agency strategy revolves around spec pools for better convexity protection, we opportunistically added to our TBA positions this quarter, some of which traded very special during the period. We currently have $664 million of TBAs that we expect to rotate back into spec pools in the future.

Agency leverage increased from 7.8x to 8.3x this quarter, consistent with the range we target in managing the portfolio. The increase in leverage reflected both higher investment activity and a larger TBA position, which carries higher implied leverage. More broadly, we utilize leverage dynamically across the investment portfolio. This means that leverage capacity within our agency book can expand to support credit purchases, giving us the ability to deploy available capital and financing to where we see the most attractive returns.

Robust non-QM origination and deal activity have brought the year-to-date non-agency residential issuance to $132 billion, putting it on pace to comfortably exceed last year's approximately $215 billion of securitization volume. At this rate, 2026 could mark a record year for issuance since the Great Financial Crisis. In addition to strong issuance volumes, securitization market pricing remained resilient, even as rates moved higher. Non-QM AAA spreads tightened from 145 basis points to 130 basis points in the quarter, alongside a flatter credit curve, with improved mezzanine tranche execution improving overall deal economics.

Our BPL rental portfolio has grown to $2.3 billion. As we mentioned before, NYMT is on track to complete five to six BPL rental securitizations this year. Most importantly, we are prioritizing quality over volume. Over time, we have built a differentiated securitization program that issues bonds investors covet for their strong underlying collateral quality, historical credit performance, and meaningful prepayment protection.

That differentiation is now increasingly reflected in NYMT's securitization execution. We repriced our most recent deal tighter than the broader market despite a competitive issuance calendar. Turning now to Constructive, I wanted to take a moment to highlight how they are uniquely positioned in today's market. By volume, Constructive is a top five specialist business purpose loan originator in the market with a lending platform primarily focused on originating BPL rental loans.

Most notably, 100% of its BPL rental production over the last 12 months includes prepayment protection, mostly with prepayment penalty terms that last for as long as five years. This is a highly desirable structural feature that is valued by us and the market. Having this protection in our residential credit portfolio helps provide a counterbalance to the negative convexity in our agency book. Constructive also originates loans under disciplined credit standards, and that discipline has translated into excellent credit performance.

For example, the Constructive segment in our BPL rental book has less than 1% of its loans in 60-plus day delinquency status. Constructive's strong distribution network to large-scale institutional partners also helps them find the best pricing for their loans in the market. All of this has translated to an impressive track record across market cycles, with Constructive being profitable in 28 of the last 30 months.

In the quarter, Constructive originated $428 million of business purpose loans, roughly in line with the prior quarter. NYMT was the primary purchaser of Constructive's loan production in the quarter, acquiring 71% of the originations. While the longer-term goal is to increase origination volume, our near-term emphasis is on operational efficiencies and cost improvements ahead of accelerating growth.

During the quarter, we onboarded a new institutional loan financing counterparty that will deliver approximately 60 basis points of savings compared to their existing financing lines. It also comes with materially fewer aging restrictions and greater capital flexibility for Constructive. In aggregate, Constructive has identified approximately $3 million of annual cost savings across its loan origination process.

And we expect the implementation of these improvements to occur over the coming quarters. As a result, these annual savings should start to flow through to Constructive's financials in the latter half of 2026 and into 2027. Across BPL Bridge and multifamily mezzanine portfolios, we are making steady progress in the wind-down of those assets. In BPL Bridge, we have kept delinquencies stable as the portfolio declines.

In multifamily, we are supported by the assets' stable credit performance and high repayment activity. Importantly, with a 12% coupon, the multifamily book continues to contribute positively to recurring income during the wind-down. As loans pay off, we redeploy the capital to our higher-yielding core strategies, where we see the potential to generate even stronger returns. In the remaining multifamily portfolio, 93% of the loans contain mark-to-market provisions.

These provisions provide a meaningful incentive for borrowers to pursue timely resolutions, rather than prolonging their hold periods in hope of realizing some speculative equity upside. This structural protection has been a key factor in supporting the heightened payoff rates to date. Despite a challenging market backdrop, our portfolio growth and diversification strategy have delivered strong book value and earnings performance year-to-date. I will now pass it over to Kristine to discuss our financials.

Thank you, Nick, and good morning, everyone. Jason and Nick have already discussed the strategic progress we made during the quarter, so I'll focus on key drivers behind second quarter financial results. For the second quarter, we reported GAAP net income attributable to common stockholders of $43.4 million, or $0.48 per share, and earnings available for distribution of $0.30 per share.

The Board increased the quarterly dividend to $0.27 per share, which remains well covered by EAD. After accounting for the dividend, we generated a 4.5% economic return on GAAP book value and 4.8% on adjusted book value. GAAP book value increased to $10.16 per share, while adjusted book value increased to $11.05 per share, extending our track record of consistent book value growth despite continued market volatility.

Interest income increased to $50.2 million during the quarter, while adjusted net interest income increased to $50.3 million, reflecting continued portfolio expansion across agency investments and BPL rental loans. Net interest spread increased 148 basis points, primarily due to lower financing costs, more than offsetting the impact of lower asset yields associated with our continued shift toward agency investments and BPL rental loans.

We continue to believe this portfolio mix provides a more stable and durable earnings profile over the long term. Derivative activity contributed positively to quarterly results, generating $48.8 million of gains during the quarter. Realized gains of $33.7 million reflected the settlement of derivative positions during the quarter, including a portion related to the transition from Treasury futures back to interest rate swaps.

We also recognized $15.1 million of net unrealized gains as higher interest rates increased the value of our interest rate swaps. These gains more than offset the $8.5 million of net unrealized losses recorded on portions of our investment portfolio as higher interest rates reduced the value of agency RMBS and certain residential loans. While higher interest rates created temporary pressure on asset valuations at the end of the quarter, our diversified portfolio and hedging strategy performed as intended, allowing us to continue growing recurring earnings, increasing book value, and delivering another quarter of strong financial performance.

Constructive continued to perform well during the quarter. Mortgage banking income increased to $16.2 million, benefiting from stronger gains on loan sales and higher origination fee income. After direct loan origination costs of $4.8 million and direct G&A expenses of $9.8 million, Constructive generated approximately $2 million profit for the quarter on a standalone basis. We are pleased with Constructive's year-to-date performance despite a volatile market environment.

Annualized ROE was approximately 12% during the first half of the year. And as Nick discussed, the initiatives currently underway are expected to improve funding costs and reduce operating expenses. As those efficiencies are implemented, we believe Constructive is well positioned to achieve our original underwriting target of 15% annual ROE. Total consolidated G&A was $25.6 million, which is within our estimated G&A ratio of approximately 7% to 7.5% in 2026.

From a financing perspective, we continue to strengthen both our funding profile and liquidity position. During the quarter, we completed two BPL rental securitizations totaling approximately $521 million at a weighted average effective cost of 5.48%, redeemed an existing residential loan securitization, and increased warehouse capacity by $250 million to $3.7 billion. These actions further diversify our funding sources while supporting continued portfolio growth.

We ended the quarter with approximately $182 million of available cash and approximately $400 million of total liquidity capacity, including financing available on unencumbered assets and under-levered assets. Company recourse leverage was 5.5x, while portfolio recourse leverage was 5.2x, which continues to be primarily concentrated on agency financing. We believe our liquidity position and funding flexibility leave us well positioned to continue growing the investment portfolio while maintaining a disciplined approach to leverage.

On the capital markets front, during the quarter, we renewed our ATM equity program, increasing the maximum offered amount from $100 million to $250 million. The larger size reflects the continued growth and scale of NYMT, and it's intended to preserve long-term financial flexibility rather than signal any change in our capital allocation philosophy. Importantly, although our previous ATM program remained available, we did not issue any shares under that program.

We continue to view common equity as an important source of long-term capital and remain committed to issuing shares only when doing so is accretive to existing stockholders and supports attractive long-term returns. Overall, the second quarter's growth in recurring earnings, book value, and investment portfolio demonstrated continued execution of our strategy. We believe those results position NYMT well as we enter the second half of 2026. That concludes our prepared remarks. Operator, please open the line for questions.

Thank you. [Operator Instructions] Our first question comes from the line of Bose George of KBW. Your line is now open.

Hi guys, good morning. This is Frankie Labetti on for Bose. Another strong quarter. Can you just talk about the current trend you're seeing quarter-to-date, given the move in rates and how you're seeing competition evolve in that channel?

Sure. We see the pipelines in Constructive as being strong so far, and furthermore that the coupons that are in the pipeline are higher than the coupons that we had at quarter end. So we do see a strong level of very desirable loans that we'll like to take on board. In terms of overall volume, there's no real guidance in terms of whether it's going to be higher or lower, still relatively early in the quarter in terms of what we're seeing, but we do see a pretty consistent level of the pipeline.

I mentioned in my remarks about the cost savings that we could potentially have. So that is something that the team is currently implementing across its loan origination process. And we expect that to have a positive benefit to earnings on a go-forward basis. And then on the demand side, the institutional demand has been actually surprisingly strong during these periods of volatility.

What we have seen is that the securitization markets have been pretty consistent in terms of execution, in terms of price discovery, and that has also allowed for whole loan buyers to have a benchmark in terms of where loans should trade, and over time that has given them more confidence to be aggressive in terms of bidding loans despite the market volatility. So all in all, I would say that the markets are very conducive to doing business, and rates are higher, which means coupons are higher. So hopefully that means from an execution perspective that bodes for higher yields on the strategy on a go-forward basis.

Great, thank you. And then you mentioned in the prepared remarks, the opportunistic use of the ATM as you guys trade closer to book or above book. Can you just talk about where you see deployment of that incremental capital and what your targeted returns are there?

Yes, so across our platform, looking at the residential landscape, we have the flexibility going between different pockets, large areas in the market, agencies and credit. And for a return on capital, we're looking for 15%+ type of equity returns on that capital. You know, in each quarter, there's different variables that we're assessing and different opportunities that we're seeing. So, it doesn't have to be consistent quarter-by-quarter on where we're deploying that capital.

It's really what the market is providing us, and we're going to look to deploy it prudently in those areas. So, the areas that we're seeing opportunities today, we're definitely seeing it with what Nick just went through on the credit side. We're seeing expanded ROEs there. Agencies is range-bound. Its spreads were tight earlier in the quarter and moved out slightly to date.

You know, seeing on the balance some better opportunities on the credit side from the ROE perspective, what we're seeing in agencies there. You know, agencies is widening out, so it's becoming more attractive. But on the balance, credit seems to be a higher returning opportunity, better risk-adjusted returns at the moment.

Great. Thank you. And if I could, could we get an updated book value, quarter-to-date?

Sure. We estimate that quarter-to-date adjusted book value was down approximately 2.3% as of close of business on July 28.

Our next question comes from the line of Matthew Erdner of JonesTrading. Your line is now open.

Hey, good morning, guys. I'd like to kind of touch on the multifamily book. It seems like the pace there slowed a little bit, but you guys mentioned kind of the incentives there for these guys to not kind of keep extending. I'm just trying to get a thought of how you guys are thinking about the timing for the resolutions here, and then where that capital is going to be deployed, whether it's opportunistically just kind of at the time of when you get the capital back or if there's a specific lever you guys want to pull.

Yes, thanks for the question. So in the multifamily side, $192 million of assets at the quarter end, we're seeing consistent payoff rates there. And more importantly, we're seeing consistent conversations about future payoff rates that's building a pipeline that will continue the historical CPRs that we're seeing. That said, last quarter we had one payoff in the quarter, which was a conversation we've had over months before, so the pipeline builds with these conversations.

There's really no extensions that, as you referred to in your question, that is part of the issue or dynamic here. There are payoffs with maturities of loans that go beyond the current period. So what we're really focusing on is duration management, more so than having to deal with an extension on a restructuring or anything similar. We have one loan in a portfolio of 19 that's been restructured in the past, 0 that are delinquent.

So the focus really is having a conversation of when we believe that the time and opportunity for that refinance is appropriate. And as Nick mentioned, 93% of our portfolio, we have that control to bring the asset to market if we feel like we do not want to continue being a part of the loan arrangement. So that's a powerful feature. It causes duration to be shortened, and we would expect to continue using that across our portfolio to continue the prepayment trends that we're seeing.

On the portfolio rotation side, again, this has been part of the story for us. These assets are unlevered on our balance sheet. So that capital that comes back is redeployed into the myriad of opportunities that we're seeing that I just discussed alongside of other assets that we're rotating into the space. We do expect that the ROEs would be expanded on the capital that we have in the multifamily book to other asset classes that we see in the market.

So we do expect an earnings pickup from that rotation. One quick follow-on thought there. There's not really, we don't really earmark certain proceeds that are coming on a particular date to a particular strategy that is part of our core strategies. It's really dependent on the timing, what the market provides us at that point in time. And as you can imagine, sometimes prepayments come in a little bit higher, come in a little bit lower, but as we have done over the past few quarters, we have deployed it in the best opportunity set that we see at any given point in time.

Got it. That's helpful. I really appreciate the color there. And then switching gears a little bit to the BPL securitizations, it looks like the cost is starting to go up, or at least effective cost. I guess what's pressuring that, or is it just kind of the higher move in rates that we've seen over the past couple of weeks?

Yes, it's the higher move in rates that is the primary driver of that. We have seen AAA spreads as tight as 105 earlier this year, but that has widened out a little bit as well. It hasn't been -- it's tighter than some of the widest points that we've seen, where we've seen 140, 145. Now AAA spreads are around 130. I would say our securitization, as I mentioned before, we actually priced tighter than the market on the AAA side. We priced at 125 when deals around us were pricing at 130 on AAA. So the vast majority of the move has been on the rate side.

And as I mentioned earlier, one of the things that gives us a lot of comfort is the fact that we are on pace for a record year of non-agency residential securitizations, despite a fair amount of volatility that we have seen and a fair amount of uncertainty in terms of the rate policy path that we have seen thus far this year.

Got it. Awesome. That's helpful. And then congrats again. Thanks, guys.

Our next question comes from the line of Douglas Harter of BTIG. Your line is now open.

Good morning. On the relative attractiveness of the residential credit today, is that more with incremental capital that you would be moving there or would you think about rotating out of some of the agency position as those opportunities presented themselves?

I would say it's more on the incremental capital side. I mentioned earlier that we do expect to reinvest payoffs on the agency side back into agencies. We expect that 56% capital allocation to remain relatively stable. So it's really the non-core, the capital that comes from the resolution of our non-core strategies will likely be rotated more into residential credit.

I appreciate that. And then just as you think about, you know, kind of continuing to grow the portfolio, you know, outside of kind of the capital rotation from the non-core, how do you think about leverage kind of on the core part of the portfolio? Is there room to move that higher or does leverage kind of increase as you resolve the unlevered multifamily?

Yes, so on the leverage side, at quarter end at 5.5x, we see that as a very comfortable area for us to be operating. We see opportunity to slightly increase that over the year, particularly as these non-core assets that are unlevered roll off into levered strategies, residential credit or even on the agency side. But, you know, that's just the nature of where the assets are coming from more so than seeking higher leverage for, you know, return sake or increasing our portfolio. So that is the primary reason why we're seeing an increase in leverage in our book slightly from last quarter. It's just that rotation continuing to happen.

Makes sense. Thank you.

At this time, I'd like to ask if there are any additional questions. Okay, thank you. I'm showing no further questions in the queue, so I would like to turn it back to Jason Serrano for closing remarks.

Yes, thank you, everybody, for joining us this morning. We look forward to sharing our Q3 update in October. Have a great day.

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

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Adamas Trust First Quarter 2026 Results Conference Call. [Operator Instructions] This conference is being recorded on Thursday, April 30, 2026. I would now like to turn the call over to Kristen Mussallem, Investor Relations. Please go ahead.

Good morning, and welcome to the First Quarter 2026 Earnings Call for Adamas 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 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.

Good morning. Thank you for joining us today to discuss our first quarter 2026 results.

With me is our executive leadership team, President, Nick Mah; and CFO, Kristine Nario. We entered 2026 with strong momentum on 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 with 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 widening 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 GAAP earnings per share of $0.41 and EAD of $0.29 per share, representing a 26% increase from prior quarter and well in excess of our $0.23 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 EAD 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-over-quarter with adjusted book value up 1.6% -- despite wider spreads 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 32% discount to adjusted book value and notably, a 15% discount to the value of our equity capital invested in agencies alone. We believe this price disconnect sales to reflect the strength of our earnings growth over the past 5 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 Jose mentioned, we are focused on closing the valuation gap of Adamas' shares with consistent execution and disciplined capital allocation. We believe Adamas 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 strength 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 Constructive's 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 multiyear tights of 94 basis points in late January, driven by the administration's mandate for the GSEs to ramp up MBS 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 7.8x, slightly above the prior quarter's 7.7x. Within our Agency [ capital ] 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 pay-ups. As Jason mentioned, our expectation is that volatility will eventually moderate, while we aim to opportunistically increase our capital deployment during episodic bouts of price dislocation.

At quarter end, Agency MBS comprised 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 tenure 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 performed 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 1x represent less than 2% of the portfolio as to 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 BPL rental deal of the year priced in January at around 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 basis points 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 5 BPL to 6 BPL rental securitizations this year, supported primarily by collateral originated by constructive.

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 Adamas' influence of a more selective origination posture to better align with our investment program rather than any pullback in capacity.

Since onboarding Constructive, we are focused on further aligning production with Adamas' underwriting standards, building on an existing foundation of strong credit quality while maximizing secondary market liquidity. In the quarter, Adamas purchased approximately 2/3 of Constructor's overall loan production. We continue to balance the development of Constructor's third-party distribution channels alongside Adamas' investment portfolio objectives.

Constructive'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 Adamas' trading team to surmise real-time visibility into securitization execution and secondary pricing enables dynamic adjustment of forward pipeline coupons as the market shift. This responsiveness proved particularly valuable amid the rate volatility experienced during the quarter.

As we are nearing the end of Constructive's integration into Adamas, 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 Adamas, 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 Kristine 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 GAAP 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 a lower yield than 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 direct 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 Adamas G&A were $24.5 million for the quarter, down slightly from $25.1 million in the last quarter. We estimate our quarterly G&A ratio to be approximately 7% to 7.5% in 2026, depending on Constructive's origination volumes.

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 5.2x and portfolio recourse leverage was 4.9x, 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 Constructive's 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.

[Operator Instructions] Our first question comes from the line of Marissa Lobo of UBS.

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 near term? Or will you continue accumulating retained earnings?

This is Jason. Look, 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 EAD, which is going to be the discussions that we have with the Board on the dividend discussion. So that's 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.

Yes. We had a strong quarter across the board. EAD came in at $0.29, 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 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 recognized gain on sale on a property within our cross-collateralized mezzanine lending, of which $13.8 million is attributable to Adamas. And it was a quarter where both recurring income or EAD and nonrecurring items worked in our favor.

Our next question comes from the line of Bose George of KBW.

Just a follow-up on the book value question. What's -- any changes to the book value quarter-to-date?

We estimate adjusted book value being up between 2% to 2.5% quarter-to-date.

Okay. Great. 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... The capital and the assets are very similar. We have -- these assets are unlevered on our balance sheet. One of the back pages of our supplemental will show you those numbers. So that's a -- yes, it's generally dollar for dollar.

Okay. And have you given sort of the time line in terms of the potential runoff of that portfolio?

Yes. So we've mentioned this on previous calls where it's a very seasoned portfolio. We control rights within many of the assets to -- in the mezzanine loan portfolio to accelerate maturity. So in utilizing those rights, given the seasoning and the ability for the sponsors to pay off the loans to refinance or sale of the property, we can help shorten our duration on these assets, which we've been effectively doing over the course of the last year, 1.5 years.

Nick mentioned that the prepayment rate was accelerated in the quarter, and we do expect to continue seeing that through the course of the year.

Our next question comes from the line of Jason Weaver of JonesTrading.

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 Constructive. We are 13% return on a stand-alone 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 1Q deal priced at about 490. 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?

Yes, 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 basis points. I mentioned in my prepared remarks, it went out to as much as 140 basis points, 145 basis points. We priced at the 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 the tighter end of the range.

Our next question comes from the line of Doug Harter of BTIG.

You mentioned looking to grow the volume at Constructive. Can you talk -- does that need more capital? Or can you be efficient -- more efficient in turning over the existing capital for Constructive?

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 Constructive 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 Adamas 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 their 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 Adamas is an exceptionally important thing, and we hope to capitalize that more in the future.

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

Yes. So it does fluctuate over time. Last quarter, we purchased about 2/3 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 Constructive has with the market, and those relationships have been important in the past, and we believe will be important in the future, and it's -- we're going to make sure that there is some carve-out of volume that is available to them.

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.

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%, 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 introduce 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 reoccurring 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 Constructor'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 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 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 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 redeem 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.

[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.

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" Keefe, Bruyette, & Woods, Inc., Research Division

" JonesTrading Institutional Services, LLC, Research Division

[":p id="A00"name="Unknown Analyst" type="A" />"

Good morning, ladies and gentlemen, and thank you for standing by.

Welcome to the Adamas Trust Third Quarter 2025 Results Conference Call. [Operator Instructions].

This conference is being recorded on Thursday, October 30, 2025.

I would now like to turn the call over to Kristi Mussallem, Investor Relations. Please go ahead.

Good morning, and welcome to the Third Quarter 2025 Earnings Call for Adamas Trust.

A press release and supplemental financial presentation with Adamas Trust's Third 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.

Good morning. Joining me today to describe our third quarter results are Nick Mah, President; and Kristine Nario, CFO.

Christine will provide commentary on quarterly results, and Nick will follow with an update on the progress of our business plan.

Before we begin, I want to thank you for being part of our first earnings call as Adamas Trust. our company rebranding reflects a broader strategic vision, moving beyond any geographic affiliation. The name Adamas, meaning firm, unbreakable and lasting, symbolizes a vision of strength and durability that guides our company's future. We fully embrace this theme as the third quarter marked a strategically significant period for Adamas. EDA rose to $0.24 per share for the quarter compared with $0.22 in Q2, marking our sixth consecutive quarterly increase.

This consistent earnings growth supported a meaningful dividend increase to $0.23 per share, which highlights the strength of our capital rotation strategy into a period where the Fed restarted its easing cycle in September with a 25 basis points cut, its first rate reduction in 2025. As treasury yields declined in the quarter across the curve with a steepening bias as inflation moderated, -- we took a more aggressive path to increase exposure to the agency sector. In fact, the third quarter included the highest level of quarterly net investment activity in the company's history with an increase of $1.8 billion or 20%. The strong momentum led by disciplined and deliberate rotation of our capital from multifamily exposure into highly liquid Agency RMBS and other core residential credit strategies positioned our balance sheet for greater earnings durability and long-term shareholder value.

We ended the quarter with Agency RMBS representing 57% of total capital, nearly tripling our capital allocation from a year earlier. This rotation was designed to enhance liquidity and drive higher earnings for distribution, attractive market spreads. We are pleased with the high-quality portfolio we have aggregated over the past 2 years.

As announced on our previous earnings call, we also strengthened our position within the housing investment ecosystem in the third quarter by acquiring the remaining 50% interest in Constructive loans, a leading business purpose loan platform. With housing affordability near historical lows and supply constraints persisting, we expect the national homeownership rate to remain pressured, gradually reverting from the mid-60s percent range today towards the level last seen 3 decades ago. We view this dynamic as a long-term opportunity, creating a sustained tailwind for business purpose lending.

Adamas is committed to realizing the constructive full potential and translating that growth into lasting value for our stockholders. We are encouraged by the strong results of the strategic pivot we made a couple of years ago to strengthen earnings stability, evident in the continued expansion of our Agency RMBS portfolio and the compelling growth trajectory of Constructive's origination business. We continue to believe Adamas equity represents a compelling value opportunity shares trade a meaningful discount of 30% of adjusted book value. And considering the adjusted book value of just Adamas' Agency RMBS position alone, our shares are still discounted by 17% to this holding. We believe this clearly highlights the depth and durability of value embedded within our platform.

After a historically active quarter for Adamas, the momentum generated to further advance EAD in the fourth quarter is obtainable given a full quarter of interest income that we can generate. We look forward to further demonstrating Adamas' value with continued improvement to our recurring earnings.

At this time, I'll pass the call over to Christine to provide our third quarter financial highlights.

Thank you, Jason, and good morning, everyone. I'll cover the key factors behind our third quarter financial results.

Overall, the third quarter marked another period of strong earnings growth and balance sheet expansion. As Jason noted, we increased our investment portfolio to $10.4 billion from $8.6 billion last quarter. This growth, along with continued rotation into interest-earning assets drove the 9% sequential increase in EAD per share.

Adjusted net interest income per share rose 7% quarter-over-quarter and 47% year-over-year to $0.47, reflecting our continued investment in agency securities, partially offset by higher corporate debt interest expense from the senior unsecured notes issuance in July.

Our net interest spread remained stable at 150 basis points, reflecting the offsetting impact of lower financing costs and a decline in asset yields. We improved our average financing cost by 15 basis points benefiting from lower base rates and more favorable securitization financing following the redemption of higher cost securitizations. Meanwhile, our yield on average interest-earning assets declined by 15 basis points, reflecting our continued emphasis on lower-yielding agency securities and BPL rental loans relative to shorter duration BPL bridge loans.

During the quarter, we recorded $54.9 million in net unrealized gains, primarily driven by improved valuations in our Agency RMBS and residential loan portfolios. These gains were partially offset by $13 million of losses on derivative instruments, primarily interest rate swaps and $5.6 million of realized losses mainly related to conversions of residential loans into foreclosed properties that remain on our balance sheet as well as short payoffs on nonperforming BPL bridge loans. Importantly, the realized losses on the residential loans were fully offset by the reversal of previously recognized unrealized losses on the same assets, resulting in minimal total P&L impact.

As Jason discussed earlier, we completed the acquisition of the remaining 50% interest in Constructive, giving us full ownership of this leading business purpose loan originator. For the quarter, Constructive generated $14.1 million in mortgage banking income related to origination and sale activity and incurred $3.8 million in direct loan origination costs and $8 million in direct G&A expenses, resulting in a $2.3 million return.

On a consolidated basis, the Constructive segment reported a net loss of $3.8 million, reflecting the transitional integration costs and allocations that we expect to decline over time. As integration progresses and efficiencies are realized, we believe Constructive is positioned to become a meaningful driver of earnings growth.

G&A expenses increased during the quarter from $23.3 million from $11.8 million, primarily due to the consolidation of Constructive and higher incentive compensation accrual. Portfolio operating expenses declined, reflecting lower servicing fees on our BPL bridge portfolio as balances continue to decline. We also incurred $7.9 million of nonrecurring costs related to the issuance of senior unsecured notes and 2 residential loan securitizations, which were fully expensed during the quarter due to our fair value election.

GAAP and adjusted book value per share ended the quarter at $9.20 and $10.38, respectively, representing increases of 1% and 1.2% compared to June 30.

Our recourse leverage ratio increased to 5x and portfolio recourse leverage to 4.7x. -- up from 3.8x and 3.6x, respectively, primarily reflecting financing activity to support Agency RMBS acquisitions, the consolidation of Constructive and the issuance of senior unsecured notes. Portfolio recourse leverage on our credit and other investments increased to 0.9x from 0.5x, driven by lower equity allocation.

Overall, our strategic repositioning has strengthened our ability to generate consistent recurring income. With continued balance sheet growth and the integration of Constructive, we remain focused on delivering sustained earnings growth and stable returns for our stockholders.

With that, I'll turn it over to Nick for a market and strategy update.

Thanks, Christine. This quarter, we achieved a record level of investment activity for the firm, surpassing the previous high reached in the first quarter. In total, we acquired $2.3 billion of residential investments, primarily concentrated in Agency RMBS and whole loans.

Within our core strategies, we deployed $1.8 billion in Agency RMBS, $260 million in BPL Rental and $262 million in BPL Bridge.

During the quarter, we had meaningful inflows of capital from multiple sources, which we channeled towards funding our elevated investment volume. Key sources of this capital include $115 million baby bond issuance in July, 2 securitizations executed at competitive advance rates and asset resolutions across both our core and noncore portfolios.

Following the quarter's acquisitions, our overall investment portfolio has risen above $10 billion. Strong and sustained asset growth over the past few quarters have contributed to steadily increasing recurring earnings. This has culminated in a key milestone of raising our dividend. With a solid base of productive assets, our goal of continued portfolio expansion will power future earnings growth.

Interest rate volatility has declined steadily since April, serving as a major tailwind for agency spreads. This was especially pronounced in the third quarter as current coupon agency spreads tightened by 20 basis points to 126 basis points. While agency spreads to treasuries have normalized over the quarter, agency spreads to swaps have tightened but still remain compelling by historical standards. After a record quarter of agency purchases, our agency portfolio currently stands at $6.7 billion.

Despite the increased pace of investments, agency leverage has declined from 8.6x to 7.8x. In terms of portfolio construction, we have continued to target 5 and 5.5 coupon spec pools with lower pay-ups. Given the mix of current purchases, the average coupon of our agency portfolio declined slightly from 5.59% to 5.51% in the quarter. Going forward, we plan to target production coupons to maintain a modest carry and lower duration profile.

In the third quarter, we surpassed our 50% target capital allocation to agencies. Since the first quarter of 2023, we strategically built and scaled our Agency RMBS portfolio, capitalizing on attractive spread levels while achieving broad diversification from our credit assets. Today, with spreads tighter and the portfolio more balanced between agencies and credit, we intend to take a more measured approach to agency allocation in the future. Our expectation is that while agency allocation will continue to grow in the near term, it will come at a more deliberate pace.

Residential securitization markets were highly active in the third quarter with $57 billion worth of issuance. Strong investor appetite supported steady deal flow across the full spectrum of residential credit, tightening spreads and maintaining a well-functioning market throughout the quarter. Against this backdrop, Adamas successfully priced 2 securitizations. The first was a $370 million relevered securitization of reperforming and performing loans. And the second was a $275 million securitization of BPL rental loans. We achieved attractive pricing and structure for both deals.

During the quarter, AAA spreads in BPL rental and in broader non-QM securitizations tightened by 10 to 20 basis points to around 130 basis points, providing a favorable environment of continued deal issuance for the rest of the year. This securitization market supports our expanding whole loan activity and strengthens the strategic fit of constructive to our business.

BPL rental has grown to our largest concentration of residential credit exposure at $1.16 billion, reflecting a 24% quarter-over-quarter growth. This remains our core strategy with the greatest growth potential as Adamas sources the majority of its BPL rental loans from constructive.

In aggregate, 98% of our BPL rental loans have prepayment penalties to help mitigate the negative convexity of the portfolio. We also prioritize acquiring loans with strong DSCR ratios, targeting property-related cash flow coverage as a buffer against credit deterioration. Our credit selection criteria remains restrictive on BPL rental loans with DSCRs less than 1, with only 1% of our BPL rental loan portfolio falling into that category.

Overall, our BPL rental strategy continues to perform well with 60-plus days delinquencies hovering at 1.3%. We see the potential for this asset class to outperform across a range of economic outcomes.

The BPL bridge market remains highly competitive. Robust securitization markets have enabled new market entrants and repeat issuers to access debt capital through revolving bond structures. This increased capital availability, coupled with increasing investor demand has intensified competition for assets within the BPL bridge market. This has, in turn, applied pressure to both purchase volumes and available pass-through rates. Maintaining our credit selection standards, we have intentionally reduced acquisition volumes ahead of our revolving securitizations exiting their reinvestment periods in 2026.

In the quarter, the BPL bridge portfolio declined by 4% to $919 million. As the BPL bridge portfolio shrinks, we are actively working to reduce delinquent loan exposure while maintaining disciplined credit standards to exclude outlier risk profiles on our go-forward purchases. We expect that near-term BPL bridge allocations will continue to decline, and we will deploy recycled capital to Agency RMBS or BPL rental. We maintain flexibility to increase portfolio exposure if more favorable market conditions return.

Within our multifamily segment, as Christine noted, we successfully completed the exit of our joint venture portfolio during the quarter. The full wind down of the JV equity book allows our multifamily team to focus exclusively on advancing the resolution of our mezzanine lending portfolio.

Performance metrics remain strong with occupancy rates at 92% and only one asset in the portfolio that is nonperforming. The mezzanine portfolio generated a 32.4% payoff rate in the quarter, well above the historical average of 25.8%. We expect payoff activity to continue as the portfolio continues to season.

Finally, we are pleased to announce the successful integration of Constructive into Adamas in the third quarter. The constructive business has not missed a step.

Origination volumes remained strong through the transition, reaching $439 million in the third quarter, 9% higher than the prior quarter. Originations over the last 12 months were heavily weighted towards BPL rental loans, comprising 94% of total production with BPL Bridge accounting for the remaining share.

Given the strength of the securitization market, competition for loans are more pronounced. Our near-term objectives are to continue prioritizing origination quality by enhancing underwriting standards and streamlining origination processes while maintaining a diversified distribution network.

In the quarter, Adamas purchased less than half of Constructive's originations, demonstrating the continuation of Constructive's broad market access. We expect Constructive to play an increasingly important role in Adamas' profitability and strategic positioning in 2026 and beyond.

I will now turn the call back to the operator for Q&A.

[Operator Instructions] Our first question comes from Doug Harter with UBS.

[":p id="A00"name="Unknown Analyst" type="A" /> It's actually Melissa Lobo on for Doug today. I was hoping you could talk to us about how developments with the GSEs are impacting your thinking around capital allocation? And what are some of the regulatory factors that are impacting how you're positioned in the BPL space...

Yes. Thank you for the question. So I think overall, there's been a lot of talk about GSE reform, what that could mean for the sector as a whole. I think every component of the mortgage sector, particularly in the non-QM space, has -- would create a massive tailwind for opportunities. However, I think that we're more balanced on what we think that opportunity would look like for the company, given that there's a lot needs to happen for a full removal of the guarantee and what that would do to credit availability to the mortgage sector and borrowers across the United States. We know the administration's goal is to reduce increase the housing affordability and reduce rates. And I think that will go in the opposite direction with a guarantee that has been removed.

So I think overall, we're continuing to run our business without planning for that particular event to happen. However, we know if it does, there will be a tailwind, particularly in areas in the non-QM space. Constructive, we believe would be able to access many new channels in that situation. But again, that's not something that we see as being a primary opportunity for us at the moment.

Color on...

[":p id="A00"name="Unknown Analyst" type="A" /> And just if you could expand on the decision to buy the rest of the originate constructive and what that means for ongoing capital allocation. I think you mentioned a 50% target, right, to agency still. How does that -- how should we think about that going forward?

Yes. So the opportunity for us was we first initially took the first 50% was to really understand the business. It was a slow approach to full acquisition, but we wanted to look at how the market was developing, and this was multiple years ago on the opportunity. So the advancement of the full acquisition of the company was a result of seeing some long-term tailwinds that would help constructive growth, particularly in homeownership rates and affordability, et cetera.

The other side was to -- we really want to step in a position to control the outcomes of origination and product development. And so taking 100% of the business was a function of controlling some of the underwriting aspects as well as distribution. So in that end, we thought it would be necessary to take that. And also we saw a great opportunity in origination volume to increase, particularly with capitalizing the company through Adamas. So we think it's an excellent opportunity. We think there's lots of new development and products that could be offered through the company. We think we have an excellent management team, an experienced management team that's been looking at non-QM and BPL opportunities for over a decade. So we're excited to take the next step with Constructive.

[":p id="A00"name="Unknown Analyst" type="A" /> Great. And if you could just provide an update for us on how book value is faring quarter-to-date?

Sure. As of October 28, we see adjusted book value up somewhere between 2.5% to 3%.

Our next question comes from Bose George with KBW.

Actually, just one follow-up on the book value question. Is the increase coming from both sides this quarter, the agencies and credit or more on one versus the other?

It's coming from both sides. We have seen thus far as of October 28, that rates have come down generally. Spreads have -- on the agency side have come in. On the non-agency or whole loan side has come in, but not as much. But overall, positive trends on both sides.

Okay. Great. And then in terms of leverage, your leverage on the credit side remains low, but it went up to 0.9 from 0.5. What's an appropriate level of leverage for that piece? And then on the agency side, is the leverage kind of where the run rate there is kind of where it is this quarter?

Yes. So the way we think about leverage is balancing it with the opportunity that we have. And as we mentioned, accessing the securitization market to us is important. So the leverage will ebb and flow based on the accessibility and our ramp with respect to our DSCR channels. And so you would see it bounce around a little bit due to the timing of those securitizations. We think below 1x is actually quite low for just a credit REIT in general. And we've looked to utilize securitization markets as a primary source of financing for our credit book over the long term. And you should expect us to continue doing -- utilizing that path. And so in that end, it's a pretty efficient model for us to finance and generate ROE on our home loan position.

And what was the second part of your question?

On the agency side, the leverage should be expected to kind of remain roughly the same.

Yes. The leverage on the agency side, we're looking to keep that around 8x. And so this is a comfortable level for us.

The next question comes from Jason Weaver with Jones Trading.

Given Nick's comments that capital allocated to agencies is above target and will be more measured ahead, what are you thinking as possible avenues for deployment for the capital coming back from the mezz and bridge investments? And would share repurchase become a bigger part of the strategy given the discount?

Yes. So on the capital allocation side, we saw a tremendous opportunity in the quarter to advance our balance sheet with respect to the agency book. We were looking for certain events to happen for some spread tightening. We saw that there's still a death of supply in the Agency RMBS market against pretty robust demand in the market for the asset. So ROE still remained above 15%, which is accretive for many avenues of capital. And therefore, we took part of that story in the quarter with historic purchases for the company.

Going forward, with agency spreads now below -- clearly below about 120 basis points, the opportunity is more balanced between what we see in the credit side and agency side. Again, we're looking to maximize ROE based on availability of the opportunity. We're not wedded to a certain ratio of agency versus credit on our balance sheet. It's very much opportunistic. To the extent that we see spreads continue to tighten in on the agency side, we will look to allocate more on the whole loan side of the equation. In particular, we're excited about the advancement of constructive and seeing higher origination volumes there, and we think there's avenues to increase it from here. So that's going to be a focal point for us as well.

On the share repurchase side, in the last 2 quarters, we did access that and did look to take advantage of where our shares trade in the market at a discount. But I would say we think of it as an incremental investment strategy is like another avenue to allocate capital. We are very conscious about the equity shrinkage caused by the repurchase and not being able to produce long-term returns on that capital that's been used for repurchases. So we balance that with the opportunity. Again, last 2 quarters, first quarter and second quarter, we took advantage of that. In this quarter, third quarter, with our historic purchases in the market, we thought that the balance went to the asset portfolio. So it's something that's considered, but we do look at the long-term impact of taking our capital and removing it with the share repurchase versus the asset opportunity.

Got it -- and then just to clarify, the size of the -- I think you said 32% paydown on the mezz and you expect that to remain elevated going forward. Is it a more muted pace? Or are we still looking at $25 or so million coming back every quarter?

I think that the historical average is a good barometer. I think we may trend slightly higher as the seasoning of the portfolio starts to take hold and also the continued conversations that our team has with the various borrowers. But I think from a long term, I don't expect that the long-term average is going to be -- in the future, once everything is resolved, it's going to be too different. But for the next few quarters, it may be a little bit higher.

I'm showing no further questions at this time. I'd like to turn it back to Jason Serrano for closing remarks.

Yes. Thank you for joining us this morning. We look forward to discussing our fourth quarter results with you in February. Have a great day.

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