ADAMAS TRUST 2026 THIRD QUARTER CONFERENCE CALL - ADAMAS TRUST INC

Explicit Guidance:

• No formal quantitative guidance provided for FY2026 or FY2027 revenue, earnings per share, or net interest income; management emphasizes that future earnings contribution will depend on capital allocation decisions and risk limits rather than fixed targets.
• Dividend: No new dividend amount guidance; current quarterly dividend is $0.30/share (13.5% yield on September 30 adjusted book value), representing the seventh consecutive quarter of coverage by Earnings Available for Distribution (EAD).
• Capital Deployment: No specific quantitative targets for AUM growth; management expects the portfolio to grow initially through the agency channel as TBA shorts are reduced, becoming "roughly balanced" between agency and credit exposure by Q4.
• Leverage: No explicit leverage targets; management expects to return economic and agency recourse leverage to prior quarters' levels (approx. 8.3x economic and 5.9x agency) as TBA shorts are normalized and the portfolio recovers.

Business-Segment Outlook:

• Agency RMBS: Outlook is "positive" following Q3 repricing; management believes extension risk is largely reflected in pricing, improving cash flow stability. Expectations include spread stabilization and potential capital deployment back into agency long positions at attractive yields.
• Credit (BPL Rental): Continues to be a growth engine; management anticipates higher originations and market share capture in Q4 and beyond due to the Constructive origination model's efficiency in a rate-averse environment.
• Constructive Mortgage Banking: Sees potential to capture additional market share in BPL Rental; origination volumes may be challenged in Q4 by broader market volumes but remain resilient due to proprietary investor purchase arrangements.
• Non-Core Strategies: Orderly runoff continues in BPL Bridge (down 46% YTD) and multifamily mezzanine; capital released from these runoffs will be redeployed into higher-return core strategies (agencies and BPL rental).
• Portfolio Composition: Expectation to shift duration gap from 0.3 years (Q3 end) to approximately 0.6 years; TBA short position reduced from $2.9B to $680M (as of Oct 26), signaling a move toward increased net long risk exposure.

Market and Competitive Outlook:

• Supply/Demand Dynamics: Lower mortgage applications (down ~21% YTD through Q3) expected to result in lower new issuance, creating a better supply-demand balance for agency securities.
• Pricing/Returns: Investment opportunity set deemed "meaningfully improved" with core strategies offering mid-to-high teens returns; spreads expected to stabilize as forced selling from leveraged hedge funds dissipates.
• Competitive Position: High confidence in market share gains within BPL Rental; investor demand for securitization programs remains constructive despite wider spreads (e.g., Oct BPL rental deal priced 67bps wider than Q3 due to baseline rates).
• Non-Agency Securitization: Market remains open; year-to-date non-agency issuance exceeded $210B by late October, with structures shifting in investor favor.

Macro / Industry Outlook:

• Interest Rates: 10-year Treasury expected to trade in a new range near 5.0% (down from >5.29% highs); rates anticipated to remain elevated ("higher mortgage rates") keeping refinancing activity low (borrowers "out of the money").
• Inflation/Geopolitics: Elevated energy prices from the prolonged Iran conflict remain a risk to inflation and rates; market conditions remain sensitive to these unresolved geopolitical factors.
• Monetary Policy: Fed path includes potential further hikes into 2027; management notes that midterms in the horizon may introduce political volatility.
• Economic Growth: Strong growth and employment expected to persist, but higher rates create a "benign" housing market with low transaction volumes.

Strategic Initiatives:

• Liquidity Management: Maintaining high excess liquidity capacity ($447M as of Q3 end) to capitalize on market dislocations; liquidity expected to support future investment growth.
• Risk Management: Continued use of dynamic hedging via Treasury futures, interest rate swaps, and macro/credit hedges; TBA shorts remain a flexible tool to be adjusted based on volatility.
• Capital Raising: ATM program remains active; potential for future equity issuances if priced at a premium to book value (accretive to GAP/Adjusted Book Value).
• Securitization: 98% of BPL Rental portfolio expected to be moved into longer-term non-recourse financing post-quarter end, reducing mark-to-market margin call risks.
• Operational Efficiency: Focus on financing and operating efficiencies at the Constructive platform as it scales, targeting improved profitability.

Risks and Headwinds to Outlook:

• Interest Rate Volatility: Sharp moves in rates could re-introduce negative convexity and duration risk; unresolved geopolitical factors (Iran conflict) could reignite inflation and rate sell-offs.
• Market Liquidity: Forced selling by leveraged players (specifically hedge funds) in agency MBS could temporarily distort spreads and pricing.
• Credit Quality: While current performance is solid, management notes the risk of isolated legacy borrower issues (e.g., the $2.6M reserve for pre-acquisition Constructive loans); no broader deterioration expected in new origination.
• Origination Volume: Broader BPL Rental market volumes may be challenged in Q4 due to high rates, potentially slowing capital deployment in the credit channel.
• Valuation Recovery: The outlook relies on "market normalization"; if spreads widen further or rates rise significantly, unrealized losses could persist or deepen before recapture.

Management Tone on the Future:

• Confidence Level: High confidence in the long-term investment opportunity set and credit strategy; tone shifts from defensive (Q3) to opportunistic (Q4) following the market repricing.
• Strategic Confidence: Management views the Q3 book value decline as a "valuation event, not a result of distress" and expresses confidence in the portfolio's ability to recover.
• Discipline: Emphasis on "disciplined and economically rational" capital allocation; no reliance on aggressive leverage assumptions to drive returns.
• Forward-Looking Sentiment: Optimistic about the "retracement" of losses and the "positive" outlook for agency RMBS, citing attractive entry levels and improved stability.

Miscellaneous:

• Book Value Recovery: Adjusted book value already up ~4% in the fourth quarter (as of Oct 26) compared to Q3 lows.
• EAD Coverage: EAD of $0.30/share covers the dividend for the seventh consecutive quarter.
• Hedge Book Activity: TBA short position reduced by ~76% post-quarter end; duration gap widened slightly from 0.3 to 0.6 years; hedge portfolio expected to remain dynamic based on market signals.