Marissa Lobel

Marissa Lobel (UBS) inquired about AdamasTrust's 2026 capital deployment strategy, specifically comparing the relative attractiveness of Agency MBS versus residential loans given recent spread tightening. She also asked about the remaining integration costs for Constructive and the expected 2026 run rate for operating expenses, and sought clarification on the gain on sale changes related to lower commitment valuations and increased loan repurchase reserves.

Answer

Nicholas Mah, President, explained that non-agency credit (BPL rental) offers higher levered returns (mid-to-high teens) compared to Agency MBS (mid-teens), with the agency portfolio expected to grow to 60-70% of equity capital. Kristine Nario, CFO, noted that some Constructive integration costs will persist into Q1, with a G&A run rate of 7-7.5% of stockholders' equity, 44% attributable to Constructive, and 40% of Constructive's G&A being variable. She clarified that gain on sale changes were due to a smaller pipeline and lower pull-through rates, and that increased repurchase reserves were a prudent, transitional measure tied to the Constructive acquisition, not an indicator of higher future loss trends, as further elaborated by Nicholas Mah.

Marissa Lobel asked about Adamas Trust's capital deployment strategy for 2026, specifically comparing the relative attractiveness and allocation pace between Agency MBS and residential loans given recent spread tightening. She also inquired about the remaining integration costs for the Constructive acquisition and the projected 2026 run rate for Constructive's operating expenses. Finally, Lobel sought clarification on the gain on sale changes, including lower commitment valuations and increased loan repurchase reserves, and their implications for on-balance sheet loan valuations.

Answer

Nicholas Mah, President, explained that BPL rental loans offer higher levered returns (mid-to-high teens) compared to Agency MBS (mid-teens). He anticipates Agency MBS allocation to grow to 60-70% of equity capital, while non-agency percentages remain static due to BPL Bridge paydowns and redeployment from multifamily. Kristine Nario, CFO, stated that some integration costs for Constructive are expected in Q1, with a consolidated G&A run rate of 7-7.5% of stockholders' equity, 44% attributable to Constructive, with 40% of Constructive's G&A being variable. Regarding gain on sale, Kristine Nario attributed changes to a smaller pipeline and lower pull-through rates, while Nicholas Mah clarified that increased repurchase reserves were a prudent, coordinated action tied to the Constructive purchase transaction, not indicative of higher loss trends or credit concerns for 2026.