Adamas Trust: Pivoting from Agency to Credit as Spreads Compress
Mortgage REIT's record business-purpose loan purchases and new funding efficiencies signal a strategic shift, but a downdraft in book value this quarter tempers the story.
ADAM · Earnings Call · 2026-07-30
A Strong Quarter, a Clear Pivot
Adamas Trust closed out a strong first half of 2026, reporting its ninth EAD increase in ten quarters and a fourth consecutive book value gain. But the more telling change is the portfolio's direction: with agency spreads tightening from 125 to 107 basis points during the quarter, the company is leaning harder into residential credit. As President Nick Mah put it, “declining rate volatility and a broad-based demand for MBS supported a meaningful tightening in agency spreads... 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.” — Nicholas Mah, President · 2026-07-30 That shift is already showing up in the numbers: a record $632 million of business purpose loans were added in the quarter, primarily through Constructive.The pivot is not a departure from the company's DNA. Agency RMBS remains the cornerstone at 61% of the portfolio, and the company continues to actively manage its spec pools and TBA positions. But the growth engine is clearly credit. The company's own keyword trajectory shows residential credit as a top theme in the most recent quarter, and the emphasis on prepayment protection in its BPL loans is a differentiator.
Constructive: The Growth Engine
The integration of Constructive is paying off. The platform originated $428 million of business purpose loans in the quarter, and Adamas purchased 71% of that production. The 100% prepayment protection on last-12-month production is a structural advantage that the market is beginning to value, as evidenced by tighter pricing on the company's recent securitizations. Nick highlighted the quality: “the constructive segment in our BPL rental book has less than 1% of its loans in 60-plus day delinquency status.” — Nicholas Mah, President · 2026-07-30More importantly, the company is attacking costs. A new institutional financing counterparty is expected to deliver ~60 basis points of savings on funding lines, and $3 million of annual cost savings have been identified across the origination process. These initiatives are designed to help Constructive reach its 15% ROE target, up from the ~12% run-rate in the first half. As Jason Serrano said in the Q&A, “we're looking for 15% plus type of equity returns on that capital.” — Jason Serrano, Head of Investor Relations or similar senior IR role · 2026-07-30
Book Value Pressure and the Rat Race
The quarter wasn't without a blemish. While the company grew book value 1.8% on a GAAP basis, the market's move higher in rates in July has taken a toll. Nick revealed, “We estimate that quarter-to-date adjusted book value was down approximately 2.3% as of close of business on July 28.” — Nicholas Mah, President · 2026-07-30 This follows a pattern where the company has seen quarter-to-date volatility flip between positive and negative. But the company's hedging strategy is designed to mitigate this, and the long-term fundamental trend is upward. Looking at Net Interest Income, the core earnings power is clearly strengthening.The company is also showing discipline on leverage and capital. Despite a 30% increase in the ATM program to $250 million, no shares were issued. That discipline is part of the reason the stock has outperformed the mortgage REIT index by ~46% over the past year. As Jason noted, “we believe our shares still do not reflect the intrinsic value of the company.” — Jason Serrano, Head of Investor Relations or similar senior IR role · 2026-07-30
A New Chapter, or Same Page?
The pivot to credit is a meaningful strategic evolution, but it's not a radical departure. The company has long discussed the value of its origination platform and the benefits of a diversified portfolio. What's new is the explicit statement that capital allocation will tilt toward residential credit in the near term as agency spreads tighten. This is a natural read of the market, but it also reflects growing confidence in Constructive's ability to scale.The company's prior guidance had suggested agency allocation growing to the low 60s. Now, with agency spreads at 107bp, it's pivoting the other way. In February, Nick had said, “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.” — Nicholas Mah, President · 2026-02-19 Those conditions have changed, and Adamas is adapting.
The near-term book value decline is a reminder that the company is not immune to rate moves. But the long-term trend is one of earnings growth and portfolio expansion. The market is starting to recognize that. As the company continues to execute on its credit-first strategy and Constructive hits its efficiency targets, the 15% ROE target could be within reach.
The story of Adamas Trust in 2026 is about a company that saw the window in agency spreads close and is now aggressively repositioning for the next phase. With record credit origination, cost savings in motion, and a valuation gap still open, the second half of the year will be telling.Across our platform... on the balance, credit seems to be a higher returning opportunity, better risk-adjusted returns at the moment.