- We believe the portfolio’s risk profile remained unchanged. Key metrics were stable, supported by a high proportion of first mortgages (96%), and a relatively low LTV of 61%.
- Due to sluggish sector activity, especially in development and construction, management remains focused on increasing exposure to lower-risk property types, such as single-family residential and income-producing commercial properties.
- Stage three (impaired) mortgages surged 23% QoQ to $56M (6% of mortgages); however, management noted that four of six impaired mortgages are expected to be fully repaid in Q4 and Q1.
- Since June 2024, the BoC has cut rates nine times (275 bps) to 2.25%, with the possibility of one more cut amid tepid GDP growth, soft consumer confidence, elevated trade tensions, and high unemployment. While mortgage delinquencies remain a concern, we believe easing rates should support a rebound in pre-sales, lower developer financing costs, and higher transaction volumes for real estate lenders next year.
- As noted in our prior reports, declining rate environments have historically boosted MIC and financial stocks. However, in the current falling-rate environment, MICs have lagged financials (flat YoY vs. +22% YoY) and are tracking REITs, given both their exposure to residential real estate, which, as mentioned above, is undergoing a slow phase with negative sentiment. With residential real estate poised for recovery in 2026, we expect MIC stocks to experience an upswing.
- With Q3 results largely meeting our expectations, we are not making any material changes to our forecasts. We project a dividend of $0.99/share this year, reflecting an 8.81% yield.
Price and Volume (1-year)
* Atrium Mortgage Investment Corporation has paid FRC a fee for research coverage and distribution of reports. See last page for other important disclosures, rating, and risk definitions.
Portfolio Update
Mortgages by Property Type
Source: Company Data / FRC
Mortgages by Region
Source: FRC / Company
*Red (green) indicates an increase (decrease) in risk level.
Source: FRC
Financials
*The calculations in the above table are approximate as we used the average of beginning and end of period mortgages outstanding.
- Our calculations are slightly different from the company’s calculations.
Source: Company / FRC
FRC Forecasts & Valuation
Source: FRC
Source: S&P Capital IQ / FRC
We are reiterating our BUY rating, and adjusting our fair value estimate from $12.98 to $13.00/share, implying a potential return of 26% (including dividends) in the next 12 months. Q3 results were largely in line with our expectations, with revenue matching, and EPS slightly exceeding forecasts. The portfolio’s risk profile remained stable, while impaired mortgages are expected to be largely resolved in upcoming quarters. With residential real estate poised for recovery in 2026, we expect MIC stocks to experience an upswing.
Risks
We believe the company is exposed to the following risks:
- Diversification – over 90% of Atrium's mortgages are secured by properties in ON
- Credit
- A downturn in the real estate sector may impact the company’s deal flow
- Timely deployment of capital is critical
- Investments in mortgages are typically affected by macroeconomic conditions, and local real estate markets
- Highly competitive sector
- Like most MICs, the company uses leverage to fund mortgages
- Default rates can rise during recession
- Geopolitical risks and the potential for a tariff-induced recession
Maintaining our risk rating of 3 (Average)
APPENDIX
