• Lower Rates Weighed on Q2 Earnings: Revenue declined 12% YoY (3% below our estimate), while EPS fell 14% YoY (2% below our estimate), reflecting lower lending rates, and a smaller mortgage portfolio. The annual regular dividend was maintained at $0.93/share.
  • Stable Rate Environment Should Support Growth: With both inflation and unemployment easing, we expect interest rates to remain broadly stable through 2026. A stable rate environment should support lower default risk and a gradual recovery in mortgage originations.
  • Portfolio Becoming More Defensive: Management continues to reduce exposure to development lending while increasing allocations to lower-risk segments, including completed single-family homes and income-producing commercial properties. The planned expansion into AB and B.C. should further improve geographic diversification, with Ontario currently accounting for over 90% of the portfolio.
  • Valuation Discount Appears Overdone: Despite a more supportive rate environment, MICs have underperformed Canadian banks this year (-2% vs. +46% YoY) due to lingering concerns over commercial real estate exposure, and slower loan growth. We expect this valuation gap to narrow as housing activity recovers, loan originations improve, and impaired mortgages continue to decline.
  • Dividend Yield Remains Attractive: Following the Q2 earnings miss, we have lowered our FY2026 forecasts, and now project a 2026 dividend of $0.96/share (previously $0.98/share), implying an 8.21% yield.

Price and Volume (1-year)

  YTD YOY
AI 1% 0%
TSX 14% 31%
XFN (Financial) 22% 46%
XRE (REIT) 8% 8%

* 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. All figures in C$ unless otherwise stated. 

Portfolio Update

Q2 loan advances ↓16% YoY, but relatively resilient given Q1 was the softest in over a decade
Repayments ↑104% YoY

 Net mortgages outstanding ↓4% QoQ to $834M vs our $875M estimate
However, management expects year-end net mortgages >$900M on a robust origination pipeline, a very encouraging signal

First mortgages ↑1.6 pp QoQ, implying lower portfolio risk
Lending rates eased, reflecting a higher share of first mortgages
Average mortgage size remained flat

Mortgages by Property Type

Source: Company Data / FRC

Increased exposure to revenue generating commercial properties, and already built single-family units, while scaling back on residential development projects, implying a lower risk profile

Mortgages by Region

Slightly reduced Ontario exposure, improving geographic diversification
Plans to further expand into AB and B.C. in coming quarters

Source: FRC / Company

Stage 3 (impaired) mortgages ↓35% QoQ to $62M, as expected, following management's Q1 guidance

*Red (green) indicates an increase (decrease) in risk level.

Source: FRC

Overall, we believe the portfolio’s risk has decreased, driven by lower impaired mortgages, higher first mortgages, and increased exposure to lower-risk property segments

Financials

Revenue ↓12% YoY (3% below est.), and EPS ↓14% YoY (2% below est.) on lower lending rates and mortgage receivables

*The calculations in the above table are approximate as we used the average of beginning and end of period mortgage s outstanding.

Annual regular dividend held steady at $0.93/share

* Our calculations are slightly different from the company’s calculations.

Source: Company / FRC

Debt-to-capital decreased slightly, driven by softer lending activity

FRC  Forecasts & Valuation

Following the Q2 miss, we are lowering our FY2026 revenue and EPS estimates

Source: FRC

Our estimate for the 2026 dividend varies between $0.91 and $0.99/share, as loan loss provisions and lending rates vary

Source: S&P Capital IQ / FRC

Sector multiples are down 3% since our May 2026 report

On average, MICs and banks are expected to report 5% revenue growth this year vs 6% in 2025 (Source: S&P Capital IQ)

Our fair value estimate decreased from $13.01 to $12.82/share, driven by a lower EPS forecast, and weaker sector multiples

We reiterate our BUY rating, and adjust our fair value estimate from $13.01 to $12.82/share, implying a potential return of 18%  (including dividends) in the next 12 months. While Q2 results were weaker than expected, we believe the market is overlooking the company's improving fundamentals, including a lower-risk portfolio, and management's expectation for stronger H2 loan originations.

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