Welcome to the Atrium Mortgage Investment Corporation's Q3 Results Conference Call. At this time, all lines are in listen-only mode. Later in the call, we will conduct a question-and-answer session. At that time, if you have a question, you will be asked for a star two on your touchtone keypad. A reminder that this conference is being recorded Friday, November 6th, 2026. Certain statements will be made during the phone call that may be forward-looking statements. Although Atrium believes that such statements are based upon reasonable assumptions, actual results may differ materially. Forward-looking statements are based upon the beliefs, estimates, and opinions of Atrium's management the date the statements are made. Atrium undertakes no obligation to update these forward-looking statements in the event that management's beliefs, estimates, opinions, or other factors change.
I would now like to turn the conference over to your host, Robert Goodall, CEO of Atrium. Mr. Goodall, please go ahead.
Thank you, and thank you for calling in this morning. Our CFO, Chris Anastasopoulos, is joining me today. Chris will begin with an overview of our financial results, and then I will speak about our performance from an operational and portfolio perspective. Chris?
Thank you, Rob. Atrium delivered solid financial results for shareholders in the Q3 while maintaining disciplined approach to its portfolio management and managing credit risk. For the Q3, Atrium generated net income of CAD 10.6 million, and our basic earnings per share were CAD 0.22 per share, compared to net income of CAD 11.9 million and basic earnings per share of CAD 0.25 in the comparative quarter of 2025. The year-over-year decline primarily reflected lower interest income resulting from a lower average mortgage portfolio balance and the lower weighted average mortgage interest rates, partially offset by lower borrowing costs for the year. Results in the Q3 included a provision for credit losses of CAD 1.5 million, an increase from CAD 137,000 provision in the Q2, which reduced net income and earnings per share for the quarter.
The weighted average interest rate on our mortgage portfolio was 8.64% at September 30, 2026, down from 8.69% at June 30, and 8.98% at December 31, 2025. The decline reflected the repayment of higher-yielding loans and new originations priced at lower rates, reflecting current market conditions. As of September 30, 2026, 80.9% of the mortgage portfolio was priced at floating interest rates, with the majority of loans having floors in place. The mortgage portfolio ended the quarter at CAD 869.1 million, an increase of 1% from CAD 860.1 million at June 30, 2026, consistent with our expectations for growth in the second half of the year. Mortgage advances exceeded repayments during the quarter, resulting in net principal advances of CAD 7.2 million, and the mortgage portfolio was 5.2% below the balance of CAD 917.1 million at December 31, 2025, as mortgage repayments outpaced advances during the first half of 2026.
As at September 30, 2026, our portfolio remained well secured with 96.8% of our mortgages being first mortgages. We maintained a conservative average loan-to-value ratio of 63.2% for the portfolio, up from 61.4% at year-end and 62.5% at Q2. In terms of staging of the mortgage portfolio, mortgages classified as Stage 1 were CAD 735.7 million at September 30, 2026, compared to CAD 704.6 million at June 30, 2026, and CAD 782.4 million at December 31, 2025. Stage 2 mortgages were CAD 72.4 million at September 30, 2026, down from CAD 93.9 million at June 30, but above CAD 48.7 million at December 31, 2025. Stage 3 mortgages were CAD 60.9 million at September 30, 2026, down marginally from CAD 61.5 million at June 30, 2026, and down from CAD 86.0 million at December 31, 2025.
Rob will provide further details on Stage 2 and Stage 3 mortgages in his portfolio update. The total allowance for credit losses was CAD 31 million at September 30, 2026, compared to CAD 30.1 million at June 30, 2026, and CAD 30.5 million at December 31, 2025. The allowance for credit losses represented 3.57% of the mortgage portfolio at September 30, 2026, compared to 3.5% at June 30 and 3.32% at December 31, 2025. By stage, the allowance breaks down as follows: Stage 1 allowance increased to CAD 6.8 million from CAD 6.1 million at year-end. The Stage 2 allowance increased to CAD 8.7 million from CAD 2.9 million at year-end. The Stage 3 allowance declined to CAD 15.5 million from CAD 21.5 million at year-end. Our balance sheet remains strong, liquid, and well capitalized.
At September 30, 2026, total debt remained low at 36% of total assets, with CAD 231 million drawn on our CAD 380 million credit facility, leaving significant available capacity. The weighted average cost of borrowing on the credit facility was 4.68% for the quarter, compared to 5.14% in the same quarter last year and 5.08% for the full year of 2025. The board announced Atrium's regular monthly dividend for 2027 will remain unchanged at CAD 0.0775 per share, or CAD 0.93 per share annually. The board also declared monthly dividends of CAD 0.0775 per share for the months of January, February, and March of 2027. Overall, these results reflect solid performance for our shareholders in the Q3, despite mixed market conditions and ongoing uncertainty.
We remain focused on maintaining a strong and flexible balance sheet, prudently managing credit risk and expenses, and selectively pursuing attractive new lending opportunities as the market continues to evolve. I'll now pass it back to Rob for the business and portfolio updates.
Thank you, Chris. As Chris said, Atrium had a solid Q3 with basic earnings per share of $0.22. The reduced earnings compared to last year were due to a higher level of provisions for credit losses. The year-to-date results are $0.71 per share, which are well above our dividends of $0.6975 per share year to date. Atrium's average mortgage rate dropped only slightly by five basis points from 8.69% in Q2 to 8.64%, and we believe that the average mortgage rate has stabilized. New first mortgages are generally being priced in the 8% range, and our subordinate ranking mortgages are generally priced from 10% to 11% per annum. The mortgage portfolio, as Chris said, increased 1% quarter-over-quarter from CAD 860 million last quarter to CAD 869 million at the end of Q3. We expect to have a strong quarter of loan originations in Q4.
I still anticipate that we can reach a portfolio of CAD 900 million at year-end. It's good to see the B.C. office contributing materially to overall new loan production in the last two quarters, and we're forecasting up to CAD 40 million of funded loans in that province in Q4. We also saw the Alberta office fund its first CAD 10 million of loans in Q3, and they are currently working on a large transaction, which is scheduled to close towards the end of Q4 or early Q1. We are executing nicely on our goal of having a greater proportion of Atrium's portfolio located in Western Canada. Turning to the composition of the portfolio, all of the new loans funded in Q3 were either commercial, apartment, or single-family loans.
As a result, commercial loans rose to 30.6% of the portfolio, and apartment and single-family mortgages also rose to 25.2% of the portfolio. We now have increased exposure to these sectors, these preferred sectors, of 55.8% of the entire portfolio versus 53% last quarter and 23% of the portfolio in 2023. The total high-ratio loans was CAD 108 million at the end of Q3, equal to 12.5% of the portfolio. It was approximately a 50/50 split between single-family loans and commercial and multi-residential loans. In Q3, the average loan-to-value of the portfolio increased just slightly to 63.2% and continues to be within our desired range of 65%. Atrium's percentage of first mortgages remained elevated at 96.8%, which is consistent with the Q2. I expect that this figure will drop slightly over time, but will still remain high relative to historic norms.
Construction loans within the portfolio increased to 6.7% of the portfolio, and I expect that the percentage will gradually rise in future quarters as a result of two recently funded construction loans in our portfolio. As I mentioned in past quarters, we've become more comfortable with construction loans given the return of more stable construction costs. However, I doubt that construction loans will represent more than 10%-15% of the portfolio until market conditions improve. Turning to portfolio quality, we saw improvement in our Stage 2 and Stage 3 loans during the Q3. In Q3, Stage 2 and Stage 3 loans decreased materially from CAD 155 million to CAD 133 million. In percentage terms, that was equivalent to 15.3% of the portfolio in Q3 versus 18% the previous quarter. By category, Stage 2 loans decreased from CAD 94 million to CAD 72.4 million, equal to 8.3% of the portfolio.
Stage 3 loans decreased marginally from CAD 61.5 million to CAD 60.9 million, equal to 7% of the portfolio. As Chris Anastasopoulos mentioned, we expensed the loan loss provision of CAD 1.45 million in Q3 versus CAD 137,500 in Q2. Atrium's total loan loss reserve increased marginally from CAD 30.1 million last quarter to CAD 31 million in Q3, equal to 357 basis points on the overall mortgage portfolio. We feel we are well reserved on an overall basis. My economic commentary is as follows. In Canada, employment was hit hard in the last two months with 110,000 job losses in August and September. Employment has fallen 41,200 jobs since December 2025, the largest year-to-date loss since the 2009 financial crisis. Fortunately, the unemployment rate of 6.5% was unchanged from the previous quarter.
On a positive note, GDP growth in Canada was 3.3% in Q2, and recent indicators point to growth of 1.5%-2% in Q3. CPI ticked up to 3.1% in September. Although the Bank of Canada's core inflation rate measures actually edged down to 1.8% and 1.9% respectively. Despite these benign results, the Bank of Canada increased the overnight rate by 25 basis points. Turning to commercial real estate, real estate investment activity was building momentum for most of Q3. According to CBRE, the overall property capitalization rate moved two basis points lower in the Q3, despite the 10-year bond yield surging by 62 basis points. By sector, office and retail enjoyed cap rate compression, while industrial, seniors housing, and hotel cap rates were steady. Multifamily was the only asset class to record a slightly higher cap rate.
The office sector, which experienced weakness over the last few years, has continued to gradually recover with a national vacancy rate of 16.7%. Positive absorption was most felt in Toronto, Calgary, and Montreal. Within our target market, vacancy rates range from 12%-20%. Given that these vacancy rates are still well above virtually every other real estate sector, it's a sector that we generally avoid. Conversely, the industrial sector remains surprisingly strong in the face of a tariff war with our major trading partner. Nationally, the availability rate dropped by 30 basis points to 5.2%. Year-to-date leasing on a national basis is actually already ahead of full-year totals for each of the last three years. Construction activity is also conservative across most of the markets. Availability rates in our target markets were 5% in Toronto, 3.6% in Calgary, 4.9% in Edmonton, and 5.8% in Vancouver.
A big difference compared to office vacancy rates. We already reported apartment trends across Canada for Q3. Vacancy rates are generally low, 3.9% for Vancouver, 4.6% for Toronto, 5.5% for Edmonton, and 5.9% for Calgary. Calgary in particular has experienced a large increase in supply, which in turn has increased that vacancy rate. Overall, commercial real estate has held up well as we enter the fifth year of a real estate downturn. Turning to the residential and multi-residential markets, residential housing markets remained weak in most markets across Canada in Q3. Turning to resale, the GTA reported resales of 5,040 homes in September, down 9% on a year-over-year basis. The benchmark price fell 0.5% on a month-to-month basis. The good news is new listings were down 14.4%, and active listings declined by 9.3% on a year-over-year basis.
In Vancouver, September resales totaled 1,700 homes, a decrease of 18.4% compared to the same month last year, as fewer apartment condominiums changed hands. The composite benchmark price of residential properties was down 0.6% from the previous month. Listings fell by 4% on a year-over-year basis. In Calgary and Edmonton, September resales were 2,200 and 1,960 homes respectively, which were down 2% and 10% respectively. However, relative to the population sizes of the GTA and Vancouver, these Alberta markets have performed much more strongly. The benchmark price over the last 12 months declined by 4.7% in the GTA, 5.5% in the Greater Vancouver area. Conversely, on a year-over-year basis, Calgary's benchmark price was up 2.2% and Edmonton's was up 2.9%. Turning to new home sales, the soft resale market conditions have contributed to the very slow activity in the new home market across most Canadian markets.
In the Greater Toronto Area, there were 8,900 new home sales from January to September of 2026, representing an increase of 122% compared to the same period in 2025, but still 52% below the 10-year average. The GTA housing market remains a tale of two sectors. Low-rise sales continue to lead the way, as they have since the introduction of the HST rebate program, with 6,600 new sales representing 171% increase versus last year. Low-rise sales actually remain well above their 10-year average. Meanwhile, high-rise sales were 40% lower than last year and 90% below the 10-year average. The high-rise condominium market will only recover once the excess supply is absorbed and consumer confidence returns.
Condo inventory under construction has now dropped to 35,900 units, and completions are forecasted to be 15,800 in 2027, 12,000 units in 2028, and 4,200 in 2029, by which time there will be virtually no remaining high-rise projects under construction. In the Greater Vancouver area, buyer demand was also soft in Q3, with 890 home sales down 22% from the previous quarter and 26% from last year. Similar to Toronto, most sales were completed units, which highlights that buyers prefer ready-to-move-in product. Forecasted 5,300 unsold condominium units are expected to be completed by the end of 2027, providing ample supply in the near term. After 2027, the level of unsold inventory is expected to decline. To conclude, Atrium has performed well on a year-to-date basis in a difficult real estate environment. The primary reason for the reduced earnings in Q3 is a higher loan loss expense of CAD 1.45 million.
The overall portfolio quality improved in Q3 with a reduction in the amount of Stage 2 and Stage 3 loans. For new loan business, we continue to focus on commercial real estate, apartments, single-family mortgages, and inventory loans of recently completed residential developments. We expect to have a strong quarter of origination in Q4. We're forecasting a portfolio balance of CAD 900 million by year-end. The B.C. office is contributing meaningfully to overall new loan production, and I anticipate that they will achieve over CAD 80 million of new funded loans in calendar 2026. We are in the early stages of achieving our long-term goal of having up to 40% of Atrium's portfolio located in Western Canada. That's all for the presentation, but we'd be pleased to take any questions from listeners.
The Q&A session will now begin. Please enter star two on your keypad to let the operator know you have a question. First question is from Graham Ryding, TD Securities. Graham, please go ahead.
Morning. Your PCLs picked up a little bit in the quarter, but it sounds like your Stage 2, Stage 3 improved slightly quarter over quarter. So what was just driving the higher PCL?
Pardon?
Stage 2 and Stage 3.
I think it was the single Nobody's asking within Stage 2 and Stage 3. I think it's really the single-family mortgages had higher provisions. I think that was the case. Because they're one-year terms, those get revalued every 12 months as they turn over. Fortunately, we're reaching a time where the revaluations are no longer dropping. For instance, the October numbers, which just came out yesterday, and I haven't had a time to look at it in detail, the year-over-year decrease in prices in the resale has actually gone down fairly significantly, and the benchmark price went up versus a year ago. The repricing and revaluation of single family is getting better, but it has been a drag the last two quarters.
And then your loan-to-values on that portion of your book, your house and apartment loans, are they similar to, I think you're at around 64% overall?
I think single family's slightly higher. I think it's around 67%, 68% off the top of my head. Because, I mean, banks are doing 75%, and they'll actually go to 80%. Single family usually has a higher loan-to-value on average than a commercial loan would. Yeah.
Okay. Makes sense. The weighted average mortgage rate, it looks like it was fairly steady. Do you think we've sort of troughed here, given that we've seen a slight increase in the Bank of Canada recently? What's your outlook here for the weighted average mortgage rates in the portfolio?
I think so. I mean, we're looking at a fairly large transaction in Alberta, and it's got a lower It's secured by apartments, so it's a pretty low-risk transaction. So it has a lower rate to it, but it has higher fees to it. So it's possible that it'll knock the rate down, but the fees are compensating for it. So it's getting, on an overall return basis, what we want. That's the only thing I think that could knock it down, is that one transaction, which is probably in the CAD 35 million range. That's the one that may close in Q4, but might slip into Q1. All the other mortgages that we would be originating would support 8.64% or higher, so on a weighted average basis.
Okay. My last one, if I could, you flagged in the commentary an increasing emphasis on lending towards sort of revenue-producing properties. That's a little bit of a strategic change for you relative to your past. Maybe just a little bit of color on what your thoughts are there.
Sorry, did you say decreasing or increasing? Because we're increasing.
Yeah, you're increasing your emphasis there, but in the past, I thought you were more sort of focused on land and construction and non-cash-flowing properties.
No, the last three years, we've moved a lot towards income-producing properties. If you took commercial and apartments together, it's not quite half of our portfolio, but it would be probably 45%, in that range. That's been deliberate, because the recurring income from those types of commercial and apartment loans provides an added level of safety. On the development side, things are quiet, to say the least. We've de-emphasized that for the last several years, probably the last two, three years.
Okay. Understood. Thank you.
Okay.
It appears that there are no other questions at this time. I would now like to give the call back to Robert Goodall for closing statements.
Okay. Thank you all for attending our conference call. We're pleased with the results. Hope you are as well. For existing shareholders, thank you for your continued support. Have a great day.
Thank you for participating. The conference call has now concluded. Please hang up.