Atrium Mortgage Investment Corporation

Thank you all 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'll speak about our performance from an operational and portfolio perspective. Chris?

Thank you, Rob. In the fourth quarter and for the year ended December 31, 2025, Atrium continued to generate strong results for shareholders amid a challenging economic environment.

Atrium generated net income of $12.2 million in the fourth quarter, and our basic earnings per share was $0.25 per share, which decreased from $0.27 per share in the fourth quarter of 2024. For the year ended December 31, 2025, Atrium earned net income of $49.1 million, a 2.5% increase over the prior year, resulting in basic earnings per share of $1.03 per share.

This was ahead of our fixed dividend rate for the year of $0.93 per share. And after considering the $0.10 per share special dividend announced yesterday, our total dividends for the year were $1.03 per share, which is in line with our earnings per share for 2025.

We are proud of this performance, particularly given the weak market conditions in 2025. As expected, the average interest rate on the mortgage portfolio decreased to 8.98% at December 31, 2025, down from 9.98% at December 31, 2024.

The decrease was largely driven by repayments of loans with higher yields compared to new loan originations and the impact of 25 basis point rate reductions by the Bank of Canada during the year impacting floating interest rates. As at December 31, 2025, 80.8% of the mortgage portfolio was priced based on floating rates with the majority having rate floors in place.

The mortgage portfolio ended the year at $917.1 million, an increase of 3.4% from $886.7 million at December 31, 2024. Despite the difficult market and due to the strength of our underwriting team, we were able to grow the portfolio this year.

During the year ended December 31, 2025, mortgage advances exceeded interest and principal repayments with $358.6 million of mortgage principal advanced and $316.6 million repaid and transferred net of write-offs of $4.3 million. At December 31, 2025, 95.2% of our mortgages were first mortgages, and we maintained a conservative average loan-to-value ratio of 61.4% for the portfolio, which decreased from 61.9% at December 31, 2024.

Our mortgages classified as Stage 1 were $782.4 million at December 31, 2025, down 3.1% from $807.7 million at December 31, 2024. We had $48.7 million in mortgages classified as Stage 2 at year-end, a decrease of 2.6% from $49.9 million at December 31, 2024.

Stage 3 loans increased to $86 million at December 31, 2025, compared to $29 million as at December 31, 2024, and $56.3 million at the end of the third quarter. 3 commercial loans totaling approximately $53 million were migrated to Stage 3 in the fourth quarter as they became impaired, which were offset by repayments of commercial loans of approximately $23 million during the quarter.

The allowance for credit losses was $30.5 million at December 31, 2025, a 3.1% increase over December 31, 2024. As a percentage of the mortgage portfolio, this represents a healthy 332 basis points, consistent with the prior year rate of 333 basis points.

The total allowance for credit losses related to Stage 1 loans was $6.1 million at December 31, 2025, down from $8.1 million at December 31, 2024. Our allowance for credit losses on Stage 2 mortgages was $2.9 million at year-end, a decrease from $8.1 million at December 31, 2024.

Our Stage 3 allowance for credit losses was $21.5 million, up from $13.3 million at December 31, 2024, primarily due to the migration of new loans from Stage 2 during the fourth quarter, offset by loan repayments. We continue to maintain a strong liquid and well-capitalized balance sheet.

As at December 31, 2025, balance sheet debt remained low at 40% with $283 million drawn on our $380 million credit facility, leaving a healthy available capacity. The weighted average cost of borrowing on the credit facility was 5.08% this year, down from 7.03% in the prior year.

During the year, we also repaid our 5.6% convertible debenture with a principal amount of $28.7 million on March 31 and our 5.5% convertible debenture with a principal amount of $34.4 million on December 31. Our healthy debt capacity provides us with the opportunity to make use of convertible debt in the market in 2026, providing market conditions are favorable.

In 2025, we continued our trend of strong financial performance for our shareholders even under difficult market conditions. We remain committed to our disciplined risk management approach as we pursue new opportunities, strengthening our team to ensure timely transaction analysis, managing our operating expenses prudently and maintaining a strong balance sheet to confidently navigate the current economic cycle.

I will now pass you back to Rob for the business and portfolio updates.

Thank you. As Chris said, Atrium MIC had a very good quarter with basic earnings per share of $0.25, identical to the previous quarter.

I'm very proud of our annual results of $1.03 per share, which marks the fourth consecutive year in which our earnings exceeded $1 a share. We were able to deliver one of our best years despite a very weak economy and the severe downturn in residential real estate markets across Canada for which our team deserves a lot of credit.

This strong performance has allowed us to reward our shareholders with a $0.10 special dividend. Overall, the portfolio increased to $917 million, up from $887 million at the end of calendar 2024.

I think a big reason for the increase in the portfolio is the growth in our underwriting team, which has more than doubled in size since the beginning of 2020. Loan advances in 2025 were $359 million, which was slightly higher than in calendar 2024.

Repayments in calendar 2025 were $317 million, which represents a portfolio turnover of approximately 39%, which is in line with our normal level and is a sign of a healthy portfolio. We made good progress implementing CMCC's strategy to increase our exposure to commercial and single-family mortgages in 2025.

The commercial category represented 28.7% of the total portfolio at the end of the year and has seen an increase of $72 million over the past year, representing a 38% increase year-over-year. And the single-family and apartment category has risen to 19.2% of the total portfolio, up 14% on a year-over-year basis.

Together, these lower-risk sectors now represent approximately 48% of our portfolio. In Q4, Atrium's average mortgage rate dropped from 9.2% last quarter to 8.98% this quarter, which reflects the 25 basis point drop in the prime rate of interest during the fourth quarter.

Total of high ratio loans, that is loans over 75% loan-to-value was $85 million, equal to 9.3% of the portfolio. For the single-family mortgage portfolio, loans over 75% loan-to-value totaled just over $30 million.

And there were 5 high ratio commercial loans totaling $54.7 million. One of these loans totaling $14.25 million was repaid in full in January, while another totaling $12.6 million is expected to be substantially paid down by the end of March.

In Q4, the average loan-to-value of the portfolio increased slightly from 60.8% last quarter to 61.4% at year-end and continues to be well within our desired range of 65%. Atrium's percentage of first mortgages remained very high at 95.2% and construction loans rose slightly in Q4 but still represent less than 5% of the portfolio.

We funded a $12.5 million construction loan with a well-known Toronto developer on a purpose-built rental in Q4. Turning to portfolio quality.

The mix of Stage 1, 2 and 3 loans changed in Q4. The good news is that the aggregate of Stage 2 and 3 loans dropped by 13.6% to 14.7% of the portfolio.

Stage 2 loans dropped sharply from $96.8 million to $48.7 million. Although Stage 3 loans did increase from $56 million to $86 million, it was due to the addition of a $31 million loan, and that property has been conditionally sold, and we expect it to be repaid in early Q2 2026.

In terms of the loan loss reserve, we expensed a loan loss provision of $1 million in Q4 after having a $1.3 million loan loss provision in Q3 and a total provision expense for the year of $4.5 million. On a net basis, Atrium's total loan loss reserve increased marginally from $29.5 million last quarter to $30.5 million at year-end, equal to 332 basis points on the overall mortgage portfolio.

With regard to our line of credit, we added 3 new lenders to our lender syndicate in 2025 and increased our committed line of credit from $340 million to $380 million. We used the line of credit to repay 2 convertible debentures, which matured in 2025.

We expect to access the convertible debenture market in 2026, provided market conditions remain favorable. My economic commentary is as follows: the Bank of Canada's latest forecast of GDP growth is for a flat Q4.

Bank of Canada has also forecasted slow growth of 1.1% in 2026 and 1.5% in 2027 as Canada adjusts to a new trading relationship with the United States. CPI dropped to 2.3% in January, and the Bank of Canada expects inflation to slow further in the coming months.

Both Canada and the United States held their rates steady in December, and it's unclear when or if more interest rate cuts will occur in either country. Turning to commercial real estate.

The commercial real estate market stabilized in 2025 as investor confidence gradually improved. Performance across most commercial real estate sectors has been resilient, particularly the retail and seniors residence sectors.

The multi-residential and industrial sectors are still healthy, although rents have dropped from their peak levels and vacancy rates have risen. We view commercial real estate as one of the best areas to focus our lending activities, and CMCC has worked hard in the last 2 years to increase Atrium's exposure to these markets.

The office sector, where we have limited exposure, has recently shown signs of recovery in the GTA as a result of return to office requirements by many large employers with mandates of 4 to 5 days per week in office. However, it is still a difficult sector for all but the AAA class buildings.

Looking at the residential and multi-residential real estate markets. In contrast to the commercial real estate, unfortunately, the misery continues in residential housing markets.

Starting with resales. In the GTA, resales declined by 11% in 2025 on a year-over-year basis, with sales at their lowest level in at least 12 years.

Similarly, resale activity in the Greater Vancouver area decreased by 10% year-over-year in December, capping a year with the lowest annual sales in 2 decades. Over the past year, benchmark resale prices declined by 6.3% in the GTA and 4.5% in the Greater Vancouver area.

Turning to new home sales. The soft resale market conditions have directly contributed to a lack of activity in the new home market as construction costs and affordability constraints continue to weigh heavily on demand.

The new home market remains slow across most urban centers in Canada, with the GTA and the GVA leading the way with new home sales 81% and 70% lower, respectively, than the average sales for the 10-year period between 2016 and 2025. But other markets are also slow.

For example, in 2025, even Calgary and Montreal, 2 of the stronger market had new home sales that were 42% and 70%, respectively, below their 10-year average from 2016 to 2025. The condo sector is the weakest sector within the residential markets.

But fortunately, the new -- the supply of new condos should reduce dramatically over the next 2 years. For example, in the GTA, the number of condominium units under construction dropped sharply to 50,000 units by the end of the year, and that number could drop as low as 30,000 units by the end of 2026, which should form the base for a recovery.

The housing market clearly needs more government support in the form of an HST rebate for all buyers, not just first-time buyers and ideally a major reduction or elimination of development charges. And it's worth noting that Mississauga and Burlington have implemented on their own a reduction or elimination of development charges.

And the housing market, of course, also needs more economic certainty to improve consumer confidence. We believe that the housing market in the GTA particularly, should stabilize and gradually start to recover in 2027 when the number of project completions starts to drop sharply.

To conclude, I'm proud of Atrium's results in 2025 and pleased that we're able to reward our eligible shareholders with a $0.10 special dividend. The results didn't come easily.

The new management -- senior management -- or the senior management team have all been working very hard to navigate the toughest real estate market that I've seen since the early '90s. We have dealt effectively and decisively where we've had problem loans rather than kicking the can down the road.

This is important because the residential resale and new home markets are generally expected to perform poorly in 2026. So a delayed response will likely be costly.

The other challenge in 2026 will be continuing to source new loan business due to the lack of overall activity in the market. The banks have at times been very aggressive.

CMCC recently added 2 underwriters in the Toronto office in attempt to free up time to source more new business. Our growth in 2026 will also hopefully come from Western Canada.

The BC office has lots of room for growth, and we are looking at the possibility of recruiting a new Managing Director in Alberta. Notwithstanding the challenges, Atrium has a more resilient portfolio than many of our competitors.

And as a publicly traded MIC, one of the few publicly traded MICs, I might add, we have more stable funding sources, including permanent shareholders' equity, better access to syndicate lenders for our line of credit. For instance, in 2025, we added 3 new lenders to our lender syndicate and access to the convertible debenture market.

While conditions remain very difficult, Atrium's results have been consistently strong through economic downturns, and our track record confirms that we know how to construct and manage a resilient loan portfolio in all stages of the market cycle. That's all for the presentation, but we'd be pleased to take any questions from the listeners.

Maybe, Rob, just to elaborate on sort of your messaging at the end of the call there or your prepared remarks, just big picture, obviously, a tough market, particularly in the GTA condo space. What's your strategy broadly for managing your portfolio and deploying capital in what seems to be a tough macro backdrop?

So the strategy, and it really started almost 3 years ago has been to do more single-family mortgages because we still view that as one of the most liquid types of real estate. And by the way, condominium had an enormous supply of completions, as you probably know, over the last 2 years, 60,000 units.

So that swamped the market. That will be changing in 2026 and even more particularly in 2027.

So it's not like we're focused on the condominium market, but we think that it will gradually improve. And condominiums do have the advantage of being the most affordable type of single-family residents.

So we're not totally against condominiums. We're obviously wary given the supply.

But -- so we look at single-family mortgages as a good area, and we look at commercial real estate as a good area. We've done a lot of multi-res, and we've done a lot of industrial, occasionally retail.

We've looked at senior residents. We haven't won any business there yet, but that's a really strong sector right now, as you probably know.

So we're avoiding development except for the very strongest developers who are being opportunistic. Those people we would back.

But those, as you know, are a few and far between those type of opportunities. So generally, we're looking at income-producing and single-family mortgages as sort of the 2 areas we're most focused on.

Okay. Helpful.

And then just with your ACLs on the balance sheet, just given the, I guess, the sort of difficult market conditions, you had about, I think, $4.9 million in PCLs in 2025. How are you thinking about your level of provisioning.

And should we expect a similar level in 2026 or could we move down to see in 2023, 2024 levels perhaps?

Yes, I don't think it will be back to '23. And I think we had well over $10 million in provisions in '23.

I don't think it will be that -- it would surprise me if we had that big a provision. So we're thinking it will probably be similar, but it's really, really hard to tell right now because we're so early in the year.

But we do risk rate every single loan every single quarter. So we know the portfolio inside and out, and we know where the vulnerabilities are, and we're watching those closely.

So one thing I'm confident is we're very adequately provisioned on what we put in Stage 3 or put in Stage 2.

Okay. Great.

And one more, if I could. Just the -- it sounds like you're expecting to get repaid for that $31 million loan in Stage 3 repaid in Q2.

Is that a full repayment with no loss. Is that what you're expecting there?

That's right. Yes.

Because it's under contract, I don't want to say more about it. But yes, it's a full recovery.

Okay. Thank you all for getting up early and attending our conference call.

We're pleased with the results, particularly the $0.10 special dividend, and I hope our shareholders are as well. For existing shareholders, thank you so much for your continued support, and have a great day.