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Atrium Mortgage Investment Corporation reported its fourth-quarter 2024 earnings, showcasing a solid performance with an EPS of $0.27 and a full-year EPS of $1.06, marking it as the third-best in the company’s history. The company also announced a dividend increase from an annualized $0.90 to $0.93. Despite a slight decrease in its mortgage portfolio, Atrium maintained a strong position in the market, supported by impressive revenue growth of 23.79% and a healthy gross profit margin of 59.85%, according to InvestingPro data. The company’s strategic shift towards lower-risk mortgages and increased commercial loans were key highlights of the quarter.
Key Takeaways
- Atrium’s Q4 EPS was $0.27, consistent with the prior year.
- The mortgage portfolio ended at $887 million, slightly down from $894 million.
- Dividend increased to $0.93 annually, reflecting strong financial health.
- Atrium’s shift to lower-risk mortgages and increased commercial loans strengthened its portfolio.
- The company is preparing for opportunities in a potentially less liquid market.
Company Performance
Atrium Mortgage Investment Corporation demonstrated resilience in a challenging market by maintaining a strong financial performance. The company’s strategic focus on lower-risk mortgages and increasing its commercial loans from 9.9% to 21.5% of its portfolio helped solidify its market position. Despite a slight decrease in the total mortgage portfolio, the company maintained a high-quality composition with 96.7% first mortgages.
Financial Highlights
- Revenue: Not specified
- Earnings per share: $0.27 for Q4, $1.06 for the full year 2024
- Dividend: Increased from $0.90 to $0.93 annually
- Mortgage portfolio: $887 million, down from $894 million
- Mortgage portfolio rate: Decreased from 10.52% to 9.98%
Outlook & Guidance
Atrium anticipates continued softness in the condo market through 2025-2026, with a potential market recovery expected in 18-24 months. The company is preparing for opportunities in a less liquid market by expanding its team in Toronto and BC markets and expects to maintain strong origination in 2025.
Executive Commentary
"Our portfolio quality has improved materially since the beginning of the year, which is remarkable in this depressed market," said Robert Goodall, CEO. He also highlighted the company’s resilience, noting, "We have only two commercial and multi-residential Stage three loans in the entire portfolio."
Risks and Challenges
- Continued softness in the condo market could impact future earnings.
- Market recovery is uncertain and could take up to two years.
- Potential slowdown due to trade uncertainties might affect market activity.
- Competition might reduce as other lenders face loan quality issues.
- Economic factors such as GDP growth and employment rates could influence market dynamics.
Q&A
During the earnings call, analysts focused on the challenges in the condo market and strategies developers might employ. There were discussions on the motivations behind the recent equity raise and potential market slowdowns due to trade uncertainties. The resilience of Atrium’s portfolio and loan quality were also key topics of interest.
Full transcript - C3.ai Inc (AI) Q4 2024:
Conference Operator: Welcome to the Acre Mortgages Investment Corporation’s Fourth Quarter 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. A reminder that this conference is being recorded Friday, 03/07/2025. Certain statements will be made during this 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 on the beliefs, estimates and opinions of Atrium’s management on the date the statements are made. Atrium undertakes no obligations to update these forward looking statements in the event that management’s beliefs, estimates, opinions or other factors change.
Graham Ryding, Analyst, TD Securities: I would
Conference Operator: now like to turn the conference over to your host, Robert Goodall, CEO of Atrium. Mr. Goodall, please go ahead.
Robert Goodall, CEO, Atrium Mortgage Investment Corporation: Thank you, and thank you all for calling in this morning. Our CFO, John Ahmad, will start by talking about our financial results, and then I’ll speak about our performance from an operational and portfolio perspective. John? Thanks, Rob. I’m very pleased
John Ahmad, CFO, Atrium Mortgage Investment Corporation: to announce that Atrium finished the year strong with earnings per share of 0.27 in the fourth quarter. This was slightly above EPS of $0.26 in Q3 and consistent with $0.27 in the prior year fourth quarter. We completed fiscal twenty twenty four with an earnings per share of 1.06 which includes a special dividend of $0.16 for the year. To give some perspective, this was the third best year earnings wise as a public company in what continued to be a challenging year for real estate markets. In light of our consistent performance, you may recall that we ended the year with an increase in our monthly dividend to shareholders from an annualized rate of $0.9 to $0.93 beginning in December 2024.
Over the course of the year, our mortgage portfolio remained relatively flat finishing the year at $887,000,000 slightly down from $8.94 at the beginning of the year and down from a record $9.26 at Q3. The decrease over the fourth quarter was largely due to payouts of Stage two and three loans, which does improve the risk profile of our mortgage book. On an annual basis, advances were $352,000,000 and were more than offset by repayments of principal and interest capitalized on Stage two and three loans. While activity was below historical levels for most of the year, Q4 did see a pickup in activity with principal originations totaling $120,000,000 and repayments of $125,000,000 As expected, the rate on our mortgage portfolio came down from 10.52% at Q3 to 9.98% at year end on the heels of two fifty bps Bank of Canada rate cuts on October 23 and December 11. There are two offsetting factors at play here as well.
Firstly, the fact that the majority of our portfolio does have rate for us in place, which has helped cushion the blow. And secondly, the fact that we have focused on lower risk mortgages, which do command lower rates. Shifting production to lower risk loans has been part of our strategy to protect shareholder capital as we navigate through uncertain market conditions. As an offset, the rate on our credit facility has also come down as it is priced off prime and short term core market rates. The average rate on our credit facility was 6.34% for the quarter, down from 6.96% in Q3 and 7.55% in the prior year quarter.
Another key objective this year was to maintain a highly liquid and well capitalized balance sheet, which we achieved. Our balance sheet leverage remains very low at 45% at year end with our drawn credit facility at $199,000,000 This implies plenty of capacity as the maximum amount is $340,000,000 Maximum was increased by $25,000,000 in June after adding RBC as a lender to the credit facility. This not only provides capacity for future growth, but is also a source of liquidity and provides us with optionality in terms of building an optimal capital structure. During the year, we paid down our $25,300,000 June debenture on the first business day or the following quarter in Q3 using the facility, and we have the capacity to do the same with our upcoming March debenture. The debt capacity provides us with an opportunity to prevent to potentially lock into lower term debt commitments to longer term debt commitments when market rates are more favorable.
And finally, we also shored up our shareholder capital in October to support future growth with an oversubscribed share offering with total gross proceeds of $28,800,000 that was well received by the markets. The credit risk profile of our mortgage portfolio continued to improve. The Q4 provision of $2,100,000 has trended downward over the course of the year and is down significantly from $4,800,000 booked in the prior year comparable quarter. Total Stage two and three loans have also come down from 17.8% of the mortgage portfolio at the beginning of the year to just 8.9% at year end. As a percentage of the mortgage portfolio, which did decrease slightly over the quarter, allowance for mortgage losses was three thirty three bps at year end, up slightly from three twenty three bps at Q3 and up from two fifty three bps at the beginning of the year.
Our Stage one provision still remains high at 91 bps due to a soft macroeconomic outlook. Overall, Atrium posted strong financial results for shareholders this year and we have successfully executed in terms of taking steps to derisk the portfolio and build capacity for growth. While macroeconomic conditions started to show signs of improvement at year end by way of lower inflation and interest rates, potential economic slowdown from a tariff war can prolong the downturn in the credit cycle. Our business is structured so that we have the capacity to seize growth opportunities if they arise, but we are also equally ready to deal with soft market conditions that do appear likely to persist. Looking back, real estate markets have in fact become increasingly challenging since rates started rising in 2022, and we’ve consistently posted strong results during this timeframe.
Over the year, we’ve taken the right steps to strengthen the quality of our mortgage portfolio, increase our liquidity, improve our balance sheet and the depth of our team, which has experience operating across all cycles in the market. Rob, I’ll pass it back to you for portfolio and business updates.
Robert Goodall, CEO, Atrium Mortgage Investment Corporation: Thank you. As John said, we had a strong quarter and a very strong year. Atrium mix generated basic earnings per share of $0.27 which was up $0.01 from last quarter. And for calendar twenty twenty four, our earnings per share of 1.06 was the third best earnings per share result in our twenty three year history. Indeed, our last three years have been the best three years from an earnings per share perspective as a public company.
I think this is a huge accomplishment in a very difficult economic environment. In fact, if you look at our results during the two thousand and eight and two thousand and nine financial crisis, we also outperformed our peers from an earnings per share perspective during that time. Calendar 2024 was especially strong when one considers that our portfolio quality actually improved in the second half of the year. Stage two and Stage three loans, that is high risk and impaired loans, decreased dramatically to $78,000,000 in Q4 from $130,000,000 in Q3. We had only three Stage three commercial and multi residential loans in the entire portfolio at year end, and we are adequately reserved on all of them.
We increased our loan loss provision in Q4 by $2,100,000 as John said. The quarterly provisions have been gradually reducing as we resolve our problem loans. We have not had any problem loans where our provisions were inadequate. In fact, in every circumstance, there was a net recovery. Overall, the portfolio decreased slightly from $926,000,000 last quarter to $887,000,000 in Q4.
Loan advances in Q4 were actually very strong at $120,000,000 For the year as a whole, total mortgage advances were $352,000,000 which is 25% above last year. This is an accomplishment which few other lenders can make because market activity was subdued as you know in 2024. Loan repayments in Q4 were unusually high at $125,000,000 equivalent to an annualized portfolio turnover rate of almost 60%. Throughout the year, most of our loans were repaid by institutional lenders, which is a testament to our loan quality. We also made really good progress implementing our strategy to increase our exposure to commercial loans and to single family mortgages.
In 2024, commercial loans rose from 9.9% of the portfolio to 21.5% and single family mortgages and apartment mortgages rose from 13.2% to 17.5 by year end. We expect that trend will continue in calendar twenty twenty five. Atrium’s average mortgage rate dropped from 10.52% last quarter to 9.98% in Q4, entirely due to reductions in the prime rate of interest. The total of high ratio loans, that is loans above 75% loan to value, was only $38,500,000 in Q4, equal to just 4.3% of the portfolio. This total is down dramatically from Q3 when the balance was $90,100,000 almost 10% of the portfolio.
And at the end of last year, the balance was also higher at $53,400,000 representing about 6% of the portfolio. In Q4, the average loan to value of the portfolio dropped from 64.1% last quarter to 61.9% at year end, which continues to be well within our desired range. Atrium’s percentage of first mortgages remain very high at 96.7% and construction loans represented only 5.4% of the total mortgage portfolio. Construction costs are becoming more stable and in many cases actually dropping. So, we are more willing to consider underwriting construction loans with experienced developers.
Turning to the few defaults that we have. In Q4, the total of Stage two and Stage three loans dropped sharply from $130,000,000 to $78,000,000 In fact, our combined Stage two and Stage three loans have dropped by almost $80,000,000 in the last four quarters. There was a lot of progress in dealing with the high risk the higher risk commercial loans during the quarter, as you will hear. I will briefly describe each of the stage three commercial and multi residential loans. First, two loans are located in Greater Vancouver to a single borrower.
At one time, there were four loans to this borrower. One loan was repaid earlier in 2024 and another loan was repaid in full in Q4 of ’twenty four. As a result, the loan balance was reduced from $34,500,000 in Q3 to $23,500,000 at the end of ’twenty four. In addition, I’m pleased to report that another one of the loans to the sponsor was repaid subsequent to year end. So, there is now only one $14,300,000 loan outstanding to the sponsor.
The only other loan that is stage three is a $2,850,000 loan secured by three Toronto office buildings, which represents the loan represents the subordinate tranche of a $17,000,000 first mortgage. In Q4, we negotiated additional security and anticipate a substantial pay down of the loan by the end of Q2. So, we are feeling more optimistic about the prospects of being repaid in full on this loan. As we mentioned earlier, we increased Atrium’s loan loss reserve in Q3 by $2,100,000 The loan loss reserve now totals a very healthy $29,600,000 equal to three thirty three basis points on the overall portfolio. It’s worth noting that we continue to have large general reserve against our highest quality Stage one loans.
We strongly believe that we have adequate reserves in place for the few Stage three loans, which will protect our profits for the future. My economic commentary is as follows. The economic news in Canada was actually much better than expected in Q4. Canada’s fourth quarter GDP growth was 2.6%, significantly better than the forecasted growth of 1.8%. And employment rose by a surprising 76,000 jobs in January, following another large gain of 91,000 jobs in December, resulting in the unemployment rate dropping to 6.6%.
If we were not absorbed by a trade war, there would actually be more discussion about a comeback in the Canadian economy. PPI in Canada rose slightly to 1.9% in January, up from 1.8% in December. Nevertheless, it was the sixth consecutive month below Canada’s Two Percent inflation target. Most bank economists are forecasting the Bank of Canada will reduce the Bank of Canada rate by 25 basis points at its next meeting on March 12, and most still expect the Bank of Canada rate to be between 22.5% by the end of twenty twenty five. Unfortunately, all this economic news is now ancient history, and we are forced to wait for further details about The United States tariff implementation plan and a possible early renegotiation of the free trade agreement.
Turning to the commercial real estate markets. Cap rates were relatively steady for the second straight quarter, rising only two basis points in Q4. Year over year, CBRE reports that cap rates rose only nine basis points, suggesting that cap rates or commercial real estate may have peaked. Cap rates had average annual increases of 53 basis points in the last two years sorry, in 2022 and 2023. Most real estate sectors are performing quite well with moderate vacancy rates, including multi residential, industrial, retail and seniors housing.
The exception is the office sector, which continues to be very weak across most of Canada. Looking at the residential and multi residential real estate markets and resales in particular, after showing approximately 40% growth in resales in October and November, the GTA market paused in December. In 2025, GTA sales were up marginally in January, but down 27% in February on a year over year basis as a result of buyer concern about a trade war. The average selling price in February was down 1.8% on a year over year basis, but listings did moderate in February and are now up only 5.4% on a year over year basis. Rev is forecasting a 12.4% increase in sales and a 2.6% increase in the average price in calendar twenty twenty five.
Metro Vancouver resales rose 8.8 over the last twelve months. However, resales dropped 11.7% in February. Listed properties rose 11% year over year and the home price index in Metro Vancouver was down 1.1% from a year earlier and 0.3% from last month. Turning to new home sales, that market remains very slow. In the GTA, there were less than 10,000 new home sales in calendar twenty twenty four, which represented a decrease of 47% compared to the same period in ’twenty three.
Number of high rise and low rise sales both declined year over year with high rise sales falling more significantly. The inventory on the market increased by 1.6% year over year for high rise and 52% for HiRISE, albeit from a very low base, resulting in an overall inventory increase of 9.7%. The benchmark price dropped by 3.4% for and 2.8% for high rise on a year over year basis. Combination of lower prices and higher construction costs have significantly impacted the profitability of new home sales. In Metro Vancouver, new home sales were marginally better.
New sales totaled 2,000 units in Q4, which was up 2% from the previous quarter, but down 39% compared to the same quarter last year. 21 projects representing 2,300 units were launched in Q4 and were 27 presold by the end of the quarter. To summarize, resales gradually improved in 2024 and are forecasted to increase more strongly in 2025. However, the new home market remains very weak, particularly the high rise condominium market. Low rise market has a lower level of unsold inventory, so most experts see that market recovering more quickly than the high rise market.
But we need a continued drop in interest rates, declining construction costs and sustained price appreciation in the resale market before we see a recovery in the new home market. To conclude, Atrium’s results for calendar twenty twenty four were very strong and well ahead of our peers. The last three years have been the best three years since Atrium went public in 2012. Some of the credit, of course, for our 2024 results is due to higher interest rates. But in the Ontario market, which now represents more than 90% of the total portfolio, we underwrote much more conservatively than most other non bank lenders.
If you look at Atrium’s results during the financial crisis in 02/2008 and 02/2009, we also outperformed our peers from an earnings per share perspective. So, we’ve proven that we know how to build a strong portfolio of loans that is resilient to market downturns. Our portfolio quality has improved materially since the beginning of the year, which is remarkable in this depressed market. We have only two commercial and multi residential Stage three loans in the entire portfolio. We have been successfully shifting the portfolio to have a greater amount of commercial and single family residential mortgages, which we view as the two lowest risk sectors.
We expect that both sectors will continue to increase in calendar 2025. Meanwhile, we see some of our competitors experiencing serious loan quality issues and believe that there may be less competition in 2025. So, while it’s very difficult to make any accurate forecast in today’s volatile economic and political environment, one thing is clear, our earnings are very strong, our portfolio is in great shape and we are well positioned to take advantage of opportunities in the market. Thank you. That’s all for the presentation, but we’d be pleased to take any questions from the
Conference Operator: It appears that there are no other questions at this time. Oh, sorry. First question is from Mr. Graham Ryding from TD Securities. Graham, please go ahead.
Graham Ryding, Analyst, TD Securities: Sorry, I was pressing star one, not star two, that threw me off. The condo market in the GTA, it’s clearly quite soft as you flagged in your comments. Just looking at your portfolio, it looks like roughly around 40% of your portfolio might be exposed to sort of mid rise and high rise in the GTA. Is that number accurate? And then how much of that would be condo related versus purpose built rental?
Robert Goodall, CEO, Atrium Mortgage Investment Corporation: Yes, it is a combination of purpose built rental and condo. I don’t have that number off the top of my head. Much of the loans that we have, particularly in the high rise, do have existing improvements on the properties that generate income. And but those projects are stalled until the condo market recovers, which we think will be probably in 2026 or 2027. We think 2025 will be another difficult year for the condo market.
Some of the borrowers are looking into converting from condominium to rental. So it will be interesting to see how many of them pivot and actually do that.
Graham Ryding, Analyst, TD Securities: And then what does that mean for those borrowers and do those loans stay on your books for a couple of years? Or they just keep servicing them? Or what’s the exit strategy there if they’re not going to be moving on their
Robert Goodall, CEO, Atrium Mortgage Investment Corporation: projects? Yes. So, believe it or not, like a lot of these loans were repaid in 2024 by institutional lenders. These are good borrowers. These are not troubled borrowers that can’t make it through the next year and a half or two years.
So, as you saw in 2024, we literally had no condominium projects that caused those difficulties in the Ontario office, like literally nothing. And we were surprised at the number of condominium loans, which were repaid, as I say, by institutional lenders, not by other non bank lenders, because the borrowers are high quality lenders. And if you look at urbanation reports, there’s going to be a real shortage in about eighteen to twenty four months and it’s going to be severe. So, any developer that can manage through the next eighteen to twenty four months we’ll see a much, much stronger market. It will probably be V shaped at that point.
I mean, I think the recovery is clearly U shaped right now. At that point, it will become V shaped.
Graham Ryding, Analyst, TD Securities: So, developers are sort of sitting on permits and sitting on land right now and just sort of waiting before moving projects further? Is that Yes.
Robert Goodall, CEO, Atrium Mortgage Investment Corporation: I mean, I think the wealthier they are, the more they’re just waiting for the condo market to return because they know it will return. And if they have the liquidity and the moderate leverage, then they can wait for a year and a half. If they can’t, then they’re looking at purpose built rental, which in my opinion never really makes much money, but it’s a way of dealing with your land.
Graham Ryding, Analyst, TD Securities: Okay. That’s helpful. And then just looking at the equity that you raised in late twenty twenty four, was that in part due to the pending convertible debenture maturities that you saw coming through? Or were you also sort of thinking this is the right time to improve the balance sheet, raise some equity, just given the softness in the macro conditions?
Robert Goodall, CEO, Atrium Mortgage Investment Corporation: It was actually a combination of both those things. We knew the convertible to the venture market was just too expensive. We still think it is too expensive. It is coming down, but more slowly than we hoped. I think as GIC rates come down, converts will become and they have come down a lot already.
Converts will become more popular and yields will come down. And at some point, we’ll access that market, but we’re not going to access the market at today’s rates. It’s just too expensive. So, yes, we saw the stock price had risen, so it was a good time to raise equity. And yes, we looked at that and said, okay, this can replace the convertible debenture that’s coming up.
Graham Ryding, Analyst, TD Securities: And then my last question just with the tariff overhang, are you seeing or you’re expecting activity to slow broadly in the commercial lending space? Any evidence of that yet?
Robert Goodall, CEO, Atrium Mortgage Investment Corporation: Yes. But, we’ve grown our team. Like, as I say, the Toronto as I said in my notes, the Toronto market originated sorry, increased originations by 25% last year, which is absolutely remarkable. In BC, we had a changed management team. So, we expect the BC market our penetration in the BC market to increase fairly significantly in 2025.
That market is a little bit stronger than the GTA, I would say. So, we have and we’ve ramped up on single family mortgage staffing. So, I think we’ll be able to offset the softness of the market. But right now, I think it’s really hard to know how soft the market will be because every day the tariff situation changes. And as long as this in my opinion, as long as these tariff uncertainties continue on, like you’re not going to see a ton of market activity.
But we also believe that as I mentioned toward the end of my speech, we also believe that the competition will lessen in 2025. Like it’s pretty clear there’s some non bank lenders with some pretty serious arrears. And we’ve done exactly the opposite. Our arrears haven’t been this low in a long time. And so, our portfolio is in great shape and we don’t have to spend much time worrying about them because they’re we literally only have two Phase II commercial loans.
So, we should have more of our effort, more of our attention devoted to origination of new loans. And we also staffed up. So, I’m hoping we can regardless of what the market is, I’m hoping we can have a really good year for origination in 2025. What we found in ’eight and ’nine is we could move up on quality because the market was less liquid. And so, that’s what we’re hoping we can do in 2025 as well.
Graham Ryding, Analyst, TD Securities: Okay, great. And then how broad, when you say you’re seeing some competition have some arrears issues, is that like two or three lenders you’re seeing that or is it like half a dozen? Like how broad is the pressure that you see
Robert Goodall, CEO, Atrium Mortgage Investment Corporation: from Emera’s perspective? So, I think a lot of it it’s from only a few lenders because the vast majority of mix as you know and non bank lenders are private. But, I do hear things about some private lenders, which suggests they have issues as well. So, at some point, you would think it’s going to come to a head because we’re not heading into a V shaped recovery in 2025, that’s for sure.
Conference Operator: Next question is from shareholder Ben Cialella. Ben, please go ahead.
Graham Ryding, Analyst, TD Securities: Thank you, Rob. Congratulations to you and your team for the performance today. This is fantastic. Bob, can you perhaps comment on what you see in the residential rental market that is the rent prices, which seems to either are they either flat or coming down? And what trends you’re seeing and whether that would affect the refinancing market, your portfolio your portfolio is getting refinanced elsewhere and so on and so forth?
Thanks, Rob.
Robert Goodall, CEO, Atrium Mortgage Investment Corporation: Okay. Nice to hear from you, Ben. So, no question I presume you’re talking about residential rents. No question condominium and purpose built rental rents have come down from a peak. They did have a pretty good run.
So, it’s not surprising that they’ve taken a pause and actually retracted a bit. I can tell you a lot of purpose built rental developers are counting on the shortage of housing being much more severe by the time they finish construction in two or three years. So, they’re performing rents that are not there today, but they believe will be there at the time of completion. Right now, on the purpose built rental projects that we see, you want to lease quickly, it’s a very competitive market and it’s very sensitive. If you’re $0.25 or $0.5 per square foot per month too high on your requested rental rates, you’ll probably stall out.
But, if you’re competitive with where the market is, then the absorption isn’t bad and the lease up isn’t bad. But, no question, it’s weaker than it was at the peak. I just think it sort of got ahead of itself. And in retrospect, not that surprising that the lease rates came back. I mean, it’s the same situation in industrial.
Industrial rents, when I was on the Board of one of the office REITs, I used to ask questions as to why rents weren’t higher than $5 a foot. And today, they’re $17 And last year, they were $18 So, it’s not surprising that both residential and industrial rents have come down a bit because they move so quickly.
Conference Operator: It appears that there is no other questions at this time. I will now give the call back to Mr. Robert Goodall for closing statements.
Robert Goodall, CEO, Atrium Mortgage Investment Corporation: Okay. Thank you very much for attending our conference call. We’re thrilled with our results in 2025. I hope our stock price reflects it going forward because we are disappointed with the way our stock is traded. I hope you’re all very pleased as well.
And for our existing shareholders, I want to thank you for your continued support. Have a great day.
Conference Operator: Thank you all for participating. The conference call is now concluded. Please hang up.
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