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First National Financial Corporation reports first quarter 2013 results

First National Financial Corporation reports first quarter 2013 results 
/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE 
U.S./ 
TORONTO, April 30, 2013 /CNW/ - First National Financial Corporation (TSX: FN) 
(the "Company" or "FNFC") today announced its financial results for the first 
quarter ended March 31, 2013. The Company derived virtually all of its 
earnings from its wholly-owned subsidiary, First National Financial LP 
("FNFLP" or "First National"). 
First Quarter Summary 


    --  Mortgages under administration ("MUA") up 12% year over year to
        $68.5 billion
    --  Mortgage originations lower by 4% to $2.4 billion from $2.5
        billion
    --  Revenue up 8% to $145.2 million from $134.0 million
    --  Net income $23.0 million ($0.36 per common share) down from
        $26.7 million ($0.43 per common share)
    --  Income before income taxes down 14% to $31.2 million from $36.2
        million
    --  Pre-FMV EBITDA* up 18% to $36.9 million from $31.2 million

"First National remained solidly profitable in the first quarter, despite 
substantially weaker activity levels in Canada's single-family real estate 
market," said Stephen Smith, Chairman and President. "While single family 
mortgage originations were down 20% compared to the first quarter of 2012, the 
Company offset most of this impact by growing our commercial originations by 
71% year over year to $809 million. First National's agility in responding to 
changing market dynamics combined with our large and growing mortgage 
portfolio and ongoing success with mortgage renewals position us well for this 
phase of the business cycle."

"Government measures introduced last year to moderate single family real 
estate activity seem to have had their intended impact," said Moray Tawse, 
Vice President, Mortgage Investments. "Even so, we are pleased to note that 
our single family MUA surpassed the $50 billion milestone within the quarter, 
which reflects well on First National's standing in the marketplace and our 
strategic alignment with Canada's mortgage broker channel. Given lower 
activity levels, we consider this a successful quarter and a good way to usher 
in our 25(th) anniversary in business."
                                               
                                         Quarter ended
                                   March 31,  March 31,
                                      2013       2012

For the Period                             ($ 000's)

Revenue                               145,228    133,965

Income before income taxes             31,236     36,188

Pre-FMV EBITDA ((1))                   36,864     31,227

At Period end                                           

Total assets                       17,163,697 13,224,456

Mortgages under administration     68,462,517 60,873,875

Note:

(1)      This non-IFRS measure adjusts income before income taxes by
         adding back expenses for amortization of intangible and
         capital assets (generally described as EBITDA) but it also
         eliminates the impact of changes in fair value by adding back
         losses on the valuation of financial instruments and deducting
         gains on the valuation of financial instruments.

Q1 2013 Results

First National's MUA grew to $68.5 billion at March 31, 2013 from $60.9 
billion at March 31, 2012, an increase of 12%. For the quarter, MUA grew 
approximately 2% from $67.3 billion at December 31, 2012, for an annualized 
increase of 7%.

Total single-family mortgage originations decreased by 20% to $1.6 billion 
from $2.0 billion in the 2012 quarter. Commercial segment originations 
increased by 71% to $809 million from $472 million in the same period of 2012. 
Overall origination was down 3% year over year.

First quarter revenue increased 8% to $145.2 million from $134.0 million in 
the first quarter of 2012 primarily as a result of a $17.2 million increase in 
interest revenue from securitized mortgages. This growth was partially offset 
by negative changes in gains and losses on financial instruments with reduced 
revenue growth by $10.5 million between the comparative quarters.

Income before income taxes in the quarter decreased 14% to $31.2 million from 
$36.2 million in the first quarter of 2012 as a result of falling interest 
rate yields in the bond market which negatively affected the fair value of 
Company's interest rate hedges. In total, losses on financial instruments 
accounted for a decrease in net income before taxes in the first quarter of 
2013 of $3.4 million compared to a gain of $7.1 million in the first quarter 
of 2012.

Without the impact of gains and losses on financial instruments, which have 
been volatile, the Company's Pre-FMV EBITDA increased by 18% to $36.9 million 
from $31.2 million a year ago. This increase is due to the steady growth of 
the Company's core business, in particular increased net margin on securitized 
mortgages.

Determination of Adjusted Cash Flow and Payout Ratio

The Company declared dividends in the first quarter of 2013 based on an 
average annual rate of $1.33 per share. Consistent with the decision announced 
by the Board in February 2013, First National began to pay dividends on its 
common shares at the new higher annualized rate of $1.40 beginning on April 
15, 2013. For the quarter ended March 31, 2013, the payout ratio was 132% 
compared to 103% for the first quarter of 2012 as determined below.

Determination of Adjusted Cash Flow and Payout Ratio
                                                              
                                                        Quarter ended
                                                  March 31,  March 31,
                                                     2013      2012

For the Period                                            ($ 000's)

Cash provided by (used in) operating                                   
       activities                                  (191,503)    127,628

Add (deduct):                                                         
    Change in mortgages accumulated for                                 
      sale or securitization between periods         207,402  (108,461)

Adjusted Cash Flow ((1))                              15,899     19,167

Less: cash dividends on preference shares            (1,163)    (1,163)

Adjusted Cash Flow available for common               14,735     18,004
shareholders
                                                              

Adjusted Cash Flow per Common Share                     0.25       0.30
($/share) ((1))

Dividends declared on Common Shares                   19,989     18,740

Dividends declared per Common Share                     0.33       0.31
($/share)

Payout Ratio                                            132%       103%

Note:

(1)      These non-IFRS measures adjust cash provided by (used in)
         operating activities by accounting for changes between periods
         in mortgages accumulated for sale or securitization and
         mortgage securitization activity.

Typically the first quarter of the Company's fiscal year has shown payout 
ratios in excess of 100% due to the payment of certain accrued expenses from 
the previous year end including payments related to the single-family broker 
volume bonus program, and the payout of employee commissions and bonuses. In 
the first quarter of 2013, in addition to these costs, the Company increased 
its securitization activities, particularly using NHA-MBS, which required net 
additional cash investments of $6.3 million for MBS issue costs and $3.4 
million for mortgage portfolio insurance. These costs decreased operating 
cash flow, although economically, they represent an investment in securitized 
mortgages which will produce future cash flow over the five and 10 year terms 
of the transactions. Without these two amounts, the payout ratio would have 
been approximately 80%.

Outlook

In the second quarter of 2013, management foresees reduced residential 
origination in 2013, but similar commercial segment origination to 2012 as the 
low-rate environment encourages real estate transactions. It intends to make 
up for lower single family originations through its mortgage renewal 
activities. These opportunities are a result of the success First National had 
in 2008 originating 5-year mortgages. With a history of high retention rates, 
the Company expects to generate significant volumes from these opportunities.

In the recently announced budget, the federal government indicated it was 
going to take steps to limit the securitization of government insured 
mortgages to CMHC sponsored programs. While the details envisioned in the 
budget in this regard are yet to be determined, it appears that mortgage 
funding for insured mortgages through ABCP may be prohibited by the proposed 
legislation. The Company has been using ABCP as an efficient source of funding 
primarily for short term insured mortgages. If the government's budget does 
restrict ABCP for insured mortgages, the Company believes it can find 
alternate sources of funding including institutional placements, repurchase 
facilities and NHA-MBS. These alternatives may not be as economical to the 
Company as ABCP.

Despite lower origination targets, the Company expects continued profitability 
and cash flow as it earns the returns from the investment it made in its 
business in 2012.

Conference Call and Webcast

 _____________________________________________
|May 1, 2013 10 a.m. ET   |Participant Numbers|
|                         |416-644-3417       |
|                         |877-974-0446       |
|_________________________|___________________|

The audio of the conference call will be webcast live and archived on First 
National's website at www.firstnational.ca. A question and answer session for 
analysts and institutional investors will be held following management's 
presentation.

A taped rebroadcast will be available to listeners until 12 a.m. on May 8, 
2013. To access the rebroadcast, please dial 416-640-1917 or 877-289-8525 and 
enter passcode 4614779 followed by the number sign.

Complete consolidated financial statements for the Company as well as 
management's discussion and analysis are available at www.sedar.com and at 
www.firstnational.ca.

About First National Financial Corporation
First National Financial Corporation (TSX: FN) is the parent company of First 
National Financial LP, a Canadian-based originator, underwriter and servicer 
of predominantly prime residential (single-family and multi-unit) and 
commercial mortgages. With almost $68 billion in mortgages under 
administration, First National is Canada's largest non-bank originator and 
underwriter of mortgages and is among the top three in market share in the 
mortgage broker distribution channel. For more information, please visit 
www.firstnational.ca.

*Non-GAAP Measures
The Company uses IFRS as its accounting framework. IFRS are generally accepted 
accounting principles (GAAP) for Canadian publically accountable enterprises 
for years beginning on or after January 1, 2011. The Company also refers to 
certain measures to assist in assessing financial performance. These "non-GAAP 
measures" such as "Pre-FMV EBITDA", "Adjusted Cash Flow," and "Adjusted Cash 
Flow per Share" should not be construed as alternatives to net income or loss 
or other comparable measures determined in accordance with GAAP as an 
indicator of performance or as a measure of liquidity and cash flow. Non-GAAP 
measures do not have standard meanings prescribed by GAAP and therefore may 
not be comparable to similar measures presented by other issuers.

Forward-Looking Information
Certain information included in this news release may constitute 
forward-looking information within the meaning of securities laws. In some 
cases, forward-looking information can be identified by the use of terms such 
as "may", "will, "should", "expect", "plan", "anticipate", "believe", 
"intend", "estimate", "predict", "potential", "continue" or other similar 
expressions concerning matters that are not historical facts. Forward-looking 
information may relate to management's future outlook and anticipated events 
or results, and may include statements or information regarding the future 
financial position, business strategy and strategic goals, product development 
activities, projected costs and capital expenditures, financial results, risk 
management strategies, hedging activities, geographic expansion, licensing 
plans, taxes and other plans and objectives of or involving the Company. 
Particularly, information regarding growth objectives, any future increase in 
mortgages under administration, future use of securitization vehicles, 
industry trends and future revenues is forward-looking information. 
Forward-looking information is based on certain factors and assumptions 
regarding, among other things, interest rate changes and responses to such 
changes, the demand for institutionally placed and securitized mortgages, the 
status of the applicable regulatory regime and the use of mortgage brokers for 
single family residential mortgages. This forward-looking information should 
not be read as providing guarantees of future performance or results, and will 
not necessarily be an accurate indication of whether or not, or the times by 
which, those results will be achieved. While management considers these 
assumptions to be reasonable based on information currently available, they 
may prove to be incorrect. Forward looking-information is subject to certain 
factors, including risks and uncertainties listed under ''Risk and 
Uncertainties Affecting the Business'' in the MD&A, that could cause actual 
results to differ materially from what management currently expects. These 
factors include reliance on sources of funding, concentration of institutional 
investors, reliance on relationships with independent mortgage brokers and 
changes in the interest rate environment. This forward-looking information is 
as of the date of this release, and is subject to change after such date. 
However, management and First National disclaim any intention or obligation to 
update or revise any forward-looking information, whether as a result of new 
information, future events or otherwise, except as required under applicable 
securities regulations.
    



Robert Inglis Chief Financial Officer First National Financial Corporation 
Tel: 416-593-1100 Email:rob.inglis@firstnational.ca

Ernie Stapleton President Fundamental Creative Inc. Tel: 905-648-9354  
Email:ernie@fundamental.ca

SOURCE: First National Financial Corporation

To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/April2013/30/c2009.html

CO: First National Financial Corporation
ST: Ontario
NI: FIN ERN 

-0- Apr/30/2013 20:40 GMT


 
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