First National Financial Corporation reports second quarter 2013 results

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


    --  Mortgages under administration ("MUA") up 12% year over year to
        $71.2 billion
    --  Mortgage originations lower by 6% to $4.2 billion from $4.4
        billion
    --  Revenue up 46% to $229.8 million from $157.0 million
    --  Net income up 275% to $67.8 million ($1.10 per common share)
        from $18.1 million ($0.28 per common share)
    --  Income before income taxes up 265% to $91.9 million from $25.5
        million
    --  Pre-FMV EBITDA* up 29% to $51.2 million from $39.6 million

"First National continued to profitably build both its mortgages under 
administration and mortgages pledged under securitization during the first 
half of 2013," said Stephen Smith, Chairman and President. "In fact, MUA set 
new records in each of the first two quarters of 2013 and was up a healthy 4% 
or 16% annualized since March 31(st). We take this as a positive sign of our 
strength in the Canadian housing market."

"On the basis of originations, First National continued to enjoy the benefits 
of our broad Canadian market presence and standing with mortgage brokers," 
said Moray Tawse, Vice President, Mortgage Investments. "This allowed us to 
keep single family originations at a healthy $3.5 billion level in the quarter 
despite government measures that have moderated housing activity. While single 
family originations were lower than a year ago by 9%, we noted a marked 
improvement over the start of the year which reflects signs of growing 
consumer confidence and a soft-landing scenario for real estate. We're also 
pleased to note our commercial segment's steady results with originations up 
7% year over year to $677 million."

First National marked its seventh anniversary as a public company in June 
2013. During this seven-year period, the Company has paid $577 million in 
distributions/dividends to shareholders, representing a pre-tax return of 96% 
on the IPO price of $10. Including capital appreciation, the total return to 
an original shareholder has been over 150%.
                                                               
                                              Quarter ended      Six months ended
                                             June       June       June       June
                                         30,        30,        30,        30,   
                                           2013       2012       2013       2012

For the Period                                                   ($ 000's)

Revenue                                    229,830    156,983    375,058    290,948

Income before income taxes                  91,945     25,499    123,181     61,687

Pre-FMV EBITDA ((1))                        51,193     39,610     88,057     70,837

At Period end                                                                      

Total assets                            18,793,683 13,682,980 18,793,683 13,682,980

Mortgages under                         71,228,677 63,676,028 71,228,677 63,676,028
administration                         
          

(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.
          

Q2 2013 Results

First National's MUA grew to $71.2 billion at June 30, 2013 from $63.7 billion 
at June 30, 2012, an increase of 12%. Between March 31, 2013 and June 30, 
2013, MUA grew approximately 4% from $68.5 billion, for an annualized increase 
of 16%.

Total single-family mortgage originations of $3.5 billion were 9% lower than 
the $3.8 billion originated in the second 2012 quarter. Commercial segment 
originations increased 7% to $677 million from $631 million in the same period 
of 2012. Overall origination was down 6% year over year. Of the $4.2 billion 
of originations in the quarter, $1.3 billion was originated for securitization 
purposes.

Second quarter revenue increased 46% to $229.8 million from $157.0 million in 
2012 as a result of growth in the business, a large gain on financial 
instruments (representing 35% of the year over year increase) and an $18 
million or 11% increase in interest revenue from securitized mortgages.

Income before income taxes in the quarter increased 260% to $91.9 million from 
$25.5 million in the second quarter of 2012. Of this $66.7 million 
improvement, $54.8 million was due to positive changes in gains and losses on 
financial instruments. Rising interest rate yields in the bond market 
positively affected the fair value of the Company's interest rate hedges.

Without the impact of gains and losses on financial instruments, which have 
been volatile, the Company's Pre-FMV EBITDA increased by 29% to $51.2 million 
from $39.6 million a year ago. This increase is due to the steady growth of 
the Company's core business, including increased net margin on securitized 
mortgages and higher mortgage investment income.

Determination of Adjusted Cash Flow and Payout Ratio

The Board declared dividends in the second quarter of 2013 based on an average 
annual rate of $1.40 per share. For the quarter ended June 30, 2013, the 
payout ratio was 50% the same as in the second quarter of 2012 despite a 12% 
year-over-year increase in dividends paid.

Determination of Adjusted Cash Flow and Payout Ratio
                                     
                    Quarter ended             Six months ended
                     June     June     June 30,       June 30,   
                  30,       30,          2013           2012
                   2013      2012

For the Period                                 ($ 000's)

Cash provided by                                                  
(used in)
operating


             (353,329)  101,965      (544,832)         229,593
activities 
Add (deduct):                                                      
Change in                                                      
mortgages
accumulated for 
  sale or      396,905 (63,692)        604,307       (172,153)
securitization
between periods 
Adjusted Cash
Flow ((1))          43,576   38,273         59,475          57,440 
Less: cash         (1,162)  (1,162)        (2,325)         (2,325)
dividends on
preference
shares  
Adjusted Cash       42,414   37,111         57,150          55,115
Flow available
for common
shareholders     
Adjusted Cash
Flow per Common
Share ($/share)
((1)          )       0.70     0.62           0.95            0.92 
Dividends           20,989   18,740         40,978          37,480
declared on
Common Shares 
Dividends             0.35     0.31           0.68            0.62
declared per
Common Share
($/share) 
Payout Ratio           50%      50%            72%             67% 
       
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.
          

The 2013 second quarter payout ratio was indicative of strong business 
performance as the increased pre-FMV EBITDA was also reflected in cash flow. 
Although the Company recorded large gains on account of financial instruments 
in the quarter, virtually all of these gains were unrealized and had no impact 
on cash generated by the Company. First National also continued to increase 
its securitization activities, primarily through the funding of $1.7 billion 
of mortgages through National Housing Act-Mortgage Backed Securities 
("NHA-MBS") programs. For such transactions, the Company paid various costs 
upfront for the mortgages which it securitized, including brokerage, CMHC, 
CMB, swap counterparty and syndication fees. These costs decreased operating 
cash flow by approximately $7.4 million in the quarter. Given the degree of 
this investment, the Company is pleased with the six months to date payout 
ratio of 72%.

Outlook

Management considers the second quarter of 2013 to have been very successful. 
Despite marginally lower origination volumes in the residential segment, the 
Company was able to maintain its level of securitization activity by taking 
advantage of its renewal opportunities and demand from the capital markets. 
For the remainder of 2013, the Company anticipates the low interest rate 
environment to continue with moderated, but still healthy, mortgage spreads. 
Despite lower origination targets, management expects to continue to 
capitalize on higher volumes of mortgage renewals and to generate cash flow 
from its $15 billion portfolio of mortgages pledged under securitization in 
order to maximize the Company's financial performance.

Conference Call and Webcast

 ___________________________________________________________________________________________
|July 31, 2013 10 a.m.          |Participant                                                |
|ET                             |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 August 7, 
2013. To access the rebroadcast, please dial 416-640-1917 or 877-289-8525 and 
enter passcode 4628905 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 more than $71 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/July2013/30/c2477.html

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

-0- Jul/30/2013 21:00 GMT


 
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