First National Financial Corporation reports third quarter 2013 results

First National Financial Corporation reports third quarter 2013 results 
/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE 
U.S./ 
TORONTO, Oct. 29, 2013 /CNW/ - First National Financial Corporation (TSX: FN, 
TSX:FN.PR.A) (the "Company" or "FNFC") today announced its financial results 
for the third quarter ended September 30, 2013. The Company derived virtually 
all of its earnings from its wholly-owned subsidiary, First National Financial 
LP ("FNFLP" or "First National"). 
Third Quarter Summary 


    --  Mortgages under administration ("MUA") up 12% year over year to
        $74.0 billion
    --  Mortgage originations lower by 5% to $4.1 billion from $4.3
        billion
    --  Revenue up 10% to $200.5 million from $181.6 million
    --  Net income up 23% to $39.4 million ($0.63 per common share)
        from $32.0 million ($0.51 per common share)
    --  Income before income taxes up 20% to $53.0 million from $44.0
        million
    --  Pre-FMV EBITDA((1)) up 38% to $56.1 million from $40.6 million

"First National achieved record third quarter performance on meaningful growth 
in mortgages under administration and mortgages pledged under securitization," 
said Stephen Smith, Chairman and President. "Annualized growth in MUA since 
June 30(th) of 16% reflects solid activity levels in Canadian real estate and 
the Company's ongoing focus on delivering responsive service and competitive 
mortgage solutions."

"We consider single family originations of $3.4 billion in the third quarter 
to be favourable given the regulatory changes that the market has absorbed 
over the past year," said Moray Tawse, Vice President, Mortgage Investments. 
"In fact, origination activity levels have increased since the first quarter 
when they were down 20% from 2012 levels. Commercial mortgage originations of 
$760 million in the quarter, while 2% lower than last year, also reflected a 
good level of market activity and the strength of First National's 
relationships in this segment."
                                                             
                                 Quarter ended      Nine months ended
                           Sept. 30,  Sept. 30,  Sept. 30,  Sept. 30,
                              2013         2012       2013     2012

For the Period                                       ($000's)

Revenue                       200,522    181,573    575,580    472,521

Income before income taxes     53,009     44,047    176,190    105,734

Pre-FMV EBITDA ((1))           56,124     40,597    144,181    111,434

At Period end                                                         

Total assets               19,930,780 14,311,584 19,930,780 14,311,584

Mortgages under            74,042,024 65,900,106 74,042,024 65,900,106
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.
     

Q3 2013 Results

First National's MUA grew to $74.0 billion at September 30, 2013 from $65.9 
billion at September 30, 2012, an increase of 12%. Between June 30, 2013 and 
September 30, 2013, MUA grew approximately 4% from $71.2 billion to $74.0 
billion, an annualized increase of 16%.

Total single-family mortgage originations of $3.4 billion were 6% lower than 
the $3.6 billion originated in the third 2012 quarter. Commercial segment 
originations of $760 million were 2% lower than originations of $774 million 
in the same period of 2012. Total origination was down 5% year over year. Of 
the $4.1 billion of originations in the quarter, $1.1 billion were originated 
for securitization purposes.

Revenue in the third quarter increased 10% to $200.5 million from $181.6 
million in the same period of 2012 primarily reflecting higher interest 
revenue from securitized mortgages that increased revenue by $25.6 million or 
14%.

Income before income taxes in the quarter increased 20% to $53.0 million from 
$44.0 million in the third quarter of 2012, despite declining interest rate 
yields in the bond market which negatively affected the fair value of the 
Company's interest rate hedges. Total losses on financial instruments in the 
third quarter amounted to $1.3 million compared to a gain of $5.6 million in 
the third quarter a year ago.

Excluding the impact of gains and losses on financial instruments, which have 
been volatile, the Company's Pre-FMV EBITDA increased 38% to $56.1 million 
from $40.6 million a year ago. This increase was 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 third quarter of 2013 of $0.35 per common 
share, based on an average annual rate of $1.40 per share, compared to $0.32 
in the third quarter of 2012. Despite the year-over-year increase in the 
common share dividend, the Company's payout ratio was 62% compared to 58% in 
2012.

Determination of Adjusted Cash Flow and Payout Ratio
                                                                
                                Quarter ended       Nine months ended
                           Sept. 30, Sept. 30,  Sept. 30, 2013 Sept.30,
                             2013       2012                     2012

For the Period                                        ($000's)

Cash provided by (used in)                                             
operating

  activities                  94,327  (149,203) (450,505)        80,390

Add (deduct):                                                          


Change in mortgages                                                 
accumulated for 
  sale or               (59,534)    183,115   544,773        10,962
securitization between
periods 
Adjusted Cash Flow ((1))      34,793     33,912    94,268        91,352 
Less: cash dividends on      (1,163)    (1,163)   (3,488)       (3,488)
preference shares  
Adjusted Cash Flow            33,630     32,749    90,780        87,864
available for common
shareholders 
Adjusted Cash Flow per
Common Share ($/share) (
(1))                            0.56       0.65      1.51          1.46 
Dividends declared on         20,990     19,239    61,968        56,719
Common Shares 
Dividends declared per          0.35       0.32      1.03          0.95
Common Share ($/share) 
Payout Ratio                     62%        58%       68%           65% 


                                                           

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 third quarter payout ratio was indicative of strong business 
performance as the pre-FMV EBITDA increase was also reflected in cash flow. 
During the third quarter, the Company crystalized $26.5 million of unrealized 
gains recorded in the second quarter of 2013. While this increased cash flow 
in the third quarter, the inflow was offset by First National's investment in 
securitization activities. This investment was larger than in previous 
quarters as the Company paid premiums for securitization-related debt due to 
the same bond yield movements that produced the large fair value gains in the 
second quarter of 2013. Given the upfront costs of $31.0 million associated 
with securitization in the third quarter, the Company is pleased with the 
payout ratio of 68% over the first nine months of 2013.

Outlook

Management considers the third quarter of 2013 a success. 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 $16 billion portfolio of 
mortgages pledged under securitization in order to maximize the Company's 
financial performance.

Conference Call and Webcast

 __________________________________________________
|October 30, 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 November 
7, 2013. To access the rebroadcast, please dial 416-640-1917 or 877-289-8525 
and enter passcode 4643825 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 $74 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.



SOURCE  First National Financial Corporation 
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 
To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/October2013/29/c8169.html 
CO: First National Financial Corporation
ST: Ontario
NI: FIN ERN CONF DIV  
-0- Oct/29/2013 21:00 GMT
 
 
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