TORONTO, April 26, 2016 /CNW/ - First National
Financial Corporation (TSX: FN, TSX: FN.PR.A, TSX: FN.PR.B)
(the "Company" or "FNFC") today announced its financial results for
the first quarter ended March 31,
2016. The Company derives 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 year over year
by 8% to a record $94.3 billion from
$87.0 billion at March 31, 2015
- Mortgage originations ahead 8% to $2.9
billion from $2.7 billion in
the 2015 first quarter
- Revenue up 38% to $231.4 million
from $167.5 million in the 2015 first
quarter
- Net income $37.3 million
($0.59 per common share) compared to
net loss of $3.5 million (loss of
$0.09 per common share) in the 2015
first quarter
- Pre-FMV EBITDA(1)up 48% to $56.8 million compared to $38.4 million in the 2015 first quarter
Common Share Dividend
Based on the Company's
consistently strong performance and outlook, the Board of Directors
today increased the common share dividend to the annual equivalent
of $1.70 per share, an almost 10%
increase over the current annualized rate of $1.55 per share, effective with the dividend to
be paid on June 15, 2016.
Management Commentary
"First National continued to
perform at a high level in the first quarter and responded well to
the opportunities available in both residential and commercial
mortgage markets," said Stephen
Smith, Chairman and CEO. "Consistently positive results
allowed our Board to increase the common share dividend rate for
the 9th time in the 10 years we've been a publicly
traded company. We are proud of this track record and the way it
was earned – through attentive, technology-enabled service and a
capital-efficient business model."
"We're very pleased with the pace of mortgage originations in
the first quarter," said Moray Tawse, Executive Vice President.
"Single family originations increased $100
million or 3% year over year as First National effectively
offset a 10% reduction in volumes out of our Calgary office, proving once again the value
of our broad geographic footprint. Commercial originations
increased $156 million, or 21% year
over year, further solidifying First National's position as
Canada's largest commercial
mortgage lender. Clearly, this was a great start to 2016."
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Quarter
ended
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March
31,
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March
31,
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2016
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2015
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For the
Period
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($
000's)
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Revenue
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231,395
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167,460
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Income (loss) before
income taxes
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50,691
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(4,899)
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Pre-FMV EBITDA
(1)
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56,819
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38,439
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At Period
end
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Total
assets
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28,194,301
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26,638,048
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Mortgages under
administration
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94,275,930
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86,998,747
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(1)
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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. See also the section "Non-GAAP Measures" in this news
release for additional detail.
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Q1 2016 Summary
First National's MUA increased 8% to $94.3 billion at quarter end 2016 from
$87.0 billion at March 31, 2015. Between December 31, 2015 and March 31, 2016, MUA grew at an annualized rate of
2%, a decent showing given housing market seasonality.
Single-family mortgage originations increased 3% to $2.0 billion from $1.9
billion in the first quarter of 2015, despite 10% lower
originations from the Company's Calgary office on account of an oil-related
downturn in Alberta and
Saskatchewan's housing markets.
Single family mortgage renewals amounted to $929 million, up from $724
million a year ago on more renewal opportunities. Commercial
segment originations increased 21% to $886
million from $730 million in
the same period of 2015, while commercial mortgage renewals
amounted to $162 million compared to
$246 million. The Company
originated and renewed for securitization purposes $1.4 billion of mortgages in the first quarter in
order to take advantage of profitable funding spreads.
Revenue increased 38% to $231.4
million from $167.5 million in
the first quarter of 2015 due to lower losses on financial
instruments which increased revenue by $37.4
million over last year. Placement fee revenue was also
$18.6 million higher than a year ago
as the Company increased the volume of mortgages placed with
institutions in the first quarter by 138% compared to the same 2015
period. Securitized mortgages amounted to $25 billion at March 31,
2016, up 9% from $23 billion a
year ago.
Income before income taxes was $50.7
million compared to a loss before income taxes of
$4.9 million in the first quarter of
2015. The year-over-year change primarily reflected a $41.1 million loss on financial instruments used
for hedging purposes in 2015 compared to a loss of $3.7 million on financial instruments in the
first quarter this year. The net change in losses between 2016 and
2015 was a $37.4 million improvement.
The balance of the increase, or $18.2
million, was due to positive operating performance.
Without the impact of these losses on financial instruments in
the comparative periods, the Company's Pre-FMV EBITDA(1)
increased 48% to $56.8 million from
$38.4 million a year ago. The change
reflected increased earnings from the Company's securitization
program and higher net placement fees on residential
origination.
Dividends
The Board declared common share dividends in the first quarter
of 2016 based on an annualized rate of $1.55 per share. On an after-tax Pre-FMV basis,
the dividend payout ratio was 61% compared to 94% in the first
quarter of 2015. At its meeting today, the Board of Directors
increased the common share dividend, effective with the
June 15, 2016 payment, to an
annualized equivalent of $1.70 per
share.
The Board also declared regular quarterly dividends on the 4.65%
Class A Preference shares for the period January 1 to March 31, 2016. The dividend of
$0.290625 per share was paid on
April 15, 2016 to holders of record
at the close of business on March 31,
2016.
Preference Shares
On February 24, 2016, the Company
announced that it would not exercise its right to redeem the
4,000,000 Class A Series 1 preference shares issued in 2011. It
also advised shareholders of their rights under the shares for a
one-for-one conversion from Series 1 shares, which have a fixed
rate dividend, into Series 2 shares which have a floating rate
dividend. Pursuant to these rights, a portion of Series 1
shareholders elected to convert 1,112,853 of the Series 1 shares
into Series 2 shares on the conversion date.
Accordingly, effective April 1,
2016, 1,112,853 Series 1 shares converted to Series 2 shares
leaving 2,887,147 Series 1 shares outstanding. The Series 1 shares
will continue to trade as FN.PR.A on the TSX, while the Series 2
shares began trading as FN.PR.B on April 1,
2016.
The annual dividend on the Series 1 shares was reset to a rate
of 2.79% effective April 1, 2016 for
the five years to March 31, 2021.
Both the Series 1 and Series 2 shares pay quarterly dividends,
subject to Board of Director approval and are redeemable at the
discretion of the Company such that after the second five-year term
ending on March 31, 2021, the Company
can choose to extend the shares for another five-year term at a
fixed spread (2.07%) over the relevant index (5-year Government of
Canada bond yield for any Series 1
shares or the 90 day T-Bill rate for any Series 2 shares).
Effective April 1, 2016, the
Corporation had: 59,967,429 common shares; 2,887,147 Class A
preference shares, Series 1; 1,112,853 Class A preference shares,
Series 2; and, 175,000 April 2020
notes outstanding.
Outlook
The Company expects Canada's
low interest rate environment to continue in 2016. Low rates will
keep mortgage affordability at favourable levels and mitigate
refinancing risk.
First National will focus on the significant value of renewal
opportunities and its partnerships with institutional customers.
Management expects the Company to continue to generate cash flow
from its $25 billion portfolio of
mortgages pledged under securitization and $69 billion servicing portfolio that will
maximize financial performance. First National also expects its
underwriting and fulfillment processing services business to
continue to add to earnings as mortgages processed increase in
response to the Company's superior service levels to the mortgage
broker distribution channel.
Conference Call and Webcast
April 27, 2016 8:30
am ET
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Participant
Numbers
416-204-9269
800-499-4035
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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 of the conference call will be available to
listeners until 11 am ET on
May 4, 2016. To access the
rebroadcast, please dial 647-436-0148 or 888-203-1112 and enter
passcode 1126457 followed by the number sign. The webcast is also
archived at www.firstnational.ca for three months.
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, TSX: FN.PR.A,
TSX:FN.PR.B) 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 $94
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.
1 Non-GAAP Measures
The Company uses IFRS as its accounting framework. IFRS are
generally accepted accounting principles (GAAP) for Canadian
publicly 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" and
"After tax Pre-FMV Dividend Payout Ratio" 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