First National Reports First Quarter 2012 Results
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Solid Growth in Core Financial Measures
TORONTO, May 1, 2012 /CNW/ - First National Financial Corporation (TSX: FN) (the "Company" or "FNFC") today announced its financial results for the first quarter ended March 31, 2012. The Company derived all of its earnings from its wholly-owned subsidiary, First National Financial LP ("FNFLP" or "First National").
First National Financial's Q1 2012 Results Compared to Q1 2011:
- Mortgages under administration up 12% year-over-year to $60.9 billion
- Mortgage originations increased by 1% to $2.5 billion from $2.4 billion
- Revenue increased by 23% year-over-year from $108.8 million to $134.0 million
- Net income increased 30% to $26.7 million from $20.5 million
- Income before income taxes increased 33% to $36.2 million from $27.2 million
- Pre-FMV EBITDA(1) increased 13% to $31.2 million from $27.6 million
"The global economic outlook turned slightly positive during the first quarter of 2012. This affected interest rates on Government of Canada bonds, which began to rise after falling precipitously at the end of 2011," said Stephen Smith, Chairman and President. "Despite the rising interest rate environment, mortgage rates remained at historically low levels which helped the Canadian real estate market as borrowers acted to take advantage of these rates."
"For the next quarter, Management sees overall origination volumes exceeding the levels recorded in the 2011 comparable quarter as first quarter commitments become funded mortgages and the Company's market share in the broker channel increases," said Moray Tawse, Vice President, Mortgage Investments. "The Company is also pleased to report its MUA, which passed the $60 billion milestone in the quarter."
| Quarter ended | |||||||||||||||||
| March 31, 2012 |
March 31, 2011 |
||||||||||||||||
| For the Period | ($ 000's) | ||||||||||||||||
| Revenue | 133,965 | 108,798 | |||||||||||||||
| Income before income taxes | 36,219 | 27,192 | |||||||||||||||
| Pre-FMV EBITDA (1) | 31,227 | 27,579 | |||||||||||||||
| At Period end | |||||||||||||||||
| Total assets | 13,224,456 | 9,261,178 | |||||||||||||||
| Mortgages under administration | 60,873,875 | 54,416,711 | |||||||||||||||
| 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 2012 Results
First National's mortgages under administration totalled $60.9 billion at March 31, 2012, up from $54.4 billion at March 31, 2011, an increase of 12%; growth from December 31, 2011, when mortgages under administration were $59.6 billion, was 2.2%, an annualized increase of 9%.
Total single-family originations increased by 12% in the first quarter of 2012 compared to 2011. The multi-unit residential and commercial segment slowed down as the real estate market was sluggish such that volumes decreased by 28% to $472 million from $655 million in 2011. Overall, origination was up 1% comparing the first quarter of 2012 to 2011.
For the first quarter of 2012, revenue increased to $134.0 million from $108.8 million in 2011. Net income increased to $26.7 million from $20.5 million in the first quarter of 2011. Income before income taxes increased 33% to $36.2 million from $27.2 million. The increase in earnings was due to an increase of $5.3 million in net interest on securitized mortgages which flowed directly through to earnings. In the quarter, the Company's earnings were also augmented by $7.1 million of favourable gains on financial instruments which were $4.6 million in excess of the quarterly gains recorded in the 2011 first quarter. Pre-FMV EBITDA, which eliminates the impact of gains and losses on financial instruments to normalize income, increased 13% to $31.2 million from $27.6 million. The increase was primarily due to the growth of net interest - securitized mortgages described above.
Determination of Adjusted Cash Flow and Payout Ratio
The Company paid dividends in the first quarter of 2012 based on an annual rate of $1.25 per share. Compared to cash generated by operations, the payout ratio for the first quarter of 2012 was 103% as determined below:
| Quarter ended | |||||||||||
| March 31, 2012 |
March 31, 2011 |
||||||||||
| For the Period | ($ 000's) | ||||||||||
| Cash provided by (used in) operating activities | 127,628 | (246,473) | |||||||||
| Add (deduct): | |||||||||||
| Cash provided (used) related to pre - | |||||||||||
| amalgamation shareholders of FNFC | — | (17,635) | |||||||||
| Change in mortgages accumulated for | |||||||||||
| sale or securitization between periods | (108,461) | 274,851 | |||||||||
| Adjusted Cash Flow (1) | 19,167 | 10,743 | |||||||||
| Less: cash dividends on preference shares | (1,163) | — | |||||||||
| Adjusted Cash Flow available for common shareholders | 18,004 | 10,743 | |||||||||
| Adjusted Cash Flow per Common Share ($/share) (1) | 0.30 | 0.18 | |||||||||
| Dividends declared on common shares | 18,740 | 18,740 | |||||||||
| Dividends declared per common share ($/share) | 0.31 | 0.31 | |||||||||
| Payout Ratio | 103% | 172% | |||||||||
| 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. 2011 ratio restated to reflect current presentation in the consolidated statement of cash flows. |
Generally, in the first quarter of 2012, the Company paid out the cash that it earned from operations. While the Company recorded $7.1 million of gains on financial instruments in the quarter, most of those were unrealized gains. In fact, the Company recorded $4.3 million of realized losses and $11.4 million of unrealized gains in the quarter. The cash value of the gains will be realized by the Company in future quarters as hedges are closed out on securitization and interest spread is received. Without the affect of these realized losses, the payout ratio would have been 83% which is closer to management's target ratio. The 2011 comparative is unusually large due to the cash disbursements related to the conversion to a corporation.
Conference Call and Webcast
| Conference Call and Webcast | May 2, 2012 10:00 a.m. ET |
| Participant Numbers | 416-644-3414 or 1-877-974-0445 |
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 9, 2012. To access the rebroadcast, please dial 416-640-1917 or 1-877-289-8525 and enter passcode 4532305#
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 over $60 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 has adopted 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.
Rob Inglis
Chief Financial Officer
First National Financial Corporation
Tel: 416-593-1100
Email: [email protected]
Steve Wallace
Vice President
Barnes Communications Inc.
Tel: 416-367-5000
Email: [email protected]
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