First National Financial LP

First National Financial Corporation Reports Second Quarter 2021 Results

Jul 27, 2021

Toronto, Ontario, July 27, 2021 – 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 three and six months ended June 30, 2021. The Company derives virtually all of its earnings from its wholly owned subsidiary, First National Financial LP (“FNFLP” or “First National”).

Q2 Summary

  • Mortgages under administration (“MUA”) increased 6% to a record $121.5 billion compared to $114.9 billion at June 30, 2020
  • Revenue increased 6% to $365.1 million from $344.6 million in Q2 2020
  • Pre-FMV Income(1) decreased 6% to $71.2 million from $75.5 million in Q2 2020 due to the allocation of more origination volume to securitization
  • Net income increased 3% to $52.4 million ($0.86 per common share) compared to $50.8 million ($0.84 per common share) in Q2 2020

Management Commentary

“Second quarter performance demonstrates the strength of our business model, exceptional market demand for mortgages in a robust real estate market and the extraordinary efforts of the First National team,” said Stephen Smith, Chairman and Chief Executive Officer. “These results, including a 56% year-over-year increase in total mortgage production, were delivered even as our people remained in work-from-home mode because of the pandemic. We appreciate their sacrifices and commitment to the mortgage broker community, our investing partners and First National’s growing customer base. On a healthy increase in revenues, and despite a decision to allocate more origination volume to securitization with a commensurate impact on short-term profitability, earnings were strong and supported the recent increase in our common share dividend during Q2. With investments in higher MUA and our securitized portfolio, we are well positioned for the future.”

In the second quarter of 2021, new mortgage originations increased 56% to $10.3 billion from $6.6 billion a year ago, while total mortgage renewals increased 8% to $2.7 billion from $2.5 billion a year ago.

“In all parts of the business, production was well ahead of Q2 last year,” said Moray Tawse, Executive Vice President. “Single-family mortgage originations were 71% higher, a reflection of a strong market, First National’s market share in the mortgage broker channel built on long-term relationships and efficient, effective execution. Commercial mortgage originations were 25% above last year as we benefitted from institutional appetite for conventional term loans, which augmented the core insured mortgage products we provide as a CMHC-approved lender. We are very pleased with these results and grateful to the team for rising to the challenge for our customers.”

  Quarter ended Six months ended
30, 2021
30, 2020
30, 2021
30, 2020
For the Period ($000's)
  Revenue 365,118 344,581 701,610 619,231
  Income  before income taxes 70,101 68,944 141,576 65,689
  Pre-FMV Income (1) 71,218 75,506 135,364 128,427
At Period end
  Total assets 41,727,249 39,040,298 41,727,249 39,040,298
  Mortgages under administration 121,537,940 114,864,139 121,537,940 114,864,139

 (1)  This non-IFRS measure adjusts income before income taxes by eliminating the impact of changes in fair value by adding back losses on the valuation of financial instruments (except those on mortgage investments) and deducting gains on the valuation of financial instruments (except those on mortgage investments)  

Second Quarter Review

Second quarter single-family mortgage originations of $7.6 billion were 71% or $3.2 billion higher than a year ago. Management believes that growth in single-family originations reflected several factors including First National’s strong mortgage broker and investor relationships, its MERLIN technology and operating systems that are purpose-built for physical distancing and enabled efficient underwriting during the pandemic and low mortgage rates that have encouraged home purchasing activity across the country. Single family mortgage renewals of $1.8 billion were 6% or $0.1 billion lower than a year ago, reflecting available renewal opportunities.  

Second quarter commercial segment originations of $2.7 billion were 25% or $0.5 billion higher than a year ago as demand for conventional lending picked up to augment insured mortgage volumes. Commercial segment mortgage renewals of $869 million were 70% or $359 million higher than a year ago.  

The Company originated and renewed for securitization purposes approximately $3.2 billion of single-family mortgages and $1.1 billion of multi-unit residential mortgages compared to $2.3 billion and $0.5 billion, respectively in 2020. 

Revenue within the business is derived from the following activities:

  • Q2 2021 placement fees increased 1% to $89.2 million from $88.7 million a year ago due to increased origination volumes sold to third parties, lower revenue per unit compared to 2020 and a shift in allocation to the Company’s own securitization programs. 
  • Q2 2021 mortgage servicing income increased 35% to $55.3 million from $41.0 million a year ago due to growth in revenue from underwriting and fulfillment processing services.
  • Q2 2021 net interest revenue earned on securitized mortgages increased 82% to $38.3 million from $21.0 million a year ago on growth in the Company’s portfolio pledged under securitization and the pandemic’s impact on securitization margin and single-family mortgage prepayments a year ago.
  • Q2 2021 mortgage investment income decreased 6% to $16.0 million from $17.0 million a year ago due to the lower interest rate environment which resulted in lower amounts of interest earned while mortgages were accumulated for securitization on First National’s balance sheet.
  • Q2 2021 gains on deferred placement fee revenue decreased 20% to $5.2 million from $6.5 million as a result of the Company’s decision to securitize more of these mortgages directly.

Overall second quarter revenue increased 6% to $365.1 million from $344.6 million in the second quarter of 2020. The increase reflected changes in the fair market value of financial instruments related to interest-rate movements in the quarters. Excluding these amounts, revenue grew 4% to $366.3 million from $352.1 million in Q2 2020. This positive change was the result of growing revenues from third-party mortgage underwriting and fulfillment processing.

Pre-FMV Income(1) was $71.2 million, down 6% from $75.5 million in Q2 2020 largely due to a shift in funding strategy to allocate more origination volume to securitization rather than institutional placement. The Company believes this shift is economically more favourable even though securitization delays the earning process to future periods under accounting rules. Additionally, tighter mortgage spreads in 2021 compared to 2020 had a negative impact on earnings.

Outstanding Securities

At June 30, 2021, and July 27, 2021, the Company had 59,967,429 common shares; 2,984,835 Class A preference shares, Series 1; 1,015,165 Class A preference shares, Series 2; 200,000 November 2024 senior unsecured notes; and 200,000 November 2025 senior unsecured notes outstanding.


The Board declared common share dividends in the second quarter of 2021 of $34.0 million ($29.2 million in Q2 2020) reflecting an increase in the regular monthly dividend paid in December 2020 and another increase, effective with the payment on June 15, 2021, that brought the annualized common share dividend rate to $2.35 per share.

For the quarter ended June 30, 2021, the common share payout ratio was 66% compared to 58% in the 2020 second quarter. Excluding gains and losses on financial instruments (which management does not consider appropriate as a determinant of its dividend policy), the after tax Pre-FMV Dividend Payout Ratio(1) was 65% compared to 53% in Q2 2020. 


With the strong results of the second quarter of 2021, management remains positive about the remainder of 2021. In the short term, the expectation for the next quarter includes: residential origination that is comparable to the 2020 third quarter, commercial segment success in growing origination, and employee productivity from the Company’s work-from-home strategy. The second quarter of 2020 was the start of the economic recovery following the pandemic-related economic turmoil experienced in the first quarter of 2020. Accordingly, growth rates in the first six months of 2021 reflected a 2020 comparative period highlighted by significant economic uncertainty and financial disruption. In the remaining six months of 2021, comparisons will be made to the last two quarters of 2020 that featured exceptionally strong real estate markets.

During the pandemic, the value of First National’s business model has been demonstrated. By designing systems that do not rely on face-to-face interactions, the Company’s business practices have resonated with mortgage brokers and borrowers alike during this period. In 2021, the Company has adhered to this model and will continue to benefit from the record MUA generated in 2020. With the steady distribution of vaccines across the nation, the economic effects of COVID-19 should slowly diminish. Despite the length of this transition, First National is set up to execute its business plan. In 2021, the Company expects to enjoy the value of the goodwill with its broker partners that it has built over the last 30+ years and reinforced over the last 12 months. On the funding side, there continues to be strong demand from institutional investors as a result of the substantial amount of liquidity in the financial system. Securitization markets are robust and continue to provide consistent and reliable funding for the Company. 

While it is not early in the crisis, there is still significant uncertainty about its duration and the extent of repercussions. The outbreak of COVID-19 and its variants has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and physical distancing, have caused material disruption to businesses globally, resulting in an economic recession. Global equity markets have experienced significant volatility. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the long-term efficacy of the government and central bank interventions. It is still not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company and its operating subsidiaries in future periods.

The Company is confident that its strong relationships with mortgage brokers and diverse funding sources will continue to set First National apart from its competition. The Company will continue to generate income and cash flow from its $33 billion portfolio of mortgages pledged under securitization and $86 billion servicing portfolio and focus on the value inherent in its significant single-family renewal book.  

Conference Call and Webcast

July 28, 2021 10:00 am ET     

 (416) 764-8609 or (888) 390-0605

A taped rebroadcast of the conference call will be available until August 4, 2021 at midnight ET. To access the rebroadcast, please dial (416) 764-8677 or (888) 390-0541 and enter passcode 983705 followed by the number sign. The webcast is also archived at for three months. 

Complete consolidated financial statements for the Company as well as management’s discussion and analysis are available at and at

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 over $121 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

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 Income” 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.

For further information:

Robert Inglis
Chief Financial Officer
First National Financial Corporation
Tel: 416-593-1100

Ernie Stapleton
Fundamental Creative Inc.
Tel: 905-483-5331