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First National Financial Corporation reports 2020 second quarter results

Jul 27, 2020

Toronto, Ontario, July 27, 2020 – First National Financial Corporation (TSX: FN, TSX: FN.PR.A, TSX: FN.PR.B) today announced its financial results for the three and six months ended June 30, 2020. 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 5% to a record $114.9 billion compared to $109.6 billion at June 30, 2019
  • Revenue increased 3% to $344.6 million from $335.2 million in Q2 2019
  • Pre-FMV Income(1) increased 12% to $75.5 million from $67.6 million in Q2 2019
  • Net income was $69.8 million ($0.84 per common share) compared to net income of $44.2 million ($0.72 per common share) in Q2 2019

Management Commentary

“First National performed well in the second quarter as our employees from coast-to-coast dealt effectively with the COVID-19 challenge,” said Stephen Smith, Chairman and Chief Executive Officer. “By quickly adjusting to the demands of working remotely, our team was rewarded with healthy year-over-year growth in total production of 6%. I thank all employees for their essential contributions to our single family and commercial businesses – your dedication has been at the heart of our results. The Company’s diverse funding sources also proved, once again, to be invaluable in sustaining our ability to offer competitive mortgage products across the country. Before the end of the quarter, securitization markets returned to normal and there is now substantial liquidity available in the capital markets, which was not the case earlier this year. As a result of mortgage origination growth and wider mortgage spreads, all of First National’s profitability metrics were much higher than a year ago. After recording a small fair market value driven loss to open 2020, the strong turnaround in the second quarter is indicative of the strength and resiliency of our business model.”
 
In the second quarter of 2020, new mortgage originations increased 2% to $6.6 billion from $6.5 billion in the same period a year ago, while total mortgage renewals increased 19% to $2.5 billion compared to $2.1 billion a year ago.
 
“Q2 was a very productive period with results that exceeded our expectations,” said Moray Tawse, Executive Vice President. “Within single family, the team drove mortgage originations higher by 15% year over year which we attribute to a number of factors which fueled growth in First National’s market share of the mortgage broker channel. We give a lot of credit for this to the popularity of MERLIN, a technology that is particularly valuable to our partners during this period of physical distancing. On the commercial side, we increased CMHC insured multi-unit origination by 32% to offset a substantial decline in demand for uninsured product. While total commercial originations of $2.1 billion were 17% below last year, we consider this a strong performance under very difficult circumstances. It’s only a matter of time before the conventional market returns and we will be ready.”