First National Financial Corporation reports 2020 third quarter results, declares special dividend, increases dividend rate

Oct 27, 2020

Toronto, Ontario, October 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 nine months ended September 30, 2020. The Company derives virtually all of its earnings from its wholly owned subsidiary, First National Financial LP (“FNFLP” or “First National”).

Q3 Summary

  •  Mortgages under administration (“MUA”) increased 6% to a record $117.1 billion compared to $110.6 billion at September 30, 2019 and increased 8% annualized during the quarter
  • Revenue increased 3% to $373.8 million from $362.8 million in Q3 2019
  • Pre-FMV Income(1) increased 25% to $99.6 million from $79.8 million in Q3 2019 
  • Net income was $72.5 million ($1.20 per common share) compared to net income of $60.6 million ($1.00 per common share) in Q3 2019

Common Share Dividend Increase and Special Dividend Declaration

Today, the Board of Directors also announced an increase to the Company’s regular monthly dividend and the payment of a special dividend.Effective with the payment on December 15, 2020, the common share dividend will increase to $2.10 per share on an annualized basis from its current annualized rate of $1.95 per share. Additionally, a special common share dividend in the amount of $0.50 per share will be paid on December 15, 2020 to shareholders of record on November 30, 2020. This special payment reflects the Board’s determination that over the past year, First National has generated excess capital and can continue to fund its near-term growth opportunities from operations. 

Management Commentary

“In a year marked by the pandemic, First National has delivered strong results for customers, partners and shareholders through the committed efforts of our 1,131 employees from coast to coast,” said Stephen Smith, Chairman and Chief Executive Officer. “For customers and partners, we originated a record volume of mortgages. For single family borrowers, we helped those who needed it with payment deferrals. For shareholders, we leveraged our non-bank business model and advantages in technology to grow our market share in all segments but not at the expense of return on equity. We are very pleased that our performance has enabled the Company to pay a special dividend for the fourth consecutive year and increase the regular common share dividend rate for the sixth time in six years.” 

In the third quarter of 2020, new mortgage originations increased 36% to $7.6 billion from $5.6 billion in the same period a year ago, while total mortgage renewals increased 14% to $2.4 billion compared to $2.1 billion a year ago.

“Heading into Q3, management’s outlook improved and results for the period followed suit, and in some cases, exceeded our expectations,” said Moray Tawse, Executive Vice President. “Within single family, each of First National’s regional offices experienced double-digit growth in mortgage originations driven in part by consumer preference for the mortgage broker distribution channel and the Company’s growing share in that channel. In commercial, First National continued to benefit from demand for insured financing particularly in the multi-family apartment sector where we enjoy a leadership position. For both business segments, full credit goes to employees for remaining productive and efficient while working from home.”


Quarter ended

Nine months ended


September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

For the Period







  Income before income taxes





  Pre-FMV Income (1)





At Period end

  Total assets





  Mortgages under administration





 (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. The 2019 comparative figure has been revised to conform to the 2020 presentation.

Third Quarter Review

Third quarter single family residential segment mortgage originations of $5.9 billion were 42% or $1.7 billion higher than a year ago. Regionally, double digit growth was achieved in all markets. Québec and British Columbia, with new origination volume increases up 69% and 61%, respectively were the regional growth leaders. Management believes that single-family origination volumes reflected First National’s strong broker and investor relationships and its MERLIN technology and operating systems which enable physical distancing and efficient underwriting during the pandemic. Lower risk-free interest rates also encouraged home purchasing across the country. When combined with renewals of $1.9 billion, total single-family production was 34% or $2.0 billion higher compared to Q3 2019.

Third quarter 2020 commercial segment originations of $1.7 billion were 18% or $256 million higher than a year ago. This growth rate reflects the Company’s emphasis on insured multi-unit product, but the quarter also featured 15% growth in production of uninsured mortgages.  Commercial segment mortgage renewals of $406 million were 18% higher than a year ago, bringing total commercial production in the quarter to $2.1 billion compared to $1.8 billion a year ago, a 17% increase.  

The Company originated and renewed for securitization purposes $2.5 billion of single-family mortgages and $0.3 billion of multi-unit residential mortgages – compared to $1.4 billion and $0.2 billion respectively, a year ago.

Revenue is derived from the following activities:

  • Q3 2020 placement fees increased 41% to $98.4 million from $69.8 million a year ago reflecting higher mortgage volume with institutional investors and wider mortgage spreads, partially offset by a decrease in placements related to renewed mortgages as the Company elected to securitize more of these.  
  • Q3 2020 mortgage servicing income increased 5% to $46.0 million from $43.9 million a year ago due to growth in revenue earned on the Company’s underwriting and fulfillment processing services business.
  • Q3 2020 net interest revenue earned on securitized mortgages decreased 3% to $34.9 million from $35.9 million a year ago largely due the indirect consequences of the pandemic on securitization spreads and the cost of indemnities payable to NHA MBS debtholders when mortgages prepaid prior to their scheduled maturity dates.
  • Q3 2020 mortgage investment income decreased 31% to $15.5 million from $22.5 million a year ago due to the lower interest rate environment and lower balances of mortgages and loan investments related to the Company’s commercial bridge loan program.
  • Q3 2020 gains on deferred placement fee revenue increased 258% to $12.9 million from $3.6 million as a result of a wider-spread environment as well as higher volumes produced for these programs.

As a result of the above-noted growth, third quarter revenue increased 3% to $373.8 million from $362.8 million in the third quarter of 2019. The increase included changes in fair market value gains and losses related to interest-rate movements in the quarters. Excluding these amounts, revenue grew 4% to $375.2 million from $360.9 million in Q3 2019. This growth was largely a function of higher mortgage origination and wider mortgage spreads which fueled an increase in placement fee revenue.

Pre-FMV Income(1) increased 25% to $99.6 million from $79.8 million in Q3 2019 as increased revenue flowed through to the bottom line. 

Outstanding Securities

At September 30, 2020, and October 27, 2020, the Corporation had 59,967,429 common shares; 2,887,147 Class A preference shares, Series 1; 1,112,853 Class A preference shares; and 200,000 November 2024 senior unsecured notes outstanding.

Dividends and Dividend Payout Ratio

The Board declared common share dividends in the third quarter of 2020 of $29.2 million ($28.5 million in Q3 2019) reflecting a dividend increase in December 2019 that brought the annualized rate to $1.95 per share from $1.90 per share.

For the third quarter of 2020, the common share payout ratio was 41% compared to 48% in the 2019 third 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 40% in Q3 2020 compared to 49% in Q3 2019.

The Company also paid $0.7 million of dividends on its preferred shares in the third quarter of 2020 compared to $0.8 million in 2019 third quarter.

Mortgage Payment Deferrals

When First National reported for the second quarter, management described the nature of deferred mortgage payments and the need for cash resources to fund these assets. As of May 11, 2020, the Company had approved mortgage payment deferrals for approximately 13.9% of the Company’s single-family MUA eligible for such an approval. At October 23, 2020 this number had fallen significantly to stand at approximately 0.7% of the relevant MUA.


With COVID-19 uncertainties still prevalent, it is difficult to look too far ahead. However, management is very positive about the fourth quarter and the start of 2021. Expectations for the fourth quarter include: substantially higher seasonal residential origination; Commercial segment success in growing origination at higher spreads; and employee productivity from the Company’s work-from-home strategy. During the third quarter, the value of First National’s business model was further demonstrated. By designing systems that do not rely on face-to-face interactions during the pandemic, the Company’s business practices resonated with mortgage brokers and borrowers alike.

In the third quarter, the commercial segment benefited from reduced competition and First National increased its market share while experiencing wider spreads. Although more and more of the Company’s competitors are returning to the market, wider mortgage spreads are persisting. The single family segment experienced substantial growth in originations in part due to the disruption that COVID-19 created for traditional bank origination channels. On the funding side, there continues be strong demand from institutional investors as a result of the substantial amount of liquidity in the financial system. Securitization markets have normalized after a period of disruption at the beginning of the crisis. Much like its experience in 2009 coming out of the credit crisis, the Company is now benefiting from wider mortgage coupons relative to funding costs on new originations.  If wider spreads persist, the Company will continue to benefit.

The outbreak of COVID-19 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.

While it is not early in the crisis, there is still significant uncertainty about its duration and the extent of repercussions. Accordingly, it is not possible to reliably estimate the length and severity of COVID-19-related 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 $34 billion portfolio of mortgages pledged under securitization and $81 billion servicing portfolio and focus on the value inherent in its significant single-family renewal book.

Conference Call and Webcast


October 28, 2020 10:00 am ET   

(647) 427-7450 or (888) 231-8191

A taped rebroadcast of the conference call will be available until November 4, 2020 at midnight ET. To access the rebroadcast, please dial (416) 849-0833 or (855) 859-2056 and enter passcode 4969329 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 more than $117 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:  905-648-9354