First National Financial Corporation Reports Fourth Quarter, Annual 2023 Results
2023 Annual Summary
- Mortgages under administration ("MUA") were a record
$143.5 billion compared to$131.0 billion atDecember 31, 2022 - Revenue was
$2.0 billion compared to$1.6 billion in 2022 - Net income was
$252.8 million ($4.15 per share), compared to$197.7 million ($3.25 per share) in 2022 - Pre-FMV Income(1) was
$322.1 million compared to$208.8 million in 2022
Fourth Quarter 2023 Summary
- Revenue was
$503.4 million compared to$414.8 million a year ago - Net income was
$44.2 million ($0.72 per share), compared to$42.7 million ($0.70 per share) a year ago - Pre-FMV Income(1) was
$77.1 million compared to$59.5 million a year ago
Management Commentary
"First National had a very successful year in 2023," said
Performance Review
|
Quarter Ended |
Year ended |
||
|
|
2022 |
|
2022 |
For the Period |
($000s) |
|||
Revenue |
503,441 |
414,785 |
2,024,285 |
1,574,293 |
Income before income taxes |
59,895 |
58,269 |
343,907 |
269,082 |
Pre-FMV Income (1) |
77,125 |
59,492 |
322,183 |
208,762 |
At Period End |
|
|||
Total assets |
45,957,399 |
43,763,672 |
45,957,399 |
43,763,672 |
Mortgages under administration |
143,546,966 |
131,000,635 |
143,546,966 |
131,000,635 |
(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). |
First National's MUA increased 10% to
For the fourth quarter of 2023, single-family mortgage origination was
Fourth quarter 2023 commercial mortgage originations were
Of the Company's
Fourth quarter 2023 revenue of
-
$58 million of net interest revenue – securitized mortgages, 26% or$12 million higher than a year ago due to portfolio growth, stable interest rates and a successful Excalibur securitization program -
$38 million of mortgage investment income, 12% or$4 million higher than a year ago due primarily to the higher interest rate environment, which resulted in more interest income earned on both the mortgage loan investment portfolio and mortgages accumulated for securitization - $60 million of mortgage servicing income, 24% or
$12 million higher than a year ago primarily due to higher MUA and growth in volumes for third party underwriting customers -
$55 million of placement fees, 4% or$2 million higher than the fourth quarter a year ago on higher volumes placed with institutional investors in the commercial segment -
$4.9 million of gains on deferred placement fees, approximately the same as a year ago
For 2023, revenue increased 29% to
These increases were partially offset by an 8% year-over-year reduction in placement fees, which amounted to
For the fourth quarter, income before income taxes increased to
For 2023, income before income taxes increased 28% to
Net income for the fourth quarter of 2023 was
Dividends
The Board declared common share dividends of
For 2023, the regular common share payout ratio (excluding the special dividend) was 58% compared to 73% in 2022. Excluding the special dividend in 2023, as well as recorded gains and losses on account of changes in fair value of financial instruments in both years, the dividend payout ratio for 2023 would have been 62% compared to 94% in 2022. Generally, management does not consider such gains and losses in the determination of its dividend policy. The regular common share dividend payout ratio (excluding the special dividend) for the fourth quarter of 2023 was 84% (86% in the fourth quarter of 2022). Excluding the special dividend and gains and losses on financial instruments, fourth quarter 2023 payout ratio would have been 64% compared to 84% in the fourth quarter of 2022.
First National paid
For the purposes of the Income Tax Act (
At
Outlook
In the short term, the Company expects significantly lower single-family origination to start 2024 than in the 2023 comparative quarters due to persistent housing affordability challenges and an increasingly competitive marketplace. Although economic indicators have shown decreasing rates of inflation, it is still above the BoC's target rate of 2% and accordingly, the BoC has yet to reverse any of its recent rate hikes. Prevailing market conditions have affected prospective buyers such that like the last quarter of 2023, the start of 2024 will show reduced activity. In the longer term, higher immigration levels are expected to support demand in the housing market. For its commercial segment, the Company anticipates a strong start for origination as recent government announcements have supported the creation of multi-unit housing. These initiatives, including the increase of the CMB program from
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
Conference Call and Webcast
Webcast |
(888) 390-0605 or (416) 764-8609 |
A taped rebroadcast of the conference call will be available until
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
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 ''Risks 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.
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
Reconciliation of Quarterly Determination of Pre-FMV Income1
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(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). See Key Performance Indicators section in this MD&A. |
SOURCE