Company Announcements

TORONTO , March 4, 2025 /CNW/ - 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 twelve months ended December 31, 2024. The Company derives virtually all of its earnings from its wholly owned subsidiary, First National Financial LP ("FNFLP" or "First National"), one of Canada's largest non-bank mortgage originators and underwriters.

Fourth Quarter Summary

• Revenue increased 19% to $600.1 from $503.4 million in Q4 of 2023
• Pre-FMV Income⁽¹⁾ decreased 3% to $74.8 million from $77.1 million in Q4 of 2023
• Net income was $63.0 million ($1.04 cents per share) compared to $44.2 million ($0.72 per share) in Q4 of 2023

Annual Results Summary

• Mortgages Under Administration ("MUA") increased 7% to a record $153.7 billion from $143.5 billion at December 31, 2023
• Revenue increased 10% to $2.2 billion from $2.0 billion in 2023
• Pre-FMV Income⁽¹⁾ decreased 10% to $290.3 million from $322.2 million in 2023
• Net income was $203.4 million ($3.33 cents per share) compared to $252.8 million ($4.15 per share) in 2023

Management Commentary
"First National's 2024 performance reflected the resilient nature of our business in the context of changing market and competitive conditions," said Jason Ellis, President and CEO. "This was particularly evident in the fourth quarter. With the support of our partners and hard work by our team, we responded well to a surge in available opportunities to grow total fourth quarter originations including renewals 27% year over year. This helped to offset relatively lower mortgage volumes in the previous three quarters. For shareholders, business resilience manifested itself in solid profitability, a 33% after tax Pre-FMV⁽¹⁾ return on shareholders' equity and the 18^th increase in our common share dividends in the past 18 years. As we prepare for what is expected to be a strong spring housing market in 2025, our goal is to demonstrate, once again, the value of a stable, resilient business model operated by a team committed to responsive, reliable service."

Fourth Quarter Performance Review

First National's MUA increased 7% to $153.7 billion at December 31, 2024 from $143.5 billion at December 31, 2023, or 8% on an annualized basis since September 30, 2024. At year end, single-family MUA was $95.8 billion, up 1% from $94.6 billion at December 31, 2023, while commercial MUA was $57.9 billion, up 18% from $49.0 billion a year ago.

For the fourth quarter, single-family mortgage origination (including renewals) was $6.3 billion, up 43% from $4.4 billion in the fourth quarter of 2023. This performance reflected higher mortgage commitments entering the fourth quarter of this year than last year as competition in the mortgage broker distribution channel normalized and borrowers responded to lower interest rates. First National's MERLIN technology and operating systems continued to support the efficiency and effectiveness of the residential team in mortgage underwriting across the country.

For Q4, commercial segment originations (including renewals) were $4.1 billion up 8% from $3.8 billion in the fourth quarter a year ago on demand for insured multi-unit property mortgages. First National continued to benefit from its status as a CMHC-Approved Lender and the commercial team's focus on providing financing solutions to commercial clients.

On a consolidated basis, originations (including renewals) were $37.5 billion in 2024, unchanged from 2023 as strong fourth quarter growth offset weaker volumes earlier in 2024.

Fourth quarter revenue increased 19% to $600.1 million from $503.4 million in Q4 2023. During the quarter, the Company generated:

• $58.4 million of net interest revenue earned on securitized mortgages (NII) compared to $58.0 million in the fourth quarter a year ago reflecting a growing portfolio of securitized mortgages  
• $61.7 million of placement fees, up 12% from $55.0 million a year ago due to a 9% increase in placement activity. Per-unit placement fees were similar year over year
• $65.3 million of mortgage servicing income, compared to $60.0 million a year ago, a 9% increase reflecting growth in our MUA
• $41.8 million of mortgage investment income compared to $38.0 million a year ago, a 10% increase primarily reflecting higher balances of mortgages accumulated for securitization
• $2.1 million of gains on deferred placement fees compared to $4.9 million a year ago, a 57% decrease as a competitive market made for tighter spreads on the mortgages underlying these fees.

Of the $10.4 billion of originations in the fourth quarter, $6.2 billion was placed with institutional investors and $4.0 billion was originated for the Company's own securitization programs.

For 2024, revenue was $2.2 billion, up 10% from $2.0 billion in 2023 largely reflecting the Company's decision to securitize more of its mortgage origination directly in recent years.  Please see the MD&A for details.

Fourth quarter income before income taxes was $85.6 million compared to $59.9 million a year ago, a 43% increase reflecting favourable capital markets related to the Company's interest rate hedges.  Pre-FMV Income⁽¹⁾, which excludes the impact of these changes, decreased 3% to $74.8 million from $77.1 million in the fourth quarter of 2023. This reflected lower deferred placement fees and a larger investment in commercial securitization which delays the recognition of revenue. This was offset by greater operational leverage in residential origination as growing volumes for placement created higher revenue with a fixed cost underwriting platform.

Dividends
The Board of Directors declared common share dividends of $177.4 million or $2.96 per share in 2024 compared to $189.4 million or $3.16 per share in 2023. Both years included a special dividend. Excluding the special dividends declared of $0.50 per share in December 2024 and $0.75 per share in 2023, the total common share payout ratio was 89% in 2024 and 76% in 2023. In both years, the Company also recorded gains and losses on changes in the fair value of financial instruments. Generally, management does not consider such gains and losses in its dividend payment policy unless they are exceptionally large or protracted. If such gains and losses on financial instruments are excluded, the regular common share dividend payout ratio (excluding the payment of special dividends) would have been 71% in 2024 and 62% in 2023.

The Company also paid dividends of $3.9 million on its preferred shares in both years.

During the fourth quarter of 2024, the Board increased the Company's regular monthly dividend to an annualized rate of $2.50 per common share from $2.45 per share annualized. Dividends paid in the fourth quarter of 2024 amounted to $67.2 million compared to $81.5 million in the fourth quarter of 2023. Excluding special dividends in both years, the regular common share dividend payment in the fourth quarter of 2024 was $37.9 million compared to $36.5 million a year ago.

First National, for the purposes of the Income Tax Act (Canada) and any similar provincial legislation, advises that its dividends declared will be eligible dividends, unless otherwise indicated. This includes the special common share dividend paid in December 2024.

Outstanding Securities
At December 31, 2024 and March 4, 2025, the Corporation had outstanding: 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 2025 senior unsecured notes; 200,000 September 2026 unsecured notes; and 200,000 November 2027 senior unsecured notes.

Outlook
In the short term, the Company expects increased year-over-year single-family origination in the next two quarters as commitment levels were higher than those in late 2023. With the Bank of Canada expected to continue cutting overnight rates over the next six months, mortgage rates are expected to move lower which may increase home buying activity. Management believes this backdrop may provide confidence to borrowers who have remained on the sidelines. This outlook, however, must be considered alongside the potential negative impact of U.S. tariffs. On February 1, 2025, U.S. President Donald Trump signed three executive orders implementing a new tariff policy, imposing a 25% duty on merchandise imports from Mexico and Canada — impacting nearly US$900 billion in trade. The U.S. administration commenced such tariffs on March 4, 2025, but it remains uncertain on the extent of the impact to the economy, employment, and the housing market in Canada. At this time, there is still some uncertainty on the impact of these announced tariffs and the potential reaction by the Canadian government. Management believes these changes may affect Canada negatively and could have an unfavorable impact to the Company, particularly if employment is affected in future periods.

The Company continued to see year over year growth of single-family mortgage commitments in the fourth quarter of 2024. Although this growth rate moderated toward year end, management expects first quarter origination volumes to exceed those from the same quarter last year. For its commercial segment, the Company anticipates steady new origination volumes as government incentives support the creation of multi-unit housing and mortgage rates come down with expected BoC rate cuts. These initiatives, including the increase of the Canada Mortgage Bonds program from $40 to $60 billion, not only enhanced the level of financing available for multi-unit mortgages, but also removed uncertainties about such programs in the future. These developments have created a reliable and stable source of funds for the Company to originate CMHC insured multi-unit mortgages. However, with the increased certainty of these programs, other lenders have entered this market, and this competition has moved spreads tighter from the levels available in the first half of 2024. 

In both business segments, management is confident that First National will remain a competitive lender in the marketplace.

First National is well prepared to execute its business plan and is confident that the strong relationships it has with mortgage brokers and diverse funding sources are enduring competitive advantages. In 2025, the Company expects to continue to enjoy the value of its goodwill with broker partners earned over the last 35+ years. With diverse institutional investors relationships and solid securitization markets, the Company also has access to consistent and reliable sources of funding.

Going forward, the Company will generate income and cash flow from its now $44 billion portfolio of mortgages pledged under securitization and $106 billion servicing portfolio while focusing on the value inherent in its significant single-family renewal book.

Conference Call and Webcast

A taped rebroadcast of the conference call will be available until March 12, 2025 at midnight ET. To access the rebroadcast, please dial (888) 660-6345 or (289) 819-1450 and enter passcode 96994 followed by the number sign. The webcast is archived at www.firstnational.ca for three months.

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, 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 $153 billion in mortgages under administration, First National is one of Canada's largest non-bank mortgage originators and underwriters and is among the top three lenders in market share in the mortgage broker distribution channel.  For more information, please visit www.firstnational.ca.

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 EBITDA" 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 ''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.

SOURCE First National Financial Corporation