First National reports fourth quarter and nine month results



    
    /NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN
    THE U.S./

    Highlights:
    -   Mortgages under Administration up 31 per cent year over year
    -   Nine month revenue up 46 per cent year over year
    -   Nine month adjusted EBITDA(*) up 24 per cent year over year
    -   Distributions declared to public unitholders totalled $6.1 million
    

    TORONTO, March 1 /CNW/ - First National Financial Income Fund (TSX:
FN.UN) (the "Fund") today announced its financial results for the period ended
December 31, 2006. The Fund commenced operations upon completion of its
initial public offering on June 15, 2006 and has a 19.97 per cent indirect
interest in First National Financial LP ("FNLP").
    "We closed 2006 with another strong period of revenue growth resulting
from increased mortgages under administration, higher origination volume and
increased securitization activities," said Stephen Smith, President, FNLP.
"This reflects the strength of our strategy and our team's success in
executing it for the benefit of unitholders."
    "We are pleased with the Fund's continued performance," said Moray Tawse,
Vice President, Mortgage Investments, FNLP. "We look forward to further
opportunities for growth in 2007 as we continue to leverage our strengths to
create value for unitholders."

    
    Selected Financial Highlights
    -------------------------------------------------------------------------
                                 Three months ended       Nine months ended
                                December    December    December    December
                                31, 2006    31, 2005    31, 2006    31, 2005
                                       ($ thousands except percent amounts)
    For the Period
    Revenue                       49,551      34,399     156,427     107,140
    Net income                    18,038       8,080      47,414      25,848
    Adjusted EBITDA(1)            18,328      13,014      51,321      41,295
    Less:
      Public company expenses          -         250         250         750
      Maintenance capital
       expenditures                  124         117         539         462
    Distributable cash(2)         18,204      12,647      50,532      40,083
    At Period end
    Total assets                 528,116     393,016     528,116     393,016
    Mortgages under
     administration           24,359,481  18,607,866  24,359,481  18,607,866
    -------------------------------------------------------------------------

    Note:
    (1) This Non-GAAP measure adjusts income before income taxes by adding
        back expenses for management compensation and interest expense on
        shareholder loans which consist primarily of distributions to
        shareholders while First National operated as a private company. This
        measure also includes a deduction of $1,500,000 for normalized
        compensation for each of the two senior management executives based
        on compensation policies that will take effect on closing of the
        initial public offering.
    (2) This Non-GAAP measure adjusts Adjusted EBITDA by deducting public
        company expenses and maintenance capital expenditures. The
        comparative figures assume the Company incurred public company
        expenses in the prior period as described in the initial public
        offering prospectus.
    

    Fourth Quarter and Nine Month Results
    -------------------------------------
    The results for the quarter ended December 31, 2006 are compared to
results of operations for FNLP's predecessor, First National Financial
Corporation ("FNFC"), for the quarter ended December 31, 2005. The results for
the nine months ended December 31, 2006 represent a 'combined period', which
includes the activities of the public Fund and FNLP from June 15 (the Fund's
IPO date) through December 31, 2006, together with the activities of FNFC from
April 1 through June 14, 2006.
    Mortgages under administration were $24.4 billion as at December 31,
2006, up 7.5 per cent from $22.7 billion as at September 30, 2006 and up
31 per cent from $18.6 billion as at December 31, 2005. The growth was mainly
due to an increase in mortgage originations, which were $1.7 billion for the
fourth quarter, up 6 per cent from the comparable quarter of 2005. For the
nine month period, mortgage originations totalled $6.0 billion, up 28 per cent
from the same period of 2005 due to First National's growth in market share in
the single family residential mortgage broker channel and the posting of very
competitive single family mortgage rates during the third quarter.
    For the quarter, the year over year origination growth was lower relative
to the significant growth in originations experienced in the third quarter.
    Total revenue for the quarter ended December 31, 2006 was $50.0 million,
up 43 per cent from the comparable quarter in 2005. For the nine months ended
December 31, 2006, revenue was $156.4 million, up 46 per cent compared to the
same period last year. The revenue growth is attributed to increased placement
fees on higher origination volumes, increased servicing income derived from
the larger portfolio of mortgages under administration, and greater gains on
securitization from higher Alt-A and commercial mortgage origination volumes
in the nine month period and current quarter.
    Adjusted earnings before interest, taxes, depreciation and amortization
(Adjusted EBITDA(*)) for the quarter was $18.3 million, up 41 per cent from the
same quarter of 2005. For the nine months ended December 31, 2006, adjusted
EBITDA was $51.3 million, up 24 per cent compared to the same period last
year.

    Distributable Cash
    ------------------
    The Fund's distributable cash(*) for the period June 15 (IPO date) to
December 31, 2006 was $7.9 million or $0.68 per unit and distributions
declared totalled $6.1 million or $0.52 per unit. This is equivalent to the
distributions that the Fund receives from FNLP. Consistent with management's
expectation at the time of the IPO, this represents an annualized distribution
of $0.95 per unit.

    
    Statement of Distributable Cash

    (in thousands $s, except where noted)
    -------------------------------------------------------------------------
                                                                     For the
                                                 For the three        Period
                                                  months ended    June 15 to
                                                   December 31,  December 31,
                                                          2006          2006

    First National Financial LP

    Net Income                                          18,038        40,148

    Amortization                                           290           589

    EBITDA(1)                                           18,328        40,737

    Maintenance Capital Expenditures                       124           341

    Distributable Cash from First National
     Financial LP                                       18,204        40,396


    First National Financial Income Fund

    Weighted Average Share of Distributable Cash
     from First National Financial LP                    3,635         7,957

    Trust Administration Expenses                            6            13

    Distributable Cash from First National Financial
     Income Fund(2)                                      3,629         7,944

    Distributable Cash per Unit ($/Unit)(2)               0.31          0.68

    Distributions Declared                               2,803         6,072

    Distributions Declared per Unit ($/Unit)              0.24          0.52
    -------------------------------------------------------------------------

    (1) EBITDA is a non-GAAP measure that represents earnings generated to
        fund capital investment, meet financial obligations and fund
        distributions. It is considered a key measure as it demonstrates the
        ability of the business to meet its capital and financing
        commitments.

    (2) Distributable cash and distributable cash per unit are non-GAAP
        measures generally used by Canadian open-ended trusts as an indicator
        of financial performance. They are considered key measures as they
        demonstrate the cash available for distributions to unit holders.
    

    Conference Call and Webcast
    ---------------------------
    Management will host a conference call at 10 a.m. (ET) on Thursday, March
1, 2007 to discuss the results. To participate in the teleconference, the
numbers are 416-644-3418 or 1-800-732-9303. The call will also be webcast live
and archived on First National's web site at www.firstnational.ca. Following
management's presentation, there will be a question and answer session for
analysts and institutional investors.
    A taped rebroadcast will be available to listeners following the call
until 12 a.m. on March 8, 2007. To access the rebroadcast, please dial
416-640-1917 or 1-877-289-8525 and quote the passcode 21219102 followed by the
number sign.
    Full annual consolidated financial statements for the Fund and FNLP and
management's discussion and analysis are available at www.sedar.com and at
www.firstnational.ca.

    About First National Financial Income Fund
    First National Financial Income Fund (TSX: FN.UN) is a Canadian-based
originator, underwriter and servicer of predominantly prime residential
(single family and multi-unit) and commercial mortgages. With more than
$24 billion in mortgages under administration, First National is Canada's
largest non-bank originator and underwriter of residential mortgages and is
among the top three in market share in the growing mortgage broker
distribution channel. For more information, please visit www.firstnational.ca.

    (*)Non-GAAP Measures
    --------------------
    The selected financial information and discussion below also refers to
certain measures to assist in assessing financial performance. These "non-GAAP
measures" such as "EBITDA", "Adjusted EBITDA", "Adjusted Net Income",
"Distributable Cash", and "Distributable Cash per Unit" 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 Statements
    --------------------------
    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 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. These forward-looking statements should
not be read as guarantees of future performance or results, and will not
necessarily be accurate indications 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 to it, they may
prove to be incorrect. Forward looking-information is subject to certain
factors, including risks and uncertainties, which 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 independent mortgage brokers' and changes in interest
rates under "Risk and Uncertainties Affecting the Business" in the MD&A. In
evaluating these statements, investors should specifically consider various
factors, including the risks outlined under "Risk and Uncertainties Affecting
the Business" in the MD&A, which may cause actual events or results to differ
materially from any forward looking statement. These forward-looking
statements are made as of the date of this release, and are subject to change
after such date. However, management and the Fund disclaim any intention or
obligation to update or revise any forward-looking statements whether as a
result of new information, future events or otherwise, except as required
under applicable securities regulations.




For further information:

For further information: Rob Inglis, Vice President, Finance and Chief
Financial Officer, First National Financial Income Fund, Tel: (416) 593-1100,
Email: rob.inglis@firstnational.ca; Danna Broadworth, Account Executive,
BarnesMcInerney Inc., Tel: (416) 367-5000 ext. 227, Email: 
dbroadworth@barnesmcinerney.com


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