First National reports growth in third quarter 2008 cash flow, income & MUA



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

    Record results generate 79% third quarter payout ratio
    

    TORONTO, Oct. 29 /CNW/ - First National Financial Income Fund (TSX:
FN.UN) (the "Fund") today reported record financial results for the three
months ended September 30, 2008. The Fund derives all of its earnings from its
21% investment in First National Financial LP (the "LP") or ("First National")
which reports significant increases in cash flow, net income and mortgages
under administration.

    
    First National's Q3 2008 Highlights:

    -   Adjusted EBITDA(*) increased 530% year-over-year to $34.0 million
        from $5.4 million.

        2007 results included a fair value adjustment of $22.9 million.

        Excluding the adjustment, Adjusted EBITDA was up 20% year-over-year

    -   Net income increased 559% year-over-year to $33.6 million-a quarterly
        record.

        Excluding the 2007 fair value adjustment, net income was up
        20% year-over-year

    -   Excluding 2007 fair value adjustment, revenue up 18% year-over-year
        to $91.3 million

    -   Mortgages under Administration up 24% year-over-year to $38.8 billion

    -   Mortgage originations up 3% year-over-year to $3.6 billion

    -   Distributions declared to public unitholders of $4.2 million or $0.33
        per unit
    

    "First National set another earnings record in the third quarter while
maintaining its traditional conservative risk profile," said Stephen Smith,
Chairman and President. "Despite a softening housing market, our spreads
widened and demand for our prime insured mortgages continued. As a result,
we've added to the positive momentum of the first half of the year."
    "First National's performance in the third quarter is a reflection of our
status as Canada's leading non-bank mortgage lender and the ongoing benefits
we receive from mortgage administration," said Moray Tawse, Vice President,
Mortgage Investments. "Mortgage servicing is a key component of our business
strategy and a significant source of continuing income and cash flow. With
this strong business foundation, we expect to more than hold our own in this
challenging economic climate and capitalize on a favourable competitive
landscape to create value for our unitholders."

    
    Selected Financial Highlights for First National

                                 Three months ended      Nine months ended
                                September   September  September   September
                                 30, 2008    30, 2007   30, 2008    30, 2007
    -------------------------------------------------------------------------
                                                 ($ 000's)
    For the Period
    Revenue                       91,266      54,518     234,471     170,699
    Net income                    33,649       5,110      90,278      48,794
    Adjusted EBITDA(1)            34,048       5,426      91,474      49,697
    At Period end
    Total assets                 857,273     692,737     857,273     692,737
    Mortgages under
     administration           38,838,824  31,191,087  38,838,824  31,191,087
    -------------------------------------------------------------------------
    Note:
    (1) This non-GAAP measure adjusts income before income taxes by adding
        back expenses for amortization of capital assets.

    Results Summary
    ---------------
    
    Mortgages under administration were $38.8 billion at September 30, 2008,
up 6% from $36.6 billion at June 30, 2008, and 24% from $31.2 billion at
September 30, 2007. The growth was mainly attributable to an increase in
mortgage originations, which totalled $3.6 billion for the quarter, up 3% from
$3.5 billion in the comparable quarter of 2007. First National has continued
to produce origination growth despite the May 15, 2008 discontinuation of the
uninsured Alt-A program. Excluding Alt-A origination volume, First National's
origination volumes would have increased 9% year-over-year. For the nine-month
period ended September 30, 2008, mortgage originations were $9.1 billion, up
12% from the same period last year.
    Total revenue for the third quarter was $91.3 million, up 68% from the
comparable quarter of 2007. However, 2007 revenue included a $22.9 million
downward fair value adjustment related to securitization assets. Excluding the
adjustment, revenue was up 18% year-over-year. This revenue growth was
primarily a result of higher per-unit placement fees and gains on
securitization. Higher mortgage servicing revenue also resulted from the 24%
increase in mortgages under administration. For the nine-month period ended
September 30, 2008, revenue was $234.5 million, up 21% from the same period
last year, excluding the adjustment in 2007.
    Net income for the third quarter was $33.6 million, up 20% from the same
quarter of 2007 adjusted for the fair value adjustment. This growth was driven
by higher mortgage origination volumes and higher margins on prime
single- family and multi-unit residential originations. For the nine-month
period ended September 30, 2008, net income was $90.3 million, up 85% from
$48.8 million in the same period last year.
    Adjusted earnings before income taxes, depreciation and amortization
("Adjusted EBITDA(*)") for the third quarter were $34.0 million, up 20% from the
same quarter of 2007, excluding the losses on securitization assets. For the
nine-month period ended September 30, 2008, Adjusted EBITDA before the
securitization adjustment was $91.5 million, up $64.7 million or 41% from the
same period last year.

    
    Q3 2008 Distributable Cash and Distribution Increase
    ----------------------------------------------------
    
    The Fund's distributable cash(*) for the third quarter was $5.3 million or
$0.42 per unit and distributions declared totalled $4.2 million or
$0.33 per unit. The payout ratio of 79% was primarily due to higher earnings
and First National's securitization of mortgages through its NHA-MBS program.
In August 2008, the monthly distribution rate increased to $0.1125 per unit,
with the distribution payable beginning on September 15, 2008 to unitholders
of record at the close of business on August 31, 2008. This represents an
annualized distribution rate of $1.35 per unit, up from $1.25 per unit.

    
    Statement of Distributable Cash

    (in $000s, except where noted)
                                                   For the      For the nine
                                               quarter ended    months ended
                                                September 30,   September 30,
                                                    2008            2008
    -------------------------------------------------------------------------
    First National Financial LP
                                               ------------------------------
    Distributable Cash from First
     National Financial LP(1)                         25,129          63,023
                                               ------------------------------
                                               ------------------------------

    First National Financial Income Fund
                                               ------------------------------
    Weighted Average Share of Distributable
     Cash from First National Financial LP(1)          5,305          13,016
                                               ------------------------------
                                               ------------------------------
    Distributable Cash per Unit ($/Unit)(1)             0.42            1.06
                                               ------------------------------
                                               ------------------------------
    Distributions Declared                             4,172          11,677
                                               ------------------------------
                                               ------------------------------
    Distributions Declared per Unit ($/Unit)            0.33            0.95
                                               ------------------------------
                                               ------------------------------
    Payout ratio                                         79%             90%
                                               ------------------------------
                                               ------------------------------

    (1) 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. For
        FNFLP this measure adjusts cash provided by (used in) operating
        activities by accounting for changes between periods of mortgages
        accumulated for sale and deducting maintenance capital expenditures.


    Conference Call and Webcast
    ---------------------------

    -------------------------------------------------------------------------
    Conference Call and Webcast               October 29 2008, 10 a.m. ET
    -------------------------------------------------------------------------
    Participant Numbers                       416-644-3415 or 1-800-733-7571
    -------------------------------------------------------------------------
    

    The audio of the conference call will 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. (ET) on
    November 5, 2008. To access the rebroadcast, please dial 416-640-1917 or
1-877-289-8525 and input passcode 21283459 followed by the number sign.
    Complete consolidated financial statements for the Fund and the LP as
well as 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) owns a 21% interest in
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 $38 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
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 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 interest. This forward-looking information is as of the date of
this release, and is subject to change after such date. However, management
and the Fund 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:

For further information: Rob Inglis, Vice President, Finance, First
National Financial LP, Tel: (416) 593-1100, Email:
rob.inglis@firstnational.ca; James Bailey, BarnesMcInerney Inc., Tel: (416)
367-5000, Email: jbailey@barnesmcinerney.com


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