First National reports 36% growth in mortgages under administration and 42% growth in revenue



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

    
    Highlights:

    -  Mortgages under Administration up 36 per cent year over year
    -  Revenue up 42 per cent year over year
    -  Adjusted EBITDA(*) up 78 per cent year over year
    -  Distributions declared to public unitholders totalled $3.4 million for
       the quarter
    

    TORONTO, Aug. 1 /CNW/ - First National Financial Income Fund (TSX: FN.UN)
(the "Fund") today announced its financial results for the period ended
June 30, 2007.
    "We've clearly experienced a strong first half for our 2007 fiscal year,"
said Stephen Smith, Chairman and President, First National Financial LP.
"During the second quarter, we've continued to show significant revenue
growth, driven by increased mortgages under administration, higher origination
volume, and increased securitization activities. First National's solid
performance this year reflects our team's success in executing the Fund's
growth strategy, particularly with respect to increasing market share in the
growing single-family residential mortgage broker channel."
    "Once again, the Fund has succeeded in delivering strong results," added
Moray Tawse, Vice President, Mortgage Investments, First National Financial
LP. "Going forward, we will continue to leverage our strengths to deliver a
high standard of service to our customers and to achieve profitable growth for
our unitholders."


    
    Selected Financial Highlights

                                  Three months ended        Six months ended
                              -----------------------------------------------
                                 June 30,    June 30,    June 30,    June 30,
                                    2007        2006        2007        2006
                              -----------------------------------------------
                                                  ($ 000's)
    For the Period
    Revenue                       62,631      44,197     116,181      81,700
    Net income                    23,524       9,061      43,684      19,545
    Adjusted EBITDA(1)            23,817      13,348      44,271      30,185
    Less:
      Public company
       expenses                        -         250           -         500
      Maintenance capital
       expenditures                  271         236         514         308
    Distributable cash(2)         23,546      12,862      43,757      29,377
    At Period end
    Total assets                 768,269     463,079     768,269     463,079
    Mortgages under
     administration           28,490,597  20,944,398  28,490,597  20,944,398

    Notes:
      (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 in the June 30, 2006
           quarter of $375 ($750 for the six months ended June 30, 2006) for
           normalized compensation for each of the two senior management
           executives based on compensation policies that took 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 periods as described in the initial public
           offering prospectus.
    


    Second Quarter Results
    ----------------------
    The Fund began operations upon completion of its initial public offering
on June 15, 2006 and has a 19.97 per cent interest in First National Financial
LP ("FNFLP"). The results for the quarter ended June 30, 2007 are compared to
the results for the 'combined period', which includes the activities of the
Fund and FNFLP from June 15 (the Fund's IPO date) through June 30, 2006,
together with the activities of FNFLP's predecessor, First National Financial
Corporation ("FNFC") from April 1 through June 14, 2006. Similarly, the
results for the six months ended June 30, 2007 are compared to results for the
activities of the Fund and FNFLP from June 15 through June 30, 2006, together
with the activities of FNFC from January 1 through June 14, 2006.
    Mortgages under administration were $28.5 billion as at June 30, 2007, up
12 per cent from $25.4 billion as at March 31, 2007 and up 36 per cent from
$20.9 billion as at June 30, 2006. The growth was mainly due to an increase in
mortgage originations, which totalled $2.8 billion for the second quarter, up
47 per cent from the comparable quarter of 2006. The increase was largely
attributable to First National's growing market share in the single-family
residential mortgage broker channel and higher volumes of commercial mortgage
transactions. A significant increase in non-originated mortgage servicing
portfolios also contributed to the growth in mortgages under administration.
    Total revenue for the quarter was $62.6 million, up 42 per cent from the
comparable quarter of 2006. This revenue growth was primarily due to increased
placement fees on higher origination volumes, increased securitization
activities, and higher servicing income derived from the larger portfolio of
mortgages under administration. For the six months ended June 30, 2007,
revenue was $116.2 million, compared to $81.7 million for the same period last
year.
    Adjusted earnings before income taxes, depreciation and amortization
("Adjusted EBITDA"(*)) for the quarter were $23.8 million, up 78 per cent from
the same quarter of 2006. For the six month period ended June 30, 2007,
Adjusted EBITDA was $44.3 million, compared with $30.2 million for the same
period last year.

    Distributable Cash
    ------------------
    The Fund's distributable cash(*) for the quarter ended June 30, 2007 was
$4.7 million or $0.40 per unit and distributions declared totalled
$3.4 million or $0.29 per unit. Distributions declared included the 31.5 per
cent distribution increase announced in May, 2007 which represents an
annualized distribution of $1.25 per unit.


    
    Statement of Distributable Cash

    (in thousands $s, except where noted)

                                                                     For the
                                                                      period
                                                       For the     January 1,
                                                 quarter ended       2007 to
                                                       June 30,      June 30,
                                                          2007          2007
    -------------------------------------------------------------------------
    First National Financial LP

    Net Income                                          23,524        43,684

    Amortization of capital assets                         293           587
                                                 ----------------------------
    EBITDA(1)                                           23,817        44,271

    Maintenance Capital Expenditures                       271           514
                                                 ----------------------------
    Distributable Cash from First National
     Financial LP                                       23,546        43,757
                                                 ----------------------------
                                                 ----------------------------

    First National Financial Income Fund

    Weighted Average Share of Distributable Cash
     from First National Financial LP                    4,702         8,738

    Trust Administration Expenses                            6            12
                                                 ----------------------------
    Distributable Cash from First National
     Financial Income Fund(2)                            4,696         8,726
                                                 ----------------------------
                                                 ----------------------------
    Distributable Cash per Unit ($/Unit)(2)               0.40          0.74
                                                 ----------------------------
                                                 ----------------------------
    Distributions Declared                               3,393         6,195
                                                 ----------------------------
                                                 ----------------------------
    Distributions Declared per Unit ($/Unit)              0.29          0.53
                                                 ----------------------------
                                                 ----------------------------
    Payout ratio                                           73%           72%
                                                 ----------------------------
                                                 ----------------------------

    (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 2 p.m. (ET) on Wednesday,
August 1, 2007 to discuss the results. To participate in the teleconference,
please call 416-644-3424 or 1-866-249-2165. 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. (ET) on August 8, 2007. To access the rebroadcast, please dial
416-640-1917 or 1-877-289-8525 and quote the passcode 21239201 followed by the
number sign.
    Full annual consolidated financial statements for the Fund and FNFLP 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) owns a 19.97 per cent
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 $28 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 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. 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, they may prove to
be incorrect. Forward looking-information is subject to certain factors,
including risks and uncertainties 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 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, First
National Financial LP, Tel: (416) 593-1100, Email:
rob.inglis@firstnational.ca; Danna Broadworth, Account Executive,
BarnesMcInerney Inc., Tel: (416) 367-5000, Email:
dbroadworth@barnesmcinerney.com


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