First National reports record third quarter results

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

       Sustained growth in mortgages under administration, revenue, net
                              income and EBITDA
    

TORONTO , Oct. 28, 2009 /CNW/ - First National Financial Income Fund (TSX: FN.UN) (the "Fund") today announced its financial results for the quarter ended September 30, 2009 . The Fund derives all of its earnings from its 21% investment in First National Financial LP ("FNFLP") or ("First National"), which reports record profitability with sustained growth in mortgages under administration, revenue, net income and EBITDA.

    
    First National Financial LP's Q3 2009 Summary:

    -  Annual distribution rate increased by 11% from $1.35 per unit to
       $1.50 per unit

    -  Mortgages under administration up 18% year-over-year to $45.9 billion

    -  Mortgage originations declined by only 6% from Q3 2008 to $3.4 billion

    -  Revenue was $96.2 million, up 5% year-over-year

    -  Net income up 33% year-over-year to $44.7 million

    -  EBITDA* up 33% year-over-year to $45.2 million

    -  Distributions declared to unitholders totalled $4.4 million
    

"First National enjoyed another record quarter as a result of stabilizing credit markets combined with the successful execution of our business strategy and prudent risk management," said Stephen Smith , Chairman and President. "We experienced a higher than expected level of mortgages under administration, while single-family origination volumes reflected those recorded in the third quarter of 2008."

"Our confidence in the Company's continued strong performance and future growth prospects led us to increase the distribution rate by 11% during the third quarter of 2009," said Moray Tawse, Vice President, Mortgage Investments. "Greater liquidity in capital markets has increased funding opportunities for the Company and we expect to see continuing income and cash flow derived from the high level of mortgages under administration."

    
    Selected Financial Highlights for First National Financial LP

    -------------------------------------------------------------------------
                                                           Quarter ended

                                                      September    September
                                                       30, 2009     30, 2008
    -------------------------------------------------------------------------
    For the Period                                           ($ 000's)

    Revenue                                              96,161       91,266
    Net income                                           44,730       33,649
    EBITDA (1)                                           45,153       34,048

    At Period end

    Total assets                                      1,122,651      857,273
    Mortgages under administration                   45,942,714   38,838,824
    -------------------------------------------------------------------------
    Note:

    (1) This non-GAAP measure adjusts income before income taxes by adding
        back expenses for amortization of capital assets.


    Q3 2009 Results
    ---------------
    

First National's mortgages under administration were $45.9 billion at September 30, 2009 , up 18% from $38.8 billion at September 30, 2008 , and up 20%, on an annualized basis, from $43.7 billion at June 30, 2009 . The growth was driven primarily by mortgage originations, which declined by only 6% to $3.4 billion from $3.6 billion in the same period of 2008.

Revenue for the quarter increased 5% to $96.7 billion from $91.3 billion in the same period of 2008 as larger gains on securitization were earned by the Company, driven by wide mortgage spreads and more liquidity in the credit markets.

Net income for the quarter was $44.7 million , an increase of 33% from $33.6 million in the same period in 2008. Earnings before income taxes, depreciation and amortization ("EBITDA"*) for the quarter was $45.1 million , an increase of 33% from $34.0 million in the same period in 2008. The increases are due to the combination of the higher margins associated with mortgage placement and securitization, coupled with stable operating costs. In particular, profitability has increased through higher margins on multi-unit residential mortgage origination and single-family floating rate mortgages as demand for these high credit quality assets has increased with the current credit environment.

    
    Distributable Cash
    ------------------
    The Fund's distributable cash* for the quarter was $9.7 million or $0.16
per unit and distributions declared totalled $4.4 million or $0.35 per unit.
The payout ratio of 219% was up significantly from 77% in the second quarter
of 2009. Despite strong earnings, distributable cash was adversely affected as
more working capital was needed to support the Company's Alt-A program. This
was further exacerbated by the Company earning larger portions of non-cash
income from gains on securitization revenue. In the third quarter of 2008, the
payout ratio was 79%. The ratio of distributions to net income, which the
Company believes is as important as the payout ratio, was 47% for the quarter.

    Statement of Distributable Cash

    (in $000s, except where noted)

                                    For the quarter      For the nine months
                                         ended                  ended
                                  September  September  September  September
                                   30, 2009   30, 2008   30, 2009   30, 2008

    First National Financial LP

    Distributable Cash of First
     National Financial LP (1)      9,686      25,129     46,655     63,023
                                  --------------------  ---------------------
    First National Financial
     Income Fund

    Weighted Average Share of
     Distributable Cash from
     First National Financial
     LP (1)                         2,049       5,305      9,867     13,016
                                  -------------------------------------------
    Distributable Cash per Unit
     ($/Unit) (1)                    0.16        0.42       0.78       1.06
                                  --------------------  ---------------------
    Distributions Declared          4,438       4,172     12,998     11,677
                                  --------------------  ---------------------
    Distributions Declared per
     Unit ($/Unit)                   0.35        0.33       1.03       0.95
                                  --------------------  ---------------------
    Payout Ratio                     219%         79%       132%        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 capital expenditures.

    Conference Call and Webcast

    -------------------------------------------------------------
    Conference Call and Webcast   October 28, 2009, 10 a.m. ET
    -------------------------------------------------------------
    Participant Numbers           416-644-3416 or 1-866-250-4892
    -------------------------------------------------------------
    

The audio of the conference call will be webcast live and archived on First National's website 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 4, 2009 . To access the rebroadcast, please dial 416-640-1917 or 1-877-289-8525 and input passcode 4173105 followed by the number sign.

Complete consolidated financial statements for the Fund and FNFLP 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 $45 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", "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: Rob Inglis, Chief Financial Officer, First National Financial LP, Tel: [phone], Email: [email protected]; Steve Wallace, Vice President, BarnesMcInerney Inc., Tel: [phone], Email: [email protected]