First National's mortgages under administration surpass $30 billion mark

    THE U.S./

    TORONTO, Oct. 31 /CNW/ - First National Financial Income Fund (TSX:
FN.UN) (the "Fund") today announced its financial results for the period ended
September 30, 2007. As previously announced on October 15, 2007, the Fund's
net income for the period was decreased by an adjustment to its equity income
from its 19.97 per cent investment in First National Financial LP (the "LP")
or ("First National"). The $4.6 million adjustment represents the Fund's share
of a $22.9 million non-cash fair value adjustment (the "Adjustment") to the
LP's securitization-related assets as a result of unfavourable capital market
conditions associated with the asset-backed commercial paper ("ABCP") market.
Excluding the Adjustment, the LP's key metrics for the third quarter and
nine-month period showed strong growth.

    First National's Third Quarter Highlights:

    -   Mortgages under Administration grew to $31.2 billion, up 37 per cent
    -   Origination volume for August, 2007 exceeded $1.2 billion, a monthly
    -   Revenue, excluding effect of Adjustment, up 23 per cent year-over-
        year to $77.4 million, a quarterly record
    -   Adjusted EBITDA(*), excluding effect of Adjustment, up 44 per cent
        year-over-year to $28.3 million, a quarterly record

    "Aside from the previously announced fair value adjustment, this quarter
saw First National surpass $30 billion in mortgages under administration and
reach new quarterly records for revenue and earnings," said Stephen Smith,
Chairman and President, First National Financial LP. "First National's strong
performance amid challenging liquidity conditions demonstrates the strength
and resilience of our business model and our team's ability to efficiently
execute the growth strategy."
    "Our origination volumes continue to be strong, reflecting First
National's major presence in the growing single-family mortgage broker
channel," added Moray Tawse, Vice President, Mortgage Investments, First
National Financial LP. "Looking towards the conclusion of fiscal 2007, we
expect to close the year with several achievements behind us and look forward
to continued profitable growth in fiscal 2008."

    Selected Financial Highlights for First National

                                 Three months ended      Nine months ended
                               September   September   September   September
                                30, 2007    30, 2006    30, 2007    30, 2006
    For the Period                               ($ 000's)
    Revenue                       54,518      62,679     170,699     144,379
    Net income                     5,110      19,388      48,794      39,860
    Adjusted EBITDA(1)             5,426      19,645      49,697      49,830
    At Period end
    Total assets                 692,737     450,244     692,737     450,244
    Mortgages under
     administration           31,191,087  22,715,527  31,191,087  22,715,527

    (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 nine-month period ended
        September 30, 2006 quarter of $750 ($Nil for the quarter ended
        September 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.

    Third Quarter Results
    Mortgages under administration were $31.2 billion as at September 30,
2007, up 9.5 per cent from $28.5 billion as at June 30, 2007 and up 37 per
cent from $22.7 billion as at September 30, 2006. The growth was mainly due to
an increase in mortgage originations, which totalled $3.5 billion for the
third quarter, up 52 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.
    Total revenue for the quarter was $54.5 million, down 13 per cent from
the comparable quarter of 2006 primarily due to the Adjustment described
above. Excluding the effect of the Adjustment, total revenue grew 23 per cent
year-over-year to $77.4 million, a quarterly record. This revenue growth was
primarily due to increased placement fees on higher origination volumes. For
the nine-month period, revenue was $170.7 million, compared to $144.4 million
for the same period last year. Excluding the effect of the Adjustment, total
revenue grew 34 per cent year-over-year to $193.6 million.
    Adjusted earnings before income taxes, depreciation and amortization
("Adjusted EBITDA"(*)) for the quarter were $5.4 million, down 72 per cent from
the same quarter of 2006 primarily due to the Adjustment described above.
Excluding the effect of the Adjustment, Adjusted EBITDA grew 44 per cent
year-over-year to $28.3 million, a quarterly record. For the nine-month
period, Adjusted EBITDA was $49.7 million, compared with $49.8 million for the
same period last year. Excluding the effect of the Adjustment, Adjusted EBITDA
grew 46 per cent year-over-year to $72.6 million.

    Distributable Cash
    The Fund's distributable cash(*) for the quarter ended September 30, 2007
was $4.6 million or $0.39 per unit and distributions declared totalled
$3.7 million or $0.31 per unit, representing an annualized distribution of
$1.25 per unit.

    Statement of Distributable Cash
    (in thousands $s, except where noted)

                                                                   For the
                                                       For the      period
                                                       quarter    January 1,
                                                        ended       2007 to
                                                      September   September
                                                       30, 2007    30, 2007
    First National Financial LP
    Distributable Cash from First National
     Financial LP                                         23,277      59,499

    First National Financial Income Fund
    Weighted Average Share of Distributable Cash
     from First National Financial LP                      4,649      11,882
    Trust Administration Expenses                              6          18
    Distributable Cash from First National
     Financial Income Fund(2)                              4,643      11,864
    Distributable Cash per Unit ($/Unit)(2)                 0.39        1.01
    Distributions Declared                                 3,687       9,882
    Distributions Declared per Unit ($/Unit)                0.31        0.84
    Payout ratio                                             79%         83%

    Conference Call and Webcast

    Management will host a conference call at 10 a.m. (ET) on Wednesday,
October 31, 2007 to discuss the results. To participate in the teleconference,
please call 416-644-3417 or 1-800-733-7571. The call will also be webcast live
and archived on First National's web site at 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 7, 2007. To access the rebroadcast, please dial
416-640-1917 or 1-877-289-8525 and input passcode 21247425 followed by the
number sign.
    Full annual consolidated financial statements for the Fund and the LP as
well as management's discussion and analysis are available at
and at

    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 $31 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

    (*)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:; Danna Broadworth, Account Executive,
BarnesMcInerney Inc., Tel: (416) 367-5000, Email:

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