First National Financial is making headlines after revealing some exciting news about its funding of residential mortgages. The company announced a remarkable 43% jump in net income for the last quarter of 2024, with a total of $63 million, and this news is turning heads in the finance world. But there’s a little twist: while mortgage originations shot up, some experts say the resulting revenue boost may be delayed—let’s dive into what this means!
Mortgage Industry News
First National is one of Canada’s largest mortgage lenders, and they just reported that their total mortgage originations reached $2.1 billion in the last quarter of 2024. This is not just good news; it represents a significant increase of 26.5% compared to the previous year. Single-family mortgage originations are really shining bright with a whopping 44% increase!
Total Mortgage Originations
This surge has been mainly powered by the company’s focus on residential mortgages. To put it simply, more and more Canadians are securing loans to buy homes. The table below shows just how impressive these numbers are:
| Metric | Q4 2023 | Q3 2024 | Q4 2024 | YoY Change (Q4) |
|---|---|---|---|---|
| Net Income ($M) | 44.2 | 36.4 | 63 | +43% |
| Single-family Originations ($B) | 4.4 | 6.7 | 6.3 | +44% |
| Commercial Originations ($B) | 3.8 | 2.7 | 4.1 | +8% |
| Mortgages Under Administration ($B) | 143.5 | 150.6 | 153.7 | +7% |
However, While Originations Were Higher in the Fourth Quarter
Experts are raising some eyebrows about how quickly these new originations will translate into revenue. First National’s earnings are getting a boost from increased mortgage renewals—thanks to a surge in home buying that happened back in 2020. It turns out these renewals are more profitable than the initial mortgages. That’s great news for the company!
COVID-Era Mortgage Renewals Set to Boost Earnings
In the world of mortgages, renewals are a big deal. As more people are getting loans renewed, First National stands to benefit from these returning customers. Not only do these increase profits, but they also show that Canadians are finding ways to keep their homes and maintain their financial stability.
Arrears Remain Low, with Signs of Improvement in Excalibur Portfolio
First National has something to smile about! Their prime mortgage arrears remain exceptionally low at just 9 basis points. This means that very few customers are falling behind on their payments. They even mentioned some positive signs in their Excalibur portfolio, which includes non-prime borrowers, where arrears are showing signs of improvement.
Q4 Earnings Overview
Turning to the financial details, First National’s strong earnings are not just luck. They are showcasing smart strategies and heightened demand in the mortgage market. More renewals and lower arrears mean a healthier outlook, but we should still be cautious about potential future impacts.
Notables from Its Call
During a recent conference call, executives discussed their future outlook. They expect year-over-year increases in single-family fundings for at least the next two quarters, so it looks like more of the good news is on the horizon!
On the Renewal Wave
Renewals are helping First National immensely as they continue to be a significant income source. With the need for stable housing still strong, clients are opting for renewal options, leading to better financial returns.
On Mortgage Market Competition
With the excitement surrounding First National, competition is also heating up in the mortgage market. The company acknowledges that retention rates on renewals were lower due to this fierce competition, meaning it has to work harder to keep its clients onboard.
On the Outlook for Single-Family Originations
The outlook for single-family mortgage originations remains bright. Customers looking for new homes or looking to switch lenders are still out there, ready to make their moves in the housing market.
On the Impact of the Removal of the Mortgage Stress Test
First National noted that the removal of the mortgage stress test for uninsured straight switches has had a negligible impact on their activities. This means that they didn’t experience a significant increase or decrease from this change, which some expected would shake things up.
On Prepayment Speeds and Retention Rate
Interestingly, prepayment speeds remain similar to last year, suggesting that borrowers are choosing to stay put for now. However, with more competition, First National will need to attract and retain more clients as the market develops.
On First National’s Third-Party Underwriting Business
The excitement doesn’t stop there! First National is expanding its third-party underwriting business with a new client, BMO. This means more opportunities for growth and increased options for borrowers in the future.
On Commercial Lending Activity
When we look at commercial lending, activity seems steady. The company is encouraged by the CMHC incentives for affordable housing, which are helping fuel growth in the commercial sector as well.
First National’s strong performance is a testament to the resilience of Canada’s mortgage market and the continued demand for housing. Keep an eye on how they navigate the challenges ahead!
