TORONTO, July 28, /CNW/ - First National Financial Income Fund (TSX: FN.UN) (the "Fund") today announced its financial results for the quarter ended June 30, 2010.

The Fund derives all of its earnings from its 21% investment in First National Financial LP ("FNFLP" or "First National"), which reports continued profitability with sustained growth in mortgages under administration, revenue, net income and EBITDA*.

First National Financial LP's Q2 2010 Summary:

• Mortgages under administration up 16% year-over-year to $50.5 billion
• Revenue increased by 14% to $104.6 million, up from $91.6 million
• Mortgage originations declined by 9% to $3.2 billion from $3.5 billion year-over-year
• Net income was up 36% year-over-year to $56.4 million
• EBITDA was up 36% year-over-year to $56.8 million
• Distributions declared to unitholders totalled $4.8 million

"First National recorded strong results in the second quarter of 2010, reaching over $50 billion in mortgages under administration despite increased competition and a relatively slow real estate market," said Stephen Smith, Chairman and President. "The Company was able to achieve this significant milestone in a slowing market by optimizing the use of its diverse funding sources. Continued high demand for prime insured mortgages and profitable spreads earned on much of the Company's origination also contributed to our success this quarter."

"The economic recovery evident at the beginning of 2010 slowed as global markets showed some weakness. For First National, this meant wider spreads during the period as Canadian banks posted higher mortgage rates to accommodate increased costs of capital," said Moray Tawse, Vice President, Mortgage Investments. "By continuing to take advantage of opportunities for growth and maintaining a conservative business strategy, the Company has succeeded in preserving its strong market position in an unsettled economy."

First National's mortgages under administration were $50.5 billion at June 30, 2010, up 16% from $43.7 billion at June 30, 2009, and up 15%, on an annualized basis, from $48.7 billion at March 31, 2010. The growth was driven primarily by mortgage originations. Although originations declined by 9% to $3.2 billion from $3.5 billion in the same period last year, new mortgage production exceeded mortgages lost to regular portfolio run-off.

Total single-family originations were up 1% for the quarter compared to the same period last year, while the commercial segment experienced increased competition within a slower market. As a result, origination volumes in this segment decreased 37% to $0.6 billion, compared to $1 billion for the period ended June 30, 2009.

Revenue for the quarter increased by 14%, from $91.6 million to $104.6 million, as the Company earned large gains from both new and existing securitizations. The largest component of the revenue growth was a gain of $21.9 million earned on the revaluation of the Company's securitization receivable related to prime based variable rate mortgages. This unrealized gain pertains primarily to the Company's entire portfolio of single-family floating rate mortgages securitized through the MBS market between April 1, 2009, and May 31, 2010, and accounts for the long-term increase in the spread between bank prime lending rates and overnight funding rates on these mortgages.

Net income for the quarter was $56.4 million, an increase of 36% from $41.5 million in the same period in 2009. EBITDA for the quarter was $56.8 million, an increase of 36% from $41.9 million in the same period in 2009. The increases come as a result of the favourable fair value adjustment of $21.9 million to the existing securitized portfolio of single-family floating rate mortgages, higher gains on securitization, and more residual securitization income.

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 over $50 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.

Full Release including Selected Financial Highlights for First National Financial LP, Statement of Distributable Cash, Forward-Looking Information.

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For further information: Rob Inglis, Chief Financial Officer, First National Financial LP, Tel: 416-593-1100, Email: rob.inglis@firstnational.ca; Steve Wallace, Vice President, BarnesMcInerney Inc., Tel: 416-367-5000, Email: swallace@barnesmcinerney.com