First National Financial Corporation (FN-PA.TO) Earnings Call Transcript & Summary

Hello and welcome to the Annual Meeting of Stockholders of First National Financial Corporation 2020. Please note that today's meeting is being recorded. [Operator Instructions] Guests will not be able to submit questions. [Operator Instructions] It is now my pleasure to turn the meeting over to Mr. Stephen Smith, Chairman and Chief Executive Officer. The floor is yours.

Thank you, operator. Good morning, ladies and gentlemen. Welcome to First National Financial Corporation's 2020 Annual Meeting of Shareholders. I'm Stephen Smith, Co-founder, Chairman and Chief Executive Officer, and I will chair today's proceedings, which I call to order. Moray Tawse, Co-founder and Executive Vice President; and Rob Inglis, our Chief Financial Officer, are participating from their home offices; as is Hilda Wong, our Senior Vice President and General Counsel. This year, due to COVID-19, we are holding our annual meeting in a virtual-only format via this online webcast. Our agenda is short but covers all the key items of business that would normally come before a meeting like this, and we appreciate the time you are taking to participate. I will act as Chairperson of the meeting, and the event -- and in the event I'm disconnected as a result of technical difficulties, Rob Inglis, our Chief Financial Officer, will step in and assume the role of the chair of the meeting. I shall ask Hilda Wong to act as Secretary of the meeting and Mark Manalo of Computershare Investor Services Inc. to act as scrutineer. I've been advised by Moray Tawse and Rob Inglis that they would be prepared to second each of the motions in respect to the items of business outlined in the management information circular. Accordingly, unless there are any objections, I will take such motions as seconded, with no further action needed. Before we begin, I will provide a few observations. It was unimaginable just a few weeks ago that we would host our annual meeting in this virtual-only format, but this is both necessary and appropriate given the COVID-19 pandemic. First National is an essential service and therefore remains active during this difficult time. To protect our employees, we implemented our business continuity plan in March, with close to 100% of our team relocating to home offices. I can't thank our employees enough for achieving tremendous productivity for our customers and partners in the face of extraordinary circumstances. First National entered what the International Monetary Fund is calling the great lockdown with a strong foundation. The 2009 (sic) [ 2019 ] featured record mortgages under administration, record revenue and record earnings, all of which supported growth in our common share dividend. We announced Q1 results on Tuesday, and while mortgages under administration increased again, as did pre-fair market value income, bond market volatility had a negative impact on the short bond positions we use to mitigate interest rate risk on our single-family commitments. As a result, we incurred a loss of $0.05 a share. This is the first loss in our history as a public company. Economic conditions have turned decidedly negative and may remain this way for the next few quarters. And it's difficult to forecast. What I can say is that First National has strength of scale and a resilient business model to prevail in this environment for our customers and shareholders. And since the start of the pandemic, we have not lost a step in either the single family or commercial segments. We have continued to renew mortgages and to lend on both insured and conventional mortgages. The biggest change to our business has been providing mortgage payment deferrals to those borrowers in need. From an accounting perspective, deferred mortgages ceased to amortize and interest otherwise payable will be capitalized the principal such that these mortgage balances will increase during this period. The government of Canada and the Bank of Canada's efforts to inject liquidity into the market are helping to sustain lending activities, and we will hopefully bridge the income gap that many Canadians have experienced as a result of the economic lockdown. Before moving to the agenda, I would like to thank our Board members for their counsel, the senior team at First National for their leadership and our customers, partners and fellow shareholders for your confidence and trust in our institution. Now to the business at hand. The notice of this Annual Meeting of Shareholders dated March 25, 2020, was mailed on March 31, 2020, to all shareholders of record on March 16, 2020. In response to the change to a virtual meeting format, an amended notice of Annual Meeting of Shareholders dated April 15, 2020, was posted on First National Financial Corporation's SEDAR page on April 15, 2020, and a press release was issued shortly thereafter. The matters to be considered at today's meeting are set out in the notice dated March 25, 2020. Proof of mailing of the notice calling the meeting and the accompanying form of proxy, information circular, financial statements and the auditor's report have been duly filed. And I direct that a copy of the notice, with proof of mailing, be kept by the Secretary with the record of this meeting. Our transfer agent, ComputerShare, has attested to the proper mailing of the notice calling this meeting. Accordingly, I will dispense with the reading of the notice of the meeting. I've been informed by the scrutineer that a quorum is present. I direct that a copy of the scrutineer's final report be annexed to the minutes of this meeting. Turning to the voting procedure on the Computershare platform. Questions or comments regarding procedural matters or the items of business can be submitted by any registered shareholder or duly appointed proxy holder using the instant messaging service on the virtual interface. Questions and comments will generally appear for all attendees, together with the legal name of the registered shareholder or proxy holder of record that submitted the question or comment, shortly after they are submitted, provided that the questions not related to procedural matters will only be addressed during the question period at the end of the meeting. Questions or comments containing inappropriate language, profanities, hostilities; or that are otherwise disruptive to the orderly conduct of the meeting will not be published or answered. Questions or comments which were already answered or that are redundant will not be published or answered. Each holder of a common share of the corporation is entitled to 1 vote for each common share held by him or her in respect of each matter to be dealt with at the meeting. Voting on the applicable items of business to come before today's meeting will be conducted by a single electronic ballot. Registered shareholders or proxy holders of record will complete their ballot to vote on each item of business after the presentation of all such matters. When you are asked to complete the ballot, you will receive a message on the virtual interface requesting you to submit your vote as it pertains to each item of business. You will have approximately 1 minute to do so. Once the ballot link closes, the scrutineer will tabulate the results of the vote for each matter. I now declare that this meeting was properly called and duly constituted for the transaction of business. The first item of business is to receive the audited consolidated financial statements for the financial period ending December 31, 2019. Copies of the consolidated financial statements and report have been mailed to shareholders who requested copies of the financial statements and report. The financial statements are presented to the meeting, but no other action is required with respect of that. Therefore, I will dispense with the reading of the financial statements and auditor's report. There will be a full question-and-answer period following the business of the meeting. The next item of business is the election of directors. I move to formally nominate the people listed in the information circular for election as directors. The proposed nominees are: Stephen Smith, Moray Tawse, John Brough, Duncan Jackman, Robert Mitchell, Barbara Palk and Robert Pearce. If there are any further nominations, please submit the nomination through the instant messaging service on the virtual interface. If there are no further nominations, I move that nominations be closed and take such motion as seconded by Moray Tawse. The nominations are now closed. The motion is now open for discussion. If you are a registered shareholder or a proxy holder of record and would like to make a comment, please submit the comment by using the instant messaging service on the virtual interface. You have heard the motion, and you will be prompted to complete your ballot for or in respect of any individual nominee as indicated on the electronic ballot shortly. The next and last item of business is the appointment of the auditors of the corporation. I move that Ernst & Young LLP be appointed auditors of the corporation to hold office until the next Annual Meeting of Shareholders and the directors of the corporation be authorized to fix their remuneration and take such motion as seconded by Moray Tawse. The motion is now open for discussion. If you are a registered shareholder or a proxy holder of record and would like to make a comment, please submit the comment by using the instant messaging service on the Lumi virtual interface. You have heard the motions, and you will now be prompted to complete your single electronic ballot and vote in respect of each of today's resolutions on the virtual interface. Please register your vote in respect of each of the resolutions by pressing the for or withheld buttons next to the name of each individual director nominee and next to the resolution appointing Ernst & Young LLP as auditors of the corporation. Once the electronic balloting closes, the voting page will disappear and your ballots will be automatically submitted. We will wait a few moments for the completion of the electronic ballots and then move on with the remainder of the meeting. We will provide registered holders and duly appointed proxy holders approximately 1 minute to complete the electronic ballot. Once voting is completed, I would ask the scrutineer to compile the report regarding the results of voting on all business matters. We will reconvene in a few moments with the scrutineer's report and the voting results. I shall pause now. [Voting]

Based on the votes received prior to this meeting, I confirm that all resolutions were carried as follows. Each of the director nominees listed on the information circular have been elected as directors of the corporation. And the appointment of Ernst & Young LLP as the auditors of the corporation has been approved, and the Board of Directors has been authorized to [ refix ] their remuneration. The final voting results will be available on SEDAR. The formal item of business as set out in the information circular have now been dealt with. As there is no further business to come before the meeting, I declare the formal part of the meeting to be concluded. At this point, we would be happy to answer a few questions from registered shareholders or duly appointed proxy holders. For each question we answer, we will summarize the question and read aloud the name of the person who asked such question and, if applicable, the entity of such person -- the entity such person represents. We would like to remind you that questions which were already answered or that are redundant or repetitive will not be published or answered. [Operator Instructions] We will now give attendees a brief moment to type in their questions. Well, I'm not seeing any question, yes. There being no questions, we are now concluding the question-and-answer portion of this meeting. We have unfortunately -- this meeting has now ended. Thank you very much.

Thank you. This concludes the meeting. You may now disconnect.