First National Financial Corp
TSX:FN
Earnings Call Analysis
Q4-2023 Analysis
First National Financial Corp
First National, a leader in financing multiunit properties, prepares to navigate an increasingly competitive market, stemming from a significant Canada Mortgage Bond program expansion. Despite 2023's strong performance, the company anticipates challenges replicating these results in 2024 due to a potential increase in competitive pressure and the prospect of a gradual market reset. However, the company remains optimistic about the longer-term outlook, propelled by demographic shifts and persistent housing shortages, which are expected to support prices and boost construction of affordable rental units.
To address upcoming challenges, First National plans to tap into its robust underwriting capabilities and cutting-edge technology. A pilot program harnessing artificial intelligence for document processing and task auto-adjudication is in the pipeline, with hopes of scaling the business further. Meanwhile, workforce adjustments are afoot; a 4% decrease in headcount was observed last year due to natural attrition. In 2024, some increase in full-time equivalent (FTE) roles is anticipated, aligning with expected growth and the recent addition of new third-party underwriting business.
The company successfully commenced a soft launch of services with a new bank client, cautiously expanding their outreach in the Ontario broker market. This venture represents both a growth opportunity and an avenue to refine their process efficiency and information flow. Margin dynamics in the multiunit segment remain steady, with spreads reported between 50 to 75 basis points offering a glimpse into the company's pricing power and market positioning.
In a challenging environment, First National believes it has upheld its market share, which is estimated to hover in the low teens. This self-assessment of market-standing amidst competitive headwinds underscores a confidence in the company's ability to maintain its foothold even as it braces for growing competition.
Following a record-high $5 billion in committed capital for construction, the company exercises caution, focusing primarily on CMHC-insured construction and partnering with reputable, experienced developers. Elevated interest rates have begun to impact all facets of construction financing, a trend that merits careful monitoring going forward.
First National anticipates a vibrant first half of the year for the construction sector, with expectations of intensified competition in the latter half. The company's analytical insights into the evolving real estate market, cap rate adjustments, and the aggregate impact of monetary policy decisions showcase a comprehensive strategic outlook.
The company regards its recent securitization funding performance as close to capacity, providing insights into its capabilities and potential constraints in this aspect of its operations. Furthermore, an expectation for a steady net interest margin echoes a cautious yet stable financial projection for the coming year.
First National exudes confidence in its provisioning levels, suggesting they are well-prepared for potential downturns. The firm contends that compared to industry peers, they are possibly over-provisioned, signifying a robust risk management strategy. The central concern is not the stability of its current portfolio, but rather the ability to source new high-quality loans to sustain its growth trajectory.
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Good morning, and welcome to First National's Fourth Quarter Analyst Call. This call is being recorded on Wednesday, March 6, 2024. [Operator Instructions] Now it's my pleasure to turn the call over to Rob Inglis, CFO of First National. Please go ahead, sir.
Good morning. Welcome to our call, and thank you for participating. Sadly, after a long illness, Jason's father passed away recently and Jason is unable to attend today. But joining me on this call today is Jeremy Wedgbury, our Executive Vice President, Commercial mortgages, who will be available to answer any of your questions waiting to our commercial segment after the call. Before we begin, I will remind you that our remarks and answers may contain forward-looking information about future events, the company's future performance -- this information is subject to risks and uncertainties and should be considered in conjunction with the risk factors detailed in our management discussion and analysis. 2023 was a very successful year for First National, marking our 35th business anniversary, 17 years of the TASX-listed company and the 17th year of increasing common share dividends. This year ended with a strong fourth quarter revenue and earnings. Q4 pre-fair-market-value income of $77.1 million was 30% higher than the same quarter of 2022. For the year, the key profit metric increased 54% over 2022. This performance reflected success in growing mortgages under administration in a volatile environment and earning more income from securitization. The higher interest rate environment while perhaps slowing new origination had a favorable impact on parts of our business. These include slower mortgage prepayment speeds that benefited portfolio growth and higher interest rates that acted as a tailwind for mortgage servicing or we earned higher interest income on escrow deposits. We ended the year with MUA of $143.5 billion, the result of 7% growth in residential MUA and a 16% growth in commercial MUA. Overall, NOI increased 10% for the year and 5% annualized during the fourth quarter was highest level ever, supported by renewal retention and historically low prepayment speeds, probably the lowest in my 27 years at First National.We are pleased with MUA performance given the significant impact of higher interest rates and affordability, which directly affects real estate market activity and our originations. -- single-family origination, including renewals, was down 20% in the fourth quarter and 7% for the full year. This is in keeping with the expectations we described in our last call, although we saw significant outperformance in Alberta and Quebec compared to that in BC and Ontario. This is perhaps a reflection of market conditions in those regions, but definitely underscores the value of our geographic diversification. Of note, the mix between new originations and renewals stayed relatively consistent on a trailing 12-month basis in 2023 compared to 2022. The Commercial origination also including renewals, was up 27% year-over-year in the fourth quarter and 11% for the year on strong demand for insured multi-unit mortgages. A higher rate of growth in the fourth quarter partially reflected a catch-up by CMHC and its underwriting centers. After announcing a premium rate increase for multiunit insurance in mid-2023, CMHC received a rush of applications before the cutoff date, turnaround time and push transactions into the last quarter of 2023.Looking a little deeper at our results, you will see net interest income on mortgages splits securitization increased in 2023 and in the fourth quarter. Both periods benefited from portfolio growth, slower than normal prepayment speeds and a relatively stable interest rate environment that feature just 2 Bank of Canada rate increases compared to 7 we experienced in 2022. Low rates of prepayment also meant lower amortization of capitalized origination expenses and other securitization-related fees. The slower amortization was one reason why NIM on our securitization portfolio widened significantly quarter-over-quarter from December 2022 to December 2023. On an annualized basis, NIM grew from 47 basis points to 56 basis points by year-end. There were several drivers of this performance beyond portfolio growth and more favorable prepayment, including the success of both our high-margin insured construction and Excalibur securitization programs and the beneficial impact from the lower frequency of short-term interest rate increases on our floating rate securitization program -- we expect NIM to remain generally at this level in 2024. 2023 annual placement fee revenue declined 8% was up 4% in the fourth quarter over 2022. The fourth quarter change came from higher volumes placed with institutional investors in the Commercial segment. As always, changes in placement activity between segments has an impact on the revenue line. As a rule, per unit fees are generally higher on residential placements compared to commercial. However, for the year, per unit pricing for new residential volume was lower by 1% than in 2022 as more borrowers chose shorter-term mortgages. Further terms may still be popular, a popular Board option in 2024 as many advisers expect mortgage rates will be lower in 3 years' time.Gains on deferred placement fees, which we earn in originating and selling multiunit residential wares to institutional investors increased 69% between 2022 and 2023, reflecting strong volumes of origination for this program. For the fourth quarter, this revenue was flat to the same period of 2022 on similar volumes. Investment income was up 32% in 2023 and 12% year-over-year in the fourth quarter, another positive result of higher interest earned on our mortgage and loan investment portfolios and mortgages held for securitization. On the growth in MUA, mortgage servicing income was higher by 70% in 2023 and 24% in the fourth quarter compared 2022. This also reflected the continued benefit of higher interest on escrow deposits and the success of our third-party underwriting customers. Excluding the impact of higher interest costs incurred to fund the securitization portfolio, net revenue for 2023 was a record $905 million, 8% higher than in 2022. On the expense side, broker fees decreased 20% year-over-year in 2023. This reflected lower origination volumes of single-family mortgages for institutional investors and a return to more traditional per-unit broker fees, which were historically high in 2022 as a result of competition. Dollars and benefits increased 4% in 2023, reflecting standard annual merit increases and incentive driven commercial underwriting compensation. FTE was slightly lower in 2023 compared to 2022 due to regular attrition that was not replaced. Other operating expenses increased 7% to $4.2 million in 2023 due to spending on technology and our growing securitization business. The bottom line, preform market value income increased 54% in 2023 and 30% year-over-year for the fourth quarter. CapEx was $6.2 million for the year, largely for computer equipment and the cost of technology. Overall, a very successful year for First National, with record net income of $4.15 per share. For shareholders, corporate success translated to in the fourth quarter to another common share dividend increase to $2.45 per share annualized and the payment of a $0.75 special dividend. Excluding the postal dividend in December, the dividend payout ratio was 58% compared to 73% in 2022. On the same basis, the fourth quarter payout was 84% compared to 86% a year early year. As an illustration of our business model efficiency, after-tax pre-fair market value return on shareholders' equity was 38% for the year.Now let's talk about our 2024 outlook. We expect residential origination to open the year below Q1 2023 volumes of $4.4 billion based on our lower commitment levels in the fourth quarter and our assessment of the ongoing impact of Bank of Canada interest rate policy of housing activity. This outlook encompasses both our Prime and Excalibur product lines. Excaliber originations were more affected by market pressures in 2023 than were prime mortgages as it was more difficult for these borrowers to qualify for credit offered as the higher mortgage coupon rates. Mortgage brokers are also still coming around the idea of First National as a lender or choice for this product. That said, we continue to view Excalibur as an important part of our long-term plan, and we've been successful in growing our available liquidity and asset-backed commercial paper programs to support our ambition. Of note, Excalibur mortgages continued to perform as expected, with virtually no loan losses and a relatively small number of mortgages in default. Since the vast majority of Excalibur borrowers take 1-year terms, -- they have been given very little time to adapt to the new rate environment as opposed to the majority of prime borrowers who are journal locked into 5-year terms as house prices continue to hold up well in our urban area markets of focus defaults can usually be resolved successfully through sale. Arrears for our prime fixed and adjustable rate Singapore portfolios are also trending as expected, with just small upticks in arrear statistics. On prepayment speeds, we expect these to remain near current levels until such time as we see a significant reduction in interest rates. In this environment, borrowers who hold mortgage coupon right well below poperymarket rates have very little incentive to refinance. Over time, prepayments will likely see a reversion to the mean after the past couple of years of extremes.For our commercial business, we expect to see ongoing strength in the first half of 2024 as borrowers have responded to government incentives to build and provide financing for multiunit properties, and we have built a sizable commitment pipeline. In the second half, we expect competitive industry or competitive intensity to increase as more aggregators come to the market, attracted by the recent $20 billion increase in the Canada Mortgage Bond program will likely have an impact on our multiunit originations and available spreads later in the year. For these reasons, it will be difficult to replicate 2023's record financial performance in 2024. Affordability will remain a challenge, but the potential for somewhat less restrictive monetary policy later in 2024 may lead to a gradual market reset. Longer term, population growth, an ongoing lack of housing supply should provide ongoing support for prices and stimulate much needed new construction of affordable rental units that First National will finance. We will address these challenges and opportunities as we always have, with a focus on striving for better using our proven strategies. Among our agenda items, we look to continue to leverage our underwriting capabilities to serve our third-party customers. On January 31, we introduced services to our newest bank client on a soft launch basis. We're now looking forward to ramp up over the course of the year. Additionally, we intend to apply our usual discipline to enhance efficiently using technology. Recently, we launched a pilot program using cognitive document readers to process residential borrower insurance updates. Auto adjudication of certain preapproval tasks is our next frontier. -- developments in AI that may reduce repetitive tasks for our team and make our business more scalable or of interest to us.In closing, 2023 was a successful year that once again dolostrated the recurring cash flow and income derived from First National securitization portfolio and MUA servicing business, even as housing market activity moderated. Now Jeremy and I will be pleased to answer any of your questions. Operator, please open the lines. Thank you. Operator, I think I see some questions in the queue. Please acknowledge the analysts. I'm sorry, some of the things that have gone wrong with our telecommunications here. We're waiting for the operator to attend to the questions. We see some questions that are lined up and we are just waiting until the Operator gets back to us. Can we acknowledge the questions?It doesn't have to be the Operator? Well, this is unfortunate. I don't know what to do. I guess we'll give them a fewer minutes to reconnect or whatever has happened.
Apologies for this. We've had some technical issues on my side sincere apologies. We're ready for the Q&A.
Yes, we are.
Apologies again for that.[Operator Instructions]. Our first question comes from the line of Nik Priebe of CIBC.
 So headcount declined 4% last year, presumably the result of a bit of natural attrition in the business. When you look out into 2024, considering the outlook for softer single-family volumes, do you foresee further room to allow headcount to gradually moderate with the natural churn in the employee base? Or how in your mind to current staffing levels align with the current level of mortgage activity?
 Yes. Nick, it's Rob. I think that's -- I think we're okay with our current headcount. I think in the pandemic, we really ramped up, we had a lot of business internally and for our third-party customers, and we ramped up, we had too much staff when the excesses of the pandemic slowed down. Now we have a new customer in our underwriting business for third parties. We have about, I think, 15 to 18 people that are going to be full time there. So that's, for the most part, moved over from our existing underwriting operations. So I would say it's probably going to be maybe a little bit of increase in FTE just as the company grows. So nothing [Idiscernible].
 Okay. No, that makes sense. And just on that partnership, I think you had indicated last quarter that the re-entry of BMO to the broker channel via First National was expected to begin sometime early this year. Are there any updates you can provide there on the rollout, just how that's proceeding and tracking relative to what you would have hoped for in the early days?
Yes. It's proceeding as planned. I mean it's going to be a slow start. I mean I think they have a soft launch end of January. In February, they sort of they grew it out to sort of a number of brokers, I think, just in Ontario as it's they learn how the flow information goes and how the reporting goes, we'll expand to more brokers in Ontario. And so it will be a slow growth throughout the course of the year. I think it's going as planned. I mean there are sales forces out there talking to brokers and telling them to send the business to them.
Okay. That's good. And just one last one for me, just a point of clarification. So the comment that placement fees are a lot lower on commercial mortgages than single-family residential. Is that because the single-family channel, the upfront placement fee needs to compensate you for the fee that you would pay to mortgage brokers to originate, whereas commercial originations are sourced mostly by proprietary channels? Or like what's the reason for that higher per unit placement fee? And are you able to roughly quantify the magnitude of the difference there?
Yes, it's almost what the market is. I mean it's like people will pay that much for a single-family mortgage, maybe there's more spread in it. That's just the nature of it. I think in general, 1.4% has been sort of a run rate for single-family placements. That's what the market pays for it. And if you compare to the banks, some things they'll tell us, oh, that's where our costs internally are anyways to retain a mortgage. So if we buy it from you or do it internally, it's the same cost. So you see the economics there. For multiunit, it's anywhere from like 50 basis points, 75 basis points, which has been historically with the rate. Why that is? I don't know why it's not different. Maybe Jeremy could pick charters more on it, but the market will bear we the market will bear. And in commercial as well, it's probably more tenure business done. So that's going to be a bit higher than like 5 years, which I think is typically at 50 basis points. And again, it's the market.Â
The next question comes from the line of Etienne Ricard BMO.
With 2023 behind us, what is your assessment of First National's market share in the broker channel? And more broadly, do you think the broker channel took market share from the bank channel.
Well, that's a difficult question. I think it's hard because we used to get a report from Finastra, which is pretty indicative of where our market share was, they stopped reporting, I think, mid of 2022 in terms of the full number of companies reporting in because they are a big share of the marketplace and then there was privacy issues, I think. We think our market share for the year has held up, and it's maybe the low teens kind of thing. As far as the channel versus the banks, I don't know. I really don't know.Â
Okay. And to circle back on placement fees, to the extent borrowers favor once again, longer-term mortgages, the 5 years as opposed to 1 to 3 years. How much of a tailwind will that be to per unit placement fees?
Probably not a lot. I mean, I think definitely, the longer the 5-year will get us more revenue with the same side of things. We pay the broker a little bit less on a shorter term. And I would say origination for single family is kind of like a breakeven business, right? It's really to get the MUA going and the longer-term value of MUA. So I think it's not a big detail in terms of that changes. And if we did a lot of 3 years this year, it means we have renewal opportunities in 3 years' time. So there's a value there as well that we'll see earlier than the 5-year.
Okay. And lastly, on the commercial segment, we've seen some construction delays and a rise in impaired loans across the industry. What credit metrics are you seeing on your commercial book?
Yes, so our construction book just hit $5 billion of committed capital. And we've been very, very careful with our program. First and foremost, it is insured by CMHC. That's the predominant asset on our book would be CMHC insured construction, but we've been very, very careful with our client selection. So we've been working -- a large portion of our portfolio would be with pension funds and very strong experienced developers there's a segment in the market definitely that has gone downstream, and we've avoided that very much. I would say that the challenges we're seeing right now, and obviously, higher interest rates are having a big impact on this. It's really impacting all aspects of construction. So yes, we're starting to see some defaults. We're seeing land defaults, but we're not seeing them on our book to be clear. We're monitoring our book of about 100 construction loans very, very carefully. But we're very confident that I think the program we set up 7 or 8 years ago has served us very well. So yes, there are some challenges in the industry. We've focused on multifamily rental insured predominantly. And we've been very, very selective with our developer clients. So I hope that answers your question.Â
Our next question comes from the line of Graham Ryding at TD.
Maybe I'll just start with -- just to make sure I heard your message correctly. So on the commercial front, it sounds like you're expecting a strong first half of the year, but then competition to pick up in the second half. Maybe you could dig into that a little bit, why are you expecting competition to pick up on that front?
Yes. So as Rob touched on in June of last year, seeing to see increase the premiums on their Select product, which is the product that they developed about 1.5 years ago to really push supply in Canada. It caused a surge by about 4x of what they would normally face from a Q perspective. And so we were -- in a normal time frame, you get an approval in 6 to 8 weeks with CMEC, that was getting pushed out to 4 to 6 months. And so basically, all of the business we put in June into the pipeline with CMHC was being pushed back into approvals really in Q4 of 2023. And even then, we're still getting them right now, Graham. So Q1, Q2 will continue to be driven by a combination of 2023 volumes and then, of course, just the volumes that are going on in 2024. The other, I guess, the tailwind for us, which is creating more competition is the increase of $20 billion to the Canada mortgage bond is really empowering the aggregators in the business, and it's allowing them to securitize more. And therefore, they tend to originate through smaller CMHC originators, and they tend to compete on price. So the greater supply is being passed on to clients with tighter pricing. So we've got strong pipeline through to sort of Q2, Q3. And then at that point, we think we're going to be in a much more competitive environment. Also given the fact that with these higher interest rates, there just seems to be -- there is less activity in commercial in general, multifamily included far fewer trades than we would normally see as buyers and sellers start to get comfortable with where cap rates should be. So that's kind of the outlook for commercial for 2024.
 Okay. That's helpful. And then on the single-family side, you said significantly lower originations at the beginning of the year. We're seeing some year-over-year increases in Canada and some more specific markets through sort of January and February in terms of housing sales. So why is that not flowing through into your origination expectations for the beginning of the year? Is that related to some of your commentary on Excalibur and maybe you could expand on that.
Yes, a little bit. I think that there's a couple of things. So Q3 for us is very strong because every thought in Q2 Bank Canada was done and rates were sort of finished. But then in June and July, Bank Canada said, no, we're not being we increased a couple of times more, and people in Q3, so I'm slowing down. And so that affected what happened in Q4, right? And that's still the case. I mean people are still on the sidelines. People were considering what's the value of my house I bought this thing in 2021 in the pandemic, and it's worth this much, it's not worth that much. So slowing down. But I think there's a swell of like people waiting to get in the housing market. and they will. So that's number one. And so I think Q1, we've seen the commitments from Q4 were pretty slow. And as well, I think competition for us a little bit, the TD Bank, Scotiabank was out from a lot of 2023 forever reason. I think they're back with a vengeance now and competing. So that's going to take some market share from us. And of course, our new friends, the BMO will be out there, too, competing against those 2 banks, I think, we start pricing. The only way they can probably start to get goodwill and broker business is through sharp pricing, I think. So we have those 2 things to worry about as well or that the pricing is well to worry about. So it will be a slower start. But I think if the economy, I think, gets better, I think it's going to get better. I think we're in for a soft landing. And if Bank Canada cuts, I think we'll see some real activity.
 Okay. Understood. And then any commentary on the Excalibur product? You're saying no loss experience. How is the book trending with expect to arrears and workout situations.
Yes. So our product that we securitize is B20 compliant, 80% loan-to-value or less. So there's a lot of equity from the borrowers in those properties. -- arrears have ticked up a little bit on a smaller portfolio. We've had, I think, one loss in the last 4 years a realized loss. I think we're well provisioned for in case something does happen. We compared to the peers in the industry, and we're at the right levels. I think we're over provisioned to be honest, but you never know. So we're not worried. Our worry is, to be honest, it to find more product. So I think last year, it was down much like our overall sale family origination book. We want to get the products to keep coming in to replace the stuff that's going to pay out and mature is typically for us 1-year and 2-year product. So it tends to turn over very quickly, and we have conduits there that need the product to keep the income flowing.
[Operator Instructions] Our next question comes from the line of Jaeme Gloyn at National Bank.
Yes, thanks. Just wanted to go back to the couple of questions to go on the comment around TD. I believe you said TD and Scotia, they had kind of paused a little bit during 2023 and are now out there competing more aggressively and you would expect BMO to also ramp that up. Did I hear that correctly in terms of their position in the market? And then I guess the follow-up to that is with the cup of these banks now in your mortgage servicing or fulfillment processing business. How do you balance that part of the channel with your own flows? And do you take what they're doing and make adjustments yourselves or maybe talk a little bit more about -- I don't want to say there's channel conflict here, but balancing those outcomes.
Okay. Well, the one thing is I think the TD Bank has never slowed down. They've been very strong for the last, I don't know, 5 years in the channel, especially after we help them with their underwriting and fulfillment. -- only Scotia sort of feel back for a while there for whatever reason, maybe it was economics, a mature, but they are back now. But yes, there's always a conflict between us doing that business and doing our own business, right? But we also find that having a customer with deep poli the banks is a great customer to have. And we're going to be there for the long term, like the TV agreements that we signed in 2014, it's been now 10 years on, and we've made the money we thought we were going to make. It's been a great addition to our our business. our competency is underwriting. And we are -- our Merlin technology also with leading edge technology. Let's use that technology to make money, and this is how we do it. But you're right, there is a conflict to me, you ask Scott MacKenzie -- he's a big fan of it because it's going to hurt his sales force competing with these 3 banks.
Yes. Understood. Second question is just on the brokerage fees. And the way I'm looking at this is looking at brokerage fees as a percentage of volumes sold to institutional investors. And it -- it's more than just normalized. It's quite a bit lower in this Q4 than we've seen it historically, going back several years even. So is there something a little bit more happening in this quarter that would drive those brokerage fee expenses lower? And then would I take that kind of rate and assume this is the "normal rate for the next couple of years? Or should we kind of go back a few more quarters to look at a more smooth level of brokerage fees as a percentage of volumes sold to institutional investors?
Yes. Well, I guess the difficulty is this is that on a commercial mortgage being sold to institution, that probably has no brokerage fees. So that's done internally, paid people salaries for that. So to the extent that -- the commercial volume has been up. I think it's up in just in Q4 because of the great origination. The fraction, the calculation you're doing will be unbalanced there, right, because you'll have a lot of commercial there at 0 and you have the regular single-family there at the regular rates. I would say for overall rates for brokers in 2022 may be lower by 10% than 2022, '22, we had to compete very strongly in the market by giving incentives or matching incentives to brokers that other people were posting. And I think next year 2024, I think we're going to be maybe half and half, a little bit like 2023, but maybe more incentive for brokers to compete with everybody in the channel looking for the same product.Â
Yes, it does might be helpful so I don't know if to be able to disclose like single-family versus commercial going institutional investors and kind of trying to narrow it that way from a forecast perspective, but a conversation for another day perhaps. But that's good for me.
That's your job -- that's your job.
Our next question comes from the line of Graham Ryding TD.
Yes. Just a couple of follow-ups. You did $11.8 billion in securitization funding this year, I think, in total, both through CMB and also your -- I guess, your bank-sponsored conduits. Is that -- should we think of that as you're sort of close to your capacity there? Is that a reasonable sort of run rate or capacity for that funding channel?
I would say it is, but subject to, I guess, the $20 billion of new CMB room that we have announced, right? So I think the government or CMHC wants to allocate that $20 billion to multifamily mostly because that's what they think is going to help Canada in terms of rental stock, et cetera, to give incentives to people to do those kind of mortgages. So that might sort of -- they might sort of carve that out in terms of allocations, and we'll be able to do more ourselves in that regard. 1.8 wells the same or go up.
 Yes. Okay. So there -- was there any of that increased CMB issuance limit in the Q4 numbers this year as that program were in rolled out yet?
Well, it was rolled out, I think, it was rolled out and they increased some things, but it's almost like a December 15 sort of thing, and we couldn't really take advantage of it at that point.They always do that. Always increase things like in December when the banks can sort of throw in a whole bunch of stuff, but we plan ahead, and we don't have the product to necessarily sell in.
Okay. And then just my last one, if I could, just on the net interest margin. You expect -- you said you expect it to be flat year-over-year. What sort of implied there in terms of your outlook for either origination volumes or prepayment activity when you're expecting it to be flat?
Yes. So I think for prepayment, similar to this year, still low because we have a whole bunch of mortgages in our programs at 2%, 3% from the pandemic years, which probably will not pay out or refinance because they can't without paying -- or if they can, but they can get a much higher mortgage rate, why do that I think NIM was lower in 2022 for a whole bunch of reasons like the Bank Canada, changing rates 7x is not good for us because our prime rate kind of lags the cost of funds as they go up, so that we lost money there. Prepayment, a lot of penalties the 975 pools in 2022. So what I'm saying is that 2022 was abnormally low, and now we're back to where it should be. So I think that's why I'm saying 2024, be similar because we have a whole the $40 billion of securitized mortgages that will keep producing at the same level they're producing in 2023.Â
And there are no further questions on the line. So I'll hand the floor back to Mr. Ingils for the closing comments.
Thank you, operator. First National reported its Q1 results on April 30, and Hosted Annual General Meeting of Shareholders on May 2 at the TMX Market Centre in Toronto. We look forward to both events. In closing, my thanks to the First National team, our business partners and customers for making 2023 a successful year. And thank you all for participating in our call today. Have a great day,
This now concludes the conference. Thank you all very much for your attendance. You may now disconnect your lines.