But that surge has yet to meaningfully flow through to the bottom line, as Canada’s largest non-bank mortgage lender saw its revenue growth tempered by narrower margins, lower servicing income, and a heavier expense load.
The lender funded 34% more single-family mortgages compared to a year earlier, with CEO Jason Ellis crediting renewed strength in insured lending, driven by recent mortgage rule changes—including the return of 30-year amortizations for first-time buyers and an increased $1.5-million purchase price cap. Average mortgage sizes also rose, particularly in high-priced markets like Toronto and Vancouver.
The gains come despite what Ellis described as a “disconnect” between media headlines about sluggish resale activity and the lender’s own strong commitment pipeline.
At the same time, mortgages under administration (MUA) climbed 7% year-over-year to $158.8 billion. But that growth didn’t fully translate to profitability. Pre-fair market value income declined 16% to $52.6 million, while revenue rose just 2%.
The shortfall was due in part to compressed net interest margins—especially in the Asset-Backed Commercial Paper conduits, which have not yet reflected lower funding costs following Bank of Canada rate cuts. Ellis said this drag should prove temporary.
Commercial segment growth offsets some drag
First National’s commercial segment posted an 18% increase in originations year-over-year, largely due to continued demand for insured multi-unit residential housing.
Of the $2.7 billion in new commercial business funded during the quarter, approximately $500 million was in construction advances. While CMHC’s tightening of its underwriting criteria has slowed some construction lending, Executive Vice President Jeremy Wedgbury said demand for term financing remains strong.
“CMHC has gone a little bit risk-off,” Wedgbury noted, but said the outlook for the multi-unit space remains resilient given the continued demand for affordable rental housing.
Renewals helped lift placement fees
First National’s placement fees rose 2% on a 22% increase in volumes. But because a larger share of those volumes came from renewals, which earn lower fees than new originations, per-unit averages dipped.
That mix shift had an upside. Since renewals don’t carry broker commissions, the net spread between placement fees and broker expenses widened meaningfully year-over-year.
Ellis said that net “expanded by 30%,” a trend he expects to continue through 2025 as more mortgages originated in 2020 come up for renewal.
Alt-A arrears still elevated but improving
While arrears in the prime portfolio remain below pre-pandemic levels, Alt-A mortgage arrears are still elevated compared to last year.
But First National noted they declined month-over-month in both February and March.
“Virtually all of the Alt A mortgages originated during the period of lowest mortgage rates between 2020 and 2022 have already renewed and have been servicing their mortgages at higher rates for several quarters now,” Ellis said, adding they are now looking ahead to renewals at lower rates.
Outlook remains positive
Despite economic uncertainty and a recent downgrade to the national housing market forecast by CREA, First National is optimistic about Q2. The company’s single-family mortgage commitments are up significantly from last year, and Ellis emphasized that this growth is being achieved without “adjustments in our approach to pricing or credit quality.”
Operating expenses rose 7% year-over-year, in part due to staffing up for expected volume increases and ongoing IT investments. Brokerage fees fell 12% as broker incentives dropped from their 2024 peak.
The quarter’s dividend payout ratio came in at 98%, typical for Q1 given the timing mismatch between volume and revenue recognition.
“The first quarter unfolded as we expected,” said CFO Rob Inglis, adding this allowed First National to “add to our portfolio of mortgages pledged under securitization and to our servicing portfolio—both of which will benefit First National and our shareholders in future years.”
Q1 earnings overview
| Q1 2024 | Q4 2024 | Q1 2025 | |
|---|---|---|---|
| Net income | $67.9M | $63M | $33M (-51% YoY) |
| Single-family originations (incl. renewals) | $3.5B | $6.3B | $4.7B (+34%) |
| Commercial originations (incl. renewals) | $3.0B | $4.1B | $3.6B (+18%) |
| Mortgages under administration | $145.1B | $153.7B | $155.4B (+7%) |
Notables from its call:
First National President and CEO Jason Ellis commented on the following topics during the company’s fourth-quarter earnings call:
On rising residential volumes:
- “We may have outperformed the market marginally just with our focus on high-ratio insured mortgages… part of the growth in year-over-year originations in dollar terms is a larger average insured mortgage size.”
On disconnect between reported resale activity and First National’s growth:
- “I think that there is something of a disconnect between what we see the media reporting in terms of housing activity and what we’re actually seeing on the ground from an originations perspective.”
On insured mortgage tailwinds:
- “We benefited perhaps disproportionately from the changes in CMHC’s rules around the $1.5 million purchase price cap and the reintroduction of 30-year amortizations for first-time homebuyers.”
On net interest margin (NIM) compression:
- “I think more significant is the transient impact of the compression in the ABCP program… I don’t think that that’s going to be a recurring issue.”
On the impact of legacy pandemic-era mortgage pools rolling off:
- “The average NIM on the single-family MBS portfolio only ticks along a couple of basis points over the next few quarters… so I don’t think that’s going to be a major story.”
On placement fee trends:
- “Our per-unit broker fee on new originations was lower… (and) a slightly higher percentage of the residential mortgages placed relative to the same quarter last year were renewed mortgages, where the placement fee…is zero… structurally, that’s the thing that we’re going to enjoy going forward for the rest of the year.”
On servicing income concerns:
- “When I think about our servicing, not just residential, but commercial… core servicing activities were up 7% in the quarter compared to the same quarter last year.”
On the broader outlook:
- “This business continues to be a function of growth in originations, renewals and growth of MUA, which will drive a persistent growth in servicing revenue and net interest income going forward.”
First National Q1 conference call
Note: Transcripts are provided as-is from the companies and/or third-party sources, and their accuracy cannot be 100% assured.
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Last modified: May 1, 2025