In 1988, two young Canadian entrepreneurs (Stephen Smith and Moray Tawse) founded First National Financial Corporation. Today, Stephen and Moray remain deeply engaged in the day-to-day business operations as committed officers, directors and shareholders of a firm that now has over $100 billion of mortgages under management and a market capitalization of over $1.6 billion. In this interview, we asked Moray to look back on First National’s early years and to look forward into the future of the Company he co-founded.
Let’s start at the beginning. Why did you team up with Stephen to create First National?
It was an easy decision to start First National because we had two years learning the mortgage banking business together before we put our own money on the line and took the leap.
I worked at a trust company and my specialty was originating loans from the brokerage community. Stephen worked at a boutique investment dealer and his speciality was selling packaged loans to pension funds, life companies and mutual funds. I found Stephen’s business card, gave him a call and said why don’t we work together to originate, package and sell the mortgages for our firms? He thought that was a good idea and so off we went. One day, we were together in Vancouver seeing a mutual client, and we said to each other, we’re working hard, we’re making money for our employers, why don’t we do it for ourselves? It seemed like the logical thing to do.
They say timing is everything when it comes to starting a business.
Well we thought our timing was impeccable because mortgage securitization structures had just appeared and we saw securitizations as the future and based our business model on it. It turns out that we were too early. Just after we started the company, the securitization market collapsed. The secondary part of our business was to sell packages of loans. Right away, our whole business became selling packages and it continued that way until securitizations reappeared four or five years later.
Were you able to adapt?
Well, the business became profitable in that first year and we started hiring almost right away. Ever since, that profit has continued to grow larger each year.
What made First National a success to start?
We understood all areas of the market and we figured out how to make the best use of our mortgage assets, whether by selling or securitizing them. But the underlying reason for our success was that we were quite entrepreneurial and our big competitors, by comparison, weren’t. Being entrepreneurial meant, in large part, doing everything we could, and then some, to give customers a better experience. We responded quickly. We worked hard to find solutions and we saw everything through to the end seamlessly. It’s still the way First National operates today, only we have a lot more people who are dedicated to our customers and mortgage brokers.
First National is now a billion-dollar business. That’s quite an accomplishment.
The most satisfying part is just the fact that we could go into a space that was completely dominated by large institutions and create an institution like First National from a small business.
Did you have a vision to be this large when you started?
No, like anyone who starts a business, we were worried about what we were going to be doing this week and next week and next month to grow. We didn’t have a grand vision, we just wanted to keep trying harder to get better. And we’ve kept with that philosophy over the years. I think it’s what you do in those weeks and months to get bigger and better that’s important.
How has your personal role in the Company changed over the years?
When we started, Stephen looked after our commercial business and I ran residential single family. As time went on and Scott McKenzie joined us, we basically switched roles. I took on commercial, Scott took on residential and reported to Stephen who was looking after our treasury operations. That’s still basically how we function. Stephen is the big picture, analytical guy and I do what I’m best at in marketing and sales. Scott’s still with us running single family and we’ve got great leaders beyond the three of us.
Are you still involved day-to-day?
Absolutely. I’m here to do business, here to work with clients and to support our sales teams.
First National now has over $100 billion of MUA, making it by far the largest non-bank mortgage lender in Canada. Where do you go from here? Do you become a bank, for example?
The non-bank business model we have is what makes us special. We’re like a mutual fund; we try not to take market risk and we make nickels and dimes but because we do billions of dollars a year in volumes, those nickels and dimes add up.
You and Stephen still have substantial ownership stakes in the Company. Is that important?
It’s important to us but this is no longer the Stephen and Moray show and hasn’t been for many years. We have wonderful people at all levels of the Company. And it’s the team that steers this ship. The strength of that team has really invigorated us. Serving with these amazing people makes it a pleasure to come into the office every day.
Does the future of First National include Moray Tawse?
You can count on it.