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Xceed Company Profile

Xceed Company Profile. Helping Canadians Make It Home. Forward-Looking And Other Statements.

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Xceed Company Profile

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  1. Xceed Company Profile Helping Canadians Make It Home

  2. Forward-Looking And Other Statements • This presentation contains forward-looking statements which reflect management’s expectations regarding Xceed Mortgage Corporation’s future growth, performance (both operational and financial), and business prospects and opportunities. Past results do not constitute a guarantee of future performance. A number of factors could cause actual results, performance, or achievements to differ materially from the results expressed or implied in these materials. Business prospects and opportunities considered are based on approximation extrapolation of potential market indicators. These factors should be considered carefully and prospective investors should not place undue reliance on any forward-looking statements. - 2 -

  3. Corporate Overview • Established in Canada in 1997 as a subsidiary of IMC Mortgage Corporation. • Current investor group purchased 90% of common stock from BMO in April 2002 and recapitalized firm with $22.2MM. • IPO of June 2004 raised additional $24.34MM. - 3 -

  4. Value Proposition • Focused Origination • Established mortgage broker relationships • Financial Institution channel • Direct business • Risk-Reward Management • Credit risk • Market risk • Business Model • Securitization program • Entrepreneurial culture • Structured management processes • Technology - 4 -

  5. Executive Team • Ivan Wahl – Chairman, CEO & Director • 30 years of experience in the Canadian mortgage finance industry. • Played a leading role in the development of the mortgage-backed securitization industry in Canada. • Founded FirstLine Trust Company in 1985, grew and sold the business to CIBC in 1995. • Vice-Chairman and Director of CIBC Mortgages Inc. from 1995 to 2001. • Recipient of the Ernst & Young Financial Services Entrepreneur of the Year award for 2005. • Michael Jones – President & COO • Previously Vice President, Commercial Mortgages for CIBC Mortgages Inc. where he also oversaw the CIBC Access Program. • Joined FirstLine Trust in 1992. • John Ayanoglou – CFO & Corporate Secretary • Previously the Chief Financial Officer of publicly-listed Cartier Partners Financial Group. • Practiced within Financial Services Group of PricewaterhouseCoopers LLP from 1996 to 2000. • Karen Martin – VP, Securitization and Capital Markets • Previously the Treasurer of Amicus Holdings (division of CIBC), Director of Balance Sheet Management, and General Manager of Securitization for CIBC. • Manager, Financial Analysis and Manager, Financial Reporting for FirstLine Trust Co. from 1988 to 1996. • Majority of Board consists of non-related independent directors • 30% of common shares controlled by management or directors - 5 -

  6. Financial Performance 2006(1) 2001 CAGR Revenue $1,824M 116% $58,015M AUM $132MM 83% $1,976MM Net Income(2) ($1,127)M 91% $21,993M ROAE (3) (34.8%) 21.9% 24.6% • Trailing twelve months ended April 30, 2006, except for Mortgages. • The CAGR figure for Net Income is calculated from fiscal year 2002 as net income was negative in 2001. • The percentage presented is the average ROAE calculated from fiscal year 2002 as net income was negative in 2001. - 6 -

  7. Revenue Growth CAGR 116% Under Previous Management Under Current Management *Xceed’s fiscal year end is October 31. The 2006 balance represents the trailing twelve months ended April 30, 2006. - 7 -

  8. Total Assets Under Administration Growth CAGR 83% Under Previous Management after 5 years Under Current Management *Xceed’s fiscal year end is October 31. The 2006 balance represents the trailing twelve months ended April 30, 2006. - 8 -

  9. Increasing Profitability Net Income Growth CAGR 91% Under Previous Management Under Current Management *Xceed’s fiscal year end is October 31. The 2006 balance represents the trailing twelve months ended April 30, 2006. - 9 -

  10. Effective Use of Capital Return on Equity Average 21.9% Under Previous Management Under Current Management *Xceed’s fiscal year end is October 31. The 2006 ratio represents the trailing twelve months ended April 30, 2006. - 10 -

  11. Growth Potential • Potential size of Canadian non-traditional market is estimated at 10% of the total residential mortgage financing market (approximately $650 billion) • Total outstandings of the non-conforming market in Canada are approximately $10 billion • About $55 billion in untapped potential!! • This represents 300,000 families living in apartments who may meet our underwriting requirements and would love to own their own homes. - 11 -

  12. Market Niche • Focus on non traditional market: • Non Conforming Credit • High Loan to Value Uninsured - 12 -

  13. Market Position Traditional Lenders (Big 6 Banks) Wells Fargo / GMAC / First National XCEED A B C Borrower Credit Rating Home Capital / Equitable Trust 25% 50% 75% 100% Mortgage Loan to Value (LTV) Ratio - 13 -

  14. Fundamentals • Opportunity for product innovation beyond vanilla 3 year & 5 year offerings. • Low variable cost business model provides significant operating leverage: electronic approval / funding system, with single location (in Toronto). • Efficient methodof raising capital provides opportunity for high ROE • Effective improvements in funding ratios to leverage increased volumes. - 14 -

  15. Funding Methodology • $62 Million combined warehouse and revolving facility • Securitization of mortgages thru regular (non-recourse) sale to Trusts. • Trust senior notes funded through established $100 billion dollar asset-backed commercial paper market • Trust credit enhancement provided by third party investors and Xceed - 15 -

  16. Solid Risk Control • Interest Risk immunization thru swaps and other hedging mechanisms. • Credit Risk control thru frequent asset quality and compliance reviews by DBRS and Trusts’ securitization agent • First charge, residential mortgages only, regionally diversified, in pre-approved locales • Average mortgage size is $160,000 • For mortgages with LTV > 90%, retain only the risk associated with 80% piece and sell the subordinated piece > 80% to third party financial institution - 16 -

  17. Credit Risk Typical Xceed Mortgage: 100% 92% 81% Securitized Portfolio - 17 -

  18. Diversification - 18 -

  19. Financial Model: Pro-Forma Economics • Approximate mortgage coupon rate and cost of funds are based on historical average in the securitized portfolio. • Trusts costs consist of allowance for losses, historical cost of credit enhancement in the existing securitized portfolio, program fees, and MCAP servicing costs. • Net Origination Costs are comprised of application fee revenue based on Xceed’s historical product mix, less other costs incurred up to mortgage funding. These other costs include commissions and volume bonuses, cost of yield “buy up” on subordinate co-owned interest, and other origination costs. • This estimate is calculated by spreading the costs incurred in a trailing twelve month look back ending April 30, 2006 over the expected life of the mortgages originated. • Recurring income is before applicable taxes and does not consider prepayment fee income and certain pipeline hedging costs. . - 19 -

  20. Disciplined Underwriting Reduction in Loss & Default Percentages(1) Mortgage Default CAGR (5)% (2) Under Previous Management Under Current Management • Ratios are a percentage of average securitized portfolio under administration. • Xceed’s fiscal year end is October 31. The 2006 percentages represent the trailing twelve months ended April 30, 2006. - 20 -

  21. Summary • Limited competition. • Nascent, rapidly growing niche. • Strong experienced management. • Capital markets proprietary funding models. • Performance based culture. • Focused multi-channel origination. • Disciplined underwriting. • Disciplined default management. • Risk adjusted pricing model. • Flexible, scalable technology with comprehensive relevant reporting capability. - 21 -

  22. Questions - 22 -

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