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

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Xceed Company Profile

Helping Canadians Make It Home


Forward looking and other statements
Forward-Looking And Other Statements

  • This presentation may contain 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 and extrapolation of past market indicators. These factors should be considered carefully and prospective investors should not place undue reliance on any forward-looking statements.

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Corporate overview
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.

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Value proposition
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 -


Executive team
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% control by management

- 5 -


Financial performance
Financial Performance

2007(1)

2001

CAGR

Revenue

$1,558M

93.3%

$68,871M

AUM

$132MM

69.3%

$2,720MM

Net Income(2)

($1,127M)

65.2%

$24,807M

ROAE (3)

(34.8%)

21.8%

22.7%

  • Trailing twelve months ended July 31, 2007, 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 -


Revenue growth
Revenue Growth

CAGR 93.3%

Under Previous Management

Under Current Management

* Xceed’s fiscal year end is October 31. The 2007 balance represents the trailing

twelve months ended July 31, 2007.

- 7 -


Total assets under administration growth
Total Assets Under Administration Growth

$2,720

CAGR 69.3% *

Under Previous

Management after 5 years

Under Current Management

* Xceed’s fiscal year end is October 31. Cumulative annual growth rate is calculated based on a trailing twelve months ended July 31, 2007, as a proxy for 2007.

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Increasing profitability
Increasing Profitability

Net Income Growth

CAGR 65.2%

Under Previous Management

Under Current Management

* Xceed’s fiscal year end is October 31. The 2007 balance represents the trailing

twelve months ended July 31, 2007.

- 9 -


Cash flows from operations
Cash Flows from Operations

CAGR 99.8%

Under Previous Management

Under Current Management

* Xceed’s fiscal year end is October 31. The 2007 balance represents the trailing

twelve months ended July 31, 2007.

- 10 -


Effective use of capital
Effective Use of Capital

Return on Equity

Average 21.8%

Under Previous Management

Under Current Management

* Xceed’s fiscal year end is October 31. The 2007 ratio represents the trailing

twelve months ended July 31, 2007.

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Growth potential
Growth Potential

  • Potential size of Canadian non-traditional market is estimated at 10% of the total residential mortgage financing market (approximately $700 billion)

  • Total outstandings of the non-conforming market in Canada are approximately $12 billion

  • Over $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.

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Market niche
Market Niche

  • Focus on non traditional market:

    • Non Conforming Credit

    • High Loan to Value Uninsured

- 13 -


Market Position

Traditional Lenders

(Big 6 Banks)

First National / GE Money /

Wells Fargo / GMAC

XCEED

A

B

C

Borrower Credit Rating

Home Capital / Equitable Trust

25% 50% 75% 100%

Mortgage Loan to Value (LTV) Ratio

- 14 -


Fundamentals
Fundamentals

  • Opportunity for product innovation beyond vanilla offerings.

  • Low variable cost business model provides significant operating leverage: electronic approval / funding system, with locations in Toronto and Montreal.

  • Efficient methodof raising capital provides opportunity for high ROE

  • Effective improvements in funding ratios to leverage increased volumes.

- 15 -


Funding methodology
Funding Methodology

  • $350 million warehouse facility

  • Securitization of mortgages thru non-recourse sales

    • Trust senior notes funded with AAA/or R-1 (High) rated floating rate notes

    • Trust credit enhancement provided by third party investors and Xceed

  • New term structure established in 2006

    • Two transactions, valued at a combined $1.1 billion, have provided non-recourse funding in the term markets

    • Rated AAA by Standard & Poor’s and DBRS

- 16 -


Solid risk control
Solid Risk Control

  • Interest Risk immunization thru swaps and other hedging mechanisms.

  • Credit Risk control thru frequent asset quality and compliance reviews by Standard & Poor’s, DBRS and Trusts’ securitization agents

    • First charge, residential mortgages only, regionally diversified, in pre-approved locales

    • Average mortgage size is $160,000 for Xceed portion

    • Option for mortgages with LTV > 90% to retain only the risk associated with 80% piece and sell the subordinated > 80% piece to third party financial institution OR to securitize entire mortgage

- 17 -


Credit risk
Credit Risk

Typical Xceed Mortgage:

100%

92%

83%

Securitized Portfolio

- 18 -


Diversification

As at July 31, 2007

7.39%

18.26%

1.75%

0.46%

1.51%

27.65%

0.22%

38.68%

1.64%

2.45%

- 19 -


Financial model pro forma economics
Financial Model: Pro-Forma Economics

  • Approximate mortgage coupon rate and cost of funds are based on the average in the securitized portfolio as at July 31, 2007.

  • 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 Income is 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 during the twelve month period ending July 31, 2007, normalized, 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.

.

- 20 -


Summary
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 -


Questions

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