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Xceed Company Profile

Xceed Company Profile. Forward-Looking And Other Statements.

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Xceed Company Profile

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  1. Xceed Company Profile

  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. Xceed Mortgage Corporation - 3 -

  4. Growth • Performance • Niche • Experience • Innovation • Risk-Reward - 4 -

  5. Brief History • 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 $24.3MM • Installed new senior management team with entrepreneurial culture and disciplined management system. • Implemented new innovative funding programs. • Invigorated existing broker network channel and created financial institution referral programs. - 5 -

  6. Financial Highlights 2004 2001 CAGR Revenue $1,558M 170% $30,814M Mortgages $126MM 106% $1,096MM Net Income(1) ($1,127)M 113% $10,412M ROAE (1) (34.8%) 21% 21.9% (1) CAGR figures for Net Income and ROAE are calculated from fiscal year 2002 as net income was negative in 2001. - 6 -

  7. Revenue Growth CAGR 170% Under Previous Management Under Current Management Note: Xceed’s fiscal year end is October 31. - 7 -

  8. Mortgage Book Growth CAGR 106% Under Previous Management after 5 years Under Current Management - 8 -

  9. Mortgage Fundings Growth CAGR 98% * Latest 12 months April 30, 2004. - 9 -

  10. Increasing Profitability Net Income Growth CAGR 113% Under Previous Management Under Current Management Note: Xceed’s fiscal year end is October 31. - 10 -

  11. Effective Use of Capital Return on Equity Growth CAGR 21% Under Previous Management Under Current Management Note: Xceed’s fiscal year end is October 31. * Trailing twelve months ended April 30, 2004. - 11 -

  12. Drivers of Growth • Nascent but rapidly growing Canadian non-traditional residential mortgage market. • Opportunity for product innovation beyond vanilla 3 year & 5 year offerings. • Distribution • Established mortgage broker relationships • Financial Institution channel has only just started to grow. • Low variable cost business model provides significant operating leverage. • Efficient methodof raising capital provides opportunity for high ROE • Effective improvements in funding ratios will leverage increased volumes. • Continued leveraging of low cost electronic approval / funding system, with single location (in Toronto). - 12 -

  13. Growth Potential • Potential size of Canadian non-traditional market is estimated at 10% of the total residential mortgage financing market (approximately $550 billion) • Total outstandings of the non-conforming market in Canada are approximately $8 billion • About $50 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. - 13 -

  14. - 14 -

  15. US Market • Sub-Prime: • $1 Trillion • 15% of total mortgage market • Credit Quality: • Accept poorer credit quality • Typical Mortgages Structures: • Open (higher prepayments, no penalties) • Long terms (e.g., 30-year fixed) • Consumer Protectionism: • In most states, lender must choose between foreclosure of property or personal assets, not both • Gain on Sale Accounting: • Volatility of assumptions because of open and longer term structure - 15 -

  16. Competitive Position Traditional Lenders (Big 6 Banks) GMAC / Wells Fargo XCEED A B C Borrower Credit Rating Home Capital / Equitable Trust 25% 50% 75% 100% Mortgage Loan to Value (LTV) Ratio - 16 -

  17. Market Niche • Focus on non traditional market: • Non Conforming Credit • High Loan to Value Uninsured • Origination through two distinct channels: • Mortgage Brokers • Financial Institutions (referral programs) • Execute effective and efficient business model: • Concentrate on origination • Disciplined credit underwriting • Outsourced servicing • All new product securitized regularly • Entrepreneurial culture with structured management processes - 17 -

  18. Shareholders - 18 -

  19. Senior Management & Directors • 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. • Michael Jones – President & COO • Previously Vice President, Commercial Mortgages for CIBC Mortgages Inc. where he also oversaw the CIBC Access Program. • Karen Martin – CFO • 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 • John Ayanoglou – VP Finance • Previously the Chief Financial Officer of publicly-listed Cartier Partners Financial Group. • Practiced within Financial Services Group of PricewaterhouseCoopers LLP from 1996 to 2000. • Robert C. Krembil – Director • President, Chiefswood Holdings Limited • Co-Founder and former Chairman and CEO of Trimark Financial Corporation • Founding shareholder in Xceed • Majority of Board consists of non-related independent directors - 19 -

  20. Experience • Breadth and depth of senior management and board. • Focused channel management. • Disciplined underwriting and default management. • Entrepreneurial results-based performance model. • Product innovation and design. • Knowledge of capital markets and proprietary funding programs • Risk adjusted pricing that ensures returns are commensurate with risk. - 20 -

  21. Innovation Established 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 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, regional diversified, in pre-approved locales • Average mortgage size is $165,000 • Adherence to GAAP - 21 -

  22. Financial Model: Pro-Forma Economics(1) . • Analysis is based on approximations of average portfolio economics over the life of a representative mortgage portfolio. • (2) Application fees are based on Xceed’s 90% loan-to-value product offering. • Commissions and other expenses includes hedge costs, cost of yield “buy up” on subordinate co-owned interest. • Approximate mortgage coupon rate based on historical average. • (5) Trusts costs consist of allowance for losses, cost of credit enhancement, program fees, and MCAP servicing costs. - 22 -

  23. Disciplined Underwriting Reduction in Loss & Default Percentages CADR (27)% Under Previous Management Under Current Management Note: Xceed’s fiscal year end is October 31. Ratios are a percentage of average secured portfolio under administration. - 23 -

  24. Credit Risk Typical Xceed Mortgage: 100% 92% 81% - 24 -

  25. 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. - 25 -

  26. Questions - 26 -

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