Title: Xceed Company Profile
1Xceed Company Profile
Helping Canadians Make It Home
2Forward-Looking And Other Statements
- This presentation contains forward-looking
statements which reflect managements
expectations regarding Xceed Mortgage
Corporations 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.
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3Corporate 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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4Value 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
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5Executive 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.
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6Financial Performance
2006(1)
2001
CAGR
Revenue
1,824M
58,015M
116
AUM
132MM
1,976MM
83
Net Income(2)
(1,127)M
21,993M
91
ROAE (3)
(34.8)
24.6
21.9
- 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.
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7Revenue Growth
CAGR 116
Under Previous Management
Under Current Management
Xceeds fiscal year end is October 31. The 2006
balance represents the trailing twelve months
ended April 30, 2006.
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8Total Assets Under Administration Growth
CAGR 83
Under Previous Management after 5 years
Under Current Management
Xceeds fiscal year end is October 31. The 2006
balance represents the trailing twelve months
ended April 30, 2006.
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9Increasing Profitability
Net Income Growth
CAGR 91
Under Previous Management
Under Current Management
Xceeds fiscal year end is October 31. The 2006
balance represents the trailing twelve months
ended April 30, 2006.
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10Effective Use of Capital
Return on Equity
Average 21.9
Under Previous Management
Under Current Management
Xceeds fiscal year end is October 31. The 2006
ratio represents the trailing twelve months
ended April 30, 2006.
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11Growth 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.
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12Market Niche
- Focus on non traditional market
- Non Conforming Credit
- High Loan to Value Uninsured
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13Market 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
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14Fundamentals
- 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 method of raising capital provides
opportunity for high ROE - Effective improvements in funding ratios to
leverage increased volumes.
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15Funding 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
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16Solid 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 gt 90, retain only the
risk associated with 80 piece and sell the
subordinated piece gt 80 to third party financial
institution
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17Credit Risk
100
Homeowner Equity
Interest Sold To 3rd Party F.I.
Credit Risk Managed by Xceed
92
81
Securitized Portfolio
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18Diversification
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19Financial 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 Xceeds
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.
Recurring Yield Spreads Recurring Yield Spreads
Mortgage Coupon (1) 7.18
Swap Cost of Funds (1) (4.06)
Gross Spread 3.12
Trust Costs (2) (1.15)
Net Spread 1.97
Net Origination Costs (3)(4) (0.19)
Net Operating Expenses (4) (0.71)
Recurring Income (5) 1.07
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20Disciplined 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. - Xceeds fiscal year end is October 31. The 2006
percentages represent the trailing twelve months
ended April 30, 2006.
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21Summary
- 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.
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22Questions
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