Transcript Document

Xceed Company Profile
Helping Canadians Make It Home
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 forwardlooking statements.
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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
Focused Origination
– Established mortgage broker relationships
– Financial Institution channel
– Direct business
Risk-Reward Management
– Credit risk
– Market risk
Business Model
– Access to Canada Mortgage Bond Program
and securitization funding
– Entrepreneurial culture
– Structured management processes
– Technology
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Executive Team
Ivan Wahl – Chairman, CEO & Director
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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
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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
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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
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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
Approximately 30% control by management*
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* Inclusive of Akemis Holdings Corp, with which Ivan Wahl and his family are
involved.
Financial Performance
2001
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2007
Pro forma
2007(1)
CAGR(1)
Revenue
$1,558M
$55,947M $55,947M
81.6%
AUM
$132MM
$2,685MM $2,685MM
65.2%
Net Income(2)
($1,127M) ($4,543M) $18,572M
52.0%
ROAE (2)
(34.8%)
16.2%
(4.1%)
16.2%
(1)
The pro forma 2007 net income, ROAE and CAGR figures have been computed after removing the negative
one-time after-tax effects of infrastructure write-offs and financial instruments valuation adjustment.
(2)
The CAGR figure for Net Income and percentage presented for the average ROAE are calculated from fiscal
year 2002 as net income was negative in 2001.
Revenue Growth
$60,000
$54,535
Revenue (C$000)
$50,000
$55,947
$46,424
$40,000
$28,761
$30,000
$20,000
Under
Previous
Management
$10,000
$17,865
$8,745
$1,558
$0
2001
2002
2003
2004
2005
Under Current Management
* Xceed’s fiscal year end is October 31.
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2006
2007
Total Assets Under Administration Growth
$3,000
Total Assets Under Administration (C$million)
$2,685
$2,500
$2,252
$2,000
$1,841
$1,500
$1,190
$1,000
Under Previous
Management
after 5 years
$500
$663
$284
$132
$0
2001
2002
2003
2004
2005
Under Current Management
* Xceed’s fiscal year end is October 31.
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2006
2007
Increasing Profitability
Net Income Growth
$24,000
$21,974
$20,275
$21,000
$18,572 *
$18,000
Net Income (C$000)
$15,000
$12,000
$10,412
Pro forma
$9,000
$6,000
Under
Previous
Management
$3,000
$5,703
$2,289
$0
($1,127)
Actual
-$3,000
Under Current Management
($4,553)
-$6,000
2001
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2002
2003
2004
2005
2006
* Xceed’s fiscal year end is October 31. The 2007 net income figure has been
computed after removing the negative one-time after-tax effects of infrastructure
write-offs and financial instruments valuation adjustment.
2007
Cash Flows from Operations
$25,000
Cash Flows from Operations (C$000)
$22,022
$18,862
$20,000
$15,000
$10,000
$8,281
Under
Previous
$5,000 Management
-$1,373
$944
-$744
$1,482
$0
Under Current Management
-$5,000
2001
2002
2003
* Xceed’s fiscal year end is October 31.
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2004
2005
2006
2007
Cash from the Securitized Portfolio
Cash from the Securitized Portfolio (C$000)
$45,000
$42,935
$38,159
$40,000
$35,000
$30,000
$24,948
$25,000
$20,000
$13,176
$15,000
$10,000
$5,991
$5,000
$1,420
$1,924
2001
2002
$0
2003
Under
Previous
Management
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* Xceed’s fiscal year end is October 31.
2004
2005
Under Current Management
2006
2007
Effective Use of Capital
Return on Equity
Average 20.7%*
30%
25.5%
22.7%
Return on Average Equity (%)
20%
Under
Previous
10% Management
22.9%
21.9%
16.2% *
14.9%
Pro forma
0%
Actual
-4.1%
-10%
-20%
Under Current Management
-30%
-40%
-34.8%
2001
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2002
2003
2004
2005
2006
* Xceed’s fiscal year end is October 31. The 2007 net income figure has been
computed after removing the negative one-time after-tax effects of infrastructure
write-offs and financial instruments valuation adjustment.
2007
Non-Traditional Market 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 Position
Borrower Credit Rating
Traditional Lenders
(Big 6 Banks)
XCEED
First National / GE Money /
Wells Fargo
Home Capital / Equitable Trust
Mortgage Loan to Value (LTV) Ratio
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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 methods of raising capital provide opportunity
for high ROE
Effective improvements in funding ratios to leverage
increased volumes.
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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
Access to Canada Mortgage Bond Program
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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 preapproved locales
– Historical average mortgage size is $176,000 with an original LTV of
83%
– On a market value basis, current credit risk exposure is 73% LTV
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Diversification
As at October 31, 2007
7.73%
19.25%
1.84%
1.54%
0.44%
27.62%
0.24%
37.23%
1.72%
2.39%
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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.
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Questions
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