xceed company profile
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Xceed Company Profile
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.
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Xceed Mortgage Corporation
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•Performance
•Niche
•Innovation
•Experience
•Risk-Reward
Growth
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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.
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Financial Highlights
Revenue $1,558M $30,814M170%
Mortgages $126MM $1,096MM106%
Net Income(1) ($1,127)M $10,412M113%
ROAE (1) (34.8%) 21.9%21%
2001 2004
(1) CAGR figures for Net Income and ROAE are calculated from fiscal year 2002 as net income was negative in 2001.
CAGR
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Revenue Growth
Note: Xceed’s fiscal year end is October 31.
$1,558
$8,745
$17,862
$30,814
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
Re
ve
nu
e (
C$
00
0)
2001 2002 2003 2004
CAGR 170%
Under PreviousManagement
Under Current Management
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Mortgage Book Growth
$126
$261
$613
$1,096
$0
$200
$400
$600
$800
$1,000
$1,200
Mo
rtg
ag
es
Un
de
r A
dm
inis
tra
tio
n (
C$
mill
ion
)
2001 2002 2003 2004
CAGR 106%
Under PreviousManagement after 5 years
Under Current Management
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Mortgage Fundings Growth
$164
$413
$644
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
Mo
rtg
ag
es
Fu
nd
ed
(C
$m
illio
n)
2002 2003 2004
CAGR 98%
* Latest 12 months April 30, 2004.
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Increasing Profitability
($1,127)
$2,289
$5,703
$10,412
-$3,000
-$1,000
$1,000
$3,000
$5,000
$7,000
$9,000
$11,000N
et
Inc
om
e (
C$
00
0)
2001 2002 2003 2004
Note: Xceed’s fiscal year end is October 31.
Under Current Management
Under Previous
Management
Net Income Growth
CAGR 113%
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Effective Use of Capital
-34.8%
0.149
0.227 0.219
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Re
turn
on
Av
era
ge
Eq
uit
y (
%)
2001 2002 2003 2004
Note: Xceed’s fiscal year end is October 31.
* Trailing twelve months ended April 30, 2004.
Under Current Management
Under Previous
Management
Return on Equity Growth
CAGR 21%
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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 method of 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).
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Growth PotentialPotential 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.
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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
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25% 50% 75% 100%
A
B
C
Traditional Lenders(Big 6 Banks)
Home Capital / Equitable Trust
Mortgage Loan to Value (LTV) Ratio
Bo
rro
wer
Cre
dit
Rat
ing
Competitive Position
GMAC /Wells Fargo
XCEED
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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
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Shareholders
Name
Post-IPO
Shares %
Management 6,975,863 25%
Non-Management Directors 6,271,669 22%
Other Pre-IPO Investors 7,470,094 26%
IPO Investors 7,531,590 27%
Total 28,249,216 100%
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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
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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.
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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 ControlInterest 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
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Financial Model: Pro-Forma Economics(1)
.
Recurring Yield Spreads
Mortgage Coupon (4) 7.16%
Swap Cost of Funds (3.41%)
Gross Spread 3.75%
Trust Costs (5) (1.19%)
Net Spread 2.56%
Net Operating Expenses (0.66%)
Recurring Pre-tax Income
1.90%
Net Origination Income
Application Fees (2) 3.90%
Commissions &
Other Expenses (3) (3.60%)
Origination Profit 0.30%
(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.
(3) Commissions and other expenses
includes hedge costs, cost of yield “buy
up” on subordinate co-owned interest.
(4) 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.
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Disciplined Underwriting
0.45%
1.80%
0.38%
1.80%
0.21%
0.81%
0.10%
0.69%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
2.0%
An
nu
aliz
ed
Cre
dit
Lo
ss
& A
ve
rag
e
Mo
rtg
ag
e D
efa
ult
Ra
te (
%)
2001 2002 2003 2004
Annualized Credit Loss Average Mortgage Default (90 Days+)
Note: Xceed’s fiscal year end is October 31. Ratios are a percentage of average secured portfolio under administration.
Under Previous Management Under Current Management
Reduction in Loss & Default Percentages
CADR (27)%
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Credit Risk
Typical Xceed Mortgage:
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Homeowner Equity
Interest Sold To 3rd Party F.I.
Credit Risk Managed by Xceed
100%
92%
81%
SummaryLimited 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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