Company Profile November 2004. Disclaimer Statement This presentation contains forward-looking...
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Transcript of Company Profile November 2004. Disclaimer Statement This presentation contains forward-looking...
Company Profile
November 2004
Disclaimer Statement
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. A number of factors could cause actual results, performance, or achievements to differ materially from the results expressed or implied in these materials. These factors should be considered carefully and prospective investors should not place undue reliance on any forward looking statements.
- 2 -
Brief History of Xceed
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.
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.
- 3 -
Financial Highlights
Revenue $1,558M $22,952M166%
Mortgages $126MM $1,016MM114%
Net Income(1) ($1,127)M $7,769M104%
ROAE (1) (34.8%) 25.8%39%
2001 July 31, 2004
(1) CAGR figures for Net Income and ROAE are calculated from fiscal year 2002 as net income was negative in 2001.
CAGR
- 4 -
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, subsequently sold the business to CIBC.
Michael Jones – President & COO– Previously Vice President, Commercial Mortgages for CIBC Mortgages Inc. where he also oversaw the
CIBC Access Program.
Karen Martin – VP Finance & CFO– Previously the Treasurer of Amicus Holdings (a division of CIBC), Director of Balance Sheet
Management, and General Manager of Securitization for CIBC.– From 1988 to 1996 acted as Manager, Financial Analysis and Manager, Financial Reporting for FirstLine
Trust Company.
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
- 5 -
Market & Business Overview
Focus on niche market of mortgage customers that do not meet traditional lender guidelines:
• Credit challenged customers• High ratio uninsured mortgages
Originate mortgages through in 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 weekly• Entrepreneurial culture with structured management processes
Total potential size of the non-traditional market in Canada is appx. 10% of the total residential mortgage financing market size or roughly $50 billion.
Market is a growing and under serviced.
- 6 -
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
- 7 -
Innovative Securitization Structure
Mortgages sold weekly to Trust.
Trust senior notes funded through asset backed commercial paper conduits. Same methodology as used by all of Canada’s large banks.
Trust credit enhancement provided by third party investors.
Immunization of mismatch risk through interest rate swaps or other hedging mechanisms.
Frequent reviews by DBRS and securitization agent for compliance and asset quality
Full GAAP accounting– Fair conservative estimates– Reviewed by external auditors and audit committee
- 8 -
Financial Model: Pro-Forma Economics
. Yield Spreads
Mortgage Coupon (1) 7.40%
Swap Cost of Funds (3.70%)
Gross Spread 3.70%
Trust Costs (2) (1.25%)
Net Spread 2.45%
Operating Expenses (0.52%)
Net Income 1.93%
Origination Income and Expense
Application Fees 3.90%
Commissions &
Other Expenses (3) (3.60%)
Origination Profit 0.30%
(1) Approximate mortgage coupon rate based on historical average.
(2) Trusts costs consist of allowance for losses, cost of credit enhancement, program fees, and MCAP servicing costs.
(3) Commissions and other expenses includes hedge costs, cost of yield “buy up” on subordinate co-owned interest and
broker commissions.
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Keys to Success
Experienced senior management team and board.
Focused channel management.
Disciplined consistent application of well defined credit standards.
Application of results based performance management system.
Creation of suite of products specifically designed for non-traditional customers.
Knowledge of the capital markets and proprietary funding programs
Risk adjusted pricing model that ensures returns are commensurate with risk.
Serving all markets across Canada- 10 -
Drivers of Growth
Nascent but rapidly growing Canadian non-traditional residential mortgage market.
Financial institution channel has only just started to grow.
Opportunity to expand product availability beyond current vanilla 3 year / 5 year fixed offerings.
Low and 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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Revenue Growth
Note: Xceed’s fiscal year end is October 31.
$1,558
$12,599
$17,862
$24,103
$0
$5,000
$10,000
$15,000
$20,000
$25,000
Re
ve
nu
e (
C$
00
0)
2001 2002 2003 31-Jul-04
CAGR 166%
Under PreviousManagement
Under Current Management
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Mortgage Book Growth
$126
$261
$613
$1,016
$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 4/3031-July-04
CAGR 114%
Under PreviousManagement after 5 years
Under Current Management
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Mortgage Fundings Growth
$164
$413
$512
$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 31-Jul-04
CAGR 92%
- 14 -
* Latest 12 months April 30, 2004.
Disciplined Underwriting
0.45%
1.80%
0.38%
1.80%
0.21%
0.81%
0.09%
0.59%
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 31-Jul-04
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 (33)%
- 15 -
Increasing Profitability
($1,127)
$2,237
$5,699
$7,769
-$3,000
-$1,000
$1,000
$3,000
$5,000
$7,000
$9,000N
et
Inc
om
e (
C$
00
0)
2001 2002 2003 31-Jul-04
Note: Xceed’s fiscal year end is October 31.
Under Current Management
Under Previous
Management
Net Income Growth
CAGR 104%
- 16 -
Effective Use of Capital
-34.8%
0.146
0.2270.258
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Re
turn
on
Av
era
ge
Eq
uit
y (
%)
2001 2002 2003 TTM *
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 39%
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Summary
Limited competition in nascent, rapidly growing market place.
Strong experienced management with performance based culture.
Focused multi-channel approach to origination.
Disciplined consistent application of well defined credit standards.
Knowledge of the capital markets and proprietary funding programs
Risk adjusted pricing model that ensures returns are commensurate with risk.
Flexible, scalable technology with comprehensive relevant reporting capability.
- 18 -
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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