Xceed Mortgage Reports Strong Growth Continued in Fiscal 2007 Second Quarter



    
    -   Mortgage fundings of $281 million in the quarter and $621 million for
        first half more than double respective fiscal 2006 periods
    -   Mortgages and other assets under administration up at $2.6 billion,
        up 33.4% from year earlier and 6.2% from end of the first quarter
    -   Net income of $4.7 million for 2007 second quarter up 42.7% from 2006
        period; six-month net income of $11.5 million up 39.3% from prior
        year
    -   ROE of 17.2% and 20.9% for 2007 second quarter and first half
        compared with 14.1% and 17.7% in the respective 2006 periods
    -   Quarterly dividend increased by 12.5% to $0.09 per share
    -   Conference call at 10:00 a.m. (ET) today
    

    TORONTO, June 14 /CNW/ - Xceed Mortgage Corporation (TSX: XMC), a leading
non-traditional mortgage lender, today announced its financial results for the
second quarter and first half of fiscal 2007 ended April 30, 2007. The company
also announced a 12.5% increase in its quarterly cash dividend to $0.09 per
share. All references to quarters or years are for the fiscal periods and all
currency amounts are in Canadian dollars unless otherwise noted.

    
    Financial Highlights - Quarterly Net Income Up 42.7%; Fundings Double

     -  Second-quarter net income amounted to $4.7 million, up 42.7% from
        $3.3 million in the 2006 period. First-half net income was
        $11.5 million, a 39.3% increase compared with $8.3 million in the
        first six months of 2006. During the 2007 second quarter, Xceed
        recorded a one-time pre-tax accounting loss of $0.6 million
        recognizing increased funding costs for the remaining duration of
        mortgages sold into Xceed Mortgage Trust (XMT). The company also
        expensed $2.7 million in the quarter for pre-tax underwriting and
        other one-time costs associated with an issue of mortgage-backed
        notes for XMT. Excluding these one-time charges, net income was
        $6.9 million for the 2007 second quarter.

        In the 2007 first quarter, Xceed took a one-time write-off of
        $1.1 million related to infrastructure and other expenditures from
        which it no longer expects to benefit. Removing the effects of the
        one-time charges in the first and second quarter, net income for the
        first half of 2007 would have been $14.3 million. In the 2006 second
        quarter, Xceed realized a $1.8 million accounting gain associated
        with an XMT notes offering, which was offset by $1.6 million in
        underwriting and other expenses related to the transaction.

     -  Basic and diluted earnings per share were $0.17 and $0.16,
        respectively in the 2007 second quarter ($0.25 and $0.24,
        respectively, if the above-noted one-time expenses were excluded),
        compared with $0.12 and $0.11 a year earlier. For the first half of
        2007, basic and diluted earnings per share were $0.42 and $0.40
        ($0.52 and $0.49, respectively, if the above-noted one-time expenses
        were excluded), compared with $0.29 and $0.28 in the first six months
        of 2006.

     -  Mortgage fundings in the 2007 second quarter were more than double
        those of a year ago at $281.2 million, up 111.2% from $133.1 million.
        In the first half of 2007, Xceed's mortgage fundings also more than
        doubled to $621.2 million, a 101.3% increased compared with
        $308.5 million in the 2006 period.

     -  Mortgages and other assets under administration rose 33.4% in the
        2007 second quarter to $2.64 billion as at April 30, compared with
        $1.98 billion a year earlier, and 6.2% higher than at the end of the
        2007 first quarter when they were $2.48 billion.

     -  Return on average shareholders' equity increased to 17.2% in 2007
        second quarter and 20.9% for the first half of the year. Excluding
        one-time charges return on average shareholders equity was 24.6% in
        the second quarter of 2007 and 25.7% in the first half of the year
        compared with 13.3% and 17.1% in the respective 2006 periods.

     -  Revenues amounted to $17.3 million and $35.4 million in the 2007
        second quarter and first six months of 2007, respectively, a 51.8%
        increase from $11.4 million in the 2006 second quarter and up 51.4%
        from $23.4 million in the prior year's first half.

     -  Normalized cash flow from operations for the second-quarter 2007 was
        $5.6 million or $0.21 and $0.19 per basic and diluted share,
        respectively, compared with $3.7 million ($0.13 per basic and $0.12
        per diluted share) in the 2006 quarter. For the first six months of
        2007, normalized cash flow was $10.8 million or $0.40 per basic and
        $0.38 per diluted share, compared with $7.3 million or $0.26 per
        basic and $0.24 per diluted share a year earlier.
    

    As a result of the increased mortgage fundings, Xceed sold $339.8 million
of mortgages to securitization vehicles during the 2007 second quarter and
$637.1 million in the first six months. In the 2006 periods, the company sold
$152.3 million and $338.3 million, respectively, to securitization vehicles.
The company recorded a net gain on the sale of mortgages to securitization
trusts of $13.2 million in the 2007 second quarter, up from $9.6 million in
the 2006 period. In the first half of the year, the net gain on the sale of
mortgages to securitization trusts was $26.2 million, compared with
$20.0 million in the 2006 period.
    Once the one-time effects of the 2007 and 2006 transactions related to
XMT are removed, the net gain realized was 4.1% of the amount of mortgages
sold in the 2007 second quarter, compared with 5.1% in the 2006 period. The
lower 2007 second-quarter level is consistent with recent quarters (4.4% in
the 2007 first quarter, and 4.4% and 4.8% in the 2006 third and fourth
quarters, respectively). This is mainly the result of Xceed changing its
average sales mix towards better-credit-profile borrowers, as well as the
origination of mortgages with shorter terms arranged on a fixed-rate basis,
which entail lower spread margins than the mix of business originated in
certain past quarters.
    As Xceed has grown, it has increased its processing ability to manage its
mortgage fundings by hiring additional staff during the past 12 months. In the
2007 second quarter, it employed an average of 137 full-time staff, a 24.5%
increase from the average of 110 employed a year ago. Xceed views the
increased staffing as needed to handle its growing business while maintaining
its reputation for service quality.
    The company's productivity index, excluding the effects of the one-time
expenditures, was 43.3% for the second-quarter 2007, compared with 47.1% in
the 2006 period. A lower productivity index generally is associated with a
more efficient cost structure.
    The average mortgage default ratio (90 or more days in arrears) on the
company's combined securitized and non-securitized portfolio increased to
2.72% in the 2007 second quarter from 2.23% in 2006 period (and compared with
2.22% for all of 2006). In the first six months of 2007, the average mortgage
default was 2.61%, compared with 2.09% a year earlier. The increase is
primarily due to the aging of the portfolio, since defaults are less likely to
occur in the early stages of a mortgage term.

    Dividend Increased 12.5%

    As the result of Xceed's performance, strong cash flow, positive outlook,
and the continuing overall growth and evolving maturity of the Canadian
non-traditional residential mortgage market, the company's Board of Directors
approved a 12.5% increase in the quarterly cash dividend. This is the seventh
increase in Xceed's quarterly cash dividend approved since Xceed initiated
payments in the 2005 second quarter at $0.02 per share.
    The Board approved a payment of $0.09 per common share, payable on 
August 7, 2007 to shareholders of record on July 26, 2007.

    Normal Course Issuer Bid

    On June 7, 2006, Xceed announced it had received regulatory approval,
pursuant to the terms of a normal course issuer bid, to purchase for
cancellation up to a total of 1,412,460 common shares, or 5% of the company's
issued and outstanding common shares of May 31, 2006, during the 12-month
period commencing June 8, 2006 and ending June 7, 2007. During the three
months ended April 30, 2007, Xceed purchased 220,600 shares at a cost of
$1.5 million and the excess paid of $1.0 million over the book value of the
shares purchased for cancellation was charged to retained earnings. During the
first six months of 2007, Xceed purchased 270,600 common shares at a cost of
$1.8 million and the excess paid of $1.3 million over the book value of the
shares purchased for cancellation was charged to retained earnings. During the
course of the issuer bid, Xceed purchased 1,068,000 of the 1,412,460 common
shares which it was allowed to purchase under the bid.

    Performance Reflects Xceed's Successful Strategies and Growing Canadian
    Non-traditional Mortgage Market

    "By every key measure, Xceed Mortgage once again achieved impressive
growth in the second quarter and first half of this year, notably in mortgage
fundings and mortgages and other assets under administration, two key
indicators of future performance," said Ivan Wahl, Chairman and Chief
Executive Officer.
    "We achieved substantial gains in net income and return on average
shareholders' equity, both of which would have been even more impressive if
not for the one-time charges incurred in the first and second quarters of this
year. We also increased our cash flow from operations by 49.6% and 48.4%
compared with the second quarter and first half of 2006, and were pleased to
be able to once more raise our quarterly cash dividend to Xceed's
shareholders. The pipeline of mortgage commitments was strong through the
first half of the year and entering our third quarter," he continued.
    "It is evident that, as we foretold last year, while more lenders have
entered Canada's non-traditional mortgage market, they have helped to further
stimulate the growth in the overall alternative residential market, including
the development of new products by ourselves and others. It is clear that as a
result of this as well as of the favorable economic conditions, the Canadian
non-traditional mortgage market is continuing to grow and to evolve in its
maturity. This can only be good for Xceed Mortgage's prospects," Mr. Wahl
said.
    "It also is evident that the marketing strategies and programs that we
initiated in mid-2006 have continued to be well received in the marketplace
and have served to increase our penetration through the channels that
distribute Xceed's mortgage products.
    "We have every reason to believe that the outlook for Xceed Mortgage
continues to be very encouraging and that we will be able to sustain the
positive momentum demonstrated during the past several quarters," said Mr.
Wahl.

    Conference Call and Webcast

    Xceed will hold a conference call for analysts and investors to discuss
its first quarter results on June 14, 2007 at 10:00 a.m. (Eastern).
    Ivan Wahl, Chairman and Chief Executive Officer, and John Ayanoglou, Vice
President Finance and Chief Financial Officer, will be available to answer
questions during the call.
    To participate in the call, please dial 416-644-3417 or 1-800-731-6941 at
least five minutes prior to the start of the call.
    A live audio webcast of the conference call will be available at
www.newswire.ca and www.xceedmortgage.com.
    An archived recording of the call will be available at 416-640-1917 or 
1-877-289-8525 (Passcode 21235728 followed by the number sign) from noon on
June 14 to 11:59 p.m. on June 21. An archived recording of the webcast will
also be available at Xceed's website.
    Xceed has filed its fiscal 2007 second-quarter financial statements and
management's discussion and analysis with SEDAR and they will be posted on the
company's website.

    About Xceed

    Xceed is one of a new breed of alternative residential mortgage lenders
in Canada. Xceed helps Canadians fulfill their aspirations of home ownership.
Its borrowers range from those who have solid credit and income histories, but
have not managed to save a down payment, to those who have gone through
periods with limited and specific credit difficulties but have since recovered
and repaired their credit. A growing proportion of Xceed's applicants are
renters, self-employed entrepreneurs, and recent immigrants to Canada, who may
otherwise not conform to major banks' electronic credit-scoring criteria.
    By meeting the needs of Canadians for alternative financing, Xceed
Mortgage Corporation has grown to become one of the largest non-traditional
residential mortgage financing companies in Canada, with mortgage and other
assets under administration of approximately $2.6 billion. Xceed operates in a
market that is estimated to have a potential size of approximately  $70
billion. Xceed's shares are traded on the Toronto Stock Exchange (TSX: XMC).
To find out more about Xceed Mortgage Corporation, visit our website at
www.xceedmortgage.com.

    Forward-Looking Statements

    Forward-looking statements in this document are based on current
expectations that are subject to significant risks and uncertainties. Actual
results might differ materially due to various factors such as the competitive
nature of the mortgage industry, the ability of Xceed to continue to execute
its growth and development strategy, and the reliance of Xceed on key
personnel. Xceed assumes no obligation to update these forward-looking
statements, or to update the reasons why actual results could differ from
those reflected in these. Additional information identifying risks and
uncertainties is contained in Xceed's regulatory filings available on its
website and at www.sedar.com.

    
    XCEED MORTGAGE CORPORATION
    INTERIM CONSOLIDATED BALANCE SHEETS
    (unaudited)

    (in thousands of dollars)
    -------------------------------------------------------------------------
                                                        April 30, October 31,
                                                            2007        2006
                                                               $           $
    -------------------------------------------------------------------------
    Assets

    Cash and cash equivalents                              7,883       9,943
    Investment in notes (notes 3 and 4)                   10,000           -
    Cash collateral and other deposits receivable
     from Trusts (note 3)                                 12,532       5,154
    Deferred net mortgage interest receivable
     (notes 3 and 5)                                      96,824      79,498
    Mortgages (note 5)                                    78,731      73,535
    Accounts receivable                                   11,396      11,504
    Deferred charges                                       5,804       7,540
    Derivative instruments (notes 5 and 6)                    15           -
    Fixed assets, net                                      1,784       1,883
    Future income tax asset                                  404       1,356
    -------------------------------------------------------------------------
                                                         225,373     190,413
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities

    Credit facilities (note 4)                            54,745      35,381
    Accounts payable and accrued liabilities (note 3)     25,515      23,673
    Mortgage commitments (note 5)                            239           -
    Future and other income taxes                         32,655      29,941
    -------------------------------------------------------------------------
    Total Liabilities                                    113,154      88,995
    -------------------------------------------------------------------------

    Shareholders' equity

    Capital stock (note 7)                                56,527      57,090
    Contributed surplus (note 8)                             932         505
    Retained earnings                                     54,760      43,823
    -------------------------------------------------------------------------
    Total Shareholders' Equity                           112,219     101,418
    -------------------------------------------------------------------------
                                                         225,373     190,413
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    XCEED MORTGAGE CORPORATION
    INTERIM CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
    (unaudited)

    (in thousands of dollars, except per share amounts)
    -------------------------------------------------------------------------
                                     Three months ended     Six months ended
                                     April 30, April 30,  April 30, April 30,
                                         2007      2006       2007      2006
                                            $         $          $         $
    -------------------------------------------------------------------------
    Revenues

    Securitization income (note 3)     13,200    11,178     26,375    22,850
    Realized and unrealized gains
     on financial instruments (note 5)    942         -      1,584         -
    Interest earned                     2,404       962      4,442     1,936
    -------------------------------------------------------------------------
                                       16,546    12,140     32,401    24,786
    Add: Net origination income
     (costs)                              716      (767)     3,048    (1,369)
    -------------------------------------------------------------------------
                                       17,262    11,373     35,449    23,417
    -------------------------------------------------------------------------

    Expenses

    Compensation and benefits           3,820     2,559      7,528     5,170
    Interest                            1,329       140      2,423       408
    Other operating                     4,877     3,460      7,828     4,842
    -------------------------------------------------------------------------
                                       10,026     6,159     17,779    10,420
    -------------------------------------------------------------------------
    Income before income taxes          7,236     5,214     17,670    12,997
    Provision for income taxes          2,492     1,889      6,161     4,736
    -------------------------------------------------------------------------

    Net income for the period           4,744     3,325     11,509     8,261

    -------------------------------------------------------------------------
    Retained earnings, beginning
     of period                         53,214    34,234     43,823    30,428
    Add:  Transition adjustment on
          adoption of financial
          instruments standards
          (note 2)                          -         -      4,775         -
    Less: Dividends declared           (2,174)   (1,412)    (4,096)   (2,542)
    Less: Shares purchased for
          cancellation (note 7)        (1,024)        -     (1,251)        -
    -------------------------------------------------------------------------
    Retained earnings, end of period   54,760    36,147     54,760    36,147
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    XCEED MORTGAGE CORPORATION
    INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
    (unaudited)

    (in thousands of dollars)
    -------------------------------------------------------------------------
                                     Three months ended     Six months ended
                                     April 30, April 30,  April 30, April 30,
                                         2007      2006       2007      2006
                                            $         $          $         $
    -------------------------------------------------------------------------
    Operating activities

    Net income for the period           4,744     3,325     11,509     8,261
    Items not affecting
     operating cash:
      Net gain on sale of mortgages   (13,208)   (9,599)   (26,184)  (20,026)
      Amortization of deferred net
      mortgage interest receivable     11,335     8,149     21,504    15,732
      Amortization of servicing fee      (971)     (722)    (1,861)   (1,407)
      Amortization of fixed assets        202       158        395       307
      Amortization of deferred charges    562       260      1,091       560
      Unrealized losses (gains)
       from financial instruments         328         -       (686)        -
      Net future income taxes           1,044       494      2,852     2,218
    -------------------------------------------------------------------------
                                        4,036     2,065      8,620     5,645
    Other changes in non-cash net
     assets                            30,635     7,036    (15,012)   41,164
    -------------------------------------------------------------------------
                                       34,671     9,101     (6,392)   46,809
    -------------------------------------------------------------------------

    Investing activities

    Sale of notes                      14,063       190     15,335    14,692
    Purchase of notes                 (20,520)   (9,406)   (25,335)  (16,126)
    Net increase (decrease) in
     deferred charges                    (458)   (2,618)       645    (4,176)
    Purchase of fixed assets             (217)     (154)      (296)     (969)
    -------------------------------------------------------------------------
                                       (7,132)  (11,988)    (9,651)   (6,579)
    -------------------------------------------------------------------------
    Financing activities

    Credit facilities, net of
     repayments                       (21,183)    2,820     19,364   (38,177)
    Share buyback                      (1,482)        -     (1,813)        -
    Dividends paid                     (1,921)   (1,130)    (3,568)   (1,977)
    -------------------------------------------------------------------------
                                      (24,586)    1,690     13,983   (40,154)
    -------------------------------------------------------------------------
    Net increase (decrease) in cash
     and cash equivalents               2,953    (1,197)    (2,060)       76
    Cash and cash equivalents,
     beginning of period                4,930     4,053      9,943     2,780
    -------------------------------------------------------------------------
    Cash and cash equivalents, end
     of period                          7,883     2,856      7,883     2,856
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements
    

    %SEDAR: 00020677E




For further information:

For further information: please contact Investor and Media Relations:
Richard Wertheim, Wertheim + Company Inc., (416) 594-1600 or (416) 518-8479
(cell), wertheim@wertheim.ca

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