Xceed Mortgage Reports Strong Growth in Fiscal 2007 First-Quarter



    
    -   Mortgage fundings at $340 million nearly double those in the 2006
        first quarter
    -   Mortgages and other assets under administration up 29% from year
        earlier and 10.1% from 2006 year-end
    -   Net income rose 37% from first-quarter 2006
    -   Quarterly dividend increased by 14.3% to $0.08 per share
    -   Conference call at 10:00 a.m. (EDT) today
    

    TORONTO, March 14 /CNW/ - Xceed Mortgage Corporation (TSX: XMC), a
leading non-traditional mortgage lender, today announced its financial results
for its fiscal 2007 first quarter ended January 31, 2007.

    
    Financial Highlights - Net Income Up 37% as Fundings Nearly Double
    (All references to quarters or years are for the fiscal periods and all
    currency amounts are in Canadian dollars unless otherwise noted.)

    -   Net income rose 37% to $6.8 million from $4.9 million a year earlier.
        Reported net income was affected by its decision to take a one-time
        after tax write-off of $0.7 million related to infrastructure and
        other expenditures from which it no longer expects to benefit.
        Removing the one-time effects of this write-off would result in net
        income of $7.4 million in the 2007 first quarter, 51.0% greater than
        in the 2006 quarter.

    -   Basic and diluted earnings per share were $0.25 and $0.23,
        respectively in the 2007 quarter ($0.27 and $0.26, respectively, if
        the write-off is excluded), compared with $0.17 and $0.17 a year
        earlier.

    -   Mortgage fundings in the first quarter at $340.0 million were nearly
        double those in the 2006 period ($175.4 million).

    -   Mortgages and other assets under administration rose to $2.48 billion
        as at January 31, 2007, up 29% from $1.92 billion a year earlier, and
        10.1% higher than the 2006 year-end amount of $2.25 billion.

    -   Return on average shareholders' equity increased to 24.5% in 2007
        first quarter (27.0% excluding the one-time write-off), compared with
        21.3% a year earlier.

    -   Revenues totaled $18.2 million in the 2007 first quarter, up 51% from
        $12.0 million in the 2006 period.

    -   Cash flow from operations for the first-quarter 2007 was $5.3 million
        or $0.19 and $0.18 per basic and diluted share, respectively (after
        removing the effects of the one-time write-off), compared with
        $3.6 million ($0.13 per basic and $0.12 per diluted share) in the
        2006 quarter.
    

    Dividend Increase

    Recognizing the company's strong financial performance, positive outlook,
and increased cash flow, Xceed's Board of Directors approved a 14.3% (one cent
per share) increase in the company's quarterly cash dividends for the 2007
first quarter. The Board declared payment of $0.08 per common share, payable
on May 10, 2007 to shareholders of record on April 25, 2007. This is the sixth
increase in quarterly dividends that Xceed's Board has approved since the
company initiated payments in the 2005 fiscal second quarter, with the payment
of $0.02 per share.

    Growth Confirms Success of Xceed's Strategies Implemented in 2006

    "Xceed Mortgage's very strong financial performance to start 2007 is
attributable to a number of factors, including favourable market and mortgage
interest rate conditions. Perhaps more importantly, our results confirm the
success of the marketing strategies that we initiated beginning in mid-2006
that have resulted in our ability to gain further market penetration through
the channels that distribute our products," said Ivan Wahl, Chairman and Chief
Executive Officer.
    "The adjustments we made to our products, sales, and marketing
initiatives, which include increases to our business development personnel
were key factors in our ability to nearly double the amount of mortgage
fundings from a year ago, leading to the healthy increase in our assets under
administration to nearly $2.5 billion," he said.
    The increase in mortgage fundings enabled Xceed to sell $297.3 million of
mortgages to securitization vehicles during the 2007 first quarter. In the
corresponding 2006 period, the company sold $186 million to securitization
vehicles. The company recorded a net gain on the sale of mortgages to
securitization trusts of $13.2 million in the 2007 first quarter, up from
$10.4 million in the 2006 period.
    The net gain represented 4.4% of the mortgages sold, compared with 5.6%
in the 2006 first quarter. The lower 2007 first-quarter level is consistent
with recent quarters (4.8% in the 2006 third quarter and 4.4% in the fourth
quarter). 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.
    To manage the growth of its mortgage fundings, during 2006, the company
significantly increased its processing ability and, as the result, in the 2007
first quarter it employed an average of 132 full-time staff, a 24.5% increase
from the average of 106 employed in the 2006 period. This increases staffing
adversely affected the company's productivity index which, excluding the
effects of the one-time expenditures, was 41.7% for the first-quarter 2007,
compared with 34.2% in the 2006 quarter. A lower productivity index generally
is associated with a more-efficient cost structure, however the company views
the increased staffing as needed to maintain its reputation for service
quality as it has grown its business.
    The average mortgage default ratio (90 or more days in arrears) on the
company's combined securitized and non-securitized portfolio increased to
2.29% in the 2007 first quarter from 1.68% in 2006 period (and compared with
2.22% for all of 2006). 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.

    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 January 31, 2007, Xceed purchased 50,000 common shares at a cost
of $0.3 million and the excess paid of $0.2 million over the book value of the
shares purchased for cancellation was charged to retained earnings.

    Outlook - Canadian Market for Non-Traditional Mortgages Remains Strong

    "All indications are that the Canadian market for non-traditional
mortgages, which we estimate is potentially about $70 billion, remains strong
and growing, and the potential for Xceed Mortgage's continued growth is
excellent," Mr. Wahl said.
    "We realize that investors may be concerned about recent developments in
the U.S. sub-prime market industry. It is therefore worth noting that there
are very significant and important differences between the U.S. sub-prime
market and Xceed's business in Canada," Mr. Wahl continued. "First, the
Canadian housing market remains strong, compared with what is being
experienced in the United States. Second, U.S. sub-prime lenders have tended
to finance products and customers with a far higher risk profile than those
offered by Xceed. Third, Canadian debt-recovery laws are generally more
lender-friendly than those prevalent in the U.S. Reflecting cultural
differences and other factors, default levels in Canada in both the prime and
sub-prime markets have been substantially lower than in the United States.
Lastly, U.S. sub-prime mortgage lenders who either securitize or sell loans to
other parties are subject to onerous repurchase obligations when these loans
do not perform as expected. Xceed's securitization programs entail no such
repurchase obligations as our mortgages are sold on a non-recourse basis."
    "The increases in our mortgage fundings, increases in mortgages and other
assets under administration, the momentum that we have established, conditions
in the Canadian housing market and economy and feedback we are getting from
our brokers are all reasons to be optimistic regarding Xceed's outlook in
2007," Mr. Wahl concluded.
    Xceed has filed its fiscal 2007 first quarter financial statements and
management's discussion and analysis with SEDAR and they will be posted on the
company's website.

    Conference Call and Webcast

    Xceed will hold a conference call for analysts and investors to discuss
its first quarter results on March 14, 2007 at 10:00 a.m. (Eastern).
    Ivan Wahl, Chairman and Chief Executive Officer, Michael Jones, President
and Chief Operating 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 416-644-3419 or 1-800-731-5319
about 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 21222697 followed by the number sign) from 12:00 p.m.
on March 14 to 11:59 p.m. on March 21. An archived recording of the webcast
will also be available at Xceed'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 $2.5 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)                        January 31,  October 31,
                                                           2007         2006
    -------------------------------------------------------------------------

    ASSETS

    Cash and cash equivalents                             4,930        9,943
    Short-term notes                                      3,543            -
    Cash collateral and other deposits
     receivable from Trusts                               5,068        5,154
    Deferred net mortgage interest
     receivable, at fair value                           93,462       79,498
    Mortgages, at fair value                            118,623       73,535
    Accounts receivable                                  14,375       11,504
    Deferred charges                                      5,908        7,540
    Derivative instruments, at fair value                   652            -
    Fixed assets, net                                     1,769        1,883
    Future income tax asset                                 848        1,356
    -------------------------------------------------------------------------
                                                        249,178      190,413
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Liabilities
    Credit facility                                      75,928       35,381
    Accounts payable and accrued liabilities             31,325       23,673
    Mortgage commitments, at fair value                     421            -
    Future and other income taxes                        30,585       29,941
    -------------------------------------------------------------------------
    Total liabilities                                   138,259       88,995
    -------------------------------------------------------------------------

    Shareholders' equity
    Capital stock                                        56,986       57,090
    Contributed surplus                                     719          505
    Retained earnings                                    53,214       43,823
    -------------------------------------------------------------------------
    Total shareholder's equity                          110,919      101,418
    -------------------------------------------------------------------------
                                                        249,178      190,413
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

    -------------------------------------------------------------------------
    (in thousands of dollars, except per                  Three Months Ended
     share amounts)                                  January 31,  January 31,
                                                           2007         2006
    -------------------------------------------------------------------------

    REVENUES
    Securitization Income                                13,403       11,672
    Realized and unrealized gains on
     financial instruments                                  415            -
    Interest earned                                       2,038          974
    -------------------------------------------------------------------------
                                                         15,856       12,646

    Add: Net origination income (cost)                    2,330         (602)
    -------------------------------------------------------------------------

                                                         18,186       12,044
    -------------------------------------------------------------------------

    EXPENSES
    Compensation and benefits                             3,708        2,611
    Interest                                              1,093          268
    Other operating                                       2,953        1,382
    -------------------------------------------------------------------------
                                                          7,754        4,261
    -------------------------------------------------------------------------
    Income before income taxes                           10,432        7,783
    Provision for income taxes                            3,668        2,847
    -------------------------------------------------------------------------

    Net income for the period                             6,764        4,936

    -------------------------------------------------------------------------
    Retained earnings, beginning of period               43,823       30,428
    -------------------------------------------------------------------------
    Add:  Transition adjustment on adoption
          of financial instruments standards              4,775            -
    Less: Dividends declared                             (1,921)      (1,130)
    Less: Share buyback                                    (227)           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Retained earnings, end of period                     53,214       34,234
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share
    Basic                                                  0.25         0.17
    Fully diluted                                          0.23         0.17



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

    -------------------------------------------------------------------------
    (in thousands of dollars)                             Three Months Ended
                                                     January 31,  January 31,
                                                           2007         2006
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net income for the period                             6,764        4,936
    Items not affecting operating cash:
      Gain on sale of mortgages                         (13,204)     (10,427)
      Amortization of deferred net mortgage
       interest receivable                               10,169        7,583
      Amortization of servicing fee                        (890)        (685)
      Amortization of fixed assets                          194          149
      Amortization of deferred charges                      529          300
      Unrealized gains from financial instruments          (786)           -
      Net future income taxes                             1,808        1,724
    -------------------------------------------------------------------------
                                                          4,584        3,580
    Other changes in net assets                         (45,648)      33,281
    -------------------------------------------------------------------------
                                                        (41,064)      36,861
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Sale of short-term notes                              1,272       14,502
    Purchase of short-term notes                         (4,813)      (6,720)
    Net increase (decrease) in deferred charges           1,103       (1,558)
    Purchase of fixed assets                                (80)        (815)
    -------------------------------------------------------------------------
                                                         (2,518)       5,409
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Credit facility, net of repayments                   40,547      (40,997)
    Share buyback                                          (331)           -
    Dividends paid                                       (1,647)           -
    -------------------------------------------------------------------------
                                                         38,569      (40,997)
    -------------------------------------------------------------------------

    Increase (decrease) in cash and
     cash equivalents                                    (5,013)       1,273
    Cash and cash equivalents, beginning
     of period                                            9,943        2,780
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period              4,930        4,053
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    %SEDAR: 00020677E




For further information:

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

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