Small Business Loan Program Drives Another Period of Record Financial Results, Including Nearly $500 Million in Revenue, $165.6 Million in Operating Income or $21.26 Per Share
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DALLAS, Sept. 14, 2021 /PRNewswire/ — Crossroads Systems, Inc. (OTCQX: CRSS) (“Crossroads” or the “Company”), a holding company focused on investing in businesses that promote economic vitality and community development, reported financial results for its fiscal third quarter 2021 ended July 31, 2021.
Fiscal Third Quarter 2021 Key Performance Indicators (KPIs)
- Gross origination fees associated with Payment Protection Program (“PPP”) loans totaled $465.6 million for the quarter. Net of cost of fees and margin split with loan service providers, the Company recorded $178.3 million in operating income from origination fees during the third fiscal quarter.
- Capital Plus Financial, a designated CDFI, issued and approved 389,254 PPP loans to small business owners and independent contractors through the program’s term. An additional 82,782 applications were withdrawn due to insufficient data or other reasons identified during Capital Plus Financial’s rigorous review process. Of the loans issued and approved where identifying information was provided, 87% were disbursed to minority small business owners and individuals with an average loan size of $15,900.
- Added $4.7 million in new single-family mortgage loan balance during the fiscal third quarter.
- The Company’s mortgage portfolio grew to $132.7 million from $125.2 million for the comparative period in 2020.
- The serious delinquency rate as of the period ended July 31, 2021 was 0.79%, compared to 1.38% at the end of the same period in 2020. The Federal Home Loan Mortgage Corporation (Freddie Mac) reported a single-family serious delinquency rate of 1.74% as of the period ended July 31, 2021. The serious delinquency rate is based on the number of mortgage loans that are three monthly payments or more past due or in the process of foreclosure.
- Held 102 properties in inventory compared to 119 at the same time in 2020. As of July 31, 2021, gross inventory was $10.6 million compared to $10.5 million as of July 31, 2020. The Company is looking to build inventory to not only meet current demand but also to plan for renovated housing units going forward.
Fiscal Third Quarter 2021 Financial Highlights
- Total revenues increased 4,638% to $486.6 million, up from $10.3 million in the comparative 2020 period. The substantial increase in total revenues was primarily due to an increase in other revenues during the period. Other revenues include processing fees the Company earned from originating PPP loans during the quarter ended July 31, 2021. The Company earned fees from the program totaling approximately $465.6 million for the quarter.
- Total property sales income was $6.1 million for the quarter compared to $7.1 million for the same period in 2020. The decrease in property sales income for the quarter was primarily due to a lack of inventory resulting in a lower number of homes being available for sale during the period.
- Total interest income increased 377% to $14.9 million, up from $3.1 million in the comparative 2020 period. The increase in interest income was the result of growth in the total mortgage note receivable portfolio during the period and the addition of PPP loans to the portfolio.
- Operating income increased 11,366% to $165.6 million, up from $1.3 million in the same period in 2020. The substantial increase in operating income was primarily due to the previously disclosed origination fees associated with the Company’s participation in the PPP loan program.
- Cash EPS (operating income less income to non-controlling interests) was $21.26 compared to $0.19 for the comparative period in 2020. The Company booked $38.5 million of state and federal income tax expense during period.
- Book value as reported was $61.6 million, or $10.31 per share. Adjusted book value including $1.2 million of subordinated debt totaled $62.8 million, or $10.51 per share.
- As of July 31, 2021, the Company held a cash balance of $291.5 million compared to $2.1 million as of October 31, 2020.
Fiscal Nine Months Ended July 31, 2021 Financial Highlights
- Total revenues increased 3,435% to $970.5 million, up from $27.4 million in the comparative 2020 period. The substantial increase in total revenues was primarily due to an increase in other revenues during the period.
- Total property sales income was $16.7 million compared to $17.7 million for the same period in 2020. The decrease in property sales income for the quarter was primarily due to fewer completed homes being available for sale during the period.
- Total interest income increased 155% to $23.8 million, up from $9.3 million in the comparative 2020 period. The increase in interest income was the result of growth in the total mortgage note receivable portfolio during the period and the addition of PPP loans to the portfolio.
- Operating income increased 7,670% to $317.1 million, up from $4.1 million in the same period in 2020. The substantial increase in operating income was primarily due to origination fees associated with the Company’s participation in the PPP loan program.
- Cash EPS (operating income less income to non-controlling interests) was $45.48 compared to $0.51 for the comparative period in 2020. The Company booked $70.0 million of state and federal income tax expense during the period, of which only $49.0 million is payable. The company has fully utilized its non-operating tax losses of $103.0 million.
“In the fiscal third quarter we continued the important work of bringing financial aid to small businesses across the country. More recently, we’ve also taken major steps in laying the groundwork for the future direction of our organization,” said Eric A. Donnelly, Chief Executive Officer of Crossroads Systems. “With the official conclusion of the Paycheck Protection Program in May, we issued and approved nearly 400,000 loans and generated nearly a billion dollars in origination fees, both of which are monumental achievements that have irrevocably changed our business and impacted the lives of many Americans. From here, we are now transitioning to loan forgiveness; to-date we have received approximately 85,000 applications and are working diligently in direct partnership with the SBA to address these requests as efficiently as we can.
“This generational experience has renewed and expanded our commitment to Crossroads’ core mission of providing financial aid and services to minority communities that have been historically underbanked and unrepresented. Our recently announced strategic relationship with Enhanced Capital Group, a National Impact lender, enables us to further that mission on a much greater scale, providing flexible lending solutions to small businesses throughout the U.S., making our Capital Plus Financial subsidiary one of the nation’s most impactful CDFI’s. In just a few short months we’ve been able to accumulate significant financial resources, build meaningful new partnerships, and attract talented leadership, which, together, will allow us to accelerate our growth trajectory and realize our vision of a more equitable financial future for all.”
About Crossroads Systems
Crossroads Systems, Inc. (OTCQX: CRSS) is a holding company focused on investing in businesses that promote economic vitality and community development. Crossroads’ subsidiary, Capital Plus Financial (CPF), is a certified Community Development Financial Institution (CDFI) and certified B- Corp, which supports Hispanic homeownership with a long term, fixed-rate single-family mortgage product.
Important Cautions Regarding Forward-Looking Statements
This press release includes forward-looking statements that relate to the business and expected future events or future performance of Crossroads Systems, Inc. and Capital Plus Financial and involve known and unknown risks, uncertainties and other factors that may cause its actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “likely,” “will,” “would,” “could,” and similar expressions or phrases identify forward-looking statements. Forward-looking statements include, but are not limited to, statements about Crossroads Systems’ and Capital Plus Financial’s ability to implement their business strategy, and their ability to achieve or maintain profitability. The future performance of Crossroads Systems and Capital Plus Financial may be adversely affected by the following risks and uncertainties: economic changes affecting homeownership in the geographies where Capital Plus Financial conducts business, developments in lending markets that may not align with Capital Plus Financial’s expectations and that may affect Capital Plus Financial’s plans to grow its portfolio, variations in quarterly results, developments in litigation to which we may be a party, technological change in the industry, future capital requirements, regulatory actions or delays and other factors that may cause actual results to be materially different from those described or anticipated by these forward-looking statements. For a more detailed discussion of these factors and risks, investors should review Crossroads Systems’ annual and quarterly reports. Forward-looking statements in this press release are based on management’s beliefs and opinions at the time the statements are made. All forward-looking statements are qualified in their entirety by this cautionary statement, and Crossroads Systems undertakes no duty to update this information to reflect future events, information or circumstances.
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