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Crossroads Systems Reports Fiscal Fourth Quarter and Fiscal Year 2020 Financial Results

DALLAS, Dec. 14, 2020 /PRNewswire/ -- Crossroads Systems, Inc. (OTCQB: 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 fourth quarter and year ended October 31, 2020.

Fiscal Fourth Quarter and Fiscal Year 2020 Key Performance Indicators (KPIs)

  • Added $5.5 million in new single-family mortgages during the fiscal fourth quarter and $21.7 million during the fiscal year 2020.
  • The Company's mortgage portfolio grew to $128.9 million from $116.9 million for the comparative period in 2019.
  • The serious delinquency rate as of the period ended October 31, 2020 was 0.9%, compared to 0.9% at the end of the same period in 2019. The Federal Home Loan Mortgage Corporation (Freddie Mac) reported a single-family serious delinquency rate of 2.9% as of the period ended October 31, 2020. 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 109 properties in inventory compared to 128 at the same time in 2019. As of October 31, 2020, gross inventory was $10.5 million compared to $11.8 million as of October 31, 2019. The Company is looking to build inventory to not only meet current demand but also to plan for renovated housing units to be ready for the spring 2021 sales season. The Company expects the upcoming spring demand for housing to be in line with historical periods compared to the COVID disrupted Spring in 2020.

Fiscal Fourth Quarter 2020 Financial Highlights

  • Total property sales income was $5.7 million for the quarter compared to $6.6 million for the same period in 2019. The decrease in property sales income for the quarter was the result of lower unit sales related to the COVID-19 pandemic, which was offset by higher sales prices during the quarter.
  • Total interest income was $3.3 million, up from $3.2 million in the comparative 2019 period. The increase in interest income was the result of growth in the total mortgage note receivable portfolio during the period. During the quarter, the Company completed 60-day forbearance agreements for 2 mortgage borrowers whose unpaid principal balance was $190,197. During the fiscal fourth quarter, there was a significant, sequential decline in the number and velocity of requests. Borrowers who had requested forbearance earlier in the year have begun to make their regular payments as they had prior to the COVID-19 pandemic.
  • Operating income was $1.6 million compared to $1.2 million in the same period in 2019.
  • Cash EPS (operating income less income to non-controlling interests) was $0.22 compared to $0.14 for the comparative period in 2019. The Company booked $929,000 of state and federal income tax expense, which will be offset against the Company's deferred tax asset. The adjusted cash EPS after adjusting for one-time transaction costs and stock option compensation of $261K was $0.27.
  • Book value as reported was $50.5 million, or $8.45 per share. Adjusted book value including $3.5 million of subordinated debt totaled $54.0 million, or $9.04 per share.
  • As of October 31, 2020, the Company held a cash balance of $2.1 million compared to $1.7 million as of October 31, 2019.

Fiscal Year 2020 Financial Highlights

  • Total property sales income was $23.5 million for the fiscal year ended October 31, 2020 compared to $25.3 million for the same period in 2019. The decrease in gross sales was the result of lower unit sales during the pandemic, which was offset by higher sales prices for the fiscal year.
  • Total interest income was $12.6 million, up from $12.0 million in the comparative period in 2019. The increase in interest income was the result of growth in the total mortgage note receivable portfolio in the period. During the fiscal year, the Company completed 60-day forbearance agreements for 234 mortgage borrowers, accounting for $23.5 million in unpaid principal balance on the portfolio and an impact to interest income of approximately $412,000.
  • Operating income was $5.8 million, up from $5.5 million in the comparative period in 2019.
  • Cash EPS (operating income less income to non-controlling interests) was $0.74, which was an increase compared to $0.63 during the same period in 2019. The Company booked $1.4 million of state and federal income tax expense, which will be offset against the Company's deferred tax asset. The adjusted cash EPS after adjusting for one-time transaction costs and stock option compensation of $503K was $0.82.

Management Commentary
"During the fiscal fourth quarter, we continued to make incremental progress in returning our portfolio to historical performance levels despite a challenging pandemic backdrop," said Eric A. Donnelly, Chief Executive Officer of Crossroads Systems. "With the state of Texas' firm economic reopening initiatives, our borrowers have been able to return to work with confidence, resulting in a material decrease in forbearance requests during the period and leading to strong cash earnings performance throughout the year. The one silver lining to the pandemic has been a validation of our alternative approach to underwriting. Across our overall borrower base, we've maintained less than a 3% default rate, proving that our first-time borrowers are more than qualified, conservative with their money, and have shown great solvency in the face of adversity. While traditional credit methods exclude those with a lack of credit history, that should not, and does not, have a comparable impact on many borrowers' true creditworthiness.

"Looking ahead to the new fiscal year, we are cautiously optimistic about a return to loan and portfolio growth. The macroeconomic backdrop of the single-family home market remains strong both in Texas and throughout the U.S. With a favorable bank rate environment expected to continue for the foreseeable future, we'll look to augment our reliable interest income performance with improved property sales as we enter the 2021 season. By maintaining conservative leverage and maximizing operational efficiencies from procurement to sale, we can continue to drive stable year-on-year growth on the top and bottom-line over the long term while continuing to provide a positive social impact to our communities throughout the state."

About Crossroads Systems
Crossroads Systems, Inc. (OTCQB: 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.

©2020 Crossroads Systems, Inc., Crossroads and Crossroads Systems are registered trademarks of Crossroads Systems, Inc. All trademarks are the property of their respective owners.

Company Contact:
Crossroads Systems
IR@crossroads.com 

Investor Relations Contact:
Gateway Investor Relations
Matt Glover and Tom Colton
CRSS@gatewayir.commailto:Investors@lastmile.holdings
(949) 574-3860

 

CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)


          ASSETS

October 31,
2020


October 31,
2019

CURRENT ASSETS




Cash and cash equivalents

$    2,127,059


$    1,656,114

Restricted cash

3,004,051


2,583,057

Interest receivable

930,871


893,343

Current portion of notes receivable

1,527,234


1,447,842

Current portion of other notes receivable

7,014


339,429

Inventory

10,544,236


11,796,430

Prepaid expenses and other current assets

411,645


351,547

Total current assets

18,552,110


19,067,762





NOTES RECEIVABLE, net of current maturities, participations and allowance of $0

126,897,360


115,278,982

OTHER NOTES RECEIVABLE, net of current maturities, participations and allowance of $0

1,583,761


6,463,049

GOODWILL

18,566,966


18,566,966

DEFERRED TAX ASSET

18,300,334


19,680,324

OTHER NON-CURRENT ASSETS

-


36,083





TOTAL ASSETS

$ 183,900,531


$ 179,093,166





          LIABILITIES AND EQUITY




CURRENT LIABILITIES




Accounts payable

$       222,610


$       289,230

Accrued liabilities

353,901


609,546

Escrow liabilities

2,886,249


2,646,581

Payroll Protection Program Loan

376,800


-

Current portion of credit facilities

52,705,640


66,167,346

Current portion of other note payable (subordinated)

191,337


179,327

Current portion of acquisition notes payable

2,495,172


2,495,168

Total current liabilities

59,231,709


72,387,198





CREDIT FACILITIES, net of current maturities

62,470,640


45,608,430

OTHER NOTE PAYABLE, net of current maturities (subordinated)

1,144,235


1,335,571

ACQUISITION NOTES PAYABLE, net of current maturities (includes $2.2M subordinated)

10,582,769


12,418,163

OTHER LONG-TERM LIABILITIES

-


-

TOTAL LIABILITIES

133,429,353


131,749,362





EQUITY




Common stock, $0.001 par value: 75,000,000 shares 




authorized, 5,971,994 shares issued and outstanding

6,172


5,972

Additional paid in capital

242,471,411


242,358,843

Accumulated deficit

(210,059,912)


(213,074,517)

Crossroads Systems, Inc. stockholders' equity

32,417,672


29,290,298

Non-controlling interests

18,053,506


18,053,506

TOTAL EQUITY

50,471,178


47,343,804





TOTAL LIABILITIES AND EQUITY

$ 183,900,531


$ 179,093,166

 

CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)



For the Twelve Months Ended 


October 31,
2020


October 31,
2019

REVENUES




Interest income

$   12,633,818


$  11,986,113

Property sales

23,461,898


25,330,557

Other revenue

538,876


387,264

Total revenues

36,634,592


37,703,935





COSTS AND EXPENSES




Interest expense

5,712,138


6,343,947

Cost of properties sold

20,297,457


21,138,085

General and administrative

2,027,976


1,962,626

Salaries and wages

2,839,113


2,788,032

Total costs and expenses

30,876,684


32,232,690





Income from operations

5,757,908


5,471,245





OTHER EXPENSES




Interest expense

(734,005)


(1,110,230)

Total other expenses

(734,005)


(1,110,230)





Income before income tax provision

5,023,903


4,361,015





INCOME TAX PROVISION

(1,377,572)


(1,990,988)





NET INCOME

3,646,331


2,370,027

Less: net income attributable to non-controlling interests

(631,726)


(617,582)





NET INCOME ATTRIBUTABLE TO CONTROLLING INTERESTS

$     3,014,605


$    1,752,445





Earnings (loss) per share:








Cash income attributable to common shareholders

4,392,177


3,743,433

Weighted average shaes outstanding

5,971,994


5,971,994

Cash income per share

$             0.74


$           0.63





 

CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)



For the Three Months Ended 


October 31,
2020


October 31,
2019

REVENUES




Interest income

$     3,294,195


3,160,107

Property sales

5,725,586


6,611,054

Other revenue

160,627


42,433

Total revenues

9,180,408


9,813,594





COSTS AND EXPENSES




Interest expense

1,343,316


1,682,942

Cost of properties sold

4,871,987


5,547,809

General and administrative

589,191


665,678

Salaries and wages

733,555


690,675

Total costs and expenses

7,538,049


8,587,105





Income from operations

1,642,359


1,226,489





OTHER EXPENSES




Interest expense

(148,707)


(240,126)

Total other expenses

(148,707)


(240,126)





Income before income tax provision

1,493,652


986,363





INCOME TAX PROVISION

(929,174)


(1,587,459)





NET INCOME

564,478


(601,096)

Less: net income attributable to non-controlling interests

(158,795)


(155,546)





NET INCOME ATTRIBUTABLE TO CONTROLLING INTERESTS

$        405,683


$     (756,642)





Earnings (loss) per share:








Cash income attributable to common shareholders

1,334,857


830,817

Weighted average shaes outstanding

5,971,994


5,971,994

Cash income per share

$             0.22


$           0.14





 

CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(except per share data)



October 31,
2020


October 31, 
2019





CASH FLOWS FROM OPERATING ACTIVITIES




Net income

$   3,646,331


3,987,299

Adjustments to reconcile net income to net cash




used in operating activities:




Loss on derivative related activity

(105,702)


225,620

Stock awards in settlement of liabilities

112,768


(1,681)

Amortization of deferred financing fees

47,533


-

Provision for income taxes

1,379,990


-

Changes in operating assets and liabilities:




Interest receivable

(37,528)


(160,706)

Notes receivable (Mortgages and other)

(7,286,153)


(14,662,839)

Inventory

1,252,194


(4,308,159)

Prepaids and other assets

(60,100)


(12,863)

Accounts payable

(66,620)


697,848

Accrued liabilities

(149,943)


(276,849)

Escrow liabilities

239,668


119,233

Net cash used in operating activities

(1,027,561)


(14,393,096)





CASH FLOWS FROM INVESTING ACTIVITIES




Restricted cash

(420,994)


(41,127)

Net cash used in investing activities

(420,994)


(41,127)





CASH FLOWS FROM FINANCING ACTIVITIES




Preferred equity contributions

-


2,500,000

Preferred equity dividend distributions

(631,726)


(663,658)

Paycheck Protection Program loan

376,800


-

Borrowings on credit facilities, net

36,701,455


16,593,569

Principal payments on credit facilities

(33,300,951)


-

Principal payments on other notes payable

(179,326)


(167,695)

Principal payments on acquisition note payable

(1,846,840)


(4,415,983)

Sale of participations in mortgage notes and other receivables

800,086


-

      Net cash provided by financing activities

1,919,498


13,846,234





Net change in cash and cash equivalents and restricted cash

470,943


(587,989)

Cash and cash equivalents and restricted cash at beginning of period

1,656,114


2,323,614

Cash and cash equivalents and restricted cash at end of period

$   2,127,057


$  1,735,625





SUPPLEMENTAL INFORMATION




Cash paid for interest

$   6,613,755


$  7,169,428

Cash paid for income taxes

$               -


$               -





 

CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
FOR THE PERIOD ENDED OCTOBER 31, 2020



Crossroads


Capital Plus






Systems, Inc.


Financial, LLC


 Eliminations 


 Total 

          ASSETS








CURRENT ASSETS








Cash and cash equivalents

$         20,649


$     2,106,410


$                  -


$        2,127,059

Restricted cash

-


3,004,051


-


3,004,051

Interest receivable

-


930,871


-


930,871

Current portion of notes receivable

-


1,527,234


-


1,527,234

Current portion of other notes receivable

-


7,014


-


7,014

Intercompany receivables

3,143,910


21,553,266


(24,697,176)


-

Inventory

-


10,544,236


-


10,544,236

Prepaid expenses and other current assets

147,392


264,253


-


411,645

Total current assets

3,311,951


39,937,335


(24,697,176)


18,552,110









NOTES RECEIVABLE, net of current 

-


126,897,360


-


126,897,360

maturities and allowance of $0

-




-


-

OTHER NOTES RECEIVABLE, net of current 

-


1,583,761


-


1,583,761

maturities and allowance of $0

-




-


-

GOODWILL

18,566,966


-


-


18,566,966

DEFERRED TAX ASSET

18,300,334


-


-


18,300,334

INVESTMENT IN SUBSIDIARY

13,386,175


-


(13,386,175)


-

OTHER NON-CURRENT ASSETS

-


-


-


-









TOTAL ASSETS

$   53,565,426


$  168,418,456


$  (38,083,351)


$     183,900,531









          LIABILITIES AND EQUITY



CURRENT LIABILITIES








Accounts payable

$                  -


$        222,610


$                  -


$           222,610

Accrued liabilities

40,444


313,460


-


353,904

Escrow liabilities

-


2,886,249




2,886,249

Intercompany payables

21,553,266


-


(21,553,266)


-

Paycheck Protection Program loan



376,800


-


376,800

Current portion of credit facilities

-


52,705,640


-


52,705,640

Current portion of other note payable (subordinated debt)

-




191,337


191,337

Current portion of acquisition notes payable

-


-


2,495,172


2,495,172

Total current liabilities

21,593,710


56,504,759


(18,866,757)


59,231,712









CREDIT FACILITIES, net of current maturities

-


62,470,640


-


62,470,640

OTHER NOTE PAYABLE, net of current maturities (subordinated)

-


1,335,571


(191,337)


1,144,234

ACQUISITION NOTES PAYABLE, net of current maturities (includes $2.2M subordinated debt)

13,077,941


-


(2,495,172)


10,582,769

 maturities (includes $2.2M subordinated debt)








   TOTAL LIABILITIES

34,671,651


120,310,970


(21,553,266)


133,429,355









EQUITY








Common stock, $0.001 par value: 75,000,000 shares 








authorized, 5,971,994 shares issued and outstanding

6,172


-


-


6,172

 Additional paid in capital 

242,473,090


-


-


242,473,090

Accumulated earnings (deficit) 

(223,585,487)


30,053,980


(16,530,085)


(210,061,592)

   Crossroads Systems, Inc. stockholders' equity

18,893,775


30,053,980


(16,530,085)


32,417,670

   Non-controlling interests

-


18,053,506


-


18,053,506

TOTAL EQUITY

18,893,775


48,107,486


(16,530,085)


50,471,176

TOTAL LIABILITIES AND EQUITY

$   53,565,426


$  168,418,456


$  (38,083,351)


$     183,900,531

 

CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS  ENDED OCTOBER 31, 2020


Crossroads


Capital Plus





Systems, Inc.


Financial, LLC



Total








REVENUES







Interest income

$                  -


$   12,633,818



$   12,633,818

Property sales

-


23,461,898



23,461,898

Other revenue

-


538,876



538,876

Total revenues

-


36,634,592



36,634,592








COSTS AND EXPENSES







Interest expense

-


5,712,138



5,712,138

Cost of properties sold

-


20,297,457



20,297,457

General and administrative

305,646


1,722,330



2,027,976

Salaries and wages

114,449


2,724,664



2,839,113

Total costs and expenses

420,095


30,456,589



30,876,684








Income (loss) from operations

(420,095)


6,178,003



5,757,908








OTHER EXPENSES







Interest expense

(734,005)


-



(734,005)

Total other expenses

(734,005)


-



(734,005)








Income (loss) before income tax provision

(1,154,100)


6,178,003



5,023,903








INCOME TAX PROVISION

(1,377,572)


-



(1,377,572)








NET INCOME (LOSS)

(2,531,671)


6,178,003



3,646,331

Less: net income attributable to non-controlling interests

-


(631,726)



(631,726)

NET INCOME (LOSS) ATTRIBUTABLE TO 







CONTROLLING INTERESTS

(2,531,671)


5,546,277



3,014,605

 

CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED OCTOBER 31, 2020



Crossroads


Capital Plus





Systems, Inc.


Financial, LLC



Total








REVENUES







Interest income

$                  -


$     3,294,195



$     3,294,195

Property sales

-


5,725,586



5,725,586

Other revenue

-


160,627



160,627

Total revenues

-


9,180,408



9,180,408








COSTS AND EXPENSES







Interest expense

-


1,343,316



1,343,316

Cost of properties sold

-


4,871,987



4,871,987

General and administrative

87,657


501,534



589,191

Salaries and wages

68,592


664,963



733,555

Total costs and expenses

156,248


7,381,801



7,538,049








Income (loss) from operations

(156,248)


1,798,607



1,642,359








OTHER EXPENSES







Interest expense

(148,707)


-



(148,707)

Total other expenses

(148,707)


-



(148,707)








Income (loss) before income tax provision

(304,956)


1,798,607



1,493,652








INCOME TAX PROVISION

(929,174)


-



(929,174)








NET INCOME (LOSS)

(1,234,129)


1,798,607



564,478

Less: net income attributable to non-controlling interests

-


(158,795)



(158,795)

NET INCOME (LOSS) ATTRIBUTABLE TO 







CONTROLLING INTERESTS

$    (1,234,129)


$     1,639,813



$        405,683








 

 Shareholder Report for


the Fourth Quarter & Fiscal Year Ended


October 31, 2020


Crossroads Systems, Inc.


Delaware

74-284664



(State of Incorporation)

(IRS Employer Identification No.)


8214 Westchester Drive


Suite 950


Dallas, TX 75225


(Address of principal executive office)



(214) 999-0149


(Company's telephone number)


Common Stock


$0.001 Par Value


Trading Symbol: CRSS


Trading Market: OTCQB



75,000,000 Common Shares Authorized


5,971,994 Shares Issued and Outstanding as of October 31, 2020

 

Dear Fellow Shareholder:

As we wrap up our third fiscal year since the Crossroads and Capital Plus Financial (CPF) business combination, we find ourselves a much stronger and unified organization despite the unique and challenging environment being experienced by the rest of the world. Our teams are still largely working remotely, and we've been fortunate to not have any material exposures to the virus throughout our workforce.

We have been highly encouraged by the resiliency among our borrowers despite the ongoing pandemic. The State of Texas' commitment to getting citizens safely back to work has allowed many within the housing and construction industry to return to work confidently, which has led to a material decrease in the level of forbearance requests as well as an improvement in payment schedules. We have also experienced the additional positive impact of operating at nearly full potential in securing new inventory and facilitating new transactions for families looking for more permanent places of residence. The single-family market in Texas is incredibly tight which bodes well for our homes for sale but can pose challenges to procuring inventory.

As a social enterprise, we've placed a great deal of trust in our borrowers. For many of these families, the purchase of a home through CPF is their first credit transaction of any kind. While most conventional banking and financing institutions perceive this lack of credit history as a liability, we view it as an opportunity—which has been clearly evidenced by our superior portfolio performance over time. At the end of the fiscal year, the Federal Home Loan Mortgage Corporation (Freddie Mac) reported a single-family delinquency rate of 2.89% whereas our borrowers collectively represent a delinquency rate of only 0.9%. The 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. Although the court system has temporarily delayed the processing of foreclosures because of the pandemic, this period's delinquency rate is in line with last period's rate of 0.9%. It is important to recognize that our borrower's credit standing is purely out of insufficient history vs. poor performance. Our process of alternative, socially conscious underwriting has enabled a previously ignored segment of the population to access the same housing products and services that other populations have had ready access to for decades, and they are performing better and more reliably than traditional borrowers during these uncertain times.

Evidence suggests that our borrowers are taking conservative leverage positions in-line with a responsible fiscal management approach. For qualified mortgage (QM) underwriters like CPF, we require borrowers to maintain debt-to-income (DTI) ratios below 43%. The average DTI ratio in our portfolio, however, is only 24%. The conservative leveraging that our borrowers employ provides us with further comfort in knowing that they can afford mortgage payments and continue to pay on time. In the unfortunate event that it becomes necessary, we have equipped ourselves to be able to rapidly turn around inventory to mitigate perceived risks around delinquency and foreclosure. As a vertically integrated company that purchases, renovates, resells, and finances homes, we are capable of quickly reabsorbing properties into the rehab and resale cycles, typically in 60 to 95 days. This capability reduces our portfolio risk.

The current bank rate environment has been favorable to us, which we expect to contribute to an increase in demand for single-family homes in the coming years. This dynamic serves both us and our borrowers well. We expect more families, especially those in the communities that CPF serves, to take advantage of the favorable rates available to them as we enter the Spring 2021 season, which is historically characterized by increased sales volume.

In preparation for this higher sales activity, during the fourth quarter, we purchased land in McAllen, TX located in the Rio Grande Valley that we intend to develop into approximately 48 single-family homes. While this purchase is somewhat of a departure from our normal operating activities, we believe the demand for these homes will prove to make this investment a prescient one. In spearheading the development process on our own, we're able to design homes to meet the unique needs of our borrowers while also having more control over the supply chain. Given our deep knowledge of development, construction, and real estate management, we are confident in our ability to execute this exciting opportunity. We believe this new approach can significantly enhance our margins and encourage a greater number of prospective homeowners to make purchases. 

Throughout this year, we have been impressed by the reliable growth of our mortgage portfolio as well as the significant improvements that we have made in key profitability metrics. At the end of the fiscal year, our mortgage loan portfolio balance totaled $128.9 million and generated $12.6 million in interest income. For the fiscal fourth quarter, CPF generated $3.3 million in interest income and added $5.5 million in new mortgages. Cash income attributable to common shareholders for the fiscal fourth quarter was $1.3 million, up 55% from $831,000 in the same period last year. For the fiscal year, CPF generated $12.6 million in interest income and added $21.7 million in new mortgages. Cash income attributable to common shareholders for the fiscal year was $4.4 million, resulting in a cash income per share of $0.74. It is important to note that these figures include several one-time operating expenses due to our pending acquisition of Rice Bancshares (RBI). Adjusting for these expenses, our profitability metrics are even stronger, resulting in an adjusted EPS of $.82.

On RBI, we are continuing to make progress on consummating a transaction soon and are optimistic about getting a deal done in the new year subject to regulatory approvals. There are many reasons why RBI represents an exciting addition to the Crossroads family. First of all, we expect the transaction to provide immediate earnings accretion to our shareholders. We also benefit from a sizable 300 basis point reduction in the cost of capital, which will prove even more valuable as we continue adding to our inventory for the coming Spring season. This cost of funds index is currently 50 basis points and yields on deposits are closer to 10 to 15 bps but for conservative modeling, we are assuming 300 bps in savings to our current trailing 6 month cost of funds rate of 4.66% and full impact on new loan production. Additionally, we see operational cost savings and non-interest income expansion opportunities for the bank. While the process can be long and arduous, the timeline is still where we anticipated it to be and we look forward to providing an update on this and other opportunities.

Looking ahead, we are cautiously optimistic about a return to loan and portfolio growth. While many indicators are pointing towards positive results for a potential vaccine and subsequent nationwide rollout, we are continuing to focus on what is within our control and remaining prudent concerning employee safety and our finances. The macroeconomic backdrop of the single-family home market remains strong both in Texas and throughout the U.S., which bodes well for the long term. We are eager to continue working with our existing borrowers as well as prospective homebuyers next year and are grateful to work with an incredibly passionate and resilient group of families who constantly validate our mission.

Saludos Cordiales,

Robert H. Alpert & Eric A. Donnelly

SOURCE Crossroads Systems