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The following segment was excerpted from this fund letter.
Crossroads Impact Corp. (OTCQX:CRSS)
The company’s PPP operations from last year are winding down as loans are forgiven, with a $1.5bn loan balance remaining out of an initial $6.3bn. What remains is the company’s traditional mortgage lending business, and an expanding small business loans book.
Crossroads $133 million loan book has continued to perform steadily, with under 1% in delinquencies and a net interest margin of approximately 5%. The company credits its performance to its deep connections in the community, manual underwriting process with conservative debt-to-income ratios, and focus on underserved first-time borrowers who “have shown the financial discipline to operate without debt.”
The company has been moving forward with its plans to expand its book of business from a single-family mortgage lending institution in Texas to a broader lender focused on serving minority individuals and small businesses through environmental and responsible social lending. To that end, it acquired an asset lending firm and a non-bank direct lender.
It also signed a $250m agreement with Enhanced Capital, a subsidiary of P10 Holdings (PX, a related company that shares a chair and several shareholders with Crossroads).
Shortly after year-end, Crossroads announced a $180m equity injection from P10, with the option to add a further $350m, and a $150m debt facility led by Texas Capital Bank (TCBI). Crossroads has deployed $70m so far in 2022 and expects its loan book to approach $500 million.
It is too early to judge results, but we know that Crossroads is targeting “in excess of 20% return on equity.”
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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