MMA Capital (Trading Symbol(s) MMAC MMAC) 8-K MuniMae Reports Fourth Quarter and Year-End Financial Results

Exhibit 99.3

MUNICIPAL MORTGAGE & EQUITY, LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(Unaudited)

	December 31,		December 31,
	2004		2003
ASSETS:
Investment in tax-exempt bonds, net	$	1,275,748	$	1,043,973
Loans receivable, net		603,173		497,884
Loans receivable held for sale		27,766		54,492
Investments in partnerships		827,273		282,492
Investments in derivative financial instruments		3,102		2,563
Cash, cash equivalents and interest receivable		111,249		67,669
Other assets		150,194		160,453
Land, building, and equipment, net		182,773		5,429
Goodwill and other intangible assets		129,052		134,664
TOTAL	$	3,310,330	$	2,249,619
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Notes payable	$	880,224	$	663,544
Mortgage notes payable		132,237		—
Short-term debt		413,157		371,881
Long-term debt		164,014		172,642
Subordinate debentures		84,000		—
Preferred shares subject to mandatory redemption (Note 1)		168,000		168,000
Tax credit equity guarantee liability		186,778		151,326
Investments in derivative financial instruments		4,923		15,287
Other liabilities		128,445		65,073
Minority interest in subsidiary companies		404,586		31
Preferred shareholders’ equity in a subsidiary company		71,031		—
Shareholders’ equity		672,935		641,835
TOTAL	$	3,310,330	$	2,249,619
BOOK VALUE PER COMMON SHARE	$	19.16	$	19.74

Note 1: As the result of adopting Financial Accounting Standards Board Statement of Financial Accounting Standard No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”, as of July 1, 2003 the Company was required to reclassify its preferred shareholders’ equity of $160.5 million, recording the $168.0 million redemption obligation as a liability and the $7.5 million of preferred equity issue costs as an asset, to be amortized until the redemption dates, on the consolidated balance sheets. In addition, amounts previously classified as distributions paid to the preferred shareholders have been recorded as interest expense starting in the third quarter of 2003.

MUNICIPAL MORTGAGE & EQUITY, LLC
CALCULATION OF CASH AVAILABLE FOR DISTRIBUTION
(In thousands, except share and per share data)
(Unaudited)

	For the three						For the twelve
	months ended						months ended
	December 31,						December 31,
	2004			2003			2004			2003
SOURCES OF CASH:
Interest on bonds, interests in bond securitizations and loans	$	30,852		$	24,708		$	125,352		$	105,779
Syndication fees		21,319			18,004			51,852			27,828
Asset management and advisory fees		3,139			6,267			20,054			12,318
Origination and brokerage fees		4,032			4,047			12,651			9,805
Guarantee fees		4,857			527			11,852			1,233
Loan servicing fees		2,079			1,705			7,979			7,157
Distributions from equity investments in partnerships		2,299			2,123			8,178			7,616
Other income		3,073			1,880			8,385			9,870
Interest on short-term investments		1,288			857			5,178			2,065
Net gain (loss) on sales		(4,664	)		878			2,006			(3,965	)
TOTAL SOURCES OF CASH		68,274			60,996			253,487			179,706
EXPENSES:
Interest expense		16,216			11,965			62,050			42,233
Interest expense on debentures and preferred shares (Note 1)		4,984			3,276			16,803			6,270
Salaries and benefits		14,543			15,034			64,286			41,736
Professional fees		4,057			1,217			10,294			4,188
General and administrative		5,175			4,746			16,523			11,741
Loan loss expense		131			2,802			87			2,849
Income tax expense		214			2,935			971			851
TOTAL EXPENSES		45,320			41,975			171,014			109,868
CASH AVAILABLE FOR DISTRIBUTION		22,954			19,021			82,473			69,838
LESS:
Cash allocable to minority interest (Note 1)		755			—			755			5,989
CASH AVAILABLE FOR DISTRIBUTION TO COMMON SHARES	$	22,199		$	19,021		$	81,718		$	63,849
CAD PER COMMON SHARE	$	0.63		$	0.58		$	2.33		$	2.13
CALCULATION OF CASH DISTRIBUTION:
CASH AVAILABLE FOR DISTRIBUTION TO COMMON SHARES	$	22,199		$	19,021		$	81,718		$	63,849
ACTUAL AMOUNT PAID	$	16,624		$	14,739		$	65,100		$	55,122
PAYOUT RATIO		74.9	%		77.5	%		79.7	%		86.3	%
COMMON SHARES OUTSTANDING		35,182,579			32,576,380
CASH DISTRIBUTION PER COMMON SHARE	$	0.4725		$	0.4525		$	1.8600		$	1.7950

Note 1: As the result of adopting Financial Accounting Standards Board Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”, as of July 1, 2003 the Company was required to reclassify its preferred shareholders’ equity of $160.5 million, recording the $168.0 million redemption obligation as a liability and the $7.5 million of preferred equity issue costs as an asset, to be amortized until the redemption dates, on the consolidated balance sheets. In addition, amounts previously classified as distributions paid to the preferred shareholders have been recorded as interest expense starting in the third quarter of 2003.

Note 2: Certain prior year amounts have been reclassified to conform to the current year presentation.

The primary differences between Net Income as calculated under generally accepted accounting principles (“GAAP”) and Cash Available For Distribution (“CAD”) result from the timing of income and expense recognition and non-cash events. These differences between CAD and GAAP income include the treatment of certain fees, which for CAD purposes are recognized when received but for GAAP purposes are amortized into income over the relevant period. In addition, there are differences related to non-cash gains and losses associated with bond valuations and sales, non-cash gains and losses associated with changes in market value of derivative financial instruments, amortization of goodwill and intangibles, deferred compensation and capitalization of mortgage servicing rights, which are not included in the calculation of CAD. As a result of Financial Interpretation No.46 (Revised), “Consolidation of Variable Interest Entities”, effective in the second quarter of 2004 certain asset management and syndication fees are eliminated for GAAP as a result of consolidating certain tax credit equity funds.

The common shares outstanding reported for Cash Available for Distribution are the actual shares outstanding at the end of the quarter. For GAAP, the weighted average shares outstanding during the period are reported for the basic net income per share calculation. The weighted average shares outstanding for diluted net income per share include the potential dilutive effect from the exercise of options and vesting of deferred shares.

VARIANCE ANALYSIS FOR CAD

4^th Quarter 2004 Compared to 4^th Quarter 2003:

CAD for the fourth quarter of 2004 increased $3.9 million over the same period last year due primarily to the following changes:

(1)	A $4.3 million increase in guarantee fees due largely to new guaranteed tax credit equity funds closed during 2004;
(2)	a $3.3 million increase in syndication fees due primarily to increased volume in the tax credit equity business in 2004;
(3)	a $2.7 million decrease in loan loss expense, largely relating to advances to tax credit equity funds that will not be collected;
(4)	a $2.7 million decrease in income tax expense; and
(5)	a $1.2 million increase in other income due to an increase in loan extension, cancellation, application and late fees;
	Offset in part by:
(6)	a $5.5 million decrease in net gain on sales due primarily to the termination of interest rate swaps during the 4th quarter of 2004;
(7)	a $3.1 million decrease in asset management and advisory fees due primarily to the timing of cash inflows into the funds; and
(8)	a $2.8 million increase in professional fees due primarily to accounting and legal costs for the Sarbanes Oxley compliance initiative.

Fiscal Year 2004 Compared to Fiscal Year 2003:

CAD income for the year ended December 31, 2004 increased $17.9 million as compared to the year ended December 31, 2003 due primarily to the following changes:

(1)	a $24.0 million increase in syndication fees and a $7.7 million increase in asset management and advisory fees due primarily to a full year of revenue resulting from the HCI acquisition as compared to six months of revenue in 2003;
(2)	a $10.6 million increase in guarantee fees due largely to new guaranteed tax credit equity funds closed during 2004;
(3)	a $6.0 million increase in net gain on sales due primarily to an overall decrease in cash paid to terminate swaps and a larger gain in 2004 from the sale of a property acquired by deed in lieu of foreclosure;
(4)	a $2.8 million increase in origination fees due principally to an increase in originations of tax-exempt bonds and taxable permanent loans; and
(9)	a $2.8 million decrease in loan loss expense, largely relating to advances to tax credit equity funds that will not be collected;
	Offset in part by:
(5)	a $22.6 million increase in salaries and benefits and a $4.8 million increase in general and administrative expenses due primarily to a full year of expense resulting from the HCI acquisition in 2004 as compared to six months of expense in 2003;
(6)	a $6.1 million increase in professional fees due primarily to accounting and legal costs for the Sarbanes Oxley compliance initiative and to increased production volumes; and
(7)	a $2.4 million decrease in net interest income (interest on bonds, interests in bond securitizations and loans less interest expense attributable to bonds, interests in bond securitizations, loans, debentures and preferred shares); excluding the effects ($1.7 million in 2004 and $10.8 million in 2003) of deferred interest recognized on the sale of properties acquired by deed in lieu of foreclosure in 2004 and 2003, net interest income increased $6.7 million due largely to the overall growth of the bond portfolio.

MUNICIPAL MORTGAGE & EQUITY, LLC

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share and per share data)

	For the year ended December 31,
	2004			2003			2002
INCOME:
Interest income
Interest on bonds and interests in bond securitizations	$	85,505		$	71,636		$	70,757
Interest on loans		43,874			37,211			36,585
Interest on short-term investments		5,020			2,158			1,255
Total interest income		134,399			111,005			108,597
Fee income
Syndication fees		25,535			26,856			7,221
Origination and brokerage fees		7,934			6,584			6,632
Guarantee fees		7,852			3,614			232
Asset management and advisory fees		12,733			10,337			3,887
Loan servicing fees		4,579			4,234			3,882
Other income		7,415			8,855			4,203
Total fee income		66,048			60,480			26,057
Net rental income		17,959			—			—
Total income		218,406			171,485			134,654
EXPENSES:
Interest expense		69,884			44,528			36,596
Interest expense on debentures and preferred shares		17,318			6,189			—
Salaries and benefits		69,540			41,736			22,678
General and administrative		26,445			11,152			6,516
Professional fees		11,118			4,188			4,960
Depreciation and amortization		14,159			7,492			1,857
Total expenses		208,464			115,285			72,607
Net gain on sale of loans		3,393			4,864			3,407
Net gain on sale of tax-exempt investments		304			2,133			4,896
Net gain on sale of investments in tax credit equity partnerships		3,019			2,747			282
Net loss on derivatives		(219	)		(1,919	)		(24,474	)
Impairments and valuation allowances		(7,141	)		(6,983	)		(730	)
Income before income tax (expense) benefit, net income (expense) allocable to minority interest, net losses from equity investments in partnerships, discontinued operations and cumulative effect of a change in accounting principle		9,298			57,042			45,428
Income tax (expense) benefit		(2,737	)		138			(1,484	)
Net income (expense) allocable to minority interest		178,280			(6,032	)		(11,938	)
Net losses from equity investments in partnerships		(169,404	)		(3,173	)		(3,057	)
Income from continuing operations		15,437			47,975			28,949
Discontinued operations		11,080			25,748			—
Income before cumulative effect of a change in accounting principle		26,517			73,723			28,949
Cumulative effect of a change in accounting principle		520			(1,228	)		—
Net income	$	27,037		$	72,495		$	28,949
Net income allocated to:
Term growth shares	$	—		$	—		$	153
Common shares	$	27,037		$	72,495		$	28,796

MUNICIPAL MORTGAGE & EQUITY, LLC

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share and per share data)

	For the year ended December 31,
	2004		2003			2002
Basic earnings per share:
Earnings before discontinued operations and cumulative effect of accounting change	$	0.44	$	1.63		$	1.16
Discontinued operations		0.32		0.88			—
Cumulative effect of a change in accounting principle		0.02		(0.04	)		—
Basic earnings per common share	$	0.78	$	2.47		$	1.16
Weighted average common shares outstanding		34,521,842		29,397,521			24,904,437
Diluted earnings per share:
Earnings before discontinued operations and cumulative effect of accounting change	$	0.44	$	1.61		$	1.13
Discontinued operations		0.32		0.87			—
Cumulative effect of a change in accounting principle		0.02		(0.04	)		—
Diluted earnings per common share	$	0.78	$	2.44		$	1.13
Weighted average common shares outstanding		34,783,888		29,766,032			25,473,815

MUNICIPAL MORTGAGE & EQUITY, LLC
RECONCILIATION OF GAAP INCOME TO CASH AVAILABLE FOR DISTRIBUTION
(in thousands)
(Unaudited)

	For the three months ended						For the twelve months ended
	December 31,						December 31,
	2004			2003			2004			2003
INCOME:
Interest income
Interest on bonds and interests in bond securitizations	$	21,895		$	17,980		$	85,505		$	71,636
Interest on loans		10,893			9,616			43,874			37,211
Interest on short-term investments		1,016			918			5,020			2,158
Total interest income		33,804			28,514			134,399			111,005
Fee income
Syndication fees		10,733			17,856			25,535			26,856
Origination and brokerage fees		2,505			2,805			7,934			6,584
Guarantee fees		2,400			1,500			7,852			3,614
Asset management and advisory fees		2,915			4,871			12,733			10,337
Loan servicing fees		1,262			981			4,579			4,234
Other income		2,565			1,881			7,415			8,855
Total fee income		22,380			29,894			66,048			60,480
Net rental income		6,943			—			17,959			—
Total income		63,127			58,408			218,406			171,485
EXPENSES:
Interest expense		20,207			12,334			69,884			44,528
Interest expense on debentures and preferred shares		5,499			3,194			17,318			6,189
Salaries and benefits		15,672			15,034			69,540			41,736
General and administrative		8,818			4,223			26,445			11,152
Professional fees		4,415			1,217			11,118			4,188
Depreciation and amortization		4,459			3,300			14,159			7,492
Total expenses		59,070			39,302			208,464			115,285
Net gain on sale of loans		577			1,521			3,393			4,864
Net gain (loss) on sale of tax-exempt investments		(241	)		(53	)		304			2,133
Net gain on sale of investments in tax credit equity partnerships		80			(2,000	)		3,019			2,747
Net gains (losses) on derivatives		1,244			459			(219	)		(1,919	)
Impairments and valuation allowances related to investments		(3,765	)		(5,839	)		(7,141	)		(6,983	)
Net gains (losses) from equity investments in partnerships		(41,419	)		788			(169,404	)		(3,173	)
Income tax benefit (expense)		(5,001	)		(2,956	)		(2,737	)		138
Net income allocable to minority interest		49,853			(485	)		178,280			(6,032	)
Net income from continuing operations		5,385			10,541			15,437			47,975
Discontinued operations		215			—			11,080			25,748
Cumulative effect of a change in accounting principle		—			(1,228	)		520			(1,228	)
Net income	$	5,600		$	9,313		$	27,037		$	72,495
Conversion to Cash Available for Distribution:
(1) Mark to market adjustments	$	(1,517	)	$	(2,400	)	$	(4,953	)	$	(6,322	)
(2) Equity investments		736			(235	)		7,400			7,351
(3) Net gain on sales		(6,546	)		(2,211	)		(4,252	)		(13,601	)
(3) Amortization of capitalized mortgage servicing fees		367			385			1,621			1,541
(3) Amortization of asset management contracts		1,179			2,458			4,716			4,880
(4) Origination and brokerage fees, syndication fees and other income, net		(526	)		2,650			15,507			6,940
(5) Valuation allowances and other-than-temporary impairments		2,051			3,037			5,471			4,134
(6) Deferred tax expense		4,786			21			1,765			(989	)
(7) Discontinued operations		(215	)		—			(11,080	)		(25,748	)
(7) Interest income		—			—			1,733			10,793
(8) Fund (income) loss		16,243			4,775			34,107			1,147
(9) Change in accounting principle		—			1,228			—			1,228
(10) Deferred compensation		41			—			2,646			—
Cash Available for Distribution (CAD)	$	22,199		$	19,021		$	81,718		$	63,849

Notes:

(1)   For GAAP reporting, the Company records the non-cash change in fair value of its investment in interest rate swaps and other derivative financial instruments through net income. These gains and losses are not included in the Company’s calculation of CAD.

(2)   For GAAP reporting, the Company accounts for various investments in partnerships using the equity accounting method. As a result, the Company’s allocable share of the income or loss from the partnerships is reported in income (losses) from equity investments in partnerships. The income from these partnerships includes depreciation expense and changes in the fair value of investments in derivatives. For GAAP reporting, distributions are treated as a return of capital. For CAD reporting, the Company records the cash distributions it receives from the partnerships as other income.

(3)   For GAAP reporting, the Company recognizes non-cash gains and losses, gain share distributed to TEB Preferred shareholders and amortization of intangible assets, including (a) non-cash gains and losses associated with the sale of assets or capitalization of certain mortgage servicing rights; (b) amortization of certain mortgage servicing rights over the estimated life of the serviced loans; (c) gain share allocated and paid to TE Bond Subsidiary, LLC preferred shareholders on the sale of tax-exempt investments; and (d) amortization of certain asset management contracts recorded in connection with a July 2003 acquisition. These non-cash items and gain share preferred distributions are not included in CAD.

(4)   This adjustment reflects the net difference, for the relevant period, between fees reflected in income when received for CAD and the recognition of fees for GAAP. This line item reflects several types of income:

(a)   Origination fees and certain other income amounts, which are recognized as income when received for CAD purposes, but for GAAP reporting are amortized over the life of the associated investment.

(b)   Syndication fees, which are recognized as income when earned for CAD purposes, but for GAAP reporting a portion of the fee may be deferred until investors have paid in greater than 20% of their total capital contributions to the tax credit funds. For quarters ended and after June 30, 2004, for GAAP purposes syndication fees relating to certain tax credit equity funds are eliminated in consolidation as a result of consolidating those funds under Financial Interpretation No.46 (Revised), “Consolidation of Variable Interest Entities” (“FIN 46”).

(c)   Guarantee fees, which are recognized as income when received for CAD purposes, but for GAAP reporting are recorded into income over the guarantee period.

(d)   Asset management fees, which are recognized as income when earned and collectible for CAD purposes, but for GAAP purposes are applied first to relieve accounts receivable recorded in conjunction with the July 2003 acquisition, and second as income consistent with CAD revenue recognition. For the quarter ended June 30, 2004 and after, for GAAP purposes asset management fees relating to certain tax credit equity funds are eliminated as a result of consolidating certain tax credit equity funds under FIN46R.

(5)   For GAAP reporting, the Company records valuation allowances and other-than-temporary impairments on its investments in loans, bonds and other bond-related investments. Such non-cash charges do not affect the cash flow generated from the operation of the underlying properties, distributions to shareholders, or the tax-exempt status of the income of the financial obligation under the bonds. Therefore, these items are not included in the calculation of CAD.

(6)   For GAAP reporting, the Company’s income tax expense contains both a current and a deferred component. Only the Company’s current income tax expense is reflected in CAD.

(7)   For GAAP reporting, the Company recognized a gain upon the sale of a property. This gain was required to be classified as discontinued operations because the Company owned the property prior to the sale. For CAD reporting, the gain was significantly less due to recording a portion of the proceeds as interest income. In addition, the carrying value of the tax-exempt bond associated with the property was significantly more for CAD due to an impairment previously recognized for GAAP.

(8)   For those of the Company’s tax credit equity syndication funds in which the Company provides a guarantee or otherwise has continuing involvement in the underlying assets of the fund, GAAP accounting requires the Company to record the net income (loss) from the fund. This non-cash item is not reflected in CAD. In addition, as a result of the adoption of FIN46R, the company determined its residual interests in non-guaranteed tax credit equity funds represented equity interests in variable interest entities (“VIEs”) and the Company was the primary beneficiary of certain of those VIEs and, therefore, was required to consolidate the funds. The GAAP earnings (loss) from these tax credit equity funds is not included in CAD.

(9)   As a result of the adoption of FIN46, the company determined its residual interests in bond securitizations represented an equity interest in a VIE and the Company was the primary beneficiary of the VIE and therefore, needed to consolidate the securitization trusts.

(10)   For GAAP reporting, the Company records an expense for certain deferred compensation arrangements. These same non-cash costs are not included in the Company’s calculation of CAD until funds are disbursed.