Exhibit 99.1
FOR IMMEDIATE RELEASE
Contact: Hugh Frater or Richard Shea
President and CEO COO and CFO
Anthracite Capital, Inc. Anthracite Capital, Inc.
Tel: (212) 754-5535 Tel: (212) 754-5579
ANTHRACITE CAPITAL, INC. REPORTS THIRD QUARTER OPERATING EARNINGS UP 27% OVER
THE PRIOR YEAR AND 11% OVER THE SECOND QUARTER OF 2001
Operating earnings increase to $0.38 for the Third Quarter up from $0.30
for the prior year period and $0.34 for the second quarter of 2001
Total earnings per share including trading activity and SFAS 133 adjustments
increase to $0.38 in the Third Quarter from $0.32 in the prior year period
Dividend Yield of 12.9% based on current stock price
New York, NY - October 29, 2001, - Anthracite Capital, Inc. ("the Company")
(NYSE: AHR) today reported record third quarter earnings per share from the
operating portfolio of $0.38 per share (diluted) versus $0.30 (diluted) for
the year earlier quarter. Total earnings including realized gains and
losses for the third quarter were $0.40 per share (basic) and $0.38
(diluted) after a SFAS 133 adjustment. Based on the $0.32 per share
dividend declared on September 30, 2001, and the October 26, 2001 closing
price of $9.89, Anthracite's annualized dividend yield is 12.9%.
The Company's third quarter operating results represent an annualized
return on quarter end common stock equity (Annualized ROE) of 21.0% and a
net interest margin of 3.64%. Annualized ROE for the year earlier period
was 15.7% and the net interest margin was 4.11%. The significant year over
year increase in ROE was due to the accretive reinvestment of proceeds from
equity raises earlier in 2001, declining borrowing costs and declining
expense ratios. The decrease in net interest margin is attributable to the
increased allocation of equity to higher credit quality assets.
During the third quarter, investment grade securities increased by $62
million as proceeds were deployed into Residential Mortgage Backed
Securities (RMBS). Based on the higher advance rates applicable to RMBS the
Company's debt to equity capital ratio increased from 4.3 to 1 at June 30,
2001 to 4.6 to 1 at September 30, 2001. Leverage on commercial credit
sensitive holdings was unchanged during the period at approximately 1.03 to
1 debt to equity capital. The Company's cost of borrowing declined steadily
throughout the quarter as the Company funded RMBS assets with lower spread
liabilities and as LIBOR declined. The average cost of borrowing during the
quarter was 4.22% compared to 4.96% for the second quarter. Pursuant to
SFAS 133, the Company is required to report hedge ineffectiveness in the
Company's earnings. The components of third quarter operating earnings
include a reclassification of $1,574,000 of hedge ineffectiveness from
interest expense to other gain (losses); the hedge ineffectiveness resulted
in a decrease in third quarter earnings per share of $0.03. The cumulative
SFAS 133 hedge ineffectiveness for the nine months ended September 30, 2001
including this adjustment is $41,000.
To capitalize on current economic conditions the Company has actively
increased its exposure to short-term interest rates over the past year. As
anticipated, the Federal Reserve has responded to slowing economic activity
by easing short-term rates, which has benefited the Company's borrowing
costs. At the same time, the Company has increased the average credit
rating of its invested equity to BB+ at September 30, 2001 from BB- at
December, 31, 2000 by investing in high quality residential mortgage backed
securities. The strong performance of this part of the portfolio due to a
very steep Treasury yield curve has effectively balanced the spread
widening of the commercial mortgage backed securities (CMBS) portfolio in
the wake of the September 11th events. As a result, GAAP book value has
increased over the quarter.
GAAP book value at quarter end was $329,276,000 based upon market prices
provided by dealers for securities available for sale and held for trading.
As the available for sale portfolio matures, the GAAP book value of credit
sensitive CMBS securities held by the Company will increase towards its
original purchase cost provided that the Company's estimates of expected
credit losses are reasonably accurate. The unrealized loss on these
securities at September 30, 2001 was $91,333,000. This amount reflects the
amount of recovery net of expected losses if the portfolio is held to
maturity.
GAAP book value per common share increased approximately 1.5% from $7.92 at
June 30, 2001 to $8.03 at September 30, 2001 due to earnings in excess of
dividends and gains on the portfolio from decreases in market interest
rates. Book value does not include the anticipated $91,333,000 accretion of
unrealized loss on CMBS securities.
Hugh Frater, President and CEO of the Company stated, "For the past several
quarters we have taken a cautious approach to the commercial real estate
markets. Since the beginning of 2001 the Company has increased its
liquidity position to over 45% of equity capital and is in a strong
position to take advantage of compelling values in the commercial lending
and mortgage backed securities markets as they arise. Our recently filed
five million share equity offering is intended to further increase our
ability to capitalize on these opportunities and will be accretive to both
earnings and book value. We expect, based on the current investment
pipeline, that most if not all of the proceeds of this raise will be
deployed by the end of the year."
Commenting further on the potential equity raise, Mr. Frater stated, "In
addition to providing new capital at an opportunistic time for investments,
this equity raise is an important part of our consistent and long stated
goal of increasing the scale of the Company. We believe the benefits of
scale include higher earnings and dividends, enhanced financing
flexibility, greater liquidity for investors and lower expense ratios. We
have reduced the ratio of expenses to net interest income as the Company
has grown and expect to continue to do so over time. Reductions in fees
under the Company management contract with BlackRock, Inc. retroactive to
July 1st will serve to reduce these expense ratios further going forward.
The greater scale of the Company will also enable us to more efficiently
pursue our long standing objective of match funding commercial assets via a
collateralized debt obligation (CDO). We may be in a position to execute
such a transaction the first half of 2002".
BlackRock, Inc. reduced its base management fee from 0.35% to 0.20% of
average invested assets rated above BB+, and revised the hurdle rate
applicable to the incentive fee from 350 BP over Ten year Treasuries to the
greater of 9.5% or 350 BP over Ten year Treasuries. These reductions
resulted in savings to the Company of approximately $670,000 in the third
quarter.
Review of Existing Credit Exposures
The Company reports GAAP earnings on its commercial mortgage backed
securities portfolio net of expected losses over the life of the portfolio.
The Company owns $600 million face amount of high yield CMBS, which
represents a subordinate interest in $9 billion of first mortgages that
have been underwritten by the Company. The Company's expected default ratio
of the underlying first mortgage loans is approximately 4.3%. The average
severity of losses on expected defaults is projected to be 40%, resulting
in a 1.7% expected loss of principal over the remaining eight year weighted
average life of the collateral pool. To date, actual losses of .04% over
the three-year life of the portfolio have been consistent with these
expectations.
The Company's earnings would be affected to the extent actual losses on
CMBS collateral were to differ from expected losses. As of September 30,
2001 the reduction in operating earnings for every 50% increase in actual
losses over expected losses would be approximately $0.08 per share per
year. The Company reviews its loss estimates on a quarterly basis and to
date has concluded based on actual portfolio performance that these
estimates are reasonable.
Commenting on the credit environment, Mr. Frater stated, "We expect vacancy
rates for all property types to increase through the remainder of 2001 and
into 2002 as economic activity continues to slow. This will clearly cause
real estate values to decline but at the national level we do not expect a
repeat of the dramatic devaluations of the early 1990s based on significant
differences in today's lending markets and the lower level of speculative
development as the cycle has matured. Our analysis suggests that the
Company's position as a well-secured lender with substantial equity value
beneath it should allow the Company to maintain stable earnings and
dividend performance over a range of credit environments."
The total commercial loan portfolio includes over $9 billion of first
mortgage loans underlying the CMBS portfolio and $108 million in the
mezzanine loan portfolio. To manage this credit risk the Company maintains
significant diversification across sectors of the commercial real estate
market. Exposure to each sector for the aggregate portfolio is shown on the
following table:
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Multifamily 32.2%
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Retail 29.9
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Office 17.1
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Lodging 9.9
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Industrial 5.6
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Healthcare 3.9
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Other 1.4
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Total 100.0%
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The Company conducts an extensive review of its commercial assets on a
quarterly basis. In the aftermath of the September 11th tragedy, particular
focus of the Company has been on the lodging sector. The Company has two
mezzanine loans on hotel properties, one on a property in San Francisco and
one on a group of hotels in and around London. These two loans have an
aggregate balance of $53 million and an original weighted average loan to
value (LTV) ratio of 66%. Both properties suffered significant drops in
occupancy in the second half of September, 2001 but, consistent with
industry trends have since stabilized at acceptable, albeit lower levels of
occupancy and revenue per available room (REVPAR). Both loans are current
and the Company is comfortable that they will perform as scheduled given
both the current operating performance of the assets and the $375 million
of invested equity at risk beneath the Company's positions.
First mortgages on lodging assets represent 9.5% of the collateral
underlying the Company's CMBS portfolio. The average LTV of these
properties at underwriting in 1998 was 66%. The latest reported average
debt service coverage ratio (DSCR) for these properties was 1.99 times, up
from 1.67 times at original underwriting. Based on general weakness in
lodging, we expect current coverage ratios to decline. However, if expected
losses were to increase 600% on these lodging assets, implying an over 20%
default rate, the Company's annual operating earnings would decrease by
approximately $0.09. Given such analysis, the Company is comfortable at the
present time that lodging exposure is not likely to significantly impact
operating results or dividends.
The credit performance of the Company's commercial mortgage backed
securities remains consistent with expectations. There are no delinquencies
on the Company's direct holdings of commercial mezzanine loans.
Delinquencies on first mortgage collateral underlying the Company's
subordinate commercial mortgage backed securities (CMBS) positions
increased from 0.84% of underlying remaining principal balance at June 30,
2001 to 1.40% at September 30, 2001 as compared to 1.05% at September 30,
2001 for the Lehman Brothers data for the comparable origination vintage.
The Company fully expects, and reflects in its existing GAAP earnings, that
CMBS collateral delinquencies will increase and losses will occur over time
on underlying collateral.
Liquidity Portfolio
The Company has maintained a significant amount of liquidity as economic
conditions slowed throughout 2001. At September 30, 2001 the Company held
47% of its equity in cash and highly liquid high credit quality securities.
These assets are actively managed and actively hedged until they are
redeployed into high yielding commercial real estate assets. The Company
views this operation as a way to enhance the yield of its excess liquidity
and so manages this operation on a very conservative basis. Maximum
aggregate leverage used by the Company is 5:1 and the maximum aggregate
long-term interest rate sensitivity is 7.5% of net equity for each 100
basis point move in rates. The alternatives for this portfolio would have
been to pay down debt that cost 4.16% during the third quarter, or to
invest in overnight cash markets at an average rate of 3.67% for the third
quarter. Average leverage on the liquidity portfolio was 8.1:1 during the
third quarter. Long-term interest rate sensitivity for this portfolio was
approximately 5.0% of net equity for each 100 basis point move in rates.
The composition of the liquid portfolio is 4.9% cash, 14.9% adjustable rate
mortgages and 80.2% fixed rate residential mortgages. The fixed rate assets
carry coupons of 6.0% or 5.5% and were all purchased at a discount to par.
The discounted purchase price provides protection where rates continue to
rally and mortgage prepayments rise. This portfolio is actively hedged with
a combination of Treasury futures and interest rate swaps.
Improved Dividend Reinvestment Executions Now Available
Anthracite has a dividend reinvestment plan that provides current owners of
its common stock with a simple, economical and convenient method of
increasing their investment. Even if you are not a current owner of
Anthracite Stock, the Company's transfer agent can issue registered stock
directly to you without commission or markup. This transaction can be done
regardless of whether or not shares are held in street name. To take
advantage of this program, shareholders must submit a signed Request for
Waiver to the Company. A printable version of the form is available on the
Company's website or investors can call or email the Company to obtain the
Waiver and instructions via fax.
To request a prospectus and receive enrollment materials or to ask
questions about the plan, interested investors and shareholders may contact
the Company's transfer agent, The Bank of New York, at 1-800-524-4458 or
Investor Relations, Anthracite Capital, Inc. at 212-409-3333. The Company's
web site address is www.anthracitecapital.com. The Company used this
program to issue over 650,000 shares in the third quarter. The Company is
currently offering a 2% discount to the trailing 12 business day average
provided the stock price remains above threshold levels established by the
Company at the time.
Anthracite is a specialty finance company that is externally managed by
BlackRock, Inc., a New York City based investment manager with over $220
billion in global assets under management. The Company's principal business
objective is to generate net income for distribution to stockholders from
the spread between the interest income on its mortgage-backed securities
and commercial loan investments and the costs of financing these
investments.
Certain matters discussed in this press release may constitute
forward-looking statements within the meaning of the federal securities
laws. Anthracite's actual results could differ materially from those
anticipated in such forward-looking statements as a result of certain
factors, including those detailed from time to time in Anthracite's reports
and filings with the Securities and Exchange Commission.
For further information, please contact Hugh Frater, President and Chief
Executive Officer at 212-754-5535 or Richard Shea, Chief Operating Officer
and Chief Financial Officer at 212-754-5579, or visit Anthracite's website
at www.anthracitecapital.com.
Anthracite Capital, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
(in thousands, except per share data)
-------------------------------------------------------------------------------------------------------------------------------
September 30, 2001 December 31, 2000
------------------ -----------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 70,667 $ 37,829
Restricted cash equivalents 29,627 9,484
Securities available for sale, at fair value
Subordinated commercial mortgage-backed securities (CMBS) $303,737 $288,686
Investment grade securities 738,223 389,436
--------- --------
Total securities available for sale 1,041,960
678,122
Securities held for trading, at fair value 612,260 54,043
Mortgage loan pools available for sale, at fair value - 71,535
Commercial mortgage loans, net 100,158 153,187
Investments in real estate joint ventures 8,464 10,354
Receivable for investments sold 407,890 -
Other assets 18,108 19,097
-------------- -----------
Total Assets $ 2,289,134 $1,033,651
============== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Borrowings:
Secured by pledge of subordinated CMBS $162,554 $161,608
Secured by pledge of other securities available for sale
and cash equivalents 673,784 356,491
Secured by mortgage loan pools - 67,367
Secured by pledge of securities held for trading 591,506 55,212
Secured by pledge of investments in real estate joint ventures 1,337 3,385
Secured by pledge of commercial mortgage loans 43,006 75,279
---------- ---------
Total borrowings $ 1,472,187 $719,342
Payable for investments purchased 405,633 -
Distributions payable 13,622 9,741
Other liabilities 37,664 31,910
-------------- ---------------
Total Liabilities 1,929,106 760,993
-------------- ---------------
10.5% Series A preferred stock, redeemable convertible, liquidation
preference $34,200 30,752 30,404
-------------- ---------------
Stockholders' Equity:
Common stock, par value $0.001 per share; 400,000 shares authorized; 35,786
shares issued and outstanding in 2001; and 25,136 shares issued and
outstanding in 2000 36 25
10% Series B Preferred stock, liquidation preference $55,317 in
2001, $56,525 in 2000 42,086 43,004
Additional paid - in capital 412,316 315,533
Distributions in excess of earnings (10,551) (13,437)
Accumulated other comprehensive loss (114,611) (102,871)
-------------- ---------------
Total Stockholders' Equity 329,276 242,254
-------------- ---------------
Total Liabilities and Stockholders' Equity $2,289,134 $1,033,651
============== ===============
Anthracite Capital, Inc.
Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
-------------------------------------------------------------------------------------------------------------
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
2001 2001
------------------- ------------------
Operating Portfolio
Income:
Securities available for sale $ 20,546 $ 56,997
Commercial mortgage loans 2,941 13,137
Mortgage loan pools - 1,575
Trading securities 11,054 15,821
Earnings from real estate joint ventures 634 1,318
Cash and cash equivalents 1,071 2,143
-------- --------
Total income 36,246 90,991
-------- --------
Expenses:
Interest 9,178 31,452
Interest - trading securities 7,589 10,867
Management and incentive fee 3,154 8,060
Other expenses - net 78 1,047
-------- --------
Total expenses 19,999 51,426
-------- --------
Income from operating portfolio 16,247 39,565
-------- --------
Other gain (losses):
Gain on sale of securities available for sale 175 7,256
Gain on securities held for trading 1,875 2,443
Foreign currency (loss) gain (91) 18
Loss on impairment of asset - (5,702)
Hedge ineffectiveness (1,574) 41
Incentive fee attributable to other gains (149) (359)
-------- --------
Total other gain 236 3,697
-------- --------
Income before cumulative transition adjustment 16,483 43,262
-------- --------
Cumulative transition adjustment - SFAS 133 - (1,903)
-------- --------
Net Income 16,483 41,359
-------- --------
Dividends and accretion on preferred stock 2,290 6,866
-------- --------
Net Income available to Common Shareholders 14,193 34,493
======== =========
Income from operating portfolio per share:
Basic $0.39 $1.03
Diluted $0.38 $0.99
Net income per share, basic:
Income before cumulative transition adjustment $0.40 $1.15
Cumulative transition adjustment - SFAS 133 - (0.06)
-------- --------
Net income $0.40 $1.09
======== =========
Net income per share, diluted:
Income before cumulative transition adjustment $0.38 $1.09
Cumulative transition adjustment - SFAS 133 - (0.05)
-------- ---------
Net income $0.38 $1.04
======== =========
Weighted average number of shares outstanding:
Basic 35,397 31,637
Diluted 39,595 35,799