Exhibit 99.2
Contact: Raymond Ahn
212-754-5359
ahr-info@blackrock.com
Anthracite Capital, Inc. Reports Second Quarter Earnings;
Increases Credit Loss Expectations;
Dividend Yield Is 12.6%
New York, NY - August 6, 2003 - Anthracite Capital, Inc. ("Anthracite" or the
"Company") (NYSE: AHR) today reported a loss for the second quarter of 2003 of
$0.26 per share versus income of $0.18 per share for the first quarter of 2003
and $0.25 per share for the second quarter of 2002. This loss is primarily the
result of an increase in loss expectations on certain 1998 controlling class
CMBS assets. As previously disclosed certain of the Company's controlling
class CMBS assets were experiencing cash flow interruptions.
Income from the operating portfolio ("Operating Earnings") for the quarter was
$0.33 per share versus $0.40 per share for the first quarter of 2003 and $0.43
per share for the second quarter of 2002. The Company considers Operating
Earnings to be net interest income after operating expenses and preferred
dividends but before realized and unrealized gains and losses and impairment
of securities. The Company believes Operating Earnings better reflects the
quality of long-term earnings and dividend stability provided asset values
remain stable.
(All numbers are thousands, except per share amounts).
Based upon the $0.35 per common share dividend paid on July 31, 2003 and the
August 5, 2003 closing price of $11.15, Anthracite's annualized dividend yield
is 12.6%.
Second quarter net loss includes a charge of $0.56 per share which resulted
from an increase in expected underlying loan losses on certain 1998 vintage
Commercial Mortgage Backed Securities ("CMBS") assets. The increase in loss
expectations triggered an impairment charge according to previously disclosed
Company accounting policies and as required the accounting standard EITF
(Emerging Issue Task Force) 99-20, "Recognition of Interest Income and
Impairment on Purchased and Retained Beneficial Interests in Securitized
Financial Assets." Actual underlying loan losses recognized to date are still
below original expectations, but the Company believes additional loss
expectations are warranted. The increase in expected losses on these CMBS
assets will decrease Operating Earnings by approximately $0.07 per share per
year. The current value of the affected securities was largely reflected in
the Company's March 31, 2003 reported book value because these assets are held
as "available for sale" and marked to market in "accumulated other
comprehensive loss" on the balance sheet.
Included in net loss, for the second quarter, are realized and unrealized
gains and losses that net to a loss of $1,422 ($0.03 per share), which are
attributable to the sale of a portion of the Company's Residential Mortgage
Backed Securities ("RMBS") portfolio. During the quarter, the Company acquired
or committed to acquire $269,000 par amount of Commercial Real Estate
Securities and newly originated mezzanine loans, and reduced RMBS holdings by
over $600,000.
Hugh Frater, President and CEO of the Company, stated, "The performance of the
majority of our credit sensitive portfolios remains consistent with or better
than our original expectations, but it is necessary and prudent in the current
commercial real estate environment to increase our underlying loan loss
expectations and reduce the income attributable to certain transactions. In
future periods, strong underlying loan collateral performance on these or
other transactions may enable us to decrease loss provisions and increase
income. The increase in our investment in newer vintage CMBS and the reduction
in our RMBS exposure over the past quarter supports our goal of stable
earnings and dividends. While low interest rates in the second quarter
provided a challenging environment for reinvestment, the Company was able to
lower its cost of capital by issuing fixed rate redeemable preferred stock.
The recent increase in long-term interest rates and credit spreads should
provide more compelling investment opportunities to enable us to enhance our
Operating Earnings and support our dividend."
The Company's second quarter Operating Earnings represent an annualized return
on the quarter's average common stock equity "Annualized ROE" of 17.7% and net
interest margin of 3.0%. Annualized ROE and the net interest margin for the
year earlier period was 22.6% and 4.7%, respectively. This change was due to a
significant reduction in the size of the Company's RMBS portfolio and
increased hedging expenses from greater reliance on interest rate swaps. The
components of realized loss include $21 of hedge ineffectiveness that was
reclassified from interest income to other gains.
During the second quarter, aggregate leverage decreased from 5.41:1 to 3.95:1.
Short-term borrowing on credit sensitive positions was 0.78:1. As of June 30,
2003, the Company's exposure to changes in short-term interest rates result in
a $0.035 change in annual net income per share for every 50 basis point change
in LIBOR. The Company's book value is dependent on long-term interest rates
and credit spreads. As of June 30, 2003, sensitivity to long-term rates is
approximately 3.0% for each 50 basis point change in long-term rates and
approximately 4% for a 50 basis point change in credit spreads. These
percentages will change if fluctuations greater than 50 basis points occur in
long-term rates or credit spreads.
Recognition of Unrealized Losses
The Company performed an analysis of its current underlying loan loss
expectations and credit performance of its 1998 vintage "controlling-class"
CMBS. The Company increased expected underlying loan loss expectations on four
securities from three 1998 vintage CMBS transactions. As a result of the
increase in loss expectations, the Company is incurring an impairment charge
of $27,014, as required by EITF 99-20. Three of the four securities are not
rated and the fourth security is rated CCC by Fitch Ratings. Securities which
are not rated are highly sensitive to changes in the timing of losses
recognized on the underlying loans. Even though losses recognized on the
underlying loans to date are still significantly less than original estimates,
the Company maintains its belief that losses in 2003 will continue to rise due
to weak conditions in many commercial real estate markets. The Company felt it
was appropriate to increase the total amount of expected losses of these
transactions. The Company's increased loss expectations do not affect the
market value of the securities.
Loss expectations of the underlying loans for the 1998 vintage transactions
prior to June 30, 2003 were $127,080, or 1.71% of collateral outstanding, net
of defeased loans. A defeased loan is a loan that has not paid off, but is
fully collateralized by U.S. Treasury obligations. The Company's loss
expectations for its 1998 vintage transactions now total $158,292, or 2.13% of
collateral outstanding, net of defeased loans. These loss expectation levels
are consistent with the current loss estimates for transactions underwritten
after 1998. As of June 30, 2003, the Company's loss expectations by vintage
year are as follows:
Loss Collateral % of
Expectation Balance * Collateral
---------------- ----------------- ----------------
1998 $158,292 $7,418,035 2.13%
1999 18,675 727,525 2.57%
2001 23,756 968,448 2.45%
2003 23,131 1,003,183 2.31%
---------------- ----------------- ----------------
$223,854 $10,117,191 2.21%
*net of defeased loans
The CMAC 98-C2 CMBS transaction credit performance has lagged all other
transactions in the Company's CMBS portfolio and is the only 1998 vintage
transaction owned by the Company which has delinquencies above that of the
Lehman index of 1998 vintage transactions. During the second quarter of 2003,
the outstanding principal balance of the Class M security was reduced by
$6,996 to $36,406. Eleven underlying loans with an original principal of
$24,342 have been resolved with a weighted average loss severity of 34.6%;
five loans resulted in no loss. The Company has active loss mitigation
strategies with respect to the loan seller including pursuing an
indemnification, initiating a put back of an asset, and initiating litigation
against the loan seller regarding mis-representations made in connection with
one of the loans.
Over the remainder of 2003, the Company expects an additional seven underlying
loan resolutions for CMAC 1998-C2. These seven loans have an original
principal balance of $62,768. Fitch Ratings has placed the B and B- rated
classes of CMAC 98-C2 on negative watch due to the pending loan resolutions.
As shown in the table below, the delinquency experience of the underlying
loans is the highest of the three transactions and significantly above loss
expectations for comparable 1998 transactions as reported in the Lehman
conduit guide. The June 30, 2003 impairment charge related to the non-rated
and CCC rated classes of this transaction is $19,217, or $0.40 per share.
The Company owns 65% of the non-rated Class M security from the LBCMT 98-C1
CMBS transaction. During the second quarter 2003, the outstanding principal
balance for this security was reduced by $9,284 to $7,991. Two loans with an
original par of $29,779 were resolved and resulted in a 33.4% loss severity.
The June 30, 2003 impairment charge related to this security is $5,573, or
$0.12 per share.
The Company owns 65% of the non-rated Class N security of the GMAC 98-C1 CMBS
transaction. During the second quarter 2003, the principal balance for this
security was reduced by $904 to $8,396. One loan was resolved at a loss of
$887, which represented a 18% loss severity. The June 30, 2003 impairment
charge related to this security is $2,224, or $0.05 per share.
Prior to the impairment charge, the weighted average loss-adjusted yield on
the Company's controlling-class CMBS was 10.25%. After the impairment charge,
the weighted average loss-adjusted yield is 10.14%.
The table below shows current delinquency and underlying loan losses
recognized on the Company's controlling-class CMBS, and the impact of
increased underlying loan loss expectations as a percentage of underlying
loans.
Losses
Post Impairment Losses Recognized as
June 30, 2003 Underlying Loan Recognized as % of
Underlying Loan Loss % of Loss Underlying
Delinquency Expectations Expectations Loans*
------------------ ----------------- ---------------- ----------------
CMAC 98-C2 3.67% 2.63% 26.46% 0.57%
LBCMT 98-C1 1.92% 2.63% 28.67% 0.65%
GMAC 98-C1 2.12% 1.56% 3.83% 0.06%
CMAC 98-C1 0.23% 1.44% 28.66% 0.45%
DLJ 98-CG1 1.27% 1.76% 20.25% 0.32%
Sub-total 1998 2.16% 2.13% 23.09% 0.45%
transactions
1999 Transactions 1.39% 2.57% 2.93% 0.07%
2001 Transactions 0.11% 2.45% 0.00% 0.00%
2003 Transactions 0.43% 2.31% 0.00% 0.00%
------------------ ----------------- ---------------- ----------------
Total-All Transactions 1.74% 2.21% 16.85% 0.34%
*As a % of cutoff balance
The table below shows the Lehman Brothers June 2003 Conduit Guide delinquency
statistics by vintage year.
Delinquency as a % of Losses Recognized as % of
Underlying Loans Underlying Loans
------------------------- ---------------------------------
1998 2.22% 0.42%
1999 1.91% 0.15%
2001 0.77% 0.03%
2003 0.02% 0.00%
Acquisition of New CMBS
After the close of the 2003 second quarter, the Company acquired $62,111 of
par of a 2003 vintage controlling-class CMBS transaction. $20,000 of these
securities will be used to complete the ramp-up financing facility from the
December 2002 CDO. Underlying loan loss expectations on the collateral are
estimated at 2.35%. The loss-adjusted yield on the securities rated B- and
lower in aggregate is 11.36%. The non-rated and B- rated tranches of this
transaction were purchased to yield an initial cash-on-cash return of 21.17%
and 18.86%, respectively, and loss-adjusted yields of 9.00% and 14.42%,
respectively. The coupon for these two securities is 5.11%.
Commercial Real Estate Securities Income
The assets in the Company's two CDOs are unaffected by the new credit
expectations. The net asset value of the CDOs increased by $7,922 net of
hedges. A breakdown of the Commercial Real Estate Securities portfolio income
for the quarters ended June 30, 2003 and March 31, 2003 is as follows:
For the three months ended
June 30, 2003 March 31, 2003
--------------------------------------
Interest Income $23,032 $22,573
Interest Expense* (11,776) (11,391)
--------------------------------------
Net Interest Income from Commercial $11,256 $11,182
Real Estate Securities
======================================
*Including hedges in CDO I and II
Commercial Real Estate Loan Income
Direct holdings of commercial loans are held at cost unless a specific
indication of impairment exists. To date, the Company's portfolio of
commercial loans has never experienced a delinquency and all of the assets
securing such loans are performing within the range of originally underwritten
expectations.
A breakdown of the commercial real estate loan portfolio income performance
for the quarters ended June 30, 2003 and March 31, 2003 is as follows:
For the three months ended
June 30, 2003 March 31, 2003
-----------------------------------------
Interest Income $2,103 $1,187
Interest Expense (108) (102)
-----------------------------------------
Net Interest Income from Commercial $1,995 $1,085
Real Estate Loans
=========================================
Residential Mortgage Backed Securities
During the second quarter, the Company reduced its investments in RMBS as the
need to maintain liquid assets continued to decline. Total investment in RMBS
was reduced 41% from approximately $1,500,000 at December 31, 2002 and was
reduced further from March 31, 2003 balances. The Company's remaining
investments in RMBS at June 30, 2003 is $888,878. By reducing the Company's
investments in RMBS, Operating Earnings will be reduced; however, less
reliance on RMBS is expected to provide greater stability of the Company's
Operating Earnings over the long term. The RMBS markets have been extremely
volatile on a mark-to-market basis as prepayments reached record levels
through June 2003, and as interest rates increased sharply in June and July
2003.
At the beginning of the second quarter, the Company changed its strategy of
hedging RMBS with U.S. Treasury futures to utilizing interest rate swaps
which, while more expensive to use, have tended to demonstrate a more
consistent relationship with RMBS. This change resulted in an increase in the
Company's swap notional by $606,000, and caused a reduction in Operating
Earnings of $0.04 per share for the quarter. A breakdown of the RMBS portfolio
income performance for the quarters ended June 30, 2003 and March 31, 2003 is
as follows:
For the three months ended
June 30, 2003 March 31, 2003
--------------------------------------------
Interest Income $16,126 $17,909
Interest Expense * (9,867) (7,940)
--------------------------------------------
Net Interest Income 6,259 9,969
--------------------------------------------
Realized loss (1,928) (8,672)
Unrealized gain (loss) in value 506 (1,731)
--------------------------------------------
Net Income (loss) from RMBS $4,837 $(434)
============================================
* Includes hedging expense
Book Value
Net book value per share at quarter end was $7.17 based upon market prices
provided by dealers for securities available for sale. As the Company's
portfolio matures, the net 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.
Alternatively, if the Company's loss expectations prove to be too high an
increase in the yield may be required in the future. The unrealized loss on
all subordinated CMBS at June 30, 2003 was $44,289. This amount reflects the
amount of recovery net of expected underlying loan losses if the portfolio is
held to maturity. Net book value per share decreased approximately 5.4% from
$7.58 at March 31, 2003 due to sharp rises in interest rates and wider
interest rate spreads on certain CMBS assets.
Preferred Stock Issuance
On May 21, 2003, the Company lowered its cost of long-term capital with the
issuance of $57,500 of Series C Cumulative Redeemable Preferred Stock. The new
Series C Preferred Stock will pay an annual dividend of 9.375%. The Company
invested part of the proceeds in investment grade CMBS and unsecured REIT
debt. As a result, investments in Commercial Real Estate Securities increased
by 20% to $1,147,398.
GAAP Reconciliation
The table below reconciles Net Income per common share with Operating Earnings
per common share:
Three Months Ended Six Months Ended
-------------------------------------------------------------
6/30/03 3/31/03 6/30/02 6/30/03
-------------------------------------------------------------
Operating Earnings per share $0.33 $0.40 $0.43 $0.73
Gain/(loss) on sale of securities
available for sale 0.07 0.01 0.09 0.07
Gain/(loss) on securities classified as
held for trading* (0.10) (0.22) (0.25) (0.32)
Foreign currency gain/(loss) & hedge
ineffectiveness - (0.01) (0.02) (0.01)
Loss on impairment of asset (0.56) - - (0.56)
-------------------------------------------------------------
Net Income (loss) per share $(0.26) $0.18 $0.25 $(0.09)
*Includes hedges
Dividend Reinvestment Plan
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 common
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, American Stock Transfer & Trust Company, at
1-877-248-6416 or Investor Relations, Anthracite Capital, Inc., at
212-409-3333. The Company's website address is www.anthracitecapital.com. 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.
About Anthracite
Anthracite is a specialty finance company that is externally managed by
BlackRock Financial Management, Inc. ("BlackRock"), a New York City based
investment manager with over $286 billion in global assets under management as
of June 30, 2003. 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. BlackRock is a
subsidiary of BlackRock, Inc. (NYSE: BLK) and a member of The PNC Financial
Services Group, Inc. (NYSE:PNC), a diversified financial services
organization. Through its affiliates, PNC originates commercial, multifamily
and residential real estate loans, and services $79 billion in commercial
mortgage loans for third parties through its Midland Loan Services, Inc.
subsidiary as of June 30, 2003.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act with respect to future financial
or business performance, strategies or expectations. Forward-looking
statements are typically identified by words or phrases such as "trend,"
opportunity," "pipeline," "believe," "comfortable," "expect," "current,"
"intention," "estimate," "position," "assume," "potential," "outlook,"
"continue," "remain," "maintain," "sustain," "seek," "achieve," and similar
expressions, or future or conditional verbs such as "will," "would," "should,"
"could," "may" or similar expressions. Anthracite cautions that
forward-looking statements are subject to numerous assumptions, risks and
uncertainties, which change over time.
Forward-looking statements speak only as of the date they are made, and
Anthracite assumes no duty to update forward-looking statements. Actual
results could differ materially from those anticipated in forward-looking
statements and future results could differ materially from historical
performance. In addition to factors previously disclosed in Anthracite's
Securities and Exchange Commission (the "SEC") reports and those identified
elsewhere in this press release, the following factors, among others, could
cause actual results to differ materially from forward-looking statements or
historical performance: (1) the introduction, withdrawal, success and timing
of business initiatives and strategies; (2) changes in political, economic or
industry conditions, the interest rate environment or financial and capital
markets, which could result in changes in the value of Anthracite's assets;
(3) the performance and operations of Anthracite's manager; (4) the impact of
increased competition; (5) the impact of capital improvement projects; (6) the
impact of future acquisitions; (7) the unfavorable resolution of legal
proceedings; (8) the extent and timing of any share repurchases; (9) the
impact, extent and timing of technological changes and the adequacy of
intellectual property protection; (10) the impact of legislative and
regulatory actions and reforms and regulatory, supervisory or enforcement
actions of government agencies relating to Anthracite, BlackRock or PNC; (11)
terrorist activities, which may adversely affect the general economy, real
estate, financial and capital markets, specific industries, and Anthracite and
BlackRock; and (12) the ability of Anthracite's manager to attract and retain
highly talented professionals.
Anthracite's Annual Report on Form 10-K for the year ended December 31, 2002
and Anthracite's subsequent reports filed with the SEC, accessible on the
SEC's website at http://www.sec.gov, identify additional factors that can
affect forward-looking statements.
Anthracite Capital, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
(in thousands, except per share data)
- --------------------------------------------------------------------------------------------------------------------------------
June 30, 2003 December 31, 2002
(Unaudited)
ASSETS
Cash and cash equivalents $ 14,259 $ 24,698
Restricted cash equivalents 56,756 84,485
Commercial real estate securities 1,147,398 894,345
Commercial real estate loans 55,556 65,664
Residential mortgage backed securities 888,878 1,506,450
Equity investment in Carbon Capital, Inc. 18,570 14,997
Investments in real estate joint ventures
7,844 8,265
Receivable for investments sold 670 -
Other assets
71,899 40,447
---------------- -----------------
Total Assets $2,261,830 $2,639,351
================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Borrowings:
Collateralized debt obligations $684,778 $684,590
Secured by pledge of commercial real estate securities 163,503 42,861
Secured by pledge of commercial real estate loans 14,667 14,667
Secured by pledge of residential mortgage backed securities 850,294 1,418,206
Secured by pledge of real estate joint ventures
512 1,337
Total borrowings $1,713,754 $2,161,661
Payable for investments purchased
21,653 524
Distributions payable
17,299 16,589
Other liabilities
75,221 54,361
---------------- -----------------
Total Liabilities
1,827,927 2,233,135
---------------- -----------------
Stockholders' Equity:
Common stock, par value $0.001 per share; 400,000 shares authorized;
48,142 shares issued and outstanding in 2003; and
47,398 shares issued and outstanding in 2002
48 47
10% Series B Preferred stock, liquidation preference $43,942
in 2003 and $47,817 in 2002 33,431 36,379
9.375% Series C Preferred stock, liquidation preference $57,500
in 2003 55,513 -
Additional paid - in capital
522,334 515,180
Distributions in excess of earnings (61,830) (24,161)
Accumulated other comprehensive loss (115,593) (121,229)
---------------- -----------------
Total Stockholders' Equity
433,903 406,216
---------------- -----------------
Total Liabilities and Stockholders' Equity $2,261,830
$2,639,351
================ =================
Anthracite Capital, Inc.
Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
- ------------------------------------------------------------------------------------------------------------------------------
For the Three Months Ended For the Six Months Ended
June 30, 2003 June 30, 2003
---------------------------------------------------------------
Operating Portfolio
Income:
Commercial real estate securities $23,032 $45,605
Commercial real estate loans 2,103 3,290
Residential mortgage backed securities 16,126 34,035
Earnings from real estate joint ventures 238 473
Earnings from equity investment 702 1,445
Cash and cash equivalents 209 385
---------- ----------
Total income 42,410 85,233
---------- ----------
Expenses:
Interest expense:
Collateralized debt obligations 11,077 21,990
Commercial real estate securities 699 1,177
Commercial real estate loans 108 210
Residential mortgage backed securities 5,103 10,052
Real estate joint ventures 7 17
Hedging Expense 4,764 7,755
General and administrative 591 1,173
Management fee 2,649 5,226
---------- ----------
Total expenses 24,998 47,600
---------- ----------
Operating Earnings 17,412 37,633
---------- ----------
Other gain (losses):
Realized loss (1,928) (10,459)
Unrealized gain (loss) 506 (1,225)
Hedge Ineffectiveness 21 (241)
Loss on impairment of assets (27,014) (27,014)
Total other loss (28,415) (38,939)
Net Loss (11,003) (1,306)
Dividends on preferred stock 1,611 2,806
Net Loss attributable to Common Shareholders (12,614) (4,112)
Income from operating portfolio per share:
Basic $0.33 $0.73
Diluted $0.33 $0.73
Net Loss per share, basic $(0.26) $(0.09)
Net Loss per share, diluted $(0.26) $(0.09)
Weighted average number of shares outstanding:
Basic 47,862 47,728
Diluted 47,883 47,746