Exhibit 99.2
Contact: Brian Beades
212-754-5596
ahr-info@blackrock.com
Anthracite Capital Reports First Quarter Earnings;
Commercial Real Estate Assets Increase to 82% of Total Portfolio;
Dividend Yield is 10.5%
New York - May 4, 2004 - Anthracite Capital, Inc. (NYSE: AHR) (the "Company"
or "Anthracite") today reported net income (loss) to common stockholders for
the first quarter of 2004 of $(0.00) per share versus net income (loss) to
common stockholders of $0.18 per share for the same three-month period last
year. Operating Earnings for the quarter were $0.28 per share versus $0.40 for
the same three-month period last year. The difference between Operating
Earnings and net income (loss) is primarily a result of a one-time charge for
the redemption of the Company's Series B Preferred Stock that was announced on
April 6, 2004, effective on March 31, 2004. Prior to the one-time charge,
total earnings were $0.20 per share. Based on the $0.28 per share dividend
declared on March 11, 2004, and the May 3, 2004 closing price of $10.71,
Anthracite's annualized dividend yield is 10.5%. (All numbers are in
thousands, except per share amounts.)
During the first quarter of 2004, the Company acquired commercial real estate
assets with a market value of $132,062. The components of that total are
$29,859 of below investment grade commercial mortgage backed securities
("CMBS"), $54,883 of investment grade CMBS, $23,010 of investment grade REIT
debt, and $24,310 of high yielding commercial real estate loans. The majority
of these assets were settled at the end of the quarter to coincide with the
closing of the Company's third collateralized debt obligation ("CDO") offering
on March 30, 2004. Separately, the Company sold $56,542 of AAA rated CMBS and
reduced its net residential mortgage backed securities ("RMBS") position by
$45,114, which resulted in a net realized loss of $4,723. The Company also
committed to acquire $1,222,103 of commercial mortgage loan pools as described
below. As of March 31, 2004, total commercial real estate assets and total
RMBS (after adjusting for RMBS securities sold, not yet settled) represent 82%
and 18%, respectively, of the total investment portfolio. The pace of
reinvestment into commercial real estate assets continues to be in-line with
the strategic reduction of RMBS announced in September 2003.
The Company considers its Operating Earnings to be net interest income after
operating expenses and preferred dividends but before realized and unrealized
gains and losses, hedge ineffectiveness and the one-time charge from the
redemption of the Company's Series B Preferred Stock. The Company believes
Operating Earnings better reflect the recurring long-term earnings of the
Company. Operating Earnings can and will fluctuate over time based on changes
in asset levels, funding rates, available reinvestment rates and expected
losses on credit sensitive positions. A table is provided below, which
reconciles Operating Earnings per share with net income available (loss) to
common stockholders per share.
Chris Milner, President and Chief Executive Officer of the Company, stated,
"We made significant progress during the quarter in identifying and closing on
new opportunities, and we expect this activity will continue in the second
quarter. The pace of the shift to commercial real estate assets continues to
be in line with our original goals. Equally as important, our team did an
outstanding job in marketing and closing Anthracite's third CDO transaction.
This transaction significantly extended the duration of the Company's
liabilities and created $50,000 of forward funding capacity in a lower
interest rate environment. This gives us a funding advantage in a highly
competitive market."
The Company's Operating Earnings for the first quarter of 2004 represent an
annualized return on the quarter's average common stock equity ("Annualized
ROE") of 16.4% and a net interest margin of 3.2%. Annualized ROE based upon
Operating Earnings for the same period last year was 20.5% and the net
interest margin was 3.6%. The decrease in the Annualized ROE is attributable
to lower market interest rates and the Company's reduction in RMBS assets.
The Company's debt to capital ratio increased from 4.4:1 at December 31, 2003
to 7.6:1 at March 31, 2004 due to the acquisition of the commercial mortgage
loan pools, as discussed below. Other financial comparisons over the same
period include a decrease in the recourse debt to capital ratio from 2.7:1 at
December 31, 2003 to 2.0:1 at March 31, 2004. The weighted average maturity of
the Company's liabilities increased from 2.9 years to 5.25 years,
respectively, due to the issuance of the Company's third CDO. This is expected
to increase to approximately 6.07 years after non-recourse debt is issued to
purchase the commercial mortgage loan pools.
Total interest income from commercial real estate assets is up 44% from the
quarter ending March 31, 2003; whereas, total interest income from RMBS is
down 67% for the same period. Other financial comparisons for the same period
of time include an increase in total weighted average cost of funds to 3.96%
at March 31, 2004 from 3.01% at March 31, 2003, respectively, due to hedging
costs. Hedging expenses not related to CDOs increased to $4,631 or $0.09 per
share from $2,991 or $0.06 per share, respectively. The Company's exposure to
a 50 basis point move in short-term interest rates decreased to $0.01 per
share annually from $0.045 cents per share annually at March 31, 2003.
Investment and Capital Markets Activity
The Company's primary focus is to invest in a diverse portfolio of commercial
real estate loans and securities. The majority of these investments take the
form of securities that represent pools of underlying mortgage loans. The
Company will generally control the credit process of its portfolio. The
Company's objective is to maximize the spread between the loss adjusted income
and the cost of financing. The credit performance and cost of financing the
Company's portfolio are the most important factors in Company performance.
On March 30, 2004, the Company closed its third CDO transaction. The total par
value of bonds sold was $372,456, with over 56% of the issuance rated AAA. The
bonds were sold throughout the global capital markets where investors focused
on the Company's fundamental real estate credit underwriting and security
selection process. The total cost of funds on a fully hedged basis was 5.0%.
Net proceeds raised from this offering will be used to invest in high yielding
commercial real estate loans, to redeem the Company's Series B Preferred
Stock, and to pay down debt. This CDO also includes a $50,000 ramp facility
that will be used to finance future commercial real estate assets, thus
eliminating financing risk for up to $50,000 of below investment grade CMBS
investments to be made during the year.
The Company's CDO offerings allow the Company to match fund its commercial
real estate portfolio by issuing long-term debt to finance long-term assets.
The CDO debt is non-recourse to the Company; therefore, the Company's losses
are limited to its equity investment in the CDO. The CDO debt is also fully
hedged to protect the Company from an increase in short-term interest rates.
The Company considers all of its CMBS rated BB+ down to B to be financeable in
a CDO transaction; and as of March 31, 2004, over 95% of the market value of
these assets is match funded with CDO's.
At the end of the first quarter, the Company also decided to redeem its 10%
Series B Preferred Stock, as announced on April 6, 2004. The effect of this
transaction reduced the Company's total stockholders' equity and will reduce
the Company's preferred dividend payments by approximately $4,400 annually or
$0.087 per share. The Company took a one-time charge to income available to
common stockholders of $9,845 or $0.20 per share, which represents the
difference between the Series B Preferred Stock book value of $19 per share
and its $25 redemption price.
Credit performance
The Company considers CMBS securities where it maintains the right to control
the foreclosure/workout process on the underlying loans as controlling class
CMBS ("Controlling Class CMBS"). At the end of the first quarter of 2004, the
Company's Controlling Class CMBS represent $14,054,815 of original balance of
underlying commercial mortgage loans compared to $12,728,256 at the end of the
fourth quarter of 2003. The number of Controlling Class CMBS transactions
owned by the Company increased from nine to ten over that period. The Company
committed to purchase an eleventh Controlling Class CMBS transaction that will
not be accounted for as securities, see "Commercial Mortgage Loan Pools"
section below. The current par balance of underlying loans securing the
Company's commercial real estate securities portfolio is $12,555,660.
Delinquencies of 30 days or more as a percent of current loan balances net of
defeased loans was 1.08% at the end of the first quarter of 2004, compared
with 1.52% at the end of the fourth quarter of 2003. Dispositions of six loans
occurred during the first quarter. The weighted average loss severity
experienced for the 1998 and 1999 Controlling Class securities was 32%. No
losses have been realized for those Controlling Class securities with vintages
from 2001 through 2004. The weighted average loss severity for the Company's
entire Controlling Class portfolio was 21%.
Commercial Real Estate Securities
The average yield on the Company's commercial real estate securities
(primarily investment grade and below investment grade CMBS, investment grade
REIT debt, and CMBS IOs) for the first quarter of 2004 was 7.9%, while the
average loss adjusted yield on only the below investment grade CMBS was 9.4%.
The average cost of financing the commercial real estate securities portfolio
during the first quarter of 2004 was 5.1% compared to 6.3% for the first
quarter of 2003.
Net interest income and realized gains of the commercial real estate
securities portfolio for the quarter ended March 31, 2004 is as follows:
For the For the
quarter quarter
ended ended
March 31, March 31,
2004 2003
------------------------------
Interest Income $29,185 $19,953
Interest Expense* (13,194) (11,391)
------------------------------
Net Interest Income 15,991 8,562
------------------------------
Realized Gains 2,866 -
==============================
Net Interest Income and Realized Gains
from Commercial Real Estate Securities $18,857 $ 8,562
==============================
*Including hedges in the Company's CDOs.
Commercial Real Estate Loans
The average yield on the Company's commercial real estate loan portfolio for
the first quarter ended March 31, 2004 was 11.2% and for the quarter ended
March 31, 2003 was 9.3%. The total cost of borrowings secured by loan assets
is 2.9% and 3.1%, respectively. The Company has two committed warehouse lines
that can be used to finance these commercial loan assets. The annualized yield
on the Company's investment in Carbon Capital, Inc., which constitutes 27% of
the Company's commercial real estate loan portfolio, for the quarter ended
March 31, 2004 was 16.6%.
Net interest income of the commercial real estate loan portfolio for the
quarter ended March 31, 2004 is as follows:
For the quarter ended For the quarter ended
March 31, 2004 March 31, 2003
----------------------------------------------------
Interest Income $3,074 2,409
Interest Expense (148) (112)
----------------------------------------------------
Net Interest Income from Commercial
Real Estate Loans $2,926 $2,297
====================================================
Commercial Mortgage Loan Pools
In March 2004, the Company committed to acquire $41,495 par value of the
Controlling Class interests in a CMBS transaction. The securities that
comprise the Controlling Class interests were acquired for a dollar price of
55.6% of par. This is the eleventh Controlling Class transaction acquired by
the Company. The total par amount of underlying loans in this transaction is
$1,234,613 which have a carrying value of $1,222,103. A CMBS real estate
mortgage investment conduit ("REMIC") trust will typically issue securities
with a par amount equal to the par value of the underlying loans. As noted,
the Company acquired $41,495 of par value of these securities; other third
party investors will acquire the remaining $1,193,118 of securities. During
the negotiations for the purchase of these Controlling Class interests, the
Company was able to obtain a greater degree of control for the special
servicer in the process of disposing of or working out defaulted loans. As a
result of this added discretion, accounting rules require the Company to
consolidate the net assets and results of operations of the issuing REMIC
trust.
Typically, the Company records securities purchased at their market price, and
the securities appear as assets on the Company's consolidated statement of
financial condition. For this CMBS transaction, the Company included on its
consolidated statement of financial condition all of the underlying loans
shown as commercial mortgage loan pools. The CMBS securities to be issued to
third parties by the REMIC trust are shown as an offsetting liability ("due to
REMIC trust"). The net effect on the Company's consolidated statement of
financial condition at March 31, 2004 from the consolidation of the net assets
of the REMIC trust is equivalent to the cost of the Controlling Class
interests acquired of $23,069.
The liability resulting from this transaction is non-recourse to Anthracite,
and is secured only by the commercial mortgage loan pools. This accounting
treatment increases the Company's debt to capital ratio from 4.6:1 to 7.6:1.
The Company received authorization from its lenders to permit debt to capital
ratios in excess of existing covenants. For income recognition purposes, the
loans will carry their own yields and the Company will establish a loss
reserve consistent with the credit assumptions made in establishing loss
adjusted yields for Controlling Class securities.
Book Value
Net book value per share at the end of the first quarter of 2004 was $6.87.
Net book value per share at March 31, 2004 increased approximately 3.46% from
$6.64 at December 31, 2003 due to lower interest rates. Since the investment
securities of the Company are marked to market based upon market prices
provided by dealers, there can be fluctuations in book value based solely on
quarterly changes in credit spreads and interest rates. As the Company's
portfolio matures, the net book value of credit sensitive CMBS securities held
by the Company is expected to increase towards its original purchase cost,
provided that the Company's estimates of expected credit losses are accurate.
The unrealized loss on all Controlling Class CMBS at March 31, 2004 was
$55,147. This amount reflects the amount of recovery (net of expected
underlying loan losses) if the portfolio is held to maturity.
Reconciliation of Operating Earnings to Net Income Available (Loss) to Common
Stockholders The table below reconciles net income (loss) per common share
with Operating Earnings per common share:
Three Months Ended
--------------------------
3/31/04 3/31/03
--------------------------
Operating Earnings per share $0.28 $0.40
Realized gain (loss) 0.06 0.01
Unrealized gain (loss)* (0.12) (0.22)
Hedge ineffectiveness (0.02) (0.01)
Cost to retire preferred stock in excess of
carrying value (0.20) -
--------------------------
Net Income available (loss) to common
stockholders per share $(0.00) $0.18
*Includes hedges
About Anthracite
Anthracite Capital, Inc. is a specialty finance company focused on investments
in high yield real commercial estate loans and related securities. Anthracite
is externally managed by BlackRock Financial Management, Inc., which is a
subsidiary of BlackRock, Inc. ("BlackRock") (NYSE:BLK), one of the largest
publicly traded investment management firms in the United States with
$320,700,000 in global assets under management as of March 31, 2004. BlackRock
is a member of The PNC Financial Services Group, Inc. ("PNC") (NYSE:PNC), a
diversified financial services organization. Through its affiliates, PNC
originates commercial, multifamily and residential real estate loans, and
services $86,400,000 in commercial mortgage loans for third parties through
its Midland Loan Services, Inc. subsidiary as of March 31, 2004.
Forward Looking Statements
This press release may contain 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," "anticipate,"
"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 and does not
undertake 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
relative and absolute investment 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; (12) the ability of Anthracite's manager to attract
and retain highly talented professionals; (13) fluctuations in foreign
currency exchange rates; and (14) the impact of changes to tax legislation
and, generally, the tax position of the company.
Anthracite's Annual Report on Form 10-K for the year ended December 31, 2003
and Anthracite's subsequent reports filed with the SEC, accessible on the
SEC's website at www.sec.gov, identify additional factors that can affect
forward-looking statements.
To learn more about Anthracite, visit our website at www.anthracitecapital.com.
Anthracite Capital, Inc. and Subsidiaries
Consolidated Statements of Financial Condition (Unaudited)
(in thousands, except per share data)
- -------------------------------------------------------------------------------------------------------------------------
March 31, 2004 December 31, 2003
-------------- ------------------
ASSETS
Cash and cash equivalents $ 17,264 $ 20,805
Restricted cash equivalents 15,389 12,845
Residential mortgage backed securities 708,105 753,219
----------- -----------
Cash and RMBS 740,758 786,869
Commercial real estate securities 1,472,636 1,366,508
Commercial mortgage loan pools 1,222,103 -
Commercial real estate loans 122,263 97,984
----------- -----------
Total Commercial real estate 2,817,002 1,464,492
Receivable for investments sold 100,662 99,056
Other assets 48,666 48,429
----------- -----------
Total Assets $ 3,707,088 $ 2,398,846
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Borrowings:
Secured by pledge of residential mortgage backed securities $ 648,525 $ 670,874
Secured by pledge of commercial real estate securities 134,467 444,987
Secured by pledge of commercial real estate loans 7,430 22,710
----------- -----------
Total short term borrowings 790,422 1,138,571
Long term Borrowings: Collateralized debt obligations 1,057,522 684,970
----------- -----------
Total borrowings $ 1,847,944 $ 1,823,541
Due to REMIC Trust 1,199,034 -
10% Series B Preferred Stock - called for redemption 43,267 -
Securities sold, not yet settled 101,234 99,551
Payable for investments purchased 49,301 -
Distributions payable 15,059 14,749
Other liabilities 48,451 43,575
----------- -----------
Total Liabilities $ 3,304,290 $ 1,981,416
----------- -----------
Stockholders' Equity:
Common Stock, par value $0.001 per share; 400,000 shares authorized; 50,572
shares issued and outstanding in 2004; and
49,464 shares issued and outstanding in 2003 $ 51 $ 49
10% Series B Preferred Stock, liquidation preference $43,942 in 2003 - 33,431
9.375% Series C Preferred Stock, liquidation preference
$57,500 in 2004 and 2003 55,435 55,435
Additional paid-in capital 549,199 536,333
Distributions in excess of earnings (115,797) (101,635)
Accumulated other comprehensive loss (86,090) (106,183)
----------- -----------
Total Stockholders' Equity 402,798 417,430
----------- -----------
Total Liabilities and Stockholders' Equity $ 3,707,088 $ 2,398,846
=========== ===========
Anthracite Capital, Inc.
Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
- -----------------------------------------------------------------------------------------------------------------------
For the Three Months Ended
March 31,
----------------------------------
2004 2003
----------------------------------
Operating Portfolio
Interest Income:
Commercial real estate securities $ 29,185 $ 19,953
Commercial real estate loans 3,074 2,409
Residential mortgage backed securities 6,717 20,285
Cash and cash equivalents 88 176
-------- --------
Total interest income $ 39,064 $ 42,823
-------- --------
Expenses:
Interest expense:
Collateralized debt obligations 11,167 10,913
Commercial real estate securities 2,027 478
Commercial real estate loans 148 112
Residential mortgage backed securities 1,927 4,949
Hedging Expense 4,631 2,991
General and administrative 602 582
Incentive fee - -
Management fee 2,130 2,577
-------- --------
Total expenses $ 22,632 $ 22,602
-------- --------
Income from the Operating Portfolio $ 16,432 $ 20,221
-------- --------
Other loss:
Realized loss (4,723) (8,531)
Unrealized gain (loss) 1,553 (1,731)
Hedge ineffectiveness (973) (262)
-------- --------
Total other loss $ (4,143) $(10,524)
-------- --------
Net Income 12,289 9,697
-------- --------
Dividends on preferred stock 2,446 1,195
Cost to retire preferred stock in excess of carrying value 9,845 -
-------- --------
Net Income available (Loss) to Common Stockholders $ (2) $ 8,502
======== ========
Operating Earnings available to Common Stockholders per share:
Basic $ 0.28 $ 0.40
Diluted $ 0.28 $ 0.40
Net Income (Loss) available to Common Stockholders per share, basic $ (0.00) $ 0.18
Net Income (Loss) available to Common Stockholders per share, diluted $ (0.00) $ 0.18
Weighted average number of shares outstanding:
Basic 49,837 47,592
Diluted 49,846 47,622
Operating Earnings:
Income from the operating portfolio $ 16,432 $ 20,221
Dividends on preferred (2,446) (1,195)
-------- --------
Net operating earnings $ 13,986 $ 19,026
======== ========