Exhibit 99.2
Anthracite Capital Reports Operating Earnings of $0.30 Per Share
and GAAP Earnings of $0.18 Per Share for the Second Quarter of 2005
New York - August 9, 2005 - Anthracite Capital, Inc. (NYSE: AHR) (the "Company"
or "Anthracite") today reported net income available to common stockholders for
the second quarter of 2005 of $0.18 per share versus a net loss to common
stockholders of $0.08 per share for the same three-month period in 2004. For
the six months ended June 30, 2005, net income available to common stockholders
was $0.45 per share compared to net income available to common stockholders of
$0.11 per share for the six months ended June 30, 2004.
Operating Earnings (defined below) for the second quarters of 2005 and 2004
were $0.30 per share and $0.28 per share, respectively. Operating Earnings were
$0.59 per share for the six months ended June 30, 2005 compared to $0.56 per
share for the six months ended June 30, 2004. Operating Earnings for the
quarter ended June 30, 2005 include a $0.01 per share adjustment related to an
increase in expected yields on commercial mortgage-backed security ("CMBS")
interest-only securities ("IOs") as a result of unexpected yield maintenance
premiums actually received during the quarter.
Based on the $0.28 per share dividend declared on May 24, 2005, and the August
8, 2005 closing price of $11.33, Anthracite's annualized dividend yield is
9.9%. Table 1, provided below, reconciles Operating Earnings per share with net
income available (loss) to common stockholders per share. All dollar amounts
discussed herein are in thousands, except per share amounts.
Second Quarter Financial Results
Interest income from commercial real estate assets increased $7,727, or 22%
from the quarter ended June 30, 2004, which includes interest income of $752
related to the increase in expected yields on the Company's CMBS IOs. Interest
income from residential mortgage-backed securities ("RMBS") declined $2,695, or
50% from the quarter ended June 30, 2004. The repositioning of the Company's
portfolio into commercial real estate assets from RMBS was the primary factor
causing the change in the revenue mix. (See Table 2 below for a reconciliation
of total income from commercial real estate assets to income before the effect
of the consolidation of the commercial mortgage loan pools.)
The Company's weighted average cost of funds increased to 5.31% at June 30,
2005 from 4.43% at June 30, 2004. For the quarter ended June 30, 2005, hedging
expenses not related to collateralized debt obligations ("CDOs") were $1,626
($0.03 per share), a decrease from $3,148 ($0.06 per share) for the quarter
ended June 30, 2004 and $2,300 ($0.04 per share) for the quarter ended March
31, 2005. The $1,522 decrease in hedging expense from the second quarter of
2004 is primarily attributable to the removal of interest rate swaps due to the
issuance of fixed rate liabilities for the Company's fourth collateralized debt
obligation ("CDO HY1") in the fourth quarter of 2004. The Company's estimated
exposure at June 30, 2005 to a 50 basis point move in short-term interest rates
decreased slightly to $0.011 per share annually from $0.012 per share annually
at March 31, 2005.
Operating Earnings for the second quarter of 2005 were negatively impacted by a
$305, or 48%, increase in general and administrative expense over second
quarter 2004 levels. The increase was attributable to professional fees
incurred in connection with the Company's ongoing compliance with the
Sarbanes-Oxley Act and additional costs associated with Company's expanding
investment activities in Europe.
The Company's debt to capital ratio at June 30, 2005 decreased slightly from
6.2:1 at December 31, 2004 to 6.1:1 at June 30, 2005, and the recourse debt to
capital ratio increased from 1.6:1 to 1.8:1 over the same period. The increase
in the Company's recourse debt to capital ratio is primarily attributable to
financing associated with the purchase of multi-family agency securities as
well as asset accumulation in anticipation of the issuance of the Company's
fifth CDO in July 2005.
The Company's Operating Earnings for the second quarter of 2005 represent an
annualized return on the quarter's average common stock equity of 13.0%, as
compared to 16.4% for the second quarter of 2004 and 13.8% for the quarter
ended March 31, 2005. The net interest margin of 3.1% for the second quarter of
2005 decreased slightly from 3.3% for the second quarter of 2004.
In 2001, the Company adopted Emerging Issues Task Force Issue 99-20,
"Recognition of Interest Income and Impairment on Purchased and Retained
Beneficial Interests in Securitized Financial Assets" ("EITF 99-20"). The
Company is required to update its estimated cash flows for securities subject
to EITF 99-20. The Company compares the yields resulting from the updated cash
flows to the current GAAP yields. An impairment charge is required under EITF
99-20 if the updated yield is lower than the current GAAP yield and the
security has a market value less than its adjusted purchase price. The Company
carries all these securities at their market value on its consolidated
statement of financial condition.
During the second quarter of 2005, the Company increased its underlying loan
loss expectations on a 1998 vintage CMBS transaction, resulting in an
impairment charge of $3,072 on one of the Company's below investment grade
securities. This CMBS transaction has two underlying mortgage loans secured by
assisted living facilities located in Texas that are performing below
management's original expectations. The Company anticipates that these mortgage
loans will be resolved in the third quarter of 2005. Based on management's
current estimate of the amount recoverable from the resolution of the loans, an
impairment charge was recorded in the second quarter. The actual loss may be
less than or exceed the amount recorded in the second quarter depending upon
final the resolution of these assets.
Commercial Real Estate Credit Risk
The Company's primary focus is to invest in a diversified portfolio of CMBS and
commercial real estate loans. The majority of these investments take the form
of CMBS that are collateralized by pools of underlying mortgage loans. The
underlying loans are secured by first mortgages on office buildings, retail
centers, apartment buildings, hotels and other types of commercial properties.
The cash flows the Company receives from its CMBS portfolio are dependent upon
the credit performance of the underlying mortgage loans. The Company assumes
losses will occur on the underlying mortgage loans and the yield the Company
accrues on its CMBS securities reflects these assumed losses. Loss assumptions
are maintained at a level believed by management to be sufficient to absorb
estimated credit losses inherent in the underlying mortgages.
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"). The Company acquired two Controlling Class
CMBS transactions during the second quarter of 2005 and owns 18 Controlling
Class CMBS transactions as of June 30, 2005. However, the non-rated tranches of
ten of the 18 transactions are included in CDO HY1 which reduces the Company's
exposure to the credit risk in these transactions.
The current principal balance underlying the Company's 18 Controlling Class
CMBS is $21,294,624. Delinquencies of 30 days or more as a percent of current
loan balances were 0.96% at the end of the second quarter of 2005, compared
with 1.28% at the end of the first quarter of 2005. With the disposition of
four loans during the second quarter of 2005, the weighted average loss
severity experienced for the 1998 and 1999 Controlling Class CMBS decreased
from 25.7% at March 31, 2005 to 24.0% at June 30, 2005. No losses have been
realized for those Controlling Class CMBS with vintages from 2001 through 2005
and the Company does not own any 2000 vintage Controlling Class CMBS. During
the second quarter of 2005, there were credit upgrades on three of the
Company's Controlling Class CMBS and no credit downgrades.
Commercial Real Estate Securities
During the second quarter of 2005, the Company purchased $301,846 of commercial
real estate securities, of which $147,764 were multi-family agency securities.
The Company's commercial real estate securities portfolio increased by
approximately 22% from an estimated fair value of $1,624,007 at March 31, 2005
compared with $1,979,779 at June 30, 2005. The average yields on the Company's
commercial real estate securities for the second quarters of 2005 and 2004,
respectively, were as follows:
For the quarter ended
June 30,
2005 2004
-------------------------
Investment grade commercial real estate securities 6.5% 6.1%
Non-investment grade CMBS securities 10.6% 9.8%
All commercial real estate securities 8.5% 8.0%
The average cost of financing the commercial real estate securities portfolio
during the second quarter of 2005 was 5.5%, compared to 5.2% for the second
quarter of 2004.
Net interest income and unrealized losses from the commercial real estate
securities portfolio for the quarters ended June 30, 2005 and 2004,
respectively, are as follows:
For the quarter ended
June 30,
2005 2004
----------------------------
Interest income $33,602 $30,166
Interest expense* (19,395) (16,792)
----------------------------
Net interest income 14,207 13,374
----------------------------
Unrealized gains (474) -
----------------------------
Net interest income and unrealized losses
from commercial real estate securities $13,733 $13,374
============================
*Including hedges in the Company's CDOs.
Commercial Real Estate Loans
During the quarter ended June 30, 2005, the Company experienced repayments of
$45,222 related to its U.S. dollar denominated commercial real estate loan
portfolio.
Additionally, during the quarter ended June 30, 2005, the Company purchased a
commercial real estate loan secured by apartment buildings located throughout
Germany. The loan is denominated in Euros and has a stated face of
(euro)25,000. The acquisition of this loan brings total European commercial
real estate loans to $49,935 as of June 30, 2005, up from $19,748 as of March
31, 2005. The Company finances these loans by borrowing in the applicable
currency and hedging the un-financed portion. The carrying value and average
yields on the Company's commercial real estate loans, exclusive of the
Company's investments in Carbon Capital, Inc. and Carbon Capital II, Inc.
(collectively, the "Carbon Capital Funds"), as of June 30, 2005 were as
follows:
Average Average Average
Spread to Spread to Spread to
Carrying Average 1-month 3-month 3-month
Value Yield USD LIBOR GBP LIBOR EURIBOR
--------------------------------------------------------------------------
Fixed Rate $89,111 9.71%
Floating Rate 82,885 5.48%
Floating Rate 19,671 6.00%
Floating Rate 30,264 4.00%
----------------
$221,931
================
For the three months ended June 31, 2005 and 2004, the total cost of borrowings
secured by loan assets was 4.5% and 2.7%, respectively. The Company has three
committed warehouse lines that can be used to finance these commercial loan
assets. The Company's investments in the Carbon Capital Funds are included in
commercial real estate loans. The annualized yield on the Company's investments
in the Carbon Capital Funds was 18.8% for the quarter ended June 30, 2005. The
Company's investments in the Carbon Capital Funds as of June 30, 2005 were
$60,472 as compared to $56,812 as of December 31, 2004.
Net interest income from the commercial real estate loan portfolio for the
quarters ended June 30, 2005 and 2004, respectively, is as follows:
For the quarter ended June 30,
2005 2004
--------------------------------
Interest income $7,961 $ 4,140
Interest expense (1,275) (145)
--------------------------------
Net interest income from commercial
real estate loans $6,686 $ 3,995
================================
Book Value
Net book value per share at the end of the second quarter of 2005 was $9.22.
This is an increase of 6.2% from $8.68 at March 31, 2005 and is reflective of
lower interest rates, credit upgrades and generally tighter credit spreads.
During the quarter, Ten-Year Treasury interest rates decreased by 56 basis
points.
Fifth Collateralized Debt Offering ("CDO HY2")
As previously reported, on July 26, 2005, the Company closed CDO HY2, a
$249,500 offering. This transaction provides match funding for a portfolio of
CMBS and unsecured real estate investment trust ("REIT") debt with a total par
of $478,000. The portfolio includes two CMBS transactions that closed just
prior to the CDO and a ramp facility that will finance up to $100,000 of
additional par of CMBS to be acquired over a nine-month ramp period. The ramp
facility is structured to provide financing for the same type of high yield
CMBS investments.
The Company will initially record the transaction as a secured financing for
accounting purposes and will consolidate the assets, liabilities, income and
expense of the CDO issuer. In the event of a sale of the floating rate CDO debt
security retained by the Company, the transaction would be recorded as a sale
for accounting purposes and the assets, liabilities, income and expense of the
CDO issuer would no longer be consolidated.
Once the ramp facility has been fully funded, the Company estimates the value
of the transaction will be $351,000, consisting of net cash of $244,000 and the
retained non-investment grade debt and the preferred shares with a fair market
value of $107,000 in exchange for the portfolio of CMBS and REIT debt. The
adjusted purchase price of the CMBS and REIT debt, excluding the assets to be
contributed to the ramp facility, is approximately $267,000 and the estimated
fair value of these securities is $274,000.
Reconciliation of Operating Earnings to Net Income Available (Loss) to
Common Stockholders (Table 1)
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, incentive fees attributable to other
gains, and foreign currency exchange impact. The Company believes Operating
Earnings to be an effective indicator of the Company's profitability and
financial performance over time. 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. The table below
reconciles net income (loss) per common share with Operating Earnings per
common share:
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------------------------------
2005 2004 2005 2004
---------------------------------------------------------
Operating earnings per share $0.30 $0.28 $0.59 $0.56
Realized loss - (0.08) - (0.17)
Unrealized loss* (0.02) (0.08) (0.05) (0.06)
Foreign currency loss & hedge
ineffectiveness (0.04) 0.01 (0.03) (0.01)
Cost to retire preferred stock in excess
of carrying value - (0.21) - (0.21)
Loss on impairment of asset (0.06) - (0.06) -
---------------------------------------------------------
Net Income available (loss) to common
stockholders per share $0.18 $(0.08) $0.45 $0.11
=========================================================
*Includes hedges
Reconciliation of Total Income from Commercial Real Estate Assets to Income
Excluding the Consolidation of Commercial Mortgage Loan Pools (Table 2)
The chart below summarizes the Company's interest income from commercial real
estate assets before the effect of the consolidation of the commercial mortgage
loan pools for the three and six months ended June 30, 2005 and 2004,
respectively. The Company believes interest income before the effect of the
consolidation of the commercial mortgage loan pools better reflects interest
earned on the Company's commercial real estate assets.
Three Months Ended Six Months Ended
June 30, June 30,
-----------------------------------------------------
2005 2004 2005 2004
-----------------------------------------------------
Income from:
Commercial real estate securities $33,602 $30,166 $66,233 $59,315
Commercial mortgage loan pools 13,605 12,351 27,157 12,351
Commercial real estate loans 7,961 4,140 16,200 7,214
-----------------------------------------------------
Total income from commercial real estate assets 55,168 46,657 109,590 78,880
-----------------------------------------------------
Interest expense related to the consolidation of
commercial mortgage loan pools (12,732) (11,948) (25,508) (11,948)
-----------------------------------------------------
Total income from commercial real estate assets before
the effect of the consolidation of commercial mortgage
loan pools $42,436 $34,709 $84,082 $66,932
=====================================================
Dividend Reinvestment Plan
The Company's Dividend Reinvestment and Stock Purchase Plan (the "Plan") has
been reinstated for all investment dates after July 26, 2005 with a discount of
2% to the trailing 12-business day average provided the stock price remains
above threshold levels established by the Company at the time. The dividend
reinvestment portion of the Plan remains in effect with a discount of 2% as
well.
To request a prospectus and receive enrollment materials or to ask questions
about the Plan, interested investors and stockholders may contact the Company's
transfer agent, American Stock Transfer & Trust Company, at 1-877-248-6416, or
Investor Relations, Anthracite Capital, Inc., at 212-810-3333. The Company's
website address is www.anthracitecapital.com.
About Anthracite
Anthracite Capital, Inc. is a specialty finance company focused on investments
in high yield commercial real 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
approximately $414.4 billion in global assets under management as of June 30,
2005. BlackRock Realty Advisors, Inc., another subsidiary of BlackRock,
provides real estate equity and other real estate-related products and services
in a variety of strategies to meet the needs of institutional investors.
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 $118.8 billion in commercial mortgage loans for third
parties through its Midland Loan Services, Inc. subsidiary as of June 30, 2005.
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," "potential,"
"opportunity," "pipeline," "believe," "comfortable," "expect," "anticipate,"
"current," "intention," "estimate," "position," "assume," "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 and divestitures; (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, 2004
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. The information contained on
the Company's website is not a part of this press release.
Anthracite Capital, Inc. and Subsidiaries
Consolidated Statements of Financial Condition (Unaudited)
(in thousands, except per share data)
- ---------------------------------------------------------------------------------------------------------------------------------
June 30, 2005 December 31, 2004
ASSETS
Cash and cash equivalents $13,251 $23,755
Restricted cash equivalents 20,876 19,680
Residential mortgage-backed securities 323,662 372,071
-------------- --------------
Cash and RMBS 357,789 415,506
Commercial mortgage loan pools 1,302,303 1,312,045
Commercial real estate securities 1,979,779 1,628,519
Commercial real estate loans 282,461 325,350
-------------- -------------
Total commercial real estate 3,564,543 3,265,914
Other assets 42,140 47,714
-------------- -------------
Total Assets $3,964,472 $3,729,134
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Short term borrowings:
Secured by pledge of residential mortgage-backed securities $302,563 $356,451
Secured by pledge of commercial real estate securities 604,069 305,526
Secured by pledge of commercial mortgage loan pools 6,703 773
Secured by pledge of commercial real estate loans 94,396 141,601
-------------- --------------
Total short term borrowings 1,007,731 804,351
Long term borrowings:
Collateralized debt obligations 1,067,589 1,067,967
Secured by pledge of commercial mortgage loan pools 1,283,503 1,294,058
-------------- --------------
Total long term borrowings 2,351,092 2,362,025
-------------- -------------
Total borrowings 3,358,823 3,166,376
Payable for investments purchased 5,155 -
Distributions payable 15,823 15,819
Other liabilities 37,803 33,201
-------------- -------------
Total Liabilities 3,417,604 3,215,396
-------------- -------------
Stockholders' Equity:
Common Stock, par value $0.001 per share; 400,000 shares
authorized;
53,305 shares issued and outstanding in 2005; and
53,289 shares issued and outstanding in 2004 53 53
9.375% Series C Preferred Stock, liquidation preference
$57,500 in 2005 and 2004 55,435 55,435
Additional paid-in capital 579,103 578,919
Distributions in excess of earnings (139,855) (134,075)
Accumulated other comprehensive income 52,132 13,406
-------------- -------------
Total Stockholders' Equity 546,868 513,738
-------------- -------------
Total Liabilities and Stockholders' Equity $3,964,472 $3,729,134
============== =============
Anthracite Capital, Inc.
Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
- --------------------------------------------------------------------------------------------------------------------------------
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-----------------------------------------------------------------------
2005 2004 2005 2004
-----------------------------------------------------------------------
Operating Portfolio
Income:
Commercial real estate securities $33,602 $30,166 $66,233 $59,351
Commercial mortgage loan pools 13,605 12,351 27,157 12,351
Commercial real estate loans 7,961 4,140 16,200 7,214
Residential mortgage-backed securities 2,691 5,386 5,571 12,103
Cash and cash equivalents 266 103 502 191
----------------------------------- --------------------------------
Total Income 58,125 52,146 115,663 91,210
----------------------------------- --------------------------------
Expenses:
Interest expense:
Collateralized debt obligations 16,018 15,678 31,765 26,845
Commercial real estate securities 3,377 1,114 5,963 3,141
Commercial mortgage loan pools 12,745 11,972 25,525 11,972
Commercial real estate loans 1,275 145 2,610 293
Residential mortgage-backed securities 2,396 1,560 4,525 3,487
Hedging expense 1,626 3,148 3,926 7,779
General and administrative expense 938 633 1,758 1,235
Management fee 2,661 2,163 5,240 4,293
----------------------------------- --------------------------------
Total Expenses 41,036 36,413 81,312 59,045
----------------------------------- --------------------------------
Income from the Operating Portfolio 17,089 15,733 34,351 32,165
----------------------------------- --------------------------------
Other loss:
Realized loss (242) (3,870) (195) (8,593)
Unrealized loss (1,017) (4,212) (2,544) (2,659)
Foreign currency loss (176) (12) (344) (12)
Hedge ineffectiveness (1,533) 467 (1,272) (506)
Loss on impairment of asset (3,072) - (3,231) -
----------------------------------- --------------------------------
Total Other Loss (6,040) (7,627) (7,586) (11,770)
----------------------------------- --------------------------------
Net Income 11,049 8,106 26,765 20,395
----------------------------------- --------------------------------
Dividends on preferred stock 1,348 1,775 2,696 4,221
Cost to retire preferred stock in excess of
carrying value - 10,508 - 10,508
----------------------------------- --------------------------------
Net Income available (loss) to Common Stockholders $9,701 $(4,177) $24,069 $5,666
=================================== ================================
Operating Earnings:
Income from the operating portfolio $17,089 $15,733 $34,351 $32,165
Dividends on preferred stock (1,348) (1,775) (2,696) (4,221)
----------------------------------- --------------------------------
Net Operating Earnings $15,741 $13,958 $31,655 $27,944
=================================== ================================
Operating Earnings available to Common
Stockholders per share:
Basic $0.30 $0.28 $0.59 $0.56
Diluted $0.30 $0.28 $0.59 $0.56
Net Income available (loss) to Common Stockholders per
share, basic $0.18 $(0.08) $0.45 $0.11
Net Income available (loss) to Common Stockholders per
share, diluted $0.18 $(0.08) $0.45 $0.11
Weighted average number of shares outstanding:
Basic 53,302 50,706 53,298 50,276
Diluted 53,311 50,706 53,307 50,285