EX-99 4 s793490.txt EXHIBIT 99.2 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