Capital Alliance Income Trust Ltd. Announces Earnings for Third Quarter.

SAN FRANCISCO -- Capital Alliance Income Trust Ltd. ("CAIT") (AMEX:CAA) a residential mortgage REIT, operating both mortgage investment and mortgage banking businesses, announced a net loss of $85,721 ($(0.21) basic and diluted per share) for the three months ended September 30, 2005 and a net loss of $108,203 ($(0.63) basic and diluted per share, after Preferred Dividends) for the nine months ended September 30, 2005, as compared to net income of $80,750 ($0.05 basic and $0.04 diluted per share, after Preferred Dividends) and $573,657 ($0.78 basic and $0.67 diluted per share, after Preferred Dividends), respectively, for the like periods in 2004. Revenues were $587,689 for the three months ended September 30, 2005 and $1,706,394 for the nine months ended September 30, 2005, as compared to $515,608 and $1,727,536 for the like periods in 2004. E[acute accent]CAIT's Board of Directors announced the following regarding dividends and dividend policy:

E[acute accent]--The Preferred Share Dividend for September, October, November and December 2005 will be omitted;

E[acute accent]--The Common Share Dividend for the 4th quarter of 2005 will be omitted;

E[acute accent]--Going forward, the declaration of the Preferred Share Dividend will coincide with the quarterly review of the Common Share Dividend using the prior quarters' operating results in the Board's deliberations.

E[acute accent]The omission of dividends during the last two quarters was done primarily to prevent a return of capital. E[acute accent]CAIT's reduced earnings can be attributed to a combination of factors. Even though aggregate revenues increased to $587,689 for the quarter ended September 30, 2005 compared to $515,608 for the quarter ended September 30, 2004, due to a larger loan portfolio, the weighted average yield from the total loan portfolio declined to 10.96% versus 12.04% one year earlier. This reduction in weighted average yield from the loan portfolio, coupled with an approximate 2.00% increase in the weighted average cost of borrowing by CAIT has resulted in the compression of margins during the last 12 months, thereby significantly reducing September, 2005 quarterly net income compared to one year earlier. In addition, a shorter weighted average maturity in the loan portfolio has accelerated the expensing of certain capitalized loan origination costs. E[acute accent]Going forward, management believes that, since long term mortgage rates have now begun to rise, CAIT's weighted average yield on its loan portfolio should stabilize. Management is also restructuring CAIT's financing arrangements that will result in a reduction in the weighted average cost of borrowings, thereby helping to restore margins. These changes should start to take effect in the fourth quarter, 2005 with their full impact being realized in the first and second quarters of 2006. Finally, management is reviewing alternatives to reduce overall CAIT overhead expenses and to restructure CAIT operations. Alternatives being reviewed should have the effect of sharpening CAIT's focus on its core portfolio lending business.

E[acute accent]CAIT is a specialty residential lender, which originates and invests in conforming and high-yielding, residential mortgage loans on one-to-four-unit-residential properties located primarily in California and other western states. It also originates loans for sale to investors, on a whole-loan basis for cash through its mortgage banking subsidiary, Capital Alliance Funding Corporation. All loans with a combined loan-to-value ratio of greater than 75% of the collateral's appraised value at the time of funding are pre-sold into the secondary market. Only residential loans with a combined loan-to-value of 75% or less are retained in CAIT's portfolio of mortgage investments.

E[acute accent]This document contains "forward-looking statements" (within the meaning of the Private Securities Litigation Reform Act of 1995) that inherently involve risks and uncertainties. CAIT's actual results and liquidity can differ materially from those anticipated in these forward-looking statements because of changes in the level and composition of CAIT's investments and unforeseen factors. As discussed in CAIT's filings with the Securities and Exchange Commission, these factors may include, but are not limited to, changes in general economic conditions, the availability of suitable investments, fluctuations in and market expectations for fluctuations in interest rates and levels of mortgage prepayments, deterioration in credit quality and ratings, the effectiveness of risk management strategies, the impact of leverage, the liquidity of secondary markets and credit markets, increases in costs and other general competitive factors.