Capital Alliance Income Trust Ltd. Announces Re-Positioning of Corporate Strategy, New $12 Million Credit Facility and Omission of Fourth Quarter Dividend.

Business Editors

SAN FRANCISCO--(BUSINESS WIRE)--Oct. 3, 2000

Capital Alliance Income Trust Ltd. ("CAIT"), (AMEX:CAA), a specialty, residential mortgage finance company, announced that CAIT has re-positioned its corporate strategy to place major emphasis on its core portfolio mortgage lending business which has consistently been profitable and produced positive cash flow since its inception in 1996.

For the immediate future, CAIT will place less emphasis on its conduit mortgage banking business, which has been conducted through its subsidiary Capital Alliance Funding Corp. ("CAFC"). For the last two years, CAFC has not performed as anticipated, due to continuing adverse conditions in the wholesale non-conforming and subprime residential mortgage businesses.

Concurrently, CAIT announced that it had also obtained $12 million in term and warehousing credit facilities from Bank United of Houston, Texas which will increase CAIT's liquidity and enhance its ability to expand its core portfolio mortgage lending business.

Thomas B. Swartz, chairman and CEO of CAIT, noted that "CAIT's core portfolio mortgage lending business has been consistently profitable, notwithstanding the downturn in the subprime residential mortgage market over the last two years, while the performance of CAFC's conduit residential mortgage banking business has been disappointing and has been the primary cause of CAIT's reduced earnings during that period. The catalyst for the extended downturn in the conduit mortgage banking business was the combination of the Asian financial crisis in October 1998 and the Federal Reserve's subsequent, multiple escalations of interest rates. Those two factors, after a slight recovery in the conduit mortgage banking business in early 1999, nevertheless precipitated a continuing contraction in loan volumes, a narrowing of profit margins, and a reduction in whole loan sale premiums for mortgage banking firms in the non-conforming and subprime industry. Given CAIT's management's commitment to the growth of CAIT's earnings, it has now determined to re-emphasize and expand CAIT's core portfolio mortgage lending business to reduce costs and to de-emphasize its prior program to build-up its conduit mortgage banking business until the creation of value through improved profit margins and increased loan volumes can be achieved."

Dennis R. Konczal, CAIT's president and COO, also announced that CAIT will omit its common share dividend for the fourth quarter of 2000 and will take a one-time charge of $71,000 to cover the costs associated with the down-sizing of its mortgage banking activities.

CAIT is a specialty residential mortgage lender which invests in high-yielding, residential mortgage loans on one-to-four unit residential properties located primarily in California and other western states. It also originates non-conforming and conforming loans for sale to investors and Freddie Mac on a whole loan basis for cash through CAFC.

Certain oral and written statements of the management of CAIT included in this press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. The accuracy of such statements cannot be guaranteed, as they are subject to a variety of risks and contingencies.