0001332551-13-000047.txt : 20131106 0001332551-13-000047.hdr.sgml : 20131106 20131105195831 ACCESSION NUMBER: 0001332551-13-000047 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20131105 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20131106 DATE AS OF CHANGE: 20131105 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Resource Capital Corp. CENTRAL INDEX KEY: 0001332551 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 202287134 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-32733 FILM NUMBER: 131194317 BUSINESS ADDRESS: STREET 1: 712 FIFTH AVENUE STREET 2: 12TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 212-506-3870 MAIL ADDRESS: STREET 1: 712 FIFTH AVENUE STREET 2: 12TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 8-K 1 form8k09302013.htm 8-K Form 8K 09302013


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 5, 2013

Resource Capital Corp.
(Exact Name of Registrant as Specified in Charter)
Maryland
 
1-32733
 
20-2287134
(State or Other Jurisdiction
 
(Commission
 
(IRS Employer
of Incorporation)
 
File Number)
 
Identification No.)
 
 
 
 
 
712 Fifth Avenue, 12th Floor
New York, NY
 
 
 
10019
(Address of Principal Executive Offices)
 
 
 
(Zip Code)
Registrant's telephone number, including area code: 212-506-3899
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






ITEM 2.02    Results of Operations and Financial Condition.
On November 5, 2013, Resource Capital Corp. (the "Company") issued a press release regarding its operating results for the three and nine months ended September 30, 2013. A copy of this press release is furnished with this report as an exhibit. The information in this Current Report, including the exhibit hereto, is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.

ITEM 9.01     Financial Statements and Exhibits.
(d)
The exhibit furnished as part of this report is identified in the Exhibit Index immediately following the signature page of this report. Such Exhibit Index is incorporated herein by reference.

SIGNATURE(S)
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
Resource Capital Corp.
 
 
/s/ David J. Bryant
November 5, 2013
 
 David J. Bryant
Chief Financial Officer

Exhibit Index
Exhibit No.
 
Description
 
EX 99.1
 
Press Release
 




 EX-99.1 2 a09302013-exh991.htm PRESS RELEASE 09.30.2013-exh 99.1



FOR IMMEDIATE RELEASE

CONTACT:
DAVID J. BRYANT
CHIEF FINANCIAL OFFICER
RESOURCE CAPITAL CORP.
712 Fifth Ave, 12TH Floor
New York, NY 10019
212-506-3870        
RESOURCE CAPITAL CORP.
REPORTS RESULTS FOR
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013
Highlights
•
Adjusted Funds from Operations (“AFFO”) of $0.24 and $0.61 per share-diluted (see Schedule I).
•
Commercial real estate (“CRE”) loan originations of $94.2 million and $246.9 million, for the three and nine months ended September 30, 2013, respectively, as compared to $32.6 million and $115.4 million for the same periods in 2012, increases of 189% and 114%, respectively.
•
Book value allocable to common shares of $5.56 per share at September 30, 2013 (see Schedule II).
•
Common stock cash dividend of $0.20 and $0.60 per share. Dividend guidance reaffirmed at $0.20 per share for the fourth quarter of 2013.
•
RSO is providing guidance of $0.20 per quarter common stock dividend per share throughout 2014 or $0.80 for the year.
•
In October 2013, RSO closed and issued $115.0 million aggregate principal amount of its 6.00% convertible senior notes due 2018, which included a $15.0 million over-allotment option. RSO received net proceeds of approximately $111.1 million after payment of underwriting discounts and commissions and other offering costs.

New York, N.Y., November 5, 2013 - Resource Capital Corp. (NYSE: RSO) (“RSO” or the “Company”), a real estate investment trust, or REIT, whose investment strategy focuses on CRE assets, commercial mortgage-backed securities (“CMBS”), commercial finance assets and other investments, reported results for the three and nine months ended September 30, 2013.
•
AFFO for the three and nine months ended September 30, 2013 was $30.8 million, or $0.24 per share-diluted, and $71.4 million, or $0.61 per share-diluted, respectively, as compared to $23.0 million, or $0.26 per share-diluted, and $63.8 million, or $0.75 per share-diluted for the three and nine months ended September 30, 2012, respectively. A reconciliation of GAAP net income to AFFO is set forth in Schedule I of this release.
•
GAAP net income allocable to common shares for the three and nine months ended September 30, 2013 was $22.1 million, or $0.18 per share-diluted, and $40.2 million, or $0.34 per share-diluted, respectively, as compared to $18.2 million, or $0.20 per share-diluted, and $49.1 million, or $0.57 per share-diluted for the three and nine months ended September 30, 2012, respectively.

Jonathan Cohen, CEO and President of Resource Capital Corp., commented, “We continued to expand our commercial real estate loan originations during this quarter and are now on a $450 million annualized run rate. We expect this to increase substantially in 2014 and will offset the runoff of our legacy CLO business. We are pleased to provide dividend per share guidance for 2014 of $0.80 or $0.20 per quarter."




Additional highlights:
Commercial Real Estate
•
CRE loan portfolio is comprised of approximately 90% senior whole loans as of September 30, 2013, as compared to 85% at December 31, 2012.
•
RSO closed $279.2 million of new whole loans in the last 12 months with a weighted average yield of 6.55%, including origination fees. In addition, RSO funded $15.8 million of previous loan commitments on existing loans for total production of $295.0 million in the last 12 months. During the 12 month period, RSO also acquired $15.2 million of mezzanine loans with a weighted average yield of 20.0%.
The following table summarizes RSO's CRE loan activities and fundings of previous commitments, at par, for the three, nine and 12 months ended September 30, 2013 (in millions, except percentages):
 
 
Three Months Ended
 
Nine Months Ended
 
12 Months Ended
 
Floating Weighted
Average Spread (1) (2)
 
Weighted Average
Fixed Rate
 
 
September 30,
2013
 
September 30,
2013
 
September 30,
2013
 
 
New whole loans production (3) 
 
$
94.2

 
$
246.9

 
$
295.0

 
5.60
%
 
—
%
Acquisition of loans
 
—

 
—

 
15.2

 
—
%
 
20.00
%
Loan production, gross
 
94.2

 
246.9

 
310.2

 
 
 
 
Payoffs (4)
 
(30.8
)
 
(91.4
)
 
(126.7
)
 
 
 
 
   Subtotal
 
63.4

 
155.5

 
183.5

 
 
 
 
Sales
 
—

 
(63.9
)
 
(63.9
)
 
 
 
 
Principal paydowns
 
(13.0
)
 
(15.8
)
 
(20.2
)
 
 
 
 
Loans, net (5)
 
$
50.4

 
$
75.8

 
$
99.4

 
 
 
 
________________
(1)
Represents the weighted average rate above the one-month London Interbank Offered Rate (“LIBOR”) on loans whose interest rate is based on LIBOR as of September 30, 2013. Of these loans, $477.6 million have LIBOR floors with a weighted average floor of 1.47%.
(2)
Reflects rates on RSO's portfolio balance as of September 30, 2013.
(3)
Whole loan production includes the funding of previous commitments of $7.1 million, $14.3 million and $15.8 million for the three, nine and 12 months ended September 30, 2013.
(4)
CRE loan payoffs and extensions resulted in $1.3 million in extension and exit fees during the nine months ended September 30, 2013.
(5)
The basis of net new loans does not include provisions for losses on legacy CRE loans of $0.1 million, $2.0 million and $2.4 million for the three, nine and 12 months ended September 30, 2013.
CMBS
•
During the nine months ended September 30, 2013, RSO acquired $32.9 million, par value, of CMBS. These 2013 CMBS purchases were in part financed by RSO's Wells Fargo repurchase facility and were AAA rated by at least one rating agency. In addition, RSO acquired $42.8 million, par value, of CMBS which were also partially financed by 30-day repurchase contracts with a repurchase value of $30.3 million. Also, during the nine months ended September 30, 2013, RSO acquired $43.9 million, par value, of CMBS, which were not financed with debt.
Commercial Finance - Syndicated Bank Loans
•
RSO's bank loan portfolio, including asset-backed securities (“ABS”), corporate bonds and certain loans held for sale, at the end of the third quarter of 2013 was $940.7 million, at amortized cost, with a weighted-average spread of one-month and three-month LIBOR plus 3.29% at September 30, 2013. RSO's bank loan portfolio was nearly 100% match-funded through five collateralized loan obligation (“CLO”) issuances.
•
During the three and nine months ended September 30, 2013, RSO bought bank loans through its CLOs with a par value of $98.6 million and $331.3 million, respectively, at a net discount of $297,000 and $3.2 million, respectively. These purchased loans have an aggregate weighted average unlevered annual yield of approximately 4.34% and 4.13%, respectively.
•
RSO, through its subsidiary, Resource Capital Asset Management, earned $4.2 million of net fees during the nine months ended September 30, 2013.




Corporate
•
In October 2013, RSO completed an underwritten public offering of $115.0 million (including an over-allotment option exercise) aggregate principal amount of its 6.00% convertible senior notes due 2018. RSO received net proceeds of approximately $111.1 million after payment of underwriting discounts and commissions and other offering expenses.
•
RSO sold approximately 157,000 shares of its 8.25% Series B cumulative redeemable preferred stock at a weighted average price of $24.80 with a liquidation preference of $25.00 per share for net proceeds of $3.7 million during the third quarter 2013, pursuant to an at-the-market program.
•
RSO also sold approximately 5,000 shares of its 8.50% Series A cumulative redeemable preferred stock at a weighted average price of $24.26 with a liquidation preference of $25.00 per share for net proceeds of $112,000 during the third quarter 2013, pursuant to an at-the-market program.
•
As we model our business into 2014, we now guide our shareholders that we currently expect to distribute $0.80 per common share in 2014 and accordingly, expect to pay a $0.20 common stock dividend per quarter throughout 2014. This guidance is based on our expectations of robust originations at our commercial real estate lending business and good capital allocation and returns from our other businesses.

Investment Portfolio

The table below summarizes the amortized cost and net carrying amount of RSO's investment portfolio as of September 30, 2013, classified by interest rate and by asset type. The following table includes both (i) the amortized cost of RSO's investment portfolio and the related dollar price, which is computed by dividing amortized cost by par amount, and (ii) the net carrying amount of RSO's investment portfolio and the related dollar price, which is computed by dividing the net carrying amount by par amount (in thousands, except percentages):
 
Amortized
cost
 
Dollar
price
 
Net
carrying
amount
 
Dollar
price
 
Net carrying
amount less
amortized
cost
 
Dollar
price
Floating rate
 
 
 
 
 
 
 
 
 
 
 
RMBS
$
1,934

 
20.89
%
 
$
519

 
5.61
%
 
$
(1,415
)
 
(15.28
)%
CMBS-private placement
27,439

 
92.47
%
 
15,593

 
52.55
%
 
(11,846
)
 
(39.92
)%
Structured notes
8,554

 
22.83
%
 
11,580

 
30.91
%
 
3,026

 
8.08
 %
Whole loans (1)
668,115

 
99.55
%
 
658,902

 
98.18
%
 
(9,213
)
 
(1.37
)%
Bank loans (2)
576,677

 
99.03
%
 
573,723

 
98.52
%
 
(2,954
)
 
(0.51
)%
Loans held for sale (3)
332,351

 
97.98
%
 
332,351

 
97.98
%
 
—

 
—
 %
ABS Securities
26,317

 
90.95
%
 
27,598

 
95.38
%
 
1,281

 
4.43
 %
Corporate Bonds
5,375

 
97.21
%
 
5,313

 
96.09
%
 
(62
)
 
(1.12
)%
   Total floating rate
1,646,762

 
96.33
%
 
1,625,579

 
95.09
%
 
(21,183
)
 
(1.24
)%
Fixed rate
 
 
 
 
 
 
 
 
 
 
 
CMBS-private placement
166,829

 
78.63
%
 
172,180

 
81.15
%
 
5,351

 
2.52
 %
CMBS-Linked Transactions
35,454

 
107.05
%
 
29,978

 
90.52
%
 
(5,476
)
 
(16.53
)%
B notes (1)
16,238

 
99.45
%
 
16,071

 
98.43
%
 
(167
)
 
(1.02
)%
Mezzanine loans (1)
57,574

 
99.84
%
 
57,043

 
98.92
%
 
(531
)
 
(0.92
)%
Loans receivable-related party
8,067

 
100.00
%
 
8,067

 
100.00
%
 
—

 
—
 %
Total fixed rate
284,162

 
86.80
%
 
283,339

 
86.55
%
 
(823
)
 
(0.25
)%
Other (non-interest bearing)
 
 
 
 
 
 
 
 
 
 
 
Investment in real estate
55,144

 
100.00
%
 
55,144

 
100.00
%
 
—

 
—
 %
Investment in unconsolidated
entities
72,955

 
100.00
%
 
72,955

 
100.00
%
 
—

 
—
 %
   Total other
128,099

 
100.00
%
 
128,099

 
100.00
%
 
—

 
—
 %
      Grand total
$
2,059,023

 
95.11
%
 
$
2,037,017

 
94.09
%
 
$
(22,006
)
 
(1.02
)%




 
(1)
Net carrying amount includes an allowance for loan losses of $9.9 million at September 30, 2013, allocated as follows:  B notes $167,000, mezzanine loans $531,000 and whole loans $9.2 million.
(2)
Net carrying amount includes allowance for loan losses of $3.0 million as of September 30, 2013.
(3)
Loans held for sale are carried at the lower of cost or fair market value.
Liquidity
At October 31, 2013, after paying RSO's third quarter 2013 common and preferred stock dividends, RSO's liquidity is derived from three primary sources:
•
unrestricted cash and cash equivalents of $259.6 million, restricted cash of $777,000 in margin call accounts and $1.4 million in the form of real estate escrows, reserves and deposits;
•
capital available for reinvestment in one of its collateralized debt obligation ("CDO") and one CLO entity of $28.1 million, of which $430,000 is designated to finance future funding commitments on CRE loans; and
•
loan principal repayments that will pay down outstanding CLO notes of $23.1 million and $5.5 million in interest collections.
In addition, RSO has funds available through three term financing facilities to finance the origination of CRE loans of $90.9 million and $200.0 million, and to finance the purchase of CMBS of $42.2 million, respectively.
Capital Allocation
As of September 30, 2013, RSO had allocated its invested equity capital among its targeted asset classes as follows: 78% in CRE assets, 18% in commercial finance assets and 4% in other investments.
Supplemental Information
The following schedules of reconciliations or supplemental information as of September 30, 2013 are included at the end of this release:
•
Schedule I - Reconciliation of GAAP Net Income to Funds from Operations (“FFO”) and AFFO.
•
Schedule II - Book value allocable to common shares rollforward.
•
Schedule III - Summary of CDO and CLO Performance Statistics.
•
Supplemental Information regarding loan investment statistics, CRE loans and bank loans.
About Resource Capital Corp.
RSO is a diversified real estate finance company that is organized and conducts its operations to qualify as a REIT for federal income tax purposes. RSO's investment strategy focuses on CRE assets, and, to a lesser extent, commercial finance assets and other investments. RSO invests in the following asset classes: CRE-related assets such as commercial real estate property, whole loans, A-notes, B-notes, mezzanine loans, CMBS and investments in real estate joint ventures as well as commercial finance assets such as bank loans, lease receivables, other asset-backed securities, corporate bonds, trust preferred securities, debt tranches of CDOs, structured note investments, and private equity investments principally issued by financial institutions.
RSO is externally managed by Resource Capital Manager, Inc., an indirect wholly-owned subsidiary of Resource America, Inc. (NASDAQ: REXI), a specialized asset management company that uses industry specific expertise to generate and administer investment opportunities for its own account and for outside investors in the real estate, financial fund management and commercial finance sectors.
For more information, please visit RSO's website at www.resourcecapitalcorp.com or contact investor relations at pkamdar@resourceamerica.com.





Safe Harbor Statement
Statements made in this release may include forward-looking statements, which involve substantial risks and uncertainties. RSO's actual results, performance or achievements could differ materially from those expressed or implied in this release. The risks and uncertainties associated with forward-looking statements contained in this release include those related to:
•
fluctuations in interest rates and related hedging activities;
•
the availability of debt and equity capital to acquire and finance investments;
•
defaults or bankruptcies by borrowers on RSO's loans or on loans underlying its investments;
•
adverse market trends which have affected and may continue to affect the value of real estate and other assets underlying RSO's investments;
•
increases in financing or administrative costs; and
•
general business and economic conditions that have impaired and may continue to impair the credit quality of borrowers and RSO's ability to originate loans.
For further information concerning these and other risks pertaining to the forward-looking statements contained in this release, and to the general risks to which RSO is subject, see Item 1A, “Risk Factors” included in its Annual Report on Form 10-K and the risks expressed in other of its public filings with the Securities and Exchange Commission.
RSO cautions you not to place undue reliance on any forward-looking statements contained in this release, which speak only as of the date of this release. All subsequent written and oral forward-looking statements attributable to RSO or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this release. Except to the extent required by applicable law or regulation, RSO undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this filing or to reflect the occurrence of unanticipated events.
The remainder of this release contains RSO's unaudited consolidated balance sheets, unaudited consolidated statements of income, a reconciliation of GAAP net income to FFO and AFFO, a book value allocable to common shares rollforward, a summary of CDO and CLO performance statistics and supplemental information regarding RSO's CRE loan and bank loan portfolios.










RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

 
September 30,
2013
 
December 31,
2012
 
(Unaudited)
 
 
ASSETS (1)
 
 
 
Cash and cash equivalents
$
144,463

 
$
85,278

Restricted cash
59,195

 
94,112

Investment securities, trading
12,099

 
24,843

Investment securities available-for-sale, pledged as collateral, at fair value
173,994

 
195,200

Investment securities available-for-sale, at fair value
46,690

 
36,390

Linked transactions, net at fair value
29,978

 
6,835

Loans held for sale
332,351

 
48,894

Investment in real estate
55,144

 
75,386

Loans, pledged as collateral and net of allowances of $12.9 million and $17.7 million
1,305,739

 
1,793,780

Loans receivable–related party
8,067

 
8,324

Investments in unconsolidated entities
72,955

 
45,413

Interest receivable
8,078

 
7,763

Deferred tax asset
3,268

 
2,766

Principal paydown receivable
7

 
25,570

Intangible assets
11,728

 
13,192

Prepaid expenses
4,961

 
10,396

Other assets
4,347

 
4,109

Total assets
$
2,273,064

 
$
2,478,251

LIABILITIES (2)
 

 
 

Borrowings
$
1,422,430

 
$
1,785,600

Distribution payable
26,796

 
21,655

Accrued interest expense
2,708

 
2,918

Derivatives, at fair value
12,208

 
14,687

Accrued tax liability
4,989

 
13,641

Deferred tax liability
7,690

 
8,376

Accounts payable and other liabilities
12,829

 
18,029

Total liabilities
1,489,650

 
1,864,906

STOCKHOLDERS’ EQUITY
 

 
 

Preferred stock, par value $0.001:  8.50% Series A 100,000,000 shares authorized, 680,952 and 676,373 shares issued and outstanding
1

 
1

Preferred stock, par value $0.001:  8.25% Series B 100,000,000 shares authorized, 3,229,317 and 1,126,898 shares issued and outstanding
3

 
1

Common stock, par value $0.001:  500,000,000 shares authorized; 127,237,134 and 105,118,093 shares issued and outstanding (including 3,046,343 and 3,308,343 unvested restricted shares)
127

 
105

Additional paid-in capital
1,028,826

 
836,053

Accumulated other comprehensive loss
(17,383
)
 
(27,078
)
Distributions in excess of earnings
(228,160
)
 
(195,737
)
Total stockholders’ equity
783,414

 
613,345

TOTAL LIABILITIES AND EQUITY
$
2,273,064

 
$
2,478,251















RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (Continued)
(in thousands, except share and per share data)

 
September 30,
2013
 
December 31,
2012
 
(Unaudited)
 
 
(1) Assets of consolidated VIEs included in the total assets above:
 
 
 
        Restricted cash
$
53,752

 
$
90,108

        Investments securities available-for-sale, pledged as collateral, at fair value
110,993

 
135,566

        Loans held for sale
332,351

 
14,894

        Loans, pledged as collateral and net of allowances of $7.3 million
           and $15.2 million
981,513

 
1,678,719

        Interest receivable
5,506

 
5,986

        Prepaid expenses
254

 
328

        Principal receivable
7

 
25,570

        Other assets
35

 
333

        Total assets of consolidated VIEs (a)
$
1,484,411

 
$
1,951,504

 
 
 
 
(2) Liabilities of consolidated VIEs included in the total liabilities above:
 
 
 
        Borrowings
$
1,166,209

 
$
1,614,882

        Accrued interest expense
2,184

 
2,666

        Derivatives, at fair value
11,766

 
14,078

        Accounts payable and other liabilities
646

 
698

        Total liabilities of consolidated VIEs (b)
$
1,180,805

 
$
1,632,324


(a) Assets of each of the consolidated VIEs may only be used to settle the obligations of each respective VIE.
(b) The creditors of the Company's VIEs have no recourse to the general credit of the Company.





RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share data)
(unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2013
 
2012
 
2013
 
2012
REVENUES
 
 
 
 
 
 
 
Interest income:
 
 
 
 
 
 
 
Loans
$
24,374

 
$
24,130

 
$
78,370

 
$
70,757

Securities
3,411

 
3,564

 
10,949

 
10,520

Interest income − other
649

 
2,218

 
3,150

 
8,204

Total interest income
28,434

 
29,912

 
92,469

 
89,481

Interest expense
11,762

 
8,208

 
34,061

 
25,460

Net interest income
16,672

 
21,704

 
58,408

 
64,021

Rental income
4,649

 
2,689

 
15,875

 
6,642

Dividend income
223

 
17

 
256

 
51

Equity in losses of unconsolidated subsidiaries
(505
)
 
(779
)
 
(858
)
 
(1,469
)
Fee income
1,245

 
1,777

 
4,182

 
5,528

Net realized and unrealized gain on sales of investment securities
available-for-sale and loans
570

 
346

 
3,355

 
2,148

Net realized and unrealized (loss) gain on investment securities, trading
(229
)
 
9,782

 
(864
)
 
13,350

Unrealized gain (loss) and net interest income on
linked transactions, net
1,161

 
133

 
(4,343
)
 
386

Total revenues
23,786

 
35,669

 
76,011

 
90,657

OPERATING EXPENSES
 

 
 

 
 
 
 
Management fees − related party
5,113

 
5,521

 
11,006

 
13,512

Equity compensation − related party
2,120

 
1,404

 
7,866

 
3,412

Professional services
1,396

 
845

 
3,745

 
2,562

Insurance
214

 
161

 
588

 
478

Rental operating expense
3,523

 
1,827

 
11,084

 
4,456

General and administrative
1,288

 
844

 
4,428

 
3,377

Depreciation and amortization
904

 
1,249

 
3,041

 
3,974

Income tax expense
722

 
3,979

 
4,221

 
6,978

Net impairment losses recognized in earnings
255

 
9

 
811

 
180

Provision for loan losses
741

 
1,370

 
541

 
7,801

Total operating expenses
16,276

 
17,209

 
47,331

 
46,730

 
7,510

 
18,460

 
28,680

 
43,927

OTHER REVENUE (EXPENSE)
 

 
 

 
 
 
 
Gain on the extinguishment of debt
—

 
—

 
—

 
5,464

Gain on sale of real estate
16,607

 
—

 
16,607

 
—

Total other revenue
16,607

 
—

 
16,607

 
5,464

NET INCOME
24,117

 
18,460

 
45,287

 
49,391

Net income allocated to preferred shares
(1,996
)
 
(308
)
 
(5,107
)
 
(333
)
NET INCOME ALLOCABLE TO COMMON SHARES
$
22,121

 
$
18,152

 
$
40,180

 
$
49,058

NET INCOME PER COMMON SHARE – BASIC
$
0.18

 
$
0.20

 
$
0.34

 
$
0.58

NET INCOME PER COMMON SHARE – DILUTED
$
0.18

 
$
0.20

 
$
0.34

 
$
0.57

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING − BASIC
124,212,032

 
89,066,927

 
116,471,142

 
84,594,892

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING − DILUTED
126,072,682

 
89,965,680

 
117,973,978

 
85,365,343






SCHEDULE I

RESOURCE CAPITAL CORP. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO FFO and AFFO
(in thousands, except per share data)
(unaudited)

Funds from Operations
We evaluate our performance based on several performance measures, including funds from operations, or FFO, and adjusted funds from operations, or AFFO, in addition to net income.  We compute FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts as net income (computed in accordance with GAAP), excluding gains or losses on the sale of depreciable real estate, the cumulative effect of changes in accounting principles, real estate-related depreciation and amortization, and after adjustments for unconsolidated/uncombined partnerships and joint ventures.
AFFO is a computation made by analysts and investors to measure a real estate company’s cash flow generated by operations.  We calculate AFFO by adding or subtracting from FFO the non-cash impacts of the following: non-cash impairment losses resulting from fair value adjustments on financial instruments, provision for loan losses, equity investment gains and losses, straight-line rental effects, share based compensation, amortization of various deferred items and intangible assets, gains on sales of property that are wholly owned or through a joint venture in addition to the cash impact of capital expenditures that are related to our real estate owned. In addition, we calculate AFFO by adding and subtracting from FFO the cash impacts of the following: extinguishment of debt, sales of property and capital expenditures.
Management believes that FFO and AFFO are appropriate measures of our operating performance in that they are frequently used by analysts, investors and other parties in the evaluation of REITs.  Management uses FFO and AFFO as measures of our operating performance, and believes they are also useful to investors, because they facilitate an understanding of our operating performance after adjustment for certain non-cash items, such as real estate depreciation, share-based compensation and various other items required by GAAP, and capital expenditures, that may not necessarily be indicative of current operating performance and that may not accurately compare our operating performance between periods.
While our calculations of AFFO may differ from the methodology used for calculating AFFO by other REITs and our AFFO may not be comparable to AFFO reported by other REITs, we also believe that FFO and AFFO may provide us and our investors with an additional useful measure to compare our performance with some other REITs.  Neither FFO nor AFFO is equivalent to net income or cash generated from operating activities determined in accordance with GAAP.  Furthermore FFO and AFFO do not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties.  Neither FFO nor AFFO should be considered as an alternative to GAAP net income as an indicator of our operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity.





The following table reconciles GAAP net income to FFO and AFFO for the periods presented (in thousands, except per share data):
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2013
 
2012
 
2013
 
2012
Net income allocable to common shares - GAAP
 
$
22,121

 
$
18,152

 
$
40,180

 
$
49,058

Adjustments:
 
 
 
 
 
 
 
 
   Real estate depreciation and amortization
 
477

 
536

 
1,741

 
2,025

   Gains on sales of property (1) 
 
(14,277
)
 
(353
)
 
(14,255
)
 
(1,440
)
FFO
 
8,321

 
18,335

 
27,666

 
49,643

Adjustments:
 
 
 
 
 
 
 
 
Non-cash items:
 
 
 
 
 
 
 
 
   (Benefit) provision for loan losses
 
(405
)
 
40

 
(2,139
)
 
4,508

   Amortization of deferred costs (non real estate)
and intangible assets
 
1,439

 
1,765

 
4,909

 
5,756

   Equity investment losses
 
347

 
1,025

 
378

 
2,300

   Share-based compensation
 
2,120

 
1,404

 
7,866

 
3,412

   Impairment losses
 
255

 
9

 
811

 
180

   Unrealized (gain) loss on CMBS marks - linked transactions
 
(561
)
 
—

 
5,823

 
—

   Straight line rental adjustments
 
(9
)
 
2

 
(6
)
 
14

   Add-back interest related to Whitney note discount amortization
 
2,549

 
—

 
2,549

 
—

REIT tax planning adjustments
 
721

 
—

 
3,079

 
(1,835
)
Cash items:
 
 
 
 
 
 
 
 
   Gains on sales of property (1) 
 
14,277

 
353

 
14,255

 
1,440

   Gain on the extinguishment of debt
 
1,949

 
663

 
7,250

 
663

   Capital expenditures
 
(188
)
 
(591
)
 
(1,010
)
 
(2,255
)
AFFO
 
$
30,815

 
$
23,005

 
$
71,431

 
$
63,826

 
 
 
 
 
 
 
 
 
Weighted average shares – diluted
 
126,072,682

 
89,965,680

 
117,973,978

 
85,365,343

 
 
 
 
 
 
 
 
 
AFFO per share – diluted 
 
$
0.24

 
$
0.26

 
$
0.61

 
$
0.75

__________________
(1)
Amounts represent gains/losses on sales of joint venture real estate interests that were recorded by RSO on an equity basis. Amounts for the three and nine months ended September 30, 2013, also include net gain on sale of property of $16.2 million after deducting incentive management fees paid to our manager, Resource Capital Manager, Inc., a subsidiary of Resource America, Inc., of $1.9 million.





SCHEDULE II

RESOURCE CAPITAL CORP. AND SUBSIDIARIES
BOOK VALUE ALLOCABLE TO COMMON SHARES ROLLFORWARD
(dollars in thousands, except per share data)
(unaudited)

Nine Months Ended September 30, 2013:
 
Amount
 
Per Share
Book value at December 31, 2012, allocable to common shares (2)
 
$
570,893

 
$
5.61

Net income allocable to common shares - nine months ended
 
40,180

 
0.34

 
 
 
 
 
Change in other comprehensive income:
 
 
 
 
    Available-for-sale securities
 
6,916

 
0.06

    Derivatives
 
2,802

 
0.02

    Foreign currency conversion
 
(23
)
 
—

Common dividends
 
(72,480
)
 
(0.60
)
Proceeds/Accretion from additional shares issued during the period (3)
 
141,544

 
0.13

Total net increases (decreases)
 
118,939

 
(0.05
)
Book value at September 30, 2013, allocable to common shares (1)(3)
 
$
689,832

 
$
5.56

_________________
(1)
Per share calculations are calculated using total shares outstanding of 105.1 million and 127.2 million less unvested restricted stock, of 3.0 million and 3.3 million shares as of September 30, 2013 and December 31, 2012, respectively, as disclosed on the consolidated balance sheet.
(2)
Book value is calculated as total stockholder's equity of $783.4 million less preferred stock equity of $93.6 million.
(3)
Includes issuance of 18.7 million shares from our common stock offering, 3.1 million shares from our dividend reinvestment plan and issuance of 363,000 shares of restricted stock.

Three Months Ended September 30, 2013:
 
Amount
 
Per Share
Book value at June 30, 2013, allocable to common shares (2)
 
$
687,636

 
$
5.55

Net income allocable to common shares - three months ended
 
22,121

 
0.18

 
 
 
 
 
Change in other comprehensive income:
 
 
 
 
    Available-for-sale securities
 
2,119

 
0.01

    Derivatives
 
627

 
0.01

    Foreign currency conversion
 
(23
)
 
—

Common dividends
 
(25,447
)
 
(0.20
)
Proceeds/Accretion from additional shares issued during the period (3)
 
2,799

 
0.01

Total net increases
 
2,196

 
0.01

Book value at September 30, 2013, allocable to common shares (1)(3)
 
$
689,832

 
$
5.56

__________________
(1)
Per share calculations are calculated using total shares outstanding of 127.0 million and 127.2 million less unvested restricted stock of 3.0 million and 3.0 million shares as of June 30, 2013 and September 30, 2013, respectively, as disclosed on the consolidated balance sheet.
(2)
Book value is calculated as total stockholder's equity of $783.4 million less preferred stock equity of $93.6 million.
(3)
Includes issuance of 153,000 shares from our dividend reinvestment plan and the issuance of 98,000 shares of restricted stock.






SCHEDULE III

RESOURCE CAPITAL CORP. AND SUBSIDIARIES
SUMMARY OF CDO AND CLO PERFORMANCE STATISTICS
(in thousands)
(unaudited)

Collateralized Debt Obligations - Distributions and Coverage Test Summary

The following table sets forth cash distributions from RSO's CDO investments and a summary of coverage test compliance for the CDO issuers for the periods presented:
 
 
 
 
Cash Distributions
 
Annualized Interest Coverage Cushion
 
Overcollateralization Cushion
 
 
 
 
Nine Months Ended
 
Year Ended
 
As of
 
As of
 
As of Initial
 
 
 
 
September 30,
 
December 31,
 
September 30,
 
September 30,
 
Measurement
Name
 
CDO Type
 
2013 (1)
 
2012 (1)
 
2013 (2) (3)
 
2013 (4)
 
Date
 
 
 
 
(actual)
 
(actual)
 
 
 
 
 
 
Apidos CDO I (5)
 
CLO
 
$
3,931

 
$
7,971

 
$
2,379

 
$
13,051

 
$
17,136

Apidos CDO III (6)
 
CLO
 
$
5,270

 
$
8,742

 
$
2,609

 
$
9,351

 
$
11,269

Apidos Cinco CDO (7)
 
CLO
 
$
9,307

 
$
11,109

 
$
5,819

 
$
19,919

 
$
17,774

Apidos CLO VIII (8)
 
CLO
 
$
3,220

 
$
2,992

 
$
4,477

 
$
15,562

 
$
13,657

Whitney CLO I (9)
 
CLO
 
$
7,881

 
$
802

 
$
3

 
$
13,659

 
N/A

RREF 2006-1 (10)
 
CRE CDO
 
$
34,600

 
$
15,050

 
$
7,213

 
$
64,608

 
$
24,941

RREF 2007-1 (11)
 
CRE CDO
 
$
8,707

 
$
13,226

 
$
8,309

 
$
43,645

 
$
26,032

__________________
(1)
Distributions on retained equity interests in CDOs (comprised of note investments and preference share ownership) and principal paydowns on notes owned; RREF CDO 2006-1 includes $27.4 million and $2.3 million of paydowns as of September 30, 2013 and December 31, 2012, respectively.
(2)
Interest coverage includes annualized amounts based on the most recent trustee statements.
(3)
Interest coverage cushion represents the amount by which annualized interest income expected exceeds the annualized amount payable on all classes of CDO notes senior to RSO's preference shares.
(4)
Overcollateralization cushion represents the amount by which the collateral held by the CDO issuer exceeds the maximum amount required.
(5)
Apidos CDO I's reinvestment period expired in July 2011.
(6)
Apidos CDO III's reinvestment period expired in June 2012.
(7)
Apidos Cinco CDO's investment period ends in May 2014.
(8)
Distributions from Apidos CLO VIII includes $570,000 and $752,000 in base and subordinated management fees for the nine months ended September 30, 2013 and year ended December 31, 2012, respectively; RSO's distributions represent 43% of the subordinated debt as a result of our investment of $15.0 million. Apidos VIII’s non-call period ended on October 17, 2013, at which time all assets were liquidated and all outstanding notes were paid off.
(9)
Whitney CLO I was acquired in October 2012. RSO holds 68.3% of the outstanding preference shares. Distributions from Whitney CLO I include $439,000 and $236,000 of collateral management fees for the nine months ended September 30, 2013 and year ended December 31, 2012, respectively. Whitney CLO I was called and substantially liquidated in September 2013.
(10)
RREF CDO 2006-1's reinvestment period expired in September 2011.
(11)
RREF CDO 2007-1's reinvestment period expired in June 2012.






RESOURCE CAPITAL CORP. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(in thousands, except percentages)

Loan Investment Statistics

The following table presents information on RSO's allowance for loan losses for the periods indicated:
 
 
September 30,
 
December 31,
 
 
2013
 
2012
 
 
(Unaudited)
 
 
Allowance for loan losses:
 
 
 
 
Specific allowance:
 
 
 
 
     Commercial real estate loans
 
$
4,067

 
$
2,142

     Bank loans
 
1,882

 
3,236

Total specific allowance
 
5,949

 
5,378

General allowance:
 
 
 
 
     Commercial real estate loans
 
5,844

 
5,844

     Bank loans
 
1,072

 
6,469

Total general allowance
 
6,916

 
12,313

Total allowance for loans
 
$
12,865

 
$
17,691

Allowance as a percentage of total loans
 
0.8
%
 
0.9
%
 
 
 
 
 
Loans held for sale:
 
 
 
 
     Commercial real estate loans
 
$
—

 
$
34,000

     Bank loans (2)
 
332,351

 
14,894

Total loans held for sale (1)
 
$
332,351

 
$
48,894

__________________
(1)
Loans held for sale are presented at the lower of cost or fair value.
(2)
$325,000 of the bank loans held for sale at September 30, 2013 are due to the equity of Apidos CLO VIII being called and the portfolio being substantially liquidated in October 2013.





RESOURCE CAPITAL CORP. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(unaudited)

The following table presents commercial real estate loan portfolio statistics as of September 30, 2013 (based on par value):
Security type:
 
Whole loans
90.1
%
Mezzanine loans
7.7
%
B Notes
2.2
%
Total
100.0
%
 
 
Collateral type:
 
Multifamily
39.3
%
Hotel
19.8
%
Retail
18.5
%
Office
12.6
%
Mixed Use
4.4
%
Industrial
1.9
%
Other
3.5
%
Total
100.0
%
 
 
Collateral location:
 
Southern California
31.5
%
Northern California
7.7
%
Texas
14.8
%
Arizona
7.1
%
Washington
4.0
%
Florida
2.6
%
Colorado
1.2
%
New York
1.1
%
Other
30.0
%
Total
100.0
%





RESOURCE CAPITAL CORP. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(unaudited)


The following table presents bank loan portfolio statistics by industry as of September 30, 2013 (based on par value):
Industry type:
 
Healthcare, education and childcare
15.2
%
Diversified/conglomerate service
11.6
%
Broadcasting and entertainment
6.8
%
Chemicals, plastics and rubber
5.9
%
Automobile
5.9
%
Retail Stores
5.6
%
Hotels, motels, inns and gaming
4.2
%
Electronics
3.8
%
Personal, food and miscellaneous services
3.6
%
Telecommunications
3.4
%
CDO
3.0
%
Aerospace and defense
2.6
%
Leisure, Amusement, Motion Pictures, Entertainment
2.3
%
Finance
2.3
%
Personal Transportation
2.3
%
Other
21.5
%
Total
100.0
%










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