0001332551-14-000042.txt : 20141104 0001332551-14-000042.hdr.sgml : 20141104 20141103204426 ACCESSION NUMBER: 0001332551-14-000042 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20141103 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20141104 DATE AS OF CHANGE: 20141103 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: 141190880 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 rso-20140930x8k.htm 8-K RSO-2014.09.30-8K


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 3, 2014

Resource Capital Corp.
(Exact name of registrant as specified in its 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 3, 2014, Resource Capital Corp. (the "Company") issued a press release regarding its operating results for the three and nine months ended September 30, 2014. 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 this 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
 
Date:
November 3, 2014
 
 David J. Bryant
Chief Financial Officer
 





Exhibit Index
 
Exhibit No.
 
Description
 
 
EX 99.1
 
Press Release
 




 EX-99.1 2 rso-20140930xex991.htm PRESS RELEASE RSO-2014.09.30-EX99.1




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, 2014

Highlights
•
Adjusted Funds from Operations (“AFFO”) of $0.18 and $0.57 per share-diluted (see Schedule I).
•
Originated $144.3 million in new CRE loans during the three months ended September 30, 2014, with $128.4 million funded.
•
Originated $475.0 million in new CRE loans during the nine months ended September 30, 2014, with $421.0 million funded. Through October 31, 2014, we have originated commitments of CRE loans totaling $641.7 million.
•
GAAP net income allocable to common shares of $0.06 and $0.29 per share-diluted.
•
Closed a $354 million commercial real estate securitization at a weighted average cost of LIBOR + 129 bps.
•
Common stock cash dividend of $0.20 and $0.60 per share.
•
Book value of $5.21 as of September 30, 2014.

New York, N.Y., November 3, 2014 - Resource Capital Corp. (NYSE: RSO) (“RSO” or the “Company”), a real estate investment trust, or REIT, whose investment strategy focuses on commercial real estate assets, commercial mortgage-backed securities (“CMBS”), commercial finance assets and other investments, reported results for the three and nine months ended September 30, 2014.
•
AFFO for the three and nine months ended September 30, 2014 was $24.3 million, or $0.18 per share-diluted and $73.3 million, or $0.57 per share-diluted, respectively, as compared to $30.8 million, or $0.24 per share-diluted and $71.4 million, or $0.61 per share-diluted for the three and nine months ended September 30, 2013, 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, 2014 was $7.3 million, or $0.06 per share-diluted and $37.1 million, or $0.29 per share-diluted, respectively, as compared to $22.1 million, or $0.18 per share-diluted and $40.2 million, or $0.34 per share-diluted for the three and nine months ended September 30, 2013, respectively.

Jonathan Cohen, CEO and President of Resource Capital Corp., commented, “Our Commercial Real Estate loan originations remain robust.  Through the end of the third quarter we originated loans with commitments of over $475 million and we now expect that 2014 originations will exceed $700 million of commitments.  The quality of our loans has resulted in excellent securitization execution, including a transaction that closed during the third quarter.  Our other credit businesses are also thriving.  Northport, our middle market corporate loan originator, closed on a $125 million syndicated credit facility which will help it to increase volumes and return on equity."








Additional highlights:
Commercial Real Estate
•
CRE loan portfolio is comprised of approximately 92% senior whole loans as of September 30, 2014, as compared to 90% a year ago.
•
RSO closed and funded $501.2 million of new whole loans in the last 12 months with a weighted average yield of 5.66%, including origination fees. In addition, RSO funded $17.1 million of previous loan commitments on existing loans.
•
RSO originated $166.7 million of new whole loans during October 2014, including $40.9 million of unfunded commitments.
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, 2014 (in millions, except percentages):
 
Three Months Ended
 
Nine Months Ended
 
12 Months Ended
 
Floating Weighted
Average Spread (2) (3)
 
Weighted Average
Fixed Rate
 
September 30,
2014
 
September 30,
2014
 
September 30,
2014
 
 
New whole loans funded (1) (4) 
$
128.4

 
$
421.0

 
$
518.3

 
5.13
%
 
—

New mezzanine loan funded
—

 
3.0

 
3.0

 
—

 
16.00
%
Payoffs (5)
(58.1
)
 
(138.4
)
 
(151.0
)
 
 
 
 
Sales
—

 
—

 
—

 
 
 
 
Principal paydowns
(1.6
)
 
(3.5
)
 
(3.5
)
 
 
 
 
Loans, net
$
68.7

 
$
282.1

 
$
366.8

 
 
 
 
 
(1)
New whole loan production does not include unfunded commitments on whole loans of $20.9 million, which bring total origination of new commercial real estate whole loans to $144.3 million during the three months ended September 30, 2014.
(2)
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, 2014. Of these loans, $394.3 million have LIBOR floors with a weighted average floor of 0.41%.
(3)
Reflects rates on RSO's portfolio balance as of September 30, 2014.
(4)
Whole loan production includes the funding of previous commitments of $5.0 million for the three months, $12.0 million for the nine months and $17.1 million for the twelve months ended September 30, 2014, respectively.
(5)
CRE loan payoffs and extensions resulted in $2.6 million in extension and exit fees during the three months ended September 30, 2014.

CMBS
•
During the nine months ended September 30, 2014, RSO purchased $66.2 million par value of CMBS which were partially financed by 30-day repurchase contracts with a repurchase value of $47.3 million. In addition, RSO purchased $4.5 million, par value, of CMBS, which were financed by RSO's Wells Fargo repurchase facility and were AAA-rated by at least one rating agency.





Commercial Finance
The following table summarizes RSO's middle market lending portfolio loan activities and fundings of previous commitments, at par, for the three, nine, and 12 months ended September 30, 2014 (in millions, except percentages):
 
Three Months Ended 
 September 30, 2014
 
Nine Months Ended 
 September 30, 2014
 
12 Months
Ended
September 30, 2014
 
Weighted
Average
Spread (1) (2)
 
Weighted
Average
All-in Rate (2)
 
Weighted Average Yield
 
 
 
 
 
 
Middle Market loan production (3)
$
46.0

 
$
156.1

 
$
206.3

 
7.64
%
 
8.63
%
 
8.72
%
Sales
(16.2
)
 
(27.8
)
 
(32.9
)
 
 
 
 
 
 
Principal paydowns
(5.1
)
 
(12.3
)
 
(13.0
)
 
 
 
 
 
 
Loans, net
$
24.7

 
$
116.0

 
$
160.4

 
 
 
 
 
 
 
(1)
Represents the weighted average rate above the one-month and three-month LIBOR on loans whose interest rate is based on LIBOR as of September 30, 2014, excluding fees. Of these loans, $185.1 million have LIBOR floors with a weighted average floor of 0.99%.
(2)
Reflects rates on RSO's portfolio balance as of September 30, 2014, excluding fees.
(3)
Loan production does not include $26.7 million of unfunded commitments as of September 30, 2014.
•
RSO closed a $125.0 million syndicated credit facility to support the anticipated growth of its middle market lending platform. At September 30, 2014, $35.5 million was outstanding on the facility.
•
RSO's bank loan portfolio, including asset-backed securities (“ABS”), corporate bonds, certain loans held for sale and middle market loans, at the end of the third quarter of 2014 was $707.2 million, at amortized cost, with a weighted-average spread of one-month and three-month LIBOR plus 4.76% at September 30, 2014. RSO's bank loan portfolio was substantially match-funded through four CLO issuances.
•
RSO, through its subsidiary Resource Capital Asset Management, earned $4.0 million of net fees during the nine months ended September 30, 2014.
Corporate
•
RSO issued 4.8 million shares of its 8.625% Series C Cumulative Redeemable Preferred Stock, at a price of $24.2125 per share with a liquidation preference of $25.00 per share, for net proceeds of $116.2 million.
•
Total revenues increased by $10.9 million, or 46.0%, and $24.6 million, or 32.4%, as compared to revenues for the three and nine months ended September 30, 2013, respectively.







Investment Portfolio
The table below summarizes the amortized cost and net carrying amount of RSO's investment portfolio as of September 30, 2014, 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(4)
September 30, 2014
 
 
 
 
 
 
 
 
 
 
 
Floating rate
 
 
 
 
 
 
 
 
 
 
 
RMBS, trading
$
1,897

 
20.57
%
 
$
66

 
0.72
%
 
$
(1,831
)
 
(19.86
)%
CMBS-private placement
26,625

 
91.85
%
 
19,850

 
68.48
%
 
(6,775
)
 
(23.37
)%
Structured notes - trading
10,821

 
49.00
%
 
9,121

 
41.30
%
 
(1,700
)
 
(7.70
)%
Structured notes - available-for-sale
33,016

 
23.75
%
 
42,924

 
30.87
%
 
9,908

 
7.13
 %
RMBS - available-for-sale
30,697

 
94.24
%
 
31,545

 
96.84
%
 
848

 
2.60
 %
Mezzanine loans
12,544

 
99.27
%
 
12,491

 
98.85
%
 
(53
)
 
(0.42
)%
Whole loans (1)
1,022,971

 
99.47
%
 
1,019,286

 
99.11
%
 
(3,685
)
 
(0.36
)%
Bank loans (2)
640,198

 
99.65
%
 
639,734

 
99.58
%
 
(464
)
 
(0.07
)%
Loans held for sale (3)
36,674

 
97.85
%
 
36,674

 
97.85
%
 
—

 
—
 %
ABS Securities
27,964

 
95.05
%
 
28,832

 
98.00
%
 
868

 
2.95
 %
Corporate Bonds
2,413

 
98.29
%
 
2,401

 
97.80
%
 
(12
)
 
(0.49
)%
Total floating rate
1,845,820

 
93.00
%
 
1,842,924

 
92.86
%
 
(2,896
)
 
(0.15
)%
Fixed rate
 
 
 
 
 
 
 
 
 
 
 
CMBS-private placement
150,345

 
80.34
%
 
155,466

 
83.08
%
 
5,121

 
2.74
 %
CMBS-linked transactions
13,707

 
105.26
%
 
14,272

 
109.60
%
 
565

 
4.34
 %
B notes (1)
16,107

 
99.65
%
 
16,038

 
99.22
%
 
(69
)
 
(0.43
)%
Mezzanine loans (1)
54,761

 
99.99
%
 
54,525

 
99.56
%
 
(236
)
 
(0.43
)%
Residential mortgage loans
2,825

 
100.00
%
 
2,825

 
100.00
%
 
—

 
—
 %
Loans held for sale (3)
54,708

 
100.00
%
 
54,708

 
100.00
%
 
—

 
—
 %
Loans receivable-related party
5,108

 
100.00
%
 
4,172

 
81.68
%
 
(936
)
 
(18.32
)%
Total fixed rate
297,561

 
89.16
%
 
302,006

 
90.50
%
 
4,445

 
1.33
 %
Other (non-interest bearing)
 
 
 
 
 
 
 
 
 
 
 
Property available-for-sale
29,581

 
100.00
%
 
29,581

 
100.00
%
 
—

 
—
 %
Investment in unconsolidated entities
60,540

 
100.00
%
 
60,540

 
100.00
%
 
—

 
—
 %
Total other
90,121

 
100.00
%
 
90,121

 
100.00
%
 
—

 
—
 %
Grand total
$
2,233,502

 
92.73
%
 
$
2,235,051

 
92.80
%
 
$
1,549

 
0.06
 %
 
(1)
Net carrying amount includes an allowance for loan losses of $4.0 million at September 30, 2014, allocated as follows:  B notes $69,000, mezzanine loans $289,000 and whole loans $3.7 million.
(2)
Net carrying amount includes allowance for loan losses of $464,000 at September 30, 2014.
(3)
Loans held for sale are carried at the lower of cost or fair market value. Amortized cost is equal to fair value.
(4)
Differences in percentages are due to rounding.




Liquidity
At October 31, 2014, after paying our third quarter 2014 common and preferred stock dividends, our liquidity is derived from three primary sources:
•
unrestricted cash and cash equivalents of $79.5 million, restricted cash of $500,000 in margin call accounts and $2.1 million in the form of real estate escrows, reserves and deposits;
•
capital available for reinvestment in one of our CRE CDO's of $250,000 and one of our CRE securitizations of $3.0 million, all of which is designated to finance future funding commitments on CRE loans; and
•
loan principal repayments of $45.8 million that will pay down outstanding CLO note balances as well as interest collections of $3.8 million.
In addition, RSO has funds available through two term financing facilities to finance the origination of CRE loans of $279.5 million and $192.0 million and funds available through a term financing facility to finance the purchase of CMBS of $69.7 million.
Capital Allocation
As of September 30, 2014, RSO had allocated its invested equity capital among its targeted asset classes as follows: 61% in CRE assets, 38% in commercial finance assets and 1% in other investments.
Supplemental Information
The following schedules of reconciliations or supplemental information as of September 30, 2014 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 Shareholders Rollforward.
•
Schedule III - Summary of Securitization Performance Statistics.
•
Supplemental Information regarding loan investment statistics, CRE loans and bank loans.
About Resource Capital Corp.
RSO is a real estate investment trust that is primarily focused on originating, holding and managing commercial mortgage loans and other commercial real estate-related debt and equity investments. RSO also makes other commercial finance investments.
RSO is externally managed by Resource Capital Manager, Inc., an indirect wholly-owned subsidiary of Resource America, Inc. (NASDAQ: REXI), an asset management company that specializes in real estate and credit investments.
For more information, please visit RSO's website at www.resourcecapitalcorp.com or contact investor relations at pkamdar@resourcecapitalcorp.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, reconciliation of GAAP net income to FFO and AFFO, Book value allocable to common shareholders rollforward, 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,
2014
 
December 31,
2013
 
(unaudited)
 
 
ASSETS (1)
 
 
 
Cash and cash equivalents
$
163,269

 
$
262,270

Restricted cash
83,604

 
63,309

Investment securities, trading
9,187

 
11,558

Investment securities available-for-sale, pledged as collateral, at fair value
204,843

 
162,608

Investment securities available-for-sale, at fair value
76,175

 
52,598

Linked transactions, net at fair value
14,272

 
30,066

Loans held for sale
91,382

 
21,916

Property available-for-sale
29,581

 
25,346

Investment in real estate
—

 
29,778

Loans, pledged as collateral and net of allowances of $4.5 million and $13.8 million ($83.0 million and $0 at fair value)
1,744,899

 
1,369,526

Loans receivable–related party net of allowances of $936,000 and $0
4,172

 
6,966

Investments in unconsolidated entities
60,540

 
69,069

Derivatives, at fair value
21,618

 
—

Interest receivable
14,831

 
8,965

Deferred tax asset
4,853

 
5,212

Principal paydown receivable
34,297

 
6,821

Intangible assets
10,254

 
11,822

Prepaid expenses
4,529

 
2,871

Other assets
20,075

 
10,726

Total assets
$
2,592,381

 
$
2,151,427

LIABILITIES (2)
 

 
 

Borrowings
$
1,590,958

 
$
1,319,810

Distribution payable
30,340

 
27,023

Accrued interest expense
3,875

 
1,693

Derivatives, at fair value
8,830

 
10,586

Accrued tax liability
3,131

 
1,629

Deferred tax liability
—

 
4,112

Accounts payable and other liabilities
11,331

 
12,650

Total liabilities
1,648,465

 
1,377,503

EQUITY
 

 
 

Preferred stock, par value $0.001:  10,000,000 shares authorized 8.50% Series A cumulative redeemable preferred shares, liquidation preference $25.00
per share, 1,011,743 and 680,952 shares issued and outstanding
1

 
1

Preferred stock, par value $0.001:  10,000,000 shares authorized 8.25% Series B cumulative redeemable preferred shares, liquidation preference $25.00 per share 4,734,495 and 3,485,078 shares issued and outstanding
5

 
3

Preferred stock, par value $0.001:  10,000,000 shares authorized 8.625% Series C cumulative redeemable preferred shares, liquidation preference $25.00 per share 4,800,000 and 0 shares issued and outstanding
5

 
—

Common stock, par value $0.001:  500,000,000 shares authorized; 133,406,123 and 127,918,927 shares issued and outstanding (including 2,742,476 and 3,112,595 unvested restricted shares)
133

 
128

Additional paid-in capital
1,224,533

 
1,042,480

Accumulated other comprehensive income (loss)
3,990

 
(14,043
)
Distributions in excess of earnings
(296,253
)
 
(254,645
)
Total stockholders’ equity
932,414

 
773,924

     Non-controlling interest
11,502

 
—

          Total equity
943,916

 
773,924

TOTAL LIABILITIES AND EQUITY
$
2,592,381

 
$
2,151,427








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

 
September 30,
2014
 
December 31,
2013
 
(unaudited)
 
 
(1) Assets of consolidated VIEs included in total assets:
 
 
 
        Restricted cash
$
80,633

 
$
61,372

        Investment securities available-for-sale, pledged as collateral, at fair value
110,376

 
105,846

        Loans held for sale
36,674

 
2,376

        Loans, pledged as collateral and net of allowances of $4.0 million and
$8.8 million ($83.0 million and $0 at fair value)
1,405,788

 
1,219,569

        Interest receivable
8,066

 
5,627

        Prepaid expenses
217

 
247

        Principal paydown receivable
34,100

 
6,821

        Other assets
(12
)
 
—

        Total assets of consolidated VIEs (a)
$
1,675,842

 
$
1,401,858

 
 
 
 
(2) Liabilities of consolidated VIEs included in total liabilities:
 
 
 
        Borrowings
$
1,214,923

 
$
1,070,339

        Accrued interest expense
1,280

 
918

        Derivatives, at fair value
7,958

 
10,191

        Accounts payable and other liabilities
(418
)
 
1,604

        Total liabilities of consolidated VIEs (b)
$
1,223,743

 
$
1,083,052

_______________
(a)
Assets of each of the consolidated variable interest entities ("VIE"s) 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 OPERATIONS
(in thousands, except share and per share data)
(unaudited)

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
REVENUES
 
 
 
 
 
 
 
Interest income:
 
 
 
 
 
 
 
Loans
$
27,026

 
$
24,374

 
$
73,474

 
$
78,370

Securities
5,168

 
3,411

 
12,563

 
10,949

Interest income − other
1,647

 
679

 
5,481

 
3,180

Total interest income
33,841

 
28,464

 
91,518

 
92,499

Interest expense
11,589

 
11,762

 
31,836

 
34,061

Net interest income
22,252

 
16,702

 
59,682

 
58,438

Rental income
1,118

 
4,649

 
7,777

 
15,875

Dividend income
16

 
223

 
169

 
256

Equity in net earnings (losses) of unconsolidated subsidiaries
887

 
(535
)
 
4,663

 
(888
)
Fee income
2,344

 
1,245

 
7,166

 
4,182

Net realized and unrealized gains on sales of investment securities available-for-sale and loans
7,546

 
570

 
15,487

 
3,355

Net realized and unrealized gains (losses) on investment securities, trading
376

 
(229
)
 
(1,834
)
 
(864
)
Unrealized gains (losses) and net interest income on linked transactions, net
177

 
1,161

 
7,494

 
(4,343
)
Total revenues
34,716

 
23,786

 
100,604

 
76,011

OPERATING EXPENSES
 

 
 

 
 

 
 

Management fees − related party
3,606

 
5,113

 
10,000

 
11,006

Equity compensation − related party
798

 
2,120

 
4,497

 
7,866

Rental operating expense
695

 
3,523

 
5,168

 
11,084

General and administrative
11,586

 
2,898

 
30,936

 
8,761

Depreciation and amortization
562

 
904

 
2,158

 
3,041

Income tax (benefit) expense
(237
)
 
722

 
(667
)
 
4,221

Net impairment losses recognized in earnings
—

 
255

 
—

 
811

Provision (recovery) for loan losses
1,439

 
741

 
(1,739
)
 
541

Total operating expenses
18,449

 
16,276

 
50,353

 
47,331

 
16,267

 
7,510

 
50,251

 
28,680

OTHER REVENUE (EXPENSE)
 

 
 

 
 

 
 

Loss on reissuance of debt
(1,867
)
 
—

 
(2,469
)
 
—

Other expense
—

 
—

 
(1,262
)
 
—

(Loss) gain on sale of real estate
(69
)
 
16,607

 
2,973

 
16,607

Total other revenue
(1,936
)
 
16,607

 
(758
)
 
16,607

NET INCOME
14,331

 
24,117

 
49,493

 
45,287

Net income allocated to preferred shares
(5,545
)
 
(1,996
)
 
(11,303
)
 
(5,107
)
Net income allocable to non-controlling interest, net of taxes
(1,458
)
 
—

 
(1,069
)
 
—

NET INCOME ALLOCABLE TO COMMON SHARES
$
7,328

 
$
22,121

 
$
37,121

 
$
40,180

NET INCOME PER COMMON SHARE – BASIC
$
0.06

 
$
0.18

 
$
0.29

 
$
0.34

NET INCOME PER COMMON SHARE – DILUTED
$
0.06

 
$
0.18

 
$
0.29

 
$
0.34

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING − BASIC
129,654,365

 
124,212,032

 
127,434,378

 
116,471,142

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING − DILUTED
131,227,759

 
126,072,682

 
128,705,916

 
117,973,978







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
The Company evaluates its performance based on several performance measures, including funds from operations, or FFO, and adjusted funds from operations ("AFFO") in addition to net income.  The Company computes 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 impact of non-cash accounting items as well as the effects of items that we deem to be non-recurring in nature.  We deem transactions to be non-recurring if a similar transaction has not occurred in the past two years, and if we do not expect a similar transaction to occur in the next two years.  We adjust for these non-cash and non-recurring items to analyze our ability to produce cash flow from on-going operations, which we use to pay dividends to our shareholders. Non-cash adjustments to FFO include the following:  impairment losses resulting from fair value adjustments on financial instruments; provisions for loan losses; equity investment gains and losses; straight-line rental effects; share based compensation expense; amortization of various deferred items and intangible assets; gains on sales of property that are wholly owned or owned through a joint venture; the cash impact of capital expenditures that are related to our real estate owned; and REIT tax planning adjustments, which primarily relate to accruals for owned properties for which we made a foreclosure election and adjustments to tax estimates with respect to the final resolution of foreclosed property when it is listed for sale. In addition, we calculate AFFO by adding and subtracting from FFO the realized cash impacts of the following: extinguishment of debt, reissuances of debt, sales of property and capital expenditures.
Management believes that FFO and AFFO are appropriate measures of the Company's 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 its operating performance, and believes they are also useful to investors, because they facilitate an understanding of the Company's 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 the Company's operating performance between periods.
While the Company's calculations of AFFO may differ from the methodology used for calculating AFFO by other REITs and its AFFO may not be comparable to AFFO reported by other REITs, the Company also believes that FFO and AFFO may provide the Company and its investors with an additional useful measure to compare its 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 the Company's operating performance or as an alternative to cash flow from operating activities as a measure of its liquidity.





The following table reconciles GAAP net income to FFO and AFFO for the periods presented (unaudited) (in thousands, except share and per share data):
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2014
 
2013
 
2014
 
2013
Net income allocable to common shares - GAAP
 
$
7,328

 
$
22,121

 
$
37,121

 
$
40,180

Adjustments:
 
 
 
 
 
 
 
 
   Real estate depreciation and amortization
 
—

 
477

 
506

 
1,741

   Gains on sale of property (1) 
 
(701
)
 
(14,277
)
 
(5,479
)
 
(14,255
)
   Gains on sale of preferred equity
 
(58
)
 
—

 
(1,107
)
 
—

FFO
 
6,569

 
8,321

 
31,041

 
27,666

Adjustments:
 
 
 
 
 
 
 
 
Non-cash items:
 
 
 
 
 
 
 
 
   Provision (recovery) for loan losses
 
528

 
(405
)
 
1,091

 
(2,139
)
   Amortization of deferred costs (non real estate)
and intangible assets
 
3,070

 
1,439

 
7,256

 
4,909

   Equity investment (gains) losses
 
(13
)
 
347

 
1,547

 
378

   Share-based compensation
 
798

 
2,120

 
4,497

 
7,866

   Impairment losses
 
—

 
255

 
—

 
811

   Unrealized losses (gains) on CMBS marks - linked
transactions
 
211

 
(561
)
 
(1,991
)
 
5,823

   Unrealized (gains) losses on trading portfolio
 
(214
)
 
—

 
1,257

 
—

   Straight-line rental adjustments
 
—

 
(9
)
 
2

 
6

   Loss on resale of debt
 
1,867

 
—

 
2,469

 
—

   Add-back interest related to Whitney note
discount amortization
 
—

 
2,549

 
—

 
2,549

   MTM adjustments on consolidated European CLO
 
1,943

 
—

 
1,797

 
—

   Unrealized loss on forward exchange transactions, net
 
744

 
—

 
744

 
—

   Unrealized loss on forward commitments
 
208

 
—

 
208

 
—

   Unrealized loss on life settlement contracts
 
171

 
—

 
171

 
—

   PCM expenses
 
—

 
—

 
300

 
—

REIT tax planning adjustments
 
293

 
721

 
1,420

 
3,079

Cash items:
 
 
 
 
 
 
 
 
   Gains on sale of property (1) 
 
701

 
14,277

 
5,479

 
14,255

   Gains on sale of preferred equity
 
58

 
—

 
1,107

 
—

   Gains on the resale of debt
 
7,333

 
1,949

 
14,932

 
7,250

   Capital expenditures
 
—

 
(188
)
 
(38
)
 
(1,010
)
AFFO
 
$
24,267

 
$
30,815

 
$
73,289

 
$
71,443

 
 
 
 
 
 
 
 
 
Weighted average shares – diluted
 
131,227,759

 
126,072,682

 
128,705,916

 
117,973,978

 
 
 
 
 
 
 
 
 
AFFO per share – diluted 
 
$
0.18

 
$
0.24

 
$
0.57

 
$
0.61

 
(1)
Amount represents gains/losses on sales of owned real estate as well as sales of joint venture real estate interests that were recorded by RSO on an equity basis.





SCHEDULE II

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

Balance Sheet - Book Value Reconciliation Year to Date
 
 
Amount
 
Per Share
Book value at December 31, 2013, allocable to common shareholders (1)
 
$
674,681

 
$
5.41

Net income allocable to common shareholders - nine months ended
 
37,121

 
0.29

 
 
 
 
 
Change in other comprehensive loss:
 
 
 
 
    Available for sale securities
 
15,666

 
0.12

    Derivatives
 
2,564

 
0.02

    Foreign currency conversion
 
(196
)
 
—

Common dividends
 
(78,523
)
 
(0.60
)
Proceeds (dilution) from additional shares issued during the period (2)
 
30,051

 
(0.03
)
Total net increase (decrease)
 
6,683

 
(0.20
)
Book value at September 30, 2014, allocable to common shareholders (1)(3)
 
$
681,364

 
$
5.21

 
(1)
Per share calculations exclude unvested restricted stock, as disclosed on the consolidated balance sheets, of 2.7 million and 3.1 million shares as of September 30, 2014 and December 31, 2013, respectively.
(2)
Includes issuance of common shares from the Company's dividend reinvestment plan of 4.6 million shares as well as 312,000 shares issued upon vesting of shares of restricted stock.
(3)
Book value is calculated as total stockholder's equity of $932.4 million less preferred stock equity of $251.1 million.

Balance Sheet - Book Value Reconciliation Quarter to Date
 
 
Amount
 
Per Share
Book value at June 30, 2014, allocable to common shareholders (1)
 
$
674,152

 
5.24

Net income allocable to common shareholders - three months ended
 
7,328

 
0.06

 
 
 
 
 
Change in other comprehensive loss:
 
 
 
 
    Available for sale securities
 
12,953

 
0.10

    Derivatives
 
1,232

 
0.01

Common dividends
 
(26,681
)
 
(0.20
)
Proceeds (dilution) from additional shares issued during the period (2)
 
12,380

 
—

Total net increase (decrease)
 
7,212

 
(0.03
)
Book value at September 30, 2014, allocable to common shareholders (1)(3)
 
$
681,364

 
$
5.21

 
(1)
Per share calculations exclude unvested restricted stock, as disclosed on the consolidated balance sheets, of 2.7 million and 2.6 million shares as of September 30, 2014 and June 30, 2014, respectively.
(2)
Includes issuance of common shares from the Company's dividend reinvestment plan of 2.0 million shares as well as 192,000 shares issued upon vesting of shares of restricted stock.
(3)
Book value is calculated as total stockholder's equity of $932.4 million less preferred stock equity of $251.1 million.





SCHEDULE III

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

Securitizations - Distributions and Coverage Test Summary
The following table sets forth the distributions made and coverage test summaries for each of RSO's securitizations for the periods presented (in thousands):
Name
 
Cash Distributions
 
Annualized Interest Coverage Cushion
 
Overcollateralization Cushion
 
 
Nine Months Ended 
 September 30,
 
Year Ended
December 31,
 
As of September 30,
 
As of September 30,
 
As of Initial
Measurement Date
 
 
2014 (1)
 
2013 (1)
 
2014 (2) (3)
 
2014 (4)
 
Apidos CDO I (5)
 
$
1,289

 
$
4,615

 
$
584

 
$
13,847

 
$
17,136

Apidos CDO III (6)
 
$
2,930

 
$
6,495

 
$
3,086

 
$
8,730

 
$
11,269

Apidos Cinco CDO (7)
 
$
7,571

 
$
12,058

 
$
9,229

 
$
20,410

 
$
17,774

RREF 2006-1 (8)
 
$
4,706

 
$
36,828

 
$
5,186

 
$
69,490

 
$
24,941

RREF 2007-1 (9)
 
$
6,084

 
$
10,880

 
$
5,555

 
$
57,613

 
$
26,032

RCC CRE Notes 2013 (10)
 
$
9,072

 
N/A

 
N/A

 
N/A

 
N/A

RCC 2014-CRE2(11)
 
$
1,499

 
N/A

 
N/A

 
N/A

 
N/A

Moselle CLO S.A. (12)
 
$
2,103

 
N/A

 
N/A

 
N/A

 
N/A

* The above table does not include Apidos CLO VIII or Whitney CLO I, as these CLOs were previously called and were substantially liquidated.
 
(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 $231,000 and $28.1 million of paydowns during the nine months ended September 30, 2014 and the year ended December 31, 2013, 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 the Company'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. Apidos CDO I was recently called and substantially liquidated as of the last distribution date on October 27, 2014.
(6)
Apidos CDO III's reinvestment period expired in June 2012.
(7)
Apidos Cinco CDO's reinvestment period expired in May 2014.
(8)
RREF CDO 2006-1's reinvestment period expired in September 2011.
(9)
RREF CDO 2007-1's reinvestment period expired in June 2012.
(10)
Resource Capital Corp. CRE Notes 2013 ("RCC CRE Notes 2013") closed on December 23, 2013; the first distribution was in January 2014. There is no reinvestment period for the securitization. Additionally, the indenture contains no coverage tests.
(11)
Resource Capital Corp. 2014-CRE2 ("RCC 2014-CRE2") closed on July 30, 2014; the first distribution was in August 2014. There is no reinvestment period for the securitization. Additionally, the indenture contains no coverage tests.
(12)
Moselle CLO S.A. was acquired on February 24, 2014; the first distribution was in April 2014. The reinvestment period for this securitization expired prior to the acquisition of this securitization.






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

Loan Investment Statistics

The following table presents information on RSO's impaired loans and related allowances for the periods indicated (based on amortized cost):
 
 
September 30,
2014
 
December 31,
2013
Allowance for loan losses:
 
 
 
 
Specific allowance:
 
 
 
 
     Commercial real estate loans
 
$
—

 
$
4,572

     Bank loans
 
464

 
2,621

     Loans receivable, related party
 
936

 
—

Total specific allowance
 
1,400

 
7,193

General allowance:
 
 
 
 
     Commercial real estate loans
 
4,043

 
5,844

     Bank loans
 
—

 
770

Total general allowance
 
4,043

 
6,614

Total allowance for loans
 
$
5,443

 
$
13,807

Allowance as a percentage of total loans
 
0.3
%
 
1.0
%
 
 
 
 
 
Loans held for sale:
 
 
 
 
     Commercial real estate
 
$
—

 
$
—

     Bank loans
 
36,674

 
6,850

     Residential mortgage loans
 
54,708

 
15,066

Total loans held for sale (1)
 
$
91,382

 
$
21,916

 
(1)
Loans held for sale are presented at the lower of cost or fair value.





RESOURCE CAPITAL CORP. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(unaudited)

The following table presents commercial real estate loan portfolio statistics as of September 30, 2014 (based on par value):
Security type:
 
Whole loans
92.4
%
Mezzanine loans
6.1
%
B Notes
1.5
%
Total
100.0
%
 
 
Collateral type:
 
Multifamily
43.4
%
Hotel
17.6
%
Retail
16.5
%
Office
15.4
%
Mixed Use
1.9
%
Other
5.2
%
Total
100.0
%
 
 
Collateral location:
 
Southern California
24.8
%
Northern California
8.3
%
Texas
21.0
%
Arizona
8.9
%
Florida
4.6
%
Pennsylvania
3.1
%
Utah
3.0
%
Washington
2.7
%
Minnesota
2.7
%
Nevada
3.2
%
Other
17.7
%
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, 2014 (based on par value):
Industry type:
 
Healthcare, education and childcare
15.5
%
Diversified/conglomerate service
13.8
%
Chemicals, plastics and rubber
6.1
%
Finance
5.3
%
Retail stores
5.2
%
Leisure, amusement, motion pictures, entertainment
5.1
%
Automobile
4.7
%
Broadcasting and entertainment
4.3
%
CDO
4.1
%
Hotels, motels, inns and gaming
3.5
%
Electronics
2.8
%
Personal, food and miscellaneous services
2.5
%
Utilities
2.5
%
Telecommunications
2.4
%
Diversified/conglomerate manufacturing
2.3
%
Personal transportation
2.0
%
Other
17.9
%
Total
100.0
%