EX-99.1 2 rso-20150630xex991.htm EXHIBIT 99.1 - PRESS RELEASE RSO-2015.06.30-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 SIX MONTHS ENDED JUNE 30, 2015
Highlights and Significant Items
•
Adjusted Funds from Operations (“AFFO”) of $0.15 and $0.31 per share (see Schedule I).
•
Net interest income increased $756,000, or 3.8% and $6.0 million, or 16.1%, as compared to the three and six months ended June 30, 2014.
•
Originated $184.5 million in new commercial real estate ("CRE") loans during the period.
•
GAAP net loss allocable to common shares of $(0.24) and $(0.16) per share.
•
Board approved $50.0 million plan to repurchase securities.
•
Announced one-for-four reverse stock split expected to be effective August 31, 2015.
•
Common stock cash dividend of $0.16 and $0.32 per share.

New York, N.Y., August 4, 2015 - 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 six months ended June 30, 2015.
•
AFFO for the three and six months ended June 30, 2015 was $20.1 million, or $0.15 per share and $41.3 million, or $0.31 per share, respectively, as compared to $24.0 million, or $0.19 per share and $49.0 million, or $0.38 for the three and six months ended June 30, 2014, respectively. A reconciliation of GAAP net income (loss) to AFFO is set forth in Schedule I of this release.
•
GAAP net loss allocable to common shares for the three and six months ended June 30, 2015 was ($31.0) million, or $(0.24) per share-diluted and ($21.6) million, or $(0.16) as compared to net income of $14.7 million, or $0.11 per share-diluted and $29.8 million, or $0.23 for the three and six months ended June 30, 2014, respectively.
•
RSO recognized an impairment of $41.1 million on a legacy mezzanine loan representing $38.1 million in loan principal and $3.0 million in accrued interest reversals, or $(0.29) and $(0.02) per common share, respectively.

Additional highlights:
Commercial Real Estate
•
CRE loan portfolio is comprised of approximately 96% senior whole loans as of June 30, 2015, an increase from 94% as of December 31, 2014.
•
$1.4 billion, or 88%, of loans in CRE portfolio have London Interbank Offered Rate (“LIBOR”) floors with a weighted average of 0.52%, or 33 basis points, above one-month LIBOR as of June 30, 2015.
•
Interest income on whole loans increased by $7.1 million, or 53.5%, to $20.2 million during the three months ended June 30, 2015 as compared to $13.1 million during the three months ended June 30, 2014.
•
Closed and funded $694.0 million of new whole loans in the last 12 months with a weighted average yield of 5.70%, including origination fees.




The following table summarizes RSO's CRE loan activities and fundings of previous commitments, at par, for the three, six and 12 months ended June 30, 2015 (in millions, except percentages):
 
Three Months Ended
 
Six Months Ended
 
12 Months Ended
 
Floating
Weighted
Average Spread (1) (2)
 
Weighted Average Fixed Rate
 
June 30,
2015
 
June 30,
2015
 
June 30,
2015
 
 
New whole loans funded and originated
$
165.8

 
$
314.9

 
$
694.0

 
4.87
%
 
—
%
Unfunded loan commitments
18.7

 
26.4

 
93.8

 
 
 
 
New loans originated
184.5

 
341.3

 
787.8

 
 
 
 
Payoffs (3)
(38.7
)
 
(104.6
)
 
(183.2
)
 
 
 
 
Previous commitments funded
9.0

 
25.6

 
40.3

 
 
 
 
Principal pay downs
(1.1
)
 
(1.6
)
 
(5.5
)
 
 
 
 
Unfunded loan commitments
(18.7
)
 
(26.4
)
 
(93.8
)
 
 
 
 
Loans, net funded
$
135.0

 
$
234.3

 
$
545.6

 
 
 
 
 
(1)
Represents the weighted-average rate above the one-month LIBOR on loans whose interest rate is based on LIBOR as of June 30, 2015. $165.8 million of loans originated during the three months ended June 30, 2015 have LIBOR floors with a weighted average floor of 0.23%.
(2)
Reflects rates on new whole loans funded and originated during the three months ended June 30, 2015.
(3)
CRE loan payoffs and extensions resulted in $753,000 of exit fees earned during the six months ended June 30, 2015.
Impairment
During the quarter ended June 30, 2015, the Company recorded a substantial allowance for loan loss on a subordinated mezzanine loan position that was acquired in 2007. The outstanding loan balance of $38.1 million was fully reserved, and associated accrued interest of $3.0 million was reversed against interest income, for a total charge to operations of $41.1 million. The loan was originally supported by a portfolio of 13 hotel properties, most of which were luxury brand hotels. The last three luxury brand hotel properties securing the loan are located in or near San Juan, Puerto Rico, and recent economic and credit disruptions in Puerto Rico resulted in events that caused the Company to determine that the loan should be fully reserved.
Commercial Finance
•
Increased the total availability on a syndicated revolving credit facility used to fund middle market loans by $85.0 million from $140.0 million to $225.0 million and total commitment to $300.0 million during the first six months of 2015. At June 30, 2015, $151.0 million was outstanding on the facility.
•
Middle market loan portfolio was $331.0 million at amortized cost, with a weighted-average spread of one-month and three-month LIBOR plus 8.32% at June 30, 2015.
•
Bank loan portfolio, including asset-backed securities (“ABS”), corporate bonds, and loans held for sale was $197.5 million at amortized cost, with a weighted-average spread of one-month and three-month LIBOR plus 3.59% at June 30, 2015. RSO's bank loan portfolio was completely match-funded through two CLO issuances.
•
RSO earned $1.9 million of net fees through its subsidiary, Resource Capital Asset Management, during the six months ended June 30, 2015.
    
    




The following table summarizes RSO's middle market loan activities and fundings of previous commitments, at par, for the three months, six months and 12 months ended June 30, 2015 (in millions, except percentages):
 
Three Months Ended 
 June 30, 2015
 
Six Months Ended
June 30, 2015
 
12 Months
Ended
June 30, 2015
 
Weighted
Average
Spread (1)
 
Weighted
Average
All-in Rate (2)
 
Weighted Average Yield
 
 
 
 
 
 
New loans funded and originated
$
47.0

 
$
97.0

 
$
221.2

 
8.32
%
 
9.36
%
 
9.93
%
Unfunded loan commitments
3.8

 
11.8

 
17.8

 
 
 
 
 
 
New loans originated
50.8

 
108.8

 
239.0

 
 
 
 
 
 
Payoffs and sales
(10.0
)
 
(32.9
)
 
(56.5
)
 
 
 
 
 
 
Previous commitments funded
0.7

 
5.0

 
16.8

 
 
 
 
 
 
Principal pay downs
(1.4
)
 
(3.0
)
 
(9.0
)
 
 
 
 
 
 
Unfunded loan commitments
(3.8
)
 
(11.8
)
 
(17.8
)
 
 
 
 
 
 
Loans, net funded
$
36.3

 
$
66.1

 
$
172.5

 
 
 
 
 
 
 
(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 June 30, 2015, excluding fees. Of these loans, $279.8 million have LIBOR floors with a weighted average floor of 1.22%.
(2)
Reflects rates on RSO's portfolio balance as of June 30, 2015, excluding fees.
Liquidity
At July 31, 2015, after paying its second quarter 2015 common and preferred stock dividends, RSO's liquidity is derived from three primary sources:
•
unrestricted cash and cash equivalents of $124.0 million, restricted cash of $1.6 million in margin call accounts and $144,000 in the form of real estate escrows, reserves and deposits;
•
capital available for reinvestment in one of RSO's CRE CDOs of $250,000 and one of its CRE securitizations of $1.7 million, all of which is designated to finance future funding commitments on CRE loans; and
•
loan principal repayments of $59.5 million that will pay down outstanding CLO note balances, as well as interest collections of $2.4 million.
In addition, RSO has $199.4 million available through a term financing facility to finance the origination of CRE loans and $70.8 million available through a term financing facility to finance the purchase of CMBS. RSO also has $52.0 million available through a middle market syndicated revolving credit facility to finance the direct origination of middle market loans and purchase of syndicated bank loans.
Capital Allocation
As of June 30, 2015, RSO had allocated its invested equity capital among its targeted asset classes as follows: 68% in CRE assets, 29% in commercial finance assets and 3% in other investments.
Book Value

As of June 30, 2015, RSO’s book value per common share was $4.56, a decrease from $5.07 per common share at December 31, 2014.  Total stockholders’ equity at June 30, 2015, which measures equity before the consideration of non-controlling interests, was $873.8 million, of which $274.7 million was attributable to preferred stock. Total stockholders’ equity at December 31, 2014 was $935.5 million of which $271.7 million was attributable to preferred stock.
Capital Transactions
On August 3, 2015, RSO’s Board of Directors approved a one-for-four reverse stock split which is expected to be effective on August 31, 2015, after the close of business.
On August 3, 2015, RSO's Board of Directors also authorized RSO to repurchase up to $50 million of its outstanding equity and debt securities.





Investment Portfolio
The following table summarizes the amortized cost and net carrying amount of RSO's investment portfolio as of June 30, 2015, classified by asset type:
 
Amortized
Cost
 
Net Carrying Amount
 
Percent of
Portfolio
 
Weighted
Average Coupon
As of June 30, 2015
 
 
 
 
 
 
 
Loans Held for Investment:
 
 
 
 
 
 
 
Commercial real estate loans (1):
 
 
 
 
 
 
 
Whole loans
$
1,502,603

 
$
1,498,653

 
60.03
%
 
5.24%
B notes
15,997

 
15,977

 
0.64
%
 
8.68%
Mezzanine loans
54,822

 
16,677

 
0.67
%
 
5.62%
Bank loans (4)
181,757

 
180,760

 
7.24
%
 
3.72%
Middle market loans (5)
330,995

 
327,788

 
13.13
%
 
9.36%
Residential mortgage loans
3,030

 
3,030

 
0.12
%
 
3.94%
 
2,089,204

 
2,042,885

 
81.83
%
 
 
Loans held for sale(2):
 
 
 
 
 
 
 
Bank loans
6,028

 
6,028

 
0.24
%
 
2.18%
Residential mortgage loans
105,094

 
105,094

 
4.21
%
 
3.87%
 
111,122

 
111,122

 
4.45
%
 
 
Investments in Available-for-Sale Securities:
 
 
 
 
 
 
 
  CMBS-private placement
181,399

 
185,322

 
7.42
%
 
5.23%
  RMBS
2,422

 
2,474

 
0.10
%
 
5.37%
  ABS (3)
55,039

 
63,241

 
2.53
%
 
N/A
  Corporate Bonds
2,419

 
2,391

 
0.10
%
 
4.88%
 
241,279

 
253,428

 
10.15
%
 
 
Investment Securities-Trading:
 
 
 
 
 
 
 
Structured notes (3)
36,676

 
32,680

 
1.31
%
 
N/A 
 
36,676

 
32,680

 
1.31
%
 
 
Other (non-interest bearing):
 
 
 
 
 
 
 
Property held for sale
180

 
180

 
0.01
%
 
N/A
Investment in unconsolidated entities
56,150

 
56,150

 
2.25
%
 
N/A
 
56,330

 
56,330

 
2.26
%
 
 
Total Investment Portfolio
$
2,534,611

 
$
2,496,445

 
100.00
%
 
 
 
(1)
Net carrying amount includes allowance for loan losses of $42.1 million at June 30, 2015, allocated as follows: general allowance: B notes $20,000, mezzanine loans $72,000 and whole loans $1.7 million; specific allowance: mezzanine loans $38.1 million and whole loans $2.2 million.
(2)
Loans held for sale are carried at the lower of cost or market.
(3)
There is no stated rate associated with these securities.
(4)
Net carrying amount includes allowance for loan losses of $1.0 million at June 30, 2015.
(5)
Net carrying amount includes allowance for loan losses of $3.2 million at June 30, 2015.







Supplemental Information
The following schedules of reconciliations and supplemental information as of June 30, 2015 are included at the end of this release:
•
Schedule I - Reconciliation of GAAP Net Income (Loss) to Funds from Operations (“FFO”) and AFFO.
•
Schedule II - Summary of Securitization Performance Statistics.
•
Supplemental Information regarding loan investment statistics, CRE loans, bank loans and middle market 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 and residential mortgage 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 have in the past affected and may in the future 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 have in the past impaired and may in the future 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 operations, reconciliation of GAAP net income (loss) to FFO and AFFO, summary of securitization performance statistics and supplemental information regarding RSO's CRE loan, bank loan and middle market loan portfolios.









RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
 
June 30,
2015
 
December 31,
2014
 
(unaudited)
 
 
ASSETS (1)
 
 
 
Cash and cash equivalents
$
145,010

 
$
79,905

Restricted cash
45,755

 
122,138

Investment securities, trading
32,680

 
20,786

Investment securities available-for-sale, pledged as collateral, at fair value
170,935

 
197,800

Investment securities available-for-sale, at fair value
82,493

 
77,920

Linked transactions, net at fair value
—

 
15,367

Loans held for sale ($105.1 million and $113.4 at fair value)
111,122

 
113,675

Property held for sale
180

 
180

Loans, pledged as collateral and net of allowances of $46.3 million and $4.6 million
2,042,885

 
1,925,980

Loans receivable–related party
—

 
558

Investments in unconsolidated entities
56,150

 
59,827

Derivatives, at fair value
4,289

 
5,304

Interest receivable
12,046

 
16,260

Deferred tax asset, net
12,828

 
12,634

Principal paydown receivable
11,525

 
40,920

Direct financing leases
1,590

 
2,109

Intangible assets
24,370

 
18,610

Prepaid expenses
3,913

 
4,196

Other assets
16,453

 
14,510

Total assets
$
2,774,224

 
$
2,728,679

LIABILITIES (2)
 

 
 

Borrowings
$
1,827,461

 
$
1,716,871

Distribution payable
25,504

 
30,592

Accrued interest expense
5,467

 
2,123

Derivatives, at fair value
6,991

 
8,476

Accrued tax liability
6,383

 
9,219

Accounts payable and other liabilities
9,769

 
9,287

Total liabilities
1,881,575

 
1,776,568

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,1,069,016 and 1,069,016 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 5,740,479 and 5,601,146 shares issued and outstanding
6

 
6

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 4,800,000 shares issued and outstanding
5

 
5

Common stock, par value $0.001:  500,000,000 shares authorized; 134,172,504 and 132,975,177 shares issued and outstanding (including 2,767,809 and 2,023,639 unvested restricted shares)
134

 
133

Additional paid-in capital
1,252,718

 
1,245,245

Accumulated other comprehensive income (loss)
1,344

 
6,043

Distributions in excess of earnings
(380,389
)
 
(315,910
)
Total stockholders’ equity
873,819

 
935,523

Non-controlling interests
18,830

 
16,588

      Total equity
892,649

 
952,111

TOTAL LIABILITIES AND EQUITY
$
2,774,224

 
$
2,728,679








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

 
June 30,
2015
 
December 31,
2014
 
(unaudited)
 
 
(1) Assets of consolidated Variable Interest Entities ("VIEs") included in the total assets above:
 
 
 
Cash and cash equivalents
$
189

 
$
25

        Restricted cash
43,954

 
121,247

        Investment securities available-for-sale, pledged as collateral, at fair value
84,858

 
119,203

        Loans held for sale
6,027

 
282

Loans, pledged as collateral and net of allowances of $42.7 million and
$3.3 million
1,352,546

 
1,261,137

        Interest receivable
5,468

 
8,941

        Prepaid expenses
182

 
221

        Principal paydown receivable
—

 
25,767

        Other assets
9

 
(12
)
        Total assets of consolidated VIEs
$
1,493,233

 
$
1,536,811

 
 
 
 
(2) Liabilities of consolidated VIEs included in the total liabilities above:
 
 
 
        Borrowings
$
1,047,172

 
$
1,046,494

        Accrued interest expense
852

 
1,000

        Derivatives, at fair value
5,946

 
8,439

Unsettled loan purchases
(529
)
 
(529
)
        Accounts payable and other liabilities
190

 
(386
)
        Total liabilities of consolidated VIEs
$
1,053,631

 
$
1,055,018





RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
 
For the Three Months Ended
 
For the Six Months Ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
REVENUES
 
 
 
 
 
 
 
Interest income:
 
 
 
 
 
 
 
Loans
$
29,759

 
$
26,219

 
$
62,422

 
$
46,448

Securities
5,500

 
3,391

 
9,552

 
7,395

Leases
163

 
—

 
258

 
—

Interest income − other
1,119

 
982

 
1,951

 
3,834

Total interest income
36,541

 
30,592

 
74,183

 
57,677

Interest expense
15,803

 
10,610

 
30,705

 
20,238

Net interest income
20,738

 
19,982

 
43,478

 
37,439

Rental income
—

 
1,507

 
—

 
6,659

Dividend income
17

 
17

 
33

 
153

Fee income
3,446

 
2,322

 
5,051

 
4,822

Total revenues
24,201

 
23,828

 
48,562

 
49,073

OPERATING EXPENSES
 

 
 

 
 

 
 

Management fees − related party
3,500

 
3,314

 
7,060

 
6,394

Equity compensation − related party
791

 
2,032

 
1,786

 
3,699

Rental operating expense
—

 
1,077

 
6

 
4,473

Lease operating
24

 
—

 
47

 
—

General and administrative - Corporate
4,067

 
4,750

 
8,850

 
7,589

General and administrative - PCM
6,722

 
4,138

 
13,801

 
7,565

Depreciation and amortization
621

 
760

 
1,186

 
1,596

Impairment losses
—

 
—

 
59

 
—

Provision (recovery) for loan losses
38,810

 
782

 
42,800

 
(3,178
)
Total operating expenses
54,535

 
16,853

 
75,595

 
28,138

 
 
 
 
 
 
 
 
 
(30,334
)
 
6,975

 
(27,033
)
 
20,935

OTHER INCOME (EXPENSE)
 

 
 

 
 

 
 

Equity in earnings of unconsolidated subsidiaries
662

 
1,762

 
1,368

 
3,776

Net realized and unrealized gain (loss) on sales of investment securities available-for-sale and loans and derivatives
9,745

 
1,648

 
24,168

 
3,736

Net realized and unrealized gain (loss) on investment securities, trading
279

 
(650
)
 
2,353

 
(2,210
)
Unrealized gain (loss) and net interest income on linked transactions, net
—

 
5,012

 
235

 
7,317

(Loss) on reissuance/gain on extinguishment of debt
(171
)
 
(533
)
 
(1,071
)
 
(602
)
(Loss) gain on sale of real estate
22

 
3,042

 
—

 
3,042

Other income (expense)
—

 
—

 
—

 
(1,262
)
Total other income (expense)
10,537

 
10,281

 
27,053

 
13,797

 
 
 
 
 
 
 
 
INCOME (LOSS) BEFORE TAXES
(19,797
)
 
17,256

 
20

 
34,732

Income tax (expense) benefit
(2,918
)
 
446

 
(4,765
)
 
430

NET INCOME (LOSS)
(22,715
)
 
17,702

 
(4,745
)
 
35,162

 
 
 
 
 
 
 
 




 
For the Three Months Ended
 
For the Six Months Ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
Net (income) loss allocated to preferred shares
(6,116
)
 
(3,358
)
 
(12,207
)
 
(5,758
)
Net (income) loss allocable to non-controlling interest, net of taxes
(2,180
)
 
333

 
(4,657
)
 
389

NET INCOME (LOSS) ALLOCABLE TO COMMON SHARES
$
(31,011
)
 
$
14,677

 
$
(21,609
)
 
$
29,793

NET INCOME (LOSS) PER COMMON SHARE – BASIC
$
(0.24
)
 
$
0.12

 
$
(0.16
)
 
$
0.24

NET INCOME (LOSS) PER COMMON SHARE – DILUTED
$
(0.24
)
 
$
0.11

 
$
(0.16
)
 
$
0.23

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING − BASIC
131,409,263

 
126,952,493

 
131,333,704

 
126,288,516

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING − DILUTED
131,409,263

 
128,142,637

 
131,333,704

 
127,409,127







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 operating performance. The Company calculates AFFO by adding or subtracting from FFO the impact of non-cash accounting items as well as the effects of items that are deemed to be non-recurring in nature.  The Company deems transactions to be non-recurring if a similar transaction has not occurred in the past two years, and if it does not expect a similar transaction to occur in the next two years.  The Company adjusts for these non-cash and non-recurring items to analyze its ability to produce cash flow from on-going operations, which is used to pay dividends to its 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 the Company's real estate owned; and REIT tax planning adjustments, which primarily relate to accruals for owned properties for which the Company 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, the Company calculates 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 the Company's 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 allow accurate period to period comparisons of the Company's operating performance.

While the Company's calculations of FFO and AFFO may differ from the methodology used for calculating FFO and AFFO by other REITs, and its FFO and AFFO may not be comparable to FFO and 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 (loss) to FFO and AFFO for the periods presented (unaudited) (in thousands, except share and per share data):
 
For the Three Months Ended
 
For the Six Months Ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
Net income (loss) allocable to common shares - GAAP
$
(31,011
)
 
$
14,677

 
$
(21,609
)
 
$
29,793

Adjustments:
 
 
 
 
 
 
 
   Real estate depreciation and amortization
—

 
214

 
—

 
506

   (Gains) losses on sales of property (1) 
(22
)
 
(3,912
)
 
—

 
(4,778
)
   Gains on sale of preferred equity
—

 
(65
)
 
—

 
(1,049
)
FFO allocable to common shares
(31,033
)
 
10,914

 
(21,609
)
 
24,472

Adjustments:
 
 
 
 
 
 
 
Non-cash items:
 
 
 
 
 
 
 
   Provision (recovery) for loan losses
38,117

 
688

 
41,741

 
563

   Amortization of deferred costs
(non real estate) and intangible assets
2,986

 
1,543

 
5,853

 
3,163

   Amortization of discount on convertible senior notes
633

 
420

 
949

 
1,023

   Equity investment (gains) losses
(350
)
 
278

 
(402
)
 
1,560

   Share-based compensation
791

 
2,032

 
1,786

 
3,699

   Impairment losses
—

 
—

 
59

 
—

   Unrealized losses (gains) on CMBS
marks - linked transactions (2)
—

 
(439
)
 
(235
)
 
(2,202
)
   Unrealized (gains) losses on
trading portfolio
(155
)
 
1,029

 
(1,319
)
 
1,471

   Unrealized (gains) losses on FX transactions
5,510

 
(146
)
 
4,851

 
(146
)
   Unrealized (gains) losses on derivatives
—

 
—

 
1,075

 
—

   Straight-line rental adjustments
—

 
—

 
—

 
2

   Loss on resale of debt
171

 
533

 
1,071

 
602

   Change in mortgage
servicing rights valuation reserve
(800
)
 
—

 
(250
)
 
300

  Residential loan warranty reserve
400

 
—

 
400

 
—

Dead deal costs
—

 
—

 
399

 
—

REIT tax planning adjustments
—

 
170

 
317

 
1,127

Cash items:
 
 
 
 
 
 
 
   Gains (losses) on sale of property (1) 
22

 
3,912

 
—

 
4,778

   Gains on sale of preferred equity
—

 
65

 
—

 
1,049

   Gain (loss) on extinguishment of debt
3,765

 
3,068

 
6,645

 
7,599

   Capital expenditures
—

 
(25
)
 
—

 
(38
)
AFFO allocable to common shares
$
20,057

 
$
24,042

 
$
41,331

 
$
49,022

 
 
 
 
 
 
 
 
Weighted average shares – diluted
131,409

 
128,143

 
131,334

 
127,409

 
 
 
 
 
 
 
 
AFFO per share – diluted 
$
0.15

 
$
0.19

 
$
0.31

 
$
0.38

 
(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.
(2)
As the result of an accounting standards update adopted on January 1, 2015, RSO unlinked its previously linked transactions.





SCHEDULE II

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 our securitizations for the periods presented (in thousands):
Name
 
Cash Distributions
 
Annualized Interest Coverage Cushion
 
Overcollateralization Cushion
 
 
Six Months Ended June 30,
 
Year Ended
December 31,
 
As of June 30,
 
As of June 30,
 
As of Initial
Measurement Date
 
 
2015 (1)
 
2014 (1)
 
2015 (2) (3)
 
2015 (4)
 
Apidos CDO III (5)
 
$
8,523

 
$
3,551

 
$
—

 
$
—

 
$
11,269

Apidos Cinco CDO
 
$
3,807

 
$
9,757

 
$
6,570

 
$
20,687

 
$
17,774

RREF 2006-1
 
$
1,875

 
$
10,172

 
$
3,466

 
$
90,124

 
$
24,941

RREF 2007-1
 
$
11,493

 
$
7,630

 
$
2,974

 
$
65,854

 
$
26,032

RCC CRE Notes 2013
 
$
5,198

 
$
11,860

 
N/A

 
N/A

 
N/A

RCC 2014-CRE2
 
$
7,876

 
$
5,463

 
N/A

 
$
20,663

 
$
20,663

RCC 2015-CRE3 (6)
 
$
3,158

 
N/A

 
N/A

 
$
20,313

 
$
20,313

Moselle CLO S.A. (7)
 
$
28,911

 
$
2,891

 
N/A

 
N/A

 
N/A

* The above table does not include Apidos CDO I, Apidos CLO VIII or Whitney CLO I, as these CLOs were previously called and were substantially liquidated. No securitizations had open reinvestment periods as of June 30, 2015.
 
(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 $0 and $4.2 million of principal paydowns during the six months ended June 30, 2015 and the year ended December 31, 2014, 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 III was called on June 12, 2015 and substantially all of its assets were liquidated. The Company received a return of principal of $7.6 million. There is an estimated $4.8 million of principal remaining to be distributed upon collection, which is expected during the period ended September 30, 2015.
(6)
Resource Capital Corp. 2015-CRE3 closed on February 24, 2015; the first distribution was in March 2015. There is no reinvestment period for the securitization. Additionally, the indenture contains no interest coverage test provisions.
(7)
Moselle CLO S.A. was acquired on February 24, 2014 and the reinvestment period for this securitization expired prior to the acquisition. In December 2014, the Company liquidated Moselle CLO S.A. and, as a result, all of the assets were sold.





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):
 
 
June 30,
2015
 
December 31,
2014
Allowance for loan losses:
 
 
 
 
Specific allowance:
 
 
 
 
     Commercial real estate loans
 
$
40,275

 
$
—

     Bank loans
 
257

 
570

Middle market loans
 
3,207

 
—

Residential mortgage loans
 
—

 
—

Total specific allowance
 
43,739

 
570

General allowance:
 
 
 
 
     Commercial real estate loans
 
1,840

 
4,043

     Bank loans
 
740

 
—

Total general allowance
 
2,580

 
4,043

Total allowance for loans
 
$
46,319

 
$
4,613

Allowance as a percentage of total loans
 
2.2
%
 
0.2
%
 
 
 
 
 
Loans held for sale:
 
 
 
 
     Commercial real estate loans
 
$
—

 
$
—

     Bank loans
 
6,028

 
282

     Residential mortgage loans
 
105,094

 
113,393

Total loans held for sale (1)
 
$
111,122

 
$
113,675

 
(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 June 30, 2015 (based on par value):
Security type:
 
Whole loans
95.5
%
Mezzanine loans
3.5
%
B Notes
1.0
%
Total
100.0
%
 
 
Collateral type:
 
Multifamily
38.1
%
Office
18.2
%
Hotel
15.5
%
Retail
13.1
%
Student Housing
9.2
%
Mixed Use
2.2
%
Other
3.7
%
Total
100.0
%
 
 
Collateral location:
 
Texas
28.8
%
Southern California
15.1
%
Northern California
7.6
%
Arizona
6.2
%
Florida
6.2
%
North Carolina
5.2
%
Georgia
4.1
%
Minnesota
3.9
%
Nevada
2.8
%
Pennsylvania
2.2
%
Washington
1.9
%
Utah
1.7
%
Other
14.3
%
Total
100.0
%





RESOURCE CAPITAL CORP. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(unaudited)

    
The following table presents bank loan portfolio statistics by industry as of June 30, 2015 (based on par value):
Industry type:
 
Diversified/Conglomerate Service
11.8
%
Automobile
10.9
%
Healthcare, Education and Childcare
10.3
%
Retail Stores
8.3
%
Chemicals, Plastics and Rubber
7.8
%
Hotels, Motels, Inns and Gaming
7.0
%
Electronics
4.7
%
Personal Transportation
4.0
%
Broadcasting and Entertainment
3.8
%
Finance
3.1
%
Utilities
3.0
%
Telecommunications
3.0
%
Personal, Food and Miscellaneous services
2.3
%
Leisure, Amusement, Motion Pictures, Entertainment
2.3
%
Buildings and Real Estate
2.2
%
Printing and Publishing
2.2
%
Banking, Finance, Insurance & Real Estate
2.1
%
Other
11.2
%
Total
100.0
%



The following table presents middle market loan portfolio statistics by industry as of June 30, 2015 (based on par value):
Industry type:
 
 Diversified/Conglomerate Service
12.3
%
 Personal, Food, and Miscellaneous Services
11.1
%
 Hotels, Motels, Inns, and Gaming
10.2
%
 Structure Finance Securities
8.3
%
 Healthcare, Education, and Childcare
8.1
%
 Telecommunications
7.4
%
 Finance
7.2
%
 Leisure, Amusement, Motion Pictures, Entertainment
5.9
%
 Personal Transportation
4.9
%
 Buildings and Real Estate
4.5
%
 Beverage, Food and Tobacco
3.8
%
 Cargo Transport
3.8
%
 Broadcasting and Entertainment
3.4
%
 Diversified/Conglomerate Manufacturing
3.1
%
 Home and Office Furnishings, Housewares, and Durable Consumer Products
3.0
%
 Oil and Gas
3.0
%
Total
100.0
%