NOTE 1 - NATURE OF OPERATIONS

Resource America, Inc. (the "Company") (NASDAQ: REXI) is a specialized asset management company that uses industry specific expertise to evaluate, originate, service and manage investment opportunities through its real estate, financial fund management, and commercial finance operating segments. As a specialized asset manager, the Company seeks to develop investment funds for outside investors for which the Company provides asset management services, typically under long-term management and operating arrangements either through a contract with, or as the manager or general partner of, the sponsored fund. The Company limits its investment funds to investment areas where it owns existing operating companies or has specific expertise.

The consolidated financial statements and the information and tables contained in the notes to the consolidated financial statements are unaudited. However, in the opinion of management, these interim financial statements include all adjustments necessary to fairly present the results of the interim periods presented. The results of operations for the three months ended March 31, 2016 may not necessarily be indicative of the results of operations for the full year ending December 31, 2016.

The Company conducts its real estate operations primarily through the following subsidiaries:

•

Resource Real Estate Advisor, LLC manages the activities of Resource Real Estate Opportunity REIT I ("Opportunity REIT I") a public non-traded REIT, which completed its initial public offering in December 2013 having raised a total of $635.0 million. As of March 31, 2016, the Opportunity REIT I manages a portfolio consisting of value-add residential multifamily rental properties and loans valued at $1.0 billion;

•

Resource Real Estate Advisor II, LLC manages the activities of Resource Real Estate Opportunity REIT II ("Opportunity REIT II"), a public non-traded REIT, which completed its initial public offering in February 6, 2016 having raised a total of $556.0 million. This fund focuses on acquiring a portfolio consisting of value-add residential multifamily rental properties and loans. As of March 31, 2016, Opportunity REIT II manages a portfolio consisting of value-add residential multifamily rental properties and loans valued at $634.9 million;

•

Resource Innovation Office Advisor, LLC manages Resource Innovation Office REIT, Inc. ("Innovation Office REIT"), a public non-traded REIT, filed an amended initial public offering of up to $1.0 billion in its common stock at a maximum price of $10.27 for Class A shares and $10.00 for Class T shares. A post-effective amendment related to securities offered by this fund was declared effective by the SEC on March 7, 2016. The Innovation Office REIT will focus on acquiring office properties and real estate debt secured by office properties;


•	Resource Capital Partners, Inc. acts as the general partner manager and managing member of, and provides asset management services to, the Company's five real estate investment partnerships and three tenant-in-common ("TIC") programs;


•	Resource Real Estate Management, Inc. (“Resource Residential”) provides property management services to the Company's multifamily apartment portfolio;

•

Resource Real Estate Funding, Inc., on behalf of Resource Capital Corp., ("RSO") (NYSE:RSO), a diversified real estate finance company that conducts its business so as to qualify as a real estate investment trust ("REIT"), manages a commercial real estate debt portfolio comprised principally of first priority interest in commercial mortgage loans ("A notes"), whole mortgage loans, mortgage participations, subordinated interests in commercial mortgage loans ("B notes"), mezzanine debt and related commercial real estate securities. In addition, it manages a separate portfolio of discounted real estate and real estate loans;


•	Pearlmark Real Estate, LLC ("Pearlmark"), a joint venture in which the Company owns a 50% interest, manages institutional real estate investments. Pearlmark is in the process of fundraising for its first real estate investment fund and another managed entity that is in the formation stage; and


•	Resource Real Estate, Inc. manages owned assets and ventures, which are collectively referred to as the “legacy portfolio.”

The Company conducts its financial fund management operations primarily through the following operating entities:


•	CVC Credit Partners ("CVC Credit Partners"), a joint venture between the Company and an unrelated third-party, finances, structures and manages investments in bank loans, high yield bonds and equity investments through collateralized loan obligation issuers ("CLOs"), managed accounts and three credit opportunity funds;


•	Resource Capital Manager, Inc. ("RCM"), an indirect wholly-owned subsidiary, provides investment management and administrative services to RSO under a management agreement between the Company, RCM and RSO ("the RCM Agreement");


•	Resource Capital Markets, Inc. ("Resource Capital Markets"), through the Company's registered broker-dealer subsidiary, Resource Securities, Inc., acts as an agent in the primary and secondary markets for structured finance securities and transactions;


•	Northport Capital, LLC ("Northport"), provides middle market loan origination, management and monitoring services to RSO under the RCM Agreement;

•

Trapeza Capital Management, LLC ("TCM"), a joint venture between the Company and an unrelated third-party, manages investments in trust preferred securities and senior debt securities of banks, bank holding companies, insurance companies and other financial companies through collateralized debt obligation ("CDO") issuers. TCM, together with the Trapeza CDO issuers, are collectively referred to as Trapeza;


•	Ischus Capital Management, LLC ("Ischus") manages legacy CDOs it sponsored, which hold investments in asset-backed securities ("ABS") including residential mortgage-backed securities ("RMBS") and commercial mortgage-backed securities, ("CMBS");


•	Resource Financial Institutions Group, Inc. (“RFIG”), serves as the general partner for seven company-sponsored affiliated partnerships which invest in financial institutions; and


•	Pelium Capital Management, LLC, serves as the manager for Pelium Capital Partners, LP ("Pelium"), a hedge fund with primary holdings in CDO/CLO note and equity positions, CMBS and warehouse facilities.

The Company conducts its commercial finance operations through LEAF Commercial Capital, Inc. (“LEAF”) and LEAF Financial Corporation (“LEAF Financial”). As of March 31, 2016, LEAF Financial sponsored and manages one publicly-held investment partnership consisting of a portfolio of leases and loans for which LEAF acts as the sub-servicer. LEAF Financial liquidated two other commercial finance investment partnerships during 2014 and a third investment partnership in July 2015.