CST: 24/09/2016 19:17:07   

Resource Capital Corp. Reports Results for Three Months and Year Ended December 31, 2015

207 Days ago

NEW YORK, NY--(Marketwired - Feb 29, 2016) - Resource Capital Corp. (NYSE: RSO)

Highlights

  • Adjusted net income was $13.7 million for the three months ended December 31, 2015, or $0.43 per share, and normalized AFFO was $15.4 million, or $0.49 per share for the same period (see Schedule I).
  • Since the inception of the common stock repurchase program, we repurchased approximately 5.9% of our outstanding shares through December 31, 2015.
  • Net interest income increased by $5.2 million, or 23.9%, as compared to the fourth quarter of 2014 and by $4.4 million, or 19.7%, as compared to the third quarter of 2015.
  • Originated $255.1 million and $744.2 million in new Commercial Real Estate ("CRE") loans during the three months and year ended December 31, 2015.
  • RSO's book value per common share was $17.63.
  • GAAP net income (loss) allocable to common shares of $0.03 and $(0.43) per share-diluted.
  • Adjusted Funds from Operations ("AFFO") of $0.36 and $2.08 per share-diluted (see Schedule I).
  • Common stock cash dividend of $0.42 and $2.34 per share.

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"), middle market loans, commercial finance assets and other investments, reported results for the three months and year ended December 31, 2015. All per share amounts stated in this release take into account the one-for-four reverse stock split effective on August 31, 2015 as though it were in full effect for all periods presented for comparison purposes.

Fourth Quarter 2015 Results

  • RSO reported AFFO for the three months ended December 31, 2015 of $11.3 million, or $0.36 per share-diluted. A reconciliation of GAAP net income (loss) to AFFO is set forth in Schedule I of this release.
  • Adjusted net income was $13.7 million, or $0.43 per share-diluted for the three months ended December 31, 2015, which includes adjustments for several items, including (i) approximately $3.3 million for provisions in our middle market loan segment; (ii) approximately $2.6 million for mark-to-market adjustments in our middle market loan segment; (iii) approximately $1.0 million for mark-to-market adjustments on our trading portfolio; (iv) approximately $2.7 million for provisions and impairments in our commercial finance segment; (v) approximately $2.3 million for loan indemnifications and aged receivables write-offs in our residential mortgage lending segment; and (vi) approximately $900,000 related to mark-to-market adjustments related to share-based compensation. A reconciliation from GAAP net income to adjusted net income is included in Schedule I of this release.

Additional highlights:

Commercial Real Estate

  • CRE loan portfolio, at carrying value, is comprised of approximately 99% senior whole loans as of December 31, 2015, an increase from 94% as of December 31, 2014.
  • $1.5 billion, or 93%, of floating rate senior whole loans in the CRE portfolio have London Interbank Offered Rate ("LIBOR") floors with a weighted average floor of 0.36% as of December 31, 2015.
  • Interest income on whole loans increased by $30.4 million, or 52.8%, to $87.9 million during the year ended December 31, 2015 as compared to $57.5 million during the year ended December 31, 2014.
  • Closed and funded $683.4 million of new whole loans in the 12 months ended December 31, 2015, with a weighted average yield of 5.36%, including amortization of origination fees.

The following table summarizes RSO's CRE loan activities and fundings of previous commitments, at par, for the three, 12 and 24 months ended December 31, 2015 (in millions, except percentages):

                             
   
Three Months Ended
December 31,
 2015
    12 Months Ended
December 31,
 2015
    24 Months Ended
December 31,
 2015
    Floating Weighted Average Spread (1) (2)     Weighted Average Fixed Rate
New whole loans funded and originated   $ 228.7     $ 683.4     $ 1,351.2     4.80 %   --
Unfunded loan commitments     26.4       60.8       170.3            
New loans originated     255.1       744.2       1,521.5            
Payoffs (3)     (211.3 )     (381.6 )     (540.5 )          
Previous commitments funded     10.9       47.5       69.1            
Principal pay downs     (0.1 )     (2.1 )     (7.8 )          
Unfunded loan commitments     (26.4 )     (60.8 )     (170.3 )          
Loans, net funded   $ 28.2     $ 347.2     $ 872.0            
                                   
(1)   Represents the weighted average rate above one-month LIBOR on loans whose interest rates are based on LIBOR for loans originated during the year ended December 31, 2015. The $683.4 million of loans originated during the year ended December 31, 2015 have LIBOR floors with a weighted average floor of 0.23% as of December 31, 2015.
(2)   Reflects rates on new whole loans funded and originated during the year ended December 31, 2015.
(3)   CRE loan payoffs and extensions resulted in $2.4 million in extension and exit fees during the year ended December 31, 2015.
     

Commercial Finance & Middle Market Loans

  • During 2015, RSO 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 the total commitment to $300.0 million. At December 31, 2015, $190.0 million was outstanding on the facility.
  • RSO's middle market loan portfolio was $379.5 million at carrying value, with a weighted-average spread of one-month and three-month LIBOR plus 9.79% at December 31, 2015.
  • RSO's legacy bank loan portfolio, including asset-backed securities ("ABS"), corporate bonds, and loans held for sale was $142.5 million at amortized cost, with a weighted-average spread of one-month and three-month LIBOR plus 3.72% at December 31, 2015. RSO's bank loan portfolio was completely match-funded through a collateralized loan obligation ("CLO") issuer.
  • RSO earned $3.9 million of net fees through its subsidiary, Resource Capital Asset Management, during the year ended December 31, 2015.

The following table summarizes RSO's middle market lending portfolio loan activities and fundings of previous commitments, at par, for the three, 12 and 24 months ended December 31, 2015 (in millions, except percentages):

                           
   
Three Months Ended
December 31,
 2015
   
12 Months Ended
December 31,
 2015
   
24 Months Ended
December 31,
 2015
    Weighted
Average
Spread
(1)
  Weighted
Average
All-in Rate
(2)
New loans funded and originated   $ 49.5     $ 179.5     $ 422.8     9.37 %   10.46 %
Unfunded loan commitments     2.8       12.7       21.7          
New loans originated     52.3       192.2       444.5          
Payoffs and sales (3)     (13.9 )     (67.6 )     (96.1 )        
Previous commitments funded     0.3       13.0       28.3          
Principal pay downs     (5.5 )     (10.0 )     (25.9 )        
Unfunded loan commitments     (2.8 )     (12.7 )     (21.7 )        
Loans, net funded   $ 30.4     $ 114.9     $ 329.1          
                                     
(1)   Represents the weighted-average rate above the one-month and three-month LIBOR on loans whose interest rates are based on LIBOR for loans originated during the year ended December 31, 2015, excluding fees. Of these loans, $138.3 million have LIBOR floors with a weighted average floor of 1.06%.
(2)   Reflects rates on RSO's entire portfolio balance as of December 31, 2015, excluding fees.
(3)   Middle Market loan payoffs resulted in $358,000 of exit fees during the year ended December 31, 2015.
     

Liquidity

At January 31, 2016, after paying our fourth quarter 2015 common and preferred stock dividends, our liquidity is derived from three primary sources:

  • unrestricted cash and cash equivalents of $77.7 million and restricted cash of $1.4 million in margin call accounts;
  • capital available for reinvestment in three of RSO's CRE securitizations of $19.3 million, all of which is designated to finance future funding commitments on CRE loans; and
  • loan principal repayments of $22.0 million that will pay down outstanding CLO note balances, as well as interest collections of $1.6 million.

In addition, RSO has $425.0 million available through two term financing facilities to finance the origination of CRE loans and $74.4 million available through a term financing facility to finance the purchase of CMBS. RSO also has $47.0 million available through a middle market syndicate facility to finance the direct origination of middle market loans and purchase of syndicated bank loans.

Equity Allocation

As of December 31, 2015, RSO had allocated its invested equity capital among its targeted asset classes as follows: 71% in CRE assets, 27% in commercial finance and middle market assets and 2% in other investments.

Book Value

As of December 31, 2015, RSO's book value per common share was $17.63. Total stockholders' equity at December 31, 2015, which measures equity before the consideration of non-controlling interests, was $818.9 million, of which $274.7 million was attributable to preferred stock.

Capital Transactions

Since the inception of the program through December 31, 2015, RSO has repurchased $25.9 million of its common stock (approximately 2.0 million shares), which represented approximately 5.9% of the outstanding common shares, at a weighted average price of $12.95 per share.

Investment Portfolio

The table below summarizes the amortized cost and net carrying amount of RSO's investment portfolio, classified by asset type, as of December 31, 2015 (in thousands, except percentages):

                     
As of December 31, 2015   Amortized
cost
  Net Carrying Amount   Percent of
portfolio
    Weighted
average coupon
 
Loans Held for Investment:                        
  Commercial real estate loans (1):                        
    Whole loans   $ 1,630,801   $ 1,627,056   64.02 %   5.09 %
    B notes     15,934     15,919   0.63 %   8.68 %
    Mezzanine loans     45,372     7,293   0.29 %   9.01 %
  Bank loans (4)     134,517     133,235   5.24 %   3.80 %
  Middle market loans (5)     379,452     375,513   14.78 %   9.72 %
  Residential mortgage loans (6)     1,746     1,735   0.07 %   4.44 %
      2,207,822     2,160,751   85.03 %      
Loans held for sale (2) :                        
  Bank loans     1,475     1,475   0.06 %   0.84 %
  Residential mortgage loans     94,471     94,471   3.72 %   3.92 %
      95,946     95,946   3.78 %      
Investments in Available-for-Sale Securities:                        
  CMBS-private placement     158,584     159,424   6.27 %   5.21 %
  RMBS     2,156     2,190   0.08 %   4.87 %
  ABS     41,994     44,214   1.74 %   N/A (3 )
  Corporate Bonds     2,422     2,260   0.09 %   4.88 %
      205,156     208,088   8.18 %      
Investment Securities-Trading:                        
  Structured notes     28,576     25,550   1.00 %   N/A (3 )
  RMBS     1,896     --   -- %   N/A (3 )
      30,472     25,550   1.00 %      
Other:                        
  Investment in unconsolidated entities     50,030     50,030   1.97 %   N/A (3 )
  Direct financing leases (7)     1,396     931   0.04 %   5.66 %
      51,426     50,961   2.01 %      
Total Investment Portfolio   $ 2,590,822   $ 2,541,296   100.00 %      
                         
(1)    Net carrying amount includes an allowance for loan losses of $41.8 million at December 31, 2015, allocated as follows: whole loans $3.7 million, B notes $15,000 and mezzanine loans $38.1 million.
(2)   Loans held for sale are carried at the lower of cost or fair market value. Amortized cost is equal to fair value.
(3)    There is no stated rate associated with these securities.
(4)   Net carrying amount includes allowance for loan losses of $1.3 million at December 31, 2015.
(5)   Net carrying amount includes allowance for loan losses of $3.9 million at December 31, 2015.
(6)   Net carrying amount includes allowance for loan losses of $11,000 at December 31, 2015.
(7)   Net carrying amount includes allowance for loan losses of $465,000 at December 31, 2015.
     

Supplemental Information

The following schedules of reconciliations or supplemental information as of December 31, 2015 are included at the end of this release:

  • Schedule I - Reconciliation of GAAP Net Income to Funds from Operations ("FFO") and AFFO.
  • Schedule II - Summary of General and Administrative Expenses.
  • Schedule III - 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 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.

Furthermore, certain non-GAAP financial measures will be discussed on this conference call. Our presentations of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with Generally Accepted Accounting Principles can be accessed through our filings with the SEC at www.sec.gov.

The remainder of this release contains RSO's unaudited consolidated balance sheets, unaudited consolidated statements of operations, reconciliation of GAAP net income 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)  
   
    December 31,
2015
    December 31,
2014
 
    (unaudited)        
ASSETS (1)                
  Cash and cash equivalents   $ 78,756     $ 79,905  
  Restricted cash     40,635       122,138  
  Investment securities, trading     25,550       20,786  
  Investment securities available-for-sale, pledged as collateral, at fair value     162,306       197,800  
  Investment securities available-for-sale, at fair value     45,782       77,920  
  Linked transactions, net at fair value     --       15,367  
  Loans held for sale ($94.5 million and $113.4 million at fair value)     95,946       113,675  
  Property available-for-sale     --       180  
  Loans, pledged as collateral and net of allowances of $47.5 million and $4.6 million     2,160,751       1,925,980  
  Loans receivable-related party     --       558  
  Investments in unconsolidated subsidiaries     50,030       59,827  
  Derivatives, at fair value     3,446       5,304  
  Interest receivable     14,009       16,260  
  Deferred tax asset, net     12,646       12,634  
  Principal paydown receivable     17,941       40,920  
  Direct financing leases, net of allowances of $465,000 and $0     931       2,109  
  Intangible assets     26,228       18,610  
  Prepaid expenses     3,180       4,196  
  Other assets     22,295       14,510  
    Total assets   $ 2,760,432     $ 2,728,679  
LIABILITIES (2)                
  Borrowings   $ 1,895,288     $ 1,716,871  
  Distribution payable     17,351       30,592  
  Accrued interest expense     5,604       2,123  
  Derivatives, at fair value     3,941       8,476  
  Accrued tax liability     549       9,219  
  Accounts payable and other liabilities     10,939       9,287  
    Total liabilities     1,933,672       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 $25.00per 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: 125,000,000 shares authorized; 31,562,724 and 33,243,794 shares issued and outstanding (including 691,369 and 505,910 unvested restricted shares)     32       33  
  Additional paid-in capital     1,228,346       1,245,345  
  Accumulated other comprehensive income (loss)     (2,923 )     6,043  
  Distributions in excess of earnings     (406,603 )     (315,910 )
    Total stockholders' equity     818,864       935,523  
  Non-controlling interests     7,896       16,588  
    Total equity     826,760       952,111  
TOTAL LIABILITIES AND EQUITY   $ 2,760,432     $ 2,728,679  
                 
   
   
   
RESOURCE CAPITAL CORP. AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS - (Continued)  
(in thousands, except share and per share data)  
   
    December 31,
2015
    December 31,
2014
 
    (unaudited)          
(1) Assets of consolidated Variable Interest Entities ("VIEs") included in the total assets above:                
  Cash and cash equivalents   $ 95     $ 25  
  Restricted cash     39,061       121,247  
  Investments securities available-for-sale, pledged as collateral, at fair value     66,137       119,203  
  Loans, pledged as collateral and net of allowances of $42.8 million and $3.3 million     1,416,441       1,261,137  
  Loans held for sale     1,475       282  
  Interest receivable     6,592       8,941  
  Prepaid expenses     238       221  
  Principal receivable     17,800       25,767  
  Other assets     833       (12 )
  Total assets of consolidated VIEs   $ 1,548,672     $ 1,536,811  
                 
(2) Liabilities of consolidated VIEs included in the total liabilities above:                
  Borrowings   $ 1,032,581     $ 1,046,494  
  Accrued interest expense     923       1,000  
  Derivatives, at fair value     3,346       8,439  
  Unsettled loan purchases     --       (529 )
  Accounts payable and other liabilities     (117 )     (386 )
  Total liabilities of consolidated VIEs   $ 1,036,733     $ 1,055,018  
                 
   
   
   
RESOURCE CAPITAL CORP. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(in thousands, except share and per share data)  
   
    Three Months Ended     Years Ended  
    December 31,     December 31,  
    2015     2014     2015     2014  
    (unaudited)     (unaudited)        
REVENUES                                
  Interest income:                                
    Loans   $ 39,006     $ 29,383     $ 134,930     $ 102,857  
    Securities     3,914       4,702       18,332       17,265  
    Leases     306       --       556       --  
    Interest income - other     1,340       1,304       4,259       6,785  
      Total interest income     44,566       35,389       158,077       126,907  
  Interest expense     17,721       13,726       65,653       45,473  
      Net interest income     26,845       21,663       92,424       81,434  
  Rental income     --       664       --       8,441  
  Dividend income     16       17       66       186  
  Fee income     3,192       2,219       9,509       9,385  
    Total revenues     30,053       24,563       101,999       99,446  
                                 
OPERATING EXPENSES                                
  Management fees - related party     2,994       3,584       13,306       13,584  
  Equity compensation - related party     1,584       2,069       3,145       6,566  
  Rental operating expense     --       275       6       5,443  
  Lease operating     43       --       57       --  
  General and administrative     14,412       11,361       48,080       34,861  
  Depreciation and amortization     3,044       579       4,858       2,737  
  Impairment losses     313       --       372       --  
  Provision for loan losses     6,055       3,543       49,889       1,804  
    Total operating expenses     28,445       21,411       119,713       64,995  
      1,608       3,152       (17,714 )     34,451  
OTHER INCOME (EXPENSE)                                
  Equity in net earnings of unconsolidated subsidiaries     686       104       2,388       4,767  
  Net realized and unrealized gain (loss) on sales of investment securities available-for-sale and loans and derivatives     5,723       7,321       35,703       15,283  
  Net realized and unrealized (loss) gain on investment securities, trading     (2,320 )     (984 )     (547 )     (2,818 )
  Unrealized gain (loss) and net interest income on linked transactions, net     --       356       235       7,850  
  (Loss) on reissuance/gain on extinguishment of debt     --       (1,973 )     (1,403 )     (4,442 )
  Gain on sale of real estate     225       3,154       206       6,127  
  Other income (expense)     60       --       60       (1,262 )
    Total other income (expense)     4,374       7,978       36,642       25,505  
NET INCOME (LOSS) BEFORE TAXES     5,982       11,130       18,928       59,956  
  Income tax (expense) benefit     1,224       1,545       (1,745 )     2,212  
NET INCOME (LOSS)     7,206       12,675       17,183       62,168  
  Net (income) loss allocated to preferred shares     (6,115 )     (5,873 )     (24,437 )     (17,176 )
  Net (income) loss allocable to non-controlling interest, net of taxes     (142 )     104       (6,628 )     (965 )
NET INCOME (LOSS) ALLOCABLE TO COMMON SHARES   $ 949     $ 6,906     $ (13,882 )   $ 44,027  
NET INCOME (LOSS) PER COMMON SHARE - BASIC   $ 0.03     $ 0.21     $ (0.43 )   $ 1.38  
NET INCOME (LOSS) PER COMMON SHARE - DILUTED   $ 0.03     $ 0.21     $ (0.43 )   $ 1.36  
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC     31,100,828       32,450,417       32,280,319       32,007,766  
WEIGHTED AVERAGE NUMBER OFCOMMON SHARES OUTSTANDING - DILUTED     31,551,089       32,725,085       32,280,319       32,314,847  

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. 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.

Adjusted net income and normalized AFFO reflect what management believes is a transparent look into what the quarter's net income and AFFO would have been if not for certain items, including many non-recurring items, that do not represent the Company's expected ongoing operations.

The following table reconciles GAAP net income (loss) to FFO and AFFO for the periods presented (unaudited) (in thousands, except per share data):

             
    Three Months Ended     Years Ended  
    December 31,     December 31,  
    2015     2014     2015     2014  
Net income (loss) allocable to common shares - GAAP   $ 949     $ 6,906     $ (13,882 )   $ 44,027  
Adjustments:                                
  Real estate depreciation and amortization     --       --       --       506  
  Gains on sales of property (1)     (415 )     (3,511 )     (396 )     (8,990 )
  Gains on sale of preferred equity     --       195       --       (912 )
FFO allocable to common shares     534       3,590       (14,278 )     34,631  
Adjustments:                                
Non-cash items:                                
  Adjust for impact of imputed interest on VIE accounting     --       --       --       --  
  Provision (recovery) for loan and lease losses     867       (271 )     43,438       820  
  Amortization of deferred costs (non real estate) and intangible assets     4,194       2,932       13,949       8,309  
  Amortization of discount on convertible senior notes     708       --       2,364       1,879  
  Impairment charge on intangible asset, net of tax benefit     1,534       --       1,534       --  
  Equity investment (gains) losses     (1,467 )     696       (2,829 )     2,243  
  Share-based compensation     1,585       2,069       3,145       6,566  
  Impairment losses     313       --       372       --  
  Unrealized (gains) losses on CMBS marks - linked transactions (2)     --       97       (235 )     (1,894 )
  Unrealized (gains) losses on trading portfolio     1,880       1,310       1,616       2,567  
  Unrealized (gains) losses on FX transactions     (116 )     822       1,985       3,363  
  Unrealized (gains) losses on derivatives     (295 )     (1,760 )     2,029       (1,381 )
  Other adjustments     --       --       --       2  
  Loss on reissuance of debt     --       1,973       1,403       4,442  
  Change in mortgage servicing rights valuation reserve     (550 )     364       100       664  
  Change in residential loan warranty reserve     1,694       --       2,295       --  
  Dead deal costs     --       --       399       --  
  REIT tax planning adjustments     --       (17 )     317       1,403  
Cash items:                                
  Gains on sales of property (1)     415       3,511       396       8,990  
  Gains on sale preferred equity     --       (195 )     --       912  
  Gains on resale of debt     --       6,536       9,252       21,469  
  Capital expenditures     --       --       --       (38 )
AFFO allocable to common shares   $ 11,296     $ 21,657     $ 67,252     $ 94,947  
                                 
Weighted average shares - diluted     31,551       32,725       32,280       32,315  
                                 
AFFO per share - diluted   $ 0.36     $ 0.66     $ 2.08     $ 2.94  
                                 
(1)    Amount represents gains/losses on sales of owned real estate as well as sales of a joint venture real estate interest that were recorded by RSO on an equity basis.
(2)   Due to a change in accounting guidance, as of January 1, 2015, the concept of linked transactions no longer exists.
     

We have five reportable operating segments: Commercial Real Estate Lending, Commercial Finance, Middle Market Lending, Residential Mortgage Lending, and Corporate & Other. The reportable operating segments are business units that offer different products and services. The Commercial Real Estate Lending operating segment includes our activities and operations related to commercial real estate loans, commercial real estate-related securities, and investments in real estate. The Commercial Finance operating segment includes our activities and operations related to bank loans, bank loan-related securities, and direct financing leases. The Middle Market Lending operating segment includes our activities and operations related to the origination and purchase of middle market loans. The Residential Mortgage Lending operating segment includes our activities and operations related to the origination and servicing of residential mortgage loans and the investment in residential mortgage-backed securities ("RMBS"). The Corporate & Other segment includes corporate level interest income, interest expense, inter-segment eliminations not allocable to any particular operating segment, and general and administrative expense. In an effort to normalize net income (loss) and AFFO, for the three months ended, the following table presents a reconciliation of GAAP net income (loss) to adjusted net income (loss) and normalized AFFO for the three months ended December 31, 2015 presented by operating segment (in thousands, except per share data):

                                     
    Commercial Real Estate Lending     Commercial Finance     Middle Market Lending     Residential Mortgage Lending     Corporate & Other     Total  
Net income (loss) allocable to common shares - GAAP, before normalization adjustments   $ 20,202     $ (2,996 )   $ 3,200     $ (2,614 )   $ (16,843 )   $ 949  
Normalization adjustments:                                                
  Middle market portfolio lower of cost or market adjustment, net of tax     --       --       2,600       --       --       2,600  
  Middle market portfolio provision, net of tax     --       --       3,300       --       --       3,300  
  Residential mortgage lending nonrecurring legacy loan indemnification     --       --       --       1,500       --       1,500  
  Residential mortgage lending nonrecurring direct write-off of aged servicing advanced receivables     --       --       --       825       --       825  
  Impairment - RCAM related CLO, net of tax     --       1,534       --       --       --       1,534  
  Legacy trading portfolio mark-to-market adjustment, net of tax     --       1,000       --       --       --       1,000  
  Share based compensation, mark-to-market adjustment     --       --       --       --       900       900  
  Direct financing leases provision, net of tax     --       307       --       --       --       307  
  Bank loan portfolio provision     --       816       --       --       --       816  
Total normalization adjustments     --       3,657       5,900       2,325       900       12,782  
Adjusted net income (loss)     20,202       661       9,100       (289 )     (15,943 )     13,731  
Adjustments to net income (loss) to reconcile AFFO:                                                
  Provision (recovery) for loan and lease losses     (275 )     155       (2,747 )     11       --       (2,856 )
  Amortization of deferred costs (non real estate) and intangible assets     1,913       1,778       233       239       31       4,194  
  Amortization of discount on convertible senior notes     --       --       --       --       708       708  
  Equity investment (gains) losses     --       (1,467 )     --       --       --       (1,467 )
  Share-based compensation     --       --       --       --       685       685  
  Impairment losses     --       314       --       --       --       314  
  Unrealized (gains) losses on trading portfolio     --       880       --       --       --       880  
  Unrealized (gains) losses on FX transactions     --       (116 )     --       --       --       (116 )
  Unrealized (gains) losses on derivatives     --       --       (224 )     126       (197 )     (295 )
  Change in mortgage servicing rights valuation reserve     --       --       --       (550 )     --       (550 )
  Change in residential loan warranty reserve     --       --       --       194       --       194  
Total AFFO adjustments     1,638       1,544       (2,738 )     20       1,227       1,691  
AFFO allocable by segment   $ 21,840     $ 2,205     $ 6,362     $ (269 )   $ (14,716 )   $ 15,422  
                                                 
Weighted average shares - diluted     31,551       31,551       31,551       31,551       31,551       31,551  
                                                 
AFFO per share - diluted (by segment)   $ 0.69     $ 0.07     $ 0.20     $ (0.01 )   $ (0.47 )   $ 0.49  
Contribution by percentage     72.5 %     7.3 %     21.1 %     (0.9 )%                
Allocation   $ 0.35     $ 0.04     $ 0.10     $ --                  
                                                 
 
 
 
SCHEDULE II
 
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
SUMMARY OF GENERAL AND ADMINISTRATIVE EXPENSES
(in thousands)
(unaudited)
 
The following table presents the break out of general and administrative expenses between Corporate general and administrative expenses and Residential Mortgage Lending general and administrative expenses:
 
    Three Months Ended December 31,   Years Ended December 31,
    2015   2014   2015   2014
General and administrative expenses:                        
  Corporate   $ 4,845   $ 3,958   $ 17,746   $ 15,263
  Residential mortgage lending     9,567     7,403     30,334     19,598
    Total   $ 14,412   $ 11,361   $ 48,080   $ 34,861
                         
 
 
 
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 our securitizations for the periods presented (in thousands):
 
    Cash Distributions   Annualized Interest Coverage Cushion   Overcollateralization
Cushion
    Years Ended   As of    
    December 31,   December 31,    
Name   2015 (1)   2014 (1)   2015 (2) (3)   2015 (4)   As of Initial
Measurement Date
Apidos III (5)   $ 13,995   $ 3,551   $ --   $ --   $ 11,269
Apidos Cinco   $ 6,336   $ 9,757   $ 4,505   $ 21,642   $ 17,774
RREF 2006-1   $ 3,451   $ 10,172   $ 4,003   $ 91,875   $ 24,941
RREF 2007-1   $ 6,102   $ 7,630   $ 19,651   $ 67,149   $ 26,032
RCC CRE Notes 2013   $ 9,129   $ 11,860     N/A     N/A     N/A
RCC 2014-CRE2 (6)   $ 15,826   $ 5,463     N/A   $ 35,946     20,663
RCC 2015-CRE3 (7)   $ 9,186     N/A     N/A   $ 20,313     20,313
RCC 2015-CRE4 (8)   $ 3,291     N/A     N/A   $ 8,659     9,397
Moselle CLO S.A. (9)   $ 29,099   $ 2,891     N/A     N/A     N/A
                               
* The above table does not include Apidos 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 December 31, 2015.
 
(1)    Distributions on retained equity interests in securitizations (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 paydowns during the years ended December 31, 2015 and 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 securitization notes senior to the Company's preference shares.
(4)   Overcollateralization cushion represents the amount by which the collateral held by the securitization issuer exceeds the maximum amount required.
(5)   Apidos III was liquidated on June 12, 2015 and substantially all of its assets were sold. The Company received a return of principal of $12.9 million through September 30, 2015.
(6)   Resource Capital Corp. 2014-CRE2 has no reinvestment period; however, principal repayments, for a period ending in July 2016, may be designated to purchase loans held outside of the securitization that represent the funded commitments of existing collateral in the securitization that were not funded as of the date the securitization was closed. Additionally, the indenture contains no interest coverage test provisions.
(7)   Resource Capital Corp. 2015-CRE3 closed on February 24, 2015; the first distribution was in March 2015. There is no reinvestment period; however, principal repayments, for a period ending in February 2017, may be designated to purchase loans held outside of the securitization that represent the funded commitments of existing collateral in the securitization that were not funded as of the date the securitization was closed. Additionally, the indenture contains no interest coverage test provisions.
(8)   Resource Capital Corp. 2015-CRE4 closed on August 18, 2015; the first distribution was in September 2015. There is no reinvestment period; however, principal repayments, for a period ending in September 2017, may be designated to purchase loans held outside of the securitization that represent the funded commitments of existing collateral in the securitization that were not funded as of the date the securitization was closed.Additionally, the indenture contains no interest coverage test provisions.
(9)   Moselle CLO S.A. was acquired on February 24, 2014 and the reinvestment period for this securitization expired prior to the acquisition. In the fourth quarter of 2014 the Company began to liquidate Moselle CLO S.A. and by January 2015, all of the assets were sold.
     
   
   
   
RESOURCE CAPITAL CORP. AND SUBSIDIARIES  
SUPPLEMENTAL INFORMATION  
(in thousands, except percentages)  
   
Loan Investment Statistics  
   
The following table presents information on RSO's impaired loans and related allowances for the periods indicated (based on amortized cost):  
   
    December 31,     December 31,  
    2015     2014  
Allowance for loan losses:   (unaudited)        
Specific allowance:                
  Commercial real estate loans   $ 40,274     $ --  
  Bank loans     1,282       570  
Total specific allowance     41,556       570  
General allowance:                
  Commercial real estate loans     1,565       4,043  
  Bank loans     --       --  
  Middle market loans     3,939       --  
  Residential mortgage loans     11       --  
Total general allowance     5,515       4,043  
Total allowance for loans   $ 47,071     $ 4,613  
Allowance as a percentage of total loans     2.1 %     0.2 %
                 
Loans held for sale:                
  Bank loans   $ 1,475       282  
  Residential mortgage loans     94,471       113,393  
Total loans held for sale (1)   $ 95,946     $ 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 December 31, 2015 (based on carrying value):  
   
Security type:      
Whole loans   98.6 %
Mezzanine loans   0.4 %
B Notes   1.0 %
Total   100.0 %
       
Collateral type:      
Multifamily   43.4 %
Hotel   13.2 %
Office   21.5 %
Retail   21.9 %
Total   100.0 %
       
Collateral location:      
Southern California   16.8 %
Northern California   11.9 %
Texas   26.8 %
Georgia   7.4 %
Arizona   3.8 %
Florida   5.4 %
North Carolina   4.9 %
Nevada   3.7 %
Colorado   2.8 %
Pennsylvania   2.1 %
Maryland   2.1 %
Minnesota   1.9 %
Other   10.4 %
Total   100.0 %
       
   
   
   
RESOURCE CAPITAL CORP. AND SUBSIDIARIES  
SUPPLEMENTAL INFORMATION  
(unaudited)  
   
The following table presents bank loan portfolio statistics by industry as of December 31, 2015 (based on carrying value):  
   
Industry type:    
  Diversified/Conglomerate Service 13.1 %
  Automobile 12.9 %
  Retail Stores 9.2 %
  Healthcare, Education and Childcare 7.9 %
  Chemicals, Plastics and Rubber 7.7 %
  Hotels, Motels, Inns and Gaming 6.9 %
  Electronics 4.9 %
  Personal Transportation 4.0 %
  Broadcasting and Entertainment 4.7 %
  Leisure, Amusement, Motion Pictures, Entertainment 3.1 %
  CDO 2.9 %
  Printing and Publishing 2.8 %
  Personal, Food and Miscellaneous Services 2.7 %
  Finance 2.6 %
  Aerospace and Defense 2.5 %
  Utilities 2.1 %
  Other 10.0 %
    Total 100.0 %
     
   
   
   
The following table presents middle market loan portfolio statistics by industry as of December 31, 2015 (based on carrying value):  
   
Industry type:    
  Diversified/Conglomerate Service 12.8 %
  Healthcare, Education, and Childcare 12.4 %
  Insurance 11.1 %
  Hotels, Motels, Inns, and Gaming 9.9 %
  Telecommunications 7.7 %
  Structure Finance Securities 7.4 %
  Buildings and Real Estate 5.7 %
  Beverage, Food and Tobacco 5.3 %
  Leisure, Amusement, Motion Pictures, Entertainment 5.1 %
  Personal Transportation 4.4 %
  Banking 3.9 %
  Home and Office Furnishings, Housewares, and Durable Consumer Products 2.7 %
  Personal, Food, and Miscellaneous Services 2.7 %
  Broadcasting and Entertainment 2.4 %
  Finance 2.3 %
  Diversified/Conglomerate Manufacturing 1.8 %
  Cargo Transport 1.6 %
  Oil and Gas 0.8 %
  Total 100.0 %

CONTACT:
DAVID J. BRYANT
CHIEF FINANCIAL OFFICER
RESOURCE CAPITAL CORP.
712 Fifth Ave, 12
TH Floor
New York, NY 10019
212-506-3870