NEW YORK, NY, Mar 16, 2009 (MARKET WIRE via COMTEX) -- Resource Capital Corp. (NYSE: RSO) ("RCC" or the "Company"). The Company today announced that it had revised the valuation of its commercial mortgage-backed securities ("CMBS"). This revision occurred after the Company had issued its March 3, 2009 press release announcing results of operations for the fourth quarter and year ended December 31, 2008 and before filing its annual report on Form 10-K with the Securities and Exchange Commission today. As a result, the Company has revised its balance sheet for the period ended December 31, 2008. The revision did not impact the Company's reported operating results and related statement of operations for the fourth quarter and year ended December 31, 2008.
A description of the revision and disclosures effected follows:
Assets:
Investment securities available-for-sale, pledged as collateral, at fair value was reduced by $13.9 million from $36.4 million to $22.5 million and Investment securities available-for-sale, at fair value was reduced by $3.7 million from $10.5 million to $6.8 million. These revisions reduced total assets by $17.6 million from $1.954 billion to $1.936 billion.
The Company concluded that a revision was needed, after further analysis, to its valuation of CMBS for the period ended December 31, 2008. The revision was made to lower the valuation on RCC's CMBS in total by $17.6 million, or approximately 0.9% of RCC's total assets.
Equity:
The revision to assets of $17.6 million had a corresponding change to Accumulated Other Comprehensive Loss, which increased from $63.1 million to $80.7 million.
Book Value:
As a result of the changes to the balance sheet described above, book value per common share was reduced from $8.04 per common share to $7.35 per common share.
Tables Corrected:
-- Investment Portfolio
-- Schedule III - Reconciliation of GAAP Stockholders' Equity to Economic
Book Value
Revised Press Release:
A copy of the March 3, 2009 press release, as modified for the CMBS valuation revision, follows.
RESOURCE CAPITAL CORP.
REPORTS OPERATING RESULTS FOR
FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2008
New York, N.Y., March 3, 2009 - Resource Capital Corp. (NYSE: RSO) ("RCC" or the "Company"), a real estate investment trust whose investment strategy focuses on commercial real estate loan assets and, to a lesser extent, commercial finance assets, reported results for the fourth quarter and year ended December 31, 2008.
Financial Summary
-- Adjusted net income, a non-GAAP measure excluding the effect of non-
cash charges and non-operating capital transactions, of $11.1 million, or
$0.44 per share for the fourth quarter ended December 31, 2008 as compared
to $10.7 million, or $0.43 per share-diluted for the fourth quarter ended
December 31, 2007, an increase of $332,000 (3%).
-- Estimated REIT taxable income, a non-GAAP measure, for the fourth
quarter and year ended December 31, 2008 of $8.3 million or $0.33 per share-
diluted and $39.3 million or $1.57 per share-diluted, respectively, as
compared to $11.4 million or $0.46 per share-diluted and $42.4 million or
$1.71 per share-diluted for the fourth quarter and year ended December 31,
2007, respectively, decreases of $3.0 million (27%) and $3.2 million (7%),
respectively.
-- Dividend distribution of $0.39 per common share, or $9.9 million, for
the quarter ended December 31, 2008. RCC paid dividends of $1.60 per
common share, for total dividends paid of $40.7 million for the year ended
December 31, 2008.
-- Economic book value, a non-GAAP measure, was $10.22 per common share
as of December 31, 2008.
-- GAAP book value was $7.35 per common share as of December 31, 2008.
-- GAAP net loss for the fourth quarter and year ended December 31, 2008
of $0.29 per share and $0.12 per share, respectively, including provisions
for loan and lease losses of $18.3 million or $0.74 per share and $46.2
million or $1.86 per share, respectively, as compared to GAAP net income
for the fourth quarter and year ended December 31, 2007 of $0.14 per share-
diluted and $0.36 per share-diluted, respectively, including provisions for
loan and lease losses of $5.9 million or $0.24 per share-diluted and $6.2
million or $0.25 per share-diluted, respectively.
-- Paydowns and repayments totaled $198.6 million, which included $80.6
million on RCC's commercial real estate loan portfolio and $118.0 million
on RCC's bank loan portfolio for the year ended December 31, 2008.
-- RCC reduced the balance to $17.0 million on the non-recourse
repurchase facility funding commercial real estate ("CRE") loans as of
December 31, 2008, with pledged collateral of $42.9 million on this
facility.
Jonathan Cohen, CEO and President of RCC, commented, "Given the global economic circumstances, our real estate portfolio continues to perform well -- this quarter we saw a modest $371,000 increase to our provision for CRE loan losses but otherwise all loans continue to perform. As the corporate credit universe worsened, we determined to take additional provisions for loan losses of $17.5 million on our bank loan portfolio. We look forward to protecting the year-end 2008 GAAP book value of $7.35 and producing a meaningful cash dividend in calendar 2009."
Additional financial results for the fourth quarter and year ended December 31, 2008 and recent developments include:
General
-- RCC's net interest income decreased by $176,000, or (1%) to $13.9
million for the fourth quarter ended December 31, 2008, as compared to
$14.1 million for the same period in 2007. RCC's net interest income
decreased by $709,000, or (1%) to $54.7 million for the year ended December
31, 2008, as compared to $55.4 million for the same period in 2007.
Commercial Real Estate
-- RCC originated new CRE loans, on a gross basis, of $8.3 million during
the fourth quarter ended December 31, 2008. The aggregate net portfolio of
CRE loans was reduced by $69.7 million to $833.2 million at December 31,
2008, from $902.9 million at December 31, 2007, not including future
funding obligations of $2.8 million.
The following table summarizes RCC's CRE loan origination activities and future funding obligations, at par, for the three, six and 12 months ended December 31, 2008 (in millions, except percentages):
Three Six Floating
Months Months 12 Months Weighted Weighted
Ended Ended Ended Average Average
December December December Spread Fixed
31, 2008 31, 2008 31, 2008 (1) (2) Rate (1)
--------- --------- --------- --------- ---------
Whole loans (3) $ 5.5 $ 13.8 $ 57.1 2.90% 7.75%
Whole loans, future
funding obligations 2.8 2.8 2.8 N/A N/A
B notes - - - 2.78% 7.57%
Mezzanine loans - - - 2.62% 8.14%
CMBS - - - N/A (4) 5.79%
--------- --------- ---------
New loans production 8.3 16.6 59.9
Payoffs (18.2) (52.5) (63.8)
Principal paydowns (2.2) (12.3) (16.8)
Whole loans, future
funding obligations (2.8) (2.8) (2.8)
Sales of CMBS - - (10.0)
--------- --------- ---------
Net - new loans (14.9) (51.0) (33.5)
Other (2.2) (1.6) (0.7)
--------- --------- ---------
New loans, net (5) $ (17.1) $ (52.6) $ (34.2)
========= ========= =========
(1) Reflects rates on our portfolio balance as of December 31, 2008.
(2) Represents the weighted average rate above London Interbank Offered
Rate ("LIBOR") on loans whose interest rate is based on LIBOR.
(3) Includes fundings of previous commitments on transitional loans of
$5.5 million for the three months ended December 31, 2008, $13.8
million for the six months ended December 31, 2008 and $36.3 million
for the 12 months ended December 31, 2008. We originated one new loan,
$20.8 million, during the 12 months ended December 31, 2008.
(4) Weighted average floating rate coupon of 2.67% at December 31, 2008.
(5) The basis of new net loans does not include provisions for losses on
commercial real estate loans of $371,000 for the three months ended
December 31, 2008, of $3.1 million for the six months ended December
31, 2008 and $14.8 million for the 12 months ended December 31, 2008.
Commercial Finance
-- RCC's bank loan portfolio ended the fourth quarter with total
investments of $937.5 million, at amortized cost, with a weighted-average
spread of one-month and three-month LIBOR plus 2.38%. All of RCC's bank
loan portfolio is match-funded through three collateralized loan obligation
("CLO") issuances with a weighted-average cost of three-month LIBOR plus
0.47%.
-- RCC's commercial finance subsidiary ended the fourth quarter with
$104.5 million, at cost, in direct financing leases and notes at a weighted-
average rate of 9.35%. RCC's leasing portfolio is match-funded through a
secured term facility, which had a balance of $95.7 million as of December
31, 2008 and a weighted-average interest rate of 8.97%, which includes the
cost of interest rate swaps associated with the term facility.
Book Value
As of December 31, 2008, RCC's GAAP book value per common share was $7.35. Total stockholders' equity was $186.3 million as of December 31, 2008 as compared to $271.6 million as of December 31, 2007. Total common shares outstanding were 25,344,867 as of December 31, 2008 as compared to 25,103,532 as of December 31, 2007. The net decrease in RCC's stockholder's equity of $85.3 million was substantially the result of increased provisions for loan and lease losses of $46.2 million combined with an increase in interest rate swap liabilities of $13.5 million and a decrease in the value of the marked-to-market securities of $24.3 million.
As of December 31, 2008, RCC's economic book value per common share outstanding, a non-GAAP measure, was $10.22. Economic book value is computed by adding back to GAAP book value any unrealized losses on the Company's investments in CMBS for which it expects to recover full par value at maturity, and on derivatives (cash flow hedges) that are associated with fixed-rate loans which it intends to hold until maturity, in excess of its value at risk, and that have not been adjusted through stockholders' equity for market fluctuations (see Footnote 1 of Schedule III). Economic book value per share is computed by dividing the economic book value by the number of shares outstanding at the end of the period.
Investment Portfolio
The table below summarizes the amortized cost and net carrying amount of RCC's investment portfolio as of December 31, 2008, classified by interest rate type. The following table includes both (i) the amortized cost of RCC'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 RCC's investment portfolio and the related dollar price, which is computed by dividing the net carrying amount by par amount (in thousands, except percentages):
Net carrying
Net amount less
Amortized Dollar carrying Dollar amortized Dollar
cost price amount price cost price
---------- ------ ---------- ------ --------- ------
December 31, 2008
Floating rate
CMBS-private
placement $ 32,061 99.99% $ 15,042 46.91% $ (17,019) -53.08%
Other ABS 5,665 94.42% 45 0.75% (5,620) -93.67%
B notes (1) 33,535 100.00% 33,434 99.70% (101) -0.30%
Mezzanine loans
(1) 129,459 100.01% 129,071 99.71% (388) -0.30%
Whole loans (1) 431,985 99.71% 430,690 99.41% (1,295) -0.30%
Bank loans (2) 937,507 99.51% 582,416(4)61.57% (355,091) -37.94%
---------- ---------- ---------
Total floating
rate $1,570,212 99.36% $1,190,698 75.35% $(379,514) -24.01%
========== ========== =========
Fixed rate
CMBS - private
placement $ 38,397 91.26% $ 14,173 33.69% $ (24,224) -57.57%
B notes (1) 55,534 100.11% 55,367 99.81% (167) -0.30%
Mezzanine loans
(1) 81,274 94.72% 68,378 79.69% (12,896) -15.03%
Whole loans (1) 87,352 99.52% 87,090 99.23% (262) -0.29%
Equipment leases
and loans (3) 104,465 99.38% 104,015 98.95% (450) -0.43%
---------- ---------- ---------
Total fixed
rate $ 367,022 97.55% $ 329,023 87.45% $ (37,999) -10.10%
========== ========== =========
Grand total $1,937,234 99.02% $1,519,721 77.68% $(417,513) -21.34%
========== ========== =========
(1) Net carrying amount includes an allowance for loan losses of $15.1
million at December 31, 2008, allocated as follows: B notes ($0.3
million), mezzanine loans ($13.3 million) and whole loans ($1.5
million).
(2) Net carrying amount includes a $28.8 million provision for loan losses
at December 31, 2008.
(3) Net carrying amount includes a $450,000 provision for lease losses at
December 31, 2008.
(4) Bank loan portfolio is carried at amortized cost less allowance for
loan loss and was $908.7 million at December 31, 2008. Amount
disclosed represents fair value at December 31, 2008.
Liquidity
At February 28, 2009, there were three primary sources for RCC's liquidity:
-- unrestricted cash and cash equivalents of $10.2 million and restricted
cash of $10.6 million comprised of $7.1 million in margin call accounts and
$3.5 million related to its leasing portfolio;
-- capital available for reinvestment in its five collateralized debt
obligation ("CDO") entities of $49.5 million, of which $8.4 million is
designated to finance future funding commitments on commercial real estate
loans; and
-- financing available under existing borrowing facilities of $9.3
million from RCC's three year non-recourse secured financing facility. RCC
also has $83.0 million of unused capacity under a three-year non-recourse
commercial real estate repurchase facility, which, however, requires
approval of individual repurchase transactions by the repurchase
counterparty.
Capital Allocation
As of December 31, 2008, RCC had allocated its equity capital among its targeted asset classes as follows: 72% in commercial real estate loans, 25% in commercial bank loans and 3% in direct financing leases and loans.
Supplemental Information
The following schedules of reconciliations as of December 31, 2008 are included in this release:
-- Schedule I - Reconciliation of GAAP Net (Loss) Income to Adjusted Net
Income;
-- Schedule II - Reconciliation of GAAP Net (Loss) Income to Estimated
REIT Taxable Income; and
-- Schedule III - Reconciliation of GAAP Stockholders' Equity to Economic
Book Value.
About Resource Capital Corp.
RCC is a diversified real estate finance company that qualifies as a real estate investment trust, or REIT, for federal income tax purposes. RCC's investment strategy focuses on commercial real estate-related assets, and, to a lesser extent, commercial finance assets. RCC invests in the following asset classes: commercial real estate-related assets such as whole loans, A-notes, B-notes, mezzanine loans and mortgage-related securities and commercial finance assets such as other asset-backed securities, bank loans, equipment leases and notes, trust preferred securities, debt tranches of collateralized debt obligations and private equity investments principally issued by financial institutions.
RCC is externally managed by Resource Capital Manager, Inc., an indirect wholly-owned subsidiary of Resource America, Inc. (NASDAQ: REXI), a specialized asset management company that uses industry specific expertise to generate and administer investment opportunities for its own account and for outside investors in the financial fund management, real estate, and commercial finance sectors.
For more information, please visit RCC's website at www.resourcecapitalcorp.com or contact investor relations at pkamdar@resourceamerica.com
Safe Harbor Statement
Statements made in this release include forward-looking statements, which involve substantial risks and uncertainties. RCC'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;
-- capital markets conditions and the availability of financing;
-- defaults or bankruptcies by borrowers on RCC'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 RCC'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 RCC'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 RCC is subject, see Item 1A, "Risk Factors" included in its annual report on Form 10-K and in other of its public filings with the Securities and Exchange Commission.
RCC 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 RCC 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, RCC 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 RCC's unaudited consolidated balance sheets, consolidated statements of operations and reconciliations of GAAP net (loss) income to adjusted net income, GAAP net (loss) income to estimated REIT taxable income and GAAP stockholders' equity to economic book value and supplemental information regarding RCC's commercial real estate, bank loan and equipment leasing portfolios.
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
December 31,
------------------------
2008 2007
----------- -----------
ASSETS (Unaudited)
Cash and cash equivalents $ 14,583 $ 6,029
Restricted cash 60,394 119,482
Investment securities available-for-sale,
pledged as collateral, at fair value 22,466 65,464
Investment securities available-for-sale, at
fair value 6,794 -
Loans, pledged as collateral and net of
allowances of $43.9 million and
$5.9 million 1,712,779 1,766,639
Direct financing leases and notes, pledged as
collateral and net of allowance of
$450,000 and $0 and net of unearned income 104,015 95,030
Investments in unconsolidated entities 1,548 1,805
Interest receivable 8,440 11,965
Principal paydown receivables 950 836
Other assets 4,062 4,898
----------- -----------
Total assets $ 1,936,031 $ 2,072,148
=========== ===========
LIABILITIES
Borrowings $ 1,699,763 $ 1,760,969
Distribution payable 9,942 10,366
Accrued interest expense 4,712 7,209
Derivatives, at fair value 31,589 18,040
Accounts payable and other liabilities 3,720 3,958
----------- -----------
Total liabilities 1,749,726 1,800,542
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.001: 100,000,000
shares authorized; no shares issued and
outstanding - -
Common stock, par value $0.001: 500,000,000
shares authorized; 25,344,867 and 25,103,532
shares issued and outstanding
(including 452,310 and 581,493 unvested
restricted shares) 26 25
Additional paid-in capital 356,103 355,205
Accumulated other comprehensive loss (80,707) (38,323)
Distributions in excess of earnings (89,117) (45,301)
----------- -----------
Total stockholders' equity 186,305 271,606
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,936,031 $ 2,072,148
=========== ===========
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,
---------------------- ----------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
(Unaudited) (Unaudited) (Unaudited)
REVENUES
Loans $ 29,014 $ 37,292 $ 119,042 $ 138,078
Securities 1,043 4,738 4,444 28,810
Leases 2,234 1,886 8,180 7,553
Interest income - other 497 625 2,675 2,554
---------- ---------- ---------- ----------
Interest income 32,788 44,541 134,341 176,995
Interest expense 18,883 30,460 79,619 121,564
---------- ---------- ---------- ----------
Net interest income 13,905 14,081 54,722 55,431
OPERATING EXPENSES
Management fees - related
party 1,477 1,197 6,301 6,554
Equity compensation -
related party (239) 848 540 1,565
Professional services 1,120 906 3,349 2,911
Insurance expense 172 115 641 466
General and
administrative 729 440 1,848 1,581
Income tax (benefit)
expense (375) 76 (241) 338
---------- ---------- ---------- ----------
Total expenses 2,884 3,582 12,438 13,415
---------- ---------- ---------- ----------
NET OPERATING INCOME 11,021 10,499 42,284 42,016
---------- ---------- ---------- ----------
OTHER (EXPENSES) REVENUES
Net realized gain
(losses) on investments 14 (15,434) (1,637) (15,098)
Gain on deconsolidation
of VIE - 14,259 - 14,259
Provision for loan and
lease losses (18,332) (5,885) (46,160) (6,211)
Asset impairments - - - (26,277)
Gain on the
extinguishment of debt - - 1,750 -
Gain on the settlement of
loan - - 574 -
Other income 29 91 115 201
---------- ---------- ---------- ----------
Total other expenses (18,289) (6,969) (45,358) (33,126)
---------- ---------- ---------- ----------
NET (LOSS) INCOME $ (7,268) $ 3,530 $ (3,074) $ 8,890
========== ========== ========== ==========
NET (LOSS) INCOME PER SHARE
- BASIC $ (0.29) $ 0.14 $ (0.12) $ 0.36
========== ========== ========== ==========
NET (LOSS) INCOME PER SHARE
- DILUTED $ (0.29) $ 0.14 $ (0.12) $ 0.36
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING -
BASIC 24,869,062 24,555,059 24,757,386 24,610,468
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING -
DILUTED 24,869,062 24,772,315 24,757,386 24,860,184
========== ========== ========== ==========
DIVIDENDS DECLARED PER
SHARE $ 0.39 $ 0.41 $ 1.60 $ 1.62
========== ========== ========== ==========
SCHEDULE I
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET (LOSS) INCOME TO ADJUSTED NET INCOME (1)
(in thousands, except per share data)
(Unaudited)
Three Months Ended Years Ended
December 31, December 31,
------------------ ------------------
2008 2007 2008 2007
-------- --------- -------- ---------
Net (loss) income - GAAP $ (7,268) $ 3,530 $ (3,074) $ 8,890
Adjustments:
Provision for loan and lease
losses (2) 18,332 5,885 46,160 6,211
Net realized loss related to
deconsolidation of a VIE (3) - 1,317 - 1,317
Asset impairments related to a
VIE's - - - 26,277
Capital losses on the sale of
available-for-sale securities - - 2,000 -
Gain on the extinguishment of
debt (4) - - (1,750) -
-------- --------- -------- ---------
Adjusted net income, excluding
non-cash charges (1) $ 11,064 $ 10,732 $ 43,336 $ 42,695
======== ========= ======== =========
Adjusted net income per share -
diluted, excluding non-cash
charges $ 0.44 $ 0.43 $ 1.75 $ 1.72
======== ========= ======== =========
(1) During 2007, RCC began evaluating its performance based on several
performance measures, including adjusted net income, in addition to net
income. Adjusted net income represents net income available to common
shares, computed in accordance with GAAP, before provision for loan and
lease losses, gain on the extinguishment of debt and non-operating
capital items. These items are recorded in accordance with GAAP and
are typically non-cash or non-operating items that do not impact RCC's
operating performance or ability to pay a dividend.
Management views adjusted net income as a useful and appropriate
supplement to GAAP net income (loss) because it helps management
evaluate RCC's performance without the effects of certain GAAP
adjustments that may not have a direct financial impact on RCC's
current operating performance and dividend paying ability. Management
uses adjusted net income to evaluate the performance of RCC's
investment portfolios, ability to manage its expenses and dividend
paying ability before the impact of non-cash adjustments and non-
operating capital gain or loss recorded in accordance with GAAP.
RCC believes this is a useful performance measure for investors to
evaluate these aspects of RCC's business as well. The most significant
adjustments RCC excludes in determining adjusted earnings as of
December 31, 2008 are its provision for loan and lease losses, gain on
the extinguishment of debt and losses on the sale of available-for-sale
securities. At December 31, 2007, RCC also excluded asset impairments
related to its ABS-RMBS portfolio that was deconsolidated on November
13, 2007. Management excludes all such items from its calculation of
adjusted net income because these items are not charges or losses which
would impact RCC's current operating performance. However, by
excluding these significant items, adjusted net income reduces an
investor's understanding of RCC's operating performance by excluding
management's expectation of possible future gains or losses from RCC's
investment portfolio.
Adjusted net income, as a non-GAAP financial measurement, does not
purport to be an alternative to GAAP net income (loss), or a measure of
operating performance or cash flows from operating activities
determined in accordance with GAAP as a measure of liquidity. Instead,
adjusted net income should be reviewed in connection with net income
(loss) and cash flows from operating, investing and financing
activities in RCC's consolidated financial statements to help analyze
management's expectation of potential future losses from RCC's
investment portfolio and other non-cash or capital matters that impact
its financial results. Adjusted net income and other supplemental
performance measures are defined in various ways throughout the REIT
industry. Investors should consider these differences when comparing
RCC's adjusted net income to these other REITs.
(2) Non-cash charges for loan and lease losses.
(3) Net realized loss related to the deconsolidation of a VIE is made up of
a gain of $14.3 million related to the deconsolidation of Ischus CDO
II, offset by a $15.6 million adjustment related to the write-down of
RCC's investment in Ischus CDO II. The adjustment of RCC's investment
is calculated as $27.0 million original investment less $10.7 million
in accumulated distributions less the $0.7 million estimated fair
value of the investment at the time of deconsolidation.
(4) Gain on the extinguishment of debt for the year ended December 31, 2008
excludes a gain on the early extinguishment of a loan of $574,000 as
management views this transaction to be in its ordinary course of
business.
SCHEDULE II
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET (LOSS) INCOME
TO ESTIMATED REIT TAXABLE INCOME (1)
(Unaudited)
RCC calculates estimated REIT taxable income, which is a non-GAAP financial measure, according to the requirements of the Internal Revenue Code. The following table reconciles net (loss) income to estimated REIT taxable income for the periods presented (in thousands, except per share data):
Three Months Ended Years Ended
December 31, December 31,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Net (loss) income - GAAP $ (7,268) $ 3,530 $ (3,074) $ 8,890
Adjustments:
Share-based compensation to
related parties (891) 225 (1,620) (500)
Capital loss carryover
(utilization)/losses from
the sale of securities - (49) 2,000 (49)
Net unrealized loss on the
deconsolidation of a VIE - 1,317 - 1,317
Asset impairments related to VIE's - - - 26,277
Provisions for loan and lease
losses unrealized 371 3,153 14,817 3,153
Net book to tax adjustments for the
Company's taxable foreign REIT
subsidiaries 15,844 3,265 27,115 3,432
Other net book to tax adjustments 288 (82) 16 (110)
-------- -------- -------- --------
Estimated REIT taxable income $ 8,344 $ 11,359 $ 39,254 $ 42,410
======== ======== ======== ========
Amounts per share - diluted (2) $ 0.33 $ 0.46 $ 1.57 $ 1.71
======== ======== ======== ========
(1) RCC believes that a presentation of estimated REIT taxable income
provides useful information to investors regarding its financial
condition and results of income as this measurement is used to
determine the amount of dividends that RCC is required to declare to
its stockholders in order to maintain its status as a REIT for federal
income tax purposes. Since RCC, as a REIT, expects to make
distributions based on taxable income, RCC expects that its
distributions may at times be more or less than its reported income.
Total taxable income is the aggregate amount of taxable income
generated by RCC and by its domestic and foreign taxable REIT
subsidiaries. Estimated REIT taxable income excludes the
undistributed taxable income of RCC's domestic taxable REIT subsidiary,
if any such income exists, which is not included in REIT taxable income
until distributed to RCC. There is no requirement that RCC's domestic
taxable REIT subsidiary distribute its income to RCC. Estimated REIT
taxable income, however, includes the taxable income of RCC's foreign
taxable REIT subsidiaries because RCC generally will be required to
recognize and report their taxable income on a current basis. Because
not all companies use identical calculations, this presentation of
estimated REIT taxable income may not be comparable to other similarly-
titled measures of other companies.
(2) Denominator for the three months and year ended December 31, 2008
includes 263,392 and 253,975 shares, respectively of dilutive shares
that were not included in the calculation of GAAP earnings per share
because the effect would have been anti-dilutive due to RCC's net loss
for the three months and year ended December 31, 2008. The dilutive
shares relate to restricted stock that has not yet vested at December
31, 2008.
SCHEDULE III
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
RECONCILIATION OF GAAP STOCKHOLDERS' EQUITY TO ECONOMIC BOOK VALUE (1) (2)
(in thousands, except per share data)
(Unaudited)
As of December 31,
-------------------
2008 2007
--------- ---------
Stockholders' equity - GAAP $ 186,305 $ 271,606
Add:
Unrealized losses - CMBS portfolio 41,243 17,810
Unrealized losses recognized in excess of value at
risk - interest rate swaps 31,589 18,040
--------- ---------
Economic book value $ 259,137 $ 307,456
========= =========
Shares outstanding 25,345 25,104
--------- ---------
Economic book value per share $ 10.22 $ 12.25
========= =========
(1) Management views economic book value, a non-GAAP measure, as a useful
and appropriate supplement to GAAP stockholders' equity and book value
per share. The measure serves as an additional measure of RCC's value
because it facilitates evaluation of us without the effects of
unrealized losses on investments for which we expect to recover full
par value at maturity and on interest rate swaps, which we intend to
hold to maturity, in excess of RCC's value at risk. Unrealized losses
recognized in RCC's financial statements, prepared in accordance with
GAAP, that are in excess of RCC's maximum value at risk are added back
to stockholders' equity in arriving at economic book value. Economic
book value should be reviewed in connection with GAAP stockholders'
equity as set forth in RCC's consolidated balance sheets, to help
analyze RCC's value to investors. Economic book value is defined in
various ways throughout the REIT industry. Investors should consider
these differences when comparing RCC's economic book value to that of
other REITs.
(2) RCC adds back unrealized losses on interest rate swaps (cash flow
hedges) that are associated with fixed-rate loans that have not been
fair-valued through stockholders' equity.
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(in thousands)
(Unaudited)
Loans and Leasing Investment Statistics
The following table presents information on RCC's non-performing loans and leases and related allowances as of December 31, 2008 and 2007 (based on amortized cost):
As of December 31,
------------------
2008 2007
-------- --------
Non-performing:
Loans and leases $ 23,938 $ 4,267
Non-performing as a percentage of total loans and
leases 1.3% 0.2%
Allowance for loan and lease losses:
Specific provision $ 18,929 $ 1,990
General provision 25,388 3,928
-------- --------
Total allowance for loans and leases $ 44,317 $ 5,918
======== ========
Allowance as a percentage of total loans and leases 2.4% 0.3%
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION, A NON-GAAP MEASURE
(Unaudited)
The following table presents commercial real estate loan portfolio statistics as of December 31, 2008 (based on par value):
Security type
Whole loans 64.5%
Mezzanine loans 24.5%
B Notes 11.0%
-----
Total 100.0%
=====
Collateral type
Multifamily 31.1%
Hotel 27.4%
Office 22.5%
Retail 13.6%
Condo 1.0%
Flex 0.9%
Self-storage 0.8%
Other 2.7%
-----
Total 100.0%
=====
Collateral location
Southern California 22.1%
Northern California 17.0%
New York 11.4%
Arizona 8.5%
Texas 5.1%
Florida 4.7%
Tennessee 4.0%
Washington 3.8%
Colorado 3.8%
Other 19.6%
-----
Total 100.0%
=====
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION, A NON-GAAP MEASURE
(Unaudited)
The following table presents bank loan portfolio statistics by industry as of December 31, 2008 (based on par value):
Industry type
Healthcare, education and childcare 11.1%
Diversified/conglomerate service 9.1%
Chemicals, plastics and rubber 6.1%
Printing and publishing 5.9%
Broadcasting and entertainment 5.4%
Retail stores 5.1%
Leisure, amusement, motion pictures, entertainment 3.9%
Hotels, motels, inns and gaming 3.9%
Finance 3.8%
Automobiles 3.7%
Utilities 3.6%
Personal, food and miscellaneous services 3.6%
Other 34.8%
-----
Total 100.0%
=====
The following chart describes equipment leases and notes by industry as of December 31, 2008 (based on par value):
Industry type
Services 50.9%
Retail trade 10.8%
Transportation, communications, electric, gas and sanitary
services 10.2%
Manufacturing 6.1%
Construction 4.4%
Wholesale trade 3.9%
Finance, insurance and real estate 3.4%
Agriculture, forestry and fishing 3.3%
Other 7.0%
-----
Total 100.0%
=====
Contact: David J. Bryant Chief Financial Officer Resource Capital Corp. 1845 Walnut Street, 10th Floor Philadelphia, PA 19103 215/546-5005 215/546-5388 (fax)
SOURCE: Resource Capital Corp.
