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Resource Capital Corp. Reports Results for Second Quarter 2006

NEW YORK--(BUSINESS WIRE)--Aug. 3, 2006--Resource Capital Corp. (NYSE:RSO) (the "Company" or "RCC"), a real estate investment trust focused on originating and investing in commercial real estate secured loans, whole loans, B-notes, mezzanine loans, mortgage-related securities and other real estate related assets and, to a lesser extent, higher-yielding commercial finance assets and asset-backed securities reported net income of $6.1 million or $0.34 per diluted share for the quarter ended June 30, 2006 as compared to net income of $2.3 million or $0.15 per diluted share for the quarter ended June 30, 2005 an increase of $3.8 million (166%) and $0.19 (127%) per diluted share, respectively. For the quarter ended June 30, 2006, estimated REIT taxable income was $6.4 million or $0.36 per diluted share, as compared to $3.1 million or $0.20 per diluted share for the quarter ended June 30, 2005. Net income for the six months ended June 30, 2006 was $11.2 million, or $0.65 per diluted share, as compared to net income for the period ended June 30, 2005 of $2.2 million, or $0.15 per diluted share an increase of $9.0 million (403%) and $0.50 (333%) per diluted share, respectively.

Highlights for the second quarter and recent developments include:

  • Resource Capital Corp. paid a quarterly dividend of $0.36 per common share for the second quarter of 2006, an increase of $0.03 per common share or 9% from the dividend paid for the first quarter of 2006. This distribution was paid on July 21, 2006 to all shareholders of record as of June 29, 2006. Based on this dividend, the annualized dividend would be $1.44 or 11.25% yield on the price of the stock at the close of the market on August 1, 2006.
  • The Company's net interest income increased by $3.9 million or 88% to $8.4 million for the quarter ended June 30, 2006 as compared to $4.5 million for the same period in 2005.
Commercial Real Estate
  • The Company continued to increase its investment in commercial real estate loans. The portfolio of loans grew by $80.2 million to $292.6 million at June 30, 2006 from $212.4 million at March 31, 2006. As of July 31, 2006, the Company had closed an additional $35.2 million of loans and is currently in the closing process for seven additional commercial real estate investment opportunities in excess of $130.0 million. In addition, RCC received a repayment in July 2006 on one loan of $27.5 million.
  • The Company announced on May 28, 2006 the addition by its manager of Kyle Geoghegan and Darryl Myrose, former managing Directors at Bear Stearns to lead its direct loan origination team based in Los Angeles, CA.
  • On July 27, 2006 the Company priced Resource Real Estate CDO-1, Ltd., a collateralized debt obligation ("CDO") that will provide long-term financing for a $345.0 million portfolio of commercial real estate loans. The notes issued by CDO-1 will bear interest at a weighted-average interest rate of LIBOR plus 0.82%. The Company will retain approximately $79.4 million of equity in this financing.
      Commercial Finance
  • The Company closed Apidos CDO III, Ltd., in May 2006, a $285.5 million CDO that provided financing for a portfolio of syndicated bank loans. RCC continued to ramp up its syndicated bank loan portfolio and ended the quarter with a total of $605.1 million, at cost, with a weighted-average spread of LIBOR plus 2.35% and a fair value of $603.4 million. Including Apidos CDO III, the Company's syndicated loan portfolio is completely match-funded through two CDO's with a weighted-average cost of LIBOR plus 0.46%.
  • RCC's commercial finance subsidiary acquired an additional $62.5 million in direct financing leases and notes since December 31, 2005, including $20.3 million since March 31, 2006.
RMBS Agency Portfolio
  • The Company decreased its agency RMBS portfolio from $1.0 billion at December 31, 2005 ($835.3 million at March 31, 2006) to $790.8 million at June 30, 2006. It is the Company's goal to lower its exposure to interest rate sensitive assets. RCC has not been reinvesting prepayment proceeds into agency RMBS and continues to believe that this portfolio will decrease substantially in size over the next 18 months. As of August 1, 2006 the portfolio of agency RMBS had an approximate fair value of $783.5 million.
      Corporate Matters
  • The Company issued a $25.8 unsecured junior subordinated debenture that bears interest at LIBOR plus 3.95% related to a trust preferred security (Trups) on May 24, 2006. RCC received net proceeds of $24.2 million from the issuance.
  • The Company appointed David J. Bryant, a former Pennsylvania REIT executive, as its Senior Vice President and Chief Financial Officer effective June 28, 2006.
Balance Sheet Summary

At June 30, 2006, RCC's investment portfolio totaled $2.2 billion and included the following: $319.0 million of commercial real estate-related investments, $790.8 million of agency RMBS, $347.8 million of non-agency RMBS, $605.1 million of syndicated bank loans, $78.0 million of direct financing leases and notes and $21.7 million of other asset-backed securities. At June 30, 2006, RCC's investment portfolio was financed with $2.0 billion of total indebtedness and included the following: $960.0 million of senior notes issued by CDOs secured primarily by mortgage-backed securities, other asset-backed securities and syndicated bank loans; $203.9 million of repurchase agreements secured by commercial real estate loans; $730.2 million of repurchase agreements secured by agency RMBS; $73.3 million outstanding under a term facility secured by equipment leases and notes and $25.8 million of an unsecured junior subordinated debenture.

Book Value

The Company's book value per common share at June 30, 2006 was $12.66 as compared to $12.46 at December 31, 2005, a 2% increase. Total stockholders' equity was $225.5 million at June 30, 2006 and $195.3 million at December 31, 2005. Total common shares outstanding were 17,815,182 and 15,682,334 at June 30, 2006 and December 31, 2005, respectively.

Investment Portfolio

The tables below summarize the amortized cost and estimated fair value of our investment portfolio as of June 30, 2006 and as of December 31, 2005, classified by interest rate type. The tables below include both (i) the amortized cost of our investment portfolio and the related dollar price, which is computed by dividing amortized cost by par amount, and (ii) the estimated fair value of our investment portfolio and the related dollar price, which is computed by dividing the estimated fair value by par amount (in thousands, except percentages):


                                              June 30, 2006
                                   -----------------------------------
                                    Amortized     Dollar    Estimated
                                       cost       price    fair value
                                   ------------  --------  -----------
          Floating rate
----------------------------------
Non-agency RMBS                    $   341,148     99.15%  $  341,951
CMBS                                       429    100.00%         433
Other ABS                               18,571     98.92%      18,642
A notes                                 20,000    100.00%      20,000
B notes                                147,639     99.90%     147,639
Mezzanine loans                         55,484    100.21%      55,484
Syndicated bank loans                  604,842     99.97%     603,128
                                   ------------            -----------
   Total floating rate             $ 1,188,113     99.83%  $1,187,277
                                   ============            ===========

           Hybrid rate
----------------------------------
Agency RMBS                        $   812,791    100.08%  $  790,815
                                   ------------            -----------
   Total hybrid rate               $   812,791    100.08%  $  790,815
                                   ============            ===========

            Fixed rate
----------------------------------
Non-agency RMBS                    $     6,000    100.00%  $    5,882
CMBS                                    27,528     98.69%      26,002
Other ABS                                3,314     99.97%       3,095
B notes                                 16,705     98.26%      16,705
Mezzanine loans                         52,687     89.87%      52,687
Syndicated bank loans                      249     99.60%         249
Equipment leases and notes              77,984    100.00%      77,984
                                   ------------            -----------
   Total fixed rate                $   184,467     96.55%  $  182,604
                                   ============            ===========
      Grand total                  $ 2,185,371     99.64%  $2,160,696
                                   ============            ===========


                                              June 30, 2006
                                   -----------------------------------
                                                Estimated
                                    Dollar   fair value less   Dollar
                                    price    amortized cost    price
                                   --------  ---------------  --------
          Floating rate
----------------------------------
Non-agency RMBS                      99.39%  $          803      0.23%
CMBS                                100.93%               4      0.93%
Other ABS                            99.30%              71      0.38%
A notes                             100.00%               -      0.00%
B notes                              99.90%               -      0.00%
Mezzanine loans                      99.97%               -      0.00%
Syndicated bank loans                99.93%          (1,714)    -0.28%
                                             ---------------
   Total floating rate               99.76%  $         (836)    -0.07%
                                             ===============

           Hybrid rate
----------------------------------
Agency RMBS                          97.38%  $      (21,976)    -2.71%
                                             ---------------
   Total hybrid rate                 97.38%  $      (21,976)    -2.71%
                                             ===============

            Fixed rate
----------------------------------
Non-agency RMBS                      98.03%  $         (118)    -1.97%
CMBS                                 93.22%          (1,526)    -5.47%
Other ABS                            93.36%            (219)    -6.61%
B notes                              98.26%               -      0.00%
Mezzanine loans                      89.87%               -      0.00%
Syndicated bank loans                99.60%               -      0.00%
Equipment leases and notes          100.00%               -      0.00%
                                             ---------------
   Total fixed rate                  95.57%  $       (1,863)    -0.98%
                                             ===============
      Grand total                    98.51%  $      (24,675)    -1.13%
                                             ===============

About Resource Capital Corp.

Resource Capital Corp. is a specialty finance company that began operations in March 2005 and intends to elect and qualify to be taxed as a real estate investment trust for federal income tax purposes. RCC's investment strategy focuses on real estate-related assets, and, to a lesser extent, higher-yielding commercial finance assets with a concentration on the following asset classes: commercial real estate-related assets such as whole loans, B-notes, mezzanine loans and mortgage-related securities and commercial finance assets such as other asset-backed securities, syndicated bank loans, equipment leases and notes, trust preferred securities 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 equipment finance sectors. As of June 30, 2006, Resource America managed approximately $10.5 billion of assets in these sectors.

For more information, please visit our website at www.resourcecapitalcorp.com or contact investors relations at pschreiber@resourceamerica.com.

Safe Harbor Statement

Statements made in this release include forward-looking statements, which involve substantial risks and uncertainties. The Company's actual results, performance or achievements could differ materially from those expressed or implied in this release. For information pertaining to risks related to these forward-looking statements, see Item 1A, under the caption "Risk Factors" contained in Item 1 of the Company's Annual Report on Form 10-K.

The remainder of this release contains the Company's consolidated balance sheets, consolidated statements of operations and a reconciliation of the Company's estimated REIT taxable income.


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


                                               June 30,   December 31,
                                                 2006         2005
                                             ------------ ------------
                                             (Unaudited)
ASSETS
   Cash and cash equivalents                 $     3,648  $    17,729
   Restricted cash                                33,534       23,592
   Due from broker                                     -          525
   Available-for-sale securities, pledged as
    collateral, at fair value                  1,146,888    1,362,392
   Available-for-sale securities, at fair
    value                                         39,932       28,285
   Loans                                         897,606      569,873
   Direct financing leases and notes, net of
    unearned income                               77,984       23,317
   Investment in unconsolidated trust                774            -
   Derivatives, at fair value                      6,673        3,006
   Interest receivable                            10,183        9,337
   Accounts receivable                               121          183
   Principal paydown receivables                   3,795        5,805
   Other assets                                    2,956        1,503
                                             ------------ ------------
      Total assets                           $ 2,224,094  $ 2,045,547
                                             ============ ============
LIABILITIES
   Repurchase agreements, including accrued
    interest of $1,342 and $2,104            $   934,060  $ 1,068,277
   Collateralized debt obligations ("CDOs")
    (net of debt issuance costs of
   $13,474 and $10,093)                          946,526      687,407
   Warehouse agreement                                 -       62,961
   Secured term facility                          73,343            -
   Unsecured revolving credit facility                 -       15,000
   Distribution payable                            6,413        5,646
   Accrued interest expense                        8,809        9,514
   Unsecured junior subordinated debenture
    held by an unconsolidated trust that
    issued trust preferred securities             25,774            -
   Management and incentive fee payable -
    related party                                    930          896
   Security deposits                               1,191            -
   Due to broker                                     771            -
   Accounts payable and accrued liabilities          738          513
                                             ------------ ------------
      Total liabilities                        1,998,555    1,850,214
                                             ------------ ------------
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;
    17,815,182 and 15,682,334  shares issued
    and outstanding (including 234,224 and
    349,000 restricted shares)                        18           16
   Additional paid-in capital                    247,160      220,161
   Deferred equity compensation                   (1,466)      (2,684)
   Accumulated other comprehensive loss          (16,519)     (19,581)
   Distributions in excess of earnings            (3,654)      (2,579)
                                             ------------ ------------
      Total stockholders' equity                 225,539      195,333
                                             ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 2,224,094  $ 2,045,547
                                             ============ ============



                RESOURCE CAPITAL CORP. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF OPERATIONS
            (in thousands, except share and per share data)


                                                          Period from
                                                         March 8, 2005
                                                            (Date
                       Three Months Ended    Six Months   Operations
                            June 30,            Ended      Commenced)
                     -----------------------  June 30,    to June 30,
                        2006        2005        2006         2005
                     ----------- ----------- ----------- -------------
REVENUES             (Unaudited)             (Unaudited)
   Net interest
    income:
      Interest
       income from
       securities
       available-
       for-sale      $   16,053  $   10,089  $   32,425  $     10,493
      Interest
       income from
       loans             15,700       1,458      26,720         1,458
      Interest
       income -
       other              3,150         852       5,192         1,142
                     ----------- ----------- ----------- -------------
         Total
          interest
          income         34,903      12,399      64,337        13,093
      Interest
       expense           26,519       7,930      47,721         8,140
                     ----------- ----------- ----------- -------------
         Net
          interest
          income          8,384       4,469      16,616         4,953
                     ----------- ----------- ----------- -------------

OTHER REVENUE
   Net realized
    gains (losses)
    on investments          161         (14)       (538)          (14)

EXPENSES
   Management fees -
    related party         1,237         808       2,230         1,016
   Equity
    compensation -
    related party           240         827         822         1,036
   Professional
    services                304         100         565           122
   Insurance                125         120         246           150
   General and
    administrative          573         320         998           383
                     ----------- ----------- ----------- -------------
      Total expenses      2,479       2,175       4,861         2,707
                     ----------- ----------- ----------- -------------
NET INCOME           $    6,066  $    2,280  $   11,217  $      2,232
                     =========== =========== =========== =============

NET INCOME PER SHARE
 - BASIC             $     0.35  $     0.15  $     0.66  $       0.15
                     =========== =========== =========== =============

NET INCOME PER SHARE
 - DILUTED           $     0.34  $     0.15  $     0.65  $       0.15
                     =========== =========== =========== =============

WEIGHTED AVERAGE
 NUMBER OF SHARES
 OUTSTANDING - BASIC 17,580,293  15,333,334  17,099,051    15,333,334
                     =========== =========== =========== =============

WEIGHTED AVERAGE
 NUMBER OF SHARES
 OUTSTANDING -
 DILUTED             17,692,586  15,373,644  17,222,553    15,356,872
                     =========== =========== =========== =============

DIVIDENDS DECLARED
 PER SHARE           $     0.36  $     0.00  $     0.69  $       0.00
                     =========== =========== =========== =============



                RESOURCE CAPITAL CORP. AND SUBSIDIARIES
                  RECONCILIATION OF NET INCOME (LOSS)
                   TO ESTIMATED REIT TAXABLE INCOME
                              (Unaudited)


                                                          Period from
                                                         March 8, 2005
                                                             (Date
                                             Six Months   Operations
                       Three Months Ended       Ended     Commenced)
                            June 30,          June 30,    to June 30,
                     -----------------------
                        2006        2005        2006         2005
                     ----------- ----------- ----------- -------------
Net income           $    6,066  $    2,280  $   11,217  $      2,232
Additions:
   Share-based
    compensation to
    related parties         240         827         822         1,036
   Incentive
    management fee
    expense to
    related party
    paid in shares           77           -         108             -
   Capital losses
    from the sale of
    available-for-
    sale securities           -           -       1,411             -
                     ----------- ----------- ----------- -------------
Estimated REIT
 taxable income      $    6,383  $    3,107  $   13,558  $      3,268
                     =========== =========== =========== =============

Estimated REIT taxable income is not a presentation made in accordance with GAAP, and does not purport to be an alternative to net income (loss) determined in accordance with GAAP as a measure of operating performance or to cash flows from operating activities determined in accordance with GAAP as a measure of liquidity. Total taxable income is the aggregate amount of taxable income generated by us and by our domestic and foreign taxable REIT subsidiaries. Estimated REIT taxable income excludes the undistributed taxable income of our domestic taxable REIT subsidiary, if any such income exists, which is not included in estimated REIT taxable income until distributed to us. There is no requirement that our domestic taxable REIT subsidiary distribute its earning to us. Estimated REIT taxable income, however, includes the taxable income of our foreign taxable REIT subsidiaries because we will generally be required to recognize and report their taxable income on a current basis. We believe that a presentation of estimated REIT taxable income provides useful information to investors regarding our financial condition and results of operations as this measurement is used to determine the amount of dividends that we are required to declare to our stockholders in order to maintain our status as a REIT for federal income tax purposes. We use estimated REIT taxable income for this purpose. 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.

CONTACT: Resource Capital Corp.
David J. Bryant, 215-546-5005
Fax: 215-546-5388

SOURCE: Resource Capital Corp.

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t. 215.546.5005
RSO (Common Stock)
ExchangeNYSE (US Dollar)
Price$9.69
Change (%) Stock is Down 0.13 (1.32%)
Volume321,088
Data as of 03/24/17 4:02 p.m. ET
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