Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES    EXCHANGE ACT OF 1934

For the transition period from _________ to __________

Commission File Number: 1-32733
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=11882436&doc=14
RESOURCE CAPITAL CORP.
(Exact name of registrant as specified in its charter)
Maryland
 
20-2287134
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
 
 
712 Fifth Avenue, 12th Floor, New York, New York 10019
(Address of principal executive offices) (Zip code)
 
 
 
(212) 506-3899
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
 
Accelerated filer
þ
Non-accelerated filer
¨
(Do not check if a smaller reporting company)
Smaller reporting company
¨
 
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ¨ Yes þ No
The number of outstanding shares of the registrant’s common stock on November 6, 2017 was 31,383,890 shares.


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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT
ON FORM 10-Q

 
 
PAGE
PART I
 
 
Item 1:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2:
 
 
 
Item 3:
 
 
 
Item 4:
 
 
 
PART II
 
 
 
 
 
Item 1:
 
 
 
Item 6:
 
 
 




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PART I
ITEM 1.    FINANCIAL STATEMENTS
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
 
September 30,
2017
 
December 31,
2016
 
(unaudited)
 
 
ASSETS (1)
 
 
 
Cash and cash equivalents
$
282,984

 
$
116,026

Restricted cash
14,539

 
3,399

Interest receivable
6,679

 
6,404

CRE loans, pledged as collateral and net of allowances of $4,077 and $3,829
1,264,264

 
1,286,278

Investment securities available-for-sale, including securities pledged as collateral of $165,953 and $97,458
189,173

 
124,968

Investment securities, trading
162

 
4,492

Loans held for sale
38

 
1,007

Principal paydowns receivable
10,873

 
19,280

Investments in unconsolidated entities
13,916

 
87,919

Derivatives, at fair value
235

 
647

Direct financing leases, net of allowances of $735 and $465
167

 
527

Intangible assets

 
213

Other assets
8,436

 
14,673

Deferred tax asset, net

 
4,255

Assets held for sale (amount includes $78,459 and $158,178 of Legacy CRE loans held for sale in continuing operations, see Note 21)
138,193

 
383,455

Total assets
$
1,929,659

 
$
2,053,543

LIABILITIES (2)
 

 
 

Accounts payable and other liabilities
$
4,660

 
$
4,480

Management fee payable - related party
3,062

 
1,318

Accrued interest expense
3,710

 
4,979

Borrowings
1,172,094

 
1,191,456

Distributions payable
5,576

 
5,560

Accrued tax liability
300

 

Derivatives, at fair value
229

 
97

Liabilities held for sale (see Note 21)
9,371

 
142,563

Total liabilities
1,199,002

 
1,350,453

EQUITY
 

 
 

Preferred stock, par value $0.001:  10,000,000 shares authorized 8.50% Series A cumulative redeemable preferred shares, liquidation preference $25.00 per share; 1,069,016 and 1,069,016 shares issued and outstanding
1

 
1

Preferred stock, par value $0.001:  10,000,000 shares authorized 8.25% Series B cumulative redeemable preferred shares, liquidation preference $25.00 per share; 5,544,579 and 5,544,579 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; 31,383,890 and 31,050,020 shares issued and outstanding (including 502,539 and 400,050 unvested restricted shares)
31

 
31

Additional paid-in capital
1,233,200

 
1,218,352

Accumulated other comprehensive income
1,484

 
3,081

Distributions in excess of earnings
(504,070
)
 
(517,177
)
Total Resource Capital Corp. stockholders’ equity
730,657

 
704,299

     Non-controlling interests

 
(1,209
)
      Total equity
730,657

 
703,090

TOTAL LIABILITIES AND EQUITY
$
1,929,659

 
$
2,053,543


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3

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

 
September 30,
2017
 
December 31,
2016
 
(unaudited)
 
 
(1) Assets of consolidated variable interest entities ("VIEs") included in
total assets above:
 
 
 
Restricted cash
$
12,859

 
$
3,308

Interest receivable
3,126

 
3,153

CRE loans, pledged as collateral and net of allowances of $838 and
$763
733,746

 
747,726

Investment securities available-for-sale, including securities pledged as collateral

 
369

Loans held for sale
38

 
1,007

Principal paydowns receivable

 
5,820

Other assets
9

 
58

Total assets of consolidated VIEs
$
749,778

 
$
761,441

 
 
 
 
(2) Liabilities of consolidated VIEs included in total liabilities above:
 
 
 
Accounts payable and other liabilities
$
45

 
$
133

Accrued interest expense
566

 
519

Borrowings
465,531

 
480,103

Total liabilities of consolidated VIEs
$
466,142

 
$
480,755


The accompanying notes are an integral part of these statements
4
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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
 

 
For the Three Months Ended
 
For the Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
REVENUES
 
 
 
 
 
 
 
Interest income:
 
 
 
 
 
 
 
CRE loans
$
21,953

 
$
21,763

 
$
65,327

 
$
64,565

Securities
1,661

 
4,602

 
5,298

 
13,691

Other
369

 
742

 
2,464

 
4,275

Total interest income
23,983

 
27,107

 
73,089

 
82,531

Interest expense
13,853

 
13,653

 
42,454

 
40,401

Net interest income
10,130

 
13,454

 
30,635

 
42,130

Dividend income
21

 
(188
)
 
60

 
(153
)
Fee income
109

 
1,035

 
1,962

 
2,369

Total revenues
10,260

 
14,301

 
32,657

 
44,346

OPERATING EXPENSES
 

 
 

 
 

 
 

Management fees - related party
4,924

 
3,053

 
10,242

 
10,189

Equity compensation - related party
895

 
1,702

 
2,417

 
3,543

General and administrative
4,336

 
3,507

 
11,780

 
10,960

Depreciation and amortization
26

 
364

 
126

 
1,234

Impairment losses

 
25,297

 
177

 
25,297

(Recovery of) provision for loan and lease losses, net
(612
)
 
7,562

 
518

 
7,639

Total operating expenses
9,569

 
41,485

 
25,260

 
58,862

 
 
 
 
 
 
 
 
 
691

 
(27,184
)
 
7,397

 
(14,516
)
OTHER INCOME (EXPENSE)
 

 
 

 
 

 
 

Equity in earnings of unconsolidated entities
41,047

 
1,032

 
41,290

 
5,950

Net realized and unrealized (loss) gain on investment securities available-for-sale and loans and derivatives
(1,465
)
 
(475
)
 
15,619

 
2,012

Net realized and unrealized (loss) gain on investment securities, trading
(9
)
 
(242
)
 
(970
)
 
86

Fair value adjustments on financial assets held for sale

 

 
58

 

Loss on extinguishment of debt
(10,365
)
 

 
(10,365
)
 

Other (expense) income
(690
)
 
1,508

 
(604
)
 
1,486

Total other income
28,518

 
1,823

 
45,028

 
9,534

 
 
 
 
 
 
 
 
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES
29,209

 
(25,361
)
 
52,425

 
(4,982
)
Income tax expense
(4,464
)
 
(8,939
)
 
(5,938
)
 
(9,558
)
NET INCOME FROM CONTINUING OPERATIONS
24,745

 
(34,300
)
 
46,487

 
(14,540
)
NET LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX
(6,087
)
 
(11,321
)
 
(10,832
)
 
(12,532
)
NET INCOME
18,658

 
(45,621
)
 
35,655

 
(27,072
)

The accompanying notes are an integral part of these statements
5
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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - (Continued)
(in thousands, except share and per share data)
(unaudited)


 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
For the Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Net income allocated to preferred shares
(6,014
)
 
(6,015
)
 
(18,043
)
 
(18,077
)
Carrying value in excess of consideration paid for preferred shares

 

 

 
1,500

Net loss allocable to non-controlling interests, net of taxes

 
63

 
196

 
213

NET INCOME (LOSS) ALLOCABLE TO COMMON SHARES
$
12,644

 
$
(51,573
)
 
$
17,808

 
$
(43,436
)
NET INCOME (LOSS) PER COMMON SHARE - BASIC
 
 
 
 
 
 
 
CONTINUING OPERATIONS
$
0.61

 
$
(1.32
)
 
$
0.93

 
$
(1.01
)
DISCONTINUED OPERATIONS
$
(0.20
)
 
$
(0.37
)
 
$
(0.35
)
 
$
(0.41
)
TOTAL NET INCOME (LOSS) PER COMMON SHARE - BASIC
$
0.41

 
$
(1.69
)
 
$
0.58

 
$
(1.42
)
NET INCOME (LOSS) PER COMMON SHARE - DILUTED
 
 
 
 
 
 
 
CONTINUING OPERATIONS
$
0.61

 
$
(1.32
)
 
$
0.92

 
$
(1.01
)
DISCONTINUED OPERATIONS
$
(0.20
)
 
$
(0.37
)
 
$
(0.35
)
 
$
(0.41
)
TOTAL NET INCOME (LOSS) PER COMMON SHARE - DILUTED
$
0.41

 
$
(1.69
)
 
$
0.57

 
$
(1.42
)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC
30,857,232

 
30,528,368

 
30,810,259

 
30,513,131

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED
31,115,152

 
30,528,368

 
31,017,108

 
30,513,131


The accompanying notes are an integral part of these statements
6
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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)

 
For the Three Months Ended
 
For the Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Net income
$
18,658

 
$
(45,621
)
 
$
35,655

 
$
(27,072
)
Other comprehensive income (loss):
 

 
 

 
 

 
 

Reclassification adjustment for realized losses (gains) on available-for-sale securities included in net income
2,521

 

 
1,342

 
(596
)
Unrealized (losses) gains on investment securities, available-for-sale, net
(1,673
)
 
6,182

 
(3,167
)
 
8,382

Reclassification adjustments associated with unrealized losses (gains) from interest rate hedges included in net income

 
26

 
17

 
(29
)
Unrealized gains on derivatives, net
136

 
1

 
211

 
118

Total other comprehensive income (loss)
984

 
6,209

 
(1,597
)
 
7,875

Comprehensive income (loss) before allocation to non-controlling interests and preferred shares
19,642

 
(39,412
)
 
34,058

 
(19,197
)
Net loss allocable to non-controlling interests, net of taxes

 
63

 
196

 
213

Net income allocated to preferred shares
(6,014
)
 
(6,015
)
 
(18,043
)
 
(18,077
)
Carrying value in excess of consideration paid for preferred shares

 

 

 
1,500

Comprehensive income (loss) allocable to common shares
$
13,628

 
$
(45,364
)
 
$
16,211

 
$
(35,561
)


The accompanying notes are an integral part of these statements
7
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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(in thousands, except share and per share data)
(unaudited)

 
Common Stock
 
Preferred Shares - Series A
 
Preferred Shares - Series B
 
Preferred Shares - Series C
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive (Loss) Income
 
Retained Earnings
 
Distributions in Excess of Earnings
 
Total Stockholders' Equity
 
Non-Controlling Interests
 
Total Equity
 
Shares
 
Amount
 
 
 
 
 
 
 
 
 
 
Balance, January 1, 2017
31,050,020

 
$
31

 
$
1

 
$
6

 
$
5

 
$
1,218,352

 
$
3,081

 
$

 
$
(517,177
)
 
$
704,299

 
$
(1,209
)
 
$
703,090

Offering costs

 

 

 

 

 
(385
)
 

 

 

 
(385
)
 

 
(385
)
Equity component of 4.5% convertible senior notes

 

 

 

 

 
14,231

 

 

 

 
14,231

 

 
14,231

Stock based compensation
371,300

 

 

 

 

 

 

 

 

 

 

 

Amortization of stock based compensation

 

 

 

 

 
2,704

 

 

 

 
2,704

 

 
2,704

Retirement of common shares
(10,817
)
 

 

 

 

 
(98
)
 

 

 

 
(98
)
 

 
(98
)
Forfeiture of unvested stock
(26,613
)
 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 
35,851

 

 
35,851

 
(196
)
 
35,655

Preferred dividends

 

 

 

 

 

 

 
(18,043
)
 

 
(18,043
)
 

 
(18,043
)
Securities available-for-sale, fair value adjustment, net

 

 

 

 

 

 
(1,825
)
 

 

 
(1,825
)
 

 
(1,825
)
Designated derivatives, fair value adjustment

 

 

 

 

 

 
228

 

 

 
228

 

 
228

Distributions on common stock

 

 

 

 

 

 

 
(17,808
)
 
13,107

 
(4,701
)
 

 
(4,701
)
Repurchase of conversion option

 

 

 

 

 
(194
)
 

 

 

 
(194
)
 

 
(194
)
Purchase of non-controlling interest

 

 

 

 

 
(1,410
)
 

 

 

 
(1,410
)
 
1,405

 
(5
)
Balance, September 30, 2017
31,383,890

 
$
31

 
$
1

 
$
6

 
$
5

 
$
1,233,200

 
$
1,484

 
$

 
$
(504,070
)
 
$
730,657

 
$

 
$
730,657



The accompanying notes are an integral part of these statements
8
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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)


 
For the Nine Months Ended
 
September 30,
 
2017
 
2016
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income (loss) from continuing operations
$
46,487

 
$
(14,540
)
Net loss from discontinued operations, net of tax
(10,832
)
 
(12,532
)
Net income (loss)
35,655

 
(27,072
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 
 
 
Provision for loan and lease losses
518

 
7,639

Depreciation, amortization and accretion
1,763

 
(7,270
)
Amortization of stock-based compensation
2,417

 
3,543

Provision for deferred taxes

 
16,335

Sale of and principal payments on syndicated corporate loans held for sale
1,433

 

Sale of and principal payments on investment securities, trading, net
4,493

 
229

Net realized and unrealized loss (gain) on investment securities, trading
970

 
(86
)
Net realized and unrealized gain on investment securities available-for-sale and loans and derivatives
(15,619
)
 
(2,012
)
Fair value adjustments on financial assets held for sale
(58
)
 

Loss on extinguishment of debt
10,365

 

Gain on sale of real estate

 
(28
)
Settlement of derivative instruments

 
(72
)
Impairment losses
177

 
25,297

Equity in net earnings of unconsolidated entities
(41,290
)
 
(5,950
)
Return on investments in unconsolidated entities
49,713

 

Changes in operating assets and liabilities
2,613

 
(3,068
)
Net cash provided by continuing operating activities
53,150

 
7,485

Net cash provided by (used in) discontinued operating activities
150,262

 
(78,790
)
Net cash provided by (used in) operating activities
203,412

 
(71,305
)
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

(Increase) decrease in restricted cash
(9,836
)
 
16,816

Deconsolidation of VIEs (1)

 
(472
)
Origination and purchase of loans
(348,764
)
 
(178,779
)
Principal payments received on loans and leases
474,729

 
243,238

Proceeds from sale of loans

 
511

Purchase of securities available-for-sale
(121,887
)
 
(6,656
)
Principal payments on securities available-for-sale
33,779

 
36,855

Proceeds from sale of securities available-for-sale
33,347

 

Acquisition of legacy collateralized debt obligation assets

 
(7,511
)
Acquisition of the remaining interest in Life Care Funding, LLC
(5
)
 

Proceeds from sale of Northport TRS, LLC

 
2,361

Return of capital from investments in unconsolidated entities
48,792

 
(490
)
Proceeds from the sale of an investment in unconsolidated entity
16,159

 

Settlement of derivative instruments
(1,416
)
 
(147
)
Purchase of furniture and fixtures

 
(28
)

The accompanying notes are an integral part of these statements
9
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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS − (Continued)
(in thousands)
(unaudited)

 
For the Nine Months Ended
 
September 30,
 
2017
 
2016
CASH FLOWS FROM INVESTING ACTIVITIES, continued:
 
 
 
Net cash provided by continuing investing activities
124,898

 
105,698

Net cash provided by discontinued investing activities
18,720

 
150,385

Net cash provided by investing activities
143,618

 
256,083

 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Net proceeds from issuances of common stock and dividend reinvestment and stock purchase plan (net of offering costs of $385 and $0)

 
108

Repurchase of common stock

 
(9,236
)
Retirement of common stock
(98
)
 
(162
)
Repurchase of preferred shares

 
(3,114
)
Net (payments on) proceeds from repurchase agreements
(13,824
)
 
107,473

Proceeds from borrowings:
 
 
 
Securitizations
251,449

 

Convertible senior notes
121,589

 

Payments on borrowings:
 
 
 

Securitizations
(266,378
)
 
(226,570
)
Convertible senior notes
(108,690
)
 

Payment of debt issuance costs
(8,253
)
 
(1,980
)
Distributions paid on preferred stock
(18,043
)
 
(18,144
)
Distributions paid on common stock
(4,685
)
 
(39,398
)
Net cash used in continuing financing activities
(46,933
)
 
(191,023
)
Net cash (used in) provided by discontinued financing activities
(133,139
)
 
42,041

Net cash used in financing activities
(180,072
)
 
(148,982
)
NET INCREASE IN CASH AND CASH EQUIVALENTS
166,958

 
35,796

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
116,026

 
78,756

CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
282,984

 
$
114,552

SUPPLEMENTAL DISCLOSURE:
 

 
 

Interest expense paid in cash
$
38,062

 
$
37,497

Income taxes paid in cash
$
517

 
$
4,032

(1)
Cash and cash equivalents at January 1, 2016 decreased by $472,000 due to the adoption of the amendments to the consolidation accounting guidance resulting in the deconsolidation of five variable interest entities.

The accompanying notes are an integral part of these statements
10
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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
(unaudited)



NOTE 1 - ORGANIZATION
Resource Capital Corp., a Maryland corporation, and its subsidiaries (collectively, the "Company") is a real estate investment trust ("REIT") that is primarily focused on originating, holding and managing commercial mortgage loans and commercial real estate ("CRE") related debt investments. The Company is externally managed by Resource Capital Manager, Inc. (the "Manager"), an indirect wholly-owned subsidiary of C-III Capital Partners LLC ("C-III"), a leading CRE investment management and services company engaged in a broad range of activities. C-III is the beneficial owner of approximately 2.3% of the Company’s outstanding common shares at September 30, 2017.
The Company has qualified, and expects to qualify in the current fiscal year, as a REIT.
    
In November 2016, the Company received approval from its board of directors to execute a strategic plan (the "Plan") to focus its strategy on CRE debt investments. The Plan contemplates disposing of certain Legacy CRE loans (loans underwritten prior to 2010), exiting underperforming non-core asset classes (residential real estate-related assets and commercial finance assets) and establishing a dividend policy based on sustainable earnings. As a result, the Company evaluated its residential mortgage and middle market lending segments' assets and liabilities and determined both met all of the criteria to be classified as held for sale in the fourth quarter of 2016. As a result of the reclassification, these segments are reported as discontinued operations and have been excluded from continuing operations. 
On July 1, 2016, the Company underwent an internal tax restructuring in order to reduce the costs and increase efficiencies by consolidating operations into one centralized entity or group of entities. As a result of this tax restructuring, several of the Company’s directly owned subsidiaries converted from corporations to single member limited liability companies ("LLCs"). In addition, several directly owned subsidiaries of the Company merged into a wholly-owned taxable real estate investment trust subsidiary ("TRS") and were dissolved upon the restructuring.
The following subsidiaries are consolidated in the Company’s financial statements:
RCC Real Estate, Inc. ("RCC Real Estate"), a wholly-owned subsidiary, holds CRE loans, CRE related securities and historically has held direct investments in real estate.  RCC Real Estate owns 100% of the equity of the following variable interest entities ("VIEs"):
RREF CDO 2006-1 and RREF CDO 2007-1 were established to complete a collateralized debt obligation ("CDO") issuance secured by a portfolio of CRE loans and commercial mortgage-backed securities ("CMBS"). These entities were deconsolidated at January 1, 2016, and the retained investment was accounted for as an investment security, available-for-sale in the Company's consolidated financial statements. In April 2016 and November 2016, RREF CDO 2006-1 and RREF CDO 2007-1 were liquidated in exchange for the Company's interests. The remaining assets of the CDOs were distributed to the Company, comprised of investment securities available-for-sale and CRE loans held for investment that were recorded at fair value.
Resource Capital Corp. CRE Notes 2013, Ltd. ("RCC CRE Notes 2013") and Resource Capital Corp. 2014-CRE2, Ltd. ("RCC 2014-CRE2") were established to complete CRE securitization issuances secured by a portfolio of CRE loans. In December 2016 and August 2017, RCC CRE Notes 2013 and RCC 2014-CRE2, respectively, were liquidated and, as a result, the remaining assets were returned to the Company in exchange for the Company's preference shares and equity notes in the securitizations.
Resource Capital Corp. 2015-CRE3, Ltd. ("RCC 2015-CRE3"), Resource Capital Corp. 2015-CRE4, Ltd. ("RCC 2015-CRE4") and Resource Capital Corp. 2017-CRE5, Ltd. ("RCC 2017-CRE5") were each established to complete CRE securitization issuances secured by a separate portfolio of loans.
RCC Commercial, Inc. ("RCC Commercial"), a wholly-owned subsidiary, holds a 29.6% investment in NEW NP, LLC ("NEW NP, LLC"), which holds syndicated corporate loan investments and one directly originated middle market loan.

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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 30, 2017
(unaudited)

RCC Commercial II, Inc. ("Commercial II"), a wholly-owned subsidiary, invests in structured notes and subordinated notes of foreign, syndicated corporate loan collateralized loan obligation ("CLO") vehicles.  Commercial II owns 100% of the equity of Apidos Cinco CDO, a TRS, that was established to complete a CDO issuance secured by a portfolio of syndicated corporate loans, ABS and corporate bonds. This entity was deconsolidated at January 1, 2016, and the retained investment was accounted for as an investment security, available-for-sale. In November 2016, the Company liquidated and sold substantially all of Apidos Cinco CDO assets. The remaining assets were consolidated by the Company upon liquidation and are marked at fair value.
RCC Commercial III, Inc. ("Commercial III"), a wholly-owned subsidiary, holds investments in syndicated corporate loan investments.  Commercial III owns 90% of the equity of a VIE, Apidos CDO I, LTD. ("Apidos CDO I"). Apidos CDO I, a TRS, was established to complete a CDO issuance secured by a portfolio of syndicated corporate loans and ABS. In October 2014, the Company liquidated Apidos CDO I and, as a result, substantially all of the assets were sold.
RSO EquityCo, LLC, a wholly-owned subsidiary, owned 10% of the equity of Apidos CDO I and 10% of the equity of Apidos CLO VIII, Ltd. ("Apidos CLO VIII"), a TRS.
RCC Residential Portfolio, Inc. ("RCC Resi Portfolio"), a wholly-owned subsidiary, historically invested in residential mortgage-backed securities ("RMBS"). This entity's investment securities were liquidated as of September 30, 2017.
RCC Residential Portfolio TRS, Inc. ("RCC Resi TRS"), a wholly-owned TRS, was formed to hold strategic residential mortgage positions which could not be held by RCC Resi Portfolio. RCC Resi TRS also owns 100% of the equity, unless otherwise stated, in the following:
Primary Capital Mortgage, LLC ("PCM"), (formerly known as Primary Capital Advisors, LLC), originates and services residential mortgage loans. In November 2016, PCM's operations were reclassified to discontinued operations. In June 2017, PCM disposed of certain assets and liabilities related to originating, acquiring, processing, underwriting, funding and closing of residential mortgage loans pursuant to an asset purchase agreement. See Note 21 for further discussion.
RCM Global Manager LLC ("RCM Global Manager") owns 9.5% of RCM Global LLC ("RCM Global"). RCM Global holds a portfolio of investment securities, available-for-sale. RCM Global was deconsolidated at January 1, 2016, and the retained investment is now accounted for as an equity method investment.
RCC Residential Depositor, LLC ("RCC Resi Depositor") owns 100% of RCC Residential Acquisition, LLC ("RCC Resi Acquisition"). RCC Resi Acquisitions purchased residential mortgage loans from PCM and transfered the assets to RCC Residential Opportunities Trust ("RCC Opp Trust"). RCC Opp Trust, a wholly-owned statutory trust held a portfolio of residential mortgage loans, available-for-sale.
Long Term Care Conversion Funding, LLC ("LTCC Funding") provides a financing facility to fund the acquisition of life settlement contracts.
Life Care Funding, LLC ("LCF") was established for the purpose of acquiring life settlement contracts. In July 2017, the Company purchased the balance of the outstanding membership interests of LCF, therefore, becoming a single member LLC.
RCC TRS, LLC ("RCC TRS") holds an equity investment in a leasing company and investment securities, trading (through both direct and indirect investments in such securities). RCC TRS also owns equity in the following:
Resource TRS, LLC, a wholly owned subsidiary, which in turn holds a 25.8% investment in NEW NP, LLC.
RCC TRS owns 44.6% of the equity in NEW NP, LLC at September 30, 2017. In addition, RCC Commercial owns 29.6% of the equity in NEW NP, LLC. NEW NP, LLC holds syndicated corporate loan investments and the self-originated middle market loans. NEW NP, LLC owned 100% of Northport TRS, LLC which held middle market loans. NEW NP, LLC sold its interest in Northport TRS, LLC on August 4, 2016. In November 2016, NEW NP, LLC's operations were reclassified to discontinued operations. See Note 21 for further discussion.
RCC TRS owns 80.2% of the equity in Pelium Capital, L.P. ("Pelium Capital") at September 30, 2017. Pelium Capital, L.P. held investment securities, trading and was deconsolidated at January 1, 2016. The retained investment is now accounted for as an equity method investment.

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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 30, 2017
(unaudited)

Resource Capital Asset Management, LLC ("RCAM") was entitled to collect senior, subordinated, and incentive fees related to CLO issuers to which it provided management services through CVC Credit Partners, L.P. ("CVC Credit Partners"), formerly Apidos Capital Management ("ACM"), a subsidiary of CVC Capital Partners SICAV-FIS, S.A. ("CVC").  C-III sold its 24.0% interest in CVC Credit Partners in August 2017.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and the accounting policies set forth in Note 2 included in the Company's annual report on Form 10-K for the year ended December 31, 2016. The consolidated financial statements include the accounts of the Company, majority owned or controlled subsidiaries and VIEs for which the Company is considered the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation.
Basis of Presentation
All adjustments necessary to present fairly the Company’s financial position, results of operations and cash flows have been made.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and all highly liquid investments with original maturities of three months or less at the time of purchase. At September 30, 2017 and December 31, 2016, approximately $278.4 million and $111.6 million, respectively, of the reported cash balances exceeded the Federal Deposit Insurance Corporation deposit insurance limit of $250,000 per institution. However, all of the Company's cash deposits are held at multiple, established financial institutions to minimize credit risk exposure.
Allowance for Loan Losses
During the three months ended September 30, 2017, the Company refined its process for the computation of its general reserve for loan losses to more fully align with the results of its risk ratings process. This change in estimate did not yield an estimate for the Company's general reserve that was materially different than estimates as determined under the Company's previous method for estimating the general reserve.
Loans that are held for investment are carried at cost, net of unamortized acquisition premiums or discounts, loan fees, and origination costs as applicable, unless the loans are deemed impaired. The Company evaluates each loan classified as held-for-investment for impairment at least quarterly. In connection with this evaluation, the Company assesses the performance of each loan and assigns a risk rating based on the collective evaluation of several factors, including but not limited to: collateral performance relative to underwritten plan, time since origination, current implied and/or reunderwritten loan-to-collateral value ratios ("LTV"), risk inherent in the loan structure, and the loan's exit plan. Loans are rated "1" through "5," from less risk to greater risk, in connection with this review. Loan with a risk rating of 5 are individually measured for impairment on a quarterly basis.
The general reserve, established for loans not determined to be impaired individually, is based on the Company's loan risk ratings. The Company records a general reserve equal to 1.5% of the aggregate carrying amount of loans with a risk rating of "3," plus 5.0% of the aggregate carrying amount of loans with a risk rating of "4."
Discontinued Operations
The results of operations of a component or a group of components of the Company that either has been disposed of or is classified as held for sale is reported in discontinued operations if the disposal represents a strategic shift that has or will have a major effect on the Company’s operations and financial results.

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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 30, 2017
(unaudited)

Income Taxes
The Company established a full valuation allowance against its net deferred tax asset of approximately $17.0 million (tax effected $4.5 million) at September 30, 2017 as the Company believed it was more likely than not that some or all of the deferred tax assets would not be realized. This assessment was based on the Company’s cumulative historical losses and uncertainties as to the amount of taxable income that would be generated in future years.
Recent Accounting Standards
Accounting Standards Adopted in 2017
In October 2016, the Financial Accounting Standard Board, or "FASB" issued guidance to amend how a reporting entity that is the single decision maker of a VIE should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The guidance requires that if, under the first characteristic of a primary beneficiary, the reporting entity determines that it is the single decision maker of a VIE, then the reporting entity is required to include all of its direct variable interests in a VIE and, on a proportionate basis, its indirect variable interests in a VIE held through related parties, including related parties that are under common control with the reporting entity, in determining whether it satisfies the second characteristic of a primary beneficiary, the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. If the reporting entity does not satisfy the second characteristic of a primary beneficiary after performing the assessment, the reporting entity is required to evaluate whether it and one or more of its related parties under common control, as a group, have the characteristics of a primary beneficiary. If the characteristics of a primary beneficiary are met as a group, then the party within the related party group that is most closely associated with the VIE is the primary beneficiary. The guidance became effective for annual reporting periods beginning after December 15, 2016, and interim periods within that reporting period. Adoption did not have a material impact on the Company's consolidated financial statements.
In March 2016, the FASB issued guidance intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. The new guidance allows for entities to make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. In addition, the guidance allows employers to withhold shares to satisfy minimum statutory tax withholding requirements up to the employees’ maximum individual tax rate without causing the award to be classified as a liability. The guidance also stipulates that cash paid by an employer to a taxing authority when directly withholding shares for tax-withholding purposes should be classified as a financing activity on the statement of cash flows. This guidance became effective for annual reporting periods beginning after December 15, 2016, and interim periods within that reporting period. Adoption did not have a material impact on the Company's consolidated financial statements.
Accounting Standards to be Adopted in Future Periods
In July 2017, the FASB issued guidance to improve the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities. Additionally, the guidance simplifies the application of the hedge accounting guidance via certain targeted improvements. The guidance is effective for annual reporting periods beginning after December 15, 2018, and interim periods within that reporting period. Early adoption is permitted. The Company is in the process of evaluating the impact of this guidance.
In May 2017, the FASB issued guidance to clarify which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. Modification accounting should be applied unless all of the following three criteria are met: (i) the fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified; (ii) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; (iii) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within that reporting period. Early adoption is permitted. The Company is in the process of evaluating the impact of this guidance.

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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 30, 2017
(unaudited)

In January 2017, the FASB issued guidance to add the SEC Staff Announcement "Disclosure of the Impact that Recently Issued Accounting Standards will have on the Financial Statements of a Registrant when such Standards are Adopted in a Future Period (in accordance with Staff Accounting Bulletin Topic 11.M)." The announcement applies to the May 2014 guidance on revenue recognition from contracts with customers, the February 2016 guidance on leases and the June 2016 guidance on how credit losses for most financial assets and certain other instruments that are measured at fair value through net income are determined. The announcement provides the SEC staff view that a registrant should evaluate certain recent accounting standards that have not yet been adopted to determine appropriate financial statement disclosures about the potential material effects of those recent accounting standards. If a registrant does not know or cannot reasonably estimate the impact that adoption of the recent accounting standards referenced in this announcement is expected to have on the financial statements, then the registrant should make a statement to that effect and consider the additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact that the recent accounting standards will have on the financial statements of the registrant when adopted. The Company has not completed its assessment under the new guidance on revenue recognition from contracts with customers, however, it expects to identify similar performance obligations as currently identified; therefore, the Company does not expect a material impact upon the application of this guidance. The Company is currently evaluating the impact of this guidance on leases and the measurement of credit losses on financial instruments and its impact on its consolidated financial statements.
In January 2017, the FASB issued guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions, or disposals, of assets or businesses. The guidance provides a screen to determine when an integrated set of assets and activities (a "set") is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired, or disposed of, is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. If the screen is not met, the guidance requires that: (i) to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create an output and (ii) remove the evaluation of whether a market participant could replace missing elements. The guidance also narrows the definition of an output to: the result of inputs and processes applied to those inputs that provide goods or services to customers, investment income (such as dividends or interest), or other revenues. The guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within that reporting period. Early adoption is permitted only for certain transactions. The Company is in the process of evaluating the impact of this guidance.
In November 2016, the FASB issued guidance to reduce the diversity in practice of the classification and presentation of changes in restricted cash on the statement of cash flows. The guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. The guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within that reporting period. Early adoption is permitted. The Company is in the process of evaluating the impact of this guidance.
In August 2016, the FASB issued guidance to reduce the diversity in practice around the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. The guidance addresses the following eight specific cash flow issues: (i) debt prepayments or extinguishment costs; (ii) contingent consideration payments made after a business combination; (iii) proceeds from the settlement of insurance claims; (iv) proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies); (v) settlement of zero-coupon debt instruments or other debt instruments with insignificant coupon rates; (vi) distributions received from equity method investees; (vii) beneficial interests in securitization transactions and (viii) separately identifiable cash flows and application of the predominance principle. The guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within that reporting period. Early adoption is permitted. The Company is in the process of evaluating the impact of this guidance.
In June 2016, the FASB issued guidance which will change how credit losses for most financial assets and certain other instruments that are measured at fair value through net income are determined. The new guidance will replace the current incurred loss approach with an expected loss model for instruments measured at amortized cost. For available-for-sale debt securities, the guidance requires recording allowances rather than reducing the carrying amount, as it is currently under the other-than-temporary impairment model. It also simplifies the accounting model for credit-impaired debt securities and loans. This guidance is effective for annual reporting periods beginning after December 15, 2019, and interim periods within that reporting period. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods within that reporting period, with any adjustments reflected as of the beginning of the fiscal year of adoption. The Company is in the process of evaluating the impact of this guidance.

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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 30, 2017
(unaudited)

In February 2016, the FASB issued guidance requiring lessees to recognize a lease liability and a right-of-use asset for all leases. Lessor accounting will remain largely unchanged. The guidance will also require new qualitative and quantitative disclosures to help financial statement users better understand the timing, amount and uncertainty of cash flows arising from leases. This guidance will be effective for reporting periods beginning on or after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this guidance.
In January 2016, the FASB issued guidance to address certain aspects of the recognition, measurement, presentation and disclosure of financial instruments in order to provide users of financial statements with more decision-useful information. The guidance requires equity investments to be measured at fair value with changes in fair value recognized in net income; simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; requires separate presentation of financial assets and financial liabilities by measurement category and form of financial assets on the balance sheet or the accompanying notes to the financial statements, and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets.  It is effective for annual reporting periods, and the interim periods within those periods, beginning after December 15, 2017 and early adoption is permitted for certain provisions. The Company is in the process of evaluating the impact of this guidance.
In May 2014, the FASB issued guidance that establishes key principles by which an entity determines the amount and timing of revenue recognized from customer contracts. At issuance, the guidance was effective for the first interim or annual period beginning after December 15, 2016. In August 2015, the FASB issued additional guidance that delayed the previous effective date by one year, resulting in the original guidance becoming effective for the first interim or annual period beginning after December 15, 2017. Early application, which was not permissible under the initial effectiveness timeline, is now permissible though no earlier than as of the first interim or annual period beginning after December 15, 2016. In 2016, the FASB issued multiple amendments to the accounting standard to provide further clarification. The Company has not completed its assessment under the new guidance, however, we do not expect that their adoption will have a material impact on our consolidated financial statements, as financial instruments are explicitly scoped out of the standards and nearly all of our income is generated from financial instruments.
Reclassifications
Certain reclassifications have been made to the 2016 consolidated financial statements to conform to the 2017 presentation, including the impact of discontinued operations and assets and liabilities held for sale.
NOTE 3 - VARIABLE INTEREST ENTITIES

The Company has evaluated its securities, loans, investments in unconsolidated entities, liabilities to subsidiary trusts issuing preferred securities (consisting of unsecured junior subordinated notes), securitizations, guarantees and other financial contracts in order to determine if they are variable interests in VIEs. The Company regularly monitors these legal interests and contracts and, to the extent it has determined that it has a variable interest, analyzes the related entity for potential consolidation.
Consolidated VIEs (the Company is the primary beneficiary)
Based on management’s analysis, the Company is the primary beneficiary of Apidos CDO I, Apidos CDO III, Apidos Cinco CDO, Whitney CLO I, RCC 2015-CRE3, RCC 2015-CRE4 and RCC 2017-CRE5 at September 30, 2017; and at December 31, 2016, the Company was the primary beneficiary of the Apidos CDO I, Apidos CDO III, Apidos Cinco CDO, Whitney CLO I, RCC 2014-CRE2, RCC 2015-CRE3 and RCC 2015-CRE4 (for each period, collectively the "Consolidated VIEs").

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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 30, 2017
(unaudited)

The Consolidated VIEs were formed on behalf of the Company to invest in real estate-related securities, CMBS, syndicated corporate loans, corporate bonds and asset-backed securities and were financed by the issuance of debt securities. The Manager manages the CRE related entities, and CVC Credit Partners manages the commercial finance-related entities on behalf of the Company, respectively. By financing these assets with long-term borrowings through the issuance of debt securities, the Company seeks to generate attractive risk-adjusted equity returns and to match the term of its assets and liabilities. The primary beneficiary determination for each of these VIEs was made at each VIE's inception and is continually assessed. All of the Company's VIEs were reevaluated under the revised consolidation model effective for the Company on January 1, 2016. In August 2017, RCC 2014-CRE2 was liquidated and, as a result, the remaining assets were returned to the Company in exchange for the Company's preference shares and equity notes in the securitization.
On November 14, 2016, the Company substantially liquidated Apidos Cinco CDO, a syndicated corporate loan CLO determined to be a VIE that is managed by CVC Credit Partners. As a result of the liquidation, all senior and mezzanine notes of the securitization were repaid, leaving only the Company's equity interest in the securitization outstanding as of December 31, 2016. Because substantially all of the VIE's activities are being conducted on behalf of a single variable interest holder that is a related party of the decision maker, it was determined that the Company is the primary beneficiary of the transaction and, as such, should consolidate Apidos Cinco CDO. The Company consolidated the remaining restricted cash, one structured security and three syndicated corporate loans for an aggregate combined fair value of $2.3 million. The Company received cash distributions of $22.4 million as a result of the liquidation through September 30, 2017. The Company elected the fair value option for the structured security and syndicated corporate loans upon acquisition. The Company believes fair value is the most useful indication of value for these assets given the short hold period
Whitney CLO I was a securitization in which the Company acquired rights to manage the collateral assets held by the entity in February 2011. For a discussion on the primary beneficiary analysis for Whitney, see "— Unconsolidated VIEs – Resource Capital Asset Management," below.
For a discussion of the Company’s consolidated securitizations, see Note 1, and for a discussion of the debt issued through the securitizations, see Note 10.
For consolidated CLOs in which the Company does not own 100% of the subordinated notes, the Company imputes an interest rate using expected cash flows over the life of the CLO and records the third party's share of the cash flows as interest expense on the consolidated statements of operations.
The Company has exposure to losses on its securitizations to the extent of its subordinated debt and preferred equity investments in them. The Company is entitled to receive payments of principal and interest on the debt securities it holds and, to the extent revenues exceed debt service requirements and other expenses of the securitizations, distributions with respect to its preferred equity interests. As a result of consolidation, debt and equity interests the Company holds in these securitizations have been eliminated, and the Company’s consolidated balance sheets reflects both the assets held and debt issued by the securitizations to third parties and any accrued expense to third parties. The Company's operating results and cash flows include the gross amounts related to the securitizations' assets and liabilities as opposed to the Company's net economic interests in the securitizations. Assets and liabilities related to the securitizations are disclosed, in the aggregate, on the Company's consolidated balance sheets.
The creditors of the Company’s seven consolidated VIEs have no recourse to the general credit of the Company nor to each other. During the three and nine months ended September 30, 2017, the Company provided no financial support to any of its VIEs nor does it have any requirement to do so, although it may choose to do so in the future to maximize future cash flows on such investments by the Company. There are no explicit arrangements that obligate the Company to provide financial support to any of its consolidated VIEs.

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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 30, 2017
(unaudited)

The following table shows the classification and carrying value of assets and liabilities of the Company's consolidated VIEs at September 30, 2017 (in thousands):
 
 
CRE Securitizations
 
Other
 
Total
ASSETS
 
 
 
 
 
 
Restricted cash
 
$
12,302

 
$
557

 
$
12,859

Loans, pledged as collateral
 
733,746

 

 
733,746

Loans held for sale
 

 
38

 
38

Interest receivable
 
3,126

 

 
3,126

Other assets
 
9

 

 
9

Total assets (1)
 
$
749,183

 
$
595

 
$
749,778

 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
Borrowings
 
$
465,531

 
$

 
$
465,531

Accrued interest expense
 
566

 

 
566

Accounts payable and other liabilities
 
45

 

 
45

Total liabilities
 
$
466,142

 
$

 
$
466,142

(1)
Assets of each of the consolidated VIEs may only be used to settle the obligations of each respective VIE.
Unconsolidated VIEs (the Company is not the primary beneficiary, but has a variable interest)
Based on management’s analysis, the Company is not the primary beneficiary of the VIEs discussed below since it does not have both (i) the power to direct the activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. Accordingly, the following VIEs are not consolidated in the Company’s financial statements at September 30, 2017. The Company’s maximum exposure to risk for each of these unconsolidated VIEs is set forth in the "Maximum Exposure to Loss" column in the table below.

RREF CDO 2006-1 and RREF CDO 2007-1
RREF CDO 2006-1 and RREF CDO 2007-1 were formed on behalf of the Company to invest in real estate-related securities and CMBS and were financed by the issuance of debt securities. The Manager manages the CRE related entities on behalf of the Company. The primary beneficiary determination for each of these VIEs was made at each VIE’s inception and is continually assessed. On January 1, 2016, the Company adopted the amendments to the consolidation guidance. As a result of its evaluation, the Company determined that it was no longer the primary beneficiary of these VIEs as its investments in these vehicles do not provide the Company with a controlling financial interest and were deconsolidated. At deconsolidation, the Company recorded its investments in these VIEs at fair value and accounted for these investments as investment securities available-for-sale in its consolidated financial statements. In April 2016, the Company liquidated its investment in RREF CDO 2006-1 and, as a result, exchanged its interest in RREF CDO 2006-1 for the CDO's remaining assets with a fair value of $65.7 million after paying off the CDO's third-party debt of $7.5 million and recognized a gain of approximately $846,000 as a result of this transaction, which was recorded in net realized and unrealized gain (loss) on investment securities available-for-sale and loans and derivatives on the consolidated statements of operations. In November 2016, the Company liquidated its investment in RREF CDO 2007-1 and, as a result, exchanged its interest in RREF CDO 2007-1 for the CDO's remaining assets with a fair value of $130.9 million after paying off the CDO's third-party debt of $33.7 million and recognized a gain of approximately $2.1 million as a result of this transaction, which was recorded in net realized and unrealized gain (loss) on investment securities available-for-sale and loans and derivatives on the consolidated statements of operations.

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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 30, 2017
(unaudited)

RCM Global, LLC

In July 2014, the Company, together with Resource America, Inc. ("Resource America") and certain Resource America employees, acquired through RCM Global a portfolio of available-for-sale securities for $23.5 million. The portfolio is managed by Resource America. The Company contributed $15.0 million for a 63.8% membership interest. Revenues and expenses of RCM Global are allocated to each member in accordance with their membership interest. In March and June 2015, the Company requested and received an in-kind distribution in certain securities held by RCM Global resulting in a reduction of its ownership interest. RCM Global was determined to be a VIE based on the majority equity interest holders' inability to direct the activities that are most significant to the entity. On January 1, 2016, the Company adopted the amendments to the consolidation guidance. Upon adoption, the Company reevaluated its variable interest in RCM Global and determined it would no longer be the primary beneficiary of RCM Global, as its investment in the limited liability company did not provide the Company with a controlling financial interest. As a result of its evaluation, the Company deconsolidated its investment in RCM Global. As of January 1, 2016, the Company accounted for its investment in RCM Global as an equity method investment in investments in unconsolidated entities in its consolidated financial statements. At September 30, 2017, the Company held a 9.5% interest in RCM Global with a fair value of $32,000, and the remainder was owned by subsidiaries of Resource America and certain of its employees and their spouses.

Pelium Capital, L.P.

In September 2014, the Company contributed $17.5 million to Pelium Capital for an initial ownership interest of 80.4%, and subsequently funded its final commitment of $2.5 million in February 2015. Pelium Capital is a specialized credit opportunity fund managed by an indirect wholly-owned subsidiary of C-III. The Company will receive 10% of the carried interest in the partnership. Resource America contributed cash of $2.8 million to the formation of Pelium Capital. At December 31, 2015, Pelium Capital was accounted for as a consolidated voting interest subsidiary. On January 1, 2016, the Company adopted the amendments to the consolidation guidance. Upon adoption, the Company reevaluated its interest in Pelium Capital and determined that although it now possessed a variable interest in Pelium Capital, it would not be the primary beneficiary of Pelium Capital, as its investment in the limited liability company does not provide the Company with a controlling financial interest. As a result of its reevaluation, the Company deconsolidated its investment in Pelium Capital on January 1, 2016, and accounted for its investment as an equity method investment in investments in unconsolidated entities in its consolidated financial statements. At September 30, 2017, the Company had an investment balance of $12.3 million and held an 80.2% interest in Pelium Capital.
Pearlmark Mezzanine Realty Partners IV, L.P.
In June 2015, the Company committed up to $50.0 million in Pearlmark Mezzanine Realty Partners IV, L.P. ("Pearlmark Mezz"), a Delaware limited partnership created to acquire and manage financial interests in CRE property. The investment advisor is Pearlmark Real Estate LLC ("Pearlmark Manager"), which was 50% owned by Resource America. The Company determined it possessed a variable interest in Pearlmark Mezz; however, it would not be the primary beneficiary of Pearlmark Mezz, as its investment in the limited liability company does not provide the Company with a controlling financial interest. The Company accounted for its investment in Pearlmark Mezz as an equity method investment in investments in unconsolidated entities in its consolidated financial statements. The Company paid Pearlmark Manager management fees of 1.0% on the unfunded committed capital and 1.5% on the invested capital. The Company was entitled to a management fee rebate of 25% for the first year of the fund, which ended in June 2016. Resource America agreed to credit any such fees paid by the Company to Pearlmark Manager against the base management fee that the Company paid the Manager. In May 2017, the Company sold its equity interest in Pearlmark Mezz for proceeds of $16.2 million and recognized a net loss of $345,000, which was recorded in equity in earnings of unconsolidated entities on the Company's consolidated statements of operations.
LEAF Commercial Capital, Inc.
In November 2011, the Company entered into an agreement to exchange its lease-related investments for shares of LEAF Commercial Capital, Inc.'s ("LCC") Series A, Series B and Series D Preferred Stock. During 2013, the Company entered into an additional agreement with LCC to purchase shares of Series A-1 and Series E Preferred Stock. The Series E Preferred Stock expired and as a result was exchanged for additional Series A-1 Preferred Stock. The Company determined that it is not the primary beneficiary of LCC because it did not participate in any management or portfolio decisions, held only two of six board positions, and did not have controlling voting rights in the entity and as a result accounted for its investment in LCC as an equity method investment in investments in unconsolidated entities in its consolidated financial statements. In July 2017, the Company received cash proceeds of $84.3 million and realized a gain of $41.1 million in connection with the sale of its investment in LCC.

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19

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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 30, 2017
(unaudited)

Unsecured Junior Subordinated Debentures
The Company has a 100% interest in the common shares of Resource Capital Trust I ("RCT I") and RCC Trust II ("RCT II"), respectively, with a value of $1.5 million in the aggregate (or 3% of each trust) at September 30, 2017. RCT I and RCT II were formed for the purposes of providing debt financing to the Company, as described below. The Company completed a qualitative analysis to determine whether or not it is the primary beneficiary of each of the trusts and determined that it was not the primary beneficiary of either trust because it does not have the power to direct the activities most significant to the trusts, which include the collection of principal and interest and protection of collateral through servicing rights. Accordingly, neither trust is consolidated into the Company’s consolidated financial statements.
The Company records its investments in RCT I and RCT II’s common shares of $774,000 each as investments in unconsolidated entities using the cost method and records dividend income when declared by RCT I and RCT II. The trusts each hold subordinated debentures for which the Company is the obligor in the amount of $25.8 million for each of RCT I and RCT II. The debentures were funded by the issuance of trust preferred securities of RCT I and RCT II. The Company will continuously reassess whether it should be deemed to be the primary beneficiary of the trusts.
Resource Capital Asset Management CLOs
In February 2011, the Company purchased a company that managed syndicated corporate loan assets through five CLOs. As a result, the Company became entitled to collect senior, subordinated and incentive management fees from the CLOs. This intangible asset was allocated to each of the five CLOs and was amortized over the expected life of each CLO. As of March 2017, the last of the five CLOs was liquidated; and, as a result, any remaining balance of the Company's associated intangible asset was written off.
The following table shows the classification, carrying value and maximum exposure to loss with respect to the Company’s unconsolidated VIEs at September 30, 2017 (in thousands):
 
Unconsolidated Variable Interest Entities
 
 
Unsecured
Junior
Subordinated
Debentures
 
RCM Global LLC
 
Pelium Capital
 
Total
 
Maximum
Exposure
to Loss
Investments in unconsolidated entities
 
$
1,548

 
$
32

 
$
12,336

 
$
13,916

 
$
13,916

Total assets
 
1,548

 
32

 
12,336

 
13,916

 

 
 
 
 
 
 
 
 
 
 
 
Borrowings
 
51,548

 

 

 
51,548

 
N/A

Total liabilities
 
51,548

 

 

 
51,548

 
N/A

Net asset (liability)
 
$
(50,000
)
 
$
32

 
$
12,336

 
$
(37,632
)
 
N/A

At September 30, 2017, there were no explicit arrangements or implicit variable interests that could require the Company to provide financial support to any of its unconsolidated VIEs.

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20

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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 30, 2017
(unaudited)

NOTE 4 - SUPPLEMENTAL CASH FLOW INFORMATION
The following table summarizes the Company's supplemental disclosure of cash flow information (in thousands):
 
For the Nine Months Ended
 
September 30,
 
2017
 
2016
Non-cash discontinued operating activities include the following:
 
 
 
Interest expense paid by third party (1)
$

 
$
(107
)
Operating liabilities assumed by third party (1)
$

 
$
(192
)
 
 
 
 
Non-cash continuing investing activities include the following:
 
 
 
Retained beneficial interest in unconsolidated securitization entities
$

 
$
(22,476
)
Loans acquired through collateralized debt obligation liquidation
$

 
$
(44,893
)
Securities acquired through collateralized debt obligation liquidation
$

 
$
(20,837
)
 
 
 
 
Non-cash continuing financing activities include the following:
 

 
 

Proceeds from the private exchange of convertible senior notes
$
22,161

 
$

Payments on the private exchange of convertible senior notes
$
(22,161
)
 
$

Distributions on common stock accrued but not paid
$
1,566

 
$
13,012

Distribution on preferred stock accrued but not paid
$
4,010

 
$
4,010

 
 
 
 
Non-cash discontinued financing activities include the following:
 
 
 
Senior secured revolving credit facility assumed by third party (1)
$

 
$
(122,000
)
Senior secured revolving credit facility paid down by third party (1)
$

 
$
(22,000
)
(1)
In August 2016, the Company completed the sale of Northport TRS, LLC. The Purchaser assumed $122.0 million and paid down  $22.0 million of principal and $107,000 of interest expense on the Company’s behalf of the senior secured revolving credit agreement. The Purchaser assumed $192,000 of accounts payable and accrued legal fees recorded to complete the sale.

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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 30, 2017
(unaudited)

NOTE 5 - LOANS
The following is a summary of the Company’s loans (dollars in thousands):
Loan Description
 
Quantity
 
Principal
 
Unamortized (Discount)
Premium, net
(1)
 
Amortized Cost
 
Allowance for Loan Losses
 
Carrying
Value
 (2)
 
Contracted Interest Rates (3)
 
Maturity Dates (4)
At September 30, 2017:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CRE whole loans, floating rate (5)
 
65
 
$
1,274,453

 
$
(6,112
)
 
$
1,268,341

 
$
(4,077
)
 
$
1,264,264

 
LIBOR plus 3.75% to LIBOR plus 6.25%
 
February 2017 to October 2020
Total CRE loans held for investment
 
 
 
1,274,453

 
(6,112
)
 
1,268,341

 
(4,077
)
 
1,264,264

 
 
 
 
Syndicated corporate loans (6)
 
2
 
38

 

 
38

 

 
38

 
n/a
 
n/a
Total loans held for sale
 
 
 
38

 

 
38

 

 
38

 
 
 
 
Total loans
 
 
 
$
1,274,491

 
$
(6,112
)
 
$
1,268,379

 
$
(4,077
)
 
$
1,264,302

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2016:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CRE whole loans, floating rate (5)
 
67
 
$
1,295,926

 
$
(5,819
)
 
$
1,290,107

 
$
(3,829
)
 
$
1,286,278

 
LIBOR plus 3.75% to LIBOR plus 6.45%
 
April 2017 to January 2020
Total CRE loans held for investment
 
 
 
1,295,926

 
(5,819
)
 
1,290,107

 
(3,829
)
 
1,286,278

 
 
 
 
Syndicated corporate loans (6)
 
3
 
1,007

 

 
1,007

 

 
1,007

 
n/a
 
n/a
Total loans held for sale
 
 
 
1,007

 

 
1,007

 

 
1,007

 
 
 
 
Total loans
 
 
 
$
1,296,933

 
$
(5,819
)
 
$
1,291,114

 
$
(3,829
)
 
$
1,287,285

 
 
 
 
(1)
Amounts include unamortized loan origination fees of $5.8 million and $5.8 million and deferred amendment fees of $310,000 and $4,000 being amortized over the life of the loans at September 30, 2017 and December 31, 2016, respectively.
(2)
Substantially all loans are pledged as collateral under various borrowings at September 30, 2017 and December 31, 2016.
(3)
LIBOR refers to London Interbank Offered Rate.
(4)
Maturity dates do not include possible extension options that may be available to the borrowers.
(5)
CRE whole loans had $65.1 million and $55.5 million in unfunded loan commitments at September 30, 2017 and December 31, 2016, respectively.  These unfunded commitments are advanced as the borrowers formally request additional funding as permitted under the loan agreement and any necessary approvals have been obtained.
(6)
All syndicated corporate loans are second lien loans.
The following is a summary of the contractual maturities, assuming full exercise of the extension options available to the borrower, of the Company’s CRE loans held for investment, at amortized cost (in thousands):
Description
 
2017
 
2018
 
2019 and Thereafter
 
Total
At September 30, 2017:
 
 
 
 
 
 
 
 
CRE whole loans
 
$
58,986

 
$
9,188

 
$
1,200,167

 
$
1,268,341

Total 
 
$
58,986

 
$
9,188

 
$
1,200,167

 
$
1,268,341

 
 
 
 
 
 
 
 
 
At December 31, 2016:
 
2017
 
2018
 
2019 and Thereafter
 
Total
CRE whole loans
 
$
7,000

 
$
24,476

 
$
1,258,631

 
$
1,290,107

Total 
 
$
7,000

 
$
24,476

 
$
1,258,631

 
$
1,290,107



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22

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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 30, 2017
(unaudited)

At September 30, 2017, approximately 25.1%, 24.2% and 16.9% of the Company's CRE loan portfolio was concentrated in the Southwest, Pacific and Southeast, respectively, based on carrying value, as defined by the National Council of Real Estate Investment Fiduciaries ("NCREIF"). At December 31, 2016, approximately 30.7%, 20.4%, and 15.5% of the Company's CRE loan portfolio was concentrated in the Southwest, Pacific and Southeast, respectively, based on carrying value.
Principal Paydowns Receivable
Principal paydowns receivable represent loan principal payments that have been received by the Company's servicers and trustees. At September 30, 2017, the Company had $10.9 million of principal paydowns receivable, all of which was received in cash by the Company during October 2017. Of this amount, $175,000 relates to a Legacy CRE loan classified as an asset held for sale on the Company's consolidated balance sheets. At December 31, 2016, the Company had $19.3 million of principal paydowns receivable, all of which was received by the Company in cash during January 2017.
NOTE 6 - FINANCING RECEIVABLES
The following tables show the allowance for loan and lease losses and recorded investments in loans and leases for the periods indicated (in thousands):
 
Nine Months Ended September 30, 2017
 
Year Ended December 31, 2016
 
Commercial Real Estate Loans
 
Syndicated Corporate Loans
 
Direct Financing Leases
 
Total
 
Commercial Real Estate Loans
 
Syndicated Corporate Loans
 
Direct Financing Leases
 
Total
Allowance for loan and lease losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan and lease losses at beginning of period
$
3,829

 
$

 
$
465

 
$
4,294

 
$
41,839

 
$
1,282

 
$
465

 
$
43,586

Provision for (recovery of) loan and lease losses
248

 

 
270

 
518

 
18,167

 
(402
)
 

 
17,765

Loans charged-off

 

 

 

 

 
402

 

 
402

Transfer to loans held for sale

 

 

 

 
(15,763
)
 

 

 
(15,763
)
Deconsolidation of VIEs

 

 

 

 
(40,414
)
 
(1,282
)
 

 
(41,696
)
Allowance for loan and lease losses at end of period
$
4,077

 
$

 
$
735

 
$
4,812

 
$
3,829

 
$

 
$
465

 
$
4,294

Allowance for loan and lease losses ending balance:
 

 
 

 
 
 
 

 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
2,500

 
$

 
$
735

 
$
3,235

 
$
2,500

 
$

 
$
465

 
$
2,965

Collectively evaluated for impairment
$
1,577

 
$

 
$

 
$
1,577

 
$
1,329

 
$

 
$

 
$
1,329

Loans acquired with deteriorated credit quality
$

 
$

 
$

 
$

 
$

 
$

 
$

 
$

Loans and Leases:
 

 
 

 
 
 
 

 
 
 
 
 
 
 
 
Amortized cost ending balance:
 
 
 

 
 
 
 

 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
7,000

 
$

 
$
902

 
$
7,902

 
$
7,000

 
$

 
$
992

 
$
7,992

Collectively evaluated for impairment
$
1,261,341

 
$

 
$

 
$
1,261,341

 
$
1,283,107

 
$

 
$

 
$
1,283,107

Loans acquired with deteriorated credit quality
$

 
$

 
$

 
$

 
$

 
$

 
$

 
$


Credit quality indicators
Commercial Real Estate Loans

The Company's CRE loans are collateralized by a diversified mix of real estate properties and are assessed for credit quality based on the collective evaluation of several factors, including but not limited to: collateral performance relative to underwritten plan, time since origination, current implied and/or reunderwritten LTV, loan structure, and the loan's exit plan. Depending on the loan's performance against these various factors, loans are rated on a scale from 1 to 5, with loans rated 1 representing loans with the highest credit quality and loans rated 5 representing loans with lowest credit quality. The factors evaluated provide general criteria to monitor credit migration in the Company's loan portfolio, as such, a loan's rating may improve or worsen, depending on new information received.

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23

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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 30, 2017
(unaudited)

The criteria set forth below should be used as general guidelines, and, therefore, not every loan will have all of the characteristics described in each category below. Loans that are performing according to their underwritten plans generally will not require an allowance for loan loss.
 
 
 
Risk Rating
 
Risk Characteristics
 
 
 
1
 
• Property performance has surpassed underwritten expectations.
 
 
• Occupancy is stabilized, the property has had a history of consistently high occupancy, and the property has a diverse and high quality tenant mix.
 
 
 
2
 
• Property performance is consistent with underwritten expectations and covenants and performance criteria are being met or exceeded.
 
 
• Occupancy is stabilized, near stabilized or is on track with underwriting.
 
 
 
3
 
• Property performance lags behind underwritten expectations.
 
 
• Occupancy is not stabilized and the property has some rollover.
 
 
 
4
 
• Property performance significantly lags behind underwritten expectations. Performance criteria and loan covenants have required occasional waivers.
 
 
• Occupancy is not stabilized and the property has a large amount of rollover.
 
 
 
5
 
• Property performance is significantly worse than underwritten expectations. The loan is not in compliance with loan covenants and performance criteria and is in default. Sale proceeds would not be sufficient to pay off the loan at maturity.
 
 
• The property has material vacancy and significant rollover of remaining tenants.
 
 
• An updated appraisal is required.
CRE whole loans are evaluated for any credit deterioration by debt asset management and certain finance personnel on at least a quarterly basis. Loans are first individually evaluated for impairment; and to the extent not deemed impaired, a general reserve is established.

The allowance for loan loss is computed as (i) 1.5% of the aggregate carrying amount of loans rated as a 3, plus (ii) 5% of the aggregate carrying amount of loans rated as a 4, plus (iii) specific allowances measured and determined on loans individually evaluated, which are loans rated 5. While the overall risk rating is generally not the sole factor used in determining whether a loan is impaired, a loan with a higher overall risk rating would tend to have more adverse indicators of impairment, and therefore would be more likely to experience a credit loss.

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24

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RESOURCE CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 30, 2017
(unaudited)

Credit risk profiles of CRE whole loans at amortized cost are as follows (in thousands):
 
Rating 1
 
Rating 2
 
Rating 3
 
Rating 4
 
Rating 5
 
Held for Sale
 
Total
At September 30, 2017:
 
 
 
 
 
 
 
 
 
 
 
 
 
CRE whole loans (1)(3)
$
64,976

 
$
1,102,594

 
$
88,938

 
$
4,833

 
$
7,000

 
$

 
$
1,268,341

Legacy CRE whole loans (1)(2)

 

 

 

 

 
78,459

 
78,459

 
$
64,976

 
$
1,102,594

 
$
88,938

 
$
4,833

 
$
7,000

 
$
78,459

 
$
1,346,800

 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2016:
 

 
 

 
 

 
 

 
 

 
 

 
 

CRE whole loans (1)
$
1,186,292

 
$
96,815

 
$

 
$
7,000

 
$

 
$

 
$
1,290,107

Legacy CRE whole loans (1)

 

 

 

 

 
158,178

 
158,178

 
$
1,186,292

 
$
96,815

 
$

 
$
7,000

 
$

 
$
158,178

 
$
1,448,285

(1)
Pursuant to the Company's strategic plan described in Note 1, certain Legacy CRE whole loans were moved to loans held for sale and included in assets held for sale carried at the lower of cost or fair value on the Company's consolidated balance sheets at September 30, 2017 and December 31, 2016, respectively (see Note 21).
(2)
Includes one loan with a maturity date of May 2017 that is currently in default.
(3)
Includes one loan with a maturity date of November 2017 that entered into technical default in November 2017.
At September 30, 2017 and December 31, 2016, the Company had one CRE whole loan with a credit quality rating of 5 under the Company's current rating methodology and 4 under the Company's previous rating methodology, respectively, due to short term vacancy/tenant concerns and a past due maturity of February 2017. The CRE whole loan is collateralized by a retail shopping center in Roswell, GA and had an amortized cost of $7.0 million at September 30, 2017