Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 3, 2018

Resource Capital Corp.
(Exact name of registrant as specified in its charter)
Maryland
 
1-32733
 
20-2287134
(State or other jurisdiction
 
(Commission
 
(IRS Employer
of Incorporation)
 
File Number)
 
Identification No.)
 
 
 
 
 
717 Fifth Avenue
New York, NY
 
 
 
10022
(Address of principal executive offices)
 
 
 
(Zip Code)
 
 
 
 
 
Registrant's telephone number, including area code: 212-621-3210
 
 
 
 
 
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ¨






ITEM 2.02    Results of Operations and Financial Condition.
On May 3, 2018, Resource Capital Corp. (the "Company") issued a press release regarding its operating results for the three months ended March 31, 2018. A copy of this press release is furnished with this report as Exhibit 99.1. The information in this Current Report, including the exhibit hereto, is to be considered "furnished" pursuant to Form 8-K and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended (the "Securities Act").
ITEM 7.01.     Regulation FD Disclosure.
On May 3, 2018, the Company, as part of the press release referenced above, announced its intention to change the Company's name from "Resource Capital Corp." to "Exantas Capital Corp." and the Company's trading symbols on the New York Stock Exchange from "RSO" to "XAN" for shares of the Company's common stock, and from "RSO PrC" to "XAN PrC" for shares of the Company's 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock. The name change will be effective at 5:00 p.m. (Eastern Daylight Time) on May 25, 2018 (the "Effective Time").
Following the Effective Time, the new CUSIP number for the Company's common stock will be 30068N105 and the new CUSIP number for the Company's 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock will be 30068N402.
A copy of the press release is attached hereto as Exhibit 99.1 and is to be considered "furnished" pursuant to Form 8-K and shall not be deemed "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act.
Forward-Looking Statements
This Current Report on Form 8-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as "may," "trend," "will," "continue," "expect," "intend," "anticipate," "estimate," "believe," "look forward" or other similar words or terms. Because such statements include risks, uncertainties and contingencies, actual results may differ materially from the expectations, intentions, beliefs, plans or predictions of the future expressed or implied by such forward-looking statements. Factors that can affect future results include, but are not limited to, those discussed under the heading "Risk Factors" and "Management's Discussion and Analysis of Financial Condition" in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking statement to reflect new or changing information or events after the date hereof or to reflect the occurrence of unanticipated events, except as may be required by law.
ITEM 9.01     Financial Statements and Exhibits.
(d)
Exhibits
Exhibit No.
 
Description
EX 99.1
 





SIGNATURES:
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
Resource Capital Corp.
 
Date:
May 3, 2018
 
/s/ David J. Bryant
 
 
 
 
 David J. Bryant
 Chief Financial Officer
 



Exhibit


FOR IMMEDIATE RELEASE

CONTACT:
DAVID J. BRYANT
CHIEF FINANCIAL OFFICER
RESOURCE CAPITAL CORP.
717 Fifth Avenue
New York, NY 10022
212-621-3210        


RESOURCE CAPITAL CORP.
REPORTS RESULTS FOR
THREE MONTHS ENDED MARCH 31, 2018
AND ANNOUNCES NAME CHANGE

New York, NY, May 3, 2018 - Resource Capital Corp. (NYSE: RSO) ("RSO" or the "Company") reports results for the three months ended March 31, 2018.
Significant Items and Highlights
GAAP net loss allocable to common shares of $(0.40) per share-diluted for the three months ended March 31, 2018.
Core Earnings were $(0.28) per common share-diluted, and were $0.03 per common share-diluted when adjusted for the non-recurring charges relating to the redemption of the Company's 8.25% Series B Cumulative Redeemable Preferred Stock ("Series B Preferred Stock") and the pending settlement of a securities litigation (see Schedule I).
Effective at 5:00 p.m. (EDT) on May 25, 2018, RSO will change its name to "Exantas Capital Corp."
RSO's board of directors anticipates that it will declare a cash dividend of $0.10 per share on its common stock for the second quarter of 2018, which is a 100% increase over the first quarter of 2018 amount.
RSO has monetized $400.6 million of the investments that were included in management's previously communicated strategic plan (the "Plan") (see Schedule III). This includes $13.9 million of assets liquidated during the three months ended March 31, 2018 and $22.7 million of assets liquidated in April and May 2018.
RSO originated $146.3 million of new commercial real estate ("CRE") loans during the three months ended March 31, 2018 (see Schedule IV).
In April 2018, RSO entered into an additional CRE term financing facility, increasing its borrowing capacity to $900.0 million from $650.0 million.
RSO redeemed all of its outstanding 8.50% Series A Cumulative Redeemable Preferred Stock ("Series A Preferred Stock") and Series B Preferred Stock.
Common stock cash dividend of $0.05 per share for the three months ended March 31, 2018.
Book value of $13.92 per common share at March 31, 2018, as compared to $14.46 per common share at December 31, 2017.
Three Months Ended March 31, 2018 Results
GAAP net loss allocable to common shares of $12.6 million, or $(0.40) per share-diluted, for the three months ended March 31, 2018 as compared to GAAP net income allocable to common shares of $2.7 million, or $0.09 per share-diluted, for the three months ended March 31, 2017. GAAP net loss allocable to common shares for the three months ended March 31, 2018 includes a $4.5 million decline in the fair value of an asset held for sale based on independent appraisals.
Core Earnings were $(8.6) million, or $(0.28) per common share-diluted, for the three months ended March 31, 2018, and were $1.0 million, or $0.03 per common share-diluted, when adjusted for the non-recurring charges relating to the redemption of the Company's Series B Preferred Stock and the pending settlement of a securities litigation.





GAAP net loss allocable to common shares and Core Earnings for the three months ended March 31, 2018 include a charge of $7.5 million, or $(0.24) per share-diluted, related to the March 2018 redemption of all remaining outstanding shares of the Company's Series B Preferred Stock. The redemption charge represents the difference between the carrying value and the redemption price of the redeemed Series B Preferred Stock. Core Earnings for the three months ended March 31, 2018 additionally include a charge of $2.2 million, or $(0.07) per common share-diluted, related to the pending settlement of a securities litigation.
Additional Items
Commercial Real Estate
Substantially all of RSO's $1.4 billion CRE loan portfolio comprised floating rate senior whole loans at March 31, 2018.
RSO's CRE floating rate whole loan portfolio had a weighted average spread of 4.65% over the one-month London Interbank Offered Rate ("LIBOR") of 1.88% at March 31, 2018.
The following table summarizes RSO's CRE loan activities and fundings of previous commitments, at par, for the three and twelve months ended March 31, 2018 (in millions, except percentages and amounts in footnotes):
 
Three Months Ended
March 31, 2018
 
Twelve Months Ended
March 31, 2018
New CRE loan commitments
$
127.1

 
$
598.5

New CRE preferred equity investment
19.2

 
19.2

Total CRE loan commitments and investments
146.3

 
617.7

Payoffs and paydowns (1)(2)
(51.5
)
 
(500.3
)
Previous commitments funded
10.5

 
35.8

New unfunded loan commitments
(13.6
)
 
(70.1
)
Net CRE loans funded
$
91.7

 
$
83.1

 
 
 
 
Weighted average one-month LIBOR floor on new originations (3)
1.37
%
 
1.13
%
Weighted average spread above one-month LIBOR (3)
3.94
%
 
4.28
%
Weighted average unlevered yield, including amortization of origination fees
5.79
%
 
5.76
%
(1)
CRE loan payoffs and extensions resulted in $370,000 and $1.2 million of exit and extension fees during the three and twelve months ended March 31, 2018, respectively.
(2)
Activity does not include legacy CRE loans classified as assets held for sale.
(3)
Applicable to new CRE whole loans funded, excluding one CRE whole loan with an 8.00% fixed interest rate.
Commercial Mortgage-Backed Securities
RSO's commercial mortgage-backed securities ("CMBS") portfolio had a carrying value of $250.7 million and a weighted average coupon of 4.36% at March 31, 2018.
The following table summarizes RSO's CMBS activities, at face value, for the three and twelve months ended March 31, 2018 (in millions, except percentages):
 
Three Months Ended
March 31, 2018
 
Twelve Months Ended
March 31, 2018
CMBS acquisitions
$
44.3

 
$
256.2

Sales

 
(7.4
)
Principal paydowns
(3.4
)
 
(50.5
)
CMBS acquisitions, net
$
40.9

 
$
198.3

 
 
 
 
Weighted average coupon at March 31, 2018
3.88%

 
4.14%

Commercial Real Estate Loans Term Facility
In April 2018, RSO entered into a $250.0 million master repurchase agreement with Barclays Bank PLC to finance CRE loan originations. The facility matures in April 2021, subject to certain one-year extension options. This facility increases RSO's financing capacity to $900.0 million from $650.0 million.





Discontinued Operations
Pursuant to the Plan, the assets and liabilities of Primary Capital Mortgage, LLC ("PCM") and RSO's middle market lending segment, NEW NP, LLC, were reclassified to held for sale during the fourth quarter of 2016 and are reported as discontinued operations on the consolidated statements of operations.
In the first quarter of 2018, PCM sold its remaining loans held for sale generating total cash proceeds of $1.9 million. PCM recognized a net loss of $539,000 for the three months ended March 31, 2018.
In the first quarter of 2018, NEW NP, LLC sold its remaining syndicated middle market loans generating total proceeds of $27.6 million, of which $12.7 million had been received in cash as of March 31, 2018 and the balance was received in May 2018.
At March 31, 2018, the one remaining directly originated middle market loan, with a carrying value of $2.0 million, was in default. The middle market portfolio generated net income of $819,000 for the three months ended March 31, 2018, including a $216,000 net realized gain on the syndicated middle market loan sales.
Liquidity
At April 30, 2018, RSO's available liquidity consisted of three primary sources:
unrestricted cash and cash equivalents of $67.1 million;
approximately $87.0 million of available liquidity from the financing of unlevered CRE and CMBS positions; and
$396.2 million available under three term financing facilities to finance CRE loans.
Common Stock Book Value and Total Stockholders' Equity
The following table reconciles RSO's common stock book value from December 31, 2017 to March 31, 2018 (in thousands, except per share data and amounts in footnotes):
 
 
Total Amount
 
Per Share Amount
Common stock book value at December 31, 2017 (1)
 
$
447,634

 
$
14.46

Net loss allocable to common shares
 
(12,582
)
 
(0.40
)
Change in other comprehensive income:
 
 
 
 
Available-for-sale securities
 
(1,292
)
 
(0.04
)
Derivatives
 
1,149

 
0.03

Common stock dividends
 
(1,560
)
 
(0.05
)
Common stock dividends on unvested shares
 
(23
)
 

Accretion (dilution) from additional shares outstanding at March 31, 2018 (2)
 
898

 
(0.08
)
Total net decrease
 
(13,410
)
 
(0.54
)
Common stock book value at March 31, 2018 (1)(3)
 
$
434,224

 
$
13.92

(1)
Per share calculations exclude unvested restricted stock, as disclosed on the consolidated balance sheets, of 465,808 and 483,073 shares at March 31, 2018 and December 31, 2017, respectively. The denominators for the calculations are 31,184,609 and 30,946,819 at March 31, 2018 and December 31, 2017, respectively.
(2)
Per share amount calculation includes the impact of 237,790 additional shares.
(3)
Common stock book value is calculated as total stockholders' equity of $550.2 million less preferred stock equity of $116.0 million at March 31, 2018.
Common stock book value includes $13.4 million of unamortized discount resulting from the value of the conversion option on RSO's convertible senior notes. The convertible senior notes' discounts will be amortized into interest expense over the remaining life of each note issuance. At March 31, 2018, common stock book value excluding this item would have been $420.9 million, or $13.50 per common share.
Total stockholders' equity at March 31, 2018, which measures equity before accounting for non-controlling interests, was $550.2 million, of which $116.0 million was attributable to preferred stock. Total stockholders' equity at December 31, 2017 was $671.5 million, of which $223.8 million was attributable to preferred stock.





Preferred Stock Redemptions
In the first quarter of 2018, RSO redeemed all of its outstanding Series A Preferred Stock and Series B Preferred Stock for $166.8 million. These redemptions eliminated approximately $13.7 million of preferred stock dividends on an annual basis, or $0.44 per common share.
Corporate Name Change
Effective at 5:00 p.m. (EDT) on May 25, 2018, RSO will change its name to "Exantas Capital Corp." The Company's common stock and 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock ("preferred stock") will continue to be listed on the NYSE, and the Company anticipates that on May 29, 2018 its common stock will begin trading under the symbol "XAN" and its preferred stock will begin trading under the symbol "XAN PrC." The new CUSIP number for the Company's common stock following the name change will be 30068N105, and the new CUSIP number for its preferred stock will be 30068N402.
Investment Portfolio
The following table summarizes the amortized cost and net carrying amount of RSO's investment portfolio at March 31, 2018, classified by asset type (in thousands, except percentages and amounts in footnotes):
At March 31, 2018
 
Amortized
Cost
 
Net Carrying Amount
 
Percent of
Portfolio
 
Weighted
Average Coupon
Core Assets:
 
 
 
 
 
 
 
 
CRE whole loans (1)(2)
 
$
1,362,520

 
$
1,357,991

 
80.23
%
 
6.34%
CRE preferred equity investment (2)
 
19,008

 
19,008

 
1.12
%
 
11.50%
CMBS (3)
 
251,343

 
250,746

 
14.81
%
 
4.36%
Total Core Assets
 
1,632,871

 
1,627,745

 
96.16
%
 
 
 
 
 
 
 
 
 
 
 
Non-Core Assets:
 
 
 
 
 
 
 
 
Structured notes (4)
 
1,218

 
164

 
0.01
%
 
N/A (10)
Investments in unconsolidated entities (5)
 
4,891

 
4,891

 
0.29
%
 
N/A (10)
Direct financing leases (6)
 
824

 
89

 
0.01
%
 
5.66%
Legacy CRE loans held for sale (7)(8)
 
63,882

 
57,341

 
3.39
%
 
1.71%
Middle market loan held for sale (7)(9)
 
13,837

 
1,978

 
0.12
%
 
—%
Life settlement contracts (7)
 
177

 
177

 
0.01
%
 
N/A (10)
Property available-for-sale (7)
 
117

 
117

 
0.01
%
 
N/A (10)
Total Non-Core Assets
 
84,946

 
64,757

 
3.84
%
 
 
 
 
 
 
 
 
 
 
 
Total investment portfolio
 
$
1,717,817

 
$
1,692,502

 
100.00
%
 
 
(1)
Net carrying amount includes an allowance for loan losses of $4.5 million at March 31, 2018.
(2)
Classified as CRE loans on the consolidated balance sheets.
(3)
Classified as investment securities available-for-sale on the consolidated balance sheets.
(4)
Classified as investment securities, trading on the consolidated balance sheets.
(5)
Classified as investments in unconsolidated entities on the consolidated balance sheets.
(6)
Net carrying amount includes an allowance for lease losses of $735,000 at March 31, 2018.
(7)
Classified as assets held for sale on the consolidated balance sheets.
(8)
Net carrying amount includes a lower of cost or market value adjustment of $6.5 million at March 31, 2018.
(9)
Net carrying amount includes the lower of cost or market value adjustment of $11.9 million at March 31, 2018.
(10)
There are no stated rates associated with these investments.





Supplemental Information
The following schedules of reconciliations and supplemental information at March 31, 2018 are included at the end of this release:
Schedule I - Reconciliation of GAAP Net Income (Loss) to Core Earnings;
Schedule II - Summary of Securitization Performance Statistics;
Schedule III - Strategic Plan Update;
Schedule IV - CRE Loan Activities; and
Schedule V - Supplemental Information.
About Resource Capital Corp.
Resource Capital Corp. is a real estate investment trust that is primarily focused on originating, holding and managing commercial mortgage loans and commercial real estate-related debt investments.
The Company is externally managed by Resource Capital Manager, Inc. (the "Manager"), which is an indirect wholly-owned subsidiary of C-III Capital Partners LLC, a leading commercial real estate investment management and services company engaged in a broad range of activities.
For more information, please visit RSO's website at www.resourcecapitalcorp.com or contact investor relations at IR@resourcecapitalcorp.com.
Safe Harbor Statement
Statements made in this release may include forward-looking statements, which involve substantial risks and uncertainties. RSO's actual results, performance or achievements could differ materially from those expressed or implied in this release. The risks and uncertainties associated with forward-looking statements contained in this release include those related to:
fluctuations in interest rates and related hedging activities;
the availability of debt and equity capital to acquire and finance investments;
defaults or bankruptcies by borrowers on RSO's loans or on loans underlying its investments;
adverse market trends that have affected and may continue to affect the value of real estate and other assets underlying RSO's investments;
increases in financing or administrative costs; and
general business and economic conditions that have impaired and may continue to impair the credit quality of borrowers and RSO's ability to originate loans.
For further information concerning these and other risks pertaining to the forward-looking statements contained in this release, and to the general risks to which RSO is subject, see Item 1A, "Risk Factors," included in its Annual Report on Form 10-K for the year ended December 31, 2017 and the risks expressed in its other public filings with the Securities and Exchange Commission.
RSO cautions you not to place undue reliance on any forward-looking statements contained in this release, which speak only as of the date of this release. All subsequent written and oral forward-looking statements attributable to RSO or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this release. Except to the extent required by applicable law or regulation, RSO undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.
Furthermore, certain non-GAAP financial measures are discussed in this release. RSO's presentation of this information is not intended to be considered in isolation of or as a substitute for the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP are set forth in Schedule I of this release and can be accessed through RSO's filings with the SEC at www.sec.gov
The remainder of this release contains RSO's unaudited (2018) and audited (2017) consolidated balance sheets, unaudited consolidated statements of operations, a reconciliation of GAAP net income (loss) to Core Earnings, a summary of securitization performance statistics, an update on RSO's strategic plan, a summary of RSO's CRE loan activities and supplemental information regarding RSO's CRE loan portfolio and loans held for sale.





RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
 
March 31,
2018
 
December 31,
2017
 
(unaudited)
 
 
ASSETS (1)
 
 
 
Cash and cash equivalents
$
61,500

 
$
181,490

Restricted cash
546

 
22,874

Accrued interest receivable
6,945

 
6,859

CRE loans, net of allowances of $4,529 and $5,328
1,376,999

 
1,284,822

Investment securities available-for-sale
250,746

 
211,737

Investment securities, trading
164

 
178

Loans held for sale

 
13

Principal paydowns receivable
20

 
76,129

Investments in unconsolidated entities
6,439

 
12,051

Derivatives, at fair value
1,751

 
602

Direct financing leases, net of allowances of $735 and $735
89

 
151

Other assets
6,981

 
7,451

Assets held for sale (amounts include $57,341 and $61,841 of legacy CRE loans held for sale in continuing operations)
77,621

 
107,718

Total assets
$
1,789,801

 
$
1,912,075

LIABILITIES (2)
 

 
 

Accounts payable and other liabilities
$
6,654

 
$
5,153

Management fee payable
938

 
1,035

Accrued interest payable
3,244

 
4,387

Borrowings
1,222,386

 
1,163,485

Distributions payable
3,308

 
5,581

Preferred stock redemption liability

 
50,000

Derivatives, at fair value

 
76

Accrued tax liability
209

 
540

Liabilities held for sale
2,883

 
10,342

Total liabilities
1,239,622

 
1,240,599

STOCKHOLDERS' EQUITY
 

 
 

Preferred stock, par value $0.001:  10,000,000 shares authorized 8.25% Series B Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share; 0 and 4,613,596 shares issued and outstanding

 
5

Preferred stock, par value $0.001:  10,000,000 shares authorized 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock, 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; 31,650,417 and 31,429,892 shares issued and outstanding (including 465,808 and 483,073 unvested restricted shares)
32

 
31

Additional paid-in capital
1,080,927

 
1,187,911

Accumulated other comprehensive income
1,154

 
1,297

Distributions in excess of earnings
(531,939
)
 
(517,773
)
Total stockholders' equity
550,179

 
671,476

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
1,789,801

 
$
1,912,075






RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (Continued)
(in thousands, except share and per share data)
 
March 31,
2018
 
December 31,
2017
 
(unaudited)
 
 
(1) Assets of consolidated variable interest entities ("VIEs") included in total assets above:
 
 
 
Restricted cash
$
513

 
$
20,846

Accrued interest receivable
2,728

 
3,347

CRE loans, pledged as collateral and net of allowances of $844 and $1,330
571,640

 
603,110

Loans held for sale

 
13

Principal paydowns receivable
20

 
72,207

Other assets
188

 
73

Total assets of consolidated VIEs
$
575,089

 
$
699,596

 
 
 
 
(2) Liabilities of consolidated VIEs included in total liabilities above:
 
 
 
Accounts payable and other liabilities
$
65

 
$
96

Accrued interest payable
412

 
592

Borrowings
298,970

 
416,655

Total liabilities of consolidated VIEs
$
299,447

 
$
417,343






RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
 
For the Three Months Ended
 
March 31,
 
2018
 
2017
 
(unaudited)
 
(unaudited)
REVENUES
 
 
 
Interest income:
 
 
 
CRE loans
$
22,383

 
$
21,533

Securities
3,456

 
2,308

Other
118

 
1,630

Total interest income
25,957

 
25,471

Interest expense
14,384

 
14,254

Net interest income
11,573

 
11,217

Other (expense) revenue
(95
)
 
928

Total revenues
11,478

 
12,145

OPERATING EXPENSES
 

 
 

Management fees
2,813

 
2,680

Equity compensation
967

 
788

General and administrative
3,060

 
3,863

Depreciation and amortization
13

 
68

Impairment losses

 
177

(Recovery of) provision for loan and lease losses, net
(799
)
 
999

Total operating expenses
6,054

 
8,575

 
 
 
 
 
5,424

 
3,570

OTHER INCOME (EXPENSE)
 

 
 

Equity in (losses) earnings of unconsolidated entities
(292
)
 
361

Net realized and unrealized (loss) gain on investment securities available-for-sale and loans and derivatives
(642
)
 
7,606

Net realized and unrealized loss on investment securities, trading
(5
)
 
(911
)
Fair value adjustments on financial assets held for sale
(4,665
)
 
(21
)
Other income
11

 
68

Total other (expense) income
(5,593
)
 
7,103

 
 
 
 
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE TAXES
(169
)
 
10,673

Income tax benefit (expense)
32

 
(1,499
)
NET (LOSS) INCOME FROM CONTINUING OPERATIONS
(137
)
 
9,174

NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX
247

 
(561
)
NET INCOME
110

 
8,613

Net income allocated to preferred shares
(5,210
)
 
(6,014
)
Consideration paid in excess of carrying value of preferred shares
(7,482
)
 

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

 
101

NET (LOSS) INCOME ALLOCABLE TO COMMON SHARES
$
(12,582
)
 
$
2,700

NET (LOSS) INCOME PER COMMON SHARE - BASIC:
 
 
 
CONTINUING OPERATIONS
$
(0.41
)
 
$
0.11

DISCONTINUED OPERATIONS
$
0.01

 
$
(0.02
)
TOTAL NET (LOSS) INCOME PER COMMON SHARE - BASIC
$
(0.40
)
 
$
0.09

NET (LOSS) INCOME PER COMMON SHARE - DILUTED:
 
 
 
CONTINUING OPERATIONS
$
(0.41
)
 
$
0.11

DISCONTINUED OPERATIONS
$
0.01

 
$
(0.02
)
TOTAL NET (LOSS) INCOME PER COMMON SHARE - DILUTED
$
(0.40
)
 
$
0.09

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC
31,111,315

 
30,752,006

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED
31,111,315

 
30,914,148








SCHEDULE I
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME (LOSS) TO CORE EARNINGS
(unaudited)
RSO uses Core Earnings as a non-GAAP financial measure to evaluate its operating performance. RSO previously used Adjusted Funds from Operations as a non-GAAP measure of operating performance.
Core Earnings exclude the effects of certain transactions and GAAP adjustments that RSO believes are not indicative of its current CRE loan portfolio and other CRE-related investments and operations. Core Earnings exclude income (loss) from all non-core assets, such as commercial finance, middle market lending, residential mortgage lending, certain legacy CRE loans and other non-CRE assets designated as assets held for sale at the initial measurement date.(1) 
Core Earnings, for reporting purposes, is defined as GAAP net income (loss) allocable to common shareholders, excluding (i) non-cash equity compensation expense, (ii) unrealized gains and losses, (iii) non-cash provisions for loan losses, (iv) non-cash impairments on securities, (v) non-cash amortization of discounts or premiums associated with borrowings, (vi) net income or loss from a limited partnership interest owned at the initial measurement date, (vii) net income or loss from non-core assets,(2)(3) (viii) real estate depreciation and amortization, (ix) foreign currency gains or losses and (x) income or loss from discontinued operations. Core Earnings may also be adjusted periodically to exclude certain one-time events pursuant to changes in GAAP and certain non-cash items.
Although pursuant to the Third Amended and Restated Management Agreement RSO calculates incentive compensation using Core Earnings excluding incentive fees payable to the Manager, beginning with the three months and year ended December 31, 2017 RSO includes incentive fees payable to the Manager in Core Earnings for reporting purposes.
Core Earnings does not represent net income or cash generated from operating activities and should not be considered as an alternative to GAAP net income or as a measure of liquidity under GAAP. RSO's methodology for calculating Core Earnings may differ from methodologies used by other companies to calculate similar supplemental performance measures, and, accordingly, its reported Core Earnings may not be comparable to similar performance measures used by other companies.





The following table provides a reconciliation from GAAP net (loss) income allocable to common shares to Core Earnings allocable to common shares for the periods presented (in thousands, except per share data):
 
For the Three Months Ended
 
March 31,
 
2018
 
2017
Net (loss) income allocable to common shares - GAAP
$
(12,582
)
 
$
2,700

Adjustment for realized gain on CRE assets

 

Net (loss) income allocable to common shares - GAAP, adjusted
(12,582
)
 
2,700

 
 
 
 
Reconciling items from continuing operations:
 
 
 
Non-cash equity compensation expense
967

 
788

Non-cash (recovery of) provision for CRE loan losses
(799
)
 
860

Realized loss on core activities (4)
(2,167
)
 

Non-cash amortization of discounts or premiums associated with borrowings
778

 
414

Net income from limited partnership interest owned at the initial measurement date (1)

 
(358
)
Income tax (benefit) expense from non-core investments (2)(3)
(32
)
 
1,499

Net realized loss on non-core assets (2)(3)
215

 

Net loss (income) from non-core assets (3)
397

 
(1,429
)
 
 
 
 
Reconciling items from discontinued operations and CRE assets:
 
 
 
Net interest income on legacy CRE loans held for sale
(322
)
 
(1,324
)
Realized gain on liquidation of CRE loans

 
(6,954
)
Fair value adjustments on legacy CRE loans held for sale
4,672

 

Net loss (income) from other non-CRE investments held for sale
478

 
(25
)
(Income) loss from discontinued operations, net of taxes
(247
)
 
561

Core Earnings allocable to common shares (5)
(8,642
)
 
(3,268
)
 
 
 
 
Reconciling items for nonrecurring activities:
 
 
 
Loss on redemption of Series B Preferred Stock
7,482

 

Realized loss on core activities
2,167

 

Core Earnings allocable to common shares, adjusted
$
1,007

 
$
(3,268
)
 
 
 
 
Weighted average common shares - diluted
31,111

 
30,752

 
 
 
 
Core Earnings per common share - diluted (5)
$
(0.28
)
 
$
(0.11
)
Core Earnings per common share, adjusted - diluted
$
0.03

 
$
(0.11
)
(1)
Initial measurement date is December 31, 2016.
(2)
Income tax expense from non-core investments and net realized gain on non-core assets are components of net income or loss from non-core assets.
(3)
Non-core assets are investments and securities owned by RSO at the initial measurement date in (i) commercial finance, (ii) middle market lending, (iii) residential mortgage lending, (iv) legacy CRE loans designated as held for sale and (v) other non-CRE assets included in assets held for sale.
(4)
Payment of pending settlement of a securities litigation, previously accrued in 2017.
(5)
Core Earnings include a non-recurring charge of $7.5 million, or $(0.24) per common share-diluted, for the three months ended March 31, 2018 in connection with the redemption of the remaining Series B Preferred Stock.
    





RSO has five operating segments: commercial real estate debt investments; commercial finance; middle market lending; residential mortgage lending; and corporate & other. The commercial real estate debt investments operating segment includes our activities and operations related to commercial real estate loans and commercial real estate-related securities. The commercial finance operating segment includes the activities and operations related to syndicated corporate loans, syndicated corporate loan-related securities and direct financing leases. The middle market lending operating segment includes the activities and operations related to the origination and purchase of middle market corporate loans. The residential mortgage lending operating segment includes the activities and operations related to originating and servicing residential mortgage loans and investments in residential mortgage-backed securities. The corporate & other segment includes corporate level interest income, interest expense, inter-segment eliminations not allocable to any particular operating segment and general and administrative expense.
As part of the plan to exit non-CRE businesses, the entire middle market lending and substantially all of the residential mortgage lending segments are reported as discontinued operations. The following table presents a reconciliation of GAAP net income (loss) allocable to common shares to Core Earnings allocable to common shares for the three months ended March 31, 2018 presented by operating segment (in thousands, except per share data):
 
Commercial Real Estate Debt Investments
 
Corporate & Other
 
Core Subtotal
 
Commercial Finance
 
Middle Market Lending
 
Residential Mortgage Lending
 
Total
Net income (loss) allocable to common shares - GAAP
$
12,302

 
$
(24,366
)
 
$
(12,064
)
 
$
(470
)
 
$
819

 
$
(867
)
 
$
(12,582
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciling items from continuing operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-cash equity compensation expense

 
967

 
967

 

 

 

 
967

Non-cash recovery of CRE loan losses
(799
)
 

 
(799
)
 

 

 

 
(799
)
Realized loss on core activities (4)

 
(2,167
)
 
(2,167
)
 

 

 

 
(2,167
)
Non-cash amortization of discounts or premiums associated with borrowings

 
778

 
778

 

 

 

 
778

Income tax benefit from non-core investments (2)(3)

 

 

 
(32
)
 

 

 
(32
)
Net realized loss on non-core assets (2)(3)

 

 

 
215

 

 

 
215

Net loss from non-core assets (3)

 

 

 
286

 

 
111

 
397

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reclassification of allocated expenses to non-CRE activities

 
(185
)
 
(185
)
 
1

 

 
184

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciling items from discontinued operations and CRE assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income on legacy CRE loans held for sale
(322
)
 

 
(322
)
 

 

 

 
(322
)
Fair value adjustments on legacy CRE loans held for sale
4,672

 

 
4,672

 

 

 

 
4,672

Net loss from other non-CRE investments held for sale

 
478

 
478

 

 

 

 
478

(Income) loss from discontinued operations, net of taxes

 

 

 

 
(819
)
 
572

 
(247
)
Core Earnings allocable to common shares (5)
15,853

 
(24,495
)
 
(8,642
)
 

 

 

 
(8,642
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciling items for nonrecurring activities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on redemption of Series B Preferred Stock

 
7,482

 
7,482

 

 

 

 
7,482

Realized loss on core activities

 
2,167

 
2,167

 

 

 

 
2,167

Core Earnings allocable to common shares, adjusted
$
15,853

 
$
(14,846
)
 
$
1,007

 
$

 
$

 
$

 
$
1,007

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares - diluted
31,111

 
31,111

 
31,111

 
31,111

 
31,111

 
31,111

 
31,111

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core Earnings per common share - diluted (5)
$
0.51

 
$
(0.79
)
 
$
(0.28
)
 
$

 
$

 
$

 
$
(0.28
)
Core Earnings per common share, adjusted - diluted
$
0.51

 
$
(0.48
)
 
$
0.03

 
$

 
$

 
$

 
$
0.03

(1)
Initial measurement date is December 31, 2016.
(2)
Income tax expense from non-core investments and net realized gain on non-core assets are components of net income or loss from non-core assets.
(3)
Non-core assets are investments and securities owned by RSO at the initial measurement date in (i) commercial finance, (ii) middle market lending, (iii) residential mortgage lending, (iv) legacy CRE loans designated as held for sale and (v) other non-CRE assets included in assets held for sale.
(4)
Payment of pending settlement of a securities litigation, previously accrued in 2017.
(5)
Core Earnings include a non-recurring charge of $7.5 million, or $(0.24) per common share-diluted, for the three months ended March 31, 2018 in connection with the redemption of the remaining Series B Preferred Stock.





SCHEDULE II
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
SUMMARY OF SECURITIZATION PERFORMANCE STATISTICS
(unaudited)
Distributions, Coverage Tests and Liquidations
The following table sets forth the distributions made by and coverage test summaries for RSO's active securitizations for the periods presented (in thousands):
Name
 
Cash Distributions
 
Overcollateralization Cushion (1)
 
End of Designated Principal Reinvestment Period
 
For the Three Months Ended March 31, 2018
 
For the Year Ended December 31, 2017
 
At March 31, 2018
 
At the Initial Measurement Date
 
RCC 2015-CRE3 (2)
 
$
1,428

 
$
8,672

 
$
61,469

 
$
20,313

 
February 2017
RCC 2015-CRE4 (2)
 
$
1,887

 
$
8,554

 
$
72,184

 
$
9,397

 
September 2017
RCC 2017-CRE5 (2)
 
$
10,601

 
$
6,643

 
$
19,655

 
$
20,727

 
July 2020
Apidos Cinco CDO (3)
 
$

 
$
2,056

 
N/A

 
$
17,774

 
N/A
(1)
Overcollateralization cushion represents the amount by which the collateral held by the securitization issuer exceeds the maximum amount required.
(2)
The designated principal reinvestment period for Resource Capital Corp. 2015-CRE3, Resource Capital Corp. 2015-CRE4 and Resource Capital Corp. 2017-CRE5 is the period in which principal repayments can be utilized to purchase loans held outside of the respective securitization that represent the funded commitments of existing collateral in the respective securitization that were not funded as of the date the respective securitization was closed. Additionally, the indenture for each securitization does not contain any interest coverage test provisions.
(3)
Apidos Cinco CDO was substantially liquidated in November 2016.
The following table sets forth the distributions made by and liquidation details for RSO's liquidated securitizations for the periods presented (in thousands):
Name
 
Cash Distributions
 
Liquidation Details
 
For the Three Months Ended March 31, 2018
 
For the Year Ended December 31, 2017
 
Liquidation Date
 
Remaining Assets at the Liquidation Date (1)
 
 
 
 
RCC 2014-CRE2 (2)
 
$

 
$
33,050

 
August 2017
 
$
92,980

(1)
The remaining assets at the liquidation date were measured at fair value and returned to RSO in exchange for its preference share and equity notes in the securitization.
(2)
Cash distributions for the year ended December 31, 2017 include preference share and equity notes distributions at liquidation of $25.6 million for Resource Capital Corp. 2014-CRE2.





SCHEDULE III
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
STRATEGIC PLAN UPDATE
(unaudited)
In November 2016, RSO's board of directors approved the Plan, pursuant to which RSO is primarily focused on making CRE debt investments. The Plan includes disposing of certain non-core businesses and investments and underperforming legacy CRE loans ("Identified Assets"), as well as maintaining a dividend policy based on sustainable earnings. As part of the Plan, certain Identified Assets were reclassified as discontinued operations and/or assets held for sale during the fourth quarter of 2016. The following table delineates these disposable investments by business segment and details the current net book value of the businesses and investments included in the Plan (in millions, except amounts in footnotes):
 
Identified Assets at Plan Inception
 
Impairments/Adjustments on Non-Monetized Assets (1)(2)
 
Impairments/Adjustments on Monetized Assets (1)
 
Monetized through March 31, 2018 (3)
 
Net Book Value at March 31, 2018 (3)
Discontinued operations and assets held for sale:
 
 
 
 
 
 
 
 
 
Legacy CRE loans (4)
$
194.7

 
$
(18.3
)
 
$
(11.7
)
 
$
(107.4
)
 
$
57.3

Middle market loans
73.8

 
(17.0
)
 
(0.8
)
 
(54.0
)
 
2.0

Residential mortgage lending segment (5)
56.6

 
(1.7
)
 
(9.6
)
 
(43.7
)
 
1.6

Other assets held for sale
5.9

 

 
3.9

 
(8.9
)
 
0.9

Subtotal - discontinued operations and assets held for sale
$
331.0

 
$
(37.0
)
 
$
(18.2
)
 
$
(214.0
)
 
$
61.8

Investments in unconsolidated entities
86.6

 

 
38.3

 
(124.3
)
 
0.6

Commercial finance assets
62.5

 

 

 
(62.3
)
 
0.2

Total
$
480.1

 
$
(37.0
)
 
$
20.1

 
$
(400.6
)
 
$
62.6

(1)
Reflects adjustments as a result of the designation as assets held for sale or discontinued operations, which occurred during the third and fourth quarters of 2016 except as noted in (2) below.
(2)
The impairment adjustment to middle market loans includes $5.4 million of fair value adjustments that occurred prior to the inception of the Plan.
(3)
Residential mortgage lending segment and investments in unconsolidated entities include pro forma adjustments of $3.6 million and $4.3 million, respectively, for proceeds received in April 2018. Middle market loans include pro forma adjustments of $14.8 million for proceeds received in May 2018.
(4)
Legacy CRE loans includes $118.2 million par value of loans at the inception of the Plan that were not reflected on the consolidated balance sheets until RSO's investment in Resource Real Estate Funding CDO 2007-1 was liquidated in November 2016.
(5)
Includes $1.9 million of cash and cash equivalents not classified as assets held for sale in the residential mortgage lending segment at March 31, 2018.




SCHEDULE IV
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CRE LOAN ACTIVITIES
(unaudited)
The following table summarizes RSO's CRE loan activities and fundings of previous commitments, at par, for the periods then ended (in millions):
 
For the Three Months Ended
 
March 31, 2018
 
December 31, 2017
 
September 30, 2017
 
June 30, 2017
 
March 31, 2017
 
December 31, 2016
 
September 30, 2016
 
June 30, 2016
New CRE loan commitments
$
127.1

 
$
229.0

 
$
157.7

 
$
84.7

 
$
128.9

 
$
50.6

 
$
86.5

 
$
10.5

New CRE preferred equity investment
19.2

 

 

 

 

 

 

 

Total CRE loan commitments and investments
146.3

 
229.0

 
157.7

 
84.7

 
128.9

 
50.6

 
86.5

 
10.5

Payoffs and paydowns (1)
(51.5
)
 
(185.7
)
 
(129.5
)
 
(133.6
)
 
(110.7
)
 
(69.1
)
 
(155.9
)
 
(107.2
)
Previous commitments funded
10.5

 
4.0

 
8.0

 
13.3

 
6.3

 
12.9

 
15.4

 
21.7

New unfunded loan commitments
(13.6
)
 
(24.6
)
 
(23.0
)
 
(8.9
)
 
(14.9
)
 
(3.5
)
 
(6.7
)
 
(3.3
)
Net CRE loans funded
$
91.7

 
$
22.7

 
$
13.2

 
$
(44.5
)
 
$
9.6

 
$
(9.1
)
 
$
(60.7
)
 
$
(78.3
)
(1)
Activity does not include legacy CRE loans classified as assets held for sale.




SCHEDULE V
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Loan Investment Statistics
The following table presents information on RSO's allowances for loan losses and its loans held for sale portfolio at the dates indicated (amounts in thousands, percentages based on amortized cost):
 
 
March 31,
2018
 
December 31,
2017
Allowance for loan losses:
 
(unaudited)
 
 
Specific allowance:
 
 
 
 
CRE whole loans
 
$
2,500

 
$
2,500

Total specific allowance
 
2,500

 
2,500

 
 
 
 
 
General allowance:
 
 
 
 
CRE whole loans
 
2,029

 
2,828

Total general allowance
 
2,029

 
2,828

Total allowance for loans
 
$
4,529

 
$
5,328

Allowance as a percentage of total loans
 
0.3
%
 
0.4
%
 
 
 
 
 
Loans held for sale:
 
 
 
 
Syndicated corporate loans (1)
 
$

 
$
13

Total loans held for sale
 
$

 
$
13

(1)
The fair value option was elected for syndicated corporate loans held for sale.





The following table presents unaudited CRE loan portfolio statistics at March 31, 2018, excluding legacy CRE loans classified as assets held for sale (percentages based on carrying value at March 31, 2018):
Loan type:
 
Whole loans
98.6
%
Preferred equity investment
1.4
%
Total
100.0
%
 
 
Collateral type:
 
Multifamily
48.6
%
Office
20.2
%
Retail
18.3
%
Hotel
8.6
%
Manufactured Housing
2.0
%
Industrial
1.4
%
Self-Storage
0.9
%
Total
100.0
%
 
 
Collateral by NCREIF U.S. region:
 
Southwest (1)
28.3
%
Pacific (2)
24.5
%
Mountain (3)
12.7
%
Southeast (4)
10.8
%
Northeast (5)
9.0
%
Mid Atlantic (6)
8.8
%
East North Central
5.1
%
West North Central
0.8
%
Total
100.0
%
(1)
CRE loans in Texas represent 26.2% of the total loan portfolio.
(2)
CRE loans in Southern and Northern California represent 14.3% and 7.8%, respectively, of the total loan portfolio.
(3)
CRE loans in Arizona represent 5.4% of the total loan portfolio.
(4)
CRE loans in Florida represent 8.1% of the total loan portfolio.
(5)
CRE loans in Pennsylvania represent 5.2% of the total loan portfolio.
(6)
CRE loans in North Carolina represent 5.8% of the total loan portfolio.