SOURCE: Resource Capital Corp.

March 08, 2011 20:17 ET

Resource Capital Corp. Reports Results for Three Months and Year Ended December 31, 2010

NEW YORK, NY--(Marketwire - March 8, 2011) - Resource Capital Corp. (NYSE: RSO)

Highlights

--  Adjusted net income of $0.33 and $1.15 per share-diluted, respectively.

--  Estimated REIT taxable income of $0.14 and $0.85 per share-diluted,
    respectively.

--  GAAP net (loss) income of ($0.17) and $0.41 per share-diluted,
    respectively.

--  Net interest income increased by $5.4 million and $15.3 million, or
    39.6% and 29.3%, compared to the three months and year ended December
    31, 2009.

--  $197.7 million of total cash, including restricted cash of $168.2
    million at December 31, 2010.

--  $124.9 million and $410.8 million of total loans receivable repaid and
    settled, respectively.

--  Repurchased $15.0 million and $91.3 million of its CDO notes for $9.7
    million and $56.7 million, a 35.5% and 37.9% discount to par, for gains
    of $5.3 million and $34.6 million, respectively.

--  Common stock cash dividend of $0.25 and $1.00 per share, respectively.

--  In a recent development, RSO acquired 100% ownership interest in
    Churchill Pacific Asset Management LLC which manages $1.9 billion in
    syndicated bank loan and high yield assets and will be entitled to
    collect senior, subordinate and incentive management fees.

Resource Capital Corp. (NYSE: RSO) ("RSO" or the "Company"), a real estate investment trust, or REIT, whose investment strategy focuses on commercial real estate ("CRE") loan assets, commercial mortgage-backed securities ("CMBS"), commercial finance assets and structured note investments, reported results for the three months and year ended December 31, 2010.

--  Adjusted net income, a non-GAAP measure excluding the effect of
    non-cash charges and non-operating capital transactions, was $18.5
    million and $55.0 million, or $0.33 per share-diluted and $1.15 per
    share-diluted for the three months and year ended December 31, 2010,
    respectively, as compared to $10.2 million and $36.6 million, or $0.36
    per share-diluted and $1.45 per share-diluted for the three months and
    year ended December 31, 2009, increases of $8.3 million (82%) and $18.3
    million (50%), respectively.  For a reconciliation of adjusted net
    income to GAAP net (loss) income, see Schedule I to this press release.

--  Estimated REIT taxable income, a non-GAAP measure, for the three months
    and year ended December 31, 2010, was $7.6 million, or $0.14 per
    share-diluted, and $40.7 million, or $0.85 per share-diluted,
    respectively, as compared to $9.7 million, or $0.34 per share-diluted,
    and $31.5 million, or $1.23 per share-diluted for the three months and
    year ended December 31, 2009, respectively, a decrease of $2.1 million,
    or 21%, and an increase of $9.3 million, or 29%, respectively.  For a
    reconciliation of estimated REIT taxable income to GAAP net (loss)
    income, see Schedule II to this press release.

--  GAAP net loss for the three months ended December 31, 2010 was $9.4
    million, or $0.17 per share-diluted and GAAP net income for the year
    ended December 31, 2010 was $19.4 million, or $0.41 per share-diluted,
    respectively, as compared to GAAP net income for the three months and
    year ended December 31, 2009 of $12.1 million, or $0.43 per
    share-diluted and $6.3 million, or $0.25 per share, respectively.

--  On December 16, 2010, the Company declared a quarterly distribution of
    $0.25 per share of common stock, $14.6 million in the aggregate, which
    was paid on January 26, 2011 to stockholders of record as of December
    31, 2010.
Jonathan Cohen, CEO and President of Resource Capital Corp., commented, "During 2010 we achieved significant improvements and positioned Resource Capital to benefit from improving economic conditions. We had adjusted net income of $1.15 per share and distributed $1.00 to our shareholders. We made important investments in commercial finance and in the syndicated loan business that we expect to generate meaningful returns. In addition, we have repositioned our real estate loan business by restarting our commercial mortgage origination platform and also by selling some mezzanine loans and b-notes originated before the financial crisis -- reducing our risk. With new investments at work and with significant liquidity and capital to take advantage of more opportunities, we look forward to 2011 and are excited about our prospects. We continue to expect to pay a $1.00 cash dividend for 2011."

Additional financial results:

Commercial Real Estate

--  RSO received repayments on CRE loans of $1.8 million and $49.4 million
    for the three months and year ended December 31, 2010, respectively.
    For the year ended December 31, 2010, RSO sold two loans, which
    resulted in $36.8 million of proceeds and had no such transactions for
    the three month period.

--  RSO received repayments on CMBS investments of $360 and $1.2 million
    and sold three and four CMBS investments, which resulted in the receipt
    of $13.0 million and $19.1 million of proceeds during the three months
    and year ended December 31, 2010, respectively.

--  During the three months and year ended December 31, 2010, RSO acquired
    $9.8 million and $37.1 million par value of CMBS at a discount to par
    of 7.8% and 22.5%, respectively.  These purchases provided a weighted
    average annual yield of approximately 5.8% and 7.2%, respectively.

--  RSO recorded asset impairments of $16.1 million and $26.6 million
    during the three months and year ended December 31, 2010 on two and
    five CMBS positions, respectively, that deteriorated and are in payment
    default.

--  RSO has originated one new CRE whole loan totaling $6.3 million since
    December 31, 2010.

The following table summarizes RSO's CRE loan activities and fundings of previous commitments, at par, for the three months and year ended December 31, 2010 (in millions, except percentages):

                         Three Months                Floating    Weighted
                             Ended      Year Ended   Weighted    Average
                          December 31, December 31,  Average      Fixed
                             2010         2010      Spread (1)   Rate (2)
                          -----------  -----------  ----------  ----------
Whole loans                      17.7         17.7
Whole loans -
 future fundings (3)      $       1.4  $       4.9        3.05%       8.51%
                          ===========  ===========

New loans production             19.1         22.6
Sale of real estate loans           -        (36.8)
Payoffs                             -        (17.7)
Principal paydowns               (1.8)       (31.7)
                          -----------  -----------
Loans, net (4)            $      17.3  $     (63.6)
                          ===========  ===========

(1) Represents the weighted average rate above the London Interbank Offered
    Rate ("LIBOR") on loans whose interest rate is based on LIBOR as of
    December 31, 2010.
(2) Reflects rates on RSO's portfolio balance as of December 31, 2010.
(3) Consists of fundings of previous commitments.
(4) The basis of new net loans does not include provisions for losses on
    CRE loans of $17.1 million for the three months ended December 31, 2010
    and $44.4 million for the year ended December 31, 2010.

Commercial Finance -- Syndicated Bank Loans

--  RSO's bank loan portfolio, including asset-backed securities ("ABS")
    held-to-maturity, ended the fourth quarter with total investments of
    $890.1 million, at amortized cost, with a weighted-average spread of
    one-month and three-month LIBOR plus 2.94%.  All of RSO's bank loan
    portfolio is match-funded through three collateralized loan obligation
    ("CLO") issuances with a weighted-average cost of three-month LIBOR
    plus 0.47% (0.81% at December 31, 2010).

--  During the three months and year ended December 31, 2010, RSO bought
    bank loans through its CLOs with a par value of $102.7 million and
    $323.8 million, respectively, at a discount to par of 2.8% and 4.3%,
    respectively.  For the three months and year ended December 31, 2010,
    the net discounts of $2.8 million and $11.2 million, respectively, each
    improved the asset collateralization in its CLOs.  These purchases
    provided weighted average annual yields of approximately 5.1% and 4.4%,
    respectively.

--  On February 24, 2011, RSO announced that it had entered into a
    definitive agreement that will expand its management operations in
    broadly syndicated bank loans. A subsidiary of RSO has agreed to
    purchase 100% of the ownership interests in Churchill Pacific Asset
    Management LLC ("CPAM") from Churchill Financial Holdings LLC
    ("Churchill") for $22.5 million. Through CPAM, RSO will be entitled to
    collect senior, subordinated and incentive fees related to five
    Collateralized Loan Obligations ("CLOs") totaling approximately $1.9
    billion in assets managed by CPAM. CPAM will be assisted by Apidos
    Capital Management, LLC, in managing the five CLOs. CPAM has
    subsequently changed its name to Resource Capital Asset Management.

Commercial Finance -- Lease Receivables

--  RSO's lease receivables portfolio, which was acquired through a
    securitization during the second quarter ended June 30, 2010, received
    paydowns of $6.0 million and $14.0 million and proceeds from sales of
    $347,000 and $1.6 million during the three months and year ended
    December 31, 2010, respectively.  The portfolio had a balance of $109.6
    million as of December 31, 2010.  RSO also paid down the notes issued
    in the securitization by $8.2 million and $18.0 million during the
    three months and year ended December 31, 2010, respectively, leaving an
    outstanding balance of $95.0 million as of December 31, 2010.

--  On January 4, 2011, RSO entered into a joint venture with LEAF
    Commercial Capital, Inc. ("LEAF Commercial"), which is a joint venture
    among LEAF Financial Corp ("LEAF") (a subsidiary of Resource America),
    RSO and Guggenheim Securities.  LEAF contributed its leasing platform
    and directly-held leases and loans to LEAF Commercial, while RSO and
    Guggenheim Securities committed to investing up to $44.0 million of
    capital in the form of preferred stock and subordinated debt,
    respectively, into LEAF Commercial.  A portion of RSO's investment
    consisted of the contribution of leases and loans it had acquired from
    LEAF which were held as of December 31, 2010.  In return for RSO's
    capital investments, RSO received 2,626 shares of LEAF Commercial
    Series A preferred stock and warrants to purchase 4,800 shares of LEAF
    Commercial common stock for an exercise price of $0.01 per share
    (representing 48% of LEAF Commercial's common stock on a fully-diluted
    basis).

Book Value

As of December 31, 2010, RSO's book value per common share was $5.99. Total stockholders' equity was $348.3 million as of December 31, 2010 as compared to $228.8 million as of December 31, 2009. Total common shares outstanding were 58,183,425 as of December 31, 2010 as compared to 36,545,737 as of December 31, 2009.

Investment Portfolio

The table below summarizes the amortized cost and net carrying amount of RSO's investment portfolio as of December 31, 2010, classified by interest rate and by asset type. The following table includes both (i) the amortized cost of RSO's investment portfolio and the related dollar price, which is computed by dividing amortized cost by par amount, and (ii) the net carrying amount of RSO's investment portfolio and the related dollar price, which is computed by dividing the net carrying amount by par amount (in thousands, except percentages):

                                                            Net
                                                         carrying
                                                           amount
                                         Net               less
                   Amortized  Dollar  carrying   Dollar  amortized  Dollar
                   cost (3)   price     amount   price     cost     price
                   ---------- ------  ---------- ------  ---------  ------
 December 31, 2010
   Floating rate
CMBS - private
 placement         $   31,127 100.00% $    9,569  30.74% $ (21,558) -69.26%
Structured notes        7,984  34.09%     17,723  75.67%     9,739   41.58%
Other ABS                   -   0.00%         22   0.26%        22    0.26%
B notes (1)            26,485  99.94%     26,071  98.38%      (414)  -1.56%
Mezzanine
 loans (1)             83,699 100.00%     82,680  98.78%    (1,019)  -1.22%
Whole loans (1)       441,372  99.92%    419,207  94.91%   (22,165)  -5.01%
Bank loans (2)        856,436  96.99%    850,500  96.32%    (5,936)  -0.67%
Loans held for
 sale (3)              13,593  55.92%     13,593  55.92%         -    0.00%
ABS held-to-
 maturity (4)          29,036  91.08%     25,941  81.37%    (3,095)  -9.71%
                   ----------         ----------         ---------
  Total floating
   rate             1,489,732  95.86%  1,445,306  93.01%   (44,426)  -2.85%
                   ----------         ----------         ---------
  Fixed rate
CMBS - private
 placement             52,097  48.30%     54,369  50.41%     2,272    2.11%
B notes (1)            30,966  99.53%     30,482  97.97%      (484)  -1.56%
Mezzanine
 loans (1)             38,545 100.23%     31,012  80.64%    (7,533) -19.59%
Loans held for
 sale (3)              15,000  75.00%     15,000  75.00%         -    0.00%
Lease
 receivables (5)      109,682 100.00%    109,612  99.94%       (70)  -0.06%
                   ----------         ----------         ---------
  Total fixed rate    246,290  80.20%    240,475  78.30%    (5,815)  -1.90%
                   ----------         ----------         ---------
    Grand total    $1,736,022  93.28% $1,685,781  90.58% $ (50,241)  -2.70%
                   ==========         ==========         =========

(1) Net carrying amount includes an allowance for loan losses of $31.6
    million at December 31, 2010, allocated as follows: B notes ($899,000),
    mezzanine loans ($8.5 million) and whole loans ($22.2 million).
(2) The bank loan portfolio is carried at amortized cost less an allowance
    for loan loss and was $853.8 million at December 31, 2010. The amount
    disclosed represents net realizable value at December 31, 2010, which
    includes a $2.6 million allowance for loan losses at December 31, 2010.
(3) Loans held for sale are carried at the lower of cost or market.
    Amortized cost is equal to fair value.
(4) ABS held to maturity are carried at amortized cost less other-than-
    temporary impairment.
(5) Net carrying amount includes a $70,000 allowance for lease receivables
    losses at December 31, 2010.

Liquidity

At February 28, 2011, after disbursing the fourth quarter 2010 dividend, RSO's liquidity of $215.0 million consists of two primary sources:

--  unrestricted cash and cash equivalents of $9.4 million and restricted
    cash of $2.5 million in margin call accounts; and

--  capital available for reinvestment in its five CDO entities of $203.1
    million, of which $0.9 million is designated to finance future funding
    commitments on CRE loans.

Capital Allocation

As of December 31, 2010, RSO had allocated its invested equity capital among its targeted asset classes as follows: 77% in CRE investments, 18% in commercial bank loans, 3% in lease receivables and 2% in structured notes (trading securities).

Supplemental Information

The following schedules of reconciliations or supplemental information as of December 31, 2010 are included at the end of this release:

--  Schedule I -- Reconciliation of GAAP Net (Loss) Income  to Adjusted Net
    Income; and

--  Schedule II -- Reconciliation of GAAP Net (Loss) Income to Estimated
    REIT Taxable Income; and

--  Schedule III -- Summary of CDO and CLO Performance Statistics.

--  Supplemental Information regarding loan and leasing investment
    statistics, CRE loans, bank loans and lease receivables.

About Resource Capital Corp.

RSO is a diversified real estate finance company that is organized and conducts its operations to qualify as a REIT for federal income tax purposes. RSO's investment strategy focuses on CRE and CRE-related assets, and, to a lesser extent, commercial finance assets. RSO invests in the following asset classes: CRE-related assets such as whole loans, A-notes, B-notes, mezzanine loans, commercial mortgage-backed securities and investments in real estate joint ventures as well as commercial finance assets such as bank loans, lease receivables, other asset-backed securities, trust preferred securities, debt tranches of CDOs, structured note investments, and private equity investments principally issued by financial institutions.

RSO is externally managed by Resource Capital Manager, Inc., an indirect wholly-owned subsidiary of Resource America, Inc. (NASDAQ: REXI), a specialized asset management company that uses industry specific expertise to generate and administer investment opportunities for its own account and for outside investors in the real estate, commercial finance and financial fund management sectors.

For more information, please visit RSO's website at www.resourcecapitalcorp.com or contact investor relations at pkamdar@resourceamerica.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;

--  capital markets conditions and the availability of financing;

--  defaults or bankruptcies by borrowers on RSO's loans or on loans
    underlying its investments;

--  adverse market trends which have affected and may continue to affect
    the value of real estate and other assets underlying RSO's investments;

--  increases in financing or administrative costs; and

--  general business and economic conditions that have impaired and may
    continue to impair the credit quality of borrowers and RSO's ability
    to originate loans.

For further information concerning these and other risks pertaining to the forward-looking statements contained in this release, and to the general risks to which RSO is subject, see Item 1A, "Risk Factors" included in its Annual Report on Form 10-K and in other of its public filings with the Securities and Exchange Commission.

RSO cautions you not to place undue reliance on any forward-looking statements contained in this release, which speak only as of the date of this release. All subsequent written and oral forward-looking statements attributable to RSO or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this release. Except to the extent required by applicable law or regulation, RSO undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this filing or to reflect the occurrence of unanticipated events.

The remainder of this release contains RSO's unaudited consolidated balance sheets, unaudited consolidated statements of operations, reconciliation of GAAP net (loss) income to adjusted net income, a reconciliation of GAAP net (loss) income to estimated REIT taxable income and a summary of CDO and CLO performance statistics and supplemental information regarding RSO's CRE loan, bank loan and lease receivable portfolios.

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


                                                        December 31,
                                                  ------------------------
                                                      2010         2009
                                                  -----------  -----------
                                                  (unaudited)
ASSETS
  Cash and cash equivalents                       $    29,488  $    51,991
  Restricted cash                                     168,192       85,125
  Investment securities-trading                        17,723            -
  Investment securities available-for-sale,
   pledged as collateral, at fair value                57,998       39,304
  Investment securities available-for-sale,
   at fair value                                        5,962        5,238
  Investment securities held-to-maturity, pledged
   as collateral                                       29,036       31,401
  Property available-for-sale                           4,444            -
  Loans, pledged as collateral and net of
   allowances of $34.2 million and $47.1 million    1,443,271    1,557,757
  Loans held for sale                                  28,593        8,050
  Lease receivables, pledged as collateral, net
   of allowances of $70,000 and  $1.1 million and
   net of unearned income                             109,612          927
  Loans receivable - related party                      9,927            -
  Investments in unconsolidated entities                6,791        3,605
  Dividend reinvestment plan proceeds receivable       10,000            -
  Interest receivable                                   6,330        5,754
  Deferred tax asset                                    4,401            -
  Other assets                                          2,432        2,252
                                                  -----------  -----------
    Total assets                                  $ 1,934,200  $ 1,791,404
                                                  ===========  ===========
LIABILITIES
  Borrowings                                      $ 1,543,251  $ 1,534,874
  Distribution payable                                 14,555        9,170
  Accrued interest expense                              1,618        1,516
  Derivatives, at fair value                           13,292       12,767
  Deferred tax liability                                9,798            -
  Accounts payable and other liabilities                3,360        4,247
                                                  -----------  -----------
    Total liabilities                               1,585,874    1,562,574
                                                  -----------  -----------
STOCKHOLDERS' EQUITY
  Preferred stock, par value $0.001: 100,000,000
   shares authorized; no shares issued and
   outstanding                                              -            -
  Common stock, par value $0.001: 500,000,000
   shares authorized;  58,183,425 and 36,545,737
   shares issued and outstanding (including
   534,957 and 437,319 unvested restricted
   shares)                                                 58           36
  Additional paid-in capital                          528,373      405,517
  Accumulated other comprehensive loss                (33,918)     (62,154)
  Distributions in excess of earnings                (146,187)    (114,569)
                                                  -----------  -----------
    Total stockholders' equity                        348,326      228,830
                                                  -----------  -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY        $ 1,934,200  $ 1,791,404
                                                  ===========  ===========





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


                              Three Months Ended          Years Ended
                                 December 31,            December 31,
                            ----------------------  ----------------------
                               2010        2009        2010        2009
                            ----------  ----------  ----------  ----------
                                  (unaudited)       (unaudited)
REVENUES
  Interest income:
    Loans                   $   19,751  $   20,230  $   76,836  $   84,563
    Securities                   2,529       2,551      11,434       7,225
    Leases                       4,529          (1)     11,306       4,336
    Interest income - other      1,684         416       4,335       1,469
                            ----------  ----------  ----------  ----------
      Total interest income     28,493      23,196     103,911      97,593
  Interest expense               9,511       9,599      36,466      45,427
                            ----------  ----------  ----------  ----------
      Net interest income       18,982      13,597      67,445      52,166
                            ----------  ----------  ----------  ----------

OPERATING EXPENSES
  Management fees - related
   party                         3,371       2,483      13,216       8,363
  Equity compensation -
   related party                   758         166       2,221       1,240
  Professional services          1,441       1,074       3,627       3,866
  Insurance                        183         219         759         828
  Depreciation on operating
   leases                        1,660           -       4,003           -
  General and
   administrative                  829         487       3,061       1,764
  Income tax expense
   (benefit)                       416          14       5,721          (2)
                            ----------  ----------  ----------  ----------
    Total expenses               8,658       4,443      32,608      16,059
                            ----------  ----------  ----------  ----------

                                10,324       9,154      34,837      36,107
                            ----------  ----------  ----------  ----------

OTHER (EXPENSE) REVENUE
  Impairment losses on
   investment securities       (17,868)    (11,396)    (29,042)    (27,490)
  Recognized in other
   comprehensive loss           (1,578)     (4,485)     (2,238)    (14,019)
                            ----------  ----------  ----------  ----------
  Net impairment losses
   recognized in earnings      (16,290)     (6,911)    (26,804)    (13,471)
  Net realized gain on
   investment securities
   available-for-sale and
   loans                         3,314       1,026       4,821       1,890
  Net realized gains on
   investment
   securities-trading              516           -       5,052           -
  Net unrealized gains on
   investment
   securities-trading            4,532           -       9,739           -
  Provision for loan and
   lease losses                (16,958)    (16,109)    (43,321)    (61,383)
  Gains on the
   extinguishment of debt        5,325      24,905      34,610      44,546
  Other (expense) income          (137)         25         513      (1,350)
                            ----------  ----------  ----------  ----------
    Total (expense) revenue    (19,698)      2,936     (15,390)    (29,768)
                            ----------  ----------  ----------  ----------

NET (LOSS) INCOME           $   (9,374) $   12,090  $   19,447  $    6,339
                            ==========  ==========  ==========  ==========

NET (LOSS) INCOME PER
 SHARE - BASIC              $    (0.17) $     0.43  $     0.41  $     0.25
                            ==========  ==========  ==========  ==========

NET (LOSS) INCOME PER
 SHARE - DILUTED            $    (0.17) $     0.43  $     0.41  $     0.25
                            ==========  ==========  ==========  ==========

WEIGHTED AVERAGE NUMBER OF
 SHARES OUTSTANDING -
 BASIC                      55,928,662  27,829,752  47,715,082  25,205,403
                            ==========  ==========  ==========  ==========

WEIGHTED AVERAGE NUMBER OF
 SHARES OUTSTANDING -
 DILUTED                    55,928,662  28,166,984  47,907,281  25,355,821
                            ==========  ==========  ==========  ==========

DIVIDENDS DECLARED PER
 SHARE                      $     0.25  $     0.25  $     1.00  $     1.15
                            ==========  ==========  ==========  ==========





SCHEDULE I


                 RESOURCE CAPITAL CORP. AND SUBSIDIARIES
    RECONCILIATION OF GAAP NET (LOSS) INCOME TO ADJUSTED NET INCOME (1)
                  (in thousands, except per share data)
                               (Unaudited)


                                 Three Months Ended       Years Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2010       2009       2010       2009
                                ---------  ---------  ---------  ---------
Net (loss) income - GAAP        $  (9,374) $  12,090  $  19,447  $   6,339
Adjustments:
  Provision for loan and lease
   losses (2)                      16,958     16,109     43,321     61,383
  Asset impairments                16,290      6,911     26,804     13,471
  Gains on the extinguishment of
   debt                            (5,325)   (24,905)   (34,610)   (44,546)
                                ---------  ---------  ---------  ---------
Adjusted net income, excluding
 non-cash charges (1)           $  18,549  $  10,205  $  54,962  $  36,647
                                =========  =========  =========  =========
Adjusted net income per share -
 diluted, excluding non-cash
 charges                        $    0.33  $    0.36  $    1.15  $    1.45
                                =========  =========  =========  =========

(1) During 2010, RSO evaluated its performance based on several performance
    measures, including adjusted net income, in addition to net (loss)
    income and estimated REIT taxable income. Adjusted net income
    represents net income available to common shares, computed in
    accordance with GAAP, before provision for loan and lease losses, gain
    on the extinguishment of debt and non-operating capital items. These
    items are recorded in accordance with GAAP and are typically non-cash
    or non-operating items that do not impact RSO's operating performance
    or ability to pay a dividend.

    Management views adjusted net income as a useful and appropriate
    supplement to GAAP net (loss) income because it helps management
    evaluate RSO's performance without the effects of certain GAAP
    adjustments that may not have a direct financial impact on RSO's
    current operating performance and dividend paying ability. Management
    uses adjusted net income to evaluate the performance of RSO's
    investment portfolios, ability to manage its expenses and dividend
    paying ability before the impact of non-cash adjustments and
    non-operating capital gain or loss recorded in accordance with GAAP.
    RSO believes this is a useful performance measure for investors to
    evaluate these aspects of RSO's business as well. The most significant
    adjustments RSO excludes in determining adjusted earnings as of
    December 31, 2010 and 2009 are its provision for loan and lease losses,
    loss from asset impairments and gain on the extinguishment of debt.
    Management excludes all such items from its calculation of adjusted net
    income because these items are not charges or losses which would impact
    RSO's current operating performance. However, by excluding these
    significant items, adjusted net income reduces an investor's
    understanding of RSO's operating performance by excluding management's
    expectation of possible future gains or losses from RSO's investment
    portfolio.

    Adjusted net income, as a non-GAAP financial measurement, does not
    purport to be an alternative to GAAP net income (loss), or a measure of
    operating performance or cash flows from operating activities
    determined in accordance with GAAP as a measure of liquidity. Instead,
    adjusted net income should be reviewed in connection with net income
    (loss) and cash flows from operating, investing and financing
    activities in RSO's consolidated financial statements to help analyze
    management's expectation of potential future losses from RSO's
    investment portfolio and other non-cash or capital matters that impact
    its financial results.  Adjusted net income and other supplemental
    performance measures are defined in various ways throughout the REIT
    industry. Investors should consider these differences when comparing
    RSO's adjusted net income to these other REITs.

(2) Non-cash charges for loan and lease losses.





SCHEDULE II


                 RESOURCE CAPITAL CORP. AND SUBSIDIARIES
                RECONCILIATION OF GAAP NET (LOSS) INCOME
                   TO ESTIMATED REIT TAXABLE INCOME (1)
                  (in thousands, except per share data)
                                (Unaudited)

RSO calculates estimated REIT taxable income, which is a non-GAAP financial
measure, according to the requirements of the Internal Revenue Code. The
following table reconciles GAAP net (loss) income to estimated REIT taxable
income for the periods presented (in thousands, except per share data):

                                 Three Months Ended       Years Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2010       2009       2010       2009
                                ---------  ---------  ---------  ---------
Net (loss) income  - GAAP       $  (9,374) $  12,090  $  19,447  $   6,339
  Taxable REIT subsidiary's
   (income) loss                   (3,222)     1,285     (9,833)     3,138
                                ---------  ---------  ---------  ---------
    Adjusted net (loss) income    (12,596)    13,375      9,614      9,477
Adjustments:
  Share-based compensation to
   related parties                  1,392       (117)       805        543
  Capital loss carryover
   (utilization)/losses from
   the sale of securities          (3,832)      (160)    (5,013)     4,818
  Provision for loan and lease
   losses unrealized               17,063     13,537     44,357     26,877
  Asset impairments                16,125      6,911     26,638     13,471
  Equity in income of real
   estate joint venture            (5,899)         -    (14,493)         -
  Tax gain on sale of real
   estate joint venture               401          -      1,443          -
  Deferral of extinguishment of
   debt income                          -    (15,789)         -    (28,530)
  Net book to tax adjustment
   for the inclusion of our
   taxable foreign REIT
   subsidiaries                    (5,997)   (10,878)   (22,204)    (6,277)
  Subpart F income
   limitation (2)                       -      3,001          -      9,872
  Distributable earnings from
   nonconsolidating taxable
   REIT subsidiary                  1,000          -      1,000          -
  Other net book to tax
   adjustments                        (27)      (175)    (1,423)     1,212
                                ---------  ---------  ---------  ---------
Estimated REIT taxable income   $   7,630  $   9,705  $  40,724  $  31,463
                                =========  =========  =========  =========

Amounts per share - diluted     $    0.14  $    0.34  $    0.85  $    1.23
                                =========  =========  =========  =========

(1) RSO believes that a presentation of estimated REIT taxable income
    provides useful information to investors regarding its financial
    condition and results of operations as this measurement is used to
    determine the amount of dividends that RSO is required to declare to
    its stockholders in order to maintain its status as a REIT for federal
    income tax purposes. Since RSO, as a REIT, expects to make
    distributions based on estimated REIT taxable income, RSO expects that
    its distributions may at times be more or less than its reported GAAP
    net income. Total estimated REIT taxable income is the aggregate amount
    of estimated REIT taxable income generated by RSO and by its domestic
    and foreign taxable REIT subsidiaries. Estimated REIT taxable income
    excludes the undistributed taxable income (if any) of RSO's domestic
    taxable REIT subsidiary, which is not included in REIT taxable income
    until distributed to RSO. There is no requirement that RSO's domestic
    taxable REIT subsidiary distribute its income to RSO. Estimated REIT
    taxable income, however, includes the taxable income of RSO's foreign
    taxable REIT subsidiaries because RSO generally will be required to
    recognize and report their taxable income on a current basis. Because
    not all companies use identical calculations, this presentation of
    estimated REIT taxable income may not be comparable to other
    similarly-titled measures of other companies.

(2) U.S. shareholders of controlled foreign corporations are required to
    include their share of such corporations' income on a current basis;
    however, losses sustained by such corporations do not offset income of
    their U.S. shareholders on a current basis.





SCHEDULE III

                 RESOURCE CAPITAL CORP. AND SUBSIDIARIES
              SUMMARY OF CDO AND CLO PERFORMANCE STATISTICS
                             (in thousands)
                               (Unaudited)

Collateralized Debt Obligations - Distributions and Coverage Test Summary

The following table sets forth collateralized debt obligations -
distributions and coverage test summary for the periods presented:

                                              Annualized
                                               Interest    Overcollateral-
                                               Coverage       ization
                           Cash Distributions  Cushion        Cushion
                           ------------------  --------  ------------------
                                                                    As of
                              Years Ended       As of     As of    Initial
                           December  December  December  December  Measure-
                    CDO    31, 2010  31, 2009  31, 2010  31, 2010    ment
Name               Type       (1)       (1)     (2)(3)      (4)      Date
                  -------  --------  --------  --------  --------  --------
                           (actual)  (actual)
Apidos CDO I          CLO  $  7,695  $  6,643  $  8,528  $ 12,854  $ 17,136
Apidos CDO III        CLO  $  6,552  $  6,390  $  3,483  $  8,531  $ 11,269
Apidos Cinco CDO      CLO  $  7,792  $  7,553  $  4,488  $ 21,030  $ 17,774
RREF 2006-1       CRE CDO  $  8,929  $ 13,222  $  7,555  $ 18,446  $ 24,941
RREF 2007-1       CRE CDO  $ 15,068  $ 20,536  $ 11,918  $ 14,024  $ 26,032

(1) Distributions on retained equity interests in CDOs (comprised of note
    investment and preference share ownership).
(2) Interest coverage includes annualized amounts based on the most recent
    trustee statements.
(3) Interest coverage cushion represents the amount by which annualized
    interest income expected exceeds the annualized amount payable on all
    classes of CDO notes senior to RSO's preference shares.
(4) Overcollateralization cushion represents the amount by which the
    collateral held by the CDO issuer exceeds the maximum amount required.





                 RESOURCE CAPITAL CORP. AND SUBSIDIARIES
                       SUPPLEMENTAL INFORMATION
                   (in thousands, except percentages)
                               (Unaudited)

Loan and Leasing Investment Statistics

The following table presents information on RSO's impaired loans and lease
receivables and related allowances for the periods indicated (based on
amortized cost):

Allowance for loan and lease receivable losses:
  Specific allowance:
    Commercial real estate loans                      $  20,844  $  18,764
    Bank loans                                              112      9,577
                                                      ---------  ---------
      Total specific allowance (1)                       20,956     28,341
                                                      ---------  ---------
  General allowance:
    Commercial real estate loans                         10,773     10,533
    Bank loans                                            2,504      8,248
    Lease receivables                                        70      1,140
                                                      ---------  ---------
      Total general allowance                            13,347     19,921
                                                      ---------  ---------
  Total allowance for loans and leases                $  34,303  $  48,262
                                                      =========  =========
  Allowance as a percentage of total loan and lease
   receivables                                              2.1%       2.9%

Loans held for sale:
  Commercial Real Estate Loans:
    Commercial real estate loans at cost              $  39,187  $       -
    Commercial real estate loans provision              (14,621)         -
                                                      ---------  ---------
      Commercial real estate loans held for sale         24,566          -
                                                      ---------  ---------
  Bank Loans:
    Bank loans at cost                                $   5,172  $  10,182
    Bank loans provision                                 (1,145)    (2,132)
                                                      ---------  ---------
      Bank loans held for sale                            4,027      8,050
                                                      ---------  ---------
Loans held for sale                                   $  28,593  $   8,050
                                                      =========  =========

(1) Includes allowances on par values of the following assets: commercial
    real estate loans of $42.2 million, bank loans of $0.3 million and
    lease receivables of $0.2 million.  Specific allowances were not taken
    on the following asset par values that were evaluated under FAS 114 for
    impairment: commercial real estate loans of $111.4 million and lease
    receivable of $10.0 million.  Statement of Financial Accounting
    Standard 114 ("FAS 114") requires that loans that have been
    restructured and / or extended are subject to evaluation as to whether
    or not they are deemed to be troubled debt restructurings ("TDRs").
    As an example, loans are deemed to be TDRs when a concession, such as
    an extension of the term of the loan has been granted to the borrower.
    These TDRs do not have an associated specific loan loss allowance
    because the principal and interest amount is considered recoverable
    based on expected collateral performance and / or guarantees made by
    the borrowers.





                 RESOURCE CAPITAL CORP. AND SUBSIDIARIES
              SUPPLEMENTAL INFORMATION, A NON-GAAP MEASURE
                               (Unaudited)

The following table presents commercial real estate loan portfolio
statistics as of December 31, 2010 (based on par value):

Security type:
  Whole loans                                     66.9%
  Mezzanine loans                                 24.4%
  B Notes                                          8.7%
                                               -------
    Total                                        100.0%
                                               =======

Collateral type:
  Hotel                                           31.9%
  Multifamily                                     26.9%
  Office                                          22.6%
  Retail                                          11.1%
  Flex                                             1.1%
  Self-storage                                     0.9%
  Other                                            5.5%
                                               -------
    Total                                        100.0%
                                               =======

Collateral location:
  Southern California                             26.0%
  Northern California                             12.0%
  New York                                        10.4%
  Arizona                                          8.8%
  Florida                                          8.0%
  Texas                                            5.0%
  Tennessee                                        4.8%
  Washington                                       4.7%
  Colorado                                         4.6%
  Other                                           15.7%
                                               -------
    Total                                        100.0%
                                               =======





                 RESOURCE CAPITAL CORP. AND SUBSIDIARIES
                        SUPPLEMENTAL INFORMATION
                               (Unaudited)

The following table presents bank loan portfolio statistics by industry
as of December 31, 2010 (based on par value):

Industry type:
  Healthcare, education and childcare             10.7%
  Diversified/conglomerate service                 9.0%
  Broadcasting and entertainment                   7.8%
  Printing and publishing                          5.5%
  Retail stores                                    5.2%
  Personal transportation                          5.0%
  Automobile                                       5.0%
  Chemicals, plastics and rubber                   4.8%
  Telecommunications                               4.7%
  Personal, food and miscellaneous services        4.7%
  Electronics                                      4.1%
  CDOs                                             3.5%
  Other                                           30.0%
                                               -------
    Total                                        100.0%
                                               =======

The following table describes lease receivables by industry as of
December 31, 2010 (based on par value):

Industry type:
  Services                                        55.7%
  Manufacturing                                   10.9%
  Finance, insurance and real estate              10.0%
  Retail Trade                                     6.6%
  Wholesale Trade                                  5.8%
  Transportation, communication, energy            4.8%
  Construction                                     3.1%
  Public Administration                            1.6%
  Agriculture, forestry, fishing                   1.1%
  Other                                            0.4%
                                               -------
    Total                                        100.0%
                                               =======

Contact Information

  • Contact:
    David J. Bryant
    Chief Financial Officer
    Resource Capital Corp.
    1845 Walnut Street
    10TH Floor
    Philadelphia, PA 19103
    215-546-5005
    215-640-6354 (fax)