Resource Capital Corp. Reports Fourth Quarter and Year Ended 2006 Results

NEW YORK, NY -- Resource Capital Corp. (NYSE: RSO) (the “Company” or “RCC”), a real estate investment trust focused on originating and investing in commercial real estate secured loans, whole loans, B-notes, mezzanine loans, mortgage-related securities and other real estate-related assets and, to a lesser extent, higher-yielding commercial finance assets and asset-backed securities, reported net income of $6.8 million or $0.36 per share-diluted (weighted-average shares of 18,736,063) for the fourth quarter ended December 31, 2006 as compared to net income of $4.9 million or $0.32 per share-diluted (weighted-average shares of 15,481,622) for the fourth quarter ended December 31, 2005, an increase of $1.9 million (39%) and $0.04 (13%) per share-diluted, respectively. Excluding the impact of the additional shares outstanding from the Company’s December follow-on offering, net income was $0.38 per-share diluted. Net income for the year ended December 31, 2006 was $15.6 million, or $0.87 per share-diluted, as compared to net income for the period from March 8, 2005 (date operations commenced) to December 31, 2005, hereafter referred to as the period ended December 31, 2005, of $10.9 million, or $0.71 per share-diluted, an increase of $4.7 million (43%) and $0.16 (23%) per share-diluted, respectively.

Estimated REIT taxable income for the year ended December 31, 2006 was $27.9 million or $1.57 per share-diluted as compared to $12.7 million or $0.82 per share-diluted for the period ended December 31, 2005, an increase of $15.2 million (121%). A reconciliation of estimated REIT taxable income to the Company’s GAAP net income accompanies this release.

The Company estimates that, for the year ended December 31, 2007, it will pay dividends between $1.65 and $1.80 per common share. As of both December 31, 2006 and February 28, 2007, the Company reports that the credit performance of its investment portfolio continues to perform as anticipated. “We reaffirm that the core of our investment process is disciplined credit analysis and proactive risk management. Our Company will continue to focus on its commercial real estate activities which represent the predominate portion of our capital and asset commitments. We believe that we are well-positioned to capitalize on the strength of our commercial real estate platform in the next few quarters,” reports Jonathan Cohen, CEO and President.

Highlights for the fourth quarter and year end 2006 and recent developments include:

-- The Company paid a regular quarterly dividend of $0.38 and a special
dividend of $0.05 per common share on 17,821,434 common shares for the
fourth quarter of 2006, an increase of $0.01 per common share or 3% from
the regular dividend paid for the third quarter of 2006. These
distributions were paid on January 4, 2007 to all shareholders of record
prior to the effect of the follow-on offering, as of December 15, 2006.
For the year ended December 31, 2006, RCC declared and paid dividends of
$1.49 per common share for a total dividends paid of $26.5 million (95% of
estimated REIT taxable income) for the calendar year 2006.
-- The Company’s net interest income increased by $2.6 million (35%) to
$10.0 million for the quarter ended December 31, 2006 as compared to $7.4
million for the same period in 2005. For the year ended December 31, 2006,
net interest income increased by $16.6 million (91%) to $34.9 million up
from $18.3 million for the period ended December 31, 2005.

Commercial Real Estate
-- The Company continued to increase its investment in commercial real
estate loans. The portfolio of loans (net of repayments and discounts) grew
by $485.0 million to $656.1 million at December 31, 2006 from $171.1
million at December 31, 2005. The Company anticipates new commercial real
estate loan investments of approximately $800.0 million to $1.0 billion at
an average range of $200.0 to $250.0 million per fiscal quarter during the
year ending December 31, 2007.
-- The following table summarizes the Company’s commercial real estate
(“CRE”) loan origination activities, at par, for the quarter, six months
and year ended December 31, 2006:

Three Months Six Months Year Floating Weighted
Ended Ended Ended Weighted Average
December December December Average Fixed
31, 2006 31, 2006 31, 2006 Spread Rate
-------- -------- -------- -------- --------
Whole loans $ 116.1 $ 192.6 $ 192.6 3.19% N/A
A-notes - 22.5 42.5 1.30% N/A
B-notes 48.9 73.7 125.8 2.46% 7.57%
Mezzanine 40.6 91.3 155.8 2.64% 8.05%
CMBS 30.1 30.1 30.1 N/A N/A
-------- -------- --------
New loans 235.7 410.2 546.8
Payoffs (5.5) (33.0) (49.5)
Principal pay downs (5.6) (5.6) (5.6)
-------- -------- --------
Net - new loans $ 224.6 $ 371.6 $ 491.7
======== ======== ========
Commercial Finance
-- RCC’s bank loan portfolio ended the period with total investments of
$614.2 million, at cost, with a weighted-average spread of LIBOR plus
2.34%. The Company’s bank loan portfolio is match-funded through two
collateralized loan obligation (“CLO”) issuances with a weighted-average
cost of LIBOR plus 0.46%.
-- RCC’s commercial finance subsidiary ended the period with $89.0
million in direct financing leases and notes at a weighted-average rate of
8.74%. The Company’s leasing portfolio is match-funded through a secured
term facility, which had a balance of $84.7 million as of December 31, 2006
and a weighted-average interest rate of 6.33%.
-- On January 8, 2007, the Company entered into a new $350.0 million
warehouse agreement with Credit Suisse to finance the purchase of bank
loans. The Company entered into this warehouse agreement to facilitate its
third bank loan CLO.

Corporate Matters
-- On December 20, 2006, the Company sold 6,000,000 shares of common
stock, at a price of $16.50 per Share ($15.5925 per share, net of
underwriting discount and commissions), in a follow-on public offering. RCC
received net proceeds of $93.0 million from the offering. On January 8,
2007, the Company’s underwriters purchased 650,000 shares of the 900,000
shares available under the over-allotment option RCC granted them in
connection with the offering. The exercise of the over-allotment option
generated net proceeds, after underwriting discounts and commissions, of
$10.1 million and brought the aggregate net proceeds of the offering up to
$103.1 million. RCC used proceeds of the follow-on offering and over-
allotment option exercise to repay indebtedness under its repurchase
agreements.
-- RCC received warrant exercises through February 28, 2007, which were
granted to common shareholders in January 2006 and became exercisable on
January 13, 2007, for 273,608 shares at $15.00 per share for proceeds of
approximately $4.1 million. These exercises increased the Company’s
outstanding shares to 24,930,399 common shares at March 6, 2007.
-- The Company announced that Mr. Gary Ickowicz joined the Board of
Directors increasing the size of the Board of Directors from six to seven
members on February 1, 2006. Mr. Ickowicz is a principal of Lazard Freres
Real Estate Investors. Mr. Ickowicz oversees several real estate
investment companies and is the President and a Board member of
Commonwealth Atlantic Properties, Inc.

Capital Allocation
As of December 31, 2006, RCC had allocated its equity capital among its targeted asset classes as follows: 77% in commercial real estate loans, 14% in commercial bank loans, 7% in asset-backed securities (“ABS”) and 2% in direct financing leases and notes.

Balance Sheet Summary

At December 31, 2006, RCC’s investment portfolio totaled $1.8 billion and included the following: $683.6 million of commercial real estate-related investments, $614.2 million of bank loans, $363.5 million of asset-backed securities, $89.0 million of direct financing leases and notes and $36.1 million of temporary cash investments. At December 31, 2006, RCC’s investment portfolio was financed with $1.5 billion of total indebtedness and included the following: $1.2 billion of senior notes issued by collaterlized debt obligations secured primarily by commercial real estate related investments, mortgage-backed securities, syndicated bank loans and other asset-backed securities; $120.5 million of repurchase agreements secured by commercial real estate-related investments, $84.7 million through a term facility secured by equipment leases and notes and $51.5 million of unsecured junior subordinated debentures.

Book Value

The Company’s book value per common share at December 31, 2006 was $13.33 as compared to $12.46 at December 31, 2005, a 7.0% increase. Total stockholders’ equity was $317.6 million at December 31, 2006 and $195.3 million at December 31, 2005. Total common shares outstanding were 23,821,434 and 15,682,334 at December 31, 2006 and 2005, respectively.

Impact of previously reported transactions

As previously reported, on September 28, 2006 the Company sold the remainder of its agency residential mortgage backed securities (“RMBS”) portfolio and terminated the related interest rate swap contract in order to redeploy its invested capital into higher earning asset classes. Consequently, included in the Company’s operating results for the year ended December 31, 2006 is a net loss of $8.8 million.

Pro-forma net income from on-going operations excludes the $8.8 million of net realized loss from the agency RMBS sale. Pro-forma net income was $24.4 million for the year ended December 31, 2006 as compared to $10.9 million for the period ended December 31, 2005, an increase of $13.5 million. The following table reconciles net income to pro-forma net income from on-going operations for both periods:

Year Ended Period Ended
December 31, December 31,
2006 2005
------------ ------------
Net income $ 15,606 $ 10,908
Plus:
Net realized loss from sale of agency RMBS
portfolio 8,768 -
------------ ------------

Pro-forma income from on-going operations $ 24,374 $ 10,908
============ ============
Pro-forma income from on-going operations per
share diluted $ 1.36 $ 0.71
============ ============
Pro-forma income from on-going operations is not a measure of financial performance under GAAP and accordingly, should not be considered as a substitute for net income.
Investment Portfolio

The following table summarizes the amortized cost and estimated fair value of the Company’s investment portfolio as of December 31, 2006, classified by interest rate type. The following table includes both (i) the amortized cost of the Company’s investment portfolio and the related dollar price, which is computed by dividing amortized cost by par amount, and (ii) the estimated fair value of the Company’s investment portfolio and the related dollar price, which is computed by dividing the estimated fair value by par amount (in thousands, except percentages):

Estimated fair
value less
Amortized Dollar Estimated Dollar amortized Dollar
cost price fair value price cost Price
---------- ------ ---------- ------ --------- -----
December 31, 2006
Floating rate
ABS-RMBS $ 342,496 99.22% $ 336,968 97.62% $ (5,528) -1.60%
CMBS 401 100.00% 406 101.25% 5 1.25%
CMBS-private
placement 30,055 100.00% 30,055 100.00% - 0.00%
Other ABS 17,539 99.87% 17,669 100.61% 130 0.74%
A notes 42,515 100.04% 42,515 100.04% - 0.00%
B notes 147,196 100.03% 147,196 100.03% - 0.00%
Mezzanine loans 105,288 100.07% 105,288 100.07% - 0.00%
Whole loans 190,768 99.06% 190,768 99.06% - 0.00%
Bank loans 613,981 100.15% 613,540 100.08% (441) -0.07%
---------- ---------- ---------
Total floating
rate $1,490,239 99.77% $1,484,405 99.38% $ (5,834) -0.39%
========== ========== =========

Fixed rate
ABS-RMBS $ 6,000 100.00% $ 5,880 98.00% $ (120) -2.00%
CMBS 27,550 98.77% 27,031 96.91% (519) -1.86%
Other ABS 2,987 99.97% 2,988 100.00% 1 0.03%
B notes 56,390 100.22% 56,390 100.22% - 0.00%
Mezzanine loans 83,901 94.06% 83,901 94.06% - 0.00%
Bank loans 249 100.00% 249 100.00% - 0.00%
Equipment leases and
notes 88,970 100.00% 88,970 100.00% - 0.00%
---------- ---------- ---------
Total fixed rate $ 266,047 97.97% $ 265,409 97.73% $ (638) -0.24%
========== ========== =========
Grand total $1,756,286 99.49% $1,749,814 99.12% $ (6,472) -0.37%
========== ========== =========
About Resource Capital Corp.
Resource Capital Corp. is a specialty finance company that began operations in March 2005 and has elected and intends to continue to qualify as a real estate investment trust for federal income tax purposes. RCC’s investment strategy focuses on real estate-related assets, and, to a lesser extent, higher-yielding commercial finance assets with a concentration on the following asset classes: commercial real estate-related assets such as whole loans, B-notes, mezzanine loans and mortgage-related securities and commercial finance assets such as other ABS, syndicated bank loans, equipment leases and notes, trust preferred securities and private equity investments principally issued by financial institutions. RCC is externally managed by Resource Capital Manager, Inc., an indirect wholly owned subsidiary of Resource America, Inc. (NASDAQ: REXI), a specialized asset management company that uses industry specific expertise to generate and administer investment opportunities for its own account and for outside investors in the financial fund management, real estate, and equipment finance sectors.

For more information, please visit the Company’s website at www.resourcecapitalcorp.com or contact investors relations at pschreiber@resourceamerica.com

Safe Harbor Statement

Statements made in this release include forward-looking statements, which involve substantial risks and uncertainties. The Company’s actual results, performance or achievements could differ materially from those expressed or implied in this release. 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 the Company’s loans or on
loans underlying the Company’s investments;
-- adverse market trends which may affect the value of real estate and
other assets underlying the Company’s investments;
-- increases in financing or administrative costs; and
-- general business and economic conditions that would impair the credit
quality of borrowers and the Company’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 the Company is subject, see Item 1A, “Risk Factors” included in the Company’s annual report on Form 10-K and in other of its public filings with the Securities and Exchange Commission.

The Company 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 the Company 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, the Company 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 the Company’s consolidated balance sheets, consolidated statements of operations and a reconciliation of the Company’s estimated REIT taxable income.

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



December 31,
------------------------
2006 2005
----------- -----------
ASSETS
Cash and cash equivalents $ 5,354 $ 17,729
Restricted cash 30,721 23,592
Due from broker 2,010 525
Available-for-sale securities, pledged as
collateral, at fair value 420,997 1,362,392
Available-for-sale securities, at fair value - 28,285
Loans 1,240,288 569,873
Direct financing leases and notes, net of
unearned income 88,970 23,317
Investments in unconsolidated trusts 1,548 -
Derivatives, at fair value - 3,006
Interest receivable 8,839 9,337
Accounts receivable 486 183
Principal paydown receivables 503 5,805
Other assets 3,113 1,503
----------- -----------
Total assets $ 1,802,829 $ 2,045,547
=========== ===========
LIABILITIES
Repurchase agreements, including accrued
interest of $322 and $2,104 $ 120,457 $ 1,068,277
Collateralized debt obligations (“CDOs”)
(net of debt issuance costs of $18,310
and $10,093) 1,207,175 687,407
Warehouse agreement - 62,961
Secured term facility 84,673 -
Unsecured revolving credit facility - 15,000
Distribution payable 7,663 5,646
Accrued interest expense 6,523 9,514
Unsecured junior subordinated debentures held
by unconsolidated trusts that issued trust
preferred securities 51,548 -
Management and incentive fee payable - related
party 1,398 896
Derivatives, at fair value 2,904 -
Security deposits 725 -
Accounts payable and accrued liabilities 2,166 513
Other liabilities 46 -
----------- -----------
Total liabilities 1,485,278 1,850,214
----------- -----------
STOCKHOLDERS’ EQUITY
Preferred stock, par value $0.001: 100,000,000
shares authorized; no shares issued and
outstanding - -
Common stock, par value $0.001: 500,000,000
shares authorized; 23,821,434 and 15,682,334
shares issued and outstanding (including
234,224 and 349,000 unvested restricted shares) 24 16
Additional paid-in capital 341,400 220,161
Deferred equity compensation (1,072) (2,684)
Accumulated other comprehensive loss (9,279) (19,581)
Distributions in excess of earnings (13,522) (2,579)
----------- -----------
Total stockholders’ equity 317,551 195,333
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,802,829 $ 2,045,547
=========== ===========






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



Period from
March 8, 2005
(Date
Operations
Three Months Ended Year Ended Commenced)to
December 31, December 31, December 31,
-----------------------
2006 2005 2006 2005
----------- ----------- ---------- -----------
REVENUES
Net interest income:
Interest income from
securities
available-for-sale $ 7,375 $ 17,507 $ 56,048 $ 44,247
Interest income from
loans 23,637 8,340 70,262 14,662
Interest income - other 2,260 851 10,438 2,478
----------- ----------- ---------- -----------
Total interest income 33,272 26,698 136,748 61,387
Interest expense 23,275 19,327 101,851 43,062
----------- ----------- ---------- -----------
Net interest income 9,997 7,371 34,897 18,325
----------- ----------- ---------- -----------

OTHER REVENUE
Net realized (losses)
gains on investments 226 133 (8,627) 311
Other income 88 - 480 -
----------- ----------- ---------- -----------
Total other revenue 314 133 (8,147) 311
----------- ----------- ---------- -----------

EXPENSES
Management fees - related
party 1,690 1,173 4,838 3,012
Equity compensation -
related party 812 836 2,432 2,709
Professional services 615 236 1,881 580
Insurance 127 122 498 395
General and
administrative 275 237 1,495 1,032
----------- ----------- ---------- -----------
Total expenses 3,519 2,604 11,144 7,728
----------- ----------- ---------- -----------
NET INCOME $ 6,792 $ 4,900 $ 15,606 $ 10,908
=========== =========== ========== ===========

NET INCOME PER SHARE -
BASIC $ 0.37 $ 0.32 $ 0.89 $ 0.71
=========== =========== ========== ===========

NET INCOME PER SHARE -
DILUTED $ 0.36 $ 0.32 $ 0.87 $ 0.71
=========== =========== ========== ===========

WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING -
BASIC 18,369,819 15,333,334 17,538,273 15,333,334
=========== =========== ========== ===========

WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING -
DILUTED 18,736,063 15,481,622 17,881,355 15,405,714
=========== =========== ========== ===========

DIVIDENDS DECLARED PER
SHARE $ 0.43 $ 0.36 $ 1.49 $ 0.86
=========== =========== ========== ===========




RESOURCE CAPITAL CORP. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME (LOSS) TO ESTIMATED REIT TAXABLE INCOME
(Unaudited)
Estimated REIT Taxable Income
The Company 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 its net income to estimated REIT taxable income for the periods presented (in thousands):

Period from
March 8, 2005
(Date Operations
Commenced)to
December 31, December 31,
2006 2005
------------- -----------
Net income $ 15,606 $ 10,908

Additions:

Share-based compensation to related parties 368 2,709

Incentive management fee expense to related
party paid in shares 371 86

Capital losses from the sale of
available-for-sale securities 11,624 -

Accrued and/or prepaid expenses 90 (86)

Removal of non-consolidating taxable REIT
subsidiary (80) -

Net book to tax adjustment for the inclusion
of the Company’s taxable foreign REIT
subsidiaries 121 (876)

Amortization of deferred debt issuance costs
on CDO financings (162) (71)
----------- -----------

Estimated REIT taxable income $ 27,938 $ 12,670
=========== ===========

The Company 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 RCC is required to declare to the Company’s stockholders in order to maintain its status as a REIT for federal income tax purposes. Since RCC, as a REIT, expects to make distributions based on taxable earnings, RCC expects that its distributions may at times be more or less than its reported earnings. Total taxable income is the aggregate amount of taxable income generated by RCC and by its domestic and foreign taxable REIT subsidiaries. Estimated REIT taxable income excludes the undistributed taxable income of RCC’s domestic taxable REIT subsidiary, if any such income exists, which is not included in REIT taxable income until distributed by RCC. There is no requirement that RCC’s domestic taxable REIT subsidiary distribute its earnings to the Company. Estimated REIT taxable income, however, includes the taxable income of RCC’s foreign taxable REIT subsidiaries because the Company will generally be required to recognize and report its taxable income on a current basis. RCC uses estimated REIT taxable income for this purpose. Because not all companies use identical calculations, this presentation of estimated REIT taxable income may not be comparable to other similarly-titled measures of other companies.
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