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Resource Capital Corp. Reports Operating Results (10-Q)

May 07, 2010 | About:
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10qk

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Resource Capital Corp. (RSO) filed Quarterly Report for the period ended 2010-03-31.

Resource Capital Corp. has a market cap of $245 million; its shares were traded at around $6.29 with a P/E ratio of 6.7 and P/S ratio of 4.7. The dividend yield of Resource Capital Corp. stocks is 15.9%.RSO is in the portfolios of John Keeley of Keeley Fund Management, Steven Cohen of SAC Capital Advisors, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

We have used recycled capital in our CRE CDO and bank loan CLO structures to make new investments at discounts to par. This reinvested capital and the related discount will produce additional income as the discount is accreted through interest income. In addition, the purchase of these investments at discounts allows us to build collateral in the CDO and CLO structures since we receive credit in these structures for these investments at par. During 2010 and 2009, we purchased CMBS with a combined par value of $59.4 million with a discount to par of 45.9% and bank loans of $358.9 million with a discount to par of 11.1%. From the net discounts of approximately $27.3 million and $40.0 million, we expect to recognize income from accretion of these discounts of approximately $4.6 million and $8.6 million in our CMBS and bank loan portfolio, respectively, through 2010.

Our net income for the three months ended March 31, 2010 was $1.4 million, or $0.04 per share (basic and diluted), as compared to a net loss of $12.2 million, or ($0.50) per share (basic and diluted), for the three months ended March 31, 2009.

Aggregate interest income decreased $5.0 million (19%) to $21.6 million for the three months ended March 31, 2010 from $26.6 million for the three months ended March 31, 2009. We attribute this decrease to the following:

Bank loans generated $9.7 million of interest income for the three months ended March 31, 2010 as compared to $8.9 million for the three months ended March 31, 2009, an increase of $824,000 (9%). This increase was primarily the result of an increase in accretion income of $2.0 million to $2.9 million for the three months ended March 31, 2010 from $888,000 for the three months ended March 31, 2009. The increase in accretion income is a result of the purchase of $73.4 million of bank loans at discounts and the accretion of those discounts into income. These discounted loan purchases are made as we invest the proceeds from the loan payoffs from our borrowers and from the loans we have sold, typically for credit reasons.

Our equipment leasing portfolio generated $235,000 of interest income for the three months ended March 31, 2010 as compared to $2.2 million for the three months ended March 31, 2009, a decrease of $2.0 million (89%). This decrease is primarily the result of our sale of the majority of the leasing portfolio, at par, as of June 30, 2009. This decrease was partially offset by the addition of a $10.2 million pool of leases during the three months ended March 31, 2010.

Aggregate interest expense decreased $6.0 million (43%) to $7.9 million for the three months ended March 31, 2010 from $13.9 million for the three months ended March 31, 2009. We attribute this decrease to the following:

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10qk
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