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Portrait de Li Ka-shing
Li Ka-shing
Birthday : 06/13/1928
Place of birth : Guangdong - China
Country of residence : China

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RESOURCE CAPITAL : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

03/02/2015 | 06:10pm US/Eastern
The following discussion provides information to assist you in understanding our
financial condition and results of operations. This discussion should be read in
conjunction with our consolidated financial statements and related notes
appearing elsewhere in this report. This discussion contains forward-looking
statements. Actual results could differ materially from those expressed in or
implied by those forward-looking statements. Please see "Forward-Looking
Statements" and "Risk Factors" in this report for a discussion of certain risks,
uncertainties and assumptions associated with those statements.
We are a diversified real estate investment trust that is primarily focused on
originating, holding and managing commercial mortgage loans and other commercial
real estate-related debt and equity investments. We also make other commercial
finance investments. We are organized and conduct our operations to qualify as a
REIT, under Subchapter M of the Internal Revenue Code of 1986, as amended. Our
objective is to provide our stockholders with total returns over time, including
quarterly distributions and capital appreciation, while seeking to manage the
risks associated with our investment strategies. We invest in a combination of
real estate-related assets and, to a lesser extent, higher-yielding commercial
finance assets. We have financed a substantial portion of our portfolio
investments through borrowing strategies seeking to match the maturities and
repricing dates of our financings with the maturities and repricing dates of
those investments, and have sought to mitigate interest rate risk through
derivative instruments.
We are externally managed by Resource Capital Manager, Inc., an indirect
wholly-owned subsidiary of Resource America, a specialized asset management
company that uses industry-specific expertise to evaluate, originate, service
and manage investment opportunities through its commercial real estate,
financial fund management and commercial finance operating segments.  As of
September 30, 2014, Resource America managed approximately $19.4 billion of
assets in these sectors. To provide its services, the Manager draws upon
Resource America, its management team and their collective investment
experience.
We generate our income primarily from the spread between the revenues we receive
from our assets and the cost to finance the purchase of those assets, from
management of assets and from hedging interest rate risks. We generate revenues
primarily from the interest and fees we earn on our whole loans, A notes, B
notes, mezzanine debt securities, CMBS, bank loans, middle market loans, other
ABS, and structured note investments. We also generate revenues from the rental
and other income from real properties we own, from management of externally
originated bank loans, from our residential mortgage origination business, and
from our investment in an equipment leasing business. Historically, we have used
a substantial amount of leverage to enhance our returns and we have financed
each of our different asset classes with different degrees of leverage. The cost
of borrowings to finance our investments is a significant part of our
expenses. Our net income depends on our ability to control these expenses
relative to our revenue. In our bank loan, middle market loan, residential
mortgage loan, CMBS and ABS portfolios, we historically have used warehouse
facilities as a short-term financing source as well as CDOs and CLOs and, to a
lesser extent, other term financing as long-term financing sources. In our
commercial real estate loan portfolio, we historically have used repurchase
agreements as a short-term financing source, and CDOs commercial real estate
securitizations and, to a lesser extent, other term financing as long-term
financing sources. Our other term financing has consisted of long-term,
match-funded financing provided through long-term bank financing and
asset-backed financing programs, depending upon market conditions and credit
availability.
Having gained traction in 2013, the economic environment in the United States
continued to show moderate growth during 2014, which resulted in several
positive operating developments for us. Our ability to access the capital
markets continued to improve, as evidenced by our Series C preferred stock
offering in June 2014, resulting in net proceeds at issuance to us of $116.2
million, and by the success of our dividend reinvestment and share purchase
program, or DRIP, which raised $30.3 million during the year ended December 31,
2014. In addition, we supplemented our common equity issuances with issuances of
preferred stock through an at-the-market program which resulted in proceeds of
$56.6 million in 2014. This brought our total net proceeds raised through the
capital markets to $203.1 million in 2014, after underwriting discounts and
commissions and other offering expenses. This improved environment and increased
capital markets access has allowed us to substantially increase our funded
originations of commercial real estate loans from $344.3 million in 2013 to
$689.4 million in 2014.
We also continued to experience improved securitization markets, closing an
additional real estate securitization for $353.9 million in July 2014. We were
able to use the proceeds from this CLO to completely pay down a financing
facility and thereby generate additional borrowing capacity. Further, we were
able to modify and expand our CRE financing facility with Wells Fargo Bank by
increasing the facility from $250.0 to $400.0 million and extend the maturity
date to August 27, 2016 with two one-year extension options available to us. We
were also successful in extending the maturity date on our CMBS financing
facility to January 31, 2016. We continue to engage in discussions with
potential financing sources about providing or expanding commercial real estate
term financing to augment and cautiously grow our loan and security portfolios.
We have expanded our borrowings with the use of term and additional repurchase
agreements and are using them primarily to finance newly underwritten

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commercial real estate loans and to purchase highly-rated CMBS. We anticipate
replacing these short-term borrowings with longer-term financing in the form of
securitization borrowings as we did in July 2014 and December 2013 with the
closings of $353.9 million and $307.8 million, respectively, of commercial real
estate, or CRE, securitizations. On February 24, 2015 we closed our third
securitization in the last 14 months with the close of Resource Capital Corp.
2015-CRE3, a $346.2 million CLO backed by self-originated commercial mortgages,
which got us to just in excess of $1.0 billion of CRE loans financed by these
securitizations during that time frame. We believe this indicates a marketplace
recognition of our ability to originate and structure high-quality transitional
commercial real estate loans. However, we caution investors that even as
financing through the credit markets becomes more available, we may not be able
to obtain economically favorable terms.
Although economic conditions in the United States have improved, previous
conditions in real estate and credit markets continue to affect both us and a
number of our commercial real estate borrowers. Over a period of several years,
we entered into loan modifications with respect to 14 of our remaining
outstanding commercial real estate loans. During the past 21 months, we have
adjusted our provision for loan losses to reflect the effect of these conditions
on our borrowers as well as, where necessary, market-related temporary
adjustments to the market valuations of both CMBS and ABS in our investment
portfolio.  However, during 2013 and continuing through December 31, 2014, the
improved economic conditions led to a stabilization in the credit quality of our
portfolio and, as a result, our provision for loan losses has decreased
significantly in 2014. For the year ended December 31, 2014, we have a net
recovery in the provision for loan losses of $1.8 million, primarily due to the
successful refinancing of a commercial real estate loan position on which we had
previously established a significant reserve for credit loss. Also, other
comprehensive income saw an increase of $20.1 million at December 31, 2014.
While we believe we have appropriately valued the assets in our investment
portfolio at December 31, 2014, we cannot assure you that further impairments
will not occur or that our assets will otherwise not be adversely affected by
market conditions.
With respect to our investments and investment portfolio growth, we continued to
see increased opportunities to deploy our capital. During 2013 and through
December 31, 2014, we have underwritten 61 new CRE loans for a total commitment
of $1.1 billion. These loans were in part financed through our CRE term
facilities, our legacy CRE CDOs, and our new CRE securitizations. We also
purchased 22 newly underwritten CMBS for $59.2 million during the same time
period all of which were financed through our Wells Fargo facility. In addition,
we purchased 26 CMBS bonds for $123.8 million that were financed by short-term
repurchase agreements and also purchased seven CMBS bonds for $43.1 million
where no debt financing sources were utilized. We intend to use the existing
capacity in our CMBS and CRE term credit facilities with Wells Fargo of $70.1
million and $218.7 million, respectively, and with Deutsche Bank of $173.8
million, as of December 31, 2014, to help finance new CRE loans and CMBS
investments. As of February 24, 2015, and concurrently with the closing of our
third CRE securitization in the last 14 months, Resource Capital Corp.
2015-CRE3, we have substantially repaid the balances on these facilities.
On October 31, 2013, we, through RCC Residential, Inc., a taxable REIT
subsidiary, acquired a residential mortgage origination company, Primary Capital
Mortgage LLC, or PCM, an Atlanta-based firm.  Our acquisition of PCM represents
a return to the residential mortgage investment market, by providing us with our
first residential mortgage origination platform. On June 30, 2014, we also
closed a residential jumbo loan-backed securitization where we retained
approximately $30.0 million of the structure's mezzanine securities. PCM is now
licensed in 35 states, up from 7 states when we acquired the business. We intend
to cautiously expand this business over the next 12 to 18 months while adding
infrastructure, staff and new technology.
In the past, we also had at our disposal the use of recycled capital in our bank
loan CLO structures to make new investments. As of December 31, 2014, both of
our remaining bank loan CLOs and our two earlier vintage real estate CDOs have
ended their reinvestment periods. Additionally, our three most recent
securitizations were structured as static deals, as such, they were not
structured with reinvestment periods. As such, principal and interest received
by these vehicles will be used to paydown their note balances and to provide
distributions in accordance with their respective indentures. As these vehicles
liquidate, we expect to use the returned capital to invest in strategic
opportunities as they arise.
We continue to see a decline in our commercial finance assets, specifically, our
bank loan portfolio, as two of our bank loan CLOs were substantially liquidated
in 2013. Two of our CLOs were liquidated in 2014 and another is expected to
liquidate in 2015. The remaining legacy CLO in our portfolio has finished its
reinvestment period and, as a result, as the collateral assets repay the
proceeds are used to pay down the associated debt.  This trend has caused our
net interest income from bank loans to decline substantially in 2014 and the
declining trend will continue into 2015. We began to mitigate this trend by
investing in new CLOs and European structured notes in late 2013 and in 2014. We
also expect to mitigate this trend by continuing to grow our real estate lending
platform and, to a lesser extent, by deploying capital into our middle-market
lending business, which loans are similar in nature to bank loans.

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In the latter half of 2013, we provided a middle market lending operation with
funds to invest on our behalf. These funds were derived from proceeds of sales
from a partial liquidation of our trading portfolio. Our first investments were
in bank loans purchased in the secondary market; however, in December 2013, we
closed on a self-originated loan. We originated and purchased new middle market
loan investments of $268.6 million during 2014. We expect the increasing trend
in the investment in our middle market portfolio to continue through 2015. In
September, we closed on a syndicated financing facility for our middle market
loan portfolio comprised of direct originations and syndicated loans with a
capacity of $125.0 million. We had $113.5 million outstanding as of December 31,
2014 on this facility. We expect to expand the financing capacity of our new
facility and to continue to grow this business in 2015.
Due to these developments, we expect to continue to modestly increase our net
interest income for 2015. However, because we believe that economic conditions
in the United States are fragile, and could be significantly harmed by
occurrences over which we have no control, we cannot assure you that we will be
able to meet our expectations or that we will not experience net interest income
reductions.
As of December 31, 2014, we had allocated our invested equity capital among our
targeted asset classes as follows: 67% in CRE assets, 29% in commercial finance
assets and 4% in other investments. As of December 31, 2013, we had allocated
our invested equity capital among our targeted asset classes as follows: 83% of
our portfolio in CRE assets, 15% in commercial finance assets and 2% in other
investments.
Results of Operations
Our net income allocable to common shares for the year ended December 31, 2014
was $44.0 million, or $0.34 per share (basic and diluted) as compared to net
income allocable to common shares of $39.2 million, or $0.33 per share (basic
and diluted) for the year ended December 31, 2013 and net income allocable to
common shares of $63.2 million, or $0.71 per share (basic and diluted) for the
year ended December 31, 2012.
Interest Income

The following tables set forth information relating to our interest income recognized for the periods presented (in thousands, except percentages):

                                    Year Ended                Year Ended               Year Ended
                                 December 31, 2014        December 31, 2013         December 31, 2012
                                 Weighted Average          Weighted Average         Weighted Average
                               Yield       Balance       Yield       Balance      Yield       Balance
Interest income:
Interest income from loans:
  Bank loans                   4.69%    $   514,939      5.54%     $ 

945,599 5.94% $ 1,189,898

 Middle market loans           8.95%    $   129,271      7.64%     $   7,080       -%      $         -
  Commercial real estate
loans                          6.00%    $ 1,088,880      5.81%     $ 767,287      5.25%    $   701,836

Interest income from
securities:
 CMBS-private placement        6.53%    $   186,732      4.93%     $ 229,272      5.22%    $   216,460
 ABS                           8.89%    $    45,609      5.06%     $  27,399      4.80%    $    32,087
 Corporate bonds               6.98%    $     2,685      3.91%     $  20,220      4.29%    $     8.237
 RMBS                          7.80%    $     9,228      5.55%     $  12,348      3.10%    $    34,396

Preference payments on
structured notes              31.34%    $    20,918     10.10%     $  38,778     19.07%    $    51,239







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The following tables summarize interest income for the years indicated (in thousands, except percentages):

                                          Unamortized           Net
                              Coupon       (Discount)       Amortization/     Interest        Fee
     Type of Security        Interest       Premium          Accretion         Income       Income        Total
Year Ended December 31,
2014:
Bank loans                      3.84 %   $     (1,240 )   $        2,136     $  21,595     $   849     $  24,580
Middle market loans                - %   $       (304 )               48        11,688         142        11,878
Commercial real estate
loans                           5.51 %   $     (7,656 )               39        63,688       2,672        66,399
  Total interest income
from loans                                                         2,223        96,971       3,663       102,857
CMBS-private placement          4.29 %   $     (2,980 )            2,803         9,442           -        12,245
RMBS                               - %   $        (18 )                -           720           -           720
ABS                             6.56 %   $     (2,153 )              720         3,393           -         4,113
Corporate bonds                 5.94 %   $        (40 )               27           160           -           187
  Total interest income
from securities                                                    3,550        13,715           -        17,265
Preference payments on
structured notes                                                       -         6,555           -         6,555
Other                                                                  -           230           -           230
  Total interest income -
other                                                                  -         6,785           -         6,785
Total interest income                                     $        5,773     $ 117,471     $ 3,663     $ 126,907
Year Ended December 31,
2013:
Bank loans                      4.23 %   $     (3,592 )   $        9,472     $  41,337     $ 2,727     $  53,536
Middle market loans                - %   $        (84 )               13           595          (1 )         607
Commercial real estate
loans                           5.57 %   $        (92 )               35        43,926       1,351        45,312
  Total interest income
from loans                                                         9,520        85,858       4,077        99,455
CMBS-private placement          3.74 %   $     (6,583 )            2,050         9,361           -        11,411
RMBS                               - %   $          -                  -           685           -           685
ABS                             2.06 %   $     (2,394 )              681           718           -         1,399
Corporate bonds                 4.13 %   $        (68 )              (18 )         832           -           814
  Total interest income
from securities                                                    2,713        11,596           -        14,309
Preference payments on
structured notes                                                       -         3,918           -         3,918
Other                                                                  -           294           -           294
  Total interest income -
other                                                                  -         4,212           -         4,212
Total interest income                                     $       12,233     $ 101,666     $ 4,077     $ 117,976
Year Ended December 31,
2012:
Bank loans                      4.25 %   $    (24,465 )   $       17,784     $  51,580     $ 2,147     $  71,511
Middle market loans                - %   $          -                  -             -           -             -
Commercial real estate
loans                           5.05 %   $       (127 )               33        35,759       1,727        37,519
  Total interest income
from loans                                                        17,817        87,339       3,874       109,030
CMBS-private placement          3.60 %   $     (8,011 )            2,635         8,723           -        11,358
RMBS                               - %   $          -                  -         1,067           -         1,067
ABS                             2.41 %   $     (3,145 )              718           785           -         1,503
Corporate bonds                 3.69 %   $        479                (26 )         394           -           368
  Total interest income
from securities                                                    3,327        10,969           -        14,296
Preference payments on
structured notes                                                       -         9,773           -         9,773
Other                                                                  -           231           -           231
  Total interest income -
other                                                                  -        10,004           -        10,004
Total interest income                                     $       21,144     $ 108,312     $ 3,874     $ 133,330





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                                                                                              Year to
                                                                                               Year
                                          Years Ended December 31,         Year to Year       Percent
                                            2014             2013         Dollar Change       Change
 Interest income from loans:
  Bank loans                           $      24,580     $   53,536      $    (28,956 )          (54 )%
  Middle market loans                         11,878            607            11,271          1,857  %
  Commercial real estate loans                66,399         45,312            21,087             47  %
    Total interest income from loans         102,857         99,455             3,402              3  %

Interest income from securities:

  CMBS-private placement                      12,245         11,411               834              7  %
  ABS                                          4,113          1,399             2,714            194  %
  Corporate bonds                                187            814              (627 )          (77 )%
  Residential mortgage-backed
securities, or RMBS                              720            685                35              5  %
    Total interest income from
securities                                    17,265         14,309             2,956             21  %

Interest income - other:

  Preference payments on structured
notes                                          6,555          3,918             2,637             67  %
Temporary investment in over-night
repurchase agreements                            230            294         

(64 ) (22 )%

   Total interest income - other               6,785          4,212             2,573             61  %
Total interest income                  $     126,907     $  117,976      $      8,931              8  %


Year Ended December 31, 2014 as compared to Year Ended December 31, 2013
Aggregate interest income increased $8.9 million (8%) to $126.9 million for the
year ended December 31, 2014 as compared to $118.0 million for the year ended
December 31, 2013. We attribute this increase to the following:
Interest Income from Loans
Bank loans. The weighted average loan balance of our bank loan portfolio
decreased by $430.7 million to $514.9 million principally due to four of our
CLOs, Apidos CLO I, Moselle CLO, Apidos CLO VIII and Whitney CLO I , liquidating
in October 2014, November 2014, September 2013 and October 2013, respectively.
Additionally, all remaining CLOs, except for Moselle, had matured and reached
the end of their reinvestment periods either in prior years or relatively early
in 2014, and, as a result, any principal collected was used to pay down notes
instead of being reinvested in new assets. The decrease in the weighted average
yield from 5.54% to 4.69% was primarily the result of the recognition of
significant discount accretion in 2013 upon the liquidation of Apidos CLO VIII
and Whitney CLO.
Middle market loans. Through focused efforts to increase the investment in our
middle market lending business, the portfolio grew from a weighted average
balance of $7.1 million for the year ended December 31, 2013 to a weighted
average balance of $129.3 million for the year ended December 31, 2014.
Concurrent with this growth and changes in the general lending market, the
weighted average yield on investments increased from 7.64% at December 31, 2013
to 8.95% as of December 31, 2014.
Commercial real estate loans. Interest income on commercial real estate loans
increased by $21.1 million to $66.4 million for the year ended December 31, 2014
due primarily to an increase in the weighted average balance of loans from
$767.3 million to $1,088.9 million and, to a lesser extent, to an increase in
the weighted average yield from 5.81% to 6.00%. The increase in the weighted
average balance of loans is due to our origination of loans for inclusion in our
CRE securitizations that closed in December 2013, July 2014, and February 2015.
The increase in the weighted average yield is primarily the result of the
recognition of a $1.6 million exit fee on a legacy loan that paid off in 2014.
Interest Income from Securities
Asset-Backed Securities, or ABS. Interest income from ABS increased $2.7 million
to $4.1 million for the year ended December 31, 2014. This increase is primarily
due to the acquisitions of structured asset-backed securities by our
consolidated variable interest entities, RCM Global, LLC, or RCM Global, and
Moselle CLO, which significantly contributed to the increase in the weighted
average balance of the ABS portfolio from $27.4 million to $45.6 million. These
purchases also increased the weighted average yield of our ABS portfolio from
5.06% to 8.89% during 2014, as these securities are higher-yielding,
foreign-currency denominated CLO mezzanine and equity debt securities purchased
at significant discounts to par.

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Interest income - other. Interest income - other increased $2.6 million to $6.8
million for the year ended December 31, 2014. Substantially all of this increase
relates to incremental interest income provided by our investments in European
structured notes at the end of 2013 and during 2014.

                                                                                              Year to
                                                                                               Year
                                          Years Ended December 31,         Year to Year       Percent
                                            2013             2012         Dollar Change       Change
 Interest income from loans:
  Bank loans                           $      53,536     $   71,511      $    (17,975 )          (25 )%
  Middle market loans                            607              -               607            100  %
  Commercial real estate loans                45,312         37,519             7,793             21  %
    Total interest income from loans          99,455        109,030            (9,575 )           (9 )%

Interest income from securities:

  CMBS-private placement                      11,411         11,358                53              -  %
  ABS                                          1,399          1,503              (104 )           (7 )%
  Corporate bonds                                814            368               446            121  %
  Residential mortgage-backed
securities, or RMBS                              685          1,067         

(382 ) (36 )%

    Total interest income from
securities                                    14,309         14,296                13              -  %

Interest income - other:
Preference payments on structured
notes                                          3,918          9,773            (5,855 )          (60 )%
Temporary investment in over-night
repurchase agreements                            294            231                63             27  %
Total interest income - other                  4,212         10,004            (5,792 )          (58 )%
Total interest income                  $     117,976     $  133,330      $    (15,354 )          (12 )%


Year Ended December 31, 2013 as compared to Year Ended December 31, 2012
Aggregate interest income decreased $15.4 million to $118.0 million for the year
ended December 31, 2013. We attribute this decrease to the following:
Interest Income from Loans. Aggregate interest income from loans decreased $9.6
million to $99.5 million for the year ended December 31, 2013.
Interest income on bank loans decreased $18.0 million to $53.5 million for the
year ended December 31, 2013. The decrease for the year ended December 31, 2013
resulted primarily from the following:
•         a decrease in the weighted average loan balance of $244.3 million to

$945.6 million for the year ended December 31, 2013 from $1.2 billion

for the year ended December 31, 2012, principally due to two of our

CLOs, Apidos CLO VIII and Whitney CLO I , liquidating in September 2013

and October 2013, respectively. In addition, two of our remaining CLOs

(Apidos CLO I and Apidos CLO III) had reached the end of their

reinvestment periods in prior years and, as a result, any principal

          collected is used to pay down notes instead of being reinvested in new
          assets. For the year ended December 31, 2013, Apidos CLO I and Apidos
          CLO III paid down a total of $173.2 million par value of loans; and


•         a decrease in the weighted average yield to 5.54% for the year ended

December 31, 2013 as compared to 5.94% for the year ended December 31,

2012, primarily as a result of the decrease in accretion income from

Apidos CLO VIII and Whitney CLO I as a result of their liquidation, as

well as a decrease in accretion income from Apidos CDO I and Apidos CDO

          III resulting from decreasing asset and discount balances as both
          securitizations reached the end of their reinvestment periods.



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Interest income on CRE loans increased $7.8 million to $45.3 million for the
year ended December 31, 2013. This increase is a result of the following
combination of factors:
•         an increase in the weighted average yield to 5.81% during the year
          ended December 31, 2013 from 5.25% during the year ended December 31,

2012 as a result of newly originated real estate loans with higher

stated interest rates than our legacy portfolio and as a result of exit

fees from seven loans that paid off during the year ended December 31,

2013; and

• an increase of $65.5 million in the weighted average loan balance to

$767.3 million for the year ended December 31, 2013 from $701.8 million

for the year ended December 31, 2012 as we reinvested proceeds from

payoffs and paydowns, classified as restricted CDO cash on our balance

sheet, beginning in the fourth quarter of 2011, with the majority of

these proceeds being reinvested during the second and third quarters of

          2012. In addition, we began to originate new loans financed by our
          Wells Fargo CRE credit facility coupled with new equity raised in 2012.


Interest Income from Securities. Aggregate interest income from securities
increased $13,000 to $14.3 million for the year ended December 31, 2013. The
increase in interest income from securities resulted principally from the
following:
Interest income on CMBS-private placement increased $53,000 to $11.4 million for
the year ended December 31, 2013. The increase resulted from an increase in the
weighted average balance of assets of $12.8 million during the year ended
December 31, 2013 to $229.3 million from $216.5 million for the year ended
December 31, 2012 primarily as a result of the purchase of assets on our Wells
Fargo CMBS facility beginning in February 2011 and purchases using three
short-term repurchase agreements as well as proceeds from our common and
preferred stock offerings. This was partially offset by the reclassification of
assets to linked transactions when certain assets were financed.
The increase in interest income on CMBS-private placement as a result of the
increase in the weighted average balance was almost completely offset by a
decrease in the weighted average yield of assets to 4.93% for the year ended
December 31, 2013 from 5.22% for the year ended December 31, 2012 primarily as a
result of the decrease in accretion income caused by higher purchase prices on
newer securities. The new assets financed by our Wells facility were typically
purchased at a premium. Our legacy CMBS assets had previously been purchased at
a discount. Interest income from ABS decreased $104,000 (7%) to $1.4 million for
the year ended December 31, 2013 from $1.5 million for the year ended December
31, 2012 as a result of a decrease of $4.7 million in the weighted average loan
balance to $27.4 million for the year ended December 31, 2013, from $32.1
million for the year ended December 31, 2012, as a result of $6.8 million in
paydowns from October 2012 through December 2013. The decrease in the weighted
average balance was partially offset by an increase in the weighted average
yield during the year ended December 31, 2013 to 5.06% from 4.80% during the
year ended December 31, 2012 as a result of the paydowns during 2013, which
accelerated accretion income recognition.
Interest income from corporate bonds increased $446,000 to $814,000 for the year
ended December 31, 2013 and was the result of our acquisition in October 2012
and in May 2013 of 66.6% and 1.7%, respectively, of the equity in Whitney CLO I
which resulted in us consolidating this entity that held some corporate bonds.
Whitney CLO I was subsequently liquidated in October 2013.
Interest income on RMBS decreased $382,000 to $685,000 for the year ended
December 31, 2013. The decrease is almost entirely the result of the sale of
four positions during the year ended December 31, 2012 and two positions during
the year ended December 31, 2013.
Interest Income - Other. Aggregate interest income-other decreased $5.8 million
to $4.2 million for the year ended December 31, 2013 and is primarily related to
the divestiture of a large portion of our trading securities investment program
with Resource Capital Markets, Inc., a wholly-owned subsidiary of Resource
America, that invested $13.0 million of our funds under an investment management
agreement. The payments vary from period to period and are based on cash flows
from the underlying securities rather than on a contractual interest rate. The
decrease of the weighted average balance of assets of $12.5 million to $38.8
million for the year ended December 31, 2013 as compared to $51.2 million for
the year ended December 31, 2012 and was primarily related to the sale of 12
securities in September 2012, which has significantly reduced the balance of
investments held in trading securities. The remaining portfolio has decreased
substantially as there were eight positions at December 31, 2013 and 26
positions at December 31, 2012, and as a result, there are fewer available
distributions from the positions to recognize.

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Interest Expense
The following tables set forth information relating to our interest expense
incurred for the periods presented by asset class (in thousands, except
percentages):
                               Year Ended                  Year Ended                   Year Ended
                            December 31, 2014           December 31, 2013           December 31, 2012
                            Weighted Average            Weighted Average             Weighted Average
                           Yield        Balance        Yield        Balance       Yield         Balance
Interest expense:
Bank loans                  1.33 %    $ 530,088         3.54 %    $ 961,742         1.83 %   $ 1,174,495
Middle market loans         4.49 %    $  16,250            - %    $       -            - %   $         -
Commercial real
estate loans                2.38 %    $ 685,324         2.15 %    $ 416,513         1.62 %   $   458,032
CMBS-private
placement                   1.39 %    $  49,757         1.72 %    $  48,953         2.09 %   $    47,533
RMBS                        1.50 %    $  11,510         N/A           N/A          N/A            N/A
Hedging instruments         5.32 %    $ 121,306         5.35 %    $ 123,999         5.13 %   $   138,581
Securitized
borrowings                 15.29 %    $   5,626        30.02 %    $  18,568         8.79 %   $    21,399
Convertible senior
notes                       7.66 %    $ 115,000         6.61 %       22,685          N/A             N/A
General                     6.88 %    $  51,548         4.65 %    $  61,720         4.75 %   $    65,148



                                        Unamortized
                          Coupon       Deferred Debt           Net           Interest
  Type of Security       Interest         Expense         Amortization     
 Expense         Other         Total
Year Ended December
31, 2014:
Bank loans                  0.96 %   $            22     $         770     $    6,564     $        -     $  7,334
Middle market loans         2.75 %   $             -                 -            806              -          806
Commercial real             1.78 %   $         4,490             4,063         12,631              -       16,694
estate loans
CMBS-private                1.37 %   $             -                12            697              -          709
placement
RMBS                        1.15 %   $             -                 -            173              -          173
Hedging                     5.08 %   $            22                 -          6,555              -        6,555
Securitized                    - %   $             -                 -            849              -          849
borrowings
Convertible senior          6.00 %
notes                                $             -             1,880          6,900              -        8,780
General                     4.18 %   $           343               200          3,373              -        3,573
  Total interest                                         $       6,925     $   38,548     $        -     $ 45,473
expense

Year Ended December
31, 2013:
Bank loans                  1.34 %   $           171     $       6,131     $   28,332     $        -     $ 34,463
Middle market loans            - %   $             -                 -              -              -            -
Commercial real                                                  2,209          6,834              -        9,043
estate loans                1.55 %   $         2,554
CMBS-private                                                       151            680              -          831
placement                   1.41 %   $            12
RMBS                           - %   $             -                 -              -              -            -
Hedging                     5.03 %   $           171                 -          6,751              -        6,751
Securitized                                                                                                 5,531
borrowings                 30.02 %   $             -                 -          5,531              -
Convertible Senior                                                                                          1,480
Notes                       4.21 %   $             -               138          1,342              -
General                        - %   $           543               192          2,719              -        2,911
  Total interest                                         $       8,821     $   52,189     $        -     $ 61,010
expense


Year Ended December 31, 2012:
Bank loans                      1.36 %   $ 7,102    $ 2,846    $ 18,935    $      -     $ 21,781
Middle market loans                - %   $     -          -           -           -            -

Commercial real estate loans 1.08 % $ 610 2,292 5,274

      -        7,566
CMBS-private placement          1.52 %   $    23        271         753           -        1,024
RMBS                               - %   $     -          -           -           -            -
Hedging                         4.97 %   $   932          -       7,266           -        7,266
Securitized borrowings          14.4 %   $     -          -       3,195      (1,202 )      1,993
Convertible Senior Notes           - %   $     -          -           -           -            -
General                         4.43 %   $   734         65       3,097           -        3,162
  Total interest expense                            $ 5,474    $ 38,520    $ (1,202 )   $ 42,792




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                                                                                              Year to
                                                                                               Year
                                          Years Ended December 31,         Year to Year       Percent
                                            2014             2013         Dollar Change       Change
Interest expense:
Bank loans                             $       7,334     $   34,463      $    (27,129 )          (79 )%
Middle market loans                              806              -               806            100  %
Commercial real estate loans                  16,694          9,043             7,651             85  %
CMBS-private placement                           709            831              (122 )          (15 )%
RMBS                                             173              -               173            100  %
Hedging instruments                            6,555          6,751              (196 )           (3 )%
Securitized borrowings                           849          5,531            (4,682 )          (85 )%
Convertible senior notes                       8,780          1,480             7,300            493  %
General                                        3,573          2,911               662             23  %
Total interest expense                 $      45,473     $   61,010      $    (15,537 )          (25 )%


Year Ended December 31, 2014 as compared to Year Ended December 31, 2013
Aggregate interest expense decreased $15.5 million to $45.5 million for the year
ended December 31, 2014. We attribute this increase to the following:
Bank loans. Interest expense on bank loans declined $27.1 million to $7.3
million for the year ended December 31, 2014. This was primarily due to a
decrease in the weighted average note balance outstanding from $961.7 million to
$530.1 million in our bank loan CLOs due to the call and liquidation of Apidos
CDO I in October 2014 and Apidos CLO VIII and Whitney CLO in September 2013 and
October 2013, respectively, which resulted in the paydown of all outstanding
notes. In addition, Apidos CDO III and Apidos Cinco CDO reached the ends of
their reinvestment periods; and, as a result, cash received from their
collateral is being used to pay down the principal amounts of the CLOs' notes.
The decrease from 3.54% to 1.33% in the weighted average cost of funds is
attributable to the liquidations of both Apidos CLO VIII and Whitney CLO I in
2013, as these vehicles had higher costs of funds.
Middle market loans. In September 2014, we closed on a syndicated financing
facility for our new middle market loan portfolio comprised of direct
originations and syndicated loans. As of December 31, 2014, we had approximately
$113.5 million outstanding on this facility. As we continue to focus on the
growth of the middle market platform and its lending capabilities, we expect to
expand the financing capacity of this facility in 2015.
Commercial real estate loans. Interest expense on commercial real estate loans
increased $7.7 million to $16.7 million for the year ended December 31, 2014.
This was primarily as a result of the consolidation of RCC CRE Notes 2013, a
securitization that closed in December 2013, as well as the consolidation of RCC
CRE 2014, a securitization that closed in July 2014 and the warehousing of
originated loans to be sold into securitization in February 2015. These
increases were partially offset by principal payoffs in Resource Real Estate
Funding CDO 2006-1, or RREF CDO 2006-1, Resource Real Estate Funding CDO 2007-1,
or RREF CDO 2007-1, and RCC CRE Notes 2013 as the underlying collateral paid
down or paid off.
Securitized borrowings. Securitized borrowings expense decreased $4.7 million to
$849,000 for the year ended December 31, 2014. This interest expense was related
to our subordinated investments in Apidos CLO VIII and Whitney CLO I, which were
liquidated in 2013. The current year's interest expense is primarily related to
Moselle CLO, which was consolidated in 2014 and substantially liquidated in
December 2014.
Convertible senior notes. Interest expense on convertible senior notes increased
$7.3 million to $8.8 million for the year ended December 31, 2014. The current
year interest expense represents the first full year of interest expense taken
on our 6% convertible notes, as the convertible notes were originally issued in
October 2013.

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                                                                                                Year to
                                                                                                 Year
                                          Years Ended December 31,          Year to Year        Percent
                                            2013             2012          Dollar Change        Change
Interest expense:
Bank loans                             $      34,463     $   21,781      $      12,682              58  %
Commercial real estate loans                   9,043          7,566              1,477              20  %
CMBS-private placement                           831          1,024               (193 )           (19 )%
Hedging instruments                            6,751          7,266               (515 )            (7 )%
Securitized borrowings                         5,531          1,993              3,538             178  %
Convertible senior notes                       1,480              -              1,480             100  %
General                                        2,911          3,162               (251 )            (8 )%
Total interest expense                 $      61,010     $   42,792      $      18,218              43  %


Year Ended December 31, 2013 as compared to Year Ended December 31, 2012
Aggregate interest expense increased $18.2 million to $61.0 million for the year
ended December 31, 2013. We attribute this decrease to the following:
Interest expense on bank loans was $34.5 million for the year ended December 31,
2013 as compared to $21.8 million for the year ended December 31, 2012, an
increase of $12.7 million. This increase resulted primarily from the increase in
the weighted average yield to 3.54% for the year ended December 31, 2013 as
compared to 1.83% for the year ended December 31, 2012 primarily due to an
increase in expense related to Apidos CLO VIII and Whitney CLO I which was
liquidated in September 2013 and October 2013, respectively. This accelerated
the original issue discount and deferred issuance costs recorded when these CLOs
were initially consolidated.
The increase in interest expense resulting from the increase in the weighted
average yield was partially offset by a decrease in the weighted average balance
of the related financings of $212.8 million to $961.7 million for the year ended
December 31, 2013 as compared to $1.2 billion for the year ended December 31,
2012 due to the call and liquidation of Apidos CLO VIII and Whitney CLO I in
September 2013 and October 2013, respectively, which resulted in the paydown of
all outstanding notes. In addition, Apidos CDO I and Apidos CDO III reached the
end of their reinvestment periods in prior years. During the year ended December
31, 2013, Apidos CDO I paid down $116.1 million in principal amount of its CDO
notes and Apidos CDO III paid down $75.9 million in principal amount of its CDO
notes.
Interest expense on CRE loans was $9.0 million for the year ended December 31,
2013, as compared to $7.6 million for the year ended December 31, 2012, an
increase of $1.5 million as a result of increase in the weighted average yield
to 2.15% for the year ended December 31, 2013 as compared to 1.62% for the year
ended December 31, 2012 which was due primarily to note paydowns which increased
the weighted average cost of these borrowings as the lower yield debt was repaid
as required in the indenture agreements.
The increase in interest rate on commercial real estate loans was partially
offset during the year ended December 31, 2013 by a decrease in the weighted
average balance of debt of $41.5 million to $416.5 million from $458.0 million
for the year ended December 31, 2012, primarily as a result of the debt
amortization of Resource Real Estate Funding CDO 2006-1, or RREF CDO 2006-1, and
Resource Real Estate Funding CDO 2007-1, or RREF CDO 2007-1, as they reached the
end of their reinvestment periods in prior years. During the year ended December
31, 2013, the CDOs paid down a total of $129.2 million of notes.
Hedge expense decreased $515,000 to $6.8 million for the year ended December 31,
2013. The decrease in the hedging expense was primarily due to the scheduled
amortization on swaps and, to a lesser extent, changes in LIBOR.
Securitized borrowings expense increased $3.5 million to $5.5 million for the
year ended December 31, 2013. This interest expense is related to our
subordinated investments in Apidos CLO VIII and Whitney CLO I. The interest
expense is imputed using an estimated internal rate of return based on expected
cash flows over the life of each CLO. The increase for the year ended December
31, 2013 was due to acceleration of expense as a result of the liquidation of
these CLOs.
Interest expense on convertible senior notes was $1.5 million. In October 2013,
we closed and issued $115.0 million aggregate principal amount of our 6.00%
convertible senior notes due 2018.


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Revenue

The following table sets forth information relating to our other revenue incurred for the periods presented (in thousands):

                                                                                             Year to
                                                                                              Year
                                         Years Ended December 31,         Year to Year       Percent
                                           2014             2013         Dollar Change       Change
Revenue:
Rental income                         $       8,441     $   19,923      $    (11,482 )          (58 )%
Dividend income                                 186            273               (87 )          (32 )%
Fee income                                    9,385          5,821             3,564             61  %
Total revenue                         $      18,012     $   26,017      $     (8,005 )          (31 )%


Year Ended December 31, 2014 as compared to Year Ended December 31, 2013
Rental income. Rental income decreased $11.5 million to $8.4 million for the
year ended December 31, 2014. This decrease was primarily related to the sale of
a hotel property we owned in April 2014. We did not own any rental properties as
of December 31, 2014, as we sold our last two remaining real estate
properties--a multi-family property in Tennessee and an office property in
California--in November 2014.
Fee income. Fee income increased $3.6 million to $9.4 million for the year ended
December 31, 2014. The increase is primarily due to increased revenues and fees
earned at PCM related to residential mortgage loan originations as that
operation expanded.
The following table sets forth information relating to our other revenue
incurred for the periods presented (in thousands):

                                                                                               Year to
                                                                                                Year
                                         Years Ended December 31,          Year to Year        Percent
                                           2013             2012          Dollar Change        Change
Revenue:
Rental income                         $      19,923     $   11,463      $       8,460              74  %
Dividend income                                 273             69                204             296  %
Fee income                                    5,821          7,068             (1,247 )           (18 )%
Total revenue                         $      26,017     $   18,600      $       7,417              40  %


Year Ended December 31, 2013 as compared to Year Ended December 31, 2012
Rental income. Rental income increased $8.5 million to $19.9 million for the
year ended December 31, 2013. This increase is related to the acquisition of two
properties in 2012, a multi-family property in Tennessee and a hotel property in
Florida (a full year of whose results were reflected in 2012).
Fee income. Fee income decreased $1.2 million to $5.8 million for the year ended
December 31, 2013. This decrease is primarily related to the consolidation of
Whitney CLO I in October 2012 due to our acquisition of a controlling interest.
As a result of consolidation, the related fee income eliminates in
consolidation.

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Operating Expenses
The following table sets forth information relating to operating expenses we
incurred for the periods presented (in thousands):

                                                                                                 Year to
                                                                                                  Year
                                          Years Ended December 31,           Year to Year        Percent
                                           2014              2013           Dollar Change        Change
Operating expenses:
Management fees - related party       $     13,584       $    14,220      $        (636 )            (4 )%
Equity compensation - related party          6,566            10,472             (3,906 )           (37 )%
Rental operating expense                     5,443            14,062             (8,619 )           (61 )%
General and administrative -
Corporate                                   15,263            12,304              2,959              24  %
General and administrative - PCM            19,598             2,203             17,395             790  %
Depreciation and amortization                2,737             3,855             (1,118 )           (29 )%
Income tax benefit                          (2,212 )          (1,041 )           (1,171 )           112  %
Net impairment losses recognized in
earnings                                         -               863               (863 )          (100 )%
Provision for loan losses                    1,804             3,020             (1,216 )           (40 )%
Total operating expenses              $     62,783       $    59,958      $       2,825               5  %


Year Ended December 31, 2014 as compared to the Year Ended December 31, 2013


Management fees - related party. Management fee-related party decreased $636,000
to $13.6 million for the year ended December 31, 2014. This expense represents
compensation in the form of base management fees and incentive management fees
pursuant to our management agreement as well as fees to the manager of our
structured note portfolio. The changes are described below:
•      Incentive management fees to our Manager, which are based upon the excess

of adjusted operating earnings, as defined in the management agreement,

over a variable base rate, decreased $1.9 million (100%) for the year

ended December 31, 2014. The decrease in this fee was primarily the result

of realized losses on the charge-off of assets in our CRE and Apidos

portfolios. The incentive fee is calculated for each quarter and the

calculation in any quarter is not affected by the results of any other

quarter.

• Base management fees increased by $1.5 million (13%) for the year ended

December 31, 2014. This increase was due to increased stockholders'

equity, a component in the formula by which base management fees are

calculated, primarily as a result of the receipt of $49.5 million of

proceeds from sales of common stock through our Dividend Reinvestment and

       Stock Purchase Plan, or DRIP, from January 1, 2013 through December 31,
       2014 as well as the receipt of $114.5million from the proceeds of our
       April 2013 secondary common stock offering. In addition, we issued

approximately 393,000 shares, 6.7 million shares and 4.8 million shares of

Series A preferred stock, Series B preferred stock, and Series C preferred

       stock respectively, from January 1, 2013 through December 31, 2014, for
       which we received $229.6 million of proceeds.


Equity compensation - related party. Equity compensation - related party
decreased $3.9 million to $6.6 million for the year ended December 31, 2014.
These expenses relate to the amortization of annual grants of restricted common
stock to our non-employee independent directors, and annual and discretionary
grants of restricted stock to employees of Resource America who provide
investment management services to us through our Manager as well as employees
through our recently acquired residential mortgage company subsidiary. The
decrease in expense was primarily the result of vestings of restricted stock as
well as a decrease in our stock price and its impact on our quarterly
remeasurement of the value of unvested stock of non-employees during the year
ended December 31, 2014.
Rental operating expense. Rental operating expense decreased $8.6 million to
$5.4 million for the year ended December 31, 2014. This decrease is primarily
related to the sale in April 2014 of our hotel property and the sale in
September 2013 of a multi-family apartment building owned by us.


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General and administrative expense - Corporate. General and administrative
expense - Corporate increased $3.0 million to $15.3 million for the year ended
December 31, 2014. This increase is primarily the result of the following: an
increase of administrative expenses due to the sale of our hotel property in
April 2014, an increase in headcount and a corresponding increase in payroll
reimbursed to our manager, and an increase of additional professional services
being incurred.
General and administrative expense - PCM. General and administrative expense -
PCM increased $17.4 million to $19.6 million for the year ended December 31,
2014. The increase principally reflects our ownerships of PCM for a full year in
2014 as compared to two months in 2013. Additionally, the business incurred
increased compensation costs to support it's strategic growth plan.
Depreciation and amortization. Depreciation and amortization decreased $1.1
million to $2.7 million for the year ended December 31, 2014. The decrease was
primarily the result of the sale of a multi-family property in September 2013
and the reclassification of a hotel property as of December 31, 2014 and a
multifamily property as of March 31, 2014, to property held-for-sale. At the
time a property is reclassified from an investment in real estate to a property
held-for-sale, we cease depreciation of the asset.
Income tax benefit. Income tax benefit increased $1.2 million to a benefit of
$2.2 million for the year ended December 31, 2014. The increase in income tax
benefit is primarily attributable to accumulated operating losses in our new
residential mortgage origination business for the year and, to a lesser extent
due, to mark downs on the valuations of securities in our trading portfolio.
Provision for loan losses. Provision for loan losses decreased $1.2 million to
$1.8 million for the year ended December 31, 2014. The following table
summarizes the information relating our loan losses for the periods presented
(in thousands):

                                                                                                  Year to
                                                                                                   Year
                                          Years Ended December 31,            Year to Year        Percent
                                            2014              2013           Dollar Change        Change
CRE loan portfolio                    $      (3,758 )     $     2,686      $      (6,444 )          (240 )%
Bank loan portfolio                           4,173               312              3,861           1,238  %
Middle market loan portfolio                     92                22                 70             318  %
Loan receivable related party                 1,297                 -              1,297             100  %

Total provision for loan losses $ 1,804 $ 3,020 $ (1,216 )

           (40 )%


CRE loan portfolio provision - The principal reason for the increase in
recoveries during the year ended December 31, 2014 as compared to the year ended
December 31, 2013 was that we reversed $4.5 million of allowance on a previously
reserved position because the mezzanine loan was paid in full.
Bank loan portfolio provision - The bank loan provision increased by $3.9
million for the year ended December 31, 2014 to $4.2 million. The principal
reason for the increased provision was due to the recognition of losses on
positions that were subsequently sold for credit reasons as well as losses
recognized due to the liquidation of Apidos CLO I. We record all such losses are
recorded as an adjustment to the allowance for loan and lease losses,
effectively increasing the provision for loan and lease losses.
Loan receivable related party provision - The loan receivable - related party
provision increased by $1.3 million for the year ended December 31, 2014 to $1.3
million due to the recognition of $936,000 of losses directly related to the
leases that serve as collateral for this loan and an additional impairment of
$361,000 recognized upon assumption of the lease collateral as payment in full
of the loan on December 31, 2014. The additional impairment of $361,000
represents the difference between the fair value of the net lease assets assumed
and the cost basis of the related-party loan recorded on our books as of
December 31, 2014.







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The following table sets forth information relating to our operating expenses incurred for the periods presented (in thousands):

                                                                                                Year to
                                                                                                 Year
                                          Years Ended December 31,           Year to Year       Percent
                                           2013               2012          Dollar Change       Change
Operating expenses:
Management fees - related party       $     14,220       $     18,512      $     (4,292 )          (23 )%
Equity compensation - related party         10,472              4,636             5,836            126  %
Rental operating expense                    14,062              8,046             6,016             75  %
General and administrative -
Corporate                                   12,304              9,773             2,531             26  %
General and administrative - PCM             2,203                  -             2,203            100  %
Depreciation and amortization                3,855              5,885            (2,030 )          (34 )%
Income tax (benefit) expense                (1,041 )           14,602           (15,643 )         (107 )%
Net impairment losses recognized in
earnings                                       863                180               683            379  %
Provision for loan losses                    3,020             16,818           (13,798 )          (82 )%
Total operating expenses              $     59,958       $     78,452      

$ (18,494 ) (24 )%



Year Ended December 31, 2013 as compared to the Year Ended December 31, 2012
Management fees - related party. Management fees - related party decreased $4.3
million to $14.2 million for the year ended December 31, 2013. These expenses
represent compensation in the form of base management fees and incentive
management fees pursuant to our management agreement as well as fees to the
manager of our structured note portfolio. The changes are described below:
•      Incentive management fees to our Manager, which are based upon the excess

of adjusted operating earnings, as defined in the management agreement,

over a variable base rate, decreased $4.0 million (68%) to $1.9 million

       for the year ended December 31, 2013 from $6.0 million for the year ended
       December 31, 2012. The decrease in this fee was primarily the result of
       realized losses on the charge-off of assets in our CRE and Apidos
       portfolios. The incentive fee is calculated for each quarter and the
       calculation in any quarter is not affected by the results of any other
       quarter.

• Base management fees increased by $3.2 million to $11.6 million for the

year ended December 31, 2013 as compared to $8.3 million for the year

ended December 31, 2012. This increase was due to increased stockholders'

equity, a component in the formula by which base management fees are

calculated, primarily as a result of the receipt of $92.2 million of

proceeds from the sales of common stock through our Dividend Reinvestment

and Stock Purchase Plan, or DRIP, from January 1, 2012 through December

31, 2013 as well as the receipt of $55.6 million from the proceeds from

our September 2012 secondary common stock offering and the receipt of

$114.5 million from the proceeds of our April 2013 secondary common stock

offering. In addition, we had two issuances of preferred stock. First, in

June 2012 we sold $6.0 million 8.5% Series A cumulative preferred stock,

or Series A preferred stock. Then in October 2012, we issued $24.2 million

of 8.25% Series B cumulative preferred stock, or Series B preferred stock.

We also entered into at-the-market sales agreements and sold $9.9 million

of Series A and $35.6 million of Series B preferred stock through December

31, 2013, respectively.

• Incentive management fees related to our structured finance manager

       decreased by $4.1 million (96%) to $158,000 for the year ended
       December 31, 2013 as compared to $4.2 million for the year ended
       December 31, 2012. The decrease in fees is primarily related to the sale

of 12 securities in September 2012, resulting in fewer assets earning

subordinated payments as well as the decrease in the remaining market

value on these securities due to a downturn in the market for these types

of assets during the year ended December 31, 2013 as compared to the year

ended December 31, 2012.



Equity compensation - related party. Equity compensation - related party
increased $5.8 million to $10.5 million for the year ended December 31, 2013.
These expenses relate to the amortization of annual grants of restricted common
stock to our non-employee independent directors, and annual and discretionary
grants of restricted stock to employees of Resource America who provide
investment management services to us through our Manager as well as employees
through our recently acquired residential mortgage company subsidiary. The
increase in expense was primarily the result of the issuance of new grants
during 2013 and

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2012 as well as the increase in our stock price and its impact on our quarterly
remeasurement of the value of unvested stock of non-employees.
Rental operating expense. Rental operating expense increased $6.0 million to
$14.1 million for the year ended December 31, 2013 and is primarily related to
having, in 2013, a full year operations of a hotel property we acquired by
conversion of a loan to equity in September 2012. This hotel is held for sale at
December 31, 2013.
General and administrative expense - Corporate. General and administrative
expense - Corporate increased $2.5 million to $12.3 million for the year ended
December 31, 2013. The increase is primarily the result of the following
combination of factors:
•         an increase of $660,000 related to the reimbursement of office
          overhead, travel costs and hiring costs for loan origination efforts
          based in various locations;

• an increase of $304,000 primarily related to the payment of fees to the

investment committee of our board of directors for their services. We

resumed paying these fees in April 2012. In addition, two additional

          board members were added in March 2013 and June 2013; and


•         an increase of $400,000 in payroll expense due to the hiring of
          additional accounting personnel.


General and administrative expense - PCM. General and administrative expense -
PCA was $2.2 million and is related to the acquisition of PCA, a mortgage
origination business in October 2013.
Depreciation and amortization. Depreciation and amortization decreased $2.0
million to $3.9 million for the year ended December 31, 2013. The decrease was
the result of the reclassification as held-for-sale of one property in the third
quarter of 2013. At the time of the reclassification, we ceased depreciation of
the asset. In addition, amortization on our intangible assets decreased as a
result of the liquidation of one of our related CLOs in January 2013 for which
the majority of expense was recognized in December 2012 and as a result of the
consolidation of a CLO which caused the amortization of the related intangible
asset to be accelerated into the fourth quarter of 2012.
Income tax expense (benefit). Income tax expense (benefit) decreased $15.6
million to a benefit of $1.0 million for the year ended December 31, 2013. The
decrease in income tax expense is primarily attributable to the liquidation of
Apidos CLO VIII and Whitney CLO I beginning in September 2013 and October 2013,
respectively. The liquidation caused acceleration of note discount and deferred
debt amortization as well as accelerated interest expense on subordinated notes.
In addition, we had fewer realized gains on sales in our trading portfolio
during the year ended December 31, 2013 after selling 12 securities in September
2012 and realizing gains then.
Provision for loan losses. Our provision for loan and lease losses decreased
$13.8 million to $3.0 million for the year ended December 31, 2013. The
following table summarizes the information relating our loan losses for the
periods presented (in thousands):

                                                                                            Year to
                                                                                             Year
                                        Years Ended December 31,         Year to Year       Percent
                                           2013            2012         Dollar Change       Change
CRE loan portfolio                    $      2,686     $    5,225      $     (2,539 )          (49 )%
Bank loan portfolio                            312         11,593          

(11,281 ) (97 )% Total provision for loan losses $ 2,998 $ 16,818 $ (13,820 ) (82 )%



CRE Loan Portfolio - The CRE loan provision decreased $2.5 million for the year
ended December 31, 2013 to $2.7 million. The principal reason for the decrease
was related to three positions for which we took provisions during the year
ended December 31, 2012. The positions had a total par value of $41.8 million
and were written down to $37.3 million for a weighted average write down
percentage of 10.9% of par. During the year ended December 31, 2013, we only
took a provision on one previously impaired loan due to further credit
deterioration of the borrower.
Bank Loan Portfolio - The bank loan provision decreased by $11.3 million for the
year ended December 31, 2013 to $312,000 as compared to $11.6 million for the
year ended December 31, 2012. The principal reason for the decrease for the year
ended December 31, 2013 was due to improved credit conditions as well as the
sales and payoffs of five loans in the general reserve and two impaired loans
that were sold and written off during the year ended December 31, 2013. All five
loans had been reserved in prior periods.



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Other Revenue (Expense) The following table sets forth information relating to our other income (expense) incurred for the periods presented (in thousands):

                                                                                                 Year to
                                                                                                  Year
                                          Years Ended December 31,           Year to Year        Percent
                                           2014              2013           Dollar Change        Change
Other Revenue (Expense):
Equity in earnings of
unconsolidated subsidiaries           $      4,767       $       949      $       3,818             402  %
Net realized gain on sales of
investment securities
available-for-sale and loans                15,283             9,637              5,646              59  %
Net realized and unrealized (loss)
gain on investment securities,
trading                                     (2,818 )            (324 )           (2,494 )           770  %
Unrealized gain (loss) and net
interest income on linked
transactions, net                            7,850            (3,841 )           11,691            (304 )%
Loss on reissuance of debt                  (4,442 )               -             (4,442 )           100  %
Gain on sale of real estate                  6,127            16,616            (10,489 )           (63 )%
Other income (expense)                      (1,262 )             391             (1,653 )          (423 )%
Total other revenue                   $     25,505       $    23,428      $       2,077               9  %


Year Ended December 31, 2014 as compared to Year Ended December 31, 2013
Equity in earnings of unconsolidated subsidiaries. Equity in earnings of
unconsolidated subsidiaries increased $3.8 million to $4.8 million for the year
ended December 31, 2014. This increase in earnings was primarily related to $3.5
million of gains on the sale of properties in which we owned equity interests in
a real estate joint venture, and we also recognized $2.0 million of income
related to our investment in CVC Global Opportunities Fund, L.P. as compared to
$1.2 million for 2013.
Net realized gain on sales of investment securities available-for-sale and
loans. Net realized gains on investment securities available-for-sale and loans
increased $5.6 million to $15.3 million for for the year ended December 31,
2014. The current year balance is comprised of gains of $2.9 million related to
the liquidation of Apidos CLO I; gains of $4.2 million recognized on the sale of
available-for-sale security positions in our newly acquired investment security
portfolio held by our consolidated subsidiary RCM Global, LLC; net gains on
sales of loans and servicing income at our residential mortgage loan originator
of $9.3 million and net gains of $1.3 million on our foreign exchange currency
contracts. These gains are partially offset by a realized loss on a TBA
(to-be-announced security) hedge contract on a portfolio of jumbo loans held in
one of our qualified REIT subsidiaries, realized losses on sales of CMBS
securities during the year of $1.6 million and realized losses on our
investments in European structured securities of $2.2 million.
Net realized and unrealized (loss) gain on investment securities, trading. Net
realized and unrealized (loss) gain on investment securities, trading decreased
$2.5 million to a loss of $2.8 million during the year ended December 31, 2014.
The current year balance is comprised of a net loss of $3.4 million in our
trading portfolio offset by a net gain of $600,000 from Pelium Capital, our
consolidated subsidiary that invests in structured securities classified as
trading securities.
Unrealized gain (loss) and net interest income on linked transactions, net.
Unrealized gain (loss) and net interest income on linked transactions, net,
increased $11.7 million to a loss of $7.9 million for the year ended
December 31, 2014. The amounts are related to our CMBS securities that are
purchased with repurchase agreements with the same counterparty from whom the
securities were purchased. These transactions are entered into contemporaneously
or in contemplation of each other and are presumed not to meet sale accounting
criteria. We account for these transactions on a net basis and record a forward
purchase commitment to purchase securities (each, a "linked transaction") at
fair value.
Loss on reissuance of debt. Loss on reissuance of debt was $4.4 million for the
year ended December 31, 2014. The transactions that give rise to the recognition
of a loss on the reissuance of debt resulted from the reissuance of previously
repurchased senior and junior notes in our consolidated variable interest
entities in the open market. These senior and junior notes were originally
repurchased at discounts to par and represent an opportunity to provide us
strategic financing at beneficial rates upon reissuance. At the date these notes
were repurchased, a gain, representative of the difference between the
repurchase price and the par value of the note, was recognized. Because these
same notes were reissued during the year ended December 31, 2014, at a price
less than par, an unrealized loss equal to the difference between the reissued
price and the par value of the note was recognized in current earnings.

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Gain on sale of real estate. The gain on the sale of real estate decreased $10.5
million to $6.1 million and is related to the sale of our remaining three
properties for a combined gain of $6.1 million as compared to a gain of $16.6
million from the sale of a multi-family apartment building in 2013.
Other income (expense). Other income (expense) decreased $1.7 million to a loss
of $1.3 million primarily related to the consolidation of LCF as a result of our
additional investment in and acquisition of a controlling financial interest in
the company during the first quarter of 2014.
The following table sets forth information relating to our other income
(expense) incurred for the periods presented (in thousands):

                                                                                               Year to
                                                                                                Year
                                          Years Ended December 31,          Year to Year       Percent
                                           2013              2012          Dollar Change       Change
Other Revenue (Expense):
Equity in earnings (losses) of
unconsolidated subsidiaries           $        949       $    (2,709 )    $      3,658           (135 )%
Net realized gain on sales of
investment securities
available-for-sale and loans                 9,637             4,106             5,531            135  %
Net realized and unrealized (loss)
gain on investment securities,
trading                                       (324 )          12,435           (12,759 )         (103 )%
Unrealized (loss) gain and net
interest income on linked
transactions, net                           (3,841 )             728            (4,569 )         (628 )%
Gain on extinguishment of debt                   -            16,699           (16,699 )         (100 )%
Gain on sale of real estate                 16,616                 -            16,616            100  %
Other income                                   391             2,498            (2,107 )          (84 )%
Total other revenue                   $     23,428       $    33,757      $ 

(10,329 ) (31 )%



Year Ended December 31, 2013 as compared to Year Ended December 31, 2012
Equity in earnings (losses) of unconsolidated subsidiaries. Equity in earnings
(losses) of unconsolidated subsidiaries increased $3.7 million for the year
ended December 31, 2013. This increase in earnings was primarily related to our
investment in LCC for which we realized a loss of $183,000 for the year ended
December 31, 2013 as compared to a loss of $3.3 million for the year ended
December 31, 2012. In addition, we recognized $1.2 million of income related to
our investment in CVC Global Credit Opportunities Fund, L.P. There was no such
investment during the year ended December 31, 2012.

Net realized gains on investment securities available-for-sale and loans. Net
realized gains on investment securities available-for-sale and loans increased
$5.5 million to $9.6 million for the year ended December 31, 2013. The increase
for the year ended December 31, 2013 is primarily due to gains of $5.0 million
as a result of the liquidation of Apidos CLO VIII in October 2013 as well as
gains of $2.2 million on the sales of residential mortgage loans, a business we
acquired in October 2013.
Net realized and unrealized gain on investment securities, trading. Net realized
and unrealized gain on investment securities, trading decreased $12.8 million to
a loss of $324,000 during the year ended December 31, 2013 primarily as a result
of a sale of nine securities in 2013 and 12 securities in September 2012, which
has significantly reduced the balance of investments held in trading securities.
The remaining portfolio has decreased substantially as we held eight positions
and 13 positions at December 31, 2013 and December 31, 2012, respectively, and
as a result, there is less opportunity to realize gains. In addition, marks
decreased at December 31, 2013 as a result of a downturn in the market for these
types of securities.
Unrealized (loss) gain and net interest income on linked transactions, net.
Unrealized (loss) gain and net interest income on linked transactions, net
increased $4.6 million to a loss of $3.8 million. The increase in expense for
the year ended December 31, 2013 resulted from the change in market value of our
linked transactions with longer duration to maturity at December 31, 2013 as
compared to December 31, 2012.
Gain on sale of real estate. Gain on sale of real estate was $16.6 million for
the year ended December 31, 2013 as a result of the sale of a multi-family
apartment building. During the three months ended June 30, 2013, we entered into
a listing agreement for this property. The sale settled on September 30, 2013.

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Gain on extinguishment of debt. There was no gain on the extinguishment of debt
during the year ended December 31, 2013 as compared to a gain of $16.7 million
recognized during the year ended December 31, 2012 resulting from the repurchase
of a portion of the debt issued by RREF CDO 2006-1, RREF CDO 2007-1 and Apidos
CDO I at discounts during the period. The notes, issued at par, were bought back
as an investment by us at a weighted average price of 88.7%.
Other income. Other income decreased $2.1 million to $391,000 as a result of
recognizing a gain on consolidation of $2.5 million during the year ended
December 31, 2012 related to the consolidation of Whitney CLO I as a result of
our acquisition of a controlling financial interest where the net fair value of
the assets acquired exceeded our purchase price.
Summary.
Our total assets at December 31, 2014 were $2.7 billion as compared to $2.2
billion at December 31, 2013. The increase in total assets was principally due
to continued expansion of our loan portfolio, slightly offset by sale of our
investments in real estate and liquidation of Apidos CLO I and Moselle CLO.
Investment Portfolio
The table below summarizes the amortized cost and net carrying amount of RSO's
investment portfolio as of December 31, 2014 and December 31, 2013 classified by
interest rate and by asset type (in thousands, except percentages):
                                       Amortized      Net Carrying    Percent of       Weighted
                                         cost            Amount        portfolio    average coupon
      As of December 31, 2014
Loans Held for Investment:
Commercial real estate loans (1):
Whole loans                          $ 1,263,592     $  1,259,834         52.26 %       5.33%
B notes                                   16,072           16,017          0.66 %       8.68%
Mezzanine loans                           67,366           67,136          2.78 %       7.44%
Bank loans                               330,648          330,078         13.69 %       3.70%
Middle market loans                      250,113          250,113         10.38 %       8.35%
Residential mortgage loans                 2,802            2,802          0.12 %       4.57%
Loans receivable-related party             1,277            1,277          0.05 %       4.62%
                                       1,931,870        1,927,257         79.94 %
Loans held for sale (2):
Bank loans                                   282              282          0.01 %       3.76%
Residential mortgage loans               111,454          111,454          4.62 %       4.04%
                                         111,736          111,736          4.63 %
Investments in Available-for-Sale
Securities:
 CMBS-private placement                  168,669          170,405          7.07 %       4.78%
 CMBS-linked transactions                 14,900           15,367          0.64 %       5.44%
 RMBS                                     29,814           30,751          1.28 %       3.17%
 ABS                                      55,617           72,157          2.99 %      N/A (3)
Corporate Bonds                            2,415            2,407          0.10 %       4.88%
                                         271,415          291,087         12.08 %
Investment Securities-Trading:
Structured notes                          23,319           20,786          0.86 %      N/A (3)
RMBS                                       1,896                -             - %      N/A (3)
                                          25,215           20,786          0.86 %
Other (non-interest bearing):
Property available for sale                  180              180          0.01 %        N/A
Investment in unconsolidated                                               2.48 %
entities                                  59,827           59,827                        N/A
                                          60,007           60,007          2.49 %
Total Investment Portfolio           $ 2,400,243     $  2,410,873        100.00 %



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                                       Amortized      Net Carrying    Percent of       Weighted
                                         cost            Amount        portfolio    average coupon
      As of December 31, 2013
Loans Held for Investment:
Commercial real estate loans (1):
Whole loans                          $   745,789     $    746,440         42.01 %       5.47%
B notes                                   16,205           16,031          0.90 %       8.68%
Mezzanine loans                           64,317           50,611          2.85 %       6.70%
Bank loans                               515,393          512,002         28.82 %       3.85%
Middle market loans                       39,780           39,780          2.24 %       8.37%
Residential mortgage loans                 1,849            1,849          0.10 %       4.19%
Loans receivable-related party             6,966            6,966          0.39 %       8.35%
                                       1,390,299        1,373,679         77.31 %
Loans held for sale (2):
Bank loans                                 2,377            2,377          0.13 %       6.43%
Middle market loans                        4,473            4,473          0.25 %       7.75%
Residential mortgage loans                15,066           15,066          0.85 %       4.19%
                                          21,916           21,916          1.23 %
Investments in Available-for-Sale
Securities:
CMBS-private placement                   185,178          180,718         10.17 %       4.89%
CMBS-linked transactions                  35,736           30,066          1.69 %       3.93%
ABS                                       25,406           26,656          1.50 %      N/A (3)
Corporate Bonds                            2,517            2,463          0.14 %       8.05%
                                         248,837          239,903         13.50 %
Investment Securities-Trading:
Structured notes                           8,057           11,107          0.63 %      N/A (3)
RMBS                                       1,919              451          0.03 %      N/A (3)
                                           9,976           11,558          0.66 %
Other (non-interest bearing):
Property available for sale               25,346           25,346          1.43 %         -%
Investment in unconsolidated
entities                                  29,778           29,778          1.68 %         -%
Investment in Real Estate                 74,438           74,438          4.19 %         -%
                                         129,562          129,562          7.30 %
Total Investment Portfolio           $ 1,800,590     $  1,776,618        100.00 %




(1) Net carrying amount includes an allowance for loan losses of $4.0 million at

December 31, 2014, allocated as follows: whole loans $3.8 million, B notes

$55,000 and mezzanine loans $231,000. Net carrying amount includes an

allowance for loan losses of $10.4 million at December 31, 2013, allocated as

follows: whole loans $9.7 million, B notes $174,000 and mezzanine loans

$559,000

(2) Loans held for sale are carried at the lower of cost or fair market value.

Amortized cost is equal to fair value.

(3) There is no stated rate associated with these securities.



Commercial Mortgage-Backed Securities-Private Placement. In the aggregate, we
purchased our CMBS-private placement portfolio at a net discount. At
December 31, 2014 and 2013, the remaining discount to be accreted into income
over the remaining lives of the securities was $3.6 million and $7.2 million,
respectively. At December 31, 2014 and 2013, the remaining premium to be
amortized into income over the remaining lives of the securities was $619,000
and $645,000, respectively. These securities are classified as
available-for-sale and, as a result, are carried at their fair value.
During the years ended December 31, 2014, 2013, and 2012 we recognized
other-than-temporary impairment losses of $0, $328,000 and $42,000,
respectively, on positions that supported our CMBS investments. Securities
classified as available-for-sale have decreased on a net basis as of
December 31, 2014 as compared to December 31, 2013 primarily due to paydowns in
2014. We perform an on-going review of third-party reports and updated financial
data on the underlying property financial information to analyze current and
projected loan performance. Rating agency downgrades are considered with respect
to our income approach when determining other-than-temporary impairment and,
when inputs are stressed, the resulting projected cash flows reflect a full
recovery of principal.

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The following table summarizes our CMBS-private placement at fair value (in thousands, except percentages):

                          Fair Value at                                                                                  Fair Value at
                           December 31,                                                            MTM Change on Same    December 31,
                               2013         Net Purchases     Upgrades/Downgrades     Paydowns          Ratings              2014
Moody's Ratings Category:
Aaa                       $     49,837     $       7,575     $            (2,328 )   $ (26,706 )   $       2,257        $      30,635
Aa1 through Aa3                  5,356                 -                   3,223        (4,554 )           1,648                5,673
A1 through A3                   14,611                 -                    (723 )        (677 )          (2,270 )             10,941
Baa1 through Baa3               38,711            (8,689 )                (2,500 )      (1,537 )          (2,537 )             23,448
Ba1 through Ba3                 13,738            10,889                  (4,721 )           -            (1,535 )             18,371
B1 through B3                   13,381             8,936                   8,573             -             2,599               33,489
Caa1 through Caa3               14,744             3,678                  (4,631 )           -             1,792               15,583
Ca through C                     8,614            (3,678 )                   779          (213 )           6,176               11,678
Non-Rated                       21,726               838                   2,328          (803 )          (3,502 )             20,587
  Total                   $    180,718     $      19,549     $                 -     $ (34,490 )   $       4,628        $     170,405

S&P Ratings Category:
AAA                       $     53,239     $         754     $                 -     $ (29,109 )   $      (2,781 )      $      22,103
A+ through A-                    7,999                 -                       -             -              (137 )              7,862
BBB+ through BBB-               14,303                 -                   3,485          (803 )             934               17,919
BB+ through BB-                 32,795             2,491                   2,458             -            (1,358 )             36,386
B+ through B-                   33,162             3,850                  (5,943 )           -             1,639               32,708
CCC+ through CCC-               12,176             9,989                  (1,161 )           -             3,297               24,301
D                                1,980                 -                   1,161          (213 )           3,145                6,073
Non-Rated                       25,064             2,465                       -        (4,365 )            (111 )             23,053
  Total                   $    180,718     $      19,549     $                 -     $ (34,490 )   $       4,628        $     170,405

Investment Securities, Trading. The following table summarizes our structured notes and RMBS securities, which are classified as investment securities, trading, and are carried at fair value (in thousands):

                          Amortized      Unrealized      Unrealized       Fair
                             Cost           Gains          Losses         Value
As of December 31, 2014:
Structured notes         $    22,876    $      1,098    $    (3,188 )   $ 20,786
RMBS                           1,896               -         (1,896 )          -
Total                    $    24,772    $      1,098    $    (5,084 )   $ 20,786

As of December 31, 2013:
Structured notes         $     8,057    $      4,050    $    (1,000 )   $ 11,107
RMBS                           1,919               -         (1,468 )        451
Total                    $     9,976    $      4,050    $    (2,468 )   $ 11,558

We purchased 38 securities and sold nine securities during the year ended December 31, 2014, for a net realized gain of $3.0 million. We held 37 and eight investment securities, trading as of December 31, 2014 and 2013, respectively.


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Real Estate Loans. The following table is a summary of the loans in our
commercial real estate loan portfolio at the dates indicated (in thousands):
                                                                Contracted      Maturity Dates
Description                  Quantity      Amortized Cost     Interest Rates          (3)
As of December 31, 2014:
                                                                LIBOR plus
Whole loans, floating           73       $      1,263,592        1.75% to         May 2015 to
rate (1) (4) (6)                                                LIBOR plus       February 2019
                                                                  15.00%
B notes, fixed rate             1                  16,072          8.68%          April 2016
Mezzanine loans, floating       1                  12,558       LIBOR plus        April 2016
rate                                                              15.32%
Mezzanine loans, fixed          3                  54,808     0.50% to 18.71%   January 2016 to
rate (7)                                                                        September 2019
Total (2)                       78       $      1,347,030

As of December 31, 2013:
                                                                LIBOR plus
Whole loans, floating           51       $        745,789        2.68% to        March 2014 to
rate (1) (5) (6)                                                LIBOR plus       February 2019
                                                                  12.14%
B notes, fixed rate             1                  16,205          8.68%          April 2016
Mezzanine loans, floating       1                  12,455       LIBOR plus        April 2016
rate                                                              15.32%
Mezzanine loans, fixed                                                          September 2014
rate (7)                        3                  51,862     0.50% to 18.72%    to September
                                                                                     2019
Total (2)                       56       $        826,311



(1) Whole loans had $105.1 million and $13.7 million in unfunded loan commitments

as of December 31, 2014 and 2013, respectively. These unfunded commitments

are advanced as the borrowers formally request additional funding as

permitted under the loan agreement and any necessary approvals have been

obtained.

(2) The total does not include an allowance for loan loss of $4.0 million and

$10.4 million as of December 31, 2014 and 2013, respectively.

(3) Maturity dates do not include possible extension options that may be

available to the borrowers.

(4) Floating rate whole loans include a combined $12.0 million mezzanine

component of two whole loans, which have a fixed rate of 12.0%, and a $4.2

million mezzanine component of two whole loans that have a fixed rate of 15%

at December 31, 2014.

(5) Floating rate whole loans include a combined $11.4 million mezzanine

component of two whole loans, which have a fixed rate of 12.0% as of

December 31, 2013.

(6) Floating rate whole loans include a $799,000 junior mezzanine tranche of a

whole loan that has a fixed rate of 10.0% as of December 31, 2014 and

December 31, 2013.

(7) Fixed rate mezzanine loans include a mezzanine loan that was modified into

two tranches, which both currently pay interest at 0.50%. In addition, the

subordinate tranche accrues interest at LIBOR plus 18.50% which is deferred

until maturity.



Bank Loans. At December 31, 2014, our consolidated securitizations, Apidos CDO
I, Apidos CDO III and Apidos Cinco CDO held a total of $323.0 million of bank
loans at fair value.  The bank loans held by the securitizations secure the CDO
notes they issued and are not available to satisfy the claims of our
creditors. The aggregate fair value of bank loans held decreased by $195.0
million over their holdings at December 31, 2013. This decrease was primarily
due to the liquidation of Apidos CDO I during the quarter and year ended
December 31, 2014.

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The following table summarizes our bank loan investments (in thousands):

                                                December 31, 2014                         December 31, 2013
                                       Amortized cost       Fair Value (1)       Amortized cost       Fair Value (1)
Moody's ratings category:
Baa1 through Baa3                    $         16,205     $         16,056     $         10,885     $         10,936
Ba1 through Ba3                               173,118              169,207              263,589              265,945
B1 through B3                                 129,863              126,774              205,243              205,490
Caa1 through Caa3                               5,234                4,915               16,360               14,799
Ca                                                  -                    -                  667                  332
No rating provided                              6,510                6,256               21,026               20,600
Total                                $        330,930     $        323,208     $        517,770     $        518,102

S&P ratings category:
BBB+ through BBB-                    $         48,582     $         48,110     $         46,201     $         46,562
BB+ through BB-                               139,544              134,434              222,270              222,432
B+ through B-                                 132,732              131,105              214,505              216,680
CCC+ through CCC-                               3,105                3,096               11,622               11,372
CC+ through CC-                                     -                    -                    -                    -
C+ through C-                                       -                    -                    -                    -
D                                                 459                  208                2,251                  723
No rating provided                              6,508                6,255               20,921               20,333
Total                                $        330,930     $        323,208     $        517,770     $        518,102

Weighted average rating factor                  1,786                                     1,917



(1)   The bank loan portfolio's fair value is determined using dealer quotes.
Middle Market Loans. At December 31, 2014, Northport our middle market lending
platform, held a total of $247.8 million of middle market loans at fair
value. The middle market loans held by Northport TRS, LLC serve to collateralize
its senior secured revolving credit agreement. The aggregate fair value of bank
loans held increased by $202.9 million over their holdings at December 31, 2013.
This increase was primarily due to increased originations and purchase of
production in our middle market lending platform.
The following table summarizes our middle market loans (in thousands):
                                                December 31, 2014                        December 31, 2013
                                       Amortized cost       Fair Value (1)       Amortized cost      Fair Value (1)
Moody's ratings category:
Baa1 through Baa3                    $              -     $              -     $              -     $             -
Ba1 through Ba3                                     -                    -                    -                   -
B1 through B3                                       -                    -               11,751              12,027
Caa1 through Caa3                              62,053               60,126                7,863               7,903
Ca                                                  -                    -                    -                   -
No rating provided                            188,060              187,655               24,639              24,928
Total                                $        250,113     $        247,781     $         44,253     $        44,858

S&P ratings category:
BBB+ through BBB-                    $              -     $              -     $              -     $             -
BB+ through BB-                                     -                    -                1,976               2,010
B+ through B-                                   4,959                3,798               14,202              14,455
CCC+ through CCC-                              49,665               48,988                3,437               3,466
CC+ through CC-                                     -                    -                    -                   -
C+ through C-                                       -                    -                    -                   -
D                                                   -                    -                    -                   -
No rating provided                            195,489              194,995               24,638              24,927
Total                                $        250,113     $        247,781     $         44,253     $        44,858

Weighted average rating factor                  6,500                                     1,707






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(1)   The middle market loan portfolio's fair value is determined using dealer
quotes.
The following table provides information as to the lien position and status of
our bank and middle market loans, which we consolidate (in thousands):
                                                                      Amortized Cost
                                                                                                   Northport LLC
                              Apidos I       Apidos III       Apidos Cinco       Whitney CLO I          (1)           Total
    As of December 31, 2014:
Loans held for investment:
First lien loans             $     153     $     80,196     $      245,377     $             -     $   149,287     $ 475,013
Second lien loans                    -                -              3,572                   -         100,826       104,398
Third lien loans                     -                -                  -                   -               -             -
Defaulted first lien loans           -                -                  -                   -               -             -
Defaulted second lien loans          -              971                379                   -               -         1,350
Total                              153           81,167            249,328                   -         250,113       580,761
First lien loans held for
sale at fair value                   -                -                282                   -               -           282
Total                        $     153     $     81,167     $      249,610     $             -     $   250,113     $ 581,043

As of December 31, 2013:
Loans held for investment:
First lien loans             $  79,483     $    126,890     $      296,368     $            72     $    31,974     $ 534,787
Second lien loans                    -                -              1,139                   -           7,805         8,944
Third lien loans                 3,020            2,475              2,463                   -               -         7,958
Defaulted first lien loans       1,206            1,124                486                   -               -         2,816
Defaulted second lien loans        334              334                  -                   -               -           668
Total                           84,043          130,823            300,456                  72          39,779       555,173
First lien loans held for
sale at fair value                 537              651              1,189                   -           4,473         6,850
Total                        $  84,580     $    131,474     $      301,645     $            72     $    44,252     $ 562,023




(1) In September 2014 Resource TRS LLC and RCC Commercial contributed their

interests in certain directly originated and syndicated bank loans to form

Northport LLC. At December 31, 2013 Resource TRS LLC and RCC Commercial held

    a total of $34.0 million and $10.3 million of bank loans, respectively at
    amortized cost.


Asset-backed securities. At December 31, 2014, we held a total of $11.8 million
of ABS at fair value through Apidos CDO III and Apidos Cinco CDO, all of which
secure the debt issued by these entities. At December 31, 2013, we held a total
of $26.7 million fair value of ABS through Apidos CDO I, Apidos CDO III and
Apidos Cinco CDO, all of which secured the debt issued by these entities.  The
decrease in total ABS during 2014 was substantially due to the liquidation of
Apidos CDO I.

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The following table summarizes our ABS at fair value (in thousands):

                                              December 31, 2014             

December 31, 2013

                                       Amortized Cost       Fair Value       Amortized Cost       Fair Value
Moody's ratings category:
Aaa                                  $          6,084     $      6,638     $          4,650     $      5,058
Aa1 through Aa3                                 3,748            4,168                8,097            7,469
A1 through A3                                       -                -                1,263            3,801
Baa1 through Baa3                                 243              232                2,737            2,736
Ba1 through Ba3                                   774              727                8,021            6,981
B1 through B3                                       -                -                  638              611
Caa1 through Caa3                                   -                -                    -                -
No rating provided                                  -                -                    -                -
Total                                $         10,849     $     11,765     $         25,406     $     26,656

S&P ratings category:
AAA                                  $          5,169     $      5,640     $              -     $          -
AA+ through AA-                                 3,748            4,168                8,030            7,259
A+ through A-                                       -                -                5,107            8,094
BBB+ through BBB-                                   -                -                    -                -
BB+ through BB-                                   774              727                4,868            4,019
B+ through B-                                     243              232                1,577            1,578
CCC+ through CCC-                                   -                -                    -                -
No rating provided                                915              998                5,824            5,706
Total                                $         10,849     $     11,765     $         25,406     $     26,656

Weighted average rating factor                     99                                   416


Corporate bonds. At December 31, 2014, our consolidated securitization, Apidos
Cinco CDO, held a total of $2.4 million of corporate bonds at fair value, which
secure the debt issued by this entity. These investments are held at fair value
with any unrealized gain or loss reported in the stockholder's equity section of
the balance sheet. The aggregate fair value of corporate bonds held decreased by
$56,000 over those held at December 31, 2013. This decrease was primarily due to
the sale of two bonds in Apidos Cinco CDO, partially offset by a purchase in
Apidos Cinco CDO.

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The following table summarizes our corporate bonds at fair value (in thousands):

                                             December 31, 2014              

December 31, 2013

                                      Amortized Cost       Fair Value      Amortized Cost       Fair Value
Moody's ratings category:
Aaa                                  $          -        $          -     $          -        $          -
Aa1 through Aa3                                 -                   -                -                   -
A1 through A3                                   -                   -                -                   -
Baa1 through Baa3                               -                   -                -                   -
Ba1 through Ba3                                 -                   -                -                   -
B1 through B3                                   -                   -                -                   -
Caa1 through Caa3                             957                 960            1,582               1,598
Ca                                          1,458               1,447                -                   -
No rating provided                              -                   -              935                 865
Total                                $      2,415        $      2,407     $      2,517        $      2,463

S&P ratings category:
AAA                                  $          -        $          -     $          -        $          -
AA+ through AA-                                 -                   -                -                   -
A+ through A-                                   -                   -                -                   -
BBB+ through BBB-                               -                   -                -                   -
BB+ through BB-                                 -                   -                -                   -
B+ through B-                                 868                 870              869                 873
CCC+ through CCC-                           1,547               1,537            1,648               1,590
No rating provided                              -                   -                -                   -
Total                                $      2,415        $      2,407     $      2,517        $      2,463
Weighted average rating factor              4,770                           

6,500



Investments in Unconsolidated Entities
The following table shows our investments in unconsolidated entities as of 2014
and 2013 and equity in net earnings (losses) of unconsolidated subsidiaries for
the years ended December 31, 2014 and 2013 (in thousands):
                                               Balance as of                      Years Ended December 31,
                                      December 31,       December 31,
                      Ownership %         2014               2013             2014          2013          2012
Varde Investment
Partners, L.P            7.5%       $          654     $          674     $      (20 )   $    148     $     (135 )
RRE VIP Borrower, LLC
(1)                                              -                  -          3,473          277            682
Investment in LCC
Preferred Stock          28.4%              39,416             41,016         (1,555 )       (183 )       (3,256 )
Investment in CVC
Global Credit
Opportunities Fund       27.7%              18,209             16,177          2,032        1,177              -
Investment in
Life Care Funding (2)    50.2%                   -              1,530            (75 )       (470 )            -
Investment in School
Lane House (1)                                   -                975            912            -              -
                                            58,279             60,372          4,767          949         (2,709 )
Investment in RCT I
and II (3)                3%                 1,548              1,548          2,387        2,401          2,494
Investment in
Preferred Equity (1)
(4)                                              -              7,149            410          992            705
                                    $       59,827     $       69,069     $    7,564     $  4,342     $      490




(1) Investment in School Lane House, Investment in RRE VIP Borrower and the

Investments in preferred equity were sold as of December 31, 2014.

(2) We began consolidating this investment during the first quarter of 2014.

Ownership % represents ownership after consolidation.

(3) For the years ended December 31, 2014, 2013, and 2012 these amounts are

recorded in interest expense on tour consolidated statements of income.

(4) For the years ended December 31, 2014, 2013 and 2012 these amounts are

    recorded in interest income on loans on our consolidated statements of
    income.




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In January 2013, Long-Term Care Conversion, Inc., a wholly-owned subsidiary of
ours, or LTCC, invested $2.0 million into Life Care Funding, LLC, a
joint-venture established for the purpose of originating and acquiring life
settlement contracts in which we own 50.2%, or LCF. In February 2014, we
invested an additional $1.4 million, which resulted in the consolidation of LCF
during the first quarter of 2014.
Financing Receivables
The following tables show the allowance for loan losses and recorded investments
in loans for the years indicated (in thousands):
                                 Commercial Real                        

Middle Market Residential Loans Receivable-Related

                                  Estate Loans       Bank Loans             Loans        Mortgage Loans               Party                 Total
As of December 31, 2014:
Allowance for Loan Losses:
Allowance for losses at January
1, 2014                         $      10,416       $    3,391          $         -     $             -     $                 -         $    13,807
Provision (recovery) for loan
loss                                   (3,758 )          4,173                   92                   -                   1,297               1,804
Loans charged-off                      (2,615 )         (6,994 )                (92 )                 -                  (1,297 )           (10,998 )
Allowance for losses at
December 31, 2014               $       4,043       $      570          $         -     $             -     $                 -         $     4,613
Ending balance: (1)
Individually evaluated for
impairment                      $           -       $      570          $         -     $             -     $                 -         $       570
Collectively evaluated for
impairment                      $       4,043       $        -          $         -     $             -     $                 -         $     4,043
Loans acquired with
deteriorated credit quality     $           -       $        -          $         -     $             -     $                 -         $         -
Loans:
Ending balance:
Individually evaluated for
impairment                      $     166,180       $    1,350          $   250,113     $             -     $             1,277         $   418,920
Collectively evaluated for
impairment                      $   1,180,850       $  329,580          $         -     $         2,802     $                 -         $ 1,513,232
Loans acquired with
deteriorated credit quality     $           -       $        -          $         -     $             -     $                 -         $         -
As of December 31, 2013:
Allowance for Loan Losses:
Allowance for losses at January
1, 2013                         $       7,986       $    9,705          $         -     $             -     $                 -         $    17,691
Provision for loan loss                 2,686              312                   22                   -                       -               3,020
Loans charged-off                        (256 )         (6,626 )                (22 )                 -                       -              (6,904 )
Allowance for losses at
December 31, 2013               $      10,416       $    3,391          $         -     $             -     $                 -         $    13,807
Ending balance:
Individually evaluated for
impairment                      $       4,572       $    2,621          $         -     $             -     $                 -         $     7,193
Collectively evaluated for
impairment                      $       5,844       $      770          $         -     $             -     $                 -         $     6,614
Loans acquired with
deteriorated credit quality     $           -       $        -          $         -     $             -     $                 -         $         -
Loans:
Ending balance: (1)
Individually evaluated for
impairment                      $     194,403       $    3,554          $         -     $             -     $             6,966         $   204,923
Collectively evaluated for
impairment                      $     631,908       $  558,469   (2  )  $         -     $        16,915     $                 -         $ 1,207,292
Loans acquired with
deteriorated credit quality     $           -       $        -          $         -     $             -     $                 -         $         -




(1) Loan balances as of December 31, 2014 and 2013 include loans held for sale.

(2) Contains $44.3 million of middle market loans at December 31, 2013.



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Credit quality indicators
Bank Loans
We use a risk grading matrix to assign grades to bank loans. Loans are graded at
inception and updates to assigned grades are made continually as new information
is received. Loans are graded on a scale of 1-5 with 1 representing our highest
rating and 5 representing its lowest rating. We also designate loans that are
sold after the period end as held for sale at the lower of their fair market
value or cost, net of any allowances and costs associated with the loan
sales. We consider factors such as performance of the underlying company,
liquidity, collectability of interest, enterprise valuation, default
probability, ratings from rating agencies and industry dynamics in grading our
bank loans.
Credit risk profiles of bank and middle market loans were as follows (in
thousands):
                   Rating 1      Rating 2      Rating 3       Rating 4       Rating 5       Held for Sale        Total
As of December
31, 2014:
Bank loans        $ 291,214     $  32,660     $   5,424     $        -     $    1,350     $           282     $ 330,930

As of December
31, 2013:
Bank loans        $ 448,224     $  42,476     $  18,806     $    2,333     $    3,554     $         2,377     $ 517,770


All of our bank loans were performing with the exception of two loans with an
amortized cost of $1.4 million as of December 31, 2014, one of which defaulted
as of March 31, 2014 and the other defaulted as of September 30, 2014. As of
December 31, 2013, all of our bank loans were performing with the exception of
three loans with an amortized cost of $3.6 million, one of which defaulted in
2012, one of which defaulted as of March 31, 2013 and one of which defaulted as
of June 30, 2013.
Middle Market Loans
We use a risk grading matrix to assign grades to middle market loans. At
inception, all middle market loans are graded at a 2 and updates to assigned
grades are made continually as new information is received. Loans are graded on
a scale of 1-5 with 1 representing our highest rating and 5 representing its
lowest rating. A loan with a rating of a 2 is considered performing within
expectations. We consider metrics such as performance of the underlying company,
liquidity, collectability of interest and principal payments, enterprise
valuation, default probability, and industry dynamics in grading its middle
market loans.
Credit risk profiles of bank and middle market loans were as follows (in
thousands):
                    Rating 1       Rating 2       Rating 3       Rating 4         Rating 5        Held for Sale        Total
As of December
31, 2014:
Middle market
loans             $         -     $ 240,245     $    9,868     $         -     $          -     $             -     $ 250,113

As of December
31, 2013:
Middle market
loans             $         -     $  39,780     $        -     $         -     $          -     $         4,473     $  44,253


All of our middle market loans were performing as of December 31, 2014 and 2013.
Commercial Real Estate Loans
We use a risk grading matrix to assign grades to commercial real estate loans.
Loans are graded at inception and updates to assigned grades are made
continually as new information is received.  Loans are graded on a scale of 1-4
with 1 representing our highest rating and 4 representing our lowest rating.  We
value loans that are sold after the period end at the lower of our fair market
value or cost, net of any allowances and costs associated with the loan sales.
In addition to the underlying performance of the loan collateral, we consider
such things as the strength of underlying sponsorship, payment history,
collectability of interest, structural credit enhancements, market trends and
loan terms in grading our commercial real estate loans.



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Credit risk profiles of commercial real estate loans were as follows (in thousands):

                               Rating 1       Rating 2      Rating 3       Rating 4        Held for Sale         Total
As of December 31, 2014:
Whole loans                  $ 1,231,092     $  32,500     $       -     $         -     $             -     $ 1,263,592
B notes                           16,072             -             -               -                   -          16,072
Mezzanine loans                   45,432        21,934             -               -                   -          67,366
                             $ 1,292,596     $  54,434     $       -     $         -     $             -     $ 1,347,030

As of December 31, 2013:
Whole loans                  $   680,718     $  32,500     $  32,571     $         -     $             -     $   745,789
B notes                           16,205             -             -               -                   -          16,205
Mezzanine loans                   51,862        12,455             -               -                   -          64,317
                             $   748,785     $  44,955     $  32,571     $         -     $             -     $   826,311


All of our commercial real estate loans were performing as of December 31, 2014
and 2013.
Residential Mortgage Loans
We review residential mortgage loans periodically for collectability in light of
historical experience, the nature and amount of the loan portfolio, adverse
situations that may affect the borrower's ability to repay, estimated value of
any underlying collateral, and prevailing underlying conditions. We also
designate loans that are sold after period end but before the financial
statements are issued as held for sale at the lower of their fair market value
or cost.
Loans Receivable - Related Party
In December 2014, we accepted net lease assets with a value of $1.9 million in
lieu of cash in order to satisfy the outstanding balance of a related party loan
with Lease Equity Appreciation Fund II, L.P, an equipment leasing partnership
sponsored by LEAF Financial, a wholly-owned subsidiary of Resource America, and
of which a LEAF Financial subsidiary is the general partner. As a result of this
transfer of assets and other impairments taken on the underlying lease portfolio
during the year, we recorded a total provision for loan losses in the amount of
$1.3 million for the year ended December 31, 2014. We took ownership of the
lease portfolio to reduce the operating costs of managing the portfolio, which
we believe, in turn, maximizes the return of expected future cash flows on our
investment.

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Loan Portfolios Aging Analysis The following table shows the loan portfolio aging analysis for the years indicated at cost basis (in thousands):

                                                                                                                       Total Loans >
                                                      Greater than     Total Past                      Total Loans      90 Days and
                      30-59 Days       60-89 Days        90 Days          Due           Current        Receivable         Accruing
As of December 31,
2014:
Whole loans         $          -     $          -     $         -     $        -     $ 1,263,592     $   1,263,592     $          -
B notes                        -                -               -              -          16,072            16,072                -
Mezzanine loans                -                -               -              -          67,366            67,366                -
Bank loans (1)                 -                -           1,350          1,350         329,580           330,930                -
Middle market
loans (3)                      -                -               -              -         250,113           250,113                -
Residential
mortgage loans (2)           443               82             119            644         113,612           114,256                -
Loans receivable-
related party                  -                -               -              -           1,277             1,277                -
Total loans         $        443     $         82     $     1,469     $    1,994     $ 2,041,612     $   2,043,606     $          -

As of December 31,
2013:
Whole loans         $          -     $          -     $         -     $        -     $   745,789     $     745,789     $          -
B notes                        -                -               -              -          16,205            16,205                -
Mezzanine loans                -                -               -              -          64,317            64,317                -
Bank loans(1)                  -                -           3,554          3,554         514,216           517,770                -
Middle market
loans (3)                      -                -               -              -          44,253            44,253                -
Residential
mortgage loans (2)           234               91             268            593          16,322            16,915                -
Loans receivable-
related party                  -                -               -              -           6,966             6,966                -
Total loans         $        234     $         91     $     3,822     $    4,147     $ 1,408,068     $   1,412,215     $          -




(1) Contains $282,000 and $2.4 million of bank loans held for sale at

December 31, 2014 and 2013, respectively.

(2) Contains $111.5 million and $15.1 million of residential mortgage loans held

for sale at December 31, 2014 and 2013, respectively.

(3) Contains $0 and $4.5 million of middle market loans held for sale at

    December 31, 2014 and 2013, respectively.



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Impaired Loans
The following tables show impaired loans indicated (in thousands):
                                               Unpaid                             Average
                             Recorded        Principal         Specific        Investment in     Interest Income
                              Balance         Balance         Allowance       Impaired Loans        Recognized
As of December 31, 2014:
Loans without a specific
valuation allowance:
Whole loans                $   128,108     $    128,108     $          -     $       130,445     $       12,679
B notes                    $         -     $          -     $          -     $             -     $            -
Mezzanine loans            $    38,072     $     38,072     $          -     $        38,072     $        2,859
Bank loans                 $         -     $          -     $          -     $             -     $            -
Middle market loans        $         -     $          -     $          -     $             -     $            -

Residential mortgage loans $ 2,082 $ 2,082 $ -

  $         2,082     $          148
Loans receivable - related
party                      $         -     $          -     $          -     $             -     $            -
Loans with a specific
valuation allowance:
Whole loans                $         -     $          -     $          -     $             -     $            -
B notes                    $         -     $          -     $          -     $             -     $            -
Mezzanine loans            $         -     $          -     $          -     $             -     $            -
Bank loans                 $     1,350     $      1,350     $       (570 )   $             -     $            -
Middle market loans        $         -     $          -     $          -     $             -     $            -

Residential mortgage loans $ - $ - $ -

  $             -     $            -
Loans receivable - related
party                      $         -     $          -     $          -     $             -     $            -
Total:
Whole loans                $   128,108     $    128,108     $          -     $       130,445     $       12,679
B notes                              -                -                -                   -                  -
Mezzanine loans                 38,072           38,072                -              38,072              2,859
Bank loans                       1,350            1,350             (570 )                 -                  -
Middle market loans                  -                -                -                   -                  -
Residential mortgage loans       2,082            2,082                -               2,082                148
Loans receivable - related
party                                -                -                -                   -                  -
                           $   169,612     $    169,612     $       (570 )   $       170,599     $       15,686

As of December 31, 2013:
Loans without a specific
valuation allowance:
Whole loans                $   130,759     $    130,759     $          -     $       123,495     $        8,439
B notes                    $         -     $          -     $          -     $             -     $            -
Mezzanine loans            $    38,072     $     38,072     $          -     $        38,072     $        1,615
Bank loans                 $         -     $          -     $          -     $             -     $            -
Middle market loans        $         -     $          -     $          -     $             -     $            -

Residential mortgage loans $ 315 $ 268 $ -

  $             -     $            -
Loans receivable - related
party                      $     5,733     $      5,733     $          -     $             -     $            -
Loans with a specific
valuation allowance:
Whole loans                $    25,572     $     25,572     $     (4,572 )   $        24,748     $        1,622
B notes                    $         -     $          -     $          -     $             -     $            -
Mezzanine loans            $         -     $          -     $          -     $             -     $            -
Bank loans                 $     3,554     $      3,554     $     (2,621 )   $             -     $            -
Middle market loans        $         -     $          -     $          -     $             -     $            -
Loans receivable - related
party                      $         -     $          -     $          -     $             -     $            -
Total:
Whole loans                $   156,331     $    156,331     $     (4,572 )   $       148,243     $       10,061
B notes                              -                -                -                   -                  -
Mezzanine loans                 38,072           38,072                -              38,072              1,615
Bank loans                       3,554            3,554           (2,621 )                 -                  -
Middle market loans                  -                -                -                   -                  -
Residential mortgage loans         315              268                -                   -                  -
Loans receivable - related
party                            5,733            5,733                -                   -                  -
                           $   204,005     $    203,958     $     (7,193 )   $       186,315     $       11,676



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Troubled-Debt Restructurings
The following tables show troubled-debt restructurings in our loan portfolio (in
thousands):
                                                              Pre-Modification          Post-Modification
                                                            Outstanding

Recorded Outstanding Recorded

                                         Number of Loans           Balance                   Balance
Year Ended December 31, 2014:
Whole loans                                     3          $              99,739     $               99,739
B notes                                         -                              -                          -
Mezzanine loans                                 1                         38,072                     38,072
Bank loans                                      -                              -                          -
Middle market loans                             -                              -                          -
Residential mortgage loans                      -                              -                          -
Loans receivable - related party                -                              -                          -
Total loans                                     4          $             137,811     $              137,811

Year Ended December 31, 2013:
Whole loans                                     5          $             143,484     $              147,826
B notes                                         -                              -                          -
Mezzanine loans                                 -                              -                          -
Bank loans                                      -                              -                          -
Middle market loans                             -                              -                          -
Loans receivable - related party                1                          6,592                      6,592
Total loans                                     6          $             150,076     $              154,418


As of December 31, 2014 and 2013, there were no commercial real estate loan
troubled-debt restructurings that subsequently defaulted. On December 31, 2014,
the loan receivable - related party was extinguished and the underlying
collateral was assigned to usivity. During the year ended December 31, 2014, we
recorded $1.3 million in total write-downs on the loan.
Investments in Real Estate
The table below summarizes our investments in real estate (in thousands, except
number of properties):
                                        December 31, 2013
                                Book Value     Number of Properties
Multi-family property          $    22,107              1
Office property                     10,273              1
Subtotal                            32,380
Less: Accumulated depreciation      (2,602 )
Investments in real estate     $    29,778


During the year ended December 31, 2014, we made no acquisitions and sold our
remaining three properties for a combined gain of $6.1 million, which is
recorded on the consolidated statements of income in gain on sale of real
estate. One of the properties was reclassified to property available-for-sale on
the balance sheet as of December 31, 2013.
During the year ended December 31, 2013, we made no acquisitions and sold one of
our multi-family properties for a gain of $16.6 million, which was recorded in
gain on sale of real estate on our consolidated statements of income.

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Restricted cash.
At December 31, 2014, we had restricted cash of $122.1 million, which consisted
of $121.2 million of restricted cash within our ten securitizations and $891,000
held in various reserve accounts. At December 31, 2013, we had restricted cash
of $63.3 million, which consisted of $61.4 million of restricted cash on our
seven securitizations, $771,000 held in a margin account related to our swap
portfolio, $848,000 held in restricted accounts at our investment properties and
$318,000 held primarily in a pledged account at our subsidiary, PCM. The
increase of $58.8 million is primarily related to new loan settlements in our
CDOs, which were a result of the use of restricted cash available for
reinvestment prior to the expiration of the reinvestment periods.
Interest Receivable.
At December 31, 2014, we had interest receivable of $16.3 million, which
consisted of $16.3 million of interest on our securities and loans and $6,000 of
interest earned on escrow and sweep accounts. At December 31, 2013, we had
interest receivable of $9.0 million, which consisted of $9.0 million of interest
on our securities and loans and $6,000 of interest earned on escrow and sweep
accounts. The increase resulted from an increase in interest receivable on
mezzanine loans of $3.6 million, an increase in interest receivable on bank
loans of $244,000, an increase in interest receivable on ABS of $1.7 million and
an increase in interest receivable on middle market loans $1.5 million,
partially offset by a decrease of 133,600 in interest receivable on CMBS.
Prepaid Expenses.
The following table summarizes our prepaid expenses as of December 31, 2014 and
2013 (in thousands):
                          December 31,
                         2014       2013
Prepaid taxes          $ 2,622    $ 2,004
Prepaid insurance          191        281
Other prepaid expenses   1,383        586
Total                  $ 4,196    $ 2,871


Prepaid expenses increased $1.3 million to $4.2 million as of December 31, 2014
from $2.9 million as of December 31, 2013. The increase resulted primarily from
a increase of $618,000 in prepaid taxes and by an increase of $797,000 in other
prepaid expenses, partially offset by a decrease of $90,000 in prepaid
insurance.
Other Assets.
The following table summarizes our other assets as of December 31, 2014 and 2013
(in thousands):

                                             Years Ended
                                            December 31,
                                          2014        2013
Mortgage Servicing Rights               $  9,374    $      -
Other assets                               6,989       6,515

Investment in life settlement contracts 3,361 1,107 Fixed assets - non real estate

             1,901       1,069
Management fees receivable                 1,076         970
Other receivables                          1,696         858

Preferred stock proceeds receivable 207 207 Total

                                   $ 24,604    $ 10,726


Other assets increased $13.9 million to $24.6 million as of December 31, 2014
from $10.7 million as of December 31, 2013. This increase resulted primarily
from the acquisition of PCM which included $9.4 million in mortgage servicing
rights and a receivable of $3.7 million for middle market loans sold prior to
year end. In addition, we had an increase of $2.3 million in life settlement
contracts due to our investment in LCF.

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Hedging Instruments.
The following tables present the fair value of our derivative financial
instruments as well as their classification on our consolidated balance sheets
and on the consolidated statements of income for the years presented:

          Fair Value of Derivative Instruments as of December 31, 2014
                                 (in thousands)
                                                     Asset Derivatives
                                  Notional
                                   Amount         Balance Sheet Location       Fair Value
Interest rate lock agreements   $    59,467     Derivatives, at fair value   $        970
Forward contracts - residential
mortgage lending                $     5,000     Derivatives, at fair value   $          7
Forward contracts - RMBS
securities                      $    42,614     Derivatives, at fair value   $      1,297
Forward contracts - foreign
currency, hedging               $    54,948     Derivatives, at fair value   $      3,377
Options - U.S. Treasury futures $        90     Derivatives, at fair value   $         52
Total return swap               $         -     Derivatives, at fair value   $          -
Warrants                        $       492     Derivatives, at fair value   $        898
                                                   Liability Derivatives
                                  Notional
                                   Amount         Balance Sheet Location       Fair Value
Interest rate swap contracts    $   124,017     Derivatives, at fair value   $      8,680
Interest rate lock agreements   $       798     Derivatives, at fair value   $         10
Forward contracts - residential
mortgage lending                $   154,692     Derivatives, at fair value   $      1,036
Forward contracts - foreign
currency, hedging               $         -     Derivatives, at fair value   $          -
Forward contracts - TBA
securities                      $    15,000     Derivatives, at fair value   $         47

                                                Accumulated other
Interest rate swap contracts    $   124,017     comprehensive loss           $      8,680


          Fair Value of Derivative Instruments as of December 31, 2013
                                 (in thousands)
                                                     Asset Derivatives
                                  Notional
                                   Amount         Balance Sheet Location       Fair Value
Interest rate lock agreements   $         -     Derivatives, at fair value         -
Forward contracts - residential
mortgage lending                $         -     Derivatives, at fair value         -
Forward contracts - foreign
currency, hedging               $         -     Derivatives, at fair value         -
Total return swap               $         -     Derivatives, at fair value         -
                                                   Liability Derivatives
                                  Notional
                                   Amount         Balance Sheet Location       Fair Value
Interest rate swap contracts    $   129,497     Derivatives, at fair value   $     10,586
Interest rate lock agreements   $         -     Derivatives, at fair value   $          -
Forward contracts - residential
mortgage lending                $         -     Derivatives, at fair value   $          -
Forward contracts - foreign
currency, hedging               $         -     Derivatives, at fair value   $          -
Forward contracts - TBA
securities                      $         -     Derivatives, at fair value   $          -

                                                Accumulated other
Interest rate swap contracts    $   129,497     comprehensive loss           $     10,586



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    The Effect of Derivative Instruments on the Statements of Income for the
                          Year Ended December 31, 2014
                                 (in thousands)
                                                         Derivatives
                                 Notional         Statement of Income        Unrealized Gains
                                  Amount                Location                (Loss) (1)
Interest rate swap contracts   $   124,017     Interest expense             

$ 6,555

                                               Net realized gain on sales
Interest rate lock agreements  $    60,265     of investment securities     $          960
                                               available-for-sale and
                                               loans
                                               Net realized gain on sales
Forward contracts -            $   159,692     of investment securities     $       (1,029 )
residential mortgage lending                   available-for-sale and
                                               loans
                                               Net realized gain on sales
Forward contracts - RMBS       $    42,614     of investment securities     $        1,297
securities                                     available-for-sale and
                                               loans
                                               Net realized gain on sales
Forward contracts - foreign    $    54,948     of investment securities     $        3,377
currency, hedging                              available-for-sale and
                                               loans
                                               Net realized gain on sales
Options - U.S. Treasury        $        90     of investment securities     $          (28 )
futures                                        available-for-sale and
                                               loans
                                               Net realized gain on sales
Forward contracts - TBA        $    15,000     of investment securities     $          (47 )
securities                                     available-for-sale and
                                               loans
                                               Net realized gain on sales
Warrants                                       of investment securities     $          898
                                               available-for-sale and
                                               loans



    The Effect of Derivative Instruments on the Statements of Income for the
                          Year Ended December 31, 2013
                                 (in thousands)
                                                        Derivatives
                                 Notional         Statement of Income       Unrealized Loss
                                  Amount                Location                  (1)
Interest rate swap contracts   $   129,497     Interest expense             $        6,751
Interest rate lock agreements  $         -     Net realized gain on sales   $            -
                                               of investment securities
                                               available-for-sale and
                                               loans
Forward contracts -            $         -     Net realized gain on sales   $            -
residential mortgage lending                   of investment securities
                                               available-for-sale and
                                               loans
Forward contracts - foreign    $         -     Net realized gain on sales   $            -
currency, hedging                              of investment securities
                                               available-for-sale and
                                               loans
Forward contracts - TBA        $         -     Net realized gain on sales   $            -
securities                                     of investment securities
                                               available-for-sale and
                                               loans



    The Effect of Derivative Instruments on the Statements of Income for the
                          Year Ended December 31, 2012
                                 (in thousands)
                                                        Derivatives
                                 Notional         Statement of Income       Unrealized Loss
                                  Amount                Location                  (1)
Interest rate swap contracts   $   135,241     Interest expense             

$ 7,266

                                               Net realized gain on sales
Interest rate lock agreements  $         -     of investment securities     $            -
                                               available-for-sale and
                                               loans
                                               Net realized gain on sales
Forward contracts -            $         -     of investment securities     $            -
residential mortgage lending                   available-for-sale and
                                               loans
                                               Net realized gain on sales
Forward contracts - foreign    $         -     of investment securities     $            -
currency, hedging                              available-for-sale and
                                               loans
                                               Net realized gain on sales
Forward contracts - TBA        $         -     of investment securities     $            -
securities                                     available-for-sale and
                                               loans





(1)  Negative values indicate a decrease to the associated balance sheets or
     consolidated statements of income line items.



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Our hedges at December 31, 2014 and 2013 were fixed-for-floating interest rate
swap agreements whereby we swapped the floating rate of interest on the
liabilities we hedged for a fixed rate of interest.  Current interest rates
remain comparatively low and the forward curve is projecting increasing rates in
the future. This, combined with the scheduled maturity of one hedge and the
continued amortization of our macro notional interest rate swaps, leads us to
expect that the fair value of our hedges will modestly improve in 2015.  We
intend to continue to seek such hedges for our floating rate debt in the
future.  Our hedges at December 31, 2014 were as follows (in thousands):
                                       Notional      Strike    Effective     Maturity       Fair
                    Benchmark rate      value         rate        date         date         value
CRE Swaps
Interest rate
swap                1 month LIBOR    $   28,191      4.13%      01/10/08     05/25/16    $    (864 )
Interest rate
swap                1 month LIBOR         1,681      5.72%      07/12/07     10/01/16         (146 )
Interest rate
swap                1 month LIBOR         1,880      5.68%      07/13/07     03/12/17         (199 )
Interest rate
swap                1 month LIBOR        78,419      5.58%      06/26/07     04/25/17       (6,344 )
Interest rate
swap                1 month LIBOR         1,726      5.65%      07/05/07     07/15/17         (200 )
Interest rate
swap                1 month LIBOR         3,850      5.65%      07/26/07     07/15/17         (444 )
Interest rate
swap                1 month LIBOR         4,023      5.41%      08/10/07     07/25/17         (440 )
Total CRE Swaps                         119,770                                             (8,637 )

CMBS Swaps
Interest rate
swap                1 month LIBOR         2,216      1.93%     02/14/2011   05/01/2015         (13 )
Interest rate
swap                1 month LIBOR           380      1.30%     07/19/2011   03/18/2016          (3 )
Interest rate
swap                1 month LIBOR         1,651      1.95%     04/11/2011   03/18/2016         (27 )
Total CMBS Swaps                          4,247                                                (43 )

Total Interest
Rate Swaps                           $  124,017      5.12%                               $  (8,680 )


Repurchase and Mortgage Finance Facilities.
Borrowings under our repurchase agreement facilities were guaranteed by us or
one of our subsidiaries. The following table sets forth certain information with
respect to the our borrowings at December 31, 2014 and 2013 (dollars in
thousands):
                                          December 31, 2014                                             December 31, 2013
                                                                        Weighted                                                      Weighted
                                                          Number of     Average                                        Number of      Average
                       Outstanding        Value of        Positions    

Interest Outstanding Value of Positions Interest

                       Borrowings        Collateral     as Collateral     Rate       Borrowings       Collateral     as Collateral      Rate
CMBS Term
Repurchase Facility
Wells Fargo Bank (1) $      24,967     $     30,180          33          1.35%     $     47,601     $     56,949          44           1.38%

CRE Term
Repurchase
Facilities
Wells Fargo Bank (2)       179,762          258,223          15          2.38%           30,003           48,186           3           2.67%
Deutsche Bank AG (3)        25,920           39,348           2          2.78%             (300 )              -           -             -%

Short-Term
Repurchase
Agreements - CMBS
Wells Fargo
Securities, LLC             10,442           17,695           1          1.66%                -                -           -             -%
Deutsche Bank
Securities, LLC             33,783           44,751           8          1.62%                -                -           -             -%

RMBS Term
Repurchase Facility
Wells Fargo Bank (4)        22,212           27,885           6          1.16%

Residential Mortgage
Financing Agreements
New Century Bank            41,387           51,961          158         2.82%           11,916           13,089          74           4.17%
ViewPoint Bank, NA               -                -           -            -%             2,711            3,398          17           4.58%
Wells Fargo Bank            61,189           95,511          104         2.75%                -                -           -             -%
Totals               $     399,662     $    565,554                                $     91,931     $    121,622





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(1) The Wells Fargo CMBS term repurchase facility includes $0 and $12,000, of

deferred debt issuance costs as of December 31, 2014 and 2013, respectively.

(2) The Wells Fargo CRE term repurchase facility includes $1.7 million and

$732,000 of deferred debt issuance costs as of December 31, 2014 and 2013,

respectively.

(3) The Deutsche Bank term repurchase facility includes $268,000 and $300,000 of

deferred debt issuance costs as of December 31, 2014 and 2013, respectively.

(4) The Wells Fargo RMBS term repurchase facility includes $36,000 of deferred

debt issuance costs as of December 31, 2014.

The assets in the following table are accounted for as linked transactions. These linked repurchase agreements are not included in borrowings on our consolidated balance sheets (See Item 8, "Financial Statements and Supplementary Data - Note 23 to the Notes to Consolidated Financial Statements").

                                            December 31, 2014                                                             December 31, 2013
                                                             Number                                                                        Number
                                          Value of        of Positions    Weighted Average                              Value of        of Positions    Weighted Average
                    Borrowings           Collateral       as Collateral    Interest Rate          Borrowings           Collateral       as Collateral  

Interest Rate

                   Under Linked         Under Linked      Under Linked       of Linked           Under Linked         Under Linked      Under Linked       of Linked
                 Transactions (1)       Transactions      Transactions      Transactions       Transactions (1)       Transactions      Transactions   
  Transactions
CMBS Term
Repurchase
Facility
Wells Fargo
Bank           $            4,941     $         6,371           7              1.67%         $            6,506     $         8,345           7              1.65%


Short-Term
Repurchase
Agreements -
CMBS
JP Morgan
Securities,
LLC                             -                   -           -                -%                      17,020              24,814           4              0.99%
Wells Fargo
Securities,
LLC                         4,108               6,233           2              1.37%                     21,969              30,803           9              1.19%
Deutsche Bank
Securities,
LLC                        24,348              36,001          10              1.57%                     18,599              29,861           9              1.43%

Totals         $           33,397     $        48,605                                        $           64,094     $        93,823


RMBS - Term Repurchase Facility
In June 2014, one of our wholly owned subsidiaries, RCC Residential Portfolio
Inc., entered into a master repurchase and securities contract with Wells Fargo
Bank, or Wells Fargo, in order to finance the purchase of residential mortgage
backed securities and other approved assets. The maximum amount of this Facility
is $285.0 million which has an original one year term with a one year extension
option, and a maximum interest rate of 1.45%. The facility's current maturity
date is June 22, 2015. The weighted averaging borrowing rate at December 31,
2014 was 1.16%.
CMBS - Term Repurchase Facility
In February 2011, our wholly-owned subsidiaries, RCC Real Estate and RCC
Commercial, entered into a master repurchase and securities agreement with Wells
Fargo to be used as a term repurchase facility to finance the purchase of
highly-rated CMBS. The maximum amount of the facility is $100.0 million and it
originally featured an initial two year term and an interest rate equal to LIBOR
plus 1.00%. In April 2014, we agreed to a third amendment of this facility,
which extended its current termination date to January 31, 2016. The facility's
weighted average borrowing rate at December 31, 2014 was 1.35%.
CRE - Term Repurchase Facilities
On February 27, 2012, RCC Real Estate's wholly-owned subsidiary, RCC Real Estate
SPE 4 LLC, or SPE 4, entered into a master repurchase agreement with Wells Fargo
to finance the origination of commercial real estate loans. The facility had an
original maximum amount of $150.0 million and an initial 18 month term. In April
2013, we paid a structuring fee of $101,000 and an extension fee of $938,000 and
entered into an amendment which increased the size of the facility to $250.0
million and extended the maturity date to February 2015. The amendment also
provided us with two one-year extension options at our discretion. On October
31, 2014, SPE 4 agreed to a modification of the terms of the facility which
increased the maximum borrowing amount to $400.0 million and extended the
maturity date to August 27, 2016. The amendment also provided us with two
one-year extension options at our discretion. The modification also increased
the facility's maximum single asset concentration limit, reduced the minimum
portfolio debt yield test requirements, and decreased pricing spreads on select
portfolio assets. We paid a structuring fee of $1.6 million to Wells Fargo upon
the closing of the modification. At December 31, 2014, the weighted average
borrowing rate of the facility was 2.38%.

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On July 19, 2013, RCC Real Estate's wholly-owned subsidiary, RCC Real Estate SPE
5 LLC, or SPE 5, entered into a master repurchase agreement with Deutsche Bank
AG, Cayman Islands Branch to finance the origination of commercial real estate
loans. The facility has a maximum amount of $200.0 million and an initial 12
month term. In July 2014, we paid an extension fee of 0.25% of the maximum
facility amount to exercise the first of two one-year extension options and
subject further to the right of SPE 5 to repurchase the assets held in the
facility earlier. The facility's weighted average borrowing rate at the year
ended December 31, 2014 was 2.78%. The facility's current maturity date is July
19, 2015.
Short-Term Repurchase Agreements - CMBS
On March 8, 2005, RCC Real Estate entered into a master repurchase agreement
with Deutsche Bank Securities Inc. to finance the origination of commercial real
estate loans and the purchase of CMBS.  There is no stated maximum amount of the
facility and the repurchase agreement has no stated maturity date with monthly
resets of interest rates. The facility's weighted average borrowing rate at
December 31, 2014 was 1.62%.
On February 14, 2012, RCC Real Estate entered into a master repurchase and
securities agreement with Wells Fargo Securities, LLC to finance the purchase of
CMBS.  There is no stated maximum amount of the facility and the repurchase
agreement has no stated maturity date with monthly resets of interest rates. The
facility's weighted average borrowing rate at December 31, 2014 was 1.66%.
On November 6, 2012, RCC Real Estate entered into a master repurchase with JP
Morgan Securities LLC to finance the purchase of CMBS.  There is no stated
maximum amount of the facility and the repurchase agreement has no stated
maturity. Interest rates reset monthly. At December 31, 2014, we did not have
any borrowings outstanding on this line.
Residential Mortgage Financing Agreements
RCC Residential's wholly owned subsidiary, PCM, has a master repurchase
agreement with New Century Bank d/b/a Customer's Bank ("New Century") to finance
the acquisition of residential mortgage loans. The facility has a maximum amount
of $30.0 million and a termination date of August 30, 2015, which was amended
from the original terms over the course of seven amendments. The facility bears
interest at a rate of one month LIBOR plus an applicable rate between 2.63% and
4.875%. At December 31, 2014, the facility's weighted average borrowing cost was
2.82%.
On November 30, 2014, we received a waiver from New Century on the facility's
minimum liquidity covenant. The waiver removed all exisiting defaults and waived
the required covenants from December 1, 2014 through January 9, 2015. We were in
compliance with all other covenants under the agreement as of December 31, 2014.
PCM had a loan participation agreement with ViewPoint Bank, NA to finance the
acquisition of residential mortgage loans. The facility had a maximum amount of
$15.0 million and a termination date of December 30, 2014, which was amended
from the original terms over the course of five amendments. In November 2014, we
terminated our agreement with ViewPoint and there were no outstanding borrowings
on this facility at year end.
In July 2014, PCM entered into a master repurchase agreement with Wells Fargo to
finance the acquisition of residential mortgage loans. The facility has a
maximum amount of $75.0 million, a termination date of July 2, 2015, and bears
interest at a rate of LIBOR plus an applicable loan margin (either 2.50% or
3.00%). This facility's weighted average cost of funds at December 31, 2014 was
2.75%.
The Wells Fargo facility contains events of default (subject to certain
materiality thresholds and grace periods) customary for this type of financing
arrangement, including but not limited to: payment defaults; bankruptcy or
insolvency proceedings; a change in the nature of PCM's business as a mortgage
banker as presently conducted; breaches of covenants and/or certain
representations and warranties; performance defaults by PCM; and a judgment in
an amount greater than $250,000 against PCM. The remedies for such events of
default are also customary for this type of transaction and include the
acceleration of the principal amount outstanding under the Wells Fargo facility
and the liquidation by Wells Fargo of assets then subject to the Wells Fargo
facility.
On November 30, 2014, we received a waiver from Wells Fargo on the facility's
minimum liquidity requirement. The waiver removed all existing defaults and
waived the required covenants from December 1, 2014 through January 9, 2015. PCM
is in compliance with all other covenants under the agreement as of December 31,
2014.


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Senior Secured Revolving Credit Facility
On September 18, 2014, the our wholly-owned subsidiary, Northport LLC, closed a
$110.0 million syndicated senior secured revolving credit facility ("Credit
Facility") with JP Morgan as the agent bank to finance the origination of middle
market and syndicated loans. On September 30, 2014, the accordion feature of the
Credit Facility was exercised to bring the facility capacity to $225.0 million
and concurrently an additional $15.0 million was secured through the addition of
a new lender to the syndicate, bringing the effective commitment to $125.0
million. We have access to draws on the Credit Facility until its commitment
date of September 18, 2017, and all outstanding borrowings under the Credit
Facility must be repaid by the maturity date of September 18, 2018.
The Credit Facility bears interest rates, at our election, on a per annum basis
equal to (i) the applicable LIBOR rate plus 2.50% or (ii) the applicable base
rate (prime rate of 3.25% as of December 31, 2014) plus 1.50%. During the six
month ramp up period, we incur a commitment fee on any unused balance of 0.375%
per annum if the unused balance is greater than 35% of the total commitment or
0.50% per annum if it is less than 35% of the total commitment. After the ramp
up period, the commitment fee on any unused balance is 0.375% per annum if the
unused balance is greater than 35% of the total commitment or 1.00% per annum if
it less than 35% of the total commitment. The weighted average borrowing rate at
December 31, 2014 was 2.66%.

Amounts available to borrow under the Credit Facility are subject to compliance
with a borrowing base computation that applies different advance rates to
different types of assets held by Northport LLC that are pledged as collateral.
Under the Credit Facility, we have made certain customary representations and
warranties and is required to comply with various covenants, including leverage
restrictions, reporting requirements and other customary requirements for
similar credit facilities. At December 31, 2014, we are in compliance with all
covenants under the agreement. We guarantee Northport LLC's performance of its
obligations under this Credit Facility.
Securitizations
As of December 31, 2014, we had executed eight and retained equity in ten
securitizations as follows:
•         In July 2014, we closed RCC CRE 2014, a $353.9 million CRE

securitization transaction that provided financing for transitional

          commercial real estate loans. RCC CRE 2014 issued a total of $253.3
          million of senior notes at par to unrelated investors. RCC Real Estate
          purchased 100% of the Class C senior notes (rated B2:Moody's) for $17.7
          million. In addition, RREF 2014-CRE2 Investor, LLC a subsidiary of RCC

Real Estate, purchased a $100.9 million equity interest representing

100% of the outstanding preference shares. At closing, the senior notes

issued to investors by RCC CRE 2014 consisted of the following classes:

(i) $196.4 million of Class A notes bearing interest at one-month LIBOR

plus 1.05%; (ii) $38.9 million of Class B notes bearing interest at

one-month LIBOR plus 2.5%; and (iii) $17.7 million of Class C notes

bearing interest at one-month LIBOR plus 4.25%. There is no

reinvestment period for RCC CRE 2014 and all of the notes issued mature

in April 2032, although we have the right to call the notes anytime

after July 2016 until maturity. The weighted average interest rate on

          all notes issued to outside investors was 1.45% at December 31, 2014.


•         In February 2014, we purchased 100% of the Class 1 Subordinated Notes

and 67.9% of the Class 2 Subordinated Notes, which represented 88.6% of

the outstanding subordinated notes in the European securitization

Moselle CLO S.A. Due to our economic interest combined with our

contractual, unilateral kick-out rights acquired upon our purchase of a

          majority of the subordinate notes, we determined that we had a
          controlling financial interest and consolidated Moselle CLO. The notes
          we purchased are subordinated in right of payment to all other notes
          issued by Moselle CLO. The balances of the senior notes issued to
          investors when we acquired a controlling interest in Moselle CLO were

as follows: (i) €24.9 million of Class A-1E notes bearing interest at

LIBOR plus 0.25%: (ii) $24.9 million of Class A-1L notes bearing

interest at LIBOR plus 0.25%: (iii) €10.3 million of Class A-1LE notes

bearing interest at LIBOR plus 0.31%: (iv) $10.3 million of Class A-1LE

USD notes bearing interest at LIBOR plus 0.31%; (v) €13.8 million of

          Class A-2E notes bearing interest at LIBOR plus 0.40%: (vi) $13.8
          million of Class A-2L notes bearing interest at LIBOR plus 0.40%; (vii)
          €6.8 million of Class A-3E notes bearing interest at LIBOR plus 0.70%;
          (viii) $6.8 million of Class A-3L notes bearing interest at LIBOR plus
          0.75%; (ix) €16 million of Class B-1E notes bearing interest at LIBOR
          plus 1.80%; and (x) $16.0 million of Class B-1L notes bearing interest
          at LIBOR plus 1.85%. We have the right to call the notes anytime after

January 6, 2010 until maturity. Total paydowns on the senior notes were

$100.3 million and the weighted average interest rate on all notes was

          1.49% at December 31, 2014.



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• In December 2013, we closed RCC CRE Notes 2013, a $307.8 million CRE

securitization transaction that provided financing for transitional CRE

loans. The investments held by RCC CRE Notes 2013 collateralized $260.8

million of senior notes issued by the securitization, of which RCC Real

          Estate purchased 100% of the Class D senior notes, Class E senior
          notes, and Class F senior notes for $30.0 million at closing. In
          addition, RCC CRE Notes 2013 Investor, LLC, a subsidiary of RCC Real

Estate, purchased a $16.9 million equity interest representing 100% of

the outstanding preference shares. At December 31, 2014, the notes

issued to outside investors, had a weighted average borrowing rate of

2.11%. There is no reinvestment period for RCC CRE Notes 2013, which

          will result in the sequential pay down of notes as underlying
          collateral matures and pays down. As of December 31, 2014, $34.0
          million of the Class A senior notes have been paid down.


•         In June 2007, we closed RREF CDO 2007-1, a $500.0 million CDO

transaction that provided financing for commercial real estate loans.

The investments held by RREF CDO 2007-1 collateralized $458.8 million

of senior notes issued by the CDO vehicle, of which RCC Real Estate, a

subsidiary of ours, purchased 100% of the class H senior notes, class K

senior notes, class L senior notes and class M senior notes for $68.0

million at closing, $5.0 million of the Class J senior notes in

February 2008, an additional $2.5 million of the Class J senior notes

in November 2009, and $11.9 million of the Class E senior notes, $11.9

million of the Class F senior notes and $7.3 million of the Class G

senior notes in December 2009, $250,000 of the Class J senior notes in

January 2010, $5.0 million of the Class A-2 senior notes in August

2011, $5.0 million of the Class A-2 senior notes in September 2011 and

          $50.0 million of the A1-R notes in June 2012.  In addition, RREF 2007-1
          CDO Investor, LLC, a subsidiary of RCC Real Estate, purchased a $41.3

million equity interest representing 100% of the outstanding preference

shares. At December 31, 2014, the notes issued to outside investors,

          net of repurchased notes, had a weighted average borrowing rate of
          1.19%. The reinvestment period expired in June 2012 and the CDO has
          begun paying down the senior notes as principal is collected. Through

December 31, 2014, $151.7 million of the Class A-1 and $50.0 million of

          the Class A-1R senior notes had been paid down.


•         In May 2007, we closed Apidos Cinco CDO, a $350.0 million CDO

transaction that provided financing for bank loans. The investments

          held by Apidos Cinco CDO collateralized $322.0 million of senior notes
          issued by the CDO vehicle.  RCC Commercial II, a subsidiary of ours,
          holds a $28.0 million equity interest representing 100% of the
          outstanding preference shares.  At December 31, 2014, the notes issued
          to outside investors had a weighted average borrowing rate of 0.81%,

and $9.6 million of Class A-1 and $56.7 million of Class A-2A notes had

          been paid down.


•         In August 2006, we closed RREF CDO 2006-1, a $345.0 million CDO
          transaction that provided financing for commercial real estate loans.
          The investments held by RREF CDO 2006-1 collateralized $308.7 million

of senior notes issued by the CDO vehicle. RCC Real Estate purchased

          100% of the class J senior notes and class K senior notes for $43.1
          million at closing and $7.5 million of the Class F senior notes in
          September 2009, $3.5 million of the Class E senior notes and $4.0

million of the Class F senior notes in September 2009, $20.0 million of

          the Class A-1 senior notes in February 2010, $4.3 million of the Class
          A-1 senior notes in May 2012 and $4.0 million of the Class C senior
          notes in May 2012. In addition, RREF 2006-1 CDO Investor, LLC, a
          subsidiary of RCC Real Estate, purchased a $36.3 million equity
          interest representing 100% of the outstanding preference shares.  At
          December 31, 2014, the notes issued to outside investors, net of

repurchased notes, had a weighted average borrowing rate of 2.12%. The

          reinvestment period expired in September 2011 and the CDO has begun
          paying down the senior notes as principal is collected. Through
          December 31, 2014, $129.4 million of the Class A-1 senior notes, $5.0
          million of Class A-2(FX) senior notes, $17.4 million of Class A-2 (FL)
          senior notes, $13.0 million of Class C senior notes, and $787,000 of
          Class D senior notes had been paid down.

• In May 2006, we closed Apidos CDO III, a $285.5 million CDO transaction

          that provided financing for bank loans.  The investments held by Apidos
          CDO III collateralized $262.5 million of senior notes issued by the CDO
          vehicle.  RCC Commercial purchased a $23.0 million equity interest
          representing 100% of the outstanding preference shares.  At
          December 31, 2014, the notes issued to outside investors had a weighted
          average borrowing rate of 1.18%.  The reinvestment period expired in
          June 2012 and the CDO has begun paying down the senior notes as
          principal is collected. Through December 31, 2014, $187.9 million of
          the Class A-1 senior notes had been paid down.


•         In August 2005, we closed Apidos CDO I, a $350.0 million CDO

transaction that provided financing for bank loans. The investments

held by Apidos CDO I collateralize $321.5 million of senior notes

issued by the CDO vehicle. RCC Commercial originally purchased a $28.5

million equity interest representing 100% of the outstanding preference

          shares and during the three months ended June 30, 2012 sold 10% or
          $2.85 million to our subsidiary RSO Equity Co, LLC in connection with

the sale of CVC Credit Partners, formerly Apidos Capital Management, by

          the Manager. Our subsidiary, RCC Commercial II, repurchased $2.0
          million of the Class B notes in May 2012. In October 2014, Apidos CLO I
          was called and liquidated and, as a result, all of the assets were
          sold. Total proceeds



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from the sale of these assets, plus proceeds from previous sales and paydowns in
the CLO were used to pay down the notes in full.
6.0% Convertible Senior Notes
On October 21, 2013, we issued and sold in a public offering $115.0 million
aggregate in principal amount of our 6.0% Convertible Senior Notes due 2018.
After deducting the underwriting discount and the estimated offering costs, we
received approximately $111.1 million of net proceeds. The discount of $4.9
million on the 6.0% Convertible Senior notes reflects the difference between the
stated value of the debt and the fair value of the notes as if they were issued
without a conversion feature and at a higher rate of interest that we estimated
would have been applicable without the conversion feature. The discount will be
amortized on a straight-line basis as additional interest expense through
maturity on December 1, 2018. Interest on the 6.0% Convertible Senior Notes is
paid semi-annually. Prior to December 1, 2018, the 6.0% Convertible Senior Notes
are not redeemable at our option, except to preserve our status as a REIT. On or
after December 1, 2018, we may redeem all or a portion of the 6.0% Convertible
Senior Notes at a redemption price equal to the principal amount plus accrued
and unpaid interest. Holders of 6.0% Convertible Senior Notes may require us to
repurchase all or a portion of the 6.0% Convertible Senior Notes at a purchase
price equal to the principal amount plus accrued and unpaid interest on December
1, 2018, or upon the occurrence of certain defined fundamental changes. The 6.0%
Convertible Senior Notes are convertible at the option of the holder at a
current conversion rate of 150.1502 common shares per $1,000 principal amount of
6.0% Convertible Senior Notes (equivalent to a current conversion price of $6.66
per common share). Upon conversion of 6.0% Convertible Senior Notes by a holder,
the holder will receive cash, our common shares or a combination of cash and our
common shares, at our election.
Trust Preferred Securities
In May 2006 and September 2006, we formed RCT I and RCT II, respectively, for
the sole purpose of issuing and selling capital securities representing
preferred beneficial interests.  Although we own $774,000 of the common
securities of RCT I and RCT II, RCT I and RCT II are not consolidated into our
consolidated financial statements because the we do not deem it to be the
primary beneficiary of these entities. In connection with the issuance and sale
of the capital securities, we issued junior subordinated debentures to RCT I and
RCT II of $25.8 million each, representing our maximum exposure to loss.  The
debt issuance costs associated with the junior subordinated debentures for RCT I
and RCT II are included in borrowings and are being amortized into interest
expense in the consolidated statements of income using the effective yield
method over a ten year period.
The debt issuance costs associated with the junior subordinated debentures for
Resource Capital Trust I, or RCT, and RCC Trust II, or RCT II, at December 31,
2014 were $160,000 and $183,000, respectively.  The debt issuance costs
associated with the junior subordinated debentures for RCT I and RCT II at
December 31, 2013, were $261,000 and $282,000, respectively.  The rates for RCT
I and RCT II, at December 31, 2014, were 4.21% and 4.18%, respectively.  The
rates for RCT I and RCT II, at December 31, 2013, were 4.20% and 4.19%,
respectively.
The rights of holders of common securities of RCT I and RCT II are subordinate
to the rights of the holders of capital securities only in the event of a
default; otherwise, the common securities' economic and voting rights are pari
passu with the capital securities.  The capital and common securities of RCT I
and RCT II are subject to mandatory redemption upon the maturity or call of the
junior subordinated debentures held by each.  Unless earlier dissolved, RCT I
will dissolve on May 25, 2041 and RCT II will dissolve on September 29, 2041.
The junior subordinated debentures are the sole assets of RCT I and RCT II,
mature on September 30, 2036 and October 30, 2036, respectively, and may be
called at par by us at any time after September 30, 2011 and October 30, 2011,
respectively.  We record our investments in RCT I and RCT II's common securities
of $774,000 each as investments in unconsolidated trusts and records dividend
income upon declaration by RCT I and RCT II.
Equity
Total equity at December 31, 2014 was $952.1 million and gave effect to $9.0
million of unrealized losses on our cash flow hedges and $15.4 million of net
unrealized gains on our available-for-sale portfolio, shown as a component of
accumulated other comprehensive income.  Equity at December 31, 2013 was $773.9
million and gave effect to $11.2 million of unrealized losses on cash flow
hedges and $3.1 million of unrealized losses on our available-for-sale
portfolio, shown as a component of accumulated other comprehensive loss. The
increase in equity during the year ended December 31, 2014 was principally due
to the proceeds from the initial issuance of Series C 8.625% Preferred Stock,
proceeds from sales of our common stock through our DRIP, as well as sales of
Series A 8.50% Preferred Stock and Series B 8.25% Preferred Stock through our
at-the market program.
Funds from Operations
We evaluate our performance based on several performance measures, including
funds from operations, or FFO, and adjusted funds from operations, or AFFO, in
addition to net income. We compute FFO in accordance with the standards
established by the National Association of Real Estate Investment Trusts as net
income (computed in accordance with GAAP), excluding gains or losses on the sale
of depreciable real estate, the cumulative effect of changes in accounting
principles, real estate-related depreciation and amortization, and after
adjustments for unconsolidated/uncombined partnerships and joint ventures.

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AFFO is a computation made by analysts and investors to measure a real estate
company's operating performance. We calculate AFFO by adding or subtracting from
FFO the impact of non-cash accounting items as well as the effects of items that
we deem to be non-recurring in nature. We deem transactions to be non-recurring
if a similar transaction has not occurred in the past two years, and if we do
not expect a similar transaction to occur in the next two years. We adjust for
these non-cash and nonrecurring items to analyze our ability to produce cash
flow from on-going operations, which we use to pay dividends to our
shareholders. Non-cash adjustments to FFO include the following: impairment
losses resulting from fair value adjustments on financial instruments;
provisions for loan losses; equity investment gains and losses; straight-line
rental effects; share based compensation expense; amortization of various
deferred items and intangible assets; gains on sales of property that are wholly
owned or owned through a joint venture; the cash impact of capital expenditures
that are related to our real estate owned; and REIT tax planning adjustments,
which primarily relate to accruals for owned properties for which we made a
foreclosure election and adjustments to tax estimates with respect to the final
resolution of foreclosed property when it is listed for sale. In addition, we
calculate AFFO by adding and subtracting from FFO the realized cash impacts of
the following: extinguishments of debt, reissuances of debt, sales of property
and capital expenditures.
Management believes that FFO and AFFO are appropriate measures of our operating
performance in that they are frequently used by analysts, investors and other
parties in the evaluation of REITs. Management uses FFO and AFFO as measures of
its operating performance, and believes they are also useful to investors,
because they facilitate an understanding of our operating performance after
adjustment for certain non-cash items, such as real estate depreciation,
share-based compensation and various other items required by GAAP, and capital
expenditures, that may not necessarily be indicative of current operating
performance and that may not accurately compare to our operating performance
between periods.

While our calculations of AFFO may differ from the methodology used for
calculating AFFO by other REITs and our AFFO may not be comparable to AFFO
reported by other REITs, we also believe that FFO and AFFO may provide us and
our investors with an additional useful measure to compare its performance with
some other REITs. Neither FFO nor AFFO is equivalent to net income or cash
generated from operating activities determined in accordance with GAAP.
Furthermore, FFO and AFFO do not represent amounts available for management's
discretionary use because of needed capital replacement or expansion, debt
service obligations or other commitments or uncertainties. Neither FFO nor AFFO
should be considered as an alternative to GAAP net income as an indicator of our
operating performance or as an alternative to cash flow from operating
activities as a measure of its liquidity.

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The following table reconciles GAAP net income to FFO and AFFO for the periods presented (in thousands, except per share data):

                                                                         Years Ended
                                                                        December 31,
                                   2014       Per Share Data       2013       Per Share Data       2012       Per Share Data
Net income allocable to
common shares - GAAP            $ 44,027     $         0.34     $ 39,232     $         0.33     $ 63,199     $         0.71
Adjustments:
  Real estate depreciation
and amortization                     506                  -        2,122               0.02        2,686               0.03
  Gains on sales of property
(1)                               (8,990 )            (0.07 )    (14,588 )            (0.12 )     (1,664 )            (0.02 )
  Gains on sale of preferred
equity                              (912 )            (0.01 )          -                  -            -                  -
FFO                               34,631               0.26       26,766               0.23       64,221               0.72
Adjustments:
Non-cash items:
  Adjust for impact of
imputed interest on VIE
accounting                             -                  -          899                  -       (3,049 )            (0.03 )
  (Recovery) provision for
loan losses                          820                  -       (3,325 )            (0.03 )     12,408               0.14
  Amortization of deferred
costs (non real estate)
and intangible assets             10,188               0.08        6,060               0.05        8,896               0.10
  Equity investment losses
(gains)                            2,243               0.02          183                  -        3,256               0.04
  Share-based compensation         6,566               0.05       10,472               0.09        4,636               0.05
  Impairment losses                    -                  -          863               0.01          180                  -
  Unrealized losses (gains)
on CMBS marks -
linked transactions               (1,894 )            (0.01 )      6,018               0.05            -                  -
  Unrealized losses on
trading portfolio                  2,567               0.02            -                  -            -                  -
  Unrealized losses (gains)
on derivatives                     1,982               0.02            -                  -            -                  -
  Loss on resale of debt           4,442               0.03            -                  -      (13,070 )            (0.15 )
  Add-back interest related
to Whitney note
discount amortization                  -                  -        2,549               0.02            -                  -
  Loss on liquidation and
deconsolidation of
Apidos VIII                            -                  -       16,036               0.13            -                  -
  PCM expenses and provisions
on mortgage servicing rights,
net of tax                           664                  -            -                  -            -                  -
  Incentive management fee
adjustment related to
extinguishment of debt                                    -                               -        2,614               0.03
  Other adjustments                    2                  -          (12 )                -           15                  -
REIT tax planning adjustments      1,403               0.01          890               0.01        6,810               0.08

Cash items:

  Gains on sales of property
(1)                                8,990               0.07       14,588               0.12        1,664               0.02
  Gain on sale preferred
equity                               912               0.01            -                  -            -                  -
  Gain on resale of debt          21,469               0.17        7,810               0.07          670                  -
  Capital expenditures               (38 )                -       (1,149 )            (0.01 )     (3,081 )            (0.03 )
AFFO                            $ 94,947     $         0.73     $ 88,648    

$ 0.74 $ 86,170 $ 0.97


Weighted average shares -
diluted                          129,259                         120,039                          89,284

AFFO per share - diluted        $   0.73                        $   0.74                        $   0.97




(1) Amount represents gains/losses on sales of owned real estate as well as sales

of a joint venture real estate interest that were recorded by us


on an equity basis.


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Liquidity and Capital Resources
For the year ended December 31, 2014, our principal sources of liquidity were
net proceeds from the June offering of our 8.625% Series C Preferred Stock of
$116.2 million, $56.6 million net proceeds from the sale of our 8.25% Series B
Preferred Stock and 8.50% Series A Preferred Stock through our ATM program. For
the year ended December 31, 2014, we also received $30.3 million of sale
proceeds from our common stock DRIP. We ended the year with $79.9 million of
unrestricted cash on hand, availability of $392.6 million on our CRE term
facilities and availability of $70.1 million on our CMBS term facility as of
December 31, 2014. On February 25, 2015 at the close of our new securitization,
Resource Capital Corp. 2015-CRE3, we repaid $214.1 million, which resulted in us
having $512 million available on our CRE term facilities.
As of December 31, 2013, our principal sources of current liquidity were
proceeds from the sale of common stock through our DRIP, proceeds from our
offerings of our 8.25% Series B Preferred Stock as well as funds available in
existing CDO financings of $35.1 million and cash flow from operations. For the
year ended December 31, 2013, we received $114.5 million of net proceeds from
our common stock offering, $19.2 million of DRIP proceeds and $56.8 million of
preferred stock sales proceeds, the remainder of which are included in our
$262.3 million of unrestricted cash at December 31, 2013. In October 2013, we
closed and issued $115.0 million aggregate principal amount of our 6.0%
Convertible Senior Notes due 2018. We received net proceeds of approximately
$111.1 million after payment of underwriting discounts and commissions and other
offering expenses. In addition, we had capital available through our two CRE
term facilities combined of $419.3 million and a CMBS term facility to help
finance the purchase of CMBS securities of $52.4 million as of December 31,
2013.
Our on-going liquidity needs consist principally of funds to make investments,
make debt repurchases, make distributions to our stockholders and pay our
operating expenses, including our management fees.  Our ability to meet our
on-going liquidity needs will be subject to our ability to generate cash from
operations and, with respect to our investments, our ability to maintain and/or
obtain additional debt financing and equity capital together with the funds
referred to above.
Most recently, we have begun to issue commercial real estate securitizations. In
February 2015, we closed a $346.2 million CRE securitization, our third in the
trailing 14 months, which brings our total to just in excess of $1 billion of
mortgage loans financed during that time frame. We will derive substantial
operating cash from our equity investments in the securitizations, which do not
have the same tests that our CDOs require us to maintain. These CRE
securitizations do not have a reinvestment period but they do allow for existing
collateral within the securitizations to purchase future funding participations
held outside of the securitization within a permitted funded companion
participation acquisition period, which typically is within two years after the
close of the securitization. This will allow us to recycle some early repaid
principal and convert the designated principal for funded companion
participation acquisition cash which would otherwise be used to pay down the
most senior notes in the securitization into unrestricted cash.
Historically, we have financed a substantial portion of our portfolio
investments through CDOs that essentially match the maturity and repricing dates
of these financing vehicles with the maturities and repricing dates of our
investments. We derive substantial operating cash from our equity investments in
our CDOs which, if the CDOs fail to meet certain tests, will cease. Through
December 31, 2014, we have not experienced difficulty in maintaining our
existing CDO financing and have passed all of the critical tests required by
these financings. However, we cannot assure you that we will continue to meet
all such critical tests in the future. If we are unable to renew, replace or
expand our sources of existing financing on substantially similar terms, we may
be unable to implement our investment strategies successfully and may be
required to liquidate portfolio investments.  If required, a sale of portfolio
investments could be at prices lower than the carrying value of such assets,
which would result in losses and reduced income.











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The following table sets forth the distributions made and coverage test
summaries for each of our securitizations for the periods presented (in
thousands):
                                                               Annualized
                                                           Interest Coverage              Overcollateralization
                               Cash Distributions               Cushion                          Cushion
                                   Years Ended                              As of
                                  December 31,                           December 31,                    As of Initial
         Name               2014 (1)        2013 (1)          2014 (2) (3)           2014 (4)           Measurement Date
                            (actual)        (actual)
Apidos CDO I (5)          $    16,322     $     4,615                   N/A              N/A          $           17,136
Apidos CDO III (6)        $     3,551     $     6,495      $          2,504     $      9,473          $           11,269
Apidos Cinco CDO (7)      $     9,757     $    12,058      $          8,756     $     20,630          $           17,774
RREF 2006-1 (8)           $    10,172     $    36,828      $          4,033     $     54,289          $           24,941
RREF 2007-1 (9)           $     7,630     $    10,880      $          3,960     $     58,690          $           26,032
RCC CRE Notes 2013 (10)   $    11,860             N/A                   N/A              N/A                         N/A
RCC CRE Notes 2014 (11)   $     5,463             N/A                   N/A              N/A                         N/A
Moselle CLO S.A. (12)     $     2,891             N/A                   N/A              N/A                         N/A

* The above table does not include Apidos CLO VIII or Whitney CLO I, as these CLOs were previously called and were substantially liquidated.

(1) Distributions on retained equity interests in securitizations (comprised of

note investments and preference share ownership) and principal paydowns on

notes owned; RREF CDO 2006-1 includes $4.2 million and $28.1 million of

paydowns during the years ended December 31, 2014 and 2013, respectively;

     Apidos CDO I includes $15.0 million of paydowns during the year ended
     December 31, 2014.


(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 our preference shares.

(4) Overcollateralization cushion represents the amount by which the collateral

     held by the CDO issuer exceeds the maximum amount required.


(5)  Apidos CDO I's reinvestment period expired in July 2011. Apidos CDO I was

called and substantially liquidated as of October 27, 2014; consequently,

there are no overcollateralization or interest coverage test requirements as

of December 31, 2014.

(6) Apidos CDO III's reinvestment period expired in June 2012.

(7) Apidos Cinco CDO's reinvestment period expired in May 2014.

(8) RREF CDO 2006-1's reinvestment period expired in September 2011.

(9) RREF CDO 2007-1's reinvestment period expired in June 2012.

(10) Resource Capital Corp. CRE Notes 2013 ("RCC CRE Notes 2013") closed on

December 23, 2013; the first distribution was in January 2014. There is no

reinvestment period for the securitization. Additionally, the indenture

contains no coverage tests.

(11) Resource Capital Corp. 2014-CRE2 ("RCC CRE 2014") closed on July 30, 2014;

the first distribution was in August 2014. There is no reinvestment period

for the securitization. Additionally, the indenture contains no coverage

tests.

(12) Moselle CLO S.A. was acquired on February 24, 2014; the first distribution

we were entitled to receive was in April 2014. The reinvestment period for

this securitization expired prior to the acquisition of this securitization.

As of December 31, 2014, Moselle CLO S.A. was called and its assets were

substantially liquidated.

At January 31, 2015, after paying our fourth quarter 2014 common and preferred stock dividends, our liquidity is derived from three primary sources: • unrestricted cash and cash equivalents of $188.5 million, restricted

          cash of $680,000 in margin call accounts and $203,000 in the form of
          real estate escrows, reserves and deposits;


•         capital available for reinvestment in one of our CRE CDO's of $250,000
          and one of our CRE securitizations of $2.7 million, all of which is
          designated to finance future funding commitments on CRE loans; and


•         loan principal repayments of $33.1 million that will pay down
          outstanding CLO note balances as well as interest collections of $3.2
          million.




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In addition, we have funds available through two term financing facilities to
finance the origination of CRE loans of $134.3 million and $173.8 million , and
funds available through a term financing facility to finance the purchase of
CMBS of $74.5 million. We also have funds available through a middle market
syndicate facility to finance the direct origination of middle market loans and
purchase of syndicated bank loans of $11.5 million.
Our leverage ratio may vary as a result of the various funding strategies we
use.  As of December 31, 2014 and 2013, our leverage ratio was 1.8 and 1.7 times
equity, respectively.  This leverage ratio increase was driven primarily by the
issuance of our second commercial real estate securitization, RCC CRE 2014, in
July, increased advances under our Wells Fargo CRE term financing facility and
borrowings under our senior secured revolving credit facility with J.P. Morgan.
These debt increases were offset by repayments of our existing CDO notes, the
liquidation of Apidos CDO I, as well as an increase in our equity base as a
result of proceeds received from our Series C preferred stock offering, sales
through our preferred stock ATM program, and our common stock DRIP.
Distributions
In order to maintain our qualification as a REIT and to avoid corporate-level
income tax on the income we distribute to our stockholders, we intend to make
regular quarterly distributions of all or substantially all of our net taxable
income to holders of our common stock.  This requirement can impact our
liquidity and capital resources.
The following tables presents dividends declared (on a per share basis) for the
years ended December 31,:
                          Common Stock
                                       Total           Dividend
                  Date Paid        Dividend Paid      Per Share
                                   (in thousands)
2014
March 31           April 28       $        25,663    $      0.20
June 30            July 28        $        26,179    $      0.20
September 30      October 28      $        26,629    $      0.20
December 31    January 28, 2015   $        26,563    $      0.20

2013
March 31           April 26       $        21,634    $      0.20
June 30            July 26        $        25,399    $      0.20
September 30      October 28      $        25,447    $      0.20
December 31    January 28, 2014   $        25,536    $      0.20

2012
March 31           April 27       $        16,921    $      0.20
June 30            July 26        $        17,253    $      0.20
September 30      October 26      $        19,897    $      0.20
December 31    January 28, 2013   $        21,024    $      0.20





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                                                                         Preferred Stock
                             Series A                                                  Series B                                       Series C
                                        Total           Dividend                       Total           Dividend                       Total           Dividend
                  Date Paid         Dividend Paid      Per Share     Date Paid     Dividend Paid      Per Share     Date Paid     Dividend Paid       Per Share
                                   (in thousands)                                 (in thousands)                                 (in thousands)
2014
March 31           April 30                   463     $  0.53125     April 30    $         2,057     $ 0.515625
June 30            July 30                    537     $  0.53125      July 30    $         2,378     $ 0.515625      July 30    $         1,437     $ 0.0299479
                                                                      October                                        October
September 30      October 30                  537     $  0.53125        30       $         2,430     $ 0.515625        30       $         2,588     $ 0.5390625
                                                                      January                                        January
December 31    January 30, 2015               568     $  0.53125     30, 2015    $         2,888     $ 0.515625     30, 2015    $         2,588     $ 0.5390625

2013
March 31           April 30       $           359     $  0.53125     April 30    $         1,152     $ 0.515625
June 30            July 30        $           359     $  0.53125      July 30    $         1,584     $ 0.515625
                                                                      October
September 30      October 30      $           362     $  0.53125        30       $         1,662     $ 0.515625
                                                                      January
December 31    January 30, 2014   $           362     $  0.53125     30, 2014    $         1,797     $ 0.515625

2012
March 31              -           $             -     $        -         -       $             -     $        -
June 30            July 30        $            93     $  0.27153         -       $             -     $        -
                                                                      October
September 30      October 30      $           359     $  0.53125        30       $           160     $  0.16042
                                                                      January
December 31    January 30, 2013   $           359     $  0.53125     30, 2013    $           576     $ 0.515625

Contractual Obligations and Commitments

                                                         Contractual Commitments
                                                         (dollars in thousands)
                                                         Payments due by Period
                                              Less than                                           More than
                                Total          1 year         1 - 3 years       3 - 5 years        5 years
CDOs (1)                    $   590,679     $         -     $           -     $           -     $   590,679
CRE Securitization              455,814               -                 -                 -         455,814
Repurchase Agreements
(2)                             399,662         194,933           204,729                 -               -
Unsecured junior
subordinated debentures
(3)                              51,205               -                 -                 -          51,205
6.0% Convertible Senior
Notes (4)                       108,374               -                 -           108,374               -
Unfunded commitments on
CRE loans (6)                   105,153               -           105,153                 -               -
Senior Secured Revolving
Credit Facility                 111,137               -                 -           111,137               -
Revolver draws available
on originated middle
market loans                     10,801           1,927             5,924             2,950               -
Base management fees (7)         14,020          14,020                 -                 -               -
Total                       $ 1,846,845     $   210,880     $     315,806  
  $     222,461     $ 1,097,698




(1) Contractual commitments does not include $1.2 million, $442,000, $2.8

million, and $6.2 million of interest expense payable through the stated

maturity dates of May 2015, May 2015, August 2016, and June 2017,

respectively, on Apidos Cinco CDO, Apidos CDO III, RREF 2006-1, and RREF

2007-1. The maturity date represents the time at which the CDO assets can be

    sold, resulting in repayment of the CDO notes.



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(2) Contractual commitments include $261,000 of interest expense payable through

the maturity date of January 2017 on our repurchase agreements.

(3) Contractual commitments do not include $43.5 million and $44.4 million of

estimated interest expense payable through the maturity dates of June 2036

and October 2036, respectively, on our trust preferred securities.

(4) Contractual commitments do not include $28.0 million of interest expense

payable through the maturity date of December 1, 2018 on our 6.0% convertible

senior notes.

(5) Unfunded commitments on CRE loans generally fall into two categories:

(1) pre-approved capital improvement projects; and (2) new or additional

construction costs subject, in each case, to the borrower meeting specified

criteria. Upon completion of the improvements or construction, we would

receive additional interest income on the advanced amount.

(6) The financing or credit agreements on our originated middle market loans, in

some cases, allow for subsequent advances. All advances require compliance

with the contractual criteria and terms as specifically described in the

individual financing or credit agreement, and therefore are subject to the

approval of the appropriate portfolio manager. Loans earn income, typically

in the form of interest and fees, as specifically outlined in the

documentation of each loan.

(7) Calculated only for the next 12 months based on our current equity, as

defined in our management agreement. Our management agreement also provides

    for an incentive fee arrangement that is based on operating
    performance. Because the incentive fee is not a fixed and determinable
    amount, it is not included in this table.


At December 31, 2014, we had 10 interest rate swap contracts with a notional
value of $124.0 million.  These contracts are fixed-for-floating interest rate
swap agreements under which we contracted to pay a fixed rate of interest for
the term of the hedge and will receive a floating rate of interest.  As of
December 31, 2014, the average fixed pay rate of our interest rate hedges was
5.12% and our receive rate was one-month LIBOR, or 0.17%.
Off-Balance Sheet Arrangements
General
As of December 31, 2014, we did not maintain any relationships with
unconsolidated entities or financial partnerships that were established for the
purpose of facilitating off-balance sheet arrangements or contractually narrow
or limited purposes, although we do have interests in unconsolidated entities
not established for those purposes. Except as set forth below, as of
December 31, 2014, we had not guaranteed obligations of any such unconsolidated
entities or entered into any commitment or letter of intent to provide
additional funding to any such entities.
Unfunded Commercial Real Estate Loan Commitments
In the ordinary course of business, we make commitments to borrowers whose loans
are in our commercial real estate loan portfolio to provide additional loan
funding in the future. These commitments generally fall into two categories: (1)
pre-approved capital improvement projects; and (2) new or additional
construction costs. Disbursement of funds pursuant to these commitments is
subject to the borrower meeting pre-specified criteria. Upon disbursement of
funds, we receive loan interest income on any such advanced funds. As of
December 31, 2014, we had 36 loans with unfunded commitments totaling $105.2
million of which $2.7 million will be funded by restricted cash in RCC CRE Notes
2013 and $250,000 will be funded by restricted cash in RREF CDO 2007-1; we
intend to fund the remaining $102.1 million through cash flow from normal
operating activities and principal repayments on other loans in our portfolio.
These commitments are subject to the same underwriting requirements and ongoing
portfolio maintenance as are the on-balance sheet financial instruments that we
hold. Since these commitments may expire without being drawn upon, the total
commitment amount does not necessarily represent future cash requirements.
Unfunded Middle Market Loan Commitments
During the year ended December 31, 2013, we began originating middle-market
loans in RCC Commercial, Inc and Resource TRS, LLC. In December 31, 2014, RCC
Commercial and Resource TRS, LLC transferred all loans to a newly formed entity,
Northport LLC. Resource America is paid origination fees in connection with our
middle-market lending operations, where fees may not exceed 2% of the loan
balance for any loan originated. The executed agreements between us and
borrowers within our portfolio contain commitments to provide additional loan
funding in the future. These commitments generally fall into two categories: (1)
revolving credit facility; and (2) additional notes commitments. Disbursement of
funds pursuant to these commitments are subject to the borrower meeting
pre-specified criteria and in some instances at our discretion. Upon
disbursement of funds, we receive loan interest income on any such advanced
funds. As of December 31, 2014, we had four loans with unfunded commitments
totaling $10.8 million, all of which would be funded by Northport LLC. We intend
to fund these commitments through cash flow from normal operating activities.
Since these commitments may expire without being drawn upon, the total
commitment amount does not necessarily represent future cash requirements.

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Guarantees and Indemnifications
In the ordinary course of business, we may provide guarantees and
indemnifications that contingently obligate us to make payments to the
guaranteed or indemnified party based on changes in the value of an asset,
liability or equity security of the guaranteed or indemnified party. As such, we
may be obligated to make payments to a guaranteed party based on another
entity's failure to perform or achieve specified performance criteria, or we may
have an indirect guarantee of the indebtedness of others.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared by management in accordance
with GAAP. The preparation of financial statements in conformity with GAAP
requires that we make estimates and assumptions that may affect the value of our
assets or liabilities and our financial results. We believe that certain of our
policies are critical because they require us to make difficult, subjective and
complex judgments about matters that are inherently uncertain. The critical
policies summarized below relate to valuation of investment securities,
accounting for derivative financial instruments and hedging activities, income
taxes, allowance for loan and lease losses and variable interest entities. We
have reviewed these accounting policies with our board of directors and believe
that all of the decisions and assessments upon which our financial statements
are based were reasonable at the time made based upon information available to
us at the time. We rely on the Manager's experience and analysis of historical
and current market data in order to arrive at what we believe to be reasonable
estimates.
Valuation of Investment Securities
We classify our investment portfolio as either available-for-sale investments or
trading investments. For a discussion of the basis of fair value analysis, and
of the determination of whether an asset's valuation should be characterized as
Level 1, Level 2 or Level 3, see Note 22, "Fair Value of Financial Instruments"
in the notes to consolidated financial statements.
We report securities available-for-sale at fair value, with unrealized gains and
losses reported as a component of accumulated other comprehensive income (loss)
in stockholders' equity. We also report investment securities, trading at fair
value with unrealized gains and losses reported on the statement of income as
net realized and unrealized gain on investment securities, trading. As of
December 31, 2014 and 2013, we had aggregate unrealized gains on our
available-for-sale securities of $15.4 million and unrealized losses of $3.1
million, respectively. To determine fair value, we use an independent third-part
valuation firm. These valuations are validated using a quote from a dealer,
which typically will be the dealer who sold us the security. If there is a
material difference between the value indicated by the third-party valuation
firm and the dealer quote, we will evaluate the difference which could result in
an updated valuation from the third-party firm or a revised dealer quote. Based
on the market color available for each position, we categorize these investments
as either 2, or 3 in the fair value hierarchy.
We are required to determine when an investment is considered impaired (i.e.,
decline in fair value below its amortized cost), evaluate whether the impairment
is other than temporary (i.e., the investment value will not be recovered over
its remaining life), and, if the impairment is other than temporary, recognize
an impairment loss equal to the difference between the investment's cost and its
fair value.
We record investment securities transactions on the trade date. We record
purchases of newly issued securities when all significant uncertainties
regarding the characteristics of the securities are removed, generally shortly
before settlement date. We determine realized gains and losses on investment
securities on the specific identification method.
Accounting for Derivative Financial Instruments and Hedging Activities
Our policies permit us to enter into derivative contracts, including interest
rate swaps and interest rate caps, as a means of mitigating our interest rate
risk on forecasted interest expense associated with the benchmark rate on
forecasted rollover/reissuance of repurchase agreements or the interest rate
repricing of repurchase agreements, or other similar hedged items, for a
specified future time period.
As of December 31, 2014, we had engaged in 10 interest rate swaps with a
notional value of $124.0 million and a fair value of $8.7 million to seek to
mitigate our interest rate risk for specified future time periods as defined in
the terms of the hedge contracts. As of December 31, 2013, we had engaged in 12
interest rate swaps with a notional value of $129.5 million and a fair value of
$10.6 million to seek to mitigate our interest rate risk for specified future
time periods as defined in the terms of the hedge contracts. The contracts we
have entered into have been designated as cash flow hedges and are evaluated at
inception and on an ongoing basis in order to determine whether they qualify for
hedge accounting. The hedge instrument must be highly effective in achieving
offsetting changes in the hedged item attributable to the risk being hedged in
order to qualify for hedge accounting. A hedge instrument is highly effective if
changes in the fair value of the derivative provide an offset to at least 80%
and not more than 125% of the changes in fair value or cash flows of the hedged
item attributable to the risk being hedged. The interest rate swap contracts are
carried on our consolidated balance sheets at fair value. Any ineffectiveness
which arises during

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the hedging relationship must be recognized in interest expense or income during
the period in which it arises. Before the end of the specified hedge time
period, the effective portion of all contract gain and losses (whether realized
or unrealized) is recorded in other comprehensive income or loss. Realized gains
and losses on the interest rate hedges are reclassified into earnings as an
adjustment to interest expense during the period after the swap repricing date
through the remaining maturity of the swap. For taxable income purposes,
realized gains and losses on interest rate cap and swap contracts are
reclassified into earnings over the term of the hedged transactions as
designated for tax.
We are not required to account for derivative contracts using hedge accounting
as described above. If we decided not to designate the derivative contracts as
hedges and to monitor their effectiveness as hedges, or if we entered into other
types of financial instruments that did not meet the criteria to be designated
as hedges, changes in the fair values of these instruments would be recorded in
our statement of income, potentially resulting in increased volatility in our
earnings. We had no interest rate cap agreements at December 31, 2014 and 2013.
We may also enter into forward contracts for the sale of mortgage-backed
securities for the purpose of hedging our closed residential mortgage loans held
for sale and our pipeline of residential mortgage loans expected to close. As
residential mortgage loans are closed, they are typically sold at prices
specified in the forward contracts. Gains or losses may arise if the yields of
the loans delivered vary from those specified in the forward contracts.
Derivative mortgage loan commitments, or interest rate locks, may also be
utilized and relate to the origination of a mortgage that will be held for sale
upon funding.
Income Taxes
The objectives of accounting for income taxes are to recognize the amount of
taxes payable or refundable for the current year and the future tax consequences
of events that have been recognized in our consolidated financial statements or
tax returns.
The tax rates we use to determine deferred tax assets or liabilities are the
enacted tax rates in effect for the year in which we expect the differences to
reverse.  We recognize effects of tax rate changes on deferred tax liabilities
and deferred tax assets, as well as other changes in income tax laws in net
earnings in the period during which such changes are enacted.  The future
realization of deferred tax assets depends upon the generation of future taxable
income during the periods in which those temporary differences become
deductible.  We continually evaluate our ability to realize the tax benefits
associated with deferred tax assets by analyzing forecasted taxable income using
both historical and projected future operating results, the reversal of existing
temporary differences, taxable income in prior carryback years (if permitted)
and the availability of tax planning strategies.  We must establish a valuation
allowance unless we determine that it is more likely than not that we will
ultimately realize the tax benefit associated with a deferred tax asset.
We account for taxes assessed by a governmental authority that is directly
imposed on a revenue-producing transaction (e.g., sales, use, value added) on a
net (excluded from revenue) basis.
Allowance for Loan Losses
We maintain an allowance for loan losses. Loans held for investment are first
individually evaluated for impairment, and then evaluated as a homogeneous pool
as loans with substantially similar characteristics for impairment. We perform
the reviews at least quarterly.
We consider an individual loan to be impaired when, based on current information
and events, management believes it is probable that we will be unable to collect
all amounts due according to the contractual terms of the loan agreement. When a
loan is impaired, we increase the allowance for loan losses by the amount of the
excess of the amortized cost basis of the loan over its fair value. Fair value
may be determined based on the present value of estimated cash flows; on market
price, if available; or the fair value of the collateral less estimated
disposition costs. When we consider a loan, or a portion thereof, uncollectible
and pursuit of the collection is not warranted, we will record a charge-off or
write-down of the loan against the allowance for credit losses.
Variable Interest Entities
We consolidate entities that are variable interest entities, or VIEs where we
have determined that we are the primary beneficiary of such entities. Once it is
determined that we hold a variable interest in a VIE, management performs a
qualitative analysis to determine (i) if we have the power to direct the matters
that most significantly impact the VIE's financial performance; and (ii) if we
have the obligation to absorb the losses of the VIE that could potentially be
significant to the VIE or the right to receive the benefits of the VIE that
could potentially be significant to the VIE. If our variable interest possesses
both of these characteristics, we are deemed to be the primary beneficiary and
would be required to consolidate the VIE. This assessment must be done on an
ongoing basis. As of December 31, 2014, we determined that Apidos CDO I, Apidos
CDO III, Apidos Cinco CDO, Apidos CLO VIII, RREF CDO 2006-1, RREF CDO 2007-1,
Whitney CLO I, RCC CRE Notes 2013, RCC CRE 2014, Moselle CLO and RCM Global, LLC
are VIEs and that we are the primary beneficiary.

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Recent Accounting Pronouncements
In February 2015, the Financial Accounting Standards Board ("FASB") issued
guidance that requires an entity to evaluate whether they should consolidate
certain legal entities. All legal entities are subject to reevaluation under the
revised consolidation model. Specifically, the amendments: (1) Modify the
evaluation of whether limited partnerships and similar legal entities are
variable interest entities (VIEs) or voting interest entities; (2) Eliminate the
presumption that a general partner should consolidate a limited partnership; (3)
Affect the consolidation analysis of reporting entities that are involved with
VIEs, particularly those that have fee arrangements and related party
relationships; (4) Provide a scope exception from consolidation guidance for
reporting entities with interests in legal entities that are required to comply
with or operate in accordance with requirements that are similar to those in
Rule 2a-7 of the Investment Company Act of 1940 for registered money market
funds. This guidance is effective for public business entities for fiscal years,
and for interim periods within those fiscal years, beginning after after
December 15, 2015. Early application is permitted. We do not expect adoption
will have a material impact on our consolidated financial statements.
In November 2014, the FASB issued guidance for determining whether and at what
threshold an acquired entity can reflect the acquirer's accounting and reporting
basis (pushdown accounting) in its separate financial statements. In accordance
with this guidance, management may elect the option to apply pushdown accounting
in the reporting period in which the change-in-control event occurs. An acquired
entity should determine whether to elect to apply pushdown accounting for each
individual change-in-control event in which an acquirer obtains control of the
acquired entity. If pushdown accounting is not applied in the reporting period
in which the change-in-control event occurs, an acquired entity will have the
option to elect to apply pushdown accounting in a subsequent reporting period to
the acquired entity's most recent change-in-control event. An election to apply
pushdown accounting in a reporting period after the reporting period in which
the change-in-control event occurred should be considered a change in accounting
principle in accordance with ASC Topic 250, Accounting Changes and Error
Corrections. If pushdown accounting is applied to an individual
change-in-control event, that election is irrevocable. If an acquired entity
elects the option to apply pushdown accounting in its separate financial
statements, it should disclose information in the current reporting period that
enables users of financial statements to evaluate the effect of pushdown
accounting. This guidance was effective after November 18, 2014. We are
currently evaluating the effect of adoption but do not expect adoption will have
a material impact on our consolidated financial statements.
In November 2014, the FASB issued guidance to eliminate the use of different
methods in practice and thereby reduce existing diversity under GAAP in the
accounting for hybrid financial instruments issued in the form of a share. An
entity that issues or invests in a hybrid financial instrument is required to
separate an embedded derivative feature from the host contract (for example, an
underlying share) and account for the feature as a derivative according to ASC
Subtopic 815-10 on derivatives and hedging if certain criteria are met. This
guidance is effective for annual periods, and interim periods within those
annual periods, beginning after December 15, 2015 and interim periods beginning
after December 15, 2016. Early adoption is permitted. We are currently
evaluating the effect of adoption.
In August 2014, the FASB issued guidance that clarifies the disclosures
management must make in its interim and annual financial statement footnotes
when management has determined that conditions exist that raise substantial
doubt about the entity's ability to continue as a going concern within one year
after the date the financial statements are issued (or within one year after the
date the financial statements are available to be issued when applicable). In
accordance with this guidance, management's assessment is required to be made
each reporting period and should be based on relevant conditions and events that
are known and reasonably knowable at the date the financial statements are
issued. In all cases, to the extent that substantial doubt about the entity's
ability to continue as a going concern is determined to be probable, management
must disclose the principal conditions or events that gave rise to the
substantial doubt about the entity's ability to continue as a going concern,
management's evaluation of the significance of those conditions or events in
relation to the entity's ability to meet its obligations, and management's plans
that either alleviated or are intended to mitigate the conditions or events that
gave rise to the substantial doubt about the entity's ability to continue as a
going concern. Additionally, to the extent substantial doubt about the entity's
ability to continue as a going concern is not alleviated by management's plans,
management must indicate in the footnotes that there is substantial doubt about
the entity's ability to continue as a going concern. This guidance is effective
for the annual period ending after December 15, 2016, and for annual periods and
interim periods thereafter. Early adoption is permitted. We do not expect
adoption will have a material impact on its consolidated financial statements.
In August 2014, the FASB issued guidance that provides for the election of a
measurement alternative when a reporting entity determines that it is the
primary beneficiary of a collateralized financing entity and, hence, is required
to consolidate that collateralized financing entity. The measurement alternative
allows a qualifying, consolidated collateralized financing entity to use the
more observable of the fair value the financial assets or the fair value of
financial liabilities adjusted by the carrying amount of non-financial assets,
the fair value of any beneficial interests retained by the reporting entity
(including those beneficial interest that represent compensation for services).
Alternatively, if the measurement alternative is not elected for a qualifying,
consolidated collateralized financing entity, this guidance requires that the
financial assets and financial liabilities be measured in accordance

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with ACI Topic 820, and any difference in the fair value of the financial assets
and the fair value of the financial liabilities would be reflected in earnings
and attributed to the reporting entity in the consolidated statement of income
(loss). This guidance is effective for public business entities for annual
periods, and interim periods within those annual periods, beginning after
December 15, 2015. Early adoption is permitted as of the beginning of an annual
period. We are currently evaluating the effect of adoption but do not expect
adoption will have a material impact on our consolidated financial statements.
In January 2014, the FASB issued guidance that clarifies when a creditor is
considered to have received physical possession of residential real estate
property collateralizing a consumer mortgage loan. Furthermore, the guidance
requires interim and annual disclosure of the amount of foreclosed residential
real estate property held by the creditor and the recorded investment in
consumer mortgage loans collateralized by residential real estate property that
are in the process of foreclosure according to local requirements of the
applicable jurisdiction. This guidance is effective or annual periods, and
interim periods within those annual periods, beginning after December 15, 2014.
We are currently evaluating the effect of adoption, but do not expect adoption
will have a material impact on our consolidated financial statements.
In July 2013, the FASB issued guidance which permits the Federal Funds Effective
Swap Rate (OIS) to be used as a U.S. benchmark interest rate for hedge
accounting purposes. This guidance is effective prospectively for qualifying new
or redesignated hedging relationships entered into on or after July 17, 2013.
Adoption did not have a material impact on our consolidated financial
statements.
In June 2013, the FASB issued guidance which clarifies the characteristics of an
investment company, provides comprehensive guidance for assessing whether an
entity is an investment company and requires an investment company to measure
non-controlling ownership interests in other investment companies at fair value
rather than using the equity method of accounting. The guidance also requires
additional disclosure. This guidance is effective for an entity's interim and
annual reporting periods in fiscal years that begin after December 15, 2013.
Earlier application is prohibited. We are currently evaluating the effect of
adoption, but do not expect adoption will have a material impact on our
consolidated financial statements.
In February 2013, the FASB issued guidance which amends required information
about the amounts reclassified out of accumulated other comprehensive income by
component. In addition, an entity is required to present, either on the face of
the statement where net income is presented or in the notes, significant amounts
reclassified out of accumulated other comprehensive income by the respective
line items of net income but only if the amount reclassified is required under
GAAP to be reclassified to net income in its entirety in the same reporting
period. For other amounts that are not required under GAAP to be reclassified in
their entirety to net income, an entity is required to cross-reference to other
disclosures required under GAAP that provide additional detail about those
amounts. The amendments in this guidance were effective for reporting periods
beginning after December 15, 2012. We provided the enhanced footnote disclosure
required by this guidance in our consolidated financial statements.
In January 2013, the FASB issued guidance which clarifies the scope of
accounting for certain derivatives including bifurcated embedded derivatives,
repurchase agreements and reverse repurchase agreements, and securities
borrowing and securities lending transactions that are either offset or subject
to an enforceable master netting arrangement or similar agreement. The
amendments in this guidance were effective for interim and annual reporting
periods beginning on or after January 1, 2013 and will be applied
retrospectively for all comparative periods presented. We provided the enhanced
footnote disclosure required by this guidance in our consolidated financial
statements.
Inflation
Virtually all of our assets and liabilities are interest rate sensitive in
nature. As a result, interest rates and other factors influence our performance
far more than does inflation. Changes in interest rates do not necessarily
correlate with inflation rates or changes in inflation rates. Our financial
statements are prepared in accordance with GAAP and our distributions are
determined by our board of directors based primarily on adjusted funds from
operations, a non-GAAP measure; in each case, our activities and balance sheet
are measured with reference to historical cost and/or fair market value without
considering inflation.

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