NEW YORK, Oct. 30, 2018 (GLOBE NEWSWIRE) -- Exantas Capital Corp. (NYSE: XAN) ("XAN" or the "Company") (formerly known as Resource Capital Corp.) reports results for the three and nine months ended September 30, 2018.
Significant Items and Highlights
- GAAP net income allocable to common shares of $0.19 per common share-diluted for the three months ended September 30, 2018.
- Core Earnings were $0.17 per common share-diluted and Core Earnings, adjusted were $0.24 per common share-diluted for the three months ended September 30, 2018 (see Schedule I).
- Management anticipates the Company will declare a cash dividend of $0.175 per share on its common stock for the fourth quarter of 2018, which would be a 17% increase over the third quarter dividend of $0.15 per share and a 250% increase over the first quarter dividend of $0.05 per share.
- XAN originated $245.1 million and $586.7 million of new commercial real estate ("CRE") loans during the three and nine months ended September 30, 2018, respectively (see Schedule IV).
- XAN originated and acquired $1.1 billion of new CRE loans and commercial mortgage-backed securities ("CMBS") during the twelve months ended September 30, 2018.
- XAN has monetized $418.4 million of the investments that were included in management's previously communicated strategic plan (the "Plan") (see Schedule III). This includes $2.3 million and $54.3 million of assets liquidated during the three and nine months ended September 30, 2018, respectively.
- In October 2018, XAN entered into a new $250.0 million CRE term financing facility, increasing its borrowing capacity to over $900.0 million.
- Book value was $14.23 per common share at September 30, 2018, as compared to $14.09 per common share at June 30, 2018.
Three and Nine Months Ended September 30, 2018 Results
- GAAP net income allocable to common shares was $6.0 million, or $0.19 per share-diluted, and GAAP net loss allocable to common shares was $394,000, or $(0.01) per share-diluted, for the three and nine months ended September 30, 2018, respectively, as compared to GAAP net income allocable to common shares of $12.6 million, or $0.41 per share-diluted, and $17.8 million, or $0.57 per share-diluted, for the three and nine months ended September 30, 2017, respectively.
- Core Earnings were $5.2 million, or $0.17 per common share-diluted, for the three months ended September 30, 2018 and $7.6 million, or $0.24 per common share-diluted, after a $2.3 million, or $0.07 per common share-diluted, adjustment for a realized loss on the sale of a previously impaired, 2013 vintage CRE loan. Core Earnings were $2.9 million, or $0.09 per common share-diluted, for the nine months ended September 30, 2018 and $14.9 million, or $0.48 per common share-diluted, after adjustments for (i) a realized loss on the sale of a previously impaired, 2013 vintage CRE loan, (ii) non-recurring charges related to the redemption of the Company's 8.25% Series B Cumulative Redeemable Preferred Stock ("Series B Preferred Stock") and (iii) the settlement of a securities litigation.
Additional Items
Commercial Real Estate
- Substantially all of XAN's $1.5 billion CRE loan portfolio comprised floating rate senior whole loans at September 30, 2018.
- XAN's CRE floating rate whole loan portfolio had a weighted average spread of 4.25% over the one-month London Interbank Offered Rate ("LIBOR") of 2.26% at September 30, 2018.
The following table summarizes XAN's CRE loan activities and fundings of previous commitments for the three, nine and twelve months ended September 30, 2018 (in millions, except percentages and amounts in footnotes):
| Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2018 | Twelve Months Ended September 30, 2018 | |||||||||
| New CRE loan commitments | $ | 245.1 | $ | 567.5 | $ | 796.5 | |||||
| New CRE preferred equity investment | — | 19.2 | 19.2 | ||||||||
| Total CRE loan commitments and investments | 245.1 | 586.7 | 815.7 | ||||||||
| Sale, payoffs and paydowns (1)(2) | (171.2 | ) | (372.5 | ) | (558.2 | ) | |||||
| Previous commitments funded | 15.5 | 38.1 | 42.1 | ||||||||
| New unfunded loan commitments | (20.6 | ) | (50.5 | ) | (75.1 | ) | |||||
| Net CRE loans funded | $ | 68.8 | $ | 201.8 | $ | 224.5 | |||||
| Weighted average one-month LIBOR floor on new originations (3) | 1.97 | % | 1.76 | % | 1.61 | % | |||||
| Weighted average spread above one-month LIBOR (3) | 3.43 | % | 3.54 | % | 3.75 | % | |||||
| Weighted average unlevered yield, including amortization of origination fees | 5.84 | % | 5.89 | % | 5.90 | % | |||||
| (1) | CRE loan payoffs and extensions resulted in $740,000, $2.0 million and $2.9 million of exit and extension fees during the three, nine and twelve months ended September 30, 2018, respectively. | |||||||||||||||||||||
| (2) | Activity excludes legacy CRE loans classified as assets held for sale. | |||||||||||||||||||||
| (3) | Applicable to new floating rate CRE whole loans funded. | |||||||||||||||||||||
Commercial Mortgage-Backed Securities
- XAN's CMBS portfolio had a carrying value of $352.8 million and a weighted average coupon of 4.58% at September 30, 2018.
The following table summarizes XAN's CMBS activities, at face value, for the three, nine and twelve months ended September 30, 2018 (in millions, except percentages):
| Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2018 | Twelve Months Ended September 30, 2018 | |||||||||
| CMBS acquisitions | $ | 47.6 | $ | 169.0 | $ | 246.8 | |||||
| Sales | (10.0 | ) | (10.0 | ) | (12.4 | ) | |||||
| Principal paydowns | (5.6 | ) | (14.1 | ) | (37.2 | ) | |||||
| CMBS acquisitions, net | $ | 32.0 | $ | 144.9 | $ | 197.2 | |||||
| Weighted average coupon at September 30, 2018 | 4.70 | % | 4.34 | % | 4.58 | % | |||||
Liquidity
• At October 26, 2018, XAN's available liquidity consisted of two primary sources:
- unrestricted cash and cash equivalents of $80.0 million; and
- approximately $189.0 million of liquidity from available financing of unlevered CRE loans and CMBS.
Common Stock Book Value and Total Stockholders' Equity
The following table reconciles XAN's common stock book value from June 30, 2018 to September 30, 2018 (in thousands, except per share data and amounts in footnotes):
| Total Amount | Per Share Amount | |||||||
| Common stock book value at June 30, 2018 (1) | $ | 439,932 | $ | 14.09 | ||||
| Net income allocable to common shares | 6,036 | 0.19 | ||||||
| Change in other comprehensive income: | ||||||||
| Available-for-sale securities | 1,588 | 0.05 | ||||||
| Derivatives | 824 | 0.03 | ||||||
| Common stock dividends | (4,685 | ) | (0.15 | ) | ||||
| Common stock dividends on unvested shares | (63 | ) | — | |||||
| Accretion (dilution) from additional shares outstanding at September 30, 2018 (2) | 757 | 0.02 | ||||||
| Total net increase | 4,457 | 0.14 | ||||||
| Common stock book value at September 30, 2018 (1)(3) | $ | 444,389 | $ | 14.23 | ||||
| (1) | Per share calculations exclude unvested restricted stock, as disclosed on the consolidated balance sheets, of 422,592 and 427,591 shares at September 30, 2018 and June 30, 2018, respectively. The denominators for the calculations are 31,234,828 and 31,229,829 at September 30, 2018 and June 30, 2018, respectively. | |||||||||||||||||||||||||||||||
| (2) | Per share amount calculation includes the impact of 4,999 additional shares. | |||||||||||||||||||||||||||||||
| (3) | Common stock book value is calculated as total stockholders' equity of $560.3 million less preferred stock equity of $116.0 million at September 30, 2018. | |||||||||||||||||||||||||||||||
Common stock book value includes $11.8 million of unamortized discount resulting from the value of the conversion option on XAN's convertible senior notes. The convertible senior notes' discounts will be amortized into interest expense over the remaining life of each note issuance. At September 30, 2018, common stock book value excluding this item would have been $432.6 million, or $13.85 per common share.
Total stockholders' equity at September 30, 2018, which measures equity before accounting for non-controlling interests, was $560.3 million, of which $116.0 million was attributable to preferred stock. Total stockholders' equity at December 31, 2017 was $671.5 million, of which $223.8 million was attributable to preferred stock.
Investment Portfolio
The following table summarizes the amortized cost and net carrying amount of XAN's investment portfolio at September 30, 2018, classified by asset type (in thousands, except percentages and amounts in footnotes):
| At September 30, 2018 | Amortized Cost | Net Carrying Amount | Percent of Portfolio | Weighted Average Coupon | ||||||
| Core Assets: | ||||||||||
| CRE whole loans (1)(2) | $ | 1,464,152 | $ | 1,462,416 | 77.59% | 6.39% | ||||
| CRE mezzanine loan and preferred equity investment (2) | 24,072 | 24,072 | 1.28% | 11.21% | ||||||
| CMBS (3) | 350,179 | 352,778 | 18.72% | 4.58% | ||||||
| Total Core Assets | 1,838,403 | 1,839,266 | 97.59% | |||||||
| Non-Core Assets: | ||||||||||
| Investments in unconsolidated entities (4) | 48 | 48 | —% | N/A (8) | ||||||
| Structured notes (5) | 1,000 | — | —% | N/A (8) | ||||||
| Direct financing leases (5) | 801 | 66 | —% | 5.66% | ||||||
| Legacy CRE loans (6)(7) | 53,543 | 45,341 | 2.41% | 2.35% | ||||||
| Total Non-Core Assets | 55,392 | 45,455 | 2.41% | |||||||
| Total investment portfolio | $ | 1,893,795 | $ | 1,884,721 | 100.00% | |||||
| (1) | Net carrying amount includes an allowance for loan losses of $1.7 million at September 30, 2018. | |||||||||||||||||||||||||||||||||||||||
| (2) | Classified as CRE loans on the consolidated balance sheets. | |||||||||||||||||||||||||||||||||||||||
| (3) | Classified as investment securities available-for-sale on the consolidated balance sheets. | |||||||||||||||||||||||||||||||||||||||
| (4) | Classified as investments in unconsolidated entities on the consolidated balance sheets. | |||||||||||||||||||||||||||||||||||||||
| (5) | Classified as other assets on the consolidated balance sheets. | |||||||||||||||||||||||||||||||||||||||
| (6) | At June 30, 2018, two legacy CRE loans with total amortized costs and net carrying amounts of $28.3 million were reclassified to CRE loans on the consolidated balance sheets as XAN now intends to hold these loans to maturity. | |||||||||||||||||||||||||||||||||||||||
| (7) | Net carrying amount includes a lower of cost or market value adjustment of $8.2 million at September 30, 2018. | |||||||||||||||||||||||||||||||||||||||
| (8) | There are no stated rates associated with these investments. | |||||||||||||||||||||||||||||||||||||||
Supplemental Information
The following schedules of reconciliations and supplemental information at September 30, 2018 are included at the end of this release:
- Schedule I - Reconciliation of GAAP Net Income (Loss) to Core Earnings;
- Schedule II - Summary of Securitization Performance Statistics;
- Schedule III - Strategic Plan Update;
- Schedule IV - CRE Loan Activities; and
- Schedule V - Supplemental Information.
About Exantas Capital Corp.
Exantas Capital Corp. is a real estate investment trust that is primarily focused on originating, holding and managing commercial mortgage loans and commercial real estate-related debt investments.
The Company is externally managed by Exantas Capital Manager Inc. (the "Manager") (formerly known as Resource Capital Manager, Inc.), which is an indirect wholly-owned subsidiary of C-III Capital Partners LLC, a leading commercial real estate investment management and services company engaged in a broad range of activities.
For more information, please visit XAN's website at www.exantas.com or contact investor relations at IR@exantas.com.
Safe Harbor Statement
Statements made in this release may include forward-looking statements, which involve substantial risks and uncertainties. XAN's actual results, performance or achievements could differ materially from those expressed or implied in this release. The risks and uncertainties associated with forward-looking statements contained in this release include those related to:
- fluctuations in interest rates and related hedging activities;
- the availability of debt and equity capital to acquire and finance investments;
- defaults or bankruptcies by borrowers on XAN's loans or on loans underlying its investments;
- adverse market trends that have affected and may continue to affect the value of real estate and other assets underlying XAN's investments;
- increases in financing or administrative costs; and
- general business and economic conditions that have in the past impaired and may in the future impair the credit quality of borrowers and XAN's ability to originate loans.
For further information concerning these and other risks pertaining to the forward-looking statements contained in this release, and to the general risks to which XAN is subject, see Item 1A, "Risk Factors," included in its Annual Report on Form 10-K for the year ended December 31, 2017 and the risks expressed in its other public filings with the Securities and Exchange Commission.
XAN cautions you not to place undue reliance on any forward-looking statements contained in this release, which speak only as of the date of this release. All subsequent written and oral forward-looking statements attributable to XAN or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this release. Except to the extent required by applicable law or regulation, XAN undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.
Furthermore, certain non-GAAP financial measures are discussed in this release. XAN's presentation of this information is not intended to be considered in isolation of or as a substitute for the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP are set forth in Schedule I of this release and can be accessed through XAN's filings with the SEC at www.sec.gov.
The remainder of this release contains XAN's unaudited (2018) and audited (2017) consolidated balance sheets, unaudited consolidated statements of operations, a reconciliation of GAAP net income (loss) to Core Earnings, a summary of securitization performance statistics, an update on XAN's strategic plan, a summary of XAN's CRE loan activities and supplemental information regarding XAN's CRE loan portfolio and loans held for sale.
EXANTAS CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
| September 30, 2018 | December 31, 2017 | ||||||
| (unaudited) | |||||||
| ASSETS (1) | |||||||
| Cash and cash equivalents | $ | 48,053 | $ | 181,490 | |||
| Restricted cash | 6,580 | 22,874 | |||||
| Accrued interest receivable | 7,466 | 6,859 | |||||
| CRE loans, net of allowances of $1,736 and $5,328 | 1,514,829 | 1,284,822 | |||||
| Investment securities available-for-sale | 352,778 | 211,737 | |||||
| Principal paydowns receivable | 44,300 | 76,129 | |||||
| Investments in unconsolidated entities | 1,596 | 12,051 | |||||
| Derivatives, at fair value | 2,665 | 602 | |||||
| Other assets | 13,298 | 7,793 | |||||
| Assets held for sale (amounts include $17,000 and $61,841 of legacy CRE loans held for sale in continuing operations) | 17,854 | 107,718 | |||||
| Total assets | $ | 2,009,419 | $ | 1,912,075 | |||
| LIABILITIES (2) | |||||||
| Accounts payable and other liabilities | $ | 12,793 | $ | 5,153 | |||
| Management fee payable | 938 | 1,035 | |||||
| Accrued interest payable | 3,937 | 4,387 | |||||
| Borrowings | 1,422,906 | 1,163,485 | |||||
| Distributions payable | 6,474 | 5,581 | |||||
| Preferred stock redemption liability | — | 50,000 | |||||
| Derivatives, at fair value | — | 76 | |||||
| Accrued tax liability | 239 | 540 | |||||
| Liabilities held for sale | 1,787 | 10,342 | |||||
| Total liabilities | 1,449,074 | 1,240,599 | |||||
| STOCKHOLDERS' EQUITY | |||||||
| Preferred stock, par value $0.001: 10,000,000 shares authorized 8.25% Series B Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share; 0 and 4,613,596 shares issued and outstanding | — | 5 | |||||
| Preferred stock, par value $0.001: 10,000,000 shares authorized 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share; 4,800,000 and 4,800,000 shares issued and outstanding | 5 | 5 | |||||
| Common stock, par value $0.001: 125,000,000 shares authorized; 31,657,420 and 31,429,892 shares issued and outstanding (including 422,592 and 483,073 unvested restricted shares) | 32 | 31 | |||||
| Additional paid-in capital | 1,082,344 | 1,187,911 | |||||
| Accumulated other comprehensive income | 5,629 | 1,297 | |||||
| Distributions in excess of earnings | (527,665 | ) | (517,773 | ) | |||
| Total stockholders' equity | 560,345 | 671,476 | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 2,009,419 | $ | 1,912,075 | |||
EXANTAS CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (Continued)
(in thousands, except share and per share data)
| September 30, 2018 | December 31, 2017 | |||||
| (unaudited) | ||||||
| (1) Assets of consolidated variable interest entities ("VIEs") included in total assets above: | ||||||
| Restricted cash | $ | 5,504 | $ | 20,846 | ||
| Accrued interest receivable | 3,477 | 3,347 | ||||
| CRE loans, pledged as collateral and net of allowances of $927 and $1,330 | 780,302 | 603,110 | ||||
| Loans held for sale | — | 13 | ||||
| Principal paydowns receivable | — | 72,207 | ||||
| Other assets | 132 | 73 | ||||
| Total assets of consolidated VIEs | $ | 789,415 | $ | 699,596 | ||
| (2) Liabilities of consolidated VIEs included in total liabilities above: | ||||||
| Accounts payable and other liabilities | $ | 41 | $ | 96 | ||
| Accrued interest payable | 656 | 592 | ||||
| Borrowings | 548,526 | 416,655 | ||||
| Total liabilities of consolidated VIEs | $ | 549,223 | $ | 417,343 | ||
EXANTAS CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| REVENUES | |||||||||||||||
| Interest income: | |||||||||||||||
| CRE loans | $ | 26,496 | $ | 21,953 | $ | 74,314 | $ | 65,327 | |||||||
| Securities | 5,217 | 1,661 | 12,878 | 5,298 | |||||||||||
| Other | 123 | 369 | 261 | 2,464 | |||||||||||
| Total interest income | 31,836 | 23,983 | 87,453 | 73,089 | |||||||||||
| Interest expense | 17,322 | 13,853 | 47,865 | 42,454 | |||||||||||
| Net interest income | 14,514 | 10,130 | 39,588 | 30,635 | |||||||||||
| Other revenue | 25 | 130 | 82 | 2,022 | |||||||||||
| Total revenues | 14,539 | 10,260 | 39,670 | 32,657 | |||||||||||
| OPERATING EXPENSES | |||||||||||||||
| Management fees | 2,813 | 4,924 | 8,438 | 10,242 | |||||||||||
| Equity compensation | 757 | 895 | 2,383 | 2,417 | |||||||||||
| General and administrative | 2,336 | 4,336 | 7,943 | 11,780 | |||||||||||
| Depreciation and amortization | 36 | 26 | 68 | 126 | |||||||||||
| Impairment losses | — | — | — | 177 | |||||||||||
| (Recovery of) provision for loan and lease losses, net | (461 | ) | (612 | ) | (1,260 | ) | 518 | ||||||||
| Total operating expenses | 5,481 | 9,569 | 17,572 | 25,260 | |||||||||||
| 9,058 | 691 | 22,098 | 7,397 | ||||||||||||
| OTHER INCOME (EXPENSE) | |||||||||||||||
| Equity in earnings of unconsolidated entities | 454 | 41,047 | 231 | 41,290 | |||||||||||
| Net realized and unrealized gain (loss) on investment securities available-for-sale and loans and derivatives | 279 | (1,465 | ) | 569 | 15,619 | ||||||||||
| Net realized and unrealized (loss) gain on investment securities, trading | — | (9 | ) | 53 | (970 | ) | |||||||||
| Fair value adjustments on financial assets held for sale | (1,588 | ) | — | (6,244 | ) | 58 | |||||||||
| Loss on extinguishment of debt | — | (10,365 | ) | — | (10,365 | ) | |||||||||
| Other income (expense) | 57 | (690 | ) | 574 | (604 | ) | |||||||||
| Total other (expense) income | (798 | ) | 28,518 | (4,817 | ) | 45,028 | |||||||||
| INCOME FROM CONTINUING OPERATIONS BEFORE TAXES | 8,260 | 29,209 | 17,281 | 52,425 | |||||||||||
| Income tax (expense) benefit | — | (4,464 | ) | 31 | (5,938 | ) | |||||||||
| NET INCOME FROM CONTINUING OPERATIONS | 8,260 | 24,745 | 17,312 | 46,487 | |||||||||||
| NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX | 364 | (6,087 | ) | 161 | (10,832 | ) | |||||||||
| NET INCOME | 8,624 | 18,658 | 17,473 | 35,655 | |||||||||||
| Net income allocated to preferred shares | (2,588 | ) | (6,014 | ) | (10,385 | ) | (18,043 | ) | |||||||
| Consideration paid in excess of carrying value of preferred shares | — | — | (7,482 | ) | — | ||||||||||
| Net loss allocable to non-controlling interest, net of taxes | — | — | — | 196 | |||||||||||
| NET INCOME (LOSS) ALLOCABLE TO COMMON SHARES | $ | 6,036 | $ | 12,644 | $ | (394 | ) | $ | 17,808 | ||||||
| NET INCOME (LOSS) PER COMMON SHARE - BASIC: | |||||||||||||||
| CONTINUING OPERATIONS | $ | 0.18 | $ | 0.61 | $ | (0.02 | ) | $ | 0.93 | ||||||
| DISCONTINUED OPERATIONS | $ | 0.01 | $ | (0.20 | ) | $ | 0.01 | $ | (0.35 | ) | |||||
| TOTAL NET INCOME (LOSS) PER COMMON SHARE - BASIC | $ | 0.19 | $ | 0.41 | $ | (0.01 | ) | $ | 0.58 | ||||||
| NET INCOME (LOSS) PER COMMON SHARE - DILUTED: | |||||||||||||||
| CONTINUING OPERATIONS | $ | 0.18 | $ | 0.61 | $ | (0.02 | ) | $ | 0.92 | ||||||
| DISCONTINUED OPERATIONS | $ | 0.01 | $ | (0.20 | ) | $ | 0.01 | $ | (0.35 | ) | |||||
| TOTAL NET INCOME (LOSS) PER COMMON SHARE - DILUTED | $ | 0.19 | $ | 0.41 | $ | (0.01 | ) | $ | 0.57 | ||||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC | 31,229,969 | 30,857,232 | 31,186,057 | 30,810,259 | |||||||||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED | 31,477,398 | 31,115,152 | 31,186,057 | 31,017,108 | |||||||||||
SCHEDULE I
EXANTAS CAPITAL CORP. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME (LOSS) TO CORE EARNINGS
(unaudited)
XAN uses Core Earnings as a non-GAAP financial measure to evaluate its operating performance.
Core Earnings exclude the effects of certain transactions and GAAP adjustments that XAN believes are not indicative of its current CRE loan portfolio and other CRE-related investments and operations. Core Earnings exclude income (loss) from all non-core assets, such as commercial finance, middle market lending, residential mortgage lending, certain legacy CRE loans and other non-CRE assets designated as assets held for sale at the initial measurement date.(1)
Core Earnings, for reporting purposes, is defined as GAAP net income (loss) allocable to common shareholders, excluding (i) non-cash equity compensation expense, (ii) unrealized gains and losses, (iii) non-cash provisions for loan losses, (iv) non-cash impairments on securities, (v) non-cash amortization of discounts or premiums associated with borrowings, (vi) net income or loss from a limited partnership interest owned at the initial measurement date, (vii) net income or loss from non-core assets,(2)(3) (viii) real estate depreciation and amortization, (ix) foreign currency gains or losses and (x) income or loss from discontinued operations. Core Earnings may also be adjusted periodically to exclude certain one-time events pursuant to changes in GAAP and certain non-cash items.
Although pursuant to the Third Amended and Restated Management Agreement XAN calculates incentive compensation using Core Earnings excluding incentive fees payable to the Manager, beginning with the three months and year ended December 31, 2017 XAN includes incentive fees payable to the Manager in Core Earnings for reporting purposes.
Core Earnings does not represent net income or cash generated from operating activities and should not be considered as an alternative to GAAP net income or as a measure of liquidity under GAAP. XAN's methodology for calculating Core Earnings may differ from methodologies used by other companies to calculate similar supplemental performance measures, and, accordingly, its reported Core Earnings may not be comparable to similar performance measures used by other companies.
The following table provides a reconciliation from GAAP net income (loss) allocable to common shares to Core Earnings allocable to common shares for the periods presented (in thousands, except per share data):
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Net income (loss) allocable to common shares - GAAP | $ | 6,036 | $ | 12,644 | $ | (394 | ) | $ | 17,808 | ||||||
| Adjustment for realized gains on CRE assets (4) | (450 | ) | — | (450 | ) | — | |||||||||
| Net income (loss) allocable to common shares - GAAP, adjusted | 5,586 | 12,644 | (844 | ) | 17,808 | ||||||||||
| Reconciling items from continuing operations: | |||||||||||||||
| Non-cash equity compensation expense | 757 | 895 | 2,383 | 2,417 | |||||||||||
| Non-cash (recovery of) provision for CRE loan losses | (293 | ) | (612 | ) | (1,092 | ) | 379 | ||||||||
| Litigation settlement expense (5) | — | 1,500 | (2,167 | ) | 1,500 | ||||||||||
| Non-cash amortization of discounts or premiums associated with borrowings | 815 | 2,450 | 2,389 | 3,278 | |||||||||||
| Net loss from limited partnership interest owned at the initial measurement date (1) | — | 703 | — | 1,073 | |||||||||||
| Income tax expense (benefit) from non-core investments (2)(3) | — | 4,464 | (31 | ) | 5,938 | ||||||||||
| Net realized gain on non-core assets (2)(3) | — | (39,230 | ) | (476 | ) | (41,015 | ) | ||||||||
| Net income from non-core assets (3) | (456 | ) | (1,432 | ) | (9 | ) | (5,701 | ) | |||||||
| Reconciling items from discontinued operations and CRE loans: | |||||||||||||||
| Net interest income on legacy CRE loans | (352 | ) | (947 | ) | (1,013 | ) | (3,252 | ) | |||||||
| Realized loss (gain) on liquidation of legacy CRE loans | — | 73 | (1,000 | ) | (12,489 | ) | |||||||||
| Operating expenses on legacy CRE loans | — | — | 187 | — | |||||||||||
| Fair value adjustments on legacy CRE loans | 1,588 | — | 6,260 | — | |||||||||||
| Net loss (income) from other non-CRE investments held for sale | 2 | 13 | 508 | (286 | ) | ||||||||||
| (Income) loss from discontinued operations, net of taxes | (364 | ) | 6,087 | (161 | ) | 10,832 | |||||||||
| Core Earnings before net realized loss on CRE assets | 7,283 | (13,392 | ) | 4,934 | (19,518 | ) | |||||||||
| Adjustment for realized loss on CRE loan | (2,332 | ) | — | (2,332 | ) | — | |||||||||
| Adjustment for realized gain on CRE-related investment | 282 | — | 282 | — | |||||||||||
| Core Earnings allocable to common shares | 5,233 | (13,392 | ) | 2,884 | (19,518 | ) | |||||||||
| Reconciling items in arriving at Core Earnings allocable to common shares, adjusted: | |||||||||||||||
| Realized loss on sale of a previously impaired CRE loan | 2,332 | — | 2,332 | — | |||||||||||
| Loss on redemption of Series B Preferred Stock | — | — | 7,482 | — | |||||||||||
| Litigation settlement expense | — | — | 2,167 | — | |||||||||||
| Core Earnings allocable to common shares, adjusted (6)(7) | $ | 7,565 | $ | (13,392 | ) | $ | 14,865 | $ | (19,518 | ) | |||||
| Weighted average common shares - diluted | 31,477 | 30,857 | 31,186 | 30,810 | |||||||||||
| Core Earnings per common share - diluted | $ | 0.17 | $ | (0.43 | ) | $ | 0.09 | $ | (0.63 | ) | |||||
| Core Earnings per common share, adjusted - diluted (6)(7) | $ | 0.24 | $ | (0.43 | ) | $ | 0.48 | $ | (0.63 | ) | |||||
| (1) | Initial measurement date is December 31, 2016. | ||||||||||||||||||||||||||||||||
| (2) | Income tax expense from non-core investments and net realized gain on non-core assets are components of net income or loss from non-core assets. | ||||||||||||||||||||||||||||||||
| (3) | Non-core assets are investments and securities owned by XAN at the initial measurement date in (i) commercial finance, (ii) middle market lending, (iii) residential mortgage lending, (iv) legacy CRE loans and (v) other non-CRE assets included in assets held for sale. | ||||||||||||||||||||||||||||||||
| (4) | Includes a realized gain of $282,000, or $0.01 per common share-diluted, in connection with the sale of CMBS and a realized recovery of CRE loan loss provision of $168,000, or $0.01 per common share-diluted, in connection with the sale of a previously impaired, 2013 vintage CRE loan for the three and nine months ended September 30, 2018. | ||||||||||||||||||||||||||||||||
| (5) | Includes the payment of the settlement of a securities litigation, previously accrued in 2017, for the nine months ended September 30, 2018 and the accrual of settlement expenses for the three and nine months ended September 30, 2017. | ||||||||||||||||||||||||||||||||
| (6) | Core Earnings, adjusted exclude a realized loss of $2.3 million, or $(0.07) per common share-diluted, for the three and nine months ended September 30, 2018 in connection with the sale of a previously impaired, 2013 vintage CRE loan. | ||||||||||||||||||||||||||||||||
| (7) | Core Earnings, adjusted exclude a non-recurring charge of $7.5 million, or $(0.24) per common share-diluted, for the nine months ended September 30, 2018 in connection with the redemption of the Company's remaining Series B Preferred Stock. | ||||||||||||||||||||||||||||||||
SCHEDULE II
EXANTAS CAPITAL CORP. AND SUBSIDIARIES
SUMMARY OF SECURITIZATION PERFORMANCE STATISTICS
(unaudited)
Distributions, Coverage Tests and Liquidations
The following table sets forth the distributions received by XAN and coverage test summaries for its active securitizations for the periods presented (in thousands):
| Name | Cash Distributions | Overcollateralization Cushion (1) | End of Designated Principal Reinvestment Period | |||||||||||||||||||||||||
| For the Nine Months Ended September 30, 2018 | For the Year Ended December 31, 2017 | At September 30, 2018 | At the Initial Measurement Date | |||||||||||||||||||||||||
| RCC 2017-CRE5 (2) | $ | 18,815 | $ | 6,643 | $ | 52,944 | $ | 20,727 | July 2020 | |||||||||||||||||||
| XAN 2018-RSO6 (2) | $ | 3,638 | $ | — | $ | 25,731 | $ | 25,731 | December 2020 | |||||||||||||||||||
| Apidos Cinco CDO (3) | $ | — | $ | 2,056 | N/A | $ | 17,774 | N/A | ||||||||||||||||||||
| (1) | Overcollateralization cushion represents the amount by which the collateral held by the securitization issuer exceeds the minimum amount required. |
| (2) | The designated principal reinvestment period for Resource Capital Corp. 2017-CRE5 and Exantas Capital Corp. 2018-RSO6 is the period in which principal repayments can be utilized to purchase loans held outside of the respective securitization that represent the funded commitments of existing collateral in the respective securitization that were not funded as of the date the respective securitization was closed. Additionally, the indenture for each securitization does not contain any interest coverage test provisions. |
| (3) | Apidos Cinco CDO was substantially liquidated in November 2016. |
The following table sets forth the distributions received by XAN and liquidation details for its liquidated securitizations for the periods presented (in thousands):
| Name | Cash Distributions | Liquidation Details | ||||||||||||
| For the Nine Months Ended September 30, 2018 | For the Year Ended December 31, 2017 | Liquidation Date | Remaining Assets at the Liquidation Date (1) | |||||||||||
| RCC 2014-CRE2 (2) | $ | — | $ | 33,050 | August 2017 | $ | 92,980 | |||||||
| RCC 2015-CRE3 | $ | 3,529 | $ | 8,672 | August 2018 | $ | 80,632 | |||||||
| RCC 2015-CRE4 | $ | 4,487 | $ | 8,554 | July 2018 | $ | 97,825 | |||||||
| (1) | The remaining assets at the liquidation date were returned to XAN in exchange for its preference share and equity notes in the securitization. | |||||||||||||||||
| (2) | Cash distributions for the year ended December 31, 2017 include preference share and equity notes distributions at liquidation of $25.6 million for Resource Capital Corp. 2014-CRE2. | |||||||||||||||||
SCHEDULE III
EXANTAS CAPITAL CORP. AND SUBSIDIARIES
STRATEGIC PLAN UPDATE
(unaudited)
In November 2016, XAN's board of directors approved the Plan, pursuant to which XAN is primarily focused on making CRE debt investments. The Plan includes disposing of certain non-core businesses and investments and underperforming legacy CRE loans ("Identified Assets"), as well as maintaining a dividend policy based on sustainable earnings. As part of the Plan, certain Identified Assets were reclassified as discontinued operations and/or assets held for sale during the fourth quarter of 2016. The following table delineates these disposable investments by business segment and details the current net book value of the businesses and investments included in the Plan (in millions, except amounts in footnotes):
| Identified Assets at Plan Inception | Impairments/ Adjustments on Non- Monetized Assets (1)(2) | Impairments/ Adjustments on Monetized Assets (1)(3) | Monetized through September 30, 2018 (2) | Net Book Value at September 30, 2018 | |||||||||||||
| Discontinued operations and assets held for sale: | |||||||||||||||||
| Legacy CRE loans (4) | $ | 162.2 | $ | (13.1 | ) | $ | (17.5 | ) | $ | (114.6 | ) | $ | 17 | ||||
| Middle market loans | 73.8 | — | (17.7 | ) | (56.1 | ) | — | ||||||||||
| Residential mortgage lending segment (5) | 56.6 | (2.0 | ) | (9.6 | ) | (43.7 | ) | 1.3 | |||||||||
| Other assets held for sale | 5.9 | — | 3.8 | (9.7 | ) | — | |||||||||||
| Subtotal - discontinued operations and assets held for sale | 298.5 | (15.1 | ) | (41.0 | ) | (224.1 | ) | 18.3 | |||||||||
| Legacy CRE loans held for investment (6)(7) | 32.5 | — | — | (4.2 | ) | 28.3 | |||||||||||
| Investments in unconsolidated entities | 86.6 | — | 38.3 | (124.9 | ) | — | |||||||||||
| Commercial finance assets | 62.5 | — | 2.1 | (64.6 | ) | — | |||||||||||
| Total | $ | 480.1 | $ | (15.1 | ) | $ | (0.6 | ) | $ | (417.8 | ) | $ | 46.6 | ||||
| (1) | Reflects adjustments as a result of the designation as assets held for sale or discontinued operations, which occurred during the third and fourth quarters of 2016 except as noted in (3) below. | |||||||||||||||||||||||||||||||
| (2) | Legacy CRE loans include $600,000 of protective advances to cover operating losses on a legacy CRE loan in the third quarter of 2018. | |||||||||||||||||||||||||||||||
| (3) | The impairment adjustment to middle market loans includes $5.4 million of fair value adjustments that occurred prior to the inception of the Plan. | |||||||||||||||||||||||||||||||
| (4) | Includes $88.2 million par value of loans at the inception of the Plan that were not reflected on the consolidated balance sheets until XAN's investment in Resource Real Estate Funding CDO 2007-1 ("RREF CDO 2007-1") was liquidated in November 2016 and the remaining assets were returned to XAN as expected. | |||||||||||||||||||||||||||||||
| (5) | Includes $2.3 million of cash and cash equivalents not classified as assets held for sale in the residential mortgage lending segment at September 30, 2018. | |||||||||||||||||||||||||||||||
| (6) | Legacy CRE loans with $28.3 million of net book value were reclassified to CRE loans on the consolidated balance sheets at June 30, 2018 as XAN now intends to hold these loans to maturity. | |||||||||||||||||||||||||||||||
| (7) | Includes $30.0 million par value of loans at the inception of the Plan that were not reflected on the consolidated balance sheets until XAN's investment in RREF CDO 2007-1 was liquidated in November 2016 and the remaining assets were returned to XAN as expected. | |||||||||||||||||||||||||||||||
SCHEDULE IV
EXANTAS CAPITAL CORP. AND SUBSIDIARIES
CRE LOAN ACTIVITIES
(unaudited)
The following table summarizes XAN's CRE loan activities and fundings of previous commitments for the periods then ended (in millions):
| For the Three Months Ended | |||||||||||||||||||||||||||||||
| September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | ||||||||||||||||||||||||
| New CRE loan commitments | $ | 245.1 | $ | 195.3 | $ | 127.1 | $ | 229.0 | $ | 157.7 | $ | 84.7 | $ | 128.9 | $ | 50.6 | |||||||||||||||
| New CRE preferred equity investment | — | — | 19.2 | — | — | — | — | — | |||||||||||||||||||||||
| Total CRE loan commitments and investments | 245.1 | 195.3 | 146.3 | 229.0 | 157.7 | 84.7 | 128.9 | 50.6 | |||||||||||||||||||||||
| Sale, payoffs and paydowns (1) | (171.2 | ) | (149.8 | ) | (51.5 | ) | (185.7 | ) | (129.5 | ) | (133.6 | ) | (110.7 | ) | (69.1 | ) | |||||||||||||||
| Previous commitments funded | 15.5 | 12.1 | 10.5 | 4.0 | 8.0 | 13.3 | 6.3 | 12.9 | |||||||||||||||||||||||
| New unfunded loan commitments | (20.6 | ) | (16.3 | ) | (13.6 | ) | (24.6 | ) | (23.0 | ) | (8.9 | ) | (14.9 | ) | (3.5 | ) | |||||||||||||||
| Net CRE loans funded | $ | 68.8 | $ | 41.3 | $ | 91.7 | $ | 22.7 | $ | 13.2 | $ | (44.5 | ) | $ | 9.6 | $ | (9.1 | ) | |||||||||||||
| (1) Activity excludes legacy CRE loans classified as assets held for sale. |
SCHEDULE V
EXANTAS CAPITAL CORP. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Certain Loan Statistics
The following table presents information on XAN's allowance for CRE loan losses, which excludes fair value adjustments on a legacy CRE loan classified as assets held for sale, at the dates indicated (amounts in thousands, percentages based on amortized cost):
| Allowance for loan losses: | September 30, 2018 | December 31, 2017 | |||||||
| Specific allowance: | (unaudited) | ||||||||
| CRE whole loans | $ | — | $ | 2,500 | |||||
| Total specific allowance | — | 2,500 | |||||||
| General allowance: | |||||||||
| CRE whole loans | 1,736 | 2,828 | |||||||
| Total general allowance | 1,736 | 2,828 | |||||||
| Total allowance for loans | $ | 1,736 | $ | 5,328 | |||||
| Allowance as a percentage of total loans | 0.1 | % | 0.4 | % | |||||
The following table presents unaudited CRE loan portfolio statistics at September 30, 2018, excluding a legacy CRE loan classified as assets held for sale (percentages based on carrying value at September 30, 2018):
| Loan type: | |||
| Whole loans | 98.4 | % | |
| Preferred equity investment | 1.3 | % | |
| Mezzanine loan | 0.3 | % | |
| Total | 100.0 | % | |
| Collateral type: | |||
| Multifamily | 57.2 | % | |
| Office | 13.9 | % | |
| Retail | 13.2 | % | |
| Hotel | 12.4 | % | |
| Industrial | 1.3 | % | |
| Manufactured Housing | 1.3 | % | |
| Self-Storage | 0.7 | % | |
| Total | 100.0 | % | |
| Collateral by NCREIF U.S. region: | |||
| Southwest (1) | 33.1 | % | |
| Pacific (2) | 20.9 | % | |
| Mountain (3) | 20.1 | % | |
| Southeast (4) | 9.0 | % | |
| Mid Atlantic (5) | 6.6 | % | |
| Northeast | 5.5 | % | |
| East North Central | 4.2 | % | |
| West North Central | 0.6 | % | |
| Total | 100.0 | % | |
| (1) | CRE loans in Texas represent 31.2% of the total loan portfolio. | |||||||||||
| (2) | CRE loans in Southern and Northern California represent 11.9% and 6.7%, respectively, of the total loan portfolio. | |||||||||||
| (3) | CRE loans in Arizona represent 9.6% of the total loan portfolio. | |||||||||||
| (4) | CRE loans in Florida represent 7.6% of the total loan portfolio. | |||||||||||
| (5) | CRE loans in North Carolina represent 3.0% of the total loan portfolio. | |||||||||||
CONTACT: DAVID J. BRYANT
CHIEF FINANCIAL OFFICER
EXANTAS CAPITAL CORP.
717 Fifth Avenue
New York, NY 10022
212-621-3210