Resource America, Inc. Reports Operating Results for the Second Quarter Ended June 30, 2014

PHILADELPHIA, PA--(Marketwired - Aug 6, 2014) - Resource America, Inc. (NASDAQ: REXI)

Second Quarter 2014 Highlights

• Adjusted net income attributable to common shareholders of $4.6 million (see Schedule I)
• Stand-alone operating income of $4.8 million as compared to a $97,000 loss for the prior year period
• Increased gross assets under management by 17% to $18.9 billion since June 30, 2013
• Book value per common share of $7.88

Second Quarter 2014 Results

Resource America, Inc. (NASDAQ: REXI) (the "Company") reported adjusted net income attributable to common shareholders, a non-GAAP measure, of $4.6 million, or $0.21 per common share-diluted, and $7.0 million, or $0.32 per common share-diluted, for the three and six months ended June 30, 2014 as compared to adjusted net income attributable to common shareholders of $502,000, or $0.02 per common share-diluted, and $3.0 million, or $0.14 per common share-diluted, for the three and six months ended June 30, 2013, respectively. A reconciliation of the Company's reported GAAP net income attributable to common shareholders to adjusted net income attributable to common shareholders, a non-GAAP measure, is included as Schedule I to this release.

The Company reported GAAP net income attributable to common shareholders of $2.7 million, or $0.12 per common share-diluted, and $3.7 million, or $0.17 per common share-diluted, for the three and six months ended June 30, 2014, respectively, as compared to GAAP net income attributable to common shareholders of $1.1 million, or $0.05 per common share-diluted, and $1.6 million, or $0.07 per common share-diluted, for the three and six months ended June 30, 2013, respectively. 

Assets Under Management

The following table details the Company's gross assets under management by operating segment, which increased by $2.8 billion (17%) from June 30, 2013 to 2014 (in billions):

		June 30,
		2014			2013
Financial fund management		$	15.5		$	13.6
Real estate			2.8			1.9
Commercial finance			0.6			0.6
		$	18.9		$	16.1
	Net assets under management (1)	$	8.8		$	7.1

(1)	Net assets under management represents the proportionate share of assets managed by the Company after reflecting joint venture arrangements.

A description of how the Company calculates assets under management is set forth in Item 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2013.

Highlights for the Second Quarter Ended June 30, 2014 and Recent Developments

REAL ESTATE ASSET MANAGEMENT:

Equity Asset Management

Resource Real Estate Opportunity REIT, Inc. ("Opportunity REIT I"), a public non-traded real estate investment trust ("REIT") managed by the Company which specializes in acquiring and managing distressed real estate assets, had the following highlights:

• Increased total assets to $951.2 million at June 30, 2014, an increase of $662.4 million, or 229%, from $288.8 million at June 30, 2013.
• Acquired four multifamily assets for $112.4 million, placed $120.4 million of financing on these assets and disposed of one additional asset for $10.5 million during the three months ended June 30, 2014. 

In February 2014, Resource Real Estate Opportunity REIT II, Inc. ("Opportunity REIT II") commenced its initial public offering of common stock and will focus on acquiring multifamily rental properties and selected loans. Opportunity REIT II is offering up to $1 billion in common stock at a maximum price of $10 per share. The Company is the external manager. Through August 5, 2014, Opportunity REIT II has raised $8.1 million.

• In June 2014, Opportunity REIT II acquired its first asset, a multifamily apartment complex, for $9.5 million, financing $7.5 million of the purchase price. 
  
  

Debt Asset Management

Resource Capital Corp. ("RSO"), a publicly-traded REIT managed by the Company which focuses on commercial real estate assets, had the following highlights:

• During the quarter, raised $147.7 million in equity capital, including $116.2 million, net of underwriting discounts and expenses, in connection with the June 2014 Series C preferred stock offering of 4.8 million shares at a net price of $24.2125 (8.625% coupon) per share.
• Originated $181.0 million of commercial real estate whole loans during the three months ended June 30, 2014.
• In July 2014, completed a $354.0 million commercial real estate securitization that issued $235.0 million of floating-rate notes at a weighted average coupon of LIBOR plus 1.29%.

The following additional highlights contributed to the Company's real estate asset management operations:

• The Company's real estate operating segment increased its assets under management at June 30, 2014 to $2.8 billion, an increase of $908.7 million, or 47%, from June 30, 2013.
• Real estate revenues increased 11% and 14% to $13.4 million and $26.7 million, for the three and six months ended June 30, 2014, respectively, as compared to $12.2 million and $23.5 million for the three and six months ended June 30, 2013, respectively. 

FINANCIAL FUND MANAGEMENT:

Credit Asset Management

CVC Credit Partners, L.P. ("CCP"), the Company's global joint venture, closed Apidos CLO XVII, Ltd. (issuing notes with a par value of $500.0 million), Apidos CLO XVIII, Ltd. (issuing notes with a par value of $700.0 million) and CVC Cordatus Loan Fund III Limited (issuing notes with a par value of EUR 436.0 million). Since creating this joint venture in April 2012, CCP has closed 10 collateralized loan obligation issuers (issuing notes with a total par value of $5.3 billion) and expects to receive approximately $24.9 million in fees on an annual run rate basis. The Company has a 33% interest in this joint venture.

The following additional highlights contributed to the Company's financial fund asset management operations:

• The Company's financial fund management operating segment increased its assets under management at June 30, 2014 to $15.5 billion, an increase of $1.9 billion, or 13%, from June 30, 2013.
• Financial fund management revenues increased 233% and 126% to $8.1 million and $15.2 million, for the three and six months ended June 30, 2014, respectively, as compared to $2.4 million and $6.7 million for the three and six months ended June 30, 2013, respectively.

CORPORATE/OTHER:

Corporate Credit Facility Modification

• In April 2014, the Company increased its revolving credit facility with TD Bank, N.A. to $11.5 million and extended the maturity from December 2014 to December 2017.
  
  

Share Repurchases

• The Company repurchased 233,891 of its shares during the second quarter ended June 30, 2014 at an average price of $8.91 per share.
  
  

Dividends

• The Company's Board of Directors authorized a cash dividend of $0.05 per share on the Company's common stock paid on July 31, 2014 to holders of record as of the close of business on July 17, 2014. 
• RSO's Board of Directors declared a cash dividend of $0.20 per common share for its quarter ended June 30, 2014.

Resource America, Inc. is a specialized asset management company that uses industry specific expertise to evaluate, originate, service and manage investment opportunities for its own account, its joint ventures, and for outside investors in the real estate, financial fund management and commercial finance sectors.

For more information, please visit our website at www.resourceamerica.com or contact investor relations at pkamdar@resourceamerica.com.

Statements made in this release include forward-looking statements, which involve substantial risks and uncertainties. The Company's actual results, performance or achievements could differ materially from those expressed or implied in this release and its other reports filed with the Securities and Exchange Commission, or SEC. For information pertaining to risks relating to these forward-looking statements, reference is made to the section "Risk Factors" contained in Item 1A of the Company's Annual Report on Form 10-K and in other of its public filings with the SEC. The Company undertakes no obligation to update or revise any forward-looking statements to reflect new or changing information or events except as may be required by law.

A registration statement relating to securities offered by Opportunity REIT II was declared effective by the SEC on February 6, 2014. A written prospectus relating to these securities may be obtained by contacting Resource Securities, Inc., 1845 Walnut Street, 18th Floor, Philadelphia, PA 19103.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy any of the securities described herein, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

The remainder of this release contains the Company's unaudited consolidated balance sheets, consolidated statements of operations, consolidating statements of operations and reconciliation of GAAP net income attributable to common shareholders to adjusted net income attributable to common shareholders.

RESOURCE AMERICA, INC
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
				June 30, 2014				December 31, 2013
				(unaudited)
ASSETS
	Cash			$	11,858			$	19,853
	Restricted cash				654				571
	Receivables				3,400				541
	Loans and receivables from managed entities and related parties, net				32,586				30,923
	Investments in real estate, net				17,084				17,696
	Investment securities, at fair value				12,590				7,839
	Investments in unconsolidated loan manager				38,461				37,821
	Investments in unconsolidated entities				13,448				14,342
	Assets of consolidated variable interest entity ("VIE") - RSO:
		Cash and cash equivalents (including restricted cash)			313,528				325,579
		Investments, at fair value			273,454				226,764
		Loans			1,785,135				1,397,458
		Investments in real estate and unconsolidated entities			89,989				124,193
		Other assets			96,062				76,467
			Total assets of consolidated VIE - RSO		2,558,168				2,150,461
	Property and equipment, net				5,378				5,844
	Deferred tax assets, net				24,607				27,769
	Other assets				5,212				4,791
		Total assets		$	2,723,446			$	2,318,451
LIABILITIES AND EQUITY
Liabilities:
	Accrued expenses and other liabilities			$	16,846			$	22,134
	Payables to managed entities and related parties				3,608				3,110
	Borrowings				20,558				20,619
	Liabilities of consolidated VIE - RSO:
		Borrowings			1,579,985				1,320,015
		Other liabilities			54,342				55,247
		Total liabilities of consolidated VIE - RSO			1,634,327				1,375,262
			Total liabilities		1,675,339				1,421,125
Commitments and contingencies
Equity:
	Preferred stock, $1.00 par value, 1,000,000 shares authorized; none outstanding				--				--
	Common stock, $.01 par value, 49,000,000 shares authorized; 31,111,667 and 30,378,339 shares issued (including nonvested restricted stock of 674,701 and 400,194), respectively				304				299
	Additional paid-in capital				290,947				288,555
	Accumulated deficit				(24,290	)			(26,025	)
	Treasury stock, at cost; 10,667,202 and 10,434,436 shares, respectively				(109,906	)			(107,874	)
	Accumulated other comprehensive loss				(1,257	)			(1,231	)
		Total stockholders' equity			155,798				153,724
	Noncontrolling interests				306				238
	Noncontrolling interests attributable to RSO				892,003				743,364
		Total equity			1,048,107				897,326
				$	2,723,446			$	2,318,451

RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2014				2013				2014				2013
REVENUES:
Real estate (includes revenues of $2,302, $2,805, $4,985 and $5,093 related to RSO)		$	13,448			$	12,153			$	26,723			$	23,493
Financial fund management (includes revenues of $753, $(111), $960 and $270 related to RSO)			8,141				2,445				15,216				6,732
Commercial finance (includes no revenue related to RSO)			(42	)			(35	)			(141	)			(213	)
			21,547				14,563				41,798				30,012
Revenues from consolidated VIE - RSO			34,608				21,647				66,539				52,225
Elimination of consolidated VIE revenues attributed to operating segments			(3,040	)			(2,725	)			(5,920	)			(5,425	)
	Total revenues		53,115				33,485				102,417				76,812
COSTS AND EXPENSES:
Real estate			9,105				8,896				17,980				18,336
Financial fund management			2,779				1,694				7,168				4,222
Commercial finance			123				(219	)			226				(174	)
General and administrative			2,729				2,149				5,883				4,302
Provision for credit losses			1,575				1,647				2,783				1,985
Depreciation and amortization			465				489				916				905
			16,776				14,656				34,956				29,576
Expenses from consolidated VIE - RSO			19,861				11,368				32,985				27,556
Elimination of consolidated VIE expenses attributed to operating segments			(3,053	)			(2,663	)			(5,872	)			(5,317	)
	Total expenses		33,584				23,361				62,069				51,815
OPERATING INCOME			19,531				10,124				40,348				24,997
OTHER INCOME (EXPENSE):
Gain on sale of investment securities, net			370				--				370				--
Other-than-temporary impairment on investments			--				--				--				(214	)
Interest expense			(497	)			(501	)			(980	)			(995	)
Other income, net			18				83				183				272
			(109	)			(418	)			(427	)			(937	)
Other income, net, from consolidated VIE - RSO			2,509				--				1,178				--
Elimination of consolidated VIE other income attributed to operating segments			11				31				29				62
			2,411				(387	)			780				(875	)
Income from continuing operations before taxes			21,942				9,737				41,128				24,122
Income tax provision (benefit)			2,181				(1,511	)			3,250				(1,657	)
Income tax (benefit) provision - RSO			(446	)			1,737				(430	)			3,499
Income from continuing operations			20,207				9,511				38,308				22,280
Loss from discontinued operations, net of tax			--				--				--				(2	)
Net income			20,207				9,511				38,308				22,278
Net (income) loss attributable to noncontrolling interests			(84	)			(26	)			(44	)			17
Net income attributable to noncontrolling interests of consolidated VIE - RSO			(17,405	)			(8,372	)			(34,556	)			(20,686	)
Net income attributable to common shareholders		$	2,718			$	1,113			$	3,708			$	1,609
Amounts attributable to common shareholders:
Income from continuing operations		$	2,718			$	1,113			$	3,708			$	1,611
Discontinued operations			--				--				--				(2	)
Net income		$	2,718			$	1,113			$	3,708			$	1,609
Basic earnings per share:
Continuing operations		$	0.13			$	0.05			$	0.18			$	0.08
Discontinued operations			--				--				--				--
Net income		$	0.13			$	0.05			$	0.18			$	0.08
Weighted average shares outstanding			20,386				20,297				20,320				20,219
Diluted earnings per share:
Continuing operations		$	0.12			$	0.05			$	0.17			$	0.07
Discontinued operations			--				--				--				--
Net income		$	0.12			$	0.05			$	0.17			$	0.07
Weighted average shares outstanding			22,032				22,106				22,031				21,969

RESOURCE AMERICA, INC.

CONSOLIDATING STATEMENT OF OPERATIONS

(in thousands)

(unaudited)

 The following table presents the consolidating statement of operations for the three months ended June 30, 2014:

		RAI				RSO				Eliminations				Consolidated
REVENUES:
Real estate		$	13,448			$	--			$	--			$	13,448
Financial fund management			8,141				--				--				8,141
Commercial finance			(42	)			--				--				(42	)
			21,547				--				--				21,547
Revenues from consolidated VIE - RSO			--				34,608				--				34,608
Elimination of consolidated VIE revenues attributed to operating segments			--				--				(3,040	)			(3,040	)
	Total revenues		21,547				34,608				(3,040	)			53,115
COSTS AND EXPENSES:
Real estate			9,105				--				--				9,105
Financial fund management			2,779				--				--				2,779
Commercial finance			123				--				--				123
General and administrative			2,729				--				--				2,729
Provision for credit losses			1,575				--				--				1,575
Depreciation and amortization			465				--				--				465
			16,776				--				--				16,776
Expenses of consolidated VIE - RSO			--				19,415				446				19,861
Elimination of consolidated VIE expenses attributed to operating segments			--				--				(3,053	)			(3,053	)
	Total expenses		16,776				19,415				(2,607	)			33,584
OPERATING INCOME			4,771				15,193				(433	)			19,531
OTHER INCOME (EXPENSE):
Gain on sale of investment securities, net			370				--				--				370
Interest expense			(497	)			--				--				(497	)
Other income, net			590				--				(572	)			18
Other income, net, from consolidated VIE - RSO			--				2,509				--				2,509
Elimination of consolidated VIE other expense, net			--				--				11				11
			463				2,509				(561	)			2,411
Income from continuing operations before taxes			5,234				17,702				(994	)			21,942
Income tax provision			2,181				--				(446	)			1,735
Net income			3,053				17,702				(548	)			20,207
Net income attributable to noncontrolling interests			(84	)			--				--				(84	)
Net income attributable to noncontrolling interests - RSO			--				(3,025	)			(14,380	)			(17,405	)
Net income attributable to common shareholders		$	2,969			$	14,677			$	(14,928	)		$	2,718

RESOURCE AMERICA, INC.

CONSOLIDATING STATEMENT OF OPERATIONS

(in thousands)

(unaudited)

 The following table presents the consolidating statement of operations for the three months ended June 30, 2013:

		RAI				RSO				Eliminations				Consolidated
REVENUES:
Real estate		$	12,153			$	--			$	--			$	12,153
Financial fund management			2,445				--				--				2,445
Commercial finance			(35	)			--				--				(35	)
			14,563				--				--				14,563
Revenues from consolidated VIE - RSO			--				21,647				--				21,647
Elimination of consolidated VIE revenues attributed to operating segments			--				--				(2,725	)			(2,725	)
	Total revenues		14,563				21,647				(2,725	)			33,485
COSTS AND EXPENSES:
Real estate			8,896				--				--				8,896
Financial fund management			1,694				--				--				1,694
Commercial finance			(219	)			--				--				(219	)
General and administrative			2,153				--				(4	)			2,149
Provision for credit losses			1,647				--				--				1,647
Depreciation and amortization			489				--				--				489
			14,660				--				(4	)			14,656
Expenses of consolidated VIE - RSO			--				13,105				(1,737	)			11,368
Elimination of consolidated VIE expenses attributed to operating segments			--				--				(2,663	)			(2,663	)
Total expenses			14,660				13,105				(4,404	)			23,361
OPERATING (LOSS) INCOME			(97	)			8,542				1,679				10,124
OTHER INCOME (EXPENSE):
Interest expense			(501	)			--				--				(501	)
Other income, net			640				--				(557	)			83
Elimination of consolidated VIE other expense, net			--				--				31				31
			139				--				(526	)			(387	)
Income from continuing operations before taxes			42				8,542				1,153				9,737
Income tax benefit			(1,511	)			--				1,737				226
Net income			1,553				8,542				(584	)			9,511
Net income attributable to noncontrolling interests			(26	)			--				--				(26	)
Net income attributable to noncontrolling interests - RSO			--				(1,800	)			(6,572	)			(8,372	)
Net income attributable to common shareholders		$	1,527			$	6,742			$	(7,156	)		$	1,113

RESOURCE AMERICA, INC.

CONSOLIDATING STATEMENT OF OPERATIONS

(in thousands)

(unaudited)

 The following table presents the consolidating statement of operations for the six months ended June 30, 2014:

	RAI				RSO				Eliminations				Consolidated
REVENUES:
Real estate	$	26,723			$	--			$	--			$	26,723
Financial fund management		15,216				--				--				15,216
Commercial finance		(141	)			--				--				(141	)
		41,798				--				--				41,798
Revenues from consolidated VIE - RSO		--				66,539				--				66,539
Elimination of consolidated VIE revenues attributed to operating segments		--				--				(5,920	)			(5,920	)
Total revenues		41,798				66,539				(5,920	)			102,417
COSTS AND EXPENSES:
Real estate		17,980				--				--				17,980
Financial fund management		7,168				--				--				7,168
Commercial finance		226				--				--				226
General and administrative		5,883				--				--				5,883
Provision for credit losses		2,783				--				--				2,783
Depreciation and amortization		916				--				--				916
		34,956				--				--				34,956
Expenses of consolidated VIE - RSO		--				32,555				430				32,985
Elimination of consolidated VIE expenses attributed to operating segments		--				--				(5,872	)			(5,872	)
Total expenses		34,956				32,555				(5,442	)			62,069
OPERATING INCOME		6,842				33,984				(478	)			40,348
OTHER INCOME (EXPENSE):
Gain on sale of investment securities, net		370				--				--				370
Interest expense		(980	)			--				--				(980	)
Other income, net		1,327				--				(1,144	)			183
Other income, net, from consolidated VIE - RSO		--				1,178				--				1,178
Elimination of consolidated VIE other income, net		--				--				29				29
		717				1,178				(1,115	)			780
Income from continuing operations before taxes		7,559				35,162				(1,593	)			41,128
Income tax provision		3,250				--				(430	)			2,820
Net income		4,309				35,162				(1,163	)			38,308
Net income attributable to noncontrolling interests		(44	)			--				--				(44	)
Net income attributable to noncontrolling interests - RSO		--				(5,369	)			(29,187	)			(34,556	)
Net income attributable to common shareholders	$	4,265			$	29,793			$	(30,350	)		$	3,708

RESOURCE AMERICA, INC.

CONSOLIDATING STATEMENT OF OPERATIONS

(in thousands)

(unaudited)

 The following table presents the consolidating statement of operations for the six months ended June 30, 2013:

	RAI				RSO				Eliminations				Consolidated
REVENUES:
Real estate	$	23,493			$	--			$	--			$	23,493
Financial fund management		6,732				--				--				6,732
Commercial finance		(213	)			--				--				(213	)
		30,012				--				--				30,012
Revenues from consolidated VIE - RSO		--				52,225				--				52,225
Elimination of consolidated VIE revenues attributed to operating segments		--				--				(5,425	)			(5,425	)
Total revenues		30,012				52,225				(5,425	)			76,812
COSTS AND EXPENSES:
Real estate		18,336				--				--				18,336
Financial fund management		4,222				--				--				4,222
Commercial finance		(174	)			--				--				(174	)
General and administrative		4,310				--				(8	)			4,302
Provision for credit losses		1,985				--				--				1,985
Depreciation and amortization		905				--				--				905
		29,584				--				(8	)			29,576
Expenses from consolidated VIE - RSO		--				27,556				--				27,556
Elimination of consolidated VIE expenses attributed to operating segments		--				--				(5,317	)			(5,317	)
Total expenses		29,584				27,556				(5,325	)			51,815
OPERATING INCOME		428				24,669				(100	)			24,997
OTHER INCOME (EXPENSE):
Other-than-temporary impairment on investments		(214	)			--				--				(214	)
Interest expense		(995	)			--				--				(995	)
Other income, net		1,385				--				(1,113	)			272
Elimination of consolidated VIE other income, net		--				--				62				62
		176				--				(1,051	)			(875	)
Income from continuing operations before taxes		604				24,669				(1,151	)			24,122
Income tax (benefit) provision		(1,657	)			3,499				--				1,842
Income from continuing operations		2,261				21,170				(1,151	)			22,280
Loss from discontinued operations, net of tax		(2	)			--				--				(2	)
Net income		2,259				21,170				(1,151	)			22,278
Net loss attributable to noncontrolling interests		17				--				--				17
Net income attributable to noncontrolling interests - RSO		--				(20,686	)			--				(20,686	)
Net income attributable to common shareholders	$	2,276			$	484			$	(1,151	)		$	1,609
Amounts attributable to common shareholders:
Income from continuing operations	$	2,278			$	484			$	(1,151	)		$	1,611
Discontinued operations		(2	)			--				--				(2	)
Net income	$	2,276			$	484			$	(1,151	)		$	1,609

Schedule I

RECONCILIATION OF GAAP NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS TO
ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS (1)
(in thousands, except per share data)
(unaudited)
		Three Months Ended							Six Months Ended
		June 30,							June 30,
		2014			2013				2014			2013
Net income attributable to common shareholders - GAAP		$	2,718		$	1,113			$	3,708		$	1,609
Adjustments, net of tax:
Income, net of eliminations, attributable to consolidation of RSO			251			418				557			675
Loss attributable to commercial finance			1,180			844				2,070			2,852		(2)
Deferred tax provision (benefit)			466			(1,873	)			627			(2,098	)
Adjusted net income attributable to common shareholders		$	4,615		$	502			$	6,962		$	3,038
Adjusted weighted average diluted shares outstanding			22,032			22,106				22,031			21,969
Adjusted net income attributable to common shareholders per common per share-diluted		$	0.21		$	0.02			$	0.32		$	0.14

(1)	Adjusted net income attributable to common shareholders presents the Company's operations prior to the consolidation of RSO and without the effect of its commercial finance operations and deferred tax provision (benefit). The Company believes that this provides useful information to investors since it allows investors to evaluate the Company's progress, excluding the impact of the RSO consolidation, in both its real estate and financial fund management segments for the three and six months ended June 30, 2014 and 2013 separately from its commercial finance operations and deferred tax provision (benefit). Adjusted net income attributable to common shareholders should not be considered as an alternative to net income attributable to common shareholders (computed in accordance with GAAP). Instead, adjusted net income attributable to common shareholders should be reviewed in connection with net income attributable to common shareholders in the Company's consolidated financial statements to help analyze how the Company's business is performing.
(2)	Utilizes a full year continuing income tax rate of 35%.