Good day, ladies and gentlemen, and welcome to the Q4 and Year-Ended December 31, 2014 Resource Capital Corp. Earnings Conference Call. My name is Gem, and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. [Operator Instructions]. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Mr. Jonathan Cohen, President and CEO of Resource Capital Corp. Please proceed, sir.

Thank you for joining the Resource Capital earnings conference call for the fourth quarter and year-ended December 31, 2014. I am Jonathan Cohen, President and CEO of Resource Capital Corp. Before I begin, I would like to ask Purvi Kamdar, our Vice President of Investor Relations to read the Safe Harbor Statement.

Thank you, Jonathan. When used in this conference call the words believes, anticipates, expects, and similar expressions are intended to identify forward-looking statements. Although, the company believes that these forward-looking statements are based on reasonable assumptions, such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those contained in the forward-looking statements. These risks and uncertainties are discussed in the company’s reports filed with the SEC including its reports on forms 8-K, 10-Q and 10-K, and in particular Item 1A on the Form 10-K report under the titled Risk Factors. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The company undertakes no obligation to update any of those forward-looking statements. With that, I’ll turn it back to Jonathan.

Thank you, Purvi. First, a few highlights from the fourth quarter and year-ended December 31, 2014. Adjusted funds from operations, AFFO, were $0.17 in the fourth quarter and $0.73 for the year per share diluted. During calendar year 2014, we originated over $775 million in new commercial real estate loans representing record production levels since inception and an increase of approximately 123% year-over-year. This exceeded the midpoint of our 2014 guidance of 600 million to 700 million by over 20%. During the fourth quarter of 2014, we originated 302.3 million in new commercial real estate loans, including future funding commitments, our highest production level quarter on record. To help fuel our growth in commercial real estate loan originations, in October 2014, we increased our Wells Fargo commercial real estate term facility by 60% from $250 million to $400 million and extended the current term to August 2016, while maintaining two one-year extensions at our option, which carries the final maturity of the facility to August of 2018. In February 2015, we closed a $346 million commercial real estate securitization at a weighted average cost of LIBOR plus 190 basis points. We expect to earn 17% to 19% on our invested equity over the life of this CLO. This is our third securitization in 14 months through which we have financed just over $1 billion of mortgage assets. Our middle market lending group, Northport Capital, originated almost $280 million of loans in 2014, including a record of $88 million of originations in the fourth quarter. Book value per share was $5.07 as of December 31, 2014. We paid a dividend of $0.20 per share on January 28, 2015. We continued to anticipate that AFFO will be approximately $0.70 to $0.80 per share. In my opinion, this quarter would have been even…

Thank you, Jonathan. Resource Capital Corp.’s committed commercial mortgage and CMBS portfolio has a current balance in excess of $1.8 billion in a diverse and granular pool. The underlying collateral base securing RSO's commercial mortgage portfolio continues to be spread across the major asset categories in geographically diverse markets with the portfolio breakdown of 45% multi-family, 20% office, 16% hotel, 15% retail and 4% other, such as mixed use deals. The commercial mortgage portfolio is comprised of 80 individual loans with an aggregate committed balance of approximately $1.6 billion and is comprised of 95% self-originated whole loans, 4% mezzanine loans and 1% B-notes. During the fourth quarter of 2014, RSO closed new loans with commitments totaling $303 million bringing total new loan production for calendar year 2014 to $777 million both of which were record production for RSO. In addition, since the start of 2015, we have closed new loans with commitments totaling $112 million. We are also in the process of closing additional new loans with an aggregate committed balance of $51 million. Provided that everything in process closes, RSO's new loan production activity for the first quarter of 2015 will total $163 million, which would be a 39% increase from the first quarter of 2014. RSO’s origination activity of $777 million for calendar year 2014 compares to $348 million in 2013, which represents a year-over-year increase of 123%. Our origination pipeline remains full and continued to grow. We currently have approximately $600 million of new lending opportunities with applications issued and under negotiation, quoted or through preliminary screening and in underwriting and structuring. Taking into account last year’s total new loan origination and considering loans already closed and in process this year as well as our pipeline of new loan opportunities, we currently anticipate new loan originations for…

Thanks, Dave. Now I’ll ask other Dave, Dave Bryant, our Chief Financial Officer to discuss our financials.

Thank you, Jonathan. Resource Capital Corp. declared and paid a cash dividend for the fourth quarter of $0.20 per common share, bringing the 2014 total to $0.80 per share. Our AFFO for the quarter was 21.7 million or $0.17 per common share diluted. In determining AFFO for the fourth quarter, there were several non-cash adjustments that net to 8.2 million and cash adjustments of 9.9 million. Our 2014 calendar year AFFO comes in at $0.73 per common share diluted. In terms of income statement presentation, I’d like to highlight that we reclassified several line items to other income expense in Q4. When other income expense is added to total revenues, we get to 32.5 million for the quarter and 125 million for the year. We passed all of the interest coverage and over collateralization tests in all of our securitizations that require such tests, including two legacy real estate CDOs and two remaining bank loan CLOs. Please note our three most recent securitizations are not subject to such tests. Each of these financing structures performed well and produced healthy cash flow to us in the fourth quarter. We had one of our legacy CLOs liquidate in Q4 and another two will liquidate during 2015. The capital from these liquidations will be recycled into newly underwritten loans. The increase in borrowing capacity on our real estate term facility provides plenty of runway for the robust real estate loan pipeline and the correlated rate reduction of 25 basis points will help our net interest income and cash flow from real estate operations as we warehouse these loans. We ended Q4 2014 with availability of 392 million on our real estate term facilities combined and 17 million on our CMBS term facility. At the closing of our latest securitization a few days ago,…

Thank you. Looking back on 2014, we believe that this has been a year in which we have accomplished our principal business objectives to grow our real estate originations, successfully execute in the securitization market, increase our middle market lending business while maintaining excellent credit quality thus generating the strong return on equity that provides our shareholders with a solid dividend and total return on the investment. We continue to seek opportunities to generate solid returns on credit quality and quality credit related products to supplement our principal commercial real estate lending business, and we are off to a good start thus far in 2015 to furthering this objective. I think you will see net income increase and the dividend coverage materialize. With that, I will open the call for any questions. Thank you.

Thank you. [Operator Instructions]. Your first question comes from the line of Steve DeLaney, JMP Securities. Please proceed.

Good morning, everyone. Thanks for taking my question.

Hi, Steve.

Hi, Jon. So the first quarter dividend, we should assume that will be declared by the Board in mid-March and are we still looking at that range that you announced in early January of $0.16 to $0.18?

Yes, we are.

Okay, very good. And in your AFFO guidance for 2015 of 70 to 80, I’m just curious what LIBOR rate assumptions might be in there for the second half of the year if in fact the Fed starts raising rates here midyear? We don’t know exactly what they’ll do or how fast, but I guess where I’m going is if you could comment on what your assumptions for rates are in your projections but also looking forward, do you have any sense for – you’re really focusing on these senior floating rate loans with the match-funded CLO structures and I’m just curious if you could estimate how much your ROE might improve or your AFFO might improve if, say, LIBOR was 100 basis points higher than it sits today?

I think that we would be making more money at that point, a 100 basis points up. I can’t really quantify that for you because there are loans that have LIBOR floors of 50 and 100 basis points, so we wouldn’t really be making that much more on those loans. But that being said, we have a lot of loans that don’t have LIBOR floors, so we would be making more loans on that. My gut would be any kind of modest rate increase would be really not that – it wouldn’t affect us one way or another much. If rates increased 200 basis points, I think we’d be making more money as long as of course the economy remained robust and credit quality remained excellent the way it has been. As far as assumptions, we assume a fairly conservative approach of just using the curve, the strip of LIBOR futures.

Got it, so nothing too dramatic --

Yes.

That may not be realized is what I’m saying, okay. That’s very helpful comments about the floor. And then as far as the bank loan portfolio, I think we’re down to – these are the syndicated bank loans, down to 330 million. Can you give us a sense for modeling purposes maybe how we should be running that off over the next several quarters?

Steve, this is Dave. I would say that about a third of that will runoff sort of midyear, June is the likely date. And then the balance of it, probably – maybe a little less than the third, maybe more like a 25% on the first point and then maybe 250 million or so will be around for a while. That reinvestment period just ended this past May, so that typically would runoff over, say, a three to four-year period almost ratably.

Okay. So you’re still going to have some of that around benefiting earnings over the next couple of years?

Yes, but we would probably just put some detail on that – we would probably call that securitization I would say probably within the next 18 months.

At some point it will make sense, Steve.

Yes, maybe sooner.

Okay. Well, it’s helpful to know how to make the adjustment in midyear in June, that’s helpful. Thanks. My last comment would be this. You guys give great detail on your loan portfolio as far as both geography and industry. You do have 27% of your loans in Texas and I was just curious if you can make any comments as far as submarkets and how well you feel your position relative to any weakness we might get in the energy industry affecting some Texas markets? Thanks.

Sure. Thanks, Steve. We’ve done an extremely detailed analysis of our exposure in Texas and we have steered clear of sort of energy office buildings. The majority of our investments there are value-add Class B multis that really cater to people with incomes between say $40,000 and $70,000 not energy sector workers. We’ve gone through the office buildings we have in Dallas, looked that we have no energy exposure there, we feel extremely well insulated from what’s going on there. We’ve also done a lot of other research study what the Dallas Fed had to say and really looked with energy where it is now even if it’s taking another leg down. The overall economy, we can talk about Houston but Texas in general is it’s extremely diverse. Our assets I think are well insulated from that one industry.

Okay, good to know and thanks for all the comments guys.

Thanks, Steve.

Thank you. The next question comes from the line of Jade Rahmani, KBW. Please proceed.

Good morning and thanks for taking the question. I was wondering if you could comment on the current investment environment and whether you saw any spread widening in the fourth quarter as a result of volatility, if that created any unique opportunities or if you think generally loan spreads continue to tighten?

I think just a general feeling is that in multi quality, decent multi even kind of value-add B type stuff, you continue to see spreads where they were or even slightly tighter. In kind of some other asset classes, I think you’re seeing kind of spread tightening stop a little bit but not much. And on the corporate side, you are seeing a little bit of widening for riskier assets.

Okay. Thanks. And can you comment or provide some color on the types of the loans originating right now, but just a sense for the range of loan yields that you’ve write to and also how LTVs have trended, say, quarter-over-quarter?

I think LTVs have stayed pretty much where they were or in some cases it’s again property specific. I think in general – maybe Dave should comment on this.

Sure. I mean looking at the tapes from our last two securitizations, our weighted average LTVs are in the low 70s. This place we feel very comfortable. So we’ve really not been pushing leverage. Again, Jon said spreads are really kind of holding, which we’re holding lines on spread and on structure.

I mean just to give you a sense like we’ve been between 4.5% and 6% plus depending on the asset type, low 70s, average LTV probably is very consistent today with where we were a year ago.

Okay, great. And are there sectors in the market that you feel are overheated or where you’re increasingly cautious?

I would say we’re increasingly cautious on LTV in the multi area and we’re also – and we’ve always been this way and probably cautious on hotels.

Okay. Just turning to the repurchase debt, how much remaining embedded gains are there from what’s previously repurchased?

Jade, this is Dave Bryant. I would peg that in the $40 million range probably a little bit more but at least 40 million.

And that would be the aggregate amount of gains that could be realized over, say, the next 12 to 18 months?

Probably a little more term than that --

Probably in that line --

Three years let’s just say.

And just to remind you, these are not gains, these are gains for AFFO purposes where we get the cash but not gains for book value purposes.

Got it. Thanks very much for taking the questions.

Thank you.

Thank you. The next question comes from the line of Richard Eckert from MLV & Company. Please proceed.

Thank you for taking my call. First, a couple of housekeeping items. On the press release there’s whole loan production of 265.4 million and if I add 46.5 million to that in unfunded commitments, I guess something like a little over $310 million not $302 million. Is there something I’m missing in there?

Yes, part of that number includes 9.6 million of the funding of commitments which were originated prior to this year, Rich.

Okay.

If you look at the footnote --

So the real number is 254 or something like that --

Yes.

Sorry, I never got passed the first footnote.

No, that’s okay, Richard. That put mezzanine [ph] down to the 302.

Okay. Also while I have you on the line, David Bloom, you said that the execution on the latest CLO was LIBOR plus 190. If I recall correctly, the last one over the summer was LIBOR plus 130. Was there something special about that summer issuance?

Well, you got to remember that each one has its own leverage, so this was more levered than that one was. So we put less equity in, so you can’t compare one rate to the other rate.

Okay. Just curious about what the difference was. And back to David Bryant, I know I’m sounding like I seem drunk here, but this is like the fourth quarter in a row the allocations that CRE has fallen below 70%, and I’m curious if I’m ever going to see it above 70 again.

Rich, you will see it. The fourth quarter was one where we put a lot of equity into the middle market, because we had only a certain amount of debt capacity there. And this will all shift around over the next couple of quarters.

Yes, and just be patient with us. Thank you for bringing it up.

Okay. And I can go over this laundry list of items later with David, but just curious --

I just wanted to point out that when the percentage of equity allocated to real estate, it moved from about 61% at the end of Q3 to 67% at the end of Q4. So that trend will continue into 2015.

Okay, that’s encouraging. Just of the many one-off items that stuck out at me was the tax benefit of 1.5 million, considerably larger than that recorded in the previous two quarters. Is there any one particular item that bumps that number up?

What I would say, Rich, is that because we had losses in some of the taxable subsidiaries, partly in the resi business that Jon highlighted and in some other areas, that’s what created that income tax benefit that will realize as the businesses become profitable in future periods.

Okay. Thank you very much for taking my questions.

Thanks, Rich, be well.

Thank you. I would now like to turn the call over to Mr. Jonathan Cohen for closing remarks.

We thank you very much and we look forward to reporting next quarter. Be well.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.