CHICAGO, May 10 /PRNewswire-FirstCall/ -- Deerfield Triarc Capital
Corp. (NYSE:DFR) today announced the results of operations for its
first quarter ended March 31, 2007. HIGHLIGHTS -- Net income of
$22.5 million, or $0.44 per diluted common share, an increase of
17.6% and 18.9%, respectively over the prior year quarter --
Estimated REIT taxable income, a non-GAAP financial measure, of
$23.0 million, or $0.44 per diluted common share, an increase of
12.3% and 10.0%, respectively over the prior year quarter --
Dividend distribution of $0.42 per share, equal to the fourth
quarter of 2006 -- First quarter increase of 5.7% in the structured
and syndicated assets portion of the alternative investments
portfolio to $473.5 million -- Book value per share of $13.40 at
March 31, 2007 -- Announced definitive agreement to purchase
Deerfield & Company LLC, a leading fixed income manager and
DFR's external manager Results of Operations Net income for the
quarter ended March 31, 2007 totaled $22.5 million, or $0.44 per
diluted common share, compared with net income of $19.2 million, or
$0.37 per share, for the first quarter of 2006. The increase
reflected improved realized and unrealized net gains on trading
securities, better loan trading results and higher net interest
income. These benefits were partially offset by a $1.8 million
provision for loan loss in the current quarter compared to zero in
the prior year quarter, a decline in derivative trading income and
higher incentive fee expense. Net interest income of $23.8 million
increased 4.0% over the prior year. Excluding the impact of hedge
ineffectiveness reflected in interest expense, net interest income
increased 6.6% primarily due to a better mix of higher yielding
alternative investments. A $1.8 million provision for loan losses
was recognized in the current quarter related to the same loan in
which a $2.0 million charge was recorded in the fourth quarter of
2006, as a restructuring event became clearer and more likely to
occur. This position is now carried at 52.5% of its original cost.
Expenses totaled $6.6 million, up by $0.6 million, or 10.1%, from
the prior year. The increase was largely due to higher incentive
fees paid on improved overall performance. Other income and gain
(loss) was $7.5 million, up by $5.1 million from the prior year.
The improvement was largely driven by a $4.5 million increase in
gains on trading securities and a $1.4 million increase in loan
non-interest income. Results also benefited from a $1.6 million
decrease in interest-only strip impairment to $0.2 million.
Estimated REIT taxable income, a non-GAAP financial measure, for
the quarter ended March 31, 2007, totaled $23.0 million, or $0.44
per diluted common share. For a reconciliation of GAAP net income
to estimated REIT taxable income, see the attached schedule.
Jonathan Trutter, chief executive officer, said, "We are executing
on our plan, as evidenced in this most recent quarter. As we are
able to put capital to work and generate attractive income growth,
we expect to reward our shareholders with dividends consistent with
our earnings." Investment Portfolio The following table summarizes
the carrying value of our invested assets and the respective
balance sheet classifications as of March 31, 2007 (in thousands):
Carrying Value Available- Trading Loans for-Sale and Other Held for
Description (4) Securities Securities Sale Loans RMBS (agency /
AAA) $7,591,965 $280,531 $- $- Corporate leveraged loans (1) - - -
422,304 Commercial mortgage-backed assets 2,534 - 10,853 31,250
Equity securities - 6,569 - - Total structured & syndicated
assets 2,534 6,569 10,853 453,554 Assets held in CLO (2) 8,473 -
274,028 - Asset-backed securities in CDO (3) 282,445 - - - High
yield corporate bonds 10,197 - - - Other investments 2,987 - 35,714
- Total alternative investments 306,636 6,569 320,595 453,554 Total
invested assets - Mar 31, 2007 $7,898,601 $287,100 $320,595
$453,554 Total invested assets - Dec 31, 2006 $7,941,091 $100,401
$282,768 $432,335 Carrying Value Total Total Mar 31, % of Dec 31, %
of Description (4) 2007 Total 2006 Total RMBS (agency / AAA)
$7,872,496 87.9% $7,691,428 87.8% Corporate leveraged loans (1)
422,304 404,976 Commercial mortgage-backed assets 44,637 36,505
Equity securities 6,569 6,382 Total structured & syndicated
assets 473,510 5.3% 447,863 5.1% Assets held in CLO (2) 282,501
3.2% 278,197 3.2% Asset-backed securities in CDO (3) 282,445 3.2%
297,420 3.4% High yield corporate bonds 10,197 0.1% 10,445 0.1%
Other investments 38,701 0.3% 31,242 0.4% Total alternative
investments 1,087,354 12.1% 1,065,167 12.2% Total invested assets -
Mar 31, 2007 $8,959,850 100% $8,756,595 100% Total invested assets
- Dec 31, 2006 $8,756,595 (1) Excludes credit default and total
return swaps at March 31, 2007 with a net fair value of
approximately $1.3 million and $1.4 million and a gross notional
value of $86.0 million and $51.6 million, respectively. (2)
Includes $8.5 million of high yield corporate bonds. (3) Includes
non agency-backed RMBS, CMBS and other ABS. (4) The portfolio
instruments that constitute each asset category reflect subjective
judgments by the company and are subject to change. Total invested
assets grew 2.3% to $9.0 billion as of March 31, 2007 compared to
$8.8 billion at the end of 2006. The increase reflected growth of
$181.1 million in the RMBS portfolio, and $22.2 million in the
alternative investment portfolio, respectively. Mortgage Securities
Investment Portfolio During the first quarter of 2007, the RMBS
portfolio increased by 2.4% to $7.9 billion from $7.7 billion as of
December 31, 2006. At March 31, 2007, the aggregate amortized cost
of RMBS exceeded its aggregate estimated fair value by $74.3
million. Unrecognized net gains of $24.8 million on interest rate
swaps designated as a hedge provided a favorable offset. The net
portfolio duration, which is the difference between the duration of
the RMBS and that of the repurchase agreements funding these
investments, adjusted for the effects of the company's swap
portfolio, was approximately -0.09 years at March 31, 2007. Net
return on average investment in the RMBS portfolio was relatively
flat at 67 basis points compared to 71 basis points in the fourth
quarter 2006. However, the net return on average net investment in
the RMBS portfolio improved 29 basis points to 8.94%. The
mortgage-backed securities holdings consisted primarily of hybrid
adjustable rate and fixed rate bonds as of March 31, 2007, as
follows: Par and Notional Estimated Security Description (1) Amount
Fair Value (In thousands) Hybrid Adjustable Rate RMBS: Rate reset
in 1 year or less $423,898 $424,884 Rate reset in 1 to 3 years
1,181,869 1,175,738 Rate reset in 3 to 5 years 3,362,783 3,358,251
Rate reset in 5 to 7 years 503,451 504,394 Rate reset in 7 to 10
years 419,562 414,710 Fixed Rate RMBS 15 year 59,007 58,443 30 year
1,878,605 1,878,926 Other: Interest-only (I/O) strips (5) 159,234
20,950 I/O strips - trading (5) 1,209,038 9,364 I/O and
principal-only strips (5) 59,420 26,836 Total RMBS - March 31, 2007
$9,256,867 $7,872,496 RMBS - December 31, 2006 $8,594,065
$7,691,428 Weighted Average Constant Mod- Months Prepay- ified to
Yield Contract- ment Dura- Reset to ual Rate tion Security
Description (1) Coupon (2) Maturity Maturity (3) (4) Hybrid
Adjustable Rate RMBS: Rate reset in 1 year or less 4.42% 8 5.51%
04/09/35 46.2 0.7 Rate reset in 1 to 3 years 4.74% 31 5.51%
12/24/34 32.4 1.6 Rate reset in 3 to 5 years 5.20% 43 5.50%
10/13/35 30.9 1.6 Rate reset in 5 to 7 years 5.60% 66 5.52%
04/02/36 27.9 1.6 Rate reset in 7 to 10 years 5.26% 101 5.66%
08/04/35 16.6 3.4 Fixed Rate RMBS 15 year 5.50% n/a 5.74% 09/12/20
13.4 3.1 30 year 5.92% n/a 5.74% 02/05/36 17.4 3.4 Other:
Interest-only (I/O) strips (5) n/m n/a 14.27% 05/02/35 10.6 (55.7)
I/O strips - trading (5) n/m n/a 17.95% 06/04/35 13.0 73.2 I/O and
principal-only strips (5) n/m n/a 7.09% 03/16/36 13.0 (2.1) n/m -
not meaningful n/a - not applicable (1) Includes securities
classified as both available-for-sale and trading. (2) Represents
number of months before conversion to floating rate. (3) Constant
prepayment rate refers to the expected average annualized
percentage rate of principal prepayments over the remaining life of
the security. The values represented in this table are estimates
only and the results of a third party financial model. (4) Modified
duration represents the approximate percentage change in market
value per 100 basis point change in interest rates. (5) Interest-
and principal-only strips represent solely the interest or
principal portion of a security. Therefore the par amount reflected
should not be used as a comparison to fair value. Fixed rate RMBS
totaled 24.6% of the portfolio as of March 31, 2007. The company
has hedged a substantial portion of the borrowing costs associated
with the repurchase agreements funding the RMBS portfolio using
interest rate swaps, which are accounted for as cash flow hedges
under GAAP. The RMBS portfolio consists entirely of agency issued
or AAA rated securities, thus effectively no exposure to the
weakness in the subprime residential market. A fairly limited
amount of exposure to subprime residential mortgages exists in the
alternative investment portfolio as discussed in the following
section. Alternative Investments Portfolio Complementing the
mortgage securities segment of the portfolio are alternative
investments that represent attractive yield and diversification
opportunities. During the first quarter of 2007, the structured and
syndicated assets portion of this portfolio increased by 5.7% to
$473.5 million from $447.9 million at December 31, 2006. Asset
backed securities collateralized by subprime residential mortgages,
which are held in the Pinetree ABS CDO ("Pinetree"), totaled $179.2
million (par amount) at March 31, 2007. Economic exposure to
subprime mortgages, however, is limited to the company's original
$12 million investment in Pinetree. (See discussion regarding Book
Value below for a more detailed explanation of the accounting
impact in the first quarter of 2007 related to our investment in
Pinetree). Commenting on the alternative investments portfolio, Mr.
Trutter noted, "Through the growth of our alternative investments
portfolio, we continue to improve our return on equity. During the
first quarter, new investment volume was in-line with our
expectations, but we are seeing higher levels of payoffs which
temper the net growth of the portfolio. Our new deal pipeline
remains robust." Dividend As previously announced, a quarterly
distribution of $0.42 per share of common stock was declared for
the first quarter of 2007, to shareholders of record as of May 7,
2007, payable on May 30, 2007. The following table summarizes our
dividends declared to-date in 2007 and 2006. Declaration Record
Payment Dividend Date Date Date Per Share 04/23/07 05/07/07
05/30/07 $0.42 04/24/06 05/04/06 05/26/06 $0.36 07/25/06 08/04/06
08/28/06 0.38 10/24/06 11/07/06 11/27/06 0.40 12/19/06 12/29/06
01/30/07 0.42 Total - 2006 $1.56 Book Value Book value per share at
March 31, 2007, was $13.40 compared to $13.32 at December 31, 2006.
Unlike the first three quarters of 2006, the fourth quarter
dividend was declared before quarter-end to avoid a non-deductible
excise tax on undistributed taxable income, which is computed on a
calendar year basis. Book value per share at December 31, 2006
computed on a pro-forma basis, excluding the reduction of book
value from the out-of-cycle fourth quarter dividend, was $13.74. On
a pro-forma basis, book value per share fell $0.34 to $13.40, or
2.5%. The decrease was primarily attributable to a $15.8 million
temporary impairment charge in equity at quarter-end on Pinetree
CDO investment securities, or $0.31 per share. As indicated
earlier, approximately $180 million of Pinetree securities are
collateralized by subprime mortgages, of which all are investment
grade. Although the full amount of $0.31 per share of temporary
impairment is required by generally accepted accounting principles
as a charge to equity, the company's economic risk is limited to
its $12 million equity investment in Pinetree, or $0.23 per share.
To date, the company has received approximately $4.1 million in
distributions from the Pinetree CDO on the original investment of
$12 million. For further information on the company's limited
subprime residential mortgage exposure, please refer to our press
release dated March 6, 2007. Definitive Agreement to Purchase
Deerfield & Company LLC As noted on April 20, DFR announced
that it has entered into a definitive agreement to acquire
Deerfield & Company LLC ("Deerfield") from Triarc Companies,
Inc. (NYSE: TRY, TR.B or "Triarc"), which owns a controlling
interest in Deerfield, and its other members for an aggregate
consideration of approximately $290 million, consisting of
approximately 9,635,000 million shares of DFR common stock having a
value at the date of the Agreement of approximately $145 million
and $145 million in cash. Deerfield, which is DFR's external
manager, is a Chicago-based registered investment advisor with
offices in New York and London that specializes in credit and
structured investment solutions and products. By acquiring
Deerfield, DFR will internalize its investment manager, which will
enhance the efficiency of its cost structure and create unanimity
of economic interests among its manager, employees and
shareholders. This should enhance earnings, produce higher returns
on equity and we would expect shareholders to be rewarded with an
expansion of our valuation multiple. Finally, Deerfield's brand
positioning as an alternative investment manager should be enhanced
by the combination, thereby providing DFR with greater access to
two key business ingredients: additional capital and new talent.
The transaction, which is expected to close during the 2007 third
quarter, is subject to customary closing conditions, including
regulatory approval. Conference Call The company will host its
quarterly earnings conference call for investors and other
interested parties on Friday, May 11, 2007, at 11:00 a.m. Eastern
Time. The conference call will be accessible by telephone and
through the Internet. Interested individuals are invited to access
the call by dialing 888-694-4641. To participate on the webcast,
log on to the company's website at http://www.deerfieldtriarc.com/
or http://www.earnings.com/ 15 minutes before the call to download
the necessary software. In addition, a taped rebroadcast will be
available beginning one hour following the completion of the call,
and will continue through May 18. To access the rebroadcast, dial
877-519-4471 and request reservation number 8734251. A replay of
the call will also be available on the Internet at
http://www.deerfieldtriarc.com/ for 30 days. About the Company
Deerfield Triarc Capital Corp. (the company) is a diversified
financial company formed in 2004 to invest in real estate-related
securities and various other asset classes. The company has elected
and intends to continue to qualify to be taxed as a real estate
investment trust, or REIT, for federal income tax purposes. The
objective is to provide attractive returns to investors through a
combination of dividends and capital appreciation, which the
company intends to achieve by opportunistically investing in
financial assets and to construct an investment portfolio
appropriately leveraged to seek attractive risk-adjusted returns.
The targeted asset classes and the principal investments the
company expects to make in each are as follows: Asset Class
Principal Investments Real Estate-Related Securities Residential
mortgage-backed securities, or RMBS Commercial mortgage-backed
securities, or CMBS Other Asset-backed Securities, Collateralized
debt obligations, or CDOs or ABS Consumer ABS Loans and Related
Derivatives Senior Secured and Unsecured Loans Credit Default Swaps
on Senior Secured Loans Leveraged Finance Instruments Corporate
Mezzanine Loans High Yield Corporate Bonds Distressed and Stressed
Debt Securities Private Equity Investments In addition, the company
may invest opportunistically in other types of investments within
the core competencies of its manager, Deerfield Capital Management,
including investment grade corporate bonds and related derivatives,
government bonds and related derivatives, and other fixed income
related instruments. * * Notes and Tables to Follow * * NOTES TO
PRESS RELEASE The statements in this press release that are not
historical facts, including, most importantly, information
concerning possible or assumed future results of operations of
Deerfield Triarc Capital Corp. ("Deerfield Triarc" or the
"company") and statements preceded by, followed by, or that include
the words "may," "believes," "plans," "expects," "anticipates" or
the negation thereof, or similar expressions, constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"). All
statements that address operating performance, events or
developments that are expected or anticipated to occur in the
future, including statements related to revenue growth, earnings
per share growth or statements expressing general optimism about
future operating results, are forward-looking statements within the
meaning of the Reform Act. These forward-looking statements are
based on our current expectations, speak only as of the date of
this press release and are susceptible to a number of risks,
uncertainties and other factors. Our actual results, performance
and achievements may differ materially from any future results,
performance or achievements expressed or implied by such
forward-looking statements. For those statements, we claim the
protection of the safe harbor for forward-looking statements
contained in the Reform Act. Many important factors could affect
our future results and could cause those results to differ
materially from those expressed in the forward-looking statements
contained herein. Such factors include higher than expected
prepayment rates on the mortgages underlying our mortgage
securities holdings; our inability to obtain favorable interest
rates or margin terms on the financing that we need to leverage our
mortgage securities and other positions; increased rates of default
on our loan portfolio (which risk rises as the portfolio seasons),
and decreased recovery rates on defaulted loans; flattening or
inversion of the yield curve (short term rates increasing at
greater rate than longer term rates), reducing our net interest
income on our financed mortgage securities positions; our inability
adequately to hedge our holdings sensitive to changes in interest
rates; narrowing of credit spreads, thus decreasing our net
interest income on future credit investments (such as bank loans);
changes in REIT qualification requirements, making it difficult for
us to conduct our investment strategy; lack of availability of
qualifying real estate-related investments; disruption in the
services we receive from our Manager, such as loss of key portfolio
management personnel; our inability to continue to issue
collateralized debt obligation vehicles (which can provide us with
attractive financing for our debt securities investments); adverse
changes in accounting principles, tax law, or legal/regulatory
requirements; competition with other REITs for investments with
limited supply; changes in the general economy or the debt markets
in which we invest; and other risks and uncertainties disclosed
from time to time in our filings with the Securities and Exchange
Commission, all of which are difficult or impossible to predict
accurately and many of which are beyond our control. All future
written and oral forward-looking statements attributable to us or
any person acting on our behalf are expressly qualified in their
entirety by the cautionary statements contained or referenced
above. New risks and uncertainties arise from time to time, and it
is impossible for us to predict these events or how they may affect
us. We assume no obligation to update any forward-looking
statements after the date of this press release as a result of new
information, future events or developments, except as required by
federal securities laws. In addition, it is our policy generally
not to make any specific projections as to future earnings, and we
do not endorse any projections regarding future performance that
may be made by third parties. DEERFIELD TRIARC CAPITAL CORP. AND
ITS SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share and per share amounts) March 31,
December 31, 2007 2006 ASSETS Cash and cash equivalents $113,751
$72,523 Due from broker, including $366,155 and $176,650 of
securities pledged - at fair value 768,118 257,818 Restricted cash
and cash equivalents 33,965 27,243 AFS securities, including
$7,412,148 and $7,245,844 pledged-at fair value 7,898,601 7,941,091
Trading securities-at fair value 280,531 94,019 Other investments
6,569 6,382 Derivative assets 38,042 55,624 Loans held for sale
320,595 282,768 Loans 453,554 432,335 Allowance for loan losses
(3,800) (2,000) Loans, net of Allowance for loan losses 449,754
430,335 Interest receivable 51,231 51,627 Other receivable 11,934
18,362 Prepaid and other assets 12,357 12,199 TOTAL ASSETS
$9,985,448 $9,249,991 LIABILITIES Repurchase agreements, including
$45,396 and $46,858 of accrued interest $7,692,228 $7,372,035 Due
to broker 557,859 158,997 Dividends payable - 21,723 Derivative
liabilities 31,564 21,456 Interest payable 33,669 33,646 Long term
debt 972,205 948,492 Management and incentive fee payable to
related party 3,296 1,092 Other payables 1,368 3,597 TOTAL
LIABILITIES 9,292,189 8,561,038 STOCKHOLDERS' EQUITY Preferred
stock, par value $0.001: 100,000,000 shares authorized; none issued
and outstanding - - Common stock, par value $0.001: 500,000,000
shares authorized; 51,722,066 and 51,721,903 shares issued and
outstanding (including 134,616 restricted shares) 51 51 Additional
paid-in capital 748,837 748,803 Accumulated other comprehensive
loss (65,414) (47,159) Accumulated deficit 9,785 (12,742) TOTAL
STOCKHOLDERS' EQUITY 693,259 688,953 TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $9,985,448 $9,249,991 DEERFIELD TRIARC CAPITAL
CORP. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED) (In thousands, except share and per share
amounts) Three months ended March 31, 2007 2006 REVENUES Net
interest income: Interest income $122,699 $102,028 Interest expense
98,859 79,105 Net interest income 23,840 22,923 Provision for loan
losses 1,800 - EXPENSES Management fee expense to related party (1)
3,330 3,690 Incentive fee expense to related party 2,185 1,185
Professional services 617 478 Insurance expense 136 181 Other
general and administrative expenses 369 492 Total expenses 6,637
6,026 OTHER INCOME AND GAIN (LOSS) Net gain (loss) on
available-for- sale securities 2,549 2,092 Net gain (loss) on
trading securities 2,640 (1,813) Net gain (loss) on loans 1,962 532
Net gain on derivatives 46 1,443 Dividend income and other net gain
(loss) 264 101 Net other income and gain (loss) 7,461 2,355 Income
before income tax expense 22,864 19,252 Income tax expense
(benefit) 337 89 NET INCOME $22,527 $19,163 NET INCOME PER
SHARE-Basic $0.44 $0.37 NET INCOME PER SHARE-Diluted $0.44 $0.37
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING - Basic 51,587,293
51,390,470 WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING - Diluted
51,763,464 51,515,588 (1) Includes $31 and $385 of stock and option
expense to related party DEERFIELD TRIARC CAPITAL CORP. AND ITS
SUBSIDIARIES EFFECTIVE RATE AND NET RETURN ANALYSIS (1) (Dollars in
thousands) Three months ended March 31, 2007 Average Interest
Effective Balance (2) Income Rate (3) RMBS (4) $8,011,616 $96,450
4.82% Assets held in CLO (Market Square) 295,545 5,718 7.74% ABS
held in CDO (Pinetree) 303,662 5,370 7.07% Other alternative assets
491,555 15,161 12.34% Total investments $9,102,378 $122,699 5.39%
Average Interest Effective Balance (2) Expense Rate (3) Repurchase
agreements (5) (6) $7,414,896 $83,118 4.48% Market Square long-term
debt 276,000 4,128 5.98% Pinetree long-term debt (5) 287,760 4,254
5.91% Revolving warehouse facility 281,600 4,672 6.64% Trust
preferred securities (TPS) 123,717 2,687 8.69% Total borrowings
$8,383,973 $98,859 4.72% Net Interest Net Net return on average
investment Income (7) Return (8) RMBS (5) $13,332 0.67% Assets held
in CLO (Market Square) 1,590 2.15% ABS held in CDO (Pinetree) (5)
1,116 1.47% Other alternative assets 10,489 8.54% Total net return
before TPS 26,527 1.17% Trust preferred securities (2,687) -0.12%
Total net return $23,840 1.05% Average Net Net Net return on
average net investment Investment Return (9) RMBS (5) $596,720
8.94% Assets held in CLO (Market Square) 24,000 26.50% ABS held in
CDO (Pinetree) (5) 12,000 37.20% Other alternative assets 209,955
19.98% Total net return (including TPS) $842,675 11.32% Three
months ended December 31, 2006 Inc/(Dec) Effective Effective Rate
(3) Rate (3) RMBS (4) 4.90% (0.08) Assets held in CLO (Market
Square) 8.07% (0.33) ABS held in CDO (Pinetree) 6.89% 0.18 Other
alternative assets 12.97% (0.63) Total investments 5.41% (0.02)
Effective Effective Rate (3) Rate (3) Repurchase agreements (5) (6)
4.57% (0.09) Market Square long-term debt 6.15% (0.17) Pinetree
long-term debt (5) 5.88% 0.03 Revolving warehouse facility 6.78%
(0.14) Trust preferred securities (TPS) 8.87% (0.18) Total
borrowings 4.78% (0.06) Net Net Net return on average investment
Return (8) Return (8) RMBS (5) 0.71% (0.04) Assets held in CLO
(Market Square) 2.31% (0.16) ABS held in CDO (Pinetree) (5) 1.38%
0.09 Other alternative assets 8.81% (0.27) Total net return before
TPS 1.12% 0.05 Trust preferred securities -0.11% (0.01) Total net
return 1.01% 0.04 Net Net Net return on average net investment
Return (9) Return (9) RMBS (5) 8.65% 0.29 Assets held in CLO
(Market Square) 28.32% (1.82) ABS held in CDO (Pinetree) (5) 35.13%
2.07 Other alternative assets 22.81% (2.83) Total net return
(including TPS) 10.88% 0.44 (1) This supplemental information is
subject to various significant limitations, including that it is
being provided solely for general informational purposes; it is
based on unaudited financial information; it is subject to
revision; the past results presented are not necessarily indicative
of future results; the company makes no representation about the
appropriateness of the information in making investment decisions;
the portfolio instruments that constitute each asset category
reflect subjective judgments by the company and are subject to
change; the information is qualified in its entirety by the
following documents available on our website -- the company's
Annual Report for 2006 on Form 10-K filed with the SEC, the
company's subsequent quarterly reports on Form 10-Q filed with the
SEC, and the "Notes to Press Release" included with this
announcement. (2) Average balance is calculated based on the
month-end balances with the exception of some of the Other
alternative assets, which are based on daily balances.
Available-for-sale securities are included in this analysis using
historical cost while all other balances are at carrying value.
Average balances exclude any unsettled purchases and sales. (3)
Effective rate is calculated by dividing Interest income or
Interest expense by the respective Average balance. The effective
rate is annualized. (4) RMBS includes interest earning cash and
short-term investments not held in a CLO or CDO. (5) This
calculation includes the impact of designated hedging activity
including increases/(decreases) in interest expense due to
ineffectiveness of ($21) and ($572) in the three months ending
March 31, 2007 and December 31, 2006, respectively) and margin
borrowing. (6) Repurchase agreements include an immaterial amount
related to Other alternative assets, however, these amounts are
included in the RMBS Net return calculations. (7) Net interest
income excludes all "Other income and gain (loss)" as well as
"Expenses" reported in the company's Consolidated Statements of
Operations. (8) Net return on average investment is calculated by
dividing Net interest income by the investment Average balance and
the return is annualized. (9) Net return on average net investment
is calculated by dividing the Net interest income by the respective
average net investment. Average net investment is calculated for
RMBS and Other alternative assets by taking their investment
Average balance less the respective borrowings Average balance. Net
investment for the Assets held in CLO and ABS held in CDO is their
initial equity of $24,000 and $12,000, respectively. The Return on
average net investment is annualized. DEERFIELD TRIARC CAPITAL
CORP. AND ITS SUBSIDIARIES RECONCILIATION OF GAAP NET INCOME TO
ESTIMATED REIT TAXABLE INCOME (UNAUDITED) (In thousands, except
share and per share amounts) Three Months Ended March 31, 2007 GAAP
net income $22,527 Adjustments to GAAP net income: Difference in
rate of premium amortization and discount accretion 979 Interest
income on non-accrual loans 290 Amortization of gain on terminated
swaps 67 Amortization of financing element in Pinetree swap (43)
Hedge ineffectiveness (22) Provision for loan losses 1,800 Stock
and options grant 31 Organization costs (2) Non-allowable deduction
for meals & entertainment 21 Security basis difference
recognized upon sale 242 Impairment of available-for sale
securities not recognized for tax purposes 202 Unrealized (gain)
loss (2,516) Gain on intercompany sale eliminated for GAAP (12)
Exclusion of Deerfield Triarc TRS Holdings, LLC net income (532)
Net adjustments to GAAP net income 505 Estimated REIT taxable
income $23,032 Weighted average diluted shares 51,763,464 Taxable
earnings per diluted share $0.44 The company believes that the
presentation of estimated REIT taxable income is useful because it
indicates the estimated minimum amount of distributions it must
make in order to avoid corporate level income tax. However, beyond
its intent to distribute to stockholders at least 90% of REIT
taxable income on an annual basis in order to maintain our REIT
qualification, the company does not expect that the amount of
distributions it makes will necessarily correlate to estimated REIT
taxable income. Rather, the company expects to determine the amount
of distributions to make based on cash flow, GAAP net income and
what it believes to be an appropriate and competitive dividend
yield relative to other specialty finance companies and mortgage
REITs. Estimated REIT taxable income will not necessarily bear any
close relation to cash flow. Accordingly, the company does not
consider estimated REIT taxable income to be a reliable measure of
liquidity although the related distribution requirement can impact
liquidity and capital resources. Moreover, there are limitations
associated with estimated REIT taxable income as a measure of
financial performance over any period, and the presentation of
estimated REIT taxable income may not be comparable to similarly
titled measures of other companies, which may use different
calculations. As a result, estimated REIT taxable income should not
be considered as a substitute for GAAP net income as a measure of
financial performance. DATASOURCE: Deerfield Triarc Capital Corp.
CONTACT: Richard G. Smith, Chief Financial Officer of Deerfield
Triarc Capital Corp., +1-773-380-6587; or Analyst Inquiries, Leslie
Loyet of Financial Relations Board, +1-312-640-6672, for Deerfield
Triarc Capital Corp. Web site: http://www.deerfieldtriarc.com/
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