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 or 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 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: