8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 6, 2012

Apollo Commercial Real Estate Finance, Inc.

(Exact name of registrant as specified in its charter)

Maryland	001-34452	27-0467113
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

c/o Apollo Global Management, LLC 9 West 57th Street, 43rd Floor New York, New York	10019
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (212) 515-3200

n/a

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02. Results of Operations and Financial Condition.

On August 6, 2012, Apollo Commercial Real Estate Finance, Inc. (the “Company”) issued an earnings release announcing its financial results for the quarter ended June 30, 2012. A copy of the earnings release is attached as Exhibit 99.1 hereto and incorporated herein by reference.

On August 6, 2012, the Company posted supplemental financial information on the Investor Relations section of its website (www.apolloreit.com). A copy of the supplemental financial information is furnished as Exhibit 99.2 hereto and incorporated herein by reference.

The information in Item 2.02 of this Current Report, including Exhibits 99.1 and 99.2, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, unless it is specifically incorporated by reference therein.

ITEM 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
99.1	Earnings Release dated August 6, 2012
99.2	Supplemental Financial Information for the quarter ended June 30, 2012

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Apollo Commercial Real Estate Finance, Inc.
By:	/s/ Stuart A. Rothstein

Name: Stuart A. Rothstein

Title: President, Chief Executive Officer, Chief Financial Officer, Treasurer and

Secretary

Date: August 6, 2012

3

Exhibit Index

Exhibit No.	Description
99.1	Earnings Release, dated August 6, 2012
99.2	Supplemental Financial Information for the quarter ended June 30, 2012

4

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE		NYSE:ARI
CONTACT:	Hilary Ginsberg
	Investor Relations
	(212) 822-0767

APOLLO COMMERCIAL REAL ESTATE FINANCE, INC. ANNOUNCES

SECOND QUARTER 2012 FINANCIAL RESULTS AND DECLARES A $0.40

PER SHARE QUARTERLY DIVIDEND

New York, NY, August 6, 2012 – Apollo Commercial Real Estate Finance, Inc. (the “Company” or “ARI”) (NYSE:ARI) today reported Operating Earnings (a non-GAAP financial measure as defined below) of $8.5 million, or $0.41 per share, for the three months ended June 30, 2012, representing a per share increase of 2.5% as compared to Operating Earnings of $7.1 million, or $0.40 per share, for the three months ended June 30, 2011. Net income for the three months ended June 30, 2012 was $9.9 million, or $0.47 per share, as compared to net income of $6.5 million, or $0.37 per share, for the three months ended June 30, 2011.

For the six months ended June 30, 2012, the Company reported Operating Earnings of $17.3 million, or $0.83 per share, representing a per share increase of 20% as compared to Operating Earnings of $12.1 million, or $0.69 per share for the six months ended June 30, 2011. Net income for the six months ended June 30, 2012 was $19.0 million, or $0.91 per share, as compared to net income of $11.7 million, or $0.66 per share, for the six months ended June 30, 2011.

The Company also announced the Board of Directors declared a dividend of $0.40 per share of common stock, which is payable on October 12, 2012 to common stockholders of record on September 28, 2012.

Second Quarter Highlights

• Increased Operating Earnings per share by 2.5%;

• Generated $12.0 million of net interest income from the Company’s $676.0 million investment portfolio, which had a weighted average underwritten internal rate of return (“IRR”) of approximately 15.0% at June 30, 2012;

• Purchased two senior sub-participation interests ($23.8 million of aggregate face value) in a first mortgage loan for $17.9 million;

• Purchased $70.7 million of commercial mortgage backed securities (“CMBS”) where the obligors are certain special purpose entities formed to hold substantially all of the assets of Hilton Worldwide, Inc. (the “Hilton CMBS”). The Company deployed $21.2 million of equity to acquire the Hilton CMBS and financed the balance utilizing $49.5 million of borrowings under the Company’s repurchase facility with Wells Fargo Bank, N.A. (the “Wells Facility”), which are coterminous with the Hilton CMBS, assuming full extensions; and

• Amended the Company’s repurchase facility with JPMorgan Chase Bank, N.A (the “JPM Facility”) to reduce the interest rate spread by 0.5% to LIBOR + 2.5%.

“ARI posted another strong quarter of solid financial results, we believe primarily due to our ability to keep the Company’s capital active in commercial real estate debt investments with attractive, risk-adjusted returns,” said Stuart Rothstein, Chief Executive Officer. “Our investment portfolio continues to have stable credit performance and remains diversified with respect to asset class as well as underlying property type. Based upon the investment portfolio’s performance, the Board of Directors declared a $0.40 dividend per share, which is our ninth consecutive quarter of maintaining this attractive dividend level.”

Second Quarter Investment and Portfolio Activity

Senior Sub-Participation Interests in First Mortgage Loan – In April 2012, the Company purchased two senior sub-participation interests ($23.8 million of aggregate face value) in a first mortgage loan with a balance of $120.0 million at the date of investment, secured by over 20 acres of land in the South Boston Waterfront District. The land is entitled for over 5.8 million buildable square feet and is currently used as parking with approximately 3,325 spaces. The aggregate purchase price of the two senior sub-participation interests was $17.9 million and their loan-to-value ratio (“LTV”) was 28.0% based upon the aggregate face value at the date of investment. The senior sub-participation interests each have an interest rate of one-month LIBOR+1.72% and mature in December 2012. Upon the repayment of $33.0 million of the first mortgage loan (of which the Company will receive its pro-rata share) and the payment of an extension fee equal to 0.5% of the outstanding balance of the first mortgage loan, the maturity of the first mortgage loan, including the senior sub-participation interests, can be extended through December 2013. Assuming the extension occurs and after a one-time payment of a brokerage fee and other expenses, the senior sub-participation interests have been underwritten to generate an IRR of approximately 21.7%.

Hilton CMBS – In June 2012, the Company purchased $70.7 million of CMBS where the obligors are certain special purpose entities formed to hold substantially all of the assets of Hilton Worldwide, Inc. The Hilton CMBS’ LTV is estimated to be in the range of 35% to 45%. The Hilton CMBS have a current interest rate of one-month LIBOR+1.75% which increases to LIBOR+2.3% on November 12, 2012, LIBOR+3.3% on November 12, 2013 and LIBOR+3.8% on November 12, 2014. The Hilton CMBS receive amortization approximately equivalent to a 16-year amortization schedule. The CMBS investment has been underwritten to generate an IRR of approximately 11.7%. The Company deployed $21.2 million of equity to purchase the Hilton CMBS and the remainder of the acquisition was financed utilizing borrowings under the Wells Facility, which was amended to provide up to $100 million of additional financing for the Hilton CMBS. The $49.5 million of debt drawn from the Wells Facility for the acquisition is coterminous with the Hilton CMBS, assuming full extensions.

Repayment of First Mortgage Loan – In April 2012, a $24.0 million two-year fixed rate first mortgage on a 155-room boutique hotel in midtown Manhattan was repaid. The loan had an interest rate of 8.00%. The Company repaid $15.4 million of borrowings under the JPM Facility in conjunction with this repayment and approximately $8.6 million of equity was generated for reinvestment.

Repayments from CMBS and Repurchase Agreement – Throughout the quarter, the Company received $54.5 million of repayments from CMBS and the repurchase agreement investment secured by CDO bonds, generating $16.0 million of equity for reinvestment. The balance of the repayments was used to repay $38.5 million of outstanding debt under the Wells Facility.

Modification of Subordinate Loan – In June 2012, the Company modified a $40.0 million subordinate loan secured by a ski resort in California. The modification was completed in connection with a modification of both the senior and junior loans in order to provide financial covenant relief to the borrower and included the addition of an amendment fee, exit fee and an increase of the interest rate.

Amended JP Morgan Facility – In April 2012, the Company amended the JPM Facility to reduce the interest rate spread by 0.5% to LIBOR + 2.5%.

Quarter End Portfolio Summary

The following table sets forth certain information regarding the Company’s investments at June 30, 2012 ($ amounts in thousands):

Description	Amortized Cost		Weighted Average Yield			Debt		Cost of Funds			Equity at cost		Weighted Average IRR *
CMBS - AAA	$	280,697		4.1	%	$	248,177		1.9	%	$	32,520		16.2	%
CMBS – Hilton		70,719		5.6			49,459		2.6			21,260		11.7
First mortgage loans		103,320		7.2			53,060		2.7			50,260		20.0
Subordinate loans		179,602		12.9					—			179,602		14.0
Repurchase agreements		41,696		13.0					—			41,696		13.7
Total	$	676,034		7.6	%	$	350,696		2.1	%	$	325,338		15.0	%

* The IRRs for the investments shown in the above table and elsewhere in this press release reflect the returns underwritten by ACREFI Management, LLC, the Company’s external manager. They are calculated on a weighted average basis assuming no dispositions, early prepayments or defaults but assume extensions as well as the cost of borrowings and derivative instruments under the Company’s Wells Facility. There can be no assurance the actual IRRs will equal the underwritten IRRs shown in the table and elsewhere in this press release. See “Risk Factors” in the reports filed by the Company with the Securities and Exchange Commission for a discussion of some of the factors that could adversely impact the returns received by the Company from the investments shown in the table over time.

Book Value

The Company’s GAAP book value per share at June 30, 2012 was $16.59, as compared to $16.46 at March 31, 2012. The increase in the Company’s GAAP book value per share from March 31, 2012 to June 30, 2012 was primarily the result of net unrealized gains on the Company’s portfolio of CMBS.

For purposes of GAAP accounting, the Company carries loans at amortized cost and its CMBS securities are marked to market. Management has estimated that the fair value of the Company’s financial assets at June 30, 2012 was approximately $12.9 million greater than the carrying value of the Company’s investment portfolio as of the same date. This represents a premium of $0.63 per share over the Company’s GAAP book value as of June 30, 2012, and results in an estimated market value per share of approximately $17.22.

Subsequent Events

Mezzanine Loan – In July 2012, the Company closed a $6.5 million mezzanine loan secured by a pledge of the equity interest in a borrower that owns a mixed use project, which consists of 55,585 square feet of Class-A retail and 114,476 square feet of Class-A office in Chapel Hill, North Carolina. The mezzanine loan is part of a new $40.0 million, 10-year fixed-rate financing comprised of a $33.5 million first mortgage and the $6.5 million mezzanine loan. The mezzanine loan is an interest-only, fixed rate loan that has an interest rate of 11.1%. The mezzanine loan has an appraised LTV of approximately 77% and has been underwritten to generate an IRR of approximately 12.0%.

Preferred Offering – On August 1, 2012, the Company completed an underwritten public offering of 3,450,000 shares of its 8.625% Series A Cumulative Redeemable Perpetual Preferred Stock (the “Series A Preferred Stock”) with a liquidation preference of $25 per share, including the exercise of the underwriter’s option to purchase additional shares. Net proceeds from the offering, after the underwriting discount and estimated offering expenses payable by the Company, were approximately $83.2 million. The Company intends to use the net proceeds from the offering to initially repay amounts outstanding under the JPM Facility and to acquire the Company’s target assets, which include commercial first mortgage loans, commercial mortgage-backed securities, subordinate financings and other commercial real estate-related debt investments, and for general corporate purposes.

Commenting on the preferred offering, Scott Weiner, the Chief Investment Officer of the Company’s Manager, said, “We were extremely pleased with our ability to raise attractively priced capital and we are confident we will be able

to deploy the proceeds into accretive commercial real estate debt investments. We continue to see a diversified range of opportunities across a broad spectrum of property types and geographies in the commercial real estate debt market.”

Definition of Operating Earnings

Operating Earnings is a non-GAAP financial measure that is used to approximate cash available for distribution and is defined by the Company as net income, computed in accordance with GAAP, adjusted for (i) non-cash equity compensation expense and (ii) any unrealized gains or losses or other non-cash items included in net income. The table provided below, reconciles Operating Earnings to net income.

Reconciliation of Operating Earnings to Net Income

The tables below reconcile Operating Earnings and Operating Earnings per share with net income and net income per share for the three and six months ended June 30, 2012 and 2011 ($ amounts in thousands):

	Three Months Ended June 30, 2012			Earnings Per Share (Diluted)			Three Months Ended June 30, 2011			Earnings Per Share (Diluted)
Operating Earnings:
Net income	$	9,910		$	0.47		$	6,520		$	0.37
Adjustments:
Unrealized (gain) loss on securities		(2,078	)		(0.09	)		(1,366	)		(0.08	)
Unrealized gain on derivative instruments		(192	)		(0.01	)		1,548			0.09
Non-cash stock-based compensation expense		886			0.04			384		$	0.02
Total adjustments:		(1,384	)	$	(0.06	)		566		$	0.03
Operating Earnings	$	8,526		$	0.41		$	7,086		$	0.40
Basic and diluted weighted average Common shares outstanding:		20,991,450						17,684,991

	Six Months Ended June 30,  2012			Earnings Per Share (Diluted)			Six Months Ended June 30,  2011			Earnings Per Share (Diluted)
Operating Earnings:
Net income	$	19,003		$	0.91		$	11,700		$	0.66
Adjustments:
Unrealized (gain) loss on securities		(3,463	)		(0.16	)		(1,392	)		(0.08	)
Unrealized gain on derivative instruments		(187	)		(0.01	)		1,089			0.06
Non-cash stock-based compensation expense		1,969			0.09			736			0.04
Total adjustments:	$	(1,681	)	$	(0.08	)		433		$	0.02
Operating Earnings	$	17,322		$	0.83		$	12,133		$	0.69
Basic and diluted weighted average common shares outstanding:		20,978,938						17,556,455

Teleconference Details:

The Company will be hosting a conference call to discuss its financial results on Tuesday, August 7, 2012 at 8:30 a.m. Eastern Time. Members of the public who are interested in participating in the Company’s second quarter 2012 earnings teleconference call should dial from the U.S., (877) 263-2989, or from outside the U.S., (702) 928-7168, shortly before 10:00 a.m. and reference the Apollo Commercial Real Estate Finance, Inc. Teleconference Call (number 10363577). Please note that the teleconference call will be available for replay beginning at 10:30 a.m. on Tuesday, August 7, 2012, and ending at midnight on Tuesday, August 14, 2012. To access the replay, callers from the U.S. should dial (855) 859-2056 and callers from outside the U.S. should dial (404) 537-3406, and enter conference identification number 10363577.

Webcast

The conference call will also be available on the Company’s website at www.apolloreit.com. To listen to a live broadcast, please go to the site at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software. A replay of the call will also be available for 30 days on the Company’s website.

Supplemental Information

The Company provides supplemental financial information to offer more transparency into its results and make its reporting more informative and easier to follow. The supplemental financial information is available on the investor relations section of the Company’s website at www.apolloreit.com.

About Apollo Commercial Real Estate Finance, Inc.

Apollo Commercial Real Estate Finance, Inc. (NYSE: ARI) is a commercial mortgage real estate investment trust that primarily originates, invests in, acquires and manages senior performing commercial real estate mortgage loans, commercial mortgage-backed securities and other commercial real estate-related debt investments throughout the U.S. The Company is externally managed and advised by ACREFI Management, LLC, a Delaware limited liability company and an indirect subsidiary of Apollo Global Management, LLC, a leading global alternative investment manager with approximately $105 billion of assets under management at June 30, 2012.

Additional information can be found on the Company’s website at www.apolloreit.com.

Dividend Reinvestment Plan

The Company has adopted a Direct Stock Purchase and Dividend Reinvestment Plan (the “Plan”). The Plan provides new investors and existing holders of the Company’s common stock with a convenient and economical method to purchase shares of its common stock. By participating in the Plan, participants may purchase additional shares of the Company’s common stock by reinvesting some or all of the cash dividends received on their shares of the Company’s common stock. In addition, the Plan permits participants to make optional cash investments of up to $10,000 per month, and, with the Company’s prior approval, optional cash investments in excess of $10,000 per month, for the purchase of additional shares of the Company’s common stock.

The Plan is administered by a division of Wells Fargo Bank, N.A. (“Wells”). Stockholders and other persons may obtain a copy of the Plan prospectus and an enrollment form by contacting Wells at (800) 468-9716 or (651) 450-4064, if outside the United States, or visiting Wells’ website at www.shareowneronline.com.

Forward-Looking Statements

Certain statements contained in this press release constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are intended to be covered by the safe harbor provided by the same. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond the Company’s control. These forward-looking statements include information about possible or assumed future results of the Company’s business, financial condition, liquidity, results of operations, plans and objectives. When used in this release, the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may” or similar expressions, are intended to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: the return on equity; the yield on investments; the ability to borrow to finance assets; and risks associated with investing in real estate assets, including changes in business conditions and the general economy. For a further list and description of such risks and uncertainties, see the reports filed by the Company with the Securities and Exchange Commission. The forward-looking statements, and other risks, uncertainties and factors are based on the Company’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to the Company. Forward-looking statements are not predictions of future events. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands—except share and per share data)

	June 30, 2012		December 31, 2011
Assets:
Cash	$	11,959	$	21,568
Securities available-for-sale, at estimated fair value		125,631		302,543
Securities, at estimated fair value		228,939		251,452
Commercial mortgage loans, held for investment		103,321		109,006
Subordinate loans, held for investment		179,602		149,086
Repurchase agreements, held for investment		41,696		47,439
Principal and interest receivable		11,195		8,075
Deferred financing costs, net		1,161		2,044
Other assets		10		17
Total Assets	$	703,514	$	891,230
Liabilities and Stockholders’ Equity
Liabilities:
Borrowings under repurchase agreements	$	350,696	$	290,700
TALF borrowings		—		251,327
Derivative instruments, net		291		478
Accounts payable and accrued expenses		1,072		1,746
Payable to related party		1,294		1,298
Dividends payable		8,726		8,703
Deferred revenue		117		—
Total Liabilities		362,196		554,252
Stockholders’ Equity:
Common stock, $0.01 par value, 450,000,000 shares authorized, 20,570,616 and 20,561,032 shares issued and outstanding in 2012 and 2011, respectively		206		206
Preferred stock, $0.01 par value, 50,000,000 shares authorized and no shares outstanding		—		—
Additional paid-in-capital		337,923		336,209
Retained Earnings		2,214		—
Accumulated other comprehensive income		975		563
Total Stockholders’ Equity		341,318		336,978
Total Liabilities and Stockholders’ Equity	$	703,514	$	891,230

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations (Unaudited)

(in thousands—except share and per share data)

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Net interest income:
Interest income from securities	$	3,230		$	6,448		$	8,552		$	13,103
Interest income from commercial mortgage loans		2,791			2,297			5,026			4,610
Interest income from subordinate loans		5,859			3,167			11,172			5,077
Interest income from repurchase agreements		2,000			1,552			3,559			1,612
Interest expense		(1,929	)		(3,781	)		(5,171	)		(7,121	)
Net interest income		11,951			9,683			23,138			17,281
Operating expenses:
General and administrative expenses (includes $886 and $1,969 of non-cash stock based compensation in 2012 and $384 and $736 in 2011, respectively)		(2,762	)		(1,412	)		(4,798	)		(2,792	)
Management fees to related party		(1,292	)		(1,101	)		(2,581	)		(2,189	)
Total operating expenses		(4,054	)		(2,513	)		(7,379	)		(4,981	)
Interest income from cash balances		—			3			1			9
Realized gain on sale of securities		—			—			262			—
Unrealized gain on securities		2,078			1,366			3,463			1,392
Loss on derivative instruments (includes $192 and $187 of unrealized gains in 2012 and $1,548 and $1,089 of unrealized losses in 2011, respectively)		(65	)		(2,019	)		(482	)		(2,001	)
Net income	$	9,910		$	6,520		$	19,003		$	11,700
Basic and diluted net income per share of common stock	$	0.47		$	0.37		$	0.91		$	0.66
Basic and diluted weighted average common shares outstanding		20,991,450			17,561,032			20,978,938			17,556,455
Dividend declared per share of common stock	$	0.40		$	0.40		$	0.80		$	0.80

EX-99.2

August 7, 2012

Supplemental Financial Information Presentation

Q2 2012

Information is as of June 30, 2012 except as otherwise noted. 

It should not be assumed that investments made in the future will be profitable or will equal the performance of investments in this document.

Exhibit 99.2

1

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

Legal Disclaimer

We make forward-looking statements in this presentation and other filings we make with the SEC within the meaning of Section 27A of the

Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are intended to be

covered by the safe harbor provided by the same. Forward-looking statements are subject to substantial risks and uncertainties, many of which

are difficult to predict and are generally beyond our control. These forward-looking statements include information about possible or assumed

future results of our business, financial condition, liquidity, results of operations, plans and objectives. When we use the words “believe,”

“expect,”

“anticipate,”

“estimate,”

“plan,”

“continue,”

“intend,”

“should,”

“may”

or similar expressions, we intend to identify forward-looking

statements. Statements regarding the following subjects, among others, may be forward-looking: our business and investment strategy; our

operating

results;

our

ability

to

obtain

and

maintain

financing

arrangements;

the

return

on

equity,

the

yield

on

investments

and

risks

associated

with investing in real estate assets, including changes in business conditions and the general economy.

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all

information currently available to us. Forward-looking statements are not predictions of future events. These beliefs, assumptions and

expectations can change as a result of many possible events or factors, not all of which are known to us. Some of these factors are described

under

“Risk

Factors,”

and

“Management’s

Discussion

and

Analysis

of

Financial

Condition

and

Results

of

Operations”

as

included

in

ARI’s

Annual Report on Form 10-K for the fiscal year ended December 31, 2011. If a change occurs, our business, financial condition, liquidity and

results of operations may vary materially from those expressed in our forward-looking statements. Any forward-looking statement speaks only as

of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may

affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a

result of new information, future events or otherwise.

This presentation may contain statistics and other data that in some cases has been obtained from or compiled from information made available

by third-party service providers.

2

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

Apollo Commercial Real Estate Finance, Inc.

2012 Second Quarter Earnings Call

August 7, 2012

Stuart Rothstein

Chief Executive Officer, President and Chief Financial Officer

Scott Weiner

Chief Investment Officer of the Manager

Megan Gaul

Controller of the Manager

Hilary Ginsberg

Investor Relations Manager

3

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

ARI –

Financial Summary

(1)

Operating Earnings is a non-GAAP financial measure that is used to approximate cash available for distribution and is defined by the Company as net income, computed in accordance with GAAP, adjusted for (i) non-cash equity compensation expense and (ii) any

unrealized gains or losses or other non-cash items included in net income.  Please see slide 22 for a reconciliation of Operating Earnings and Operating Earnings per Share to GAAP net income and GAAP net income per share.

(2)

Fixed rate debt refers to the TALF borrowings which were refinanced with the Wells repurchase facility during January 2012.

(3)

Debt service coverage is EBITDA divided by interest expense.

Income Statement

June 30, 2012

June 30, 2011

% Change

June 30, 2012

June 30, 2011

% Change

13,880

$        

13,464

$               

3.1%

28,309

$        

24,402

$        

16.0%

(1,929)

$         

(3,781)

$                 

-49.0%

(5,171)

$         

(7,121)

$         

-27.4%

Net interest income

(in thousands)

11,951

$        

9,683

$                   

23.4%

23,138

$        

17,281

$        

33.9%

0.41

$             

0.40

$                     

2.5%

0.83

$             

0.69

$             

20.3%

20,991,450

17,684,991

18.7%

20,978,938

17,556,455

19.5%

Balance sheet

June 30, 2012

December 31, 2011

% Change

676,034

$      

860,247

$             

-21.4%

325,338

$      

318,220

$             

2.2%

Net stockholders equity

341,518

$      

336,978

$             

1.3%

2.9 Years

2.2 Years

1.1x

1.6x

-

$               

251,327

$             

350,696

$      

290,700

$             

6.9x

3.9x

Three Months Ended

Six Months Ended

Interest income

(in thousands)

Interest expense

(in thousands)

Operating earnings per share

(1)

Basic and diluted weighted average common shares

outstanding

Investments at amortized cost

(in thousands)

Net equity in investments at cost

(in thousands)

Investments -

Weighted average Duration

Debt to equity

Fixed rate debt

(in thousands)

(2)

Debt service coverage

(3)

Floating rate debt

(in thousands)

4

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

ARI –

Six Month Overview

Operating Earnings per Share

Dividends per Share

Net Interest Income ($000s)

Return

on

Equity

Based

on

Operating

Earnings

(1)

$0.40

$0.40

$0.40

$0.40

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

Six Months Ended June 30, 2011

Six Months Ended June 30, 2012

(1)

Return on equity is calculated as annualized Operating Earnings for the quarter as a percentage of average equity.

$0.29

$0.42

$0.40

$0.41

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

Six Months Ended June 30, 2011

Six Months Ended June 30, 2012

$7,599

$11,187

$9,684

$11,951

$0

$5,000

$10,000

$15,000

$20,000

$25,000

Six Months Ended June 30, 2011

Six Months Ended June 30, 2012

6.8%

10.4%

9.6%

10.0%

0.0%

3.0%

6.0%

9.0%

12.0%

Six Months Ended June 30, 2011

Six Months Ended June 30, 2012

1Q

2Q

1Q

2Q

5

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

ARI –

Historical Overview

Operating Earnings per Share

(1)

Return on equity is calculated as annualized Operating Earnings for the quarter as a percentage of average equity.

Dividends per Share

Net Interest Income ($000s)

Return

on

Equity

Based

on

Operating

Earnings

(1)

9.3%

9.8%

10.4%

10.0%

8.6%

9.0%

9.4%

9.8%

10.2%

10.6%

Q3 2011

Q4 2011

Q1 2012

Q2 2012

$1.50

$1.60

$0.40

$0.40

$0.00

$0.40

$0.80

$1.20

$1.60

$2.00

2010

2011

YTD 2012

$1.09

$1.47

$0.42

$0.41

$0.00

$0.40

$0.80

$1.20

$1.60

2010

2011

YTD 2012

$21,771

$38,464

$11,187

$11,951

$0

$10,000

$20,000

$30,000

$40,000

2010

2011

YTD 2012

6

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

ARI –

Q2 Highlights

Financial Results & Earnings Per Share

Operating Earnings for the quarter ended June 30, 2012 of $8.5 million, or $0.41 per diluted

common share

(1)

–

A per

share

increase

of

2.5%

as

compared

with

Operating

Earnings

per

share

for

the

same

period

in

2011

–

Net interest income of $12.0 million for Q2 2012

–

Total expenses of $4.1 million, comprised of management fees of $1.3 million, G&A of

$1.9

million

(including

a

one-time

brokerage

fee

of

$0.7

million

related

to

an

investment)

and

non-cash,

stock based compensation of $0.9 million

–

GAAP net income for the quarter ended June 30, 2012 of $9.9 million, or $0.47 per diluted

common share

Dividend

Declared a dividend of $0.40 per share of common stock for the quarter ended September 30,

2012

–

Ninth consecutive quarter of maintaining consistent dividend level

–

9.6% annualized dividend yield based on $16.75 closing price on August 3, 2012

(1)

Operating Earnings is a non-GAAP financial measure that is used to approximate cash available for distribution and is defined by the Company as net income, computed in accordance with GAAP, adjusted for (i) non-cash

equity compensation expense and (ii) any unrealized gains or losses or other non-cash items included in net income. Please see slide 22 for a reconciliation of operating earnings and operating earnings per diluted common

share to GAAP net income and GAAP net income per diluted common share.

7

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

ARI –

Q2 Highlights

Investment and Portfolio Activity

New Investments

–

Acquired two senior sub-participation interests with an aggregate face value of $23.8 million, part of a $120

million first mortgage loan secured by over 20 acres of land in the South Boston Waterfront District, which is

entitled for over 5.8 million buildable square feet and is currently used as parking with approximately 3,325

spaces.  The aggregate purchase price of the senior sub-participation interests was $17.9 million (75% of face

value) and the investment has been underwritten to generate an IRR of approximately 21.7%, after the payment

of expenses

(1)

–

Acquired $70.7 million of CMBS where the obligors are certain special purpose entities formed to hold

substantially all of the assets of Hilton Worldwide, Inc.(the “Hilton CMBS”)  The investment has been

underwritten

to

generate

an

IRR

of

approximately

11.7%

(1)

Loan Modification

–

Modified a $40 million subordinate loan secured by a ski resort in California to provide financial covenant relief

in connection with a loan modification of the senior and junior loans.  The loan modification included the

addition of an amendment fee, exit fee and an increase of the interest rate. Following the modification, the

investment

has

been

underwritten

to

generate

an

IRR

of

approximately

14.8%

(1)

(1)

The

internal

rates

of

return

(“IRR”)

for

the

investments

listed

reflect

the

returns

underwritten

by

the

Manager,

calculated

on

a

weighted

average

basis

assuming

no

dispositions,

early

prepayments

or

defaults

but

assumes

extensions

as

well

as

the

cost

of

borrowings

and

derivative

instruments

under

the

Company’s

master

repurchase

agreement

with

Wells

Fargo

Bank,

N.A.

(“Wells

Facility”).

There

can

be

no

assurance

the

actual

IRRs

will

equal

the

underwritten

IRRs

shown.

See

“Risk

Factors”

in

the

Company’s

Annual

Report

on

Form

10-K for the year ended December 31, 2011 for a discussion of some of the factors that could adversely impact the returns received by the Company from the investments over time.

8

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

ARI –

Q2 Highlights

Investment and Portfolio Activity (cont.)

Loan/Investment Repayments

–

Received repayment from a $24 million first mortgage loan on a hotel in midtown Manhattan, which

generated $8.6 million of equity for reinvestment after repayment of $15.4 million of borrowings

–

Received $54.5 million of repayments from CMBS and the repurchase agreement secured by CDO bonds,

generating $16.0 million of equity for reinvestment

Financing Overview

Amended JP Morgan Facility

–

Amended

the

JP

Morgan

repurchase

facility

to

reduce

the

interest

rate

spread

by

0.50%

to

LIBOR+2.50%

Amended Wells Fargo Facility

–

In connection with the acquisition of the Hilton CMBS, the repurchase facility with Wells Fargo was amended

to provide up to $100 million of financing for the purchase of Hilton CMBS at LIBOR+2.35%;  The

additional financing is coterminous with the Hilton CMBS, assuming full extensions

Portfolio Summary

Total

investments

with

an

amortized

cost

of

$676

million

at

June

30,

2012

Weighted

average

underwritten

IRR

of

approximately

15.0%

(1)

(1)

The

internal

rates

of

return

(“IRR”)

for

the

investments

listed

reflect

the

returns

underwritten

by

theManager,calculated

on

a

weighted

average

basis

assuming

no

dispositions,

early

prepayments

or

defaults

but

assumes

extensions

as

well

as

the

cost

of

borrowings

and

derivative

instruments under the Wells Facility. There can be no assurance the actual IRRs will equal the underwritten IRRs shown. See “Risk Factors”

in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 for a discussion of some of the factors that could

adversely impact the returns received by the Company from the investments over time.

9

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

ARI –

Q2 Highlights and Subsequent Events

Book Value

GAAP book value of $16.59 per share as of June 30, 2012

Fair

value

of

$17.22

per

share

as

of

June

30,

2012

(1)

ARI closed at $16.75 on August 3, 2012, a 1% premium to GAAP book value per share and a 2.9%

discount to fair market value per share

Subsequent Events

New Investments

–

Acquired a $6.5 million mezzanine loan secured by a pledge of the equity interest in a borrower that owns a mixed

use project consisting of 55,585 square feet of Class-A retail and 114,476 square feet of Class-A office in Chapel

Hill,

North

Carolina.

The

loan

has

been

underwritten

to

generate

an

IRR

of

approximately

12.0%

(2)

Preferred Offering

–

Completed

an

underwritten

public

offering

of

3.45

million

shares

of

its

Series

A

Cumulative

Redeemable

Perpetual Preferred Stock (the “Series A Preferred Stock”), with a liquidation preference of $25 per share,

including the exercise of the underwriters’

option to purchase additional shares 

–

Net proceeds, after the underwriting discount and estimated offering expenses payable by the Company, were

approximately $83.2 million

(1)

The Company carries loans at amortized cost and its CMBS securities are marked to market.  Management has estimated that the fair value of the Company’s financial assets at June 30, 2012 was approximately $12.9 million greater than the carrying value of the Company’s

investment portfolio as of the same date.  This represents a premium of $0.63 per share over the Company's GAAP book value as ofJune 30, 2012.

(2)

The

internal

rates

of

return

(“IRR”)

for

the

investments

listed

reflect

the

returns

underwritten

by

theManager,calculated

on

a

weighted

average

basis

assuming

no

dispositions,

early

prepayments

or

defaults

but

assumes

extensions

as

well

as

the

cost

of

borrowings

and

derivative

instruments under the Wells Facility. There can be no assurance the actual IRRs will equal the underwritten IRRs shown. See “Risk Factors”

in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 for a discussion of some of the factors that could

adversely impact the returns received by the Company from the investments over time.

10

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

ARI –

Portfolio Overview

Asset Type

($000s)

Amortized

Cost

Borrowings

Equity

at Cost

Weighted

Average

IRR

(2)(3)

First

Mortgage

Loans

(2)

$103,320

$53,060

$50,260

2.4

20.0%

Subordinate Loans

179,602

-

179,602

5.2

14.0%

Repurchase Agreements

41,696

-

41,696

1.8

13.7%

CMBS -

AAA

280,697

248,177

$32,520

1.7

16.2%

CMBS -

Hilton

70,719

49,459

$21,260

3.4

11.7%

Investments at June 30, 2012

$676,034

$350,696

$325,338

2.9 Years

15.0%

As of June 30, 2012.

(1) 

Remaining Weighted Average Life assumes all extension options are exercised.

(2)

Borrowings under the Company’s master repurchase facility with JPMorgan bear interest at LIBOR plus 250 basis points, or 2.75% at June 30, 2012. The IRR calculation further assumes the JPM repurchase facility will

remain available over the life of these investments.

(3)

The IRR for the investments shown in the above table reflect the returns underwritten by the Manager, calculated on a weighted average basis assuming no dispositions, early prepayments or defaults but assumes extensions

as well as the cost of borrowings and derivative instruments under the Wells Facility. There can be no assurance the actual IRRs will equal the underwritten IRRs shown in the table. See “Risk Factors” in the Company’s

Annual Report on Form 10-K for the year ended December 31, 2011 for a discussion of some of the factors that could adversely impact the returns received by the Company from the investments shown in the table over time.

Remaining

Weighted

Average

Life (years )

(1)

11

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

ARI –

Portfolio Overview

Diversified Investment Portfolio with Amortized Cost Basis of $676 million

Weighted Average IRR of Approximately 15.0%

(1)

Net Invested Equity at Amortized Cost Basis

Gross Assets at Amortized Cost Basis

CMBS -

AAA

42%

CMBS -

Hilton

10%

First Mortgages

15%

Subordinate

Loans

27%

Repurchase

Agreements

6%

CMBS -

AAA

10%

CMBS -

Hilton

7%

First Mortgages

15%

Subordinate

Loans

55%

Repurchase

Agreements

13%

As of June 30, 2012.

(1)

The IRR for the investments shown in the above charts reflect the returns underwritten by the Manager, calculated on a weighted average basis assuming no dispositions, early prepayments or defaults but

assumes extensions as well as the cost of borrowings and derivative instruments under the Wells Facility. There can be no assurance the actual IRRs will equal the underwritten IRRs shown in the charts. See

“Risk Factors”

in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 for a discussion of some of the factors that could adversely impact the returns received by the Company

from the investments over time.

12

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

ARI –

Loan Portfolio Diversification

As of June 30, 2012, first mortgages and subordinate loans represented 70% of

ARI’s investment portfolio’s net equity

The loan portfolio is diversified by property type and geographic location

Loan Portfolio -

Geographic Diversification by Face

Amount

(1)

Loan Portfolio -

Property Type by Face Amount

(1)

(1)

Does not include CMBS (AAA or Hilton) or repurchase agreement investment secured by CDO bond.

(2)

Other category includes the subordinate financing on a ski resort.

Hotel

39%

Office

13%

Retail

26%

Parking/

Development

Site

8%

Other (2)

14%

Northeast

50%

Southeast

5%

Mid-Atlantic

18%

Midwest

5%

West

22%

13

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

ARI –Loan Portfolio -

Maturity and Type

Fully

Extended

Loan

Maturity

Schedule

($000s)

(1)

(1)

Based upon Face Amount of Loans; Does not include CMBS (AAA or Hilton) or repurchase agreement investment secured by CDO bond.

Loan Position and Rate Type

(1)

ARI’s Loan Portfolio had a face amount of $288 million at June 30, 2012

$0

$23.8

$41.7

$99.6

$65.7

$40.0

$0

$50.0

$8.9

$0

$0

$20

$40

$60

$80

$100

$120

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Senior Loan

Fixed

38%

Mezzanine

Loan Fixed

23%

Mezzanine

Loan Floating

12%

Subordinate

Loan Fixed

12%

Subordinate

Loan Floating

7%

Preferred

Equity Fixed

8%

14

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

ARI –

Loan Portfolio –

Loan Level LTV (Through Last Invested Dollar)

(1)

Ending LTV represents the loan-to-value as of the date of investment for all loans except the $32,000 New York, NY hotel loan, which is as of March 2011.

(2)

Description ($ in thousands)

Location

Balance at  

June 30, 2012

LTV (Senior

Mortgage)

Ending LTV

(1)

First Mortgage - Hotel

New York 

31,687

$              

0%

40%

First Mortgage - Office

New York

27,534

$              

0%

53%

First Mortgage - Hotel

Maryland

25,421

$              

0%

57%

First Mortgage - Parking/Development Site

(2)

Boston

23,844

$              

0%

28%

Subordinate - Ski Resort

California

40,000

$              

29%

56%

Subordinate - Retail

Various

30,000

$              

58%

68%

Subordinate - Retail

Virginia

25,670

$              

60%

74%

Subordinate - Hotel Portfolio

New York

25,000

$              

40%

60%

Subordinate -Retail

Various

20,000

$              

58%

72%

Subordinate - Hotel 

New York

15,000

$              

51%

63%

Subordinate - Hotel

New York

15,000

$              

51%

65%

Subordinate - Office

Michigan

8,932

$                

53%

68%

Total

288,088

$           

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

LTV is based upon the aggregate face value ($23.8 million) of the senior sub-participation interests at the date of investment; ARI purchased the senior sub participation interests for $17.8 million (75% of face value).

15

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

ARI –

Senior Loan Portfolio

Description ($000’s)

Date of

Investment

Maturity

Date

(1)

Original

Face

Amount

Current

Face

Amount

Coupon

Amortization

Schedule

Property

Size

Appraised

LTV

(2)

Hotel

New York, NY

Jan-10

Feb-15

$32,000

31,687

8.25%

30 year

151

rooms

40%

Office Condo (Headquarters)

New York, NY

Feb-10

Feb-15

28,000

27,534

8.00

30 year

73,419

sq. ft.

54%

Hotel

Silver Spring, MD

Mar-10

Apr-15

26,000

25,421

9.00

25 year

263

rooms

58%

Parking/Development Site

Boston, MA

Apr-12

Dec-13

23,844

23,844

2.00%

(L+1.72%)

Interest

Only

20 acres

28%

Total

.

.

$109,844

$108,486

6.99%

(1)

Maturity date assumes all extension options are exercised.

(2)

Appraised LTV represents the loan to value as of the date of investment for all loans except the $32,000 New York, NY hotel loan, which is as of March 2011.

(3)

Interest rate includes 10% current payment with a 3% accrual.

Description ($000’s)

Date of

Investment

Maturity

Date

Original

Face

Amount

Current

Face

Amount

Coupon

Amortization

Schedule

Property

Size

Appraised

LTV

(2)

Repurchase Agreement

(3)

Sept-10

Mar-14

$47,439

$41,696

13.00%

Interest

only

N/A

N/A

Total

$47,439

$41,696

13.00%

16

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

ARI –

Subordinate Loan Portfolio

Description ($000’s)

Date of

Investment

Maturity

Date

(1)

Original

Face

Amount

Current Face

Amount

Coupon

Amortization

Schedule

Appraised

LTV

(2)

Senior Mezz –

Retail

Various

Dec-09

Dec-19

(3)

$30,000

30,000

12.24%

Interest

only

69%

Junior Mezz –

Retail

Various

Dec-09

Dec-19

(3)

20,000

20,000

14.00

Interest

only

74%

Office

Michigan

May-10

Jun-20

9,000

8,932

13.00

25 year

70%

Ski Resort

California

Apr-11

May-17

(4)

40,000

40,000

14.00

Interest

only

64%

Hotel Portfolio

New York

(5)

Aug-11

July-16

(6)

25,000

25,000

11.49

(L+10.49%)

Interest

only

60%

Retail Center

Virginia

(7)

Oct-11

Oct-16

(7)

25,000

25,670

14.00

Interest

only

74%

Hotel

(8)

New York

Jan-12

Jan-15

15,000

15,000

12.00

Interest     

only

63%

Hotel

(9)

New York

Mar-12

Feb-16

15,000

15,000

11.50

(L+11.00%)

Interest  only

65%

Total

.

.

$179,000

$179,602

13.03%

(1)  Maturity date assumes all extension options are exercised.

(2)  Appraised LTV represents the loan to value as of the date of investment.

(3) Prepayments are prohibited prior to the fourth year of the loan and any prepayments thereafter are subject to prepayment penalties ranging from 5% to 1%. 

(4) Prepayments are prohibited prior to the third year of the loan and any prepayments thereafter are subject to prepayment penalties ranging from 5% to 1%.

(5) Includes a LIBOR floor of 1% and three one-year extension options subject to certain conditions and the payment of a 0.25% fee for the fourth and fifth year extensions.

(6) Prepayments are prohibited prior to February 2013 and any prepayments thereafter are subject to spread maintenance premiums.

(7) Interest rate of 14.0% includes a 10.0% current payment with

a 4.0% accrual.  There are two one-year extension options subject to certain conditions.

(8) Includes a 1.00% origination fee, a one-year extension option subject to certain conditions and a 0.50% extension fee as well as a 1.50% exit fee.

(9) Includes a LIBOR floor of 0.50%, two one-year extension options subject to certain conditions and the payment of a 0.50% fee for the second extension.

17

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

ARI –

CMBS Portfolio

Face

Amortized

Cost

Remaining Weighted

Average Life with

Extensions (years)

Estimated

Fair Value

Debt

Net

Equity at

Cost

CMBS –

AAA

$275,997

$280,697

1.7

$283,365

$248,177

$32,520

CMBS –

Hilton

74,854

70,719

3.4

71,205

49,459

21,260

CMBS –

Total

$350,851

$351,416

2.0

$354,570

$297,636

$53,780

CMBS -

AAA

CUSIP

Description

07388YAB8

BSCMS 07-PW16 A2

07401DAB7

BSCMS 2007-PW18 A2

12513YAC4

CD 2007-CD4 A2B

46629MAB1

JPMCC 2006-LDP8 A2

61754KAC9

MSC 07-IQ14 A2

92978YAB6

WBCMT 07-C32 A2

CMBS -

AAA

CUSIP

Description

07401DAB7

BSCMS 2007-PW18 A2

36246LAB7

GSMS 2007-GG10 A2

46630JAK5

JPMCC 2007-LDPX A2S

61751NAD4

MSC 2007-HQ11 A31

92978TAB7

WBCMT 2007-C31 A2

CMBS –

Hilton

CUSIP

Description

05956KAA6

BALL 2010-HLTN

18

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

Financing Overview

Facility

Debt Balance

Weighted

Average

Remaining

Maturity

(1)

Cost of

Funds

Hedged

Cost of

Funds

Wells Facility

$297,636

1.5 years

1.8%

2.0%

JP Morgan Facility

53,060

0.5 years

2.7%

2.7%

Total Borrowings at June 30, 2012

$350,696

1.3 years

1.9%

2.1%

Facility

Less than 1 year

1 to 3 years

3 to 5 years

Total

Wells Facility

$118,087

$137,466

$42,083

$297,636

JP Morgan Facility

53,060

-

-

53,060

Total Borrowings at June 30, 2012

$171,147

$137,466

$42,083

$350,696

ARI had total borrowings outstanding of $351 million at June 30,

2012

ARI’s borrowings had the following remaining maturities at June 30, 2012:

(1)

Assumes extension options on Wells Facility are exercised. Borrowings outstanding under the Wells Facility bear interest at LIBOR plus 125bps, 150bps or 235bps depending on the collateral pledged.

19

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

Financials

20

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

Consolidated Balance Sheets

(in thousands—except share and per share data)

June 30, 2012

December 31, 2011

Assets:

Cash

11,959

$                        

21,568

$                        

Securities available-for-sale, at estimated fair value

125,631

302,543

Securities, at estimated fair value

228,939

251,452

Commercial mortgage loans, held for investment

103,321

109,006

Subordinate loans, held for investment

179,602

149,086

Repurchase agreements, held for investment

41,696

47,439

Principal and interest receivable

11,195

8,075

Deferred financing costs, net

1,161

2,044

Other assets

10

17

Total Assets

703,514

$                      

891,230

$                      

Liabilities and Stockholders' Equity

Liabilities:

Borrowings under repurchase agreements

350,696

$                      

290,700

$                      

TALF Borrowings

-

251,327

Derivative instruments, net

291

478

Accounts payable and accrued expenses

1,072

1,746

Payable to related party

1,294

1,298

Dividends payable

8,726

8,703

Deferred revenue

117

-

Total Liabilities

362,196

554,252

Stockholders' Equity:

Common stock, $0.01 par value, 450,000,000 shares authorized 20,570,616 and 20,561,032 shares issued and

outstanding in 2012 and 2011, respectively

206

206

Preferred stock, $0.01 par value, 50,000,000 shares authorized and no shares outstanding

-

-

Additional paid-in-capital

337,923

336,209

Retained earnings

2,214

-

Accumulated other comprehensive income

975

563

Total Stockholders' Equity

341,318

336,978

Total Liabilities and Stockholders' Equity

703,514

$                      

891,230

$                      

21

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

Consolidated Statement of Operations

2012

2011

2012

2011

Net interest income:

Interest income from securities

3,230

$                   

6,448

$                   

8,552

$                   

13,103

$                 

Interest income from commercial mortgage loans

2,791

2,297

5,026

4,610

Interest income from subordinate loans

5,859

3,167

11,172

5,077

Interest income from repurchase agreements

2,000

1,552

3,559

1,612

Interest expense

(1,929)

(3,781)

(5,171)

(7,121)

Net interest income

11,951

9,683

23,138

17,281

Operating expenses:

General and administrative expenses (includes $886 and

$1,969 of non-cash stock based compensation in 2012 and

$384 and $736 in 2011, respectively)

(2,762)

(1,412)

(4,798)

(2,792)

Management fees to related party

(1,292)

(1,101)

(2,581)

(2,189)

Total operating expenses

(4,054)

(2,513)

(7,379)

(4,981)

Interest income from cash balances

-

3

1

9

Realized gain on sale of securities

-

-

262

-

Unrealized gain on securities

2,078

1,366

3,463

1,392

Loss on derivative instruments (includes $192 and $187 of

unrealized gains in 2012 and $1,548 and $1,089 of unrealized

losses 2011, respectively)

(65)

(2,019)

(482)

(2,001)

Net income

9,910

$                   

6,520

$                   

19,003

$               

11,700

$                 

Basic and diluted net income per share of common stock   

0.47

$                      

0.37

$                      

0.91

$                     

0.66

$                      

Basic and diluted weighted average common shares outstanding

20,991,450

17,561,032

20,978,938

17,556,455

Dividend declared per share of common stock

0.40

$                      

0.40

$                      

0.80

$                     

0.80

$                      

Three months ended June 30,

Six months ended June 30,

22

COMMERCIAL REAL ESTATE FINANCE, INC. (“ARI”)

Reconciliation of Operating Earnings to Net Income

June 30, 2012

Earnings Per Share

(Diluted)

June 30, 2011

Earnings Per Share

(Diluted)

Operating Earnings:

Net income

$19,003

$0.91

$11,700

$0.66

Adjustments:

Unrealized gains on securities

(3,463)

(0.16)

(1,392)

(0.08)

Unrealized gains on derivative instruments

(187)

(0.01)

1,089

0.06

Non-cash stock-based compensation expense

1,969

0.09

736

0.04

Total adjustments:

(1,681)

(0.08)

433

0.02

Operating Earnings

17,322

$0.83

$12,133

$0.69

20,978,938

17,556,455

Six Months Ended

June 30, 2012

Earnings Per Share

(Diluted)

June 30, 2011

Earnings Per Share

(Diluted)

Operating Earnings:

Net income

$9,910

$0.47

$6,520

$0.37

Adjustments:

Unrealized gains on securities

(2,078)

(0.09)

(1,366)

(0.08)

Unrealized gains on derivative instruments

(192)

(0.01)

1,548

0.09

Non-cash stock-based compensation expense

886

0.04

384

0.02

Total adjustments:

(1,384)

(0.06)

566

0.03

Operating Earnings

8,526

$0.41

$7,086

$0.40

Basic and diluted weighted average common shares outstanding

20,991,450

17,684,991

Three Months Ended

Basic and diluted weighted average common shares outstanding