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): November 1, 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 November 1, 2012, Apollo Commercial Real Estate Finance, Inc. (the “Company”) issued an earnings release announcing its financial results for the quarter ended September 30, 2012. A copy of the earnings release is attached as Exhibit 99.1 hereto and incorporated herein by reference.

On November 1, 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 November 1, 2012
99.2	Supplemental Financial Information for the quarter ended September 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: November 1, 2012

3

Exhibit Index

Exhibit No.	Description
99.1	Earnings Release dated November 1, 2012
99.2	Supplemental Financial Information for the quarter ended September 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

THIRD QUARTER 2012 FINANCIAL RESULTS AND DECLARES A $0.40

PER COMMON SHARE QUARTERLY DIVIDEND

— 16% Increase in Operating Earnings Per Share —

New York, NY, November 1, 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 $9.2 million, or $0.44 per share, for the three months ended September 30, 2012, representing a per share increase of 16% as compared to Operating Earnings of $7.6 million, or $0.38 per share, for the three months ended September 30, 2011. Net income for the three months ended September 30, 2012 was $11.0 million, or $0.52 per share, as compared to net income of $5.5 million, or $0.28 per share, for the three months ended September 30, 2011.

For the nine months ended September 30, 2012, the Company reported Operating Earnings of $26.5 million, or $1.27 per share, representing a per share increase of 19% as compared to Operating Earnings of $19.8 million, or $1.07 per share for the nine months ended September 30, 2011. Net income for the nine months ended September 30, 2012 was $30.0 million, or $1.43 per share, as compared to net income of $17.2 million, or $0.93 per share, for the nine months ended September 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 January 14, 2013 to common stockholders of record on December 31, 2012. This is the tenth consecutive quarter the Company has paid a $0.40 per common share dividend.

Third Quarter Highlights

• Increased Operating Earnings per share by 16%;

• Generated $13.2 million of net interest income from the Company’s $605.6 million investment portfolio, which had a current weighted average underwritten internal rate of return (“IRR”) of approximately 13.1% and a levered weighted average underwritten IRR of 14.9% at September 30, 2012;

• Closed two mezzanine loan transactions totaling $16.5 million; and

• Completed an underwritten public offering of 3,450,000 shares of its 8.625% Series A Cumulative Redeemable Perpetual Preferred Stock, with a liquidation preference of $25.00 per share (the “Series A Preferred Stock”), raising net proceeds of approximately $83.1 million.

“ARI had another solid quarter of operating results and stable credit performance from the Company’s investment portfolio,” commented Stuart Rothstein, Chief Executive Officer of the Company. “Year-to-date 2012, ARI has deployed $85.6 million of equity into $135.1 million of investments with a weighted average underwritten IRR of 14.5%. We continue to make progress deploying the proceeds from the Company’s recent capital raises into well structured transactions with attractive risk adjusted returns. Our investment pipeline remains strong and we have identified compelling financing opportunities across a wide range of commercial property types and geographies.”

Commenting on the Company’s investment pipeline, Scott Weiner, the Chief Investment Officer of the Manager, said “As of today, approximately $125 million of commercial real estate debt investments in ARI’s pipeline are in

closing. While the market is competitive and there are no assurances that we will win the mandate on any specific deal in our pipeline, given the level of deal flow the Company is seeing, we remain confident in our ability to put our capital to work at attractive returns.”

Third Quarter Investment and Portfolio Activity

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 has an appraised loan-to-value (“LTV”) of approximately 77% and has been underwritten to generate an IRR of approximately 12.0%.

Mezzanine Loan – In September 2012, the Company closed a $10.0 million mezzanine loan secured by a pledge of the equity interests in a borrower that owns an 845,241 square foot Class A office tower complex in downtown Kansas City, Missouri. The mezzanine loan is part of a $70.0 million, 10-year fixed-rate financing with 30-year amortization that will be comprised of the mezzanine loan and a $60.0 million first mortgage loan. The mezzanine loan has an appraised LTV of 72% and has been underwritten to generate an IRR of approximately 12.6%.

Repayments from Repurchase Agreement Secured by CDO Bonds – During the quarter, the Company received $30.7 million of repayments from the repurchase agreement secured by CDO bonds. The Company also recognized $1.0 million of additional interest income during the quarter related to make-whole interest payments, which the Company is entitled to receive on any principal repayments on the repurchase agreement secured by CDO bonds that occur prior to January 23, 2013.

Preferred Offering – On August 1, 2012, the Company completed an underwritten public offering of 3,450,000 shares of its Series A Preferred Stock, 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 $83.1 million.

Quarter End Portfolio Summary

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

Description	Amortized Cost		Weighted Average Yield			Debt		Cost of Funds			Equity at cost		Current Weighted Average IRR (1)			Levered Weighted Average IRR(2)
First mortgage loans	$	104,101		11.3	%	$	3		2.7	%	$	104,098		11.3	%		20.2	%
Subordinate loans		196,177		13.2			—		—			196,177		13.9			13.9
Repurchase agreements		10,975		13.0			—		—			10,975		13.7			13.7
CMBS – AAA		223,781		4.2			194,069		1.8			29,712		15.6			15.6
CMBS – Hilton		70,521		5.6			48,898		2.6			21,623		11.7			11.7
Total	$	605,555		8.7	%	$	242,970		1.9	%	$	362,585		13.1	%		14.9	%

(1) 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 master repurchase agreement with Wells Fargo Bank, N.A. The calculation also assumes extension options on the Wells Facility with respect to the Hilton CMBS are exercised 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.

(2) Substantially all of the Company’s borrowings under the JPMorgan Facility were repaid upon the closing of the Company’s Series A Preferred Stock offering in August 2012. The Company’s ability to achieve its underwritten levered weighted average

IRR with regard to its portfolio of first mortgage loans is additionally dependent upon the Company re-borrowing approximately $53,000 under the JPMorgan Facility or any replacement facility. Without such re-borrowing, the levered weighted average IRRs will be as indicated in the current weighted average IRR column above.

Book Value

The Company’s GAAP book value per share at September 30, 2012 was $16.58, as compared to $16.59 at June 30, 2012.

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 September 30, 2012 was approximately $12.0 million greater than the carrying value of the Company’s investment portfolio as of the same date. This represents a premium of $0.58 per share over the Company’s GAAP book value as of September 30, 2012, and results in an estimated market value per share of approximately $17.16.

Subsequent Events

Common Stock Offering – In October 2012, the Company completed an underwritten public offering of seven million shares of common stock at a price of $16.81 per share. On November 1, 2012 the underwriters partially exercised their option to purchase additional shares and purchased 404,640 shares of common stock, resulting in total net proceeds to the Company of $124.2 million. The Company intends to use the net proceeds from the offering to acquire its 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.

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 nine months ended September 30, 2012 and 2011 ($ amounts in thousands):

	Three Months Ended September 30, 2012			Earnings Per Share (Diluted)			Three Months Ended September 30, 2011		Earnings Per Share (Diluted)
Operating Earnings:
Net income	$	10,992		$	0.52		$	5,512	$	0.28
Adjustments:
Unrealized (gain) loss on securities		(3,010	)		(0.14	)		1,511		0.07
Unrealized (gain) loss on derivative instruments		(40	)		—			202		0.01
Non-cash stock-based compensation expense		1,276			0.06			418		0.02
Total adjustments:		(1,774	)		(0.08	)		2,131		0.10
Operating Earnings	$	9,218		$	0.44		$	7,643	$	0.38
Basic and diluted weighted average Common shares outstanding:		20,992,312						19,647,989

	Nine Months Ended September 30, 2012			Earnings Per Share (Diluted)			Nine Months Ended September 30, 2011		Earnings Per Share (Diluted)
Operating Earnings:
Net income	$	29,995		$	1.43		$	17,212	$	0.93
Adjustments:
Unrealized (gain) loss on securities		(6,473	)		(0.31	)		118		0.01
Unrealized (gain) loss on derivative instruments		(228	)		(0.01	)		1,291		0.07
Non-cash stock-based compensation expense		3,244			0.16			1,154		0.06
Total adjustments:		(3,457	)		(0.16	)		2,563		0.14
Operating Earnings	$	26,538		$	1.27		$	19,775	$	1.07
Basic and diluted weighted average common shares outstanding:		20,983,429						18,261,294

Teleconference Details:

The Company will host a conference call to discuss its financial results on Friday, November 2, 2012 at 10:00 a.m. Eastern Time. Members of the public who are interested in participating in the Company’s third 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 39079606). Please note that the teleconference call will be available for replay beginning at 12:00 p.m. on Friday, November 2, 2012, and ending at midnight on Friday, November 9, 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 39079606.

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 in 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 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; the Company’s ability to deploy the proceeds of it’s capital raises or acquire its target 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)

	September 30, 2012		December 31, 2011
Assets:
Cash	$	67,994	$	21,568
Securities available-for-sale, at estimated fair value		81,405		302,543
Securities, at estimated fair value		218,185		251,452
Commercial mortgage loans, held for investment		104,101		109,006
Subordinate loans, held for investment		196,177		149,086
Repurchase agreements, held for investment		10,975		47,439
Principal and interest receivable		4,107		8,075
Deferred financing costs, net		1,090		2,044
Other assets		207		17
Total Assets	$	684,241	$	891,230
Liabilities and Stockholders’ Equity
Liabilities:
Borrowings under repurchase agreements	$	242,970	$	290,700
TALF borrowings		—		251,327
Derivative instruments, net		251		478
Accounts payable and accrued expenses		1,965		1,746
Payable to related party		1,520		1,298
Dividends payable		10,114		8,703
Total Liabilities	$	256,820	$	554,252
Stockholders’ Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized and 3,450,000 shares outstanding in 2012		35		—
Common stock, $0.01 par value, 450,000,000 shares authorized, 20,572,112 and 20,561,032 shares issued and outstanding in 2012 and 2011, respectively		206		206
Additional paid-in-capital		422,273		336,209
Retained Earnings		4,808		—
Accumulated other comprehensive income		99		563
Total Stockholders’ Equity		427,421		336,978
Total Liabilities and Stockholders’ Equity	$	684,241	$	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 September 30,						Nine months ended September 30,
	2012			2011			2012			2011
Net interest income:
Interest income from securities	$	3,674		$	6,316		$	12,227		$	19,419
Interest income from commercial mortgage loans		2,825			2,276			7,851			6,886
Interest income from subordinate loans		6,144			3,784			17,316			8,861
Interest income from repurchase agreements		2,361			1,576			5,920			3,188
Interest expense		(1,768	)		(3,716	)		(6,939	)		(10,836	)
Net interest income		13,236			10,236			36,375			27,518
Operating expenses:
General and administrative expenses (includes $1,276 and $3,244 of non-cash stock based compensation in 2012 and $418 and $1,154 in 2011, respectively)		(2,430	)		(1,297	)		(7,229	)		(4,089	)
Management fees to related party		(1,518	)		(1,241	)		(4,099	)		(3,430	)
Total operating expenses		(3,948	)		(2,538	)		(11,328	)		(7,519	)
Interest income from cash balances		—			2			1			10
Realized gain on sale of securities		—			—			262			—
Unrealized gain (loss) on securities		3,010			(1,511	)		6,473			(118	)
Loss on derivative instruments (includes $40 and $228 of unrealized gains in 2012 and $202 and $1,291 of unrealized losses in 2011, respectively)		(87	)		(677	)		(569	)		(2,679	)
Net income		12,211			5,512			31,214			17,212
Preferred Dividends		(1,219	)		—			(1,219	)		—
Net income available to common stockholders	$	10,992		$	5,512		$	29,995		$	17,212
Basic and diluted net income per share of common stock	$	0.52		$	0.28		$	1.43		$	0.93
Basic and diluted weighted average common shares outstanding		20,992,312			19,647,989			20,983,429			18,261,294
Dividend declared per share of common stock	$	0.40		$	0.40		$	1.20		$	1.20

EX-99.2

November 2, 2012

Information is as of September 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

Supplemental

Financial

Information

Presentation

Q3 2012

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 Third Quarter Earnings Call

November 2, 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 23 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.

Income Statement

September 30, 2012

September 30, 2011

% Change

September 30, 2012

September 30, 2011

% Change

15,004

$      

13,952

$           

7.5%

43,314

$      

38,354

$       

12.9%

(1,768)

$      

(3,716)

$             

-52.4%

(6,939)

$      

(10,836)

$      

-36.0%

Net interest income (in thousands)

13,236

$      

10,236

$           

29.3%

36,375

$      

27,518

$       

32.2%

0.44

$         

0.38

$                

15.8%

1.27

$         

1.07

$           

18.7%

20,992,312

19,647,989

6.8%

20,983,429

18,261,294

14.9%

Balance sheet

September 30, 2012

December 31, 2011

% Change

605,555

$    

860,247

$          

-29.6%

362,585

$    

318,220

$          

13.9%

Common stockholders equity

341,171

$    

336,978

$          

1.2%

86,250

$      

-

$                 

-

$           

251,327

$          

242,970

$    

290,700

$          

0.75x

1.6x

4.3x

3.9x

Three Months Ended

Nine 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)

Preferred stockholders equity

Debt to common equity

Fixed rate debt

(in thousands)

(2)

Fixed charge coverage

(3)

Floating rate debt (in thousands)

(3)

Fixed charge coverage is EBITDA divided by interest expense plus the preferred stock dividends.

4

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

$0.40

$0.40

$0.40

$0.40

$0.40

$0.40

$0.00

$0.40

$0.80

$1.20

$1.60

$2.00

Nine Months Ended September 30,

2011

Nine Months Ended September 30,

2012

$7,599

$11,187

$9,683

$11,951

$10,236

$13,236

$0

$10,000

$20,000

$30,000

$40,000

Nine Months Ended September 30,

2011

Nine Months Ended September 30,

2012

$0.29

$0.42

$0.40

$0.41

$0.38

$0.44

$0.00

$0.40

$0.80

$1.20

$1.60

Nine Months Ended September 30,

2011

Nine Months Ended September 30,

2012

ARI –

Nine Month Overview

Operating Earnings per Share

Dividends per Common Share

Net Interest Income ($000s)

Return

on

Common

Equity

Based

on

Operating

Earnings

(1)

$1.20

$1.20

$1.07

$1.27

$36,375

$27,518

6.8%

10.4%

9.6%

10.0%

9.3%

10.8%

0.0%

3.0%

6.0%

9.0%

12.0%

Nine Months Ended September 30,

2011

Nine Months Ended September 30,

2012

Q1

Q1

Q2

Q3

Q2

Q3

(1)

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

5

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

$21,771

$38,464

$11,187

$11,951

$13,236

$0

$10,000

$20,000

$30,000

$40,000

2010

2011

YTD 2012

$1.09

$1.46

$0.42

$0.41

$0.44

$0.00

$0.40

$0.80

$1.20

$1.60

2010

2011

YTD 2012

$1.50

$1.60

$0.40

$0.40

$0.40

$0.00

$0.40

$0.80

$1.20

$1.60

$2.00

2010

2011

YTD 2012

ARI –

Historical Overview

Operating Earnings per Share

(1)

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

Dividends per Common Share

Net Interest Income ($000s)

Return

on

Common

Equity

Based

on

Operating

Earnings

(1)

$1.20

$1.27

$36,375

9.8%

10.4%

10.0%

10.8%

0.0%

3.0%

6.0%

9.0%

12.0%

Q4 2011

Q1 2012

Q2 2012

Q3 2012

6

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

ARI –

Q3 Highlights

Financial Results & Earnings Per Share

Operating Earnings for the quarter ended September 30, 2012 of $9.2 million, or $0.44 per diluted

common share

(1)

–

A per share increase of 16% as compared with Operating Earnings per share for the same period in 2011

–

Net interest income of $13.2 million for Q3 2012

–

Total expenses of $3.9 million, comprised of management fees of $1.5 million, G&A of

$1.1 million and non-cash, stock based compensation of $1.3 million

–

GAAP net income for the quarter ended September 30, 2012 of $11.0 million, or $0.52 per diluted

common share

Dividends

Declared a dividend of $0.40 per share of common stock for the quarter ended December 31, 2012

–

Tenth consecutive quarter of maintaining consistent dividend level

–

9.5% annualized dividend yield based on $16.91 closing price on October 31, 2012

Declared a dividend on the Company’s 8.625% Series A Cumulative Redeemable Perpetual Preferred

Stock

of

$0.4432

per

share

for

the

partial

quarterly

period

that

began

on

August

1,

2012

and

ended on

October 15, 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 23 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 –

Q3 Highlights

Investment and Portfolio Activity

Mezzanine Loan, Mixed-Use Project, Chapel Hill, NC

$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

Part of a new $40 million, 10-year fixed rate financing comprised of a $33.5 million first

mortgage loan and the $6.5 million mezzanine loan

Appraised LTV –

77%; Interest rate –

11.1%, interest only

Underwritten

IRR

(1)

–

12.0%

Mezzanine Loan, Office Complex, Kansas City, MO

$10 million mezzanine loan secured by a pledge of the equity interest in a borrower that owns

a 845,241 square foot Class-A office tower complex

Part of a $70 million, 10-year fixed rate financing comprised of a $60 million first mortgage

loan and the $10 million mezzanine loan

Appraised LTV –

72%; Interest rate –

11.75% with 30 year amortization

Underwritten

IRR

(1)

–

12.6%

(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”).

The

calculation

also

assumes

extension

options

on

the

Wells

Facility

with

respect

to

the

Hilton

CMBS

are

exercised

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 –

Q3 Highlights

Investment and Portfolio Activity (cont.)

Repurchase Agreement Secured by CDO Bonds Repayments

Received $30.7 million of repayments from the repurchase agreement secured by CDO bonds;  The Company also

recognized

$1.0

million

of

additional

interest

income

during

the

quarter

related

to

make

whole

interest

payments

(1)

Capital Markets Activity

Preferred Stock Offering

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”), raising net proceeds of approximately $83.1 million

Portfolio Summary

Total investments with an amortized cost of $606 million at September 30, 2012

Current

weighted

average

underwritten

IRR

of

approximately

13.1%

and

levered

weighted

average

underwritten

IRR

of

approximately

14.9%

at

September

30,

2012

(2)

(1)

The Company

is

entitled

to

receivemake-whole

interest

payments

on

any

principal

repayments

on

the

repurchase

agreement

secured

by

CDO

bonds

that

occur

prior

to

January

2013.

(2)

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 Wells Facility. The calculation also assumes extension options on the Wells Facility with respect to the Hilton CMBS are exercised.

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.  Substantially all of the Company’s borrowings under the Company's master

repurchase facility with JPMorgan Chase Bank, N.A. (the "JPMorgan Facility")

were repaid upon the closing of the Company’s Series A Preferred Stock offering in August 2012.

The Company's ability to achieve its levered weighted average underwritten IRR is additionally

dependent upon the Company re-borrowing approximately $53,000 under the JPMorgan Facility or any replacement facility.

Without such re-borrowing, the levered weighted average IRR with regard to its portfolio of first mortgage loan will be significantly lower than

the amount

shown above, as indicated by the weighted average underwritten IRR above.

9

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

ARI –

Q3 Highlights and Subsequent Events

Book Value

GAAP book value of $16.58 per share as of September 30, 2012

Fair

value

of

$17.16

per

share

as

of

September

30,

2012

(1)

ARI

closed

at

$16.91

on

October

31,

2012,

a

2.0%

premium

to

GAAP

book

value

per

share

Subsequent Events

Common Stock Offering

–

Completed

an

underwritten

public

offering

of

7,404,640

shares

of

common

stock,

including

the

partial exercise of the underwriters’

option to purchase additional shares, at a price of $16.81 per

share, resulting in net proceeds to the Company of $124.2 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

September

30,

2012

was

approximately

$12.0

million

greater

than

the

carryingvalue

of

the

Company’s

investment portfolio as of the same date.  This represents a premium of $0.58 per share over the Company's GAAP book value as of

September 30, 2012.

10

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

ARI –

Portfolio Overview

Asset Type

($000s)

Amortized

Cost

Borrowings

Equity

at Cost

Remaining

Weighted

Average Life    

(years )

(1)

Current

Weighted

Average

IRR

(2)(3)

Levered

Weighted

Average

IRR

(4)

First

Mortgage

Loans

(2)

$104,101

$3

$104,098

2.1

11.3%

20.2%

Subordinate Loans

196,177

-

196,177

5.4

13.9

13.9

Repurchase Agreements

10,975

-

10,975

1.5

13.7

13.7

CMBS -

AAA

223,781

194,069

29,712

2.1

15.6

15.6

CMBS -

Hilton

70,521

48,898

21,623

3.1

11.7

11.7

Investments at September 30, 2012

$605,555

$242,970

$362,585

3.3 Years

13.1%

14.9%

As of September 30, 2012.

(1)

Remaining Weighted Average Life assumes all extension options are exercised.

(2)

Borrowings under the Company’s master repurchase facility with JPMorgan (the “JPM Facility”) bear interest at LIBOR plus 250 basis points, or 2.7% at September 30, 2012. The IRR calculation further assumes the JPM Facility or any replacement 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. The calculation

also assumes extension options on the Wells Facility with respect to the Hilton CMBS are exercised.

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.

(4)

Substantially all of the Company’s borrowings under the JPMorgan Facility were repaid upon the closing of the Company’s Series A Preferred Stock offering in August 2012.

The Company's ability to achieve its underwritten levered weighted average IRR with

regard to its portfolio of first mortgage loans is additionally dependent upon the Company re-borrowing approximately $53,000 under the JPMorgan Facility or any replacement facility.

Without such re-borrowing, the levered weighted average IRRs will be as

indicated in the current weighted average IRR column above.

11

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

ARI –

Portfolio Overview

Diversified Investment Portfolio with Amortized Cost Basis of $606 million

Net Invested Equity at Amortized Cost Basis

Gross Assets at Amortized Cost Basis

CMBS -

AAA

8%

CMBS -

Hilton

6%

Repurchase

Agreements

3%

First Mortgages

29%

Subordinate

Loans

54%

CMBS -

AAA

37%

CMBS -

Hilton

12%

First Mortgages

17%

Subordinate

Loans

32%

Repurchase

Agreements

2%

12

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

ARI –

Loan Portfolio Diversification

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 and a first mortgage loan on a development site with income producing parking lots.

Hotel

37%

Office

15%

Retail

25%

Mixed

Use/Other

(2)

23%

Northeast

47%

Southeast

7%

Mid-Atlantic

17%

Midwest

9%

West

20%

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 $305 million at September 30, 2012

$0

$23.8

$0

$99.5

$66.0

$40.0

$0

$50.0

$8.9

$0

$16.5

$0

$20

$40

$60

$80

$100

$120

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Senior Loan

Fixed

28%

Mezzanine

Loan Fixed

23%

Mezzanine

Loan Floating

13%

Subordinate

Loan Fixed

13%

Subordinate

Loan Floating

8%

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 current loan balance as a percentage of the value as of the date of investment for all loans except the $31,633 New York, NY hotel loan, which is as of March 2011.

First Mortgage Loans

Subordinate Financing

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Description ($ in thousands)

Location

Balance at  

September 30,

2012

Starting

LTV

Ending

LTV

(1)

First Mortgage - Hotel

New York 

31,633

$              

0%

40%

First Mortgage - Office

New York

27,480

$              

0%

53%

First Mortgage - Hotel

Maryland

25,351

$              

0%

56%

First Mortgage - Parking/Development Site

(2)

Massachusetts

23,844

$              

0%

28%

Total

108,308

$           

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Description ($ in thousands)

Location

Balance at

September 30,

2012

Starting

LTV

Ending

LTV

(1)

Subordinate - Ski Resort

California

40,000

$              

29%

56%

Subordinate - Retail

Various

30,000

$              

58%

68%

Subordinate - Retail

Virginia

25,953

$              

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

Missouri

10,000

$              

62%

72%

Subordinate - Office

Michigan

8,923

$                

53%

68%

Subordinate - Mixed Use

North Carolina

6,525

$                

65%

77%

Total

196,401

$           

(2)

Ending 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

LTV

(2)

Hotel

New York, NY

Jan-10

Feb-15

$32,000

31,633

8.25%

30 year

151

rooms

40%

Office Condo (Headquarters)

New York, NY

Feb-10

Feb-15

28,000

27,480

8.00

30 year

73,419

sq. ft.

53%

Hotel

Silver Spring, MD

Mar-10

Apr-15

26,000

25,351

9.00

25 year

263

rooms

56%

Parking/Development Site

Boston, MA

Apr-12

Dec-13

23,844

23,844

1.98%

(L+1.72%)

Interest

Only

20 acres

28%

Total

.

.

$109,844

$108,308

6.99%

(1)

Maturity date assumes all extension options are exercised.

(2)

LTV represents the current loan balance as a percentage of the value as of the date of investment for all loans except the $31,633 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

LTV

(2)

Repurchase Agreement

(3)

Sept-10

Mar-14

$47,439

10,975

13.00%

Interest

only

N/A

N/A

Total

$47,439

$10,975

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

LTV

(2)

Senior Mezz –

Retail

Various

Dec-09

Dec-19

(3)

$30,000

30,000

12.24%

Interest

only

68%

Junior Mezz –

Retail

Various

Dec-09

Dec-19

(3)

20,000

20,000

14.00

Interest

only

72%

Office

Troy, MI

May-10

Jun-20

9,000

8,923

13.00

25 year

68%

Ski Resort

Mammoth Lakes, CA

Apr-11

May-17

(4)

40,000

40,000

14.00

Interest

only

56%

Hotel Portfolio

New York,

NY

(5)

Aug-11

July-16

(6)

25,000

25,000

11.49

(L+10.49%)

Interest

only

60%

Retail Center

Woodbridge, Virginia

(7)

Oct-11

Oct-16

(7)

25,000

25,953

14.00

Interest

only

74%

Hotel

New York, NY

(8)

Jan-12

Jan-15

15,000

15,000

12.00

Interest       

only

63%

Hotel

New York, NY

(9)

Mar-12

Feb-16

15,000

15,000

11.50

(L+11.00%)

Interest      

only

65%

Mixed Use

Chapel Hill, NC

July-12

July-22

6,525

6,525

11.10

Interest       

only

77%

Office

Kansas City, MO

Sept-12

Sept-22

10,000

10,000

11.75

30 year

72%

Total

$195,525

$196,401

13.2%

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

(2)  LTV represents the current loan balance as a percentage of the 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

$219,706

$223,781

2.1

$225,351

$194,069

$29,712

CMBS –

Hilton

74,054

70,521

3.1

74,239

48,898

21,623

CMBS –

Total

$293,760

$294,302

2.3

$299,590

$242,967

$51,335

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

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”)

Portfolio Metrics –

Quarterly Migration Summary

(1)

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. The calculation

also assumes extension options on the Wells Facility with respect to the Hilton CMBS are exercised.

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.

(2)

Represents

an

underwritten

levered

weighted

average

IRR.

The

Company's

ability

to

achieve

the

underwritten

levered

weighted

average

IRR,

additionally

depends

upon

the

Company

re-borrowing

approximately

$53,000

under

the

JPMorgan

Facility

or any

replacement facility with regard to its portfolio of first mortgage loans.

Without such re-borrowing, the levered weighted average IRR will be significantly lower than the amount shown above, as indicated in the weighted average IRR column on page 10.

(3)

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

Portfolio Metrics ($ in thousands)

Q3 2012

Q2 2012

Q1 2012

Q4 2011

Q3 2011

(Investment balances represent amortized cost)

First Mortgage Loans

104,101

$        

103,320

$        

108,817

$        

109,006

$        

109,192

$        

Subordinate Loans

196,177

179,602

179,336

149,086

123,960

Repurchase Agreement

10,975

41,696

47,439

47,439

47,439

CMBS -

AAA

223,781

280,697

330,413

554,716

575,981

CMBS -

Hilton

70,521

70,719

-

-

-

Total Investments

605,555

$        

676,034

$        

666,005

$        

860,247

$        

856,572

$        

(Investment balances represent net equity)

First Mortgage Loans

104,098

$        

50,260

$         

40,210

$         

40,286

$         

40,178

$         

Subordinate Loans

196,177

179,602

179,336

149,086

123,960

Repurchase Agreement

10,975

41,696

47,439

47,439

47,439

CMBS -

AAA

29,712

32,520

43,763

81,409

84,089

CMBS -

Hilton

21,623

21,260

-

-

-

Net Equity in Investments at Cost

362,585

$        

325,338

$        

310,748

$        

318,220

$        

295,666

$        

Weighted Average IRR

(1)

14.9%

(2)

15.0%

14.7%

14.2%

14.0%

Weighted Average Duration

3.3 Years

2.9 Years

2.8 Years

2.2 Years

2.3 Years

Loan Portfolio Weighted Average Ending LTV

58.0%

57.1%

59.3%

58.8%

57.2%

Borrowings

242,970

$        

350,696

$        

355,257

$        

542,027

$        

560,906

$        

(3)

19

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

Financing Overview

Facility ($000s)

Debt Balance

Weighted

Average

Remaining

Maturity

(1)

Cost of

Funds

Hedged

Cost of

Funds

Wells Facility

$242,967

1.3

1.8%

1.9%

JP Morgan Facility

3

0.3

2.7

2.7

Total Borrowings at September 30, 2012

$242,970

1.3

1.8%

1.9%

Facility ($000s)

Less than 1 year

1 to 3 years

3 to 5 years

Total

Wells Facility

(1)

$196,275

$4,914

$41,778

$242,967

JP Morgan Facility

3

-

-

3

Total Borrowings at September 30, 2012

$196,278

$4,914

$41,778

$242,970

ARI had total borrowings outstanding of $243 million at September 30, 2012

ARI’s borrowings had the following remaining maturities at September

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.

20

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

Financials

21

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

Consolidated Balance Sheets

(in thousands—except share and per share data)

September 30, 2012

December 31, 2011

Assets:

Cash

67,994

$                  

21,568

$                  

Securities available-for-sale, at estimated fair value

81,405

302,543

Securities, at estimated fair value

218,185

251,452

Commercial mortgage loans, held for investment

104,101

109,006

Subordinate loans, held for investment

196,177

149,086

Repurchase agreements, held for investment

10,975

47,439

Principal and interest receivable

4,107

8,075

Deferred financing costs, net

1,090

2,044

Other assets

207

17

Total Assets

684,241

$                 

891,230

$                 

Liabilities and Stockholders' Equity

Liabilities:

Borrowings under repurchase agreements

242,970

$                 

290,700

$                 

TALF Borrowings

-

251,327

Derivative instruments, net

251

478

Accounts payable and accrued expenses

1,965

1,746

Payable to related party

1,520

1,298

Dividends payable

10,114

8,703

Total Liabilities

256,820

554,252

Stockholders' Equity:

Preferred stock, $0.01 par value, 50,000,000 shares authorized and 3,450,000 shares outstanding in 2012

35

-

Common stock, $0.01 par value, 450,000,000 shares authorized 20,572,112 and 20,561,032 shares issued and

outstanding in 2012 and 2011, respectively

206

206

Additional paid-in-capital

422,273

336,209

Retained earnings

4,808

-

Accumulated other comprehensive income

99

563

Total Stockholders' Equity

427,421

336,978

Total Liabilities and Stockholders' Equity

684,241

$                 

891,230

$                 

22

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

Consolidated Statement of Operations

2012

2011

2012

2011

Net interest income:

Interest income from securities

3,674

$               

6,316

$               

12,227

$             

19,419

$             

Interest income from commercial mortgage loans

2,825

2,276

7,851

6,886

Interest income from subordinate loans

6,144

3,784

17,316

8,861

Interest income from repurchase agreements

2,361

1,576

5,920

3,188

Interest expense

(1,768)

(3,716)

(6,939)

(10,836)

Net interest income

13,236

10,236

36,375

27,518

Operating expenses:

General and administrative expenses (includes $1,276 and

$3,244 of non-cash stock based compensation in 2012 and $418

and $1,154 in 2011, respectively)

(2,430)

(1,297)

(7,229)

(4,089)

Management fees to related party

(1,518)

(1,241)

(4,099)

(3,430)

Total operating expenses

(3,948)

(2,538)

(11,328)

(7,519)

Interest income from cash balances

-

2

1

10

Realized gain on sale of securities

-

-

262

-

Unrealized gain (loss) on securities

3,010

(1,511)

6,473

(118)

Loss on derivative instruments (includes $40 and $228 of

unrealized gains in 2012 and $202 and $1,291 of unrealized

losses 2011, respectively)

(87)

(677)

(569)

(2,679)

Net income

12,211

$          

5,512

$            

31,214

$          

17,212

$          

Preferred dividends

(1,219)

-

(1,219)

-

Net Income available to common shareholders

10,992

$          

5,512

$            

29,995

$          

17,212

$          

Basic and diluted net income per share of common stock   

0.52

$                

0.28

$                

1.43

$                

0.93

$                

Basic and diluted weighted average common shares outstanding

20,992,312

19,647,989

20,983,429

18,261,294

Dividend declared per share of common stock

0.40

$                

0.40

$                

1.20

$                

1.20

$                

Three months ended September 30,

Nine months ended September 30,

23

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

Reconciliation of Operating Earnings to Net Income

September 30, 2012

Earnings Per Share

(Diluted)

September 30, 2011

Earnings Per Share

(Diluted)

Operating Earnings:

Net income

$10,992

$0.52

$5,512

$0.28

Adjustments:

Unrealized (gain) loss on securities

(3,010)

(0.14)

1,151

0.07

Unrealized (gain) loss on derivative instruments

(40)

-

202

0.01

Non-cash stock-based compensation expense

1,276

0.06

418

0.02

Total adjustments:

(1,774)

(0.08)

1,771

0.10

Operating Earnings

$9,218

$0.44

$7,643

$0.38

Basic and diluted weighted average common shares outstanding

20,992,312

19,647,989

Three Months Ended

September 30, 2012

Earnings Per Share

(Diluted)

September 30, 2011

Earnings Per Share

(Diluted)

Operating Earnings:

Net income

$29,995

$1.43

$17,212

$0.93

Adjustments:

Unrealized (gain) loss on securities

(6,473)

(0.31)

118

0.01

Unrealized (gain) loss on derivative instruments

(228)

(0.01)

1,291

0.07

Non-cash stock-based compensation expense

3,457

0.16

1,154

0.06

Total adjustments:

(3,244)

(0.16)

2,563

0.14

Operating Earnings

$26,751

$1.27

$19,775

$1.07

Basic and diluted weighted average common shares outstanding

20,978,938

18,261,294

Nine Months Ended

24

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

Financial Metrics –

Quarterly Migration 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 23 for a reconciliation of Operating Earnings and Operating Earnings per Share to GAAP net income and GAAP net income per share.

(2)

The Company carries loans at amortized cost and its CMBS securities are marked to market.  Management estimates the fair value of the Company’s financial assets.

(3)

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

Financial Metrics

($ in thousands, except per share data)

Q3 2012

Q2 2012

Q1 2012

Q4 2011

Q3 2011

Net Interest Income

13,236

$         

11,951

$         

11,187

$         

10,946

$         

10,236

$         

Management Fee

1,518

1,292

1,289

1,297

1,241

General and Administrative Costs

1,154

1,876

953

929

879

Non-Cash Stock Based Compensation

1,276

886

1,083

634

418

Net Income Available to Common Stockholders

10,992

$         

9,910

$           

9,093

$           

8,669

$           

5,512

$           

GAAP Diluted EPS

0.52

$              

0.47

$              

0.43

$              

0.41

$              

0.28

$              

Operating Earnings

(1)

9,218

$           

8,526

$           

8,795

$           

8,278

$           

7,644

$           

Operating EPS

(1)

0.44

$              

0.41

$              

0.42

$              

0.39

$              

0.38

$              

Distributions Declared to Common Stockholders

0.40

$              

0.40

$              

0.40

$              

0.40

$              

0.40

$              

GAAP Book Value per Common Share

16.58

$           

16.59

$           

16.46

$           

16.39

$           

16.34

$           

Fair Value per Common Share

(2)

17.16

$           

17.22

$           

17.04

$           

16.80

$           

17.02

$           

Total Stockholders' Equity

427,421

$        

341,518

$        

338,377

$        

336,978

$        

336,045

$        

Return on Common Equity Based on Operating Earnings

10.8%

10.0%

10.4%

9.8%

9.3%

(3)