RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND AS OF DECEMBER 31, 2012 AND CHANGE IN FISCAL YEAR

On September 19, 2013, the Audit Committee of the Board of Directors concluded that it was necessary to restate the audited financial statements set forth in the Company’s Annual Report on Form 10-K for the year ended September 30, 2012 and certain of the unaudited financial statements in its Quarterly Reports on Form 10-Q, including the three and nine months ended September 30, 2012. The restatement reflects the consolidation of RSO which the Company previously treated as an unconsolidated variable interest entity ("VIE"). The Company also determined to change its fiscal year end from September 30^th to December 31^st in order to conform to the fiscal year of RSO.

The impact of consolidating RSO to the Company's consolidated net income attributable to common shareholders for the three and nine months ended September 30, 2012 was as follows (in thousands):


•	Dividends from RSO were eliminated, which reduced net income attributable to common shareholders by $528,000 and $1.5 million, respectively.


•	The Company's interests in the earnings of RSO increased consolidated net income attributable to common shareholders by $539,000 and $1.5 million, respectively.

The following sets forth the effect of the restatement on the applicable line items in the Company's consolidated balance sheet as of December 31, 2012 (in thousands) (unaudited):



				Restatement Adjustments
	As Previously Reported			RSO		Eliminations			As Restated
ASSETS
Cash	$	11,899		$	—	$	—		$	11,899
Restricted cash	638			—		—			638
Receivables	468			—		—			468
Receivables from managed entities and related parties, net	38,685			—		(8,067		)	30,618
Investments in real estate, net	18,041			—		—			18,041
Investment securities, at fair value	25,533			—		(14,957		)	10,576
Investments in unconsolidated loan manager	37,221			—		—			37,221
Investments in unconsolidated entities	13,156			—		—			13,156
Assets of consolidated VIE - RSO:
Cash and cash equivalents (including restricted cash)	—			179,390		—			179,390
Investments, at fair value	—			256,433		—			256,433
Loans	—			1,850,998		(1,570		)	1,849,428
Investments in real estate and unconsolidated entities	—			120,799		(93		)	120,706
Other assets	—			70,631		(31		)	70,600
Total assets of consolidated VIE - RSO	—			2,478,251		(1,694		)	2,476,557
Property and equipment, net	2,590			—		—			2,590
Deferred tax assets, net	35,373			—		(7,099		)	28,274
Other assets	6,726			—		—			6,726
Total assets	$	190,330		$	2,478,251	$	(31,817	)	$	2,636,764

LIABILITIES AND EQUITY
Liabilities:
Accrued expenses and other liabilities	$	21,556		$	—	$	3		$	21,559
Payables to managed entities and related parties	3,567			—		(31		)	3,536
Borrowings	22,610			—		(1,570		)	21,040
Liabilities of consolidated VIE - RSO:
Borrowings	—			1,785,600		—			1,785,600
Other liabilities	—			79,306		(8,067		)	71,239
Total liabilities of consolidated VIE - RSO	—			1,864,906		(8,067		)	1,856,839
Total liabilities	47,733			1,864,906		(9,665		)	1,902,974

Commitments and contingencies

Equity:
Preferred stock	—			—		—			—
Common stock	295			—		—			295
Additional paid-in capital	286,048			—		—			286,048
Accumulated deficit	(27,137		)	—		(2,349		)	(29,486		)
Treasury stock, at cost	(103,472		)	—		—			(103,472		)
Accumulated other comprehensive (loss) income	(13,416		)	—		11,219			(2,197		)
Total stockholders’ equity	142,318			—		8,870			151,188
Noncontrolling interests	279			—		—			279
Noncontrolling interests attributable to RSO	—			613,345		(31,022		)	582,323
Total equity	142,597			613,345		(22,152		)	733,790
	$	190,330		$	2,478,251	$	(31,817	)	$	2,636,764

The following sets forth the effect of the restatement on the applicable line items in the Company's consolidated statement of operations for the three months ended September 30, 2012 (in thousands) (unaudited):



				Restatement Adjustments
	As Previously Reported			RSO			Eliminations			As Restated
REVENUES:
Real estate	$	11,292		$	—		$	—		$	11,292
Financial fund management	6,083			—			—			6,083
Commercial finance	(167		)	—			—			(167		)
Revenues from consolidated VIE - RSO	—			35,669			—			35,669
Elimination of consolidated revenues attributed to operating segments	—			—			(4,988		)	(4,988		)
	17,208			35,669			(4,988		)	47,889
COSTS AND EXPENSES:
Real estate	7,684			—			—			7,684
Financial fund management	3,909			—			—			3,909
Commercial finance	103			—			—			103
General and administrative	2,530			—			—			2,530
Impairment charges	2,280			—			—			2,280
Provision for credit losses	6,336			—			—			6,336
Depreciation and amortization	529			—			—			529
Expenses from consolidated VIE - RSO	—			13,230			—			13,230
Elimination of consolidated expenses attributed to operating segments	—			—			(4,950		)	(4,950		)
	23,371			13,230			(4,950		)	31,651
OPERATING (LOSS) INCOME	(6,163		)	22,439			(38		)	16,238

OTHER INCOME (EXPENSE):
Loss on deconsolidation and sale of subsidiaries	(140		)	—			—			(140		)
Interest expense	(544		)	—			—			(544		)
Other income, net	557			—			(528		)	29
Elimination of consolidated VIE - RSO other income attributable to operating segments	—			—			34			34
	(127		)	—			(494		)	(621		)
(Loss) income from continuing operations before taxes	(6,290		)	22,439			(532		)	15,617
Income tax (benefit) provision	(3,984		)	3,979			—			(5		)
(Loss) income from continuing operations	(2,306		)	18,460			(532		)	15,622
Loss from discontinued operations, net of tax	(8		)	—			—			(8		)
Net (loss) income	(2,314		)	18,460			(532		)	15,614
Net loss attributable to noncontrolling interests - RAI	36			—			—			36
Net income attributable to noncontrolling interests of consolidated VIE - RSO	—			(17,917		)	—			(17,917		)
Net (loss) income attributable to common shareholders	$	(2,278	)	$	543		$	(532	)	$	(2,267	)

Amounts attributable to common shareholders:
(Loss) income from continuing operations	$	(2,270	)	$	543		$	(532	)	$	(2,259	)
Discontinued operations	(8		)	—			—			(8		)
Net (loss) income	$	(2,278	)	$	543		$	(532	)	$	(2,267	)

The following sets forth the effect of both the change in year end and the restatement on the applicable line items in the Company's consolidated statement of operations for the nine months ended September 30, 2012 (in thousands) (unaudited):



	For the Twelve Months Ended			For the Three Months Ended			For the Nine Months Ended
	September 30, 2012			December 31, 2011			September 30, 2012			Restatement Adjustments
	As Previously Reported			As Previously Reported			As calculated			RSO		Eliminations			As Restated
REVENUES:
Real estate	$	40,595		$	8,666		$	31,929		$	—	$	—		$	31,929
Financial fund management	21,957			6,579			15,378			—		—			15,378
Commercial finance	1,884			3,419			(1,535		)	—		—			(1,535		)
Revenues from consolidated VIE - RSO	—			—			—			90,657		—			90,657
Elimination of consolidated revenues attributed to operating segments	—			—			—			—		(12,733		)	(12,733		)
	64,436			18,664			45,772			90,657		(12,733		)	123,696
COSTS AND EXPENSES:
Real estate	29,669			7,192			22,477			—		—			22,477
Financial fund management	17,086			5,804			11,282			—		—			11,282
Commercial finance	2,414			1,963			451			—		—			451
Restructuring expenses	365			—			365			—		—			365
General and administrative	10,460			2,896			7,564			—		—			7,564
Gain on sale of leases and loans	(37		)	(37		)	—			—		—			—
Impairment charges	2,280			—			2,280			—		—			2,280
Provision for credit losses	17,246			2,250			14,996			—		—			14,996
Depreciation and amortization	3,653			2,061			1,592			—		—			1,592
Expenses from consolidated VIE - RSO	—			—			—			39,752		—			39,752
Elimination of consolidated VIE expenses attributable to operating segments	—			—			—			—		(12,589		)	(12,589		)
	83,136			22,129			61,007			39,752		(12,589		)	88,170
OPERATING (LOSS) INCOME	(18,700		)	(3,465		)	(15,235		)	50,905		(144		)	35,526

OTHER INCOME (EXPENSE):
Gain on deconsolidation and sale of subsidiaries	63,291			8,749			54,542			—		—			54,542
Loss on extinguishment of debt	(2,190		)	(2,190		)	—			—		—			—
Other-than-temporary impairment on investments	(74		)	—			(74		)	—		—			(74		)
Gain on sale of investment securities, net	63			58			5			—		(5		)	—
Interest expense	(4,741		)	(2,974		)	(1,767		)	—		—			(1,767		)
Other income, net	2,103			559			1,544			—		(1,538		)	6
Other income of consolidated VIE - RSO	—			—			—			5,464		—			5,464
Elimination of consolidated VIE - RSO other income attributable to operating segments	—			—			—			—		101			101
	58,452			4,202			54,250			5,464		(1,442		)	58,272





	For the twelve months ended			For the three months ended			For the nine months ended
	September 30, 2012			December 31, 2011			September 30, 2012			Restatement Adjustments
	As Previously Reported			As Previously Reported			As calculated			RSO			Eliminations			As Restated
Income (loss) from continuing operations before taxes	39,752			737			39,015			56,369			(1,586		)	93,798
Income tax provision	13,512			154			13,358			6,978			—			20,336
Income from continuing operations	26,240			583			25,657			49,391			(1,586		)	73,462
Loss from discontinued operations, net of tax	(58		)	(20		)	(38		)	—			—			(38		)
Net income (loss)	26,182			563			25,619			49,391			(1,586		)	73,424
Net (income) loss attributable to noncontrolling interests - RAI	(348		)	(378		)	30			—			—			30
Net income attributable to noncontrolling interests of consolidated VIE - RSO	—			—			—			(47,892		)	—			(47,892		)
Net income (loss) attributable to common shareholders	$	25,834		$	185		$	25,649		$	1,499		$	(1,586	)	$	25,562

Amounts attributable to common shareholders:
Income (loss) from continuing operations	$	25,892		$	205		$	25,687		$	1,499		$	(1,586	)	$	25,600
Discontinued operations	(58		)	(20		)	(38		)	—			—			(38		)
Net income (loss)	$	25,834		$	185		$	25,649		$	1,499		$	(1,586	)	$	25,562

Basic earnings per share:
Continuing operations	$	1.31		$	0.01		$	1.30								$	1.29
Discontinued operations	—			—			—									—
Net income	$	1.31		$	0.01		$	1.30								$	1.29
Weighted average shares outstanding	19,740			19,641			19,786									19,786

Diluted earnings per share:
Continuing operations	$	1.25		$	0.01		$	1.23								$	1.23
Discontinued operations	—			—			—									—
Net income	$	1.25		$	0.01		$	1.23								$	1.23
Weighted average shares outstanding	20,634			20,039			20,845									20,845

The following sets forth the effect of both the change in year end and the restatement on the applicable line items in the Company's consolidated statement of comprehensive income for the three months ended September 30, 2012 (in thousands) (unaudited):



	For the Twelve Months Ended September 30, 2012			For the Nine Months Ended June 30, 2012			For the Three Months Ended September 30, 2012			Restatement Adjustments
	As Previously Reported			As Previously Reported			As calculated			RSO			Eliminations			As Restated
Net income (loss)	$	26,182		$	28,496		$	(2,314	)	$	18,460		$	(532	)	$	15,614

Other comprehensive (loss) income:
Unrealized losses on investment securities available-for-sale	1,363			518			845			—			(887		)	(42		)
Less: reclassification for (gains) losses realized, net of tax	45			46			(1		)	—			—			(1		)
	1,408			564			844			—			(887		)	(43		)
Minimum pension liability adjustments, net of tax	(289		)	—			(289		)	—			—			(289		)
Minimum pension liability - reclassification for losses realized, net of tax	214			140			74			—			—			74
	(75		)	140			(215		)	—			—			(215		)
Unrealized gains (losses) on hedging contracts, net of tax	(6		)	(21		)	15			—			—			15
Deconsolidation of LEAF -unrealized loss on hedging contracts	255			255			—			—			—			—
	249			234			15			—			—			15
Subtotal- activity related to RAI:	1,582			938			644			—			(887		)	(243		)
Activity related to consolidated VIE - RSO:
Reclassifications adjustment for losses (gains) included in net income	—			—			—			89			—			89
Unrealized gains on available-for-sale securities, net	—			—			—			6,820			—			6,820
Reclassification adjustments associated with unrealized losses from interest rate hedges included in net income	—			—			—			58			—			58
Unrealized losses on derivatives, net	—			—			—			(2,625		)	—			(2,625		)
Subtotal activity related to consolidated VIE - RSO:	—			—			—			4,342			—			4,342
Subtotal - other comprehensive income (loss)	1,582			938			644			4,342			(887		)	4,099
Comprehensive income (loss)	27,764			29,434			(1,670		)	22,802			(1,419		)	19,713
Comprehensive (income) loss attributable to noncontrolling interests	(397		)	(433		)	36			(22,259		)	—			(22,223		)
Comprehensive income (loss) attributable to common shareholders	$	27,367		$	29,001		$	(1,634	)	$	543		$	(1,419	)	$	(2,510	)

The following sets forth the effect of both the change in year end and the restatement on the applicable line items in the Company's consolidated statement of comprehensive income for the nine months ended September 30, 2012 (in thousands) (unaudited):



	For the Twelve Months Ended September 30, 2012			For the Three Months Ended December 31, 2011			For the Nine Months Ended September 30, 2012			Restatement Adjustments
	As Previously Reported			As Previously Reported			As calculated			RSO			Eliminations			As Restated
Net income (loss)	$	26,182		$	563		$	25,619		$	49,391		$	(1,586	)	$	73,424

Other comprehensive income (loss):
Unrealized gains (losses) on investment securities available-for-sale	1,363			985			378			—			(452		)	(74		)
Less: reclassification for losses realized, net of tax	45			—			45			—			—			45
	1,408			985			423			—			(452		)	(29		)
Minimum pension liability adjustments, net of tax	(289		)	—			(289		)	—			—			(289		)
Minimum pension liability - reclassification for losses realized, net of tax	214			47			167			—			1			168
	(75		)	47			(122		)	—			1			(121		)
Unrealized (losses) gains on hedging contracts, net of tax	(6		)	(129		)	123			—			—			123
Deconsolidation of LEAF - unrealized loss on hedging contracts	255			255			—			—			—			—
	249			126			123			—			—			123
Subtotal - activity related to RAI	1,582			1,158			424			—			(451		)	(27		)
Activity related to consolidated VIE - RSO:
Reclassifications adjustment for losses included in net income	—			—			—			1,023			—			1,023
Unrealized gains on available-for- sale securities, net	—			—			—			15,216			—			15,216
Reclassification adjustments associated with unrealized losses from interest rate hedges included in net income	—			—			—			170			—			170
Unrealized losses on derivatives, net	—			—			—			(2,985		)	—			(2,985		)
Subtotal activity related to consolidated VIE - RSO	—			—			—			13,424			—			13,424
Subtotal - other comprehensive income (loss)	1,582			1,158			424			13,424			(451		)	13,397
Comprehensive income (loss)	27,764			1,721			26,043			62,815			(2,037		)	86,821
Comprehensive (income) loss attributable to noncontrolling interests	(397		)	(427		)	30			(61,316		)	—			(61,286		)
Comprehensive income (loss) attributable to common shareholders	$	27,367		$	1,294		$	26,073		$	1,499		$	(2,037	)	$	25,535

The following table presents the consolidating statement of cash flows as originally presented in the September 30, 2012 10-K for the twelve months ended September 30, 2012, less the activity for the three months ended December 31, 2011, in order to derive the activity for the nine months ended September 30, 2012 as shown in the column labeled "RAI" in the previous table presented (in thousands) (unaudited):



	For the Twelve Months Ended September 30, 2012			For the Three Months Ended December 31, 2011						For the Nine Months Ended September 30, 2012
	As Previously Reported			As Previously Reported			Adjustments			As Restated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	26,182		$	563		$	—		$	25,619
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	4,875			3,087			—			1,788
Other-than-temporary impairment on investments	74			—			—			74
Impairment charges	2,280			—			—			2,280
Provision for credit losses	17,246			2,250			—			14,996
Unrealized gain on trading securities	(1,108		)	—			—			(1,108		)
Equity in earnings of unconsolidated entities	(3,439		)	(557		)	—			(2,882		)
Distributions from unconsolidated entities	3,463			1,163			—			2,300
Gain on sale of leases and loans	(37		)	(37		)	—			—
Gain on sale of loans and investment securities, net	(972		)	(58		)	—			(914		)
Gain on the sale of assets	(84		)	—			—			(84		)
Gain on sale and deconsolidation of subsidiaries	(63,291		)	(8,749		)	—			(54,542		)
Loss on extinguishment of debt	2,190			2,190			—			—
Deferred income tax benefit	13,393			154			—			13,239
Equity-based compensation issued	1,286			498			—			788
Equity-based compensation received	(153		)	—			—			(153		)
Trading securities purchases and sales, net	(1,048		)	—			—			(1,048		)
Loss from discontinued operations	58			—			20			38
Changes in operating assets and liabilities	(2,911		)	(1,412		)	(20		)	(1,479		)
Net cash used in operating activities	(1,996		)	(908		)	—			(1,088		)

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(222		)	(106		)	—			(116		)
Payments received on real estate loans and real estate	1,726			1,550			—			176
Investments in unconsolidated real estate entities	(1,608		)	(127		)	—			(1,481		)
Purchase of commercial finance assets	(18,483		)	(18,483		)	—			—
Principal payments received on leases and loans	9,043			9,031			—			12
Cash divested on deconsolidation of LEAF	(2,284		)	(2,284		)	—			—
Net proceeds from sale of Apidos and cash divested on deconsolidation	17,860			—			—			17,860
Purchase of loans and investments	(1,874		)	(600		)	—			(1,274		)
Proceeds from sale of loan and investments	262			207			—			55
Net cash provided by (used in) in investing activities	4,420			(10,812		)	—			15,232




	For the Twelve Months Ended September 30, 2012			For the Three Months Ended December 31, 2011						For the Nine Months Ended September 30, 2012
	As Previously Reported			As Previously Reported			Adjustments			As Restated
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings	128,845			128,845			—			—
Principal payments on borrowings	(129,416		)	(123,823		)	—			(5,593		)
Dividends paid	(2,310		)	(569		)	—			(1,741		)
Proceeds from issuance of common stock	2,131			—			—			2,131
Repurchase of common stock	(2,324		)	(939		)	—			(1,385		)
Increase in restricted cash	(664		)	(633		)	(31		)	—
Preferred stock dividends paid by LEAF to RSO	(188		)	(188		)	—			—
Other	(2,275		)	(2,250		)	31			(56		)
Net cash (used in) provided by financing activities	(6,201		)	443			—			(6,644		)

CASH FLOWS FROM DISCONTINUED OPERATIONS:
Operating activities	(1,285		)	(375		)	—			(910		)
Net cash used in discontinued operations	(1,285		)	(375		)	—			(910		)

(Decrease) increase in cash	(5,062		)	(11,652		)	—			6,590
Cash, beginning of period	24,455			24,455			—			12,803
Cash, end of period	$	19,393		$	12,803		$	—		$	19,393

The following table shows the details of the consolidating cash flows of the Company, RSO and eliminations that are included in the Consolidated Statement of Cash Flows for the nine months ended September 30, 2012 (in thousands) (unaudited):



	RAI			RSO			Eliminations			As Restated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	25,619		$	49,391		$	(1,586	)	$	73,424
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	1,788			—			—			1,788
Other-than-temporary impairment on investments	74			—			—			74
Impairment charges	2,280			—			—			2,280
Provision for credit losses	14,996			—			—			14,996
Unrealized gain on trading securities	(1,108		)	—			—			(1,108		)
Equity in earnings of unconsolidated entities	(2,882		)	—			—			(2,882		)
Distributions from unconsolidated entities	2,300			—			—			2,300
Gain on sale of loans and investment securities, net	(914		)	—			—			(914		)
Gain on the sale of assets	(84		)	—			—			(84		)
Gain on sale of subsidiary	(54,542		)	—			—			(54,542		)
Deferred income tax benefit	13,239			—			—			13,239
Equity-based compensation issued	788			814			(814		)	788
Equity-based compensation received	(153		)				153			—
Trading securities purchases and sales, net	(1,048		)	—			—			(1,048		)
Loss from discontinued operations	38			—			—			38
Changes in operating assets and liabilities	(1,479		)	—			—			(1,479		)
Change in cash attributable to operations of consolidated VIE - RSO	—			(66,749		)	661			(66,088		)
Net cash used in operating activities	(1,088		)	(16,544		)	(1,586		)	(19,218		)

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(116		)	—			—			(116		)
Payments received on real estate loans and real estate	176			—			—			176
Investments in unconsolidated real estate entities	(1,481		)	—			—			(1,481		)
Principal payments received on leases and loans	12			—			—			12
Purchase of loans and securities by consolidated VIE - RSO	—			(549,826		)	—			(549,826		)
Principal payments and proceeds from sales received by consolidated VIE - RSO	—			540,117			—			540,117
Proceeds from sale of Apidos, net of transaction costs and cash divested on deconsolidation	17,860			—			—			17,860
Purchase of loans and investments	(1,274		)	—			—			(1,274		)
Proceeds from sale of loans and investment securities	55			—			—			55
Increase in restricted cash - consolidated VIE RSO	—			85,413			—			85,413
Other investing activity of consolidated VIE - RSO	—			3,592			43			3,635
Net cash provided by investing activities	15,232			79,296			43			94,571

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings	(5,593		)	—			—			(5,593		)
Net repayments of debt by consolidated VIE - RSO	—			(128,019		)	—			(128,019		)
Dividends paid	(1,741		)	—			—			(1,741		)
Dividends paid on common stock by consolidated VIE - RSO	—			(54,231		)	1,543			(52,688		)
Net proceeds from issuance of common stock by consolidated VIE - RSO	—			122,337			—			122,337
Proceeds from issuance of common stock	2,131			—			—			2,131
Repurchase of common stock	(1,385		)	—			—			(1,385		)
Other	(56		)	—			—			(56		)
Other financing activities of consolidated VIE-RSO	—			(2,839		)	—			(2,839		)
Net cash (used in) provided by financing activities	(6,644		)	(62,752		)	1,543			(67,853		)

CASH FLOWS FROM DISCONTINUED OPERATIONS:
Operating activities	(910		)	—			—			(910		)
Net cash used in discontinued operations	(910		)	—			—			(910		)

Increase in cash	6,590			—			—			6,590
Cash, beginning of year	12,803			—			—			12,803
Cash, end of period	$	19,393		$	—		$	—		$	19,393