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VARIABLE INTEREST ENTITIES (Tables)

12 Months Ended

Sep. 30, 2012

Variable Interest Entity [Line Items]

Property and equipment, net, consist of the following (in thousands):



	Estimated Useful Life	September 30,
	Estimated Useful Life	2012			2011
Furniture and equipment	3-7 years	$	6,123		$	5,620
Leasehold improvements	1-8 years	2,377			2,656
LEAF property and equipment		—			11,939
		8,500			20,215
Accumulated depreciation and amortization		(5,768		)	(5,183		)
Accumulated depreciation and amortization - LEAF		—			(8,034		)
Property and equipment, net		$	2,732		$	6,998

Schedule of Variable Interest Entities

The following table reflects the assets and liabilities of a real estate VIE which was included in the Company’s consolidated balance sheets (in thousands):



	September 30, 2012		September 30, 2011
Cash and property and equipment, net	$	727	$	944
Accrued expenses and other liabilities	189		300

The following table presents the carrying amounts of the assets in the Company's consolidated balance sheets that relate to the Company's variable interests in identified nonconsolidated VIEs and the Company's maximum exposure to loss associated with these VIEs in which it holds variable interests at September 30, 2012 (in thousands):



	Receivables from Managed Entities and Related Parties, Net ⁽¹⁾		Investments		Maximum Exposure to Loss in Non-consolidated VIEs
RRE Opportunity REIT	$	—	$	1,444	$	1,444
Ischus entities	231		—		231
Trapeza entities	—		967		967
	$	231	$	2,411	$	2,642


(1)	Exclusive of expense reimbursements due to the Company.

Supplemental Cash Flow Information

Supplemental disclosure of cash flow information for the fiscal years ended September 30 are as follows (in thousands):



	September 30,
	2012			2011			2010
Cash (paid) received:	(Restated)			(Restated)
Interest	$	(3,889	)	$	(9,926	)	$	(9,433	)
Income tax payments	(1,424		)	(964		)	(1,325		)
Refund of income taxes	109			596			2,860

Dividends declared per common share	$	0.12		0.12			0.09

Non-cash activities:
Repurchases of common stock from employees in exchange for the payment of income taxes and option exercises	$	1,718		$	113		$	54
Issuance of treasury stock for the Company's investment savings plan	539			730			1,091
Common stock issued to former director in exchange for vested director units	135			—			—
Warrants issued and recorded as a discount to the Senior Notes	—			—			2,339
Leasehold improvements paid by the landlord	—			—			668
Sale of commercial finance assets to RSO:
Reduction of investments in commercial finance assets	$	—		$	—		$	99,386
Termination of associated secured warehouse facility	—			—			(99,386		)
Effects from the deconsolidation of entities:⁽¹⁾
Restricted cash	$	20,282		$	—		$	—
Receivables from managed entities and related parties, net	(2,696		)	—			—
Receivables	954			—			9
Investments in commercial finance, net	199,955			—			—
Investments in unconsolidated entities	5,225			—			—
Property and equipment, net	3,754			—			1,638
Deferred tax assets, net	4,558			—			—
Goodwill	7,969			—			—
Other assets	6,826			—			755
Accrued expense and other liabilities	(11,146		)	—			(174		)
Payables to managed entities and related parties	(98		)	—			—
Borrowings	(202,481		)	—			(1,013		)
Accumulated other comprehensive loss	255			—			—
Noncontrolling interests	(37,668		)	—			—
Equity	—			—			(1,258		)

(1)

Reflects the deconsolidation of LEAF and Apidos during fiscal 2012 and a real estate and two financial fund management partnerships during fiscal 2010. As a result of the deconsolidation of these entities, the amounts noted above were removed from the Company’s consolidated balance sheets. The sum of the assets removed and cash equated to the sum of the liabilities and equity that were similarly eliminated and, as such, there was no change in the Company’s total net assets.

Unrealized Losses Along with the Related Fair Value, Aggregated by the Length of Time the Investments were in a Continuous Unrealized Loss Position

Unrealized losses along with the related fair value and aggregated by the length of time the investments were in a continuous unrealized loss position, are as follows (in thousands, except number of securities):



	Less than 12 Months						More than 12 Months
	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses		Number of Securities
September 30, 2012:
CLO securities	$	1,274	$	(15	)	1	$	—	$	—	—

September 30, 2011:
CLO securities	$	—	$	—		—	$	—	$	—	—

Summarization of Activity in the Allowance for Credit Losses for the Company's Financing Receivables

The following table summarizes the activity in the allowance for credit losses for all financing receivables (in thousands):



			Investments in Commercial Finance
	Receivables from Managed Entities		Leases and Loans			Future Payment Card Receivables			Rent Receivables		Investment in Real Estate Loans			Total
Year Ended September 30, 2012:
Balance, beginning of year	$	10,490	$	430		$	—		$	15	$	—		$	10,935
Provision for credit losses	17,090		138			—			18		—			17,246
Charge-offs	—		(124		)	—			—		—			(124		)
Recoveries	—		38			—			—		—			38
Deconsolidation of LEAF	—		(482		)	—			—		—			(482		)
Balance, end of year	$	27,580	$	—		$	—		$	33	$	—		$	27,613

Ending balance, individually evaluated for impairment	$	27,580	$	—		$	—		$	33	$	—		$	27,613
Ending balance, collectively evaluated for impairment	—		—			—			—		—			—
Balance, end of year	$	27,580	$	—		$	—		$	33	$	—		$	27,613

Year Ended September 30, 2011:
Balance, beginning of year	$	1,075	$	770		$	130		$	—	$	49		$	2,024
Provision for credit losses	9,415		1,137			94			15		—			10,661
Charge-offs	—		(1,764		)	(286		)	—		(49		)	(2,099		)
Recoveries	—		287			62			—		—			349
Balance, end of year	$	10,490	$	430		$	—		$	15	$	—		$	10,935

Ending balance, individually evaluated for impairment	$	10,490	$	—		$	—		$	15	$	—		$	10,505
Ending balance, collectively evaluated for impairment	—		430			—			—		—			430
Balance, end of year	$	10,490	$	430		$	—		$	15	$	—		$	10,935



							Investments in Commercial Finance
	Receivables from Managed Entities			Investment in Loans			Leases and Loans			Future Payment Card Receivables			Investment in Real Estate Loans			Total
Year Ended September 30, 2010:
Balance, beginning of year	$	—		$	—		$	570		$	2,640		$	1,585		$	4,795
Provision for credit losses	1,852			1			2,860			447			49			5,209
Charge-offs	(777		)	(1		)	(2,721		)	(2,983		)	(1,585		)	(8,067		)
Recoveries	—			—			61			26			—			87
Balance, end of year	$	1,075		$	—		$	770		$	130		$	49		$	2,024

Aging of the Company's Past Due Financing Receivables, Gross of Allowances for Credit Losses

The following table is the aging of the Company’s past due financing receivables (presented gross of allowance for credit losses) as of September 30, 2012 (in thousands):



	30-89 Days Past Due		Greater than 90 Days		Greater than 181 Days		Total Past Due		Current		Total
Receivables from managed entities and related parties: ⁽¹⁾
Commercial finance investment entities	$	—	$	—	$	38,834	$	38,834	$	148	$	38,982
Real estate investment entities	743		2,694		15,180		18,617		2,054		20,671
Financial fund management entities	6		—		46		52		2,141		2,193
Other	—		—		—		—		152		152
	749		2,694		54,060		57,503		4,495		61,998
Rent receivables - real estate	6		1		32		39		6		45
Total financing receivables	$	755	$	2,695	$	54,092	$	57,542	$	4,501	$	62,043


(1)	Receivables are presented gross of an allowance for credit losses of $25.1 million and $2.5 million related to the Company’s commercial finance and real estate investment entities, respectively. The remaining receivables from managed entities and related parties have no related allowance for credit losses.

The following table is the aging of the Company’s past due financing receivables (presented gross of allowance for credit losses) as of September 30, 2011 (in thousands):



	30-89 Days Past Due		Greater than 90 Days		Greater than 181 Days		Total Past Due		Current		Total
Receivables from managed entities and related parties: ⁽¹⁾
Commercial finance investment entities	$	—	$	—	$	37,547	$	37,547	$	490	$	38,037
Real estate investment entities	1,314		1,511		17,405		20,230		1,697		21,927
Financial fund management entities	2,395		93		28		2,516		24		2,540
Other	—		—		—		—		103		103
	3,709		1,604		54,980		60,293		2,314		62,607
Investments in commercial finance	984		526		—		1,510		190,932		192,442
Rent receivables - real estate	1		11		—		12		3		15
Total financing receivables	$	4,694	$	2,141	$	54,980	$	61,815	$	193,249	$	255,064


(1)	Receivables are presented gross of an allowance for credit losses of $8.3 million and $2.2 million related to the Company’s commercial finance and real estate investment entities, respectively. The remaining receivables from managed entities and related parties have no related allowance for credit losses.

Information about Company's Impaired Financing Receivables

The following table discloses information about the Company’s impaired financing receivables (in thousands):



	Net Balance		Unpaid Balance		Specific Allowance		Average Investment in Impaired Assets
As of September 30, 2012
Financing receivables with a specific valuation allowance:
Receivables from managed entities – commercial finance	$	12,865	$	37,943	$	25,078	$	38,060
Receivables from managed entities – real estate	2,181		4,683		2,502		4,511
Rent receivables – real estate	12		45		33		45

As of September 30, 2011:
Financing receivables with a specific valuation allowance:
Receivables from managed entities – commercial finance	$	14,990	$	23,302	$	8,312	$	23,377
Receivables from managed entities – real estate	2,353		4,531		2,178		3,897
Leases and loans	310		526		216		318
Rent receivables – real estate	—		15		15		7

Credit Facilities and Other Debt of the Company and Related Borrowings Outstanding

The credit facilities and other debt of the Company and related borrowings outstanding are as follows (in thousands):



	As of September 30, 2012				September 30, 2011
	Maximum Amount of Facility		Borrowings Outstanding		Borrowings Outstanding
Corporate and Real Estate:
TD Bank – secured revolving credit facility ⁽¹⁾	$	6,997	$	—	$	7,493
TD Bank – term loan	—		—		1,250
Republic Bank – secured revolving credit facility	3,500		—		—
			—		8,743
Senior Notes ⁽²⁾			10,000		16,263
Mortgage debt			10,531		10,700
Other debt			812		548
Total corporate and real estate borrowings			21,343		36,254
Commercial Finance debt			—		177,800
Total borrowings outstanding			$	21,343	$	214,054


(1)	The amount of the facility as shown has been reduced for outstanding letters of credit of $503,000 at September 30, 2012 and 2011.


(2)	The September 30, 2011 balance shown is net of an unamortized discount of $2.6 million related to the fair value of detachable warrants issued to the note holders. In conjunction with the refinancing of the Senior Notes in November 2011, the remaining unamortized discount was charged off to Loss on Extinguishment of Debt in the consolidated statements of operations.

Company's Asset Recorded at Fair Value on Recurring Basis

As of September 30, 2012, the fair values of the Company’s assets recorded at fair value on a recurring basis were as follows (in thousands):



	Level 1		Level 2		Level 3		Total
Asset:
Investment securities	$	195	$	—	$	6,835	$	7,030

As of September 30, 2011, the fair values of the Company’s assets recorded at fair value on a recurring basis were as follows (in thousands):



	Level 1		Level 2		Level 3		Total
Assets:
Investment securities	$	376	$	—	$	2,356	$	2,732
Retained financial interest – commercial finance	—		—		22		22
Total	$	376	$	—	$	2,378	$	2,754
Liability:
Interest rate swap	$	—	$	404	$	—	$	404

Additional Information about Assets Measured at Fair Value on Recurring Basis for which the Company Has Utilized Level 3 Inputs to Determine Fair Value

The following table presents additional information about assets which were measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value during fiscal 2012 (in thousands):



	Investment Securities			Retained Financial Interest
Balance, beginning of year	$	2,356		$	22
Purchases	7,570			—
Income accreted	823			—
Payments and distributions received	(2,827		)	—
Sales	(2,999		)	—
Impairment recognized in earnings	(74		)	—
Gains on sales of trading securities	909			—
Unrealized holding gain on trading securities	1,108			—
Deconsolidation of LEAF	—			(22		)
Change in unrealized losses – included in accumulated other comprehensive loss	(31		)	—
Balance, end of year	$	6,835		$	—



	Investment Securities			Retained Financial Interest
Balance, beginning of year	$	6,223		$	273
Purchases, sales, issuances and settlements, net	(2,946		)	—
Loss on sale of investment securities, net	(1,470		)	—
Income accreted	948			—
Payment and distributions received	(861		)	(251		)
Change in unrealized losses – included in accumulated other comprehensive loss	462			—
Balance, end of year	$	2,356		$	22

Changes in Carrying Value of Assets and Liabilities Measured at Fair Value on Non-recurring Basis

The Company recognized the following changes in carrying value of the assets and liabilities measured at fair value on a non-recurring basis, as follows (in thousands):



	Level 1		Level 2		Level 3		Total
Fiscal Year Ended September 30, 2012:
Assets:
Receivables from managed entities – commercial finance and real estate	$	—	$	—	$	16,752	$	16,752
Investment in real estate	—		727		—		727
Investment in real estate - office building	—		—		906		906
Investment in CVC Credit Partners	—		—		28,600		28,600
Investment in Apidos-CVC preferred equity	—		—		6,792		6,792
Investment in LEAF	—		—		1,749		1,749
Total	$	—	$	727	$	54,799	$	55,526
Liability:
Apidos contractual commitment	$	—	$	—	$	589	$	589

Fiscal Year Ended September 30, 2011:
Assets:
Investments in commercial finance – impaired loans and leases	$	—	$	—	$	310	$	310
Receivables from managed entities	—		—		18,941		18,941
Total	$	—	$	—	$	19,251	$	19,251
Liability:
Guggenheim - secured revolving credit facility	$	—	$	—	$	49,266	$	49,266

Fair Value of Financial Instruments

The fair value of financial instruments required to be disclosed at fair value, excluding instruments valued on a recurring basis, is as follows (in thousands):



	September 30, 2012				September 30, 2011
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets:
Receivables from managed entities	$	34,418	$	34,418	$	52,117	$	36,526
Investments in commercial finance – loans held for investment	—		—		19,640		19,550
	$	34,418	$	34,418	$	71,757	$	56,076
Borrowings:
Real estate debt	$	10,531	$	11,554	$	10,700	$	10,700
Senior Notes	10,000		11,364		16,263		17,438
Corporate secured credit facilities and note	—		—		8,743		8,743
Other debt	812		812		2,102		1,204
Commercial finance debt	—		—		176,246		176,246
	$	21,343	$	23,730	$	214,054	$	214,331

Components of Income Taxes

The following table details the allocation of the Company's provision (benefit) for income taxes from continuing operations between RAI and RSO:



	Fiscal Years Ended September 30,
	2012		2011			2010
RAI	$	13,512	$	(4,607	)	(2,650		)
RSO	14,602		12,036			—
Total	$	28,114	$	7,429		$	(2,650	)

The following table details the components of the Company's provision (benefit) for income taxes from continuing operations excluding RSO (in thousands):



	Fiscal Years Ended September 30,
	2012			2011			2010
Current tax provision:
Federal	$	—		$	51		$	1,379
State	959			574			535
Foreign	44			425			—
Total current tax provision	1,003			1,050			1,914
Deferred tax provision (benefit)
Federal	13,787			(4,668		)	(5,795		)
State	(1,278		)	(2,056		)	(223		)
Foreign	—			1,067			1,454
Total deferred tax provision (benefit)	12,509			(5,657		)	(4,564		)
Total income tax provision (benefit)	$	13,512		$	(4,607	)	$	(2,650	)

The following table details the components of income taxes (in thousands):



	Years Ended December 31,
	2012		2011
Provision (benefit) for income taxes:
Current:
Federal	$	11,497	$	7,839
State	776		4,596
Total current	12,273		12,435

Deferred:
Federal	1,769		(305		)
State	560		(94		)
Total deferred	2,329		(399		)
Income tax provision (benefit)	$	14,602	$	12,036

Reconciliation Between Federal Statutory Income Tax Rate and Effective Income Tax Rate

A reconciliation between the federal statutory income tax rate and the Company's effective income tax rate excluding RSO is as follows:



	Fiscal Years Ended September 30,
	2012		2011		2010
Statutory tax rate	35	%	35	%	35	%
State and local taxes, net of federal benefit	2		13		12
Deconsolidation adjustment	(6	)	—		—
Return permanent adjustments	—		12		(7	)
Taxable foreign distributions	—		(6	)	—
Valuation allowance for deferred tax assets	2		(4	)	(18	)
Equity-based compensation expense	—		(3	)	(8	)
Other items	1		—		(1	)
	34	%	47	%	13	%

A reconciliation between the federal statutory income tax rate and effective income tax rate is as follows:



	Years Ended December 31,
	2012		2011
Statutory tax	35	%	35	%
State and local taxes, net of federal benefit	1	%	15	%
Valuation allowance for deferred tax assets	—	%	—	%
Subpart F income	13	%	11	%
Basis difference in LEAF Commercial Capital investment	—	%	6	%
Other items	5	%	—	%
	54	%	67	%

Components of Deferred Tax Assets and Liabilities

The components of deferred tax assets, net, excluding RSO are as follows (in thousands):



	September 30,
	2012			2011
Deferred tax assets related to:
Federal, foreign, state and local operating loss carryforwards	$	23,225		$	23,594
Capital loss carryforwards	1,314			24,752
Unrealized loss on investments	2,118			2,164
Provision for credit losses	11,288			4,627
Accrued expenses	2,059			3,685
Employee equity compensation awards	906			1,242
Investments in real estate assets	1,076			41
Property and equipment basis differences	—			681
Gross deferred tax assets	41,986			60,786
Less: valuation allowance	(5,812		)	(4,858		)
	36,174			55,928
Deferred tax liabilities related to:
Investments in partnership interests	(6,001		)	(12,013		)
Deferred income	(2,312		)	—
Property and equipment basis differences	(91		)	—
	(8,404		)	(12,013		)

Deferred tax assets, net	$	27,770		$	43,915

The components of deferred tax assets and liabilities are as follows (in thousands):



	December 31,
	2012		2011
Deferred tax assets related to:
Investment in securities	$	118	$	119
Intangible assets basis difference	2,557		490
Federal, state and local loss carryforwards	45		17
Capital loss carryforward	12		—
Partnership investment	34		—
Total deferred tax assets	2,766		626
Valuation allowance	—		—
Total deferred tax assets	$	2,766	$	626



Deferred tax liabilities related to:
Unrealized income/loss on investments	$	(4,286	)	$	(1,188	)
Equity investments	(838		)	(394		)
Basis difference in LEAF Commercial Capital investment	(185		)	(3,390		)
Subpart F income	(3,067		)	(652		)
Total deferred tax liabilities	$	(8,376	)	$	(5,624	)

RSO [Member]

Variable Interest Entity [Line Items]

Condensed Financial Statements

The following reflects the assets and liabilities and operations of RSO which was consolidated by the Company:



RSO Balance Sheets Detail (in thousands):
	December 31,
	2012			2011
ASSETS ⁽¹⁾
Cash and cash equivalents	$	85,278		$	43,116
Restricted cash	94,112			142,806
Subtotal- Cash and cash equivalents	179,390			185,922

Investment securities, trading	24,843			38,673
Investment securities available-for-sale, pledged as collateral, at fair value	195,200			136,188
Investment securities available-for-sale, at fair value	36,390			4,678
Subtotal- Investments, at fair value	256,433			179,539

Loans, pledged as collateral and net of allowances of $17.7 million and $27.5 million	1,793,780			1,772,063
Loans receivable–related party	8,324			9,497
Loans held for sale	48,894			3,154
Subtotal - Loans, before eliminations	1,850,998			1,784,714
Eliminations	(1,677		)	(8,605		)
Subtotal - Loans	1,849,321			1,776,109

Property available-for-sale	—			2,980
Investment in real estate	75,386			48,027
Investments in unconsolidated entities	45,413			47,899
Subtotal, Investments in real estate and unconsolidated entities, before eliminations	120,799			98,906
Eliminations	(93		)	(38,850		)
Subtotal, Investments in real estate and unconsolidated entities	120,706			60,056
Line items included in "other assets":
Linked transactions, at fair value	6,835			2,275
Interest receivable	7,763			8,836
Deferred tax asset	2,766			626
Principal paydown receivable	25,570			—
Intangible assets	13,192			19,813
Prepaid expenses	10,396			648
Other assets	4,109			3,445
Subtotal - Other assets, before eliminations	70,631			35,643
Eliminations	(31		)	(34		)
Subtotal - Other assets	70,600			35,609
Total assets (excluding eliminations)	$	2,478,251		$	2,284,724
Total assets (including eliminations)	$	2,476,450		$	2,237,235
LIABILITIES⁽²⁾
Borrowings	$	1,785,600		$	1,794,083

Distribution payable	21,655			19,979
Accrued interest expense	2,918			3,260
Derivatives, at fair value	14,687			13,210
Accrued tax liability	13,641			12,567
Deferred tax liability	8,376			5,624
Accounts payable and other liabilities	18,029			6,311
Subtotal - Other liabilities, before eliminations	79,306			60,951
Eliminations	(6,633		)	(2,698		)
Subtotal - Other liabilities	72,673			58,253
Total liabilities (before eliminations)	$	1,864,906		$	1,855,034
Total liabilities (after eliminations)	$	1,858,273		$	1,852,336



RSO Balance Sheets Detail (in thousands):
	December 31,
	2012		2011
(1) Assets of consolidated RSO's VIEs included in the total assets above:
Restricted cash	$	90,108	$	138,120
Investments securities available-for-sale, pledged as collateral, at fair value	135,566		89,045
Loans held for sale	14,894		3,154
Property available-for-sale	—		2,980
Loans, pledged as collateral and net of allowances of $15.2 million and $17.2 million	1,678,719		1,730,950
Interest receivable	5,986		6,003
Prepaid expenses	328		212
Principal receivable	25,570		—
Other assets	333		24
Total assets of consolidated VIEs	$	1,951,504	$	1,970,488

(2) Liabilities of consolidated RSO's VIEs included in the total liabilities above:
Borrowings	$	1,614,882	$	1,689,638
Accrued interest expense	2,666		2,943
Derivatives, at fair value	14,078		12,000
Accounts payable and other liabilities	698		442
Total liabilities of consolidated VIEs	$	1,632,324	$	1,705,023

The following table presents detail of noncontrolling interests attributable to RSO:



	December 31,
	2012			2011
Total stockholders equity per RSO balance sheet	$	613,345		$	429,690
Eliminations	(31,895		)	(31,313		)
Noncontrolling interests attributable to RSO	$	581,450		$	398,377



RSO Income Statement Detail (in thousands)
	Years Ended December 31,
	2012			2011
REVENUES
Interest income:
Loans	$	109,030		$	86,739
Securities	14,296			12,424
Interest income − other	10,004			10,711
Total interest income	133,330			109,874
Interest expense	42,792			32,186
Net interest income	90,538			77,688
Rental income	11,463			3,656
Dividend income	69			3,045
Equity in (losses) earnings of unconsolidated subsidiaries	(2,709		)	112
Fee income	7,068			7,789
Net realized gain on sales of investment securities available-for-sale and loans	4,106			2,643
Net realized and unrealized gain on investment securities, trading	12,435			837
Unrealized gain and net interest income on linked transactions, net	728			216
Revenues from consolidated VIE - RSO	123,698			95,986
OPERATING EXPENSES
Management fees − related party	18,512			11,022
Equity compensation − related party	4,636			2,526
Professional services	4,700			3,791
Insurance	639			658
Rental operating expense	8,046			2,743
General and administrative	4,434			3,950
Depreciation and amortization	5,885			4,619
Income tax expense	14,602			12,036
Net impairment losses recognized in earnings	180			6,898
Provision for loan losses	16,818			13,896
Total operating expenses	78,452			62,139
Reclassification of income tax expense	(14,602		)	(12,036		)
Expenses of consolidated VIE - RSO	63,850			50,103
Adjusted operating income	59,848			45,883
OTHER REVENUE (EXPENSE)
Gain on consolidation	2,498			—
Gains on the extinguishment of debt	16,699			3,875
Other expenses	—			(6		)
Other income, net, from consolidated VIE - RSO	19,197			3,869
Income from continuing operations	79,045			49,752
Income tax provision - RSO	14,602			12,036
NET INCOME	64,443			37,716
Net income allocated to preferred shares	(1,244		)	—
NET INCOME ALLOCABLE TO RSO COMMON SHAREHOLDERS	$	63,199		$	37,716



RSO Cash Flow Detail (in thousands)
	Years Ended
	December 31,
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	64,443		$	37,716
Items included in "Change in cash attributable to consolidated VIE - RSO":
Provision for loan losses	16,818			13,896
Depreciation of investments in real estate and other	1,838			729
Amortization of intangible assets	4,047			3,890
Amortization of term facilities	957			570
Accretion of net discounts on loans held for investment	(17,817		)	(15,588		)
Accretion of net discounts on securities available-for-sale	(3,177		)	(3,698		)
Amortization of discount on notes of CDOs	2,470			274
Amortization of debt issuance costs on notes of CDOs	4,700			3,341
Amortization of stock-based compensation	4,636			2,526
Amortization of terminated derivative instruments	227			227
Accretion of interest-only available-for-sales securities	(719		)	—
Deferred income tax benefits	2,329			(399		)
Purchase of securities, trading	(8,348		)	(38,904		)
Principal payments on securities, trading	1,027			643
Proceeds from sales of securities, trading	33,579			18,131
Net realized and unrealized gain on investment securities, trading	(12,435		)	(837		)
Net realized gains on investments	(4,106		)	(2,643		)
Gain on early extinguishment of debt	(16,699		)	(3,875		)
Net impairment losses recognized in earnings	180			6,898
Gain on consolidation	(2,498		)	—
Linked Transactions fair value adjustments	(168		)	—
Equity in losses (earnings) of unconsolidated subsidiaries	2,709			(112		)
Minority Interest Equity	114			—
Adjust for impact of imputed interest on VIE accounting	1,879			—
Changes in operating assets and liabilities
Decrease in restricted cash	(2,062		)	(5,628		)
Decrease in interest receivable, net of purchased interest	987			(2,513		)
Increase in subscriptions receivable	(1,248		)	—
Increase in principal paydowns receivable	(25,465		)	363
Increase in management fee payable	3,929			974
Increase in security deposits	25			80
Increase in accounts payable and accrued liabilities	7,573			15,370
Decrease in accrued interest expense	(193		)	1,696
Increase in other assets	(20,003		)	(520		)
Subtotal -consolidated VIE - RSO operating activity	(24,914		)	(5,109		)
Change in consolidated VIE - RSO cash for the period	(42,162		)	(13,628		)
Subtotal- Change in cash attributable to consolidated VIE - RSO before eliminations	(67,076		)	(18,737		)
Elimination of intercompany activity	1,850			2,572
Subtotal- Change in cash attributable to consolidated VIE - RSO	(65,226		)	(16,165		)

Non-cash incentive compensation to RAI	1,468			430
Elimination of intercompany activity	(1,468		)	(430		)
Non-cash incentive compensation to RAI, after eliminations	—			—

Net cash provided by operating activities (excluding eliminations)	40,997			33,037



RSO Consolidated Statements of Cash Flows (in thousands)
	Years Ended
	December 31,
	2012			2011
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of loans	(649,983		)	(970,309		)
Purchase of securities available-for-sale	(119,779		)	(117,044		)

Subtotal - Purchase of loans and securities by consolidated VIE - RSO, before eliminations	(769,762		)	(1,087,353		)
Eliminations	—			15,221
Subtotal - Purchase of loans and securities by consolidated VIE - RSO	(769,762		)	(1,072,132		)

Principal payments received on loans	570,276			424,600
Proceeds from sale of loans	173,378			212,042
Principal payments on securities available-for-sale	47,284			11,810
Proceeds from sale of securities available-for-sale	28,652			13,747
Proceeds from sale of real estate held-for-sale	2,886			1,464
Subtotal - principal payments and proceeds from sales received by consolidated VIE - RSO, before eliminations	822,476			663,663

Decrease (increase) in restricted cash	50,756			31,014

Items included in "Other -VIE, investing activity":
Investment in unconsolidated entity	474			(4,762		)
Equity contribution to VIE	(710		)	—
Improvement of real estate held-for-sale	(138		)	—
Purchase of investments in real estate	—			(19,299		)
Distributions from investments in real estate	1,152			—
Improvements in investments in real estate	(3,878		)	—
Purchase of intangible asset	—			(21,213		)
Investment in loans - related parties	—			(10,000		)
Principal payments received on loans – related parties	1,251			10,430
Investments in real estate assets	—			(689		)
Subtotal - Other consolidated VIE - investing activity, before eliminations	(1,849		)	(45,533		)
Eliminations	(76		)	—
Subtotal - Other consolidated VIE - investing activity	(1,925		)	(45,533		)

Net cash provided by (used in) investing activities (excluding eliminations)	101,621			(438,209		)





















	Years Ended
	December 31,
	2012			2011
CASH FLOWS FROM FINANCING ACTIVITIES:
Items included in "Net borrowings (repayments) of debt by consolidated VIE - RSO"
Proceeds from borrowings:
Repurchase agreements	71,121			55,852
Collateralized debt obligations	—			323,244
Mortgage payable	—			13,600
Payments on borrowings:
Collateralized debt obligations	(257,905		)	(28,542		)
Repurchase of issued bonds	—			(6,125		)
Retirement of debt	(20,365		)	—
Subtotal - net (repayments) borrowings of debt by consolidated VIE - RSO	(207,149		)	358,029

Distributions paid on common stock	(74,050		)	(69,869		)
Elimination of dividends paid to RAI	2,174			2,455
Distributionx paid on common stock, after elimination	(71,876		)	(67,414		)

Net proceeds from issuances of common stock (net of offering costs of $2,165 and $1,263)	55,502			46,347
Net proceeds from dividend reinvestment and stock purchase plan (net of offering costs of $19 and $11)	73,044			83,564
Proceeds from issuance of 8.5% Series A redeemable preferred shares (net of offering costs of $781 and $0)	16,411			—
Proceeds from issuance of 8.25% Series B redeemable preferred shares (net of offering costs of $1,201 and $0)	26,099			—
Subtotal - net proceeds from issuance of stock by consolidated VIE	171,056			129,911

Payment of debt issuance costs	(586		)	(6,385		)
Payment of equity to third party sub-note holders	(3,480		)	—
Distributions paid on preferred stock	(613		)	—
Proceeds from CDO retained notes	14,366			7,114
Subtotal - Other consolidated VIE -RSO financing activity	9,687			729
Net cash (used in) provided by financing activities (excluding eliminations)	$	(100,456	)	$	418,800
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	42,162			13,628
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	43,116			29,488
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	85,278		$	43,116
SUPPLEMENTAL DISCLOSURE:
Interest expense paid in cash	$	41,369		$	32,596

Plant and Equipment, Net

RSO depreciates real property using the straight-line method over the estimated useful lives of the assets as follows:



Category	Term
Building	25 - 40 years
Site improvements	Lesser of the remaining life of building or useful life

Schedule of Variable Interest Entities

The following table shows the classification, carrying value and maximum exposure to loss with respect to RSO’s unconsolidated VIEs as of December 31, 2012 (in thousands):



	Unconsolidated Variable Interest Entities
	LEAF Commercial Capital, Inc.		Unsecured Junior Subordinated Debentures			Resource Capital Asset Management CDOs		RRE VIP Borrower, LLC		Värde Investment Partners, LP		Total			Maximum Exposure to Loss (1)

Investment in unconsolidated entities	$	33,071	$	1,548		$	—	$	2,264	$	526	$	37,409		37,409
Intangible assets	—		—			13,105		—		—		13,105			13,105
Total assets	33,071		1,548			13,105		2,264		526		50,514

Borrowings	—		50,814			—		—		—		50,814			N/A
Total liabilities	—		50,814			—		—		—		50,814			N/A

Net asset (liability)	$	33,071	$	(49,266	)	13,105		2,264		526		$	(300	)	N/A


(1)	RSO's maximum exposure to loss at December 31, 2012 does not exceed the carrying amount of its investment, subject to the LEAF Receivables Funding 3's contingent obligation as described above.

The following table shows the classification and carrying value of assets and liabilities of consolidated VIEs as of December 31, 2012 (in thousands):



	Apidos I			Apidos III		Apidos Cinco		Apidos VIII		Whitney CLO I		RREF 2006		RREF 2007		Total
ASSETS
Restricted cash ⁽¹⁾	$	30,799		$	12,956	$	22,669	$	11,027	$	11,800	$	20	$	837	$	90,108
Investment securities available-for-sale, pledged as collateral, at fair value	8,333			6,902		11,316		501		33,700		10,796		64,018		135,566
Loans, pledged as collateral	177,385			209,561		306,196		329,467		146,106		226,716		283,288		1,678,719
Loans held for sale	2,671			2,770		3,657		5,796		—		—		—		14,894
Interest receivable	(12		)	720		1,050		737		404		1,153		1,934		5,986
Prepaid assets	50			25		30		69		18		78		58		328
Principal receivable	—			—		—		—		—		6,320		19,250		25,570
Other assets	—			—		—		—		—		63		270		333
Total assets ⁽²⁾	$	219,226		$	232,934	$	344,918	$	347,597	$	192,028	$	245,146	$	369,655	$	1,951,504

LIABILITIES
Borrowings	$	202,968		$	221,304	$	320,550	$	320,998	$	177,415	$	145,664	$	225,983	$	1,614,882
Accrued interest expense	380			94		343		1,427		266		50		106		2,666
Derivatives, at fair value	—			—		—		—		—		1,939		12,139		14,078
Accounts payable and other liabilities	142			16		30		395		92		22		1		698
Total liabilities	$	203,490		$	221,414	$	320,923	$	322,820	$	177,773	$	147,675	$	238,229	$	1,632,324


(1)	Includes $27.5 million available for reinvestment in certain of the CDOs.


(2)	Assets of each of the consolidated VIEs may only be used to settle the obligations of each respective VIE.

Supplemental Cash Flow Information

Supplemental disclosure of cash flow information (in thousands):



	Year Ended
	December 31,
	2012			2011
Non-cash investing activities include the following:
Acquisition of real estate investments	$	(21,661	)	$	(33,073	)
Conversion of loans to investment in real estate	$	21,661		$	34,550
Net purchase of loans on warehouse line	$	—		$	(52,735	)
Acquisition of loans, pledged as collateral	$	(230,152	)	$	—

Non-cash financing activities include the following:
Distributions on common stock declared but not paid	$	21,024		$	19,979
Distribution on preferred stock declared but not paid	$	1,244		$	—
Issuance of restricted stock	$	2,189		$	1,203
Subscription receivable	$	1,248		$	—
Assumption of collateralized debt obligations	$	206,408		$	—
Acquisition of loans on warehouse line	$	—		$	52,735

Investment Trading Securities at Fair Value

The following table summarizes RSO's structured notes and residential mortgage-backed securities (“RMBS”) which are classified as investment securities, trading and carried at fair value (in thousands):



	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
December 31, 2012
Structured notes	$	9,413	$	10,894	$	(1,028	)	$	19,279
RMBS	6,047		858		(1,341		)	5,564
Total	$	15,460	$	11,752	$	(2,369	)	$	24,843

December 31, 2011
Structured notes	$	27,345	$	6,098	$	(1,890	)	$	31,553
RMBS	8,729		100		(1,709		)	7,120
Total	$	36,074	$	6,198	$	(3,599	)	$	38,673

Available-for-sale Securities, Fair Value

The following table summarizes RSO's investment securities, including those pledged as collateral and classified as available-for-sale, which are carried at fair value (in thousands):



	Amortized Cost (1)		Unrealized Gains		Unrealized Losses			Fair Value
December 31, 2012:
CMBS	$	182,828	$	4,626	$	(16,639	)	$	170,815
ABS	26,479		1,700		(1,127		)	27,052
Corporate Bonds	33,767		111		(178		)	33,700
Other asset-backed	—		23		—			23
Total	$	243,074	$	6,460	$	(17,944	)	$	231,590

December 31, 2011:
CMBS	$	144,334	$	1,129	$	(29,821	)	$	115,642
ABS	28,513		215		(3,527		)	25,201
Other asset-backed	—		23		—			23
Total	$	172,847	$	1,367	$	(33,348	)	$	140,866


(1)	As of December 31, 2012 and 2011, $195.2 million and $136.2 million, respectively, of securities were pledged as collateral security under related financings.

Estimated maturities of available for sale securities

The following table summarizes the estimated maturities of RSO’s CMBS, ABS and corporate bonds according to their estimated weighted average life classifications (in thousands, except percentages):



Weighted Average Life	Fair Value			Amortized Cost		Weighted Average Coupon
December 31, 2012:
Less than one year	$	42,618	⁽¹⁾	$	46,522	4.09	%
Greater than one year and less than five years	122,509			131,076		4.55	%
Greater than five years and less than ten years	61,780			60,801		3.31	%
Greater than ten years	4,683			4,675		4.03	%
Total	$	231,590		$	243,074	4.12	%

December 31, 2011:
Less than one year	$	44,583	⁽²⁾	$	48,934	4.45	%
Greater than one year and less than five years	68,751			91,199		4.62	%
Greater than five years and less than ten years	25,596			29,527		3.52	%
Greater than ten years	1,936			3,187		3.84	%
Total	$	140,866		$	172,847	4.36	%


(1)	RSO expects that the maturity date of these CMBS will either be extended or the CMBS will be paid in full.

(2)

CMBS of $6.7 million maturing in this category are collateralized by floating-rate loans and, as permitted under the CMBS terms, are expected to extend their maturities, because, beyond their contractual extensions which expired or will expire this year, the servicer may allow further extensions of the underlying floating rate loans. RSO expects that the remaining $37.9 million of CMBS will either have their maturity date extended or be paid in full. ABS of $950,000 maturing in this category were subsequently extended until March 2018.

Unrealized Losses Along with the Related Fair Value, Aggregated by the Length of Time the Investments were in a Continuous Unrealized Loss Position

The following table shows the fair value and gross unrealized losses, aggregated by investment category and length of time, of those individual investment securities available-for-sale that have been in a continuous unrealized loss position during the periods specified (in thousands):



	Less than 12 Months					More than 12 Months					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
December 31, 2012:
CMBS	$	25,803	$	(442	)	$	38,734	$	(16,197	)	$	64,537	$	(16,639	)
ABS	501		(12		)	5,961		(1,115		)	6,462		(1,127		)
Corporate Bonds	18,944		(178		)	—		—			18,944		(178		)
Total temporarily impaired securities	$	45,248	$	(632	)	$	44,695	$	(17,312	)	$	89,943	$	(17,944	)

December 31, 2011:
CMBS	$	88,726	$	(17,033	)	$	8,281	$	(12,788	)	$	97,007	$	(29,821	)
ABS	13,583		(935		)	4,473		(2,592		)	18,056		(3,527		)
Total temporarily impaired securities	$	102,309	$	(17,968	)	$	12,754	$	(15,380	)	$	115,063	$	(33,348	)

Investments in real estate



	As of December 31, 2012				As of December 31, 2011
	Book Value			Number of Properties	Book Value			Number of Properties
Multi-family property	$	42,179		2	$	38,577		2
Office property	10,149			1	10,149			1
Hotel property	25,608			1	—			—
Subtotal	77,936				48,726
Less: Accumulated depreciation	(2,550		)		(699		)
Investments in real estate	$	75,386			$	48,027

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The following table is a summary of the aggregate estimated fair value of the assets and liabilities acquired on the respective date of acquisition (in thousands):



	December 31,
Description	2012			2011
Assets acquired:
Investments in real estate	$	25,500		$	48,683
Cash and cash equivalents	—			177
Restricted cash	—			2,360
Intangible assets	—			2,490
Other assets	(89		)	391
Total assets acquired	25,411			54,101
Liabilities assumed:
Accounts payable and other liabilities	3,750			673
Total liabilities assumed	3,750			673
Estimated fair value of net assets acquired	$	21,661		$	53,428

Real Estate Acquisition, Pro Forma Information

The following unaudited pro forma information, after including the acquisition of real properties, is presented below as if the acquisitions occurred on January 1, 2011. The pro forma results are not necessarily indicative of the results which actually would have occurred if the acquisition had occurred on the first day of the periods presented, nor is it indicative of RSO's future results (in thousands):



	Years Ended December 31,
Description	2012		2011
Total revenue, as reported	$	123,698	$	95,986
Pro forma revenue	$	131,028	$	111,263
Net income, reported	$	63,199	$	37,716
Pro forma net income	$	63,503	$	37,535
Earnings per share - basic, reported	$	0.71	$	0.54
Earnings per share per - diluted, reported	$	0.71	$	0.53
Pro forma earnings per share - basic	$	0.72	$	0.53
Pro forma earnings per share - diluted	$	0.71	$	0.53

Schedule of Receivables with Imputed Interest

The following is a summary of RSO’s loans (in thousands):



Loan Description	Principal			Unamortized (Discount) Premium ⁽¹⁾			Carrying Value ⁽²⁾
December 31, 2012
Bank loans ⁽³⁾	$	1,218,563		$	(25,249	)	$	1,193,314
Commercial real estate loans:
Whole loans ⁽⁴⁾	569,829			(1,891		)	567,938
B notes	16,441			(114		)	16,327
Mezzanine loans	82,992			(206		)	82,786
Total commercial real estate loans	669,262			(2,211		)	667,051
Subtotal loans before allowances	1,887,825			(27,460		)	1,860,365
Allowance for loan loss	(17,691		)	—			(17,691		)
Total	$	1,870,134		$	(27,460	)	$	1,842,674

December 31, 2011:
Bank loans ⁽³⁾	$	1,205,826		$	(32,073	)	$	1,173,753
Commercial real estate loans:
Whole loans	545,828			(1,155		)	544,673
B notes	16,579			(144		)	16,435
Mezzanine loans	67,842			32			67,874
Total commercial real estate loans	630,249			(1,267		)	628,982
Subtotal loans before allowances	1,836,075			(33,340		)	1,802,735
Allowance for loan loss	(27,518		)	—			(27,518		)
Total	$	1,808,557		$	(33,340	)	$	1,775,217

(1)

Amounts include deferred amendment fees of $450,000 and $286,000 and deferred upfront fees of $334,000 and $0 being amortized over the life of the bank loans as of December 31, 2012 and 2011, respectively. Amounts include loan origination fees of $1.9 million and $984,000 and loan extension fees of $214,000 and $123,000 being amortized over the life of the commercial real estate loans as of December 31, 2012 and 2011, respectively.


(2)	Substantially all loans are pledged as collateral under various borrowings at December 31, 2012 and 2011, respectively.


(3)	Amounts include $14.9 million and $3.2 million of bank loans held for sale at December 31, 2012 and 2011, respectively.


(4)	Amount includes $34.0 million from two whole loans which are classified as loans held for sale at December 31, 2012.

Summary of the weighted average life of bank loans at amortized cost

The following is a summary of the weighted average life of RSO’s bank loans, at amortized cost (in thousands):



	December 31,
	2012		2011
Less than one year	$	10,028	$	1,968
Greater than one year and less than five years	821,568		684,376
Five years or greater	361,718		487,409
	$	1,193,314	$	1,173,753

Summary of the commercial real estate loans

The following is a summary of RSO’s commercial real estate loans held for investment (in thousands):



Description	Quantity	Amortized Cost		Contracted Interest Rates	Maturity Dates ⁽³⁾
December 31, 2012
Whole loans, floating rate ^{(1) (4) (5) (6)}	37	$	567,938	LIBOR plus 2.50% to LIBOR plus 5.50%	June 2013 to February 2019
B notes, fixed rate	1	16,327		8.68%	April 2016
Mezzanine loans, floating rate	2	15,845		LIBOR plus 2.50% to LIBOR plus 7.45%	August 2013 to December 2013
Mezzanine loans, fixed rate ⁽⁷⁾	3	66,941		0.50% to 20.00%	September 2014 to September 2019
Total ⁽²⁾	43	$	667,051

December 31, 2011:
Whole loans, floating rate ^{(1) (4) (5)}	32	$	537,708	LIBOR plus 2.50% to LIBOR plus 5.75%	April 2012 to February 2019
Whole loans, fixed rate	1	6,965		10.00%	June 2012
B notes, fixed rate	1	16,435		8.68%	April 2016
Mezzanine loans, floating rate	3	53,908		LIBOR plus 2.50% to LIBOR plus 7.45%	May 2012 to December 2012
Mezzanine loans, fixed rate ⁽⁷⁾	2	13,966		8.99% to 11.00%	January 2016 to September 2016
Total ⁽²⁾	39	$	628,982


(1)	Whole loans had $8.9 million and $5.2 million in unfunded loan commitments as of December 31, 2012 and 2011, respectively. These commitments are funded as the borrowers require additional funding and have satisfied the requirements to obtain this additional funding.


(2)	The total does not include an allowance for loan loss of $8.0 million and $24.2 million as of December 31, 2012 and 2011, respectively.


(3)	Maturity dates do not include possible extension options that may be available to the borrowers.


(4)	Floating rate whole loans include a $2.0 million portion of a whole loan that has a fixed rate of 15% as of December 31, 2012 and 2011, respectively.


(5)	Floating rate whole loans include a $1.0 million and $302,000 preferred equity tranche of a whole loan that has a fixed rate of 10% as of December 31, 2012 and 2011, respectively.


(6)	Amount includes $34.0 million from two whole loans that are classified as loans held for sale at December 31, 2012.


(7)	Fixed rate mezzanine loans include a mezzanine loan that was modified into two tranches which both currently pay interest at 0.5%. In addition, the subordinate tranche accrues interest at LIBOR plus 18.5% which is deferred until maturity.

Summary of the weighted average life of the commercial real estate loans at amortized cost

The following is a summary of the weighted average life of RSO’s commercial real estate loans, at amortized cost (in thousands):



Description	2013		2014		2015 and Thereafter		Total
December 31, 2012
B notes	$	—	$	—	$	16,327	$	16,327
Mezzanine loans	5,328		20,694		56,764		82,786
Whole loans	71,799		—		496,139		567,938
Total ⁽¹⁾	$	77,127	$	20,694	$	569,230	$	667,051


(1)	Weighted average life of commercial real estate loans assumes full exercise of extension options available to borrowers.

Allocation of Allowance for Loan Loss

The following is a summary of the allocation of the allowance for loan loss with respect to RSO’s commercial real estate and bank loans (in thousands, except percentages) by asset class:



Description	Allowance for Loan Loss		Percentage of Total Allowance
December 31, 2012:
B notes	$	206	1.17%
Mezzanine loans	860		4.85%
Whole loans	6,920		39.12%
Bank loans	9,705		54.86%
Total	$	17,691

December 31, 2011:
B notes	$	253	0.92%
Mezzanine loans	1,437		5.23%
Whole loans	22,531		81.87%
Bank loans	3,297		11.98%
Total	$	27,518

Summarization of Activity in the Allowance for Credit Losses for the Company's Financing Receivables

The following tables show the allowance for loan losses and recorded investments in loans for the years indicated (in thousands):



	Commercial Real Estate Loans			Bank Loans			Lease Receivables			Loans Receivable-Related Party		Total
December 31, 2012:
Allowance for losses at January 1, 2012	$	24,221		$	3,297		$	—		$	—	$	27,518
Provision for loan loss	5,225			11,593			—			—		16,818
Loans charged-off	(21,460		)	(5,185		)	—			—		(26,645		)
Allowance for losses at December 31, 2012	$	7,986		$	9,705		$	—		$	—	$	17,691
Ending balance:
Individually evaluated for impairment	$	2,142		$	3,236		$	—		$	—	$	5,378
Collectively evaluated for impairment	$	5,844		$	6,469		$	—		$	—	$	12,313
Loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—	$	—
Loans:
Ending balance:
Individually evaluated for impairment	$	177,055		$	4,688		$	—		$	8,324	$	190,067
Collectively evaluated for impairment	$	489,996		$	1,187,875		$	—		$	—	$	1,677,871
Loans acquired with deteriorated credit quality	$	—		$	751		$	—		$	—	$	751

December 31, 2011:
Allowance for losses at January 1, 2011	$	31,617		$	2,616		$	70		$	—	$	34,303
Provision for loan loss	6,478			7,418			—			—		13,896
Loans charged-off	(13,874		)	(6,737		)	(70		)	—		(20,681		)
Allowance for losses at December 31, 2011	$	24,221		$	3,297		$	—		$	—	$	27,518
Ending balance:
Individually evaluated for impairment	$	17,065		$	1,593		$	—		$	—	$	18,658
Collectively evaluated for impairment	$	7,156		$	1,704		$	—		$	—	$	8,860
Loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—	$	—
Loans:
Ending balance:
Individually evaluated for impairment	$	113,038		$	2,693		$	—		$	9,497	$	125,228
Collectively evaluated for impairment	$	515,944		$	1,171,060		$	—		$	—	$	1,687,004
Loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—	$	—

Financing Receivable Credit Quality Indicators

Credit risk profiles of commercial real estate loans were as follows (in thousands):



	Rating 1		Rating 2		Rating 3		Rating 4		Held for Sale		Total
As of December 31, 2012:
Whole loans	$	427,456	$	—	$	106,482	$	—	$	34,000	$	567,938
B notes	16,327		—		—		—		—		16,327
Mezzanine loans	38,296		—		44,490		—		—		82,786
	$	482,079	$	—	$	150,972	$	—	$	34,000	$	667,051

As of December 31, 2011:
Whole loans	$	329,085	$	87,598	$	90,225	$	37,765	$	—	$	544,673
B notes	16,435		—		—		—		—		16,435
Mezzanine loans	23,347		—		44,527		—		—		67,874
	$	368,867	$	87,598	$	134,752	$	37,765	$	—	$	628,982

Credit risk profiles of bank loans were as follows (in thousands):



	Rating 1		Rating 2		Rating 3		Rating 4		Rating 5		Held for Sale		Total
As of December 31, 2012:
Bank loans	$	1,095,148	$	33,677	$	27,837	$	16,318	$	5,440	$	14,894	$	1,193,314

As of December 31, 2011:
Bank loans	$	1,076,298	$	19,739	$	60,329	$	11,540	$	2,693	$	3,154	$	1,173,753

Aging of the Company's Past Due Financing Receivables, Gross of Allowances for Credit Losses

The following table shows the loan portfolio aging analysis as of the dates indicated at cost basis (in thousands):



	30-59 Days		60-89 Days		Greater than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days and Accruing
December 31, 2012:
Whole loans	$	—	$	—	$	—	$	—	$	567,938	$	567,938	$	—
B notes	—		—		—		—		16,327		16,327		—
Mezzanine loans	—		—		—		—		82,786		82,786		—
Bank loans	1,549		—		3,891		5,440		1,187,874		1,193,314		—
Loans receivable- related party	—		—		—		—		8,324		8,324		—
Total loans	$	1,549	$	—	$	3,891	$	5,440	$	1,863,249	$	1,868,689	$	—

December 31, 2011:
Whole loans	$	—	$	—	$	—	$	—	$	544,673	$	544,673	$	—
B notes	—		—		—		—		16,435		16,435		—
Mezzanine loans	—		—		—		—		67,874		67,874		—
Bank loans	—		—		—		—		1,173,753		1,173,753		—
Loans receivable- related party	—		—		—		—		9,497		9,497		—
Total loans	$	—	$	—	$	—	$	—	$	1,812,232	$	1,812,232	$	—

Information about Company's Impaired Financing Receivables

The following tables show impaired loans indicated (in thousands):



	Recorded Balance		Unpaid Principal Balance		Specific Allowance			Average Investment in Impaired Loans		Interest Income Recognized
December 31, 2012:
Loans without a specific valuation allowance:
Whole loans	$	115,841	$	115,841	$	—		$	114,682	$	3,436
B notes	$	—	$	—	$	—		$	—	$	—
Mezzanine loans	$	38,072	$	38,072	$	—		$	38,072	$	367
Bank loans	$	—	$	—	$	—		$	—	$	—
Loans receivable - related party	$	6,754	$	6,754	$	—		$	—	$	851
Loans with a specific valuation allowance:
Whole loans	$	23,142	$	23,142	$	(2,142	)	$	22,576	$	801
B notes	$	—	$	—	$	—		$	—	$	—
Mezzanine loans	$	—	$	—	$	—		$	—	$	—
Bank loans	$	5,440	$	5,440	$	(3,236	)	$	—	$	—
Loans receivable - related party	$	—	$	—	$	—		$	—	$	—

Total:
Whole loans	$	138,983	$	138,983	$	(2,142	)	$	137,258	$	4,237
B notes	—		—		—			—		—
Mezzanine loans	38,072		38,072		—			38,072		367
Bank loans	5,440		5,440		(3,236		)	—		—
Loans receivable - related party	6,754		6,754		—			—		851
	$	189,249	$	189,249	$	(5,378	)	$	175,330	$	5,455



	Recorded Balance		Unpaid Principal Balance		Specific Allowance			Average Investment in Impaired Loans		Interest Income Recognized
December 31, 2011:
Loans without a specific valuation allowance:
Whole loans	$	75,273	$	75,273	$	—		$	75,263	$	2,682
B notes	$	—	$	—	$	—		$	—	$	—
Mezzanine loans	$	—	$	—	$	—		$	—	$	—
Bank loans	$	—	$	—	$	—		$	—	$	—
Loans receivable - related party	$	7,820	$	7,820	$	—		$	—	$	1,112
Loans with a specific valuation allowance:
Whole loans	$	37,765	$	37,765	$	(17,065	)	$	36,608	$	920
B notes	$	—	$	—	$	—		$	—	$	—
Mezzanine loans	$	—	$	—	$	—		$	—	$	—
Bank loans	$	2,693	$	2,693	$	(1,593	)	$	2,693	$	—
Loans receivable - related party	$	—	$	—	$	—		$	—	$	—

Total:
Whole loans	$	113,038	$	113,038	$	(17,065	)	$	111,871	$	3,602
B notes	—		—		—			—		—
Mezzanine loans	—		—		—			—		—
Bank loans	2,693		2,693		(1,593		)	2,693		—
Loans receivable - related party	7,820		7,820		—			—		1,112
	$	123,551	$	123,551	$	(18,658	)	$	114,564	$	4,714

Troubled Debt Restructurings on Financing Receivables

The following tables show troubled-debt restructurings in RSO's loan portfolio (in thousands):



	Number of Loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance
Year Ended December 31, 2012:
Whole loans ⁽¹⁾	7	$	175,708	$	158,422
B notes	—	—		—
Mezzanine loans	1	38,072		38,072
Bank loans	—	—		—
Loans receivable - related party ⁽²⁾	1	7,797		7,797
Total loans	9	$	221,577	$	204,291

Year Ended December 31, 2011:
Whole loans	2	$	34,739	$	33,073
B notes	—	—		—
Mezzanine loans	—	—		—
Bank loans	—	—		—
Loans receivable	—	—		—
Loans receivable - related party	1	7,981		7,981
Total loans	3	$	42,720	$	41,054


(1)	Whole loans include a whole loan with a pre-modification and post-modification outstanding recorded balance of $21.8 million that have been converted to real-estate owned and will no longer be a TDR after December 31, 2012.


(2)	Loans receivable - related party reflects a loan outstanding to LEAF Fund II, which is a commercial finance partnership that was sponsored and is managed/serviced by the Company. RSO has received paydowns on this loan for the year ended December 31, 2012 and currently has an outstanding balance of $6.8 million as of December 31, 2012.

As of December 31, 2012 and December 31, 2011, there were no troubled-debt restructurings that subsequently defaulted.

Schedule of Intangible Assets and Goodwill

The following table summarizes intangible assets at December 31, 2012 and 2011 (in thousands).



	Beginning Balance		Accumulated Amortization			Net Asset
December, 2012
Investment in RCAM	$	21,213	$	(8,108	)	$	13,105
Investments in real estate:
In-place leases	2,461		(2,379		)	82
Above (below) market leases	29		(24		)	5
	2,490		(2,403		)	87
Total intangible assets	$	23,703	$	(10,511	)	$	13,192

December 31, 2011:
Investment in RCAM	$	21,213	$	(2,237	)	$	18,976
Investments in real estate:
In-place leases	2,461		(1,634		)	827
Above (below) market leases	29		(19		)	10
	2,490		(1,653		)	837
Total intangible assets	$	23,703	$	(3,890	)	$	19,813

Credit Facilities and Other Debt of the Company and Related Borrowings Outstanding

RSO historically has financed the acquisition of its investments, including investment securities, loans and lease receivables, through the use of secured and unsecured borrowings in the form of CDOs, securitized notes, repurchase agreements, secured term facilities, warehouse facilities and trust preferred securities issuances. Certain information with respect to RSO’s borrowings at December 31, 2012 and 2011 is summarized in the following table (in thousands, except percentages):



	Outstanding Borrowings		Weighted Average Borrowing Rate	Weighted Average Remaining Maturity	Value of Collateral
December 31, 2012:
RREF CDO 2006-1 Senior Notes ⁽¹⁾	$	145,664	1.42%	33.6 years	$	295,759
RREF CDO 2007-1 Senior Notes ⁽²⁾	225,983		0.81%	33.8 years	292,980
Apidos CDO I Senior Notes ⁽³⁾	202,969		1.07%	4.6 years	217,745
Apidos CDO III Senior Notes ⁽⁴⁾	221,304		0.80%	7.5 years	232,655
Apidos Cinco CDO Senior Notes ⁽⁵⁾	320,550		0.82%	7.4 years	344,105
Apidos CLO VIII Senior Notes ⁽⁶⁾	300,951		2.16%	8.8 years	351,014
Apidos CLO VIII Securitized Borrowings ⁽¹¹⁾	20,047		15.27%	8.8 years	—
Whitney CLO I ⁽¹⁰⁾	171,555		1.82%	4.2 years	191,704
Whitney Securitized Borrowings⁽¹¹⁾	5,860		9.50%	4.2 years	—
Unsecured Junior Subordinated Debentures ⁽⁷⁾	50,814		4.26%	23.7 years	—
Repurchase Agreements ⁽⁸⁾	106,303		2.28%	18 days	145,234
Mortgage Payable ⁽⁹⁾	13,600		4.17%	5.6 years	18,100
Total⁽¹²⁾	$	1,785,600	1.62%	12.5 years	$	2,089,296

December 31, 2011:
RREF CDO 2006-1 Senior Notes ⁽¹⁾	$	157,803	1.44%	34.6 years	$	264,796
RREF CDO 2007-1 Senior Notes ⁽²⁾	315,882		0.85%	34.8 years	422,641
Apidos CDO I Senior Notes ⁽³⁾	314,884		1.04%	5.6 years	315,088
Apidos CDO III Senior Notes ⁽⁴⁾	261,209		0.99%	8.5 years	260,167
Apidos Cinco CDO Senior Notes ⁽⁵⁾	319,959		0.95%	8.4 years	326,164
Apidos CLO VIII Senior Notes ⁽⁶⁾	298,312		2.42%	9.8 years	334,122
Apidos CLO VIII Securitized Borrowings ⁽¹¹⁾	21,364		15.27%	9.8 years	—
Unsecured Junior Subordinated Debentures ⁽⁷⁾	50,631		4.35%	24.7 years	—
Repurchase Agreements ⁽⁸⁾	40,503		1.54%	18 days	47,143
Mortgage Payable ⁽⁹⁾	13,536		4.23%	6.6 years	18,100
Total	$	1,794,083	1.38%	15.2 years	$	1,988,221


(1)	Amount represents principal outstanding of $146.4 million and $159.1 million less unamortized issuance costs of $728,000 and $1.2 million as of December 31, 2012 and 2011, respectively. This CDO transaction closed in August 2006.


(2)	Amount represents principal outstanding of $227.4 million and $318.6 million less unamortized issuance costs of $1.4 million and $2.7 million as of December 31, 2012 and 2011, respectively. This CDO transaction closed in June 2007.


(3)	Amount represents principal outstanding of $203.2 million and $315.9 million less unamortized issuance costs of $274,000 and $1.1 million as of December 31, 2012 and 2011, respectively. This CDO transaction closed in August 2005.


(4)	Amount represents principal outstanding of $222.0 million and $262.5 million less unamortized issuance costs of $659,000 and $1.3 million as of December 31, 2012 and 2011, respectively. This CDO transaction closed in May 2006.


(5)	Amount represents principal outstanding of $322.0 million and $322.0 million less unamortized issuance costs of $1.5 million and $2.0 million as of December 31, 2012 and 2011, respectively. This CDO transaction closed in May 2007.


(6)	Amount represents principal outstanding of $317.6 million and $317.6 million, less unamortized issuance costs of $4.7 million and $5.5 million, and less unamortized discounts of $11.9 million and $13.8 million as of December 31, 2012 and 2011, respectively. This CDO transaction closed in October 2011.


(7)	Amount represents junior subordinated debentures issued to RCT I and RCT II in May 2006 and September 2006, respectively.

(8)

Amount represents principal outstanding of $47.5 million and $40.9 million less unamortized deferred debt costs of $23,000 and $494,000 and accrued interest costs of $37,000 and $39,000 related to CMBS repurchase facilities as of December 31, 2012 and 2011, respectively, and principal outstanding of $59.1 million less unamortized deferred debt costs of $348,000 and accrued interest costs of $79,000 related to CRE repurchase facilities as of December 31, 2012. Does not reflect CMBS repurchase agreement borrowings that are components of Linked Transactions. At December 31, 2012 and 2011, RSO had repurchase agreements of $20.4 million and $14.9 million, respectively, that were linked to CMBS purchases and accounted for as Linked Transactions, and as such, the linked repurchase agreements are not included in the above table.


(9)	Amount represents principal outstanding of $13.6 million and $13.6 million less unamortized real estate financing costs of $0 and $65,000 as of December 31, 2012 and 2011, respectively. This real estate transaction closed in August 2011.


(10)	Amount represents principal outstanding of $174.1 million less unamortized discounts of $2.5 million as of December 31, 2012 . In October 2012 RSO purchased a $20.9 million equity interest in Whitney CLO I which represents 67% of the outstanding preference shares. The transaction gave RSO a controlling interest in the CLO.


(11)	The securitized borrowings are collateralized by the same assets as the Apidos CLO VIII Senior Notes and the Whitney CLO I Senior Notes, respectively.

Company's Asset Recorded at Fair Value on Recurring Basis

The following table presents information about RSO’s assets (including derivatives that are presented net) measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques utilized by RSO to determine such fair value as follows (in thousands):



	Level 1		Level 2		Level 3		Total
December 31, 2012:
Assets:
Investment securities, trading	$	—	$	—	$	24,843	$	24,843
Investment securities available-for-sale	9,757		132,561		89,272		231,590
CMBS - Linked Transactions	—		4,802		2,033		6,835
Total assets at fair value	$	9,757	$	137,363	$	116,148	$	263,268

Liabilities:
Derivatives (net)	—		610		14,077		14,687
Total liabilities at fair value	$	—	$	610	$	14,077	$	14,687

December 31, 2011:
Assets:
Investment securities, trading	$	—	$	—	$	38,673	$	38,673
Investment securities available-for-sale	—		121,031		19,835		140,866
CMBS - Linked Transactions	—		2,275		—		2,275
Total assets at fair value	$	—	$	123,306	$	58,508	$	181,814

Liabilities:
Derivatives (net)	—		1,210		12,000		13,210
Total liabilities at fair value	$	—	$	1,210	$	12,000	$	13,210

Additional Information about Assets Measured at Fair Value on Recurring Basis for which the Company Has Utilized Level 3 Inputs to Determine Fair Value

The following table presents additional information about assets which are measured at fair value on a recurring basis for which RSO has utilized Level 3 inputs (in thousands):



	Level 3
Beginning balance, January 1, 2011	$	43,380
Total gains or losses (realized/unrealized):
Included in earnings	2,948
Purchases	38,887
Sales	(18,181		)
Paydowns	(3,212		)
Transfers out of Level 3	(4,437		)
Unrealized losses – included in accumulated other comprehensive income	(877		)
Beginning balance, January 1, 2012	58,508
Total gains or losses (realized/unrealized):
Included in earnings	14,105
Purchases	8,341
Sales	(37,632		)
Paydowns	(2,012		)
Unrealized gains (losses) – included in accumulated other comprehensive income	8,457
Transfers from level 2	66,381
Ending balance, December 31, 2012	$	116,148

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation

The following table presents additional information about liabilities which are measured at fair value on a recurring basis for which RSO has utilized Level 3 inputs (in thousands):



	Level 3
Beginning balance, January 1, 2011	$	10,929
Unrealized losses – included in accumulated other comprehensive income	1,071
Beginning balance, January 1, 2012	12,000
Unrealized losses – included in accumulated other comprehensive income	2,077
Ending balance, December 31, 2012	$	14,077

Changes in Carrying Value of Assets and Liabilities Measured at Fair Value on Non-recurring Basis

The following table summarizes the financial assets and liabilities measured at fair value on a nonrecurring basis and indicates the fair value hierarchy of the valuation techniques utilized by RSO to determine such fair value as follows (in thousands):



	Level 1		Level 2		Level 3		Total
December 31, 2012:
Assets:
Loans held for sale	$	—	$	14,894	$	34,000	$	48,894
Impaired loans	—		4,366		21,000		25,366
Total assets at fair value	$	—	$	19,260	$	55,000	$	74,260

December 31, 2011:
Assets:
Loans held for sale	$	—	$	3,154	$	—	$	3,154
Impaired loans	—		1,099		—		1,099
Total assets at fair value	$	—	$	4,253	$	—	$	4,253

Fair Value, Assets and Liabilities Measured on Nonrecurring Basis, Valuation Techniques

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of December 31, 2012, the significant unobservable inputs used in the fair value measurements were as follows (in thousands):



	Fair Value at December 31, 2012			Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Impaired loans	$	21,000		Discounted cash flow	Cap rate	10.00%
Interest rate swap agreements	$	(14,687	)	Discounted cash flow	Weighted average credit spreads	4.98%

Fair Value of Financial Instruments

The fair values of the Company’s remaining financial instruments that are not reported at fair value on the consolidated balance sheet are reported below (in thousands):



			Fair Value Measurements
	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets of Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2012:
Loans held-for-investment	$	1,793,780	$	1,848,617	$	—	$	1,186,642	$	661,975
Loans receivable-related party	$	8,324	$	8,324	$	—	$	—	$	8,324
CDO notes	$	1,614,883	$	1,405,124	$	—	$	1,405,124	$	—
Junior subordinated notes	$	50,814	$	17,308	$	—	$	—	$	17,308

December 31, 2011:
Loans held-for-investment	$	1,772,063	$	1,755,541	$	—	$	1,142,638	$	612,903
Loans receivable-related party	$	9,497	$	9,497	$	—	$	—	$	9,497
CDO notes	$	1,689,413	$	1,034,060	$	—	$	1,034,060	$	—
Junior subordinated notes	$	50,631	$	17,125	$	—	$	—	$	17,125

RSO [Member] | CMBS - Term Repurchase Facilities [Member]

Variable Interest Entity [Line Items]

Schedule of Amount at Risk under Credit Facility

The following table shows information about the amount at risk under this facility (dollars in thousands):



	Amount at Risk ⁽¹⁾		Weighted Average Maturity in Days	Weighted Average Interest Rate
December 31, 2012:
Wells Fargo Bank, National Association.	$	10,722	18	1.53%

December 31, 2011:
Wells Fargo Bank, National Association.	$	8,461	18	1.54%


(1)	Equal to the estimated fair value of securities or loans sold, plus accrued interest income, minus the sum of repurchase agreement liabilities plus accrued interest expense.


(2)	$12.2 million and $14.9 million of linked repurchase agreement borrowings are being included as derivative instruments as of December 31, 2012 and 2011, respectively.

RSO [Member] | CRE - Term Repurchase Facility [Member]

Variable Interest Entity [Line Items]

Schedule of Amount at Risk under Credit Facility



	Amount at Risk ⁽¹⁾		Weighted Average Maturity in Days	Weighted Average Interest Rate
December 31, 2012:
Wells Fargo Bank, National Association.	$	26,332	18	2.88%


(1)	Equal to the estimated fair value of securities or loans sold, plus accrued interest income, minus the sum of repurchase agreement liabilities plus accrued interest expense.

RSO [Member] | Deutsche Bank Securities, Inc [Member] | Repurchase Agreements Debt [Member]

Variable Interest Entity [Line Items]

Schedule of Amount at Risk under Credit Facility

The following table shows information about the amount at risk under this facility (dollars in thousands);



	Amount at Risk ⁽¹⁾		Weighted Average Maturity in Days	Weighted Average Interest Rate
December 31, 2012:
Deutsche Bank Securities, Inc.	$	2,069	7	1.46%


(1)	Equal to the estimated fair value of securities or loans sold, plus accrued interest income, minus the sum of repurchase agreement liabilities plus accrued interest expense.

RSO [Member] | Wells Fargo Securities, LLC [Member] | Repurchase Agreements Debt [Member]

Variable Interest Entity [Line Items]

Schedule of Amount at Risk under Credit Facility

The following table shows information about the amount at risk under this facility (dollars in thousands);



	Amount at Risk ⁽¹⁾		Weighted Average Maturity in Days	Weighted Average Interest Rate
December 31, 2012:
Wells Fargo Securities, LLC	$	1,956	28	1.46	%


(1)	Equal to the estimated fair value of securities or loans sold, plus accrued interest income, minus the sum of repurchase agreement liabilities plus accrued interest expense.


(2)	$3.5 million of linked repurchase agreement borrowings are being included as derivative instruments as of December 31, 2012.

RSO [Member] | JP Morgan Securities, LLC [Member] | Repurchase Agreements Debt [Member]

Variable Interest Entity [Line Items]

Schedule of Amount at Risk under Credit Facility

The following table shows information about the amount at risk under this facility (dollars in thousands);



	Amount at Risk ⁽¹⁾		Weighted Average Maturity in Days	Weighted Average Interest Rate
December 31, 2012:
JP Morgan Securities	$	2,544	11	1.01	%


(1)	Equal to the estimated fair value of securities or loans sold, plus accrued interest income, minus the sum of repurchase agreement liabilities plus accrued interest expense.


(2)	$4.7 million of linked repurchase agreement borrowings are being included as derivative instruments as of December 31, 2012.