Liquidity and Capital Resources

We expect to continue to use a significant amount of our available capital resources to originate or purchase new loans and investments for our balance sheet. We intend to continue to employ leverage on our balance sheet to enhance our return on equity. At September 30, 2007, our net liquidity was as follows:

Liquidity and Capital Resources

We expect to continue to use a significant amount of our available capital resources to originate or purchase new loans and investments for our balance sheet.  We intend to continue to employ leverage on our balance sheet to enhance our return on equity. At June 30, 2007, our net liquidity was as follows:

At June 30, 2007, we had $24.5 million in cash, $3.8 million in restricted cash and $135.9 million of immediately available liquidity from our repurchase agreements ($128.8 million from master repurchase agreements and $7.1 million from asset specific repurchase agreements) and $25 million from our senior unsecured credit facility.  Our

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primary sources of liquidity during the next 12 months are expected to be cash on hand, cash generated from operations, principal and interest payments received on loans and investments, additional borrowings under our repurchase agreements and senior unsecured credit facility, and funds raised through CDO issuances, stock offerings, junior subordinated debenture issuances and other capital raising activities.  We believe these sources of capital will be adequate to meet both short term and long term cash requirements.

We experienced a net decrease in cash of $1.7 million for the six months ended June 30, 2007, compared to a net decrease of $14.7 million for the six months ended June 30, 2006.  Cash provided by operating activities during the six months ended June 30, 2007 was $48.7 million, compared to cash provided by operating activities of $31.5 million during the same period of 2006.  The change was primarily due to increased net interest income due to our increased investment originations.  For the six months ended June 30, 2007, cash used in investing activities was $648.8 million, compared to $619.4 million during the same period in 2006.  The change was primarily due to our receiving $276.9 million more in principal repayments during the six months ended June 30, 2007 compared to the six months ended June 30, 2006, as well as originating $298.7 million more in Interest Earning Assets. For the six months ended June 30, 2007, cash provided by financing activities was $598.4 million, compared to $573.2 million during the same period in 2006.  The change was primarily due to our net borrowing activity on repurchase obligations and the proceeds in March 2006 from the issuance of CDO IV, and activity on other debt.

At June 30, 2007, under our repurchase agreements, we had pledged assets that enable us to borrow an additional $135.9 million. We had $643.4 million of credit available for the financing of new and existing unpledged assets pursuant to these sources of financing.  Furthermore, at June 30, 2007, we had $25 million of liquidity available under our senior unsecured credit facility. At June 30, 2007, we had outstanding borrowings under our CDOs of $1.2 billion and outstanding repurchase obligations totaling $964.8 million.  The terms of these agreements are described in Note 7 of the consolidated financial statements.  Additional liquidity will be generated when assets that are currently pledged under repurchase obligations are contributed to our CDOs.  CDOs generally have higher borrowing advance rates than corresponding repurchase obligations. At June 30, 2007, we had additional liquidity of $3.8 million in our CDOs in the form of restricted cash.

Liquidity and Capital Resources

We expect to continue to use a significant amount of our available capital resources to originate or purchase new loans and investments for our balance sheet.  We intend to continue to employ leverage on our balance sheet to enhance our return on equity. At March 31, 2007 our net liquidity was as follows:

At March 31, 2007, we had $22.2 million in cash, $913,000 in restricted cash and $143.5 million of immediately available liquidity from our repurchase agreements ($136.4 million from master repurchase agreements and $7.1 million from asset specific repurchase agreements) and $25 million from our senior unsecured credit facility.  Our primary sources of liquidity during the next 12 months are expected to be cash on hand, cash generated from operations, principal and interest payments received on loans and investments, additional borrowings under our repurchase agreements and senior unsecured credit facility, and funds raised through CDO issuances, stock offerings, junior subordinated debenture issuances and other capital raising activities.  We believe these sources of capital will be adequate to meet both short term and long term cash requirements.

We experienced a net decrease in cash of $4.0 million for the three months ended March 31, 2007, compared to a net decrease of $19.8 million for the three months ended March 31, 2006.  Cash provided by operating activities during the three months ended March 31, 2007 was $16.4 million, compared to cash provided by operating activities of $7.0 million during the same period of 2006.  The change was primarily due to increased net interest income due to our increased investment originations.  For the three months ended March 31, 2007, cash used in investing activities was $300.8 million, compared to $370.6 million during the same period in 2006.  The change was primarily due to our receiving $32 million more in principal repayments during the three months ended March 31, 2007 compared to the three months ended March 31, 2006, as well as originating $36 million less in Interest

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Earning Assets. For the three months ended March 31, 2007, cash provided by financing activities was $280.5 million, compared to $343.8 million during the same period in 2006.  The change was primarily due to our net borrowing activity on repurchase obligations and the proceeds in March 2006 from the issuance of CDO IV.

At March 31, 2007, under our repurchase agreements, we had pledged assets that enable us to borrow an additional $143.5 million and had unpledged assets of $19.5 million, which when pledged will generate approximately $12.7 million of additional liquidity. We had $718.9 million of credit available for the financing of new and existing unpledged assets pursuant to these sources of financing.  At March 31, 2007, we had outstanding borrowings under our CDOs of $1.2 billion and outstanding repurchase obligations totaling $881.1 million.  The terms of these agreements are described in Note 7 of the consolidated financial statements.  Additional liquidity will be generated when assets that are currently pledged under repurchase obligations are contributed to our CDOs.  CDOs generally have higher borrowing advance rates than corresponding repurchase obligations. At March 31, 2007, we had additional liquidity of $913,000 in our CDOs in the form of restricted cash.  Furthermore, at March 31, 2007, we had $25 million of liquidity available under our new senior unsecured credit facility with WestLB.

Liquidity and Capital Resources

We expect we will continue to use a significant amount of our available capital resources to originate or purchase new loans and investments for our balance sheet. We intend to continue to employ leverage on our balance sheet to enhance our return on equity. At December 31, 2006, we had $26.1 million in cash, $1.7 million in restricted cash and $81.2 million of immediately available liquidity from our repurchase agreements ($74.1 million from master repurchase agreements and $7.1 million from asset specific repurchase agreements). Our primary sources of liquidity during 2007 are expected to be cash on hand, cash generated from operations, principal and interest payments received on loans and investments, additional borrowings under our repurchase agreements, and funds raised through CDO issuances, stock offerings, junior subordinated debenture issuances and other capital raising activities. We believe these sources of capital will be adequate to meet both short term and long term cash requirements.

We experienced a net increase in cash of $1.2 million for the year ended December 31, 2006, compared to a net increase of $391,000 for the year ended December 31, 2005. Cash provided by operating activities during the year ended December 31, 2006 was $64.8 million, compared to cash provided by operating activities of $50.8 million during the same period of 2005. The change was primarily due to increased net interest income due to our increased investment originations. For the year ended December 31, 2006, cash used in investing activities was $1.2 billion, compared to $663.0 million during the same period in 2005. The change was primarily due to our increased investment originations. For the year ended December 31, 2006, cash provided by financing activities was $1.1 billion, compared to $612.6 million during the same period in 2005. The change was primarily due to our increased investment originations.

At December 31, 2006, we had outstanding borrowings under our CDOs of $1.2 billion and outstanding repurchase obligations totaling $704.4 million. The terms of these agreements are described in Note 7 of the consolidated financial statements. At December 31, 2006, we had pledged assets that enable us to borrow an additional $81.2 million and had unpledged assets of $21.5 million, which when pledged will generate approximately $16.4 million of additional liquidity.  We had $495.6 million of credit available for the financing of new and existing unpledged assets pursuant to these sources of financing. Additional liquidity will be generated when assets that are currently pledged under repurchase obligations are contributed to our CDOs. CDOs generally have higher borrowing advance rates than corresponding repurchase obligations. At December 31, 2006, we had additional liquidity of $1.7 million in our CDO’s in the form of restricted cash.

In November 2006, we issued 2,000,000 shares of Class A Common Stock in a public offering underwritten by Bear Stearns & Co. Inc. Gross proceeds were $43.48 per share and total net proceeds were $86.6 million. We expect to continue to utilize stock offerings as a form of liquidity in the future when appropriate.

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Liquidity and Capital Resources

We expect that during 2006, we will use a significant amount of our available capital resources to originate or purchase new loans and investments for our balance sheet. We intend to continue to employ leverage on our balance sheet assets to enhance our return on equity. At March 31, 2006, we had $5.2 million in cash, $3.5 million in restricted cash and $112.0 million of immediately available liquidity from our repurchase agreements. Our primary sources of liquidity for the remainder of 2006 are expected to be cash on hand, cash generated from operations, principal and interest payments received on loans and investments, additional borrowings under our repurchase agreements, and capital raised through stock offerings, junior subordinated debenture issuances and other capital activities. We believe these sources of capital will be adequate to meet future cash requirements.

We experienced a net decrease in cash of $19.8 million for the three months ended March 31, 2006, compared to a net decrease of $2.3 million for the three months ended March 31, 2005. Cash provided by operating activities during the three months ended March 31, 2006 was $7.0 million, compared to $10.5 million during the same period of 2005. For the three months ended March 31, 2006, cash used in investing activities was $371 million, compared to $122 million during the same period in 2005. The change was primarily due to our increased loan and investment originations. For the three months ended March 31, 2006, cash provided by financing activities was $344 million, compared to $110 million during the same period in 2005. The change was primarily due to our use of CDOs and the issuance of $51.6 million of junior subordinated debentures.

At March 31, 2006, we had outstanding repurchase obligations totaling $247.9 million. At March 31, 2006, we had pledged assets that enable us to obtain an additional $112.0 million of financing under our repurchase agreements. At March 31, 2006, we had $684.8 million of credit available for the financing of new and existing unpledged assets pursuant to our repurchase agreements.