Alesco Financial Inc. Announces Second Quarter 2009 Financial Results

PHILADELPHIA, Aug. 17 /PRNewswire-FirstCall/ -- Alesco Financial Inc. (NYSE:
AFN) ("AFN" or the "Company"), a specialty finance real estate investment
trust, today announced financial results for the three-months and six-months
ended June 30, 2009.

AFN reported GAAP net income attributable to common stockholders for the
three-months ended June 30, 2009 of $373.7 million, or $6.21 per diluted
common share, as compared to net loss attributable to common stockholders of
($81.2) million, or ($1.36) per diluted common share for the three-months
ended June 30, 2008. AFN's net income for the three-month period ended June
30, 2009 was primarily attributable to the operations of consolidated
securitization entities and includes net changes in the fair value of
financial instruments of $577.4 million, partially offset by loan loss
provisions of ($49.7) million. During the three-months ended June 30, 2009,
these amounts were reduced by $168.2 million of net income attributable to
noncontrolling interests associated with our consolidated CDO entities.

AFN reported GAAP net income attributable to common stockholders for the
six-months ended June 30, 2009 of $337.8 million, or $5.61 per diluted common
share, as compared to net income attributable to common stockholders of $3.7
million or $0.06 per diluted common share for the six-months ended June 30,
2008. AFN's net income for the six-month period ended June 30, 2009 was
primarily attributable to the operations of consolidated securitization
entities and includes net changes in the fair value of financial instruments
of $579.5 million, partially offset by loan loss provisions of ($100.2)
million. During the six-months ended June 30, 2009, these amounts were
reduced by $161.1 million of net income attributable to noncontrolling
interests associated with our consolidated CDO entities.

Analysis of GAAP Equity

As of June 30, 2009, our consolidated financial statements include $88.9
million of available, unrestricted cash and cash equivalents. The following
table shows the components of our stockholders' equity and the net change in
cash and cash equivalents attributable to such components, in each case as
determined in accordance with GAAP, as of, and for the three months ended,
June 30, 2009. The table is divided between the components of our
stockholders' equity which are attributable to our assets and liabilities
which are not assets and liabilities of consolidated variable interest
entities ("VIEs"), and those which are assets and liabilities of consolidated
VIEs. The assets of consolidated VIEs are pledged to satisfy the liabilities
of the consolidated VIEs. The liabilities of our consolidated VIEs are
non-recourse to us, but similarly we have no rights to use any of the proceeds
of the assets held by consolidated VIEs to satisfy any of our recourse
liabilities. The components of our stockholders' equity attributable to our
investments in consolidated VIEs are determined in accordance with GAAP (under
which we consolidate all of the assets and liabilities of the VIEs) and do not
reflect the fair value of the interests in the consolidated VIEs owned by us.
The Net Change in Cash and Cash Equivalents column reflects the sources and
uses of cash during the period with respect to each component of our
stockholders' equity.

Net Change in Cash
and Cash Equivalents
Allocated Parent for Three Months
Stockholders' Equity Ended June 30, 2009 (C)
(Amounts in thousands) as of June 30, 2009
Net Assets not Included
in Consolidated VIEs:
Investments in TruPS
debt securities $6,604 $186
Investments in
residential and
commercial loans 8,568 493
Cash and cash equivalents 88,922 99
Other assets and
liabilities, net (A) 2,552 (1,856)(D)
Recourse indebtedness (A) (76,214) (2,035)

Net Assets of Consolidated
VIEs (B):
Investments in TruPS CDOs $412,957 -
Investments in leveraged
loan CLOs and warehouse
facility 1,698 2,842(E)
Investment in Kleros Real
Estate (MBS) CDOs - -
Investment in residential
loan mortgage loan
securitization (40,462) 1,527
Total $404,625 $1,256

(A) Recourse indebtedness is net of our $1.5 million investment in
common securities of the trusts that issued our junior subordinated
debentures. The $1.5 million is recorded within other assets in our
consolidated financial statements.

(B) We currently hold the following notional amounts of preference
shares or subordinated interests in consolidated VIEs: $218.6
million in TruPS CDOs, $48.1 million in leveraged loan CLOs, $38.5
million in a leveraged loan warehouse facility, $45.6 million in a
whole-loan mortgage securitization and $90 million in Kleros Real
Estate CDOs. The Company's stockholders' equity includes the
effects of accounting for each of the underlying assets and
liabilities of our consolidated VIEs as separate units of account.
However, if for accounting purposes the Company were to use the
notional amounts of preference shares or subordinated interests that
it directly owns as the unit of account, its net asset value could
be materially different. As of June 30, 2009, the Company estimates
the aggregate fair value of its investments in preference shares and
subordinated interests of consolidated VIEs to be approximately $3.3
million.

(C) Primary sources and uses of cash of consolidated VIEs include
interest income on investments and interest expense on the related
debt. The Company's primary sources of cash are distributions from
investments in consolidated VIEs, interest on cash deposits, and
interest income on or proceeds from the sale of debt securities and
mortgage loans held directly. The Company's primary uses of cash
are recourse debt service, payment of general and administrative
expenses, and additional investments. The following reconciles the
change in cash and cash equivalents during the three-months ended
June 30, 2009:

Cash and cash equivalents, at March 31, 2009 $87,666
Net change in cash and cash equivalents 1,256
Cash and cash equivalents, at June 30, 2009 $88,922
=======

(D) Amount relates to payment of general and administrative expenses
incurred directly by the Company. General and administrative
expenses incurred and paid by consolidated VIEs reduce the Company's
net distributions, if any, from these consolidated VIEs and are not
paid directly by the Company.

(E) Amount includes $2.8 million of distributions from investments in
CLOs. Subsequent to June 30, 2009, we experienced an interest
diversion test failure in Emporia Preferred Funding II, Ltd. The
failure was primarily attributable to an increase in defaulted
assets collateralizing the CLO. As a result of the interest
diversion test failure in Emporia Preferred Funding II, Ltd., the
Company did not receive any of its quarterly distribution in July
2009, and assuming no additional defaults or significant credit
downgrades the Company does not expect to receive its quarterly cash
distribution for several quarters.

Liquidity

Management has evaluated our current and forecasted liquidity and continues to
monitor evolving market conditions. Future investment alternatives and
operating activities will continue to be evaluated against anticipated current
and longer term liquidity demands. Management will continue to consider
projections regarding our taxable income and liquidity position and decisions
regarding future dividends are subject to the review and approval of our board
of directors.

On October 10, 2008, the Company was notified by the NYSE that it was not in
compliance with an NYSE continued listing standard applicable to its common
stock. The standard requires that the average closing price of any listed
security not fall below $1.00 per share for any consecutive 30 trading-day
period. On October 15, 2008, the Company notified the NYSE of its intent to
cure this deficiency. After exploring different alternatives for curing the
deficiency and restoring compliance with the continued listing standards, the
Company currently expects to effectuate a 1 for 10 reverse stock split of the
outstanding shares of its common stock. Under the NYSE rules, the Company has
six months from the date of the NYSE notice to comply with the NYSE minimum
share price standard. If the Company is not compliant by that date, its common
stock will be subject to suspension and delisting by the NYSE. However, on
February 26, 2009, the NYSE granted NYSE-listed companies a reprieve from the
NYSE's $1 minimum price requirement until June 30, 2009, which reprieve was
subsequently extended for an additional month through July 31, 2009. In
addition, the NYSE permanently decreased its market-capitalization standard to
$15 million for listed companies, which previously required that average
market capitalization of a NYSE-listed company be at least $25 million over
any 30 consecutive trading day periods. We therefore have until September 13,
2009 to become compliant with the NYSE minimum share price standard. If we
fail to meet any of the NYSE's other listing standards, however, we may be
delisted for failing to comply with the continued listing standards.

Involvement in Variable Interest Entities

The following table presents information as of June 30, 2009 with respect to
how the Company's involvement with VIEs affects the Company's consolidated
financial position, financial performance and cash flows.

Leveraged
Loan CLOs
and Residential Kleros
TruPS Warehouse Mortgage Real Estate
CDOs Facility Securitization (MBS) CDOs Total
Consolidated
VIE assets $1,942,348 $816,356 $753,104 $433,345 $3,945,153
Consolidated
VIE
liabilities 1,323,728 816,761 793,566 433,345 3,367,400
Noncontrolling
interests in
consolidated
VIE
subsidiaries 205,663 (2,103) - - 203,560

Net assets
attributable
to common
stockholders $412,957 $1,698 $(40,462) $ - $374,193

Leveraged
Loan CLOs
and Residential Kleros
TruPS Warehouse Mortgage Real Estate
CDOs Facility Securitization (MBS) CDOs Total
Maximum
exposure
to loss:(1)
Debt and equity
interests
in CDOs,
CLOs and
other
securitiz-
ation
vehicles $218,570 $48,100 $45,566 $90,000 $402,236
Warehouse
facility - 38,475 - - 38,475
Total
maximum
exposure
to loss $218,570 $86,575 $45,566 $90,000 $440,711

(1) Represents our total investments in VIEs, and is not adjusted for
losses incurred to date.

As of June 30, 2009, consolidated VIEs represent $374.2 million of net assets
attributable to common stockholders (excluding non-controlling interests).
For the three and six-month periods ended June 30, 2009, net income from
consolidated VIEs included in the Company's net income attributable to common
stockholders was $376.5 million and $346.2 million, respectively. As of June
30, 2009, the Company estimates that the fair value of the Company's
investments in the preference shares and subordinated interests of
consolidated VIEs is approximately $3.3 million. For the three and six months
ended June 30, 2009, the Company received $4.4 million and $8.8 million in
cash distributions from consolidated VIE entities.

Our consolidated TruPS assets serve as the sole source of collateral and cash
flows for the TruPS CDO notes payable and trust preferred obligations. As a
result, the Company generally expects that there will be significant
correlation between its fair value estimates of the CDO notes payable and its
fair value estimates for the associated TruPS assets. This expected price
correlation between the underlying assets and the CDO notes payable was
consistent with what the Company had historically experienced and observed in
the market. However, during the three-months ended June 30, 2009, changes in
market conditions significantly impacted the degree of this correlation.
Changes in market conditions during the quarter had a significant positive
impact on the pricing of credit risk associated with our individual TruPS
assets. The change in market perceptions regarding the benefits or risks
associated with our investments in TruPS assets did not have a significant
impact on the markets perception regarding the credit risk and other market
risks of our CDO notes payable. As a result, the correlation of the changes
in fair value of our TruPS assets and CDO notes payable was not consistent
with our historical experience and therefore, the changes in the fair value of
our TruPS assets were significantly greater than the changes in fair value of
our TruPS related CDO notes payable during the three-months ended June 30,
2009. As a result, our GAAP parent stockholders' equity includes $413 million
of equity relating to our consolidated TruPS CDOs. However, we estimate that
our direct investment in the preference shares of the TruPS CDOs has little to
no value as of June 30, 2009.

Identification of Material Weakness in Internal Controls

In July 2009 we identified certain computational errors in our internal
valuation models which we utilized, in part, to derive the fair value of our
investments used in the preparation of our financial statements. Upon
identifying these errors, we undertook a broad review of our valuation
processes and methodologies. After performing this additional work, we
determined that these errors did not result in a need to modify the December
31, 2008 financial statements. However, we determined that there were
deficiencies in our internal controls over the development and validation of
the valuation models which resulted in a material weakness.

To remediate the material weakness in internal control over financial
reporting described above, management enhanced its controls over financial
reporting by completing the following remediation steps:

-- Corrected the computational errors in our internal valuation models;
and

-- Enhanced our internal valuation process to include additional
validation
procedures, including more formal review and comparison of internal
valuation model results to observable market data.

We believe that the actions described above and the resulting improvements in
controls will strengthen our internal control over financial reporting
relating to our valuation process.

Conference Call

A conference call to discuss these financial results with investors and
analysts will be held on August 18, 2009 at 10:00 AM ET. Interested parties
can access the live webcast of our conference call by clicking on the webcast
link on our homepage at www.alescofinancial.com. Those wishing to participate
in the conference call via telephone with operator assistance can dial
866-831-6272 or, for those calling from overseas, 617-213-8859, at least ten
minutes in advance of the scheduled time. A replay will be available for two
weeks at 888-286-8010, pass code 30705114.

About Alesco Financial Inc.

Alesco Financial Inc. is a specialty finance REIT headquartered in
Philadelphia, Pennsylvania. Alesco Financial Inc. is externally managed by
Cohen & Company Management, LLC, a subsidiary of Cohen & Company, an
alternative investment management firm, which, since 2001, has provided
financing to small and mid-sized companies in financial services, real estate
and other sectors. For more information, please visit
www.alescofinancial.com.

Forward-Looking Statements

Information set forth in this release contains forward-looking statements,
which involve a number of risks and uncertainties. Alesco Financial Inc.
cautions readers that any forward-looking information is not a guarantee of
future performance and that actual results could differ materially from those
contained or implied in the forward-looking information.

The following factors, among others, could cause actual results to differ from
those set forth in the forward-looking statements: the failure of Alesco
Financial Inc. to successfully execute its business plans or gain access to
additional financing, continued disruption in the U.S. credit markets
generally and the mortgage loan and CDO markets particularly, AFN's ability to
timely consummate the merger with Cohen & Company, the limited availability of
additional investment portfolios for future acquisition, performance of
existing investments, AFN's ability to restore compliance with NYSE continued
listing standards or, in the event that AFN is unable to maintain its listing
with the NYSE, its ability to comply with the initial listing standards of the
NYSE or another securities exchange, continued qualification as a REIT and the
cost of capital. Additional factors that may affect future results are
contained in our filings with the Securities and Exchange Commission (the
"SEC"), which are available at the SEC's web site at www.sec.gov and Alesco
Financial Inc.'s web site, www.alescofinancial.com. Alesco Financial Inc.
disclaims any obligation to update and revise statements contained in these
materials based on new information or otherwise.

Additional Information About the Merger and Where to Find It

In connection with the proposed merger, AFN will file with the SEC, a
registration statement on Form S-4 which will include proxy statements of AFN
and Cohen & Company and a prospectus of AFN. STOCKHOLDERS ARE URGED TO READ
THE PROXY STATEMENT/PROSPECTUS CAREFULLY AND IN ITS ENTIRETY WHEN IT BECOMES
AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
MERGER. The definitive proxy statement will be mailed to AFN's stockholders.
In addition, stockholders will be able to obtain the proxy
statement/prospectus and all other relevant documents filed by AFN with the
SEC free of charge at the SEC's website www.sec.gov or from Alesco Financial
Inc., Attn: Investor Relations, 2929 Arch Street, 17th Floor, Philadelphia, PA
19104.

Participants in the Solicitation

AFN and its directors and executive officers may be deemed to be participants
in the solicitation of proxies from the stockholders of AFN in favor of the
proposed merger. Information about the directors and executive officers of
AFN and their ownership of AFN stock is set forth in AFN's annual report on
Form 10-K/A filed with the SEC on April 30, 2009. Investors may obtain
additional information regarding the interests of such participants by reading
the proxy statement/prospectus for the proposed merger when it becomes
available. Stockholders may obtain these documents from the SEC or AFN using
the contact information above.

Investors: Media:
John Longino Joseph Kuo
Chief Financial Officer Kekst and Company
215-701-8952 212-521-4863
info@alescofinancial.com

Alesco Financial Inc.
Consolidated Statements of Income (Loss)
(Unaudited and in thousands, except share and per share information)

For the For the
Three- Six-
For the Month For the Month
Three- Period Six- Period
Month Ended Month Ended
Period June 30, Period June 30,
Ended 2008 Ended 2008
June 30 (As June 30, (As
2009 Adjusted) 2009 Adjusted)
Net investment
income (loss):
Investment
interest
income $90,382 $137,520 $190,265 $311,415
Investment
interest
expense (53,403) (101,588) (112,355) (241,372)
Provision for
loan losses (49,696) (7,891) (100,154) (15,455)

Net investment
income (loss) (12,717) 28,041 (22,244) 54,588

Expenses:
Related party
management
compensation 3,389 4,197 6,842 8,942
General and
administrative 4,242 3,545 8,638 7,160

Total expenses 7,631 7,742 15,480 16,102
Other income and
expense:
Interest and other
income 184 1,131 592 2,625
Net change in fair
value of
investments in
debt securities
and loans and
non-recourse
indebtedness 540,908 (132,651) 547,785 70,208
Net change in fair
value of
derivative
contracts 36,492 37,055 31,739 (45,808)
Credit default
swap premiums - (1,536) - (2,872)
Impairments on
other investments
and intangible
assets (2,670) (4,286) (4,748) (12,844)
Loss on disposition
of consolidated
entities - (5,558) - (5,558)
Net realized loss
on sale of assets (4,281) (1,742) (16,126) (3,191)

Earnings (loss)
before benefit
(provision) for
income taxes 550,285 (87,288) 521,518 41,046
Benefit
(provision)
for income
taxes (8,380) 2,975 (22,568) 3,402

Net income (loss) 541,905 (84,313) 498,950 44,448
Less: Net
(income) loss
attributable to
noncontrolling
interests (168,240) 3,109 (161,118) (40,765)
Net income (loss)
attributable to
common
stockholders $373,665 $(81,204) $337,832 $3,683

Earnings (loss)
per share-basic:
Basic earnings
(loss) per
share $6.21 $(1.36) $5.61 $0.06
Weighted-average
shares
outstanding-
Basic 60,169,240 59,512,594 60,170,794 60,550,247

Earnings (loss)
per share-diluted:
Diluted earnings
(loss) per share $6.21 $(1.36) $5.61 $0.06
Weighted-average
shares
outstanding-
Diluted 60,169,240 59,512,594 60,170,794 60,550,247

Distributions
declared per
common share $ - $0.25 $ - $0.50

Alesco Financial Inc.
Consolidated Balance Sheets
(Unaudited and in thousands, except share and per share information)

As of
As of December 31,
June 30, 2008
2009 (As Adjusted)
Assets
Investments in debt securities and
security-related receivables, at fair value $2,349,220 $2,079,750
Investments in loans
Residential mortgages 839,668 901,491
Commercial mortgages 7,464 7,464
Leveraged loans (including amounts held for
sale at fair value of $105,452 and $63,601,
respectively) 808,728 780,269
Loan loss reserve (158,512) (68,428)

Total investments in loans, net 1,497,348 1,620,796
Cash and cash equivalents 88,922 86,035
Restricted cash and warehouse deposits 69,668 54,059
Accrued interest receivable 20,901 31,435
Deferred tax asset 3,676 25,036
Other assets 27,855 37,820

Total assets $4,057,590 $3,934,931

Liabilities and equity
Indebtedness
Trust preferred obligations, at fair value $138,203 $120,409
Securitized mortgage debt 789,598 844,764
CDO notes payable (including amounts at fair
value of $1,401,422 and $1,647,590,
respectively) 2,106,752 2,342,920
Warehouse credit facilities 106,582 126,623
Recourse indebtedness 77,703 77,656

Total indebtedness 3,218,838 3,512,372
Accrued interest payable 19,682 30,530
Related party payable 6,512 4,880
Derivative liabilities 191,087 266,984
Other liabilities 13,286 12,165

Total liabilities 3,449,405 3,826,931
Equity
Preferred stock, $0.001 par value per share,
50,000,000 shares authorized, no shares
issued and outstanding - -
Common stock, $0.001 par value per share,
100,000,000 shares authorized, 60,169,240
and 60,171,324 issued and outstanding,
including 659,076 and 985,810 unvested
restricted share awards, respectively 60 59
Additional paid-in-capital 484,934 484,612
Accumulated other comprehensive loss (12,705 ) (14,223 )
Accumulated deficit (67,664) (405,496 )

Total parent stockholders' equity 404,625 64,952
Noncontrolling interests in subsidiaries 203,560 43,048

Total equity 608,185 108,000

Total liabilities and equity $4,057,590 $3,934,931

SOURCE Alesco Financial Inc.

Investors: John Longino, Chief Financial Officer, +1-215-701-8952,
info@alescofinancial.com; or Media: Joseph Kuo, Kekst and Company,
+1-212-521-4863