Increased Core Earnings, a non-GAAP financial measure, to $13.8 million, or $0.42 per basic and diluted share, from $8.1 million, or $0.25 per basic and diluted share, in the second quarter of 2011. Net income attributable to common stockholders increased to $12.0 million, or $0.36 per basic and diluted share, from $8.0 million, or $0.25 per basic and diluted share, in the second quarter of 2011

During the quarter, the Company invested approximately $152 million, comprised of an additional $70 million in single family homes for rent, $68 million in four loan acquisitions at a weighted average price of 65% of par and $14 million in two new originations with a weighted average current yield of 13%

During the quarter, the Company generated $66 million of gross proceeds from the resolution (excluding small balance loan portfolios), sale and financing of loan interests from seven investments. Four investments, representing $26 million of full or partial realizations, resulted in a weighted average internal rate of return of 21%⁽¹⁾ and equity multiple of 1.6 times⁽²⁾; of the other three investments which represent $40 million of senior/A-note financings and sales, two investments now in the form of a B-note and a mezzanine loan will generate a weighted average 16% current yield based on the retained interests and the third investment, a loan portfolio that is partially financed, is expected to generate an internal rate of return of 18%⁽³⁾

Declared and paid a second quarter dividend of $0.35 per share of common stock, up from $0.34 per share in the first quarter

Subsequent to quarter end, the Company raised net proceeds of approximately $106 million through a re-opening of our Series A preferred stock priced at a premium to par from the original March 2012 issue. The Company also deployed $75 million additional equity into single family homes (for a current investment total of $150 million) and $45 million into a new origination with a 15% yield, and sold approximately $5.5 million of the Company’s position in First Republic Bank at approximately 2.1 times our original acquisition basis

The Company increased its investment to $75 million in a joint venture with an investment fund managed by an affiliate of the Company’s Manager (“Co-Investment Fund”) to acquire single-family homes for rent. Subsequent to quarter end, the Company increased its investment in this strategy to $150 million in the aggregate. Through August 2, 2012, the joint venture had acquired approximately 1,477 homes and had approximately 1,220 homes in escrow across California, Arizona, Texas, Nevada, Colorado and Georgia.

The Company, in a joint venture with two unaffiliated investors, acquired, at a discount, a $181 million participation interest in an approximate $250 million recourse first mortgage loan, which shares the same corporate guarantor as a $46 million loan the Company originated in September 2011. At acquisition, the newly acquired loan was collateralized by 269 luxury residential properties located at 26 resorts in the United States and various international destinations. The properties comprise the majority of the assets belonging to and operated by a leading luxury destination club operator. This senior mortgage bears interest at 8.57% plus a 50 basis points collateral management fee. The $181 million participation interest was acquired for approximately $159 million, or 88% of par, and financed by the seller with an approximately $103 million non-recourse, co-terminus loan at a fixed rate of 5.0%. Concurrent with the loan acquisition, the loan was amended and the borrower funded a cash reserve that will be used to make the interest payments under the seller financing. The Company’s share of the net equity investment of $56 million is $34 million, or 60%, with the remaining 40% owned by the two unaffiliated investors. As part of the transaction, the Company also assigned $18 million, or 40%, of the existing $46 million loan originated in September 2011 to the same unaffiliated investors in the transaction to maintain consistent ownership across both interests. The estimated loan-to-value of the combined loan interests is approximately 56% and the Company’s combined investment of $62 million, which is an incremental $16 million to its pre-existing investment, is expected to generate a weighted average current cash yield of approximately 20% following the transaction.

The Company invested in a joint venture with a Co-Investment Fund and an unaffiliated investor that acquired two non-performing loans secured by two master planned communities in California for approximately $57 million, or 16% of the unpaid principal balance. The joint venture now owns the properties after entering into a deed-in-lieu with the borrower immediately following the acquisition. The Company’s share is 24%.

The Company invested in a joint venture with a Co-Investment Fund that acquired a portfolio of loans from a U.S. commercial bank. The portfolio included 26 performing and non-performing loans with an aggregate unpaid principal balance of approximately $38.7 million, consisting of substantially all first mortgage loans geographically concentrated in the Midwest. The purchase price for the portfolio was approximately $18 million, or 47% of the portfolio’s UPB. The Company’s share of this investment is 50%.

The Company invested in a joint venture with a Co-Investment Fund that originated a $17.5 million loan on a portfolio of five select-service hotels in Massachusetts and New Hampshire. The Company and the Co-Investment Fund will fund an additional $10 million in the form of a mezzanine loan if the borrower adds certain hotels to the collateral package over the next 18 months. The loan bears an interest rate of 13.5% with a 1.0% origination fee and matures in July 2017. The Company’s share of this investment is 50%.

The Company invested in a joint venture with a Co-Investment Fund that acquired a performing $20 million senior mortgage loan secured by a multifamily asset in Florida. The loan was acquired for $17 million, or 85% of the unpaid principal balance. The loan bears a 5.5% fixed interest rate and matures in March 2016. It is expected this loan will soon be financed with matched term, non-recourse financing. The Company’s share of this investment is 49%.

The Company invested in a joint venture with a Co-Investment Fund that invested, at par, in a $10 million B-note cut from a $56 million term loan recently originated in October 2011. The loan is secured by nine assisted living properties and features full recourse to the sponsor. The B-note bears interest at LIBOR plus 12% with final maturity in October 2014. The Company’s share of this investment is 50%.

The Company amended and restated two notes receivable, each with an original principal amount of $19.6 million, into a $26 million A-note and a $14 million B-note. The A-note was sold to an unrelated third party for $25.7 million, or 99% of par. The remaining B-note bears interest at approximately 20.9%, of which approximately 6% will be paid-in-kind.

The Company, together with Co-Investment Funds, borrowed $35 million of non-recourse loan proceeds secured by a subset of loans in the Bulls Loan Portfolio at a rate of LIBOR plus 400 basis points.

The Company sold its 50% share of a $20 million senior first mortgage loan secured by all assets of a destination spa resort located in Arizona to an unrelated third party at par. The Company retained its 50% share of a $15 million mezzanine loan, which bears interest at approximately 15%.

Four loans in the Company’s U.S. Life Insurance Portfolio totaling approximately $35 million of unpaid principal balance were prepaid at par. These four loans were originally acquired in December 2009 for a weighted average 80% of the unpaid principal balance based on the allocated purchase price. The payoffs resulted in an internal rate of return of 17%⁽¹⁾ and an equity multiple of 1.4 times⁽²⁾ on these loans. The Company’s interest in this portfolio is 37.9%.

A joint venture between the Company and a Co-Investment Fund, sold a $25 million pari-passu participation interest in the $235 million William Lyon Homes senior secured term loan to an unrelated third party at par (10.25% yield). The Company’s share of this investment is 24%.

The Midwest Multifamily Retail Loan fully repaid approximately $13 million at maturity including an exit fee. The loan was originated in May 2010 by the Company and a Co-Investment Fund as a $9.8 million loan. The payoff resulted in an internal rate of return of 23%⁽¹⁾ and an equity multiple of 1.5 times⁽²⁾ on this investment. The Company’s share of the loan was 33.3%.

The Company and a Co-Investment Fund sold residential development projects to William Lyon Homes, Inc. (WLH) for an aggregate purchase price of $21.5 million. WLH paid $11 million in cash and issued 10,000,000 shares of Class A common stock of WLH to the Company and a Co-

Investment Fund. These development projects were originally purchased from WLH for $13.6 million in December 2009. Together with lease payments during the hold period, this cash realization and receipt of stock resulted in an internal rate of return of 29%⁽¹⁾ and an equity multiple of 1.8 times⁽²⁾. The Company’s share of this investment is 24%.

Through August 3, 2012, the Company will have invested $150 million in the aggregate into single-family residential investments (inclusive of the $75 million invested through the quarter ended June 30, 2012). Thus far, the joint venture has acquired approximately 1,477 homes and is in escrow to acquire an additional 1,220 homes. On July 31, 2012, the Company committed to transfer its interest in the single-family home investment platform to a newly formed investment vehicle, CSFR Operating Partnership, L.P. (“CSFR”), managed by an affiliate of the Company’s manager. CSFR has been formed to evolve the Company’s investment in single-family homes within an entity that is exclusively focused on the single-family home rental business and has the means to achieve much greater scale and diversity. As part of a larger portfolio of homes, the Company should benefit from economies of scale in terms of acquisition opportunities, renovation work and certain property management costs; potentially better access to the private and public capital markets which will provide more options to grow the business; as well as more options for potential exit strategies.

In July, ColFin FRB Investor, LLC (“FRB Investor”), a joint venture between the Company and investment funds managed by affiliates of the Company’s manager, sold 3.0 million shares of First Republic Bank’s common stock at 2.1 times our original cost basis. Following this sale, FRB Investor owns approximately 10.4 million shares (approximately 8% ownership interest) in First Republic Bank, and the Company indirectly owns approximately 616,000 shares in First Republic Bank through its interest in FRB Investor. This most recent sale represented a cumulative sale of approximately 62% of our original share holdings and returned approximately 118% of the Company’s original cost basis.

In July 2012, the Company, a Co-Investment Fund and an unaffiliated investor, funded a $125 million preferred equity investment in a 1.4 million square feet Class-A office building located in Queens, New York. The investment earns a preferred return of 15.0%, of which 5.5% may be paid-in-kind, with a 1.0% origination fee and 1.0% exit fee. The Company’s investment basis represents a value well below replacement cost of the underlying collateral. The term of the investment is approximately three years. The Company’s share of the investment was 36%, or $45 million.

ASSETS

Cash

Investments in unconsolidated joint ventures

Loans held for investment, net

Beneficial interests in debt securities, available-for-sale, at fair value

Other assets

Total assets

LIABILITIES AND EQUITY

Liabilities:

Line of credit

Secured financing

Accrued and other liabilities

Due to affiliates

Dividends payable

Total liabilities

Commitments and contingencies

Equity:

Stockholders’ equity:

Preferred stock, $0.01 par value, 8.5% Series A Cumulative Redeemable Perpetual liquidation preference of $25 per share, 50,000,000 shares authorized, 5,800,000 and no shares issued and outstanding, respectively

Common stock, $0.01 par value, 450,000,000 shares authorized, 33,115,665 and 32,624,889 shares issued and outstanding, respectively

Additional paid-in capital

Retained earnings

Accumulated other comprehensive loss

Total stockholders’ equity

Noncontrolling interests

Total equity

Total liabilities and equity

Income

Equity in income of unconsolidated joint ventures

Interest income

Other income from affiliates

Total income

Expenses

Management fees (including $608, $0, $2,364 and $0 of share-based compensation, respectively)

Investment expenses

Interest expense

Administrative expenses

Total expenses

Net unrealized loss on derivatives

Foreign exchange loss, net of foreign currency hedges

Income before income taxes

Income tax provision (benefit)

Net income

Net income attributable to noncontrolling interests

Net income attributable to Colony Financial, Inc.

Preferred dividends

Net income attributable to common stockholders

Net income per common share:

Basic

Diluted

Weighted average number of common shares outstanding:

Basic

Diluted

Dividends declared per common share

GAAP net income attributable to common stockholders

Adjustments to GAAP net income to reconcile to Core Earnings:

Noncash equity compensation expense

Incentive fee

Depreciation expense

Net unrealized (gain) loss on derivatives

Core Earnings

Basic

Diluted

Basic weighted average number of common shares outstanding

Diluted weighted average number of common shares outstanding

GAAP net income attributable to common stockholders

Adjustments to GAAP net income to reconcile to Core Earnings:

Noncash equity compensation expense

Incentive fee

Depreciation expense

Net unrealized loss on derivatives

Core Earnings

Basic

Diluted

Basic weighted average number of common shares outstanding

Diluted weighted average number of common shares outstanding