Newcastle Announces Fourth Quarter & Year End 2010 Results
FINANCIAL RESULTS
Fourth Quarter 2010
NEW YORK--(BUSINESS WIRE)-- Newcastle Investment Corp. (NYSE: NCT) reported that in the fourth quarter of 2010, income applicable to common stockholders ("GAAP income") was $197 million, or $3.18 per diluted share, compared to $17 million, or $0.31 per diluted share, in the fourth quarter of 2009.
GAAP income of $197 million consisted of the following: $26 million of net interest income less expenses (net of preferred dividends), $136 million of other income and $35 million representing the reversal of prior valuation allowances on loans net of impairment recorded on securities.
Other income was primarily related to a $124 million gain on the extinguishment of CDO debt and a $35 million net gain on the sale of investments, primarily offset by a $24 million one time non-cash mark-to-market loss related to an interest rate swap agreement in connection with the repurchase of the Newcastle CDO VI Class I-MM notes.
In the fourth quarter, Newcastle repurchased $316 million of CDO bonds for $190 million, recording a $124 million gain on the extinguishment of debt. Of the $316 million, $257 million represented all of the outstanding Newcastle CDO VI Class I-MM notes (the "Notes"), which were repurchased in December 2010 at a price of 67.5% of par. The Company purchased the Notes using a combination of restricted cash, unrestricted cash and proceeds from a new limited recourse repurchase facility. The $19 million repurchase facility has a one-year term and bears interest at a rate of LIBOR + 1.50%. Although the repurchase facility requires margin to be posted in the event that the value of the Notes decreases, recourse to the Company is limited to twenty-five percent of the then-outstanding balance of the repurchase facility. As of December 31, 2010, the recourse amount was $4.7 million.
Full Year 2010
In 2010, GAAP income was $657 million, or $10.96 per diluted share, compared to a loss applicable to common stockholders ("GAAP loss") of $223 million, or $4.23 per diluted share, in 2009.
GAAP income of $657 million consisted of the following: $91 million of net interest income less expenses (net of preferred dividends), $282 million of other income, $241 million representing the reversal of prior valuation allowances on loans net of impairment recorded on securities and $43 million representing the excess of the carrying amount of exchanged preferred stock over the fair value of consideration paid.
Other income was primarily related to a $266 million gain on the extinguishment of CDO debt and $52 million of net gain on the sale of investments, primarily offset by a $37 million net loss related to the Company's derivatives. In 2010, the Company repurchased $484 million of CDO bonds for $216 million, recording a $266 million gain on the extinguishment of debt.
For a reconciliation of income (loss) applicable to common stockholders to net interest income less expenses (net of preferred dividends), please refer to the tables following the presentation of GAAP results.
SUBSEQUENT EVENTS
In February 2011, Newcastle purchased the management rights with respect to certain C-BASS Investment Management LLC ("C-BASS") CDOs pursuant to a bankruptcy proceeding for approximately $2 million. As a result, Newcastle became the collateral manager of certain CDOs previously managed by C-BASS and will earn, on average, a 20 basis point annual senior management fee on a portion of the total collateral, which is currently $1.3 billion.
In February 2011, two mezzanine loan investments with a total outstanding principal balance of $89 million were paid off in full. The payoff increased our restricted cash available for reinvestment by $61 million in CDOs VIII and IX and increased the Company's unrestricted cash by $28 million.
Recently, Newcastle purchased $63 million current face amount of FNMA and FHLMC one-year ARM securities for $66 million. The Company financed the purchase with a $63 million repurchase agreement that has a three-month term.
Since year end, the repurchase facility financing the Newcastle CDO VI Class I-MM notes was reduced by $2 million, from $19 million to $17 million, through principal received on the underlying bonds.
RECOURSE DEBT FINANCING AND CASH
In the fourth quarter of 2010, the Company's unrestricted cash decreased by $24 million, from $58 million to $34 million, mainly as a result of the repurchase of the Company's CDO bonds, offset by the receipt of net operating cash flows.
Certain details regarding the Company's cash and current financings are set forth below as of February 25, 2011, including the impact of the subsequent events mentioned above:
-- Cash - The Company had unrestricted cash of $58 million. In addition,
the Company had $193 million of restricted cash available for
reinvestment within its consolidated CDOs;
-- Margin Exposure - The Company had margin exposure of $17 million related
to the financing of the Newcastle CDO VI Class I-MM notes (of which only
$4 million is recourse) and $63 million related to the financing of FNMA
and FHLMC securities.
The following table illustrates the change in cash and recourse financings, excluding junior subordinated notes ($ in millions):
Feb 25, Dec 31, Sep 30,
2010 2010 2010
CDO Cash for Reinvestment $ 193 $ 150 $ 147
Unrestricted Cash 58 34 58
Recourse Financings
Non-FNMA/FHLMC (non-agency)
NCT CDO senior bonds 4 5 -
Subtotal 4 5 -
FNMA/FHLMC Securities 63 - -
Total Recourse Financings $ 67 $ 5 $ -
CDO FINANCINGS
The following table summarizes the cash receipts in the fourth quarter of 2010 from the Company's consolidated CDO financings, their related coverage tests and negative watch assets ($ in thousands):
Interest
Coverage
% Excess
Primary Over Collateralization Excess (Deficiency) Assets on
(Deficiency)
Collateral Cash February 25, February 25, 2011(2) December 31, 2010(2) September 30, 2010 Negative
(2)
Type Receipts 2011(2) % $ % $ % $ Watch(3)
(1)
CDO Securities $ 116 223.1 % -10.8 % (33,908 ) -10.8 % (33,908 ) -15.3 % (54,513 ) $ 32,664
IV
CDO V Securities 143 165.6 % -8.3 % (30,319 ) -8.3 % (30,319 ) 0.5 % 1,991 43,003
CDO Securities 115 -38.5 % -51.5 % (184,846 ) -46.9 % (178,604 ) -42.1 % (167,624 ) 45,637
VI
CDO Loans 3,746 272.7 % 7.3 % 47,223 9.9 % 63,954 16.2 % 104,652 10,994
VIII
CDO Loans 3,205 415.3 % 14.2 % 91,474 18.5 % 119,317 16.5 % 106,526 -
IX
CDO X Securities 6,555 122.4 % 4.2 % 50,929 4.0 % 48,480 3.2 % 39,543 133,925
Total $ 13,880 $ 266,223
Represents cash received from each CDO based on all of the interests in
such CDO (including senior management fees but excluding principal
received from CDO bonds owned by the Company). Cash receipts for the
(1) quarter ended December 31, 2010 may not be indicative of cash receipts for
subsequent periods. See Forward-Looking Statements below for risks and
uncertainties that could cause cash receipts for subsequent periods to
differ materially from these amounts.
Represents excess or deficiency under the applicable interest coverage or
over collateralization test to the first threshold at which cash flow
would be redirected. The Company generally does not receive material
(2) interest cash flow from a CDO until a deficiency is corrected. The
information regarding coverage tests is based on data from the most recent
remittance date on or before February 25, 2011, December 31, 2010, or
September 30, 2010, as applicable. The CDO IV and V tests are conducted
only on a quarterly basis (December, March, June and September).
Represents the face amount of assets on negative watch for possible
downgrade by at least one rating agency (Moody's, S&P or Fitch). Amounts
are as of the determination date pertaining to December 2010 remittances
(3) for CDO IV and V (these tests are conducted only on a quarterly basis) and
as of the determination date pertaining to February 2011 remittances for
all other CDO's. The amounts include $53 million of bonds issued by
Newcastle, which are eliminated in consolidation and not reflected in the
investment portfolio disclosures.
-- $2 million of the $14 million CDO cash receipts were senior collateral
management fees, which were not subject to the related CDO coverage
tests.
-- The cash receipts above also include $2.5 million of non-recurring
interest and extension fees.
BOOK VALUE
In the fourth quarter of 2010, GAAP book value increased $344 million or $5.54 per share. As of December 31, 2010, GAAP book value was $(309) million or $(4.98) per share, compared to $(653) million or $(10.52) per share as of September 30, 2010.
DIVIDENDS
For the fourth quarter of 2010, Newcastle's Board of Directors elected not to pay a dividend on its common stock. On January 6, 2011, the Board of Directors declared dividends on the Company's Series B, Series C and Series D Preferred Stock for the period beginning May 1, 2010 and ending January 31, 2011. The Company paid total dividends of $1.828125, $1.509375 and $1.570313 per share on the 9.75% Series B, 8.05% Series C and 8.375% Series D preferred stock, respectively. As of January 31, 2011, there were no unpaid dividends with respect to any of Newcastle's Preferred Stock.
INVESTMENT PORTFOLIO
Newcastle's $4.3 billion investment portfolio (with a basis of $3.0 billion) consists of commercial, residential and corporate debt. During the quarter, the weighted average carrying value on the December 31, 2010 portfolio changed from 67.0% to 70.3%, an increase of $145 million. The face amount of the portfolio decreased by $377 million, primarily as a result of principal repayments of $152 million, sales of $150 million and actual principal write-downs of $136 million, offset by purchases of $101 million at a weighted average price of 93% of par, a weighted average yield of 6%, a weighted average life of 4.6 years, and a weighted average rating of single A.
The following table describes the investment portfolio as of December 31, 2010 ($ in millions):
% of Weighted
Face Basis Total Carry Number of Average
Value
Amount Amount Basis Amount Investments Credit Life
$ $(1) $ (2) (yrs)(3)
Commercial
Assets
CMBS $ 1,971 $ 1,265 42.7 % $ 1,301 261 BB 3.1
Mezzanine 580 389 13.1 % 389 17 64 % 1.9
Loans
B-Notes 233 155 5.2 % 155 9 77 % 1.8
Whole Loans 31 31 1.0 % 31 3 48 % 2.8
Other 25 25 0.8 % 25 1 -- --
Investment (4)
Total
Commercial 2,840 1,865 62.8 % 1,901 2.8
Assets
Residential
Assets
MH and
Residential 428 371 12.5 % 371 11,287 704 6.6
Loans
Subprime 353 161 5.4 % 178 88 B- 5.0
Securities
Real Estate 66 43 1.5 % 45 20 BB 3.6
ABS
847 575 19.4 % 594 5.7
FNMA/FHLMC 3 3 0.1 % 3 1 AAA 3.2
Securities
Total
Residential 850 578 19.5 % 597 5.7
Assets
Corporate
Assets
REIT Debt 317 316 10.7 % 329 40 BB+ 3.5
Corporate Bank 309 208 7.0 % 208 9 CC 3.4
Loans
Total
Corporate 626 524 17.7 % 537 3.4
Assets
Total/Weighted $ 4,316 $ 2,967 100.0 % $ 3,035 3.4
Average(5)
(1) Net of impairment.
Credit represents the weighted average of minimum ratings for rated
assets, the Loan to Value ratio (based on the appraised value at the time
of purchase or refinancing) for non-rated commercial assets, or the FICO
(2) score for non-rated residential assets and an implied AAA rating for
FNMA/FHLMC securities. Ratings provided herein were determined by third
party rating agencies as of a particular date, may not be current and are
subject to change (including a "negative watch" assignment) at any time.
(3) Weighted average life is based on the timing of expected principal
reduction on the asset.
(4) Relates to equity investment in a REO property.
Excludes unconsolidated CDO securities with a face amount of $123 million,
(5) as they are valued at zero in the current period, operating real estate
held for sale of $9 million and loans subject to call option with a face
amount of $406 million.
Commercial Assets
The Company owns $2.8 billion of commercial assets (with a basis of $1.9 billion), which includes CMBS, mezzanine loans, B-Notes, whole loans and other investments.
-- During the quarter, the Company had $119 million of actual principal
write-downs, sold $106 million, received principal repayments of $101
million and purchased $97 million of new CMBS assets with a weighted
average rating of single A.
-- Regarding the Company's CMBS portfolio, two securities or $10 million
were upgraded (from a weighted average rating of A+ to AA), four
securities or $24 million were affirmed and 60 securities or $486
million were downgraded (from a weighted average rating of BB- to CCC+).
-- The weighted average carrying value of these assets changed from 62.3%
to 66.9%, an increase of $132 million in the quarter.
CMBS portfolio ($ in thousands):
Average % of Carry Weighted
Face Basis Total Value Delinquency Principal Average
Minimum
Vintage Rating Number Amount $ Amount $ Basis Amount $ 60+/FC/REO Subordination Life
(1) (2) (3) (4) (yrs)(5)
Pre 2004 BB+ 82 425,785 384,726 30.4 % 362,743 5.7 % 10.8 % 2.3
2004 B+ 61 417,733 245,642 19.4 % 205,078 4.2 % 6.0 % 2.8
2005 B+ 37 383,212 177,506 14.0 % 210,487 5.3 % 8.1 % 3.2
2006 BB+ 54 492,424 346,327 27.4 % 390,691 4.5 % 12.4 % 3.5
2007 B+ 24 203,871 66,699 5.3 % 86,823 9.8 % 11.5 % 2.9
2010 BB 3 48,000 44,460 3.5 % 44,912 0.0 % 2.4 % 9.8
TOTAL/WA BB 261 1,971,025 1,265,360 100.0 % 1,300,734 5.3 % 9.5 % 3.1
(1) The year in which the securities were originally issued.
Ratings provided above were determined by third party rating agencies as
of a particular date, which may not be current and are subject to change
(2) (including a "negative watch" assignment) at any time. The Company had
approximately $204 million of CMBS assets that were on negative watch for
possible downgrade by at least one rating agency as of December 31, 2010.
(3) The percentage of underlying loans that are 60+ days delinquent, in
foreclosure or considered real estate owned (REO).
(4) The percentage of the outstanding face amount of securities that is
subordinate to the Company's investments.
(5) Weighted average life is based on the timing of expected principal
reduction on the asset.
Mezzanine loans, B-Notes and whole loans portfolio ($ in thousands):
% of Carrying WA WA
Face Basis Total Value First Last $
$
Loan Loan
Asset Number Amount Amount Basis Amount to to Delinquency
Type ($) ($) ($) Value Value (%)(2)
(1) (1)
Mezzanine 17 579,579 388,510 67.7 % 388,510 52.5 % 64.0 % 13.2 %
Loans
B-Notes 9 233,132 154,760 26.9 % 154,760 62.2 % 76.6 % 19.3 %
Whole 3 30,970 30,970 5.4 % 30,970 0.0 % 48.2 % 0.0 %
Loans
Total/WA 29 843,681 574,240 100.0 % 574,240 53.3 % 66.9 % 14.4 %
(1) Loan to Value is based on the appraised value at the time of purchase or
refinancing.
(2) The percentage of underlying loans that are non-performing, in
foreclosure, under bankruptcy filing or considered real estate owned.
Residential Assets
The Company owns $850 million of residential assets (with a basis of $578 million), which include manufactured housing ("MH") loans, residential loans, subprime securities, real estate ABS and FNMA/FHLMC securities.
-- During the quarter, the Company had actual principal write-downs of $17
million, received principal repayments of $24 million and sold $12
million of real estate ABS. The Company did not purchase any ABS assets.
-- Regarding the Company's ABS portfolio, two securities or $9 million were
upgraded (from weighted average rating of A to AA), no securities were
affirmed and seven securities or $18 million were downgraded (from a
weighted average rating of CCC to CCC-).
-- The weighted average carrying value of these assets changed from 69.9%
to 70.3%, an increase of $4 million in the quarter.
Manufactured housing and residential loan portfolios ($ in thousands):
% of Carrying Average
Average Face Basis Total Value Loan Age Original Delinquency Cumulative
Deal FICO Amount Amount Basis Amount $ (months) Balance $ 90+/FC/REO Loss to
Score $ $ (1) Date
MH Loans 703 152,450 123,042 33.2 % 123,042 111 327,855 1.3 % 6.8 %
Portfolio 1
MH Loans 702 212,036 198,275 53.4 % 198,275 140 434,743 1.4 % 4.9 %
Portfolio 2
Residential
Loans 715 59,604 46,235 12.5 % 46,235 90 646,357 8.2 % 0.3 %
Portfolio 1
Residential
Loans 737 3,795 3,495 0.9 % 3,495 74 83,950 0.0 % 0.0 %
Portfolio 2
TOTAL/WA 704 427,885 371,047 100.0 % 371,047 122 1,492,905 2.3 % 4.9 %
(1) The percentage of loans that are 90+ days delinquent, in foreclosure or
considered real estate owned (REO).
Subprime Securities portfolio ($ in thousands):
Security Characteristics:
Average % of Carrying
Minimum Face Basis Total Value Principal Excess
Vintage Rating Number Amount Amount Basis Amount $ Subordination Spread
(1) (2) $ $ (3) (4)
2003 B 15 19,154 10,649 6.6 % 10,741 22.6 % 4.0 %
2004 B 28 82,845 28,277 17.5 % 30,924 16.9 % 3.9 %
2005 CCC+ 25 93,269 28,341 17.6 % 36,520 28.2 % 4.5 %
2006 CCC+ 10 83,095 46,425 28.7 % 48,477 31.6 % 4.8 %
2007 & B+ 10 74,943 47,772 29.6 % 51,344 19.5 % 3.1 %
Later
TOTAL/WA B- 88 353,306 161,464 100.0 % 178,006 24.2 % 4.1 %
Collateral Characteristics:
Average
Loan Age Collateral 3 Month Delinquency Cumulative
Vintage(1) (months) Factor(5) CPR(6) 90+/FC/REO(7) Loss to Date
2003 94 0.10 8.8 % 19.7 % 3.2 %
2004 80 0.13 9.8 % 21.0 % 3.6 %
2005 68 0.19 8.6 % 33.0 % 8.5 %
2006 56 0.39 10.1 % 31.4 % 16.6 %
2007 & Later 40 0.45 7.8 % 19.7 % 13.2 %
TOTAL/WA 64 0.28 9.1 % 26.3 % 9.9 %
Real Estate ABS portfolios ($ in thousands):
Security Characteristics:
Average % of Carrying
Minimum Face Basis Total Value Principal Excess
Asset Type Rating Number Amount Amount Basis Amount $ Subordination Spread
(2) $ $ (3) (4)
Manufactured BBB+ 7 35,137 34,101 80.3 % 35,215 39.4 % 1.5 %
Housing
Small
Business CCC 13 30,228 8,374 19.7 % 9,963 15.1 % 3.4 %
Loans
TOTAL/WA BB 20 65,365 42,475 100.0 % 45,178 28.1 % 2.4 %
Collateral Characteristics:
Average
Loan Age Collateral 3 Month Delinquency Cumulative
Asset Type (months) Factor(5) CPR(6) 90+/FC/REO(7) Loss to Date
Manufactured 138 0.28 6.2 % 2.3 % 12.6 %
Housing
Small Business 75 0.54 6.7 % 29.4 % 7.2 %
Loans
TOTAL/WA 109 0.40 6.4 % 14.8 % 10.1 %
(1) The year in which the securities were issued.
Ratings provided above were determined by third party rating agencies as
of a particular date, may not be current and are subject to change
(2) (including a "negative watch" assignment) at any time. The Company had
approximately $96 million of subprime and ABS securities that were on
negative watch for possible downgrade by at least one rating agency as of
December 31, 2010.
(3) The percentage of the outstanding face amount of securities and residual
interests that is subordinate to the Company's investments.
The annualized amount of interest received on the underlying loans in
(4) excess of the interest paid on the securities, as a percentage of the
outstanding collateral balance.
(5) The ratio of original unpaid principal balance of loans still outstanding.
(6) Three month average constant prepayment rate.
(7) The percentage of underlying loans that are 90+ days delinquent, in
foreclosure or considered real estate owned (REO).
Corporate Assets
The Company owns $626 million of corporate assets (with a basis of $524 million), including REIT debt and corporate bank loans.
-- During the quarter, the Company sold $32 million of REIT debt, received
$27 million of principal repayments from REIT debt and purchased a $4
million corporate bank loan.
-- Regarding the Company's REIT debt portfolio, no securities were
upgraded, two securities or $27 million were affirmed and two securities
or $27 million were downgraded (from a weighted average rating of BBB to
BBB-).
-- The weighted average carrying value of these assets changed from 84.3%
to 85.7%, an increase of $9 million in the quarter.
REIT debt portfolio ($ in thousands):
Average Carrying
Face Basis % of Total Value
Minimum
Industry Rating(1) Number Amount $ Amount $ Basis Amount $
Retail BBB+ 10 75,665 71,962 22.8 % 81,911
Diversified CCC+ 8 71,036 71,613 22.7 % 67,305
Office BBB- 9 80,127 81,304 25.7 % 83,869
Multifamily BBB 3 12,765 12,818 4.0 % 13,539
Hotel BBB- 3 29,220 29,598 9.4 % 30,785
Healthcare BBB- 5 41,600 41,673 13.2 % 44,215
Storage A- 1 5,000 5,052 1.6 % 5,360
Industrial BB- 1 2,000 2,065 0.6 % 1,986
TOTAL/WA BB+ 40 317,413 316,085 100.0 % 328,970
Corporate bank loan portfolio ($ in thousands):
Average % of Carrying
Minimum Face Basis Total Value
Industry Rating(1) Number Amount $ Amount $ Basis Amount $
Real Estate CC 3 35,898 34,021 16.3 % 34,021
Media CCC- 2 111,764 44,985 21.6 % 44,985
Resorts NR 1 116,649 86,649 41.6 % 86,649
Restaurant B 2 18,136 16,326 7.8 % 16,326
Transportation NR 1 26,990 26,384 12.7 % 26,384
TOTAL/WA CC 9 309,437 208,365 100.0 % 208,365
Ratings provided above were determined by third party rating agencies as
of a particular date, may not be current and are subject to change
(1) (including a "negative watch" assignment) at any time. The Company had no
corporate assets that were on negative watch for possible downgrade as of
December 31, 2010.
CONFERENCE CALL
Newcastle's management will conduct a live conference call today, March 1, 2011, at 11:00 A.M. Eastern Time to review the financial results for the fourth quarter and year ended December 31, 2010. A copy of the earnings press release is posted to the Investor Relations section of Newcastle's website, www.newcastleinv.com
All interested parties are welcome to participate on the live call. You can access the conference call by dialing 1-888-243-2046 (from within the U.S.) or 1-706-679-1533 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference "Newcastle Fourth Quarter Earnings Call."
A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.newcastleinv.com. Please allow extra time prior to the call to visit the site and download the necessary software required to listen to the internet broadcast.
A telephonic replay of the conference call will also be available until 11:59 P.M. Eastern Time on Friday, March 11, 2011 by dialing 1-800-642-1687 (from within the U.S.) or 1-706-645-9291 (from outside of the U.S.); please reference access code "44397805."
ABOUT NEWCASTLE
Newcastle Investment Corp. owns and manages a portfolio of diversified, credit sensitive real estate debt that is primarily financed with match funded debt. Newcastle is organized and conducts its operations to qualify as a real estate investment trust (REIT) for federal income tax purposes. Newcastle is managed by an affiliate of Fortress Investment Group LLC, a global investment management firm. For more information regarding Newcastle Investment Corp. or to be added to our e-mail distribution list, please visit www.newcastleinv.com.
FORWARD-LOOKING STATEMENTS
Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements relating to our liquidity, future losses and impairment charges, our ability to acquire assets with attractive returns and the delinquent and loss rates on our subprime portfolios. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond our control. Newcastle can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from Newcastle's expectations include, but are not limited to, the risk that market conditions cause downgrades of a significant number of our securities or the recording of additional impairment charges or reductions in shareholders' equity; the risk that we can find additional suitably priced investments; the risk that investments made or committed to be made cannot be financed on the basis and for the term at which we expect; the relationship between yields on assets which are paid off and yields on assets in which such monies can be reinvested; and the relative spreads between the yield on the assets we invest in and the cost and availability of debt and equity financing. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. For a discussion of some of the risks and important factors that could affect such forward-looking statements, see the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operation" in the Company's Annual Report on Form 10-K, which is available on the Company's website (www.newcastleinv.com). In addition, new risks and uncertainties emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. Newcastle expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.
Newcastle Investment Corp.
Consolidated Statements of Operations
(dollars in thousands, except per share data)
Three Months Ended December 31, Year Ended December 31,
2010 2009 2010 2009
(unaudited) (unaudited)
Interest income $ 74,957 $ 74,833 $ 300,272 $ 361,866
Interest expense 40,942 51,256 172,219 218,410
Net interest income 34,015 23,577 128,053 143,456
Impairment
Valuation allowance (47,219 ) (68,086 ) (339,887 ) 15,007
(reversal) on loans
Other-than-temporary
impairment on (999 ) 77,077 101,398 603,768
securities
Portion of
other-than-temporary
impairment on
securities
recognized in other
comprehensive
income (loss),
net of reversal of
other comprehensive
loss into
net income (loss) 13,206 17,870 (2,369 ) (70,235 )
(35,012 ) 26,861 (240,858 ) 548,540
Net interest income
(loss) after 69,027 (3,284 ) 368,911 (405,084 )
impairment
Other Income (Loss)
Gain (loss) on
settlement of 34,810 3,650 52,307 11,438
investments, net
Gain on
extinguishment of 123,958 29,070 265,656 215,279
debt
Other income (loss), (23,070 ) (1,792 ) (35,676 ) 682
net
135,698 30,928 282,287 227,399
Expenses
Loan and security 1,107 1,165 4,580 5,034
servicing expense
General and
administrative 784 1,860 7,696 8,899
expense
Management fee to 4,259 4,493 17,252 17,968
affiliate
6,150 7,518 29,528 31,901
Income (loss) from
continuing 198,575 20,126 621,670 (209,586 )
operations
Income (loss) from
discontinued (194 ) (222 ) (8 ) (318 )
operations
Net Income (Loss) 198,381 19,904 621,662 (209,904 )
Preferred dividends (1,395 ) (3,375 ) (7,453 ) (13,501 )
Excess of carrying
amount of exchanged
preferred stock
over fair value of - - 43,043 -
consideration paid
Income (Loss)
Applicable to Common $ 196,986 $ 16,529 $ 657,252 $ (223,405 )
Stockholders
Income (loss) Per
Share of Common
Stock
Basic $ 3.18 $ 0.31 $ 10.96 $ (4.23 )
Diluted $ 3.18 $ 0.31 $ 10.96 $ (4.23 )
Income (loss) from
continuing operations per
share of common stock,
after preferred dividends
and excess of carrying
amount of
exchanged preferred stock
over fair value of
consideration paid
Basic $ 3.18 $ 0.32 $ 10.96 $ (4.22 )
Diluted $ 3.18 $ 0.32 $ 10.96 $ (4.22 )
Income (loss) from
discontinued
operations per share
of common stock
Basic $ - $ (0.01 ) $ - $ (0.01 )
Diluted $ - $ (0.01 ) $ - $ (0.01 )
Weighted Average Number
of Shares of Common Stock
Outstanding
Basic 62,024,969 52,905,413 59,948,827 52,863,993
Diluted 62,024,969 52,905,413 59,948,827 52,863,993
Dividends Declared
per Share of Common $ - $ - $ - $ -
Stock
Newcastle Investment Corp.
Consolidated Balance Sheets
(dollars in thousands)
December 31,
2010 2009
Assets
Non-Recourse VIE Financing Structures
Real estate securities, available for sale $ 1,859,984 $ 1,784,487
Real estate related loans, held for sale, 750,130 554,367
net
Residential mortgage loans, held for 124,974 -
investment, net
Residential mortgage loans, held for sale, 252,915 380,123
net
Subprime mortgage loans subject to call 403,793 403,006
option
Operating real estate, held for sale 8,776 -
Other investments 18,883 -
Restricted cash 157,005 200,251
Derivative assets 7,067 -
Receivables and other assets 29,206 36,643
3,612,733 3,358,877
Recourse Financing Structures and Unlevered
Assets
Real estate securities, available for sale 600 46,308
Real estate related loans, held for sale, 32,475 19,495
net
Residential mortgage loans, held for sale, 298 3,524
net
Operating real estate, held for sale - 9,966
Other investments 6,024 193
Cash and cash equivalents 33,524 68,300
Receivables and other assets 1,457 7,965
74,378 155,751
$ 3,687,111 $ 3,514,628
Liabilities and Stockholders' Equity
(Deficit)
Liabilities
Non-Recourse VIE Financing Structures
CDO bonds payable $ 3,010,868 $ 4,058,928
Other bonds payable 256,809 303,697
Notes payable 4,356 -
Financing of subprime mortgage loans subject 403,793 403,006
to call option
Repurchase agreements 14,049 -
Derivative liabilities 176,861 203,054
Accrued expenses and other liabilities 8,445 2,992
3,875,181 4,971,677
Recourse Financing Structures and Other
Liabilities
Repurchase agreements 4,683 71,309
Junior subordinated notes payable 51,253 103,264
Derivative liabilities - 4,100
Due to affiliates 1,419 1,497
Accrued expenses and other liabilities 2,160 3,433
59,515 183,603
3,934,696 5,155,280
Stockholders' Equity (Deficit)
Preferred stock, $0.01 par value,
100,000,000 shares authorized,
1,347,321 and 2,500,000 shares of 9.75% Series B
Cumulative Redeemable Preferred Stock
496,000 and 1,600,000 shares of 8.05% Series C
Cumulative Redeemable Preferred Stock, and
620,000 and 2,000,000 shares of 8.375% Series D
Cumulative Redeemable Preferred Stock,
liquidation preference $25.00 per share, issued
and outstanding as of December 31, 2010 and
December 31, 2009, respectively 61,583 152,500
Common stock, $0.01 par value, 500,000,000
shares authorized, 62,027,184 and
52,912,513 shares issued and outstanding at
December 31, 2010 and
December 31, 2009, respectively 620 529
Additional paid-in capital 1,065,377 1,033,520
Accumulated deficit (1,328,986 ) (2,193,383 )
Accumulated other comprehensive income (46,179 ) (633,818 )
(loss)
(247,585 ) (1,640,652 )
$ 3,687,111 $ 3,514,628
Newcastle Investment Corp.
Reconciliation of Net Interest Income Less Expenses (Net of Preferred
Dividends)
(dollars in thousands)
Three Months Ended December Twelve Months Ended December 31,
31,
2010 2009 2010 2009
Income (Loss)
Applicable to $ 196,986 $ 16,529 $ 657,252 $ (223,405 )
Common
Stockholders
Add (Deduct):
Impairment
(including
the reversal
of prior (35,012 ) 26,861 (240,858 ) 548,540
valuation
allowance on
loans)
Other (135,698 ) (30,928 ) (282,287 ) (227,399 )
(Income) Loss
Excess of
carrying
amount of
exchanged
preferred - - (43,043 ) -
stock over
fair value of
consideration
paid
Loss from
discontinued 194 222 8 318
operations
Net Interest
Income less
Expenses (Net $ 26,470 $ 12,684 $ 91,072 $ 98,054
of Preferred
Dividends)
Source: Newcastle Investment Corp.
Released March 1, 2011