EXHIBIT 99.1
[NEWCASTLE INVESTMENT CORP. LOGO]
Contact: FOR IMMEDIATE RELEASE
Lilly H. Donohue
Director of Investor Relations
212-798-6118
NEWCASTLE ANNOUNCES THIRD QUARTER 2005 RESULTS
Third Quarter Highlights:
- Income available for common stockholders of $27.7 million, or $0.63
per diluted common share, up 5% from third quarter 2004 on a per
diluted common share basis
- Declared a dividend of $0.625 per share of common stock
- $853.7 million of investment activity
- Total assets of $5.9 billion, up 19.0% from $4.9 billion at December
31, 2004
New York, NY. October 26, 2005 - Newcastle Investment Corp. (NYSE: NCT) reported
funds from operations (FFO) for the quarter ended September 30, 2005 of $27.8
million, or $0.63 per diluted common share, as compared to $24.0 million, or
$0.62 per diluted common share, for the quarter ended September 30, 2004. The
Company generated an FFO return on average invested common equity of 14.3% for
third quarter 2005.
For the three months ended September 30, 2005, income available for common
stockholders was $27.7 million, or $0.63 per diluted common share, compared with
$23.4 million, or $0.60 per diluted common share, in third quarter 2004.
For the quarter ended September 30, 2005, Newcastle's Board of Directors
declared a dividend of $0.625 per share of common stock. The Board also declared
a dividend of $0.609 per share on Newcastle's 9.75% Series B Cumulative
Redeemable Preferred Stock.
Our common equity book value decreased to $831.3 million, or $18.98 per share,
at September 30, 2005 from $848.7 million, or $19.38 per share, at June 30, 2005
principally due to a decrease in net unrealized gains, as reported in other
comprehensive income.
For a reconciliation and discussion of GAAP net income to FFO and GAAP book
equity to invested common equity, please refer to the tables following the
presentation of GAAP results.
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SELECTED FINANCIAL DATA (IN THOUSANDS):
THREE MONTHS ENDED THREE MONTHS ENDED
OPERATING DATA (UNAUDITED): SEPTEMBER 30, 2005 SEPTEMBER 30, 2004
------------------ ------------------
Funds from operations $ 27,795 $ 23,977
Income available for common
stockholders 27,677 23,445
AS OF AS OF
BALANCE SHEET DATA (UNAUDITED): SEPTEMBER 30, 2005 DECEMBER 31, 2004
------------------ -------------------
Total assets $ 5,867,925 $ 4,932,720
Total liabilities 4,974,121 4,136,005
Common stockholders' equity 831,304 734,215
Preferred stock 62,500 62,500
The following tables compare certain supplemental data relating to our
investment portfolio at September 30, 2005 versus June 30, 2005:
SUPPLEMENTAL DATA - TOTAL INVESTMENT PORTFOLIO (UNAUDITED):
SEPTEMBER 30, 2005 JUNE 30, 2005
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Total portfolio (face amount)* $ 5,645,993 $ 5,352,648
Percentage of total assets 96% 94%
Weighted average asset yield 6.46% 6.30%
Weighted average liability cost 4.87% 4.68%
Weighted average net spread 1.59% 1.62%
* Excluding ICH.
SUPPLEMENTAL DATA - REAL ESTATE SECURITIES AND REAL ESTATE RELATED LOANS
(UNAUDITED):
SEPTEMBER 30, 2005 JUNE 30, 2005
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Real estate securities and real estate related loans (face amount)* $ 4,950,522 $ 4,543,497
Percentage of total assets 84% 80%
Weighted average credit rating BBB- BBB
Weighted average asset credit spread 247 254
Percentage investment grade 69% 70%
Number of securities and loans 516 514
* Excluding ICH.
SUPPLEMENTAL DATA - RESIDENTIAL MORTGAGE LOANS (UNAUDITED):
SEPTEMBER 30, 2005 JUNE 30, 2005
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Residential mortgage loans (unpaid principal amount) $ 695,471 $ 809,151
Percentage of total assets 12% 14%
Weighted average FICO score 713 715
Number of residential mortgage loans 8,473 9,344
CAPITAL MARKETS ACTIVITY
In July 2005, we closed a $50 million 3-year unsecured revolving credit
facility, which we have since increased to $75 million in October 2005. In
addition, subsequent to
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quarter end, we raised $40 million of gross proceeds from the issuance of
perpetual preferred stock which is non-callable until October 2010. The
preferred stock was issued at a rate of 8.05%. The net proceeds of the offering
will be used to make investments in real estate securities and/or other real
estate related assets and for general corporate purposes.
Wesley R. Edens, our Chairman and Chief Executive Officer, commented, "We are
pleased with our recent ability to raise equity capital through our preferred
stock offering. We expect to invest this capital in the fourth quarter at
returns that are accretive to shareholders. We are confident in our business
strategy and our ability to continue to generate stable and growing dividends in
varying interest rate and credit cycles."
THIRD QUARTER INVESTMENT ACTIVITY
During the third quarter, we purchased and committed to purchase a total of
$853.7 million in face amount of real estate securities and real estate related
loans: $560.9 million on balance sheet; $172.8 million for our next
collateralized bond obligation (CBO) through its warehouse agreement; and the
remaining $120.0 million of a bank loan financed through a total rate of return
swap. With respect to investments under the CBO warehouse agreement and the
total rate of return swap in the quarter, we have recorded deposits of $31.7
million on our balance sheet. As a result of the commitments in the quarter and
subsequent to quarter end, we have committed to purchase 87%, or $436 million,
of the assets for our eighth CBO. We expect to price the liabilities to
permanently finance these assets in the near term.
Our purchases and commitments to purchase during the third quarter had an
average credit rating of BBB-. The investments were comprised of: $323.4 of real
estate related loans (including $193.3 million of mezzanine loans and $125.0
million of bank loans); $239.9 million of agency RMBS; $151.6 million of
commercial mortgage backed securities (CMBS); $74.1 million of real estate
related asset backed securities (ABS); and $64.7 million of real estate
investment trust (REIT) debt. In addition, we sold $58.1 million of real estate
securities with an average credit rating of BBB.
Kenneth Riis, our President, commented, "On the investment side, we had a robust
third quarter, investing $95 million of capital. Given the large upcoming deal
calendar, we are optimistic about our ability to deploy capital in the fourth
quarter, which has historically been our most active quarter."
INVESTMENT PORTFOLIO
At September 30, 2005, our $5.6 billion investment portfolio (excluding the ICH
loans) represented 96% of our total assets and consisted of $4.9 billion of real
estate securities and real estate related loans and $695.5 million of
residential mortgage loans.
Real Estate Securities and Real Estate Related Loans. Our portfolio was
well diversified with 516 securities and loans. Of these investments, 66%
were fixed rate investments and the remaining 34% were floating rate. The
portfolio consisted of 34% CMBS, 17% REIT debt, 14% ABS, 13% agency RMBS,
13% B-Notes and mezzanine loans and 9% real estate loans and bank loans.
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The average credit quality was BBB-, and 69% of these investments were
rated investment grade. Our average investment size was $9.6 million, with
our largest single investment being $139.1 million, at quarter end. The
weighted average credit spread on this portfolio (i.e., the yield premium
on our investments over the comparable U.S. Treasury rate or LIBOR) was
247 basis points as of September 30, 2005.
Residential Mortgage Loans. Our portfolio is comprised of $397.1 million
of residential mortgage loans and $298.4 million of manufactured housing
loans. The residential loans and manufactured housing loans were well
diversified with 1,087 loans and 7,386 loans, respectively. The
residential mortgage loans had an average maturity of 2.8 years at quarter
end. In addition, the manufactured housing loans had an average maturity
of 4.9 years at the quarter end.
Newcastle's business strategy is to invest in a diversified portfolio of
moderately credit sensitive real estate securities and other real estate related
assets. The credit profile of our investment portfolio improved during the third
quarter. This can be demonstrated by the ratio of upgrades to downgrades in the
quarter, where 38 securities ($230 million face amount) experienced credit
rating upgrades versus one security ($5 million face amount) which experienced a
credit rating downgrade.
Our core business strategy is to "lock in" and optimize the difference between
the yield on our assets and the cost of our liabilities (which we refer to as
the "net spread"). We finance our investments in a manner that matches the
interest rates and maturities of our assets and liabilities in an effort to
minimize the impact of interest rate fluctuations on our earnings and to reduce
the risk of having to refinance our liabilities prior to the maturities of our
assets. As a result of this strategy, our earnings are relatively unaffected by
a change in rates. For instance, despite an increase in the one month LIBOR and
five year US treasury rates of approximately 52 bps and 49 bps, respectively, in
the third quarter, our net spread remained relatively unchanged at 159 bps.
Further, an immediate 100 basis point increase in short-term interest rates at
September 30, 2005 would have increased our earnings by approximately $350,000
per annum, or less than $0.01 per share.
CONFERENCE CALL
Newcastle's management will conduct a live conference call on October 27, 2005
at 4:30 P.M. Eastern Time to review the financial results for the quarter ended
September 30, 2005. All interested parties are welcome to participate on the
live call. You can access the conference call by dialing 866-323-3742 (from
within the U.S.) or 706-643-3330 (from outside of the U.S.) ten minutes prior to
the scheduled start of the call; please reference "Newcastle Third Quarter 2005
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. An online replay of the webcast will be
available until November 11, 2005.
A telephonic replay of the conference call will be available until 11:59 P.M.
Eastern Time on Friday, November 11, 2005 by dialing 800-642-1687 (from within
the U.S.) or 706-645-9291 (from outside of the U.S.); please reference access
code "1597321."
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ABOUT NEWCASTLE
Newcastle Investment Corp. invests in real estate securities and other real
estate related assets. Newcastle is organized and conducts its operations to
qualify as a real estate investment trust (REIT) for federal income tax
purposes. For more information regarding Newcastle Investment Corp. or to be
added to our email distribution list, please visit www.newcastleinv.com.
SAFE HARBOR
Certain items in this press release may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995,
including statements relating to our ability to deploy capital on an accretive
basis and the stability of our earnings. 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; 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, changes in investment opportunities present in the markets
we operate in or our ability to access or finance such investment opportunities;
the relative spreads between the yield on the assets we invest in and the cost
of financing; and other risks detailed from time to time in Newcastle's SEC
reports. 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.
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NEWCASTLE INVESTMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
REVENUES
Interest income $ 91,191 $ 55,767 $ 257,617 $ 160,937
Rental and escalation income 1,871 1,152 4,850 3,321
Gain on investments 6,788 6,227 13,111 15,809
------------ ------------ ------------ ------------
99,850 63,146 275,578 180,067
------------ ------------ ------------ ------------
EXPENSES
Interest expense 58,681 33,612 163,238 94,318
Property operating expense 594 616 1,827 1,787
Loan and security servicing expense 1,483 742 4,646 2,385
Provision for credit losses 4,091 - 5,990 -
General and administrative expense 1,034 1,180 3,251 3,484
Management fee to affiliate 3,316 2,790 9,895 7,750
Incentive compensation to affiliate 2,416 2,494 5,271 6,104
Depreciation and amortization 182 108 453 316
------------ ------------ ------------ ------------
71,797 41,542 194,571 116,144
------------ ------------ ------------ ------------
Income before equity in earnings of
unconsolidated subsidiaries 28,053 21,604 81,007 63,923
Equity in earnings of unconsolidated
subsidiaries 1,104 4,893 4,628 8,334
Income taxes on related taxable subsidiaries (43) (1,714) (321) (1,714)
------------ ------------ ------------ ------------
Income from continuing operations 29,114 24,783 85,314 70,543
Income (loss) from discontinued operations 86 185 2,051 (550)
------------ ------------ ------------ ------------
NET INCOME 29,200 24,968 87,365 69,993
Preferred dividends (1,523) (1,523) (4,570) (4,570)
------------ ------------ ------------ ------------
INCOME AVAILABLE FOR COMMON
STOCKHOLDERS $ 27,677 $ 23,445 $ 82,795 $ 65,423
============ ============ ============ ============
NET INCOME PER SHARE OF COMMON STOCK
BASIC $ 0.63 $ 0.61 $ 1.90 $ 1.80
============ ============ ============ ============
DILUTED $ 0.63 $ 0.60 $ 1.88 $ 1.77
============ ============ ============ ============
Income from continuing operations per share
of common stock, after preferred dividends
Basic $ 0.63 $ 0.61 $ 1.85 $ 1.82
============ ============ ============ ============
Diluted $ 0.63 $ 0.60 $ 1.84 $ 1.79
============ ============ ============ ============
Income (loss) from discontinued operations
per share of common stock
Basic $ 0.00 $ 0.00 $ 0.05 $ (0.02)
============ ============ ============ ============
Diluted $ 0.00 $ 0.00 $ 0.04 $ (0.02)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING
BASIC 43,789,819 38,234,481 43,595,411 36,273,142
============ ============ ============ ============
DILUTED 44,121,263 38,882,991 43,961,044 36,851,038
============ ============ ============ ============
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 0.625 $ 0.600 $ 1.875 $ 1.800
============ ============ ============ ============
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NEWCASTLE INVESTMENT CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
AS OF
SEPTEMBER 30, 2005 AS OF
(UNAUDITED) DECEMBER 31, 2004
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ASSETS
Real estate securities, available for sale $ 4,088,443 $ 3,369,496
Real estate securities portfolio deposit 24,055 25,411
Real estate related loans, net 668,558 591,890
Residential mortgage loans, net 684,321 654,784
Investments in unconsolidated subsidiaries 32,687 41,230
Operating real estate, net 16,839 57,193
Real estate held for sale - 12,376
Cash and cash equivalents 16,409 37,911
Restricted cash 246,132 77,974
Derivative assets 54,161 27,122
Receivables and other assets 36,320 37,333
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$ 5,867,925 $ 4,932,720
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LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CBO bonds payable $ 3,093,865 $ 2,656,510
Other bonds payable 369,082 222,266
Notes payable 324,920 652,000
Repurchase agreements 983,573 490,620
Credit facility 42,000 -
Derivative liabilities 24,106 39,661
Dividends payable 28,384 25,928
Due to affiliates 6,380 8,963
Accrued expenses and other liabilities 101,811 40,057
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4,974,121 4,136,005
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STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value, 100,000,000 shares authorized, 2,500,000
shares of Series B Cumulative Redeemable Preferred Stock, liquidation
preference $25.00 per share, issued and outstanding 62,500 62,500
Common stock, $0.01 par value, 500,000,000 shares authorized,
43,789,819 and 39,859,481 shares issued and outstanding at September
30, 2005 and December 31, 2004, respectively 438 399
Additional paid-in capital 782,091 676,015
Dividends in excess of earnings (13,265) (13,969)
Accumulated other comprehensive income 62,040 71,770
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893,804 796,715
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$ 5,867,925 $ 4,932,720
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NEWCASTLE INVESTMENT CORP.
RECONCILIATION OF GAAP NET INCOME TO FFO
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2005 SEPTEMBER 30, 2004
------------------- ------------------
Net income available for common stockholders $ 27,677 $ 23,445
Operating real estate depreciation 118 532
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Funds from operations ("FFO") $ 27,795 $ 23,977
================== ==================
We believe FFO is one appropriate measure of the operating performance of
real estate companies because it provides investors with information
regarding our ability to service debt and make capital expenditures. We
also believe that FFO is an appropriate supplemental disclosure of
operating performance for a REIT due to its widespread acceptance and use
within the REIT and analyst communities. Furthermore, FFO is used to
compute our incentive compensation to our manager. FFO, for our purposes,
represents net income available for common stockholders (computed in
accordance with GAAP), excluding extraordinary items, plus real estate
depreciation, and after adjustments for unconsolidated subsidiaries, if
any. We consider gains and losses on resolution of our investments to be a
normal part of our recurring operations and therefore do not exclude such
gains and losses when arriving at FFO. Adjustments for unconsolidated
subsidiaries, if any, are calculated to reflect FFO on the same basis. FFO
does not represent cash generated from operating activities in accordance
with GAAP and therefore should not be considered an alternative to net
income as an indicator of our operating performance or as an alternative
to cash flow as a measure of liquidity and is not necessarily indicative
of cash available to fund cash needs. Our calculation of FFO may be
different from the calculation used by other companies and, therefore,
comparability may be limited.
NEWCASTLE INVESTMENT CORP.
RECONCILIATION OF GAAP BOOK EQUITY TO INVESTED COMMON EQUITY
(IN THOUSANDS)
(UNAUDITED)
SEPTEMBER 30, 2005
------------------
Book equity $ 893,804
Preferred stock (62,500)
Accumulated depreciation on operating real estate 3,352
Accumulated other comprehensive income (62,040)
------------------
Invested common equity $ 772,616
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