[LOGO GRAPHIC OMITTED] NEWCASTLE INVESTMENT CORP. Contact: FOR IMMEDIATE RELEASE Lilly H. Donohue Director of Investor Relations 212-798-6118 Newcastle Announces First Quarter 2005 Results First Quarter Highlights o Income available for common stockholders of $27.2 million, or $0.62 per diluted common share, up 6.9% from the first quarter 2004 on a per diluted common share basis. o $749 million investment activity in the first quarter, a 66% increase over first quarter 2004. o Declared dividend of $0.625 per share of common stock. o Issued 3.3 million shares of common stock, for net proceeds of approximately $97 million. New York, NY. April 27, 2005 - Newcastle Investment Corp. (NYSE: NCT) reported that for the quarter ended March 31, 2005, Funds from Operations ("FFO") were $25.6 million, or $0.59 per diluted common share, as compared to $20.9 million, or $0.60 per diluted common share for the quarter ended March 31, 2004. The FFO excluding the effect of the reversal of accumulated depreciation from the sale of a real estate property was $27.4 million or $0.63 per share. The Company generated an FFO return on average invested common equity of 13.52% for the first quarter 2005 and 14.50% excluding the reversal of accumulated depreciation. For the three months ended March 31, 2005, income available for common stockholders was $27.2 million, or $0.62 per diluted common share compared with $20.3 million, or $0.58 per diluted common share, in the first quarter 2004. For the quarter ended March 31, 2005, Newcastle declared a dividend of $0.625 per share of common stock. The Board also declared a dividend on the Series B preferred stock of $0.609 per share. Our GAAP common equity book value per share increased to $19.17 at March 31, 2005 from $18.42 at December 31, 2004. GAAP common equity book value was $839.0 million at March 31, 2005 compared with $734.2 million at December 31, 2004. 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. Selected Financial Data (in thousands) Three Months Ended Three Months Ended Operating Data (Unaudited): March 31, 2005 March 31, 2004 ------------------ ------------------ Funds from operations $25,623 $ 20,910 Income available for common stockholders 27,161 20,328 As of Balance Sheet Data: March 31, 2005 As of (Unaudited) December 31, 2004 ------------------ ------------------ Real estate securities $3,429,088 $ 3,369,496 Real estate related loans 567,489 591,890 Total assets 5,274,335 4,932,720 CBO bond obligations 2,656,427 2,656,510 Common stockholders' equity 838,981 734,215 Preferred stock 62,500 62,500 Supplemental Real Estate Securities and Real Estate Related Loans Data (Unaudited)*: March 31, 2005 -------------- Real estate securities and real estate related loans $ 3,798,608 Percentage of total assets 72% Weighted average asset yield 6.35% Weighted average liability cost 4.64% Weighted average net spread 1.71% Weighted average credit rating BBB- Weighted average asset credit spread 266 Percentage investment grade 70% Number of securities and loans 456 * Current face amount excluding ICH loans (as disclosed in our SEC filings). Capital Markets Activity In January 2005, Newcastle issued 3.3 million shares of common stock, raising net proceeds of approximately $97 million. The proceeds were used to acquire real estate securities and other real estate-related assets. Wesley R. Edens, our Chairman and Chief Executive Officer, commented, "Newcastle continues to successfully access the equity and debt capital markets. Since our IPO in October 2002, we have raised a total of $543 million in equity and issued approximately $2.4 billion in term debt. Our latest CBO financing was priced at the tightest spread level to date, illustrating the success and market acceptance of Newcastle as a manager and issuer." In April, we priced $447 million of non-recourse investment grade debt to finance our seventh real estate securities and real estate related loan portfolio. Approximately 85%, or $382 million, of the issued debt is rated AAA, which includes $323 million of money market eligible notes. The CBO has an expected weighted average life of approximately 8.9 years. The average initial funding spread is 32 basis points over swaps or LIBOR which is 13 basis points lower than our prior CBO financing. The final portfolio is expected to total approximately $500 million. To date, we have acquired, or entered into agreements to acquire, approximately 94% of the assets. First Quarter Investment Activity During the first quarter, we purchased or committed to purchase approximately $749 million in face amount of investments, of which $476 million was acquired on balance sheet. In addition, $146 million was acquired for CBO VII through its warehouse agreement, $100 million represented a bank loan (financed through a total rate of return swap) and $27 million was acquired within our existing consolidated CBOs. Real estate securities and real estate related loans. We purchased approximately $421 million of real estate securities and real estate related loans with an average credit rating of BBB-. Approximately $120 million of these securities were bank loans, $115 million agency RMBS, $100 million commercial mortgage backed securities and REIT debt, $61 million asset backed securities and $25 million B-Notes and mezzanine loans. In addition, we sold approximately $28 million of real estate securities with an average credit rating of BBB-. Residential mortgage loans. Manufactured housing loans represent $328 million of total purchases. At the time of purchase, the weighted average coupon was 9.06%, the loans were approximately 47 months seasoned with an average remaining term of 256 months and the weighted average FICO score of the borrowers was over 700. All of the loans were current at the time of purchase. Operating real estate. In the quarter, we closed on the sale of Fieldway, a Canadian property, for C$14.3 million. As a result of this sale, we recorded a net income gain of $0.5 million, or $0.01 per diluted share and a net FFO loss of $1.4 million, or $0.03 per diluted share because upon sale of the real estate, accumulated depreciation is reversed for purposes of calculating FFO. Kenneth Riis, our President, commented, "We continued to grow and diversify our investment portfolio in the first quarter. We successfully purchased a portfolio of manufactured housing loans that is generating attractive risk adjusted returns. In an environment where spreads are tight, we continue to source attractive investments to grow. Our total purchase commitments this quarter reflect a 66% increase over the first quarter in 2004." Real Estate Securities and Real Estate Related Loans As of March 31, 2005, our aggregate $3.8 billion real estate securities and real estate related loan portfolio was well diversified with 456 securities and loans. Of such amount, 68% were fixed rate investments and the remaining 32% were floating rate. The portfolio consisted of 61% CMBS and REIT debt, 17% ABS, 10% B-Notes and mezzanine loans, 8% agency RMBS and 4% real estate loans and bank loans. As of March 31, 2005, the average credit quality of our aggregate real estate securities and real estate related loan portfolio was BBB- and 70% of these investments were rated investment grade. Our average investment size was $8.3 million and our largest single investment was $85.3 million. The weighted average credit spread was 266 basis points as of March 31, 2005. The weighted average credit spread represents the yield premium on our investments over the comparable US Treasury rate or LIBOR. The Company's business strategy is to invest in a diverse portfolio of moderately credit sensitive real estate debt investments. Our business model is to lock in the difference between the yield on our assets and the cost of our liabilities and optimize this difference, which we refer to as "net spread." Newcastle seeks to match fund these investments with respect to interest rates and maturities in order to minimize the impact of interest rate fluctuations on earnings, and to reduce the risk of refinancing our liabilities prior to the maturity of our assets. The Company's real estate securities and real estate related loan portfolio and the respective liabilities have a weighted average life of 5.22 years and 5.36 years. As of March 31, 2005, a 100 basis point increase in short term interest rates would increase our earnings by $871,000 per annum, or $0.020 per share. Our real estate securities and real estate related loan portfolio continues to perform as expected. We continue to seek investments that will generate superior risk adjusted returns with a long-term objective of capital preservation and earnings stability in varying interest rate and credit cycles. Conference Call Management will conduct a conference call on April 27, 2005 to review the Company's first quarter financial results for the period ended March 31, 2005. The conference call is scheduled for 4:30 P.M. eastern time. All interested parties are welcome to participate on the live call. You can access the conference call by dialing (800) 762-6568 ten minutes prior to the scheduled start of the call; please reference "Newcastle First Quarter 2005 Earnings." International callers should dial (480) 629-9037. For those who are not available to listen to the live call, a replay will be available until 11:59 P.M. eastern time on Wednesday, May 4, 2005 by dialing (800) 475-6701; please reference access code "779903." International callers should dial (320) 365-3844 to access the replay. 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 on Newcastle Investment Corp. or to be added to our email distribution list, please visit www.newcastleinv.com. 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 source attractive investments and the performance of our real estate securities portfolio. 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 and changes in particular sectors of the economy which might adversely affect the credit quality of our securities portfolios and thereby their performance; 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. Newcastle Investment Corp. and Subsidiaries Consolidated Statements of Income (dollars in thousands, except share data) (Unaudited)
Three Months Ended March 31, -------------------------- Revenues 2005 2004 ---- ---- Interest income $ 79,711 $ 49,026 Rental and escalation income 1,264 1,147 ------------- ------------ Gain on settlement of investments , net 1,976 5,136 ------------- ------------ 82,951 55,309 ------------- ------------ Expenses Interest expense 48,766 28,091 Property operating expense 693 640 Loan and security servicing expense 1,583 782 General and administrative expense 891 1,140 Management fee to affiliate 3,263 2,397 Incentive compensation to affiliate 1,972 2,374 Depreciation and amortization 136 113 ------------- ------------ 57,304 35,537 ------------- ------------ Income before equity in earnings of unconsolidated subsidiaries 25,647 19,772 Equity in earnings of unconsolidated subsidiaries 2,086 1,223 Income taxes on related taxable subsidiaries (233) - ------------- ------------ Income from continuing operations 27,500 20,995 Income from discontinued operations 1,184 856 ------------- ------------ Net income 28,684 21,851 Preferred dividends (1,523) (1,523) ------------- ------------ Income Available For Common Stockholders $ 27,161 $ 20,328 ============= ============ Net Income Per Share of Common Stock Basic $ 0.63 $ 0.59 ============= ============ Diluted $ 0.62 $ 0.58 ============= ============ Income from continuing operations per share of common stock, after preferred dividends Basic $ 0.60 $ 0.57 ============= ============ Diluted $ 0.59 $ 0.56 ============= ============ Income from discontinued operations per share of common stock Basic $ 0.03 $ 0.02 ============= ============ Diluted $ 0.03 $ 0.02 ============= ============ Weighted Average Number Shares of Common Stock Outstanding Basic 43,221,792 34,401,800 ============= ============ Diluted 43,629,078 34,976,378 ============= ============ Dividends Declared per Share of Common Share $ 0.625 $ 0.600 ============= ============
Newcastle Investment Corp. and Subsidiaries Consolidated Balance Sheets (dollars in thousands, except share data)
As of March 31, 2005 As of Assets (Unaudited) December 31, 2004 ------------------------ ---------------------- Real estate securities, available for sale $ 3,429,088 $ 3,369,496 Real estate securities portfolio deposit 41,793 25,411 Real estate related loans, net 567,489 591,890 Investments in unconsolidated subsidiaries 37,264 41,230 Operating real estate, net 16,533 57,193 Real estate held for sale 41,365 12,376 Residential mortgage loans, net 888,979 654,784 Cash and cash equivalents 28,789 37,911 Restricted cash 128,763 77,974 Derivative assets 57,321 27,122 Receivables and other assets 36,951 37,333 ------------------------ ---------------------- $ 5,274,335 $ 4,932,720 ======================== ====================== Liabilities and Stockholders' Equity Liabilities CBO bonds payable $ 2,656,427 $ 2,656,510 Other bonds payable 436,509 222,266 Notes payable 586,680 652,000 Repurchase agreements 597,270 490,620 Derivative liabilities 23,718 39,661 Dividends payable 28,365 25,928 Due to affiliates 3,080 8,963 Accrued expenses and other liabilities 40,805 40,057 ------------------------ ---------------------- 4,372,854 4,136,005 ------------------------ ---------------------- 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, 43,758,911 and 39,859,481 shares issued and outstanding at March 31, 2005 and December 31, 2004, respectively 438 399 Additional paid-in capital 781,659 676,015 Dividends in excess of earnings (14,158) (13,969) Accumulated other comprehensive income 71,042 71,770 ------------------------ ---------------------- 901,481 796,715 ------------------------ ---------------------- $ 5,274,335 $ 4,932,720 ======================== ======================
Newcastle Investment Corp. Reconciliation of GAAP Net Income to FFO (In thousands) (Unaudited)
Three Months Ended Three Months Ended March March 31, 2005 31, 2004 -------------- ------------- Net income available for common stockholders $ 27,161 $ 20,328 Operating real estate depreciation 291 582 Accumulated depreciation on operating real estate sold (1,829) - -------------- ------------- Funds from operations ("FFO") $ 25,623 $ 20,910 ============== =============
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) March 31, 2005 -------------- Book equity $901,481 Preferred stock (62,500) Accumulated depreciation on operating real estate 2,986 Accumulated other comprehensive income (71,042) -------------- Invested common equity $770,925 ==============