Maryland
|
81-0559116
|
|
(State
or other jurisdiction of incorporation or
organization)
|
(I.R.S.
Employer Identification No.)
|
|
1345
Avenue of the Americas, New York, NY
|
10105
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(212)
798-6100
|
||
(Registrant's
telephone number, including area code)
|
||
(Former
name, former address and former fiscal year, if changed since last
report)
|
||
PAGE
|
|||
PART
I
|
FINANCIAL
INFORMATION
|
||
Item
1
|
Financial
Statements
|
||
Consolidated
Balance Sheets as of March 31, 2006 (unaudited) and December 31,
2005
|
1
|
||
Consolidated
Statements of Income (unaudited) for the three ended March 31,
2006 and
2005
|
2
|
||
Consolidated
Statements of Stockholders' Equity (unaudited) for the three months
ended
March 31, 2006 and 2005
|
3
|
||
Consolidated
Statements of Cash Flows (unaudited) for the three months ended
March 31,
2006 and 2005
|
4
|
||
Notes
to Consolidated Financial Statements (unaudited)
|
6
|
||
Item
2
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
14
|
|
Item
3
|
Quantitative
and Qualitative Disclosures About Market Risk
|
31
|
|
Item
4
|
Controls
and Procedures
|
36
|
|
PART
II.
|
OTHER
INFORMATION
|
||
Item
1
|
Legal
Proceedings
|
37
|
|
Item
1A
|
Risk
Factors
|
37
|
|
Item
2
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
38
|
|
Item
3
|
Defaults
upon Senior Securities
|
38
|
|
Item
4
|
Submission
of Matters to a Vote of Security Holders
|
38
|
|
Item
5
|
Other
Information
|
38
|
|
Item
6
|
Exhibits
|
39
|
|
SIGNATURES
|
|
40
|
March
31, 2006 (Unaudited)
|
December
31, 2005
|
||||||
Assets
|
|||||||
Real
estate securities, available for sale
|
$
|
4,732,563
|
$
|
4,554,519
|
|||
Real
estate related loans, net
|
670,938
|
615,551
|
|||||
Residential
mortgage loans, net
|
540,231
|
600,682
|
|||||
Subprime
mortgage loans, held for sale - Note 5
|
1,510,022
|
-
|
|||||
Investments
in unconsolidated subsidiaries
|
28,946
|
29,953
|
|||||
Operating
real estate, net
|
28,821
|
16,673
|
|||||
Cash
and cash equivalents
|
38,475
|
21,275
|
|||||
Restricted
cash
|
190,259
|
268,910
|
|||||
Derivative
assets
|
109,944
|
63,834
|
|||||
Receivables
and other assets
|
35,575
|
38,302
|
|||||
$
|
7,885,774
|
$
|
6,209,699
|
||||
Liabilities
and Stockholders' Equity
|
|||||||
Liabilities
|
|||||||
CBO
bonds payable
|
$
|
3,521,395
|
$
|
3,530,384
|
|||
Other
bonds payable
|
352,050
|
353,330
|
|||||
Notes
payable
|
220,825
|
260,441
|
|||||
Repurchase
agreements
|
2,674,127
|
1,048,203
|
|||||
Credit
facility
|
-
|
20,000
|
|||||
Junior
subordinated notes payable (security for trust preferred)
|
100,100
|
-
|
|||||
Derivative
liabilities
|
9,108
|
18,392
|
|||||
Dividends
payable
|
29,032
|
29,052
|
|||||
Due
to affiliates
|
4,011
|
8,783
|
|||||
Accrued
expenses and other liabilities
|
35,849
|
23,111
|
|||||
6,946,497
|
5,291,696
|
||||||
Stockholders'
Equity
|
|||||||
Preferred
stock, $0.01 par value, 100,000,000 shares authorized, 2,500,000
shares
of
9.75% Series B Cumulative Redeemable Preferred Stock and 1,600,000
shares
of 8.05% Series C Cumulative Redeemable Preferred Stock, liquidation
preference $25.00 per share, issued and
outstanding
|
102,500
|
102,500
|
|||||
Common
stock, $0.01 par value, 500,000,000 shares authorized, 43,967,409
and
43,913,409
shares issued and outstanding at March 31, 2006 and December
31, 2005, respectively
|
440
|
439
|
|||||
Additional
paid-in capital
|
783,784
|
782,735
|
|||||
Dividends
in excess of earnings
|
(12,124
|
)
|
(13,235
|
)
|
|||
Accumulated
other comprehensive income
|
64,677
|
45,564
|
|||||
939,277
|
918,003
|
||||||
$
|
7,885,774
|
$
|
6,209,699
|
Three
Months Ended
March
31,
|
|||||||
2006
|
2005
|
||||||
Revenues
|
|||||||
Interest
income
|
$
|
113,907
|
$
|
79,036
|
|||
Rental
and escalation income
|
2,008
|
1,264
|
|||||
Gain
on sale of investments, net
|
1,928
|
1,714
|
|||||
Other
income
|
5,705
|
1,649
|
|||||
123,548
|
83,663
|
||||||
Expenses
|
|||||||
Interest
expense
|
76,965
|
48,766
|
|||||
Property
operating expense
|
818
|
693
|
|||||
Loan
and security servicing expense
|
2,006
|
1,583
|
|||||
Provision
for credit losses
|
2,007
|
712
|
|||||
Provision
for losses, loans held for sale - Note 5
|
4,127
|
-
|
|||||
General
and administrative expense
|
1,630
|
891
|
|||||
Management
fee to affiliate
|
3,471
|
3,263
|
|||||
Incentive
compensation to affiliate
|
2,852
|
1,972
|
|||||
Depreciation
and amortization
|
199
|
136
|
|||||
|
94,075
|
58,016
|
|||||
Income
before equity in earnings of unconsolidated subsidiaries
|
29,473
|
25,647
|
|||||
Equity
in earnings of unconsolidated subsidiaries
|
1,195
|
2,086
|
|||||
Income
taxes on related taxable subsidiaries
|
-
|
(233
|
)
|
||||
Income
from continuing operations
|
30,668
|
27,500
|
|||||
Income
from discontinued operations
|
251
|
1,184
|
|||||
Net
Income
|
30,919
|
28,684
|
|||||
Preferred
dividends
|
(2,328
|
)
|
(1,523
|
)
|
|||
Income
Available For Common Stockholders
|
$
|
28,591
|
$
|
27,161
|
|||
Net
Income Per Share of Common Stock
|
|||||||
Basic
|
$
|
0.65
|
$
|
0.63
|
|||
Diluted
|
$
|
0.65
|
$
|
0.62
|
|||
Income
from continuing operations per share of common stock, after preferred
dividends
|
|||||||
Basic
|
$
|
0.64
|
$
|
0.60
|
|||
Diluted
|
$
|
0.64
|
$
|
0.59
|
|||
Income
from discontinued operations per share of common stock
|
|||||||
Basic
|
$
|
0.01
|
$
|
0.03
|
|||
Diluted
|
$
|
0.01
|
$
|
0.03
|
|||
Weighted
Average Number of Shares of Common
Stock Outstanding
|
|||||||
Basic
|
43,944,820
|
43,221,792
|
|||||
Diluted
|
44,063,940
|
43,629,078
|
|||||
Dividends
Declared per Share of Common Stock
|
$
|
0.625
|
$
|
0.625
|
|
Preferred
Stock
|
Common
Stock
|
Additional
Paid-in
Capital
|
Dividends
in Excess of
Earnings
|
Accum.
Other Comp.
Income
|
Total
Stock-holders'
Equity
|
|||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||||
Stockholders'
equity - December 31, 2005
|
4,100,000
|
$
|
102,500
|
43,913,409
|
$
|
439
|
$
|
782,735
|
$
|
(13,235
|
)
|
$
|
45,564
|
$
|
918,003
|
||||||||||
Dividends
declared
|
-
|
-
|
-
|
-
|
-
|
(29,808
|
)
|
-
|
(29,808
|
)
|
|||||||||||||||
Exercise
of common stock options
|
-
|
-
|
54,000
|
1
|
1,049
|
-
|
-
|
1,050
|
|||||||||||||||||
Comprehensive
income:
|
|||||||||||||||||||||||||
Net
income
|
-
|
-
|
-
|
-
|
-
|
30,919
|
-
|
30,919
|
|||||||||||||||||
Net
unrealized (loss) on securities
|
-
|
-
|
-
|
-
|
-
|
-
|
(36,554
|
)
|
(36,554
|
)
|
|||||||||||||||
Reclassification
of net realized (gain) on securities into earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
(29
|
)
|
(29
|
)
|
|||||||||||||||
Foreign
currency translation
|
-
|
-
|
-
|
-
|
-
|
-
|
(34
|
)
|
(34
|
)
|
|||||||||||||||
Net
unrealized gain on derivatives designated as cash flow
hedges
|
-
|
-
|
-
|
-
|
-
|
-
|
56,145
|
56,145
|
|||||||||||||||||
Reclassification
of net realized (gain) on derivatives designated as cash flow
hedges
into earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
(415
|
)
|
(415
|
)
|
|||||||||||||||
Total
comprehensive income
|
50,032
|
||||||||||||||||||||||||
Stockholders'
equity - March 31, 2006
|
4,100,000
|
$
|
102,500
|
43,967,409
|
$
|
440
|
$
|
783,784
|
$
|
(12,124
|
)
|
$
|
64,677
|
$
|
939,277
|
||||||||||
Stockholders'
equity - December 31, 2004
|
2,500,000
|
$
|
62,500
|
39,859,481
|
$
|
399
|
$
|
676,015
|
$
|
(13,969
|
)
|
$
|
71,770
|
$
|
796,715
|
||||||||||
Dividends
declared
|
-
|
-
|
-
|
-
|
-
|
(28,873
|
)
|
-
|
(28,873
|
)
|
|||||||||||||||
Issuance
of common stock
|
-
|
-
|
3,300,000
|
33
|
96,567
|
-
|
-
|
96,600
|
|||||||||||||||||
Exercise
of common stock options
|
-
|
-
|
599,430
|
6
|
9,077
|
-
|
-
|
9,083
|
|||||||||||||||||
Comprehensive
income:
|
|||||||||||||||||||||||||
Net
income
|
-
|
-
|
-
|
-
|
-
|
28,684
|
-
|
28,684
|
|||||||||||||||||
Net
unrealized (loss) on securities
|
-
|
-
|
-
|
-
|
-
|
-
|
(42,353
|
)
|
(42,353
|
)
|
|||||||||||||||
Reclassification
of net realized (gain) on securities into earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,409
|
)
|
(1,409
|
)
|
|||||||||||||||
Foreign
currency translation
|
-
|
-
|
-
|
-
|
-
|
-
|
(719
|
)
|
(719
|
)
|
|||||||||||||||
Reclassification
of net realized foreign currency translation into earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
(542
|
)
|
(542
|
)
|
|||||||||||||||
Net
unrealized gain on derivatives designated as cash flow
hedges
|
-
|
-
|
-
|
-
|
-
|
-
|
44,637
|
44,637
|
|||||||||||||||||
Reclassification
of net realized (gain) on derivatives designated as cash flow
hedges
into earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
(342
|
)
|
(342
|
)
|
|||||||||||||||
Total
comprehensive income
|
27,956
|
||||||||||||||||||||||||
Stockholders'
equity - March 31, 2005
|
2,500,000
|
$
|
62,500
|
43,758,911
|
$
|
438
|
$
|
781,659
|
$
|
(14,158
|
)
|
$
|
71,042
|
$
|
901,481
|
Three
Months Ended March 31,
|
|||||||
2006
|
2005
|
||||||
Cash
Flows From Operating Activities
|
|||||||
Net
income
|
$
|
30,919
|
$
|
28,684
|
|||
Adjustments
to reconcile net income to net cash provided by (used in) operating
activities
|
|||||||
(inclusive
of amounts related to discontinued operations):
|
|||||||
Depreciation
and amortization
|
199
|
312
|
|||||
Accretion
of discount and other amortization
|
(9,732
|
)
|
386
|
||||
Equity
in earnings of unconsolidated subsidiaries
|
(1,195
|
)
|
(2,086
|
)
|
|||
Distributions
of earnings from unconsolidated subsidiaries
|
1,195
|
2,086
|
|||||
Deferred
rent
|
(837
|
)
|
(258
|
)
|
|||
Gain
on sale of investments
|
(2,291
|
)
|
(2,456
|
)
|
|||
Unrealized
gain on non-hedge derivatives and hedge ineffectiveness
|
(5,673
|
)
|
(2,687
|
)
|
|||
Provision
for credit losses
|
2,007
|
-
|
|||||
Provision
for losses, loans held for sale
|
4,127
|
-
|
|||||
Purchase
of loans held for sale - Note 5
|
(1,511,086
|
)
|
-
|
||||
Change
in:
|
|||||||
Restricted
cash
|
8,570
|
(696
|
)
|
||||
Receivables
and other assets
|
5,929
|
(1,539
|
)
|
||||
Due
to affiliates
|
(4,772
|
)
|
(5,883
|
)
|
|||
Accrued
expenses and other liabilities
|
12,239
|
327
|
|||||
Net
cash provided by (used in) operating activities
|
(1,470,401
|
)
|
16,190
|
||||
Cash
Flows From Investing Activities
|
|||||||
Purchase
of real estate securities
|
(168,480
|
)
|
(122,254
|
)
|
|||
Proceeds
from sale of real estate securities
|
54,225
|
6,574
|
|||||
Deposit
on real estate securities (treated as a derivative)
|
-
|
(15,539
|
)
|
||||
Purchase
of and advances on loans
|
(221,173
|
)
|
(342,878
|
)
|
|||
Repayments
of loan and security principal
|
187,188
|
120,136
|
|||||
Margin
deposit on derivative instruments
|
(15,517
|
)
|
(20,000
|
)
|
|||
Return
of margin deposit on derivative instruments
|
19,866
|
-
|
|||||
Proceeds
from sale of derivative instruments
|
7,356
|
342
|
|||||
Purchase
and improvement of operating real estate
|
(179
|
)
|
(199
|
)
|
|||
Proceeds
from sale of operating real estate
|
-
|
10,693
|
|||||
Contributions
to unconsolidated subsidiaries
|
(100
|
)
|
-
|
||||
Distributions
of capital from unconsolidated subsidiaries
|
1,107
|
3,966
|
|||||
Payment
of deferred transaction costs
|
-
|
(24
|
)
|
||||
Net
cash used in investing activities
|
(135,707
|
)
|
(359,183
|
)
|
Three
Months Ended March 31,
|
|||||||
2006
|
2005
|
||||||
Cash
Flows From Financing Activities
|
|||||||
Repayments
of CBO bonds payable
|
(10,129
|
)
|
(891
|
)
|
|||
Issuance
of other bonds payable
|
237,111
|
246,547
|
|||||
Repayments
of other bonds payable
|
(236,372
|
)
|
(31,473
|
)
|
|||
Repayments
of notes payable
|
(39,616
|
)
|
(65,320
|
)
|
|||
Borrowings
under repurchase agreements
|
1,817,109
|
129,430
|
|||||
Repayments
of repurchase agreements
|
(191,185
|
)
|
(22,780
|
)
|
|||
Draws
under credit facility
|
90,000
|
-
|
|||||
Repayments
of credit facility
|
(110,000
|
)
|
-
|
||||
Issuance
of junior subordinated notes payable
|
100,100
|
-
|
|||||
Issuance
of common stock
|
-
|
97,680
|
|||||
Costs
related to issuance of common stock
|
-
|
(1,036
|
)
|
||||
Exercise
of common stock options
|
1,050
|
9,083
|
|||||
Dividends
paid
|
(29,828
|
)
|
(26,436
|
)
|
|||
Payment
of deferred financing costs
|
(4,932
|
)
|
(933
|
)
|
|||
Net
cash provided by financing activities
|
1,623,308
|
333,871
|
|||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
17,200
|
(9,122
|
)
|
||||
Cash
and Cash Equivalents, Beginning of Period
|
21,275
|
37,911
|
|||||
Cash
and Cash Equivalents, End of Period
|
$
|
38,475
|
$
|
28,789
|
|||
Supplemental
Disclosure of Cash Flow Information
|
|||||||
Cash
paid during the period for interest expense
|
$
|
67,648
|
$
|
46,232
|
|||
Cash
paid during the period for income taxes
|
$
|
244
|
$
|
355
|
|||
Supplemental
Schedule of Non-Cash Investing and Financing
Activities
|
|||||||
Common
stock dividends declared but not paid
|
$
|
27,480
|
$
|
27,349
|
|||
Preferred
stock dividends declared but not paid
|
$
|
1,552
|
$
|
1,016
|
|||
Foreclosure
of loans
|
$
|
12,200
|
$
|
-
|
Year
|
Shares
Issued
|
Range
of Issue Prices (1)
|
Net
Proceeds (millions)
|
|||||||
Formation
|
16,488,517
|
N/A
|
N/A
|
|||||||
2002
|
7,000,000
|
|
$13.00
|
$
|
80.0
|
|||||
2003
|
7,886,316
|
|
$20.35-$22.85
|
$
|
163.4
|
|||||
2004
|
8,484,648
|
|
$26.30-$31.40
|
$
|
224.3
|
|||||
2005
|
4,053,928
|
|
$29.60
|
$
|
108.2
|
|||||
Three
Months 2006
|
54,000
|
N/A
|
$
|
1.1
|
||||||
March
31, 2006
|
43,967,409
|
Real
Estate Securities
and
Real Estate Related Loans
|
Residential
Mortgage Loans
|
Operating
Real Estate
|
Unallocated
|
Total
|
||||||||||||
March
31, 2006 and the Three Months then Ended
|
||||||||||||||||
Gross
revenues
|
$
|
95,193
|
$
|
26,029
|
$
|
2,184
|
$
|
142
|
$
|
123,548
|
||||||
Operating
expenses
|
(817
|
)
|
(7,463
|
)
|
(877
|
)
|
(7,754
|
)
|
(16,911
|
)
|
||||||
Operating
income (loss)
|
94,376
|
18,566
|
1,307
|
(7,612
|
)
|
106,637
|
||||||||||
Interest
expense
|
(62,198
|
)
|
(13,928
|
)
|
-
|
(839
|
)
|
(76,965
|
)
|
|||||||
Depreciation
and amortization
|
-
|
-
|
(131
|
)
|
(68
|
)
|
(199
|
)
|
||||||||
Equity
in earnings of unconsolidated subsidiaries (A)
|
701
|
-
|
494
|
-
|
1,195
|
|||||||||||
Income
(loss) from continuing operations
|
32,879
|
4,638
|
1,670
|
(8,519
|
)
|
30,668
|
||||||||||
Income
from discontinued operations
|
-
|
-
|
251
|
-
|
251
|
|||||||||||
Net
Income (loss)
|
$
|
32,879
|
$
|
4,638
|
$
|
1,921
|
$
|
(8,519
|
)
|
$
|
30,919
|
|||||
Revenue
derived from non-U.S. sources:
|
||||||||||||||||
Canada
|
$
|
-
|
$
|
-
|
$
|
2,380
|
$
|
-
|
$
|
2,380
|
||||||
Total
assets
|
$
|
5,739,539
|
$
|
2,060,487
|
$
|
44,059
|
$
|
41,689
|
$
|
7,885,774
|
||||||
Long-lived
assets outside the U.S.:
|
||||||||||||||||
Canada
|
$
|
-
|
$
|
-
|
$
|
16,632
|
$
|
-
|
$
|
16,632
|
||||||
December
31, 2005
|
||||||||||||||||
Total
assets
|
$
|
5,544,818
|
$
|
606,320
|
$
|
36,306
|
$
|
22,255
|
$
|
6,209,699
|
||||||
Long-lived
assets outside the U.S.:
|
||||||||||||||||
Canada
|
$
|
-
|
$
|
-
|
$
|
16,673
|
$
|
-
|
$
|
16,673
|
||||||
Three
Months Ended March 31, 2005
|
||||||||||||||||
Gross
revenues
|
$
|
69,546
|
$
|
12,694
|
$
|
1,276
|
$
|
147
|
$
|
83,663
|
||||||
Operating
expenses
|
(323
|
)
|
(2,003
|
)
|
(701
|
)
|
(6,087
|
)
|
(9,114
|
)
|
||||||
Operating
income (loss)
|
69,223
|
10,691
|
575
|
(5,940
|
)
|
74,549
|
||||||||||
Interest
expense
|
(41,330
|
)
|
(7,278
|
)
|
(158
|
)
|
-
|
(48,766
|
)
|
|||||||
Depreciation
and amortization
|
-
|
-
|
(116
|
)
|
(20
|
)
|
(136
|
)
|
||||||||
Equity
in earnings of unconsolidated subsidiaries (A)
|
846
|
-
|
1,007
|
-
|
1,853
|
|||||||||||
Income
(loss) from continuing operations
|
28,739
|
3,413
|
1,308
|
(5,960
|
)
|
27,500
|
||||||||||
Income
from discontinued operations
|
-
|
-
|
1,184
|
-
|
1,184
|
|||||||||||
Net
Income (loss)
|
$
|
28,739
|
$
|
3,413
|
$
|
2,492
|
$
|
(5,960
|
)
|
$
|
28,684
|
|||||
Revenue
derived from non-U.S. sources:
|
||||||||||||||||
Canada
|
$
|
-
|
$
|
-
|
$
|
4,071
|
$
|
-
|
$
|
4,071
|
||||||
Belgium
|
$
|
-
|
$
|
-
|
$
|
532
|
$
|
-
|
$
|
532
|
Operating
Real Estate Subsidiary
|
Real
Estate Loan Subsidiary
|
Trust
Preferred Subsidiary
|
||||||||
Balance
at December 31, 2005
|
$
|
12,151
|
$
|
17,802
|
$
|
-
|
||||
Contributions
to unconsolidated subsidiaries
|
-
|
-
|
100
|
|||||||
Distributions
from unconsolidated subsidiaries
|
(456
|
)
|
(1,846
|
)
|
-
|
|||||
Equity
in earnings of unconsolidated subsidiaries
|
494
|
701
|
-
|
|||||||
Balance
at March 31, 2006
|
$
|
12,189
|
$
|
16,657
|
$
|
100
|
Operating
Real
Estate
Subsidiary
(A) (B)
|
Real
Estate Loan Subsidiary (A) (C)
|
||||||||||||
March
31,
|
December
31,
|
March
31,
|
December
31,
|
||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Assets
|
$
|
77,835
|
$
|
77,758
|
$
|
33,503
|
$
|
35,806
|
|||||
Liabilities
|
(53,000
|
)
|
(53,000
|
)
|
-
|
-
|
|||||||
Minority
interest
|
(457
|
)
|
(455
|
)
|
(189
|
)
|
(202
|
)
|
|||||
Equity
|
$
|
24,378
|
$
|
24,303
|
$
|
33,314
|
$
|
35,604
|
|||||
Equity
held by Newcastle
|
$
|
12,189
|
$
|
12,151
|
$
|
16,657
|
$
|
17,802
|
|||||
|
Three
Months Ended March 31,
|
Three
Months Ended March 31,
|
|||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Revenues
|
$
|
1,835
|
$
|
4,347
|
$
|
1,418
|
$
|
1,713
|
|||||
Expenses
|
(828
|
)
|
(1,822
|
)
|
(8
|
)
|
(12
|
)
|
|||||
Minority
interest
|
(19
|
)
|
(47
|
)
|
(8
|
)
|
(9
|
)
|
|||||
Net
income
|
$
|
988
|
$
|
2,478
|
$
|
1,402
|
$
|
1,692
|
|||||
Newcastle's
equity in net income
|
$
|
494
|
$
|
1,240
|
$
|
701
|
$
|
846
|
(A)
|
The
unconsolidated subsidiaries’ summary financial information is presented on
a fair value basis, consistent with their internal basis of
accounting.
|
(B) |
Included
in the operating real estate segment.
|
(C) |
Included
in the real estate securities and real estate related loans
segment.
|
|
|
|
Gross
Unrealized
|
|
|
Weighted
Average
|
|||||||||||||||||||||||||
Asset
Type
|
Current
Face Amount
|
Amortized
Cost Basis
|
Gains
|
Losses
|
Carrying
Value
|
Number
of
Securities
|
S&P
Equivalent
Rating
|
Coupon
|
Yield
|
Maturity
(Years)
|
|||||||||||||||||||||
CMBS-Conduit
|
$
|
1,439,923
|
$
|
1,386,083
|
$
|
22,437
|
$
|
(33,864
|
)
|
$
|
1,374,656
|
197
|
BBB-
|
5.84
|
%
|
6.55
|
%
|
7.61
|
|||||||||||||
CMBS-Large
Loan
|
651,043
|
647,783
|
7,707
|
(712
|
)
|
654,778
|
61
|
BBB-
|
6.77
|
%
|
6.99
|
%
|
2.39
|
||||||||||||||||||
CMBS-
B-Note
|
219,200
|
213,295
|
3,340
|
(1,286
|
)
|
215,349
|
33
|
BBB-
|
6.55
|
%
|
7.15
|
%
|
6.34
|
||||||||||||||||||
Unsecured
REIT Debt
|
931,208
|
946,833
|
14,286
|
(19,877
|
)
|
941,242
|
99
|
BBB-
|
6.35
|
%
|
5.98
|
%
|
6.70
|
||||||||||||||||||
ABS-Manufactured
Housing
|
175,912
|
159,727
|
1,503
|
(3,744
|
)
|
157,486
|
10
|
B
|
7.12
|
%
|
8.64
|
%
|
6.13
|
||||||||||||||||||
ABS-Home
Equity
|
549,937
|
547,563
|
5,873
|
(210
|
)
|
553,226
|
97
|
A-
|
6.47
|
%
|
6.65
|
%
|
3.00
|
||||||||||||||||||
ABS-Franchise
|
70,523
|
69,666
|
1,081
|
(1,557
|
)
|
69,190
|
20
|
BBB+
|
6.86
|
%
|
8.09
|
%
|
5.17
|
||||||||||||||||||
Agency
RMBS
|
776,725
|
781,505
|
-
|
(14,869
|
)
|
766,636
|
23
|
AAA
|
4.84
|
%
|
4.79
|
%
|
4.74
|
||||||||||||||||||
Total/Average
(A)
|
$
|
4,814,471
|
$
|
4,752,455
|
$
|
56,227
|
$
|
(76,119
|
)
|
$
|
4,732,563
|
540
|
BBB+
|
6.07
|
%
|
6.34
|
%
|
5.59
|
|
|
|
|
|
|
Gross
Unrealized
|
|
|
|
|
|
Weighted
Average
|
|
||||||||||||||||||
Securities
in an Unrealized Loss Position
|
|
Current
Face Amount
|
|
Amortized
Cost Basis
|
|
Gains
|
|
Losses
|
|
Carrying
Value
|
|
Number
of
Securities
|
|
S&P
Equivalent
Rating
|
|
Coupon
|
|
Yield
|
|
Maturity
(Years)
|
|||||||||||
Less
Than Twelve Months
|
$
|
2,157,334
|
$
|
2,131,028
|
$
|
-
|
$
|
(41,780
|
)
|
$
|
2,089,248
|
249
|
A-
|
5.80
|
%
|
5.96
|
%
|
6.63
|
|||||||||||||
Twelve
or More Months
|
851,130
|
861,347
|
-
|
(34,339
|
)
|
827,008
|
91
|
A
|
5.58
|
%
|
5.37
|
%
|
5.64
|
||||||||||||||||||
Total
|
$
|
3,008,464
|
$
|
2,992,375
|
$
|
-
|
$
|
(76,119
|
)
|
$
|
2,916,256
|
340
|
A-
|
5.74
|
%
|
5.79
|
%
|
6.35
|
Loan
Type
|
Current
Face
Amount
|
Carrying
Value
|
Loan
Count
|
Wtd.
Avg. Yield
|
Weighted
Average Maturity
(Years)
(D)
|
Delinquent
Carrying Amount (E)
|
|||||||||||||
B-Notes
|
$
|
38,568
|
$
|
38,964
|
6
|
7.84
|
%
|
3.14
|
$
|
-
|
|||||||||
Mezzanine
Loans (A)
|
445,200
|
444,904
|
7
|
8.79
|
%
|
2.30
|
-
|
||||||||||||
Bank
Loans
|
21,977
|
21,993
|
2
|
7.13
|
%
|
1.86
|
-
|
||||||||||||
Real
Estate Loans
|
20,917
|
20,140
|
1
|
20.02
|
%
|
1.75
|
-
|
||||||||||||
ICH
Loans (B)
|
145,360
|
144,937
|
85
|
8.64
|
%
|
1.54
|
6,104
|
||||||||||||
Total
Real Estate Related
Loans
|
$
|
672,022
|
$
|
670,938
|
101
|
8.99
|
%
|
2.15
|
$
|
6,104
|
|||||||||
Residential
Loans
|
$
|
276,381
|
$
|
282,755
|
785
|
5.40
|
%
|
2.80
|
$
|
3,192
|
|||||||||
Manufactured
Housing Loans
|
271,420
|
257,476
|
6,752
|
7.84
|
%
|
5.77
|
1,512
|
||||||||||||
Total
Residential Mortgage
Loans
|
547,801
|
540,231
|
7,537
|
6.56
|
%
|
4.27
|
4,704
|
||||||||||||
Subprime
Mortgage Loans (C)
|
1,502,181
|
1,510,022
|
11,272
|
7.18
|
%
|
2.49
|
-
|
||||||||||||
Total
Residential Mortgage and
Subprime Mortgage Loan
|
$
|
2,049,982
|
$
|
2,050,253
|
18,809
|
7.02
|
%
|
2.97
|
$
|
4,704
|
(A) |
One
of these loans has a contractual exit fee which Newcastle will begin
to
accrue if and when management believes
|
(B) |
In
October 2003, pursuant to FIN No. 46, Newcastle consolidated an entity
which holds a portfolio of commercial mortgage loans which has been
securitized. This investment, which is referred to as the ICH CMO,
was
previously treated as a non-consolidated residual interest in such
securitization. The primary effect of the consolidation is the requirement
that Newcastle reflect the gross loan assets and gross bonds payable
of
this entity in its financial
statements.
|
(C) |
See
Note 5 regarding the securitization of this portfolio in April
2006.
|
(D) |
The
weighted average maturities
for the residential loan portfolio, the manufactured housing loan
portfolio and the subprime mortgage loan portfolio were calculated
based
on constant prepayment rates (CPR) of approximately 30%, 10% and
28%,
respectively.
|
(E) |
This
face amount of loans is 60 or more days
delinquent.
|
Real
Estate Related Loans
|
Residential
Mortgage Loans
|
||||||
Balance
at December 31, 2005
|
$
|
4,226
|
$
|
3,207
|
|||
Provision
for credit losses
|
291
|
1,716
|
|||||
Realized
losses
|
(2,930
|
)
|
(1,514
|
)
|
|||
Balance
at March 31, 2006
|
$
|
1,587
|
$
|
3,409
|
Reference
Asset
|
|
Notional
Amount
|
|
Margin
Amount
|
|
Receive
Interest
Rate
|
|
Pay
Interest
Rate
|
|
Maturity
Date
|
|
Fair
Value
|
|||||||
Term
loan to a diversified real estate and
finance company
|
$
|
90,544
|
$
|
18,109
|
LIBOR
+ 3.000%
|
|
LIBOR
+ 0.625%
|
|
Feb
2008
|
$
|
1,092
|
||||||||
Mezzanine
loan to a real estate company
|
15,000
|
5,224
|
LIBOR
+ 4.985%
|
|
LIBOR
+ 1.350%
|
|
Jun
2007
|
101
|
|||||||||||
Term
loan to a diversified real estate
company
|
92,847
|
9,270
|
LIBOR
+ 1.750%
|
|
LIBOR
+ 0.500%
|
|
Aug
2007
|
970
|
|||||||||||
Term
loan to a retail company
|
100,000
|
19,960
|
LIBOR
+ 3.000%
|
|
LIBOR
+ 0.500%
|
|
Dec
2008
|
416
|
|||||||||||
Term
loan and revolver to an appliance
manufacturer (A)
|
37,168
|
15,517
|
LIBOR
+ 6.000% (B)
|
|
LIBOR
+ 1.000%
|
|
Feb
2007
|
(809
|
)
|
||||||||||
$
|
335,559
|
$
|
68,080
|
$
|
1,770
|
Weighted
average life (years)
|
2.5
|
|||
Expected
credit losses
|
5.3
|
%
|
||
Weighted
average constant prepayment rate
|
28.0
|
%
|
||
Discount
rate
|
18.7
|
%
|
Notional
Amount
|
|
Fair
Value
|
|
Longest
Maturity
|
||||||
Interest
rate swaps, treated as hedges (A)
|
$
|
3,077,308
|
$
|
91,123
|
November
2018
|
|||||
Interest
rate caps, treated as hedges (A)
|
342,351
|
2,127
|
October
2015
|
|||||||
Non-hedge
derivative obligations (A) (B)
|
1,573,061
|
5,932
|
July
2038
|
(A) |
Included
in Derivative Assets or Derivative Liabilities, as applicable. Derivative
Liabilities also include accrued interest.
|
(B) |
Represents
two essentially offsetting interest rate caps and two essentially
offsetting interest rate swaps, each with notional amounts
of $32.5 million, an interest rate cap with a notional amount of
$17.5
million, four interest rate swaps with an aggregate notional amount
of $24.8 million, and the swap related to the financing of our Subprime
Portfolio (Note 5) with a notional of $1,400.8
million.
|
Three
Months Ended March 31,
|
|||||||
2006
|
2005
|
||||||
|
|||||||
Weighted
average number of shares of common stock
outstanding, basic
|
43,944,820
|
43,221,792
|
|||||
Dilutive
effect of stock options, based on
the treasury stock method
|
119,120
|
407,286
|
|||||
Weighted
average number of shares of common stock
outstanding, diluted
|
44,063,940
|
43,629,078
|
Held
by the Manager
|
1,193,439
|
||
Issued
to the Manager and subsequently transferred to
certain of the Manager's Employees
|
550,368
|
||
Held
by the directors
|
14,000
|
||
Total
|
1,757,807
|
Year
|
|
Shares
Issued
|
|
Range
of Issue Prices (1)
|
|
Net
Proceeds (millions)
|
|
|||
Formation
|
16,488,517
|
N/A
|
N/A
|
|||||||
2002
|
7,000,000
|
|
13.00
|
$
|
80.0
|
|||||
2003
|
7,886,316
|
|
$20.35-$22.85
|
$
|
163.4
|
|||||
2004
|
8,484,648
|
|
$26.30-$31.40
|
$
|
224.3
|
|||||
2005
|
4,053,928
|
|
$29.60
|
$
|
108.2
|
|||||
Three
Months 2006
|
54,000
|
N/A
|
$
|
1.1
|
||||||
March
31, 2006
|
43,967,409
|
For
the Three Months Ended March 31,
|
|
Real
Estate Securities and Real Estate Related Loans
|
|
Residential
Mortgage Loans |
|
Operating
Real Estate |
|
Unallocated
|
|
Total
|
||||||
2006
|
$
|
95,193
|
$
|
26,029
|
$
|
2,184
|
$
|
142
|
$
|
123,548
|
||||||
2005
|
$
|
69,546
|
$
|
12,694
|
$
|
1,276
|
$
|
147
|
$
|
83,663
|
Three
Months Ended March 31, 2006/2005
|
||||||||||
Period
to Period
Change
|
Period
to Period
Percent
Change
|
Explanation
|
||||||||
Interest
income
|
$
|
34,871
|
44.1
|
%
|
(1)
|
|
||||
Rental
and escalation income
|
744
|
58.9
|
%
|
(2)
|
|
|||||
Gain
on sale of investments
|
214
|
12.5
|
%
|
(3)
|
|
|||||
Other
income
|
4,056
|
246.0
|
%
|
(4)
|
|
|||||
Interest
expense
|
28,199
|
57.8
|
%
|
(1)
|
|
|||||
Property
operating expense
|
125
|
18.0
|
%
|
(2)
|
|
|||||
Loan
and security servicing expense
|
423
|
26.7
|
%
|
(1)
|
|
|||||
Provision
for credit losses
|
1,295
|
181.9
|
%
|
(5)
|
|
|||||
Provision
for losses, loans held for sale
|
4,127
|
N/A
|
(6)
|
|
||||||
General
and administrative expense
|
739
|
82.9
|
%
|
(7)
|
|
|||||
Management
fee to affiliate
|
208
|
6.4
|
%
|
(8)
|
|
|||||
Incentive
compensation to affiliate
|
880
|
44.6
|
%
|
(8)
|
|
|||||
Depreciation
and amortization
|
63
|
46.3
|
%
|
(9)
|
|
|||||
Equity
in earnings of unconsolidated subsidiaries
|
(658
|
)
|
(35.5
|
%)
|
(10)
|
|
||||
Income
from continuing operations
|
$
|
3,168
|
11.5
|
%
|
(1)
|
Changes
in interest income and expense are primarily related to our acquisition
and disposition during the periods of interest bearing assets and
related
financings, as follows:
|
Three
Months Ended March 31, 2006/2005
|
|||||||
Period
to Period Increase (Decrease)
|
|||||||
Interest
Income
|
Interest
Expense
|
||||||
Real
estate security and loan portfolios (A)
|
$
|
14,745
|
$
|
12,424
|
|||
Agency
RMBS
|
5,995
|
5,672
|
|||||
Subprime
mortgage loan portfolio
|
9,588
|
7,093
|
|||||
Other
real estate related loans
|
7,280
|
2,221
|
|||||
Other
(B)
|
1,513
|
2,636
|
|||||
Other
real estate related loans (C)
|
(2,363
|
)
|
(1,115
|
)
|
|||
Residential
mortgage loan portfolio (C)
|
(1,887
|
)
|
(732
|
)
|
|||
$
|
34,871
|
$
|
28,199
|
(A)
|
Represents
our seventh and eighth CBO financings and the acquisition of the
related
collateral.
|
(B)
|
Primarily
due to increasing interest rates on floating rate assets and liabilities
owned during the entire period.
|
(C)
|
These
loans received paydowns during the period which served to offset
the
amounts listed above.
|
(2)
|
These
changes are primarily the result of the effect of the termination
of a
lease (including the acceleration of lease termination income), offset
by
foreign currency fluctuations.
|
(3)
|
This
change is primarily a result of the volume of sales of real estate
securities. Sales of real estate securities are based on a number
of
factors including credit, asset type and industry and can be expected
to
increase or decrease from time to time. Periodic fluctuations in
the
volume of sales of securities is dependent upon, among other things,
management’s assessment of credit risk, asset concentration, portfolio
balance and other factors.
|
(4)
|
This
change is primarily the result of recent investments in total return
swaps
which we treat as non-hedge derivatives and mark to market through
the
income statement, as well as the $5.5 million unrealized gain on
the
derivative used to hedge the financing of our subprime mortgage loans,
which did not qualify as a hedge for accounting purposes.
|
(5)
|
This
change is primarily the result of the acquisition of manufactured
housing
and residential mortgage loan pools at a discount for credit quality
and
impairment recorded with respect to the ICH loans.
|
(6)
|
This
change represents the unrealized loss on our pool of subprime mortgage
loans which was considered held for sale at March 31, 2006. This
loss was
related to market factors and was offset by the gain described in
(4)
above.
|
Debt
Obligation/Collateral
|
Month
Issued
|
|
Current
Face
Amount
|
|
Carrying
Value
|
|
Unhedged
Weighted
Average
Funding
Cost
|
|
Final
Stated Maturity
|
|
Weighted
Average
Funding
Cost
(1)
|
|
Weighted
Average Maturity
(Years)
|
|
Face
Amount
of
Floating Rate Debt
|
|
Collateral
Carrying
Value
|
|
Collateral
Weighted Average Maturity
(Years)
|
|
Face
Amount
of
Floating Rate Collateral
|
Aggregate
Notional
Amount
of
Current
Hedges
|
||
CBO
Bonds Payable
|
||||||||||||||||||||||||
Real
estate securities
|
Jul
1999
|
$
416,557
|
$
413,365
|
6.13%
(2)
|
Jul
2038
|
5.06%
|
2.85
|
|
$
321,557
|
$
555,490
|
4.77
|
$
-
|
$
262,732
|
|||||||||||
Real
estate securities and loans
|
Apr
2002
|
444,000
|
441,185
|
5.79%
(2)
|
Apr
2037
|
6.64%
|
4.21
|
|
372,000
|
|
494,240
|
5.61
|
67,613
|
296,000
|
||||||||||
Real
estate securities and loans
|
Mar
2003
|
472,000
|
468,543
|
5.87%
(2)
|
Mar
2038
|
5.23%
|
6.05
|
|
427,800
|
|
510,781
|
5.20
|
141,800
|
285,060
|
||||||||||
Real
estate securities and loans
|
Sep
2003
|
460,000
|
455,802
|
5.56%
(2)
|
Sep
2038
|
5.60%
|
6.61
|
442,500
|
501,566
|
4.71
|
170,659
|
207,500
|
||||||||||||
Real
estate securities and loans
|
Mar
2004
|
414,000
|
410,635
|
5.55%
(2)
|
Mar
2039
|
5.17%
|
6.36
|
382,750
|
441,187
|
5.21
|
193,054
|
177,300
|
||||||||||||
Real
estate securities and loans
|
Sep
2004
|
454,500
|
450,761
|
5.51%
(2)
|
Sep
2039
|
5.27%
|
7.01
|
442,500
|
492,325
|
5.50
|
216,427
|
209,373
|
||||||||||||
Real
estate securities and loans
|
Apr
2005
|
447,000
|
442,485
|
5.28%
(2)
|
Apr
2040
|
5.30%
|
7.92
|
439,600
|
480,986
|
6.42
|
177,969
|
243,247
|
||||||||||||
Real
estate securities
|
Dec
2005
|
442,800
|
438,619
|
5.18%
(2)
|
Dec
2050
|
5.30%
|
8.83
|
436,800
|
496,669
|
8.13
|
115,706
|
341,506
|
||||||||||||
3,550,857
|
3,521,395
|
5.45%
|
6.26
|
3,265,507
|
3,973,244
|
5.71
|
1,083,228
|
2,022,718
|
||||||||||||||||
Other
Bonds Payable
|
||||||||||||||||||||||||
ICH
loans (3)
|
(3)
|
121,156
|
121,156
|
6.73%
(2)
|
Aug
2030
|
|
6.73%
|
1.47
|
2,003
|
144,937
|
1.54
|
2,003
|
-
|
|||||||||||
Manufactured
housing loans
|
Jan
2006
|
232,912
|
230,894
|
LIBOR+1.25%
|
Jan
2009
|
6.03%
|
2.78
|
|
232,912
|
257,476
|
5.77
|
6,161
|
231,867
|
|||||||||||
354,068
|
352,050
|
6.27%
|
2.33
|
234,915
|
402,413
|
4.29
|
8,164
|
231,867
|
||||||||||||||||
Notes
Payable
|
||||||||||||||||||||||||
Residential
mortgage loans (4)
|
Nov
2004
|
220,825
|
220,825
|
LIBOR+0.16%
|
Nov
2007
|
5.14%
|
0.91
|
220,825
|
245,851
|
2.80
|
240,396
|
-
|
||||||||||||
220,825
|
220,825
|
5.14%
|
0.91
|
220,825
|
245,851
|
2.80
|
240,396
|
-
|
||||||||||||||||
Repurchase
Agreements (4) (11)
|
||||||||||||||||||||||||
Subprime
mortgage loans (5)
|
Rolling
|
1,462,427
|
1,462,427
|
LIBOR+
0.50%
|
Apr
2006 (5)
|
5.47%
|
0.02
|
1,462,427
|
1,510,022
|
2.49
|
987,684
|
-
|
||||||||||||
Residential
mortgage loans
|
Rolling
|
34,442
|
34,442
|
LIBOR+
0.43%
|
Jun
2006
|
5.39%
|
0.25
|
34,442
|
36,903
|
2.81
|
35,985
|
-
|
||||||||||||
Agency
RMBS (6)
|
Rolling
|
744,794
|
744,794
|
LIBOR+
0.13%
|
Apr
2006
|
4.60%
|
0.08
|
744,794
|
766,636
|
4.74
|
-
|
736,343
|
||||||||||||
Real
estate securities
|
Rolling
|
140,431
|
140,431
|
LIBOR+
0.57%
|
Various
(8)
|
4.77%
|
0.16
|
140,431
|
155,942
|
5.71
|
-
|
86,380
|
||||||||||||
Real
estate related loans
|
Rolling
|
292,033
|
292,033
|
LIBOR+
0.79%
|
Various
(8)
|
5.56%
|
0.08
|
292,033
|
417,891
|
2.37
|
418,130
|
-
|
||||||||||||
2,674,127
|
2,674,127
|
5.20%
|
0.04
|
2,674,127
|
2,887,394
|
3.27
|
1,441,799
|
822,723
|
||||||||||||||||
Credit
facility (7)
|
Jul
2005
|
-
|
-
|
LIBOR+
2.50% (9)
|
Jul
2008
|
0.00%
|
-
|
-
|
-
|
0.00
|
-
|
-
|
||||||||||||
Junior
subordinated notes payable
|
Mar
2006
|
100,100
|
100,100
|
7.574%
(10)
|
Apr
2036
|
7.62%
|
30.00
|
-
|
-
|
0.00
|
-
|
-
|
||||||||||||
Total
debt obligations
|
$
6,899,977
|
$
6,868,497
|
5.42%
|
3.82
|
$
6,395,374
|
$
7,508,902
|
4.59
|
$
2,773,587
|
$
3,077,308
|
(1) |
Includes
the effect of applicable
hedges.
|
(2) |
Weighted
average, including floating and fixed rate
classes.
|
(3) |
See
"Liquidity and Capital Resources" below regarding the consolidation
of ICH
CMO.
|
(4) |
Subject
to potential mandatory prepayments based on collateral
value.
|
(5) |
Repaid
in April 2006 with the proceeds from a term securitization of this
collateral. $400 million of this amount is nonrecourse to
us.
|
(6) |
A
maximum of $1 billion is available until November
2006.
|
(7) |
A
maximum of $100 million can be drawn. This credit facility was
terminated
and replaced with a new facility in May
2006.
|
(8) |
The
longest maturity is June 2006.
|
(9) |
In
addition, unused commitment fees of between 0.125% and 0.250% are
paid.
|
(10) |
LIBOR
+ 2.25% after April
2016.
|
(11) |
The
counterparties on our repurchase agreements include: Bank of America
Securities LLC ($777 million), Bear Stearns Mortgage Capital Corporation
($230 million), Greenwich Capital Markets Inc. ($1,532 million),
Deutsche
Bank AG ($104 million), and other ($31 million).
|
Period
from April 1, 2006 through December 31, 2006
|
$
|
2,674,127
|
||
2007
|
220,825
|
|||
2008
|
-
|
|||
2009
|
232,912
|
|||
2010
|
-
|
|||
2011
|
-
|
|||
Thereafter
|
3,772,113
|
|||
Total
|
$
|
6,899,977
|
Reference
Asset
|
|
Notional
Amount
|
|
Margin
Amount
|
|
Receive
Interest
Rate
|
|
Pay
Interest
Rate
|
|
Maturity
Date
|
|
Fair
Value
|
|||||||
Term
loan to a diversified real estate and finance
company
|
$
|
90,544
|
$
|
18,109
|
LIBOR
+3.000%
|
|
|
LIBOR
+ 0.625%
|
|
Feb
2008
|
$
|
1,092
|
|||||||
Mezzanine
loan to a real estate company
|
15,000
|
5,224
|
LIBOR
+4.985%
|
|
LIBOR
+ 1.350%
|
|
Jun
2007
|
101
|
|||||||||||
Term
loan to a diversified real estate company
|
92,847
|
9,270
|
LIBOR
+1.750%
|
|
LIBOR
+ 0.500%
|
|
Aug
2007
|
970
|
|||||||||||
Term
loan to a retail company
|
100,000
|
19,960
|
LIBOR
+3.000%
|
|
LIBOR
+ 0.500%
|
|
Dec
2008
|
416
|
|||||||||||
Term
loan and revolver to an appliance
manufacturer (A)
|
37,168
|
15,517
|
LIBOR
+6.000% (B)
|
|
LIBOR
+ 1.000%
|
|
Feb
2007
|
(809
|
)
|
||||||||||
$
|
335,559
|
$
|
68,080
|
$
|
1,770
|
Period
|
Shares
Issued
|
Range
of Issue Prices
(1)
|
Net
Proceeds (millions)
|
Options
Granted
to
Manager
|
||||
Three
Months 2006
|
54,000
|
N/A
|
$1.1
|
N/A
|
Held
by the Manager
|
1,193,439
|
|||
Issued
to the Manager and subsequently transferred to certain of the Manager’s
employees
|
550,368
|
|||
Held
by directors
|
14,000
|
|||
Total
|
1,757,807
|
Accumulated
other comprehensive income, December 31, 2005
|
$
|
45,564
|
||
Net
unrealized (loss) on securities
|
(36,554
|
)
|
||
Reclassification
of net realized (gain) on securities into earnings
|
(29
|
)
|
||
Foreign
currency translation
|
(34
|
)
|
||
Net
unrealized gain on derivatives designated as cash flow
hedges
|
56,145
|
|||
Reclassification
of net realized (gain) on derivatives designated as cash flow hedges
into
earnings
|
(415
|
)
|
||
Accumulated
other comprehensive income, March 31, 2006
|
$
|
64,677
|
Declared
for
the
Period Ended
|
|
Paid
|
|
Amount
Per
Share
|
March
31, 2006
|
April
28, 2006
|
$0.625
|
Total
Portfolio (1)
|
Core
Investment Portfolio (2)
|
||||||||||||
March
31,
2006
|
December
31,
2005
|
March
31,
2006
|
December
31,
2005
|
||||||||||
Face
amount
|
$
|
7,754,510
|
$
|
6,111,464
|
$
|
6,977,785
|
$
|
5,413,142
|
|||||
Percentage
of total assets (3) (4)
|
93
|
%
|
92
|
%
|
82
|
%
|
80
|
%
|
|||||
Weighted
average asset yield (3)
|
7.01
|
%
|
6.59
|
%
|
7.32
|
%
|
6.85
|
%
|
|||||
Weighted
average liability cost (3)
|
5.52
|
%
|
5.12
|
%
|
5.67
|
%
|
5.22
|
%
|
|||||
Weighted
average net spread (3)
|
1.49
|
%
|
1.47
|
%
|
1.65
|
%
|
1.63
|
%
|
(1)
|
Excluding the ICH loans. | ||||||
(2)
|
Excluding the ICH loans and Agency RMBS. | ||||||
(3)
|
March 31, 2006 has been adjusted to reflect the subprime mortgage loans and related financing on a pro forma basis, as they would be reflected subsequent to their securitization in April 2006. | ||||||
(4)
|
Represents unamortized cost as a percentage of total assets. |
Contract
Category
|
Change
|
Non-hedge
derivative obligations
|
We
entered into an additional total return swap, as well as a hedge
of the
financing of our subprime mortgage loan portfolio which did not qualify
for hedge accounting.
|
Other
bonds payable
|
The
portfolio of manufactured housing loans was refinanced.
|
Repurchase
agreements
|
We
entered into the interim financing for our subprime mortgage
loans.
|
Junior
subordinated notes payable
|
We
issued the junior subordinated notes payable in connection with the
issuance of trust preferred securities by our unconsolidated, wholly
owned
subsidiary.
|
Interest
rate swaps, treated as hedges
|
Certain
floating rate debt issuances, including those described above, as
well as
certain assets, were hedged with interest rate swaps.
|
Loan
servicing agreements
|
We
renewed the agreement related to our manufactured housing loan portfolio
at the same terms, and entered into an agreement related to our subprime
mortgage loan portfolio.
|
Funds
from Operations (FFO) is calculated as follows (unaudited) (in
thousands):
|
For
the Three
Months
Ended
March
31, 2006
|
||||
Income
available for common stockholders
|
$
|
28,591
|
||
Operating
real estate depreciation
|
131
|
|||
Funds
from Operations (FFO)
|
$
|
28,722
|
Funds
from Operations was derived from our segments as follows (unaudited)
(in
thousands):
|
Book
Equity at
March
31, 2006
|
Average
Invested Common Equity for the Three Months Ended March 31,
2006(2)
|
FFO
for the Three Months Ended
March
31, 2006
|
Return
on
Invested
Common
Equity (ROE) (3)
|
||||||||||
Real
estate securities and real estate related loans
|
$
|
832,814
|
$
|
809,690
|
$
|
32,879
|
16.2
|
%
|
|||||
Residential
mortgage loans
|
94,975
|
74,714
|
4,638
|
24.8
|
%
|
||||||||
Operating
real estate
|
44,651
|
45,185
|
2,052
|
18.2
|
%
|
||||||||
Unallocated
(1)
|
(196,822
|
)
|
(142,579
|
)
|
(10,847
|
)
|
N/A
|
||||||
Total
(2)
|
775,618
|
$
|
787,010
|
$
|
28,722
|
14.6
|
%
|
||||||
Preferred
stock
|
102,500
|
||||||||||||
Accumulated
depreciation
|
(3,518
|
)
|
|||||||||||
Accumulated
other comprehensive income
|
64,677
|
||||||||||||
Net
book equity
|
$
|
939,277
|
(1)
|
Unallocated FFO represents ($2,328) of preferred dividends, ($839) of interest on our credit facility, and ($7,680) of corporate general and administrative expense, management fees and incentive compensation for the three months ended March 31, 2006. | |||||||
(2)
|
Invested
common equity is equal to book equity excluding preferred stock,
accumulated depreciation and accumulated
other
comprehensive income.
|
|||||||
(3)
|
FFO divided by average invested common equity, annualized. |
Carrying
Value
|
|
Principal
Balance or Notional Amount
|
|
Weighted
Average Yield/Funding Cost
|
|
Maturity
Date
|
|
Fair
Value
|
||||||||
Assets:
|
||||||||||||||||
Real
estate securities, available for sale (1)
|
$
|
4,732,563
|
$
|
4,814,471
|
6.34
|
%
|
(1)
|
$
|
4,732,563
|
|||||||
Real
estate related loans (2)
|
670,938
|
672,022
|
8.99
|
%
|
(2)
|
673,589
|
||||||||||
Residential
mortgage loans (3)
|
540,231
|
547,801
|
6.56
|
%
|
(3)
|
538,588
|
||||||||||
Subprime
mortgage loans, held for sale (3)
|
1,510,022
|
1,502,181
|
7.18
|
%
|
(3)
|
1,510,022
|
||||||||||
Interest
rate caps, treated as hedges (4)
|
2,127
|
342,351
|
N/A
|
(4)
|
2,127
|
|||||||||||
Total
return swaps (5)
|
1,770
|
335,559
|
N/A
|
(5)
|
1,770
|
|||||||||||
Liabilities:
|
|
|||||||||||||||
CBO
bonds payable (6)
|
3,521,395
|
3,550,857
|
5.45
|
%
|
(6)
|
3,577,420
|
||||||||||
Other
bonds payable (7)
|
352,050
|
354,068
|
6.27
|
%
|
(7)
|
353,491
|
||||||||||
Notes
payable (8)
|
220,825
|
220,825
|
5.14
|
%
|
(8)
|
220,825
|
||||||||||
Repurchase
agreements (9)
|
2,674,127
|
2,674,127
|
5.20
|
%
|
(9)
|
2,674,127
|
||||||||||
Credit
facility (10)
|
-
|
-
|
N/A
|
N/A
|
-
|
|||||||||||
Junior
subordinated notes payable (11)
|
100,100
|
100,100
|
7.62
|
%
|
(11)
|
|
100,100
|
|||||||||
Interest
rate swaps, treated as hedges (12)
|
(91,123
|
)
|
3,077,308
|
N/A
|
(12)
|
|
(91,123
|
)
|
||||||||
Non-hedge
derivatives (13)
|
(5,932
|
)
|
1,573,061
|
N/A
|
(13)
|
(5,932
|
)
|
(1) |
These
securities contain various terms, including fixed and floating rates,
self-amortizing and interest only. Their weighted average maturity
is 5.59
years. The fair value of these securities is estimated by obtaining
third
party broker quotations, if available and practicable, and counterparty
quotations.
|
(2)
|
Represents
the following loans:
|
Loan
Type
|
|
Current
Face
Amount
|
|
Carrying
Value
|
|
Weighted
Avg.
Yield
|
|
Weighted
Average
Maturity
(Years)
|
|
Floating
Rate Loans as a % of Carrying Value
|
|
Fair
Value
|
|||||||
B-Notes
|
$
|
38,568
|
$
|
38,964
|
7.84
|
%
|
3.14
|
51.3
|
%
|
$
|
40,631
|
||||||||
Mezzanine
Loans
|
445,200
|
444,904
|
8.79
|
%
|
2.30
|
100.0
|
%
|
445,155
|
|||||||||||
Bank
Loans
|
21,977
|
21,993
|
7.13
|
%
|
1.86
|
100.0
|
%
|
22,198
|
|||||||||||
Real
Estate Loans
|
20,917
|
20,140
|
20.02
|
%
|
1.75
|
0.0
|
%
|
20,668
|
|||||||||||
ICH
Loans
|
145,360
|
144,937
|
8.64
|
%
|
1.54
|
1.4
|
%
|
144,937
|
|||||||||||
$
|
672,022
|
$
|
670,938
|
8.99
|
%
|
2.15
|
72.9
|
%
|
$
|
673,589
|
(3)
|
This
aggregate portfolio of residential loans consists of a portfolio
of
floating rate residential mortgage loans, a portfolio of mostly floating
rate subprime mortgage loans, and a portfolio of primarily fixed
rate
manufactured housing loans. The $282.8 million portfolio of residential
mortgage loans has a weighted average maturity of 2.80 years. The
$257.5
million manufactured housing loan portfolio has a weighted average
maturity of 5.77 years. The $1,510.0 million portfolio of subprime
mortagage loans has a weighted average maturity of 2.49 years. The
residential mortgage loans and manufactured housing loans were valued
by
discounting expected future receipts by a rate calculated based on
current
market conditions for comparable financial instruments, including
market
interest rates and credit spreads. The subprime mortgage loans were
valued
by obtaining a third party broker
quotation.
|
(4) |
Represents
cap agreements as follows:
|
Notional
Balance
|
|
Effective
Date
|
|
Maturity
Date
|
|
Capped
Rate
|
|
Strike
Rate
|
|
Fair
Value
|
|||||||
$
|
262,732
|
Current
|
March
2009
|
1-Month
LIBOR
|
6.50%
|
|
$
|
180
|
|||||||||
18,000
|
January
2010
|
October
2015
|
3-Month
LIBOR
|
8.00%
|
|
338
|
|||||||||||
8,619
|
December
2010
|
June
2015
|
3-Month
LIBOR
|
7.00%
|
|
583
|
|||||||||||
53,000
|
May
2011
|
September
2015
|
1-Month
LIBOR
|
7.50%
|
|
1,026
|
|||||||||||
$
|
342,351
|
$
|
2,127
|
(5) |
Represents
total rate of return swaps which are treated as non-hedge derivatives.
The
fair value of these agreements, which is included in Derivative Assets,
is
estimated by obtaining counterparty quotations. See “Management’s
Discussion and Analysis of Financial Condition and Results of Operations
-
Liquidity and Capital Resources” for a further discussion of these
swaps.
|
(6)
|
These
bonds were valued by discounting expected future cash flows by a
rate
calculated based on current market conditions for comparable financial
instruments, including market interest rates and credit spreads.
The
weighted average maturity of the CBO bonds payable is 6.26 years.
The CBO
bonds payable amortize principal prior to maturity based on collateral
receipts, subject to reinvestment
requirements.
|
(7)
|
The
ICH bonds amortize principal prior to maturity based on collateral
receipts and have a weighted average maturity of 1.47 years. These
bonds
were valued by discounting expected future cash flows by a rate calculated
based on current market conditions for comparable financial instruments,
including market interest rates and credit spreads. The manufactured
housing loan bonds have a weighted average maturity of 2.78 years
and bear
a floating rate of interest. These bonds were issued in January 2006
and
we believe the credit spread is still a market credit spread. Accordingly,
the carrying amount outstanding is believed to approximate fair
value.
|
(8)
|
The
residential mortgage loan financing has a weighted average maturity
of
0.91 years, bears a floating rate of interest, and is subject to
adjustment monthly based on the market value of the loan portfolio.
This
financing was valued by discounting expected future cash flows by
a rate
calculated based on current market conditions for comparable financial
instruments, including market interest rates and credit spreads.
|
(9) |
These
agreements bear floating rates of interest, which reset monthly or
quarterly to a market credit spread, and we believe that, for similar
financial instruments with comparable credit risks, the effective
rates
approximate market rates. Accordingly, the carrying amounts outstanding
are believed to approximate fair value. These agreements have a weighted
average maturity of 0.04 years.
|
(10) |
There
were no amounts outstanding on the credit
facility.
|
(11) |
These
notes have a weighted average maturity of 30.0 years. This financing
closed in late March 2006. As a result, the carrying amount outstanding
at
March 31, 2006 is believed to approximate fair
value.
|
(12) |
Represents
current swap agreements as follows (in
thousands):
|
Notional
Balance
|
|
Maturity
Date
|
|
Swapped
Rate
|
|
Fixed
Rate
|
|
Fair
Value
|
||||||
$
|
262,732
|
March
2009
|
1-Month
LIBOR*
|
3.1250%
|
|
$
|
(11,427
|
)
|
||||||
290,000
|
|
April
2011
|
3-Month
LIBOR
|
5.9325%
|
|
7,230
|
||||||||
6,000
|
February
2011
|
3-Month
LIBOR
|
5.0790%
|
|
(49
|
)
|
||||||||
276,060
|
March
2013
|
3-Month
LIBOR
|
3.8650%
|
|
(19,950
|
)
|
||||||||
9,000
|
February
2011
|
3-Month
LIBOR
|
5.0790%
|
|
(74
|
)
|
||||||||
192,500
|
March
2015
|
1-Month
LIBOR
|
4.8880%
|
|
(3,812
|
)
|
||||||||
15,000
|
February
2011
|
1-Month
LIBOR
|
5.0610%
|
|
(126
|
)
|
||||||||
165,300
|
March
2014
|
3-Month
LIBOR
|
3.9945%
|
|
(12,256
|
)
|
||||||||
12,000
|
February
2011
|
3-Month
LIBOR
|
5.0780%
|
|
(100
|
)
|
||||||||
189,373
|
September
2014
|
3-Month
LIBOR
|
4.3731%
|
|
(11,863
|
)
|
||||||||
20,000
|
February
2011
|
3-Month
LIBOR
|
5.0780%
|
|
(168
|
)
|
||||||||
243,247
|
March
2015
|
1-Month
LIBOR
|
4.8495%
|
|
(6,980
|
)
|
||||||||
307,355
|
December
2015
|
1-Month
LIBOR
|
4.9885%
|
|
(7,167
|
)
|
||||||||
34,151
|
December
2015
|
1-Month
LIBOR
|
5.0098%
|
|
(1,095
|
)
|
||||||||
177,310
|
January
2016
|
1-Month
LIBOR
|
4.8140%
|
|
(3,240
|
)
|
||||||||
54,557
|
January
2016
|
1-Month
LIBOR
|
4.7940%
|
|
(1,040
|
)
|
||||||||
5,000
|
November
2008
|
1-Month
LIBOR
|
3.5400%
|
|
(202
|
)
|
||||||||
4,500
|
November
2018
|
1-Month
LIBOR
|
4.4800%
|
|
(173
|
)
|
||||||||
40,000
|
January
2009
|
1-Month
LIBOR
|
3.6500%
|
|
(1,611
|
)
|
||||||||
12,000
|
January
2015
|
1-Month
LIBOR
|
4.5100%
|
|
(682
|
)
|
||||||||
64,884
|
October
2009
|
1-Month
LIBOR
|
3.7150%
|
|
(2,208
|
)
|
||||||||
61,716
|
September
2009
|
1-Month
LIBOR
|
3.7090%
|
|
(2,079
|
)
|
||||||||
21,246
|
December
2009
|
1-Month
LIBOR
|
3.8290%
|
|
(687
|
)
|
||||||||
7,201
|
August
2009
|
1-Month
LIBOR
|
4.0690%
|
|
(181
|
)
|
||||||||
20,893
|
February
2010
|
1-Month
LIBOR
|
4.1030%
|
|
(558
|
)
|
||||||||
32,809
|
April
2010
|
1-Month
LIBOR
|
4.5310%
|
|
(550
|
)
|
||||||||
28,431
|
March
2010
|
1-Month
LIBOR
|
4.5260%
|
|
(473
|
)
|
||||||||
23,954
|
April
2010
|
1-Month
LIBOR
|
4.1640%
|
|
(618
|
)
|
||||||||
40,623
|
March
2010
|
1-Month
LIBOR
|
4.0910%
|
|
(1,118
|
)
|
||||||||
41,719
|
May
2010
|
1-Month
LIBOR
|
3.9900%
|
|
(1,269
|
)
|
||||||||
20,841
|
April
2010
|
1-Month
LIBOR
|
3.9880%
|
|
(627
|
)
|
||||||||
36,216
|
September
2010
|
1-Month
LIBOR
|
4.3980%
|
|
(767
|
)
|
||||||||
17,683
|
September
2010
|
1-Month
LIBOR
|
4.4300%
|
|
(362
|
)
|
||||||||
42,723
|
August
2010
|
1-Month
LIBOR
|
4.4865%
|
|
(806
|
)
|
||||||||
26,799
|
August
2010
|
1-Month
LIBOR
|
4.4210%
|
|
(559
|
)
|
||||||||
20,490
|
June
2010
|
1-Month
LIBOR
|
4.4870%
|
|
(387
|
)
|
||||||||
21,580
|
August
2010
|
1-Month
LIBOR
|
4.4900%
|
|
(415
|
)
|
||||||||
42,347
|
July
2010
|
1-Month
LIBOR
|
4.4290%
|
|
(861
|
)
|
||||||||
58,759
|
December
2010
|
1-Month
LIBOR
|
4.7110%
|
|
(713
|
)
|
||||||||
28,550
|
January
2011
|
1-Month
LIBOR
|
5.0720%
|
|
(123
|
)
|
||||||||
28,623
|
January
2011
|
1-Month
LIBOR
|
5.0700%
|
|
(135
|
)
|
||||||||
23,697
|
January
2011
|
1-Month
LIBOR
|
5.0760%
|
|
(100
|
)
|
||||||||
24,559
|
February
2011
|
1-Month
LIBOR
|
5.2000%
|
|
(26
|
)
|
||||||||
6,245
|
March
2016
|
3-Month
LIBOR
|
5.2699%
|
|
(58
|
)
|
||||||||
15,100
|
January
2016
|
3-Month
LIBOR
|
4.8546%
|
|
(604
|
)
|
||||||||
3,535
|
March
2016
|
3-Month
LIBOR
|
5.1930%
|
|
(54
|
)
|
||||||||
$
|
3,077,308
|
|
$
|
(91,123
|
)
|
(a)
|
Disclosure
Controls and Procedures. The Company's management, with the participation
of the Company’s Chief Executive Officer and Chief Financial Officer, has
evaluated the effectiveness of the Company's disclosure controls
and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e)
under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
as
of the end of the period covered by this report. The Company’s disclosure
controls and procedures are designed to provide reasonable assurance
that
information is recorded, processed, summarized and reported accurately
and
on a timely basis. Based on such evaluation, the Company’s Chief Executive
Officer and Chief Financial Officer have concluded that, as of the
end of
such period, the Company's disclosure controls and procedures are
effective.
|
(b) |
Internal
Control Over Financial Reporting. During the fiscal quarter to which
this
report relates, the Company began using a significant new system
function
with respect to one of its information technology systems in a live
environment. As a result of, and in conjunction with, the implementation
of this function, the Company implemented certain new internal controls
and modified others. The nature of these new or modified internal
controls
did not have a material impact on the Company’s financial reporting. No
other changes in the Company's internal control over financial reporting
(as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) occurred during the fiscal quarter to which this report
relates that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
|
3.1
|
Articles
of Amendment and Restatement (incorporated by reference to the
Registrant's Registration Statement on Form S-11 (File No. 333-90578),
Exhibit 3.1).
|
3.2
|
Articles
Supplementary Relating to the Series B Preferred Stock (incorporated
by
reference to the Registrant’s Quarterly Report on Form 10-Q for the period
ended March 31, 2003, Exhibit 3.3).
|
3.3
|
Articles
Supplementary Relating to the Series C Preferred Stock (incorporated
by
reference to the Registrant’s Report on Form 8-K, Exhibit 3.3, filed on
October 25, 2005).
|
3.4
|
Amended
and Restated By-laws (incorporated by reference to the Registrant's
Registration Statement on Form 8-K, Exhibit 3.1, filed on May 5,
2006).
|
4.1
|
Rights
Agreement between the Registrant and American Stock Transfer and
Trust
Company, as Rights Agent, dated October 16, 2002 (incorporated by
reference to the Registrant’s Quarterly Report on Form 10-Q for the period
ended September 30, 2002, Exhibit
4.1).
|
10.1
|
Amended
and Restated Management and Advisory Agreement by and among the Registrant
and Fortress Investment Group LLC, dated June 23, 2003 (incorporated
by
reference to the Registrant’s Registration Statement on Form S-11 (File
No. 333-106135), Exhibit 10.1).
|
10.2
|
Newcastle
Investment Corp. Nonqualified Stock Option and Incentive Award Plan
Amended and Restated Effective as of February 11, 2004 (incorporated
by
reference to the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 2005, Exhibit
10.2).
|
31.1 |
Certification
of Chief Executive Officer as adopted pursuant to Section 302 of
the
Sarbanes-Oxley Act of 2002.
|
31.2 |
Certification
of Chief Financial Officer as adopted pursuant to Section 302 of
the
Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
32.2 |
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
By:
/s/
Wesley R. Edens
Name:
Wesley R. Edens
Title:
Chairman of the Board
Chief Executive Officer
Date:
May 10, 2006
|
||
By:
/s/
Debra A. Hess
Name:
Debra A. Hess
Title:
Chief Financial Officer
Date:
May 10, 2006
|