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)
|
PAGE
|
||
PART
I.
|
FINANCIAL
INFORMATION
|
|
Item
1.
|
Financial
Statements
|
|
Consolidated
Balance Sheets as of March 31, 2007 (unaudited) and December 31,
2006
|
1
|
|
Consolidated
Statements of Income (unaudited) for the three months ended March
31, 2007
and 2006
|
2
|
|
Consolidated
Statements of Stockholders' Equity (unaudited) for the three months
ended
March 31, 2007 and 2006
|
3
|
|
Consolidated
Statements of Cash Flows (unaudited) for the three months ended
March 31,
2007 and 2006
|
4
|
|
Notes
to Consolidated Financial Statements (unaudited)
|
6
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
15
|
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, 2007 (Unaudited)
|
December
31, 2006
|
||||||
Assets
|
|
|
|||||
Real
estate securities, available for sale
|
$
|
5,581,179
|
$
|
5,581,228
|
|||
Real
estate related loans, net
|
2,138,974
|
1,568,916
|
|||||
Residential
mortgage loans, net
|
752,590
|
809,097
|
|||||
Subprime
mortgage loans, held for sale
|
1,018,080
|
-
|
|||||
Subprime
mortgage loans subject to call option - Note 5
|
289,021
|
288,202
|
|||||
Investments
in unconsolidated subsidiaries
|
22,778
|
22,868
|
|||||
Operating
real estate, net
|
29,684
|
29,626
|
|||||
Cash
and cash equivalents
|
3,929
|
5,371
|
|||||
Restricted
cash
|
267,903
|
184,169
|
|||||
Derivative
assets
|
51,032
|
62,884
|
|||||
Receivables
and other assets
|
65,801
|
52,031
|
|||||
|
$
|
10,220,971
|
$
|
8,604,392
|
|||
Liabilities
and Stockholders' Equity
|
|||||||
Liabilities
|
|||||||
CBO
bonds payable
|
$
|
4,282,503
|
$
|
4,313,824
|
|||
Other
bonds payable
|
649,853
|
675,844
|
|||||
Notes
payable
|
109,922
|
128,866
|
|||||
Repurchase
agreements
|
2,198,064
|
760,346
|
|||||
Repurchase
agreements subject to ABCP facility
|
1,312,209
|
1,143,749
|
|||||
Financing
of subprime mortgage loans subject to call option - Note 5
|
289,021
|
288,202
|
|||||
Credit
facility
|
125,500
|
93,800
|
|||||
Junior
subordinated notes payable (security for trust preferred)
|
100,100
|
100,100
|
|||||
Derivative
liabilities
|
22,726
|
17,715
|
|||||
Dividends
payable
|
35,003
|
33,095
|
|||||
Due
to affiliates
|
5,035
|
13,465
|
|||||
Accrued
expenses and other liabilities
|
52,085
|
33,406
|
|||||
|
9,182,021
|
7,602,412
|
|||||
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, 1,600,000
|
|||||||
shares
of 8.05% Series C Cumulative Redeemable Preferred Stock and 2,000,000
|
|||||||
shares
of 8.375% Series D Cumulative Redeemable Preferred Stock, liquidation
|
|||||||
preference
$25.00 per share, issued and outstanding
|
152,500
|
102,500
|
|||||
Common
stock, $0.01 par value, 500,000,000 shares authorized, 48,209,699
and
|
|||||||
45,713,817
shares issued and outstanding at March 31, 2007 and
|
|||||||
December
31, 2006, respectively
|
482
|
457
|
|||||
Additional
paid-in capital
|
908,368
|
833,887
|
|||||
Dividends
in excess of earnings
|
(10,437
|
)
|
(10,848
|
)
|
|||
Accumulated
other comprehensive income (loss)
|
(11,963
|
)
|
75,984
|
||||
|
1,038,950
|
1,001,980
|
|||||
|
$
|
10,220,971
|
$
|
8,604,392
|
|||
|
Three
Months Ended
March
31,
|
|||||||
|
2007
|
2006
|
|||||
Revenues
|
|
|
|||||
Interest
income
|
$
|
162,221
|
$
|
113,907
|
|||
Rental
and
escalation income
|
1,253
|
2,008
|
|||||
Gain
on sale of
investments, net
|
2,212
|
1,928
|
|||||
Other
income,
net
|
743
|
5,705
|
|||||
|
166,429
|
123,548
|
|||||
Expenses
|
|||||||
Interest
expense
|
116,757
|
76,965
|
|||||
Property
operating
expense
|
1,036
|
818
|
|||||
Loan
and security
servicing expense
|
1,983
|
2,006
|
|||||
Provision
for
credit losses
|
2,036
|
2,007
|
|||||
Provision
for
losses, loans held for sale - Note 5
|
-
|
4,127
|
|||||
General
and
administrative expense
|
1,337
|
1,630
|
|||||
Management
fee to
affiliate
|
3,906
|
3,471
|
|||||
Incentive
compensation to affiliate
|
3,688
|
2,852
|
|||||
Depreciation
and
amortization
|
329
|
199
|
|||||
|
131,072
|
94,075
|
|||||
Income
before equity in earnings of unconsolidated subsidiaries
|
35,357
|
29,473
|
|||||
Equity
in earnings of unconsolidated subsidiaries
|
847
|
1,195
|
|||||
Income
from continuing operations
|
36,204
|
30,668
|
|||||
Income
(loss) from discontinued operations
|
(13
|
)
|
251
|
||||
Net
Income
|
36,191
|
30,919
|
|||||
Preferred
dividends
|
(2,515
|
)
|
(2,328
|
)
|
|||
Income
Available For Common Stockholders
|
$
|
33,676
|
$
|
28,591
|
|||
Net
Income Per Share of Common Stock
|
|||||||
Basic
|
$
|
0.71
|
$
|
0.65
|
|||
Diluted
|
$
|
0.70
|
$
|
0.65
|
|||
Income
from continuing operations per share of common stock,
|
|||||||
after preferred dividends
|
|||||||
Basic
|
$
|
0.71
|
$
|
0.64
|
|||
Diluted
|
$
|
0.70
|
$
|
0.64
|
|||
Income
(loss) from discontinued operations per share of common
stock
|
|||||||
Basic
|
$
|
(0.00
|
)
|
$
|
0.01
|
||
Diluted
|
$
|
(0.00
|
)
|
$
|
0.01
|
||
Weighted
Average Number of Shares of Common Stock
Outstanding
|
|||||||
Basic
|
47,572,895
|
43,944,820
|
|||||
Diluted
|
47,823,497
|
44,063,940
|
|||||
Dividends
Declared per Share of Common Stock
|
$
|
0.690
|
$
|
0.625
|
|||
|
|||||||
|
|||||||
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
Additional
Paid-in
Capital
|
|
Dividends
in Excess of
Earnings
|
|
Accum.
Other Comp. Income
(Loss)
|
Total
Stock-holders'
Equity
|
||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
||||||||||||||||||||||
Stockholders'
equity - December 31, 2006
|
4,100,000
|
$
|
102,500
|
45,713,817
|
$
|
457
|
$
|
833,887
|
$
|
(10,848
|
)
|
$
|
75,984
|
$
|
1,001,980
|
||||||||||
Dividends
declared
|
-
|
-
|
-
|
-
|
-
|
(35,780
|
)
|
-
|
(35,780
|
)
|
|||||||||||||||
Issuance
of common stock
|
-
|
-
|
2,420,000
|
24
|
74,958
|
-
|
-
|
74,982
|
|||||||||||||||||
Exercise
of common stock options
|
-
|
-
|
75,882
|
1
|
1,270
|
-
|
-
|
1,271
|
|||||||||||||||||
Issuance
of preferred stock
|
2,000,000
|
50,000
|
-
|
-
|
(1,747
|
)
|
-
|
-
|
48,253
|
||||||||||||||||
Comprehensive
income:
|
|||||||||||||||||||||||||
Net
income
|
-
|
-
|
-
|
-
|
-
|
36,191
|
-
|
36,191
|
|||||||||||||||||
Net
unrealized
(loss) on securities
|
-
|
-
|
-
|
-
|
-
|
-
|
(65,513
|
)
|
(65,513
|
)
|
|||||||||||||||
Reclassification
of
net realized (gain) loss
on securities
into earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
(7,759
|
)
|
(7,759
|
)
|
|||||||||||||||
Foreign
currency
translation
|
-
|
-
|
-
|
-
|
-
|
-
|
189
|
189
|
|||||||||||||||||
Net
unrealized
(loss) on derivatives designated
as cash
flow hedges
|
-
|
-
|
-
|
-
|
-
|
-
|
(15,195
|
)
|
(15,195
|
)
|
|||||||||||||||
Reclassification
of
net realized loss
on derivatives
designated as
cash
flow
hedges
into earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
331
|
331 | |||||||||||||||||
Total
comprehensive
income (loss)
|
(51,756
|
)
|
|||||||||||||||||||||||
Stockholders'
equity - March 31, 2007
|
6,100,000
|
$
|
152,500
|
48,209,699
|
$
|
482
|
$
|
908,368
|
$
|
(10,437
|
)
|
$
|
(11,963
|
)
|
$
|
1,038,950
|
|||||||||
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
|
||||||||||
|
|
Three
Months Ended March 31,
|
||||||
|
2007
|
2006
|
|||||
Cash
Flows From Operating Activities
|
|
|
|||||
Net
income
|
$
|
36,191
|
$
|
30,919
|
|||
Adjustments
to reconcile net income to net cash provided by (used in) operating
activities
|
|||||||
(inclusive
of amounts related to discontinued operations):
|
|||||||
Depreciation
and amortization
|
329
|
199
|
|||||
Accretion
of discount and other amortization
|
(3,429
|
)
|
(9,732
|
)
|
|||
Equity
in earnings of unconsolidated subsidiaries
|
(847
|
)
|
(1,195
|
)
|
|||
Distributions
of
earnings from unconsolidated subsidiaries
|
847
|
1,195
|
|||||
Deferred rent
|
73
|
(837
|
)
|
||||
Gain on sale of investments
|
(2,212
|
)
|
(2,291
|
)
|
|||
Unrealized gain on non-hedge derivatives and hedge
ineffectiveness
|
(471
|
)
|
(5,673
|
)
|
|||
Provision for credit losses
|
2,036
|
2,007
|
|||||
Provision for losses, loans held for sale
|
-
|
4,127
|
|||||
Purchase
of loans held for sale - Notes 4 and 5
|
(992,031
|
)
|
(1,511,086
|
)
|
|||
Change
in:
|
|||||||
Restricted
cash
|
(22,645
|
)
|
8,570
|
||||
Receivables
and other assets
|
(17,233
|
)
|
5,929
|
||||
Due
to affiliates
|
(8,430
|
)
|
(4,772
|
)
|
|||
Accrued
expenses and other liabilities
|
5,631
|
12,239
|
|||||
Net
cash used in operating activities
|
(1,002,191
|
)
|
(1,470,401
|
)
|
|||
Cash
Flows From Investing Activities
|
|||||||
Purchase
of real estate securities
|
(225,808
|
)
|
(168,480
|
)
|
|||
Proceeds
from sale of real estate securities
|
51,673
|
54,225
|
|||||
Purchase of and advances on loans
|
(574,698
|
)
|
(221,173
|
)
|
|||
Repayments
of loan and security principal
|
124,559
|
187,188
|
|||||
Margin
received on derivative instruments
|
20,946
|
-
|
|||||
Return
of margin on derivative instruments
|
(26,691
|
)
|
-
|
||||
Margin
deposits on total rate of return swaps (treated as derivative
instruments)
|
(48,636
|
)
|
(15,517
|
)
|
|||
Return
of margin deposits on total rate of return swaps (treated as derivative
instruments)
|
29,316
|
19,866
|
|||||
Proceeds
from termination of derivative instruments
|
208
|
-
|
|||||
Proceeds
from sale of derivative instrument into Securitization Trust -
Note
5
|
-
|
7,356
|
|||||
Purchase
and improvement of operating real estate
|
(144
|
)
|
(179
|
)
|
|||
Contributions
to unconsolidated subsidiaries
|
-
|
(100
|
)
|
||||
Distributions
of capital from unconsolidated subsidiaries
|
90
|
1,107
|
|||||
Net
cash used in investing activities
|
(649,185
|
)
|
(135,707
|
)
|
|||
|
|||||||
Continued
on Page 5
|
|
Three
Months Ended March 31,
|
||||||
2007
|
2006
|
||||||
Cash
Flows From Financing Activities
|
|
|
|||||
Repayments of CBO bonds payable
|
(32,210
|
)
|
(10,129
|
)
|
|||
Issuance
of other
bonds payable
|
-
|
237,111
|
|||||
Repayments
of
other bonds payable
|
(26,407
|
)
|
(236,372
|
)
|
|||
Repayments
of
notes payable
|
(18,944
|
)
|
(39,616
|
)
|
|||
Borrowings
under repurchase agreements
|
1,776,665
|
1,817,109
|
|||||
Repayments
of
repurchase agreements
|
(338,947
|
)
|
(191,185
|
)
|
|||
Issuance
of
repurchase agreement subject to ABCP facility
|
216,672
|
-
|
|||||
Repayments
of
repurchase agreement subject to ABCP facility
|
(48,212
|
)
|
-
|
||||
Draws
under
credit facility
|
308,800
|
90,000
|
|||||
Repayments
of
credit facility
|
(277,100
|
)
|
(110,000
|
)
|
|||
Issuance
of
junior subordinated notes payable
|
-
|
100,100
|
|||||
Issuance
of
common stock
|
75,746
|
-
|
|||||
Costs
related
to issuance of common stock
|
(732
|
)
|
-
|
||||
Exercise
of
common stock options
|
1,271
|
1,050
|
|||||
Issuance
of
preferred stock
|
50,000
|
-
|
|||||
Costs
related
to issuance of preferred stock
|
(1,747
|
)
|
-
|
||||
Dividends
paid
|
(33,872
|
)
|
(29,828
|
)
|
|||
Payment
of
deferred financing costs
|
(1,049
|
)
|
(4,932
|
)
|
|||
Net
cash provided by financing activities
|
1,649,934
|
1,623,308
|
|||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
(1,442
|
)
|
17,200
|
||||
Cash
and Cash Equivalents, Beginning of Period
|
5,371
|
21,275
|
|||||
Cash
and Cash Equivalents, End of Period
|
$
|
3,929
|
$
|
38,475
|
|||
Supplemental
Disclosure of Cash Flow Information
|
|||||||
Cash
paid during
the period for interest expense
|
$
|
101,458
|
$
|
67,648
|
|||
Cash
paid
during the period for income taxes
|
$
|
-
|
$
|
244
|
|||
Supplemental
Schedule of Non-Cash Investing and Financing
Activities
|
|||||||
Common
stock dividends declared but not paid
|
$
|
33,265
|
$
|
27,480
|
|||
Preferred
stock
dividends declared but not paid
|
$
|
1,552
|
$
|
1,552
|
|||
Foreclosure
of
loans
|
$
|
-
|
$
|
12,200
|
Real
Estate Securities
and
Real Estate Related Loans
|
Residential
Mortgage
Loans
|
Operating
Real
Estate
|
Unallocated
|
Total
|
||||||||||||
March
31, 2007 and the Three Months then Ended
|
|
|
|
|
|
|||||||||||
Gross
revenues
|
$
|
135,419
|
$
|
29,646
|
$
|
1,284
|
$
|
80
|
$
|
166,429
|
||||||
Operating
expenses
|
(613
|
)
|
(3,436
|
)
|
(1,080
|
)
|
(8,857
|
)
|
(13,986
|
)
|
||||||
Operating
income (loss)
|
134,806
|
26,210
|
204
|
(8,777
|
)
|
152,443
|
||||||||||
Interest
expense
|
(93,342
|
)
|
(19,738
|
)
|
(6
|
)
|
(3,671
|
)
|
(116,757
|
)
|
||||||
Depreciation
and amortization
|
-
|
-
|
(256
|
)
|
(73
|
)
|
(329
|
)
|
||||||||
Equity
in earnings of unconsolidated subsidiaries
|
270
|
-
|
576
|
1
|
847
|
|||||||||||
Income
(loss) from continuing operations
|
41,734
|
6,472
|
518
|
(12,520
|
)
|
36,204
|
||||||||||
Income
(loss) from discontinued operations
|
-
|
-
|
(13
|
)
|
-
|
(13
|
)
|
|||||||||
Net
income (loss)
|
41,734
|
6,472
|
505
|
(12,520
|
)
|
36,191
|
||||||||||
Preferred
dividends
|
-
|
-
|
-
|
(2,515
|
)
|
(2,515
|
)
|
|||||||||
Income
(loss) available for common stockholders
|
$
|
41,734
|
$
|
6,472
|
$
|
505
|
$
|
(15,035
|
)
|
$
|
33,676
|
|||||
Revenue
derived from non-U.S. sources:
|
||||||||||||||||
Canada
|
$
|
-
|
$
|
-
|
$
|
730
|
$
|
-
|
$
|
730
|
||||||
Total
assets
|
$
|
8,031,677
|
$
|
2,132,769
|
$
|
48,731
|
$
|
7,794
|
$
|
10,220,971
|
||||||
Long-lived
assets outside the U.S.:
|
||||||||||||||||
Canada
|
$
|
-
|
$
|
-
|
$
|
16,661
|
$
|
-
|
$
|
16,661
|
||||||
December
31, 2006
|
||||||||||||||||
Total
assets
|
$
|
7,366,684
|
$
|
1,179,547
|
$
|
48,518
|
$
|
9,643
|
$
|
8,604,392
|
||||||
Long-lived
assets outside the U.S.:
|
||||||||||||||||
Canada
|
$
|
-
|
$
|
-
|
$
|
16,553
|
$
|
-
|
$
|
16,553
|
||||||
Three
Months Ended March 31, 2006
|
||||||||||||||||
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
|
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
|
||||||||||
Preferred
dividends
|
-
|
-
|
-
|
(2,328
|
)
|
(2,328
|
)
|
|||||||||
Income
(loss) available for common stockholders
|
$
|
32,879
|
$
|
4,638
|
$
|
1,921
|
$
|
(10,847
|
)
|
$
|
28,591
|
|||||
Revenue
derived from non-U.S. sources:
|
||||||||||||||||
Canada
|
$
|
-
|
$
|
-
|
$
|
2,380
|
$
|
-
|
$
|
2,380
|
||||||
continued
on page 8
|
Operating
Real
Estate
|
Real
Estate Loan
|
||||||
Balance
at December 31, 2006
|
$
|
12,528
|
$
|
10,249
|
|||
Contributions
to unconsolidated subsidiaries
|
-
|
-
|
|||||
Distributions
from unconsolidated subsidiaries
|
(371
|
)
|
(706
|
)
|
|||
Equity
in earnings of unconsolidated subsidiaries
|
576
|
409
|
|||||
Balance
at March 31, 2007
|
$
|
12,733
|
$
|
9,952
|
|||
Operating
Real Estate (A) (B)
|
Real
Estate Loan (A) (C)
|
||||||||||||
March
31,
|
December
31,
|
March
31,
|
December
31,
|
||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Assets
|
$
|
78,568
|
$
|
78,381
|
$
|
20,018
|
$
|
20,615
|
|||||
Liabilities
|
(52,625
|
)
|
(52,856
|
)
|
-
|
-
|
|||||||
Minority
interest
|
(477
|
)
|
(470
|
)
|
(113
|
)
|
(116
|
)
|
|||||
Equity
|
$
|
25,466
|
$
|
25,055
|
$
|
19,905
|
$
|
20,499
|
|||||
Equity
held by Newcastle
|
$
|
12,733
|
$
|
12,528
|
$
|
9,952
|
$
|
10,249
|
|||||
|
Three
Months Ended March 31,
|
Three
Months Ended March 31,
|
|||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Revenues
|
$
|
2,018
|
$
|
1,835
|
$
|
828
|
$
|
1,417
|
|||||
Expenses
|
(844
|
)
|
(828
|
)
|
(5
|
)
|
(8
|
)
|
|||||
Minority
interest
|
(22
|
)
|
(19
|
)
|
(5
|
)
|
(8
|
)
|
|||||
Net
income
|
$
|
1,152
|
$
|
988
|
$
|
818
|
$
|
1,401
|
|||||
Newcastle's
equity in net income
|
$
|
576
|
$
|
494
|
$
|
409
|
$
|
701
|
|||||
(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
|
|||||||||||||||||||||||||
Current
Face Amount
|
Amortized
Cost
Basis
|
Gains
|
Losses
|
Carrying
Value
|
Number
of
Securities
|
S&P
Equivalent
Rating
|
Coupon
|
Yield
|
Maturity
(Years)
|
||||||||||||||||||||||
CMBS-Conduit
|
$
|
1,477,085
|
$
|
1,433,659
|
$
|
25,025
|
$
|
(16,348
|
)
|
$
|
1,442,336
|
201
|
BBB
|
5.83%
|
|
6.52%
|
|
6.72
|
|||||||||||||
CMBS-Large
Loan
|
681,548
|
682,070
|
2,833
|
(976
|
)
|
683,927
|
50
|
BBB-
|
6.82%
|
|
6.85%
|
|
2.40
|
||||||||||||||||||
CMBS-
CDO
|
23,500
|
20,825
|
1,236
|
(890
|
)
|
21,171
|
2
|
BB
|
9.41%
|
|
11.86%
|
|
7.67
|
||||||||||||||||||
CMBS-
B-Note
|
280,243
|
268,346
|
5,352
|
(428
|
)
|
273,270
|
41
|
BB
|
6.58%
|
|
7.51%
|
|
5.80
|
||||||||||||||||||
Unsecured
REIT Debt
|
953,895
|
966,772
|
18,855
|
(7,380
|
)
|
978,247
|
96
|
BBB-
|
6.36%
|
|
6.07%
|
|
5.97
|
||||||||||||||||||
ABS-Manufactured
Housing
|
80,839
|
76,695
|
2,176
|
(1,591
|
)
|
77,280
|
9
|
BBB-
|
6.68%
|
|
7.80%
|
|
6.37
|
||||||||||||||||||
ABS-Home
Equity
|
698,710
|
683,836
|
469
|
(54,672
|
)
|
629,633
|
122
|
BBB+
|
7.13%
|
|
7.82%
|
|
2.35
|
||||||||||||||||||
ABS-Franchise
|
82,669
|
82,230
|
1,114
|
(3,250
|
)
|
80,094
|
22
|
BBB
|
7.46%
|
|
8.21%
|
|
4.62
|
||||||||||||||||||
Agency
RMBS (C)
|
1,348,562
|
1,356,668
|
3,871
|
(5,597
|
)
|
1,354,942
|
42
|
AAA
|
5.29%
|
|
5.26%
|
|
4.33
|
||||||||||||||||||
Subtotal/Average
(A)
|
5,627,051
|
5,571,101
|
60,931
|
(91,132
|
)
|
5,540,900
|
585
|
A-
|
6.16%
|
|
6.45%
|
|
4.88
|
||||||||||||||||||
Residual
interest (B)
|
40,279
|
40,279
|
-
|
-
|
40,279
|
1
|
NR
|
0.00%
|
|
18.77%
|
|
2.29
|
|||||||||||||||||||
Total/Average
|
$
|
5,667,330
|
$
|
5,611,380
|
$
|
60,931
|
$
|
(91,132
|
)
|
$
|
5,581,179
|
586
|
BBB+
|
6.12%
|
|
6.53%
|
|
4.86
|
|||||||||||||
(A)
|
The total current face amount of fixed rate securities was $4.5 billion, and of floating rate securities was $1.2 billion. |
(B) | Represents the equity from the Securitization Trust as described in Note 5. These securities have been treated as part of the residential mortgage loan segment - see Note 2. The residual does not have a stated coupon and therefore its coupon has been treated as zero for purposes of the table. |
(C)
|
Agency RMBS have an implied AAA rating. |
|
|
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
|
$
|
1,390,610
|
$
|
1,364,801
|
$
|
-
|
$
|
(54,184
|
)
|
$
|
1,310,617
|
208
|
A-
|
6.36%
|
|
6.77%
|
|
4.54
|
|||||||||||||
Twelve
or More Months
|
1,477,400
|
1,489,045
|
-
|
(36,948
|
)
|
1,452,097
|
170
|
A
|
5.62%
|
5.46%
|
|
5.32
|
|||||||||||||||||||
Total
|
$
|
2,868,010
|
$
|
2,853,846
|
$
|
-
|
$
|
(91,132
|
)
|
$
|
2,762,714
|
378
|
A-
|
5.98%
|
|
6.09%
|
|
4.94
|
|||||||||||||
Loan
Type
|
Current
Face
Amount
|
Carrying
Value
|
Loan
Count
|
Wtd.
Avg.
Yield
|
Weighted
Average Maturity
(Years)
(E)
|
Delinquent
Carrying Amount
(F)
|
|||||||||||||
Mezzanine
Loans (A)
|
$
|
1,223,656
|
$
|
1,219,082
|
26
|
9.25%
|
|
2.77
|
$
|
-
|
|||||||||
Bank
Loans
|
347,226
|
347,056
|
11
|
8.06%
|
|
4.40
|
-
|
||||||||||||
B-Notes
|
345,960
|
344,613
|
12
|
8.20%
|
|
2.66
|
-
|
||||||||||||
Whole
Loans
|
107,881
|
108,348
|
4
|
10.30%
|
|
1.98
|
-
|
||||||||||||
ICH
Loans (B)
|
121,649
|
119,875
|
68
|
7.63%
|
|
0.89
|
3,284
|
||||||||||||
Total
Real Estate Related Loans
|
$
|
2,146,372
|
$
|
2,138,974
|
121
|
8.85%
|
|
2.87
|
$
|
3,284
|
|||||||||
Residential
Loans
|
$
|
140,549
|
$
|
144,168
|
423
|
6.39%
|
|
2.79
|
$
|
4,203
|
|||||||||
Manufactured
Housing Loans
|
617,924
|
608,422
|
17,660
|
8.56%
|
|
5.79
|
6,293
|
||||||||||||
Total
Residential Mortgage Loans
|
$
|
758,473
|
$
|
752,590
|
18,083
|
8.14%
|
|
5.23
|
$
|
10,496
|
|||||||||
Subprime
Mortgage Loans Held for Sale (D)
|
$
|
1,049,285
|
$
|
1,018,080
|
4,402
|
7.82%
|
|
2.54
|
$
|
-
|
|||||||||
Subprime
Mortgage Loans Subject to Call Option (C)
|
$
|
299,176
|
$
|
289,021
|
|||||||||||||||
|
|||||||||||||||||||
(A) |
One
of these loans has an $8.9 million contractual exit fee which
Newcastle
will begin to accrue when management believes it is probable
that such
exit fee will be received.
|
(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.
|
(D) |
In
March 2007, Newcastle, through a consolidated subsidiary, entered
into an
agreement to acquire a portfolio of residential mortgage loans to
subprime
borrowers (the “Subprime Portfolio II”). Based upon the due diligence
review, which was completed in April 2007, the final loan portfolio
is
$1.3 billion of unpaid principal balance. At March 31, 2007, $1.0
billion
of loans have been purchased and are considered “held for sale” and
carried at the lower of cost or fair value. No write down was recorded
related to these loans. Furthermore, the acquisition of loans held
for
sale is considered an operating activity for statement of cash flow
purposes. Newcastle entered into an interest rate swap in order to
hedge
its exposure to the risk of changes in market interest rates with
respect
to the financing of the Subprime Portfolio II. This swap is marked
to
market through income with the related portion of the hedged item,
to the
extent that the purchase has been consummated and the swap qualifies
as a
fair value hedge for accounting purposes, also marked to market through
income. The unfunded portion of the loan is treated as a non-hedge
derivative for accounting purposes and is marked to market through
income.
The carrying value of the loans at March 31, 2007 included approximately
$10.0 million related to principal receivable, interest receivable
and
basis adjustments.
|
(E) |
The
weighted average maturities for the residential loan portfolio and
the two
manufactured housing loan portfolios were calculated based on constant
prepayment rates (CPR) of 30%, 8% and 9%,
respectively.
|
(F) |
This
face amount of loans is 60 or more days past due, in foreclosure
or real
estate owned, representing 3.0% and 1.0% of the total current face
amounts
of the Residential Loans and the Manufactured Housing Loans,
respectively.
|
Real
Estate
Related
Loans
|
Residential
Mortgage
Loans
|
||||||
Balance
at December 31, 2006
|
$
|
(2,150
|
)
|
$
|
(7,256
|
)
|
|
Provision
for credit losses
|
(100
|
)
|
(1,936
|
)
|
|||
Realized
losses
|
-
|
2,955
|
|||||
Balance
at March 31, 2007
|
$
|
(2,250
|
)
|
$
|
(6,237
|
)
|
Total
securitized loans (unpaid principal balance)
|
$
|
1,105,213
|
||
Loans
subject to call option (carrying value)
|
$
|
289,021
|
||
Retained
interests (fair value)
|
$
|
69,382
|
||
Weighted
average life (years) of residual interest
|
2.29
|
|||
Expected
credit losses (A)
|
5.2%
|
|
||
Effect
on fair
value of retained interests of 10% adverse change
|
$
|
(2,482
|
)
|
|
Effect
on fair
value of retained interests of 20% adverse change
|
$
|
(5,224
|
)
|
|
Weighted
average constant prepayment rate (B)
|
30.5%
|
|
||
Effect
on fair
value of retained interests of 10% adverse change
|
$
|
(3,441
|
)
|
|
Effect
on fair
value of retained interests of 20% adverse change
|
$
|
(5,605
|
)
|
|
Discount
rate
|
18.8%
|
|
||
Effect
on fair
value of retained interests of 10% adverse change
|
$
|
(2,242
|
)
|
|
Effect
on fair
value of retained interests of 20% adverse change
|
$
|
(4,391
|
)
|
|
(A) |
Represents
the percentage of losses on the original principal balance of the
loans at
the time of securitization (April 2006) to the maturity of the
loans.
|
(B) |
Represents
the weighted average prepayment rate for the loans as of March 31,
2007
until maturity of such loans.
|
Loan
unpaid
principal balance (UPB)
|
$
|
1,105,213
|
||
Delinquencies
of 60
or more days (UPB)
|
$
|
47,107
|
||
Net
credit
losses
|
$
|
197
|
Notional
Amount
|
Fair
Value
|
Longest
Maturity
|
||||||||
Interest
rate swaps, treated as hedges (A)
|