Exhibit 99.1

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

 

The following unaudited pro forma condensed consolidated financial information was derived from the application of pro forma adjustments to the consolidated financial statements of Newcastle Investment Corp. and its subsidiaries (collectively, “Newcastle”). These unaudited pro forma condensed consolidated financial statements should be read in conjunction with the related notes to these financial statements and with Newcastle’s historical consolidated financial statements and the related notes included in Newcastle’s previous filings with the Securities and Exchange Commission.

 

The unaudited pro forma information set forth below reflects the historical information of Newcastle, as adjusted to give effect to the following transactions:

 

   

A spin-off in which Newcastle would separate certain of its residential real estate related investments from the rest of its assets by distributing shares of common stock of New Residential Investment Corp. (“New Residential”), which is currently a wholly-owned subsidiary of Newcastle. The completion of this transaction is subject to a number of conditions.

 

   

The agreement to invest approximately $340 million for a 50% interest in an equity method investee, subsequent to September 30, 2012, that is expected to acquire a 67% interest in excess mortgage servicing rights (“Excess MSRs”) on a portfolio of residential mortgage loans with an unpaid principal balance of approximately $215 billion as of November 30, 2012. The completion of this transaction is subject to regulatory and third party approvals.

 

   

The investment of approximately $27 million for a 50% interest in an equity method investee, subsequent to September 30, 2012, that acquired a 67% interest in Excess MSRs on a portfolio of residential mortgage loans with an unpaid principal balance of approximately $13 billion as of November 30, 2012.

 

   

The proposed offering of $            million of common stock.

 

The unaudited pro forma condensed consolidated statements of operations give effect to the spin-off of New Residential as if the spin-off had occurred on January 1, 2011. The unaudited pro forma condensed consolidated statements of operations exclude the impact of the proposed offering of common stock and the investments in equity method investees since the impact will depend on future returns, which are based on various assumptions which could prove to be incorrect. The unaudited pro forma condensed consolidated balance sheet assumes that the spin-off of New Residential, the proposed offering of common stock and the investments in equity method investees occurred on September 30, 2012.

 

The historical statements of operations presented in the unaudited pro forma condensed consolidated financial information are for the nine months ended September 30, 2012 as presented in Newcastle’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2012, filed on October 26, 2012, and for the year ended December 31, 2011 as presented in Newcastle’s Annual Report on Form 10-K for the year ended December 31, 2011, filed on March 15, 2012. The historical balance sheet presented in the unaudited pro forma condensed consolidated financial information is as of September 30, 2012 as presented in Newcastle’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2012.

 

In the opinion of management, all adjustments necessary to reflect the effects of the potential transactions described in the notes to the unaudited pro forma condensed consolidated financial statements have been included and are based upon available information and assumptions that Newcastle believes are reasonable.

 

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Further, the historical financial information presented herein has been adjusted to give pro forma effect to events that Newcastle believes are factually supportable and which are expected to have a continuing impact on Newcastle’s results. However, such adjustments are estimates and may not prove to be accurate. Information regarding these adjustments is subject to risks and uncertainties that could cause actual results to differ materially from those anticipated.

 

These unaudited pro forma condensed consolidated financial statements are provided for information purposes only. The unaudited pro forma condensed consolidated statements of operations and the unaudited pro forma condensed consolidated balance sheet do not purport to represent what Newcastle’s results of operations would have been had such transactions been consummated on the dates indicated, nor do they represent the financial position or results of operations of either Newcastle or New Residential for any future date or period.

 

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NEWCASTLE INVESTMENT CORP. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

As of September 30, 2012

(dollars in thousands)

 

    Newcastle
Consolidated
Historical (a)


    Capital
Raise (b)


    Equity
Method
Investments,
Excess
MSRs (c)


    Spin-Off of
New
Residential (d)


    Newcastle
Consolidated
Pro Forma


 

Assets

                                       

Non-Recourse VIE Financing Structures

                                       

Real estate securities, available-for-sale

  $ 591,929      $         —        $         —        $         —        $ 591,929   

Real estate related loans, held-for-sale, net

    832,885        —          —          —          832,885   

Residential mortgage loans, held-for-investment, net

    301,370        —          —          —          301,370   

Subprime mortgage loans subject to call option

    405,525        —          —          —          405,525   

Operating real estate, held-for-sale

    7,839        —          —          —          7,839   

Other investments

    18,883        —          —          —          18,883   

Restricted cash

    2,829        —          —          —          2,829   

Receivables and other assets

    6,432        —          —          —          6,432   
   


 


 


 


 


      2,167,692        —          —          —          2,167,692   
   


 


 


 


 


Recourse Financing Structures, Mortgaged Real Estate and
Unlevered Assets

   

               

Real estate securities, available-for-sale

    788,431        —          —          (199,862     579,569   

Real estate related loans, held-for-sale, net

    9,418        —          —          —          9,418   

Residential mortgage loans, held-for-sale, net

    2,566        —          —          —          2,566   

Investments in excess mortgage servicing rights at fair value

    258,347        —          —          (258,347     —     

Investments in equity method investees, excess mortgage service rights

    —          —          367,261        (367,261     —     

Investments in real estate, net of accumulated depreciation

    126,798        —          —          —          126,798   

Resident lease intangibles, net of accumulated amortization

    14,755        —          —          —          14,755   

Other investments

    6,024        —          —          —          6,024   

Cash and cash equivalents

    229,036                (367,261     —                   (f) 

Derivative assets

    224        —          —          —          224   

Receivables and other assets

    33,571        —          —          (25,258     8,313   
   


 


 


 


 


      1,469,170                —          (850,728        
   


 


 


 


 


    $ 3,636,862      $        $ —        $ (850,728   $     
   


 


 


 


 


Liabilities and Stockholders’ Equity

Liabilities

  

  

       

Non-Recourse VIE Financing Structures

                                       

CDO bonds payable

  $ 1,155,080      $ —        $ —        $ —        $ 1,155,080   

Other bonds and notes payable

    197,583        —          —          —          197,583   

Repurchase agreements

    5,368        —          —          —          5,368   

Financing of subprime mortgage loans subject to call option

    405,525        —          —          —          405,525   

Derivative liabilities

    36,519        —          —          —          36,517   

Accrued expenses and other liabilities

    8,241        —          —          —          8,241   
   


 


 


 


 


      1,808,316        —          —          —          1,808,316   
   


 


 


 


 


Recourse Financing Structures, Mortgages and Other Liabilities

  

               

Repurchase agreements

    599,959        —          —          (59,646     540,313   

Mortgage notes payable

    88,400        —          —          —          88,400   

Junior subordinated notes payable

    51,245        —          —          —          51,245   

Dividends payable

    38,877        —          —          —          38,877   

Due to affiliates

    3,351        —          —          (463 )(e)      2,888   

Purchase price payable on investments in excess mortgage servicing rights

    3,250        —          —          (3,250     —     

Accrued expenses and other liabilities

    9,278        —          —          (2,161     7,117   
   


 


 


 


 


      794,360        —          —          (65,520     728,840   
   


 


 


 


 


      2,602,676        —          —          (65,520     2,537,156   
   


 


 


 


 


Stockholders’ Equity

                                       

Preferred stock

    61,583        —          —          —          61,583   

Common stock

    1,725                —          —             

Additional paid-in capital

    1,709,905                —          —             

Accumulated deficit

    (788,725     —          —          (777,895     (1,566,620

Accumulated other comprehensive income (loss)

    49,698        —          —          (7,313     42,385   
   


 


 


 


 


      1,034,186                —          (785,208        
   


 


 


 


 


    $ 3,636,862      $        $ —        $ (850,728   $     
   


 


 


 


 


 

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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

 

(a)   Amounts as originally reported by Newcastle in its fiscal 2012 third quarter report filed on Form 10-Q.
(b)   Represents the net cash proceeds received, common stock issued and additional paid-in capital from the issuance of                  shares of common stock at a price of $             per share.
(c)   Represents the investments in equity method investees, which are invested in Excess MSRs.
(d)   Represents the historical financial position of New Residential as of September 30, 2012 adjusted for: (i) the investments in equity method investees described in (c) above; (ii) the contribution of proceeds from Newcastle to New Residential to complete these investments; and (iii) the adjustment to due to affiliates described in (e) below. Newcastle expects to contribute an as yet determined amount of certain other investments, including investments in Agency RMBS, prior to the spin-off. New Residential expects to finance a portion of these assets with repurchase agreements.
(e)   Represents a reduction of Newcastle’s due to affiliates for the allocation of one month of accrued and unpaid management fees from Newcastle to New Residential.
(f)   Represents Newcastle’s cash and cash equivalents at September 30, 2012, the cash received from the proposed offering and the investment of cash for the investments in equity method investees described in (c) above. Newcastle’s uninvested unrestricted cash balance at the date hereof is lower than the cash and cash equivalents balance at September 30, 2012 since Newcastle has committed or deployed cash for investments in Excess MSRs, senior living facilities, residential mortgage backed securities and other investments. In addition, Newcastle expects to contribute to New Residential an as of get determined amount of cash and cash equivalents prior to the spin-off.

 

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NEWCASTLE INVESTMENT CORP. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Nine Months Ended September 30, 2012

(dollars in thousands)

 

     Newcastle
Consolidated
Historical (a)


    Spin-Off of
New
Residential (b)


    Newcastle
Consolidated
Pro Forma


 

Interest income

   $ 240,187      $ (18,811   $ 221,376   

Interest expense

     88,038        (298     87,740   
    


 


 


Net interest income

     152,149        (18,513     133,636   
    


 


 


Impairment/(Reversal)

                        

Valuation allowance (reversal) on loans

     (8,160     —          (8,160

Other-than-temporary impairment on securities

     16,506        —          16,506   

Portion of other-than-temporary impairment on securities recognized in other comprehensive income (loss), net of the reversal of other comprehensive loss into net income (loss)

     (1,913     —          (1,913
    


 


 


       6,433        —          6,433   
    


 


 


Net interest income after impairment/reversal

     145,716        (18,513     127,203   

Other Revenues

                        

Rental income

     6,137        —          6,137   

Care and ancillary income

     1,411        —          1,411   
    


 


 


Total other revenues

     7,548        —          7,548   
    


 


 


Other Income (Loss)

                        

Gain (loss) on settlement of investments, net

     232,885        —          232,885   

Gain on extinguishment of debt

     23,127        —          23,127   

Change in fair value of investments in excess mortgage servicing rights

     6,513        (6,513     —     

Other income (loss), net

     1,650        —          1,650   
    


 


 


       264,175        (6,513     257,662   
    


 


 


Expenses

                        

Loan and security servicing expense

     3,256        —          3,256   

Property operating expenses

     4,742        —          4,742   

General and administrative expense

     13,193        (2,363     10,830   

Management fee to affiliate

     17,459        (1,733     15,726   

Depreciation and amortization

     2,370        —          2,370   
    


 


 


       41,020        (4,096     36,924   
    


 


 


Income from continuing operations

     376,419        (20,930     355,489   

Preferred dividends

     (4,185     —          (4,185
    


 


 


Income from continuing operations after preferred dividends

   $ 372,234      $ (20,930   $ 351,304   
    


 


 


Income from continuing operations per share of common stock, after preferred dividends

                        

Basic

   $ 2.77              $ 2.61   
    


         


Diluted

   $ 2.74              $ 2.59 (c) 
    


         


Weighted Average Number of Shares of Common Stock Outstanding

                        

Basic

     134,619,858                134,619,858   
    


         


Diluted

     135,869,332                135,869,332 (c) 
    


         


 

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NEWCASTLE INVESTMENT CORP. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Twelve Months Ended December 31, 2011

(dollars in thousands)

 

     Newcastle
Consolidated
Historical (a)


    Spin-Off of
New
Residential (b)


    Newcastle
Consolidated
Pro Forma


 

Interest income

   $ 292,296      $ (1,260   $ 291,036   

Interest expense

     138,035        —          138,035   
    


 


 


Net interest income

     154,261        (1,260     153,001   
    


 


 


Impairment/(Reversal)

                        

Valuation allowance (reversal) on loans

     (15,163     —          (15,163

Other-than-temporary impairment on securities

     12,955        —          12,955   

Portion of other-than-temporary impairment on securities recognized in other comprehensive income (loss), net of the reversal of other comprehensive loss into net income (loss)

     2,885        —          2,885   
    


 


 


       677        —          677   
    


 


 


Net interest income after impairment/reversal

     153,584        (1,260     152,324   

Other Income (Loss)

                        

Gain (loss) on settlement of investments, net

     78,181        —          78,181   

Gain on extinguishment of debt

     66,110        —          66,110   

Other income (loss), net

     (8,501     (367     (8,868
    


 


 


       135,790        (367     135,423   
    


 


 


Expenses

                        

Loan and security servicing expense

     4,649        —          4,649   

General and administrative expense

     7,295        (874     6,421   

Management fee to affiliate

     18,289        (39     18,250   
    


 


 


       30,233        (913     29,320   
    


 


 


Income from continuing operations

     259,141        (714     258,427   

Preferred dividends

     (5,580     —          (5,580
    


 


 


Income from continuing operations after preferred dividends

   $ 253,561      $ (714   $ 252,847   
    


 


 


Income from continuing operations per share of common stock, after preferred dividends

                        

Basic

   $ 3.09              $ 3.08   
    


         


Diluted

   $ 3.09              $ 3.08 (c) 
    


         


Weighted Average Number of Shares of Common Stock Outstanding

                        

Basic

     81,983,973                81,983,973   
    


         


Diluted

     81,990,297                81,990,297 (c) 
    


         


 

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NOTES TO UNAUDITED PRO FORMA CONDENSED

CONSOLIDATED STATEMENT OF OPERATIONS

 

(a)   Amounts as originally reported by Newcastle in its fiscal 2012 third quarter report filed on Form 10-Q and fiscal 2011 annual report on Form 10-K.
(b)   Represents New Residential’s results of operations for the nine months ended September 30, 2012 and the period from December 8, 2011 (commencement of operations) to December 31, 2011.
(c)   Does not include potential additional diluted shares as a result of changes to outstanding Newcastle options from the potential spin-off. The number of additional diluted shares will vary depending on various factors, including the share prices of Newcastle and New Residential subsequent to the spin-off.

 

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