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UNITED STATES

 

 

 

 

 

 

 

Newcastle Investment Corp.

 

 

 

 

 

 

 

 

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reductions in cash flows received from our investments;

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our ability to deploy capital accretively;

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the risks that default and recovery rates on our real estate securities and loan portfolios deteriorate compared to our underwriting estimates;

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changes in prepayment rates on the loans underlying certain of our assets;

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the relationship between yields on assets which are paid off and yields on assets in which such monies can be reinvested;

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the relative spreads between the yield on the assets we invest in and the cost of financing;

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changes in economic conditions generally and the real estate and debt securities markets specifically;

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adverse changes in the financing markets we access affecting our ability to finance our investments, or in a manner that maintains our historic net spreads;

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changing risk assessments by lenders that potentially lead to increased margin calls, not extending our repurchase agreements or other financings in accordance with their current terms or entering into new financings with us;

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changes in interest rates and/or credit spreads, as well as the success of any hedging strategy we may undertake in relation to such changes;

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the quality and size of the investment pipeline and the rate at which we can invest our cash at attractive risk-adjusted returns, including cash inside our collateralized debt obligations (“CDOs”);

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impairments in the value of the collateral underlying our investments and the relation of any such impairments to our judgments as to whether changes in the market value of our securities, loans or real estate are temporary or not and whether circumstances bearing on the value of such assets warrant changes in carrying values;

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legislative/regulatory changes, including but not limited to, any modification of the terms of loans;

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the availability and cost of capital for future investments;

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competition within the finance and real estate industries; and

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other risks detailed from time to time below, particularly under the heading “Risk Factors,” and in our other reports filed with or furnished to the Securities and Exchange Commission (the “SEC”).

 

 

 

 

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should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements provide to be inaccurate;

 

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have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

 

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may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and

 

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were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

 

 

 

 

 

 

		March 31, 2013
		(Unaudited)				December 31, 2012
Assets
Real estate securities, available-for-sale		$	2,495,473			$	1,691,575
Real estate related loans, held-for-sale, net			851,525				843,132
Residential mortgage loans, held-for-investment, net			317,708				292,461
Residential mortgage loans, held-for-sale, net			2,380				2,471
Investments in excess mortgage servicing rights at fair value			236,555				245,036
Investments in equity method investees at fair value			102,588				—
Subprime mortgage loans subject to call option			406,115				405,814
Investments in real estate, net of accumulated depreciation			168,515				169,473
Intangibles, net of accumulated amortization			16,218				19,086
Other investments			24,907				24,907
Cash and cash equivalents			534,772				231,898
Restricted cash			11,494				2,064
Derivative assets			176				165
Receivables and other assets			27,577				17,230
Total Assets		$	5,196,003			$	3,945,312
Liabilities and Stockholders’ Equity
Liabilities
CDO bonds payable		$	1,015,560			$	1,091,354
Other bonds and notes payable			173,723				183,390
Repurchase agreements			1,473,586				929,435
Mortgage notes payable			120,525				120,525
Financing of subprime mortgage loans subject to call option			406,115				405,814
Junior subordinated notes payable			51,242				51,243
Derivative liabilities			26,612				31,576
Dividends Payable			56,596				38,884
Due to affiliates			4,611				3,620
Purchase price payable on investments in excess mortgage servicing rights			59				59
Accrued expenses and other liabilities			17,875				16,352
Total Liabilities		$	3,346,504			$	2,872,252
Commitments and contingencies
Stockholders’ Equity
Preferred stock, $0.01 par value, 100,000,000 shares authorized, 1,347,321 shares of 9.75% Series B Cumulative Redeemable Preferred Stock, 496,000 shares  of 8.05% Series C Cumulative Redeemable Preferred Stock, and 620,000 shares of 8.375% Series D Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, issued and outstanding as of March 31, 2013 and December 31, 2012		$	61,583			$	61,583
Common stock, $0.01 par value, 500,000,000 shares authorized, 253,025,645 and 172,525,645 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively			2,530				1,725
Additional paid-in capital			2,472,931				1,710,083
Accumulated deficit			(790,143	)			(771,095	)
Accumulated other comprehensive income (loss)			102,598				70,764
Total Equity		$	1,849,499			$	1,073,060
Total Liabilities and Stockholders’ Equity		$	5,196,003			$	3,945,312

 

		March 31, 2013
		(Unaudited)				December 31, 2012
Assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs
Real estate securities, available-for-sale		$	563,639			$	567,685
Real estate related loans, held-for-sale, net			754,913				813,301
Residential mortgage loans, held-for-investment, net			244,552				292,461
Subprime mortgage loans subject to call option			406,115				405,814
Investments in real estate, net of accumulated depreciation			6,740				6,672
Other investments			18,883				18,883
Restricted cash			11,494				2,064
Receivables and other assets			7,647				7,535
Total assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs		$	2,013,983			$	2,114,415

 

The following table presents certain liabilities of consolidated VIEs, which are included in the Consolidated Balance Sheets above. The liabilities in the table below include liabilities of consolidated VIEs due to third parties only, and exclude intercompany balances that eliminate in consolidation. The liabilities also exclude amounts where creditors or beneficial interest holders have recourse to the general credit of Newcastle.

 

 

 

		Three Months Ended March 31,
		2013				2012
Interest income		$	71,367			$	74,899
Interest expense			22,710				30,165
Net interest income			48,657				44,734
Impairment/(Reversal)
Valuation allowance (reversal) on loans			2,234				(9,031	)
Other-than-temporary impairment on securities			422				5,883
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)			117				(3,932	)
			2,773				(7,080	)
Net interest income after impairment/reversal			45,884				51,814
Other Revenues
Rental income			12,887				509
Care and ancillary income			613				—
Total other revenues			13,500				509
Other Income (Loss)
Gain (loss) on settlement of investments, net			(3	)			4,823
Gain on extinguishment of debt			1,206				20,743
Change in fair value of investments in excess mortgage servicing rights			1,858				1,216
Change in fair value of investments in equity method investees			969				—
Other income (loss), net			4,567				2,970
			8,597				29,752
Expenses
Loan and security servicing expense			1,034				1,098
Property operating expenses			8,363				225
General and administrative expense			6,911				2,286
Management fee to affiliate			9,565				4,976
Depreciation and amortization			4,079				2
			29,952				8,587
Income from continuing operations			38,029				73,488
Income (loss) from discontinued operations			(16	)			(17	)
Net Income			38,013				73,471
Preferred dividends			(1,395	)			(1,395	)
Income Available for Common Stockholders		$	36,618			$	72,076
Income Per Share of Common Stock
Basic		$	0.16			$	0.68
Diluted		$	0.15			$	0.68
Income from continuing operations per share of common stock, after preferred dividends
Basic		$	0.16			$	0.68
Diluted		$	0.15			$	0.68
Income (loss) from discontinued operations per share of common stock
Basic		$	—			$	—
Diluted		$	—			$	—
Weighted Average Number of Shares of Common Stock Outstanding
Basic			235,136,756				105,181,009
Diluted			240,079,144				105,670,102
Dividends Declared per Share of Common Stock		$	0.22			$	0.20

 

See notes to consolidated financial statements

 

		Three Months Ended  March 31,
		2013				2012
Net income		$	38,013			$	73,471
Other comprehensive income (loss):
Net unrealized gain (loss) on securities			29,454				76,417
Reclassification of net realized (gain) loss on securities into earnings			539				(4,487	)
Net unrealized gain (loss) on derivatives designated as cash flow hedges			1,841				8,174
Reclassification of net realized (gain) loss on derivatives designated as cash flow hedges into earnings			—				(211	)
Other comprehensive income (loss)			31,834				79,893
Total comprehensive income		$	69,847			$	153,364