Quarterly report pursuant to Section 13 or 15(d)

REAL ESTATE SECURITIES (Tables)

v2.4.0.6
REAL ESTATE SECURITIES (Tables)
3 Months Ended
Mar. 31, 2013
Real Estate Securities Tables  
Schedule of Real Estate Securities Holdings
The following is a summary of Newcastle’s real estate securities at March 31, 2013, all of which are classified as available-for-sale and are, therefore, reported at fair value with changes in fair value recorded in other comprehensive income, except for securities that are other-than-temporarily impaired.
 
         
Amortized Cost Basis
   
Gross Unrealized
               
Weighted Average
 
               
Other-Than-
                           
Number
                     
Maturity
   
Principal
 
Asset Type
 
Outstanding Face
Amount
   
Before Impairment
   
Temporary Impairment
   
After Impairment
   
Gains
   
Losses
   
Carrying Value (A)
   
of Securities
   
Rating
(B)
   
Coupon
   
Yield
   
(Years) (C)
   
Subordination (D)
 
CMBS-Conduit
  $ 338,056     $ 314,424     $ (99,020 )   $ 215,404     $ 54,263     $ (6,752 )   $ 262,915       52     B+       5.54 %     10.33 %     3.2       9.5 %
CMBS- Single Borrower
    124,709       123,409       (12,364 )     111,045       5,818       (1,609 )     115,254       22    
BB
      4.89 %     5.93 %     2.5       9.5 %
CMBS-Large Loan
    5,819       5,643             5,643       205             5,848       1    
BBB-
      6.08 %     12.16 %     0.7       2.0 %
REIT Debt
    50,700       50,055             50,055       4,064             54,119       8    
BBB-
      5.75 %     6.10 %     1.8       N/A  
Non-Agency RMBS (E)
    904,784       604,616       (68,708 )     535,908       49,218       (1,226 )     583,900       93    
CC
      0.75 %     6.55 %     7.3       10.0 %
ABS-Franchise
    10,036       9,329       (7,839 )     1,490       219       (325 )     1,384       3    
CCC-
      5.95 %     3.47 %     4.7       2.7 %
FNMA/FHLMC
    1,309,855       1,396,400             1,396,400       6,130       (2,102 )     1,400,428       83    
AAA
      3.23 %     1.42 %     4.1       N/A  
CDO (F)
    202,232       81,608       (14,861 )     66,747       4,878             71,625       13    
CCC+
      2.86 %     8.12 %     1.4       21.4 %
Total / Average (G)
  $ 2,946,191     $ 2,585,484     $ (202,792 )   $ 2,382,692     $ 124,795     $ (12,014 )   $ 2,495,473       275    
BBB-
      2.84 %     3.92 %     4.7          
 
(A)
See Note 9 regarding the estimation of fair value, which is equal to carrying value for all securities.
 
(B)
Represents the weighted average of the ratings of all securities in each asset type, expressed as an S&P equivalent rating. For each security rated by multiple rating agencies, the lowest rating is used. Newcastle used an implied AAA rating for the FNMA/FHLMC securities. Ratings provided were determined by third party rating agencies as of a particular date, may not be current and are subject to change at any time.
 
(C)
The weighted average maturity is based on the timing of expected principal reduction on the assets.
 
(D)
Percentage of the outstanding face amount of securities and residual interests that is subordinate to Newcastle’s investments.
 
(E)
Includes (i) the retained bond with a face amount of $4.0 million and a carrying value of $1.4 million from Securitization Trust 2006 (Note 4) and (ii) 53 non-agency RMBS purchased since April 2012 with an aggregate face amount of $784.3 million and a carrying value of $518.6 million as of March 31, 2013, of which an aggregate face amount of $644.7 million and a carrying value of $440.1 million is serviced by Nationstar. The total UPB of the loans underlying these Nationstar serviced non-Agency RMBS was approximately $8.3 billion as of March 31, 2013.
(F)
Includes two CDO bonds issued by a third party with a carrying value of $62.5 million, four CDO bonds issued by CDO V (which has been deconsolidated) and held as investments by Newcastle with a carrying value of $5.3 million and seven CDO bonds issued by C-BASS with a carrying value of $3.9 million.
 
(G)
The total outstanding face amount of fixed rate securities was $0.5 billion, and of floating rate securities was $2.4 billion.
Schedule of Real Estate Securities Holdings in an Unrealized Loss Position
The following table summarizes Newcastle’s securities in an unrealized loss position as of March 31, 2013.
 
         
Amortized Cost Basis
   
Gross Unrealized
             
Weighted Average
 
Securities in
 
Outstanding
         
Other-than-
                           
Number
                     
an Unrealized
 
Face
   
Before
   
Temporary
   
After
               
Carrying
   
of
                 
Maturity
 
Loss Position
 
Amount
   
Impairment
   
Impairment
   
Impairment
   
Gains
   
Losses
   
Value
   
Securities
 
Rating
 
Coupon
   
Yield
   
(Years)
 
Less Than Twelve Months
  $ 562,897     $ 509,420     $ (5,236 )   $ 504,184     $     $ (3,230 )   $ 500,954       34  
 BBB
    2.44 %     2.15 %     5.9  
Twelve or More Months
    119,054       118,953       (236 )     118,717             (8,784 )     109,933       24  
 BB-
    4.44 %     4.63 %     1.5  
Total
  $ 681,951     $ 628,373     $ (5,472 )   $ 622,901     $     $ (12,014 )   $ 610,887       58  
 BBB
    2.79 %     2.62 %     5.1  
 
Newcastle performed an assessment of all of its debt securities that are in an unrealized loss position (unrealized loss position exists when a security’s amortized cost basis, excluding the effect of OTTI, exceeds its fair value) and determined the following:

   
March 31, 2013
 
         
Amortized
             
         
Cost Basis
   
Unrealized Losses
 
   
Fair Value
   
After Impairment
   
Credit (B)
   
Non-Credit (C)
 
Securities Newcastle intends to sell
  $     $     $       N/A  
Securities Newcastle is more likely than not to be required to sell (A)
                      N/A  
Securities Newcastle has no intent to sell and is not more likely than not to be required to sell:
                               
Credit impaired securities
    1,155       1,274       (5,355 )     (119 )
Non credit impaired securities
    609,732       621,627             (11,895 )
Total debt securities in an unrealized loss position
  $ 610,887     $ 622,901     $ (5,355 )   $ (12,014 )
 
(A)
Newcastle may, at times, be more likely than not to be required to sell certain securities for liquidity purposes. While the amount of the securities to be sold may be an estimate, and the securities to be sold have not yet been identified, Newcastle must make its best estimate, which is subject to significant judgment regarding future events, and may differ materially from actual future sales.
 
(B)
This amount is required to be recorded as other-than-temporary impairment through earnings. In measuring the portion of credit losses, Newcastle’s management estimates the expected cash flow for each of the securities.  This evaluation includes a review of the credit status and the performance of the collateral supporting those securities, including the credit of the issuer, key terms of the securities and the effect of local, industry and broader economic trends.  Significant inputs in estimating the cash flows include management’s expectations of prepayment speeds, default rates and loss severities.  Credit losses are measured as the decline in the present value of the expected future cash flows discounted at the investment’s effective interest rate.
 
(C)
This amount represents unrealized losses on securities that are due to non-credit factors and is required to be recorded through other comprehensive income.

 

 
Schedule of Credit Losses on Debt Securities
The following table summarizes the activity related to credit losses on debt securities for the three months ended March 31, 2013:
 
Beginning balance of credit losses on debt securities for which a portion of an OTTI was recognized in other comprehensive income
  $ (4,770 )
         
Additions for credit losses on securities for which an OTTI was not previously recognized
     
         
Increases to credit losses on securities for which an OTTI was previously recognized and a portion of an OTTI was recognized in other comprehensive income
    (594 )
         
Additions for credit losses on securities for which an OTTI was previously recognized without any portion of OTTI recognized in other comprehensive income
     
         
Reduction for credit losses on securities for which no OTTI was recognized in other comprehensive income at the current measurement date
     
         
Reduction for securities sold during the period
     
         
Reduction for securities deconsolidated during the period
     
         
Reduction for increases in cash flows expected to be collected that are recognized over the remaining life of the security
    9  
         
Ending balance of credit losses on debt securities for which a portion of an OTTI was recognized in other comprehensive income
  $ (5,355 )
 
Schedule of Geographic Distribution of Collateral Securing Newcastle's CMBS and ABS
The table below summarizes the geographic distribution of the collateral securing Newcastle’s CMBS and ABS at March 31, 2013 (in thousands):

   
CMBS
   
ABS
 
Geographic Location
 
Outstanding Face
Amount
   
Percentage
   
Outstanding Face Amount
   
Percentage
 
Western U.S.
  $ 114,446       24.4 %   $ 331,852       36.3 %
Northeastern U.S.
    96,067       20.5 %     206,507       22.6 %
Southeastern U.S.
    86,896       18.5 %     192,309       21.0 %
Midwestern U.S.
    63,588       13.6 %     104,717       11.4 %
Southwestern U.S.
    72,915       15.6 %     73,155       8.0 %
Other
    14,730       3.1 %     6,280       0.7 %
Foreign
    19,942       4.3 %           0.0 %
    $ 468,584       100.0 %   $ 914,820       100.0 %
Schedule of Real Estate Securities with a deteriorated credit quality rating
The following is the outstanding face amount and carrying value for such securities in which,as of the acquisition date it was determined probable that Newcastle would be unable to collect all contractually required payments, at December 31, 2012 and March 31, 2013.
   
Outstanding
Face Amount
   
Carrying Value
 
December 31, 2012
  $ 342,013     $ 212,129  
      March 31, 2013
  $ 692,140     $ 436,458  
 
Schedule of accretable yield of real estate securities
The following is a summary of the changes in accretable yield (a portion of the discount) for these securities during the three months ended March 31, 2013.

   
For the three months
ended March 31, 2013
 
Balance at December 31, 2012
  $ 89,636  
Additions
    57,568  
Accretion
    (4,248 )
Reclassifications from nonaccretable difference
    49,553  
Disposals
     
Balance at March 31, 2013
  $ 192,509