Schedule of Real Estate Securities Holdings |
The following is a summary of Newcastle’s real estate securities at December 31, 2012 and 2011, 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.
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Amortized Cost Basis
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Gross Unrealized
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Weighted Average
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Asset Type
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Outstanding
Face Amount
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Before
Impairment
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Other-Than-
Temporary-
Impairment (A)
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After
Impairment
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Gains
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Losses
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Carrying Value
(B)
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Number of
Securities
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Rating (C)
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Coupon
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Yield
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Maturity
(Years)
(D)
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Principal
Subordination
(E)
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December 31, 2012
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CMBS-Conduit
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$ |
340,978 |
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$ |
315,554 |
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$ |
(98,481 |
) |
|
$ |
217,073 |
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$ |
47,776 |
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|
$ |
(10,081 |
) |
|
$ |
254,768 |
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|
53 |
|
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BB-
|
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|
5.55 |
% |
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|
10.81 |
% |
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3.3 |
|
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9.8% |
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CMBS- Single Borrower
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125,123 |
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123,638 |
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(12,364 |
) |
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111,274 |
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4,482 |
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(3,002 |
) |
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112,754 |
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22 |
|
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BB
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|
4.89 |
% |
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5.92 |
% |
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|
2.9 |
|
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|
9.2% |
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CMBS-Large Loan
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|
8,891 |
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|
8,619 |
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|
|
— |
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|
8,619 |
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|
250 |
|
|
|
— |
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|
8,869 |
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1 |
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BBB-
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6.08 |
% |
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12.41 |
% |
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0.6 |
|
|
|
4.8% |
|
REIT Debt
|
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62,700 |
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|
62,069 |
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|
|
— |
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62,069 |
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4,105 |
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|
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— |
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66,174 |
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10 |
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BBB-
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5.72 |
% |
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5.89 |
% |
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1.8 |
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N/A |
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ABS-Subprime (F)
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558,215 |
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390,509 |
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(68,708 |
) |
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321,801 |
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34,565 |
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(391 |
) |
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355,975 |
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|
69 |
|
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CC
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0.76 |
% |
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|
7.50 |
% |
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6.4 |
|
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13.3% |
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ABS-Franchise
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10,098 |
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9,386 |
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(7,839 |
) |
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1,547 |
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|
237 |
|
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(309 |
) |
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1,475 |
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3 |
|
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CCC-
|
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|
5.93 |
% |
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|
3.40 |
% |
|
|
4.7 |
|
|
|
3.0% |
|
FNMA/FHLMC
|
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|
768,619 |
|
|
|
818,866 |
|
|
|
— |
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|
818,866 |
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3,860 |
|
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(2,191 |
) |
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820,535 |
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|
58 |
|
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AAA
|
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3.05 |
% |
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1.40 |
% |
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|
3.5 |
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N/A |
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CDO (G)
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|
203,477 |
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|
82,399 |
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(14,861 |
) |
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67,538 |
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|
3,487 |
|
|
|
— |
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|
71,025 |
|
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|
13 |
|
|
|
BB
|
|
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|
2.83 |
% |
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|
7.07 |
% |
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|
1.6 |
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|
20.9% |
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Total/Average (H)
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|
$ |
2,078,101 |
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$ |
1,811,040 |
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|
$ |
(202,253 |
) |
|
$ |
1,608,787 |
|
|
$ |
98,762 |
|
|
$ |
(15,974 |
) |
|
$ |
1,691,575 |
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|
229 |
|
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BBB-
|
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|
3.04 |
% |
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|
4.69 |
% |
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4.0 |
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December 31, 2011
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CMBS-Conduit
|
|
$ |
1,344,819 |
|
|
$ |
1,143,910 |
|
|
$ |
(202,164 |
) |
|
$ |
941,746 |
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|
$ |
91,583 |
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|
$ |
(76,424 |
) |
|
$ |
956,905 |
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|
169 |
|
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BB+
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|
5.61 |
% |
|
|
11.03 |
% |
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|
4.2 |
|
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|
10.8% |
|
CMBS- Single Borrower
|
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|
186,088 |
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180,874 |
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(12,364 |
) |
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168,510 |
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|
3,121 |
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(14,366 |
) |
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157,265 |
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33 |
|
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|
BB
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|
5.05 |
% |
|
|
6.25 |
% |
|
|
3.6 |
|
|
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6.7% |
|
CMBS-Large Loan
|
|
|
14,970 |
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|
|
14,190 |
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|
|
— |
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|
14,190 |
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|
519 |
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(61 |
) |
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|
14,648 |
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2 |
|
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BBB+
|
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|
5.15 |
% |
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8.89 |
% |
|
|
1.2 |
|
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|
7.5% |
|
REIT Debt
|
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|
137,393 |
|
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|
136,704 |
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(773 |
) |
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135,931 |
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5,060 |
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(5,695 |
) |
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135,296 |
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20 |
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BB+
|
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5.83 |
% |
|
|
5.72 |
% |
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|
2.4 |
|
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N/A |
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ABS-Subprime
|
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|
246,014 |
|
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|
209,838 |
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|
(86,815 |
) |
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|
123,023 |
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14,481 |
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(8,882 |
) |
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128,622 |
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63 |
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B |
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1.22 |
% |
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10.16 |
% |
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6.9 |
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32.5% |
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ABS-Manufactured Housing
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30,232 |
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|
29,454 |
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|
— |
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|
29,454 |
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1,247 |
|
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|
(154 |
) |
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30,547 |
|
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|
7 |
|
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BBB+
|
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|
6.61 |
% |
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|
7.54 |
% |
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|
4.2 |
|
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|
41.6% |
|
ABS-Franchise
|
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|
23,115 |
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21,598 |
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(11,133 |
) |
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10,465 |
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|
215 |
|
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|
(3,120 |
) |
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|
7,560 |
|
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|
7 |
|
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BB+
|
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|
|
3.58 |
% |
|
|
4.56 |
% |
|
|
11.0 |
|
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|
21.9% |
|
FNMA/FHLMC
|
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|
232,355 |
|
|
|
243,385 |
|
|
|
— |
|
|
|
243,385 |
|
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|
1,715 |
|
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|
(185 |
) |
|
|
244,915 |
|
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|
31 |
|
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AAA
|
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|
2.37 |
% |
|
|
1.63 |
% |
|
|
4.6 |
|
|
|
N/A |
|
CDO
|
|
|
206,150 |
|
|
|
82,486 |
|
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(14,861 |
) |
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|
67,625 |
|
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|
149 |
|
|
|
(11,788 |
) |
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|
55,986 |
|
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|
13 |
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CCC+
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|
3.03 |
% |
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|
8.05 |
% |
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|
1.5 |
|
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|
21.4% |
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Total/Average (H)
|
|
$ |
2,421,136 |
|
|
|
2,062,439 |
|
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|
(328,110 |
) |
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|
1,734,329 |
|
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|
118,090 |
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|
(120,675 |
) |
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|
1,731,744 |
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|
345 |
|
|
|
BB+
|
|
|
|
4.60 |
% |
|
|
8.54 |
% |
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|
4.2 |
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(A)
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Represents the cumulative impairment against amortized cost basis recorded through earnings, net of the effect of the cumulative adjustment as a result of the adoption of new accounting guidance on impairment in 2009.
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(B)
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See Note 10 regarding the estimation of fair value, which is equal to carrying value for all securities.
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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.
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The weighted average maturity is based on the timing of expected principal reduction on the assets.
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Percentage of the outstanding face amount of securities and residual interests that is subordinate to Newcastle’s investments.
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Includes (i) the retained bonds with a face amount of $4.0 million and a carrying value of $1.3 million from Securitization Trust 2006 (Note 6) and (ii) $456.0 million non-agency RMBS purchased during the year ended December 31, 2012 with an aggregate face amount of $433.5 million and a carrying value of $289.8 million as of December 31, 2012.
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Includes two CDO bonds issued by a third party with a carrying value of $61.2 million, four CDO bonds issued by CDO V (which has been deconsolidated and held as an investment by Newcastle) with a carrying value of $6.0 million and seven CDO bonds issued by C-BASS with a carrying value of $3.9 million .
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As of December 31, 2012 and 2011, the total outstanding face amount of fixed rate securities was $0.5 billion and $1.7 billion, respectively, and of floating rate securities was $1.5 billion and $0.7 billion, respectively.
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Schedule of Real Estate Securities Holdings in an Unrealized Loss Position and the Associated Intent to Sell |
Newcastle performed an assessment of all of its debt securities that are in an unrealized loss position (unrealized loss position exists when a security’s amortized cost basis, excluding the effect of OTTI, exceeds its fair value) and determined the following:
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December 31, 2012
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Amortized Cost Basis
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Unrealized Losses
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Fair Value
|
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After Impairment
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Credit (B)
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Non-Credit (C)
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Securities Newcastle intends to sell
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$ |
— |
|
|
$ |
— |
|
|
$ |
— |
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N/A |
|
Securities Newcastle is more likely than not to be required to sell (A)
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|
— |
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|
— |
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|
— |
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N/A |
|
Securities Newcastle has no intent to sell and is not more likely than not to be required to sell:
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Credit impaired securities
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|
1,607 |
|
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|
1,849 |
|
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|
(4,770 |
) |
|
|
(242 |
) |
Non credit impaired securities
|
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|
564,927 |
|
|
|
580,659 |
|
|
|
— |
|
|
|
(15,732 |
) |
Total debt securities in an unrealized loss position
|
|
$ |
566,534 |
|
|
$ |
582,508 |
|
|
$ |
(4,770 |
) |
|
$ |
(15,974 |
) |
(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.
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(B)
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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.
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|
This amount represents unrealized losses on securities that are due to non-credit factors and is required to be recorded through other comprehensive income.
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