Annual report pursuant to Section 13 and 15(d)

REAL ESTATE SECURITIES (Tables)

v2.4.0.8
REAL ESTATE SECURITIES (Tables)
 12 Months Ended
Dec. 31, 2013
Real Estate Securities Tables  
Schedule of real estate securities holdings

The following is a summary of Newcastle’s real estate securities at December 31, 2013 and 2012, 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  
Asset Type   Outstanding
Face Amount 		  Before
Impairment 		  Other-Than-
Temporary-
Impairment 		  After
Impairment 		  Gains   Losses   Carrying Value
(A) 		  Number of
Securities 		    Rating
(B) 		  Coupon     Yield     Maturity
(Years)
(C) 		    Principal
Subordination
(D) 		   
December 31, 2013                                                                    
CMBS-Conduit   $ 238,400   $ 215,341   $ (69,099 ) $ 146,242   $ 52,900   $ (208 ) $ 198,934   34     BB-   5.47 %   17.00 %   2.6     10.2 %  
CMBS- Single Borrower     91,492     90,788     (12,364 )   78,424     3,964     (82 )   82,306   15     BB   5.71 %   7.16 %   2.4     7.8 %  
CMBS-Large Loan     3,229     3,212     —     3,212     17     —     3,229   1     BBB-   6.63 %   8.87 %   0.3     8.1 %  
REIT Debt     29,200     28,667     —     28,667     2,519     —     31,186   5     BB+   5.89 %   6.86 %   1.8     N/A    
Non-Agency RMBS     96,762     103,535     (62,860 )   40,675     16,907     (1 )   57,581   34     CCC+   1.07 %   12.20 %   4.4     25.9 %  
ABS-Franchise     8,464     7,647     (7,647 )   —     —     —     —   1     C   6.69 %   0.00 %   —     0.0 %  
FNMA/FHLMC (G)     514,994     548,456     (817 )   547,639     3,631     —     551,270   64     AAA   2.90 %   1.25 %   3.6     N/A    
CDO (E)     188,364     71,857     (14,861 )   56,996     2,761     —     59,757   11     CCC-   3.21 %   7.56 %   1.2     19.1 %  
Total/Average (F)   $ 1,170,905   $ 1,069,503   $ (167,648 ) $ 901,855   $ 82,699   $ (291 ) $ 984,263   165     BBB   3.65 %   5.44 %   2.9          
December 31, 2012                                                                              
CMBS-Conduit   $ 340,978   $ 315,554   $ (98,481 ) $ 217,073   $ 47,776   $ (10,081 ) $ 254,768   53     BB-   5.55 %   10.81 %   3.3     9.8 %  
CMBS- Single Borrower     125,123     123,638     (12,364 )   111,274     4,482     (3,002 )   112,754   22     BB   4.89 %   5.92 %   2.9     9.2 %  
CMBS-Large Loan     8,891     8,619     —     8,619     250     —     8,869   1     BBB-   6.08 %   12.41 %   0.6     4.8 %  
REIT Debt     62,700     62,069     —     62,069     4,105     —     66,174   10     BBB-   5.72 %   5.89 %   1.8     N/A    
Non-Agency RMBS     558,215     390,509     (68,708 )   321,801     34,565     (391 )   355,975   69     CC   0.76 %   7.50 %   6.4     13.3 %  
ABS-Franchise     10,098     9,386     (7,839 )   1,547     237     (309 )   1,475   3     CCC-   5.93 %   3.40 %   4.7     3.0 %  
FNMA/FHLMC (G)     768,619     818,866     —     818,866     3,860     (2,191 )   820,535   58     AAA   3.05 %   1.40 %   3.5     N/A    
CDO     203,477     82,399     (14,861 )   67,538     3,487     —     71,025   13     BB   2.83 %   7.07 %   1.6     20.9 %  
Total/Average (F)   $ 2,078,101     1,811,040     (202,253 )   1,608,787     98,762     (15,974 )   1,691,575   229     BBB-   3.04 %   4.69 %   4.0          
     
  (A) See Note 13 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, represent the most resent credit ratings available as of the reporting date and may not be current.
  (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 two CDO bonds issued by a third party with a carrying value of $57.8 million, three CDO bonds issued by CDO V (which has been deconsolidated) and held as an investment by Newcastle with a carrying value of $2.0 million and six CDO bonds issued by C-BASS with no carrying value.
  (F) As of December 31, 2013 and 2012, the total outstanding face amount of fixed rate securities was $0.4 billion and $0.5 billion, respectively, and of floating rate securities were $0.8 billion and $1.5 billion, respectively.
  (G) Amortized cost basis and carrying value include principal receivable of $4.8 million and $7.4 million as of December 31, 2013 and 2012, respectively.
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 December 31, 2013.

                                                                           
          Amortized Cost Basis   Gross Unrealized               Weighted Average  
Securities in
an Unrealized
Loss Position 		  Outstanding
Face
Amount 		  Before
Impairment 		  Other-than-
Temporary
Impairment 		  After
Impairment 		  Gains   Losses   Carrying
Value 		  Number
of
Securities 		  Rating   Coupon   Yield   Maturity
(Years) 		 
Less Than
   Twelve        Months 		 
 		  
$ 		 
14,456 		 
 		  
$ 		 
17,024 		 
 		  
$ 		 
(2,874 		 
) 		 
$ 		 
14,150 		 
 		  
$ 		 
— 		 
 		  
$ 		 
(115 		 
) 		 
$ 		 
14,035 		 
 		  
 		  
6 		 
 		  
 		  
BBB+ 		 
 		  
 		  
5.58 		 
% 		 
 		  
6.34 		 
% 		 
 		  
0.9 		 
 
Twelve or
    More        Months 		 
 		  
 		  
11,157 		 
 		  
 		  
10,963 		 
 		  
 		  
— 		 
 		  
 		  
10,963 		 
 		  
 		  
— 		 
 		  
 		  
(176 		 
) 		 
 		  
10,787 		 
 		  
 		  
2 		 
 		  
 		  
B    		 
 		  
 		  
5.38 		 
% 		 
 		  
5.74 		 
% 		 
 		  
3.2 		 
 
Total   $ 25,613   $ 27,987   $ (2,874 ) $ 25,113   $ —   $ (291 ) $ 24,822     8     BB+     5.49 %   6.08 %   1.9  

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:

                           
    December 31, 2013  
            Amortized Cost Basis   Unrealized Losses  
    Fair Value   After Impairment   Credit (B)   Non-Credit (C)  
Securities Newcastle intends to sell   $ 179,225   $ 179,225   $ (817 ) $  —  
Securities Newcastle is more likely than not to be required to sell (A)     —     —     —     —  
Securities Newcastle has no intent to sell and is not more likely                          
than not to be required to sell:                          
Credit impaired securities     —     1     (2,873 )   (1 )
Non-credit impaired securities     24,822     25,112     —     (290 )
Total debt securities in an unrealized loss position   $ 204,047   $ 204,338   $ (3,690 ) $ (291 )
     
  (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:

               
    2013   2012  
Beginning balance of credit losses on debt securities for which a portion of an OTTI was recognized in other comprehensive income   $ (4,770 ) $ (20,207 )
               
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     (89 )   (4,581 )
               
Additions for credit losses on securities for which an OTTI was previously recognized without any portion of OTTI recognized in other comprehensive income     (2,874 )   —  
               
Reduction for credit losses on securities for which no OTTI was recognized in other comprehensive income at the current measurement date     120     14,771  
               
Reduction for securities sold during the period     4,739     1,498  
               
Reduction for securities deconsolidated during the period     —     3,736  
               
Reduction for increases in cash flows expected to be collected that are recognized over the remaining life of the security     1     13  
               
Ending balance of credit losses on debt securities for which a portion of an OTTI was recognized in other comprehensive income   $ (2,873 ) $ (4,770 )
Schedule of geographic distribution of collateral securing Newcastle's CMBS and ABS

The table below summarizes the geographic distribution of the collateral securing the CMBS and ABS at December 31, 2013:

                           
    CMBS   ABS  
Geographic Location   Outstanding Face Amount   Percentage   Outstanding Face Amount   Percentage  
Western U.S.   $ 74,067     22.2 % $ 32,080     30.5 %
Northeastern U.S.     60,858     18.3 %   21,972     20.9 %
Southeastern U.S.     66,534     20.0 %   20,722     19.7 %
Midwestern U.S.     49,413     14.8 %   13,704     13.0 %
Southwestern U.S.     64,632     19.4 %   10,567     10.0 %
Other     12,720     3.8 %   6,181     5.9 %
Foreign     4,897     1.5 %   —     0.0 %
    $ 333,121     100.0 % $ 105,226     100.0 %