Quarterly report pursuant to Section 13 or 15(d)

REAL ESTATE SECURITIES (Tables)

v3.2.0.727
REAL ESTATE SECURITIES (Tables)
 6 Months Ended
Jun. 30, 2015
Investments, Debt and Equity Securities [Abstract]  
Schedule of real estate securities holdings
The following is a summary of Newcastle’s real estate securities at June 30, 2015, 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
 
Life
(Years) (C)
 
Principal Subordination (D)
CMBS
 
$
83,283

 
$
94,055

 
$
(67,437
)
 
$
26,618

 
$
18,847

 
$
(57
)
 
$
45,408

 
17

 
B-
 
5.13
%
 
15.80
%
 
1.3

 
22.1
%
Non-Agency RMBS
 
17,032

 
23,537

 
(20,667
)
 
2,870

 
6,975

 
(28
)
 
9,817

 
9

 
CC
 
1.59
%
 
11.35
%
 
12.1

 
8.3
%
ABS-Franchise
 
8,464

 
7,647

 
(7,647
)
 
—

 
—

 
—

 
—

 
1

 
C
 
6.69
%
 
0.00
%
 
—

 
0.0
%
CDO (E)
 
14,520

 
—

 
—

 
—

 
10,187

 
—

 
10,187

 
2

 
C
 
1.49
%
 
0.00
%
 
6.5

 
20.3
%
Debt Security Total / Average (F)
 
$
123,299

 
$
125,239

 
$
(95,751
)
 
$
29,488

 
$
36,009

 
$
(85
)
 
$
65,412

 
29

 
CCC+
 
4.32
%
 
15.37
%
 
3.3

 
 

Equity Securities
 
 
 
367

 
(280
)
 
87

 
—

 
—

 
87

 
2

 
 
 
 
 
 
 
 
 
 
Total Securities, Available-for-Sale
 
 
 
$
125,606

 
$
(96,031
)
 
$
29,575

 
$
36,009

 
$
(85
)
 
$
65,499

 
31

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FNMA/FHLMC
 
201,928

 
207,731

 
—

 
207,731

 
310

 
—

 
208,041

 
4

 
AAA
 
3.50
%
 
3.09
%
 
8.8

 
N/A

Total Securities, Pledged as Collateral (F)
 
$
201,928

 
$
207,731

 
$
—

 
$
207,731

 
$
310

 
$
—

 
$
208,041

 
4

 
 
 
 
 
 
 
 
 
 
  
(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 uses an implied AAA rating for the FNMA/FHLMC securities. Ratings provided were determined by third party rating agencies, represent the most recent credit ratings available as of the reporting date and may not be current.
(C)
The weighted average life is based on the timing of expected principal reduction on the assets.
(D)
Percentage of the outstanding face amount of securities and interests that is subordinate to Newcastle’s investments.
(E)
Represents non-consolidated CDO securities, excluding 8 securities with zero value, which had an aggregate face amount of $115.0 million.
(F)
The total outstanding face amount was $283.3 million for fixed rate securities and $41.9 million for floating rate securities.

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 June 30, 2015.
 
 
 
 
 
Amortized Cost Basis
 
 
 
 
 
 
 
 
Securities in
 
Outstanding
 
 
 
Other-than-
 
 
 
 
 
 
 
 
 
Number
 
Weighted Average
an Unrealized
 
Face
 
Before
 
Temporary
 
After
 
Gross Unrealized
 
Carrying
 
of
 
 
 
 
 
 
 
Life
Loss Position
 
Amount
 
Impairment
 
Impairment
 
Impairment
 
Gains
 
Losses
 
Value
 
Securities
 
Rating
 
Coupon
 
Yield
 
(Years)
Less Than Twelve
Months
 
$
5,072

 
$
5,735

 
$
(3,068
)
 
$
2,667

 
$
—

 
$
(85
)
 
$
2,582

 
4

 
CC

 
4.16
%
 
5.77
%
 
6.3

Twelve or More
Months
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—
%
 
—
%
 
—

Total
 
$
5,072

 
$
5,735

 
$
(3,068
)
 
$
2,667

 
$
—

 
$
(85
)
 
$
2,582

 
4

 
CC

 
4.16
%
 
5.77
%
 
6.3

 
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:
 
June 30, 2015
 
 
 
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
2,218

 
2,302

 
(3,068
)
 
(84
)
Non credit impaired securities
364

 
365

 
—

 
(1
)
Total debt securities in an unrealized loss position
$
2,582

 
$
2,667

 
$
(3,068
)
 
$
(85
)
 
(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 flows 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 activity related to credit losses on debt securities
 

The following table summarizes the activity related to credit losses on debt securities for the six months ended June 30, 2015: 
Beginning balance of credit losses on debt securities for which a portion of an OTTI was recognized in other comprehensive income
$
(4,174
)
 
 

Additions for credit losses on securities for which an OTTI was not previously recognized
(1,625
)
 
 

Additions for credit losses on securities for which an OTTI was previously recognized without any portion of OTTI recognized in other comprehensive income
(1,443
)
 
 
Reduction for credit losses on securities for which no OTTI was recognized in other comprehensive income at the current measurement date
4,174

 
 

Reduction for securities sold/written off during the period
—

 
 
Reduction for increases in cash flows expected to be collected that are recognized over the remaining life of the security
—

 
 

Ending balance of credit losses on debt securities for which a portion of an OTTI was recognized in other comprehensive income
$
(3,068
)
 
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 asset backed securities (“ABS”) at June 30, 2015:
 
CMBS
 
ABS
Geographic Location
Outstanding Face Amount
 
Percentage
 
Outstanding Face Amount
 
Percentage
Western U.S.
$
12,939

 
15.5
%
 
$
4,790

 
18.8
%
Northeastern U.S.
15,761

 
18.9
%
 
7,083

 
27.8
%
Southeastern U.S.
19,277

 
23.2
%
 
4,226

 
16.6
%
Midwestern U.S.
24,651

 
29.6
%
 
5,481

 
21.5
%
Southwestern U.S.
10,655

 
12.8
%
 
3,910

 
15.3
%
Other
—

 
—
%
 
6

 
—
%
Foreign
—

 
—
%
 
—

 
—
%
 
$
83,283

 
100.0
%
 
$
25,496

 
100.0
%