FAIR VALUE (Tables)
|
9 Months Ended |
Sep. 30, 2015 |
|---|
| Fair Value Disclosures [Abstract] |
|
| Schedule of carrying value and estimated fair value of assets and liabilities |
The following table summarizes the carrying values and estimated fair values of Newcastle’s financial instruments at September 30, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
Value |
|
Estimated
Fair Value |
|
Fair Value Method (A) |
Assets |
|
|
|
|
|
|
|
Real estate securities, available-for-sale |
$ |
61,508 |
|
|
$ |
61,508 |
|
|
Broker/counterparty quotations, pricing services, pricing models |
Real estate securities, pledged as collateral |
370,342 |
|
|
370,342 |
|
|
Broker/counterparty quotations, pricing services |
Real estate related and other loans, held-for-sale, net |
142,802 |
|
|
158,874 |
|
|
Broker/counterparty quotations, pricing services, pricing models |
Residential mortgage loans, held-for-sale, net |
569 |
|
|
603 |
|
|
Broker/counterparty quotations, pricing models |
Subprime mortgage loans subject to call option (B) |
392,342 |
|
|
392,342 |
|
|
(B) |
Restricted cash |
5,759 |
|
|
5,759 |
|
|
|
Cash and cash equivalents |
31,493 |
|
|
31,493 |
|
|
|
Non-hedge derivative assets (C) |
3,712 |
|
|
3,712 |
|
|
Counterparty quotations, pricing services |
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
CDO bonds payable (D) |
$ |
92,812 |
|
|
$ |
16,243 |
|
|
Pricing models |
Other bonds and notes payable (D) |
7,494 |
|
|
8,003 |
|
|
Pricing models |
Repurchase agreements |
415,442 |
|
|
415,859 |
|
|
Market comparables, counterparty quotations |
Credit facilities and obligations under capital leases |
12,003 |
|
|
12,003 |
|
|
Pricing models |
Financing of subprime mortgage loans subject to call option (B) |
392,342 |
|
|
392,342 |
|
|
(B) |
Junior subordinated notes payable |
51,226 |
|
|
38,696 |
|
|
Pricing models |
Non-hedge derivatives (C) |
6,124 |
|
|
6,124 |
|
|
Counterparty quotations, pricing services |
|
|
(A) |
Methods are listed in order of priority. In the case of real estate securities and real estate related and other loans, broker quotations are obtained if available and practicable, otherwise counterparty quotations or pricing service valuations are obtained or, finally, internal pricing models are used. Internal pricing models are only used for (i) securities and loans that are not traded in an active market, and, therefore, have little or no price transparency, and for which significant unobservable inputs must be used in estimating fair value, or (ii) loans or debt obligations which are private and untraded. |
|
|
(B) |
Represents an option, not an obligation, to repurchase loans from Newcastle’s subprime mortgage loan securitizations (Note 6).
|
|
|
(C) |
Represents derivative assets and liabilities including TBA forward contracts (Note 12). |
|
|
(D) |
Newcastle notes that the unrealized gain on the liabilities within such structures cannot be fully realized. Assets held within CDOs and other non-recourse structures are generally not available to satisfy obligations outside of such financings, except to the extent Newcastle receives net cash flow distributions from such structures. Therefore, Newcastle’s exposure to the economic losses from such structures is limited to its invested equity in them and economically their book value cannot be less than zero. As a result, the fair value of Newcastle’s net investments in these non-recourse financing structures is equal to the present value of their expected future net cash flows. |
|
| Schedule of assets and liabilites measured at fair value on a recurring basis |
The following table summarizes financial assets and liabilities measured at fair value on a recurring basis at September 30, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
Carrying Value |
|
Level 2 |
|
Level 3 |
|
Total |
|
|
|
Market Quotations (Observable) |
|
Market Quotations (Unobservable) |
|
Internal Pricing Models |
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate securities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
CMBS |
$ |
42,562 |
|
|
$ |
— |
|
|
$ |
42,562 |
|
|
$ |
— |
|
|
$ |
42,562 |
|
Non-Agency RMBS |
9,763 |
|
|
— |
|
|
9,763 |
|
|
— |
|
|
9,763 |
|
CDO (A) |
9,183 |
|
|
— |
|
|
— |
|
|
9,183 |
|
|
9,183 |
|
Real estate securities, available-for-sale total |
$ |
61,508 |
|
|
$ |
— |
|
|
$ |
52,325 |
|
|
$ |
9,183 |
|
|
$ |
61,508 |
|
|
|
|
|
|
|
|
|
|
|
Real estate securities, pledged as collateral: |
|
|
|
|
|
|
|
|
|
FNMA/FHLMC |
$ |
370,342 |
|
|
$ |
370,342 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
370,342 |
|
Real estate securities, pledged as collateral total |
$ |
370,342 |
|
|
$ |
370,342 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
370,342 |
|
|
|
|
|
|
|
|
|
|
|
Derivative assets: |
|
|
|
|
|
|
|
|
|
TBAs, not treated as hedges |
$ |
3,712 |
|
|
$ |
3,712 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
3,712 |
|
Derivative assets total |
$ |
3,712 |
|
|
$ |
3,712 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
3,712 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
TBAs, not treated as hedges |
$ |
6,124 |
|
|
$ |
6,124 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
6,124 |
|
Derivative liabilities total |
$ |
6,124 |
|
|
$ |
6,124 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
6,124 |
|
|
|
(A) |
Represents non-consolidated CDO securities, excluding eight securities with zero value, which had an aggregate face amount of $115.5 million as of September 30, 2015.
|
|
| Schedule of quantitative information about significant unobservable inputs |
The following table provides quantitative information regarding the significant unobservable inputs used by Newcastle for assets and liabilities measured at fair value on a recurring basis as of September 30, 2015. This table excludes inputs used to measure fair value that are not developed by Newcastle, such as broker prices and other third-party pricing service valuations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Significant Input |
Asset Type |
|
Amortized
Cost
Basis |
|
Fair Value |
|
Discount
Rate |
|
Prepayment
Speed |
|
Cumulative
Default
Rate |
|
Loss
Severity |
CDO |
|
$ |
— |
|
|
$ |
9,183 |
|
|
10.5 |
% |
|
4.7 |
% |
|
28.8 |
% |
|
62.5 |
% |
Total |
|
$ |
— |
|
|
$ |
9,183 |
|
|
|
|
|
|
|
|
|
|
| Schedule of change in fair value of Level 3 investments |
Newcastle’s investments in instruments measured at fair value on a recurring basis using Level 3 inputs changed during the nine months ended September 30, 2015 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMBS |
|
Non-Agency RMBS |
|
Equity/Other Securities |
|
Total |
Balance at December 31, 2014 |
$ |
178,763 |
|
|
$ |
45,035 |
|
|
$ |
7,956 |
|
|
$ |
231,754 |
|
Transfers |
|
|
|
|
|
|
|
Transfers into Level 3 |
— |
|
|
— |
|
|
367 |
|
|
367 |
|
Total gains (losses) |
|
|
|
|
|
|
|
|
|
|
|
Included in net income (A) |
12,038 |
|
|
14,826 |
|
|
(367 |
) |
|
26,497 |
|
Included in other comprehensive income (loss) |
(17,671 |
) |
|
(12,846 |
) |
|
1,227 |
|
|
(29,290 |
) |
Amortization included in interest income |
5,611 |
|
|
2,699 |
|
|
— |
|
|
8,310 |
|
Purchases, sales and repayments |
|
|
|
|
|
|
|
|
|
|
|
Purchases |
— |
|
|
— |
|
|
— |
|
|
— |
|
Proceeds from sales |
(102,607 |
) |
|
(37,582 |
) |
|
— |
|
|
(140,189 |
) |
Proceeds from repayments |
(33,572 |
) |
|
(2,369 |
) |
|
— |
|
|
(35,941 |
) |
Balance at September 30, 2015 |
$ |
42,562 |
|
|
$ |
9,763 |
|
|
$ |
9,183 |
|
|
$ |
61,508 |
|
|
|
(A) |
These gains (losses) are recorded in the following line items in the consolidated statements of operations: |
|
|
|
|
|
|
Nine Months Ended September 30, 2015 |
Gain (loss) on settlement of investments, net |
$ |
28,854 |
|
OTTI, net |
(2,357 |
) |
Total |
$ |
26,497 |
|
|
| Schedule of gains (losses) on investments |
These gains (losses) are recorded in the following line items in the consolidated statements of operations:
|
|
|
|
|
|
Nine Months Ended September 30, 2015 |
Gain (loss) on settlement of investments, net |
$ |
28,854 |
|
OTTI, net |
(2,357 |
) |
Total |
$ |
26,497 |
|
|
| Schedule of fair value for real estate related and other loans and residential mortgage loans held-for-sale |
The following tables summarize certain information for real estate related and other loans and residential mortgage loans held-for-sale as of September 30, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Input |
|
|
|
|
|
|
Range |
|
Weighted Average |
|
|
Carrying |
|
Fair |
|
Discount |
|
Loss |
|
Discount |
|
Loss |
Loan Type |
|
Value |
|
Value |
|
Rate |
|
Severity |
|
Rate |
|
Severity |
Mezzanine |
|
$ |
19,433 |
|
|
$ |
19,433 |
|
|
0.0%-8.0% |
|
0%-100% |
|
8.0 |
% |
|
47.8 |
% |
Bank Loan |
|
123,369 |
|
|
139,441 |
|
|
0.0%-22.5% |
|
0%-100% |
|
22.4 |
% |
|
23.7 |
% |
Total Real Estate Related and other Loans Held-for-Sale, Net |
|
$ |
142,802 |
|
|
$ |
158,874 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Input (Weighted Average) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying |
|
Fair |
|
Discount |
|
Prepayment |
|
Constant |
|
Loss |
Loan Type |
|
Value |
|
Value |
|
Rate |
|
Speed |
|
Default Rate |
|
Severity |
Residential Loans |
|
569 |
|
|
603 |
|
|
69.3 |
% |
|
0.9 |
% |
|
83.7 |
% |
|
22.4 |
% |
Total Residential Mortgage Loans, Held-for-Sale, Net |
|
$ |
569 |
|
|
$ |
603 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|