| Schedule of real estate securities holdings |
The following is a summary of Newcastle’s real estate securities at December 31, 2015 and 2014, 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 |
Asset Type |
|
Outstanding
Face Amount |
|
Before
Impairment |
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Other-Than-
Temporary-
Impairment |
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After
Impairment |
|
Gains |
|
Losses |
|
Carrying Value
(A) |
|
Number of
Securities |
|
Rating
(B) |
|
Coupon |
|
Yield |
|
Life
(Years)
(C) |
|
Principal
Subordination
(D) |
December 31, 2015 |
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CMBS |
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$ |
67,669 |
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|
$ |
78,416 |
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|
$ |
(55,372 |
) |
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$ |
23,044 |
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$ |
16,673 |
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|
$ |
(33 |
) |
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$ |
39,684 |
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16 |
|
|
B |
|
4.97 |
% |
|
14.78 |
% |
|
2.1 |
|
26.1 |
% |
Non-Agency RMBS |
|
16,477 |
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|
23,403 |
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(20,667 |
) |
|
2,736 |
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6,958 |
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(75 |
) |
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9,619 |
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9 |
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CC |
|
1.89 |
% |
|
11.95 |
% |
|
11.0 |
|
9.7 |
% |
ABS-Franchise |
|
8,464 |
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|
7,647 |
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(7,647 |
) |
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— |
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|
— |
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— |
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— |
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|
1 |
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C |
|
6.69 |
% |
|
— |
% |
|
0 |
|
— |
% |
CDO (E)
|
|
14,632 |
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— |
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— |
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— |
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|
9,731 |
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— |
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9,731 |
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2 |
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C |
|
1.80 |
% |
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— |
% |
|
7.2 |
|
25.1 |
% |
Debt Security Total/Average (F)
|
|
$ |
107,242 |
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|
$ |
109,466 |
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|
$ |
(83,686 |
) |
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$ |
25,780 |
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$ |
33,362 |
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|
$ |
(108 |
) |
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$ |
59,034 |
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28 |
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CCC+ |
|
4.20 |
% |
|
14.48 |
% |
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4.0 |
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|
Equity Securities |
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— |
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— |
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— |
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— |
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— |
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— |
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2 |
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Total Securities, Available-for-Sale |
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$ |
109,466 |
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|
$ |
(83,686 |
) |
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$ |
25,780 |
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$ |
33,362 |
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$ |
(108 |
) |
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$ |
59,034 |
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30 |
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Agency RMBS (FNMA/FHLMC) |
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102,660 |
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|
105,940 |
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|
— |
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|
105,940 |
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23 |
|
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— |
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|
105,963 |
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3 |
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AAA |
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3.50 |
% |
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2.99 |
% |
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7.8 |
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N/A |
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Total Securities, Pledged as Collateral |
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$ |
102,660 |
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$ |
105,940 |
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$ |
— |
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$ |
105,940 |
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$ |
23 |
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$ |
— |
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$ |
105,963 |
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3 |
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December 31, 2014 |
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CMBS |
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$ |
214,026 |
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$ |
218,900 |
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$ |
(75,574 |
) |
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$ |
143,326 |
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$ |
35,441 |
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$ |
(4 |
) |
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$ |
178,763 |
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32 |
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B |
|
5.86 |
% |
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11.00 |
% |
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2.6 |
|
10.4 |
% |
Non-Agency RMBS |
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67,475 |
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|
79,808 |
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(54,589 |
) |
|
25,219 |
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|
19,816 |
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— |
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45,035 |
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28 |
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CCC |
|
1.21 |
% |
|
9.66 |
% |
|
7.7 |
|
21.8 |
% |
ABS-Franchise |
|
8,464 |
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7,647 |
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(7,647 |
) |
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— |
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— |
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— |
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— |
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1 |
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C |
|
6.69 |
% |
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— |
% |
|
0 |
|
— |
% |
CDO (E)
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14,413 |
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— |
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— |
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— |
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|
7,956 |
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— |
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7,956 |
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2 |
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CCC- |
|
1.46 |
% |
|
— |
% |
|
11.5 |
|
13.7 |
% |
Debt Security Total/Average (F)
|
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$ |
304,378 |
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$ |
306,355 |
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$ |
(137,810 |
) |
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$ |
168,545 |
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$ |
63,213 |
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$ |
(4 |
) |
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$ |
231,754 |
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63 |
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B- |
|
4.64 |
% |
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10.80 |
% |
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4.1 |
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Equity Securities |
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— |
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— |
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— |
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— |
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— |
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— |
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1 |
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Total Securities, Available-for-Sale |
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$ |
306,355 |
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$ |
(137,810 |
) |
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$ |
168,545 |
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$ |
63,213 |
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$ |
(4 |
) |
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$ |
231,754 |
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64 |
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Agency RMBS (FNMA/FHLMC) |
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390,771 |
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|
403,216 |
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— |
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|
403,216 |
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|
4,473 |
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— |
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|
407,689 |
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9 |
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AAA |
|
3.50 |
% |
|
2.94 |
% |
|
5.6 |
|
N/A |
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Total Securities, Pledged as Collateral |
|
$ |
390,771 |
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$ |
403,216 |
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$ |
— |
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$ |
403,216 |
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$ |
4,473 |
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$ |
— |
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$ |
407,689 |
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9 |
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(A) |
See Note 10 regarding the estimation of fair value, which is equal to carrying value for all securities. |
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(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.
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(C) |
The weighted average life is based on the timing of expected principal reduction on the assets. |
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(D) |
Percentage of the outstanding face amount of securities and residual interests that is subordinate to Newcastle’s investments. |
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(E) |
Represents non-consolidated CDO securities, excluding eight securities with zero value which had an aggregate face amount of $116.0 million and $113.3 million as of December 31, 2015 and 2014, respectively.
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(F) |
As of December 31, 2015 and 2014, the total outstanding face amount of fixed rate securities was $168.5 million and $600.9 million, respectively, and of floating rate securities were $41.4 million and $94.2 million, respectively.
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| 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, 2015.
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Amortized Cost Basis |
|
Gross Unrealized |
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|
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 |
|
Life
(Years) |
|
Less Than
Twelve
Months
|
$ |
3,699 |
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$ |
4,389 |
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$ |
(3,010 |
) |
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$ |
1,379 |
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$ |
— |
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$ |
(108 |
) |
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$ |
1,271 |
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2 |
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CC |
|
3.46 |
% |
|
11.20 |
% |
|
7.4 |
|
Twelve or
More
Months
|
— |
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|
— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
|
— |
|
0 |
Total |
$ |
3,699 |
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$ |
4,389 |
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$ |
(3,010 |
) |
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$ |
1,379 |
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$ |
— |
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$ |
(108 |
) |
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$ |
1,271 |
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2 |
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|
CC |
|
3.46 |
% |
|
11.20 |
% |
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7.4 |
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, 2015 |
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Amortized Cost Basis |
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Unrealized Losses |
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Fair Value |
|
After Impairment |
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Credit (B) |
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Non-Credit (C) |
Securities Newcastle intends to sell |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
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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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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 |
1,271 |
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1,379 |
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(3,010 |
) |
|
(108 |
) |
Non-credit impaired securities |
— |
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— |
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— |
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|
— |
|
Total debt securities in an unrealized loss position |
$ |
1,271 |
|
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$ |
1,379 |
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|
$ |
(3,010 |
) |
|
$ |
(108 |
) |
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(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) |
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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(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. |
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