SEGMENT REPORTING AND VARIABLE INTEREST ENTITIES

v2.4.1.9

SEGMENT REPORTING AND VARIABLE INTEREST ENTITIES	12 Months Ended
	Dec. 31, 2014
Segment Reporting [Abstract]
SEGMENT REPORTING AND VARIABLE INTEREST ENTITIES	4. SEGMENT REPORTING AND VARIABLE INTEREST ENTITIES Newcastle conducts its business through the following segments: (i) debt investments financed with collateralized debt obligations (“CDOs”), (ii) other debt investments (“Other Debt”), (iii) investment in golf courses and facilities (“Golf”) and (iv) corporate. With respect to the CDOs and other debt segments, Newcastle is generally entitled to receive net cash flows from these structures on a periodic basis. The corporate segment consists primarily of interest income on short-term investments, general and administrative expenses, interest expense on the junior subordinated notes payable (Note 11) and management fees pursuant to the Management Agreement (Note 13). Summary financial data on Newcastle’s segments is given below, together with reconciliation to the same data for Newcastle as a whole:                               Debt Investments (A)                       CDOs   Other Debt (B)   Golf   Corporate   Discontinued Operations   Eliminations   Total Year Ended December 31, 2014                           Interest income $ 84,938   $ 50,093   $ 147   $ 44   $ —   $ (7,595 )   $ 127,627 Interest expense (22,142 )   (41,874 )   (19,783 )   (3,818 )   —   7,595   (80,022 ) Inter-segment elimination (7,595 )   1,861   5,734   —   —   —   — Net interest income (expense) 55,201   10,080   (13,902 )   (3,774 )   —   —   47,605 Impairment (reversal) (3,303 )   884   —   —   —   —   (2,419 ) Operating revenues —   —   291,537   —   —   —   291,537 Other income 41,780   26,819   5,863   —   —   —   74,462 Loan and security servicing expense 238   961   —   —   —   —   1,199 Operating expenses - golf (C) —   —   244,234   —   —   —   244,234 Repairs and maintenance expenses - golf —   —   9,870   —   —   —   9,870 Cost of sales - golf —   —   30,271   —   —   —   30,271 General and administrative expense 14   2   1,435   7,722   —   —   9,173 Acquisition and transaction expenses (D) —   2,919   1,941   619   —   —   5,479 Management fee to affiliate —   —   —   21,039   —   —   21,039 Depreciation and amortization —   —   26,880   87   —   —   26,967 Income tax expense —   —   208   —   —   —   208 Income (loss) from continuing operations 100,032   32,133   (31,341 )   (33,241 )   —   —   67,583 Loss from discontinued operations, net of tax —   —   —   —   (35,189 )   —   (35,189 ) Net income (loss) 100,032   32,133   (31,341 )   (33,241 )   (35,189 )   —   32,394 Preferred dividends —   —   —   (5,580 )   —   —   (5,580 ) Net loss attributable to noncontrolling interests —   —   329   —   523   —   852 Income (loss) applicable to common stockholders $ 100,032   $ 32,133   $ (31,012 )   $ (38,821 )   $ (34,666 )   $ —   $ 27,666                             December 31, 2014                           Investments, net (E) $ 473,209   $ 833,293   $ 323,969   $ —   $ —   $ —   $ 1,630,471 Cash and restricted cash 11,790   877   21,637   55,137   —   —   89,441 Other assets 1,927   2,190   31,366   91   —   —   35,574 Assets of discontinued operations —   —   —   —   6,803   —   6,803 Total assets 486,926   836,360   376,972   55,228   6,803   —   1,762,289 Debt, net (E) 310,636   791,499   161,857   51,231   —   —   1,315,223 Other liabilities 2,391   4,528   164,897   16,475   —   —   188,291 Liabilities of discontinued operations —   —   —   —   447   —   447 Total liabilities 313,027   796,027   326,754   67,706   447   —   1,503,961 Preferred stock —   —   —   61,583   —   —   61,583 Noncontrolling interests —   —   36   —   —   —   36 Equity attributable to common stockholders $ 173,899   $ 40,333   $ 50,182   $ (74,061 )   $ 6,356   $ —   $ 196,709                               Debt Investments (A)                       CDOs   Other Debt (B)   Golf   Corporate   Discontinued Operations   Eliminations   Total Year Ended December 31, 2013                           Interest income $ 119,292   $ 98,968   $ —   $ 198   $ —   $ (4,746 )   $ 213,712 Interest expense (24,996 )   (54,534 )       (3,817 )       4,746   (78,601 ) Inter-segment elimination (4,746 )   4,746   —   —   —   —   — Net interest income (expense) 89,550   49,180   —   (3,619 )   —   —   135,111 Impairment (reversal) (9,338 )   (10,431 )   —   —   —   —   (19,769 ) Other income, net 23,946   11,344   —   —   —   —   35,290 Loan and security servicing expense 741   3,113   —   3   —   —   3,857 General and administrative expense —   18   —   17,440   —   —   17,458 Management fee to affiliate —   —   —   28,057   —   —   28,057 Depreciation and amortization —   —   —   4   —   —   4 Income (loss) from continuing operations 122,093   67,824   —   (49,123 )   —   —   140,794 Income from discontinued operations, net of tax —   —   —   —   11,547   —   11,547 Net income (loss) 122,093   67,824   —   (49,123 )   11,547   —   152,341 Preferred dividends —   —   —   (5,580 )   —   —   (5,580 ) Net income attributable to noncontrolling interests —   —   —   —   (928 )   —   (928 ) Income (loss) applicable to common stockholders $ 122,093   $ 67,824   $ —   $ (54,703 )   $ 10,619   $ —   $ 145,833                             December 31, 2013                           Investments, net (E) $ 838,162   $ 1,272,952   $ 345,755   $ —   $ —   $ —   $ 2,456,869 Cash and restricted cash 2,377   —   22,890   23,310   —   —   48,577 Other assets 47,130   3,395   32,654   987       —   84,166 Assets of discontinued operations —   —   —   —   2,248,023   —   2,248,023 Total assets 887,669   1,276,347   401,299   24,297   2,248,023   —   4,837,635 Debt, net (E) 645,938   1,091,430   152,498   51,237   —   —   1,941,103 Other liabilities 19,194   1,669   170,623   44,528       —   236,014 Liabilities of discontinued operations —   —   —   —   1,434,394   —   1,434,394 Total liabilities 665,132   1,093,099   323,121   95,765   1,434,394   —   3,611,511 Preferred stock —   —   —   61,583   —   —   61,583 Noncontrolling interest —   —   366   —   60,913   —   61,279 Equity attributable to common stockholders $ 222,537   $ 183,248   $ 77,812   $ (133,051 )   $ 752,716   $ —   $ 1,103,262                               Debt Investments (A)                       CDOs   Other Debt (B)   Golf   Corporate   Discontinued Operations   Eliminations (D)   Total Year Ended December 31, 2012                           Interest income $ 197,007   $ 91,818   $ —   $ 170   $ —   $ (6,044 )   $ 282,951 Interest expense (56,767 )   (53,700 )   —   (3,813 )   —   6,044   (108,236 ) Inter-segment elimination (6,044 )   6,044   —   —   —   —   — Net interest income (expense) 134,196   44,162   —   (3,643 )   —   —   174,715 Impairment (reversal) (7,381 )   1,717   —   —   —   —   (5,664 ) Other income, net 260,025   2,351   —   —   —   —   262,376 Loan and security servicing expense 916   3,344   —   —   —   —   4,260 General and administrative expense —   4   —   11,235   —   —   11,239 Management fee to affiliate —   —   —   23,611   —   —   23,611 Depreciation and amortization —   —   —   —   —   —   — Income (loss) from continuing operations 400,686   41,448   —   (38,489 )       —   403,645 Income from discontinued operations, net of tax —   —   —   —   30,465   —   30,465 Net income (loss) 400,686   41,448   —   (38,489 )   30,465   —   434,110 Preferred dividends —   —   —   (5,580 )   —   —   (5,580 ) Income (loss) applicable to common stockholders $ 400,686   $ 41,448   $ —   $ (44,069 )   $ 30,465   $ —   $ 428,530 (A) Assets held within non-recourse structures, including all of the assets in the CDO segment, are not available to satisfy obligations outside of such financings, except to the extent net cash flow distributions are received from such structures. Furthermore, creditors or beneficial interest holders of these structures generally have no recourse to the general credit of Newcastle. Therefore, the exposure to the economic losses from such structures generally is limited to invested equity in them and economically their book value cannot be less than zero. Therefore, impairment recorded in excess of Newcastle’s investment, which results in negative GAAP book value for a given non-recourse financing structure, cannot economically be incurred and will eventually be reversed through amortization, sales at gains, or as gains at the deconsolidation or termination of such non-recourse financing structure. (B) The following table summarizes the investments and debt in the other debt segment:   December 31, 2014   December 31, 2013   Investments   Debt   Investments   Debt Non-Recourse Outstanding Face Amount   Carrying Value   Outstanding Face Amount   Carrying Value   Outstanding Face Amount   Carrying Value   Outstanding Face Amount   Carrying Value Manufactured housing loan portfolio I $ —   $ —   $ —   $ —   $ 102,681   $ 91,924   $ 53,753   $ 50,424 Manufactured housing loan portfolio II —   —   —   —   128,975   128,117   93,863   93,536 Subprime mortgage loans subject to call options 406,217   406,217   406,217   406,217   406,217   406,217   406,217   406,217 Real estate securities —   —   —   —   56,466   50,961   —   — Subtotal 406,217   406,217   406,217   406,217   694,339   677,219   553,833   550,177 Other                               Unlevered real estate securities 167,457   12,265   —   —   129,563   4,296   —   — Levered real estate securities 390,771   407,689   385,282   385,282   514,994   551,270   516,134   516,134 Other Investments N/A   6,479   —   —   N/A   6,160   —   — Residential mortgage loans 934   643   —   —   45,323   34,007   25,119   25,119   $ 965,379   $ 833,293   $ 791,499   $ 791,499   $ 1,384,219   $ 1,272,952   $ 1,095,086   $ 1,091,430 (C) Operating expenses-golf includes rental expenses recorded under operating leases for carts and equipment in the amount of $5.0 million for the year ended December 31, 2014. (D) Includes all transaction related and spin-off related expenses. (E) Net of $35.1 million and $87.7 million of inter-segment eliminations as of December 31, 2014 and 2013, respectively.   Variable Interest Entities The VIEs in which Newcastle has a significant interest include (i) Newcastle’s CDOs, in which Newcastle has been determined to be the primary beneficiary and therefore consolidates them (with the exception of CDO V), since it has the power to direct the activities that most significantly impact the CDOs’ economic performance and would absorb a significant portion of their expected losses and receive a significant portion of their expected residual returns. Newcastle’s CDOs are held in special purpose entities whose debt is treated as non-recourse secured borrowings of Newcastle. Newcastle’s subprime securitizations are also considered VIEs, but Newcastle does not control the decisions that most significantly impact their economic performance and no longer receive a significant portion of their returns, and therefore does not consolidate them. In addition, Newcastle’s investments in RMBS, CMBS, CDO securities and real estate related and other loans may be deemed to be variable interests in VIEs, depending on their structure. Newcastle monitors these investments and analyzes the potential need to consolidate the related securitization entities pursuant to the VIE consolidation requirements. These analyses require considerable judgment in determining whether an entity is a VIE and determining the primary beneficiary of a VIE since they involve subjective determinations of significance, with respect to both power and economics. The result could be the consolidation of an entity that otherwise would not have been consolidated or the de-consolidation of an entity that otherwise would have been consolidated. As of December 31, 2014, Newcastle has not consolidated these potential VIEs. This determination is based, in part, on the assessment that Newcastle does not have the power to direct the activities that most significantly impact the economic performance of these entities, such as if Newcastle owned a majority of the currently controlling class. In addition, Newcastle is not obligated to provide, and has not provided, any financial support to these entities. On September 12, 2012, Newcastle deconsolidated CDO X subsequent to the completion of the sale of 100% of its interests in CDO X to the sole owner of the senior notes and another third party. The sale and resulting deconsolidation has reduced Newcastle’s gross assets by $1.1 billion, reduced liabilities by $1.2 billion, decreased other comprehensive income by $25.5 million and resulted in a gain on sale of $224.3 million. As of December 31, 2014, Newcastle had no continuing involvement with CDO X as it had been liquidated. Newcastle had variable interests in the following unconsolidated VIEs at December 31, 2014, in addition to the subprime securitizations which are described in Note 6: Entity   Gross Assets (A)   Debt (B)   Carrying Value of Newcastle’s Investment (C) Newcastle CDO V   $ 121,497   $ 149,402   $ 7,956 (A) Face amount. (B) Newcastle CDO V includes $41.8 million face amount of debt owned by Newcastle with a carrying value of $8.0 million at December 31, 2014. (C) This amount represents Newcastle’s maximum exposure to loss from this entity.