| Schedule of real estate securities holdings |
The following is a summary of Newcastle’s real estate securities at June 30, 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
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Asset Type
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Outstanding Face Amount
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Before Impairment
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Other-Than- Temporary Impairment
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After Impairment
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Gains
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Losses
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Carrying Value
(A)
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Number of Securities
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Rating (B)
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Coupon
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Yield
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Life
(Years) (C)
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Principal Subordination (D)
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CMBS-Conduit
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$
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160,893
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$
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163,393
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$
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(68,980
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)
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$
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94,413
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$
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38,892
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$
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—
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$
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133,305
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27
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B+
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5.53
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%
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24.26
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%
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2.1
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10.6
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%
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CMBS- Single Borrower
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79,490
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79,103
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(12,364
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)
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66,739
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4,092
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(5
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70,826
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12
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BB-
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6.33
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%
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7.55
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%
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2.2
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2.3
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%
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CMBS-Large Loan
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3,229
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3,229
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—
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3,229
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—
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—
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3,229
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1
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BBB-
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3.20
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%
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3.20
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%
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0.1
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4.4
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%
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REIT Debt
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29,200
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28,791
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—
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28,791
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1,892
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—
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30,683
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5
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BB+
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5.89
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%
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6.88
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%
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1.1
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N/A
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Non-Agency RMBS
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90,781
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98,862
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(59,987
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38,875
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21,633
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—
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60,508
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33
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CCC+
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1.03
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%
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14.12
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%
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4.3
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26.4
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%
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ABS-Franchise
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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
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6.69
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%
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0.00
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%
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—
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0.0
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%
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CDO (E)
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17,063
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6,368
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—
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6,368
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6,349
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—
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12,717
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2
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B
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0.83
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%
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10.00
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%
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8.7
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33.0
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%
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Total / Average (F)
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$
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389,120
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$
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387,393
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$
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(148,978
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)
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$
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238,415
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$
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72,858
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$
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(5
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$
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311,268
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81
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B
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4.47
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%
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15.16
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%
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2.8
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(A)
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See Note 12 regarding the estimation of fair value, which is equal to carrying value for all securities.
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(B)
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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. 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.
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(C)
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The weighted average life is based on the timing of expected principal reduction on the assets.
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(D)
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Percentage of the outstanding face amount of securities and residual interests that is subordinate to Newcastle’s investments.
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(E)
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Represents non-consolidated CDO securities, excluding nine securities with a zero value, which had an aggregate face amount of $116.1 million.
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(F)
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The total outstanding face amount was $265.7 million for fixed rate securities and $123.4 million for floating rate securities.
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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 June 30, 2014.
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Amortized Cost Basis
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Securities in
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Outstanding
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Other-than-
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Number
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Weighted Average
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an Unrealized
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Face
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Before
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Temporary
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After
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Gross Unrealized
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Carrying
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of
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Life
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Loss Position
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Amount
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Impairment
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Impairment
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Impairment
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Gains
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Losses
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Value
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Securities
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Rating
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Coupon
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Yield
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(Years)
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Less Than Twelve Months
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$
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1,869
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$
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1,867
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$
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—
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$
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1,867
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$
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—
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$
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(5
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$
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1,862
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1
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A+
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4.81
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%
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5.84
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%
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0.2
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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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—
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—
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%
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—
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%
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—
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Total
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$
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1,869
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$
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1,867
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$
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—
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$
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1,867
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$
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—
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$
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(5
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$
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1,862
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1
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A+
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4.81
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%
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5.84
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%
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0.2
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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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June 30, 2014
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Amortized
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Cost Basis
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Unrealized Losses
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Fair Value
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After Impairment
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Credit (B)
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Non-Credit (C)
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Securities Newcastle intends to sell
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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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$ N/A
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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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—
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N/A
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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
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—
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—
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—
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—
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Non credit impaired securities
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1,862
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1,867
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—
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(5
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)
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Total debt securities in an unrealized loss position
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$
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1,862
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$
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1,867
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$
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—
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$
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(5
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(A)
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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)
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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)
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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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| 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, 2014:
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CMBS
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ABS
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Geographic Location
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Outstanding Face Amount
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Percentage
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Outstanding Face Amount
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Percentage
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Western U.S.
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$
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48,865
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20.1
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%
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$
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30,271
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30.5
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%
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Northeastern U.S.
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51,424
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21.1
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%
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20,559
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20.7
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%
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Southeastern U.S.
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44,636
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18.3
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%
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19,492
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19.6
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%
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Midwestern U.S.
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35,210
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14.5
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%
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12,844
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13.0
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%
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Southwestern U.S.
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45,774
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18.8
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%
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10,041
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10.1
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%
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Other
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11,022
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4.5
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%
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6,038
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6.1
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%
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Foreign
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6,681
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2.7
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%
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—
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0.0
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%
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$
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243,612
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100.0
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%
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$
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99,245
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100.0
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%
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