REAL ESTATE SECURITIES (Tables)
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6 Months Ended |
Jun. 30, 2016 |
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| Investments, Debt and Equity Securities [Abstract] |
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| Marketable Securities |
The following is a summary of Newcastle’s real estate securities at June 30, 2016, 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 |
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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) |
CMBS |
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$ |
10,308 |
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$ |
10,308 |
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$ |
(10,308 |
) |
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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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C |
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2.44 |
% |
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— |
% |
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0.0 |
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— |
% |
Non-Agency RMBS |
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4,000 |
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2,237 |
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(1,521 |
) |
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716 |
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2,362 |
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— |
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3,078 |
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1 |
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C |
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0.85 |
% |
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24.22 |
% |
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9.6 |
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25.6 |
% |
ABS - Small Business Loans |
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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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0.0 |
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— |
% |
CDO (E) |
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14,768 |
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— |
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— |
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— |
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9,910 |
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— |
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9,910 |
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2 |
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C |
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1.85 |
% |
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— |
% |
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4.5 |
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27.1 |
% |
Debt Security Total / Average (F) |
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$ |
37,540 |
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$ |
20,192 |
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$ |
(19,476 |
) |
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$ |
716 |
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$ |
12,272 |
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$ |
— |
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$ |
12,988 |
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6 |
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C |
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3.00 |
% |
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24.22 |
% |
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2.8 |
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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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$ |
20,192 |
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$ |
(19,476 |
) |
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$ |
716 |
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$ |
12,272 |
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$ |
— |
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$ |
12,988 |
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7 |
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FNMA/FHLMC |
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428,881 |
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453,116 |
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— |
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453,116 |
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100 |
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(401 |
) |
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452,815 |
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12 |
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AAA |
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3.50 |
% |
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2.52 |
% |
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4.0 |
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N/A |
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Total Securities, Pledged as Collateral (F) |
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$ |
428,881 |
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$ |
453,116 |
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$ |
— |
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$ |
453,116 |
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$ |
100 |
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$ |
(401 |
) |
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$ |
452,815 |
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12 |
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(A) |
See Note 13 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 uses an implied AAA rating for the Fannie Mae/Freddie Mac (“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.
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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 interests that is subordinate to Newcastle’s investments. |
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(E) |
Represents non-consolidated CDO securities, excluding 12 securities with zero value, which had an aggregate face amount of $183.5 million.
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(F) |
The total outstanding face amount was $437.3 million for fixed rate securities and $29.1 million for floating rate securities.
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| Schedule of real estate securities holdings in an unrealized loss position |
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Amortized Cost Basis |
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Securities in |
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Outstanding |
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Other-than- |
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Number |
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Weighted Average |
an Unrealized |
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Face |
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Before |
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Temporary |
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After |
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Gross Unrealized |
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Carrying |
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of |
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Life |
Loss Position |
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Amount |
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Impairment |
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Impairment |
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Impairment |
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Gains |
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Losses |
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Value |
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Securities |
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Rating |
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Coupon |
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Yield |
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(Years) |
Less Than Twelve
Months |
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$ |
281,422 |
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$ |
297,529 |
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$ |
— |
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$ |
297,529 |
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$ |
— |
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$ |
(401 |
) |
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$ |
297,128 |
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11 |
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AAA |
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3.50 |
% |
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2.52 |
% |
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3.9 |
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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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Total |
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$ |
281,422 |
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$ |
297,529 |
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$ |
— |
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$ |
297,529 |
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$ |
— |
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$ |
(401 |
) |
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$ |
297,128 |
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11 |
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— |
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3.50 |
% |
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2.52 |
% |
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3.9 |
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June 30, 2016 |
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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) |
Securities Newcastle intends to sell |
$ |
— |
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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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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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Non credit impaired securities |
297,128 |
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297,529 |
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— |
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(401 |
) |
Total debt securities in an unrealized loss position |
$ |
297,128 |
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$ |
297,529 |
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$ |
— |
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$ |
(401 |
) |
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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 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. |
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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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| 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, 2016:
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Beginning balance of credit losses on debt securities for which a portion of an OTTI was recognized in other comprehensive income |
$ |
(3,010 |
) |
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Additions for credit losses on securities for which an OTTI was not previously recognized |
— |
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Additions to credit losses on securities for which OTTI was previously recognized and a portion of an OTTI was recognized in other comprehensive income |
(110 |
) |
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Reduction for securities deconsolidated during the period |
3,120 |
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Reduction for securities sold/written off during the period |
— |
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Reduction for increases in cash flows expected to be collected that are recognized over the remaining life of the security |
— |
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Ending balance of credit losses on debt securities for which a portion of OTTI was recognized in 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, 2016:
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CMBS |
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ABS |
Geographic Location |
Outstanding Face Amount |
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Percentage |
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Outstanding Face Amount |
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Percentage |
Western U.S. |
$ |
— |
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— |
% |
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$ |
1,320 |
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10.6 |
% |
Northeastern U.S. |
— |
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— |
% |
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9,094 |
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73.0 |
% |
Southeastern U.S. |
10,308 |
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100.0 |
% |
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1,048 |
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8.4 |
% |
Midwestern U.S. |
— |
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— |
% |
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419 |
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3.4 |
% |
Southwestern U.S. |
— |
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— |
% |
|
583 |
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4.6 |
% |
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$ |
10,308 |
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100.0 |
% |
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$ |
12,464 |
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100.0 |
% |
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