Newcastle Announces Second Quarter 2013 Results

NEW YORK--(BUSINESS WIRE)-- Newcastle (NYSE: NCT; the "Company") today reported the following information for the quarter ended June 30, 2013:

  • Income available for common stockholders ("GAAP Income") of $52.3 million, or $0.20 per diluted share, an increase of 43% and 33%, respectively, compared to Q1 2013
  • Core earnings of $43.0 million, an increase from $37.4 million in Q1 2013, and core earnings per diluted share of $0.16, in-line with Q1 2013

The Company's second quarter results include forty-five days of earnings attributable to the operations of New Residential Investment Corp. (NYSE: NRZ; "New Residential"), which was spun off on May 15, 2013. Excluding earnings attributable to New Residential, the Company's GAAP Income was $27.8 million, or $0.11 per diluted share, and core earnings was $23.3 million, or $0.09 per diluted share.

      Q1 2013       Q2 2013       Q2 2013, Pro forma Excluding NRZ    
Summary Operating Results:            
GAAP Income $36.6 million $52.3 million $27.8 million
GAAP Income per Diluted Share $0.15 $0.20 $0.11
Non-GAAP Results:
Core Earnings $37.4 million $43.0 million $23.3 million
Core Earnings per Diluted Share $0.16 $0.16 $0.09

At quarter end, the Company had approximately $216 million of cash to invest. If this cash were fully invested at a 15% return, the Company expects that it could add approximately $0.03 to future quarterly earnings. The Company's cash on hand as of August 5, 2013 was fully committed.

For a reconciliation of GAAP Income to core earnings and Pro forma GAAP Income to pro forma core earnings, please refer to the table below following the presentation of GAAP results.

Highlights for the quarter ended June 30, 2013:

  • Spin-Off of New Residential - Completed the spin-off of New Residential on May 15, 2013.
  • Investment Activity - Invested $119 million in debt related investments, including $43 million to purchase debt backed by CDO VIII notes.
  • CDO IV Collapse - Generated $68 million of proceeds to the Company by selling all of the collateral in CDO IV at an average price of 95% of par, or $145 million, and paying off $77 million of third-party debt (including $5 million to CDO VIII) at par. Proceeds included $60 million on debt that the Company had repurchased at an average price of 52% of par.
  • Dividend - Dividend of $0.17 per common share, or $43 million, for the second quarter declared on June 3, 2013.
  • Capital Raise- Raisedapproximately $200 million of gross proceeds from the sale of 40 million shares of common stock, which priced on June 11, 2013.

Highlights subsequent to June 30, 2013:

  • Senior Living Acquisitions - Invested $86 million to purchase 17 senior living assets financed with $177 million of non-recourse debt at a weighted average rate of 4.3% and a weighted average maturity of 5.2 years, for a total gross initial investment of $263 million, including related transaction costs and working capital.
  • Other Investment Activity - Invested or committed to invest up to approximately $115 million in opportunistic investments, with total equity expected to be $80 million after financing.

ADDITIONAL INFORMATION

For additional information that management believes to be useful for investors, please refer to the presentation posted on the Investor Relations section of Newcastle's website, www.newcastleinv.com. For consolidated investment portfolio information, please refer to the Company's Quarterly Report on Form 10-Q, which is also available on the Company's website, www.newcastleinv.com.

             
Newcastle Investment Corp.
Investment Portfolio as of June 30, 2013

($ in millions)

 
% of Weighted
Outstanding Face Amortized Total Carrying Number of Average
Amount $   Cost Basis (1)   Basis   Value   Investments   Credit (2)   Life (years) (3)

Investment

 
Real Estate Debt & Other Assets
Commercial Assets
CMBS $ 353 227 11.1% 281 51 BB- 3.6
Mezzanine Loans 431 350 17.1% 350 15 80% 1.0
B-Notes 111 94 4.6% 94 4 77% 1.1
Whole Loans 30 30 1.5% 30 2 48% 0.7
CDO Securities (4) 93 66 3.2% 69 5 BB 2.9
Other Investments (5)   68   68   3.3% 68 3 -- --
Total Commercial Assets 1,086 835 40.8% 892 2.1
 
Residential Assets
MH and Residential Loans 307 271 13.3% 271 8,316 705 5.8
Non-Agency RMBS 108 42 2.1% 59 34 CCC 4.8
Real Estate ABS   8   -   0.0% - 1 C 4.4
423 313 15.3% 330 5.5
 
FNMA/FHLMC Securities   312   329   16.1% 329 39 AAA 3.7
Total Residential Assets 735 642 31.4% 659 4.7
 
Corporate Assets
REIT Debt 29 29 1.4% 31 5 BB+ 2.1
Corporate Bank Loans   783   363   17.9% 363 7 CC 1.5
Total Corporate Assets 812 392 19.3% 394 1.5
 
Total Real Estate Debt & Other Assets   2,633   1,869   91.4% 1,945 2.7
 
Senior Living Facilities (6) 188 175 8.6% 175 12 -- --
             
Total Portfolio/Weighted Average $ 2,821   2,044   100.0% 2,120 2.7
 

WA - Weighted average, in all tables

1) Net of impairment.

2) Credit represents the weighted average minimum rating for rated assets, the loan-to-value ratio (based on the appraised value at the time of purchase or refinancing) for non-rated commercial assets, or the FICO score for non-rated residential assets and an implied AAA rating for FNMA/FHLMC securities. Ratings provided above were determined by third party rating agencies, represent the most recent credit ratings available as of the reporting date and may not be current.

3) Weighted average life is based on the timing of expected principal reduction on the asset.

4) Represents non-consolidated CDO securities, excluding eight securities with a zero value, which had an aggregate face amount of $109 million.

5) Represents a $25 million equity investment in a real estate owned property and $43 million related to a linked transaction.

6) Face amount of Senior Living Facilities investments represents the gross carrying amount, including intangibles, which excludes accumulated depreciation and amortization.


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Newcastle Investment Corp.
Unaudited Consolidated Statements of Income

(dollars in thousands, except share data)

 
Three Months Ended June 30, Six Months Ended June 30,
2013   2012 2013   2012
Interest income $ 62,824 $ 77,956 $ 124,156 $ 150,818
Interest expense   21,998       29,462     44,708       59,627  
Net interest income   40,826       48,494     79,448       91,191  
 
Impairment (Reversal)
Valuation allowance (reversal) on loans (709 ) (3,223 ) 1,525 (12,254 )
Other-than-temporary impairment on securities 3,430 10,859 4,405 16,742

Portion of other-than-temporary impairment on securities recognized in other comprehensive income (loss), net of reversal of other comprehensive loss into net income (loss)

 

480

     

863

   

44

     

(3,069

)

Total impairment   3,201       8,499     5,974       1,419  
 
Net interest income after impairment/reversal 37,625 39,995 73,474 89,772
 
Other Revenues
Rental income 11,721 515 23,195 1,024
Care and ancillary income   2,292       -     4,318       -  
Total other revenues   14,013       515     27,513       1,024  
 
Other Income (Loss)
Gain (loss) on settlement of investments, net 5,066 (1,177 ) 5,063 3,646
Gain on extinguishment of debt - 39 1,206 20,782
Other income (loss), net   3,024       (3,744 )   7,591       (774 )
Total other income (loss)   8,090       (4,882 )   13,860       23,654  
 
Expenses
Loan and security servicing expense 1,021 1,104 2,055 2,202
Property operating expenses 8,409 231 16,772 457
General and administrative expense 9,938 4,841 14,151 7,003
Management fee to affiliate 8,148 5,631 17,713 10,607
Depreciation and amortization   4,070       2     8,149       4  
Total expenses   31,586       11,809     58,840       20,273  
 
Income from continuing operations 28,142 23,819 56,007 94,177
Income (loss) from discontinued operations   25,581       6,620     35,729       9,733  
Net Income 53,723 30,439 91,736 103,910
Preferred dividends
TWX -2.24 84.54

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