Newcastle Announces First Quarter 2013 Results
Newcastle Announces First Quarter 2013 Results
First Quarter 2013 Highlights
$716 million of unrestricted cash invested or committed
GAAP income of $0.15 per diluted share
Core Earnings of $0.16 per diluted share
Declared common dividend of $0.22 per share
GAAP book value increased by $1.21 per share
FIRST QUARTER 2013 FINANCIAL RESULTS
NEW YORK--(BUSINESS WIRE)-- Newcastle Investment Corp. (NYS: NCT) reported that in the first quarter of 2013, income available for common stockholders ("GAAP income") was $36.6 million, or $0.15 per diluted share, compared to $72.1 million, or $0.68 per diluted share, in the first quarter of 2012.
GAAP income of $36.6 million consisted of the following:
Core Earnings:
$37.4 million, or $0.16 per diluted share, which is equal to net interest income and other revenues less expenses excluding depreciation and amortization, net of preferred dividends, plus
Other Income/Loss:
$4 million of other income primarily related to $3 million gain of on non-hedge derivative instruments and $1 million gain on the extinguishment of debt, less
$4 million of depreciation and amortization
If the Company had fully invested $630 million of average uninvested capital in the quarter, then core earnings would have been $0.12 higher.
On March 14, 2013, the Board of Directors declared a quarterly dividend of $0.22 per common share, or $56 million, for the quarter. The Board of Directors also declared dividends of $0.609375, $0.503125 and $0.523438 per share on the 9.75% Series B, 8.05% Series C and 8.375% Series D preferred stock, respectively, for the period beginning February 1, 2013 and ending April 30, 2013.
As of March 31, 2013, GAAP book value was $7.07 per share, an increase of $1.21 per share from December 31, 2012.
The following table summarizes the Company's operating results ($ in millions, except per share data):
Three Months Ended | |||||||||||||||
Mar 31, | Dec 31, | Mar 31, | |||||||||||||
2013 | 2012 | 2012 | |||||||||||||
Summary Operating Results: | |||||||||||||||
GAAP income | $ | 36.6 | $ | 55.6 | $ | 72.1 | |||||||||
GAAP income, per diluted share | $ | 0.15 | $ | 0.32 | $ | 0.68 | |||||||||
Non-GAAP Results: | |||||||||||||||
Core earnings | $ | 37.4 | $ | 32.6 | $ | 35.3 | |||||||||
Core earnings, per diluted share | $ | 0.16 | $ | 0.19 | $ | 0.33 | |||||||||
For a reconciliation of income available for common stockholders to core earnings, please refer to the tables following the presentation of GAAP results.
FIRST QUARTER 2013 ACTIVITY
$780 million of common equity raised:
During the first quarter of 2013, the Company completed the sale of approximately 80.5 million shares of its common stock for gross proceeds of approximately $780 million.
$716 million of unrestricted cash invested or committed to invest primarily in the following:
$346 million:Excess MSRs investments
Invested or committed to invest approximately $319 million to purchase a 33% interest in Excess MSRs on four portfolios of residential mortgage loans with a total unpaid principal balance ("UPB") of approximately $196 billion. The Company expects the four investments to generate an average unlevered yield of 16%. During the first quarter of 2013, the Company closed on two of the four pools and funded a total of $80 million. The Company anticipates the closing and funding of the remaining pools to occur throughout the next several months.
Invested $27 million to purchase a 33% interest in the Excess MSRs on a residential mortgage loan portfolio with a UPB of $13 billion. The Company expects the investment to generate an unlevered yield of 16%.
$227 million:Non-Agency RMBS investments
Invested $227 million to purchase $374 million face amount of Non‐Agency RMBS at an average price of 60.8% of par, with an expected unlevered yield of 5.4%.
$66 million:Bank Loans
Invested $66 million to purchase two bank loans with a $186 million face amount in an existing investment at an average price of 35.5% of par, with an expected unlevered yield of 6.6%.
$35 million:Reverse mortgage loan portfolio
Invested $35 million to purchase a 70% interest in a pool of reverse mortgage loan portfolio with a total UPB of $83 million at a price of 59.7% of par, and an expected unlevered yield of 10%.
$10 million:Newcastle CDO senior bond
Invested $10 million to repurchase $11 million face amount of a Newcastle CDO senior bond at a price of 89% of par, with an expected unlevered yield of 10%.
SUBSEQUENT EVENTS & INVESTMENT ACTIVITY:
$297 million of unrestricted cash invested primarily in the following:
$250 million:Consumer Loan Portfolio
Invested approximately $250 million to purchase a 30% equity interest in a consumer loan portfolio with a total UPB of $4.2 billion as of December 31, 2012. The total purchase price of the portfolio was $3.0 billion, which was financed using $2.2 billion of asset backed notes at a fixed coupon of 3.75%.
On April 26, 2013, Newcastle announced that its Board of Directors had formally declared the distribution of shares of common stock of New Residential Investment Corp. ("New Residential"), a wholly owned subsidiary of Newcastle. The distribution will complete the spin-off of New Residential from Newcastle. Following the distribution, New Residential will be an independent, publicly-traded real estate investment trust ("REIT") primarily focused on investing in residential mortgage related assets. The distribution will be made on or about May 15, 2013 to Newcastle stockholders of record as of 5:00 p.m., Eastern Time, on May 6, 2013.
I.NEW RESIDENTIAL INVESTMENT CORP ASSETS
As of March 31, 2013, New Residential Investment Corp's assets consisted of eight Excess MSRs investments with a total carrying value of $329 million, Non-Agency RMBS with a total carrying value of $519 million, a 70% interest in a reverse mortgage loan pool with a $83 million UPB and a total carrying value of $35 million, and Agency RMBS with a total carrying value of $1.1 billion.
During the quarter, this portfolio generated total cash flow of $43 million.
Excess MSRs
As of March 31, 2013, the total carrying value of the Company's Excess MSR investments was $329 million, representing an interest in the net MSR cash flows on eight loan portfolios with a total unpaid principal balance of $140 billion.
During the quarter, these investments generated $25 million of total cash flow.
The average IRR, updated for actual performance was 19%, compared to an initial expected IRR of 17%.
Received $81 million of total cash flow from inception through the end of March, or 21% of the initial investment of $392 million over an average term of 8 months.
The life-to-date weighted average constant prepayment rate ("CPR") was 18% compared to the Company's initial CPR projection of 21%.
Non-Agency RMBS
As of March 31, 2013, the Company's Non-Agency RMBS portfolio consisted of $784 million face amount of assets (valued at 66.1% of par, or $519 million). During the quarter, these investments generated $18 million of total cash flow and increased in value by $18 million.
Reverse Mortgage Loan Portfolio
As of March 31, 2013, the Company's reverse mortgage loan portfolio consisted of $59 million face amount of assets (valued at 59.4% of par, or $35 million).
II.COMMERCIAL REAL ESTATE DEBT & OTHER ASSETS
As of March 31, 2013, the Company's commercial real estate debt and other assets portfolio included $2.6 billion of diversified assets financed with $1.5 billion of primarily match funded, non-recourse debt. In addition, the portfolio included $188 million of senior living properties financed with $121 million of non-recourse mortgage notes. The portfolio consisted of 193 commercial, residential and corporate real estate securities and loan investments with an average investment size of $12 million, 8,595 mortgage loans backed by residential real estate, and 12 senior living properties.
During the quarter, this portfolio generated total cash flow of $39 million and the real estate debt portfolio increased in value by $14 million.
Newcastle CDO financings
As of March 31, 2013, Newcastle's four consolidated CDOs consisted of $1.7 billion face amount of collateral (valued at 80.6% of par) financed with $1.0 billion of non-recourse debt. During the quarter, the CDOs generated $22.9 million of total cash flow, which included: $11.0 million of excess interest, $2.5 million of interest on retained and repurchased CDO debt, $0.8 million of senior collateral management fees, and $8.6 million of principal repayments on repurchased CDO debt.
The following table summarizes the cash receipts in the quarter from the Company's consolidated CDO financings and the results of their related coverage tests ($ in thousands):
Interest | Over-Collateralization Excess (Deficiency)(2)(3) | ||||||||||||||||||||||||||||||||||||||
Primary | Cash | April 30, | April 30, 2013 | March 31, 2013 | December 31, 2012 | ||||||||||||||||||||||||||||||||||
Type | Receipts(1) | 2013 ((2)) | % | $ | % | $ | % | $ | |||||||||||||||||||||||||||||||
CDO IV | Securities | $ | 324 | 46.0 | % | -3.0 | % | (4,117 | ) | -3.0 | % | (4,117 | ) | -3.7 | % | (5,586 | ) | ||||||||||||||||||||||
CDO VI | Securities | 109 | -280.9 | % | -74.2 | % | (179,218 | ) | -74.1 | % | (179,515 | ) | -70.4 | % | (171,434 | ) | |||||||||||||||||||||||
CDO VIII | Loans | 5,547 | 375.9 | % | 12.5 | % | 83,665 | 11.3 | % | 78,797 | 10.6 | % | 74,593 | ||||||||||||||||||||||||||
CDO IX | Loans | 8,302 | 488.7 | % | 27.0 | % | 145,501 | 24.7 | % | 139,681 | 23.4 | % | 134,675 | ||||||||||||||||||||||||||
Total | $ | 14,282 | |||||||||||||||||||||||||||||||||||||
(1) | Cash receipts exclude $8.6 million of principal repayments from repurchased bonds. Cash receipts for the quarter ended March 31, 2013 may not be indicative of cash receipts for subsequent periods. See Forward-Looking Statements below for risks and uncertainties that could cause cash receipts for subsequent periods to differ materially from these amounts. | ||||||||||||||||||||||||||||||||||||||
(2) | Represents the excess or deficiency under the applicable interest coverage or over-collateralization test to the first threshold at which cash flow would be redirected. The Company generally does not receive material interest cash flow from a CDO until a deficiency is corrected. The information regarding coverage tests is based on data from the most recent remittance date on or before April 30, 2013, March 31, 2013 or December 31, 2012, as applicable. The CDO IV test is conducted only on a quarterly basis (December, March, June and September). | ||||||||||||||||||||||||||||||||||||||
(3) | As of the April 2013 remittance, no assets were on negative watch for possible downgrade by any rating agency (Moody's, S&P, or Fitch) for CDOs VIII and IX. | ||||||||||||||||||||||||||||||||||||||
Other Real Estate Related Investments
As of March 31, 2013, other real estate related investments consisted of $1.0 billion face amount of assets (valued at 73.5% of par) financed with $0.5 billion of debt. During the quarter, these investments generated $13.9 million of total cash flow.
Senior Living Property Investments
As of March 31, 2013, the Company owned 12 senior living properties consisting of $188 million of assets financed with $121 million of debt.
During the quarter, the investments generated $2.6 million of total cash flow, $0.5 million more than projected.
The average occupancy rate was 87.5%, compared to 85.9% in the Company's initial projection
The average monthly revenue per occupied unit was $3,517, compared to $3,576 initially projected
Total operating expenses were $8.3 million, compared to $8.5 million initially projected
INVESTMENT PORTFOLIO
The following table describes the investment portfolio as of March 31, 2013 ($ in millions):
Face | Basis | % of | Carry Value | Number of | Weighted | |||||||||||||||||||||||
Amount $ | Amount $(8) | Basis | Amount $ | Investments | Credit(9) | Life (years)(10) | ||||||||||||||||||||||
I. New Residential Investment Corp. Assets | ||||||||||||||||||||||||||||
Excess MSRs Investments(1) | $ | 329 | $ | 319 | 7.9 | % | $ | 329 | 8 | -- | 5.7 | |||||||||||||||||
Non-Agency RMBS (2) | 784 | 489 | 12.0 | % | 519 | 53 | CC | 7.6 | ||||||||||||||||||||
Reverse Mortgage Loans | 59 | 35 | 0.9 | % | 35 | 331 | -- | 3.9 | ||||||||||||||||||||
FNMA/FHLMC Securities(3) | 1,020 | 1,079 | 26.6 | % | 1,080 | 53 | AAA | 4.1 | ||||||||||||||||||||
Total New Residential Assets | 2,192 | 1,922 | 47.4 | % | 1,963 | 5.6 | ||||||||||||||||||||||
II. Commercial Real Estate Debt & Other Assets | ||||||||||||||||||||||||||||
Commercial Assets | ||||||||||||||||||||||||||||
CMBS | 469 | 332 | 8.2 | % | 384 | 75 | BB- | 3.0 | ||||||||||||||||||||
Mezzanine Loans | 518 | 432 | 10.6 | % | 432 | 17 | 77 | % | 1.5 | |||||||||||||||||||
B-Notes | 121 | 111 | 2.7 | % | 111 | 5 | 77 | % | 1.1 | |||||||||||||||||||
Whole Loans | 30 | 30 | 0.7 | % | 30 | 2 | 48 | % | 0.9 | |||||||||||||||||||
Third-Party CDO Securities (4) | 94 | 67 | 1.7 | % | 72 | 5 | BB | 3.0 | ||||||||||||||||||||
Other Investments (5) | 25 | 25 | 0.6 | % | 25 | 1 | -- | -- | ||||||||||||||||||||
Total Commercial Assets | 1,257 | 997 | 24.5 | % | 1,054 | 2.1 | ||||||||||||||||||||||
Residential Assets | ||||||||||||||||||||||||||||
MH and Residential Loans | 319 | 279 | 6.9 | % | 279 | 8,595 | 704 | 5.9 | ||||||||||||||||||||
Subprime Securities | 121 | 47 | 1.2 | % | 65 | 40 | CCC | 4.8 | ||||||||||||||||||||
Real Estate ABS | 10 | 1 | 0.0 | % | 1 | 3 | CCC- | 4.7 | ||||||||||||||||||||
450 | 327 | 8.1 | % | 345 | 5.6 | |||||||||||||||||||||||
FNMA/FHLMC Securities | 290 | |||||||||||||||||||||||||||
