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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

FORM 10-Q

x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2013

 

or

 

o    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

Commission File Number: 001-31458

 

Newcastle Investment Corp.

 (Exact name of registrant as specified in its charter)

 

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes    x     No    o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x   Yes    No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x                            Accelerated filer o                             Non-accelerated filer   o                             (Do not check if a smaller reporting company)

Smaller reporting company  o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o     No    x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the last practicable date.

 

Common stock, $0.01 par value per share: 253,025,645 shares outstanding as of May 2, 2013.

 

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1

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

 

This report contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements relate to, among other things, the operating performance of our investments, the stability of our earnings, and our financing needs.  Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,” “overestimate,” “underestimate,” “believe,” “could,” “project,” “predict,” “continue” or other similar words or expressions.  Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information.  Our ability to predict results or the actual outcome of future plans or strategies is inherently uncertain.  Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements.  These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results in future periods to differ materially from forecasted results.  Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:

 

●

reductions in cash flows received from our investments;

●

our ability to deploy capital accretively;

●

the risks that default and recovery rates on our real estate securities and loan portfolios deteriorate compared to our underwriting estimates;

●

changes in prepayment rates on the loans underlying certain of our assets;

●

the relationship between yields on assets which are paid off and yields on assets in which such monies can be reinvested;

●

the relative spreads between the yield on the assets we invest in and the cost of financing;

●

changes in economic conditions generally and the real estate and debt securities markets specifically;

●

adverse changes in the financing markets we access affecting our ability to finance our investments, or in a manner that maintains our historic net spreads;

●

changing risk assessments by lenders that potentially lead to increased margin calls, not extending our repurchase agreements or other financings in accordance with their current terms or entering into new financings with us;

●

changes in interest rates and/or credit spreads, as well as the success of any hedging strategy we may undertake in relation to such changes;

●

the quality and size of the investment pipeline and the rate at which we can invest our cash at attractive risk-adjusted returns, including cash inside our collateralized debt obligations (“CDOs”);

●

impairments in the value of the collateral underlying our investments and the relation of any such impairments to our judgments as to whether changes in the market value of our securities, loans or real estate are temporary or not and whether circumstances bearing on the value of such assets warrant changes in carrying values;

●

legislative/regulatory changes, including but not limited to, any modification of the terms of loans;

●

the availability and cost of capital for future investments;

●

competition within the finance and real estate industries; and

●

other risks detailed from time to time below, particularly under the heading “Risk Factors,” and in our other reports filed with or furnished to the Securities and Exchange Commission (the “SEC”).

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  The factors noted above could cause our actual results to differ significantly from those contained in any forward-looking statement.

 

Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our management’s views only as of the date of this report.  We are under no duty to update any of the forward-looking statements after the date of this report to conform these statements to actual results.

 

2

SPECIAL NOTE REGARDING EXHIBITS

 

In reviewing the agreements included as exhibits to this Quarterly Report on Form 10 -Q, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements.  The agreements contain representations and warranties by each of the parties to the applicable agreement.  These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

 

●

should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements provide to be inaccurate;

 

●

have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

 

●

may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and

 

●

were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

 

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time.  Additional information about the Company may be found elsewhere in this Quarterly Report on Form 10-Q and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov .

 

The Company acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this report not misleading.

 

NEWCASTLE INVESTMENT CORP.

FORM 10-Q

 

INDEX

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

NEWCASTLE INVESTMENT CORP. AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share data)

		March 31, 2013
		(Unaudited)				December 31, 2012
Assets
Real estate securities, available-for-sale		$	2,495,473			$	1,691,575
Real estate related loans, held-for-sale, net			851,525				843,132
Residential mortgage loans, held-for-investment, net			317,708				292,461
Residential mortgage loans, held-for-sale, net			2,380				2,471
Investments in excess mortgage servicing rights at fair value			236,555				245,036
Investments in equity method investees at fair value			102,588				—
Subprime mortgage loans subject to call option			406,115				405,814
Investments in real estate, net of accumulated depreciation			168,515				169,473
Intangibles, net of accumulated amortization			16,218				19,086
Other investments			24,907				24,907
Cash and cash equivalents			534,772				231,898
Restricted cash			11,494				2,064
Derivative assets			176				165
Receivables and other assets			27,577				17,230
Total Assets		$	5,196,003			$	3,945,312
Liabilities and Stockholders’ Equity
Liabilities
CDO bonds payable		$	1,015,560			$	1,091,354
Other bonds and notes payable			173,723				183,390
Repurchase agreements			1,473,586				929,435
Mortgage notes payable			120,525				120,525
Financing of subprime mortgage loans subject to call option			406,115				405,814
Junior subordinated notes payable			51,242				51,243
Derivative liabilities			26,612				31,576
Dividends Payable			56,596				38,884
Due to affiliates			4,611				3,620
Purchase price payable on investments in excess mortgage servicing rights			59				59
Accrued expenses and other liabilities			17,875				16,352
Total Liabilities		$	3,346,504			$	2,872,252
Commitments and contingencies
Stockholders’ Equity
Preferred stock, $0.01 par value, 100,000,000 shares authorized,  1,347,321 shares of 9.75% Series B Cumulative Redeemable Preferred Stock, 496,000 shares  of 8.05% Series C Cumulative Redeemable Preferred Stock, and 620,000 shares of 8.375% Series D Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, issued and outstanding as of March 31, 2013 and December 31, 2012		$	61,583			$	61,583
Common stock, $0.01 par value, 500,000,000 shares authorized, 253,025,645 and  172,525,645 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively			2,530				1,725
Additional paid-in capital			2,472,931				1,710,083
Accumulated deficit			(790,143	)			(771,095	)
Accumulated other comprehensive income (loss)			102,598				70,764
Total Equity		$	1,849,499			$	1,073,060
Total Liabilities and Stockholders’ Equity		$	5,196,003			$	3,945,312

 

 

1

 

The following table presents certain liabilities of consolidated VIEs, which are included in the Consolidated Balance Sheets above. The liabilities in the table below include liabilities of consolidated VIEs due to third parties only, and exclude intercompany balances that eliminate in consolidation. The liabilities also exclude amounts where creditors or beneficial interest holders have recourse to the general credit of Newcastle.

 

 

See notes to consolidated financial statements

 

2

 

See notes to consolidated financial statements

 

3

 

4

 

5