Newcastle Announces Second Quarter 2010 Results
Second Quarter 2010 Financial Results
NEW YORK--(BUSINESS WIRE)-- Newcastle Investment Corp. (NYSE: NCT) reported that for the quarter ended June 30, 2010, income applicable to common stockholders ("GAAP income") was $118 million, or $1.90 per diluted share, compared to a loss applicable to common stockholders of $47 million, or $0.90 per diluted share, for the quarter ended June 30, 2009.
GAAP income of $118 million consisted of the following: $22 million of net interest income less expenses (net of preferred dividends), $53 million of other income, and $43 million from the reversal of prior valuation allowances on loans net of the impairment on securities.
Other income is primarily related to a gain on the extinguishment of CDO debt. In the second quarter, Newcastle repurchased a face amount of $64 million of CDO bonds for $17 million, recording a $47 million gain on the extinguishment of debt.
During the quarter, the Company completed a securitization transaction to refinance its Manufactured Housing Loans Portfolio I. The Company received unrestricted cash of $14 million and retained the residual interest in the securitization.
For a reconciliation of income (loss) applicable to common stockholders to net interest income less expenses (net of preferred dividends), please refer to the tables following the presentation of the GAAP results.
Recourse Debt Financing and Liquidity
In the second quarter, the Company increased unrestricted cash by $26 million and repaid $19 million of non-agency recourse debt; the remaining $1 million of non-agency recourse debt was repaid in July. The Company currently does not have any short-term recourse debt.
Certain details regarding the Company's liquidity and current financings are set forth below as of August 4, 2010:
    --  Cash - The Company had unrestricted cash of $41 million. In addition,
        the Company had $122 million of restricted cash for reinvestment in its
        CDOs;
    --  Margin Exposure - The Company had no financings or derivatives subject
        to margin calls.
    The following table illustrates the change in unrestricted cash and recourse financings, excluding junior subordinated notes ($ in millions):
                                                 August 4,  June 30,  March 31,
                                                 2010       2010      2010
Unrestricted Cash                                $ 41       $ 38      $ 12
Recourse Financings
 Non-FNMA/FHLMC (non-agency)
  Real Estate Securities, Loans, and Properties    -          -         13
  Manufacturing Housing Loans                      -          1         7
Total Recourse Financings                        $ -        $ 1       $ 20
    CDO Financings
The following table summarizes the cash receipts in the second quarter of 2010 from the Company's consolidated CDO financings, their related coverage tests, and negative watch assets ($ in thousands):
                              Interest
                              Coverage
                              % Excess
                                            Over Collateralization Excess (Deficiency)
       Primary                (Deficiency)                                                                 Assets on
       Collateral                                                                                          Negative
       Type        Cash       July 31,      July 31, 2010(2)     June 30, 2010(2)     March 31, 2010(2)    Watch(3)
                   Receipts
                   (1)        2010(2)       %        $           %        $           %        $
CDO    Securities  $ 153      109.5 %       -7.8  %  (28,647  )  -7.8  %  (28,647  )  -7.1  %  (26,531  )  $ 87,911
IV
CDO V  Securities    868      230.1 %       0.8   %  3,173       0.8   %  3,173       -4.0  %  (17,622  )    133,823
CDO    Securities    126      64.2  %       -40.7 %  (166,380 )  -39.6 %  (162,467 )  -24.8 %  (108,077 )    17,042
VI
CDO    Loans         5,915    253.5 %       16.1  %  103,683     15.9  %  102,714     9.7   %  62,404        90,438
VIII
CDO    Loans         5,693    172.2 %       9.7   %  62,727      9.4   %  60,531      10.9  %  70,156        68,000
IX
CDO X  Securities    2,572    152.5 %       2.3   %  27,546      2.4   %  28,892      6.0   %  73,577        113,015
Total              $ 15,327                                                                                $ 510,229
     Represents net cash received from each CDO based on all of the interests in such CDO (including senior
(1)  management fees). Cash receipts for the quarter ended June 30, 2010 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.
     Represents 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 cash
(2)  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 July 31, 2010, June 30, 2010, or March 31, 2010, as applicable.
     The CDO IV and V tests are conducted only on a quarterly basis (December, March, June and September).
     Represents the face amount of assets on negative watch for possible downgrade by at least one rating agency
     (Moody's, S&P or Fitch). Amounts are as of the determination date pertaining to June 2010 remittances for CDO
(3)  IV and V (these tests are conducted only on a quarterly basis) and as of the determination date pertaining to
     July 2010 remittances for all other CDOs. The amounts include $213 million of bonds issued by Newcastle, which
     are eliminated in consolidation and not reflected in the investment portfolio disclosures.
    
    --  $2 million of the $15 million CDO cash receipts were senior collateral
        management fees, which were not subject to their related CDO coverage
        tests.
    --  The cash receipts above also include $5 million of non-recurring
        interest, prepayment, extension and yield maintenance fees received in
        the CDOs.
    Book Value
GAAP book value increased by $280 million or $4.53 per share. As of June 30, 2010, GAAP book value was $(899) million or $(14.49) per share compared to $(1.2) billion or $(19.02) per share at March 31, 2010.
Dividends
For the quarter ended June 30, 2010, Newcastle's Board of Directors elected not to pay a common stock or preferred stock dividend. The Company decided to retain capital to further reduce recourse debt and for working capital purposes.
Investment Portfolio
Newcastle's $4.8 billion investment portfolio (with a basis of $3.1 billion) consists of commercial, residential and corporate debt. During the quarter, the portfolio decreased by $64 million, primarily as a result of principal repayments of $176 million, sales of $96 million and actual principal write-downs of $47 million, offset by purchases of $248 million at an average price of 76% of par, an average yield of 15.3% and an average life of 4.6 years.
The following table describes the investment portfolio as of June 30, 2010 ($ in millions):
                                         % of                          Weighted
                     Face      Basis     Total    Number of            Average
                     Amount $  Amount $  Basis    Investments  Credit  Life
                               (1)                             (2)     (yrs)(3)
     Commercial
     Assets
      CMBS           $ 2,092   $ 1,345   44.1  %  272          BB      2.9
      Mezzanine        716       314     10.3  %  20           71%     2.1
      Loans
      B-Notes          284       125     4.1   %  10           77%     2.0
      Whole Loans      85        50      1.6   %  4            84%     4.0
      Total
      Commercial       3,177     1,834   60.1  %                       2.7
      Assets
     Residential
     Assets
      MH and
      Residential      454       387     12.7  %  11,926       699     6.6
      Loans
      Subprime         395       174     5.7   %  89           B-      4.4
      Securities
      Real Estate      81        58      1.9   %  22           BB      4.7
      ABS
                       930       619     20.3  %                       5.5
      FNMA/FHLMC       4         4       0.1   %  1            AAA     3.5
      Securities
      Total
      Residential      934       623     20.4  %                       5.5
      Assets
     Corporate
     Assets
      REIT Debt        390       389     12.8  %  46           BB+     3.5
      Corporate        306       206     6.7   %  9            C       3.6
      Bank Loans
      Total
      Corporate        696       595     19.5  %                       3.6
      Assets
     Total/Weighted  $ 4,807   $ 3,052   100.0 %                       3.3
     Average(4)
(1)  Net of impairment.
     Credit represents the weighted average of minimum ratings for rated
     assets, the Loan to Value ratio (based on the appraised value at the time
     of purchase) for non-rated commercial assets, or the FICO score for
(2)  non-rated residential assets and an implied AAA rating for FNMA/FHLMC
     securities. Ratings provided above were determined by third party rating
     agencies as of a particular date, may not be current and are subject to
     change (including a "negative watch" assignment) at any time.
(3)  Weighted average life is based on the timing of expected principal
     reduction on the asset.
     Excludes CDO securities of $80 million (which was included in the prior
(4)  quarter), operating real estate held for sale of $10 million and loans
     subject to call option with a face amount of $406million.
    Commercial Assets
The Company owns $3.2 billion of commercial assets (with a basis of $1.8 billion), which includes CMBS, mezzanine loans, B-Notes and whole loans.
    --  During the quarter, the Company purchased $125 million, sold $82
        million, had principal repayments of $79 million and had $0.4 million of
        actual principal write-downs. The Company purchased 11 CMBS assets with
        an average rating of "BBB" and one whole loan.
    --  The Company had no commercial assets upgraded, seven securities or $34
        million affirmed and 34 securities or $296 million downgraded (from an
        average rating of B+ to CCC+).
    CMBS portfolio ($ in thousands):
          Average                                % of                                Weighted
                           Face       Basis      Total   Delinquency  Principal      Average
          Minimum
Vintage   Rating   Number  Amount $   Amount $   Basis   60+/FC/REO   Subordination  Life
(1)       (2)                                            (3)          (4)            (yrs)(5)
Pre 2004  BBB      86      433,623    400,710    29.8%   7.0%         13.0%          2.5
2004      BB       63      437,986    270,437    20.1%   3.3%         5.7%           2.9
2005      BB       36      351,783    155,254    11.5%   5.2%         8.3%           2.8
2006      BB+      53      506,181    350,407    26.1%   3.6%         11.0%          3.1
Post      B+       34      362,068    168,394    12.5%   6.2%         12.8%          3.2
2007
TOTAL/WA  BB       272     2,091,641  1,345,202  100.0%  5.0%         10.2%          2.9
(1)       The year in which the securities were issued.
          Ratings provided above were determined by third party rating agencies as of a
          particular date, which may not be current and are subject to change (including a
(2)       "negative watch" assignment) at any time. The Company had approximately $233
          million of CMBS assets that are on negative watch for possible downgrade by at
          least one rating agency as of June 30, 2010.
(3)       The percentage of underlying loans that are 60+ days delinquent, or in foreclosure
          or considered real estate owned (REO).
(4)       The percentage of the outstanding face amount of securities that is subordinate to
          the Company's investments.
(5)       Weighted average life is based on the timing of expected principal reduction on the
          asset.
    Mezzanine loans, B-Notes and whole loans portfolio ($ in thousands):
                   Face       Basis    % of    WA First  WA Last $
                                       Total   $
Asset      Number  Amount     Amount   Basis   Loan to   Loan to    Delinquency
Type               ($)        ($)              Value(1)  Value(1)   (%)(2)
Mezzanine  20      716,286    313,879  64.2%   56.1%     71.1%      18.5%
Loans
B-Notes    10      283,830    125,092  25.6%   61.9%     76.6%      46.7%
Whole      4       85,110     50,043   10.2%   0.0%      83.7%      0.0%
Loans
Total/WA   34      1,085,226  489,014  100.0%  53.2%     73.5%      24.4%
(1)        Loan To Value is based on the appraised value at the time of
           purchase.
           The percentage of underlying loans that are non-performing, in
(2)        foreclosure, under bankruptcy filing or considered real estate
           owned.
    Residential Assets
The Company owns $934 million of residential assets (with a basis of $623 million), which includes manufactured housing ("MH") loans, residential loans, subprime securities and FNMA/FHLMC securities.
    --  During the quarter, the Company had principal repayments of $27 million,
        actual principal write-downs of $24 million, purchased $18 million and
        sold $9 million of residential assets. The Company purchased two ABS
        assets with an average rating of "BBB."
    --  The Company had no ABS securities upgraded, three securities or $14
        million affirmed, and 46 securities or $183 million downgraded (from an
        average rating of B to CCC-).
    Manufactured housing and residential loan portfolios ($ in thousands):
                               % of    Average
             Face     Basis    Total   Loan Age  Original   Delinquency  Cumulative
Deal         Amount   Amount   Basis   (months)  Balance $  90+/FC/REO   Loss to
             $        $                                     (1)          Date
MH Loans     161,020  130,466  33.7%   105       327,855    1.2%         6.2%
Portfolio 1
MH Loans     227,197  206,087  53.3%   135       434,743    1.0%         4.3%
Portfolio 2
Residential
Loans        62,480   46,808   12.1%   85        646,357    9.1%         0.3%
Portfolio 1
Residential
Loans        3,795    3,612    0.9%    68        83,950     0.0%         0.0%
Portfolio 2
TOTAL/WA     454,492  386,973  100.0%  117       1,492,905  2.1%         4.4%
(1)  The percentage of loans that are 90+ days delinquent, or in foreclosure or
     considered real estate owned (REO).
    Subprime Securities portfolio ($ in thousands):
Security Characteristics:
          Average                              % of
          Minimum          Face      Basis     Total   Principal      Excess
Vintage   Rating   Number  Amount $  Amount $  Basis   Subordination  Spread(4)
(1)       (2)                                          (3)
2003      B        15      20,643    12,198    7.0%    21.9%          3.9%
2004      B        28      88,584    33,479    19.3%   16.9%          4.0%
2005      B        26      101,574   31,022    17.9%   27.4%          4.5%
2006      CCC+     11      99,905    47,764    27.5%   20.9%          4.8%
Post      B+       9       84,381    49,080    28.3%   17.2%          3.4%
2007
TOTAL/WA  B-       89      395,087   173,543   100.0%  20.9%          4.2%
    Collateral Characteristics:
            Average
            Loan Age  Collateral  3 Month  Delinquency    Cumulative
Vintage(1)  (months)  Factor(5)   CPR(6)   90+/FC/REO(7)  Loss to Date
2003        88        0.10        8.4%     17.6%          3.0%
2004        75        0.14        9.2%     19.8%          3.3%
2005        62        0.21        11.1%    33.5%          8.1%
2006        50        0.42        11.2%    36.0%          14.1%
Post 2007   36        0.50        8.8%     24.0%          11.2%
TOTAL/WA    58        0.31        10.1%    28.2%          8.9%
    Real Estate ABS portfolios ($ in thousands):
Security Characteristics:
              Average                              % of
              Minimum          Face      Basis     Total   Principal      Excess
Asset Type    Rating   Number  Amount $  Amount $  Basis   Subordination  Spread
              (2)                                          (3)            (4)
Manufactured  BBB+     9       49,345    47,961    82.3%   37.6%          1.6%
Housing
Small
Business      CCC+     13      31,218    10,293    17.7%   15.3%          3.0%
Loans
TOTAL/WA      BB       22      80,563    58,254    100.0%  29.0%          2.1%
    Collateral Characteristics:
                      Average
                      Loan Age  Collateral  3 Month  Delinquency    Cumulative
Asset Type            (months)  Factor(5)   CPR(6)   90+/FC/REO(7)  Loss to Date
Manufactured Housing  115       0.36        8.5%     3.2%           10.6%
Small Business Loans  69        0.57        7.2%     26.6%          5.6%
TOTAL/WA              97        0.44        8.0%     12.3%          8.6%
    
(1)  The year in which the securities were issued.
     Ratings provided above were determined by third party rating agencies as of
     a particular date, may not be current and are subject to change (including
(2)  a "negative watch" assignment) at any time. The Company had approximately
     $171 million of subprime and ABS securities that are on negative watch for
     possible downgrade by at least one rating agency as of June 30, 2010.
(3)  The percentage of the outstanding face amount of securities and residual
     interests that is subordinate to the Company's investments.
     The annualized amount of interest received on the underlying loans in
(4)  excess of the interest paid on the securities, as a percentage of the
     outstanding collateral balance.
(5)  The ratio of original unpaid principal balance of loans still outstanding.
(6)  Three month average constant prepayment rate.
(7)  The percentage of underlying loans that are 90+ days delinquent, or in
     foreclosure or considered real estate owned (REO).
    Corporate Assets
The Company owns $696 million of corporate assets (with a basis of $595 million), including REIT debt and corporate bank loans.
    --  During the quarter, the Company purchased $105 million, had principal
        repayments of $71 million, actual principal write-downs of $22 million
        and sold $5 million. The Company purchased one bank loan asset and sold
        one REIT asset.
    --  The Company had no corporate assets upgraded, affirmed or downgraded.
    REIT debt portfolio ($ in thousands):
             Average
                                Face      Basis     % of Total
             Minimum
Industry     Rating(1)  Number  Amount $  Amount $  Basis
Retail       BBB+       11      80,660    76,901    19.8%
Diversified  CCC        10      101,836   102,644   26.4%
Office       BBB        11      115,469   117,215   30.1%
Multifamily  BBB        3       12,765    12,830    3.3%
Hotel        BBB        4       30,220    30,683    7.9%
Healthcare   BBB-       5       41,600    41,706    10.7%
Storage      A-         1       5,000     5,063     1.3%
Industrial   BB-        1       2,000     2,073     0.5%
TOTAL/WA     BB+        46      389,550   389,115   100.0%
    Corporate bank loan portfolio ($ in thousands):
                Average                                % of
                Minimum            Face      Basis     Total
Industry        Rating(1)  Number  Amount $  Amount $  Basis
Real Estate     C          3       42,087    40,591    19.7%
Media           CC         2       111,764   46,427    22.6%
Resorts         NR         1       107,903   77,903    37.9%
Restaurant      B          2       18,160    15,335    7.5%
Transportation  NR         1       26,995    25,375    12.3%
TOTAL/WA        C          9       306,909   205,631   100.0%
    
     Ratings provided above were determined by third party rating agencies as of
     a particular date, may not be current and are subject to change (including
(1)  a "negative watch" assignment) at any time. The Company had approximately
     $2 million of REIT assets that are on negative watch for possible downgrade
     by at least one rating agency as of June 30, 2010.
    Conference Call
Newcastle's management will conduct a live conference call tomorrow, August 6, 2010, at 8:30 A.M. Eastern Time to review the financial results for the quarter ended June 30, 2010. All interested parties are welcome to participate on the live call. You can access the conference call by dialing (888) 243-2046 (from within the U.S.) or (706) 679-1533 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference "Newcastle Second Quarter Earnings Call."
A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.newcastleinv.com. Please allow extra time prior to the call to visit the site and download the necessary software required to listen to the internet broadcast.
A telephonic replay of the conference call will also be available until 11:59 P.M. Eastern Time on Friday, August 13, 2010 by dialing (800) 642-1687 (from within the U.S.) or (706) 645-9291 (from outside of the U.S.); please reference access code "89368391."
About Newcastle
Newcastle Investment Corp. owns and manages a portfolio of diversified, credit sensitive real estate debt that is primarily financed with match funded debt. Newcastle is organized and conducts its operations to qualify as a real estate investment trust (REIT) for federal income tax purposes. Newcastle is managed by an affiliate of Fortress Investment Group LLC, a global investment management firm. For more information regarding Newcastle Investment Corp. or to be added to our e-mail distribution list, please visit www.newcastleinv.com.
Forward-Looking Statements
Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements relating to our liquidity, future losses and impairment charges, our ability to acquire assets with attractive returns and the delinquent and loss rates on our subprime portfolios. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond our control. Newcastle can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from Newcastle's expectations include, but are not limited to, the risk that the ongoing challenging credit and liquidity conditions continue to cause downgrades of a significant number of our securities and recording of additional impairment charges or reductions in shareholders' equity; the risk that we can find additional suitably priced investments; the risk that investments made or committed to be made cannot be financed on the basis and for the term at which we expect; the relationship between yields on assets which are paid off and yields on assets in which such monies can be reinvested; and the relative spreads between the yield on the assets we invest in and the cost and availability of debt and equity financing. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. For a discussion of some of the risks and important factors that could affect such forward-looking statements, see the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operation" in the Company's Quarterly Report on Form 10-Q, which is available on the Company's website (www.newcastleinv.com). In addition, new risks and uncertainties emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. Newcastle expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.
 Newcastle Investment Corp.
 Consolidated Statements of Operations (Unaudited)
 (dollars in thousands, except per share data)
                       Three Months Ended June 30,     Six Months Ended June 30,
                       2010            2009            2010            2009
Interest income        $ 74,183        $ 87,338        $ 144,275       $ 211,811
Interest expense         43,141          54,172          88,730          114,716
 Net interest income     31,042          33,166          55,545          97,095
Impairment
 Valuation allowance     (91,534    )    (30,869    )    (187,308   )    90,019
 (reversal) on loans
 Other-than-temporary
 impairment on           33,925          209,554         98,781          396,136
 securities
 Portion of
 other-than-temporary
 impairment on
 securities
 recognized in other     15,114          (55,278    )    (22,000    )    (55,278    )
 comprehensive income
 (loss), net of the
 reversal of other
 comprehensive losses
 into net income
 (loss)
                         (42,495    )    123,407         (110,527   )    430,877
 Net interest income
 (loss) after            73,537          (90,241    )    166,072         (333,782   )
 impairment
Other Income (Loss)
 Gain on settlement      8,954           17,544          18,631          9,497
 of investments, net
 Gain on
 extinguishment of       46,728          26,830          95,074          53,675
 debt
 Other income (loss),    (2,298     )    10,911          (3,778     )    4,430
 net
                         53,384          55,285          109,927         67,602
Expenses
 Loan and security       1,322           1,370           2,357           2,772
 servicing expense
 General and
 administrative          1,938           2,965           4,976           4,591
 expense
 Management fee to       4,258           4,492           8,735           8,983
 affiliate
 Depreciation and        62              73              125             145
 amortization
                         7,580           8,900           16,193          16,491
Income (loss) from       119,341         (43,856    )    259,806         (282,671   )
continuing operations
Income (loss) from
discontinued             13              (142       )    (27        )    (175       )
operations
Net Income (Loss)        119,354         (43,998    )    259,779         (282,846   )
 Preferred dividends     (1,395     )    (3,376     )    (4,663     )    (6,751     )
 Excess of carrying
 amount of exchanged
 preferred stock         -               -               43,043          -
 over fair value of
 consideration paid
Income (Loss)
Applicable to Common   $ 117,959       $ (47,374    )  $ 298,159       $ (289,597   )
Stockholders
Income (loss) Per
Share of Common Stock
 Basic                 $ 1.90          $ (0.90      )  $ 5.16          $ (5.48      )
 Diluted               $ 1.90          $ (0.90      )  $ 5.16          $ (5.48      )
Income (loss) from
continuing operations
per share of common
stock,
 after preferred
 dividends and excess
 of carrying amount
 of
 exchanged preferred
 stock over fair
 value of
 consideration paid
 Basic                 $ 1.90          $ (0.90      )  $ 5.16          $ (5.48      )
 Diluted               $ 1.90          $ (0.90      )  $ 5.16          $ (5.48      )
Income (loss) from
discontinued
operations per share
 of common stock
 Basic                 $ -             $ -             $ -             $ -
 Diluted               $ -             $ -             $ -             $ -
Weighted Average
Number of Shares of
Common Stock
Outstanding
 Basic                   62,010,570      52,836,208      57,838,286      52,821,800
 Diluted                 62,010,570      52,836,208      57,838,286      52,821,800
Dividends Declared
per Share of Common    $ -             $ -             $ -             $ -
Stock
    
 Newcastle Investment Corp.
 Consolidated Balance Sheets
 (dollars in thousands, except share data)
                                               June 30, 2010
                                               (Unaudited)     December 31, 2009
Assets
Non-Recourse VIE Financing Structures
 Real estate securities, available for sale    $ 1,872,612     $ 1,784,487
 Real estate related loans, held for sale,       671,657         554,367
 net
 Residential mortgage loans, held for            131,084         -
 investment, net
 Residential mortgage loans, held for sale,      258,373         380,123
 net
 Subprime mortgage loans subject to call         403,383         403,006
 option
 Restricted cash                                 145,366         200,251
 Receivables from brokers, dealers and           -               1,795
 clearing organizations
 Receivables and other assets                    32,769          34,848
                                                 3,515,244       3,358,877
Recourse Financing Structures and Unlevered
Assets
 Real estate securities, available for sale      3,467           46,308
 Real estate related loans, held for sale,       23,001          19,495
 net
 Residential mortgage loans, held for sale,      4,182           3,524
 net
 Operating real estate, held for sale            9,906           9,966
 Cash and cash equivalents                       37,684          68,300
 Receivables and other assets                    1,016           8,158
                                                 79,256          155,751
                                               $ 3,594,500     $ 3,514,628
Liabilities and Stockholders' Equity
(Deficit)
Liabilities
Non-Recourse VIE Financing Structures
 CDO bonds payable                             $ 3,481,618     $ 4,058,928
 Other bonds payable                             275,933         303,697
 Notes payable                                   4,582           -
 Financing of subprime mortgage loans subject    403,383         403,006
 to call option
 Derivative liabilities                          203,274         203,054
 Accrued expenses and other liabilities          7,415           2,992
                                                 4,376,205       4,971,677
Recourse Financing Structures and Other
Liabilities
 Repurchase agreements                           -               71,309
 Junior subordinated notes payable               51,256          103,264
 Derivative liabilities                          -               4,100
 Due to affiliates                               1,419           1,497
 Accrued expenses and other liabilities          3,086           3,433
                                                 55,761          183,603
                                                 4,431,966       5,155,280
Stockholders' Equity (Deficit)
 Preferred stock, $0.01 par value,
 100,000,000 shares authorized,
 1,347,321 and 2,500,000 shares of 9.75%
 Series B Cumulative Redeemable Preferred
 Stock
 496,000 and 1,600,000 shares of 8.05% Series
 C Cumulative Redeemable Preferred Stock, and
 620,000 and 2,000,000 shares of 8.375%
 Series D Cumulative Redeemable Preferred
 Stock
 liquidation preference $25.00 per share,
 issued and outstanding as of June 30, 2010
 and
 December 31, 2009, respectively                 61,583          152,500
 Common stock, $0.01 par value, 500,000,000
 shares authorized, 62,024,945 and
 52,912,513 shares issued and outstanding at
 June 30, 2010 and
 December 31, 2009, respectively                 620             529
 Additional paid-in capital                      1,065,362       1,033,520
 Accumulated deficit                             (1,690,870 )    (2,193,383 )
 Accumulated other comprehensive income          (274,161   )    (633,818   )
 (loss)
                                                 (837,466   )    (1,640,652 )
                                               $ 3,594,500     $ 3,514,628
    
Newcastle Investment Corp.
Reconciliation of Net Interest Income Less Expenses (Net of Preferred Dividends)
(dollars in thousands)
(Unaudited)
                      Three Months Ended            Six Months Ended
                      June 30, 2010  June 30, 2009  June 30, 2010  June 30, 2009
Income (Loss)
Applicable to Common  $ 117,959      $ (47,374 )    $ 298,159      $ (289,597 )
Stockholders
Add (Deduct):
Impairment              (42,495 )      123,407        (110,527 )     430,877
Other (Income) Loss     (53,384 )      (55,285 )      (109,927 )     (67,602  )
Excess of carrying
amount of exchanged
preferred stock over    -              -              (43,043  )     -
fair value of
consideration paid
Loss from
discontinued            (13     )      142            27             175
operations
Net Interest Income
less Expenses (Net    $ 22,067       $ 20,890       $ 34,689       $ 73,853
of Preferred
Dividends)
    
    Source: Newcastle Investment Corp.
    	Released August 5, 2010