Newcastle Announces Fourth Quarter and Year End 2009 Results

2009 Financial Results

Fourth Quarter 2009

NEW YORK--(BUSINESS WIRE)-- Newcastle Investment Corp. (NYSE: NCT) reported that for the quarter ended December 31, 2009, GAAP income was $16.5 million, or $0.31 per diluted share, compared to a GAAP loss of $51.48 per diluted share for the quarter ended December 31, 2008.

GAAP income of $16.5 million consists of net interest income less expenses (net of preferred dividends) of $12.7 million plus other income of $30.7 million, less impairments of $26.9 million.

Other income is primarily related to gains on the extinguishment of CDO debt. In the fourth quarter, Newcastle repurchased a face amount of $36.9 million of CDO bonds for $7.6 million. As a result, Newcastle recorded a gain on extinguishment of debt of $29.1 million for the fourth quarter 2009.

Full Year 2009

GAAP loss was $223.4 million, or $4.23 per diluted share, compared to GAAP loss of $56.81 per diluted share for 2008.

The GAAP loss of $223.4 million consists of net interest income less expenses (net of preferred dividends) of $98.1 million plus other income of $227.1 million, less impairments of $548.6 million.

Other income is primarily related to gains on the extinguishment of CDO debt. In 2009, Newcastle repurchased a face amount of $246.7 million of CDO bonds for $29.9 million. As a result, Newcastle recorded a gain on extinguishment of debt of $215.3 million for 2009.

For a reconciliation of net 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 Reduction

In the fourth quarter, the Company reduced its non-agency recourse debt by $7 million and decreased its FNMA/FHLMC recourse debt by $2 million. As detailed below, the Company's unrestricted cash balance currently exceeds its non-agency recourse liabilities (excluding our junior subordinated notes, which are long-term obligations).

Financing and Liquidity

Certain details regarding our liquidity and current financings are set forth below as of February 17, 2010:

    --  Cash - We had unrestricted cash of $59 million. In addition, we had $201
        million of restricted cash for reinvestment in our CDOs;
    --  Margin Exposure - We have no financings subject to margin calls, other
        than one repurchase agreement with a face amount of $40 million, which
        finances our FNMA/FHLMC investments and four interest rate swap
        agreements with an aggregate notional amount of $67 million; and
    --  Recourse Financings- Substantially all of our assets, other than our
        FNMA/FHLMC investments, are currently financed with term debt subject to
        amortization payments.

The following table illustrates the change in our unrestricted cash and recourse financings, excluding our junior subordinated notes ($ in millions):


                                  February 17,   December 31,   September 30,
                                  2010           2009           2009

Unrestricted Cash                 $ 59           $ 68           $ 73

Recourse Financings

 Non-FNMA/FHLMC (non-agency)

  Real Estate Securities, Loans,    21             32             36
  and Properties

  Manufacturing Housing Loans       8              10             13

  Subtotal                          29             42             49

 FNMA/FHLMC Investments             40             40             42

 Total Recourse Financings        $ 69           $ 82           $ 91



The following table summarizes the scheduled repayments of our non-agency recourse financings ($ in millions):


Scheduled Repayments

 February 18, 2010 to March 31, 2010 $ 9

 2nd Quarter 2010                      16

 3rd Quarter 2010                      4

 Total Recourse Financings           $ 29



The following table summarizes our cash receipts in the fourth quarter 2009 from our CDO financings, their related coverage tests, and negative watch assets ($ in thousands):


                               Interest

                               Coverage

         Primary               %         Over Collateralization %    Assets on
                               Excess    Excess

         Collateral  Cash      Jan 31,   Jan 31,  Dec 31,  Sep 30,   Negative

         Type        Receipts  2010      2010     2009     2009      Watch(3)
                     (1)       (2)       (2)      (2)      (2)

CDO IV   Securities  $ 128     122.1 %   -6.8  %  -6.8  %  -6.5  %   $ 88,623

CDO V    Securities    165     215.0 %   -3.8  %  -3.8  %  2.7   %     135,690

CDO VI   Securities    142     45.6  %   -24.3 %  -21.8 %  -15.5 %     184,413

CDO VII  Securities    139     69.3  %   -51.9 %  -49.2 %  -26.3 %     229,450

CDO      Loans         3,720   287.5 %   8.5   %  9.8   %  2.7   %     130,121
VIII

CDO IX   Loans         5,134   354.8 %   11.0  %  10.5  %  6.1   %     41,750

CDO X    Securities    3,451   181.5 %   5.1   %  2.8   %  1.6   %     239,965

Total                $ 12,879                                        $ 1,050,012




     Represents net cash received from each CDO based on all of our interests in
     such CDO (including senior management fees). Cash receipts for the
(1)  quarter-ended December 31, 2009, may not be indicative of cash receipts for
     subsequent periods. See forward-looking statements below for risks and
     uncertainties that could cause our cash receipts for subsequent periods to
     differ materially from these amounts.

     Represents excess or deficiency under the applicable interest coverage or
     over collateralization tests to the first threshold at which cash flow
     would be redirected. We generally do not receive material cash flow from
(2)  the CDO until the deficiency is corrected. The information regarding
     coverage tests is based on data from the most recent remittance date on or
     before January 31, 2010, December 31, 2009, or September 30, 2009, as
     applicable. CDO IV and V test results are only applicable 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 of December 2009 remittances for CDO IV
(3)  and V (these test results are only applicable on a quarterly basis) and as
     of the latest determination date of January 2010 remittances for all other
     CDOs. The amounts include CDO bonds of $54.6 million issued by Newcastle,
     which are eliminated in consolidation and not reflected in our investment
     portfolio segments.



    --  The cash receipts above include $0.9 million of non-recurring fees
        received in the CDOs.
    --  Results do not include the expected default of our $59.1 million of
        Stuyvesant Mezzanine loan held in CDO IX, which would eliminate a
        substantial amount of our excess overcollateralization cushion in CDO
        IX.

Book Value

Our GAAP book value increased to $(33.89) per share, or $(1.8) billion at December 31, 2009, up from $(38.20) per share, or $(2.0) billion at September 30, 2009.

Dividends

For the quarter ended December 31, 2009, Newcastle's Board of Directors elected not to pay a common stock or preferred stock dividend. The Company decided to retain capital for liquidity and for working capital purposes.

Investment Portfolio

Newcastle's $5.6 billion investment portfolio (with a basis of $3.2 billion) consists of commercial, residential and corporate debt. During the quarter, the portfolio decreased by $84.0 million primarily as a result of principal repayments of $102.7 million, sales of $53.0 million and actual principal writedowns of $16.1 million, offset by purchases of $78.7 million.

The following table describes our investment portfolio as of December 31, 2009 ($ in millions):


                                                                        Weighted

                Face      Basis        % of     Number of               Average

                Amount $  Amount $(1)  Basis    Investments  Credit(2)  Life
                                                                        (yrs)(3)

Commercial
Assets

 CMBS           $ 2,458   $ 1,467      45.4  %  294          BB         3.1

 Mezzanine        718       240        7.4   %  21           69%        1.9
 Loans

 B-Notes          308       80         2.5   %  11           76%        1.9

 Whole Loans      93        55         1.7   %  4            36%        1.6

 Total
 Commercial       3,577     1,842      57.0  %                          2.7
 Assets

Residential
Assets

 MH and
 Residential      484       375        11.6  %  12,613       699        6.5
 Loans

 Subprime         463       187        5.8   %  104          B          4.6
 Securities

 Real Estate      86        66         2.0   %  26           BB+        4.4
 ABS

 Subprime
 Retained         62        2          0.1   %  7            C          1.8
 Securities &
 Residuals

                  1,095     630        19.5  %                          5.3

 FNMA/FHLMC       46        46         1.4   %  3            AAA        3.8
 Securities

 Total
 Residential      1,141     676        20.9  %                          5.2
 Assets

Corporate
Assets

 REIT Debt        518       513        15.9  %  59           BB+        4.2

 Corporate        314       199        6.2   %  10           CCC-       3.4
 Bank Loans

 Total
 Corporate        832       712        22.0  %                          3.9
 Assets

Total/Weighted  $ 5,550   $ 3,230      100.0 %                          3.4
Average(4)




(1)  Net of impairments.

     Credit represents weighted average of minimum rating for rated assets, LTV
     (based on the appraised value at the time of purchase) for non-rated
     commercial assets, FICO score for non-rated residential assets and an
(2)  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 the assignment of a
     "negative watch") at any time.

(3)  Weighted average life represents the timing of expected principal reduction
     on the asset.

(4)  Excludes operating real estate held for sale of $10 million and loans
     subject to call option with a face amount of $406 million.



Commercial Assets

We own $3.6 billion of commercial assets (with a basis of $1.8 billion), which includes CMBS, mezzanine loans, B-Notes and whole loans.

    --  During the quarter, we purchased $77.8 million, sold $7.5 million, had
        principal repayments of $49.0 million and had $ 1.3 million of actual
        principal writedowns for a net increase of $20.0 million. We purchased
        11 CMBS assets with an average rating of "A."
    --  We had no commercial assets upgraded, 13 securities or $ 160.9 million
        affirmed and 43 securities or $461.7 million downgraded (from an average
        rating of BBB- to B).

CMBS portfolio ($ in thousands):



          Average                                                                    Weighted
                           Face       Basis      % of    Delinquency  Principal      Average
          Minimum

Vintage   Rating   Number  Amount $   Amount $   Basis   60+/FC/REO   Subordination  Life
(1)       (2)                                            (3)          (4)            (yrs)

Pre 2004  BBB+     84      434,496    417,820    28.5%   5.0%         12.4%          3.1

2004      BB+      61      434,515    305,844    20.8%   3.8%         5.7%           3.5

2005      BB-      53      600,343    200,292    13.7%   3.0%         5.9%           3.0

2006      BB+      55      527,422    361,051    24.6%   2.0%         10.9%          3.1

2007      B        40      450,375    171,818    11.7%   4.8%         10.9%          2.4

2009      BBB-     1       11,000     10,060     0.7%    0.0%         0.0%           9.9

TOTAL/WA  BB       294     2,458,151  1,466,885  100.0%  3.6%         9.0%           3.1




(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)  the assignment of a "negative watch") at any time. We had approximately
     $850.9 million of CMBS assets that are on negative watch for possible
     downgrade by at least one rating agency as of December 31, 2009.

(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 our investments.



Mezzanine loans, B-Notes and whole loans portfolio ($ in thousands):


                              Mezzanine           Whole

                              Loans      B-Notes  Loans   Total

Face Amount ($)               718,298    308,082  93,305  1,119,685

Basis Amount ($)              240,185    79,427   55,408  375,020

Number                        21         11       4       36

WA First $ Loan To Value (1)  55.6%      61.9%    0.0%    52.7%

WA Last $ Loan To Value (1)   69.3%      75.9%    36.1%   68.4%

Delinquency (%) (2)           6.9%       42.7%    0.0%    16.2%




(1)  Loan To Value is based on the appraised value at the time of purchase.

(2)  The percentage of underlying loans that are non-performing, in foreclosure,
     under bankruptcy filing or considered real estate owned.



Residential Assets

We own $1.1 billion of residential assets (with a basis of $0.7 billion), which includes manufactured housing loans ("MH"), residential loans, subprime securities and FNMA/FHLMC securities.

    --  During the quarter, we purchased $0.9 million, had principal repayments
        of $29.4 million and actual principal writedowns of $14.8 million for a
        net decrease of $43.3 million. We purchased one ABS asset with a rating
        of "BBB."
    --  We had no ABS securities upgraded or affirmed, and 23 securities or
        $59.9 million downgraded (from an average rating of BB+ to CCC).

Manufactured housing and residential loans portfolios ($ in thousands):



                                       Average

             Face     Basis    % of    Loan Age  Original   Delinquency  Cumulative

Deal         Amount   Amount   Basis   (months)  Balance $  90+/FC/REO   Loss to
             $        $                                     (1)          Date

MH Loans     170,452  119,482  31.8%   99        327,855    1.7%         5.5%
Portfolio 1

MH Loans     243,781  202,025  53.8%   129       434,743    1.3%         3.6%
Portfolio 2

Residential
Loans        66,136   50,320   13.4%   91        646,357    9.1%         0.2%
Portfolio 1

Residential
Loans        3,795    3,516    1.0%    64        83,950     0.0%         0.0%
Portfolio 2

TOTAL/WA     484,164  375,343  100.0%  113       1,492,905  2.5%         3.8%




(1)  The percentage of loans that are 90+ days delinquent, or in foreclosure or
     considered real estate owned (REO).



Subprime securities portfolio excluding our residuals and retained interests in our own securitizations ($ in thousands):

Security Characteristics:


          Average

          Minimum          Face      Basis     % of    Principal      Excess

Vintage   Rating   Number  Amount $  Amount $  Basis   Subordination  Spread(4)
(1)       (2)                                          (3)

2003      BB-      15      22,147    13,593    7.3%    21.3%          4.4%

2004      B-       31      96,253    35,218    18.8%   12.9%          4.2%

2005      B        38      162,249   43,224    23.1%   24.2%          5.1%

2006      CCC      12      102,604   43,042    23.0%   18.5%          4.9%

2007      BB       8       79,250    52,122    27.8%   29.5%          4.7%

TOTAL/WA  B        104     462,503   187,199   100.0%  21.3%          4.7%



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        82        0.11        8.9%     17.4%          2.7%

2004        68        0.15        9.1%     20.8%          2.7%

2005        55        0.24        13.4%    35.8%          7.7%

2006        41        0.56        14.1%    42.1%          10.5%

2007        39        0.65        20.6%    34.1%          10.7%

TOTAL/WA    53        0.35        13.7%    32.9%          7.5%



Real Estate ABS portfolios ($ in thousands):

Security Characteristics:


              Average

              Minimum          Face      Basis     % of    Principal      Excess

Asset Type    Rating   Number  Amount $  Amount $  Basis   Subordination  Spread
              (2)                                          (3)            (4)

Manufactured  BBB+     9       51,276    49,795    75.9%   36.8%          2.3%
Housing

Small
Business      B        17      34,730    15,799    24.1%   17.7%          3.4%
Loans

TOTAL/WA      BB+      26      86,006    65,594    100.0%  29.1%          2.8%



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  110       0.37        7.9%     4.5%           9.9%

Small Business Loans  65        0.58        4.7%     14.5%          4.3%

TOTAL/WA              92        0.46        6.6%     8.5%           7.6%




(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)  the assignment of a "negative watch") at any time. We had approximately
     $21.1 million of ABS securities that are on negative watch for possible
     downgrade by at least one rating agency as of December 31, 2009.

(3)  The percentage of the outstanding face amount of securities and residual
     interests that is subordinate to our 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

We own $832 million of corporate assets (with a basis of $712 million), including REIT debt and corporate bank loans.

    --  During the quarter, we sold $45.5 million and had principal repayments
        of $24.3 million for a decrease of $69.8 million. Our sales consisted of
        nine REIT assets and one bank loan with an average rating of "B-."
    --  We had no REIT assets upgraded or affirmed and one REIT asset or $10.0
        million downgraded (from a rating of BBB+ to BBB). We had one bank loan
        or $20.5 million downgraded (from a rating of B- to CC).

REIT debt portfolio ($ in thousands):


             Average
                                Face      Basis     % of
             Minimum

Industry     Rating(1)  Number  Amount $  Amount $  Basis

Retail       BBB-       17      142,460   134,512   26.2%

Diversified  CCC+       12      123,836   124,344   24.3%

Office       BBB        12      125,469   127,532   24.9%

Multifamily  BBB        4       18,765    17,537    3.4%

Hotel        BBB        4       30,220    30,771    6.0%

Healthcare   BBB-       6       51,600    51,379    10.0%

Storage      A-         1       5,000     5,073     1.0%

Industrial   BB-        3       20,865    21,372    4.2%

TOTAL/WA     BB+        59      518,215   512,520   100.0%



Corporate bank loan portfolio ($ in thousands):


                Average

                Minimum            Face      Basis     % of

Industry        Rating(1)  Number  Amount $  Amount $  Basis

Real Estate     D          3       82,828    48,943    24.6%

Media           CC         2       112,000   42,956    21.6%

Resorts         BB-        1       71,449    64,363    32.4%

Restaurant      B          2       19,400    16,065    8.1%

Transportation  NR         1       27,000    25,110    12.6%

Theaters        B+         1       1,457     1,391     0.7%

TOTAL/WA        CCC-       10      314,134   198,828   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)  the assignment of a "negative watch") at any time. We did not have any REIT
     assets or bank loans that are on negative watch for possible downgrade by
     any rating agency as of December 31, 2009.



Conference Call

Newcastle's management will conduct a live conference call today, February 19, 2010, at 11:00 A.M. Eastern Time to review the financial results for the quarter and full year ended December 31, 2009. 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 Fourth 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, March 5, 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 "55209464."

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 alternative asset manager. For more information regarding Newcastle Investment Corp. or to be added to our e-mail distribution list, please visit www.newcastleinv.com.

Safe Harbor

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 Annual Report on Form 10-K, 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
 (dollars in thousands, except per share data)

                       Year Ended December 31,         Three Months Ended December
                                                       31,

                         2009            2008            2009            2008

Interest income        $ 361,866       $ 468,867       $ 74,833        $ 107,406

Interest expense         218,410         307,303         51,256          70,564

 Net interest income     143,456         161,564         23,577          36,842

Impairment

 Provision for credit    -               8,457           -               2,007
 losses on loan pools

 Valuation allowance
 (reversal) on loans     15,007          985,677         (68,086    )    908,761
 (held for sale in
 2009)

 Other-than-temporary
 impairment on           603,768         1,997,696       77,077          1,728,480
 securities

 Portion of
 other-than-temporary
 impairment on           (70,235    )    -               17,870          -
 securities
 recognized in other
 comprehensive income

                         548,540         2,991,830       26,861          2,639,248

 Net interest income
 (loss) after            (405,084   )    (2,830,266 )    (3,284     )    (2,602,406 )
 impairment

Other Income (Loss)

 Gain (loss) on
 settlement of           11,438          (58,668    )    3,650           (62,588    )
 investments, net

 Gain on
 extinguishment of       215,279         13,824          29,070          (24        )
 debt

 Other income (loss),    262             (76,122    )    (1,931     )    (40,329    )
 net

 Equity in earnings
 of unconsolidated       420             8,157           139             (32        )
 subsidiaries

                         227,399         (112,809   )    30,928          (102,973   )

Expenses

 Loan and security       5,034           6,649           1,165           1,413
 servicing expense

 General and
 administrative          8,609           7,297           1,788           1,678
 expense

 Management fee to       17,968          18,388          4,493           4,597
 affiliate

 Depreciation and        290             289             72              71
 amortization

                         31,901          32,623          7,518           7,759

Income (loss) from       (209,586   )    (2,975,698 )    20,126          (2,713,138 )
continuing operations

Income (loss) from
discontinued             (318       )    (9,654     )    (222       )    (930       )
operations

Net Income (Loss)        (209,904   )    (2,985,352 )    19,904          (2,714,068 )

 Preferred dividends     (13,501    )    (13,501    )    (3,375     )    (3,375     )

Income (Loss)
Applicable to Common   $ (223,405   )  $ (2,998,853 )  $ 16,529        $ (2,717,443 )
Stockholders

Income (loss) Per
Share of Common Stock

 Basic                 $ (4.23      )  $ (56.81     )  $ 0.31          $ (51.48     )

 Diluted               $ (4.23      )  $ (56.81     )  $ 0.31          $ (51.48     )

Income (loss) from
continuing operations
per share

 of common stock,
 after preferred
 dividends

 Basic                 $ (4.22      )  $ (56.63     )  $ 0.32          $ (51.46     )

 Diluted               $ (4.22      )  $ (56.63     )  $ 0.32          $ (51.46     )

Income (loss) from
discontinued
operations per share

 of common stock

 Basic                 $ (0.01      )  $ (0.18      )  $ (0.01      )  $ (0.02      )

 Diluted               $ (0.01      )  $ (0.18      )  $ (0.01      )  $ (0.02      )

Weighted Average
Number of Shares of
Common Stock
Outstanding

 Basic                   52,863,993      52,785,305      52,905,413      52,789,050

 Diluted                 52,863,993      52,785,305      52,905,413      52,789,050

Dividends Declared
per Share of Common    $ -             $ 0.750         $ -             $ -
Stock




 Newcastle Investment Corp.
 Consolidated Balance Sheets
 (dollars in thousands, except share data)

                                            December 31, 2009  December 31, 2008

Assets

 Real estate securities, available for      $ 1,830,795        $ 1,668,748
 sale

 Real estate related loans, held for sale,    573,862            843,212
 net

 Residential mortgage loans, held for         383,647            409,632
 sale, net

 Subprime mortgage loans subject to call      403,006            398,026
 option

 Investments in unconsolidated                193                384
 subsidiaries

 Operating real estate, held for sale         9,966              11,866

 Cash and cash equivalents                    68,300             49,746

 Restricted cash                              205,378            44,282

 Receivables and other assets                 39,481             47,727

                                            $ 3,514,628        $ 3,473,623

Liabilities and Stockholders' Equity
(Deficit)

Liabilities

 CDO bonds payable                            4,058,928          4,359,981

 Other bonds payable                          303,697            380,620

 Repurchase agreements                        71,309             276,472

 Financing of subprime mortgage loans         403,006            398,026
 subject to call option

 Junior subordinated notes payable            103,264            100,100

 Derivative liabilities                       207,154            333,977

 Due to affiliates                            1,497              1,532

 Accrued expenses and other liabilities       6,425              16,447

                                              5,155,280          5,867,155

Stockholders' Equity (Deficit)

 Preferred stock, $0.01 par value,
 100,000,000 shares authorized,

 2,500,000 shares of 9.75% Series B
 Cumulative Redeemable Preferred Stock

 1,600,000 shares of 8.05% Series C
 Cumulative Redeemable Preferred Stock,
 and

 2,000,000 shares of 8.375% Series D
 Cumulative Redeemable Preferred Stock

 liquidation preference $25.00 per share,     152,500            152,500
 issued and outstanding

 Common stock, $0.01 par value,
 500,000,000 shares authorized, 52,912,513
 and

 52,789,050 shares issued and outstanding
 at December 31, 2009 and

 December 31, 2008, respectively              529                528

 Additional paid-in capital                   1,033,520          1,033,416

 Accumulated deficit                          (2,193,383 )       (3,272,403 )

 Accumulated other comprehensive income       (633,818   )       (307,573   )
 (loss)

                                              (1,640,652 )       (2,393,532 )

                                            $ 3,514,628        $ 3,473,623




Newcastle Investment Corp.

Reconciliation of Net Interest Income Less Expenses (Net of Preferred
Dividends)

(dollars in thousands)

(Unaudited)

                                           Three Months Ended

                                           December 31, 2009  December 31, 2008

Net Income (Loss) Applicable to Common     $ 16,529           $ (2,717,443 )
Stockholders

Add (Deduct):

Impairment                                   26,861             2,639,248

Other (Income) Loss                          (30,928 )          102,973

Loss from discontinued operations            222                930

Net Interest Income less Expenses (Net of  $ 12,684           $ 25,708
Preferred Dividends)




                                           Year Ended

                                           December 31, 2009  December 31, 2008

Net Income (Loss) Applicable to Common     $ (223,405 )       $ (2,998,853 )
Stockholders

Add (Deduct):

Impairment                                   548,540            2,991,830

Other (Income) Loss                          (227,399 )         112,809

Loss from discontinued operations            318                9,654

Net Interest Income less Expenses (Net of  $ 98,054           $ 115,440
Preferred Dividends)




    Source: Newcastle Investment Corp.