Newcastle Announces Third Quarter 2009 Results

Third Quarter 2009 Financial Results

NEW YORK--(BUSINESS WIRE)-- Newcastle Investment Corp. (NYSE: NCT) reported that for the quarter ended September 30, 2009, GAAP income was $49.7 million or $0.94 per diluted share, compared to a GAAP loss of $2.83 per diluted share for the quarter ended September 30, 2008.

GAAP income of $49.7 million consists of net interest income less expenses (net of preferred dividends) of $11.5 million plus other income of $129.0 million, less impairments of $90.8 million.

Other income is primarily related to gains on the extinguishment of CDO debt. In September, Newcastle repurchased a face amount of $150.1 million of CDO bonds in CDOs VIII, IX and X for $16.7 million. As a result, Newcastle recorded a gain on extinguishment of debt of $132.5 million in the third quarter of 2009.

Recourse Debt Reduction

In the third quarter, the Company decreased its non-agency recourse debt by $41 million and decreased its FNMA/FHLMC recourse debt by $3 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 November 4, 2009:

    --  Cash - We had unrestricted cash of $74.0 million. In addition, we had
        $126.7 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 $41.4 million which
        finances our FNMA/FHLMC investments and four interest rate swap
        agreements with an aggregate notional amount of $70.1 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):


                                      November 4,  September 30,  June 30,
                                      2009         2009           2009

Unrestricted Cash                     $ 74         $ 73           $ 66

Recourse Financings

 Non-FNMA/FHLMC (non-agency)

  Real Estate Securities, Loans, and    36           36             73
  Properties

  Manufacturing Housing Loans           13           13             17

  Subtotal                              49           49             90

 FNMA/FHLMC Investments                 41           42             45

 Total Recourse Financings            $ 90         $ 91           $ 135



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


Scheduled Repayments

 November 5, 2009 to December 31, 2009  $ 6

 1st Quarter 2010                         15

 2nd Quarter 2010                         23

 3rd Quarter 2010                         3

 4th Quarter 2010                         2

 Total Recourse Financings              $ 49



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


                             Interest

                             Coverage

       Primary               % Excess   Over Collateralization %     Assets on
                                        Excess

       Collateral  Cash      September  September  June              Negative
                             30,        30,        30,

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

CDO    Securities  $ 145     108.2%     -6.5%      0.6%    3.5%      $ 136,374
IV

CDO V  Securities    1,764   117.1%     2.7%       2.7%    2.5%        129,026

CDO    Securities    147     97.4%      -15.5%     -13.4%  2.6%        193,436
VI

CDO    Securities    147     70.2%      -26.3%     -20.1%  2.5%        232,748
VII

CDO    Loans         5,021   263.8%     2.7%       4.4%    4.5%        197,743
VIII

CDO    Loans         5,373   266.7%     6.1%       2.3%    8.1%        47,250
IX

CDO X  Securities    4,590   267.4%     1.6%       3.6%    8.3%        381,878

Total              $ 17,187                                          $ 1,318,455



(1) Represents net cash received from each CDO based on all of our interests in such CDO (including senior management fees). Cash receipts for the quarter-ended September 30, 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.

(2) 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 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 September 30, 2009 or June 30, 2009 as applicable.

(3) Represents the face amount of assets on negative watch for possible downgrade by at least one rating agency (Moody's, S&P, or Fitch) as of September 30, 2009 in each CDO. The amounts include CDO bonds of $146.3 million issued by Newcastle, which are eliminated in consolidation and not reflected in our investment portfolio segments.

    --  The cash receipts above include $1.5 million of non-recurring fees
        received in the CDOs.
    --  The over collateralization excess percentages as of the October
        remittance reports were as follows: CDO VI -15.3%, CDO VII -28.0 %, CDO
        VIII 8.3%, CDO IX 15.7% and CDO X 7.0 %. CDOs IV and V only report
        actual over collateralization excess percentages on a quarterly basis.

Book Value

Our GAAP book value increased to $(38.20) per share, or $(2.0) billion at September 30, 2009, up from $(44.15) per share, or $(2.3) billion at June 30, 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 GAAP results.

Dividends

For the quarter ended September 30, 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 $3.3 billion) consists of commercial, residential and corporate debt. During the quarter, the portfolio decreased by $150.7 million primarily as a result of principal repayments of $176.9 million, sales of $42.5 million and actual principal writedowns of $33.2 million, offset by purchases of $101.9 million.

The following table describes our investment portfolio as of September 30, 2009 ($ in millions):


                                                                       Weighted

                Face      Basis        % of    Number of               Average

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

Commercial
Assets

 CMBS           $ 2,389   $ 1,504      44.9%   285          BB+        3.2

 Mezzanine        754       276        8.3%    23           68%        1.7
 Loans

 B-Notes          308       74         2.2%    11           60%        1.6

 Whole Loans      98        58         1.7%    4            37%        1.9

 Total
 Commercial       3,549     1,912      57.1%                           2.7
 Assets

Residential
Assets

 MH and
 Residential      499       361        10.8%   12,956       697        6.0
 Loans

 Subprime         483       206        6.2%    104          B          3.8
 Securities

 Subprime
 Retained         66        3          0.1%    7            C/649      1.8
 Securities &
 Residuals

 Real Estate      87        68         2.0%    26           BBB-       4.5
 ABS

                  1,135     638        19.1%                           4.7

 FNMA/FHLMC       48        48         1.4%    3            AAA        3.9
 Securities

 Total
 Residential      1,183     686        20.5%                           4.6
 Assets

Corporate
Assets

 REIT Debt        561       552        16.5%   61           BB         4.3

 Corporate        341       198        5.9%    10           CCC-       2.6
 Bank Loans

 Total
 Corporate        902       750        22.4%                           3.7
 Assets

Total/Weighted  $ 5,634   $ 3,348      100.0%                          3.3
Average(4)



(1) Net of impairments.

(2) 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 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 payments on the asset. For an asset with an expected loss, weighted average life represents the timing of all remaining expected cash flows, both principal and interest payments.

(4) Excludes operating real estate held for sale of $11 million and loans subject to call option with a face amount of $406 million.

Commercial Assets

We own $3.5 billion of commercial assets (with a basis of $1.9 billion), which includes CMBS, mezzanine loans, B-Notes and whole loans.

    --  During the quarter, we purchased CMBS assets of $48.6 million, had
        principal repayments of $31.8 million and had $1.3 million of actual
        principal writedowns for a net increase of $15.5 million. We purchased
        eight CMBS assets with an average rating of "A."
    --  We had no commercial assets upgraded, 19 securities or $137.6 million
        affirmed and 37 securities or $369.0 million downgraded (from an average
        rating of BB+ to B).
    --  We currently have approximately $1.1 billion of CMBS assets that are on
        negative watch for possible downgrade by at least one rating agency as
        of September 30, 2009.

CMBS portfolio ($ in thousands):



          Average          Face       Basis      % of    Delinquency  Principal      Weighted
          Minimum                                                                    Average

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

Pre 2004  BBB+     81      429,115    413,444    27.5%   3.6%         11.8%          3.3

2004      BB+      61      434,747    338,967    22.5%   3.1%         5.7%           4.2

2005      BB       53      601,136    251,409    16.7%   2.0%         5.8%           3.1

2006      BB+      50      473,568    324,715    21.6%   1.3%         10.3%          2.9

2007      B+       40      450,518    175,363    11.7%   3.0%         10.8%          2.4

TOTAL/WA  BB+      285     2,389,084  1,503,898  100.0%  2.5%         8.7%           3.2



(1) The year in which the securities were issued.

(2) 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) 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 ($)               753,902    308,085    97,680    1,159,667

Basis Amount ($)              276,196    73,599     58,496    408,291

Number                        23         11         4         38

WA First $ Loan To Value (1)  55.3    %  47.9    %  0.0    %  48.7      %

WA Last $ Loan To Value (1)   68.1    %  59.8    %  37.3   %  63.3      %

Delinquency (%) (2)           6.0     %  42.7    %  0.0    %  15.2      %



(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 $1.2 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 $33.3 million, sold $19.7 million, had
        principal repayments of $36.9 million and actual principal writedowns of
        $28.9 million for a net decrease of $52.2 million. We purchased four ABS
        assets with an average rating of "A."
    --  We had no ABS securities upgraded, one security or $7.5 million affirmed
        and 38 securities or $123.2 million downgraded (from an average rating
        of B+ to CCC-).
    --  We currently have approximately $48.8 million of ABS securities that are
        on negative watch for possible downgrade by at least one rating agency
        as of September 30, 2009.

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     175,377  116,359  32.3%   96        327,855    1.5%         5.1%
Portfolio 1

MH Loans     252,436  199,641  55.3%   126       434,743    1.2%         3.2%
Portfolio 2

Residential
Loans        67,498   41,438   11.5%   77        646,357    9.1%         0.2%
Portfolio 1

Residential
Loans        3,795    3,180    0.9%    60        83,950     0.0%         0.0%
Portfolio 2

TOTAL/WA     499,106  360,618  100.0%  108       1,492,905  2.3%         3.5%



(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      23,085    15,481    7.5%    20.9%          4.2%

2004      B+       31      99,222    41,420    20.1%   12.9%          4.2%

2005      B        39      169,272   46,915    22.8%   23.3%          5.1%

2006      CCC      12      105,166   45,187    21.9%   18.7%          4.9%

2007      BB+      7       86,072    57,085    27.7%   30.7%          4.6%

TOTAL/WA  B        104     482,817   206,088   100.0%  21.4%          4.8%



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        78        0.11        13.1%    15.0%          2.6%

2004        65        0.15        11.7%    18.8%          2.6%

2005        52        0.25        17.2%    32.8%          7.3%

2006        38        0.58        14.9%    38.6%          9.2%

2007        36        0.69        20.7%    32.4%          8.3%

TOTAL/WA    50        0.37        16.0%    30.3%          6.7%



(1) The year in which the securities were issued.

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

(4) The annualized amount of interest received on the underlying loans in 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).

Residuals and retained securities

We own $66.3 million of retained securities and residual interest with a basis of $3.0 million in two subprime portfolio securitizations from 2006 and 2007.

Corporate Assets

We own $0.9 billion of corporate assets (with a basis of $0.8 billion), including REIT debt and corporate bank loans.

    --  During the quarter, we purchased $20.0 million, sold $22.8 million, had
        principal repayments of $108.2 million, and actual principal writedowns
        of $3.0 million for a net decrease of $114.0 million. Our purchase
        consisted of three REIT assets with an average rating of "BBB-."
    --  We had no REIT assets upgraded or affirmed and seven REIT assets or
        $73.1 million downgraded (from a rating of CCC+ to C). We had no bank
        loans upgraded or affirmed and two securities or $112.0 million
        downgraded (from an average rating of CCC to CC).
    --  We currently have approximately $11.5 million of REIT assets on
        downgrade watch and $23.0 million of bank loans that are on negative
        watch for possible downgrade by at least one rating agency as of
        September 30, 2009.

REIT debt portfolio ($ in thousands):


             Average Minimum          Face      Basis     % of

Industry     Rating(1)        Number  Amount $  Amount $  Basis

Retail       BB+              18      164,460   152,365   27.6%

Diversified  B-               13      133,141   133,511   24.2%

Office       BBB              12      130,219   132,441   24.0%

Multifamily  BBB              4       18,765    17,513    3.2%

Hotel        BBB-             4       37,220    37,777    6.9%

Healthcare   BBB-             6       51,600    51,374    9.3%

Storage      A-               1       5,000     5,078     0.9%

Industrial   BB-              3       20,865    21,440    3.9%

TOTAL/WA     BB               61      561,270   551,499   100.0%



Corporate bank loan portfolio ($ in thousands):


                Average

                Minimum            Face      Basis     % of

Industry        Rating(1)  Number  Amount $  Amount $  Basis

Real Estate     C          3       104,549   62,974    31.8%

Media           CC         2       112,000   35,840    18.1%

Resorts         BB-        1       76,406    59,215    29.9%

Restaurant      B          2       19,388    14,458    7.3%

Transportation  NR         1       27,000    24,300    12.2%

Theatres        B-         1       1,461     1,411     0.7%

TOTAL/WA        CCC-       10      340,804   198,198   100.0%



(1) 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.

Conference Call

Newcastle's management will conduct a live conference call today, November 6, 2009, at 1:00 P.M. Eastern Time to review the financial results for the quarter ended September 30, 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 Third 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, November 13, 2009 by dialing (800) 642-1687 (from within the U.S.) or (706) 645-9291 (from outside of the U.S.); please reference access code "36221474."

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 credit and liquidity crisis continues 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 and Quarterly Report on Form 10-Q, which are 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 share data)

(Unaudited)

                       Three Months Ended              Nine Months Ended
                       September 30,                   September 30,

                       2009            2008            2009            2008

Interest income        $ 75,222        $ 113,549       $ 287,033       $ 361,461

Interest expense         52,438          73,651          167,154         236,739

 Net interest income     22,784          39,898          119,879         124,722

Impairment

 Provision for credit    -               2,077           -               6,450
 losses on loan pools

 Valuation allowance
 (reversal) on loans     (6,926     )    39,831          83,093          76,916
 (held for sale in
 2009)

 Other-than-temporary
 impairment on           130,555         121,047         526,691         269,216
 securities

 Portion of
 other-than-temporary
 impairment on           (32,827    )    -               (88,105    )    -
 securities
 recognized in other
 comprehensive income

                         90,802          162,955         521,679         352,582

 Net interest income
 (loss) after            (68,018    )    (123,057   )    (401,800   )    (227,860   )
 impairment

Other Income (Loss)

 Gain (loss) on
 settlement of           (1,709     )    (2,569     )    7,788           3,920
 investments, net

 Gain on
 extinguishment of       132,534         5,315           186,209         13,848
 debt

 Other income (loss),    (2,252     )    (17,912    )    2,193           (35,793    )
 net

 Equity in earnings
 of unconsolidated       296             419             281             8,189
 subsidiaries

                         128,869         (14,747    )    196,471         (9,836     )

Expenses

 Loan and security       1,097           1,718           3,869           5,236
 servicing expense

 General and
 administrative          2,230           2,135           6,821           5,619
 expense

 Management fee to       4,492           4,597           13,475          13,791
 affiliate

 Depreciation and        73              73              218             218
 amortization

                         7,892           8,523           24,383          24,864

Income (loss) from       52,959          (146,327   )    (229,712   )    (262,560   )
continuing operations

Income (loss) from
discontinued             79              227             (96        )    (8,724     )
operations

Net Income (Loss)        53,038          (146,100   )    (229,808   )    (271,284   )

 Preferred dividends     (3,375     )    (3,375     )    (10,126    )    (10,126    )

Income (Loss)
Applicable to Common   $ 49,663        $ (149,475   )  $ (239,934   )  $ (281,410   )
Stockholders

Income (loss) Per
Share of Common Stock

 Basic                 $ 0.94          $ (2.83      )  $ (4.54      )  $ (5.33      )

 Diluted               $ 0.94          $ (2.83      )  $ (4.54      )  $ (5.33      )

Income (loss) from
continuing operations
per share of common
stock, after
preferred dividends

 Basic                 $ 0.94          $ (2.84      )  $ (4.54      )  $ (5.17      )

 Diluted               $ 0.94          $ (2.84      )  $ (4.54      )  $ (5.17      )

Income (loss) from
discontinued
operations per share
of common stock

 Basic                 $ -             $ 0.01          $ -             $ (0.16      )

 Diluted               $ -             $ 0.01          $ -             $ (0.16      )

Weighted Average
Number of Shares of
Common Stock
Outstanding

 Basic                   52,905,335      52,788,766      52,850,034      52,784,048

 Diluted                 52,905,335      52,788,766      52,850,034      52,784,048

Dividends Declared
per Share of Common    $ -             $ 0.250         $ -             $ 0.750
Stock




Newcastle Investment Corp.

Consolidated Balance Sheets

(dollars in thousands, except share data)

                                           September 30, 2009  December 31, 2008
                                           (unaudited)

Assets

 Real estate securities, available for     $ 1,761,209         $ 1,668,748
 sale

 Real estate related loans, held for         606,504             843,212
 sale, net

 Residential mortgage loans, held for        368,939             409,632
 sale, net

 Subprime mortgage loans subject to call     401,713             398,026
 option

 Investments in unconsolidated               173                 384
 subsidiaries

 Operating real estate, held for sale        10,116              11,866

 Cash and cash equivalents                   73,249              49,746

 Restricted cash                             140,728             44,282

 Receivables and other assets                36,276              47,727

                                           $ 3,398,907         $ 3,473,623

Liabilities and Stockholders' Equity
(Deficit)

Liabilities

 CDO bonds payable                           4,111,136           4,359,981

 Other bonds payable                         315,845             380,620

 Repurchase agreements                       78,039              276,472

 Financing of subprime mortgage loans        401,713             398,026
 subject to call option

 Junior subordinated notes payable           101,634             100,100

 Derivative liabilities                      242,578             333,977

 Due to affiliates                           1,497               1,532

 Payables to brokers, dealers and            7,337               -
 clearing organizations

 Accrued expenses and other liabilities      7,457               16,447

                                             5,267,236           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         152,500             152,500
 Redeemable Preferred Stock, and
 2,000,000 shares of 8.375% Series D
 Cumulative Redeemable Preferred Stock
 liquidation preference $25.00 per share,
 issued and outstanding

 Common stock, $0.01 par value,
 500,000,000 shares authorized,
 52,905,335 and 52,789,050 shares issued     529                 528
 and outstanding at September 30, 2009
 and December 31, 2008, respectively

 Additional paid-in capital                  1,033,506           1,033,416

 Accumulated deficit                         (2,213,287 )        (3,272,403 )

 Accumulated other comprehensive income      (841,577   )        (307,573   )
 (loss)

                                             (1,868,329 )        (2,393,532 )

                                           $ 3,398,907         $ 3,473,623




Newcastle Investment Corp.

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

(dollars in thousands)

(Unaudited)

                                        Three Months Ended

                                        September 30, 2009  September 30, 2008

Net Income (Loss) Applicable to Common  $ 49,663            $ (149,475 )
Stockholders

Add (Deduct):

Impairment                                90,802              162,955

Other Income (Loss)                       (128,869 )          14,747

Income from discontinued operations       (79      )          (227     )

Net Interest Income less Expenses (Net  $ 11,517            $ 28,000
of Preferred Dividends)




    Source: Newcastle Investment Corp.