Newcastle Announces Second Quarter 2009 Results

NEW YORK--(BUSINESS WIRE)-- Newcastle Investment Corp. (NYSE: NCT):

Second Quarter 2009 Financial Results

Newcastle Investment Corp. (NYSE: NCT) reported that for the quarter ended June 30, 2009, GAAP loss was $47.4 million or $0.90 per diluted share, compared to GAAP loss of $1.66 per diluted share for the quarter ended June 30, 2008.

The GAAP loss of $47.4 million consists of net interest income less expenses (net of preferred dividends) of $20.9 million plus other income of $55.1 million, less impairments of $123.4 million.

Recourse Debt Reduction and Modifications

In April 2009, Newcastle entered into an Exchange Agreement, pursuant to which the Company agreed to exchange newly issued junior subordinated notes due 2035 in an initial aggregate principal amount of $101.7 million for $100 million in aggregate liquidation amount of our outstanding trust preferred securities. The new notes will accrue interest at a rate of 1.0% per year for a modification period (February 2009 through July 2010 unless we elect to terminate prior to this date), compared to the 7.574% interest rate that the Company was required to pay on the trust preferred securities, which were canceled as part of the transaction. Please review our Form 8-K dated May 4, 2009, for additional important details regarding this transaction.

Effective June 30, 2009, the Company entered into an agreement with the other parties to a commercial construction loan for which we previously had funding commitments of $37.9 million (excluding $13.2 million of commitments owned by our CDOs), pursuant to which all future funding commitments, including both the commitments of Newcastle and our CDOs, were permanently terminated. As a result, as of June 30, 2009, Newcastle and our CDOs do not have any future funding commitments with respect to this loan.

In the second quarter, the Company decreased its non-agency recourse debt by $13 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 trust preferred securities, which are long-term obligations).

Financing and Liquidity

Certain details regarding our liquidity, current financings and capital obligations are set forth below as of August 5, 2009:

    --  Cash - We had unrestricted cash of $69.1 million. In addition, we had
        $126.6 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 $43.7 million which
        finances our FNMA/FHLMC investments and four interest rate swap
        agreements with an aggregate notional amount of $72.2 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, as opposed to short-term debt such as repurchase
        agreements, which could be subject to margin requirements.

The following table compares the face amount of our recourse financings, excluding the trust preferred securities ($ in millions):


                                               August 5, June 30,  March 31,

                                               2009      2009      2009

Recourse Financings

Non-FNMA/FHLMC (non-agency)

Real Estate Securities, Loans, and Properties  $ 52      $ 73      $ 83

Manufacturing Housing Loans                      16        17        20

Subtotal                                         68        90        103

FNMA/FHLMC Investments                           44        45        48

Total Recourse Financings                      $ 112     $ 135     $ 151



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


Scheduled Repayments

August 6, 2009 to September 30, 2009  $    9

4th Quarter 2009                           12

1st Quarter 2010                           19

2nd Quarter 2010                           23

3rd Quarter 2010                           3

4th Quarter 2010                           2

Total Recourse Financings             $    68



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


                               Interest

         Primary               Coverage

         Collateral            % Excess       Over Collateralization % Excess

                     Cash      June 30, 2009  June 30, 2009  March 31,
         Type        Receipts  (2)            (2)            2009(2)    Original
                     (1)

CDO IV   Securities  $ 2,428   109.3 %        0.6   %        1.0  %     3.5 %

CDO V    Securities    3,464   158.8 %        2.7   %        2.3  %     2.5 %

CDO VI   Securities    152     182.5 %        -13.4 %        -5.4 %     2.6 %

CDO VII  Securities    158     122.6 %        -20.1 %        -9.1 %     2.5 %

CDO      Loans         4,006   302.4 %        4.4   %        0.2  %     4.5 %
VIII

CDO IX   Loans         4,234   218.0 %        2.3   %        4.8  %     8.1 %

CDO X    Securities    7,860   135.8 %        3.6   %        2.5  %     8.3 %

Total                $ 22,302



    --  The cash receipts above include $7.5 million of non-recurring prepayment
        fees received in the CDOs.
    --  We currently have approximately $1.1 billion of CMBS and ABS assets held
        within our CDOs that are on downgrade watch by the rating agencies.
        These securities could be downgraded at any time, which could impact our
        future cash flows.

(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 June 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. 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 June 30, 2009 or March 31, 2009 as applicable.

Book Value

Our GAAP book value increased to $(44.15) per share, or $(2.3) billion at June 30, 2009, up from $(49.95) per share, or $(2.6) billion at March 31, 2009.

For a reconciliation of net interest income 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 June 30, 2009, 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 $5.8 billion investment portfolio (with a basis of $3.6 billion) consists of commercial, residential and corporate debt. During the quarter, the portfolio decreased by $91.4 million primarily as a result of principal repayments of $124.3 million, sales of $146.9 million and actual principal writedowns of $49.6 million, offset by purchases and fundings of a prior commitment of $229.4 million.

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


                                                                        Weighted

                Face      Basis        % of     Number of               Average

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

Commercial
Assets

CMBS            $ 2,366   $ 1,581      44.4  %  282          BBB-       3.6

Mezzanine         755       297        8.3   %  23           68%        2.1
Loans

B-Notes           310       81         2.3   %  11           60%        2.0

Whole Loans       102       67         1.9   %  4            45%        1.9

Total
Commercial        3,533     2,026      56.9  %                          3.1
Assets

Residential
Assets

MH and
Residential       517       373        10.5  %  13,340       694        6.8
Loans

Subprime          502       205        5.7   %  111          B          4.2
Securities

Subprime
Retained          76        4          0.1   %  8            CC/650     1.9
Securities &
Residuals

Real Estate       89        69         2.0   %  26           BBB        4.7
ABS

                  1,184     651        18.3  %                          5.2

FNMA/FHLMC        52        52         1.5   %  3            AAA        4.0
Securities

Total
Residential       1,236     703        19.8  %                          5.2
Assets

Corporate
Assets

REIT Debt         564       555        15.6  %  59           BB+        4.5

Corporate Bank    452       273        7.7   %  12           CCC        2.4
Loans

Total
Corporate         1,016     828        23.3  %                          3.6
Assets

Total/Weighted  $ 5,785   $ 3,557      100.0 %                          3.6
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 outlook" or "credit 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 and loans subject to call option with a face amount of $11 million and $406 million, respectively.

Commercial Assets

We own $3.5 billion of commercial assets (with a basis of $2.0 billion), which includes CMBS, mezzanine loans, B-Notes and whole loans.

    --  During the quarter, we funded a prior commitment of $1.6 million,
        purchased CMBS assets of $186.5 million, had principal repayments of
        $88.4 million and no actual principal writedowns for a net increase of
        $99.7 million. We purchased 28 CMBS assets with an average rating of
        "AA+."
    --  We had no commercial assets upgraded and 20 securities or $219.5 million
        downgraded (from an average rating of BB+ to B).
    --  We currently have approximately $1 billion of CMBS assets that are on
        downgrade watch by S&P.

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)            (yr)

Pre 2004  BBB+     77      400,963    393,643    24.9%   2.9%         11.7%          3.5

2004      BB+      61      446,969    367,993    23.3%   2.8%         5.4%           4.2

2005      BBB-     55      608,759    288,451    18.2%   1.7%         6.0%           3.8

2006      BBB-     49      461,555    319,283    20.2%   1.4%         9.7%           3.2

2007      BB       40      447,729    211,857    13.4%   2.3%         10.7%          3.1

TOTAL/WA  BBB-     282     2,365,975  1,581,227  100.0%  2.1%         8.5%           3.6



(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 outlook" or "credit 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 loan portfolio ($ in thousands):


                                                  Whole

                              Mezzanine  B-Note   Loan     Total

Face Amount ($)               755,477    309,710  102,053  1,167,240

Basis Amount ($)              296,542    80,568   66,763   443,873

WA First $ Loan To Value (1)  55.8%      48.0%    0.0%     48.8%

WA Last $ Loan To Value (1)   68.1%      59.9%    44.8%    63.9%

Delinquency (%) (2)           6.0%       30.7%    0.0%     12.0%



(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 $39.8 million, sold $47.3 million, had
        principal repayments of $34.6 million and actual principal writedowns of
        $33.7 million for a net decrease of $75.8 million. We purchased four ABS
        assets with an average rating of "AA."
    --  We had no ABS securities upgraded and 24 securities or $99.3 million
        downgraded (from an average rating of BB+ to B-).
    --  We currently have approximately $70 million of ABS securities that are
        on downgrade watch by the rating agencies.

Manufactured housing loan portfolios ($ in thousands):


                                     Weighted

                                     Average                          Actual

           Face     Basis    % of    Loan Age  Original  Delinquency  Cumulative

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

Portfolio  180,823  122,191  37.4%   94        327,855   1.6%         4.7%
1

Portfolio  261,938  204,625  62.6%   123       434,743   1.1%         2.9%
2

TOTAL/WA   442,761  326,816  100.0%  111       762,598   1.3%         3.6%



(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      BBB+     15      24,763    18,248    8.9%    20.5%          4.2%

2004      BB       30      101,920   45,727    22.4%   12.9%          4.4%

2005      B-       45      190,941   49,885    24.4%   20.2%          5.2%

2006      CCC-     14      114,699   45,952    22.5%   17.9%          4.5%

2007      BB+      7       70,013    44,686    21.8%   30.1%          4.7%

TOTAL/WA  B        111     502,336   204,498   100.0%  19.6%          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        75        0.11        10.7%    13.7%          2.5%

2004        62        0.15        12.3%    18.0%          2.5%

2005        49        0.26        19.6%    31.4%          6.7%

2006        35        0.59        16.0%    35.0%          7.7%

2007        32        0.73        16.7%    32.4%          6.0%

TOTAL/WA    47        0.37        16.5%    28.8%          5.8%



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

(2) Ratings provided above were determined by third party rating agencies as of June 30, 2009, may not be current and are subject to change (including the assignment of a "negative outlook" or "credit 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 $76.1 million of retained securities with a basis of $4.1 million and residual interests with a basis of $0.4 million in two subprime portfolio securitizations from 2006 and 2007.

Corporate Assets

We own $1.0 billion of corporate assets (with a basis of $0.8 billion), including REIT debt and corporate bank loans.

    --  During the quarter, we purchased $1.5 million, sold $99.6 million, had
        principal repayments of $1.4 million, and actual principal writedowns of
        $15.9 million for a net decrease of $115.4 million. Our purchase
        consisted of one REIT asset with a rating of "A-."
    --  We had one REIT asset or $5.0 million upgraded (from a rating of A- to
        A). We had no bank loans upgraded and 16 securities or $291.9 million
        downgraded (from an average rating of B- to CCC).

REIT debt portfolio ($ in thousands):


             Average
                                Face      Basis     % of
             Minimum

Industry     Rating(1)  Number  Amount $  Amount $  Basis

Retail       BB+        17      163,935   151,980   27.4%

Diversified  B+         14      151,463   151,857   27.3%

Office       BBB        12      130,219   132,604   23.9%

Multifamily  BBB        4       18,765    17,490    3.1%

Hotel        BBB-       4       37,220    37,818    6.8%

Healthcare   BBB-       4       36,600    37,124    6.7%

Storage      A-         1       5,000     5,084     0.9%

Industrial   BB-        3       20,865    21,506    3.9%

TOTAL/WA     BB+        59      564,067   555,463   100.0%



Corporate bank loan portfolio ($ in thousands):


                Average
                                   Face      Basis     % of
                Minimum

Industry        Rating(1)  Number  Amount $  Amount $  Basis

Real Estate     CC         3       115,299   55,803    20.4%

Media           CCC        2       112,000   27,625    10.1%

Retail          B-         1       97,438    97,438    35.7%

Resorts         BB-        1       76,406    54,630    20.0%

Restaurant      B          2       19,436    13,755    5.0%

Gaming          CCC        1       3,000     276       0.1%

Transportation  NR         1       27,000    22,275    8.2%

Theatres        B-         1       1,464     1,388     0.5%

TOTAL/WA        CCC        12      452,043   273,190   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 outlook" or "credit watch") at any time.

Conference Call

Newcastle's management will conduct a live conference call today, August 7, 2009, at 1:00 P.M. Eastern Time to review the financial results for the quarter ended June 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 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 14, 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 "22705137."

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              Six Months Ended

                      June 30,                        June 30,

                        2009            2008            2009            2008

Interest income       $ 87,338        $ 115,018       $ 211,811       $ 247,912

Interest expense        54,172          73,713          114,716         163,088

Net interest income     33,166          41,305          97,095          84,824

Impairment

Provision for credit    3,557           1,868           5,464           4,373
losses on loan pools

Valuation allowance
(reversal) on loans     (34,426    )    16,759          86,100          37,085
held for sale

Other-than-temporary
impairment on           211,812         101,797         398,394         148,169
securities

Portion of
other-than-temporary
impairment on
                        (57,536    )    -               (57,536    )    -
securities
recognized in other
comprehensive income

                        123,407         120,424         432,422         189,627

Net interest income     (90,241    )    (79,119    )    (335,327   )    (104,803   )
after impairment

Other Income (Loss)

Gain (loss) on
settlement of           17,544          (37        )    11,042          6,489
investments, net

Gain on
extinguishment of       26,830          -               53,675          8,533
debt

Other income (loss),    10,939          1,427           4,445           (17,881    )
net

Equity in earnings
of unconsolidated       (28        )    7,062           (15        )    7,770
subsidiaries

                        55,285          8,452           69,147          4,911

Expenses

Loan and security       1,370           1,788           2,772           3,518
servicing expense

General and
administrative          2,965           1,892           4,591           3,484
expense

Management fee to       4,492           4,597           8,983           9,194
affiliate

Depreciation and        73              73              145             145
amortization

                        8,900           8,350           16,491          16,341

Income (loss) from
continuing              (43,856    )    (79,017    )    (282,671   )    (116,233   )
operations

Income (loss) from
discontinued            (142       )    (5,263     )    (175       )    (8,951     )
operations

Net Income (Loss)       (43,998    )    (84,280    )    (282,846   )    (125,184   )

Preferred dividends     (3,376     )    (3,376     )    (6,751     )    (6,751     )

Income (Loss)
Applicable to Common  $ (47,374    )  $ (87,656    )  $ (289,597   )  $ (131,935   )
Stockholders

Income (loss) Per
Share of Common
Stock

Basic                 $ (0.90      )  $ (1.66      )  $ (5.48      )  $ (2.50      )

Diluted               $ (0.90      )  $ (1.66      )  $ (5.48      )  $ (2.50      )

Income (loss) from
continuing
operations per share

of common stock,
after preferred
dividends

Basic                 $ (0.90      )  $ (1.56      )  $ (5.48      )  $ (2.33      )

Diluted               $ (0.90      )  $ (1.56      )  $ (5.48      )  $ (2.33      )

Income (loss) from
discontinued
operations per share

of common stock

Basic                 $ -             $ (0.10      )  $ -             $ (0.17      )

Diluted               $ -             $ (0.10      )  $ -             $ (0.17      )

Weighted Average
Number of Shares of
Common Stock
Outstanding

Basic                   52,836,208      52,783,006      52,821,800      52,781,662

Diluted                 52,836,208      52,783,006      52,821,800      52,781,662

Dividends Declared
per Share of Common   $ -             $ 0.250         $ -             $ 0.500
Stock




Newcastle Investment Corp.

Consolidated Balance Sheets

(dollars in thousands, except share data)

                                               June 30, 2009
                                                               December 31, 2008
                                               (unaudited)

Assets

Real estate securities, available for sale     $ 1,568,324     $ 1,668,748

Real estate related loans, held for sale         717,078         843,212

Residential mortgage loans, held for sale        381,709         409,632

Subprime mortgage loans subject to call          400,474         398,026
option

Investments in unconsolidated subsidiaries       221             384

Operating real estate, held for sale             10,266          11,866

Cash and cash equivalents                        66,628          49,746

Restricted cash                                  77,573          44,282

Receivables and other assets                     43,024          47,727

                                               $ 3,265,297     $ 3,473,623

Liabilities and Stockholders' Equity

Liabilities

CDO bonds payable                                4,270,103       4,359,981

Other bonds payable                              329,256         380,620

Repurchase agreements                            117,478         276,472

Financing of subprime mortgage loans subject     400,474         398,026
to call option

Junior subordinated notes payable                101,700         100,100

Derivative liabilities                           222,252         333,977

Due to affiliates                                1,497           1,532

Accrued expenses and other liabilities           6,068           16,447

                                                 5,448,828       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, 52,905,335 and

52,789,050 shares issued and outstanding at
June 30, 2009 and

December 31, 2008, respectively                  529             528

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

Accumulated deficit                              (2,266,325 )    (3,272,403 )

Accumulated other comprehensive loss             (1,103,741 )    (307,573   )

                                                 (2,183,531 )    (2,393,532 )

                                               $ 3,265,297     $ 3,473,623




Newcastle Investment Corp.

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

(dollars in thousands)

(Unaudited)

                                           Three Months Ended

                                           June 30, 2009  June 30, 2008

Net Interest Income                        $ 33,166       $ 41,305

Less: Expenses                               (8,900 )       (8,350 )

Less: Preferred dividends                    (3,376 )       (3,376 )

Net Interest Income less Expenses (Net of  $ 20,890       $ 29,579
Preferred Dividends)




    Source: Newcastle Investment Corp.