Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b-2 of the Exchange Act. (Check one):

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

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

Common stock, $0.01 par value per share: 52,779,179 shares outstanding as of November 7, 2007.


		PAGE
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of September 30, 2007 (unaudited) and December 31, 2006		1
	Consolidated Statements of Income (unaudited) for the three and nine months ended September 30, 2007 and 2006		2
	Consolidated Statements of Stockholders’ Equity (unaudited) for the nine months ended September 30, 2007 and 2006		3
	Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2007 and 2006		4
	Notes to Consolidated Financial Statements (unaudited)		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		44
Item 4.	Controls and Procedures		50
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		51
Item 1A.	Risk Factors		51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		52
Item 3.	Defaults upon Senior Securities		52
Item 4.	Submission of Matters to a Vote of Security Holders		52
Item 5.	Other Information		52
Item 6.	Exhibits		53
	SIGNATURES		54


	September 30, 2007				December 31, 2006
	(Unaudited)
Assets
Real estate securities, available for sale		$	5,186,147			$	5,581,228
Real estate related loans, net			1,960,762				1,568,916
Residential mortgage loans, net			662,624				809,097
Subprime mortgage loans subject to call option – Note 5			392,992				288,202
Investments in unconsolidated subsidiaries			34,097				22,868
Operating real estate, net			33,348				29,626
Cash and cash equivalents			40,772				5,371
Restricted cash			107,415				184,169
Derivative assets			21,907				62,884
Receivables and other assets			65,409				52,031
		$	8,505,473			$	8,604,392
Liabilities and Stockholders’ Equity
Liabilities
CBO bonds payable		$	4,728,805			$	4,313,824
Other bonds payable			588,971				675,844
Notes payable			85,233				128,866
Repurchase agreements			1,583,842				760,346
Repurchase agreements subject to ABCP facility			98,655				1,143,749
Financing of subprime mortgage loans subject to call option – Note 5			392,992				288,202
Credit facility			—				93,800
Junior subordinated notes payable (security for trust preferred)			100,100				100,100
Derivative liabilities			46,164				17,715
Dividends payable			40,251				33,095
Due to affiliates			7,741				13,465
Accrued expenses and other liabilities			12,098				33,406
			7,684,852				7,602,412
Stockholders’ Equity
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, issued and outstanding (Series D issued in 2007)			152,500				102,500
Common stock, $0.01 par value, 500,000,000 shares authorized, 52,779,179 and 45,713,817 shares issued and outstanding at September 30, 2007 and December 31, 2006, respectively			528				457
Additional paid-in capital			1,033,322				833,887
Dividends in excess of earnings			(91,973	)			(10,848	)
Accumulated other comprehensive income (loss)			(273,756	)			75,984
			820,621				1,001,980
		$	8,505,473			$	8,604,392

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(dollars in thousands, except share data)


	Three Months Ended September 30,								Nine Months Ended September 30,
	2007				2006				2007				2006
Revenues
Interest income		$	169,770			$	140,330			$	523,860			$	378,446
Rental and escalation income			1,323				834				3,898				3,616
Gain on sale of investments, net			4,825				2,642				14,014				10,722
Other income (loss), net			(7,053	)			288				(557	)			4,545
			168,865				144,094				541,215				397,329
Expenses
Interest expense			117,434				100,239				368,108				265,113
Loss on extinguishment of debt – Note 6			7,752				—				15,032				658
Property operating expense			1,019				1,041				3,099				2,808
Loan and security servicing expense			2,091				1,553				7,772				4,961
Provision for credit losses			2,820				2,682				7,945				5,868
Provision for losses, loans held for sale – Note 5			—				—				5,754				4,127
General and administrative expense			1,335				1,187				4,150				3,979
Management fee to affiliate			4,597				3,475				13,048				10,420
Incentive compensation to affiliate			—				3,094				6,209				8,780
Depreciation and amortization			359				290				1,030				767
			137,407				113,561				432,147				307,481
Other Gains (Losses)
Other-than-temporary impairment – Note 3			(67,860	)			—				(73,813	)			—
Income (loss) before equity in earnings of unconsolidated subsidiaries			(36,402	)			30,533				35,255				89,848
Equity in earnings of unconsolidated subsidiaries			488				1,506				2,154				3,916
Income (loss) from continuing operations			(35,914	)			32,039				37,409				93,764
Income (loss) from discontinued operations			17				(12	)			(2	)			212
Net Income (Loss)			(35,897	)			32,027				37,407				93,976
Preferred dividends			(3,375	)			(2,328	)			(9,265	)			(6,985	)
Income (Loss) Applicable to Common Stockholders		$	(39,272	)		$	29,699			$	28,142			$	86,991
Income (Loss) Per Share of Common Stock
Basic		$	(0.74	)		$	0.68			$	0.55			$	1.98
Diluted		$	(0.74	)		$	0.67			$	0.55			$	1.97
Income (loss) from continuing operations per share of common stock, after preferred dividends
Basic		$	(0.74	)		$	0.68			$	0.55			$	1.97
Diluted		$	(0.74	)		$	0.67			$	0.55			$	1.97
Income from discontinued operations per share of common stock
Basic		$	0.00			$	0.00			$	0.00			$	0.01
Diluted		$	0.00			$	0.00			$	0.00			$	0.00
Weighted Average Number of Shares of Common Stock Outstanding
Basic			52,779,179				43,999,817				50,894,424				43,978,625
Diluted			52,779,179				44,136,956				51,045,418				44,091,003
Dividends Declared per Share of Common Stock		$	0.720			$	0.650			$	2.130			$	1.925

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
(dollars in thousands)


	Preferred Stock					Common Stock					Additional Paid-in Capital				Dividends in Excess of Earnings				Accum. Other Comp. Income (Loss)				Total Stockholders’ Equity
	Shares		Amount			Shares		Amount			Additional Paid-in Capital				Dividends in Excess of Earnings				Accum. Other Comp. Income (Loss)				Total Stockholders’ Equity
Stockholders’ equity – December 31, 2006		4,100,000		$	102,500		45,713,817		$	457		$	833,887			$	(10,848	)		$	75,984			$	1,001,980
Dividends declared		—			—		—			—			—				(118,532	)			—				(118,532	)
Issuance of common stock		—			—		6,980,000			70			199,703				—				—				199,773
Exercise of common stock options		—			—		83,198			1			1,442				—				—				1,443
Issuance of common stock to directors		—			—		2,164			—			60				—				—				60
Issuance of preferred stock		2,000,000			50,000		—			—			(1,770	)			—				—				48,230
Comprehensive income:
Net income		—			—		—			—			—				37,407				—				37,407
Net unrealized (loss) on securities		—			—		—			—			—				—				(292,713	)			(292,713	)
Reclassification of net realized (gain) loss on securities into earnings		—			—		—			—			—				—				(20,831	)			(20,831	)
Foreign currency translation		—			—		—			—			—				—				3,205				3,205
Net unrealized (loss) on derivatives designated as cash flow hedges		—			—		—			—			—				—				(39,466	)			(39,466	)
Reclassification of net realized loss on derivatives designated as cash flow hedges into earnings		—			—		—			—			—				—				65				65
Total comprehensive income (loss)																									(312,333	)
Stockholders’ equity – September 30, 2007		6,100,000		$	152,500		52,779,179		$	528		$	1,033,322			$	(91,973	)		$	(273,756	)		$	820,621
Stockholders’ equity – December 31, 2005		4,100,000		$	102,500		43,913,409		$	439		$	782,735			$	(13,235	)		$	45,564			$	918,003
Dividends declared		—			—		—			—			—				(91,664	)			—				(91,664	)
Exercise of common stock options		—			—		84,000			1			1,439				—				—				1,440
Issuance of common stock to directors		—			—		2,408			—			60				—				—				60
Comprehensive income:
Net income		—			—		—			—			—				93,976				—				93,976
Net unrealized gain on securities		—			—		—			—			—				—				31,775				31,775
Reclassification of net realized (gain) on securities into earnings		—			—		—			—			—				—				(637	)			(637	)
Foreign currency translation		—			—		—			—			—				—				763				763
Net unrealized gain on derivatives designated as cash flow hedges		—			—		—			—			—				—				6,801				6,801
Reclassification of net realized (gain) on derivatives designated as cash flow hedges into earnings		—			—		—			—			—				—				(3,351	)			(3,351	)
Total comprehensive income																									129,327
Stockholders’ equity – September 30, 2006		4,100,000		$	102,500		43,999,817		$	440		$	784,234			$	(10,923	)		$	80,915			$	957,166


	Nine Months Ended September 30,
	2007				2006
Cash Flows From Operating Activities
Net income		$	37,407			$	93,976
Adjustments to reconcile net income to net cash provided by (used in) operating activities (inclusive of amounts related to discontinued operations):
Depreciation and amortization			1,028				767
Accretion of discount and other amortization			(18,751	)			(14,976	)
Equity in earnings of unconsolidated subsidiaries			(2,154	)			(3,916	)
Distributions of earnings from unconsolidated subsidiaries			2,154				3,916
Deferred rent			234				(1,274	)
Gain on sale of investments			(14,155	)			(10,430	)
Unrealized gain on non-hedge derivatives and hedge ineffectiveness			829				(4,421	)
Loss on extinguishment of debt			10,278				—
Provision for credit losses			7,945				5,868
Provision for losses, loans held for sale			5,754				4,127
Other-than-temporary impairment			73,813				—
Purchase of loans held for sale – Notes 4 and 5			(1,089,202	)			(1,511,086	)
Sale of loans held for sale – Note 5			969,747				1,411,530
Non-cash directors’ compensation			60				60
Change in:
Restricted cash from operating activities			(8,268	)			34,398
Receivables and other assets			(13,138	)			(524	)
Due to affiliates			(5,724	)			1,155
Accrued expenses and other liabilities			(5,030	)			8,757
Net cash provided by (used in) operating activities			(47,173	)			17,927
Cash Flows From Investing Activities
Purchase of real estate securities			(416,408	)			(1,020,618	)
Proceeds from sale of real estate securities			237,892				306,618
Purchase of and advances on loans			(896,500	)			(1,267,511	)
Repayments of loan and security principal			925,431				417,277
Margin received on derivative instruments			73,978				(33,387	)
Return of margin on derivative instruments			(90,097	)			30,349
Margin deposits on total rate of return swaps (treated as derivative instruments)			(60,085	)			(46,158	)
Return of margin deposits on total rate of return swaps (treated as derivative instruments)			67,632				89,255
Proceeds from termination of derivative instruments			26,801				17,982
Proceeds from sale of derivative instrument into Securitization Trust 2006 – Note 5			—				5,623
Purchase and improvement of operating real estate			(1,537	)			(1,314	)
Contributions to unconsolidated subsidiaries			(12,191	)			(100	)
Distributions of capital from unconsolidated subsidiaries			962				1,504
Change in restricted cash from investing activities			(2,516	)			—
Net cash used in investing activities			(146,638	)			(1,500,480	)


	Nine Months Ended September 30,
	2007				2006
Cash Flows From Financing Activities
Issuance of CBO bonds payable			1,835,071				—
Repayments of CBO bonds payable			(1,430,506	)			(27,716	)
Issuance of other bonds payable			—				631,988
Repayments of other bonds payable			(88,067	)			(276,082	)
Repayments of notes payable			(43,633	)			(106,484	)
Borrowings under repurchase agreements			4,785,636				3,300,477
Repayments of repurchase agreements			(3,962,140	)			(2,150,900	)
Issuance of repurchase agreement subject to ABCP facility			247,409				—
Repayments of repurchase agreement subject to ABCP facility			(1,292,503	)			—
Draws under credit facility			382,800				393,900
Repayments of credit facility			(476,600	)			(288,900	)
Issuance of junior subordinated notes payable			—				100,100
Issuance of common stock			200,165				—
Costs related to issuance of common stock			(358	)			—
Exercise of common stock options			1,443				1,440
Issuance of preferred stock			50,000				—
Costs related to issuance of preferred stock			(1,770	)			—
Dividends paid			(111,376	)			(90,564	)
Payment of deferred financing costs			(2,244	)			(9,664	)
Change in restricted cash from financing activities			135,885				—
Net cash provided by financing activities			229,212				1,477,595
Net Increase (Decrease) in Cash and Cash Equivalents			35,401				(4,958	)
Cash and Cash Equivalents, Beginning of Period			5,371				21,275
Cash and Cash Equivalents, End of Period		$	40,772			$	16,317
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest expense		$	345,777			$	248,594
Cash paid during the period for income taxes		$	—			$	244
Supplemental Schedule of Non-Cash Investing and Financing Activities
Common stock dividends declared but not paid		$	38,001			$	28,600
Preferred stock dividends declared but not paid		$	2,250			$	1,552
Foreclosure of loans		$	—			$	12,200
Acquisition and financing of loans subject to call option		$	102,457			$	286,315

NEWCASTLE INVESTMENT CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
SEPTEMBER 30, 2007
(dollars in tables in thousands, except share data)

Newcastle Investment Corp. (and its subsidiaries, ‘‘Newcastle’’) is a Maryland corporation that was formed in 2002. Newcastle conducts its business through three primary segments: (i) real estate securities and real estate related loans, (ii) residential mortgage loans, and (iii) operating real estate.

Newcastle is organized and conducts its operations to qualify as a real estate investment trust (‘‘REIT’’) for U.S. federal income tax purposes. As such, Newcastle will generally not be subject to U.S. federal corporate income tax on that portion of its net income that is distributed to stockholders if it distributes at least 90% of its REIT taxable income to its stockholders by prescribed dates and complies with various other requirements.

Newcastle is party to a management agreement (the ‘‘Management Agreement’’) with FIG LLC (the ‘‘Manager’’), an affiliate of Fortress Investment Group LLC, under which the Manager advises Newcastle on various aspects of its business and manages its day-to-day operations, subject to the supervision of Newcastle’s board of directors. For its services, the Manager receives an annual management fee and incentive compensation, both as defined in the Management Agreement.

Approximately 5.1 million shares of Newcastle’s common stock were held by the Manager, through its affiliates, and its principals at September 30, 2007. In addition, the Manager, through its affiliates, held options to purchase approximately 1.5 million shares of Newcastle’s common stock at September 30, 2007.

The accompanying consolidated financial statements and related notes of Newcastle have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared under U.S. generally accepted accounting principles have been condensed or omitted. In the opinion of management, all adjustments considered necessary for a fair presentation of Newcastle’s financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These financial statements should be read in conjunction with Newcastle’s consolidated financial statements for the year ended December 31, 2006 and notes thereto included in Newcastle’s annual report on Form 10-K filed with the Securities and Exchange Commission. Capitalized terms used herein, and not otherwise defined, are defined in Newcastle’s consolidated financial statements for the year ended December 31, 2006.

NEWCASTLE INVESTMENT CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
SEPTEMBER 30, 2007
(dollars in tables in thousands, except share data)

Newcastle conducts its business through three primary segments: real estate securities and real estate related loans, residential mortgage loans, and operating real estate.

Summary financial data on Newcastle’s segments is given below, together with a reconciliation to the same data for Newcastle as a whole:


	Real Estate Securities and Real Estate Related Loans				Residential Mortgage Loans				Operating Real Estate				Unallocated				Total
September 30, 2007 and the Nine Months then Ended
Gross revenues		$	416,458			$	119,607			$	3,867			$	1,283			$	541,215
Operating expenses			(2,115	)			(19,390	)			(3,224	)			(23,248	)			(47,977	)
Operating income (loss)			414,343				100,217				643				(21,965	)			493,238
Interest expense			(285,462	)			(74,453	)			(44	)			(8,149	)			(368,108	)
Loss on extinguishment of debt			(15,032	)			—				—				—				(15,032	)
Other-than-temporary impairment			(73,813	)			—				—				—				(73,813	)
Depreciation and amortization			—				—				(812	)			(218	)			(1,030	)
Equity in earnings of unconsolidated subsidiaries			432				—				1,717				5				2,154
Income (loss) from continuing operations			40,468				25,764				1,504				(30,327	)			37,409
Income (loss) from discontinued operations			—				—				(2	)			—				(2	)
Net income (loss)			40,468				25,764				1,502				(30,327	)			37,407
Preferred dividends			—				—				—				(9,265	)			(9,265	)
Income (loss) applicable to common stockholders		$	40,468			$	25,764			$	1,502			$	(39,592	)		$	28,142
Revenue derived from non-U.S. sources:
Canada		$	—			$	—			$	2,229			$	—			$	2,229
Total assets		$	7,265,735			$	1,142,322			$	52,152			$	45,264			$	8,505,473
Long-lived assets outside the U.S.:
Canada		$	—			$	—			$	20,403			$	—			$	20,403
December 31, 2006
Total assets		$	7,366,684			$	1,179,547			$	48,518


Maryland			81-0559116
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
1345 Avenue of the Americas, New York, NY			10105
(Address of principal executive offices)			(Zip Code)
(212) 798-6100
(Registrant’s telephone number, including area code)

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


	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


1.	GENERAL


2.	INFORMATION REGARDING BUSINESS SEGMENTS