NEWCASTLE INVESTMENT CORP.

Contact:

Lilly H. Donohue
Director of Investor Relations
212-798-6118

Nadean Finke
Investor Relations
212-479-5295

Highlights

Financial Results

Fourth Quarter 2007

New York, NY, February 27, 2008 – Newcastle Investment Corp. (NYSE: NCT) reported that for the quarter ended December 31, 2007, Funds from Operations (“FFO”) loss was $105.9 million, or $2.01 per diluted share, compared to FFO of $0.70 per diluted share for quarter ended December 31, 2006. Fourth quarter FFO includes charges of $143.0 million. Excluding the effect of such charges, we generated FFO of $37.1 million, or $0.70 per diluted share, and an FFO return on average invested equity of 14.4%.

For the three months ended December 31, 2007, the loss attributable to common stockholders was $106.2 million, or $2.01 per diluted share, compared to income of $0.70 per diluted share for the fourth quarter 2006. Excluding the effect of charges, income available for common stockholders was $36.7 million, or $0.70 per diluted share for the quarter ended December 31, 2007.

Of the $143.0 million of charges recorded in the fourth quarter 2007, $128.8 million represented other than temporary impairment under U.S. GAAP. These charges resulted in a reduction in FFO and income available to common stockholders of $2.71 per diluted share.

Full Year 2007

FFO loss for the year ended December 31, 2007 was $77.0 million, or $1.50 per diluted share, compared to FFO of $2.69 per diluted share for the year ended December 31, 2006. Full year FFO includes total charges of $224.1 million. Excluding the effect of such charges, we generated FFO of $147.1 million, or $2.86 per diluted share, and an FFO return on average invested equity of 14.2%.

For 2007, the loss attributable to common stockholders was $78.1 million, or $1.52 per diluted share, compared to income of $2.67 per diluted share for 2006. Excluding the effect of charges, income available for common stockholders was $146.0 million, or $2.84 per diluted share, for the year ended December 31, 2007.

Of the $224.1 million of charges recorded in the year ended December 31, 2007, $202.6 million represented other than temporary impairment under U.S. GAAP. These charges resulted in a reduction in FFO and income available to common stockholders of $4.36 per diluted share.

Net Book Value

Our GAAP common equity book value decreased to $5.59 per share, or $295.1 million at December 31, 2007, down from $12.66 per share at September 30, 2007. Under U.S. GAAP, we are required to mark our available for sale security investments and our derivatives to fair value, but not our loan investments or liabilities. If we marked all of our assets and liabilities to fair value, we estimate our net book value per share would have been $16.39 at December 31, 2007. Our GAAP book value would equal our adjusted book value if we elected to mark all of our financial assets and liabilities to fair value under SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities.”

For a reconciliation and discussion of GAAP income available to common stockholders to FFO and GAAP book equity to invested common equity as well as GAAP net book value to adjusted net book value, please refer to the tables following the presentation of GAAP results.

Dividends

For the quarter ended December 31, 2007, Newcastle’s Board of Directors declared a dividend of $0.72 per common share. Common dividends declared in 2007 totaled $2.85 per share. In 2007, we declared preferred dividends on our 9.75% Series B, 8.05% Series C and 8.38% Series D Cumulative Redeemable Preferred Stock in the amounts of $2.438, $2.013 and $1.838 per share, respectively.

First Quarter 2008 Activity

Given the uncertain market environment, since year end the Company has focused on strengthening its balance sheet by reducing its recourse debt exposure and increasing liquidity. As a result, the Company sold $1.3 billion of assets, reduced its recourse debt by $888 million, reduced its non-recourse debt by $379 million and increased its cash available to invest from $29 million to $120 million. In connection with these sales, we realized a net loss of $14.2 million.

Asset sales since December 31, 2007 through February 25, 2008 included:

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The following table compares the face amount of our liabilities as of December 31, 2007 adjusted for sales through February 25, 2008 ($ in millions):

⁽¹⁾ Recourse financings on our real estate securities and loans include off-balance sheet debt (in the form of total return swaps) of $93 million at February 25, 2008 and $172 million at December 31, 2007.

Investment Portfolio

Newcastle’s current $6.9 billion investment portfolio consists primarily of commercial, residential and corporate debt. During the fourth quarter, we purchased $145 million, sold $40 million and had paydowns of $346 million for a net decrease of $241 million. Since 2007 year end, we sold an additional $1.3 billion of assets.

All tables pertaining to our investment portfolio are as of December 31, 2007 adjusted for sales through February 25, 2008.

The following table describes our investment portfolio ($ in millions):

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The following table compares certain supplemental data relating to our investment portfolio ($ in millions): 

Commercial Assets

We own $3.6 billion of adjusted face amount of commercial assets, which includes CMBS, mezzanine loans, B-Notes, whole loans and investments in joint ventures.

The following table summarizes our CMBS portfolio ($ in thousands):

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The following table summarizes the loan-to-value ratios on our mezzanine loans, B-Notes and whole loan portfolio ($ in thousands):

Residential Assets

We own $1.5 billion of adjusted face amount of residential assets, which includes manufactured housing (MH), residential loans and subprime securities.

The following tables summarize our subprime securities portfolio excluding our residuals and retained interests in our own securitizations ($ in thousands):

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In the fourth quarter, we recorded an $84 million charge related to our $586 million subprime securities portfolio. The majority of the charge was related to a $59 million impairment of our 2006 vintage securities, reducing our GAAP basis in these securities to $22 million. In addition, we recorded a $25 million impairment on 13 other subprime securities with a face amount of $67 million.

We own $76 million of securities and $69 million of residual interests in two subprime portfolio securitizations from 2006 (“Portfolio 1”) and 2007 (“Portfolio 2”). The following table summarizes our subprime portfolio securitizations ($ in thousands):

In the fourth quarter, even though the portfolios have been out-performing our initial underwriting, we updated our future loss and prepayment assumptions based on current market conditions. Under the new assumptions, we recorded impairments of $13 million on the residuals and $13 million on the retained securities. The following summarizes the changes in our prepayment and loss assumptions on both portfolios:

In addition, prior to securitization of Portfolio 2, the seller repurchased $185 million (or 14.6%) of the original loan pool due to early payment defaults. We believe these loans would otherwise have contributed to significantly higher delinquencies and ultimately greater losses in the deal.

Corporate Assets

We own $1.3 billion of adjusted face amount of corporate assets, including REIT debt and corporate bank loans.

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The following table summarizes our corporate bank loan portfolio ($ in thousands): 

Conference Call

Newcastle’s management will conduct a live conference call today, February 27, 2008, at 1:00 P.M. Eastern Time to review the financial results for the quarter ended December 31, 2007. 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. An online replay of the webcast will be available until March 31, 2008.

A telephonic replay of the conference call will also be available until 11:59 P.M. eastern time on Wednesday, March 12, 2008 by dialing (800) 642-1687 (from within the U.S.) or (706) 645-9291 (from outside of the U.S.); please reference access code “34057948.”

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About Newcastle

Newcastle Investment Corp. owns and manages a $6.9 billion highly diversified real estate debt portfolio with moderate credit risk that is primarily financed with match funded debt. Our business strategy is to “lock in” and optimize the difference between the yield on our assets and the cost of our liabilities. 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 management firm with approximately $40 billion in assets under management as of September 30, 2007. 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 statements relating to 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 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 them. 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.

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