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Press release from Business Wire

Newcastle Announces Fourth Quarter & Year End 2010 Results

<p> <b>FINANCIAL RESULTS</b> </p> <p> <span class='bwuline'>Fourth Quarter 2010</span> </p>

Tuesday, March 01, 2011

Newcastle Announces Fourth Quarter & Year End 2010 Results08:00 EST Tuesday, March 01, 2011 NEW YORK (Business Wire) -- Newcastle Investment Corp. (NYSE: NCT) reported that in the fourth quarter of 2010, income applicable to common stockholders (“GAAP income”) was $197 million, or $3.18 per diluted share, compared to $17 million, or $0.31 per diluted share, in the fourth quarter of 2009. GAAP income of $197 million consisted of the following: $26 million of net interest income less expenses (net of preferred dividends), $136 million of other income and $35 million representing the reversal of prior valuation allowances on loans net of impairment recorded on securities. Other income was primarily related to a $124 million gain on the extinguishment of CDO debt and a $35 million net gain on the sale of investments, primarily offset by a $24 million one time non-cash mark-to-market loss related to an interest rate swap agreement in connection with the repurchase of the Newcastle CDO VI Class I-MM notes. In the fourth quarter, Newcastle repurchased $316 million of CDO bonds for $190 million, recording a $124 million gain on the extinguishment of debt. Of the $316 million, $257 million represented all of the outstanding Newcastle CDO VI Class I-MM notes (the “Notes”), which were repurchased in December 2010 at a price of 67.5% of par. The Company purchased the Notes using a combination of restricted cash, unrestricted cash and proceeds from a new limited recourse repurchase facility. The $19 million repurchase facility has a one-year term and bears interest at a rate of LIBOR + 1.50%. Although the repurchase facility requires margin to be posted in the event that the value of the Notes decreases, recourse to the Company is limited to twenty-five percent of the then-outstanding balance of the repurchase facility. As of December 31, 2010, the recourse amount was $4.7 million. Full Year 2010 In 2010, GAAP income was $657 million, or $10.96 per diluted share, compared to a loss applicable to common stockholders (“GAAP loss”) of $223 million, or $4.23 per diluted share, in 2009. GAAP income of $657 million consisted of the following: $91 million of net interest income less expenses (net of preferred dividends), $282 million of other income, $241 million representing the reversal of prior valuation allowances on loans net of impairment recorded on securities and $43 million representing the excess of the carrying amount of exchanged preferred stock over the fair value of consideration paid. Other income was primarily related to a $266 million gain on the extinguishment of CDO debt and $52 million of net gain on the sale of investments, primarily offset by a $37 million net loss related to the Company's derivatives. In 2010, the Company repurchased $484 million of CDO bonds for $216 million, recording a $266 million gain on the extinguishment of debt. For a reconciliation of 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. SUBSEQUENT EVENTS In February 2011, Newcastle purchased the management rights with respect to certain C-BASS Investment Management LLC (“C-BASS”) CDOs pursuant to a bankruptcy proceeding for approximately $2 million. As a result, Newcastle became the collateral manager of certain CDOs previously managed by C-BASS and will earn, on average, a 20 basis point annual senior management fee on a portion of the total collateral, which is currently $1.3 billion. In February 2011, two mezzanine loan investments with a total outstanding principal balance of $89 million were paid off in full. The payoff increased our restricted cash available for reinvestment by $61 million in CDOs VIII and IX and increased the Company's unrestricted cash by $28 million. Recently, Newcastle purchased $63 million current face amount of FNMA and FHLMC one-year ARM securities for $66 million. The Company financed the purchase with a $63 million repurchase agreement that has a three-month term. Since year end, the repurchase facility financing the Newcastle CDO VI Class I-MM notes was reduced by $2 million, from $19 million to $17 million, through principal received on the underlying bonds. RECOURSE DEBT FINANCING AND CASH In the fourth quarter of 2010, the Company's unrestricted cash decreased by $24 million, from $58 million to $34 million, mainly as a result of the repurchase of the Company's CDO bonds, offset by the receipt of net operating cash flows. Certain details regarding the Company's cash and current financings are set forth below as of February 25, 2011, including the impact of the subsequent events mentioned above: Cash – The Company had unrestricted cash of $58 million. In addition, the Company had $193 million of restricted cash available for reinvestment within its consolidated CDOs; Margin Exposure – The Company had margin exposure of $17 million related to the financing of the Newcastle CDO VI Class I-MM notes (of which only $4 million is recourse) and $63 million related to the financing of FNMA and FHLMC securities. The following table illustrates the change in cash and recourse financings, excluding junior subordinated notes ($ in millions):                   Feb 25,2010Dec 31,2010Sep 30,2010   CDO Cash for Reinvestment $ 193 $ 150 $ 147   Unrestricted Cash 58 34 58   Recourse Financings Non-FNMA/FHLMC (non-agency) NCT CDO senior bonds   4   5   - Subtotal 4 5 -   FNMA/FHLMC Securities 63 - -             Total Recourse Financings$67$5$-   CDO FINANCINGS The following table summarizes the cash receipts in the fourth quarter of 2010 from the Company's consolidated CDO financings, their related coverage tests and negative watch assets ($ in thousands):                                         InterestCoveragePrimary% Excess (Deficiency)Over Collateralization Excess (Deficiency)Assets onCollateralCashFebruary 25,February 25, 2011 (2)December 31, 2010 (2)September 30, 2010 (2)NegativeTypeReceipts (1)2011 (2)     %   $   %   $   %   $   Watch (3) CDO IV Securities $ 116 223.1 % -10.8 % (33,908 ) -10.8 % (33,908 ) -15.3 % (54,513 ) $ 32,664 CDO V Securities 143 165.6 % -8.3 % (30,319 ) -8.3 % (30,319 ) 0.5 % 1,991 43,003 CDO VI Securities 115 -38.5 % -51.5 % (184,846 ) -46.9 % (178,604 ) -42.1 % (167,624 ) 45,637 CDO VIII Loans 3,746 272.7 % 7.3 % 47,223 9.9 % 63,954 16.2 % 104,652 10,994 CDO IX Loans 3,205 415.3 % 14.2 % 91,474 18.5 % 119,317 16.5 % 106,526 - CDO X Securities   6,555 122.4 % 4.2 % 50,929 4.0 % 48,480 3.2 % 39,543   133,925 Total$13,880$266,223   (1)     Represents cash received from each CDO based on all of the interests in such CDO (including senior management fees but excluding principal received from CDO bonds owned by the Company). Cash receipts for the quarter ended December 31, 2010 may not be indicative of cash receipts for subsequent periods. See Forward-Looking Statements below for risks and uncertainties that could cause cash receipts for subsequent periods to differ materially from these amounts. (2) Represents excess or deficiency under the applicable interest coverage or over collateralization test to the first threshold at which cash flow would be redirected. The Company generally does not receive material interest cash flow from a CDO until a deficiency is corrected. The information regarding coverage tests is based on data from the most recent remittance date on or before February 25, 2011, December 31, 2010, or September 30, 2010, as applicable. The CDO IV and V tests are conducted only on a quarterly basis (December, March, June and September). (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). Amounts are as of the determination date pertaining to December 2010 remittances for CDO IV and V (these tests are conducted only on a quarterly basis) and as of the determination date pertaining to February 2011 remittances for all other CDO's. The amounts include $53 million of bonds issued by Newcastle, which are eliminated in consolidation and not reflected in the investment portfolio disclosures. $2 million of the $14 million CDO cash receipts were senior collateral management fees, which were not subject to the related CDO coverage tests. The cash receipts above also include $2.5 million of non-recurring interest and extension fees. BOOK VALUE In the fourth quarter of 2010, GAAP book value increased $344 million or $5.54 per share. As of December 31, 2010, GAAP book value was $(309) million or $(4.98) per share, compared to $(653) million or $(10.52) per share as of September 30, 2010. DIVIDENDS For the fourth quarter of 2010, Newcastle's Board of Directors elected not to pay a dividend on its common stock. On January 6, 2011, the Board of Directors declared dividends on the Company's Series B, Series C and Series D Preferred Stock for the period beginning May 1, 2010 and ending January 31, 2011. The Company paid total dividends of $1.828125, $1.509375 and $1.570313 per share on the 9.75% Series B, 8.05% Series C and 8.375% Series D preferred stock, respectively. As of January 31, 2011, there were no unpaid dividends with respect to any of Newcastle's Preferred Stock. INVESTMENT PORTFOLIO Newcastle's $4.3 billion investment portfolio (with a basis of $3.0 billion) consists of commercial, residential and corporate debt. During the quarter, the weighted average carrying value on the December 31, 2010 portfolio changed from 67.0% to 70.3%, an increase of $145 million. The face amount of the portfolio decreased by $377 million, primarily as a result of principal repayments of $152 million, sales of $150 million and actual principal write-downs of $136 million, offset by purchases of $101 million at a weighted average price of 93% of par, a weighted average yield of 6%, a weighted average life of 4.6 years, and a weighted average rating of single A. The following table describes the investment portfolio as of December 31, 2010 ($ in millions):                               % ofWeightedFaceBasisTotalCarry ValueNumber ofAverageAmount $     Amount $ (1)     Basis     Amount $     Investments     Credit (2)     Life (yrs) (3)Commercial Assets CMBS $ 1,971 $ 1,265 42.7 % $ 1,301 261 BB 3.1 Mezzanine Loans 580 389 13.1 % 389 17 64 % 1.9 B-Notes 233 155 5.2 % 155 9 77 % 1.8 Whole Loans 31 31 1.0 % 31 3 48 % 2.8 Other Investment (4)   25       25     0.8 %   25 1 -- -- Total Commercial Assets 2,840 1,865 62.8 % 1,901 2.8   Residential Assets MH and Residential Loans 428 371 12.5 % 371 11,287 704 6.6 Subprime Securities 353 161 5.4 % 178 88 B- 5.0 Real Estate ABS   66       43     1.5 %   45 20 BB 3.6 847 575 19.4 % 594 5.7   FNMA/FHLMC Securities   3       3     0.1 %   3 1 AAA 3.2 Total Residential Assets 850 578 19.5 % 597 5.7   Corporate Assets REIT Debt 317 316 10.7 % 329 40 BB+ 3.5 Corporate Bank Loans   309       208     7.0 %   208 9 CC 3.4 Total Corporate Assets 626 524 17.7 % 537 3.4                           Total/Weighted Average (5) $ 4,316     $ 2,967     100.0 % $ 3,035 3.4   (1)     Net of impairment. (2) Credit represents the weighted average of minimum ratings for rated assets, the Loan to Value ratio (based on the appraised value at the time of purchase or refinancing) for non-rated commercial assets, or the FICO score for non-rated residential assets and an implied AAA rating for FNMA/FHLMC securities. Ratings provided herein were determined by third party rating agencies as of a particular date, may not be current and are subject to change (including a “negative watch” assignment) at any time. (3) Weighted average life is based on the timing of expected principal reduction on the asset. (4) Relates to equity investment in a REO property. (5) Excludes unconsolidated CDO securities with a face amount of $123 million, as they are valued at zero in the current period, operating real estate held for sale of $9 million and loans subject to call option with a face amount of $406 million. Commercial Assets The Company owns $2.8 billion of commercial assets (with a basis of $1.9 billion), which includes CMBS, mezzanine loans, B-Notes, whole loans and other investments. During the quarter, the Company had $119 million of actual principal write-downs, sold $106 million, received principal repayments of $101 million and purchased $97 million of new CMBS assets with a weighted average rating of single A. Regarding the Company's CMBS portfolio, two securities or $10 million were upgraded (from a weighted average rating of A+ to AA), four securities or $24 million were affirmed and 60 securities or $486 million were downgraded (from a weighted average rating of BB- to CCC+). The weighted average carrying value of these assets changed from 62.3% to 66.9%, an increase of $132 million in the quarter. CMBS portfolio ($ in thousands):                                     Average MinimumFaceBasis% of TotalCarry ValueDelinquencyPrincipalWeighted AverageVintage (1)     Rating (2)     Number     Amount $     Amount $     Basis       Amount $     60+/FC/REO (3)       Subordination (4)       Life (yrs) (5)   Pre 2004 BB+ 82 425,785 384,726 30.4 % 362,743 5.7 % 10.8 % 2.3 2004 B+ 61 417,733 245,642 19.4 % 205,078 4.2 % 6.0 % 2.8 2005 B+ 37 383,212 177,506 14.0 % 210,487 5.3 % 8.1 % 3.2 2006 BB+ 54 492,424 346,327 27.4 % 390,691 4.5 % 12.4 % 3.5 2007 B+ 24 203,871 66,699 5.3 % 86,823 9.8 % 11.5 % 2.9 2010     BB     3     48,000     44,460     3.5 %     44,912     0.0 %     2.4 %     9.8   TOTAL/WA     BB     261     1,971,025     1,265,360     100.0%     1,300,734     5.3%     9.5%     3.1   (1)     The year in which the securities were originally issued. (2) Ratings provided above were determined by third party rating agencies as of a particular date, which may not be current and are subject to change (including a “negative watch” assignment) at any time. The Company had approximately $204 million of CMBS assets that were on negative watch for possible downgrade by at least one rating agency as of December 31, 2010. (3) The percentage of underlying loans that are 60+ days delinquent, in foreclosure or considered real estate owned (REO). (4) The percentage of the outstanding face amount of securities that is subordinate to the Company's investments. (5) Weighted average life is based on the timing of expected principal reduction on the asset. Mezzanine loans, B-Notes and whole loans portfolio ($ in thousands):                                   FaceBasis% of TotalCarrying ValueWA First $WA Last $Asset Type     Number     Amount ($)     Amount ($)     BasisAmount ($)     Loan to Value (1)     Loan to Value (1)     Delinquency (%) (2) Mezzanine Loans 17 579,579 388,510 67.7 % 388,510 52.5 % 64.0 % 13.2 % B-Notes 9 233,132 154,760 26.9 % 154,760 62.2 % 76.6 % 19.3 % Whole Loans     3     30,970     30,970     5.4 % 30,970     0.0 %     48.2 %     0.0 %   Total/WA     29     843,681     574,240     100.0%574,240     53.3%     66.9%     14.4%   (1)     Loan to Value is based on the appraised value at the time of purchase or refinancing. (2) The percentage of underlying loans that are non-performing, in foreclosure, under bankruptcy filing or considered real estate owned. Residential Assets The Company owns $850 million of residential assets (with a basis of $578 million), which include manufactured housing (“MH”) loans, residential loans, subprime securities, real estate ABS and FNMA/FHLMC securities. During the quarter, the Company had actual principal write-downs of $17 million, received principal repayments of $24 million and sold $12 million of real estate ABS. The Company did not purchase any ABS assets. Regarding the Company's ABS portfolio, two securities or $9 million were upgraded (from weighted average rating of A to AA), no securities were affirmed and seven securities or $18 million were downgraded (from a weighted average rating of CCC to CCC-). The weighted average carrying value of these assets changed from 69.9% to 70.3%, an increase of $4 million in the quarter. Manufactured housing and residential loan portfolios ($ in thousands):                                     % ofCarryingAverageAverageFaceBasisTotalValueLoan AgeOriginalDelinquencyCumulativeDeal     FICO Score     Amount $     Amount $     Basis     Amount $     (months)     Balance $     90+/FC/REO (1)     Loss to Date   MH Loans Portfolio 1 703 152,450 123,042 33.2 % 123,042 111 327,855 1.3 % 6.8 % MH Loans Portfolio 2 702 212,036 198,275 53.4 % 198,275 140 434,743 1.4 % 4.9 % Residential Loans Portfolio 1 715 59,604 46,235 12.5 % 46,235 90 646,357 8.2 % 0.3 % Residential Loans Portfolio 2     737     3,795     3,495     0.9 % 3,495     74     83,950     0.0 %     0.0 %   TOTAL/WA     704     427,885     371,047     100.0%371,047     122     1,492,905     2.3%     4.9%   (1)     The percentage of loans that are 90+ days delinquent, in foreclosure or considered real estate owned (REO). Subprime Securities portfolio ($ in thousands): Security Characteristics:                                 Average% ofCarryingMinimumFaceBasisTotalValuePrincipalExcessVintage (1)     Rating (2)     Number     Amount $     Amount $     Basis     Amount $     Subordination (3)     Spread (4)   2003 B 15 19,154 10,649 6.6 % 10,741 22.6 % 4.0 % 2004 B 28 82,845 28,277 17.5 % 30,924 16.9 % 3.9 % 2005 CCC+ 25 93,269 28,341 17.6 % 36,520 28.2 % 4.5 % 2006 CCC+ 10 83,095 46,425 28.7 % 48,477 31.6 % 4.8 % 2007 & Later     B+     10     74,943     47,772     29.6 % 51,344     19.5 %     3.1 %   TOTAL/WA     B-     88     353,306     161,464     100.0%178,006     24.2%     4.1%   Collateral Characteristics:                     AverageLoan AgeCollateral3 MonthDelinquencyCumulativeVintage (1)     (months)     Factor (5)     CPR (6)     90+/FC/REO (7)     Loss to Date   2003 94 0.10 8.8 % 19.7 % 3.2 % 2004 80 0.13 9.8 % 21.0 % 3.6 % 2005 68 0.19 8.6 % 33.0 % 8.5 % 2006 56 0.39 10.1 % 31.4 % 16.6 % 2007 & Later     40     0.45     7.8 %     19.7 %     13.2 %   TOTAL/WA     64     0.28     9.1%     26.3%     9.9%   Real Estate ABS portfolios ($ in thousands): Security Characteristics:                                   Average% ofCarryingMinimumFaceBasisTotalValuePrincipalExcessAsset Type     Rating (2)     Number     Amount $     Amount $     Basis       Amount $     Subordination (3)     Spread (4)   Manufactured Housing BBB+ 7 35,137 34,101 80.3 % 35,215 39.4 % 1.5 % Small Business Loans     CCC     13     30,228     8,374     19.7 % 9,963     15.1 %     3.4 %   TOTAL/WA     BB     20     65,365     42,475     100.0%45,178     28.1%     2.4%   Collateral Characteristics:                     AverageLoan AgeCollateral3 MonthDelinquencyCumulativeAsset Type     (months)     Factor (5)     CPR (6)     90+/FC/REO (7)     Loss to Date   Manufactured Housing 138 0.28 6.2 % 2.3 % 12.6 % Small Business Loans     75     0.54     6.7 %     29.4 %     7.2 %   TOTAL/WA     109     0.40     6.4%     14.8%     10.1%   (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 a “negative watch” assignment) at any time. The Company had approximately $96 million of subprime and ABS securities that were on negative watch for possible downgrade by at least one rating agency as of December 31, 2010. (3) The percentage of the outstanding face amount of securities and residual interests that is subordinate to the Company's 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, in foreclosure or considered real estate owned (REO). Corporate Assets The Company owns $626 million of corporate assets (with a basis of $524 million), including REIT debt and corporate bank loans. During the quarter, the Company sold $32 million of REIT debt, received $27 million of principal repayments from REIT debt and purchased a $4 million corporate bank loan. Regarding the Company's REIT debt portfolio, no securities were upgraded, two securities or $27 million were affirmed and two securities or $27 million were downgraded (from a weighted average rating of BBB to BBB-). The weighted average carrying value of these assets changed from 84.3% to 85.7%, an increase of $9 million in the quarter. REIT debt portfolio ($ in thousands):                         AverageMinimumFaceBasis% of TotalCarrying ValueIndustry     Rating (1)     Number     Amount $     Amount $     Basis     Amount $   Retail BBB+ 10 75,665 71,962 22.8 % 81,911 Diversified CCC+ 8 71,036 71,613 22.7 % 67,305 Office BBB- 9 80,127 81,304 25.7 % 83,869 Multifamily BBB 3 12,765 12,818 4.0 % 13,539 Hotel BBB- 3 29,220 29,598 9.4 % 30,785 Healthcare BBB- 5 41,600 41,673 13.2 % 44,215 Storage A- 1 5,000 5,052 1.6 % 5,360 Industrial     BB-     1     2,000     2,065     0.6 % 1,986   TOTAL/WA     BB+     40     317,413     316,085     100.0%328,970   Corporate bank loan portfolio ($ in thousands):                         Average% ofCarryingMinimumFaceBasisTotalValueIndustry     Rating (1)     Number     Amount $     Amount $     Basis     Amount $   Real Estate CC 3 35,898 34,021 16.3 % 34,021 Media CCC- 2 111,764 44,985 21.6 % 44,985 Resorts NR 1 116,649 86,649 41.6 % 86,649 Restaurant B 2 18,136 16,326 7.8 % 16,326 Transportation     NR     1     26,990     26,384     12.7 % 26,384   TOTAL/WA     CC     9     309,437     208,365     100.0%208,365   (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 a “negative watch” assignment) at any time. The Company had no corporate assets that were on negative watch for possible downgrade as of December 31, 2010. CONFERENCE CALL Newcastle's management will conduct a live conference call today, March 1, 2011, at 11:00 A.M. Eastern Time to review the financial results for the fourth quarter and year ended December 31, 2010. A copy of the earnings press release is posted to the Investor Relations section of Newcastle's website, www.newcastleinv.com All interested parties are welcome to participate on the live call. You can access the conference call by dialing 1-888-243-2046 (from within the U.S.) or 1-706-679-1533 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference "Newcastle Fourth Quarter Earnings Call." A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.newcastleinv.com. Please allow extra time prior to the call to visit the site and download the necessary software required to listen to the internet broadcast. A telephonic replay of the conference call will also be available until 11:59 P.M. Eastern Time on Friday, March 11, 2011 by dialing 1-800-642-1687 (from within the U.S.) or 1-706-645-9291 (from outside of the U.S.); please reference access code “44397805.” 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 investment management firm. For more information regarding Newcastle Investment Corp. or to be added to our e-mail distribution list, please visit www.newcastleinv.com. FORWARD-LOOKING STATEMENTS 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 market conditions cause downgrades of a significant number of our securities or the recording of additional impairment charges or reductions in shareholders' equity; the risk that we can find additional suitably priced investments; the risk that investments made or committed to be made cannot be financed on the basis and for the term at which we expect; the relationship between yields on assets which are paid off and yields on assets in which such monies can be reinvested; and the relative spreads between the yield on the assets we invest in and the cost and availability of debt and equity financing. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. For a discussion of some of the risks and important factors that could affect such forward-looking statements, see the sections entitled “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operation” in the Company's Annual Report on Form 10-K, which is available on the Company's website (www.newcastleinv.com). In addition, new risks and uncertainties emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. Newcastle expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.                         Newcastle Investment Corp.Consolidated Statements of Operations(dollars in thousands, except per share data)   Three Months Ended December 31,Year Ended December 31,2010200920102009 (unaudited) (unaudited) Interest income $ 74,957 $ 74,833 $ 300,272 $ 361,866 Interest expense   40,942     51,256     172,219     218,410   Net interest income   34,015     23,577     128,053     143,456     Impairment Valuation allowance (reversal) on loans (47,219 ) (68,086 ) (339,887 ) 15,007 Other-than-temporary impairment on securities (999 ) 77,077 101,398 603,768 Portion of other-than-temporary impairment on securities recognized in other comprehensive income (loss), net of reversal of other comprehensive loss into net income (loss)   13,206     17,870     (2,369 )   (70,235 )   (35,012 )   26,861     (240,858 )   548,540     Net interest income (loss) after impairment 69,027 (3,284 ) 368,911 (405,084 )   Other Income (Loss) Gain (loss) on settlement of investments, net 34,810 3,650 52,307 11,438 Gain on extinguishment of debt 123,958 29,070 265,656 215,279 Other income (loss), net   (23,070 )   (1,792 )   (35,676 )   682     135,698     30,928     282,287     227,399   Expenses Loan and security servicing expense 1,107 1,165 4,580 5,034 General and administrative expense 784 1,860 7,696 8,899 Management fee to affiliate   4,259     4,493     17,252     17,968     6,150     7,518     29,528     31,901     Income (loss) from continuing operations 198,575 20,126 621,670 (209,586 ) Income (loss) from discontinued operations   (194 )   (222 )   (8 )   (318 ) Net Income (Loss) 198,381 19,904 621,662 (209,904 ) Preferred dividends (1,395 ) (3,375 ) (7,453 ) (13,501 ) Excess of carrying amount of exchanged preferred stock  over fair value of consideration paid   -     -     43,043     -   Income (Loss) Applicable to Common Stockholders $ 196,986   $ 16,529   $ 657,252   $ (223,405 ) Income (loss) Per Share of Common Stock Basic $ 3.18   $ 0.31   $ 10.96   $ (4.23 ) Diluted $ 3.18   $ 0.31   $ 10.96   $ (4.23 ) Income (loss) from continuing operations per share of common stock,after preferred dividends and excess of carrying amount ofexchanged preferred stock over fair value of consideration paid Basic $ 3.18   $ 0.32   $ 10.96   $ (4.22 ) Diluted $ 3.18   $ 0.32   $ 10.96   $ (4.22 ) Income (loss) from discontinued operations per shareof common stock Basic $ -   $ (0.01 ) $ -   $ (0.01 ) Diluted $ -   $ (0.01 ) $ -   $ (0.01 )   Weighted Average Number of Shares of Common Stock Outstanding Basic   62,024,969     52,905,413     59,948,827     52,863,993   Diluted   62,024,969     52,905,413     59,948,827     52,863,993     Dividends Declared per Share of Common Stock $ -   $ -   $ -   $ -                 Newcastle Investment Corp.Consolidated Balance Sheets(dollars in thousands)   December 31,20102009AssetsNon-Recourse VIE Financing Structures Real estate securities, available for sale $ 1,859,984 $ 1,784,487 Real estate related loans, held for sale, net 750,130 554,367 Residential mortgage loans, held for investment, net 124,974 - Residential mortgage loans, held for sale, net 252,915 380,123 Subprime mortgage loans subject to call option 403,793 403,006 Operating real estate, held for sale 8,776 - Other investments 18,883 - Restricted cash 157,005 200,251 Derivative assets 7,067 - Receivables and other assets   29,206     36,643     3,612,733     3,358,877   Recourse Financing Structures and Unlevered Assets Real estate securities, available for sale 600 46,308 Real estate related loans, held for sale, net 32,475 19,495 Residential mortgage loans, held for sale, net 298 3,524 Operating real estate, held for sale - 9,966 Other investments 6,024 193 Cash and cash equivalents 33,524 68,300 Receivables and other assets   1,457     7,965     74,378     155,751   $ 3,687,111   $ 3,514,628     Liabilities and Stockholders' Equity (Deficit)LiabilitiesNon-Recourse VIE Financing Structures CDO bonds payable $ 3,010,868 $ 4,058,928 Other bonds payable 256,809 303,697 Notes payable 4,356 - Financing of subprime mortgage loans subject to call option 403,793 403,006 Repurchase agreements 14,049 - Derivative liabilities 176,861 203,054 Accrued expenses and other liabilities   8,445     2,992     3,875,181     4,971,677   Recourse Financing Structures and Other Liabilities Repurchase agreements 4,683 71,309 Junior subordinated notes payable 51,253 103,264 Derivative liabilities - 4,100 Due to affiliates 1,419 1,497 Accrued expenses and other liabilities   2,160     3,433     59,515     183,603     3,934,696     5,155,280     Stockholders' Equity (Deficit) Preferred stock, $0.01 par value, 100,000,000 shares authorized, 1,347,321 and 2,500,000 shares of 9.75% Series B Cumulative Redeemable Preferred Stock 496,000 and 1,600,000 shares of 8.05% Series C Cumulative Redeemable Preferred Stock, and 620,000 and 2,000,000 shares of 8.375% Series D Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, issued and outstanding as of December 31, 2010 and December 31, 2009, respectively 61,583 152,500 Common stock, $0.01 par value, 500,000,000 shares authorized, 62,027,184 and 52,912,513 shares issued and outstanding at December 31, 2010 and December 31, 2009, respectively 620 529 Additional paid-in capital 1,065,377 1,033,520 Accumulated deficit (1,328,986 ) (2,193,383 ) Accumulated other comprehensive income (loss)   (46,179 )   (633,818 )   (247,585 )   (1,640,652 ) $ 3,687,111   $ 3,514,628                       Newcastle Investment Corp.Reconciliation of Net Interest Income Less Expenses (Net of Preferred Dividends)(dollars in thousands)   Three Months Ended December 31,Twelve Months Ended December 31,2010200920102009 Income (Loss) Applicable to Common Stockholders $ 196,986 $ 16,529 $ 657,252 $ (223,405 ) Add (Deduct): Impairment (including the reversal of prior valuation allowance on loans) (35,012 ) 26,861 (240,858 ) 548,540 Other (Income) Loss (135,698 ) (30,928 ) (282,287 ) (227,399 ) Excess of carrying amount of exchanged preferred stock over fair value of consideration paid - - (43,043 ) - Loss from discontinued operations   194     222     8     318   Net Interest Income less Expenses (Net of Preferred Dividends) $ 26,470   $ 12,684   $ 91,072   $ 98,054     Newcastle Investment Corp.Nadean Novogratz, 212-479-5295Investor Relations