Drive Shack (DSHK) 8-K Newcastle Announces Third Quarter 2010 Results

Exhibit 99.1

  NEWCASTLE INVESTMENT CORP.

Contact:

Nadean Finke Novogratz

Investor Relations

212-479-5295

Newcastle Announces Third Quarter 2010 Results

Financial Results

Third Quarter 2010

New York, NY, November 9, 2010 – Newcastle Investment Corp. (NYSE: NCT) reported that for the quarter ended September 30, 2010, income applicable to common stockholders (“GAAP income”) was $162 million, or $2.61 per diluted share, compared to $50 million, or $0.94 per diluted share, for the quarter ended September 30, 2009.

GAAP income of $162 million consisted of the following: $30 million of net interest income less expenses (net of preferred dividends), $37 million of other income, and $95 million from the reversal of prior valuation allowances on loans net of the impairment on securities.

Other income was primarily related to a gain on the extinguishment of CDO debt partially offset by the decrease in value of the Company’s derivatives. In the third quarter, Newcastle repurchased $48 million of CDO bonds for $1 million, recording a $47 million gain on the extinguishment of debt.

During the quarter, the Company increased the over-collateralization excess in CDO’s VIII, IX and X by $59 million despite $194 million of asset downgrades and received approximately $17 million of net interest cash flow and management fees from its CDO’s.

Nine-Months 2010

For the nine-months ended September 30, 2010, GAAP income was $460 million, or $7.77 per diluted share, compared to a loss applicable to common stockholders (“GAAP loss”) of $240 million, or $4.54 per diluted share, for the nine-months ended September 30, 2009.

GAAP income of $460 million consisted of the following: $65 million of net interest income less expenses (net of preferred dividends), $146 million of other income, $43 million representing the excess of carrying amount of exchanged preferred stock over the fair value of consideration paid, and $206 million from the reversal of prior valuation allowances on loans net of the impairment on securities.

Other income was primarily related to a gain on the extinguishment of CDO debt and net gain on sale of investments partially offset by the decrease in value of the Company’s derivatives. In the nine months year-to-date, the Company repurchased $168 million of CDO bonds for $26 million, recording a $142 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.

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Recourse Debt Financing and Liquidity

In the third quarter, the Company increased unrestricted cash by $21 million to $58 million and repaid the remaining $1 million of non-agency recourse debt. As a result, the Company currently does not have any recourse debt except for the Junior Subordinated Notes due in 2035.

As of November 5, 2010, Newcastle had a total of $239 million of cash to invest, comprised of $63 million of unrestricted cash and $176 million of restricted cash for CDO reinvestment. This compares to $58 million of unrestricted cash and $147 million of restricted cash for CDO reinvestment at September 30, 2010.

CDO Financings

The following table summarizes the cash receipts in the third quarter of 2010 from the Company’s consolidated CDO financings, their related coverage tests, and negative watch assets ($ in thousands):

	Primary				Interest Coverage % Excess (Deficiency)			Over Collateralization Excess (Deficiency)																		Assets on Negative
	Collateral		Cash		October 31,			October 31, 2010 (2)						September 30, 2010 (2)						June 30, 2010 (2)
	Type		Receipts (1)		2010 (2)			%			$			%			$			%			$			Watch (3)
CDO IV		Securities	$	193		104.4	%		-15.3	%		(54,513	)		-15.3	%		(54,513	)		-7.8	%		(28,647	)	$	34,478
CDO V		Securities		1,656		162.1	%		0.5	%		1,991			0.5	%		1,991			0.8	%		3,173			45,053
CDO VI		Securities		116		21.6	%		-38.7	%		(148,696	)		-42.1	%		(167,624	)		-39.6	%		(162,467	)		51,140
CDO VIII		Loans		4,506		278.6	%		15.9	%		102,843			16.2	%		104,652			15.9	%		102,714			113,602
CDO IX		Loans		6,443		221.3	%		17.3	%		111,436			16.5	%		106,526			9.4	%		60,531			29,795
CDO X		Securities		3,702		293.7	%		3.6	%		43,951			3.2	%		39,543			2.4	%		28,892			340,132
Total			$	16,616																						$	614,200

(1) Represents net cash received from each CDO based on all of the interests in such CDO (including senior management fees). Cash receipts for the quarter ended September 30, 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 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 October 31, 2010, September 30, 2010, or June 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 September 2010 remittances for CDO IV and V (these tests are conducted only on a quarterly basis) and as of the determination date pertaining to October 2010 remittances for all other CDO’s. The amounts include $55 million of bonds issued by Newcastle, which are eliminated in consolidation and not reflected in the investment portfolio disclosures.

• $2 million of the $17 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 $4 million of non-recurring interest and extension fees received in the CDO’s.

Book Value

GAAP book value increased by $246 million or $3.97 per share. As of September 30, 2010, GAAP book value was $(653) million or $(10.52) per share compared to $(899) million or $(14.49) per share at June 30, 2010.

Dividends

For the quarter ended September 30, 2010, Newcastle’s Board of Directors elected not to pay a common stock or preferred stock dividend. The Company decided to retain capital for working capital purposes.

Investment Portfolio

Newcastle’s $4.7 billion investment portfolio (with a basis of $3.1 billion) consists of commercial, residential and corporate debt. During the quarter, the weighted average carrying value of the portfolio changed from 60.2% to 64.0%, an increase of $178 million or 6%. The size of the portfolio decreased by $114 million, primarily as a result

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of principal repayments of $134 million, sales of $91 million and actual principal write-downs of $43 million, offset by purchases of $148 million at a weighted average price of 70% of par, a weighted average yield of 13.1% and a weighted average life of 6.3 years.

The following table describes the investment portfolio as of September 30, 2010 ($ in millions):

	Face Amount $		Basis Amount $ (1)		% of Total Basis			Number of Investments		Credit (2)			Weighted Average Life (yrs) (3)		Weighted Average Carrying Value (4)
Commercial Assets
CMBS	$	2,070	$	1,338		43.3	%		271		BB			3.1		62.9	%
Mezzanine Loans		658		368		11.9	%		19		65	%		2.0		56.0	%
B-Notes		283		149		4.8	%		10		59	%		2.2		52.7	%
Whole Loans		102		56		1.8	%		4		80	%		11.5		54.8	%
Total Commercial Assets		3,113		1,911		61.8	%							3.0		60.2	%
Residential Assets
MH and Residential Loans		442		377		12.2	%		11,606		704			6.7		85.3	%
Subprime Securities		379		173		5.6	%		89		B-			4.4		50.4	%
Real Estate ABS		79		56		1.8	%		22		BB			4.3		70.3	%
		900		606		19.6	%							5.5		69.3	%
FNMA/FHLMC Securities		3		3		0.1	%		1		AAA			3.3		107.3	%
Total Residential Assets		903		609		19.7	%							5.5		69.4	%
Corporate Assets
REIT Debt		376		375		12.1	%		44		BB+			3.4		38.0	%
Corporate Bank Loans		301		196		6.4	%		9		C			3.6		102.4	%
Total Corporate Assets		677		571		18.5	%							3.5		73.8	%
Total/Weighted Average(5)	$	4,693	$	3,091		100.0	%							3.6		64.0	%

(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 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.

(3) Weighted average life is based on the timing of expected principal reduction on the asset.

(4) As a percentage of face amount.

(5) Excludes CDO securities with a face amount of $80 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 $3.1 billion of commercial assets (with a basis of $1.9 billion), which includes CMBS, mezzanine loans, B-Notes and whole loans.

• During the quarter, the Company purchased $137 million, sold $84 million, had principal repayments of $95 million and had $23 million of actual principal write-downs. The Company purchased 12 CMBS assets with a weighted average rating of “BBB-” and made an additional investment in a whole loan using $6 million of unrestricted cash.

• No commercial assets were upgraded, 12 securities or $72 million were affirmed and 31 securities or $191 million were downgraded (from a weighted average rating of BB+ to B-).

• The weighted average carrying value of these assets changed from 55.1% to 60.2%, an increase of $161 million or 9%, in the quarter.

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CMBS portfolio ($ in thousands):

Vintage(1)	Average Minimum Rating(2)	Number	Face Amount $		Basis Amount $		% of Total Basis			Delinquency 60+/FC/REO (3)			Principal Subordination (4)			Weighted Average Life (yrs) (5)
Pre 2004	BBB-	84		417,718		379,932		28.4	%		5.8	%		10.5	%		2.5
2004	BB	60		427,435		261,147		19.5	%		3.9	%		5.5	%		2.7
2005	BB	38		375,044		168,926		12.6	%		5.9	%		8.2	%		3.1
2006	BBB-	56		505,578		346,212		25.9	%		4.3	%		12.6	%		3.8
2007 & Later	BB-	33		344,068		181,559		13.6	%		6.3	%		13.1	%		3.2
TOTAL/WA	BB	271		2,069,843		1,337,776		100.0	%		5.1	%		10.0	%		3.1

(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, which may not be current and are subject to change (including a “negative watch” assignment) at any time. The Company had approximately $372 million of CMBS assets that were on negative watch for possible downgrade by at least one rating agency as of September 30, 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):

Asset Type	Number	Face Amount ($)		Basis Amount ($)		% of Total Basis			WA First $ Loan to Value (1)			WA Last $ Loan to Value (1)			Delinquency (%) (2)
Mezzanine Loans	19		658,103		368,267		64.2	%		53.7	%		64.5	%		13.3	%
B-Notes	10		283,132		149,167		26.0	%		46.7	%		59.0	%		33.6	%
Whole Loans	4		102,228		55,973		9.8	%		0.0	%		79.9	%		69.6	%
Total/WA	33		1,043,463		573,407		100.0	%		46.5	%		64.5	%		24.3	%

(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 $903 million of residential assets (with a basis of $609 million), which includes manufactured housing (“MH”) loans, residential loans, subprime securities and FNMA/FHLMC securities.

• During the quarter, the Company had principal repayments of $23 million, actual principal write-downs of $20 million and purchased $11 million of residential assets. The Company purchased two ABS assets with a weighted average rating of “CCC.”

• No ABS securities were upgraded, one security or $17 million was affirmed, and 11 securities or $52 million were downgraded (from a weighted average rating of B+ to CC+).

• The weighted average carrying value of these assets changed from 67.8% to 69.4%, an increase of $14 million or 2%, in the quarter.

Manufactured housing and residential loan portfolios ($ in thousands):

Deal	Average FICO Score	Face Amount $		Basis Amount $		% of Total Basis			Average Loan Age (months)		Original Balance $		Delinquency 90+/FC/REO (1)			Cumulative Loss to Date
MH Loans Portfolio 1	704		156,273		126,107		33.5	%		108		327,855		1.0	%		6.5	%
MH Loans Portfolio 2	700		220,027		201,276		53.4	%		138		434,743		1.4	%		4.5	%
Residential Loans Portfolio 1	714		61,451		45,900		12.2	%		88		646,357		7.1	%		0.3	%
Residential Loans Portfolio 2	737		3,795		3,439		0.9	%		68		83,950		0.0	%		0.0	%
TOTAL/WA	704		441,546		376,722		100.0	%		120		1,492,905		2.0	%		4.6	%

(1) The percentage of loans that are 90+ days delinquent, in foreclosure or considered real estate owned (REO).

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Subprime Securities portfolio ($ in thousands):

Security Characteristics:

Vintage(1)	Average Minimum Rating(2)	Number	Face Amount $		Basis Amount $		% of Total Basis			Principal Subordination (3)			Excess Spread (4)
2003	B	15		19,957		11,641		6.7	%		22.3	%		4.1	%
2004	B	28		85,651		31,163		18.0	%		16.9	%		4.0	%
2005	CCC+	26		96,682		30,728		17.7	%		28.2	%		4.7	%
2006	CCC	10		90,837		48,184		27.8	%		22.4	%		4.9	%
2007 & Later	B	10		85,692		51,406		29.8	%		19.3	%		3.3	%
TOTAL/WA	B-	89		378,819		173,122		100.0	%		21.9	%		4.2	%

Collateral Characteristics:

Vintage (1)	Average Loan Age (months)	Collateral Factor(5)		3 Month CPR(6)			Delinquency 90+/FC/REO (7)			Cumulative Loss to Date
2003	91		0.10		7.0	%		18.2	%		3.1	%
2004	77		0.14		8.9	%		19.9	%		3.5	%
2005	65		0.20		9.3	%		32.4	%		8.3	%
2006	53		0.41		9.4	%		32.8	%		15.3	%
2007 & Later	39		0.48		8.8	%		20.8	%		12.5	%
TOTAL/WA	60		0.29		9.0	%		26.3	%		9.6	%

Real Estate ABS portfolios ($ in thousands):

Security Characteristics:

Asset Type	Average Minimum Rating(2)	Number		Face Amount $		Basis Amount $		% of Total Basis			Principal Subordination (3)			Excess Spread (4)
Manufactured Housing	BBB		9		48,275		46,935		84.0	%		37.6	%		1.6	%
Small Business Loans	CCC+		13		30,709		8,925		16.0	%		15.4	%		2.9	%
TOTAL/WA	BB		22		78,984		55,860		100.0	%		29.0	%		2.1	%

Collateral Characteristics:

Asset Type	Average Loan Age (months)	Collateral Factor(5)		3 Month CPR(6)			Delinquency 90+/FC/REO (7)			Cumulative Loss to Date
Manufactured Housing	118		0.35		7.4	%		3.2	%		10.7	%
Small Business Loans	72		0.55		7.6	%		29.4	%		6.4	%
TOTAL/WA	100		0.43		7.5	%		13.4	%		9.0	%

(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 $97 million of subprime and ABS securities that were on negative watch for possible downgrade by at least one rating agency as of September 30, 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 $677 million of corporate assets (with a basis of $571 million), including REIT debt and corporate bank loans.

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• During the quarter, the Company had principal repayments of $16 million and sold an $8 million REIT asset.

• One corporate asset was upgraded (from a rating of CCC to B) and no assets were affirmed or downgraded.

• The weighted average carrying value of these assets changed from 73.3% to 73.8%, an increase of $3 million or 1%, in the quarter.

REIT debt portfolio ($ in thousands):

Industry	Average Minimum Rating(1)	Number	Face Amount $		Basis Amount $		% of Total Basis
Retail	BBB+	10		75,665		71,877		19.2	%
Diversified	CCC+	10		94,336		95,088		25.3	%
Office	BBB	11		115,469		117,041		31.2	%
Multifamily	BBB	3		12,765		12,824		3.4	%
Hotel	BBB	3		29,220		29,641		7.9	%
Healthcare	BBB-	5		41,600		41,689		11.1	%
Storage	A-	1		5,000		5,057		1.3	%
Industrial	BB-	1		2,000		2,069		0.6	%
TOTAL/WA	BB+	44		376,055		375,286		100.0	%

Corporate bank loan portfolio ($ in thousands):

Industry	Average Minimum Rating(1)	Number	Face Amount $		Basis Amount $		% of Total Basis
Real Estate	CC	3		31,996		30,102		15.3	%
Media	CC	2		111,764		42,051		21.5	%
Resorts	NR	1		112,191		82,191		42.0	%
Restaurant	B	2		18,159		15,813		8.1	%
Transportation	NR	1		26,992		25,643		13.1	%
TOTAL/WA	C	9		301,102		195,800		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 a “negative watch” assignment) at any time. The Company had approximately $2 million of REIT assets that were on negative watch for possible downgrade by at least one rating agency as of September 30, 2010.

Conference Call

Newcastle’s management will conduct a live conference call today, November 9, 2010, at 11:00 A.M. Eastern Time to review the financial results for the quarter ended September 30, 2010. All interested parties are welcome to participate on the live call. You can access the conference call by dialing (888) 243-2046 (from within the U.S.) or (706) 679-1533 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “Newcastle Third Quarter Earnings Call.”

A simultaneous webcast of the conference call will be available to the public on a listen-only basis atwww.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 Tuesday, November 23, 2010 by dialing (800) 642-1687 (from within the U.S.) or (706) 645-9291 (from outside of the U.S.); please reference access code “19732150.”

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

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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 visitwww.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 the ongoing challenging credit and liquidity conditions continue 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 Quarterly Report on Form 10-Q, 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.

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Newcastle Investment Corp.

Consolidated Statements of Operations (Unaudited)

(dollars in thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Interest income	$	81,040		$	75,222		$	225,315		$	287,033
Interest expense		42,547			52,438			131,277			167,154
Net interest income		38,493			22,784			94,038			119,879
Impairment
Valuation allowance (reversal) on loans		(105,360	)		(6,926	)		(292,668	)		83,093
Other-than-temporary impairment on securities		3,616			130,555			102,397			526,691
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)		6,425			(32,827	)		(15,575	)		(88,105	)
		(95,319	)		90,802			(205,846	)		521,679
Net interest income (loss) after impairment		133,812			(68,018	)		299,884			(401,800	)
Other Income (Loss)
Gain (loss) on settlement of investments, net		(1,134	)		(1,709	)		17,497			7,788
Gain on extinguishment of debt		46,624			132,534			141,698			186,209
Other income (loss), net		(8,828	)		(1,956	)		(12,606	)		2,474
		36,662			128,869			146,589			196,471
Expenses
Loan and security servicing expense		1,116			1,097			3,473			3,869
General and administrative expense		1,775			2,230			6,751			6,821
Management fee to affiliate		4,258			4,492			12,993			13,475
Depreciation and amortization		36			73			161			218
		7,185			7,892			23,378			24,383
Income (loss) from continuing operations		163,289			52,959			423,095			(229,712	)
Income (loss) from discontinued operations		213			79			186			(96	)
Net Income (Loss)		163,502			53,038			423,281			(229,808	)
Preferred dividends		(1,395	)		(3,375	)		(6,058	)		(10,126	)
Excess of carrying amount of exchanged preferred stock over fair value of consideration paid		—			—			43,043			—
Income (Loss) Applicable to Common Stockholders	$	162,107		$	49,663		$	460,266		$	(239,934	)
Income (loss) Per Share of Common Stock
Basic	$	2.61		$	0.94		$	7.77		$	(4.54	)
Diluted	$	2.61		$	0.94		$	7.77		$	(4.54	)
Income (loss) from continuing operations per share of common stock, after preferred dividends and excess of carrying amount of exchanged preferred stock over fair value of consideration paid
Basic	$	2.61		$	0.94		$	7.77		$	(4.54	)
Diluted	$	2.61		$	0.94		$	7.77		$	(4.54	)
Income (loss) from discontinued operations per share of common stock
Basic	$	—		$	—		$	—		$	—
Diluted	$	—		$	—		$	—		$	—
Weighted Average Number of Shares of Common Stock Outstanding
Basic		62,024,945			52,905,335			59,249,175			52,850,034
Diluted		62,024,945			52,905,335			59,249,175			52,850,034
Dividends Declared per Share of Common Stock	$	—		$	—		$	—		$	—

8

Newcastle Investment Corp.

Consolidated Balance Sheets

(dollars in thousands, except share data)

	September 30, 2010 (Unaudited)			December 31, 2009
Assets
Non-Recourse VIE Financing Structures
Real estate securities, available for sale	$	1,941,162		$	1,784,487
Real estate related loans, held for sale, net		736,386			554,367
Residential mortgage loans, held for investment, net		127,830			—
Residential mortgage loans, held for sale, net		255,452			380,123
Subprime mortgage loans subject to call option		403,584			403,006
Restricted cash		156,825			200,251
Derivative assets		4,403			—
Receivables and other assets		32,571			36,643
		3,658,213			3,358,877
Recourse Financing Structures and Unlevered Assets
Real estate securities, available for sale		1,117			46,308
Real estate related loans, held for sale, net		32,821			19,495
Residential mortgage loans, held for sale, net		343			3,524
Operating real estate, held for sale		9,066			9,966
Cash and cash equivalents		58,336			68,300
Receivables and other assets		170			8,158
		101,853			155,751
	$	3,760,066		$	3,514,628
Liabilities and Stockholders’ Equity (Deficit)
Liabilities
Non-Recourse VIE Financing Structures
CDO bonds payable	$	3,393,139		$	4,058,928
Other bonds payable		266,243			303,697
Notes payable		4,516			—
Financing of subprime mortgage loans subject to call option		403,584			403,006
Derivative liabilities		220,447			203,054
Accrued expenses and other liabilities		7,076			2,992
		4,295,005			4,971,677
Recourse Financing Structures and Other Liabilities
Repurchase agreements		—			71,309
Junior subordinated notes payable		51,255			103,264
Derivative liabilities		—			4,100
Due to affiliates		1,419			1,497
Accrued expenses and other liabilities		3,571			3,433
		56,245			183,603
		4,351,250			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 Stock496,000 and 1,600,000 shares of 8.05% Series C Cumulative Redeemable Preferred Stock, and620,000 and 2,000,000 shares of 8.375% Series D Cumulative Redeemable Preferred Stockliquidation preference $25.00 per share, issued and outstanding as of September 30, 2010 andDecember 31, 2009, respectively		61,583			152,500
Common stock, $0.01 par value, 500,000,000 shares authorized, 62,024,945 and 52,912,513 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively		620			529
Additional paid-in capital		1,065,362			1,033,520
Accumulated deficit		(1,527,368	)		(2,193,383	)
Accumulated other comprehensive income (loss)		(191,381	)		(633,818	)
		(591,184	)		(1,640,652	)
	$	3,760,066		$	3,514,628

9

Newcastle Investment Corp.

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

(dollars in thousands)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30, 2010			September 30, 2009			September 30, 2010			September 30, 2009
Income (Loss) Applicable to Common Stockholders	$	162,107		$	49,663		$	460,266		$	(239,934	)
Add (Deduct):
Impairment (including the reversal of prior valuation allowance on loans)		(95,319	)		90,802			(205,846	)		521,679
Other (Income) Loss		(36,662	)		(128,869	)		(146,589	)		(196,471	)
Excess of carrying amount of exchanged preferred stock over fair value of consideration paid		—			—			(43,043	)		—
Loss from discontinued operations		(213	)		(79	)		(186	)		96
Net Interest Income less Expenses (Net of Preferred Dividends)	$	29,913		$	11,517		$	64,602		$	85,370

10