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Newcastle Announces Fourth Quarter & Full Year 2012 Results



  Newcastle Announces Fourth Quarter & Full Year 2012 Results

FOURTH QUARTER 2012 HIGHLIGHTS

  * GAAP income of $0.32 per diluted share
  * Core Earnings of $0.19 per diluted share
  * Declared common dividend of $0.22 per share
  * GAAP book value increased by $0.22 per share

FOURTH QUARTER 2012 FINANCIAL RESULTS

Business Wire

NEW YORK -- February 28, 2013

Newcastle Investment Corp. (NYSE: NCT) reported that in the fourth quarter of
2012, income available for common stockholders (“GAAP income”) was $56
million, or $0.32 per diluted share, compared to $19 million, or $0.18 per
diluted share, in the fourth quarter of 2011.

GAAP income of $56 million consisted of the following:

Core Earnings:

  * $33 million, or $0.19 per diluted share, which is equal to net interest
    income and other revenues less expenses excluding depreciation and
    amortization, net of preferred dividends

Other Income/Loss:

  * $16 million of other income primarily related to an $8 million break-up
    fee related to the “ResCap” transaction, $3 million related to non-cash
    mark-to-market gain related to interest rate derivatives in the CDOs, and
    $3 million related to non-cash mark-to-market gain related to excess MSRs
    investments
  * $12 million of non-cash mark-to-market net gain on loans held for sale and
    impairment recorded on investments
  * Less $5 million of depreciation and amortization

The Company generated $35 million of Cash Available for Distribution (“CAD”),
compared to $36 million in the third quarter of 2012.

On December 18, 2012, the Board of Directors declared a quarterly dividend of
$0.22 per common share, or $38 million, for the quarter. The Board of
Directors also declared dividends of $0.609375, $0.503125 and $0.523438 per
share on the 9.75% Series B, 8.05% Series C and 8.375% Series D preferred
stock, respectively, for the period beginning November 1, 2012 and ending
January 31, 2013.

As of December 31, 2012, GAAP book value was $5.86 per share, an increase of
$0.22 per share from September 30, 2012.

FULL YEAR 2012 FINANCIAL RESULTS

In 2012, GAAP income was $429 million, or $2.94 per diluted share, consisted
of the following:

Core Earnings:

  * $150 million, or $1.03 per diluted share, which is equal to net interest
    income and other revenues less expenses excluding depreciation and
    amortization, net of preferred dividends

Other Income/Loss:

  * $279 million of other income primarily related to a $224 million net gain
    on the sale of Newcastle’s CDO X interests, a $24 million gain on
    extinguishment of debt, $9 million related to non-cash mark-to-market gain
    related to excess MSRs investments and an $8 million break-up fee related
    to the “ResCap” transaction.

The Company generated $112 million of Cash Available for Distribution (“CAD”).

As of December 31, 2012, GAAP book value was $5.86 per share, an increase of
$4.62 per share from December 31, 2011.

The following table summarizes the Company’s operating results ($ in millions,
except per share data):

                                                                  
                         Three Months Ended                        Year Ended
                         Dec 31,       Sep 30,       Dec 31,       December
                                                                   31,
                         2012          2012          2011          2012
Summary
Operating
Results:
                                                                    
GAAP income              $  56         $  272        $  19         $    429
                                                                    
GAAP income, per         $  0.32       $  1.63       $  0.18       $    2.94
diluted share
                                                                    
                                                                    
Non-GAAP
Results:
                                                                    
Core earnings            $  33         $  43         $  32         $    150
                                                                    
Core earnings,
per diluted              $  0.19       $  0.26       $  0.30       $    1.03
share
                                                                    
Cash Available           $  35         $  36         $  18         $    112
for Distribution
                                                                         

For a reconciliation of income available for common stockholders to core
earnings and net cash flow provided by operating activities to cash available
for distribution, please refer to the tables following the presentation of
GAAP results.

FOURTH QUARTER 2012 INVESTMENT ACTIVITY

$145 million of unrestricted cash invested primarily in the following:

$87 million: Non-Agency RMBS investments

Invested $87 million to purchase $134 million face amount of Non‐Agency RMBS
at an average price of 64.5% of par, with an expected unlevered yield of 6%,
and a levered return of 12% assuming 65% financing.

$18 million: Bank Loan investments

Invested $18 million to purchase $52 million face amount of two bank loans in
an existing investment at an average price of 34.9% of par.

$16 million: Senior Living Property investments

Invested $16 million (including working capital and transaction costs) to
purchase four senior housing assets in two portfolios of $48 million financed
with $32 million of non-recourse debt at a weighted average interest rate of
4.75% with a five-year maturity.

$10 million: Non-Agency securities issued by Newcastle

Invested $10 million to purchase $12 million face amount of senior Non-Agency
securities issued by Newcastle at an average price of 82.0% of par

SUBSEQUENT EVENTS & INVESTMENT ACTIVITY

$780 million of common equity raised:

Since December 31, 2012, the Company completed the sale of approximately 80.5
million shares of its common stock for gross proceeds of approximately $780
million.

$660 million of unrestricted cash invested or committed to invest primarily in
the following:

$347 million: Excess MSRs investments

Invested or committed to invest approximately $320 million to purchase a 33%
interest in Excess MSRs on four portfolios with a total of approximately $215
billion unpaid principal balance (“UPB”) of residential mortgage loans. The
Company expects the four investments to generate an average 16% IRR and $635
million of total cash flow, or 2.0x its initial investment.

Invested $27 million to purchase a 33% interest in the Excess MSRs on a $13
billion UPB of residential mortgage loan portfolio. The Company expects the
investment to generate a 16% IRR and $57 million of total cash flow, or 2.1x
its initial investment.

$191 million: Non-Agency RMBS investments

Invested $191 million to purchase $322 million face amount of Non‐Agency RMBS
at an average price of 59.3% of par, with an expected unlevered yield of 5%,
and a levered return of 11% assuming 65% financing.

$66 million: Bank Loan investments

Invested $66 million to purchase $186 million face amount of two bank loans in
an existing investment at an average price of 35.5% of par.

$35 million: Non-performing loans

Invested $35 million to purchase 70% interest in a pool of non-performing
loans with a total UPB of $83 million at a price of 59.7% of par, with an
expected unlevered yield of 10%, and a levered return in the mid-teens
assuming 50% financing.

$10 million: Newcastle CDO senior bond

Invested $10 million to repurchase $11 million face amount of a Newcastle CDO
senior bond at a price of 89% of par, with an expected unlevered yield of 8%.

CASH AND RECOURSE FINANCING

As of February 27, 2013, the Company’s cash and recourse financings, excluding
junior subordinated notes, were as set forth below:

  * Unrestricted Cash Available to Invest after commitments – The Company had
    $284 million of unrestricted cash available to invest after commitments.
  * Recourse Financing – The Company had $924 million of financing related to
    FNMA and FHLMC securities with a value of $972 million and $157 million of
    financing related to a portion of its Non-Agency RMBS portfolio with a
    value of $240 million. The Company also had an additional $400 million
    face amount of Non-Agency RMBS with a value of approximately $235 million
    that was unlevered.

I. RESIDENTIAL SERVICING & SECURITIES

As of December 31, 2012, Newcastle’s residential servicing and securities
portfolio consisted of five Excess MSRs investments with a total carrying
value of $245 million and 29 Non-Agency RMBS purchased outside of the
Company’s CDOs since April 2012 with a total carrying value of $290 million.

During the quarter, this portfolio generated total cash flow of $43 million,
including an $8 million break-up fee related to the “ResCap” transaction, and
increased in value by $14 million.

Excess MSRs

As of December 31, 2012, the total carrying value of the Company’s Excess MSR
investments was $245 million, representing a 65% interest in the net MSR cash
flows on five loan portfolios with a total unpaid principal balance of $77
billion.

During the quarter, these investments generated $27 million of total cash flow
and increased in value by $3 million.

  * The average updated IRR with actual performance was 19%, compared to an
    initial expected IRR of 18%
  * Received $55 million of life-to-date total cash flow through the end of
    December, or 21% of the initial investment of $262 million over an average
    of 7 months
  * Weighted Average Constant Prepayment Rate (“CPR”) life-to-date was 12%
    compared to the Company’s initial CPR projection of 20%

Non-Agency RMBS

As of December 31, 2012, the Company’s Non-Agency RMBS portfolio consisted of
$434 million face amount of assets (value of 66.8% of par). During the
quarter, these investments generated $8 million of total cash flow and
increased in value by $11 million.

II. COMMERCIAL REAL ESTATE DEBT & OTHER ASSETS

As of December 31, 2012, the Company’s commercial real estate debt and other
assets portfolio consisted of $3.0 billion of diversified assets financed with
$2.0 billion of primarily match funded, non-recourse debt In addition, the
portfolio consisted of $188 million of senior living properties financed with
$121 million of non-recourse mortgage notes. Assets included 226 commercial,
residential and corporate real estate securities and loan investments with an
average investment size of $12 million, 8,881 mortgage loans backed by
residential real estate, and 12 senior living properties.

During the quarter, this portfolio generated total cash flow of $47 million
and increased in value by $21 million. During the quarter, the weighted
average carrying value of the real estate debt portfolio changed from a price
of 83.9% to 84.7% of par.

Newcastle CDO financings

As of December 31, 2012, Newcastle’s four CDOs consisted of $1.8 billion face
amount of collateral (value of 80.3% of par) financed with $1.1 billion of
non-recourse debt. During the quarter, the CDOs generated $35 million of total
cash flow, which included:

  * $14 million of CDO cash receipts consisting of $10 million of excess
    interest, $3 million of interest on retained and repurchased CDO debt, and
    $1 million of senior collateral management fees
  * $21 million of principal repayments on repurchased CDO debt

The following table summarizes the cash receipts in the quarter from the
Company’s consolidated CDO financings and the results of their related
coverage tests ($ in thousands):

                                                                                                                                
                                        Interest
                                        Coverage
                                        % Excess
            Primary                                        Over-Collateralization Excess (Deficiency) ^(2)(3)
                                        (Deficiency)
            Collateral     Cash         Feb 27,            February 27, 2013            December 31, 2012            September 30, 2012
            Type           Receipts     2013 ((2))         %           $                %           $                %           $
                           ^(1)
CDO         Securities     $ 348        35.2     %         -3.7  %     (5,586   )       -3.7  %     (5,586   )       0.1   %     213
IV
CDO         Securities       140        -206.9   %         -70.5 %     (171,187 )       -70.4 %     (171,434 )       -64.8 %     (176,780 )
VI
CDO         Loans            5,883      369.2    %         11.3  %     78,506           10.6  %     74,593           9.8   %     70,553
VIII
CDO         Loans            7,622      689.9    %         24.7  %     139,312          23.4  %     134,675          20.6  %     127,199
IX
Total                      $ 13,993
                                                                                                                                  

       Cash receipts exclude $21 million of principal repayments from
       repurchased bonds. Cash receipts for the quarter ended December 31,
^(1)   2012 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.
       Represents the 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
^(2)   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 27, 2013, December 31,
       2012 or September 30, 2012, as applicable. The CDO IV test is conducted
       only on a quarterly basis (December, March, June and September).
       As of the February 2013 remittance, the face amount of assets on
^(3)   negative watch for possible downgrade by at least one rating agency
       (Moody’s, S&P, or Fitch) for CDOs VIII and IX was zero.
        

Other Real Estate Related Investments

As of December 31, 2012, other real estate related investments consisted of
$1.3 billion face amount of assets (value of 91.1% of par) financed with $1.0
billion of debt. During the quarter, these investments generated $9 million of
total cash flow which included:

  * $8 million of excess interest and interest on retained debt
  * $1 million of principal repayments

Senior Living Property Investments

As of December 31, 2012, the Company owned 12 senior living properties
consisting of $188 million of assets financed with $121 million of debt.

During the quarter, the investments generated $2.1 million of total cash flow,
$0.4 million more than projected.

  * Average occupancy rate was 87.4%, compared to 86.0% in the Company’s
    initial projection
  * Average monthly revenue per occupied unit was $3,845, compared to $3,874
    initially projected
  * Total operating expenses were $6.9 million, compared to $7.1 million
    initially projected

INVESTMENT PORTFOLIO

The following table describes the investment portfolio as of December 31, 2012
($ in millions):

                                                                                                    
                                                                                                     Weighted
                        Face        Basis       % of          Carry       Number of                  Average
                                                              Value
                        Amount      Amount                    Amount                      Credit     Life
                        $           $ ^(6)      Basis         $           Investments     ^(7)       (years)
                                                                                                     ^(8)
I. Residential
Servicing &
Securities
Excess MSRs             $ 245       $ 236       7.4   %       $ 245       5               --         5.4
Investments
Non-Agency RMBS           434         275       8.7   %         290       29              CC         6.8
^(1)
Total
Residential
Servicing &               679         511       16.1  %         535                                  6.3
Securities
Assets
                                                                                                      
II. Commercial
Real Estate
Debt & Other
Assets
Commercial
Assets
CMBS                      475         337       10.6  %         376       76              BB-        3.2
Mezzanine                 528         443       13.9  %         443       17              77%        2.2
Loans
B-Notes                   171         162       5.1   %         162       6               68%        2.1
Whole Loans               30          30        0.9   %         30        3               48%        1.1
Third-Party CDO           96          67        2.1   %         71        5               BB         3.3
Securities ^(2)
Other
Investments               25          25        0.8.  %         25        1               --         --
^(3)
Total
Commercial                1,325       1,064     33.4  %         1,107                                2.6
Assets
                                                                                                      
Residential
Assets
MH and
Residential               332         290       9.1   %         290       8,881           705        6.1
Loans
Subprime                  124         47        1.5   %         66        40              CCC        5.0
Securities
Real Estate               10          2         0.1   %         1         3               CCC-       4.7
ABS
                          466         339       10.7  %         357                                  5.8
                                                                                                      
FNMA/FHLMC                769         811       25.5  %         813       58              AAA        3.5
Securities
Total
Residential               1,235       1,150     36.2  %         1,170                                4.4
Assets
                                                                                                      
Corporate
Assets
REIT Debt                 63          62        2.0   %         66        10              BBB-       1.8
Corporate Bank            392         209       6.6   %         209       7               CC         3.6
Loans
Total Corporate           455         271       8.6   %         275                                  3.3
Assets
                                                                                                      
Senior Living
Property                  188         182       5.7   %         182       12              --         --
Investments^(4)
                                                                                                      
Total
Commercial Real           3,203       2,667     83.9  %         2,734                                3.4
Estate Debt &
Other Assets
                                                                                                      
Total/Weighted          $ 3,882     $ 3,178     100.0 %       $ 3,269                                4.0
Average ^(5)
                                                                                                      

^(1)   Represents Non-Agency RMBS purchased outside of the Company’s CDOs
       since April 2012.
^(2)   Represents non-consolidated CDO securities, excluding eight securities
       with a zero value that had an aggregate face amount of $107 million.
^(3)   Relates to an equity investment in a REO property.
       Face amount of Senior Living Property Investments represents the gross
^(4)   carrying amount, which excludes accumulated depreciation and
       amortization.
^(5)   Excludes an investment in real estate of $7 million and loans subject
       to a call option with a face amount of $406 million.
^(6)   Net of impairment.
       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
^(7)   the FICO score for non-rated residential assets and an implied and
       assumed 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 at any time.
^(8)   Weighted average life is an estimate based on the timing of expected
       principal reduction on the asset.
        

ADDITIONAL INFORMATION

For additional information that management believes to be useful for
investors, please refer to the “Quarterly Supplement – Fourth Quarter 2012”
presentation posted to the Investor Relations section of Newcastle’s website,
www.newcastleinv.com. For consolidated investment portfolio information,
please refer to the Company’s Quarterly Report on Form 10-Q, which are also
available on the Company’s website, www.newcastleinv.com.

CONFERENCE CALL

Newcastle’s management will conduct a live conference call on Thursday,
February 28, 2013 at 8:30 A.M. Eastern Time to review the financial results
for the fourth quarter and full year 2012. 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. The
conference call may be accessed 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 2012
Earnings Call.”

A simultaneous webcast of the conference call will be available to the public
on a listen-only basis at http://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 two hours
following the completion of the call through 11:59 P.M. Eastern Time on
Friday, March 8, 2013 by dialing 1-855-859-2056 (from within the U.S.) or
1-404-537-3406 (from outside of the U.S.); please reference access code
“13755210”.

ABOUT NEWCASTLE

Newcastle Investment Corp. focuses on opportunistically investing in, and
actively managing, real estate related assets. The Company primarily invests
in two distinct areas: (1) Residential Servicing and Securities and (2)
Commercial Real Estate Debt and Other Assets. The Company is organized and
conducts its operations to qualify as a real estate investment trust (REIT)
for federal income tax purposes. The Company is managed by an affiliate of
Fortress Investment Group LLC, a global investment management firm.

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, the average life of an investment, the expected
returns, or expected yield on an investment, 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; actual recapture rates with respect to any Excess MSR investment;
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 or 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.

CAUTIONARY NOTE REGARDING EXPECTED RETURNS AND EXPECTED YIELDS PRESENTED IN
THIS PRESS RELEASE

Expected returns and expected yields are estimates of the annualized effective
rate of return that we presently expect to be earned over the expected average
life of an investment (i.e., IRR), after giving effect, in the case of
returns, to existing leverage, and calculated on a weighted average basis.
Expected returns and expected yields reflect our estimates of an investment’s
coupon, amortization of premium or discount, and costs and fees, and they
contemplate our assumptions regarding prepayments, defaults and loan losses,
among other things. In the case of Excess MSRs, these assumptions include, but
are not limited to, the recapture rate. Income recognized by the Company in
future periods may be significantly less than the income that would have been
recognized if an expected return or expected yield were actually realized, and
the estimates we use to calculate expected returns and expected yields could
differ materially from actual results.

Statements about expected returns and expected yields in this press release
are forward-looking statements. You should carefully read the cautionary
statement above under the caption “Forward-looking Statements,” which directly
applies to our discussion of expected returns and expected yields.

                                                                     
Newcastle Investment Corp.

Consolidated Statements of Income

(dollars in thousands, except share data)
                                                                       
                               Three Months Ended December 31,        Year Ended
                               2012                2011               December 31,
                                                                      2012
                               (unaudited)         (unaudited)
Interest income                $ 70,272            $ 73,557           $ 310,459
Interest expense                 21,886              31,533             109,924      
  Net interest income            48,386              42,024             200,535      
                                                                       
Impairment (Reversal)
  Valuation allowance            (16,427     )       23,055             (24,587     )
  (reversal) on loans
  Other-than-temporary
  impairment on                  2,853               (1,478      )      19,359
  securities
  Impairment of                  -                   -                  -
  long-lived assets
  Portion of
  other-than-temporary
  impairment on

  securities
  recognized in other
  comprehensive income           1,477               3,723              (436        )
  (loss),

  net of reversal of
  other comprehensive
  loss into net income
  (loss)
                                 (12,097     )       25,300             (5,664      )
                                                                       
  Net interest income            60,483              16,724             206,199
  after impairment
                                                                       
Other Revenues
  Rental income                  9,397               488                17,081
  Care and ancillary             1,583               -                  2,994        
  income
  Total other revenues           10,980              488                20,075       
                                                                       
Other Income (Loss)
  Gain (loss) on
  settlement of                  12                  2,847              232,897
  investments, net
  Gain on
  extinguishment of              958                 5,708              24,085
  debt
  Change in fair value
  of investments in              2,510               367                9,023
  excess mortgage
  servicing rights
  Other income (loss),           12,062              3,708              13,712       
  net
                                 15,542              12,630             279,717      
Expenses
  Loan and security              1,004               1,191              4,260
  servicing expense
  Property operating             7,443               306                12,943
  expenses
  General and
  administrative                 9,739               2,654              22,942
  expense
  Management fee to              7,234               4,976              24,693
  affiliate
  Depreciation and               4,586               1                  6,975        
  amortization
                                 30,006              9,128              71,813       
                                                                       
Income from continuing           56,999              20,714             434,178
operations
Income (loss) from
discontinued                     (20         )       (18         )      (68         )
operations
Net Income                       56,979              20,696             434,110
  Preferred dividends            (1,395      )       (1,395      )      (5,580      )
Income Available for           $ 55,584            $ 19,301           $ 428,530      
Common Stockholders
Income Per Share of
Common Stock
  Basic                        $ 0.32              $ 0.18             $ 2.97         
  Diluted                      $ 0.32              $ 0.18             $ 2.94         
Income from continuing
operations per share
of common stock,
  after preferred
  dividends
  Basic                        $ 0.32              $ 0.18             $ 2.97         
  Diluted                      $ 0.32              $ 0.18             $ 2.94         
Income (loss) from
discontinued
operations per share
  of common stock
  Basic                        $ -                 $ -                $ -            
  Diluted                      $ -                 $ -                $ -            
                                                                       
Weighted Average
Number of Shares of
Common Stock
Outstanding
  Basic                          172,518,808         105,175,323        144,146,370  
  Diluted                        175,413,251         105,175,323        145,766,413  
                                                                       
Dividends Declared per         $ 0.22              $ 0.15             $ 0.84         
Share of Common Stock
                                                                       
                                                                       

                                           
Newcastle Investment Corp.

Consolidated Balance Sheets

(dollars in thousands)
                                             
                                            December 31,
                                            2012                2011
Assets
  Real estate securities,                   $ 1,691,575         $ 1,731,744
  available-for-sale
  Real estate related loans,                  843,132             813,580
  held-for-sale, net
  Residential mortgage loans,                 292,461             331,236
  held-for-investment, net
  Residential mortgage loans,                 2,471               2,687
  held-for-sale, net
  Investments in excess mortgage              245,036             43,971
  servicing rights at fair value
  Subprime mortgage loans subject to          405,814             404,723
  call option
  Investments in real estate, net of          169,473             -
  accumulated depreciation
  Intangibles, net of accumulated             19,086              -
  amortization
  Operating real estate,                      -                   7,741
  held-for-sale
  Other investments                           24,907              24,907
  Cash and cash equivalents                   231,898             157,356
  Restricted cash                             2,064               105,040
  Derivative assets                           165                 1,954
  Receivables and other assets                17,230              26,860      
Total Assets                                $ 3,945,312         $ 3,651,799   
                                                                 
Liabilities and Stockholders' Equity
Liabilities
  CDO bonds payable                         $ 1,091,354         $ 2,403,605
  Other bonds and notes payable               183,390             200,377
  Repurchase agreements                       929,435             239,740
  Mortgage notes payable                      120,525             -
  Financing of subprime mortgage              405,814             404,723
  loans subject to call option
  Junior subordinated notes payable           51,243              51,248
  Derivative liabilities                      31,576              119,320
  Dividends payable                           38,884              16,707
  Due to affiliates                           3,620               1,659
  Purchase price payable on
  investments in excess mortgage              59                  3,250
  servicing rights
  Accrued expenses and other                  16,352              19,081      
  liabilities
Total Liabilities                             2,872,252           3,459,710   
                                                                 
Stockholders' Equity
  Preferred stock, $0.01 par value,
  100,000,000 shares authorized,
  1,347,321 shares of 9.75% Series B
  Cumulative Redeemable Preferred
  Stock
  496,000 shares of 8.05% Series C
  Cumulative Redeemable Preferred
  Stock, and
  620,000 shares of 8.375% Series D
  Cumulative Redeemable Preferred
  Stock,
  liquidation preference $25.00 per
  share, issued and outstanding as of
  December 31, 2012 and
  December 31, 2011                           61,583              61,583
  Common stock, $0.01 par value,
  500,000,000 shares authorized,
  172,525,645 and
  105,181,009 shares issued and
  outstanding at December 31, 2012            1,725               1,052
  and 2011, respectively
  Additional paid-in capital                  1,710,083           1,275,792
  Accumulated deficit                         (771,095  )         (1,073,252 )
  Accumulated other comprehensive             70,764              (73,086    )
  income (loss)
Total Equity                                  1,073,060           192,089     
Total Liabilities and Stockholders'         $ 3,945,312         $ 3,651,799   
Equity
                                                                              
                                                                              

                                                             
Newcastle Investment Corp.

Consolidated Statements of Cash Flows

(dollars in thousands)
                                                               
                             Three Months Ended December 31   Year Ended
                                                              December 31
                             2012              2011           2012
                             (unaudited)       (unaudited)
Cash flows From
Operating Activities
Net income                       56,979           20,696         434,110
Adjustment to reconcile net income to net cash
provided by (used in) operating activities
(inclusive of amounts
related to discontinued
operations):
Depreciation and                 4,750            87             7,451
amortization
Accretion of discount            (6,659    )      (11,572 )      (45,582     )
and other amortization
Interest income in CDOs
redirected for                   (2,540    )      (1,298  )      (5,484      )
reinvestment or CDO bond
paydown
Interest income on
investments accrued to           (6,076    )      (5,204  )      (22,835     )
principal balance
Interest expense on
debt accrued to                  109              109            437
principal balance
Non-cash directors'              60               27             280
compensation
Reversal of valuation            (16,427   )      23,055         (24,587     )
allowance on loans
Other-than-temporary
impairment on                    4,330            2,245          18,923
securities
Change in fair value on
investments in excess            (2,510    )      (367    )      (9,023      )
mortgage servicing
rights
Gain on settlement of
investments (net) and            (12       )      (2,847  )      (232,897    )
real estate
held-for-sale
Unrealized loss on
non-hedge derivatives            (3,048    )      (2,911  )      (2,547      )
and hedge
ineffectiveness
Gain on extinguishment           (958      )      (5,708  )      (24,085     )
of debt
Change in:
Restricted cash                  482              (88     )      2,223
Receivables and other            (2,790    )      (1,870  )      (1,702      )
assets
Due to affiliates                269              127            1,961
Accrued expenses and             (359      )      929            1,259
other liabilities
Payment of Deferred              -                -              (568        )
Interest
Net cash provided by
(used in) operating              25,600           15,410         97,334       
activities
                                                               
Cash Flows From
Investing Activities
Principal repayments
from repurchased CDO             21,488           8,804          42,835
debt
Principal repayments             568              894            2,014
from CDO securities
Principal repayments             8,289            11             20,729
from non-Agency RMBS
Return of investment in
excess mortgage                  15,840           760            29,167
servicing rights
Principal repayments
from loans and non-CDO           55,727           17,140         126,125
securities (excluding
non-Agency RMBS)
Purchase of real estate          (391,940  )      (30,794 )      (989,709    )
securities
Purchase of real estate          (18,010   )      -              (27,226     )
loans
Proceeds from sale of            -                -              127,000
investments
Acquisition of
investments in excess            (3,190    )      (40,492 )      (221,832    )
mortgage servicing
rights
Acquisition of
investments in real              (44,110   )      -              (185,686    )
estate
Additions to
investments in real              (270      )      -              (296        )
estate
Deposit paid on                  -                -              (25,857     )
investments
Return of deposit paid           25,582           -              25,582       
on investments
Net cash provided by
(used in) investing              (330,026  )      (43,677 )      (1,077,154  )
activities
                                                               
Cash flows From
Financing Activities
Repurchases of CDO               (53       )      (10,915 )      (35,748     )
bonds payable
Repayments of other              (9,266    )      (9,772  )      (42,443     )
bonds payable
Borrowings under                 374,871          29,202         782,749
repurchase agreements
Repayments of                    (50,763   )      (10,390 )      (93,054     )
repurchase agreements
Margin deposits under            (43,935   )      (10,270 )      (87,895     )
repurchase agreement
Return of margin
deposits under                   44,448           10,270         87,895
repurchase agreements
Borrowings under                 32,125           -              120,525
mortgage notes payable
Issuance of common               -                -              435,821
stock
Costs related to
issuance of common               (243      )      (437    )      (1,083      )
stock
Common Stock dividends           (37,947   )      (15,776 )      (104,196    )
paid
Preferred Stock                  (1,395    )      (1,395  )      (5,580      )
dividends paid
Payment of deferred              (554      )      -              (2,385      )
financing costs
Purchase of derivative           -                -              (244        )
instruments
Restricted cash
returned from                    -                (74     )      -            
refinancing activities
Net cash provided by
(used in) financing              307,288          (19,557 )      1,054,362    
activities
                                                               
Net Increase (Decrease)
in Cash and Cash                 2,862            (47,824 )      74,542
Equivalents
                                                               
Cash and Cash
Equivalents, Beginning           229,036          205,180        157,356      
of Period
                                                               
Cash and Cash
Equivalents, End of          $   231,898       $  157,356     $  231,898      
Period
                                                               
Supplemental Disclosure
of Cash Flow
Information
Cash paid during the
period for interest              12,011           22,366      $  71,395
expense
                                                               
Supplemental Schedule of
Non-Cash Investing and
Financing Activities
Preferred stock
dividends declared but       $   930           $  930         $  930
not paid
Common stock dividends       $   37,954        $  15,776      $  37,954
declared but not paid
Purchase price payable
on investments in excess     $   -             $  -           $  59
mortgage servicing
rights
Re-issuance of other
bonds and notes payable      $   29,959        $  5,751       $  29,959
to third parties upon
deconsolidation of CDO
                                                                              

                                                              
Newcastle Investment Corp.

Reconciliation of Core Earnings

(dollars in thousands)
                                                                
                           Three Months Ended December 31,     Year Ended
                                                               December 31,
                           2012                2011            2012
Income (loss)
applicable to              $  55,584           $ 19,301        $  428,530
common
stockholders
Add (Deduct):
Impairment                    (12,097  )         25,300           (5,664    )
(Reversal)
Other income                  (15,542  )         (12,630 )        (279,717  )
(Income) loss from
discontinued                  20                 18               68
operations
Depreciation and              4,586              1                6,975      
amortization
Core earnings              $  32,551           $ 31,990        $  150,192    
                                                                             

Core Earnings

Core earnings is used by management to gauge the current performance of
Newcastle without taking into account of gains and losses, which, although
they represent a part of our recurring operations, are subject to significant
variability and are only a potential indicator of future economic performance.
Management views this measure as Newcastle’s “core” current earnings, while
gains and losses (including impairment) are simply a potential indicator of
future earnings. It also excludes the effect of depreciation and amortization
charges, which, in the judgment of management, are not indicative of operating
performance.

Management believes that this measure provides investors with useful
information regarding Newcastle’s “core” current earnings, and it enables
investors to evaluate Newcastle’s current performance using the same measure
that management uses to operate the business. Core earnings does not represent
cash generated from operating activities in accordance with GAAP and therefore
should not be considered an alternative to net income as an indicator of the
Company’s operating performance or as an alternative to cash flow as a measure
of its liquidity and is not necessarily indicative of cash available to fund
cash needs. The Company’s calculation of core earnings may be different from
the calculation used by other companies and, therefore, comparability may be
limited.

                                                                
Newcastle Investment Corp.

Reconciliation of Cash Available for Distribution

(dollars in thousands)
                                                                  
                         Three Months Ended December 31,         Year Ended
                                                                 December 31,
                         2012                2011                2012
Reconciliation of Cash
Available for
Distribution:
Net cash provided by        25,600             15,410            97,334
operating activities
                                                                  
Principal repayments        30,345             9,698             65,578
bought at a discount^(1)
Less: Return of capital     (19,305   )        (5,608  )         (45,522)
included above ^ (2)
Subtotal                    36,640             19,500            117,390
                                                                  
Preferred dividends^(3)     (1,395    )        (1,395  )         (5,580)
Cash Available for       $  35,245           $ 18,105            $111,810
Distribution
                                                                  
Other data from the
Consolidated Statements
of Cash Flows:
Net cash provided by
(used in) investing      $  (330,026  )      $ (43,677 )         $(1,077,154)
activities
Net cash provided by
(used in) financing         307,288            (19,557 )         1,054,362
activities
Net increase (decrease)
in cash and cash            2,862              (47,824 )         74,542
equivalents
                                                                  

     Excludes principal repayments on assets purchased at par or assets where
^(1) the principal received is required to pay down Newcastle’s debt (assets
     held in its CDO’s, MH loans and Agency securities).
     Represents the portion of principal repayments from repurchased CDO debt,
^(2) CDO securities, and Non-Agency RMBS computed based on the ratio of
     Newcastle’s purchase price of such debt or securities to the aggregate
     principal payments expected to be received from such debt or securities.
^(3) Represents preferred dividends to be paid on an accrual basis (payments
     are made at the end of Jan, Apr, Jul and Oct).
      

Cash Available for Distribution (“CAD”)

  * Management believes that CAD is useful for investors because it is a
    meaningful measure of the Company’s operating liquidity. It represents
    GAAP net cash provided by operating activities adjusted for two factors:

 1. Principal payments received in excess of the portion which represents a
    return of Newcastle’s invested capital in certain of Newcastle’s
    investments, which were acquired at a significant discount to par. These
    investments include repurchased CDO debt, CDO securities and Non-Agency
    RMBS. Although these net principal repayments are reported as investing
    activities for GAAP purposes, they actually represent a portion of
    Newcastle’s return on these investments (or yield), rather than a return
    of Newcastle’s invested capital.
 2. Preferred dividends. Although these dividends are reported as financing
    activities for GAAP purposes, they represent a recurring use of
    Newcastle’s operating cash flow similar to interest payments on debt.

  * Management uses CAD as an important input in determining cash available to
    pay dividends to Newcastle’s common stockholders.
  * CAD excludes principal repayments on assets purchased at par or assets
    where the principal received is required to pay down Newcastle’s debt
    (assets held in the its CDOs, MH loans and Agency securities).
    Furthermore, net cash provided by operating activities, a primary element
    of CAD, includes timing differences based on changes in accruals. CAD does
    not represent cash generated from operating activities in accordance with
    GAAP and should not be considered an alternative to net income as an
    indicator of the Company’s operating performance or as an alternative to
    cash flow as a measure of the Company’s liquidity and is not necessarily
    indicative of cash available to fund cash needs. The Company’s calculation
    of CAD may be different from the calculation used by other companies and
    therefore comparability may be limited.

Contact:

Newcastle Investment Corp.
Investor Relations
212-479-3195
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