Friedman, Billings, Ramsey Group Reports Third Quarter Financial Results
PRNewswire - First Call
Arlington, Virginia
NYSE: FBR

ARLINGTON, Va., Oct. 23 /PRNewswire-FirstCall/ -- Friedman, Billings, Ramsey Group, Inc. (FBR Group) (NYSE: FBR) today reported a net after-tax loss of $169.0 million for the quarter ended September 30, 2008, or $1.12 per share (diluted), compared to net after-tax loss of $210.6 million, or $1.25 per share (diluted), for the third quarter of 2007. FBR Group's net after-tax loss for the first nine months of 2008 was $149.0 million, or $0.99 per share (diluted), compared to a net after-tax loss of $388.2 million, or $2.27 per share (diluted) in the first nine months of 2007.

FBR Group also announced that it has retained financial advisors to evaluate strategic alternatives for the purpose of maximizing the value of its assets and liabilities including all of its trust preferred debt. Potential strategic alternatives include the sale of the company or its assets or distribution of its assets to shareholders.

Excluding its ownership interest in FBR Capital Markets, as of September 30, 2008, FBR Group had assets of $2.3 billion including MBS of $1.7 billion and cash of $82 million, and repurchase agreements of $1.7 billion. Total tangible capital was $349 million including trust preferred debt but excluding its ownership interest in FBR Capital Markets. FBR Group's interest in FBR Capital Markets' tangible capital was $223 million at September 30, 2008. FBR Group's consolidated tangible capital on September 30, 2008 was $572 million and consolidated shareholders' equity was $268 million.

Book value net of Accumulated Other Comprehensive Income (AOCI) (1) as of September 30, 2008 was $1.81 per share compared to book value net of AOCI of $2.89 per share as of June 30, 2008.

As of September 30, 2008, approximately $188 million of tangible capital, or $1.24 per share, was invested in cash and readily marketable agency securities. During the third quarter, $19 million of liquidations and pay- downs of capital invested in non-agency MBS securities and other investments was recovered. Remaining non-prime securities totaled $10 million at the end of the third quarter.

During the quarter and subsequent to the quarter end, FBR Group implemented a program to downsize its MBS portfolio in order to reduce exposure to deteriorating market conditions while at the same time generating additional cash to fund the extinguishment of its trust preferred debt at a significant discount to face value.

In the third quarter, the Company extinguished $6.8 million of trust preferred debt and realized a $4.1 million gain versus face value on the debt. Subsequent to quarter end, the Company extinguished an additional $38 million of trust preferred debt for a gain of $23 million leaving $273 million of trust preferred debt outstanding. Also subsequent to quarter end, the Company further reduced its MBS portfolio by $1.1 billion resulting in a net loss of $42 million after deducting the $23 million gain from the extinguishment of trust preferred debt.

After giving effect to these post-third quarter transactions, FBR Group has agency MBS of $503 million, super senior AAA MBS of $195 million, and total repurchase agreements of $568 million.

    Third Quarter Highlights
    The third quarter 2008 results reflect cash and non-cash items.

    Operating and realized Investment Losses of $36.0 million include:

    -- $1.5 million of operating cash loss at FBR Group
    -- $4.1 million gain on the extinguishment of $6.8 million of trust
       preferred debt.
    -- $23.9 million of realized investment loss related to sales of agency
       MBS and a hedge instrument during the quarter, of which $2.8 million
       was recorded in AOCI as of June 30, 2008.
    -- $14.7 million of losses, net of minority interest, relating to FBR
       Capital Markets.

    Non-Cash and Impairment Charges of $133.0 million include:

    -- $129.2 million of impairment related investment losses including:
       -- $119.0 million of other than temporary impairment on MBS and related
          hedges, of which $85.5 million was recorded in AOCI as of June 30,
          2008.
       -- $7.1 million of other than temporary impairment on merchant banking
          Investments.
       -- $3.1 million related to investment partnerships and sub-prime NIMs.
    -- $3.8 million of non-cash compensation charges.

Merchant Banking

Excluding FBR Capital Markets, the total value of the merchant banking investments held by FBR Group at the end of the third quarter was $27.3 million. During the quarter, the Company recorded $7.1 million in other than temporary impairments related to merchant banking investments. No additional investments were made in the portfolio during the quarter.

FBR Capital Markets Corporation

Friedman Billings Ramsey Group, Inc. results have no effect or impact on the financial strength, performance, or ongoing operations of FBR Group's majority owned subsidiary, FBR Capital Markets Corporation (Nasdaq: FBCM), which is a separately traded and managed public company. FBR Group does, however, consolidate FBR Capital Markets' financial results on a proportionate basis.

FBR Capital Markets reported a net after-tax loss of $28.6 million, or $0.44 per share (diluted), for the quarter ended September 30, 2008, compared to net after-tax earnings of $0.3 million in the third quarter of 2007. For the nine months ending September 30, 2008, FBR Capital Markets reported a net loss of $64.0 million after tax, or $0.99 per share (diluted), compared to net after-tax earnings of $33.0 million, or $0.51 per share (diluted), for the first nine months of 2007. At quarter's end, book value per share was $6.96.

FBR Capital Markets also reported a balance sheet reflecting $452 million in capital -- all equity -- and approximately $294 million of cash and net cash invested in floating rate securities. In line with its strategic plan and market conditions, FBR Capital Markets announced it is taking additional aggressive steps to lower break even levels. The Company plans to take maximum advantage of the adverse economic environment and dislocation in the industry and fully expects to participate in a substantial number capital raising opportunities such as the recapitalizations of financial institutions.

Looking Ahead

"These are undoubtedly the most challenging times that we have ever seen in the financial markets," said Eric Billings, Chairman and Chief Executive Officer of FBR Group. "We believe we have taken and are continuing to take all necessary steps to position the Company to be able to patiently realize the maximum value of all of our assets and liabilities."

Complete third quarter 2008 financial results and tables for FBR Capital Markets can be found at www.fbrcapitalmarkets.com.

Investors wishing to listen to the FBR Group earnings conference call at 9:00 A.M. U.S. EDT, October 23, 2008, may do so via the Web at: http://phx.corporate-ir.net/phoenix.zhtml?c=71352&p=irol-irhome.

Replays of the webcast will be available after the call.

Friedman, Billings, Ramsey Group, Inc. (FBR) invests in mortgage-related assets, merchant banking opportunities and is the majority owner of FBR Capital Market Corporation, a separate publicly traded company. FBR is headquartered in the Washington, D.C. metropolitan area. For more information, please visit www.fbr.com.

(1) Accumulated Other Comprehensive Income (AOCI) includes changes in the value of available-for-sale securities and cash flow hedges. FBR believes that such changes represent temporary market fluctuations, are not reflective of our market strategy, and, therefore, the exclusion of AOCI provides a reasonable basis for calculating returns.

Statements concerning future performance, developments, events, market forecasts, revenues, expenses, earnings, run rates and any other guidance on present or future periods, constitute forward-looking statements that are subject to a number of factors, risks and uncertainties that might cause actual results to differ materially from stated expectations or current circumstances. These factors include, but are not limited to, changes in interest rates, increased costs of borrowing, decreased interest spreads, changes in mortgage pre-payment speeds, risks associated with merchant banking investments, the realization of gains and losses on principal investments, available technologies, competition for business and personnel, and general economic, political and market conditions. These and other risks are described in the Company's Annual Report and Form 10-K and quarterly reports on Form 10- Q that are available from the Company and from the SEC.

    Financial data follow.



          FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
          (Dollars in thousands, except per share amounts)
          (Unaudited)                                Quarter Ended
                                                     September 30,

                                          2008        %      2007         %
                                          -------   -----   -------   -------
    REVENUES:
    Investment banking:
      Capital raising                      $6,763   -6.5%    $49,692  -108.8%
      Advisory                              5,999   -5.8%     16,480   -36.1%
    Institutional brokerage:
      Principal transactions                2,610   -2.5%        968    -2.1%
      Agency commissions                   33,813  -32.6%     26,257   -57.5%
    Asset management:
      Base management fees                  3,710   -3.6%      6,119   -13.4%
      Incentive allocations and fees            -    0.0%         82    -0.2%
    Principal investment:
      Interest                             31,057  -29.9%    115,007  -251.7%
      Net investment loss                (164,153) 158.2%   (131,960)  288.8%
      Dividends                               307   -0.3%        526    -1.2%
    Mortgage banking:
      Interest                                  -    0.0%      7,194   -15.7%
      Net investment loss                       -    0.0%    (27,968)   61.2%
    Other                                   1,548   -1.5%      3,990    -8.6%
                                          -------   -----   -------   -------
         Total revenues                   (78,346)  75.5%     66,387  -145.3%
    Interest expense                       25,387  -24.5%    112,072  -245.3%
                                          -------   -----   -------   -------
         Revenues, net of interest
          expense                        (103,733) 100.0%    (45,685)  100.0%
                                          -------   -----   -------   -------

    NON-INTEREST EXPENSES:
    Compensation and benefits              61,111  -58.9%     80,955  -177.2%
    Professional services                  10,442  -10.1%     12,281   -26.9%
    Business development                    5,262   -5.1%      7,713   -16.9%
    Clearing and brokerage fees             3,834   -3.7%      3,953    -8.7%
    Occupancy and equipment                 8,282   -8.0%     12,695   -27.8%
    Communications                          5,773   -5.6%      7,148   -15.6%
    Other operating expenses                6,668   -6.4%     16,140   -35.3%
    Restructuring charges                       -    0.0%      6,172   -13.5%
                                          -------   -----   -------   -------
         Total non-interest expenses      101,372  -97.8%    147,057  -321.9%
                                          -------   -----   -------   -------

    Operating loss                       (205,105) 197.8%   (192,742)  421.9%
                                          -------   -----   -------   -------

    OTHER INCOME (LOSS):
     Gain on reduction in long-term debt    4,078   -4.0%          -     0.0%
     Loss on subsidiary share
      transactions and other losses            (4)   0.0%     (2,450)    5.4%
                                          -------   -----   -------   -------

     Loss before income taxes and
         minority interest               (201,031) 193.8%   (195,192)  427.3%

    Income tax (benefit) provision        (18,123)  17.5%     15,288   -33.4%
    Minority interest in (losses)
     earnings of consolidated subsidiary  (13,886)  13.4%        165    -0.4%
                                          -------   -----   -------   -------

         Net loss                       $(169,022) 162.9%  $(210,645)  461.1%
                                          =======  ======   ========  =======

    Basic loss per share                   $(1.12)            $(1.25)
                                          =======           ========
    Diluted loss per share                 $(1.12)            $(1.25)
                                          =======           ========

    Weighted average shares  - basic      151,301            167,874
                                          =======           ========
    Weighted average shares  - diluted    151,301            167,874
                                          =======           ========



          FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
          (Dollars in thousands, except per share amounts)
          (Unaudited)
                                                  Nine Months Ended
                                                    September 30,

                                       2008          %      2007     *     %
                                       -------   -------   --------   -------
    REVENUES:
    Investment banking:
      Capital raising                  $75,635    198.9%   $256,971    182.6%
      Advisory                          15,267     40.2%     29,090     20.7%
    Institutional brokerage:
      Principal transactions            13,455     35.4%      7,156      5.1%
      Agency commissions                89,581    235.6%     78,639     55.9%
    Asset management:
      Base management fees              12,507     32.9%     18,007     12.8%
      Incentive allocations and fees         -      0.0%        302      0.2%
    Principal investment:
      Interest                          83,798    220.4%    446,258    317.1%
      Net investment loss             (188,637)  -496.2%   (194,102)  -137.9%
      Dividends                            994      2.6%      2,368      1.7%
    Mortgage banking:
      Interest                              36      0.1%     47,186     33.5%
      Net investment income (loss)         463      1.2%   (138,858)   -98.7%
    Other                                5,815     15.3%     12,566      8.9%
                                       -------   -------   --------   -------
         Total revenues                108,914    286.4%    565,583    401.9%
    Interest expense                    70,895    186.4%    424,854    301.9%
                                       -------   -------   --------   -------
         Revenues, net of interest      38,019    100.0%    140,729    100.0%
                                       -------   -------   --------   -------

    NON-INTEREST EXPENSES:
    Compensation and benefits          192,035    505.1%    291,822    207.4%
    Professional services               33,401     87.9%     40,143     28.5%
    Business development                24,368     64.1%     32,640     23.2%
    Clearing and brokerage fees         10,857     28.6%      9,717      6.9%
    Occupancy and equipment             26,051     68.5%     38,511     27.4%
    Communications                      18,046     47.5%     21,791     15.5%
    Other operating expenses            19,107     50.3%     66,540     47.3%
    Goodwill impairment                      -      0.0%     54,752     38.9%
    Restructuring charges                    -      0.0%     25,519     18.1%
                                       -------   -------   --------   -------
         Total non-interest expenses   323,865    852.0%    581,435    413.2%
                                       -------   -------   --------   -------

    Operating loss                    (285,846)  -752.0%   (440,706)  -313.2%

    OTHER INCOME:
     (Loss) gain on subsidiary share
      transactions                        (189)    -0.5%    104,058     74.0%
     Gain on reduction in long-term
      debt                               4,078     10.8%          -      0.0%
     Gain on disposition of subsidiary
      and other income                  73,030    192.1%          -      0.0%
                                       -------   -------   --------   -------

     Loss before income taxes and
      minority interest               (208,927)  -549.5%   (336,648)  -239.2%

    Income tax (benefit) provision     (28,903)   -76.0%     38,749     27.5%
    Minority interest in (losses)
     earnings of consolidated
     subsidiary                        (31,053)   -81.7%     12,782      9.1%
                                       -------   -------   --------   -------

     Net loss                        $(148,971)  -391.8%  $(388,179)  -275.8%
                                       =======   =======   ========   =======

    Basic loss per share                $(0.99)              $(2.27)
                                       =======             ========
    Diluted loss per share              $(0.99)              $(2.27)
                                       =======             ========

    Weighted average shares - basic    151,134              171,308
                                       =======             ========
    Weighted average shares  -
     diluted                           151,134              171,308
                                       =======             ========




             FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
             Financial & Statistical Supplement - Operating Results
             (Dollars in thousands, except per share data)
             (Unaudited)


                                 Nine Months Ended
                                     September
                                     30, 2008      Q-3 08     Q-2 08   Q-1 08
                                 ---------------------------------------------
    Revenues
    Investment banking:
     Capital raising                    $75,635     $6,763    $3,962  $64,910
     Advisory                            15,267      5,999     4,192    5,076
    Institutional brokerage:
     Principal transactions              13,455      2,610     4,888    5,957
     Agency commissions                  89,581     33,813    29,918   25,850
    Asset management:
     Base management fees                12,507      3,710     4,153    4,644
    Principal investment:
     Interest                            83,798     31,057    26,827   25,914
     Net investment loss               (188,637)  (164,153)   (4,797) (19,687)
     Dividends                              994        307       258      429
    Mortgage banking:
     Interest                                36          -         -       36
     Net investment income (loss)           463          -        (5)     468
    Other                                 5,815      1,548     1,932    2,335
                                 ---------------------------------------------
         Total revenues                 108,914    (78,346)   71,328  115,932
    Interest expense                     70,895     25,387    21,858   23,650
                                 ---------------------------------------------
         Revenues, net of interest
          expense                        38,019   (103,733)   49,470   92,282
                                 ---------------------------------------------

    Non-interest expenses
    Compensation and benefits           192,035     61,111    53,970   76,954
    Professional services                33,401     10,442    10,492   12,467
    Business development                 24,368      5,262     6,812   12,294
    Clearing and brokerage fees          10,857      3,834     3,393    3,630
    Occupancy and equipment              26,051      8,282     8,580    9,189
    Communications                       18,046      5,773     6,255    6,018
    Other operating expenses             19,107      6,668     7,055    5,384
                                 ---------------------------------------------
         Total non-interest
          expenses                      323,865    101,372    96,557  125,936
                                 ---------------------------------------------

    Operating loss                     (285,846)  (205,105)  (47,087) (33,654)

    Other income (loss)                  76,919      4,074      (192)  73,037
                                 ---------------------------------------------

    (Loss) income before income
     taxes and minority interest       (208,927)  (201,031)  (47,279)  39,383

    Income tax benefit                  (28,903)   (18,123)   (9,974)    (806)
    Minority interest in losses of
     consolidated subsidiary            (31,053)   (13,886)  (12,254)  (4,913)
                                 ---------------------------------------------

    Net (loss) income                 $(148,971) $(169,022) $(25,051) $45,102
                                 =============================================


    ROE (annualized)                     -60.0%    -204.3%    -27.2%    48.9%
    ROE (annualized-excluding
     AOCI)(1)                            -58.3%    -198.5%    -23.8%    41.8%

    Total shareholders' equity         $268,097   $268,097  $343,686 $344,408
    Total shareholders' equity, net
     of AOCI(1)                        $274,547   $274,547  $436,093 $455,761


    Basic (loss) earnings per share      $(0.99)    $(1.12)   $(0.17)   $0.30
    Diluted (loss) earnings per share    $(0.99)    $(1.12)   $(0.17)   $0.30

    Ending shares outstanding (in
     thousands)                         151,352    151,352   150,989  150,915

    Book value per share                  $1.77      $1.77     $2.28    $2.28
    Book value per share, net of
     AOCI (1)                             $1.81      $1.81     $2.89    $3.02

    Gross assets under management
     (in millions)
    Managed accounts                     $276.8     $276.8    $275.7   $333.9
    Hedge & offshore funds                 29.6       29.6      35.5     45.1
    Mutual funds                        1,433.2    1,433.2   1,553.4  1,702.9
    Private equity and venture
     capital funds                         17.2       17.2      21.1     21.4
                                 ---------------------------------------------
         Total                         $1,756.8   $1,756.8  $1,885.7 $2,103.3
                                 =============================================

    Net assets under management (in
     millions)
    Managed accounts                     $276.8     $276.8    $275.7   $333.9
    Hedge & offshore funds                 27.5       27.5      33.4     40.4
    Mutual funds                        1,427.1    1,427.1   1,533.8  1,698.0
    Private equity and venture
     capital funds                         16.2       16.2      20.2     20.2
                                 ---------------------------------------------
         Total                         $1,747.6   $1,747.6  $1,863.1 $2,092.5
                                 =============================================

    Employee count                          666        666       719      726
                                 =============================================

    (1) Accumulated Other Comprehensive Income (AOCI) includes changes in
        value of available-for-sale securities and cash flow hedges.  We
        believe that such changes represent temporary market fluctuations,
        are not reflective of our market strategy, and therefore,
        exclusion of AOCI provides a reasonable basis for calculating returns.




           FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
           Financial & Statistical Supplement - Operating Results
           (Dollars in thousands, except per share data)
           (Unaudited)

                          Year Ended
                           Dec. 31,
                             2007     Q-4 07     Q-3 07     Q-2 07    Q-1 07
                         -----------------------------------------------------
    Revenues
    Investment banking:
      Capital raising     $282,619    $25,648    $49,692   $110,032   $97,247
      Advisory              34,063      4,973     16,480      6,152     6,458
    Institutional
     brokerage:
      Principal
       transactions         10,152      2,996        968      4,152     2,036
      Agency commissions   104,792     26,153     26,257     28,564    23,818
    Asset management:
      Base management
       fees                 23,549      5,542      6,119      6,360     5,528
    Incentive allocations
     and fees                  401         99         82        116       104
    Principal investment:
      Interest             497,256     50,998    115,007    152,368   178,883
      Net investment loss (216,429)   (22,327)  (131,960)    (3,377)  (58,765)
      Dividends              3,173        805        526        883       959
    Mortgage banking:
      Interest              51,245      4,059      7,194     13,462    26,530
      Net investment
       loss               (222,032)   (83,174)   (27,968)    (4,031) (106,859)
    Other                   15,808      3,242      3,990      4,482     4,094
                         -----------------------------------------------------
         Total revenues    584,597     19,014     66,387    319,163   180,033
    Interest expense       477,437     52,583    112,072    143,231   169,551
                         -----------------------------------------------------
         Revenues, net of
          interest expense 107,160    (33,569)   (45,685)   175,932    10,482
                         -----------------------------------------------------

    Non-interest expenses
    Compensation and
     benefits              361,355     69,533     80,955    106,885   103,982
    Professional services   55,741     15,598     12,281     14,008    13,854
    Business development    43,518     10,878      7,713     11,158    13,769
    Clearing and
     brokerage fees         12,514      2,797      3,953      3,063     2,701
    Occupancy and
     equipment              52,302     13,791     12,695     12,699    13,117
    Communications          28,690      6,899      7,148      7,592     7,051
    Other operating
     expenses               82,246     15,706     16,140     18,684    31,716
    Impairment of
     goodwill              162,765    108,013          -     28,900    25,852
    Restructuring
     charges                46,985     21,466      6,172      3,862    15,485
                         -----------------------------------------------------
    Total non-interest
     expenses              846,116    264,681    147,057    206,851   227,527
                         -----------------------------------------------------

    Operating loss        (738,956)  (298,250)  (192,742)   (30,919) (217,045)

    Other income (loss)    104,062          4     (2,450)   105,677       831
                         -----------------------------------------------------

    (Loss) income before
     income taxes and
     minority interest    (634,894)  (298,246)  (195,192)    74,758  (216,214)

    Income tax provision
     (benefit)              22,932    (15,817)    15,288     55,011   (31,550)
    Minority interest
     in earnings (losses)
     of consolidated
     subsidiary                774    (12,008)       165      9,538     3,079
                         -----------------------------------------------------

    Net (loss) income    $(658,600) $(270,421) $(210,645)   $10,209 $(187,743)
                         =====================================================


    ROE (annualized)        -84.2%    -138.3%     -90.2%       3.7%    -69.5%

    ROE (annualized-
     excluding AOCI)(1)     -82.7%    -135.8%     -88.7%       3.7%    -69.0%


    Total shareholders'
     equity               $393,691   $393,691   $698,214 $1,012,635  $989,213
    Total shareholders'
     equity, net of
     AOCI (1)             $406,762   $406,762   $714,566   $996,283  $990,460

    Basic (loss)
     earnings per
     share                  $(3.94)    $(1.77)    $(1.25)     $0.06    $(1.09)
    Diluted (loss)
     earnings per
     share                  $(3.94)    $(1.77)    $(1.25)     $0.06    $(1.09)

    Ending shares
     outstanding
     (in thousands)        150,674    150,674    158,671    173,756   172,846

    Book value per
     share                   $2.61      $2.61      $4.40      $5.83     $5.72
    Book value per
     share, net of
     AOCI (1)                $2.70      $2.70      $4.50      $5.73     $5.73

    Gross assets under
     management
     (in millions)
    Managed accounts        $347.1     $347.1     $345.6     $291.3    $258.8
    Hedge & offshore
     funds                    52.1       52.1       61.7       61.7      67.1
    Mutual funds           2,046.5    2,046.5    2,292.3    2,482.6   2,412.9
    Private equity
     and venture
     capital funds            23.8       23.8       31.3       33.8      41.2
                         -----------------------------------------------------
        Total             $2,469.5   $2,469.5   $2,730.9   $2,869.4  $2,780.0
                         =====================================================

    Net assets under
     management
     (in millions)
    Managed accounts        $347.1     $347.1     $345.6     $291.3    $258.8
    Hedge & offshore
     funds                    50.7       50.7       58.1       58.1      62.5
    Mutual funds           2,034.6    2,034.6    2,285.1    2,474.7   2,406.4
    Private equity
     and venture
     capital funds            22.6       22.6       29.8       32.0      38.0
                         -----------------------------------------------------
        Total             $2,455.0   $2,455.0   $2,718.6   $2,856.1  $2,765.7
                         =====================================================

    Employee count           1,025      1,025      1,290      2,151     2,592
                         =====================================================


    (1) Accumulated Other Comprehensive Income (AOCI) includes changes in
        value of available-for-sale securities and cash flow hedges.  We
        believe that such changes represent temporary market fluctuations, are
        not reflective of our market strategy, and therefore, exclusion of
        AOCI provides a reasonable basis for calculating returns.

    (2) Effective January 1, 2008, the Company elected to change its method of
        amortizing and accreting premiums, discounts and other deferred costs
        on its mortgage-backed securities portfolio to the "Contractual
        Method", in accordance with SFAS 91.  See the Company's quarterly
        filing filed with the Securities and Exchange Commission for the
        period ending March 31, 2008 for further discussion.




           FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
           CONSOLIDATED BALANCE SHEETS
           (Dollars and shares in thousands, except per share amounts)
           (Unaudited)

    ASSETS                                       30-Sep-08         31-Dec-07
                                                 ---------         ---------

    Cash and cash equivalents                     $227,162          $692,360
    Restricted cash                                    172            14,166
    Receivables                                    429,253            75,357
    Investments:
     Mortgage-backed securities, at fair value   2,592,379         1,791,480
     Loans held for sale, net                          -              65,074
     Long-term investments                         106,795           169,274
     Trading securities, at fair value              25,092            19,057
    Due from clearing broker                        17,168                 -
    Derivative assets, at fair value                 6,767             3,514
    Intangible assets, net                           9,372             9,837
    Furniture, equipment, software and
     leasehold improvements, net                    25,998            30,451
    Prepaid expenses and other assets               65,790            74,385
                                                 ---------         ---------
         Total assets                           $3,505,948        $2,944,955
                                                 =========         =========


    LIABILITIES AND SHAREHOLDERS' EQUITY

    Liabilities:
    Trading account securities sold but not
     yet purchased, at fair value                   $4,601              $206
    Repurchase agreements                        2,374,715         1,744,377
    Securities purchased                           227,191                 -
    Derivative liabilities, at fair value            3,788             3,558
    Interest payable                                 4,438             5,746
    Accrued compensation and benefits               39,237            57,000
    Due to clearing broker                             -               7,059
    Accounts payable, accrued expenses and
     other liabilities                              50,616           105,456
    Short-term loan financing                          -              63,981
    Long-term debt                                 313,358           320,820
                                                 ---------         ---------
         Total liabilities                       3,017,944         2,308,203
                                                 ---------         ---------

    Minority interest                              219,907           243,061

    Shareholders' equity:
    Common stock, 159,360 and 151,883 shares         1,594             1,519
    Additional paid-in capital                   1,485,482         1,468,801
    Accumulated other comprehensive loss, net
     of taxes                                       (6,450)          (13,071)
    Accumulated deficit                         (1,212,529)       (1,063,558)
                                                 ---------         ---------
         Total shareholders' equity                268,097           393,691
                                                 ---------         ---------

         Total liabilities and shareholders'
          equity                                $3,505,948        $2,944,955
                                                 =========         =========
 

For further information: Media +1-703-469-1004 media@fbr.com Investors Kurt Harrington +1-703-469-1080 ir@fbr.com