FBR Group Reports First Quarter Earnings
PRNewswire - First Call
Arlington, Virginia
NYSE: FBR

ARLINGTON, Va., April 24 /PRNewswire-FirstCall/ -- Friedman, Billings, Ramsey Group, Inc. (FBR Group; NYSE: FBR) today reported net after-tax earnings of $45.1 million, or $0.30 per share (diluted), for the quarter ended March 31, 2008 compared to a net after-tax loss of $185.9 million, or $1.08 per share (diluted) in the first quarter of 2007.

FBR Group ended the quarter with $667 million of consolidated total capital, including $318 million of trust preferred securities. Of this capital, $259 million was attributable to FBR Group's 52% ownership interest in FBR Capital Markets Corporation (FBR Capital Markets) (Nasdaq: FBCM). Of the remaining $408 million in capital, FBR Group had approximately $240 million invested in cash and agency securities at the end of the first quarter. Book value net of Accumulated Other Comprehensive Income (AOCI)(1) as of March 31, 2008 was $3.02 per share compared to book value net of AOCI of $2.70 as of December 31, 2007.

    The first quarter 2008 results reflect:

    -- a $73.0 million non-cash GAAP reversal of pre-bankruptcy losses
       relating to First NLC Financial Services (FNLC),

    -- $3.4 million of losses related primarily to pre-bankruptcy FNLC
       activities,

    -- $15.0 million of investment-related losses, including $3.6 million
       related to merchant banking and $10.6 million related to non-prime
       securities,

    -- a $4.2 million net operating loss at FBR Group for the quarter, and

    -- a $5.3 million loss, representing FBR Group's proportionate share of
       52%-owned FBR Capital Markets' first quarter loss.

The $372 million net operating loss carry-forward and the $268 million of capital loss carry-forward disclosed last quarter remain a potential future economic benefit.

"We benefited from low leverage and a strong liquidity position during the quarter," said J. Rock Tonkel, Jr., President and Chief Operating Officer of FBR Group. "Going forward, we expect to benefit from the full effect of the $578 million of agency hybrid securities added during the first quarter which had a spread in excess of 225 basis points on March 31st. In addition, we have reduced operating expenses from ongoing operations by 28% from the average 2007 quarterly run-rate, and we expect additional cost reductions during the remainder of 2008."

Mortgage Investment Portfolio

Excluding FBR Capital Markets, FBR Group's investments in mortgage-backed securities (MBS), primarily government agency securities, averaged $1.9 billion with a one-month CPR of 9.9, and an ending net premium of $13 million. The net yield on MBS for the first quarter was 4.76% with a corresponding cost of funds of 3.76% for a net spread of 1.00%. At the end of the quarter, total MBS was $2.5 billion with a yield of 4.22% and a cost of funds of 2.81% for a net spread of 1.41%.

Merchant Banking

Excluding merchant banking investments of $54.0 million at FBR Capital Markets, the total value of the merchant banking investments held by FBR Group at the close of the first quarter was $44.5 million.

Looking Ahead

"We continue to examine strategies to maximize the economic benefit that can be derived from the Company's substantial net operating and capital loss carry-forwards," said Eric F. Billings, Chairman and Chief Executive Officer of FBR Group. "Our balance sheet at the end of the quarter includes $408 million of long-term capital, approximately $240 million of which is in cash and highly liquid agency securities. This financial strength positions us well to manage through the current environment with a goal of growing earnings and capital and increasing shareholder value as we continue to implement our core strategy of investing in a leveraged portfolio of hybrid agency mortgage- backed securities on a hedged basis."

FBR Capital Markets Corporation

FBR Capital Markets yesterday reported a net after-tax loss of $10.2 million, or $0.16 per share (diluted), for the quarter ended March 31, 2008, compared to net after-tax income of $11.0 million, or $0.17 per share (diluted) in the first quarter of 2007.

Net revenues for the first quarter were $104.0 million compared to net revenues of $60.7 million in the fourth quarter of 2007 and $143.2 million in first quarter of 2007. At the close of the first quarter, FBR Capital Markets had $503.0 million in equity, $313.3 million of cash, and a book value of $7.77 per share.

Complete financial results and tables for FBR Capital Markets can be found at www.fbr.com .

FBR Group will host an earnings conference call this morning, Thursday, April 24, 2008 at 9:00 A.M. U.S. EDT. Investors wishing to listen to the call 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, the effect of demand for public offerings, activity in the secondary securities markets, interest rates, costs of borrowing, interest spreads, 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 follows.



    FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
    (Dollars in thousands, except per share amounts)
    (Unaudited)
                                                 Three Months Ended
                                                      March 31,

                                           2008        %      2007         %
                                       ---------- ------- ---------- --------
    REVENUES:
    Investment banking:
      Capital raising                    $64,910    70.3%   $97,247    787.6%
      Advisory                             5,076     5.5%     6,458     52.3%
    Institutional brokerage:
      Principal transactions               5,957     6.5%     2,036     16.5%
      Agency commissions                  25,850    28.0%    23,818    192.9%
    Asset management:
      Base management fees                 4,644     5.0%     5,528     44.8%
      Incentive allocations and fees           -     0.0%       104      0.8%
    Principal investment:
      Interest                            25,914    28.1%   181,696   1471.6%
      Net investment loss                (19,687)  -21.3%   (59,713)  -483.6%
      Dividends                              429     0.5%       959      7.8%
    Mortgage banking:
      Interest                                36     0.0%    26,530    214.9%
      Net investment income (loss)           468     0.5%  (106,859)  -865.5%
    Other                                  2,335     2.5%     4,094     33.1%
                                       ---------- ------- ---------- --------
        Total revenues                   115,932   125.6%   181,898   1473.2%
    Interest expense                      23,650    25.6%   169,551   1373.2%
                                       ---------- ------- ---------- --------
        Revenues, net of interest
         expense                          92,282   100.0%    12,347    100.0%
                                       ---------- ------- ---------- --------

    NON-INTEREST EXPENSES:
    Compensation and benefits             76,954    83.4%   103,982    842.2%
    Professional services                 12,467    13.5%    13,854    112.2%
    Business development                  12,294    13.3%    13,769    111.5%
    Clearing and brokerage fees            3,630     3.9%     2,701     21.9%
    Occupancy and equipment                9,189    10.0%    13,117    106.2%
    Communications                         6,018     6.5%     7,051     57.1%
    Other operating expenses               5,384     5.8%    31,716    256.8%
    Goodwill impairment                        -     0.0%    25,852    209.3%
    Restructuring charges                      -     0.0%    15,485    125.3%
                                       ---------- ------- ---------- --------
        Total non-interest expenses      125,936   136.4%   227,527   1842.5%
                                       ---------- ------- ---------- --------

    Operating loss                       (33,654)  -36.4%  (215,180) -1742.5%
                                       ---------- ------- ---------- --------

    OTHER INCOME:
      Gain on disposition of
       subsidiary and other income        73,037    79.1%       831      6.7%
                                       ---------- ------- ---------- --------

      Income (loss) before income
       taxes and minority interest        39,383    42.7%  (214,349) -1736.0%

    Income tax benefit                      (806)   -0.9%   (31,550)  -255.5%
    Minority interest in (losses)
     earnings of consolidated
     subsidiary                           (4,913)   -5.3%     3,079     24.9%
                                       ---------- ------- ---------- --------

    Net income (loss)                    $45,102    48.9% $(185,878) -1505.4%
                                       ========== ======= ========== ========
    Basic earnings (loss) per share        $0.30             $(1.08)
                                       ==========         ==========
    Diluted earnings (loss) per share      $0.30             $(1.08)
                                       ==========         ==========

     Weighted average shares - basic
      (in thousands)                     150,784            172,850
                                       ==========         ==========
     Weighted average shares - diluted
      (in thousands)                     151,419            172,850
                                       ==========         ==========



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


                                                        Q-1 08
    Revenues                                          ---------
    Investment banking:
      Capital raising                                  $64,910
      Advisory                                           5,076
    Institutional brokerage:
      Principal transactions                             5,957
      Agency commissions                                25,850
    Asset management:
      Base management fees                               4,644
    Principal investment:
      Interest                                          25,914
      Net investment loss                              (19,687)
      Dividends                                            429
    Mortgage banking:
      Interest                                              36
      Net investment income                                468
    Other                                                2,335
                                                      ---------
        Total revenues                                 115,932
    Interest expense                                    23,650
                                                      ---------
        Revenues, net of interest expense               92,282
                                                      ---------

    Non-interest expenses
    Compensation and benefits                           76,954
    Professional services                               12,467
    Business development                                12,294
    Clearing and brokerage fees                          3,630
    Occupancy and equipment                              9,189
    Communications                                       6,018
    Other operating expenses                             5,384
                                                      ---------
        Total non-interest expenses                    125,936
                                                      ---------

    Operating loss                                     (33,654)

    Other income
      Gain on disposition of subsidiary and
       other income                                     73,037
                                                      ---------

    Net income before income taxes and
     minority interest                                  39,383

    Income tax benefit                                    (806)
    Minority interest in losses of
     consolidated subsidiary                            (4,913)

                                                      ---------
    Net income                                         $45,102
                                                      =========

    ROE (annualized)                                     48.9%
    ROE (annualized-excluding AOCI)(1)                   41.8%

    Total shareholders' equity                        $344,408
    Total shareholders' equity, net of
     AOCI(1)                                          $455,761


    Basic earnings per share                             $0.30
    Diluted earnings per share                           $0.30

    Ending shares outstanding (in thousands)           150,915

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

    Gross assets under management (in millions)
    Managed accounts                                    $333.9
    Hedge & offshore funds                                45.1
    Mutual funds                                       1,702.9
      Private equity and venture capital funds            21.4
                                                      ---------
        Total                                         $2,103.3
                                                      =========

    Net assets under management (in millions)
    Managed accounts                                    $333.9
    Hedge & offshore funds                                40.4
    Mutual funds                                       1,698.0
    Private equity and venture capital funds              20.2
                                                      ---------
        Total                                         $2,092.5
                                                      =========

    Employee count                                         726
                                                      =========



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

                              For the
                           twelve months
                               ended
                            December 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                501,130    51,057   115,450   152,927   181,696
      Net investment loss    (221,956)  (22,327) (136,475)   (3,441)  (59,713)
      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        582,944    19,073    62,315   319,658   181,898
    Interest expense          477,437    52,583   112,072   143,231   169,551
                            ---------  --------  --------  --------  --------
        Revenues, net of
         interest expense     105,507   (33,510)  (49,757)  176,427    12,347
                            ---------  --------  --------  --------  --------

    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           (740,609) (298,191) (196,814)  (30,424) (215,180)

    Other income (loss)
      Gain (loss) on sale of
       subsidiary shares      104,062         4    (2,450)  105,677       831
                            ---------  --------  --------  --------  --------

    (Loss) income before
     income taxes and
     minority interest       (636,547) (298,187) (199,264)   75,253  (214,349)

    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       $(660,253)$(270,362)$(214,717)  $10,704  (185,878)
                            =========  ========  ========  ========  ========


    ROE (annualized)            -84.4%   -138.2%    -91.9%      3.9%    -68.8%
    ROE (annualized-
     excluding AOCI)(1)         -82.9%   -135.8%    -90.5%      3.9%    -68.2%


    Total shareholders'
     equity                  $393,691  $393,691  $698,214 $1,012,635 $989,213
    Total shareholders'
     equity, net of AOCI(1)  $406,537  $406,537  $711,693 $1,000,071 $993,753

    Basic (loss) earnings
     per share                 $(3.95)   $(1.77)   $(1.28)    $0.06    $(1.08)
    Diluted (loss) earnings
     per share                 $(3.95)   $(1.77)   $(1.28)    $0.06    $(1.08)

    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     $4.49     $5.76     $5.75

    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.



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


    ASSETS                                       31-Mar-08         31-Dec-07
                                                -----------       -----------
    Cash and cash equivalents                      $337,041          $692,360
    Restricted cash                                     178            14,166
    Receivables                                      69,322            75,357
    Investments:
      Mortgage-backed securities, at fair
       value                                      2,770,334         1,791,480
      Loans held for sale, net                            -            65,074
      Long-term investments                         145,465           169,274
      Trading securities, at fair value              42,675            19,057
    Due from clearing broker                         15,950                 -
    Derivative assets, at fair value                  1,699             3,514
    Intangible assets, net                           10,147             9,837
    Furniture, equipment, software and
     leasehold improvements, net                     27,742            30,451
    Prepaid expenses and other assets                70,183            74,385
                                                -----------       -----------
        Total assets                             $3,490,736        $2,944,955
                                                ===========       ===========


    LIABILITIES AND SHAREHOLDERS ' EQUITY

    Liabilities:
    Trading account securities sold short
     but not yet purchased, at fair value               $60              $206
    Repurchase agreements                         2,458,550         1,744,377
    Derivative liabilities, at fair value            10,937             3,558
    Interest payable                                  2,697             2,991
    Accrued compensation and benefits                38,480            57,000
    Accounts payable, accrued expenses and
     other liabilities                               69,287           105,456
    Due to clearing broker                                -             7,059
    Short-term loan financing                             -            63,981
    Long-term debt                                  322,155           323,575
                                                -----------       -----------
        Total liabilities                         2,902,166         2,308,203
                                                -----------       -----------

    Minority interest                               244,162           243,061

    Shareholders' equity:
      Common stock, 159,505 and 151,883 shares        1,595             1,519
    Additional paid-in capital                    1,472,623         1,468,801
    Accumulated other comprehensive loss,
     net of taxes                                  (111,353)          (12,846)
    Accumulated deficit                          (1,018,457)       (1,063,783)
                                                -----------       -----------
        Total shareholders' equity                  344,408           393,691
                                                -----------       -----------

        Total liabilities and shareholders'
         equity                                  $3,490,736        $2,944,955
                                                ===========       ===========
 

For further information: Media - Lauren Burk +1-703-469-1004 lburk@fbr.com Investors - Paul Beattie +1-703-312-9673 pbeattie@fbr.com