FBR Group Announces Third Quarter 2007 Financial Results
PRNewswire - First Call
Arlington, Virginia
NYSE: FBR

ARLINGTON, Va., Oct. 25 /PRNewswire-FirstCall/ -- Friedman, Billings, Ramsey Group, Inc. (NYSE: FBR) today announced its results for the quarter ended September 30, 2007. The company reported a net after-tax loss for the quarter of $214.7 million, or $1.28 per share, compared to a net after-tax loss of $67.4 million, or $0.39 per share, for the third quarter of 2006. FBR Group's net after-tax loss for the first nine months of 2007 was $389.9 million, or $2.28 per share, compared to a net after-tax loss of $71.1 million, or $0.41 per share, for the first nine months of 2006. Core book value net of Accumulated Other Comprehensive Income (AOCI) at the close of the third quarter was $4.49 compared to $5.76 at the end of the second quarter of 2007(1).

FBR Group ended the quarter with $904 million of consolidated tangible capital, including approximately $320 million of trust preferred securities. Of this tangible capital, $270 million is attributable to FBR Group's 52% ownership interest in FBR Capital Markets Corporation (FBR Capital Markets). Of the remaining $634 million of tangible capital, FBR Group has approximately $480 million in cash and liquid securities, which is available for investment.

    The four principal components of the third quarter results are:
    - $90 million of write downs and losses relating to the company's
      on-balance sheet securitized loan portfolio ("residual interests") that
      reduce the company's economic risk in this portfolio to zero,
    - a net loss of $67 million from the company's mortgage-backed securities
      portfolio and operations, including the previously announced $57 million
      loss on the sale of approximately $4.95 billion of agency
      mortgage-backed securities,
    - an economic loss of $17.2 million(2) associated with restructuring and
      operating costs at First NLC Financial Services (FNLC), of which $15
      million was incurred prior to the agreement announced in July to sell
      FNLC to an affiliate of Sun Capital Partners (Sun Capital), and
    - a $27 million valuation loss relating to the portfolio of conforming and
      non-conforming loans originated by FNLC and for which FBR Group took
      ownership  under the Sun Capital sale agreement, reducing the value of
      those loans to $203 million.

    Share Buyback Program

On July 25, 2007, FBR Group's board of directors passed a resolution increasing an existing share buyback authorization from 14 million to 50 million shares. Since that date, the company has repurchased 22.8 million shares at an average price of $4.66 a share.

Merchant Banking

Excluding merchant banking investments of $59.9 million at FBR Capital Markets, the total value of the merchant banking investments held by FBR Group at the close of the third quarter was $57.7 million. During the third quarter, FBR Group recognized $25 million in net gains from its merchant banking portfolio.

First NLC

As disclosed on July 26, 2007, an agreement entered into with Sun Capital limits FBR Group's ongoing economic exposure to FNLC to $15 million, representing a 20% ownership interest. At the end of the third quarter, this exposure to FNLC was $12 million. However, FBR Group will continue to consolidate FNLC for financial reporting purposes until the transfer of ownership to Sun Capital is completed. The company currently expects this transfer to be completed by year end.

Looking Ahead

"Economic exposure to our securitized, non-recourse mortgage loan portfolio has been eliminated, and our remaining exposure to FNLC is $12 million," said Eric F. Billings, Chairman and Chief Executive Officer of FBR Group. "With nearly $500 million in cash and highly liquid securities in addition to our 52% ownership of FBR Capital Markets, our risk profile is significantly reduced. Going forward, we are pleased to have the financial flexibility to execute our core agency mortgage backed security strategy through which we believe we will be able to achieve very acceptable returns."

FBR Capital Markets Corporation

FBR Capital Markets (Nasdaq: FBCM), a majority-owned subsidiary of FBR Group, yesterday reported net after-tax third quarter 2007 earnings of $0.3 million, compared to an after-tax loss of $22.6 million, or $0.37 per share (diluted), in the third quarter of 2006. Net revenues for the third quarter of 2007 were $106.2 million compared to net revenues of $42.0 million in the third quarter of 2006.

For the nine months ending September 30, 2007, FBR Capital Markets earned $33.0 million after tax, or $0.51 per share (diluted), compared to an after- tax loss of $16.8 million, or $0.33 per share (diluted), for the first nine months of 2006. Net revenues for the first nine months of 2007 were $418.8 million compared to $244.0 million for the first nine months of 2006.

At the close of the third quarter, FBR Capital Markets had $527.0 million in equity, $387.1 million of cash, and no debt, and its book value was $8.25 per share compared to $8.20 per share at the end of the second quarter of 2007. Complete financial results and tables for FBR Capital Markets can be found at www.fbr.com.

FBR Group will host an earnings conference call on Thursday, October 25, 2007 at 9:00 A.M. U.S. EDT. Investors wishing to listen to the earnings conference call may do so via the web at: http://phx.corporate-ir.net/phoenix.zhtml?c=71352&p=irol-irhome.

Replays of the web cast will be available after the call.

Friedman, Billings, Ramsey Group, Inc. (FBR) provides investment banking*, merger and acquisition advisory services*, institutional brokerage*, asset management and private wealth services through majority ownership of FBR Capital Markets Corporation (FBR Capital Markets). FBR Capital Markets focuses capital and financial expertise on eight industry sectors: consumer, diversified industrials, energy & natural resources, financial institutions, healthcare, insurance, real estate, and technology, media & telecom. FBR Group also invests in mortgage-related assets and merchant banking opportunities. FBR is headquartered in the Washington, D.C. metropolitan area with offices in Arlington, VA, Boston; Dallas; Houston; Irvine; New York; Phoenix; San Francisco; London, England; and Sydney, Australia. For more information, please visit www.fbr.com.

*Friedman, Billings, Ramsey & Co., Inc.

(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.

(2)During the third quarter, FBR Group recorded consolidated GAAP losses, excluding valuation losses related to the mortgage loans assumed under the agreement with Sun Capital, totaling $28 million associated with FNLC operations. However, the economic loss to the company, once the Sun Capital transaction closes, will be $17.2 million. There are several components to the economic loss. As noted in the announcement regarding the agreement with Sun Capital, FBR Group funded approximately $15 million in FNLC operating losses and restructuring costs that were incurred prior to signing the agreement with Sun Capital. The company also recorded net interest on the loans assumed under the agreement with Sun Capital and recognized an additional $14 million of losses and restructuring expenses subsequent to signing the agreement, but its economic exposure to these costs is limited to $3 million, corresponding to FBR Group's 20% economic ownership interest in FNLC. The remaining $11 million recorded during the third quarter by FBR Group will be recaptured upon the final closing of the agreement with Sun Capital.

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)

                                                     Quarter ended
                                                     September 30,
                                        2007        %        2006       %
                                      --------  --------   --------  -------
    REVENUES:
    Investment banking:
      Capital raising                 $49,692    -99.9%     $6,852     -8.3%
      Advisory                         16,480    -33.1%      5,826     -7.0%
    Institutional brokerage:
      Principal transactions              968     -1.9%     (1,658)     2.0%
      Agency commissions               26,257    -52.8%     24,388    -29.5%
      Mortgage trading interest             -      0.0%     13,845    -16.7%
      Mortgage trading investment loss      -               (1,546)     1.9%
    Asset management:
      Base management fees              6,119    -12.3%      4,880     -5.9%
      Incentive allocations and fees       82     -0.2%        (31)     0.0%
    Principal investment:
      Interest                        115,450   -232.0%    150,649   -182.0%
      Net investment loss            (136,475)   274.3%   (170,621)   206.1%
      Dividends                           526     -1.1%      4,750     -5.7%
    Mortgage banking:
      Interest                          7,194    -14.5%     22,476    -27.1%
      Net investment (loss) income    (27,968)    56.2%     16,092    -19.4%
    Other                               3,990     -7.9%      6,540     -8.0%
                                      --------  --------   --------  -------
      Total revenues                   62,315   -125.2%     82,442    -99.6%
    Interest expense                  112,072   -225.2%    165,237   -199.6%
                                      --------  --------   --------  -------
      Revenues, net of interest
       expense                        (49,757)   100.0%    (82,795)   100.0%
                                      --------  --------   --------  -------
    NON-INTEREST EXPENSES:
    Compensation and benefits          80,955   -162.7%     69,405    -83.8%
    Professional services              12,281    -24.7%     14,308    -17.3%
    Business development                7,713    -15.5%      7,577     -9.2%
    Clearing and brokerage fees         3,953     -7.9%      2,917     -3.5%
    Occupancy and equipment            12,695    -25.5%     12,909    -15.6%
    Communications                      7,148    -14.4%      6,471     -7.8%
    Other operating expenses           16,140    -32.4%     23,291    -28.1%
    Restructuring charges               6,172    -12.4%          -      0.0%
                                      --------  --------   --------  -------
      Total non-interest expenses     147,057   -295.5%    136,878   -165.3%
                                      --------  --------   --------  -------
    Operating loss                   (196,814)   395.5%   (219,673)   265.3%

    OTHER (LOSS) INCOME:
    (Loss) gain on sale of subsidiary
     shares                            (2,450)     4.9%    121,511   -146.8%
                                      --------  --------   --------  -------
      Loss before income taxes and
       minority interest             (199,264)   400.5%    (98,162)   118.6%

    Income tax provision (benefit)     15,288    -30.7%    (26,062)    31.5%
    Minority interest in earnings
     (losses) of consolidated
     subsidiary                           165     -0.3%     (4,708)     5.7%
                                      --------  --------   --------  -------
      Net loss                      $(214,717)   431.5%   $(67,392)    81.4%
                                      ========  ========   ========  =======
    Basic loss per share               $(1.28)              $(0.39)
                                      ========             ========
    Diluted loss per share             $(1.28)              $(0.39)
                                      ========             ========
      Weighted average shares-basic   167,874              172,091
                                      ========             ========
      Weighted average shares-diluted 167,874              172,091
                                      ========             ========


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

                                                Nine Months Ended
                                                  September 30,
                                       2007         %        2006        %
                                     --------   --------   --------  -------
    REVENUES:
    Investment banking:
      Capital raising                $256,971    184.8%   $118,304     57.8%
      Advisory                         29,090     20.9%     14,976      7.3%
    Institutional brokerage:
      Principal transactions            7,156      5.1%      5,822      2.8%
      Agency commissions               78,639     56.6%     76,289     37.3%
      Mortgage trading interest             -      0.0%     48,638     23.8%
      Mortgage trading net investment
       loss                                 -      0.0%     (2,992)    -1.5%
    Asset management:
      Base management fees             18,007     13.0%     15,042      7.4%
      Incentive allocations and fees      302      0.2%        924      0.5%
    Principal investment:
      Interest                        450,073    323.8%    413,388    202.0%
      Net investment loss            (199,629)  -143.6%   (175,726)   -85.9%
      Dividends                         2,368      1.7%     12,508      6.1%
    Mortgage banking:
      Interest                         47,186     33.9%     66,856     32.7%
      Net investment (loss) income   (138,858)   -99.9%     56,231     27.5%
    Other                              12,566      9.1%     16,992      8.3%
                                      --------  --------   --------  -------
      Total revenues                  563,871    405.6%    667,252    326.1%
    Interest expense                  424,854    305.6%    446,909    218.4%
    Provision for loan losses               -      0.0%     15,740      7.7%
                                      --------  --------   --------  -------
      Revenues, net of interest
       expense and provision for
       loan losses                    139,017    100.0%    204,603    100.0%
                                      --------  --------   --------  -------

    NON-INTEREST EXPENSES:
    Compensation and benefits         291,822    209.9%    224,634    109.8%
    Professional services              40,143     28.9%     41,498     20.3%
    Business development               32,640     23.5%     30,266     14.8%
    Clearing and brokerage fees         9,717      7.0%      8,315      4.1%
    Occupancy and equipment            38,511     27.7%     36,383     17.8%
    Communications                     21,791     15.7%     18,091      8.8%
    Other operating expenses           66,540     47.9%     69,261     33.9%
    Impairment of goodwill             54,752     39.4%          -      0.0%
    Restructuring charges              25,519     18.4%          -      0.0%
                                      --------  --------   --------  -------
      Total non-interest expenses     581,435    418.4%    428,448    209.5%
                                      --------  --------   --------  -------
    Operating loss                   (442,418)  -318.4%   (223,845)  -109.4%

    OTHER INCOME:
      Gain on sale of subsidiary
       shares                         104,058     74.9%    121,511     59.4%
                                      --------  --------   --------  -------
      Loss before income taxes
       and minority interest         (338,360)  -243.4%   (102,334)   -50.0%

    Income tax provision (benefit)     38,749     27.9%    (26,541)   -13.0%
    Minority interest in earnings
     (losses) of consolidated
     subsidiary                        12,782      9.2%     (4,708)    -2.3%
                                      --------  --------   --------  -------

      Net loss                      $(389,891)  -280.5%   $(71,085)   -34.7%
                                      ========  ========   ========  =======
    Basic loss per share               $(2.28)              $(0.41)
                                      ========             ========
    Diluted loss per share             $(2.28)              $(0.41)
                                      ========             ========
      Weighted average shares-basic   171,308              171,376
                                      ========             ========
      Weighted average shares-diluted 171,308              171,376
                                      ========             ========



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

                                 For the
                            nine months ended
                                September
                                 30, 2007      Q-3 07      Q-2 07     Q-1 07
                               ---------------------------------------------
    Revenues
    Investment banking:
      Capital raising            $256,971     $49,692    $110,032    $97,247
      Advisory                     29,090      16,480       6,152      6,458
    Institutional brokerage:
      Principal transactions        7,156         968       4,152      2,036
      Agency commissions           78,639      26,257      28,564     23,818
    Asset management:
      Base management fees         18,007       6,119       6,360      5,528
      Incentive allocations and
       fees                           302          82         116        104
    Principal investment:
      Interest                    450,073     115,450     152,927    181,696
      Net investment loss        (199,629)   (136,475)     (3,441)   (59,713)
      Dividends                     2,368         526         883        959
    Mortgage banking:
      Interest                     47,186       7,194      13,462     26,530
      Net investment loss        (138,858)    (27,968)     (4,031)  (106,859)
    Other                          12,566       3,990       4,482      4,094
                               ---------------------------------------------
      Total revenues              563,871      62,315     319,658    181,898
    Interest expense              424,854     112,072     143,231    169,551
                               ---------------------------------------------
      Revenues, net of
       interest expense           139,017     (49,757)    176,427     12,347
                               ---------------------------------------------

    Non-interest expenses
    Compensation and benefits     291,822      80,955     106,885    103,982
    Professional services          40,143      12,281      14,008     13,854
    Business development           32,640       7,713      11,158     13,769
    Clearing and brokerage fees     9,717       3,953       3,063      2,701
    Occupancy and equipment        38,511      12,695      12,699     13,117
    Communications                 21,791       7,148       7,592      7,051
    Other operating expenses       66,540      16,140      18,684     31,716
    Impairment of goodwill         54,752           -      28,900     25,852
    Restructuring charges          25,519       6,172       3,862     15,485
                               ---------------------------------------------
      Total non-interest expenses 581,435     147,057     206,851    227,527
                               ---------------------------------------------
    Operating loss               (442,418)   (196,814)    (30,424)  (215,180)

    Other income (loss)
      Gain (loss) on sale of
       subsidiary shares          104,058      (2,450)    105,677        831
                               ---------------------------------------------
    (Loss) income before income
     taxes and minority interest (338,360)   (199,264)     75,253   (214,349)

    Income tax provision (benefit) 38,749      15,288      55,011    (31,550)
    Minority interest in earnings
     of consolidated subsidiary    12,782         165       9,538      3,079
                               ---------------------------------------------
    Net (loss) income           $(389,891)  $(214,717)    $10,704  $(185,878)
                               =============================================

    ROE (annualized)               -55.6%      -91.9%        3.9%     -68.8%
    ROE (annualized-excluding
     AOCI) (1)                     -54.8%      -90.5%        3.9%     -68.2%


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

    Basic loss (earnings) per
     share                         $(2.28)     $(1.28)      $0.06     $(1.08)
    Diluted loss (earnings)
     per share                     $(2.28)     $(1.28)      $0.06     $(1.08)

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

    Book value per share            $4.40       $4.40       $5.83      $5.72
    Book value per share, net
     of AOCI (1)                    $4.49       $4.49       $5.76      $5.75

    Gross assets under
     management (in millions)
    Managed accounts               $345.6      $345.6      $291.3     $258.8
    Hedge & offshore funds           61.7        61.7        61.7       67.1
    Mutual funds                  2,292.3     2,292.3     2,482.6    2,412.9
    Private equity and venture
     capital funds                   31.3        31.3        33.8       41.2
                               ---------------------------------------------
      Total                      $2,730.9    $2,730.9    $2,869.4   $2,780.0
                               =============================================
    Net assets under
     management (in millions)
    Managed accounts               $345.6      $345.6      $291.3     $258.8
    Hedge & offshore funds           58.1        58.1        58.1       62.5
    Mutual funds                  2,285.1     2,285.1     2,474.7    2,406.4
    Private equity and venture
     capital funds                   29.8        29.8        32.0       38.0
                               ---------------------------------------------
      Total                      $2,718.6    $2,718.6    $2,856.1   $2,765.7
                               =============================================
    Employee count                  1,290       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.
    Financial & Statistical Supplement -- Operating Results
     (Dollars in thousands, except per share data)
     (Unaudited)

                     For the
                   year ended
               December 31, 2006   Q-4 06      Q-3 06      Q-2 06      Q-1 06
               ---------------------------------------------------------------
    Revenues
    Investment
     banking:
      Capital
       raising       $190,187     $71,883      $6,852     $45,117     $66,335
      Advisory         24,148       9,172       5,826       6,281       2,869
    Institutional
     brokerage:
      Principal
       transactions     5,814          (8)     (1,658)      1,760       5,720
      Agency
       commissions    101,009      24,720      24,388      28,492      23,409
      Mortgage trading
       interest        51,147       2,509      13,845      17,143      17,650
      Mortgage trading
       net investment
       loss            (3,301)       (309)     (1,546)       (209)     (1,237)
    Asset management:
      Base management
       fees            20,093       5,051       4,880       5,065       5,097
      Incentive
       allocations
       and fees         1,327         403         (31)        (53)      1,008
    Principal
     investment:
      Interest        594,879     181,491     150,649     113,613     149,126
      Net investment
      (loss) income  (184,552)     (8,826)   (170,621)    (31,290)     26,185
      Dividends        14,551       2,043       4,750       4,059       3,699
    Mortgage banking:
      Interest         88,662      21,806      22,476      21,267      23,113
      Net investment
       income          83,786      27,555      16,092      29,401      10,738
    Other              20,154       3,162       6,540       5,465       4,987
               ---------------------------------------------------------------
      Total
       revenues     1,007,904     340,652      82,442     246,111     338,699
    Interest
     expense          611,800     164,891     165,237     128,189     153,483
    Provision for
     loan losses       15,740           -           -       7,348       8,392
               ---------------------------------------------------------------
      Revenues,
       net of
       interest
       expense and
       provision for
       loan losses    380,364     175,761     (82,795)    110,574     176,824
               ---------------------------------------------------------------
    Non-interest
     expenses
    Compensation
     and benefits     309,065      84,431      69,405      71,732      83,497
    Professional
     services          59,722      18,224      14,308      12,925      14,265
    Business
     development       42,150      11,884       7,577       8,604      14,085
    Clearing
     and brokerage
     fees              11,820       3,505       2,917       3,082       2,316
    Occupancy
     and equipment     50,051      13,668      12,909      12,232      11,242
    Communications     24,398       6,307       6,471       6,013       5,607
    Other operating
     expenses          89,377      20,116      23,291      24,993      20,977
               ---------------------------------------------------------------
      Total non-
       interest
       expenses       586,583     158,135     136,878     139,581     151,989
               ---------------------------------------------------------------
    Operating
     (loss) income   (206,219)     17,626    (219,673)    (29,007)     24,835

    Other income
      Gain on sale
       of subsidiary
       shares         121,511           -     121,511           -           -
               ---------------------------------------------------------------

    (Loss) income
     before income
     taxes and
     minority
     interest         (84,708)     17,626     (98,162)    (29,007)     24,835

    Income tax
    (benefit)
     provision        (14,682)     11,859     (26,062)      1,240      (1,719)
    Minority interest
     in (loss) earnings
     of consolidated
     subsidiary        (2,751)      1,957      (4,708)          -           -
               ---------------------------------------------------------------
    Net (loss)
     income          $(67,275)     $3,810    $(67,392)   $(30,247)    $26,554
               ===============================================================

    ROE (annualized)    -5.4%        1.3%      -22.1%       -9.4%        8.2%
    ROE (annualized-
     excluding AOCI)(1) -5.4%        1.3%      -22.2%       -9.5%        8.1%


    Total shareholders'
     equity        $1,171,045  $1,171,045  $1,163,681  $1,270,361  $1,301,949
    Total shareholders'
     equity, net
     of AOCI (1)   $1,186,181  $1,186,181  $1,181,372  $1,250,117  $1,306,450

    Basic (loss)
     earnings per
     share             $(0.39)      $0.02      $(0.39)     $(0.18)      $0.16
    Diluted (loss)
     earnings per
     share             $(0.39)      $0.02      $(0.39)     $(0.18)      $0.16

    Ending shares
     outstanding
     (in thousands)   172,759     172,759     172,506     171,812     171,236

    Book value per
     share              $6.78       $6.78       $6.75       $7.39       $7.60
    Book value per
     share, net
     of AOCI (1)        $6.87       $6.87       $6.85       $7.28       $7.63

    Gross assets
     under management
     (in millions)

    Managed accounts   $259.9      $259.9      $376.6      $386.8      $383.9
    Hedge & offshore
     funds               97.5        97.5       102.1       125.8       136.6
    Mutual funds      1,961.9     1,961.9     1,825.1     1,750.6     1,849.5
    Private equity
     and venture
     capital funds       42.2        42.2        48.5        48.2        50.5
               ---------------------------------------------------------------
      Total          $2,361.5    $2,361.5    $2,352.3    $2,311.4    $2,420.5
               ===============================================================

    Net assets
     under management
     (in millions)
    Managed accounts   $259.9      $259.9     $376.6      $386.8       $380.9
    Hedge & offshore
     funds               96.4        96.4       98.3       116.1        125.4
    Mutual funds      1,954.7     1,954.7    1,817.8     1,742.6      1,843.4
    Private equity
     and venture
     capital funds       40.5        40.5       46.9        46.7         49.1
               ---------------------------------------------------------------
      Total          $2,351.5    $2,351.5   $2,339.6    $2,292.2     $2,398.8
               ===============================================================

    Employee count      3,019       3,019      2,909       2,651        2,531
               ===============================================================

    (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 in thousands, except per share amounts)
    (Unaudited)

    ASSETS                                      30-Sep-07          31-Dec-06
                                            -------------      -------------
    Cash and cash equivalents                   $692,737           $189,956
    Restricted cash                                  116                132
    Receivables                                   68,735            217,249
    Investments:
      Mortgage-backed securities, at fair
       value                                     470,749          6,870,661
      Loans held for sale, net                 3,255,807          5,367,934
      Long-term investments                      181,098            185,492
      Trading securities, at fair value           19,120             18,180
    Due from clearing broker                      11,675             28,999
    Derivative assets, at fair value              12,159             36,875
    Goodwill                                     108,013            162,765
    Intangible assets, net                        10,228             21,825
    Furniture, equipment, software and
     leasehold improvements, net                  45,782             44,111
    Prepaid expenses and other assets            243,050            208,339
                                            -------------      -------------
         Total assets                         $5,119,269        $13,352,518
                                            =============      =============

    LIABILITIES AND SHAREHOLDERS ' EQUITY

    Liabilities:
    Trading account securities sold short
     but not yet purchased, at fair value        $10,066               $202
    Commercial paper                                   -          3,971,389
    Repurchase agreements                        497,926          3,059,330
    Derivative liabilities, at fair value          1,938             44,582
    Dividends payable                              8,001              8,743
    Interest payable                               6,329             12,239
    Accrued compensation and benefits             39,381             57,227
    Accounts payable, accrued expenses
     and other liabilities                        79,962             81,819
    Short-term debt                               60,000                  -
    Securitization financing, net              3,141,773          4,486,046
    Long-term debt                               323,609            324,453
                                            -------------      -------------
         Total liabilities                     4,168,985         12,046,030
                                            -------------      -------------

    Minority interest                            252,070            135,443

    Shareholders' equity:
    Common stock, 160,055 and 174,712 shares       1,601              1,747
    Additional paid-in capital                 1,503,509          1,562,485
    Accumulated other comprehensive loss,
     net of taxes                                (13,479)           (15,136)
    Accumulated deficit                         (793,417)          (378,051)
                                            -------------      -------------
     Total shareholders' equity                  698,214          1,171,045
                                            -------------      -------------
     Total liabilities and
      shareholders' equity                    $5,119,269        $13,352,518
                                            =============      =============
 

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