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

ARLINGTON, Va., April 26, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Friedman, Billings, Ramsey Group, Inc. (FBR Group) (NYSE: FBR) today announced results for the quarter ended March 31, 2007. FBR Group reported a net after-tax loss for the quarter of $185.9 million, or $1.08 per share (diluted), compared to after-tax earnings of $26.6 million, or $0.16 per share (diluted), for the first quarter of 2006. Core book value net of Accumulated Other Comprehensive Income (AOCI) at the close of the quarter was $5.75 compared to $6.87 at the end of the fourth quarter of 2006(1).

Non-Prime Mortgage Businesses and Investments

FBR Group's loss for the first quarter was attributable to its non-prime mortgage-related businesses, of which First NLC (FNLC), FBR Group's non-prime mortgage origination subsidiary, is the principal component. During the first quarter, FNLC lost $124.2 million on an after-tax basis, a figure that includes a $36.1 million write-down of goodwill and intangible assets and $5.2 million of restructuring and other costs.

In addition, there were $21.8 million in realized losses and write-downs in the value of certain investments in non-prime mortgage companies in FBR Group's merchant banking and other long-term investment portfolio. Lastly, the company revalued its non-prime mortgage loan investment portfolio, recognizing a $34.4 million non-cash, lower-of-cost or market value write- down.

FBR Group announced in March that it is evaluating all strategic alternatives for FNLC that would reduce all of FBR Group's exposure to the non-prime sector. These include, among other alternatives, the possibility of a sale or third-party recapitalization of the business. While we cannot give any assurances with regard to the execution of a specific alternative, we intend to implement one of the alternatives during the second quarter. Further, FNLC has taken extensive steps described below to reduce the current risk in the business. Those steps, together with the implementation of any one of the alternatives under consideration, will substantially reduce FBR Group's financial risk with respect to its ownership of this business.

"This has been an extremely difficult operating environment for the entire non-prime mortgage banking industry, and it has resulted in a series of distressed sales and bankruptcies," said Eric F. Billings, Chairman and Chief Executive Officer of FBR Group. "We believe that FNLC's management has taken aggressive steps designed to limit foreseeable major risks with respect to the business."

Among the actions FNLC has taken are a substantial modification in lending guidelines and significant cost restructuring initiatives. These guideline changes are resulting in substantially lower origination volumes - from approximately $8 billion on an annualized basis in the fourth quarter of 2006 to less than $2 billion currently - and an increase in the value of loans originated. FNLC recently closed on the sale of approximately $712 million of warehouse loans, substantially reducing its unsold loan inventory since the end of the first quarter.

Mortgage Investment Portfolios

In the first quarter, FBR Group's investments in mortgages and mortgage- backed securities generated net interest income of $35.0 million, compared to $37.4 million in the fourth quarter of 2006. The average balance of these portfolios was $11.2 billion during the first quarter and yielded gross income of 6.21% with associated cost of funds of 5.18%, resulting in earned net interest income of 1.03%.

Merchant Banking

Excluding the previously mentioned realized losses and write-downs in certain of the company's investments in non-prime mortgage companies, the investment gains and dividends in FBR Group's merchant banking and other long- term investment portfolio totaled $3.4 million during the first quarter. The total value of FBR Group's merchant banking and other long-term investments at the close of the first quarter was $114.5 million.

FBR Capital Markets Initial Public Offering

In March, FBR Capital Markets Corporation (FBR Capital Markets), FBR Group's 71%-owned equity capital markets and asset management taxable REIT subsidiary, filed an S-1 registration statement with the Securities and Exchange Commission in connection with a planned initial public offering of up to 13,512,500 shares of its common stock that are beneficially owned by FBR Group and certain other selling stockholders. The net proceeds of the offering will all go to FBR Group and the other selling stockholders, if any. If all of the FBR Capital Markets shares that are being offered by FBR Group are sold in the proposed offering, FBR Group's beneficial ownership of FBR Capital Markets common stock will be reduced to 50.5%.

"It is important to note that the difficulties in the non-prime businesses have no direct impact on FBR Capital Markets, which is a separately capitalized company with $430 million in cash and no exposure to FBR Group's non-prime mortgage businesses," Mr. Billings said.

FBR Capital Markets Corporation First Quarter 2007 Results

FBR Capital Markets Corporation reported first quarter pre-tax earnings of $25.8 million on net revenues of $143.2 million. Excluding FASB 123R-related non-cash tax charges of $3.4 million, after-tax earnings were $14.4 million, or $0.22 per share (diluted). Net after-tax earnings for the first quarter were $11.0 million, or $0.17 cents per share (diluted), compared to net after- tax earnings of $4.8 million, or $0.10 per share (diluted), in the first quarter of 2006. The company expects to return to a normalized tax rate in the second quarter.

FBR Capital Market's book value at the close of the quarter was $7.81 per share compared to $7.57 at the end of the fourth quarter of 2006. At the close of the first quarter, FBR Capital Markets had $502 million in equity, $430 million of cash, and no funded liabilities or debt. Complete financial results for FBR Capital Markets are included in the tabular material in this release.

Equity Capital Markets

In the first quarter, FBR Capital Markets generated investment banking revenues of $103.7 million compared to $69.2 million in the first quarter of 2006 and $81.1 million in the fourth quarter of 2006. The firm raised a total of $3.0 billion in 13 capital markets transactions, including four initial public offerings. FBR Capital Markets acted as sole or joint book runner for eight of the 13 transactions and completed seven advisory assignments during the quarter.

In a very competitive market environment, FBR Capital Markets recorded agency commissions and principal transactions revenues of $25.8 million in the first quarter of 2007 compared to $29.1 million in the first quarter of 2006 and $24.7 million in the fourth quarter of 2006.

Asset Management

In FBR Capital Markets' asset management/private wealth business, asset management base fees and incentive fees were $5.6 million for the first quarter of 2007, compared to $5.5 million in the fourth quarter of 2006. During the quarter we opened two new mutual funds and reopened a fund that had been closed to new investors since October 2004. Assets under management as of March 31, 2007 were $2.8 billion compared to $2.4 billion at the end of the fourth quarter of 2006, an increase of 17%.

"Our investment banking activity was well diversified across our industry groups during the quarter," said Richard J. Hendrix, President and Chief Operating Officer of FBR Capital Markets," and our new M&A team has already had a positive impact on our business development activities. Most importantly, in support of the evolution and growth of our business, we made a series of important leadership appointments during the quarter that included the naming of co-heads of investment banking, a new head of research, a new director of human capital, and several key positions in our growing international operations."

Mr. Billings added, "We are very pleased with our capital markets businesses and the progress we have made in executing our strategic plan."

The firm will host an earnings conference call on Thursday, April 26, 2007 at 9:00 a.m. U.S. EST. 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 Group) 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 & telecommunications. For the benefit of its shareholders, 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, London, New York, Phoenix and San Francisco. Friedman, Billings, Ramsey Group, Inc. is the parent company of First NLC Financial Services, Inc., a non-conforming residential mortgage originator headquartered in Deerfield Beach, Florida. For more information, please visit http://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.

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, the overall environment for interest rates, costs of borrowing, interest spreads, mortgage pre-payment speeds, the adverse impact of delinquencies, losses and declining real estate values on the non-conforming mortgage loan origination business, credit and regulatory risks associated with the business of originating, holding and securitizing non-conforming residential mortgage loans which can result in losses on these assets, sustainability of loan origination volumes and levels of origination costs, continued availability of credit facilities for the origination of mortgage loans, the ability to sell or securitize loans originated by FNLC on favorable terms or at all, deterioration in the performance of loans sold by FNLC and the related repurchase activities, 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., followed by FBR Capital Markets Corporation).

                                     ###

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

                                            2007        %      2006       %
                                           -------    ------  -------   -----
    REVENUES:
    Investment banking:
      Capital raising                      $97,247    787.6%  $66,335   37.5%
      Advisory                               6,458     52.3%    2,869    1.6%
    Institutional brokerage:
      Principal transactions                 2,036     16.5%    5,720    3.2%
      Agency commissions                    23,818    192.9%   23,409   13.2%
      Mortgage trading interest                  -      0.0%   17,650   10.0%
      Mortgage trading net investment loss       -      0.0%   (1,237)  -0.7%
    Asset management:
      Base management fees                   5,528     44.8%    5,097    2.9%
      Incentive allocations and fees           104      0.8%    1,008    0.6%
    Principal investment:
     Interest                              181,696   1471.6%  149,126   84.3%
     Net investment (loss) income          (59,713)  -483.6%   26,185   14.8%
     Dividends                                 959      7.8%    3,699    2.1%
    Mortgage banking:
     Interest                               26,530    214.9%   23,113   13.1%
     Net investment (loss) income         (106,859)  -865.5%   10,738    6.1%
    Other                                    4,094     33.1%    4,987    2.8%
                                          --------   -------  -------  ------
          Total revenues                   181,898   1473.2%  338,699  191.5%
    Interest expense                       169,551   1373.2%  153,483   86.8%
    Provision for loan losses                    -      0.0%    8,392    4.7%
                                          --------   -------  -------  ------
          Revenues, net of interest
           expense and provision for
           loan losses                      12,347    100.0%  176,824  100.0%
                                          --------   -------  -------  ------

    NON-INTEREST EXPENSES:
    Compensation and benefits              103,982    842.2%   83,497   47.2%
    Professional services                   13,854    112.2%   14,265    8.1%
    Business development                    13,769    111.5%   14,085    8.0%
    Clearing and brokerage fees              2,701     21.9%    2,316    1.3%
    Occupancy and equipment                 13,117    106.2%   11,242    6.3%
    Communications                           7,051     57.1%    5,607    3.2%
    Other operating expenses                31,716    256.9%   20,977   11.9%
    Impairment of goodwill                  25,852    209.4%      -      0.0%
    Restructuring charges                   15,485    125.4%      -      0.0%
                                          --------   -------  -------  ------
          Total non-interest expenses      227,527   1842.8%  151,989   86.0%
                                          --------   -------  -------  ------

    Operating (loss) income               (215,180) -1742.8%   24,835   14.0%

    OTHER INCOME:
     Gain on sale of subsidiary shares         831      6.7%      -      0.0%
                                          --------   -------  -------  ------

          Net (loss) income before income
           taxes and minority interest    (214,349) -1736.0%   24,835   14.0%

    Income tax benefit                     (31,550)  -255.5%   (1,719)  -1.0%
    Minority interest in earnings of
     consolidated subsidiary                 3,079     24.9%      -      0.0%
                                          --------   -------  -------  ------

          Net (loss) income              $(185,878) -1505.4%  $26,554   15.0%
                                          ========   =======  =======  ======

    Basic (loss) earnings per share         $(1.08)             $0.16
                                          ========            =======
    Diluted (loss) earnings per share       $(1.08)             $0.16
                                          ========            =======

    Weighted average shares - basic        172,850            170,728
                                          ========            =======
    Weighted average shares - diluted      172,850            171,031
                                          ========            =======



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

                                                                     Q-1 07
                                                                    --------
    Revenues
    Investment banking:
       Capital raising                                                $97,247
       Advisory                                                         6,458
    Institutional brokerage:
       Principal transactions                                           2,036
       Agency commissions                                              23,818
    Asset management:
       Base management fees                                             5,528
       Incentive allocations and fees                                     104
    Principal investment:
       Interest                                                       181,696
       Net investment loss                                            (59,713)
       Dividends                                                          959
    Mortgage banking:
       Interest                                                        26,530
       Net investment loss                                           (106,859)
    Other                                                               4,094
                                                                    ----------
                   Total revenues                                     181,898
    Interest expense                                                  169,551
                                                                    ----------
                   Revenues, net of interest expense                   12,347
                                                                    ----------

    Non-interest expenses
    Compensation and benefits                                         103,982
    Professional services                                              13,854
    Business development                                               13,769
    Clearing and brokerage fees                                         2,701
    Occupancy and equipment                                            13,117
    Communications                                                      7,051
    Other operating expenses                                           31,716
    Impairment of goodwill                                             25,852
    Restructuring charges                                              15,485
                                                                    ----------
       Total non-interest expenses                                    227,527
                                                                    ----------

    Operating loss                                                   (215,180)

    Other Income
       Gain on sale of subsidiary shares                                  831
                                                                    ----------

    Net loss before income taxes
     and minority interest                                           (214,349)

    Income tax benefit                                                (31,550)
    Minority interest in earnings of consolidated subsidiary            3,079
                                                                    ----------

    Net loss                                                        $(185,878)
                                                                    ==========


    Net loss before income taxes and minority
     interest as a percentage of net revenue                         -1736.0%

    ROE (annualized)                                                   -68.8%
    ROE (annualized-excluding AOCI) (1)                                -68.2%


    Total shareholders' equity                                       $989,213
    Total shareholders' equity, net of AOCI (1)                      $993,753

    Basic loss per share                                               $(1.08)
    Diluted loss per share                                             $(1.08)

    Ending shares outstanding (in
     thousands)                                                       172,846

    Book value per share                                                $5.72
    Book value per share, net of AOCI (1)                               $5.75

    Gross assets under management (in millions)
     Managed accounts                                                  $258.8
     Hedge & offshore funds                                              67.1
     Mutual funds                                                     2,412.9
     Private equity and venture capital funds                            41.2
                                                                    ----------
       Total                                                         $2,780.0
                                                                    ==========

    Net assets under management (in millions)
     Managed accounts                                                  $258.8
     Hedge & offshore funds                                              62.5
     Mutual funds                                                     2,406.4
     Private equity and venture capital funds                            38.0
                                                                    ----------
       Total                                                         $2,765.7
                                                                    ==========

    Employee count                                                      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           -          -
                   ----------------------------------------------------------

    Net (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
                   ==========================================================


    Net (loss) income
     before income taxes
     and minority
     interest as a
     percentage of net
     revenue            -22.3%       10.0%      118.6%      -26.2%      14.0%

    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                                   31-Mar-07         31-Dec-06
                                            -----------       -----------

    Cash and cash equivalents                     $450,979          $189,956
    Restricted cash                                     92               132
    Receivables                                    227,765           217,249
    Investments:
      Mortgage-backed securities, at fair
       value                                     5,783,273         6,870,661
      Loans held for sale, net                   5,169,489         5,367,934
      Long-term investments                        149,793           185,492
      Trading securities, at fair value             22,400            18,180
    Due from clearing broker                        30,452            28,999
    Derivative assets, at fair value                22,011            36,875
    Goodwill                                       136,913           162,765
    Intangible assets, net                          11,600            21,825
    Furniture, equipment, software and
     leasehold improvements, net                    43,428            44,111
    Prepaid expenses and other assets              222,088           208,339
                                               -----------       -----------
         Total assets                          $12,270,283       $13,352,518
                                               ===========       ===========


    LIABILITIES AND SHAREHOLDERS ' EQUITY

    Liabilities:
    Trading account securities sold short
     but not yet purchased, at fair value             $759              $202
    Commercial paper                             3,425,432         3,971,389
    Repurchase agreements                        3,013,827         3,059,330
    Derivative liabilities, at fair value           41,247            44,582
    Dividends payable                                8,736             8,743
    Interest payable                                14,579            12,239
    Accrued compensation and benefits               48,906            57,227
    Accounts payable, accrued expenses
     and other liabilities                         160,395            81,819
    Securitization financing, net                4,100,975         4,486,046
    Long-term debt                                 323,466           324,453
                                               -----------       -----------
         Total liabilities                      11,138,322        12,046,030
                                               -----------       -----------

    Minority Interest                              142,748           135,443

    Shareholders' equity:
    Common stock, 174,433 and 174,712 shares         1,744             1,747
    Additional paid-in capital                   1,564,671         1,562,497
    Employee stock loan receivable
     (2 and 2 shares)                                  (12)              (12)
    Accumulated other comprehensive loss,
     net of taxes                                   (4,540)          (15,136)
    Accumulated deficit                           (572,650)         (378,051)
                                               -----------       -----------
         Total shareholders' equity                989,213         1,171,045
                                               -----------       -----------

         Total liabilities and
          shareholders' equity                 $12,270,283       $13,352,518
                                               ===========       ===========



    FBR CAPITAL MARKETS CORPORATION
    CONSOLIDATED STATEMENTS OF OPERATIONS
    (Dollars in thousands, except per share amounts)
    (Unaudited)

                                                      Quarter Ended
                                                        March 31,
                                            2007        %      2006       %
                                           ------     -----   ------    -----
    REVENUES:
    Investment banking:
       Capital raising                     $97,236    67.9%   $66,335   59.9%
       Advisory                              6,458     4.5%     2,869    2.6%
    Institutional brokerage:
       Principal transactions                2,036     1.4%     5,720    5.2%
       Agency commissions                   23,776    16.6%    23,366   21.1%
       Mortgage trading interest               -       0.0%    17,650   15.9%
       Mortgage trading net investment loss    -       0.0%    (1,234)  -1.1%
    Asset management:
       Base management fees                  5,528     3.9%     4,876    4.4%
       Incentive allocations and fees          104     0.1%     1,008    0.9%
    Interest income                         11,114     7.8%     2,613    2.4%
    Net investment income                    1,495     1.0%     3,046    2.8%
    Other                                       76     0.1%     1,315    1.1%
                                          --------  -------  --------  ------
             Total revenues                147,823   103.3%   127,564  115.2%
    Interest expense                         4,662     3.3%    16,862   15.2%
                                          --------  -------  --------  ------
             Revenues, net of interest
              expense                      143,161   100.0%   110,702  100.0%
                                          --------  -------  --------  ------

    NON-INTEREST EXPENSES:
    Compensation and benefits               77,791    54.3%    63,552   57.4%
    Professional services                   10,824     7.6%    10,004    9.0%
    Business development                    11,315     7.9%    12,376   11.2%
    Clearing and brokerage fees              2,666     1.9%     2,266    2.0%
    Occupancy and equipment                  7,493     5.2%     7,273    6.6%
    Communications                           5,409     3.8%     4,583    4.1%
    Other operating expenses                 1,820     1.2%     3,264    3.0%
                                          --------  -------  --------  ------
             Total non-interest expenses   117,318    81.9%   103,318   93.3%
                                          --------  -------  --------  ------

             Net income before
              income taxes                  25,843    18.1%     7,384    6.7%

    Income tax provision                    14,837    10.4%     2,566    2.3%
                                          --------  -------  --------  ------

             Net income                    $11,006     7.7%    $4,818    4.4%
                                          ========  =======  ========  ======

    Basic earnings per share                 $0.17              $0.10
                                          ========           ========
    Diluted earnings per share               $0.17              $0.10
                                          ========           ========

    Weighted average shares - basic         64,149             46,000
                                          ========           ========
    Weighted average shares - diluted       64,155             46,000
                                          ========           ========



    FBR CAPITAL MARKETS CORPORATION
    Financial & Statistical Supplement - Operating Results
    (Dollars in thousands, except per share data)
    (Unaudited)


                                                                   Q-1 07
                                                                 ----------
    Revenues
    Investment banking:
      Capital raising                                                 $97,236
      Advisory                                                          6,458
    Institutional brokerage:
      Principal transactions                                            2,036
      Agency commissions                                               23,776
    Asset management:
      Base management fees                                              5,528
      Incentive allocations and fees                                      104
    Interest                                                           11,114
    Net investment income                                               1,495
    Other                                                                  76
                                                                     --------
                       Total revenues                                 147,823
    Interest expense                                                    4,662
                                                                     --------
                       Revenues, net of
                        interest expense                              143,161
                                                                     --------

    Non-interest expenses
    Compensation and benefits                                          77,791
    Professional services                                              10,824
    Business development                                               11,315
    Clearing and brokerage fees                                         2,666
    Occupancy and equipment                                             7,493
    Communications                                                      5,409
    Other operating expenses                                            1,820
                                                                     --------
         Total non-interest expenses                                  117,318
                                                                     --------

    Net income before income taxes                                     25,843

    Income tax provision                                               14,837
                                                                     --------
    Net income                                                        $11,006
                                                                     ========

    Net income before income taxes
     as a percentage of net revenue                                     18.1%

    ROE (annualized)                                                     8.9%


    Total shareholders' equity                                        501,858

    Basic earnings per share                                            $0.17
    Diluted earnings per share                                          $0.17

    Ending shares outstanding (in
     thousands)                                                        64,282

    Book value per share                                                $7.81

    Gross assets under management (in millions)
    Managed accounts                                                   $258.8
    Hedge & offshore funds                                               67.1
    Mutual funds                                                      2,412.9
    Private equity and venture capital funds                             41.2
                                                                     --------
         Total                                                       $2,780.0
                                                                     ========

    Net assets under management (in millions)
    Managed accounts                                                   $258.8
    Hedge & offshore funds                                               62.5
    Mutual funds                                                      2,406.4
    Private equity and venture capital funds                             38.0
                                                                     --------
         Total                                                       $2,765.7
                                                                     ========

    Employee count                                                        751
                                                                     ========



    FBR CAPITAL MARKETS CORPORATION
    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        $190,576   $71,879    $6,852   $45,510   $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      100,855    24,683    24,359    28,447    23,366
      Mortgage trading
       interest                51,148     2,510    13,845    17,143    17,650
      Mortgage trading net
       investment loss         (3,298)     (309)   (1,546)     (209)   (1,234)
    Asset management:
      Base management fees     19,871     5,051     4,879     5,065     4,876
      Incentive allocations
       and fees                 1,327       403       (30)      (54)    1,008
    Interest                   20,934     5,235     8,439     4,647     2,613
    Net investment income
     (loss)                     3,372     3,288    (3,070)      108     3,046
    Other                       3,892     1,279       482       816     1,315
                            -------------------------------------------------
                Total
                 revenues     418,639   123,183    58,378   109,514   127,564
    Interest expense           54,543     3,136    16,390    18,155    16,862
                            -------------------------------------------------
                Revenues,
                 net of
                 interest
                 expense      364,096   120,047    41,988    91,359   110,702
                            -------------------------------------------------

    Non-interest expenses
    Compensation and
     benefits                 225,712    61,326    46,398    54,436    63,552
    Professional services      43,712    13,809     9,069    10,830    10,004
    Business development       33,772     9,458     5,229     6,709    12,376
    Clearing and brokerage
     fees                      11,715     3,504     2,892     3,053     2,266
    Occupancy and equipment    30,039     7,918     7,349     7,499     7,273
    Communications             20,039     5,024     5,442     4,990     4,583
    Other operating expenses   12,219     1,434     4,561     2,960     3,264
                            -------------------------------------------------
         Total non-interest
          expenses            377,208   102,473    80,940    90,477   103,318
                            -------------------------------------------------

    Net (loss) income before
     income taxes             (13,112)   17,574   (38,952)      882     7,384

    Income tax (benefit)
     provision                 (3,271)   10,614   (16,346)     (105)    2,566
                            -------------------------------------------------
    Net (loss) income         $(9,841)   $6,960  $(22,606)     $987    $4,818
                            =================================================

    Net (loss) income before
     income taxes as a
     percentage of
     net revenue                -3.6%     14.6%    -92.8%      1.0%      6.7%

    ROE (annualized)            -2.7%      7.6%    -24.9%      1.6%      7.7%


    Total shareholders'
     equity                   484,388   484,388   476,098   248,965   253,812

    Basic (loss) earnings
     per share                 $(0.18)    $0.11    $(0.37)    $0.02     $0.10
    Diluted (loss) earnings
     per share                 $(0.18)    $0.11    $(0.37)    $0.02     $0.10

    Ending shares
     outstanding (in
     thousands)                64,000    64,000    64,000    46,000    46,000

    Book value per share        $7.57     $7.57     $7.44     $5.41     $5.52

    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                702       702       702       726       752
                            =================================================



    FBR CAPITAL MARKETS CORPORATION
    CONSOLIDATED BALANCE SHEETS
    (Dollars in thousands, except per share amounts)
    (Unaudited)


    ASSETS                                    31-Mar-07         31-Dec-06
                                             -----------       -----------

    Cash and cash equivalents                      $430,426          $151,417
    Receivables                                      15,462            43,013
    Investments:
      Mortgage-backed securities, at fair value       5,961           415,391
      Long-term investments                          35,249            32,343
      Trading securities, at fair value              22,400            18,180
    Due from clearing broker                         30,117            28,691
    Intangible assets, net                           11,600            11,000
    Furniture, equipment and leasehold
     improvements, net                               30,271            31,222
    Prepaid expenses and other assets                27,244            28,162
                                                  ---------         ---------
         Total assets                              $608,730          $759,419
                                                  =========         =========


    LIABILITIES AND SHAREHOLDERS' EQUITY

    Liabilities:
    Trading account securities sold short
     but not yet purchased, at fair value              $759              $202
    Repurchase agreements                                 -           189,155
    Accrued compensation and benefits                39,247            43,836
    Accounts payable, accrued expenses and
     other liabilities                               66,752            36,602
    Due to affiliates                                   114             5,236
                                                  ---------         ---------
         Total liabilities                          106,872           275,031
                                                  ---------         ---------

    Shareholders' equity:
    Common stock - 64,623 and 64,000
     shares                                              65                64
    Additional paid-in capital                      402,509           395,778
    Accumulated other comprehensive
     income, net of taxes                               275               543
    Retained earnings                                99,009            88,003
                                                  ---------         ---------
         Total shareholders' equity                 501,858           484,388
                                                  ---------         ---------

         Total liabilities and
          shareholders' equity                     $608,730          $759,419
                                                  =========         =========

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