FBR Reports 4th Quarter and 2006 Financial Results
PRNewswire - First Call
Arlington, Virginia
NYSE: FBR

ARLINGTON, Va., Feb. 22 /PRNewswire-FirstCall/ -- Friedman, Billings, Ramsey Group, Inc. (FBR Group; NYSE: FBR) today reported net after-tax earnings of $3.8 million, or $0.02 per share (diluted), for the quarter ended December 31, 2006 compared to a net after-tax loss of $271.6 million, or $1.60 per share (diluted) in the fourth quarter of 2005. For the year, FBR had a net after-tax loss of $67.3 million, or $0.39 per share (diluted), compared to a net after-tax loss of $170.9 million, or $1.01 per share (diluted), in 2005. Core book value net of Accumulated Other Comprehensive Income (AOCI) at year end was $6.87 compared to $7.67 at year end 2005(1).

The fourth quarter results for FBR Group included higher than historical income tax expense of $6.4 million or $0.04 per share (diluted) attributable primarily to the effects of FASB 123R (an accounting rule adopted in 2006 relating to stock compensation), deferred tax valuation allowances and other tax items. In addition, the company incurred "other than temporary impairment" charges of $17.2 million, or $0.10 per share (diluted), on merchant banking investments in the sub-prime mortgage industry.

FBR Capital Markets Corporation Results

FBR Capital Markets Corporation (FBR Capital Markets), FBR Group's 72%- owned investment banking, institutional brokerage and asset management subsidiary, reported for the fourth quarter pre-tax earnings of $17.6 million on net revenues of $120.0 million. Net after-tax earnings for the fourth quarter were $7.0 million. Excluding FASB 123R-related and other non-cash tax charges of $3 million, after-tax earnings were $10.0 million. Complete financial results for FBR Capital Markets, which is a privately held company, are included in the tabular material in this release along with those of FBR Group.

Investment Banking

In the fourth quarter, FBR Capital Markets generated investment banking revenues of $81.1 million. The firm raised a total of $4.2 billion in 17 transactions and undertook eight merger and acquisition advisory assignments. Also in the fourth quarter, the firm executed a $777 million private placement and advisory assignment for a power generation company, FBR's first capital raise in that sector. Because the transaction was subject to regulatory approval by power authorities, it did not close until the first quarter of 2007. As a result, $40 million of the revenues associated with this capital raise will be recognized in that quarter.

In 2006, FBR was ranked as:

 

  • #1 book-running manager of all common stock offerings for U.S. companies with a market capitalization of $1 billion or less,(2)
  • #7 book-running manager for all U.S. IPOs and 144A equity placements combined for all industries,(3)
  • #1 book-running manager of all common stock offerings for domestic mining, oil and gas, and utility and energy companies, with a market capitalization of $1 billion or less,(4) and
  • #1 book-running manager of all common stock offerings for U.S. and Bermuda finance and insurance companies with a market capitalization of $1 billion or less.(5)

 

On February 8, 2007, FBR Capital Markets announced the completion of an important step in further expanding its M&A platform. The company acquired the 26-person banking team along with certain assets from Legacy Partners Group, LLC. With offices in New York and Washington, D.C., this banking unit specializes in middle market merger and acquisition advisory services and in the raising of private capital.

Institutional Brokerage and Research

In a very competitive market environment, FBR Capital Markets grew its agency commission revenue from $82.5 million in 2005 to $100.9 million in the year just ended, a 22% increase. Overall, agency commissions and revenue from principal transactions increased 8% year to year.

Asset Management

In FBR Capital Markets' asset management/private wealth business, asset management base fees and incentive fees were $5.5 million for the fourth quarter of 2006. Assets under management increased slightly between the close of the third quarter of 2006 and year end, and continued asset growth is anticipated in the first quarter of 2007. This reverses a trend of asset outflows that began with the closing and repositioning of some of the firm's alternative investment products in 2005.

In October 2006 a new long/short hedge fund was launched, and in January 2007, the FBR Small Cap Mutual Fund, which had been closed to new investors since October 2004, was reopened to investors.

FBR Group Results

Mortgage Investment Portfolios

For the fourth quarter, FBR Group's mortgage investments generated portfolio earnings of $20.7 million on average investment balances of $11.1 billion held during the quarter. These portfolios yielded gross income of 6.40% with associated cost of funds of 5.15%, resulting in earned net interest income of 1.25%.

Merchant Banking

For the fourth quarter, earnings from the consolidated merchant banking portfolio and other long-term investments were $3.7 million. These earnings include a $17.2 million write-down in the value of certain non-prime mortgage company investment positions, the largest of which was a $13.7 million reduction in the carrying value of shares in Fieldstone Investment Corp., which has agreed to be acquired for cash. Excluding the Fieldstone Investment position, merchant banking investments in non-prime companies at year end was $19 million. The total value of FBR's merchant banking portfolio and other long-term equity securities was $150 million as of December 31, 2006.

First NLC

First NLC (FNLC), our non-conforming mortgage origination subsidiary, lost $1.8 million on a pre-tax basis in the fourth quarter. During the quarter, FNLC continued to build additional reserves related to the impact of an industry-wide increase in requests for buy-backs of loans related to early pay defaults (EPDs). Loan provisions, including EPD expense, averaged 70 basis points for the fourth quarter.

FNLC originated $2.1 billion in loans in the fourth quarter and $7.5 billion for the full year, compared to $1.5 billion in the final quarter of 2005 and $6.0 billion for all of 2005. FNLC's cost to originate loans dropped from an average of 244 basis points in 2005 to an average of 191 basis points in 2006. In 2007, FNLC management has further reduced expenses and has aggressively adapted its lending standards to a continuing difficult environment.

Looking Ahead

"The acquisition of Legacy Partners was a major step in the execution of our strategic plan, broadening our array of banking services and increasing our ability to significantly grow our advisory practice," said Eric F. Billings, FBR Group Chairman and Chief Executive Officer. "In addition, as we continue to execute our plan by selling our non-prime mortgage residuals and exiting our non-prime merchant banking investments, we believe that the stability and predictability of our earnings will become more apparent. Although 2006 was a challenging and difficult year, we closed with a solid fourth quarter in our capital markets businesses, and we are off to a strong start in 2007."

The firm will host an earnings conference call this morning, Thursday, February 22, 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 following the call.

Friedman, Billings, Ramsey Group, Inc. (FBR) invests in mortgage-related assets and merchant banking opportunities. Through its 72% owned FBR Capital Markets Corporation (FBRCM) subsidiary, FBR provides investment banking*, merger and acquisition advisory services*, institutional brokerage*, asset management, and private wealth services. FBRCM focuses capital and financial expertise on eight industry sectors: consumer, diversified industrials, energy and natural resources, financial institutions, healthcare, insurance, real estate, and technology, media and telecommunications. 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, see 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) Source: Dealogic. Relates to total deal value of all common stock or
        common equity, including private placements, offered for all U.S.
        companies with a market capitalization of $1 billion or less.
        Transactions priced between 1/1/06 and 12/31/06, with apportioned
        credit to all book-runners.  Includes only rank eligible transactions.

    (3) Source: Dealogic. Relates to total deal value of all common stock of
        U.S. issuers offered in IPOs or transactions exempt from SEC
        registration pursuant to rule 144A, on a combined basis.  Transactions
        priced between 1/1/06 through 12/31/06 with apportioned credit to all
        book-runners.  Includes only rank eligible transactions.

    (4) Source: Dealogic. Relates to total deal value of all common stock or
        common equity, including private placements, offered for all U.S.
        mining, oil and gas, and utility and energy companies with a market
        capitalization of $1 billion or less. Transactions priced between
        1/1/06 and 12/31/06, with apportioned credit to all book-runners.
        Includes only rank eligible transactions.

    (5) Source: Dealogic. Relates to total deal value of all common stock or
        common equity, including private placements, offered for all U.S. and
        Bermuda finance and insurance companies with a market capitalization
        of $1 billion or less. Transactions priced between 1/1/06 and
        12/31/06, with apportioned credit to all book-runners.  Includes only
        rank eligible transactions.

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.


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

                                            2006      %       2005        %
                                         ------------------------------------
    REVENUES:
    Investment banking:
      Capital raising                     $71,883   40.9%    $88,866   -77.9%
      Advisory                              9,172    5.2%      7,415    -6.5%
    Institutional brokerage:
      Principal transactions                   (8)   0.0%      3,788    -3.3%
      Agency commissions                   24,720   14.1%     21,006   -18.4%
      Mortgage trading interest             2,509    1.4%     19,555   -17.1%
      Mortgage trading net investment
       loss                                  (309)  -0.2%     (1,419)    1.2%
    Asset management:
      Base management fees                  5,051    2.9%      6,153    -5.4%
      Incentive allocations and fees          403    0.2%        742    -0.7%
    Principal investment:
      Interest                            181,491  103.3%    189,811  -166.3%
      Net investment loss                  (8,826)  -5.0%   (258,500)  226.5%
      Dividends                             2,043    1.2%     16,039   -14.1%
    Mortgage banking:
      Interest                             21,806   12.4%     28,825   -25.3%
      Net investment income (loss)         27,555   15.6%    (21,899)   19.2%
    Other                                   3,162    1.8%      5,164    -4.4%
                                         ------------------------------------
           Total revenues                 340,652  193.8%    105,546   -92.5%
    Interest expense                      164,891   93.8%    211,393  -185.3%
    Provision for loan losses                   -    0.0%      8,263    -7.2%
                                         ------------------------------------
           Revenues, net of interest
            expense and provision for
            loan losses                   175,761  100.0%   (114,110)  100.0%
                                         ------------------------------------

    NON-INTEREST EXPENSES:
    Compensation and benefits              84,431   48.0%     87,330   -76.5%
    Professional services                  18,224   10.4%     16,556   -14.5%
    Business development                   11,884    6.8%     10,433    -9.2%
    Clearing and brokerage fees             3,505    2.0%      2,447    -2.1%
    Occupancy and equipment                13,668    7.8%     10,151    -8.9%
    Communications                          6,307    3.6%      5,741    -5.0%
    Other operating expenses               20,116   11.4%     24,984   -21.9%
                                         ------------------------------------
           Total non-interest expenses    158,135   90.0%    157,642  -138.1%
                                         ------------------------------------

    Operating income (loss)                17,626   10.0%   (271,752)  238.1%

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

           Net income (loss) before
            income taxes and minority
            interest                       17,626   10.0%   (271,752)  238.1%

    Income tax provision (benefit)         11,859    6.7%       (142)    0.1%
    Minority interest in earnings of
     consolidated subsidiary                1,957    1.1%        -       0.0%
                                         ------------------------------------

           Net income (loss)               $3,810    2.2%  $(271,610)  238.0%
                                         ====================================

    Basic earnings (loss) per share         $0.02             $(1.60)
                                         ========           ========
    Basic earnings (loss) per share         $0.02             $(1.60)
                                         ========           ========

    Weighted average shares  - basic      172,531            169,921
                                         ========           ========
    Weighted average shares  - diluted    172,600            169,921
                                         ========           ========



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

                                           2006        %      2005        %
                                          -----------------------------------
    REVENUES:
    Investment banking:
       Capital raising                    $190,187   50.0%   $356,753   82.1%
       Advisory                             24,148    6.3%     17,759    4.1%
    Institutional brokerage:
      Principal transactions                 5,814    1.5%     17,950    4.1%
      Agency commissions                   101,009   26.6%     82,778   19.0%
      Mortgage trading interest             51,147   13.4%     30,859    7.1%
      Mortgage trading net investment
       loss                                 (3,301)  -0.9%     (3,820)  -0.9%
    Asset management:
      Base management fees                  20,093    5.3%     30,348    7.0%
      Incentive allocations and fees         1,327    0.3%      1,929    0.4%
    Principal investment:
      Interest                             594,879  156.4%    549,832  126.5%
      Net investment loss                 (184,552) -48.5%   (239,754) -55.2%
      Dividends                             14,551    3.8%     36,622    8.4%
    Mortgage banking:
      Interest                              88,662   23.3%     78,007   17.9%
      Net investment income                 83,786   22.0%     13,741    3.2%
    Other                                   20,154    5.3%     22,302    5.1%
                                         ------------------------------------
          Total revenues                 1,007,904  264.8%    995,306  228.8%
    Interest expense                       611,800  160.8%    546,313  125.7%
    Provision for loan losses               15,740    4.0%     14,291    3.1%
                                         ------------------------------------
          Revenues, net of interest
           expense and provision for
           loan losses                     380,364  100.0%    434,702  100.0%
                                         ------------------------------------

    NON-INTEREST EXPENSES:
    Compensation and benefits              309,065   81.3%    331,492   76.3%
    Professional services                   59,722   15.7%     66,550   15.3%
    Business development                    42,150   11.1%     46,648   10.7%
    Clearing and brokerage fees             11,820    3.1%      8,882    2.0%
    Occupancy and equipment                 50,051   13.2%     34,044    7.8%
    Communications                          24,398    6.4%     20,634    4.7%
    Other operating expenses                89,377   23.5%     70,679   16.3%
                                         ------------------------------------
          Total non-interest expenses      586,583  154.3%    578,929  133.1%
                                         ------------------------------------

    Operating loss                        (206,219) -54.3%   (144,227) -33.1%

    OTHER INCOME:
      Gain on sale of subsidiary shares    121,511   31.9%          -    0.0%
                                         ------------------------------------

          Net loss before income taxes
           and minority interest           (84,708) -22.3%   (144,227) -33.2%

    Income tax (benefit) provision         (14,682)  -3.9%     26,683    6.1%
    Minority interest in loss of
     consolidated subsidiary                (2,751)  -0.7%          -    0.0%
                                         ------------------------------------
          Net loss                        $(67,275) -17.7%  $(170,910) -39.3%
                                         ====================================

    Basic loss per share                    $(0.39)            $(1.01)
                                         =========          =========
    Diluted loss per share                  $(0.39)            $(1.01)
                                         =========          =========

     Weighted average shares  - basic      171,667            169,333
                                         =========          =========
     Weighted average shares  - diluted    171,667            169,333
                                         =========          =========



    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.
    Financial & Statistical Supplement - Operating Results
    (Dollars in thousands, except per share data)
    (Unaudited)

                         For the
                        year ended
                         December
                         31, 2005     Q-4 05     Q-3 05     Q-2 05     Q-1 05
                        -----------------------------------------------------
    Revenues
    Investment banking:
     Capital raising     $356,753    $88,866    $86,035     $95,039   $86,813
     Advisory              17,759      7,415      3,026       6,180     1,138
    Institutional
     brokerage:
     Principal
      transactions         17,950      3,788      4,348       4,187     5,627
     Agency
      commissions          82,778     21,006     20,445      19,170    22,157
     Mortgage trading
      interest             30,859     19,555     11,304         -         -
     Mortgage trading
      net investment
      loss                 (3,820)    (1,419)    (2,401)        -         -
    Asset management:
     Base management
      fees                 30,348      6,153      7,914       7,813     8,468
     Incentive
      allocations and
      fees                  1,929        742        832         730      (375)
    Principal investment:
     Interest             549,832    189,811    144,401     116,724    98,896
     Net investment
      (loss) income      (239,754)  (258,500)     4,866      17,738    (3,858)
     Dividends             36,622     16,039      8,772       8,371     3,440
    Mortgage banking:
     Interest              78,007     28,825     27,280      15,543     6,359
     Net investment
      income (loss)        13,741    (21,899)    17,600      14,559     3,481
    Other                  22,302      5,164      5,479       6,030     5,629
                        -----------------------------------------------------
         Total revenues   995,306    105,546    339,901     312,084   237,775
    Interest expense      546,313    211,393    156,373     103,725    74,822
    Provision for loan
     losses                14,291      8,263      4,890       1,138       -
                        -----------------------------------------------------
         Revenues, net
          of interest
          expense and
          provision for
          loan losses     434,702   (114,110)   178,638     207,221   162,953
                        -----------------------------------------------------

    Non-interest expenses
    Compensation and
     benefits             331,492     87,330     88,348     80,015     75,799
    Professional
     services              66,550     16,556     16,158     20,186     13,650
    Business
     development           46,648     10,433      8,815     11,962     15,438
    Clearing and
     brokerage fees         8,882      2,447      2,363      2,040      2,032
    Occupancy and
     equipment             34,044     10,151      9,397      8,772      5,724
    Communications         20,634      5,741      5,561      5,300      4,032
    Other operating
     expenses              70,679     24,984     16,861     12,540     16,294
                        -----------------------------------------------------
      Total non-interest
       expenses           578,929    157,642    147,503    140,815    132,969
                        -----------------------------------------------------

    Net (loss) income
     before income
     taxes               (144,227)  (271,752)    31,135     66,406     29,984

    Income tax
     provision
    (benefit)              26,683       (142)     8,090     13,163      5,572
                        -----------------------------------------------------

    Net (loss) income   $(170,910) $(271,610)   $23,045    $53,243    $24,412
                        =====================================================
    Net (loss) income
     before income taxes
     as a percentage
     of net revenue        -33.2%     238.1%      17.4%      32.0%       8.4%

    ROE (annualized)       -11.9%     -80.5%       6.3%      14.3%       6.4%
    ROE (annualized-
     excluding AOCI)(1)    -11.7%     -74.7%       5.9%      13.8%       6.0%

    Total
     shareholders'
     equity            $1,304,170 $1,304,170 $1,394,137 $1,519,021 $1,458,861
    Total
     shareholders'
     equity, net of
     AOCI (1)          $1,305,147 $1,305,147 $1,603,305 $1,631,955 $1,629,293

    Basic (loss)
     earnings
     per share             $(1.01)    $(1.60)     $0.14      $0.31      $0.15
    Diluted (loss)
     earnings per
     share                 $(1.01)    $(1.60)     $0.14      $0.31      $0.14

    Ending shares
     outstanding (in
     thousands)           170,264    170,264    169,891    169,617    169,214

    Book value per
     share                  $7.66      $7.66      $8.21      $8.96      $8.62
    Book value per
     share, net of
     AOCI (1)               $7.67      $7.67      $9.44      $9.62      $9.63

    Gross assets
     under
     management (in
     millions)
    Managed accounts       $463.4     $463.4     $437.2     $510.4     $242.4
    Hedge & offshore
     funds                  154.3      154.3      239.0      463.1      601.1
    Mutual funds          1,883.3    1,883.3    2,078.1    2,185.0    2,213.9
    Private equity
     and venture
     capital funds           56.2       56.2       42.7       41.3       69.5
                        -----------------------------------------------------
         Total           $2,557.2   $2,557.2   $2,797.0    $3,199.8  $3,126.9
                        =====================================================
    Net assets under
     management (in
     millions)
    Managed accounts       $329.5     $329.5     $255.5      $257.3    $223.0
    Hedge & offshore
     funds                  150.5      150.5      227.8       401.1     490.3
    Mutual funds          1,872.8    1,872.8    2,069.9     2,176.6   2,204.2
    Private equity
     and venture
     capital funds           46.8       46.8       39.9        37.8      66.3
                        -----------------------------------------------------
         Total           $2,399.6   $2,399.6   $2,593.1    $2,872.8  $2,983.8
                        =====================================================
    Employee count          2,449      2,449      2,455       2,226     2,123
                        =====================================================

    (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-Dec-06          31-Dec-05
                                               -----------        -----------
    Cash and cash equivalents                     $189,956           $238,615
    Restricted cash                                    132              6,101
    Receivables                                    217,249            259,519
    Investments:
      Mortgage-backed securities, at fair
       value                                     6,870,661          8,002,561
      Loans held for investment, net                   -            6,841,266
      Loans held for sale, net                   5,367,934            963,807
      Long-term investments                        185,492            347,644
      Reverse repurchase agreements                    -              283,824
      Trading securities, at fair value             18,180          1,032,638
    Due from clearing broker                        28,999             71,065
    Derivative assets, at fair value                36,875             70,636
    Goodwill                                       162,765            162,765
    Intangible assets, net                          21,825             26,485
    Furniture, equipment and leasehold
     improvements, net                              44,111             46,382
    Prepaid expenses and other assets              208,339             82,482
                                               -----------        -----------
         Total assets                          $13,352,518        $18,435,790
                                               ===========        ===========


    LIABILITIES AND SHAREHOLDERS' EQUITY

    Liabilities:
    Trading account securities sold short
     but not yet purchased, at fair value             $202           $150,547
    Commercial paper                             3,971,389          6,996,950
    Repurchase agreements                        3,059,330          2,698,619
    Derivative liabilities, at fair value           44,582             31,952
    Dividends payable                                8,743             34,588
    Interest payable                                12,239             12,039
    Accrued compensation and benefits               57,227             82,465
    Accounts payable, accrued expenses
     and other liabilities                          81,819             82,576
    Temporary subordinated loan payable                -               75,000
    Securitization financing, net                4,486,046          6,642,198
    Long-term debt                                 324,453            324,686
                                               -----------        -----------
         Total liabilities                      12,046,030         17,131,620
                                               -----------        -----------

    Minority Interest                              135,443                  -

    Shareholders' equity:
    Common stock, 174,712 and 172,854 shares         1,747              1,729
    Additional paid-in capital                   1,562,497          1,547,128
    Employee stock loan receivable including
     accrued interest (2 and 551 shares)               (12)            (4,018)
    Deferred compensation, net                         -              (15,602)
    Accumulated other comprehensive loss,
     net of taxes                                  (15,136)              (977)
    Accumulated deficit                           (378,051)          (224,090)
                                               -----------        -----------
         Total shareholders' equity              1,171,045          1,304,170
                                               -----------        -----------
         Total liabilities and
          shareholders' equity                 $13,352,518        $18,435,790
                                               ===========        ===========



    FBR CAPITAL MARKETS CORPORATION
    CONSOLIDATED STATEMENT OF OPERATIONS
    (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              51,147      2,509     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                    3,893      1,280        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
                        ======================================================

    Basic & diluted (loss)
     earnings per share     $(0.18)     $0.11(1)  $(0.37)     $0.02      $0.10

    Weighted average
     shares - basic &
     diluted            54,136,986 64,000,000 60,282,609 46,000,000 46,000,000

    (1) Non-GAAP earnings per share determined by using a 43% tax rate would
        be $0.16.  Management believes this information is relevant because it
        expects the effective tax rate to approximate 43% after FASB 123R and
        other non-cash tax charges.

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