FBR Announces Second Quarter 2006 Financial Results
PRNewswire - First Call
Arlington, Virginia
NYSE: FBR

 ARLINGTON, Va., July 27 /PRNewswire-FirstCall/ -- Friedman, Billings, Ramsey Group, Inc. (NYSE: FBR) today announced its results for the quarter ended June 30, 2006. The company reported a net after-tax loss for the quarter of $30.2 million, or $0.18 per share (diluted), compared to after-tax earnings of $53.2 million, or $0.31 per share (diluted), for the second quarter of 2005. FBR's net after-tax loss for the first six months of 2006 was $3.7 million, or $0.02 per share (diluted), compared to earnings of $77.7 million, or $0.46 per share (diluted), for the first six months of 2005.

The second quarter results include a non-cash $42.2 million write-down -- $0.25 per share (diluted) -- of certain equity investments in the firm's merchant banking portfolio. Of this amount, $26.8 million was previously reflected as Accumulated Other Comprehensive Loss on the company's balance sheet at March 31, 2006 and is now being recognized through the income statement. These results also reflect what was essentially a breakeven quarter for capital markets and an average balance in FBR's mortgage securities portfolio of only $1.1 billion.

Separately, subsequent to the end of the quarter the company has recognized a net gain that is estimated to be approximately $120 million -- or $0.70 per share -- associated with the issuance and sale of shares in FBR Capital Markets Corporation (FBR Capital Markets), the company's newly formed capital markets subsidiary. Book value per share as of June 30, 2006 was $7.39, and the company estimates that book value, after taking into account the FBR Capital Markets transaction, is $8.09 per share.

The company also announced a change in its dividend policy beginning in the third quarter of 2006. Going forward, the company will adopt a variable dividend policy under which dividends will be paid primarily out of current earnings generated at the real estate investment trust (REIT).

"Historically, it has always been the intent of the company to retain the earnings of its capital markets businesses," said Eric F. Billings, FBR Chairman and Chief Executive Officer. "Having completed the FBR Capital Markets transaction, we believe it is appropriate to shift to a variable dividend policy that gives us the flexibility to maintain book value in the REIT while retaining earnings in our capital markets businesses to help fuel their growth."

Principal Investment and Mortgage Finance

During the quarter, FBR began to redeploy capital made available by the mortgage-backed securities portfolio repositioning in the first quarter. The company expects to substantially complete this reinvestment activity in the third quarter. Additionally, First NLC (FNLC), the company's non-conforming mortgage subsidiary, returned to profitability in the second quarter with pre- tax operating earnings of $4.7 million compared to a $4.8 million pre-tax operating loss in the previous quarter. The company expects to see improving results from principal investment and mortgage finance activities over the coming quarters.

Mortgage Portfolios

For the second quarter, FBR earned $126.4 million in interest on its mortgage investments compared to $135.1 million in the second quarter of 2005. The portfolio yield was 6.39% with a corresponding cost of funds of 5.38%. At the end of the quarter, the unpaid principal balance of the mortgage portfolio was approximately $8.6 billion.

The company's investments in non-conforming mortgage loans averaged $6.0 billion with an average coupon of 7.23%, a one-month CPR of 33, and an ending net premium of $125.9 million, including deferred net origination costs. The net yield for the second quarter was 6.57% with a corresponding cost of funds of 5.41%. Pre-provision net interest margin totaled 92 basis points, net of 24 basis points of mortgage insurance costs.

The company's investments in mortgage securities averaged $1.1 billion with an average coupon of 5.59%, a one-month CPR of 14.4, and an ending net premium of $14.8 million. The net yield for the second quarter was 5.43% with a corresponding cost of funds of 5.15%.

FNLC's return to profitability was achieved in part by lowering its cost to originate to 177 basis points for the quarter ended June 30, 2006 while originating loans of $1.9 billion. This is a significant improvement from the first quarter of 2006 when FNLC's cost to originate was 210 basis points and originations totaled $1.5 billion.

Merchant Banking

As of June 30, 2006, FBR made a determination in evaluating its merchant banking portfolio to recognize as "other than temporary impairments" the amounts by which the fair value of certain of its merchant banking investments were below their respective cost bases. As a result, FBR recognized a $42.2 million non-cash write-down in the value of the securities of five portfolio companies, $26.8 million of which had already been reflected in the company's book value at the close of the first quarter of 2006. The decision to recognize the write-down relates to trading values as of June 30, 2006 and is not the result of any change in the company's investment intent regarding these securities.

The merchant banking portfolio generated $4.1 million in dividends and $4.3 million in net realized gains during the quarter. When combined with the impairment charge, the merchant banking and long-term investments portfolio had a net loss of $34.2 million in the second quarter.

The total value of FBR's merchant banking portfolio and other long-term investments at the end of the quarter was $255.7 million compared to $306.0 million on March 31, 2006. Of this total, $214.2 million was held in the merchant banking and long-term investments portfolio and $41.5 million was held in alternative asset investments.

FBR Capital Markets Corporation

During the second quarter, FBR formed FBR Capital Markets Corporation, a taxable subsidiary that acts as a holding company for FBR's capital markets businesses -- investment banking, institutional brokerage, research, and its asset management businesses, including FBR-sponsored mutual funds and private wealth management. In July, FBR Capital Markets Corporation sold shares of its common stock to institutional and accredited investors in a private transaction valued at $270 million, giving the newly formed subsidiary an initial market value of $960 million. FBR Group retains a beneficial 71.9% ownership interest in FBR Capital Markets, whose results will continue to be consolidated.

FBR believes this transaction will make it easier for investors to properly value what the company considers to be an exceptionally strong investment banking platform. Specifically, for two of the last three years FBR was the #1 ranked book-running manager for U.S. issuers of common stock in initial public offerings and Rule 144A offerings on a combined basis.(1) FBR Capital Markets' businesses have achieved an average annualized pre-tax return on average equity in excess of 50% over the past five calendar years.(2) In addition, as part of this transaction, FBR Capital Markets has added an important strategic investor, Crestview Partners, a private equity firm founded by a group of former Goldman Sachs partners and colleagues who had served in leadership roles in the firm's senior management and private equity business. FBR expects that Crestview, through its contribution of two board members will add great value to its business. Most importantly, this transaction provides FBR the financial resources to take advantage of market opportunities and to build out its merchant banking, trading, mergers and acquisitions, and asset management businesses consistent with its strategic plan.

In the second quarter of 2006, the three business units comprising FBR Capital Markets -- equity capital markets, fixed income capital markets and asset management -- generated net revenue of $91.4 million and pre-tax earnings of $0.9 million. The results by business unit were:

    FBR Capital Markets                     Pre-Tax
            (in millions)                Income/(Loss)
    Equity Capital Markets                   $5.4
    Fixed Income Capital Markets             (1.8)
    Asset Management and Private Wealth      (2.7)
    Total                                    $0.9


    Equity Capital Markets

In the second quarter of 2006, FBR helped raise $1.5 billion for its clients in eight transactions, five of which it lead managed. In addition, FBR completed ten advisory assignments. Investment banking revenues for the quarter totaled $51.4 million, down from $101.2 million in the second quarter of 2005. For the first six months, FBR participated in 14 merger and acquisition and advisory assignments and helped clients raise a total of $6.8 billion in 24 capital-raising transactions -- 17 of which it lead managed.

For the first six months of 2006, FBR ranked #1 in U.S. 144A common equity private placements, was the #1 book-running manager of common stock capital raises for U.S. companies with a market capitalization of $1 billion or less, and ranked #7 for initial public offerings and 144A common stock private placements combined.(3)

Institutional brokerage revenues for the first two quarters of 2006, net of related interest expense, rose about 27% to $64.7 million from $51.1 million in the first half of 2005. FBR continues to focus on building and extending trading relationships, particularly with middle market buy-side firms that value both the quality of FBR's research and its trading expertise.

Fixed Income Capital Markets

Net revenue from FBR's fixed income capital markets business was $3.1 million for the second quarter of 2006. The fixed income business continues to be challenged by the shape of the yield curve which flattened further and ended the second quarter inverted. This created a disincentive for investment in longer term securities, slowing the pace of underwritings and fixed income trading dramatically. During the first six months of 2006, FBR completed seven ABS underwritings -- four of them lead managed -- valued at $3.7 billion. FBR's fixed income group continues to deploy capital in sectors of the mortgage-backed securities and asset-backed securities markets that offer attractive risk adjusted returns. The company is continuing to focus on and explore alternatives that will maximize the return on capital in this business.

Asset Management

Base management and incentive fees from FBR's asset management businesses were $5.0 million for the second quarter compared to base and incentive fees of $6.1 million in the first quarter of 2006. Total assets under management were $2.3 billion as of June 30, 2006, down from $2.4 billion on March 31, 2006. Mutual fund assets currently managed by FBR Fund Advisers, Inc. totaled $1.8 billion at the end of the quarter compared to $2.2 billion at the close of the second quarter of 2005 and $1.8 billion at the close of the first quarter of 2006.

Outlook

"We are very pleased to have successfully completed our recent FBR Capital Markets transaction," said Mr. Billings. "Having built one of the leading capital markets franchises in the United States, it was gratifying to see the enthusiasm with which the offering was received despite what was a challenging market environment. This event greatly enhances our opportunities for growth while generating meaningful value for shareholders. In looking ahead, we find ourselves fortunate to have a group of talented and dedicated employees, a knowledgeable and committed new strategic investor, and a strong capital markets platform with numerous growth opportunities."

The firm will host an earnings conference call tomorrow morning, Friday, July 28, 2006 at 9:00 A.M. U.S. EDT. Investors wishing to listen to the earnings conference call at 9:00 A.M. U.S. EDT 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. provides investment banking*, institutional brokerage*, asset management, and private wealth through its operating subsidiaries and invests in mortgage-related assets and merchant banking opportunities. FBR 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, Denver, Houston, Irvine, London, New York, Phoenix, San Francisco and Seattle. 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 http://www.fbr.com.

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

(1) 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 1/1/03 through 12/31/03 and 1/1/05 through 12/31/05, respectively, with apportioned credit to all book-runners. Includes only rank eligible transactions.

(2) Pre-tax return on average equity as calculated for the legal entities contributed by FBR Group to the formation of FBR Capital Markets: net income before taxes / ((current year ending shareholders' equity + prior year ending shareholders' equity) / 2).

(3) Source: Dealogic. Relates to total deal value of all common stock or common equity (stock and units combined), as noted, offered for: all U.S. issuers in transactions exempt from SEC registration pursuant to rule 144A; U.S. issuers valued at $1 billion or less in IPOs or follow-ons, including private placements; and all U.S. issuers in IPOs or transactions exempt from SEC registration pursuant to rule 144A combined, respectively. Transactions priced between 1/1/06 and 6/30/06, 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.

    Financial data follows.



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

                                                      Quarter ended
                                                         June 30,

                                            2006       %       2005       %
                                          --------   ------  --------  ------
    REVENUES:
    Investment banking:
      Capital raising                     $ 45,117    40.8%  $ 95,039   45.9%
      Advisory                               6,281     5.7%     6,180    3.0%
    Institutional brokerage:
      Principal transactions                 2,630     2.4%     4,680    2.3%
      Agency commissions                    28,491    25.8%    18,677    9.0%
      Mortgage trading interest             17,143    15.5%         -    0.0%
      Mortgage trading net investment loss    (209)   -0.2%         -    0.0%
    Asset management:
      Base management fees                   5,065     4.6%     7,813    3.8%
      Incentive allocations and fees           (53)    0.0%       730    0.4%
    Principal investment:
      Interest                             113,613   102.7%   116,724   56.3%
      Net investment (loss) income         (32,159)  -29.1%    17,738    8.6%
      Dividends                              4,059     3.7%     8,371    4.0%
    Mortgage Banking:
      Interest                              21,267    19.2%    18,118    8.7%
      Net investment income                 29,401    26.6%    14,559    7.0%
    Other                                    5,465     4.8%     3,455    1.7%
                                          --------   ------  --------  ------
            Total revenues                 246,111   222.5%   312,084  150.7%
    Interest expense                       128,189   115.9%   103,725   50.2%
    Provision for loan losses                7,348     6.6%     1,138    0.5%
                                          --------   ------  --------  ------
            Revenues, net of interest
             expense and provision for
             loan losses                   110,574   100.0%   207,221  100.0%
                                          --------   ------  --------  ------

    NON-INTEREST EXPENSES:
    Compensation and benefits               71,732    64.9%    80,015   38.6%
    Professional services                   12,925    11.7%    20,186    9.7%
    Business development                     8,604     7.8%    11,962    5.8%
    Clearing and brokerage fees              3,082     2.8%     2,040    1.0%
    Occupancy and equipment                 12,232    11.2%     8,772    4.3%
    Communications                           6,013     5.4%     5,300    2.6%
    Other operating expenses                24,993    22.6%    12,540    6.1%
                                          --------   ------  --------  ------
            Total non-interest expenses    139,581   126.4%   140,815   68.1%
                                          --------   ------  --------  ------

      Net (loss) income before income
       taxes                               (29,007)  -26.4%    66,406   31.9%

    Income tax provision                     1,240     1.1%    13,163    6.4%
                                          --------   ------  --------  ------

            Net (loss) income             $(30,247)  -27.5%  $ 53,243   25.5%
                                          ========   ======  ========  ======


    Basic (loss) earnings per share       $  (0.18)          $   0.31
                                          ========           ========
    Diluted (loss) earnings per share     $  (0.18)          $   0.31
                                          ========           ========

    Weighted average shares  - basic       171,294            169,364
                                          ========           ========
    Weighted average shares  - diluted     171,294            170,101
                                          ========           ========



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

                                                     Six Months Ended
                                                         June 30,

                                             2006      %       2005       %
                                           --------  ------  --------  ------
    REVENUES:
    Investment banking:
      Capital raising                      $111,452   38.8%  $181,852   49.1%
      Advisory                                9,150    3.2%     7,318    2.0%
    Institutional brokerage:
      Principal transactions                  9,255    3.2%    10,307    2.8%
      Agency commissions                     51,899   18.1%    40,834   11.0%
      Mortgage trading interest              34,793   12.1%         -    0.0%
      Mortgage trading net investment loss   (1,446)  -0.5%         -    0.0%
    Asset management:
      Base management fees                   10,162    3.5%    16,281    4.4%
      Incentive allocations and fees            955    0.3%       355    0.1%
    Principal investment:
      Interest                              262,739   91.5%   215,620   58.2%
      Net investment (loss) income           (6,878)  -2.4%    13,880    3.7%
      Dividends                               7,758    2.7%    11,811    3.2%
    Mortgage Banking:
      Interest                               44,380   15.4%    27,610    7.5%
      Net investment income                  40,139   14.0%    18,040    4.9%
    Other                                    10,452    3.7%     5,951    1.6%
                                           --------  ------  --------  ------
            Total revenues                  584,810  203.6%   549,859  148.5%
    Interest expense                        281,672   98.0%   178,547   48.2%
    Provision for loan losses                15,740    5.6%     1,138    0.3%
                                           --------  ------  --------  ------
            Revenues, net of interest
             expense and provision for
             loan losses                    287,398  100.0%   370,174  100.0%
                                           --------  ------  --------  ------

    NON-INTEREST EXPENSES:
    Compensation and benefits               155,229   54.0%   155,814   42.1%
    Professional services                    27,190    9.5%    33,836    9.1%
    Business development                     22,689    7.9%    27,400    7.4%
    Clearing and brokerage fees               5,398    1.9%     4,072    1.1%
    Occupancy and equipment                  23,474    8.2%    14,496    3.9%
    Communications                           11,620    4.0%     9,332    2.5%
    Other operating expenses                 45,970   16.0%    28,834    7.8%
                                           --------  ------  --------  ------
            Total non-interest expenses     291,570  101.5%   273,784   74.0%
                                           --------  ------  --------  ------

      Net (loss) income before income
       taxes                                 (4,172)  -1.5%    96,390   26.0%

    Income tax (benefit) provision             (479)  -0.2%    18,735    5.1%
                                           --------  ------  --------  ------

            Net (loss) income              $ (3,693)  -1.3%  $ 77,655   20.9%
                                           ========  ======  ========  ======

    Basic (loss) earnings per share        $  (0.02)         $   0.46
                                           ========          ========
    Diluted (loss) earnings per share      $  (0.02)         $   0.46
                                           ========          ========

    Weighted average shares  - basic        171,012           168,741
                                           ========          ========
    Weighted average shares  - diluted      171,012           169,670
                                           ========          ========



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

                                For the six
                                months ended
                                June 30, 2006      Q-2 06        Q-1 06
                                 ----------      ----------    ----------
    Revenues
    --------
    Investment banking:
      Capital raising            $  111,452      $   45,117    $   66,335
      Advisory                        9,150           6,281         2,869
    Institutional brokerage:
      Principal transactions          9,255           2,630         6,625
      Agency commissions             51,899          28,491        23,408
      Mortgage trading interest      34,793          17,143        17,650
      Mortgage trading net
       investment loss               (1,446)           (209)       (1,237)
    Asset management:
      Base management fees           10,162           5,065         5,097
      Incentive allocations
       and fees                         955             (53)        1,008
    Principal investment:
      Interest                      262,739         113,613       149,126
      Net investment (loss) income   (6,878)        (32,159)       25,281
      Dividends                       7,758           4,059         3,699
    Mortgage Banking:
      Interest                       44,380          21,267        23,113
      Net investment income          40,139          29,401        10,738
    Other                            10,452           5,465         4,987
                                 ----------------------------------------
          Total revenues            584,810         246,111       338,699
    Interest expense                281,672         128,189       153,483
    Provision for loan losses        15,740           7,348         8,392
                                 ----------------------------------------
          Revenues, net of interest
           expense and provision
           for loan losses          287,398         110,574       176,824
                                 ----------------------------------------

    Non-interest expenses
    ---------------------
    Compensation and benefits       155,229          71,732        83,497
    Professional services            27,190          12,925        14,265
    Business development             22,689           8,604        14,085
    Clearing and brokerage fees       5,398           3,082         2,316
    Occupancy and equipment          23,474          12,232        11,242
    Communications                   11,620           6,013         5,607
    Other operating expenses         45,970          24,993        20,977
                                 ----------      ----------    ----------
      Total non-interest expense    291,570         139,581       151,989
                                 ----------      ----------    ----------

    Net (loss) income before
     income taxes                    (4,172)        (29,007)       24,835

    Income tax (benefit) provision     (479)          1,240        (1,719)
                                 ----------      ----------    ----------

    Net (loss) income                (3,693)        (30,247)   $   26,554
                                 ==========      ==========    ==========

    Net (loss) income before
     income taxes as a
     percentage of net revenue        -1.5%          -26.2%         14.0%

    ROE (annualized)                  -0.6%           -9.4%          8.2%
    ROE (annualized-excluding
     AOCI) (1)                        -0.6%           -9.5%          8.1%


    Total shareholders' equity   $1,270,361      $1,270,361    $1,301,949
    Total shareholders' equity,
     net of AOCI (1)             $1,250,117      $1,250,117    $1,306,450

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

    Ending shares outstanding
     (in thousands)                 171,812         171,812       171,236

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

    Gross assets under management
     (in millions)
    -----------------------------
    Managed accounts             $    386.8      $    386.8    $    383.9
    Hedge & offshore funds            125.8           125.8         136.6
    Mutual funds                    1,750.6         1,750.6       1,849.5
    Private equity and venture
     capital funds                     48.2            48.2          50.5
                                 ----------      ----------    ----------
          Total                  $  2,311.4      $  2,311.4    $  2,420.5
                                 ==========      ==========    ==========

    Net assets under management
     (in millions)
    ---------------------------
    Managed accounts             $    386.8      $    386.8    $    380.9
    Hedge & offshore funds            116.1           116.1         125.4
    Mutual funds                    1,742.6         1,742.6       1,843.4
    Private equity and venture
     capital funds                     46.7            46.7          49.1
                                 ----------      ----------    ----------
          Total                  $  2,292.2      $  2,292.2    $  2,398.8
                                 ==========      ==========    ==========


    Employee count                    2,651           2,651         2,531
                                 ==========      ==========    ==========


                           For the
                         year ending
                         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      4,680     5,627
      Agency commissions    82,778     21,006     20,445     18,677    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              87,958     30,965     29,383     18,118     9,492
      Net investment
       (loss) income        13,741    (21,899)    17,600     14,559     3,481
    Other                   12,351      3,024      3,376      3,455     2,496
                         ----------------------------------------------------
         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 (benefit)
     provision              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%     18.4%

    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 earnings
    (loss) per share     $   (1.01) $   (1.60) $    0.14  $    0.31 $    0.15
    Diluted earnings
    (loss) 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                                      30-Jun-06         31-Dec-05
                                               -----------       -----------

    Cash and cash equivalents                  $    75,346       $   238,615
    Restricted cash                                  5,656             6,101
    Receivables                                    207,292           259,519
    Investments:
      Mortgage-backed securities, at fair value  3,212,655         8,002,561
      Loans held for investment, net             5,632,519         6,841,266
      Loans held for sale, net                     879,584           963,807
      Long-term investments                        255,748           347,644
      Reverse repurchase agreements                422,799           283,824
      Trading securities, at fair value          1,027,084         1,032,638
    Due from clearing broker                        69,008            71,065
    Derivative assets, at fair value               109,563            70,636
    Goodwill                                       162,765           162,765
    Intangible assets, net                          23,789            26,485
    Furniture, equipment and leasehold
     improvements, net                              45,059            46,382
    Prepaid expenses and other assets               83,242            82,482
                                               -----------       -----------
         Total assets                          $12,212,109       $18,435,790
                                               ===========       ===========


    LIABILITIES AND SHAREHOLDERS ' EQUITY

    Liabilities:
    Trading account securities sold short
     but not yet purchased, at fair value      $   130,561       $   150,547
    Commercial paper                             2,105,211         6,996,950
    Repurchase agreements                        2,532,821         2,698,619
    Securities purchased                           105,448                 -
    Derivative liabilities, at fair value           39,798            31,952
    Dividends payable                               34,823            34,588
    Interest payable                                10,428            12,039
    Accrued compensation and benefits               58,304            82,465
    Accounts payable, accrued expenses
     and other liabilities                          82,059            82,576
    Temporary subordinated loan payable                  -            75,000
    Securitization financing for loans
     held for investment, net                    5,518,098         6,642,198
    Long-term debt                                 324,197           324,686
                                               -----------       -----------
         Total liabilities                      10,941,748        17,131,620
                                               -----------       -----------


    Shareholders' equity:
    Common stock, 174,132 and 172,854 shares         1,741             1,729
    Additional paid-in capital                   1,560,669         1,547,128
    Employee stock loan receivable including
     accrued interest (399 and 551 shares)          (2,999)           (4,018)
    Deferred compensation, net                     (13,626)          (15,602)
    Accumulated other comprehensive income
     (loss), net of taxes                           20,244              (977)
    Accumulated deficit                           (295,668)         (224,090)
                                               -----------       -----------
         Total shareholders' equity              1,270,361         1,304,170
                                               -----------       -----------

         Total liabilities and
          shareholders' equity                 $12,212,109       $18,435,790
                                               ===========       ===========
SOURCE  Friedman, Billings, Ramsey Group, Inc.
    -0-                             07/27/2006

For further information: Media: Lauren Burk, +1-703-469-1004, lburk@fbr.com, or Investors: Paul Beattie, +1-703-312-9673, pbeattie@fbr.com, both of Friedman, Billings, Ramsey Group, Inc./ /Web site: http://www.fbr.com / (FBR) CO: Friedman, Billings, Ramsey Group, Inc. ST: Virginia IN: FIN SU: ERN CCA TW-JV -- DCTH027 -- 1222 07/27/2006 20:37 EDT http://www.prnewswire.com