FBR Announces First Quarter 2006 Financial Results
Net After-Tax Income of $26.6 Million or $0.16 per Share
PRNewswire - First Call
Arlington, Virginia
NYSE: FBR

ARLINGTON, Va., April 26 /PRNewswire-FirstCall/ -- Friedman, Billings, Ramsey Group, Inc. (NYSE: FBR) today announced its results for the quarter ended March 31, 2006. Net income after tax for the quarter was $26.6 million, or $0.16 per share (diluted), compared to after-tax earnings of $24.4 million, or $0.14 per share (diluted) for the first quarter of 2005.

Net revenues for the quarter were $176.8 million, an increase of 8.5% from the $163.0 million in net revenues in the first quarter of 2005. Book value per share as of March 31, 2006 was $7.60, and book value per share net of Accumulated Other Comprehensive Income (AOCI)(1) was $7.63.

These results reflect continued solid performance by FBR's capital markets group, a substantial improvement in the results of the Company's non- conforming mortgage subsidiaries, and better returns on FBR's principal investment portfolios.

Capital Markets

In the first quarter of 2006, FBR helped raise $8.3 billion for its clients in 21 transactions, 14 of which it lead managed. In addition, FBR advised on four merger and acquisition assignments. Investment banking revenues for the quarter totaled $69.2 million, down from $88.0 million in the first quarter of 2005.

Trends in the first quarter of 2006 were in many respects similar to those seen in 2005 -- a broadening capital markets franchise with leading equity underwriting positions in a growing number of key industries. In particular, the insurance and energy groups performed well. Following 2005, when FBR was the #1 book-running manager for the year for initial public offerings and 144A common stock private placements combined, FBR maintained a market leading position with a #2 ranking in these offerings for the first quarter of 2006.(2)

Institutional brokerage revenues, net of related interest expense, rose 14% from $27.8 million in the first quarter of 2005 to $31.7 million in the quarter just ended. FBR continues to be successful at minimizing the impact of industry cost pressures by maintaining and strengthening relationships with mid-sized buy-side firms that value both quality research and trading expertise.

Principal Investment and Mortgage Finance

The steps FBR took to reposition its principal investment portfolios in the fourth quarter of 2005 have given the firm greater liquidity and a broader range of investment options going forward. FBR expects to see gradual improvement in returns on its investments in mortgage securities as it continues to redeploy the $450 million of capital invested in this portfolio.

Mortgage Portfolios

The repositioning of FBR's principal investment portfolio was substantially completed by the end of February 2006. At the close of the first quarter of 2006, FBR had sold mortgage-backed securities valued at $7.0 billion, effectively completing the liquidation phase of the repositioning. For the quarter, the mortgage securities portfolio yield was 4.54% with a corresponding cost of funds of 4.45%. At the end of the quarter, the balance of the mortgage securities portfolio was approximately $900 million. As a result of the portfolio repositioning, the Company recorded net realized gains of $4.5 million from the sale of mortgage securities and loans.

The Company's investments in non-conforming mortgage loans averaged $6.6 billion with an average coupon of 7.26%, a one-month CPR of 33.5, and an ending net premium of $137.4 million, including deferred net origination costs. The net yield for the quarter was 6.78% with a corresponding cost of funds of 5.15%. Pre-provision net interest margin totaled 98 basis points, net of 24 basis points of mortgage insurance costs.

In the first quarter of 2006, First NLC (FNLC) narrowed its loss margin substantially, generating a pre-tax loss from its operating activities of $4.8 million compared to a pre-tax loss of $23.5 million in the fourth quarter of 2005. Importantly, FNLC achieved a cost to originate of 174 basis points during the month of March. The cost to originate for the full quarter was 210 basis points. As a result of cost cutting and other initiatives undertaken by FNLC during the quarter, FBR now expects FNLC to return to profitability in the second quarter of 2006.

Merchant Banking

During the first quarter, the merchant banking and long-term investments portfolio generated total income of $17.4 million -- comprising $3.7 million in dividends and $13.7 million in net realized gains. During the quarter, FBR made four new merchant banking investments totaling $37.5 million.

The total value of FBR's merchant banking portfolio and other long-term investments at the end of the quarter was $306.0 million compared to $347.6 million as of December 31, 2005. Of this total, $263.9 million was held in the merchant banking and long-term investments portfolio and $42.1 million was held in alternative asset investments.

Asset Management

Base management fees for the first quarter were $5.1 million compared to base fees of $8.5 million in the first quarter of 2005. Incentive allocations and fees rose to $1.0 million from a negative $0.4 million in the comparable quarter of 2005. Total funds under management were $2.4 billion as of March 31, 2006, down from $3.1 billion on March 31, 2005. Mutual fund assets currently managed by FBR Investment Management totaled $1.8 billion at March 31, 2006, compared to $2.2 billion at the close of the first quarter of 2005. In the first quarter, mutual fund assets rose 1.5% over year-end 2005 levels.(3)

The firm will host an earnings conference call tomorrow morning, Thursday, April 27, 2006 at 9:00 A.M. U.S. EDT. Investors wishing to listen to the conference call may do so via the web at: http://phx.corporateir.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 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, 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 the 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 of
        U.S. issuers offered in IPOs or transactions exempt from SEC
        registration pursuant to Rule 144A; priced between 1/1/05 and 12/31/05
        and 1/1/06 and 3/31/06, respectively, with apportioned credit to all
        book-runners.  Includes only rank-eligible transactions.

    (3) Excluding two mutual funds sold in the first quarter of 2006 that had
        assets of $61.2 million as of year-end 2005.

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
                                                        March 31,

                                            2006        %      2005        %
                                          ---------  ------  ---------  ------
    REVENUES:
    Investment banking:
      Capital raising                     $ 66,335    37.5%  $ 86,813    53.3%
      Advisory                               2,869     1.6%     1,138     0.7%
    Institutional brokerage:
      Principal transactions                 6,625     3.7%     5,627     3.5%
      Agency commissions                    23,408    13.2%    22,157    13.6%
      Mortgage trading interest             17,650    10.0%         -     0.0%
      Mortgage trading net investment
       loss                                 (1,237)   -0.7%         -     0.0%
    Asset management:
      Base management fees                   5,097     2.9%     8,468     5.2%
      Incentive allocations and fees         1,008     0.6%      (375)   -0.2%
    Principal investment:
      Interest                             149,126    84.3%    98,896    60.7%
      Net investment income (loss)          25,281    14.3%    (3,858)   -2.4%
      Dividends                              3,699     2.1%     3,440     2.1%
    Mortgage Banking:
      Interest                              25,059    14.2%     9,492     5.8%
      Net investment income                 10,738     6.1%     3,481     2.1%
    Other                                    3,041     1.7%     2,496     1.5%
                                          ---------  ------  ---------  ------
        Total revenues                     338,699   191.5%   237,775   145.9%
    Interest expense                       153,483    86.8%    74,822    45.9%
    Provision for loan losses                8,392     4.7%       -       0.0%
                                          ---------  ------  ---------  ------
        Revenues, net of interest expense
         and provision for loan losses     176,824   100.0%   162,953   100.0%
                                          ---------  ------  ---------  ------

    NON-INTEREST EXPENSES:
    Compensation and benefits               83,497    47.2%    75,799    46.5%
    Professional services                   14,265     8.1%    13,650     8.4%
    Business development                    14,085     8.0%    15,438     9.5%
    Clearing and brokerage fees              2,316     1.3%     2,032     1.2%
    Occupancy and equipment                 11,242     6.3%     5,724     3.5%
    Communications                           5,607     3.2%     4,032     2.5%
    Other operating expenses                20,977    11.9%    16,294    10.0%
                                          ---------  ------  ---------  ------
        Total non-interest expenses        151,989    86.0%   132,969    81.6%
                                          ---------  ------  ---------  ------

      Net income before income taxes        24,835    14.0%    29,984    18.4%

    Income tax (benefit) provision          (1,719)   -1.0%     5,572     3.4%
                                          ---------  ------  ---------  ------

        Net income                        $ 26,554    15.0%  $ 24,412    15.0%
                                          =========  ======  =========  ======


    Basic earnings per share              $   0.16           $   0.15
                                          =========          =========
    Diluted earnings per share            $   0.16           $   0.14
                                          =========          =========

    Weighted average shares - basic        170,728            168,334
                                          =========          =========
    Weighted average shares - diluted      171,031            169,458
                                          =========          =========



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

                                                                Q-1 06
                                                             ----------
    Revenues
    Investment banking:
      Capital raising                                        $   66,335
      Advisory                                                    2,869
    Institutional brokerage:
      Principal transactions                                      6,625
      Agency commissions                                         23,408
      Mortgage trading interest                                  17,650
      Mortgage trading net investment loss                       (1,237)
    Asset management:
      Base management fees                                        5,097
      Incentive allocations and fees                              1,008
    Principal investment:
      Interest                                                  149,126
      Net investment income (loss)                               25,281
      Dividends                                                   3,699
    Mortgage Banking:
      Interest                                                   25,059
      Net investment income (loss)                               10,738
    Other                                                         3,041
                                                             ----------
               Total revenues                                   338,699
    Interest expense                                            153,483
    Provision for loan losses                                     8,392
                                                             ----------
               Revenues, net of interest expense and
                provision for loan losses                       176,824
                                                             ----------

    Non-interest expenses
    Compensation and benefits                                    83,497
    Professional services                                        14,265
    Business development                                         14,085
    Clearing and brokerage fees                                   2,316
    Occupancy and equipment                                      11,242
    Communications                                                5,607
    Other operating expenses                                     20,977
                                                             ----------
         Total non-interest expenses                            151,989
                                                             ----------

    Net income (loss) before income taxes                        24,835

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

    Net income (loss)                                        $   26,554
                                                             ==========

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

    ROE (annualized)                                               8.2%
    ROE (annualized-excluding AOCI) (1)                            8.1%


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

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

    Ending shares outstanding (in thousands)                    171,236

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

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

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

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

                    For the
                   year ended
                   31-Dec-05      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
       income (loss) (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
       income (loss)   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 income
     (loss) 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 income
     (loss)        $ (170,910) $ (271,610) $   23,045  $   53,243  $   24,412
                   ==========  ==========  ==========  ==========  ==========

    Net income
     (loss) 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                                          31-Mar-06     31-Dec-05
                                                  ------------- -------------
    Cash and cash equivalents                     $    188,714  $    238,615
    Restricted cash                                      5,020         6,101
    Receivables                                        278,697       259,519
    Investments:
       Mortgage-backed securities, at fair value       892,159     8,002,561
       Loans held for investment, net                6,254,819     6,841,266
       Loans held for sale, net                        914,442       963,807
       Long-term investments                           305,992       347,644
       Reverse repurchase agreements                   179,983       283,824
       Trading securities, at fair value             1,252,485     1,032,638
    Due from clearing broker                            81,350        71,065
    Derivative assets, at fair value                    92,723        70,636
    Goodwill                                           162,765       162,765
    Intangible assets, net                              24,771        26,485
    Furniture, equipment and leasehold
     improvements, net                                  44,328        46,382
    Prepaid expenses and other assets                   81,345        82,482
                                                  ------------- -------------
         Total assets                             $ 10,759,593  $ 18,435,790
                                                  ============= =============


    LIABILITIES AND SHAREHOLDERS ' EQUITY

    Liabilities:
    Trading account securities sold short but
     not yet purchased, at fair value             $    153,058  $    150,547
    Commercial paper                                   423,020     6,996,950
    Repurchase agreements                            2,200,739     2,698,619
    Securities purchased                                23,786             -
    Derivative liabilities, at fair value               36,855        31,952
    Dividends payable                                   34,747        34,588
    Interest payable                                    11,310        12,039
    Accrued compensation and benefits                   43,301        82,465
    Accounts payable, accrued expenses and
     other liabilities                                  80,593        82,576
    Temporary subordinated loan payable                      -        75,000
    Securitization financing for loans held
     for investment, net                             6,126,317     6,642,198
    Long-term debt                                     323,918       324,686
                                                  ------------- -------------
         Total liabilities                           9,457,644    17,131,620
                                                  ------------- -------------


    Shareholders' equity:
    Common stock, 173,848 and 172,854 shares             1,738         1,729
    Additional paid-in capital                       1,557,713     1,547,128
    Employee stock loan receivable including
     accrued interest (551 shares)                      (4,081)       (4,018)
    Deferred compensation                              (17,467)      (15,602)
    Accumulated other comprehensive loss                (4,501)         (977)
    Accumulated deficit                               (231,453)     (224,090)
                                                  ------------- -------------
         Total shareholders' equity                  1,301,949     1,304,170
                                                  ------------- -------------

         Total liabilities and shareholders'
          equity                                   $10,759,593   $18,435,790
                                                  ============= =============

SOURCE  Friedman, Billings, Ramsey Group, Inc.
    -0-                             04/26/2006

For further information: Media: Lauren Burk, +1-703-469-1004, lburk@fbr.com, or Investors: Kurt Harrington, +1-703-312-9647, kharrington@fbr.com, both of Friedman, Billings, Ramsey Group, Inc. / /Web site: http://www.fbr.com/ (FBR) CO: Friedman, Billings, Ramsey Group, Inc.; FBR ST: Virginia IN: FIN SU: ERN CCA LM-MH -- DCW034 -- 7180 04/26/2006 20:36 EDT http://www.prnewswire.com