FBR Announces 2005 Financial Results
Net Loss of $170.9 Million or $1.01 Per Share for the Year Reflects 4th Quarter Investment Portfolio Write-Downs and Losses of $261.6 Million
PRNewswire - First Call
Arlington, Virginia
NYSE: FBR

ARLINGTON, Va., Feb. 22 /PRNewswire-FirstCall/ -- Friedman, Billings, Ramsey Group, Inc. (NYSE: FBR) today announced a net loss after tax for the year ended December 31, 2005 of $170.9 million, or $1.01 per share (diluted). These results include a previously announced write-down within FBR's spread- based portfolio of mortgage-backed securities, a separate write-down of certain equity investments in the firm's merchant banking portfolio, and a fourth quarter loss in FBR's non-conforming mortgage subsidiaries.

The mortgage-backed securities (MBS) and merchant banking portfolio write- downs and losses realized during the fourth quarter of 2005 totaled $261.6 million. Included in that figure were:

    * $180.1 million in write-downs, net of hedging gains, of mortgage-backed
      securities,

    * $7.0 million of realized losses on sales of mortgage-backed securities,
      and

    * $74.5 million recognized in the write-down of nine equity investments to
      reflect "other than temporary" impairments in the firm's merchant
      banking portfolio.

The company's decision to reposition the MBS portfolio and recognize merchant banking write-downs is discussed in detail below.

The full-year 2005 loss of $170.9 million, or $1.01 per share (diluted), compares to net after-tax income of $349.6 million, or $2.07 per share (diluted), in 2004. Total revenue in 2005 was $1.0 billion compared to $1.1 billion in 2004.

FBR incurred a fourth quarter net after-tax loss of $271.6 million, or $1.60 per share (diluted), compared to net after-tax income of $86.6 million, or $0.51 per share (diluted), in the final quarter of 2004. The company's book value per share was reduced by $0.55 during the quarter from $8.21 at September 30, 2005 to $7.66 at December 31, 2005. The reduction in book value per share was less than the overall reported loss in the fourth quarter since the majority of the impact from the portfolio write-downs was already reflected in the September 30, 2005 balance sheet. Also contributing to the loss for the quarter, First NLC Financial Services, Inc. (FNLC), FBR's wholly- owned non-conforming residential mortgage origination business, incurred an after-tax loss of $15.5 million. On December 7, 2005, FBR declared a regular quarterly dividend of $0.20 per share for the fourth quarter of 2005, which was paid on January 31, 2006 to shareholders of record on December 30, 2005. For the full year, the company declared a total of $1.22 per share in dividends, down from $1.53 per share in 2004. Information regarding the tax treatment of FBR's 2005 dividends was released on February 16, 2006 and may also be found on the company's web site.

Net income for the company during the fourth quarter, excluding the portfolio write-downs, the loss in the non-conforming mortgage subsidiaries and the negative carry of the MBS portfolio, was $35.0 million, or $0.21 per share (diluted).(1) The company believes this is an important measure because it more accurately reflects the core earnings of the business.

"There is no question that 2005 was a difficult and disappointing year in many respects," said Eric F. Billings, Chairman and Chief Executive Officer. "However, it is very important to note that FBR's capital markets operations continue to perform at exceptional levels. Finally, the business overall -- excluding the impact of the write-downs and other items -- delivered a return on tangible equity of approximately 12% during the fourth quarter."(1)

Capital Markets

"In 2005, a year in which FBR continued to broaden its broker/dealer franchise, two accomplishments, in particular, stand out," said J. Rock Tonkel, Jr., President and Head of Investment Banking. "FBR ranked as the #1 book-running manager for U.S. IPOs and 144A equity placements combined -- the best and most comprehensive measure of initial capital-raising performance.(2) Additionally, we were the #2 book running manager in oil and gas - the core of the energy sector -- the newest sector in which we have achieved an industry- leading position."

In 134 transactions during 2005, FBR raised $41.2 billion compared to $26.2 billion in 2004, and the size of its average common equity transactions grew from $188.2 million in 2004 to $259.8 million in 2005. Additionally, for the full year, FBR led the U.S. equity capital markets in net revenue per transaction.(3)

    * Investment banking revenue for the year was $374.5 million, down from
      the record $428.3 million generated in 2004.  Revenue for the fourth
      quarter was $96.3 million compared to $133.6 million in the fourth
      quarter of 2004.

    * In 2005, FBR was ranked as:

      -- #1 book-running manager for U.S. IPOs and 144A equity placements
         combined,(2)

      -- #1 book-running manager of all common stock offerings for U.S.
         companies with a market capitalization of $2 billion or less,(4)

      -- #2 book-running manager of all common stock offerings for domestic
         oil and gas companies,(4) and

      -- #9 book-running manager of all common stock offerings for all U.S.
         companies.(4)

In a difficult trading environment characterized by continuing pressure on commission rates, revenue from institutional brokerage (principal transactions and agency commissions) was down 8.5% on a year-to-year basis, falling from $110.1 million in 2004 to $100.7 million in 2005. For the fourth quarter of 2005, brokerage revenue totaled $24.8 million, a decline of 3.5% from the $25.7 million generated in the final quarter of 2004.

Principal Investment and Mortgage Banking

"While 2005 was clearly the most challenging year the company has experienced from a portfolio perspective, we believe we have taken the necessary steps to position our spread businesses and the merchant bank to achieve higher returns on equity in the coming quarters and years," commented Richard J. Hendrix, President and COO. "Although we believe that many opportunities exist to generate very good returns in each of our portfolio businesses, we are operating in essentially a low return environment for most asset classes. Consequently, we will be patient with the redeployment of capital generated from the MBS portfolio repositioning and any other portfolio liquidations."

Mortgage Portfolio

During a year when the federal funds rate was increased eight times, almost doubling short-term interest rates, FBR's spread-based businesses were under constant pressure from the impact of a flattening yield curve combined with persistently high mortgage prepayment speeds. Consequently, the company determined to undertake a repositioning of the MBS portfolio to eliminate a negative cash spread on much of the portfolio and to be in a position to take advantage of reinvestment opportunities presented by the changing environment over the coming quarters.

The repositioning, a step involving the sale of a significant percentage of the mortgage portfolio in early 2006, was announced on December 21, 2005. This decision marked a change in FBR's intent to hold securities in its MBS portfolio until maturity. Consequently, a determination was made that unrealized MBS portfolio losses as of December 31, 2005 were to be considered "other than temporary" impairments under Statement of Financial Accounting Standards (SFAS) 115, necessitating a recognition through the income statement of the reduced value of those securities at year end. As of February 22, 2006, FBR had sold mortgage-backed securities valued at $6.7 billion, substantially completing the liquidation phase of the portfolio repositioning. The company intends to patiently reinvest the net proceeds from the $6.7 billion liquidation throughout 2006.

The non-conforming mortgage portfolio investment was substantially completed in the third quarter of 2005. During the fourth quarter the company completed $3.1 billion in securitization financing for the portfolio, placing permanent financing on the remaining warehouse funded portions of the held for investment portfolio. At year end, FBR held for investment $6.8 billion in non-conforming mortgage loans with an average coupon of 7.25%, an ending premium of 102.10, and a one-month CPR of 25. The yield for the month of December was 6.84% with a corresponding cost of funds of 4.86%. With the construction of the non-conforming portfolio complete for the near term, FBR will patiently invest available capital opportunistically.

Merchant Banking

FBR made a determination during the year-end evaluation of its merchant banking portfolio to recognize as "other than temporary" impairments the amount by which the fair value of certain of its merchant banking investments was below their respective cost bases. This determination, which was discussed as a possible course of action in the December 21, 2005 press release, is different from the determination for the mortgage portfolio as it relates strictly to current trading values and is not the result of any change in the company's investment intent regarding these securities.

During 2005, the merchant banking group continued to make new investments in attractive opportunities presented by the capital markets business, investing a total of $68 million of equity in eight companies over the course of the year. The merchant banking and long-term investments portfolio generated total income of $57.5 million during the year -- comprised of $36.6 million in dividends and $20.9 million in related gains -- prior to the recognition of a $74.5 million write-down in the cost basis of a portion of the assets in the portfolio. At year end, the merchant banking investment portfolio had an estimated cash dividend yield of more than 12%.

The total value of FBR's merchant banking portfolio and other long-term investments was $333.1 million as of December 31, 2005. Of this total, $291.6 million was held in the merchant banking and long-term investments portfolio and $41.5 million was held in alternative asset investments.

First NLC Financial Services

The adverse interest rate climate contributed to the difficult environment for FNLC and other non-conforming mortgage lenders in the fourth quarter. The compression between funding costs and coupons in the non-conforming mortgage business continued until late in the year, leading to deteriorating sale prices for mortgage originators throughout the fourth quarter. During the fourth quarter, FNLC achieved an average sale price of 100.90 on sold production resulting in an after-tax loss of $15.5 million for the quarter. Importantly, FNLC has seen coupon increases of 109 basis points on its first

mortgage production since November, resulting in a meaningful increase in sale prices for its mortgage inventory.

Nonetheless, the environment remains challenging in the gain-on-sale business. FNLC is taking the necessary steps to quickly return to profitability, including headcount reductions in many areas and other cost reductions throughout its origination business, while continuing to serve its broad base of mortgage brokers and retail customers. For the full year, FNLC originated a record $6.0 billion in mortgages, an increase of 81% over 2004. Total non-interest expenses related to FNLC since the acquisition in February were $87.1 million for the year and are the primary reason for the year-to- year increase in non-interest expenses for the entire firm.

Asset Management

Base management fees for 2005 were $30.3 million compared to fees of $28.3 million in 2004. Incentive fees, however, fell from $10.9 million in 2004 to $1.9 million in 2005. Base management fees for the fourth quarter of 2005 were $6.1 million, and incentive fees were $.7 million.

    * Total funds under management were $2.6 billion as of December 31, 2005,
      compared to $3.2 billion on December 31, 2004.

    * Mutual fund assets totaled $1.9 billion at year end 2005 compared to
      $2.3 billion at the close of 2004.

    Looking Ahead

"As the 2005 capital markets results demonstrate, our franchise is far broader and more diversified than it was just a few short years ago," Mr. Billings said. "Nothing says more about the strength of our business than our three-year aggregate ranking as the #1 book-running manager for U.S. IPOs and 144A equity placements combined.(5) Given this record of accomplishment and the position it puts us in our marketplace, we have great confidence about our business as we look toward the future."

The firm will host an earnings conference call tomorrow morning, Thursday, February 23, 2006 at 9:00 A.M. U.S. EST. Investors wishing to listen to the conference 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. provides investment banking*, institutional brokerage*, asset management, and private client services 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, Cleveland, 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, visit http://www.fbr.com.

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

    (1) Return on tangible equity computed as annualized quarterly earnings
        per share excluding portfolio write-downs ($1.54 per share (diluted)),
        the loss in the non-conforming mortgage subsidiaries ($0.18 per share
        (diluted)) and the negative carry of the MBS portfolio ($0.09 per
        share (diluted)): $0.84 ($.21 x 4), divided by the average tangible
        book value per share: $6.83 ($7.10 at 9/30/05; $6.55 at 12/31/05).
        Tangible book value is shareholders' equity less goodwill and
        intangible assets.  The company believes this is an important measure
        because it more accurately reflects the core earnings of the business.

    (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, with apportioned credit to all book-runners.  Includes only
        rank eligible transactions.

    (3) Source: Dealogic.  Relates to reported net revenue for all U.S. equity
        capital markets IPO and follow-on transactions; priced between 1/1/05
        and 12/31/05, with net revenue allocated to lead banks on an
        apportioned basis.  Includes only rank eligible transactions.

    (4) Source: Dealogic.  Relates to total deal value of all common stock
        offered in transactions classified as IPOs or follow-ons, regardless
        of SEC registration, for: U.S. issuers valued at $2 billion or less,
        U.S. issuers classified in the Oil and Gas general industry group, and
        all U.S. issuers, respectively; priced between 1/1/05 and 12/31/05,
        with apportioned credit to all book-runners.  Includes only rank
        eligible transactions.

    (5) 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 1/1/03 and
        12/31/05, 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,

                                         2005        %        2004       %
                                       --------- --------   --------- -------
    REVENUES:
    Investment banking:
      Capital raising                 $  88,866     77.9%  $ 125,488    51.2%
      Advisory                            7,415      6.5%     $8,088     3.3%
    Institutional brokerage:
      Principal transactions              3,788      3.3%      4,758     1.9%
      Agency commissions                 21,006     18.4%     20,948     8.5%
      Mortgage trading interest          19,555     17.1%        -       0.0%
      Mortgage trading net
       investment loss                   (1,419)    -1.2%        -       0.0%
    Asset management:
      Base management fees                6,153      5.4%      8,344     3.4%
      Incentive allocations and fees        742      0.6%      7,982     3.3%
    Principal investment:
      Interest                          189,811    166.3%     86,550    35.3%
      Net investment (loss) income     (258,500)  -226.5%     27,442    11.2%
      Dividends                          16,039     14.1%      6,169     2.5%
    Mortgage Banking:
      Interest                           30,965     27.1%        -       0.0%
      Net investment loss               (21,899)   -19.2%        -       0.0%
    Other                                 3,024      2.7%      2,329     1.0%
                                       --------- --------   --------- -------
           Total revenues               105,546     92.5%    298,098   121.6%
    Interest expense                    211,393    185.3%     52,968    21.6%
    Provision for loan losses             8,263      7.2%        -       0.0%
                                       --------- --------   --------- -------
           Revenues, net of interest
            expense and provision for
            loan losses                (114,110)  -100.0%    245,130   100.0%
                                       --------- --------   --------- -------

    NON-INTEREST EXPENSES:
    Compensation and benefits            87,330     76.5%     95,113    38.8%
    Professional services                16,556     14.5%     11,832     4.8%
    Business development                 10,433      9.2%     11,248     4.6%
    Clearing and brokerage fees           2,447      2.1%      2,186     0.9%
    Occupancy and equipment              10,151      8.9%      4,330     1.8%
    Communications                        5,741      5.0%      4,227     1.7%
    Other operating expenses             24,984     21.9%      6,570     2.7%
                                       --------- --------   --------- -------
           Total non-interest
            expenses                    157,642    138.1%    135,506    55.3%
                                       --------- --------   --------- -------

      Net (loss) income before
       income taxes                    (271,752)  -238.1%    109,624    44.7%

    Income tax (benefit) provision         (142)    -0.1%     23,032     9.4%
                                       --------- --------   --------- -------

           Net (loss) income          $(271,610)  -238.0%  $  86,592    35.3%
                                       ========= ========   ========= =======


    Basic (loss) earnings per share   $   (1.60)           $    0.52
                                       =========            =========
    Diluted (loss) earnings per share $   (1.60)           $    0.51
                                       =========            =========

    Weighted average shares - basic     169,921              167,753
                                       =========            =========
    Weighted average shares - diluted   169,921              168,867
                                       =========            =========



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

                                                  Twelve Months Ended
                                                     December 31,

                                         2005        %        2004      %
                                       --------- --------   ---------  -------
    REVENUES:
    Investment banking:
       Capital raising                $ 356,753     82.1%  $ 398,183     44.8%
       Advisory                          17,759      4.1%     30,115      3.4%
    Institutional brokerage:
       Principal transactions            17,950      4.1%     20,444      2.3%
       Agency commissions                82,778     19.0%     89,650     10.1%
       Mortgage trading interest         30,859      7.1%          -      0.0%
       Mortgage trading net
        investment loss                  (3,820)    -0.9%          -      0.0%
    Asset management:
       Base management fees              30,348      7.0%     28,307      3.2%
       Incentive allocations and fees     1,929      0.4%     10,940      1.2%
    Principal investment:
       Interest                         549,832    126.6%    350,691     39.5%
       Net investment (loss) income    (239,754)   -55.2%    101,973     11.5%
       Dividends                         36,622      8.4%     14,644      1.6%
    Mortgage Banking:
       Interest                          87,958     20.2%        -        0.0%
       Net investment income             13,741      3.2%        -        0.0%
    Other                                12,351      2.9%      7,155      0.9%
                                       --------- --------   ---------  -------
           Total revenues               995,306    229.0%  1,052,102    118.5%
    Interest expense                    546,313    125.7%    164,156     18.5%
    Provision for loan losses            14,291      3.3%        -        0.0%
                                       --------- --------   ---------  -------
           Revenues, net of interest
            expense and provision
            for loan losses             434,702    100.0%    887,946    100.0%
                                       --------- --------   ---------  -------

    NON-INTEREST EXPENSES:
    Compensation and benefits           331,492     76.3%    323,524     36.4%
    Professional services                66,550     15.3%     50,467      5.7%
    Business development                 46,648     10.7%     44,955      5.1%
    Clearing and brokerage fees           8,882      2.0%      9,123      1.0%
    Occupancy and equipment              34,044      7.8%     14,458      1.6%
    Communications                       20,634      4.8%     13,959      1.6%
    Other operating expenses             70,679     16.3%     22,740      2.6%
                                       --------- --------   ---------  -------
           Total non-interest
            expenses                    578,929    133.2%    479,226     54.0%
                                       --------- --------   ---------  -------

      Net (loss) income before
       income taxes                    (144,227)   -33.2%    408,720     46.0%

    Income tax provision                 26,683      6.1%     59,161      6.7%
                                       --------- --------   ---------  -------

           Net (loss) income          $(170,910)   -39.3%  $ 349,559     39.3%
                                       ========= ========   =========  =======

    Basic (loss) earnings per share   $   (1.01)           $    2.09
                                       =========            =========
    Diluted (loss) earnings per share $   (1.01)           $    2.07
                                       =========            =========

    Weighted average shares - basic     169,333              167,099
                                       =========            =========
    Weighted average shares - diluted   169,333              168,490
                                       =========            =========



                    FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
            FINANCIAL & STATISTICAL SUPPLEMENT - OPERATING RESULTS
                (Dollars in thousands, except per share data)
                                 (Unaudited)

                        As of and
                         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      4,187      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              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 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%      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 $1,636,371

    Basic earnings per
     share                 $(1.01)    $(1.60)     $0.14      $0.31      $0.15
    Diluted 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      $9.67

    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
                        ========== ========== ========== ========== ==========

    Productive
     assets under
     management
     (in millions)
    Managed accounts       $329.5     $329.5     $255.5     $257.3     $223.0
    Hedge & offshore
     funds                  142.2      142.2      183.3      332.8      425.3
    Mutual funds          1,872.8    1,872.8    2,069.9    2,176.6    2,204.2
    Private equity and
     venture capital
     funds                  100.3      100.3       51.4       51.2       79.9
                        ---------- ---------- ---------- ---------- ----------
         Total           $2,444.8   $2,444.8   $2,560.1   $2,817.9   $2,932.4
                        ========== ========== ========== ========== ==========

    Employee count          2,449      2,449      2,455      2,226      2,123
                        ========== ========== ========== ========== ==========


                        As of and
                       for the year
                         ending
                       December 31,
                           2004      Q-4 04     Q-3 04     Q-2 04     Q-1 04
                        ---------- ---------- ---------- ---------- ----------
    Revenues
    Investment banking:
     Capital raising     $398,183   $125,488   $130,019    $52,883    $89,793
     Advisory              30,115      8,088     11,602      9,107      1,318
    Institutional
     brokerage:
     Principal
      transactions         20,444      4,758      4,241      5,426      6,019
     Agency commissions    89,650     20,948     18,505     21,060     29,137
     Mortgage trading
      interest                -          -          -          -          -
     Mortgage trading net
      investment loss         -          -          -          -          -
    Asset management:
     Base management fees  28,307      8,344      7,044      6,384      6,535
     Incentive
      allocations and
      fees                 10,940      7,982      1,737     (1,444)     2,665
    Principal investment:
     Interest             350,691     86,550     88,035     87,111     88,995
     Net investment
      income              101,973     27,442     19,090     28,832     26,609
     Dividends             14,644      6,169      5,820      1,683        972
    Mortgage Banking:
     Interest                 -          -          -          -          -
     Net investment
      income (loss)           -          -          -          -          -
    Other                   7,155      2,329      1,827      1,683      1,316
                        ---------- ---------- ---------- ---------- ----------
      Total revenues    1,052,102    298,098    287,920    212,725    253,359
    Interest expense      164,156     52,968     44,265     34,276     32,647
    Provision for loan
     losses                   -          -          -          -          -
                        ---------- ---------- ---------- ---------- ----------
      Revenues, net of
       interest expense
       and provision
       for loan losses   887,946    245,130    243,655     178,449    220,712
                        ---------- ---------- ---------- ---------- ----------

    Non-interest
     expenses
    Compensation and
     benefits             323,524     95,113     95,824     57,698     74,889
    Professional services  50,467     11,832     13,421     15,050     10,164
    Business development   44,955     11,248      8,284      8,885     16,538
    Clearing and
     brokerage fees         9,123      2,186      1,556      2,608      2,773
    Occupancy and
     equipment             14,458      4,330      3,898      3,326      2,904
    Communications         13,959      4,227      3,348      3,442      2,942
    Other operating
     expenses              22,740      6,570      4,846      5,351      5,973
                        ---------- ---------- ---------- ---------- ----------
      Total expenses      479,226    135,506    131,177     96,360    116,183
                        ---------- ---------- ---------- ---------- ----------

    Net income before
     income taxes         408,720    109,624    112,478     82,089    104,529

    Income tax provision   59,161     23,032     20,329        910     14,890
                        ---------- ---------- ---------- ---------- ----------
    Net income           $349,559    $86,592    $92,149    $81,179    $89,639
                        ========== ========== ========== ========== ==========

    Net income before
     income taxes as a
     percentage of net
     revenue                46.0%      44.7%      46.2%      46.0%      47.4%

    ROE (annualized)        22.3%      22.2%      24.8%      20.8%      22.1%
    ROE (annualized -
     excluding AOCI)(1)     45.0%      11.1%      12.0%      10.7%      11.8%


    Total shareholders'
     equity            $1,578,524 $1,578,524 $1,543,361 $1,431,345 $1,685,673
    Total shareholders'
     equity, net of
     AOCI(1)           $1,616,686 $1,616,686 $1,588,310 $1,549,918 $1,540,739

    Basic earnings per
     share                  $2.09      $0.52      $0.55      $0.49      $0.54
    Diluted earnings per
     share                  $2.07      $0.51      $0.55      $0.48      $0.54

    Ending shares
     outstanding (in
     thousands)           166,931    166,931    166,753    166,631    165,623

    Book value per share    $9.46      $9.46      $9.26      $8.59     $10.18
    Book value per share,
     net of AOCI(1)         $9.68      $9.68      $9.52      $9.30      $9.30

    Gross assets under
     management
     (in millions)
    Managed accounts       $196.1     $196.1     $168.7     $160.3      $78.8
    Hedge & offshore
     funds                  631.6      631.6      519.3      430.0      435.4
    Mutual funds          2,320.4    2,320.4    1,963.7    1,612.2    1,897.4
    Private equity and
     venture capital
     funds                   52.5       52.5       49.7       50.7       76.5
                        ---------- ---------- ---------- ---------- ----------
       Total             $3,200.6   $3,200.6   $2,701.4   $2,253.2   $2,488.1
                        ========== ========== ========== ========== ==========

    Net assets under
     management
     (in millions)
    Managed accounts       $196.1     $196.1     $168.7     $160.3      $78.8
    Hedge & offshore
     funds                  589.6      589.6      482.8      409.0      350.5
    Mutual funds          2,305.5    2,305.5    1,951.7    1,606.9    1,874.0
    Private equity and
     venture capital
     funds                   49.7       49.7       46.4       46.5       70.4
                        ---------- ---------- ---------- ---------- ----------
       Total             $3,140.9   $3,140.9   $2,649.6   $2,222.7   $2,373.7
                        ========== ========== ========== ========== ==========

    Productive assets
     under management
     (in millions)
    Managed accounts       $196.1     $196.1     $168.7     $160.3      $78.8
    Hedge & offshore
     funds                  488.7      488.7      393.8      329.9      263.8
    Mutual funds          2,305.5    2,305.5    1,951.7    1,606.9    1,874.0
    Private equity and
     venture capital
     funds                   70.9       70.9       70.9      111.6      131.2
                        ---------- ---------- ---------- ---------- ----------
       Total             $3,061.2   $3,061.2   $2,585.1   $2,208.7   $2,347.8
                        ========== ========== ========== ========== ==========

    Employee count            698        698        665        626        549
                        ========== ========== ========== ========== ==========


    (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-05         31-Dec-04
                                               -----------       -----------

    Cash and cash equivalents                  $   238,615       $   224,381
    Restricted cash                                  6,101             7,146
    Receivables                                    259,519            74,880
    Investments:
        Mortgage-backed securities,
         at fair value                           8,002,561        11,726,689
        Loans held for investment, net           6,841,266                 -
        Loans held for sale, net                   963,807                 -
        Long-term investments                      333,067           441,499
        Reverse repurchase agreements              283,824           183,375
        Trading securities, at fair value        1,032,638             7,744
        Residual interest in securitization,
         at fair value                              14,577                 -
    Due from clearing broker                        71,065            95,247
    Derivative assets, at fair value                70,636             8,098
    Goodwill                                       162,765           108,013
    Intangible assets, net                          26,485            14,404
    Furniture, equipment, software and
     leasehold improvements, net                    46,382            18,733
    Prepaid expenses and other assets               82,482            18,079
                                               -----------       -----------
         Total assets                          $18,435,790       $12,928,288
                                               ===========       ===========

    LIABILITIES AND SHAREHOLDERS ' EQUITY

    Liabilities:
    Trading account securities sold short
     but not yet purchased, at fair value      $   150,547        $   17,176
    Commercial paper                             6,996,950         7,294,949
    Repurchase agreements                        2,698,619         3,467,569
    Securities purchased                                 -           144,430
    Derivative liabilities, at fair value           31,952               613
    Dividends payable                               34,588            65,870
    Interest payable                                12,039             5,894
    Accrued compensation and benefits               82,465           131,218
    Accounts payable, accrued expenses
     and other liabilities                          82,576            93,675
    Temporary subordinated loan payable             75,000                 -
    Securitization financing for loans
     held for investment, net                    6,642,198                 -
    Long-term debt                                 324,686           128,370
                                               -----------       -----------
         Total liabilities                      17,131,620        11,349,764
                                               -----------       -----------


    Shareholders' equity:
    Common stock, 172,854 and 168,897 shares         1,729             1,689
    Additional paid-in capital                   1,547,128         1,483,640
    Employee stock loan receivable
     (551 and 711 shares)                           (4,018)           (4,890)
    Deferred compensation                          (15,602)          (16,863)
    Accumulated other comprehensive loss              (977)          (38,162)
    Retained (deficit) earnings                   (224,090)          153,110
                                               -----------       -----------
         Total shareholders' equity              1,304,170         1,578,524
                                               -----------       -----------

         Total liabilities and
          shareholders' equity                 $18,435,790       $12,928,288
                                               ===========       ===========

SOURCE  Friedman, Billings, Ramsey Group, Inc.
         02/22/2006

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)