425 1 groupcomplete.txt FORM 425 Filed by Friedman, Billings Ramsey Group, Inc. Pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 under the Securities Act of 1934 Subject Company: FBR Asset Investment Corporation Commission File No. 001-15049 On November 18, 2002, Friedman, Billings, Ramsey Group, Inc. and FBR Asset Investment Corporation distributed the following information: Friedman Billings Ramsey [FBR Logo] MERGER OF FRIEDMAN, BILLINGS, RAMSEY GROUP ("FBR GROUP") WITH FBR ASSET INVESTMENT ("FBR ASSET") 2002 [FBR LOGO] ________________________________________________________________________________ FORWARD LOOKING INFORMATION Statements concerning projections, future performance, developments, events, market forecasts, revenues, expenses, earnings, run rates and any other guidance on present or future periods constitute forward-looking statements. These forward-looking statements 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 overall environment for interest rates, repayment speeds within the mortgage-backed securities market, risk associated with equity investments, the demand for public offerings, activity in the secondary securities market, the high degree of risk associated with technology and other venture capital investments, competition for business and personnel, and general economic, political, and market conditions. Additional information concerning factors that could cause actual results to differ materially is contained in FBR Asset's Annual Report on Form 10-K and quarterly reports on Form 10-Q, and FBR Group's Annual Report on Form 10-K and quarterly reports on Form 10-Q. PROXY INFORMATION In connection with the proposed transactions, Friedman, Billings, Ramsey Group, Inc. and FBR Asset Investment Corporation will file a joint proxy statement/ prospectus with the Securities and Exchange Commission. Investors and security holders are urged to carefully read the joint proxy statement/prospectus regarding the proposed transactions when it becomes available, because it will contain important information. Investors and security holders may obtain a free copy of the joint proxy statement/prospectus (when it is available) and other documents containing information about Friedman, Billings, Ramsey Group, Inc. and FBR Asset, without charge, at the SEC's web site at http://www.sec.gov. Free copies of both companies' filings may be obtained by directing a request to 1001 Nineteenth Street North, Arlington, Virginia 22209, Attention: Investor Relations. PARTICIPANTS IN SOLICITATION FBR Group, FBR Asset and their respective directors, executive officers and other members of their management and employees may be soliciting proxies from their respective stockholders in connection with the proposed merger. Information concerning FBR Group's participants in the solicitation is set forth in FBR Group's proxy statement for its annual meeting of stockholders, filed with the SEC on May 30, 2002. Information concerning FBR Asset's participants in the solicitation is set forth in FBR Asset's proxy statement for its annual meeting of stockholders, filed with the SEC on April 23, 2002. _______________________________________________________________________________ FRIEDMAN BILLINGS RAMSEY SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2. PAGE 2 [FBR LOGO] TRANSACTION OVERVIEW ________________________________________________________________________________
Exchange Ratio: 3.65 "New FBR Group" shares per FBR Asset share Implied FBR Asset Price per Share: (a) $34.68 Implied Aggregate Consideration: (a)(b) $869 Million Implied Premium to Market: (a) 22% $34.68 $29.06 GAAP book Implied Multiple to Adjusted Book (2.81) AOCI (2.81) AOCI (ex. AOCI): (a) 1.23x ------ (0.29) Excess earnings $31.87 ----- Price paid for $25.96 Adjusted book adjusted book Consideration: 100% Stock (tax-free) Transaction Structure: o New FBR Group Created and elects to be taxed as a REIT o FBR Asset to be merged into New FBR Group o FBR Group to be merged into New FBR Group and operating business elects to become a taxable REIT subsidiary ("TRS") Board Composition: FBR Group Board plus FBR Asset Board; nine directors in total, of which seven are outsiders; at least five are independent directors in accordance with the proposed guidelines Required Approvals: FBR Group Shareholders, FBR Asset Shareholders and regulatory approvals Walk-Away Provisions: 10 day average FBR Group share price of below $8.75 and above $10.55 for 10 days prior to shareholder meetings; may be waived Anticipated Closing First Quarter 2003 (a) As of November 14, 2002 - date of agreement (b) Includes shares beneficially owned by FBR
________________________________________________________________________________ FRIEDMAN BILLINGS RAMSEY SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2. PAGE 3 [FBR LOGO] OLD STRUCTURE/ TWO SEPARATE COMPANIES ________________________________________________________________________________ [Graph depicting the following text]
FBR GROUP FRR ASSET FBR Group ( C Corp.) 10% of Merchant Base Fee of $11 Million FBR Asset Investment Corporation (REIT) Banking Related plus Incentive Fee of $730 Million of Capital (2) $260 Million of Capital (1) Investment Banking $21.5 Million Projected $125 Million Projected 2003 Income Fees for 2003 $60 Million Projected 2003 Net Income ------------------------------ ----------------------------------------- Investment Banking, Sales & Managed by FBR Investment Management Trading, Research FBR Investment Management (FBRIM) FBR Asset Taxable REIT Subsidiary ("TRS") -------------------------------- $3 Million of Capital ----------------------------------- MBS Portfolio Management, Merchant Banking Investments, Other Investment Pays Tax and Retains Capital Management
1 Approximate as of September 30, 2002, including approximately $24 million of employee loans 2 Approximate as of September 30, 2002 ________________________________________________________________________________ FRIEDMAN BILLINGS RAMSEY SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2. PAGE 4 [FBR LOGO] NEW FBR GROUP TOTAL CAPITAL OF MORE THAN $1 BILLION (1), PROJ. EARNINGS OF ALMOST $200 MILLION (2) ________________________________________________________________________________ [Graph depicting the following text] New FBR Group (REIT) $964 Million of Capital (1) $174.7 Million Projected 2003 Net Income (2) -------------------------------------------- No Tax, Pays Dividends MBS Portfolio Encompasses both the old FBR Asset Capital and the Old FBR Group Excess Capital Merchant Banking FBR Taxable REIT Subsidiary $49 Million of Capital $23.1 Million Projected 2003 After-tax Income ------------------------------------------ Pays Tax, Retains Capital Investment Banking, Research, Sales & Trading, Other Management and Customer Services 1 Pro Forma as of September 30, 2002, excluding approximately $24 million of employee loans 2 Before $10.8 million amortization of excess premium resulting from purchase accounting ________________________________________________________________________________ FRIEDMAN BILLINGS RAMSEY SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2. PAGE 5 [FBR LOGO] TRANSACTION SUMMARY ________________________________________________________________________________
Old FBR Group FBR Asset Investment New FBR Group Corporation Business Fast Growing Investment Externally managed Top ten investment bank with Bank mortgage REIT efficient tax structure Corporate Structure C Corporation REIT REIT Management Structure Internal External Internal Stock for Stock Exchange 1.00 3.65 N/A Total Shares Outstanding (1) 50.4 25.1 132.4 Estimated Fully Diluted GAAP shares (2) 48.0 25.1 130.0 (3) Former FBR Asset Share Equivalents 9/30/02 Book Value per share (4) $5.06 (2) $29.06 $7.89 (2) $28.80 equivalent for FBR Asset 2003 Projected EPS $1.27 $4.99 $1.52 $5.55 equivalent for FBR Asset 2003 Projected Dividend None $5.00 $1.37 $5.00 equivalent for FBR Asset Assets/Equity 2:1 8:1 6:1 Market Capitalization at 11/14/02 $475,000,000 $700,000,000 $1,257,800,000 (5)
(1) Includes 4 million employee loan shares (2) Excludes effect of employee loans and related shares (3) 25.1 million FBR Asset shares less 2.6 million FBR Asset shares owned by FBR Group times 3.65 equals 82 million plus 48 million equals 130 million shares (4) On total shares outstanding, excluding employee loan shares, with no dilution for option shares (5) Pro Forma New FBR Group market capitalization based on $9.50 FBR closing price on November 14, 2002 ________________________________________________________________________________ FRIEDMAN BILLINGS RAMSEY SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2. PAGE 6 [FBR LOGO] TRANSACTION RATIONALE - FBR ASSET ________________________________________________________________________________ o INTERNALIZES MANAGEMENT AND PROPRIETARY DEAL FLOW o PROVIDES SIGNIFICANT GROWTH OPPORTUNITY o MAINTAINS DIVIDEND o ACHIEVES ACCRETION TO EARNINGS WHILE REDUCING LEVERAGE o IMPROVES FLEXIBILITY AND DIVERSIFICATION - BENEFIT IN DIFFERENT ENVIRONMENTS o POTENTIAL FOR WIDER COVERAGE AND BROADER INVESTMENT BASE o INCREASES POTENTIAL FOR STOCK APPRECIATION ________________________________________________________________________________ FRIEDMAN BILLINGS RAMSEY SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2. PAGE 7 [FBR LOGO] TRANSACTION RATIONALE - FBR GROUP ________________________________________________________________________________ o ACCRETIVE TO EARNINGS AND BOOK VALUE o MORE EFFICIENT INTERNAL ACCESS TO CAPITAL ENHANCES INVESTMENT BANKING GROWTH o INCREASED VISIBILITY AND MARKET PRESENCE ENHANCES OVERALL GROWTH OPPORTUNITIES o DIVERSIFIES AND PROVIDES QUARTER TO QUARTER STABILITY TO REVENUE STREAM o DEPLOYS EXCESS CAPITAL IN TAX EFFICIENT MANNER o CURRENT DIVIDEND PLUS GROWTH PROVIDES SIGNIFICANT TOTAL RETURN POTENTIAL o POTENTIAL FOR WIDER COVERAGE AND BROADER INVESTOR BASE ________________________________________________________________________________ FRIEDMAN BILLINGS RAMSEY SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2. PAGE 8 [FBR LOGO] NEW FBR GROUP ________________________________________________________________________________ o ONE OF THE LARGEST PUBLICLY-OWNED INVESTMENT BANKING FIRMS IN THE UNITED STATES o SUBSTANTIAL CAPITAL BASE OF OVER $1 BILLION, HIGHLY LIQUID BALANCE SHEET o MORE THAN 460 EMPLOYEES IN 16 OFFICES o ONE OF THE MOST COST EFFICIENT PLATFORMS IN THE INVESTMENT BANKING INDUSTRY o SIGNIFICANT DIVIDEND INCOME GENERATION COMBINED WITH GROWTH o TAX-EFFICIENT BALANCE SHEET EARNINGS STRUCTURE o SIGNIFICANT GROWTH OPPORTUNITY WITHIN INVESTMENT BANKING BUSINESS BASED ON ACCESS TO SIGNIFICANT CAPITAL o ABILITY TO CAPITALIZE ON MERCHANT BANKING OPPORTUNITIES o DIVERSIFIED EARNINGS STREAM ________________________________________________________________________________ FRIEDMAN BILLINGS RAMSEY SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2. PAGE 9 [FBR LOGO] NEW FBR GROUP OVERVIEW
____________________________________________________________________________________________________________________________________ PRINCIPAL ACTIVITIES INVESTMENT BANKING RESEARCH INSTITUTIONAL ASSET MANAGEMENT MORTGAGE BACKED MERCHANT SALES & TRADING SECURITIES BANKING 75 investment bankers 60 analysts 50 Institutional Private Equity $5.8 billion in $160 million 6 focused industry Over 380 Brokers Hedge Funds assets of invested sectors companies 30 Traders & Sales Venture Capital - AAA rated capital o Financial Services under coverage Traders Mutual funds securities - - Preferred o Real Estate o Independence Market-maker in Mezzanine funds guaranteed by and common o Technology o In-depth over 470 equity Private Client Group Freddie Mac, equity o Energy company analysis and debt securities o Investment Fannie Mae, - Senior o Diversified o Theme-driven o Covering over management Ginnie Mae secured and Industries industry 1,000 o Restricted (144) - Short-duration mezzanine o Healthcare coverage institutional stock sales of 1-2 - limits loans Top 10 lead-managing o Daily meetings accounts o Financial planning / price risk - Interest in equity underwriter with sales force o Mutual funds trust & estate - Leverage proprietary o 78 transactions o Up-to-date o Hedge funds services guideline - funds with $5.6 b in economic and o Money managers o Credit lines 6-11x (debt to - Direct total transaction policy news o Pension funds o Hedging and equity), target assets value* o Frequent monetization of 8.5x within - Non-levered o 29 lead and sole management o Employee stock mortgage portfolio managed roadshows option management portfolio transactions* o Annual investor o Cash management o 34 M&A and conferences o FBR National Bank & Advisory Trust (a) assignments* * For 12 months ended 9/30/02 All numbers approximate as of September 30 2002 unless otherwise stated. (a) Member FDIC and an equal housing lender. Products offered by other FBR subsidiatires are not FDIC insured, not offered, guaranteed or endorsed by FBR National Bank & Trust, and may lose value ____________________________________________________________________________________________________________________________________ FRIEDMAN BILLNGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2 PAGE 10 [FBR LOGO] BUSINESS OVERVIEW ________________________________________________________________________________ (US $ IN MILLIONS, EXCEPT PER SHARE DATA) INVESTMENT BANKING REVENUE* 1999 2000 2001 2002 NINE MONTHS ANNUALIZED Underwriting $22.6 $21.1 $47.9 $ 90.3 Corporate Finance $22.5 $31.4 $28.5 $ 63.3 Gains $ 3.9 $ 1.4 $ 6.7 $ 5.9 TOTAL $49.0 $53.9 $83.1 $159.5 SALES & TRADING REVENUE(1)* 1999 2000 2001 2002 NINE MONTHS ANNUALIZED Agency $15.0 $21.1 $27.1 $36.4 Principal $22.0 $32.3 $26.3 $28.3 TOTAL $37.0 $53.4 $53.4 $64.7 MORTGAGE BACKED SECURITIES PORTFOLIO(2)* 1999 2000 2001 SEPT. 30, 2002 $235.8 $154.8 $1,238.4 $5,822.5 MERCHANT BANKING PORTFOLIO(2)* 1999 2000 2001 SEPT. 30, 2002 $76.6 $32.1 $69.7 $99.3 (1) FBR Group only (2) FBR Asset only; ending balances * These charts are depicted by bar graphs in the presentation ________________________________________________________________________________ FRIEDMAN BILLNGS RAMSEY SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2 PAGE 11 [FBR LOGO] BROKER/DEALER COMPARABLES
___________________________________________________________________________________________________ $ MILLIONS MARKET CAP (A) 2003E P/E PRICE/BOOK INDICATED DIV. YIELD ______________________________________________________________________________________ FBR PRO FORMA $1,258 6.4x 1.23x 14.2% Lehman Bros. $13,738 11.9 1.88 0.6 Bear Stearns 9,079 11.7 1.39 NM A.G. Edwards 2,720 15.6 1.56 NM Raymond James 1,499 14.3 1.76 NM Jefferies Group 1,148 15.8 2.00 0.5 ___________________________________________________________ MEDIAN BROKER/DEALER 14.3x 1.76x 0.6% (a) Market data as of November 15, 2002, except FBR Pro Forma, which is calculated based on the closing price on November 14, 2002 the day prior to the date that the transaction was announced. ___________________________________________________________________________________________________ FRIEDMAN BILLNGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2 PAGE 12 [FBR LOGO] INDEPENDENT BROKER/DEALER COMPARABLES ________________________________________________________________________________ INDEPENDENT BROKER/DEALER EQUITY CAPITAL Period End Equity Capital 1 Merrill Lynch 27-Sep-02 $22,299 2 Morgan Stanley 31-Aug-02 21,416 3 Goldman Sachs 30-Aug-02 18,844 4 Lehman Brothers 31-Aug-02 8,909 5 Bear Stearns 31-Aug-02 5,954 6 A. G. Edwards Inc. 31-Aug-02 1,627 7 Legg Mason, Inc 30-Sep-02 1,126 8 NEW FBR GROUP 30-SEP-02 1,013 9 Raymond James Financial 28-Jun-02 801 10 Jefferies Group 27-Sep-02 609 11 SWS Group 27-Sep-02 250 12 Stifel Financial Corp. 30-Sep-02 79 INDEPENDENT BROKER/DEALER Nine Month Interest & REVENUE BREAK DOWN Period End Dividends Lehman Brothers 31-Aug-02 70% Morgan Stanley 31-Aug-02 49% Goldman Sachs 30-Aug-02 48% Merrill Lynch 27-Sep-02 46% NEW FBR GROUP*(EST. PRO FORMA) 30-SEP-02 40% SWS Group* 27-Sep-02 38% Bear Stearns 31-Aug-02 32% Jefferies Group 27-Sep-02 12% Raymond James Financial 28-Jun-02 11% Stifel Financial Corp. 30-Sep-02 8% Legg Mason, inc** 30-Sep-02 7% A. G. Edwards Inc.** 31-Aug-02 5% * Three months ended ** Six months ended INDEPENDENT BROKER/DEALER LEVERAGE Assets / Period End Equity 1 A. G. Edwards Inc. 31-Aug-02 2.41 2 Legg Mason, Inc 30-Sep-02 5.34 3 Stifel Financial Corp. 30-Sep-02 5.34 4 NEW FBR GROUP 30-SEP-02 6.43 5 Raymond James Financial 28-Jun-02 8.18 6 Jefferies Group 27-Sep-02 9.60 7 SWS Group 27-Sep-02 13.98 8 Goldman Sachs 30-Aug-02 18.55 9 Merrill Lynch 27-Sep-02 19.72 10 Morgan Stanley 31-Aug-02 24.13 11 Lehman Brothers 31-Aug-02 29.77 12 Bear Stearns 31-Aug-02 31.11 INDEPENDENT BROKER DEALER EXPENSE BREAKDOWN Nine Month Comp/Net Period End Revenue NEW FBR GROUP*(EST. PRO FORMA) 30-SEP-02 40% Morgan Stanley 31-Aug-02 46% Bear Stearns 31-Aug-02 49% Goldman Sachs 30-Aug-02 50% Lehman Brothers 31-Aug-02 51% Merrill Lynch 27-Sep-02 52% SWS Group* 27-Sep-02 56% Jefferies Group 27-Sep-02 58% Legg Mason, Inc** 30-Sep-02 59% A. G. Edwards Inc.** 31-Aug-02 66% Stifel Financial Corp. 30-Sep-02 68% Raymond James Financial 28-Jun-02 76% * Three months ended ** Six months ended ________________________________________________________________________________ FRIEDMAN BILLNGS RAMSEY SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2. PAGE 13 [FBR LOGO] INVESTMENT BANKING RANKINGS 1/1/02-9/30/02 _________________________________________________________________________ ________________________________________________________________________________ ALL MARKET CAPS - ALL INDUSTRIES NUMBER OF DEALS AND DOLLAR AMOUNT LEAD MANAGED EQUITY UNDERWRITERS, 1/01/02-9/30/02 RAISED, RANKED BY =========================================================== NUMBER OF DEALS LEAD MANAGER # OF DEALS AMT RAISED Credit Suisse First Boston 49 $16,405.392 Merrill Lynch & Co 28 6,693.042 Salomon Smith Barney 26 10,851.538 Morgan Stanley 26 6,817.097 Goldman, Sachs & Co 25 13,103.261 UBS Warburg LLC 22 2,438.798 Lehman Brothers 19 4,022.967 Bear Stearns & Co 16 2,202.195 ----------------------------------------------------------- FRIEDMAN, BILLINGS, RAMSEY 16 1,694.163 ----------------------------------------------------------- Deutsche Bank Securities 13 2,276.230 J.P. Morgan Securities Inc 13 2,138.884 Banc of America Securities 12 2,136.812 Raymond James 9 280.402 CIBC World Markets 8 405.579 Robertson Stephens 7 386.014 Wachovia Securities Inc 6 289.258 Keefe, Bruyette & Woods Inc 5 216.599 Thomas Weisel Partners LLC 4 468.110 Robert W. Baird & Co Inc 4 384.601 U.S. Bancorp Piper Jaffray Inc 4 303.256 ----------------------------------------------------------- . Source: CommScan LLC $ millions, IPOS and Secondaries only, excludes closed end funds. *IN ADDITION, FBR RAISED MORE THAN $450 MILLION IN 144A INSTITUTIONAL EQUITY PLACEMENTS. INCLUDING THIS $450MM, FBR RAISED APPROXIMATELY $2.15 BILLION DURING THE NINE MONTHS ENDED SEPTEMBER 30, 2002 ________________________________________________________________________________ FRIEDMAN BILLINGS RAMSEY SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2. PAGE 14 [FBR LOGO] INVESTMENT BANKING AFTERMARKET PERFORMANCE ACROSS ALL INDUSTRIES 21 MONTHS 1/1/01 - 9/30/02 -------------------------------------------------------------------------- ________________________________________________________________________________ AFTER MARKET PERFORMANCE LEAD MANAGER* # OF DEALS (%) ====================================================================== ---------------------------------------------------------------------- FRIEDMAN, BILLINGS, RAMSEY 34 9.48 ---------------------------------------------------------------------- A.G. Edwards & Sons Inc 13 -1.89 Wachovia Securities (Old) 17 -4.50 UBS Warburg LLC 84 -10.41 Salomon Smith Barney Inc 104 -11.32 Bear, Stearns & Co 40 -11.89 Deutsche Bank Securities 43 -11.89 Merrill Lynch & Co 147 -13.35 Goldman, Sachs & Co 103 -15.78 Raymond James 17 -15.81 Morgan Stanley 83 -16.32 Credit Suisse First Boston 159 -17.17 Lehman Brothers 70 -18.24 J.P Morgan Securities 69 -18.80 U.S Bancorp Piper Jaffray Inc 22 -19.07 SG Cowen Securities Corp 13 -23.08 Banc of America Securities 46 -25.48 Thomas Weisel Partners LLC 13 -32.39 CIBC World Markets 22 -32.83 Robertson Stephens 19 -33.74 ------------------------------ SOURCE: COMMSCAN LLC AVERAGE: 1,118 TOTAL: -16.22 *Of five or more transactions priced during the period 1/1/01 to 9/20/02 Aftermarket performance results for each of the offerings vary considerably, and may be significantly different from the average figure quoted. Past performance is no guarantee of future results. ________________________________________________________________________________ FRIEDMAN BILLINGS RAMSEY SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2. PAGE 15 [FBR LOGO] ACCESS TO CAPITAL DRIVES INVESTMENT BANKING GROWTH ________________________________________________________________________________ --------------------------------------------------------------------------- INVESTMENT TOTAL INVESTMENT BANKING PERIOD INVESTMENT AMOUNT VALUE (1) FEES -------------------------------------------------------------------------------- Jul-01 Saxon Capital $9,300,000 $11,070,000 $16,922,717 Nov-02 Quaker Coal - (a) - 950,000 Nov-01 MCG Capital 9,934,375 9,612,500 9,904,280 Dec-01 Anworth Mortgage 3,890,650 6,309,438 1,014,216 Mar-02 Oxford Finance Corp. 14,650,000 (b) 14,873,993 2,906,412 Apr-02 Southwest Royalties 18,333,333 18,508,634 2,775,260 Sep-02 American Fin Realty 40,000,001 (c) 40,193,612 25,762,429 Sep-02 AmeriCredit 35,250,000 40,350,000 27,610,095 Oct-02 Franklin Bank 5,580,000 (d) 5,580,000 4,034,121 ------------- ------------------------------ $136,938,360 $146,498,178 $91,879,529 (1) Equals total cash proceeds to date plus mark to market value at September 30, 2002 (a) Breakup fee (b) Includes $10 million note and $4,650,000 equity investment (c) Includes $5 million Three Beaver Valley note and $35,000,001 equity investment (d) Investment value equals cost ________________________________________________________________________________ FRIEDMAN BILLINGS RAMSEY SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2. PAGE 16 [FBR LOGO] CASE STUDIES FOR USE OF CAPITAL ________________________________________________________________________________ ---------------------------------------------------------------------------
American Financial Realty Southwest Royalties, Inc. AmeriCredit Corp.(ACF) Trust -------------------------------------------------------------------------------------------------------- FBR Group worked with American FBR acted as the sole manager Financial's Management team to FBR was engaged to syndicate a and placement agent for a $500 create a REIT that purchases real senior loan for Southwest Royalties, million recapitalization of Description of estate assets from large commercial an oil and gas exploration and AmeriCredit, a sub-prime Transaction banking institutions and subsequently production company, in an amount automobile finance company. releases the properties back to the up to $80 million. FBR Asset FBR Asset acted as the lead institutions or a third party and in participated as the lead, helping investor, enabling FBR to some cases, sells the acquired to bring in two other institutions to successfully complete the property. FBR Assets acted as the consummate the transaction. transaction in a difficult lead investor in the placement of market environment. $400 million dollars to initially capitalize the REIT. Transaction 144A Private Placement Syndicated Senior Loan Follow-on Offering Structure Deal Size $400 Million $55 Million Over $500 Million Investment Amount $35,000,001 $18,333,333 $35,250,000 Days Held 75+ (still in portfolio) 26 50+ (still in portfolio) Holding Period Return 14.9% to date 28.9% 14.9% to date ------------------------------------------------------------------------------------------------------------------------------------
________________________________________________________________________________ FRIEDMAN BILLINGS RAMSEY SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2. PAGE 17 [FBR LOGO] NEW FBR GROUP MBS AND PRINCIPAL INVESTMENTS ________________________________________________________________________________ ---------------------------------------------------------------------------- THE STRATEGY SUCCESSFULLY EMPLOYED BY FBR ASSET IN THE PAST WILL CONTINUE TO BE USED INSIDE OF NEW FBR GROUP o RESIDENTIAL MORTGAGE-BACKED SECURITIES ($5.8 BILLION AS OF SEPTEMBER 30, 2002) o AAA rated securities - GSE guaranteed by Freddie Mac, Fannie Mae, Ginnie Mae o Short-duration of 1-2 years - limits price risk o Leverage guideline - 6-11x (debt to equity), Target 8.5x o Allocation of capital: 50%-90% (long-term average target 60%-65%) o MERCHANT BANKING PORTFOLIO ($99.3 MILLION AS OF SEPTEMBER 30, 2002) o Senior secured and mezzanine loans o Preferred and common equity o Direct assets o Non-levered portfolio o Typical hold period 12-18 months o Allocation of capital: 10%-50% (long-term average target 35%-40%) ________________________________________________________________________________ FRIEDMAN BILLINGS RAMSEY SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2. PAGE 18 [FBR LOGO] PORTFOLIO RETURNS ________________________________________________________________________________ --------------------------------------------------------------------------- o MORTGAGE BACKED SECURITIES PORTFOLIO INVESTMENTS Portfolio Example ----------------- Unlevered Asset Yield: 3.75% Cost of funds: 1.35% Spread: 2.40% ----- ROE, Gross (Assumed Leverage @8.5x) 24.15% o OPPORTUNITY FUND INVESTMENTS o The Dollar Weighted Internal Rate of Return in FBR Asset's Opportunity Portfolio Investments has been 30.6% (Before Accounting for Investment Banking Fees Paid to FBR Asset by FBR Group) ________________________________________________________________________________ FRIEDMAN BILLINGS RAMSEY SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2. PAGE 19 [FBR LOGO] FBR ASSET MBS PORTFOLIO ________________________________________________________________________________ ---------------------------------------------------------------------------
FOR THE NINE MONTHS ENDING 30-SEP-2002 ____________________________________________________________________________________________________________________________________ CURRENT MARKET RELEVANT FACE VALUE ANNUAL % OF AVERAGE AVERAGE BOOK MODIFIED EFFECTIVE PREPAYMENT SECTOR ($000) ($000) INCOME PORTFOLIO COUPON YRS TO MAT YIELD DURATION DURATION ASSUMPTIONS ____________________________________________________________________________________________________________________________________ ARM 5,618,770 5,789,145 252,966 99.44% 5.27% 2.55 5.34% 2.38 1.37 56.71 Fixed 31,869 33,360 13,709 0.56% 7.00 2.27 4.74 2.00 1.00 30.37 TOTAL 5,650,639 5,822,505 266,675 100.00% 5.28 2.55 4.75 2.37 1.37 30.53
[PIE CHART DEPICTING [PIE CHART DEPICTING SECTOR ARM = 99% FNMA = 40% FIXED = 1%] FHLMC = 60%] ________________________________________________________________________________ FRIEDMAN BILLINGS RAMSEY SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2. PAGE 20 [FBR LOGO] NEW FBR GROUP PRO FORMA SUMMARY ________________________________________________________________________________ ----------------------------------------------------------------------------
(US $ IN MILLIONS) FBR ASSET 2003 FORECAST FBR GROUP INVESTMENT MERGER NEW FBR CORP. ADJUSTMENTS GROUP Revenues Investment Banking 150.0 $150.0 Institutional Brokerage 82.6 82.6 Asset Management 31.4 31.4 FBR Asset 45.5 (45.5) 0.0 Interest & Other 22.0 246.5 (24.3) 244.2 ---------- ------------ ------------- ---------- Total Revenues 331.5 246.5 (69.8) 508.2 Expenses 230.4 121.5 (46.0) 305.9 ---------- ------------ ------------- ---------- Pre-Tax Income 101.1 125.0 (23.8) 202.3 Tax(1) 40.4 0.0 (25.1) 15.3 ---------- ------------ ------------- ---------- GAAP Net Income $60.7 $125.0 $1.3 $187.0 Accretion of MBS mark to ========== ============ ============= ========== market purchase adjustment 10.8 10.8 Adjusted Net Income 197.8 Dividends Paid 181.4 Retained Capital 16.4 Fully Diluted Shares Outstanding 48.0 * 25.1 ** 130.0 *** Fully Diluted GAAP Earnings Per $1.27 $4.99 1.44 Share Fully Diluted Adjusted Earnings 1.52 Per Share * 50.4 million primary shares less 4.0 million (1) Tax savings detailed below: shares securing employee loans in accordance with GAAP plus an estimated 1.6 million ------------------------------------------------------ additional shares from option dilution Tax Savings of Net Management Fees & Costs $12.7 **Includes 2.6 million shares owned by FBR Group ***25.1 million FBR Asset shares less 2.6 million Tax Savings of Income Pickup from FBR Asset 5.2 FBR Asset shares owned by FBR Group times 3.65 equals 82 million plus 48 million equals 130 million shares Tax Savings of Shifting Capital to REIT 8.8 Tax Expense of Executive Compensation Allocated (1.6) ----- to REIT Net Tax Benefits $25.1 ----- ------------------------------------------------------
________________________________________________________________________________ FRIEDMAN BILLINGS RAMSEY SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION OF PAGE 2. PAGE 21 [FBR LOGO] NEW FBR GROUP _______________________________________________________________________________ --------------------------------------------------------------------------- o ONE OF THE LARGEST PUBLICLY-OWNED INVESTMENT BANKING FIRMS IN THE UNITED STATES o SUBSTANTIAL CAPITAL BASE OF OVER $1 BILLION, HIGHLY LIQUID BALANCE SHEET o MORE THAN 460 EMPLOYEES IN 16 OFFICES o ONE OF THE MOST COST EFFICIENT PLATFORMS IN THE INVESTMENT BANKING INDUSTRY o SIGNIFICANT DIVIDEND INCOME GENERATION COMBINED WITH GROWTH o TAX-EFFICIENT BALANCE SHEET EARNINGS STRUCTURE o SIGNIFICANT GROWTH OPPORTUNITY WITHIN INVESTMENT BANKING BUSINESS BASED ON ACCESS TO SIGNIFICANT CAPITAL o ABILITY TO CAPITALIZE ON MERCHANT BANKING OPPORTUNITIES o DIVERSIFIED EARNINGS STREAM ________________________________________________________________________________ FRIEDMAN BILLINGS RAMSEY SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2. PAGE 22