EX-99.1 2 v091300_ex99-1.htm Unassociated Document

  

Contacts:
Media: Lauren Burk at 703.469.1004 or lburk@fbr.com
Investors: Paul Beattie at 703.312.9673 or pbeattie@fbr.com

FBR Group Announces
Third Quarter 2007 Financial Results
 
ARLINGTON, VA, October 25, 2007 - Friedman, Billings, Ramsey Group, Inc. (NYSE: FBR) today announced its results for the quarter ended September 30, 2007. The company reported a net after-tax loss for the quarter of $214.7 million, or $1.28 per share, compared to a net after-tax loss of $67.4 million, or $0.39 per share, for the third quarter of 2006. FBR Group’s net after-tax loss for the first nine months of 2007 was $389.9 million, or $2.28 per share, compared to a net after-tax loss of $71.1 million, or $0.41 per share, for the first nine months of 2006. Core book value net of Accumulated Other Comprehensive Income (AOCI) at the close of the third quarter was $4.49 compared to $5.76 at the end of the second quarter of 2007(1).

FBR Group ended the quarter with $904 million of consolidated tangible capital, including approximately $320 million of trust preferred securities. Of this tangible capital, $270 million is attributable to FBR Group’s 52% ownership interest in FBR Capital Markets Corporation (FBR Capital Markets). Of the remaining $634 million of tangible capital, FBR Group has approximately $480 million in cash and liquid securities, which is available for investment.

The four principal components of the third quarter results are:

 
§
$90 million of write downs and losses relating to the company’s on-balance sheet securitized loan portfolio (“residual interests”) that reduce the company’s economic risk in this portfolio to zero,
 
§
a net loss of $67 million from the company’s mortgage-backed securities portfolio and operations, including the previously announced $57 million loss on the sale of approximately $4.95 billion of agency mortgage-backed securities,
 
§
an economic loss of $17.2 million(2) associated with restructuring and operating costs at First NLC Financial Services (FNLC), of which $15 million was incurred prior to the agreement announced in July to sell FNLC to an affiliate of Sun Capital Partners (Sun Capital), and
 
§
a $27 million valuation loss relating to the portfolio of conforming and non-conforming loans originated by FNLC and for which FBR Group took ownership under the Sun Capital sale agreement, reducing the value of those loans to $203 million.
 
1
 
Share Buyback Program

On July 25, 2007, FBR Group’s board of directors passed a resolution increasing an existing share buyback authorization from 14 million to 50 million shares. Since that date, the company has repurchased 22.8 million shares at an average price of $4.66 a share.
 
Merchant Banking

Excluding merchant banking investments of $59.9 million at FBR Capital Markets, the total value of the merchant banking investments held by FBR Group at the close of the third quarter was $57.7 million. During the third quarter, FBR Group recognized $25 million in net gains from its merchant banking portfolio.
 
First NLC

As disclosed on July 26, 2007, an agreement entered into with Sun Capital limits FBR Group’s ongoing economic exposure to FNLC to $15 million, representing a 20% ownership interest. At the end of the third quarter, this exposure to FNLC was $12 million. However, FBR Group will continue to consolidate FNLC for financial reporting purposes until the transfer of ownership to Sun Capital is completed. The company currently expects this transfer to be completed by year end.
 
Looking Ahead
 
“Economic exposure to our securitized, non-recourse mortgage loan portfolio has been eliminated, and our remaining exposure to FNLC is $12 million,” said Eric F. Billings, Chairman and Chief Executive Officer of FBR Group. “With nearly $500 million in cash and highly liquid securities in addition to our 52% ownership of FBR Capital Markets, our risk profile is significantly reduced. Going forward, we are pleased to have the financial flexibility to execute our core agency mortgage backed security strategy through which we believe we will be able to achieve very acceptable returns.”
 
FBR Capital Markets Corporation

FBR Capital Markets (NASDAQ: FBCM), a majority-owned subsidiary of FBR Group, yesterday reported net after-tax third quarter 2007 earnings of $0.3 million, compared to an after-tax loss of $22.6 million, or $0.37 per share (diluted), in the third quarter of 2006. Net revenues for the third quarter of 2007 were $106.2 million compared to net revenues of $42.0 million in the third quarter of 2006.
 
2
 
For the nine months ending September 30, 2007, FBR Capital Markets earned $33.0 million after tax, or $0.51 per share (diluted), compared to an after-tax loss of $16.8 million, or $0.33 per share (diluted), for the first nine months of 2006. Net revenues for the first nine months of 2007 were $418.8 million compared to $244.0 million for the first nine months of 2006.

At the close of the third quarter, FBR Capital Markets had $527.0 million in equity, $387.1 million of cash, and no debt, and its book value was $8.25 per share compared to $8.20 per share at the end of the second quarter of 2007. Complete financial results and tables for FBR Capital Markets can be found at www.fbr.com.
 
FBR Group will host an earnings conference call on Thursday, October 25, 2007 at 9:00 A.M. U.S. EDT. Investors wishing to listen to the earnings conference call may do so via the web at: http://phx.corporate-ir.net/phoenix.zhtml?c=71352&p=irol-irhome.
Replays of the web cast will be available after the call.
 
Friedman, Billings, Ramsey Group, Inc. (FBR) provides investment banking*, merger and acquisition advisory services*, institutional brokerage*, asset management and private wealth services through majority ownership of FBR Capital Markets Corporation (FBR Capital Markets). FBR Capital Markets focuses capital and financial expertise on eight industry sectors: consumer, diversified industrials, energy & natural resources, financial institutions, healthcare, insurance, real estate, and technology, media & telecom. FBR Group also invests in mortgage-related assets and merchant banking opportunities. FBR is headquartered in the Washington, D.C. metropolitan area with offices in Arlington, VA, Boston; Dallas; Houston; Irvine; New York; Phoenix; San Francisco; London, England; and Sydney, Australia. For more information, please visit www.fbr.com.
 
*Friedman, Billings, Ramsey & Co., Inc.
 
1Accumulated Other Comprehensive Income (AOCI) includes changes in the value of available-for-sale securities and cash flow hedges. FBR believes that such changes represent temporary market fluctuations, are not reflective of our market strategy, and, therefore, the exclusion of AOCI provides a reasonable basis for calculating returns.

2During the third quarter, FBR Group recorded consolidated GAAP losses, excluding valuation losses related to the mortgage loans assumed under the agreement with Sun Capital, totaling $28 million associated with FNLC operations. However, the economic loss to the company, once the Sun Capital transaction closes, will be $17.2 million. There are several components to the economic loss. As noted in the announcement regarding the agreement with Sun Capital, FBR Group funded approximately $15 million in FNLC operating losses and restructuring costs that were incurred prior to signing the agreement with Sun Capital. The company also recorded net interest on the loans assumed under the agreement with Sun Capital and recognized an additional $14 million of losses and restructuring expenses subsequent to signing the agreement, but its economic exposure to these costs is limited to $3 million, corresponding to FBR Group’s 20% economic ownership interest in FNLC. The remaining $11 million recorded during the third quarter by FBR Group will be recaptured upon the final closing of the agreement with Sun Capital.
 
3
 
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.
# # #
 
4
 
   
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
 
   
Quarter ended
September 30,
  
       
   
2007
  
%
 
2006
  
%
 
REVENUES:
                          
Investment banking:
                          
Capital raising
  
$
49,692
    
-99.9
%
$
6,852
    
-8.3
%
Advisory
    
16,480
   
-33.1
%
  
5,826
   
-7.0
%
Institutional brokerage:
                          
Principal transactions
   
968
   
-1.9
%
  
(1,658
)
  
2.0
%
Agency commissions
   
26,257
   
-52.8
%
  
24,388
   
-29.5
%
Mortgage trading interest
    
-
   
0.0
%
  
13,845
   
-16.7
%
Mortgage trading investment loss
    
-
         
(1,546
)
  
1.9
%
Asset management:
                          
Base management fees
   
6,119
   
-12.3
%
  
4,880
   
-5.9
%
Incentive allocations and fees
    
82
   
-0.2
%
  
(31
)
  
0.0
%
Principal investment:
                          
Interest
    
115,450
   
-232.0
%
  
150,649
   
-182.0
%
Net investment loss
    
(136,475
)
  
274.3
%
  
(170,621
)
  
206.1
%
Dividends
    
526
   
-1.1
%
  
4,750
   
-5.7
%
Mortgage banking:
                          
Interest
    
7,194
   
-14.5
%
  
22,476
   
-27.1
%
Net investment (loss) income
   
(27,968
)
  
56.2
%
  
16,092
   
-19.4
%
Other
    
3,990
   
-7.9
%
  
6,540
   
-8.0
%
Total revenues
    
62,315
   
-125.2
%
  
82,442
   
-99.6
%
Interest expense
    
112,072
   
-225.2
%
  
165,237
   
-199.6
%
Revenues, net of interest expense
    
(49,757
)
  
100.0
%
  
(82,795
)
  
100.0
%
                           
NON-INTEREST EXPENSES:
                          
Compensation and benefits
    
80,955
   
-162.7
%
  
69,405
   
-83.8
%
Professional services
    
12,281
   
-24.7
%
  
14,308
   
-17.3
%
Business development
   
7,713
   
-15.5
%
  
7,577
   
-9.2
%
Clearing and brokerage fees
    
3,953
   
-7.9
%
  
2,917
   
-3.5
%
Occupancy and equipment
    
12,695
   
-25.5
%
  
12,909
   
-15.6
%
Communications
    
7,148
   
-14.4
%
  
6,471
   
-7.8
%
Other operating expenses
    
16,140
   
-32.4
%
  
23,291
   
-28.1
%
Restructuring charges
    
6,172
   
-12.4
%
  
-
   
0.0
%
Total non-interest expenses
    
147,057
   
-295.5
%
  
136,878
   
-165.3
%
                           
Operating loss
    
(196,814
)
  
395.5
%
  
(219,673
)
  
265.3
%
                           
OTHER (LOSS) INCOME:
                          
(Loss) gain on sale of subsidiary shares
    
(2,450
)
  
4.9
%
  
121,511
   
-146.8
%
                           
Loss before income taxes and minority interest
    
(199,264
)
  
400.5
%
  
(98,162
)
  
118.6
%
                           
Income tax provision (benefit)
    
15,288
   
-30.7
%
  
(26,062
)
  
31.5
%
Minority interest in earnings (losses) of
consolidated subsidiary
    
165
   
-0.3
%
  
(4,708
)
  
5.7
%
                           
Net loss
  
$
(214,717
)
  
431.5
%
$
(67,392
)
  
81.4
%
                           
Basic loss per share
  
$
(1.28
)
      
$
(0.39
)
      
Diluted loss per share
  
$
(1.28
)
      
$
(0.39
)
      
                           
Weighted average shares - basic
    
167,874
         
172,091
        
Weighted average shares - diluted
    
167,874
         
172,091
        
 
 
 
   
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
 
           
Nine Months Ended
        
         
September 30,
      
 
    
2007
    
% 
    
2006
    
%
  
REVENUES:
                          
Investment banking:
                          
Capital raising
  
$
256,971
    
184.8
%
$
118,304
    
57.8
%
Advisory
    
29,090
   
20.9
%
  
14,976
   
7.3
%
Institutional brokerage:
                          
Principal transactions
   
7,156
   
5.1
%
  
5,822
    
2.8
%
Agency commissions
   
78,639
   
56.6
%
  
76,289
    
37.3
%
Mortgage trading interest
    
-
   
0.0
%
  
48,638
    
23.8
%
Mortgage trading net investment loss
    
-
   
0.0
%
  
(2,992
)
  
-1.5
%
Asset management:
                          
Base management fees
   
18,007
   
13.0
%
  
15,042
   
7.4
%
Incentive allocations and fees
    
302
   
0.2
%
  
924
   
0.5
%
Principal investment:
                          
Interest
    
450,073
   
323.8
%
  
413,388
   
202.0
%
Net investment loss
    
(199,629
)
  
-143.6
%
  
(175,726
)
  
-85.9
%
Dividends
    
2,368
   
1.7
%
  
12,508
   
6.1
%
Mortgage banking:
                          
Interest
    
47,186
   
33.9
%
  
66,856
   
32.7
%
Net investment (loss) income
   
(138,858
)
  
-99.9
%
  
56,231
   
27.5
%
Other
    
12,566
   
9.1
%
  
16,992
   
8.3
%
Total revenues
    
563,871
   
405.6
%
  
667,252
   
326.1
%
Interest expense
    
424,854
   
305.6
%
  
446,909
   
218.4
%
Provision for loan losses
    
-
   
0.0
%
  
15,740
   
7.7
%
Revenues, net of interest expense and
provision for loan losses
    
139,017
   
100.0
%
  
204,603
   
100.0
%
                           
NON-INTEREST EXPENSES:
                          
Compensation and benefits
    
291,822
   
209.9
%
  
224,634
   
109.8
%
Professional services
    
40,143
   
28.9
%
  
41,498
   
20.3
%
Business development
   
32,640
   
23.5
%
  
30,266
   
14.8
%
Clearing and brokerage fees
    
9,717
   
7.0
%
  
8,315
   
4.1
%
Occupancy and equipment
    
38,511
   
27.7
%
  
36,383
   
17.8
%
Communications
    
21,791
   
15.7
%
  
18,091
   
8.8
%
Other operating expenses
    
66,540
   
47.9
%
  
69,261
   
33.9
%
Impairment of goodwill
    
54,752
   
39.4
%
  
-
   
0.0
%
Restructuring charges
    
25,519
   
18.4
%
  
-
   
0.0
%
Total non-interest expenses
    
581,435
   
418.4
%
  
428,448
   
209.5
%
                           
Operating loss
    
(442,418
)
  
-318.4
%
  
(223,845
)
  
-109.4
%
                           
OTHER INCOME:
                          
Gain on sale of subsidiary shares
    
104,058
   
74.9
%
  
121,511
   
59.4
%
                           
Loss before income taxes and minority interest
    
(338,360
)
  
-243.4
%
  
(102,334
)
  
-50.0
%
                           
Income tax provision (benefit)
    
38,749
   
27.9
%
  
(26,541
)
  
-13.0
%
Minority interest in earnings (losses) of consolidated subsidiary
    
12,782
   
9.2
%
  
(4,708
)
  
-2.3
%
                           
Net loss
  
$
(389,891
)
  
-280.5
%
$
(71,085
)
  
-34.7
%
                           
Basic loss per share
  
$
(2.28
)
      
$
(0.41
)
      
Diluted loss per share
  
$
(2.28
)
      
$
(0.41
)
      
                           
Weighted average shares - basic
   
171,308
         
171,376
       
Weighted average shares - diluted
   
171,308
         
171,376
       
 
 
 
 
   
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
Financial & Statistical Supplement - Operating Results
(Dollars in thousands, except per share data)
(Unaudited)
 
   
For the
 
 
 
 
 
 
 
 
 
nine months ended
 
 
 
 
 
 
 
 
 
September 30, 2007
 
Q-3 07
 
Q-2 07
 
Q-1 07
  
Revenues
                          
Investment banking:
                          
Capital raising
  
$
256,971
  
$
49,692
  
$
110,032
  
$
97,247
  
Advisory
    
29,090
   
16,480
   
6,152
   
6,458
 
Institutional brokerage:
                          
Principal transactions
   
7,156
   
968
   
4,152
   
2,036
 
Agency commissions
   
78,639
   
26,257
   
28,564
   
23,818
 
Asset management:
                          
Base management fees
    
18,007
   
6,119
   
6,360
   
5,528
 
Incentive allocations and fees
    
302
   
82
   
116
   
104
 
Principal investment:
                          
Interest
    
450,073
   
115,450
   
152,927
   
181,696
 
Net investment loss
    
(199,629
)
  
(136,475
)
  
(3,441
)
  
(59,713
)
Dividends
    
2,368
   
526
   
883
   
959
 
Mortgage banking:
                          
Interest
    
47,186
   
7,194
   
13,462
   
26,530
 
Net investment loss
    
(138,858
)
  
(27,968
)
  
(4,031
)
  
(106,859
)
Other
    
12,566
   
3,990
   
4,482
   
4,094
 
Total revenues
    
563,871
   
62,315
   
319,658
   
181,898
 
Interest expense
    
424,854
   
112,072
   
143,231
   
169,551
 
Revenues, net of interest expense
   
139,017
   
(49,757
)
  
176,427
   
12,347
 
                           
Non-interest expenses
                          
Compensation and benefits
    
291,822
   
80,955
   
106,885
   
103,982
 
Professional services
    
40,143
   
12,281
   
14,008
   
13,854
 
Business development
   
32,640
   
7,713
   
11,158
   
13,769
 
Clearing and brokerage fees
    
9,717
   
3,953
   
3,063
   
2,701
 
Occupancy and equipment
    
38,511
   
12,695
   
12,699
   
13,117
 
Communications
    
21,791
   
7,148
   
7,592
   
7,051
 
Other operating expenses
    
66,540
   
16,140
   
18,684
   
31,716
 
Impairment of goodwill
    
54,752
   
-
   
28,900
   
25,852
 
Restructuring charges
    
25,519
   
6,172
   
3,862
   
15,485
 
Total non-interest expenses
    
581,435
   
147,057
   
206,851
   
227,527
 
                           
Operating loss
    
(442,418
)
  
(196,814
)
  
(30,424
)
  
(215,180
)
                           
Other income (loss)
                          
Gain (loss) on sale of subsidiary shares
    
104,058
   
(2,450
)
  
105,677
   
831
 
                           
(Loss) income before income taxes
                         
and minority interest
    
(338,360
)
  
(199,264
)
  
75,253
   
(214,349
)
                           
Income tax provision (benefit)
    
38,749
   
15,288
   
55,011
   
(31,550
)
Minority interest in earnings of consolidated subsidiary
    
12,782
   
165
   
9,538
   
3,079
 
                           
Net (loss) income
  
$
(389,891
)
$
(214,717
)
$
10,704
  
$
(185,878
)
                           
                           
ROE (annualized)
    
-55.6
%
  
-91.9
%
  
3.9
%
  
-68.8
%
ROE (annualized-excluding AOCI) (1)
    
-54.8
%
  
-90.5
%
  
3.9
%
  
-68.2
%
                           
                           
Total shareholders' equity
  
$
698,214
  
$
698,214
  
$
1,012,635
  
$
989,213
  
Total shareholders' equity, net of AOCI (1)
  
$
711,693
  
$
711,693
  
$
1,000,071
  
$
993,753
  
                           
Basic loss (earnings) per share
  
$
(2.28
)
$
(1.28
)
$
0.06
  
$
(1.08
)
Diluted loss (earnings) per share
  
$
(2.28
)
$
(1.28
)
$
0.06
  
$
(1.08
)
                           
Ending shares outstanding (in thousands)
    
158,671
   
158,671
   
173,756
   
172,846
 
                           
Book value per share
  
$
4.40
  
$
4.40
  
$
5.83
  
$
5.72
  
Book value per share, net of AOCI (1)
  
$
4.49
  
$
4.49
  
$
5.76
  
$
5.75
  
                           
Gross assets under management (in millions)
                  
Managed accounts
  
$
345.6
  
$
345.6
  
$
291.3
  
$
258.8
  
Hedge & offshore funds
    
61.7
   
61.7
   
61.7
   
67.1
 
Mutual funds
    
2,292.3
   
2,292.3
   
2,482.6
   
2,412.9
 
Private equity and venture capital funds
    
31.3
   
31.3
   
33.8
   
41.2
 
Total
  
$
2,730.9
  
$
2,730.9
  
$
2,869.4
  
$
2,780.0
  
                           
Net assets under management (in millions)
                          
Managed accounts
  
$
345.6
  
$
345.6
  
$
291.3
  
$
258.8
  
Hedge & offshore funds
    
58.1
   
58.1
   
58.1
   
62.5
 
Mutual funds
    
2,285.1
   
2,285.1
   
2,474.7
   
2,406.4
 
Private equity and venture capital funds
    
29.8
   
29.8
   
32.0
   
38.0
 
Total
  
$
2,718.6
  
$
2,718.6
  
$
2,856.1
  
$
2,765.7
  
                           
Employee count
    
1,290
   
1,290
   
2,151
   
2,592
 
 

(1) Accumulated Other Comprehensive Income (AOCI) includes changes in value of available-for-sale securities and cash flow hedges. We
believe that such changes represent temporary market fluctuations, are not reflective of our market strategy, and therefore, exclusion of
AOCI provides a reasonable basis for calculating returns.
 
 
 
   
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
Financial & Statistical Supplement - Operating Results
(Dollars in thousands, except per share data)
(Unaudited)
 
 
   
For the
 
 
 
 
 
 
 
 
 
 
 
year ended
 
 
 
 
 
 
 
 
 
 
 
December 31, 2006
 
Q-4 06
 
Q-3 06
 
Q-2 06
 
Q-1 06
  
Revenues
                                
Investment banking:
                                
Capital raising
  
$
190,187
  
$
71,883
  
$
6,852
  
$
45,117
  
$
66,335
  
Advisory
    
24,148
   
9,172
   
5,826
   
6,281
   
2,869
 
Institutional brokerage:
                                
Principal transactions
   
5,814
   
(8
)
  
(1,658
)
  
1,760
   
5,720
 
Agency commissions
   
101,009
   
24,720
   
24,388
   
28,492
   
23,409
 
Mortgage trading interest
    
51,147
   
2,509
   
13,845
   
17,143
   
17,650
 
Mortgage trading net investment loss
    
(3,301
)
  
(309
)
  
(1,546
)
  
(209
)
  
(1,237
)
Asset management:
                                
Base management fees
    
20,093
   
5,051
   
4,880
   
5,065
   
5,097
 
Incentive allocations and fees
    
1,327
   
403
   
(31
)
  
(53
)
  
1,008
 
Principal investment:
                                
Interest
    
594,879
   
181,491
   
150,649
   
113,613
   
149,126
 
Net investment (loss) income
    
(184,552
)
  
(8,826
)
  
(170,621
)
  
(31,290
)
  
26,185
 
Dividends
    
14,551
   
2,043
   
4,750
   
4,059
   
3,699
 
Mortgage banking:
                                
Interest
    
88,662
   
21,806
   
22,476
   
21,267
   
23,113
 
Net investment income
    
83,786
   
27,555
   
16,092
   
29,401
   
10,738
 
Other
    
20,154
   
3,162
   
6,540
   
5,465
   
4,987
 
Total revenues
    
1,007,904
   
340,652
   
82,442
   
246,111
   
338,699
 
Interest expense
    
611,800
   
164,891
   
165,237
   
128,189
   
153,483
 
Provision for loan losses
    
15,740
   
-
   
-
   
7,348
   
8,392
 
Revenues, net of interest expense and
provision for loan losses
    
380,364
   
175,761
   
(82,795
)
  
110,574
   
176,824
 
                                 
Non-interest expenses
                                
Compensation and benefits
    
309,065
   
84,431
   
69,405
   
71,732
   
83,497
 
Professional services
    
59,722
   
18,224
   
14,308
   
12,925
   
14,265
 
Business development
   
42,150
   
11,884
   
7,577
   
8,604
   
14,085
 
Clearing and brokerage fees
    
11,820
   
3,505
   
2,917
   
3,082
   
2,316
 
Occupancy and equipment
    
50,051
   
13,668
   
12,909
   
12,232
   
11,242
 
Communications
    
24,398
   
6,307
   
6,471
   
6,013
   
5,607
 
Other operating expenses
    
89,377
   
20,116
   
23,291
   
24,993
   
20,977
 
Total non-interest expenses
    
586,583
   
158,135
   
136,878
   
139,581
   
151,989
 
                                 
Operating (loss) income
    
(206,219
)
  
17,626
   
(219,673
)
  
(29,007
)
  
24,835
 
                                 
Other income
                                
Gain on sale of subsidiary shares
    
121,511
   
-
   
121,511
   
-
   
-
 
                                 
(Loss) income before income taxes
                               
and minority interest
    
(84,708
)
  
17,626
   
(98,162
)
  
(29,007
)
  
24,835
 
                                 
Income tax (benefit) provision
    
(14,682
)
  
11,859
   
(26,062
)
  
1,240
   
(1,719
)
Minority interest in (loss) earnings of
consolidated subsidiary
    
(2,751
)
  
1,957
   
(4,708
)
  
-
   
-
 
                                 
Net (loss) income
  
$
(67,275
)
$
3,810
  
$
(67,392
)
$
(30,247
)
$
26,554
  
                                 
                                 
                                 
ROE (annualized)
    
-5.4
%
  
1.3
%
  
-22.1
%
  
-9.4
%
  
8.2
%
ROE (annualized-excluding AOCI) (1)
    
-5.4
%
  
1.3
%
  
-22.2
%
  
-9.5
%
  
8.1
%
                                 
                                 
Total shareholders' equity
  
$
1,171,045
  
$
1,171,045
  
$
1,163,681
  
$
1,270,361
  
$
1,301,949
  
Total shareholders' equity, net of AOCI (1)
  
$
1,186,181
  
$
1,186,181
  
$
1,181,372
  
$
1,250,117
  
$
1,306,450
  
                                 
Basic (loss) earnings per share
  
$
(0.39
)
$
0.02
  
$
(0.39
)
$
(0.18
)
$
0.16
  
Diluted (loss) earnings per share
  
$
(0.39
)
$
0.02
  
$
(0.39
)
$
(0.18
)
$
0.16
  
                                 
Ending shares outstanding (in thousands)
    
172,759
   
172,759
   
172,506
   
171,812
   
171,236
 
                                 
Book value per share
  
$
6.78
  
$
6.78
  
$
6.75
  
$
7.39
  
$
7.60
  
Book value per share, net of AOCI (1)
  
$
6.87
  
$
6.87
  
$
6.85
  
$
7.28
  
$
7.63
  
                                 
Gross assets under management (in millions)
                        
Managed accounts
  
$
259.9
  
$
259.9
  
$
376.6
  
$
386.8
  
$
383.9
  
Hedge & offshore funds
   
97.5
   
97.5
   
102.1
   
125.8
   
136.6
 
Mutual funds
   
1,961.9
   
1,961.9
   
1,825.1
   
1,750.6
   
1,849.5
 
Private equity and venture capital funds
   
42.2
   
42.2
   
48.5
   
48.2
   
50.5
 
Total
  
$
2,361.5
  
$
2,361.5
  
$
2,352.3
  
$
2,311.4
  
$
2,420.5
  
                                 
Net assets under management (in millions)
                                
Managed accounts
  
$
259.9
  
$
259.9
  
$
376.6
  
$
386.8
  
$
380.9
  
Hedge & offshore funds
   
96.4
   
96.4
   
98.3
   
116.1
   
125.4
 
Mutual funds
   
1,954.7
   
1,954.7
   
1,817.8
   
1,742.6
   
1,843.4
 
Private equity and venture capital funds
   
40.5
   
40.5
   
46.9
   
46.7
   
49.1
 
Total
  
$
2,351.5
  
$
2,351.5
  
$
2,339.6
  
$
2,292.2
  
$
2,398.8
  
                                 
Employee count
    
3,019
   
3,019
   
2,909
   
2,651
   
2,531
 
 

(1) Accumulated Other Comprehensive Income (AOCI) includes changes in value of available-for-sale securities and cash flow hedges. We
believe that such changes represent temporary market fluctuations, are not reflective of our market strategy, and therefore, exclusion of
AOCI provides a reasonable basis for calculating returns.
 
 
 
   
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)

 
ASSETS
  
30-Sep-07
 
31-Dec-06
  
               
Cash and cash equivalents
  
$
692,737
  
$
189,956
  
Restricted cash
    
116
   
132
 
Receivables
    
68,735
   
217,249
 
Investments:
              
Mortgage-backed securities, at fair value
    
470,749
   
6,870,661
 
Loans held for sale, net
    
3,255,807
   
5,367,934
 
Long-term investments
    
181,098
   
185,492
 
Trading securities, at fair value
    
19,120
   
18,180
 
Due from clearing broker
    
11,675
   
28,999
 
Derivative assets, at fair value
    
12,159
   
36,875
 
Goodwill
    
108,013
   
162,765
 
Intangible assets, net
    
10,228
   
21,825
 
Furniture, equipment, software and leasehold improvements, net
    
45,782
   
44,111
 
Prepaid expenses and other assets
    
243,050
   
208,339
 
Total assets
  
$
5,119,269
  
$
13,352,518
  
               
LIABILITIES AND SHAREHOLDERS ’ EQUITY
              
               
Liabilities:
              
Trading account securities sold short but
             
not yet purchased, at fair value
  
$
10,066
  
$
202
  
Commercial paper
    
-
   
3,971,389
 
Repurchase agreements
    
497,926
   
3,059,330
 
Derivative liabilities, at fair value
    
1,938
   
44,582
 
Dividends payable
    
8,001
   
8,743
 
Interest payable
    
6,329
   
12,239
 
Accrued compensation and benefits
    
39,381
   
57,227
 
Accounts payable, accrued expenses and other liabilities
    
79,962
   
81,819
 
Short-term debt
    
60,000
   
-
 
Securitization financing, net
   
3,141,773
   
4,486,046
 
Long-term debt
    
323,609
   
324,453
 
Total liabilities
    
4,168,985
   
12,046,030
 
               
Minority interest
    
252,070
   
135,443
 
               
Shareholders' equity:
              
Common stock, 160,055 and 174,712 shares
    
1,601
   
1,747
 
Additional paid-in capital
    
1,503,509
   
1,562,485
 
Accumulated other comprehensive loss, net of taxes
    
(13,479
)
  
(15,136
)
Accumulated deficit
    
(793,417
)
  
(378,051
)
Total shareholders' equity
   
698,214
   
1,171,045
 
               
Total liabilities and shareholders' equity
  
$
5,119,269
  
$
13,352,518