8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (date of earliest event reported): February 22, 2007

FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.

(Exact name of Registrant as specified in its charter)

Virginia	54-1873198	000-50230
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)	(Commission File Number)

1001 Nineteenth Street North

Arlington, VA 22209

(Address of principal executive offices) (Zip code)

(703) 312-9500

(Registrant’s telephone number including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On February 22, 2007, Friedman, Billings, Ramsey Group, Inc. (the “Company”) issued a press release announcing its earnings for the quarter ended December 31, 2006 and FY 2006. A copy of the press release is furnished herewith and attached hereto as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits.

EXHIBIT

99.1 Friedman, Billings, Ramsey Group, Inc. Press Release dated February 22, 2007.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

	FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
February 22, 2007	By:	/s/ Kurt R. Harrington
		Kurt R. Harrington Senior Vice President, Chief Financial Officer and Treasurer

EX-99.1

Exhibit 99.1

Contacts:

Media: Lauren Burk at 703-469-1004 or lburk@fbr.com

Investors: Paul Beattie at 703-312-9673 or pbeattie@fbr.com

FBR Reports 4^th Quarter and 2006 Financial Results

ARLINGTON, VA, February 22, 2007 – Friedman, Billings, Ramsey Group, Inc. (FBR Group; NYSE: FBR) today reported net after-tax earnings of $3.8 million, or $0.02 per share (diluted), for the quarter ended December 31, 2006 compared to a net after-tax loss of $271.6 million, or $1.60 per share (diluted) in the fourth quarter of 2005. For the year, FBR had a net after-tax loss of $67.3 million, or $0.39 per share (diluted), compared to a net after-tax loss of $170.9 million, or $1.01 per share (diluted), in 2005. Core book value net of Accumulated Other Comprehensive Income (AOCI) at year end was $6.87 compared to $7.67 at year end 2005⁽¹⁾.

The fourth quarter results for FBR Group included higher than historical income tax expense of $6.4 million or $0.04 per share (diluted) attributable primarily to the effects of FASB 123R (an accounting rule adopted in 2006 relating to stock compensation), deferred tax valuation allowances and other tax items. In addition, the company incurred “other than temporary impairment” charges of $17.2 million, or $0.10 per share (diluted), on merchant banking investments in the sub-prime mortgage industry.

FBR Capital Markets Corporation Results

FBR Capital Markets Corporation (FBR Capital Markets), FBR Group’s 72%-owned investment banking, institutional brokerage and asset management subsidiary, reported for the fourth quarter pre-tax earnings of $17.6 million on net revenues of $120.0 million. Net after-tax earnings for the fourth quarter were $7.0 million. Excluding FASB 123R-related and other non-cash tax charges of $3 million, after-tax earnings were $10.0 million. Complete financial results for FBR Capital Markets, which is a privately held company, are included in the tabular material in this release along with those of FBR Group.

Investment Banking

In the fourth quarter, FBR Capital Markets generated investment banking revenues of $81.1 million. The firm raised a total of $4.2 billion in 17 transactions and undertook eight merger and acquisition advisory assignments. Also in the fourth quarter, the firm

executed a $777 million private placement and advisory assignment for a power generation company, FBR’s first capital raise in that sector. Because the transaction was subject to regulatory approval by power authorities, it did not close until the first quarter of 2007. As a result, $40 million of the revenues associated with this capital raise will be recognized in that quarter.

In 2006, FBR was ranked as:

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

• #7 book-running manager for all U.S. IPOs and 144A equity placements combined for all industries,⁽³⁾

• #1 book-running manager of all common stock offerings for domestic mining, oil and gas, and utility and energy companies, with a market capitalization of $1 billion or less,⁽⁴⁾ and

• #1 book-running manager of all common stock offerings for U.S. and Bermuda finance and insurance companies with a market capitalization of $1 billion or less.⁽⁵⁾

On February 8, 2007, FBR Capital Markets announced the completion of an important step in further expanding its M&A platform. The company acquired the 26-person banking team along with certain assets from Legacy Partners Group, LLC. With offices in New York and Washington, D.C., this banking unit specializes in middle market merger and acquisition advisory services and in the raising of private capital.

Institutional Brokerage and Research

In a very competitive market environment, FBR Capital Markets grew its agency commission revenue from $82.5 million in 2005 to $100.9 million in the year just ended, a 22% increase. Overall, agency commissions and revenue from principal transactions increased 8% year to year.

Asset Management

In FBR Capital Markets’ asset management/private wealth business, asset management base fees and incentive fees were $5.5 million for the fourth quarter of 2006. Assets under management increased slightly between the close of the third quarter of 2006 and year end, and continued asset growth is anticipated in the first quarter of 2007. This reverses a trend of asset outflows that began with the closing and repositioning of some of the firm’s alternative investment products in 2005.

In October 2006 a new long/short hedge fund was launched, and in January 2007, the FBR Small Cap Mutual Fund, which had been closed to new investors since October 2004, was reopened to investors.

Investors should consider the investment objectives, risks, charges and expenses carefully before investing. This and other important information about the investment company can be found in the Fund’s prospectus. To obtain a free prospectus, please call 888.200.4710. Please read the prospectus carefully before investing.

The FBR Funds are distributed by FBR Investment Services, Inc. Member NASD/SIPC.

FBR Group Results

Mortgage Investment Portfolios

For the fourth quarter, FBR Group’s mortgage investments generated portfolio earnings of $20.7 million on average investment balances of $11.1 billion held during the quarter. These portfolios yielded gross income of 6.40% with associated cost of funds of 5.15%, resulting in earned net interest income of 1.25%.

Merchant Banking

For the fourth quarter, earnings from the consolidated merchant banking portfolio and other long-term investments were $3.7 million. These earnings include a $17.2 million write-down in the value of certain non-prime mortgage company investment positions, the largest of which was a $13.7 million reduction in the carrying value of shares in Fieldstone Investment Corp., which has agreed to be acquired for cash. Excluding the Fieldstone Investment position, merchant banking investments in non-prime companies at year end was $19 million. The total value of FBR’s merchant banking portfolio and other long-term equity securities was $150 million as of December 31, 2006.

First NLC

First NLC (FNLC), our non-conforming mortgage origination subsidiary, lost $1.8 million on a pre-tax basis in the fourth quarter. During the quarter, FNLC continued to build additional reserves related to the impact of an industry-wide increase in requests for buy-backs of loans related to early pay defaults (EPDs). Loan provisions, including EPD expense, averaged 70 basis points for the fourth quarter.

FNLC originated $2.1 billion in loans in the fourth quarter and $7.5 billion for the full year, compared to $1.5 billion in the final quarter of 2005 and $6.0 billion for all of 2005. FNLC’s cost to originate loans dropped from an average of 244 basis points in 2005 to an average of 191 basis points in 2006. In 2007, FNLC management has further reduced expenses and has aggressively adapted its lending standards to a continuing difficult environment.

Looking Ahead

“The acquisition of Legacy Partners was a major step in the execution of our strategic plan, broadening our array of banking services and increasing our ability to significantly grow our advisory practice,” said Eric F. Billings, FBR Group Chairman and Chief Executive Officer. “In addition, as we continue to execute our plan by selling our non- prime mortgage residuals and exiting our non-prime merchant banking investments, we believe that the stability and predictability of our earnings will become more apparent. Although 2006 was a challenging and difficult year, we closed with a solid fourth quarter in our capital markets businesses, and we are off to a strong start in 2007.”

The firm will host an earnings conference call this morning, Thursday, February 22, 2007 at 9:00 A.M. U.S. EST. Investors wishing to listen to the 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. (FBR) invests in mortgage-related assets and merchant banking opportunities. Through its 72% owned FBR Capital Markets Corporation (FBRCM) subsidiary, FBR provides investment banking*, merger and acquisition advisory services*, institutional brokerage*, asset management, and private wealth services. FBRCM focuses capital and financial expertise on eight industry sectors: consumer, diversified industrials, energy and natural resources, financial institutions, healthcare, insurance, real estate, and technology, media and telecommunications. FBR is headquartered in the Washington, D.C. metropolitan area with offices in Arlington, Va., Boston, Dallas, Houston, Irvine, London, New York, Phoenix and San Francisco. Friedman, Billings, Ramsey Group, Inc. is the parent company of First NLC Financial Services, Inc., a non-conforming residential mortgage originator headquartered in Deerfield Beach, Florida. For more information, see www.fbr.com.

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

¹ Accumulated Other Comprehensive Income (AOCI) includes changes in the value of available-for-sale securities and cash flow hedges. FBR believes that such changes represent temporary market fluctuations, are not reflective of our market strategy, and, therefore, the exclusion of AOCI provides a reasonable basis for calculating returns.

² Source: Dealogic. Relates to total deal value of all common stock or common equity, including private placements, offered for all U.S. companies with a market capitalization of $1 billion or less. Transactions priced between 1/1/06 and 12/31/06, with apportioned credit to all book-runners. Includes only rank eligible transactions.

³ Source: Dealogic. Relates to total deal value of all common stock of U.S. issuers offered in IPOs or transactions exempt from SEC registration pursuant to rule 144A, on a combined basis. Transactions priced between 1/1/06 through 12/31/06 with apportioned credit to all book-runners. Includes only rank eligible transactions.

⁴ Source: Dealogic. Relates to total deal value of all common stock or common equity, including private placements, offered for all U.S. mining, oil and gas, and utility and energy companies with a market capitalization of $1 billion or less. Transactions priced between 1/1/06 and 12/31/06, with apportioned credit to all book-runners. Includes only rank eligible transactions.

⁵ Source: Dealogic. Relates to total deal value of all common stock or common equity, including private placements, offered for all U.S. and Bermuda finance and insurance companies with a market capitalization of $1 billion or less. Transactions priced between 1/1/06 and 12/31/06, with apportioned credit to all book-runners. Includes only rank eligible transactions.

Statements concerning future performance, developments, events, market forecasts, revenues, expenses, earnings, run rates and any other guidance on present or future periods, constitute forward-looking statements that are subject to a number of factors, risks and uncertainties that might cause actual results to differ materially from stated expectations or current circumstances. These factors include, but are not limited to, the effect of demand for public offerings, activity in the secondary securities markets, interest rates, costs of borrowing, interest spreads, mortgage pre-payment speeds, risks associated with merchant banking investments, the realization of gains and losses on principal investments, available technologies, competition for business and personnel, and general economic, political and market conditions. These and other risks are described in the Company’s Annual Report and Form 10-K and quarterly reports on Form 10-Q that are available from the company and from the SEC.

Financial data follows.

# # #

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

	Quarter ended December 31,
	2006			%		2005			%
REVENUES:
Investment banking:
Capital raising	$	71,883		40.9	%	$	88,866		-77.9	%
Advisory		9,172		5.2	%		7,415		-6.5	%
Institutional brokerage:
Principal transactions		(8	)	0.0	%		3,788		-3.3	%
Agency commissions		24,720		14.1	%		21,006		-18.4	%
Mortgage trading interest		2,509		1.4	%		19,555		-17.1	%
Mortgage trading net investment loss		(309	)	-0.2	%		(1,419	)	1.2	%
Asset management:
Base management fees		5,051		2.9	%		6,153		-5.4	%
Incentive allocations and fees		403		0.2	%		742		-0.7	%
Principal investment:
Interest		181,491		103.3	%		189,811		-166.3	%
Net investment loss		(8,826	)	-5.0	%		(258,500	)	226.5	%
Dividends		2,043		1.2	%		16,039		-14.1	%
Mortgage banking:
Interest		21,806		12.4	%		28,825		-25.3	%
Net investment income (loss)		27,555		15.6	%		(21,899	)	19.2	%
Other		3,162		1.8	%		5,164		-4.4	%
Total revenues		340,652		193.8	%		105,546		-92.5	%
Interest expense		164,891		93.8	%		211,393		-185.3	%
Provision for loan losses		—		0.0	%		8,263		-7.2	%
Revenues, net of interest expense and provision for loan losses		175,761		100.0	%		(114,110	)	100.0	%
NON-INTEREST EXPENSES:
Compensation and benefits		84,431		48.0	%		87,330		-76.5	%
Professional services		18,224		10.4	%		16,556		-14.5	%
Business development		11,884		6.8	%		10,433		-9.2	%
Clearing and brokerage fees		3,505		2.0	%		2,447		-2.1	%
Occupancy and equipment		13,668		7.8	%		10,151		-8.9	%
Communications		6,307		3.6	%		5,741		-5.0	%
Other operating expenses		20,116		11.4	%		24,984		-21.9	%
Total non-interest expenses		158,135		90.0	%		157,642		-138.1	%
Operating income (loss)		17,626		10.0	%		(271,752	)	238.1	%
OTHER INCOME:
Gain on sale of subsidiary shares		—		0.0	%		—		0.0	%
Net income (loss) before income taxes and minority interest		17,626		10.0	%		(271,752	)	238.1	%
Income tax provision (benefit)		11,859		6.7	%		(142	)	0.1	%
Minority interest in earnings of consolidated subsidiary		1,957		1.1	%		—		0.0	%
Net income (loss)	$	3,810		2.2	%	$	(271,610	)	238.0	%
Basic earnings (loss) per share	$	0.02				$	(1.60	)
Basic earnings (loss) per share	$	0.02				$	(1.60	)
Weighted average shares - basic		172,531					169,921
Weighted average shares - diluted		172,600					169,921

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

	Years Ended December 31,
	2006			%		2005			%
REVENUES:
Investment banking:
Capital raising	$	190,187		50.0	%	$	356,753		82.1	%
Advisory		24,148		6.3	%		17,759		4.1	%
Institutional brokerage:
Principal transactions		5,814		1.5	%		17,950		4.1	%
Agency commissions		101,009		26.6	%		82,778		19.0	%
Mortgage trading interest		51,147		13.4	%		30,859		7.1	%
Mortgage trading net investment loss		(3,301	)	-0.9	%		(3,820	)	-0.9	%
Asset management:
Base management fees		20,093		5.3	%		30,348		7.0	%
Incentive allocations and fees		1,327		0.3	%		1,929		0.4	%
Principal investment:
Interest		594,879		156.4	%		549,832		126.5	%
Net investment loss		(184,552	)	-48.5	%		(239,754	)	-55.2	%
Dividends		14,551		3.8	%		36,622		8.4	%
Mortgage banking:
Interest		88,662		23.3	%		78,007		17.9	%
Net investment income		83,786		22.0	%		13,741		3.2	%
Other		20,154		5.3	%		22,302		5.1	%
Total revenues		1,007,904		264.8	%		995,306		228.8	%
Interest expense		611,800		160.8	%		546,313		125.7	%
Provision for loan losses		15,740		4.0	%		14,291		3.1	%
Revenues, net of interest expense and provision for loan losses		380,364		100.0	%		434,702		100.0	%
NON-INTEREST EXPENSES:
Compensation and benefits		309,065		81.3	%		331,492		76.3	%
Professional services		59,722		15.7	%		66,550		15.3	%
Business development		42,150		11.1	%		46,648		10.7	%
Clearing and brokerage fees		11,820		3.1	%		8,882		2.0	%
Occupancy and equipment		50,051		13.2	%		34,044		7.8	%
Communications		24,398		6.4	%		20,634		4.7	%
Other operating expenses		89,377		23.5	%		70,679		16.4	%
Total non-interest expenses		586,583		154.3	%		578,929		133.2	%
Operating loss		(206,219	)	-54.4	%		(144,227	)	-33.2	%
OTHER INCOME:
Gain on sale of subsidiary shares		121,511		31.9	%		—		0.0	%
Net loss before income taxes and minority interest		(84,708	)	-22.3	%		(144,227	)	-33.2	%
Income tax (benefit) provision		(14,682	)	-3.9	%		26,683		6.1	%
Minority interest in loss of consolidated subsidiary		(2,751	)	-0.7	%		—		0.0	%
Net loss	$	(67,275	)	-17.7	%	$	(170,910	)	-39.3	%
Basic loss per share	$	(0.39	)			$	(1.01	)
Diluted loss per share	$	(0.39	)			$	(1.01	)
Weighted average shares - basic		171,667					169,333
Weighted average shares - diluted		171,667					169,333

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			—			—
Net (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
Net (loss) income before income taxes and minority interest as a percentage of net revenue		-22.3	%		10.0	%		118.6	%		-26.2	%		14.0	%
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. Financial & Statistical Supplement - Operating Results (Dollars in thousands, except per share data) (Unaudited)

	For the year ended 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		78,007			28,825			27,280			15,543			6,359
Net investment income (loss)		13,741			(21,899	)		17,600			14,559			3,481
Other		22,302			5,164			5,479			6,030			5,629
Total revenues		995,306			105,546			339,901			312,084			237,775
Interest expense		546,313			211,393			156,373			103,725			74,822
Provision for loan losses		14,291			8,263			4,890			1,138			—
Revenues, net of interest expense and provision for loan losses		434,702			(114,110	)		178,638			207,221			162,953
Non-interest expenses
Compensation and benefits		331,492			87,330			88,348			80,015			75,799
Professional services		66,550			16,556			16,158			20,186			13,650
Business development		46,648			10,433			8,815			11,962			15,438
Clearing and brokerage fees		8,882			2,447			2,363			2,040			2,032
Occupancy and equipment		34,044			10,151			9,397			8,772			5,724
Communications		20,634			5,741			5,561			5,300			4,032
Other operating expenses		70,679			24,984			16,861			12,540			16,294
Total non-interest expenses		578,929			157,642			147,503			140,815			132,969
Net (loss) income before income taxes		(144,227	)		(271,752	)		31,135			66,406			29,984
Income tax 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		$	1,629,293
Basic (loss) earnings per share	$	(1.01	)	$	(1.60	)	$	0.14		$	0.31		$	0.15
Diluted (loss) 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		$	9.63
Gross assets under management (in millions)
Managed accounts	$	463.4		$	463.4		$	437.2		$	510.4		$	242.4
Hedge & offshore funds		154.3			154.3			239.0			463.1			601.1
Mutual funds		1,883.3			1,883.3			2,078.1			2,185.0			2,213.9
Private equity and venture capital funds		56.2			56.2			42.7			41.3			69.5
Total	$	2,557.2		$	2,557.2		$	2,797.0		$	3,199.8		$	3,126.9
Net assets under management (in millions)
Managed accounts	$	329.5		$	329.5		$	255.5		$	257.3		$	223.0
Hedge & offshore funds		150.5			150.5			227.8			401.1			490.3
Mutual funds		1,872.8			1,872.8			2,069.9			2,176.6			2,204.2
Private equity and venture capital funds		46.8			46.8			39.9			37.8			66.3
Total	$	2,399.6		$	2,399.6		$	2,593.1		$	2,872.8		$	2,983.8
Employee count		2,449			2,449			2,455			2,226			2,123

(1) Accumulated Other Comprehensive Income (AOCI) includes changes in value of available-for-sale securities and cash flow hedges. We believe that such changes represent temporary market fluctuations, are not reflective of our market strategy, and therefore, exclusion of AOCI provides a reasonable basis for calculating returns.

FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts) (Unaudited)

	31-Dec-06			31-Dec-05
ASSETS
Cash and cash equivalents	$	189,956		$	238,615
Restricted cash		132			6,101
Receivables		217,249			259,519
Investments:
Mortgage-backed securities, at fair value		6,870,661			8,002,561
Loans held for investment, net		—			6,841,266
Loans held for sale, net		5,367,934			963,807
Long-term investments		185,492			347,644
Reverse repurchase agreements		—			283,824
Trading securities, at fair value		18,180			1,032,638
Due from clearing broker		28,999			71,065
Derivative assets, at fair value		36,875			70,636
Goodwill		162,765			162,765
Intangible assets, net		21,825			26,485
Furniture, equipment and leasehold improvements, net		44,111			46,382
Prepaid expenses and other assets		208,339			82,482
Total assets	$	13,352,518		$	18,435,790
LIABILITIES AND SHAREHOLDERS ‘ EQUITY
Liabilities:
Trading account securities sold short but not yet purchased, at fair value	$	202		$	150,547
Commercial paper		3,971,389			6,996,950
Repurchase agreements		3,059,330			2,698,619
Derivative liabilities, at fair value		44,582			31,952
Dividends payable		8,743			34,588
Interest payable		12,239			12,039
Accrued compensation and benefits		57,227			82,465
Accounts payable, accrued expenses and other liabilities		81,819			82,576
Temporary subordinated loan payable		—			75,000
Securitization financing, net		4,486,046			6,642,198
Long-term debt		324,453			324,686
Total liabilities		12,046,030			17,131,620
Minority Interest		135,443			—
Shareholders’ equity:
Common stock, 174,712 and 172,854 shares		1,747			1,729
Additional paid-in capital		1,562,497			1,547,128
Employee stock loan receivable including accrued interest (2 and 551 shares)		(12	)		(4,018	)
Deferred compensation, net		—			(15,602	)
Accumulated other comprehensive loss, net of taxes		(15,136	)		(977	)
Accumulated deficit		(378,051	)		(224,090	)
Total shareholders’ equity		1,171,045			1,304,170
Total liabilities and shareholders’ equity	$	13,352,518		$	18,435,790

FBR CAPITAL MARKETS CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (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	$	190,576		$	71,879		$	6,852		$	45,510		$	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		100,855			24,683			24,359			28,447			23,366
Mortgage trading interest		51,147			2,509			13,845			17,143			17,650
Mortgage trading net investment loss		(3,298	)		(309	)		(1,546	)		(209	)		(1,234	)
Asset management:
Base management fees		19,871			5,051			4,879			5,065			4,876
Incentive allocations and fees		1,327			403			(30	)		(54	)		1,008
Interest		20,934			5,235			8,439			4,647			2,613
Net investment income (loss)		3,372			3,288			(3,070	)		108			3,046
Other		3,893			1,280			482			816			1,315
Total revenues		418,639			123,183			58,378			109,514			127,564
Interest expense		54,543			3,136			16,390			18,155			16,862
Revenues, net of interest expense		364,096			120,047			41,988			91,359			110,702
Non-interest expenses
Compensation and benefits		225,712			61,326			46,398			54,436			63,552
Professional services		43,712			13,809			9,069			10,830			10,004
Business development		33,772			9,458			5,229			6,709			12,376
Clearing and brokerage fees		11,715			3,504			2,892			3,053			2,266
Occupancy and equipment		30,039			7,918			7,349			7,499			7,273
Communications		20,039			5,024			5,442			4,990			4,583
Other operating expenses		12,219			1,434			4,561			2,960			3,264
Total non-interest expenses		377,208			102,473			80,940			90,477			103,318
Net (loss) income before income taxes		(13,112	)		17,574			(38,952	)		882			7,384
Income tax (benefit) provision		(3,271	)		10,614			(16,346	)		(105	)		2,566
Net (loss) income	$	(9,841	)	$	6,960		$	(22,606	)	$	987		$	4,818
Basic & diluted (loss) earnings per share	$	(0.18	)	$	0.11	(1)	$	(0.37	)	$	0.02		$	0.10
Weighted average shares - basic & diluted		54,136,986			64,000,000			60,282,609			46,000,000			46,000,000

⁽¹⁾ Non-GAAP earnings per share determined by using a 43% tax rate would be $0.16. Management believes this information is relevant because it expects the effective tax rate to approximate 43% after FASB 123R and other non-cash tax charges.