EX-99.1 3 fbr03qtr2release.txt SECOND QUARTER 2003 EARNINGS PRESS RELEASE. EXHIBIT 99.1 [GRAPHIC OMITTED][GRAPHIC OMITTED] Investor Contact: Kurt Harrington 703.312.9647 or kharrington@fbr.com Media Contacts: Bob Leahy 703.312.9745 or bleahy@fbr.com or Bill Dixon 703.469.1092 or bdixon@fbr.com FBR Reports Second Quarter 2003 Net Income of $58.8 Million, or $.43 per Share (Basic and Diluted) ARLINGTON, Va., July 29, 2003 - Friedman, Billings, Ramsey Group, Inc. (NYSE: FBR) today reported net income after tax of $58.8 million, or $.43 (basic and diluted) per share on gross revenues of $148.4 million for the quarter ended June 30, 2003, compared to net income of $17.8 million, or $.39 (basic), $.36 (diluted) per share on gross revenues of $73.3 million for the second quarter of 2002. On March 31, 2003, FBR completed its merger with FBR Asset Investment Corporation, forming a new company known as Friedman, Billings, Ramsey Group, Inc. Accordingly, the company also is disclosing its results on a pro forma basis, in accordance with SEC Regulation S-X, Article 11, assuming the merger had occurred on January 1, 2002. On this basis, for the quarter ended June 30, 2002 the company reported pro forma net income before extraordinary gain of $31.6 million, or $.30 (basic), $.29 (diluted) per share on pro forma gross revenues of $98.8 million. "The quarter visibly demonstrated our merged company's business model, with our balance sheet businesses more than covering our $.34 quarterly dividend, and our capital markets and asset management businesses retaining approximately $10 million in after-tax earnings and maintaining the company's dynamic growth characteristic," said Co-Chairman and Co-CEO Emanuel J. Friedman. "During the quarter, we grew the mortgage-backed securities (MBS) portfolio from only $5.0 billion at March 31 to $8.1 billion at June 30, with an average spread during the quarter of 1.99%. At these levels, we reasonably expect our balance sheet businesses alone to cover our dividend." "We are extremely pleased by the impact that the merger has already had on our business, particularly investment banking, institutional brokerage and merchant banking," said Co-Chairman and Co-CEO Eric F. Billings. "While we expected to see these benefits over time, it seems that the merger has already transformed our company, and our customers'understanding of the company and the unique strengths of our franchise in the very first quarter after the merger. For example, our investment banking backlog exceeds anything we have seen in our history." In the investment banking business, FBR completed four lead-managed equity offerings totaling $1.1 billion during the quarter, including an $804 million IPO for American Financial Realty (AFR), the largest IPO of the year. FBR ranks as the number two lead-managing IPO underwriter in the United States for the first six months of 2003, with a market share in excess of 30%, according to CommScan Equidesk (ranked by dollar volume). For the six months ended June 30, 2003, FBR is the number one ranked lead managing underwriter in after-market performance for United States equity offerings, according to CommScan Equidesk. "The level of activity continues to grow and extends across all of our industry sectors. Since the beginning of the third quarter, we have already completed or are currently marketing lead-managed equity offerings with an aggregate transaction value in excess of $1.1 billion - more than the entire second quarter. This includes a $202 million IPO for a security alarm monitoring company in our diversified industries sector that was completed today," said J. Rock Tonkel, Executive Vice President and Head of Investment Banking. "We attribute this to a number of factors, including the merger, the strength of our institutional distribution - as evidenced last quarter by our IPO ranking, the aftermarket performance of our underwritten transactions, and our growing issuer franchise, including repeat business for existing clients." Investment banking revenue for the quarter was $42.8 million. In the institutional brokerage business, volumes continued to grow despite a difficult environment for our industry. Brokerage revenue for the quarter was $19.6 million. In its asset management business, FBR recorded fee revenues of $6.5 million, including base fees of $5.4 million and non-cash incentive income of $1.1 million. Net assets under management totaled $1.7 billion at June 30, 2003, representing a 6.4% increase over the preceding 12 months (excluding FBR Asset), and a 16.0% increase from March 31, 2003. FBR recognized mark to market gain of $8.9 million on its investments in alternative asset funds, which is recorded in its asset management revenues. FBR's merchant banking portfolio and other long term investments totaled $236.2 million, or approximately 20.8% of the company's equity, at June 30, 2003. Of this total, $164.4 million was held in the merchant banking portfolio, $53.1 million was held in alternative asset funds and $18.7 million was held in broker-dealer investments. FBR generated realized gains and dividends of $12.1 million in its merchant banking business during the quarter ended June 30, 2003. Additionally, the company had unrealized gains in the merchant banking portfolio of $56.2 million at June 30, 2003. The company's mortgaged-backed securities (MBS) portfolio averaged $6.2 billion during the quarter ended June 30, 2003. The weighted average annualized yield of FBR's MBS portfolio was 3.25% during the quarter and the company's weighted average cost of financing for the mortgage-backed securities was 1.26% (including the cost of hedging) resulting in an average net interest spread of 1.99%. The average one month constant prepayment rate (CPR) was 35 during the quarter. The premium of the MBS portfolio was 2.4% and unrealized gains were $34.8 million as of June 30, 2003. Included in this result are non-cash purchase accounting adjustments from the merger which reduced the company's net interest spread by 10.5 basis points. Subsequent to June 30, 2003, certain of the company's interest rate swaps, representing approximately $3 billion of one-year swaps with a cash basis funding cost of 2.15% expired. The company has entered into one year interest rate swaps on $2 billion of funding with a start date of October 2003 and a funding cost of 1.31%. At June 30, 2003, the company continued to maintain a low effective duration of 1.15 in its mortgage-backed securities portfolio. As of June 30, 2003 the company owned no fixed rate mortgage pools in its portfolio, and continued to own only adjustable rate mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae. FBR had 136.1 million common shares outstanding, shareholders' equity of $1.1 billion, and book value per share of $8.35 as of June 30, 2003, compared with 46.5 million common shares outstanding, shareholders' equity of $245.2 million and book value per share of $5.28 as of December 31, 2002. Friedman, Billings, Ramsey Group, Inc. is a national investment bank that provides investment banking, institutional brokerage, asset management, and private client services through its operating subsidiaries and invests in mortgage backed securities and merchant banking opportunities. FBR focuses capital and financial expertise on six industry sectors: financial services, real estate, technology, healthcare, energy and diversified industries. FBR, headquartered in the Washington, D.C. metropolitan area, with offices in Arlington, Va. and Bethesda, Md., also has offices in Atlanta, Boston, Charlotte, Chicago, Cleveland, Denver, Irvine, London, New York, Portland, San Francisco, Seattle, and Vienna. FBR has elected REIT tax status. For more information, see http://www.fbr.com. Investment banking and institutional brokerage provided in the United States by Friedman, Billings, Ramsey & Co., Inc.\ A live webcast of FBR's conference call will be available at 9:00am on July 30, 2003 (Eastern Time) via http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=FBR. Replays of the webcast will be available afterward. The company believes that the pro forma information about the merger set forth above when read in configuration with the company's GAAP financial information, can provide useful supplemental information for investors analyzing period to period comparisons of the company's results. Financial data follows.
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (Unaudited) Quarter ended June 30, 2003 % 2002 % REVENUES: Investment banking $42,791 33.2% $36,670 50.4% Institutional brokerage 19,625 15.2% 18,326 25.2% Asset management Base fees 5,369 4.2% 7,633 10.5% Incentive and investment income 10,101 7.8% 11,419 15.7% Technology sector investment and incentive loss (66) -0.1% (2,432) -3.3% Principal investment Interest 49,088 38.1% - 0.0% Realized gains 17,770 13.8% - 0.0% Dividends 1,542 1.2% - 0.0% Other 2,219 1.7% 1,638 2.2% --------- ------- -------- ------- Gross revenues 148,439 115.3% 73,254 100.6% Interest expense 19,721 15.3% 430 0.6% --------- ------- -------- ------- Net revenues 128,718 100.0% 72,824 100.0% --------- ------- -------- ------- EXPENSES: Compensation and benefits 42,841 33.3% 38,411 52.7% Business development and professional services 10,678 8.3% 7,982 11.0% Other 10,246 8.0% 8,652 11.9% --------- ------- -------- ------- Total expenses 63,765 49.5% 55,045 75.6% --------- ------- -------- ------- Net income before income taxes 64,953 50.5% 17,779 24.4% Income tax provision 6,181 4.8% - 0.0% --------- ------- -------- ------- Net income 58,772 45.7% 17,779 24.4% ========= ======= ======== ======= Basic earnings per share $0.43 $0.39 ========= ======= ======== ======= Diluted earnings per share $0.43 $0.36 ========= ======= ======== ======= Weighted average shares - basic 135,467 45,944 ========= ======= ======== ======= Weighted average shares - diluted 136,190 48,772 ========= ======= ======== =======
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (Unaudited) Six Months ended June 30, 2003 % 2002 % REVENUES: Investment banking $60,530 34.3% $60,645 47.8% Institutional brokerage 30,913 17.5% 34,129 26.9% Asset management Base fees 13,060 7.4% 13,629 10.7% Incentive and investment income 18,306 10.4% 19,224 15.2% Technology sector investment and incentive loss (503) -0.3% (3,531) -2.8% Principal investment Interest 51,583 29.2% - 0.0% Realized gains 17,829 10.1% - 0.0% Dividends 2,483 1.4% - 0.0% Other 3,777 2.1% 3,528 2.8% -------- ------- -------- ------- Gross revenues 197,978 112.1% 127,624 100.6% Interest expense 21,367 12.1% 800 0.6% -------- ------- -------- ------- Net revenues 176,611 100.0% 126,824 100.0% -------- ------- -------- ------- EXPENSES: Compensation and benefits 67,645 38.3% 69,730 55.0% Business development and professional services 16,557 9.4% 14,394 11.3% Other 18,890 10.7% 16,032 12.6% -------- ------- -------- ------- Total expenses 103,092 58.4% 100,156 79.0% -------- ------- -------- ------- Net income before income taxes and extraordinary gain 73,519 41.6% 26,668 21.0% Income tax provision 9,024 5.1% - 0.0% -------- ------- -------- ------- Net income before extraordinary gain 64,495 36.5% 26,668 21.0% Extraordinary gain - 0.0% 1,413 1.1% -------- ------- -------- ------- Net income $64,495 36.5% $28,081 22.1% ======== ======= ======== ======= Basic earnings per share before extraordinary gain $0.70 $0.58 ======== ======== Diluted earnings per share before extraordinary gain $0.69 $0.56 ======== ======== Basic earnings per share $0.70 $0.61 ======== ======== Diluted earnings per share $0.69 $0.59 ======== ======== Weighted average shares - basic 92,502 45,804 ======== ======== Weighted average shares - diluted 92,821 47,500 ======== ========
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. Financial & Statistical Supplement -Operating Results (unaudited) (Dollars in thousands, except per share data) YTD 2003 Q-2 03 Q-1 03 Revenues Investment banking: Underwriting $32,763 $23,975 $8,788 Corporate finance 19,102 13,383 5,719 Investment gains 8,665 5,433 3,232 Institutional brokerage: Principal transactions 10,327 6,576 3,751 Agency commissions 20,586 13,049 7,537 Asset management: Base management fees 13,060 5,369 7,691 Incentive income 6,712 1,133 5,579 Net investment income (loss) 11,594 8,968 2,626 Technology sector investment and incentive income (loss) (503) (66) (437) Principal investment: Interest 51,583 49,088 2,495 Realized gains 17,829 17,770 59 Dividends 2,483 1,542 941 Other 3,777 2,219 1,558 -------- -------- -------- Total revenues 197,978 148,439 49,539 -------- -------- -------- Expenses Compensation and benefits 67,645 42,841 24,804 Business development & professional services 16,557 10,678 5,879 Clearing and brokerage fees 2,980 1,748 1,232 Occupancy & equipment 4,416 2,217 2,199 Communications 4,437 2,228 2,209 Interest expense 21,367 19,721 1,646 Other operating expenses 7,057 4,053 3,004 -------- -------- -------- Total expenses 124,459 83,486 40,973 -------- -------- -------- Net income before taxes and extraordinary gain 73,519 64,953 8,566 Income tax provision 9,024 6,181 2,843 -------- -------- -------- Net income before extraordinary gain $64,495 $58,772 $5,723 Extraordinary gain - - - Income tax provision on extraordinary gain - - - ------- -------- -------- Net income $64,495 $58,772 $5,723 ======= ======== ======== Net income before taxes and extraordinary gain as a percentage of revenue 37.1% 43.8% 17.3% ROE (annualized) 18.7% 21.9% 3.6% Total shareholders' equity $1,136,093 $1,136,093 $1,011,647 Basic earnings per share $0.70 $0.43 $0.12 Diluted earnings per share $0.69 $0.43 $0.12 Ending shares outstanding (in thousands) 136,087 136,087 131,576 Book value per share $8.35 $8.35 $7.69 Gross assets under management (in millions) Managed accounts $69.6 $69.6 $818.8 Hedge & offshore funds 234.8 234.8 237.5 Mutual funds 1,419.6 1,419.6 1,196.8 Private equity funds 32.5 32.5 32.7 Technology sector funds 44.8 44.8 49.7 Total $1,801.3 $1,801.3 $2,335.5 Net assets under management (in millions) Managed accounts $69.6 $69.6 $82.7 Hedge & offshore funds 196.8 196.8 159.4 Mutual funds 1,410.5 1,410.5 1,191.6 Private equity funds 30.9 30.9 28.6 Technology sector funds 40.4 40.4 45.4 Total $1,748.2 $1,748.2 $1,507.7 Productive assets under management (in millions) Managed accounts $69.6 $69.6 $818.8 Hedge & offshore funds 196.8 196.8 159.4 Mutual funds 1,410.5 1,410.5 1,191.6 Private equity funds 88.1 88.1 90.9 Technology sector funds 89.5 89.5 249.2 Total $1,854.5 $1,854.5 $2,509.9 Employee count 500 500 493
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. Financial & Statistical Supplement -Operating Results (unaudited) (Dollars in thousands, except per share data) YTD 2002 Q-4 02 Q-3 02 Q-2 02 Q-1 02 Revenues Investment banking: Underwriting $76,556 $8,890 $30,108 $25,248 $12,310 Corporate finance 58,595 11,119 26,175 9,827 11,474 Investment gains 8,725 4,312 2,627 1,595 191 Institutional brokerage: Principal transactions 27,512 6,339 5,743 8,372 7,058 Agency commissions 35,672 8,344 8,629 9,954 8,745 Asset management: Base management fees 28,956 8,119 7,208 7,633 5,996 Incentive income 14,258 5,291 4,282 2,902 1,783 Net investment income (loss) 16,276 4,474 (2,737) 8,517 6,022 Technology sector investment and incentive income (loss) (5,622) 111 (2,202) (2,432) (1,099) Principal investment: Interest - - - - - Realized gains - - - - - Dividends - - - - - Other 7,275 1,868 1,879 1,638 1,890 -------- -------- -------- -------- -------- Total revenues 268,203 58,867 81,712 73,254 54,370 -------- -------- -------- -------- -------- Expenses Compensation and benefits 147,072 31,617 45,725 38,411 31,319 Business development & professional services 30,589 7,545 8,650 7,982 6,412 Clearing and brokerage fees 5,353 1,467 1,443 1,817 626 Occupancy & equipment 8,838 2,274 2,309 2,046 2,209 Communications 8,185 1,910 2,009 2,187 2,079 Interest expense 2,073 665 608 430 370 Other operating expenses 10,652 2,608 2,976 2,602 2,466 -------- -------- -------- -------- -------- Total expenses 212,762 48,086 63,720 55,475 45,481 -------- -------- -------- -------- -------- Net income before taxes and extraordinary gain 55,441 10,781 17,992 17,779 8,889 Income tax provision 3,035 692 2,343 - - -------- -------- -------- -------- -------- Net income before extraordinary gain $52,406 $10,089 $15,649 $17,779 $8,889 Extraordinary gain 1,413 - - - 1,413 Income tax provision on extraordinary gain 536 - 536 - - Net income $53,283 $10,089 $15,113 $17,779 $10,302 ======== ======== ======== ======== ======== Net income before taxes and extraordinary gain as a percentage of revenue 20.7% 18.3% 22.0% 24.3% 16.3% ROE (annualized) 24.8% 16.8% 26.7% 34.4% 21.7% Total shareholders' equity $245,165 $245,165 $234,625 $218,368 $194,590 Basic earnings per share $1.16 $0.22 $0.33 $0.39 $0.23 Diluted earnings per share $1.10 $0.21 $0.31 $0.36 $0.22 Ending shares outstanding (in thousands) 46,456 46,456 46,396 46,339 45,751 Book value per share $5.28 $5.28 $5.06 $4.71 $4.25 Gross assets under management (in millions) Managed accounts $6,538.0 $6,538.0 $7,356.0 $4,152.3 $2,757.7 Hedge & offshore funds 247.0 247.0 232.3 216.0 209.2 Mutual funds 1,188.5 1,188.5 1,071.2 1,313.4 1,270.4 Private equity funds 34.7 34.7 41.7 46.1 46.4 Technology sector funds 63.8 63.8 54.0 56.6 60.4 Total $8,072.0 $8,072.0 $8,755.2 $5,784.4 $4,344.1 Net assets under management (in millions) Managed accounts $871.5 $871.5 $849.7 $748.5 $394.5 Hedge & offshore funds 162.4 162.4 162.9 188.5 157.7 Mutual funds 1,173.3 1,173.3 1,064.4 1,297.7 1,214.1 Private equity funds 30.9 30.9 40.1 45.5 45.5 Technology sector funds 48.2 48.2 48.6 52.3 55.8 Total $2,286.3 $2,286.3 $2,165.7 $2,332.5 $1,867.6 Productive assets under management (in millions) Managed accounts $6,538.0 $6,538.0 $7,356.0 $4,152.3 $2,757.7 Hedge & offshore funds 162.4 162.4 162.9 188.5 157.7 Mutual funds 1,173.3 1,173.3 1,064.4 1,297.7 1,214.1 Private equity funds 91.2 91.2 92.5 94.8 95.3 Technology sector funds 249.0 249.0 248.5 248.1 249.3 Total $8,213.9 $8,213.9 $8,924.3 $5,981.4 $4,474.1 Employee count 481 481 464 445 441
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. CONSOLIDATED BALANCE SHEETS (amounts in thousands) ASSETS 30-Jun-03 31-Dec-02 Cash and cash equivalents $116,015 $90,007 Receivables 75,092 28,122 Due from clearing broker 31,292 43,146 Investments: Mortgage-backed securities, at fair value 8,135,379 38,505 Trading securities, at market value 5,469 8,298 Long-term investments 236,247 150,447 Bank loans, net 12,086 15,052 MMA acquired management contracts 16,972 17,629 Goodwill 108,013 - Building, furniture, equipment and leasehold improvements, net 9,096 9,156 Other assets 9,657 5,823 ----------- ---------- Total assets $8,755,318 $406,185 =========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Trading account securities sold short, at market value $2,629 $19,932 Repurchase agreements 7,417,418 16,352 Interest rate swaps 10,275 - Accounts payable and accrued expenses 33,800 16,412 Accrued compensation and benefits 34,592 41,255 Bank deposits 55,002 51,215 Short-term loans payable 40,000 10,588 Long-term debt 25,509 5,266 Total liabilities 7,619,225 161,020 Shareholders' equity: Common stock, 140,071 and 50,456 shares 1,401 505 Additional paid-in capital 996,448 211,724 Employee stock loan receivable including accrued interest (3,984 and 4,000 shares) (24,824) (24,182) Accumulated other comprehensive income 91,677 4,345 Retained earnings 71,391 52,773 ----------- ---------- Total shareholders' equity 1,136,093 245,165 ----------- ---------- Total liabilities and ----------- ---------- shareholders' equity $8,755,318 $406,185 =========== ========== Book Value per Share $8.35 $5.28 Shares Outstanding 136,087 46,456 The following unaudited pro forma consolidated results for the six months ended June 30, 2003 and 2002 and three months ended June 30, 2002 have been prepared based on the requirements of SEC Regulation S-X, Article 11, assuming the company's merger with FBR Asset had occurred on January 1, 2002. Because the merger was completed on March 31, 2003, the company's results for the three months ended June 30, 2003 include the effects of the merger and are presented here for comparative purposes. Three Months Ended June 30, 2003 2002 Gross revenues, as reported $148,439 $73,254 Net revenues, as reported (1) 128,718 72,824 Net earnings before extraordinary gain, as reported 58,772 17,779 Gross revenues, pro forma n/a $98,791 Net revenues, pro forma n/a 85,915 Net earnings before extraordinary gain, pro forma n/a 31,643 Earnings per common share Basic before extraordinary gain, as reported $0.43 $0.39 Diluted before extraordinary gain, as reported $0.43 $0.36 Basic before extraordinary gain, pro forma n/a $0.30 Diluted before extraordinary gain, pro forma n/a $0.29 Six Months Ended June 30, 2003 2002 Gross revenues, as reported $197,978 $127,624 Net revenues, as reported (1) 176,611 126,824 Net earnings before extraordinary gain, as reported 64,495 26,668 Gross revenues, pro forma $245,222 $163,473 Net revenues, pro forma 202,929 150,131 Net earnings before extraordinary gain, pro forma 90,321 52,143 Earnings per common share Basic before extraordinary gain, as reported $0.70 $0.58 Diluted before extraordinary gain, as reported $0.69 $0.56 Basic before extraordinary gain, pro forma $0.67 $0.55 Diluted before extraordinary gain, pro forma $0.66 $0.54 (1) Revenues net of interest expense. 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.
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