8-K

- --------------------------------------------------------------------------------
                                    FORM 8-K
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



    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 5, 2004


                     FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
             (Exact name of Registrant as specified in its charter)




   Virginia                      54-1873198                   000-50230
(State or other    (I.R.S. Employer incorporation or    (Commission File Number)
jurisdiction of                organization)
Identification No.)



                             1001 Nineteenth Street
                            North Arlington, VA 22209
               (Address of principal executive offices) (Zip code)


                                 (703) 312-9500
               (Registrant's telephone number including area code)



Item 12. Results of Operations and Financial Condition.

1.   On  February  5,  2004,  Friedman,  Billings,  Ramsey  Group,  Inc.  held a
     conference  call to discuss its earnings for the full year 2003 and for the
     fourth quarter.  A replay of the conference call is currently  available on
     the company's website,  www.fbr.com.  The script of that conference call is
     being furnished herewith and attached as Exhibit 99.1.


EXHIBIT LIST

99.1 February 5, 2004 Conference Call Script.




                                   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.


Date:  February 10, 2004        By: /s/ Emanuel J. Friedman
                                    --------------------------------
                                    Emanuel J. Friedman
                                    Co-Chairman & Co-Chief Executive Officer

EX-99. 1

EXHIBIT 99.1
                    Friedman, Billings, Ramsey Group, Inc.
                    Fourth Quarter Earnings Conference Call
                                February 5, 2004


Facilitator:
Ladies and gentlemen,  this is the operator.  Today's conference is scheduled to
begin momentarily.  Until that time, your lines will again play music. Thank you
for your patience.

Good morning. My name is Kristi, and I'll be your conference  facilitator today.
At this time,  I would  like to welcome  everyone  to the  fourth  quarter  2003
conference  call.  All lines have been placed on mute to prevent any  background
noise.

After the speakers' remarks,  there will be a question and answer period. If you
would  like to ask a question  during  this time,  simply  press  "star "and the
number "1" on your  telephone  keypad.  If you'd like to withdraw your question,
press "star" and the number "2" on your telephone.

Thank  you.  I will now turn the call over to Mr.  Harrington,  Chief  Financial
Officer. Go ahead, sir.

Kurt Harrington,  Chief Financial Officer of Friedman,  Billings,  Ramsey Group,
Inc.:

Thank you. Good morning.  This is Kurt  Harrington,  Chief Financial  Officer of
Friedman, Billings, Ramsey Group, Inc.

Before we begin this morning's  earnings  call, I would like to remind  everyone
that 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.   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 effect of demand for public offerings, activity in the secondary
securities  markets,  interest rates, our cost of borrowing,  interest  spreads,
mortgage   prepayment   speeds,  the  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.  Additional information concerning
these factors that could cause results to differ  materially is contained in FBR
Group's Annual Report on Form 10-K and quarterly reports on Form 10-Q.

I would now like to turn over the call to FBR Group's  Co-Chairmen  and Co-Chief
Executive  Officers,  Emanuel  Friedman and Eric Billings.  Also joining us this
morning are Robert Smith,  FBR's Chief Operating Officer,  Rock Tonkel,  Head of
Investment Banking, and Rick Hendrix, Chief Investment Officer.

Emanuel  Friedman,  Co-Chairman and Co-CEO,  Friedman,  Billings,  Ramsey Group,
Inc.:
Thank you and good  morning.  Last night we announced  our December  quarter and
year end 2003 results.  2003 was a very eventful and profitable year for FBR and
our  shareholders.  We took  numerous  actions to prepare  ourselves  for future
profitability and growth, in line with 2003 results.

One, we strengthened and consolidated the entire FBR platform by merging our two
companies.Two,   we  increased  corporate  liquidity  through  the  creation  of
Georgetown  Funding, a $5 billion commercial conduit program.  Three, we further
strengthened  our balance  sheet by completing a $450 million  follow-on  equity
offering in October,  increasing  our  shareholders'  equity to $1,554  million.
Four,  we began a  campaign  to  increase  our  brand  awareness  and  corporate
notoriety,  including the recently completed FBR Open in Phoenix.  We grew every
line of our business profitably,  while taking steps to broaden our platform and
position  it for  sustained,  prudent and  profitable  growth.  Finally,  we set
company records for revenue and profitability.

The  earnings  we  reported  last  night are what we believe  are the  beginning
results  of  our  efforts  I  just  mentioned.  We  also  achieved  revenue  and
profitability records in nearly every business line in the fourth quarter.

Net income was $201.4 million, or a $1.68 per basic share, and $1.63 per diluted
share for 2003,  compared to $53.3  million or a $1.16 per basic share and $1.10
per diluted share for 2002.  For the fourth  quarter of 2003, net income was $80
million,  or $0.50 per basic  share,  and $0.49 per diluted  share,  compared to
$10.1  million  or $0.22 per basic  share  and $0.21 per  diluted  share for the
fourth quarter of 2002.

Adjusting for the impact of purchase accounting  adjustments on asset yields and
cost of funds resulting from our merger with FBR Asset  Investment  Corporation,
the full year  diluted  earnings  per share of $1.63 would  increase by $0.10 to
$1.73, and the fourth quarter diluted earnings per share of $0.49 would increase
by $0.01 to $0.50.

We declared a quarterly  dividend of $0.34 per share on December  11,  2003,  to
shareholders of record as of December 31, 2003. For the full year, we declared a
total of a $1.36 per share in dividends  and  increased our book value per share
by 78%,  from $5.28 at  December  31, 2002 to $9.41 at December  31,  2003.  The
dividends  and increase in book value per share  provided a 104% total return on
equity to shareholders in 2003.

Our fourth quarter reflected continued strong performance in our capital markets
business  and a  recovery  of the net  interest  margin  in our  mortgage-backed
securities  portfolio  as the  extremely  high  prepayment  speeds  in the third
quarter moderated significantly in the last three months of 2003.

All of our businesses  are  positioned  well for future growth and have begun to
see the results of this positioning.

We achieved  record  earnings  during the quarter despite running lower than our
targeted leverage in the mortgage-backed  portfolio as we invested proceeds from
the $450 million follow-on  offering in October.  Additionally,  we chose not to
realize any gains in our $261  million  merchant  banking  portfolio  during the
quarter.  Unrealized  gains,  however,  did increase  $45.3  million  during the
quarter and totaled $96 million at year-end.

2003 full year investment banking revenues totaled $278.6 million, versus $143.9
million  in 2002 and ended up almost  double  our  original  projection  of $150
million.  In fact,  our fourth  quarter total of $127.8 million was close to the
original projection for the entire year.

Our  institutional  brokerage  revenues  totaled $74.1  million  during 2003, an
increase of 17% over the 2002 total of $63.2 million.  For the fourth quarter of
2003,  institutional  brokerage  revenue  totaled  $23.5  million,  versus $14.7
million  during the fourth  quarter of 2002,  an increase of 60%.  These results
were achieved despite the continuation of industry-wide pricing pressure in this
part of the business.  Illustrating  this market  condition is the fact that our
customer share trading volume increased 32% year over year.

Our asset management  business also performed well during the year. Assets under
management  increased  in both our mutual  fund and hedge fund  businesses.  Net
assets  under  management,  excluding  FBR Asset prior to the merger,  increased
34.3%  percent  year over year.  Total fee  revenues  from the asset  management
business  increased by 48.6%,  to $30.4  million in 2003,  from $24.4 million in
2002, again excluding the impact of FBR Asset.

Our  overall  2003 and fourth  quarter  performance  was  reflective  of what we
believe is the beginning of a sustained period of growth, driven by the strength
and flexibility of our balance sheet,  the positioning of our existing  business
lines,  continuing  growth  in our  client  relationships,  and our  entry  into
additional businesses which take advantage of our existing infrastructure.

Now I would like to hand the call over to Eric  Billings,  who will  discuss our
results in more detail and our outlook for the future.

Eric Billings, Co-Chairman and Co-CEO, Friedman, Billings, Ramsey Group, Inc.:
Thanks, Manny.

Before we go through the detail of our five profit centers, I would like to talk
a little  about how we have  positioned  and will  continue to build each of our
businesses.  As we have  stated  on  previous  calls,  we make  investments  and
underwriting  judgments  based on an analysis of intrinsic  value of businesses,
with a strong emphasis on optimized capital structures. We apply this discipline
in all facets of our business and use this, along with an emphasis on execution,
as the basis for our corporate  culture.  Of course,  we use this  discipline in
managing FBR for our shareholders as well.

It is our belief that this approach is responsible  for many  outstanding  track
records within FBR,  including the aftermarket  performance of all of our public
equity  offerings  over the last  five  years,  which  ranks #1 among  all major
underwriters,  the historical  annualized  performance  of our merchant  banking
portfolio,  which has returned an  un-leveraged  36% IRR since its  inception in
1997, the performance  and rating of our five FBR equity mutual funds,  three of
which are five star ranked by  Morningstar;  and the strong  performance  of our
private investment partnerships.

We believe that  through this  unwavering  investment  discipline  in all of our
business  lines and by  maintaining a  disciplined  expense  structure,  we will
continue  to  expand  our  franchise  and  create   additional  wealth  for  our
shareholders.

Our  capital  markets  franchise  continues  to  reflect  the  results  of  this
discipline.  We have finished the year as the #3 lead manager of U.S.  IPOs, the
#10 lead manager for U.S. public equity  offerings,  and the #1 performing major
underwriter as measured by the after-market performance of our lead underwritten
equity transactions during 2003, continuing our five year track record mentioned
earlier.

Our  transaction  volume has grown from $2.5  billion  in lead  managed  capital
raises in 2002 to $6.5 billion in 2003. Our fourth quarter lead managed  capital
raises were $3.1 billion  versus $269  million in the fourth  quarter last year,
and $2.1 billion in the third quarter of this year.

During the fourth  quarter,  we completed 6 IPOs, 7 follow-on  offerings,  and 3
private  equity  placements,  representing  over $3.0  billion in total  dollars
raised.  Our fourth quarter  investment  banking revenues were a $127.8 million,
versus $24.3 million in the same quarter last year.

In  previous  quarters we have talked  about our lead  managed  equity and M & A
pipeline,  which was approximately $3.5 billion in the first quarter and grew to
$5.0 billion last quarter. Today this pipeline continues to be in excess of $5.0
billion despite our record fourth quarter underwriting levels.

Our  capital  markets  and  institutional  brokerage  businesses  have  achieved
compounded annual growth rates since 1999 of 54% and 19% respectively.  This has
been achieved  despite a general lack of  recognition  within our markets of the
capability and strengths of our franchise. We are optimistic that as we begin to
achieve greater franchise  recognition  throughout  corporate America,  which we
believe to date has little awareness of FBR, both our investment banking and our
institutional  brokerage businesses will continue to achieve increases in market
share for the foreseeable future.

Turning to our  balance  sheet  businesses,  I would like to first  address  our
mortgage-backed  security strategy.  At December 31, 2003, the fair value of our
mortgage-backed  security portfolio totaled $10.6 billion, and our corresponding
repurchase  agreement and commercial  paper  liabilities,  including  Georgetown
funding, were $9.5 billion.

2003 was a year that included some volatile periods for these securities, and we
believe our  performance  shows that we have the  discipline  to  maintain  that
strategy in all  environments and can achieve  outstanding  returns in different
markets.  Preservation of capital is our guiding  principle,  and like our other
businesses,  we focus on an  appropriate  capital  structure,  which  means  low
leverage and an intrinsic value approach to the risks we take.

For the  mortgage-backed  security  portfolio,  this approach means specifically
that we focus heavily on maintaining significant liquidity to be able to finance
our  portfolio  through  virtually  all market  environments.  This focus  takes
several  forms--we  maintain low leverage for this asset class,  we maintain low
duration to limit  interest rate risk and related price  volatility,  we finance
this  portfolio  efficiently  through  multiple  counterparties  and  Georgetown
Funding,   our  dedicated  A1-P1  commercial  paper  program,  and  we  maintain
significant  liquidity  in the  form  of our  other  investments  and  borrowing
capacity away from the portfolio.

In addition to our focus on liquidity and capital preservation,  we also protect
our expected  current income through the use of interest rate swaps.  Currently,
we have $5.1 billion,  or  approximately  53% of our floating rate  liabilities,
swapped  to fixed  rates  for an  average  term of almost  one  year,  providing
significant protection against short-term interest rate increases.

For the fourth quarter, our mortgage-backed securities portfolio asset yield was
3.23% and the company's weighted average financing rate was 1.21%,  resulting in
a net  interest  spread  of 2.02%,  versus  1.69% for the year and 1.25% for the
third  quarter.  These net  interest  spreads  would  have been  2.14% and 1.91%
respectively,  adjusting  for the excess  amortization  from the merger.  On the
third  quarter call we mentioned  our forecast that spreads would return to more
normalized  levels in the  fourth  quarter.  In fact,  the  spread in the fourth
quarter was 77 basis points higher in the fourth quarter than the third quarter,
as asset yields improved due to falling CPRs. The company experienced an average
one-year CPR, or constant  prepayment rate, of 27 during the quarter,  down from
41 during the third quarter. The return to a more normalized spread demonstrates
the  resiliency of the company's  mortgage-backed  security  business  given the
extreme conditions of the third quarter.

For our merchant banking investments,  we use a highly disciplined  approach, in
which we  thoroughly  analyze  all  aspects of a  company's  business  to ensure
investments  in  companies  that  achieve  high cash  returns  on  risk-adjusted
capital.  Further,  as part of our larger balance sheet  discipline,  we measure
every merchant banking investment continuously against the returns we achieve in
the  mortgage-backed  securities  portfolio on a risk-adjusted  basis.  Thus, we
expect the  long-term  performance  of this  portfolio to exceed  returns in the
mortgage-backed  security  strategy.  This has held true in the  past,  with the
merchant  banking  portfolio  achieving  a 36%  unlevered  IRR since  inception,
although these results will vary from quarter to quarter.

FBR's merchant banking portfolio and other long term investments  totaled $379.0
million  at the end of the  quarter.  This is 24% of the  company's  equity  and
approximately  equal as a percentage of equity to our third quarter level before
the capital raise in October.  We believe there are  opportunities far exceeding
our funding  capability to invest in  transactions  in keeping with our strategy
and are  therefore  optimistic  about our  ability to continue  our  outstanding
record in this area.

Finally,  we have alluded to our efforts to increase our corporate notoriety and
brand awareness.  Last year we sponsored the FBR Capital Open as an initial step
in this direction.  On a longer term basis,  last week we sponsored the FBR Open
for the first year of a  five-year  commitment  to this  popular and storied PGA
tour  tournament in  Scottsdale,  Arizona.  This is the largest  spectator  golf
tournament  in the world,  which was formerly  known as the Phoenix  Open.  This
tournament  was a great success for FBR and the Phoenix area  charities.  Over a
half a million  people  attended  the event and over $3 million will be given to
charity.  We also used this event as an  opportunity  to develop an even  closer
relationship  with our clients,  whom we value as the backbone of our  business.
Our  sponsorship of the FBR Open will continue  through 2008, and it will be the
centerpiece  of  our  brand  building  and  corporate   entertainment   for  the
foreseeable future.

Concurrent  with the FBR Open,  we  launched  a national  advertising  campaign,
including  TV,  print and online.  Our  objective,  as with the FBR Open,  is to
increase our name  recognition,  building on the momentum of the  tournament and
our  strong  2003  financial  performance.  Our  research  shows  that our brand
awareness is so low that even a modest gain should translate into an appreciable
number of new engagement opportunities.

We  believe  that we have now built a  platform  which has  multiple  businesses
positioned for growth, a disciplined investment strategy, a lean cost structure,
prospects for growing brand  awareness and a strong and flexible  balance sheet.
Hence,  we are very optimistic that the outlook for 2004 and beyond includes the
opportunity for both increased profitability and dividends.

Specifically,  as we update our model to reflect  current  revenue run rates, we
can share with you how we view our  prospects for 2004. As we have stated in the
past,  when talking about our model,  keep in mind that this is not a projection
and that  results  will vary from this  model,  especially  quarter to  quarter,
particularly in investment banking.

It is  reasonable,  though,  to now look at  revenue  rates  for our  investment
banking  businesses  achieved during the second half of 2003,  combined with the
current ramp level in secondary institutional sales, as the basis for our model.
This would imply  investment  banking  revenues of $400 million,  with sales and
trading  revenues  of  $125  million,  for  total  capital  market  revenues  of
approximately  $525  million.  In  response  to this new level of  business  and
anticipated  future growth,  our top initiative  this year is fully building out
all areas of our  current  sales,  trading,  research,  and  investment  banking
businesses.  We  anticipate  that the  largest  areas of  growth  will be in the
healthcare,  consumer and  technology  sectors,  where we have made  significant
market  share  gains a top focus this  year.  We expect  great  success in these
areas,  similar to other industry  groups where we have hired top  professionals
and focused our  energies in the past.  We expect that with this added  breadth,
our  break-even  level for the  capital  markets  businesses  will  increase  to
approximately  $200 million,  with 27% after-tax margins on revenues above these
levels.   Hence,   we  believe  this  business   could   reasonably   contribute
approximately $85 million of after-tax earnings in 2004.

It should be noted that we measure every increase in cost against future revenue
and cash flow for increasing margins.  This model would result in an increase in
after-tax margins while still allowing for increases in revenues and margins off
of this break-even base.

As we have stated before on previous  earnings calls, you can model your own MBS
spreads, but we use 220 basis points, our estimate of the 20 year average,  with
9.5 times  leverage in a $10.5  billion  portfolio  which,  after 10%  estimated
costs, would yield earnings of approximately  $220 million.  Our other principal
activities,  we  estimate,  could  yield  approximately  $68  million  after 10%
operating  expenses on  approximately  $380  million of invested  capital,  well
within our historical return results from these assets.

In  addition,  we estimate our run rate in asset  management  fee revenues to be
close to $40  million,  which  would  generate  about $7  million  of  after-tax
earnings.  This model would  generate  approximately  $380  million of after-tax
earnings in 2004,  with  approximately  $280 million being generated in the REIT
holding company and available for dividends.

Again, this is a model.  Break-even points and marginal  contributions will vary
with revenue mix and timing of expenses.  Our actual  results are subject to the
risks and uncertainties inherent in our business.

I would now like to open the call for any questions.

Facilitator:
At this  time,  I would  like to remind  everyone,  in order to ask a  question,
please press star-one on your telephone keypad. We'll pause for just a moment to
compile a Q&A roster. [Pause]

Your first question comes form Mike Flanagan, Securities Industry Analyst.

Mike Flanagan, Securities Industry Analyst:
Good morning. Two questions on, I guess they're looking forward more. Given your
optimism for the 2004  operating  results,  how might this impact your dividend,
which is currently $1.36 annually?  And secondly,  given your success in the IPO
markets in 2003, are you sensing increased competitive pressure, especially from
larger firms, and how might this translate into opportunities for you in 2004?

Eric Billings:
Great, Mike. Good questions.  Let me clarify--I think on the prepared release, I
indicated   that  the  model  would   result  in  $300   million  of   after-tax
profitability.  That number is $380 million,  so I want to clarify to everybody,
that number is actually $380 million, not $300 million.

So specifically,  Mike, the results of our 2004 model would result in a dividend
of  approximately  $1.75.  And  as  we've  indicated  in  the  past,  it is  our
anticipation  that we will pay two special dividends on a semi-annual basis this
year for the dividend amounts that would exceed $1.36. And certainly our current
planned  model as we look at 2004  would  strongly  suggest to us that these are
achievable.

Emanuel Friedman:
In terms of the IPO market in a competitive environment, a couple factors - One,
the trends  that we set forth in 2003 are  continuing  in 2004.  That is,  we've
already  completed two IPOs since the beginning of the year. They both had very,
very strong  performance,  so we rank at the top of both IPO performance and the
number of IPOs  completed.  We have two more IPOs filed right now and  companies
are coming to us on other  transactions  and other  groups given the strength of
our results in 2003, including diversified  industries,  energy,  technology and
across all our verticals.  Even though the competitive environment certainly has
increased, we're confident about maintaining our pace in 2004.

Mike Flanagan:
Thank you very much.

Facilitator:
Your next question comes from Mark Atlas of Centurion [ph].

Mark Alpert, Centurion:
Good morning.  I actually have three  questions.  Number one, how much of the $5
billion  in  backlog  have you done  year to date in equity  deals and M&A?  And
number  two is,  could you talk about  where the  unrealized  gains in  merchant
banking  came from a little  bit and when they might be  realized?  And then the
third is a little more complicated,  and that is just a kind of clarification of
the rules,  you know,  regarding a TRS and what  percentage  of earnings you can
have coming from outside of the REIT?

Emanuel Friedman:
Concerning our backlog,  the backlog that we stated is an unrealized backlog. It
doesn't include anything that we've already done.

Mark Alpert:
It says in the press release that going into the, leading into 2004...

Emanuel Friedman:
I would  say  that as fast as we are  doing  transactions,  we are  getting  new
transactions  being signed up, so the backlog  continues to run at, in excess of
the $5 billion dollar run rate.

Mark Alpert:
And so then what have you done already in January

Emanuel Friedman:
In...

Mark Alpert:
In IPOs, if nothing else--lead managed.

Emanuel Friedman:
We've completed two lead-managed IPOs in January so far, but that backlog refers
to secondaries also.

Mark Alpert:
Oh, okay.  And the merchant  banking gains,  where did they come from,  when are
they realized?

Eric Billings:
The way we run the merchant banking portfolio, very specifically,  is we measure
all  investments  against our  mortgage-backed  securities  strategy,  which has
historically  and we believe will  continue on average to produce  approximately
22% - 23% returns on invested equity.

By  definition,  all  investments  we make have more risk than the MBS portfolio
returns of 22%-23%. We don't leverage any other part of the balance sheet in the
company, so we monitor these other investments on a quarterly basis. We evaluate
whether we can achieve a higher  risk-adjusted return in the next four quarters,
depending  on the  particular  investment  returns  which are in the 30% rate or
higher.  If we don't  believe that a  particular  investment  can achieve  these
return  levels,  then we will sell that  investment and redeploy that capital in
the mortgage-backed security portfolio.

And so, specifically,  we do have substantial unrealized gains. Clearly, when we
recognize these gains is not precise.  It is likely that we will recognize gains
this year and we certainly  believe that we'll take gains that would be equal to
our targeted gains which is approximately  $70 million for the year. Having said
that, you know, these things are not completely predictable.

Mark Alpert:
No, I guess what I'm more  interested  in is, you know,  is the  increase of $45
million, I guess, in the quarter. You know, is that one or two investments where
that could swing the other way? Is it pretty broad-based?

Eric Billings:
It's very  broad-based,  Mark. We have gains in every investment that we have in
the fourth quarter and the gains have been growing fairly  consistently  through
the year.

Richard J. Hendrix, Chief Investment Officer, FBR:
Mark, this is Rick Hendrix.  We'd like this to be as transparent as possible for
our  investors,  but as we said in previous  calls,  we don't discuss what we've
sold during any quarter. But since we took no gains, I think it's safe to assume
we didn't sell anything in the fourth  quarter,  and you can look at the list of
investments in the third quarter,  and where they were marked, and actually come
up with the gain.

Mark Alpert:
Okay, thank you. And then in terms of the rules  regarding--you  know, could you
just run quickly over what you do pay on the dividend above, you know, above the
REIT,  and aren't  there rules that kind of dictate  what you have to pay out in
the dividend?

Richard Hendrix:
The rules relate  specifically  to the  earnings  generated in the REIT. I think
your  initial  question is the limit of the income that can be  generated in the
TRS? There is no practical limit. The limits with regard to the TRS, the Taxable
REIT Subsidiary,  have to do with the value of that subsidiary against the total
value of your assets for the whole company.

So as long as we retain the income in the Taxable REIT Subsidiary, there's no
real limit on how much earnings we can generate there. Now, we do pay tax on
those earnings.

Mark Alpert:
Okay.

Richard Hendrix:
Okay?  So we'll pay the  dividend,  and our policy is to pay virtually a 100% of
the earnings generated to the REIT in the form of a dividend.

Eric Billings:
And as our 2004 model suggests, approximately $280 million of our earnings could
be applied to the dividend and approximately a $100 million would be retained in
the Taxable REIT Subsidiary the broker dealer, and we would utilize that capital
to grow the business.  The capital would then most probably be upstreamed to the
REIT and thereby earn what we believe on a long-term  basis is  approximately  a
22% incremental return.

Mark Alpert:
Right.

Emanuel Friedman:
Keep in mind, we're a full taxpayer, as a TRS.

Mark Alpert:
Right.

Emanuel Friedman:
We paid over $45 million of taxes in 2003.

Mark Alpert:
Okay,  but the dividend  payment rate is $1.36,  and then you expect to have two
special dividends, correct?

Emanuel Friedman:
Correct.

Mark Alpert:
The $280 million that the REIT earns...

Richard Hendrix:
Right.

Mark Alpert:
Doesn't that basically all have to get paid out?

Richard Hendrix:
Yes,  it does.  Based on our policy and to the extent that our  earnings  exceed
$1.36,  we would intend to pay the excess in special  dividends,  and ideally we
would do that in two special dividends throughout the year.

Mark Alpert:
Okay.  And then  none of the,  and none of the $100  million  would--what  about
merchant banking, or gains? Would those ever go to pay a dividend,  or is it all
just what the REIT earns?

Richard Hendrix:
The merchant banking gains are primarily in the REIT.

Mark Alpert:
Oh, okay.

Richard Hendrix:
And  it  would  go to  pay  dividends,  but  the  earnings,  as a  Taxable  REIT
Subsidiary, primarily the broker dealer and the asset management unit, are fully
retained.

Mark Alpert:
Okay. Are potential merchant banking gains included in your outlook or is that
strictly the MBS? That's strictly the MBS, wasn't it?

Richard Hendrix:
No, the $280 million includes gains from merchant banking business.

Mark Alpert:
Okay. All right. Thank you very much.

Eric Billings:
Thank you.

Facilitator:
Your next question comes from Howard Feingold of Raymond James.

Howard Feingold, Raymond James:
Thank you. Congratulations on your quarter, guys.

Eric Billings:
Thank you, Howard.

Howard Feingold:
I have three questions.  Did the $1.36 that you paid in dividends for '03 exceed
the taxable earnings on the REIT itself?

Eric Billings:
Go ahead, Kurt.

Kurt Harrington:
Yes.  There was a slight  distribution  in excess of the  earnings.  It resulted
primarily in the first quarter,  when we paid out a dividend to all  post-merger
shareholders,  versus  three  quarters  worth of REIT  earnings for the combined
group.

Eric Billings:
Specifically,  the only overage  we've paid was as a result of the merger in the
first quarter which came from the REIT earnings.

Howard Feingold:
I understand  that. My real question is on the taxability to the shareholders on
the $1.36.  Is any portion of that going to be either  nontaxable  or  qualified
taxable dividend?

Kurt Harrington:
94.5% is  taxable  ordinary  income  to the  shareholders.  3.04%  is  qualified
dividends...

Howard Feingold:
Qualified? Okay.

Kurt Harrington:
The qualified  dividends also fall under the new 15% percent tax rule. 2.01% are
post-May 5th capital gains, which also qualify for the 15% percent new tax rule,
and 0.45% were pre-May 6th capital gains,  which fall under the old capital gain
rates.

Howard Feingold:
Okay. All right.  Thanks very much.  Secondly,  if you could offer some guidance
here in terms of  current  share  price and book  value,  an  additional  add-on
offering would certainly be accretive to your book and probably certainly to the
earnings  in the  MBS,  and you also  alluded  to the  fact  that you have  more
opportunities  in the capital  market  than you can fund at this point.  At what
point would you be looking to do an additional raise?

Eric Billings:
We have a very, very disciplined  approach.  Anything we do inside the business,
actually anything at all, but particularly as it relates to capital  activities,
must be accretive to earnings, book value, dividends, and the intrinsic value of
the business in order for us to raise additional capital. Or for instance to buy
back  stock,  both  of  which  in  times,  historically,  in the  two  different
companies,  when FBR Asset and FBR Group were separate businesses,  we have done
from time to time.

So we monitor  these things very  carefully,  and when we believe we can achieve
these results and that  capability,  then we will do that.  But clearly,  a very
large part of it is that we  believe  we can  deploy the  capital we retain in a
basis which is  accretive to earnings and the  dividend,  and  therefore we must
believe  that the  environment  is suitable  for us to  allocate  capital in our
mortgage-backed  securities  portfolio and most probably in our merchant banking
portfolio,  and/or possibly in strategic  alternatives  that may be appropriate.
And when those are available, then we would intend to execute against that.

Howard Feingold:
Okay. Last  question--several  months ago you made an announcement that you were
going to enter the sub-prime market.  Could you give us some kind of description
about that part of your business?

Richard Hendrix:
Sure, Howard. Specifically,  what we talked about was the addition of a group of
professionals to focus on the  asset-backed  securities,  ABS,  component of the
sub-prime market. We actually have been involved with three transactions to date
since  that  group  joined us, and  they're  in the  process of  expanding  that
business. They brought to us several relationships, and as you probably know, we
have many relationships from our investment banking business in that sector. The
ABS team is doing a great  job for us and we hope  that  they  continue  to grow
aggressively in '04.

Emanuel Friedman:
And that covers not just the sub-prime market, but really, financial services.

Howard Feingold:
Basically,  what you're doing in that market is securitizing loans and financing
it, or...?

Richard Hendrix:
We are  acting as an  underwriter  and  placement  agent  from a  securitization
perspective.

Howard Feingold:
Okay. Thank you very much, gentlemen.

Facilitator:
Your next question comes from Joe Stieven of Stifel, Nicolaus & Company.

Joe Stieven, Stifel, Nicolaus & Company:
Hi, guys.  First of all, great quarter and year.  Most of my questions have been
answered,  but I'll ask a couple. Number one, your asset management business was
much more profitable in the fourth quarter than I think you guys have previously
talked about,  and even when you talk about '04, it seems like you're being very
conservative  with  your  thoughts  for  that.  So  that's  one--why  was  it so
profitable in the quarter, talk about that.

Number  two is  that  when I look at the  MBS  portfolio  with  the  concept  of
potentially  rising rates,  any thoughts or any changes in your strategy on what
you're  trying to do? I obviously see you're trying to fix more and more of your
liabilities out there. Thanks, guys. I'll sit back and listen.

Emanuel Friedman:
In terms of the asset  management,  what was driving it was three factors.  One,
we've had steady  inflows.  Number  two,  the mutual  funds and the  alternative
assets,  incentive fees were substantial in the fourth quarter and began to kick
in for the entire year. So the two major factors were the growth of the business
and significant incentive fees. We see those trends continuing in 2004.

Eric Billings:
Joe, specifically,  just a quick comment on asset management. We do believe that
because the  historical  performance  is so strong  across the board,  the asset
management  business  has  been  so  strong  and  as  we,  on  a  more  focused,
conservative basis, go after capital to invest in our asset management business,
we will have significant  success.  And we are optimistic that we can build that
to be a substantial profit center for the company.

The question on the mortgage-backed security portfolio-- Absolutely,  Joe, great
question, of course, and it's something we think about all the time. And exactly
to your point, we have taken, funded on a liability side of both. 55% percent of
our liabilities  are now out  approximately  a year or longer.  In addition,  of
course, about 10% of our funding is through our equity capital.

So between our longer term  funding on the  liability  plus our equity  capital,
roughly 2/3 of our capital  would not be affected by rate  movements  during the
course of the year.  We look at that on what we think is a very  balanced  basis
from the perspective that even in a pretty sharply upward rate moving market, we
would expect between the repricing  activity of our adjustable  rate  securities
and the  refinancing  that would still occur even in a rising rate  environment,
that we  would  get  back or  reprice  at  least  35% of the  asset  side of our
portfolio.  Therefore,  by leaving 35% on a short-term  basis, we will allow the
asset side to substantially  move up with the cost of financing on the liability
side.

So that we think it's a good  balance,  it's gives us a good,  defensive  way to
maintain a spread and earn what we think are very acceptable, very high rates of
return on the equity portfolio,  and it's still, of course,  low leverage,  high
level  liquidity so that we can withstand  what we believe is virtually any mark
in that  portfolio  so as to be able to  maintain  the spread at all  times.  So
that's the way we run it, Joe, and always have.

Joe Stieven:
One final question. The merchant banking investments were a little bit larger in
the quarter than the last  conference  call.  Is that just  primarily due to the
mark to markets?

Richard Hendrix:
It's a combination,  Joe, of the unrealized gains of the appreciation  portfolio
and new investments that were made in the fourth quarter.

Eric Billings:
And as we  indicated,  Joe,  the  opportunity  for us to invest in the  merchant
banking area right now is  extraordinarily  good from our  perspective,  so it's
something that we balance pretty carefully,  and certainly one of the reasons we
will recognize gains in the portfolio because the reinvestment opportunity is so
substantial.

Joe Stieven:
Great quarter, guys. Thanks.

Eric Billings:
Thank you, Joe.

Facilitator:
Your next question comes from Randy Saluc of Meisen Bach Capital.

Randy Saluc, Meisen Bach Capital:
Hey,  guys.  How are you?  Just  wanted  to ask  about  the  investment  banking
pipeline.

Emanuel Friedman:
As we said earlier,  the  investment  banking  pipeline is very strong,  over $5
billion in the pipeline,  and the diversity is growing also--it's obviously very
strong in financials and real estate.  We've become the most important factor in
hotels now, and our fixed  income  investment  banking  pipeline is very strong,
mainly in banks and REITs.  We've become an important factor in REITs preferred.
It's also in energy,  where we've done a series of very large transactions,  and
we're also becoming a bigger factor in technology  and  diversified  industries.
Our brand is starting to really  transfer.  We just filed a large  secondary  to
diversified industries.

Eric Billings:
Maybe a little more specific-- The number of transactions  that we do every year
continues  to grow.  Because of the size and  magnitude  of the company now, the
resources we have  vis-a-vis our market cap, our equity base, our earnings base,
our  ability to  facilitate  our  corporate  clients on a very broad  basis,  is
allowing us to maintain our  corporate  relationships  virtually in  perpetuity.
Therefore,   our  ability  to  not  only  do  IPOs  but  then  to  do  follow-on
activities--secondaries,   high-yield   transactions,   preferred  transactions,
advisory transactions--grows with that growing base, which gives us, you know, a
great anticipation for future growth because of that dynamic.

In  addition,  when we  alluded  to the  fact  that we are  growing  our base of
resources, we will be adding approximately,  somewhere between 65 and 100 people
this year.  The focus in that  regard is in areas that we think have  tremendous
transferability and ability for us to grow technology, healthcare, and consumer,
where to date we have had  success but not nearly to the level that we've had in
other industry focuses.

We have seen a very strong correlation to our building out industry focuses with
professionals that can generate investment banking business.  The correlation is
extremely strong and we're very optimistic that as we do that more thoroughly in
the technology,  the healthcare,  and the consumer area, we will have comparable
results.

Randy Saluc:
Okay.  Well,  I  thought  it was a great  quarter.  I have  one  more  follow-up
question.  I mean,  you gave us some numbers in terms of what earnings  might be
for different  parts of the  business.  Do you have a sort of a EPS '04 guidance
range or number that you have in mind that you can share with us?

Emanuel Friedman:
We don't,  but we gave you what our model says what our earnings look like,  and
obviously right now there is 165 million shares outstanding.

Eric Billings:
If you do the math on that, on the model that we went through,  it would lead to
approximately  $2.30  earnings  per share and  approximately  a $1.75  dividend.
Again,  we stress  this is a model based on a view,  as we look at our  business
today,  on a  historic  run-rate  activity.  And it is only a model,  it isn't a
projection, and we want people to have the tools to make your own assumptions on
each component part of our business so they can then make their own judgments as
to what that earnings and/or the dividend would result in.

Randy Saluc:
Good. Thanks.

Eric Billings:
Thank you.

Facilitator:
Your next question comes form Norman Jaffe of Sunova Capital [ph].

Norman Jaffe, Sunova Capital:
Thank you, guys. Great quarter.

Richard Hendrix:
Thanks, Norm.

Norman Jaffe:
I have two  questions.  One,  can you share with us,  since the end of the year,
what your  unrealized  gain might be on the merchant  portfolio?  And two, did I
hear it right that you said that based upon your model,  '04 profits could be in
the $380 million range?

Emanuel Friedman:
That's correct.

Emanuel Friedman:
We did use that as our model,  $380  million  in  profits  in '04,  based on our
model.

Norman Jaffe:
Okay. And how about the unrealized gains since the year end?

Eric Billings:
We really don't disclose that, Norm, but you can look at the  investments.  As I
think we've indicated, since we had no gains in the portfolio...

Norman Jaffe:
Right.

Eric Billings:
....it's probably a reasonable assumption that the investments that we had in the
third  quarter are the same  investments  we have today,  which is not to say we
didn't make  additional  investments in the fourth  quarter,  because in fact we
did.

Norman Jaffe:
Right.

Eric Billings:
Then--you can look at that and reach a conclusion, I think, pretty clearly.

Norman Jaffe:
Okay. Can I just go back, then, to one thing? On each of the business lines, you
were  talking very quick and I wasn't  typing fast  enough.  Could I just bounce
these numbers off to make sure I was correct? The investment banking, based upon
your model, you're looking at like $85 million in '04.

Emanuel Friedman:
After tax.

Norman Jaffe:
Okay, fine. And the MBS portfolio was like a $220 million number after tax?

Eric Billings:
That's right.

Norman Jaffe:
And then your principal investments, like, at $68 million after tax?

Eric Billings:
Yes.

Norman Jaffe:
And then the asset management was something like $300 million after tax.

Eric Billings:
$7 million.

Norman Jaffe:
$7 million.

Emanuel Friedman:
And keep in mind, on the merchant  baking piece and the  mortgage-backed  piece,
that's a pre-tax number and after-tax number because it is in the REIT.

Norman Jaffe:
The REIT, okay. And you said the asset was $7 million.

Emanuel Friedman:
Yes.

Norman Jaffe:
Okay.

Emanuel Friedman:
After tax.

Norman Jaffe:
I got that. I got it. Thank you, guys, Great quarter.

Eric Billings:
Thank you.

Facilitator:
Your next question comes from Richard Herr at KBW [ph].

Richard Herr, KBW Asset Management:
Hi. Good morning,  guys.  Very nice quarter.  Just a few questions to start off.
Just curious--the  investment  banking revenues have grown a lot faster than the
sales and  trading.  I was  wondering  if you could kind of walk us through your
strategy on further build-out in the sales and trading?

Eric Billings:
Right,  absolutely.  In fact, a significant  part of the growth in our cost base
and our building out of our infrastructure, as we've described, will come fairly
proportionately    between    sales   and    trading    a   little    bit   more
significantly--sales,  research,  and investment banking. But specifically,  our
sales  and  trading  today,  actually,  if you look at this  year so far,  it is
actually  running  at a run  rate  which  is--in  fact,  north  of $150  million
currently.

And so the activity levels are growing  significantly,  but having said that, we
think  there  is a  direct  correlation  to our  ability  to  continue  to go to
institutional accounts,  particularly the top 125 accounts, which we have a very
focused, disciplined effort. Our director of research, the person that leads our
whole  institutional  equity effort, is going to the 125 largest  accounts,  and
we're trying to make all of our  like-sized  clients  aware of the depth and the
breadth and the extraordinarily good performance  capability of our company, and
in bringing that awareness to them,  cause them to recognize that a stronger and
deeper   relationship,   as  measured  by  commission   dollar,   is  completely
appropriate.

We have had great success,  which I think you know,  from 2000, when this effort
began.  And even though  commission  spreads have contracted  very sharply,  our
revenues  have grown  significantly  in this area,  and we  continue  to be very
optimistic that that will continue. In fact, proportionately, if you look at our
secondary  commission  level,  the  level  relative  to our  investment  banking
business,  one might  conclude that our  secondary  trading  business  should be
multiples higher than it is today.

Now, there are offsets in certain  activities as it relates to secondary trading
that we don't do,  which will limit that to some degree,  but we are  optimistic
that  proportionality will grow and continue to grow and will grow the sales and
trading line on a very profitable basis as we continue to go forward.

Emanuel Friedman:
As Eric  suggested,  our model for '04 suggests that both sales and trading will
grow at almost a similar rate as investment  banking,  both growing a little bit
in excess of 50%.

Richard Herr:
Okay, thank you.

Emanuel Friedman:
We are seeing those trends in the early part of this year.

Richard Herr:
Thank  you.  And given  what  your  model is and kind of our own  estimates,  it
appears that the brokers will be generating a significant amount of cash flow in
2004. I know in 2003, in certain quarters, some of that cash flow was lent up to
the REIT in order to, in order to pay the dividend.  Any kind of sense of if you
could do that this year as well?

Eric Billings:
Yes,  absolutely.  That is our express methodology.  Specifically,  the retained
equity capital in the Taxable REIT Subsidiary,  once we retain that capital,  we
do lend it up to the REIT so that that capital then can achieve the returns. And
again,  as we've stated,  historically  we believe we can continue to be in that
low 20% level.

This will derive higher earnings and higher dividends to the total company.  The
only  other  alternative,  realistically  right now,  is of course the  merchant
banking  portfolio.  Some part of that will be invested in the merchant  banking
area because that opportunity is so significant for us as well.

Emanuel Friedman:
In 2003,  the money that went up in the REIT was really used just for investment
purpose.  It was not used to pay the  dividend,  so please keep that in mind for
2003.  Our model  suggests we will deliver $90 million in after-tax  earnings in
2004. The  broker-dealer  does not require much capital,  so we will have excess
capital.

Richard Herr:
So depending on the strength in brokerage  earnings,  would it be okay to assume
that the $1.79  could  maybe be a little  bit  higher,  depending  on  brokerage
profitability?

Eric Billings:
We  really  would  like  you  guys to run  those  models  and  come to your  own
conclusions.  We try to provide a model for you based on activity in the company
today and give you the tools to make those further judgments.

But I think what is important  is that you can see the dynamic of our  corporate
structure,  which allows us to have what we believe is  significant  and dynamic
growth in the  Taxable  REIT  Subsidiary,  pay full  taxes,  retain  that equity
capital,  lend that equity capital to the REIT, not to pay dividends,  but to be
therefore  deployed  in  the  spread-based  merchant  banking  side,  generating
incremental returns that then can be paid out in the form of dividends, allowing
us to  grow  not  only  the  earnings  vis-a-vis  growth  in  the  Taxable  REIT
Subsidiary,  but also to grow the earnings and the dividends at the REIT part of
the business.

Richard Herr:
All right. Thank you very much, guys. Great quarter.

Facilitator:
Again, if you would like to ask a question at this time, please press "star-one"
on your telephone  keypad.  [Pause] Your next question comes from Mark Patterson
of NWQ Investments [ph].

Mark Patterson, NWQ Investments:
Hey,  guys.  Excellent  job. A couple of questions for you.  What  percentage of
equity would you be willing to take the merchant  portfolio to - around 24%? And
then in the  mortgage-backed  securities  portfolio,  asset-wise,  what  are you
looking at right now? I'm sorry if I missed that.

Eric Billings:
You mean the yield on assets?

Mark Patterson:
Yeah. Just kind of what product are you looking at on the asset side right now?

Eric Billings:
Specifically,  Mark, the first question, as it relates to the percentage,  we've
indicated  historically  that we want to keep the merchant  banking in alternate
asset  investments,  which includes our private  partnerships in the vicinity of
30% of capital. It'll bounce around,  depending on investment  opportunities and
so forth.  Clearly,  the opportunities  that we've indicated are so significant,
and  where  we  think  we  can  achieve  very  high  returns--obviously,   on  a
risk-adjusted basis, higher than the spread-based  business. So we're tending up
toward  the upper end of that  range and would  expect for as long as we believe
these opportunities are available to us. So that's the merchant banking side.

Richard Hendrix:
On the assets, Mark, we actually lowered duration throughout the fourth quarter,
so the mix of the assets today  is--or I should say at the end of the  year--was
approximately 19% in kind of the 5/1, 4/1 category, and approximately 66% in the
2/1 and 3/1's.  As you know,  the 4/1's just roll down from original  purchases,
and approximately 15% are 1/1's.

Mark Patterson:
Okay, thanks a lot.

Eric Billings:
Thank you, Mark.

Facilitator:
At this time, there are no further questions.

Emanuel Friedman:
Again, thank you very much.

Eric Billings:
Thanks, everybody for joining us.

Facilitator:
Thank you. This concludes your conference. You may now disconnect.


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