Arlington Asset Investment (AAIC) 8-K FBR Group Reports Second Quarter Earnings

Contacts:

Media: 703.469.1004 or media@fbr.com

Investors: Paul Beattie at 703.312.9673 or pbeattie@fbr.com

FBR Group Reports Second Quarter Earnings

ARLINGTON, VA, July 23, 2008 - Friedman, Billings, Ramsey Group, Inc. (FBR Group) (NYSE: FBR) today reported a net after-tax loss of $25.1 million for the quarter ended June 30, 2008, or $0.17 per share (diluted), compared to net after-tax earnings of $10.2 million, or $0.06 per share (diluted), for the second quarter of 2007. FBR Group's net after-tax earnings for the first six months of 2008 were $20.1 million, or $0.13 per share (diluted), compared to a net after-tax loss of $177.5 million, or $1.03 per share (diluted) in first six months of 2007.

The second quarter 2008 results reflect:

§ a $0.9 million cash operating loss for FBR Group’s core mortgage investment business during the quarter,

§ a $5.8 million loss relating primarily to write-downs and losses in non-prime mortgage investments, and

§ a $13.0 million loss, representing FBR Group’s proportionate share of 51%-owned FBR Capital Markets Corporation’s (FBR Capital Markets) (NASDAQ: FBCM) second quarter loss.

Book value net of Accumulated Other Comprehensive Income (AOCI) ⁽¹⁾ as of June 30, 2008 was $2.89 per share compared to book value net of AOCI of $3.02 as of March 31, 2008. Excluding FBR Group’s 51% ownership interest in FBR Capital Markets, FBR Group had total tangible capital at the end of the second quarter of $414 million, including $318 million of trust preferred securities.

As of June 30, 2008, approximately $270 million of tangible capital, or $1.79 per share, was invested in cash and readily marketable agency securities. The company expects that the remaining $144 million of tangible capital, including a $28 million IRS tax refund expected in the third quarter of 2008, will be redeployed over time to agency mortgage-backed securities. During the second quarter, $18 million of liquidations and pay-downs of capital invested in non-agency AAA securities and other investments was recovered and will be redeployed to the agency portfolio. Remaining non-prime investments totaled approximately $11 million at the end of the quarter.

“Increased liquidity during the quarter afforded us the opportunity to patiently expand the agency portfolio and, correspondingly, net interest income while maintaining leverage of approximately five times,” said J. Rock Tonkel, Jr., President and Chief Operating Officer of FBR Group. “As a consequence, operating results on a cash basis for the company’s core mortgage investing business are now at breakeven.”

Looking forward, the company intends to focus on maximizing return on equity on a number of fronts:

§ continuing to examine strategic alternatives to maximize the potential economic benefit from operating and capital-loss tax carry-forwards totaling approximately $670 million,

§ redeploying capital realized from repayments and the revaluation of non-agency AAA mortgage and merchant banking portfolio assets, and

§ continuing to reduce all general and administrative expenses.

Mortgage Investment Portfolio

Excluding FBR Capital Markets, FBR Group's investments in mortgage-backed securities (MBS), primarily government agency securities, averaged $2.3 billion with a one-month CPR of 12.9, and an ending net premium of $5.8 million. The net yield on MBS for the second quarter was 3.96% with a corresponding cost of funds of 2.82% for a net spread of 1.14%. At the end of the quarter, total MBS was $2.5 billion with a yield of 3.68% and a cost of funds of 2.55% for a net spread of 1.13%.

Merchant Banking

Excluding FBR Capital Markets, the total value of the merchant banking investments held by FBR Group at the close of the second quarter was $38.9 million. During the quarter, $4.7 million in merchant banking investments were sold at a gain. No additional investments were made in the portfolio during the quarter.

FBR Capital Markets Corporation

FBR Capital Markets Corporation reported a net after-tax loss of $25.2 million, or $0.39 per share (diluted), for the quarter ended June 30, 2008 compared to net after-tax earnings of $21.8 million, or $0.34 per share (diluted) in the second quarter of 2007. For the six months ending June 30, 2008, FBR Capital Markets lost $35.4 million after tax, or $0.55 per share (diluted), compared to after-tax earnings of $32.8 million, or $0.51 per share (diluted), for the first half of 2007.

Net revenues for the second quarter were $50.5 million compared to net revenues of $104.0 million in the first quarter of 2008 and $169.5 million in the second quarter of 2007. Net revenues for the first six months of 2008 were $154.5 million compared to net revenues of $312.6 million for the first six months of 2007.

During the quarter, FBR Capital Markets broadened its corporate finance capabilities through the establishment of a new convertible securities origination and trading operation and strengthened its investment banking and sales/trading teams through a series of senior-level hires. At the same time, in light of what it believes will be a prolonged difficult economic environment for the securities industry, the firm also is taking steps to further reduce expenses across its entire organization.

2

Complete financial results and tables for FBR Capital Markets can be found at www.fbrcapitalmarkets.com.

Looking Ahead

“It is our intent - as market conditions permit - to continue to execute our core strategy of deploying capital in a conservative, substantially hedged portfolio of agency mortgage-backed securities” said Eric F. Billings, Chairman and Chief Executive Officer of FBR Group. “This strategy, we believe, will produce attractive returns for this asset class as markets stabilize and begin to recover. As for FBR Capital Markets, the firm has historically performed well in challenging environments. The franchise is strong, and has substantial balance sheet strength with $482 million of capital - all equity - and more than $300 million in cash and cash equivalents. In line with its strategic plan, FBR Capital Markets is taking steps that, along with the flexibility and adaptability of the firm, should lead to reduced revenue volatility and greater profitability as it takes advantage of the adverse economic environment and the inevitable recovery.”

Investors wishing to listen to the earnings conference call at 9:00 A.M. U.S. EDT, Thursday, July 24, 2008, 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 after the call.

Friedman, Billings, Ramsey Group, Inc. (FBR) invests in mortgage-related assets, merchant banking opportunities and is the majority owner of FBR Capital Market Corporation, a separate publicly traded company. FBR is headquartered in the Washington, D.C. metropolitan area. For more information, please visit www.fbr.com.

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.

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 follow.

# # #

3

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

				Quarter Ended
				June 30,
	2008			%			2007			%
REVENUES:
Investment banking:
Capital raising	$	3,962			8.0	%	$	110,032			62.5	%
Advisory		4,192			8.5	%		6,152			3.5	%
Institutional brokerage:
Principal transactions		4,888			9.9	%		4,152			2.4	%
Agency commissions		29,918			60.5	%		28,564			16.2	%
Asset management:
Base management fees		4,153			8.4	%		6,360			3.6	%
Incentive allocations and fees		-			0.0	%		116			0.1	%
Principal investment:
Interest		26,827			54.2	%		152,368			86.6	%
Net investment loss		(4,797	)		-9.7	%		(3,377	)		-1.9	%
Dividends		258			0.5	%		883			0.5	%
Mortgage banking:
Interest		-			0.0	%		13,462			7.7	%
Net investment loss		(5	)		0.0	%		(4,031	)		-2.3	%
Other		1,932			3.9	%		4,482			2.5	%
Total revenues		71,328			144.2	%		319,163			181.4	%
Interest expense		21,858			44.2	%		143,231			81.4	%
Revenues, net of interest expense		49,470			100.0	%		175,932			100.0	%
NON-INTEREST EXPENSES:
Compensation and benefits		53,970			109.1	%		106,885			60.8	%
Professional services		10,492			21.2	%		14,008			8.0	%
Business development		6,812			13.8	%		11,158			6.3	%
Clearing and brokerage fees		3,393			6.9	%		3,063			1.7	%
Occupancy and equipment		8,580			17.3	%		12,699			7.2	%
Communications		6,255			12.6	%		7,592			4.3	%
Other operating expenses		7,055			14.3	%		18,684			10.6	%
Goodwill impairment		-			0.0	%		28,900			16.4	%
Restructuring charges		-			0.0	%		3,862			2.2	%
Total non-interest expenses		96,557			195.2	%		206,851			117.5	%
Operating loss		(47,087	)		-95.2	%		(30,919	)		-17.5	%
OTHER INCOME:
(Loss) gain on issuance and sale of subsidiary shares and other income (loss)		(192	)		-0.4	%		105,677			60.1	%
(Loss) gain before income taxes and minority interest		(47,279	)		-95.6	%		74,758			42.6	%
Income tax (benefit) provision		(9,974	)		-20.2	%		55,011			31.3	%
Minority interest in (losses) earnings of consolidated subsidiary		(12,254	)		-24.8	%		9,538			5.4	%
Net (loss) income	$	(25,051	)		-50.6	%	$	10,209			5.9	%
Basic (loss) earnings per share	$	(0.17	)				$	0.06
Diluted (loss) earnings per share	$	(0.17	)				$	0.06
Weighted average shares - basic		150,948						173,256
Weighted average shares - diluted		150,948						173,256

4

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

				Six Months Ended
				June 30,
	2008			%			2007			%
REVENUES:
Investment banking:
Capital raising	$	68,872			48.6	%	$	207,279			111.2	%
Advisory		9,268			6.5	%		12,610			6.8	%
Institutional brokerage:
Principal transactions		10,845			7.7	%		6,188			3.3	%
Agency commissions		55,768			39.3	%		52,382			28.1	%
Asset management:
Base management fees		8,797			6.2	%		11,888			6.4	%
Incentive allocations and fees		-			0.0	%		220			0.1	%
Principal investment:
Interest		52,741			37.2	%		331,251			177.7	%
Net investment loss		(24,484	)		-17.3	%		(62,142	)		-33.3	%
Dividends		687			0.5	%		1,842			1.0	%
Mortgage banking:
Interest		36			0.0	%		39,992			21.5	%
Net investment income (loss)		463			0.3	%		(110,890	)		-59.5	%
Other		4,267			3.1	%		8,576			4.5	%
Total revenues		187,260			132.1	%		499,196			267.8	%
Interest expense		45,508			32.1	%		312,782			167.8	%
Revenues, net of interest expense		141,752			100.0	%		186,414			100.0	%
NON-INTEREST EXPENSES:
Compensation and benefits		130,924			92.4	%		210,867			113.1	%
Professional services		22,959			16.2	%		27,862			14.9	%
Business development		19,106			13.5	%		24,927			13.4	%
Clearing and brokerage fees		7,023			5.0	%		5,764			3.1	%
Occupancy and equipment		17,769			12.5	%		25,816			13.8	%
Communications		12,273			8.7	%		14,643			7.9	%
Other operating expenses		12,439			8.8	%		50,400			27.0	%
Goodwill impairment		-			0.0	%		54,752			29.4	%
Restructuring charges		-			0.0	%		19,347			10.4	%
Total non-interest expenses		222,493			157.1	%		434,378			233.0	%
Operating loss		(80,741	)		-57.1	%		(247,964	)		-133.0	%
OTHER INCOME:
(Loss) gain on issuance and sale of subsidiary shares		(189	)		-0.1	%		106,508			57.1	%
Gain on disposition of subsidiary and other income		73,034			51.5	%		-			0.0	%
Loss before income taxes and minority interest		(7,896	)		-5.7	%		(141,456	)		-75.9	%
Income tax (benefit) provision		(10,780	)		-7.6	%		23,461			12.6	%
Minority interest in (losses) earnings of consolidated subsidiary		(17,167	)		-12.1	%		12,617			6.8	%
Net income (loss)	$	20,051			14.0	%	$	(177,534	)		-95.3	%
Basic earnings (loss) per share	$	0.13					$	(1.03	)
Diluted earnings (loss) per share	$	0.13					$	(1.03	)
Weighted average shares - basic		150,869						173,054
Weighted average shares - diluted		151,345						173,054

5

  FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. Financial & Statistical Supplement - Operating Results (Dollars in thousands, except per share amounts) (Unaudited)

	Six Months Ended
	June 30, 2008			Q-2 08			Q-1 08
Revenues
Investment banking:
Capital raising	$	68,872		$	3,962		$	64,910
Advisory		9,268			4,192			5,076
Institutional brokerage:
Principal transactions		10,845			4,888			5,957
Agency commissions		55,768			29,918			25,850
Asset management:
Base management fees		8,797			4,153			4,644
Principal investment:
Interest		52,741			26,827			25,914
Net investment loss		(24,484	)		(4,797	)		(19,687	)
Dividends		687			258			429
Mortgage banking:
Interest		36			-			36
Net investment income (loss)		463			(5	)		468
Other		4,267			1,932			2,335
Total revenues		187,260			71,328			115,932
Interest expense		45,508			21,858			23,650
Revenues, net of interest expense		141,752			49,470			92,282
Non-interest expenses
Compensation and benefits		130,924			53,970			76,954
Professional services		22,959			10,492			12,467
Business development		19,106			6,812			12,294
Clearing and brokerage fees		7,023			3,393			3,630
Occupancy and equipment		17,769			8,580			9,189
Communications		12,273			6,255			6,018
Other operating expenses		12,439			7,055			5,384
Total non-interest expenses		222,493			96,557			125,936
Operating loss		(80,741	)		(47,087	)		(33,654	)
Other income
Gain on disposition of subsidiary and other income (loss)		72,845			(192	)		73,037
Net (loss) income before income taxes and minority interest		(7,896	)		(47,279	)		39,383
Income tax benefit		(10,780	)		(9,974	)		(806	)
Minority interest in losses of consolidated subsidiary		(17,167	)		(12,254	)		(4,913	)
Net income (loss)	$	20,051		$	(25,051	)	$	45,102
ROE (annualized)		10.9	%		-27.2	%		48.9	%
ROE (annualized-excluding AOCI) (1)		9.5	%		-23.8	%		41.8	%
Total shareholders' equity	$	343,686		$	343,686		$	344,408
Total shareholders' equity, net of AOCI (1)	$	436,093		$	436,093		$	455,761
Basic earnings (loss) per share	$	0.13		$	(0.17	)	$	0.30
Diluted earnings (loss) per share	$	0.13		$	(0.17	)	$	0.30
Ending shares outstanding (in thousands)		150,989			150,989			150,915
Book value per share	$	2.28		$	2.28		$	2.28
Book value per share, net of AOCI (1)	$	2.89		$	2.89		$	3.02
Gross assets under management (in millions)
Managed accounts	$	275.7		$	275.7		$	333.9
Hedge & offshore funds		35.5			35.5			45.1
Mutual funds		1,553.4			1,553.4			1,702.9
Private equity and venture capital funds		21.1			21.1			21.4
Total	$	1,885.7		$	1,885.7		$	2,103.3
Net assets under management (in millions)
Managed accounts	$	275.7		$	275.7		$	333.9
Hedge & offshore funds		33.4			33.4			40.4
Mutual funds		1,533.8			1,533.8			1,698.0
Private equity and venture capital funds		20.2			20.2			20.2
Total	$	1,863.1		$	1,863.1		$	2,092.5
Employee count		719			719			726

(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.

6

FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. Financial & Statistical Supplement - Operating Results (Dollars in thousands, except per share data) (Unaudited)

	Year Ended
	December 31, 2007			Q-4 07			Q-3 07			Q-2 07			Q-1 07
Revenues
Investment banking:
Capital raising	$	282,619		$	25,648		$	49,692		$	110,032		$	97,247
Advisory		34,063			4,973			16,480			6,152			6,458
Institutional brokerage:
Principal transactions		10,152			2,996			968			4,152			2,036
Agency commissions		104,792			26,153			26,257			28,564			23,818
Asset management:
Base management fees		23,549			5,542			6,119			6,360			5,528
Incentive allocations and fees		401			99			82			116			104
Principal investment:
Interest		497,256			50,998			115,007			152,368			178,883
Net investment loss		(216,429	)		(22,327	)		(131,960	)		(3,377	)		(58,765	)
Dividends		3,173			805			526			883			959
Mortgage banking:
Interest		51,245			4,059			7,194			13,462			26,530
Net investment loss		(222,032	)		(83,174	)		(27,968	)		(4,031	)		(106,859	)
Other		15,808			3,242			3,990			4,482			4,094
Total revenues		584,597			19,014			66,387			319,163			180,033
Interest expense		477,437			52,583			112,072			143,231			169,551
Revenues, net of interest expense		107,160			(33,569	)		(45,685	)		175,932			10,482
Non-interest expenses
Compensation and benefits		361,355			69,533			80,955			106,885			103,982
Professional services		55,741			15,598			12,281			14,008			13,854
Business development		43,518			10,878			7,713			11,158			13,769
Clearing and brokerage fees		12,514			2,797			3,953			3,063			2,701
Occupancy and equipment		52,302			13,791			12,695			12,699			13,117
Communications		28,690			6,899			7,148			7,592			7,051
Other operating expenses		82,246			15,706			16,140			18,684			31,716
Impairment of goodwill		162,765			108,013			-			28,900			25,852
Restructuring charges		46,985			21,466			6,172			3,862			15,485
Total non-interest expenses		846,116			264,681			147,057			206,851			227,527
Operating loss		(738,956	)		(298,250	)		(192,742	)		(30,919	)		(217,045	)
Other income (loss)
Gain (loss) on issuance and sale of subsidiary shares		104,062			4			(2,450	)		105,677			831
(Loss) income before income taxes
and minority interest		(634,894	)		(298,246	)		(195,192	)		74,758			(216,214	)
Income tax provision (benefit)		22,932			(15,817	)		15,288			55,011			(31,550	)
Minority interest in earnings (losses) of consolidated subsidiary		774			(12,008	)		165			9,538			3,079
Net (loss) income	$	(658,600	)	$	(270,421	)	$	(210,645	)	$	10,209		$	(187,743	)
ROE (annualized)		-84.2	%		-138.3	%		-90.2	%		3.7	%		-69.5	%
ROE (annualized-excluding AOCI) (1)		-82.7	%		-135.8	%		-88.7	%		3.7	%		-69.0	%
Total shareholders' equity	$	393,691		$	393,691		$	698,214		$	1,012,635		$	989,213
Total shareholders' equity, net of AOCI (1)	$	406,762		$	406,762		$	714,566		$	996,283		$	990,460
Basic (loss) earnings per share	$	(3.94	)	$	(1.77	)	$	(1.25	)	$	0.06		$	(1.09	)
Diluted (loss) earnings per share	$	(3.94	)	$	(1.77	)	$	(1.25	)	$	0.06		$	(1.09	)
Ending shares outstanding (in thousands)		150,674			150,674			158,671			173,756			172,846
Book value per share	$	2.61		$	2.61		$	4.40		$	5.83		$	5.72
Book value per share, net of AOCI (1)	$	2.70		$	2.70		$	4.50		$	5.73		$	5.73
Gross assets under management (in millions)
Managed accounts	$	347.1		$	347.1		$	345.6		$	291.3		$	258.8
Hedge & offshore funds		52.1			52.1			61.7			61.7			67.1
Mutual funds		2,046.5			2,046.5			2,292.3			2,482.6			2,412.9
Private equity and venture capital funds		23.8			23.8			31.3			33.8			41.2
Total	$	2,469.5		$	2,469.5		$	2,730.9		$	2,869.4		$	2,780.0
Net assets under management (in millions)
Managed accounts	$	347.1		$	347.1		$	345.6		$	291.3		$	258.8
Hedge & offshore funds		50.7			50.7			58.1			58.1			62.5
Mutual funds		2,034.6			2,034.6			2,285.1			2,474.7			2,406.4
Private equity and venture capital funds		22.6			22.6			29.8			32.0			38.0
Total	$	2,455.0		$	2,455.0		$	2,718.6		$	2,856.1		$	2,765.7
Employee count		1,025			1,025			1,290			2,151			2,592

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

(2) Effective January 1, 2008, the Company elected to change its method of  amortizing and accreting premiums, discounts and other deferred costs on its mortgage-backed securities portfolio to the "Contractual Method", in accordance with SFAS 91. See the Company's quarterly filing filed with the Securities and Exchange Commission for the period ending March 31, 2008 for further discussion.

7

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

	30-Jun-08			31-Dec-07
ASSETS
Cash and cash equivalents	$	417,940		$	692,360
Restricted cash		162			14,166
Receivables		72,923			75,357
Investments:
Mortgage-backed securities, at fair value		3,431,550			1,791,480
Long-term investments		133,808			169,274
Trading securities, at fair value		16,978			19,057
Due from clearing broker		12,521			-
Derivative assets, at fair value		9,481			3,514
Intangible assets, net		9,817			9,837
Furniture, equipment, software and leasehold improvements, net		26,731			30,451
Prepaid expenses and other assets		68,319			139,459
Total assets	$	4,200,230		$	2,944,955
LIABILITIES AND SHAREHOLDERS ’ EQUITY
Liabilities:
Trading account securities sold but	$	259		$	206
not yet purchased, at fair value
Repurchase agreements		2,813,768			1,744,377
Securities purchased		375,361
Derivative liabilities, at fair value		4,215			3,558
Interest payable		5,684			5,746
Accrued compensation and benefits		45,563			57,000
Due to clearing broker		-			7,059
Accounts payable, accrued expenses and other liabilities		57,398			105,456
Short-term loan financing		-			63,981
Long-term debt		320,051			320,820
Total liabilities		3,622,299			2,308,203
Minority interest		234,245			243,061
Shareholders' equity:
Common stock, 159,411 and 151,883 shares		1,594			1,519
Additional paid-in capital		1,478,006			1,468,801
Accumulated other comprehensive loss, net of taxes		(92,407	)		(13,071	)
Accumulated deficit		(1,043,507	)		(1,063,558	)
Total shareholders' equity		343,686			393,691
Total liabilities and shareholders' equity	$	4,200,230		$	2,944,955

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