Arlington Asset Investment (AAIC) 8-K FBR Reports Net Income of $81.2 Million

Exhibit 99.1

Contacts:

Investors: Kurt Harrington at 703-312-9647 or kharrington@fbr.com

Media: Bill Dixon at 703-469-1092 or bdixon@fbr.com

FBR Reports Net Income of $81.2 Million

for the Second Quarter of 2004

Diluted Earnings per Share increase 11% to $0.48,

versus $0.43 for the Same Period Last Year

Arlington, Va., August 3, 2004– Friedman, Billings, Ramsey Group, Inc. (NYSE: FBR) today announced net income after tax for the quarter ended June 30, 2004 of $81.2 million, or $0.48 per share (diluted), compared to $58.8 million, or $0.43 per share (diluted), for the second quarter of 2003. Net revenues for the quarter were $178.4 million, up 39% from net revenues of $128.7 million in the second quarter of 2003.

On June 10, 2004, FBR declared a quarterly regular dividend of $0.34 per share and a special dividend of $0.12 per share, paid on July 30, 2004 to shareholders of record as of June 30, 2004. The company earned a total of $170.8 million during the first six months of 2004, or $1.01 per share (diluted), and declared $0.80 per share of total dividends. During the first six months of 2003, the company declared $0.68 per share of total dividends. FBR intends to continue regular quarterly dividends and, to the extent that earnings from the REIT holding company exceed its regular quarterly dividend amount of $0.34 per share, will consider declaring an additional special dividend in December.

“During the first half of 2004 we experienced over 100% revenue growth year-over-year in our taxable subsidiaries. Our overall earnings capability has been enhanced by our growing investor and issuer client bases, as well as the increased recognition of our franchise and brand name.

Our second quarter investment banking revenues of $62 million grew 66% compared to the same period in 2003 and were within our range of expectations for any given quarter. However, these results do demonstrate the quarter to quarter volatility associated with the investment banking business when compared with our first quarter revenues of $91 million.

Importantly, third quarter revenue associated with transactions scheduled to close prior to August 6, 2004 will exceed that of the entire second quarter, and we continue to win new mandates from industry-leading clients and complete transactions from our backlog,” said Eric F. Billings, Co-Chairman and Co-Chief Executive Officer.

Investment Banking

• FBR’s investment banking operations achieved revenues of $62 million in the second quarter, an increase of 66% over the second quarter of 2003.

• In the second quarter of 2004, FBR raised $2.6 billion for issuers, including:

o $445 million in six initial public offerings

o $1.3 billion in follow-on equity offerings

o $382 million in private equity placements

o $500 million in corporate debt and non-convertible preferred securities.

• During the quarter FBR completed its largest advisory assignment to date, totaling more than $600 million in transaction value.

• FBR continues to be ranked number one in terms of the after-market performance of its equity underwritings over the trailing five year period ending June 30, 2004.*

• FBR finished the first half of 2004 as the number six book-running manager of U.S. IPOs.**

• During the second quarter of 2004 FBR grew its senior investment banking headcount by 14%.

“Our second quarter results reflect many of the strengths of our business model. More importantly, despite what is perceived as a difficult market for real estate related equities, we have already lead-managed over $550 million of real estate-related offerings during the first part of the third quarter and continue to see strong activity in this sector. Additionally, we believe the contributions we experienced in the second quarter from the diversified industrials and technology, media and telecom sectors will continue into the third quarter,” said Emanuel J. Friedman, Co-Chairman and Co-Chief Executive Officer.

Institutional Brokerage and Research

FBR’s institutional brokerage revenues totaled $26.5 million during the second quarter of 2004, an increase of 35% over the second quarter of 2003. Brokerage revenues for the first half of 2004 were almost double those of the comparable 2003 period.

• Revenues from agency commissions led the growth, increasing 61% from the second quarter of 2003 to $21.1 million.

• Since March 31, 2004, FBR has increased its institutional broker headcount by 7%.

• During the second quarter of 2004, the research department of Friedman Billings Ramsey increased its staff of senior analysts by 25%, and now offers independent, value-added equity research on more than 520 companies in eight industry sectors, asset-backed securities (ABS) fixed-income research, as well as Economic and Policy Research, including the work of the Washington Policy Analysis Group.

Asset Management

• Base management fees were $6.4 million for this quarter versus $5.4 million, an increase of 19% over the corresponding quarter in 2003.

• In the second quarter of 2004, there was a marked increase in net asset inflows into the alternative asset investment vehicles managed by FBR Investment Management. The net inflows of $91 million for this quarter exceeded the inflows for the entire year of 2003. Total assets under management were $2.2 billion as of June 30, 2004.

2

Principal Investment

FBR’s principal investing activities achieved revenues net of interest expense of $83.2 million during the quarter that ended on June 30, 2004. This $83.2 million is compared to $62.7 million for the second quarter of 2003 and $83.9 million for the first quarter of this year. The fair market value of FBR’s mortgage-backed securities (MBS) portfolio totaled $12.3 billion on June 30, 2004 and the corresponding repurchase agreement and commercial paper liabilities (including those with Georgetown Funding, a commercial paper conduit administered by FBR) were $11.3 billion. Quarter-end leverage (debt to equity) was 10.7 and average leverage in the MBS portfolio for the second quarter of 2004 was 10.1. The company’s overall leverage was 8.3 on June 30, 2004.

The second quarter environment for FBR’s MBS portfolio was characterized by significantly higher prepayments resulting from falling mortgage rates late in the first quarter. These higher prepayments resulted in yields falling during the second quarter due to increased premium amortization. As rates rose through the second quarter prepayment activity slowed, which FBR anticipates will lead to lower constant prepayment rates (CPR’s) and a stabilization of yields in the third quarter.

• FBR’s MBS portfolio had a weighted average annual yield of 3.17% and a weighted average financing rate of 1.26% (including the cost of hedging), resulting in a net interest spread of 1.91% for the second quarter of 2004, compared to a net interest spread of 2.03% for the preceding quarter.

• The second quarter spread was negatively impacted by the average one-month constant prepayment rate (CPR) which was 30.5 for the quarter, up from the 21.6 experienced in the first quarter of 2004.

• The weighted average remaining premium of FBR’s MBS portfolio was 1.8% on June 30, 2004.

• At the end of the second quarter, FBR’s MBS portfolio continued to maintain a low effective duration (a measure of interest rate sensitivity) of 1.36.

• The total value of FBR’s merchant banking portfolio and other long-term investments was $293.2 million as of June 30, 2004. Of this total, $220.8 million was held in the merchant banking portfolio, $59.9 million was held in alternative asset funds, and $12.5 million was held in other long-term investments.

• FBR recorded $28.8 million of net gains on principal investments during the quarter.

Friedman, Billings, Ramsey Group, Inc. 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 eight industry sectors: consumer, diversified industrials, energy, financial services, healthcare, insurance, real estate, and technology, media and telecommunications. FBR, headquartered in the Washington, D.C. metropolitan area, with offices in Arlington, Va. and Bethesda, Md., also has offices in Atlanta, Boston, Chicago, Cleveland, Denver, Houston, Irvine, London, New York, Portland, San Francisco, Seattle, and Vienna. For more information, seehttp://www.fbr.com.

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

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A live webcast of FBR’s conference call will be available at 9:00 a.m. on Wednesday, August 4, 2004 (Eastern Daylight Time) viahttp://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=FBR. Replays of the webcast will be available afterward.

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,
	2004			%		2003		%
REVENUES:
Investment banking:
Underwriting	$	37,476		21.0	%	$	23,975	18.5	%
Corporate finance		24,514		13.7	%		13,383	10.4	%
Institutional brokerage:
Principal transactions		5,426		3.0	%		6,576	5.1	%
Agency commissions		21,060		11.8	%		13,049	10.1	%
Asset management:
Base management fees		6,384		3.6	%		5,369	4.2	%
Incentive allocations and fees		(1,444	)	-0.8	%		1,471	1.1	%
Principal investment:
Interest		86,993		48.7	%		49,088	38.1	%
Net investment income		28,832		16.2	%		31,767	24.7	%
Dividends		1,683		0.9	%		1,542	1.2	%
Other		1,801		1.0	%		2,219	1.7	%
Total revenues		212,746		119.2	%		148,439	115.3	%
Interest expense		34,276		19.2	%		19,721	15.3	%
Revenues, net of interest expense		178,449		100.0	%		128,718	100.0	%
NON-INTEREST EXPENSES:
Compensation and benefits		57,698		32.3	%		42,841	33.3	%
Business development		8,885		5.0	%		7,032	5.5	%
Professional services		15,050		8.4	%		3,646	2.8	%
Clearing and brokerage fees		2,608		1.5	%		1,748	1.4	%
Occupancy and equipment		3,326		1.9	%		2,217	1.7	%
Communications		3,442		1.9	%		2,228	1.7	%
Other operating expenses		5,351		3.0	%		4,053	3.1	%
Total non-interest expenses		96,360		54.0	%		63,765	49.5	%
Net income before income taxes		82,089		46.0	%		64,953	50.5	%
Income tax provision		910		0.5	%		6,181	4.8	%
Net Income	$	81,179		45.5	%	$	58,772	45.7	%
Basic earnings per share		$0.49					$0.43
Diluted earnings per share		$0.48					$0.43
Weighted average shares – basic		167,277					135,467
Weighted average shares – diluted		168,566					136,190

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FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

	Six months ended June 30,
	2004		%		2003		%
REVENUES:
Investment banking:
Underwriting	$	100,250	25.1	%	$	32,763	18.6	%
Corporate finance		52,851	13.2	%		19,102	10.8	%
Institutional brokerage:
Principal transactions		11,445	2.9	%		10,327	5.8	%
Agency commissions		50,197	12.6	%		20,586	11.7	%
Asset management:
Base management fees		12,919	3.2	%		13,060	7.4	%
Incentive allocations and fees		1,221	0.3	%		6,986	4.0	%
Principal investment:
Interest		175,977	44.1	%		49,088	27.8	%
Net investment income		55,441	13.9	%		37,311	21.1	%
Dividends		2,655	0.7	%		1,542	0.9	%
Other		3,126	0.8	%		7,213	4.1	%
Total revenues		466,082	116.8	%		197,978	112.1	%
Interest expense		66,923	16.8	%		21,367	12.1	%
Revenues, net of interest expense		399,159	100.0	%		176,611	100.0	%
NON-INTEREST EXPENSES:
Compensation and benefits		132,587	33.2	%		67,645	38.3	%
Business development		25,423	6.4	%		10,006	5.7	%
Professional services		25,214	6.3	%		6,551	3.7	%
Clearing and brokerage fees		5,381	1.3	%		2,980	1.7	%
Occupancy and equipment		6,230	1.6	%		4,416	2.5	%
Communications		6,384	1.6	%		4,437	2.5	%
Other operating expenses		11,322	2.8	%		7,057	4.0	%
Total non-interest expenses		212,541	53.2	%		103,092	58.4	%
Net income before income taxes		186,618	46.8	%		73,519	41.6	%
Income tax provision		15,800	4.0	%		9,024	5.1	%
Net income	$	170,818	42.8	%	$	64,495	36.5	%
Basic earnings per share		$1.02				$0.70
Diluted earnings per share		$1.01				$0.69
Weighted average shares – basic		166,678				91,502
Weighted average shares – diluted		168,462				92,821

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FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.

Financial & Statistical Supplement—Operating Results (unaudited)

(Dollars in thousands, except per share data)

	YTD 2004			Q-2 04			Q-1 04			YTD 2003
Revenues
Investment banking:
Underwriting	$	100,250		$	37,476		$	62,774		$	117,296
Corporate finance		52,851			24,514			28,337			144,086
Institutional brokerage:
Principal transactions		11,445			5,426			6,019			23,965
Agency commissions		50,197			21,060			29,137			50,178
Asset management:
Base management fees		12,919			6,384			6,535			24,782
Incentive income		1,221			(1,444	)		2,665			13,959
Principal investment:
Interest		175,977			86,993			88,984			165,898
Net investment income		55,441			28,832			26,609			70,619
Dividends		2,655			1,683			972			4,078
Other		3,126			1,801			1,325			13,664
Total revenues		466,082			212,725			253,357			628,525
Interest expense		66,923			34,276			32,647			68,995
Revenues, net of interest expense		399,159			178,449			220,710			559,530
Non-interest expenses
Compensation and benefits		132,587			57,698			74,889			226,389
Business development		25,423			8,885			16,538			21,416
Professional services		25,214			15,050			10,164			21,628
Clearing and brokerage fees		5,381			2,608			2,773			7,014
Occupancy & equipment		6,230			3,326			2,904			9,585
Communications		6,384			3,442			2,942			10,574
Other operating expenses		11,322			5,351			5,971			16,919
Total non-interest expenses		212,541			96,360			116,181			313,525
Net income before taxes		186,618			82,089			104,529			246,005
Income tax provision		15,800			910			14,890			44,591
Net income	$	170,818		$	81,179		$	89,639		$	201,414
Net income before taxes as a percentage of net revenue		46.8	%		46.0	%		47.4	%		44.0	%
ROE (annualized)		22.9	%		20.8	%		22.1	%		22.4	%
Total shareholders’ equity	$	1,431,345		$	1,431,345		$	1,685,673		$	1,554,339
Basic earnings per share		$1.02			$0.49			$0.54			$1.68
Diluted earnings per share		$1.01			$0.48			$0.54			$1.63
Ending shares outstanding (in thousands)		166,632			166,632			165,623			165,189
Book value per share		$8.59			$8.59			$10.18			$9.41
Gross assets under management (in millions)
Managed accounts	$	160.3		$	160.3		$	78.8		$	60.6
Hedge & offshore funds		370.1			370.1			435.4			344.2
Mutual funds		1,612.2			1,612.2			1,897.4			1,661.5
Private equity and venture capital funds		110.6			110.6			76.5			72.2
Total	$	2,253.2		$	2,253.2		$	2,488.1		$	2,138.5
Net assets under management (in millions)
Managed accounts	$	160.3		$	160.3		$	78.8		$	60.6
Hedge & offshore funds		366.7			366.7			350.5			286.7
Mutual funds		1,606.9			1,606.9			1,874.0			1,649.6
Private equity and venture capital funds		88.8			88.8			70.4			64.3
Total	$	2,222.7		$	2,222.7		$	2,373.7		$	2,061.2
Productive assets under management (in millions)
Managed accounts	$	160.3		$	160.3		$	78.8		$	60.6
Hedge & offshore funds		366.7			366.7			350.5			286.7
Mutual funds		1,606.9			1,606.9			1,874.0			1,649.6
Private equity and venture capital funds		153.8			153.8			131.2			130.7
Total	$	2,287.7		$	2,287.7		$	2,434.5		$	2,127.6
Employee count		626			626			549			494

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FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.

Financial & Statistical Supplement—Operating Results (unaudited)

(Dollars in thousands, except per share data)

	Q-4 03			Q-3 03			Q-2 03			Q-1 03
Revenues
Investment banking:
Underwriting	$	47,015		$	37,518		$	23,975		$	8,788
Corporate finance		73,347			51,637			13,383			5,719
Institutional brokerage:
Principal transactions		7,089			6,549			6,576			3,751
Agency commissions		16,447			13,145			13,049			7,537
Asset management:
Base management fees		6,120			5,602			5,369			7,691
Incentive income		5,424			1,549			1,471			5,515
Principal investment:
Interest		69,961			46,849			49,088			—
Net investment income		15,130			18,178			31,767			5,544
Dividends		1,278			1,258			1,542			—
Other		3,776			2,675			2,219			4,994
Total revenues		245,587			184,960			148,439			49,539
Interest expense		24,656			22,972			19,721			1,646
Revenues, net of interest expense		220,931			161,988			128,718			47,893
Non-interest expenses
Compensation and benefits		91,239			67,505			42,841			24,804
Business development		6,589			4,821			7,032			2,974
Professional services		8,570			6,507			3,646			2,905
Clearing and brokerage fees		1,977			2,057			1,748			1,232
Occupancy & equipment		2,743			2,426			2,217			2,199
Communications		3,168			2,969			2,228			2,209
Other operating expenses		5,603			4,259			4,053			3,004
Total expenses		119,889			90,544			63,765			39,327
Net income before taxes		101,042			71,444			64,953			8,566
Income tax provision		21,084			14,483			6,181			2,843
Net income	$	79,958		$	56,961		$	58,772		$	5,723
Net income before taxes as a percentage of net revenue		45.7	%		44.1	%		50.5	%		17.9	%
ROE (annualized)		24.4	%		20.7	%		21.9	%		3.6	%
Total shareholders’ equity	$	1,554,339		$	1,068,153		$	1,136,093		$	1,011,647
Basic earnings per share		$0.50			$0.42			$0.43			$0.12
Diluted earnings per share		$0.49			$0.41			$0.43			$0.12
Ending shares outstanding (in thousands)		165,189			136,180			136,087			131,576
Book value per share		$9.41			$7.84			$8.35			$7.69
Gross assets under management (in millions)
Managed accounts	$	60.6		$	63.8		$	69.6		$	818.8
Hedge & offshore funds		344.2			253.4			237.8			239.7
Mutual funds		1,661.5			1,497.7			1,424.1			1,199.5
Private equity and venture capital funds		72.2			73.6			69.8			77.5
Total	$	2,138.5		$	1,888.5		$	1,801.3		$	2,335.5
Net assets under management (in millions)
Managed accounts	$	60.6		$	63.8		$	69.6		$	82.7
Hedge & offshore funds		286.7			226.2			199.2			160.8
Mutual funds		1,649.6			1,486.1			1,414.9			1,194.2
Private equity and venture capital funds		64.3			63.4			64.5			70.0
Total	$	2,061.2		$	1,839.5		$	1,748.2		$	1,507.7
Productive assets under management (in millions)
Managed accounts	$	60.6		$	63.8		$	69.6		$	818.8
Hedge & offshore funds		286.7			226.2			199.2			160.8
Mutual funds		1,649.6			1,486.1			1,414.9			1,194.2
Private equity and venture capital funds		130.7			171.3			170.8			336.1
Total	$	2,127.6		$	1,947.4		$	1,854.5		$	2,509.9
Employee count		494			479			500			493

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FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

(Unaudited)

ASSETS	30-Jun-04			31-Dec-03
Cash and cash equivalents	$	140,941		$	92,688
Receivables		146,491			67,295
Investments:
Mortgage-backed securities, at fair value		12,272,924			10,551,570
Long-term investments		293,158			379,002
Reverse repurchase agreements		225,507			—
Trading securities, at market value		33,416			4,932
Due from clearing broker		8,985			89,940
MMA acquired management contracts		15,068			16,090
Goodwill		108,013			108,013
Building, furniture, equipment and leasehold improvements, net		9,282			6,969
Other assets		45,097			12,086
Total assets	$	13,298,882		$	11,328,585
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Trading account securities sold short, at market value	$	4,702		$	9,525
Repurchase agreements		6,994,707			5,095,676
Commercial paper		4,575,890			4,392,965
Dividends payable		77,345			56,744
Interest payable		9,203			6,188
Accrued compensation and benefits		86,430			100,901
Accounts payable, accrued expenses and other liabilities		41,972			58,058
Long-term debt		77,288			54,189
Total liabilities		11,867,537			9,774,246
Shareholders’ equity:
Common stock, 168,452 and 166,893 shares		1,685			1,669
Additional paid-in capital		1,474,590			1,443,228
Employee stock loan receivable including accrued interest (717 and 1,290 shares)		(4,735	)		(8,277	)
Deferred compensation		(17,902	)		(2,203	)
Accumulated other comprehensive (loss)/income		(118,573	)		60,505
Retained earnings		96,280			59,417
Total shareholders’ equity		1,431,345			1,554,339
Total liabilities and shareholders’ equity	$	13,298,882		$	11,328,585
Book Value per Share		$8.59			$9.41
Shares Outstanding		166,632			165,189

*Source: Dealogic. Relates to all public U.S. equity transactions [initial public offerings and secondaries/follow-ons, excluding closed-end funds] and all industries. Transactions and performance priced through 6/30/04. Non-weighted average aftermarket performance. Ranked among lead-managing underwriters of more than 50 transactions for the five-year period.

**Source: Dealogic.

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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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