Exhibit 99.1
Contacts:
Media: Lauren Burk at 703-469-1004 or lburk@fbr.com
Investors: Kurt Harrington at 703-312-9647 or kharrington@fbr.com
FBR Announces First Quarter 2006 Financial Results
Net After-Tax Income of $26.6 Million or $0.16 per Share
ARLINGTON, Va., April 26, 2006 – Friedman, Billings, Ramsey Group, Inc. (NYSE: FBR) today announced its results for the quarter ended March 31, 2006. Net income after tax for the quarter was $26.6 million, or $0.16 per share (diluted), compared to after-tax earnings of $24.4 million, or $0.14 per share (diluted) for the first quarter of 2005.
Net revenues for the quarter were $176.8 million, an increase of 8.5% from the $163.0 million in net revenues in the first quarter of 2005. Book value per share as of March 31, 2006 was $7.60, and book value per share net of Accumulated Other Comprehensive Income (AOCI)1 was $7.63.
These results reflect continued solid performance by FBR’s capital markets group, a substantial improvement in the results of the Company’s non-conforming mortgage subsidiaries, and better returns on FBR’s principal investment portfolios.
Capital Markets
In the first quarter of 2006, FBR helped raise $8.3 billion for its clients in 21 transactions, 14 of which it lead managed. In addition, FBR advised on four merger and acquisition assignments. Investment banking revenues for the quarter totaled $69.2 million, down from $88.0 million in the first quarter of 2005.
Trends in the first quarter of 2006 were in many respects similar to those seen in 2005 – a broadening capital markets franchise with leading equity underwriting positions in a growing number of key industries. In particular, the insurance and energy groups performed well. Following 2005, when FBR was the #1 book-running manager for the year for initial public offerings and 144A common stock private placements combined, FBR maintained a market leading position with a #2 ranking in these offerings for the first quarter of 2006.2
Institutional brokerage revenues, net of related interest expense, rose 14% from $27.8 million in the first quarter of 2005 to $31.7 million in the quarter just ended. FBR continues to be successful at minimizing the impact of industry cost pressures by maintaining and strengthening relationships with mid-sized buy-side firms that value both quality research and trading expertise.
Principal Investment and Mortgage Finance
The steps FBR took to reposition its principal investment portfolios in the fourth quarter of 2005 have given the firm greater liquidity and a broader range of investment options going forward. FBR expects to see gradual improvement in returns on its investments in mortgage securities as it continues to redeploy the $450 million of capital invested in this portfolio.
Mortgage Portfolios
The repositioning of FBR’s principal investment portfolio was substantially completed by the end of February 2006. At the close of the first quarter of 2006, FBR had sold mortgage-backed securities valued at $7.0 billion, effectively completing the liquidation phase of the repositioning. For the quarter, the mortgage securities portfolio yield was 4.54% with a corresponding cost of funds of 4.45%. At the end of the quarter, the balance of the mortgage securities portfolio was approximately $900 million. As a result of the portfolio repositioning, the Company recorded net realized gains of $4.5 million from the sale of mortgage securities and loans.
The Company’s investments in non-conforming mortgage loans averaged $6.6 billion with an average coupon of 7.26%, a one-month CPR of 33.5, and an ending net premium of $137.4 million, including deferred net origination costs. The net yield for the quarter was 6.78% with a corresponding cost of funds of 5.15%. Pre-provision net interest margin totaled 98 basis points, net of 24 basis points of mortgage insurance costs.
In the first quarter of 2006, First NLC (FNLC) narrowed its loss margin substantially, generating a pre-tax loss from its operating activities of $4.8 million compared to a pre-tax loss of $23.5 million in the fourth quarter of 2005. Importantly, FNLC achieved a cost to originate of 174 basis points during the month of March. The cost to originate for the full quarter was 210 basis points. As a result of cost cutting and other initiatives undertaken by FNLC during the quarter, FBR now expects FNLC to return to profitability in the second quarter of 2006.
Merchant Banking
During the first quarter, the merchant banking and long-term investments portfolio generated total income of $17.4 million – comprising $3.7 million in dividends and $13.7 million in net realized gains. During the quarter, FBR made four new merchant banking investments totaling $37.5 million.
The total value of FBR’s merchant banking portfolio and other long-term investments at the end of the quarter was $306.0 million compared to $347.6 million as of December 31, 2005. Of this total, $263.9 million was held in the merchant banking and long-term investments portfolio and $42.1 million was held in alternative asset investments.
Asset Management
Base management fees for the first quarter were $5.1 million compared to base fees of $8.5 million in the first quarter of 2005. Incentive allocations and fees rose to $1.0 million from a negative $0.4
million in the comparable quarter of 2005. Total funds under management were $2.4 billion as of March 31, 2006, down from $3.1 billion on March 31, 2005. Mutual fund assets currently managed by FBR Investment Management totaled $1.8 billion at March 31, 2006, compared to $2.2 billion at the close of the first quarter of 2005. In the first quarter, mutual fund assets rose 1.5% over year-end 2005 levels.3
The firm will host an earnings conference call tomorrow morning, Thursday, April 27, 2006 at 9:00 A.M. U.S. EDT. Investors wishing to listen to the conference call may do so via the web at: http://phx.corporate-ir.net/phoenix.zhtml?c=71352&p=irol-irhome.
Replays of the webcast will be available following the call.
Friedman, Billings, Ramsey Group, Inc. provides investment banking*, institutional brokerage*, asset management, and private wealth through its operating subsidiaries and invests in mortgage-related assets and merchant banking opportunities. FBR focuses capital and financial expertise on eight industry sectors: consumer, diversified industrials, energy and natural resources, financial institutions, healthcare, insurance, real estate, and technology, media and telecommunications. FBR is headquartered in the Washington, D.C. metropolitan area with offices in Arlington, Va., Boston, Dallas, Denver, Houston, Irvine, London, New York, Phoenix and San Francisco. Friedman, Billings, Ramsey Group, Inc. is the parent company of First NLC Financial Services, Inc., a non-conforming residential mortgage originator headquartered in Deerfield Beach, Florida. For more information, visit http://www.fbr.com.
* | Friedman, Billings, Ramsey & Co., Inc. |
1 | Accumulated Other Comprehensive Income (AOCI) includes changes in the value of available-for-sale securities and cash flow hedges. FBR believes that such changes represent temporary market fluctuations, are not reflective of the market strategy, and, therefore, the exclusion of AOCI provides a reasonable basis for calculating returns. |
2 | Source: Dealogic. Relates to total deal value of all common stock of U.S. issuers offered in IPOs or transactions exempt from SEC registration pursuant to Rule 144A; priced between 1/1/05 and 12/31/05 and 1/1/06 and 3/31/06, respectively, with apportioned credit to all book-runners. Includes only rank-eligible transactions. |
3 | Excluding two mutual funds sold in the first quarter of 2006 that had assets of $61.2 million as of year-end 2005. |
Statements concerning future performance, developments, events, market forecasts, revenues, expenses, earnings, run rates and any other guidance on present or future periods, constitute forward-looking statements that are subject to a number of factors, risks and uncertainties that might cause actual results to differ materially from stated expectations or current circumstances. These factors include, but are not limited to, the effect of demand for public offerings, activity in the secondary securities markets, interest rates, costs of borrowing, interest spreads, mortgage pre-payment speeds, risks associated with merchant banking investments, the realization of gains and losses on principal investments, available technologies, competition for business and personnel, and general economic, political and market conditions. These and other risks are described in the Company’s Annual Report and Form 10-K and quarterly reports on Form 10-Q that are available from the company and from the SEC.
Financial data follows.
# # #
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (Unaudited) |
Quarter ended March 31, | ||||||||||||||
2006 | % | 2005 | % | |||||||||||
REVENUES: | ||||||||||||||
Investment banking: | ||||||||||||||
Capital raising | $ | 66,335 | 37.5 | % | $ | 86,813 | 53.3 | % | ||||||
Advisory | 2,869 | 1.6 | % | 1,138 | 0.7 | % | ||||||||
Institutional brokerage: | ||||||||||||||
Principal transactions | 6,625 | 3.7 | % | 5,627 | 3.5 | % | ||||||||
Agency commissions | 23,408 | 13.2 | % | 22,157 | 13.6 | % | ||||||||
Mortgage trading interest | 17,650 | 10.0 | % | — | 0.0 | % | ||||||||
Mortgage trading net investment loss | (1,237 | ) | -0.7 | % | — | 0.0 | % | |||||||
Asset management: | ||||||||||||||
Base management fees | 5,097 | 2.9 | % | 8,468 | 5.2 | % | ||||||||
Incentive allocations and fees | 1,008 | 0.6 | % | (375 | ) | -0.2 | % | |||||||
Principal investment: | ||||||||||||||
Interest | 149,126 | 84.3 | % | 98,896 | 60.7 | % | ||||||||
Net investment income (loss) | 25,281 | 14.3 | % | (3,858 | ) | -2.4 | % | |||||||
Dividends | 3,699 | 2.1 | % | 3,440 | 2.1 | % | ||||||||
Mortgage Banking: | ||||||||||||||
Interest | 25,059 | 14.2 | % | 9,492 | 5.8 | % | ||||||||
Net investment income | 10,738 | 6.1 | % | 3,481 | 2.1 | % | ||||||||
Other | 3,041 | 1.7 | % | 2,496 | 1.5 | % | ||||||||
Total revenues | 338,699 | 191.5 | % | 237,775 | 145.9 | % | ||||||||
Interest expense | 153,483 | 86.8 | % | 74,822 | 45.9 | % | ||||||||
Provision for loan losses | 8,392 | 4.7 | % | — | 0.0 | % | ||||||||
Revenues, net of interest expense and provision for loan losses | 176,824 | 100.0 | % | 162,953 | 100.0 | % | ||||||||
NON-INTEREST EXPENSES: | ||||||||||||||
Compensation and benefits | 83,497 | 47.2 | % | 75,799 | 46.5 | % | ||||||||
Professional services | 14,265 | 8.1 | % | 13,650 | 8.4 | % | ||||||||
Business development | 14,085 | 8.0 | % | 15,438 | 9.5 | % | ||||||||
Clearing and brokerage fees | 2,316 | 1.3 | % | 2,032 | 1.2 | % | ||||||||
Occupancy and equipment | 11,242 | 6.3 | % | 5,724 | 3.5 | % | ||||||||
Communications | 5,607 | 3.2 | % | 4,032 | 2.5 | % | ||||||||
Other operating expenses | 20,977 | 11.9 | % | 16,294 | 10.0 | % | ||||||||
Total non-interest expenses | 151,989 | 86.0 | % | 132,969 | 81.6 | % | ||||||||
Net income before income taxes | 24,835 | 14.0 | % | 29,984 | 18.4 | % | ||||||||
Income tax (benefit) provision | (1,719 | ) | -1.0 | % | 5,572 | 3.4 | % | |||||||
Net income | $ | 26,554 | 15.0 | % | $ | 24,412 | 15.0 | % | ||||||
Basic earnings per share | $ | 0.16 | $ | 0.15 | ||||||||||
Diluted earnings per share | $ | 0.16 | $ | 0.14 | ||||||||||
Weighted average shares - basic | 170,728 | 168,334 | ||||||||||||
Weighted average shares - diluted | 171,031 | 169,458 | ||||||||||||
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. Financial & Statistical Supplement - Operating Results (Dollars in thousands, except per share data) (Unaudited) |
Q-1 06 | For the year ended 31-Dec-05 | Q-4 05 | Q-3 05 | Q-2 05 | Q-1 05 | |||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Investment banking: | ||||||||||||||||||||||||
Capital raising | $ | 66,335 | $ | 356,753 | $ | 88,866 | $ | 86,035 | $ | 95,039 | $ | 86,813 | ||||||||||||
Advisory | 2,869 | 17,759 | 7,415 | 3,026 | 6,180 | 1,138 | ||||||||||||||||||
Institutional brokerage: | ||||||||||||||||||||||||
Principal transactions | 6,625 | 17,950 | 3,788 | 4,348 | 4,680 | 5,627 | ||||||||||||||||||
Agency commissions | 23,408 | 82,778 | 21,006 | 20,445 | 18,677 | 22,157 | ||||||||||||||||||
Mortgage trading interest | 17,650 | 30,859 | 19,555 | 11,304 | — | — | ||||||||||||||||||
Mortgage trading net investment loss | (1,237 | ) | (3,820 | ) | (1,419 | ) | (2,401 | ) | — | — | ||||||||||||||
Asset management: | ||||||||||||||||||||||||
Base management fees | 5,097 | 30,348 | 6,153 | 7,914 | 7,813 | 8,468 | ||||||||||||||||||
Incentive allocations and fees | 1,008 | 1,929 | 742 | 832 | 730 | (375 | ) | |||||||||||||||||
Principal investment: | ||||||||||||||||||||||||
Interest | 149,126 | 549,832 | 189,811 | 144,401 | 116,724 | 98,896 | ||||||||||||||||||
Net investment income (loss) | 25,281 | (239,754 | ) | (258,500 | ) | 4,866 | 17,738 | (3,858 | ) | |||||||||||||||
Dividends | 3,699 | 36,622 | 16,039 | 8,772 | 8,371 | 3,440 | ||||||||||||||||||
Mortgage Banking: | ||||||||||||||||||||||||
Interest | 25,059 | 87,958 | 30,965 | 29,383 | 18,118 | 9,492 | ||||||||||||||||||
Net investment income (loss) | 10,738 | 13,741 | (21,899 | ) | 17,600 | 14,559 | 3,481 | |||||||||||||||||
Other | 3,041 | 12,351 | 3,024 | 3,376 | 3,455 | 2,496 | ||||||||||||||||||
Total revenues | 338,699 | 995,306 | 105,546 | 339,901 | 312,084 | 237,775 | ||||||||||||||||||
Interest expense | 153,483 | 546,313 | 211,393 | 156,373 | 103,725 | 74,822 | ||||||||||||||||||
Provision for loan losses | 8,392 | 14,291 | 8,263 | 4,890 | 1,138 | — | ||||||||||||||||||
Revenues, net of interest expense and provision for loan losses | 176,824 | 434,702 | (114,110 | ) | 178,638 | 207,221 | 162,953 | |||||||||||||||||
Non-interest expenses | ||||||||||||||||||||||||
Compensation and benefits | 83,497 | 331,492 | 87,330 | 88,348 | 80,015 | 75,799 | ||||||||||||||||||
Professional services | 14,265 | 66,550 | 16,556 | 16,158 | 20,186 | 13,650 | ||||||||||||||||||
Business development | 14,085 | 46,648 | 10,433 | 8,815 | 11,962 | 15,438 | ||||||||||||||||||
Clearing and brokerage fees | 2,316 | 8,882 | 2,447 | 2,363 | 2,040 | 2,032 | ||||||||||||||||||
Occupancy and equipment | 11,242 | 34,044 | 10,151 | 9,397 | 8,772 | 5,724 | ||||||||||||||||||
Communications | 5,607 | 20,634 | 5,741 | 5,561 | 5,300 | 4,032 | ||||||||||||||||||
Other operating expenses | 20,977 | 70,679 | 24,984 | 16,861 | 12,540 | 16,294 | ||||||||||||||||||
Total non-interest expenses | 151,989 | 578,929 | 157,642 | 147,503 | 140,815 | 132,969 | ||||||||||||||||||
Net income (loss) before income taxes | 24,835 | (144,227 | ) | (271,752 | ) | 31,135 | 66,406 | 29,984 | ||||||||||||||||
Income tax (benefit) provision | (1,719 | ) | 26,683 | (142 | ) | 8,090 | 13,163 | 5,572 | ||||||||||||||||
Net income (loss) | $ | 26,554 | $ | (170,910 | ) | $ | (271,610 | ) | $ | 23,045 | $ | 53,243 | $ | 24,412 | ||||||||||
Net income (loss) before income taxes as a percentage of net revenue | 14.0 | % | -33.2 | % | 238.1 | % | 17.4 | % | 32.0 | % | 18.4 | % | ||||||||||||
ROE (annualized) | 8.2 | % | -11.9 | % | -80.5 | % | 6.3 | % | 14.3 | % | 6.4 | % | ||||||||||||
ROE (annualized-excluding AOCI) (1) | 8.1 | % | -11.7 | % | -74.7 | % | 5.9 | % | 13.8 | % | 6.0 | % | ||||||||||||
Total shareholders’ equity | $ | 1,301,949 | $ | 1,304,170 | $ | 1,304,170 | $ | 1,394,137 | $ | 1,519,021 | $ | 1,458,861 | ||||||||||||
Total shareholders’ equity, net of AOCI (1) | $ | 1,306,450 | $ | 1,305,147 | $ | 1,305,147 | $ | 1,603,305 | $ | 1,631,955 | $ | 1,629,293 | ||||||||||||
Basic earnings (loss) per share | $ | 0.16 | $ | (1.01 | ) | $ | (1.60 | ) | $ | 0.14 | $ | 0.31 | $ | 0.15 | ||||||||||
Diluted earnings (loss) per share | $ | 0.16 | $ | (1.01 | ) | $ | (1.60 | ) | $ | 0.14 | $ | 0.31 | $ | 0.14 | ||||||||||
Ending shares outstanding (in thousands) | 171,236 | 170,264 | 170,264 | 169,891 | 169,617 | 169,214 | ||||||||||||||||||
Book value per share | $ | 7.60 | $ | 7.66 | $ | 7.66 | $ | 8.21 | $ | 8.96 | $ | 8.62 | ||||||||||||
Book value per share, net of AOCI (1) | $ | 7.63 | $ | 7.67 | $ | 7.67 | $ | 9.44 | $ | 9.62 | $ | 9.63 |
Q-1 06 | For the year ended 31-Dec-05 | Q-4 05 | Q-3 05 | Q-2 05 | Q-1 05 | |||||||||||||
Gross assets under management (in millions) | ||||||||||||||||||
Managed accounts | $ | 383.9 | $ | 463.4 | $ | 463.4 | $ | 437.2 | $ | 510.4 | $ | 242.4 | ||||||
Hedge & offshore funds | 136.6 | 154.3 | 154.3 | 239.0 | 463.1 | 601.1 | ||||||||||||
Mutual funds | 1,849.5 | 1,883.3 | 1,883.3 | 2,078.1 | 2,185.0 | 2,213.9 | ||||||||||||
Private equity and venture capital funds | 50.5 | 56.2 | 56.2 | 42.7 | 41.3 | 69.5 | ||||||||||||
Total | $ | 2,420.5 | $ | 2,557.2 | $ | 2,557.2 | $ | 2,797.0 | $ | 3,199.8 | $ | 3,126.9 | ||||||
Net assets under management (in millions) | ||||||||||||||||||
Managed accounts | $ | 380.9 | $ | 329.5 | $ | 329.5 | $ | 255.5 | $ | 257.3 | $ | 223.0 | ||||||
Hedge & offshore funds | 125.4 | 150.5 | 150.5 | 227.8 | 401.1 | 490.3 | ||||||||||||
Mutual funds | 1,843.4 | 1,872.8 | 1,872.8 | 2,069.9 | 2,176.6 | 2,204.2 | ||||||||||||
Private equity and venture capital funds | 49.1 | 46.8 | 46.8 | 39.9 | 37.8 | 66.3 | ||||||||||||
Total | $ | 2,398.8 | $ | 2,399.6 | $ | 2,399.6 | $ | 2,593.1 | $ | 2,872.8 | $ | 2,983.8 | ||||||
Employee count | 2,531 | 2,449 | 2,449 | 2,455 | 2,226 | 2,123 | ||||||||||||
(1) | Accumulated Other Comprehensive Income (AOCI) includes changes in value of available-for-sale securities and cash flow hedges. We believe that such changes represent temporary market fluctuations, are not reflective of our market strategy, and therefore, exclusion of AOCI provides a reasonable basis for calculating returns. |
3
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts) (Unaudited) | ||
31-Mar-06 | 31-Dec-05 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 188,714 | $ | 238,615 | ||||
Restricted cash | 5,020 | 6,101 | ||||||
Receivables | 278,697 | 259,519 | ||||||
Investments: | ||||||||
Mortgage-backed securities, at fair value | 892,159 | 8,002,561 | ||||||
Loans held for investment, net | 6,254,819 | 6,841,266 | ||||||
Loans held for sale, net | 914,442 | 963,807 | ||||||
Long-term investments | 305,992 | 347,644 | ||||||
Reverse repurchase agreements | 179,983 | 283,824 | ||||||
Trading securities, at fair value | 1,252,485 | 1,032,638 | ||||||
Due from clearing broker | 81,350 | 71,065 | ||||||
Derivative assets, at fair value | 92,723 | 70,636 | ||||||
Goodwill | 162,765 | 162,765 | ||||||
Intangible assets, net | 24,771 | 26,485 | ||||||
Furniture, equipment and leasehold improvements, net | 44,328 | 46,382 | ||||||
Prepaid expenses and other assets | 81,345 | 82,482 | ||||||
Total assets | $ | 10,759,593 | $ | 18,435,790 | ||||
LIABILITIES AND SHAREHOLDERS ’ EQUITY | ||||||||
Liabilities: | ||||||||
Trading account securities sold short but not yet purchased, at fair value | $ | 153,058 | $ | 150,547 | ||||
Commercial paper | 423,020 | 6,996,950 | ||||||
Repurchase agreements | 2,200,739 | 2,698,619 | ||||||
Securities purchased | 23,786 | — | ||||||
Derivative liabilities, at fair value | 36,855 | 31,952 | ||||||
Dividends payable | 34,747 | 34,588 | ||||||
Interest payable | 11,310 | 12,039 | ||||||
Accrued compensation and benefits | 43,301 | 82,465 | ||||||
Accounts payable, accrued expenses and other liabilities | 80,593 | 82,576 | ||||||
Temporary subordinated loan payable | — | 75,000 | ||||||
Securitization financing for loans held for investment, net | 6,126,317 | 6,642,198 | ||||||
Long-term debt | 323,918 | 324,686 | ||||||
Total liabilities | 9,457,644 | 17,131,620 | ||||||
Shareholders’ equity: | ||||||||
Common stock, 173,848 and 172,854 shares | 1,738 | 1,729 | ||||||
Additional paid-in capital | 1,557,713 | 1,547,128 | ||||||
Employee stock loan receivable including accrued interest (551 shares) | (4,081 | ) | (4,018 | ) | ||||
Deferred compensation | (17,467 | ) | (15,602 | ) | ||||
Accumulated other comprehensive loss | (4,501 | ) | (977 | ) | ||||
Accumulated deficit | (231,453 | ) | (224,090 | ) | ||||
Total shareholders’ equity | 1,301,949 | 1,304,170 | ||||||
Total liabilities and shareholders’ equity | $ | 10,759,593 | $ | 18,435,790 | ||||