Exhibit 99.1
Contacts:
Media: Lauren Burk at 703-469-1004 orlburk@fbr.com
Investors: Paul Beattie at 703-312-9673 orpbeattie@fbr.com
FBR Announces Second Quarter 2006 Financial Results
ARLINGTON, Va., July 27, 2006 – Friedman, Billings, Ramsey Group, Inc. (NYSE: FBR) today announced its results for the quarter ended June 30, 2006. The company reported a net after-tax loss for the quarter of $30.2 million, or $0.18 per share (diluted), compared to after-tax earnings of $53.2 million, or $0.31 per share (diluted), for the second quarter of 2005. FBR’s net after-tax loss for the first six months of 2006 was $3.7 million, or $0.02 per share (diluted), compared to earnings of $77.7 million, or $0.46 per share (diluted), for the first six months of 2005.
The second quarter results include a non-cash $42.2 million write-down – $0.25 per share (diluted) – of certain equity investments in the firm’s merchant banking portfolio. Of this amount, $26.8 million was previously reflected as Accumulated Other Comprehensive Loss on the company’s balance sheet at March 31, 2006 and is now being recognized through the income statement. These results also reflect what was essentially a breakeven quarter for capital markets and an average balance in FBR’s mortgage securities portfolio of only $1.1 billion.
Separately, subsequent to the end of the quarter the company has recognized a net gain that is estimated to be approximately $120 million – or $0.70 per share – associated with the issuance and sale of shares in FBR Capital Markets Corporation (FBR Capital Markets), the company’s newly formed capital markets subsidiary. Book value per share as of June 30, 2006 was $7.39, and the company estimates that book value, after taking into account the FBR Capital Markets transaction, is $8.09 per share.
The company also announced a change in its dividend policy beginning in the third quarter of 2006. Going forward, the company will adopt a variable dividend policy under which dividends will be paid primarily out of current earnings generated at the real estate investment trust (REIT).
“Historically, it has always been the intent of the company to retain the earnings of its capital markets businesses,” said Eric F. Billings, FBR Chairman and Chief Executive Officer. “Having completed the FBR Capital Markets transaction, we believe it is appropriate to shift to a variable dividend policy that gives us the flexibility to maintain book value in the REIT while retaining earnings in our capital markets businesses to help fuel their growth.”
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Principal Investment and Mortgage Finance
During the quarter, FBR began to redeploy capital made available by the mortgage-backed securities portfolio repositioning in the first quarter. The company expects to substantially complete this reinvestment activity in the third quarter. Additionally, First NLC (FNLC), the company’s non-conforming mortgage subsidiary, returned to profitability in the second quarter with pre-tax operating earnings of $4.7 million compared to a $4.8 million pre-tax operating loss in the previous quarter. The company expects to see improving results from principal investment and mortgage finance activities over the coming quarters.
Mortgage Portfolios
For the second quarter, FBR earned $126.4 million in interest on its mortgage investments compared to $135.1 million in the second quarter of 2005. The portfolio yield was 6.39% with a corresponding cost of funds of 5.38%. At the end of the quarter, the unpaid principal balance of the mortgage portfolio was approximately $8.6 billion.
The company’s investments in non-conforming mortgage loans averaged $6.0 billion with an average coupon of 7.23%, a one-month CPR of 33, and an ending net premium of $125.9 million, including deferred net origination costs. The net yield for the second quarter was 6.57% with a corresponding cost of funds of 5.41%. Pre-provision net interest margin totaled 92 basis points, net of 24 basis points of mortgage insurance costs.
The company’s investments in mortgage securities averaged $1.1 billion with an average coupon of 5.59%, a one-month CPR of 14.4, and an ending net premium of $14.8 million. The net yield for the second quarter was 5.43% with a corresponding cost of funds of 5.15%.
FNLC’s return to profitability was achieved in part by lowering its cost to originate to 177 basis points for the quarter ended June 30, 2006 while originating loans of $1.9 billion. This is a significant improvement from the first quarter of 2006 when FNLC’s cost to originate was 210 basis points and originations totaled $1.5 billion.
Merchant Banking
As of June 30, 2006, FBR made a determination in evaluating its merchant banking portfolio to recognize as “other than temporary impairments” the amounts by which the fair value of certain of its merchant banking investments were below their respective cost bases. As a result, FBR recognized a $42.2 million non-cash write-down in the value of the securities of five portfolio companies, $26.8 million of which had already been reflected in the company’s book value at the close of the first quarter of 2006. The decision to recognize the write-down relates to trading values as of June 30, 2006 and is not the result of any change in the company’s investment intent regarding these securities.
The merchant banking portfolio generated $4.1 million in dividends and $4.3 million in net realized gains during the quarter. When combined with the impairment charge, the merchant banking and long-term investments portfolio had a net loss of $34.2 million in the second quarter.
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The total value of FBR’s merchant banking portfolio and other long-term investments at the end of the quarter was $255.7 million compared to $306.0 million on March 31, 2006. Of this total, $214.2 million was held in the merchant banking and long-term investments portfolio and $41.5 million was held in alternative asset investments.
FBR Capital Markets Corporation
During the second quarter, FBR formed FBR Capital Markets Corporation, a taxable subsidiary that acts as a holding company for FBR’s capital markets businesses – investment banking, institutional brokerage, research, and its asset management businesses, including FBR-sponsored mutual funds and private wealth management. In July, FBR Capital Markets Corporation sold shares of its common stock to institutional and accredited investors in a private transaction valued at $270 million, giving the newly formed subsidiary an initial market value of $960 million. FBR Group retains a beneficial 71.9% ownership interest in FBR Capital Markets, whose results will continue to be consolidated.
FBR believes this transaction will make it easier for investors to properly value what the company considers to be an exceptionally strong investment banking platform. Specifically, for two of the last three years FBR was the #1 ranked book-running manager for U.S. issuers of common stock in initial public offerings and Rule 144A offerings on a combined basis.1 FBR Capital Markets’ businesses have achieved an average annualized pre-tax return on average equity in excess of 50% over the past five calendar years.2 In addition, as part of this transaction, FBR Capital Markets has added an important strategic investor, Crestview Partners, a private equity firm founded by a group of former Goldman Sachs partners and colleagues who had served in leadership roles in the firm’s senior management and private equity business. FBR expects that Crestview, through its contribution of two board members will add great value to its business. Most importantly, this transaction provides FBR the financial resources to take advantage of market opportunities and to build out its merchant banking, trading, mergers and acquisitions, and asset management businesses consistent with its strategic plan.
In the second quarter of 2006, the three business units comprising FBR Capital Markets – equity capital markets, fixed income capital markets and asset management – generated net revenue of $91.4 million and pre-tax earnings of $0.9 million. The results by business unit were:
FBR Capital Markets (in millions) | Pre-Tax Income/(Loss) | |||
Equity Capital Markets | $ | 5.4 | ||
Fixed Income Capital Markets | (1.8 | ) | ||
Asset Management and Private Wealth | (2.7 | ) | ||
Total | $ | 0.9 |
Equity Capital Markets
In the second quarter of 2006, FBR helped raise $1.5 billion for its clients in eight transactions, five of which it lead managed. In addition, FBR completed ten advisory assignments. Investment banking revenues for the quarter totaled $51.4 million, down from $101.2 million in the second quarter of 2005. For the first six months, FBR participated in 14 merger and acquisition and advisory assignments and helped clients raise a total of $6.8 billion in 24 capital-raising transactions – 17 of which it lead managed.
3
For the first six months of 2006, FBR ranked #1 in U.S. 144A common equity private placements, was the #1 book-running manager of common stock capital raises for U.S. companies with a market capitalization of $1 billion or less, and ranked #7 for initial public offerings and 144A common stock private placements combined.3
Institutional brokerage revenues for the first two quarters of 2006, net of related interest expense, rose about 27% to $64.7 million from $51.1 million in the first half of 2005. FBR continues to focus on building and extending trading relationships, particularly with middle market buy-side firms that value both the quality of FBR’s research and its trading expertise.
Fixed Income Capital Markets
Net revenue from FBR’s fixed income capital markets business was $3.1 million for the second quarter of 2006. The fixed income business continues to be challenged by the shape of the yield curve which flattened further and ended the second quarter inverted. This created a disincentive for investment in longer term securities, slowing the pace of underwritings and fixed income trading dramatically. During the first six months of 2006, FBR completed seven ABS underwritings – four of them lead managed – valued at $3.7 billion. FBR’s fixed income group continues to deploy capital in sectors of the mortgage-backed securities and asset-backed securities markets that offer attractive risk adjusted returns. The company is continuing to focus on and explore alternatives that will maximize the return on capital in this business.
Asset Management
Base management and incentive fees from FBR’s asset management businesses were $5.0 million for the second quarter compared to base and incentive fees of $6.1 million in the first quarter of 2006. Total assets under management were $2.3 billion as of June 30, 2006, down from $2.4 billion on March 31, 2006. Mutual fund assets currently managed by FBR Fund Advisers, Inc. totaled $1.8 billion at the end of the quarter compared to $2.2 billion at the close of the second quarter of 2005 and $1.8 billion at the close of the first quarter of 2006.
Outlook
“We are very pleased to have successfully completed our recent FBR Capital Markets transaction,” said Mr. Billings. “Having built one of the leading capital markets franchises in the United States, it was gratifying to see the enthusiasm with which the offering was received despite what was a challenging market environment. This event greatly enhances our opportunities for growth while generating meaningful value for shareholders. In looking ahead, we find ourselves fortunate to have a group of talented and dedicated employees, a knowledgeable and committed new strategic investor, and a strong capital markets platform with numerous growth opportunities.”
The firm will host an earnings conference call tomorrow morning, Friday, July 28, 2006 at 9:00 A.M. U.S. EDT. Investors wishing to listen to the earnings conference call at 9:00 A.M. U.S. EDT 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.
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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, San Francisco and Seattle. 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, see http://www.fbr.com.
* | Friedman, Billings, Ramsey & Co., Inc. |
1 | 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, on a combined basis. Transactions priced between 1/1/03 through 12/31/03 and 1/1/05 through 12/31/05, respectively, with apportioned credit to all book-runners. Includes only rank eligible transactions. |
2 | Pre-tax return on average equity as calculated for the legal entities contributed by FBR Group to the formation of FBR Capital Markets: net income before taxes / ((current year ending shareholders’ equity + prior year ending shareholders’ equity) / 2). |
3 | Source: Dealogic. Relates to total deal value of all common stock or common equity (stock and units combined), as noted, offered for: all U.S. issuers in transactions exempt from SEC registration pursuant to rule 144A; U.S. issuers valued at $1 billion or less in IPOs or follow-ons, including private placements; and all U.S. issuers in IPOs or transactions exempt from SEC registration pursuant to rule 144A combined, respectively. Transactions priced between 1/1/06 and 6/30/06, with apportioned credit to all book-runners. Includes only rank eligible transactions. |
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.
# # #
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FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (Unaudited) |
Quarter ended June 30, | |||||||||||||
2006 | % | 2005 | % | ||||||||||
REVENUES: | |||||||||||||
Investment banking: | |||||||||||||
Capital raising | $ | 45,117 | 40.8 | % | $ | 95,039 | 45.9 | % | |||||
Advisory | 6,281 | 5.7 | % | 6,180 | 3.0 | % | |||||||
Institutional brokerage: | |||||||||||||
Principal transactions | 2,630 | 2.4 | % | 4,680 | 2.3 | % | |||||||
Agency commissions | 28,491 | 25.8 | % | 18,677 | 9.0 | % | |||||||
Mortgage trading interest | 17,143 | 15.5 | % | — | 0.0 | % | |||||||
Mortgage trading net investment loss | (209 | ) | -0.2 | % | — | 0.0 | % | ||||||
Asset management: | |||||||||||||
Base management fees | 5,065 | 4.6 | % | 7,813 | 3.8 | % | |||||||
Incentive allocations and fees | (53 | ) | 0.0 | % | 730 | 0.4 | % | ||||||
Principal investment: | |||||||||||||
Interest | 113,613 | 102.7 | % | 116,724 | 56.3 | % | |||||||
Net investment (loss) income | (32,159 | ) | -29.1 | % | 17,738 | 8.6 | % | ||||||
Dividends | 4,059 | 3.7 | % | 8,371 | 4.0 | % | |||||||
Mortgage Banking: | |||||||||||||
Interest | 21,267 | 19.2 | % | 18,118 | 8.7 | % | |||||||
Net investment income | 29,401 | 26.6 | % | 14,559 | 7.0 | % | |||||||
Other | 5,465 | 4.8 | % | 3,455 | 1.7 | % | |||||||
Total revenues | 246,111 | 222.5 | % | 312,084 | 150.7 | % | |||||||
Interest expense | 128,189 | 115.9 | % | 103,725 | 50.2 | % | |||||||
Provision for loan losses | 7,348 | 6.6 | % | 1,138 | 0.5 | % | |||||||
Revenues, net of interest expense and provision for loan losses | 110,574 | 100.0 | % | 207,221 | 100.0 | % | |||||||
NON-INTEREST EXPENSES: | |||||||||||||
Compensation and benefits | 71,732 | 64.9 | % | 80,015 | 38.6 | % | |||||||
Professional services | 12,925 | 11.7 | % | 20,186 | 9.7 | % | |||||||
Business development | 8,604 | 7.8 | % | 11,962 | 5.8 | % | |||||||
Clearing and brokerage fees | 3,082 | 2.8 | % | 2,040 | 1.0 | % | |||||||
Occupancy and equipment | 12,232 | 11.2 | % | 8,772 | 4.3 | % | |||||||
Communications | 6,013 | 5.4 | % | 5,300 | 2.6 | % | |||||||
Other operating expenses | 24,993 | 22.6 | % | 12,540 | 6.1 | % | |||||||
Total non-interest expenses | 139,581 | 126.4 | % | 140,815 | 68.1 | % | |||||||
Net (loss) income before income taxes | (29,007 | ) | -26.4 | % | 66,406 | 31.9 | % | ||||||
Income tax provision | 1,240 | 1.1 | % | 13,163 | 6.4 | % | |||||||
Net (loss) income | $ | (30,247 | ) | -27.5 | % | $ | 53,243 | 25.5 | % | ||||
Basic (loss) earnings per share | $ | (0.18 | ) | $ | 0.31 | ||||||||
Diluted (loss) earnings per share | $ | (0.18 | ) | $ | 0.31 | ||||||||
Weighted average shares - basic | 171,294 | 169,364 | |||||||||||
Weighted average shares - diluted | 171,294 | 170,101 | |||||||||||
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (Unaudited) |
Six Months Ended June 30, | |||||||||||||
2006 | % | 2005 | % | ||||||||||
REVENUES: | |||||||||||||
Investment banking: | |||||||||||||
Capital raising | $ | 111,452 | 38.8 | % | $ | 181,852 | 49.1 | % | |||||
Advisory | 9,150 | 3.2 | % | 7,318 | 2.0 | % | |||||||
Institutional brokerage: | |||||||||||||
Principal transactions | 9,255 | 3.2 | % | 10,307 | 2.8 | % | |||||||
Agency commissions | 51,899 | 18.1 | % | 40,834 | 11.0 | % | |||||||
Mortgage trading interest | 34,793 | 12.1 | % | — | 0.0 | % | |||||||
Mortgage trading net investment loss | (1,446 | ) | -0.5 | % | — | 0.0 | % | ||||||
Asset management: | |||||||||||||
Base management fees | 10,162 | 3.5 | % | 16,281 | 4.4 | % | |||||||
Incentive allocations and fees | 955 | 0.3 | % | 355 | 0.1 | % | |||||||
Principal investment: | |||||||||||||
Interest | 262,739 | 91.5 | % | 215,620 | 58.2 | % | |||||||
Net investment (loss) income | (6,878 | ) | -2.4 | % | 13,880 | 3.7 | % | ||||||
Dividends | 7,758 | 2.7 | % | 11,811 | 3.2 | % | |||||||
Mortgage Banking: | |||||||||||||
Interest | 44,380 | 15.4 | % | 27,610 | 7.5 | % | |||||||
Net investment income | 40,139 | 14.0 | % | 18,040 | 4.9 | % | |||||||
Other | 10,452 | 3.7 | % | 5,951 | 1.6 | % | |||||||
Total revenues | 584,810 | 203.6 | % | 549,859 | 148.5 | % | |||||||
Interest expense | 281,672 | 98.0 | % | 178,547 | 48.2 | % | |||||||
Provision for loan losses | 15,740 | 5.6 | % | 1,138 | 0.3 | % | |||||||
Revenues, net of interest expense and provision for loan losses | 287,398 | 100.0 | % | 370,174 | 100.0 | % | |||||||
NON-INTEREST EXPENSES: | |||||||||||||
Compensation and benefits | 155,229 | 54.0 | % | 155,814 | 42.1 | % | |||||||
Professional services | 27,190 | 9.5 | % | 33,836 | 9.1 | % | |||||||
Business development | 22,689 | 7.9 | % | 27,400 | 7.4 | % | |||||||
Clearing and brokerage fees | 5,398 | 1.9 | % | 4,072 | 1.1 | % | |||||||
Occupancy and equipment | 23,474 | 8.2 | % | 14,496 | 3.9 | % | |||||||
Communications | 11,620 | 4.0 | % | 9,332 | 2.5 | % | |||||||
Other operating expenses | 45,970 | 16.0 | % | 28,834 | 7.8 | % | |||||||
Total non-interest expenses | 291,570 | 101.5 | % | 273,784 | 74.0 | % | |||||||
Net (loss) income before income taxes | (4,172 | ) | -1.5 | % | 96,390 | 26.0 | % | ||||||
Income tax (benefit) provision | (479 | ) | -0.2 | % | 18,735 | 5.1 | % | ||||||
Net (loss) income | $ | (3,693 | ) | -1.3 | % | $ | 77,655 | 20.9 | % | ||||
Basic (loss) earnings per share | $ | (0.02 | ) | $ | 0.46 | ||||||||
Diluted (loss) earnings per share | $ | (0.02 | ) | $ | 0.46 | ||||||||
Weighted average shares - basic | 171,012 | 168,741 | |||||||||||
Weighted average shares - diluted | 171,012 | 169,670 | |||||||||||
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. Financial & Statistical Supplement - Operating Results (Dollars in thousands, except per share data) (Unaudited) |
For the six months ended June 30, 2006 | Q-2 06 | Q-1 06 | ||||||||||
Revenues | ||||||||||||
Investment banking: | ||||||||||||
Capital raising | $ | 111,452 | $ | 45,117 | $ | 66,335 | ||||||
Advisory | 9,150 | 6,281 | 2,869 | |||||||||
Institutional brokerage: | ||||||||||||
Principal transactions | 9,255 | 2,630 | 6,625 | |||||||||
Agency commissions | 51,899 | 28,491 | 23,408 | |||||||||
Mortgage trading interest | 34,793 | 17,143 | 17,650 | |||||||||
Mortgage trading net investment loss | (1,446 | ) | (209 | ) | (1,237 | ) | ||||||
Asset management: | ||||||||||||
Base management fees | 10,162 | 5,065 | 5,097 | |||||||||
Incentive allocations and fees | 955 | (53 | ) | 1,008 | ||||||||
Principal investment: | ||||||||||||
Interest | 262,739 | 113,613 | 149,126 | |||||||||
Net investment (loss) income | (6,878 | ) | (32,159 | ) | 25,281 | |||||||
Dividends | 7,758 | 4,059 | 3,699 | |||||||||
Mortgage Banking: | ||||||||||||
Interest | 44,380 | 21,267 | 23,113 | |||||||||
Net investment income | 40,139 | 29,401 | 10,738 | |||||||||
Other | 10,452 | 5,465 | 4,987 | |||||||||
Total revenues | 584,810 | 246,111 | 338,699 | |||||||||
Interest expense | 281,672 | 128,189 | 153,483 | |||||||||
Provision for loan losses | 15,740 | 7,348 | 8,392 | |||||||||
Revenues, net of interest expense and provision for loan losses | 287,398 | 110,574 | 176,824 | |||||||||
Non-interest expenses | ||||||||||||
Compensation and benefits | 155,229 | 71,732 | 83,497 | |||||||||
Professional services | 27,190 | 12,925 | 14,265 | |||||||||
Business development | 22,689 | 8,604 | 14,085 | |||||||||
Clearing and brokerage fees | 5,398 | 3,082 | 2,316 | |||||||||
Occupancy and equipment | 23,474 | 12,232 | 11,242 | |||||||||
Communications | 11,620 | 6,013 | 5,607 | |||||||||
Other operating expenses | 45,970 | 24,993 | 20,977 | |||||||||
Total non-interest expenses | 291,570 | 139,581 | 151,989 | |||||||||
Net (loss) income before income taxes | (4,172 | ) | (29,007 | ) | 24,835 | |||||||
Income tax (benefit) provision | (479 | ) | 1,240 | (1,719 | ) | |||||||
Net (loss) income | $ | (3,693 | ) | $ | (30,247 | ) | $ | 26,554 | ||||
Net (loss) income before income taxes as a percentage of net revenue | -1.5 | % | -26.2 | % | 14.0 | % | ||||||
ROE (annualized) | -0.6 | % | -9.4 | % | 8.2 | % | ||||||
ROE (annualized-excluding AOCI) (1) | -0.6 | % | -9.5 | % | 8.1 | % | ||||||
Total shareholders’ equity | $ | 1,270,361 | $ | 1,270,361 | $ | 1,301,949 | ||||||
Total shareholders’ equity, net of AOCI (1) | $ | 1,250,117 | $ | 1,250,117 | $ | 1,306,450 | ||||||
Basic earnings (loss) per share | $ | (0.02 | ) | $ | (0.18 | ) | $ | 0.16 | ||||
Diluted earnings (loss) per share | $ | (0.02 | ) | $ | (0.18 | ) | $ | 0.16 | ||||
Ending shares outstanding (in thousands) | 171,812 | 171,812 | 171,236 | |||||||||
Book value per share | $ | 7.39 | $ | 7.39 | $ | 7.60 | ||||||
Book value per share, net of AOCI (1) | $ | 7.28 | $ | 7.28 | $ | 7.63 | ||||||
Gross assets under management (in millions) | ||||||||||||
Managed accounts | $ | 386.8 | $ | 386.8 | $ | 383.9 | ||||||
Hedge & offshore funds | 125.8 | 125.8 | 136.6 | |||||||||
Mutual funds | 1,750.6 | 1,750.6 | 1,849.5 | |||||||||
Private equity and venture capital funds | 48.2 | 48.2 | 50.5 | |||||||||
Total | $ | 2,311.4 | $ | 2,311.4 | $ | 2,420.5 | ||||||
Net assets under management (in millions) | ||||||||||||
Managed accounts | $ | 386.8 | $ | 386.8 | $ | 380.9 | ||||||
Hedge & offshore funds | 116.1 | 116.1 | 125.4 | |||||||||
Mutual funds | 1,742.6 | 1,742.6 | 1,843.4 | |||||||||
Private equity and venture capital funds | 46.7 | 46.7 | 49.1 | |||||||||
Total | $ | 2,292.2 | $ | 2,292.2 | $ | 2,398.8 | ||||||
Employee count | 2,651 | 2,651 | 2,531 | |||||||||
(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. |
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. Financial & Statistical Supplement - Operating Results (Dollars in thousands, except per share data) (Unaudited) |
For the year ending December 31, 2005 | Q-4 05 | Q-3 05 | Q-2 05 | Q-1 05 | ||||||||||||||||
Revenues | ||||||||||||||||||||
Investment banking: | ||||||||||||||||||||
Capital raising | $ | 356,753 | $ | 88,866 | $ | 86,035 | $ | 95,039 | $ | 86,813 | ||||||||||
Advisory | 17,759 | 7,415 | 3,026 | 6,180 | 1,138 | |||||||||||||||
Institutional brokerage: | ||||||||||||||||||||
Principal transactions | 17,950 | 3,788 | 4,348 | 4,680 | 5,627 | |||||||||||||||
Agency commissions | 82,778 | 21,006 | 20,445 | 18,677 | 22,157 | |||||||||||||||
Mortgage trading interest | 30,859 | 19,555 | 11,304 | — | — | |||||||||||||||
Mortgage trading net investment loss | (3,820 | ) | (1,419 | ) | (2,401 | ) | — | — | ||||||||||||
Asset management: | ||||||||||||||||||||
Base management fees | 30,348 | 6,153 | 7,914 | 7,813 | 8,468 | |||||||||||||||
Incentive allocations and fees | 1,929 | 742 | 832 | 730 | (375 | ) | ||||||||||||||
Principal investment: | ||||||||||||||||||||
Interest | 549,832 | 189,811 | 144,401 | 116,724 | 98,896 | |||||||||||||||
Net investment (loss) income | (239,754 | ) | (258,500 | ) | 4,866 | 17,738 | (3,858 | ) | ||||||||||||
Dividends | 36,622 | 16,039 | 8,772 | 8,371 | 3,440 | |||||||||||||||
Mortgage Banking: | ||||||||||||||||||||
Interest | 87,958 | 30,965 | 29,383 | 18,118 | 9,492 | |||||||||||||||
Net investment (loss) income | 13,741 | (21,899 | ) | 17,600 | 14,559 | 3,481 | ||||||||||||||
Other | 12,351 | 3,024 | 3,376 | 3,455 | 2,496 | |||||||||||||||
Total revenues | 995,306 | 105,546 | 339,901 | 312,084 | 237,775 | |||||||||||||||
Interest expense | 546,313 | 211,393 | 156,373 | 103,725 | 74,822 | |||||||||||||||
Provision for loan losses | 14,291 | 8,263 | 4,890 | 1,138 | — | |||||||||||||||
Revenues, net of interest expense and provision for loan losses | 434,702 | (114,110 | ) | 178,638 | 207,221 | 162,953 | ||||||||||||||
Non-interest expenses | ||||||||||||||||||||
Compensation and benefits | 331,492 | 87,330 | 88,348 | 80,015 | 75,799 | |||||||||||||||
Professional services | 66,550 | 16,556 | 16,158 | 20,186 | 13,650 | |||||||||||||||
Business development | 46,648 | 10,433 | 8,815 | 11,962 | 15,438 | |||||||||||||||
Clearing and brokerage fees | 8,882 | 2,447 | 2,363 | 2,040 | 2,032 | |||||||||||||||
Occupancy and equipment | 34,044 | 10,151 | 9,397 | 8,772 | 5,724 | |||||||||||||||
Communications | 20,634 | 5,741 | 5,561 | 5,300 | 4,032 | |||||||||||||||
Other operating expenses | 70,679 | 24,984 | 16,861 | 12,540 | 16,294 | |||||||||||||||
Total non-interest expenses | 578,929 | 157,642 | 147,503 | 140,815 | 132,969 | |||||||||||||||
Net (loss) income before income taxes | (144,227 | ) | (271,752 | ) | 31,135 | 66,406 | 29,984 | |||||||||||||
Income tax provision (benefit) | 26,683 | (142 | ) | 8,090 | 13,163 | 5,572 | ||||||||||||||
Net (loss) income | $ | (170,910 | ) | $ | (271,610 | ) | $ | 23,045 | $ | 53,243 | $ | 24,412 | ||||||||
Net (loss) income before income taxes as a percentage of net revenue | -33.2 | % | 238.1 | % | 17.4 | % | 32.0 | % | 18.4 | % | ||||||||||
ROE (annualized) | -11.9 | % | -80.5 | % | 6.3 | % | 14.3 | % | 6.4 | % | ||||||||||
ROE (annualized-excluding AOCI) (1) | -11.7 | % | -74.7 | % | 5.9 | % | 13.8 | % | 6.0 | % | ||||||||||
Total shareholders’ equity | $ | 1,304,170 | $ | 1,304,170 | $ | 1,394,137 | $ | 1,519,021 | $ | 1,458,861 | ||||||||||
Total shareholders’ equity, net of AOCI (1) | $ | 1,305,147 | $ | 1,305,147 | $ | 1,603,305 | $ | 1,631,955 | $ | 1,629,293 | ||||||||||
Basic earnings (loss) per share | $ | (1.01 | ) | $ | (1.60 | ) | $ | 0.14 | $ | 0.31 | $ | 0.15 | ||||||||
Diluted earnings (loss) per share | $ | (1.01 | ) | $ | (1.60 | ) | $ | 0.14 | $ | 0.31 | $ | 0.14 | ||||||||
Ending shares outstanding (in thousands) | 170,264 | 170,264 | 169,891 | 169,617 | 169,214 | |||||||||||||||
Book value per share | $ | 7.66 | $ | 7.66 | $ | 8.21 | $ | 8.96 | $ | 8.62 | ||||||||||
Book value per share, net of AOCI (1) | $ | 7.67 | $ | 7.67 | $ | 9.44 | $ | 9.62 | $ | 9.63 | ||||||||||
Gross assets under management (in millions) |
| |||||||||||||||||||
Managed accounts | $ | 463.4 | $ | 463.4 | $ | 437.2 | $ | 510.4 | $ | 242.4 | ||||||||||
Hedge & offshore funds | 154.3 | 154.3 | 239.0 | 463.1 | 601.1 | |||||||||||||||
Mutual funds | 1,883.3 | 1,883.3 | 2,078.1 | 2,185.0 | 2,213.9 | |||||||||||||||
Private equity and venture capital funds | 56.2 | 56.2 | 42.7 | 41.3 | 69.5 | |||||||||||||||
Total | $ | 2,557.2 | $ | 2,557.2 | $ | 2,797.0 | $ | 3,199.8 | $ | 3,126.9 | ||||||||||
Net assets under management (in millions) |
| |||||||||||||||||||
Managed accounts | $ | 329.5 | $ | 329.5 | $ | 255.5 | $ | 257.3 | $ | 223.0 | ||||||||||
Hedge & offshore funds | 150.5 | 150.5 | 227.8 | 401.1 | 490.3 | |||||||||||||||
Mutual funds | 1,872.8 | 1,872.8 | 2,069.9 | 2,176.6 | 2,204.2 | |||||||||||||||
Private equity and venture capital funds | 46.8 | 46.8 | 39.9 | 37.8 | 66.3 | |||||||||||||||
Total | $ | 2,399.6 | $ | 2,399.6 | $ | 2,593.1 | $ | 2,872.8 | $ | 2,983.8 | ||||||||||
Employee count | 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. |
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts) (Unaudited) |
ASSETS | 30-Jun-06 | 31-Dec-05 | ||||||
Cash and cash equivalents | $ | 75,346 | $ | 238,615 | ||||
Restricted cash | 5,656 | 6,101 | ||||||
Receivables | 207,292 | 259,519 | ||||||
Investments: | ||||||||
Mortgage-backed securities, at fair value | 3,212,655 | 8,002,561 | ||||||
Loans held for investment, net | 5,632,519 | 6,841,266 | ||||||
Loans held for sale, net | 879,584 | 963,807 | ||||||
Long-term investments | 255,748 | 347,644 | ||||||
Reverse repurchase agreements | 422,799 | 283,824 | ||||||
Trading securities, at fair value | 1,027,084 | 1,032,638 | ||||||
Due from clearing broker | 69,008 | 71,065 | ||||||
Derivative assets, at fair value | 109,563 | 70,636 | ||||||
Goodwill | 162,765 | 162,765 | ||||||
Intangible assets, net | 23,789 | 26,485 | ||||||
Furniture, equipment and leasehold improvements, net | 45,059 | 46,382 | ||||||
Prepaid expenses and other assets | 83,242 | 82,482 | ||||||
Total assets | $ | 12,212,109 | $ | 18,435,790 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Liabilities: | ||||||||
Trading account securities sold short but not yet purchased, at fair value | $ | 130,561 | $ | 150,547 | ||||
Commercial paper | 2,105,211 | 6,996,950 | ||||||
Repurchase agreements | 2,532,821 | 2,698,619 | ||||||
Securities purchased | 105,448 | — | ||||||
Derivative liabilities, at fair value | 39,798 | 31,952 | ||||||
Dividends payable | 34,823 | 34,588 | ||||||
Interest payable | 10,428 | 12,039 | ||||||
Accrued compensation and benefits | 58,304 | 82,465 | ||||||
Accounts payable, accrued expenses and other liabilities | 82,059 | 82,576 | ||||||
Temporary subordinated loan payable | — | 75,000 | ||||||
Securitization financing for loans held for investment, net | 5,518,098 | 6,642,198 | ||||||
Long-term debt | 324,197 | 324,686 | ||||||
Total liabilities | 10,941,748 | 17,131,620 | ||||||
Shareholders’ equity: | ||||||||
Common stock, 174,132 and 172,854 shares | 1,741 | 1,729 | ||||||
Additional paid-in capital | 1,560,669 | 1,547,128 | ||||||
Employee stock loan receivable including accrued interest (399 and 551 shares) | (2,999 | ) | (4,018 | ) | ||||
Deferred compensation, net | (13,626 | ) | (15,602 | ) | ||||
Accumulated other comprehensive income (loss), net of taxes | 20,244 | (977 | ) | |||||
Accumulated deficit | (295,668 | ) | (224,090 | ) | ||||
Total shareholders’ equity | 1,270,361 | 1,304,170 | ||||||
Total liabilities and shareholders’ equity | $ | 12,212,109 | $ | 18,435,790 | ||||