FBR & Co (FBRC) 8-K Results of Operations and Financial Condition

Contacts:

Media: Lauren Burk at 703.469.1004 or lburk@fbr.com

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

FBR Capital Markets Reports Fourth Quarter and

Full Year 2007 Financial Results

ARLINGTON, VA, February 20, 2008 - FBR Capital Markets Corporation (NASDAQ: FBCM) (FBR Capital Markets) today reported a net after-tax loss of $27.8 million, or $0.43 per share (diluted), for the quarter ended December 31, 2007, compared to net after-tax income of $7.0 million, or $0.11 per share (diluted) in the fourth quarter of 2006.

For the year ended December 31, 2007, FBR Capital Markets had net after-tax earnings of $5.2 million, or $0.08 per share (diluted), compared to a net after-tax loss of $9.8 million, or $0.18 per share (diluted), in 2006. Net revenues for the full year 2007 were $479.6 million compared to net revenues of $364.1 million in 2006.

The fourth quarter results include $10.7 million in expenses that the company considers not to be recurring - primarily severance costs and unusually high transaction expenses - and $9.3 million of impairment charges and losses on merchant banking and other long-term investments.  Absent these costs and the portfolio write-downs, the fourth quarter loss would have been $15.8 million.

At the close of the fourth quarter, FBR Capital Markets had $506.7 million in equity, $383.6 million of cash, no debt, and its book value was $7.91 per share compared to $8.25 per share at the end of the third quarter of 2007.

“Prior to the break in the global credit and capital markets in August we were headed for the best year in our history,” said Richard J. Hendrix, President and Chief Operating Officer of FBR Capital Markets. “Obviously, overall capital markets conditions deteriorated meaningfully in the last five months of 2007, and our franchise was not immune to the fallout. Despite the very difficult second half environment, we earned $5.2 million for the year, investment banking revenues increased 51% year over year, and our merger and acquisition advisory and equity sales and trading groups had record performances. ”

Equity Capital Markets

In the fourth quarter, FBR Capital Markets generated investment banking revenues of $30.6 million compared to $66.2 million in the third quarter of 2007 and $81.1 million in the fourth quarter of 2006. During the fourth quarter of 2007, the firm raised a total of $1.7 billion in seven capital markets transactions, three of which were lead managed. During the same period, FBR Capital Markets’ merger and acquisition advisory group completed seven assignments and generated revenues of $5.0 million.

For the full year, investment banking revenues were $323.6 million compared with $214.7 million in 2006. During the year the firm completed 48 capital raising transactions, 25 of which were sole or lead managed, and raised a total of $11.6 billion. FBR Capital Markets’ merger and acquisition advisory group participated in 40 transactions and generated $34.1 million in fees compared to $24.1 million in 2006.

In its institutional brokerage business, FBR Capital Markets recorded agency commissions and principal transactions revenue of $29.1 million in the fourth quarter of 2007 compared to $27.2 million in the third quarter of 2007 and $24.7 million in the fourth quarter of 2006. Agency commissions and principal transaction revenue for all of 2007 were $114.8 million compared to $106.7 million in 2006.

Asset Management

In FBR Capital Markets’ asset management/private wealth business, base management and incentive fees were $5.6 million for the fourth quarter of 2007, compared to $6.2 million in the third quarter of 2007 and $5.5 million in the fourth quarter of 2006. Base management and incentive fees for the full year were $24.0 million compared to $21.2 million in 2006. Assets under management as of December 31, 2007 were $2.5 billion compared to $2.7 billion at the end of the third quarter of 2007 and $2.4 billion as of December 31, 2006.

Merchant Banking

As of December 31, 2007 FBR Capital Markets had 11 merchant banking portfolio investments with an investment value of $58.3 million, compared to $59.6 million at the close of the third quarter of 2007.

Looking Ahead

“Despite the second half environment, FBR Capital Markets came out of 2007 a broader, more dynamic and better positioned business,” said Eric F. Billings, Chairman and Chief Executive Officer. “The continued strong development and over 40% revenue increase of our M&A practice, the expansion of our international effort, and strong sales and trading performance are all important accomplishments.  At year end, we conducted an aggressive assessment of the company and took steps to reduce expenses appropriately in the face of challenging markets. Our balance sheet and liquidity position us well to manage through and ultimately prosper from the current environment. Our business has historically performed well in reaction to capital markets dislocations, and we believe we will be able to continue that track record.”

The firm will host an earnings conference call today, Wednesday, February 20, 2008 at 9:00 A.M. U.S. EDT. Investors wishing to listen to the call may do so via the web at: http://phx.corporate-ir.net/phoenix.zhtml?c=204322&p=irol-irhome. Replays of the web cast will be available after the call.

FBR Capital Markets Corporation (FBR Capital Markets), a majority-owned subsidiary of Friedman, Billings, Ramsey Group, Inc. (FBR), provides investment banking*, merger and acquisition advisory services*, institutional brokerage*, asset management and private wealth services. FBR Capital Markets focuses capital and financial expertise on eight industry sectors: consumer, diversified industrials, energy & natural resources, financial institutions, healthcare, insurance, real estate, and technology, media & telecom. FBR is headquartered in the Washington, D.C. metropolitan area with offices in Arlington, VA; Boston; Dallas; Houston; Irvine; New York; San Francisco; London, England; and Sydney, Australia. For more information, please visit www.fbrcapitalmarkets.com.

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

Statements in this release 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 on our web site (www.fbrcapitalmarkets.com) and in our prospectus, which we filed with the SEC October 5, 2007 and is available on our web site and on the SEC web site (www.sec.gov).

Financial data follows.

# # #

FBR CAPITAL MARKETS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (Unaudited)

	Quarter ended December 31,
	2007			%			2006			%
REVENUES:
Investment banking:
Capital raising	$	25,646			42.2	%	$	71,879			59.9	%
Advisory		4,973			8.2	%		9,172			7.6	%
Institutional brokerage:
Principal transactions		2,996			4.9	%		(8	)		0.0	%
Agency commissions		26,112			43.0	%		24,683			20.6	%
Mortgage trading interest		-			0.0	%		2,510			2.1	%
Mortgage trading net investment loss		-			0.0	%		(309	)		-0.3	%
Asset management:
Base management fees		5,542			9.1	%		5,051			4.2	%
Incentive allocations and fees		99			0.2	%		403			0.3	%
Interest income		3,625			6.0	%		5,235			4.4	%
Net investment (loss) income		(8,703	)		-14.3	%		3,288			2.7	%
Other		536			0.8	%		1,279			1.1	%
Total revenues		60,826			100.1	%		123,183			102.6	%
Interest expense		85			0.1	%		3,136			2.6	%
Revenues, net of interest expense		60,741			100.0	%		120,047			100.0	%
NON-INTEREST EXPENSES:
Compensation and benefits		53,049			87.3	%		61,326			51.1	%
Professional services		12,598			20.7	%		13,809			11.5	%
Business development		9,806			16.1	%		9,458			7.9	%
Clearing and brokerage fees		2,774			4.6	%		3,504			2.9	%
Occupancy and equipment		9,217			15.2	%		7,918			6.6	%
Communications		5,503			9.1	%		5,024			4.2	%
Other operating expenses		7,034			11.6	%		1,434			1.2	%
Total non-interest expenses		99,981			164.6	%		102,473			85.4	%
Net (loss) income before income taxes		(39,240	)		-64.6	%		17,574			14.6	%
Income tax (benefit) provision		(11,451	)		-18.9	%		10,614			8.8	%
Net (loss) income	$	(27,789	)		-45.7	%	$	6,960			5.8	%
Basic (loss) earnings per share	$	(0.43	)				$	0.11
Diluted (loss) earnings per share	$	(0.43	)				$	0.11
Weighted average shares  - basic		63,927						64,000
Weighted average shares  - diluted		63,927						64,000

FBR CAPITAL MARKETS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (Unaudited)

	Twelve Months Ended December 31,
	2007			%			2006			%
REVENUES:
Investment banking:
Capital raising	$	289,545			60.4	%	$	190,576			52.3	%
Advisory		34,063			7.1	%		24,148			6.6	%
Institutional brokerage:
Principal transactions		10,152			2.1	%		5,814			1.6	%
Agency commissions		104,633			21.8	%		100,855			27.7	%
Mortgage trading interest		-			0.0	%		51,148			14.0	%
Mortgage trading net investment loss		-			0.0	%		(3,298	)		-0.9	%
Asset management:
Base management fees		23,549			4.9	%		19,871			5.5	%
Incentive allocations and fees		401			0.1	%		1,327			0.4	%
Interest income		25,760			5.4	%		20,934			5.7	%
Net investment (loss) income		(4,497	)		-0.9	%		3,372			0.9	%
Other		1,290			0.2	%		3,892			1.2	%
Total revenues		484,896			101.1	%		418,639			115.0	%
Interest expense		5,337			1.1	%		54,543			15.0	%
Revenues, net of interest expense		479,559			100.0	%		364,096			100.0	%
NON-INTEREST EXPENSES:
Compensation and benefits		287,752			60.0	%		225,712			62.0	%
Professional services		45,303			9.4	%		43,712			12.0	%
Business development		37,356			7.8	%		33,772			9.3	%
Clearing and brokerage fees		12,373			2.6	%		11,715			3.2	%
Occupancy and equipment		33,197			6.9	%		30,039			8.3	%
Communications		22,434			4.7	%		20,039			5.5	%
Other operating expenses		15,868			3.3	%		12,219			3.3	%
Total non-interest expenses		454,283			94.7	%		377,208			103.6	%
Net income (loss) before income taxes		25,276			5.3	%		(13,112	)		-3.6	%
Income tax provision (benefit)		20,032			4.2	%		(3,271	)		-0.9	%
Net income (loss)	$	5,244			1.1	%	$	(9,841	)		-2.7	%
Basic earnings (loss) per share	$	0.08					$	(0.18	)
Diluted earnings (loss) per share	$	0.08					$	(0.18	)
Weighted average shares  - basic		64,123						54,137
Weighted average shares  - diluted		64,187						54,137

FBR CAPITAL MARKETS CORPORATION Financial & Statistical Supplement - Operating Results (Dollars in thousands, except per share data) (Unaudited)

	For the
	year ended
	December 31, 2007			Q-4 07			Q-3 07			Q-2 07			Q-1 07
Revenues
Investment banking:
Capital raising	$	289,545		$	25,646		$	49,691		$	116,972		$	97,236
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		104,633			26,112			26,219			28,526			23,776
Asset management:
Base management fees		23,549			5,542			6,119			6,360			5,528
Incentive allocations and fees		401			99			82			116			104
Interest		25,760			3,625			5,223			5,798			11,114
Net investment (loss) income		(4,497	)		(8,703	)		1,493			1,218			1,495
Other		1,290			536			213			465			76
Total revenues		484,896			60,826			106,488			169,759			147,823
Interest expense		5,337			85			316			274			4,662
Revenues, net of interest expense		479,559			60,741			106,172			169,485			143,161
Non-interest expenses
Compensation and benefits		287,752			53,049			67,035			89,877			77,791
Professional services		45,303			12,598			9,195			12,686			10,824
Business development		37,356			9,806			6,304			9,931			11,315
Clearing and brokerage fees		12,373			2,774			3,911			3,022			2,666
Occupancy and equipment		33,197			9,217			8,671			7,816			7,493
Communications		22,434			5,503			5,717			5,805			5,409
Other operating expenses		15,868			7,034			3,308			3,706			1,820
Total non-interest expenses		454,283			99,981			104,141			132,843			117,318
Net income (loss) before income taxes		25,276			(39,240	)		2,031			36,642			25,843
Income tax provision (benefit)		20,032			(11,451	)		1,764			14,882			14,837
Net income (loss)	$	5,244		$	(27,789	)	$	267		$	21,760		$	11,006
Net income (loss) before income taxes
as a percentage of net revenue		5.3	%		-64.6	%		1.9	%		21.6	%		18.1	%
ROE (annualized)		1.1	%		-22.4	%		0.2	%		17.2	%		8.9	%
Total shareholders' equity	$	506,740		$	506,740		$	527,045		$	528,341		$	501,858
Basic earnings (loss) per share	$	0.08		$	(0.43	)	$	-		$	0.34		$	0.17
Diluted earnings (loss) per share	$	0.08		$	(0.43	)	$	-		$	0.34		$	0.17
Ending shares outstanding (in thousands)		64,059			64,059			63,889			64,411			64,282
Book value per share	$	7.91		$	7.91		$	8.25		$	8.20		$	7.81
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		758			758			765			745			751

FBR CAPITAL MARKETS CORPORATION Financial & Statistical Supplement - Operating Results (Dollars in thousands, except per share data) (Unaudited)

	For the
	year ended
	December 31, 2006			Q-4 06			Q-3 06			Q-2 06			Q-1 06
Revenues
Investment banking:
Capital raising	$	190,576		$	71,879		$	6,852		$	45,510		$	66,335
Advisory		24,148			9,172			5,826			6,281			2,869
Institutional brokerage:
Principal transactions		5,814			(8	)		(1,658	)		1,760			5,720
Agency commissions		100,855			24,683			24,359			28,447			23,366
Mortgage trading interest		51,148			2,510			13,845			17,143			17,650
Mortgage trading net investment loss		(3,298	)		(309	)		(1,546	)		(209	)		(1,234	)
Asset management:
Base management fees		19,871			5,051			4,879			5,065			4,876
Incentive allocations and fees		1,327			403			(30	)		(54	)		1,008
Interest		20,934			5,235			8,439			4,647			2,613
Net investment income (loss)		3,372			3,288			(3,070	)		108			3,046
Other		3,892			1,279			482			816			1,315
Total revenues		418,639			123,183			58,378			109,514			127,564
Interest expense		54,543			3,136			16,390			18,155			16,862
Revenues, net of interest expense		364,096			120,047			41,988			91,359			110,702
Non-interest expenses
Compensation and benefits		225,712			61,326			46,398			54,436			63,552
Professional services		43,712			13,809			9,069			10,830			10,004
Business development		33,772			9,458			5,229			6,709			12,376
Clearing and brokerage fees		11,715			3,504			2,892			3,053			2,266
Occupancy and equipment		30,039			7,918			7,349			7,499			7,273
Communications		20,039			5,024			5,442			4,990			4,583
Other operating expenses		12,219			1,434			4,561			2,960			3,264
Total non-interest expenses		377,208			102,473			80,940			90,477			103,318
Net (loss) income before income taxes		(13,112	)		17,574			(38,952	)		882			7,384
Income tax (benefit) provision		(3,271	)		10,614			(16,346	)		(105	)		2,566
Net (loss) income	$	(9,841	)	$	6,960		$	(22,606	)	$	987		$	4,818
Net (loss) income before income taxes		-3.6	%		14.6	%		-92.8	%		1.0	%		6.7	%
as a percentage of net revenue
ROE (annualized)		-2.7	%		7.6	%		-24.9	%		1.6	%		7.7	%
Total shareholders' equity		484,388			484,388			476,098			248,965			253,812
Basic (loss) earnings per share	$	(0.18	)	$	0.11		$	(0.37	)	$	0.02		$	0.10
Diluted (loss) earnings per share	$	(0.18	)	$	0.11		$	(0.37	)	$	0.02		$	0.10
Ending shares outstanding (in thousands)		64,000			64,000			64,000			46,000			46,000
Book value per share	$	7.57		$	7.57		$	7.44		$	5.41		$	5.52
Gross assets under management (in millions)
Managed accounts	$	259.9		$	259.9		$	376.6		$	386.8		$	383.9
Hedge & offshore funds		97.5			97.5			102.1			125.8			136.6
Mutual funds		1,961.9			1,961.9			1,825.1			1,750.6			1,849.5
Private equity and venture capital funds		42.2			42.2			48.5			48.2			50.5
Total	$	2,361.5		$	2,361.5		$	2,352.3		$	2,311.4		$	2,420.5
Net assets under management (in millions)
Managed accounts	$	259.9		$	259.9		$	376.6		$	386.8		$	380.9
Hedge & offshore funds		96.4			96.4			98.3			116.1			125.4
Mutual funds		1,954.7			1,954.7			1,817.8			1,742.6			1,843.4
Private equity and venture capital funds		40.5			40.5			46.9			46.7			49.1
Total	$	2,351.5		$	2,351.5		$	2,339.6		$	2,292.2		$	2,398.8
Employee count		702			702			702			726			752

FBR CAPITAL MARKETS CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts) (Unaudited)

ASSETS	31-Dec-07		31-Dec-06
Cash and cash equivalents	$	383,558	$	151,417
Receivables
Investment banking		3,717		11,991
Asset management fees		1,991		2,197
Due from Affiliates		7,306		1,407
Other		17,909		27,418
Investments:
Mortgage-backed securities, at fair value		-		415,391
Long-term investments		84,076		32,343
Trading securities, at fair value		19,057		18,180
Due from clearing broker		-		28,691
Intangible assets, net		9,837		11,000
Furniture, equipment and leasehold improvements, net		29,092		31,222
Prepaid expenses and other assets		52,189		28,162
Total assets	$	608,732	$	759,419
LIABILITIES AND SHAREHOLDERS ’ EQUITY
Liabilities:
Trading account securities sold short but	$	206	$	202
not yet purchased, at fair value
Repurchase agreements		-		189,155
Accrued compensation and benefits		45,432		43,836
Accounts payable, accrued expenses and other liabilities		48,778		36,602
Due to clearing broker		7,512		-
Due to Affiliates		64		5,236
Total liabilities		101,992		275,031
Shareholders' equity:
Common stock		66		64
Additional paid-in capital		412,805		395,778
Accumulated other comprehensive income, net of taxes		622		543
Retained earnings		93,247		88,003
Total shareholders' equity		506,740		484,388
Total liabilities and shareholders' equity	$	608,732	$	759,419
Book Value per Share	$	7.91	$	7.57
Shares Outstanding		64,059		64,000