Filed by FBR Asset Investment Corporation
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12 under the Securities Act of 1934
Subject Company: FBR Asset Investment Corporation
Commission File No: 001-15049
[FBR Logo]
FINAL 18:40
Investor Contact: Kurt R. Harrington 703-312-9647 or kharrington@fbr.com
Media Contact: Robert Leahy 703-312-9745 or bleahy@fbr.com or
Bill Dixon 703-469-1092 or bdixon@fbr.com
FBR ASSET INVESTMENT CORPORATION REPORTS
EARNINGS PER SHARE OF $1.30 FOR THE FOURTH QUARTER OF 2002
RECORD FULL YEAR EARNINGS PER SHARE OF $5.72 INCREASE 37% OVER PRIOR YEAR
ARLINGTON, VA., JANUARY 29, 2003 - FBR Asset Investment Corporation (NYSE: FB)
today announced record earnings for 2002. Net income was $117.1 million or
$5.72 per fully diluted share for the year ended December 31, 2002 compared to
$23.1 million or $4.17 per fully diluted share for the year ended December 31,
2001. For the quarter ended December 31, 2002, net income was $32.9 million or
$1.30 per fully diluted share compared to $13.3 million or $1.62 per fully
diluted share for the prior year's comparable period. The Company had 26.2
million shares outstanding at December 31, 2002 and weighted average fully
diluted shares outstanding during the year were 20.5 million. FBR Asset
declared a quarterly dividend of $1.25 per share and an additional special
dividend of $.30 per share on December 10, 2002, to shareholders of record as of
December 27, 2002. The Company declared a total of $5.30 in dividends per share
for the year.
At December 31, 2002, FBR Asset Investment Corporation's (the Company) portfolio
of mortgage-backed securities (MBS) at fair value totaled $5.21 billion and the
Company's corresponding repurchase agreement liabilities were $4.54 billion
resulting in leverage of 7.0 to 1 at the end of the year. At December 31, 2002
the Company's investments in equity securities totaled $103.2 million. Total
equity at December 31, 2002 was $752.2 million and book value per outstanding
common share was $28.76.
The weighted average annual yield of the MBS portfolio was 4.28% for the fourth
quarter and the Company's weighted average interest rate of financing for the
mortgage-backed securities was 1.81% (including the cost of hedging) resulting
in a net interest spread of 2.47% during the fourth quarter. The spread in the
fourth quarter was down 26 basis points from 2.73% during the third quarter as a
result of lower asset yields partially offset by a lower cost of funds. During
the quarter, the Company experienced an average one-month CPR (constant pre-
payment rate) of 36%. The weighted average net interest spread for the full
year was 2.76%. The average unamortized cost of the Company's MBS portfolio was
101.65 at December 31, 2002.
Net interest income and gains from the MBS portfolio totaled $42.2 million in
the fourth quarter and $118.8 million for the full year, contributing
approximately 95.4% and 80.9% respectively, of the Company's net revenue (net
interest, dividends, fees and net gains). Dividends and net gains from equity
investments totaled $1.4 million in the fourth quarter and $20.0 million for the
full year representing approximately 3.2% and 13.6%, respectively of net
revenue. Fees earned from Friedman, Billings, Ramsey Group, Inc. (FBR)
investment banking transactions totaled $0.5 million during the fourth quarter
and $6.4 million for the full year contributing approximately 1.2% and 4.4%
respectively, of net revenue. The Company's return on equity (excluding Other
Comprehensive Income) for the fourth quarter (annualized) was 19.3% and for the
full year was 21.2% and its annualized dividend yield based upon yesterday's
closing price is 15.5%.
At year-end, the Company continued to maintain a low effective duration of 1.18
in its mortgage-backed securities portfolio. As of December 31, 2002 the Company
no longer owned any fixed rate mortgage pools in its portfolio. The Company
continued to own only adjustable rate mortgage-backed securities guaranteed by
Fannie Mae, Freddie Mac, or Ginnie Mae. At December 31, 2002, the weighted
average number of days to repricing of the Company's liabilities (including the
impact of hedging) was 141 days.
As previously disclosed, the Company issued 1.1 million shares of common stock
to an institutional investor on December 6, 2002 at a price of $33.65. Net
proceeds to the Company from this sale were approximately $37.0 million.
Commenting on the Company's performance for 2002, Eric Billings, Chairman and
CEO said, "2002 was a tremendous year for FBR Asset and its shareholders.
During the year, we increased book value by over 20% while growing the Company's
total equity from approximately $200 million at the end of 2001 to over $750
million at December 31, 2002. Additionally, we declared shareholder dividends
of $5.30 during the year which when combined with the growth in book value for
the year represented a total return on beginning equity of over 42%. These
results were achieved in what was an overall favorable environment for our
strategy, but the year also presented challenges in the form of unprecedented
prepayment activity within the mortgage-backed securities market and a volatile
equity market. I am pleased to say we were able to manage these challenges
effectively during the year, but we remain focused on what continues to be a
unique environment for our business. We believe many of the actions we have
taken during 2002 have prepared us to continue to perform well in 2003."
Richard J. Hendrix, President and COO, discussed the Company's pending merger,
"The process to complete our business combination with FBR Group (NYSE:FBR)
continues to progress well. We anticipate closing in the first quarter of 2003
based upon the time required to complete our shareholder vote process. We
continue to believe that the merger provides tremendous value to FBR Asset
shareholders and we look forward to becoming part of what will be the seventh
largest independent brokerage firm in the country."
FBR Asset is a real estate investment trust (REIT) that was formed in December
1997. FBR Asset invests in mortgage-backed securities and makes opportunistic
investments in debt and equity securities of companies engaged in real estate-
related and other businesses.
This news release shall not constitute an offer to sell or a solicitation of an
offer to buy securities of FBR Asset nor shall there be any sale of these
securities in any state or jurisdiction in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under the
securities laws of any such state or jurisdiction.
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A live webcast of the joint FBR/FBR Asset conference call on January 29th will
be available at 9 a.m. (Eastern Time) via http://www.corporate-ir.net/ireye/ir_
site.zhtml?ticker=FBR. Replays of the webcast will be available afterward.
# # #
THE COMPANY MAKES FORWARD-LOOKING STATEMENTS IN THIS DOCUMENT THAT ARE SUBJECT
TO RISKS AND UNCERTAINTIES IN ADDITION TO THOSE SET FORTH ABOVE. THESE FORWARD-
LOOKING STATEMENTS INCLUDE INFORMATION ABOUT POSSIBLE OR ASSUMED FUTURE RESULTS
OF THE COMPANY'S OPERATIONS. ALSO, WHEN THE COMPANY USES ANY OF THE WORDS
"BELIEVES," "EXPECTS," "ANTICIPATES" OR SIMILAR EXPRESSIONS, IT IS MAKING
FORWARD-LOOKING STATEMENTS. MANY POSSIBLE EVENTS OR FACTORS COULD AFFECT THE
COMPANY'S FUTURE FINANCIAL RESULTS AND PERFORMANCE. THIS COULD CAUSE THE
COMPANY'S RESULTS OR PERFORMANCE TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN
THE FORWARD-LOOKING STATEMENTS. THESE AND OTHER RISKS ARE DESCRIBED IN THE
COMPANY'S PUBLICLY FILED DOCUMENTS AND REPORTS THAT ARE AVAILABLE FROM THE
COMPANY AND FROM THE SEC.
PROXY INFORMATION
IN CONNECTION WITH THE PROPOSED MERGER OF FBR ASSET AND FRIEDMAN, BILLINGS,
RAMSEY GROUP, INC., FBR ASSET, FBR GROUP AND A MERGER SUBSIDIARY OF FBR ASSET
CALLED FOREST MERGER CORPORATION HAVE FILED A PRELIMINARY JOINT PROXY STATEMENT/
PROSPECTUS WITH THE SECURITIES AND EXCHANGE COMMISSION. IN ADDITION, FBR GROUP,
FBR ASSET AND FOREST MERGER CORPORATION WILL PREPARE AND FILE A DEFINITIVE JOINT
PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS REGARDING THE PROPOSED
TRANSACTION WITH THE SEC. INVESTORS AND SECURITY HOLDERS ARE URGED TO CAREFULLY
READ THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED
TRANSACTIONS WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT
INFORMATION. INVESTORS AND SECURITY HOLDERS MAY OBTAIN A FREE COPY OF THE
DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS (WHEN IT IS AVAILABLE) AND OTHER
DOCUMENTS CONTAINING INFORMATION ABOUT FBR GROUP AND FBR ASSET, WITHOUT CHARGE,
AT THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. FREE COPIES OF BOTH COMPANIES'
FILINGS MAY BE OBTAINED BY DIRECTING A REQUEST TO 1001 NINETEENTH STREET NORTH,
ARLINGTON, VIRGINIA 22209, ATTENTION: INVESTOR RELATIONS.
PARTICIPANTS IN SOLICITATION
FBR GROUP, FBR ASSET AND THEIR RESPECTIVE DIRECTORS, EXECUTIVE OFFICERS AND
OTHER MEMBERS OF THEIR MANAGEMENT AND EMPLOYEES MAY BE SOLICITING PROXIES FROM
THEIR RESPECTIVE STOCKHOLDERS IN CONNECTION WITH THE PROPOSED MERGER.
INFORMATION CONCERNING FBR GROUP'S PARTICIPANTS IN THE SOLICITATION IS SET FORTH
IN FBR GROUP'S PROXY STATEMENT FOR ITS ANNUAL MEETING OF STOCKHOLDERS, FILED
WITH THE SEC ON MAY 30, 2002. INFORMATION CONCERNING FBR ASSET'S PARTICIPANTS
IN THE SOLICITATION IS SET FORTH IN FBR ASSET'S PROXY STATEMENT FOR ITS ANNUAL
MEETING OF STOCKHOLDERS, FILED WITH THE SEC ON APRIL 23, 2002. ADDITIONAL
INFORMATION IS SET FORTH IN THE PRELIMINARY JOINT PROXY STATEMENT/PROSPECTUS AND
WILL BE SET FORTH IN THE DEFINITIVE PRELIMINARY JOINT PROXY STATEMENT/PROSPECTUS
WHEN IT IS FILED WITH THE SEC.
FINANCIAL DATA FOLLOWS.
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[FBR Logo] FBR ASSET INVESTMENT CORPORATION
CONDENSED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three months ended
December 31,
-------------------------------------------------------------
REVENUE: 2002 2001
----------------------- --------------------
Interest $ 57,038 $ 17,514
Dividends 1,403 1,510
Fee income 533 1,174
----------------------- --------------------
Total Revenue 58,974 20,198
EXPENSES:
Interest 23,488 6,819
Management fees:
Base 2,925 879
Incentive 5,036 841
Professional fees & other 3,179 181
----------------------- --------------------
Total Expenses 34,628 8,720
----------------------- --------------------
Net realized gains 8,777 2,265
----------------------- --------------------
Net income before income taxes 33,123 13,743
Income tax provision (209) (474)
----------------------- --------------------
Net income $ 32,914 $ 13,269
======================= ====================
Basic earnings per share $ 1.30 $ 1.65
======================= ====================
Diluted earnings per share $ 1.30 $ 1.62
======================= ====================
Basic weighted-average shares 25,317 8,053
======================= ====================
Diluted weighted-average shares 25,341 8,198
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[FBR Logo] FBR ASSET INVESTMENT CORPORATION
CONDENSED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
Year ended
December 31,
-------------------------------------------------------------
REVENUE: 2002 2001
----------------------- --------------------
Interest $ 176,205 $ 32,391
Dividends 3,367 3,821
Fee income 6,391 2,876
----------------------- --------------------
Total Revenue 185,963 39,088
EXPENSES:
Interest 67,558 14,613
Management fees:
Base 8,642 1,842
Incentive 13,769 1,652
Professional fees & other 4,858 772
----------------------- --------------------
Total Expenses 94,827 18,879
----------------------- --------------------
Net realized gains 28,423 3,875
Recognized loss on
available for-sale
equity securities -- (545)
----------------------- --------------------
Net income before
income taxes 119,559 23,539
Income tax provision (2,489) (474)
----------------------- --------------------
Net income $ 117,070 $ 23,065
======================= ====================
Basic earnings per share $ 5.73 $ 4.27
======================= ====================
Diluted earnings per share $ 5.72 $ 4.17
======================= ====================
Basic weighted-average shares 20,432 5,402
======================= ====================
Diluted weighted-average shares 20,455 5,525
======================= ====================
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[FBR Logo] FBR ASSET INVESTMENT CORPORATION
CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
SELECTED BALANCE SHEET DATA
AS OF AS OF AVERAGE DAILY
DECEMBER 31, DECEMBER 31, BALANCE
2001 2002 2002
---------------- --------------- ----------------
Mortgage-Backed securities 1,238,365,511(1) 5,208,616,030(1) 3,783,519,303(2)
Repurchase agreements 1,105,145,000 4,535,881,000 3,476,745,074
Equity securities(1) 61,692,660 103,171,251 60,055,846
Notes receivable 8,000,000 - 5,549,905
Equity capital(3) 203,865,546 752,169,222 593,791,671
4TH QUARTER
AS OF AS OF AVERAGE DAILY
SEPTEMBER 30, DECEMBER 31, BALANCE
2002 2002 2002
---------------- ----------------- ------------------
Mortgage-Backed securities 5,822,504,819(1) 5,208,616,030(1) 5,316,104,168(2)
Repurchase agreements 5,151,038,600 4,535,881,000 5,066,634,576
Equity securities(1) 99,307,501 103,171,251 103,675,834
Notes receivable - - -
Equity capital(3) 728,026,265 752,169,222 746,783,160
(1) Public equities are recorded at fair value. Non-public equities are
recorded at cost.
(2) Average daily book value.
(3) The average daily balance is the average of the month-end balances
including Other Comprehensive Income.