FIRST QUARTER 2002 EARNINGS
PRESENTATION
May 2, 2002
Statements concerning future performance, developments, events, market
forecasts, earnings models, earnings, revenues, expenses, 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 those expressed in the
forward looking information. These factors include, but are not limited to, the
effect of demand for public offerings, activity in the secondary securities
markets, the high degree of risk associated with technology and other venture
capital investments, changes in interest rates, competition for business and
personnel, and general economic, political and market conditions. These and
other risks are described in the company's Annual Report on Form 10-K that is
available from the company and from the SEC.
FBR Group Overview
As of March 31, 2002
o Institutional research capital markets company (NYSE: FBR)
o 441 full-time employees in 14 offices
o 6 focused industry verticals (Financial Services, Real Estate, Technology,
Energy, Diversified Industries, Healthcare)
o Top 10 lead-managing equity
underwriter
o Strong balance sheet:
* Total assets of $284.5 million and shareholders' equity of $194.6 million-
$4.25 per share ($4.37 assuming repayment of loans under the Employee Stock
Purchase and Loan program).
* Combined FBR Group and FBR Asset Investment
Corporation (NYSE: FB) equity of more than $600 million
o 3 profit centers driven by research:
* Institutional brokerage sales and trading
* Investment banking
* Asset management, including FBR Asset Investment Corporation
Business Overview
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Research Institutional Sales Investment Banking Asset Management Private Client
& Trading Group
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60 Analysts 50 Institutional 75 investment More than $5 Investment
Brokers bankers billion a of April services for high
Over 350 companies 30, 2002 net worth
under coverage 27 Traders & Sales 6 focused industry individuals,
Traders sectors FBR Asset foundations and
Independence Investment endowments
Market-maker in Financial Services Corporation
In-depth company over 440 equity and (NYSE:FB) Investment
analysis debt securities Real Estate Management
Mutual funds
Theme-driven industry Covering over 1,000 Technology Restricted (144)
coverage institutional Hedge funds stock sales
accounts Energy
Daily meetings with Private equity Credit lines
sales force Mutual funds Diversified
Industries Venture capital Hedging and
Frequent management Hedge funds monetization
roadshows Healthcare
Money managers Employee stock
Annual investor Top 10 option management
conferences Pension funds lead-managing
underwriter Cash management
FBR National Bank
& Trust*
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All numbers approximate as of April 30, 2002 unless otherwise stated.
*Member FDIC and an equal housing lender. Products offered by other FBR
subsidiaries are not FDIC insured, not offered, guaranteed or endorsed by FBR
National Bank & Trust, and may lose value.
First Quarter 2002 Financial Highlights
o Earnings of $10.3 million or $0.23 per share
o Revenues up 142% over first quarter 2001, $54.4 million
* Institutional brokerage revenues up 26% at $15.8 million
* Investment banking revenues up 142% at $24.0 million
* Asset management revenues up 183% at $13.8 million
* Venture capital losses down 85% at $(1.1) million
* Expense containment o Gross assets under management up 54% at $4.3 billion
Gross assets under management up 54% at $4.3 billion
o Top 10 lead managing underwriter by dollar volume raised for mid-market
issuers (market-cap less than $1 billion)
o #1 lead managing underwriter by weighted aftermarket performance through
4/30/02, with performance of 33.54% year-to-date (vs. industry average of
7.19%)
Drivers of FBR's Business and Revenue Growth
o High-quality, objective and timely research
o Increasing business with the largest institutional investors in the United
States and Europe
o In-depth focus on industry verticals and mid-market focus
o Growing assets under management
Research
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Financial Services Real Estate Technology Energy Diversified/High Healthcare
Yield
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Asset Managers Apartment Communication Coal Consumer Products Genomics &
Infrastructure Proteomics
Brokers Lodging Exploration Debt, Equity and
Communication & Production Distressed Specialty
Community Banks Mortgage Semiconductors & (E&P) Securities Pharmaceuticals
Intellectual
Government Office/Industrial Property Integrated High Yield
Sponsored Oil &
Enterprises Triple-Net Lease Display & Refineries Special Situations
(GSE's) Semiconductor
Technologies Pipelines
Insurance
Enterprise
Money Center Banks Platform &
Application
Mortgage Bankers Software
Mortgage Companies Enterprise
Services
Regional Banks
Media
Specialty Finance Infrastructure
Thrifts Network Software
Telecom
Equipment &
Services
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Over 350 companies under coverage.
Sales & Trading Revenue Growth
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Principal Agency Total
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1999 24.3 15.0 $39.3M
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2000 25.5 21.1 $46.6M
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2001 24.3 27.1 $51.4M
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12 Months Ended 03/31/02 25.8 29.2 $55.0M
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Q1 2002 29.8 35.0 $64.8M
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Excludes trading gains and losses.
Revenue Growth
2001 - 2002 = 10.3%
Q1 2001 - Q1 2002 = 26%
55 Institutional Brokers
27 Traders & Sales Traders
Investment Banking
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2001 Q1 2002
- --------------------------------------- ----------------------------------------
- --------------------------------------- ----------------------------------------
50 capital markets assignments 20 capital markets assignments
$2.7 billion in transaction value $1.8 billion in transaction value
29 capital raising transactions 11 capital raising transactions
-1 lead-managed IPO - 1 co-managed IPO
-15 lead-managed secondaries - 6 lead-managed secondaries
-9 co-managed secondaries - 3 co-managed secondaries
-4 sole-managed private - 1 sole-managed private
placements placement
22 M&A and advisory assignments 9 M&A and advisory assignments
$426 million* of transaction $599 million* of transaction
value value
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*Some figures not publicly disclosed
Investment Banking Revenue Growth
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Corporate Finance Underwriting Total
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1999 22.5 22.7 $45.2M
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2000 31.4 21.1 $52.5M
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2001 28.5 47.9 $76.4M
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12 Months Ended 03/31/02 37.8 52.5 $90.3M
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Q1 2002 45.9 49.2 $95.1M
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Revenue Growth
2000-2001 = 45.5%
Q1 2001 - Q1 2002 = 142%
75 Investment Bankers
Excludes investment gains.
Investment Banking
Aftermarket Performance Across All Industries
Criteria:
Lead Managed
Secondary and IPO equity transactions
Pricing date: 01/01/01-04/30/02
Performance from pricing through 04/30/02
Performance does not include dividends
January 1, 2001 through May 1, 2002
Aggregate Deal Value Over $150 Million
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Lead Manager # of Deals % Change Offer to Current
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Friedman, Billings, Ramsey 23 33.54
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Robert W. Baird & Co. Incorporated 3 32.32
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Jolson Merchant Partners 4 22.11
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Raymond James 10 18.28
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Deutsche Bank Securities 19 16.94
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William Blair & Company 3 16.47
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Bear, Stearns & Co. 20 14.30
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Wachovia Securities 8 12.99
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Needham & Company, Inc. 4 9.59
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SG Cowen Securities Corporation 5 8.82
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Robertson Stephens 13 7.49
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A.G. Edwards & Sons, Inc. 9 7.42
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Merrill Lynch & Co. 92 7.25
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Credit Suisse First Boston 89 6.59
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Salomon Smith Barney Inc. 99 6.24
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UBS Warburg LLC 50 4.61
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Jeffries & Company, Inc. 6 2.97
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U.S. Bancorp Piper Jaffray Inc. 14 2.56
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Morgan Stanley 38 0.93
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J.P. Morgan Securities Inc. 29 0.23
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Banc of America Securities 20 -0.99
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Goldman, Sachs & Co. 57 -3.05
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Lehman Brothers 43 -5.90
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CIBC World Markets 11 -10.96
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Thomas Weisel Partners L.L.C. 3 -30.88
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Total: 672 Average: 7.19
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Source: CommScan LLC
Asset Management
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Alternative Assets FBR Asset Mutual Funds
and other managed accounts
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- ------------------------------------- ----------------------------------- -----------------------------------
More than $300 million More than $2.7 billion More than $1.3 billion
Hedge Funds: FBR Asset Investment Corp. Equity funds, Morningstar Rated,
- -FBR Ashton -NYSE: FB 4 & 5 Stars over 3 & 5 years
- -FBR Weston -REIT Tax Status ended 12/21/01*:
- -FBR Arbitrage -Mortgage Backed Securities
- -FBR Biotech -Mezzanine or Senior Loans FBR Small Cap Financial
- -FBR Pegasus (fund of funds) -Equity Securities (Five Stars)
Venture Capital: Private Client Group FBR Financial Services
- -FBR Technology Venture -Asset Allocation and other (Four Stars)
Partners I & II Managed Accounts
- -FBR Co-Motion -Investment Management FBR Small Cap Value
- -ETP/FBR Genomic I & II -Wealth Planning (Five Stars)
- -FBR Infinity II -Access to FBR Proprietary
Products American Gas Index
Private Equity: (Four Stars)
- -FBR Private Equity Fund
- -FBR Future Financial Fund Our newest fund (02/02):
- -FBR Financial Services Partners -FBR Technology Fund
Fixed income and money market
funds:
-Fund for Government Investors
(Money Market)
-Rushmore Fund for Tax-Free
Investors (VA,MD and Money
Market)
-The Rushmore Fund (Bond
Fund)
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All numbers approximate as of April 30, 2002. Stated asset amounts represent
total gross assets under management.
*copyright Morningstar, Inc. All Rights Reserved. The information contained
herein: (1) is proprietary to Morningstar and/or its content providers; (2)
may not be copied or distributed; and (3) is not warranted to be accurate,
complete or timely. Neither Morningstar nor its content providers are
responsible for any damages or losses arising from any use of this information.
Past performance is no guarantee of future results.
Assets Under Management
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Net Assets Under Total
Management#
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12/31/1999 $694M $990M
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12/31/2000 $721M $1,004M
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12/31/2001* $1,518M $2,757M
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03/31/2002 $1,868M $4,344M
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AUM Growth 12/31/2001 - 03/31/2001 = 57%
# Net assets under management represents total gross assets under management,
net of any repo debt, margin loans, securities sold but not yet purchased,
lines of credit, and any other liabilities.
* Includes technology sector assets of $71.0M ($64.9M net).
Equity Mutual Funds
Equity Mutual Funds
More than $1.3 billion under management in 10 equity, fixed income and money market mutual funds.
Overall
Morningstar Rating(TH) Q4'01 1-Year 3-Years 5-Years* 10-Years
(among 4,811 domestic equity funds)
Small Cap Value (FBRVX)1 ***** 18.23% 32.63% 13.11% 15.05% n/a
Small Cap Financial (FBRSX)2 ***** 4.93% 23.85% 15.76% 16.23% n/a
Financial Services (FBRFX)2 **** 2.77% -1.72% 6.48% 13.06% n/a
American Gas Index Fund (GASFX)3 **** 3.34% -14.78% 8.55% 10.83% 11.94%
*The FBR Funds commenced operations on 12/31/96. The American Gas Index Fund
commenced operations on 05/10/89
TOTAL RETURNS REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE
RESULTS. Please read the prospectus carefully before you invest or send money.
Investment return and principal will fluctuate so that investor's shares when
redeemed, may be worth more or less than their original value. FBR Funds are NOT
FDIC insured and not bank guaranteed. All results assume reinvestment of
distributions. FBR Fund Advisors, Inc. and FBR Investment Services Inc., member
NASD/SIPC, each a subsidiary of Friedman, Billings Ramsey Group Inc., serve as
advisor to, and distributor of the FBR Funds respectively. For each fund with at
least a three-year history, Morningstar calculates a Morningstar Rating metric
each month by subtracting the return on a 90-day U.S. Treasury Bill from the
fund's load-adjusted return for the same period, and then adjusting this excess
return for risk. The top 10% of funds in each broad asset class receive 5 stars,
the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5%
receive 2 stars and the bottom 10% receive 1 star. The Overall Morningstar
Rating for a fund is derived from a weighted average of the performance figures
associated with its 3-, 5- and 10-year (if applicable) Morningstar metrics. Both
the FBR Small Cap Value and Small Cap Financial Funds received 5 stars for the
3- and 5-year periods and were rated among 4811 and 3160 domestic equity funds.
The FBR Financial Services fund received 4 stars for the 3- and 5-year periods
and was rated among 4811 and 3160 domestic equity funds. The American Gas Index
Fund received 4 stars for the 3- and 5-year periods and 3 stars for the prior 10
years and was rated among 4811, 3160 and 895 domestic equity funds respectively.
1The non-diversified nature of the fund may subject investors to greater
volatility than other diversified funds. Small capitalization stocks as a group
may not respond to market rallies or downturns as much as other types of equity
securities.
2Fund investments are focused on the financial services industry, which may be
adversely affected by regulatory or other market conditions, such as rising
interest rates. Small capitalization stocks as a group may not respond to market
rallies or downturns as much as other types of equity securities.
3The gas industry is sensitive to increased interest rates because of the
capital-intensive nature of the industry. Typically, a significant portion of
the financing of the gas industry's assets is obtained through debt. As interest
rates increase, such refinanced debt would be acquired at higher-rates thereby
adversely affecting earnings.
Copyright 2002 Morningstar, Inc. All Rights Reserved. The information contained
herein: (1) is proprietary to Morningstar and/or its content providers; (2) may
not be copied or distributed; and (3) is not warranted to be accurate, complete
or timely. Neither Morningstar nor its content providers are responsible for any
damages or losses arising from any use of this information. Past performance is
no guarantee of future results.
Fixed Income Mutual Funds
Fixed Income Mutual Funds Q1 2002 1-Year 3-Years 5-Years 10-Years
Fund for Government Investors (RSGVX) 1 0.27% 2.29% 3.94% 4.10% 3.90%
Tax-Free Money Market Portfolio (FFTXX) 1,2 0.26% 1.63% 2.48% 2.60% 2.47%
Maryland Tax-Free Portfolio (RSXLX)1,2 0.93% 3.57% 3.87% 5.26% 5.67%
Virginia Tax-Free Portfolio (RSXIX)1,2 0.98% 2.92% 3.69% 5.21% 5.70%
U.S. Government Bond Portfolio (FUSXX) 1.84% 4.29% 5.79% 8.50% 7.92%
TOTAL RETURNS REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE
RESULTS. Investment return and principal will fluctuate so that investor's
shares when redeemed, may be worth more or less than their original value. All
results assume reinvestment of distributions.
1Investment in the money market funds are not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
money market funds seek to preserve the value at $1 per share, it is possible to
lose money by investing in the funds.
2Some income earned in the tax-free portfolios may be subject to the federal
alternative minimum tax. Income earned by non-Maryland or non-Virginian
residents will be subject to applicable state and local taxes.
For more complete information about the FBR Money Market Portfolios, including
fees and expenses, call 1.800.622.1386 for a free prospectus. Please read the
prospectus carefully before you invest or send money. FBR Money Market
Portfolios are distributed by FBR Investment Services, Inc., member NASD/SIPC.
Asset Management Revenue Growth
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Net investment and incentive Base management fees. Total
income*
- ------------------ ------------------------------- ------------------------ ---------------
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1999 $2.7M $9.4M $12.1M
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2000 $12.5M $9.7M $22.2M
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2001 $13.2M $19.7M $32.9M
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12 months ended $19.0M $22.8M $41.8M
03/31/02
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Q1 2002 $31.2M $24.0M $55.2M
Annualized
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Revenue Growth
2000 - 2001 = 48.2%
Q1 2001 - Q2 2002 = 183%
*Excludes technology sector net investment and incentive gain or loss of
$36.4M, $41.6M, $(18.1)M and $(1.1)M or $(4.4)M annualized for 1999, 2000, 2001,
and Q1 2002 respectively.
Friedman Billings Ramsey Group, Inc.
Washington, D.C. Headquarters
1001 Nineteenth Street North
Arlington, Virginia 22209
Tel: 703.312.9500
Fax: 703.312.9501
Atlanta
3475 Lennox Road, Suite 400
Atlanta, Georgia 30326
866.249.4640
Bethesda
4922 Fairmont Avenue
Bethesda, Maryland 20814
301.657.1500
Boston
101 Federal Street, Suite 2130
Boston, Massachusetts 02110
617.439.9550
Charlotte
100 N. Tryon Street, 51st Floor
Charlotte, North Carolina 28202
704.348.2631
Cleveland
3201 Enterprise Parkway, Suite 320
Cleveland, Ohio 44122
216.593.7000
Dallas
200 Crescent Court, Suite 520
Dallas, Texas 75201
214.559.7172
Denver
1200 17th Street , Suite 950
Denver, Colorado 80202
303.534.6060
Irvine (Los Angeles)
18101 Von Karman Avenue, Suite 1000
Irvine, California 92612
949.477.3100
New York
330 Madison Avenue, Suite 900
New York, New York 10017
646.495.5239
Portland
208 SW First Avenue, Suite 300
Portland, Oregon 97204
503. 221.0200
Seattle
1111 Third Avenue, Suite 2400
Seattle, Washington 98104
206. 382.9191
Austria
Millenium Tower - 23rd floor
Handelskai 94-96
A-1201 Vienna
43.1.240.27250
London
9-11 Grosvenor Gardens
London SW1W OBD
44.207.663.9100
www.fbr.com
NOTE: Not all services are available from all offices.
Why is FBR Unique?
We believe that FBR occupies a unique position in the capital markets. We are
neither Wall Street nor regional; neither bulge bracket nor boutique.
Our research, institutional brokerage and investment banking services have
placed us, with the Wall Street bulge bracket, among the top 10 lead-managed
equity underwriters* and among the leading research-driven national brokerages,
in the United States.
Yet, like a boutique, we achieve success through knowing our industries
extremely well. This proprietary thought process enables us to provide
independent research and investment ideas and to provide creative capital to
issuers. We focus across research, brokerage, investment banking and asset
management on six industry sectors: financial services, real estate, technology,
energy, healthcare and diversified industries. Our research analysts write on or
have detailed knowledge and understanding of the S&P 500 issuers in their
respective spaces, as well as small- and mid-cap names.
Our process combines our deep understanding of individual businesses in the
context of their industries, with our significant experience in the capital
markets. This, along with our broad institutional distribution, has enabled us
to raise billions of dollars of capital as a lead-managing underwriter,
including transactions in excess of $500 million in size.