EXHIBIT 99.1
Conference Call Transcript
FBR - FBR's 1Q05 Preliminary Earnings Results
Event Date/Time: Apr. 26. 2005 / 9:00AM ET
Event Duration: N/A
CORPORATE PARTICIPANTS
Kurt Harrington, CFO
Eric Billings, Co-Chairman, Co-CEO
Bill Ginivan, Chief Legal Officer
Rick Hendrix, President & COO
Rock Tonkel, President & Head of Investment Banking
CONFERENCE CALL PARTICIPANTS
Richard Herr, KBW - Analyst
KP Ambrecht, Millenium - Analyst
Mitch Lester, Lester Brothers Capital - Analyst
Jason Nichols, GLG Partners - Analyst
Ben Atkinson, Gagnon - Analyst
Bernard Krig, Haven Funds - Analyst
Ariel Warszawski, Elm Ridge Capital - Analyst
PRESENTATION
Operator
At this time I would like to welcome everyone to FBR's preliminary first-quarter
2005 earnings conference call. All lines have been placed on mute to prevent any
background noise. After the speaker's remarks there will be a question and
answer period. (OPERATOR INSTRUCTIONS). I would now like to turn the call over
to Mr. Kurt Harrington, Chief Financial Officer. Please go ahead, sir.
Kurt Harrington - FBR - CFO
Good morning. This is Kurt Harrington, Chief Financial Officer of Friedman,
Billings, Ramsey Group. Before we begin this morning's call, I would like to
remind everyone that 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.
These forward-looking statements are subject to a number of factors, risks, and
uncertainties that might cause actual results to differ materially from stated
expectations of 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, our
cost of borrowing, interest spreads, mortgage prepayment speeds, the 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.
Additional information concerning these factors that could cause results to
differ materially is contained in FBR Group's Annual Report on Form 10-K and in
Quarterly Reports on Form 10-Q. I would now like to turn over the call to FBR
Group's Co-Chairman and Co-Chief Executive Officer, Eric Billings. Also joining
us this morning are Rick Hendrix, President and Chief Operating Officer; Rock
Tonkel, President and Head of Investment Banking; and Bill Ginivan, our Chief
Legal Officer.
Eric Billings - FBR - Co-Chairman, Co-CEO
Good morning everybody. This is Eric Billings. We hope all of you have had a
chance to review our press release from last night. We were all disappointed by
our first-quarter results in absolute terms and relative to our expectations.
I want to focus this morning on what has changed since March our 17th call -
what we didn't see then and why and how we see the business going forward.
Before I do, however, I want to stress that we continue to believe in the
fundamental strengths of our capital markets and principal investment
businesses. This quarter has tested us for sure - and we all know that our
businesses can be lumpy at times - but we are optimistic about our future
performance.
As you have seen, the preliminary results for the quarter indicate that we
earned net after-tax income of $22 million to $25 million, or $0.13 to $0.15 per
share on revenues of $163 million. We had previously guided earnings of $0.30 to
$0.34 cents per share. Subsequent to the date of that guidance, there have been
several developments which have combined to cause our preliminary results to
fall short of our expectations.
First, net income attributable to capital markets was approximately $10 million
or about $0.06 per share less than anticipated. The biggest single item
contributing to the shortfall was a banking transaction that slipped from the
first-quarter to the second-quarter. Importantly, that transaction which
generated approximately $14 million in revenue, has now been completed, and it
will be reflected in our second-quarter results.
Second, the $7.5 million reserve for the potential settlement of the previously
disclosed regulatory investigation into the PIPE transaction we completed in
2001 reduced earnings by approximately $0.05 per share.
Third, several of our merchant banking companies chose to wait until the
second-quarter to declare their first-quarter dividends, paying no dividend
during the first-quarter. But this should result in investors receiving two
dividends in the fourth quarter of this year. This timing difference reduced net
income by approximately $3 million or about $0.02 per share.
Fourth, income related to our alternative asset funds, including both fees and
the mark-to-market of our investment in those funds, was negatively impacted by
performance late in the quarter. The total impact of the shortfall in these
areas was approximately $3 million or about $0.02 per share.
Finally, professional services and other corporate expenses, mainly legal fees,
ran substantially higher than we expected in mid-March. The single biggest
component of these expenses was legal fees related to the previously mentioned
regulatory investigation. The total impact of these expenses was about $3
million or $0.02 per share.
Despite these results we are confident in the fundamental character of our
business, and we believe that we will continue to deliver acceptable returns on
equity.
Further, we believe that we will earn and pay the current dividend rate even in
a difficult environment, one which would include all of the following:
o short-term interest rates increasing in line with the forward
LIBOR curve,
o modest levels of merchant banking gains of about $4 million a quarter
on average,
o capital markets revenues falling to about $400 million from
approximately $525 million last year, and
o a nonconforming portfolio building to approximately $6.5 billion.
We will earn and pay the current dividend rate even under those circumstances.
With that said, the expectations around which we have built the business assumes
LIBOR not rising above 3.5% this year, dividends and gains from merchant banking
of about $15 million per quarter on average, and capital markets revenue of
approximately $550 million for the year with a breakeven in capital markets of
about $280 million. Including these assumptions and a year-end nonconforming
portfolio of approximately $8 billion, the business overall would be generating
about a 20% return on equity.
This was a difficult quarter in many respects, particularly regarding the
announced departure of Emanuel Friedman, our Co-Founder, Co-CEO and Co-Chairman.
We are all saddened by his impending departure, and we will miss him in many
ways. Operationally, Manny had overseen the management team of our alternate
asset management businesses. Rick Hendrix, our Chief Operating Officer, will now
oversee this same management group. All other management operations will
continue as they have for the past couple of years.
In addition, as we disclosed earlier, our first-quarter results included a
reserve for costs related to an ongoing regulatory investigation regarding a
PIPE transaction we completed in 2001. The decision to take the reserve reflects
our belief that we are close to a settlement in this matter. We hope to
communicate with you in the very near future regarding this settlement, but
cannot expound at this time.
In closing, our confidence in the strength of our core business has not changed.
The last quarter is behind us, and we are approaching the balance of 2005
optimistically and committed to a return to the level of profitability that we
have come to expect from ourselves while protecting the dividend. Thank you.
Before we move into the Q&A, I would like to ask Bill Ginivan, our General
Counsel, to make a few comments.
Bill Ginivan - FBR - Chief Legal Officer
Good morning. This is Bill Ginivan. As you know our press release discusses a
$7.5 million charge due to a potential settlement of SEC and NASD investigations
concerning a 2001 PIPE transaction. We believe we will be able to release more
information concerning the possible settlement shortly. I would like to note
that the investigations and possible settlement, as previously disclosed,
concern the activities of our broker-dealer subsidiary and not, as some have
speculated, FBR hedge funds. Until we are closer to a settlement, we cannot
discuss this matter further. Therefore, please do not ask questions concerning
this matter as we are not able to respond at this time. Thank you.
Eric Billings - FBR - Co-Chairman, Co-CEO
We'd like to open the call to questions now, please.
QUESTION AND ANSWER
Operator
(OPERATOR INSTRUCTIONS) Richard Herr with KBW.
Richard Herr, KBW - Analyst
Thanks for having the update. Eric, you went kind of quickly through the
discussion about merchant banking gains at $4 million a quarter and the
investment banking revenues of $400 million, down from $525 million. Is that why
you have been saying $15 to $20 million a quarter in gains? Is this kind of a
new run rate we can expect?
Eric Billings - FBR - Co-Chairman, Co-CEO
No, what we have tried to do here is really do two different things. First of
all, we have had many, many questions about the core dividend and what would it
take for us to be able to pay the core dividend. What we wanted to do was
provide information as to what could happen in all aspects of the business and
still allow us to still pay the core dividend - that was the first part of that
discussion. In that regard, if merchant banking gains fell to those levels, if
our nonconforming portfolio builds to $6.5 billion, and if capital market
revenues fell to $400 million from last year's $525 million - if all of those
things occur - we would still pay the core dividend.
Having said that, we want to be very clear that we believe that, as we build out
our business, the cost structure of our business is predicated on the fact that
we anticipate capital markets revenues this year to be $550 million. As I think
many of you know, we are working on at least one very large transaction that is
not included in that number. We also are looking for a build-out of our nonprime
portfolio to approximately $8 billion. This is a little bit reduced from the
last time when we spoke of $10 billion by year end.
This is a better assessment of what we think at this time and is very reasonable
by year end. It also assumes that the forward LIBOR curve or the Fed Funds rate
will move to about 350 basis points and then pause. That is what we anticipate,
but again we certainly want people to put in their own expectations as it
relates to that. If that occurs, then, as we said, we would achieve a return on
equity of approximately 20%. And that is clearly what we think our business
model will provide us for this year. But we wanted the model to answer any
questions about what it would take for us to be able to pay the core dividend,
and that was the purpose of the first part of the discussion.
Richard Herr - KBW - Analyst
Could you talk a little bit about the investment banking transaction that got
moved back to this quarter. Looking at the publicly disclosed transactions,
Online Resources looked to be the deal - a $40 million follow-on. Was that the
$14 million fee?
Eric Billings - FBR - Co-Chairman, Co-CEO
It was a private 144A transaction. It was approximately a $200 million
transaction that we completed earlier in April.
Richard Herr - KBW - Analyst
The $8 billion nonprime portfolio is kind of a new thing. Why are you bringing
that down from the $10 to $10.5 billion range discussed earlier?
Eric Billings - FBR - Co-Chairman, Co-CEO
It's really just an expectation based on our ability to transition the
portfolio. We are very optimistic right now, not only about origination through
our First NLC wholly-owned subsidiary, which is doing a great job, but also we
think it's a very good time to be purchasing assets in the nonconforming sector,
as we stated before. We can purchase at fairly attractive prices very good
product, but as we do that and try to build a portfolio along the lines that
we're looking for, we believe that $8 billion is a number that we are more
comfortable with right now than $10 billion.
Richard Herr - KBW - Analyst
Did you purchase any loans in the quarter?
Rick Hendrix - FBR - President & COO
We entered into some purchase agreements in the first-quarter. We didn't close
any of those until the second quarter, although we did obviously add assets
through the production of First NLC in the first-quarter.
Richard Herr - KBW - Analyst
Can you disclose what size the loan portfolio is right now?
Rick Hendrix - FBR - President & COO
Not currently. You can see in the press release that the loan portfolio was
roughly $800 million at the end of the quarter.
Operator
(OPERATOR INSTRUCTIONS). KP Ambrecht with Millenium.
KP Ambrecht - Millenium - Analyst
Just on the MBS portfolio, can you give us a little bit more color on what we
should be expecting here? It looks like the leverage increased from 11.2 to
12.5, and the duration increased. It looks like you're taking a little bit more
risk for continuing compression in that spread.
Rick Hendrix - FBR - President & COO
The durations increased as they will in this asset class as rates increase. This
is a negatively correlated security, and the durations didn't increase, frankly,
as much as we might have expected given the rate rise. But, in terms of taking
more risk, we not adding to the agency portfolio today. So we have not changed
the strategy there at all; we're not leveraging the portfolio. The increase in
leverage is primarily attributable to the reduction in Other Comprehensive
Income, which is basically just a markdown on a mark-to-market basis for that
portfolio. We are not taking more risk there, we're not increasing our purchases
there, or increasing leverage. But, on a reported basis, leverage goes up as the
value of the assets falls on a mark-to-market basis.
KP Ambrecht - Millenium - Analyst
Okay. What do you think (indiscernible)?
Rick Hendrix - FBR - President & COO
Well, it really gets into what your expectations are for rates. We reported net
interest margin of just less than 100 basis points for the first-quarter.
Currently, net interest margin is below that. But we are getting improvements in
yield, as we have talked about in previous calls. If you look at our cost of
funds fourth-quarter to first-quarter, our cost of funds was up roughly 50 basis
points. We picked up almost 25 basis points in yield, which is what we been
talking about and what we are expecting.
You can run a bunch of different models. It all gets down to how far and how
fast the Fed raises. And, if you use a 350 model, the spread is going to bottom
for a month or two sub-50 basis points, but on a full-quarter basis it's going
to be somewhere in front of the 50 basis points range. If the Fed moves further
than that and faster than that, it is going to fall below there.
KP Ambrecht - Millenium - Analyst
Thank you.
Operator
Mitch Lester with Lester Brothers Capital.
Mitch Lester - Lester Brothers Capital - Analyst
Could you address, with Mr. Friedman's departure, does he have the ability, if
he wanted to, to start up a competing operation? Are there non-compete clauses
that shareholders of FBR should be made aware of?
Eric Billings - FBR - Co-Chairman, Co-CEO
We have absolutely no anticipation or expectation that Manny would create a
competing firm or has any interest in activity like that at all.
Mitch Lester - Lester Brothers Capital - Analyst
Okay. Could you talk about any new compliance procedures at your firm?
Eric Billings - FBR - Co-Chairman, Co-CEO
Let me just say that our Company has had a history of a very, very strong
compliance track record. We have thoroughly reviewed our compliance activity.
This transaction took place in 2001, four years ago, and there have been,
obviously, many regulatory actions on a nationwide basis since this that have
affected virtually all of the major firms in the United States. We have not been
affected. We are, obviously, always monitoring to try to maintain the highest
possible regulatory compliance standards that we can. And we are very, very
confident that we are doing that. So we do that on a constant basis.
Mitch Lester - Lester Brothers Capital - Analyst
Thank you.
Operator
Jason Nichols with GLG Partners.
Jason Nichols - GLG Partners - Analyst
Just a question on the prime portfolio. When you announced the acquisition, you
mentioned that you expected about $100 million in annualized revenues from the
acquisition. Then in the fourth-quarter conference call you mentioned being in
the $75 million to $80 million range. Now, with the reduction in expectation for
the portfolio by year-end to $8 billion from $10 billion, I just wondered if you
could give an update on what you expect from that acquisition in terms of
annualized revenues?
Rick Hendrix - FBR - President & COO
To be honest with you, I'm not exactly sure which revenue guidance you are
referring to. What we expect out of the acquisition is that FNLC is going to be
at a run rate to originate nonconforming mortgages in the $5 billion annualized
range. As we have disclosed in the press release, they did have a record quarter
in the first-quarter that we owned them, generating about $400 million. That is
in excess of $400 million in loans.
Our expectation for this business is that it is going to allow us to do a couple
of things. It's going to allow us to build the portfolio more quickly than we
might have otherwise, and it's going to allow us to do it with a lower cost than
we would otherwise. But, specifically, with regard to revenues, to be honest
with you I'm not exactly sure what you are referring to.
Jason Nichols - GLG Partners - Analyst
Okay. That is fine. This reduction in expectation for the year-end portfolio is
subsequent to the fourth-quarter conference call. Is that right? Has there been
a change in your outlook?
Rick Hendrix - FBR - President & COO
That is correct. That is really based on a couple of things. That is based on
our experience to date in bidding on third party portfolios. We have always been
very disciplined with regard to how we put our agency portfolio together. We are
going to exhibit similar discipline in putting together the nonprime portfolio.
And it is also a reflection of the fact that we think we will probably sell more
of the NLC production than we anticipated at that time.
Jason Nichols - GLG Partners - Analyst
Thanks a lot.
Operator
Ben Atkinson with Gagnon
Ben Atkinson - Gagnon - Analyst
On the nonprime loans, could you talk a little bit about what changes in spreads
have been, and in gain on sale premiums, since the end of the quarter? And also
could you talk a little bit more about why you are choosing to sell more of your
production rather than hold it in the portfolio?
Rick Hendrix - FBR - President & COO
With regard to gain on sale, we haven't sold anything subsequent to the end of
the quarter. So with regard to actual results, I can't give you a reflection of
where that would be specifically in the FNLC production. I can tell you that, as
we look at third-party portfolios, bids for nonconforming mortgages are very
strong today. I would say, if anything, probably the ability to sell at a profit
has been enhanced since the end of the quarter.
With regard to our decision to sell more, it's nothing more or less than, as we
build this portfolio and as we look at owning the $5 billion originator, we have
current run rate expenses in the origination business that we want to cover up
through some gain-on-sale revenue. And so we are going to probably sell a little
bit more of the production than we would have intended, which is going to
provide an earnings stream that actually looks more like the long-term earnings
out of this portfolio, as opposed to having a drag as we drove the portfolio
against what our origination rate is.
Ben Atkinson - Gagnon - Analyst
Are your expenses higher than you anticipated previously?
Rick Hendrix - FBR - President & COO
They are not. In fact it looks like our cost to originate probably came in below
what our expectations would have been for the first period in which we are going
to own the company.
Ben Atkinson - Gagnon - Analyst
Can you give us any sense for that cost to originate and what you would
anticipate you could get in gain on sale at this point?
Rick Hendrix - FBR - President & COO
These numbers are still preliminary, and we are still closing the books at NLC,
so I would prefer not to give you a specific cost to originate number other than
to say I believe it's going to be lower than we anticipated. And it clearly, in
today's market, would provide us the ability to generate gains if we sell those
loans.
Ben Atkinson - Gagnon - Analyst
Thank you.
Operator
Richard Herr with KBW.
Richard Herr - KBW - Analyst
I have here the $4 million a quarter in merchant banking gains and the run rate
of investment banking and current dividend rates being maintained, is there
something I am missing? Is there offset in maybe lowering expenses?
Rick Hendrix - FBR - President & COO
I don't believe so, Richard. By the way, that $400 million is capital markets,
it's not just investment banking. But the $4 million in gains, that is an
average number. It's not what we expect, as Eric indicated. We are using about a
$280 million breakeven level in the capital markets business, but there is no
real change in the expense level over any we've previously discussed.
Richard Herr - KBW - Analyst
That is helpful. If you could maybe comment on the pipeline.
Eric Billings - FBR - Co-Chairman, Co-CEO
Richard? Richard we lost you.
Operator
It appears we have lost Mr. Herr. We will now proceed to the next question.
Bernard Krig with Haven Funds.
Bernard Krig - Haven Funds - Analyst
Can you talk a little bit about how you're going to sell down some of the prime
portfolio that you have if that is your intention, or if you're just going to
increase leverage as you build the subprime portfolio out to $8 billion by
year-end?
Rick Hendrix - FBR - President & COO
We don't intend to sell down in the agency portfolio. We do so from time to
time, where we have opportunities and we think it makes sense to readjust the
portfolio. Then, we will do some modest reductions in the portfolio. But I
wouldn't look to see us selling the portfolio to take our leverage down. That is
going to happen more in optimizing the returns in the portfolio.
Just through prepayments we expect to, on an annualized basis, basically, have
the portfolio run itself down to about $8 million by the end of this year. This
brings leverage down commensurately and frees-up in the neighborhood of $250
million of capital throughout the year that will be redeployed into the
nonperforming portfolio.
Bernard Krig - Haven Funds - Analyst
Right, but that would still take overall leverage up pretty significantly
because you're saying the run-up is going to be about $2 billion to $2.5 billion
through year-end, and you're looking to add $8 billion to the portfolio?
Rick Hendrix - FBR - President & COO
That is about right.
Eric Billings - FBR - Co-Chairman, Co-CEO
The leverage goes in naturally because, in the nonprime area, we run a higher
leverage factor than we do against the agency portfolio where we run at between
10 and 12 times. The nonprime portfolio runs to a higher leverage than that. And
so the total leverage in the portfolio would naturally move up a little bit.
Again, on a very balanced basis, and total equity leveraged to the balance sheet
will stay well within previous guidelines and will be very low by capital market
standards.
Bernard Krig - Haven Funds - Analyst
Since you're also taking a credit risk on the subprime side, why would you
naturally assume that has to be run at higher leverage?
Rick Hendrix - FBR - President & COO
It's only higher leverage as a result of mark-to-market that is in the portfolio
today. As you know, that has moved around in both directions for us over time.
The reason that we have always run leverage of, call it 10 times, on a purchase
basis in this portfolio is because rates can move. And, as a result, the
mark-to-market may give a reported higher leverage than where it was when we
purchased.
Eric Billings - FBR - Co-Chairman, Co-CEO
But very specifically, the difference between the nonprime and the agency is
that the agency, because of the nature of the funding, is subject to
mark-to-market markdowns and you can actually be required at certain levels to
put more capital into the portfolio. That is not possible in the nonprime area -
vis-a-vis securitization financing - where once you have completed a
securitization financing, that financing is final and complete. And, so, you
have no potential to add additional capital as you do in the agency portfolio.
And that is the only reason.
Bernard Krig - Haven Funds - Analyst
How far are you guys along with doing the first securitization?
Rick Hendrix - FBR - President & COO
We actually completed our first securitization last week. It will close here in
another 10 days or so.
Bernard Krig - Haven Funds - Analyst
Thank you.
Operator
Richard Herr with KBW.
Richard Herr - KBW - Analyst
Can you hear me guys? I apologize for the technical problems. I was just curious
on your pipeline. I see KKR has announced they're going to go public, an $800
million IPO. Couple other deals in the pipeline look pretty significant. What is
your confidence level of getting these done this quarter given the slowdown we
see in the equity issuance market?
Rock Tonkel - FBR - President & Head of Investment Banking
Richard, the pipeline continues to progress nicely. Just to be clear, the
pipeline continues to be in excess of $10 billion for engaged transactions. That
does include the large transaction that Eric alluded to, which for purposes of
the pipeline, we put at approximately $5 billion. But the business transactions
can move from quarter to quarter, as we saw in this quarter, based on market
developments.
We have a significant pipeline of filed transactions with several transactions
of $250 million or above. So we feel confident about the capital markets
business. The real estate business continues to be the market leader. The energy
business is moving quickly to a leadership position. I believe we are the number
two energy underwriter thus far this year for issuers with under market caps of
$1 billion or under, and I think we are four or five overall.
So we are moving to a leadership position in energy. The private equity effort
continues to progress nicely with the addition of a couple of transactions in
the first quarter from new private equity relationships. And, naturally, the
financial services platform is quite strong even if you don't include any
significant activity from the residential mortgage REIT sector, which right now
is volatile. So the business is progressing nicely, and that is what is behind
Eric's comments regarding the scale of expectations for the capital markets
platform for this year.
Richard Herr - KBW - Analyst
That is helpful. Just one last thing, just so we can possibly better gauge how
the First NLC acquisition is going. Is there any thought to maybe providing us
monthly mortgage production numbers, and maybe yields, as some of your peers do
in that space?
Rick Hendrix - FBR - President & COO
Richard, this is just one part of our business, and it's not, from an
organizational standpoint, the big driver for the business. We certainly will
update people on our quarterly calls with regard to production volumes. But we
don't participate right now in providing monthly information.
Richard Herr - KBW - Analyst
Thanks a lot.
Operator
Ariel Warszawski, Elm Ridge Capital - Analyst
Can you hear me? Just a question on your forward guidance and the way that you
gave it in two pieces, which I thought was actually pretty useful. You are going
to cover your dividend no matter what, but what would your GAAP EPS be in both
scenarios? Can you give a little more clarity on that? Are you actually going to
be paying your dividend effectively out of your GAAP book?
Eric Billings - FBR - Co-Chairman, Co-CEO
Ariel, we really don't give the sort of guidance which would kind of look like
projections of earnings. What we really try to do - and we hope it's helpful to
people - is give you specific information as to what each area does and the
resulting profitability, and with this we think you can then make your own
assessments. People may disagree with 3.5% Fed funds, for instance. They may
disagree with other types of activities, loan volume originations, high or low,
and you can adjust and make your own assumptions, and that would have an affect
on what those earnings might be. But, clearly, if you look at around a 20%
return on equity, which is what our business looks like as we look internally
against these expectations - again, in no way are these projections, just as we
look internally against these things - you could arrive at an approximate level
of profitability.
Rick Hendrix - FBR - President & COO
Ariel, with regards to the other case where we are talking about paying the
dividend, we're talking about earning the dividend and paying the dividend, not
paying it out of capital.
Eric Billings - FBR - Co-Chairman, Co-CEO
Exactly.
Ariel Warszawski, Elm Ridge Capital - Analyst
But I guess in these structures, it seems like you can actually earn the
dividend in the QRS and pay it out in the QRS in the cash produced there. Yet at
the same time you can actually have GAAP losses, if you will, in the TRS
structure. So in other words, what you are saying is your reported EPS, which I
think is going to be $0.13 to $0.15 in the first quarter, did not cover your
dividend. Under all of these scenarios, your GAAP EPS will be above $1.36 which
is $.34 times four. Am I getting that right?
Eric Billings - FBR - Co-Chairman, Co-CEO
On a run rate basis going forward, that is exactly right, Ariel.
Ariel Warszawski, Elm Ridge Capital - Analyst
I see. In other words I should say $0.34, $0.34, $0.34 plus $0.13 to $0.15 is
the minimum GAAP EPS you're guiding us to under the bad scenario?
Eric Billings - FBR - Co-Chairman, Co-CEO
That is exactly how we are looking at the business, Ariel. That is precisely
right.
Ariel Warszawski, Elm Ridge Capital - Analyst
I appreciate the clarification. Thanks.
Operator
At this time we have no further questions. Gentlemen, are there any closing
remarks?
Eric Billings - FBR - Co-Chairman, Co-CEO
Thank you everybody. We appreciate a great deal you're taking the time and
joining us. We look forward to talking to you all next quarter. Take care.
Operator
This concludes today's FBR conference call. You may now disconnect.