Filed by Friedman, Billings Ramsey Group, Inc.
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
On November 18, 2002, Friedman, Billings, Ramsey Group, Inc. and FBR Asset
Investment Corporation distributed the following information:
Friedman Billings Ramsey
[FBR Logo]
MERGER OF
FRIEDMAN, BILLINGS, RAMSEY GROUP ("FBR GROUP")
WITH
FBR ASSET INVESTMENT ("FBR ASSET")
2002
[FBR LOGO]
________________________________________________________________________________
FORWARD LOOKING INFORMATION
Statements concerning projections, 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 or current circumstances. These factors include, but are not
limited to, the overall environment for interest rates, repayment speeds within
the mortgage-backed securities market, risk associated with equity investments,
the demand for public offerings, activity in the secondary securities market,
the high degree of risk associated with technology and other venture capital
investments, competition for business and personnel, and general economic,
political, and market conditions. Additional information concerning factors that
could cause actual results to differ materially is contained in FBR Asset's
Annual Report on Form 10-K and quarterly reports on Form 10-Q, and FBR Group's
Annual Report on Form 10-K and quarterly reports on Form 10-Q.
PROXY INFORMATION
In connection with the proposed transactions, Friedman, Billings, Ramsey Group,
Inc. and FBR Asset Investment Corporation will file a joint proxy statement/
prospectus with the Securities and Exchange Commission. Investors and security
holders are urged to carefully read the 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 joint proxy statement/prospectus (when it is available) and other
documents containing information about Friedman, Billings, Ramsey Group, Inc.
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.
_______________________________________________________________________________
FRIEDMAN BILLINGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2.
PAGE 2
[FBR LOGO] TRANSACTION OVERVIEW
________________________________________________________________________________
Exchange Ratio: 3.65 "New FBR Group" shares per FBR Asset share
Implied FBR Asset Price per Share: (a) $34.68
Implied Aggregate Consideration: (a)(b) $869 Million
Implied Premium to Market: (a) 22% $34.68 $29.06 GAAP book
Implied Multiple to Adjusted Book (2.81) AOCI (2.81) AOCI
(ex. AOCI): (a) 1.23x ------ (0.29) Excess earnings
$31.87 -----
Price paid for $25.96 Adjusted book
adjusted book
Consideration: 100% Stock (tax-free)
Transaction Structure: o New FBR Group Created and elects to be taxed as a REIT
o FBR Asset to be merged into New FBR Group
o FBR Group to be merged into New FBR Group and operating business elects to become
a taxable REIT subsidiary ("TRS")
Board Composition: FBR Group Board plus FBR Asset Board; nine directors in total, of which seven are
outsiders; at least five are independent directors in accordance with the proposed
guidelines
Required Approvals: FBR Group Shareholders, FBR Asset Shareholders and regulatory approvals
Walk-Away Provisions: 10 day average FBR Group share price of below $8.75 and above $10.55 for 10 days
prior to shareholder meetings; may be waived
Anticipated Closing First Quarter 2003 (a) As of November 14, 2002
- date of agreement
(b) Includes shares beneficially
owned by FBR
________________________________________________________________________________
FRIEDMAN BILLINGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2.
PAGE 3
[FBR LOGO] OLD STRUCTURE/ TWO SEPARATE COMPANIES
________________________________________________________________________________
[Graph depicting the following text]
FBR GROUP FRR ASSET
FBR Group ( C Corp.) 10% of Merchant Base Fee of $11 Million FBR Asset Investment Corporation (REIT)
Banking Related plus Incentive Fee of $730 Million of Capital (2)
$260 Million of Capital (1) Investment Banking $21.5 Million Projected $125 Million Projected 2003 Income
Fees for 2003
$60 Million Projected 2003
Net Income
------------------------------ -----------------------------------------
Investment Banking, Sales & Managed by FBR Investment Management
Trading, Research
FBR Investment Management (FBRIM) FBR Asset Taxable REIT Subsidiary
("TRS")
-------------------------------- $3 Million of Capital
-----------------------------------
MBS Portfolio Management, Merchant
Banking Investments, Other Investment Pays Tax and Retains Capital
Management
1 Approximate as of September 30, 2002, including approximately $24 million of
employee loans
2 Approximate as of September 30, 2002
________________________________________________________________________________
FRIEDMAN BILLINGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2.
PAGE 4
[FBR LOGO] NEW FBR GROUP
TOTAL CAPITAL OF MORE THAN $1 BILLION (1),
PROJ. EARNINGS OF ALMOST $200 MILLION (2)
________________________________________________________________________________
[Graph depicting the following text]
New FBR Group (REIT)
$964 Million of Capital (1)
$174.7 Million Projected 2003 Net Income (2)
--------------------------------------------
No Tax, Pays Dividends
MBS Portfolio Encompasses both the old
FBR Asset Capital and the Old FBR Group
Excess Capital
Merchant Banking
FBR Taxable REIT Subsidiary
$49 Million of Capital
$23.1 Million Projected 2003 After-tax
Income
------------------------------------------
Pays Tax, Retains Capital
Investment Banking, Research, Sales &
Trading, Other Management and
Customer Services
1 Pro Forma as of September 30, 2002, excluding approximately $24 million of
employee loans
2 Before $10.8 million amortization of excess premium resulting from purchase
accounting
________________________________________________________________________________
FRIEDMAN BILLINGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2.
PAGE 5
[FBR LOGO] TRANSACTION SUMMARY
________________________________________________________________________________
Old FBR Group FBR Asset Investment New FBR Group
Corporation
Business Fast Growing Investment Externally managed Top ten investment bank with
Bank mortgage REIT efficient tax structure
Corporate Structure C Corporation REIT REIT
Management Structure Internal External Internal
Stock for Stock Exchange 1.00 3.65 N/A
Total Shares Outstanding (1) 50.4 25.1 132.4
Estimated Fully Diluted GAAP shares (2) 48.0 25.1 130.0 (3) Former FBR Asset
Share Equivalents
9/30/02 Book Value per share (4) $5.06 (2) $29.06 $7.89 (2) $28.80 equivalent
for FBR Asset
2003 Projected EPS $1.27 $4.99 $1.52 $5.55 equivalent
for FBR Asset
2003 Projected Dividend None $5.00 $1.37 $5.00 equivalent
for FBR Asset
Assets/Equity 2:1 8:1 6:1
Market Capitalization at 11/14/02 $475,000,000 $700,000,000 $1,257,800,000 (5)
(1) Includes 4 million employee loan shares
(2) Excludes effect of employee loans and related shares
(3) 25.1 million FBR Asset shares less 2.6 million FBR Asset shares owned by FBR
Group times 3.65 equals 82 million plus 48 million equals 130 million shares
(4) On total shares outstanding, excluding employee loan shares, with no
dilution for option shares
(5) Pro Forma New FBR Group market capitalization based on $9.50 FBR closing
price on November 14, 2002
________________________________________________________________________________
FRIEDMAN BILLINGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2.
PAGE 6
[FBR LOGO] TRANSACTION RATIONALE - FBR ASSET
________________________________________________________________________________
o INTERNALIZES MANAGEMENT AND PROPRIETARY DEAL FLOW
o PROVIDES SIGNIFICANT GROWTH OPPORTUNITY
o MAINTAINS DIVIDEND
o ACHIEVES ACCRETION TO EARNINGS WHILE REDUCING LEVERAGE
o IMPROVES FLEXIBILITY AND DIVERSIFICATION - BENEFIT IN DIFFERENT
ENVIRONMENTS
o POTENTIAL FOR WIDER COVERAGE AND BROADER INVESTMENT BASE
o INCREASES POTENTIAL FOR STOCK APPRECIATION
________________________________________________________________________________
FRIEDMAN BILLINGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2.
PAGE 7
[FBR LOGO] TRANSACTION RATIONALE - FBR GROUP
________________________________________________________________________________
o ACCRETIVE TO EARNINGS AND BOOK VALUE
o MORE EFFICIENT INTERNAL ACCESS TO CAPITAL ENHANCES INVESTMENT
BANKING GROWTH
o INCREASED VISIBILITY AND MARKET PRESENCE ENHANCES OVERALL GROWTH
OPPORTUNITIES
o DIVERSIFIES AND PROVIDES QUARTER TO QUARTER STABILITY TO REVENUE
STREAM
o DEPLOYS EXCESS CAPITAL IN TAX EFFICIENT MANNER
o CURRENT DIVIDEND PLUS GROWTH PROVIDES SIGNIFICANT TOTAL RETURN
POTENTIAL
o POTENTIAL FOR WIDER COVERAGE AND BROADER INVESTOR BASE
________________________________________________________________________________
FRIEDMAN BILLINGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2.
PAGE 8
[FBR LOGO] NEW FBR GROUP
________________________________________________________________________________
o ONE OF THE LARGEST PUBLICLY-OWNED INVESTMENT BANKING FIRMS IN THE
UNITED STATES
o SUBSTANTIAL CAPITAL BASE OF OVER $1 BILLION, HIGHLY LIQUID BALANCE
SHEET
o MORE THAN 460 EMPLOYEES IN 16 OFFICES
o ONE OF THE MOST COST EFFICIENT PLATFORMS IN THE INVESTMENT BANKING
INDUSTRY
o SIGNIFICANT DIVIDEND INCOME GENERATION COMBINED WITH GROWTH
o TAX-EFFICIENT BALANCE SHEET EARNINGS STRUCTURE
o SIGNIFICANT GROWTH OPPORTUNITY WITHIN INVESTMENT BANKING BUSINESS
BASED ON ACCESS TO SIGNIFICANT CAPITAL
o ABILITY TO CAPITALIZE ON MERCHANT BANKING OPPORTUNITIES
o DIVERSIFIED EARNINGS STREAM
________________________________________________________________________________
FRIEDMAN BILLINGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2.
PAGE 9
[FBR LOGO] NEW FBR GROUP OVERVIEW
____________________________________________________________________________________________________________________________________
PRINCIPAL ACTIVITIES
INVESTMENT BANKING RESEARCH INSTITUTIONAL ASSET MANAGEMENT MORTGAGE BACKED MERCHANT
SALES & TRADING SECURITIES BANKING
75 investment bankers 60 analysts 50 Institutional Private Equity $5.8 billion in $160 million
6 focused industry Over 380 Brokers Hedge Funds assets of invested
sectors companies 30 Traders & Sales Venture Capital - AAA rated capital
o Financial Services under coverage Traders Mutual funds securities - - Preferred
o Real Estate o Independence Market-maker in Mezzanine funds guaranteed by and common
o Technology o In-depth over 470 equity Private Client Group Freddie Mac, equity
o Energy company analysis and debt securities o Investment Fannie Mae, - Senior
o Diversified o Theme-driven o Covering over management Ginnie Mae secured and
Industries industry 1,000 o Restricted (144) - Short-duration mezzanine
o Healthcare coverage institutional stock sales of 1-2 - limits loans
Top 10 lead-managing o Daily meetings accounts o Financial planning / price risk - Interest in
equity underwriter with sales force o Mutual funds trust & estate - Leverage proprietary
o 78 transactions o Up-to-date o Hedge funds services guideline - funds
with $5.6 b in economic and o Money managers o Credit lines 6-11x (debt to - Direct
total transaction policy news o Pension funds o Hedging and equity), target assets
value* o Frequent monetization of 8.5x within - Non-levered
o 29 lead and sole management o Employee stock mortgage portfolio
managed roadshows option management portfolio
transactions* o Annual investor o Cash management
o 34 M&A and conferences o FBR National Bank &
Advisory Trust (a)
assignments*
* For 12 months ended 9/30/02
All numbers approximate as of September 30 2002 unless otherwise stated.
(a) Member FDIC and an equal housing lender. Products offered by other FBR subsidiatires are not FDIC insured, not offered,
guaranteed or endorsed by FBR National Bank & Trust, and may lose value
____________________________________________________________________________________________________________________________________
FRIEDMAN BILLNGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2
PAGE 10
[FBR LOGO] BUSINESS OVERVIEW
________________________________________________________________________________
(US $ IN MILLIONS, EXCEPT PER SHARE DATA)
INVESTMENT BANKING REVENUE*
1999 2000 2001 2002 NINE MONTHS
ANNUALIZED
Underwriting $22.6 $21.1 $47.9 $ 90.3
Corporate Finance $22.5 $31.4 $28.5 $ 63.3
Gains $ 3.9 $ 1.4 $ 6.7 $ 5.9
TOTAL $49.0 $53.9 $83.1 $159.5
SALES & TRADING REVENUE(1)*
1999 2000 2001 2002 NINE MONTHS
ANNUALIZED
Agency $15.0 $21.1 $27.1 $36.4
Principal $22.0 $32.3 $26.3 $28.3
TOTAL $37.0 $53.4 $53.4 $64.7
MORTGAGE BACKED SECURITIES PORTFOLIO(2)*
1999 2000 2001 SEPT. 30, 2002
$235.8 $154.8 $1,238.4 $5,822.5
MERCHANT BANKING PORTFOLIO(2)*
1999 2000 2001 SEPT. 30, 2002
$76.6 $32.1 $69.7 $99.3
(1) FBR Group only
(2) FBR Asset only; ending balances
* These charts are depicted by bar graphs in the presentation
________________________________________________________________________________
FRIEDMAN BILLNGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2
PAGE 11
[FBR LOGO] BROKER/DEALER COMPARABLES
___________________________________________________________________________________________________
$ MILLIONS MARKET CAP (A) 2003E P/E PRICE/BOOK INDICATED
DIV. YIELD
______________________________________________________________________________________
FBR PRO FORMA $1,258 6.4x 1.23x 14.2%
Lehman Bros. $13,738 11.9 1.88 0.6
Bear Stearns 9,079 11.7 1.39 NM
A.G. Edwards 2,720 15.6 1.56 NM
Raymond James 1,499 14.3 1.76 NM
Jefferies Group 1,148 15.8 2.00 0.5
___________________________________________________________
MEDIAN BROKER/DEALER 14.3x 1.76x 0.6%
(a) Market data as of November 15, 2002, except FBR Pro Forma, which is calculated
based on the closing price on November 14, 2002 the day prior to the date that
the transaction was announced.
___________________________________________________________________________________________________
FRIEDMAN BILLNGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2
PAGE 12
[FBR LOGO] INDEPENDENT BROKER/DEALER COMPARABLES
________________________________________________________________________________
INDEPENDENT BROKER/DEALER EQUITY CAPITAL
Period End Equity Capital
1 Merrill Lynch 27-Sep-02 $22,299
2 Morgan Stanley 31-Aug-02 21,416
3 Goldman Sachs 30-Aug-02 18,844
4 Lehman Brothers 31-Aug-02 8,909
5 Bear Stearns 31-Aug-02 5,954
6 A. G. Edwards Inc. 31-Aug-02 1,627
7 Legg Mason, Inc 30-Sep-02 1,126
8 NEW FBR GROUP 30-SEP-02 1,013
9 Raymond James Financial 28-Jun-02 801
10 Jefferies Group 27-Sep-02 609
11 SWS Group 27-Sep-02 250
12 Stifel Financial Corp. 30-Sep-02 79
INDEPENDENT BROKER/DEALER Nine Month Interest &
REVENUE BREAK DOWN Period End Dividends
Lehman Brothers 31-Aug-02 70%
Morgan Stanley 31-Aug-02 49%
Goldman Sachs 30-Aug-02 48%
Merrill Lynch 27-Sep-02 46%
NEW FBR GROUP*(EST. PRO FORMA) 30-SEP-02 40%
SWS Group* 27-Sep-02 38%
Bear Stearns 31-Aug-02 32%
Jefferies Group 27-Sep-02 12%
Raymond James Financial 28-Jun-02 11%
Stifel Financial Corp. 30-Sep-02 8%
Legg Mason, inc** 30-Sep-02 7%
A. G. Edwards Inc.** 31-Aug-02 5%
* Three months ended
** Six months ended
INDEPENDENT BROKER/DEALER LEVERAGE
Assets /
Period End Equity
1 A. G. Edwards Inc. 31-Aug-02 2.41
2 Legg Mason, Inc 30-Sep-02 5.34
3 Stifel Financial Corp. 30-Sep-02 5.34
4 NEW FBR GROUP 30-SEP-02 6.43
5 Raymond James Financial 28-Jun-02 8.18
6 Jefferies Group 27-Sep-02 9.60
7 SWS Group 27-Sep-02 13.98
8 Goldman Sachs 30-Aug-02 18.55
9 Merrill Lynch 27-Sep-02 19.72
10 Morgan Stanley 31-Aug-02 24.13
11 Lehman Brothers 31-Aug-02 29.77
12 Bear Stearns 31-Aug-02 31.11
INDEPENDENT BROKER DEALER EXPENSE BREAKDOWN
Nine Month Comp/Net
Period End Revenue
NEW FBR GROUP*(EST. PRO FORMA) 30-SEP-02 40%
Morgan Stanley 31-Aug-02 46%
Bear Stearns 31-Aug-02 49%
Goldman Sachs 30-Aug-02 50%
Lehman Brothers 31-Aug-02 51%
Merrill Lynch 27-Sep-02 52%
SWS Group* 27-Sep-02 56%
Jefferies Group 27-Sep-02 58%
Legg Mason, Inc** 30-Sep-02 59%
A. G. Edwards Inc.** 31-Aug-02 66%
Stifel Financial Corp. 30-Sep-02 68%
Raymond James Financial 28-Jun-02 76%
* Three months ended
** Six months ended
________________________________________________________________________________
FRIEDMAN BILLNGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2.
PAGE 13
[FBR LOGO] INVESTMENT BANKING RANKINGS 1/1/02-9/30/02
_________________________________________________________________________
________________________________________________________________________________
ALL MARKET CAPS - ALL INDUSTRIES
NUMBER OF DEALS
AND DOLLAR AMOUNT LEAD MANAGED EQUITY UNDERWRITERS, 1/01/02-9/30/02
RAISED, RANKED BY ===========================================================
NUMBER OF DEALS
LEAD MANAGER # OF DEALS AMT RAISED
Credit Suisse First Boston 49 $16,405.392
Merrill Lynch & Co 28 6,693.042
Salomon Smith Barney 26 10,851.538
Morgan Stanley 26 6,817.097
Goldman, Sachs & Co 25 13,103.261
UBS Warburg LLC 22 2,438.798
Lehman Brothers 19 4,022.967
Bear Stearns & Co 16 2,202.195
-----------------------------------------------------------
FRIEDMAN, BILLINGS, RAMSEY 16 1,694.163
-----------------------------------------------------------
Deutsche Bank Securities 13 2,276.230
J.P. Morgan Securities Inc 13 2,138.884
Banc of America Securities 12 2,136.812
Raymond James 9 280.402
CIBC World Markets 8 405.579
Robertson Stephens 7 386.014
Wachovia Securities Inc 6 289.258
Keefe, Bruyette & Woods Inc 5 216.599
Thomas Weisel Partners LLC 4 468.110
Robert W. Baird & Co Inc 4 384.601
U.S. Bancorp Piper Jaffray Inc 4 303.256
-----------------------------------------------------------
..
Source: CommScan LLC $ millions, IPOS and Secondaries only, excludes closed
end funds.
*IN ADDITION, FBR RAISED MORE THAN $450 MILLION IN 144A INSTITUTIONAL
EQUITY PLACEMENTS. INCLUDING THIS $450MM, FBR RAISED APPROXIMATELY
$2.15 BILLION DURING THE NINE MONTHS ENDED SEPTEMBER 30, 2002
________________________________________________________________________________
FRIEDMAN BILLINGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2.
PAGE 14
[FBR LOGO] INVESTMENT BANKING
AFTERMARKET PERFORMANCE ACROSS ALL INDUSTRIES 21 MONTHS 1/1/01 - 9/30/02
--------------------------------------------------------------------------
________________________________________________________________________________
AFTER MARKET
PERFORMANCE
LEAD MANAGER* # OF DEALS (%)
======================================================================
----------------------------------------------------------------------
FRIEDMAN, BILLINGS, RAMSEY 34 9.48
----------------------------------------------------------------------
A.G. Edwards & Sons Inc 13 -1.89
Wachovia Securities (Old) 17 -4.50
UBS Warburg LLC 84 -10.41
Salomon Smith Barney Inc 104 -11.32
Bear, Stearns & Co 40 -11.89
Deutsche Bank Securities 43 -11.89
Merrill Lynch & Co 147 -13.35
Goldman, Sachs & Co 103 -15.78
Raymond James 17 -15.81
Morgan Stanley 83 -16.32
Credit Suisse First Boston 159 -17.17
Lehman Brothers 70 -18.24
J.P Morgan Securities 69 -18.80
U.S Bancorp Piper Jaffray Inc 22 -19.07
SG Cowen Securities Corp 13 -23.08
Banc of America Securities 46 -25.48
Thomas Weisel Partners LLC 13 -32.39
CIBC World Markets 22 -32.83
Robertson Stephens 19 -33.74
------------------------------
SOURCE: COMMSCAN LLC
AVERAGE: 1,118 TOTAL: -16.22
*Of five or more transactions priced during
the period 1/1/01 to 9/20/02
Aftermarket performance results for each of the offerings vary considerably,
and may be significantly different from the average figure quoted.
Past performance is no guarantee of future results.
________________________________________________________________________________
FRIEDMAN BILLINGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2.
PAGE 15
[FBR LOGO] ACCESS TO CAPITAL DRIVES INVESTMENT BANKING GROWTH
________________________________________________________________________________
---------------------------------------------------------------------------
INVESTMENT TOTAL INVESTMENT BANKING
PERIOD INVESTMENT AMOUNT VALUE (1) FEES
--------------------------------------------------------------------------------
Jul-01 Saxon Capital $9,300,000 $11,070,000 $16,922,717
Nov-02 Quaker Coal - (a) - 950,000
Nov-01 MCG Capital 9,934,375 9,612,500 9,904,280
Dec-01 Anworth Mortgage 3,890,650 6,309,438 1,014,216
Mar-02 Oxford Finance Corp. 14,650,000 (b) 14,873,993 2,906,412
Apr-02 Southwest Royalties 18,333,333 18,508,634 2,775,260
Sep-02 American Fin Realty 40,000,001 (c) 40,193,612 25,762,429
Sep-02 AmeriCredit 35,250,000 40,350,000 27,610,095
Oct-02 Franklin Bank 5,580,000 (d) 5,580,000 4,034,121
------------- ------------------------------
$136,938,360 $146,498,178 $91,879,529
(1) Equals total cash proceeds to date plus mark to market value at
September 30, 2002
(a) Breakup fee
(b) Includes $10 million note and $4,650,000 equity investment
(c) Includes $5 million Three Beaver Valley note and $35,000,001 equity
investment
(d) Investment value equals cost
________________________________________________________________________________
FRIEDMAN BILLINGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2.
PAGE 16
[FBR LOGO] CASE STUDIES FOR USE OF CAPITAL
________________________________________________________________________________
---------------------------------------------------------------------------
American Financial Realty Southwest Royalties, Inc. AmeriCredit Corp.(ACF)
Trust
--------------------------------------------------------------------------------------------------------
FBR Group worked with American FBR acted as the sole manager
Financial's Management team to FBR was engaged to syndicate a and placement agent for a $500
create a REIT that purchases real senior loan for Southwest Royalties, million recapitalization of
Description of estate assets from large commercial an oil and gas exploration and AmeriCredit, a sub-prime
Transaction banking institutions and subsequently production company, in an amount automobile finance company.
releases the properties back to the up to $80 million. FBR Asset FBR Asset acted as the lead
institutions or a third party and in participated as the lead, helping investor, enabling FBR to
some cases, sells the acquired to bring in two other institutions to successfully complete the
property. FBR Assets acted as the consummate the transaction. transaction in a difficult
lead investor in the placement of market environment.
$400 million dollars to initially
capitalize the REIT.
Transaction 144A Private Placement Syndicated Senior Loan Follow-on Offering
Structure
Deal Size $400 Million $55 Million Over $500 Million
Investment Amount $35,000,001 $18,333,333 $35,250,000
Days Held 75+ (still in portfolio) 26 50+ (still in portfolio)
Holding Period Return 14.9% to date 28.9% 14.9% to date
------------------------------------------------------------------------------------------------------------------------------------
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FRIEDMAN BILLINGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2.
PAGE 17
[FBR LOGO] NEW FBR GROUP MBS AND PRINCIPAL INVESTMENTS
________________________________________________________________________________
----------------------------------------------------------------------------
THE STRATEGY SUCCESSFULLY EMPLOYED BY FBR ASSET IN THE PAST WILL CONTINUE
TO BE USED INSIDE OF NEW FBR GROUP
o RESIDENTIAL MORTGAGE-BACKED SECURITIES ($5.8 BILLION AS OF SEPTEMBER 30,
2002)
o AAA rated securities - GSE guaranteed by Freddie Mac, Fannie Mae,
Ginnie Mae
o Short-duration of 1-2 years - limits price risk
o Leverage guideline - 6-11x (debt to equity), Target 8.5x
o Allocation of capital: 50%-90% (long-term average target 60%-65%)
o MERCHANT BANKING PORTFOLIO ($99.3 MILLION AS OF SEPTEMBER 30, 2002)
o Senior secured and mezzanine loans
o Preferred and common equity
o Direct assets
o Non-levered portfolio
o Typical hold period 12-18 months
o Allocation of capital: 10%-50% (long-term average target 35%-40%)
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FRIEDMAN BILLINGS RAMSEY
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PAGE 18
[FBR LOGO] PORTFOLIO RETURNS
________________________________________________________________________________
---------------------------------------------------------------------------
o MORTGAGE BACKED SECURITIES PORTFOLIO INVESTMENTS
Portfolio Example
-----------------
Unlevered Asset Yield: 3.75%
Cost of funds: 1.35%
Spread: 2.40%
-----
ROE, Gross (Assumed Leverage @8.5x) 24.15%
o OPPORTUNITY FUND INVESTMENTS
o The Dollar Weighted Internal Rate of Return in FBR Asset's
Opportunity Portfolio Investments has been 30.6% (Before Accounting
for Investment Banking Fees Paid to FBR Asset by FBR Group)
________________________________________________________________________________
FRIEDMAN BILLINGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2.
PAGE 19
[FBR LOGO] FBR ASSET MBS PORTFOLIO
________________________________________________________________________________
---------------------------------------------------------------------------
FOR THE NINE MONTHS ENDING 30-SEP-2002
____________________________________________________________________________________________________________________________________
CURRENT MARKET RELEVANT
FACE VALUE ANNUAL % OF AVERAGE AVERAGE BOOK MODIFIED EFFECTIVE PREPAYMENT
SECTOR ($000) ($000) INCOME PORTFOLIO COUPON YRS TO MAT YIELD DURATION DURATION ASSUMPTIONS
____________________________________________________________________________________________________________________________________
ARM 5,618,770 5,789,145 252,966 99.44% 5.27% 2.55 5.34% 2.38 1.37 56.71
Fixed 31,869 33,360 13,709 0.56% 7.00 2.27 4.74 2.00 1.00 30.37
TOTAL 5,650,639 5,822,505 266,675 100.00% 5.28 2.55 4.75 2.37 1.37 30.53
[PIE CHART DEPICTING [PIE CHART DEPICTING SECTOR
ARM = 99%
FNMA = 40% FIXED = 1%]
FHLMC = 60%]
________________________________________________________________________________
FRIEDMAN BILLINGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2.
PAGE 20
[FBR LOGO] NEW FBR GROUP PRO FORMA SUMMARY
________________________________________________________________________________
----------------------------------------------------------------------------
(US $ IN MILLIONS)
FBR ASSET
2003 FORECAST FBR GROUP INVESTMENT MERGER NEW FBR
CORP. ADJUSTMENTS GROUP
Revenues
Investment Banking 150.0 $150.0
Institutional Brokerage 82.6 82.6
Asset Management 31.4 31.4
FBR Asset 45.5 (45.5) 0.0
Interest & Other 22.0 246.5 (24.3) 244.2
---------- ------------ ------------- ----------
Total Revenues 331.5 246.5 (69.8) 508.2
Expenses 230.4 121.5 (46.0) 305.9
---------- ------------ ------------- ----------
Pre-Tax Income 101.1 125.0 (23.8) 202.3
Tax(1) 40.4 0.0 (25.1) 15.3
---------- ------------ ------------- ----------
GAAP Net Income $60.7 $125.0 $1.3 $187.0
Accretion of MBS mark to ========== ============ ============= ==========
market purchase
adjustment 10.8 10.8
Adjusted Net Income 197.8
Dividends Paid 181.4
Retained Capital 16.4
Fully Diluted Shares Outstanding 48.0 * 25.1 ** 130.0 ***
Fully Diluted GAAP Earnings Per $1.27 $4.99 1.44
Share
Fully Diluted Adjusted Earnings 1.52
Per Share
* 50.4 million primary shares less 4.0 million
(1) Tax savings detailed below: shares securing employee loans in accordance
with GAAP plus an estimated 1.6 million
------------------------------------------------------ additional shares from option dilution
Tax Savings of Net Management Fees & Costs $12.7 **Includes 2.6 million shares owned by FBR Group
***25.1 million FBR Asset shares less 2.6 million
Tax Savings of Income Pickup from FBR Asset 5.2 FBR Asset shares owned by FBR Group times 3.65 equals
82 million plus 48 million equals 130 million shares
Tax Savings of Shifting Capital to REIT 8.8
Tax Expense of Executive Compensation Allocated (1.6)
-----
to REIT Net Tax Benefits $25.1
-----
------------------------------------------------------
________________________________________________________________________________
FRIEDMAN BILLINGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION OF PAGE 2.
PAGE 21
[FBR LOGO] NEW FBR GROUP
_______________________________________________________________________________
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o ONE OF THE LARGEST PUBLICLY-OWNED INVESTMENT BANKING FIRMS IN THE
UNITED STATES
o SUBSTANTIAL CAPITAL BASE OF OVER $1 BILLION, HIGHLY LIQUID BALANCE
SHEET
o MORE THAN 460 EMPLOYEES IN 16 OFFICES
o ONE OF THE MOST COST EFFICIENT PLATFORMS IN THE INVESTMENT BANKING
INDUSTRY
o SIGNIFICANT DIVIDEND INCOME GENERATION COMBINED WITH GROWTH
o TAX-EFFICIENT BALANCE SHEET EARNINGS STRUCTURE
o SIGNIFICANT GROWTH OPPORTUNITY WITHIN INVESTMENT BANKING BUSINESS
BASED ON ACCESS TO SIGNIFICANT CAPITAL
o ABILITY TO CAPITALIZE ON MERCHANT BANKING OPPORTUNITIES
o DIVERSIFIED EARNINGS STREAM
________________________________________________________________________________
FRIEDMAN BILLINGS RAMSEY
SEE STATEMENT CONCERNING FORWARD LOOKING INFORMATION ON PAGE 2.
PAGE 22