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Net revenues for the second quarter of 2008 were $50.5 million compared to net revenues of $104.0 million in the first quarter of 2008 and $169.5 million in the second quarter of 2007. Net revenues for the first six months of 2008 were $154.5 million compared to net revenues of $312.6 million for the first six months of 2007.
"While certain parts of our business, most notably institutional brokerage, performed well, the extremely difficult capital markets environment and the resulting slowdown in banking revenues led to a loss for the quarter," said Richard J. Hendrix, President and Chief Operating Officer of FBR Capital Markets. "We are capitalized in a way that allows us to continue to execute our strategic plan to broaden our franchise even through this difficult market. We will, however, also be focused on reducing expenses to reflect the current market environment."
Capital Markets
In the second quarter, FBR Capital Markets generated investment banking revenues of $8.2 million compared to $70.0 million in the first quarter of 2008 and $123.1 million in the second quarter of 2007. During the second quarter of 2008, investment banking revenues included $4.2 million generated by its mergers and acquisitions advisory group.
In its institutional brokerage business, FBR Capital Markets extended its growth trajectory by posting $34.8 million in second quarter revenue compared to $31.8 million in the first quarter of 2008 and $32.7 million in the second quarter of 2007 -- a year over year increase of 6.4%. Year-to-date institutional brokerage revenues of $66.6 million are 13.8% higher than the $58.5 million recorded in the first six months of 2007.
Asset Management
In FBR Capital Markets' asset management business, management and incentive fees were $4.2 million for the second quarter of 2008, compared to $4.6 million in the first quarter of 2008 and $6.5 million in the second quarter of 2007. Assets under management as of June 30, 2008 were $1.9 billion compared to $2.1 billion at the end of the first quarter 2008 and $2.9 billion as of June 30, 2007.
Merchant Banking
As of June 30, 2008 FBR Capital Markets had nine merchant banking portfolio investments with an aggregate value of $49.3 million, compared to $54.0 million at the end of last quarter.
Looking Ahead
"While the environment continues to be difficult, we have taken advantage of the disarray in the marketplace and - consistent with our strategic plan - have been adding talented professionals in many areas of our business, including a convertible securities team from Bear Stearns," said Eric F. Billings, Chairman and Chief Executive Officer of FBR Capital Markets. "As market conditions evolve, we fully expect to participate in substantial capital-raising opportunities such as recapitalizations of financial institutions. While the future will undoubtedly be unpredictable, we will be taking steps to reduce our costs on an ongoing basis which should position us for enhanced profitability both in the short term as well as when markets begin to normalize."
Investors wishing to listen to the earnings conference call at 9:00 A.M. U.S. EDT, Wednesday, July 23, 2008, may do so via the web at: http://phx.corporate-ir.net/phoenix.zhtml?c=204322&p=irol-irhome.
Replays of the webcast will be available after the call.
FBR Capital Markets Corporation, a majority-owned subsidiary of Friedman, Billings, Ramsey Group, Inc. (FBR), provides investment banking*, merger and acquisition advisory services*, institutional brokerage*, research*, asset management and private wealth services. FBR Capital Markets focuses capital and financial expertise on seven industry sectors: consumer, diversified industrials, energy & natural resources, financial institutions, insurance, real estate, and technology, media & telecom. FBR is headquartered in the Washington, D.C. metropolitan area with offices in Arlington, VA; Boston; Dallas; Houston; Irvine; New York; San Francisco; London, England; and Sydney, Australia. For more information, please visit www.fbrcapitalmarkets.com.
*Friedman, Billings, Ramsey & Co., Inc.
Statements in this release concerning future performance, developments, events, market forecasts, revenues, expenses, earnings, run rates and any other guidance on present or future periods, constitute forward-looking statements that are subject to a number of factors, risks and uncertainties that might cause actual results to differ materially from stated expectations or current circumstances. These factors include, but are not limited to, the effect of demand for public offerings, activity in the secondary securities markets, interest rates, costs of borrowing, interest spreads, mortgage pre- payment speeds, risks associated with merchant banking investments, the realization of gains and losses on principal investments, available technologies, competition for business and personnel, and general economic, political and market conditions. For a discussion of these and other risks and important factors that could affect our future results and financial condition, see "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the our Annual Report on Form 10-K for the fiscal year ended December 31, 2007.
Financial data follows. FBR CAPITAL MARKETS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (Unaudited) Quarter Ended June 30, 2008 % 2007 % ------ ----- ------ ----- REVENUES: Investment banking: Capital raising $3,961 7.8% $116,972 69.0% Advisory 4,192 8.3% 6,152 3.6% Institutional brokerage: Principal transactions 4,888 9.7% 4,152 2.4% Agency commissions 29,891 59.2% 28,526 16.8% Asset management: Base management fees 4,153 8.2% 6,360 3.8% Incentive allocations and fees - 0.0% 116 0.1% Interest income 4,881 9.7% 5,798 3.4% Net investment income 745 1.5% 1,218 0.7% Other 282 0.6% 465 0.4% ------ ------ ------- ------ Total revenues 52,993 105.0% 169,759 100.2% Interest expense 2,505 5.0% 274 0.2% ------ ------ ------- ------ Revenues, net of interest expense 50,488 100.0% 169,485 100.0% ------ ------ ------- ------ NON-INTEREST EXPENSES: Compensation and benefits 48,273 95.6% 89,877 53.0% Professional services 8,841 17.5% 12,686 7.5% Business development 6,624 13.1% 9,931 5.9% Clearing and brokerage fees 3,367 6.7% 3,022 1.8% Occupancy and equipment 8,361 16.6% 7,816 4.6% Communications 6,165 12.2% 5,805 3.4% Other operating expenses 4,080 8.1% 3,706 2.2% ------ ------ ------- ------ Total non-interest expenses 85,711 169.8% 132,843 78.4% ------ ------ ------- ------ (Loss) income before income taxes (35,223) -69.8% 36,642 21.6% Income tax (benefit) provision (9,974) -19.8% 14,882 8.8% ------ ------ ------- ------ Net (loss) income $(25,249) -50.0% $21,760 12.8% ======== ====== ======= ====== Basic (loss) earnings per share $(0.39) $0.34 ====== ===== Diluted (loss) earnings per share $(0.39) $0.34 ====== ===== Weighted average shares - basic (in thousands) 64,755 64,297 ====== ====== Weighted average shares - diluted (in thousands) 64,755 64,354 ====== ====== FBR CAPITAL MARKETS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (Unaudited) Six Months Ended June 30, 2008 % 2007 % ------ ----- ------ ----- REVENUES: Investment banking: Capital raising $68,870 44.6% $214,208 68.5% Advisory 9,268 6.0% 12,610 4.0% Institutional brokerage: Principal transactions 10,845 7.0% 6,188 2.0% Agency commissions 55,707 36.0% 52,302 16.7% Asset management: Base management fees 8,797 5.7% 11,888 3.8% Incentive allocations and fees - 0.0% 220 0.1% Interest income 7,342 4.8% 16,912 5.4% Net investment (loss) income (4,283) -2.8% 2,713 0.9% Other 526 0.3% 541 0.2% ------- ------ ------- ------ Total revenues 157,072 101.6% 317,582 101.6% Interest expense 2,538 1.6% 4,936 1.6% ------- ------ ------- ------ Revenues, net of interest expense 154,534 100.0% 312,646 100.0% ------- ------ ------- ------ NON-INTEREST EXPENSES: Compensation and benefits 119,136 77.1% 167,668 53.6% Professional services 20,004 12.9% 23,510 7.5% Business development 18,644 12.1% 21,246 6.8% Clearing and brokerage fees 6,965 4.5% 5,688 1.8% Occupancy and equipment 16,968 11.0% 15,309 4.9% Communications 12,208 7.9% 11,214 3.6% Other operating expenses 6,813 4.4% 5,526 1.8% ------- ------ ------- ------ Total non-interest expenses 200,738 129.9% 250,161 80.0% ------- ------ ------- ------ (Loss) income before income taxes (46,204) -29.9% 62,485 20.0% Income tax (benefit) provision (10,781) -7.0% 29,719 9.5% ------- ------ ------- ------ Net (loss) income $(35,423) -22.9% $32,766 10.5% ======= ====== ======= ====== Basic (loss) earnings per share $(0.55) $0.51 ======= ====== Diluted (loss) earnings per share $(0.55) $0.51 ======= ====== Weighted average shares - basic (in thousands) 64,592 64,223 ======= ====== Weighted average shares - diluted (in thousands) 64,592 64,247 ======= ====== FBR CAPITAL MARKETS CORPORATION Financial & Statistical Supplement - Operating Results (Dollars in thousands, except per share data) (Unaudited) Six Months Ended June 30, 2008 Q-2 08 Q-1 08 -------- -------- -------- Revenues Investment banking: Capital raising $68,870 $3,961 $64,909 Advisory 9,268 4,192 5,076 Institutional brokerage: Principal transactions 10,845 4,888 5,957 Agency commissions 55,707 29,891 25,816 Asset management: Base management fees 8,797 4,153 4,644 Interest 7,342 4,881 2,461 Net investment (loss) income (4,283) 745 (5,028) Other 526 282 244 -------- -------- -------- Total revenues 157,072 52,993 104,079 Interest expense 2,538 2,505 33 -------- -------- -------- Revenues, net of interest expense 154,534 50,488 104,046 -------- -------- -------- Non-interest expenses Compensation and benefits 119,136 48,273 70,863 Professional services 20,004 8,841 11,163 Business development 18,644 6,624 12,020 Clearing and brokerage fees 6,965 3,367 3,598 Occupancy and equipment 16,968 8,361 8,607 Communications 12,208 6,165 6,043 Other operating expenses 6,813 4,080 2,733 -------- -------- -------- Total non-interest expenses 200,738 85,711 115,027 -------- -------- -------- Loss before income taxes (46,204) (35,223) (10,981) Income tax benefit (10,781) (9,974) (807) -------- -------- -------- Net loss $(35,423) $(25,249) $(10,174) ======== ======== ======== Loss before income taxes as a percentage of net revenue -29.9% -69.8% -10.6% ROE (annualized) -14.3% -20.4% -8.1% Total shareholders' equity $481,653 $481,653 $503,033 Basic loss per share $(0.55) $(0.39) $(0.16) Diluted loss per share $(0.55) $(0.39) $(0.16) Ending shares outstanding (in thousands) 64,874 64,874 64,765 Book value per share $7.42 $7.42 $7.77 Gross assets under management (in millions) Managed accounts $275.7 $275.7 $333.9 Hedge & offshore funds 35.5 35.5 45.1 Mutual funds 1,553.4 1,553.4 1,702.9 Private equity and venture capital funds 21.1 21.1 21.4 -------- -------- -------- Total $1,885.7 $1,885.7 $2,103.3 ======== ======== ======== Net assets under management (in millions) Managed accounts $275.7 $275.7 $333.9 Hedge & offshore funds 33.4 33.4 40.4 Mutual funds 1,533.8 1,533.8 1,698.0 Private equity and venture capital funds 20.2 20.2 20.2 -------- -------- -------- Total $1,863.1 $1,863.1 $2,092.5 ======== ======== ======== Employee count 700 700 707 ======== ======== ======== FBR CAPITAL MARKETS CORPORATION Financial & Statistical Supplement - Operating Results (Dollars in thousands, except per share data) (Unaudited) Year Ended December 31, 2007 Q-4 07 Q-3 07 Q-2 07 Q-1 07 -------- -------- -------- -------- -------- Revenues Investment banking: Capital raising $289,545 $25,646 $49,691 $116,972 $97,236 Advisory 34,063 4,973 16,480 6,152 6,458 Institutional brokerage: Principal transactions 10,152 2,996 968 4,152 2,036 Agency commissions 104,633 26,112 26,219 28,526 23,776 Asset management: Base management fees 23,549 5,542 6,119 6,360 5,528 Incentive allocations and fees 401 99 82 116 104 Interest 25,760 3,625 5,223 5,798 11,114 Net investment (loss) income (4,497) (8,703) 1,493 1,218 1,495 Other 1,290 536 213 465 76 -------- -------- -------- -------- -------- Total revenues 484,896 60,826 106,488 169,759 147,823 Interest expense 5,337 85 316 274 4,662 -------- -------- -------- -------- -------- Revenues, net of interest expense 479,559 60,741 106,172 169,485 143,161 -------- -------- -------- -------- -------- Non-interest expenses Compensation and benefits 287,752 53,049 67,035 89,877 77,791 Professional services 45,303 12,598 9,195 12,686 10,824 Business development 37,356 9,806 6,304 9,931 11,315 Clearing and brokerage fees 12,373 2,774 3,911 3,022 2,666 Occupancy and equipment 33,197 9,217 8,671 7,816 7,493 Communications 22,434 5,503 5,717 5,805 5,409 Other operating expenses 15,868 7,034 3,308 3,706 1,820 -------- -------- -------- -------- -------- Total non-interest expenses 454,283 99,981 104,141 132,843 117,318 -------- -------- -------- -------- -------- Net income (loss) before income taxes 25,276 (39,240) 2,031 36,642 25,843 Income tax provision (benefit) 20,032 (11,451) 1,764 14,882 14,837 -------- -------- -------- -------- -------- Net income (loss) $5,244 $(27,789) $267 $21,760 $11,006 ======== ======== ======== ======== ======== Net income (loss) before income taxes as a percentage of net revenue 5.3% -64.6% 1.9% 21.6% 18.1% ROE (annualized) 1.1% -22.4% 0.2% 17.2% 8.9% Total shareholders' equity $506,740 $506,740 $527,045 $528,341 $501,858 Basic earnings (loss) per share $0.08 $(0.43) $- $0.34 $0.17 Diluted earnings (loss) per share $0.08 $(0.43) $- $0.34 $0.17 Ending shares outstanding (in thousands) 64,059 64,059 63,889 64,411 64,282 Book value per share $7.91 $7.91 $8.25 $8.20 $7.81 Gross assets under management (in millions) Managed accounts $347.1 $347.1 $345.6 $291.3 $258.8 Hedge & offshore funds 52.1 52.1 61.7 61.7 67.1 Mutual funds 2,046.5 2,046.5 2,292.3 2,482.6 2,412.9 Private equity and venture capital funds 23.8 23.8 31.3 33.8 41.2 -------- -------- -------- -------- -------- Total $2,469.5 $2,469.5 $2,730.9 $2,869.4 $2,780.0 ======== ======== ======== ======== ======== Net assets under management (in millions) Managed accounts $347.1 $347.1 $345.6 $291.3 $258.8 Hedge & offshore funds 50.7 50.7 58.1 58.1 62.5 Mutual funds 2,034.6 2,034.6 2,285.1 2,474.7 2,406.4 Private equity and venture capital funds 22.6 22.6 29.8 32.0 38.0 -------- -------- -------- -------- -------- Total $2,455.0 $2,455.0 $2,718.6 $2,856.1 $2,765.7 ======== ======== ======== ======== ======== Employee count 758 758 765 745 751 ======== ======== ======== ======== ======== FBR CAPITAL MARKETS CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts) (Unaudited) ASSETS 30-Jun-08 31-Dec-07 ---------- -------- Cash and cash equivalents $300,280 $383,558 Receivables 37,797 30,923 Investments: Mortgage-backed securities, at fair value 884,318 - Long-term investments 76,365 84,076 Trading securities, at fair value 16,978 19,057 Due from clearing broker 12,021 - Derivative assets, at fair value 4,597 - Intangible assets, net 9,817 9,837 Furniture, equipment and leasehold improvements, net 26,713 29,092 Prepaid expenses and other assets 58,326 52,189 ---------- -------- Total assets $1,427,212 $608,732 ========== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Trading account securities sold $259 $206 but not yet purchased, at fair value Repurchase agreements 553,127 - Securities purchased 300,318 - Accrued compensation and benefits 41,692 45,432 Accounts payable, accrued expenses and other liabilities 50,066 48,778 Due to clearing broker - 7,512 Due to affiliates 97 64 ---------- -------- Total liabilities 945,559 101,992 ---------- -------- Shareholders' equity: Common stock 67 66 Additional paid-in capital 423,440 412,805 Restricted stock units 1,980 - Accumulated other comprehensive (loss) income, net of taxes (1,658) 622 Retained earnings 57,824 93,247 ---------- -------- Total shareholders' equity 481,653 506,740 ---------- -------- Total liabilities and shareholders' equity $1,427,212 $608,732 ========== ========
SOURCE FBR Capital Markets Corporation
http://www.fbrcapitalmarkets.com
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