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
Subject Company: FBR Asset Investment Corporation
Commission File No: 001-15049
FRIEDMAN, BILLINGS, RAMSEY, GROUP, INC. (NYSE: FB)
AND
FBR ASSET INVESTMENT CORPORATION (NYSE: FB)
JOINT EARNINGS CALL
FOURTH QUARTER, 2002
9:00 A.M. E.S.T., JANUARY 29, 2003
TRANSCRIPT
MODERATOR:
Good morning and welcome to the Friedman, Billings, Ramsey Group and FBR Asset
Investment Corporation's joint fourth quarter earnings call. Lines will be
placed on a listen-only until the question and answer session of today's call,
and the call is being recorded. If you have any objections, you may disconnect
at this time.
Now I would like to turn the call over to Mr. Kurt Harrington. Thank you, sir.
You may begin.
KURT HARRINGTON, CHIEF FINANCIAL OFFICER OF FRIEDMAN, BILLINGS, RAMSEY GROUP,
INC.:
Good morning. This is Kurt Harrington, Chief Financial Officer of Friedman,
Billings, Ramsey Group and FBR Asset Investment Corporation.
Before we begin this joint conference 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 or current circumstances. These factors include, but are not
limited to, the effect of demand for public offerings, activity in the secondary
securities markets, changes in interest rates, prepayment speeds within the
mortgage-backed securities (MBS) market, the ability to enter into repurchase
agreements to finance MBS investments, the high degree of risk associated with
venture capital and other equity investments, available technologies,
competition for business and personnel, and general economic, political, and
market conditions. Additional information concerning factors that could cause
results to differ materially is contained in FBR Group's and FBR Asset
Investment Corp.'s Annual Reports on Form 10-K and quarterly reports on Form
10-Q.
I would now like to turn the call over to Emanuel Friedman, FBR Group's Chairman
and Co-CEO, and Eric Billings, Vice Chairman and Co-CEO of FBR Group and
Chairman and CEO of FBR Asset Investment Corp. Also joining us this morning are
Rick Hendrix, President and COO of FBR Asset Investment Corp., and Bob Smith,
COO of FBR Group.
EMANUEL FRIEDMAN, FBR GROUP'S CHAIRMAN AND CO-CHIEF EXECUTIVE OFFICER:
Today, FBR Group announced record annual revenue and earnings. This growth
reaffirms, in what can only be described as unsettled times, the ongoing success
of our platform build-out and the effectiveness of our execution.
For the full year of 2002, FBR reported net income of fifty-two point four
million, or a dollar eight per share before extraordinary gain, on revenues of
two hundred and sixty-eight million, compared to a net loss of thirteen point
nine million, or twenty-nine percent per share before extraordinary gain on
revenue of a hundred and sixty point eight million the previous year. Remember
that our 2001 results included technology sector write-downs of eighteen point
one million and restructuring charges of five point two
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million. Adjusting for the effect of these items, our 2001 operating results
would have been nine point four million, or twenty cents per basic share.
FBR achieved both record revenue and net income in 2002. We saw revenue growth
across each of our profit centers--investment banking, institutional brokerage,
and asset management. For the year, aggregate growth across the company was
sixty-seven percent compared to 2001, including growth of seventy-three percent
in investment banking, eighteen percent in institutional brokerage, and two
hundred and sixty-four percent in asset management.
We're also pleased with our fourth quarter. Although not as strong as the third
quarter, our results continued to demonstrate our ability to generate a high
cash return on unleveraged equity capital even in difficult markets--sixteen
point eight percent annualized return on equity for the fourth quarter.
Friedman, Billings, Ramsey Group reported net income after tax of ten point one
million, or twenty-one cents per share for the quarter, compared with net income
before extraordinary gain of nine point six million, or twenty-one cents per
share, in the fourth quarter of 2001.
The company fully utilized its operating loss carry forwards and began recording
income tax expense during the second half of 2002. Pre-tax net income for the
fourth quarter of 2002 was ten point eight million, up thirty-eight percent
compared to seven point eight million before extraordinary gain for the fourth
quarter of 2001.
The results that we announce today do not include any impact from the deployment
of capital into a mortgage-backed strategy similar to FBR Asset's. We began in
the fourth quarter our planned redeployment of seventy million dollars of excess
capital, including ten million dollars of our existing long-term investments.
This week, we closed on the first tranche with the purchase of three hundred and
fifty million of mortgage-backeds, utilizing thirty-five million of redeployed
equity capital invested at spreads that create a return of twenty percent.
At December 31st, our book value per share was five dollars and twenty-eight
cents, a thirty percent increase from four dollars and six cents at the start of
the year. FBR Group's annualized return off of equity for the year was
twenty-four point eight percent, and for the fourth quarter was sixteen point
eight percent.
Now let me talk for a moment about the performance of each of FBR Group's profit
centers. In investment banking, during the fourth quarter, FBR raised
approximately five hundred and seventy million in capital for our investment
banking clients. We completed ten capital raises, lead managing four public
underwritings and two private placements, and co-managing four public
underwritings. In addition, we completed three M&A transactions and four other
advisory assignments. These transactions included a more than a hundred and
twenty million dollar lead-managed follow-on offering for RLI, a specialty
insurance company, just a year after we expanded our insurance investment
banking effort.
Most importantly, FBR continued to be ranked number one among major underwriters
for aftermarket performance for the one and five year periods ending December
31, 2002. For 2002, FBR ranked twelfth by dollar volume raised as a lead manager
of public equities across all industries and all market capitalizations,
according to CommScan Equidesk.
Thirty-five percent of our transactions during the year were in sectors other
than financials and real estate, and we continue to grow in those other
sectors--for example, many of you have noticed that we have recently filed a
hundred and forty million dollar IPO in the security industry.
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Looking forward, despite difficult market conditions, we remain optimistic about
our prospects in investment banking. Our backlog remains strong, with IPO
transactions totaling two hundred and fifty million dollars already filed. We
are reaffirming our revenue target of a hundred and fifty million in our
investment banking business for 2003.
In institutional brokerage, FBR continued to expand its research, institutional
sales, and trading capabilities, adding seven analysts and five brokers and two
traders during the quarter, taking the totals in these groups up to sixty-six
and eighty-four, respectively.
In its asset management business, at December 31, 2002, FBR had more than two
point seven billion in gross assets under management, excluding FBR Asset, which
is FBR Group's largest managed vehicle. Our mutual fund assets under management
grew eighteen percent during the year, and our revenue for the year included
sixty-one point one million from asset management fees, balance sheet earnings,
interest, and dividends.
In conclusion, we are pleased with our results for 2002 - not only
quantitatively, with the strongest year-over-year revenue growth since we went
public - but also qualitatively, with the continued diversification of our
revenue stream across our three profit centers and six industry sectors.
Now I would like to hand the call over to Eric Billings.
ERIC BILLINGS, VICE CHAIRMAN AND CO-CEO, FRIEDMAN, BILLINGS, RAMSEY GROUP, INC:
Thank you, Manny. FBR Group's results for 2002 confirm the growth that has
characterized our company since we founded it in 1989. Since we created our
company through the end of 2002, our business has grown at a compounded annual
growth rate of approximately thirty percent. Since 1999, the growth rate has
been even higher.
We are particularly well positioned for continued growth at this time and are
actively hiring across the platform, as well as considering further geographic
expansion. In addition to our internal structure, the competitive environment in
the securities industries is aiding our growth.
Internally, we continue to grow our intellectual capital and revenue-generating
potential through selective hiring and strategic expansion. Key people are, of
course, key to driving profitability in our business. During 2002, we hired
senior producers throughout our capital markets business--institutional sales,
sales trading, research, and investment banking. At year-end, FBR Group's total
full-time headcount was four hundred and eighty-one people. Over the next twelve
to eighteen months, we expect to grow that closer to five hundred people.
Presently, we are actively recruiting managing directors in our investment
banking in five of six, of our six industry sectors. Our ability to attract
qualified candidates is better now than ever in our history, as our recent hires
show.
The competitive environment is also very favorable from a business-generation
perspective. Throughout our thirteen-year existence, we have competed not only
with Wall Street, but also with some of the great names outside of Wall
Street--Robbie Stevens, Montgomery, Alex Brown, H&Q--many of which are either
gone completely or have been acquired. As a result, for middle-market issuers in
the United States seeking to raise equity capital in size, we are now one of the
few remaining investment banks outside of Wall Street that can execute
that--hence our number eight rank for 2002 among all lead managers of equity
underwritings for issuers with market caps less than a billion dollars.
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The competitive environment is also in our favor in our institutional brokerage
business as we seek to provide more depth of service and more value added to our
institutional brokerage customers. As fewer firms outside of Wall Street are
able to support the significant cost of meaningful institutional research
effort, we have invested in generating a truly independent research view. We
look forward to significant growth in this business, a goal that seems eminently
achievable given our current market share of less than one percent.
Now let me address the broader economic environment and why we believe that the
challenging economy may actually be a backdrop to enhanced opportunity for our
company. One of our great strengths over ten years of investment banking has
been to recapitalize companies. This goes back to the foundation of our
investment banking business in 1993, when we recapitalized several of the banks
and thrifts in the United States--names like Glendale Federal, later acquired by
Golden State, and Crossland Savings Bank. In the late nineties and into 2000, we
did the same for energy companies, and have recently seen opportunities to do
the same across all of our industry sectors. Today, corporate America is
over-leveraged, a fact that creates opportunity for us. We can help companies to
de-leverage and bring their debt-to-equity ratio back into balance by raising
equity capital for companies with good business franchises but bad balance
sheets.
Against this background, let me provide some guidance on our current revenue
projections for 2003. We currently project total revenues for FBR Group, on a
stand-alone basis, of approximately three hundred and thirty million dollars,
including a hundred and fifty million in investment banking, seventy-eight
million in institutional brokerage, excluding interest and dividends, and more
than twenty-five million in asset management fees, excluding FBR Asset.
For 2003, we are increasing our estimate of the break-even revenue level in our
capital markets businesses--investment banking and institutional brokerage--to a
hundred and fifteen million dollars, up from a hundred and ten million dollars
in 2002, with an anticipated contribution margin beyond that break-even point of
approximately forty percent in those businesses. Investment banking revenue can
be volatile, so this revenue outlook for the year is not necessarily indicative
of what we might see in any particular quarter.
Turning now to FBR Asset's results, this morning FBR Asset reported record
fourth quarter net income of thirty-two point nine million dollars, or a dollar
thirty per share, fully diluted. This compares to net income of thirteen point
three million, or a dollar sixty-two per share, fully diluted, in the fourth
quarter of 2001. For the full year, FBR Asset's earnings totaled a hundred and
seventeen million dollars, or five dollars and seventy-two cents per share,
fully diluted, WHICH REPRESENTED A THIRTY PERCENT--SEVEN PERCENT INCREASE IN
EARNINGS PER SHARE OVER 2001, WHEN NET INCOME TOTALED TWENTY-THREE POINT ONE
MILLION, OR FOUR POINT SEVENTEEN PERCENT FULLY DILUTED SHARES.
The fourth quarter was characterized by a continued rapid prepayment in FBR
Asset's mortgage-backed securities portfolio, with the average monthly CPR, or
constant prepayment rate, reaching thirty-six percent. Despite this activity,
the mortgage portfolio continued to be the most significant contributor to FBR
Asset's net income, representing ninety-five point four percent of net revenue,
which we define as net interest, dividends, fees, and net gains. During the
quarter, our net interest spread was two point four seven percent, and we
finished the quarter with leverage in the MBS portfolio, as measured by
liabilities to capital invested, of approximately seven to one. The net interest
spread declined from two point seven three percent in the third quarter of 2002,
primarily as a result of lower asset yields driven by the exceptionally high
prepayment speeds and lower reinvestment rates.
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FBR Asset generated gains in the quarter of eight point eight million dollars.
These gains were one hundred percent from the mortgage-backed security portfolio
and were generated as we selectively realized gains in the securities that were
exhibiting very high prepayment speeds, yet continued to trade at significant
premiums to our cost basis. This gain was substantially offset by one-time
merger expenses and lower-than-normal leverage during the quarter. Additionally,
through these sales, we have eliminated all fixed rate mortgage securities from
FBR Asset's portfolio and lowered our effective duration to below one point one
eight.
FBR Asset continues to have a significant portion of its overall funding hedged
against increases in short term interest rates and, as a result, we did not
benefit fully from the most recent cut in the discount rate in the fourth
quarter. Additionally, we have continued to maintain a conservative stance with
regard to FBR Asset's portfolio composition and leverage. As we have discussed
with you in our prior calls, our strategy at all times is to avoid credit risk
in the mortgage-backed security portfolio and limit our interest rate risk.
Consistent with these goals, we finished the year with a hundred percent of our
mortgage-backed security assets invested in agency-backed adjustable-rate
mortgage securities, guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae.
Our leverage at year-end was below our long-term target of eight and a half to
one, and our average leverage during the quarter was approximately seven point
seven to one. As a result, we continue to have the potential to add net interest
income through meeting our target leverage in future quarters, which we intend
to do as prepayment activity level eventually abates.
During the last three months of 2002, we made one new merchant banking
investment of seven point five million dollars and took no gains from our equity
portfolio. We have received many questions recently regarding our AmeriCredit
investment. I would like to be clear that we have been and continue to be
focused on the long-term intrinsic value in our merchant banking business. The
AmeriCredit investment, in which we have a basis of seven dollars and five cents
per share, was made significantly below what we believe to be the company's
intrinsic value, and we have complete confidence in the business model and the
management's ability to run what is now one of the best capitalized companies in
the United States. As many of you are aware, the returns in our merchant banking
portfolio since we formed the company have exceeded thirty percent annualized.
FBR Asset's book value at the end of the year, which through January 29th is
virtually unchanged, stood at approximately twenty-eight dollars and seventy-six
cents per share. That represents an increase of twenty percent from the book
value of twenty-three dollars and ninety-eight cents at December 31, 2001. This
increase, when combined with our dividends paid of five dollars and thirty cents
per share during the year, provided a total return of over forty-two percent on
beginning book equity for 2002.
In summary, we are very pleased with FBR Asset's performance during 2002 in what
was a unique and challenging environment for the mortgage-backed strategy for
much of the year.
In December, after the announcement of our agreement to merge with FBR Group,
Legg Mason Value Trust and affiliated accounts purchased one point one million
new shares of FBR Asset stock. These shares were sold directly to investors at
thirty-three dollars and sixty-five cents per share and, as with all of our
recent share issuances, the transaction was accretive to book value and
earnings. Net proceeds to the company were approximately thirty-seven point
three million dollars.
Now let me talk for a moment about the 2003 outlook for FBR Asset. Of seven
hundred and fifty million of equity at December 31, 2002, we had about six
hundred and fifty million invested in the mortgage-
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backed security strategy and about a hundred million in our merchant banking
portfolio. We expect the mortgage-backed strategy to continue to generate an
ROE in 2003 in excess of twenty percent. We expect the merchant banking
portfolio will provide returns higher than twenty percent over time, which is
consistent with our discipline of using the mortgage-backed strategy to create
our internal hurdle for returns on a risk-adjusted basis we expect from the
merchant banking portfolio. However, as is always the case given the lack of
predictability of timing in the realization of these gains, we are currently
including in our earnings forecast for 2003 just the dividend returns on our
portfolio.
Since we created FBR Asset in 1997 with a book value of eighteen dollars and
sixty cents per share, we have managed the company through the Asian debt crisis
and the resulting break in the domestic credit and equity markets of 1998, the
inverted yield curve of 1999 into 2000, and the rapidly declining interest rates
of 2001 and 2002, with the resulting prepayment speeds of recent quarters. I am
thus particularly proud to note that from inception through the end of last
year, we have increased the book value of the company from eighteen dollars and
sixty, eighteen dollars and sixty cents to almost twenty-nine dollars per share,
and paid cash dividends during that time frame totaling fourteen dollars and
thirty-six cents.
Lastly, we look forward to the completion of the pending merger of FBR Asset and
FBR Group in the first quarter, which will create significant value for the
shareholders of both companies.
With that, I would like to open the call for questions regarding either FBR
Group or FBR Asset Investment Corporation.
MODERATOR:
Thank you, sir. At this time, if you do have a question, please press star-one
on your touch-tone phone. Again, that is star-one to ask a question. Our first
question comes from Eric Woodworth. Sir, your line is open.
ERIC WOODWORTH, CALLER:
Good morning. Your leverage on your mortgage-backed portfolio within FBR
Asset--why did you take it down lower than your target? And also, do you intend
to keep decreasing that leverage, or do you intend to bring it back up here in
the next couple quarters?
FBR REPRESENTATIVE:
Specifically, the leverage, as you know, can be volatile simply because of -
particularly in this environment - the rapid prepayment speed. And so we very
selectively reposition the portfolio, and add new assets as appropriate. We
certainly anticipate that we should be back to a fully leveraged position by
sometime in the middle to the end of this quarter--in fact, by February we
should be back to a fully leveraged position of about eight and a half to one.
WOODWORTH:
And the spreads are comparable to the fourth quarter, or should I assume some
further contraction?
FBR REPRESENTATIVE:
No, they are roughly comparable to where we were for the average of the fourth
quarter.
WOODWORTH:
Okay, thanks.
MODERATOR:
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Our next question comes from Howard Feingold. Sir, your line is open.
HOWARD FEINGOLD, CALLER:
Thank you. Two questions--the first is on FBR Asset Management. In the non-MBS
mortgage portfolio, at the end of the quarter, where did you end up in terms of
unrealized gains or losses?
FBR REPRESENTATIVE:
Our unrealized gains at December 31st were roughly about four million dollars.
FEINGOLD:
Okay. That's slightly less than it was, I believe, in the third quarter, is it
not?
FBR REPRESENTATIVE:
Slightly less. That includes some securities that we carry which are private and
which are actually trading actively at much higher prices. So from an accounting
standpoint it's roughly four. We believe there's more value in that portfolio
today.
FBR REPRESENTATIVE:
In other words, the private securities we keep at our cost. We don't mark them,
although they're trading in the market today at considerably higher prices.
FEINGOLD:
Okay, thank you. The second question--I hope you can provide some enlightenment
to me. This is on the merger. My understanding was that a taxable REIT
subsidiary needed to be incidental to the business of the REIT itself. Can you
explain your rationale - how the brokerage firm is incidental to the
mortgage-backed portfolio? And secondly, have you had any IRS prior scrutiny of
this transaction in terms of how they would view it?
FBR REPRESENTATIVE:
Very specifically, our company, FBR Group, is the manager for FBR Asset
Corporation. All of the employees are located in and employed at FBR Group. This
is a very fundamental and very significant part of FBR Group's business, and it
is very consistent with the business that we've operated now for many years. So
it is very integral and completely consistent with the business activity of FBR
Group and certainly of the combined business.
FBR REPRESENTATIVE:
With regard to the IRS, you know, we have opinions of counsel that this is
consistent with any IRS rules, and we do not require an IRS ruling or opinion to
go forward with the transaction.
FEINGOLD:
When do you expect the proxy material to go out?
FBR REPRESENTATIVE:
Within the next two weeks.
FEINGOLD:
Okay. Thanks very much, gentlemen.
FBR REPRESENTATIVE:
page 7
Thank you.
MODERATOR:
Our next question comes from Alice Hoey. Your line is open.
ALICE HOEY, CALLER:
Yes, a couple of quick questions. Could you provide quarterly CPR rates,
excluding any assets purchased in the fourth quarter? And also, what was the CPR
in December and what is it today?
FBR REPRESENTATIVE:
What we provided was an average monthly for the quarter, and it did exclude
purchases of securities. I don't have the actual quarterly number in front of
me, but it would not be materially different, because our average assets were
not materially different on a month-by-month basis.
HOEY:
Okay.
FBR REPRESENTATIVE:
We can certainly get you that right after the call. But it's going to be
somewhere in the mid to high thirties.
HOEY:
So they are trending up a bit?
FBR REPRESENTATIVE:
Actually, December was lower than November...
HOEY:
Okay.
FBR REPRESENTATIVE:
....but January is kind of right in line - right in between December and November
- so they are holding constant at a high level.
HOEY:
Also, your duration came down further than I expected it to. Is that a level
you're going to want to keep it at, or do you think you'll go back up to more
normalized levels?
FBR REPRESENTATIVE:
We have always said that we want to stay somewhere between one and a half to
two. We are very comfortable with it at one point two. Over time, as we add new
securities and prepayments slow, it's going to drift back up to about one and a
half.
HOEY:
Okay. Thank you.
MODERATOR:
Our next question comes from Joe Stieven. Sir, your line is open.
page 8
JOE STIEVEN, CALLER:
Good morning, guys. First of all, good quarter. A couple of my questions were
answered, but could you explain--you did change the investment mix around. As
you said, you got rid of all your fixed-rate MBSs. I actually applaud you for
that, but I'd like to sort of hear your rationale on doing that. That's question
number one. Question number two is, is there, is the fact that the leverage has
come down in FBR Asset due in part to the fact that you're putting on some
securities transactions over at the broker dealer that I do not follow? Thanks,
guys.
FBR REPRESENTATIVE:
Joe, with regard to the fixed-rate securities, it was a very small percentage of
the portfolio even heading into the fourth quarter, somewhere in the
neighborhood of one or two percent. But the decision was very simply, as Eric
outlined in his comments, those securities were exhibiting very high prepayment
speeds and yet were still trading at significant premiums to our cost. And so it
was an opportunity to realize value that we believed might have degraded as we
continued at high prepayment speeds.
And with regard to the leverage, we haven't adjusted the leverage in advance of
the transaction. We are simply continuing to deal with high prepayment speeds,
which are going to take your leverage down, and in trying to make purchases,
that will get us back to our target.
FBR REPRESENTATIVE:
But again, Joe, just to be clear we are not trying to manage this portfolio at
all. They are just - given a very rapid falling rate environment - there was a
very unusual circumstance, as Rick pointed out, in these fixed-rate securities,
and it simply made sense to take advantage of it, but it's a very unusual
circumstance and it is not something we do as a practice.
STEVENS:
Thank you, guys.
FBR REPRESENTATIVE:
Thank you, Joe.
MODERATOR:
Just as a reminder, if you do have a question, please press star-one on your
touch-tone phone. Our next question comes from Larry Yavner. Sir, your line is
open.
LARRY YAVNER, CALLER:
With regard to your deal, could you just let us know where you stand on the
regulatory front?
FBR REPRESENTATIVE:
On the regulatory front, we expect our final comments from the SEC within the
next two weeks, and then we will file our proxy. We've gotten all our
Scott-Rodino approvals, and the Federal Reserve has given us an indication that
they have no problem with the transaction.
ABNER:
So what would be the timing on the Federal Reserve?
FBR REPRESENTATIVE:
The Federal Reserve will probably give us a final ruling in mid-February, and
there is a fifteen-day waiting period after that.
page 9
ABNER:
And the OCC?
FBR REPRESENTATIVE:
There is no OCC.
ABNER:
Okay. Thank you.
MODERATOR:
At this time I'm showing no further questions.
FBR REPRESENTATIVE:
Thank you, everybody, for joining us. We appreciate it.
# # #
Proxy Information
In connection with the proposed transactions, Friedman, Billings, Ramsey Group,
Inc., FBR Asset Investment Corporation and Forest Merger Corporation have filed
a preliminary joint proxy statement/prospectus with the Securities and Exchange
Commission. In addition, FBR Group, FBR Asset and Forest Merger Corporation
will prepare and file a definitive joint proxy statement/prospectus and other
documents regarding the proposed transaction with the SEC. Investors and
security holders are urged to carefully read the definitive joint proxy
statement/prospectus regarding the proposed transactions when it becomes
available, because it will contain important information. Investors and
security holders may obtain a free copy of the definitive joint proxy
statement/prospectus (when it is available) and other documents containing
information about FBR Group and FBR Asset, without charge, at the SEC's web
site at http://www.sec.gov. Free copies of both companies' filings may be
obtained by directing a request to 1001 Nineteenth Street North, Arlington,
Virginia 22209, Attention: Investor Relations.
Participants in Solicitation
FBR Group, FBR Asset and their respective directors, executive officers and
other members of their management and employees may be soliciting proxies from
their respective stockholders in connection with the proposed merger.
Information concerning FBR Group's participants in the solicitation is set forth
in FBR Group's proxy statement for its annual meeting of stockholders, filed
with the SEC on May 30, 2002. Information concerning FBR Asset's participants
in the solicitation is set forth in FBR Asset's proxy statement for its annual
meeting of stockholders, filed with the SEC on April 23, 2002. Additional
information is set forth in the preliminary joint proxy statement/prospectus and
will be set forth in the definitive preliminary joint proxy statement/prospectus
when it is filed with the SEC.