By Zachary A. Goldfarb
Washington Post Staff Writer
Friday, October 26, 2007

Friedman Billings Ramsey Group, the Washington area's largest investment bank, said its losses tripled in the third quarter compared with a year ago following declines in the mortgage market and the sale of a subprime mortgage lender.

The credit crunch and mortgage downturn that have battered many Wall Street banks have been brutal for FBR of Arlington, which made a $550 million bet on the subprime market in 2005, only to see much of it eventually disappear.

The company lost $214.7 million ($1.28 a share) in the three months ended Sept. 30, compared with a loss of $67.4 million (39 cents) in the same period a year ago.

Chief executive Eric F. Billings said yesterday that the bank significantly reduced its subprime risk exposure in the quarter. The company took $67 million in losses on its portfolio of mortgage-backed securities and $44.2 million in losses related to First NLC, a Florida subprime lender that the company had bought two years ago and sold most of this summer.

With interest rates improving slightly in recent weeks, "we are now ready to begin deploying our capital" back in mortgage-backed securities, Billings said. FBR has about $480 million to invest.

Billings expressed delight with the performance of FBR Capital Markets, a brokerage subsidiary that FBR spun off earlier this year. FBR shares closed down 14 cents, or 3.3 percent, at $4.12.

The brokerage said it earned $300,000 in the third quarter, compared with a loss of $22.6 million in 2006. Its revenue jumped to $106.2 million from $42 million a year earlier.