<PAGE>
================================================================================
                                   FORM 10-Q
                        SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2001

                                      OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

For the transition period from ________ to ___________

Commission file number: 001-13731


                    Friedman, Billings, Ramsey Group, Inc.
            ------------------------------------------------------
            (Exact name of Registrant as specified in its charter)

           Virginia                                        54-187743
-------------------------------                        -------------------
(State or other jurisdiction of                         (I.R.S. Employer
 incorporation or organization)                        Identification No.)

     1001 Nineteenth Street North                              22209
             Arlington, VA                                   ----------
---------------------------------------                      (Zip code)
(Address of principal executive offices)

                                (703) 312-9500
              (Registrant's telephone number including area code)

          Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes  X  No
                                              ----   ----

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:

Title                                   Outstanding

Class A Common Stock                   18,493,432 shares as of October 31, 2001
Class B Common Stock                   27,021,029 shares as of October 31, 2001
================================================================================








<PAGE>

                     FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.

                                   FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 2001

                                     INDEX

<TABLE>
<S>                                                             <C>
                                                                Page Number(s)
Part I.  FINANCIAL INFORMATION


Item 1.  Financial Statements - (unaudited)

            Consolidated Balance Sheets-
              September 30, 2001 and December 31, 2000                 3

            Consolidated Statements of Operations-
              Three Months Ended September 30, 2001 and 2000           4
              Nine Months Ended September 30, 2001 and 2000            5

            Consolidated Statements of Cash Flows-
              Nine Months Ended September 30, 2001 and 2000            6

            Notes to Consolidated Financial Statements                7-12

Item 2.     Management's Discussion and Analysis of Financial
              Condition and Results of Operations                    13-19

Item 3.     Changes in Information about Market Risk                  20

Part II.    OTHER INFORMATION

Item 6.     Exhibits and Reports on Form 8-K                          20

SIGNATURES                                                            20

EXHIBIT INDEX                                                         20
</TABLE>

                                       2
<PAGE>

                     FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
                          CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                             (Unaudited)
                                                                            September 30,   December 31,
                                                                                 2001           2000
                                                                            -------------   ------------
<S>                                                                          <C>            <C>
ASSETS
 Cash and cash equivalents                                                       $ 32,892       $ 52,337
 Receivables:
   Investment banking                                                               3,209          4,696
   Asset management fees                                                            3,044          1,806
   Affiliates                                                                         963          1,849
   Other                                                                            3,428          2,744
 Due from clearing broker                                                          10,890         11,840
 Marketable and trading securities, at market value                                13,599         18,447
 Bank investment securities                                                        10,780             --
 Long-term investments                                                            110,462        142,950
 Bank loans, net                                                                    9,038             --
 Prepaid expenses and other assets                                                  3,607          5,377
 Furniture, equipment, software and leasehold improvements,
   net of accumulated depreciation and amortization of
   $18,750 and $10,636, respectively                                                9,929         10,173
 MMA management contracts                                                          19,047             --
                                                                                 --------       --------
   Total assets                                                                  $230,888       $252,219
                                                                                 ========       ========

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
 Trading account securities sold but not yet purchased, at market value:         $  1,092       $    930
 Accounts payable and accrued expenses                                             16,065         11,348
 Accrued compensation and benefits                                                 12,093         22,849
 Bank deposits                                                                     19,394             --
 Deferred tax liability                                                             1,760          1,760
 Long-term secured debt                                                             6,817            776
                                                                                 --------       --------
   Total liabilities                                                               57,221         37,663
                                                                                 --------       --------

 Commitments and contingencies (Note 10)                                               --             --

Shareholders' equity:
 Preferred Stock, $0.01 par value, 15,000,000 shares authorized,
   none issued and outstanding                                                         --             --
 Class A Common Stock, $0.01 par value, 150,000,000 shares
   authorized, 23,391,403 and 17,455,406 shares issued, respectively                  232            175
 Class B Common Stock, $0.01 par value, 100,000,000 shares authorized,
   27,021,029 and 32,910,029 shares issued and outstanding, respectively              272            329
 Additional paid-in capital                                                       210,577        210,164
 Employee stock loan program receivable, 4,000,000 shares                         (22,346)            --
 Treasury stock, at cost, 897,971 and 985,170 shares, respectively                 (6,552)        (7,188)
 Accumulated other comprehensive income (loss)                                      2,699         (1,128)
 Retained earnings (deficit)                                                      (11,215)        12,204
                                                                                 --------       --------
   Total shareholders' equity                                                     173,667        214,556
                                                                                 --------       --------
   Total liabilities and shareholders' equity                                    $230,888       $252,219
                                                                                 ========       ========

</TABLE>
                See notes to consolidated financial statements.

                                       3
<PAGE>

                     FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                 (Amounts in thousands, except per share data)
                                (Unaudited)

<TABLE>
<CAPTION>

                                                       Three Months
                                                    Ended September 30,
                                                    -------------------

                                                      2001       2000
                                                    --------   -------
<S>                                                 <C>        <C>
Revenues:
 Investment banking:
  Underwriting                                      $  9,857   $ 4,928
  Corporate finance                                    1,153     7,264
  Investment gains                                        74     1,453
 Institutional brokerage:
  Principal transactions                               4,158     7,019
  Agency commissions                                   5,934     4,989
 Asset management:
  Base management fees                                 5,836     2,504
  Incentive allocations                               (1,843)    7,751
  Net investment income (loss)                        (6,554)    5,780
 Interest, dividends and other                         3,168     3,014
                                                    --------   -------
  Total revenues                                      21,783    44,702
                                                    --------   -------

Expenses:
 Compensation and benefits                            24,276    24,809
 Business development and professional services        7,639     5,974
 Clearing and brokerage fees                           1,786     1,483
 Occupancy and equipment                               5,742     2,657
 Communications                                        1,555     1,300
 Interest expense                                        322       424
 Other operating expenses                              2,853     1,862
                                                    --------   -------
  Total expenses                                      44,173    38,509
                                                    --------   -------

Net income (loss) before taxes                       (22,390)    6,193
 Income tax provision                                     --     1,239
                                                    --------   -------
Net income (loss)                                   $(22,390)  $ 4,954
                                                    ========   =======

Basic and diluted earnings (loss) per share         $  (0.49)  $  0.10
                                                    ========   =======

Weighted average shares outstanding:
 Basic                                                45,808    49,229
                                                    ========   =======
 Diluted                                              45,808    50,360
                                                    ========   =======

</TABLE>



                See notes to consolidated financial statements.

                                       4
<PAGE>

                    FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                 (Amounts in thousands, except per share data)
                                  (Unaudited)

<TABLE>
<CAPTION>


                                                         Nine Months
                                                     Ended September 30,
                                                    ---------------------
                                                      2001         2000
                                                    --------     --------

<S>                                                 <C>            <C>
Revenues:
 Investment banking:
  Underwriting                                      $ 26,925     $ 16,639
  Corporate finance                                   21,454       22,195
  Investment gains                                     5,414        1,453
 Institutional brokerage:
  Principal transactions                              15,513       25,808
  Agency commissions                                  18,461       15,292
 Asset management:
  Base management fees                                13,934        6,884
  Incentive allocations                               (4,586)      52,203
  Net investment income (loss)                        (5,141)       6,648
 Interest, dividends and other                         7,414        7,359
                                                    --------     --------
  Total revenues                                      99,388      154,481
                                                    --------     --------

Expenses:
 Compensation and benefits                            73,283       96,241
 Business development and professional services       21,170       14,982
 Clearing and brokerage fees                           5,106        4,589
 Occupancy and equipment                              11,125        7,353
 Communications                                        4,220        3,748
 Interest expense                                        737          965
 Other operating expenses                              7,166        5,789
                                                    --------     --------
  Total expenses                                     122,807      133,667
                                                    --------     --------

Net income (loss) before taxes                       (23,419)      20,814
 Income tax provision                                     --        4,163
                                                    --------     --------
Net income (loss)                                   $(23,419)    $ 16,651
                                                    ========     ========

Basic earnings (loss) per share                     $  (0.49)    $   0.34
                                                    ========     ========
Diluted earnings (loss) per share                   $  (0.49)    $   0.33
                                                    ========     ========

Weighted average shares outstanding:
 Basic                                                48,122       49,119
                                                    ========     ========
 Diluted                                              48,122       50,787
                                                    ========     ========

</TABLE>



                See notes to consolidated financial statements.

                                       5
<PAGE>

                     FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
<TABLE>
<CAPTION>
(Unaudited)

                                                                   Nine Months
                                                                Ended September 30,
                                                              -----------------------

                                                                2001           2000
                                                              --------       --------

<S>                                                          <C>             <C>
Cash flows from operating activities:
  Net income (loss)                                           $(23,419)      $ 16,651
  Non-cash items included in earnings--
      Incentive allocations and net investment (income)
        loss from long-term investments                         21,124        (52,017)
      Depreciation and amortization                              7,588          3,695
      Other                                                        273             --
      Deferred income taxes                                         --          4,163
  Changes in operating assets:
    Receivables--
      Investment banking                                         1,487         (1,168)
      Asset management fees                                     (1,238)         1,379
      Affiliates                                                   886           (382)
      Other                                                      1,196         (1,767)
    Due from clearing broker                                       950         (6,102)
    Marketable and trading securities                            4,848         (2,086)
    Prepaid expenses and other assets                              680            652
  Changes in operating liabilities:
    Trading account securities sold but not
      yet purchased                                                162          4,386
    Accounts payable and accrued expenses                        3,753           (152)
    Accrued compensation and benefits                          (10,756)        40,544
                                                              --------       --------
      Net cash provided by operating activities                  7,534          7,796
                                                              --------       --------

Cash flows from investment activities:
  MMA/Rushmore acquisition                                     (17,500)            --
  Cash acquired from MMA/Rushmore Acquisition                    9,740             --
  Bank investment securities                                     2,469             --
  Bank loans, net                                               (7,390)            --
  Purchases of fixed assets                                     (2,235)        (3,289)
  Sales (purchases) of long-term investments, net               14,095         (9,273)
                                                              --------       --------
      Net cash used in investing activities                       (821)       (12,562)
                                                              --------       --------

Cash flows from financing activities:
  Employee stock loan program                                  (22,346)            --
  Bank deposits                                                 (4,404)            --
  Repayments of long-term secured loans                           (457)          (433)
  Proceeds from issuance of common stock                           473          1,611
  Issuance of treasury common stock                                576            483
                                                              --------       --------
      Net cash (used in) provided by financing activities      (26,158)         1,661
                                                              --------       --------

Net decrease in cash and cash equivalents                      (19,445)        (3,105)
Cash and cash equivalents, beginning of period                  52,337         43,743
                                                              --------       --------
Cash and cash equivalents, end of period                      $ 32,892       $ 40,638
                                                              ========       ========

</TABLE>
                See notes to consolidated financial statements.

                                       6
<PAGE>

                     FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       (Dollars in thousands)-(Unaudited)


1.  Basis of Presentation:

   The consolidated financial statements of Friedman, Billings, Ramsey Group,
Inc. and subsidiaries (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q.  Therefore, they do not include all
information required by generally accepted accounting principles for complete
financial statements.  The interim financial statements reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the results for the periods
presented.  All significant intercompany accounts and transactions have been
eliminated in consolidation.  The results of operations for interim periods are
not necessarily indicative of the results for the entire year.  These financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended December 31, 2000 included on
Form 10-K filed by the Company under the Securities Exchange Act of 1934.

   The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

   Certain amounts in the consolidated financial statements and notes for prior
periods have been reclassified to conform to the current period presentation.


2.  MMA/Rushmore Acquisition:

   On April 1, 2001, the Company completed the acquisition of Money Management
Associates, LP ("MMA") and Rushmore Trust and Savings, FSB ("Rushmore").  MMA
was a privately-held investment adviser with $933.4 million in assets under
management as of March 31, 2001.  Together, MMA and Rushmore are the investment
adviser, servicing agent or administrator for more than 20 mutual funds.  Upon
closing, Rushmore was rechartered as a national bank and was named FBR National
Bank & Trust ("FBR Bank").  The FBR Bank offers traditional banking services
(lending, deposits, cash management, trust services and serve as a transfer
agent and custodian), along with mutual fund accounting.  Under the terms of the
agreement, the Company acquired MMA/Rushmore for $17.5 million in cash at
closing and a $9.7 million non-interest-bearing installment note payable over a
ten-year period.

   The total purchase price of $25.2 million, including capitalized transaction
costs of $1.5 million and the present value of the installment note at an
imputed rate of 9%, was allocated (in millions):

     MMA management contracts   $ 19.7
     Bank equity                   5.5
                                ------
                                $ 25.2
                                ======

   The acquisition of MMA/Rushmore was accounted for as a purchase and resulted
in the recording of $19.7 million of Management Contracts on the balance sheet.
These Management Contracts were previously unrecognized intangible assets of
MMA.  These Management Contracts will be amortized straight-line over 15 years
for both book and tax purposes.  Income related to these management contracts is
recognized as earned usually based on invested assets and a stated management
fee percentage.

   The accounting policies related to other significant accounts related to FBR
Bank:

                                       7
<PAGE>

2.   MMA/Rushmore Acquisition, continued:

   Bank Securities - Represent FBR Bank's investments in Mortgage-Backed
Securities (MBS) which are carried at fair value and classified as Available-
for-Sale under SFAS 115.  Unrealized gains and losses on such MBS are reported
as other comprehensive income in shareholders' equity.  Interest income from the
MBS is recognized using the effective interest rate method.

   Bank Loans - Bank Loans are carried at cost less an allowance for loan
losses. Impairment of Loans is recorded under SFAS 114, "Accounting by Creditors
for Impairment of a Loan".  The loss allowance as of September 30, 2001 is $0.1
million.  Interest Income from the Loans is recognized using the effective
interest rate method.

   Bank Deposits - Represent deposits held by FBR Bank for its customers.
Interest Expense is recognized based on the deposit balance and the stated
interest rate paid.

   The Company's pro-forma condensed consolidated results of operations,
excluding the results of the acquired business were (in millions):
<TABLE>
<CAPTION>
                                       Three months ended    Nine months ended
                                       September 30, 2001   September 30, 2001
                                       -------------------  -------------------
<S>                                    <C>                  <C>
     Revenue                                  $ 19.0               $ 94.0
     Compensation expense                       23.4                 71.5
     Other operating expense                    18.2                 46.0
     Interest expense                            0.1                  0.2
                                              ------               ------
     Net loss before taxes                     (22.7)               (23.7)
     Pro-forma income tax provision               --                   --
                                              ------               ------
     Net loss                                 $(22.7)              $(23.7)
                                              ======               ======
</TABLE>

3.  Comprehensive Income:

   The components of comprehensive income are (in thousands):
<TABLE>
<CAPTION>

                                                               Three Months                  Nine Months
                                                            Ended September 30,          Ended  September 30,
<S>                                                        <C>         <C>             <C>         <C>
                                                                2001       2000             2001          2000
                                                             -------    -------         --------       -------
   Net income (loss)                                        $(22,390)    $4,954         $(23,419)      $16,651
   Other comprehensive income:
    Net change in unrealized investment gains
     (losses) related to available-for-sale securities,
     bank securities and investment in
     FBR Asset Investment Corporation                           (986)     2,657            3,827        4,080
                                                            --------     ------           ------      -------
   Comprehensive income (loss)                              $(23,376)    $7,611         $(19,592)     $20,731
                                                            ========     ======          ========     =======

</TABLE>
4. Long-Term Investments, Incentive Allocations and Net Investment Income:

   Long-term investments consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                         September 30,             December 31,
                                                              2001                     2000
                                                       -----------------         ----------------
<S>                                                     <C>                      <C>
   Equity method investments:
     Venture capital and other proprietary
      investment partnerships                             $ 43,338                 $ 72,773
     FBR Asset Investment Corporation                       32,843                   30,054
   Marketable securities                                     6,333                    5,370
   Private debt investments                                  7,500                   17,837
   Cost method investments                                  16,745                    7,208
   Other                                                     3,703                    9,708
                                                          --------                 --------
                                                          $110,462                 $142,950
                                                          ========                 ========

</TABLE>


                                       8
<PAGE>

4. Long-Term Investments, Incentive Allocations and Net Investment Income,
   continued:

   FBR Technology Venture Partners, L.P. ("TVP")
   ---------------------------------------------

   As of September 30, 2001, TVP's investments include equity investments in
securities of development-stage and early-stage, privately and publicly held
technology companies.  The disposition of the privately held investments is
generally restricted due to the lack of a ready market and may remain restricted
for a period of time even if a company becomes public.  TVP's investments may
represent significant portions of the issuer's equity and they may carry special
contractual privileges, as well as certain restrictions, not applicable to other
security holders.  As a result, precise valuation for the private and restricted
investments is a matter of judgment and the determination of fair value must be
considered only an approximation.  Public company investments are valued based
on the September 30, 2001 closing price.  During the quarter ended September 30,
2001, the partnership made no distributions.

   The Company's investment in TVP of $3,105 represents 3% of the Company's
total long-term investments and 1% of the Company's total assets as of September
30, 2001.  The following table summarizes TVP's income statement information (in
thousands):
<TABLE>
<CAPTION>
                                                     Three Months            Nine Months
                                                  Ended September 30,     Ended September 30,
                                                    2001       2000         2001       2000
                                                  --------   --------     --------   --------
<S>                                             <C>          <C>          <C>        <C>
   Investment income (loss)                       $      2   $    (35)    $     10   $     88
   Total expenses                                      371        320        1,052        968
                                                  --------   --------     --------   --------

   Net investment loss                                (369)      (355)      (1,042)      (880)
   Unrealized (depreciation)
    appreciation of investments                    (13,572)   (12,718)     (89,291)   170,878
   Net realized gains (losses) on investments         (299)    28,916       57,300     68,737
                                                  --------   --------     --------   --------
   Net income (loss)                              $(14,240)  $ 15,843     $(33,033)  $238,735
                                                  ========   ========     ========   ========
</TABLE>

   FBR Asset Investment Corporation ("FBR-Asset")
   ----------------------------------------------

   During the quarter ended September 30, 2001, the Company recorded $23 (net of
$1,086 of investment loss, representing dilution associated with FBR-Asset's
secondary offering in August 2001) of net investment income in the statement of
operations for its proportionate share of FBR-Asset's net income. The Company
also recorded, in other comprehensive income, $(2,146) of unrealized investment
losses for its proportionate share of FBR-Asset's net unrealized losses related
to available-for-sale securities. As of September 30, 2001, the net unrealized
gain related to FBR-Asset and included in the Company's accumulated other
comprehensive income was $2,655.

   The Company's investment in FBR-Asset of $32,843 represents 30% of the
Company's total long-term investments and 14% of the Company's total assets as
of September 30, 2001.  The following table summarizes FBR-Asset's income
statement information (in thousands):
<TABLE>
<CAPTION>
                                                           Three Months            Nine Months
                                                        Ended September 30,     Ended September 30,
                                                          2001      2000        2001          2000
                                                         ------    ------      -------      -------
<S>                                                     <C>       <C>          <C>        <C>
   Gross revenues                                        $9,582    $5,594      $18,889      $17,831
   Total expenses                                         5,220     3,255       10,158        9,910
                                                         ------    ------      -------      -------
   Net income before net investment gains (losses)        4,362     2,339        8,731        7,921
   Net investment gains (losses)                          1,282        57        1,065       (4,922)
                                                         ------    ------      -------      -------
   Net income                                            $5,644    $2,396      $ 9,796      $ 2,999
                                                         ======    ======      =======      =======
</TABLE>

                                       9
<PAGE>

4. Long-Term Investments, Incentive Allocations and Net Investment Income,
   continued:

   FBR Ashton, L.P. ("Ashton")
   ---------------------------

   As of September 30, 2001, Ashton's investments were comprised of securities
primarily in the financial services industry.  During the quarter ended
September 30, 2001, the Company recorded $(1,957) of net investment loss in the
statement of operations for its proportionate share of Ashton's net loss.

   The Company's investment in Ashton of $16,546 represents 15% of the Company's
total long-term investments and 7% of the Company's total assets as of September
30, 2001.  The following table summarizes Ashton's income statement information
(in thousands):
<TABLE>
<CAPTION>

                                                  Three Months            Nine Months
                                                Ended September 30,     Ended September 30,
                                                  2001       2000        2001         2000
                                                -------    -------      ------      -------
  <S>                                         <C>         <C>          <C>      <C>
   Gross revenues                               $   458    $   459      $1,490      $ 1,200
   Total expenses                                   353        431       1,163        1,085
                                                -------    -------      ------      -------
   Net income before net investment income
     (losses)                                       105         28         327          115
   Net investment income (losses)                (6,410)    10,507       3,724       10,483
                                                -------    -------      ------      -------
   Net income (loss)                            $(6,305)   $10,535      $4,051      $10,598
                                                =======    =======      ======      =======
</TABLE>

   Available-For-Sale Securities
   -----------------------------

   During the third quarter, the Company recorded $(949) of "other than
temporary" loss in the statement of operations as net investment loss.  As of
September 30, 2001, the unrealized gain related to available-for-sale securities
was $44 and included in accumulated other comprehensive income.


5. Executive Officer Compensation:

   During 2001, certain of the Company's executive officers are eligible for
bonuses under the Key Employee Incentive Plan (the "Plan").  As of September 30,
2001, the Company has not accrued any executive officer compensation related to
this plan.  Compensation, if any, related to the Plan will be paid subsequent to
December 31, 2001.


6. Income Taxes:

   The Company has a net operating loss ("NOL") carryforward to offset future
taxable income that expires through 2019. The Company has provided a valuation
allowance against its deferred tax assets based on its ongoing assessment of
realizability of the deferred tax assets. This assessment includes analyzing
future taxable income, a significant component of which is dependent on the
realizability of the investment partnerships' unrealized gains that have been
recorded for financial reporting purposes, but not for income tax purposes.


7. Shareholders' Equity:

   On June 26, 2001 and August 10, 2001, the Company repurchased 4,228,000 and
772,000 shares, respectively, of Class B common stock from an executive officer
of the Company for $5.50 per share.  The shares were converted to Class A common
stock and sold to other company employees at the same price.  Upon settlement of
the repurchase and sales transactions on July 5, 2001 and August 15, 2001,
respectively, the Company received 20% ($1.10 per share) of the purchase price
in cash from the employees, and received

                                       10
<PAGE>

7.   Shareholders' Equity, continued:

five-year, limited recourse promissory notes from the employees with interest
accruing at 6.5% accreting to principal for the remaining purchase price.

   For accounting purposes, the portion of the employee share purchase financed
by the Company (80%) is considered a stock option, and deducted from
shareholders' equity.  These shares are deducted from shares outstanding,
similar to treasury stock, in computing book value and earnings per share. As a
result, both the $22.3 million financed by the Company and the 4,000,000 common
shares related to the financing are reflected as a receivable in shareholders'
equity. As the employees repay the loans, shareholders' equity and shares
outstanding will increase. In addition, the interest earned on the employee
loans was added to paid-in-capital and excluded from net income.


8.  Net Capital Requirements:

   The Company's U.S. broker-dealer subsidiaries are subject to the Securities
and Exchange Commission's Uniform Net Capital Rule which requires the
maintenance of minimum net capital and requires the ratio of aggregate
indebtedness to net capital, both as defined by the rule, not to exceed 15 to 1.
The Company's U.K. broker-dealer subsidiary is subject to the net capital rules
of the Securities and Futures Authority.  As of September 30, 2001, the broker-
dealer subsidiaries had aggregate net capital of $16.5 million, which exceeded
the requirements by $14.1 million.


9.  Earnings (Loss) Per Share:

   Basic earnings (loss) per share is computed by dividing net income (loss)
available to common shareholders by the weighted-average number of common shares
outstanding for the period.  The diluted earnings per share calculation also
includes the impact of dilutive options.

   As of September 30, 2001 and 2000, respectively, 12,940,234 and 8,211,062
options to purchase shares of common stock were outstanding.  As of September
30, 2001, no outstanding options were included in the fully diluted calculation.
As of September 30, 2000, 5,523,660 of the total outstanding options were
included in the fully diluted calculation.  As of September 30, 2001 and 2000,
respectively, 6,751,784 and 884,544 of the total outstanding options were
exercisable.


10.  Commitments and Contingencies:

  As of September 30, 2001, the Company is not a defendant or plaintiff in any
lawsuits or arbitrations that are expected to have a material adverse effect on
the Company's financial condition.  The Company is a defendant in a small number
of civil lawsuits and arbitrations (together "litigation") relating to its
various businesses.  In addition, the Company is subject to regulatory oversight
relating to its various businesses.  There can be no assurance that these
matters will not have a material adverse effect on the Company's financial
condition or results of operations in a future period.  However, based on
management's review with counsel, including a review of the reserves set aside
for litigation, resolution of these matters is not expected to have a material
adverse effect on the Company's financial condition or results of operations.

   Many aspects of the Company's business involve substantial risks of liability
and litigation.  Underwriters, broker-dealers and investment advisers are
exposed to liability under Federal and state securities laws, other Federal and
state laws and court decisions, including decisions with respect to
underwriters' liability and limitations on indemnification, as well as with
respect to the handling of customer accounts.  For example, underwriters may be
held liable for material misstatements or omissions of fact in a prospectus used
in connection with the securities being offered and broker-dealers may be held
liable for statements made by their securities analysts or other personnel.  In
certain circumstances, broker-dealers and asset managers may also be held liable
by customers and clients for losses sustained on investments.  In recent years,
there has been an increasing incidence of litigation involving the securities
industry, including

                                       11
<PAGE>

10.  Commitments and Contingencies, continued:

class actions that seek substantial damages.  The Company is also subject to the
risk of litigation, including litigation that may be without merit.  As the
Company intends to actively defend such litigation, significant legal expenses
could be incurred.  An adverse resolution of any future litigation against the
Company could materially affect the Company's operating results and financial
condition.

   As of September 30, 2001, the Company had $21.6 million of unfunded
commitments to various investment partnerships that may be called over the next
10 years.


11.  Segment Information:

   The Company considers its capital markets, asset management and online
financial services operations to be three separate reportable segments. The
Company developed systems and methodologies to allocate overhead costs to its
business units and, accordingly, presents segment information consistent with
internal management reporting.  There are no significant revenue transactions
between the segments.  The following table illustrates the financial information
for its segments for the periods presented (in thousands):
<TABLE>
<CAPTION>

                                                                  Online
                                                                ----------
                                         Capital      Asset     Financial   Consolidated
                                         Markets   Management    Services      Totals
                                         --------  -----------  ----------  -------------
<S>                                      <C>       <C>          <C>         <C>

Three Months Ended September 30, 2001
---------------------------------------
   Total revenues                        $22,066      $  (358)    $    75       $ 21,783
   Pre-tax loss                           (9,179)      (9,339)     (3,872)       (22,390)

Three Months Ended September 30, 2000
---------------------------------------
   Total revenues                         27,046       17,459         197         44,702
   Pre-tax income (loss)                    (101)       7,267        (973)         6,193

Nine Months Ended September 30, 2001
---------------------------------------
   Total revenues                         89,786        9,314         288         99,388
   Pre-tax loss                           (8,068)      (9,086)     (6,265)       (23,419)

Nine Months Ended September 30, 2000
---------------------------------------
   Total revenues                         85,014       68,777         690        154,481
   Pre-tax income (loss)                   5,041       19,892      (4,119)        20,814

</TABLE>

12.  Subsequent Events:

  None.

                                       12
<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
of Operations

   The following analysis of the consolidated financial condition and results of
operations of Friedman, Billings, Ramsey Group, Inc. (the "Company") should be
read in conjunction with the unaudited Consolidated Financial Statements as of
September 30, 2001 and 2000, and the Notes thereto and the Company's 2000 Annual
Report on Form 10-K.

BUSINESS ENVIRONMENT

   Our principal business activities: investment banking (capital raising and
merger and acquisition and advisory services), institutional brokerage and asset
management (including proprietary investments) are linked to the capital
markets.  In addition, our business activities are focused to a large extent on
small and mid-cap stocks in the financial services, real estate, technology and
energy sectors, although our research coverage and associated brokerage
activities increasingly involve larger-cap stocks and other sectors.  By their
nature, our business activities are highly competitive and are not only subject
to general market conditions, volatile trading markets and fluctuations in the
volume of market activity, but also to the conditions affecting the companies
and markets in our areas of focus.

   In the third quarter, although the economic slowdown that began in the second
half of 2000 continued, we continued to experience an increase in underwriting
and private placement activity in two of our focused industry sectors: the
financial institutions and real estate sectors.  The economic slowdown continued
to adversely affect equity valuations, particularly in the technology and
financial sectors. This slowdown was accelerated in the aftermath of the events
surrounding September 11.  Secondary equity market trading activity continued to
remain under pressure and the advent of decimal pricing has adversely affected
secondary equity market trading margins.

   Our revenues and net income are subject to substantial positive and negative
fluctuations due to a variety of factors that cannot be predicted with great
certainty. These factors include the overall condition of the economy and the
securities markets as a whole and of the sectors on which we focus.  For
example, a significant portion of the performance based or incentive revenues
that we recognize from our venture capital, private equity and asset management
activities is based on the value of securities held by the funds we manage.
Increases in value from these activities include unrealized gains that may be
reduced from one period to another.  The downturn in the technology and
financial sectors has adversely affected this portion of our business and caused
us to reduce certain unrealized gains in securities held by these funds.
Although, when market conditions permit, we take steps to realize or lock-in
gains on these securities, these securities are often illiquid and therefore,
the value of these securities is subject to increased market risk.

    Fluctuations in revenues and net income also occur due to the overall level
of market activity which, among other things, affects the flow of investment
dollars and the size, number and timing of investment banking transactions. In
addition, a downturn in the level of market activity can lead to a decrease in
brokerage commissions.  Therefore, net income and revenues in any particular
period may not be representative of full-year results and may vary significantly
from year to year and from quarter to quarter.

   The financial services industry continues to be affected by the intensifying
competitive environment, as demonstrated by consolidation through mergers and
acquisitions, as well as significant growth in competition in the market for
brokerage and investment banking services.  The relaxation of banks' barriers to
entry into the securities industry and expansion by insurance companies into
traditional brokerage products, coupled with the repeal of laws separating
commercial and investment banking activities, have increased the number and size
of companies competing for a similar customer base many of which have greater
capital resources with which to pursue these activities.

   In order to compete in this increasingly competitive environment, we
continually evaluate each of our businesses across varying market conditions for
competitiveness, profitability and alignment with our long-term strategic
objectives, including the diversification of revenue sources. As a result, we
may choose, from time to time, to reallocate resources based on the
opportunities for profitability and revenue growth for each of our businesses
relative to our commitment of resources.  In October, we announced that we had
implemented a program to reduce fixed costs by a targeted 20% of the third
quarter run-rate.

                                       13
<PAGE>

RESULTS OF OPERATIONS

   Three months ended September 30, 2001 compared to three months ended
September 30, 2000

   The Company's revenues decreased 51% from $44.7 million in 2000 to $21.8
million in 2001 primarily due to a decrease in asset management revenues and, to
a lesser extent, decreases in investment banking and institutional brokerage
revenues.

   Underwriting revenue increased from $4.9 million in 2000 to $9.9 million in
2001.  The increase is attributable to more lead-managed transactions resulting
in higher fees per transaction.  During the third quarter of 2001, the Company
managed seven public offerings, of which the Company lead-managed three, raising
$525.8 million and generating $9.9 million in revenues.  During the third
quarter of 2000, the Company managed seven public offerings, of which the
Company lead-managed one, raising $954.9 million and generating $4.9 million in
revenues.  The average size of underwritten transactions for which we were a
lead or co-manager decreased from $136.4 million in 2000 to $75.1 million in
2001.

   Corporate finance revenue decreased from $7.3 million in 2000 to $1.2 million
in 2001 due primarily to a decrease in the number and size of private placement
transactions completed.  In 2000, the Company completed two private placements
generating $1.4 million in revenues compared to one completed transaction in
2001 generating $1.0 million in revenues.  M&A and advisory fee revenue
decreased from $5.9 million in 2000 to $0.2 million in 2001.  We completed two
M&A transactions in 2000 compared to none in 2001.

   In connection with certain capital raising transactions, the Company has
received and holds warrants for the stock of the issuing companies, which are
generally exercisable at the respective offering price of the transaction.  The
Company has previously carried the warrants at nominal values, and recognized
profits, if any, only when realized due to the restrictions on the warrants and
underlying securities, and the uncertainty surrounding the valuation of the
warrants. Based on the lapsing of restrictions and the development of a trading
history for these publicly traded securities, the Company reassessed the
valuation models and methodology for the warrants.  As such, the Company has
valued warrants on publicly traded stocks, where the restriction periods have
lapsed, using an undiscounted Black-Scholes valuation model.  During the
quarter, the Company recorded an unrealized investment banking loss of $(1.0)
million as a result of the change in valuation offset by a gain of $0.9 million
related to the exercise of warrants previously received as part of a capital
raising transaction.

   Institutional brokerage revenue from principal transactions decreased 40%
from $7.0 million in 2000 to $4.2 million in 2001 primarily due to the move to
decimalization and resulting lower per trade commissions which continue to place
pressure on spread margins. In addition, the Company recorded trading gains of
$1.2 million in 2000 attributable to the Company's ability, as a market maker
for its own account, to take advantage of an increase in market volatility in
the technology sector.

   Institutional brokerage agency commissions increased 18% from $5.0 million in
2000 to $5.9 million in 2001 primarily due to increased customer trading
attributed to, among other things, greater penetration of institutional accounts
through broader research coverage and sales and trading services.

   Asset management base management fees increased 132% from $2.5 million in
2000 to $5.8 million in 2001 primarily due to additional fees earned as a result
of our acquisition of MMA/Rushmore and, to a lesser extent, our other managed
vehicles.

   Asset management incentive allocations decreased from $7.8 million in 2000 to
$(1.8) million in 2001.  Incentive allocations in 2000 and 2001 are primarily
from TVP.

   Asset management net investment income (loss) decreased from $5.8 million in
2000 to $(6.6) million in 2001.  Net investment loss in 2001 includes: $(5.7)
million of net investment loss from investments in venture capital and other
proprietary investment partnerships and $(1.0) million of "other than temporary"
unrealized depreciation related to an available-for-sale security offset by $0.1
million of net investment

                                       14
<PAGE>

RESULTS OF OPERATIONS

Three months ended September 30, 2001 compared to three months ended September
30, 2000, continued

income generated from other miscellaneous investments.  Net investment income in
2000 included $4.9 million of net investment income from investments in venture
capital and other proprietary investment partnerships and $1.3 million of net
investment income generated from our investment in FBR-Asset offset by a $(0.4)
million of "other than temporary" unrealized depreciation related to an
available-for sale security.

   Unrealized gains related to our investments that are included in "accumulated
other comprehensive income" in our balance sheet totaled $2.7 million as of
September 30, 2001.  If and when we liquidate these investments or determine
that the decline in value of these investments is "other than temporary", a
portion or all of the losses will be recognized as an investment loss in the
statement of operations during the period in which the liquidation or
determination is made.  Our investment portfolio is also exposed to future
downturns in the markets and private debt and equity securities are exposed to
deterioration of credit quality, defaults and downward valuations.  On a
quarterly basis, we review the valuations of our private debt and equity
investments.  If and when we determine that the net realizable value of these
investments is less than our carrying value, we will reflect the reduction as an
investment loss.

   Net interest, dividends, and other revenue (net of interest expense)
increased 8% from $2.6 million in 2000 to $2.8 million in 2001 primarily due to
$0.9 million of miscellaneous income recorded in 2001 offset by lower cash
balances and lower interest rates.

   Total expenses increased 15% from $38.5 million in 2000 to $44.2 million in
2001 due primarily to an increase in occupancy and equipment associated with
write-off of capitalized software related to fbr.com and, to a lesser extent, an
increase in business development and professional services and other operating
expenses.

   Compensation and benefits expense decreased 2% from $24.8 million in 2000 to
$24.3 million in 2001 due to a decrease of $5.0 million in variable compensation
primarily related to TVP and, to a lesser extent, executive officer
compensation.  These decreases were offset by an increase in fixed compensation
from $7.1 million in 2000 to $11.5 million in 2001 associated with the hiring of
investment banking, research, sales and trading professionals.

   Business development and professional services increased 27% from $6.0
million in 2000 to $7.6 million in 2001 primarily due to an increase in travel
associated with the increase in underwriting activity and, to a lesser extent,
sub-advisory expenses and consulting expenses associated with recruiting
investment banking, research, sales and trading professionals.

   Clearing and brokerage fees increased 20% from $1.5 million in 2000 to $1.8
million in 2001 primarily due to an increase in market-making activity and
agency transactions.  As a percentage of institutional brokerage revenue,
clearing and brokerage fees increased from 12% in 2000 compared to 18% 2001, due
primarily to $1.2 million of trading gains in 2000 and pressure on spread
margins from the over-the-counter business.

   Occupancy and equipment expense increased 111% from $2.7 million in 2000 to
$5.7 million in 2001 due to an increase in amortization expense related to
fbr.com.  Depreciation and amortization expense increased $3.2 million in 2001
compared to 2000 primarily as a result of the $2.7 million accelerated write-off
of capitalized fbr.com software costs due to the Company determining such
capitalized costs were impaired during the period.

   Communications expense increased 23% from $1.3 million in 2000 to $1.6
million in 2001 primarily due to expenses in connection with the MMA/Rushmore
acquisition in April 2001.

   Other operating expenses increased 53% from $1.9 million in 2000 to $2.9
million in 2001 primarily due to expenses in connection with the MMA/Rushmore
acquisition in April 2001.

                                       15
<PAGE>

RESULTS OF OPERATIONS

Nine months ended September 30, 2001 compared to nine months ended September 30,
2000

   The Company's revenues decreased 36% from $154.5 million in 2000 to $99.4
million in 2001 primarily due to lower asset management revenue, particularly
incentive allocations related to FBR Technology Venture Partners, L.P. ("TVP").
Additionally, in 2001, there was a decrease in revenue from institutional
brokerage offset by an increase in investment banking revenues.

   Underwriting revenue increased 62% from $16.6 million in 2000 to $26.9
million in 2001.  The increase is attributable to more lead-managed transactions
resulting in higher fees per transaction.  During the first nine months of 2001,
the Company managed fifteen public offerings, of which the Company lead-managed
ten, raising $1.1 billion and generating $26.9 million in revenues.  During the
first nine months of 2000, the Company managed nineteen public offerings, of
which the Company lead-managed two, raising $3.9 billion and generating $16.6
million in revenues.  The average size of underwritten transactions for which we
were a lead or co-manager decreased from $205.3 million in 2000 to $73.6 million
in 2001.

   Corporate finance revenue decreased 3% from $22.2 million in 2000 to $21.5
million in 2001 due primarily to a decrease in the number of private placement
and M&A transactions completed offset by higher fees per private placement
transaction.  In 2000, the Company completed four private placements generating
$6.2 million in revenues compared to three completed transactions in 2001
generating $16.5 million in revenues, net of $1.7 million in revenues paid to
FBR-Asset related to the fee sharing agreement with FBRC.  During the second
quarter of 2001, FBR-Asset participated in a private placement of the common
stock of Saxon Capital Acquisition Corporation, where FBRC acted as the
placement agent.  M&A and advisory fee revenue decreased from $16.0 million in
2000 to $5.0 million in 2001.  We completed nine M&A transactions in 2000
compared to six in 2001.

   In connection with certain capital raising transactions, the Company has
received and holds warrants for the stock of the issuing companies, which are
generally exercisable at the respective offering price of the transaction.  The
Company has previously carried the warrants at nominal values, and recognized
profits, if any, only when realized due to the restrictions on the warrants and
underlying securities, and the uncertainty surrounding the valuation of the
warrants. Based on the lapsing of restrictions and the development of a trading
history for these publicly traded securities, the Company reassessed the
valuation models and methodology for the warrants.  As such, the Company has
valued warrants on publicly traded stocks, where the restriction periods have
lapsed, using an undiscounted Black-Scholes valuation model.  During the first
nine months of the year, the Company recorded an unrealized investment banking
gain of $3.5 million as a result of the change in valuation.  In addition, the
Company recorded a miscellaneous investment banking related gain of $1.0 million
as well as a gain of $0.9 million related to the exercise of warrants previously
received as part of a capital raising transaction.

   Institutional brokerage revenue from principal transactions decreased 40%
from $25.8 million in 2000 to $15.5 million in 2001 primarily due to the move to
decimalization and resulting lower per trade commissions which continue to place
pressure on spread margins. In addition, the Company recorded trading gains of
$6.6 million in 2000 attributable to the Company's ability, as a market maker
for its own account, to take advantage of an increase in market volatility in
the technology sector.

   Institutional brokerage agency commissions increased 21% from $15.3 million
in 2000 to $18.5 million in 2001 primarily due to increased customer trading
attributed to, among other things, greater penetration of institutional accounts
through broader research coverage and sales and trading services.

   Asset management base management fees increased 101% from $6.9 million in
2000 to $13.9 million in 2001 primarily due to additional fees earned as a
result of our acquisition of MMA/Rushmore and, to a lesser extent, our other
managed vehicles.

   Asset management incentive allocations decreased from $52.2 million in 2000
to $(4.6) million in 2001.  Incentive allocations in 2000 and 2001 are primarily
from TVP.

                                       16
<PAGE>

RESULTS OF OPERATIONS

Nine months ended September 30, 2001 compared to nine months ended September 30,
2000, continued

   Asset management net investment income (loss) decreased from $6.6 million in
2000 to $(5.1) million in 2001.  Net investment loss in 2001 includes: $(6.6)
million of net investment loss from investments in venture capital and other
proprietary investment partnerships; $(1.9) million of "other than temporary"
unrealized depreciation related to an available-for-sale security; and $(0.4)
million of net investment loss related to losses on our marketable securities
offset by $2.1 million (net of $1.1 million of investment loss, representing
dilution associated with FBR-Asset's secondary offering in August 2001) of net
investment income generated from our investment in FBR-Asset and $1.7 million of
realized gains related to private, mezzanine investments. Net investment income
in 2000 included $12.3 million of net investment income from investments in
venture capital and other proprietary investment partnerships and $5.0 million
of net investment income generated from our investment in FBR-Asset offset by
$(7.9) million in write-downs of our private equity and private debt investments
and $(2.8) million of "other than temporary" impairments related to available-
for-sale securities.

   Unrealized gains related to our investments that are included in "accumulated
other comprehensive income" in our balance sheet totaled $2.7 million as of
September 30, 2001.  If and when we liquidate these or determine that the
decline in value of these investments is "other than temporary", a portion or
all of the losses will be recognized as investment losses in the statement of
operations during the period in which the liquidation or determination is made.
Our investment portfolio is also exposed to future downturns in the markets and
private debt and equity securities are exposed to deterioration of credit
quality, defaults and downward valuations. On a quarterly basis, we review the
valuations of our private debt and equity investments. If and when we determine
that the net realizable value of these investments is less than our carrying
value, we will reflect the reduction as an investment loss.

   Net interest, dividends, and other revenue (net of interest expense)
increased 5% from $6.4 million in 2000 to $6.7 million in 2001 primarily due to
$1.1 million of miscellaneous income recorded in 2001 offset by lower cash
balances and lower interest rates.

   Total expenses decreased 8% from $133.7 million in 2000 to $122.8 million in
2001 due primarily to a decrease in variable compensation expense offset by an
increase in business development and professional services and, to a lesser
extent, occupancy and equipment associated with write-off of capitalized
software related to fbr.com and other operating expenses.

   Compensation and benefits expense decreased 24% from $96.2 million in 2000 to
$73.3 million in 2001 due to a decrease of $34.2 million in variable
compensation primarily related to TVP and, to a lesser extent, executive officer
compensation.  These decreases were offset by an increase in fixed compensation
from $20.9 million in 2000 to $30.7 million in 2001 associated with the hiring
of investment banking, research, sales and trading professionals.

   Business development and professional services increased 29% from $15.0
million in 2000 to $21.2 million in 2001 primarily due to an increase in
consulting expenses associated with recruiting investment banking, research,
sales and trading professionals and travel associated with the increase in
underwriting activity and, to a lesser extent, sub-advisory expenses.

   Clearing and brokerage fees increased 11% from $4.6 million in 2000 to $5.1
million in 2001 primarily due to an increase in market-making activity and
agency transactions.  As a percentage of institutional brokerage revenue,
clearing and brokerage fees increased from 11% in 2000 compared to 15% 2001, due
primarily to $6.6 million of trading gains in 2000 and pressure on spread
margins from the over-the-counter business.

   Occupancy and equipment expense increased 15% from $7.4 million in 2000 to
$11.1 million in 2001 due to an increase in amortization expense related to
fbr.com.  Depreciation and amortization expense increased $3.9 million in 2001
compared to 2000 primarily as a result of the $2.7 million accelerated write-off
of capitalized fbr.com software costs due to the Company determining such
capitalized costs were impaired during the period.

                                       17
<PAGE>

RESULTS OF OPERATIONS

Nine months ended September 30, 2001 compared to nine months ended September 30,
2000, continued

   Communications expense increased 14% from $3.7 million in 2000 to $4.2
million in 2001 primarily due to expenses in connection with the MMA/Rushmore
acquisition in April 2001.

   Other operating expenses increased 24% from $5.8 million in 2000 to $7.2
million in 2001 primarily due to expenses in connection with the MMA/Rushmore
acquisition in April 2001.


LIQUIDITY AND CAPITAL RESOURCES

   Historically, we have satisfied our liquidity and regulatory capital needs
through three primary sources: (1) internally generated funds; (2) equity
capital contributions; and (3) credit provided by banks, clearing brokers, and
affiliates of our principal clearing broker.  We have required the use, and may
continue the use, of temporary subordinated loans in connection with regulatory
capital requirements to support our underwriting activities.

   Our principal assets consist of cash and cash equivalents, receivables,
securities held for trading purposes and long-term investments.  As of September
30, 2001, liquid assets consisted primarily of cash and cash equivalents of
$32.9 million and a $10.9 million receivable for cash on deposit with the
Company's clearing broker.  Cash equivalents of $32.9 million consist primarily
of money market funds invested in debt obligations of the U.S. government.  We
had borrowing capacity (borrowing against security positions) from FBRC's
clearing broker of approximately $8.8 million as of September 30, 2001 and a
total of $40.0 million in a committed subordinated revolving loan from an
affiliate of the Company's clearing broker that is allowable for net capital
purposes.  The Company intends to replace this agreement upon expiration in
December 2001.

   Long-term investments consist primarily of investments in managed
partnerships, including venture capital funds in which we serve as managing
partner, available-for-sale securities, our investment in FBR-Asset and long-
term debt and equity investments in privately held companies. The decrease in
the Company's long-term investments from December 31, 2000 to September 30, 2001
is primarily due to net sales of long-term investments of $30.0 million.
Although the investments in venture capital funds and other limited partnerships
are for the most part illiquid, the underlying investments of such entities may
be in publicly traded, equity and debt securities, some of which may be
restricted due to contractual "lock-up" requirements. The Company is continually
evaluating and implementing various strategies designed to minimize its risk of
loss from potential market declines of securities underlying its long-term
investments. During 2000 and the first six months of 2001, the Company employed
option strategies that were indexed to common equity shares held by certain of
the Company's managed investment partnerships. The options are subject to fair
value accounting. Total realized and unrealized gains of $2.5 million were
recognized during 2001 and included in net investment income in the statement of
operations.

   As of September 30, 2001, a majority, by value, of the underlying assets of
the investment partnerships and FBR-Asset were equity securities of domestic,
publicly traded companies or, in the case of FBR-Asset, mortgage-backed
securities.  These underlying investments are marked to market, subject to
liquidity discounts in the case of securities that are subject to contractual
"lock-up" requirements or regulatory restrictions (including Rule 144) or
otherwise not readily marketable, and we record our proportionate share of
unrealized gains and losses.  To the extent the underlying investments in the
investment partnerships, FBR-Asset and direct investments are not marketable
securities, they are valued at estimated fair values.  In 2001, we recorded net
realized and unrealized losses from our investments of $(5.1) million and
incentive allocations that represent unrealized losses and realization events
related to our partnership interests and underlying securities of $(4.6)
million. We also maintain, as a separate component of shareholders' equity, $2.7
million of accumulated other comprehensive income primarily representing our
proportionate share of FBR-Asset's unrealized gains.  As of September 30, 2001,
the recorded value of our long-term investment securities and our marketable and
trading securities (net of short positions) was $123.0

                                       18
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES, continued

million. The net potential loss in fair value, using a 10% hypothetical decline
in reported value, was $12.3 million.

   We believe that the Company's current level of equity capital and committed
line of credit, including funds generated from operations, are adequate to meet
our liquidity and regulatory capital requirements and other activities. We may,
however, seek debt or equity financing, in public or private transactions, or
otherwise re-deploy assets, to provide capital for corporate purposes and/or to
fund strategic business opportunities, including possible acquisitions, joint
ventures, alliances or other business arrangements which could require
substantial capital outlays. Our policy is to evaluate strategic business
opportunities, including acquisitions and divestitures, as they arise.

   In connection with certain capital raising transactions, the Company has
received and holds warrants for the stock of the issuing companies, which are
generally exercisable at the respective offering price of the transaction.  The
Company has previously carried the warrants at nominal values, and recognized
profits, if any, only when realized due to the restrictions on the warrants and
underlying securities, and the uncertainty surrounding the valuation of the
warrants. Based on the lapsing of restrictions and the development of a trading
history for these publicly traded securities, the Company reassessed the
valuation models and methodology for the warrants.  As such, the Company has
valued warrants on publicly traded stocks, where the restriction periods have
lapsed, using an undiscounted Black-Scholes valuation model.  The Company
recorded an unrealized investment banking gain of $3.5 million in 2001 as a
result of the change in valuation estimates.

   We constantly review our capital needs and sources, the cost of capital and
return on equity, and we seek strategies to provide favorable returns on
capital.  In evaluating our anticipated capital needs and current cash resources
during 1998, our Board of Directors authorized a share repurchase program of up
to 2.5 million shares of our Company's Class A Common Stock.  Since announcing
the share repurchase program, the Company purchased 1,468,027 shares as of
September 30, 2001.  570,056 of the purchased shares were reissued to employees
pursuant to our Employee Stock Purchase Plan.

                                       19
<PAGE>

Item 3.  Changes in Information About Market Risk

   None.


Forward-Looking Statements

   This Form 10-Q includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended.  Some of the forward-looking
statements can be identified by the use of forward-looking words such as
"believes", "expects," "may," "will," "should," "seeks," "approximately,"
"intends," "plans," "estimates" or "anticipates" or the negative of those words
or other comparable terminology.  Such statements include, but are not limited
to, those relating to the effects of growth, our principal investment
activities, levels of assets under management and our current equity capital
levels.  Forward-looking statements involve risks and uncertainties.  You should
be aware that a number of important factors could cause our actual results to
differ materially from those in the forward-looking statements. These factors
include, but are not limited to, competition among venture capital firms and the
high degree of risk associated with venture capital investments, the effect of
demand for public offerings, mutual fund and 401(k) and pension plan inflows or
outflows, volatility of the securities markets, available technologies,
government regulation, economic conditions and competition for business and
personnel in the business areas in which we focus, fluctuating quarterly
operating results, the availability of capital to us and risks related to online
commerce.  We will not necessarily update the information presented or
incorporated by reference in this Form 10-Q if any of these forward-looking
statements turn out to be inaccurate.  For a more detailed discussion of the
risks affecting our business see our Form 10-K for 2000 and especially the
section "Business--Factors Affecting Our Business, Operating Results and
Financial Condition".


Part II.  Other Information

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits
          none

(b)  Reports on Form 8-K
     o  October 25, 2001: third quarter 2001 results
     o  October 25, 2001: third quarter 2001 Financial and Statistical
        Supplement
     o  October 25, 2001: third quarter 2001 Long-term Investment Matrix


SIGNATURES

   Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                     Friedman, Billings, Ramsey Group, Inc.

       11/14/01      By:       /s/ Kurt R. Harrington
   ----------------            ----------------------
      Date                     Kurt R. Harrington, Senior Vice President and
                               Chief Financial Officer (Principal Financial and
                               Accounting Officer)

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