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 June 30, 1998

                                       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                                                     54-1837743
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

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

                                 (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                          13,416,421 as of July 31, 1998
Class B Common Stock                          36,577,579 as of July 31, 1998



<PAGE>


                     FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.

                                    FORM 10-Q

                      FOR THE QUARTER ENDED JUNE 30, 1998

                                      INDEX

                                                                   Page Number
Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements - (unaudited)

         Consolidated Balance Sheets-
           December 31, 1997 and June 30, 1998                         3

         Consolidated Statements of Operations-
           Three Months Ended June 30, 1997 and 1998                   5
           Six Months Ended June 30, 1997 and 1998                     6

         Consolidated Statement of Cash Flows-
           Six Months Ended June 30, 1997 and 1998                     7

         Notes to Consolidated Financial Statements                    8

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                           14

Item 3.  Changes in Information About Market Risk                      24

Part II.  OTHER INFORMATION

Item 1.  Legal Proceedings                                             25

Item 4.  Submission of Matters to a Vote of Security Holders           25

Item 6. Exhibits and Reports on 8-K                                    26

SIGNATURES                                                             26

EXHIBIT INDEX                                                          26



<PAGE>



                     FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.

                           CONSOLIDATED BALANCE SHEETS
                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                                                    (Audited)        (Unaudited)
                                                                                   December 31,        June 30,
                                                                                      1997               1998
                                                                                   -----------       ----------
                                                                                   <C>               <C>
<S>
Assets
    Cash and cash equivalents................................................      $   205,709       $   71,246
    Short-term investments, at market value..................................            1,982               --
    Receivables:
     Investment banking......................................................            7,232            9,565
     Asset management fees...................................................            4,426            5,898
     Other...................................................................            2,465           10,654
    Due from clearing organization...........................................           15,650           51,621

    Marketable trading securities, at market value:
     Corporate equities......................................................           60,299          118,092
     Corporate bonds.........................................................           18,485           19,899

    Deferred tax asset.......................................................            2,402              390
    Long-term investments, at fair value.....................................           36,352           57,008
    Furniture, equipment and leasehold improvements, net of accumulated
       depreciation and amortization of $2,198, and $2,681, respectively.....            3,471            6,193
    Prepaid expenses and other assets........................................              854            2,878
                                                                                   -----------       ----------
             Total assets....................................................      $   359,327       $  353,444
                                                                                   ===========       ==========














</TABLE>



  The accompanying notes are an integral part of these consolidated statements.

<PAGE>
<TABLE>


                     FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.

                           CONSOLIDATED BALANCE SHEETS
                             (Amounts in thousands)


<CAPTION>
                                                                                         (Audited)      (Unaudited)
                                                                                        December 31,      June 30,
                                                                                           1997             1998
                                                                                      --------------    -----------
                                                                                      <C>               <C>
<S>
Liabilities and Shareholders' Equity

Liabilities:
     Trading account securities sold but not yet purchased, at market value:
        Corporate equities........................................................    $      10,726     $    13,656
        Corporate and U.S. government bonds.......................................            5,947           5,508

     Due to issuer- underwriting.................................................                --          23,183
     Accounts payable and accrued expenses.......................................            30,423          23,621
     Accrued compensation and benefits...........................................            19,023          30,222
     Dividends payable...........................................................            24,000              --
     Income taxes payable........................................................                --           4,509
     Short-term subordinated revolving loan......................................            40,000              --
     Long-term secured loans.....................................................             2,416           2,169
     Other   ....................................................................
                                                                                                146             917
                                                                                      -------------     ----------- 
          Total liabilities......................................................           132,681         103,785
                                                                                      -------------     -----------

Commitments and contingencies (Note 8)...........................................                --              --

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,.......
13,451,421 issued and outstanding................................................               135             135
     Class B Common Stock $.01 par value, 100,000,000 shares authorized,.........
    36,577,579 shares issued and outstanding.....................................               366             366
     Additional paid-in capital..................................................           208,843         208,843
     Retained earnings...........................................................            17,302          40,315
                                                                                      -------------     ----------- 
          Total shareholders' equity.............................................           226,646         249,659
                                                                                      -------------     -----------
          Total liabilities and shareholders' equity.............................     $     359,327     $   353,444
                                                                                      =============     ===========


</TABLE>









  The accompanying notes are an integral part of these consolidated statements.

<PAGE>

<TABLE>

                                   FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.

                                    CONSOLIDATED STATEMENTS OF OPERATIONS
                               (Amounts in thousands, except per share data)
                                                (Unaudited)
<CAPTION>

                                                                          For the Three Months
                                                                             Ending June 30,

                                                                          1997              1998
                                                                        ---------         --------
                                                                        <C>               <C>
<S>
Revenues:
   Investment banking-
     Underwriting................................................       $  29,424         $ 16,314
     Corporate finance...........................................             769           28,935
   Institutional brokerage-
     Principal sales credits.....................................           5,954            7,639
     Agency commissions..........................................           1,740            4,335
   Gains and losses, net-
     Trading                                                               (3,040)          (7,490)
     Investment..................................................             805             (274)
   Asset management..............................................           1,072            2,283
   Interest, dividends, and other................................             917            5,592
          Total revenues.........................................          37,641           57,334

Expenses:
     Compensation and benefits...................................          24,848           28,898
     Business development and sales support......................           2,823            5,260
     Professional services.......................................           1,546            2,984
     Clearing and brokerage fees.................................             897            1,649
     Occupancy and equipment.....................................             679              899
     Communications..............................................             559              877
     Interest expense............................................           1,006            1,468
     Other operating expenses....................................           1,263            2,705
                                                                        ---------         --------
          Total expenses.........................................          33,621           44,740
                                                                        ---------         --------
     Net income before taxes ....................................           4,020           12,594

     Income tax provision........................................              --            5,161
                                                                        ---------         --------
     Net income..................................................       $   4,020         $  7,433
                                                                        =========         ========

     Basic and diluted net income per share......................       $    0.10         $   0.15
                                                                        =========         ========
     Weighted average shares outstanding.........................          40,029           50,029
                                                                        =========         ========

Pro forma statements of operations data (Note 3):
     Net income before tax.......................................       $   4,020
     Pro forma income tax provision..............................           1,608
                                                                        ---------
     Pro forma net income........................................       $   2,412
                                                                        =========
     Pro forma basic and diluted net income per share............       $    0.06
                                                                        =========
     Weighted average shares outstanding.........................          40,029
                                                                        =========

</TABLE>


 The accompanying notes are an integral part of these consolidated statements.

<PAGE>
<TABLE>

                                   FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.

                                    CONSOLIDATED STATEMENTS OF OPERATIONS
                               (Amounts in thousands, except per share data)
                                                (Unaudited)
                                                                             For the Six Months
                                                                              Ending June 30,

                                                                            1997              1998
                                                                         --------          --------
                                                                         <C>               <C>
<S>
Revenues:
   Investment banking-
     Underwriting................................................        $ 42,603          $ 64,024
     Corporate finance...........................................           9,552            32,596
   Institutional brokerage-
     Principal sales credits.....................................          12,867            16,673
     Agency commissions..........................................           4,543             8,043
   Gains and losses, net-
     Trading ....................................................         (13,411)           (7,393)
     Investment..................................................             935             2,730
   Asset management..............................................           1,885             5,452
   Interest, dividends and other.................................           1,693             9,210
                                                                         --------          -------- 
          Total revenues.........................................          66,685           125,317
                                                                         --------          --------
Expenses:
     Compensation and benefits...................................          44,543            57,241
     Business development and sales support......................           4,923             9,534
     Professional services.......................................           2,831             5,516
     Clearing and brokerage fees.................................           1,914             2,992
     Occupancy and equipment.....................................           1,187             1,663
     Communications..............................................             995             1,703
     Interest expense............................................           1,730             3,127
     Other operating expenses....................................           2,280             5,212
                                                                         --------          --------  
          Total expenses.........................................          60,403            86,988
                                                                         --------          --------
     Net income before taxes ....................................           6,282            38,331
                                                                                                            
     Income tax provision........................................              --            15,319
                                                                         --------          --------
     Net income..................................................        $  6,282          $ 23,012
                                                                         ========          ========
     Basic and diluted net income per share......................        $   0.16          $   0.46
                                                                         ========          ========
     Weighted average shares outstanding.........................          40,029            50,029
                                                                         ========          ========

Pro forma statements of operations data (Note 3):
     Net income before tax.......................................        $  6,282
     Pro forma income tax provision..............................           2,513
                                                                         --------
     Pro forma net income........................................        $  3,769
                                                                         ========
     Pro forma basic and diluted net income per share............        $   0.09
                                                                         ========
     Weighted average shares outstanding.........................          40,029
                                                                         ========

</TABLE>



  The accompanying notes are an integral part of these consolidated statements.


<PAGE>
<TABLE>


                                   FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.

                                    CONSOLIDATED STATEMENT OF CASH FLOWS
                                           (Amounts in thousands)
                                                (Unaudited)
<CAPTION>

                                                                                For the Six Months
                                                                                 Ending June 30,

                                                                                 1997         1998
                                                                               -------     --------
                                                                               <C>         <C>
  <S>
  Cash flows from operating activities:
    Net income .............................................................   $ 6,282     $ 23,012
    Adjustments to reconcile net income to net cash used in operating
  activities--
      Income and special allocations on investments in limited partnerships.    (1,688)      (4,751)
      Depreciation and amortization.........................................       394          484
      Changes in operating assets:
        Receivables--
          Due to/from clearing organization.................................   (10,944)     (35,971)
          Investment banking................................................     5,709       (2,333)
          Asset management fees.............................................       (55)      (1,472)
          Other.............................................................       167       (8,189)
        Marketable trading account securities...............................    (5,415)     (59,207)
        Prepaid expenses and other assets...................................       436       (2,024)
        Deferred tax asset..................................................        --        2,012
      Changes in operating liabilities:
        Due to issuer- underwriting.........................................        --       23,183
        Trading account securities sold but not yet purchased...............   (33,604)       2,491
        Borrowings (repayments) on short-term subordinated loans............    20,000      (40,000)
        Repayments on short-term revolving loan and line of credit..........    (1,000)          --
        Accounts payable and accrued expenses...............................       (85)      (6,802)
        Income taxes payable................................................        --        4,509
        Accrued compensation and benefits...................................    10,969       11,199
        Other...............................................................       (12)         771
                                                                               -------      -------
          Net cash used in operating activities.............................    (8,846)     (93,088)
                                                                               -------      -------
  Cash flows from investment activities:
    Purchases of fixed assets...............................................      (892)      (3,205)
    Long-term investments...................................................      (225)     (15,905)
    Sale (purchase) of short-term investments............................          (12)       1,982
                                                                               -------      -------
          Net cash used in investing activities.............................    (1,129)     (17,128)
                                                                               -------      -------
  Cash flows from financing activities:
    Repayments of long-term secured loans...................................      (162)        (247)
    Distributions...........................................................   (10,146)          --
    Capital contributions...................................................       272           --
    Dividend payments.......................................................        --      (24,000)
                                                                               -------      -------
          Net cash used in financing activities.............................   (10,036)     (24,247)
                                                                               -------      -------
  Net decrease in cash and cash equivalents.................................   (20,011)    (134,463)

  Cash and cash equivalents, beginning of period............................    20,681      205,709
                                                                               -------      -------
  Cash and cash equivalents, end of period.................................    $   670      $71,246
                                                                               =======      =======
  Supplemental Cash Flow Information:
     Income taxes paid......................................................   $    --      $ 8,795
                                                                               =======      =======

</TABLE>



   The accompanying notes are an integral part of these consolidated statements.


<PAGE>



                     FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.    Organization and Nature of Operations:

   Organization

     Friedman,  Billings,  Ramsey  Group,  Inc.,  a  Virginia  corporation  (the
"Company"),  is the sole parent  holding  company for three  subsidiary  holding
companies,  Friedman,  Billings,  Ramsey Capital Markets,  Inc.  ("FBRCM"),  FBR
Capital Management,  Inc. ("FBRAM",  formerly Friedman,  Billings,  Ramsey Asset
Management,  Inc.) and FBR Holdings,  Inc. The principal  subsidiary of FBRCM is
Friedman, Billings, Ramsey & Co., Inc. ("FBRC"), a registered broker-dealer. The
principal  subsidiary  of  FBRAM  is  Friedman,   Billings,   Ramsey  Investment
Management,  Inc. ("FBRIM"), a registered investment advisor. FBR Holdings, Inc.
is an investment holding company formed to make and hold long-term  investments.
All of the subsidiaries of FBRCM and FBRAM are hereafter  collectively  referred
to as the "Operating Entities".

     FBRC is a member of the National  Association of Securities  Dealers,  Inc.
FBRC  acts  as  an  introducing  broker  executing  transactions  primarily  for
institutional  customers and forwards all such  transactions to clearing brokers
on a fully disclosed  basis.  FBRC does not hold funds or securities for, or owe
funds or securities to, customers.

     FBRC receives  underwriting  revenues from underwriting public offerings of
debt and equity securities.  These revenues are comprised of selling concessions
and management and underwriting  fees. FBRC also receives corporate finance fees
from private  placement  offerings and from  providing  merger and  acquisition,
financial  restructuring,  and other advisory  services.  FBRC  concentrates its
underwriting  and corporate  finance  activities  primarily on bank,  thrift and
specialty finance institutions,  technology companies and real estate investment
trusts ("REITS").

       FBRIM acts as general partner of investment limited partnerships and also
manages  investment  accounts  and a REIT,  and is the  principal  owner  in two
investment holding companies organized as limited liability companies.

Reincorporation Merger

      In December  1997,  Friedman,  Billings,  Ramsey  Group,  Inc., a Delaware
corporation (the "Old Holding  Company") and its operating  entities  terminated
their  status as  subchapter  S  corporations  and  converted  to  subchapter  C
corporations  as defined  under the Internal  Revenue  Code (the  "Conversion").
Prior to the Conversion,  the Old Holding Company declared a distribution to its
shareholders of $54 million representing previously  undistributed  subchapter S
corporation  earnings.  As of December 31, 1997, $30 million of the distribution
had  been  paid.  The Old  Holding  Company  was then  merged  with and into the
Company,  with the  Company  as the  surviving  corporation.  As a result of the
merger,  shareholders of the Company received 330 shares of Class B Common Stock
of the Company for each share in the Old Holding Company.

     The  effects of the  reincorporation  merger  have been  given  retroactive
application in the consolidated financial statements for all periods presented.


<PAGE>


                     FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Initial Public Offering

     Subsequent to the reincorporation merger, the Company issued 10,000,000 new
Class A common shares and certain  selling  shareholders  sold 1,000,000 Class A
common shares in an initial public offering (the  "Offering").  The net proceeds
to the Company from the Offering approximated $185,000,000.  Simultaneously with
the Offering,  certain  selling  shareholders  sold 2,451,421  shares of Class B
common  stock to PNC Bank Corp.  These  shares were  automatically  converted to
Class A common shares upon the sale.

Nature of Operations

     The  Company  is  primarily  engaged  in a  single  line of  business  as a
securities   firm,   which  comprises   several  types  of  services,   such  as
underwriting,  principal  and  agency  securities  trading  transactions,  asset
management and long-term equity investing,  primarily in the United States.  The
operations  related to the Company's  foreign entities are not material to these
consolidated financial statements.

     The securities industry generally, and specifically in volatile or illiquid
markets,  is subject to numerous risks,  including the risk of losses associated
with the  underwriting,  ownership,  and trading of securities  and the risks of
reduced  revenues  in periods  of reduced  demand  for  security  offerings  and
activity in secondary  trading  markets.  Changing or negative  economic trends,
such as  inflation  or  interest  rate  volatility,  political  trends,  such as
regulatory and  legislative  changes,  and overall or specific market trends can
influence the liquidity and value of the Company's  investments,  and impact the
level of security  offerings  underwritten  by the  Company,  all of which could
adversely affect the Company's revenues and profitability.

     Many  aspects  of the  Company's  business  involve  substantial  risks  of
liability.  An underwriter is exposed to substantial 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 of underwriters by issuers.  Underwriters may be held liable for
material  misstatements  or omissions of fact in a prospectus used in connection
with the  securities  being  offered or for  statements  made by its  securities
analysts or other  personnel.  While the Company has never been  subject to such
litigation, in recent years there has been an increasing incidence of litigation
involving the securities industry, including 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  actively to defend
such  litigation,  significant  legal  expenses  could be  incurred.  An adverse
resolution of any future lawsuits  against the Company could  materially  affect
the Company's operating results and financial condition.

Concentrations of Risk

     The  Company's   historical  revenues  have  been  derived  primarily  from
investment  banking  transactions  in the  financial  services  and real  estate
industries and the industry  consolidation  sector. As a result of the Company's
dependence on specific industries and the consolidation  sector, any downturn in
the market for  securities in these areas could  adversely  impact the Company's
results of operations and financial condition.

     A substantial  portion of the  Company's  revenues in a year may be derived
from a small number of  underwriting  transactions  or may be  concentrated in a
particular  industry.  Revenues  derived from two unrelated  investment  banking
transactions  accounted for  approximately 38 percent of the Company's  revenues
for the six  months  ended  June 30,  1997.  Two  unrelated  investment  banking
transactions  accounted  for 32 percent  of the  Company's  revenues  in the six
months ended June 30, 1998.

     Trading positions in two marketable securities,  both corporate equities of
issuers classified as REITs,  accounted for $57.6 million or 48.7 percent of the
Company's equity trading securities positions as of June 30, 1998.


<PAGE>




                     FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


2. Summary of Significant Accounting Policies:

Basis of Presentation

     The Company's  financial  statements  have been prepared in accordance with
the rules and regulations of the Securities and Exchange Commission ("SEC") with
respect to Form 10-Q and reflect all normal recurring  adjustments which are, in
the opinion of management,  necessary for a fair presentation of the results for
the interim periods presented.  Pursuant to such rules and regulations,  certain
footnote  disclosures which are contained in the Company's Annual Report on 10-K
for the year ended  December 31, 1997 ("1997 Annual  Report") have been omitted.
It is  recommended  that  these  consolidated  financial  statements  be read in
conjunction with the audited  consolidated  financial statements included in the
1997 Annual Report.  The Consolidated  Balance Sheet as of December 31, 1997 was
derived from the audited  financial  statements.  All  significant  intercompany
accounts and transactions have been eliminated in consolidation.

     Certain  prior year amounts have been  reclassified  to conform to the 1998
presentation.

 Net Income Per Share

     In March 1997,  the Financial  Accounting  Standards  Board issued SFAS No.
128,  "Earnings per Share." SFAS No. 128 is effective  for financial  statements
issued after December 15, 1997. SFAS No. 128 requires dual presentation of basic
and diluted income per share. Basic income per share includes no dilution and is
computed by dividing net income or loss available to common  stockholders by the
weighted-average  number of common shares  outstanding  for the period.  Diluted
income per share includes the impact of potentially dilutive options,  warrants,
or convertible  debt and convertible  preferred  equity  securities.  Options to
purchase  4,269,900  shares of common stock at $20 per share were outstanding as
of June 30, 1998,  but were not included in  calculating  diluted net income per
share as their  effect  would have been  anti-dilutive.  Therefore,  there is no
difference  between  the  amounts of basic and  diluted  net income per share in
these statements.

     In February 1998, the SEC issued Staff Accounting  Bulletin ("SAB") No. 98,
concerning  the  computation  of  earnings  per  share.  SAB 98 amends  previous
guidance  concerning  the impact of equity  interests  issued in proximity to an
initial  public  offering  on  the   computation  of  weighted   average  shares
outstanding.  SAB 98 also amends the requirements to present historical earnings
per share  information when a company converts from a non-taxable,  to a taxable
entity.  SAB 98 has been  applied  in the  accompanying  consolidated  financial
statements.

Use of Estimates

     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.




<PAGE>



                     FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Compensation

      A  significant  component  of  compensation  expense  relates to incentive
bonuses. Incentive bonuses are accrued based on the contribution of key business
units using certain  pre-defined  formulas.  Since the bonus  determinations are
also  based on  aftermarket  security  performance  and other  factors,  amounts
originally accrued may not ultimately be paid. All of the Company's compensation
plans are reviewed and evaluated on a quarterly basis.  Pursuant to this policy,
the Company reduced $9.5 million of previously  accrued bonuses in the six month
period ending June 30, 1998.

3.   Income Taxes:

     Through  December 20, 1997,  the Company and its U.S.  Operating  Entities,
with the exception of its subsidiaries which are limited liability  corporations
("LLC"s),  had  elected  to be taxed as  subchapter  S  corporations  under  the
Internal Revenue Code. Subchapter S corporations and LLCs are not taxed on their
income;  rather their income or loss pass directly through to their shareholders
(or members in the case of LLCs). As a result,  there is no provision for income
taxes in these financial statements for the periods prior to December 20, 1997.

     The accompanying  consolidated  statements of operations  include pro forma
adjustments  for income tax  expense,  which  would have been  recorded  had the
Company  been  subject to federal  and state  corporate  income  taxes,  for all
periods presented.

4.   Long-Term Investments:

     Long-term investments primarily include non-readily  marketable investments
in limited  investment  partnerships  and other  equity  investments,  including
privately held companies.  Long-term  investments also include illiquid warrants
for stock of corporations to which the Company has provided  investment  banking
services, carried at nominal values. Long-term investments are reported at their
estimated fair values.

     The  principal  private  company  investment  consists  of  a  $25  million
investment in FBR Asset Investment Corporation  ("FBR-Asset"),  a privately held
real estate investment trust formed in 1997. FBR-Asset's  investments as of June
30, 1998 consist of corporate  equities-  21% (79% of these are publicly  traded
REITs),  mortgage-backed  securities-59%,   corporate  bonds-5%,  and  cash  and
equivalents-15%.

 5.   Asset Management Revenue:

     Certain of the  Company's  subsidiaries,  as investment  advisers,  receive
management  fees for the  management  of the  business  and  affairs  of limited
partnerships  or  investment  companies,  based upon the amount of assets  under
management,  as well as incentive performance fees or special allocations of net
income based upon the operating results.

     Incentive  performance  fees and special  allocations  are calculated on at
least an annual period,  which generally coincides with the calendar year. As of
December  31,  1997,  and June 30, 1997 and June 30,  1998,  unrecorded  special
allocations were $1.5 million, $3.4 million, and $4.2 million,  respectively. As
the  ultimate  amount  of  such  fees  and  allocations  may  vary  with  future
performance,  these fees and  allocations are not recorded as revenue until such
time as they become due and payable.


<PAGE>



                     FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


6.   Borrowings:

Subordinated Revolving Loans

     As of June 30, 1998, the Company had two unsecured  revolving  subordinated
loan  agreements  with its  clearing  broker and an  affiliate  of its  clearing
broker.  Available  credit lines under these agreements were $15 million and $10
million.  As of June 30,  1998  there were no amounts  outstanding  under  these
lines.  Borrowing capacity under the credit lines expire as follows: $15 million
in July 1998,  and $10  million in October  1998.  The Company did not renew the
line that expired in July, 1998.

7.   Net Capital Computation:

     FBRC is subject to the Net Capital Rule,  which requires the maintenance of
minimum net capital and requires that the ratio of aggregate indebtedness to net
capital,  both as defined,  shall not exceed 15 to 1. At June 30, 1998, FBRC had
net capital of $65.4 million,  which was $61.4 million in excess of its required
net capital of $4.0 million.  FBRC's aggregate indebtedness to net capital ratio
was .92 to 1 at June 30, 1998.

8.   Commitments and Contingencies:

Leases

     The Company leases  premises under  long-term  lease  agreements  requiring
minimum annual rental payments with annual  adjustments  based upon increases in
the consumer price index,  plus the pass-through of certain  operating and other
costs above a base amount.

     Future minimum aggregate annual rentals payable under these  non-cancelable
leases and rentals for certain  equipment  leases for the years ending  December
31, 1999 through 2003 and the aggregate amount thereafter, are as follows:

            Year Ending December 31,                           (in Thousands)
            1999................................................    2,546
            2000................................................    2,609
            2001................................................    2,789
            2002................................................    2,766
            2003................................................    2,696
            Thereafter..........................................      225
                                                                  -------
                                                                  $13,631
                                                                  =======

FBR Business Development Capital ("FBR-BDC")

     In May 1998, the Company  organized an interim loan fund designed to extend
financing  to  "middle-market"  businesses  in  need  of  subordinated  debt  or
mezzanine  financing that is not readily  available from traditional banks or in
the capital markets. In connection therewith,  the Company provided FBR-BDC with
a loan for its operations  and  commitments of $6.6 million as of June 30, 1998.
Subsequent to June 30, 1998, the Company made three  additional loans to FBR-BDC
totaling  $17.9  million,  and expects to provide loans up to $15 million in the
aggregate during the remainder of 1998, to be used by the fund.


<PAGE>



                     FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


9. Distributions:

     In  1997,  prior to its  initial  public  offering,  the  Company  declared
distributions to its shareholders totaling $72,570,582.  There were no dividends
declared  during the six months  ended June 30,  1998.  However,  $24 million of
distributions  declared  in 1997  were paid in the  first  quarter  of 1998 to S
corporation shareholders.


10.   Shareholders' Equity

     At June 30,  1998,  the  Company  has three  stock-based  compensation  and
benefit plans  discussed  below.  In July 1998, the Company's Board of Directors
approved a plan to  repurchase up to 2.5 million  shares of the Company's  Class
"A" Common Stock from time to time. In accordance  with the  repurchase  plan, a
portion of the stock acquired in the  repurchase  plan will be used in the three
stock-based compensation and benefit plans. As of July 31, 1998, the Company had
repurchased 35,000 shares of its class A common stock pursuant to this plan.

1997 Stock and Annual Incentive Plan

     Under the 1997  Stock  and  Annual  Incentive  Plan the  Company  may grant
options,  stock  appreciation  rights,  "performance"  awards and restricted and
unrestricted  stock  (collectively,  the "Awards") to purchase up to 9.9 million
shares of Class A Common Stock to  participants in the 1997 Plan. As of December
31, 1997,  4,384,400  stock options were granted to employees.  The options were
granted  at the  initial  public  offering  price of $20 per  share  and  become
exercisable  as follows:  10 percent,  40 percent,  and 50 percent at the end of
three,  four, and five years,  respectively.  As of June 30, 1998 no options had
been  exercised or had expired.  As of June 30, 1998,  114,500  options had been
cancelled upon the departure of employees,  and 75,000  additional  options have
been committed to new employees.

Non-Employee Director Stock Compensation Plan

     Under the  Non-Employee  Director  Stock  Compensation  Plan (the "Director
Plan"), the Company may grant options or stock (in lieu of annual director fees)
up to 100,000  shares of Class A Common  Stock.  There were no awards made under
this plan during the six months ending June 30, 1998.

Employee Stock Purchase Plan

     Under the 1997 Employee Stock Purchase Plan (the "Purchase Plan") 1,000,000
shares of Class A Common Stock were reserved for future  issuance of stock.  The
Purchase Plan will permit  eligible  employees to purchase  common stock through
payroll  deductions  at a price equal to 85 percent of the fair market  value as
determined  by the plan.  The plan will not  result in  compensation  expense in
future periods.  As of June 30, 1998, the Purchase Plan had not yet been offered
to employees; therefore, no stock had been purchased under the Purchase Plan.


<PAGE>


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

NOTE: The following  discussion should be read in conjunction with the unaudited
Consolidated  Financial  Statements as of June 30, 1998 and 1997,  and the Notes
thereto included  elsewhere herein. In addition to historical  information,  the
following  Management's  Discussion  and  Analysis of  Financial  Condition  and
Results of Operations contains forward-looking statements that involve risks and
uncertainties.  Such statements include,  but are not limited to, those relating
to the effects of growth, the Company's principal investment  activities and its
current  equity capital  levels.  The risks and  uncertainties  relate to, among
other  factors:  general  economic  and market  conditions,  changes in interest
rates, loan delinquency rates,  stock market volume and prices,  mutual fund and
401(k)  and  pension  plan  inflows  or  outflows,  changes  in the real  estate
investment  trust  ("REIT"),  technology and financial  services  industries and
other  industries  in which  the  Company  is  active,  changes  in  demand  for
investment banking and securities  brokerage  services,  competitive  conditions
within the securities industry,  the Company's ability to recruit and retain key
employees,  changes in the securities and banking laws and regulations,  trading
and  principal  investment  activities,  and  litigation.  For a  more  detailed
explanation  of these  and  other  risks and  uncertainties,  refer to  "Factors
Affecting the Company's Business,  Operating Results and Financial Condition" in
the Company's Form 10-K for 1997,  incorporated herein by reference. As a result
of these  risks and  uncertainties,  there can be no  assurance  that  operating
results for any future period will be comparable to those  attained in the prior
periods.   The  Company   undertakes  no  obligation  to  update   publicly  any
forward-looking  statements  whether  as a  result  of new  information,  future
events, or otherwise.

Overview

         Friedman,  Billings,  Ramsey Group,  Inc. ("FBR" or the "Company") is a
holding company for Friedman,  Billings,  Ramsey Capital Markets, Inc. ("Capital
Markets Group"), FBR Capital Management, Inc. ("Asset Management Group") and FBR
Holdings,  Inc., an investment  holding company.  The Capital Markets Group is a
holding company,  whose primary subsidiary,  Friedman,  Billings,  Ramsey & Co.,
Inc. ("FBRC"),  is a U.S. investment banking firm and securities  broker-dealer.
The Capital  Markets  Group's other  subsidiaries,  Friedman,  Billings,  Ramsey
International,  Ltd. ("FBRIL") and FBR Investment  Services,  Inc. (formerly FBR
Direct, Inc.,  "FBRIS"),  are also broker-dealers in targeted markets. The Asset
Management  Group  is a  holding  company  whose  subsidiaries  are  engaged  in
investment  management  and  advisory  services to managed  accounts,  hedge and
offshore  funds,  private equity and venture  capital funds,  mutual funds,  and
holding  principal  investments.  The Company's  operations are primarily in the
United  States,  and the Company  has very  limited  exposure to foreign  market
activity.

Business Environment

     The  financial  markets in the U.S. have been  turbulent as U.S.  investors
continued to focus on worldwide market conditions,  especially on events in Asia
and Japan,  as well as heightened  anxiety over the direction of interest  rates
and potential weakening in the domestic economy, and the securities markets have
exhibited considerable volatility. The Company's business depends on the markets
for the  securities of companies that are affected by many of the same risks and
uncertainties  relating to the Company  itself  (discussed  above) as well as by
other factors that apply to particular industries.  However, the Company expects
that the  environment  will continue to be a  challenging  one in which to raise
capital, for at least  the  remainder of 1998, which may  adversely  affect  the
Company's revenues.


<PAGE>


OPERATING GROUPS

Asset Management Group

         Revenue from the Asset  Management  Group has increased  more than 180%
from the first six months of 1997 to the first six months of 1998.  This revenue
has been derived from an increasing  variety of investment  products,  which the
Company  plans to continue to  diversify  over the next two years.  Assets under
management  ("AUM") have  increased  35%,  from $641 million at year-end to $865
million  as of June  30,  1998.  Asset  management  revenue  consists  of  "base
management  fees"  (which are  calculated  based on the market value of clients'
assets under  management),  and  performance  fees or special  (incentive-based)
allocations.

         Base  management  fees are  earned on all the  Company's  AUM,  and are
determined  based on a percentage  of the market value of net assets,  excluding
FBR's and certain other investors' assets. The percentages used to determine the
Company's  fee vary  within  each  product  category  (from 0.9% for mutual fund
assets to 2.5% for venture  capital  funds).  As of June 30, 1998,  the weighted
average base  management  fees of the Company  approximate  1.2% annually on the
AUM.

         In addition to the base  management  fees, the Company earns  incentive
compensation  or  receives  special  allocations  on private  equity and venture
capital  funds,  hedge  and  offshore  funds,  and FBR  Asset  Investment  Corp.
("FBR-Asset").  The Company receives 20% of the net investment gains (if any) on
the hedge and offshore fund assets  contributed  by third  parties,  and is also
entitled to incentive fees or special allocations on other investment  products.
Generally,  the incentive fees and special  allocations are calculated  annually
every  December 31.  However,  the Company  receives  initial  incentive fees or
special allocations at the end of the quarter in which the one-year  anniversary
of each  contribution  occurs.  Assets on which the Company has the potential to
earn incentive compensation have increased 32%, from $470 million at year-end to
$620 million as of June 30, 1998.

         The Company's  investment  products have historically been concentrated
in the financial  services industry.  However,  one of the Company's hedge funds
and  FBR-Asset,  as well as one of the  Company's  mutual  funds,  are primarily
invested in other sectors. In addition, in July 1998, the Company entered into a
definitive  agreement to purchase GrandView  Advisors,  Inc.  ("Grandview"),  an
investment advisor based in Boston, Massachusetts.  Grandview manages two mutual
funds totaling $3 million in net assets.  Both Grandview  funds are sector funds
specializing in the REIT sector. The Grandview funds' shareholders are currently
undertaking  a vote on a proposed  merger  into a newly  created FBR mutual fund
named the FBR Realty  Fund.  This new fund will  broaden  and  complement  FBR's
current mutual fund products.

         The Company has investments in proprietary investment vehicles of $32.0
million as of June 30, 1998  compared to $21.4  million as of December  31, 1997
(excluding  the Company's  investment in  FBR-Asset).  FBR has recorded gains of
$2.7  million  in the  first  six  months  of 1998 on these  investments,  which
represents a total return on  investment of 10.1% for the first half of the year
(20.2% on an annualized basis).

         The Company  will  endeavor  to grow its assets  under  management  and
continue to make minority  investments in new investment vehicles as appropriate
during 1998. As part of that  strategy,  during the second  quarter of 1998, the
Company  formed  FBR  Business  Development  Capital  ("FBR-BDC"),   a  business
development  company  intended  to  complement  the  Company's  capabilities  in
mezzanine and bridge financing for growing businesses. The Company made loans to
FBR-BDC  totaling  $24.5 million as of July 31, 1998,  and currently  expects to
provide $15 million of additional loans in the aggregate during the remainder of
1998. A  significant  source of loan volume for FBR-BDC is expected to originate
from PNC Bank, the Company's strategic business partner.

         The  Company  has begun  marketing  four  investment  products  that it
intends to  continue  to develop  during the  remainder  of the year.  These new
products involve;  (i) asset allocation services for high net worth individuals;
(ii) corporate  treasury advisory  services for middle-market  business clients;
(iii) a "fund of funds", to provide investors an opportunity to invest in all of
the Company's  hedge funds,  and certain  outside  funds;  and (iv) an arbitrage
hedge fund.  Although these  additional  products are not expected to contribute
significantly  to revenues in the second half of 1998, the Company believes they
will produce more meaningful results in 1999.


<PAGE>


OPERATING GROUPS (Continued)

Capital Markets Group

         During  the  first  six  months  of 1998,  the  Capital  Markets  Group
completed a greater  number of  transactions  for  existing  investment  banking
clients (by volume  measures) than it completed in initial public  offerings for
new  clients.  During  the six  months  ended  June 30,  1998,  FBR  managed  or
co-managed seven IPO's and twelve secondary offerings.  During the first half of
1998, the Company  increased the number of personnel in the  investment  banking
group and the research department by 48 percent and 34 percent, respectively, in
order to increase  its focus on a number of  industry  sectors  that  management
believes offer favorable  opportunities for FBR to gain market share, as well as
reduce exposure to cyclical  declines in sectors in which the Company  currently
operates.

        Corporate finance activities  accelerated in the second quarter of 1998,
as FBR  acted as sole or  o-placement agent on five  non-public  capital raising
transactions,   totaling   $508  million  in  capital.   The  largest  of  these
transactions  involved a competitive  bidding  process through which the Company
was  contracted as the sole  placement  agent for the  acquisition  of East-West
Bank,  a mid-cap  financial  institution  based in  California.  In  addition to
private  placements,  corporate finance revenue growth was also attributed to an
increase in M&A and advisory  service fees which comprise 7.5% of total revenues
for the six months  ended June 30,  1998  versus 1.6% in the first six months of
1997.  FBRC has acted as  placement  agent or  co-placement  agent  raising $808
million  in eight  non-public,  capital-raising  transactions  in the  first six
months of 1998 versus four such  transactions  in the same period in 1997.  Over
the last six  quarters  (beginning  with the first  quarter  of  1997),  private
placements  have  generated  more than $11  million of revenue  per  quarter (on
average),  ranging  from none in one  quarter,  to as much as $22.7  million  in
another.

         Institutional  brokerage  revenues  increased 42% from $17.4 million to
$24.7 million,  for the six months ending June 30, 1997 and 1998,  respectively.
FBRC conducts market-making  activities in more than 400 securities.  During the
first six months of 1997 and 1998, in  connection  with these  activities,  FBRC
experienced  net trading losses on positions held in securities  inventories and
primarily in those securities for which FBR had acted as underwriter. FBR has an
investment  banking incentive  compensation  policy which takes into account the
risk of trading and other  losses  related to  market-making  activity and other
transactions  conducted to support investment banking transactions.  This policy
provides for a deferral of a portion of the  incentive  compensation  payable to
investment banking and other personnel. Any losses or liabilities of the Company
attributable  to  capital  raising  transactions  may result in a  reduction  of
accrued incentive compensation to investment banking personnel. Pursuant to this
policy, the Company reduced $9.5 million of accrued investment banking and other
bonus compensation during the six months ended June 30, 1998.

         The  Company  continues  to  be  approached  by  existing  clients  and
potential new clients concerning possible capital raising transactions. However,
given the uncertainties involved in completing such transactions, the Company is
unable to predict  when or whether any such  transactions  will be  successfully
completed.


<PAGE>


RESULTS OF OPERATIONS

         Revenues

         Total  revenues  are  comprised  primarily  of  underwriting   revenue,
corporate  finance fees,  principal  sales credits,  agency  commissions,  asset
management revenue,  and net gains and losses. The Company believes that revenue
from underwriting and corporate finance is substantially dependent on the market
for public and private  offerings of equity and debt securities by the companies
in the sectors within which FBR focuses its efforts. Principal sales credits are
dependent  on Nasdaq  trading  volume  and  spreads  in the  securities  of such
companies.  Net trading gains and losses are dependent on the market performance
of securities in which the Company holds trading positions in its inventory,  as
well as on the  decisions of  management  as to the level of market  exposure in
these securities.  Accordingly,  the Company's revenues have fluctuated, and are
likely to continue to fluctuate, based on these factors.

         Underwriting  revenue  consists  of  underwriting  discounts,   selling
concessions, management fees and other underwriting fees and reimbursed expenses
associated with underwriting activities.  The Company acts in varying capacities
in its underwriting activities, which, based on the underlying economics of each
transaction,  determines its ultimate revenues from these  activities.  When the
Company is engaged as lead-manager  of an  underwriting,  the Company  generally
bears more risk and earns higher  revenues than if engaged as a  co-manager,  an
underwriter  ("syndicate  member"), or a broker included in the "selling group".
In  general,  when FBRC acts as lead  manager or  co-manager,  the  Company  may
receive 20 to 80 percent of the total  underwriters'  discount;  however if FBRC
acts as a syndicate member,  or has a reduced role as a co-manager,  the Company
may receive 3 to 20 percent of the total underwriters' discount.

         Corporate  finance  revenues are comprised of the Company's  merger and
acquisition, private placement,  mutual-to-stock conversion, and other corporate
finance advisory fees and reimbursed  expenses  associated with such activities.
Corporate finance fees have fluctuated, and are likely to continue to fluctuate,
based on the number and size of transactions,  including private placements,  by
the Company

         Principal sales credits consist of a portion of dealer spreads from the
securities  trading  activities of the Company as principal in Nasdaq-listed and
other  over-the-counter  ("OTC")  securities,  and is primarily derived from the
Company's activities as a market-maker.

         Trading gains are combined with trading losses and the resulting amount
is reported on an aggregate basis. Gains and losses result primarily from market
price  fluctuations  that occur while holding positions in the Company's trading
security inventory,  while losses also reflect the internally allocated costs of
sales associated with principal  transactions  ("principal sales credits").  The
Company has established policies (including compensation policies) to reduce the
risk and economic impact of trading and other losses resulting from underwriting
activities.

         Agency  commissions  revenue includes revenue  resulting from executing
Nasdaq-listed  and other OTC transactions as agent, and executing trades through
a stock exchange.

         The Company  receives asset  management  revenue in its capacity as the
investment  manager  to  advisory  clients  and as  general  partner  of several
investment   partnerships.   Management  fees,  performance  fees,  and  special
allocations  on  investment  partnerships  historically  have been  earned  from
vehicles that invest  primarily in the  securities  of companies  engaged in the
financial services sector.  Incentive fees and special allocations are likely to
fluctuate  with  performance of securities in the sectors in which managed funds
invest.  A growing  asset base  coupled  with a stable or rising  equity  market
(including  equity of  financial  services  companies)  can provide  significant
revenues  with a high  net  margin  for  the  Company.  The  Company's  ultimate
objective  is to establish  an asset base with  sufficient  revenue to cover the
fixed cost of the Company's business.


<PAGE>


RESULTS OF OPERATIONS

         Expenses

         Compensation  and benefits  expense  includes  base salaries as well as
incentive  compensation  paid to  sales,  trading,  underwriting  and  corporate
finance professionals and to executive management. Incentive compensation (other
than under the 1997 Plan,  below) varies primarily based on revenue  production.
Salaries,  payroll taxes and employee  benefits are relatively  fixed in nature.
During the first six months of 1997, the incentive  compensation paid to the top
three of the Company's  Executive  Officers,  who also serve as Directors of the
Company,  was based primarily on gross  revenues,  from certain of the Company's
business  lines. In December 1997, the Company adopted the 1997 Stock and Annual
Incentive  Plan ("1997  Plan"),  under which the Executive  Officers and certain
other employees are eligible to participate in a bonus pool, based on net income
before  taxes,  rather than on gross  revenues.  In  particular,  the cash bonus
payments  made pursuant to the 1997 Plan will be made from a pool equal to up to
30% of FBR's annual  pre-tax net income (before annual cash bonus payments under
the 1997 Plan).  The pool will be reduced to the extent the Company's  aggregate
compensation  and  benefits  expense for the year  (including  annual cash bonus
payments under the 1997 Plan) would exceed 55% of revenues.  The Company's Board
of Directors is responsible for determining the percentage of pre-tax net income
remunerated  under the 1997 Plan and intends to do so based on quantitative  and
qualitative  performance criteria. FBR intends to review and evaluate all of its
compensation plans on a quarterly basis.

         The following  table sets forth certain  financial data as a percentage
of revenues:
<TABLE>
<CAPTION>
                                                  For the quarter          For the six months
                                                   ended June 30,            ended June 30,
                                                   1997       1998           1997       1998
                                                 -------    -------        -------    -------
<S>                                              <C>       <C>             <C>        <C>
Revenues:
Investment banking-
   Underwriting                                   78.17%     28.45%         63.89%     51.09%
   Corporate finance                               2.04%     50.47%         14.32%     26.01%
                                                 -------    -------        -------    -------
        Total investment banking                  80.21%     78.92%         78.21%     77.10%
                                                 -------    -------        -------    -------
Institutional brokerage-
   Principal (OTC) sales credits                  15.82%     13.32%         19.30%     13.30%
   Agency commission                               4.62%      7.56%          6.81%      6.42%
                                                 -------    -------        -------    -------
        Total institutional brokerage             20.44%     20.88%         26.11%     19.72%
                                                 -------    -------        -------    -------
Gains and losses, net-
   Trading                                       (8.08%)   (13.06%)        (11.09%)   (10.70%)
   Investment                                      2.14%    (0.48%)          1.40%      2.18%
                                                 -------    -------        -------    ------- 
        Total gains and losses, net              (5.94%)   (13.54%)        (9.69%)    (8.52%)
                                                 -------    -------        -------    -------
Asset management                                   2.85%      3.98%          2.83%      4.35%
Interest and dividends                             2.44%      9.76%          2.54%      7.35%
                                                 -------    -------        -------    -------
Total revenues                                   100.00%    100.00%        100.00%    100.00%
                                                 -------    -------        -------    -------
Expenses:
Compensation and benefits                         66.01%     50.40%         66.80%     45.68%
Brokerage and clearance                            2.38%      2.88%          2.87%      2.39%
Occupancy and equipment                            1.80%      1.57%          1.78%      1.33%
Communications                                     1.49%      1.53%          1.49%      1.36%
Interest                                           2.67%      2.56%          2.59%      2.50%
Other (1)                                         14.97%     19.09%         15.05%     16.15%
                                                --------    -------        -------    -------
Total expenses                                    89.32%     78.03%         90.58%     69.41%
                                                --------    -------        -------    -------
Net income before taxes                           10.68%     21.97%          9.42%     30.59%
                                                ========    =======        =======    =======
</TABLE>
1) Includes business promotion, investment banking and other expenses.

         The Company  estimates  its fixed costs as a percentage  of  historical
revenue have  increased  to 15% for the year ended  December 31, 1997 to 22% for
the six  months  ended June 30,  1998.  This  increase  is  attributed  to a 32%
increase in total full-time employees,  and approximately 40% increase in office
facilities  in the first half of 1998,  which can take several  months to become
productively utilized.

<PAGE>



RESULTS OF OPERATIONS

Three months ended June 30, 1998 compared to three months ended June 30, 1997

         Total  revenues  increased  52%  from  $37.6  million  in 1997 to $57.3
million in 1998 due  primarily  to  increased  investment  banking  revenues and
interest and dividend income.

         Underwriting  revenue decreased 45% from $29.4 million in 1997 to $16.3
million  in 1998.  This  decrease  was due  primarily  to a change in the mix of
capital raising  activities  completed in the quarter from public to non-public.
The number of completed  transactions  increased,  from 5 in 1997 to 10 in 1998,
while the  average  size of the  capital  raising  transactions  in the  quarter
decreased  from  $129  million  per  transaction  in  1997  to $62  million  per
transaction in 1998.

         Corporate  finance fees  increased  over 35-fold from $769  thousand in
1997 to $28.9  million  in 1998.  This  increase  was due to a shift in  capital
raising activities from public  underwritings to private placements,  as well as
increased  advisory,  merger, and acquisition  activities,  which generated $769
thousand in 1997, compared to $7.3 million in 1998.

         Principal sales credit revenue  increased 28% from $6.0 million in 1997
to $7.6 million 1998. This increase is a result of higher volumes of activity in
the Company's  Nasdaq trading  overall,  as well as increased  trading  activity
derived from the Company's  expansion of its equity sales and trading  personnel
and capabilities.

         Agency  commissions  increased  149% from $1.7  million in 1997 to $4.3
million  in  1998.  This  increase  was due to the  expansion  of the  Company's
institutional  listed equity  business  fostered by an increase in the number of
institutional  brokers,  an increase in listed equity trading  capabilities,  as
well as an increase in issuance of research reports covering  securities  listed
on national exchanges.

         Trading  and  investment  gains,  net of losses  contributed  to a 247%
larger net loss in 1998 compared to 1997. Net losses increased from $3.0 million
in 1997 to $7.5 million in 1998. This increase is attributed to larger corporate
securities  inventories in 1998,  specifically in the REIT sector. The Company's
largest 10 corporate  securities  positions  account for 26% of total assets and
66% of the Company's total corporate  securities  positions as of June 30, 1998.
The Company's  largest  losses in the second  quarter of 1998 are  attributed to
these positions and are more heavily  weighted in the REIT and mortgage  company
sectors.

         Asset management revenue increased by 113% from $1.1 million in 1997 to
$2.3 million in 1998.  The  increase was due  primarily to an increase in assets
under management,  which increased from $286 million as of June 30, 1997 to $865
million as of June 30, 1998.

         Interest,  dividends  and  other  revenue  increased  by 510% from $917
thousand in 1997 to $5.6 million in 1998.  This  increase is due  primarily to a
five-fold  increase in the Company's invested assets, net of liabilities at June
30, 1998 compared to June 30, 1997.

         Total  expenses  increased  33%  from  $33.6  million  in 1997 to $44.7
million 1998  primarily due to the Company's  growth in number of personnel (52%
increase in full-time  employees as of June 30, 1998 compared to June 30, 1997).
In addition to personnel  increases,  the  Company's  spending has  increased on
business promotion and investment banking efforts.

         Compensation and benefits  expense  increased 16% from $24.8 million in
1997 to $28.9 million in 1998.  The increase was due primarily to an increase in
the number of the Company's  personnel.  Compensation  and benefits expense as a
percentage  of total  revenues  decreased  from 66% to 50%.  This  decrease  was
attributable to a number of factors, including the change in revenue mix towards
asset  management  revenue and investment gains and  implementation  of the 1997
Plan,  which  includes  incentive   compensation  for  the  Company's  Executive
Officers.  The decrease in compensation as a percent of revenues was also due to
a reduction of accrued bonus  compensation in the first six months of 1998. This
compensation  adjustment  is  discussed  more fully in the Capital  Market Group
section on page 16 herein. Average employee headcount was 222 in the 2nd quarter
of 1997 compared to 327 in the 2nd quarter of 1998.


<PAGE>



RESULTS OF OPERATIONS

Three  months  ended June 30, 1998  compared to three months ended June 30, 1997
(Continued)

         Brokerage  and  clearance  expense  increased 84% from $897 thousand in
1997  to  $1.6  million  in  1998  due to the  increase  in  sales  and  trading
activities.  As a percentage of institutional  brokerage revenue,  brokerage and
clearance  expense  increased  from  11.7% in 1997 to  13.8%  in 1998,  due to a
greater  increase in the volume of listed  business  relative to the increase in
principal  transaction volume. Listed trading carries higher expenses related to
order execution than does principal transaction activity.

         Occupancy  and  equipment  expense  increased 32% from $679 thousand in
1997 to $899 thousand in 1998. This increase is due to additional  office leases
at the corporate  headquarters,  which began in May 1998,  and office  equipment
rental to accommodate its growth in personnel.

         Communications expense increased 57% from $559 thousand in 1997 to $877
thousand  in  1998.   This   increase   was  due   primarily   to  increases  in
telecommunications  expenses  resulting  from  the  increase  in  employees  and
expansion of facilities in 1998, and the enhancement of network technology.

         Interest  expense  increased  by 46% from $1.0  million in 1997 to $1.5
million in 1998, primarily due to increased margin interest expense,  which is a
result of increased securities position levels.

         Other expenses increased 94% from $5.6 million in 1997 to $10.9 million
in 1998.  This  increase  was due  primarily  to  increased  investment  banking
activity,   increased  expenses  associated  with  expanded  office  space,  and
increased business promotion expenses.

Six months ended June 30, 1998 compared to six months ended June 30, 1997

         Total  revenues  increased  88% from  $66.7  million  in 1997 to $125.3
million in 1998 due  primarily  to  increased  investment  banking  revenue  and
institutional brokerage revenue.

         Underwriting  revenue increased 50% from $42.6 million in 1997 to $64.0
million in 1998 but  decreased  as a  percentage  of  revenues  from 64% to 51%,
respectively.  This  increase in revenue was due primarily to an increase in the
number of the security  transactions  managed from 11 in 1997 to 21 in 1998, and
slightly  offset  by a  decrease  in the  average  size of the  capital  raising
transactions  in the first half of 1998,  from $137 million per  transaction  in
1997 to $102 million per  transaction  in 1998.  The increase was also offset by
reduced  FBRC  participation  in  some  co-managed  deals.  The  reduction  as a
percentage  of revenues was due  primarily to a shift in revenue mix from public
to non-public capital raising activities, and to a lesser extent to a shift from
investment banking to asset management revenues.

         Corporate  finance revenue  increased 241% from $9.6 million in 1997 to
$32.6  million in 1998.  This  increase  was due to a shift in  capital  raising
activities from public  underwritings  to private  placements,  and was somewhat
magnified by increased  advisory,  merger,  and  acquisition  activities,  which
generated $1.0 million in 1997, compared to $9.4 million in 1998.

         Principal  sales  credits  increased  30% from $12.9 million in 1997 to
$16.7 million 1998.  This increase is a result of higher  volumes of activity in
the Company's  Nasdaq trading  overall,  as well as increased  trading  activity
derived from the Company's  expansion of its equity sales and trading  personnel
and capabilities.

         Agency  commissions  increased  77% from $4.5  million  in 1997 to $8.0
million  in  1998.  This  increase  was due to the  expansion  of the  Company's
institutional  listed equity  business  fostered by an increase in the number of
institutional  brokers,  an increase in listed equity trading  capabilities,  as
well as an increase in issuance of research reports covering  securities  listed
on national exchanges.

         Trading  and  investment  gains,  net of losses,  contributed  to a 65%
larger loss in 1998 compared to 1997. Net losses  increased from $6.5 million in
1997 to $10.7  million in 1998.  This  increase is attributed to larger and more
concentrated corporate securities inventories in 1998,  specifically in the REIT
and  mortgage  company  sectors.  The  Company's  largest  losses  in  1998  are
principally from holding positions in stocks in

RESULTS OF OPERATIONS

Six months  ended June 30,  1998  compared  to six  months  ended June 30,  1997
(Continued)

which the  Company  has  acted in an  underwriting  capacity.  Net  losses  were
partially  offset  by an  increase  in net  gains  from  proprietary  investment
products.

         Asset management revenue increased by 189% from $1.9 million in 1997 to
$5.5 million in 1998.  The  increase was due  primarily to an increase in assets
under  management,  as  well  as an  increase  in  incentive  based  allocations
principally in the Company's  largest hedge fund,  which focuses its investments
in the financial services industry sector.

         Interest,  dividends  and  other  revenue  increased  by 444% from $1.7
million in 1997 to $9.2  million in 1998.  This  increase is due  primarily to a
five-fold  increase in the Company's invested assets, net of liabilities at June
30, 1998 compared to June 30, 1997.

         Total  expenses  increased  44%  from  $60.4  million  in 1997 to $87.0
million 1998  primarily due to the Company's  growth in number of personnel (52%
increase in full-time  employees as of June 30, 1998 compared to June 30, 1997).
In addition to personnel increases, the Company has been increasing expenditures
on business promotion and investment banking efforts.

         Compensation and benefits  expense  increased 29% from $44.5 million in
1997 to $57.2 million in 1998.  The increase was due primarily to an increase in
the number of the Company's  personnel.  Compensation  and benefits expense as a
percentage  of total  revenues  decreased  from 67% to 46%.  This  decrease  was
attributable to a number of factors, including the change in revenue mix towards
asset  management  revenue and investment gains and  implementation  of the 1997
Plan,  which  includes  incentive   compensation  for  the  Company's  Executive
Officers.  The decrease in compensation as a percent of revenues was also due to
a reduction of accrued bonus  compensation in the first six months of 1998. This
compensation  adjustment  is discussed  more fully in the Capital  Markets Group
section on page 16 herein.  Average employee  headcount for the six-month period
was 204 in 1997 compared to 308 in 1998.

         Brokerage and clearance expense increased 56% from $1.9 million in 1997
to $3.0 million in 1998 due to the increase in sales and trading activities.  As
a percentage of institutional brokerage revenue, brokerage and clearance expense
increased from 11.0% in 1997 to 12.1% in 1998, due to a greater  increase in the
volume of listed  business  relative to the  increase in  principal  transaction
volume.  Listed trading carries higher expenses  related to order execution than
does principal transaction activity.

         Occupancy and equipment expense increased 40% from $1.2 million in 1997
to $1.7 million in 1998.  This increase is due to additional  office leases,  an
increase in equipment  rental to  accommodate  its growth in  personnel,  and an
increase  in   depreciation   expense  due  to   acquisitions  of  computer  and
telecommunications equipment for expanded staff.

         Communications expense increased 71% from $995 thousand in 1997 to $1.7
million  in  1998.   This   increase   was  due   primarily   to   increases  in
telecommunications  expenses  resulting  from  the  increase  in  employees  and
expansion of facilities in 1998, and the enhancement of network technology.

         Interest  expense  increased  by 81% from $1.7  million in 1997 to $3.1
million in 1998, primarily due to increased margin interest expense,  which is a
result of increased securities position levels.

         Other  expenses  increased  102% from  $10.0  million  in 1997 to $20.3
million in 1998. This increase was due primarily to increased investment banking
activity,   increased  expenses  associated  with  expanded  office  space,  and
increased business promotion expenses.



<PAGE>



LIQUIDITY AND CAPITAL RESOURCES

         The Company has  historically  satisfied its  liquidity and  regulatory
capital needs through three primary sources: (1) internally generated funds; (2)
equity capital  contributions;  and (3) credit provided by the Company's  banks,
and its clearing broker and that broker's affiliates. The Company has frequently
required the use, and  reasonably  believes  that it may continue to require the
use, of temporary  subordinated  loans in  connection  with  regulatory  capital
requirements to support its underwriting activities.

         The Company completed its initial public offering in December 1997. Net
proceeds from the offering were $185  million.  After the offering,  the Company
made capital  contributions  of $73 million to FBRC,  distributed $54 million to
its S corporation  shareholders,  repaid $8.5 million on an outstanding  line of
credit,  invested $25 million in FBR Asset, made other investments in securities
of $6 million, made advances to affiliates of $7 million, and held the remaining
funds in short-term money market accounts. FBRC used $40 million of its existing
capital to repay its outstanding subordinated loans and retained the $73 million
contributed  by FBR for working  capital  purposes.  The  Company  has  employed
approximately  two-thirds of the IPO proceeds to date by making  investments  in
affiliated  investment  vehicles,  and  supporting  increased  underwriting  and
related trading activity without drawing on external lines of credit.

         The Company's  principal  assets consist of cash and cash  equivalents,
receivables from other broker-dealers, including its clearing broker, securities
held for trading  purposes,  and long-term  investments.  Long-term  investments
consist  primarily of investments in limited  partnerships  in which the Company
serves  as the  general  partner  and its  investment  in FBR-  Asset.  Although
investments  in  limited  partnerships  are  for the  most  part  illiquid,  the
underlying  investments  of such  partnerships  are mostly in  publicly  traded,
liquid debt and equity securities.

         As of June 30, 1998, the Company had liquid assets consisting primarily
of cash  and  cash  equivalents  of  $71.2  million.  Cash  equivalents  consist
primarily of money market mutual funds invested in debt  obligations of the U.S.
government.  The Company also had $138.0 million in marketable securities in its
trading  accounts.  FBRC has available  borrowing  capacity  (borrowing  against
security  positions)  from its clearing  broker of $71.6  million as of June 30,
1998. Due to the timing of an  underwriting  transaction on June 30, 1998,  FBRC
had a payable to an investment  banking client for the proceeds of a transaction
in the amount of $23.2 million and a corresponding  receivable from its clearing
broker for the same amount.

         Trading positions in two marketable securities, both corporate equities
of issuers  classified  as REITs,  accounted  for $57.6  million or 48.7% of the
Company's equity trading  securities  positions as of June 30, 1998. The largest
ten  marketable  corporate  securities  owned by the Company as of June 30, 1998
totaled  $90.9  million,  or 66%  of  the  Company's  total  marketable  trading
securities.  While  trading  positions  of  this  magnitude  decrease  available
regulatory capital of the Company's broker-dealer  subsidiary,  the Company does
not expect this to hinder FBRC's ability to underwrite securities offerings.

         FBRC, as a broker-dealer, is registered with the SEC and is a member of
the NASD.  As such,  it is  subject  to the  minimum  net  capital  requirements
promulgated by the SEC. FBRC's regulatory net capital has historically  exceeded
these minimum  requirements.  As of June 30, 1998, FBRC was required to maintain
minimum  regulatory  net capital of  approximately  $4.0 million,  and had total
regulatory  net  capital  of  approximately  $61.4  million  in  excess  of  its
requirement.  Regulatory net capital requirements increase when FBRC is involved
in  underwriting  activities  based  upon  a  percentage  of  the  amount  being
underwritten by FBRC.

       Other  broker-dealer  subsidiaries were in compliance with all applicable
regulatory capital adequacy requirements as of June 30, 1998.

       FBR has no material  long-term debt. As of June 30, 1998, the Company had
available a total of $25.0 million in two committed subordinated revolving loans
from its  clearing  broker and an  affiliate  of its  clearing  broker  that are
allowable for net capital purposes. Certain of the Company's principal employee-


<PAGE>



LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

shareholders  personally  guaranteed these  facilities.  The facilities have not
been used during 1998, and expire in July and October of 1998. The Company is in
process of renewing  the loan that  expired in July,  and will either  renew the
second  loan or seek  alternative  financing  from other  sources.  The  Company
characterizes  its  relationship  with its  lenders as very  good,  and does not
expect any impediments to obtaining credit, as needed, from available sources.

         The  Company  believes  that its  current  level of equity  capital and
committed lines of credit,  combined with funds anticipated to be generated from
operations and anticipated  additional lines of credit, are adequate to meet its
liquidity and regulatory capital requirements  associated with its broker-dealer
activities. The Company may, however, seek debt financing 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.  The Company's  policy is to
evaluate acquisition opportunities as they arise.

       The Company constantly reviews its capital needs and sources, the cost of
capital and return on equity,  and seeks strategies to provide favorable returns
on capital.  In evaluating the Company's  anticipated  capital needs and current
cash resources,  the Company's Board of Directors  authorized a share repurchase
program of up to 2.5 million shares of the Company's class A common stock. As of
July 31,  1998,  the Company had  repurchased  35,000  shares of stock at market
prices.

Risk Management

       FBR monitors its market and counter-party risk on a daily basis through a
number of control procedures designed to identify and evaluate the various risks
to which the Company is  exposed.  FBR has  established  various  committees  to
assess and to manage  risk  associated  with its  investment  banking  and other
activities.   The   committees   review,   among  other  things,   business  and
transactional  risks  associated  with potential  clients and  engagements.  The
Company  seeks to  control  the risks  associated  with its  investment  banking
activities  by review and approval of  transactions  by the relevant  committee,
prior to accepting an engagement or pursuing a material investment transaction.

         In  addition  to  the  risks   associated   with   investment   banking
transactions,  the Company may be exposed to significant after-market risks with
these  companies,  as FBR may hold  substantial  positions in the  securities of
these  companies  as  underwriter  or market  maker.  The Company  often acts as
principal in customer-related  transactions in financial instruments that expose
the Company to market risks. The Company also engages in proprietary trading and
arbitrage   activities  and  makes  dealer  markets  in  equity  securities  and
high-yield securities. These trading activities generally result in the creation
of  inventory  positions.   Position  and  exposure  reports  are  prepared  and
circulated to  management of the Company on a daily basis.  The Company seeks to
manage the exposure to market risks by establishing  position  limits,  and from
time to time may  limit  its net long or short  position  by  selling  or buying
similar instruments.

         The  Securities  and Exchange  Commission has developed new market risk
disclosure  rules.  The Company is required to adopt these rules with the filing
of its annual  report on Form 10-K for the year ended  December  31,  1998.  The
Company  has risk  management  policies  and  procedures  related to its trading
activities  designed to reduce its  exposure to market  risk.  The Company  will
adopt  additional  policies or  procedures  during 1998 that may be necessary to
meet  compliance with the new SEC rules;  however,  the Company will continue to
use other risk  management  measures,  such as trading limits and daily position
summary reports.

High Yield and Non-Investment Grade Debt Securities

       The Company underwrites, trades, invests, and makes markets in high-yield
corporate debt securities.  The Company also  syndicates,  trades and invests in
loans to and preferred  stock of below  investment  grade-rated  companies.  For
purposes of this  discussion,  non-investment  grade  securities  are defined as
securities or

<PAGE>


LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)


loans to  companies  rated BB+ or lower,  or  equivalent  ratings by  recognized
credit rating agencies, as well as non-rated securities or loans. Investments in
non-investment  grade securities generally involve greater risks than investment
grade securities due to the issuer's  creditworthiness  and the liquidity of the
market for such securities. High yield and other non-investment grade securities
are carried at market value and unrealized gains and losses for these securities
are reflected in the Company's Consolidated  Statements of Income. The Company's
portfolio  of such  securities  at  December  31,  1997 and June 30,  1998,  are
included in long positions and have an aggregate  market value of  approximately
$19.8 million and $24.1 million, respectively. The Company's portfolio may, from
time to time,  contain  concentrated  holdings of selected issues. The Company's
largest,  unhedged  non-investment  grade  position  was $5.7  million  and $4.5
million at December 31, 1997 and June 30, 1998, respectively.

Warrants

         In  connection  with  certain  capital  raising  transactions,  FBR has
received  and holds  warrants  for stock of the  issuing  corporation  generally
exercisable at the corporation's  respective  offering price. Due to the current
restrictions  on the warrants  and the  underlying  securities,  FBR carries the
warrants at a nominal value in its financial statements,  and will recognize any
potential,  future revenues and profits, if any, only when realized. FBR may use
a portion of these warrants as incentive  compensation for certain key employees
of the Capital Markets Group. As of July 31, 1998, FBR had received  warrants in
client companies as set forth below:
<TABLE>
<CAPTION>

                                                                                                  Expiration
                                                       Number of    Exercise      Closing Price     date of
                                                        Warrants      Price     on July 31, 1998   Warrants
                                                      -----------   ---------   ----------------  -----------
                                                      <C>           <C>         <C>               <C>
<S>
American Capital Strategies, Ltd...................      442,751      $15.00        $23.0000        08/29/02
Capital Automotive REIT............................    1,277,794       15.00         13.6875        02/12/03
Consolidation Capital Corporation..................    1,130,000       20.00         21.7500        11/25/01
East-West Bank.....................................      475,500       10.00        *10.0000        06/12/03
Local Financial Corporation........................      591,000       10.00         12.3750        09/08/02
Styling Technology Corporation.....................      101,500       12.00         20.0000        11/21/01
FBR Asset Investment Corporation...................      970,805       20.00        *18.3250        12/11/07
Resource Asset Investment Trust....................      141,667       15.00         18.5000        01/08/03

* Represents the market price of the underlying unregistered security in recent Rule 144a transaction trading.
</TABLE>


MATTERS RELATED TO THE COMPANY'S INFORMATION SYSTEMS:

         The Company's software and information systems are year 2000 compliant;
however,  the Company utilizes certain software and related  technologies of its
clearing  organization.  The Company expects that it will be indirectly affected
by the date change in the year 2000 as it relates to the systems of its clearing
organization.  The year 2000 issue  exists  because  many  computer  systems and
applications  currently use two-digit date fields to designate a year.  When the
century date change occurs,  date-sensitive systems will recognize the year 2000
as 1900, or not at all. This  inability to recognize or properly  treat the year
2000 may cause systems to process critical financial and operational information
incorrectly.  The Company's clearing  organization has a defined plan to address
and correct its year 2000 deficiencies. The Company does not expect to incur any
significant   expenditure  related  to  year  2000  problems  with  its  primary
information systems. However, any failure by the Company's clearing organization
to adequately  address the date change could have a material  adverse  effect on
the Company's financial condition and operations.

Item 3.  Changes in Information About Market Risk

         None.


<PAGE>



Part II.  Other Information

Item 1.  Legal Proceedings


         While the  Company is not  currently a defendant  or  plaintiff  in any
lawsuits  or  arbitrations,  many  aspects  of the  Company's  business  involve
substantial  risks of liability,  litigation and arbitration.  An underwriter is
exposed to potential  liability under federal and state  securities  laws, other
federal and state laws and court decisions,  including decisions with respect to
underwriters'  liability and limitation on  indemnification  of  underwriters by
issuers.  For example, a firm that acts as an underwriter may be held liable for
material  misstatements  or omissions of fact in a prospectus used in connection
with the  securities  being  offered or for  statements  made by its  securities
analysts or other personnel.

         If plaintiffs in any future suits against the Company were to prosecute
their claims successfully, or if the Company were to settle such suits by making
significant  payments to the  plaintiffs,  the Company's  operating  results and
financial  condition  could be materially  and adversely  affected.  The Company
carries  very  limited  insurance  that may  cover  only a  portion  of any such
payments.

         In  addition  to these  financial  costs  and  risks,  the  defense  of
litigation or arbitration  may divert the efforts and attention of the Company's
management and staff,  and the Company may incur  significant  legal expenses in
defending  such  litigation  and  arbitration.  This may be the case  even  with
respect to claims and litigation that management  believes to be frivolous,  and
the Company  intends to defend  vigorously any frivolous  claims against it. The
amount of time that  management and other employees may be required to devote in
connection  with the  defense  of  litigation  could be  substantial  and  might
materially  divert  their  attention  from  other  responsibilities  within  the
Company.

         The  Company  also  may  become  a  defendant  in  civil   actions  and
arbitrations  arising  out of its other  activities  as a  broker-dealer,  as an
investment adviser, in other business activities,  or as an employer.  There can
be no assurance that  substantial  payments in connection with the resolution of
disputed claims will not occur in the future.

         In addition,  the Company's charter documents allow  indemnification of
the Company's  officers,  directors and agents to the maximum  extent  permitted
under Virginia law. The Company intends to enter into indemnification agreements
with these persons. The Company has been and in the future may be the subject of
indemnification  assertions  under these  charter  documents  or  agreements  by
officers, directors or agents of the Company who are or may become defendants in
litigation.

Item 4.           Submission of Matters to a Vote of Security Holders

         Friedman,  Billings,  Ramsey Group,  Inc. held its Annual Meeting of
 Shareholders on June 18, 1998 at which shareholders took the following actions:

1.       The election of five directors nominated to serve until the next Annual
         Meeting,

2.       The  approval of an  amendment  to the 1997 Stock and Annual  Incentive
         Plan  increasing the number of Class A Common Stock available for grant
         under the Plan by 5 million  shares,  bringing the total number of such
         shares available for grant to 9,900,000, and

3.       The  ratification  of the  appointment  of Arthur  Andersen  LLP as the
         Company's independent public accountants for 1998.



<PAGE>


The  results  of the  voting in  connection  with the  preceding  items  were as
follows:

1.    Election of Directors: A total of 118,852,487 votes were received for this
      item.

                             For             Against         Abstain

Emanuel J. Friedman        118,714,357       138,130           -0-
Eric F. Billings           118,714,357       138,130           -0-              
W.Russell Ramsey           118,714,357       138,130           -0-
Wallace L. Timmeny         118,714,357       138,130           -0- 
Mark R. Warner             118,714,357       138,130           -0-

2.    Approval  of  Amendment  to 1997 Stock and Annual  Incentive  Plan A total
      of  115,318,597  votes were received for this item.

                             For             Against         Abstain

                           113,003,083     2,228,714          86,800

3.    Ratification  of the  Appointment of Arthur  Andersen LLP. A total of 
      118,852,487  votes were received for this item.

                             For             Against         Abstain

                           118,810,862        12,970          28,655


Item 6.  Exhibits and Reports on Form 8-K

         (a)       Exhibits
                   (27)    Financial Data Schedule

         (b)       Reports on Form 8-K
                   None.

                                   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.

   08/13/98                          By:    /s/ Eric Y. Generous
  ----------                             ---------------------------------------
     Date                              Eric Y. Generous, Chief Financial Officer
                                      (Principal Financial Officer),

   08/13/98                          By:    /s/ Kurt R. Harrington
  ----------                             ---------------------------------------
     Date                              Kurt R. Harrington, Treasurer (Principal
                                       Accounting Officer)


                                  EXHIBIT INDEX

EXHIBIT 27.01         Financial Data Schedule.

<PAGE>