Repurchase Agreement. On May 18, 2009, we entered into a stock repurchase agreement (the "Repurchase Agreement") with Friedman, Billings, Ramsey Group, Inc., d/b/a Arlington Asset Investment Corp. ("Arlington Asset"), and, Arlington Asset's direct, wholly-owned subsidiary, FBR TRS Holdings, Inc. ("FBR TRS Holdings"), pursuant to which, among other things, the Company will repurchase a total of 16,667,000 shares of the Company's common stock directly from FBR TRS Holdings (the "Repurchase Transaction"). The repurchase from FBR TRS Holdings was a privately negotiated transaction, and the Company will pay a purchase price of $4.35 per share, for an aggregate purchase price of $72,501,450. The terms of the Repurchase Agreement require the closing of the repurchase to occur on or prior to June 2, 2009, subject to customary closing conditions and the execution of certain agreements. Assuming the closing of the Repurchase Transaction, FBR TRS Holdings will hold 16,666,049 shares of the Company's common stock, representing approximately 39% of the outstanding shares of the Company's common stock after the repurchase.

After the Repurchase Transaction, we believe that our existing cash and cash equivalents balances totaling $135 million after the transaction, comprised primarily of investments in money market funds investing in short term U.S. Treasury securities, cash flows from operations, other sources of liquidity and execution of our financing strategies will be sufficient to meet our cash requirements. We believe we will be able to continue to obtain short term financing, such as margin financing and temporary subordinated financing, in amounts and at interest rates consistent with our financing objectives. We will, however, continue to consider our ongoing capitalization alternatives and may seek debt or equity financings, in public or private transactions, to provide capital for corporate purposes and/or strategic business opportunities.

Under the Repurchase Agreement, Arlington Asset and FBR TRS Holdings have agreed, with respect to the shares FBR TRS Holdings owned as of the record date for the Company's next Annual Meeting of Shareholders to be held on June 4, 2009 and that are to be repurchased, to provide certain of our designated representatives with an irrevocable proxy to vote such shares "FOR" the election of each nominee for director recommended by the Company's Board of Directors (the "Board") and "FOR" each other recommendation of the Board on other matters to be voted on at such meeting.

Pursuant to the Repurchase Agreement, Arlington Asset has agreed to waive all registration rights it may have with respect to our next follow-on equity offering so long as such offering occurs within one year after the date of the Repurchase Agreement, provided that, if the aggregate public offering price of the shares of our common stock to be registered and sold in the follow-on offering exceeds $90 million, then Arlington Asset will have the option to elect either (a) to sell the number of shares up to 50% of the shares registered and sold in that follow-on offering in excess of $90 million, or (b) sell up to 100% of the shares to be sold pursuant to the underwriters' over allotment option in that follow-on offering. Further, in addition to agreeing to a customary lock up restriction in connection with our next equity offering, Arlington Asset has agreed not to sell any of its shares of our common stock prior to our next equity offering, unless we have not filed a registration statement with respect to such an offering within 45 days of the Repurchase Date or such sale is at a price per share at least equal to $4.35.

In the Repurchase Agreement, we have agreed to file a shelf registration statement at Arlington Asset's request in the event that Arlington Asset sells, or proposes to sell, at least 400,000 shares to a third party (a "Selling Shareholder"). The shelf registration statement would include such number of shares of our common stock held by Arlington Asset after the Repurchase Transaction (the "Remaining Shares") as are held by one or more Selling Shareholders and may also include any shares held by Arlington Asset. We are obligated to file such shelf registration statement as soon as reasonably practicable after Arlington Asset's request and in any event no later than 90 days after the request. In certain circumstances, Arlington Asset may request that we file multiple registration statements relating to the Remaining Shares but in no event may Arlington Asset request more than six registration statements.

We have also agreed following the closing of the Repurchase Transaction to cooperate diligently and in good faith with Arlington Asset, if requested, to facilitate the sale of the Remaining Shares, in whole or in part, to prospective purchasers, subject to the terms and conditions set forth in the Repurchase Agreement.

The Company's proxy statement related to the Annual Meeting of Shareholders to be held on June 4, 2009 filed with the SEC will be amended to reflect the events described herein.

In addition, we agreed to enter into the following agreements in connection with the closing of the Repurchase Transaction, the material terms of which are described below:

Amended and Restated Voting Agreement. We agreed to enter into the amended and restated voting agreement with Arlington Asset, FBR TRS Holdings, Forest Holdings (ERISA) LLC ("Forest ERISA"), and Forest Holdings LLC ("Forest" and, together with Forest ERISA, "Crestview"), which agreement will amend and restate the Voting Agreement, dated as of July 20, 2006 (the "Voting Agreement"), by and between the Company, Arlington Asset, FBR TRS Holdings, and Crestview. The material terms of the amended provisions and certain new provisions are as follows:

• the provision giving FBR TRS Holdings the right to remove and replace independent directors will be amended to be the right of the Board, with such . . .

In connection with the closing of the Repurchase Transaction, the following agreements will be terminated, the material terms of which are described below:

Corporate Agreement. In connection with our July 2006 private offering, we entered into a corporate agreement with Arlington Asset pursuant to which, among other things, we granted to Arlington Asset a continuing option to purchase, through FBR TRS Holdings, additional shares of our common stock. In addition, the corporate agreement contains indemnification and contribution provisions pursuant to which Arlington Asset agreed to indemnify us against any and all liabilities and claims relating to the businesses contributed to us prior to completion of our 2006 private offering and claims arising out of any breach by Arlington Asset of any of its obligations under the corporate agreement. We also had agreed to indemnify Arlington Asset and related persons against any and all liabilities and claims arising out any breach by us of any of our obligations under the corporate agreement. In 2008, we did not receive or make any payments pursuant to the indemnification and contribution provisions. The corporate agreement also provided certain guidelines for the pursuit of corporate opportunities identified by directors serving both on our Board and the Board of Arlington Asset.

Services Agreement. In connection with our July 2006 private offering, we entered into a services agreement with Arlington Asset pursuant to which we provide, or cause one or more of our subsidiaries to provide, to Arlington Asset certain services for fees based on actual costs incurred by us and our subsidiaries in providing the services. Similarly, Arlington Asset agreed to provide to us under the same services agreement certain services for fees based on actual costs incurred by Arlington Asset and its subsidiaries in providing the services.

Trademark License Agreement. In connection with our July 2006 private offering, we entered into a trademark license agreement with Arlington Asset, pursuant to which Arlington Asset granted to us a non-exclusive, royalty-free license to use the names "Friedman Billings Ramsey" and "FBR" and the related trademarks in the operation of our business. Under this agreement, we have the right to use on a royalty-free basis the "Friedman Billings Ramsey" and "FBR" names and related trademarks for so long as Arlington Asset beneficially owns at least 5% of our outstanding capital stock.

Governance Agreement. In connection with our July 2006 private offering, Arlington Asset and FBR TRS Holdings entered into a governance agreement with Crestview. The governance agreement provides Crestview with, among other things, customary tag-along sale rights after the expiration of a one-year lock-up period beginning on the date that our 2006 private offering was completed. During the lock-up period, neither Crestview nor FBR TRS Holdings may transfer any shares of our common stock it owns except in certain specified circumstances. Crestview also agreed in the governance agreement that upon the expiration of Crestview's lock-up period, Arlington Asset and its affiliates would have a right of first offer with respect to any shares of our common stock that Crestview intends to sell, other than sales in a public offering, pursuant to Rule 144 under the Securities Act (except in a privately negotiated sale to a known counter-party) or to certain permitted transferees, and a right of first refusal with respect to sales by Crestview of any shares of our common stock it holds to certain entities that we have identified.

In connection with the Repurchase Transaction, the Company announced that Mr. John T. Wall would not stand for reelection to the Board at the Company's Annual Meeting of Shareholders to be held on June 4, 2009. Arlington Asset has designated Mr. Ralph S. Michael, III, as director nominee standing for election at the annual meeting of shareholders, who will replace Mr. Wall as a director if elected. Mr. Wall will continue to serve as a director of the Company through the end of his current term.

On May 18, 2009, the Company issued a press release announcing the Repurchase Transaction. A copy of the press release is attached as Exhibit 99.1.

Item 9.01 Exhibits.




Exhibit 10.1    Stock Repurchase Agreement, dated as of May 18, 2009, by and among
                the Registrant, Friedman, Billings, Ramsey Group, Inc. (d/b/a
                Arlington Asset Investment Corp.), and FBR TRS Holdings, Inc.

Exhibit 10.2    Form of Amended and Restated Voting Agreement by and among the
                Registrant, Friedman, Billings, Ramsey Group, Inc. (d/b/a Arlington
                Asset Investment Corp.), FBR TRS Holdings, Inc., Forest Holdings
                (ERISA) LLC, and Forest Holdings LLC

Exhibit 10.3    Form of Transition Services Agreement by and between the Registrant
                and Friedman, Billings, Ramsey Group, Inc. (d/b/a Arlington Asset
                Investment Corp.)

Exhibit 10.4    Form of Assignment and Assumption Agreement by and between the
                Registrant and Friedman, Billings, Ramsey Group, Inc. (d/b/a
                Arlington Asset Investment Corp.)

Exhibit 10.5    Form of Trademark and Copyright Assignment by and between the
                Registrant and Friedman, Billings, Ramsey Group, Inc. (d/b/a
                Arlington Asset Investment Corp.)

Exhibit 10.6    Form of Domain Name Assignment by and between the Registrant and
                Friedman, Billings, Ramsey Group, Inc. (d/b/a Arlington Asset
                Investment Corp.)

Exhibit 10.7    Form of Trademark License Agreement by and between the Registrant
                and Friedman, Billings, Ramsey Group, Inc. (d/b/a Arlington Asset
                Investment Corp.)

Exhibit 99.1    FBR Capital Markets Corporation Press Release dated May 18, 2009