Past Quarterly Earnings

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Third Quarter 1999
Lehman Brothers Reports Earnings of $290 Million in Third Quarter, Up 92%

Posts Record Earnings Per Share of $2.20, and
Record Nine Month Earnings of $830 Million

NEW YORK, September 23, 1999 —
Lehman Brothers Holdings Inc. (NYSE: LEH) today reported net income of $290 million, or $2.20 per common share (diluted), for the third quarter ended August 31, 1999. Net income increased by 92 percent from the $151 million earned in the third quarter of 1998. Earnings per share increased by 100 percent, from $1.10 (diluted) in the year-earlier quarter. The current quarter's performance represented the highest quarterly earnings per share that Lehman Brothers has ever posted, surpassing the $2.12 per share earned in the fiscal 1998 second quarter.

For the first nine months of fiscal 1999, net income was a record $830 million, an increase of 25 percent from $662 million in net income for the first nine months of fiscal 1998.

"This continues to be a terrific year for Lehman Brothers, with another quarter of record performance," said Richard S. Fuld, Jr., Chairman and Chief Executive Officer. "The Firm is well on its way to having its most profitable year ever, a clear indication that our strategy of expanding key business franchises and broadening our international presence has been successful."

Mr. Fuld noted that the strong performance in revenues, operating margin, net income, and return on equity in the fiscal 1999 third quarter reflected the continuing shift in the Firm's business mix to high-return, franchise-based activities, particularly investment banking and equities, as well as significant growth in European operations.

Net revenues (total revenues less interest expense) for the third quarter were $1.356 billion, an increase of 46 percent from $930 million in the third quarter of fiscal 1998. Mr. Fuld noted that the quarter was among the best the Firm had ever posted in terms of net revenues.

For the first nine months of fiscal 1999, net revenues were a record $3.929 billion, an increase of 14 percent from $3.448 billion in the fiscal 1998 first nine months.

Non-interest expenses for the third quarter were $939 million. Compensation and benefits as a percentage of net revenues remained at 50.7 percent for the 18th successive quarter. Nonpersonnel expenses were $251 million, the same as in the previous fiscal year's third quarter, despite continued investments in a number of key strategic businesses and in Year 2000 technology initiatives.

For the first nine months of fiscal 1999, non-interest expenses were $2.737 billion.

Nonpersonnel expenses were $745 million, compared with $741 million in the first nine months of fiscal 1998.

For the fiscal 1999 third quarter, the Firm's pre-tax margin was 30.8 percent, up from 22.3 percent in the third quarter of fiscal 1998. Return on common equity was 22.1 percent for the quarter ended August 31, 1999, compared with 13 percent a year ago. For the first nine months of fiscal 1999, the Firm's pre-tax margin was 30.3 percent, compared with 27.8 percent for the first nine months of fiscal 1998; for the same period, return on common equity was 21.9 percent, compared with 20.1 percent in fiscal 1998. (Return on common equity for the nine months of both 1999 and 1998 is calculated using net income before adjusting for special preferred dividends.)

As of August 31, 1999, Lehman Brothers stockholders' equity and trust preferred securities were $6.7 billion and total capital (stockholders' equity, trust preferred, and long-term debt) was $36.5 billion. Book value per common share was $42.91.

As a result of the level of earnings Lehman Brothers attained in the first nine months of 1999 and 1998, earnings per share calculations include the impact of a special preferred dividend of $50 million expected to be paid to American Express Company and to Nippon Life Insurance Company at year end. American Express and Nippon Life are entitled to receive an annual non-cumulative preferred dividend equal to 50 percent of the amount by which the Firm's net income for the full fiscal year exceeds $400 million, up to a maximum of $50 million per year, through mid-year 2002. The special preferred dividend, while not payable until year end, was accrued in the second quarter of fiscal 1999.

Lehman Brothers is a global investment bank with leadership positions in corporate finance, advisory services, municipal finance and fixed income and equity sales, trading and research. Lehman Brothers serves the financial needs of corporate, government and institutional clients, and high-net-worth individuals through offices in major financial centers worldwide.

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Financial Statements Attached

LEHMAN BROTHERS HOLDINGS INC.
SELECTED STATISTICAL INFORMATION
(Preliminary and Unaudited)
(Dollars in millions, except per share data)
  Quarters Ended
  8/31/99 5/31/99 2/28/99 11/30/98 8/31/98 5/31/98
 
Income Statement              
Net Revenues
$1,356
$1,455
$1,118
$665
$930
$1,473
  
Non-Interest Expenses:  
         
    Compensation and Benefits
688
738
567
337
472
747
    Nonpersonnel Expenses
251
251
242
234
251
250
Net Income
290
330
211
74
151
324
Net Income Applicable to
Common Stock
279
268
198
62
139
268
 
Earnings per Common Share              
    Basic
$2.30
$2.19
$1.62
$0.51
$1.15
$2.22
 
    Diluted
$2.20
$2.09
$1.57
$0.51
$1.10
$2.12
  
               
Financial Ratios (%)              
Return on Common Equity
(annualized) (a)
22.1
26.3
17.2
5.6
13.0
29.9

Return on Common Equity
(annualized) (b)
22.1
22.1
17.2
5.6
13.0
25.2
 
Pretax Operating Margin
30.8
32.0
27.6
14.1
22.3
32.4
 
Compensation & Benefits/
Net Revenues
50.7
50.7
50.7
50.7
50.7
50.7

Effective Tax Rate
27.0
27.0
31.0
20.5
27.0
32.0
 
               
Balance Sheet              
Total Assets
$203,000
$191,543
$179,305
$153,890
$191,074
$179,067
 
Total Assets Excluding
Matched Book (c)
137,000
128,822
121,881
111,509
133,787
130,140
 
Common Stockholders' Equity
5,192
4,935
4,731
4,505
4,391
4,326
 
Total Stockholders' Equity + Trust
Preferred Securities
6,660
6,453
5,964
5,413
5,349
5,084
  
Total Capital (d)
36,517
34,915
32,682
32,754
33,730
31,929
 
Book Value per Common Share(e)
42.91
40.58
38.72
37.06
36.35
35.93
 
Other Data(#s)
              
Employees
8,729
8,511
8,695
8,873
8,839
8,387
 
Common Stock Outstanding
120,070,089
119,700,830
118,977,746
113,657,877
116,673,240
117,114,203
 
Average Shares              
    Basic
121,317,358
122,144,018
121,942,892
120,726,366
121,523,227
120,633,663
 
    Diluted(f)
129,063,197
130,364,705
125,776,277
122,527,953
126,222,483
126,301,259
 
               
(a) Return on common equity calculated using net income before adjusting for special preferred dividends.
(b) Return on common equity calculated using net income after adjusting for special preferred dividends.
(c) Matched book is defined as the lower of securities purchased under agreements to resell or securities sold under agreements to repurchase.
(d) Total capital includes long-term debt and stockholders' equity, as well as Trust Preferred Securities, where applicable.
(e) This calculation includes restricted stock units granted under the Lehman Stock Award Programs included in stockholders' equity.
(f) For the quarters ended August 31 and May 31, 1999, the assumed conversion of Series A and B Convertible Preferred Stock into 2,607,680 and 2,912,505 common shares had the effect of decreasing diluted earnings per share by $0.01.

LEHMAN BROTHERS HOLDINGS INC.
CONSOLIDATED STATEMENT OF INCOME
(Preliminary and Unaudited)
(In millions, except per share data)
Three Months Ended

August 31 1999 August 31 1998 Percentage of Dollar Change Inc/(Dec)
Revenues:
     Principal transactions $493
$131
*
     Investment banking 498 493 1%  
     Commissions 151 137 10%
     Interest and dividends 3,590 5,254 (32)%
   Other 33 (52) *
             Total revenues 4,765 5,963 (20)%
   Interest expense 3,409 5,033 (32)%
             Net revenues 1,356 930 46%
Non-interest expenses:
   Compensation and benefits 688 472 46%
   Technology and communications 79 83 (5)%
   Brokerage and clearance 56 63 (11)%
   Business development 33 27 22%
   Occupancy 29 29
   Professional fees 31 29 7%
   Other 23 20 15%
             Total non-interest expenses 939 723 30%
Income before taxes and dividends on
trust preferred securities		 417 207 *
   Provision for income taxes 112 56 *
   Dividends on trust preferred securities 15     *
Net income $290 $151 92%
Net income applicable to common stock $279 $139 *

Earnings per common share
   Basic $2.30 $1.15
   Diluted $2.20 $1.10


* Denotes equal to or greater than 100 percent.

LEHMAN BROTHERS HOLDINGS INC.
CONSOLIDATED STATEMENT OF INCOME
(Preliminary and Unaudited)
(Dollars in millions, except per share data)

  Nine Months Ended
   
August 31 1999 August 31 1998 Percentage of Dollar Change Inc/(Dec)    
Revenues:          
   Principal transactions $1,682 $1,142 47%        
   Investment banking 1,286 1,336 (4)%      
   Commissions 465 378 23%      
   Interest and dividends 10,798 13,235 (18)%      
   Other 57 6 *      
            Total revenues 14,288 16,097 (11)%      
   Interest expense 10,359 12,649 (18)%      
            Net revenues 3,929 3,448 14%      
Non-interest expenses:          
   Compensation and benefits 1,992 1,749 14%      
   Technology and communications 242 243        
   Brokerage and clearance 175 183 (4)%      
   Business development 91 79 15%      
   Occupancy 85 87 (2)%      
   Professional fees 82 78 5%      
   Other 70 71 (1)%      
            Total non-interest expenses 2,737 2,490 10%      
Income before taxes and dividends on
trust preferred securities		 1,192 958 24%      
   Provision for income taxes 334 296 13%      
   Dividends on trust preferred securities 28     *      
Net income $830 $662 25%      
Net income applicable to common stock $745 $587 27%      

         
Earnings per common share          
   Basic $6.12 $4.86        
   Diluted $5.86 $4.67        


* Denotes equal to or greater than 100 percent.