Diamond Hill Investment Group, Inc. Reports Results for Third Quarter 2007

Company Release - 11/5/2007 4:15 PM ET

COLUMBUS, Ohio, Nov. 5 /PRNewswire-FirstCall/ -- Diamond Hill Investment Group, Inc. (Nasdaq: DHIL) today reported unaudited results for the quarter ended September 30, 2007. Assets under management increased by 42% to $4.4 billion compared to $3.1 billion at the end of the third quarter of 2006 while revenue of $10.7 million for the quarter increased by 61% compared to 2006. Performance incentive fees, which are volatile from period to period, were insignificant in both the third quarter of 2007 and 2006. Net income for the quarter was $2.65 million or $1.14 per diluted share compared to net income of $1.36 million or $0.61 per diluted share in 2006.

R. H. Dillon, president and chief investment officer, stated, "Our primary business objective is to produce excellent long-term investment returns for our clients. Over the past year, the investment returns in our investment strategies were mixed; however, it is important that we remain focused on long-term results and are pleased that all strategies with at least five years of investment results have outperformed their benchmarks over that period." James F. Laird, chief financial officer, stated, "Net new client investments in the first three quarters of 2007 were $600 million compared to $1.6 billion in 2006. We have continued to add resources to market into the wirehouse and broker dealer channels, and to maintain and grow our business in other distribution channels. Clearly growth in our business is affected by short- term investment results which have led to a significant reduction in net inflows so far in 2007."

                                 Three months ended September 30,
                                        2007           2006            Change
    Total revenue                  $10,701,341     $6,654,613            61 %
    Performance incentive fees           1,520              0            n.m
        Net operating income         3,533,490      2,021,159            75 %
        Net operating margin              33 %           30 %
    Investment return                  534,594        113,187           372 %
        Pre-tax income               4,068,084      2,134,346            91 %
    Net income                       2,648,293      1,362,245            94 %
    Earnings per share -
     diluted                             $1.14          $0.61            87 %
        Assets under management   $4.4 billion   $3.1 billion            42 %

                                  Nine months ended September 30,
                                        2007          2006             Change
    Total revenue                  $30,424,924    $18,483,689            65 %
    Performance incentive fees           5,817      2,509,875          (100%)
        Net operating income        10,042,315      5,321,201            89 %
        Net operating margin              33 %           29 %
    Investment return                  733,720        903,287           (19%)
        Pre-tax income              10,776,035      6,224,488            73 %
    Net income                       7,056,302      3,983,025            77 %
    Earnings per share -
     diluted                             $3.13          $1.81            73 %

Income taxes -- In the first nine months of 2007, non-qualified stock options and warrants were exercised which will result in a $22.7 million tax deduction but, in accordance with generally accepted accounting principles (GAAP), no compensation expense. Further, under GAAP, the company accrued a $3.7 million tax expense in the first nine months of 2007 despite the fact that the company will not pay income tax related to the first nine months of income as a result of the aforementioned tax deduction. Similarly, in future periods, the company will not pay income tax until cumulative pre-tax income in 2007, and future periods, exceeds the $22.7 million tax deduction described above.

About Diamond Hill:

Diamond Hill provides investment management services to institutions and financial intermediaries seeking to preserve and build capital. The firm currently manages mutual funds, separate accounts and private investment funds. For more information on Diamond Hill, visit http://www.diamond-hill.com.

SOURCE Diamond Hill Investment Group, Inc.

Contact: Investors, James F. Laird, Chief Financial Officer of Diamond Hill Investment Group, Inc., +1-614-255-3353, jlaird@diamond-hill.com
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