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FirstCity Financial Corporation Reports Second Quarter 2010 Results

The FirstCity Financial Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4413

Cautionary Statement Regarding Forward-Looking Statements

FirstCity may from time to time make written or oral forward-looking statements, including statements contained in this press release, FirstCity's filings with the Securities and Exchange Commission ("SEC"), in its reports to stockholders and in other FirstCity communications. These statements relate to FirstCity's or management's intentions, hopes, beliefs, expectations, representations, projections, plans or predictions of the future and may be deemed to be forward-looking statements under the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. The forward-looking statements in this press release are based upon management's beliefs, assumptions and expectations of the Company's future operations and economic performance, taking into account currently available information. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties, some of which are not currently known to us. Actual events or results may differ from those expressed or implied in any such forward-looking statements as a result of various factors, including FirstCity's continued need for financing; availability of FirstCity's credit facilities; FirstCity's ability to obtain additional financing from Bank of Scotland or any other lender; and other risk factors and other risks that are described from time to time in the Company's filings with the SEC including but not limited to its annual reports on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on Form 8-K, filed with the SEC and available through the Company's website, which contain a more detailed discussion of the Company's business, including risks and uncertainties that may affect future results. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. Information in this press release may be superseded by more recent information or statements, which may be disclosed in later press releases, subsequent filings with the SEC or otherwise. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or to reflect any change in events, conditions or circumstances on which any such forward-looking statements are based, in whole or in part.

 
FirstCity Financial Corporation
Summary of Operations
(Dollars in thousands, except per share data)
(Unaudited)
         
  Three Months Ended June 30, Six Months Ended June 30,
  2010 2009 2010 2009
Revenues:        
Finance and Servicing:        
Servicing fees  $ 1,743  $ 2,403  $ 3,746  $ 4,795
Income from Portfolio Assets  14,622  14,077  26,085  23,120
Gain on sale of SBA loans held for sale, net  163  610  163  610
Gain on sale of investment security  3,250  —  3,250  —
Interest income from SBA loans  313  295  581  641
Interest income from loans receivable - affiliates  773  939  1,727  1,862
Interest income from loans receivable - other  229  364  361  793
Other income  1,565  1,118  2,696  1,998
   22,658  19,806  38,609  33,819
Manufacturing, Railroad and Coal Mine:        
Operating revenues - manufacturing  6,107  —  10,466  —
Operating revenues - railroad  1,192  705  2,457  1,452
Operating revenues - coal mine  13,100  —  13,100  —
Other   4  150  4  1,070
   20,403  855  26,027  2,522
Total revenues  43,061  20,661  64,636  36,341
Costs and expenses:        
Finance and Servicing:        
Interest and fees on notes payable to banks and other  3,334  3,125  6,376  6,134
Interest and fees on note payable to affiliate  400  444  792  877
Salaries and benefits  6,001  5,796  11,072  10,607
Provision for loan and impairment losses  2,625  677  4,327  1,783
Asset-level expenses  2,103  1,417  3,724  2,654
Other  3,306  1,903  6,502  4,949
   17,769  13,362  32,793  27,004
Manufacturing, Railroad and Coal Mine:        
Cost of revenues and operating costs - manufacturing  5,952  —  10,788  —
Cost of revenues and operating costs - railroad  627  535  1,233  1,026
Cost of revenues and operating costs - coal mine  13,295  —  13,295  —
   19,874  535  25,316  1,026
Total costs and expenses  37,643  13,897  58,109  28,030
Earnings before other revenue and income taxes  5,418  6,764  6,527  8,311
Equity in earnings of unconsolidated subsidiaries  1,816  1,198  4,045  1,052
Gain on business combinations  4,838  1,455  5,729  1,455
Earnings before income taxes  12,072  9,417  16,301  10,818
Income tax expense  1,205  440  719  849
Net earnings  10,867  8,977  15,582  9,969
Less: net income attributable to noncontrolling interests  2,802  1,231  7,416  1,579
Net earnings attributable to FirstCity  $ 8,065  $ 7,746  $ 8,166  $ 8,390
         
Basic earnings per common share are as follows:        
Net earnings attributable to FirstCity stockholders   $ 0.81  $ 0.79  $ 0.82  $ 0.85
Weighted average common shares outstanding  10,009  9,832  10,000  9,832
         
Diluted earnings per common share are as follows:        
Net earnings attributable to FirstCity stockholders   $ 0.80  $ 0.76  $ 0.81  $ 0.84
Weighted average common shares outstanding  10,117  10,135  10,101  9,983
         
Selected Balance Sheet Data
(Dollars in thousands)
         
  June 30, 2010 December 31, 2009    
  (Unaudited)      
Cash and cash equivalents  $ 50,573  $ 80,368    
Restricted cash  1,641  1,364    
Earning assets:        
Portfolio Asset Acquisition and Resolution assets:        
Domestic   253,784  225,406    
Latin America   40,161  41,248    
Europe   47,573  57,888    
Special Situations Platform assets   46,162  41,688    
Service fees receivable and other assets  26,080  17,112    
Total assets  $ 465,974  $ 465,074    
         
Notes payable to banks and other  $ 305,561  $ 305,888    
Note payable to affiliate  7,760  7,838    
Other liabilities  30,099  26,077    
Total liabilities  343,420  339,803    
Total equity  122,554  125,271    
Total liabilities and equity  $ 465,974  $ 465,074    
 
 
FirstCity Financial Corporation
Supplemental Information
(Dollars in thousands)
(Unaudited)
         
  Three Months Ended June 30, Six Months Ended June 30,
  2010 2009 2010 2009
Summary Operating Statement Data for Each Segment        
Portfolio Asset Acquisition and Resolution segment:        
Revenues  $ 21,813  $ 18,969  $ 36,535  $ 32,266
Equity in net earnings of unconsolidated subsidiaries  10  1,840  1,193  855
Gain on business combinations  —  1,455  891  1,455
Costs and expenses  (13,123)  (9,805)  (23,249)  (20,178)
Operating contribution before provision for loan and impairment losses  8,700  12,459  15,370  14,398
Provision for loan and impairment losses, net  2,057  (290)  3,158  816
Net income attributable to noncontrolling interests  (1,595)  (1,611)  (6,071)  (1,528)
Operating contribution, net of direct taxes   $ 5,048  $ 11,138  $ 6,141  $ 12,054
         
Special Situations Platform segment:        
Revenues  $ 21,202  $ 1,575  $ 28,012  $ 3,913
Equity in earnings (loss) of unconsolidated subsidiaries  1,806  (642)  2,852  197
Gain on business combinations  4,838  —  4,838  —
Costs and expenses  (20,808)  (1,478)  (27,210)  (2,887)
Operating contribution before provision for loan and impairment losses  7,038  (545)  8,492  1,223
Provision for loan and impairment losses  568  967  1,169  967
Net loss (income) attributable to noncontrolling interests  (1,207)  380  (1,345)  (51)
Operating contribution (loss), net of direct taxes   $ 5,263  $ (1,132)  $ 5,978  $ 205
         
  Three Months Ended June 30, Six Months Ended June 30,
Portfolio Asset Acquisition and Resolution segment: 2010 2009 2010 2009
Revenues and equity in earnings of investments by region:      
Domestic  $ 15,828  $ 15,785  $ 24,209  $ 25,518
Latin America  2,908  4,355  4,693  5,274
Europe  3,087  661  8,826  2,313
Canada  —  8  —  16
Total  $ 21,823  $ 20,809  $ 37,728  $ 33,121
         
Revenues and equity in earnings of investments by source:      
Equity in earnings of unconsolidated subsidiaries  $ 10  $ 1,840  $ 1,193  $ 855
Income from Portfolio Assets  14,622  14,077  26,085  23,120
Servicing fees  1,743  2,403  3,746  4,795
Gain on Sale of Investment Securities  3,250  —  3,250  —
Gain on sale of SBA loans held for sale, net  163  610  163  610
Interest income from SBA loans  313  295  581  641
Interest income from loans receivable - affiliates  459  553  936  1,089
Interest income from loans receivable - other  —  207  —  414
Other  1,263  824  1,774  1,597
Total  $ 21,823  $ 20,809  $ 37,728  $ 33,121
         
Special Situations Platform segment:        
Revenues and equity in earnings of investments by source:      
Equity in earnings (loss) of unconsolidated subsidiaries  $ 1,806  $ (642)  $ 2,852  $ 197
Interest income from loans receivable  543  544  1,152  1,152
Operating revenue - railroad  1,192  705  2,457  1,452
Operating revenue - manufacturing  6,107  —  10,466  —
Operating revenue - coal mine  13,100  —  13,100  —
Other  260  326  837  1,309
Total  $ 23,008  $ 933  $ 30,864  $ 4,110
         
Number of personnel at period end:        
Domestic, Portfolio Asset Acquisition and Resolution segment  89  82    
Domestic, Special Situations Platform segment  29  25    
Latin America  118  127    
Corporate  30  31    
Total personnel   266  265    
 
 
FirstCity Financial Corporation
Supplemental Information
(Dollars in thousands)
(Unaudited)
                 
Portfolio Purchases and Other Investments:
               FirstCity   
  Portfolio Purchases    FirstCity   Investment   
       Latin     FirstCity   Investment   in Special   
  Domestic  Europe   America   Total   Investment   in Other   Situations   Total 
2010                
2nd Quarter  $ 141,566  $ —  $ —  $ 141,566  $ 28,122  $ 14,482  $ 8,107  $ 50,711
1st Quarter  18,114  —  —  18,114  14,605  9,005  4,790  28,400
Total Year 2010  $ 159,680  $ —  $ —  $ 159,680  $ 42,727  $ 23,487  $ 12,897  $ 79,111
2009                
4th Quarter  $ 14,608  $ —  $ —  $ 14,608  $ 13,188  $ 5,903  $ 3,370  $ 22,461
3rd Quarter  48,659  —  —  48,659  21,000  2,403  3,481  26,884
2nd Quarter  67,085  —  —  67,085  48,559  19,149  3,164  70,872
1st Quarter  70,238  —  —  70,238  64,907  6,418  2,400  73,725
Total Year 2009  $ 200,590  $ —  $ —  $ 200,590  $ 147,654  $ 33,873  $ 12,415  $ 193,942
Total Year 2008  $ 64,394  $ 1,823  $ 23,097  $ 89,314  $ 72,307  $ 33,007  $ 19,906  $ 125,220
Total Year 2007  $ 121,679  $ 23,199  $ 69,455  $ 214,333  $ 126,714  $ 10,476  $ 11,530  $ 148,720
                 
Portfolio Asset Acquisition and Resolution segment:  
        Three Months Ended June 30, Six Months Ended June 30,  
        2010 2009 2010 2009  
Aggregate purchase price of portfolios acquired:            
Acquisition partnerships          
Domestic        $ 141,566  $ 67,085  $ 159,680  $ 137,323  
Latin America        —  —  —  —  
Europe        —  —  —  —  
Total        $ 141,566  $ 67,085  $ 159,680  $ 137,323  
                 
Historical acquisitions of Portfolios - annual:      Purchase Price   FirstCity's Investment       
First six months of 2010    $ 159,680  $ 42,727      
2009        200,590  147,654      
2008        89,314  72,307      
2007        214,333  126,714      
2006        296,990  144,048      
2005        146,581  71,405      
                 
        June 30, 2010 December 31, 2009      
Portfolio acquisition and resolution assets by region:            
Domestic        $ 253,784  $ 225,406      
Latin America        40,161  41,248      
Europe        47,573  57,888      
Total        $ 341,518  $ 324,542      
                 
                 
Special Situations Platform segment:          
         Total  FirstCity Denver's Investment  
Historical investments - annual:      Investment  Debt Equity Total  
First six months of 2010    $ 13,416  $ 8,650  $ 4,247  $ 12,897  
2009        20,058  12,023  392  12,415  
2008        28,750  16,650  3,256  19,906  
2007        22,314  5,630  5,900  11,530  
 
 
FirstCity Financial Corporation
Supplemental Information
(Dollars in thousands)
(Unaudited)
         
  Three Months Ended June 30, Six Months Ended June 30,
  2010 2009 2010 2009
Analysis of Equity Investments        
FirstCity's average investment:        
Domestic, Portfolio Asset Acquisition and Resolution segment  $ 19,041  $ 13,928  $ 16,599  $ 14,366
Domestic, Special Situations Platform segment  3,921  1,529  3,095  1,329
Latin America  17,164  17,484  17,299  17,783
Europe  6,187  12,754  7,199  12,989
Europe-Servicing subsidiaries  25,599  22,596  25,415  22,356
Latin America-Servicing subsidiaries  1,863  2,929  2,182  2,960
Total  $ 73,775  $ 71,220  $ 71,789  $ 71,783
         
FirstCity's share of equity earnings (losses):        
Domestic, Portfolio Asset Acquisition and Resolution segment  $ (95)  $ 515  $ 37  $ 516
Domestic, Special Situations Platform segment  1,806  (642)  2,852  197
Latin America  165  1,391  45  (253)
Europe  (345)  227  (965)  979
Europe-Servicing subsidiaries  378  (89)  2,801  80
Latin America-Servicing subsidiaries  (93)  (204)  (725)  (467)
Total  $ 1,816  $ 1,198  $ 4,045  $ 1,052
         
Selected Other Data:        
Average investment in consolidated portfolio assets and loans receivable:        
Domestic, Portfolio Asset Acquisition and Resolution segment  $ 225,098  $ 213,933  $ 215,904  $ 190,798
Domestic, Special Situations Platform segment  28,785  30,344  28,366  29,557
Latin America  18,393  19,183  18,438  19,413
Europe  15,824  15,644  17,256  14,196
Canada  —  175  —  196
Total  $ 288,100  $ 279,279  $ 279,964  $ 254,160
         
Income from consolidated portfolio assets and loans receivable:      
Domestic, Portfolio Asset Acquisition and Resolution segment  $ 11,586  $ 14,218  $ 19,492  $ 22,990
Domestic, Special Situations Platform segment  543  544  1,152  1,152
Latin America  1,058  1,111  1,636  1,887
Europe  2,913  405  6,637  981
Canada  —  8  --   16
Total  $ 16,100  $ 16,286  $ 28,917  $ 27,026
         
Servicing fee revenues:        
Domestic partnerships:        
Servicing fee revenue  $ 74  $ 501  $ 295  $ 1,031
Average servicing fee  2.9% 5.0% 3.7% 7.2%
Latin American partnerships:        
Servicing fee revenue  $ 1,523  $ 1,722  $ 3,245  $ 3,458
Average servicing fee %  17.9% 43.7% 24.6% 41.9%
Total Service Fees-Portfolio Assets:        
Servicing fee revenue  $ 1,597  $ 2,223  $ 3,540  $ 4,489
Average servicing fee %  14.5% 16.0% 16.8% 19.8%
Service Fees-SBA loans:  $ 146  $ 180  $ 206  $ 306
Total Service Fees  $ 1,743  $ 2,403  $ 3,746  $ 4,795
         
Collections:        
Domestic partnerships  $ 2,530  $ 9,928  $ 7,874  $ 14,375
Latin American partnerships   9,951  5,772  16,102  11,862
European partnerships  2,045  6,314  9,929  15,378
Partnership collections  14,526  22,014  33,905  41,615
Domestic consolidated  27,555  50,329  59,068  79,194
Latin American consolidated  917  899  1,192  1,336
European consolidated  5,470  462  10,706  1,624
Consolidated collections  33,942  51,690  70,966  82,154
Total collections  $ 48,468  $ 73,704  $ 104,871  $ 123,769
         
Servicing portfolio (face value) at period end:        
Domestic   $ 915,597  $ 775,307    
Latin America  1,439,153  1,019,685    
Europe  1,245,119  1,698,442    
Total  $ 3,599,869  $ 3,493,434    
 
 
FirstCity Financial Corporation
Supplemental Information
(Dollars in thousands)
(Unaudited)
                 
Summary of Consolidated Portfolio Assets (at Carrying Value) by Region and Type
                 
  June 30, 2010
   Income-Accruing Loans   Non-Accrual Loans     
        Purchased Credit--       
   Purchased    Impaired Loans   Other     
   Credit--       Cost    Cost      
  Impaired   Cash recovery Cash recovery Real  
   Loans   Other  basis  basis basis  basis  Estate  Total 
United States  $ 527  $ 4,760  $ 105,765  $ 56,316  $ 1,685  $ —  $ 32,339  $ 201,392
                 
France  —  1,018  4,068  7  —  1,957  —  7,050
                 
Germany  —  —  2,911  —  —  —  —  2,911
                 
Mexico  —  —  —  10,033  —  —  —  10,033
                 
Total  $ 527  $ 5,778  $ 112,744  $ 66,356  $ 1,685  $ 1,957  $ 32,339  $ 221,386
                 
  December 31, 2009
   Income-Accruing Loans   Non-Accrual Loans     
       Purchased Credit--       
   Purchased    Impaired Loans   Other     
   Credit--      Cost     Cost      
  Impaired   Cash recovery Cash recovery Real  
   Loans   Other   basis   basis  basis   basis   Estate   Total 
United States  $ 42,385  $ 5,323  $ 42,125  $ 78,165  $ 2,770  $ —  $ 26,438  $ 197,206
                 
France  —  1,555  —  7,648  —  2,305  —  11,508
                 
Germany  5,225  —  —  —  —  —  —  5,225
                 
Mexico  —  —  —  10,445  —  —  —  10,445
                 
Total  $ 47,610  $ 6,878  $ 42,125  $ 96,258  $ 2,770  $ 2,305  $ 26,438  $ 224,384
                 
                 
Illustration of the Effects of Foreign Currency Fluctuations on Net Earnings
                 
  Three Months Ended June 30, Six Months Ended June 30,        
  2010 2009 2010 2009        
Net earnings to common stockholders  $ 8,065  $ 7,746  $ 8,166  $ 8,390        
Foreign currency gains (losses), net:                
Euro  (549)  381  (949)  (60)        
Mexican Peso  (9)  1,762  (3)  311        
Argentine Peso  (7)  (8)  (12)  (49)        
Chilean Peso  (14)  79  (67)  203        
           
                 
Exchange rate at valuation date:            
Euro 0.82 0.71            
Mexican Peso 12.66 13.20            
Argentine Peso 3.94 3.80            
Chilean Peso  550.66 539.98            
 
 
FirstCity Financial Corporation 
Schedule of Estimated Unrealized Gross Profit from Portfolio Assets 
June 30, 2010
(Unaudited)
   Basis in Portfolio Assets (1), (4) 
 ($ in 000's)  12/31/2008 12/31/2009 6/30/2010
 Domestic   $ 153,148  190,541  208,307
 Europe   29,555  32,665  22,272
 Latin America   29,867  27,473  24,472
 Total   $ 212,570  250,679  255,051
       
   Estimated Remaining Collections (2) 
  12/31/2008 12/31/2009 6/30/2010
 Domestic   $ 217,347  276,018  302,259
 Europe   39,341  50,328  36,416
 Latin America   78,211  70,398  67,839
 Total   $ 334,899  396,744  406,513
       
   Estimated Unrealized Gross Profit (3) 
  12/31/2008 12/31/2009 6/30/2010
 Domestic   $ 64,199  85,476  93,952
 Europe   9,787  17,663  14,144
 Latin America   48,344  42,925  43,366
 Total   $ 122,329  146,064  151,462
       
   Estimated Unrealized Gross Profit % 
  12/31/2008 12/31/2009 6/30/2010
 Domestic  29.54% 30.97% 31.08%
 Europe  24.88% 35.10% 38.84%
 Latin America  61.81% 60.97% 63.93%
 Total  36.53% 36.82% 37.26%
 
 
A graphic accompanying this release is available at http://media.globenewswire.com/cache/9623/file/8640.pdf
 
(1) Basis in Portfolio Assets represents FirstCity's share of the unamortized purchase price of the Portfolios held by the various acquisition entities, some of which are consolidated by FirstCity and others held through equity investments in unconsolidated partnerships.
(2) Estimated Remaining Collections represents FirstCity's share of future projected net cash collections expected from the Portfolios Assets.
(3) Unrealized Gross Profit represents the excess difference between the Estimated Remaining Collections and the Basis in Portfolio Assets.
(4) FirstCity considers Basis in Portfolio Assets a useful measurement of the Company's underlying holdings and interests in Portfolio Assets. As FirstCity's share of Basis in Portfolio Assets is considered a non-GAAP measure, the following reconciliation is provided:
       
  12/31/2008 12/31/2009 6/30/2010
FirstCity's consolidated Portfolio Assets (as reported in "Portfolio Assets" on the balance sheet of the respective Form 10-K or 10-Q)  $ 148,213  224,384  221,386
Noncontrolling interests in FirstCity's consolidated Portfolio Assets (component of "Non-controlling interests" on the balance sheet of the respective Form 10-K or 10-Q)  (11,460)  (37,277)  (31,934)
FirstCity's interest in Portfolio Assets held by Acquisition Partnerships (a component of "Assets" as reported in the "Condensed Combined Balance Sheets" tabular disclosure under the "Equity Investments" footnote of the respective Form 10-K or 10-Q)  75,817  63,572  65,599
FirstCity's basis in consolidated and non-consolidated Portfolio Assets  $ 212,570  250,679  255,051
CONTACT:  FirstCity Financial Corporation
          Suzy W. Taylor
          866-652-1810

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