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TheStreet Open House

FirstCity Financial Corporation Reports Third 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 and risks, including unfavorable conditions and negative trends in U.S. and global economies, financial markets and real estate markets; adverse fluctuations in the underlying values of real estate and other assets securing our loan portfolios; sufficiency of funds generated from our operations, existing cash and available liquidity sources, combined with our ability to access the credit and capital markets, to finance our operations and investment activities; our ability to project future cash collections and develop critical assumptions and estimates surrounding the liquidation of our portfolio assets; and other factors and 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   Nine Months Ended 
  September 30, September 30,
  2010 2009 2010 2009
Revenues:        
Finance and Servicing:        
Servicing fees  $ 2,252  $ 2,222  $ 5,998  $ 7,017
Income from Portfolio Assets  8,195  12,134  34,280  35,254
Gain on sale of SBA loans held for sale, net  197  301  360  911
Gain on sale of investment security  —  —  3,250  —
Interest income from SBA loans  314  299  895  940
Interest income from loans receivable - affiliates  864  1,078  2,591  2,940
Interest income from loans receivable - other  233  99  594  892
Other income  1,856  1,701  4,552  3,699
   13,911  17,834  52,520  51,653
Manufacturing, Railroad and Coal Mine:        
Operating revenues - manufacturing  —  —  10,466  —
Operating revenues - railroad  998  776  3,455  2,228
Operating revenues - coal mine  15,329  —  28,429  —
Other   —  121  4  1,192
   16,327  897  42,354  3,420
Total revenues  30,238  18,731  94,874  55,073
Costs and expenses:        
Finance and Servicing:        
Interest and fees on notes payable to banks and other  4,211  3,043  10,587  9,177
Interest and fees on note payable to affiliate  393  428  1,185  1,305
Salaries and benefits  4,995  5,048  16,067  15,654
Provision for loan and impairment losses  4,090  425  8,417  2,208
Asset-level expenses  2,257  1,992  5,981  4,646
Other  2,158  2,868  8,660  7,819
   18,104  13,804  50,897  40,809
Manufacturing, Railroad and Coal Mine:        
Cost of revenues and operating costs - manufacturing  —  —  10,788  —
Cost of revenues and operating costs - railroad  635  506  1,868  1,532
Cost of revenues and operating costs - coal mine  15,662  —  28,957  —
   16,297  506  41,613  1,532
Total costs and expenses  34,401  14,310  92,510  42,341
Earnings (losses) before other revenue and income taxes  (4,163)  4,421  2,364  12,732
Equity in earnings of unconsolidated subsidiaries  9,962  421  14,007  1,473
Gain on business combinations  —  —  5,729  1,455
Earnings before income taxes  5,799  4,842  22,100  15,660
Income tax expense  473  1,254  1,192  2,103
Net earnings  5,326  3,588  20,908  13,557
Less: net income attributable to noncontrolling interests  2,767  1,588  10,183  3,167
Net earnings attributable to FirstCity  $ 2,559  $ 2,000  $ 10,725  $ 10,390
         
Basic earnings per common share are as follows:        
Net earnings attributable to FirstCity stockholders   $ 0.25  $ 0.20  $ 1.07  $ 1.06
Weighted average common shares outstanding  10,160  9,838  10,054  9,834
         
Diluted earnings per common share are as follows:        
Net earnings attributable to FirstCity stockholders   $ 0.25  $ 0.19  $ 1.06  $ 1.02
Weighted average common shares outstanding  10,280  10,325  10,162  10,160
         
 
Selected Balance Sheet Data
(Dollars in thousands)
 
  September 30, December 31,    
  2010 2009    
  (Unaudited)      
Cash and cash equivalents  $ 35,549  $ 80,368    
Restricted cash  1,356  1,364    
Earning assets:        
Portfolio Asset Acquisition and Resolution assets:        
Domestic   246,732  225,406    
Latin America   39,077  41,248    
Europe   50,060  57,888    
Special Situations Platform assets   50,337  41,688    
Service fees receivable and other assets  22,052  17,112    
Total assets  $ 445,163  $ 465,074    
         
Notes payable to banks and other  $ 285,975  $ 305,888    
Note payable to affiliate  7,686  7,838    
Other liabilities  29,839  26,077    
Total liabilities  323,500  339,803    
Total equity  121,663  125,271    
Total liabilities and equity  $ 445,163  $ 465,074    
 
 
FirstCity Financial Corporation
Supplemental Information
(Dollars in thousands)
(Unaudited)
         
   Three Months Ended   Nine Months Ended 
  September 30, September 30,
  2010 2009 2010 2009
Summary Operating Statement Data for Each Segment        
Portfolio Asset Acquisition and Resolution segment:        
Revenues  $ 12,823  $ 16,817  $ 49,358  $ 49,083
Equity in net losses of unconsolidated subsidiaries  (1,446)  (1,043)  (253)  (188)
Gain on business combinations  —  —  891  1,455
Costs and expenses  (11,268)  (11,995)  (34,517)  (32,173)
Operating contribution before provision for loan and impairment losses  109  3,779  15,479  18,177
Provision for loan and impairment losses, net  2,236  425  5,394  1,241
Net income attributable to noncontrolling interests  (1,219)  (1,326)  (7,290)  (2,854)
Operating contribution (loss), net of direct taxes   $ (3,346)  $ 2,028  $ 2,795  $ 14,082
         
Special Situations Platform segment:        
Revenues  $ 17,410  $ 1,820  $ 45,422  $ 5,733
Equity in earnings of unconsolidated subsidiaries  11,408  1,464  14,260  1,661
Gain on business combinations  —  —  4,838  —
Costs and expenses  (17,403)  (1,407)  (44,613)  (4,294)
Operating contribution before provision for loan and impairment losses  11,415  1,877  19,907  3,100
Provision for loan and impairment losses  1,854  —  3,023  967
Net income attributable to noncontrolling interests  (1,548)  (262)  (2,893)  (313)
Operating contribution, net of direct taxes   $ 8,013  $ 1,615  $ 13,991  $ 1,820
         
   Three Months Ended   Nine Months Ended 
  September 30, September 30,
Portfolio Asset Acquisition and Resolution segment: 2010 2009 2010 2009
Revenues and equity in earnings of investments by region:      
Domestic  $ 7,543  $ 12,506  $ 31,752  $ 38,024
Latin America  2,466  2,811  7,159  8,085
Europe  1,368  457  10,194  2,770
Canada  —  —  —  16
Total  $ 11,377  $ 15,774  $ 49,105  $ 48,895
         
Revenues and equity in earnings (loss) of investments by source:      
Equity in losses of unconsolidated subsidiaries  $ (1,446)  $ (1,043)  $ (253)  $ (188)
Income from Portfolio Assets  8,195  12,134  34,280  35,254
Servicing fees  2,252  2,222  5,998  7,017
Gain on Sale of Investment Securities  —  —  3,250  —
Gain on sale of SBA loans held for sale, net  197  301  360  911
Interest income from SBA loans  314  299  895  940
Interest income from loans receivable - affiliates  435  471  1,371  1,560
Interest income from loans receivable - other  —  —  —  414
Other  1,430  1,390  3,204  2,987
Total  $ 11,377  $ 15,774  $ 49,105  $ 48,895
         
Special Situations Platform segment:        
Revenues and equity in earnings of investments by source:      
Equity in earnings of unconsolidated subsidiaries  $ 11,408  $ 1,464  $ 14,260  $ 1,661
Interest income from loans receivable  662  706  1,814  1,858
Operating revenue - railroad  998  776  3,455  2,228
Operating revenue - manufacturing  —  —  10,466  —
Operating revenue - coal mine  15,329  —  28,429  —
Other  421  338  1,258  1,647
Total  $ 28,818  $ 3,284  $ 59,682  $ 7,394
         
Number of personnel at period end:        
Domestic, Portfolio Asset Acquisition and Resolution segment  88  90    
Domestic, Special Situations Platform segment  32  26    
Latin America  114  126    
Corporate  30  30    
 Total personnel  264  272    
 
 
FirstCity Financial Corporation
Supplemental Information
(Dollars in thousands)
(Unaudited)
         
   Three Months Ended   Nine Months Ended 
  September 30, September 30,
  2010 2009 2010 2009
Analysis of Equity Investments        
FirstCity's average investment:        
Domestic, Portfolio Asset Acquisition and Resolution segment  $ 32,495  $ 12,424  $ 21,366  $ 13,816
Domestic, Special Situations Platform segment  8,536  1,411  5,023  1,402
Latin America  16,671  18,042  17,064  17,843
Europe  5,099  11,917  6,539  12,607
Europe-Servicing subsidiaries  30,184  24,255  26,942  22,998
Latin America-Servicing subsidiaries  1,750  2,897  2,048  2,939
Total  $ 94,735  $ 70,946  $ 78,982  $ 71,605
         
FirstCity's share of equity earnings (losses):        
Domestic, Portfolio Asset Acquisition and Resolution segment  $ (98)  $ (300)  $ (61)  $ 216
Domestic, Special Situations Platform segment  11,408  1,464  14,260  1,661
Latin America  (550)  (207)  (505)  (460)
Europe  (1,158)  (290)  (2,123)  689
Europe-Servicing subsidiaries  473  (26)  3,274  54
Latin America-Servicing subsidiaries  (113)  (220)  (838)  (687)
Total  $ 9,962  $ 421  $ 14,007  $ 1,473
         
Selected Other Data:        
Average investment in consolidated portfolio assets and loans receivable:        
Domestic, Portfolio Asset Acquisition and Resolution segment  $ 215,556  $ 224,696  $ 215,376  $ 201,313
Domestic, Special Situations Platform segment  28,598  30,481  28,288  29,871
Latin America  17,745  19,275  18,208  19,329
Europe  12,882  25,344  15,938  17,324
Canada  —  —  —  137
Total  $ 274,781  $ 299,796  $ 277,810  $ 267,974
         
Income from consolidated portfolio assets and loans receivable:      
Domestic, Portfolio Asset Acquisition and Resolution segment  $ 6,008  $ 11,750  $ 25,500  $ 34,740
Domestic, Special Situations Platform segment  662  706  1,814  1,858
Latin America  1,449  889  3,085  2,776
Europe  1,684  566  8,321  1,547
Canada  —  —  --   16
Total  $ 9,803  $ 13,911  $ 38,720  $ 40,937
         
Servicing fee revenues:        
Domestic partnerships:        
Servicing fee revenue  $ 691  $ 365  $ 986  $ 1,396
Average servicing fee  3.2% 7.8% 3.4% 7.3%
Latin American partnerships:        
Servicing fee revenue  $ 1,439  $ 1,744  $ 4,684  $ 5,202
Average servicing fee %  32.3% 25.6% 26.5% 34.5%
Total Service Fees-Portfolio Assets:        
Servicing fee revenue  $ 2,130  $ 2,109  $ 5,670  $ 6,598
Average servicing fee %  8.3% 18.4% 12.1% 19.3%
Service Fees-SBA loans:  $ 122  $ 113  $ 328  $ 419
Total Service Fees  $ 2,252  $ 2,222  $ 5,998  $ 7,017
         
Collections:        
Domestic unconsolidated partnerships  $ 21,347  $ 4,667  $ 29,221  $ 19,042
Latin American unconsolidated partnerships   6,080  8,673  22,182  20,535
European unconsolidated partnerships  2,180  7,200  12,109  22,578
Total unconsolidated partnership collections  29,607  20,540  63,512  62,155
Domestic consolidated partnerships  18,958  36,891  78,026  116,085
Latin American consolidated partnerships  1,416  594  2,608  1,930
European consolidated partnerships  2,706  4,982  13,412  6,606
Total consolidated partnership collections  23,080  42,467  94,046  124,621
Total collections  $ 52,687  $ 63,007  $ 157,558  $ 186,776
         
Servicing portfolio (face value) at period end:        
Domestic   $ 1,123,882  $ 766,491    
Latin America  1,544,181  1,419,269    
Europe  1,075,782  1,750,148    
Total  $ 3,743,845  $ 3,935,908    
 
 
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                
3rd Quarter  $ 15,025  $ —  $ —  $ 15,025  $ 10,513  $ 4,956  $ 148  $ 15,617
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  $ 174,705  $ —  $ —  $ 174,705  $ 53,240  $ 28,443  $ 13,045  $ 94,728
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   Nine Months Ended   
        September 30, September 30,  
        2010 2009 2010 2009  
Aggregate purchase price of portfolios acquired:              
Acquisition partnerships                
Domestic        $ 15,025  $ 48,659  $ 174,705  $ 185,982  
Latin America        —  —  —  —  
Europe        —  —  —  —  
Total        $ 15,025  $ 48,659  $ 174,705  $ 185,982  
                 
         Purchase   FirstCity's       
Historical acquisitions of Portfolios - annual:      Price   Investment       
First nine months of 2010        $ 174,705  $ 53,240      
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      
                 
        September 30, December 31,      
        2010 2009      
Portfolio acquisition and resolution assets by region:            
Domestic        $ 246,732  $ 225,406      
Latin America        39,077  41,248      
Europe        50,060  57,888      
Total        $ 335,869  $ 324,542      
                 
                 
Special Situations Platform segment:    
         Total  FirstCity Denver's Investment  
Historical investments - annual:        Investment  Debt Equity Total  
First nine months of 2010        $ 13,564  $ 8,650  $ 4,395  $ 13,045  
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)
                 
                 
Summary of Consolidated Portfolio Assets (at Carrying Value) by Region and Type    
                 
  September 30, 2010
   Income-Accruing Loans   Non-Accrual Loans     
   Purchased     Purchased Credit--       
   Credit--     Impaired Loans   Other     
   Impaired       Cost recovery     Cost recovery     
   Loans   Other   Cash basis   basis   Cash basis   basis   Real Estate   Total 
United States  $ 495  $ 4,061  $ 100,255  $ 49,573  $ 1,638  $ —  $ 36,652  $ 192,674
                 
France  —  1,069  3,860  —  —  1,906  —  6,835
                 
Germany  —  —  2,671  —  —  —  —  2,671
                 
Mexico  —  —  —  9,572  —  —  —  9,572
                 
Total  $ 495  $ 5,130  $ 106,786  $ 59,145  $ 1,638  $ 1,906  $ 36,652  $ 211,752
                 
  December 31, 2009
   Income-Accruing Loans   Non-Accrual Loans     
   Purchased     Purchased Credit--       
   Credit--     Impaired Loans   Other     
   Impaired       Cost recovery     Cost recovery     
   Loans   Other   Cash basis   basis   Cash basis   basis   Real 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   Nine Months Ended         
  September 30, September 30,        
  2010 2009 2010 2009        
Net earnings to common stockholders  $ 2,559  $ 2,000  $ 10,725  $ 10,390        
Foreign currency gains (losses), net:                
Euro  503  141  (446)  81        
Mexican Peso  103  (81)  100  230        
Argentine Peso  (4)  (5)  (16)  (54)        
Chilean Peso  59  57  (8)  260        
                 
                 
Exchange rate at valuation date:              
Euro 0.73 0.69            
Mexican Peso 12.50 13.50            
Argentine Peso 3.97 3.85            
Chilean Peso  489.46 555.30            
 
 
FirstCity Financial Corporation 
Schedule of Estimated Unrealized Gross Profit from Portfolio Assets 
September 30, 2010
(Unaudited)
 
   Basis in Portfolio Assets (1), (4) 
 ($ in 000's)  12/31/2008 12/31/2009 9/30/2010
 Domestic   $ 153,148  190,541  201,599
 Europe   29,555  32,665  20,708
 Latin America   29,867  27,473  23,510
 Total   $ 212,570  250,679  245,817
       
   Estimated Remaining Collections (2) 
  12/31/2008 12/31/2009 9/30/2010
 Domestic   $ 217,347  276,018  291,604
 Europe   39,341  50,328  34,092
 Latin America   78,211  70,398  65,739
 Total   $ 334,899  396,744  391,435
       
   Estimated Unrealized Gross Profit (3) 
  12/31/2008 12/31/2009 9/30/2010
 Domestic   $ 64,199  85,476  90,006
 Europe   9,787  17,663  13,383
 Latin America   48,344  42,925  42,229
 Total   $ 122,329  146,064  145,618
       
   Estimated Unrealized Gross Profit % 
  12/31/2008 12/31/2009 9/30/2010
 Domestic  29.54% 30.97% 30.87%
 Europe  24.88% 35.10% 39.26%
 Latin America  61.81% 60.97% 64.24%
 Total  36.53% 36.82% 37.20%

A graphic accompanying this release is available at http://media.globenewswire.com/cache/9623/file/9090.pdf

CONTACT:  FirstCity Financial Corporation
          Suzy W. Taylor
          866-652-1810

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