SOURCE: FirstCity Financial Corporation

May 10, 2006 07:30 ET

FirstCity Financial (NASDAQ: FCFC) Reports First Quarter 2006 Earnings

WACO, TX -- (MARKET WIRE) -- May 10, 2006 --


Highlights of the Quarter:

--  FirstCity (NASDAQ: FCFC) reports 1st quarter 2006 earnings of
    $2,022,141 or $.17 per  diluted share.
--  FirstCity invested $23.3 million in portfolio assets for the quarter.
--  FirstCity reports continued earning asset growth of $12.4 million for
    the quarter.
    
Components of the quarterly results are detailed below (dollars in thousands except per share data):
                                               Three Months Ended
                                                 March 31, 2006
                                                  (unaudited)
                                                 2006       2005
                                               -------    -------
Portfolio Asset Acquisition and Resolution     $ 3,328    $ 4,115
Corporate overhead                              (1,231)    (1,566)
                                               -------    -------
Earnings from continuing operations              2,097      2,549
Loss from discontinued operations net of taxes     (75)         -
                                               -------    -------
Net earnings to common stockholders            $ 2,022    $ 2,549
                                               =======    =======
Diluted earnings per common share              $  0.17    $  0.21
                                               =======    =======
James T. Sartain, President and CEO, said, "We were pleased with the strong acquisitions and equity investments in the first quarter. Our asset base continues to grow as we progress toward a critical mass in earning assets. The revenues and resulting earnings from this growth will build steadily over time. Our pipeline is strong and we are currently evaluating 29 different transactions representing over $4 billion in face value of assets."

Portfolio Asset Acquisition and Resolution

FirstCity purchased $42.4 million in portfolio assets during the first quarter of 2006 and invested equity in these portfolios of $23.3 million. These purchases consisted of three portfolios -- all in the United States.

Portfolio purchases are detailed below (in millions):

                                          Latin          Invested
                        Domestic  Europe  America  Total   Equity
                        -----------------------------------------
             2006
1st  Quarter               $42.4       —        —  $42.4   $23.3  *
             2005
4th Quarter                $32.9   $37.2    $12.6  $82.7   $35.0
3rd Quarter                 32.3       —      0.6   32.9    18.1
2nd Quarter                 16.1       —        —   16.1    16.1
1st  Quarter                12.1       —      2.8   14.9     2.2
                        -----------------------------------------
Total Year 2005            $93.4   $37.2    $16.0 $146.6   $71.4  *
                        =========================================
Total Year 2004            $91.2   $ 9.8    $73.1 $174.1   $59.8
                        =========================================
Total Year 2003            $92.6   $31.2    $ 5.4 $129.2   $22.9  *
                        =========================================
* In addition to the portfolio acquisitions above, FirstCity invested $730,000 in partnerships during the first quarter of 2006, $3.2 million during 2005 and $3.4 million during 2003.

Operating contribution from the Portfolio Asset Acquisition business for the first quarter was $3.3 million. The earnings were comprised of $5.5 million in revenues, $3.6 million in equity in earnings of investments and $5.8 million of expenses, including a provision for loan losses of $109,000. The business generated 58% of the revenues (including equity in earnings of investments) from domestic investments, 29% from investments in Latin America and 13% from investments in Europe. The major components of revenue for the quarter include equity earnings in Acquisition Partnerships and servicing entities of $3.6 million, servicing fees of $2.6 million, gain on resolution of Portfolio Assets of $1.3 million and interest income of $1.2 million.

Operating contribution from the Portfolio Asset Acquisition business for the first quarter includes net foreign currency gains of $517,000, which is comprised of $334,000 of Euro gains, $174,000 in Mexican peso gains and $9,000 in Argentine peso gains. The Company continued to borrow in Euros to hedge the risk associated with foreign currency exposure.

The following table details the impact of these items on corporate earnings:

                                               Three Months Ended
                                               ------------------
                                                    March 31,
                                                    ---------
Illustration of the Effects of  Currency         2006       2005
Fluctuations (dollars in thousands)                (unaudited)
                                                ------------------
Net earnings to Common Stockholders as reported $ 2,022    $ 2,549
Euro gains                                          334        230
Mexican Peso gains                                  174        319
Argentine Peso gains                                  9          —
                                                ------------------

Euro exchange rate at valuation date               0.83       0.77
Mexican Peso exchange rate at valuation date      10.95      11.29
Argentine Peso exchange rate at valuation date     3.14        n/a
Conference Call

A conference call will be held today at 9:00 a.m. Central time to discuss first quarter 2006 results. A question and answer session will follow the prepared remarks. Details to access the call and webcast are as follows:

       Event:         FirstCity Financial Corporation First Quarter 2006
                      Conference Call
       Date:          Wednesday, May 10, 2006
       Time:          9:00 a.m. Central Time
       Host:          James T. Sartain, FirstCity's President and Chief
                      Executive Officer

       Web Access:    FirstCity's web page-     www.fcfc.com/invest.htm or,
                      CCBN's Investor websites- www.streetevents.com and,
                                                www.earnings.com

       Dial In Access:    Domestic        800-599-9816
                          International   617-847-8705

                          Pass code -     92311829

       Replay             Domestic        888-286-8010
                          International   617-801-6888

                          Pass code -     15714033
The replay will be available until Wednesday May 24, 2006.

Forward-Looking Statements

Certain statements in this press release, which are not historical in fact, including, but not limited to, statements relating to future performance, may be deemed to be forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may project, indicate or imply future results, performance or achievements, and may contain the words "expect," "intend," "plan," "estimate," "believe," "will be," "will continue," "will likely result," and similar expressions. Such statements inherently are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected. There are many important factors that could cause the Company's actual results to differ materially.

These factors include, but are not limited to, the performance of the Company's subsidiaries and affiliates, availability of portfolio assets, assumptions underlying portfolio asset performance, risks associated with foreign operations, currency exchange rate fluctuations, interest rate risk, risks of declining value of loans, collateral or assets, the degree to which the Company is leveraged, the Company's continued need for financing, availability of the Company's credit facilities, the impact of certain covenants in loan agreements of the Company and its subsidiaries, the ability of the Company to utilize net operating loss carry forwards, general economic conditions, foreign social and economic conditions, changes (legislative and otherwise) in the asset securitization industry, fluctuation in residential and commercial real estate values, capital markets conditions, including the markets for asset-backed securities, uncertainties of any litigation arising from discontinued operations, factors more fully discussed and identified under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and risk factors and other risks identified in the Company's Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on March 16,2006, as well as in the Company's other filings with the SEC.

Many of these factors are beyond the Company's control. In addition, it should be noted that past financial and operational performance of the Company is not necessarily indicative of future financial and operational performance. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements.

The forward-looking statements in this release speak only as of the date of this release. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based.

The Company is a diversified financial services company with operations dedicated to portfolio asset acquisition and resolution with offices in the U.S. and with affiliate organizations in France and Mexico. Its common stock is listed on the NASDAQ National Market System under the symbol "FCFC."

                     FirstCity Financial Corporation
                          Summary of Operations
                  (In thousands, except per share data)
                                (Unaudited)

                                                   Three Months Ended
                                                        March 31,
                                                    2006          2005
                                                ------------  ------------
Revenues:
  Servicing fees from affiliates                $      2,647  $      3,172
  Gain on resolution of Portfolio Assets               1,284         1,862
  Interest income from affiliates                        430           424
  Loan interest income                                   774           478
  Other income                                           580           384
                                                ------------  ------------
    Total revenues                                     5,715         6,320
                                                ------------  ------------
Expenses:
  Interest and fees on notes payable - other           1,698           872
  Interest and fees on notes payable to
   affiliates                                             10             8
  Interest on shares subject to mandatory
   redemption                                              -             -
  Salaries and benefits                                3,738         4,158
  Provision (recovery) for loan and impairment
   losses                                                109            85
  Occupancy, data processing, communication and
   other                                               1,564         1,913
                                                ------------  ------------
    Total expenses                                     7,119         7,036
                                                ------------  ------------
    Equity in earnings of investments                  3,634         3,401
                                                ------------  ------------
Earnings from continuing operations before
 income taxes and minority interest                    2,230         2,685
 Income taxes                                           (122)         (139)
 Minority interest                                       (11)            3
                                                ------------  ------------
Earnings from continuing operations                    2,097         2,549
                                                ------------  ------------
Discontinued operations
 Earnings (loss) from operations of
  discontinued components                                (75)            -
 Income taxes                                              -             -
                                                ------------  ------------
 Earnings (loss) from discontinued operations            (75)
                                                ------------  ------------
Net earnings                                    $      2,022  $      2,549
                                                ============  ============

Basic earnings per common share are as follows:
   Earnings from continuing operations          $       0.19  $       0.23
   Discontinued operations                      $      (0.01) $          -
   Net earnings per common share                $       0.18  $       0.23
   Wtd. avg. common shares outstanding                11,307        11,262

Diluted earnings per common share are as
 follows:
   Earnings from continuing operations          $       0.18  $       0.21
   Discontinued operations                      $      (0.01) $          -
   Net earnings per common share                $       0.17  $       0.21
   Wtd. avg. common shares outstanding                11,958        12,007

            Selected Unaudited Balance Sheet Data
                                                   March 31,  December 31,
                                                    2006          2005
                                                ------------  ------------
  Cash                                          $      9,248  $     12,901
  Portfolio Assets, net                               52,124        49,346
  Loans receivable                                    20,107        19,606
  Equity investments                                  92,892        83,785
  Deferred tax asset, net                             20,101        20,101
  Service fees receivable and other assets             8,983         8,973
  Discontinued mortgage assets held for sale              91           157
                                                ------------  ------------
   Total assets                                 $    203,546  $    194,869
                                                ============  ============

  Notes payable - other                         $     95,330  $     89,653
  Notes payable to affiliates                            546           606
  Minority interest and other liabilities              6,583         5,578
  Liabilities from discontinued consumer
   operations                                            121           121
                                                ------------  ------------
   Total liabilities                                 102,580        95,958
   Total equity                                      100,966        98,911
                                                ------------  ------------
   Total liabilities and equity                 $    203,546  $    194,869
                                                ============  ============







                    FirstCity Financial Corporation
                         Supplemental Information
                          (Dollars in thousands)
                                (Unaudited)

                                              Three Months Ended
                                                  March 31,
                                           2006                2005
                                    ------------------  ------------------
Portfolio Asset Acquisition and
 Resolution:
 Summary Operating Statement Data
   Revenues                         $            5,546  $            6,207
   Equity in earnings of
    investments                                  3,634               3,401
   Expenses                                     (5,743)             (5,408)
                                    ------------------  ------------------
   Operating contribution before
    provision for
    loan and impairment losses                   3,437               4,200
   Provision (recovery) for loan
    and impairment losses                          109                  85
                                    ------------------  ------------------
    Operating contribution, net of
     direct taxes                   $            3,328  $            4,115
                                    ==================  ==================

 Aggregate purchase price of
  portfolios acquired:
  Acquisition partnerships
   Domestic                         $           42,351  $           12,108
   Latin America                                     -               2,763
   Europe                                            -                   -
                                    ------------------  ------------------
    Total                           $           42,351  $           14,871
                                    ==================  ==================

                                              Purchase         FirstCity's
 Historical Acquisitions - Annual:               Price          Investment
                                    ------------------  ------------------
   2006                             $           42,351  $           23,342
   2005                                        146,581              71,405
   2004                                        174,139              59,762
   2003                                        129,192              22,944
   2002                                        171,769              16,717

                                          March 31,        December 31,
                                            2006                2005
                                    ------------------  ------------------
 Portfolio acquisition and
  resolution assets by region:
   Domestic                         $          119,285  $          105,938
   Latin America                                19,661              19,764
   Europe                                       26,736              27,699
                                    ------------------  ------------------
    Total                           $          165,682  $          153,401
                                    ==================  ==================

                                              Three Months Ended
                                                   March 31,
                                           2006                2005
                                    ------------------  ------------------
 Revenues and equity in earnings of
  investments by region:
   Domestic                         $            5,354  $            5,962
   Latin America                                 2,653               2,397
   Europe                                        1,173               1,249
                                    ------------------  ------------------
    Total                           $            9,180  $            9,608
                                    ==================  ==================

 Revenues and equity in earnings of
  investments by source:
   Equity earnings                  $            3,634  $            3,401
   Servicing fees                                2,647               3,172
   Interest income - loans                       1,204                 902
   Gain on resolution of Portfolio
    Assets                                       1,284               1,862
   Other                                           411                 271
                                    ------------------  ------------------
    Total                           $            9,180  $            9,608
                                    ==================  ==================



                     FirstCity Financial Corporation
                         Supplemental Information
                          (Dollars in thousands)
                                (Unaudited)


                                                     Three Months Ended
                                                          March 31,
                                                      2006         2005
                                                  -----------  -----------
Analysis of Equity Investments in Acquisition
 Partnerships:
FirstCity's Average investment in Acquisition
 Partnerships
  Domestic                                        $    55,682  $    36,552
  Latin America                                         3,038        1,518
  Europe                                               25,267       18,874
                                                  -----------  -----------
   Total                                          $    83,987  $    56,944
                                                  ===========  ===========

FirstCity Share of Equity Earnings:
  Domestic                                        $     2,269  $     2,313
  Latin America                                           313            3
  Europe                                                1,052        1,085
                                                  -----------  -----------
   Total                                          $     3,634  $     3,401
                                                  ===========  ===========

Selected other data:
Average investment in wholly owned portfolio
 assets and loans receivable:
  Domestic                                        $    50,263  $    36,315
  Latin America                                        16,123       19,096
  Europe                                                1,748          530
                                                  -----------  -----------
   Total                                          $    68,134  $    55,941
                                                  ===========  ===========

Income from wholly owned portfolio assets and
 loans receivable:
  Domestic                                        $     2,130  $     2,393
  Latin America                                           331          363
  Europe                                                   27            8
                                                  -----------  -----------
   Total                                          $     2,488  $     2,764
                                                  ===========  ===========

Servicing fee revenues:
  Domestic partnerships:
   Servicing fee revenue                          $       759  $     1,141
   Average servicing fee %                                3.3%         4.2%
  Latin American partnerships:
   Servicing fee revenue                          $     1,826  $     1,981
   Average servicing fee %                               15.0%        18.2%
  Incentive service fees                          $        62  $        50
  Total Service Fees:
   Servicing fee revenue                          $     2,647  $     3,172
   Average servicing fee %                                7.5%         8.3%

Collections:
  Domestic                                        $    23,269  $    27,434
  Latin America                                        12,145       10,898
  Europe                                               16,697       13,198
                                                  -----------  -----------
   Subtotal                                            52,111       51,530
  Wholly-owned                                          6,731        8,338
                                                  -----------  -----------
   Total                                          $    58,842  $    59,868
                                                  ===========  ===========

Servicing portfolio (face value)
  Domestic                                        $   568,029  $   450,204
  Latin America                                     1,330,719    1,446,059
  Europe                                              882,574      867,078
                                                  -----------  -----------
   Total                                          $ 2,781,322  $ 2,763,341
                                                  ===========  ===========

Number of personnel at period end:
  Domestic                                                 64           65
  Latin America                                           113          129
  Corporate                                                30           31
                                                  -----------  -----------
   Total personnel                                        207          225
                                                  ===========  ===========

Contact Information

  • Contact:
    Suzy W. Taylor
    866-652-1810