SOURCE: FirstCity Financial Corporation

August 03, 2005 07:45 ET

FirstCity Financial (NASDAQ: FCFC) Reports Second Quarter 2005 Earnings of $2.7 Million

WACO, TX -- (MARKET WIRE) -- August 3, 2005 -- FirstCity Financial (NASDAQ: FCFC)

Highlights of the Quarter:

    
--  FirstCity reports 2nd quarter 2005 earnings of $2.7 million, or $.23
    per diluted share
    
--  FirstCity invested $16.1 million in portfolio assets for the quarter.
    
FirstCity Financial Corporation today announced net earnings to common stockholders for the quarter ended June 30, 2005 of $2.7 million or $.23 per share on a diluted basis.

Components of the results are detailed below (dollars in thousands except per share data):

                                   Three Months Ended   Six Months Ended
                                         June 30,           June 30,
                                       (unaudited)        (unaudited)
                                     2005      2004      2005      2004
                                   --------  --------  --------  --------
Portfolio Asset Acquisition and
 Resolution                        $  4,128  $  2,443  $  8,243  $  6,489
Corporate interest                        -    (1,026)        -    (2,026)
Corporate overhead                   (1,308)   (1,031)   (2,874)   (2,343)
                                   --------  --------  --------  --------
Earnings from continuing
 operations                           2,820       386     5,369     2,120

Earnings (loss) from discontinued
 operations                             (97)    2,913       (97)    6,028
                                   --------  --------  --------  --------
Net earnings to common
 stockholders                      $  2,723  $  3,299  $  5,272  $  8,148
                                   ========  ========  ========  ========
Diluted earnings per common share  $   0.23  $   0.28  $   0.44  $   0.69
                                   ========  ========  ========  ========

James T. Sartain, President and CEO of FirstCity, said, "We had a strong quarter in terms of acquisitions and were able to deploy our capital in attractive investments. The pipeline remains strong as the Company continues to build momentum."

Portfolio Asset Acquisition and Resolution

FirstCity purchased $16.1 million in portfolio assets during the second quarter of 2005. Purchases consisted of eight portfolios -- all in the United States. All portfolios purchased during the quarter are wholly owned by FirstCity, which allowed the Company to invest $16.1 million in equity.

Portfolio purchases are detailed below (in millions):

                         Domestic   Europe    Latin     Total    Invested
                                             America              Equity
                         --------  --------  --------  --------  --------
      2005
2nd Quarter              $   16.1  $      -  $      -  $   16.1  $   16.1
1st Quarter                  12.1         -       2.8      14.9       2.2
                         --------  --------  --------  --------  --------
   YTD 2005              $   28.2  $      -  $    2.8  $   31.0  $   18.3*
                         ========  ========  ========  ========  ========
      2004
4th Quarter              $   23.2  $      -  $   22.7  $   45.9  $   11.1
3rd  Quarter                 26.6         -       9.5      36.1      27.1
2nd Quarter                  34.9       9.8      40.7      85.4      18.5
1st Quarter                   6.5         -        .2       6.7       3.1
                         --------  --------  --------  --------  --------
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*
                         ========  ========  ========  ========  ========
Total Year 2002          $   61.4  $   98.7  $   11.7  $  171.8  $   16.7
                         ========  ========  ========  ========  ========

* In addition to the portfolio acquisitions above, FirstCity invested $2.0 million in partnerships during the first six months of 2005 and $3.4 million in partnerships during 2003.

Operating contribution from the Portfolio Asset Acquisition business for the second quarter was $4.1 million. The earnings are comprised of $9.2 million in revenues and $5.0 million of expenses. The business generated 52% of the revenues from domestic investments, 32% from investments in Latin America and 16% from investments in Europe. The major components of revenue for the quarter include equity earnings in Acquisition Partnerships and servicing entities of $3.7 million, servicing fees of $2.9 million, gain on resolution of Portfolio Assets of $1.2 million and interest income and other of $1.4 million.

Operating contribution from the Portfolio Asset Acquisition business for the second quarter includes net foreign currency gains of $688,000, which is comprised of $424,000 in Mexican peso gains and $264,000 of Euro gains. Quarterly results were less impacted by foreign currency fluctuations, as the Company borrowed 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   Six Months Ended
                                        June 30,            June 30,
Illustration of the Effects of
 Currency                            2005      2004      2005      2004
Fluctuations (dollars in
 thousands)                            (unaudited)         (unaudited)
                                   --------  --------  --------  --------
Net earnings to Common
 Stockholders as reported          $  2,723  $  3,299  $  5,272  $  8,148
Mexican Peso gains (losses)             424      (678)      744      (216)
Euro gains                              264       249       494       558
                                   --------  --------  --------  --------

Peso exchange rate at valuation
 date                                 10.84     11.45
Euro exchange rate at valuation
 date                                  0.83      0.83

Conference Call

A conference call will be held today at 9:00 a.m. Central Daylight Time to discuss second quarter 2005 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 Second Quarter 2005
                Conference Call

Date:           Wednesday, August 3, 2005

Time:           9:00 a.m. Central Daylight 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      800-706-7748
                International 617-614-3473

                Pass code -   18511213

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

                Pass code -   65897167

The replay will be available until Thursday, August 18, 2005

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, 2004, filed with the SEC on March 22, 2005, 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   Six Months Ended
                                        June 30,            June 30,
                                     2005      2004      2005      2004
                                   --------  --------  --------  --------
Revenues:
  Servicing fees from affiliates   $  2,909  $  3,716  $  6,081  $  6,748
  Gain on resolution of Portfolio
   Assets                             1,205       162     3,067       237
  Equity in earnings of
   investments                        3,690     2,639     7,091     6,814
  Interest income from affiliates       460       617       895     1,061
  Interest income - other               634        51     1,136       136
  Other income                          381       444       730     1,782
                                   --------  --------  --------  --------
    Total revenues                    9,279     7,629    19,000    16,778
Expenses:
  Interest and fees on notes
   payable to affiliates                 10        20        18        45
  Interest and fees on notes
   payable - other                      838     1,818     1,710     3,506
  Interest on shares subject to
   mandatory redemption                   -        67         -       133
  Salaries and benefits               3,684     3,477     7,842     7,554
  Provision for loan and
   impairment losses                     29        22       114        22
  Occupancy, data processing,
   communication and other            1,753     1,784     3,666     3,233
                                   --------  --------  --------  --------
    Total expenses                    6,314     7,188    13,350    14,493
Earnings from continuing
 operations before income
 taxes and minority interest          2,965       441     5,650     2,285
Income taxes                           (103)      (72)     (242)     (156)
                                   --------  --------  --------  --------
Earnings from continuing
 operations before minority
 interest                             2,862       369     5,408     2,129
Minority interest                       (42)       17       (39)       (9)
                                   --------  --------  --------  --------
Earnings from continuing
 operations                           2,820       386     5,369     2,120
                                   --------  --------  --------  --------
Discontinued operations
  Earnings (loss) from operations
   of discontinued components           (97)    3,312       (97)    6,455
  Income taxes                            -      (399)        -      (427)
                                   --------  --------  --------  --------
  Earnings (loss) from
   discontinued operations              (97)    2,913       (97)    6,028
                                   --------  --------  --------  --------
Net earnings                       $  2,723  $  3,299  $  5,272  $  8,148
                                   ========  ========  ========  ========

Basic earnings per common share
 are as follows:
    Earnings from continuing
     operations                    $   0.25  $   0.03  $   0.48  $   0.19
    Discontinued operations        $  (0.01) $   0.26  $  (0.01) $   0.54
    Net earnings per common
     share                         $   0.24  $   0.29  $   0.47  $   0.73
    Wtd. avg. common shares
     outstanding                     11,274    11,235    11,268    11,216

Diluted earnings per common share
 are as follows:
    Earnings from continuing
     operations                    $   0.24  $   0.03  $   0.45  $   0.18
    Discontinued operations        $  (0.01) $   0.25  $  (0.01) $   0.51
    Net earnings per common share  $   0.23  $   0.28  $   0.44  $   0.69
    Wtd. avg. common shares
     outstanding                     12,025    11,820    12,016    11,806

                  Selected Unaudited Balance Sheet Data
                                   June 30, December 31,
                                     2005      2004
                                   --------  --------
  Cash                             $  5,337  $  9,724
  Portfolio Assets, net              43,862    37,952
  Loans receivable from
   Acquisition Partnerships          20,400    21,255
  Equity investments                 53,181    57,815
  Deferred tax asset, net            20,101    20,101
  Service fees receivable
   and other assets                   8,428    10,193
  Discontinued mortgage assets
   held for sale                        409     1,817
                                   --------  --------
    Total assets                   $151,718  $158,857
                                   ========  ========

  Notes payable to affiliates      $    545  $    491
  Notes payable - other              49,153    50,812
  Minority interest and other
   liabilities                        4,866     6,048
  Liabilities from discontinued
   consumer operations                  987     9,033
  Liabilities from discontinued
   mortgage operations                    -        50
                                   --------  --------
    Total liabilities                55,551    66,434
    Total equity                     96,167    92,423
                                   --------  --------
    Total liabilities and equity   $151,718  $158,857
                                   ========  ========



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

                                   Three Months Ended   Six Months Ended
                                        June 30,            June 30,
                                     2005      2004      2005      2004
                                   --------  --------  --------  --------
Portfolio Asset Acquisition
 and Resolution:
  Summary Operating Statement Data
    Revenues                       $  9,159  $  7,489  $ 18,767  $ 16,434
    Expenses                          5,002     5,024    10,410     9,923
                                   --------  --------  --------  --------
    Operating contribution before
     provision for loan and
     impairment losses                4,157     2,465     8,357     6,511
    Provision for loan and
     impairment losses                   29        22       114        22
                                   --------  --------  --------  --------
      Operating contribution, net
       of direct taxes             $  4,128  $  2,443  $  8,243  $  6,489
                                   ========  ========  ========  ========
  Aggregate purchase price of
   portfolios acquired:
    Acquisition partnerships
      Domestic                     $ 16,073  $ 34,937  $ 28,181  $ 41,486
      Latin America                       -    40,650     2,763    40,800
      Europe                              -     9,837         -     9,837
                                   --------  --------  --------  --------
        Total                      $ 16,073  $ 85,424  $ 30,944  $ 92,123
                                   ========  ========  ========  ========

  Historical Acquisitions          Purchase  FirstCity's
   - Annual:                        Price    Investment
                                   --------  --------
      2005 year to date            $ 30,944  $ 18,286
      2004                          174,139    59,762
      2003                          129,192    22,944
      2002                          171,769    16,717
      2001                          224,927    24,319
      2000                          394,927    22,140

                                   June 30,  June 30,
                                     2005      2004
                                   --------  --------
  Portfolio acquisition and
   resolution assets by region:
      Domestic                     $ 79,735  $ 53,355
      Latin America                  20,283    18,788
      Europe                         17,619    19,828
                                   --------  --------
        Total                      $117,637  $ 91,971
                                   ========  ========

                                   Three Months Ended   Six Months Ended
                                         June 30,            June 30,
                                     2005      2004      2005      2004
                                   --------  --------  --------  --------
  Revenues by region:
      Domestic                     $  4,764  $  4,204  $ 10,726  $  8,350
      Latin America                   2,973     2,265     5,370     4,862
      Europe                          1,422     1,020     2,671     3,222
                                   --------  --------  --------  --------
        Total                      $  9,159  $  7,489  $ 18,767  $ 16,434
                                   ========  ========  ========  ========

  Revenues by source:
      Equity earnings              $  3,690  $  2,639  $  7,091  $  6,814
      Servicing fees                  2,909     3,716     6,081     6,748
      Interest income - loans         1,049       642     1,951     1,165
      Gain on resolution of
       Portfolio Assets               1,205       162     3,067       237
      Other                             306       330       577     1,470
                                   --------  --------  --------  --------
        Total                      $  9,159  $  7,489  $ 18,767  $ 16,434
                                   ========  ========  ========  ========



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

                                    Three Months Ended   Six Months Ended
                                         June 30,             June 30,
                                     2005       2004      2005      2004
                                 ---------- ----------  --------  --------
Analysis of Equity Investments
 in Acquisition Partnerships:

FirstCity's Average investment
 in Acquisition Partnerships
   Domestic                      $   35,561 $   37,162  $ 35,969  $ 36,951
   Latin America                      1,778      1,065     1,658     1,054
   Europe                            18,513     16,771    18,567    17,693
                                 ---------- ----------  --------  --------
     Total                       $   55,852 $   54,998  $ 56,194  $ 55,698
                                 ========== ==========  ========  ========

FirstCity Share of
 Equity Earnings:
   Domestic                      $    1,911 $    2,594  $  4,224  $  4,543
   Latin America                        467       (890)      470      (778)
   Europe                             1,312        935     2,397     3,049
                                 ---------- ----------  --------  --------
     Total                       $    3,690 $    2,639  $  7,091  $  6,814
                                 ========== ==========  ========  ========

Selected other data:

Average investment in wholly
 owned portfolio assets and
 loans receivable:
   Domestic                      $   39,570 $   10,500  $ 38,620  $  8,509
   Latin America                     18,909     16,770    18,947    15,284
   Europe                               505      1,426       517     1,805
                                 ---------- ----------  --------  --------
     Total                       $   58,984 $   28,696  $ 58,084  $ 25,598
                                 ========== ==========  ========  ========

Income from wholly owned
 portfolio assets and
 loans receivable:

   Domestic                      $    1,863 $      250  $  4,256  $    446
   Latin America                        384        537       747       913
   Europe                                 7         17        15        43
                                 ---------- ----------  --------  --------
     Total                       $    2,254 $      804  $  5,018  $  1,402
                                 ========== ==========  ========  ========

Servicing fee revenues:
   Domestic partnerships:
     $ Collected                 $   24,057 $   31,085  $ 51,491  $ 57,438
     Servicing fee revenue              833      1,223     1,974     2,261
     Average servicing fee %            3.5%       3.9%      3.8%      3.9%
   Latin American partnerships:
     $ Collected                 $   23,031 $   20,249  $ 33,928  $ 35,095
     Servicing fee revenue            1,915      2,400     3,896     4,356
     Average servicing fee %            8.3%      11.9%     11.5%     12.4%
   Incentive service fees        $      161 $       93  $    211  $    131
   Total Service Fees:
     $ Collected                 $   47,088 $   51,334  $ 85,419  $ 92,533
     Servicing fee revenue            2,909      3,716     6,081     6,748
     Average servicing fee %            6.2%       7.2%      7.1%      7.3%

Servicing portfolio (face value)
   Domestic                      $  485,435 $  442,710
   Latin America                  1,447,634  1,159,490
   Europe                           809,955    832,692
                                 ---------- ----------
      Total                      $2,743,024 $2,434,892
                                 ========== ==========

Number of personnel at
 period end:
   Domestic                              66         60
   Latin America                        128        144
   Corporate                             34         33
                                 ---------- ----------
     Total personnel                    228        237
                                 ========== ==========

Contact Information

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