SOURCE: FirstCity Financial Corporation

May 12, 2008 08:00 ET

FirstCity Financial Reports First Quarter 2008 Results and Activities

WACO, TX--(Marketwire - May 12, 2008) -

Highlights:

-- FirstCity reported 1st quarter 2008 loss of $3.6 million or ($.34) per diluted share - which includes $4.1 million of net provisions.

-- FirstCity invested $9.9 million in portfolio acquisitions and other investments during the quarter.

-- FirstCity purchased 385,830 shares of its common stock in 2008 under its stock repurchase plan.





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

                                        Three Months Ended
                                             March 31,
                                        ------------------
                                          2008        2007
                                        ------------------
                                            (unaudited)
Portfolio Asset Acquisition
 and Resolution                        $ (1,800)   $  1,870
Corporate overhead *                     (1,693)     (2,785)
                                       --------------------
Loss from continuing operations          (3,493)       (915)
Loss from discontinued operations
 net of taxes                               (91)         --
                                       --------------------
Loss to common stockholders            $ (3,584)   $   (915)
                                       ====================
Diluted loss per common share          $  (0.34)   $  (0.08)

* Corporate overhead includes $1.2 million of expenses related to an independent audit committee investigation in first quarter 2007.

Portfolio Asset Acquisition and Resolution

For the first quarter 2008, the operating contribution from the Portfolio Asset Acquisition business resulted in a $1.8 million loss. The loss was comprised primarily of $9.3 million in revenues, $2.8 million in equity in earnings of investments, and $13.9 million of expenses. The business generated 55% of the revenues (including equity in earnings of investments) from domestic investments, 25% from investments in Latin America, 20% from investments in Europe and less than 1% from investments in Canada.

The revenues for the first quarter were positively impacted by continued income streams from Portfolio Assets of $4.9 million, equity in earnings of investments of $2.8 million, servicing fees of $2.2 million, and interest income of $0.9 million from loans receivable.

First quarter earnings were negatively impacted by $4.1 million of net provisions -- comprised of $3.0 million of provisions recorded to our wholly owned domestic and Latin American portfolios, and $1.1 million recorded to portfolio assets held in our partnerships ($0.2 million of net provisions in domestic partnerships, $0.3 million of net provisions in European partnerships and $0.6 million in Latin American partnerships). The first quarter provisions were attributed primarily to declines in values of loan collateral and real estate assets in our domestic portfolios, and additional delays in the timing of collections of expected cash flows on loan portfolios in Latin America and Europe. Management regularly evaluates the collectibility of the Company's portfolio assets and may decrease those values in future periods as the cash flows expected from those assets change.

The following tables detail the impact of net foreign currency gains (losses) on corporate earnings:

                                   Three Months Ended
                                       March 31,
                                   ------------------
Illustration of the
Effects of Currency                2008          2007
                                   ------------------
Fluctuations
(dollars in thousands)                 (unaudited)
-----------------------------------------------------
Net earnings (loss) to
Common Stockholders                $ (3,584)   $ (915)
Foreign currency gains (losses):
 Euro                                   225      (242)
 Mexican Peso                           246       (23)
 Argentine Peso                          (3)      (11)
 Canadian Dollar                        (15)       21
 Chilean Peso                           104         2
                                   ------------------

Exchange rate at valuation date:
 Euro                                  0.63      0.75
 Mexican Peso                         10.70     11.08
 Argentine Peso                        3.16      3.10
 Canadian Dollar                       1.02      1.16
 Chilean Peso                        440.00    539.28

The Company invested $9.9 million in portfolio acquisitions and other investments during the quarter. Earning assets totaled $236.2 million at quarter end. The global distribution of FirstCity's earning assets (at carrying value) included $151.8 million in the United States, $48.3 million in Europe, and $36.1 million in Latin America.

Portfolio purchases are detailed below (in millions):

                            Portfolio Purchases
              -------------------------------------------
                                                          FirstCity
                                 Latin         FirstCity  Investment
              Domestic  Europe  America Total  Investment  in Other  Total
              ========= ======= ======= ======= ========= ========= =======
        2008
1st  Quarter  $     6.7 $    -- $  13.2 $  19.9 $     8.4 $     1.5 $   9.9
              --------- ------- ------- ------- --------- --------- -------
  YTD 2008    $     6.7 $    -- $  13.2 $  19.9 $     8.4 $     1.5 $   9.9
              ========= ======= ======= ======= ========= ========= =======
        2007
4th Quarter   $     5.3 $  14.7 $   4.4 $  24.4 $    15.7 $     3.7 $  19.4
3rd Quarter        17.4     2.3      --    19.7      16.3       6.3    22.6
2nd Quarter        27.4     2.4    61.6    91.4      25.2       4.2    29.4
1st Quarter       71.6     3.8     3.4    78.8      69.5       7.8    77.3
              --------- ------- ------- ------- --------- --------- -------
  YTD 2007    $   121.7 $  23.2 $  69.4 $ 214.3 $   126.7 $    22.0 $ 148.7
              ========= ======= ======= ======= ========= ========= =======
        2006
4th Quarter   $    34.6 $ 101.2 $   2.1 $ 137.9 $    70.2 $    16.8 $  87.0
3rd Quarter        35.4      --    56.1    91.5      31.5       3.7    35.2
2nd Quarter        24.2     1.0      --    25.2      19.0       7.0    26.0
1st  Quarter       42.4      --      --    42.4      23.3       0.7    24.0
              --------- ------- ------- ------- --------- --------- -------
Total Year
 2006         $   136.6 $ 102.2 $  58.2 $ 297.0 $   144.0 $    28.2 $ 172.2
              ========= ======= ======= ======= ========= ========= =======
Total Year
 2005         $    93.4 $  37.2 $  16.0 $ 146.6 $    71.4 $     3.2 $  74.6
              ========= ======= ======= ======= ========= ========= =======
Total Year
 2004         $    91.2 $   9.8 $  73.1 $ 174.1 $    59.8 $      -- $  59.8
              ========= ======= ======= ======= ========= ========= =======

As a result of the recent deterioration of credit quality experienced by many banks, management believes that acquisition opportunities at attractive margins are available. FirstCity (NASDAQ: FCFC) was involved in acquiring $19.9 million of portfolio assets with a face value of approximately $546.1 million in first quarter 2008 -- of which FirstCity's investment share was $8.4 million. The Company is currently evaluating 28 different transactions representing over $7.6 billion in face value of assets, although there can be no assurance that FirstCity will be able to consummate any of these transactions on acceptable terms.

In the first quarter of 2008, the Company discontinued using the income recognition model for previously-purchased non-performing loan portfolios in Mexico. Management determined that external factors outside their control preclude them from developing reasonable expectations of the timing of cash flows to be collected on these loan portfolios. The Company now accounts for its non-performing loan portfolios in Mexico under the cost-recovery model.

Other Corporate Matters

Liquidity

FirstCity's ability to obtain financing for investment opportunities is strong and remains unhindered by the negative conditions witnessed recently in the financial services sector. FirstCity has $350.0 million of credit facility commitments available to finance its portfolio and asset purchases and equity investments in new ventures, and to provide for working capital loans. In addition, FirstCity has a $40.0 million credit facility commitment to finance and acquire SBA loans. At March 31, 2008, FirstCity's maximum borrowing capacity under these credit commitments was $156.0 million, subject to borrowing base requirements of the respective credit facilities.

Share Repurchase Program

FirstCity has a stock repurchase program providing for the repurchase of up to 1,500,000 shares of its common stock. To date, the Company has purchased 966,330 shares at an average cost of $9.12 per share (including 385,830 shares purchased in 2008 at an average cost of $7.34 per share). Share repurchases continue and signify management's assessment that the shares are undervalued in the market and represent a good investment alternative to enhance long term shareholder value.

Conference Call

A conference call will be held on Monday, May 12, 2008 at 9:00 a.m. Central Time to discuss first quarter 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 2008 Conference Call
Date:   Monday, May 12, 2008
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.fulldisclosure.com

Dial In Access: Domestic  888-396-2369
                International 617-847-8710

Pass code 17543120

Replay Available on FirstCity's web page (www.fcfc.com/invest.htm)

FirstCity Financial Corporation 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 Europe and Latin America. FirstCity common stock is listed on the NASDAQ Global Select Market under the symbol "FCFC."

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 within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. 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," "indication" 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 and other investment opportunities; the Company's ability to consummate portfolio acquisitions and other investment transactions on acceptable terms; assumptions underlying portfolio asset performance; risks associated with start up of new businesses and entry into new foreign markets, risks associated with foreign operations; currency exchange rate fluctuations; interest rate risk; credit 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; ability to obtain additional financing from the Bank of Scotland or any other lender; 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, business and market conditions; foreign social and economic conditions; changes (legislative and otherwise) in the asset securitization industry; regulatory and accounting changes; 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, 2007, filed with the SEC on March 17, 2008, 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.

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


                                                    Three Months Ended
                                                         March 31,
                                                    2008          2007
                                                ------------  ------------
Revenues:
  Servicing fees                                $      2,200  $      2,605
  Income from Portfolio Assets                         4,935         5,035
  Gain on sale of SBA loans held for sale, net             9           281
  Interest income from SBA loans                         476           308
  Interest income from affiliates                        150           126
  Interest income from loans receivable - other          275           907
  Other income                                         1,459           459
                                                ------------  ------------
    Total revenues                                     9,504         9,721
                                                ------------  ------------
Expenses:
  Interest and fees on notes payable                   3,683         4,251
  Salaries and benefits                                5,030         3,993
  Provision for loan and impairment losses             3,030           326
  Occupancy, data processing, property
   protection and other                                3,925         3,933
                                                ------------  ------------
    Total expenses                                    15,668        12,503
                                                ------------  ------------
Equity in earnings of investments                      2,840         1,826
                                                ------------  ------------
Loss from continuing operations before income
 taxes and minority interest                          (3,324)         (956)
  Income taxes                                          (191)          (67)
  Minority interest                                       22           108
                                                ------------  ------------
Loss from continuing operations                       (3,493)         (915)
                                                ------------  ------------
Discontinued operations
 Loss from operations of discontinued
  components                                             (91)           --
Net loss                                        $     (3,584) $       (915)
                                                ============  ============

Basic and diluted loss per common share are as
 follows:
   Loss from continuing operations              $      (0.33) $      (0.08)
   Discontinued operations                      $      (0.01) $         --
   Net loss per common share                    $      (0.34) $      (0.08)
   Weighted average common shares outstanding         10,584        10,788


                     Selected Unaudited Balance Sheet Data
                                                   March 31,  December 31,
                                                     2008         2007
                                                ------------  ------------
  Cash                                          $     14,395  $     23,546
  Earning Assets:
   Portfolio Assets, net                             112,593       122,001
   Loans and interest receivable                      26,364        26,574
   Equity investments                                 89,643        87,622
   Railroad assets                                     7,575         7,403
  Deferred tax asset, net                             20,101        20,101
  Service fees receivable and other assets             9,760        10,872
                                                ------------  ------------
   Total assets                                 $    280,431  $    298,119
                                                ============  ============

  Notes payable                                 $    167,579  $    177,329
  Minority interest and other liabilities             12,000        13,967
                                                ------------  ------------
   Total liabilities                                 179,579       191,296
   Total equity                                      100,852       106,823
                                                ------------  ------------
   Total liabilities and equity                 $    280,431  $    298,119
                                                ============  ============



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


                                                    Three Months Ended
                                                         March 31,
                                                    2008          2007
                                                ------------  ------------
Portfolio Asset Acquisition and Resolution:
 Summary Operating Statement Data
   Revenues                                     $      9,321  $      9,592
   Equity in earnings of investments                   2,840         1,826
   Expenses                                          (10,931)       (9,222)
                                                ------------  ------------
   Operating contribution before provision for
    loan and impairment losses                         1,230         2,196
   Provision for loan and impairment losses            3,030           326
                                                ------------  ------------
    Operating contribution, net of direct taxes $     (1,800) $      1,870
                                                ============  ============

 Aggregate purchase price of portfolios
  acquired:
   Acquisition partnerships
    Domestic                                    $      6,693  $     71,568
    Latin America                                     13,207         3,401
    Europe                                                --         3,802
                                                ------------  ------------
     Total                                      $     19,900  $     78,771
                                                ============  ============

                                                   Purchase    FirstCity's
 Historical Acquisitions - Annual:                  Price       Investment
                                                ------------  ------------
   Three months ended March 31, 2008            $     19,900  $      8,435
   2007                                              214,333       126,714
   2006                                              296,990       144,048
   2005                                              146,581        71,405
   2004                                              174,139        59,762

                                                  March 31,   December 31,
                                                    2008          2007
                                                ------------  ------------
 Portfolio acquisition and resolution assets by
  region:
   Domestic                                     $    151,443  $    163,078
   Latin America                                      36,054        33,450
   Europe                                             48,341        46,701
   Canada                                                337           371
                                                ------------  ------------
    Total                                       $    236,175  $    243,600
                                                ============  ============

                                                    Three Months Ended
                                                         March 31,
                                                    2008          2007
                                                ------------  ------------
 Revenues and equity in earnings of investments
  by region:
   Domestic                                     $      6,718  $      6,967
   Latin America                                       3,035         2,532
   Europe                                              2,395         1,830
   Canada                                                 13            89
                                                ------------  ------------
    Total                                       $     12,161  $     11,418
                                                ============  ============

 Revenues and equity in earnings of investments
  by source:
   Equity earnings                              $      2,840  $      1,826
   Income from Portfolio Assets                        4,935         5,035
   Servicing fees                                      2,200         2,605
   Gain on sale of SBA loans held for sale, net            9           281
   Interest income from SBA loans                        476           308
   Interest income from affiliates                       150           126
   Interest income from loans receivable -
    other                                                275           907
   Other                                               1,276           330
                                                ------------  ------------
    Total                                       $     12,161  $     11,418
                                                ============  ============



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


                                                    Three Months Ended
                                                         March 31,
                                                    2008          2007
                                                ------------  ------------
Analysis of Equity Investments
FirstCity's average investment:
  Domestic                                      $     23,696  $     35,877
  Latin America                                       22,890        18,659
  Europe                                              30,526        47,436
  Europe-Servicing subsidiaries                        7,153         6,125
  Latin America-Servicing subsidiaries                 4,925         1,474
                                                ------------  ------------
   Total                                        $     89,190  $    109,571
                                                ============  ============

FirstCity share of equity earnings (losses):
  Domestic                                      $        266  $        251
  Latin America                                          369           (10)
  Europe                                               1,686         1,540
  Europe-Servicing subsidiaries                          316            76
  Latin America-Servicing subsidiaries                   203           (31)
                                                ------------  ------------
   Total                                        $      2,840  $      1,826
                                                ============  ============

Selected Other Data:
Average investment in wholly owned portfolio
 assets and loans receivable:
  Domestic                                      $    126,377  $    142,747
  Latin America                                        6,998         9,349
  Europe                                               9,107         3,610
  Canada                                                 350         2,287
                                                ------------  ------------
   Total                                        $    142,832  $    157,993
                                                ============  ============

Income from wholly owned portfolio assets and
 loans receivable:
  Domestic                                      $      5,235  $      5,967
  Latin America                                          321           527
  Europe                                                 276            74
  Canada                                                  13            89
                                                ------------  ------------
   Total                                        $      5,845  $      6,657
                                                ============  ============

Servicing fee revenues:
  Domestic partnerships:
   Servicing fee revenue                        $        362  $        629
   Average servicing fee %                               3.2%          3.7%
  Latin American partnerships:
   Servicing fee revenue                        $      1,848  $      1,958
   Average servicing fee %                              15.5%         15.9%
  Total Service Fees-Portfolio Assets:
   Servicing fee revenue                        $      2,210  $      2,587
   Average servicing fee %                               9.5%          8.7%
  Service Fees-SBA loans:                       $        (10) $         18
   Total Service Fees                           $      2,200  $      2,605

Collections:
  Domestic                                      $     11,349  $     17,225
  Latin America                                       11,885        12,342
  Europe                                              12,768        33,511
                                                ------------  ------------
     Subtotal                                         36,002        63,078
  Wholly owned                                        19,489        19,691
                                                ------------  ------------
   Total                                        $     55,491  $     82,769
                                                ============  ============

Servicing portfolio (face value):
  Domestic                                      $    556,774  $    619,098
  Latin America                                    1,596,845     1,712,128
  Europe                                           1,174,578     1,027,430
                                                ------------  ------------
   Total                                        $  3,328,197  $  3,358,656
                                                ============  ============

Number of personnel at period end:
  Domestic                                                94            58
  Latin America                                          122           116
  Corporate                                               34            32
                                                ------------  ------------
   Total personnel                                       250           206
                                                ============  ============



                      FirstCity Financial Corporation
                    Schedule of Unrealized Gross Profit
                              March 31, 2008
                                (Unaudited)


                                       Book Value of Portfolio Assets (1)
                                     -------------------------------------
 ($ in 000's)                        12/31/2006   12/31/2007    3/31/2008
                                     ===========  ===========  ===========
 Domestic                            $   153,118      151,802      138,534
 Europe                                   46,204       40,340       40,008
 Latin America                            22,378       26,844       38,840
                                     -----------  -----------  -----------
 Total  (4)                          $   221,700      218,987      217,383
                                     ===========  ===========  ===========

                                      Estimated Remaining Collections (2)
                                     -------------------------------------
                                     12/31/2006   12/31/2007    3/31/2008
                                     ===========  ===========  ===========
 Domestic                            $   215,987      195,845      171,868
 Europe                                   61,081       52,617       51,802
 Latin America                            50,866       68,900       89,695
                                     -----------  -----------  -----------
 Total                               $   327,934      317,363      313,365
                                     ===========  ===========  ===========

                                          Unrealized Gross Profit (3)
                                     -------------------------------------
                                     12/31/2006   12/31/2007    3/31/2008
                                     ===========  ===========  ===========
 Domestic                            $    62,869       44,043       33,334
 Europe                                   14,877       12,278       11,794
 Latin America                            28,488       42,056       50,854
                                     -----------  -----------  -----------
 Total                               $   106,234       98,376       95,982
                                     ===========  ===========  ===========

                                           Unrealized Gross Profit %
                                     -------------------------------------
                                     12/31/2006   12/31/2007    3/31/2008
                                     ===========  ===========  ===========
 Domestic                                   29.1%        22.5%        19.4%
 Europe                                     24.4%        23.3%        22.8%
 Latin America                              56.0%        61.0%        56.7%
 Total                                      32.4%        31.0%        30.6%

(1) Book Value of Portfolio Assets represents the unamortized purchase
price of Portfolio Assets held by various acquisition entities, some of
which are consolidated by FirstCity and others held through equity
investments in partnerships or similar arrangements.
(2) Estimated Remaining Collections represents the sum of all future
projected cash collections expected from the Portfolio Assets, net of
certain expenses.
(3) Unrealized Gross Profit represents the excess difference between the
Estimated Remaining Collections and the Book Value of Portfolio Assets.
(4) FirstCity considers Book Value of its interests in Portfolio Assets a
useful measurement of the Company's underlying holdings and interests in
Portfolio Assets. As FirstCity's share of Book Value of Portfolio Assets is
considered a non-GAAP measure, the following reconciliation is provided:


         12/31/2006           12/31/2007          3/31/2008
         ==========           ==========          =========
          $ 108,696              122,001            112,593

             (2,005)              (4,474)            (3,996)

            115,009              101,460            108,786

         ----------           ----------          ---------
          $ 221,700              218,987            217,383
         ==========           ==========          =========


FirstCity's wholly owned and majority-owned Portfolio Assets(as reported in
"Portfolio Assets" on the financial statement of respective SEC filing)
Minority shareholders' interests in FirstCity's majority-owned Portfolio
Assets (included in "Minority interest" on the financial statement of
respective SEC filing) FirstCity's interests in Portfolio Assets held by
equity investment entities (included in total assets of equity investments
in "Condensed Combined Balance Sheets" table disclosed in financial
statement footnotes of respective SEC filing)

Contact Information

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