EX-99.1 2 a08-28003_1ex99d1.htm EX-99.1

Exhibit 99.1

 

N E W S    R E L E A S E

 

Contact:

Suzy W. Taylor

 

866-652-1810

 

 

FirstCity Financial Reports Third Quarter 2008 Results and Other Activities

 

Waco, Texas   November 10, 2008          

 

Highlights:

 

·      FirstCity reported 3rd quarter 2008 loss of $1.8 million or ($0.17) per diluted share – which includes $2.1 million of net provisions.

 

·      FirstCity invested $9.3 million in portfolio acquisitions and other investments during the quarter.

 

·      FirstCity purchased 439,170 shares of its common stock since June 30, 2008, completing the 1,500,000 share repurchase authorized under its stock repurchase plan.

 

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

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2008

 

2007

 

2008

 

2007

 

 

 

(unaudited)

 

(unaudited)

 

Portfolio Asset Acquisition and Resolution

 

$

(510

)

$

4,680

 

$

(7,131

)

$

10,863

 

Corporate overhead *

 

(1,241

)

(2,026

)

(4,592

)

(7,318

)

Earnings (loss) from continuing operations

 

(1,751

)

2,654

 

(11,723

)

3,545

 

Loss from discontinued operations, net of taxes

 

(4

)

—

 

(145

)

—

 

Net earnings (loss) to common stockholders

 

$

(1,755

)

$

2,654

 

$

(11,868

)

$

3,545

 

Diluted earnings (loss) per common share

 

$

(0.17

)

$

0.23

 

$

(1.14

)

$

0.31

 

 

*     Corporate overhead includes $0.2 million and $2.2 million of expenses related to the independent investigation for the three-month and nine-month periods ended September 30, 2007, respectively.

 

Portfolio Asset Acquisition and Resolution

 

For the third quarter 2008, the operating contribution from the Portfolio Asset Acquisition business resulted in a $0.5 million loss. The loss was comprised primarily of $12.6 million in revenues, $2.2 million in equity in earnings of investments, and $15.3 million of expenses. The business generated 57% of the revenues (including equity in earnings of investments) from domestic investments, 30% from investments in Latin America, and 13% from investments in Europe.

 

Earnings for the third quarter were positively impacted by continued revenue streams from Portfolio Assets of $5.2 million; equity in earnings of investments of $2.2 million; servicing fees of $3.8 million; interest income of $1.8 million from loan investments; and $0.8 million from our majority-owned domestic railroad operation. However, third quarter earnings were negatively impacted by net impairment provisions, declining collections, and asset-level expenses attributed primarily to the Company’s consolidated and non-consolidated domestic portfolios; and foreign currency exchange losses.

 

(more)

 


 

Portfolio Asset Acquisition and Resolution (Continued)

 

Net Impairment Provisions, Declining Collections and Asset-Level Expenses

 

FirstCity recorded $2.1 million of net impairment provisions in third quarter 2008 – comprised of $1.1 million of net provisions recorded to our consolidated portfolios, and $1.0 million as our share of net impairment provisions recorded to portfolio assets held in our partnership interests. The global distribution of the $2.1 million of net impairment provisions recorded by the Company in third quarter 2008 includes $1.2 million in the United States, $0.3 million in Europe, and $0.6 million in Latin America. The impairment provisions in third quarter 2008 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 domestic loan portfolios. Collections on the Company’s consolidated domestic portfolios decreased to $14.5 million in third quarter 2008 from $18.3 million in third quarter 2007, and aggregate collections on portfolios held in our non-consolidated domestic partnerships decreased to $13.2 million in third quarter 2008 from $14.2 million in third quarter 2007. FirstCity also recorded $1.2 million of asset-level costs (i.e. property taxes, insurance, repairs and legal costs) in third quarter 2008 related to consolidated domestic portfolios to protect the Company’s security interests in its loan collateral and to support foreclosed properties until they are sold. These asset-level costs are attributed primarily to increased levels of delinquent property tax and insurance payments by the borrowers and increased loan foreclosures over the past twelve months. Management believes that declines in real estate values, delayed collections, and rising asset-level costs are the resulting adverse effects from the subprime mortgage crisis that began in the United States in 2007 (i.e. rising loan defaults and foreclosures on loan collateral because borrowers cannot refinance their loans and/or continue to make payments, and significant declines in real estate values attributed primarily to excess building inventories). The impairment provisions were identified in connection with management’s quarterly evaluation of the collectability of the Company’s Portfolio Assets. Management’s evaluation is inherently subjective as it requires estimates that are susceptible to revision in future periods as more information becomes available. Given current market conditions, we cannot provide assurance that we will not incur additional provisions in the future.

 

Foreign Currency Transaction Losses

 

The combined impact of foreign currency transactions from the Company’s consolidated and non-consolidated foreign operations resulted in a $0.4 million foreign currency exchange loss in third quarter 2008 (compared to a combined impact of $0.9 million in foreign currency exchange gains in third quarter 2007). The global distribution of the Company’s combined foreign currency exchange loss in third quarter 2008 was comprised of $0.5 million of exchange losses from European operations and $0.1 million of exchange gains from Latin American operations.

 

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

 

 

 

Three Months Ended

 

Nine Months Ended

 

Illustration of the Effects of Currency

 

September 30,

 

September 30,

 

Fluctuations (dollars in thousands)

 

2008

 

2007

 

2008

 

2007

 

 

 

(unaudited)

 

(unaudited)

 

Net earnings (loss) to Common Stockholders

 

$

(1,755

)

$

2,654

 

$

(11,868

)

$

3,545

 

Foreign currency gains (losses):

 

 

 

 

 

 

 

 

 

Euro

 

(550

)

1,231

 

(512

)

785

 

Mexican Peso

 

325

 

(349

)

1,019

 

(190

)

Argentine Peso

 

(33

)

(22

)

(2

)

(24

)

Canadian Dollar

 

(8

)

23

 

(20

)

243

 

Chilean Peso

 

(182

)

5

 

(129

)

28

 

 

 

 

 

 

 

 

 

 

 

Exchange rate at valuation date:

 

 

 

 

 

 

 

 

 

Euro

 

0.69

 

0.70

 

 

 

 

 

Mexican Peso

 

10.79

 

10.92

 

 

 

 

 

Argentine Peso

 

3.13

 

3.15

 

 

 

 

 

Canadian Dollar

 

1.04

 

0.99

 

 

 

 

 

Chilean Peso

 

550.59

 

511.20

 

 

 

 

 

 

2


 

Portfolio Asset Acquisition and Resolution (Continued)

 

The Company was involved in acquiring $4.5 million of portfolio investments with a face value of approximately $78.1 million in the third quarter 2008 – of which FirstCity’s investment share was $3.2 million. FirstCity’s global distribution of its third quarter 2008 investments includes $2.9 million in the United States and $0.3 million in Latin America. In addition to its portfolio acquisitions in third quarter 2008, FirstCity invested $4.2 million in the form of SBA loan originations and advances; and $1.8 million in equity interest investments. For the nine months ended September 30, 2008, FirstCity was involved in acquiring $61.1 million of portfolio investments with a face value of approximately $716.2 million (of which FirstCity’s investment share was $45.1 million), and $39.7 million of additional portfolio investments, debt financing arrangements, SBA loan originations and advances, and equity interest investments. At September 30, 2008, FirstCity’s earning assets (Portfolio Assets, equity investments, loans receivable and entity-level earning assets) totaled $301.7 million, and the global distribution of such earning assets (at carrying value) included $194.3 million in the United States; $54.7 million in Europe; and $52.7 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3rd Quarter

 

$

2.9

 

$

—

 

$

1.6

 

$

4.5

 

$

3.2

 

$

6.0

 

$

9.2

 

2nd Quarter

 

28.4

 

—

 

8.3

 

36.7

 

33.5

 

32.2

 

65.7

 

1st Quarter

 

6.7

 

—

 

13.2

 

19.9

 

8.4

 

1.5

 

9.9

 

YTD 2008

 

$

38.0

 

$

—

 

$

23.1

 

$

61.1

 

$

45.1

 

$

39.7

 

$

84.8

 

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

 

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

 

 

Management believes that current market conditions have created tremendous opportunities for FirstCity to expand its business, and that asset acquisition opportunities at attractive margins are available. These opportunities are showing up in FirstCity’s current pipeline as the Company is currently evaluating 29 different transactions representing approximately $7.2 billion in face value of assets, of which $6 billion is in the U.S., $347 million in Europe and $817 million in Latin America. This is in contrast to the pipeline at the end of the fourth quarter 2007 with $1.8 billion in face value, of which only $398 million was in the U.S. While FirstCity is very encouraged with the prospects, most of these transactions are subject to competitive bidding and negotiations, and there can be no assurance as to the ultimate execution of any one transaction.

 

Other Corporate Matters

 

Liquidity

 

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. At September 30, 2008, FirstCity’s maximum borrowing capacity under these credit commitments was approximately $145.0 million (subject to borrowing base requirements of the respective credit facilities). These credit facilities are available to FirstCity through their maturity in November 2010, at which time management expects to negotiate for a maturity date extension. At September 30, 2008, FirstCity was in compliance with all material covenants and requirements set forth in the underlying credit agreements for these credit facilities.

 

3


 

Other Corporate Matters (Continued)

 

Share Repurchase Program

 

The Company completed the purchase of 1,500,000 shares of its common stock under its stock repurchase plan by purchasing an additional 439,170 shares since June 30, 2008 for $1.7 million (including 102,800 shares purchased in third quarter 2008 for $0.6 million). To date, the Company has purchased 1,500,000 shares of its common stock pursuant to the stock repurchase plan for an aggregate purchase price of $10.9 million from August 2006 to October 2008.

 

Conference Call

 

A conference call will be held on Monday, November 10, 2008 at 9:00 a.m. Central Time to discuss third 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 Third Quarter 2008 Conference Call

 

Date:

Monday, November 10, 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.earnings.com

 

 

 

 

Dial In Access:

Domestic

866-713-8565

 

 

International

617-597-5324

 

 

 

 

 

 

Pass code

59236678

 

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 (NASDAQ: FCFC).

 

4


 

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 SEC, in its reports to stockholders and in other FirstCity communications. These statements relate to the Company’s strategic objectives and future performance, which are not historical facts, 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, as amended (“Exchange Act”). Forward-looking statements include, without limitation, statements regarding our future financial position, business strategy, and plans and objectives of management for future operations, as well as any statement that may project, indicate or imply future results, performance or achievements, and may contain the words “expect,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “may,” “could,” “would,” “should,” “will likely result,” “indication,” “outlook,” “projects” and similar expressions. Forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Actual results and outcomes may differ materially from those expressed in, or implied by, our forward-looking statements.

 

There are many important factors that could cause the Company’s actual results to differ materially from those indicated in the forward-looking statements. Such factors include, but are not limited to, changes in general economic conditions in the United States and local economic conditions in the geographic regions and industries in which the Company operates; foreign social and economic conditions; performance of the Company’s subsidiaries and affiliates; availability of investments and investment opportunities; the Company’s ability to project future cash receipts and develop critical assumptions and estimates underlying asset performance; increased competition in the business in which we operate; the Company’s ability to consummate portfolio acquisitions and other investment transactions on acceptable terms; credit risk associated with our borrowers’ ability to repay their loans; level of nonperforming assets, charge-offs and impairment provisions; risks associated with foreign operations; currency exchange rate fluctuations; risks associated with start-up of new businesses and entry into new markets; changes in the interest rate environment and market liquidity; fluctuations in residential and commercial real estate values; adverse movements and volatility in equity capital markets; 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; risks of declining value of loans, collateral or assets; the ability of the Company to utilize NOLs; liabilities resulting from litigation and regulatory investigations that might arise from continuing and discontinued operations, including costs, expenses, settlements and judgments; changes (legislative and otherwise) in the asset securitization industry; changes in domestic or foreign tax laws, rules and regulations as well as court, Internal Revenue Service or other governmental agencies’ interpretations thereof; changes in accounting standards, rules and interpretations; and factors more fully discussed and 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 (including those discussed under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”), as well as in other SEC filings of the Company. 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 Quarterly Report on Form 10-Q represent beliefs and assumptions only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, the Company expressly disclaims any obligation or intention 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 future events, conditions or circumstances on which any forward-looking statement is based.

 

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.

 

5


 

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

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2008

 

2007

 

2008

 

2007

 

Revenues:

 

 

 

 

 

 

 

 

 

Servicing fees

 

$

3,842

 

$

2,426

 

$

8,748

 

$

8,008

 

Income from Portfolio Assets

 

5,229

 

5,743

 

15,786

 

16,463

 

Gain on sale of SBA loans held for sale, net

 

85

 

34

 

227

 

658

 

Interest income from SBA loans

 

368

 

752

 

1,210

 

1,666

 

Interest income from affiliates

 

875

 

147

 

1,508

 

413

 

Interest income from loans receivable - other

 

541

 

1,627

 

1,171

 

3,516

 

Revenue from railroad operations

 

810

 

302

 

2,474

 

302

 

Other income

 

939

 

601

 

2,558

 

1,598

 

Total revenues

 

12,689

 

11,632

 

33,682

 

32,624

 

Expenses:

 

 

 

 

 

 

 

 

 

Interest and fees on notes payable to banks

 

4,249

 

4,747

 

11,690

 

13,666

 

Interest and fees on notes payable to affiliates

 

322

 

—

 

322

 

—

 

Salaries and benefits

 

5,655

 

4,446

 

15,982

 

12,303

 

Provision for loan and impairment losses

 

1,123

 

(136

)

11,243

 

936

 

Property protection

 

1,307

 

781

 

4,661

 

1,950

 

Occupancy, data processing and other

 

3,774

 

1,438

 

9,025

 

8,590

 

Total expenses

 

16,430

 

11,276

 

52,923

 

37,445

 

Equity in earnings of investments

 

2,170

 

2,157

 

8,018

 

8,315

 

Gain on sale of subsidiaries and equity investments

 

—

 

207

 

—

 

207

 

Earnings (loss) from continuing operations before income taxes and minority interest

 

(1,571

)

2,720

 

(11,223

)

3,701

 

Income taxes

 

44

 

(153

)

(245

)

(366

)

Minority interest

 

(224

)

87

 

(255

)

210

 

Earnings (loss) from continuing operations

 

(1,751

)

2,654

 

(11,723

)

3,545

 

Discontinued operations

 

 

 

 

 

 

 

 

 

Loss from discontinued operations

 

(4

)

—

 

(145

)

—

 

Net earnings (loss)

 

$

(1,755

)

$

2,654

 

$

(11,868

)

$

3,545

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share are as follows:

 

 

 

 

 

 

 

 

 

Earnings (loss) from continuing operations

 

$

(0.17

)

$

0.25

 

$

(1.13

)

$

0.33

 

Discontinued operations

 

$

—

 

$

—

 

$

(0.01

)

$

—

 

Net earnings (loss) per common share

 

$

(0.17

)

$

0.25

 

$

(1.14

)

$

0.33

 

Weighted average common shares outstanding

 

10,232

 

10,790

 

10,391

 

10,789

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per common share are as follows:

 

 

 

 

 

 

 

 

 

Earnings (loss) from continuing operations

 

$

(0.17

)

$

0.23

 

$

(1.13

)

$

0.31

 

Discontinued operations

 

$

—

 

$

—

 

$

(0.01

)

$

—

 

Net earnings (loss) per common share

 

$

(0.17

)

$

0.23

 

$

(1.14

)

$

0.31

 

Wtd. avg. common shares outstanding

 

10,232

 

11,379

 

10,391

 

11,402

 

 

 

 

 

 

 

 

 

 

 

Selected Unaudited Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

 

 

 

 

 

 

2008

 

2007

 

 

 

 

 

 

Cash and cash equivalents

 

$

12,984

 

$

23,037

 

 

 

 

 

 

Restricted cash

 

1,124

 

509

 

 

 

 

 

 

Earning Assets:

 

 

 

 

 

 

 

 

 

 

Portfolio Assets, net

 

141,153

 

122,001

 

 

 

 

 

 

Loans and interest receivable

 

59,009

 

26,574

 

 

 

 

 

 

Equity investments

 

93,287

 

87,622

 

 

 

 

 

 

Railroad assets

 

8,264

 

7,403

 

 

 

 

 

 

Deferred tax asset, net

 

20,101

 

20,101

 

 

 

 

 

 

Service fees receivable and other assets

 

11,008

 

10,872

 

 

 

 

 

 

Total assets

 

$

346,930

 

$

298,119

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes payable to banks

 

$

216,597

 

$

177,329

 

 

 

 

 

 

Note payable to affiliate

 

8,658

 

—

 

 

 

 

 

 

Minority interest and other liabilities

 

29,606

 

13,967

 

 

 

 

 

 

Total liabilities

 

254,861

 

191,296

 

 

 

 

 

 

Total equity

 

92,069

 

106,823

 

 

 

 

 

 

Total liabilities and equity

 

$

346,930

 

$

298,119

 

 

 

 

 

 

6


 

FirstCity Financial Corporation

Supplemental Information

(Dollars in thousands)

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2008

 

2007

 

2008

 

2007

 

Portfolio Asset Acquisition and Resolution:

 

 

 

 

 

 

 

 

 

Summary Operating Statement Data

 

 

 

 

 

 

 

 

 

Revenues

 

$

12,601

 

$

11,492

 

$

33,367

 

$

32,272

 

Equity in earnings of investments

 

2,170

 

2,157

 

8,018

 

8,315

 

Gain on sale of subsidiaries and equity investments

 

—

 

207

 

—

 

207

 

Expenses

 

(14,158

)

(9,312

)

(37,273

)

(28,995

)

Operating contribution before provision for loan and impairment losses

 

613

 

4,544

 

4,112

 

11,799

 

Provision for loan and impairment losses

 

1,123

 

(136

)

11,243

 

936

 

Operating contribution, net of direct taxes

 

$

(510

)

$

4,680

 

$

(7,131

)

$

10,863

 

 

 

 

 

 

 

 

 

 

 

Aggregate purchase price of portfolios acquired:

 

 

 

 

 

 

 

 

 

Acquisition partnerships

 

 

 

 

 

 

 

 

 

Domestic

 

$

2,912

 

$

17,338

 

$

38,031

 

$

116,370

 

Latin America

 

1,576

 

—

 

23,097

 

64,959

 

Europe

 

—

 

2,327

 

—

 

8,538

 

Total

 

$

4,488

 

$

19,665

 

$

61,128

 

$

189,867

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase

 

FirstCity’s

 

 

 

 

 

 

 

Price

 

Investment

 

 

 

 

 

Historical Acquisitions - Annual:

 

 

 

 

 

 

 

 

 

Nine months ended September 30, 2008

 

$

61,128

 

$

45,124

 

 

 

 

 

2007

 

214,333

 

126,714

 

 

 

 

 

2006

 

296,990

 

144,048

 

 

 

 

 

2005

 

146,581

 

71,405

 

 

 

 

 

2004

 

174,139

 

59,762

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

 

 

 

 

 

2008

 

2007

 

 

 

 

 

Portfolio acquisition and resolution assets by region:

 

 

 

 

 

 

 

 

 

Domestic

 

$

194,051

 

$

163,078

 

 

 

 

 

Latin America

 

52,698

 

33,450

 

 

 

 

 

Europe

 

54,692

 

46,701

 

 

 

 

 

Canada

 

272

 

371

 

 

 

 

 

Total

 

$

301,713

 

$

243,600

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2008

 

2007

 

2008

 

2007

 

Revenues and equity in earnings of investments by region:

 

 

 

 

 

 

 

 

 

Domestic

 

$

8,373

 

$

9,869

 

$

22,340

 

$

26,218

 

Latin America

 

4,433

 

2,303

 

11,321

 

8,528

 

Europe

 

1,955

 

1,462

 

7,690

 

5,667

 

Canada

 

10

 

15

 

34

 

174

 

Total

 

$

14,771

 

$

13,649

 

$

41,385

 

$

40,587

 

 

 

 

 

 

 

 

 

 

 

Revenues and equity in earnings of investments by source:

 

 

 

 

 

 

 

 

 

Equity earnings

 

$

2,170

 

$

2,157

 

$

8,018

 

$

8,315

 

Income from Portfolio Assets

 

5,229

 

5,743

 

15,786

 

16,463

 

Servicing fees

 

3,842

 

2,426

 

8,748

 

8,008

 

Gain on sale of SBA loans held for sale, net

 

85

 

34

 

227

 

658

 

Interest income from SBA loans

 

368

 

752

 

1,210

 

1,666

 

Interest income from affiliates

 

875

 

147

 

1,508

 

413

 

Interest income from loans receivable - other

 

541

 

1,627

 

1,171

 

3,516

 

Revenue from railroad operations

 

810

 

302

 

2,474

 

302

 

Other

 

851

 

461

 

2,243

 

1,246

 

Total

 

$

14,771

 

$

13,649

 

$

41,385

 

$

40,587

 

 

7


 

FirstCity Financial Corporation

Supplemental Information

(Dollars in thousands)

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2008

 

2007

 

2008

 

2007

 

Analysis of Equity Investments

 

 

 

 

 

 

 

 

 

FirstCity’s average investment:

 

 

 

 

 

 

 

 

 

Domestic

 

$

20,728

 

$

36,114

 

$

22,202

 

$

35,207

 

Latin America

 

24,238

 

21,980

 

23,610

 

20,670

 

Europe

 

27,757

 

39,398

 

29,569

 

43,587

 

Europe-Servicing subsidiaries

 

11,531

 

5,923

 

8,887

 

5,869

 

Latin America-Servicing subsidiaries

 

4,798

 

4,578

 

4,960

 

3,315

 

Domestic-Operating subsidiaries

 

34

 

—

 

5

 

—

 

Total

 

$

89,086

 

$

107,993

 

$

89,233

 

$

108,648

 

 

 

 

 

 

 

 

 

 

 

FirstCity’s share of equity earnings (losses):

 

 

 

 

 

 

 

 

 

Domestic

 

$

(448

)

$

1,064

 

$

(294

)

$

2,428

 

Latin America

 

405

 

(62

)

1,509

 

815

 

Europe

 

1,625

 

1,082

 

5,705

 

4,295

 

Europe-Servicing subsidiaries

 

(161

)

168

 

649

 

731

 

Latin America-Servicing subsidiaries

 

(183

)

(95

)

(127

)

46

 

Domestic-Operating subsidiaries

 

932

 

—

 

576

 

—

 

Total

 

$

2,170

 

$

2,157

 

$

8,018

 

$

8,315

 

 

 

 

 

 

 

 

 

 

 

Selected Other Data:

 

 

 

 

 

 

 

 

 

Average investment in consolidated portfolio assets and loans receivable:

 

 

 

 

 

 

 

 

 

Domestic

 

$

167,781

 

$

158,039

 

$

147,149

 

$

151,906

 

Latin America

 

19,653

 

7,335

 

12,030

 

8,327

 

Europe

 

9,463

 

4,328

 

9,293

 

3,976

 

Canada

 

272

 

351

 

305

 

1,522

 

Total

 

$

197,169

 

$

170,053

 

$

168,777

 

$

165,731

 

 

 

 

 

 

 

 

 

 

 

Income from consolidated portfolio assets and loans receivable:

 

 

 

 

 

 

 

 

 

Domestic

 

$

5,528

 

$

7,723

 

$

17,002

 

$

20,766

 

Latin America

 

1,123

 

465

 

1,826

 

1,511

 

Europe

 

437

 

100

 

1,040

 

265

 

Canada

 

10

 

15

 

34

 

174

 

Total

 

$

7,098

 

$

8,303

 

$

19,902

 

$

22,716

 

 

 

 

 

 

 

 

 

 

 

Servicing fee revenues:

 

 

 

 

 

 

 

 

 

Domestic partnerships:

 

 

 

 

 

 

 

 

 

Servicing fee revenue

 

$

1,157

 

$

435

 

$

1,865

 

$

2,114

 

Average servicing fee %

 

8.8

%

3.1

%

6.1

%

3.7

%

Latin American partnerships:

 

 

 

 

 

 

 

 

 

Servicing fee revenue

 

$

2,615

 

$

1,874

 

$

6,744

 

$

5,741

 

Average servicing fee %

 

25.7

%

23.0

%

22.1

%

24.9

%

Total Service Fees-Portfolio Assets:

 

 

 

 

 

 

 

 

 

Servicing fee revenue

 

$

3,772

 

$

2,309

 

$

8,609

 

$

7,855

 

Average servicing fee %

 

16.2

%

10.3

%

14.1

%

9.9

%

Service Fees-SBA loans:

 

$

70

 

$

117

 

$

139

 

$

153

 

Total Service Fees

 

$

3,842

 

$

2,426

 

$

8,748

 

$

8,008

 

 

 

 

 

 

 

 

 

 

 

Collections:

 

 

 

 

 

 

 

 

 

Domestic partnerships

 

$

13,161

 

$

14,190

 

$

30,736

 

$

56,674

 

Latin American partnerships

 

16,384

 

14,827

 

56,900

 

42,068

 

European partnerships

 

17,028

 

22,254

 

50,149

 

70,093

 

Subtotal

 

46,573

 

51,271

 

137,785

 

168,835

 

Consolidated portfolio assets

 

15,608

 

19,733

 

46,523

 

60,817

 

Total

 

$

62,181

 

$

71,004

 

$

184,308

 

$

229,652

 

 

 

 

 

 

 

 

 

 

 

Servicing portfolio (face value) at period end:

 

 

 

 

 

 

 

 

 

Domestic

 

$

593,898

 

$

601,119

 

 

 

 

 

Latin America

 

1,582,654

 

1,129,681

 

 

 

 

 

Europe

 

1,362,008

 

1,065,638

 

 

 

 

 

Total

 

$

3,538,560

 

$

2,796,438

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of personnel at period end:

 

 

 

 

 

 

 

 

 

Domestic

 

96

 

84

 

 

 

 

 

Latin America

 

132

 

116

 

 

 

 

 

Corporate

 

32

 

35

 

 

 

 

 

Total personnel

 

260

 

235

 

 

 

 

 

 

8


 

FirstCity Financial Corporation

Schedule of Unrealized Gross Profit

September 30, 2008

(Unaudited)

 

 

 

Basis in Portfolio Assets (1)

 

($ in 000’s)

 

12/31/2006

 

12/31/2007

 

9/30/2008

 

Domestic

 

$

153,118

 

151,802

 

145,393

 

Europe

 

46,204

 

40,340

 

35,489

 

Latin America

 

22,378

 

26,844

 

40,679

 

Total (4)

 

$

221,700

 

218,987

 

221,561

 

 

 

 

Estimated Remaining Collections (2)

 

 

 

12/31/2006

 

12/31/2007

 

9/30/2008

 

Domestic

 

$

215,987

 

195,845

 

202,769

 

Europe

 

61,081

 

52,617

 

46,333

 

Latin America

 

50,866

 

68,900

 

90,174

 

Total

 

$

327,934

 

317,363

 

339,276

 

 

 

 

Unrealized Gross Profit (3)

 

 

 

12/31/2006

 

12/31/2007

 

9/30/2008

 

Domestic

 

$

62,869

 

44,043

 

57,376

 

Europe

 

14,877

 

12,278

 

10,845

 

Latin America

 

28,488

 

42,056

 

49,495

 

Total

 

$

106,234

 

98,376

 

117,716

 

 

 

 

Unrealized Gross Profit %

 

 

 

12/31/2006

 

12/31/2007

 

9/30/2008

 

Domestic

 

29.1

%

22.5

%

28.3

%

Europe

 

24.4

%

23.3

%

23.4

%

Latin America

 

56.0

%

61.0

%

54.9

%

Total

 

32.4

%

31.0

%

34.7

%

 

This schedule represents information related to the Company’s ownership interests in consolidated and non-consolidated Portfolio Assets and is provided for informational purposes to give an indication of the future potential Unrealized Gross Profit attributable to those portfolios. These are estimates and will change each period based upon management’s review and evaluation of the individual facts and circumstances surrounding the underlying assets and pools in the Portfolios.

 

(1) Basis in Portfolio Assets represents FirstCity’s share of the unamortized purchase price of the Portfolios held by the various acquisition entities, some of which are consolidated by FirstCity and others held through equity investments in partnership or similar arrangements.

(2) Estimated Remaining Collections represents FirstCity’s share of future projected cash collections expected from the Portfolios, net of expenses.

(3) Unrealized Gross Profit represents the excess difference between the Estimated Remaining Collections and the Basis in Portfolio Assets.

(4) FirstCity considers Basis in Portfolio Assets a useful measurement of the Company’s underlying holdings and interests in Portfolio Assets. As FirstCity’s share of Basis in Portfolio Assets is considered a non-GAAP measure, the following reconciliation is provided:

 

 

 

12/31/2006

 

12/31/2007

 

9/30/2008

 

FirstCity’s consolidated Portfolio Assets (as reported in “Portfolio Assets” on the financial statement of the respective Form 10-K or 10-Q)

 

$

108,696

 

122,001

 

147,840

 

Minority ownership interests in FirstCity’s consolidated Portfolio Assets (component of “Minority interest” liability on the financial statement of the respective Form 10-K or 10-Q)

 

(2,005

)

(4,474

)

(11,914

)

FirstCity’s interests in Portfolio Assets held by Acquisition Partnerships (a component of “Assets” as reported in the “Condensed Combined Balance Sheets” tabular disclosure under the “Equity Investments” footnote of the respective Form 10-K or 10-Q)

 

115,009

 

101,460

 

85,635

 

FirstCity’s basis in consolidated and non-consolidated Portfolio Assets

 

$

221,700

 

218,987

 

221,561

 

 

9