Segment Reporting

6 Months Ended

Jun. 30, 2011

Segment Reporting

Segment Reporting

(18)  Segment Reporting

At June 30, 2011 and 2010, the Company was engaged in two major business segments — Portfolio Asset Acquisition and Resolution business and Special Situations Platform business.

In the Portfolio Asset Acquisition and Resolution business, the Company acquires and resolves portfolios of performing and non-performing loans and other assets (collectively, “Portfolio Assets” or “Portfolios”), which are generally acquired at a discount to their legal principal balance or appraised value. Purchases may be in the form of pools of assets or single assets. The Portfolio Assets are generally aggregated, including loans of varying qualities that are secured or unsecured by diverse collateral types and real estate. Some Portfolio Assets are loans for which resolution is linked primarily to the real estate securing the loan, while others may be collateralized business loans for which resolution may be based either on real estate, business assets or other collateral cash flow. Portfolio Assets are acquired on behalf of the Company or its consolidated subsidiaries, and on behalf of U.S. and foreign investment entities formed with co-investors (“Acquisition Partnerships”). The Company services, manages and ultimately resolves or otherwise disposes of substantially all Portfolio Assets acquired by the Company, its Acquisition Partnerships, or other related entities. The Company services such assets until they are collected or sold.

The Company engages in its Special Situations Platform business through its majority ownership interest in FirstCity Denver Investment Corp. (“FirstCity Denver”). Through its Special Situations Platform business, the Company provides investment capital to privately-held middle-market companies through flexible capital structuring arrangements. The nature of the capital investments primarily takes the form of senior and junior financing arrangements, but also includes direct equity investments and common equity warrants. In addition, our Special Situations Platform business engages in other types of investment activity including distressed debt transactions and leveraged buyouts. FirstCity Denver’s primary investment objective is to generate both current income and capital appreciation through debt and equity investments, and to generally structure the investments to be repaid or exited in 12 to 60 months.

We evaluate the performance of our Portfolio Asset Acquisition and Resolution and Special Situations Platform business segments based primarily on the results of the segments without allocating certain corporate and administrative expenses and other items. “Corporate and Other” in the tables below represent the portions of our expenses (primarily salaries and benefits, accounting fees and legal expenses) and certain other items that are not allocable to our business segments.

The following tables set forth summarized information by segment for the three-and six-month periods ended June 30, 2011 and 2010:

	Three Months Ended
	June 30, 2011
	(Dollars in thousands)
	Portfolio Asset			Special
	Acquisition			Situations			Corporate
	and Resolution			Platform			and Other			Total
Revenues	$	14,547		$	2,323		$	48		$	16,918
Costs and expenses	(10,879		)	(1,836		)	(2,070		)	(14,785		)
Equity in earnings of unconsolidated subsidiaries	1,661			1,622			—			3,283
Gain on business combinations	278			—			—			278
Income tax (expense) benefit	(1,216		)	(34		)	226			(1,024		)
Net income attributable to noncontrolling interests	(1,787		)	(455		)	—			(2,242		)
Net earnings (loss)	$	2,604		$	1,620		$	(1,796	)	$	2,428

	Three Months Ended
	June 30, 2010
	(Dollars in thousands)
	Portfolio Asset			Special
	Acquisition			Situations			Corporate
	and Resolution			Platform			and Other			Total
Revenues	$	21,813		$	8,102		$	46		$	29,961
Costs and expenses	(14,141		)	(8,094		)	(2,113		)	(24,348		)
Equity in earnings of unconsolidated subsidiaries	10			1,806			—			1,816
Income tax (expense) benefit	(1,039		)	13			(179		)	(1,205		)
Net income attributable to noncontrolling interests	(1,595		)	(1,207		)	—			(2,802		)
Earnings (loss) from continuing operations	5,048			620			(2,246		)	3,422
Income from discontinued operations	—			4,643			—			4,643
Net earnings (loss)	$	5,048		$	5,263		$	(2,246	)	$	8,065

	Six Months Ended
	June 30, 2011
	(Dollars in thousands)
	Portfolio Asset			Special
	Acquisition			Situations			Corporate
	and Resolution			Platform			and Other			Total
Revenues	$	33,101		$	4,519		$	80		$	37,700
Costs and expenses	(21,568		)	(3,630		)	(3,798		)	(28,996		)
Equity in earnings of unconsolidated subsidiaries	3,380			1,774			—			5,154
Gain on business combinations	278			—			—			278
Income tax (expense) benefit	(1,782		)	(33		)	189			(1,626		)
Net income attributable to noncontrolling interests	(5,820		)	(537		)	—			(6,357		)
Net earnings (loss)	$	7,589		$	2,093		$	(3,529	)	$	6,153

	Six Months Ended
	June 30, 2010
	(Dollars in thousands)
	Portfolio Asset			Special
	Acquisition			Situations			Corporate
	and Resolution			Platform			and Other			Total
Revenues	$	36,535		$	14,912		$	89		$	51,536
Costs and expenses	(26,022		)	(14,930		)	(3,862		)	(44,814		)
Equity in earnings of unconsolidated subsidiaries	1,193			2,852			—			4,045
Gain on business combinations	891			—			—			891
Income tax (expense) benefit	(385		)	(154		)	(180		)	(719		)
Net income attributable to noncontrolling interests	(6,071		)	(1,345		)	—			(7,416		)
Earnings (loss) from continuing operations	6,141			1,335			(3,953		)	3,523
Income from discontinued operations	—			4,643			—			4,643
Net earnings (loss)	$	6,141		$	5,978		$	(3,953	)	$	8,166

Revenues and equity in earnings of investments from the Special Situations Platform segment are all attributable to U.S. operations. Revenues and equity in earnings of unconsolidated equity-method investments from the Portfolio Asset Acquisition and Resolution segment are attributable to U.S. and foreign operations as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
	(Dollars in thousands)
Domestic	$	9,836	$	15,828	$	20,288	$	24,209
Latin America	3,364		2,908		5,715		4,693
Europe	3,008		3,087		10,478		8,826
Total	$	16,208	$	21,823	$	36,481	$	37,728

Total assets for each segment and a reconciliation to total assets are as follows:

	June 30,		December 31,
	2011		2010
	(Dollars in thousands)
Cash and cash equivalents	$	31,922	$	46,597
Restricted cash	1,702		1,207
Portfolio acquisition and resolution assets:
Domestic	216,925		241,589
Latin America	40,170		39,476
Europe	49,070		68,642
Special situations platform assets	49,125		50,765
Other non-earning assets, net	13,160		12,128
Total assets	$	402,074	$	460,404