Investments in Unconsolidated Subsidiaries

9 Months Ended

Sep. 30, 2012

Investments in Unconsolidated Subsidiaries

Investments in Unconsolidated Subsidiaries

(6)  Investments in Unconsolidated Subsidiaries

The Company has investments in Acquisition Partnerships and various servicing and operating entities that are accounted for under the equity method of accounting (refer to Note 1). The condensed combined financial position and results of operations of the Acquisition Partnerships (which include our U.S. and foreign Acquisition Partnerships) and the servicing and operating entities (collectively, the “Equity Investees”), are summarized as follows:

Condensed Combined Balance Sheets

	September 30,		December 31,
	2012		2011
	(Dollars in thousands)
Acquisition Partnerships:
Assets	$	453,889	$	450,189
Liabilities	$	28,976	$	39,401
Net equity	424,913		410,788
	$	453,889	$	450,189
Servicing and operating entities:
Assets	$	189,322	$	163,647
Liabilities	$	100,411	$	86,269
Net equity	88,911		77,378
	$	189,322	$	163,647
Total:
Assets	$	643,211	$	613,836
Liabilities	$	129,387	$	125,670
Net equity	513,824		488,166
	$	643,211	$	613,836
Equity investment in Acquisition Partnerships	$	58,034	$	59,952
Equity investment in servicing and operating entities	43,001		49,441
	$	101,035	$	109,393

Condensed Combined Summary of Operations

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2012		2011			2012		2011
	(Dollars in thousands)
Acquisition Partnerships:
Revenues	$	22,802	$	12,531		$	68,154	$	37,891
Costs and expenses	8,994		19,136			34,505		32,282
Net earnings (loss)	$	13,808	$	(6,605	)	$	33,649	$	5,609
Servicing and operating entities:
Revenues	$	27,271	$	28,707		$	76,964	$	78,130
Costs and expenses	21,808		22,077			64,587		62,553
Net earnings	$	5,463	$	6,630		$	12,377	$	15,577
Equity income (loss) from Acquisition Partnerships	$	1,900	$	(180	)	$	5,089	$	397
Equity income from servicing and operating entities	2,349		2,957			5,708		7,534
	$	4,249	$	2,777		$	10,797	$	7,931

At September 30, 2012 and December 31, 2011, the Acquisition Partnerships’ total carrying value of loans accounted for under non-accrual methods of accounting (i.e. cost-recovery or cash basis method) approximated $364.4 million and $377.7 million, respectively.

The combined assets and equity of the Equity Investees, and the Company’s carrying value of its equity investments in the Equity Investees, are summarized by geographic region below.

	September 30,		December 31,
	2012		2011
	(Dollars in thousands)
Combined assets of the Equity Investees:
Domestic:
Acquisition Partnerships	$	356,547	$	349,529
Operating entities	63,171		53,256
Latin America:
Acquisition Partnerships	97,342		100,660
Servicing entities	2,047		1,857
Europe - servicing entities	124,104		108,534
	$	643,211	$	613,836
Combined equity of the Equity Investees:
Domestic:
Acquisition Partnerships	$	336,612	$	325,557
Operating entities	21,117		20,515
Latin America:
Acquisition Partnerships	88,301		85,231
Servicing entities	829		763
Europe - servicing entities	66,965		56,100
	$	513,824	$	488,166
Company’s carrying value of its investments in the Equity Investees:
Domestic:
Acquisition Partnerships	$	53,054	$	55,612
Operating entities	13,313		12,508
Latin America:
Acquisition Partnerships	4,980		4,340
Servicing entities	3,006		2,758
Europe - servicing entities (1)	26,682		34,175
	$	101,035	$	109,393

(1)Includes a $6.1 million non-cash reduction to the carrying value of FirstCity’s equity-method investment in a European servicing entity in June 2012 (see Note 3 for additional information).

Revenues and net earnings (losses) of the Equity Investees, and the Company’s share of equity income (loss) of those entities, are summarized by geographic region below. The tables below include individual entities and combined entities under common management that are considered to be significant Equity Investees of FirstCity at September 30, 2012.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
	(Dollars in thousands)
Revenues of the Equity Investees:
Domestic:
Combined Värde Acquisition Partnerships	$	18,772		$	7,183		$	56,440		$	23,251
Other Acquisition Partnerships	384			50			459			345
Other operating entities	11,814			11,577			27,050			31,012
Latin America:
Acquisition Partnerships	3,646			5,298			11,255			14,004
Servicing entity	2,481			2,666			7,277			8,139
Europe:
Acquisition Partnerships	—			—			—			291
MCS et Associes (servicing entity)	12,108			13,360			39,466			35,730
Other servicing entities	868			1,104			3,171			3,249
	$	50,073		$	41,238		$	145,118		$	116,021
Net earnings (loss) of the Equity Investees:
Domestic:
Combined Värde Acquisition Partnerships	$	10,509		$	3,014		$	32,431		$	9,409
Other Acquisition Partnerships	(34		)	(164		)	(1,033		)	(625		)
Other operating entities	3,245			3,291			3,809			6,928
Latin America:
Acquisition Partnerships	3,333			(9,455		)	2,251			(3,211		)
Servicing entity	286			260			768			1,119
Europe:
Acquisition Partnerships	—			—			—			36
MCS et Associes (servicing entity)	1,958			3,056			7,565			7,401
Other servicing entities	(26		)	23			235			129
	$	19,271		$	25		$	46,026		$	21,186
Company’s equity income (loss) from the Equity Investees:
Domestic:
Combined Värde Acquisition Partnerships	$	1,337		$	773		$	5,100		$	1,801
Other Acquisition Partnerships	—			(73		)	(483		)	(281		)
Other operating entities	1,482			1,376			1,708			3,150
Latin America:
Acquisition Partnerships	563			(880		)	472			(1,152		)
Servicing entity	143			129			384			559
Europe:
Acquisition Partnerships	—			—			—			29
MCS et Associes (servicing entity)	731			1,447			3,559			3,794
Other servicing entities	(7		)	5			57			31
	$	4,249		$	2,777		$	10,797		$	7,931

At September 30, 2012, the Company had $9.9 million in Euro-denominated debt for the purpose of hedging a portion of the Company’s net equity investments in Europe. Refer to Note 10 for additional information.