Segment Reporting

3 Months Ended

Mar. 31, 2013

Segment Reporting

Segment Reporting

(16)  Segment Reporting

At March 31, 2013 and 2012, 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 under-performing and non-performing loans, and to a lesser extent, 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-month month periods ended March 31, 2013 and 2012:

	Three Months Ended
	March 31, 2013
	(Dollars in thousands)
	Portfolio Asset			Special
	Acquisition			Situations			Corporate
	and Resolution			Platform			and Other			Total
Revenues	$	5,687		$	4,267		$	120		$	10,074
Costs and expenses	(6,562		)	(3,638		)	(2,831		)	(13,031		)
Equity income (loss) from unconsolidated subsidiaries	960			(161		)	—			799
Income tax (expense) benefit	24			(4		)	55			75
Net income attributable to noncontrolling interests	(302		)	(234		)	—			(536		)
Earnings (loss) from continuing operations	(193		)	230			(2,656		)	(2,619		)
Income from discontinued operations	111			—			—			111
Net earnings (loss)	$	(82	)	$	230		$	(2,656	)	$	(2,508	)

	Three Months Ended
	March 31, 2012
	(Dollars in thousands)
	Portfolio Asset			Special
	Acquisition			Situations			Corporate
	and Resolution			Platform			and Other			Total
Revenues	$	16,074		$	2,528		$	85		$	18,687
Costs and expenses	(8,275		)	(1,873		)	(2,914		)	(13,062		)
Equity income (loss) from unconsolidated subsidiaries	4,532			(65		)	—			4,467
Income tax (expense) benefit	(761		)	(20		)	(51		)	(832		)
Net income attributable to noncontrolling interests	(953		)	(155		)	—			(1,108		)
Earnings (loss) from continuing operations	10,617			415			(2,880		)	8,152
Income from discontinued operations	213			—			—			213
Net earnings (loss)	$	10,830		$	415		$	(2,880	)	$	8,365

Revenues and equity income (loss) from investments in unconsolidated subsidiaries from the Special Situations Platform segment are all attributable to U.S. operations. Revenues and equity income (loss) of unconsolidated subsidiaries from the Portfolio Asset Acquisition and Resolution segment are attributable to U.S. and foreign operations as summarized as follows:

	Three Months Ended
	March 31,
	2013		2012
	(Dollars in thousands)
Domestic	$	4,444	$	15,815
Latin America	1,820		2,085
Europe	383		2,706
Total	$	6,647	$	20,606

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

	March 31,		December 31,
	2013		2012
	(Dollars in thousands)
Cash and cash equivalents	$	33,076	$	39,347
Portfolio acquisition and resolution assets:
Domestic	107,825		111,935
Latin America	7,023		6,495
Europe	5,406		6,049
Assets held for sale	24,086		20,552
Special situations platform assets	32,717		45,158
Other non-earning assets, net	13,024		15,101
Total assets	$	223,157	$	244,637