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FirstCity Financial Corporation Reports Third Quarter 2012 Results

WACO, Texas, Nov. 14, 2012 (GLOBE NEWSWIRE) --

Highlights and Key Points:

  • FirstCity reported third quarter 2012 earnings of $4.8 million or $0.45 per diluted share.
  • FirstCity and its partners acquired $17.5 million of portfolio assets with a face value of $45.1 million during the third quarter of 2012.
  • FirstCity and its partners, year to date, have acquired $157.0 million of portfolio assets with a face value of $343.8 million.
  • FirstCity invested $1.4 million in non-portfolio debt and equity investments during the third quarter of 2012, bringing year-to-date totals to $13.1 million.
  • In November 2012, FirstCity entered into an agreement to sell its 37.4% ownership interest in UBN for 20 million Euros, with a closing date no later than December 20, 2012.

Components of FirstCity's quarterly and year-to-date earnings results are summarized below:

Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
(Dollars in thousands, except per share data) (Unaudited)
Portfolio Asset Acquisition and Resolution $ 6,367 $ 3,136 $ 20,288 $ 10,725
Special Situations Platform 858 1,376 1,885 3,469
Corporate and other (2,458) (1,782) (7,554) (5,311)
Net earnings attributable to FirstCity $ 4,767 $ 2,730 $ 14,619 $ 8,883
Diluted earnings per common share $ 0.45 $ 0.26 $ 1.38 $ 0.86

Portfolio Asset Acquisition and Resolution Business Segment

For the third quarter of 2012 ("Q3 2012"), our Portfolio Asset Acquisition and Resolution business segment reported $6.4 million in earnings – comprised primarily of $14.2 million in revenues, $2.8 million of equity income from unconsolidated subsidiaries, $0.7 million of gains from the sale of subsidiaries, $7.5 million of operating costs and expenses, $1.7 million of net income attributable to noncontrolling interests, and $2.2 million of provisions to consolidated assets. Revenue streams from our core investment activities and servicing platforms continued to support earnings for Q3 2012, due to increased collections and loan sales from majority-owned U.S. portfolios. Additional information related to our Portfolio Asset Acquisition and Resolution business segment for Q3 2012, including investment activity and the major components of revenue, costs and expenses, is included in the supplemental schedules of this release.

The Company's unrealized gross profit associated with its core portfolio assets totaled $78.0 million at September 30, 2012. Unrealized gross profit is a non-GAAP measure. Refer to the Schedule of Estimated Unrealized Gross Profit from Portfolio Assets on page 9 of this release for a reconciliation of this measure with the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP.

Special Situations Platform Business Segment

Our Special Situations Platform business segment provided $0.9 million in earnings for Q3 2012 – comprised primarily of $4.5 million in revenues, $1.5 million of equity income from unconsolidated subsidiaries, and $4.7 million of operating costs and expenses. Net earnings for Q3 2012 were positively impacted by continued revenue streams from our consolidated railroad operations.

Additional information related to our Special Situations Platform business segment for Q3 2012, including the major components of revenue, costs and expenses, is included in the supplemental schedules of this release.

Conference Call

A conference call will be held on Wednesday, November 14, 2012 at 9:00 a.m. Central Time to discuss Q3 2012 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 2012 Conference Call
Date: Wednesday, November 14, 2012
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: 800-264-7882
International: 847-413-3708
Passcode: 33695842

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

FirstCity Financial Corporation is a diversified financial services company with operations dedicated primarily to distressed asset acquisitions and special situations investments. FirstCity has offices in the U.S. and affiliate organizations in Europe and Latin America. FirstCity common stock is listed on the NASDAQ Global Select Market (Nasdaq:FCFC).

The FirstCity Financial Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4413

Cautionary Statement Regarding 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 Securities and Exchange Commission ("SEC"), its reports to stockholders and other FirstCity communications. These statements relate to FirstCity's or management's intentions, hopes, beliefs, expectations, representations, projections, plans or predictions of the future 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. The forward-looking statements in this press release are based upon management's beliefs, assumptions and expectations of the Company's future operations and economic performance, taking into account currently available information. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties, some of which are not currently known to us. Actual events or results may differ from those expressed or implied in any such forward-looking statements as a result of various factors and risks, including the precautionary statements included in this document and those contained from time to time in the Company's filings with the SEC including but not limited to its annual reports on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on Form 8-K, filed with the SEC and available through the Company's website, which contain a more detailed discussion of the Company's business, including risks and uncertainties that may affect future results. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. Information in this press release may be superseded by more recent information or statements, which may be disclosed in later press releases, subsequent filings with the SEC or otherwise. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or to reflect any change in events, conditions or circumstances on which any such forward-looking statements are based, in whole or in part.

FirstCity Financial Corporation
Summary of Operations and Selected Balance Sheet Data
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Revenues:
Servicing fees $ 3,745 $ 2,829 $ 12,886 $ 7,734
Income from Portfolio Assets 7,741 11,964 22,111 33,902
Gain on sale of SBA loans held for sale, net 248 306 1,104 1,836
Interest income from SBA loans 408 350 1,145 1,024
Interest income from loans receivable 258 872 1,020 2,683
Revenue from railroad operations 4,245 2,157 7,881 5,017
Other income 2,169 1,774 6,748 5,751
Total revenues 18,814 20,252 52,895 57,947
Costs and expenses:
Interest and fees on notes payable to banks and other 1,230 3,195 4,302 10,156
Interest and fees on note payable to affiliate 374 1,140
Salaries and benefits 5,785 5,360 17,231 16,034
Provision for loan and impairment losses 2,169 1,553 3,408 2,370
Asset-level expenses 844 1,572 2,819 4,716
Costs and expenses from railroad operations 3,271 1,211 5,970 2,978
Other costs and expenses 3,672 4,114 11,442 8,981
Total costs and expenses 16,971 17,379 45,172 46,375
Earnings before other revenue and income taxes 1,843 2,873 7,723 11,572
Equity income from unconsolidated subsidiaries 4,249 2,777 10,797 7,931
Gain on business combination 155 935 433
Gain on sale of subsidiaries 746 746 5
Earnings before income taxes 6,838 5,805 20,201 19,941
Income tax expense (benefit) (59) 421 779 2,047
Net earnings 6,897 5,384 19,422 17,894
Less: net income attributable to noncontrolling interests 2,130 2,654 4,803 9,011
Net earnings attributable to FirstCity $ 4,767 $ 2,730 $ 14,619 $ 8,883
Basic earnings per share of common stock:
Net earnings per common share $ 0.45 $ 0.26 $ 1.39 $ 0.86
Weighted average common shares outstanding (in thousands) 10,345 10,290 10,330 10,279
Diluted earnings per share of common stock:
Net earnings per common share $ 0.45 $ 0.26 $ 1.38 $ 0.86
Weighted average common shares outstanding (in thousands) 10,436 10,326 10,402 10,297
Selected Balance Sheet Data: September 30, December 31,
2012 2011
(Unaudited)
Cash and cash equivalents $ 41,656 $ 34,802
Earning assets:
Portfolio Asset Acquisition and Resolution assets:
United States 141,245 199,093
Latin America 8,698 17,048
Europe 32,390 41,447
Special Situations Platform assets - U.S. 44,654 51,099
Service fees receivable and other assets 13,826 12,857
Total assets $ 282,469 $ 356,346
Notes payable to banks and other debt obligations $ 117,839 $ 189,936
Other liabilities 25,735 29,007
Total liabilities 143,574 218,943
FirstCity stockholders' equity 129,066 111,976
Noncontrolling interests 9,829 25,427
Total equity 138,895 137,403
Total liabilities and equity $ 282,469 $ 356,346
FirstCity Financial Corporation
Supplemental Information
(Dollars in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Summary Operating Statement Data for Business Segments
Portfolio Asset Acquisition and Resolution segment:
Revenues $ 14,193 $ 17,287 $ 43,229 $ 50,383
Equity income from unconsolidated subsidiaries 2,767 1,401 9,089 4,781
Gain on sale of subsidiaries 746 746 5
Gain on business combinations 278
Costs and expenses (7,457) (11,840) (25,518) (34,372)
Operating contribution before provision for loan and impairment losses and noncontrolling interest expense 10,249 6,848 27,546 21,075
Provision for loan and impairment losses, net (2,169) (1,553) (3,408) (2,370)
Net income attributable to noncontrolling interests (1,713) (2,159) (3,850) (7,980)
Operating contribution, net of direct taxes $ 6,367 $ 3,136 $ 20,288 $ 10,725
Special Situations Platform segment:
Revenues $ 4,503 $ 2,905 $ 9,363 $ 7,424
Equity income (loss) from unconsolidated subsidiaries 1,482 1,376 1,708 3,150
Gain on business combination 155 935 155
Costs and expenses (4,710) (2,565) (9,168) (6,229)
Operating contribution before provision for loan and impairment losses and noncontrolling interest expense 1,275 1,871 2,838 4,500
Net income attributable to noncontrolling interests (417) (495) (953) (1,031)
Operating contribution, net of direct taxes $ 858 $ 1,376 $ 1,885 $ 3,469
Three Months Ended Nine Months Ended
September 30, September 30,
Portfolio Asset Acquisition and Resolution segment: 2012 2011 2012 2011
Revenues and equity income of investments by region:
United States $ 13,297 $ 11,538 $ 40,817 $ 31,826
Latin America 2,608 2,820 6,363 8,535
Europe 1,055 4,330 5,138 14,803
Total $ 16,960 $ 18,688 $ 52,318 $ 55,164
Revenues and equity income of investments by source:
Equity income from unconsolidated subsidiaries $ 2,767 $ 1,401 $ 9,089 $ 4,781
Income from Portfolio Assets 7,741 11,964 22,111 33,902
Servicing fees 3,745 2,829 12,886 7,734
Gain on sale of SBA loans held for sale, net 248 306 1,104 1,836
Interest income from SBA loans 408 350 1,145 1,024
Interest income from loans receivable 379 1,170
Other 2,051 1,459 5,983 4,717
Total $ 16,960 $ 18,688 $ 52,318 $ 55,164
Special Situations Platform segment:
Revenues and equity income of investments by source:
Equity income from unconsolidated subsidiaries $ 1,482 $ 1,376 $ 1,708 $ 3,150
Interest income from loans receivable 258 493 1,020 1,513
Revenue from railroad operations 4,245 2,157 7,881 5,017
Other 255 462 894
Total $ 5,985 $ 4,281 $ 11,071 $ 10,574
Number of personnel at period end:
U.S. - Portfolio Asset Acquisition and Resolution segment 102 89
U.S. - Special Situations Platform segment 57 38
Latin America - Portfolio Asset Acquisition and Resolution segment 104 118
Corporate 31 30
Total personnel 294 275
FirstCity Financial Corporation
Supplemental Information
(Dollars in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Analysis of Equity Investments
FirstCity's average investment:
U.S. - Portfolio Asset Acquisition and Resolution segment $ 55,406 $ 54,789 $ 55,367 $ 44,183
U.S. - Special Situations Platform segment 12,539 12,944 12,494 13,325
Latin America 4,596 14,148 4,498 14,427
Europe (25)
Europe - servicing subsidiaries 25,759 35,581 31,499 35,295
Latin America - servicing subsidiaries 2,905 3,216 2,911 3,107
Total $ 101,205 $ 120,678 $ 106,769 $ 110,312
FirstCity's share of equity income (loss):
U.S. - Portfolio Asset Acquisition and Resolution segment $ 1,337 $ 700 $ 4,617 $ 1,520
U.S. - Special Situations Platform segment 1,482 1,376 1,708 3,150
Latin America 563 (880) 472 (1,152)
Europe 29
Europe - servicing subsidiaries 724 1,452 3,616 3,825
Latin America - servicing subsidiaries 143 129 384 559
Total $ 4,249 $ 2,777 $ 10,797 $ 7,931
Selected Other Data:
Average investment in consolidated portfolio assets and loans receivable:
U.S. - Portfolio Asset Acquisition and Resolution segment $ 98,391 $ 157,282 $ 115,141 $ 176,873
U.S. - Special Situations Platform segment 11,261 23,216 15,376 23,172
Latin America 557 17,199 244 17,541
Europe 3,978 7,768 4,397 11,709
Total $ 114,187 $ 205,465 $ 135,158 $ 229,295
Income from consolidated portfolio assets and loans receivable:
U.S. - Portfolio Asset Acquisition and Resolution segment $ 8,259 $ 8,367 $ 23,405 $ 23,827
U.S. - Special Situations Platform segment 258 493 1,020 1,513
Latin America 46 1,997 492 4,285
Europe 92 2,635 463 9,820
Total $ 8,655 $ 13,492 $ 25,380 $ 39,445
Servicing fee revenues:
Portfolio assets - U.S. partnerships:
Servicing fee revenue $ 2,222 $ 1,240 $ 6,315 $ 3,092
Average servicing fee 3.0% 3.1% 3.1% 3.2%
Portfolio assets - Latin American partnerships:
Servicing fee revenue $ 1,160 $ 1,335 $ 3,940 $ 4,109
Average servicing fee % 26.0% 22.0% 28.5% 24.3%
Incentive service fees $ 208 $ — $ 2,126 $ —
Portfolio assets - all partnerships (total):
Servicing fee revenue $ 3,590 $ 2,575 $ 12,381 $ 7,201
Average servicing fee % 4.6% 5.6% 5.7% 6.3%
Service fees - SBA loans $ 155 $ 254 $ 505 $ 533
Total service fees $ 3,745 $ 2,829 $ 12,886 $ 7,734
Collections:
U.S. unconsolidated partnerships $ 73,121 $ 39,657 $ 202,196 $ 97,413
Latin American unconsolidated partnerships 5,188 7,400 16,202 20,740
Total unconsolidated partnership collections 78,309 47,057 218,398 118,153
U.S. consolidated partnerships 24,779 28,721 72,708 77,246
Latin American consolidated partnerships 48 1,906 500 3,852
European consolidated partnerships 314 3,676 1,386 27,727
Total consolidated partnership collections 25,141 34,303 74,594 108,825
Total collections $ 103,450 $ 81,360 $ 292,992 $ 226,978
Servicing portfolio (face value) at period end:
United States $ 1,269,783 $ 1,230,555
Latin America 1,479,933 1,448,967
Europe 1,197,970 1,212,280
Total $ 3,947,686 $ 3,891,802
FirstCity Financial Corporation
Supplemental Information
(Dollars in thousands)
(Unaudited)
Portfolio Purchases and Other Investments:
FirstCity
Portfolio Purchases FirstCity FirstCity Investment
United Investment Investment in Special
States Europe Total in Portfolios in Other Situations Total
2012
3rd Quarter $ 17,474 $ — $ 17,474 $ 5,586 $ 1,424 $ — $ 7,010
2nd Quarter 48,338 48,338 10,263 6,786 17,049
1st Quarter 90,853 382 91,235 9,548 3,906 1,000 14,454
Total Year 2012 $ 156,665 $ 382 $ 157,047 $ 25,397 $ 12,116 $ 1,000 $ 38,513
2011
4th Quarter $ 105,075 $ 1,798 $ 106,873 $ 12,342 $ 7,554 $ — $ 19,896
3rd Quarter 87,112 594 87,706 18,728 7,814 2,601 29,143
2nd Quarter 81,653 81,653 22,159 7,396 29,555
1st Quarter 11,091 11,091 4,810 9,931 700 15,441
Total Year 2011 $ 284,931 $ 2,392 $ 287,323 $ 58,039 $ 32,695 $ 3,301 $ 94,035
Total Year 2010 $ 225,764 $ — $ 225,764 $ 67,713 $ 42,757 $ 13,220 $ 123,690
Total Year 2009 $ 200,590 $ — $ 200,590 $ 147,654 $ 33,873 $ 12,415 $ 193,942
Portfolio Asset Acquisition and Resolution segment:
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Aggregate purchase price of portfolios acquired:
Acquisition partnerships
United States $ 17,474 $ 87,112 $ 156,665 $ 179,856
Europe 594 382 594
Total $ 17,474 $ 87,706 $ 157,047 $ 180,450
Purchase FirstCity's
Historical acquisitions of Portfolios - annual: Price Investment
2012 (nine months) $ 157,047 $ 25,397
2011 287,323 58,039
2010 225,764 67,713
2009 200,590 147,654
2008 89,314 72,307
September 30, December 31,
2012 2011
Portfolio acquisition and resolution asset holdings by region:
United States $ 141,245 $ 199,093
Latin America 8,698 17,048
Europe 32,390 41,447
Total $ 182,333 $ 257,588
Special Situations Platform segment:
Total FirstCity Denver's Investment
Historical investments - annual: Investment Debt Equity Total
2012 (nine months) $ 1,000 $ 1,000 $ — $ 1,000
2011 3,301 1,200 2,101 3,301
2010 13,739 8,825 4,395 13,220
2009 20,058 12,023 392 12,415
2008 28,750 16,650 3,256 19,906
FirstCity Financial Corporation
Supplemental Information
(Dollars in thousands, except exchange rate data)
(Unaudited)
Summary of Consolidated Portfolio Assets (at Carrying Value) by Region and Type
September 30, 2012
Income-Accruing Loans Non-Accrual Loans
Purchased Purchased Credit-
Credit- Impaired Loans Other
Impaired Cost recovery
Loans Other Cash basis basis Cash basis Real Estate Total
United States $ — $ 4,798 $ 22,046 $ 23,008 $ 437 $ 11,739 $ 62,028
Germany 3,228 511 214 3,953
Mexico 713 713
Total $ — $ 4,798 $ 25,274 $ 24,232 $ 437 $ 11,953 $ 66,694
December 31, 2011
Income-Accruing Loans Non-Accrual Loans
Purchased Purchased Credit-
Credit- Impaired Loans Other
Impaired Cost recovery
Loans Other Cash basis basis Cash basis Real Estate Total
United States $ 9,429 $ 4,749 $ 50,133 $ 27,313 $ 1,149 $ 26,649 $ 119,422
Germany 3,700 567 207 4,474
Mexico (1) 4,851 4,851
Total $ 9,429 $ 4,749 $ 53,833 $ 32,731 $ 1,149 $ 26,856 $ 128,747
(1) Classified and reported as "assets held for sale" on FirstCity's consolidated balance sheet.
Illustration of the Effects of Foreign Currency Fluctuations on Net Earnings
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Net earnings attributable to FirstCity $ 4,767 $ 2,730 $ 14,619 $ 8,883
Foreign currency gains (losses), net:
Euro $ 301 $ (310) 176 689
Mexican Peso 55 (513) 62 15
Chilean Peso 360 449 57
Exchange rate at valuation date:
Euro 0.78 0.74
Mexican Peso 12.85 13.42
Chilean Peso 474.50 514.40
FirstCity Financial Corporation
Schedule of Estimated Unrealized Gross Profit from Portfolio Assets (Unaudited)
September 30, 2012
Basis in Portfolio Assets (1), (4)
($ in 000's) 12/31/2010 12/31/2011 9/30/2012
Domestic $ 196,159 163,050 110,942
Europe 31,826 9,381 6,835
Latin America 23,329 15,298 11,051
Total $ 251,314 187,729 128,828
Estimated Remaining Collections (2)
12/31/2010 12/31/2011 9/30/2012
Domestic $ 290,626 238,547 163,046
Europe 43,634 15,262 13,687
Latin America 66,564 50,955 30,063
Total $ 400,825 304,764 206,796
Estimated Unrealized Gross Profit (3)
12/31/2010 12/31/2011 9/30/2012
Domestic $ 94,469 75,497 52,104
Europe 11,807 5,880 6,852
Latin America 43,235 35,658 19,012
Total $ 149,511 117,036 77,968
Estimated Unrealized Gross Profit %
12/31/2010 12/31/2011 9/30/2012
Domestic 32.50% 31.65% 31.96%
Europe 27.06% 38.53% 50.06%
Latin America 64.95% 69.98% 63.24%
Total 37.30% 38.40% 37.70%
A chart accompanying this release is available at http://media.globenewswire.com/cache/9623/file/16690.pdf
This schedule provides selected information related to the Company's economic interests in consolidated and unconsolidated Portfolio Assets and is provided for informational purposes to provide an indication of the future potential unrealized gross profit attributable to those portfolios. In preparing this schedule, management was required to make certain estimates and assumptions surrounding the underlying assets in the Portfolios that impact the reported amounts. Such estimates and assumptions could change in the future, as more information becomes known, which could impact the reported amounts. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.
(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 and beneficial interests in unconsolidated partnerships.
(2) Estimated Remaining Collections represents FirstCity's share of future projected net cash collections expected from the Portfolios Assets.
(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:
12/31/2010 12/31/2011 9/30/2012
FirstCity's consolidated Portfolio Assets (as reported in "Portfolio Assets" on the balance sheet of the respective Form 10-K or 10-Q) $ 216,061 128,747 66,694
Noncontrolling interests in FirstCity's consolidated Portfolio Assets (component of "Non-controlling interests" as reported on the balance sheet of the respective Form 10-K or 10-Q) (23,482) (13,556) (4,867)
FirstCity's equity and beneficial interests in Portfolio Assets held by unconsolidated partnerships (components of "Assets" as reported in the "Condensed Combined Balance Sheets" tabular disclosure under the "Equity Investments" footnote, and "Investment securities" as reported on the balance sheet of the respective Form 10-K or 10-Q) 58,735 72,538 67,002
FirstCity's economic basis in consolidated and unconsolidated Portfolio Assets $ 251,314 187,729 128,828
CONTACT: Suzy W. Taylor 866-652-1810

Source:FirstCity Financial Corporation