Commitments and Contingencies	12 Months Ended
Dec. 31, 2012
Commitments and Contingencies
Commitments and Contingencies	21. Commitments and Contingencies Legal Proceedings FirstCity and certain of its subsidiaries and affiliates (including Acquisition Partnerships) are involved in various claims and legal proceedings which are incidental to the ordinary course of our business. We initiate lawsuits against borrowers and are occasionally countersued by them in such actions. From time to time, other types of lawsuits are brought against us. In view of the inherent difficulty of predicting the outcome of pending legal actions and proceedings, the Company cannot predict with certainty the eventual outcome of any such proceedings. Based on current knowledge, management does not believe that liabilities, if any, arising from any ordinary course proceeding will have a material adverse effect on the consolidated financial condition, operations, results of operations or liquidity of the Company. Class Action Litigation On January 15, 2013, a putative class action lawsuit was filed in the District Court in McLennan County, Texas against the Company, its directors, Parent, Merger Subsidiary and Värde purportedly on behalf of the Company's stockholders, under the caption Eric J. Drayer v. James T. Sartain, et. al., Cause No. 2013-246-5. The lawsuit alleges, among other things, that the director defendants breached their fiduciary duties to the District Court in McLennan County, Texas against the Company, its directors, Parent, Merger Subsidiary and Värde purportedly on behalf of the Company's stockholders, under the caption Eric J. Drayer v. James T. Sartain, et. al., Cause No. 2013-246-5. The lawsuit alleges, among other things, that the director defendants breached their fiduciary duties to the Company's stockholders in connection with Värde's merger proposal and that Värde, Parent and Merger Subsidiary have aided and abetted such breaches. The plaintiff seeks declaratory and injunctive relief, reasonable attorneys' and experts' fees and, in the event the transaction is consummated, rescission of the transaction or rescissory damages and an accounting of all damages, profits and special benefits. On February 13, 2013, a first amended petition was filed. The amended petition alleges that the director defendants breached their fiduciary duties by (i) failing to maximize the value of the Company, (ii) taking steps to avoid competitive bidding, (iii) failing to properly value the Company and (iv) omitting material information and providing materially misleading information in the preliminary proxy statement, and seeks the same relief and asserts the same claims as the original petition. On January 29, 2013, a putative class action lawsuit was filed in the Court of Chancery of the State of Delaware against the Company, its directors, Parent, Merger Subsidiary and Värde purportedly on behalf of the Company's stockholders, under the caption Paul Perry v. FirstCity Financial Corporation, et. al., Case No. 8259-VCG. The lawsuit alleges, among other things, that the director defendants breached their fiduciary duties to the Company's stockholders by entering into the merger agreement and that the Company, Värde, Parent and Merger Subsidiary have aided and abetted such breaches. The plaintiff seeks declaratory and injunctive relief, reasonable attorneys' and experts' fees and, in the event the transaction is consummated, rescission of the transaction and an accounting of all damages, profits and special benefits. On February 15, 2013, a first amended complaint was filed adding Värde Management, L.P. as a defendant. The amended complaint alleges that the director defendants breached their fiduciary duties by (i) agreeing to the merger consideration which undervalues the Company, (ii) agreeing to the terms of the merger agreement which deter other bidders and (iii) omitting material information and providing materially misleading information in the preliminary proxy statement, and seeks the same relief and asserts the same claims as the original complaint. Defendants have not yet filed any responsive pleadings or motions to the amended petitions. In the Perry lawsuit, the plaintiff has moved for a preliminary injunction and sought expedited discovery, but no hearings or proceedings have been scheduled on either motion. The Company believes that the claims in these lawsuits are without merit and intends to vigorously defend itself against them. However, there can be no assurance as to the outcome of these lawsuits. Wave Tec Pools, Inc. Litigation. FH Partners LLC (formerly FH Partners, L.P.), FC Servicing, and FirstCity Financial Corporation were defendants in a suit that was originally filed by Superior Funding, Inc., Wave Tec Pools, Inc. and Nations Pool Supply, Inc. (collectively, the "Obligors") against State Bank and Cole Harmonson in March 2007. The Obligors alleged that they sustained actual damages of $165 million as a result of alleged breaches by FH Partners LLC and FC Servicing under a loan-related agreement from State Bank to Obligors that was purchased by FH Partners LLC from State Bank in December 2006. Following various court rulings and proceedings (including Prosperity Bank's settlement with the Obligors in 2009), FirstCity entered into an agreement with the Obligors in August 2011, which provided for the settlement of the pending lawsuit and provided for a payment by FH Partners LLC to the Obligors and their attorneys of $100,000. The final settlement is non-appealable, and all FirstCity parties were released from all claims and liability related to the loan and lawsuit. FH Partners LLC continues to pursue collection of the loan. Investment Agreement with VIP Effective April 1, 2010, FC Diversified, FC Servicing, and VIP, entered into an investment agreement that provides, among other things, a "right of first refusal" provision. Pursuant to the investment agreement, FC Diversified and FC Servicing granted VIP a right of first refusal to participate in distressed asset investment opportunities in which the aggregate amount of the proposed investment is to exceed $3.0 million. FC Diversified and FC Servicing are required to follow a prescribed notice procedure pursuant to which VIP has the option to participate in a proposed investment, whether in the form of a direct purchase, equity investment or loan, by requiring that the purchase, acquisition or loan be effected through an acquisition entity formed by FC Diversified (or its affiliate) and VIP (or its affiliate). An affiliate of FC Diversified will own from 5% to 25% of the acquisition entity at FC Diversified's determination. The investment agreement has a termination date of June 30, 2015, which is subject to consecutive automatic one-year extensions without any action by FC Diversified, FC Servicing and VIP. FC Servicing will be the servicer for all of the acquisition entities formed by FC Diversified and VIP (subject to removal by VIP on a pool-level basis under certain conditions). The parties may terminate the investment agreement prior to June 30, 2015 under certain conditions. Indemnification Obligation Commitments Strategic Mexican Investment Partners L.P. ("SMIP"), a wholly-owned subsidiary of FirstCity, Cargill Financial Services International Inc. ("CFSI"), and a Mexican acquisition partnership that is collectively owned by SMIP and CFSI (collectively, the "Sellers"), are parties to indemnification arrangements that originated in 2006 in connection with their respective sales of eleven Mexican portfolio entities to Bidmex Holding LLC ("Bidmex Holding") and a loan portfolio to a Bidmex Holding subsidiary. Bidmex Holding is a Mexican acquisition partnership that was formed by certain subsidiaries of American International Group, Inc. ("AIG Entities"), as the 85%-majority owner, and SMIP, as the 15%-minority owner, to acquire the interests of the portfolio entities and loan portfolio from the Sellers. In connection with these sales transactions, the Sellers made various representations and warranties concerning (i) the existence and ownership of the portfolio entities, (ii) the assets and liabilities of the portfolio entities, (iii) taxes related to periods prior to the sales transaction date, (iv) the operations of the portfolio entities, and (v) the ownership of the loan portfolio and existence of the underlying loans. The Sellers agreed to indemnify Bidmex Holding and AIG Entities from damages resulting from a breach of these representation and warranty conditions on basis according to their respective ownership percentages in each Mexican portfolio entity, or on the basis of 80% to CFSI and 20% to SMIP as to any matter that was not related to a particular portfolio entity. The indemnity obligation survives for a period of the statute of limitations for matters related to taxes, existence and authority, capitalization and good standing of the Mexican portfolio entities. The Sellers are not required to make any payments as a result of the indemnity provisions until the aggregate amount payable exceeds certain thresholds (ranging from $25,000 for the loan portfolio transaction to $250,000 for the Mexican portfolio entities transaction). However, claims related to taxes and fraud are not subject to these thresholds. At this time, management does not believe that this potential obligation will have a material adverse impact on the Company's consolidated results of operations, financial position or liquidity. Guarantees and Letters of Credit FC Commercial has a term loan facility with Bank of Scotland. The obligations under this loan facility are secured by substantially all assets and subsidiaries of FC Commercial (excluding FH Partners LLC). FirstCity provides an unlimited guaranty for the repayment of the indebtedness under this loan facility. At December 31, 2012, the unpaid principal balance on this loan was $31.1 million. Refer to Note 2 for additional information. ABL has a $25.0 million revolving loan facility with WFCF (see Note 2). The obligations under this credit facility are secured by substantially all of the assets of ABL, and FirstCity provides WFCF with an unconditional guaranty on ABL's obligations under the loan facility up to a maximum of $5.0 million plus enforcement cost. At December 31, 2012, the unpaid principal balance on this loan facility was $15.2 million. FC Investment has a $15.0 million revolving loan facility with FNBCT. The obligations under this facility are secured by substantially all of the assets of FC Investment and its subsidiaries. FirstCity provides an unlimited guaranty for the repayment of the indebtedness under this revolving loan facility. At December 31, 2012, the unpaid principal balance on this loan facility was $2.0 million. Refer to Note 2 for additional information. Certain of the Company's consolidated subsidiaries provide guarantees to various financial institutions related to their financing arrangements with certain Acquisition Partnerships. The underlying financing arrangements of these Acquisitions Partnerships mature at various dates through September 2015, and are secured primarily by certain real estate properties held by the Acquisition Partnerships. At December 31, 2012, the unpaid debt obligations of these Acquisition Partnerships attributed to the underlying guarantees of the Company's subsidiaries approximated $1.4 million. Fondo de Inversion Privado NPL Fund One ("PIF1"), an equity-method investment of FirstCity, has a credit facility with Banco Santander Chile, S.A. with an unpaid principal balance of $5.3 million at December 31, 2012. PIF1 uses the credit facility to finance the purchases of loan portfolios. Pursuant to terms of the credit facility, FirstCity was required to provide a stand-by letter of credit from Bank of Scotland that would satisfy the current loan balance upon demand. At December 31, 2012, FirstCity had a letter of credit in the amount of $5.4 million from Bank of Scotland under the terms of FirstCity's loan facility with Bank of Scotland, with Banco Santander Chile, S.A. as the letter of credit beneficiary. In the event that a demand is made under the $5.4 million letter of credit, FirstCity would be required to reimburse Bank of Scotland by making payment to Bank of Scotland for all amounts disbursed or to be disbursed by Bank of Scotland under the letter of credit. Environmental Matters The Company generally retains environmental consultants to conduct or update environmental assessments in connection with the Company's foreclosed and acquired real estate properties. These environmental assessments have not revealed environmental conditions that the Company believes will have a material adverse effect on its business, assets, financial condition, results of operations or liquidity, and the Company is not otherwise aware of environmental conditions with respect to properties that the Company believes would have such a material adverse effect. However, from time to time, environmental conditions at the Company's properties have required and may in the future require environmental testing and/or regulatory filings, as well as remedial action. Liabilities for future remediation costs are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated. Other than for assessments, the timing and magnitude of these accruals generally are based on the completion of investigations or other studies or a commitment to a formal plan of action. Income Taxes We are subject to income taxes in both the United States and the non-U.S. jurisdictions in which we operate. Certain of our entities are under examination by the relevant taxing authorities for various tax years. We regularly assess the potential outcome of current and future examinations in each of the taxing jurisdictions when determining the adequacy of the provision for income taxes. We have only recorded financial statement benefits for tax positions which we believe reflect the "more-likely-than-not" criteria incorporated in the FASB's authoritative guidance on accounting for uncertainty in income taxes, and we have established income tax reserves in accordance with this authoritative guidance where necessary. Once a financial statement benefit for a tax position is recorded or a tax reserve is established, we adjust it only when there is more information available or when an event occurs necessitating a change. While we believe that the amount of the recorded financial statement benefits and tax reserves reflect the more-likely-than-not criteria, it is possible that the ultimate outcome of current or future examinations may result in a reduction to the tax benefits previously recorded on the financial statements or may exceed the current income tax reserves in amounts that could be material.

21. Commitments and Contingencies

Legal Proceedings

FirstCity and certain of its subsidiaries and affiliates (including Acquisition Partnerships) are involved in various claims and legal proceedings which are incidental to the ordinary course of our business. We initiate lawsuits against borrowers and are occasionally countersued by them in such actions. From time to time, other types of lawsuits are brought against us. In view of the inherent difficulty of predicting the outcome of pending legal actions and proceedings, the Company cannot predict with certainty the eventual outcome of any such proceedings. Based on current knowledge, management does not believe that liabilities, if any, arising from any ordinary course proceeding will have a material adverse effect on the consolidated financial condition, operations, results of operations or liquidity of the Company.

Class Action Litigation

On January 15, 2013, a putative class action lawsuit was filed in the District Court in McLennan County, Texas against the Company, its directors, Parent, Merger Subsidiary and Värde purportedly on behalf of the Company's stockholders, under the caption Eric J. Drayer v. James T. Sartain, et. al., Cause No. 2013-246-5. The lawsuit alleges, among other things, that the director defendants breached their fiduciary duties to the District Court in McLennan County, Texas against the Company, its directors, Parent, Merger Subsidiary and Värde purportedly on behalf of the Company's stockholders, under the caption Eric J. Drayer v. James T. Sartain, et. al., Cause No. 2013-246-5. The lawsuit alleges, among other things, that the director defendants breached their fiduciary duties to the Company's stockholders in connection with Värde's merger proposal and that Värde, Parent and Merger Subsidiary have aided and abetted such breaches. The plaintiff seeks declaratory and injunctive relief, reasonable attorneys' and experts' fees and, in the event the transaction is consummated, rescission of the transaction or rescissory damages and an accounting of all damages, profits and special benefits. On February 13, 2013, a first amended petition was filed. The amended petition alleges that the director defendants breached their fiduciary duties by (i) failing to maximize the value of the Company, (ii) taking steps to avoid competitive bidding, (iii) failing to properly value the Company and (iv) omitting material information and providing materially misleading information in the preliminary proxy statement, and seeks the same relief and asserts the same claims as the original petition.

On January 29, 2013, a putative class action lawsuit was filed in the Court of Chancery of the State of Delaware against the Company, its directors, Parent, Merger Subsidiary and Värde purportedly on behalf of the Company's stockholders, under the caption Paul Perry v. FirstCity Financial Corporation, et. al., Case No. 8259-VCG. The lawsuit alleges, among other things, that the director defendants breached their fiduciary duties to the Company's stockholders by entering into the merger agreement and that the Company, Värde, Parent and Merger Subsidiary have aided and abetted such breaches. The plaintiff seeks declaratory and injunctive relief, reasonable attorneys' and experts' fees and, in the event the transaction is consummated, rescission of the transaction and an accounting of all damages, profits and special benefits. On February 15, 2013, a first amended complaint was filed adding Värde Management, L.P. as a defendant. The amended complaint alleges that the director defendants breached their fiduciary duties by (i) agreeing to the merger consideration which undervalues the Company, (ii) agreeing to the terms of the merger agreement which deter other bidders and (iii) omitting material information and providing materially misleading information in the preliminary proxy statement, and seeks the same relief and asserts the same claims as the original complaint.

Defendants have not yet filed any responsive pleadings or motions to the amended petitions. In the Perry lawsuit, the plaintiff has moved for a preliminary injunction and sought expedited discovery, but no hearings or proceedings have been scheduled on either motion. The Company believes that the claims in these lawsuits are without merit and intends to vigorously defend itself against them. However, there can be no assurance as to the outcome of these lawsuits.

Wave Tec Pools, Inc. Litigation.

FH Partners LLC (formerly FH Partners, L.P.), FC Servicing, and FirstCity Financial Corporation were defendants in a suit that was originally filed by Superior Funding, Inc., Wave Tec Pools, Inc. and Nations Pool Supply, Inc. (collectively, the "Obligors") against State Bank and Cole Harmonson in March 2007. The Obligors alleged that they sustained actual damages of $165 million as a result of alleged breaches by FH Partners LLC and FC Servicing under a loan-related agreement from State Bank to Obligors that was purchased by FH Partners LLC from State Bank in December 2006. Following various court rulings and proceedings (including Prosperity Bank's settlement with the Obligors in 2009), FirstCity entered into an agreement with the Obligors in August 2011, which provided for the settlement of the pending lawsuit and provided for a payment by FH Partners LLC to the Obligors and their attorneys of $100,000. The final settlement is non-appealable, and all FirstCity parties were released from all claims and liability related to the loan and lawsuit. FH Partners LLC continues to pursue collection of the loan.

Investment Agreement with VIP

Effective April 1, 2010, FC Diversified, FC Servicing, and VIP, entered into an investment agreement that provides, among other things, a "right of first refusal" provision. Pursuant to the investment agreement, FC Diversified and FC Servicing granted VIP a right of first refusal to participate in distressed asset investment opportunities in which the aggregate amount of the proposed investment is to exceed $3.0 million. FC Diversified and FC Servicing are required to follow a prescribed notice procedure pursuant to which VIP has the option to participate in a proposed investment, whether in the form of a direct purchase, equity investment or loan, by requiring that the purchase, acquisition or loan be effected through an acquisition entity formed by FC Diversified (or its affiliate) and VIP (or its affiliate). An affiliate of FC Diversified will own from 5% to 25% of the acquisition entity at FC Diversified's determination. The investment agreement has a termination date of June 30, 2015, which is subject to consecutive automatic one-year extensions without any action by FC Diversified, FC Servicing and VIP. FC Servicing will be the servicer for all of the acquisition entities formed by FC Diversified and VIP (subject to removal by VIP on a pool-level basis under certain conditions). The parties may terminate the investment agreement prior to June 30, 2015 under certain conditions.

Indemnification Obligation Commitments

Strategic Mexican Investment Partners L.P. ("SMIP"), a wholly-owned subsidiary of FirstCity, Cargill Financial Services International Inc. ("CFSI"), and a Mexican acquisition partnership that is collectively owned by SMIP and CFSI (collectively, the "Sellers"), are parties to indemnification arrangements that originated in 2006 in connection with their respective sales of eleven Mexican portfolio entities to Bidmex Holding LLC ("Bidmex Holding") and a loan portfolio to a Bidmex Holding subsidiary. Bidmex Holding is a Mexican acquisition partnership that was formed by certain subsidiaries of American International Group, Inc. ("AIG Entities"), as the 85%-majority owner, and SMIP, as the 15%-minority owner, to acquire the interests of the portfolio entities and loan portfolio from the Sellers. In connection with these sales transactions, the Sellers made various representations and warranties concerning (i) the existence and ownership of the portfolio entities, (ii) the assets and liabilities of the portfolio entities, (iii) taxes related to periods prior to the sales transaction date, (iv) the operations of the portfolio entities, and (v) the ownership of the loan portfolio and existence of the underlying loans. The Sellers agreed to indemnify Bidmex Holding and AIG Entities from damages resulting from a breach of these representation and warranty conditions on basis according to their respective ownership percentages in each Mexican portfolio entity, or on the basis of 80% to CFSI and 20% to SMIP as to any matter that was not related to a particular portfolio entity. The indemnity obligation survives for a period of the statute of limitations for matters related to taxes, existence and authority, capitalization and good standing of the Mexican portfolio entities. The Sellers are not required to make any payments as a result of the indemnity provisions until the aggregate amount payable exceeds certain thresholds (ranging from $25,000 for the loan portfolio transaction to $250,000 for the Mexican portfolio entities transaction). However, claims related to taxes and fraud are not subject to these thresholds. At this time, management does not believe that this potential obligation will have a material adverse impact on the Company's consolidated results of operations, financial position or liquidity.

Guarantees and Letters of Credit

FC Commercial has a term loan facility with Bank of Scotland. The obligations under this loan facility are secured by substantially all assets and subsidiaries of FC Commercial (excluding FH Partners LLC). FirstCity provides an unlimited guaranty for the repayment of the indebtedness under this loan facility. At December 31, 2012, the unpaid principal balance on this loan was $31.1 million. Refer to Note 2 for additional information.

ABL has a $25.0 million revolving loan facility with WFCF (see Note 2). The obligations under this credit facility are secured by substantially all of the assets of ABL, and FirstCity provides WFCF with an unconditional guaranty on ABL's obligations under the loan facility up to a maximum of $5.0 million plus enforcement cost. At December 31, 2012, the unpaid principal balance on this loan facility was $15.2 million.

FC Investment has a $15.0 million revolving loan facility with FNBCT. The obligations under this facility are secured by substantially all of the assets of FC Investment and its subsidiaries. FirstCity provides an unlimited guaranty for the repayment of the indebtedness under this revolving loan facility. At December 31, 2012, the unpaid principal balance on this loan facility was $2.0 million. Refer to Note 2 for additional information.

Certain of the Company's consolidated subsidiaries provide guarantees to various financial institutions related to their financing arrangements with certain Acquisition Partnerships. The underlying financing arrangements of these Acquisitions Partnerships mature at various dates through September 2015, and are secured primarily by certain real estate properties held by the Acquisition Partnerships. At December 31, 2012, the unpaid debt obligations of these Acquisition Partnerships attributed to the underlying guarantees of the Company's subsidiaries approximated $1.4 million.

Fondo de Inversion Privado NPL Fund One ("PIF1"), an equity-method investment of FirstCity, has a credit facility with Banco Santander Chile, S.A. with an unpaid principal balance of $5.3 million at December 31, 2012. PIF1 uses the credit facility to finance the purchases of loan portfolios. Pursuant to terms of the credit facility, FirstCity was required to provide a stand-by letter of credit from Bank of Scotland that would satisfy the current loan balance upon demand. At December 31, 2012, FirstCity had a letter of credit in the amount of $5.4 million from Bank of Scotland under the terms of FirstCity's loan facility with Bank of Scotland, with Banco Santander Chile, S.A. as the letter of credit beneficiary. In the event that a demand is made under the $5.4 million letter of credit, FirstCity would be required to reimburse Bank of Scotland by making payment to Bank of Scotland for all amounts disbursed or to be disbursed by Bank of Scotland under the letter of credit.

Environmental Matters

The Company generally retains environmental consultants to conduct or update environmental assessments in connection with the Company's foreclosed and acquired real estate properties. These environmental assessments have not revealed environmental conditions that the Company believes will have a material adverse effect on its business, assets, financial condition, results of operations or liquidity, and the Company is not otherwise aware of environmental conditions with respect to properties that the Company believes would have such a material adverse effect. However, from time to time, environmental conditions at the Company's properties have required and may in the future require environmental testing and/or regulatory filings, as well as remedial action. Liabilities for future remediation costs are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated. Other than for assessments, the timing and magnitude of these accruals generally are based on the completion of investigations or other studies or a commitment to a formal plan of action.

Income Taxes

We are subject to income taxes in both the United States and the non-U.S. jurisdictions in which we operate. Certain of our entities are under examination by the relevant taxing authorities for various tax years. We regularly assess the potential outcome of current and future examinations in each of the taxing jurisdictions when determining the adequacy of the provision for income taxes. We have only recorded financial statement benefits for tax positions which we believe reflect the "more-likely-than-not" criteria incorporated in the FASB's authoritative guidance on accounting for uncertainty in income taxes, and we have established income tax reserves in accordance with this authoritative guidance where necessary. Once a financial statement benefit for a tax position is recorded or a tax reserve is established, we adjust it only when there is more information available or when an event occurs necessitating a change. While we believe that the amount of the recorded financial statement benefits and tax reserves reflect the more-likely-than-not criteria, it is possible that the ultimate outcome of current or future examinations may result in a reduction to the tax benefits previously recorded on the financial statements or may exceed the current income tax reserves in amounts that could be material.