EX-99.1 2 a08-14168_1ex99d1.htm EX-99.1

Exhibit 99.1

 

NEWS RELEASE

 

Contact:

 

Suzy W. Taylor

 

 

866-652-1810

 

 

 

 

 

 

FirstCity Financial Reports First Quarter 2008 Results and Activities

 

Waco, Texas   May 12, 2008

 

Highlights:

 

·                  FirstCity reported 1st quarter 2008 loss of $3.6 million or ($.34) per diluted share – which includes $4.1 million of net provisions.

 

·                  FirstCity invested $9.9 million in portfolio acquisitions and other investments during the quarter.

 

·                  FirstCity purchased 385,830 shares of its common stock in 2008 under its stock repurchase plan.

 

Components of the quarterly results are detailed below (dollars in thousands except per share data):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2008

 

2007

 

 

 

(unaudited)

 

Portfolio Asset Acquisition and Resolution

 

$

(1,800

)

$

1,870

 

Corporate overhead *

 

(1,693

)

(2,785

)

Loss from continuing operations

 

(3,493

)

(915

)

Loss from discontinued operations, net of taxes

 

(91

)

—

 

Loss to common stockholders

 

$

(3,584

)

$

(915

)

Diluted loss per common share

 

$

(0.34

)

$

(0.08

)

 

*                 Corporate overhead includes $1.2 million of expenses related to an independent audit committee investigation in first quarter 2007.

 

Portfolio Asset Acquisition and Resolution

 

For the first quarter 2008, the operating contribution from the Portfolio Asset Acquisition business resulted in a $1.8 million loss. The loss was comprised primarily of $9.3 million in revenues, $2.8 million in equity in earnings of investments, and $13.9 million of expenses. The business generated 55% of the revenues (including equity in earnings of investments) from domestic investments, 25% from investments in Latin America, 20% from investments in Europe and less than 1% from investments in Canada.

 

The revenues for the first quarter were positively impacted by continued income streams from Portfolio Assets of $4.9 million, equity in earnings of investments of $2.8 million, servicing fees of $2.2 million, and interest income of $0.9 million from loans receivable.

 

First quarter earnings were negatively impacted by $4.1 million of net provisions – comprised of $3.0 million of provisions recorded to our wholly-owned domestic and Latin American portfolios, and $1.1 million recorded to portfolio assets held in our partnerships ($0.2 million of net provisions in domestic partnerships, $0.3 million of net provisions in European partnerships and $0.6 million in Latin American partnerships). The first quarter provisions were attributed primarily to declines in values of loan collateral and real estate assets in our domestic portfolios, and additional delays in the timing of collections of expected cash flows on loan portfolios in Latin America and Europe. Management regularly evaluates the collectibility of the Company’s portfolio assets and may decrease those values in future periods as the cash flows expected from those assets change.

 

(more)

 


 

The following tables detail the impact of net foreign currency gains (losses) on corporate earnings:

 

 

 

Three Months Ended

 

 

 

March 31,

 

Illustration of the Effects of Currency

 

2008

 

2007

 

Fluctuations (dollars in thousands)

 

(unaudited)

 

Net earnings (loss) to Common Stockholders

 

$

(3,584

)

$

(915

)

Foreign currency gains (losses):

 

 

 

 

 

Euro

 

225

 

(242

)

Mexican Peso

 

246

 

(23

)

Argentine Peso

 

(3

)

(11

)

Canadian Dollar

 

(15

)

21

 

Chilean Peso

 

104

 

2

 

 

 

 

 

 

 

Exchange rate at valuation date:

 

 

 

 

 

Euro

 

0.63

 

0.75

 

Mexican Peso

 

10.70

 

11.08

 

Argentine Peso

 

3.16

 

3.10

 

Canadian Dollar

 

1.02

 

1.16

 

Chilean Peso

 

440.00

 

539.28

 

 

The Company invested $9.9 million in portfolio acquisitions and other investments during the quarter. Earning assets totaled $236.2 million at quarter end. The global distribution of FirstCity’s earning assets (at carrying value) included $151.8 million in the United States, $48.3 million in Europe, and $36.1 million in Latin America.

 

Portfolio purchases are detailed below (in millions):

 

 

 

 

 

Portfolio Purchases

 

FirstCity

 

 

 

 

 

 

 

Domestic

 

Europe

 

Latin
America

 

Total

 

FirstCity
Investment

 

Investment
in Other

 

Total

 

 

 

2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1st Quarter

 

 

 

$

6.7

 

$

—

 

$

13.2

 

$

19.9

 

$

8.4

 

$

1.5

 

$

9.9

 

YTD 2008

 

 

 

$

6.7

 

$

—

 

$

13.2

 

$

19.9

 

$

8.4

 

$

1.5

 

$

9.9

 

 

 

2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4th Quarter

 

 

 

$

5.3

 

$

14.7

 

$

4.4

 

$

24.4

 

$

15.7

 

$

3.7

 

$

19.4

 

3rd Quarter

 

 

 

17.4

 

2.3

 

—

 

19.7

 

16.3

 

6.3

 

22.6

 

2nd Quarter

 

 

 

27.4

 

2.4

 

61.6

 

91.4

 

25.2

 

4.2

 

29.4

 

1st Quarter

 

 

 

71.6

 

3.8

 

3.4

 

78.8

 

69.5

 

7.8

 

77.3

 

YTD 2007

 

 

 

$

121.7

 

$

23.2

 

$

69.4

 

$

214.3

 

$

126.7

 

$

22.0

 

$

148.7

 

 

 

2006

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4th Quarter

 

 

 

$

34.6

 

$

101.2

 

$

2.1

 

$

137.9

 

$

70.2

 

$

16.8

 

$

87.0

 

3rd Quarter

 

 

 

35.4

 

—

 

56.1

 

91.5

 

31.5

 

3.7

 

35.2

 

2nd Quarter

 

 

 

24.2

 

1.0

 

—

 

25.2

 

19.0

 

7.0

 

26.0

 

1st Quarter

 

 

 

42.4

 

—

 

—

 

42.4

 

23.3

 

0.7

 

24.0

 

Total Year 2006

 

 

 

$

136.6

 

$

102.2

 

$

58.2

 

$

297.0

 

$

144.0

 

$

28.2

 

$

172.2

 

Total Year 2005

 

 

 

$

93.4

 

$

37.2

 

$

16.0

 

$

146.6

 

$

71.4

 

$

3.2

 

$

74.6

 

Total Year 2004

 

 

 

$

91.2

 

$

9.8

 

$

73.1

 

$

174.1

 

$

59.8

 

$

—

 

$

59.8

 

 

2


 

As a result of the recent deterioration of credit quality experienced by many banks, management believes that acquisition opportunities at attractive margins are available. FirstCity was involved in acquiring $19.9 million of portfolio assets with a face value of approximately $546.1 million in first quarter 2008 – of which FirstCity’s investment share was $8.4 million. The Company is currently evaluating 28 different transactions representing over $7.6 billion in face value of assets, although there can be no assurance that FirstCity will be able to consummate any of these transactions on acceptable terms.

 

In the first quarter of 2008, the Company discontinued using the income recognition model for previously-purchased non-performing loan portfolios in Mexico. Management determined that external factors outside their control preclude them from developing reasonable expectations of the timing of cash flows to be collected on these loan portfolios. The Company now accounts for its non-performing loan portfolios in Mexico under the cost-recovery model.

 

Other Corporate Matters

 

Liquidity

 

FirstCity’s ability to obtain financing for investment opportunities is strong and remains unhindered by the negative conditions witnessed recently in the financial services sector. FirstCity has $350.0 million of credit facility commitments available to finance its portfolio and asset purchases and equity investments in new ventures, and to provide for working capital loans. In addition, FirstCity has a $40.0 million credit facility commitment to finance and acquire SBA loans. At March 31, 2008, FirstCity’s maximum borrowing capacity under these credit commitments was $156.0 million, subject to borrowing base requirements of the respective credit facilities.

 

Share Repurchase Program

 

FirstCity has a stock repurchase program providing for the repurchase of up to 1,500,000 shares of its common stock.  To date, the Company has purchased 966,330 shares at an average cost of $9.12 per share (including 385,830 shares purchased in 2008 at an average cost of $7.34 per share). Share repurchases continue and signify management’s assessment that the shares are undervalued in the market and represent a good investment alternative to enhance long term shareholder value.

 

Conference Call

 

A conference call will be held on Monday, May 12, 2008 at 9:00 a.m. Central Time to discuss first quarter 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 First Quarter 2008 Conference Call

Date:

 

Monday, May 12, 2008

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.fulldisclosure.com

 

 

 

 

 

Dial In Access:

 

Domestic

 

888-396-2369

 

 

International

 

617-847-8710

 

 

 

 

 

 

 

Pass code

 

17543120

 

Replay    Available on FirstCity’s web page (www.fcfc.com/invest.htm)

 

FirstCity Financial Corporation is a diversified financial services company with operations dedicated to portfolio asset acquisition and resolution with offices in the U.S. and with affiliate organizations in Europe and Latin America. FirstCity common stock is listed on the NASDAQ Global Select Market under the symbol “FCFC.”

 

3


 

Forward-Looking Statements

 

Certain statements in this press release, which are not historical in fact, including, but not limited to, statements relating to future performance, may be deemed to be forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Forward-looking statements include, without limitation, any statement that may project, indicate or imply future results, performance or achievements, and may contain the words “expect,” “intend,” “plan,” “estimate,” “believe,” “will be,” “will continue,” “will likely result,” “indication” and similar expressions. Such statements inherently are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected. There are many important factors that could cause the Company’s actual results to differ materially.

 

These factors include, but are not limited to, the performance of the Company’s subsidiaries and affiliates; availability of portfolio assets and other investment opportunities; the Company’s ability to consummate portfolio acquisitions and other investment transactions on acceptable terms; assumptions underlying portfolio asset performance; risks associated with start up of new businesses and entry into new foreign markets, risks associated with foreign operations; currency exchange rate fluctuations; interest rate risk; credit risk; risks of declining value of loans, collateral or assets; the degree to which the Company is leveraged; the Company’s continued need for financing; availability of the Company’s credit facilities; ability to obtain additional financing from the Bank of Scotland or any other lender; the impact of certain covenants in loan agreements of the Company and its subsidiaries; the ability of the Company to utilize net operating loss carry forwards; general economic, business and market conditions; foreign social and economic conditions; changes (legislative and otherwise) in the asset securitization industry; regulatory and accounting changes; fluctuation in residential and commercial real estate values; capital markets conditions, including  the markets for asset-backed securities; uncertainties of any litigation arising from discontinued operations; factors more fully discussed and identified under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations;” and risk factors and other risks identified in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, filed with the SEC on March 17, 2008, as well as in the Company’s other filings with the SEC. Many of these factors are beyond the Company’s control. In addition, it should be noted that past financial and operational performance of the Company is not necessarily indicative of future financial and operational performance. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements.

 

The forward-looking statements in this release speak only as of the date of this release. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based.

 

4


 

FirstCity Financial Corporation

Summary of Operations

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2008

 

2007

 

Revenues:

 

 

 

 

 

Servicing fees

 

$

2,200

 

$

2,605

 

Income from Portfolio Assets

 

4,935

 

5,035

 

Gain on sale of SBA loans held for sale, net

 

9

 

281

 

Interest income from SBA loans

 

476

 

308

 

Interest income from affiliates

 

150

 

126

 

Interest income from loans receivable - other

 

275

 

907

 

Other income

 

1,459

 

459

 

Total revenues

 

9,504

 

9,721

 

Expenses:

 

 

 

 

 

Interest and fees on notes payable

 

3,683

 

4,251

 

Salaries and benefits

 

5,030

 

3,993

 

Provision for loan and impairment losses

 

3,030

 

326

 

Occupancy, data processing, property protection and other

 

3,925

 

3,933

 

Total expenses

 

15,668

 

12,503

 

Equity in earnings of investments

 

2,840

 

1,826

 

Loss from continuing operations before income

 

 

 

 

 

taxes and minority interest

 

(3,324

)

(956

)

Income taxes

 

(191

)

(67

)

Minority interest

 

22

 

108

 

Loss from continuing operations

 

(3,493

)

(915

)

Discontinued operations

 

 

 

 

 

Loss from operations of discontinued components

 

(91

)

—

 

Net loss

 

$

(3,584

)

$

(915

)

 

 

 

 

 

 

Basic and diluted loss per common share are as follows:

 

 

 

 

 

Loss from continuing operations

 

$

(0.33

)

$

(0.08

)

Discontinued operations

 

$

(0.01

)

$

—

 

Net loss per common share

 

$

(0.34

)

$

(0.08

)

Weighted average common shares outstanding

 

10,584

 

10,788

 

 

Selected Unaudited Balance Sheet Data

 

 

 

March 31,

 

December 31,

 

 

 

2008

 

2007

 

Cash

 

$

14,395

 

$

23,546

 

Earning Assets:

 

 

 

 

 

Portfolio Assets, net

 

112,593

 

122,001

 

Loans and interest receivable

 

26,364

 

26,574

 

Equity investments

 

89,643

 

87,622

 

Railroad assets

 

7,575

 

7,403

 

Deferred tax asset, net

 

20,101

 

20,101

 

Service fees receivable and other assets

 

9,760

 

10,872

 

Total assets

 

$

280,431

 

$

298,119

 

 

 

 

 

 

 

Notes payable

 

$

167,579

 

$

177,329

 

Minority interest and other liabilities

 

12,000

 

13,967

 

Total liabilities

 

179,579

 

191,296

 

Total equity

 

100,852

 

106,823

 

Total liabilities and equity

 

$

280,431

 

$

298,119

 

 

5


 

 

FirstCity Financial Corporation

Supplemental Information

(Dollars in thousands)

(Unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2008

 

2007

 

Portfolio Asset Acquisition and Resolution:

 

 

 

 

 

Summary Operating Statement Data

 

 

 

 

 

Revenues

 

$

9,321

 

$

9,592

 

Equity in earnings of investments

 

2,840

 

1,826

 

Expenses

 

(10,931

)

(9,222

)

Operating contribution before provision for

 

 

 

 

 

loan and impairment losses

 

1,230

 

2,196

 

Provision for loan and impairment losses

 

3,030

 

326

 

Operating contribution, net of direct taxes

 

$

(1,800

)

$

1,870

 

 

 

 

 

 

 

Aggregate purchase price of portfolios acquired:

 

 

 

 

 

Acquisition partnerships

 

 

 

 

 

Domestic

 

$

6,693

 

$

71,568

 

Latin America

 

13,207

 

3,401

 

Europe

 

—

 

3,802

 

Total

 

$

19,900

 

$

78,771

 

 

 

 

Purchase

 

FirstCity’s

 

 

 

Price

 

Investment

 

Historical Acquisitions - Annual:

 

 

 

 

 

Three months ended March 31, 2008

 

$

19,900

 

$

8,435

 

2007

 

214,333

 

126,714

 

2006

 

296,990

 

144,048

 

2005

 

146,581

 

71,405

 

2004

 

174,139

 

59,762

 

 

 

 

March 31,

 

December 31,

 

 

 

2008

 

2007

 

Portfolio acquisition and resolution assets by region:

 

 

 

 

 

Domestic

 

$

151,443

 

$

163,078

 

Latin America

 

36,054

 

33,450

 

Europe

 

48,341

 

46,701

 

Canada

 

337

 

371

 

Total

 

$

236,175

 

$

243,600

 

 

 

 

Three Months Ended
March 31, 

 

 

 

2008

 

2007

 

Revenues and equity in earnings of investments by region:

 

 

 

 

 

Domestic

 

$

6,718

 

$

6,967

 

Latin America

 

3,035

 

2,532

 

Europe

 

2,395

 

1,830

 

Canada

 

13

 

89

 

Total

 

$

12,161

 

$

11,418

 

 

 

 

 

 

 

Revenues and equity in earnings of investments by source:

 

 

 

 

 

Equity earnings

 

$

2,840

 

$

1,826

 

Income from Portfolio Assets

 

4,935

 

5,035

 

Servicing fees

 

2,200

 

2,605

 

Gain on sale of SBA loans held for sale, net

 

9

 

281

 

Interest income from SBA loans

 

476

 

308

 

Interest income from affiliates

 

150

 

126

 

Interest income from loans receivable - other

 

275

 

907

 

Other

 

1,276

 

330

 

Total

 

$

12,161

 

$

11,418

 

 

6


 

 

 

Three Months Ended
March 31,

 

 

 

2008

 

2007

 

Analysis of Equity Investments:

 

 

 

 

 

FirstCity’s average investment:

 

 

 

 

 

Domestic

 

$

23,696

 

$

35,877

 

Latin America

 

22,890

 

18,659

 

Europe

 

30,526

 

47,436

 

Europe-Servicing subsidiaries

 

7,153

 

6,125

 

Latin America-Servicing subsidiaries

 

4,925

 

1,474

 

Total

 

$

89,190

 

$

109,571

 

 

 

 

 

 

 

FirstCity share of equity earnings (losses):

 

 

 

 

 

Domestic

 

$

266

 

$

251

 

Latin America

 

369

 

(10

)

Europe

 

1,686

 

1,540

 

Europe-Servicing subsidiaries

 

316

 

76

 

Latin America-Servicing subsidiaries

 

203

 

(31

)

Total

 

$

2,840

 

$

1,826

 

 

 

 

 

 

 

Selected Other Data:

 

 

 

 

 

Average investment in wholly owned portfolio assets and loans receivable:

 

 

 

 

 

Domestic

 

$

126,377

 

$

142,747

 

Latin America

 

6,998

 

9,349

 

Europe

 

9,107

 

3,610

 

Canada

 

350

 

2,287

 

Total

 

$

142,832

 

$

157,993

 

 

 

 

 

 

 

Income from wholly owned portfolio assets and loans receivable:

 

 

 

 

 

Domestic

 

$

5,235

 

$

5,967

 

Latin America

 

321

 

527

 

Europe

 

276

 

74

 

Canada

 

13

 

89

 

Total

 

$

5,845

 

$

6,657

 

 

 

 

 

 

 

Servicing fee revenues:

 

 

 

 

 

Domestic partnerships:

 

 

 

 

 

Servicing fee revenue

 

$

362

 

$

629

 

Average servicing fee %

 

3.2

%

3.7

%

Latin American partnerships:

 

 

 

 

 

Servicing fee revenue

 

$

1,848

 

$

1,958

 

Average servicing fee %

 

15.5

%

15.9

%

Total Service Fees-Portfolio Assets:

 

 

 

 

 

Servicing fee revenue

 

$

2,210

 

$

2,587

 

Average servicing fee %

 

9.5

%

8.7

%

Service Fees-SBA loans:

 

$

(10

)

$

18

 

Total Service Fees

 

$

2,200

 

$

2,605

 

 

 

 

 

 

 

Collections:

 

 

 

 

 

Domestic

 

$

11,349

 

$

17,225

 

Latin America

 

11,885

 

12,342

 

Europe

 

12,768

 

33,511

 

Subtotal

 

36,002

 

63,078

 

Wholly-owned

 

19,489

 

19,691

 

Total

 

$

55,491

 

$

82,769

 

 

 

 

 

 

 

Servicing portfolio (face value):

 

 

 

 

 

Domestic

 

$

556,774

 

$

619,098

 

Latin America

 

1,596,845

 

1,712,128

 

Europe

 

1,174,578

 

1,027,430

 

Total

 

$

3,328,197

 

$

3,358,656

 

 

 

 

 

 

 

Number of personnel at period end:

 

 

 

 

 

Domestic

 

94

 

58

 

Latin America

 

122

 

116

 

Corporate

 

34

 

32

 

Total personnel

 

250

 

206

 

 

7


 

FirstCity Financial Corporation

Schedule of Unrealized Gross Profit

March 31, 2008

(Unaudited)

 

 

 

Book Value of Portfolio Assets (1)

 

($ in 000’s)

 

12/31/2006

 

12/31/2007

 

3/31/2008

 

Domestic

 

$

153,118

 

151,802

 

138,534

 

Europe

 

46,204

 

40,340

 

40,008

 

Latin America

 

22,378

 

26,844

 

38,840

 

Total (4)

 

$

221,700

 

218,987

 

217,383

 

 

 

 

 

 

 

 

 

 

 

Estimated Remaining Collections (2)

 

 

 

12/31/2006

 

12/31/2007

 

3/31/2008

 

Domestic

 

$

215,987

 

195,845

 

171,868

 

Europe

 

61,081

 

52,617

 

51,802

 

Latin America

 

50,866

 

68,900

 

89,695

 

Total

 

$

327,934

 

317,363

 

313,365

 

 

 

 

 

 

 

 

 

 

 

Unrealized Gross Profit (3)

 

 

 

12/31/2006

 

12/31/2007

 

3/31/2008

 

Domestic

 

$

62,869

 

44,043

 

33,334

 

Europe

 

14,877

 

12,278

 

11,794

 

Latin America

 

28,488

 

42,056

 

50,854

 

Total

 

$

106,234

 

98,376

 

95,982

 

 

 

 

 

 

 

 

 

 

 

Unrealized Gross Profit%

 

 

 

12/31/2006

 

12/31/2007

 

3/31/2008

 

Domestic

 

29.1

%

22.5

%

19.4

%

Europe

 

24.4

%

23.3

%

22.8

%

Latin America

 

56.0

%

61.0

%

56.7

%

Total

 

32.4

%

31.0

%

30.6

%

 

 

This schedule represents statistical information related to the Company’s ownership in portfolio assets and is provided for informational purposes to give an indication of the future Unrealized Gross Profit attributable to those pools. These are estimates and will change each period based upon review and judgment of management and individual facts and circumstances surrounding each asset in the portfolios.

 

(1) Book Value of Portfolio Assets represents the unamortized purchase price of Portfolio Assets held by various acquisition entities, some of which are consolidated by FirstCity and others held through equity investments in partnerships or similar arrangements.

 

(2) Estimated Remaining Collections represents the sum of all future projected cash collections expected from the Portfolio Assets, net of certain expenses.

 

(3) Unrealized Gross Profit represents the excess difference between the Estimated Remaining Collections and the Book Value of Portfolio Assets.

 

(4) FirstCity considers Book Value of its interests in Portfolio Assets a useful measurement of the Company’s underlying holdings and interests in Portfolio Assets. As FirstCity’s share of Book Value of Portfolio Assets is considered a non-GAAP measure, the following reconciliation is provided:

 

 

 

12/31/2006

 

12/31/2007

 

3/31/2008

 

FirstCity’s wholly-owned and majority-owned Portfolio Assets (as reported in “Portfolio Assets” on the financial statement of respective SEC filing)

 

$

 108,696

 

122,001

 

112,593

 

Minority shareholders’ interests in FirstCity’s majority-owned Portfolio Assets (included in “Minority interest” on the financial statement of respective SEC filing)

 

(2,005

)

(4,474

)

(3,996

)

FirstCity’s interests in Portfolio Assets held by equity investment entities (included in total assets of equity investments in “Condensed Combined Balance Sheets” table disclosed in financial statement footnotes of respective SEC filing)

 

115,009

 

101,460

 

108,786

 

 

 

$

221,700

 

218,987

 

217,383

 

 

8