(4) Portfolio Assets

Portfolio Assets are summarized as follows:

	March 31, 2013
	(Dollars in thousands)
	Carrying		Allowance for		Carrying
	Value		Loan Losses		Value, net
Loan Portfolios:
Purchased Credit-Impaired Loans
Domestic:
Commercial real estate	$	24,518	$	29	$	24,489
Business assets	3,712		26		3,686
Other	2,669		—		2,669
Latin America - commercial real estate	1,046		331		715
Europe - commercial real estate	3,242		—		3,242
Other	4,561		31		4,530
Total Loan Portfolios	$	39,748	$	417	39,331

Real estate held for sale, net					12,133

Total Portfolio Assets					$	51,464

	December 31, 2012
	(Dollars in thousands)
	Carrying		Allowance for		Carrying
	Value		Loan Losses		Value, net
Loan Portfolios:
Purchased Credit-Impaired Loans
Domestic:
Commercial real estate	$	28,487	$	—	$	28,487
Business assets	4,047		26		4,021
Other	3,087		—		3,087
Latin America - commercial real estate	1,034		327		707
Europe - commercial real estate	3,449		—		3,449
Other	5,194		41		5,153
Total Loan Portfolios	$	45,298	$	394	44,904

Real estate held for sale, net					10,171

Total Portfolio Assets					$	55,075

Certain Portfolio Assets are pledged to secure a loan facility with Bank of Scotland and Bank of America (see Note 7). In addition, certain Portfolio Assets are pledged to secure notes payable of certain consolidated affiliates of FirstCity that are generally non-recourse to FirstCity or any affiliate other than the entity that incurred the debt.

In March 2012, a real estate property with a carrying value of $6.9 million (owned by a subsidiary under the Company’s Special Situations Platform business segment) was acquired by the creditor holding the mortgage secured by this property in a foreclosure transaction. The Company had the legal right to bring the account into good standing by paying all past due payments; however, the Company believed it would be unable to facilitate a positive cash flow on the property for an extended period of time based on local economic conditions. Management further believed that the property’s liquidation value was less than the debt obligation securing the property. Upon acquisition of the real estate property by the creditor and legal release from the obligation, the Company de-recognized the related non-recourse debt obligation from its consolidated balance sheet. This non-cash activity did not have a material impact on the Company’s results of operations for the three-month period ended March 31, 2012.

Income from Portfolio Assets is summarized as follows:

	Three Months Ended
	March 31,
	2013		2012
	(Dollars in thousands)
Loan Portfolios:
Purchased Credit-Impaired Loans	$	1,605	$	7,575
Purchased performing loans	91		71
Other	36		35
Real Estate Portfolios	204		824
Income from Portfolio Assets	$	1,936	$	8,505

Accretable yield represents the amount of income the Company can expect to generate over the remaining life of its existing income-accruing Purchased Credit-Impaired Loans based on estimated future cash flows as of March 31, 2013 and 2012, respectively. Reclassifications from nonaccretable difference to accretable yield primarily result from the Company’s increase in its estimates of future cash flows on Purchased Credit-Impaired Loans, whereas reclassifications to nonaccretable difference from accretable yield primarily result from the Company’s decrease in its estimates of future cash flows on these loans. Transfers from (to) non-accrual primarily result from adjustments to the income-recognition method applied to Purchased Credit-Impaired Loans based on management’s ability to reasonably estimate both the timing and amount of future cash flows (see Note 1). Changes in accretable yield related to the Company’s Purchased Credit-Impaired Loans for the three-month periods ended March 31, 2013 and 2012 are as follows:

	Three Months Ended
	March 31,
	2013			2012
	(Dollars in thousands)
Beginning Balance	$	—		$	4,732
Accretion	(14		)	(347		)
Reclassification from (to) nonaccretable difference	42			18
Disposals	(28		)	(25		)
Ending Balance	$	—		$	4,378

Acquisitions of Purchased Credit-Impaired Loans for the three-month month periods ended March 31, 2013 and 2012, respectively, are summarized in the table below:

	Three Months Ended
	March 31,
	2013		2012
	(Dollars in thousands)
Face value at acquisition	$	3,599	$	5,205
Cash flows expected to be collected at acquisition, net of adjustments	612		1,699
Basis in acquired loans at acquisition	356		382

During the three-month period ended March 31, 2013, the Company sold loan Portfolio Assets with an aggregate carrying value of $0.2 million. The Company sold loan Portfolio Assets with an aggregate carrying value of $8.4 million during the three-month period ended March 31, 2012.

For the three-month period ended March 31, 2013, the Company recorded provisions for loan and impairment losses, net of recoveries, through a charge to income of $106,000 — which was comprised of a $51,000 provision for loan losses, net of recoveries, and a $55,000 impairment charge on real estate portfolios. For the three-month period ended March 31, 2012, the Company recorded provisions for loan and impairment losses, net of recoveries, through a charge to income of $0.2 million — which was comprised of a $0.1 million provision for loan losses, net of recoveries, and a $0.1 million impairment charge on real estate portfolios.

Changes in the allowance for loan losses related to our loan Portfolio Assets for the three-month month periods ended March 31, 2013, are as follows:

	Purchased Credit-Impaired Loans
	Domestic							Latin America				Europe
	Commercial			Business				Commercial		Residential		Commercial
(dollars in thousands)	Real Estate			Assets		Other		Real Estate		Real Estate		Real Estate		Other			Total
Beginning balance, January 1, 2013	$	—		$	26	$	—	$	327	$	—	$	—	$	41		$	394
Provisions	61			—		—		—		—		—		—			61
Recoveries	—			—		—		—		—		—		(10		)	(10		)
Charge offs	(32		)	—		—		—		—		—		—			(32		)
Translation adjustments	—			—		—		4		—		—		—			4
Ending balance, March 31, 2013	$	29		$	26	$	—	$	331	$	—	$	—	$	31		$	417

Changes in the allowance for loan losses related to our loan Portfolio Assets for the three-month month period ended March 31, 2012, are as follows:

	Purchased Credit-Impaired Loans
	Domestic									Latin America				Europe
	Commercial			Business						Commercial		Residential		Commercial
(dollars in thousands)	Real Estate			Assets			Other			Real Estate		Real Estate		Real Estate		Other		Total
Beginning balance, January 1, 2012	$	553		$	185		$	38		$	—	$	—	$	—	$	5	$	781
Provisions	128			62			5			—		—		—		—		195
Recoveries	—			(44		)	—			—		—		—		—		(44		)
Charge offs	(171		)	(3		)	(5		)	—		—		—		—		(179		)
Translation adjustments	—			—			—			—		—		—		—		—
Ending balance, March 31, 2012	$	510		$	200		$	38		$	—	$	—	$	—	$	5	$	753

The following table presents our recorded investment in loan Portfolio Assets by collateral type. Our loan Portfolio Assets, which are primarily comprised of Purchased Credit-Impaired Loans, are categorized by collateral type based on the common risk characteristics that management generally uses for pooling purposes (when management elects to pool purchased loans).

	March 31,		December 31,
	2013		2012
	(Dollars in thousands)
Commercial real estate	$	28,446	$	32,643
Business assets	3,686		4,021
Other commercial	7,199		8,240
	$	39,331	$	44,904