Exhibit 99.1
NEWS RELEASE
Contact: |
| Suzy W. Taylor |
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| 866-652-1810 |
FirstCity Financial (NASDAQ FCFC) Reports First Quarter 2006 Earnings
Waco, Texas May 10, 2006
Highlights of the Quarter:
• FirstCity reports 1st quarter 2006 earnings of $2,022,141 or $.17 per diluted share
• FirstCity invested $23.3 million in portfolio assets for the quarter.
• FirstCity reports continued earning asset growth of $12.4 million for the quarter.
Components of the quarterly results are detailed below (dollars in thousands except per share data):
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| Three Months Ended |
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| 2006 |
| 2005 |
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Portfolio Asset Acquisition and Resolution |
| $ | 3,328 |
| $ | 4,115 |
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Corporate overhead |
| (1,231 | ) | (1,566 | ) | ||
Earnings from continuing operations |
| 2,097 |
| 2,549 |
| ||
Loss from discontinued operations net of taxes |
| (75 | ) | — |
| ||
Net earnings to common stockholders |
| $ | 2,022 |
| $ | 2,549 |
|
Diluted earnings per common share |
| $ | 0.17 |
| $ | 0.21 |
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James T. Sartain, President and CEO said, “We were pleased with the strong acquisitions and equity investments in the first quarter. Our asset base continues to grow as we progress toward a critical mass in earning assets. The revenues and resulting earnings from this growth will build steadily over time. Our pipeline is strong and we are currently evaluating 29 different transactions representing over $4 billion in face value of assets.”
Portfolio Asset Acquisition and Resolution
FirstCity purchased $42.4 million in portfolio assets during the first quarter of 2006 and invested equity in these portfolios of $23.3 million. These purchases consisted of three portfolios – all in the United States.
(more)
Portfolio purchases are detailed below (in millions):
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| Domestic |
| Europe |
| Latin |
| Total |
| Invested |
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2006 |
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1st Quarter |
| $ | 42.4 |
| — |
| — |
| $ | 42.4 |
| $ | 23.3 | * | ||
2005 |
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4th Quarter |
| $ | 32.9 |
| $ | 37.2 |
| $ | 12.6 |
| $ | 82.7 |
| $ | 35.0 |
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3rd Quarter |
| 32.3 |
| — |
| 0.6 | �� | 32.9 |
| 18.1 |
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2nd Quarter |
| 16.1 |
| — |
| — |
| 16.1 |
| 16.1 |
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1st Quarter |
| 12.1 |
| — |
| 2.8 |
| 14.9 |
| 2.2 |
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Total Year 2005 |
| $ | 93.4 |
| $ | 37.2 |
| $ | 16.0 |
| $ | 146.6 |
| $ | 71.4 | * |
Total Year 2004 |
| $ | 91.2 |
| $ | 9.8 |
| $ | 73.1 |
| $ | 174.1 |
| $ | 59.8 |
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Total Year 2003 |
| $ | 92.6 |
| $ | 31.2 |
| $ | 5.4 |
| $ | 129.2 |
| $ | 22.9 | * |
* In addition to the portfolio acquisitions above, FirstCity invested $730,000 in partnerships during the first quarter of 2006, $3.2 million during 2005 and $3.4 million during 2003.
Operating contribution from the Portfolio Asset Acquisition business for the first quarter was $3.3 million. The earnings were comprised of $5.5 million in revenues, $3.6 million in equity in earnings of investments and $5.8 million of expenses, including a provision for loan losses of $109,000. The business generated 58% of the revenues (including equity in earnings of investments) from domestic investments, 29% from investments in Latin America and 13% from investments in Europe. The major components of revenue for the quarter include equity earnings in Acquisition Partnerships and servicing entities of $3.6 million, servicing fees of $2.6 million, gain on resolution of Portfolio Assets of $1.3 million and interest income of $1.2 million.
Operating contribution from the Portfolio Asset Acquisition business for the first quarter includes net foreign currency gains of $517,000, which is comprised of $334,000 of Euro gains, $174,000 in Mexican peso gains and $9,000 in Argentine peso gains. The Company continued to borrow in Euros to hedge the risk associated with foreign currency exposure.
The following table details the impact of these items on corporate earnings:
Illustration of the Effects of Currency |
| Three Months Ended |
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2006 |
| 2005 | |||||
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| (unaudited) |
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Net earnings to Common Stockholders as reported |
| $ | 2,022 |
| $ | 2,549 |
|
Euro gains |
| 334 |
| 230 |
| ||
Mexican Peso gains |
| 174 |
| 319 |
| ||
Argentine Peso gains |
| 9 |
| — |
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Euro exchange rate at valuation date |
| 0.83 |
| 0.77 |
| ||
Mexican Peso exchange rate at valuation date |
| 10.95 |
| 11.29 |
| ||
Argentine Peso exchange rate at valuation date |
| 3.14 |
| n/a |
| ||
2
Conference Call
A conference call will be held today at 9:00 a.m. Central time to discuss first quarter 2006 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 2006 Conference Call | |||
Date: |
| Wednesday, May 10, 2006 | |||
Time: |
| 9:00 a.m. Central Time | |||
Host: |
| James T. Sartain, FirstCity’s President and Chief Executive Officer | |||
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Web Access: |
| FirstCity’s web page- |
| www.fcfc.com/invest.htm or, | |
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| CCBN’s Investor websites- |
| www.streetevents.com and, | |
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| www.earnings.com | |
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Dial In Access: |
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| Domestic | 800-599-9816 | |
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| International | 617-847-8705 | |
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| Pass code - | 92311829 | |
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Replay |
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| Domestic | 888-286-8010 | |
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| International | 617-801-6888 | |
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| Pass code - | 15714033 |
The replay will be available until Wednesday May 24, 2006.
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 statements under the Private Securities Litigation Reform Act of 1995. 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”, 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, assumptions underlying portfolio asset performance, risks associated with foreign operations, currency exchange rate fluctuations, interest rate 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, 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 conditions, foreign social and economic conditions, changes (legislative and otherwise) in the asset securitization industry, 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, 2005, filed with the SEC on March 16,2006, 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.
The Company 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 France and Mexico. Its common stock is listed on the NASDAQ National Market System under the symbol “FCFC.”
3
FirstCity Financial Corporation
Summary of Operations
(In thousands, except per share data)
(Unaudited)
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| Three Months Ended |
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| 2006 |
| 2005 |
| ||
Revenues: |
|
|
|
|
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Servicing fees from affiliates |
| $ | 2,647 |
| $ | 3,172 |
|
Gain on resolution of Portfolio Assets |
| 1,284 |
| 1,862 |
| ||
Interest income from affiliates |
| 430 |
| 424 |
| ||
Loan interest income |
| 774 |
| 478 |
| ||
Other income |
| 580 |
| 384 |
| ||
Total revenues |
| 5,715 |
| 6,320 |
| ||
Expenses: |
|
|
|
|
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Interest and fees on notes payable - other |
| 1,698 |
| 872 |
| ||
Interest and fees on notes payable to affiliates |
| 10 |
| 8 |
| ||
Salaries and benefits |
| 3,738 |
| 4,158 |
| ||
Provision (recovery) for loan and impairment losses |
| 109 |
| 85 |
| ||
Occupancy, data processing, communication and other |
| 1,564 |
| 1,913 |
| ||
Total expenses |
| 7,119 |
| 7,036 |
| ||
Equity in earnings of investments |
| 3,634 |
| 3,401 |
| ||
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Earnings from continuing operations before income taxes and minority interest |
| 2,230 |
| 2,685 |
| ||
Income taxes |
| (122 | ) | (139 | ) | ||
Minority interest |
| (11 | ) | 3 |
| ||
Earnings from continuing operations |
| 2,097 |
| 2,549 |
| ||
Discontinued operations |
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|
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Earnings (loss) from operations of discontinued components |
| (75 | ) | — |
| ||
Income taxes |
| — |
| — |
| ||
Earnings (loss) from discontinued operations |
| (75 | ) | — |
| ||
Net earnings |
| $ | 2,022 |
| $ | 2,549 |
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Basic earnings per common share are as follows: |
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Earnings from continuing operations |
| $ | 0.19 |
| $ | 0.23 |
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Discontinued operations |
| $ | (0.01 | ) | $ | — |
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Net earnings per common share |
| $ | 0.18 |
| $ | 0.23 |
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Wtd. avg. common shares outstanding |
| 11,307 |
| 11,262 |
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Diluted earnings per common share are as follows: |
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Earnings from continuing operations |
| $ | 0.18 |
| $ | 0.21 |
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Discontinued operations |
| $ | (0.01 | ) | $ | — |
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Net earnings per common share |
| $ | 0.17 |
| $ | 0.21 |
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Wtd. avg. common shares outstanding |
| 11,958 |
| 12,007 |
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Selected Unaudited Balance Sheet Data
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| March 31, |
| December 31, |
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Cash |
| $ | 9,248 |
| $ | 12,901 |
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Portfolio Assets, net |
| 52,124 |
| 49,346 |
| ||
Loans receivable |
| 20,107 |
| 19,606 |
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Equity investments |
| 92,892 |
| 83,785 |
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Deferred tax asset, net |
| 20,101 |
| 20,101 |
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Service fees receivable and other assets |
| 8,983 |
| 8,973 |
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Discontinued mortgage assets held for sale |
| 91 |
| 157 |
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Total assets |
| $ | 203,546 |
| $ | 194,869 |
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Notes payable - other |
| $ | 95,330 |
| $ | 89,653 |
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Notes payable to affiliates |
| 546 |
| 606 |
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Minority interest and other liabilities |
| 6,583 |
| 5,578 |
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Liabilities from discontinued consumer operations |
| 121 |
| 121 |
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Total liabilities |
| 102,580 |
| 95,958 |
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Total equity |
| 100,966 |
| 98,911 |
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Total liabilities and equity |
| $ | 203,546 |
| $ | 194,869 |
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4
FirstCity Financial Corporation
Supplemental Information
(Dollars in thousands)
(Unaudited)
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| Three Months Ended |
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| 2006 |
| 2005 |
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Portfolio Asset Acquisition and Resolution: |
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Summary Operating Statement Data |
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Revenues |
| $ | 5,546 |
| $ | 6,207 |
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Equity in earnings of investments |
| 3,634 |
| 3,401 |
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Expenses |
| (5,743 | ) | (5,408 | ) | ||
Operating contribution before provision for loan and impairment losses |
| 3,437 |
| 4,200 |
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Provision (recovery) for loan and impairment losses |
| 109 |
| 85 |
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Operating contribution, net of direct taxes |
| $ | 3,328 |
| $ | 4,115 |
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Aggregate purchase price of portfolios acquired: |
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Acquisition partnerships |
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Domestic |
| $ | 42,351 |
| $ | 12,108 |
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Latin America |
| — |
| 2,763 |
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Europe |
| — |
| — |
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Total |
| $ | 42,351 |
| $ | 14,871 |
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| Purchase |
| FirstCity’s |
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Historical Acquisitions - Annual: |
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2006 |
| $ | 42,351 |
| $ | 23,342 |
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2005 |
| 146,581 |
| 71,405 |
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2004 |
| 174,139 |
| 59,762 |
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2003 |
| 129,192 |
| 22,944 |
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2002 |
| 171,769 |
| 16,717 |
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| March 31, |
| December 31, |
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Portfolio acquisition and resolution assets by region: |
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Domestic |
| $ | 119,285 |
| $ | 105,938 |
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Latin America |
| 19,661 |
| 19,764 |
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Europe |
| 26,736 |
| 27,699 |
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Total |
| $ | 165,682 |
| $ | 153,401 |
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| Three Months Ended |
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| 2006 |
| 2005 |
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Revenues and equity in earnings of investments by region: |
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Domestic |
| $ | 5,354 |
| $ | 5,962 |
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Latin America |
| 2,653 |
| 2,397 |
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Europe |
| 1,173 |
| 1,249 |
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Total |
| $ | 9,180 |
| $ | 9,608 |
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Revenues and equity in earnings of investments by source: |
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Equity earnings |
| $ | 3,634 |
| $ | 3,401 |
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Servicing fees |
| 2,647 |
| 3,172 |
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Interest income - loans |
| 1,204 |
| 902 |
| ||
Gain on resolution of Portfolio Assets |
| 1,284 |
| 1,862 |
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Other |
| 411 |
| 271 |
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Total |
| $ | 9,180 |
| $ | 9,608 |
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5
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| Three Months Ended |
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| 2006 |
| 2005 |
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Analysis of Equity Investments in Acquisition Partnerships: |
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FirstCity’s Average investment in Acquisition Partnerships |
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Domestic |
| $ | 55,682 |
| $ | 36,552 |
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Latin America |
| 3,038 |
| 1,518 |
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Europe |
| 25,267 |
| 18,874 |
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Total |
| $ | 83,987 |
| $ | 56,944 |
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FirstCity Share of Equity Earnings: |
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Domestic |
| $ | 2,269 |
| $ | 2,313 |
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Latin America |
| 313 |
| 3 |
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Europe |
| 1,052 |
| 1,085 |
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Total |
| $ | 3,634 |
| $ | 3,401 |
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Selected other data: |
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Average investment in wholly owned portfolio assets and loans receivable: |
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Domestic |
| $ | 50,263 |
| $ | 36,315 |
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Latin America |
| 16,123 |
| 19,096 |
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Europe |
| 1,748 |
| 530 |
| ||
Total |
| $ | 68,134 |
| $ | 55,941 |
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Income from wholly owned portfolio assets and loans receivable: |
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Domestic |
| $ | 2,130 |
| $ | 2,393 |
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Latin America |
| 331 |
| 363 |
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Europe |
| 27 |
| 8 |
| ||
Total |
| $ | 2,488 |
| $ | 2,764 |
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Servicing fee revenues: |
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Domestic partnerships: |
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Servicing fee revenue |
| $ | 759 |
| $ | 1,141 |
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Average servicing fee % |
| 3.3 | % | 4.2 | % | ||
Latin American partnerships: |
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Servicing fee revenue |
| $ | 1,826 |
| $ | 1,981 |
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Average servicing fee % |
| 15.0 | % | 18.2 | % | ||
Incentive service fees |
| $ | 62 |
| $ | 50 |
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Total Service Fees: |
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Servicing fee revenue |
| $ | 2,647 |
| $ | 3,172 |
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Average servicing fee % |
| 7.5 | % | 8.3 | % | ||
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Collections: |
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Domestic |
| $ | 23,269 |
| $ | 27,434 |
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Latin America |
| 12,145 |
| 10,898 |
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Europe |
| 16,697 |
| 13,198 |
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Subtotal |
| 52,111 |
| 51,530 |
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Wholly-owned |
| 6,731 |
| 8,338 |
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Total |
| $ | 58,842 |
| $ | 59,868 |
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Servicing portfolio (face value) |
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Domestic |
| $ | 568,029 |
| $ | 450,204 |
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Latin America |
| 1,330,719 |
| 1,446,059 |
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Europe |
| 882,574 |
| 867,078 |
| ||
Total |
| $ | 2,781,322 |
| $ | 2,763,341 |
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Number of personnel at period end: |
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Domestic |
| 64 |
| 65 |
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Latin America |
| 113 |
| 129 |
| ||
Corporate |
| 30 |
| 31 |
| ||
Total personnel |
| 207 |
| 225 |
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6