Exhibit 99.1
NEWS RELEASE
Contact: | Suzy W. Taylor |
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| 866-652-1810 |
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FirstCity Financial Corporation Reports Second Quarter 2010 Results
Waco, Texas August 10, 2010……….
Highlights:
· FirstCity reported second quarter 2010 earnings of $8.1 million or $0.80 per diluted share.
· FirstCity invested $50.7 million during the quarter, consisting of $28.1 million of portfolio assets and $22.6 million in non-portfolio debt and equity investments.
· FirstCity reported continued earning asset growth of $13.4 million for the second quarter of 2010 — as total earning assets grew to $387.7 million at June 30, 2010.
Overview of Second Quarter 2010
FirstCity reported net earnings of $8.1 million for the second quarter of 2010 (“Q2 2010”), compared to $7.7 million reported for the second quarter of 2009 (“Q2 2009”). The Company recorded diluted net earnings per common share of $0.80 in Q2 2010, compared to $0.76 of diluted net earnings per common share for the same period last year.
James T. Sartain, President and CEO of FirstCity, said, “I am very pleased with the strong financial results we reported for the quarter. We continue to enhance the future earnings power of our servicing platform by implementing a “fees for services and performance” strategy. This initiative, as well as our continued pursuit of strategic investment opportunities available in the marketplace, will deliver long-term sustainable growth for the company.”
During Q2 2010, FirstCity and its investment partners jointly acquired $141.6 million of domestic portfolio assets with a face value of $251.0 million — of which FirstCity’s investment acquisition share was $28.1 million. FirstCity’s non-portfolio investments in Q2 2010 included $5.4 million of SBA loan advances and originations; $8.1 million of debt and equity investments in privately-held middle-market companies; $6.6 million of equity investments in foreign partnerships; and $2.5 million of other debt and equity investments.
The Company’s unrealized future gross profit associated with its core portfolio asset business assets totaled $151.5 million at June 30, 2010. Unrealized future gross profit is a non-GAAP measure. Refer to the Schedule of Estimated Unrealized Gross Profit from Portfolio Assets on page 11 of this release for a reconciliation of this measure with the most directly comparable financial measure calculated and presented in accordance with U.S. generally accepted accounting principles.
Items impacting comparability of results for Q2 2010 with previous results are as follows:
Total assets of FirstCity at the end of Q2 2010 totaled $466.0 million compared to $453.5 million at the end of March 2010. The Company’s earning assets experienced a corresponding increase to $387.7 million at the end of June 2010 compared to $374.3 million at the end of March 2010 as a result of its Q2 2010 investment activity.
(more)
Revenues in Q2 2010 increased to $43.1 million compared to $20.7 million in Q2 2009. The Company’s revenues in Q2 2010 included $14.6 million of income and gains from Portfolio Assets, $1.5 million of interest income and gains from loans receivable, $1.7 million of fee income attributable to our loan servicing platform; $3.3 million gain from an investment security sale; and $20.4 million of consolidated revenues from our railroad, manufacturing and coal mine subsidiaries. FirstCity’s holdings in earning assets increased to $387.7 million at the end of Q2 2010 from $383.2 million at the end of Q2 2009.
Revenues in Q2 2010 increased as a result of the $3.3 million investment security gain; $13.1 million of revenue from our newly-consolidated coal mine operation (we increased our stake in the coal mine subsidiary to a controlling interest from a noncontrolling interest in Q2 2010); and $6.1 million of consolidated revenue from our manufacturing subsidiary in Q2 2010 (acquired in December 2009). On June 30, 2010, the manufacturing subsidiary’s operating agreement was amended, with consent of all owners, and the change resulted in the Company ceasing to have a controlling interest, but retaining a noncontrolling interest, in the manufacturing entity. As such, beginning July 1, 2010, the Company will record its share of the manufacturing subsidiary’s net earnings as “equity in earnings of unconsolidated subsidiaries” (instead of reporting the subsidiary’s consolidated results of operations).
The Company recorded net impairment provisions of $3.2 million during Q2 2010 compared to $2.0 million in Q2 2009. The provisions in Q2 2010 were recorded primarily to reflect changes in management’s estimates as to the timing and amount of projected future collections and declines in domestic real estate values. The global distribution of Q2 2010 net impairment provisions included $2.3 million for domestic assets, $0.2 million related to Latin American assets, and $0.7 million related to European assets. Net provisions in Q2 2010 were split between consolidated assets ($2.6 million) and FirstCity’s share of net provisions from unconsolidated subsidiaries ($0.6 million).
The Company’s share of foreign currency transaction losses from its consolidated and unconsolidated foreign operations was $0.6 million for Q2 2010, compared to $2.2 million of foreign currency transaction gains for the same period in 2009.
Equity in earnings of unconsolidated subsidiaries was $1.8 million in Q2 2010 compared to $1.2 million for Q2 2009. This favorable increase in equity earnings was due to additional equity earnings of $2.4 million and $0.6 million reported by our special situations platform subsidiaries and foreign servicing entities, respectively, in Q2 2010 compared to Q2 2009; off-set partially by $2.4 million of lower equity earnings reported by our domestic and foreign acquisition partnerships in Q2 2010 compared to Q2 2009.
In Q2 2010, the Company also recognized a $4.8 million gain attributable to the transaction that resulted in the Company obtaining a controlling financial interest in its coal mine subsidiary. The Company owned a noncontrolling interest in this entity prior to the transaction. Under business combination accounting guidance, FirstCity recorded the coal mine subsidiary’s assets and liabilities at fair value and re-measured its previously-held noncontrolling interest in the coal mine subsidiary to fair value on the date control was obtained — which resulted in the Company’s recognition of the gain.
Selected financial data for Q2 2010:
The Company’s total operating costs and expenses (excluding provision, interest and income tax expenses) increased to $31.2 million for Q2 2010 from $9.6 million in Q2 2009, primarily due to $6.0 million of consolidated costs and expenses from our manufacturing subsidiary in Q2 2010 (refer to discussion above); $13.3 million of costs and expenses from our newly-consolidated coal mine subsidiary (refer to discussion above); and $0.6 million of consolidated foreign currency exchange losses recorded in Q2 2010 compared to $0.9 million of such gains in the same period a year ago — which is a $1.5 million unfavorable swing.
Total interest expense was $3.8 million in Q2 2010 and $3.6 million in Q2 2009. FirstCity’s average debt holdings were $310.0 million at an average cost of funds of 4.9% for Q2 2010, compared to its average debt holdings of $302.5 million at an average cost of funds of 4.8% for Q2 2009.
The Company recorded $1.2 million of income tax expense in Q2 2010 compared to $0.4 million of income tax expense in Q2 2009. The $0.8 million of additional income tax expense in Q2 2010 is attributable primarily to income tax expense associated with our foreign consolidated operations.
Other Corporate Matters
Credit Facilities Renewal with Bank of Scotland and BoS(USA) (collectively, “Bank of Scotland”)
As reported in our June 30, 2010 news release and in our Current Report on Form 8-K filed with the SEC on July 1, 2010, FirstCity and Bank of Scotland reached agreement and closed on a $268.6 million Reducing Note Facility Agreement (“Reducing Note Facility”) that allows for repayment to Bank of Scotland over time as cash flows from the underlying assets securing the loan facility are realized. The Company’s outstanding indebtedness and existing letter of credit obligations under its then-existing loan facilities with Bank of Scotland were refinanced into the Reducing Note Facility. The primary terms of this note facility are as follows:
· Scheduled amortization of $268.6 million over 3 years ($43.6 million in the first year, $80.0 million in the second year, $65.0 million in the first nine months of the third year, and $80.0 million at maturity), with interest at LIBOR + 3.5% (LIBOR floor of 1.0%);
· Repayment will be supported by the cash flows from assets and equity investments of the Company’s existing subsidiaries that were pledged to secure its then-existing loan facilities with Bank of Scotland when the debt was refinanced into the Reducing Note Facility;
· FirstCity’s existing loan facilities with Bank of Scotland are capped and Bank of Scotland has no further obligation to fund, except for draws on outstanding letters of credit in the amount of $22.35 million that are included in the amount of the note facility;
· FirstCity will receive unencumbered cash of 20% of the monthly net cash flows (i.e. cash “leak-through”), up to $25.0 million, after (a) payment to Bank of Scotland of interest and fees; and (b) payment of a scheduled overhead allowance to FirstCity of $38.9 million over 3 years ($1.50 million per month for the first year, $1.03 million per month for the second year, and $0.70 million per month for the third year);
· FirstCity provided a limited guaranty for the repayment of the indebtedness under the note facility to a maximum amount of $75.0 million; and
· FirstCity will be required to maintain a minimum tangible net worth of $60.0 million.
At closing, FirstCity had in excess of $45.0 million in unencumbered cash and portfolio assets, which combined with (1) the unencumbered cash leak-through of up to $25.0 million; (2) the overhead allowance of $38.9 million; and (3) management’s estimation of residual cash flows of $70.0 million from the pledged investments after full repayment of the Bank of Scotland debt, will potentially provide the Company in excess of $178.0 million in unencumbered cash and assets to fund future investments and operations.
FC Investment Holdings Corporation (a newly-formed wholly-owned subsidiary of FirstCity) and its current and future subsidiaries, or other entities in which such subsidiaries own any equity interest, are not subject to, do not guaranty and do not provide security interests in their assets, to secure the Reducing Note Facility. Further details about the structure and terms of the Reducing Note Facility are included in the above-mentioned press release and Current Report on Form 8-K.
Investment and Securities Purchase Agreements with Värde Investment Partners, L.P. (“Värde”)
As reported in the same June 30, 2010 news release and Current Report on Form 8-K filed with the SEC on July 1, 2010 mentioned above, FirstCity and Värde entered into an Investment Agreement whereby Värde may invest up to $750 million, at its discretion, alongside FirstCity in distressed loan portfolios and similar investment opportunities, subject to the terms and conditions contained in the agreement. The primary terms of the Investment Agreement are as follows:
· FirstCity will act as the exclusive servicer for the investment portfolios;
· FirstCity will provide Värde with a “right of first refusal” with regard to distressed asset investment opportunities in excess of $3 million sourced by FirstCity;
· FirstCity, at its determination, will co-invest between 5%-25% in each investment;
· FirstCity will receive a $200,000 monthly retainer in exchange for its services and commitments;
· FirstCity will receive a base servicing fee (based on investment portfolio collections) and will be eligible to receive additional incentive-based servicing fees (depending on the performance of the portfolios acquired); and
· FirstCity will be eligible to receive incentive-based management fees (depending on the aggregate amount and performance of the portfolios acquired).
The cash flows from the assets and equity interests from the Company’s investments under the Investment Agreement are not subject to the security interest requirements of Bank of Scotland’s Reducing Note Facility described above.
In addition, under terms of a Securities Purchase Agreement entered into between FirstCity and Värde, FirstCity issued and sold 150,000 shares of its common stock to Värde at a price of $5.93 per share in Q2 2010. Further details about the structure of the Investment Agreement with Värde and the terms of the Investment and Securities Purchase Agreements are included in the above-mentioned press release and Current Report on Form 8-K.
Conference Call
A conference call will be held on Tuesday, August 10, 2010 at 9:00 a.m. Central Time to discuss second 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 Second Quarter 2010 Conference Call | ||
Date: | Tuesday, August 10, 2010 | ||
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, | |
| CCBN’s Investor websites - | www.streetevents.com and, | |
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| www.earnings.com | |
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Dial In Access: | Domestic | 800-329-9097 | |
| International | 617-614-4929 | |
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| Pass code | 56501119 | |
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).
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”), in its reports to stockholders and in 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. 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, including FirstCity’s continued need for financing; availability of FirstCity’s credit facilities; FirstCity’s ability to obtain additional financing from Bank of Scotland or any other lender; and other risk factors and other risks that are described 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
(Dollars in thousands, except per share data)
(Unaudited)
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| Three Months Ended |
| Six Months Ended |
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| June 30, |
| June 30, |
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| 2010 |
| 2009 |
| 2010 |
| 2009 |
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Revenues: |
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Finance and Servicing: |
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Servicing fees |
| $ | 1,743 |
| $ | 2,403 |
| $ | 3,746 |
| $ | 4,795 |
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Income from Portfolio Assets |
| 14,622 |
| 14,077 |
| 26,085 |
| 23,120 |
| ||||
Gain on sale of SBA loans held for sale, net |
| 163 |
| 610 |
| 163 |
| 610 |
| ||||
Gain on sale of investment security |
| 3,250 |
| — |
| 3,250 |
| — |
| ||||
Interest income from SBA loans |
| 313 |
| 295 |
| 581 |
| 641 |
| ||||
Interest income from loans receivable - affiliates |
| 773 |
| 939 |
| 1,727 |
| 1,862 |
| ||||
Interest income from loans receivable - other |
| 229 |
| 364 |
| 361 |
| 793 |
| ||||
Other income |
| 1,565 |
| 1,118 |
| 2,696 |
| 1,998 |
| ||||
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| 22,658 |
| 19,806 |
| 38,609 |
| 33,819 |
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Manufacturing, Railroad and Coal Mine: |
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Operating revenues - manufacturing |
| 6,107 |
| — |
| 10,466 |
| — |
| ||||
Operating revenues - railroad |
| 1,192 |
| 705 |
| 2,457 |
| 1,452 |
| ||||
Operating revenues - coal mine |
| 13,100 |
| — |
| 13,100 |
| — |
| ||||
Other |
| 4 |
| 150 |
| 4 |
| 1,070 |
| ||||
|
| 20,403 |
| 855 |
| 26,027 |
| 2,522 |
| ||||
Total revenues |
| 43,061 |
| 20,661 |
| 64,636 |
| 36,341 |
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Costs and expenses: |
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Finance and Servicing: |
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Interest and fees on notes payable to banks and other |
| 3,334 |
| 3,125 |
| 6,376 |
| 6,134 |
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Interest and fees on note payable to affiliate |
| 400 |
| 444 |
| 792 |
| 877 |
| ||||
Salaries and benefits |
| 6,001 |
| 5,796 |
| 11,072 |
| 10,607 |
| ||||
Provision for loan and impairment losses |
| 2,625 |
| 677 |
| 4,327 |
| 1,783 |
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Asset-level expenses |
| 2,103 |
| 1,417 |
| 3,724 |
| 2,654 |
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Other |
| 3,306 |
| 1,903 |
| 6,502 |
| 4,949 |
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| 17,769 |
| 13,362 |
| 32,793 |
| 27,004 |
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Manufacturing, Railroad and Coal Mine: |
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Cost of revenues and operating costs - manufacturing |
| 5,952 |
| — |
| 10,788 |
| — |
| ||||
Cost of revenues and operating costs - railroad |
| 627 |
| 535 |
| 1,233 |
| 1,026 |
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Cost of revenues and operating costs - coal mine |
| 13,295 |
| — |
| 13,295 |
| — |
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| 19,874 |
| 535 |
| 25,316 |
| 1,026 |
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Total costs and expenses |
| 37,643 |
| 13,897 |
| 58,109 |
| 28,030 |
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Earnings before other revenue and income taxes |
| 5,418 |
| 6,764 |
| 6,527 |
| 8,311 |
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Equity in earnings of unconsolidated subsidiaries |
| 1,816 |
| 1,198 |
| 4,045 |
| 1,052 |
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Gain on business combinations |
| 4,838 |
| 1,455 |
| 5,729 |
| 1,455 |
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Earnings before income taxes |
| 12,072 |
| 9,417 |
| 16,301 |
| 10,818 |
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Income tax expense |
| 1,205 |
| 440 |
| 719 |
| 849 |
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Net earnings |
| 10,867 |
| 8,977 |
| 15,582 |
| 9,969 |
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Less: net income attributable to noncontrolling interests |
| 2,802 |
| 1,231 |
| 7,416 |
| 1,579 |
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Net earnings attributable to FirstCity |
| $ | 8,065 |
| $ | 7,746 |
| $ | 8,166 |
| $ | 8,390 |
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Basic earnings per common share are as follows: |
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Net earnings attributable to FirstCity stockholders |
| $ | 0.81 |
| $ | 0.79 |
| $ | 0.82 |
| $ | 0.85 |
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Weighted average common shares outstanding |
| 10,009 |
| 9,832 |
| 10,000 |
| 9,832 |
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Diluted earnings per common share are as follows: |
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Net earnings attributable to FirstCity stockholders |
| $ | 0.80 |
| $ | 0.76 |
| $ | 0.81 |
| $ | 0.84 |
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Weighted average common shares outstanding |
| 10,117 |
| 10,135 |
| 10,101 |
| 9,983 |
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Selected Balance Sheet Data
(Dollars in thousands)
|
| June 30, |
| December 31, |
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| 2010 |
| 2009 |
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| (Unaudited) |
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Cash and cash equivalents |
| $ | 50,573 |
| $ | 80,368 |
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Restricted cash |
| 1,641 |
| 1,364 |
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Earning assets: |
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Portfolio Asset Acquisition and Resolution assets: |
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Domestic |
| 253,784 |
| 225,406 |
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Latin America |
| 40,161 |
| 41,248 |
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Europe |
| 47,573 |
| 57,888 |
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Special Situations Platform assets |
| 46,162 |
| 41,688 |
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Service fees receivable and other assets |
| 26,080 |
| 17,112 |
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Total assets |
| $ | 465,974 |
| $ | 465,074 |
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Notes payable to banks and other |
| $ | 305,561 |
| $ | 305,888 |
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Note payable to affiliate |
| 7,760 |
| 7,838 |
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Other liabilities |
| 30,099 |
| 26,077 |
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Total liabilities |
| 343,420 |
| 339,803 |
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Total equity |
| 122,554 |
| 125,271 |
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Total liabilities and equity |
| $ | 465,974 |
| $ | 465,074 |
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FirstCity Financial Corporation
Supplemental Information
(Dollars in thousands)
(Unaudited)
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| Three Months Ended |
| Six Months Ended |
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|
| June 30, |
| June 30, |
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|
| 2010 |
| 2009 |
| 2010 |
| 2009 |
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Summary Operating Statement Data for Each Segment |
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Portfolio Asset Acquisition and Resolution segment: |
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Revenues |
| $ | 21,813 |
| $ | 18,969 |
| $ | 36,535 |
| $ | 32,266 |
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Equity in net earnings of unconsolidated subsidiaries |
| 10 |
| 1,840 |
| 1,193 |
| 855 |
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Gain on business combinations |
| — |
| 1,455 |
| 891 |
| 1,455 |
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Costs and expenses |
| (13,123 | ) | (9,805 | ) | (23,249 | ) | (20,178 | ) | ||||
Operating contribution before provision for loan and impairment losses |
| 8,700 |
| 12,459 |
| 15,370 |
| 14,398 |
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Provision for loan and impairment losses, net |
| 2,057 |
| (290 | ) | 3,158 |
| 816 |
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Net income attributable to noncontrolling interests |
| (1,595 | ) | (1,611 | ) | (6,071 | ) | (1,528 | ) | ||||
Operating contribution, net of direct taxes |
| $ | 5,048 |
| $ | 11,138 |
| $ | 6,141 |
| $ | 12,054 |
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Special Situations Platform segment: |
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Revenues |
| $ | 21,202 |
| $ | 1,575 |
| $ | 28,012 |
| $ | 3,913 |
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Equity in earnings (loss) of unconsolidated subsidiaries |
| 1,806 |
| (642 | ) | 2,852 |
| 197 |
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Gain on business combinations |
| 4,838 |
| — |
| 4,838 |
| — |
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Costs and expenses |
| (20,808 | ) | (1,478 | ) | (27,210 | ) | (2,887 | ) | ||||
Operating contribution before provision for loan and impairment losses |
| 7,038 |
| (545 | ) | 8,492 |
| 1,223 |
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Provision for loan and impairment losses |
| 568 |
| 967 |
| 1,169 |
| 967 |
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Net loss (income) attributable to noncontrolling interests |
| (1,207 | ) | 380 |
| (1,345 | ) | (51 | ) | ||||
Operating contribution (loss), net of direct taxes |
| $ | 5,263 |
| $ | (1,132 | ) | $ | 5,978 |
| $ | 205 |
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| Three Months Ended |
| Six Months Ended |
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|
| June 30, |
| June 30, |
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|
| 2010 |
| 2009 |
| 2010 |
| 2009 |
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Portfolio Asset Acquisition and Resolution segment: |
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Revenues and equity in earnings of investments by region: |
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Domestic |
| $ | 15,828 |
| $ | 15,785 |
| $ | 24,209 |
| $ | 25,518 |
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Latin America |
| 2,908 |
| 4,355 |
| 4,693 |
| 5,274 |
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Europe |
| 3,087 |
| 661 |
| 8,826 |
| 2,313 |
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Canada |
| — |
| 8 |
| — |
| 16 |
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Total |
| $ | 21,823 |
| $ | 20,809 |
| $ | 37,728 |
| $ | 33,121 |
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Revenues and equity in earnings of investments by source: |
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Equity in earnings of unconsolidated subsidiaries |
| $ | 10 |
| $ | 1,840 |
| $ | 1,193 |
| $ | 855 |
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Income from Portfolio Assets |
| 14,622 |
| 14,077 |
| 26,085 |
| 23,120 |
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Servicing fees |
| 1,743 |
| 2,403 |
| 3,746 |
| 4,795 |
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Gain on Sale of Investment Securities |
| 3,250 |
| — |
| 3,250 |
| — |
| ||||
Gain on sale of SBA loans held for sale, net |
| 163 |
| 610 |
| 163 |
| 610 |
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Interest income from SBA loans |
| 313 |
| 295 |
| 581 |
| 641 |
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Interest income from loans receivable - affiliates |
| 459 |
| 553 |
| 936 |
| 1,089 |
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Interest income from loans receivable - other |
| — |
| 207 |
| — |
| 414 |
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Other |
| 1,263 |
| 824 |
| 1,774 |
| 1,597 |
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Total |
| $ | 21,823 |
| $ | 20,809 |
| $ | 37,728 |
| $ | 33,121 |
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|
| ||||
Special Situations Platform segment: |
|
|
|
|
|
|
|
|
| ||||
Revenues and equity in earnings of investments by source: |
|
|
|
|
|
|
|
|
| ||||
Equity in earnings (loss) of unconsolidated subsidiaries |
| $ | 1,806 |
| $ | (642 | ) | $ | 2,852 |
| $ | 197 |
|
Interest income from loans receivable |
| 543 |
| 544 |
| 1,152 |
| 1,152 |
| ||||
Operating revenue - railroad |
| 1,192 |
| 705 |
| 2,457 |
| 1,452 |
| ||||
Operating revenue - manufacturing |
| 6,107 |
| — |
| 10,466 |
| — |
| ||||
Operating revenue - coal mine |
| 13,100 |
| — |
| 13,100 |
| — |
| ||||
Other |
| 260 |
| 326 |
| 837 |
| 1,309 |
| ||||
Total |
| $ | 23,008 |
| $ | 933 |
| $ | 30,864 |
| $ | 4,110 |
|
|
|
|
|
|
|
|
|
|
| ||||
Number of personnel at period end: |
|
|
|
|
|
|
|
|
| ||||
Domestic, Portfolio Asset Acquisition and Resolution segment |
| 89 |
| 82 |
|
|
|
|
| ||||
Domestic, Special Situations Platform segment |
| 29 |
| 25 |
|
|
|
|
| ||||
Latin America |
| 118 |
| 127 |
|
|
|
|
| ||||
Corporate |
| 30 |
| 31 |
|
|
|
|
| ||||
Total personnel |
| 266 |
| 265 |
|
|
|
|
|
FirstCity Financial Corporation
Supplemental Information
(Dollars in thousands)
(Unaudited)
Portfolio Purchases and Other Investments:
|
| Portfolio Purchases |
|
|
| FirstCity |
| FirstCity |
|
|
| ||||||||||||||
|
|
|
|
|
| Latin |
|
|
| FirstCity |
| Investment |
| in Special |
|
|
| ||||||||
|
| Domestic |
| Europe |
| America |
| Total |
| Investment |
| in Other |
| Situations |
| Total |
| ||||||||
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
2nd Quarter |
| $ | 141,566 |
| $ | — |
| $ | — |
| $ | 141,566 |
| $ | 28,122 |
| $ | 14,482 |
| $ | 8,107 |
| $ | 50,711 |
|
1st Quarter |
| 18,114 |
| — |
| — |
| 18,114 |
| 14,605 |
| 9,005 |
| 4,790 |
| 28,400 |
| ||||||||
Total Year 2010 |
| $ | 159,680 |
| $ | — |
| $ | — |
| $ | 159,680 |
| $ | 42,727 |
| $ | 23,487 |
| $ | 12,897 |
| $ | 79,111 |
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
4th Quarter |
| $ | 14,608 |
| $ | — |
| $ | — |
| $ | 14,608 |
| $ | 13,188 |
| $ | 5,903 |
| $ | 3,370 |
| $ | 22,461 |
|
3rd Quarter |
| 48,659 |
| — |
| — |
| 48,659 |
| 21,000 |
| 2,403 |
| 3,481 |
| 26,884 |
| ||||||||
2nd Quarter |
| 67,085 |
| — |
| — |
| 67,085 |
| 48,559 |
| 19,149 |
| 3,164 |
| 70,872 |
| ||||||||
1st Quarter |
| 70,238 |
| — |
| — |
| 70,238 |
| 64,907 |
| 6,418 |
| 2,400 |
| 73,725 |
| ||||||||
Total Year 2009 |
| $ | 200,590 |
| $ | — |
| $ | — |
| $ | 200,590 |
| $ | 147,654 |
| $ | 33,873 |
| $ | 12,415 |
| $ | 193,942 |
|
Total Year 2008 |
| $ | 64,394 |
| $ | 1,823 |
| $ | 23,097 |
| $ | 89,314 |
| $ | 72,307 |
| $ | 33,007 |
| $ | 19,906 |
| $ | 125,220 |
|
Total Year 2007 |
| $ | 121,679 |
| $ | 23,199 |
| $ | 69,455 |
| $ | 214,333 |
| $ | 126,714 |
| $ | 10,476 |
| $ | 11,530 |
| $ | 148,720 |
|
Portfolio Asset Acquisition and Resolution segment:
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
|
| June 30, |
| June 30, |
| ||||||||
|
| 2010 |
| 2009 |
| 2010 |
| 2009 |
| ||||
Aggregate purchase price of portfolios acquired: |
|
|
|
|
|
|
|
|
| ||||
Acquisition partnerships |
|
|
|
|
|
|
|
|
| ||||
Domestic |
| $ | 141,566 |
| $ | 67,085 |
| $ | 159,680 |
| $ | 137,323 |
|
Latin America |
| — |
| — |
| — |
| — |
| ||||
Europe |
| — |
| — |
| — |
| — |
| ||||
Total |
| $ | 141,566 |
| $ | 67,085 |
| $ | 159,680 |
| $ | 137,323 |
|
|
| Purchase |
| FirstCity’s |
|
|
|
|
| ||
|
| Price |
| Investment |
|
|
|
|
| ||
Historical acquisitions of Portfolios - annual: |
|
|
|
|
|
|
|
|
| ||
First six months of 2010 |
| $ | 159,680 |
| $ | 42,727 |
|
|
|
|
|
2009 |
| 200,590 |
| 147,654 |
|
|
|
|
| ||
2008 |
| 89,314 |
| 72,307 |
|
|
|
|
| ||
2007 |
| 214,333 |
| 126,714 |
|
|
|
|
| ||
2006 |
| 296,990 |
| 144,048 |
|
|
|
|
| ||
2005 |
| 146,581 |
| 71,405 |
|
|
|
|
| ||
|
| June 30, |
| December 31, |
|
|
|
|
| ||
|
| 2010 |
| 2009 |
|
|
|
|
| ||
Portfolio acquisition and resolution assets by region: |
|
|
|
|
|
|
|
|
| ||
Domestic |
| $ | 253,784 |
| $ | 225,406 |
|
|
|
|
|
Latin America |
| 40,161 |
| 41,248 |
|
|
|
|
| ||
Europe |
| 47,573 |
| 57,888 |
|
|
|
|
| ||
Total |
| $ | 341,518 |
| $ | 324,542 |
|
|
|
|
|
Special Situations Platform segment:
|
| Total |
| FirstCity Denver’s Investment |
| ||||||||
|
| Investment |
| Debt |
| Equity |
| Total |
| ||||
Historical investments - annual: |
|
|
|
|
|
|
|
|
| ||||
First six months of 2010 |
| $ | 13,416 |
| $ | 8,650 |
| $ | 4,247 |
| $ | 12,897 |
|
2009 |
| 20,058 |
| 12,023 |
| 392 |
| 12,415 |
| ||||
2008 |
| 28,750 |
| 16,650 |
| 3,256 |
| 19,906 |
| ||||
2007 |
| 22,314 |
| 5,630 |
| 5,900 |
| 11,530 |
| ||||
FirstCity Financial Corporation
Supplemental Information
(Dollars in thousands)
(Unaudited)
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
|
| June 30, |
| June 30, |
| ||||||||
|
| 2010 |
| 2009 |
| 2010 |
| 2009 |
| ||||
Analysis of Equity Investments |
|
|
|
|
|
|
|
|
| ||||
FirstCity’s average investment: |
|
|
|
|
|
|
|
|
| ||||
Domestic, Portfolio Asset Acquisition and Resolution segment |
| $ | 19,041 |
| $ | 13,928 |
| $ | 16,599 |
| $ | 14,366 |
|
Domestic, Special Situations Platform segment |
| 3,921 |
| 1,529 |
| 3,095 |
| 1,329 |
| ||||
Latin America |
| 17,164 |
| 17,484 |
| 17,299 |
| 17,783 |
| ||||
Europe |
| 6,187 |
| 12,754 |
| 7,199 |
| 12,989 |
| ||||
Europe-Servicing subsidiaries |
| 25,599 |
| 22,596 |
| 25,415 |
| 22,356 |
| ||||
Latin America-Servicing subsidiaries |
| 1,863 |
| 2,929 |
| 2,182 |
| 2,960 |
| ||||
Total |
| $ | 73,775 |
| $ | 71,220 |
| $ | 71,789 |
| $ | 71,783 |
|
|
|
|
|
|
|
|
|
|
| ||||
FirstCity’s share of equity earnings (losses): |
|
|
|
|
|
|
|
|
| ||||
Domestic, Portfolio Asset Acquisition and Resolution segment |
| $ | (95 | ) | $ | 515 |
| $ | 37 |
| $ | 516 |
|
Domestic, Special Situations Platform segment |
| 1,806 |
| (642 | ) | 2,852 |
| 197 |
| ||||
Latin America |
| 165 |
| 1,391 |
| 45 |
| (253 | ) | ||||
Europe |
| (345 | ) | 227 |
| (965 | ) | 979 |
| ||||
Europe-Servicing subsidiaries |
| 378 |
| (89 | ) | 2,801 |
| 80 |
| ||||
Latin America-Servicing subsidiaries |
| (93 | ) | (204 | ) | (725 | ) | (467 | ) | ||||
Total |
| $ | 1,816 |
| $ | 1,198 |
| $ | 4,045 |
| $ | 1,052 |
|
|
|
|
|
|
|
|
|
|
| ||||
Selected Other Data: |
|
|
|
|
|
|
|
|
| ||||
Average investment in consolidated portfolio assets and loans receivable: |
|
|
|
|
|
|
|
|
| ||||
Domestic, Portfolio Asset Acquisition and Resolution segment |
| $ | 225,098 |
| $ | 213,933 |
| $ | 215,904 |
| $ | 190,798 |
|
Domestic, Special Situations Platform segment |
| 28,785 |
| 30,344 |
| 28,366 |
| 29,557 |
| ||||
Latin America |
| 18,393 |
| 19,183 |
| 18,438 |
| 19,413 |
| ||||
Europe |
| 15,824 |
| 15,644 |
| 17,256 |
| 14,196 |
| ||||
Canada |
| — |
| 175 |
| — |
| 196 |
| ||||
Total |
| $ | 288,100 |
| $ | 279,279 |
| $ | 279,964 |
| $ | 254,160 |
|
|
|
|
|
|
|
|
|
|
| ||||
Income from consolidated portfolio assets and loans receivable: |
|
|
|
|
|
|
|
|
| ||||
Domestic, Portfolio Asset Acquisition and Resolution segment |
| $ | 11,586 |
| $ | 14,218 |
| $ | 19,492 |
| $ | 22,990 |
|
Domestic, Special Situations Platform segment |
| 543 |
| 544 |
| 1,152 |
| 1,152 |
| ||||
Latin America |
| 1,058 |
| 1,111 |
| 1,636 |
| 1,887 |
| ||||
Europe |
| 2,913 |
| 405 |
| 6,637 |
| 981 |
| ||||
Canada |
| — |
| 8 |
| — |
| 16 |
| ||||
Total |
| $ | 16,100 |
| $ | 16,286 |
| $ | 28,917 |
| $ | 27,026 |
|
|
|
|
|
|
|
|
|
|
| ||||
Servicing fee revenues: |
|
|
|
|
|
|
|
|
| ||||
Domestic partnerships: |
|
|
|
|
|
|
|
|
| ||||
Servicing fee revenue |
| $ | 74 |
| $ | 501 |
| $ | 295 |
| $ | 1,031 |
|
Average servicing fee |
| 2.9 | % | 5.0 | % | 3.7 | % | 7.2 | % | ||||
Latin American partnerships: |
|
|
|
|
|
|
|
|
| ||||
Servicing fee revenue |
| $ | 1,523 |
| $ | 1,722 |
| $ | 3,245 |
| $ | 3,458 |
|
Average servicing fee % |
| 17.9 | % | 43.7 | % | 24.6 | % | 41.9 | % | ||||
Total Service Fees-Portfolio Assets: |
|
|
|
|
|
|
|
|
| ||||
Servicing fee revenue |
| $ | 1,597 |
| $ | 2,223 |
| $ | 3,540 |
| $ | 4,489 |
|
Average servicing fee % |
| 14.5 | % | 16.0 | % | 16.8 | % | 19.8 | % | ||||
Service Fees-SBA loans: |
| $ | 146 |
| $ | 180 |
| $ | 206 |
| $ | 306 |
|
Total Service Fees |
| $ | 1,743 |
| $ | 2,403 |
| $ | 3,746 |
| $ | 4,795 |
|
|
|
|
|
|
|
|
|
|
| ||||
Collections: |
|
|
|
|
|
|
|
|
| ||||
Domestic partnerships |
| $ | 2,530 |
| $ | 9,928 |
| $ | 7,874 |
| $ | 14,375 |
|
Latin American partnerships |
| 9,951 |
| 5,772 |
| 16,102 |
| 11,862 |
| ||||
European partnerships |
| 2,045 |
| 6,314 |
| 9,929 |
| 15,378 |
| ||||
Partnership collections |
| 14,526 |
| 22,014 |
| 33,905 |
| 41,615 |
| ||||
Domestic consolidated |
| 27,555 |
| 50,329 |
| 59,068 |
| 79,194 |
| ||||
Latin American consolidated |
| 917 |
| 899 |
| 1,192 |
| 1,336 |
| ||||
European consolidated |
| 5,470 |
| 462 |
| 10,706 |
| 1,624 |
| ||||
Consolidated collections |
| 33,942 |
| 51,690 |
| 70,966 |
| 82,154 |
| ||||
Total collections |
| $ | 48,468 |
| $ | 73,704 |
| $ | 104,871 |
| $ | 123,769 |
|
|
|
|
|
|
|
|
|
|
| ||||
Servicing portfolio (face value) at period end: |
|
|
|
|
|
|
|
|
| ||||
Domestic |
| $ | 915,597 |
| $ | 775,307 |
|
|
|
|
| ||
Latin America |
| 1,439,153 |
| 1,019,685 |
|
|
|
|
| ||||
Europe |
| 1,245,119 |
| 1,698,442 |
|
|
|
|
| ||||
Total |
| $ | 3,599,869 |
| $ | 3,493,434 |
|
|
|
|
|
FirstCity Financial Corporation
Supplemental Information
(Dollars in thousands)
(Unaudited)
Summary of Consolidated Portfolio Assets (at Carrying Value) by Region and Type
|
| June 30, 2010 |
| ||||||||||||||||||||||
|
| Income-Accruing Loans |
| Non-Accrual Loans |
|
|
|
|
| ||||||||||||||||
|
| Purchased |
|
|
| Purchased Credit- |
|
|
|
|
|
|
|
|
| ||||||||||
|
| Credit- |
|
|
| Impaired Loans |
| Other |
|
|
|
|
| ||||||||||||
|
| Impaired |
|
|
|
|
| Cost recovery |
|
|
| Cost recovery |
|
|
|
|
| ||||||||
|
| Loans |
| Other |
| Cash basis |
| basis |
| Cash basis |
| basis |
| Real Estate |
| Total |
| ||||||||
United States |
| $ | 527 |
| $ | 4,760 |
| $ | 105,765 |
| $ | 56,316 |
| $ | 1,685 |
| $ | — |
| $ | 32,339 |
| $ | 201,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
France |
| — |
| 1,018 |
| 4,068 |
| 7 |
| — |
| 1,957 |
| — |
| 7,050 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Germany |
| — |
| — |
| 2,911 |
| — |
| — |
| — |
| — |
| 2,911 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Mexico |
| — |
| — |
| — |
| 10,033 |
| — |
| — |
| — |
| 10,033 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total |
| $ | 527 |
| $ | 5,778 |
| $ | 112,744 |
| $ | 66,356 |
| $ | 1,685 |
| $ | 1,957 |
| $ | 32,339 |
| $ | 221,386 |
|
|
| December 31, 2009 |
| ||||||||||||||||||||||
|
| Income-Accruing Loans |
| Non-Accrual Loans |
|
|
|
|
| ||||||||||||||||
|
| Purchased |
|
|
| Purchased Credit- |
|
|
|
|
|
|
| ||||||||||||
|
| Credit- |
|
|
| Impaired Loans |
| Other |
|
|
|
|
| ||||||||||||
|
| Impaired |
|
|
|
|
| Cost recovery |
|
|
| Cost recovery |
|
|
|
|
| ||||||||
|
| Loans |
| Other |
| Cash basis |
| basis |
| Cash basis |
| basis |
| Real Estate |
| Total |
| ||||||||
United States |
| $ | 42,385 |
| $ | 5,323 |
| $ | 42,125 |
| $ | 78,165 |
| $ | 2,770 |
| $ | — |
| $ | 26,438 |
| $ | 197,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
France |
| — |
| 1,555 |
| — |
| 7,648 |
| — |
| 2,305 |
| — |
| 11,508 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Germany |
| 5,225 |
| — |
| — |
| — |
| — |
| — |
| — |
| 5,225 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Mexico |
| — |
| — |
| — |
| 10,445 |
| — |
| — |
| — |
| 10,445 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total |
| $ | 47,610 |
| $ | 6,878 |
| $ | 42,125 |
| $ | 96,258 |
| $ | 2,770 |
| $ | 2,305 |
| $ | 26,438 |
| $ | 224,384 |
|
Illustration of the Effects of Foreign Currency Fluctuations on Net Earnings
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
|
| June 30, |
| June 30, |
| ||||||||
|
| 2010 |
| 2009 |
| 2010 |
| 2009 |
| ||||
Net earnings to common stockholders |
| $ | 8,065 |
| $ | 7,746 |
| $ | 8,166 |
| $ | 8,390 |
|
Foreign currency gains (losses), net: |
|
|
|
|
|
|
|
|
| ||||
Euro |
| (549 | ) | 381 |
| (949 | ) | (60 | ) | ||||
Mexican Peso |
| (9 | ) | 1,762 |
| (3 | ) | 311 |
| ||||
Argentine Peso |
| (7 | ) | (8 | ) | (12 | ) | (49 | ) | ||||
Chilean Peso |
| (14 | ) | 79 |
| (67 | ) | 203 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Exchange rate at valuation date: |
|
|
|
|
|
|
|
|
| ||||
Euro |
| 0.82 |
| 0.71 |
|
|
|
|
| ||||
Mexican Peso |
| 12.66 |
| 13.20 |
|
|
|
|
| ||||
Argentine Peso |
| 3.94 |
| 3.80 |
|
|
|
|
| ||||
Chilean Peso |
| 550.66 |
| 539.98 |
|
|
|
|
| ||||
FirstCity Financial Corporation
Schedule of Estimated Unrealized Gross Profit from Portfolio Assets
June 30, 2010
(Unaudited)
|
| Basis in Portfolio Assets (1), (4) |
| |||||
($ in 000’s) |
| 12/31/2008 |
| 12/31/2009 |
| 6/30/2010 |
| |
Domestic |
| $ | 153,148 |
| 190,541 |
| 208,307 |
|
Europe |
| 29,555 |
| 32,665 |
| 22,272 |
| |
Latin America |
| 29,867 |
| 27,473 |
| 24,472 |
| |
Total |
| $ | 212,570 |
| 250,679 |
| 255,051 |
|
|
| Estimated Remaining Collections (2) |
| |||||
|
| 12/31/2008 |
| 12/31/2009 |
| 6/30/2010 |
| |
Domestic |
| $ | 217,347 |
| 276,018 |
| 302,259 |
|
Europe |
| 39,341 |
| 50,328 |
| 36,416 |
| |
Latin America |
| 78,211 |
| 70,398 |
| 67,839 |
| |
Total |
| $ | 334,899 |
| 396,744 |
| 406,513 |
|
|
| Estimated Unrealized Gross Profit (3) |
| |||||
|
| 12/31/2008 |
| 12/31/2009 |
| 6/30/2010 |
| |
Domestic |
| $ | 64,199 |
| 85,476 |
| 93,952 |
|
Europe |
| 9,787 |
| 17,663 |
| 14,144 |
| |
Latin America |
| 48,344 |
| 42,925 |
| 43,366 |
| |
Total |
| $ | 122,329 |
| 146,064 |
| 151,462 |
|
|
| Estimated Unrealized Gross Profit % |
| ||||
|
| 12/31/2008 |
| 12/31/2009 |
| 6/30/2010 |
|
Domestic |
| 29.54 | % | 30.97 | % | 31.08 | % |
Europe |
| 24.88 | % | 35.10 | % | 38.84 | % |
Latin America |
| 61.81 | % | 60.97 | % | 63.93 | % |
Total |
| 36.53 | % | 36.82 | % | 37.26 | % |
This schedule provides selected information related to the Company’s ownership 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 investments 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:
|
| 12/31/2008 |
| 12/31/2009 |
| 6/30/2010 |
| |
FirstCity’s consolidated Portfolio Assets (as reported in “Portfolio Assets” on the balance sheet of the respective Form 10-K or 10-Q) |
| $ | 148,213 |
| 224,384 |
| 221,386 |
|
Noncontrolling interests in FirstCity’s consolidated Portfolio Assets (component of “Non- controlling interests” on the balance sheet of the respective Form 10-K or 10-Q) |
| (11,460 | ) | (37,277 | ) | (31,934 | ) | |
FirstCity’s interest in Portfolio Assets held by Acquisition Partnerships (a component of “Assets” as reported in the “Condensed Combined Balance Sheets” tabular disclosure under the “Equity Investments” footnote of the respective Form 10-K or 10-Q) |
| 75,817 |
| 63,572 |
| 65,599 |
| |
FirstCity’s basis in consolidated and non-consolidated Portfolio Assets |
| $ | 212,570 |
| 250,679 |
| 255,051 |
|