EXHIBIT 99.1
FirstCity Financial Reports Third Quarter 2007 Earnings of $2,653,989 or $0.23 Per Diluted Share
WACO, Texas, Nov. 9, 2007 (PRIME NEWSWIRE) -- FirstCity Financial Corporation (Nasdaq:FCFC)
Highlights:
Third Quarter 2007 Results - FirstCity reported 3rd quarter 2007 earnings of $2,653,989 or $.23 per diluted share. - FirstCity invested $16.3 million in portfolio acquisitions for the 3rd quarter 2007. - FirstCity invested $5.9 million in the form of acquiring a majority interest in a railroad. - FirstCity negotiated $125.0 million in increases to its credit facilities.
Components of the quarterly results are detailed below (dollars in thousands except per share data):
Three Months Nine Months Ended Ended September 30, September 30, ---------------- ---------------- 2007 2006 2007 2006 ---------------- ---------------- (unaudited) (unaudited) Portfolio Asset Acquisition and Resolution $ 4,680 $ 6,218 $10,863 $12,095 Corporate overhead * (2,026) (1,251) (7,318) (3,768) ---------------- ---------------- Earnings from continuing operations 2,654 4,967 3,545 8,327 Loss from discontinued operations, net of taxes -- -- -- (75) ---------------- ---------------- Net earnings to common stockholders $ 2,654 $ 4,967 $ 3,545 $ 8,252 ================ ================ Diluted earnings per common share $ 0.23 $ 0.42 $ 0.31 $ 0.69 ================ ================ * Corporate overhead includes expenses related to the independent audit committee investigation of $2.2 million year to date, comprised of $1.2 million in the first quarter, $0.8 million in the second quarter and $0.2 million in the third quarter.
Portfolio Asset Acquisition and Resolution
The Company invested $16.3 million in portfolio acquisitions during the quarter. Earning assets totaled $273.6 million at quarter end. FirstCity is currently evaluating 27 different transactions representing over $2.0 billion in face value of assets.
Portfolio purchases are detailed below (in millions):
Portfolio Purchases ------------------- FirstCity Investment Latin FirstCity in Domestic Europe America Total Investment Other Total ------------------------------------------------------------- ------ 2007 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 $116.4 $ 8.5 $ 65.0 $189.9 $111.0 $ 18.3 $129.3 ============================================== ====== 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 ============================================== ======
For the third quarter 2007, operating contribution from the Portfolio Asset Acquisition business was $4.7 million. The earnings were comprised primarily of $11.5 million in revenues, $2.2 million in equity in earnings of investments, and $9.2 million of expenses. The business generated 72% of the revenues (including equity in earnings of investments) from domestic investments, 17% from investments in Latin America, 11% from investments in Europe and less than 1% from investments in Canada. The major components of revenue for the quarter include income from Portfolio Assets of $5.7 million, equity in earnings of investments of $2.2 million, servicing fees of $2.4 million, and interest income from loans receivable of $2.5 million.
The revenues for the third quarter were positively impacted by $0.9 million as a result of a change in estimated future cash flows on loan portfolios. Management determined that actual cash flows related to certain loan portfolios have exceeded management's historical estimates. The increase in estimated cash flows is a result of adjusting cash flows related to certain asset-level expenses, which are accounted for as period expenses and recognized in the period incurred. Beginning with the third quarter of 2007, management is using estimated gross cash receipts net of estimated selling costs in the estimates of future cash flows, and will apply the revised cash flow estimates on a prospective basis. Third quarter earnings were also positively impacted by $0.9 million in foreign currency exchange net gains.
The third quarter earnings were negatively impacted by provisions for loan losses, net of recoveries, of $732,000, comprised of net provisions to loan portfolios held in our partnerships as follows: $384,000 domestic; $290,000 European; and $194,000 Latin American. The difference of ($136,000) represents net recoveries on our wholly-owned domestic portfolios.
Business Acquisition
FirstCity invested $5.9 million in the form of a business acquisition under its special situations platform -- FirstCity Crestone -- which purchased a majority interest in a short line freight railroad in the Northeastern United States in the third quarter of 2007. FirstCity Crestone was formed in April 2007 for the purpose of investing in distressed debt, special loan originations, leveraged buyouts and other special opportunities. This $5.9 million business acquisition is FirstCity Crestone's largest investment to date.
The following tables detail the impact of net foreign currency gains (losses) on corporate earnings:
Three Months Ended Nine Months Ended Illustration of the September 30, September 30, Effects of Currency ------------------ ----------------- Fluctuations 2007 2006 2007 2006 ------------------ ----------------- (dollars in thousands) (unaudited) (unaudited) --------------------------------------------------------------------- Net earnings to Common Stockholders as reported $ 2,654 $ 4,967 $ 3,545 $ 8,252 Euro gains 1,231 123 785 781 Mexican Peso gains (losses) (349) 843 (190) (311) Argentine Peso losses (22) (15) (24) (59) Canadian Dollar gains (losses) 23 (6) 243 (6) Chilean Peso gains 5 -- 28 -- ------------------------------------ Euro exchange rate at valuation date 0.70 0.79 Mexican Peso exchange rate at valuation date 10.92 11.02 Argentine Peso exchange rate at valuation date 3.15 3.11 Canadian Dollar exchange rate at valuation date 0.99 1.11 Chilean Peso exchange rate at valuation date 511.20 n/a
Other Corporate Matters
Share Repurchase Program
FirstCity has a repurchase program for shares of its common stock. Since the program was initiated, the Company has purchased 540,100 shares at an average cost of $10.47 per share. 9,800 shares were repurchased during the third quarter of 2007. Share repurchases may be made from time to time when and if management feels the repurchase of such shares represent the optimum use of FirstCity's resources.
Liquidity
On August 22, 2007, FirstCity and Bank of Scotland entered into an amendment to the existing revolving credit facility to increase the maximum available commitment under the credit facility from $175.0 million to $225.0 million. FirstCity uses this revolving credit agreement to finance equity investments made in connection with portfolio and asset purchases, to provide for the issuance of letters of credit, and for working capital loans. As of November 6, 2007, $138.9 million of loans and letters of credit are outstanding under this facility.
On August 22, 2007, FH Partners, a wholly-owned affiliate of FirstCity, and Bank of Scotland entered into an amendment to the existing revolving credit facility to increase the maximum available commitment under the credit facility from $50.0 million to $100.0 million. FH Partners uses this revolving credit agreement to finance its portfolio and asset purchases. As of November 6, 2007, $42.0 million is outstanding under the facility.
On September 5, 2007, FirstCity and BoS (USA), Inc., an affiliate of Bank of Scotland, entered into a subordinated credit agreement which provides a $25.0 million loan facility to FirstCity to be used to finance equity investments in new ventures, equity investments made in connection with portfolio and asset purchases, provide for the issuance of letters of credit, and for working capital loans. The subordinated credit agreement is to be effective November 16, 2007, provided that certain consents of third parties and information required under the credit agreement are delivered by FirstCity.
Current market conditions are creating liquidity constraints primarily as a result of the deterioration in the sub-prime mortgage industry and tightening credit standards in the marketplace. Management believes that these conditions have not impacted the Company's ability to obtain financing for its operations, nor hindered its ability to continue to grow its business. This is evidenced by the recent increases in the Bank of Scotland credit facilities and continued acquisitions during the third quarter of 2007. Management believes that the prospects for continued growth are strong based on existing acquisition opportunities and the potential to acquire additional distressed assets as a result of market conditions.
Conference Call
A conference call will be held on Friday, November 9, 2007 at 9:00 a.m. Central Time to discuss third quarter 2007 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 Third Quarter 2007 Conference Call Date: Friday, November 9, 2007 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 866-700-7101 International 617-213-8837 Pass code 13943849 Replay Available on FirstCity's web page (www.fcfc.com/invest.htm)
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, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, without limitation, statements based on management's expectations and statements regarding revenues, earnings guidance and future projected cash collections, as well as any statement that may project, indicate or imply future results, performance or achievements, and may contain the "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 facto rs 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 start up of new businesses and entry into new foreign markets, 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, 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 conditions, foreign social and economic conditions, changes (legislative and otherwise) in the asset securitization industry, fluctuation in residential and commercial real estate valu es, 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, 2006, filed with the SEC on July 24, 2007, 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 Europe and Latin America. Its common stock is listed on the NASDAQ Stock Market, LLC under the symbol "FCFC."
The FirstCity Financial Corporation logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=4413
FirstCity Financial Corporation Summary of Operations (In thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 -------- -------- -------- -------- Revenues: Servicing fees $ 2,426 $ 4,679 $ 8,008 $ 10,182 Income from Portfolio Assets 5,743 2,547 16,463 7,551 Gain on sale of SBA loans held for sale, net 34 -- 658 -- Interest income from SBA loans 752 -- 1,666 -- Interest income from affiliates 147 294 413 1,189 Interest income from loans receivable - other 1,627 17 3,516 17 Other income 903 654 1,900 1,846 -------- -------- -------- -------- Total revenues 11,632 8,191 32,624 20,785 -------- -------- -------- -------- Expenses: Interest and fees on notes payable - other 4,747 1,797 13,666 5,433 Interest and fees on notes payable to affiliates -- 2 -- 22 Salaries and benefits 4,446 4,094 12,303 11,110 Provision (recovery) for loan and impairment losses (136) 50 936 101 Occupancy, data processing, communication and other 2,238 2,688 10,469 6,165 -------- -------- -------- -------- Total expenses 11,295 8,631 37,374 22,831 -------- -------- -------- -------- Equity in earnings of investments 2,157 3,023 8,315 8,044 Gain on sale of subsidiaries and equity investments 207 2,378 207 2,405 -------- -------- -------- -------- Earnings from continuing operations before income taxes and minority interest 2,701 4,961 3,772 8,403 Income taxes (134) 4 (437) (140) Minority interest 87 2 210 64 -------- -------- -------- -------- Earnings from continuing operations 2,654 4,967 3,545 8,327 -------- -------- -------- -------- Discontinued operations Loss from operations of discontinued components -- -- -- (75) Income taxes -- -- -- -- -------- -------- -------- -------- Loss from discontinued operations -- -- -- (75) -------- -------- -------- -------- Net earnings $ 2,654 $ 4,967 $ 3,545 $ 8,252 ======== ======== ======== ======== Basic earnings per common share are as follows: Earnings from continuing operations $ 0.25 $ 0.45 $ 0.33 $ 0.74 Discontinued operations $ -- $ -- $ -- $ (0.01) Net earnings per common share $ 0.25 $ 0.45 $ 0.33 $ 0.73 Wtd. avg. common shares outstanding 10,790 11,104 10,789 11,239 Diluted earnings per common share are as follows: Earnings from continuing operations $ 0.23 $ 0.42 $ 0.31 $ 0.70 Discontinued operations $ -- $ -- $ -- $ (0.01) Net earnings per common share $ 0.23 $ 0.42 $ 0.31 $ 0.69 Wtd. avg. common shares outstanding 11,379 11,711 11,402 11,875 Selected Unaudited Balance Sheet Data Sept. 30, Dec. 31, 2007 2006 -------- -------- Cash $ 32,909 $ 18,472 Earning Assets: Portfolio Assets, net 124,850 108,696 Loans and interest receivable 48,537 29,311 Equity investments 93,258 112,357 Railroad assets 6,922 -- Deferred tax asset, net 20,101 20,101 Service fees receivable and other assets 12,939 8,726 -------- -------- Total assets $339,516 $297,663 ======== ======== Notes payable - other $222,529 $187,811 Minority interest and other liabilities 9,493 5,959 -------- -------- Total liabilities 232,022 193,770 Total equity 107,494 103,893 -------- -------- Total liabilities and equity $339,516 $297,663 ======== ======== FirstCity Financial Corporation Supplemental Information (Dollars in thousands) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 --------- --------- --------- -------- Portfolio Asset Acquisition and Resolution: Summary Operating Statement Data Revenues $ 11,492 $ 7,818 $ 32,272 $ 20,052 Equity in earnings of investments 2,157 3,023 8,315 8,044 Gain on sale of subsidiaries and equity investments 207 2,378 207 2,405 Expenses (9,312) (6,951) (28,995) (18,305) -------- -------- -------- -------- Operating contribution before provision for loan and impairment losses 4,544 6,268 11,799 12,196 Provision (recovery) for loan and impairment losses (136) 50 936 101 --------- --------- --------- -------- Operating contribution, net of direct taxes $ 4,680 $ 6,218 $ 10,863 $ 12,095 ========= ========= ========= ======== Aggregate purchase price of portfolios acquired: Acquisition partnerships Domestic $ 17,338 $ 35,416 $116,370 $101,943 Latin America -- 56,104 64,959 56,104 Europe 2,327 -- 8,538 1,026 -------- -------- -------- -------- Total $ 19,665 $ 91,520 $189,867 $159,073 ======== ======== ======== ======== Historical Acquisitions Purchase FirstCity's - Annual: Price Investment --------- --------- Nine months ended September 30, 2007 $189,867 $111,018 2006 296,990 144,048 2005 146,581 71,405 2004 174,139 59,762 2003 129,192 22,944 Sept. 30, Dec. 31, 2007 2006 --------- --------- Portfolio acquisition and resolution assets by region: Domestic $202,622 $158,147 Latin America 32,750 28,883 Europe 37,816 61,062 Canada 379 2,272 -------- -------- Total $273,567 $250,364 ======== ======== Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 -------- -------- -------- -------- Revenues and equity in earnings of investments by region: Domestic $ 9,869 $ 4,953 $ 26,218 $ 16,344 Latin America 2,303 4,761 8,528 7,902 Europe 1,462 1,110 5,667 3,833 Canada 15 17 174 17 -------- -------- -------- -------- Total $ 13,649 $ 10,841 $ 40,587 $ 28,096 ======== ======== ======== ======== Revenues and equity in earnings of investments by source: Equity earnings $ 2,157 $ 3,023 $ 8,315 $ 8,044 Income from Portfolio Assets 5,743 2,547 16,463 7,551 Servicing fees 2,426 4,679 8,008 10,182 Gain on sale of SBA loans held for sale, net 34 -- 658 -- Interest income from SBA loans 752 -- 1,666 -- Interest income from affiliates 147 294 413 1,189 Interest income from loans receivable - other 1,627 17 3,516 17 Other 763 281 1,548 1,113 -------- -------- -------- -------- Total $ 13,649 $ 10,841 $ 40,587 $ 28,096 ======== ======== ======== ======== FirstCity Financial Corporation Supplemental Information (Dollars in thousands) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 ---------- ---------- ---------- ---------- Analysis of Equity Investments FirstCity's Average investment Domestic $ 36,114 $ 38,993 $ 35,207 $ 47,792 Latin America 21,980 16,739 20,670 8,431 Europe 39,398 18,635 43,587 19,123 Europe-Servicing subsidiaries 5,923 5,570 5,869 5,538 Latin America- Servicing subsidiaries 4,578 162 3,315 205 ---------- ---------- ---------- ---------- Total $ 107,993 $ 80,099 $ 108,648 $ 81,089 ========== ========== ========== ========== FirstCity Share of Equity Earnings: Domestic $ 1,064 $ 1,282 $ 2,428 $ 5,136 Latin America (62) 815 815 (316) Europe 1,082 895 4,295 2,991 Europe-Servicing subsidiaries 168 67 731 433 Latin America- Servicing subsidiaries (95) (36) 46 (200) ---------- ---------- ---------- ---------- Total $ 2,157 $ 3,023 $ 8,315 $ 8,044 ========== ========== ========== ========== Selected other data: Average investment in wholly owned portfolio assets and loans receivable: Domestic $ 158,039 $ 64,192 $ 151,906 $ 56,172 Latin America 7,335 6,519 8,327 12,774 Europe 4,328 2,645 3,976 2,158 Canada 351 573 1,522 229 ---------- ---------- ---------- ---------- Total $ 170,053 $ 73,929 $ 165,731 $ 71,333 ========== ========== ========== ========== Income from wholly owned portfolio assets and loans receivable: Domestic $ 7,723 $ 2,640 $ 20,766 $ 7,797 Latin America 465 155 1,511 834 Europe 100 46 265 109 Canada 15 17 174 17 ---------- ---------- ---------- ---------- Total $ 8,303 $ 2,858 $ 22,716 $ 8,757 ========== ========== ========== ========== Servicing fee revenues: Domestic partnerships: Servicing fee revenue $ 435 $ 825 $ 2,114 $ 2,798 Average servicing fee % 3.1% 3.0% 3.7% 2.9% Latin American partnerships: Servicing fee revenue $ 1,874 $ 1,883 $ 5,741 $ 5,243 Average servicing fee % 11.8% 6.6% 13.3% 9.1% Incentive service fees $ -- $ 1,971 $ -- $ 2,141 Total Service Fees-Portfolio Assets: Servicing fee revenue $ 2,309 $ 4,679 $ 7,855 $ 10,182 Average servicing fee % 7.7% 8.3% 7.9% 6.7% Service Fees-SBA loans: $ 117 $ -- $ 153 $ -- Total Service Fees $ 2,426 $ 4,679 $ 8,008 $ 10,182 Collections: Domestic $ 14,190 $ 27,898 $ 56,674 $ 95,007 Latin America 15,934 28,574 43,193 57,778 Europe 22,254 11,049 70,093 40,164 ---------- ---------- ---------- ---------- Subtotal 52,378 67,521 169,960 192,949 Wholly-owned 19,733 8,823 60,817 30,970 ---------- ---------- ---------- ---------- Total $ 72,111 $ 76,344 $ 230,777 $ 223,919 ========== ========== ========== ========== Servicing portfolio (face value) Domestic $ 601,119 $ 541,116 Latin America 1,129,681 1,634,816 Europe 1,065,638 824,031 ---------- ---------- Total $2,796,438 $2,999,963 ========== ========== Number of personnel at period end: Domestic 84 58 Latin America 116 118 Corporate 35 32 ---------- ---------- Total personnel 235 208 ========== ==========
A graphic accompanying this release is available at http://media.primezone.com/cache/9623/file/4894.pdf
FirstCity Financial Corporation Example of a portfolio accounted for under SOP 03-3 To illustrate income recognition --------------------------------------------------------------------- Example assumptions ($ in 000's) Purchase price of portfolio is $10,000 Life of portfolio 5yrs Original yield on portfolio 17% Estimated original collections $16,000 --------------------------------------------------------------------- Scenario 1 - Cash flows of portfolio stay equal to original projection --------------------------------------------------------------------- Purchased Yield (Initial Cost Life accrual of Year Year Year Year Year to rate) Portfolio 1 2 3 4 5 date --------------------------------------------------------------------- Original 17% (10,000) 3,000 3,000 3,000 3,000 4,000 16,000 ------------------------------------------ Net income statement impact - Interest Income recorded 1,723 1,503 1,245 942 588 6,000 ------------------------------------------ ---------------------------------- Remaining portfolio cost at year end 8,723 7,225 5,470 3,412 0 ---------------------------------- --------------------------------------------------------------------- Scenario 2 - Cash flows in total the same push into future periods in year 3 causes impairment --------------------------------------------------------------------- Original 17% (10,000) 3,000 3,000 3,000 3,000 4,000 16,000 Revised cash flows yr 3-5 2,000 3,500 4,500 16,000 Revised NPV at end of yr 2 at 17% 7,046 Book Value before impairment 7,225 ------- Impairment recognized (179) ------- Interest Income recognized each year 1,723 1,503 1,214 1,078 661 Impairment recognized (179) ------------------------------------------ Net income statement impact 1,723 1,324 1,214 1,078 661 6,000 ------------------------------------------ ---------------------------------- Remaining portfolio cost at year end 8,723 7,046 6,260 3,839 -- ---------------------------------- --------------------------------------------------------------------- Scenario 3 - Cash flows increase in year 4 & 5 results in recovery of impairment and higher accrual of interest --------------------------------------------------------------------- Original 17% (10,000) 3,000 3,000 2,000 3,500 4,500 16,000 Revised cash flows yr 4-5 3,750 5,000 16,750 New accrual rate for periods 4 & 5 21.93% Revised NPV at end of yr 3 at 17% 6,837 Book Value before recovery 6,260 ------- NPV improvement sufficient to recover previous provision 577 ------- Interest Income recognized each year 1,723 1,503 1,214 1,412 899 Impairment recovered (179) 179 ------------------------------------------ Net income statement impact 1,723 1,324 1,393 1,412 899 6,750 ------------------------------------------ ---------------------------------- Remaining portfolio cost at year end 8,723 7,046 6,439 4,101 (0) ---------------------------------------------------------------------
CONTACT: FirstCity Financial Corporation Suzy W. Taylor 866-652-1810