Mail Stop 3561
September 30, 2005
Via U.S. Mail and Fax (254-761-2957)
Mr. Bryan Baker
Senior Vice President and Chief Financial Officer
FirstCity Financial Corporation
6400 Imperial Drive
Waco, Texas 76712
Re: FirstCity Financial Corporation
Form 10-K for the year ended December 31, 2004
Filed March 21, 2005
Form 10-Q for the quarter ended June 30, 2005
Filed on August 12, 2005
File No.: 033-19694
Dear Mr. Baker:
We have reviewed the above-referenced filings and have the
following comments. We have limited our review to only your
financial statements and related disclosures and do not intend to
expand our review to other portions of your documents. Please
address the following comments in future filings, as applicable.
If
you disagree, we will consider your explanation as to why our
comment
is inapplicable or a future revision is unnecessary. Please be as
detailed as necessary in your explanation. In some of our
comments,
we may ask you to provide us with information so we may better
understand your disclosure. After reviewing this information, we
may
or may not raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Financial Statements
Consolidated Statements of Operations, page 41
1. We note your presentation of "Equity in earnings of
investments"
as revenues. Note that "Equity in earnings of investments" is not
considered revenues. In future filings, please reclassify this
item
outside revenues in accordance with Rule 5-03.13 of Regulation S-
X.
Note 1. Summary of Significant Accounting Policies, page 44
(c) Principles of Consolidation
2. We note your accounting for the Acquisition Partnerships under
the
equity method of accounting and your disclosures on page 54 that
they
are variable interest entities (`VIE`) under FIN 46R. Also you
state that you are not the primary beneficiaries, in this regard
please address the following comments:
a. Provide us a listing of these entities, and include the
information which shows the amounts of your share in general
partner
interests and limited partner interests, and the amounts of loan
receivable held for investment, if applicable, related to each
individual entity. Also, provide in your response the annual
servicing fee income and the interest income earned from each
individual entity.
b. Provide us your analysis to support your basis that you are not
the primary beneficiaries of these VIE in light of the
significance
of the amounts of distributions, servicing fee income and interest
income earned. Refer to paragraph 14 of FIN 46R.
c. For each individual VIE, identify for us the primary
beneficiary
who would absorb the majority of the VIE`s expected losses or
expected residual returns or both and explain to us why.
3. Please tell us how you determined that separate financial
statements under Rule 3-09 of Regulation S-X were not required for
your investments in the Acquisition Partnerships - Europe and for
the
Mexican Acquisition Partnerships. Supplementally provide us with
your
supporting calculations for 2004, 2003 and 2002.
Form 10-Q For the Quarterly Period Ended June 30, 2005
Liquidity and Capital Resources, page 6
4. You state that "[t]he Company had $11.3 million in Euro-
dominated
debt for the purpose of hedging a portion of the net equity
investment in Europe ... Effectiveness of the hedging relationship
is
measured and designated at the beginning of each month ..." So
we
may better understand your accounting, please explain to us how
the
debt would qualify for hedge accounting under SFAS No. 133. If
not,
please remove the language that describes hedging or hedge
relationship in the filing.
* * * * *
Please respond to these comments within 10 business days or
tell us when you will provide us with a response. Please furnish
a
letter that keys your responses to our comments and provides any
requested information. Detailed letters greatly facilitate our
review. Please understand that we may have additional comments
after
reviewing your responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that
* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filings; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filings or
in
response to our comments on your filings.
You may contact Andrew Mew, Senior Staff Accountant, at
(202)
551-3377 or Ivette Leon, Assistant Chief Accountant, at (202) 551-
3351 if you have questions regarding comments on the financial
statements and related matters. Please contact me at (202) 551-
3810
with any other questions.
Sincerely,
Larry Spirgel
Assistant Director
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Mr. Bryan Baker
FirstCity Financial Corporation
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