FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 1-7614
FIRSTCITY FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 76-0243729
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
6400 Imperial Drive, Waco, TX 76712
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (817) 751-1750
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of July 31, 1996, 4,922,135
shares of Common Stock, par value $.01 per share, were outstanding.
FIRSTCITY FINANCIAL CORPORATION
TABLE OF CONTENTS TO
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FirstCity Financial Corporation and Subsidiaries
Consolidated Balance Sheets............................... 3
FirstCity Financial Corporation and Subsidiaries
Consolidated Statements of Income......................... 4
FirstCity Financial Corporation and Subsidiaries
Consolidated Statements of Shareholders' Equity........... 5
FirstCity Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows..................... 6
FirstCity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements................ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 12
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders....... 20
Item 6. Exhibits and Reports on Form 8-K.......................... 21
SIGNATURES.................................................................. 24
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
(Dollars in thousands, except per share data) 1996 1995
- --------------------------------------------------------------------------------------------------------------------
Assets
Cash and equivalents.............................................. $ 6,336 $ 8,370
Purchased asset pools, net........................................ 107,160 95,939
Equity investments in and advances to acquisition partnerships.... 36,582 26,187
Class "A" Certificate of FirstCity Liquidating Trust.............. 111,776 162,245
Deferred tax benefit.............................................. 14,600 -
Other assets...................................................... 14,584 16,148
--------------------- --------------------
Total Assets.................................................... $ 291,038 $ 308,889
===================== ====================
Liabilities, Special Preferred Stock
and Shareholders' Equity
Liabilities:
Notes payable, secured......................................... $ 105,907 $ 85,518
Senior subordinated notes payable.............................. 52,345 106,690
Notes payable to others........................................ 4,829 8,988
Other liabilities.............................................. 3,839 5,887
--------------------- --------------------
Total Liabilities............................................ 166,920 207,083
--------------------- --------------------
Commitments and contingencies..................................... - -
Special preferred stock, including dividends of $7,752 and
$3,876, respectively (nominal stated value of $21.00 per
share; 2,500,000 shares authorized; 2,460,911 issued and
outstanding)................................................... 59,431 55,555
Shareholders' equity:
Optional preferred stock (par value $.01 per share; 100,000,000
shares authorized; no shares issued or
outstanding)................................................. - -
Common stock (par value $.01 per share; 100,000,000
shares authorized; issued and outstanding: 4,922,135 and
4,921,422 shares, respectively).............................. 49 49
Paid in capital................................................ 22,933 22,916
Retained earnings.............................................. 41,705 23,286
--------------------- --------------------
Total Shareholders' Equity................................... 64,687 46,251
--------------------- --------------------
Total Liabilities, Special Preferred Stock and
Shareholders' Equity..................................... $ 291,038 $ 308,889
===================== ====================
See accompanying Notes to Consolidated Financial Statements.
3
FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------- -----------------------------------
(Amounts in thousands,
except per share data) 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------- -----------------------------------
Proceeds from disposition and payments
received on purchased asset pools............... $ 13,683 $ 19,477 $ 27,678 $ 23,586
Cost of purchased asset pools...................... 9,731 15,195 19,062 17,887
--------------- --------------- --------------- ---------------
Net gain on purchased asset pools............... 3,952 4,282 8,616 5,699
Other income:
Servicing fees.................................. 2,855 2,052 5,373 3,708
Interest income on Class "A" Certificate........ 3,116 - 7,428 -
Other interest income........................... 2,196 44 3,286 52
Rental income on purchased real estate pools.... 1,448 - 1,935 -
Other........................................... 339 403 597 662
--------------- --------------- --------------- ---------------
13,906 6,781 27,235 10,121
--------------- --------------- --------------- ---------------
Expenses:
Interest on senior subordinated notes payable... 1,178 - 3,552 -
Interest on other notes payable................. 2,448 541 4,579 1,283
Salaries and benefits........................... 2,547 1,538 5,116 2,912
Amortization.................................... 836 - 1,661 -
Other general and administrative................ 3,278 1,330 5,892 1,743
--------------- --------------- --------------- ---------------
10,287 3,409 20,800 5,938
--------------- --------------- --------------- ---------------
Equity in earnings of acquisition partnerships..... 916 731 1,630 1,359
--------------- --------------- --------------- ---------------
Earnings from operations before income taxes... 4,535 4,103 8,065 5,542
Provision (benefit) for income taxes.............. (14,370) 446 (14,230) 936
--------------- --------------- --------------- ---------------
Net earnings.................................. $ 18,905 $ 3,657 $ 22,295 $ 4,606
=============== =============== =============== ===============
Special preferred dividends........................ 1,938 - 3,876 -
--------------- --------------- --------------- ---------------
Net earnings to common shareholders................ $ 16,967 $ 3,657 $ 18,419 $ 4,606
=============== =============== =============== ===============
Net earnings per share............................. $ 3.45 $ 1.54 $ 3.74 $ 1.94
=============== =============== =============== ===============
Weighted average shares outstanding................ 4,921 2,367 4,921 2,370
=============== =============== =============== ===============
See accompanying Notes to Consolidated Financial Statements.
4
FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Total
Common Paid in Retained Shareholders'
(Dollars in thousands) Stock Capital Earnings Equity
- -----------------------------------------------------------------------------------------------------------------------------------
Balances, January 1, 1995................ $ 1,574 $ 1,812 $ 17,781 $ 21,167
Common stock issued (5,935 shares)....... 59 720 - 779
Common stock retired (11,080
shares)............................... (111) (1,089) - (1,200)
Net assets spun off to Combined
Financial Corporation................. - - (5,352) (5,352)
Merger with First City
Bancorporation of Texas, Inc.......... (1,473) 21,473 - 20,000
Net earnings for 1995.................... - - 14,733 14,733
Preferred stock dividends................ - - (3,876) (3,876)
----------------- ----------------- ---------------- -----------------
Balances, December 31, 1995 ............. 49 22,916 23,286 46,251
----------------- ----------------- ---------------- -----------------
Exercise of warrants and employee
stock purchase plan (713 shares)...... - 17 - 17
Net earnings for the six months
ended June 30, 1996................... - - 22,295 22,295
Preferred stock dividends................ - - (3,876) (3,876)
----------------- ----------------- ---------------- -----------------
Balances, June 30, 1996.................. $ 49 $ 22,933 $ 41,705 $ 64,687
================= ================= ================ =================
See accompanying Notes to Consolidated Financial Statements.
5
FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months
Ended June 30,
-------------------------------------
(Dollars in thousands) 1996 1995
- -----------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings...................................... $ 22,295 $ 4,606
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Cost of collections.............................. 19,062 17,887
Purchase of asset pools.......................... (32,778) -
Equity in earnings of acquisition partnerships... (1,630) (1,359)
Collections on performing asset pools............ 3,510 -
Deferred income tax benefit...................... (14,600) (64)
Depreciation and amortization.................... 2,320 158
Increase in other assets......................... (4,949) (5,108)
Decrease in other liabilities.................... (2,048) (301)
----------------- ----------------
Net cash provided by (used in) operating
activities.................................. (8,818) 15,819
----------------- ----------------
Cash flows from investing activities:
Advances to acquisition partnerships and affiliates (235) -
Payments on advances to acquisition partnerships
and affiliates................................... 551 -
Principal payment on Class "A" Certificate........ 53,345 -
Property and equipment, net....................... (397) (92)
Acquisition of National Auto Funding Corporation.. (302) -
Contributions to acquisition partnerships ........ (13,376) (1,375)
Distributions from acquisition partnerships....... 4,296 3,189
----------------- ----------------
Net cash provided by investing activities........ 43,882 1,722
----------------- ----------------
Cash flows from financing activities:
Borrowings under notes payable ................... 71,424 3,800
Payments of notes payable ........................ (55,194) (21,130)
Payment of senior subordinated notes payable...... ( 53,345) -
Additions to notes payable to stockholders and
officers......................................... - 1,930
Reduction of notes payable to stockholders and
officers......................................... - (1,843)
Issuance of common stock.......................... 17 779
Retirement of common stock........................ - (1,200)
----------------- ----------------
Net cash used in financing activities............ (37,098) (17,664)
----------------- ----------------
Net decrease in cash................................. $ (2,034) $ (123)
Cash, beginning of period............................ 8,370 4,150
----------------- ----------------
Cash, end of period.................................. $ 6,336 $ 4,027
================= ================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest......................................... $ 7,844 $ 1,126
================= ================
Income taxes..................................... $ 116 $ 1,000
================= ================
See accompanying Notes to Consolidated Financial Statements.
6
FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1996
(1) Basis of Presentation
---------------------
On July 3, 1995, FirstCity Financial Corporation ("FirstCity" or the
"Company") was formed by the merger ("Merger") of J-Hawk Corporation
and First City Bancorporation of Texas, Inc. Historical financial
statements prior to the merger date reflect the financial position and
results of operations of J-Hawk Corporation ("JHawk") and are not
necessarily indicative of results expected to be achieved in the
future. For further information, see the 1995 Annual Report on Form
10-K.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Significant estimates include
the estimation of future collections on purchased asset pools used in
the calculation of net gain on purchased asset pools. Actual results
could differ materially from those estimates.
The unaudited consolidated financial statements of FirstCity Financial
Corporation reflect, in the opinion of management, all adjustments,
consisting only of normal and recurring adjustments, necessary to
present fairly FirstCity Financial Corporation's financial position at
June 30, 1996, and the results of operations and cash flows for the
three month and six month periods ended June 30, 1996 and 1995.
(2) Purchased Asset Pools
---------------------
The purchased asset pools are summarized as follows (dollars in
thousands):
June 30, December 31, 1995
1996
---------------------- -----------------------
Non-performing asset pools:
Loans:
Borrowers' obligation on outstanding balance of:
Performing loans $ 36,613 $ 55,337
Non-performing loans 330,182 339,465
---------------------- -----------------------
366,795 394,802
Real estate assets 8,819 10,052
---------------------- -----------------------
375,614 404,854
Performing asset pools:
Loans:
Borrowers' obligation on outstanding balance of:
7
FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(continued)
Performing loans 46,736 16,714
Non-performing loans 560 -
---------------------- -----------------------
47,296 16,714
Purchased real estate pool (at amortized cost) 25,969 35,179
---------------------- -----------------------
Total purchased asset pools 448,879 456,747
Discount required to reflect purchased asset pools at
amortized cost (341,719) (360,808)
---------------------- -----------------------
Purchased asset pools, net $ 107,160 $ 95,939
====================== =======================
The purchased asset pools are pledged to secure non-recourse notes
payable.
(3) Acquisition Partnerships
------------------------
The Company has investments in partnerships and related general
partners that are accounted for on the equity method. The combined
financial position and results of operations of the acquisition
partnerships and general partners are summarized below (dollars in
thousands) :
8
FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(continued)
Condensed Combined Balance Sheets
June 30, December 31,
1996 1995
----------------------- ---------------------
Assets $275,291 $235,820
======================= =====================
Liabilities 199,087 180,659
Net equity 76,204 55,161
----------------------- ---------------------
$275,291 $235,820
======================= =====================
Company's equity in
acquisition partnerships $27,312 $16,601
======================= =====================
Advances to
acquisition partnerships $9,270 $9,586
======================= =====================
Condensed Combined Statements of Income
Three months ended Six months ended
June 30, June 30,
------------------------------------------------------
1996 1995 1996 1995
------------- ----------- ----------- ----------
Collections $35,902 $54,437 $61,224 $94,443
Gross margin 10,418 13,581 18,604 24,883
Interest income on performing asset pools 2,065 - 3,833 -
Net income 1,842 1,824 3,281 3,305
============ =========== =========== ==========
Company's equity in net income of
acquisition partnerships $916 $731 $1,630 $1,359
============= ============ =========== ==========
(4) Class "A" Certificate of FirstCity Liquidating Trust ("Trust")
--------------------------------------------------------------
FirstCity is the sole holder of the Class "A" Certificate of the Trust.
Redemption by the Trust of the balance due on the Class "A" Certificate
will be used to retire the senior subordinated notes payable, which are
general obligations of FirstCity, and to redeem the special preferred
stock. On March 29, 1996, $53.3 million of the senior subordinated
notes were redeemed, reducing the "A" Certificate by a like amount.
During the three months ended June 30, 1996, $1 million of senior
subordinated notes (purchased by the Trust) were redeemed. On July 26,
1996, the remaining senior subordinated notes were redeemed with a
corresponding reduction in the "A" Certificate.
Under the terms of the special preferred stock, FirstCity is only
required to redeem such stock and to declare dividends thereon to the
extent it receives sufficient funds from the Trust to make such
payments. Interest income on the Class "A" Certificate consists of
reimbursement to FirstCity (by the Trust) of interest expense on senior
subordinated notes and of accrued (but not declared) dividends on
special preferred stock. At June 30, 1996, dividends accrued but not
declared totaled $7.8 million, or
9
FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(continued)
$3.15 a share. In the opinion of management, sufficient funds will be
available from the Trust to redeem the special preferred stock at its
stated redemption price and accrued dividends on the redemption date of
September 30, 1998.
The net assets in liquidation of the FirstCity Liquidating Trust are
summarized below (dollars in thousands):
Condensed Consolidated Statements
of Net Assets in Liquidation
June 30, December 31,
1996 1995
----------------------- ---------------------
Assets $164,130 $206,464
Liabilities (902) (4,683)
----------------------- ---------------------
Net Asset Value $163,228 $201,781
======================= =====================
Class "A" Certificate $111,776 $162,245
Class "B" Certificate 51,452 39,536
(5) Federal Income Taxes
--------------------
Federal income taxes subsequent to the Merger are provided at a 35%
rate. Net operating loss carryforwards are available to FirstCity and
are recognized as an offset to the provision in the period during which
the benefit is realized. During the second quarter of 1996, FirstCity
recognized a deferred tax benefit of $14.6 million. Realization of the
resulting net deferred tax asset is dependent upon generating
sufficient taxable income prior to expiration of the net operating loss
carryfowards. Although realization is not assured, management believes
it is more likely than not that all of the recorded deferred tax asset
will be realized. The amount of the deferred tax asset considered
realizable, however, could be adjusted in the future if estimates of
future taxable income during the carryfoward period change.
(6) Other Related Party Transactions
--------------------------------
In January, 1995, the Company entered into an agreement with a
shareholder to repurchase 11,080 shares of J-Hawk common stock for $1.2
million. The Company paid the former shareholder $.4 million in cash
and issued a $.8 million note, which was assumed by Combined Financial
Corporation in June 1995.
During the three months ended June 30, 1995, the Company sold
approximately $12 million (allocated cost) of loans to a partnership
owned by certain executive officers of J-Hawk. The Company recognized
approximately $3 million in gain from the transaction. Additionally,
the Company entered into a servicing arrangement with the partnership
to service the sold assets for a fee based on collections. This
transaction
10
FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(continued)
was part of the overall spin out transaction completed prior to the
Merger on July 3, 1995.
The Company has contracted with the Trust, the acquisition partnerships
and related parties as third party loan servicer. Substantially all
servicing fees and due diligence fees (included in other income)
reflected in the Consolidated Statements of Income were derived from
such affiliates.
(7) Commitments and Contingencies
-----------------------------
FirstCity has pledged a portion of its interest in the future
distributions of certain acquisition partnerships, after FirstCity's
initial investment has been returned, to the subordinated debt lender
under a Residual Share Agreement (the "Agreement"). Under the Agreement,
this pledge is limited to twice FirstCity's original investment in the
respective partnership. In the opinion of management, this pledge does
not currently represent a material contingent claim on the future
distributions from the acquisition partnerships to FirstCity.
The Company is involved in various legal proceedings in the ordinary
course of business. In the opinion of management, the resolution of such
matters should not have a material adverse impact on the financial
condition, results of operations or liquidity of the Company.
11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FirstCity Financial Corporation ("FirstCity" or the "Company") reported net
earnings for the second quarter of 1996 of $18.9 million. After dividends
accrued but not declared on the Company's special preferred stock, earnings
attributable to common equity were $17.0 million, or $3.45 per share. The
results were positively impacted by the recognition of $14.6 million of deferred
tax benefits. Excluding the tax benefit recognition, earnings attributable to
common equity were $2.4 million, or $.48 per share, for the quarter. Earnings
for the second quarter of 1995 were $3.7 million, or $1.54 per share. 1996
year-to-date earnings attributable to common equity were $18.4 million, or $3.74
per share, compared to $4.6 million, or $1.94 per share, for the 1995
year-to-date period. Excluding the effect of the tax benefits, 1996 year-to-date
earnings attributable to common equity were $3.8 million, or $ .78 per share.
Earnings for the current quarter were significantly increased by the recognition
of certain tax benefits resulting from the Company's reassessment of its
valuation allowance (reserve) related to its net operating loss carryforward
("NOL") asset. Prior to the second quarter, the deferred tax asset resulting
from the Company's NOL was entirely offset by this valuation reserve.
Realization of the asset is dependent upon generating sufficient taxable
earnings to utilize the NOL. Although realization is not assured, management
believes it is more likely than not that FirstCity will generate sufficient
taxable income in future periods to utilize the tax benefit recognized this
quarter. The amount of tax benefits recognized will be adjusted in future
quarters should the estimates of future taxable income change. To the extent
that there are changes, net earnings will be impacted accordingly.
In May 1996, FirstCity initiated its sub-prime auto finance lending activity
through the acquisition of National Auto Funding Corporation and NAF Auto Loan
Trust (collectively, "NAF"), Irving, Texas. At quarter-end the Company owned
$31.6 million in sub-prime auto loans, including NAF's $28 million portfolio,
which an acquisition partnership had acquired in the first quarter of 1996.
Asset acquisitions for the second quarter were modest with FirstCity acquiring
approximately $10 million of face value of assets, including the loans
originated by NAF. The acquisitions included a commercial/industrial portfolio
purchased from a large banking organization and a consumer portfolio.
The Company is in the process of finalizing the securitization of approximately
$75 million of performing assets. The transaction, which is anticipated to close
in August, will result in decreased funding costs for FirstCity's acquisition
partnerships.
On July 26, 1996, FirstCity redeemed the remainder of its senior subordinated
notes with proceeds from a distribution from the FirstCity Liquidating Trust.
BACKGROUND
- ----------
On July 3, 1995, FirstCity was formed by the merger (the "Merger") of J-Hawk and
First City Bancorporation of Texas, Inc. ("FCBOT"). For accounting purposes, the
Merger was treated as an acquisition of FCBOT by J-Hawk. Accordingly, financial
information prior to the Merger reflects the historical financial position and
results of operations of J-Hawk.
FirstCity is a specialized financial services company which evaluates, acquires,
manages, services, and disposes of portfolios of performing loans,
non-performing loans, other real estate and other financial assets
(collectively, "purchased asset pools"). Purchased asset pools are acquired by
FirstCity or its wholly-owned subsidiaries and through partnerships
12
("acquisition partnerships") in which an affiliate of FirstCity is the general
partner and FirstCity and other investors are limited partners.
In connection with the Merger, the shareholders of J-Hawk received approximately
49.9% of FirstCity's common stock and the former security holders of FCBOT
received approximately 50.1% of FirstCity's common stock. FirstCity also issued
$106.7 million in senior subordinated notes (all of which have been redeemed by
the Company), $51.7 million in special preferred stock and warrants to purchase
500,000 shares of its common stock at an initial exercise price of $25 per
share.
Also in connection with the Merger, substantially all of the assets of FCBOT,
other than $20 million in cash, were transferred to the newly-formed FirstCity
Liquidating Trust (the "Trust"). The liquidation of the assets transferred to
the Trust is managed by the Company for a prescribed servicing fee.
The following table summarizes FirstCity's performance for the second quarter
and first six months of 1996 and 1995.
CONSOLIDATED SUMMARY OF OPERATIONS
- --------------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
(Amounts in thousands, except per share data) June 30, June 30,
------------------------------ -----------------------------
1996 1995 1996 1995
-------------- ------------- ------------- -------------
Income:
Net gain on purchased asset pools $ 3,952 $ 4,282 $ 8,616 $ 5,699
Servicing fees 2,855 2,052 5,373 3,708
Interest income on Class A Certificate 3,116 - 7,428 -
Other interest income 2,196 44 3,286 52
Rental income on purchased real estate pools 1,448 - 1,935 -
Other income 339 403 597 662
-------------- ------------- ------------- -------------
Subtotal 13,906 6,781 27,235 10,121
-------------- ------------- ------------- -------------
Expenses:
Interest on senior subordinated notes payable 1,178 - 3,552 -
Interest on other notes payable 2,448 541 4,579 1,283
Salaries and benefits 2,547 1,538 5,116 2,912
Amortization 836 - 1,661 -
Other general and administrative expense 3,278 1,330 5,892 1,743
-------------- ------------- ------------- -------------
Subtotal 10,287 3,409 20,800 5,938
-------------- ------------- ------------- -------------
Equity earnings of acquisition partnerships 916 731 1,630 1,359
-------------- ------------- ------------- -------------
Earnings before income taxes 4,535 4,103 8,065 5,542
-------------- ------------- ------------- -------------
Provision (benefit) for income taxes (14,370) 446 (14,230) 936
-------------- ------------- ------------- -------------
Net earnings $ 18,905 $ 3,657 $ 22,295 $ 4,606
============== ============= ============= =============
Special preferred dividends 1,938 - 3,876 -
-------------- ------------- ------------- -------------
Net earnings to common $ 16,967 $ 3,657 $ 18,419 $ 4,606
============== ============= ============= =============
Net earnings per share $ 3.45 $ 1.54 $ 3.74 $ 1.94
Average shares outstanding 4,921 2,367 4,921 2,370
Return on average equity (annualized) 120.8 % 71.5% 69.7 % 44.6 %
13
The following table analyzes the composition of FirstCity's major revenue
resources:
ANALYSIS OF REVENUE SOURCES
- ------------------------------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
------------------------- ------------------------
(Dollars in thousands) 1996 1995 1996 1995
------------------------- ----------- ------------
GAINS ON PURCHASED ASSET POOLS
------------------------------
Asset portfolios purchased $ 31,037 $ - $ 32,778 $ -
$ collected 13,683 19,477 27,678 23,586
Net gain on collections 3,952 4,282 8,616 5,699
Profit margin on purchased asset pools 28.88% 21.98% 31.13% 24.16%
SERVICE FEE REVENUES
--------------------
ACQUISITION PARTNERSHIPS
$ collected $ 35,902 $ 54,437 $ 61,224 $ 94,443
Service fee revenue 1,354 1,965 2,295 3,612
Average service fee % 3.77% 3.61% 3.75% 3.82%
TRUST
$ collected
FDIC receivable $ - - $ 17,698 -
Other trust assets 38,443 - 62,318 -
Service fee revenue 1,124 - 2,260 -
Average service fee % 2.92% - 2.82% -
OTHER AFFILIATED ENTITIES
$ collected $ 4,898 $ 3,249 $ 9,968 $ 4,337
Service fee revenue 377 87 818 96
Average service fee % 7.70% 2.68% 8.21% 2.21%
TOTAL SERVICE FEES
$ collected $ 79,243 $ 57,686 $ 151,208 $ 98,780
Service fee revenue 2,855 2,052 5,373 3,708
Average service fee % 3.60% 3.56% 3.55% 3.75%
EQUITY EARNINGS IN
ACQUISITION PARTNERSHIPS
------------------------
Asset portfolios purchased $ 1,490 $ 6,533 $ 99,926 $ 53,167
Average FirstCity investment 28,584 14,186 23,381 14,309
Equity earnings in investments 916 731 1,630 1,359
- ------------------------------------------------------------------------------------------------
14
The following table analyzes the operations of the acquisition partnerships:
ANALYSIS OF ACQUISITION PARTNERSHIPS
- -------------------------------------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
-------------------------- --------------------------
(Dollars in thousands) 1996 1995 1996 1995
------------ ------------- ------------ -------------
GAINS ON DISPOSITION OF ASSET POOLS
- -----------------------------------
Gross collections $ 35,902 $ 54,437 $ 61,224 $ 94,443
Cost of collections 25,484 40,856 42,620 69,560
------------ ------------- ------------ -------------
Total gain on disposition of asset
pools $ 10,418 $ 13,581 $ 18,604 $ 24,883
Variance from previous year due
to:
Collection levels (4,624) (2,625) (8,772) (4,148)
Gross profit margins 2,217 (766) 3,848 2,004
Mix (756) 120 (1,355) (284)
------------ ------------- ------------ -------------
Total variance from previous year (3,163) (3,271) (6,279) (2,428)
INTEREST INCOME ON PERFORMING ASSET POOLS $ 2,065 $ - $ 3,833 $ -
- -----------------------------------------
COST OF BORROWINGS
- ------------------
Interest expense $ 7,172 $ 7,192 $ 12,914 $ 14,419
Average borrowings 209,300 237,169 193,445 234,684
Weighted average rate 13.71% 12.13% 13.35% 12.29%
OTHER EXPENSES
- --------------
Service fee expense $ 1,455 $ 1,965 $ 2,421 $ 3,612
Legal 571 550 1,117 1,069
Property protection 1,107 1,461 1,996 1,409
Other 336 589 708 1,069
------------ ------------- ------------ -------------
Total other expenses 3,469 4,565 6,242 7,159
- -------------------------------------------------------------------------------------------------------
SECOND QUARTER 1996 COMPARED TO SECOND QUARTER 1995
Net earnings in the second quarter of 1996 were $18.9 million, including $14.6
million of deferred tax benefits, compared to $3.7 million in the second quarter
of 1995. Net earnings to common in the 1996 period were $17.0 million ($2.4
million excluding the deferred tax benefit) compared to $3.7 million in the 1995
period. On a per share basis, earnings attributable to common equity were $3.45
($.48 excluding the deferred tax benefit) for 1996 compared to $1.54 per share
for 1995. Results for periods prior to July 3, 1995 reflect the historical net
earnings of J-Hawk. The related earnings per share are restated to reflect the
equivalent number of FirstCity common shares issued to the J-Hawk shareholders
in connection with the Merger.
15
NET GAIN ON PURCHASED ASSET POOLS
The net gain on purchased asset pools decreased to $4.0 million in the second
quarter of 1996 from $4.3 million in 1995 primarily because, in the second
quarter of 1995, gains of approximately $3 million resulted from a sale of
approximately $12 million in loans to a partnership owned by certain executive
officers of J-Hawk, as a part of the spin off transaction completed in
conjunction with the Merger. The profit margin on collections in 1996 was 29% as
compared to 22% in 1995. The average investment in purchased asset pools in 1996
of $97.0 million exceeded the average investment levels for 1995 of $20.2
million, with the resulting gain on disposition of purchased asset pools higher
in the 1996 period due to increased levels of collections (excluding the sale
that was part of the 1995 spin off) on larger asset pools.
Many of the assumptions upon which the future collections from purchased asset
pools are based, and therefore the gross profits recognized upon collections,
are subject to significant uncertainties such as timing and levels of
collections and the cost of maintaining and protecting such assets within the
pools. Additionally, unanticipated events and circumstances may occur.
Consequently, there may be differences between current recognized gross profit
rates and actual results achieved over the life of a portfolio.
SERVICING FEES
Servicing fees grew to $2.9 million in the second quarter of 1996 from $2.1
million for such period in 1995, an increase of 39%. Excluding $1.1 million in
fees from collection of Trust assets, servicing fees declined $.3 million from
1995 because of lower collection levels achieved in acquisition partnerships.
INTEREST INCOME AND EXPENSE
As a result of the Merger, interest income on the Trust Class A Certificate was
recorded in the second quarter of 1996, representing reimbursement to FirstCity
(by the Trust) of interest expense of $1.2 million on the senior subordinated
notes and accrual of dividends of $1.9 million on special preferred stock. The
Company realized other interest income primarily from performing loans. Interest
expense on other notes payable rose in proportion to higher volumes of debt
associated with purchase of asset pools.
OTHER INCOME
Rental income on purchased real estate pools resulted from a third quarter 1995
acquisition of a pool consisting entirely of real estate assets. On this and
other real estate purchases, the net operating income derived from such assets
is recognized as other income, while gains on sales are recognized upon
disposition of the asset.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expenses increased $3.8 million, reflecting higher
costs since the Company's acquisition of Diversified Financial Systems, Inc.
("Diversified"), increased property expenses and amortization of goodwill and
servicing rights in the second quarter of
1996 (none in the second quarter of 1995).
16
EQUITY IN EARNINGS OF ACQUISITION PARTNERSHIPS
Equity in earnings of acquisition partnerships in the second quarter of 1996
increased 25% from such period in 1995. Collections in the acquisition
partnerships decreased $18.5 million, or 34%, and caused a decrease in gross
profit of $4.6 million. However, this reduction was more than offset by a higher
gross profit margin ($2.2 million), interest income on newly-acquired performing
asset pools ($2.1 million) and an increased ownership percentage by FirstCity in
the new partnerships.
Most of the indebtedness incurred by FirstCity and its acquisition partnerships
is floating rate debt, the rates of which change when certain short term
benchmark rates increase. If these benchmark rates increase beyond what
FirstCity had originally projected, the profitability of FirstCity and the
acquisition partnerships will be adversely affected.
FEDERAL INCOME TAXES
Federal income taxes are provided at 35% of taxable income. The Company believes
certain NOLs are available to it after July 3, 1995, and are recognized as an
offset to the provision in the period during which the benefit is realized.
During the second quarter of 1996, FirstCity recognized a deferred tax benefit
of $14.6 million. Realization of the resulting net deferred tax asset is
dependent upon generating sufficient taxable income prior to expiration of the
NOLs. Although realization is not assured, management believes it is more likely
than not that all of the recorded deferred tax asset will be realized. The
amount of the deferred tax asset considered realizable, however, could be
adjusted in the future if estimates of future taxable income during the
carryfoward period change.
The Company believes that the NOLs that were accrued prior to the Merger
survived the Merger and are available to offset future taxable income of the
Company. However, there is no authority governing many of the tax aspects of the
Merger because some determinations primarily may be questions of fact.
Additionally, no private letter ruling from the Internal Revenue Service ("IRS")
or opinion of counsel regarding the availability of such NOLs was sought or
obtained; therefore, there can be no assurance that the availability of such
NOLs will not be successfully challenged by the IRS.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Net earnings for the six months ended June 30, 1996 were $22.3 million,
including the deferred tax benefit, compared to $4.6 million for the six months
ended June 30, 1995. Net earnings to common in the 1996 period were $18.4
million ($3.8 million excluding the tax benefit) compared to $4.6 million in the
1995 period. On a per share basis, earnings attributable to common equity were
$3.74 ($.78 excluding the tax benefit) for the 1996 period compared to $1.94 per
share for the 1995 period.
NET GAIN ON PURCHASED ASSET POOLS
The net gain on purchased asset pools increased to $8.6 million in the first six
months of 1996 from $5.7 million in 1995. The average investment in purchased
asset pools in 1996 of $95.2 million exceeded the average investment levels for
such period in 1995 of $24.2 million, with the resulting gain on disposition of
purchased asset pools higher in the 1996 period due to increased levels of
collections on larger asset pools. The previously-mentioned $3 million gain
17
was included in 1995 results. The profit margin on collections in 1996 was 31%
as compared to 24% in 1995.
SERVICING FEES
Servicing fees grew to $5.4 million in the first six months of 1996 from $3.7
million for such period in 1995, an increase of 45%. Excluding $2.3 million in
fees from collection of Trust assets, servicing fees declined $.6 million from
1995 because of lower collection levels achieved in acquisition partnerships.
INTEREST INCOME AND EXPENSE
Interest income on the Trust Class A Certificate was recorded in the six months
ended June 30, 1996, representing reimbursement to FirstCity (by the Trust) of
interest expense of $3.6 million on the senior subordinated notes and accrual of
dividends of $3.9 million on the special preferred stock. The Company realized
other interest income primarily from a portfolio of performing loans acquired in
the Diversified transaction. Interest expense on other notes payable rose in
proportion to higher volumes of debt associated with the purchase of asset
pools.
OTHER INCOME
Rental income on purchased real estate pools resulted from a third quarter 1995
acquisition of a pool consisting entirely of real estate assets. There was no
such investment or related income in the year earlier period.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expenses increased $8.0 million, reflecting higher
costs since acquiring Diversified, increased property expenses and amortization
of goodwill and servicing rights in the first six months of 1996 (none in the
corresponding period of 1995). Also, general and administrative expenses in 1995
include a recovery of $.7 million of prior year expenses related to the Merger
(which expenses were reimbursed by FCBOT).
EQUITY IN EARNINGS OF ACQUISITION PARTNERSHIPS
Equity in earnings of acquisition partnerships in the first six months of 1996
increased 20% from such period in 1995. Collections in the acquisition
partnerships decreased $33.2 million, or 35%, and caused a decrease in gross
profit of $8.8 million. However, this reduction was more than offset by a higher
gross profit margin ($3.8 million), interest income on newly-acquired performing
asset pools ($3.8 million) and an increased ownership percentage by FirstCity in
new partnerships.
FEDERAL INCOME TAXES
Federal income taxes are provided at 35% of taxable income. The Company believes
NOLs are available to it after July 3, 1995, and are recognized as an offset to
the provision in the period during which the benefit is realized. As discussed
earlier, a deferred tax benefit was recorded in 1996.
18
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Generally, the liquidity needs of FirstCity are for operations, payment of debt,
acquisitions of purchased asset pools, investments in and advances to
acquisition partnerships and other investments by the Company. The sources of
liquidity are funds generated from operations, distributions from the Trust to
the Company as the sole holder of the Trust Class "A" Certificate, equity
distributions from acquisition partnerships and short term borrowings from lines
of credit and other specific purpose short term borrowings.
FirstCity contributed equity to acquisition partnerships totaling $13.4 million
to facilitate the purchase of $99.9 million in portfolios of assets during the
first six months of 1996 and also acquired $32.8 million in purchased asset
pools. During the first six months of 1996, FirstCity borrowed $18.8 million
under a credit facility provided by Cargill Financial Services ("Cargill"),
increasing the balance under that facility to $24.0 million at quarter end. Such
facility matures on December 29, 1996, and is secured by substantially all of
the unencumbered assets of the Company. The Company and Cargill are currently
negotiating an increase in the amount available under such facility from $25
million to $35 million, although there can be no assurances such an increase
will be consummated.
During the quarter ended June 30, 1996, NAF borrowed $23.8 million under a $50.0
million Warehouse Credit Agreement with ContiTrade Services L.L.C. to purchase
and originate auto loans through NAF. As the origination of auto loans
increases, NAF can borrow under this facility. Increases in loan originations
may require additional equity injections into NAF to comply with the borrowing
base terms of the Warehouse Credit Agreement.
On March 29, 1996, FirstCity redeemed early $53.3 million of its senior
subordinated notes by means of a distribution from the Trust. During the second
quarter of 1996, $1 million of notes held by the Trust were redeemed. On July
26, 1996, the remaining $52.3 million of notes were redeemed via another
distribution from the Trust. Each of these transactions resulted in a
corresponding reduction in the Trust Class "A" Certificate.
In the future, FirstCity anticipates being able to raise capital through public
debt or equity offerings, thus enhancing the investment and growth opportunities
of the Company. The Company believes that these and other sources of liquidity,
including the Cargill credit facility, securitizations, and funding from senior
lenders providing funding for acquisition partnership formation and direct
portfolio acquisitions, should prove adequate to continue to fund the Company's
other contemplated investment activities. At June 30, 1996, total common equity
was $64.7 million and is considered by management adequate to support the
current capital requirements and planned growth of the Company.
19
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of shareholders (the
"Annual Meeting") on April 24, 1996. The following items of
business were considered at the Annual Meeting:
(a) Election of Directors
All standing directors were elected as directors to
serve as members of the Company's Board of Directors
until the Company's 1997 annual meeting of
shareholders. The number of votes cast for each
nominee was as follows:
Votes Votes
Nominee Cast Against
For
---------------------- --------------- -------------
James R. Hawkins 4,289,690 36,970
C. Ivan Wilson 4,289,703 36,957
James T. Sartain 4,289,742 36,918
Rick R. Hagelstein 4,289,742 36,918
Matt A. Landry, Jr. 4,289,742 36,918
Richard E. Bean 4,289,742 36,918
Bart A. Brown, Jr. 4,289,570 37,090
Donald J. Douglass 4,289,742 36,918
David W. MacLennan 4,289,666 36,994
David Palmer 4,289,742 36,918
There were no abstentions or broker non-votes.
(b) Approval of Employee Benefit Plans
The following three employee benefit plans were
approved by the shareholders as follows:
Plan Votes Votes
Cast Against Unvoted Abstentions
For
- ----------------------------------------------------- ------------------ ----------------- ------------------
1995 Stock Option and Award Plan 3,000,324 173,121 1,129,224 23,991
1995 Employee Stock Purchase Plan 3,124,492 49,773 1,129,224 23,171
1996 Stock Option and Award Plan 2,876,483 229,504 1,195,676 24,997
20
(c) Ratification of Appointment of Auditors
A proposal to ratify the Board of Directors'
appointment of KPMG Peat Marwick LLP as the Company's
independent Auditors for 1996 was approved by the
shareholders. The number of votes for the proposal:
4,270,481; votes withheld: 32,187; abstentions:
10,433; unvoted: 13,559.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Joint Plan of Reorganization by First City
Bancorporation of Texas, Inc., Official
Committee of Equity Security Holders and
J-Hawk Corporation, with the Participation
of Cargill Financial Services Corporation,
Under Chapter 11 of the United States
Bankruptcy Code, Case No. 392-39474-HCA-11
(incorporated by reference herein to Exhibit
2.1 of the Registrant's Form 8-K dated July
3, 1995 filed with the Commission on July
18, 1995)
2.2 Agreement and Plan of Merger, dated as of
July 3, 1995, by and between First City
Bancorporation of Texas, Inc. and J-Hawk
Corporation (incorporated herein by
reference to Exhibit 2.2 of the Registrant's
Form 8-K dated July 3, 1995 filed with the
Commission on July 18, 1995)
3.1 Amended and Restated Certificate of
Incorporation of the Registrant
(incorporated herein by reference to Exhibit
3.1 of the Registrant's Form 8-K dated July
3, 1995 filed with the Commission on July
18, 1995)
3.2 Bylaws of the Registrant (incorporated
herein by reference to Exhibit 3.2 of the
Registrant's Form 8-K dated July 3, 1995
filed with the Commission on July 18, 1995)
21
10.9 Revolving Credit Agreement, dated December
29, 1995, by and between Cargill Financial
Services Corporation and the Registrant *
10.10 Amended and Restated Right of First Refusal
Agreement, dated June 9, 1994, by and
among the Registrant, James R. Hawkins,
James T. Sartain, Rick R. Hagelstein,
Cargill Financial Services Corporation and
CFSC Capital Corp. II, and Letter Agreement
Amendment to Amended and Restated Right of
First Refusal Agreement, dated March 11,
1996 *
10.11 FirstCity Financial Corporation 1995 Stock
Option and Award Plan (incorporated herein
by reference to Exhibit A of the
Registrant's Proxy Statement for the
Registrant's 1996 Annual Meeting of
Stockholders)
10.12 FirstCity Financial Corporation 1996 Stock
Option and Award Plan (incorporated herein
by reference to Exhibit C of the
Registrant's Proxy Statement for the
Registrant's 1996 Annual Meeting of
Stockholders)
10.13 FirstCity Financial Corporation 1995
Employee Stock Purchase Plan (incorporated
herein by reference to Exhibit B of the
Registrant's Proxy Statement for the
Registrant's 1996 Annual Meeting of
Stockholders)
10.14 Warehouse Credit Agreement, dated May 17,
1996, by and among ContiTrade Services
L.L.C. as Lender, N.A.F. Auto Loan Trust as
Borrower and National Auto Funding
Corporation *
10.15 Security and Collateral Agent Agreement,
dated May 17, 1996, by and among N.A.F. Auto
Loan Trust as Borrower, ContiTrade Services
L.L.C. as Lender and Texas Commerce Bank
National Association as Collateral Agent *
10.16 Funding Commitment, dated May 17, 1996, by
and between ContiTrade Services L.L.C. as
Lender and the Registrant *
10.17 Paying Agent Agreement, dated May 17, 1996,
by and among N.A.F. Auto Loan Trust as
Borrower, ContiTrade Services L.L.C. as
Lender and Texas Commerce Bank National
Association as Paying Agent *
10.18 Servicing Agreement Relating to N.A.F. Auto
Loan Trust, dated May 17, 1996, by and among
N.A.F. Auto Loan Trust as Borrower, J-Hawk
Servicing Corporation as Servicer, National
Auto Funding Corporation and ContiTrade
Services L.L.C. as Lender *
10.19 Investment Banking Services Agreement, dated
May 17, 1996, by and between ContiFinancial
Services Corporation and National Auto
Funding Corporation *
22
10.20 Amendment to Funding Commitment, dated May
17, 1996, by and between ContiTrade Services
L.L.C. as Lender and the Registrant *
10.21 Loan and Security Agreement, dated April 18,
1996, by and among American National Bank
and Trust Company of Chicago and Bank of
Scotland as Lenders and Diversified
Financial Systems, Inc., as Borrower *
10.22 Guarantee Agreement, dated April 18, 1996,
by and among American National Bank and
Trust Company of Chicago and Bank of
Scotland as Lenders and FirstCity Financial
Corporation as Guarantor *
27.1 Financial Data Schedule. (Exhibit 27.1 is
being submitted as an exhibit only in the
electronic format of this Quarterly Report
on Form 10-Q being submitted to the
Securities and Exchange Commission. Exhibit
27.1 shall not be deemed filed for purposes
of Section 11 of the Securities Act of 1933,
as amended, Section 18 of the Securities
Exchange Act of 1934, as amended, or Section
323 of the Trust Indenture Act of 1939, as
amended, or otherwise be subject to the
liabilities of such sections, nor shall it
be deemed a part of any registration
statement to which it relates.)
* - Filed herewith
(b) Reports on Form 8-K. No report on Form 8-K was filed
by the Registrant with the Securities and Exchange
Commission during the quarterly period ended June 30,
1996.
23
HOFS02...:\92\54892\0004\2236\FRM8056R.55C
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
FIRSTCITY FINANCIAL CORPORATION
/s/ Gary H. Miller
------------------------------------
Name: Gary H. Miller
Title: Senior Vice President and
Controller
(Duly authorized officer and chief
accounting officer of the Registrant)
Dated: August 9, 1996
24
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1 Joint Plan of Reorganization by First City Bancorporation of
Texas, Inc., Official Committee of Equity Security Holders and
J-Hawk Corporation, with the Participation of Cargill Financial
Services Corporation, Under Chapter 11 of the United States
Bankruptcy Code, Case No. 392-39474-HCA-11 (incorporated by
reference herein to Exhibit 2.1 of the Registrant's Form 8-K dated
July 3, 1995 filed with the Commission on July 18, 1995)
2.2 Agreement and Plan of Merger, dated as of July 3, 1995, by and
between First City Bancorporation of Texas, Inc. and J-Hawk
Corporation (incorporated herein by reference to Exhibit 2.2 of
the Registrant's Form 8-K dated July 3, 1995 filed with the
Commission on July 18, 1995)
3.1 Amended and Restated Certificate of Incorporation of the
Registrant (incorporated herein by reference to Exhibit 3.1 of the
Registrant's Form 8-K dated July 3, 1995 filed with the Commission
on July 18, 1995)
3.2 Bylaws of the Registrant (incorporated herein by reference to
Exhibit 3.2 of the Registrant's Form 8-K dated July 3, 1995 filed
with the Commission on July 18, 1995)
10.9 Revolving Credit Agreement, dated December 29, 1995, by and
between Cargill Financial Services Corporation and the Registrant*
10.10 Amended and Restated Right of First Refusal Agreement, dated June
9, 1994, by and among the Registrant, James R. Hawkins, James T.
Sartain, Rick R. Hagelstein, Cargill Financial Services
Corporation and CFSC Capital Corp. II, and Letter Agreement
Amendment to Amended and Restated Right of First Refusal
Agreement, dated March 11, 1996 *
10.11 FirstCity Financial Corporation 1995 Stock Option and Award Plan
(incorporated herein by reference to Exhibit A of the Registrant's
Proxy Statement for the Registrant's 1996 Annual Meeting of
Stockholders)
10.12 FirstCity Financial Corporation 1996 Stock Option and Award Plan
(incorporated herein by reference to Exhibit C of the Registrant's
Proxy Statement for the Registrant's 1996 Annual Meeting of
Stockholders)
10.13 FirstCity Financial Corporation 1995 Employee Stock Purchase Plan
(incorporated herein by reference to Exhibit B of the Registrant's
Proxy Statement for the Registrant's 1996 Annual Meeting of
Stockholders)
10.14 Warehouse Credit Agreement, dated May 17, 1996, by and among
ContiTrade Services L.L.C. as Lender, N.A.F. Auto Loan Trust as
Borrower and National Auto Funding Corporation *
10.15 Security and Collateral Agent Agreement, dated May 17, 1996, by
and among N.A.F. Auto Loan Trust as Borrower, ContiTrade Services
L.L.C. as Lender and Texas Commerce Bank National Association as
Collateral Agent *
10.16 Funding Commitment, dated May 17, 1996, by and between ContiTrade
Services L.L.C. as Lender and the Registrant *
10.17 Paying Agent Agreement, dated May 17, 1996, by and among N.A.F.
Auto Loan Trust as Borrower, ContiTrade Services L.L.C. as Lender
and Texas Commerce Bank National Association as Paying Agent *
10.18 Servicing Agreement Relating to N.A.F. Auto Loan Trust, dated May
17, 1996, by and among N.A.F. Auto Loan Trust as Borrower, J-Hawk
Servicing Corporation as Servicer, National Auto Funding
Corporation and ContiTrade Services L.L.C. as Lender *
10.19 Investment Banking Services Agreement, dated May 17, 1996, by and
between ContiFinancial Services Corporation and National Auto
Funding Corporation *
10.20 Amendment to Funding Commitment, dated May 17, 1996, by and
between ContiTrade Services L.L.C. as Lender and the Registrant *
10.21 Loan and Security Agreement, dated April 18, 1996, by and among
American National Bank and Trust Company of Chicago and Bank of
Scotland as Lenders and Diversified Financial Systems, Inc., as
Borrower *
10.22 Guarantee Agreement, dated April 18, 1996, by and among American
National Bank and Trust Company of Chicago and Bank of Scotland as
Lenders and FirstCity Financial Corporation as Guarantor *
27.1 Financial Data Schedule. (Exhibit 27.1 is being submitted as an
exhibit only in the electronic format of this Quarterly Report on
Form 10-Q being submitted to the Securities and Exchange
Commission. Exhibit 27.1 shall not be deemed filed for purposes of
Section 11 of the Securities Act of 1933, as amended, Section 18
of the Securities Exchange Act of 1934, as amended, or Section 323
of the Trust Indenture Act of 1939, as amended, or otherwise be
subject to the liabilities of such sections, nor shall it be
deemed a part of any registration statement to which it relates.)
_____________
* - Filed herewith