EXHIBIT C(5)
PRESENTATION TO THE BOARD OF DIRECTORS OF:
[FIRSTCITY LOGO]
SEPTEMBER 30, 2002
JOSEPH J. SPALLUTO, MANAGING DIRECTOR
KEVIN D. SPINNER, MANAGING DIRECTOR
NEW YORK SAN FRANCISCO CHICAGO BOSTON HARTFORD RICHMOND COLUMBUS
www.kbw.com
[KBW LOGO]
TABLE OF CONTENTS
================================================================================
<Table>
<Caption>
TAB SUBJECT PAGE(S)
--- ------- -------
1. INTRODUCTION ............................................................................................. 4-6
2. THE RESTRUCTURING ........................................................................................ 8-19
3. RESTRUCTURING IMPACT TO FIRSTCITY
Summary .................................................................................................. 21
Pro Forma Balance Sheet .................................................................................. 22,23
4. HISTORICAL TRADING VALUES & VOLUMES OF PREFERRED & COMMON STOCKS ......................................... 25-28
5. EXCHANGE OFFER VALUATION
Summary & Assumptions .................................................................................... 30
Valuation Table .......................................................................................... 31
6. LIQUIDATION ANALYSIS
Summary .................................................................................................. 33
Asset Sale Approach ...................................................................................... 34-36
7. GOING PRIVATE TRANSACTIONS ............................................................................... 38
8. CASE STUDY COMPARISON: DYNEX CAPITAL
Summary Description of Dynex Capital ..................................................................... 40
Relative Stock Performance ............................................................................... 41
Tender Offer Summary & Results ........................................................................... 42,43
9. ALTERNATIVE COMPARISONS: AMRESCO & WILSHIRE FINANCIAL SERVICES GROUP
Summary Comparisons to FCFC .............................................................................. 45
AMRESCO .................................................................................................. 46,47
Wilshire ................................................................................................. 48,49
10. CONCLUSION ............................................................................................... 51
</Table>
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FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
2
INTRODUCTION
FIRSTCITY RESTRUCTURING TRANSACTION SUMMARY
================================================================================
o THE SPECIAL COMMITTEE HAS REQUESTED KBW RE-CONFIRM ITS FAIRNESS OPINION
DELIVERED MARCH 26, 2002, IN LIGHT OF THE FOLLOWING CHANGE IN THE
RESTRUCTURING:
o Previously, FCFC was to sell a 20% total interest in Drive Financial
Services ("Drive") to Bank of Scotland ("BOS") for $16.0 million. This
is not the case in the current proposed restructuring.
o In the currently proposed structure, FCFC will use its interest in
Drive to secure a non-recourse loan of $16.0 million, provided that
FCFC will at all times maintain a beneficial interest in 11% of Drive.
After distributions from or proceeds on any sale of the 20% Drive
interest exceed $16.0 million, BOS will share in 20% of the excess
distributions or proceeds.
o KBW has updated its presentation and opinion to reflect this change,
and to reflect June 30, 2002 financial statements. In reviewing the
exchange offer, KBW has not changed its previous assumptions related
to the spot price or average price of New Preferred Stock, or Common
Stock. KBW believes this is appropriate since the prices of the New
Preferred Stock and Common Stock may have changed related, in part,
due to information related to the announcement of the Restructuring
and the Exchange Offer.
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
4
FIRSTCITY RESTRUCTURING TRANSACTION SUMMARY
================================================================================
o FIRSTCITY ("FCFC") IS CONTEMPLATING ENTERING INTO A NUMBER OF TRANSACTIONS,
WHICH ARE DESIGNED TO RESTRUCTURE AND RE-CAPITALIZE THE COMPANY. THESE
TRANSACTIONS INCLUDE:
o BOS lending $16.0 million to FCFC, non-recourse, using FCFC's
interest in Drive as collateral (the "Drive Loan"), provided that
FCFC will at all times maintain a beneficial interest in 11% of
Drive.
o The offer to exchange (the "Exchange Offer") 1,222,901 shares of
FCFC's preferred stock (the "Preferred") for either:
o $10.00 cash and two FCFC common shares for each
Preferred share or
o $8.00 cash and three FCFC common shares for each
Preferred share
o Residual cash from the sale of Drive and the Exchange Offer will
be applied to debt reduction.
o BOS will refinance the remainder of FCFC existing facilities with
a $47 to $49 million commitment.
o FCFC will purchase the 20% interest held by management in FCFC's
indirect subsidiary, FirstCity Holdings ("FCH") in exchange for
400,000 shares of FCFC common stock and up to $3.2 million in
earn-out payments.
o BOS will provide new financing to FCFC, with a total commitment
of $58 to $60 million.
o FCFC will be released from its guaranty of $4 million of Drive's
Term Loan.
o BOS will release its existing option to acquire 1,975,000 shares
of FCFC's common stock.
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
5
SCOPE OF KBW ENGAGEMENT
================================================================================
o KBW has been engaged by a Special Committee of the Board of Directors.
o THE SPECIAL COMMITTEE REQUESTED KBW'S OPINION AS TO THE FAIRNESS, FROM A
FINANCIAL POINT OF VIEW, TO THE HOLDERS OF FCFC'S PREFERRED STOCK, OF THE
CONSIDERATION OFFERED IN THE EXCHANGE OFFER.
o The consideration includes both cash and FCFC common stock.
o KBW has considered, among other things deemed to be relevant, the
following:
o The Drive Loan
o Peer groups of, and merger and acquisition transactions
involving, automobile finance companies
o The consideration offered in the Exchange Offer and the
valuation of the consideration
o FCFC's purchase of a 20% interest in FCH
o FCFC's debt refinancing, and restructuring
o The past, current, and pro forma financial condition of
FCFC
o Certain of FCFC's publicly available financial
information: 10-Qs, 10-Ks, and other filings
o A draft of the S-4 to be filed related to the
Restructuring
o Liquidation analysis
o Historical trading values of FCFC's common and
preferred stocks
o Premiums paid in other transactions filed with the SEC
as going private transactions
o Certain estimated investor recovery results from
transactions involving comparable companies
o Previous and prevailing economic conditions
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FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
6
THE RESTRUCTURING:
THE DRIVE LOAN
THE DRIVE LOAN
================================================================================
Summary
o FCFC owns a 31% interest in Drive.
o FCFC will its interest in Drive to collateralize a non-recourse $16.0
million loan from BOS.
o The debt and the collateral will not be cross-collateralized with
other BOS loans. A default under the Drive Loan will not constitute a
default under other BOS loans.
o BOS and FCFC will share in distributions from or proceeds of any sale
of the 20% Drive interest. To the extent the proceeds related to the
sale of the 20% interest in Drive exceed $16 million, FCFC will
receive 80% of such excess, with BOS receiving 20% of such excess.
o The Drive Loan is conditioned upon achieving at least 80%
participation in the Exchange Offer.
o BOS will release FCFC from a $4 million guaranty related to Drive's
debt.
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
8
THE DRIVE LOAN
================================================================================
Summary Balance Sheet & Income Statement
<Table>
<Caption>
AT OR FOR THE YEAR ENDED
DECEMBER 31, 2001
------------------------
ASSETS
Cash 7,395
Contracts held for sale - net 70,447
Investment Securities 77,407
Interest Receivable 1,089
Furniture & Fixtures 6,201
Service Fees Receivable 1,212
Goodwill --
Other Assets 1,820
-----------------
TOTAL ASSETS 165,571
LIABILITIES
Term Loan 27,500
Notes Payable to Banks 67,165
Other Liabilities 12,910
-----------------
TOTAL LIABILITIES 107,575
Capital Note 32,000
TOTAL EQUITY 25,996
-----------------
TOTAL LIABILITIES & EQUITY 165,571
REVENUES:
Interest Income 33,335
Interest Expense (9,329)
-----------------
Net Interest Income 24,006
Other Income 439
Gain on Sale 39,033
Impairment of Residual Assets (3,897)
Servicing Fee Income 11,986
-----------------
Total Revenue 71,567
EXPENSES:
Operating Expenses 45,639
Provisions on Contracts held for sale 5,377
Accounting Policy Change 783
-----------------
Total Expenses 51,799
INCOME BEFORE PROVISION FOR TAXES 19,768
Other Comprehensive Income (1,800)
-----------------
COMBINED PRE-TAX INCOME 17,968
Pro Forma Provision for Income Taxes 7,187
-----------------
PRO FORMA NET INCOME 10,781
</Table>
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
9
THE DRIVE LOAN
================================================================================
Publicly-Traded Auto Finance Companies
<Table>
<Caption>
MARKET STATS. EPS MULTIPLE - I/B/E/S
------------------- ---------------------------------------------
MARKET STOCK 2002 2003 CHANGE PRICE PRICE
CAP. PRICE EST. EPS EST. EPS 2002 / 2003 / 02E / 03E
STOCK ------------ ----- -------- -------- ----------- ----- -----
Company Name SYMBOL STATE ($ millions) ($) ($) ($) (%) (x) (x)
- ------------ ------ ----- ------------ ----- -------- -------- ----------- ----- -----
SMALL MARKET CAPITALIZATION
Union Acceptance Corporation(1) UACA IN 125 4.03 nm ne nm nm nm
Consumer Portfolio Services CPSS CA 42 1.90 0.10 0.25 150% 19.0 7.6
Onyx Acceptance Corporation ONYX CA 13 2.66 0.30 0.45 50% 8.9 5.9
First Investors Financial, Inc.(2) FIFS TX 17 3.00 0.15 0.28 nm 20.0 10.7
MEDIAN 100% 19.0 7.6
LARGE MARKET CAPITALIZATION
AmeriCredit Corp.(3) ACF TX 606 7.18 3.08 5.05 64% 2.3 1.4
WFS Financial, Inc.(4) WFSI CA 407 20.35 2.35 3.75 60% 8.7 5.4
Credit Acceptance Corp. CACC MI 353 8.39 0.79 0.82 4% 10.6 10.2
MEDIAN 60% 8.7 5.4
DRIVE FINANCIAL SERVICES(5) 80 NA 10.8 NA NM 7.4 NM
</Table>
<Table>
<Caption>
OTHER
--------------------------
GAIN ON
SALE / RESIDUALS PRICE
REVENUE / EQUITY / BOOK
STOCK ------- --------- ------
Company Name SYMBOL STATE (%) (%) (%)
- ------------ ------ ----- ------- --------- ------
SMALL MARKET CAPITALIZATION
Union Acceptance Corporation(1) UACA IN 27% 115% 72%
Consumer Portfolio Services CPSS CA 70% 174% 59%
Onyx Acceptance Corporation ONYX CA 35% 293% 22%
First Investors Financial, Inc.(2) FIFS TX 0% 0% 57%
31% 144% 58%
LARGE MARKET CAPITALIZATION
AmeriCredit Corp.(3) ACF TX 38% 110% 49%
WFS Financial, Inc.(4) WFSI CA 3% 58% 152%
Credit Acceptance Corp. CACC MI 2% 0% 123%
3% 58% 123%
DRIVE FINANCIAL SERVICES(5) 55% 298% 308%
</Table>
(1) June Fiscal Year, Estimate adjusted to calendar year, 2001 excludes
residual valuation charge.
(2) April Fiscal Year, adjusted to calendar year
(3) June Fiscal Year, adjusted to calendar year
(4) WFS currently under tender offer from 80% owner Westcorp
(5) At or For the Year Ended December 31, 2001. Valuation implied by Drive Loan
collateral of 20% for $16 million
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
10
THE DRIVE LOAN
================================================================================
Mergers and Acquisitions Involving Auto Finance Companies
<Table>
<Caption>
SELLER'S
ANNUAL SELLER'S
ORIGINATIONS MGD. SELLER'S
IN YEAR RECEIVABLES TRAILING
ANN. PURCHASE OF SALE PORTFOLIO EARNINGS(a)
DATE BUYER SELLER PRICE $ MILLIONS $ MILLIONS $ MILLIONS
- ---- ----- ------ -------- ------------ ----------- -----------
11/19/2001 CONSUMER PORTFOLIO SERVICES MFN FINANCIAL CORPORATION $104 MILLION 279 424 $ 5.1
11/18/1999 SUSQUEHANNA BANCSHARES HANN FINANCIAL CORP. $ 35 MILLION NA 800 $ 3.4(c)
11/16/1999 ASSOCIATES FIRST CAPITAL CORP. ARCADIA FINANCIAL, LTD. $193 MILLION 2,400 5,300 $(6.8)
6/14/1999 FAIRLANE CREDIT, LLC TRIAD FINANCIAL CORP. $105 MILLION(c) 425 511 $12.4
7/16/1998 CAPITAL ONE FINANCIAL CORP. SUMMIT ACCEPTANCE $ 55 MILLION NA 260 NA
6/23/1997 NORWEST CORP. FIDELITY ACCEPTANCE $344 MILLION 1,000 1,120 $24.7
6/1/1997 HOUSEHOLD INTERNATIONAL ACC CONSUMER FINANCE $200 MILLION 484 396 $11.0
3/29/1996 SOUTHERN NATIONAL CORP. REGIONAL ACCEPTANCE $167 MILLION NA 136 $ 8.8
2/5/1996 BAYVIEW CAPITAL CORP. CTL CREDIT, INC. $ 65 MILLION 133 466 $ 5.2
</Table>
<Table>
<Caption>
PURCHASE PURCHASE PURCHASE PURCHASE PURCHASE
PRICE / PRICE / PREMIUM / PRICE / PRICE/
ANN. ANNUAL MANAGED MARKET BOOK TRAILING
DATE BUYER SELLER ORIGINATIONS RECEIVABLES PRICE VALUE EARNINGS
- ---- ----- ------ ------------ ----------- --------- ------- --------
11/19/2001 CONSUMER PORTFOLIO SERVICES MFN FINANCIAL CORPORATION 37% 25% 89% 75% 20.4x
11/18/1999 SUSQUEHANNA BANCSHARES HANN FINANCIAL CORP. NA 4% NA NA 10.3x
11/16/1999 ASSOCIATES FIRST CAPITAL CORP. ARCADIA FINANCIAL, LTD. 8% 4% 31% 112% nm
6/14/1999 FAIRLANE CREDIT, LLC TRIAD FINANCIAL CORP. 25% 21% NA 144% 8.5x
7/16/1998 CAPITAL ONE FINANCIAL CORP. SUMMIT ACCEPTANCE NA 21% NA NA NA
6/23/1997 NORWEST CORP. FIDELITY ACCEPTANCE 20% 31% NA NA 13.9x
6/1/1997 HOUSEHOLD INTERNATIONAL ACC CONSUMER FINANCE 41% 51% 100% 655% 18.2x
3/29/1996 SOUTHERN NATIONAL CORP. REGIONAL ACCEPTANCE 134% 123% 13% 423% 19.1x
2/5/1996 BAYVIEW CAPITAL CORP. CTL CREDIT, INC. 151% 14% 30% 132% 12.6x
</Table>
NOTES:
(A) trailing "core" earnings at announcement, excludes amortization and
non-recurring items, fully-taxed
(b) estimate based on Susquehanna's claim that the transaction would be
accretive to EPS in 2000.
(c) includes assumption and repayment of $60 million of unsecured debt due to
ContiFinancial
(d) valuation based on loan-to-collateral value of Drive Loan
<Table>
<Caption>
PURCHASE PURCHASE PURCHASE PURCHASE PURCHASE
PRICE / PRICE / PREMIUM / PRICE / PRICE/
ANNUAL MANAGED MARKET BOOK TRAILING
ORIGINATIONS RECEIVABLES PRICE VALUE EARNINGS
------------ ----------- --------- ------- --------
MEDIAN '99-'01 DEALS 25% 12% 60% 112% 10.3X
MEDIAN '97 & '98 DEALS 31% 31% 100% 655% 16.0X
MEDIAN '96 DEALS 142% 69% 21% 277% 15.8X
ALL MEDIAN 37% 21% 31% 138% 13.9X
ALL AVERAGE 63% 34% 43% 293% 13.8X
</Table>
<Table>
<Caption>
SELLER'S
ANNUAL SELLER'S
ORIGINATIONS MGD. SELLER'S PURCHASE
IN YEAR RECEIVABLES TRAILING PRICE /
ANN. PURCHASE OF SALE PORTFOLIO EARNINGS(a) ANNUAL
DATE BUYER SELLER PRICE $ MILLIONS $ MILLIONS $ MILLIONS ORIGINATIONS
- ---- ----- ------ -------- ------------ ----------- ----------- ------------
TBD(d) BANK OF SCOTLAND DRIVE FINANCIAL SERVICES $80 MILLION 400 555 $10.8 20%
</Table>
<Table>
<Caption>
PURCHASE PURCHASE PURCHASE PURCHASE
PRICE / PREMIUM / PRICE / PRICE/
ANN. MANAGED MARKET BOOK TRAILING
DATE BUYER SELLER RECEIVABLES PRICE VALUE EARNINGS
- ---- ----- ------ ----------- --------- ------- --------
TBD(d) BANK OF SCOTLAND DRIVE FINANCIAL SERVICES 14% NA 308% 7.4X
</Table>
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
11
THE RESTRUCTURING:
THE EXCHANGE OFFER
THE EXCHANGE OFFER
================================================================================
Summary
o FCFC IS CONTEMPLATING MAKING AND EXCHANGE OFFER IN WHICH HOLDERS OF
FCFC'S PREFERRED STOCK WOULD HAVE THE OPPORTUNITY TO EXCHANGE ONE SHARE
OF PREFERRED FOR EITHER:
o $10.00 per share in cash and two shares of FCFC common stock
("Exchange Offer Choice A"), or
o $8.00 per share in cash and three shares of FCFC common stock
("Exchange Offer Choice B")
The current Preferred has characteristics as follows:
o Legal claim of $33.4 million as of June 30, 2002 ($27.30 per share)
o Par value of $21.00 per share, $6.30 per share of accrued and unpaid
dividends
o Dividend (currently suspended) of $2.10 per share per year
o Scheduled Redemption of September 2005
o Right to elect two Board members if dividends not paid for six or more
consecutive quarters, with those elected Board members serving until
dividends in arrears are paid (currently could elect two Board members
at annual meeting in 2002).
o PREFERRED HOLDERS, POST-EXCHANGE OFFER (ASSUMING 80% PARTICIPATION AND
50-50 SPLIT ON EXCHANGE OFFER CHOICE A OR EXCHANGE OFFER CHOICE B) WILL
OWN 21.8% OF FCFC.
o COMPLETION OF THE EXCHANGE OFFER IS CONDITIONED UPON ACHIEVING 80%
PARTICIPATION.
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
13
THE RESTRUCTURING:
PURCHASE OF 20% INTEREST IN FIRSTCITY HOLDINGS
PURCHASE OF 20% INTEREST IN FIRSTCITY HOLDINGS
================================================================================
Summary
o Prior to the Restructuring, management of FCH own a 20% interest in
FCH, FCFC owns the other 80%.
o FCFC is contemplating acquiring this interest through the issuance of
400,000 shares of FCFC common stock, and through up to $3.20 million in
"earn-out" payments based on the performance of Mexican asset pools.
o The total value of the purchase is up to $3.65 million ($0.45 million
in common stock, and up to $3.20 million in earn-out).
o The value of 20% of FCH at $3.65 million values FCH at $18.25 million.
$18.25 million represents 454% of book value, and 4.2 times FCH's
trailing pre-tax income.
o Pre-tax income, divided into the FCH valuation implies a 23.9% yield.
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
15
PURCHASE OF 20% INTEREST IN FIRSTCITY HOLDINGS
================================================================================
Summary Income Statement & Balance Sheet of FCH
<Table>
<Caption>
AT OR FOR THE YEAR ENDED
DECEMBER 31, 2001
------------------------
ASSETS
Cash 3,059
Inventory 5,822
Note Receivable 19,765
Investment in Unconsol. Subs 26,379
Furniture & Fixtures 1,161
Accounts Receivable 394
Prepaid Expenses 283
Goodwill 74
Other Assets 360
--------
TOTAL ASSETS 57,297
LIABILITIES
Note Payable - FirstCity 17,669
Notes Payable to Banks 31,399
Other Liabilities 1,868
--------
TOTAL LIABILITIES 50,936
Minority Interest 2,337
TOTAL EQUITY 4,024
--------
TOTAL LIABILITIES & EQUITY 57,297
REVENUES:
Interest & Accretion on Perf. Loans 5,562
Earnings of Subs 6,323
Servicing Fees 10,393
Other 1,494
--------
Total Revenue 23,772
EXPENSES:
Servicing Fees Expense 3,031
Compensation & Benefits 7,678
Occupancy 1,219
Other Non-Interest Expenses 2,765
Interest Expense 4,725
--------
Total Expenses 19,419
Profit / (Loss) Before Tax 4,353
</Table>
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
16
THE RESTRUCTURING:
DEBT RESTRUCTURING
DEBT RESTRUCTURING
================================================================================
Summary
o Remaining cash from the $16.0 million Drive Loan, after completing the
Exchange Offer, will be applied to existing FCFC debt held by BOS.
o FCFC remaining debt held by BOS, estimated at $49 million, will be
restructured as follows:
o $35 to $37 million - Senior Cash Flow Note
This note will have a 4 year maturity and provide for all cash
flow from existing investments to first pay all corporate
overhead, and then principal and interest on the Senior Cash Flow
Note.
o $12 million - Term Note
This note will have a 5 year maturity with interest only payments
to be provided from existing cash flows. In conjunction, BOS will
release warrants for 1,975,000 FCFC shares with a strike price of
$2.31.
o BOS will provide a $53 to $55 million New Acquisition Line of Credit.
o BOS will provide a $5 million New Working Capital Line of Credit.
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
18
DEBT RESTRUCTURING
================================================================================
Summary Table
($ in millions)
<Table>
<Caption>
OUTSTANDING OUTSTANDING PRO
BORROWINGS AS OF ADJUSTMENTS PER FORMA AS OF
JUNE 30, 2002 RESTRUCTURING JUNE 30, 2002
---------------- --------------- ---------------
FIRSTCITY
Company Senior Facility:
Revolving Line of Credit 10 (7) 3
Term Loan A 31 (31) --
Term Loan B 12 (12) --
Term Loan C -- -- --
Term Loan E 3 (3) --
Drive Loan -- 16 16
Term Credit Facility 3 (3) --
Cash Flow Note -- 37 37
Term Note -- 12 12
FCH Note -- 3 3
Acquisition Line of Credit -- -- --
Working Capital Line of Credit -- -- --
COMMERCIAL CORP
Acquisition Facility 2 -- 2
Term Facilities 3 -- 3
Equity investment facility 25 -- 25
Total 89 12 101
-- -- ---
</Table>
Note: Assumes cash flow note at $37 million
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
19
RESTRUCTURING IMPACT TO FIRSTCITY
RESTRUCTURING IMPACT TO FIRSTCITY
================================================================================
Summary & Major Assumptions Used
o SIGNIFICANTLY INCREASES FCFC COMMON EQUITY BY:
o Debt Forgiveness of, and Equity Issued to Preferred
Stockholders ($17.9 million)
o SIMPLIFIES FCFC DEBT OBLIGATIONS & PROVIDES NEW FINANCING
o Existing Facilities With BOS Paid Off, and Restructured into 3
Notes from Current 5
o $58 to $60 million in New Acquisition and Working Capital by
BOS
o INCREASES COMMON EQUITY PER SHARE FROM $0.46 TO $2.41 (06/30/02 and Pro
Forma at 06/30/02, respectively)
o REDUCES POTENTIAL DILUTION FROM BOS WARRANTS (through release of
1,975,000 warrants at $2.31)
- --------------------------------------------------------------------------------
o RESTRUCTURING - MAJOR ASSUMPTIONS
o All transactions in restructuring are completed as currently
contemplated
o Exchange offer reaches required 80% exchange threshold
o 50% of exchange participation select Exchange Offer Choice A,
and 50% select Exchange Offer Choice B
o FCFC current stock price is $1.14, as is price at point of
transaction closings
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
21
RESTRUCTURING IMPACT TO FIRSTCITY
================================================================================
Pro Forma Balance Sheet Impact of Restructuring
($ in `000s, except per share)
<Table>
<Caption>
DEBT
6/30/2002 DRIVE EXCHANGE 20% FCH RESTRUC. PRO FORMA
--------- -------- -------- -------- -------- ---------
Cash and Cash Equivalents 6,838 9,080 (9,080) -- -- 6,838
Portfolio Assets, net 11,591 -- -- -- -- 11,591
Loans Receivable, net 21,845 -- -- -- -- 21,845
Equity Investments 51,504 -- -- -- -- 51,504
Deferred Tax Benefit, net 20,101 -- -- -- -- 20,101
Other Assets, net 14,543 -- -- 1,613 -- 16,156
Net Assets of discontinued ops 15,175 -- -- -- -- 15,175
-------- -------- -------- -------- -------- --------
Total Assets 141,597 9,080 (9,080) 1,613 -- 143,210
Notes Payable 89,435 9,080 -- 3,200 (49,000) 52,715
New Credit Facilities -- -- -- -- 49,000 49,000
Other Liabilities (1) 13,763 (4,000) -- (2,043) -- 7,720
-------- -------- -------- -------- -------- --------
Total Liabilities 103,198 5,080 -- 1,157 -- 109,435
Redeemable Preferred Stock 33,385 -- (26,708) -- -- 6,677
Common Equity 5,014 4,000 17,628 456 -- 27,098
-------- -------- -------- -------- -------- --------
Liabilities and Equity 141,597 9,080 (9,080) 1,613 -- 143,210
Common Shares Outstanding 8,377 -- 2,446 400 -- 11,222
Book Value Per Share $ 0.60 $ 2.41
</Table>
(1) Other liabilities includes minority interest
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
22
RESTRUCTURING IMPACT TO FIRSTCITY
================================================================================
Footnotes to Pro Forma Balance Sheet
($ in `000s, except per share)
<Table>
LOAN SECURED BY DRIVE FINANCIAL STAKE
Cash and Cash Equivalents
Cash Proceeds from Drive Loan ......................... 16,000
Excess Cash From Exchange to Repay Debt ............... (6,920)
---------
Net Change ....................................... 9,080
Equity Investments
Carrying Value of Drive Interest Sold ................. --
Notes Payable
Drive Loan ............................................ 16,000
Previous Loans Repayment .............................. (6,920)
---------
Net Change ....................................... 9,080
Other Liabilities
Drive Debt Guaranty Release ........................... (4,000)
Minority Interest Elimination ......................... --
---------
Net Change ....................................... (4,000)
Common Equity
Carrying Value of Drive Interest ...................... --
Minority Interest Elimination ......................... --
Release of Previously Accrued Guaranty ................ 4,000
---------
Net Change ....................................... 4,000
EXCHANGE OFFER
Cash and Cash Equivalents
Cash Required for Choice A ............................ (4,892)
Cash Required for Choice B ............................ (3,913)
Associated Expenses ................................... (275)
---------
Net Change ....................................... (9,080)
Redeemable Preferred Stock
Preferred Stock Exchanged ............................. (26,708)
Exchange Participation Rate ........................... 80%
Common Equity
Common stock issued to Preferred holders .............. 2,788
Debt forgiveness by Preferred holders ................. 15,115
Expenses .............................................. (275)
---------
Net Change ....................................... 17,628
</Table>
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
23
HISTORICAL PREFERRED & COMMON
STOCK PRICES & VOLUMES
PREFERRED STOCK PRICE PERFORMANCE: SINCE PREFERRED ISSUANCE
================================================================================
[GRAPH]
<Table>
<Caption>
Date FCFCO Preferred Stock
---- ---------------------
8/13/1997 22
11/13/1997 21.13
2/13/1998 22
5/13/1998 22.88
8/13/1998 22.25
11/13/1998 15.5
2/12/1999 19.5
2/13/1999
5/13/1999 16.06
8/13/1999 6
11/12/1999 8.63
11/13/1999
2/14/2000 9.5
2/13/2000
5/12/2000 6.13
5/13/2000
8/14/2000 10.25
8/13/2000
11/13/2000 10.06
2/13/2001 10
5/14/2001 8.25
5/13/2001
8/13/2001 8.25
11/13/2001 7.11
2/13/2002 7.775
5/13/2002 7.245
8/13/2002 9.94
</Table>
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
25
PREFERRED STOCK PRICE PERFORMANCE: DAILY VOLUME
================================================================================
[GRAPH]
<Table>
<Caption>
Date FCFCO Preferred Stock
---- ---------------------
8/13/1997 400
11/13/1997 2400
2/13/1998 8400
5/13/1998 900
8/13/1998 1000
11/13/1998 2000
2/12/1999 1600
2/13/1999
5/13/1999 2400
8/13/1999 8400
11/12/1999 4500
11/13/1999
2/14/2000 1100
2/13/2000
5/12/2000 0
5/13/2000
8/14/2000 11300
8/13/2000
11/13/2000 11000
2/13/2001 0
5/14/2001 8200
5/13/2001
8/13/2001 900
11/13/2001 0
2/13/2002 0
5/13/2002 0
8/13/2002 100
</Table>
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
26
COMMON STOCK PRICE PERFORMANCE: SINCE PREFERRED ISSUANCE
================================================================================
[GRAPH]
<Table>
<Caption>
Date FCFC Common Stock
---- -----------------
8/13/1997 25.75
11/13/1997 26.5
2/13/1998 28.125
5/13/1998 31.375
8/13/1998 24.5
11/13/1998 13.5
2/12/1999 13.375
2/13/1999
5/13/1999 6.625
8/13/1999 1.7813
11/12/1999 2.25
11/13/1999
2/14/2000 3.4375
2/13/2000
5/12/2000 2.125
5/13/2000
8/14/2000 1.875
8/13/2000
11/13/2000 2.1875
2/13/2001 1.625
5/14/2001 1.5
5/13/2001
8/13/2001 1.55
11/13/2001 1.65
2/13/2002 1.165
5/13/2002 1.125
8/13/2002 1.19
</Table>
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
27
COMMON STOCK PRICE PERFORMANCE: VOLUME
================================================================================
[GRAPH]
<Table>
<Caption>
Date FCFC Common Stock
---- -----------------
8/13/1997 8400
11/13/1997 26100
2/13/1998 5500
5/13/1998 38200
8/13/1998 26700
11/13/1998 57000
2/12/1999 16900
2/13/1999
5/13/1999 84300
8/13/1999 1300600
11/12/1999 218500
11/13/1999
2/14/2000 53600
2/13/2000
5/12/2000 1900
5/13/2000
8/14/2000 69800
8/13/2000
11/13/2000 1000
2/13/2001 1300
5/14/2001 1100
5/13/2001
8/13/2001 2700
11/13/2001 3000
2/13/2002 100
5/13/2002 0
8/13/2002 2200
</Table>
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
28
EXCHANGE OFFER VALUATION
EXCHANGE OFFER VALUATION
================================================================================
Summary
o The valuation of Exchange Offer Choice A is $10.00 per preferred share
in cash, plus 2 times the value of an FCFC common share. The last trade
of FCFC common stock was $1.14, indicating $2.28 per preferred share in
value (OR $12.28 IN TOTAL). However, KBW estimates FCFC's common stock
book value per share, pro forma for the Restructuring at December 31,
2001, is $2.41. Valued at pro forma book value, the value per preferred
share would be $14.83.
o The valuation of Exchange Offer Choice B is $8.00 per preferred share
in cash, plus 3 times the value of an FCFC common share. The last trade
of FCFC common stock was $1.14, indicating $3.42 per preferred share in
value (OR $11.42 IN TOTAL). However, KBW estimates FCFC's common stock
book value per share, pro forma for the Restructuring at December 31,
2001 is $2.41. Valued at pro forma book value, the value per preferred
share would be $15.24.
o Assuming a 50% / 50% split, the Exchange Offer is valued at $11.85 (at
FCFC last trade) or at $15.04 (at pro forma book)
o MAJOR ASSUMPTIONS
o 80% of current preferred shares are exchanged in the Exchange
Offer.
o 50% select Exchange Offer Choice A and 50% select Exchange
Offer Choice B.
o Current FCFC common stock price is $1.14.
o Last FCFCO preferred stock price is $7.10.
o 1,222,901 preferred shares outstanding pre-Exchange Offer.
o Pro forma book value per FCFC common share is $2.41 (rounded).
o All other Restructuring transactions close as contemplated
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
30
EXCHANGE OFFER VALUATION
================================================================================
Valuation Table
($ in `000s, except per share)
<Table>
<Caption>
PER SHARE VALUE PREMIUM TO MARKET PRICE-TO-LEGAL CLAIM
--------------- ----------------- --------------------
CASH PER STOCK PER TOTAL PER LAST 30-DAY JUN. 30 SEP. 30 DEC. 30
SHARE SHARE SHARE TRADE AVG. 2002 2002 2002
-------- --------- --------- ----- ------ ------- ------- -------
EXCHANGE OFFER CHOICE A ($10.00 CASH, 2 COMMON SHARES)
FCFC Common Last Price $ 10.00 $ 2.28 $ 12.28 73% 62% 45% 44% 43%
50.0% $ 10.00 $ 2.41 $ 12.41 75% 64% 45% 45% 44%
66.7% $ 10.00 $ 3.22 $ 13.22 86% 74% 48% 48% 47%
75.0% $ 10.00 $ 3.62 $ 13.62 92% 80% 50% 49% 48%
90.0% $ 10.00 $ 4.35 $ 14.35 102% 89% 53% 52% 51%
100.0% $ 10.00 $ 4.83 $ 14.83 109% 96% 54% 53% 52%
EXCHANGE OFFER CHOICE B ($8.00 CASH, 3 COMMON SHARES)
FCFC Common Last Price $ 8.00 $ 3.42 $ 11.42 61% 51% 42% 41% 40%
50.0% $ 8.00 $ 3.62 $ 11.62 64% 53% 43% 42% 41%
66.7% $ 8.00 $ 4.83 $ 12.83 81% 69% 47% 46% 45%
75.0% $ 8.00 $ 5.43 $ 13.43 89% 77% 49% 48% 47%
90.0% $ 8.00 $ 6.52 $ 14.52 105% 91% 53% 52% 51%
100.0% $ 8.00 $ 7.24 $ 15.24 115% 101% 56% 55% 54%
TOTAL EXCHANGE OFFER
FCFC Common Last Price $ 9.00 $ 2.85 $ 11.85 67% 56% 43% 43% 42%
50.0% $ 9.00 $ 3.02 $ 12.02 69% 58% 44% 43% 42%
66.7% $ 9.00 $ 4.02 $ 13.02 83% 72% 48% 47% 46%
75.0% $ 9.00 $ 4.53 $ 13.53 91% 78% 50% 49% 48%
90.0% $ 9.00 $ 5.43 $ 14.43 103% 90% 53% 52% 51%
100.0% $ 9.00 $ 6.04 $ 15.04 112% 98% 55% 54% 53%
</Table>
Note: Last trade of FCFC Preferred is $7.10, 30-day average was $7.58, legal
claim at 6/30/02 is $27.30.
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
31
LIQUIDATION ANALYSIS
LIQUIDATION ANALYSIS
================================================================================
Summary
o KBW PERFORMED A LIQUIDATION ANALYSIS, TO INCLUDE:
o Sale of assets
o ASSET SALE APPROACH - MAJOR ASSUMPTIONS
o Assets of FCFC marketed for sale immediately
o Low, Mid, and High price assumptions reviewed
o Low, Mid, and High levels assume assets sold in orderly
fashion
o Assumes assets can be sold within 6 month time period
o 6 months of declining-level parent company operating expenses
(100% in month 1, 90% in month 2, etc.)
o Other selling expenses are 2% of purchase price, transaction
specific legal fees are fixed at $1,500,000
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
33
LIQUIDATION ANALYSIS
================================================================================
Asset Sale Approach
o The majority of FCFC's assets are illiquid, there is no readily
available market for them, thus, book value is likely the best-case
price one could expect to achieve in any sale (for assets that may have
value for another investor).
o Several types of FCFC's assets are not saleable, for instance the
Deferred Tax Asset is an intangible asset.
o Assets from Discontinued Operations are highly illiquid (they are
primarily residual assets from home equity securitizations) and would
likely only be purchased at a significant discount to carrying value.
o FCFC's interest in Drive may sell for a price higher than book value.
However given the current ownership structure of Drive (with BOS owning
49%) it is unclear what type of entity would purchase it. WHEN TAKEN
OUTSIDE THE AUSPICES OF THE RESTRUCTURING AS A WHOLE, IT IS UNLIKELY
THAT FCFC WOULD BE ABLE TO ACHIEVE COLLATERAL VALUATION AS FAVORABLE AS
WHAT IS CONTEMPLATED IN CONJUNCTION WITH THE RESTRUCTURING.
o Given the fact that FirstCity would no longer exist under a liquidation
scenario, a) asset buyers would not have any financial backing to
representations and warranties, and b) the servicing agent would no
longer be able to perform its duties. BOTH (A) AND (B) WOULD PUSH ASSET
SALE PRICES TOWARD THE MID AND LOW POINTS IN THE ANALYSIS TO FOLLOW.
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
34
LIQUIDATION ANALYSIS
================================================================================
Asset Sale Approach
o The following table illustrates low, mid and high expectations for cash
proceeds from the sale of balance sheet assets.
<Table>
<Caption>
PRICE / CARRYING VALUE $ GROSS PROCEEDS
-------------------------------------------------------------------------------------------
ASSETS 6/30/2002 LOW MID HIGH LOW MID HIGH
- ------ --------- --- --- ---- --- --- ----
Cash and equivalents 6,838 100% 100% 100% 6,838 6,838 6,838
Portfolio Assets, Net 11,591 80% 90% 100% 9,273 10,432 11,591
Loans Receivable
Student Loans, net 88 70% 85% 100% 62 75 88
Auto Loans, net 70% 85% 100% -- -- --
Note Receivable 21,845 80% 90% 100% 17,476 19,661 21,845
Mortgage loans held for sale 70% 85% 100% -- -- --
Equity Investments
Drive Financial 8,754 75% 100% 125% 6,566 8,754 10,943
MCS 2,935 80% 90% 100% 2,348 2,642 2,935
Acquisition Partnerships 39,815 90% 95% 100% 35,834 37,824 39,815
Discontinued Operations 15,175 25% 38% 50% 3,794 5,691 7,588
Interest Receivable 986 100% 100% 100% 986 986 986
Deferred Tax Asset 20,101 0% 0% 0% -- -- --
Furniture & Fixtures 2,444 25% 50% 66% 611 1,222 1,613
Accounts Receivable 3,820 90% 95% 100% 3,438 3,629 3,820
Note Receivable - related 133 70% 85% 100% 93 113 133
Service Fees Receivable 2,035 70% 85% 100% 1,425 1,730 2,035
Prepaid Expenses 4,668 0% 15% 25% -- 700 1,167
Servicing Rights 99 70% 85% 100% 69 84 99
Goodwill 93 0% 0% 0% -- -- --
Other Assets 177 100% 100% 100% 177 177 177
---------- -------- ---------- ----------
TOTAL ASSETS $ 141,597 Cash Proceeds: $ 88,988 $ 100,557 $ 111,672
========== ======== ========== ==========
</Table>
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
35
LIQUIDATION ANALYSIS
================================================================================
Asset Sale Approach
o As can be seen below, only our "High" expectations for asset sale
prices, which are aggressive, result in any remaining proceeds for
Preferred shareholders. The cash flow provided from our High price
expectation is $5.88 per preferred share.
o The "Mid" and "Low" price expectations do not result in any proceeds
for preferred shareholders.
o If equal probability weightings are applied to the Low, Mid, and High
values, the expected value for Preferred shareholders would be $1.96.
<Table>
<Caption>
$ PROCEEDS
------------------------------------------
LOW MID HIGH
---------- ---------- ----------
Gross Cash Proceeds ........................... $ 88,988 $ 100,557 $ 111,672
Parent Expenses ............................... (1,688) (1,688) (1,688)
Direct Sale Expenses .......................... (1,780) (2,011) (2,233)
Legal Expenses ................................ (1,500) (1,500) (1,500)
---------- ---------- ----------
Net Proceeds .................................. 84,021 95,358 106,251
========== ========== ==========
Notes Payable to Banks ........................ (84,021) (89,435) (89,435)
Accounts Payable & Accrued Interest ........... -- (559) (559)
Accrued Expenses .............................. -- (2,859) (2,859)
Minority Interest ............................. -- (2,505) (6,204)
Net Proceeds Available for Preferred .......... -- -- 7,194
Net Proceeds Per Preferred Share .............. $ 0.00 $ 0.00 $ 5.88
</Table>
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
36
FINANCIAL SERVICES "GOING PRIVATE" TRANSACTIONS
FINANCIAL SERVICES GOING PRIVATE TRANSACTIONS
================================================================================
Summary Information & Premiums Paid
<Table>
<Caption>
FINANCIAL TYPE OF ANN. TENDER
COMPANY NAME STATE SECTOR SECURITY DEAL VALUE DATE OFFER PRICE
- ------------------------------------------------------------------------------------------------------------------------------
BancWest Corporation CA Bank Common Stock $ 2,438,200 05/07/2001 $ 35.00
FVNB Corporation TX Bank Common Stock 16,875 04/27/2001 45.00
Essex Bancorp, Inc. VA Thrift Common Stock 1,538 01/31/2001 1.45
Impac Commercial Holdings, Inc. MD Real Estate Common Stock 41,410 10/13/2000 7.55
National Discount Brokers Group NJ Broker Common Stock 857,906 10/09/2000 49.00
BNC Mortgage, Inc. CA Mortgage Common Stock 52,565 02/04/2000 10.00
Bankatlantic Bancorp, Inc. FL Thrift Common Stock 39,581 01/14/2000 6.00
PIMCO Advisors Holdings L.P. CA Investments Common Stock 1,921,362 10/31/1999 38.75
Preferred Employers Holdings, Inc. FL Insurance Common Stock 16,122 09/16/1999 5.00
Hawaii National Bancshares, Inc. HI Bank Common Stock 31,995 05/04/1999 45.00
FIRSTCITY FINANCIAL CORPORATION TX ASSET PREFERRED STOCK 11,593 (a) 11.85
------------------------------
14,711 (b) 15.04
<Caption>
PRICE ONE DAY ONE DAY 30-DAY-AVG. 30-DAY-AVG.
COMPANY NAME STATE PRIOR TO ANN. PREMIUM PRIOR TO ANN. PREMIUM
- ------------------------------------------------------------------------------------------------------------------
BancWest Corporation CA $ 24.98 40.1% $ 24.61 42.2%
FVNB Corporation TX 34.85 29.1% 33.41 34.7%
Essex Bancorp, Inc. VA 1.40 3.6% 1.24 16.7%
Impac Commercial Holdings, Inc. MD 7.37 2.4% 6.53 15.6%
National Discount Brokers Group NJ 25.25 94.1% 31.04 57.9%
BNC Mortgage, Inc. CA 7.38 35.5% 6.57 52.2%
Bankatlantic Bancorp, Inc. FL 4.81 24.7% 4.88 23.0%
PIMCO Advisors Holdings L.P. CA 34.69 11.7% 33.52 15.6%
Preferred Employers Holdings, Inc. FL 2.75 81.8% 2.92 71.4%
Hawaii National Bancshares, Inc. HI 40.00 12.5% 40.75 10.4%
--------------------------------------------------------------------
Median: 26.9% 28.8%
FIRSTCITY FINANCIAL CORPORATION TX 7.10 66.9% 7.58 56.2%
--------------------------------------------------------------------
7.10 111.8% 7.58 98.3%
</Table>
(a) Value based on exchanging for FCFC common shares at current market price.
(a) Value based on exchanging for FCFC common shares at pro forma book value per
share.
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
38
CASE STUDY COMPARISON:
DYNEX CAPITAL
CASE STUDY COMPARISON: DYNEX CAPITAL
================================================================================
Description of Dynex Capital
DESCRIPTION FROM DX 9/30/98 10-Q
Dynex Capital, Inc. is a financial services company electing to be treated as a
real estate investment trust. Dynex originates primarily mortgage loans secured
by multifamily and commercial properties and loans secured by manufactured
homes. Dynex will generally securitize the loans funded as collateral for
collateralized bonds, thereby limiting its credit and liquidity risk and
providing long-term financing for its investment portfolio.
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
40
CASE STUDY COMPARISON: DYNEX CAPITAL
================================================================================
Relative Common Stock Performance: DX vs. FCFC
[GRAPH]
<Table>
<Caption>
Date FCFC (-96.4%) DX (-91.2%)
---- ------------- -----------
1/30/1998 100 100
5/1/1998 113.656 86.321
4/30/1998
7/31/1998 99.559 75.472
7/30/1998
10/30/1998 46.696 36.321
1/29/1999 51.542 37.736
1/30/1999
4/30/1999 37.445 22.17
7/30/1999 19.824 17.925
10/29/1999 4.515 12.264
10/30/1999
1/28/2000 11.233 14.858
1/30/2000
4/28/2000 7.489 2.948
4/30/2000
7/28/2000 8.59 2.712
7/30/2000
10/27/2000 6.828 2.241
10/30/2000
2/2/2001 5.837 1.245
1/30/2001
4/27/2001 4.582 2.396
4/30/2001
7/27/2001 5.286 4.038
7/30/2001
11/2/2001 5.463 4.34
10/30/2001
2/1/2002 4.229 6.623
1/30/2002
4/26/2002 4.141 7.642
4/30/2002
8/2/2002 3.391 9.113
7/30/2002
</Table>
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
41
CASE STUDY COMPARISON: DYNEX CAPITAL
================================================================================
Description of Preferred Stock Tender Offers
o Dynex has completed two tender offers for its preferred stock
o APRIL 30, 2001 (announcement)
o SEPTEMBER 6, 2001 (announcement)
o Both tenders involved offering to purchase up to maximum dollar amounts
of Dynex's Series A, Series B and Series C Preferred, for cash
consideration. Maximum amounts were those allowed under senior lending
agreements.
o The maximum amount to be tendered for the April 30th transaction was
$26 million (Series A, B and C).
o The maximum amount to be tendered in the September 6th transaction was
$15 million (Series A, B and C).
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
42
CASE STUDY COMPARISON: DYNEX CAPITAL
================================================================================
Preferred Stock Tenders - Pertinent Statistics
SUMMARY OF DYNEX CAPITAL 2001 PREFERRED STOCK TENDER OFFERS
<Table>
<Caption>
Tender /
Tender Liquidation Last Liquidation Tender / Tender Max
Offer Preference Trade Preference Last Trade Dollar Value
----------- ---------- ---------- ----------- ---------- ------------
Series A $ 16.80 $ 28.68 $ 14.10 58.6% 19.1% 3,575
Series B $ 17.15 $ 29.18 $ 14.40 58.8% 19.1% 5,106
Series C $ 21.00 $ 35.84 $ 17.75 58.6% 18.3% 6,400
Series A $ 12.24 $ 28.11 $ 11.25 43.5% 8.8% 6,120
Series B $ 12.50 $ 28.60 $ 11.50 43.7% 8.7% 9,125
Series C $ 15.30 $ 35.11 $ 13.60 43.6% 12.5% 10,751
Weighted Average ............................................................... 49.1% 13.4%
COMPARISON OF FCFC EXCHANGE
FCFCO(1) $ 11.85 $ 27.30 $ 7.10 43.4% 66.9% 11,593
FCFCO(2) $ 15.04 $ 27.30 $ 7.10 55.1% 111.8% 14,711
</Table>
Notes:
1) Assumes value of FCFC common stock holds constant at the most recent trade.
2) Assumes value of FCFC common stock is book value pro forma for the
restructuring results.
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
43
ALTERNATIVE COMPARISONS:
AMRESCO &
WILSHIRE FINANCIAL SERVICES GROUP
ALTERNATIVE COMPARISONS: AMRESCO & WILSHIRE FINANCIAL SERVICES GROUP
================================================================================
Summary
DESCRIPTION FROM FCFC 9/30/98 10-Q:
The Company is a diversified financial services company engaged in residential
and commercial mortgage banking ("Mortgage Corp."), Portfolio Asset acquisition
and resolution ("Commercial Corp.") and consumer lending ("Consumer Corp.").
DESCRIPTION FROM AMMB 9/30/98 10-Q:
AMRESCO is a diversified financial services company with five principal lines of
business: asset management, commercial mortgage banking, home equity lending
(previously residential mortgage banking), commercial finance and residential
mortgage banking.
DESCRIPTION FROM WFSG 9/30/98 10-Q:
Wilshire Financial Services Group Inc. ("WFSG") is a diversified financial
services company. WFSG conducts business in the United States and Europe,
specializing in loan portfolio acquisition and securitization, correspondent
lending and servicing.
<Table>
<Caption>
FCFC AMMB WFSG
---- ---- ----
ASSET ACQUISITION Y Y Y
LENDING Y Y Y
SERVICING EXPERTISE Y Y Y
U.S. AND ABROAD Y Y Y
RESTRUCTURING Y Y Y
</Table>
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
45
ALTERNATIVE COMPARISONS: AMRESCO
================================================================================
Relative Common Stock Performance: AMMB vs. FCFC
[GRAPH]
<Table>
<Caption>
Date FCFC (-96.4%) AMMB (-100.0%)
---- ------------- --------------
1/30/1998 100 100
5/1/1998 113.656 129.217
4/30/1998
7/31/1998 99.559 100.772
7/30/1998
10/30/1998 46.696 24.476
1/29/1999 51.542 40.573
1/30/1999
4/30/1999 37.445 22.933
7/30/1999 19.824 22.051
10/29/1999 4.515 10.364
10/30/1999
1/28/2000 11.233 4.631
1/30/2000
4/28/2000 7.489 3.087
4/30/2000
7/28/2000 8.59 1.654
7/30/2000
10/27/2000 6.828 1.411
10/30/2000
2/2/2001 5.837 1.058
1/30/2001
4/27/2001 4.582 0.931
4/30/2001
7/27/2001 5.286 0.624
7/30/2001
11/2/2001 5.463 0.005
10/30/2001
2/1/2002 4.229 0.009
1/30/2002
5/3/2002 4.159 0.007
4/30/2002
8/2/2002 3.391 0.004
7/30/2002
</Table>
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
46
ALTERNATIVE COMPARISONS: AMRESCO
================================================================================
Investor Recovery Results
o The table compares certain aspects of the experience of particular
AMRESCO note holders and FCFC's preferred holders
<Table>
<Caption>
FCFC(1) AMMB(2)
------------- ---------------------------
EVENT RESTRUCTURING REPURCHASE / SALE OF ASSETS
INVESTORS PREFERRED NOTES
LEGAL CLAIM $33 MILLION $617 MILLION
RECOVERY PERCENTAGE (3) 42% - 45% 53%(4)
EXPECTED LIQUIDATION RECOVERY (5) 0% - 22% NA
</Table>
Notes:
(1) Recovery percentage range is from 42% from Exchange Offer Choice B to
45% for Exchange Offer Choice A. Also assumes FCFC common stock worth
the value of last trade. Does not assume any increase in FCFC common
stock due to increase in pro forma book value per common share.
(2) $617 million of legal claim includes $217 million of open market
purchases of Senior Subordinated Notes repurchased in the fourth
quarter of 2000, and $410 million of notes to receive proceeds from the
company's asset sale in connection with its bankruptcy filing. Recovery
percentage for AMRESCO is the blended result between 75% for the open
market purchases and 41% from KBW's estimate of the recovery for note
holders post-bankruptcy. Estimate is based on 8-K filing dated July 5,
2001 and the March 31, 2001 10-Q.
(3) As a percentage of legal claim.
(4) Implies that if a preferred stock existed at AMRESCO, similar to that
of FCFC, the recovery to the preferred would have been zero.
(5) KBW estimate range from Tab 6 for FCFC.
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
47
ALTERNATIVE COMPARISONS: WILSHIRE FINANCIAL SERVICES GROUP
================================================================================
Relative Common Stock Performance: WFSG vs. FCFC
[GRAPH]
<Table>
<Caption>
Date FCFC (-96.4%) WFSG (-87.4%)
---- ------------- -------------
1/30/1998 100 100
5/1/1998 113.656 92.788
4/30/1998
7/31/1998 99.559 81.25
7/30/1998
10/30/1998 46.696 11.779
1/29/1999 51.542 1.202
1/30/1999
4/30/1999 37.445 1.382
7/30/1999 19.824 4.808
10/29/1999 4.515 5.529
10/30/1999
1/28/2000 11.233 3.846
1/30/2000
4/28/2000 7.489 4.327
4/30/2000
7/28/2000 8.59 4.447
7/30/2000
10/27/2000 6.828 4.688
10/30/2000
2/2/2001 5.837 6.13
1/30/2001
4/27/2001 4.582 8.154
4/30/2001
7/27/2001 5.286 7.212
7/30/2001
11/2/2001 5.463 7.385
10/30/2001
2/1/2002 4.229 9.077
1/30/2002
5/3/2002 4.159 9.423
4/30/2002
8/2/2002 3.391 13.231
7/30/2002
</Table>
================================================================================
FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
48
ALTERNATIVE COMPARISONS: WILSHIRE FINANCIAL SERVICES GROUP
================================================================================
Investor Recovery Results
o The table compares certain aspects of the experience of particular
Wilshire note holders and FCFC's preferred holders.
<Table>
<Caption>
FCFC(1) WFSG(2)
------------- --------------------
EVENT RESTRUCTURING BANKRUPTCY EMERGENCE
INVESTORS PREFERRED NOTES
LEGAL CLAIM $33 MILLION $199 MILLION
RECOVERY PERCENTAGE(3) 54% - 56% 37% - 42%(4)
EXPECTED LIQUIDATION RECOVERY(5) 0% - 22% 18%
</Table>
Notes:
(1) Recovery percentage range is from 54% from Exchange Offer Choice A to
56% for Exchange Offer Choice B. Also assumes FCFC common stock worth
pro forma book value per common share (pro forma for restructuring).
This compares with WFSG's estimated amount also in the table.
(2) Legal claim, recovery percentage and expected liquidation recovery are
WFSG's estimates include in its Solicitation and Disclosure Statement
Dated February 1, 1999. Legal claim includes accrued interest. Recovery
percentage based on pro forma book value of common shares received.
Liquidation recovery is as a percentage of claims.
(3) As a percentage of legal claim.
(4) Implies that if a preferred stock existed at WFSG, similar to that of
FCFC, the recovery percentage on the preferred would have been zero.
(5) KBW estimate range from Tab 6 for FCFC.
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FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
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KBW CONCLUSION
CONCLUSION
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o IN KBW'S OPINION, THE CONSIDERATION OFFERED TO THE HOLDERS OF FCFC'S
REDEEMABLE PREFERRED STOCK IN THE EXCHANGE OFFER, IS FAIR, FROM A
FINANCIAL POINT OF VIEW. THIS OPINION IS BASED ON THE FOLLOWING:
o The significant premium to the current market price of the
Preferred.
o The high level of premium offered, when compared to other
transactions filed with the SEC as "going private transactions" in
financial services sectors.
o The Exchange Offer's superiority to the results of the
liquidation analysis performed.
o The favorable level of recovery of legal claim for the Preferred
holders, of the Exchange Offer, when compared to the recovery
results of transactions involving restructurings of comparable
companies, and specifically relative to positions within capital
structure.
o The liquidity provided to the Preferred holders, compared to the
current market, which provides little liquidity.
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FIRSTCITY FINANCIAL CORPORATION KEEFE, BRUYETTE & WOODS, INC.
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