NEWS RELEASE
(FIRSTCITY FINANCIAL CORPORATION LOGO)
Contact: Suzy W. Taylor
(866) 652-1810
FIRSTCITY FINANCIAL ANNOUNCES SECOND QUARTER 2004 RESULTS
WACO, TEXAS AUGUST 3, 2004... FirstCity Financial Corporation (NASDAQ
FCFC) today announced net earnings to common stockholders for the quarter ended
June 30, 2004 of $3.3 million or $.28 per share on a diluted basis.
Components of the results for the three and six months ended June 30, 2004 and
2003, respectively, are detailed below (dollars in thousands except per share
data):
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Portfolio Asset Acquisition and Resolution $ 2,424 $ 4,636 $ 6,467 $ 6,413
Consumer 3,182 2,052 6,300 2,627
Corporate interest (1,026) (1,188) (2,026) (2,360)
Corporate overhead (1,031) (1,263) (2,343) (2,462)
---------- ---------- ---------- ----------
Earnings from continuing operations 3,549 4,237 8,398 4,218
Loss from discontinued operations (250) (420) (250) (420)
Accrued preferred dividends -- (67) -- (133)
---------- ---------- ---------- ----------
Net earnings to common stockholders $ 3,299 $ 3,750 $ 8,148 $ 3,665
========== ========== ========== ==========
Diluted earnings per common share $ 0.28 $ 0.33 $ 0.69 $ 0.33
========== ========== ========== ==========
</Table>
PORTFOLIO ASSET ACQUISITION AND RESOLUTION
Operating contribution for the quarter was $2.4 million, comprised of $7.5
million in revenues and $5.1 million of expenses. The business generated 56% of
the revenues from domestic investments, 30% from investments in Latin America
and 14% from investments in Europe. The major components of revenue for the
quarter include servicing fees of $3.7 million, equity earnings in Acquisition
Partnerships and servicing entities of $2.6 million and interest income of $.6
million.
Operating contribution from the Portfolio Asset Acquisition business for the
quarter includes net foreign currency losses of $.4 million, comprised of $.7
million in Mexican peso losses and $.3 million of foreign currency gains related
to cash collections of certain Euro investments. Quarterly results have been,
and continue to be, impacted by fluctuations in foreign currencies. To help
hedge against Euro fluctuations, FirstCity restructured its portfolio
acquisition funding facility with The Bank of Scotland in April 2004 to allow
the Company to borrow in Euros up to a U.S. dollar equivalent of $22.5 million.
In June 2004, FirstCity borrowed 7.0 million Euros under the Bank of Scotland
portfolio acquisition facility to refinance the outstanding balance of U.S.
Dollar denominated loans it had with Cargill related to the acquisition of
European portfolios. The company has subsequently used the Bank of Scotland
portfolio acquisition facility to acquire a French portfolio with a Euro
denominated loan. FirstCity continues to attempt to locate a Peso based
financing facility
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(2)
to hedge its peso exposure. The following table details these impacts on
corporate earnings (dollars in thousands):
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
ILLUSTRATION OF THE EFFECTS OF CURRENCY FLUCTUATIONS 2004 2003 2004 2003
- ----------------------------------------------------- ---------- ---------- ----------- -----------
Net earnings to Common Stockholders as reported $ 3,299 $ 3,750 $ 8,148 $ 3,665
Mexican Peso gains (losses) (678) 1,110 (216) (513)
Euro gains 249 143 558 390
---------- ---------- ---------- ----------
Peso exchange rate at valuation date 11.45 10.41
Euro exchange rate at valuation date 0.83 0.87
</Table>
The Company and its Acquisition Partnerships purchased ten portfolios in the
second quarter - seven domestic portfolios totaling $35 million, one Mexican
portfolio for $41 million and two French portfolios for $10 million. The Company
invested equity of $18.7 million in these portfolios. A summary of acquisitions
for the recent quarters follows (dollars in millions):
<Table>
<Caption>
LATIN INVESTED
DOMESTIC EUROPE AMERICA TOTAL EQUITY
---------- ---------- ---------- ---------- ----------
2004
2nd Quarter $ 35.3 $ 9.8 $ 40.7 $ 85.8 $ 18.7
1st Quarter $ 6.5 $ -- $ 0.2 $ 6.7 $ 3.1
---------- ---------- ---------- ---------- ----------
Year to Date 2004 $ 41.8 $ 9.8 $ 40.9 $ 92.5 $ 21.8
========== ========== ========== ========== ==========
2003
4th Quarter $ 46.7 $ 11.1 $ -- $ 57.7 $ 7.6
3rd Quarter 39.3 -- -- 39.3 3.9
2nd Quarter 6.7 20.1 5.4 32.2 11.4
1st Quarter -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total Year 2003 $ 92.6 $ 31.2 $ 5.4 $ 129.2 $ 22.9*
========== ========== ========== ========== ==========
Total Year 2002 $ 61.4 $ 98.7 $ 11.7 $ 171.8 $ 16.7
========== ========== ========== ========== ==========
</Table>
* The Company invested $3.4 million in partnerships during 2003 in addition to
the acquisitions above.
CONSUMER
Operating contribution for the quarter was $3.2 million, comprised of $4.1
million from the Company's investment in Drive and $.9 million of interest,
taxes and other expenses. The Company owns a 31% interest in Drive Financial
Services L.P., a sub prime auto lending company. Drive originated $177.5 million
of receivables during the quarter compared to $127.7 million in the second
quarter of 2003. Defaults and losses were 20.00% and 10.65%, respectively, at
the end of the quarter compared to 21.46% and 11.07%, respectively, for the same
period last year. These statistics reflect the weakness in the economy in prior
periods and the resulting impact on used car prices, although recent indicators
reflect an upward trend in used car prices. Delinquencies were 17.28% for the
quarter, up from 6.00% the same period last year as a result of a change in
collection strategies, which will in some instances allow Drive to provide
borrowers additional time to cure delinquencies rather than pursue immediate
repossession.
Net income from Drive continues to be positive as originations and the volume of
portfolio assets grow over time. Based on information provided by Drive, the
Company expects that this positive trend will continue.
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(3)
The following table details this trend (dollars in thousands):
<Table>
<Caption>
INCOME BEFORE PROVISIONS
LOAN TOTAL PROVISIONS ON ON RESIDUAL FIRSTCITY'S
ORIGINATIONS INVENTORY ASSETS RESIDUAL ASSETS ASSETS NET INCOME 31% SHARE
----------- ----------- ---------- --------------- ----------- ---------- ----------
2004
2nd Quarter $ 177,549 $ 861,461 $1,074,036 $ 13,211 $ -- $ 13,211 $ 4,095
1st Quarter 244,121 770,042 915,128 13,001 -- 13,001 4,031
2003
4th Quarter 102,228 623,389 738,829 6,308*** (2,087) 4,221 1,308
3rd Quarter 128,688 577,974 700,760 9,132 (3,904) 5,228 1,621
2nd Quarter 127,706 511,212 619,269 8,251 (1,240) 7,011 2,173
1st Quarter 126,118 443,099 551,412 3,707 (1,217) 2,490 689
---------- ---------- ---------- --------------- ----------- ---------- ----------
</Table>
*** Net of $3.7 million of additional provisions related to loans receivable.
Note: As of June 30, 2004, Drive holds on its balance sheet residual interests
with a book value of $19.6 million compared with $45.3 million as of June 30,
2003.
DISCONTINUED OPERATIONS
The anticipated realizable value of the Company's investment in discontinued
mortgage operations decreased to $5.5 million, net of reserves of $250,000, at
June 30, 2004. Additional provisions of $250,000 were required during the second
quarter of 2004.
PAYMENT OF DIVIDEND ON NEW PREFERRED STOCK
On July 29, 2004, the Company paid a dividend of $10.50 per share on its New
Preferred Stock (NASDAQ FCFCO). The dividend was paid to holders of record as of
July 22, 2004 and represented all dividends in arrears on the New Preferred
Stock. The dividend covered the period from July 1, 1999 through June 30, 2004.
Because the dividend was in excess of 25% of the value of the New Preferred
Stock, the ex dividend date for the security was July 30, 2004, the day after
the payable date. The company halted payment of dividends on New Preferred Stock
as of July 1, 1999, due to liquidity constraints resulting from financial
difficulties the company experienced at the time. Since then, the company's bank
lending agreements have prohibited the payment of any dividends on New Preferred
Stock. Giving consideration to its successful recapitalization in December of
2002, and resulting improvement in its balance sheet, liquidity and earnings,
the Company recently sought and received a waiver of the restrictions on
dividend payments from its lender.
There are currently 126,281 shares of New Preferred Stock outstanding. The
issue, which matures in September 2005, has a $21.00 per share liquidation
preference and $2.10 per share annual dividend rate. The company expects to make
normal quarterly dividend payments of $.525 per share beginning in October of
2004, until the shares are retired.
ANNUAL MEETING
The Company will hold its annual meeting of stockholders on August 5, 2004 at
the Company headquarters located at 6400 Imperial Drive, Waco, Texas 76712. The
record date for the meeting is June 8, 2004.
CONFERENCE CALL
The Company will host a conference call to discuss the quarterly results today,
Tuesday, August 3, 2004 at 9:00 a.m., CDT. James T. Sartain, the Company's
President and Chief Executive Officer will lead the call. To participate, dial
toll free 1-888-243-0812 and specify conference I.D. number 519375.
International callers should dial 1-703-736-7293. Please dial in five minutes
prior to the call. If you are unable to listen to the live conference call, a
replay will be available by dialing 1-888-266-2081. For international callers
the replay number is 1-703-925-2533. The pass code for the replay is 519375. The
replay will be available through Tuesday, August 17, 2004.
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(4)
FORWARD LOOKING STATEMENTS
Certain statements in this press release, which are not historical in fact,
including, but not limited to, statements relating to future performance, may be
deemed to be forward-looking statements under the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include, without limitation, any
statement that may project, indicate or imply future results, performance or
achievements, and may contain the words "expect", "intend", "plan", "estimate",
"believe", "will be", "will continue", "will likely result", and similar
expressions. Such statements inherently are subject to a variety of risks and
uncertainties that could cause actual results to differ materially from those
projected. There are many important factors that could cause the Company's
actual results to differ materially.
These factors include, but are not limited to, the performance of the Company's
subsidiaries and affiliates, availability of portfolio assets, assumptions
underlying portfolio asset performance, risks associated with foreign
operations, currency exchange rate fluctuations, interest rate risk, risks of
declining value of loans, collateral or assets; the degree to which the Company
is leveraged, the Company's continued need for financing, availability of the
Company's credit facilities, the impact of certain covenants in loan agreements
of the Company and its subsidiaries, the ability of the Company to utilize net
operating loss carry forwards, uncertainties of any litigation arising from
discontinued operations, general economic conditions, foreign social and
economic conditions, changes (legislative and otherwise) in the asset
securitization industry; fluctuation in residential and commercial real estate
values, capital markets conditions, including the markets for asset-backed
securities; factors more fully discussed and identified under Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," risk factors and other risks identified in the Company's Annual
Report on Form 10-K for the year ended December 31, 2003, filed with the SEC on
March 30, 2004, as well as in the Company's other filings with the SEC.
Many of these factors are beyond the Company's control. In addition, it should
be noted that past financial and operational performance of the Company is not
necessarily indicative of future financial and operational performance. Given
these risks and uncertainties, investors should not place undue reliance on
forward-looking statements.
The forward-looking statements in this release speak only as of the date of this
release. The Company expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statement to
reflect any change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any forward-looking
statement is based.
The Company is a diversified financial services company with operations
dedicated to portfolio asset acquisition and resolution and consumer lending
with offices in the U.S. and with affiliate organizations in France and Mexico.
Its common (FCFC) and preferred (FCFCO) stocks are listed on the NASDAQ National
Market System.
(TABLES FOLLOW)
FIRSTCITY FINANCIAL CORPORATION
SUMMARY OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ ------------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Revenues:
Servicing fees from affiliates $ 3,716 $ 4,086 $ 6,748 $ 7,593
Gain on resolution of Portfolio Assets 162 272 237 967
Equity in earnings of investments 7,757 6,933 16,969 9,024
Interest income from affiliates 617 911 1,061 1,826
Interest income - other 51 157 136 345
Other income 444 254 1,782 616
------------ ------------ ------------ ------------
Total revenues 12,747 12,613 26,933 20,371
Expenses:
Interest and fees on notes payable to affiliates 2,268 1,804 4,797 3,695
Interest and fees on notes payable - other 102 52 171 114
Interest on shares subject to mandatory redemption 67 -- 133 --
Salaries and benefits 3,477 4,098 7,554 7,594
Provision for (recovery of) loan and impairment losses 22 (56) 22 (22)
Occupancy, data processing, communication and other 1,785 1,736 3,237 3,730
------------ ------------ ------------ ------------
Total expenses 7,721 7,634 15,914 15,111
Earnings from continuing operations before income
taxes and minority interest 5,026 4,979 11,019 5,260
Provision for income taxes (471) (133) (583) (254)
------------ ------------ ------------ ------------
Earnings from continuing operations before minority interest 4,555 4,846 10,436 5,006
Minority interest (1,006) (609) (2,038) (788)
------------ ------------ ------------ ------------
Earnings from continuing operations 3,549 4,237 8,398 4,218
Loss from discontinued operations (250) (420) (250) (420)
------------ ------------ ------------ ------------
Net earnings 3,299 3,817 8,148 3,798
Accumulated preferred dividends in arrears -- (67) -- (133)
------------ ------------ ------------ ------------
Net earnings to common stockholders $ 3,299 $ 3,750 $ 8,148 $ 3,665
============ ============ ============ ============
Basic earnings per common share are as follows:
Earnings from continuing operations $ 0.31 $ 0.37 $ 0.75 $ 0.37
Discontinued operations (0.02) (0.04) (0.02) (0.04)
Net earnings per common share $ 0.29 $ 0.33 $ 0.73 $ 0.33
Wtd. avg. common shares outstanding 11,235 11,204 11,216 11,203
Diluted earnings per common share are as follows:
Earnings from continuing operations $ 0.30 $ 0.37 $ 0.71 $ 0.37
Discontinued operations (0.02) (0.04) (0.02) (0.04)
Net earnings per common share $ 0.28 $ 0.33 $ 0.69 $ 0.33
Wtd. avg. common shares outstanding 11,820 11,204 11,806 11,203
</Table>
SELECTED UNAUDITED BALANCE SHEET DATA
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2004 2003
----------- -----------
Cash $ 3,823 $ 2,745
Portfolio acquisition and resolution assets 91,971 80,428
Consumer assets 25,824 15,685
Deferred tax asset 20,101 20,101
Net assets of discontinued operations 5,527 6,150
Total assets 160,942 132,139
Notes payable to affiliates 97,856 88,628
Notes payable other 4,664 2,432
Preferred stock 3,978 3,846
Total common stockholders' equity 35,915 28,969
</Table>
5
FIRSTCITY FINANCIAL CORPORATION
SUPPLEMENTAL INFORMATION
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
SUMMARY OPERATING STATEMENT DATA FOR EACH BUSINESS
Portfolio Asset Acquisition and Resolution:
Revenues $ 7,470 $ 9,823 $ 16,412 $ 16,659
Expenses 5,024 5,243 9,923 10,268
------------ ------------ ------------ ------------
Operating contribution before provision for
loan and impairment losses 2,446 4,580 6,489 6,391
Provision for loan and impairment losses 22 (56) 22 (22)
------------ ------------ ------------ ------------
Operating contribution, net of direct taxes $ 2,424 $ 4,636 $ 6,467 $ 6,413
============ ============ ============ ============
Consumer Lending:
Revenues $ 5,137 $ 2,716 $ 10,177 $ 3,577
Expenses, net of minority interest 1,955 664 3,877 950
------------ ------------ ------------ ------------
Operating contribution $ 3,182 $ 2,052 $ 6,300 $ 2,627
============ ============ ============ ============
PORTFOLIO ASSET ACQUISITION AND RESOLUTION:
OVERVIEW
AGGREGATE PURCHASE PRICE OF PORTFOLIOS ACQUIRED:
Acquisition partnerships
Domestic $ 35,334 $ 6,750 $ 41,883 $ 6,750
Latin America 40,650 5,400 40,800 5,400
Europe 9,837 20,055 9,837 20,055
------------ ------------ ------------ ------------
Total $ 85,821 $ 32,205 $ 92,520 $ 32,205
============ ============ ============ ============
</Table>
<Table>
<Caption>
PURCHASE FIRSTCITY'S
HISTORICAL ACQUISITIONS - ANNUAL: PRICE INVESTMENT
- --------------------------------- ------------ ------------
2004 year to date $ 92,520 $ 21,832
2003 129,192 22,944
2002 171,769 16,717
2001 224,927 24,319
2000 394,927 22,140
1999 210,799 11,203
</Table>
<Table>
<Caption>
JUNE 30, JUNE 30,
2004 2003
------------ ------------
PORTFOLIO ACQUISITION AND RESOLUTION
ASSETS BY REGION:
Domestic $ 53,355 $ 41,011
Latin America 18,788 16,840
Europe 19,828 21,998
------------ ------------
Total $ 91,971 $ 79,849
============ ============
</Table>
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
REVENUES BY REGION:
Domestic $ 4,185 $ 5,387 $ 8,328 $ 9,794
Latin America 2,265 3,795 4,862 5,220
Europe 1,020 641 3,222 1,645
------------ ------------ ------------ ------------
Total $ 7,470 $ 9,823 $ 16,412 $ 16,659
============ ============ ============ ============
REVENUES BY SOURCE:
Equity earnings $ 2,639 $ 4,217 $ 6,814 $ 5,447
Servicing fees 3,716 4,086 6,748 7,593
Interest income - loans 642 1,062 1,165 2,158
Gain on sale of interest in equity investment -- -- -- --
Gain on resolution of Portfolio Assets 162 272 237 967
Other 311 186 1,448 494
------------ ------------ ------------ ------------
Total $ 7,470 $ 9,823 $ 16,412 $ 16,659
============ ============ ============ ============
</Table>
6
FIRSTCITY FINANCIAL CORPORATION
SUPPLEMENTAL INFORMATION
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------- -----------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
ANALYSIS OF EQUITY INVESTMENTS IN ACQUISITION PARTNERSHIPS:
FIRSTCITY'S AVERAGE INVESTMENT IN ACQUISITION PARTNERSHIPS
Domestic $ 37,162 $ 33,089 $ 36,951 $ 33,109
Latin America 1,065 1,036 1,054 1,040
Europe 12,200 11,628 13,158 11,535
Europe-Servicing subsidiaries 4,571 3,737 4,535 3,575
------------ ------------ ------------ ------------
Total $ 54,998 $ 49,490 $ 55,698 $ 49,259
============ ============ ============ ============
FIRSTCITY SHARE OF EQUITY EARNINGS (LOSS):
Domestic $ 2,594 $ 3,264 $ 4,543 $ 5,611
Latin America (890) 390 (778) (1,670)
Europe 789 460 2,573 1,187
Europe-Servicing subsidiaries 146 103 476 319
------------ ------------ ------------ ------------
Total $ 2,639 $ 4,217 $ 6,814 $ 5,447
============ ============ ============ ============
SELECTED OTHER DATA:
AVERAGE INVESTMENT IN WHOLLY OWNED PORTFOLIO ASSETS
AND LOANS RECEIVABLE:
Domestic $ 10,500 $ 8,262 $ 8,509 $ 8,553
Latin America 16,770 14,816 15,284 14,877
Europe 1,426 1,001 1,805 715
------------ ------------ ------------ ------------
Total $ 28,696 $ 24,079 $ 25,598 $ 24,145
============ ============ ============ ============
INCOME FROM WHOLLY OWNED PORTFOLIO ASSETS AND LOANS
RECEIVABLE:
Domestic $ 250 $ 462 $ 446 $ 1,375
Latin America 537 855 913 1,733
Europe 17 17 43 17
------------ ------------ ------------ ------------
Total $ 804 $ 1,334 $ 1,402 $ 3,125
============ ============ ============ ============
SERVICING FEE REVENUES:
Domestic partnerships:
$ Collected $ 31,085 $ 40,644 $ 57,438 $ 64,694
Servicing fee revenue 1,223 1,541 2,261 2,582
Average servicing fee % 3.9% 3.8% 3.9% 4.0%
Latin American partnerships:
$ Collected $ 20,249 $ 13,513 $ 35,095 $ 30,025
Servicing fee revenue 2,400 2,484 4,356 4,879
Average servicing fee % 11.9% 18.4% 12.4% 16.2%
Incentive service fees $ 93 $ 61 $ 131 $ 132
Total Service Fees:
$ Collected $ 51,334 $ 54,157 $ 92,533 $ 94,719
Servicing fee revenue 3,716 4,086 6,748 7,593
Average servicing fee % 7.2% 7.5% 7.3% 8.0%
SERVICING PORTFOLIO (FACE VALUE)
Domestic $ 442,710 $ 361,957
Latin America 1,159,490 1,222,626
Europe 832,692 905,224
------------ ------------
Total $ 2,434,892 $ 2,489,807
============ ============
NUMBER OF PERSONNEL AT PERIOD END:
Domestic 60 70
Latin America 144 166
------------ ------------
Total personnel 204 236
============ ============
</Table>
7
FIRSTCITY FINANCIAL CORPORATION
SUPPLEMENTAL INFORMATION
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------- --------------------------------
2004 2003 2004 2003
-------------- -------------- -------------- --------------
CONSUMER LENDING: (1)
Retail installment contracts acquired $ 177,549 $ 127,706 $ 421,670 $ 253,825
Origination characteristics:
Face value to wholesale value 99.47% 98.71% 101.14% 98.79%
Weighted average coupon 21.18% 21.04% 21.13% 20.97%
Purchase discount (% of face value) 16.56% 17.50% 17.01% 17.29%
Servicing portfolio (face value in $) 1,094,817 768,889
Defaults (% of original balance at time of default) 20.00% 21.46%
Net loss on defaults after recovery 10.65% 11.07%
Delinquencies (% of total serviced portfolio) 17.28% 6.00%
Equity in earnings of Drive $ 5,118 $ 2,716 $ 10,155 $ 3,577
Minority interest (1,023) (543) (2,029) (715)
-------------- -------------- -------------- --------------
Net equity in earnings of Drive $ 4,095 $ 2,173 $ 8,126 $ 2,862
============== ============== ============== ==============
</Table>
(1) Auto lending business conducted by Drive Financial Services LP, of
which FirstCity owns 31% and accounts for its investment using the
equity method of accounting.
8