1
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 0-26500

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)

(254) 751-1750
(Registrant's Telephone Number, Including Area Code)

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 Section 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 [ ]

The number of shares of common stock, par value $.01 per share, outstanding
at November 12, 1999 was 8,327,236.

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2

PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
(UNAUDITED)

ASSETS

SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------

Cash and cash equivalents................................... $ 12,899 $ 5,955
Portfolio Assets, net....................................... 41,996 68,423
Loans receivable, net....................................... 89,153 14,854
Residual interests in securitizations....................... 42,585 41,349
Equity investments in Acquisition Partnerships and Servicing
Entities.................................................. 36,054 41,466
Deferred tax benefit, net................................... 27,101 32,162
Other assets, net........................................... 15,961 16,344
Net assets of discontinued operations....................... 16,433 116,090
-------- --------
Total Assets...................................... $282,182 $336,643
======== ========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable............................................. $222,145 $165,922
Other liabilities......................................... 8,229 7,443
-------- --------
Total Liabilities................................. 230,374 173,365
Commitments and contingencies............................... -- --
Redeemable preferred stock:
Adjusting rate preferred stock, including dividends (in
arrears in 1999) of $642 (redemption value of $21 per
share; 2,000,000 shares authorized; 1,222,901 shares
issued and outstanding)................................ 26,323 26,323
Shareholders' equity:
Optional preferred stock (par value $.01 per share;
98,000,000 shares authorized; no shares issued or
outstanding)........................................... -- --
Common stock (par value $.01 per share; 100,000,000
authorized; issued and outstanding: 8,327,236 and
8,287,959 shares, respectively)........................ 83 83
Paid in capital............................................. 78,671 78,456
Retained earnings (accumulated deficit)..................... (53,175) 58,061
Accumulated other comprehensive income (loss)............... (94) 355
-------- --------
Total Shareholders' Equity........................ 25,485 136,955
-------- --------
Total Liabilities, Redeemable Preferred Stock and
Shareholders' Equity............................ $282,182 $336,643
======== ========

See accompanying notes to consolidated financial statements.

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3

FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- --------------------
1999 1998 1999 1998
-------- -------- --------- --------

Revenues:
Gain on sale of automobile loans................ $ -- $ -- $ 6,445 $ 2,434
Servicing fees.................................. 2,068 1,534 6,346 3,906
Gain on resolution of Portfolio Assets.......... 1,335 1,947 3,382 7,883
Equity in earnings of Acquisition Partnerships
and Servicing Entities....................... 3,106 3,061 8,548 7,798
Interest income................................. 6,009 3,151 14,493 9,934
Other income.................................... 571 781 1,248 3,682
-------- -------- --------- --------
Total revenues.......................... 13,089 10,474 40,462 35,637
Expenses:
Interest on notes payable....................... 4,349 3,206 11,572 9,053
Salaries and benefits........................... 3,409 3,119 9,921 9,432
Provision for loan losses and impairment on
residual interests........................... 1,074 4,580 3,036 7,432
Occupancy, data processing, communication and
other........................................ 5,234 4,555 15,029 12,682
-------- -------- --------- --------
Total expenses.......................... 14,066 15,460 39,558 38,599
Earnings (loss) from continuing operations before
minority interest, accounting change and income
taxes........................................... (977) (4,986) 904 (2,962)
Benefit (provision) for income taxes............ (16) (99) (5,048) 1,386
-------- -------- --------- --------
Loss from continuing operations before minority
interest and accounting change.................. (993) (5,085) (4,144) (1,576)
Minority interest............................... 124 108 (486) 35
Cumulative effect of accounting change.......... -- -- (765) --
-------- -------- --------- --------
Loss from continuing operations................... (869) (4,977) (5,395) (1,541)
-------- -------- --------- --------
Loss from discontinued operations, net of benefit
(provision) for income taxes of $ -- , $ -- ,
$ -- , and $(89), respectively.................. (63,058) (33,523) (103,915) (23,539)
-------- -------- --------- --------
Net loss.......................................... (63,927) (38,500) (109,310) (25,080)
Preferred dividends(1).......................... (642) (1,514) (1,926) (4,544)
-------- -------- --------- --------
Net loss to common shareholders................... $(64,569) $(40,014) $(111,236) $(29,624)
======== ======== ========= ========
Basic and diluted loss per common share are as
follows:
Loss from continuing operations before
accounting change per common share........... $ (0.18) $ (0.78) $ (0.79) $ (0.83)
Discontinued operations per common share........ $ (7.59) $ (4.06) $ (12.52) $ (3.20)
Cumulative effect of accounting change.......... $ -- $ -- $ (0.09) $ --
Net loss per common share....................... $ (7.77) $ (4.84) $ (13.40) $ (4.03)
Weighted average common shares outstanding...... 8,314 8,261 8,301 7,351

- ---------------

(1) Includes accumulated dividends in arrears for the three months ended
September 30, 1999.

See accompanying notes to consolidated financial statements.

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FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
(UNAUDITED)

ACCUMULATED
OTHER
NUMBER OF COMPREHENSIVE TOTAL
COMMON COMMON PAID IN RETAINED EARNINGS INCOME SHAREHOLDERS'
SHARES STOCK CAPITAL (ACCUMULATED DEFICIT) (LOSS) EQUITY
--------- ------ ------- --------------------- ------------- -------------

BALANCES, JANUARY 1,
1998...................... 6,526,510 $65 $29,509 $ 83,140 $ 44 $ 112,758
Exercise of warrants,
options and employee
stock purchase plan..... 519,299 5 12,675 -- -- 12,680
Issuance of common stock
to acquire the minority
interest of
subsidiary.............. 41,000 1 2,149 -- -- 2,150
Issuance of common stock
in public offering...... 1,201,150 12 34,123 -- -- 34,135
Comprehensive loss:
Net loss for 1998....... -- -- -- (20,192) -- (20,192)
Foreign currency
items................ -- -- -- -- 311 311
---------
Total comprehensive
loss.................... (19,881)
---------
Preferred dividends....... -- -- -- (5,186) -- (5,186)
Other..................... -- -- -- 299 -- 299
--------- --- ------- --------- ------- ---------
BALANCES, DECEMBER 31,
1998.................... 8,287,959 83 78,456 58,061 355 136,955
Exercise of employee stock
purchase plan........... 39,277 -- 215 -- -- 215
Comprehensive loss:
Net loss for the nine
months ended
September 30, 1999... -- -- -- (109,310) -- (109,310)
Foreign currency
items................ -- -- -- -- (449) (449)
---------
Total comprehensive
loss.................... (109,759)
---------
Preferred dividends....... -- -- -- (1,926) -- (1,926)
--------- --- ------- --------- ------- ---------
BALANCES, SEPTEMBER 30,
1999.................... 8,327,236 $83 $78,671 $ (53,175) $ (94) $ 25,485
========= === ======= ========= ======= =========

See accompanying notes to consolidated financial statements.

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FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)

NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1999 1998
--------- ---------

Cash flows from operating activities:
Net loss.................................................. $(109,310) $ (25,080)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Proceeds from resolution of Portfolio Assets........... 16,985 37,551
Loss from discontinued operations...................... 103,915 23,539
Gain on resolution of Portfolio Assets................. (3,382) (7,883)
Purchase of Portfolio Assets and loans receivable,
net................................................... (281) (11,506)
Origination of automobile receivables, net of purchase
discount.............................................. (131,863) (89,861)
Provision for loan losses and impairment on residual
interests............................................. 3,036 7,432
Equity in earnings of Acquisition Partnerships and
Servicing Entities.................................... (8,548) (7,798)
Proceeds from performing Portfolio Assets and loans
receivable, net....................................... 61,009 56,845
(Increase) decrease in net deferred tax asset.......... 5,061 (1,573)
Depreciation and amortization.......................... 2,125 1,804
Decrease in other assets............................... 10,139 2,614
Increase in other liabilities.......................... 2,379 34,089
--------- ---------
Net cash provided by (used in) operating
activities...................................... (48,735) 20,173
--------- ---------
Cash flows from investing activities:
Property and equipment, net............................... (4,953) (1,255)
Contributions to Acquisition Partnerships and Servicing
Entities............................................... (15,357) (15,369)
Distributions from Acquisition Partnerships and Servicing
Entities............................................... 28,370 18,199
--------- ---------
Net cash provided by investing activities......... 8,060 1,575
--------- ---------
Cash flows from financing activities:
Borrowings under notes payable............................ 190,702 274,432
Payments of notes payable................................. (137,114) (232,665)
Redemption of special preferred stock..................... -- (14,716)
Proceeds from issuance of common stock.................... 215 46,633
Preferred dividends paid.................................. (1,926) (5,097)
--------- ---------
Net cash provided by financing activities......... 51,877 68,587
--------- ---------
Net cash provided by continuing operations.................. 11,202 90,335
Net cash used by discontinued operations.................... (4,258) (109,743)
--------- ---------
Net increase (decrease) in cash............................. 6,944 (19,408)
Cash, beginning of period................................... 5,955 27,325
--------- ---------
Cash, end of period......................................... $ 12,899 $ 7,917
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest............................................... $ 11,178 $ 8,399
Income taxes........................................... $ 53 $ 57
Non-cash investing activities:
Investment securities received as a result of sales of
loans through securitizations......................... $ 11,957 $ 28,340
Non-cash financing activities:
Dividends declared and not paid on preferred stock $ 642 $ 963

See accompanying notes to consolidated financial statements.

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6

FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

(1) BASIS OF PRESENTATION

The unaudited consolidated financial statements of FirstCity Financial
Corporation ("FirstCity" or the "Company") reflect, in the opinion of
management, all adjustments, consisting only of normal and recurring
adjustments, necessary to present fairly FirstCity's financial position at
September 30, 1999, the results of operations and the cash flows for the three
month and nine month periods ended September 30, 1999 and 1998.

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 portfolio assets used in the calculation of net gain on
resolution of portfolio assets, interest rate environments, valuation of the
deferred tax asset, and prepayment speeds and collectibility on loans held in
inventory, securitization trusts and for investment. Actual results could differ
materially from those estimates. Certain amounts in the financial statements for
prior periods have been reclassified to conform with current financial statement
presentation.

An accounting change due to the adoption of SOP 98-5, which requires
previously capitalized start-up costs including organization costs to be written
off and future costs related to start-up entities to be charged to expense as
incurred, resulted in an expense of $.8 million for the first quarter of 1999
and has been reflected as a cumulative effect of a change in accounting
principle.

(2) DISCONTINUED OPERATIONS

Effective during the third quarter of 1999, management of the Company
adopted formal plans to discontinue the operations of Harbor Financial Group,
Inc. (formerly known as FirstCity Mortgage Corp.) and its subsidiaries
(collectively referred to as "Mortgage Corp."), and FC Capital Corp. ("Capital
Corp."). These entities comprise the operations that were previously reported as
the Company's mortgage banking operations. As formal termination plans have been
adopted and operations at each entity are expected to cease in the near future
(within 12 months), the results of current and historical operations have been
reflected as discontinued operations in the accompanying consolidated statements
of operations. Additionally, a net asset related to the resolution of activity
from the discontinued operations has been reflected in the accompanying
consolidated balance sheets. The following is a summary of activity related to
each of the entity's operations:

Mortgage Corp. During the third quarter of 1999, Mortgage Corp. incurred
significant losses from operations and the liquidation of certain assets.
Ultimately, on October 14, 1999, Mortgage Corp., filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the Northern District of Texas. In the
filings, the stated assets of Mortgage Corp. were approximately $95 million, and
liabilities were approximately $98 million. Additionally, it is anticipated that
the liquidation of any remaining assets will yield proceeds which are less than
the stated amount of the assets as listed in the filings. The Company does not
guarantee and has not guaranteed any of the debt of Mortgage Corp. Furthermore,
management of the Company was not involved in the daily operations of Mortgage
Corp. during a significant portion of the third quarter of 1999 and no longer
has access to financial records of Mortgage Corp.

Based on the above, Mortgage Corp. is deemed insolvent and the Company has
written-off its entire investment in and advances to Mortgage Corp.
(collectively referred to as the "Net Investment"). At June 30,

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FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1999, the Net Investment in Mortgage Corp. totaled $50.5 million. The Company
did not fund any of the operations of Mortgage Corp. subsequent to June 30,
1999.

Capital Corp. Management of the Company made the decision to completely
exit all mortgage banking activities due to the significant negative impact
realized from Mortgage Corp. Currently, the Company is in the process of
identifying potential buyers for Capital Corp.'s production platform. If no
acquirer is ultimately identified, Capital Corp. will cease operations.

It is projected that the only assets remaining from Capital Corp.'s
operations will be the investment securities resulting from the retention of
residual interests in securitization transactions completed by Capital Corp. The
Company has considered the estimated future income from such investment
securities in the computation of the net loss on discontinued operations.

A summary of the mortgage banking segment's net assets at December 31,
1998, as previously reported is as follows:

DECEMBER 31, 1998
-----------------

Mortgage loans held for sale and other loan receivables..... $1,238,876
Mortgage servicing rights................................... 91,440
Receivable for servicing advances and accrued interest...... 58,161
Residual interest in securitizations........................ 23,893
Other assets................................................ 31,054
----------
Total assets...................................... 1,443,424
Notes payable............................................... 1,296,309
Other liabilities........................................... 31,025
----------
Total liabilities................................. 1,327,334
----------
Net assets of discontinued operations............. $ 116,090
==========
At September 30, 1999, the net assets from discontinued
operations consist of the following:
Investment securities, net of valuation allowance......... $ 20,594
Accrual for loss on operations and disposal of
discontinued operations................................ (4,161)
----------
Net assets of discontinued operations............. $ 16,433
==========

(3) LIQUIDITY AND CAPITAL RESOURCES

Generally, the Company requires liquidity to fund its operations, working
capital, payment of debt, equity for acquisition of Portfolio Assets,
investments in and advances to the Acquisition Partnerships, investments in
expanding businesses to support their growth, retirement of and dividends on
preferred stock, and other investments by the Company. The potential sources of
liquidity are funds generated from operations, equity distributions from the
Acquisition Partnerships, interest and principal payments on subordinated
intercompany debt and dividends from the Company's subsidiaries, short-term
borrowings from revolving lines of credit, proceeds from equity market
transactions, securitization and other structured finance transactions and other
special purpose short-term borrowings.

The Company completed an extension and renewal of its working capital
revolving line of credit with its revolving lenders ("Revolving Lenders") in
August 1999 in the amount of $93 million. This renewed facility includes a
sub-line for FirstCity Consumer Lending Corporation ("Consumer Corp.") and
matures June 30, 2000. During the quarter, the Company reached an agreement with
its Revolving Lenders that waived all existing and future defaults related to
Mortgage Corp. This waiver included the bankruptcy filing by Mortgage

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FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Corp., which was filed on October 14, 1999. This facility requires the approval
of the lenders prior to payment of common and preferred dividends.

Previously, the Company announced that certain trigger and termination
events resulting from losses at Mortgage Corp. had occurred under the agreements
with its credit enhancement provider on the Consumer residual assets and the
Consumer warehouse facility. The credit enhancement provider has provided
monthly waivers of such trigger and termination events which presently extend to
December 15, 1999 and has periodically extended the servicing term, presently
through November 24, 1999. The credit enhancement provider has escrowed a
portion of the excess cash flows payable to affiliates of Consumer for the
period from July 1, 1999 through September 30, 1999, in an amount totaling
approximately $5.4 million until such time as the Company has resolved any
further liquidity issues. Subsequent to quarter end, the credit enhancement
provider has released the most recent excess cash flow payment in the amount of
approximately $1.9 million covering cash flows for the period from October 1,
1999 through October 31, 1999. The $1.9 million was used to reduce the
outstanding balance on the residual financing and to fund Consumer operations.
Additionally, the credit enhancement provider has reinstated the advance rate
under the warehouse line to 79.5%. Upon the occurrence of the trigger events
related to mortgage losses, the advance rate had been reduced to 77%.

During the quarter, the Company eliminated its repurchase agreement secured
by its interests in automobile securitized loans, by refinancing that facility
into its residual term debt facility. Reductions through excess payments
received from borrowers and other sources have reduced the outstanding balance
on these term loans to $5.9 million at September 30, 1999.

The Company is currently exploring several sources of additional financing.
Although no definitive agreement with any investor or lender has been reached,
management of the Company is encouraged by the discussions to date and
anticipates additional funding will be available. However, should additional
financing not become available in the near future, the Company could be
adversely affected and certain assets may have to be liquidated to supplement
the financing requirements of the Company.

(4) PORTFOLIO ASSETS

Portfolio Assets are summarized as follows:

SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------

Non-performing Portfolio Assets............................ $ 76,537 $ 93,716
Performing Portfolio Assets................................ 18,689 24,759
Real estate Portfolios..................................... 7,538 11,267
-------- --------
Total Portfolio Assets........................... 102,764 129,742
Discount required to reflect Portfolio Assets at carrying
value.................................................... (60,768) (61,319)
-------- --------
Portfolio Assets, net............................ $ 41,996 $ 68,423
======== ========

Portfolio Assets are pledged to secure non-recourse notes payable.

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FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(5) LOANS RECEIVABLE

Loans receivable are summarized as follows:

SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------

Automobile and consumer finance receivables................ $105,454 $16,475
Other loans held for investment............................ 1,244 4,273
Allowance for loan losses.................................. (17,545) (5,894)
-------- -------
Loans receivable, net.................................... $ 89,153 $14,854
======== =======

The activity in the allowance for loan losses is summarized as follows for
the periods indicated:

NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1999 1998
------- --------

Balances, beginning of period............................... $ 5,894 $ 9,282
Provision for loan losses................................. 52 4,432
Discounts acquired........................................ 20,650 13,607
Allocation of reserves to sold loans...................... (7,890) (7,602)
Charge off activity:
Principal balances charged off......................... (2,679) (11,294)
Recoveries............................................. 1,518 3,006
------- --------
Net charge offs................................... (1,161) (8,288)
------- --------
Balances, end of period..................................... $17,545 $ 11,431
======= ========

The provision for loan losses during the nine months ended September 30,
1998, was predominantly for automobile finance receivables generated by the NAF
platform that was discontinued in January 1998.

(6) RESIDUAL INTERESTS IN SECURITIZATIONS

The Company has residual interests in securitizations consisting of rated
securities, retained interests and related interest only strips (collectively
referred to as residual interests) which are attributable to loans sold through
securitization transactions by Consumer Corp. Residual interests are comprised
of the following as of the dates indicated.

SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------

Rated securities........................................... $ 1,449 $ 2,073
Residual interests......................................... 47,222 43,374
Accrued interest........................................... 1,348 352
Allowance for losses....................................... (7,434) (4,450)
------- -------
$42,585 $41,349
======= =======

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FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The activity related to residual interests for 1999 and 1998 is as follows:

NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1999 1998
-------- -------

Balance, beginning of period................................ $ 41,349 $ 6,935
Cost allocated from securitizations......................... 11,957 28,340
Interest accreted........................................... 4,098 1,504
Cash received from trusts................................... (11,835) (4,699)
Provision for permanent impairment of value................. (2,984) (3,000)
-------- -------
Balance, end of period...................................... $ 42,585 $29,080
======== =======

(7) EQUITY INVESTMENTS IN ACQUISITION PARTNERSHIPS AND SERVICING ENTITIES

The Company has investments in Acquisition Partnerships and their general
partners that are accounted for on the equity method. During 1999, the Company
also acquired investments in Servicing Entities that are accounted for on the
equity method. The condensed combined financial position and results of
operations of the Acquisition Partnerships (excluding the Servicing Entities),
which include the domestic and foreign Acquisition Partnerships and their
general partners, are summarized below.

CONDENSED COMBINED BALANCE SHEETS

SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------

Assets................................................... $260,771 $295,114
======== ========
Liabilities.............................................. $165,747 $190,590
Net equity............................................... 95,024 104,524
-------- --------
$260,771 $295,114
======== ========
Equity investment in Acquisition Partnerships............ $ 32,547 $ 41,466
Equity investment in Servicing Entities.................. 3,507 --
-------- --------
$ 36,054 $ 41,466
======== ========

CONDENSED COMBINED SUMMARY OF EARNINGS

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- --------------------
1999 1998 1999 1998
------- ------- ------- --------

Proceeds from resolution of Portfolio Assets.... $21,190 $33,575 $88,374 $121,203
Gross margin.................................... $10,027 $12,704 $34,384 $ 40,347
Interest income on performing Portfolio
Assets........................................ $ 2,838 $ 2,129 $ 9,422 $ 6,751
Net earnings.................................... $ 6,311 $ 8,042 $22,691 $ 21,025
======= ======= ======= ========
Equity in earnings of Acquisition
Partnerships.................................. $ 3,246 $ 3,061 $ 8,710 $ 7,798
Equity in earnings (loss) of Servicing
Entities...................................... $ (140) -- $ (162) --
------- ------- ------- --------
$ 3,106 $ 3,061 $ 8,548 $ 7,798
======= ======= ======= ========

(8) SEGMENT REPORTING

At September 30, 1999, the Company was engaged in two reportable segments
i) portfolio asset acquisition and resolution; and ii) consumer lending. These
segments have been segregated based on products and services offered by each.
Prior to the quarter ended September 30, 1999, the Company also reflected

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FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

operations from its mortgage banking segment. As described in note 2, the
Company has discontinued operations in the mortgage banking segment effective in
the third quarter. Accordingly, all activity related to the mortgage banking
segment has been reclassified as discontinued operations in the consolidated
statements of operations included herein. The following is a summary of results
of operations for each of the two remaining segments and a reconciliation to
loss from continuing operations for the periods indicated.

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------
1999 1998 1999 1998
-------- -------- ------- -------

PORTFOLIO ASSET ACQUISITION AND RESOLUTION:
Revenues:
Gain on resolution of Portfolio Assets............ $ 1,335 $ 1,947 $ 3,382 $ 7,883
Equity in earnings of Acquisition Partnerships and
Servicing Entities.............................. 3,106 3,061 8,548 7,798
Servicing fees.................................... 900 769 2,657 2,166
Other............................................. 1,061 450 3,244 3,078
------- ------- ------- -------
Total........................................ 6,402 6,227 17,831 20,925
Expenses:
Salaries and benefits............................. 1,019 1,172 3,053 3,439
Interest on notes payable......................... 938 1,573 3,028 4,502
Asset level expenses, occupancy, data processing
and other....................................... 1,536 1,859 4,680 5,960
------- ------- ------- -------
Total........................................ 3,493 4,604 10,761 13,901
------- ------- ------- -------
Operating contribution before direct taxes........ $ 2,909 $ 1,623 $ 7,070 $ 7,024
======= ======= ======= =======
Operating contribution, net of direct taxes....... $ 2,893 $ 1,575 $ 7,025 $ 6,967
======= ======= ======= =======
CONSUMER LENDING:
Revenues:
Gain on sale of automobile loans.................. $ -- $ -- $ 6,445 $ 2,434
Interest income................................... 5,451 2,753 12,301 7,971
Servicing fees.................................... 1,168 765 3,689 1,740
Other............................................. 43 314 112 389
------- ------- ------- -------
Total........................................ 6,662 3,832 22,547 12,534
Expenses:
Salaries and benefits............................. 1,808 1,149 5,008 3,553
Provision for loan losses and residual
interests....................................... 1,074 4,580 3,036 7,432
Interest on notes payable......................... 1,161 641 2,564 2,455
Occupancy, data processing and other.............. 2,756 1,648 7,853 4,418
------- ------- ------- -------
Total........................................ 6,799 8,018 18,461 17,858
------- ------- ------- -------
Operating contribution (loss) before direct
taxes........................................... $ (137) $(4,186) $ 4,086 $(5,324)
======= ======= ======= =======
Operating contribution (loss), net of direct
taxes........................................... $ (137) $(4,186) $ 4,086 $(5,324)
======= ======= ======= =======
Total operating income (loss), net of direct
taxes...................................... $ 2,756 $(2,611) $11,111 $ 1,643
======= ======= ======= =======
CORPORATE OVERHEAD:
Corporate interest expense........................... (2,250) (992) (5,980) (2,096)
Salaries and benefits, occupancy, professional and
other income and expenses, net.................... $(1,375) (1,374) (5,526) $(2,588)
Deferred tax benefit (provision) from NOLs........... -- -- (5,000) 1,500
------- ------- ------- -------
Loss from continuing operations...................... $ (869) $(4,977) $(5,395) $(1,541)
======= ======= ======= =======

11
12
FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Total assets for each of the segments and a reconciliation to total assets
is as follows:

SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------

Portfolio acquisition and resolution assets................. $ 80,221 $114,596
Consumer assets............................................. 137,297 52,029
Deferred tax benefit........................................ 27,101 32,162
Other assets................................................ 21,130 21,766
Net assets of discontinued operations....................... 16,433 116,090
-------- --------
Total assets...................................... $282,182 $336,643
======== ========

(9) PREFERRED STOCK AND SHAREHOLDERS' EQUITY

In the third quarter of 1999, dividends on the Company's adjusting rate
preferred stock were suspended. At September 30, 1999, accumulated dividends in
arrears on such preferred stock totaled $.6 million, or $.525 per share.

In May 1998, the Company closed the public offering of 1,542,150 shares of
FirstCity common stock, of which 341,000 shares were sold by selling
shareholders. Net proceeds (after expenses) of $34.1 million were used to retire
debt. On May 11, 1998, the Company notified holders of its outstanding warrants
to purchase shares of common stock that it was exercising its option to
repurchase such warrants for $1.00 each. In June 1998, as a result of such
notification, warrants representing 471,380 shares of common stock were
exercised for an aggregate warrant purchase price of $11.8 million. On July 17,
1998, the Company filed a shelf registration statement with the Securities and
Exchange Commission which allows the Company to issue up to $250 million in debt
and equity securities from time to time in the future. The registration
statement became effective July 28, 1998. As of September 30, 1999, there have
been no securities issued under this registration statement.

(10) INCOME TAXES

Federal income taxes are provided at a 35% rate. Net operating loss carry
forwards ("NOLs") are available to FirstCity and are recognized as an offset to
the provision in the period during which the benefit is realized. The Company
accounts for the benefit of the NOLs by recording the benefit as an asset and
then establishing an allowance to value the net deferred tax asset at a value
commensurate with the Company's expectation of being able to utilize the
recognized benefit. Such estimates are reevaluated on a quarterly basis with the
adjustment to the allowance recorded as an adjustment to the income taxes
generated by the quarterly operating results. Significant events that change the
Company's view of its currently estimated ability to utilize the tax benefits
result in substantial changes to the estimated allowance required to value the
deferred tax benefits recognized in the Company's periodic financial statements.
Due to the evaluation of the recoverability of the deferred tax asset recognized
related to the mortgage banking operations, the Company increased its valuation
allowance by $5 million during the quarter ended June 30, 1999. The Company's
analysis for the quarter ended September 30, 1999 indicated no additional
adjustments were necessary to the valuation allowance. Additional events could
occur in the future, and would impact the quarterly recognition of the Company's
estimate of the required valuation allowance associated with its 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.

12
13
FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(11) COMMITMENTS AND CONTINGENCIES

The Company is involved in various legal proceedings in the ordinary course
of business. In the opinion of management, the resolution of such matters will
not have a material adverse impact on the consolidated financial condition,
results of operations or liquidity of the Company.

On October 14, 1999, Harbor Financial Group, Inc., Harbor Financial
Mortgage Corporation and certain of their subsidiaries filed voluntary petitions
under Chapter 11 of the United States Bankruptcy Code before the United States
Bankruptcy Court for the Northern District of Texas, Dallas Division. In a
motion filed in those proceedings requesting the appointment of a Chapter 11
Trustee, the debtors have stated that they are reviewing pre-petition transfers
to the Company to determine if those transfers are avoidable. The Company
believes that it has valid defenses to any allegations that might be made to
avoid any pre-petition transfers in connection with the Mortgage Corp.
bankruptcy proceedings.

The Company is a 50% owner in an entity that is obligated to advance up to
$2.5 million toward the acquisition of Portfolio Assets from financial
institutions in California. At September 30, 1999, advances of $1.8 million had
been made under the obligation.

13
14

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

The Company is a diversified financial services company engaged in
Portfolio Asset acquisition and resolution ("Commercial Corp.") and consumer
lending ("Consumer Corp."). The Portfolio Asset acquisition and resolution
business involves acquiring Portfolio Assets at a discount to Face Value and
servicing and resolving such Portfolios in an effort to maximize the present
value of the ultimate cash recoveries. The consumer lending business involves
the acquisition, origination, warehousing, securitization and servicing of
consumer receivables. The Company's current consumer lending operations are
focused on the acquisition of sub-prime automobile receivables.

During the quarter, the Company adopted plans of discontinuation for its
mortgage operations, which consist of Harbor Financial Group, Inc. (formerly
known as FirstCity Mortgage Corp.), its subsidiaries (collectively, "Mortgage
Corp."), and FC Capital Corp. ("Capital"). As a result of the adoption of plans
for discontinued operations, the Company realized losses in the third quarter
from the discontinued operations in the amount of $63.1 million. The components
of this loss are the write-off of the Company's investment in Mortgage Corp. of
$50.5 million, write down in the investment in Capital of $15.6 million, offset
by the future operations, net of reserves, of approximately $3 million. The
anticipated disposition is subject to many assumptions, including the financial
and general market conditions. Changes in these and other factors could
materially affect the results of these plans of discontinuation. Furthermore,
changes in conditions could dictate changes in the plans of discontinuation,
which could result in a material difference in the results of discontinuation.

On October 14, 1999, Mortgage Corp. filed for protection under Chapter 11
of the Bankruptcy Code. In the filings, the stated assets were approximately $95
million, and the stated liabilities were approximately $98 million. FirstCity
has not guaranteed the indebtedness of Mortgage Corp. and has previously reached
agreement with its corporate revolving lenders to permanently waive any events
of default related to Mortgage Corp., including bankruptcy. Neither FirstCity
nor any of its affiliates or business units, other than Mortgage Corp., are
contemplating filing for bankruptcy protection.

The Company posted a loss from continuing operations of $.9 million for the
quarter ended September 30, 1999 and $5.4 million for the year-to-date. After
dividends on the preferred stock and loss from discontinued operations, the
basic net loss was $64.6 million or $7.77 per common share for the quarter and
$111.2 million or $13.40 per common share year-to-date. Such loss was primarily
comprised of the loss from discontinued operations of $63.1 million for the
quarter ended September 30, 1999 and $103.9 million for the year-to-date.

The Company's financial results are affected by many factors including
levels of and fluctuations in interest rates, fluctuations in the underlying
values of real estate and other assets, and the availability and prices for
loans and assets acquired in all of the Company's businesses. The Company's
business and results of operations are also affected by the availability of
financing with terms acceptable to the Company and the Company's access to
capital markets, including the securitization markets.

As a result of the significant period to period fluctuations in the
revenues and earnings of the Company's Portfolio Asset acquisition and
resolution business and the timing of securitization transactions in the
Company's Consumer business, period to period comparisons of the Company's
results of continuing operations may not be meaningful.

14
15

ANALYSIS OF REVENUES AND EXPENSES

The following table summarizes the revenues and expenses of each of the
Company's business lines and presents the operating contribution (loss) of each
business.

ANALYSIS OF REVENUES AND EXPENSES
(IN THOUSANDS, EXCEPT PER SHARE DATA)

NINE MONTHS ENDED
THIRD THIRD SEPTEMBER 30,
QUARTER QUARTER --------------------
1999 1998 1999 1998
-------- -------- --------- --------

PORTFOLIO ASSET ACQUISITION AND RESOLUTION:
Revenues:
Gain on resolution of Portfolio Assets....... $ 1,335 $ 1,947 $ 3,382 $ 7,883
Equity in earnings of Acquisition
Partnerships and Servicing Entities........ 3,106 3,061 8,548 7,798
Servicing fees............................... 900 769 2,657 2,166
Other........................................ 1,061 450 3,244 3,078
-------- -------- --------- --------
Total................................... 6,402 6,227 17,831 20,925
Expenses:
Salaries and benefits........................ 1,019 1,172 3,053 3,439
Interest on notes payable.................... 938 1,573 3,028 4,502
Asset level expenses, occupancy, data
processing and other....................... 1,536 1,859 4,680 5,960
-------- -------- --------- --------
Total................................... 3,493 4,604 10,761 13,901
-------- -------- --------- --------
Operating contribution before direct taxes...... $ 2,909 $ 1,623 $ 7,070 $ 7,024
======== ======== ========= ========
Operating contribution, net of direct taxes..... $ 2,893 $ 1,575 $ 7,025 $ 6,967
======== ======== ========= ========
CONSUMER LENDING:
Revenues:
Gain on sale of automobile loans............. $ -- $ -- $ 6,445 $ 2,434
Interest income.............................. 5,451 2,753 12,301 7,971
Servicing fees............................... 1,168 765 3,689 1,740
Other........................................ 43 314 112 389
-------- -------- --------- --------
Total................................... 6,662 3,832 22,547 12,534
Expenses:
Salaries and benefits........................ 1,808 1,149 5,008 3,553
Provision for loan losses and residual
interests.................................. 1,074 4,580 3,036 7,432
Interest on notes payable.................... 1,161 641 2,564 2,455
Occupancy, data processing and other......... 2,756 1,648 7,853 4,418
-------- -------- --------- --------
Total................................... 6,799 8,018 18,461 17,858
-------- -------- --------- --------
Operating contribution (loss) before direct
taxes........................................ $ (137) $ (4,186) $ 4,086 $ (5,324)
======== ======== ========= ========
Operating contribution (loss), net of direct
taxes........................................ $ (137) $ (4,186) $ 4,086 $ (5,324)
======== ======== ========= ========
Total operating contribution (loss), net
of direct taxes....................... $ 2,756 $ (2,611) $ 11,111 $ 1,643
======== ======== ========= ========

15
16

NINE MONTHS ENDED
THIRD THIRD SEPTEMBER 30,
QUARTER QUARTER --------------------
1999 1998 1999 1998
-------- -------- --------- --------

CORPORATE OVERHEAD:
Corporate interest expense...................... $ (2,250) $ (992) $ (5,980) $ (2,096)
Salaries and benefits, occupancy, professional
and other income and expenses, net........... (1,375) (1,374) (5,526) (2,588)
Deferred tax benefit (provision) from NOLs...... -- -- (5,000) 1,500
-------- -------- --------- --------
Loss from continuing operations................. (869) (4,977) (5,395) (1,541)
Loss from discontinued operations, net of
benefit (provision) for income taxes of $--,
$--, $-- and $(89), respectively............. (63,058) (33,523) (103,915) (23,539)
-------- -------- --------- --------
Net loss........................................ (63,927) (38,500) (109,310) (25,080)
Preferred dividends............................. (642) (1,514) (1,926) (4,544)
-------- -------- --------- --------
Net loss to common shareholders................. $(64,569) $(40,014) $(111,236) $(29,624)
======== ======== ========= ========
BASIC AND DILUTED LOSS PER COMMON SHARE IS AS
FOLLOWS:
Loss from continuing operations before
accounting change per common share........... $ (0.18) $ (0.78) $ (0.79) $ (0.83)
Discontinued operations per common share........ $ (7.59) $ (4.06) $ (12.52) $ (3.20)
Cumulative effect of accounting change.......... $ -- $ -- $ (0.09) $ --
Net loss per common share
share........................................ $ (7.77) $ (4.84) $ (13.40) $ (4.03)
Weighted average common shares outstanding...... 8,314 8,261 8,301 7,351
ORIGINATION AND OTHER FINANCIAL DATA:
Commercial Corp.:
Aggregate purchase price of assets
acquired................................... $140,784 $ 9,200 $ 208,780 $ 79,040
Proceeds from resolution..................... 27,157 41,095 105,359 158,754
Consumer Corp.:
Aggregate acquisition of automobile and other
consumer receivables....................... $ 43,774 $ 37,056 $ 152,518 $104,117

16
17

PORTFOLIO ASSET ACQUISITION AND RESOLUTION

The following table presents selected information regarding the revenues
and expenses of Commercial Corp.

ANALYSIS OF SELECTED REVENUES AND EXPENSES
PORTFOLIO ASSET ACQUISITION AND RESOLUTION
(DOLLARS IN THOUSANDS)

NINE MONTHS ENDED
THIRD THIRD SEPTEMBER 30,
QUARTER QUARTER -----------------
1999 1998 1999 1998
------- ------- ------- -------

GAIN ON RESOLUTION OF PORTFOLIO ASSETS:
Average investment:
Nonperforming Portfolios.......................... $26,370 $38,728 $30,209 $43,744
Performing Portfolios............................. 12,050 13,546 16,571 13,819
Real estate Portfolios............................ 8,514 14,746 9,375 16,892
Gain on resolution of Portfolio Assets:
Nonperforming Portfolios.......................... 1,027 1,181 2,466 5,071
Performing Portfolios............................. -- -- -- 299
Real estate Portfolios............................ 308 766 916 2,513
------- ------- ------- -------
Total........................................ $ 1,335 $ 1,947 $ 3,382 $ 7,883
======= ======= ======= =======
Interest income on performing Portfolios............. $ 467 $ 339 $ 1,954 $ 1,525
Gross profit percentage on resolution of Portfolio
Assets:
Nonperforming Portfolios.......................... 21.55% 29.70% 18.81% 23.39%
Performing Portfolios............................. -- -- -- 7.99%
Real estate Portfolios............................ 25.76% 21.62% 23.63% 20.72%
Weighted average gross profit percentage.......... 22.39% 25.89% 19.91% 20.99%
Interest yield on performing Portfolios
(annualized).................................... 15.51% 10.01% 15.72% 14.01%
SERVICING FEE REVENUES:................................ $ 900 $ 769 $ 2,657 $ 2,166
PERSONNEL:
Personnel expenses................................... $ 1,019 $ 1,172 $ 3,053 $ 3,439
Number of personnel (at period end):
Production........................................ 10 12
Servicing......................................... 64 70
------- -------
Total........................................ 74 82
======= =======
INTEREST EXPENSE:
Average debt......................................... $45,417 $74,301 $53,216 $73,826
Interest expense..................................... 938 1,573 3,028 4,502
Average yield (annualized)........................... 8.26% 8.47% 7.58% 8.13%

17
18

The following chart presents selected information regarding the revenues
and expenses of the Acquisition Partnerships.

ANALYSIS OF SELECTED REVENUES AND EXPENSES
ACQUISITION PARTNERSHIPS
(DOLLARS IN THOUSANDS)

NINE MONTHS ENDED
THIRD THIRD SEPTEMBER 30,
QUARTER QUARTER -----------------
1999 1998 1999 1998
------- ------- ------- -------

REVENUES:
Gain on resolution of Portfolio Assets............... $10,027 $12,704 $34,384 $40,347
Gross profit percentage on resolution of Portfolio
Assets............................................ 47.32% 37.84% 38.91% 33.29%
Interest income...................................... 2,838 2,129 9,422 6,751
Other income......................................... 495 1,577 1,634 1,910
INTEREST EXPENSE:
Interest expense..................................... $ 4,570 $ 3,250 $10,425 $10,207
Average yield (annualized)........................... 10.09% 7.99% 10.58% 7.28%
OTHER EXPENSES:
Servicing fees....................................... $ 1,395 $ 1,148 $ 3,904 $ 3,933
Legal................................................ 272 711 1,491 1,696
Property protection.................................. 85 1,679 2,115 3,673
Other................................................ 727 1,580 4,814 8,474
------- ------- ------- -------
Total other expenses......................... 2,479 5,118 12,324 17,776
------- ------- ------- -------
Net earnings................................. $ 6,311 $ 8,042 $22,691 $21,025
======= ======= ======= =======

18
19

CONSUMER LENDING

The following chart presents selected information regarding the revenues
and expenses of Consumer Corp.'s consumer lending business.

ANALYSIS OF SELECTED REVENUES AND EXPENSES
CONSUMER LENDING
(DOLLARS IN THOUSANDS)

NINE MONTHS ENDED
THIRD THIRD SEPTEMBER 30,
QUARTER QUARTER -----------------
1999 1998 1999 1998
------- ------- ------- -------

INTEREST INCOME:
Average loans and investments:
Auto.............................................. $79,330 $32,748 $48,175 $39,397
Investments....................................... 42,521 32,471 41,405 22,940
Interest income:
Auto.............................................. $ 3,945 $ 1,783 $ 7,843 $ 6,253
Investments....................................... 1,396 833 4,099 1,523
Average yield (annualized):
Auto.............................................. 19.89% 21.78% 21.71% 21.16%
Investments....................................... 13.13% 10.27% 13.20% 8.85%
SERVICING FEE REVENUES................................. $ 1,168 $ 765 $ 3,689 $ 1,740
PERSONNEL:
Personnel expenses................................... $ 1,808 $ 1,149 $ 5,008 $ 3,553
Number of personnel (at period end):
Production........................................ 160 99
Servicing......................................... 121 100
------- -------
Total........................................ 281 199
======= =======
INTEREST EXPENSE:
Average debt......................................... $64,117 $29,409 $46,871 $37,202
Interest expense..................................... 1,161 641 2,564 2,455
Average yield (annualized)........................... 7.24% 8.72% 7.29% 8.80%

BENEFIT (PROVISION) FOR INCOME TAXES

The Company has substantial federal NOLs, which can be used to offset the
tax liability associated with the Company's pre-tax earnings until the earlier
of the expiration or utilization of such NOLs. The Company accounts for the
benefit of the NOLs by recording the benefit as an asset and then establishing
an allowance to value the net deferred tax asset at a value commensurate with
the Company's expectation of being able to utilize the recognized benefit. Such
estimates are reevaluated on a quarterly basis with the adjustment to the
allowance recorded as an adjustment to the income taxes generated by the
quarterly operating results. Significant events that change the Company's view
of its currently estimated ability to utilize the tax benefits result in
substantial changes to the estimated allowance required to value the deferred
tax benefits recognized in the Company's periodic financial statements. Due to
the evaluation of the recoverability of the deferred tax asset recognized
related to the mortgage banking operations the Company increased its valuation
allowance by $5 million during the quarter ended June 30, 1999. The Company's
analysis for the quarter ended September 30, 1999 resulted in no change in the
valuation allowance. Additional events could occur in the future, and would
impact the quarterly recognition of the Company's estimate of the required
valuation allowance associated with its 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.

19
20

RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements of the Company (including the Notes
thereto) included elsewhere in this Quarterly Report on Form 10-Q.

THIRD QUARTER 1999 COMPARED TO THIRD QUARTER 1998

The Company reported a net loss of $63.9 million in the third quarter 1999
compared to a loss of $38.5 million in 1998. Net loss to common shareholders was
$64.6 million in 1999 compared to a loss of $40.0 million in 1998. On a per
share basis, net loss attributable to common shareholders was $7.77 in 1999
compared to $4.84 in 1998. The principal factor contributing to the loss in the
1999 third quarter was the loss related to the discontinued operations of the
mortgage business segment of the Company. This loss was $63.1 million or $7.59
per share for 1999 compared to a loss of $33.5 million or $4.06 per share in
1998.

Portfolio Asset Acquisition and Resolution

Commercial Corp.'s quarter end investment in Portfolio Assets decreased to
$42.0 million in 1999 from $61.4 million in 1998. Commercial Corp., through its
investment in Acquisition Partnerships, invested $3.8 million in equity in
Portfolio Assets in 1999 compared to $2.7 million in 1998. Such investments
represented Commercial Corp.'s share of Portfolio Assets acquired totaling
$140.8 million and $9.2 million for the quarters ended September 30, 1999 and
1998, respectively.

Net gain on resolution of Portfolio Assets. Proceeds from the resolution of
Portfolio Assets decreased by 21% to $6.0 million in 1999 from $7.5 million in
1998. The net gain on resolution of Portfolio Assets decreased by 31% to $1.3
million in 1999 from $1.9 million in 1998 as the result of lower collections and
a lower gross profit percentage. The gross profit percentage on the resolution
of Portfolio Assets in 1999 was 22.4% as compared to 25.9% in 1998.

Equity in earnings of Acquisition Partnerships. Equity earnings for the
quarter were flat period to period.

Servicing fee revenues. Servicing fees increased by 17% to $.9 million in
1999 from $.8 million in 1998 primarily as a result of collections from the
acquisition partnership in Mexico formed at year-end 1998.

Other revenues. Other revenues increased by 136% to $1.1 million in 1999
compared to $.5 million in 1998 principally as a result of higher gain on sale
of other assets.

Operating expenses. Operating expenses declined by 24% to $3.5 million in
1999 from $4.6 million in 1998 primarily as a result of reduced personnel and
interest expense.

Salaries and benefits decreased by $.2 million or 13% in 1999 as a result
of staff reductions during the quarter.

Interest on notes payable declined $.6 million or 40% due to overall lower
cost of funds and lower debt levels.

Asset level expenses, occupancy, data processing and other expenses
decreased by 17% to $1.5 million in 1999 from $1.9 million in 1998 as a result
of lower investments in Portfolio Assets and the consolidation of servicing
offices in 1999.

Consumer Lending

Interest, service fees and other income. Interest income increased by 98%
to $5.5 million in 1999 from $2.8 million in 1998, reflecting increased levels
of loan origination activity and an increase in the average balance of aggregate
loans and investments held by Consumer Corp. during 1999. Servicing fees
increased $.4 million or 53% due to increased service fee revenue from
securitization trusts.

Interest expense. Interest expense increased by 81% to $1.2 million in 1999
from $.6 million in 1998 as a result of higher volume of debt.

20
21

Operating expenses. Operating expenses decreased by 24% to $5.6 million in
1999 from $7.4 million in 1998 primarily as a result of a significant decrease
in the provision for impairment on residual interests.

Provision for loan losses and impairment on residual interests decreased by
$3.5 million from 1998 as a result of decreased losses in NAF originated Auto
Receivable residuals.

Salaries and benefits increased by $.7 million or 57% and other expenses
increased $1.1 million or 67% as a result of the increased levels of operating
activity.

Other Items Affecting Net Loss

The following items affect the Company's overall results of operations and
are not directly related to any one of the Company's businesses discussed above.

Corporate interest expense. Company level interest expense increased by
127% to $2.3 million in 1999 from $1.0 million in 1998 as a result of higher
volumes of debt associated with the equity required to purchase Portfolio
Assets, equity interests in Acquisition Partnerships and capital support to
operating subsidiaries.

Corporate overhead. Salaries and benefits and other overhead expenses were
flat from period to period.

Income taxes. Federal income taxes are provided at a 35% rate applied to
taxable income and are offset by NOLs that the Company believes are available.
The tax benefit of the NOLs is recorded in the period during which the benefit
is realized. A valuation allowance was established during 1999 and 1998 in an
amount equal to the tax NOLs recorded during each period.

NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998

The Company reported a net loss of $109.3 million in 1999 (including a
deferred tax provision of $5 million) compared to a loss of $25.1 million in
1998 (including a $1.5 million deferred tax benefit from NOLs). Net loss to
common shareholders was $111.2 million in 1999 compared to a loss of $29.6
million in 1998. On a per share basis, net loss attributable to common
shareholders was $13.40 in 1999 compared to $4.03 in 1998. The primary factor
contributing to the loss for the year was losses from discontinued mortgage
operations of $103.9 million or $12.52 per share for 1999 as compared to losses
of $23.5 million or $3.20 per share in 1998. Additionally, an accounting change
related to SOP 98-5 resulted in a loss of $.8 million in the first nine months
of 1999 or $0.09 per share.

Portfolio Asset Acquisition and Resolution

Commercial Corp.'s quarter end investment in Portfolio Assets decreased to
$42.0 million in 1999 from $61.4 million in 1998. Commercial Corp., through its
investment in Acquisition Partnerships invested $10.8 million in equity in
Portfolio Assets in 1999 compared to $19.6 million in 1998. Such investments
represented Commercial Corp.'s Share of Portfolio Assets acquired totaling
$208.8 million and $79.0 million for the nine months ended September 30, 1999
and 1998, respectively.

Net gain on resolution of Portfolio Assets. Proceeds from the resolution of
Portfolio Assets decreased by 55% to $17.0 million in 1999 from $37.6 million in
1998. The net gain on resolution of Portfolio Assets decreased by 57% to $3.4
million in 1999 from $7.9 million in 1998 as the result of lower collections.
The gross profit percentage on the resolution of Portfolio Assets in 1999 was
20% as compared to 21% in 1998.

Equity in earnings of Acquisition Partnerships. Proceeds from the
resolution of Portfolio Assets for the Acquisition Partnerships decreased by 27%
to $88.4 million in 1999 from $121.2 million in 1998 while the gross profit
percentage increased to 38.9% in 1999 from 33.3% in 1998. Interest income rose
$2.7 million in 1999. Other expenses of the Acquisition Partnerships decreased
by $5.5 million in 1999 generally reflecting costs associated with the
resolution of Portfolio Assets in Europe which generated proceeds of $43.9
million. The net result was an overall increase in the net income of the
Acquisition Partnerships of 7.9% to $22.7 million in 1999 from $21.0 million in
1998. As a result, Commercial Corp.'s equity earnings from Acquisition
Partnerships increased by 9.6% to $8.5 million in 1999 from $7.8 million in
1998.

21
22

Servicing fee revenues. Servicing fees increased by 23% to $2.7 million in
1999 from $2.2 million in 1998 primarily as a result of collections from the
acquisition partnership in Mexico formed at year-end 1998.

Other revenues. Other revenues were flat year to year.

Operating expenses. Operating expenses declined by 23% to $10.8 million in
1999 from $13.9 million in 1998 primarily as a result of reduced interest
expense and lower asset level expenses.

Salaries and benefits decreased $.4 million primarily due to staff
reductions since the prior year.

Interest on notes payable declined $1.5 million or 33% due to overall lower
cost of funds and lower debt levels.

Asset level expenses, occupancy, data processing and other expenses
decreased by 21% to $4.7 million in 1999 from $6.0 million in 1998 as a result
of lower investments in Portfolio Assets and the consolidation of servicing
offices in 1999.

Consumer Lending

Gain on sale of automobile loans. In the first nine months of 1999,
Consumer Corp. realized a gain of $6.4 million on the sale of automobile loans
as compared to $2.4 million in 1998, primarily due to the purchase discount
associated with the underlying loans sold into the securitization.

Interest, service fees and other income. Interest income increased by 54%
to $12.3 million in 1999 from $8.0 million in 1998, reflecting increased levels
of loan origination activity and an increase in the average balance of aggregate
loans and investments held by Consumer Corp. during 1999. Service fees income
increased $1.9 million or 112% due to increased service fee revenue from
securitization trusts.

Interest expense. Interest expense increased by 4% to $2.6 million in 1999
from $2.5 million in 1998 as a result of higher volume of debt.

Operating expenses. Operating expenses increased by 3% to $15.9 million in
1999 from $15.4 million in 1998 primarily as a result of increased operating
activity.

Provision for loan losses and impairment on residual interests decreased by
$4.4 million or 59% from 1998 as a result of decreased losses in the NAF
originated Auto Receivable residuals.

Salaries and benefits increased by $1.5 million or 41% and other expenses
increased $3.4 million or 78% as a result of the increased levels of operating
activity.

Other Items Affecting Net Loss

The following items affect the Company's overall results of operations and
are not directly related to any one of the Company's businesses discussed above.

Corporate interest expense. Company level interest expense increased by
185% to $6.0 million in 1999 from $2.1 million in 1998 as a result of higher
volumes of debt associated with the equity required to purchase Portfolio
Assets, equity interests in Acquisition Partnerships and capital support to
operating subsidiaries.

Corporate overhead. Salary and benefits decreased 24% to $1.9 million in
1999. Loan fees and professional fees account for the majority of the $3.0
million increase in other overhead expenses, which increased due to higher
borrowings and other costs associated with outsourcing projects related to the
Company's year 2000 initiative and other operational reviews, as well as a
write-off of $.5 million of organization costs in accordance with SOP 98-5.
Additionally, during the first nine months of 1998 the Company recognized
deferred premium income related to the redemption of Special Preferred Stock.

Income taxes. Federal income taxes are provided at a 35% rate applied to
taxable income (loss) and are offset by NOLs that the Company believes are
available. The tax benefit of the NOLs is recorded in the period during which
the benefit is realized. The Company recorded a deferred tax provision of $5
million to

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23

increase the valuation allowance on the deferred tax asset based on an
evaluation of the realization of income from the mortgage banking operations in
1999 as compared to a benefit of $1.5 million in 1998.

LIQUIDITY AND CAPITAL RESOURCES

The Company completed an extension and renewal of its working capital
revolving line of credit with its revolving lenders ("Revolving Lenders") in
August 1999 in the amount of $93 million. This renewed facility includes a
sub-line for FirstCity Consumer Lending Corporation ("Consumer") and matures
June 30, 2000. During the quarter, the Company reached an agreement with its
Revolving Lenders that waived all existing and future defaults related to
Mortgage Corp. This waiver included the bankruptcy filing by Mortgage Corp.,
which was filed on October 14, 1999. This facility requires the approval of the
lenders prior to payment of common and preferred dividends.

During the quarter, the Company eliminated its repurchase agreement secured
by its interests in automobile securitized loans, by refinancing that facility
into its residual term debt facility. Reductions through excess payments and
other sources have reduced the outstanding balance on that facility to $5.9
million at quarter end.

The Company and each of its major operating subsidiaries have entered into
one or more credit facilities to finance its respective operations. Each of the
operating subsidiary credit facilities is nonrecourse to the Company and the
other operating subsidiaries, except as discussed below.

Excluding the term acquisition facilities of the unconsolidated Acquisition
Partnerships, as of September 30, 1999, the Company and its subsidiaries had
credit facilities providing for borrowings in an aggregate principal amount of
$253 million and outstanding borrowings of $222 million. The following table
summarizes the material terms of the credit facilities to which the Company, its
major operating subsidiaries and the

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Acquisition Partnerships were parties as of November 18, 1999 and the
outstanding borrowings under such facilities as of September 30, 1999.

CREDIT FACILITIES

OUTSTANDING
PRINCIPAL BORROWINGS AS OF
AMOUNT SEPTEMBER 30, 1999 INTEREST RATE OTHER TERMS AND CONDITIONS
--------- ------------------ ----------------------- --------------------------
(DOLLARS IN MILLIONS)

FIRSTCITY
Company Credit Facility........ $ 93 $87 Prime + 1.0% to Prime + Secured by the assets of the
4% Company, expires June 30, 2000
Term fixed asset facilities.... 1 1 Prime + 1.0% Secured by certain fixed
assets, expires January 1, 2001
Term credit facilities......... 10 10 LIBOR + 5.0% Secured by stock of an
acquisition partnership and
certain residual interests,
expires February 20, 2000 and
January 3, 2001
COMMERCIAL CORP.
Term facility................ 67 67 LIBOR + 4.0% Term facility secured by
existing Portfolio Assets,
expires April 30, 2000
(includes $58 million advanced
to unconsolidated Acquisition
Partnerships).
French and Japanese acquisition
facility..................... 4 3 French franc LIBOR + Acquisition facility to fund
3.5%, Japanese yen equity investments in French
LIBOR + 3.5% and Japanese Portfolio Assets,
expires March 31, 2000.
Guaranteed by Commercial Corp.
and the Company. Facility was
paid-off subsequent to
September 30, 1999
Term acquisition facilities.... 28 28 Fixed at 7.00% to 7.66% Acquisition facilities for
existing Portfolio Assets.
Secured by Portfolio Assets.
Expires February 25, 2003 and
June 5, 2002 and November 7,
2002
CONSUMER CORP.
Warehouse facility............. 100 76 Rate equal to the mixed Commercial paper conduit
rate of LIBOR and warehouse facility secured by
commercial paper rates automobile receivables, expires
March 30, 2000
Term facilities................ 6 6 Prime + 1% Term facility secured by
Fixed at 10% residual interests in
automobile securitized loans,
expires December 31, 1999,
March 15, 2000 and May 15, 2000
Term fixed asset facilities.... 2 2 Fixed at 9.33% to 9.50% Secured by certain fixed
assets, expires July 31, 2002
and 2003
OTHER
Unconsolidated Acquisition
Partnerships Term acquisition
facilities................... 72 72 Fixed at 4.5% to 13%, Senior and subordinated loans
LIBOR + 3.0% to 5.0% secured by Portfolio Assets,
and Prime + 1.0% various maturities

RELIANCE ON SYSTEMS; YEAR 2000 ISSUES

The Year 2000 Issue consists of shortcomings of many electronic data
processing systems that make them unable to process year-date data accurately
beyond the year 1999. The primary shortcoming arises

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25

because computer programmers have abbreviated dates by eliminating the first two
digits of the year under the assumption that these digits would always be 19.
Another shortcoming is caused by the routine used by some computers for
calculating leap year does not detect that the year 2000 is a leap year. This
inability to process dates could potentially result in a system failure or
miscalculation causing disruptions in the Company's operations or performance.

The potential problems posed by this issue affect the Company's internal
business-critical systems (internal systems) upon which the Company depends.
This includes information technology systems and applications (IT), as well as
non-IT systems and equipment with embedded technology, such as fax machines and
telephone systems. Examples of internal IT systems includes accounting systems
such as general ledger, loan servicing systems, cash management systems and loan
origination systems. In addition to the internal systems, the Company may be at
risk from Year 2000 failures caused by or occurring to third parties. Some third
parties have significant direct business relationships with the Company. These
parties include borrowers, lenders, investors who buy the Company's loan
products and outside system vendors such as PeopleSoft and McCracken Financial
Software that develop and maintain the Company's critical software systems.

THE COMPANY'S YEAR 2000 INITIATIVE

The Company, with the assistance of a consulting firm that specializes in
Year 2000 readiness, has been in the process of conducting an enterprise-wide
Year 2000 initiative that encompasses both the internal systems and exposure to
third parties. For the Company's internal systems, the initiative has been
approached in four phases comprised of assessment, remediation, testing and
contingency planning. While there is considerable overlap in the timing of the
four phases, the internal assessment phase was completed in March 1999 within
the $135,000 budget allocated for this phase. The components (i.e., hardware and
software) of all internal systems have been identified and the Year 2000
readiness assessed.

The Company has identified its third party business relationships and is
conducting a letter writing campaign to obtain written representations of Year
2000 readiness from the mission critical and significant third party business
relationships. At present, approximately 1000 letters have been mailed with 58%
of the entities responding including both mission critical and non-mission
critical relationships. At this time 100% of the mission critical business
relationships have responded with 98% of those indicating that they are Year
2000 ready or have Year 2000 plans in place. The letter writing campaign to
assess third party relationships will continue throughout the remainder of 1999.

A comprehensive remediation and testing plan along with a budget of
approximately $1,500,000 for the remainder of the Year 2000 project was
presented and approved by the Board of Directors of the Company on April 15,
1999. Within this budget, approximately $1,039,160 was for computer hardware,
software and remediation consultants associated with the discontinued mortgage
banking segment. FirstCity and its remaining business units have completed Year
2000 remediation activities using 70% of the $477,900 budgeted for this phase.
All estimated costs have been budgeted and will be funded by cash flows from
operations.

Remediation of mission critical infrastructure components began in January
1999 and was completed as of June 30, 1999. Infrastructure is defined as
Servers, Workstations, Operating Systems and Network Operating Systems. Mission
critical vendor supplied applications have been upgraded to the vendor's
disclosed Year 2000 ready release. The General Ledger accounting systems have
been replaced by the implementation of PeopleSoft Financials in the third
quarter of 1999. Mission critical custom applications written and/or maintained
by the Company have been remediated and are in the process of verification
testing. Test plans have been written for these applications and testing will be
completed by the end November 1999.

Non IT systems, including fax machines, copiers and building mechanical
systems are also being addressed. Fax and copy machines have been identified by
model number and manufacturers have been contacted using the third party/vendor
letters requesting their Year 2000 readiness. Properties owned or occupied by
the Company's business units are managed by individual property management
companies who have been contacted as to the readiness of the mechanical systems
within those buildings. To date no critical

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Non-IT systems or equipment with embedded technology have been identified as
having Year 2000 related issues that will have a significant impact on business
operations.

Based on the Company's remediation efforts, responses received and testing
to date, it is not anticipated that any internal or third party Year 2000
readiness issues will materially affect the Company. The Company expects to have
a comprehensive Year 2000 contingency plan in place by the fourth quarter of
1999. In general, contingency plans will be developed to replace any significant
third party service providers or internal systems that have not completed their
Year 2000 initiative and disclosed their readiness to the Company by the end of
the third quarter of 1999. Contingency planning also involves a comprehensive
risk assessment in order to maintain focus on critical business relationships
and systems. Contingency planning with respect to third parties will continue
throughout the remainder of 1999.

The cost of the Year 2000 initiative and the dates by which the Company
anticipates completion of its Year 2000 plan are based on management's best
estimates, which are derived utilizing numerous assumptions of future events
including the continued availability of certain resources, third party
modification plans and other factors. Unanticipated failures by critical third
parties, as well as the failure by the Company to execute its own remediation
and testing efforts, could have a material adverse effect on the cost of the
initiative and its completion date. As a result, there can be no assurance that
these forward-looking estimates will be achieved and the actual cost and third
party compliance could differ materially from those plans, resulting in material
financial risk.

POTENTIAL RISKS

Currently, there is uncertainty as to the ultimate success of global
remediation efforts, including the efforts of entities that provide services to
large segments of society such as airlines, utilities and securities exchanges.
There could be short term or longer-term disruptions in segments of the economy
that could impact the Company. Due to the uncertainty with respect to how the
Year 2000 issue will affect business and government, it is not possible to list
all potential problems or risks to the Company.

The Company believes that the most reasonably likely worst case scenarios
that could have adverse effects on the Company are the failures of third
parties, particularly borrowers, its lenders and the investors who purchase its
loan products. The Company's borrowers could be affected by any adverse impact
on the general economy that could cause a rise in delinquencies. Lenders, who
provide funds used by the Company to acquire assets, might be adversely
affected, disrupting the flow of funds, which could have an adverse impact on
the Company's ability to make new loans. Likewise, a disruption in services by
investors could have an adverse impact on the Company's ability to sell loans,
which would result in significant reductions in operating activities.

Any Year 2000 factors that might impact borrowers' abilities to repay their
obligations relate to the failure of global remediation efforts over which the
Company has no influence. The Company's lenders and investors, most of which
operate in highly regulated industries, are among the largest such institutions
in the world. These institutions are under government regulatory mandates to
achieve full readiness prior to the end of 1999. The Company believes that it is
unlikely that these institutions will fail to achieve readiness within a
reasonable time frame; however, the Company will continue to monitor their
readiness and maintain an ongoing contingency plan.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report on Form 10-Q or
incorporated by reference from time to time, including, but not limited to,
statements relating to the Company's strategic objectives and future
performance, which are not historical fact, 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
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could cause the Company's actual results to differ materially from those
indicated in the forward-looking statements. Such factors include, but are not
limited to, the impact of certain covenants in loan agreements of the Company
and its subsidiaries; the degree to which the Company is leveraged; its need for
financing; the continued availability of the Company's credit facilities;
capital markets conditions, including the markets for asset-backed securities
and commercial mortgage-backed securities; the performance of the Company's
subsidiaries and affiliates; availability of net operating loss carryforwards;
risks associated with rapid growth and entry into new businesses; general
economic conditions; interest rate risk; prepayment speeds; delinquency and
default rates; credit loss rates; changes (legislative and otherwise) in the
asset securitization industry; risk of securitization; demand for the Company's
services; residential and commercial and other real estate values; changes in
foreign political, social and economic conditions, regulatory initiatives and
compliance with governmental regulations, the ability to attract and retain
qualified and key personnel; and dependence on automobile dealership
relationships, the Company's Year 2000 issues; factors more fully discussed and
identified under Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations, risk factors and other risks identified in
the Company's current report on Form 10-K, filed March 31, 1999 and other
Securities and Exchange Commission filings. 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 Report speak only as of the date of this
Report. 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risk is the risk of loss from adverse changes in market prices and
interest rates. The Company's operations are materially impacted by net gains on
sales of loans and net interest margins. The level of gains from loan sales the
Company achieves is dependent on demand for the products originated. Net
interest margins are dependent on the Company to maintain the spread or interest
differential between the interest it charges the customer for loans and the
interest the Company is charged for the financing of those loans. The following
describes each component of interest bearing assets held by the Company and how
each could be effected by changes in interest rates.

Portfolio assets consist of investments in pools of non-homogenous assets
that predominantly consist of loan and real estate assets. Earnings from these
assets are based on the estimated future cash flows from such assets and
recorded when those cash flows occur. The underlying loans within these pools
bear both fixed and variable rates. Due to the non-performing nature and history
of these loans, changes in prevailing bench-mark rates (such as the prime rate
or LIBOR) generally have a nominal effect on the ultimate future cash flow to be
realized from the loan assets. Furthermore, these pools of assets are held for
sale, not for investment; therefore, the disposition strategy is to liquidate
these assets as quickly as possible.

The sub-prime loans the Company sells generally are included in asset
backed securities the investor or purchaser issues. These securities are priced
at spreads over the LIBOR or an equivalent term treasury security. These spreads
are determined by demand for the security. Demand is affected by the perception
of credit quality and prepayment risk associated with the loans the Company
originates and sells. Interest rates offered to customers also affect prices
paid for loans. These rates are determined by review of competitors rate
offerings to the public and current prices being paid to the Company for the
products. The Company does not hedge these price risks.

The Company's residual interests in securitizations represent the present
value of the excess cash flows the Company expects to receive over the life of
the underlying sub-prime mortgage (included in net assets of discontinued
operations) or automobile loans. The value of the sub-prime mortgage residual
interest is adversely affected by prepayment, losses and delinquencies due to
the longer term of the underlying assets and the value would be negatively
impacted by an increase in short-term rates, as a portion of the cash flows
fluctuate monthly based upon the one-month LIBOR. The potential effects of
adverse changes in interest
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rates has been factored into the reserve for future losses of discontinued
operations. The sub-prime automobile residual interests is affected less by
prepayment speeds due to the shorter term of the underlying assets and the fact
that the loans are fixed rate, generally at the highest rate allowable by law.

Additionally the Company has various sources of financing which have been
previously described in the Liquidity Capital Resources section of Item 2.

In summary, the Company would be negatively impacted by rising interest
rates and declining prices for its sub-prime loans. Rising interest rates would
negatively impact the value of the residual interests in the securitization and
declining prices for the Company's sub-prime loans would adversely effect the
levels of gains achieved upon the sale of those loans.

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PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company filed suit in the federal district court for the Western
District of Texas, Waco Division, against Chase Bank of Texas, N.A. and Chase
Securities, Inc. on September 17, 1999 seeking damages resulting from alleged
violations by the defendants of the Bank Holding Company Act and from civil
conspiracy engaged in by the defendants, and injunctive relief, arising from an
engagement letter entered into between the Company and Chase Securities, Inc.
relating to the sale assets or securities of Harbor Financial Group, Inc.,
Harbor Financial Mortgage Corporation and their subsidiaries (collectively
"Harbor"). The Company alleges that Chase Bank of Texas, N.A. conditioned its
extension of credit to Harbor on the retention of Chase Securities, Inc. by the
Company and Harbor in violation of the Bank Holding Company Act. The Company
has, in its First Amended Original Complaint filed on November 5, 1999, sought a
judicial declaration that the plaintiffs are not obligated to pay any commission
to Chase Securities, Inc. under the engagement letter. The actual damages sought
by the Company are in excess of $200,000,000. The Company also seeks recovery of
three times its damages pursuant to the Bank Holding Company Act and recovery of
its costs of court, including reasonable attorneys fees. On October 4, 1999,
Chase Securities, Inc. filed suit against the Company before the Supreme Court
for the State of New York, County of New York; Commercial Part seeking recovery
of $2,400,000 as the balance of a transaction fee allegedly due it under the
terms of the engagement letter, expenses in an amount in excess of $3,909, and
other just and proper relief. The Company denies that is has any liability to
Chase Securities, Inc. and intends to vigorously defend the suit.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

EXHIBIT
NUMBER DESCRIPTION
------- -----------

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30

EXHIBIT
NUMBER DESCRIPTION
------- -----------

4.4 -- Stock Purchase Agreement, dated March 24, 1998, between
the Company and Texas Commerce Shareholders Company
(incorporated herein by reference to Exhibit 4.4 of the
Company's Form 10-K dated March 24, 1998 filed with the
Commission on March 26, 1998).
4.5 -- Registration Rights Agreement, dated March 24, 1998,
between the Company and Texas Commerce Shareholders
Company. (incorporated herein by reference to Exhibit 4.5
of the Company's Form 10-K dated March 24, 1998 filed
with the Commission on March 24, 1998).
9.1 -- Shareholder Voting Agreement, dated as of June 29, 1995,
among ATARA I Ltd., James R. Hawkins, James T. Sartain
and Cargill Financial Services Corporation (incorporated
herein by reference to Exhibit 9.1 of the Company's Form
10-K dated March 24,1998 filed with the Commission on
March 26, 1998).
10.1 -- Trust Agreement of FirstCity Liquidating Trust, dated
July 3, 1995 (incorporated herein by reference to Exhibit
10.1 of the Company's Current Report on Form 8-K dated
July 3, 1995 filed with the Commission on July 18, 1995).
10.2 -- Investment Management Agreement, dated July 3, 1995,
between the Company and FirstCity Liquidating Trust
(incorporated herein by reference to Exhibit 10.2 of the
Company's Current Report on Form 8-K dated July 3, 1995
filed with the Commission on July 18, 1995).
10.3 -- Lock-Box Agreement, dated July 11, 1995, among the
Company, NationsBank of Texas, N.A., as lock-box agent,
FirstCity Liquidating Trust, FCLT Loans, L.P., and the
other Trust-Owned Affiliates signatory thereto, and each
of NationsBank of Texas, N.A. and Fleet National Bank, as
co-lenders (incorporated herein by reference to Exhibit
10.3 of the Company's Form 8-A/A dated August 25, 1995
filed with the Commission on August 25, 1995).
10.4 -- Custodial Agreement, dated July 11, 1995, among Fleet
National Bank, as custodian, Fleet National Bank, as
agent, FCLT Loans, L.P., FirstCity Liquidating Trust, and
the Company (incorporated herein by reference to Exhibit
10.4 of the Company's Form 8-A/A dated August 25, 1995
filed with the Commission on August 25, 1995).
10.5 -- Tier 3 Custodial Agreement, dated July 11, 1995, among
the Company, as custodian, Fleet National Bank, as agent,
FCLT Loans, L.P., FirstCity Liquidating Trust, and the
Company, as servicer (incorporated herein by reference to
Exhibit 10.5 of the Company's Form 8-A/A dated August 25,
1995 filed with the Commission on August 25, 1995).
10.6 -- 12/97 Amended and Restated Facilities Agreement, dated
effective as of December 3, 1997, among Harbor Financial
Mortgage Corporation, New America Financial, Inc., Texas
Commerce Bank National Association and the other
warehouse lenders party thereto (incorporated herein by
reference to Exhibit 10.6 of the Company's Form 10-K
dated March 24, 1998 filed with the Commission March 26,
1998).
10.7 -- Modification Agreement, dated January 26, 1998, to the
Amended and Restated Facilities Agreement, dated as of
December 3, 1997, among Harbor Financial Mortgage
Corporation, New America Financial, Inc. and Chase Bank
of Texas, National Association (formerly known as Texas
Commerce Bank National Association) (incorporated herein
by reference to Exhibit 10,7 of the company's Form 10-K
dated March 24, 1998 filed with the Commission March 26,
1998).

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31

EXHIBIT
NUMBER DESCRIPTION
------- -----------

10.8 -- $50,000,000 3/98 Chase Texas Temporary Additional
Warehouse Note, dated March 17, 1998, by Harbor Financial
Mortgage Corporation and New America Financial, Inc., in
favor of Chase Bank of Texas, National Association
(incorporated herein by reference to Exhibit 10.8 of the
Company's Form 10-K dated March 24, 1998 filed with the
Commission March 26, 1998).
10.9 -- Employment Agreement, dated as of July 1, 1997, by and
between Harbor Financial Mortgage Corporation and Richard
J. Gillen (incorporated herein by reference to Exhibit
10.9 of the Company's 10-K dated March 24, 1998 filed
with the Commission March 26, 1998).
10.10 -- Employment Agreement, dated as of September 8, 1997, by
and between FirstCity Funding Corporation and Thomas R.
Brower, with similar agreements between FC Capital Corp.
and each of James H. Aronoff and Christopher J. Morrissey
(incorporated herein by reference to Exhibit 10.10 of the
Company's Form 10-K dated March 24, 1998 filed with the
Commission March 26, 1998).
10.11 -- Shareholder Agreement, dated as of September 8, 1997,
among FirstCity Funding Corporation, FirstCity Consumer
Lending Corporation, Thomas R. Brower, Scot A. Foith,
Thomas G. Dundon, R. Tyler Whann, Bradley C. Reeves,
Stephen H. Trent and Blake P. Bozman (incorporated herein
by reference to Exhibit 10.11 of the Company's Form 10-K
dated March 24, 1998 filed with the Commission March 26,
1998).
10.12 -- Revolving Credit Loan Agreement, dated as of March 20,
1998, by and between FC Properties, Ltd. and Nomura Asset
Capital Corporation (incorporated herein by reference to
Exhibit 10.12 of the Company's Form 10-K dated March 24,
1998 filed with the Commission March 26, 1998).
10.13 -- Revolving Credit Loan Agreement, dated as of February 27,
1998, by and between FH Partners, L.P. and Nomura Asset
Capital Corporation (incorporated herein by reference to
Exhibit 10.13 of the Company's Form 10-K dated March 24,
1998 filed with the Commission March 26, 1998).
10.14 -- Note Agreement, dated as of June 6, 1997, among Bosque
Asset Corp., SVD Realty, L.P., SOWAMCO XXII, LTD., Bosque
Investment Realty Partners, L.P. and Bankers Trust
Company of California, N.A. (incorporated herein by
reference to Exhibit 10.14 of the Company's Form 10-K
dated March 24, 1998 filed with the Commission March 26,
1998).
10.15 -- 60,000,000 French Franc Revolving Promissory Note, dated
September 25, 1997, by J-Hawk International Corporation
in favor of the Bank of Scotland (incorporated herein by
reference to Exhibit 10.15 of the Company's Form 10-K
dated March 24, 1998 filed with the Commission March 26,
1998).
10.16 -- Loan Agreement, dated as of September 25, 1997, by and
between Bank of Scotland and J-Hawk International
Corporation (incorporated herein reference to Exhibit
10.16 of the Company's Form 10-K dated March 24, 1998
filed with the Commission March 26, 1998).
10.17 -- Guaranty Agreement, dated as of September 25, 1997, by
J-Hawk (incorporated herein by reference to Exhibit 10.17
of the Company's Form 10-K dated March 24, 1998 filed
with the Commission March 26, 1998).
10.18 -- Guaranty Agreement, dated as of September 25, 1997, by
FirstCity Financial Corporation in favor of Bank of
Scotland (incorporated herein by reference to Exhibit
10.18 of the Company's Form 10-K dated March 24, 1998
filed with the Commission March 26, 1998).

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32

EXHIBIT
NUMBER DESCRIPTION
------- -----------

10.19 -- Warehouse Credit Agreement, dated as of May 17, 1996,
among ContiTrade Services L.L.C., N.A.F. Auto Loan Trust
and National Auto Funding Corporation (incorporated
herein by reference to Exhibit 10.19 of the Company's
Form 10-K dated March 24, 1998 filed with the Commission
March 26, 1998).
10.20 -- Funding Commitment, dated as of May 17, 1996 by and
between ContiTrade Services L.L.C. and The Company
(incorporated herein by reference to Exhibit 10.20 of the
Company's Form 10-K dated March 24, 1998 filed with the
Commission March 26, 1998).
10.21 -- Revolving Credit Agreement, dated as of December 29,
1995, by and between the Company and Cargill Financial
Services Corporation, as amended by the Eighth Amendment
to Revolving Credit Agreement dated February 1998
(incorporated herein by reference to Exhibit 10.21 of the
Company's Form 10-K dated March 24, 1998 filed with the
Commission March 26, 1998).
10.22 -- Master Repurchase Agreement Governing Purchased and Sales
of Mortgage Loans, dated as of July 1998, between Lehman
Commercial Paper Inc. and FHB Funding Corp. (incorporated
herein by reference to Exhibit 10.1 of the Company's Form
10-Q dated August 14, 1998, filed with the Commission
August 18, 1998).
10.23 -- Warehouse Credit Agreement, dated as of April 30, 1998
among ContiTrade Services, L.L.C., FirstCity Consumer
Lending Corporation, FirstCity Auto Receivables L.L.C.
and FirstCity Financial Corporation (incorporated herein
by reference to Exhibit 10.2 of the Company's Form 10-Q
dated August 14, 1998, filed with the Commission August
16, 1998).
10.24 -- Servicing Agreement, dated as of April 30, 1998 among
FirstCity Auto Receivables L.L.C., FirstCity Servicing
Corporation of California, FirstCity Consumer Lending
Corporation and ContiTrade Services L.L.C. (incorporated
herein by reference to Exhibit 10.3 of the Company's Form
10-Q dated August 14, 1998, filed with the Commission
August 16, 1998).
10.25 -- Security and Collateral Agreement, dated as of April 30,
1998 among FirstCity Auto Receivables L.L.C., ContiTrade
Services L.L.C. and Chase Bank of Texas, National
Association (incorporated herein by reference to Exhibit
10.4 of the Company's Form 10-Q dated August 14, 1998,
filed with the Commission August 16, 1998).
10.26 -- Loan Agreement, dated as of July 24, 1998, between
FirstCity Commercial Corporation and CFSC Capital Corp.
XXX (incorporated herein by reference Exhibit 10.5 of the
Company's Form 10-Q dated August 14, 1998, filed with the
Commission on August 18, 1998).
10.27 -- Loan Agreement, dated April 8, 1998 between Bank of
Scotland and the Company (incorporated herein by
reference to Exhibit 10.6 of the Company's Form 10-Q
dated August 14, 1998, filed with the Commission on
August 18, 1998).
10.28 -- First Amendment to Loan Agreement, dated July 20, 1998,
between Bank of Scotland and the Company (incorporated
herein by reference to Exhibit 10.7 of the Company's Form
10-Q dated August 14, 1998, filed with the Commission on
August 18, 1998).
10.29 -- Employment Agreement, dated October 1, 1998, by and
between FirstCity. Financial Mortgage Corporation, and
Buddy L. Terrell (incorporated herein by reference to
Exhibit 10.29 of the Company's Form 10-Q dated May 17,
1999, filed with the commission on May 17, 1999).

32
33

EXHIBIT
NUMBER DESCRIPTION
------- -----------

10.30 -- Security Agreement, dated as of April 30, 1998 among
Enterprise Funding Corporation, FCAR Receivables L.L.C.,
MBIA Insurance Corporation, FirstCity Funding
Corporation, NationsBank N.A. and CSC Logic/MSA LLP d/b/a
Loan Servicing enterprise (incorporated herein by
reference to Exhibit 10.30 of the Company's Form 10-Q
dated May 17, 1999, filed with the commission on May 17,
1999).
10.31 -- Note purchase agreement, dated March 30, 1999 among
Enterprise Funding Corporation, FCAR Receivables, LLC and
NationsBank , N.A. (incorporated herein by reference to
Exhibit 10.31 of the Company's Form 10-Q dated May 17,
1999, filed with the commission on May 17, 1999).
10.32 -- Custodian Agreement, dated March 30, 1999, among FCAR
Receivables LLC, FirstCity Funding Corporation,
NationsBank, N.A., Enterprise Funding Corporation and
Chase Bank of Texas, N.A. (incorporated herein by
reference to Exhibit 10.32 of the Company's Form 10-Q
dated May 17, 1999, filed with the commission on May 17,
1999).
10.33 -- Credit agreement dated effective as of May 28, 1999 made
by and among Harbor Financial Mortgage, New America
Financial, Inc., FirstCity Financial Mortgage
Corporation, and Guaranty Federal Bank F.S.B. as
Administrative Agent and Bank One, Texas, N.A. as
Collateral Agent (incorporated herein by reference to
Exhibit 10.33 of the Company's Form 10-Q dated August 16,
1999, filed with the commission on August 16, 1999).
10.34 -- Tenth Amendment to Loan Agreement, dated August 11, 1999
between Bank of Scotland and the Company (incorporated
herein by reference to Exhibit 10.34 of the Company's
Form 10-Q dated August 16, 1999, filed with the
Commission on August 16, 1999).
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, Section 18 of the Securities 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.)

(b) Reports on Form 8-K.

The Company filed a Report on Form 8-K on September 22, 1999.

33
34

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

FIRSTCITY FINANCIAL CORPORATION

By /s/ JAMES T. SARTAIN
------------------------------------
Name: James T. Sartain
Title:President and Chief Operating
Officer and Director
(Duly authorized officer of the
Registrant)

By /s/ GARY H. MILLER
------------------------------------
Name: Gary H. Miller
Title:Senior Vice President and Chief
Financial Officer
(Duly authorized officer and
principal financial officer
of the Registrant)

By /s/ JAMES B. BAKER
------------------------------------
Name: James B. Baker
Title:Vice President and Controller
(Duly authorized officer and
principal accounting officer
of the Registrant)

Dated: November 19, 1999

34
35

EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION
------- -----------

3.2 -- Bylaws of the Company (incorporated herein by reference
to Exhibit 3.2 of the Company's Current Report on Form
8-K dated July 3, 1995 filed with the Commission on July
18, 1995).
4.1 -- Certificate of Designations of the New Preferred Stock
($0.01 par value) of the Company (incorporated herein by
reference to Exhibit 4.1 to the Company's Current Report
on Form 10-K dated March 24, 1998 filed with the
Commission on March 26, 1998).
4.2 -- Warrant Agreement, dated July 3, 1995, by and between the
Company and American Stock Transfer & Trust Company, as
Warrant Agent (incorporated herein by reference to
Exhibit 4.2 of the Company's Current Report on Form 8-K
dated July 3, 1995 filed with the Commission on July 18,
1995).
4.3 -- Registration Rights Agreement, dated July 1, 1997, among
the Company, Richard J. Gillen, Bernice J. Gillen, Harbor
Financial Mortgage Company Employees Pension Plan,
Lindsey Capital Corporation, Ed Smith and Thomas E. Smith
(incorporated herein by reference to Exhibit 4.3 of the
Company's Form 10-K dated March 24, 1998 filed with the
Commission on March 26, 1998).
4.4 -- Stock Purchase Agreement, dated March 24, 1998, between
the Company and Texas Commerce Shareholders Company
(incorporated herein by reference to Exhibit 4.4 of the
Company's Form 10-K dated March 24, 1998 filed with the
Commission on March 26, 1998).
4.5 -- Registration Rights Agreement, dated March 24, 1998,
between the Company and Texas Commerce Shareholders
Company. (incorporated herein by reference to Exhibit 4.5
of the Company's Form 10-K dated March 24, 1998 filed
with the Commission on March 24, 1998).
9.1 -- Shareholder Voting Agreement, dated as of June 29, 1995,
among ATARA I Ltd., James R. Hawkins, James T. Sartain
and Cargill Financial Services Corporation (incorporated
herein by reference to Exhibit 9.1 of the Company's Form
10-K dated March 24,1998 filed with the Commission on
March 26, 1998).
10.1 -- Trust Agreement of FirstCity Liquidating Trust, dated
July 3, 1995 (incorporated herein by reference to Exhibit
10.1 of the Company's Current Report on Form 8-K dated
July 3, 1995 filed with the Commission on July 18, 1995).
10.2 -- Investment Management Agreement, dated July 3, 1995,
between the Company and FirstCity Liquidating Trust
(incorporated herein by reference to Exhibit 10.2 of the
Company's Current Report on Form 8-K dated July 3, 1995
filed with the Commission on July 18, 1995).
10.3 -- Lock-Box Agreement, dated July 11, 1995, among the
Company, NationsBank of Texas, N.A., as lock-box agent,
FirstCity Liquidating Trust, FCLT Loans, L.P., and the
other Trust-Owned Affiliates signatory thereto, and each
of NationsBank of Texas, N.A. and Fleet National Bank, as
co-lenders (incorporated herein by reference to Exhibit
10.3 of the Company's Form 8-A/A dated August 25, 1995
filed with the Commission on August 25, 1995).
10.4 -- Custodial Agreement, dated July 11, 1995, among Fleet
National Bank, as custodian, Fleet National Bank, as
agent, FCLT Loans, L.P., FirstCity Liquidating Trust, and
the Company (incorporated herein by reference to Exhibit
10.4 of the Company's Form 8-A/A dated August 25, 1995
filed with the Commission on August 25, 1995).

EXHIBIT
NUMBER DESCRIPTION
------- -----------

10.5 -- Tier 3 Custodial Agreement, dated July 11, 1995, among
the Company, as custodian, Fleet National Bank, as agent,
FCLT Loans, L.P., FirstCity Liquidating Trust, and the
Company, as servicer (incorporated herein by reference to
Exhibit 10.5 of the Company's Form 8-A/A dated August 25,
1995 filed with the Commission on August 25, 1995).
10.6 -- 12/97 Amended and Restated Facilities Agreement, dated
effective as of December 3, 1997, among Harbor Financial
Mortgage Corporation, New America Financial, Inc., Texas
Commerce Bank National Association and the other
warehouse lenders party thereto (incorporated herein by
reference to Exhibit 10.6 of the Company's Form 10-K
dated March 24, 1998 filed with the Commission March 26,
1998).
10.7 -- Modification Agreement, dated January 26, 1998, to the
Amended and Restated Facilities Agreement, dated as of
December 3, 1997, among Harbor Financial Mortgage
Corporation, New America Financial, Inc. and Chase Bank
of Texas, National Association (formerly known as Texas
Commerce Bank National Association) (incorporated herein
by reference to Exhibit 10,7 of the company's Form 10-K
dated March 24, 1998 filed with the Commission March 26,
1998).
10.8 -- $50,000,000 3/98 Chase Texas Temporary Additional
Warehouse Note, dated March 17, 1998, by Harbor Financial
Mortgage Corporation and New America Financial, Inc., in
favor of Chase Bank of Texas, National Association
(incorporated herein by reference to Exhibit 10.8 of the
Company's Form 10-K dated March 24, 1998 filed with the
Commission March 26, 1998).
10.9 -- Employment Agreement, dated as of July 1, 1997, by and
between Harbor Financial Mortgage Corporation and Richard
J. Gillen (incorporated herein by reference to Exhibit
10.9 of the Company's 10-K dated March 24, 1998 filed
with the Commission March 26, 1998).
10.10 -- Employment Agreement, dated as of September 8, 1997, by
and between FirstCity Funding Corporation and Thomas R.
Brower, with similar agreements between FC Capital Corp.
and each of James H. Aronoff and Christopher J. Morrissey
(incorporated herein by reference to Exhibit 10.10 of the
Company's Form 10-K dated March 24, 1998 filed with the
Commission March 26, 1998).
10.11 -- Shareholder Agreement, dated as of September 8, 1997,
among FirstCity Funding Corporation, FirstCity Consumer
Lending Corporation, Thomas R. Brower, Scot A. Foith,
Thomas G. Dundon, R. Tyler Whann, Bradley C. Reeves,
Stephen H. Trent and Blake P. Bozman (incorporated herein
by reference to Exhibit 10.11 of the Company's Form 10-K
dated March 24, 1998 filed with the Commission March 26,
1998).
10.12 -- Revolving Credit Loan Agreement, dated as of March 20,
1998, by and between FC Properties, Ltd. and Nomura Asset
Capital Corporation (incorporated herein by reference to
Exhibit 10.12 of the Company's Form 10-K dated March 24,
1998 filed with the Commission March 26, 1998).
10.13 -- Revolving Credit Loan Agreement, dated as of February 27,
1998, by and between FH Partners, L.P. and Nomura Asset
Capital Corporation (incorporated herein by reference to
Exhibit 10.13 of the Company's Form 10-K dated March 24,
1998 filed with the Commission March 26, 1998).

EXHIBIT
NUMBER DESCRIPTION
------- -----------

10.14 -- Note Agreement, dated as of June 6, 1997, among Bosque
Asset Corp., SVD Realty, L.P., SOWAMCO XXII, LTD., Bosque
Investment Realty Partners, L.P. and Bankers Trust
Company of California, N.A. (incorporated herein by
reference to Exhibit 10.14 of the Company's Form 10-K
dated March 24, 1998 filed with the Commission March 26,
1998).
10.15 -- 60,000,000 French Franc Revolving Promissory Note, dated
September 25, 1997, by J-Hawk International Corporation
in favor of the Bank of Scotland (incorporated herein by
reference to Exhibit 10.15 of the Company's Form 10-K
dated March 24, 1998 filed with the Commission March 26,
1998).
10.16 -- Loan Agreement, dated as of September 25, 1997, by and
between Bank of Scotland and J-Hawk International
Corporation (incorporated herein reference to Exhibit
10.16 of the Company's Form 10-K dated March 24, 1998
filed with the Commission March 26, 1998).
10.17 -- Guaranty Agreement, dated as of September 25, 1997, by
J-Hawk (incorporated herein by reference to Exhibit 10.17
of the Company's Form 10-K dated March 24, 1998 filed
with the Commission March 26, 1998).
10.18 -- Guaranty Agreement, dated as of September 25, 1997, by
FirstCity Financial Corporation in favor of Bank of
Scotland (incorporated herein by reference to Exhibit
10.18 of the Company's Form 10-K dated March 24, 1998
filed with the Commission March 26, 1998).
10.19 -- Warehouse Credit Agreement, dated as of May 17, 1996,
among ContiTrade Services L.L.C., N.A.F. Auto Loan Trust
and National Auto Funding Corporation (incorporated
herein by reference to Exhibit 10.19 of the Company's
Form 10-K dated March 24, 1998 filed with the Commission
March 26, 1998).
10.20 -- Funding Commitment, dated as of May 17, 1996 by and
between ConiTrade Services L.L.C. and The Company
(incorporated herein by reference to Exhibit 10.20 of the
Company's Form 10-K dated March 24, 1998 filed with the
Commission March 26, 1998).
10.21 -- Revolving Credit Agreement, dated as of December 29,
1995, by and between the Company and Cargill Financial
Services Corporation, as amended by the Eighth Amendment
to Revolving Credit Agreement dated February 1998
(incorporated herein by reference to Exhibit 10.21 of the
Company's Form 10-K dated March 24, 1998 filed with the
Commission March 26, 1998).
10.22 -- Master Repurchase Agreement Governing Purchased and Sales
of Mortgage Loans, dated as of July 1998, between Lehman
Commercial Paper Inc. and FHB Funding Corp. (incorporated
herein by reference to Exhibit 10.1 of the Company's Form
10-Q dated August 14, 1998, filed with the Commission
August 18, 1998).
10.23 -- Warehouse Credit Agreement, dated as of April 30, 1998
among ContiTrade Services, L.L.C., FirstCity Consumer
Lending Corporation, FirstCity Auto Receivables L.L.C.
and FirstCity Financial Corporation (incorporated herein
by reference to Exhibit 10.2 of the Company's Form 10-Q
dated August 14, 1998, filed with the Commission August
16, 1998).
10.24 -- Servicing Agreement, dated as of April 30, 1998 among
FirstCity Auto Receivables L.L.C., FirstCity Servicing
Corporation of California, FirstCity Consumer Lending
Corporation and ContiTrade Services L.L.C. (incorporated
herein by reference to Exhibit 10.3 of the Company's Form
10-Q dated August 14, 1998, filed with the Commission
August 16, 1998).

EXHIBIT
NUMBER DESCRIPTION
------- -----------

10.25 -- Security and Collateral Agreement, dated as of April 30,
1998 among FirstCity Auto Receivables L.L.C., ContiTrade
Services L.L.C. and Chase Bank of Texas, National
Association (incorporated herein by reference to Exhibit
10.4 of the Company's Form 10-Q dated August 14, 1998,
filed with the Commission August 16, 1998).
10.26 -- Loan Agreement, dated as of July 24, 1998, between
FirstCity Commercial Corporation and CFSC Capital Corp.
XXX (incorporated herein by reference Exhibit 10.5 of the
Company's Form 10-Q dated August 14, 1998, filed with the
Commission on August 18, 1998).
10.27 -- Loan Agreement, dated April 8, 1998 between Bank of
Scotland and the Company (incorporated herein by
reference to Exhibit 10.6 of the Company's Form 10-Q
dated August 14, 1998, filed with the Commission on
August 18, 1998).
10.28 -- First Amendment to Loan Agreement, dated July 20, 1998,
between Bank of Scotland and the Company (incorporated
herein by reference to Exhibit 10.7 of the Company's Form
10-Q dated August 14, 1998, filed with the Commission on
August 18, 1998).
10.29 -- Employment Agreement, dated October 1, 1998, by and
between FirstCity. Financial Mortgage Corporation, and
Buddy L. Terrell (incorporated herein by reference to
Exhibit 10.29 of the Company's Form 10-Q dated May 17,
1999, filed with the commission on May 17, 1999).
10.30 -- Security Agreement, dated as of April 30, 1998 among
Enterprise Funding Corporation, FCAR Receivables L.L.C.,
MBIA Insurance Corporation, FirstCity Funding
Corporation, NationsBank N.A. and CSC Logic/MSA LLP d/b/a
Loan Servicing enterprise (incorporated herein by
reference to Exhibit 10.30 of the Company's Form 10-Q
dated May 17, 1999, filed with the commission on May 17,
1999).
10.31 -- Note purchase agreement, dated March 30, 1999 among
Enterprise Funding Corporation, FCAR Receivables, LLC and
NationsBank , N.A. (incorporated herein by reference to
Exhibit 10.31 of the Company's Form 10-Q dated May 17,
1999, filed with the commission on May 17, 1999).
10.32 -- Custodian Agreement, dated March 30, 1999, among FCAR
Receivables LLC, FirstCity Funding Corporation,
NationsBank, N.A., Enterprise Funding Corporation and
Chase Bank of Texas, N.A. (incorporated herein by
reference to Exhibit 10.32 of the Company's Form 10-Q
dated May 17, 1999, filed with the commission on May 17,
1999).
10.33 -- Credit agreement dated effective as of May 28, 1999 made
by and among Harbor Financial Mortgage, New America
Financial, Inc., FirstCity Financial Mortgage
Corporation, and Guaranty Federal Bank F.S.B. as
Administrative Agent and Bank One, Texas, N.A. as
Collateral Agent (incorporated herein by reference to
Exhibit 10.33 of the Company's Form 10-Q dated August 16,
1999, filed with the commission on August 16, 1999).

EXHIBIT
NUMBER DESCRIPTION
------- -----------

10.34 -- Tenth Amendment to Loan Agreement, dated August 11, 1999
between Bank of Scotland and the Company (incorporated
herein by reference to Exhibit 10.34 of the Company's
Form 10-Q dated August 16, 1999, filed with the
Commission on August 16, 1999).
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, Section 18 of the Securities 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.)