Debt Buyer FirstCity Reports Third Quarter Loss

Waco, Texas-based FirstCity Financial (Nasdaq: FCFC) said Monday that it lost $1.8 million in the third quarter of 2008 on declining collections and increases in portfolio impairments and foreign exchange losses.

FirstCity’s $1.8 million loss, or $0.17 per share, marked a swing from the $2.7 million profit it reported in the third quarter of 2007.

The company said that third quarter earnings were negatively impacted by net impairment provisions, declining collections, and asset-level expenses attributed primarily to consolidated and non-consolidated domestic portfolios; and foreign currency exchange losses.

FirstCity recorded an impairment charge of $2.1 million in the quarter, which included impairments of $1.2 million in the United States, $300,000 in Europe, and $600,000 in Latin America.

Total revenues in the third quarter were $12.7 million, up from $11.6 million in the year-ago quarter. The business generated 57 percent of the revenues (including equity in earnings of investments) from domestic investments, 30 percent from investments in Latin America, and 13 percent from investments in Europe.

Collections on FirstCity’s consolidated domestic portfolios decreased to $14.5 million in third quarter 2008 from $18.3 million in third quarter 2007, and aggregate collections on portfolios held in non-consolidated domestic partnerships decreased to $13.2 million in third quarter 2008 from $14.2 million in third quarter 2007.

The combined impact of foreign currency transactions from the company's foreign operations resulted in a $0.4 million foreign currency exchange loss in third quarter 2008, compared to a combined impact of $0.9 million in foreign currency exchange gains in third quarter 2007. The global distribution of the combined foreign currency exchange loss in third quarter 2008 was comprised of $0.5 million of exchange losses from European operations and $0.1 million of exchange gains from Latin American operations.

FirstCity was involved in acquiring $4.5 million of portfolio investments with a face value of approximately $78.1 million in the third quarter 2008 -- of which the company's investment share was $3.2 million. FirstCity's global distribution of its third quarter 2008 investments includes $2.9 million in the United States and $0.3 million in Latin America.

Management believes that current market conditions have created tremendous opportunities for FirstCity to expand its business, and that asset acquisition opportunities at attractive margins are available. These opportunities are showing up in FirstCity's current pipeline as the company is currently evaluating 29 different transactions representing approximately $7.2 billion in face value of assets, of which $6 billion is in the U.S., $347 million in Europe and $817 million in Latin America. This is in contrast to the pipeline at the end of the fourth quarter 2007 with $1.8 billion in face value, of which only $398 million was in the U.S.