FirstCity Financial Reports Second Quarter 2005 Earnings of $2.7 Million

FirstCity Financial Corporation today announced net earnings to common stockholders for the quarter ended June 30, 2005 of $2.7 million or $.23 per share on a diluted basis.

James T. Sartain, President and CEO of FirstCity, said, “We had a strong quarter in terms of acquisitions and were able to deploy our capital in attractive investments. The pipeline remains strong as the Company continues to build momentum.”

Portfolio Asset Acquisition and Resolution
FirstCity purchased $16.1 million in portfolio assets during the second quarter of 2005. Purchases consisted of eight portfolios — all in the United States. All portfolios purchased during the quarter are wholly owned by FirstCity, which allowed the Company to invest $16.1 million in equity.

Operating contribution from the Portfolio Asset Acquisition business for the second quarter was $4.1 million. The earnings are comprised of $9.2 million in revenues and $5.0 million of expenses. The business generated 52% of the revenues from domestic investments, 32% from investments in Latin America and 16% from investments in Europe. The major components of revenue for the quarter include equity earnings in Acquisition Partnerships and servicing entities of $3.7 million, servicing fees of $2.9 million, gain on resolution of Portfolio Assets of $1.2 million and interest income and other of $1.4 million.

Operating contribution from the Portfolio Asset Acquisition business for the second quarter includes net foreign currency gains of $688,000, which is comprised of $424,000 in Mexican peso gains and $264,000 of Euro gains. Quarterly results were less impacted by foreign currency fluctuations, as the Company borrowed in Euros to hedge the risk associated with foreign currency exposure.

The Company is a diversified financial services company with operations dedicated to portfolio asset acquisition and resolution with offices in the U.S. and with affiliate organizations in France and Mexico. Its common stock is listed on the NASDAQ National Market System under the symbol “FCFC.”