FirstCity Financial Reports Fourth Quarter 2005 Earnings

Highlights of the Quarter:

• FirstCity reports 4th quarter 2005 earnings of $1,948,137, or $.16 per diluted share.

• FirstCity invested $35 million in portfolio assets for the quarter.

• FirstCity reports continued earning asset growth of $25 million for the quarter.

Earnings from continuing operations of $2 million for the quarter reflected strong collections of $70 million as well as $793,000 of foreign currency gains for the quarter.

James T. Sartain, President and CEO said, “We are pleased with the strong purchases in the fourth quarter and the resulting growth in earning assets. The pipeline for prospective investments remains strong and the company is well positioned to take advantage of its strong liquidity to continue the growth of the asset base.”

Portfolio Asset Acquisition and Resolution
FirstCity purchased $82.7 million in portfolio assets during the fourth quarter of 2005. Purchases consisted of thirteen portfolios; two in Europe, two in South America and nine in the United States. Invested equity of $35 million for the quarter advanced total year investments to $71.4 million.

Operating contribution from the portfolio asset acquisition business for the fourth quarter was $3.5 million. The earnings were comprised of revenues of $6.4 million and $3.1 million of equity in earnings of investments, net of $6.2 million in expenses and $224,000 of net recoveries of loan and impairment losses. The business generated 56% of the revenues (including equity in earnings of investments) from domestic investments, 32% from investments in Latin America and 12% from investments in Europe. The major components of revenue for the quarter included servicing fees of $2.8 million, gain on resolution of portfolio assets of $1.1 million, interest income of $1.5 million and other income of $1.0 million.

Operating contribution from the portfolio asset acquisition business for the fourth quarter included net foreign currency gains of $793,000 comprised of $690,000 in Mexican peso gains and $103,000 of Euro gains.