FirstCity Financial Reports First Quarter 2006 Earnings

Highlights of the Quarter:

• FirstCity (NasdaqNM:FCFC – News) reports 1st quarter 2006 earnings of $2,022,141 or $.17 per diluted share.
• FirstCity invested $23.3 million in portfolio assets for the quarter.
• FirstCity reports continued earning asset growth of $12.4 million for the quarter.

James T. Sartain, President and CEO, said, “We were pleased with the strong acquisitions and equity investments in the first quarter. Our asset base continues to grow as we progress toward a critical mass in earning assets. The revenues and resulting earnings from this growth will build steadily over time. Our pipeline is strong and we are currently evaluating 29 different transactions representing over $4 billion in face value of assets.”

Portfolio Asset Acquisition and Resolution

FirstCity purchased $42.4 million in portfolio assets during the first quarter of 2006 and invested equity in these portfolios of $23.3 million. These purchases consisted of three portfolios — all in the United States.

Operating contribution from the Portfolio Asset Acquisition business for the first quarter was $3.3 million. The earnings were comprised of $5.5 million in revenues, $3.6 million in equity in earnings of investments and $5.8 million of expenses, including a provision for loan losses of $109,000. The business generated 58% of the revenues (including equity in earnings of investments) from domestic investments, 29% from investments in Latin America and 13% from investments in Europe. The major components of revenue for the quarter include equity earnings in Acquisition Partnerships and servicing entities of $3.6 million, servicing fees of $2.6 million, gain on resolution of Portfolio Assets of $1.3 million and interest income of $1.2 million.

Operating contribution from the Portfolio Asset Acquisition business for the first quarter includes net foreign currency gains of $517,000, which is comprised of $334,000 of Euro gains, $174,000 in Mexican peso gains and $9,000 in Argentine peso gains. The Company continued to borrow in Euros to hedge the risk associated with foreign currency exposure.