FirstCity Financial Corporation Announces Delay in Filing Annual Report

FirstCity Financial Corporation announced today that it will file a 15-day extension notification with the Securities and Exchange Commission regarding its Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

The delay in filing its 2006 10-K is necessary to allow for the completion of an independent investigation being conducted by the Audit Committee of FirstCity’s Board of Directors. The Audit Committee began its investigation on February 20, 2007, with the assistance of outside advisors to review two unrelated but potentially improper events. The Audit Committee is investigating whether FirstCity and its subsidiaries received inadequate compensation, or other improprieties occurred, with respect to the sale of a loan portfolio to a third party.

The Audit Committee is also reviewing FirstCity’s compliance with laws applicable to its foreign operations as a result of allegations against an officer of an affiliate of the Company regarding matters that occurred prior to the individual becoming an officer of that affiliate. Both matters were brought to the attention of the Board of Directors and Audit Committee by management.
 
Management believes that the outcome of the Audit Committee’s investigation will not have a material adverse effect on FirstCity’s financial condition or results of operations as will be reported in FirstCity’s 2006 financial statements or as FirstCity reported in any of its previously filed financial statements. FirstCity will postpone its conference call to discuss 2006 results, previously scheduled for March 14, 2007, until it has filed its 2006 Form 10-K. FirstCity will file its 2006 Form 10-K as soon as possible.