Debt Buyer FirstCity Financial Reports $47 million Loss in 2008

Commercial asset purchaser and servicer FirstCity Financial Corp. (Nasdaq: FCFC) announced full year and fourth quarter 2008 earnings early Tuesday marked by large net losses in both reporting periods.

Waco, Texas-based FirstCity said that it lost $46.7 million in 2008, compared to net income of $2.2 million in the full year 2007. The vast majority of losses — $34.8 million — occurred in the fourth quarter of 2008.

FirstCity said that the fourth quarter’s earnings were negatively impacted by a $20.1 million write-down on its deferred tax asset. The company also recorded provisions for loss in the quarter of $11.3 million, compared to $3.2 million in the prior year period. The provisions were recorded to reflect declines in expected realization and delayed timing of asset collections.

FirstCity invested $40.4 million in portfolio acquisitions and other investments during the fourth quarter bringing total acquisitions for the year to $125.2 million, down from the $148.7 million invested in 2007. The company focuses on acquiring portfolios of commercial assets, including commercial mortgages, business loans and lease obligations.

The company is an active purchaser of commercial loans outside of the U.S. In 2008, FirstCity invested $23 million in portfolios backed by collateral in Latin America and $1.8 million in Europe.

In the fourth quarter, FirstCity noted that it lost $2.6 million in foreign currency exchange.

“While GAAP earnings have been hit hard in 2008 due to the large provisions, tax adjustments and foreign exchange losses, the company continues to generate positive cash flow from its investments to cover its operating expenses and contribute to current investments,” said Jim Sartain, CEO of FirstCity, in a press release. “Recent investments are reflecting promising returns, and with the continued availability under our lines-of-credit, the Company expects to be able to take advantage of the current opportunities available in the market. We continue to strive to get the best execution on our acquisitions and monitor our operational costs to be as efficient as possible.”

FirstCity, like most other ARM companies, notes that portfolio acquisition market conditions “have created increased opportunities for FirstCity to grow its business through asset acquisition opportunities at attractive margins.” The company also said that recently announced government programs will allow it to acquire portfolios from failed banks in the U.S.