Surviving A Banking CrisisPurchasing and Managing Distressed Debt

September 1, 2010 Santiago, Chile

Presented by James T. Sartain

President and CEO FirstCity Financial Corporation

OpportunityA favorable juncture of circumstances

Webster’s dictionary

•Formed in 1986 as commercial debt buyer in the U.S. •Large buyer of distressed commercial debt in previous banking crisis•Merged with publicly traded holding company in 1995 (Nasdaq-FCFC)•Exported debt purchase/management platform to other geographies:

1996 France1998 Mexico1999 Japan, Thailand2005 Argentina, Caribbean2005 Chile2007 Germany

•Purchased, managed and resolved over $11.5 B of face value distressed debt since 1986.

•Currently managing $3.6B of face value of distressed debt

FirstCity Financial Corporation

0

1

2

3

4

5

6

7

8

9

10

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Une

mpl

oym

ent R

ate

%

Unemployment

Unemployment Rates2000 - 2010

Source: Bureau of Labor Statistics Generated on: August 18, 2010

Nearly 15 million workers unemployed 9.5%

12,347

14,417

6,838

7,9268,315

14,434

8,243

8.7

7.2

9.79.5

5.6

5.3

4

5.6

0

5,000

10,000

15,000

1980 1985 1990 1995 2000 2005 2010 Q2 20100.0

2.0

4.0

6.0

8.0

10.0

# of Banks U.S. Unemployment

Bank Count and Unemployment 1980 - 2010

Ban

k C

ount

Une

mpl

oym

ent %

Each 1.00% of unemployment equates approximately to 1.5 million workers

Historical Interest Rates2000 - 2010

0.18

9.23

6.92

4.684.12

4.34

7.96

5.09

3.25

3.25

8.05

6.17

0.23 0.33

1.08

5.335.02

4.39

2.42

1.121.38

1.88

6.57

0.120.17

5.24

4.16

0.99

2.16

1.25

1.82

6.45

4.22

0

1

2

3

4

5

6

7

8

9

10

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

WSJ Prime Rate 30 Day LIBOR Fed Fund Rate

WSJ

Prim

e R

ate

(in %

)

Fed Fund Rate

30 Day LIBOR

WSJ Prime

Case Shiller 20 City Index(Baseline value of 100 set in Jan 2000)

1987 - 2010

0

50

100

150

200

250

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

20 City Average

Cas

e Sc

hille

r Ind

ex

Index set to 100 in Jan 2000

Peak value in Jan 2006 of 202.4

Index is 82.3 in Jan 1990

2.15%/yr average increase 1990 - 2000

17.1%/yr average increase 2000 - 2006

12.8%/yr average decrease

2006 - 2009

Case Shiller 20 City Index(Baseline value of 100 set in Jan 2000)

2000 - 2010

100

125

150

175

200

225

250

275

300

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Las Vegas Average 20 City Average Phoenix Average Miami Average

Cas

e Sc

hille

r Ind

ex

Las Vegas values approximately same in 2010 as in 2000

High value of 230.5 in Las Vegas in 2007

High value of 221.8 in Phoenix in 2006

High value of 279.4 in Miami in 2007

High value of 202.3 20 City Average in 2007

3.313

3.105

3.680

3.870

3.004

2.785

2.895

2.682

3.2413.233

2.947

0.00

1.00

2.00

3.00

4.00

5.00

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Average price in USD

$ pe

r gal

. (3.

8 lit

)

Milk Prices (Milk, fresh whole, fortified, per gal )

2000 - 2010

Source: US Bureau of Labor Statistics

Average increase of 1.9%/yr from 2000-2010 28.8% increase 2006-2007. Note similar shape to Case Shiller curve)

*7/31/10

The Milk Bubble

Historical CMBS Volume(Commercial Mortgage – Backed Securities)

4312

230

203

169

93

78

52

67

4757

74

3726

161514 16

$0

$50

$100

$150

$200

$250

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

CMBS Volume

CM

BS

Vol

ume

($ b

illio

ns)

WAMU fails, AIG Rescued

FDIC closes 108 banks and sells $13.737 billion

FDIC closes 25 banks and sells $1.597 billion UPB of failed assets

FDIC closes 140 banks and sells $5.683 billion of failed assets

Current Banking Crisis Timeline

July 2007

Sept 2008

Jan-Dec 2009

Bear Sterns Funds FailUnemployed 4.6%*

Unemployed rate 10.0% in 12/09*

Lehman Brothers Files bankruptcyMerrill Lynch sells to Bank of America

Jan-Jul 2010

* Each 1.00% of unemployment equates to approximately 1.5 million workers

Oct 2008

US government funds TARP program to provide liquidity to banking system

Unemployment rate 7.4% on 12/08* Sep-Dec 2008

Unemployment 6.6%*

Unemployed rate 9.5% in 7/10*

Unemployment 6.2%*

Bank Failures 2000 - 2010

25

185

140

30043

1142

0

25

50

75

100

125

150

175

200

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Bank Falures

*

*109 banks have failed through August 6, 2010

# of

Fai

led

Ban

ks

Extrapolated 12/31/10 value

25

185

140

30043

1142

100

112.4120.6

135.6

151.7

176.5

202.4 202.3

180.7

146.4146.3

0

25

50

75

100

125

150

175

200

225

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Bank Falures Case Shiller 20 city index

Bank Failures/Home Price Index 2000 – 2010

*

*109 banks have failed through August 6, 2010

# of

Fai

led

Ban

ks

Rapid decline of house prices

Rapid increase in failed bank count

Cas

e Sh

iller

20

Citi

es In

dex

# of

Fai

led

Ban

ks

Prim

e R

ate

(%)

Une

mpl

oym

ent R

ate

(%)

Bank Failures, Prime Rate, Case Shiller Index and Unemployment

2000 - 2010

25

100112.4

120.6

135.6

151.7

176.4

202.4 202.3

180.7

146.3 146.4

140

2 411 3

185

3004

5.09

8.057.96

6.17

4.344.134.68

6.92

9.23

3.25 3.254.2

4.0

5.7

5.85.7

5.34.7 4.6

5.0

7.7

9.7

0

25

50

75

100

125

150

175

200

225

1 2 3 4 5 6 7 8 9 10 110.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

Case Shiller 2 0 city ind ex Bank Failures Prime Rate Unemp lo yment

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Bank failures

Case Shiller Index

Prime Rate

Unemployment Rate

Domino Effect

Non-Current Loans and Real Estate Owned Assets6,772 Reporting Institutions

As of 3/31/10

53

97

419398

44

227

0.49%

0.52%0.87%

3.47%3.36%

1.84%

0

100

200

300

400

500

2005 2006 2007 2008 2009 20100%

1%

2%

3%

4%

5%

Balance in $ of Non-Current % of Non-Current Assets & REO to Total Assets

UPB

OF

Non

-Cur

rent

Ass

ets (

$ bi

llion

s)

% o

f Non

-Cur

rent

to T

A

44.8

65.8

83.1

38.3

29.2

9.27.165.5

10.4

6.24.74.7

36.5

10.2 10.713.3

19.6

0

10

20

30

40

50

60

70

80

2005 2006 2007 2008 2009 2010

Bank Group 1 - Total Assers $100 mil - $1 BillionBank Group 2 - Total Assers $1 Billion - 10 BillionCombined Bank Group

Non

Cur

rent

Ass

ets &

REO

($ in

Bill

ions

)

Non-Current Loans & REO AssetsHeld by Midsized Banks 2010 Q1

Combined Bank Group Curve

FDIC Loan Sales Via Auction

1,450

5,683.8

1.6

1,597.3

69354

675

230336568

335 7.8448.8

2,119

3,480

4,146

2,005

4,562

1,341

5,387

106

180915.5

42020740 1.4

204204

845

1458

3.5 422.2

2453.2

646

1455

2811

882

2654

3332

0

1,000

2,000

3,000

4,000

5,000

6,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Book Value Sale Price

UPB

of L

oan

Sale

s ($

in m

illio

ns)

Duration = 8 years

Aggregate UPB Sold

Aggregate PPx paid

$0

$50

$100

$150

$200

$250

$300

$350

$400

2003 2004 2005 2006 2007 2008 2009 6/30/2010

Non-Loss sharing UPB Loss Sharing UPB

$ in billions

UPB of Failed Banks and Introduction of Loss Sharing Agreements

No loss sharing in 200825 banks

140 banks

108 banks YTD

Loss Sharing causes acquiring banks to enter partnerships with FDIC and retain assets for future sale with FDIC approval

Loss Sharing amounts

87% of 2008 UPB amount due to failure of WAMU

91.5

79.3

55.0

36.3

373.6

FDIC Loan SalesSold Via Structured Transactions

Price for EquityLoan Type # of loans BV (Mil) % Equity sold Equity $ (Mil) Leverage Implied Value % Implied $ Pd

SFR, A&D 733 146.0 40% 19.0 na 32.8% 47.9 SFR, A&D 2,829 561.0 20% 43.0 na 38.6% 216.5 2008 Total 3,562 707 62.0 264.4

ADC 1,112 1,120.0 20% 20.0 na 9.0% 100.8 Resi Construction 520 733.0 20% 32.0 na 22.0% 161.3 Commercial Construction 147 702.0 20% 41.0 na 29.2% 205.0 Consumer, Construction, Lots 3,044 1,652.0 20% 54.0 na 16.4% 270.9 SFR, A&D 5,475 1,320.0 50% 64.0 6:01 64.8% 855.4 Commercial Construction 101 4,451.0 40% 551.0 1:01 62.5% 2,781.9 2009 Total 10,399 9,978 762.0 4,375.2

Commercial Real Estate 1,184 1,028.0 40% 91.0 1:01 44.7% 459.5 Residential ADC 5,166 2,253.0 40% 172.0 1:01 38.6% 869.7 Commercial ADC 345 799.0 40% 72.0 1:01 45.7% 365.1 SFE 3,373 491.0 50% 34.0 2:01 42.0% 206.2 Commercial RE, ADC 57 421.0 40% 68.0 1:01 82.3% 346.5 SFR, A&D 1,456 314.0 50% 28.0 1:01 35.4% 111.2 Commercial Real Estate 1,660 1,849.0 40% 218.0 1:01 59.9% 1,107.6 SFR, A&D 3,755 898.0 40% 66.0 1:01 37.4% 335.9 2010 Total 16,996 8,053 749.0 3,801.6

Grand Total 30,957 18,738 1,573 8,441

FirstCity Operations

U.S.A. Europe Latin America

FirstCity Business Model

Identification

Evaluation

Execution

Servicing

Asset by Asset pricing discipline

Asset specific disposition strategies

Pricing Analysis (Economics, Industry, Operational)

FirstCity is a brand name in asset acquisition business

Sourcing comes from 24 years of relationships

Experience allows precise targeting of purchase opportunities

Sale Documentation

Servicing Transfer

Leverage considerations

Experience – tested and validated asset servicing methodologies

Extensive reporting for management and investors

Feedback Loop

Portfolio Management; Surveillance; Reporting

FirstCity Commercial FirstCity Servicing

Monitoring Servicing and making proactive changes to collection strategies

Feedback process is used to continuously refine and improve the purchase process

Knowledge gained from actual performance provides feedback for pricing

Specific resolution successes and failures reviewed with Evaluation team

FirstCity Markets – United States

• Year Established

• Assets Under Management

• Locations

• Employees

• Primary Asset Type

• Investment/Funding Capital Partners

$769 million

Waco, Texas

106

1986

Improved Commercial RE Commercial & Industrial Office

Warehouse Business Assets

Varde Partners Cargill

Perella Weinberg Partners Bank of America Bank of Scotland

• Entity FirstCity Commercial FirstCity Crestone American Business Lending

Denver, Colorado Dallas, Texas

20062007

$137 million$46 million

Small Business Loan Origination/Servicing

through SBA programs

Small Private Equity Turnaround Financing

6 14

Bank of America BFI Business Finance

Bank of Scotland

Wells Fargo Capital Finance Bank of Scotland

FirstCity Markets – Europe

• Year Established

• Assets Under Management

• Locations

• Employees

• Primary Asset Type

• Investment/Funding Capital Partners

France

$856 million

Paris

190

1997

Fonds D’Commerce Business Assets Commercial &

Industrial Single Family Residence

MCS Cargill BESV

Germany

$389 million

Hannover Siegberg

58

2006

Commercial & Industrial Business

Assets

MCS Cargill

Bank of Scotland

• Country

FirstCity Markets – Latin America

Mexico

$868 million

Mexico City Guadalajara

113

1996

Commercial & Industrial Single Family Residence Business Assets

Consumer

AIG Banco Santander

Brazil

4

2008

$282 million

Sao Paulo

Commercial & Industrial Business

Assets

AIG

Chile

$289 million

Santiago

559

2005

Consumer Commercial &

Industrial Business Assets

ServincoDeutsche Bank

• Year Established

• Assets Under Management

• Locations

• Employees

• Primary Asset Type

• Investment/Funding Capital Partners

• Country

Historical Equity Investments By Region

2.2

$ in millions

Total2004 47.7$ 80% 9.9$ 17% $ 4% 59.8$ 2005 58.6$ 79% 2.2$ 3% 13.8$ 18% 74.6$ 2006 120.2$ 70% 15.2$ 9% 34.5$ 20% 2.3$ 1% 172.2$2007 125.7$ 84% 14.3$ 10% 8.7$ 6% 148.7$2008 114.2$ 91% 7.1$ 6% 3.9$ 3% 125.2$2009 182.8$ 94% - 0 - 11.1$ 6% 193.9$-0-

-0-

Europe Other-0--0-

U.S.Latin

America

-0-

YTD 2010 71.8$ 91% - 0 - 79.1$-0-

* FCFC Investments, including other

7.3$ 9%*

• Economic and governmental uncertainties extend globally

• Uncertainties create challenges

• Unemployment in the U.S. will remain at historically high levels

• U.S. economy will struggle with a jobless recovery (the new norm)

• Dislocated markets create new opportunities

• Investors remain cautious

• Debt issuers and banks will need to adjust

• Bankers back to banking

Take - Aways

“Out of adversity comes opportunity”

James T. Sartain

(Nasdaq – FCFC)