##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549
 Form 10-K/A (Amendment No. 1)
 (Mark One)R
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2004or£
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from           to
 Commission file number 033-19694 
 FirstCity Financial Corporation (Exact name of registrant as specified in its charter)
 Delaware
    
    76-0243729(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 6400 Imperial Drive, Waco, TX(Address of Principal Executive Offices)
    
    76712
(Zip Code)
 (254) 761-2800
(Registrants Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act:
None Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Common Stock, par value $.01
Adjusting Rate Preferred Stock, par value $.01 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes R No £ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. £ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act). Yes £ No R The number of shares of common stock outstanding at April 27, 2005 was 11,267,187. As of June
30, 2004, the aggregate market value of the voting and non-voting common equity held by
non-affiliates, based upon the closing price of the common stock on the Nasdaq National Market
System, was approximately $69,121,639.




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TABLE OF CONTENTS  PART IIIItem 10. Directors and Executive Officers of the RegistrantItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related TransactionsItem 14. Principal Accountant Fees and ServicesPART IVItem 15. Exhibits and Financial Statement SchedulesSIGNATURESEXHIBIT INDEXCertification of CEO Pursuant to Section 1350Certification of CFO Pursuant to Section 1350    Table of Contents  EXPLANATORY NOTE This Amendment No. 1 to the Annual Report on Form 10-K of FirstCity Financial Corporation (the
Company or FirstCity) is being filed to amend the Companys Form 10-K filed with the Securities
and Exchange Commission (SEC) on March 22, 2005 to include disclosures under Part III of Form
10-K, which were previously incorporated by reference to the Companys definitive proxy statement 
 PART III 
 Item 10.Directors and Executive Officers of the Registrant. Director Information Information concerning members of the Companys board of directors (the Board) is set forth
below: Name
    
    Age
    
    PositionJames R. Hawkins
    
    
    69
    
    
    Chairman of the BoardC. Ivan Wilson
    
    
    77
    
    
    Vice Chairman of the BoardJames T. Sartain
    
    
    56
    
    
    President, Chief Executive Officer and DirectorRichard E. Bean
    
    
    61
    
    
    DirectorDane Fulmer
    
    
    54
    
    
    DirectorRobert E. Garrison II
    
    
    63
    
    
    DirectorJeffery D. Leu
    
    
    49
    
    
    Director
 James R. Hawkinshas been Chairman of the Board since the consummation of the merger of J-Hawk
Corporation (J-Hawk) and First City Bancorporation of Texas, Inc. in 1995 (the Merger), and was
Chairman of the Board and Chief Executive Officer of J-Hawk from 1976 until the Merger. Mr. Hawkins
was also formerly Chief Executive Officer of FirstCity through January 2001. Mr. Hawkins is a
certified public accountant licensed in the state of Texas. C. Ivan Wilsonhas been Vice Chairman of the Board of FirstCity since the Merger. From
February 1998 to June 1998, Mr. Wilson was Chairman, President and Chief Executive Officer of
Mercantile Bank, N.A., Corpus Christi, Texas, a national banking organization. Mr. Wilson was
Chairman of the Board and Chief Executive Officer of First City Bancorporation of Texas, Inc.
(FCBOT) from 1991 to the Merger. Prior to 1991, Mr. Wilson was the Chief Executive Officer of
FirstCity, Texas  Corpus Christi, one of FCBOTs banking subsidiaries. James T. Sartainhas been President of FirstCity since the Merger and Chief Executive Officer
since January 2001 and has served as a Director of FirstCity since the Merger. Prior to January
2001, Mr. Sartain was President and Chief Operating Officer of FirstCity. From 1988 to the Merger,
Mr. Sartain was President and Chief Operating Officer of J-Hawk. Richard E. Beanhas been a Director of FirstCity since the Merger and since 1976 Mr. Bean has
served as the Executive Vice President and a Director of Pearce
Industries, Inc., a privately held
company that markets a variety of oilfield equipment and construction machinery. Mr. Bean served
as Chief Financial Officer of Pearce Industries from 1976 to 2004. Mr. Bean served as a member of
the Portfolio committee of the FirstCity Liquidating Trust from the Merger through the termination
of the Trust in January 2004. Prior to the Merger, Mr. Bean was Chairman of the FCBOTs Official
Committee of Equity Security Holders. Mr. Bean is currently a Director, the Chairman of the Audit
Committee, and a member of the Compensation Committee of WCA Waste Corporation, a publicly owned
solid waste collection and disposal Company, and a Director and the Chairman of the Audit Committee
of Sanders Morris Harris Group Inc., a publicly owned financial services firm. Mr. Bean is also a
stockholder and director of several closely held corporations. Mr. Bean is involved in numerous
civic organizations such as the Houston Livestock Show and Rodeo where he serves as a Director and
Member of the Audit Budget Committee. Mr. Bean received a M.B.A. in Accounting and a Bachelor of
Business Administration in Finance from the University of Texas at Austin and has been a Certified
Public Accountant licensed in the State of Texas since 1968. 2




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Dane Fulmerhas been a Director of FirstCity since May 1999. Mr. Fulmer is a consultant and
provides risk management services. From August 1995 until January 2004, Mr. Fulmer served as
Executive Vice President and director of risk management of John Taylor Financial Group, a
broker/dealer and investment advisory firm that Mr. Fulmer co-founded in 1995. From July 1991 until
August 1996, Mr. Fulmer served as Executive Vice President of Merchants Investment Center of Fort
Smith, a broker/dealer and investment advisory firm, and as portfolio manager for Merchants
National, the parent company. Robert E. Garrison IIhas been a Director of FirstCity since May 1999. Mr. Garrison is the
President, Chief Executive Officer and director of Sanders Morris Harris Group. Previously, Mr.
Garrison served as Executive Vice President and director of Harris Webb & Garrison and also served
as Chairman, Chief Executive Officer, and director of Pinnacle Management & Trust Co. Mr. Garrison
co-founded both of these companies in 1994. Both Harris Webb & Garrison and Pinnacle Management &
Trust Co. are subsidiaries of Sanders Morris Harris Group. In addition, Mr. Garrison serves as
Chairman of the Board of BioCyte Therapeutics, a cancer diagnostic and therapeutic company focused
on breast, ovarian, and prostate cancer. Mr. Garrison serves as a director of TeraForce Technology
Corporation, Inc., a public defense electronics company, Somerset House Publishing, First Capital
Bank, and is a member of the Finance Committee of Memorial Hermann Hospital System. He has over 36
years of experience in the securities industry. Mr. Garrison is a Chartered Financial Analyst. Jeffery D. Leuhas been a Director of FirstCity since December 2000. Mr. Leu is President of
the Value Investment Group of Cargill, a wholly owned subsidiary of Cargill Incorporated, which is
regarded as one of the worlds largest privately-held corporations. Mr. Leu joined Cargill in 1981
and has held various management positions in Cargills financial businesses. Board of Directors and Committees The Board has reviewed the provisions of the Sarbanes-Oxley Act of 2002, the rules of the SEC
and the NASDAQ Stock Market governance listing standards and determined that the Company is in
compliance with such standards. The Board has determined that Messrs. Bean, Fulmer, Garrison and
Wilson are independent Directors under the NASDAQ Stock Market Rules. Messrs. Hawkins and Sartain,
employees of the Company, and Mr. Leu, an executive officer of CFSC Capital Corp. XXX (see Certain
Relationships and Related Transactions for relationships of Cargill and CFSC Capital Corp. with
the Company), were not deemed independent. Mr. C. Ivan Wilson, an independent Director, serves as
Vice-Chairman and presides over executive sessions of the non-management Directors. Board Meetings.During 2004, the Board of Directors held five (5) meetings. Each of the
directors attended more than 75% of such meetings. All of the directors attended the Companys
2004 Annual Meeting of Stockholders. The Company has encouraged the attendance of all Directors at
the annual meetings of stockholders and has scheduled its stockholders meetings to achieve that
goal. The Company has not adopted a formal policy related to the attendance of Directors at annual
meetings of stockholders. Committees. The Companys Board of Directors has the following five standing committees:
Executive Committee; Audit Committee; Compensation Committee; Investment Committee; and a
Nominating and Corporate Governance Committee. Members of these committees generally are elected
annually at the regular meeting of the Board of Directors immediately following the annual meeting
of stockholders. Further information concerning the Boards standing committees appears below. Executive Committee. The Executive Committee consists of Messrs. Hawkins (Chairman) and
Sartain. Subject to certain limitations specified by the Companys Bylaws and the Delaware General
Corporation Law, the Executive Committee is authorized to exercise the powers of the Board of
Directors when the Board is not in session. During 2004, the Executive Committee held no actual
meetings but took several actions by unanimous written consent. Audit Committee.The Audit Committee consists of Messrs. Bean (Chairman), Garrison and
Wilson. The Audit Committee is a standing committee of the Board of Directors. The
Board has determined that all members
of the Audit Committee are independent Directors under the rules of the
NASDAQ Stock Market and the rules and regulations of the SEC. The Board of Directors has
determined that Mr. Bean qualifies as an audit committee financial expert under applicable SEC
and NASDAQ regulations. The Audit Committee has a charter adopted by the Board of Directors that
sets forth its membership requirements, authority and responsibilities. A copy of the Audit
Committee Charter can be found in the Investor Relations  Corporate Governance Section of the
Companys website at www.fcfc.com. During 2004, the Audit Committee held eight(8) meetings. 3




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The Audit Committee meets with management to consider the adequacy of the internal controls of the
Company and the objectivity of financial reporting. Its primary function is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing  
    the financial information to be provided to the stockholders, potential stockholders,
the investment community and others;
    the systems of internal controls established by the management and the Board of Directors; and
    the audit process. The Audit Committee also meets with the independent auditors and with appropriate Company financial
personnel about these matters. The functions of the Audit Committee also include recommending to
the Board of Directors which firm of independent public accountants should be engaged by the
Company to perform the annual audit, reviewing annually the Companys Audit Committee Charter,
approving certain other types of professional service rendered to the Company by the independent
public accountants and considering the possible effects of such services on the independence of
such public accountants. The independent auditors periodically meet alone with the Audit Committee
and always have unrestricted access to the Audit Committee. Compensation Committee.The Compensation Committee during 2004 consisted of Messrs. Wilson
(Chairman), Garrison and Leu until August 5, 2004, and after August 5, 2004, consisted of Messrs.
Wilson (Chairman), Garrison and Fulmer. The Compensation Committee is a standing committee of the
Board of Directors. The Board has determined that all members of the Compensation Committee are
(i) independent directors under the listing standards of the NASDAQ Stock Market, (ii)
non-employee directors within the meaning of Rule 16b-3 under the Exchange Act and (iii) outside
directors within the meaning of Section 162(m) of the Internal Revenue Code. The Compensation
Committee has a charter that has been adopted by the Board of Directors that sets forth its
membership requirements, authority and responsibilities. A copy of the Compensation Committee
Charter can be found in the Investor Relations  Corporate Governance section of the Companys
website at www.fcfc.com. The functions of the Compensation Committee include making
recommendations to the Board of Directors regarding compensation for executive officers, including
the chief executive officer, of the Company and its subsidiaries. The Compensation Committee is
responsible for all recommendations, reviews, modifications and approvals with respect to the Stock
Option and Award Plans. During 2004, the Compensation Committee held
two (2) meetings. Investment Committee. The Investment Committee consists of Messrs. Sartain (Chairman),
Garrison, Fulmer, Wilson, Leu and Bean. The functions of the Investment Committee include providing
oversight and approval of prospective investments based on thresholds of risk exposure to the
Companys balance sheet. During 2004, the Investment Committee held no meetings. Nominating and Corporate Governance Committee.The Nominating and Corporate Governance
Committee during 2004 consisted of Messrs. Leu (Chairman) and Fulmer until August 5, 2004, and
after August 5, 2004, consisted of Messrs. Fulmer (Chairman), Garrison and Bean. The Nominating and
Corporate Governance Committee is a standing committee of the Board of Directors. The Board has
determined that each of the members of the Nominating and Corporate Governance Committee qualified
as an independent Director under the rules of the NASDAQ Stock Market and rules and regulations of
the SEC. The Nominating and Corporate Governance Committee has a charter that has been adopted by
the Board of Directors that sets forth its membership requirements, authority and responsibilities.
The full text of the Charter of the Nominating and Corporate Governance Committee can be found in
the Investor Relations  Corporate Governance
section of the Companys website at www.fcfc.com.
The Nominating and Corporate Governance Committee recommends the number of board positions to be
filled in accordance with the Bylaws of the Company and the persons to be nominated to serve in
those positions. In this regard, the Nominating Committee considers the performance of incumbent
directors in determining whether such directors should be nominated to stand for reelection. The
Nominating and Corporate Governance Committee also reviews the recommendations of the Chief
Executive Officer related to the appointment of executive officers and proposed personnel changes
related to such officers and is responsible for conducting an annual review of the Companys Code
of Business Conduct and Ethics. During 2004, the Nominating and Corporate Governance Committee
held one meeting. 4




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Executive Officers The executive officers of the Company, who are elected by the Board of Directors of the
Company and serve at its discretion, are as follows: Name
    
    Age
    
    PositionJames R. Hawkins
    
    
    69
    
    
    Chairman of the BoardJames T. Sartain
    
    
    56
    
    
    President and Chief Executive OfficerJ. Bryan Baker
    
    
    44
    
    
    Senior Vice President and Chief Financial OfficerTerry R. DeWitt
    
    
    47
    
    
    Senior Vice PresidentJoe S. Greak
    
    
    56
    
    
    Senior Vice President, Tax DirectorJames C. Holmes
    
    
    48
    
    
    Senior Vice PresidentRichard J. Vander Woude
    
    
    50
    
    
    Senior Vice President, General Counsel and Secretary
 The business experience of Messrs. Hawkins and Sartain is set forth under Proposal I -
Election of Directors. J. Bryan Bakerhas been Senior Vice President and Chief Financial Officer of FirstCity since
June 2000. Previously, Mr. Baker served as Vice President and Treasurer from August 1999 to June
2000, as Vice President and Controller of FirstCity from November 1996 to August 1999, and as Vice
President and Assistant Controller from 1995 to November 1996. From 1990 to 1995, Mr. Baker was
with Jaynes, Reitmeier, Boyd & Therrell, P.C., an independent public accounting firm, involved in
both auditing and consulting. From 1988 to 1990, Mr. Baker was Controller of Heights Bancshares in
Harker Heights, Texas. Mr. Baker is a certified public accountant licensed in the state of Texas. Terry R. DeWitthas been Senior Vice President responsible for Due Diligence and Investment
Evaluation of FirstCity since the Merger. Mr. DeWitt served as Senior Vice President responsible
for Due Diligence and Investment Evaluation of J-Hawk from 1992 to the Merger. From 1991 to 1992,
Mr. DeWitt was Senior Vice President of the First National Bank of Central Texas, a national
banking association, and from 1989 to 1991, he was President of the First National Bank of
Goldthwaite, a national banking association. Joe S. Greakhas been Senior Vice President and Tax Director of the Company since the Merger.
Mr. Greak was the Tax Manager of FCBOT since 1993. From 1992 to 1993, Mr. Greak was the Tax Manager
of New First City -Houston, N.A. Prior thereto, he was Senior Vice President and Tax Director of
First City, Texas  Houston, N.A. Mr. Greak is a certified public accountant licensed in the state
of Texas. James C. Holmeshas been Senior Vice President of FirstCity since the Merger. From the Merger
to August 1999 Mr. Holmes served as Senior Vice President and Treasurer of the Company and held the
same positions with J-Hawk from 1994 to the Merger. From 1988 to 1991, Mr. Holmes was a Vice
President of MBank, Waco, a national banking association. Richard J. Vander Woudehas been General Counsel and Senior Vice President of FirstCity since
January 1998 and has served as Secretary since June 2000. Prior thereto, Mr. Vander Woude was a
director and shareholder in the law firm of Vander Woude & Istre, P.C., Waco, Texas from 1992
through 1997. From 1978 to 1992, Mr. Vander Woude was a director and shareholder of Sheehy,
Lovelace & Mayfield, P.C., Waco, Texas. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires the Companys directors and executive officers, and
persons who own more than 10 percent of Common Stock, to file with the SEC certain reports of
beneficial ownership of Common Stock. Based solely upon a review of copies of such reports
furnished to the Company and written representations that no other reports were required, the
Company believes that all applicable Section 16(a) filing requirements were complied with by its
directors, officers and 10 percent stockholders during 2004,
except for James R. Hawkins, who was
late filing statements of changes in beneficial ownership for transactions occurring on October 19,
2004, November 23, 2004, and December 12, 13, 14, 16 and
17, 2004. 5




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Code of Business Conduct and Ethics The Company has adopted a Code of Business Conduct and Ethics which is applicable to the
directors, executive officers and all employees of the Company, including the principal executive
officer, principal financial officer and principal accounting officer. The Code of Business
Conduct and Ethics is available in the Investor Relations  Corporate Governance section of the
Companys website at www.fcfc.com. 
 Item 11.Executive Compensation. The following table sets forth certain information concerning compensation for services during
each of the last three years to (1) the Companys Chief Executive Officer during 2004, (2) the
Companys other four most highly compensated executive officers during 2004 serving as such at the
end of 2004, and (3) Jim W. Moore, who resigned from the Company
in November 2004 (collectively, the Named
Executive Officers). Summary Compensation Table Long TermCompensationAwardsAnnual Compensation
    
    
    SecuritiesUnderlying
    
    
    All OtherName and Principal Position
    
    Year
    
    
    Salary($)
    
    
    Bonus($)
    
    
    Options(#)
    
    
    Compensation(1)($)James T. Sartain,
    
    
    2004
    
    
    
    365,627
    
    
    
    380,002
    
    
    
    37,500
    
    
    
    16,048President and Chief Executive Officer
    
    
    2003
    
    
    
    300,014
    
    
    
    100,000
    
    
    
    
    
    
    
    15,7902002
    
    
    
    300,014
    
    
    
    
    
    
    
    
    
    
    
    15,190Terry R. DeWitt,
    
    
    2004
    
    
    
    271,875
    
    
    
    150,000
    
    
    
    15,000
    
    
    
    5,040Senior Vice President
    
    
    2003
    
    
    
    250,000
    
    
    
    
    
    
    
    
    
    
    
    4,9502002
    
    
    
    250,000
    
    
    
    135,000
    
    
    
    
    
    
    
    4,950James C. Holmes,
    
    
    2004
    
    
    
    243,750
    
    
    
    149,997
    
    
    
    15,000
    
    
    
    5,040Senior Vice President
    
    
    2003
    
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    4,9502002
    
    
    
    200,000
    
    
    
    135,000
    
    
    
    
    
    
    
    4,950Richard J. Vander Woude,
    
    
    2004
    
    
    
    275,000
    
    
    
    90,000
    
    
    
    15,000
    
    
    
    5,328Senior Vice President, General
    
    
    2003
    
    
    
    275,000
    
    
    
    
    
    
    
    
    
    
    
    4,950Counsel and Secretary
    
    
    2002
    
    
    
    275,000
    
    
    
    80,000
    
    
    
    
    
    
    
    4,950J. Bryan Baker,
    
    
    2004
    
    
    
    200,000
    
    
    
    90,000
    
    
    
    15,000
    
    
    
    4,860Senior Vice President and Chief
    
    
    2003
    
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    4,800Financial Officer
    
    
    2002
    
    
    
    150,000
    
    
    
    50,000
    
    
    
    
    
    
    
    4,800Jim W. Moore
    
    
    2004
    
    
    
    335,293
    
    
    
    360,500
    
    
    
    15,000
    
    
    
    5,190Former Senior Vice President
    
    
    2003
    
    
    
    354,375
    
    
    
    319,097
    
    
    
    
    
    
    
    5,1902002
    
    
    
    337,096
    
    
    
    243,750
    
    
    
    
    
    
    
    5,190
   (1)
    
    The total amounts indicated under All Other Compensation for 2004 consist of (a) amounts
contributed to match a portion of such employees contributions under a 401(k) plan (401(k)
Match), (b) excess premiums paid on supplemental life insurance policies (Supplement Life)
and (c) personal use of a business vehicle (Auto), and (d) amounts paid for moving expenses
(Other). The following table details the amounts paid during 2004 for each of the
categories: 401(k)
    
    
    SupplementExecutive
    
    Match($)
    
    
    Life($)
    
    
    Auto($)
    
    
    Total($)James T. Sartain
    
    
    4,500
    
    
    
    1,548
    
    
    
    10,000
    
    
    
    16,048Terry R. DeWitt
    
    
    4,500
    
    
    
    540
    
    
    
    
    
    
    
    5,040James C. Holmes
    
    
    4,500
    
    
    
    540
    
    
    
    
    
    
    
    5,040Richard J. Vander Woude
    
    
    4,500
    
    
    
    828
    
    
    
    
    
    
    
    5,328J. Bryan Baker
    
    
    4,500
    
    
    
    360
    
    
    
    
    
    
    
    4,860Jim W. Moore
    
    
    4,500
    
    
    
    690
    
    
    
    
    
    
    
    5,190
 6




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Employment Agreements with Named Executive Officers On March 31, 2004, the Company entered into a Separation and Release Agreement with G. Stephen
Fillip, former Senior Vice President of the Company, as a result of his resignation of employment.
The agreement provides for the payment of severance benefits to Mr. Fillip. Such benefits include a
monthly payment equal to $10,000 and continuation of health coverage through June 15, 2006. As a
condition of payment, Mr. Fillip has agreed not to participate in any business involving the
acquisition of and/or servicing of portfolios of assets and/or loans for one year after the
expiration or termination of his Consultant Agreement with the Company (described below). The Company entered into a Consultant Agreement with Mr. Fillip on April 1, 2004 for a period
of one year. Under this agreement, Mr. Fillip provided services similar to the duties he performed
prior to his resignation and received a consulting fee of $1,000 per day worked. The Consultant
Agreement terminated by its terms in April 2005. Director Compensation During
2004, Directors of the Company who were not employees of the Company or any of its
subsidiaries received a retainer of $3,000 per quarter for their services as directors (from January
1, 2004 through December 31, 2004, each such director received an aggregate of $12,000 for such
directors services as director for such period). Such directors also received $1,000 plus expenses
for each regular and special board of directors meeting attended, $500 plus expenses for each
meeting of any committee of the board of directors attended, and $500 per each telephonic meeting
of the Board of Directors or any committee. Directors who are employees of the Company do not
receive directors fees. Beginning in January 1, 2005, Directors of the Company who are not employees of the Company or
any of its subsidiaries receive a retainer of $3,500 per quarter for their services as directors.
The Chairman of the Audit Committee receives an additional retainer of $750 per quarter. Such Directors also
receive $1,000 plus expenses for each regular and special board of directors meeting attended, $500
($750 for the Chairman) plus expenses for each meeting of any committee of the board of directors
attended, and $500 per each telephonic meeting of the Board of Directors or any committee.
Directors who are employees of the Company do not receive directors fees. Stock Option Plans and 401(k) Plan FirstCity has stock option and award plans for the benefit of key individuals, including its
directors, officers and key employees. The exercise price for all options granted is equal to or
greater than the fair market value of the underlying Common Stock at the date of grant. Therefore,
the holders of the stock options will benefit from such options only when, and to the extent, the
price of Common Stock increases after the grant of the option. The performance of individual
executive officers and other key employees is considered by the Compensation Committee in
allocating such grants, taking into account the Companys performance, each individuals
contributions thereto and specific accomplishments in each individuals area of responsibility. Information about FirstCitys compensation plans at December 31, 2004 was as follows: Equity Compensation Plan Information Number of Sharesto Be Issued
    
    
    Weighted-Average
    
    
    Number of SharesUpon Exercise of
    
    
    Exercise Price of
    
    
    Remaining AvailablePlan Category
    
    Outstanding Options
    
    
    Outstanding Options
    
    
    for Future IssuanceEquity compensation
plans approved by
stockholders(1)
    
    
    737,000
    
    
    $
    7.19
    
    
    
    198,150Equity compensation
plans not approved
by stockholders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    737,500
    
    
    $
    7.19
    
    
    
    198,150
   (1)
    
    Consists of the 1995, 1996 and 2004 Stock Option and Award Plans. The Company also has a defined contribution 401(k) employee profit sharing plan (the 401(k)
Plan) in which the Company matches employee contributions at a stated percentage of employee
contributions to a defined maximum. The Company contributed approximately $143,000, $162,000 and
$184,000 in 2004, 2003 and 2002, respectively, to the 401(k) Plan. 7




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Option Grants in 2004 The following table sets forth certain information with respect to grants of stock options
during 2004 to the Named Executive Officers. Individual Grants in 2004Number of Shares
    
    
    Percent of TotalUnderlying Options
    
    
    Options Granted to
    
    
    Exercise Price Per
    
    
    Expiration
    
    
    Grant Date PresentName
    
    Granted (1)
    
    
    Employees
    
    
    Share ($)
    
    
    Date
    
    
    Value (2)James T. Sartain
    
    
    37,500
    
    
    
    15.66
    %
    
    $
    7.25
    
    
    
    5/13/2014
    
    
    $
    239,625Terry R. DeWitt
    
    
    15,000
    
    
    
    6.26
    %
    
    $
    7.25
    
    
    
    5/13/2014
    
    
    $
    95,850James C. Holmes
    
    
    15,000
    
    
    
    6.26
    %
    
    $
    7.25
    
    
    
    5/13/2014
    
    
    $
    95,850Richard J. Vander Woude
    
    
    15,000
    
    
    
    6.26
    %
    
    $
    7.25
    
    
    
    5/13/2014
    
    
    $
    95,850J. Bryan Baker
    
    
    15,000
    
    
    
    6.26
    %
    
    $
    7.25
    
    
    
    5/13/2014
    
    
    $
    95,850Jim W. Moore
    
    
    15,000
    
    
    
    6.26
    %
    
    $
    7.25
    
    
    
    5/13/2014
    
    
    $
    95,850
   (1)
    
    These options were granted as of May 13, 2004 and will vest in four equal, consecutive
annual installments, commencing on the first anniversary of the grant date. Subject to the
terms of the 2004 Stock Option and Award Plan, such options may be exercised to purchase
all or any portion of such vested shares at any time prior to the termination thereof. The
unexercised portions of such options, if any, terminate ten years from the grant date. Such
options are non-transferable other than by will or the laws of descent and distribution or
to members of the immediate family of the employee, a trust for the benefit of the
immediate family of the employee, or a partnership where immediate family members of the
employee are the only partners. Under the 2004 Stock Option and Award Plan, the right to
exercise options with respect to unvested shares may be accelerated in certain
circumstances.(2)
    
    These estimated hypothetical values are based on a Black-Scholes option pricing model
in accordance with SEC rules. FirstCity used the following assumptions in estimating these
values: potential option term, 10 years; risk-free rate of return, 4.85%; expected
volatility, 90.4%; and expected dividend yield, 0%. Option Exercises and Year-End Values The following table sets forth, for the Named Executive Officers, stock options exercised in
2004, the number of shares of Common Stock underlying both exercisable and non-exercisable stock
options held by such persons as of December 31, 2004, and the year-end values for unexercised
in-the-money options, which represent the positive spread between the exercise price of any such
options and the year-end market price of the Common Stock. Aggregated 2004 Option Exercises
and Year-End Option Values Exercised in 2004
    
    
    Unexercised at December 31, 2004Number of Shares
    
    
    
    
    
    
    Number of Shares
    
    
    Value of UnexercisedAcquired Upon
    
    
    
    
    
    
    Underlying Unexercised
    
    
    In-the-Money OptionsExercise of
    
    
    $ Value
    
    
    Options at Year End
    
    
    at Year End($) (1)Name
    
    Options
    
    
    Realized
    
    
    Exercisable
    
    
    Unexercisable
    
    
    Exercisable
    
    
    UnexercisableJames T. Sartain
    
    
    
    
    
    
    N/A
    
    
    
    124,800
    
    
    
    37,500
    
    
    $
    755,000
    
    
    $
    106,125Terry R. DeWitt
    
    
    
    
    
    
    N/A
    
    
    
    42,700
    
    
    
    15,000
    
    
    $
    175,500
    
    
    $
    42,450James C. Holmes
    
    
    
    
    
    
    N/A
    
    
    
    37,400
    
    
    
    15,000
    
    
    $
    154,440
    
    
    $
    42,450Richard J. Vander Woude
    
    
    
    
    
    
    N/A
    
    
    
    50,000
    
    
    
    15,000
    
    
    $
    377,500
    
    
    $
    42,450J. Bryan Baker
    
    
    
    
    
    
    N/A
    
    
    
    54,000
    
    
    
    15,000
    
    
    $
    382,800
    
    
    $
    42,450Jim W. Moore
    
    
    25,000
    
    
    $
    144,750
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    
   (1)
    
    Calculated using the aggregate market value (based on December 31, 2004 stock price of $10.08
per share) of the shares of the Common Stock underlying such options, less the aggregate
exercise price payable. 8




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##### Table of Contents



BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The following report concerning the specific factors, criteria and goals underlying decisions
on payments and awards of compensation to each of the executive officers of the Company for fiscal
year 2004 is provided by the Compensation Committee of the Companys Board of Directors. General.Recommendations regarding compensation of the Companys executive officers (other
than the compensation of the Chief Executive Officer and the Chairman of the Board) are made by the
Chief Executive Officer to the Chairman of the Board. The Chairman of the Board makes
recommendations regarding compensation of the Companys executive officers (other than the Chairman
of the Board) to the Compensation Committee. The Compensation Committee reviews the
recommendations of the Chairman of the Board and determines the compensation of the Chairman of the
Board and the other executive officers. The compensation of the Chief Executive Officer and the
other executive officers is subject to the review, modification and approval of the Board of
Directors, except that (1) the Chief Executive Officer and the Chairman of the Board do not
participate in the preparation of recommendations, or the review, modification or approval thereof,
with respect to their compensation and (2) all such recommendations, reviews, modifications and
approvals with respect to awards under the Stock Option and Award Plans are made solely by the
Compensation Committee. The Companys compensation program is designed to enable the Company to attract, motivate and
retain high quality senior management by providing a competitive total compensation opportunity
based on performance. Toward this end, the Company provides for competitive base salaries, annual
variable performance incentives payable in cash for the achievement of financial performance goals,
and long-term, stock-based incentives that strengthen the mutuality of interests between senior
management and the Companys stockholders. Section 162(m) (Section 162(m)) of the Internal Revenue Code of 1986, as amended (the
Code), provides that no deduction for federal income tax purposes shall be allowed to a publicly
held corporation for applicable employee remuneration with respect to any covered employee of the
corporation to the extent that the amount of such remuneration for the taxable year with respect to
such employee exceeds $1.0 million. For purposes of this limitation, the term covered employee
generally includes the chief executive officer of the corporation and the four highest compensated
officers of the corporation (other than the chief executive officer), and the term applicable
employee remuneration generally means, with respect to any covered employee for the taxable year,
the aggregate amount allowable as a federal income tax deduction for services performed by such
employee (whether or not during the taxable year); provided, however, that applicable employee
remuneration does not include, among other items, certain remuneration payable solely on account
of the attainment of one or more performance goals (performance based compensation). It is the
Companys general intention that the remuneration paid to its covered employees not exceed the
deductibility limitation established by Section 162(m). Nevertheless, due to the fact that not all
remuneration paid to covered employees may qualify as performance-based compensation, it is
possible that the Companys deduction for remuneration paid to any covered employee during a
taxable year may be limited by Section 162(m). Salaries.Salaries for the year 2004 for each of the Companys executive officers, including
its Chief Executive Officer, were determined based upon such officers level of responsibility,
time with the Company, contribution to the Company and individual performance. The evaluation of
these factors was subjective, and no fixed, relative weights were assigned thereto. Bonuses. Messrs. Sartain, DeWitt, Holmes, Vander Woude and Baker were participants in a bonus
plan in 2004, which provided for a bonus pool based on the annual net profits of FirstCity and
price increase of the Common Stock exceeding certain thresholds. Mr. Moore
participated in a bonus pool established for executive management of Drive. Stock Options.The Compensation Committee believes that stock options are critical in
motivating and rewarding the creation of long-term stockholder value, and the subcommittee has
established a policy of awarding stock options each year based on the continuing progress of the
Company as well as on individual performance. In 2004, the Compensation Committee recommended, and
the Board of Directors approved, the grant of stock options for 239,500 shares of the Common Stock
under the 2004 Stock Option and Award Plan (112,500 were granted to the Companys executive
officers). The exercise price with respect to all such grants was equal to the fair market value
of the underlying the Common Stock at the date of grant so that the holders of such options will
benefit from such options only when, and to the extent, the price of the Common Stock increases
after such grant. The performance of individual executive officers and other key employees was
considered by the Compensation Committee in allocating such grants, taking into account the
Companys performance, each individuals contributions thereto and specific accomplishments in each
individuals area of responsibility. 9




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##### Table of Contents



Compensation of the Chief Executive Officer. The Chairman of the Board makes recommendations
to the Compensation Committee regarding compensation of the Companys Chief Executive Officer. The
Compensation Committee reviews the recommendation of the Chairman and makes appropriate adjustments
regarding the compensation of the Chief Executive Officer and makes a recommendation to the Board
of Directors, which recommendation is subject to the review, modification and approval of the
members of the Board of Directors, other than the Chief Executive Officer. Such recommendations,
reviews, modifications and approvals for 2004 were based on the Chief Executive Officers level of
responsibility, time with the Company, contributions to the performance of the Company, maintenance
of liquidity during the year to ensure the Company was able to continue to make investments and
involvement in initiatives to strengthen corporate governance and comply with new regulations. THE COMPENSATION COMMITTEEC. Ivan Wilson, ChairmanRobert E. Garrison IIDane Fulmer
 Compensation Committee Interlocks and Insider Participation in Compensation Decisions Messrs. Wilson (Chairman), Fulmer and Garrison served as members of the Compensation Committee
of the Board of Directors since the 2004 Annual Meeting of Stockholders. Neither of Messrs.
Wilson, Fulmer and Garrison was an officer or employee of the Company or any of its subsidiaries
during 2004 or any prior year. No interlocking relationship exists between the members of the
Companys Board of Directors, executive officers or Compensation Committee and the board of
directors, executive officers and compensation committee of any other company, nor has any such
interlocking relationship existed in the past. Cumulative Total Stockholder Return The following graph compares the cumulative total stockholder return on a share of Common
Stock, based on the market price thereof, with  
    the Nasdaq Stock Market (US) Index (the Nasdaq Market Index) prepared for Nasdaq by
the Center for Research in Security Prices (CRSP) and
    the Nasdaq Financial Stocks Index (the Nasdaq Industry Index) prepared for Nasdaq
by CRSP for the period beginning on December 31, 1999 and ending on December 31, 2004. Cumulative total
stockholder return is based on an annual total return, which assumes the reinvestment of all
dividends for the period shown and assumes that $100 was invested on December 31, 1999 in each of
Common Stock, the Nasdaq Market Index and the Nasdaq Industry Index. 10




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##### Table of Contents



The Company has not declared any dividends during this period. The results shown below are not
necessarily indicative of future performance. (PERFORMANCE GRAPH) 1999
    
    
    2000
    
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004FirstCity
    
    
    100.00
    
    
    
    61.45
    
    
    
    43.64
    
    
    
    49.82
    
    
    
    221.82
    
    
    
    366.55Nasdaq Market Index
    
    
    100.00
    
    
    
    60.31
    
    
    
    47.84
    
    
    
    33.07
    
    
    
    49.45
    
    
    
    53.81Nasdaq Industry Index
    
    
    100.00
    
    
    
    108.11
    
    
    
    118.75
    
    
    
    122.30
    
    
    
    165.41
    
    
    
    193.11
 
 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters. The following table sets forth certain information regarding the Common Stock owned on April
7, 2005 (the Measurement Date) by (1) each person who is known by the Company to be the
beneficial owner of more than five percent of the Common Stock as of such date, (2) each of the
Companys directors and nominees for director, (3) each of the Named Executive Officers and (4) all
directors and executive officers of the Company as a group. Except as otherwise indicated, all
shares of the Common Stock shown in the table are held with sole voting and investment power. Amount andNature ofTitle
    
    
    
    Beneficial
    
    Percentof Class
    
    Name and Address of Beneficial Owner(1)
    
    Ownership(2)
    
    of ClassCommon Stock
    
    James R. Hawkins
    
    
    1,054,639
    (3)(5)
    
    
    9.4
    %Common Stock
    
    James T. Sartain
    
    
    620,209
    (5)
    
    
    5.4
    %Common Stock
    
    Richard E. Bean
    
    
    294,333
    
    
    
    2.6
    %Common Stock
    
    Dane Fulmer
    
    
    74,200
    
    
    
    *Common Stock
    
    Robert E. Garrison II
    
    
    78,450
    
    
    
    *Common Stock
    
    Jeffery Leu
    
    
    
    (4)
    
    
    *Common Stock
    
    C. Ivan Wilson
    
    
    40,520
    
    
    
    *Common Stock
    
    Terry R. DeWitt
    
    
    201,332
    
    
    
    1.8
    %Common Stock
    
    James C. Holmes
    
    
    174,485
    
    
    
    1.5
    %Common Stock
    
    Richard J. Vander Woude
    
    
    59,185
    
    
    
    *Common Stock
    
    J. Bryan Baker
    
    
    57,750
    
    
    
    *Common Stock
    
    Jim W. Moore
    
    
    31,157
    (6)
    
    
    *Common Stock
    
    All directors and executive officers as a group (12 persons)
    
    
    2,766,510
    
    
    
    23.6
    %
   *Less than 1%  (1)
    The business mailing address of each of such persons (except as otherwise indicated) is P.O.
Box 8216, Waco, Texas 76714-8216.  (2)
    Includes shares that may be acquired within 60 days of the Measurement Date upon the exercise
of options granted under the Companys stock option and award plans as follows: James T.
Sartain  134,175; Richard E. Bean  12,500; Dane Fulmer  3,750; Robert E. Garrison II 
3,750; C. Ivan Wilson  8,750; Terry R. DeWitt  46,450; James C. Holmes 11




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##### Table of Contents



 41,150; Richard J. Vander Woude  53,750; J. Bryan Baker  57,750; all directors and executive
officers as a group (12 persons)  442,275.  (3)
    Includes 250,994 shares of Common Stock held of record by J-Hawk, Ltd., the sole general
partner of which is Combined Funding, Inc. Mr. Hawkins may be deemed to beneficially own such
shares of Common Stock as a result of his ownership of 50% of the common stock of Combined
Funding, Inc.  (4)
    Mr. Leu is an officer of certain affiliates of Cargill, which, as of the Measurement Date was
the record owner of 221,683 shares of Common Stock and may acquire
12,500 shares within 60 days of the Measurement Date upon
the exercise of options granted under the Companys stock option and award plans.
Mr. Leu disclaims beneficial ownership of
such shares and options. Cargill is party to the Shareholder Voting Agreement with Messrs. Hawkins and
Sartain, and ATARA, regarding the Common Stock.  (5)
    Messrs. Hawkins and Sartain and ATARA, the sole general partner of which is ATARA Corp., are
parties to a Shareholder Voting Agreement with Cargill regarding the Common Stock, pursuant to
which ATARA and Messrs. Hawkins and Sartain are required to vote their shares of Common Stock
to elect one designee of Cargill as a director of the Company, and Cargill is required to vote
its shares of Common Stock to elect one or more designees of ATARA and Messrs. Hawkins and
Sartain as directors of the company. Each of Messrs. Hawkins and Sartain and ATARA disclaims
beneficial ownership of the shares of Common Stock owned by Cargill.(6)
    Mr. Moore resigned from the Company in November 2004. 
 Item 13.Certain Relationships and Related Transactions. The Company owns equity interests in various purchased asset portfolios through limited
partnerships and limited liability companies (Acquisition Partnerships) in which a corporate
affiliate of the Company is the sole general partner or managing member, and the Company and other
non-affiliated investors are limited partners or members. Certain directors and executive officers
of the Company may also serve as directors and/or executive officers of the general partner or
managing member, but receive no additional compensation from or on behalf of such general partner
or managing member for serving in such capacity. The Company provides asset servicing to such
Acquisition Partnerships pursuant to servicing agreements between the Company and such Acquisition
Partnerships. Service fees totaling $13.7 million for 2004 were derived from such affiliates. Under a Right of First Refusal Agreement and Due Diligence Reimbursement Agreement effective
as of January 1, 1998, as amended (the Right of First Refusal Agreement) among the Company,
FirstCity Servicing Corporation, Cargill and its wholly-owned subsidiary CFSC Capital Corp. II
(CFSC), if the Company receives an invitation to bid on or otherwise obtains an opportunity to
acquire interests in loans, receivables, real estate or other assets located in the United States,
Mexico, Central America and South America in which the aggregate amount to be bid exceeds $4
million, or $500,000 for consumer assets, the Company is required to follow a prescribed notice
procedure pursuant to which CFSC has the option to participate in the proposed purchase by
requiring that such purchase or acquisition be effected through an Acquisition Partnership formed
by the Company and Cargill (or an affiliate). The Right of First Refusal Agreement does not
prohibit the Company from holding discussions with entities other than CFSC regarding potential
joint purchases of interests in loans, receivables, real estate or other assets, provided that any
such purchase is subject to CFSCs right to participate in the Companys share of the investment.
The Right of First Refusal Agreement further provides that, subject to certain conditions, CFSC
will pay to the Company a monthly amount to cover due diligence expense, plus 50% of the third
party due diligence expenses incurred by the Company in connection with proposed asset purchases.
The Right of First Refusal Agreement is a restatement and extension of a similar agreement entered
into among the Company, certain members of the Companys management and Cargill in 1992. The Right
of First Refusal Agreement has a termination date of February 1, 2006 and will renew automatically
for an additional year on an annual basis thereafter unless either party gives notice to the other
of its desire to discontinue the arrangement six months prior to the termination date. The Company has loans receivable, totaling $21.3 million at December 31, 2004, made to certain
Acquisition Partnerships. These loans are secured by the assets/loans acquired by the partnerships
with purchase money loans provided by the investors to the partnerships to purchase the asset pools
held in those entities. Payments on these notes are dependent upon proceeds from the resolution of
Portfolio Assets held by the Acquisition Partnerships. The Company leases office space for its principal executive offices in Waco, Texas from a
trust created for the benefit of the children of James R. Hawkins, the Chairman of the Board of the
Company. This lease expires in December of 2006 and contains an option in favor of the Company
pursuant to which the Company may renew the lease for an additional five-year period, with 12




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escalating lease payments. Rental expense under such lease is $10,000 per month. The Company
believes that the terms of such lease are generally as favorable to the Company as the terms it
would receive from an independent third party. J-Hawk I, Ltd., a limited partnership of which James R. Hawkins is an affiliate, and
FirstStreet Investments, LLC, an affiliate of FirstCity Financial Corporation, entered into a loan
sale agreement dated June 30, 2004, pursuant to which J-Hawk I, Ltd. purchased from FirstStreet
Investments, LLC, a promissory note executed on behalf of Combined Entertainment, Inc. (also an
affiliate of Mr. Hawkins) as maker. The note was guaranteed by James R. Hawkins, Rick R. Hagelstein
and J-Hawk Corporation (now FirstCity Financial Corporation). The purchase price for the note was
$2.0 million, an amount equal to the outstanding principal balance of the promissory note plus all
outstanding accrued interest due on the note. Pursuant to the loan sale agreement, J-Hawk I, Ltd.,
Park Central Recreation, Inc., Combined Entertainment, Inc. and James R. Hawkins released
FirstCity, FirstStreet Investments, LLC, FirstCity Servicing Corporation, WAMCO IX, Ltd. and their
affiliates and subsidiaries from all obligations under a guaranty of the promissory note and
indemnified FirstCity, FirstStreet Investments, LLC, FirstCity Servicing Corporation, WAMCO IX,
Ltd. and their subsidiaries and affiliates and all officers, directors, employees, agents and
representatives of all such persons from any claims related to the promissory note, the guaranty
and the ownership and servicing of the promissory note and guaranty. The sale was without
representations or warranties except as to ownership of the promissory note. FirstCity Servicing Corporation and MCS, in which FirstCity Servicing Corporation is a 10%
shareholder as of December 31, 2004, and Compagnie Transatlantic De Portefeuille SAS (CTP), in
which FirstCity Servicing Corporation is a 33% shareholder, are each parties, to Consulting,
License and Confidentiality Agreements, dated June 30, 1999 and November 1, 1997, respectively,
pursuant to which FirstCity Servicing Corporation provides consultation services and personnel to
be employed by MCS and CTP to assist in developing and managing due diligence and servicing
systems. Pursuant to those agreements, MCS and CTP agree to provide the supplied personnel with
compensation, tax equalization payments, housing allowances, transportation allowance, tax
preparation and MCS and CTP pay consulting fees to FirstCity Servicing Corporation and reimburse
FirstCity Servicing Corporation for travel, hotel, airfare, and meal expenses paid by it related to
the provision of the services. EuroTex Partners, Ltd., a subsidiary of FirstCity Commercial
Corporation, purchased real and personal property used as a personal residence of the supplied
employee in Paris, France for a purchase price of $2.2 million. FirstCity recorded $255,000 in 2004
from MCS and CTP as reimbursement fees included in other income. The Company has unsecured notes payable to Terry R. DeWitt, G. Stephen Fillip and James C.
Holmes, each of whom were Senior Vice Presidents of FirstCity, in connection with the acquisition
of the minority interest in FirstCity Holdings. The notes are to be periodically redeemed by the
Company for an aggregate of up to $3.2 million out of certain cash collections from servicing
income from Portfolios in Mexico. FirstCity valued the loans at the inception date using an imputed
interest rate based on the Companys cost of funds. At December 31, 2004, these notes had an
imputed balance of $491 and mature in December 2011. 
 Item 14.Principal Accountant Fees and Services. Audit and Related Fees The aggregate fees billed for professional services by KPMG LLP (KPMG) in 2004 and 2003 for
these various services were: 2004
    
    
    2003Audit Fees (1)
    
    $
    1,228,327
    
    
    $
    603,180Audit-Related Fees (2)
    
    
    15,413
    
    
    
    Tax Fees
    
    
    
    
    
    
    All Other Fees
    
    
    
    
    
    
    Total
    
    $
    1,243,740
    
    
    $
    603,180
   (1)
    
    Audit Fees are fees paid to KPMG for the audit of the Companys annual consolidated financial
statements and the financial statements of certain equity investments, review of financial
statements included in the Companys Form 10-Qs, and services that are normally provided by KPMG
in connection with statutory and regulatory filings. Audit fees in 2004 also include fees paid to
KPMG relating to compliance with Section 404 of the Sarbanes-Oxley Act, which, for companies
meeting the SEC definition of an accelerated filer, requires an independent registered public
accounting firm to audit managements evaluation of internal controls over financial reporting. In
March 2004, management of the Company believed that FirstCitys market value of the voting and
non-voting common equity held by non-affiliates was close enough to potentially cause the Company
to be an accelerated filer at year-end in accordance with the SEC rules and regulations.
Therefore, the Company engaged KPMG to audit managements evaluation of internal controls over
financial reporting. At year-end, however, FirstCity was deemed not to meet the definition of an
accelerated 13




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filer, and therefore was not required to include in its annual report on Form 10-K KPMGs audit
opinion over managements evaluation of internal controls over financial reporting.(2)
    
    Audit-related fees are fees for assurance and related services that are reasonably related to
the performance of the audit or review of FirstCitys financial statements and internal control
over financial reporting, including services in connection with assisting the Company in its
compliance with its obligations under Section 404 of the Sarbanes-Oxley Act and related
regulations. Audit Committee Pre-Approval Policies and Procedures The Audit Committee has adopted policies and procedures for pre-approving all audit and
non-audit services performed by the Companys independent auditor. Except as noted below, no audit
services or non-audit services shall be provided to the Company by the independent auditor unless
first pre-approved by the Audit Committee and unless permitted by applicable securities laws and
the rules and regulations of the SEC. If the Audit Committee approves an audit service within the
scope of the engagement of the independent auditor, such audit service shall be deemed to have been
pre-approved. Pre-approval shall not be required for non-audit services provided by the independent auditor,
if (i) the aggregate amount of all such non-audit services provided to the Company constitutes not
more than the five percent (5%) of the total amount of revenues paid by the Company to the
independent auditor during the fiscal year in which such non-audit services are provided, (ii) such
non-audit services were not recognized by the Company at the time of the independent auditors
engagement to be non-audit services, and (iii) such non-audit services are promptly brought to the
attention of the Audit Committee and approved by the Audit Committee prior to the completion of the
audit. The Audit Committee may delegate to one or more members of the Audit Committee the authority
to grant pre-approval of certain non-audit services. The decision of any member to whom such
authority is delegated to pre-approve non-audit services shall be presented to the full Audit
Committee for its approval at its next scheduled meeting. 
 PART IV 
 Item 15.Exhibits and Financial Statement Schedules. (a) 3. Exhibits ExhibitNumber
    
    
    
    Description of Exhibit31.1*
    
    
    
    Certification of James T. Sartain, Chief Executive Officer of the Company, pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    
    
    Certification of J. Bryan Baker, Chief Financial Officer of the Company, pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
   *
    
    Filed herewith. 14




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized. FIRSTCITY FINANCIAL CORPORATIONBy:
    /s/   JAMES T. SARTAINJames T. SartainPresident and Chief Executive Officer By:
    /s/   J. BRYAN BAKERJ. Bryan BakerSenior Vice President and Chief Financial Officer April 29, 2005 15




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##### Table of Contents



EXHIBIT INDEX ExhibitNumber
    
    
    
    Description of Exhibit32.1*
    
    
    
    Certification of James T. Sartain, Chief Executive Officer of the Company, pursuant to 18
U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and
relating to the Annual Report on Form 10-K for the year ended December 31, 2004.32.2*
    
    
    
    Certification of J. Bryan Baker, Chief Financial Officer of the Company, pursuant to 18
U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and
relating to the Annual Report on Form 10-K for the year ended December 31, 2004.