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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549

Form 10-K/A(Amendment No. 1)

|(Mark One)                                                    |                                                                                         
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                                             | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|For the fiscal year ended December 31, 2007                  
|or                                                           
|o                                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from                             to

Commission file number 033-19694

---

FirstCity Financial Corporation(Exact name of registrant as specified in its charter)

|Delaware(State or other jurisdiction of
incorporation or organization) |  | 76-0243729(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:

|Title of Each Class          |  | Name of Each Exchange on Which Registered
|---------------------------- |  | -----------------------------------------
|Common Stock, par value $.01 |  | The NASDAQ Stock Market LLC              

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes o        No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.    Yes o        No ý

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 ý        No o

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.    o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

|Large accelerated filer o |  | Accelerated filer ý |  | Non-accelerated filer o (Do not check if a smaller reporting company) |  | Smaller reporting company o
|------------------------- |  | ------------------- |  | --------------------------------------------------------------------- |  | ---------------------------

Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes o        No ý

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 Stock Market as of June 30, 2007, was $95,343,164.

The
number of shares of common stock outstanding at April 15, 2008, was 10,378,207.



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FIRSTCITY FINANCIAL CORPORATION

TABLE OF CONTENTS



|           |  |                                                                                                |  | Page
|---------- |  | ---------------------------------------------------------------------------------------------- |  | ----
|           |  | PART III                                                                                       |  |     
|Item 10.   |  | Directors, Executive Officers and Corporate Governance                                         |  | 3   
|Item 11.   |  | Executive Compensation                                                                         |  | 8   
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |  | 19  
|Item 13.   |  | Certain Relationships and Related Transactions, and Director Independence                      |  | 21  
|Item 14.   |  | Principal Accounting Fees and Services                                                         |  | 22  
|           |  | PART IV                                                                                        |  |     
|Item 15.   |  | Exhibits and Financial Statement Schedules                                                     |  | 24  
|Signatures |  | 28                                                                                            

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A ("Amendment") to the Annual Report on Form 10-K of FirstCity Financial
Corporation (the "Company," "FirstCity," "we" or "us") is being filed to amend the Company's Form 10-K ("Original Filing") filed with the Securities and Exchange Commission ("SEC")
on March 17, 2008, to provide disclosures under Part III of Form 10-K, which were not included in the Original Filing, as FirstCity will not file its definitive proxy
statement within 120 days of the end of its fiscal year ended December 31, 2007.

Except
for the additions and modifications described above, the Company has not modified or updated disclosures presented in the Original Filing in this Amendment. Accordingly, this
Amendment does not reflect events occurring after the filing of the Original Filing or modify or update those disclosures, including the exhibits to the Original Filing, affected by subsequent events.

In
addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), new certifications by our principal executive
officer and principal financial officer are filed as exhibits to this Amendment under Item 15 of Part IV hereof.

Forward-Looking Statements:

The Original Filing and this Amendment documents incorporated herein by reference, include forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. All statements, other than statements of historical fact, are statements that could be
deemed forward-looking statements, including, but not limited to, statements regarding our future financial position, business strategy and plans and objectives of management for future operations.
Words such as "expect," "intend," "plan," "anticipate," "estimate," "believe," "may," "could," "will be," "will continue," "will likely result," "indication" and similar expressions are intended to
identify forward-looking statements.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be
materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed in this Amendment, and in particular, the risks discussed under Item 1A. "Risk Factors" in our Original Filing filed with the SEC on March 17,
2008, and those discussed in other documents we file with the SEC. In light of these risks, uncertainties and assumptions, readers are cautioned not to place undue reliance on such forward-looking
statements. These forward-looking statements represent beliefs and assumptions only as of the date of this Amendment. Except as required by applicable law, we do not intend to update or revise
forward-looking statements contained in this Amendment or the Original Filing to reflect future events or circumstances.

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PART III

Item 10.Directors, Executive Officers and Corporate Governance.

Director Information

Information concerning members of the Company's board of directors (the "Board") is set forth below:

Name

Age

PositionRichard E. Bean

64

Chairman of the BoardC. Ivan Wilson

80

Vice Chairman of the BoardJames T. Sartain

59

President, Chief Executive Officer and DirectorDane Fulmer

57

DirectorRobert E. Garrison, II

66

DirectorD. Michael Hunter

65

DirectorJeffery D. Leu

52

DirectorF. Clayton Miller

44

Director


Richard E. Beanhas been a Director of FirstCity since July 1995 (the "Merger") and Chairman of the Board since December 31,
2005. 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 Official Committee of Equity Security Holders of First
City Bancorporation of Texas, Inc. ("FCBOT"). Mr. Bean is currently a director, 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 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.

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 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.

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.

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Robert E. Garrison, IIhas been a Director of FirstCity since May 1999. Mr. Garrison is the President of Sanders Morris
Harris Group Inc. 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. Mr. Garrison serves as a director of Prosperity Bank and as
a director of Crown Castle International (CCI), a public company that is a leading independent owner and operator of shared wireless infrastructures, including extensive networks of towers. He has
over 40 years of experience in the investment business. Mr. Garrison is a Chartered Financial Analyst.

D. Michael Hunterhas been as a Director of FirstCity since August 2005. Mr. Hunter is the Vice Chairman of the board of
directors of Prosperity Bancshares, Inc. and serves as a director of Prosperity Bank. Mr. Hunter previously served as Chairman, President and Chief Executive Officer and a director of
First Capital Bankers, Inc. from 1995 until its merger with and into Prosperity Bancshares, Inc. on March 1, 2005. Mr. Hunter also served as Chairman and Chief Executive
Officer of First Capital Bank from 1995 until March 2005. Prior to 1995, Mr. Hunter served as President and Chief Operating Officer
of Victoria Bancshares, Inc. and Victoria Bank & Trust Company from 1988 to June 1994. Prior to 1988, Mr. Hunter served twenty four years with FCBOT.

Jeffery D. Leuhas been a Director of FirstCity since December 2000. Mr. Leu is a Class B Director and Senior Partner
of CarVal Investors, LLC ("CVI"), an affiliate of Cargill, responsible for managing CVI's worldwide investment activities. Mr. Leu joined Cargill in 1981 in the Strategy and Business
Development Group. He held several management positions in Cargill's equipment finance unit before managing the high-yield business in 1989. Mr. Leu became president of CVI in 1993
and resigned that position as of December 21, 2007.

F. Clayton Millerhas been a Director of FirstCity since February 2006. Mr. Miller is a founding partner at Stone Arch
Capital, a private equity fund based in Minneapolis, Minnesota. From 1998 to 2004, Mr. Miller was the Managing Partner of Churchill Equity Partners, the private equity arm of Churchill
Capital, Inc. Mr. Miller is a graduate of the University of Michigan (B.A.), Northwestern University School of Law (J.D., cum laude), and Harvard University (M.B.A., with honors).

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, Hunter, Miller and Wilson are independent Directors under the
NASDAQ Stock Market Rules. Mr. Sartain, an employee of the Company, and Mr. Leu, an executive officer of CVI (see "Certain Relationships and Related Transactions, and Director
Independence" for relationships of Cargill and CFSC Capital Corp. with the Company), were not deemed independent. Mr. Richard E. Bean, an independent Director, serves as Chairman and presides
over executive sessions of the non-management Directors.

Board Meetings.During 2007, the Board held five meetings. Each of the directors attended more than 75% of such meetings held
in 2007, with the exception of Mr. Miller, who attended 60% of the meetings. All of the directors except Mr. Leu and Mr. Miller attended the Company's 2007 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 has the following standing committees: Executive Committee; Audit Committee; Compensation
Committee; and Nominating and Corporate Governance Committee. Members of these committees generally are elected annually at the regular meeting of the Board

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immediately
following the annual meeting of stockholders. Further information concerning the Board's standing committees appears below.

Executive Committee.The Executive Committee consisted of Messrs. Bean (Chairman) and Sartain during 2007. 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 when the Board is not in
session. During 2007, the Executive Committee held no meetings, but did take action on two occasions by unanimous consent.

Audit Committee.The Audit Committee consisted of Messrs. Bean (Chairman), Garrison and Wilson during 2007. The Audit
Committee is a standing committee of the Board. 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 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 that sets forth its membership requirements, authority and responsibilities. A copy of the Audit Committee Charter is available on our website at www.fcfc.comunder the "Investor
RelationsCorporate Governance" heading. During 2007, the Audit Committee held three regular meetings and
held numerous special meetings related to the conduct of the independent investigation.

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 in fulfilling its oversight responsibilities by reviewing



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 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 services 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 have unrestricted access to the Audit Committee.

Compensation Committee.The Compensation Committee consisted of Messrs. Wilson (Chairman), Fulmer, Garrison, Hunter
and Miller during 2007. The Compensation Committee is a standing committee of the Board. 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 of 1986, as amended. The Compensation Committee has a charter that has been adopted by the
Board that sets forth its membership requirements, authority and responsibilities. A copy of the Compensation Committee Charter is available on our website at www.fcfc.comunder the "Investor
RelationsCorporate Governance" heading. The functions of the Compensation Committee include making
recommendations to the Board 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 2007, the Compensation Committee held three meetings.

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Nominating and Corporate Governance Committee.The Nominating and Corporate Governance Committee consisted of
Messrs. Fulmer (Chairman), Garrison, Hunter and Miller during 2007. The Nominating and Corporate Governance Committee is a standing committee of the Board. 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 that sets forth its membership requirements, authority and responsibilities. The full text of the Charter of the
Nominating and Corporate Governance Committee is available on our website atwww.fcfc.comunder the "Investor RelationsCorporate
Governance" heading. 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 and Corporate Governance 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 2007, the Nominating and
Corporate Governance Committee held two meetings.

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 T. Sartain

59

President and Chief Executive OfficerJim W. Moore

57

Executive Vice President and Chief Operating OfficerJ. Bryan Baker

47

Senior Vice President and Chief Financial OfficerTerry R. DeWitt

50

Senior Vice PresidentJoe S. Greak

59

Senior Vice President, Tax DirectorJames C. Holmes

51

Senior Vice PresidentRichard J. Vander Woude

53

Senior Vice President, General Counsel and Secretary


Jim W. Moorewas appointed Executive Vice President, Chief Operating Officer and Treasurer of FirstCity on February 1, 2008.
Mr. Moore rejoined the Company after spending the past seven years with Santander Consumer USA Inc., formerly known as Drive Financial Services LP, a national subprime auto
indirect lender with a managed portfolio exceeding $5 billion. Mr. Moore served in various capacities including Director of Securitizations, Chief Financial Officer, and Treasurer.
Mr. Moore had a long-term association with FirstCity as a senior officer prior to the formation of the Drive entity, which resulted as a part of a sale to Bank of Scotland and
reorganizations of FirstCity which occurred in 2000 and 2004. Mr. Moore has 38 years of banking and financial services experience.

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.

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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 responsible for investments and servicing operations in the United States since the Merger.
He also served as Treasurer of the Company from the Merger to August 1999 and from June 2000 to February 2008. Prior to the Merger, he served as Senior Vice President and Treasurer of J-Hawk
Corporation. From 1988 to 1991, Mr. Holmes was a Vice President of MBank Waco, a national banking association.

Richard J. Vander Woudehas been Senior Vice President and General Counsel of FirstCity since January 1998 and has served as
Secretary since June 2000. Prior thereto, Mr. Vander Woude was a director and
stockholder 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 stockholder 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% of Common Stock, to file with
reports of their ownership, and any changes in that ownership, with the SEC. Based solely on our review of copies of these reports provided to the Company and written representations from such
reporting persons that no other reports were required, the Company believes that, during 2007, our reporting persons complied with all Section 16(a) filing requirements, except as shown in the
table below:

Name

Number of
late reports

Number of
transactions not
reported timely

Known failure
to file reportRichard E. Bean

1

1

NoneJeffery D. Leu

1

1

NoneDane Fulmer

1

1

NoneF. Clayton Miller

1

1

NoneC. Ivan Wilson

1

1

NoneD. Michael Hunter

1

1

NoneRobert E. Garrison II

1

1

None


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 on our website at www.fcfc.comunder the "Investor
RelationsCorporate Governance" heading.

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Item 11.Executive Compensation.

COMPENSATION DISCUSSION AND ANALYSIS

Overview

The Compensation Committee of our Board of Directors is responsible for evaluating and developing the compensation policies applicable to our executive officers.
The Compensation Committee's charter sets forth the following responsibilities, among others, for the committee:



In
essence, the Compensation Committee's fundamental responsibility is to administer our compensation program for our executive officers and our other officers, which generally include
those employees whose job responsibilities and policy-making authority are the broadest and most significant. The Compensation Committee is responsible for ensuring that the Company's compensation
policies and practices support the successful recruitment, development, and retention of the executive talent required by the Company to achieve its business objectives. The Committee is made up
entirely of independent directors, consistent with the current listing requirements of NASDAQ.

Objectives of our compensation program

In general, our core business strategy is to acquire, manage, service, and resolve distressed assets and other assets that meet the Company's investment criteria.
Our compensation program is designed to attract, motivate and retain employees capable of executing this strategy. Toward this end, the Company provides for competitive base salaries, annual variable
performance incentives payable in cash upon 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.

What our program is designed to reward

Our program is designed to reward performance that contributes to the achievement of the Company's objectives and the implementation of our strategy. It is also
designed to reward exceptional organizational and individual performance that supports the Company's core values and is appropriate given the individual's level of responsibility.

Elements of our compensation program and why we pay each element

Salaries.We intend to recognize each executive officer's unique value and historical contributions to the Company's success
in light of salary norms in the industry and the general marketplace; to match competitors for executive talent; to provide executives with sufficient, regularly-paid income; and to
reflect position and level of responsibility.

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Bonuses.We include a cash bonus as part of our management compensation program because we believe this element of
compensation (i) helps focus management on and motivate management to achieve key corporate objectives by rewarding the achievement of these objectives and (ii) is necessary to be
competitive from a total remuneration standpoint.

Stock Option and Award Plans.The stockholders have approved the FirstCity Financial Corporation 2004 Stock Option and Award
Plan and the FirstCity Financial Corporation 2006 Stock Option and Award Plan (the "Stock Option and Award Plans"), the purpose of which are to attract and retain the services of key management and
employees of the Company and its subsidiaries and to provide such persons with a proprietary interest in the Company through the granting of equity incentives. We believe that equity incentives:



We
have established a policy of awarding stock options each year based on the continuing progress of the Company as well as on individual performance. We have historically only utilized
stock option awards, but intend to explore the use of performance shares and restricted shares in addition to stock option awards. The Compensation Committee has discretion to award stock options,
nonqualified stock options, restricted stock, performance shares, and other awards, which may be granted singly, in combination, or in tandem.

Benefits.We offer a Profit Sharing and 401(k) Plan and a variety of health and welfare programs to all eligible employees,
including the named executive officers. Our health and welfare programs include medical, pharmacy, dental, vision, life insurance and accidental death, and disability. We provide full time employees
short and long-term disability and basic life insurance at no cost to the employee. In addition, for the President and Chief Executive Officer we pay country club dues and provide a car
allowance.

How we determine each element of compensation

General.The Compensation Committee engaged A G Ferguson & Associates ("AGF") to consult on compensation matters and
to provide data in order to assess our competitive position relative to a peer group of companies with respect to the individual elements of total executive compensation for our named executive
officers compared to that of the chief executive officers, chief financial officers and other named executive officers in the peer group. The peer group was comprised of the following 10 public
companies in the financial services industry:

Cohen & Steers

MVC CapitalEvercore Partners

NexCen BrandsFirst Albany Companies

Safeguard ScientificsGreenhill & Co.

The Hallwood GroupInternet Capital Group

Thomas Weisel Partners


The
review of compensation by AGF indicated that, although our base salaries were competitive, the failure to award bonuses under our 2006 bonus plan had resulted in significant below
market total cash pay in 2006. The review by AGF of equity incentive plans indicated that the small size of stock options grants in 2004 and 2005 and lack of grants of stock options or restricted
stock in 2006 resulted in significant below market total compensation for the named executive officers.

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In
setting 2007 base salary and stock option awards, the Compensation Committee did not benchmark against the peer group. Instead, the Compensation Committee and the Board used the
comparative information from the peer group review and other factors set forth below in setting the 2007 base salary and in making the 2007 stock option awards. The determination of 2007 compensation
for executive officers was postponed until October 2007 to allow completion of the independent investigation conducted in 2007 and the completion of the review of compensation programs by AGF.

Salaries.Salaries for 2007 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. The review of compensation by AGF indicated that, although our base salaries were competitive, the failure to award bonuses under our 2006 bonus plan had
resulted in significant below market total cash pay in 2006. In determining its recommended salary adjustments for 2007, the Compensation Committee considered the review and report by AGF, the peer
group data and survey information included in the AGF report, a survey of salaries and other compensation of executives in the financial services industry in Austin, Dallas, Houston and Waco, Texas,
and the fact that the named executive officers had not received adjustments in base salary since 2004 and did not receive bonuses under the 2006 performance-based bonus plan. On October 11,
2007, we made the following salary adjustments to increase annual base salaries for the named executive officers as follows: James T. Sartain, President and Chief Executive Officer, an increase
of $125,000 from $375,000 to $500,000; J. Bryan Baker, Senior Vice President and Chief Financial Officer, an increase of $75,000 from $225,000 to $300,000; Terry R. DeWitt, Senior Vice
President, an increase of $25,000 from $275,000 to $300,000; James C. Holmes, Senior Vice President, an increase of $25,000 from $275,000 to $300,000; and Richard J. Vander Woude, Senior
Vice President, General Counsel and Secretary, an increase of $30,000 from $285,000 to $315,000. The salary adjustments were made because there had been no adjustments in base salary since 2004, the
named executive officers did not receive any performance-based bonuses in 2006 and would not receive any performance-based bonuses in 2007, and were appropriate to address the disparity in the total
market compensation paid to the named executive officers from that paid to the named executive officers of the companies in the peer group and in the salary survey reviewed by the Compensation
Committee.

Bonuses.Bonuses are awarded pursuant to performance-based plans and additional bonuses are awarded when appropriate in
recognition of specific accomplishments, although no performance-based bonuses or additional bonuses were awarded for 2007. The performance-based bonus plans are designed to reward our executives for
the achievement of shorter-term financial goals, primarily increases in net operating income per diluted share. The performance-based bonus plans establish a pool, based upon the Company's
achievement of the selected financial goals, that can be awarded by the Compensation Committee based on individual executive performance. Although each executive officer is eligible to receive an
award under a plan, the granting of the awards to any individual or the officers as a group is entirely at the discretion of the Compensation Committee. The Compensation Committee may choose to award
the bonus or not, and decide on the actual level of the award in light of all relevant factors after completion of the fiscal year.

A
performance-based bonus plan was not adopted for 2007 due to the delay in considering executive compensation due to the internal investigation during 2007 and upon completion of the
investigation, it was apparent that a plan based upon the previous terms would not be achievable, and the Compensation Committee believed that setting a plan over the period remaining in 2007 would
not affect performance for 2007.

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Stock Option and Award Plans.We grant equity incentive awards to our executive officers and key employees based upon prior
performance, our estimation of the level of equity incentive compensation necessary to retain their services and our estimation of the level of equity incentive compensation necessary to motivate them
to help us attain our long-term goals. There is no set formula for the granting of awards to individual executive officers or employees. We consider the grant of equity incentive awards
following the end of each fiscal year after results for the fiscal year are available. We consider awards at other times for new employees or may postpone consideration of awards to a later time in
the year if we determine that there are reasons to do so. In 2007, the consideration of equity incentive awards was postponed until the completion of the independent investigation conducted in 2007
and the completion of the review of compensation programs by AGF.

For
2007, the President and Chief Executive Officer made recommendations to the Compensation Committee regarding stock option awards for the named executive officers and other employees.
The President and Chief Executive Officer was not eligible to receive an award of stock options under the terms of the Stock Option and Award Plans because the aggregate fair market value (determined
at the time the options were to be granted) of the shares to which incentive stock options were exercisable for the first time by the President and Chief Executive Officer exceeded $100,000. In
granting awards to other named executive officers and key employees, we considered the performance of each such individual, taking into account the Company's performance, each individual's
contributions thereto and specific accomplishments in each individual's area of responsibility. The Compensation Committee also considered the comparative information provided by AGF and the fact that
no stock options were awarded to executive officers in 2006 in determining the award of stock options for 2007. The review by AGF of equity incentive plans indicated that the small size of stock
options grants in 2004 and 2005 and lack of grants of stock options or restricted stock in 2006 resulted in significant below market total compensation. On October 11, 2007, we granted options
to purchase 8,000 shares of our common stock to each of our named executive officers (except the President and Chief Executive Officer) at an exercise price of $9.85 per share with
one-quarter of the options vesting on the first, second, third and fourth anniversaries of October 11, 2007 if the named executive officer is still employed on such dates. The
Compensation Committee made these awards to compensate for the small awards in 2004 and 2005, to compensate for the failure to make awards in 2006 and to increase the stake of the named executive
officers in the long-term success of the Company. See "Grants of Plan-Based Awards." We believe this vesting schedule will encourage the executives to remain FirstCity
employees.

How elements of our compensation program are related to each other and the Company's overall compensation objectives

We view the various components of compensation as related but distinct. Although our Compensation Committee does review total compensation, we do not believe that
significant compensation derived from one component of compensation should negate or reduce compensation from other components. We determine the appropriate level for each compensation component based
in part, but not exclusively, on our view of internal equity and consistency, and other considerations we deem relevant, such as rewarding extraordinary performance. Our Compensation Committee has not
adopted any formal or informal policies or guidelines for allocating compensation between long-term and currently paid out compensation, between cash and non-cash compensation,
or among different forms of non-cash compensation.

Use of External Compensation Advisors

The Compensation Committee has the authority to retain and terminate independent third party compensation consultants to obtain independent advice and assistance
from internal and external legal, accounting and other advisors. In 2007, the Compensation Committee engaged AGF to consult on compensation matters and to provide data in order to assess our
competitive position relative to a peer

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group
of companies with respect to the individual elements of total executive compensation for each of our named executive officers compared to that of the chief executive officers, chief financial
officers and other named executive officers of a peer group. The work performed by AGF with regard to the Company's executive compensation program was tasked and overseen directly by the Compensation
Committee. The Company's management worked with AGF to determine the peer group and to ensure that the information, analysis, and recommendations given to the Compensation Committee provided a
thorough and accurate basis for its decisions. In addition, the Company participates in and purchases various compensation surveys and studies, which management uses to analyze compensation for the
named executive officers as well as all other employees. This information is also made available to the Compensation Committee. The Company believes that utilizing information from AGF and surveys
obtained by management to analyze compensation ensures an objective and well-rounded view of executive compensation practices.

Role of Executive Officers in Determining Executive Compensation

Recommendations regarding compensation of the Company's executive officers (other than the compensation of the President and Chief Executive Officer), including
base salary adjustment,
performance-based bonuses, additional bonuses and equity awards, are made by the President and Chief Executive Officer to the Compensation Committee. The Compensation Committee reviews the
recommendations of the President and Chief Executive Officer and makes all final decisions regarding the compensation of the President and Chief Executive Officer and the other executive officers. The
compensation of the President and 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
President and Chief Executive Officer does not participate in the review, modification or approval of the recommendations of the Compensation Committee, with respect to his compensation and
(2) all reviews, modifications and approvals with respect to awards under the Stock Option and Award Plans are made solely by the Compensation Committee.

Compensation of the Chief Executive Officer.The Compensation Committee determines compensation of the President and Chief
Executive Officer and makes a recommendation to the Board, which recommendation is subject to the review, modification and approval of the members of the Board, other than the President and Chief
Executive Officer. Such recommendations, reviews, modifications and approvals for 2007 were based on the President and 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.

Tax Deductibility of Executive Compensation

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

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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).

Stock Ownership Policy

Currently the Company does not have a stock ownership policy and does not have a policy that prohibits employees from hedging their economic exposure with respect
to any shares of the Company stock that they might own.

Employment Contracts

No named executive officer is a party to an employment contract with the Company.

Change of Control Triggers

As discussed below under "Potential Payments Upon Termination or Change-In-Control," our officers are entitled to certain rights upon a
"change in control" of the Company. The events that are deemed to constitute a Change in Control, which are set forth under "Potential Payments Upon Termination or
Change-In-Control," were selected because each reflects a circumstance in which a new person or group would be expected to obtain control or effective control over our policies
and direction. In those circumstances, the Compensation Committee believes it would be appropriate to provide management the benefit of the awards that have been conveyed prior to such event and to
waive the service and other conditions applicable to management's rights to such awards, because such change could reasonably be expected to materially alter our policies and objectives, and/or result
in a material change in the composition of management.

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of
Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and
Analysis be included in the Company's Annual Report on Form 10-K for 2007, as amended, for 2007 and the annual meeting proxy statement on Schedule 14A.

| |  | THE COMPENSATION COMMITTEE
C. Ivan Wilson, Chairman
Dane Fulmer
Robert E. Garrison, II
D. Michael Hunter
F. Clayton Miller
| |  | --------------------------------------------------------------------------------------------------------------------------

Summary Compensation Table

The following table sets forth certain information concerning compensation for fiscal years 2007 and 2006 to (1) the Company's Chief Executive Officer,
(2) the Company's Chief Financial Officer, and (3) the Company's other three most highly compensated executive officers (collectively, the "Named Executive Officers").

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Summary Compensation Table

|Name and Principal Position                                                   |  | Year      |  | Salary
($)      |  | Bonus
($) |  | Option
Awards(1)
($) |  | All Other
Compensation(2)
($) |  | Total
Compensation
($)
|----------------------------------------------------------------------------- |  | --------- |  | --------------- |  | --------- |  | -------------------- |  | ----------------------------- |  | ----------------------
|James T. Sartain,
President and
Chief Executive Officer                       |  | 2007
2006 |  | 385,417
375,000 |  | 
       |  | 
                  |  | 16,048
16,048                 |  | 401,465
391,048       
|J. Bryan Baker,
Senior Vice President and Chief Financial Officer             |  | 2007
2006 |  | 231,250
225,000 |  | 
       |  | 56,442
             |  | 5,040
5,040                   |  | 292,732
230,040       
|Terry R. DeWitt,
Senior Vice President                                        |  | 2007
2006 |  | 277,083
275,000 |  | 
       |  | 56,442
             |  | 5,328
5,040                   |  | 338,853
280,040       
|James C. Holmes,
Senior Vice President                                        |  | 2007
2006 |  | 277,083
275,000 |  | 
       |  | 56,442
             |  | 5,328
5,040                   |  | 338,853
280,040       
|Richard J. Vander Woude,
Senior Vice President, General
Counsel and Secretary |  | 2007
2006 |  | 287,501
285,001 |  | 
50,000  |  | 56,442
             |  | 5,328
5,328                   |  | 349,271
340,329       

---

Executive

401(k) Match ($)

Supplemental Life ($)

Auto ($)

Total ($)James T. Sartain

$
4,500

$
1,548

$
10,000

$
16,048J. Bryan Baker


4,500


540





5,040Terry R. DeWitt


4,500


828





5,328James C. Holmes


4,500


828





5,328Richard J. Vander Woude


4,500


828





5,328


Grants of Plan-Based Awards

The following table provides information on the grants of stock option awards under the Company's 2006 Stock Option and Award Plan to the Named Executive Officers
during the fiscal year

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ended
December 31, 2007. The Company did not grant any non-equity or equity incentive plan awards or stock awards to the Name Executive Officers in 2007.

Name

Grant Date

Option Awards:
Number of
Securities
Underlying
Options
(#)

Exercise
Price of Option Awards
($/Sh)

Grant Date
Fair Value of
Option Awards
($)J. Bryan Baker

10/11/2007

8,000

$
9.85

$
56,442Terry R. DeWitt

10/11/2007

8,000

$
9.85

$
56,442James C. Holmes

10/11/2007

8,000

$
9.85

$
56,442Richard J. Vander Woude

10/11/2007

8,000

$
9.85

$
56,442


Outstanding Equity Awards at Fiscal Year-End

The following table provides information on the holdings of stock options by the Named Executive Officers as of December 31, 2007. This table includes
unexercised and unvested option awards. Each equity grant is shown separately for each Named Executive Officer. The vesting schedule for each grant is shown following this table, based on the option
award grant date.

|                        |  |                                                      |  | Number of Shares Underlying Unexercised Options (#) |  |                       |  |      
|----------------------- |  | ---------------------------------------------------- |  | --------------------------------------------------- |  | --------------------- |  | -----
|
|
|James T. Sartain        |  | 12/1/2000
12/20/2001
5/13/2004
10/12/2005            |  | 50,000
50,000
28,125
5,500                          |  | 

9,375
5,500       |  | $$$$ 
|J. Bryan Baker          |  | 12/1/2000
12/20/2001
5/13/2004
10/25/2005
10/11/2007 |  | 30,000
20,000
11,250
4,000
                        |  | 

3,750
4,000
8,000 |  | $$$$$
|Terry R. DeWitt         |  | 12/20/2001
5/13/2004
10/25/2005
10/11/2007           |  | 25,000
11,250
4,000
                               |  | 
3,750
4,000
8,000   |  | $$$$ 
|James C. Holmes         |  | 12/20/2001
5/13/2004
10/25/2005
10/11/2007           |  | 22,000
11,250
4,000
                               |  | 
3,750
4,000
8,000   |  | $$$$ 
|Richard J. Vander Woude |  | 12/1/2000
12/20/2001
5/13/2004
10/25/2005
10/11/2007 |  | 25,000
25,000
11,250
4,000
                        |  | 

3,750
4,000
8,000 |  | $$$$$

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|
|

|Grant Date |  | Vesting Schedule                                                                                
|---------- |  | ------------------------------------------------------------------------------------------------
|12/1/2000  |  | 25% vests in one year; 25% vests in two years; 25% vests in three years; 25% vests in four years
|12/20/2001 |  | 50% vests on grant dates; 25% vests in one year; 25% vests in two years                         
|5/13/2004  |  | 25% vests in one year; 25% vests in two years; 25% vests in three years; 25% vests in four years
|10/12/2005 |  | 25% vests in one year; 25% vests in two years; 25% vests in three years; 25% vests in four years
|10/25/2005 |  | 25% vests in one year; 25% vests in two years; 25% vests in three years; 25% vests in four years
|10/11/2007 |  | 25% vests in one year; 25% vests in two years; 25% vests in three years; 25% vests in four years

Option Exercises and Stock Vested

There were no options exercised and no shares of Common Stock acquired upon vesting by the Named Executive Officers during the fiscal year ended
December 31, 2007.

Potential Payments Upon Termination or Change-In-Control

The Named Executive Officers have received stock options under the Company's Stock Option and Award Plans. In the event of a Change in Control (as defined below)
under the Stock Option and Award Plans,



A
"Change in Control" is defined as follows:



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The
following table summarizes the potential change in control benefits under the Company's Stock Option and Award Plans the Named Executive Officers would have been eligible to receive
if such officer was terminated without cause or resigned for good reason in connection with a Change in Control that occurred on December 31, 2007.

Name



Change
in ControlJames T. Sartain

Stock option acceleration(1)

$
60,711J. Bryan Baker

Stock option acceleration(1)

$
92,972Terry R. DeWitt

Stock option acceleration(1)

$
92,972James C. Holmes

Stock option acceleration(1)

$
92,972Richard J. Vander Woude

Stock option acceleration(1)

$
92,972




Pension Benefits

The Company has no pension plans.

Nonqualified Deferred Compensation

The Company has no nonqualified defined contribution or other nonqualified deferred compensation plans.

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Director Summary Compensation Table

The following table summarizes compensation of all non-employee directors during the fiscal year ended December 31, 2007.

Name

Fees Earned or
Paid in Cash(1)
($)

Option
Awards(2)
($)

Total
($)Richard E. Bean

128,000

26,286

154,286C. Ivan Wilson

73,750

26,286

100,036Dane Fulmer

22,250

26,286

48,536Robert E. Garrison, II

90,000

26,286

116,286D. Michael Hunter

22,000

26,286

48,286Jeffery D. Leu

17,000



17,000F. Clayton Miller

19,500

26,286

45,786




Compensation Committee Interlocks and Insider Participation

Messrs. Wilson (Chairman), Fulmer, Garrison, Hunter and Miller served as members of the Compensation Committee of the Board of Directors during 2007. No
member of the Compensation Committee was an officer or employee of the Company or any of its subsidiaries or had any relationship requiring disclosure pursuant to Item 404 of
Regulation S-K during the fiscal year ended December 31, 2007. No interlocking relationship exists between the members of the Board, 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



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The
Company has not declared any dividends during this period. The results shown below are not necessarily indicative of future performance.

GRAPHIC

2002

2003

2004

2005

2006

2007FirstCity

100.00

445.26

735.77

841.61

808.76

593.43NASDAQ Market Index

100.00

149.52

162.72

166.18

182.57

197.97NASDAQ Industry Index

100.00

135.25

157.85

161.60

185.81

167.04


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 15, 2008 (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, (3) each of the Named Executive Officers and
(4) all directors and executive

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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.

|Title of Class |  | Name and Address of Beneficial Owner                                         |  | Amount and Nature of Beneficial
Ownership(2) |     | Percent
of Class |  
|-------------- |  | ---------------------------------------------------------------------------- |  | -------------------------------------------- | --- | ---------------- | -
|               |  | Directors and Executive Officers(1):                                         |  |                                              |     |                  |  
|Common Stock   |  | James T. Sartain                                                             |  | 651,034                                      |     | 6.19             | %
|Common Stock   |  | Richard E. Bean                                                              |  | 321,583                                      |     | 3.09             | %
|Common Stock   |  | Dane Fulmer                                                                  |  | 94,300                                       |     | *                |  
|Common Stock   |  | Robert E. Garrison, II                                                       |  | 122,900                                      |     | 1.18             | %
|Common Stock   |  | D. Michael Hunter                                                            |  | 48,750                                       |     | *                |  
|Common Stock   |  | Jeffery Leu                                                                  |  | 5,000                                        | (3) | *                |  
|Common Stock   |  | F. Clayton Miller                                                            |  | 8,750                                        |     | *                |  
|Common Stock   |  | C. Ivan Wilson                                                               |  | 61,770                                       |     | *                |  
|Common Stock   |  | Terry R. DeWitt                                                              |  | 198,882                                      |     | 1.91             | %
|Common Stock   |  | James C. Holmes                                                              |  | 107,667                                      |     | 1.03             | %
|Common Stock   |  | Richard J. Vander Woude                                                      |  | 74,435                                       |     | *                |  
|Common Stock   |  | J. Bryan Baker                                                               |  | 70,116                                       |     | *                |  
|Common Stock   |  | All directors and executive officers as a group (13 persons)                 |  | 1,855,187                                    |     | 17.00            | %
|               |  | Certain Other Beneficial Owners:                                             |  |                                              |     |                  |  
|Common Stock   |  | Heartland Advisors, Inc.
789 N. Water St. Suite 500
Milwaukee, WI 53202      |  | 1,299,211                                    | (4) | 12.52            | %
|Common Stock   |  | First Manhattan Co.
437 Madison Avenue
New York, NY 10022                    |  | 987,250                                      | (4) | 9.51             | %
|Common Stock   |  | Dimensional Fund Advisors LP
1299 Ocean Avenue
Santa Monica, CA 90401        |  | 723,903                                      | (4) | 6.98             | %
|Common Stock   |  | F&C Asset Management plc.
80 George Street
Edinburgh EH2 3BU, United Kingdom |  | 582,697                                      | (4) | 5.61             | %

---

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|                             |  |       |  |            |  | Voting  |  | Investment
|---------------------------- |  | ----- |  | ---------- |  | ------- |  | ----------
|
|
|Heartland Advisors, Inc.     |  | 13G/A |  | 12/31/2007 |  |        |  | 1,247,811 
|First Manhattan Co.          |  | 13G/A |  | 12/31/2007 |  | 34,400  |  | 868,680   
|Dimensional Fund Advisors LP |  | 13G/A |  | 12/31/2007 |  | 723,903 |  |          
|F&C Asset Management plc.    |  | 13G   |  | 12/31/2007 |  | 582,697 |  |          

Equity Compensation Plan Information

The following table provides information as of December 31, 2007 with respect to the shares of our Common Stock that may be issued under the Company's
equity compensation plans:

Equity Compensation Plan Information

|Plan Category                                          |  | Number of Shares
to Be Issued
Upon Exercise of
Outstanding Options |  | Weighted Average
Exercise Price of
Outstanding Options |      | Number of Shares
Remaining Available
for Future Issuance |        
|------------------------------------------------------ |  | ------------------------------------------------------------------ |  | ------------------------------------------------------ | ---- | -------------------------------------------------------- | -------
|Equity compensation plans approved by stockholders     |  | 879,150                                                            |  | $                                                      | 6.67 |                                                          | 379,000
|Equity compensation plans not approved by stockholders |  |                                                                   |  |                                                        |     |                                                          |       
|                                                       |  |                                                                    |  |                                                        |      |                                                          |        
|Total                                                  |  | 879,150                                                            |  | $                                                      | 6.67 |                                                          | 379,000
|                                                       |  |                                                                    |  |                                                        |      |                                                          |        

---

Item 13.Certain Relationships and Related Transactions, and Director Independence.

Director Independence

As required under the NASDAQ Stock Market listing standards, a majority of the members of a listed company's board of directors must qualify as "independent," as
affirmatively determined by the board of directors. The Board has determined that Messrs. Bean, Fulmer, Garrison, Hunter, Miller and Wilson are independent directors under the NASDAQ Stock
Market Rules. Mr. Sartain, the Company's President and Chief Executive Officer, is not an independent director by virtue of his employment with the Company, and Mr. Leu, an executive
officer of CVI (an affiliate of Cargill and CFSC Capital Corp.see below), is not an independent director by virtue of Cargill's relationship with the Company.

Company Policy Regarding Related Party Transactions

It is our policy that the Audit Committee approve or ratify transactions involving directors, executive officers or principal shareholders, or members of their
immediate families or entities controlled by any of them, or in which they have a substantial ownership interest in which the amount involved exceeds $120,000 and that are otherwise reportable under
SEC disclosure rules. Management advises the Audit Committee on a regular basis and seeks their approval of any such transaction that is proposed to be entered into or continued.

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Transactions and Relationships Involving Our Directors and Executive Officers

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 derived from such affiliates totaled $9.7 million for 2007 and $12.6 million for 2006.

In
April 2007, FirstCity entered into a special situations platform that buys or finances distressed debt and companies, originates junior and senior bridge loans, and executes lower
middle market buyouts through its 80% investment in FirstCity Denver Investment Corp. The other 20% interest in FirstCity Denver Investment Corp. is owned by Crestone Capital LLC, a Colorado
limited liability company that is owned by Richard W. Horrigan and Stephen C. Schmeltekopf. Mr. Horrigan, President of FirstCity Denver Investment Corp., and Mr. Schmeltekopf, Senior
Vice President of FirstCity Denver Investment Corp., are employees of FirstCity Denver Investment Corp. and have employment contracts with FirstCity Denver Investment Corp. Stephen Schmeltekopf is the
brother of Andrew Schmeltekopf, Senior Vice President of FirstCity Servicing.

Transactions and RelationshipsOther

FirstCity Servicing Corporation ("FCSC"), an affiliate of the Company, and MCS et Associates ("MCS"), in which FCSC is an 11.89% shareholder as of
December 31, 2007, are parties to Consulting, License and Confidentiality Agreements dated June 30, 1999 pursuant to which FCSC provides consultation services and personnel to be
employed by MCS to assist in developing and managing due diligence and servicing systems. Pursuant to those agreements, MCS provides the supplied personnel with compensation, tax equalization
payments, housing allowances, transportation allowance, and tax preparation. MCS also pays consulting fees to FCSC and reimburses FCSC for travel, hotel, airfare, and meal expenses incurred related to
the provision of the services. In 2007 and 2006, FCSC received fees totaling $443,000 and $344,000, respectively, from MCS.

Item 14.Principal Accounting Fees and Services.

Audit Fees

The aggregate fees billed for professional services by KPMG LLP ("KPMG") in 2007 and 2006 for these various services were:

2007

2006Audit Fees(1)

$
1,808,353

$
1,673,000Audit Related Fees





Tax Fees





All Other Fees





Total

$
1,808,353

$
1,673,000




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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.

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PART IV

Item 15.Exhibits and Financial Statement Schedules.



Incorporated
by reference to FirstCity's Annual Report on Form 10-K for the year ended December 31, 2007, filed on March 17, 2008.



Incorporated
by reference to FirstCity's Annual Report on Form 10-K for the year ended December 31, 2007, filed on March 17, 2008.



|Exhibit
Number |  |   |  | Description of Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-------------- |  | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1            |  |  |  | Joint Plan of Reorganization by First City Bancorporation of Texas, Inc., Official Committee of Equity Security Holders and J-Hawk Corporation, with the Participation of Cargill Financial Services Corporation, Under Chapter 11 of the United
States Bankruptcy Code, Case No. 392-39474-HCA-11 (incorporated herein by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K dated July 3, 1995 filed with the Commission on July 18, 1995)
|2.2            |  |  |  | Agreement and Plan of Merger, dated as of July 3, 1995, by and between First City Bancorporation of Texas, Inc. and J-Hawk Corporation (incorporated herein by reference to Exhibit 2.2 of the Company's Current Report on Form 8-K
dated July 3, 1995 filed with the Commission on July 18, 1995)                                                                                                                                                            
|3.1            |  |  |  | Amended and Restated Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K dated July 3, 1995 filed with the Commission on July 18, 1995)                                                                                                                                                                                                                                  
|3.2            |  |  |  | Amended and Restated Bylaws of the Company (incorporated herein by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K dated December 30, 2005 filed with the Commission on December 30, 2005)                                                                                                                                                                                                                                               
|10.1           |  |  |  | Contribution and Assumption Agreement by and between Funding LP and Drive dated as of August 18, 2000. (incorporated herein by reference to Exhibit 10.42 of the Company's Form 8-K dated August 25, 2000, filed with the
Commission on September 11, 2000)                                                                                                                                                                                                   
|10.2           |  |  |  | Separation Agreement and Release, dated March 31, 2004, by and between G. Stephen Fillip, FirstCity Servicing Corporation and FirstCity Financial Corporation (incorporated herein by reference to Exhibit 10.19 of the Company's
Form 10-Q dated May 14, 2004)                                                                                                                                                                                               
|10.3           |  |  |  | Consultant Agreement, dated April 1, 2004, by and between FirstCity Servicing Corporation and G. Stephen Fillip (incorporated herein by reference to Exhibit 10.20 of the Company's Form 10-Q dated May 14, 2004)                                                                                                                                                                                                                                             
|10.4           |  |  |  | Securities Purchase Agreement dated as of September 21, 2004 by and among FirstCity Financial Corporation and certain affiliates of FirstCity and IFA Drive GP Holdings LLC, IFA Drive LP Holdings LLC, Drive Management LP
and certain affiliates of those persons. (incorporated herein by reference to Exhibit 10.1 of the Company's Form 8-K dated September 27, 2004)                                                                                    

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|10.5  |  |  |  | Revolving Credit Agreement, dated November 12, 2004, among FirstCity Financial Corporation as Borrower and the Lenders named therein, as Lenders, and Bank of Scotland, as Agent (incorporated herein by reference to Exhibit 10.12 of the
Company's Form 10-Q dated November 15, 2004)                                                                                                                                                                  
|----- |  | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.6  |  |  |  | 1995 Stock Option and Award Plan (incorporated herein by reference to Exhibit A of the Company's Schedule 14A, Definitive Proxy Statement, dated March 27, 1996)                                                                                                                                                                                                                                                                                         
|10.7  |  |  |  | 1996 Stock Option and Award Plan (incorporated herein by reference to Exhibit C of the Company's Schedule 14A, Definitive Proxy Statement, dated March 27, 1996)                                                                                                                                                                                                                                                                                         
|10.8  |  |  |  | 2004 Stock Option and Award Plan (incorporated herein by reference to Appendix A of the Company's Schedule 14A, Definitive Proxy Statement, dated October 21, 2003)                                                                                                                                                                                                                                                                                      
|10.9  |  |  |  | Revolving Credit Agreement, dated August 26, 2005, among FH Partners, L.P., as Borrower, and the Lenders named therein, as Lenders, and Bank of Scotland, as Agent (incorporated herein by reference to Exhibit 10.1 of the Company's
Form 8-K dated September 1, 2005)                                                                                                                                                                                  
|10.10 |  |  |  | Guaranty Agreement, dated August 26, 2005, executed by FirstCity Financial Corporation, FirstCity Commercial Corporation, FirstCity Europe Corporation, FirstCity Holdings Corporation, FirstCity International Corporation, FirstCity Mexico,
 Inc., and FirstCity Servicing Corporation for the benefit of Bank of Scotland, as agent, and lenders (incorporated herein by reference to Exhibit 10.2 of the Company's Form 8-K dated September 1, 2005)
|10.11 |  |  |  | Sixth Amendment to Right Of First Refusal Agreement And Due Diligence Reimbursement Agreement dated effective as of February 1, 2006 (incorporated herein by reference to Exhibit 10.1 of the Company's Form 8-K dated February 6,
2006)                                                                                                                                                                                                                 
|10.12 |  |  |  | Asset Purchase Agreement, dated June 30, 2006, by and among FirstCity Financial Corporation and its subsidiaries, FirstCity Business Lending Corporation and American Business Lending, Inc.; and AMRESCO SBA Holdings, Inc. and NCS I,
 LLC (incorporated herein by reference to Exhibit 10.1 of the Company's Form 8-K dated July 7, 2006)                                                                                                             
|10.13 |  |  |  | 2006 Stock Option and Award Plan (incorporated herein by reference to Appendix A of the Company's Schedule 14A, Definitive Proxy Statement, dated June 26, 2006)                                                                                                                                                                                                                                                                                         
|10.14 |  |  |  | Interest Purchase and Sale Agreement, dated August 8, 2006, by and among Bidmex Holding, LLC, and Strategic Mexican Investment Partners, L.P. and Cargill Financial Services International, Inc. and certain other parties
(incorporated herein by reference to Exhibit 10.14 of the Company's Form 10-Q dated November 9, 2006)                                                                                                                         
|10.15 |  |  |  | Put Option Agreement dated August 8, 2006, by and among Bidmex Holding, LLC, Recuperacion de Carteras Mexicanas, S. de R.L. de C.V., Bidmex 6, LLC, Strategic Mexican Investment Partners 2, L.P. and Cargill Financial
Services International, Inc. (incorporated herein by reference to Exhibit 10.15 of the Company's Form 10-Q dated November 9, 2006)                                                                                               
|10.16 |  |  |  | Guarantee dated August 8, 2006, executed by FirstCity Financial Corporation for the benefit of Bidmex Holding, LLC, Residencial Oeste 2 S. de R.L. de C.V., National Union Fire Insurance Company of Pittsburg, P.A., American
General Life Insurance Company, and American General Life and Accident Insurance Company (incorporated herein by reference to Exhibit 10.15 of the Company's Form 10-Q dated November 9, 2006)                            

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|10.17 |  |  |  | Amendment No. 4 to Revolving Credit Agreement, dated as of October 31, 2006, among FirstCity Financial Corporation as Borrower and the Lenders named therein, as Lenders, and Bank of Scotland, as Agent (incorporated herein by reference to
Exhibit 10.1 of the Company's Form 8-K dated November 7, 2006)  
|----- |  | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.18 |  |  |  | Management Employment Contract dated November 30, 2006, between FirstCity Business Lending Corporation, American Business Lending, Inc., and Charles P. Bell, Jr. (incorporated herein by reference to Exhibit 10.2 of the Company's
Form 8-K dated December 7, 2006)                                         
|10.19 |  |  |  | Management Employment Contract dated November 30, 2006, between FirstCity Business Lending Corporation, American Business Lending, Inc.,and Joe N. Smith (incorporated herein by reference to
Exhibit 10.3 of the Company's Form 8-K dated December 7, 2006)                                                  
|10.20 |  |  |  | Amendment No. 5 to Revolving Credit Agreement, dated as of December 14, 2006, among FirstCity Financial Corporation as Borrower and the Lenders named therein, as Lenders, and Bank of Scotland, as Agent (incorporated herein by reference to
Exhibit 10.1 of the Company's Form 8-K dated December 20, 2006)
|10.21 |  |  |  | Loan Agreement, dated as of December 15, 2006 by and between American Business Lending, Inc., as Borrower, and Wells Fargo Foothill, LLC, as lender (incorporated herein by reference to Exhibit 10.1 of the Company's Form 8-K
dated December 28, 2006)                                                      
|10.22 |  |  |  | Amendment No. 1 to Loan Agreement, dated as of February 27, 2007, by and between American Business Lending, Inc., as Borrower, and Wells Fargo Foothill, LLC, as lender (incorporated herein by reference to Exhibit 10.22 of the
Company's Form 10-K dated July 24, 2007)                                    
|10.23 |  |  |  | Amendment No. 9 to Revolving Credit Agreement, dated as of June 29, 2007, among FirstCity Financial Corporation as Borrower and the Lenders named therein, as Lenders, and Bank of Scotland, as Agent (incorporated herein by reference to
Exhibit 10.23 of the Company's Form 10-Q dated August 10, 2007)    
|10.24 |  |  |  | Amendment No. 1 to Revolving Credit Agreement, dated June 29, 2007, among FH Partners, L.P., as Borrower, and the Lenders named therein, as Lenders, and Bank of Scotland, as Agent (incorporated herein by reference to
Exhibit 10.24 of the Company's Form 10-Q dated August 10, 2007)                      
|10.25 |  |  |  | Amendment No. 2 to Loan Agreement, dated as of July 30, 2007, by and between American Business Lending, Inc., as Borrower, and Wells Fargo Foothill, LLC, as lender (incorporated herein by reference to Exhibit 10.1 of the
Company's Form 8-K dated August 3, 2007)                                         
|10.26 |  |  |  | Amendment No. 10 to Revolving Credit Agreement, dated as of August 22, 2007, among FirstCity Financial Corporation as Borrower and the Lenders named therein, as Lenders, and Bank of Scotland, as Agent (incorporated herein by reference to
Exhibit 10.1 of the Company's Form 8-K dated August 28, 2007)   
|10.27 |  |  |  | Amendment No. 3 and Consent to Revolving Credit Agreement, dated August 22, 2007, among FH Partners, L.L.C., as Borrower, and the Lenders named therein, as Lenders, and Bank of Scotland, as Agent (incorporated herein by reference to
Exhibit 10.2 of the Company's Form 8-K dated August 28, 2007)        

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|10.28  |  |  |  | Subordinated Delayed Draw Credit Agreement, dated as of September 5, 2007, among FirstCity Financial Corporation, as Borrower, and the Lenders named therein, as Lenders, and BoS (USA), Inc., as agent (incorporated herein by reference to
Exhibit 10.1 of the Company's Form 8-K dated September 10, 2007)                                         
|------ |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.29  |  |  |  | Letter agreement between FirstCity Financial Corporation and Bank of Scotland extending time period for closing of subordinate credit facility to be provided by BoS (USA,) Inc. to October 2, 2007 (incorporated herein by reference to
Exhibit 10.2 of the Company's Form 8-K dated September 10, 2007)                                             
|10.30  |  |  |  | Letter agreement between FirstCity Financial Corporation and BoS (USA), Inc. extending time period for closing of subordinate credit facility to be provided by BoS (USA), Inc. to October 31, 2007 (incorporated herein by reference
to Exhibit 10.1 of the Company's Form 8-K dated October 5, 2007)                                                
|10.31  |  |  |  | Letter agreement between FirstCity Financial Corporation and Bank of Scotland extending time period for closing of subordinate credit facility to be provided by BoS (USA), Inc. to October 31, 2007 (incorporated herein by reference to
Exhibit 10.2 of the Company's Form 8-K dated October 5, 2007)                                               
|10.32  |  |  |  | Letter agreement between FirstCity Financial Corporation and BoS (USA), Inc. extending time period for closing of subordinate credit facility to be provided by BoS (USA), Inc. to November 16, 2007 (incorporated herein by reference
to Exhibit 10.1 of the Company's Form 8-K dated November 8, 2007)                                              
|10.33  |  |  |  | Letter agreement between FirstCity Financial Corporation and Bank of Scotland which amended the Revolving Credit Agreement to extend time period for closing of subordinate credit facility to be provided by BoS (USA), Inc. to
November 16, 2007 (incorporated herein by reference to Exhibit 10.2 of the Company's Form 8-K dated November 8, 2007)
|21.1*  |  |  |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                                                                                        
|23.1*  |  |  |  | Consent of KPMG LLP                                                                                                                                                                                                                                                                                                                                   
|23.2*  |  |  |  | Consent of KPMG LLP                                                                                                                                                                                                                                                                                                                                   
|31.1** |  |  |  | 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                                                                                                                                                                                                                    

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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 CORPORATION
| |  | -------------------------------
| |  | By:                            

April 29,
2008

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                       |  | Title                                                                           |  | Date          
|----------------------------------------------- |  | ------------------------------------------------------------------------------- |  | --------------
|                                                |  |                                                                                 |  |               
|/s/RICHARD E. BEANRichard E. Bean               |  | Chairman of the Board and Director                                              |  | April 29, 2008
|/s/JAMES T. SARTAINJames T. Sartain             |  | President, Chief Executive Officer and Director (Principal Executive Officer)   |  | April 29, 2008
|/s/J. BRYAN BAKERJ. Bryan Baker                 |  | Senior Vice President and Chief Financial Officer (Principal Financial Officer) |  | April 29, 2008
|/s/C. IVAN WILSONC. Ivan Wilson                 |  | Vice Chairman of the Board and Director                                         |  | April 29, 2008
|/s/DANE FULMERDane Fulmer                       |  | Director                                                                        |  | April 29, 2008
|/s/ROBERT E. GARRISON, IIRobert E. Garrison, II |  | Director                                                                        |  | April 29, 2008
|/s/F. CLAY MILLERF. Clay Miller                 |  | Director                                                                        |  | April 29, 2008

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