<PAGE>   1

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                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                               FORM 10-K/A NO. 1
(MARK ONE)
      [X]       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

                 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 OR

      [ ]     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 0-26500

                        FIRSTCITY FINANCIAL CORPORATION
             (Exact name of Registrant as Specified in Its Charter)

<TABLE>
<S>                                                <C>
                  DELAWARE                                          76-0243729
      (State or Other Jurisdiction of                            (I.R.S. Employer
       Incorporation or Organization)                          Identification No.)

       6400 IMPERIAL DRIVE, WACO, TX                                  76712
  (Address of Principal Executive Offices)                          (Zip Code)
</TABLE>

                                 (254) 751-1750
              (Registrant's Telephone Number, Including Area Code)

          Securities Registered Pursuant to Section 12(b) of the Act:
                                      NONE

          Securities Registered Pursuant to Section 12(g) of the Act:

                              TITLE OF EACH CLASS

                          Common Stock, par value $.01
                 Adjusting Rate Preferred Stock, par value $.01

     Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]  No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]

     Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.  Yes [X]  No [ ]

     The number of shares of common stock outstanding at February 8, 2000 was
8,333,300. As of such date, the aggregate market value of the voting and
non-voting common equity held by non-affiliates, based upon the closing price of
the common stock on the NASDAQ National Market System, was approximately
$23,547,223.

     The undersigned Registrant hereby amends its Annual Report on Form 10-K for
the year ended December 31, 1999, to include the information called for by the
following items, as set forth in the pages attached hereto:

<TABLE>
  <S>        <C>       <C>                                                            <C>
  Part III.  Item 10.  Directors and Executive Officers of the Registrant
             Item 11.  Executive Compensation
             Item 12.  Security Ownership of Certain Beneficial Owners and Management
             Item 13.  Certain Relationships and Related Transactions
</TABLE>

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<PAGE>   2

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                            FIRSTCITY FINANCIAL CORPORATION

                                            By:    /s/ JAMES R. HAWKINS
                                              ----------------------------------
                                                       James R. Hawkins
                                                    Chairman of the Board

May 1, 2000
<PAGE>   3

                               AMENDMENT NO. 1 TO
                           ANNUAL REPORT ON FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 1999

     Because definitive proxy soliciting materials relating to the 2000 Annual
Meeting of the Stockholders of FirstCity Financial Corporation ("FirstCity" or
the "Company") will be filed after April 29, 2000, the information called for by
Part III of the Company's Form 10-K for the year ended December 31, 1999 is
included in this Amendment No. 1 to such Form 10-K.

                             PART III OF FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 1999

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


     There are seven directors of the Company, each holding office until the
next annual meeting of stockholders or until his successor is elected or
appointed and qualified, or as otherwise provided by the Company's Bylaws or by
Delaware law. The following table sets forth as of March 1, 2000, certain
information concerning the directors of the Company.


<TABLE>
<CAPTION>
NAME                                    AGE                  POSITION
----                                    ---                  --------
<S>                                     <C>   <C>
James R. Hawkins......................  64    Chairman of the Board and Chief
                                              Executive Officer
C. Ivan Wilson........................  72    Vice Chairman of the Board
James T. Sartain......................  51    President, Chief Operating Officer and
                                              Director
Richard E. Bean.......................  56    Director
Dane Fulmer...........................  49    Director
Robert E. Garrison II.................  58    Director
David W. MacLennan....................  40    Director
</TABLE>


     Further information concerning the directors of the Company, including
their business experience during the past five years, appears below.


     James R. Hawkins has been Chairman of the Board and Chief Executive Officer
of the Company since the consummation of the merger of the Company and First
City Bancorporation of Texas, Inc. ("FCBOT") on July 3, 1995 (the "Merger"), and
was Chairman of the Board and Chief Executive Officer of J-Hawk Corporation
("J-Hawk") from 1976 until the Merger.

     C. Ivan Wilson has been Vice Chairman of the Board of the Company since the
Merger. From June 1998 to February 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. Sartain has been President and Chief Operating Officer, and has
served as a Director, of the Company since the Merger, and was President and
Chief Operating Officer of J-Hawk from 1988 to the Merger.

     Richard E. Bean has been a Director of the Company since the Merger and has
been Executive Vice President and Chief Financial Officer of Pearce Industries,
Inc. since 1976, which company, through its subsidiaries, markets a variety of
oil field equipment and machinery. Mr. Bean has also been a member of the
Portfolio Committee of the FirstCity Liquidating Trust since the Merger. Prior
to the Merger, Mr. Bean was Chairman of the FCBOT's Official Committee of Equity
Security Holders. Mr. Bean is a director of TransAmerican Waste Industries, Inc.

                                        1
<PAGE>   4

     Dane Fulmer has been a Director of the Company since May 1999. Mr. Fulmer
serves as Executive Vice President and director of risk management of John
Taylor Financial Group, a broker/dealer and investment advisory firm 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, and
portfolio manager for Merchants National, the parent company.

     Robert E. Garrison II has been a Director of the Company since May 1999.
Mr. Garrison is the President, Chief Executive Officer and director of Pinnacle
Global Group, Inc., a publicly owned financial services firm. Previously, Mr.
Garrison served as Executive Vice President and director of Harris Webb and
Garrison and also served as Chairman, Chief Executive Officer, and director of
Pinnacle Management & Trust Co. Mr. Garrison co-founded both of these companies
in 1994. Both Harris Webb & Garrison and Pinnacle Management & Trust Co. are
subsidiaries of Pinnacle Global Group, Inc. along with Spires Financial, L.P. In
addition, Mr. Garrison serves as Chairman of the Board of BioCyte Therapeutics,
a cancer diagnostic and therapeutic company focused on breast, ovarian, and
prostate cancer. Mr. Garrison serves as a director of Intelect Communications,
Inc., a public telecommunications equipment company, Somerset House Publishing,
First Capital Bank, and is a member of the Finance Committee of Memorial Hermann
Hospital System. He has over 34 years of experience in the securities industry.
Mr. Garrison is a Chartered Financial Analyst.

     David W. MacLennan has been a Director of the Company since the Merger and
has been with subsidiaries of Cargill, Incorporated, regarded as one of the
world's largest, privately-held corporations, since 1991. From 1993 to February
1996, Mr. MacLennan was a Vice President of Cargill Financial Services
Corporation, a wholly owned subsidiary of Cargill, Incorporated engaged
primarily in the investment of proprietary funds and in the proprietary trading
of financial instruments and assets. From February 1996 to August 1997, Mr.
MacLennan was the Managing Director of Cargill Financial Markets, PLC in London.
Since August 1997, Mr. MacLennan has been Chief Financial Officer of Cargill
Financial Services Corporation.

                            OTHER EXECUTIVE OFFICERS

<TABLE>
<CAPTION>
NAME                                    AGE                  POSITION
----                                    ---                  --------
<S>                                     <C>   <C>
Thomas R. Brower......................  41    President of FirstCity Funding
                                              Corporation
Terry R. DeWitt.......................  42    Senior Vice President
G. Stephen Fillip.....................  48    Senior Vice President and Chief Credit
                                                Officer
Joe S. Greak..........................  51    Senior Vice President, Tax Director
                                              and Secretary
Gary H. Miller........................  40    Senior Vice President and Chief
                                              Financial Officer
Jim W. Moore..........................  49    Senior Vice President and Manager of
                                                Subsidiary Activities
Richard J. Vander Woude...............  45    Senior Vice President and General
                                              Counsel
</TABLE>

     Thomas R. Brower has been President of FirstCity Funding Corporation since
September 1997. From 1995 to 1997, he was President of The Brower Group, a
sub-prime automobile finance company. Mr. Brower has over fifteen years
experience in the automotive industry, and was named Man of the Year in 1995 by
the Association of Finance and Insurance Professionals.

     Terry R. DeWitt has been Senior Vice President responsible for Due
Diligence and Investment Evaluation of the Company since the Merger and has
served as Co-President of FirstCity Commercial Corporation since January 2000.
From 1998 to January 2000, Mr. DeWitt served as President of FirstCity
Commercial Corporation. 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.

                                        2
<PAGE>   5

     G. Stephen Fillip has been Senior Vice President since the Merger. Mr.
Fillip has served as President of FirstCity Servicing Corporation since 1998 and
has served as Co-President of FirstCity Commercial Corporation since January
2000. Mr. Fillip was Senior Vice President of J-Hawk from 1991 to the Merger.
From 1989 to 1991, Mr. Fillip was Executive Vice President and Chief Credit
Officer of BancOne, Texas, N.A. (Waco), a national banking association.

     Joe S. Greak has been Senior Vice President, Tax Director and Secretary 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.

     Gary H. Miller has been Senior Vice President and Chief Financial Officer
of the Company since November 1996. Mr. Miller served as Senior Vice President
and Controller of the Company from the Merger to November 1996, and held the
same position with J-Hawk from 1994 to the Merger. From 1990 to 1994, Mr. Miller
was a senior manager of Jaynes, Reitmeier, Boyd & Therrell, P.C., an independent
public accounting firm. From 1988 to 1990, Mr. Miller was a Vice President of
NCNB Texas National Bank, a national banking association.

     Jim W. Moore has been Senior Vice President and Manager of Subsidiary
Activities of the Company since November 1996. Mr. Moore served as Senior Vice
President and Manager of Assets of the Company from the Merger to November 1996,
and held the same position with J-Hawk from 1992 to the Merger. From 1990 to
1992, Mr. Moore was a management consultant for MBank, Waco, a national banking
association, and from 1988 to 1990, Mr. Moore was President and a Director of
Central Texas Savings and Loan, a savings and loan association.

     Richard J. Vander Woude has been General Counsel and Senior Vice President
of the Company since January 1, 1998. Prior thereto, Mr. Vander Woude was a
director and shareholder in the law firm of Vander Woude & Istre, P.C., Waco,
Texas from 1992 to 1997. From 1978 to 1992, Mr. Vander Woude was a director and
shareholder of Sheehy, Lovelace & Mayfield, P.C., Waco, Texas.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     To the Company's knowledge, based solely on a review of the copies of
reports furnished to the Company and, in certain instances, written
representations that no additional reports were required, during the year ended
December 31, 1999, all of the Company's executive officers, directors and
holders of more than 10% of its Common Stock timely filed all reports required
by Section 16(a) of the Securities and Exchange Act of 1934, as amended (the
"1934 Act").

                                        3
<PAGE>   6

ITEM 11. EXECUTIVE COMPENSATION

     The following table sets forth certain information concerning compensation
for services during each of the last three years to (1) the Company's Chief
Executive Officer during 1999, and (2) the Company's other four most highly
compensated executive officers during 1999 serving as such at the end of 1999:

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                   LONG TERM
                                                                  COMPENSATION
                                           ANNUAL COMPENSATION       AWARDS
                                           --------------------   ------------
                                                                   SECURITIES
                                                                   UNDERLYING        ALL OTHER
NAME AND PRINCIPAL POSITION         YEAR   SALARY($)   BONUS($)    OPTIONS(#)    COMPENSATION(1)($)
---------------------------         ----   ---------   --------   ------------   ------------------
<S>                                 <C>    <C>         <C>        <C>            <C>
James R. Hawkins,.................  1999    300,014          --           --           20,539
  Chairman of the Board             1998    300,014          --           --           19,626
  and Chief Executive Officer       1997    303,858          --           --            9,871
James T. Sartain,.................  1999    300,014          --       50,000           16,843
  President and Chief               1998    300,014          --           --           16,257
  Operating Officer                 1997    303,858          --           --            6,418
Terry R. DeWitt,..................  1999    214,584     128,400       25,000            5,089
  Senior Vice President of the      1998    172,317      25,000           --            5,183
  Company and Co-President of       1997    147,157      10,000           --            5,432
  FirstCity Commercial Corporation
G. Stephen Fillip,................  1999    214,584      83,400       25,000            5,455
  Senior Vice President of the      1998    172,917      25,000           --            5,453
  Company and Co-President of       1997    147,963          --           --            5,432
  FirstCity Commercial Corporation
Thomas R. Brower,.................  1999    192,833     179,385           --            4,960
  President of FirstCity            1998    144,000     202,593           --            4,996
  Funding, L.P.                     1997     48,923          --           --              136
</TABLE>

---------------

(1) With respect to Messrs. Hawkins, Sartain, DeWitt and Brower, the total
    amounts indicated under "All Other Compensation" for 1999 consist of (a)
    amounts contributed to match a portion of such employee's contributions
    under a 401(k) plan ("401(k) Match"), (b) excess premiums paid on
    supplemental life insurance policies ("Supplement Life") and (c) personal
    use of a business vehicle ("Auto"). The follows table details the amounts
    paid during 1999 for each of the categories:

<TABLE>
<CAPTION>
                                                 401(K)    SUPPLEMENT
EXECUTIVE                                       MATCH($)    LIFE($)     AUTO($)   TOTAL($)
---------                                       --------   ----------   -------   --------
<S>                                             <C>        <C>          <C>       <C>
James R. Hawkins..............................   4,500       6,039      10,000     20,539
James T. Sartain..............................   4,500       2,343      10,000     16,843
Terry R. DeWitt...............................   4,500         589          --      5,089
G. Stephen Fillip.............................   4,500         955          --      5,455
Thomas R. Brower..............................   4,500         460          --      4,960
</TABLE>

STOCK OPTION AND PURCHASE PLANS AND 401(K) PLAN

     At the Company's annual shareholders' meeting, held on April 24, 1996, the
Company's shareholders approved (1) the 1995 Stock Option and Award Plan, which
provides for the grant of up to 230,000 options to purchase the Company Common
Stock to plan participants (229,600 of which have been granted), (2) the 1996
Stock Option and Award Plan, which provides for the grant of up to 500,000
options to purchase the Company Common Stock to plan participants and (3) the
1995 Employee Stock Purchase Plan, under which

                                        4
<PAGE>   7

up to 100,000 shares of the Company Common Stock may be made available for
purchase by plan participants. Grants of options to purchase 15,473 shares of
the Company Common Stock have been granted to date. The 1996 Stock Option and
Award Plan also provides for the grant of up to 50,000 performance shares to
employees of the Company, to be awarded in the discretion of the Stock Option
Subcommittee. The performance measure to be used for the purposes of granting
the performance shares will be the extent to which performance goals are met, in
addition to the factors of total shareholder return, return on equity, earnings
per share and the ratio of operating overhead to operating revenue.

     In October 1995, on the recommendation of the Stock Option Subcommittee,
the Board of Directors approved the grant of 229,600 stock options under the
1995 Stock Option and Award Plan. Of these options, 173,600 were granted to the
Company's executive officers. The exercise price for all such options was equal
to or greater than the fair market value of the underlying the Company Common
Stock at the date of grant. Therefore, the holders of the stock options will
benefit from such options only when, and to the extent, the price of the Company
Common Stock increases after the grant of the option. The performance of
individual executive officers and other key employees was considered by the
Stock Option Subcommittee in allocating such grants, taking into account the
Company's performance, each individual's contributions thereto and specific
accomplishments in each individual's area of responsibility. In October 1996, on
the recommendation of the Stock Option Subcommittee, the Board of Directors
approved the grant of 18,000 stock options under the 1996 Stock Option and Award
Plan (no such shares were granted to executive officers). In February 1997, on
the recommendation of the Stock Option Subcommittee, the Board of Directors
approved the grant of 95,200 stock options under the 1996 Stock Option and Award
Plan Of these options, 46,200 were granted to the Company's executive officers.
In September 1997, on the recommendation of the Stock Option Subcommittee, the
Board of Directors approved the grant of 30,000 stock options under the 1996
Stock Option and Award Plan (no such shares were granted to executive officers).
In May 1998, on the recommendation of the Stock Option Subcommittee, the Board
of Directors approved the grant of 15,000 stock options under the 1996 Stock
Option and Award Plan to the independent directors. In December 1999, on the
recommendation of the Stock Option Subcommittee, the Board of Directors approved
the grant of 310,500 stock options under the 1996 Stock Option and Award Plan of
which 212,500 were issued to executive officers and independent directors. In
connection with this issuance, the Company also cancelled previously granted,
unexercised stock options totaling 171,150.

     Beginning January 1, 1994, the Company also initiated a defined
contribution 401(k) employee profit sharing plan (the "401(k) Plan") in which
the Company matches employee contributions at a stated percentage of employee
contributions to a defined maximum. The Company contributed approximately
$238,000, $192,000 and $186,000 in 1999, 1998 and 1997, respectively, to the
401(k) Plan.

OPTION GRANTS

     The following table sets forth certain information with respect to grants
of stock options under the 1995 Stock Option and Award Plan and the 1996 Stock
Option and Award Plan during 1999, to the Company's Chief Executive Officer and
each of the other executive officers of the Company named in the Summary
Compensation Table under the caption "Executive Compensation." In addition,
there are shown hypothetical gains or "option spreads" that could be realized
for the respective options, based on arbitrarily assumed rates of annual
compound stock price appreciation of 5 percent and 10 percent from the date the
options were

                                        5
<PAGE>   8

granted over the full option terms. The Company granted no stock options to Mr.
Hawkins or Mr. Brower during 1999 and granted no stock appreciation rights
during 1999.

                             OPTION GRANTS IN 1999

<TABLE>
<CAPTION>
                                                INDIVIDUAL GRANTS                     POTENTIAL REALIZABLE
                               ----------------------------------------------------     VALUE AT ASSUMED
                                               PERCENT OF                               ANNUAL RATES OF
                                 NUMBER OF       TOTAL                                    STOCK PRICE
                                  SHARES        OPTIONS      EXERCISE                   APPRECIATION FOR
                                UNDERLYING     GRANTED TO    OR BASE                     OPTION TERM(2)
                                  OPTIONS      EMPLOYEES    PRICE (PER   EXPIRATION   --------------------
NAME                           GRANTED(#)(1)    IN 1999     SHARE)($)       DATE       5%($)      10%($)
----                           -------------   ----------   ----------   ----------   --------   ---------
<S>                            <C>             <C>          <C>          <C>          <C>        <C>
James T. Sartain.............     50,000          15.97%       3.06      12/2/2009     14,980     114,480
Terry R. DeWitt..............     25,000           7.99%       3.06      12/2/2009      7,490      57,240
G. Stephen Fillip............     25,000           7.99%       3.06      12/2/2009      7,490      57,240
</TABLE>

---------------

(1) The options granted to the above persons were granted as of December 2,
    1999, at an exercise price of $3.06 (greater than fair market value of the
    Company Common Stock on the date of grant). The shares of the Company Common
    Stock underlying such option will vest in five equal, consecutive annual
    installments, commencing on the first anniversary of the grant date. Subject
    to the terms of the 1996 Stock Option and Award Plan, such option may be
    exercised to purchase all or any portion of such vested shares at any time
    prior to the termination thereof. The unexercised portions of such options,
    if any, terminate ten years from the grant date. Such options are
    non-transferable other than by will or the laws of descent and distribution.
    Under the 1996 Stock Option and Award Plan, the right to exercise options
    with respect to unvested shares may be accelerated in certain circumstances.

(2) These amounts represent certain assumed rates of appreciation only. There
    can be no assurance that the amounts reflected will be achieved.

OPTION EXERCISES AND YEAR-END VALUES

     The following table sets forth, for the Company's Chief Executive Officer
and each of the other executive officers of the Company named in the Summary
Compensation Table under the caption "Executive Compensation," the number of
shares of the Company Common Stock underlying both exercisable and
non-exercisable stock options held by such persons as of December 31, 1999, and
the year-end values for unexercised "in-the-money" options, which represent the
positive spread between the exercise price of any such options and the year-end
market price of the Company Common Stock. All such options were granted under
the 1995 Stock Option and Award Plan and 1996 Stock Option and Award Plan. No
options were exercised by the officers listed below during 1999.

                        AGGREGATED 1999 OPTION EXERCISES
                           AND YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
                                                     NUMBER OF SHARES            VALUE OF UNEXERCISED
                                                  UNDERLYING UNEXERCISED         IN-THE-MONEY OPTIONS
                                                    OPTIONS AT YEAR END            AT YEAR END($)(1)
                                                ---------------------------   ---------------------------
NAME                                            EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
----                                            -----------   -------------   -----------   -------------
<S>                                             <C>           <C>             <C>           <C>
James R. Hawkins..............................    18,000          4,500             --             --
James T. Sartain..............................        --         50,000             --             --
Terry R. DeWitt...............................        --         25,000             --             --
G. Stephen Fillip.............................        --         25,000             --             --
Thomas R. Brower..............................        --             --             --             --
</TABLE>

---------------

(1) Calculated using the aggregate market value (based on December 31, 1999
    stock price of $2.75 per share) of the shares of the Company Common Stock
    underlying such options, less the aggregate exercise price payable.

                                        6
<PAGE>   9

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

     The following report concerning the specific factors, criteria and goals
underlying decisions on payments and awards of compensation to each of the
executive officers of the Company for fiscal year 1999 is provided by the
Compensation Committee of the Company's Board of Directors.

GENERAL

     Recommendations regarding compensation of the Company's executive officers
are prepared by the Compensation Committee of the Board of Directors and are
subject to the review, modification and approval of the Board, except that (1)
the Chief Executive Officer does not participate in the preparation of
recommendations, or the review, modification or approval thereof, with respect
to his compensation and (2) all such recommendations, reviews, modifications and
approvals with respect to awards under the 1996 Stock Option and Award Plan are
made solely by the Stock Option Subcommittee of the Compensation Committee.

     The Company's compensation program is designed to enable the Company to
attract, motivate and retain high quality senior management by providing a
competitive total compensation opportunity based on performance. Toward this
end, the Company provides for competitive base salaries, annual variable
performance incentives payable in cash for the achievement of financial
performance goals, and long-term, stock-based incentives which strengthen the
mutuality of interests between senior management and the Company's stockholders.

     Section 162(m) ("Section 162(m)") of the Internal Revenue Code of 1986, as
amended (the "Code"), provides that no deduction for federal income tax purposes
shall be allowed to a publicly held corporation for applicable employee
remuneration with respect to any covered employee of the corporation to the
extent that the amount of such remuneration for the taxable year with respect to
such employee exceeds $1.0 million. For purposes of this limitation, the term
"covered employee" generally includes the chief executive officer of the
corporation and the four highest compensated officers of the corporation (other
than the chief executive officer), and the term "applicable employee
remuneration" generally means, with respect to any covered employee for the
taxable year, the aggregate amount allowable as a federal income tax deduction
for services performed by such employee (whether or not during the taxable
year); provided, however, that applicable employee remuneration does not
include, among other items, certain remuneration payable solely on account of
the attainment of one or more performance goals ("performance based
compensation"). It is the Company's general intention that the remuneration paid
to its covered employees not exceed the deductibility limitation established by
Section 162(m). Nevertheless, due to the fact that not all remuneration paid to
covered employees may qualify as performance-based compensation, it is possible
that the Company's deduction for remuneration paid to any covered employee
during a taxable year may be limited by Section 162(m).

SALARIES

     Salaries for the year 1999 for each of the Company's executive officers,
including its Chief Executive Officer, were determined based upon such officer's
level of responsibility, time with the Company, contribution to the Company and
individual performance. The evaluation of these factors was subjective, and no
fixed, relative weights were assigned thereto.

BONUSES

     Messrs. DeWitt, Fillip and Brower were participants in bonus plan in each
of their respective business units. Messrs. DeWitt and Fillip participated in a
bonus pool of $600,000 established for both executive and non-executive
management of FirstCity Commercial and its subsidiaries. Mr. Brower participated
in a bonus pool of $1,027,995 established for the management of FirstCity
Funding, L.P. ("Funding"). Bonuses earned pursuant to Funding's bonus plan are
paid one-half in cash in the year the bonus is granted and the remainder
deferred over the two succeeding years. One-half of the deferred portion of the
bonus is contingent upon meeting certain performance bonus targets in the first
year succeeding the year in which the bonus was
                                        7
<PAGE>   10

granted. The other half of the deferred portion of the bonus is contingent upon
meeting certain performance bonus targets in the second year succeeding the year
in which the bonus was granted.

STOCK OPTIONS

     The Stock Option Subcommittee of the Compensation Committee believes that
stock options are critical in motivating and rewarding the creation of long-term
shareholder value, and the subcommittee has established a policy of awarding
stock options each year based on the continuing progress of the Company as well
as on individual performance.

     In 1999, the Stock Option Subcommittee recommended, and the Board of
Directors approved, the grant of stock options for 310,500 shares of the Company
Common Stock under the 1996 Stock Option and Award Plan (100,000 were granted to
Messrs. Sartain, DeWitt and Fillip). The exercise price with respect to all such
grants was equal to or greater than the fair market value of the underlying the
Company Common Stock at the date of grant so that the holders of such options
will benefit from such options only when, and to the extent, the price of the
Company Common Stock increases after such grant. The performance of individual
executive officers and other key employees was considered by the Stock Option
Subcommittee in allocating such grants, taking into account the Company's
performance, each individual's contributions thereto and specific
accomplishments in each individual's area of responsibility.

COMPENSATION OF THE CHIEF EXECUTIVE OFFICER

     Recommendations regarding compensation of the Company's Chief Executive
Officer are prepared by those members of the Compensation Committee, and are
subject to the review, modification and approval of those members of the Board,
other than the Chief Executive Officer. Such recommendations, reviews,
modifications and approvals for 1999 were based on the Chief Executive Officer's
level of responsibility, time with the Company, individual performance and
significant contributions to the successful implementation of several important
decisions that are expected to benefit the Company in future years, including
the acquisition of various purchased asset portfolios.

                                            THE COMPENSATION COMMITTEE
                                            C. Ivan Wilson, Chairman
                                            David W. MacLennan
                                            Robert E. Garrison II

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Messrs. Wilson (Chairman), Garrison and MacLennan served as members of the
Compensation Committee of the Board of Directors during 1999. Messrs. Wilson,
Garrison and MacLennan served as members of the Stock Option Subcommittee of the
Compensation Committee during 1999. Neither of Messrs. Wilson, Garrison and
MacLennan was an officer or employee of the Company or any of its subsidiaries
during 1999 or any prior year. Mr. MacLennan is an employee of Cargill, which
has entered into various agreements with the Company. See "Certain Relationships
and Related Transactions". No interlocking relationship exists between the
members of the Company's Board of Directors or Compensation Committee and the
board of directors and compensation committee of any other company, nor has any
such interlocking relationship existed in the past.

EMPLOYMENT AGREEMENTS

     In 1999, the FirstCity Commercial Corp. ("Commercial") (an 100% owned
subsidiary of the Company) entered into employment agreements with Messrs. Terry
R. DeWitt and G. Stephen Fillip. Such contracts provide for annual salaries of
$250,000 each. Additionally, these contracts provide for the establishment of a
bonus pool based on the annual net profits of Commercial before taxes and
interest expense on the indebtedness of Commercial to the Company exceeding
certain thresholds. Messrs. DeWitt and Fillip participate in the benefit plans
of the Company.
                                        8
<PAGE>   11

CUMULATIVE TOTAL SHAREHOLDER RETURN

     The following performance graph (the "Performance Graph") compares the
cumulative total shareholder return on the Company's Common Stock, based on the
market price thereof, with the cumulative total return of the CRSP Total Return
Index for the Nasdaq Stock Market (US) prepared for the National Association of
Securities Dealers Automated Quotations System ("NASDAQ") by the Center for
Research in Security Prices ("CRSP," and such index, the "NASDAQ Market Index")
and the CRSP Financial Stocks Index prepared for NASDAQ by CRSP (the "NASDAQ
Industry Index") for the period beginning on July 3, 1995 (the date the
Company's Common Stock commenced trading on NASDAQ) and ending on December 31,
1999. Cumulative total shareholder return is based on an annual total return,
which assumes the reinvestment of all dividends for the period shown and assumes
that $100 was invested on July 3, 1995 in each of the Company's Common Stock,
the NASDAQ Market Index and the NASDAQ Industry Index. The Company has not
declared any dividends during the period covered by the Performance Graph. The
results shown in the Performance Graph are not necessarily indicative of future
performance.

                                    [GRAPH]

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                            7/3/95      9/29/95      12/31/95     3/29/96      6/28/96      9/30/96      12/31/96
-------------------------------------------------------------------------------------------------------------------
<S>                      <C>          <C>          <C>          <C>          <C>          <C>          <C>
 NASDAQ MARKET            100.00       111.94       113.30       118.59       128.27       132.83       139.36
 NASDAQ FINANCIAL STOCKS  100.00       113.95       122.24       127.15       130.14       141.06       156.70
 FIRSTCITY FINANCIAL      100.00       133.33       170.83       167.71       231.25       243.75       241.67
</TABLE>

                                        9
<PAGE>   12

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                           3/31/97      6/30/97      9/30/97      12/31/97     3/31/98      6/30/98      9/30/98
-------------------------------------------------------------------------------------------------------------------
<S>                      <C>          <C>          <C>          <C>          <C>          <C>          <C>
 NASDAQ MARKET            131.80       155.96       182.34       171.01       199.90       205.39       185.48
 NASDAQ FINANCIAL STOCKS  163.48       190.36       222.14       240.50       254.55       247.93       103.93
 FIRSTCITY FINANCIAL      179.17       233.33       212.50       253.13       252.08       241.67       133.33
</TABLE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                                               12/31/98     3/31/99      6/30/99      9/30/99      12/31/99
-------------------------------------------------------------------------------------------------------------
<S>                                          <C>          <C>          <C>          <C>          <C>
 NASDAQ MARKET                                240.69       269.24       294.58       301.30       434.84
 NASDAQ FINANCIAL STOCKS                      131.93       229.33       256.95       222.77       230.50
 FIRSTCITY FINANCIAL                          107.81        82.81        45.83        12.50        22.92
</TABLE>

                                       10
<PAGE>   13

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The following table sets forth certain information regarding the Company
Common Stock owned on March 31, 2000 (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 Company Common Stock as of such date, (2) each of the Company's
directors and the nominees for director named herein, (3) each of the executive
officers of the Company named in the Summary Compensation Table under the
caption "Executive Compensation" and (4) all directors and executive officers of
the Company as a group. Except as otherwise indicated, all shares of the Company
Common Stock shown in the table are held with sole voting and investment power.

<TABLE>
<CAPTION>
                                                                 SHARES           PERCENT
                                                              BENEFICIALLY          OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1)                          OWNED             CLASS
---------------------------------------                       ------------        -------
<S>                                                           <C>                 <C>
James R. Hawkins............................................     958,570(2),(3)    11.5%
C. Ivan Wilson..............................................       2,664              *
James T. Sartain............................................     342,397(3)         4.1%
Richard E. Bean.............................................      80,633            1.0%
Dane Fulmer.................................................      18,500              *
Robert E. Garrison II.......................................      35,050              *
David W. MacLennan..........................................          --(4)          --
Terry R. DeWitt.............................................      14,882              *
G. Stephen Fillip...........................................      46,387              *
Thomas R. Brower............................................         241              *
All directors and executive officers as a group (14
  persons)..................................................   1,520,751(2),(4)    18.2%
Richard J. Gillen...........................................     468,755            5.6%
  4015 Buckeye Creek
  Kingwood, Texas 77339
Ed Smith....................................................     589,451(5)         7.1%
  1021 Main Street, #1000
  Houston, Texas 77002
Lindsey Capital.............................................     419,969(5)         5.0%
  1021 Main Street, #1000
  Houston, Texas 77002
</TABLE>

---------------

 *  Less than 1%

(1) The business mailing address of each of such persons (except as otherwise
    indicated) is P.O. Box 8216, Waco, Texas 76714-8216.

(2) Includes 18,000 shares of Common Stock that may be acquired within 60 days
    of the Measurement Date upon the exercise of options granted under the
    Company's 1995 Stock Option and Award Plan. Also includes 52,810 shares of
    Common Stock held of record by J-Hawk, Ltd., the sole general partner of
    which is 5-Star Management, Inc. Mr. Hawkins may be deemed to beneficially
    own such shares of common stock as a result of his ownership of 50% of the
    common stock of 5-Star Management, Inc.

(3) Messrs. Hawkins and Sartain and ATARA, the sole general partner of which is
    ATARA Corp., are parties to a Shareholder Voting Agreement with Cargill
    regarding the Common Stock, pursuant to which ATARA and Messrs. Hawkins and
    Sartain are required to vote their shares of Common Stock to elect one
    designee of Cargill as a director of the Company, and Cargill is required to
    vote its shares of Common Stock to elect one or more designees of ATARA and
    Messrs. Hawkins and Sartain as directors of the company. Each of Messrs.
    Hawkins and Sartain and ATARA disclaims beneficial ownership of the shares
    of Common Stock owned by Cargill.

(4) Mr. MacLennan is an officer of certain affiliates of Cargill, which, as of
    the Measurement Date was the record owner of 221,683 shares of Common Stock.
    Mr. MacLennan disclaims beneficial ownership of such shares. Cargill is
    party to the Shareholder Voting Agreement with Messrs. Hawkins and Sartain,
    and ATARA, regarding the Common Stock.

                                       11
<PAGE>   14

(5) 419,969 of such shares of Common Stock are held of record by Lindsey Capital
    Corporation. Mr. Smith beneficially owns such shares of Common Stock as a
    result of his ownership of 100% of the common stock of Lindsey Capital
    Corporation.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The Company owns equity interests in various purchased asset portfolios
through limited partnerships and limited liability companies ("Acquisition
Partnerships") in which a corporate affiliate of the Company is the sole general
partner or managing member and the Company and other non-affiliated investors
are limited partners or members. Certain directors and executive may also serve
as directors and/or executive officers of such 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.

     Under a Right of First Refusal Agreement and Due Diligence Reimbursement
Agreement effective as of January 1, 1998 (the "Right of First Refusal
Agreement") among the Company, FirstCity Servicing Corporation, Cargill and its
wholly owned subsidiary CFSC Capital Corp. II ("CFSC"), if the Company receives
an invitation to bid on or otherwise obtains an opportunity to acquire interests
in domestic loans, receivables, real estate or other assets in which the
aggregate amount to be bid exceeds $4 million, the Company is required to follow
a prescribed notice procedure pursuant to which CFSC has the option to
participate in the proposed purchase by requiring that such purchase or
acquisition be effected through an Acquisition Partnership formed by the Company
and Cargill (or an affiliate). The Right of First Refusal Agreement does not
prohibit the Company from holding discussions with entities other than CFSC
regarding potential joint purchases of interests in loans, receivables, real
estate or other assets, provided that any such purchase is subject to CFSC's
right to participate in the Company's share of the investment. The Right of
First Refusal Agreement further provides that, subject to certain conditions,
CFSC will bear 50% of the due diligence expenses incurred by the Company in
connection with proposed asset purchases. The Right of First Refusal Agreement
has been extended to January 1, 2002. During 1999, Cargill provided the Company
with a $9.6 million credit facility, which matures on May 15, 2000. Borrowings
under such facility bore interest at LIBOR plus 5% and were secured by
substantially all of the Company's unencumbered assets. As of December 31, 1999,
outstanding borrowings under such facility were $9.6 million. David W.
MacLennan, a director of the Company, is an officer of certain affiliates of
Cargill.

     Pursuant to a noncancellable operating lease, the Company leases the office
space for its principal executive offices in Waco, Texas from a trust created
for the benefit of the children of James R. Hawkins, the Chairman of the Board
and Chief Executive Officer of the Company. Such lease expires in December of
2001 and contains an option in favor of the Company pursuant to which the
Company may renew such lease for two additional five-year periods, with
escalating lease payments. Rental expenses under such lease for calendar year
1999 were $90,000. As of December 31, 1999, the future minimum lease payments
for each of the next two years under such lease are $90,000 per year. The
Company believes that the terms of such lease are generally as favorable to the
Company as the terms it would receive from an independent third party.

     The Company is a party to agreements with Combined Financial Corporation
and its subsidiaries ("CFC") and HATARAS Limited ("HATARAS") to provide asset
servicing for a fee based on a percentage of collections. Certain directors and
executive officers have beneficial ownership of CFC and HATARAS. The fee paid by
CFC to the Company in 1999 was approximately $27,000. The fee paid by HATARAS to
the Company in 1999 was approximately $15,000. Messrs. Hawkins and Sartain and
ATARA, Ltd. (Rick R. Hagelstein, former executive officer and director of the
Company, serves as President of ATARA Corp., the sole general partner of ATARA,
Ltd.) are owners of HATARAS.

     The Company had certain borrowings secured by residual interest in the
Company's automobile securitizations and certain other automobile loan assets.
These borrowings were originally $6,000,000 and bore a rate of interest equal to
Wall Street Journal Prime Rate plus 1%. During the year, Messrs. Hawkins,
Sartain and Hagelstein purchased participations in the amounts of $1,000,000,
$500,000 and $500,000, respectively.

                                       12
<PAGE>   15

Subsequent to the original participation, Mr. Hawkins purchased an additional
participation in the amount of $1,000,000. Repayment of the participations are
subordinated to the repayment of the note holders. All other terms and
conditions of the participations are the same as the note holder. On December
31, 1999, Messrs. Hawkins and Sartain purchased additional participations in the
amounts of $500,000 and $500,000, respectively. Subsequent to year end, the
December 31, 1999 participations were repaid with the proceeds of a refinance
transaction in the amount of $7,000,000. During 1999, interest in the amounts of
$87,739, $26,754 and $26,754 were paid to Messrs. Hawkins, Sartain and
Hagelstein, respectively.

     During 1999, the Company borrowed $760,364 from J-Hawk Distributing, an
affiliate owned by Mr. Hawkins. This loan is unsecured and bears a rate of
interest of 10%. The current balance of the note is $510,364. Interest paid
during 1999 on this note was $38,441.

     At December 31, 1999, Terry R. DeWitt, the Co-President of Commercial had
indebtedness with the Company in the amount of $112,500. The highest amount of
this indebtedness during 1999, was $150,000. Such indebtedness is unsecured and
bear rates of interest of 5%. Repayment of such indebtedness is expected from
future performance bonuses from the Company. To the extent such repayment from
performance bonuses does not meet the amounts due under this indebtedness, the
difference between the amount due and the amount repaid from performance bonuses
will be forgiven. If employment is terminated during the term of this
indebtedness, the remaining amount due will not be forgiven.

                                       13