##### 



---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION


Washington, DC 20549


Form 10-Q

|           |     |  |                                                                                        
|---------- | --- |  | ---------------------------------------------------------------------------------------
|(Mark One) |    
|           | [X] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2003 or

| |      |  |                                                                                         
| | ---- |  | ----------------------------------------------------------------------------------------
| | [  ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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

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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [  ]   No [X]

The number of shares of common stock, par value $.01 per share,
outstanding at May 15, 2003 was 11,204,007.



---

---





---



##### 

TABLE OF CONTENTS



|                             |                                                                                                |  |  |  |  |  |  | 
|---------------------------- | ---------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I FINANCIAL INFORMATION
|                             | Item 1. Financial Statements                                                                  
|                             | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
|                             | Item 3. Quantitative and Qualitative Disclosures About Market Risk                            
|                             | Item 4. Controls and Procedures                                                               
|PART II OTHER INFORMATION   
|                             | Item 1. Legal Proceedings                                                                     
|                             | Item 2. Changes in Securities and Use of Proceeds                                             
|                             | Item 3. Defaults Upon Senior Securities                                                       
|                             | Item 4. Submission of Matters to a Vote of Security Holders                                   
|                             | Item 5. Other Information                                                                     
|                             | Item 6. Exhibits and Reports on Form 8-K                                                      
|SIGNATURES                  
|CERTIFICATIONS              
|INDEX TO EXHIBITS           




PART I

FINANCIAL INFORMATION




Item 1.Financial Statements

FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)


|                                                                   |                                                                                                                                                                                                                                                              |                                                                        |                            |         |         |             |        |              |         |         |  | 
|------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------- | -------------------------- | ------- | ------- | ----------- | ------ | ------------ | ------- | ------- |  | 
|                                                                   |                                                                                                                                                                                                                                                              |                                                                        |                            |         |         | March 31,   |        | December 31,
|                                                                   |                                                                                                                                                                                                                                                              |                                                                        |                            |         |         | 2003        |        | 2002        
|                                                                   |                                                                                                                                                                                                                                                              |                                                                        |                            |         |         |             |        |             
|                                                                   |                                                                                                                                                                                                                                                              |                                                                        |                            |         |         | (Unaudited) |        |             
|                                                                   |                                                                                                                                                                                                                                                              |                                                                        |                            | ASSETS  |         |             |        |              |         |         |  | 
|Cash and cash equivalents                                          |                                                                                                                                                                                                                                                              | $                                                                      | 2,869                      |         |         | $           | 4,118  |             
|Portfolio Assets, net                                              |                                                                                                                                                                                                                                                              |                                                                        | 7,492                      |         |         |             | 9,820  |             
|Loans receivable from Acquisition Partnerships held for investment |                                                                                                                                                                                                                                                              |                                                                        | 15,651                     |         |         |             | 17,700 |             
|Equity investments                                                 |                                                                                                                                                                                                                                                              |                                                                        | 57,681                     |         |         |             | 58,342 |             
|Deferred tax benefit, net                                          |                                                                                                                                                                                                                                                              |                                                                        | 20,101                     |         |         |             | 20,101 |             
|Service fees receivable from affiliates                            |                                                                                                                                                                                                                                                              |                                                                        | 2,524                      |         |         |             | 2,235  |             
|Other assets, net                                                  |                                                                                                                                                                                                                                                              |                                                                        | 5,857                      |         |         |             | 6,376  |             
|Net assets of discontinued operations                              |                                                                                                                                                                                                                                                              |                                                                        | 7,948                      |         |         |             | 7,764  |             
|                                                                   |                                                                                                                                                                                                                                                              |                                                                        |                            |         |         |             |        |             
|                                                                   |                                                                                                                                                                                                                                                              |                                                                        | Total Assets               |         | $       | 120,123     |        |              | $       | 126,456 | 
|                                                                   |                                                                                                                                                                                                                                                              |                                                                        |                            |         |         |             |        |             
|                                                                   |                                                                                                                                                                                                                                                              | LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS EQUITY       |                            |         |         |             |       
|Liabilities:                                                       |                                                                                                                                                                                                                                                              |                                                                        |                            |         |         |             |        |             
|                                                                   | Notes payable to affiliates                                                                                                                                                                                                                                  |                                                                        | $                          | 89,621  |         |             | $      | 95,560       |        
|                                                                   | Notes payable  other                                                                                                                                                                                                                                        |                                                                        |                            | 504     |         |             |        | 1,113        |        
|                                                                   | Minority interest                                                                                                                                                                                                                                            |                                                                        |                            | 4,112   |         |             |        | 4,052        |        
|                                                                   | Other liabilities                                                                                                                                                                                                                                            |                                                                        |                            | 3,537   |         |             |        | 3,274        |        
|                                                                   |                                                                                                                                                                                                                                                              |                                                                        |                            |         |         |             |        |             
|                                                                   |                                                                                                                                                                                                                                                              |                                                                        | Total Liabilities          |         |         | 97,774      |        |              |         | 103,999 | 
|Commitments and contingencies (note 10)                            |                                                                                                                                                                                                                                                              |                                                                        |                            |         |         |             |        |             
|Redeemable preferred stock:                                        |                                                                                                                                                                                                                                                              |                                                                        |                            |         |         |             |        |             
|                                                                   | Adjusting rate preferred stock, including accumulated dividends in arrears
of $995 and $960, respectively (par value $.01; redemption value of $21 per
share; 2,000,000 shares authorized; shares issued and outstanding: 126,291
and 130,691, respectively) |                                                                        |                            | 3,647   |         |             |        | 3,705        |        
|Shareholders equity (deficit):                                    |                                                                                                                                                                                                                                                              |                                                                        |                            |         |         |             |        |             
|                                                                   | Optional preferred stock (par value $.01 per share; 98,000,000 shares
authorized; no shares issued or outstanding)                                                                                                                                           |                                                                        |                            |        |         |             |        |             |        
|                                                                   | Common stock (par value $.01 per share; 100,000,000 shares authorized;
shares issued and outstanding: 11,204,007 and 11,195,076, respectively)                                                                                                               |                                                                        |                            | 112     |         |             |        | 112          |        
|                                                                   | Paid in capital                                                                                                                                                                                                                                              |                                                                        |                            | 99,010  |         |             |        | 98,934       |        
|                                                                   | Accumulated deficit                                                                                                                                                                                                                                          |                                                                        |                            | (83,062 | )       |             |        | (82,977      | )      
|                                                                   | Accumulated other comprehensive income                                                                                                                                                                                                                       |                                                                        |                            | 2,642   |         |             |        | 2,683        |        
|                                                                   |                                                                                                                                                                                                                                                              |                                                                        |                            |         |         |             |        |             
|                                                                   |                                                                                                                                                                                                                                                              |                                                                        | Total Shareholders Equity |         |         | 18,702      |        |              |         | 18,752  | 
|                                                                   |                                                                                                                                                                                                                                                              |                                                                        |                            |         |         |             |        |             
|                                                                   |                                                                                                                                                                                                                                                              | Total Liabilities, Redeemable Preferred Stock and Shareholders Equity |                            | $       | 120,123 |             |        | $            | 126,456 |        
|                                                                   |                                                                                                                                                                                                                                                              |                                                                        |                            |         |         |             |        |             

See accompanying notes to consolidated financial statements.

2



---



##### 



FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share data)
(Unaudited)

|                                                                                     |                                                     |                |      |                    |       |      |        |       |       | 
|------------------------------------------------------------------------------------ | --------------------------------------------------- | -------------- | ---- | ------------------ | ----- | ---- | ------ | ----- | ----- | 
|                                                                                     |                                                     |                |      | Three Months Ended
|                                                                                     |                                                     |                |      | March 31,         
|                                                                                     |                                                     |                |      |                   
|                                                                                     |                                                     |                |      | 2003               |       | 2002
|                                                                                     |                                                     |                |      |                    |       |     
|Revenues:                                                                            |                                                     |                |      |                    |       |      |        |      
|                                                                                     | Servicing fees from affiliates                      |                | $    | 3,507              |       |      | $      | 2,222 |      
|                                                                                     | Gain on resolution of Portfolio Assets              |                |      | 695                |       |      |        | 244   |      
|                                                                                     | Equity in earnings of investments                   |                |      | 2,091              |       |      |        | 1,475 |      
|                                                                                     | Interest income from affiliates                     |                |      | 915                |       |      |        | 1,020 |      
|                                                                                     | Interest income  other                             |                |      | 188                |       |      |        | 285   |      
|                                                                                     | Other income                                        |                |      | 362                |       |      |        | 240   |      
|                                                                                     |                                                     |                |      |                    |       |      |        |      
|                                                                                     |                                                     | Total revenues |      |                    | 7,758 |      |        |       | 5,486 | 
|Expenses:                                                                            |                                                     |                |      |                    |       |      |        |      
|                                                                                     | Interest and fees on notes payable to affiliates    |                |      | 1,891              |       |      |        | 1,405 |      
|                                                                                     | Interest and fees on notes payable  other          |                |      | 62                 |       |      |        | 143   |      
|                                                                                     | Salaries and benefits                               |                |      | 3,496              |       |      |        | 2,735 |      
|                                                                                     | Provision for loan and impairment losses            |                |      | 34                 |       |      |        | 99    |      
|                                                                                     | Occupancy, data processing, communication and other |                |      | 1,994              |       |      |        | 1,910 |      
|                                                                                     |                                                     |                |      |                    |       |      |        |      
|                                                                                     |                                                     | Total expenses |      |                    | 7,477 |      |        |       | 6,292 | 
|Earnings (loss) from continuing operations before income taxes and minority interest |                                                     |                | 281  |                    |       |      | (806   | )    
|Provision for income taxes                                                           |                                                     |                | (121 | )                  |       |      | (13    | )    
|                                                                                     |                                                     |                |      |                    |       |      |        |      
|Earnings (loss) from continuing operations before minority interest                  |                                                     |                | 160  |                    |       |      | (819   | )    
|Minority interest                                                                    |                                                     |                | (179 | )                  |       |      | (15    | )    
|                                                                                     |                                                     |                |      |                    |       |      |        |      
|Loss from continuing operations                                                      |                                                     |                | (19  | )                  |       |      | (834   | )    
|Loss from discontinued operations                                                    |                                                     |                |     |                    |       |      | (500   | )    
|                                                                                     |                                                     |                |      |                    |       |      |        |      
|Net loss                                                                             |                                                     |                | (19  | )                  |       |      | (1,334 | )    
|Accumulated preferred dividends in arrears                                           |                                                     |                | (66  | )                  |       |      | (642   | )    
|                                                                                     |                                                     |                |      |                    |       |      |        |      
|Net loss to common shareholders                                                      |                                                     | $              | (85  | )                  |       | $    | (1,976 | )    
|                                                                                     |                                                     |                |      |                    |       |      |        |       |      
|Basic and diluted loss per common share are as follows:                              |                                                     |                |      |                    |       |      |        |      
|                                                                                     | Loss from continuing operations                     |                | $    | (0.01              | )     |      | $      | (0.18 | )    
|                                                                                     | Discontinued operations                             |                |      |                   |       |      |        | (0.06 | )    
|                                                                                     | Net
loss to common shareholders                     |                | $    | (0.01              | )     |      | $      | (0.24 | )    
|                                                                                     | Weighted average common shares outstanding          |                |      | 11,202             |       |      |        | 8,376 |      

See accompanying notes to consolidated financial statements.

3



---



##### 



FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
AND COMPREHENSIVE LOSS
(Dollars in thousands)
(Unaudited)

|                                                                    |                                             |  |            |   |        |   |         |   |             |   |               |   |               |   |         |        |       |   |             |       |   |   |        |        |  
|------------------------------------------------------------------- | ------------------------------------------- |  | ---------- | - | ------ | - | ------- | - | ----------- | - | ------------- | - | ------------- | - | ------- | ------ | ----- | - | ----------- | ----- | - | - | ------ | ------ | -
|                                                                    |                                             |  |            |   |        |   |         |   |             |   |               |   |               |   |         |        |       |   | Accumulated |       |   |   |       
|                                                                    |                                             |  | Number of  |   |        |   |         |   |             |   |               |   |               |   |         |        | Other |   | Total      
|                                                                    |                                             |  | Common     |   | Common |   | Paid in |   | Accumulated |   | Comprehensive |   | Shareholders
|                                                                    |                                             |  | Shares     |   | Stock  |   | Capital |   | Deficit     |   | Income        |   | Equity       
|                                                                    |                                             |  |            |   |        |   |         |   |             |   |               |   |              
|Balances, December 31, 2001                                         |                                             |  | 8,376,500  |   |        | $ | 84      |   |             | $ | 79,645        |   |               | $ | (76,728 | )      |       | $ | 876         |       |   | $ | 3,877  |       
|Issuance of common stock in exchange for
redeemable preferred stock |                                             |  | 2,417,388  |   |        |   | 24      |   |             |   | 18,891        |   |               |   |        |        |       |   |            |       |   |   | 18,915 |       
|Issuance of common stock to acquire
minority interest in subsidiary |                                             |  | 400,000    |   |        |   | 4       |   |             |   | 396           |   |               |   |        |        |       |   |            |       |   |   | 400    |       
|Issuance of shares through employee stock
purchase plan             |                                             |  | 1,188      |   |        |   |        |   |             |   | 2             |   |               |   |        |        |       |   |            |       |   |   | 2      |       
|Comprehensive loss:                                                 |                                             |  |            |   |        |   |         |   |             |   |               |   |               |   |         |        |       |   |             |       |   |   |        |       
|                                                                    | Net loss for 2002                           |  |            |  |        |   |         |  |             |   |               |  |               |   |         | (3,771 | )     |   |             |      |   |   |        | (3,771 | )
|                                                                    | Foreign currency items                      |  |            |  |        |   |         |  |             |   |               |  |               |   |         |       |       |   |             | 1,782 |   |   |        | 1,782  |  
|                                                                    | Unrealized net gain on securitization       |  |            |  |        |   |         |  |             |   |               |  |               |   |         |       |       |   |             | 25    |   |   |        | 25     |  
|                                                                    |                                             |  |            |   |        |   |         |   |             |   |               |   |               |   |         |        |       |   |             |       |   |   |        |       
|Total comprehensive loss                                            |                                             |  |            |   |        |   |         |   |             |   |               |   |               |   |         |        |       |   |             |       |   |   | (1,964 | )     
|                                                                    |                                             |  |            |   |        |   |         |   |             |   |               |   |               |   |         |        |       |   |             |       |   |   |        |       
|Preferred dividends                                                 |                                             |  |           |   |        |   |        |   |             |   |              |   |               |   | (2,478  | )      |       |   |            |       |   |   | (2,478 | )     
|                                                                    |                                             |  |            |   |        |   |         |   |             |   |               |   |               |   |         |        |       |   |             |       |   |   |        |       
|Balances, December 31, 2002                                         |                                             |  | 11,195,076 |   |        |   | 112     |   |             |   | 98,934        |   |               |   | (82,977 | )      |       |   | 2,683       |       |   |   | 18,752 |       
|Issuance of common stock in exchange for
redeemable preferred stock |                                             |  | 8,200      |   |        |   |        |   |             |   | 75            |   |               |   |        |        |       |   |            |       |   |   | 75     |       
|Issuance of shares through employee stock
purchase plan             |                                             |  | 731        |   |        |   |        |   |             |   | 1             |   |               |   |        |        |       |   |            |       |   |   | 1      |       
|Comprehensive loss:                                                 |                                             |  |            |   |        |   |         |   |             |   |               |   |               |   |         |        |       |   |             |       |   |   |        |       
|                                                                    | Net loss for the first three months of 2003 |  |            |  |        |   |         |  |             |   |               |  |               |   |         | (19    | )     |   |             |      |   |   |        | (19    | )
|                                                                    | Foreign currency items                      |  |            |  |        |   |         |  |             |   |               |  |               |   |         |       |       |   |             | 311   |   |   |        | 311    |  
|                                                                    | Unrealized net loss on securitization       |  |            |  |        |   |         |  |             |   |               |  |               |   |         |       |       |   |             | (352  | ) |   |        | (352   | )
|                                                                    |                                             |  |            |   |        |   |         |   |             |   |               |   |               |   |         |        |       |   |             |       |   |   |        |       
|Total comprehensive loss                                            |                                             |  |            |   |        |   |         |   |             |   |               |   |               |   |         |        |       |   |             |       |   |   | (60    | )     
|                                                                    |                                             |  |            |   |        |   |         |   |             |   |               |   |               |   |         |        |       |   |             |       |   |   |        |       
|Preferred dividends                                                 |                                             |  |           |   |        |   |        |   |             |   |              |   |               |   | (66     | )      |       |   |            |       |   |   | (66    | )     
|                                                                    |                                             |  |            |   |        |   |         |   |             |   |               |   |               |   |         |        |       |   |             |       |   |   |        |       
|Balances, March 31, 2003                                            |                                             |  | 11,204,007 |   |        | $ | 112     |   |             | $ | 99,010        |   |               | $ | (83,062 | )      |       | $ | 2,642       |       |   | $ | 18,702 |       
|                                                                    |                                             |  |            |   |        |   |         |   |             |   |               |   |               |   |         |        |       |   |             |       |   |   |        |       

See accompanying notes to consolidated financial statements.

4



---



##### 



FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)

|                                                  |                                                                                           |                                                                                                             |                                                     |        |                    |        |       |        |        |        |  
|------------------------------------------------- | ----------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ------ | ------------------ | ------ | ----- | ------ | ------ | ------ | -
|                                                  |                                                                                           |                                                                                                             |                                                     |        | Three Months Ended
|                                                  |                                                                                           |                                                                                                             |                                                     |        | March 31,         
|                                                  |                                                                                           |                                                                                                             |                                                     |        |                   
|                                                  |                                                                                           |                                                                                                             |                                                     |        | 2003               |        | 2002 
|                                                  |                                                                                           |                                                                                                             |                                                     |        |                    |        |      
|Cash flows from operating activities:             |                                                                                           |                                                                                                             |                                                     |        |                    |        |       |       
|                                                  | Net loss                                                                                  |                                                                                                             | $                                                   | (19    | )                  |        | $     | (1,334 | )     
|                                                  | Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |                                                                                                             |                                                     |        |                    |        |       |        |       
|                                                  |                                                                                           | Loss from discontinued operations                                                                           |                                                     |        |                   |        |       |        | 500    |       
|                                                  |                                                                                           | Proceeds from resolution of Portfolio Assets                                                                |                                                     |        | 3,003              |        |       |        | 718    |       
|                                                  |                                                                                           | Gain on resolution of Portfolio Assets                                                                      |                                                     |        | (695               | )      |       |        | (244   | )     
|                                                  |                                                                                           | Purchase of Portfolio Assets and advances on loans receivable, net                                          |                                                     |        |                   |        |       |        | (3,902 | )     
|                                                  |                                                                                           | Provision for loan and impairment losses                                                                    |                                                     |        | 34                 |        |       |        | 99     |       
|                                                  |                                                                                           | Equity in earnings of investments                                                                           |                                                     |        | (2,091             | )      |       |        | (1,475 | )     
|                                                  |                                                                                           | Proceeds from performing Portfolio Assets and loans receivable, net                                         |                                                     |        | 971                |        |       |        | 1,102  |       
|                                                  |                                                                                           | Capitalized interest and costs on Portfolio Assets and loans receivable                                     |                                                     |        | (84                | )      |       |        | (43    | )     
|                                                  |                                                                                           | Depreciation and amortization                                                                               |                                                     |        | 192                |        |       |        | 175    |       
|                                                  |                                                                                           | (Increase) decrease in other assets                                                                         |                                                     |        | (258               | )      |       |        | 343    |       
|                                                  |                                                                                           | Increase (decrease) in other liabilities                                                                    |                                                     |        | 157                |        |       |        | (63    | )     
|                                                  |                                                                                           |                                                                                                             |                                                     |        |                    |        |       |       
|                                                  |                                                                                           |                                                                                                             | Net cash provided by (used in) operating activities |        |                    | 1,210  |       |        |        | (4,124 | )
|                                                  |                                                                                           |                                                                                                             |                                                     |        |                    |        |       |       
|Cash flows from investing activities:             |                                                                                           |                                                                                                             |                                                     |        |                    |        |       |       
|                                                  | Property and equipment, net                                                               |                                                                                                             |                                                     | (441   | )                  |        |       | (283   | )     
|                                                  | Contributions to Acquisition Partnerships and Servicing Entities                          |                                                                                                             |                                                     | (75    | )                  |        |       | (1,488 | )     
|                                                  | Distributions from Acquisition Partnerships and Servicing Entities                        |                                                                                                             |                                                     | 4,892  |                    |        |       | 2,563  |       
|                                                  |                                                                                           |                                                                                                             |                                                     |        |                    |        |       |       
|                                                  |                                                                                           |                                                                                                             | Net cash provided by investing activities           |        |                    | 4,376  |       |        |        | 792    |  
|                                                  |                                                                                           |                                                                                                             |                                                     |        |                    |        |       |       
|Cash flows from financing activities:             |                                                                                           |                                                                                                             |                                                     |        |                    |        |       |       
|                                                  | Borrowings under notes payable to affiliates                                              |                                                                                                             |                                                     | 500    |                    |        |       | 7,044  |       
|                                                  | Payments of notes payable to affiliates                                                   |                                                                                                             |                                                     | (6,493 | )                  |        |       | (3,248 | )     
|                                                  | Payments of notes payable  other                                                         |                                                                                                             |                                                     | (609   | )                  |        |       | (1,115 | )     
|                                                  | Payments for tender of redeemable preferred stock                                         |                                                                                                             |                                                     | (50    | )                  |        |       |       |       
|                                                  | Proceeds from issuance of common stock                                                    |                                                                                                             |                                                     | 1      |                    |        |       |       |       
|                                                  |                                                                                           |                                                                                                             |                                                     |        |                    |        |       |       
|                                                  |                                                                                           |                                                                                                             | Net cash provided by (used in) financing activities |        |                    | (6,651 | )     |        |        | 2,681  |  
|                                                  |                                                                                           |                                                                                                             |                                                     |        |                    |        |       |       
|                                                  |                                                                                           |                                                                                                             | Net cash used in continuing operations              |        |                    | (1,065 | )     |        |        | (651   | )
|                                                  |                                                                                           |                                                                                                             | Net cash used in discontinued operations            |        |                    | (184   | )     |        |        | (306   | )
|                                                  |                                                                                           |                                                                                                             |                                                     |        |                    |        |       |       
|Net decrease in cash and cash equivalents         |                                                                                           | $                                                                                                           | (1,249                                              | )      |                    | $      | (957  | )     
|Cash and cash equivalents, beginning of period    |                                                                                           |                                                                                                             | 4,118                                               |        |                    |        | 5,583 |       
|                                                  |                                                                                           |                                                                                                             |                                                     |        |                    |        |       |       
|Cash and cash equivalents, end of period          |                                                                                           | $                                                                                                           | 2,869                                               |        |                    | $      | 4,626 |       
|                                                  |                                                                                           |                                                                                                             |                                                     |        |                    |        |       |        |       
|Supplemental disclosure of cash flow information: |                                                                                           |                                                                                                             |                                                     |        |                    |        |       |       
|                                                  | Cash paid during the period for:                                                          |                                                                                                             |                                                     |        |                    |        |       |        |       
|                                                  |                                                                                           | Interest                                                                                                    |                                                     | $      | 1,607              |        |       | $      | 1,284  |       
|                                                  |                                                                                           | Income taxes                                                                                                |                                                     |        | 222                |        |       |        | 15     |       
|                                                  | Non-cash financing activities:                                                            |                                                                                                             |                                                     |        |                    |        |       |        |       
|                                                  |                                                                                           | Dividends accumulated and not paid on preferred stock                                                       |                                                     |        | 66                 |        |       |        | 642    |       
|                                                  |                                                                                           | Balance
of redeemable preferred stock and associated dividends relinquished
in recapitalization transaction |                                                     |        | 74                 |        |       |        |       |       

See accompanying notes to consolidated financial statements.

5



---



##### 



FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2003
(Dollars in thousands, except per share data)

(1)  Basis of
Presentation, Loss per Common Share and Stock-Based Compensation

The unaudited consolidated financial statements of FirstCity Financial
Corporation (FirstCity or the Company) reflect, in the opinion of
management, all adjustments, consisting only of normal and recurring
adjustments, necessary to present fairly FirstCitys consolidated financial
position at March 31, 2003, and the results of operations and cash flows for the
three-month periods ended March 31, 2003 and 2002.

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Significant estimates include the
estimation of future collections on purchased portfolio assets used in the
calculation of net gain on resolution of portfolio assets, interest rate
environments, valuation of the deferred tax asset, and prepayment speeds and
collectibility of loans held in inventory, in securitization trusts and held
for investment. Actual results could differ materially from those estimates.

The effects of any common stock equivalents are antidilutive for the three
months ended March 31, 2003 and 2002; therefore, diluted loss per common share
is reported the same as basic loss per common share.

At March 31, 2003, the Company has two stock-based employee compensation
plans. The Company accounts for those plans under the recognition and
measurement principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees,and related Interpretations. No stock-based employee compensation
cost is reflected in the consolidated statements of operations, as all options
granted under those plans had an exercise price equal to the market value of
the underlying common stock on the date of grant. As required by FASB
Statement No. 148, Accounting for Stock-Based
CompensationTransition and disclosure, the following table
represents the effect on net loss and loss per share if the Company had applied
the fair value recognition provisions of FASB Statement No. 123, Accounting for
Stock-Based Compensation,to stock-based employee compensation.

|                                             |                                                                                                                                          |   |              |     |      |   |        |     |  
|-------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | - | ------------ | --- | ---- | - | ------ | --- | -
|                                             |                                                                                                                                          |   | Three Months
|                                             |                                                                                                                                          |   | Ended       
|                                             |                                                                                                                                          |   | March 31,   
|                                             |                                                                                                                                          |   |             
|                                             |                                                                                                                                          |   | 2003         |     | 2002
|                                             |                                                                                                                                          |   |              |     |     
|Net loss to common stockholders, as reported |                                                                                                                                          | $ | (85          | )   |      | $ | (1,976 | )  
|                                             | Add: Total stock-based employee compensation expense
determined under fair value based method for all
awards, net of related tax effects |   |              | (34 | )    |   |        | (41 | )
|                                             |                                                                                                                                          |   |              |     |      |   |        |    
|Pro forma net loss to common stockholders    |                                                                                                                                          | $ | (119         | )   |      | $ | (2,017 | )  
|                                             |                                                                                                                                          |   |              |     |      |   |        |    
|Net loss per common share:                   |                                                                                                                                          |   |              |     |      |   |        |    
|Basic  as reported                          |                                                                                                                                          | $ | (0.01        | )   |      | $ | (0.24  | )  
|                                             |                                                                                                                                          |   |              |     |      |   |        |    
|Basic  pro forma                            |                                                                                                                                          | $ | (0.01        | )   |      | $ | (0.24  | )  
|                                             |                                                                                                                                          |   |              |     |      |   |        |    
|Diluted  as reported                        |                                                                                                                                          | $ | (0.01        | )   |      | $ | (0.24  | )  
|                                             |                                                                                                                                          |   |              |     |      |   |        |    
|Diluted  pro forma                          |                                                                                                                                          | $ | (0.01        | )   |      | $ | (0.24  | )  
|                                             |                                                                                                                                          |   |              |     |      |   |        |    

(2)  Restructure, Liquidity and Capital Resources

Generally, the Company requires liquidity to fund its operations, working
capital, payment of debt, equity for acquisition of Portfolio Assets,
investments in and advances to the Acquisition Partnerships, retirement of and
dividends on preferred stock, and other investments by FirstCity. The potential
sources of liquidity are funds generated from operations, equity distributions
from the Acquisition Partnerships, interest and principal payments on
subordinated intercompany debt and dividends from the Companys subsidiaries,
short-term borrowings from revolving lines of credit, proceeds from equity
market transactions, securitization and other structured finance transactions
and other special purpose short-term borrowings.

In December 2002, FirstCity completed a recapitalization in which holders
of redeemable preferred stock, par value $.01 per share, (New Preferred
Stock) exchanged 1,092,210 shares of New Preferred Stock for 2,417,388 shares
of common stock and $10.5 million in cash. As a result, common equity was
increased by $18.9 million. During the first quarter of 2003, 4,400 shares of
New Preferred Stock were redeemed for 8,200 shares of common stock
and $50,000
in cash. FirstCity also recorded a $4 million gain in December 2002 from the
release of its guaranty of Drives indebtedness to BoS(USA),
Inc. ("BoS(USA)"). BoS(USA)s warrant
to purchase 1,975,000 shares of non-voting common stock was cancelled.
FirstCity also acquired the minority interest in FirstCity Holdings Corporation
held by Terry R. DeWitt, G. Stephen Fillip and James C. Holmes, each of whom
are Senior Vice Presidents of FirstCity, by issuing 400,000 shares of common
stock of the Company and a note payable, to be periodically redeemed by the
Company for an aggregate of up to $3.2 million in accordance with certain cash
collections from servicing income from Portfolio asset acquisitions in Mexico.

As a part of the recapitalization, BoS(USA) provided a non-recourse loan
in the amount of $16 million to FirstCity which was used to pay the cash
portion of the exchange offer to the holders of the New Preferred Stock, to pay
expenses of the exchange offer and recapitalization, and to reduce FirstCitys
debt to the Bank of Scotland (together with BoS(USA), the "Senior
Lenders"). The $16 million loan is secured by a 20% interest
in Drive (64.51% of FirstCitys remaining 31% interest in Drive) and other
assets of Consumer Corp. In connection with the $16 million loan, FirstCity is
obligated to pay an arrangement fee to BoS(USA) equal to 20% of all amounts
received by FirstCity in excess of $16 million from any sale or other
disposition of FirstCitys 20% interest in Drive and all dividends and other
distributions paid by Drive or its general partner on FirstCitys 20% interest
in Drive. Management of the Company believes the value of FirstCitys 20%
ownership interest of Drive does not exceed $16 million as of March 31, 2003.

6



---



##### 



FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

In connection with the recapitalization, the Senior Lenders refinanced the
remainder of the Companys debt facilities ($47 million
outstanding at March 31, 2003). The Senior Lenders also provided
new financing to FirstCity, with a total commitment of up to $59 million,
consisting of (a) a $5 million revolving credit loan and (b) an acquisition
term loan in an amount up to $54 million ($24 million available at March 31,
2003). The aggregate amount of outstanding loans under the total commitment by
the Senior Lenders for the refinancing and the new financing at any time may
not exceed $77 million.

BoS(USA) has a warrant to purchase 425,000 shares of the Companys voting
Common Stock at $2.3125 per share. BoS(USA) is entitled to additional warrants
in connection with this existing warrant for 425,000 shares to retain its
ability to acquire approximately 4.86% of the Companys voting Common Stock.

In the third quarter of 1999, dividends on the Companys redeemable
preferred stock (New Preferred Stock) were suspended. At March 31, 2003,
accumulated dividends in arrears on New Preferred Stock totaled $1.0 million,
or $7.87 per share. Since the Company failed to pay quarterly dividends for six
consecutive quarters, the holders of New Preferred Stock are entitled to elect
two directors to the Companys Board until cumulative dividends have been paid
in full. Dividends on outstanding shares of New Preferred Stock of FirstCity
will be restricted until the Tranche II term loan is paid in full. Given the
continued high debt levels of the Company, and managements priority of
assuring adequate levels of liquidity, the Company does not anticipate that
dividends on New Preferred Stock will be paid in the foreseeable future.

The Company has a $35 million loan facility with CFSC Capital Corp. XXX, a
subsidiary of Cargill. This facility is being used exclusively to provide
equity in new Portfolio acquisitions in partnerships with Cargill and its
affiliates and matures in March 2005. At March 31, 2003, approximately $21
million was outstanding under this facility.

Management believes that the BoS(USA) loan facilities along with the
liquidity from the Cargill Facility, the related fees generated from the
servicing of assets and equity distributions from existing Acquisition
Partnerships and wholly owned portfolios will allow the Company to meet its
obligations as they come due during the next twelve months.

(3)  New Accounting Pronouncements

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation
of Variable Interest Entities, an Interpretation of ARB No. 51(FIN 46). FIN
46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 is
effective immediately for all new variable interest entities created or
acquired after January 31, 2003. For variable interest entities created or
acquired prior to February 1, 2003, the provisions of FIN 46 must be applied
for the first interim or annual period beginning after June 15, 2003. FIN 46
also requires certain disclosures in financial statements issued after January
31, 2003 if it is reasonably possible that the entity will consolidate or
disclose information about variable interest entities when FIN 46 becomes
effective. Although management is still evaluating the impact of FIN 46, the
adoption is not expected to have a material effect. Presently the Company does
not believe that any of its equity investments will qualify for consolidation
in accordance with FIN 46.

In April 2003, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 149, Amendment of Statement 133 on Derivative Instruments and
Hedging Activities(SFAS 149). SFAS 149 amends and clarifies accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities.SFAS 149 is effective for
contracts entered into or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. The Company currently has no
derivatives or hedging relationships, and therefore, the adoption of SFAS 149
will not have a material effect on the Companys consolidated financial
statements.

The FASB announced it expects to issue
the proposed limited-scope statement, Accounting for Certain
Financial Instruments with Characteristics of Liabilities and
Equity in the second quarter of 2003. This statement would
require redeemable preferred stock to be classified as a liability
and any related accretion of discount and accrued dividends to be
charged to the results of operations. If this statement is adopted as
proposed, the Company would present the New Preferred Stock as a
liability in its's Consolidated Financial Statements. For the three
months ended March 31, 2003 and 2002, the dividends were $66 and
$642, respectively. Under this proposed statement this amount would
be recorded as a charge to results of operations.

7



---



##### 



FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

(4)  Discontinued Operations

The Company recorded no provision in the first three months of 2003 and
$.5 million in 2002 for additional losses from discontinued operations. The
provision in 2002 primarily relates to a reduction in the anticipated future
cash flows from securitization trusts due to increased expected prepayments and
losses. The net assets from discontinued operations consist of the following:

|                                                                              |                                       |   |           |       |              |   |        |       | 
|----------------------------------------------------------------------------- | ------------------------------------- | - | --------- | ----- | ------------ | - | ------ | ----- | 
|                                                                              |                                       |   | March 31, |       | December 31,
|                                                                              |                                       |   | 2003      |       | 2002        
|                                                                              |                                       |   |           |       |             
|Estimated future gross cash receipts on residual interests in securitizations |                                       | $ | 8,734     |       |              | $ | 8,764  |      
|Accrual for loss on operations and disposal of discontinued operations, net   |                                       |   | (786      | )     |              |   | (1,000 | )    
|                                                                              |                                       |   |           |       |              |   |        |      
|                                                                              | Net assets of discontinued operations |   | $         | 7,948 |              |   | $      | 7,764 | 
|                                                                              |                                       |   |           |       |              |   |        |      

The only assets remaining from discontinued operations are the investment
securities resulting from the retention of residual interests in securitization
transactions. Although the liquidation or run-off of these investment
securities will last longer than one year, the Company is contractually
obligated to service the securitized assets. The Company has considered the
estimated future gross cash receipts for such investment securities in the
computation of the value of such investment securities. The cash flows are
collected over a period of time and are valued using prepayment assumptions of
25% to 41% for fixed rate loans and 20% to 25% for variable rate loans. Overall
loss rates are estimated from 3% to 11% of collateral.

(5)  Portfolio Assets

Portfolio Assets are summarized as follows:

|                                                                                  |                        |   |           |        |              |   |         |        | 
|--------------------------------------------------------------------------------- | ---------------------- | - | --------- | ------ | ------------ | - | ------- | ------ | 
|                                                                                  |                        |   | March 31, |        | December 31,
|                                                                                  |                        |   | 2003      |        | 2002        
|                                                                                  |                        |   |           |        |             
|Non-performing Portfolio Assets                                                   |                        | $ | 36,619    |        |              | $ | 39,241  |       
|Performing Portfolio Assets                                                       |                        |   | 7,214     |        |              |   | 7,761   |       
|Real estate Portfolios                                                            |                        |   | 1,227     |        |              |   | 1,242   |       
|                                                                                  |                        |   |           |        |              |   |         |       
|                                                                                  | Total Portfolio Assets |   |           | 45,060 |              |   |         | 48,244 | 
|Adjusted purchase discount required to reflect Portfolio Assets at carrying value |                        |   | (37,568   | )      |              |   | (38,424 | )     
|                                                                                  |                        |   |           |        |              |   |         |       
|                                                                                  | Portfolio Assets, net  |   | $         | 7,492  |              |   | $       | 9,820  | 
|                                                                                  |                        |   |           |        |              |   |         |       

Portfolio Assets are pledged to secure non-recourse notes payable.

(6)  Loans Receivable from Acquisition Partnerships Held for Investment

Loans receivable from Acquisition Partnerships held for investment consist
primarily of loans from certain partnerships located in Mexico and are
summarized as follows:

|         |  |           |        |              |  |   |        | 
|-------- |  | --------- | ------ | ------------ |  | - | ------ | 
|         |  | March 31, |        | December 31,
|         |  | 2003      |        | 2002        
|         |  |           |        |             
|Mexico   |  | $         | 14,313 |              |  | $ | 16,399 | 
|Domestic |  |           | 1,338  |              |  |   | 1,301  | 
|         |  |           |        |              |  |   |        | 
|         |  | $         | 15,651 |              |  | $ | 17,700 | 
|         |  |           |        |              |  |   |        | 

There were no provisions recorded on these loans during the first three
months of 2003 and 2002. The loans receivable from the Mexican partnerships are
secured by the assets/loans acquired by the Mexican partnerships with purchase
money loans provided by affiliates of the investors in the Mexican partnerships to purchase
the asset pools held in those entities. These loans are evaluated for
impairment by analyzing the expected future cash flows from the underlying
assets within each pool to determine that the cash flows were sufficient to
repay these notes. The Company applies the asset valuation methodology
consistently in all venues and uses the same proprietary asset management
system to evaluate impairment on all asset pools. The results of this
evaluation indicated that cash flows from the pools will be sufficient to repay
the loans and no allowances for impairment were necessary. Equity method
losses, which were recorded to reduce the loans and interest receivable from
the Mexican partnerships, were $1.9 million and $.1 million during the first
three months of 2003 and 2002, respectively, in compliance with EITF 98-13.

(7)  Equity Investments

The Company has investments in entities formed to acquire Portfolios
(Acquisition Partnerships) and their general partners and investments in
servicing entities that are accounted for under the equity method. The
condensed combined financial position and

8



---



##### 



FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

results of operations of the Acquisition Partnerships (excluding servicing
entities), which include the domestic and foreign Acquisition Partnerships and
their general partners, are summarized below:

Condensed Combined Balance Sheets

|                                              |  |           |         |              |  |   |         | 
|--------------------------------------------- |  | --------- | ------- | ------------ |  | - | ------- | 
|                                              |  | March 31, |         | December 31,
|                                              |  | 2003      |         | 2002        
|                                              |  |           |         |             
|Assets                                        |  | $         | 545,613 |              |  | $ | 585,435 | 
|                                              |  |           |         |              |  |   |         | 
|Liabilities                                   |  | $         | 480,084 |              |  | $ | 480,713 | 
|Net equity                                    |  |           | 65,529  |              |  |   | 104,722 | 
|                                              |  |           |         |              |  |   |         | 
|                                              |  | $         | 545,613 |              |  | $ | 585,435 | 
|                                              |  |           |         |              |  |   |         | 
|Equity investment in Acquisition Partnerships |  | $         | 44,361  |              |  | $ | 46,029  | 
|Equity investment in servicing entities       |  |           | 3,577   |              |  |   | 3,247   | 
|                                              |  |           |         |              |  |   |         | 
|                                              |  | $         | 47,938  |              |  | $ | 49,276  | 
|                                              |  |           |         |              |  |   |         | 

Condensed Combined Summary of Operations

|                                               |  |                    |         |      |  |   |        | 
|---------------------------------------------- |  | ------------------ | ------- | ---- |  | - | ------ | 
|                                               |  | Three Months Ended
|                                               |  | March 31,         
|                                               |  |                   
|                                               |  | 2003               |         | 2002
|                                               |  |                    |         |     
|Proceeds from resolution of Portfolio Assets   |  | $                  | 57,582  |      |  | $ | 42,361 | 
|Gain on resolution of Portfolio Assets         |  |                    | 20,989  |      |  |   | 18,776 | 
|Interest income on performing Portfolio Assets |  |                    | 2,145   |      |  |   | 5,076  | 
|Net earnings (loss)                            |  |                    | (21,038 | )    |  |   | 8,320  | 
|                                               |  |                    |         |      |  |   |        | 
|Equity in earnings of Acquisition Partnerships |  | $                  | 1,014   |      |  | $ | 2,401  | 
|Equity in earnings of servicing entities       |  |                    | 216     |      |  |   | 419    | 
|                                               |  |                    |         |      |  |   |        | 
|                                               |  | $                  | 1,230   |      |  | $ | 2,820  | 
|                                               |  |                    |         |      |  |   |        | 

The assets and equity of the Acquisition Partnerships and equity
investments in the Acquisition Partnerships are summarized by geographic region
below. The WAMCO Partnerships represent limited partnerships and limited
liability companies in which the Company has a common ownership with Cargill.
MinnTex Investment Partners LP is considered to be a significant subsidiary of
FirstCity.

|                                               |           |                                |         |           |         |              |         |         |         | 
|---------------------------------------------- | --------- | ------------------------------ | ------- | --------- | ------- | ------------ | ------- | ------- | ------- | 
|                                               |           |                                |         | March 31, |         | December 31,
|                                               |           |                                |         | 2003      |         | 2002        
|                                               |           |                                |         |           |         |             
|Assets:                                        |           |                                |         |           |         |              |         |        
|                                               | Domestic: |                                |         |           |         |              |         |         |        
|                                               |           | WAMCO Partnerships             |         | $         | 174,639 |              |         | $       | 189,392 | 
|                                               |           | MinnTex Investment Partners LP |         |           | 2,697   |              |         |         | 3,733   | 
|                                               |           | Other                          |         |           | 15,935  |              |         |         | 15,758  | 
|                                               | Mexico    |                                |         | 234,681   |         |              |         | 246,087 |        
|                                               | France    |                                |         | 117,661   |         |              |         | 130,465 |        
|                                               |           |                                |         |           |         |              |         |        
|                                               |           | $                              | 545,613 |           |         | $            | 585,435 |        
|                                               |           |                                |         |           |         |              |         |         |         | 
|Equity (deficit):                              |           |                                |         |           |         |              |         |        
|                                               | Domestic: |                                |         |           |         |              |         |         |        
|                                               |           | WAMCO Partnerships             |         | $         | 76,747  |              |         | $       | 80,059  | 
|                                               |           | MinnTex Investment Partners LP |         |           | 2,574   |              |         |         | 3,569   | 
|                                               |           | Other                          |         |           | 3,749   |              |         |         | 3,643   | 
|                                               | Mexico    |                                |         | (83,084   | )       |              |         | (51,567 | )      
|                                               | France    |                                |         | 65,543    |         |              |         | 69,018  |        
|                                               |           |                                |         |           |         |              |         |        
|                                               |           | $                              | 65,529  |           |         | $            | 104,722 |        
|                                               |           |                                |         |           |         |              |         |         |         | 
|Equity investment in Acquisition Partnerships: |           |                                |         |           |         |              |         |        
|                                               | Domestic: |                                |         |           |         |              |         |         |        
|                                               |           | WAMCO Partnerships             |         | $         | 29,392  |              |         | $       | 29,951  | 
|                                               |           | MinnTex Investment Partners LP |         |           | 849     |              |         |         | 1,178   | 
|                                               |           | Other                          |         |           | 2,257   |              |         |         | 2,316   | 
|                                               | Mexico    |                                |         | 1,038     |         |              |         | 1,108   |        
|                                               | France    |                                |         | 10,825    |         |              |         | 11,476  |        
|                                               |           |                                |         |           |         |              |         |        
|                                               |           | $                              | 44,361  |           |         | $            | 46,029  |        
|                                               |           |                                |         |           |         |              |         |         |         | 

9



---



##### 



FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Revenues and earnings (loss) of the Acquisition Partnerships and equity in
earnings of the Acquisition Partnerships are summarized by geographic region
below.

|                                                       |           |                                |         |                    |       |      |        |        |        |  
|------------------------------------------------------ | --------- | ------------------------------ | ------- | ------------------ | ----- | ---- | ------ | ------ | ------ | -
|                                                       |           |                                |         | Three Months Ended
|                                                       |           |                                |         | March 31,         
|                                                       |           |                                |         |                   
|                                                       |           |                                |         | 2003               |       | 2002
|                                                       |           |                                |         |                    |       |     
|Revenues:                                              |           |                                |         |                    |       |      |        |       
|                                                       | Domestic: |                                |         |                    |       |      |        |        |       
|                                                       |           | WAMCO Partnerships             |         | $                  | 6,352 |      |        | $      | 11,320 |  
|                                                       |           | MinnTex Investment Partners LP |         |                    | 3,255 |      |        |        |       |  
|                                                       |           | Other                          |         |                    | 10    |      |        |        | 237    |  
|                                                       | Mexico    |                                |         | 7,006              |       |      |        | 9,532  |       
|                                                       | France    |                                |         | 7,026              |       |      |        | 3,375  |       
|                                                       |           |                                |         |                    |       |      |        |       
|                                                       |           | $                              | 23,649  |                    |       | $    | 24,464 |       
|                                                       |           |                                |         |                    |       |      |        |        |        |  
|Net earnings (loss):                                   |           |                                |         |                    |       |      |        |       
|                                                       | Domestic: |                                |         |                    |       |      |        |        |       
|                                                       |           | WAMCO Partnerships             |         | $                  | 3,367 |      |        | $      | 7,464  |  
|                                                       |           | MinnTex Investment Partners LP |         |                    | 2,859 |      |        |        | (5     | )
|                                                       |           | Other                          |         |                    | (136  | )    |        |        | 115    |  
|                                                       | Mexico    |                                |         | (31,518            | )     |      |        | (1,438 | )     
|                                                       | France    |                                |         | 4,390              |       |      |        | 2,184  |       
|                                                       |           |                                |         |                    |       |      |        |       
|                                                       |           | $                              | (21,038 | )                  |       | $    | 8,320  |       
|                                                       |           |                                |         |                    |       |      |        |        |        |  
|Equity in earnings (loss) of Acquisition
Partnerships: |           |                                |         |                    |       |      |        |       
|                                                       | Domestic: |                                |         |                    |       |      |        |        |       
|                                                       |           | WAMCO Partnerships             |         | $                  | 1,434 |      |        | $      | 1,848  |  
|                                                       |           | MinnTex Investment Partners LP |         |                    | 944   |      |        |        | (2     | )
|                                                       |           | Other                          |         |                    | (30   | )    |        |        | 112    |  
|                                                       | Mexico    |                                |         | (2,061             | )     |      |        | (17    | )     
|                                                       | France    |                                |         | 727                |       |      |        | 460    |       
|                                                       |           |                                |         |                    |       |      |        |       
|                                                       |           | $                              | 1,014   |                    |       | $    | 2,401  |       
|                                                       |           |                                |         |                    |       |      |        |        |        |  

FirstCity also has an investment in Drive that is accounted for under the
equity method. The condensed consolidated financial position and results of
operations of Drive are summarized below:

Condensed Consolidated Balance Sheets

|                                      |                   |                         |         |           |       |              |         |         |       | 
|------------------------------------- | ----------------- | ----------------------- | ------- | --------- | ----- | ------------ | ------- | ------- | ----- | 
|                                      |                   |                         |         | March 31, |       | December 31,
|                                      |                   |                         |         | 2003      |       | 2002        
|                                      |                   |                         |         |           |       |             
|Cash                                  |                   | $                       | 18,147  |           |       | $            | 14,337  |        
|Restricted cash                       |                   |                         | 18,033  |           |       |              | 12,124  |        
|Retail installment contracts, net     |                   |                         | 443,098 |           |       |              | 367,520 |        
|Residual interests in securitizations |                   |                         | 56,608  |           |       |              | 63,202  |        
|Other assets                          |                   |                         | 15,526  |           |       |              | 14,494  |        
|                                      |                   |                         |         |           |       |              |         |        
|                                      | Total assets      |                         | $       | 551,412   |       |              | $       | 471,677 |      
|                                      |                   |                         |         |           |       |              |         |        
|Notes payable                         |                   | $                       | 510,605 |           |       | $            | 434,422 |        
|Other liabilities                     |                   |                         | 15,657  |           |       |              | 14,123  |        
|                                      |                   |                         |         |           |       |              |         |        
|                                      | Total liabilities |                         |         | 526,262   |       |              |         | 448,545 |      
|Net equity                            |                   |                         | 25,150  |           |       |              | 23,132  |        
|                                      |                   |                         |         |           |       |              |         |        
|                                      |                   | $                       | 551,412 |           |       | $            | 471,677 |        
|                                      |                   |                         |         |           |       |              |         |        
|Equity investment in Drive            |                   | $                       | 9,743   |           |       | $            | 9,066   |        
|                                      | Minority interest |                         |         | (1,947    | )     |              |         | (1,812  | )    
|                                      |                   |                         |         |           |       |              |         |        
|                                      |                   | Net investment in Drive |         | $         | 7,796 |              |         | $       | 7,254 | 
|                                      |                   |                         |         |           |       |              |         |        

10



---



##### 



FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Condensed Consolidated Summary Of Operations

|                                                                               |                                                      |                                                                       |        |                             |        |      |        |        |        |  
|------------------------------------------------------------------------------ | ---------------------------------------------------- | --------------------------------------------------------------------- | ------ | --------------------------- | ------ | ---- | ------ | ------ | ------ | -
|                                                                               |                                                      |                                                                       |        | Three Months Ended March 31
|                                                                               |                                                      |                                                                       |        |                            
|                                                                               |                                                      |                                                                       |        | 2003                        |        | 2002
|                                                                               |                                                      |                                                                       |        |                             |        |     
|Finance and other interest income                                              |                                                      | $                                                                     | 39,303 |                             |        | $    | 10,007 |       
|Interest expense                                                               |                                                      |                                                                       | 6,193  |                             |        |      | 2,368  |       
|                                                                               |                                                      |                                                                       |        |                             |        |      |        |       
|                                                                               |                                                      | Net interest margin                                                   |        |                             | 33,110 |      |        |        | 7,639  |  
|                                                                               |                                                      |                                                                       |        |                             |        |      |        |       
|Provision for credit losses on retail installment contracts                    |                                                      |                                                                       | 14,164 |                             |        |      | 20     |       
|Impairment of residual interests in securitizations, including servicing asset |                                                      |                                                                       | 1,217  |                             |        |      |       |       
|                                                                               |                                                      |                                                                       |        |                             |        |      |        |       
|                                                                               |                                                      | Net interest margin after provision for credit losses and impairments |        |                             | 17,729 |      |        |        | 7,619  |  
|                                                                               |                                                      |                                                                       |        |                             |        |      |        |       
|Other revenues:                                                                |                                                      |                                                                       |        |                             |        |      |        |       
|                                                                               | Servicing income                                     |                                                                       |        | 5,592                       |        |      |        | 4,421  |       
|                                                                               | Other income                                         |                                                                       |        | 554                         |        |      |        | 185    |       
|                                                                               |                                                      |                                                                       |        |                             |        |      |        |       
|                                                                               |                                                      | Total other revenues                                                  |        |                             | 6,146  |      |        |        | 4,606  |  
|                                                                               |                                                      |                                                                       |        |                             |        |      |        |       
|Costs and expenses:                                                            |                                                      |                                                                       |        |                             |        |      |        |       
|                                                                               | Salaries and benefits                                |                                                                       |        | 12,480                      |        |      |        | 10,258 |       
|                                                                               | Servicing expense                                    |                                                                       |        | 6,434                       |        |      |        | 3,099  |       
|                                                                               | Occupancy, data processing, communication, and other |                                                                       |        | 2,471                       |        |      |        | 2,338  |       
|                                                                               |                                                      |                                                                       |        |                             |        |      |        |       
|                                                                               |                                                      | Total costs and expenses                                              |        |                             | 21,385 |      |        |        | 15,695 |  
|                                                                               |                                                      |                                                                       |        |                             |        |      |        |       
|                                                                               |                                                      | Net income (loss)                                                     |        | $                           | 2,490  |      |        | $      | (3,470 | )
|                                                                               |                                                      |                                                                       |        |                             |        |      |        |       
|Equity in earnings (loss) of Drive                                             |                                                      | $                                                                     | 861    |                             |        | $    | (1,345 | )     
|Minority interest                                                              |                                                      |                                                                       | (172   | )                           |        |      | 269    |       
|                                                                               |                                                      |                                                                       |        |                             |        |      |        |       
|                                                                               | Net equity in earnings (loss) of Drive               |                                                                       | $      | 689                         |        |      | $      | (1,076 | )     
|                                                                               |                                                      |                                                                       |        |                             |        |      |        |       

(8)  Segment Reporting

The Company is engaged in two reportable segments: (i) Portfolio Asset
acquisition and resolution; and (ii) consumer lending. These segments have been
segregated based on products and services offered. The Portfolio Asset
acquisition and resolution business involves acquiring Portfolio Assets at a
discount to face value and servicing and resolving such Portfolios in an effort
to maximize the present value of the ultimate cash recoveries. The consumer
lending business is conducted through the Companys equity investment in Drive.
Drive is a specialized consumer finance company engaged in the purchase,
securitization and servicing of retail installment contracts originated by
automobile dealers. The following is a summary of results of operations for
each of the segments and reconciliation to earnings (loss) from continuing
operations for the three months ended March 31, 2003 and 2002.

|                                            |                                              |                                                     |       |       |                    |       |      |       |       |       | 
|------------------------------------------- | -------------------------------------------- | --------------------------------------------------- | ----- | ----- | ------------------ | ----- | ---- | ----- | ----- | ----- | 
|                                            |                                              |                                                     |       |       | Three Months Ended
|                                            |                                              |                                                     |       |       | March 31,,        
|                                            |                                              |                                                     |       |       |                   
|                                            |                                              |                                                     |       |       | 2003               |       | 2002
|                                            |                                              |                                                     |       |       |                    |       |     
|Portfolio Asset Acquisition and Resolution: |                                              |                                                     |       |       |                    |       |      |      
|                                            | Revenues:                                    |                                                     |       |       |                    |       |      |       |      
|                                            |                                              | Servicing fees                                      |       | $     | 3,507              |       |      | $     | 2,222 |      
|                                            |                                              | Gain on resolution of Portfolio Assets              |       |       | 695                |       |      |       | 244   |      
|                                            |                                              | Equity in earnings of investments                   |       |       | 1,230              |       |      |       | 2,820 |      
|                                            |                                              | Interest income                                     |       |       | 1,102              |       |      |       | 1,303 |      
|                                            |                                              | Other                                               |       |       | 302                |       |      |       | 202   |      
|                                            |                                              |                                                     |       |       |                    |       |      |      
|                                            |                                              |                                                     | Total |       |                    | 6,836 |      |       |       | 6,791 | 
|                                            | Expenses:                                    |                                                     |       |       |                    |       |      |       |      
|                                            |                                              | Interest and fees on notes payable                  |       |       | 686                |       |      |       | 726   |      
|                                            |                                              | Salaries and benefits                               |       |       | 2,842              |       |      |       | 2,001 |      
|                                            |                                              | Provision for loan and impairment losses            |       |       | 34                 |       |      |       | 99    |      
|                                            |                                              | Occupancy, data processing, communication and other |       |       | 1,381              |       |      |       | 1,337 |      
|                                            |                                              | Minority interest                                   |       |       | 7                  |       |      |       | 284   |      
|                                            |                                              |                                                     |       |       |                    |       |      |      
|                                            |                                              |                                                     | Total |       |                    | 4,950 |      |       |       | 4,447 | 
|                                            |                                              |                                                     |       |       |                    |       |      |      
|                                            | Operating contribution before direct taxes   |                                                     | $     | 1,886 |                    |       | $    | 2,344 |      
|                                            |                                              |                                                     |       |       |                    |       |      |       |       |      
|                                            | Operating contributiong, net of direct taxes |                                                     | $     | 1,777 |                    |       | $    | 2,331 |      
|                                            |                                              |                                                     |       |       |                    |       |      |       |       |      

11



---



##### 



FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

|                    |                                                                                   |                                                     |   |                                                   |     |                    |       |        |        |   |        |  
|------------------- | --------------------------------------------------------------------------------- | --------------------------------------------------- | - | ------------------------------------------------- | --- | ------------------ | ----- | ------ | ------ | - | ------ | -
|                    |                                                                                   |                                                     |   |                                                   |     | Three Months Ended
|                    |                                                                                   |                                                     |   |                                                   |     | March 31,,        
|                    |                                                                                   |                                                     |   |                                                   |     |                   
|                    |                                                                                   |                                                     |   |                                                   |     | 2003               |       | 2002  
|                    |                                                                                   |                                                     |   |                                                   |     |                    |       |       
|Consumer Lending:   |                                                                                   |                                                     |   |                                                   |     |                    |       |       
|                    | Revenues:                                                                         |                                                     |   |                                                   |     |                    |       |        |       
|                    |                                                                                   | Equity in earnings (loss) of investment             |   | $                                                 | 861 |                    |       | $      | (1,345 | )
|                    |                                                                                   |                                                     |   |                                                   |     |                    |       |       
|                    |                                                                                   |                                                     |   | Total                                             |     |                    | 861   |        |        |   | (1,345 | )
|                    | Expenses:                                                                         |                                                     |   |                                                   |     |                    |       |        |       
|                    |                                                                                   | Interest and fees on notes payable                  |   |                                                   | 95  |                    |       |        |       |  
|                    |                                                                                   | Occupancy, data processing, communication and other |   |                                                   | 5   |                    |       |        | 5      |  
|                    |                                                                                   | Minority interest                                   |   |                                                   | 172 |                    |       |        | (269   | )
|                    |                                                                                   |                                                     |   |                                                   |     |                    |       |       
|                    |                                                                                   |                                                     |   | Total                                             |     |                    | 272   |        |        |   | (264   | )
|                    |                                                                                   |                                                     |   |                                                   |     |                    |       |       
|                    | Operating contribution (loss) before direct taxes                                 |                                                     | $ | 589                                               |     |                    | $     | (1,081 | )     
|                    |                                                                                   |                                                     |   |                                                   |     |                    |       |        |        |  
|                    | Operating contribution (loss), net of direct taxes                                |                                                     | $ | 576                                               |     |                    | $     | (1,081 | )     
|                    |                                                                                   |                                                     |   |                                                   |     |                    |       |        |        |  
|                    |                                                                                   |                                                     |   | Total operating contribution, net of direct taxes |     | $                  | 2,353 |        |        | $ | 1,250  |  
|Corporate Overhead: |                                                                                   |                                                     |   |                                                   |     |                    |       |       
|                    | Corporate interest expense                                                        |                                                     |   | 1,172                                             |     |                    |       | 822    |       
|                    | Salaries and benefits, occupancy, professional and
other income and expenses, net |                                                     |   | 1,200                                             |     |                    |       | 1,262  |       
|                    |                                                                                   |                                                     |   |                                                   |     |                    |       |       
|                    | Loss from continuing operations                                                   |                                                     | $ | (19                                               | )   |                    | $     | (834   | )     
|                    |                                                                                   |                                                     |   |                                                   |     |                    |       |        |        |  

All of the revenues from the consumer lending segment are attributable to
domestic operations. Revenues from the Portfolio Asset acquisition and
resolution segment are attributable to domestic and foreign operations as
follows:

|              |       |   |              |       |      |   |       |       | 
|------------- | ----- | - | ------------ | ----- | ---- | - | ----- | ----- | 
|              |       |   | Three Months
|              |       |   | Ended       
|              |       |   | March 31,   
|              |       |   |             
|              |       |   | 2003         |       | 2002
|              |       |   |              |       |     
|Domestic      |       | $ | 4,407        |       |      | $ | 3,446 |      
|Mexico        |       |   | 1,425        |       |      |   | 2,436 |      
|France        |       |   | 1,004        |       |      |   | 908   |      
|Other foreign |       |   |             |       |      |   | 1     |      
|              |       |   |              |       |      |   |       |      
|              | Total |   | $            | 6,836 |      |   | $     | 6,791 | 
|              |       |   |              |       |      |   |       |      

Total assets for each of the segments and a reconciliation to total assets
is as follows:

|                                            |                  |              |        |           |         |              |        |        |         | 
|------------------------------------------- | ---------------- | ------------ | ------ | --------- | ------- | ------------ | ------ | ------ | ------- | 
|                                            |                  |              |        | March 31, |         | December 31,
|                                            |                  |              |        | 2003      |         | 2002        
|                                            |                  |              |        |           |         |             
|Portfolio acquisition and resolution assets |                  |              |        |           |         |              |        |       
|                                            | Domestic         |              | $      | 41,339    |         |              | $      | 44,610 |        
|                                            | Mexico           |              |        | 15,407    |         |              |        | 17,542 |        
|                                            | France and Italy |              |        | 15,261    |         |              |        | 15,592 |        
|Consumer assets                             |                  |              | 9,793  |           |         |              | 9,127  |       
|Deferred tax benefit, net                   |                  |              | 20,101 |           |         |              | 20,101 |       
|Cash                                        |                  |              | 2,869  |           |         |              | 4,118  |       
|Other assets, net                           |                  |              | 7,405  |           |         |              | 7,602  |       
|Net assets of discontinued operations       |                  |              | 7,948  |           |         |              | 7,764  |       
|                                            |                  |              |        |           |         |              |        |       
|                                            |                  | Total assets |        | $         | 120,123 |              |        | $      | 126,456 | 
|                                            |                  |              |        |           |         |              |        |       

(9)  Income Taxes

Federal income taxes are provided at a 35% rate. The Company has
substantial NOLs, which can be used to offset the tax liability associated with
the Companys pre-tax earnings until the earlier of the expiration or
utilization of such NOLs. The Company accounts for the benefit of the NOLs by
recording the benefit as an asset and then establishing a valuation allowance
to value the net deferred tax asset at a level, which more likely than not,
will be realized. Realization is determined based on managements expectation
of generating sufficient taxable income in a look forward period over the next
four years. The ultimate realization of the resulting net deferred tax asset is
dependent upon generating sufficient taxable income from its continuing
operations prior to expiration of the NOLs. Although realization is not
assured, management believes it is more likely than not that all of the
recorded deferred tax asset, net of the allowance, will be realized. The amount
of the deferred tax asset considered realizable, however, could be adjusted in
the

12



---



##### 



FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

future if estimates of future taxable income during the carryforward
period change. The ability of the Company to realize the deferred tax asset is
periodically reviewed and the valuation allowance is adjusted accordingly.

(10)  Commitments and Contingencies

Periodically, FirstCity, its subsidiaries, its affiliates and the
Acquisition Partnerships are parties to or otherwise involved in legal
proceedings arising in the normal course of business. FirstCity does not
believe that there is any proceeding threatened or pending against it, its
subsidiaries, its affiliates or the Acquisition Partnerships which, if
determined adversely, would have a material adverse effect on the consolidated
financial position, results of operations or liquidity of FirstCity, its
subsidiaries, its affiliates or the Acquisition Partnerships.

The Company is a 50% owner in an entity that is obligated to advance up to
$2.5 million toward the acquisition of Portfolio Assets from financial
institutions in California. At March 31, 2003, advances of $2.4 million had
been made under the obligation.

In connection with the transactions contemplated by the Securities
Purchase Agreement, effective August 1, 2000, Consumer Corp. and Funding LP
contributed all of the assets utilized in the operations of the automobile
finance operation to Drive pursuant to the terms of a Contribution and
Assumption Agreement by and between Consumer Corp. and Drive, and a
Contribution and Assumption Agreement by and between Funding LP and Drive
(collectively, the Contribution Agreements). Drive assumed substantially all
of the liabilities of the automobile finance operation as set forth in the
Contribution Agreements.

In addition, in the Securities Purchase Agreement, the Company, Consumer
Corp., Funding LP and Funding GP made various representations and warranties
concerning (i) their respective organizations, (ii) the automobile finance
operation conducted by Consumer Corp. and Funding LP, and (iii) the assets
transferred by Consumer Corp. and Funding LP to Drive. The Company, Consumer
Corp., Funding LP and Funding GP also agreed to indemnify BoS(USA), IFA-GP and
IFA-LP from damages resulting from a breach of any representation or warranty
contained in the Securities Purchase Agreement or otherwise made by the
Company, Consumer Corp. or Funding LP in connection with the transaction. The
indemnity obligation under the Securities Purchase Agreement survives for a
period of seven (7) years from August 25, 2000 (the Closing Date) with
respect to tax-related representations and warranties and for thirty months
from the Closing Date with respect to all other representations and warranties.
Neither the Company, Consumer Corp., Funding LP, or Funding GP is required to
make any payments as a result of the indemnity provided under the Securities
Purchase Agreement until the aggregate amount payable exceeds $.25 million, and
then only for the amount in excess of $.25 million in the aggregate; however
certain representations and warranties are not subject to this $.25 million
threshold. Pursuant to the terms of the Contribution Agreements, Consumer Corp.
and Funding LP have agreed to indemnify Drive from any damages resulting in a
material adverse effect on Drive resulting from breaches of representations or
warranties, failure to perform, pay or discharge liabilities other than the
assumed liabilities, or claims, lawsuits or proceedings resulting from the
transactions contemplated by the Contribution Agreements. Pursuant to the terms
of the Contribution Agreements, Drive has agreed to indemnify Consumer Corp.
and Funding LP for any breach of any representation or warranty by Drive, the
failure of Drive to discharge any assumed liability, or any claims arising out
of any failure by Drive to properly service receivables after August 1, 2000.
Liability for indemnification pursuant to the terms of the Contribution
Agreements will not arise until the total of all losses with respect to such
matters exceeds $.25 million and then only for the amount by which such losses
exceed $.25 million; however this limitation will not apply to any breach of
which the party had knowledge at the time of the Closing Date or any
intentional breach by a party of any covenant or obligation under the
Contribution Agreements.

The Company has agreed to indemnify BoS(USA) for up to 31% of losses,
which might arise as a result of agreements BoS(USA) executed as a sponsor in
connection with the securitizations completed by Drive. The Company also agreed
to provide support in connection with securitizations by Consumer Corp. and
Drive prior to the acquisition by BoS(USA) of the interest in Drive in August
2000. Management of the Company currently does not believe it is
likely that FirstCity will be required to make payments on these
indemnification agreements.

FirstCity is obligated to pay BOS(USA) an arrangement fee related to the
$16 million loan equal to 20% of all proceeds and other amounts paid to
FirstCity from any sale or other disposition (regardless of when such sale or
other disposition occurs) of, and of all dividends and other distributions paid
to FirstCity by Drive or its general partner (regardless of when such dividend
or other distribution occurs) on, its 20% interest in Drive, in each case in
excess of $16 million in the aggregate. As of March 31, 2003 the Company has
not accrued any amount related to this contingent liability. The Companys
maximum loss exposure related to this contingency is the amount of the
arrangement fee that would be calculated in the event the fair value of Drive
exceeds $16 million in the future.

13



---



##### 



FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

14



---



##### 



WAMCO PARTNERSHIPS

Combined Financial Statements
March 31, 2003
(Unaudited)

15



---



##### 



WAMCO PARTNERSHIPS

COMBINED BALANCE SHEETS

|                                                                                             |                   |                                   |         |        |                        |   |              |         |  |  | 
|-------------------------------------------------------------------------------------------- | ----------------- | --------------------------------- | ------- | ------ | ---------------------- | - | ------------ | ------- |  |  | 
|                                                                                             |                   |                                   |         |        | March 31,              |   | December 31,
|                                                                                             |                   |                                   |         |        | 2003                   |   | 2002        
|                                                                                             |                   |                                   |         |        |                        |   |             
|                                                                                             |                   |                                   |         |        | (Unaudited)            |   |              |         | 
|                                                                                             |                   |                                   |         |        | (Dollars in thousands)
|                                                                                             |                   |                                   | ASSETS  |        |                        |   |              |         |  |  | 
|Cash                                                                                         |                   | $                                 | 11,163  |        |                        | $ | 13,035       |        
|Portfolio Assets, net                                                                        |                   |                                   | 134,172 |        |                        |   | 147,686      |        
|Investments in partnerships                                                                  |                   |                                   | 2,331   |        |                        |   | 2,302        |        
|Investments in trust certificates                                                            |                   |                                   | 7,234   |        |                        |   | 7,883        |        
|Deferred profit sharing                                                                      |                   |                                   | 18,985  |        |                        |   | 17,671       |        
|Other assets, net                                                                            |                   |                                   | 754     |        |                        |   | 815          |        
|                                                                                             |                   |                                   |         |        |                        |   |              |        
|                                                                                             |                   | $                                 | 174,639 |        |                        | $ | 189,392      |        
|                                                                                             |                   |                                   |         |        |                        |   |              |        
|                                                                                             |                   | LIABILITIES AND PARTNERS CAPITAL |         |        |                        |   |              |         |  | 
|Notes payable (including $38,861 and $46,137 to affiliates in 2003 and 2002, respectively)   |                   | $                                 | 68,499  |        |                        | $ | 79,891       |        
|Deferred compensation                                                                        |                   |                                   | 22,962  |        |                        |   | 21,706       |        
|Other liabilities (including $1,699 and $1,862 to affiliates in 2003 and 2002, respectively) |                   |                                   | 2,138   |        |                        |   | 3,392        |        
|                                                                                             |                   |                                   |         |        |                        |   |              |        
|                                                                                             | Total liabilities |                                   |         | 93,599 |                        |   |              | 104,989 | 
|Commitments and contingencies (note 8)                                                       |                   |                                   |         |        |                        |   |              |        
|Preferred equity                                                                             |                   |                                   | 4,293   |        |                        |   | 4,344        |        
|Partners capital                                                                            |                   |                                   | 76,747  |        |                        |   | 80,059       |        
|                                                                                             |                   |                                   |         |        |                        |   |              |        
|                                                                                             |                   | $                                 | 174,639 |        |                        | $ | 189,392      |        
|                                                                                             |                   |                                   |         |        |                        |   |              |        

See accompanying notes to combined financial statements.

16



---



##### 



WAMCO PARTNERSHIPS

COMBINED STATEMENTS OF OPERATIONS
(Unaudited)

|                                                |                                        |   |                        |       |      |   |        |       | 
|----------------------------------------------- | -------------------------------------- | - | ---------------------- | ----- | ---- | - | ------ | ----- | 
|                                                |                                        |   | Three Months Ended    
|                                                |                                        |   | March 31,             
|                                                |                                        |   |                       
|                                                |                                        |   | 2003                   |       | 2002
|                                                |                                        |   |                        |       |     
|                                                |                                        |   | (Dollars in thousands)
|Proceeds from resolution of Portfolio Assets    |                                        | $ | 15,889                 |       |      | $ | 18,433 |      
|Cost of Portfolio Assets resolved               |                                        |   | 11,469                 |       |      |   | 11,810 |      
|                                                |                                        |   |                        |       |      |   |        |      
|                                                | Gain on resolution of Portfolio Assets |   |                        | 4,420 |      |   |        | 6,623 | 
|Interest income on performing Portfolio Assets  |                                        |   | 1,523                  |       |      |   | 4,212  |      
|Interest and fees on notes payable  affiliates |                                        |   | (955                   | )     |      |   | (1,791 | )    
|Interest and fees on notes payable  other      |                                        |   | (404                   | )     |      |   | (422   | )    
|Provision for loan losses                       |                                        |   | (444                   | )     |      |   |       |      
|Servicing fees  affiliate                      |                                        |   | (657                   | )     |      |   | (813   | )    
|General, administrative and operating expenses  |                                        |   | (525                   | )     |      |   | (830   | )    
|Other income, net                               |                                        |   | 409                    |       |      |   | 485    |      
|                                                |                                        |   |                        |       |      |   |        |      
|                                                | Net earnings                           |   | $                      | 3,367 |      |   | $      | 7,464 | 
|                                                |                                        |   |                        |       |      |   |        |      

See accompanying notes to combined financial statements.

17



---



##### 



WAMCO PARTNERSHIPS

COMBINED STATEMENTS OF CHANGES IN PARTNERS CAPITAL
(Unaudited)

|                             |                                        |   |                |     |          |   |          |        |          |   |                        |      |       |   |       |      |   |   |        |         |   |   |        |         |  
|---------------------------- | -------------------------------------- | - | -------------- | --- | -------- | - | -------- | ------ | -------- | - | ---------------------- | ---- | ----- | - | ----- | ---- | - | - | ------ | ------- | - | - | ------ | ------- | -
|                             |                                        |   |                |     |          |   |          |        |          |   | Class B                |      |       |   |       |      |   |   |        |         |   |   |       
|                             |                                        |   | Class A Equity |     | Equity   |   |          |        |          |   |                        |      |       |   |       |      |  
|                             |                                        |   |                |     |          |   |          |        |          |   |                        |      |       |   |       |      |  
|                             |                                        |   | General        |     | Limited  |   | Limited  |        | General  |   | Limited                |      |       |   |      
|                             |                                        |   | Partners       |     | Partners |   | Partners |        | Partners |   | Partners               |      | Total
|                             |                                        |   |                |     |          |   |          |        |          |   |                        |      |      
|                             |                                        |   |                |     |          |   |          |        |          |   | (Dollars in thousands) |      |       |   |       |      |   |   |       
|Balance at December 31, 2001 |                                        | $ | 131            |     |          | $ | 6,402    |        |          | $ | 1,108                  |      |       | $ | 1,082 |      |   | $ | 81,526 |         |   | $ | 90,249 |        
|                             | Contributions                          |   |                |    |          |   |          |       |          |   |                        |     |       |   |       | 159  |   |   |        | 15,812  |   |   |        | 15,971  |  
|                             | Distributions                          |   |                | (43 | )        |   |          | (2,119 | )        |   |                        | (126 | )     |   |       | (605 | ) |   |        | (51,305 | ) |   |        | (54,198 | )
|                             | Comprehensive income:                  |   |                |     |          |   |          |        |          |   |                        |      |       |   |       |      |   |   |        |         |   |   |        |         |  
|                             | Net earnings                           |   |                | 28  |          |   |          | 1,376  |          |   |                        | 76   |       |   |       | 300  |   |   |        | 25,761  |   |   |        | 27,541  |  
|                             | Unrealized net gain on Securitizations |   |                | 7   |          |   |          | 351    |          |   |                        | 5    |       |   |       | 3    |   |   |        | 130     |   |   |        | 496     |  
|                             |                                        |   |                |     |          |   |          |        |          |   |                        |      |       |   |       |      |   |   |        |         |   |   |        |        
|                             | Total comprehensive income             |   |                | 35  |          |   |          | 1,727  |          |   |                        | 81   |       |   |       | 303  |   |   |        | 25,891  |   |   |        | 28,037  |  
|                             |                                        |   |                |     |          |   |          |        |          |   |                        |      |       |   |       |      |   |   |        |         |   |   |        |        
|Balance at December 31, 2002 |                                        |   | 123            |     |          |   | 6,010    |        |          |   | 1,063                  |      |       |   | 939   |      |   |   | 71,924 |         |   |   | 80,059 |        
|                             | Distributions                          |   |                | (9  | )        |   |          | (437   | )        |   |                        |     |       |   |       | (89  | ) |   |        | (5,732  | ) |   |        | (6,267  | )
|                             | Comprehensive income:                  |   |                |     |          |   |          |        |          |   |                        |      |       |   |       |      |   |   |        |         |   |   |        |         |  
|                             | Net earnings                           |   |                | 6   |          |   |          | 300    |          |   |                        | (66  | )     |   |       | 114  |   |   |        | 3,013   |   |   |        | 3,367   |  
|                             | Unrealized net loss on securitization  |   |                | (6  | )        |   |          | (291   | )        |   |                        | (5   | )     |   |       | (2   | ) |   |        | (108    | ) |   |        | (412    | )
|                             |                                        |   |                |     |          |   |          |        |          |   |                        |      |       |   |       |      |   |   |        |         |   |   |        |        
|                             | Total comprehensive income             |   |                |    |          |   |          | 9      |          |   |                        | (71  | )     |   |       | 112  |   |   |        | 2,905   |   |   |        | 2,955   |  
|                             |                                        |   |                |     |          |   |          |        |          |   |                        |      |       |   |       |      |   |   |        |         |   |   |        |        
|Balance at March 31, 2003    |                                        | $ | 114            |     |          | $ | 5,582    |        |          | $ | 992                    |      |       | $ | 962   |      |   | $ | 69,097 |         |   | $ | 76,747 |        
|                             |                                        |   |                |     |          |   |          |        |          |   |                        |      |       |   |       |      |   |   |        |         |   |   |        |        

See accompanying notes to combined financial statements.

18



---



##### 



WAMCO PARTNERSHIPS

COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                                                    |                                          |                                                      |                                                     |        |                        |         |        |         |        |         |  
|----------------------------------------------------------------------------------- | ---------------------------------------- | ---------------------------------------------------- | --------------------------------------------------- | ------ | ---------------------- | ------- | ------ | ------- | ------ | ------- | -
|                                                                                    |                                          |                                                      |                                                     |        | Three Months Ended    
|                                                                                    |                                          |                                                      |                                                     |        | March 31,             
|                                                                                    |                                          |                                                      |                                                     |        |                       
|                                                                                    |                                          |                                                      |                                                     |        | 2003                   |         | 2002  
|                                                                                    |                                          |                                                      |                                                     |        |                        |         |       
|                                                                                    |                                          |                                                      |                                                     |        | (Dollars in thousands)
|Cash flows from operating activities:                                               |                                          |                                                      |                                                     |        |                        |         |        |        
|                                                                                    | Net earnings                             |                                                      | $                                                   | 3,367  |                        |         | $      | 7,464   |       
|Adjustments to reconcile net earnings to net cash provided by operating activities: |                                          |                                                      |                                                     |        |                        |         |        |        
|                                                                                    |                                          | Amortization of loan origination and commitment fees |                                                     |        | 96                     |         |        |         | 74     |        
|                                                                                    |                                          | Amortization of deferred profit sharing              |                                                     |        |                       |         |        |         | 462    |        
|                                                                                    |                                          | Accretion of unrealized gain on trust certificates   |                                                     |        | (81                    | )       |        |         | (58    | )      
|                                                                                    |                                          | Provision for loan losses                            |                                                     |        | 444                    |         |        |         |       |        
|                                                                                    |                                          | Gain on resolution of Portfolio Assets               |                                                     |        | (4,420                 | )       |        |         | (6,623 | )      
|                                                                                    |                                          | Capitalized costs on Portfolio Assets                |                                                     |        | (458                   | )       |        |         | (2,890 | )      
|                                                                                    |                                          | Capitalized interest on Portfolio Assets             |                                                     |        | (184                   | )       |        |         | (333   | )      
|                                                                                    |                                          | Proceeds from resolution of Portfolio Assets         |                                                     |        | 15,889                 |         |        |         | 18,433 |        
|                                                                                    |                                          | Principal payments on Performing Portfolio Assets    |                                                     |        | 2,243                  |         |        |         | 8,668  |        
|                                                                                    |                                          | Decrease (increase) in deferred profit sharing       |                                                     |        | (1,314                 | )       |        |         | 357    |        
|                                                                                    |                                          | Decrease (increase) in other assets                  |                                                     |        | (35                    | )       |        |         | 42     |        
|                                                                                    |                                          | Increase (decrease) in deferred compensation         |                                                     |        | 1,314                  |         |        |         | (357   | )      
|                                                                                    |                                          | Deferred compensation paid                           |                                                     |        | (58                    | )       |        |         |       |        
|                                                                                    |                                          | Increase (decrease) in other liabilities             |                                                     |        | (1,254                 | )       |        |         | 120    |        
|                                                                                    |                                          |                                                      |                                                     |        |                        |         |        |         |       
|                                                                                    |                                          |                                                      | Net cash provided by operating activities           |        |                        | 15,549  |        |         |        | 25,359  |  
|Cash flows from investing activities:                                               |                                          |                                                      |                                                     |        |                        |         |        |        
|                                                                                    | Contribution to subsidiaries             |                                                      |                                                     | (29    | )                      |         |        |        |       
|                                                                                    | Change in trust certificates             |                                                      |                                                     | 318    |                        |         |        | (158    | )     
|                                                                                    |                                          |                                                      |                                                     |        |                        |         |        |         |       
|                                                                                    |                                          |                                                      | Net cash provided by (used in) investing activities |        |                        | 289     |        |         |        | (158    | )
|Cash flows from financing activities:                                               |                                          |                                                      |                                                     |        |                        |         |        |        
|                                                                                    | Borrowing of debt  affiliates           |                                                      |                                                     | 118    |                        |         |        |        |       
|                                                                                    | Repayment of debt  affiliates           |                                                      |                                                     | (7,394 | )                      |         |        | (11,681 | )     
|                                                                                    | Repayment of debt                        |                                                      |                                                     | (4,116 | )                      |         |        | (4,772  | )     
|                                                                                    | Capitalized interest on preferred equity |                                                      |                                                     |       |                        |         |        | 82      |       
|                                                                                    | Repayment of preferred equity            |                                                      |                                                     | (51    | )                      |         |        |        |       
|                                                                                    | Capital distributions                    |                                                      |                                                     | (6,267 | )                      |         |        | (6,803  | )     
|                                                                                    |                                          |                                                      |                                                     |        |                        |         |        |         |       
|                                                                                    |                                          |                                                      | Net cash used in financing activities               |        |                        | (17,710 | )      |         |        | (23,174 | )
|                                                                                    |                                          |                                                      |                                                     |        |                        |         |        |         |       
|Net increase (decrease) in cash                                                     |                                          |                                                      | (1,872                                              | )      |                        |         | 2,027  |        
|Cash at beginning of period                                                         |                                          |                                                      | 13,035                                              |        |                        |         | 13,397 |        
|                                                                                    |                                          |                                                      |                                                     |        |                        |         |        |         |       
|Cash at end of period                                                               |                                          | $                                                    | 11,163                                              |        |                        | $       | 15,424 |        
|                                                                                    |                                          |                                                      |                                                     |        |                        |         |        |         |       

Supplemental disclosure of cash flow information:

Cash paid for interest was $1,189 and $1,731 for the three months ended
March 31, 2003 and 2002, respectively.

Unrealized net gain on trust certificates recorded in partners capital
was $(331) and $593 for the three months ended March 31, 2003 and 2002,
respectively.

See accompanying notes to combined financial statements.

19



---



##### 



WAMCO PARTNERSHIPS

NOTES TO COMBINED FINANCIAL STATEMENTS
March 31, 2003
(Dollars in thousands)
(Unaudited)

(1)  Basis of Presentation

The unaudited combined financial statements of the WAMCO Partnerships
reflect, in the opinion of management, all adjustments, consisting only of
normal and recurring adjustments, necessary to present fairly the combined
financial position at March 31, 2003, and the results of operations and cash
flows for the three-month periods ended March 31, 2003 and 2002.

(2)   Organization and Partnership Agreements

The combined financial statements represent domestic Texas limited
partnerships and limited liability companies (Acquisition Partnerships or
Partnerships) and include the accounts of WAMCO III, Ltd. (WAMCO III);
WAMCO IX, Ltd.; WAMCO XXIV, Ltd.; WAMCO XXV, Ltd.; WAMCO XXVI Ltd.; WAMCO XXVII
Ltd.; WAMCO XXVIII Ltd. (WAMCO XXVIII); WAMCO XXIX, Ltd.; WAMCO XXX, Ltd.;
Calibat Fund, LLC; First B Realty, Ltd.; First Paradee, Ltd.; FirstStreet
Investments LLC (FirstStreet); FC Properties, Ltd. (FC Properties); and
Community Development Investment, LLC. FirstCity Financial Corporation or its
subsidiaries, FirstCity Commercial Corporation and FirstCity Holdings
Corporation (together FirstCity), share limited partnership interests and
participate as general partners in common with Cargill Financial Services, Inc.
in all of the Partnerships. FC Properties and WAMCO XXVIII are considered
significant subsidiaries of FirstCity.

The Partnerships were formed to acquire, hold and dispose of Portfolio
Assets acquired from the Federal Deposit Insurance Corporation, Resolution
Trust Corporation and other nongovernmental agency sellers, pursuant to certain
purchase agreements or assignments of such purchase agreements. In accordance
with the purchase agreements, the Partnerships retain certain rights of return
regarding the assets in the event of a breach of a representation or
a warranty related to an asset.

Generally, the partnership agreements of the Partnerships provide for
certain preferences as to the distribution of cash flows. Proceeds from
disposition of and payments received on the Portfolio Assets are allocated
based on the partnership and other agreements which ordinarily provide for the
payment of interest and mandatory principal installments on outstanding debt
before payment of intercompany servicing fees and return of capital and
restricted distributions to partners.

The partnership agreement for WAMCO III provides for Class A and Class B
Equity partners. The Class A Equity partners are WAMCO III of Texas, Inc.,
FirstCity Commercial Corporation and CFSC Capital Corp. II, and the Class B
Equity partner is CFSC Capital Corp. II. The Class B Equity limited partner is
allocated 20 percent net income or loss, excluding equity earnings in
FirstStreet, recognized by the partnership prior to allocation of net income or
loss to the Class A Equity partners. Net earnings in FirstStreet are allocated
to the Class A Equity partners in proportion to their respective ownership
percentages. Net income or loss is credited or charged to the Class A Equity
partners capital accounts in proportion to their respective capital account
balances after the 20% allocation to the Class B Equity limited partner.
Distributions are allocated using the same methodology as net income or loss.
The Class B Equity limited partner is not required to make capital
contributions.

20



---



##### 



WAMCO PARTNERSHIPS

NOTES TO COMBINED FINANCIAL STATEMENTS  (Continued)

(3) Combining Financial Statements

FC Properties and WAMCO XXVIII are considered significant subsidiaries of
FirstCity. The following tables summarize the combining balance sheets and
changes in partners capital of the WAMCO Partnerships as of March 31, 2003 and
December 31, 2002, the related combining statements of operations and combining
cash flows for the three months ended March 31, 2003 and 2002.

COMBINING BALANCE SHEETS
March 31, 2003

|                                                                |                   |   |        |        |            |   |        |        |                        |   |          |        |  |   |         |        |  |  | 
|--------------------------------------------------------------- | ----------------- | - | ------ | ------ | ---------- | - | ------ | ------ | ---------------------- | - | -------- | ------ |  | - | ------- | ------ |  |  | 
|                                                                |                   |   |        |        | FC         |   | WAMCO  |        | Other                  |   |          |        | 
|                                                                |                   |   |        |        | Properties |   | XXVIII |        | Partnerships           |   | Combined
|                                                                |                   |   |        |        |            |   |        |        |                        |   |         
|                                                                |                   |   |        |        |            |   |        |        | (Dollars in thousands) |   |          |        | 
|                                                                |                   |   |        |        |            |   |        |        | (Unaudited)            |   |          |        | 
|ASSETS                                                          |                   |   |        |        |            |   |        |        |                        |   |          |        |  |   |         |       
|Cash                                                            |                   | $ | 830    |        |            | $ | 2,644  |        |                        | $ | 7,689    |        |  | $ | 11,163  |       
|Portfolio Assets, net                                           |                   |   | 15,278 |        |            |   | 28,884 |        |                        |   | 90,010   |        |  |   | 134,172 |       
|Investments in partnerships                                     |                   |   |       |        |            |   |       |        |                        |   | 2,331    |        |  |   | 2,331   |       
|Investments in trust certificates                               |                   |   |       |        |            |   |       |        |                        |   | 7,234    |        |  |   | 7,234   |       
|Deferred profit sharing                                         |                   |   | 18,985 |        |            |   |       |        |                        |   |         |        |  |   | 18,985  |       
|Other assets, net                                               |                   |   | 26     |        |            |   | 289    |        |                        |   | 439      |        |  |   | 754     |       
|                                                                |                   |   |        |        |            |   |        |        |                        |   |          |        |  |   |         |       
|                                                                |                   | $ | 35,119 |        |            | $ | 31,817 |        |                        | $ | 107,703  |        |  | $ | 174,639 |       
|                                                                |                   |   |        |        |            |   |        |        |                        |   |          |        |  |   |         |       
|LIABILITIES AND
PARTNERS CAPITAL                               |                   |   |        |        |            |   |        |        |                        |   |          |        |  |   |         |       
|Notes payable                                                   |                   | $ |       |        |            | $ | 16,683 |        |                        | $ | 51,816   |        |  | $ | 68,499  |       
|Deferred compensation                                           |                   |   | 22,962 |        |            |   |       |        |                        |   |         |        |  |   | 22,962  |       
|Other liabilities                                               |                   |   | 109    |        |            |   | 1,183  |        |                        |   | 846      |        |  |   | 2,138   |       
|                                                                |                   |   |        |        |            |   |        |        |                        |   |          |        |  |   |         |       
|                                                                | Total liabilities |   |        | 23,071 |            |   |        | 17,866 |                        |   |          | 52,662 |  |   |         | 93,599 | 
|Preferred equity                                                |                   |   |       |        |            |   |       |        |                        |   | 4,293    |        |  |   | 4,293   |       
|Partners capital                                               |                   |   | 12,048 |        |            |   | 13,951 |        |                        |   | 50,748   |        |  |   | 76,747  |       
|                                                                |                   |   |        |        |            |   |        |        |                        |   |          |        |  |   |         |       
|                                                                |                   | $ | 35,119 |        |            | $ | 31,817 |        |                        | $ | 107,703  |        |  | $ | 174,639 |       
|                                                                |                   |   |        |        |            |   |        |        |                        |   |          |        |  |   |         |       
|Notes payable owed to affiliates included in above balances     |                   | $ |       |        |            | $ |       |        |                        | $ | 38,861   |        |  | $ | 38,861  |       
|Other liabilities owed to affiliates included in above balances |                   |   | 3      |        |            |   | 1,117  |        |                        |   | 579      |        |  |   | 1,699   |       

COMBINING BALANCE SHEETS
December 31, 2002

|                                                                |                   |   |        |        |            |   |        |        |                        |   |          |        |  |   |         |         |  |  | 
|--------------------------------------------------------------- | ----------------- | - | ------ | ------ | ---------- | - | ------ | ------ | ---------------------- | - | -------- | ------ |  | - | ------- | ------- |  |  | 
|                                                                |                   |   |        |        | FC         |   | WAMCO  |        | Other                  |   |          |        | 
|                                                                |                   |   |        |        | Properties |   | XXVIII |        | Partnerships           |   | Combined
|                                                                |                   |   |        |        |            |   |        |        |                        |   |         
|                                                                |                   |   |        |        |            |   |        |        | (Dollars in thousands) |   |          |        | 
|                                                                |                   |   |        |        |            |   |        |        | (Unaudited)            |   |          |        | 
|ASSETS                                                          |                   |   |        |        |            |   |        |        |                        |   |          |        |  |   |         |        
|Cash                                                            |                   | $ | 1,484  |        |            | $ | 2,440  |        |                        | $ | 9,111    |        |  | $ | 13,035  |        
|Portfolio Assets, net                                           |                   |   | 15,182 |        |            |   | 32,341 |        |                        |   | 100,163  |        |  |   | 147,686 |        
|Investments in partnerships                                     |                   |   |       |        |            |   |       |        |                        |   | 2,302    |        |  |   | 2,302   |        
|Investments in trust certificates                               |                   |   |       |        |            |   |       |        |                        |   | 7,883    |        |  |   | 7,883   |        
|Deferred profit sharing                                         |                   |   | 17,671 |        |            |   |       |        |                        |   |         |        |  |   | 17,671  |        
|Other assets, net                                               |                   |   | 5      |        |            |   | 346    |        |                        |   | 464      |        |  |   | 815     |        
|                                                                |                   |   |        |        |            |   |        |        |                        |   |          |        |  |   |         |        
|                                                                |                   | $ | 34,342 |        |            | $ | 35,127 |        |                        | $ | 119,923  |        |  | $ | 189,392 |        
|                                                                |                   |   |        |        |            |   |        |        |                        |   |          |        |  |   |         |        
|LIABILITIES AND
PARTNERS CAPITAL                               |                   |   |        |        |            |   |        |        |                        |   |          |        |  |   |         |        
|Notes payable                                                   |                   | $ |       |        |            | $ | 18,882 |        |                        | $ | 61,009   |        |  | $ | 79,891  |        
|Deferred compensation                                           |                   |   | 21,706 |        |            |   |       |        |                        |   |         |        |  |   | 21,706  |        
|Other liabilities                                               |                   |   | 540    |        |            |   | 1,301  |        |                        |   | 1,551    |        |  |   | 3,392   |        
|                                                                |                   |   |        |        |            |   |        |        |                        |   |          |        |  |   |         |        
|                                                                | Total liabilities |   |        | 22,246 |            |   |        | 20,183 |                        |   |          | 62,560 |  |   |         | 104,989 | 
|Preferred equity                                                |                   |   |       |        |            |   |       |        |                        |   | 4,344    |        |  |   | 4,344   |        
|Partners capital                                               |                   |   | 12,096 |        |            |   | 14,944 |        |                        |   | 53,019   |        |  |   | 80,059  |        
|                                                                |                   |   |        |        |            |   |        |        |                        |   |          |        |  |   |         |        
|                                                                |                   | $ | 34,342 |        |            | $ | 35,127 |        |                        | $ | 119,923  |        |  | $ | 189,392 |        
|                                                                |                   |   |        |        |            |   |        |        |                        |   |          |        |  |   |         |        
|Notes payable owed to affiliates included in above balances     |                   | $ |       |        |            | $ |       |        |                        | $ | 46,137   |        |  | $ | 46,137  |        
|Other liabilities owed to affiliates included in above balances |                   |   | 20     |        |            |   | 1,196  |        |                        |   | 646      |        |  |   | 1,862   |        

21



---



##### 



WAMCO PARTNERSHIPS

NOTES TO COMBINED FINANCIAL STATEMENTS  (Continued)

COMBINING STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2003

|                                               |              |   |            |    |        |   |                        |     |          |   |        |       |  |   |        |       | 
|---------------------------------------------- | ------------ | - | ---------- | -- | ------ | - | ---------------------- | --- | -------- | - | ------ | ----- |  | - | ------ | ----- | 
|                                               |              |   | FC         |    | WAMCO  |   | Other                  |     |          |   |       
|                                               |              |   | Properties |    | XXVIII |   | Partnerships           |     | Combined
|                                               |              |   |            |    |        |   |                        |     |         
|                                               |              |   |            |    |        |   | (Dollars in thousands) |     |          |   |       
|                                               |              |   |            |    |        |   | (Unaudited)            |     |          |   |       
|Proceeds from resolution of Portfolio Assets   |              | $ | 232        |    |        | $ | 2,981                  |     |          | $ | 12,676 |       |  | $ | 15,889 |      
|Cost of Portfolio Assets resolved              |              |   | 39         |    |        |   | 2,141                  |     |          |   | 9,289  |       |  |   | 11,469 |      
|                                               |              |   |            |    |        |   |                        |     |          |   |        |       |  |   |        |      
|Gain on resolution of Portfolio Assets         |              |   | 193        |    |        |   | 840                    |     |          |   | 3,387  |       |  |   | 4,420  |      
|Interest income on performing Portfolio Assets |              |   |           |    |        |   | 410                    |     |          |   | 1,113  |       |  |   | 1,523  |      
|Interest and fees expense  affiliates         |              |   |           |    |        |   | (162                   | )   |          |   | (793   | )     |  |   | (955   | )    
|Interest and fees expense  other              |              |   |           |    |        |   | (221                   | )   |          |   | (183   | )     |  |   | (404   | )    
|Provision for loan losses                      |              |   |           |    |        |   | (112                   | )   |          |   | (332   | )     |  |   | (444   | )    
|Service fees  affiliate                       |              |   | (7         | )  |        |   | (152                   | )   |          |   | (498   | )     |  |   | (657   | )    
|General, administrative and operating expenses |              |   | (146       | )  |        |   | (73                    | )   |          |   | (306   | )     |  |   | (525   | )    
|Other income, net                              |              |   |           |    |        |   | 2                      |     |          |   | 407    |       |  |   | 409    |      
|                                               |              |   |            |    |        |   |                        |     |          |   |        |       |  |   |        |      
|                                               | Net earnings |   | $          | 40 |        |   | $                      | 532 |          |   | $      | 2,795 |  |   | $      | 3,367 | 
|                                               |              |   |            |    |        |   |                        |     |          |   |        |       |  |   |        |      

COMBINING STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2002

|                                               |              |   |            |       |        |   |                        |       |          |   |        |       |  |   |        |       | 
|---------------------------------------------- | ------------ | - | ---------- | ----- | ------ | - | ---------------------- | ----- | -------- | - | ------ | ----- |  | - | ------ | ----- | 
|                                               |              |   | FC         |       | WAMCO  |   | Other                  |       |          |   |       
|                                               |              |   | Properties |       | XXVIII |   | Partnerships           |       | Combined
|                                               |              |   |            |       |        |   |                        |       |         
|                                               |              |   |            |       |        |   | (Dollars in thousands) |       |          |   |       
|                                               |              |   |            |       |        |   | (Unaudited)            |       |          |   |       
|Proceeds from resolution of Portfolio Assets   |              | $ | 4,564      |       |        | $ | 9,509                  |       |          | $ | 4,360  |       |  | $ | 18,433 |      
|Cost of Portfolio Assets resolved              |              |   | 1,449      |       |        |   | 7,111                  |       |          |   | 3,250  |       |  |   | 11,810 |      
|                                               |              |   |            |       |        |   |                        |       |          |   |        |       |  |   |        |      
|Gain on resolution of Portfolio Assets         |              |   | 3,115      |       |        |   | 2,398                  |       |          |   | 1,110  |       |  |   | 6,623  |      
|Interest income on performing Portfolio Assets |              |   |           |       |        |   | 869                    |       |          |   | 3,343  |       |  |   | 4,212  |      
|Interest and fees expense  affiliates         |              |   |           |       |        |   | (770                   | )     |          |   | (1,021 | )     |  |   | (1,791 | )    
|Interest and fees expense  other              |              |   |           |       |        |   |                       |       |          |   | (422   | )     |  |   | (422   | )    
|Service fees  affiliate                       |              |   | (137       | )     |        |   | (316                   | )     |          |   | (360   | )     |  |   | (813   | )    
|General, administrative and operating expenses |              |   | (639       | )     |        |   | (69                    | )     |          |   | (122   | )     |  |   | (830   | )    
|Other income, net                              |              |   | 2          |       |        |   | 12                     |       |          |   | 471    |       |  |   | 485    |      
|                                               |              |   |            |       |        |   |                        |       |          |   |        |       |  |   |        |      
|                                               | Net earnings |   | $          | 2,341 |        |   | $                      | 2,124 |          |   | $      | 2,999 |  |   | $      | 7,464 | 
|                                               |              |   |            |       |        |   |                        |       |          |   |        |       |  |   |        |      

See accompanying notes to combined financial statements.

22



---



##### 



WAMCO PARTNERSHIPS

NOTES TO COMBINED FINANCIAL STATEMENTS  (Continued)

COMBINING STATEMENTS OF CHANGES IN PARTNERS CAPITAL
Three Months Ended March 31, 2003

|                             |                                       |   |            |        |        |   |                        |         |          |   |        |         |   |   |        |         |  
|---------------------------- | ------------------------------------- | - | ---------- | ------ | ------ | - | ---------------------- | ------- | -------- | - | ------ | ------- | - | - | ------ | ------- | -
|                             |                                       |   | FC         |        | WAMCO  |   | Other                  |         |          |   |       
|                             |                                       |   | Properties |        | XXVIII |   | Partnerships           |         | Combined
|                             |                                       |   |            |        |        |   |                        |         |         
|                             |                                       |   |            |        |        |   | (Dollars in thousands) |         |          |   |       
|                             |                                       |   |            |        |        |   | (Unaudited)            |         |          |   |       
|Balance at December 31, 2001 |                                       |   | 12,024     |        |        |   | 24,810                 |         |          |   | 53,415 |         |   |   | 90,249 |        
|                             |                                       |   |            |        |        |   |                        |         |          |   |        |         |   |   |        |        
|                             | Contributions                         |   |            |       |        |   |                        |         |          |   |        | 15,971  |   |   |        | 15,971  |  
|                             | Distributions                         |   |            | (2,596 | )      |   |                        | (20,668 | )        |   |        | (30,934 | ) |   |        | (54,198 | )
|                             | Net earnings                          |   |            | 2,668  |        |   |                        | 10,802  |          |   |        | 14,071  |   |   |        | 27,541  |  
|                             | Unrealized net gain on securitization |   |            |       |        |   |                        |        |          |   |        | 496     |   |   |        | 496     |  
|                             |                                       |   |            |        |        |   |                        |         |          |   |        |         |   |   |        |        
|                             | Total comprehensive income            |   |            | 2,668  |        |   |                        | 10,802  |          |   |        | 14,567  |   |   |        | 28,037  |  
|                             |                                       |   |            |        |        |   |                        |         |          |   |        |         |   |   |        |        
|Balance at December 31, 2002 |                                       | $ | 12,096     |        |        | $ | 14,944                 |         |          | $ | 53,019 |         |   | $ | 80,059 |        
|                             |                                       |   |            |        |        |   |                        |         |          |   |        |         |   |   |        |        
|                             | Contributions                         |   |            |       |        |   |                        |        |          |   |        |        |   |   |        |        |  
|                             | Distributions                         |   |            | (88    | )      |   |                        | (1,525  | )        |   |        | (4,654  | ) |   |        | (6,267  | )
|                             | Net earnings                          |   |            | 40     |        |   |                        | 532     |          |   |        | 2,795   |   |   |        | 3,367   |  
|                             | Unrealized net gain on securitization |   |            |       |        |   |                        |        |          |   |        | (412    | ) |   |        | (412    | )
|                             |                                       |   |            |        |        |   |                        |         |          |   |        |         |   |   |        |        
|                             | Total comprehensive income            |   |            | 40     |        |   |                        | 532     |          |   |        | 2,383   |   |   |        | 2,955   |  
|                             |                                       |   |            |        |        |   |                        |         |          |   |        |         |   |   |        |        
|Balance at March 31, 2003    |                                       | $ | 12,048     |        |        | $ | 13,951                 |         |          | $ | 50,748 |         |   | $ | 76,747 |        
|                             |                                       |   |            |        |        |   |                        |         |          |   |        |         |   |   |        |        

COMBINING STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2003

|                                                 |                                                                                               |                                                      |       |                                                     |        |            |       |        |       |                        |        |          |        |   |         |        |        |   |         |  
|------------------------------------------------ | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ----- | --------------------------------------------------- | ------ | ---------- | ----- | ------ | ----- | ---------------------- | ------ | -------- | ------ | - | ------- | ------ | ------ | - | ------- | -
|                                                 |                                                                                               |                                                      |       |                                                     |        | FC         |       | WAMCO  |       | Other                  |        |          |        |  
|                                                 |                                                                                               |                                                      |       |                                                     |        | Properties |       | XXVIII |       | Partnerships           |        | Combined
|                                                 |                                                                                               |                                                      |       |                                                     |        |            |       |        |       |                        |        |         
|                                                 |                                                                                               |                                                      |       |                                                     |        |            |       |        |       | (Dollars in thousands) |        |          |        |  
|                                                 |                                                                                               |                                                      |       |                                                     |        |            |       |        |       | (Unaudited)            |        |          |        |  
|Cash flows from operating activities:            |                                                                                               |                                                      |       |                                                     |        |            |       |        |       |                        |        |          |        |   |         |       
|                                                 | Net earnings                                                                                  |                                                      | $     | 40                                                  |        |            | $     | 532    |       |                        | $      | 2,795    |        |   | $       | 3,367  |       
|                                                 | Adjustments to reconcile net earnings to net cash
provided
by (used in) operating activities: |                                                      |       |                                                     |        |            |       |        |       |                        |        |          |        |   |         |        |       
|                                                 |                                                                                               | Amortization of loan origination and commitment fees |       |                                                     |       |            |       |        | 44    |                        |        |          | 52     |   |         |        | 96     |  
|                                                 |                                                                                               | Accretion of unrealized gain on trust certificates   |       |                                                     |       |            |       |        |      |                        |        |          | (81    | ) |         |        | (81    | )
|                                                 |                                                                                               | Provision for loan losses                            |       |                                                     |       |            |       |        | 112   |                        |        |          | 332    |   |         |        | 444    |  
|                                                 |                                                                                               | Gain on resolution of Portfolio Assets               |       |                                                     | (193   | )          |       |        | (840  | )                      |        |          | (3,387 | ) |         |        | (4,420 | )
|                                                 |                                                                                               | Capitalized costs on Portfolio Assets                |       |                                                     | (135   | )          |       |        | (9    | )                      |        |          | (314   | ) |         |        | (458   | )
|                                                 |                                                                                               | Capitalized interest on Portfolio Assets             |       |                                                     |       |            |       |        | (6    | )                      |        |          | (178   | ) |         |        | (184   | )
|                                                 |                                                                                               | Proceeds from resolution of Portfolio Assets         |       |                                                     | 232    |            |       |        | 2,981 |                        |        |          | 12,676 |   |         |        | 15,889 |  
|                                                 |                                                                                               | Principal payments on Performing Portfolio Assets    |       |                                                     |       |            |       |        | 1,219 |                        |        |          | 1,024  |   |         |        | 2,243  |  
|                                                 |                                                                                               | Increase in deferred profit sharing                  |       |                                                     | (1,314 | )          |       |        |      |                        |        |          |       |   |         |        | (1,314 | )
|                                                 |                                                                                               | (Increase) decrease in other assets                  |       |                                                     | (21    | )          |       |        | 13    |                        |        |          | (27    | ) |         |        | (35    | )
|                                                 |                                                                                               | Increase in deferred compensation                    |       |                                                     | 1,314  |            |       |        |      |                        |        |          |       |   |         |        | 1,314  |  
|                                                 |                                                                                               | Deferred compensation and profit sharing paid        |       |                                                     | (58    | )          |       |        |      |                        |        |          |       |   |         |        | (58    | )
|                                                 |                                                                                               | Decrease in other liabilities                        |       |                                                     | (431   | )          |       |        | (118  | )                      |        |          | (705   | ) |         |        | (1,254 | )
|                                                 |                                                                                               |                                                      |       |                                                     |        |            |       |        |       |                        |        |          |        |   |         |       
|                                                 |                                                                                               |                                                      |       | Net cash provided by (used in) operating activities |        |            | (566  | )      |       |                        | 3,928  |          |        |   | 12,187  |        |        |   | 15,549  |  
|Cash flows from investing activities:            |                                                                                               |                                                      |       |                                                     |        |            |       |        |       |                        |        |          |        |   |         |       
|                                                 | Contribution to subsidiaries                                                                  |                                                      |       |                                                    |        |            |       |       |       |                        |        | (29      | )      |   |         | (29    | )     
|                                                 | Change in trust certificates                                                                  |                                                      |       |                                                    |        |            |       |       |       |                        |        | 318      |        |   |         | 318    |       
|                                                 |                                                                                               |                                                      |       |                                                     |        |            |       |        |       |                        |        |          |        |   |         |       
|                                                 |                                                                                               |                                                      |       | Net cash provided by investing activities           |        |            |      |        |       |                        |       |          |        |   | 289     |        |        |   | 289     |  
|Cash flows from financing activities:            |                                                                                               |                                                      |       |                                                     |        |            |       |        |       |                        |        |          |        |   |         |       
|                                                 | Borrowing of debt  affiliate                                                                 |                                                      |       |                                                    |        |            |       |       |       |                        |        | 118      |        |   |         | 118    |       
|                                                 | Repayment of debt  affiliate                                                                 |                                                      |       |                                                    |        |            |       |       |       |                        |        | (7,394   | )      |   |         | (7,394 | )     
|                                                 | Repayment of debt                                                                             |                                                      |       |                                                    |        |            |       | (2,199 | )     |                        |        | (1,917   | )      |   |         | (4,116 | )     
|                                                 | Repayment of preferred equity                                                                 |                                                      |       |                                                    |        |            |       |       |       |                        |        | (51      | )      |   |         | (51    | )     
|                                                 | Capital distributions                                                                         |                                                      |       | (88                                                 | )      |            |       | (1,525 | )     |                        |        | (4,654   | )      |   |         | (6,267 | )     
|                                                 |                                                                                               |                                                      |       |                                                     |        |            |       |        |       |                        |        |          |        |   |         |       
|                                                 |                                                                                               |                                                      |       | Net cash used in financing activities               |        |            | (88   | )      |       |                        | (3,724 | )        |        |   | (13,898 | )      |        |   | (17,710 | )
|                                                 |                                                                                               |                                                      |       |                                                     |        |            |       |        |       |                        |        |          |        |   |         |       
|Net increase (decrease) in cash                  |                                                                                               |                                                      | (654  | )                                                   |        |            | 204   |        |       |                        | (1,422 | )        |        |   | (1,872  | )     
|Cash
at beginning of period                      |                                                                                               |                                                      | 1,484 |                                                     |        |            | 2,440 |        |       |                        | 9,111  |          |        |   | 13,035  |       
|                                                 |                                                                                               |                                                      |       |                                                     |        |            |       |        |       |                        |        |          |        |   |         |       
|Cash
at end of period                            |                                                                                               | $                                                    | 830   |                                                     |        | $          | 2,644 |        |       | $                      | 7,689  |          |        | $ | 11,163  |       
|                                                 |                                                                                               |                                                      |       |                                                     |        |            |       |        |       |                        |        |          |        |   |         |        |       
|Supplemental disclosure of cash flow information |                                                                                               |                                                      |       |                                                     |        |            |       |        |       |                        |        |          |        |   |         |       
|Cash paid for interest                           |                                                                                               | $                                                    |      |                                                     |        | $          | 359   |        |       | $                      | 830    |          |        | $ | 1,189   |       

23



---



##### 



WAMCO PARTNERSHIPS

NOTES TO COMBINED FINANCIAL STATEMENTS  (Continued)

COMBINING STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2002

|                                                  |                                                                                     |                                                      |       |                                           |        |            |       |        |        |                        |        |          |        |   |         |         |        |   |         |  
|------------------------------------------------- | ----------------------------------------------------------------------------------- | ---------------------------------------------------- | ----- | ----------------------------------------- | ------ | ---------- | ----- | ------ | ------ | ---------------------- | ------ | -------- | ------ | - | ------- | ------- | ------ | - | ------- | -
|                                                  |                                                                                     |                                                      |       |                                           |        | FC         |       | WAMCO  |        | Other                  |        |          |        |  
|                                                  |                                                                                     |                                                      |       |                                           |        | Properties |       | XXVIII |        | Partnerships           |        | Combined
|                                                  |                                                                                     |                                                      |       |                                           |        |            |       |        |        |                        |        |         
|                                                  |                                                                                     |                                                      |       |                                           |        |            |       |        |        | (Dollars in thousands) |        |          |        |  
|                                                  |                                                                                     |                                                      |       |                                           |        |            |       |        |        | (Unaudited)            |        |          |        |  
|Cash flows from operating activities:             |                                                                                     |                                                      |       |                                           |        |            |       |        |        |                        |        |          |        |   |         |        
|                                                  | Net earnings                                                                        |                                                      | $     | 2,341                                     |        |            | $     | 2,124  |        |                        | $      | 2,999    |        |   | $       | 7,464   |       
|                                                  | Adjustments to reconcile net earnings to net cash
provided
by operating activities: |                                                      |       |                                           |        |            |       |        |        |                        |        |          |        |   |         |         |       
|                                                  |                                                                                     | Amortization of loan origination and commitment fees |       |                                           |       |            |       |        |       |                        |        |          | 74     |   |         |         | 74     |  
|                                                  |                                                                                     | Amortization of deferred profit sharing              |       |                                           | 462    |            |       |        |       |                        |        |          |       |   |         |         | 462    |  
|                                                  |                                                                                     | Accretion of unrealized gain on trust certificates   |       |                                           |       |            |       |        |       |                        |        |          | (58    | ) |         |         | (58    | )
|                                                  |                                                                                     | Gain on resolution of Portfolio Assets               |       |                                           | (3,115 | )          |       |        | (2,398 | )                      |        |          | (1,110 | ) |         |         | (6,623 | )
|                                                  |                                                                                     | Capitalized costs on Portfolio Assets                |       |                                           | (1,036 | )          |       |        | (1,849 | )                      |        |          | (5     | ) |         |         | (2,890 | )
|                                                  |                                                                                     | Capitalized interest on Portfolio Assets             |       |                                           |       |            |       |        | (102   | )                      |        |          | (231   | ) |         |         | (333   | )
|                                                  |                                                                                     | Proceeds from resolution of Portfolio Assets         |       |                                           | 4,564  |            |       |        | 9,509  |                        |        |          | 4,360  |   |         |         | 18,433 |  
|                                                  |                                                                                     | Principal payments on Performing Portfolio Assets    |       |                                           |       |            |       |        | 1,342  |                        |        |          | 7,326  |   |         |         | 8,668  |  
|                                                  |                                                                                     | Decrease in deferred profit sharing                  |       |                                           | 357    |            |       |        |       |                        |        |          |       |   |         |         | 357    |  
|                                                  |                                                                                     | (Increase) decrease in other assets                  |       |                                           | (19    | )          |       |        | (20    | )                      |        |          | 81     |   |         |         | 42     |  
|                                                  |                                                                                     | Decrease in deferred compensation                    |       |                                           | (357   | )          |       |        |       |                        |        |          |       |   |         |         | (357   | )
|                                                  |                                                                                     | Increase (decrease) in other liabilities             |       |                                           | (308   | )          |       |        | (19    | )                      |        |          | 447    |   |         |         | 120    |  
|                                                  |                                                                                     |                                                      |       |                                           |        |            |       |        |        |                        |        |          |        |   |         |        
|                                                  |                                                                                     |                                                      |       | Net cash provided by operating activities |        |            | 2,889 |        |        |                        | 8,587  |          |        |   | 13,883  |         |        |   | 25,359  |  
|Cash flows from investing activities:             |                                                                                     |                                                      |       |                                           |        |            |       |        |        |                        |        |          |        |   |         |        
|                                                  | Change in trust certificates                                                        |                                                      |       |                                          |        |            |       |       |        |                        |        | (158     | )      |   |         | (158    | )     
|                                                  |                                                                                     |                                                      |       |                                           |        |            |       |        |        |                        |        |          |        |   |         |        
|                                                  |                                                                                     |                                                      |       | Net cash used in investing activities     |        |            |      |        |        |                        |       |          |        |   | (158    | )       |        |   | (158    | )
|Cash flows from financing activities:             |                                                                                     |                                                      |       |                                           |        |            |       |        |        |                        |        |          |        |   |         |        
|                                                  | Repayment of debt affiliate                                                         |                                                      |       |                                          |        |            |       | (6,412 | )      |                        |        | (5,269   | )      |   |         | (11,681 | )     
|                                                  | Repayment of debt                                                                   |                                                      |       |                                          |        |            |       |       |        |                        |        | (4,772   | )      |   |         | (4,772  | )     
|                                                  | Capitalized interest on preferred equity                                            |                                                      |       |                                          |        |            |       |       |        |                        |        | 82       |        |   |         | 82      |       
|                                                  | Capital distributions                                                               |                                                      |       |                                          |        |            |       | (2,187 | )      |                        |        | (4,616   | )      |   |         | (6,803  | )     
|                                                  |                                                                                     |                                                      |       |                                           |        |            |       |        |        |                        |        |          |        |   |         |        
|                                                  |                                                                                     |                                                      |       | Net
cash used in financing activities     |        |            |      |        |        |                        | (8,599 | )        |        |   | (14,575 | )       |        |   | (23,174 | )
|                                                  |                                                                                     |                                                      |       |                                           |        |            |       |        |        |                        |        |          |        |   |         |        
|Net
increase (decrease) in cash                   |                                                                                     |                                                      | 2,889 |                                           |        |            | (12   | )      |        |                        | (850   | )        |        |   | 2,027   |        
|Cash
at beginning of period                       |                                                                                     |                                                      | 1,942 |                                           |        |            | 3,510 |        |        |                        | 7,945  |          |        |   | 13,397  |        
|                                                  |                                                                                     |                                                      |       |                                           |        |            |       |        |        |                        |        |          |        |   |         |        
|Cash
at end of period                             |                                                                                     | $                                                    | 4,831 |                                           |        | $          | 3,498 |        |        | $                      | 7,095  |          |        | $ | 15,424  |        
|                                                  |                                                                                     |                                                      |       |                                           |        |            |       |        |        |                        |        |          |        |   |         |         |       
|Supplemental disclosure of cash flow information: |                                                                                     |                                                      |       |                                           |        |            |       |        |        |                        |        |          |        |   |         |        
|                                                  | Cash paid for interest                                                              |                                                      | $     |                                          |        |            | $     | 591    |        |                        | $      | 1,140    |        |   | $       | 1,731   |       

24



---



##### 



WAMCO PARTNERSHIPS

NOTES TO COMBINED FINANCIAL STATEMENTS  (Continued)

(3) Portfolio Assets

Portfolio Assets are summarized as follows:

|                                                                |                        |   |            |        |        |   |                |        |          |   |         |         |  |   |          |         | 
|--------------------------------------------------------------- | ---------------------- | - | ---------- | ------ | ------ | - | -------------- | ------ | -------- | - | ------- | ------- |  | - | -------- | ------- | 
|                                                                |                        |   |            |        |        |   | March 31, 2003 |        |          |   |        
|                                                                |                        |   |            |        |        |   |                |        |          |   |        
|                                                                |                        |   | FC         |        | WAMCO  |   | Other          |        |          |   |        
|                                                                |                        |   | Properties |        | XXVIII |   | Partnerships   |        | Combined
|                                                                |                        |   |            |        |        |   |                |        |         
|Non-performing Portfolio Assets                                 |                        | $ |           |        |        | $ | 49,002         |        |          | $ | 126,965 |         |  | $ | 175,967  |        
|Performing Portfolio Assets                                     |                        |   |           |        |        |   | 18,519         |        |          |   | 57,819  |         |  |   | 76,338   |        
|Real estate Portfolios                                          |                        |   | 15,278     |        |        |   |               |        |          |   | 1,128   |         |  |   | 16,406   |        
|                                                                |                        |   |            |        |        |   |                |        |          |   |         |         |  |   |          |        
|                                                                | Total Portfolio Assets |   |            | 15,278 |        |   |                | 67,521 |          |   |         | 185,912 |  |   |          | 268,711 | 
|Discount required to reflect
Portfolio Assets at carrying
value |                        |   |           |        |        |   | (38,637        | )      |          |   | (95,902 | )       |  |   | (134,539 | )      
|                                                                |                        |   |            |        |        |   |                |        |          |   |         |         |  |   |          |        
|                                                                | Portfolio Assets, net  |   | $          | 15,278 |        |   | $              | 28,884 |          |   | $       | 90,010  |  |   | $        | 134,172 | 
|                                                                |                        |   |            |        |        |   |                |        |          |   |         |         |  |   |          |        

|                                                                |                        |   |            |        |        |   |                   |        |          |   |          |         |  |   |          |         | 
|--------------------------------------------------------------- | ---------------------- | - | ---------- | ------ | ------ | - | ----------------- | ------ | -------- | - | -------- | ------- |  | - | -------- | ------- | 
|                                                                |                        |   |            |        |        |   | December 31, 2002 |        |          |   |         
|                                                                |                        |   |            |        |        |   |                   |        |          |   |         
|                                                                |                        |   | FC         |        | WAMCO  |   | Other             |        |          |   |         
|                                                                |                        |   | Properties |        | XXVIII |   | Partnerships      |        | Combined
|                                                                |                        |   |            |        |        |   |                   |        |         
|Non-performing Portfolio Assets                                 |                        | $ |           |        |        | $ | 60,386            |        |          | $ | 141,468  |         |  | $ | 201,854  |        
|Performing Portfolio Assets                                     |                        |   |           |        |        |   | 20,404            |        |          |   | 59,461   |         |  |   | 79,865   |        
|Real estate Portfolios                                          |                        |   | 15,182     |        |        |   |                  |        |          |   | 1,129    |         |  |   | 16,311   |        
|                                                                |                        |   |            |        |        |   |                   |        |          |   |          |         |  |   |          |        
|                                                                | Total Portfolio Assets |   |            | 15,182 |        |   |                   | 80,790 |          |   |          | 202,058 |  |   |          | 298,030 | 
|Discount required to reflect
Portfolio Assets at carrying
value |                        |   |           |        |        |   | (48,449           | )      |          |   | (101,895 | )       |  |   | (150,344 | )      
|                                                                |                        |   |            |        |        |   |                   |        |          |   |          |         |  |   |          |        
|                                                                | Portfolio Assets, net  |   | $          | 15,182 |        |   | $                 | 32,341 |          |   | $        | 100,163 |  |   | $        | 147,686 | 
|                                                                |                        |   |            |        |        |   |                   |        |          |   |          |         |  |   |          |        

Portfolio Assets are pledged to secure non-recourse notes payable. During
the second quarter of 2002, three Partnerships (WAMCO XXVII, WAMCO XXVIII and
WAMCO XXIX) completed a bulk loan sale of performing and non-performing
Portfolio Assets with a carrying value of $59,149. Total proceeds on the sale
were $71,128 generating a gain on resolution of Portfolio Assets of $11,979.

(4)  Interest Related to Residual Interest in Trust Certificates

Residual certificates held by the Partnerships to which the Partnerships
receives all the economic benefits and risks consist of retained interests in
the amount of $7,234 and $7,883 at March 31, 2003 and December 31, 2002,
respectively. The Partnerships recognized interest income on these certificates
utilizing a yield of 21.29% and 21.75% for the three months ended March 31,
2003 and 2002, respectively.

(5)  Deferred Profit Sharing and Deferred Compensation

In connection with the formation of FC Properties, an agreement was
entered into which provided for potential payments to the project manager based
on a percentage of total estimated sales. An equal amount of deferred profit
participation and deferred compensation is recorded based on such estimates
with the deferred profit participation being amortized into expense in
proportion to actual sales realized. No profit participation was paid until the
limited partners recognized a 20% return on their investment. This return
threshold was met in 2001. At March 31, 2003 and December 31, 2002, the
estimated liability for this profit participation was $22,962 and $21,706,
respectively, and was included in deferred compensation in the accompanying
combined balance sheets. Additionally, amortization of $0 and $462 was
recognized during the three months ended March 31, 2003 and 2002, respectively,
and has been included in general, administrative and operating expenses in the
accompanying combined statements of operations.

(6) Transactions with Affiliates

Under the terms of the various servicing agreements between the
Partnerships and FirstCity, FirstCity receives a servicing fee based on
proceeds from resolution of the Portfolio Assets for processing transactions on
the Portfolio Assets and for conducting settlement, collection and other
resolution activities. Included in the accompanying combined statements of
operations is $657 and $813 in servicing fees incurred by the Partnerships
during the three months ended March 31, 2003 and 2002, respectively.

25



---



##### 



WAMCO PARTNERSHIPS

NOTES TO COMBINED FINANCIAL STATEMENTS  (Continued)

(7) Preferred Equity

In 1999, CFSC Capital Corp. XXX contributed $3,556 as preferred equity in
Community Development Investment, LLC. The preferred equity agreement requires
interest to be paid at a rate equal to the London Interbank Offering Rate
(1.31% at March 31, 2003) plus 5%. Interest in the amount of $11 and $11 has
been accrued at March 31, 2003 and December 31, 2002, respectively. Interest
expense on the preferred equity total $68 and $80 during the three months ended
March 31, 2003 and 2002, respectively. This interest expense is included in
interest and fees on notes payable  affiliates in the accompanying combined
statements of operations.

(8) Commitments and Contingencies

Calibat Fund, LLC has committed to make additional investments in
partnerships up to $60 at March 31, 2003.

The Partnerships are involved in various legal proceedings in the ordinary
course of business. In the opinion of management, the resolution of such
matters will not have a material adverse impact on the combined financial
condition, results of operations or liquidity of the Partnerships.

26



---



##### 






Item 2.Managements Discussion and Analysis of Financial Condition and
Results of Operations.

Overview

FirstCity is a financial services company engaged in the acquisition and
resolution of portfolios of assets or single assets (collectively referred to
as Portfolio Assets). The Portfolio Asset acquisition and resolution
business involves acquiring Portfolio Assets at a discount to face value and
servicing and resolving such portfolios in an effort to maximize the present
value of the ultimate cash recoveries. FirstCity also has an equity investment
in Drive Financial Services LP (Drive), which is engaged in the acquisition,
origination, warehousing, securitization and servicing of sub-prime automobile
receivables.

The Companys financial results are affected by many factors including
levels of and fluctuations in interest rates, fluctuations in the underlying
values of real estate and other assets, the timing of and ability to liquidate
assets, and the availability and prices for loans and assets acquired in all of
the Companys businesses. The Companys business and results of operations are
also affected by the availability of financing with terms acceptable to the
Company and the Companys access to capital markets, including the
securitization markets.

As a result of the significant period to period fluctuations in the
revenues and earnings and losses of the Companys Portfolio Asset acquisition
and resolution business, and the type of securitization transactions of Drive,
period to period comparisons of the Companys results of continuing operations
may not be meaningful.

The Company reported a loss from continuing operations for the quarter
ended March 31, 2003 of $19,000. After recording accrued and unpaid dividends
on the New Preferred Stock, net loss to common stockholders was $85,000 or $.01
per share on a basic and diluted basis.

|                                           |                                 |   |                    |     |      |   |        |        |  
|------------------------------------------ | ------------------------------- | - | ------------------ | --- | ---- | - | ------ | ------ | -
|                                           |                                 |   | Three Months Ended
|                                           |                                 |   | March 31,         
|                                           |                                 |   |                   
|                                           |                                 |   | 2003               |     | 2002
|                                           |                                 |   |                    |     |     
|Portfolio Asset Acquisition and Resolution |                                 | $ | 1,777              |     |      | $ | 2,331  |       
|Consumer                                   |                                 |   | 576                |     |      |   | (1,081 | )     
|Corporate interest                         |                                 |   | (1,172             | )   |      |   | (822   | )     
|Corporate overhead                         |                                 |   | (1,200             | )   |      |   | (1,262 | )     
|                                           |                                 |   |                    |     |      |   |        |       
|                                           | Loss from continuing operations |   |                    | (19 | )    |   |        | (834   | )
|Accrued preferred dividends                |                                 |   | (66                | )   |      |   | (642   | )     
|Loss from discontinued operations          |                                 |   |                   |     |      |   | (500   | )     
|                                           |                                 |   |                    |     |      |   |        |       
|                                           | Net loss to common shareholders |   | $                  | (85 | )    |   | $      | (1,976 | )
|                                           |                                 |   |                    |     |      |   |        |       

Results of Operations

The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements of the Company (including the Notes
thereto) included elsewhere in this Quarterly Report on Form 10-Q.

First Quarter 2003 Compared to First Quarter 2002

The Company reported a loss from continuing operations of $19,000 in the
first quarter of 2003. Net loss to common stockholders was $85,000 in the first
quarter of 2003 compared to $2.0 million (including a $.5 million loss from
discontinued operations) in the first quarter of 2002. On a per share basis,
basic and diluted net loss attributable to common stockholders was $.01 in the
first quarter of 2003 compared to a loss of $.24 in the first quarter of 2002.

Portfolio Asset Acquisition and Resolution

The operating contribution of $1.8 million in the first quarter of 2003
decreased by $.6 million or 24% compared with the first quarter of 2002
primarily due to increased equity losses in Acquisition Partnerships located in
Mexico. FirstCity did not purchase any Portfolio Assets during the first
quarter of 2003 compared to $24.5 million in acquisitions in the first quarter
of 2002.

Servicing fee revenues.Servicing fee revenues increased by 58% to $3.5
million in the first quarter of 2003 from $2.2 million in the first quarter of
2002. Service fees from the Mexican partnerships increased $1.0 million or 77%
with increased servicing
27responsibilities in Mexico. For the Mexican Acquisition Partnerships,
FirstCity earns a servicing fee based on costs of servicing plus a profit
margin. Although collections in the U.S. declined to $24 million in the first
quarter of 2003 compared to $32 million in the first quarter of 2002, service
fees from domestic Acquisition Partnerships increased from $.8 million to $1.0
million, respectively. This increase resulted from an increase in average
servicing rates.Gain on resolution of Portfolio Assets.The net gain on resolution of
Portfolio Assets increased from $.2 million in the first quarter of 2002 to $.7
million in the first quarter of 2003. The weighted average gross profit
percentage on the resolution of Portfolio Assets in the first quarter of 2003
was 23% as compared to 34% in the first quarter of 2002. This decrease was
primarily due to one Portfolio generating proceeds of $2.2 million and a net
gain of $.4 million or 18% during 2003.Equity in earnings of investments.Equity in earnings of Acquisition
Partnerships decreased 58% to $1.0 million in the first quarter of 2003
compared to $2.4 million in the first quarter of 2002. The Acquisition
Partnerships reflected a net loss of $21.0 million in the first quarter of 2003
compared to net earnings of $8.3 million in the first quarter of 2002.
Following is a discussion of equity earnings by geographic region.
    
    Domestic Equity in earnings of domestic Acquisition Partnerships
increased 20% to $2.3 million in the first quarter of 2003 from $2.0
million in 2002 primarily due to equity earnings from two partnerships
that began operations after the first quarter of 2002.
    
    Mexico Equity in losses of Mexican Acquisition Partnerships were
$2.1 million in the first quarter of 2003 compared to $17 thousand in
2002. These partnerships reflected a net loss of $31.5 million in the
first quarter of 2003 compared to a $1.4 million loss in 2002.
Approximately $23 million of these losses are due to foreign exchange
losses recognized by the partnerships as the Mexican peso fell to
historical lows during the first quarter of 2003 (FirstCity's portion
of these losses was $1.5 million).
In addition, $12 million of interest expense was recorded in the first
quarter of 2003. This interest is owed to the investors of these
partnerships, of which FirstCity has recorded $.9 million as
interest income. Excluding effects of foreign currency transactions and
interest expense, these partnerships reflected adjusted net earnings of
$3.9 million in the first quarter of 2003 compared to $7.3 million in
2002, which is primarily due to the Mexican partnerships receiving $2.7
million or 14% less collections in the first quarter of 2003 compared to
2002.
    
    France Equity in earnings of Acquisition Partnerships located in
France increased 58% to $.7 million in the first quarter of 2003 from
$.5 million in 2002. This increase is principally due to the addition of
five French Partnerships during 2002, which accounted for $.5 million in
equity in earnings in 2003. In addition, during the second quarter of
2002, the Company sold its investment in eight French Acquisition
Partnerships, which accounted for $.2 million in equity in earnings in
the first quarter of 2002. During the first quarter of 2003, FirstCity
also recorded $.2 million in foreign currency transactions gains
(included in other expenses) relating to investments in France as the
euro relative to the dollar appreciated from 1.05 at December 31, 2002
to 1.08 at March 31, 2003.Interest income.Interest income decreased from $1.3 million in the first
quarter of 2002 to $1.1 million in the first quarter of 2003 due to average
balances in Portfolio Assets and loans receivable decreasing to $24.9 million
in the first quarter of 2003 from $34.1 million in the first quarter of 2002.Expenses.Operating expenses increased $.5 million or 11%,
primarily as a result of increased salaries and benefits.Interest and fees on notes payable was flat from period to period. The
average debt for the quarter decreased to $26.8 million in the first quarter of
2003 from $38.0 million in the first quarter of 2002. However, the average cost
of borrowing increased from 7.64% in the first quarter of 2002 to 10.24% in the
first quarter of 2003.Salaries and benefits increased $.8 million, or 42%, due to increased
servicing personnel in Mexico. Total personnel within the Portfolio Asset
acquisition and resolution segment increased from 151 to 219 at March 31, 2002
and 2003, respectively, with the personnel in Mexico increasing from 82 to 143.
FirstCity also recorded additional servicing fee revenues with the increased
servicing responsibilities in Mexico.The provision for loan and impairment losses was minimal from period to
period.Impairment on performing Portfolio Assets is measured based on the present
value of the expected future cash flows in the aggregate discounted at the
loans risk adjusted rates, which approximates the effective interest rates, or
the fair value of the collateral, less estimated selling costs, if any loans
are collateral dependent and foreclosure is probable. Impairment on
nonperforming Portfolios28is evaluated by analyzing the expected future cash flows from the
underlying assets within each Portfolio. The expected future cash flows are
reviewed monthly and adjusted as deemed necessary. Changes in various factors
including, but not limited to, economic conditions, deterioration of collateral
values, deterioration in the borrowers financial condition and other
conditions described in the risk factors discussed later in this document,
could have a negative impact on the estimated future cash flows of the
Portfolio. Significant decreases in estimated future cash flows can reduce a
Portfolios present value to below the Companys carrying value of that
Portfolio, causing impairment.For real estate Portfolios, the evaluation of impairment is determined
quarterly based on the review of the estimated future cash receipts less
estimated costs to sell, which represents the net realizable value of the real
estate Portfolio. A valuation allowance is established for any impairment
identified through provisions charged to operations in the period the
impairment is identified.There were no provisions recorded on loans receivable from Acquisition
Partnerships during the first quarter of 2003 and 2002. The loans receivable
from the Mexican partnerships are secured by the assets/loans acquired by the
Mexican partnerships with purchase money loans provided by affiliates
of the investors in the
Mexican partnerships to purchase the asset pools held in those entities. These
loans are evaluated for impairment by analyzing the expected future cash flows
from the underlying assets within each pool to determine that the cash flows
were sufficient to repay these notes. The Company applies the asset valuation
methodology consistently in all venues and uses the same proprietary asset
management system to evaluate impairment on all asset pools. The results of
this evaluation indicated that cash flows from the pools will be sufficient to
repay the loans and no allowances for impairment were necessary.Occupancy, data processing, communication and other expenses were flat
from period to period.Minority interest expense was $.3 million in the first quarter of 2002.
In December 2002, FirstCity acquired the minority interest in FirstCity
Holdings as part of a recapitalization.Consumer LendingFirstCitys consumer lending segment consists of the Companys net
investment in Drive. The operating contribution for the first quarter of 2003
was $.6 million compared to an operating loss of $1.1 million during the first
quarter of 2002. Drive recorded net income of $2.5 million in the first quarter
of 2003 compared to a loss of $3.5 million in the first quarter of 2002.
Drives inventory of retail installments contracts have grown from $159 million
at March 31, 2002 to $443 million at March 31, 2003. Consequently, net
interest margin after provision for credit losses and impairments at Drive rose
from $7.6 million to $17.7 million during the first quarter of 2002 and 2003,
respectively.Other Items Affecting OperationsThe following items affect the Companys overall results of operations and
are not directly related to any one of the Companys businesses discussed
above.Corporate overhead.Company level interest expense increased by 43% to
$1.2 million in the first quarter of 2003 from $.8 million in the first quarter
of 2002 due to increased effective interest costs. Other corporate overhead expenses were
flat from year to year.Income taxes.Provision for income taxes was $.1 million in the first
quarter of 2003 and related to state income taxes on FirstCitys servicing
operations in Minnesota, which began in April 2002. Federal income taxes are
provided at a 35% rate applied to taxable income or loss and are offset by NOLs
that the Company believes are available. The tax benefit of the NOLs is
recorded in the period during which the benefit is realized. The Company
recorded no deferred tax provision in the first quarters of 2003 and 2002.Discontinued Operations.The Company recorded a provision of $.5 million
in 2002 for additional losses from discontinued operations. The additional
provisions primarily relate to a decrease in the estimated future gross cash
receipts on residual interests in securitizations. These securities are in
run-off, and the Company is contractually obligated to service these assets.
The assumptions used in the valuation model consider both industry as well as
the Companys historical experience. The decrease in the estimated future gross
cash receipts is partially a result of the actual losses exceeding the losses
projected by the valuation model. In addition, prepayment assumptions have
increased to take into consideration the lower market rates and higher than
predicted actual prepayments over the past quarter. As the securities run
off, assumptions are reviewed in light of historical evidence in revising the
prospective results of the model. These revised assumptions could potentially
result in either an increase or decrease in the estimated cash receipts. An
additional provision is booked based on the output of the valuation model if
deemed necessary.29Portfolio Asset Acquisition and ResolutionAggregate acquisitions by the Company are as follows (dollars in
thousands):

|                   |  |          |         |            |  |   |        | 
|------------------ |  | -------- | ------- | ---------- |  | - | ------ | 
|                   |  | Purchase |         | FirstCity 
|                   |  | Price    |         | Investment
|                   |  |          |         |           
|First quarter 2003 |  | $        |        |            |  | $ |       | 
|Total 2002         |  |          | 171,769 |            |  |   | 16,717 | 
|Total 2001         |  |          | 224,927 |            |  |   | 24,319 | 
|Total 2000         |  |          | 394,927 |            |  |   | 22,140 | 
|Total 1999         |  |          | 210,799 |            |  |   | 11,203 | 

The following table presents selected information regarding the revenues
and expenses of the Companys Portfolio Asset acquisition and resolution
business:

Analysis of Selected Revenues and Expenses
Portfolio Asset Acquisition and Resolution

|                                                             |                                      |                         |       |        |        |        |       |        |        |        |  
|------------------------------------------------------------ | ------------------------------------ | ----------------------- | ----- | ------ | ------ | ------ | ----- | ------ | ------ | ------ | -
|                                                             |                                      | Three Months Ended     
|                                                             |                                      | March 31,              
|                                                             |                                      |                        
|                                                             |                                      | 2003                    |       | 2002  
|                                                             |                                      |                         |       |       
|Income from Portfolio Assets and Loans Receivable:           |                                      |                         |       |        |        |        |       |       
|Average investment in Portfolio Assets and loans
receivable: |                                      |                         |       |        |        |        |       |       
|                                                             |                                      | Domestic                |       | $      | 9,558  |        |       | $      | 14,656 |       
|                                                             |                                      | Mexico                  |       |        | 15,354 |        |       |        | 19,406 |       
|                                                             |                                      |                         |       |        |        |        |       |       
|                                                             |                                      |                         | Total |        | $      | 24,912 |       |        | $      | 34,062 |  
|                                                             |                                      |                         |       |        |        |        |       |        |        |       
|Income from Portfolio Assets and loans receivable:           |                                      |                         |       |        |        |        |       |       
|                                                             |                                      | Domestic                |       | $      | 913    |        |       | $      | 535    |       
|                                                             |                                      | Mexico                  |       |        | 878    |        |       |        | 986    |       
|                                                             |                                      |                         |       |        |        |        |       |       
|                                                             |                                      |                         | Total |        | $      | 1,791  |       |        | $      | 1,521  |  
|                                                             |                                      |                         |       |        |        |        |       |        |        |       
|                                                             | Average return (annualized):         |                         |       |        |        |        |       |        |       
|                                                             |                                      | Domestic                |       |        | 38.2   | %      |       |        | 14.6   | %     
|                                                             |                                      | Mexico                  |       |        | 22.9   | %      |       |        | 20.3   | %     
|                                                             |                                      |                         | Total |        |        | 28.8   | %     |        |        | 17.9   | %
|Servicing fee revenues:                                      |                                      |                         |       |        |        |        |       |       
|                                                             | Domestic partnerships:               |                         |       |        |        |        |       |        |       
|                                                             |                                      | $ Collected             |       | $      | 24,051 |        |       | $      | 31,824 |       
|                                                             |                                      | Servicing fee revenue   |       |        | 1,041  |        |       |        | 817    |       
|                                                             |                                      | Average servicing fee % |       |        | 4.3    | %      |       |        | 2.6    | %     
|                                                             | Mexico partnerships:                 |                         |       |        |        |        |       |        |       
|                                                             |                                      | $ Collected             |       | $      | 16,512 |        |       | $      | 19,194 |       
|                                                             |                                      | Servicing fee revenue   |       |        | 2,395  |        |       |        | 1,353  |       
|                                                             |                                      | Average servicing fee % |       |        | 14.5   | %      |       |        | 7.0    | %     
|                                                             | Incentive service fees               |                         | $     | 71     |        |        | $     | 52     |       
|                                                             | Total Service Fees:                  |                         |       |        |        |        |       |        |       
|                                                             |                                      | $ Collected             |       | $      | 40,563 |        |       | $      | 51,018 |       
|                                                             |                                      | Servicing fee revenue   |       |        | 3,507  |        |       |        | 2,222  |       
|                                                             |                                      | Average servicing fee % |       |        | 8.6    | %      |       |        | 4.4    | %     
|Personnel:                                                   |                                      |                         |       |        |        |        |       |       
|Personnel expenses                                           |                                      | $                       | 2,842 |        |        | $      | 2,001 |       
|                                                             | Number of personnel (at period end): |                         |       |        |        |        |       |        |       
|                                                             |                                      | Production              |       |        | 25     |        |       |        | 23     |       
|                                                             |                                      | Servicing               |       |        | 194    |        |       |        | 128    |       
|Interest expense:                                            |                                      |                         |       |        |        |        |       |       
|                                                             | Average debt                         |                         | $     | 26,788 |        |        | $     | 37,994 |       
|                                                             | Interest expense                     |                         |       | 686    |        |        |       | 726    |       
|                                                             | Average cost (annualized)            |                         |       | 10.24  | %      |        |       | 7.64   | %     

30



---



##### 



The following table presents selected information regarding the revenues
and expenses of the Acquisition Partnerships:

Analysis of Selected Revenues and Expenses
Acquisition Partnerships

|                                               |                                                           |                      |       |                    |         |      |       |        |        |  
|---------------------------------------------- | --------------------------------------------------------- | -------------------- | ----- | ------------------ | ------- | ---- | ----- | ------ | ------ | -
|                                               |                                                           |                      |       | Three Months Ended
|                                               |                                                           |                      |       | March 31,         
|                                               |                                                           |                      |       |                   
|                                               |                                                           |                      |       | 2003               |         | 2002
|                                               |                                                           |                      |       |                    |         |     
|Revenues:                                      |                                                           |                      |       |                    |         |      |       |       
|                                               | Gain on resolution of Portfolio Assets                    |                      | $     | 20,989             |         |      | $     | 18,776 |       
|                                               | Gross profit percentage on resolution of Portfolio Assets |                      |       | 36.5               | %       |      |       | 44.3   | %     
|                                               | Interest income                                           |                      | $     | 2,145              |         |      | $     | 5,076  |       
|                                               | Other income                                              |                      |       | 515                |         |      |       | 612    |       
|Interest expense(1):                           |                                                           |                      |       |                    |         |      |       |       
|                                               | Interest expense                                          |                      | $     | 14,486             |         |      | $     | 17,175 |       
|                                               | Average cost (annualized)                                 |                      |       | 14.2               | %       |      |       | 15.4   | %     
|Other expenses:                                |                                                           |                      |       |                    |         |      |       |       
|                                               | Service fees                                              |                      |       | 4,474              |         |      |       | 3,584  |       
|                                               | Other operating costs                                     |                      |       | 3,641              |         |      |       | 3,024  |       
|                                               | Foreign currency loss (gain)                              |                      |       | 22,988             |         |      |       | (6,060 | )     
|                                               | Income taxes                                              |                      |       | (902               | )       |      |       | (1,579 | )     
|                                               |                                                           |                      |       |                    |         |      |       |       
|                                               |                                                           | Total other expenses |       |                    | 30,201  |      |       |        | (1,031 | )
|                                               |                                                           |                      |       |                    |         |      |       |       
|                                               |                                                           | Net earnings (loss)  |       | $                  | (21,038 | )    |       | $      | 8,320  |  
|                                               |                                                           |                      |       |                    |         |      |       |        |       
|Equity in earnings of Acquisition Partnerships |                                                           | $                    | 1,014 |                    |         | $    | 2,401 |       
|Equity in earnings of Servicing Entities       |                                                           |                      | 216   |                    |         |      | 419   |       
|                                               |                                                           |                      |       |                    |         |      |       |       
|                                               |                                                           | $                    | 1,230 |                    |         | $    | 2,820 |       
|                                               |                                                           |                      |       |                    |         |      |       |        |       



---



|(1) |  | Interest expense includes interest on loans to the Acquisition
Partnerships located in Mexico from affiliates of the investor groups. The
rates on these loans range from 19% to 20%. The average cost on debt
excluding the Mexican Acquisition Partnerships was 5.6% and 5.9% for the
three months ended March 31, 2003 and 2002, respectively.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Consumer Lending

The following table presents selected information regarding consumer
lending:

Analysis of Selected Data
Consumer Lending

|                                                         |                                     |   |                    |         |      |   |         |         |  
|-------------------------------------------------------- | ----------------------------------- | - | ------------------ | ------- | ---- | - | ------- | ------- | -
|                                                         |                                     |   | Three Months Ended
|                                                         |                                     |   | March 31,         
|                                                         |                                     |   |                   
|                                                         |                                     |   | 2003               |         | 2002
|                                                         |                                     |   |                    |         |     
|Retail installment contracts acquired                    |                                     | $ | 126,118            |         |      | $ | 113,401 |        
|Origination characteristics:                             |                                     |   |                    |         |      |   |         |        
|                                                         | Face value to wholesale value       |   |                    | 98.86   | %    |   |         | 101.27  | %
|                                                         | Weighted average coupon             |   |                    | 20.91   | %    |   |         | 20.97   | %
|                                                         | Purchase discount (% of face value) |   |                    | 17.08   | %    |   |         | 15.75   | %
|Servicing portfolio                                      |                                     |   |                    |         |      |   |         |        
|                                                         | Owned                               |   | $                  | 163,473 |      |   | $       | 183,682 |  
|                                                         | Securitized                         |   |                    | 559,983 |      |   |         | 416,132 |  
|                                                         |                                     |   |                    |         |      |   |         |        
|                                                         | Total                               |   | $                  | 723,456 |      |   | $       | 599,814 |  
|                                                         |                                     |   |                    |         |      |   |         |        
|                                                         | Owned  number of contracts         |   |                    | 14,570  |      |   |         | 15,204  |  
|                                                         | Securitized  number of contracts   |   |                    | 52,233  |      |   |         | 37,739  |  
|                                                         |                                     |   |                    |         |      |   |         |        
|                                                         | Total number of contracts           |   |                    | 66,803  |      |   |         | 52,943  |  
|                                                         |                                     |   |                    |         |      |   |         |        
|Defaults (% of original loan balance at time
of default) |                                     |   | 21.03              | %       |      |   | 17.49   | %      
|Net losses on defaults after recovery                    |                                     |   | 10.83              | %       |      |   | 8.19    | %      
|Delinquencies (% of total serviced portfolio)            |                                     |   | 4.66               | %       |      |   | 4.87    | %      

31



---



##### 



Provision for Income Taxes

The Company has substantial NOLs, which can be used to offset the tax
liability associated with the Companys pre-tax earnings until the earlier of
the expiration or utilization of such NOLs. The Company accounts for the
benefit of the NOLs by recording the benefit as an asset and then establishing
a valuation allowance to value the net deferred tax asset at a level, which
more likely than not, will be realized. Realization is determined based on
managements expectation of generating sufficient taxable income in a look
forward period over the next four years. The ultimate realization of the
resulting net deferred tax asset is dependent upon generating sufficient
taxable income from its continuing operations prior to expiration of the NOLs.
Although realization is not assured, management believes it is more likely than
not that all of the recorded deferred tax asset, net of the allowance, will be
realized. The amount of the deferred tax asset considered realizable, however,
could be adjusted in the future if estimates of future taxable income during
the carryforward period change. The ability of the Company to realize the
deferred tax asset is periodically reviewed and the valuation allowance is
adjusted accordingly.

Liquidity and Capital Resources

Generally, the Company requires liquidity to fund its operations, working
capital, payment of debt, equity for acquisition of Portfolio Assets,
investments in and advances to the Acquisition Partnerships, retirement of and
dividends on preferred stock, and other investments by the Company. The
potential sources of liquidity are funds generated from operations, equity
distributions from the Acquisition Partnerships, interest and principal
payments on subordinated intercompany debt and dividends from the Companys
subsidiaries, short-term borrowings from revolving lines of credit, proceeds
from equity market transactions, securitization and other structured finance
transactions and other special purpose short-term borrowings.

In December 2002, FirstCity completed a recapitalization in which holders
of New Preferred Stock exchanged 1,092,210 shares of New Preferred Stock for
2,417,388 shares of common stock and $10.5 million in cash. As a result, common
equity was increased by $18.9 million. During the first quarter of 2003, 4,400
shares of New Preferred Stock were redeemed for 8,200 shares of common stock
and $50,000 in cash. FirstCity also recorded a $4 million gain from the
release of its guaranty of Drives indebtedness to BoS(USA). BoS(USA)s warrant
to purchase 1,975,000 shares of non-voting common stock was cancelled.
FirstCity also acquired the minority interest in FirstCity Holdings held by
Terry R. DeWitt, G. Stephen Fillip and James C. Holmes, each of whom are Senior
Vice Presidents of FirstCity, by issuing 400,000 shares of common stock of the
Company and a note payable, to be periodically redeemed by the Company for an
aggregate of up to $3.2 million in accordance with certain cash collections
from servicing income from Portfolio asset acquisitions in Mexico.

As a part of the recapitalization, BoS(USA) provided a non-recourse loan
in the amount of $16 million to FirstCity which was used to pay the cash
portion of the exchange offer to the holders of the New Preferred Stock, to pay
expenses of the exchange offer and recapitalization, and to reduce FirstCitys
debt to the Senior Lenders. The $16 million loan is secured by a 20% interest
in Drive (64.51% of FirstCitys remaining 31% interest in Drive) and other
assets of Consumer Corp. In connection with the $16 million loan, FirstCity is
obligated to pay an arrangement fee to BoS(USA) equal to 20% of all amounts
received by FirstCity in excess of $16 million from any sale or other
disposition of FirstCitys 20% interest in Drive and all dividends and other
distributions paid by Drive or its general partner on FirstCitys 20% interest
in Drive. Management of the Company believes the value of FirstCitys 20%
ownership interest of Drive does not exceed $16 million as of March 31, 2003.

In connection with the recapitalization, FirstCity and the Senior Lenders
entered into a loan agreement that refinanced the Companys existing debt with
the Senior Lenders ($47 million outstanding at March 31, 2003). The Senior
Lenders also provided new financing to FirstCity, with a total commitment of up
to $59 million, consisting of (a) a $5 million
revolving credit loan ($.5 million outstanding at March 31, 2003) and (b) an acquisition term loan in an
amount up to $54 million (unfunded at March 31, 2003). The aggregate amount of
outstanding loans under the total commitment by the Senior Lenders for the
refinancing and the new financing at any time may not exceed $77 million.

BoS(USA) has a warrant to purchase 425,000 shares of the Companys voting
Common Stock at $2.3125 per share. BoS(USA) is entitled to additional warrants
in connection with this existing warrant for 425,000 shares to retain its
ability to acquire approximately 4.86% of the Companys voting Common Stock.

Currently, the Company has approximately 126,291 shares of New Preferred
Stock outstanding with accrued and unpaid dividends of approximately $1.0
million. The Companys loan agreement with the Senior Lenders restricts the
payment of dividends on these

32



---



##### 



shares until it is repaid in full. Given the continued high debt levels of
the Company, and managements priority of assuring adequate levels of
liquidity, the Company does not anticipate that dividends on shares of New
Preferred Stock will be paid in the foreseeable future.

FirstCity has a $35 million loan facility with CFSC Capital Corp. XXX, a
subsidiary of Cargill. This facility is being used exclusively to provide
equity in new Portfolio acquisitions in partnerships with Cargill and its
affiliates and matures in March 2005. At March 31, 2003, approximately $21
million was outstanding under this facility.

Drive has a warehouse line of credit with BoS(USA), which provides
borrowings up to $250 million (increased from $200 million in February 2003).
Drives obligation under this arrangement at March 31, 2003 was $137 million.
The debt is secured by Drives retail installment contracts and has been
extended to February 2004.

Drive also has a warehouse line of credit agreement with Variable Funding
Capital Corporation, a subsidiary of First Union National Bank, which provides
borrowings up to $100 million. Drives obligation under the arrangement at
March 31, 2003 was zero. The debt will be secured by Drives retail installment
contracts and terminates September 2003.

The Company and each of its major operating subsidiaries have entered into
one or more credit facilities to finance their respective operations. Each of
the operating subsidiary credit facilities is nonrecourse to the Company. The
Company has agreed to indemnify BoS(USA) for up to 31% of losses, which might
arise as a result of agreements BoS(USA) executed as a sponsor in connection
with the securitizations completed by Drive. The Company also agreed to provide
support in connection with securitizations by Consumer Corp. and Drive prior to
the acquisition by BoS(USA) of the interest in Drive in August 2000.
Management of the Company currently does not believe it is likely
that FirstCity will be required to make payments on these
indemnification agreements.

Excluding the term acquisition facilities of the unconsolidated
Acquisition Partnerships and the term and warehouse facilities of Drive, as of
March 31, 2003, the Company and its subsidiaries had credit facilities
providing for borrowings in an aggregate principal amount of $131 million and
outstanding borrowings of $90 million.

Management believes that the BoS(USA) loan facilities, along with the
liquidity from the Cargill Facility, the related fees generated from the
servicing of assets, equity distributions from existing Acquisition
Partnerships and wholly owned portfolios, as well as sales of interests in
equity investments, will allow the Company to meet its obligations as they come
due during the next twelve months.

33



---



##### 



The following table summarizes the material terms of the credit facilities
to which the Company, its major operating subsidiaries and the Acquisition
Partnerships were parties to as of May 8, 2003 and the outstanding borrowings
under such facilities as of March 31, 2003.

Credit Facilities

|                           |                          |             |    |              |     |             |    |               |    |                                          |                |                                                                                                |                                                             |                                                             |  |  |  | 
|-------------------------- | ------------------------ | ----------- | -- | ------------ | --- | ----------- | -- | ------------- | -- | ---------------------------------------- | -------------- | ---------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | ----------------------------------------------------------- |  |  |  | 
|                           |                          |             |    | Funded and   |     |             |    |               |    |                                          |                |                                                                                                |                                                             |                                                             |  | 
|                           |                          |             |    | Unfunded     |     | Outstanding |    |               |    |                                          |                |                                                                                                |                                                             |                                                            
|                           |                          |             |    | Commitment   |     | Borrowings  |    |               |    |                                          |                |                                                                                                |                                                             |                                                            
|                           |                          |             |    | Amount as of |     | as of       |    |               |    |                                          |                |                                                                                                |                                                             |                                                            
|                           |                          |             |    | May 8,       |     | March 31,   |    |               |    |                                          |                | Other Terms                                                                                   
|                           |                          |             |    | 2003         |     | 2003        |    | Interest Rate |    | and Conditions                          
|                           |                          |             |    |              |     |             |    |               |    |                                         
|                           |                          |             |    |              |     |             |    |               |    |                                          |                | (Dollars in millions)                                                                          |                                                             |                                                             |  | 
|FirstCity                  |                          |             |    |              |     |             |    |               |    |                                          |                |                                                                                                |                                                             |                                                             |  | 
|Company Senior Facility:   |                          |             |    |              |     |             |    |               |    |                                          |                |                                                                                                |                                                             |                                                             |  | 
|                           | Revolving Line of Credit |             | $  | 5            |     |             | $  | 1             |    |                                          | LIBOR + 2.75%  |                                                                                                | Secured by the assets of the Company, matures December 2003
|                           | Portfolio Acquisition    |             |    |              |     |             |    |               |    |                                          |                |                                                                                                |                                                             |                                                             |  |  | 
|                           |                          | Loan (Term) |    |              | 24  |             |    |               |   |                                          |                | LIBOR + 2.75%                                                                                  |                                                             | Secured by the assets of the Company, matures November 2006
|                           | Tranche I (Term)         |             |    | 35           |     |             |    | 35            |    |                                          | Prime + 2.5%   |                                                                                                | Secured by the assets of the Company, matures December 2006
|                           | Tranche II (Term)        |             |    | 12           |     |             |    | 12            |    |                                          | Fixed at 8.77% |                                                                                                | Secured by the assets of the Company, matures December 2007
|Term credit facility       |                          |             | 2  |              |     |             | 2  |               |    | LIBOR + 5.0%                             |                | Secured by ownership interests in certain Acquisition partnerships Matures June 2003          
|Commercial Corp.           |                          |             |    |              |     |             |    |               |    |                                          |                |                                                                                                |                                                             |                                                             |  | 
|Acquisition term facility  |                          |             | 1  |              |     |             | 1  |               |    | LIBOR + 5.0%                             |                | Secured by existing Portfolio Assets, matures June 2003                                       
|Term facility              |                          |             |   |              |     |             | 1  |               |    | Fixed at 10.0%                           |                | Secured by Portfolio Assets, paid-off in May 2003                                             
|Equity investment facility |                          |             | 35 |              |     |             | 21 |               |    | Maximum of Fixed at 8.5% or LIBOR + 4.5% |                | Acquisition facility for the investment in future Acquisition partnerships, Matures March 2005
|Unsecured loans            |                          |             | 1  |              |     |             | 1  |               |    | Fixed at 4.5% to 7.0%                    |                |                                                                                                |                                                             |                                                            
|Consumer Corp.             |                          |             |    |              |     |             |    |               |    |                                          |                |                                                                                                |                                                             |                                                             |  | 
|Term loan                  |                          |             | 16 |              |     |             | 16 |               |    | LIBOR + 1.0%                             |                | Secured by equity interest in Drive, matures December 2007, Non-recourse                      
|                           |                          |             |    |              |     |             |    |               |    |                                          |                |                                                                                                |                                                             |                                                             |  | 
|                           |                          | Total       |    | $            | 131 |             |    | $             | 90 |                                          |                |                                                                                                |                                                             |                                                             |  |  |  | 
|                           |                          |             |    |              |     |             |    |               |    |                                          |                |                                                                                                |                                                             |                                                             |  | 

34



---



##### 



|                                                           |  |   |              |  |             |   |               |  |                |                                                                          |             |                                                                                    |  |  |  |  | 
|---------------------------------------------------------- |  | - | ------------ |  | ----------- | - | ------------- |  | -------------- | ------------------------------------------------------------------------ | ----------- | ---------------------------------------------------------------------------------- |  |  |  |  | 
|                                                           |  |   | Funded and   |  |             |   |               |  |                |                                                                          |             |                                                                                    |  |  | 
|                                                           |  |   | Unfunded     |  | Outstanding |   |               |  |                |                                                                          |             |                                                                                    | 
|                                                           |  |   | Commitment   |  | Borrowings  |   |               |  |                |                                                                          |             |                                                                                    | 
|                                                           |  |   | Amount as of |  | as of       |   |               |  |                |                                                                          |             |                                                                                    | 
|                                                           |  |   | May 8,       |  | March 31,   |   |               |  |                |                                                                          | Other Terms
|                                                           |  |   | 2003         |  | 2003        |   | Interest Rate |  | and Conditions
|                                                           |  |   |              |  |             |   |               |  |               
|Unconsolidated
Acquisition Partnerships term Facilities(1) |  | $ | 135          |  |             | $ | 135           |  |                | Various rates                                                            |             | Secured by Portfolio Assets, various Maturities                                   
|                                                           |  |   |              |  |             |   |               |  |                |                                                                          |             |                                                                                    |  |  |  | 
|Unconsolidated
Drive                                       |  |   |              |  |             |   |               |  |                |                                                                          |             |                                                                                    |  |  |  | 
|Warehouse Facility                                         |  | $ | 250          |  |             | $ | 137           |  |                | LIBOR + 1%; Prime   1.5%                                                |             | Secured by warehouse inventory, matures February 2004                             
|Warehouse Facility                                         |  |   | 100          |  |             |   |              |  |                | Rate based on Commercial paper rates combined with Certain facility fees |             | Secured by warehouse inventory, matures September 2003                            
|Bonds payable                                              |  |   | 308          |  |             |   | 308           |  |                | Fixed at 1.33% To 4.09%                                                  |             | Secured by retail installment Contracts, various maturities Through September 2008
|Subordinate capital Facility                               |  |   | 65           |  |             |   | 54            |  |                | Fixed at 16%                                                             |             | Secured by all assets of Drive, matures February 2006                             
|Term Facility                                              |  |   | 12           |  |             |   | 12            |  |                | LIBOR + 1%;                                                              |             | Secured by residual interests, matures August 2003                                
|                                                           |  |   |              |  |             |   |               |  |                |                                                                          |             |                                                                                    |  |  |  | 
|                                                           |  | $ | 735          |  |             | $ | 511           |  |                |                                                                          |             |                                                                                    |  |  |  | 
|                                                           |  |   |              |  |             |   |               |  |                |                                                                          |             |                                                                                    |  |  |  | 



---



|(1) |  | In addition to the term acquisition facilities of the unconsolidated
Acquisition Partnerships, the Mexican Acquisition Partnerships also have
term debt of approximately $266 million outstanding as of March 31, 2003
owed to affiliates of the investor groups. Of this amount, the Company has
recorded approximately $14 million as Loans Receivable on the Consolidated
Balance Sheets.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

35



---



##### 



Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q or
incorporated by reference from time to time, including, but not limited to,
statements relating to the Companys strategic objectives and future
performance, which are not historical facts, may be deemed to be
forward-looking statements under the Private Securities Litigation Reform Act
of 1995. Forward-looking statements include, without limitation, any statement
that may project, indicate or imply future results, performance or
achievements, and may contain the words expect, intend, plan, estimate,
believe, will be, will continue, will likely result, and similar
expressions. Such statements inherently are subject to a variety of risks and
uncertainties that could cause actual results to differ materially from those
projected. There are many important factors that could cause the Companys
actual results to differ materially from those indicated in the forward-looking
statements. Such factors include, but are not limited to, the
performance of the Company's subsidiaries and affiliates; the
availability of Portfolio Assets; assumptions underlying Portfolio
asset performance; risks associated with foreign operations; currency
exchange rate fluctuations; interest rate risk; the degree to which
the Company is leveraged; FirstCity's continued need for financing;
availability of the Company's credit facilities; the impact of
certain covenants in loan agreements of FirstCity and its
subsidiaries; risks of declining value of loans, collateral or
assets; the ability of the Company to utilize NOLs; uncertainties of
any litigation that might arise from discontinued operations; general
economic conditions; foreign social and economic conditions; changes
(legislative and otherwise) in the asset securitization industry;
fluctuations in residential and commercial real estate values;
capital market conditions, including the markets for asset backed
securities;
factors more fully discussed and identified in the Companys Annual Report on
Form 10-K, filed April 15, 2003 (including those discussed under Item 7.
Managements Discussion and Analysis of Financial Condition and Results of
Operations), as well as in other Securities and Exchange Commission filings of
the Company. Many of these factors are beyond the Companys control. In
addition, it should be noted that past financial and operational performance of
the Company is not necessarily indicative of future financial and operational
performance. Given these risks and uncertainties, investors should not place
undue reliance on forward-looking statements. The forward-looking statements in
this Form 10-Q speak only as of the date of this Form 10-Q. The Company
expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statement to reflect any change in
the Companys expectations with regard thereto or any change in events,
conditions or circumstances on which any forward-looking statement is based.




Item 3.Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss from adverse changes in market prices and
interest rates. The Companys operations are materially impacted by net gains
on sales of loans and net interest margins. The level of gains from loan sales
the Company achieves is dependent on demand for the products originated. Net
interest margins are dependent on the Company ability to maintain the spread or
interest differential between the interest it charges the customer for loans
and the interest the Company is charged for the financing of those loans. The
following describes each component of interest bearing assets held by the
Company and how each could be affected by changes in interest rates.

The Company invests in Portfolio Assets both directly through consolidated
subsidiaries and indirectly through equity investments in Acquisition
Partnerships. Portfolio Assets consist of investments in pools of
non-homogenous assets that predominantly consist of loan and real estate
assets. Earnings from these assets are based on the estimated future cash flows
from such assets and recorded when those cash flows occur. The underlying loans
within these pools bear both fixed and variable rates. Due to the
non-performing nature and history of these loans, changes in prevailing
benchmark rates (such as the prime rate or LIBOR) generally have a nominal
effect on the ultimate future cash flow to be realized from the loan assets.
Furthermore, these pools of assets are held for sale, not for investment;
therefore, the disposition strategy is to liquidate these assets as quickly as
possible.

Loans receivable consist of investment loans made to Acquisition
Partnerships located in Mexico and bear interest at predominately fixed rates.
The collectibility of these loans is directly related to the underlying
Portfolio Assets of those Acquisition Partnerships, which are non-performing in
nature. Therefore, changes in benchmark rates would have minimal effect on the
collectibility of these loans.

The Companys equity investment in Drive is materially impacted by net
interest margins and the ability to securitize the loans Drive originates.
During 2002, Drive elected not to use gain on sale treatment when assets were
securitized. Instead, Drive pursued a strategy to grow the balance sheet and
record interest income from loans and interest expense on the related debt as
incurred to build an earnings stream over time. Demand from potential investors
in Drives securitizations is affected by the perception of credit quality and
prepayment risk associated with the loans Drive originates and securitizes. The
timing and size and interest rates of the bonds issued as a part of the
securitizations could also have a material effect on the net income of Drive.
Interest rates offered to customers

36



---



##### 



also affect prices paid for loans. These rates are determined by review of
competitors rate offerings to the public and current prices being paid to
Drive for the products. Drive does not hedge these price risks.

Drives residual interests in securitizations represent the present value
of the excess cash flows Drive expects to receive over the life of the
underlying sub-prime automobile loans. The sub-prime automobile residual
interests are affected less by prepayment speeds due to the shorter term of the
underlying assets and the fact that the loans are fixed rate, generally at the
highest rate allowable by law.

In summary, the Company would be negatively impacted by rising interest
rates and declining prices of its sub-prime loans. Rising interest rates would
negatively impact the value of residual interests in securitizations currently
held and costs of borrowings under the warehouse lines and new secured
financings. Declining prices of the Companys sub-prime loans would adversely
affect the levels of gains achieved in the event Drive elects to sell those
loans. The Company has not entered into any instruments to minimize this market
risk of adverse changes in interest rates or declining prices. There have been
no material changes in the quantitative and qualitative risks of the Company
since December 31, 2002.

The Company currently has investments in Mexico and France. In France, the
Companys investments are in the form of equity and represent a significant
portion of the Companys total equity investments. As of March 31, 2003, one
U.S. dollar equaled .93 Euros as compared to .95 at December 31, 2002. A sharp
change of the Euro relative to the U.S. dollar could materially adversely
affect the consolidated financial position and results of operations of the Company. The
Company has not entered into any instruments to minimize this market risk of
adverse changes in currency rates.

In Mexico, approximately 95% of the Companys investments in Mexico are
made through U.S. dollar denominated loans to the Partnerships located in
Mexico. The remaining investment is in the form of equity in these same
Partnerships. The loans receivable are required to be repaid in U.S. dollars.
Although the U.S. dollar balance of these loans will not change due to a change
in the Mexican peso, the future estimated cash flows of the underlying assets
in Mexico could become less valuable as a result of a change in the exchange
rate for the Mexican peso, and thus could affect the overall total returns to
the Company on these investments. As of March 31, 2003, one U.S. dollar equaled
10.77 Mexican pesos as compared to 10.31 at December 31, 2002.




Item 4.Controls and Procedures

The Company maintains controls and procedures designed to ensure that
information required to be disclosed in the reports that the Company files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the rules and
forms of the Securities and Exchange Commission. Based upon their evaluation of
those controls and procedures performed within 90 days of the filing date of
this report, the chief executive officer and the chief financial officer of the
Company concluded that the Companys disclosure controls and procedures were
effective as of that date.

The Company made no significant changes in its internal controls or in
other factors that could significantly affect these controls subsequent to the
date of the evaluation of those controls by the chief executive officer and
chief financial officer.




PART II

OTHER INFORMATION




Item 1.Legal Proceedings

FirstCity was not involved in any material legal proceedings as of March
31, 2003.




Item 2.Changes in Securities and Use of Proceeds

None




Item 3.Defaults Upon Senior Securities

In the first quarter of 1999, dividends on the Companys adjusting rate
preferred stock were suspended. At March 31, 2003, accumulated dividends in
arrears on such preferred stock totaled $1.0 million, or $7.87 per share.




Item 4.Submission of Matters to a Vote of Security Holders

None

37



---



##### 






Item 5.Other Information

None




Item 6.Exhibits and Reports on Form 8-K

(a)  Exhibits.

|        |      |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- | ---- |  |  | ---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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  |  |  |                       |  | Bylaws of the Company (incorporated herein by reference to
Exhibit 3.2 of the Companys Current Report on Form 8-K
dated July 3, 1995 filed with the Commission on July 18,
1995).                                                                                                                                                                                                                                                                             
|        |      |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 4.1  |  |  |                       |  | Certificate of Designations of the New Preferred Stock
($0.01 par value) of the Company. (incorporated herein by
reference to Exhibit 4.1 to the Companys Current Report on
Form 10-K dated March 24, 1998 filed with the Commission on
March 26, 1998).                                                                                                                                                                                                      
|        |      |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 9.1  |  |  |                       |  | Shareholder Voting Agreement, dated as of June 29, 1995,
among ATARA I Ltd., James R. Hawkins, James T. Sartain and
Cargill Financial Services Corporation. (incorporated herein
by reference to Exhibit 9.1 of the Companys Form 10-K dated
March 24, 1998 filed with the Commission on March 26, 1998).                                                                                                                                                     
|        |      |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10.1 |  |  |                       |  | Note Agreement, dated as of June 6, 1997, among Bosque Asset
Corp., SVD Realty, L.P., SOWAMCO XXII, LTD., Bosque
Investment Realty Partners, L.P. and Bankers Trust Company
of California, N.A. (incorporated herein by reference to
Exhibit 10.14 of the Companys Form 10-K dated March 24,
1998 filed with the Commission March 26, 1998).                                                                                                                  
|        |      |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10.2 |  |  |                       |  | Loan Agreement, dated April 8, 1998 between Bank of Scotland
and the Company (incorporated herein by reference to Exhibit
10.6 of the Companys Form 10-Q dated August 14, 1998, filed
with the Commission on August 18, 1998)                                                                                                                                                                                                                                 

38



---



##### 



|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                     
|------- | ----- |  |  | ---------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |  |                       
|Number  |       |  |  | Description of Exhibit
|        |       |  |  |                       
|        | 10.3  |  |  |                       |  | First Amendment to Loan Agreement, dated July 20, 1998,
between Bank of Scotland and the Company (incorporated
herein by reference to Exhibit 10.7 of the Companys Form
10-Q dated August 14, 1998, filed with the Commission on
August 18, 1998).                                                                                                 
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                     
|        | 10.4  |  |  |                       |  | Tenth Amendment to Loan Agreement, dated August 11, 1999
between Bank of Scotland and the Company (incorporated
herein by reference to Exhibit 10.34 of the Companys Form
10-Q dated August 16, 1999, filed with the Commission on
August 16, 1999).                                                                                               
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                     
|        | 10.5  |  |  |                       |  | Amended and Restated Loan Agreement, dated December 20,
1999, by and 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 22,
1999, filed with the Commission on December 28, 1999).
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                     
|        | 10.6  |  |  |                       |  | Securities Purchase Agreement, dated as of August 18, 2000,
by and among the Company, Consumer Corp., Funding LP,
Funding GP, IFA-GP and IFA-LP. (incorporated herein by
reference to Exhibit 10.40 of the Companys Form 8-K dated
August 25, 2000, filed with the Commission on September 11,
2000).                                              
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                     
|        | 10.7  |  |  |                       |  | Contribution and Assumption Agreement by and between
Consumer Corp. and Drive dated as of August 18, 2000.
(incorporated herein by reference to Exhibit 10.41 of the
Companys Form 8-K dated August 25, 2000, filed with the
Commission on September 11, 2000).                                                                                    
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                     
|        | 10.8  |  |  |                       |  | 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).                                                                                        
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                     
|        | 10.9  |  |  |                       |  | Second Amendment to Amended and Restated Loan Agreement,
dated December 20, 1999, by and among the Company, as
borrower, and the Lenders, as lenders, and Bank of Scotland,
as Agent. (incorporated herein by reference to Exhibit 10.43
of the Companys Form 8-K dated August 25, 2000, filed with
the Commission on September 11, 2000).         
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                     
|        | 10.10 |  |  |                       |  | Receivables Financing Agreement, dated August 18, 2000,
among Drive BOS LP, Drive Financial Services LP, each
Lender, IFA Inc. and Wells Fargo Bank Minnesota, N.A.
(incorporated herein by reference to Exhibit 10.44 of the
Companys Form 10-K dated April 13, 2001, filed with the
Commission on April 13, 2001).                               
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                     
|        | 10.11 |  |  |                       |  | Amendment to Loan Agreement and extension of Promissory
Note, dated January 12, 2001, by and between FirstCity
Holdings Corporation and CSFC Capital Corp. XXX
(incorporated herein by reference to Exhibit 10.45 of the
Companys Form 10-K dated April 13, 2001, filed with the
Commission on April 13, 2001).                                    

39



---



##### 



|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | ----- |  |  | ---------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |  |                       
|Number  |       |  |  | Description of Exhibit
|        |       |  |  |                       
|        | 10.12 |  |  |                       |  | Second Amendment, dated as of February 16, 2001, to the
Receivables Financing Agreement, dated as of August 18,
2000, among Drive BOS LP, Drive Financial Services LP the
Lenders party thereto, IPA Incorporated and Wells Fargo Bank
Minnesota, NA (incorporated herein by reference to Exhibit
10.46 of the Companys Form 10-K dated April 13, 2001, filed
with the Commission on April 13, 2001).                                                                  
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10.13 |  |  |                       |  | Subordinate Capital Loan Agreement, dated as of February 16,
2001, among Drive Financial Services LP, DRIVE BOS LP, the
financial institutions from time to time party hereto and
IFA Incorporated (incorporated herein by reference to
Exhibit 10.47 of the Companys Form 10-K dated April 13,
2001, filed with the Commission on April 13, 2001).                                                                                                                    
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10.14 |  |  |                       |  | Amended and Restated Amendment #4 (Option and Option
Warrant), dated as of December 31, 2001, between the Company
and BoS(USA) Inc. (incorporated herein by reference to
Exhibit 99.1 of the Companys Form 8-K dated January 18,
2002, filed with the Commission on January 18, 2002).                                                                                                                                                                                 
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10.15 |  |  |                       |  | Letter Agreement, dated November 26, 2002, between FirstCity
Consumer Lending Corporation and The Governor and Company of
the Bank of Scotland, including Form of Promissory Note to
be executed by FirstCity Consumer Lending Corporation,
payable to The Governor and Company of the Bank of Scotland.
(incorporated herein by reference to Exhibit 99(d)(5) of the
Companys Form SC TO-I/A dated November 27, 2002, filed with
the Commission on November 27, 2002).
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10.16 |  |  |                       |  | Amended and Restated Loan Agreement, dated December 12,
2002, by and 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 10.16 of the Companys Form 10-K dated March 28,
2003, filed with the Commission on April 15, 2003).                                                                                                                       
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10.17 |  |  |                       |  | Term Loan and Revolving Credit Agreement, dated December 12,
2002, by and 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 10.17 of the Companys Form 10-K dated March 28,
2003, filed with the Commission on April 15, 2003).                                                                                                                  
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 99.1  |  |  |                       |  | Certification of James T. Sartain, Chief Executive Officer
of the Company, pursuant to 18 U.S.C Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                      
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 99.2  |  |  |                       |  | Certification of J. Bryan Baker, Chief Financial Officer of
the Company, pursuant to 18 U.S.C Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                        

(b)  Reports on Form 8-K.

No report on Form 8-K was filed by the Registrant with the Securities and
Exchange Commission during the quarterly period ended March 31, 2003.

40



---



##### 






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: | /s/ JAMES T. SARTAIN
James T. SartainPresident and Chief Executive
Officer and Director
(Duly authorized officer of the
Registrant)

| |     |                                                                                                                                                                              
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | By: | /s/ J. BRYAN BAKER
J. Bryan BakerSenior Vice President and Chief
Financial Officer
(Duly authorized officer and
principal financial and accounting
officer of the Registrant)

Dated: May 15, 2003

41



---



##### 






CERTIFICATIONS

I, James T. Sartain, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of FirstCity
Financial Corporation;

2.     Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;



| |                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and



| |                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and



| |                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

| |     |                                                                 
| | --- | ----------------------------------------------------------------
| | By: | /s/ JAMES T. SARTAIN
James T. SartainPrincipal Executive Officer

Dated: May 15, 2003

42



---



##### 



CERTIFICATIONS

I, J. Bryan Baker, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of FirstCity
Financial Corporation;

2.     Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;



| |                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and



| |                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and



| |                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

| |     |                                                              
| | --- | -------------------------------------------------------------
| | By: | /s/ J. BRYAN BAKER

J. Bryan BakerPrincipal Financial Officer

Dated: May 15, 2003

43



---



##### 






INDEX TO EXHIBITS

|        |      |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- | ---- |  |  | ---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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  |  |  |                       |  | Bylaws of the Company (incorporated herein by reference to
Exhibit 3.2 of the Companys Current Report on Form 8-K
dated July 3, 1995 filed with the Commission on July 18,
1995).                                                                                                                                                                                                                                                                             
|        |      |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 4.1  |  |  |                       |  | Certificate of Designations of the New Preferred Stock
($0.01 par value) of the Company. (incorporated herein by
reference to Exhibit 4.1 to the Companys Current Report on
Form 10-K dated March 24, 1998 filed with the Commission on
March 26, 1998).                                                                                                                                                                                                      
|        |      |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 9.1  |  |  |                       |  | Shareholder Voting Agreement, dated as of June 29, 1995,
among ATARA I Ltd., James R. Hawkins, James T. Sartain and
Cargill Financial Services Corporation. (incorporated herein
by reference to Exhibit 9.1 of the Companys Form 10-K dated
March 24, 1998 filed with the Commission on March 26, 1998).                                                                                                                                                     
|        |      |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10.1 |  |  |                       |  | Note Agreement, dated as of June 6, 1997, among Bosque Asset
Corp., SVD Realty, L.P., SOWAMCO XXII, LTD., Bosque
Investment Realty Partners, L.P. and Bankers Trust Company
of California, N.A. (incorporated herein by reference to
Exhibit 10.14 of the Companys Form 10-K dated March 24,
1998 filed with the Commission March 26, 1998).                                                                                                                  
|        |      |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10.2 |  |  |                       |  | Loan Agreement, dated April 8, 1998 between Bank of Scotland
and the Company (incorporated herein by reference to Exhibit
10.6 of the Companys Form 10-Q dated August 14, 1998, filed
with the Commission on August 18, 1998)                                                                                                                                                                                                                                 
|        |      |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10.3 |  |  |                       |  | First Amendment to Loan Agreement, dated July 20, 1998,
between Bank of Scotland and the Company (incorporated
herein by reference to Exhibit 10.7 of the Companys Form
10-Q dated August 14, 1998, filed with the Commission on
August 18, 1998).                                                                                                                                                                                                            

44



---



##### 



|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                               
|------- | ----- |  |  | ---------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |  |                       
|Number  |       |  |  | Description of Exhibit
|        |       |  |  |                       
|        | 10.4  |  |  |                       |  | Tenth Amendment to Loan Agreement, dated August 11, 1999
between Bank of Scotland and the Company (incorporated
herein by reference to Exhibit 10.34 of the Companys Form
10-Q dated August 16, 1999, filed with the Commission on
August 16, 1999).                                                                                                         
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                               
|        | 10.5  |  |  |                       |  | Amended and Restated Loan Agreement, dated December 20,
1999, by and 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 22,
1999, filed with the Commission on December 28, 1999).          
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                               
|        | 10.6  |  |  |                       |  | Securities Purchase Agreement, dated as of August 18, 2000,
by and among the Company, Consumer Corp., Funding LP,
Funding GP, IFA-GP and IFA-LP. (incorporated herein by
reference to Exhibit 10.40 of the Companys Form 8-K dated
August 25, 2000, filed with the Commission on September 11,
2000).                                                        
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                               
|        | 10.7  |  |  |                       |  | Contribution and Assumption Agreement by and between
Consumer Corp. and Drive dated as of August 18, 2000.
(incorporated herein by reference to Exhibit 10.41 of the
Companys Form 8-K dated August 25, 2000, filed with the
Commission on September 11, 2000).                                                                                              
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                               
|        | 10.8  |  |  |                       |  | 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).                                                                                                  
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                               
|        | 10.9  |  |  |                       |  | Second Amendment to Amended and Restated Loan Agreement,
dated December 20, 1999, by and among the Company, as
borrower, and the Lenders, as lenders, and Bank of Scotland,
as Agent. (incorporated herein by reference to Exhibit 10.43
of the Companys Form 8-K dated August 25, 2000, filed with
the Commission on September 11, 2000).                   
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                               
|        | 10.10 |  |  |                       |  | Receivables Financing Agreement, dated August 18, 2000
among Drive BOS LP, Drive Financial Services LP, each
Lender, IFA Inc. and Wells Fargo Bank Minnesota, N.A.
(incorporated herein by reference to Exhibit 10.44 of the
Companys Form 10-K dated April 13, 2001, filed with the
Commission on April 13, 2001).                                          
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                               
|        | 10.11 |  |  |                       |  | Amendment to Loan Agreement and extension of Promissory
Note, dated January 12, 2001, by and between FirstCity
Holdings Corporation and CSFC Capital Corp. XXX
(incorporated herein by reference to Exhibit 10.45 of the
Companys Form 10-K dated April 13, 2001, filed with the
Commission on April 13, 2001).                                              
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                               
|        | 10.12 |  |  |                       |  | Second Amendment, dated as of February 16, 2001, to the
Receivables Financing Agreement, dated as of August 18,
2000, among Drive BOS LP, Drive Financial Services LP the
Lenders party thereto, IPA Incorporated and Wells Fargo Bank
Minnesota, NA (incorporated herein by reference to Exhibit
10.46 of the Companys Form 10-K dated April 13, 2001, filed

45



---



##### 



|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | ----- |  |  | ---------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |  |                       
|Number  |       |  |  | Description of Exhibit
|        |       |  |  |                       
|        |       |  |  |                        |  | with the Commission on April 13, 2001).                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10.13 |  |  |                       |  | Subordinate Capital Loan Agreement, dated as of February 16,
2001, among Drive Financial Services LP, DRIVE BOS LP, the
financial institutions from time to time party hereto and
IFA Incorporated (incorporated herein by reference to
Exhibit 10.47 of the Companys Form 10-K dated April 13,
2001, filed with the Commission on April 13, 2001).                                                                                                                    
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10.14 |  |  |                       |  | Amended and Restated Amendment #4 (Option and Option
Warrant), dated as of December 31, 2001, between the Company
and BoS(USA) Inc. (incorporated herein by reference to
Exhibit 99.1 of the Companys Form 8-K dated January 18,
2002, filed with the Commission on January 18, 2002).                                                                                                                                                                                 
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10.15 |  |  |                       |  | Letter Agreement, dated November 26, 2002, between FirstCity
Consumer Lending Corporation and The Governor and Company of
the Bank of Scotland, including Form of Promissory Note to
be executed by FirstCity Consumer Lending Corporation,
payable to The Governor and Company of the Bank of Scotland.
(incorporated herein by reference to Exhibit 99(d)(5) of the
Companys Form SC TO-I/A dated November 27, 2002, filed with
the Commission on November 27, 2002).
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10.16 |  |  |                       |  | Amended and Restated Loan Agreement, dated December 12,
2002, by and 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 10.16 of the Companys Form 10-K dated March 28,
2003, filed with the Commission on April 15, 2003).                                                                                                                       
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10.17 |  |  |                       |  | Term Loan and Revolving Credit Agreement, dated December 12,
2002, by and 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 10.17 of the Companys Form 10-K dated March 28,
2003, filed with the Commission on April 15, 2003).                                                                                                                  
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 99.1  |  |  |                       |  | Certification of James T. Sartain, Chief Executive Officer
of the Company, pursuant to 18 U.S.C Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                      
|        |       |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 99.2  |  |  |                       |  | Certification of J. Bryan Baker, Chief Financial Officer of
the Company, pursuant to 18 U.S.C Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                        

46