<PAGE>   1
 
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                       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, 1999 OR
 
      [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
 
                         COMMISSION FILE NUMBER 0-26500
 
                        FIRSTCITY FINANCIAL CORPORATION
             (Exact Name of Registrant as Specified in Its Charter)
 
<TABLE>
<S>                                            <C>
                   DELAWARE                                      76-0243729
       (State or Other Jurisdiction of                        (I.R.S. Employer
        Incorporation or Organization)                      Identification No.)
 
        6400 IMPERIAL DRIVE, WACO, TX                              76712
   (Address of Principal Executive Offices)                      (Zip Code)
</TABLE>
 
                                 (254) 751-1750
              (Registrant's Telephone Number, Including Area Code)
 
     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 has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.  Yes  [X]  No  [ ]
 
     The number of shares of common stock, par value $.01 per share, outstanding
at May 14, 1999 was 8,299,252.
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2
 
                                     PART I
 
                             FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS
 
                FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (UNAUDITED)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                MARCH 31,        DECEMBER 31,
                                                                   1999              1998
                                                              --------------   -----------------
<S>                                                           <C>              <C>
Cash and cash equivalents...................................    $   20,022        $   13,677
Portfolio Assets, net.......................................        56,399            69,717
Loans receivable, net.......................................        84,215            46,187
Mortgage loans held for sale................................     1,028,934         1,207,679
Residual interests in securitizations.......................        64,585            65,242
Equity investments in and advances to Acquisition
  Partnerships..............................................        40,261            41,466
Mortgage servicing rights, net..............................        47,436            91,440
Receivable for servicing advances and accrued interest......       112,203            58,977
Deferred tax benefit, net...................................        32,113            32,162
Other assets, net...........................................        24,900            37,430
                                                                ----------        ----------
          Total Assets......................................    $1,511,068        $1,663,977
                                                                ==========        ==========
 
                LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY
 
Liabilities:
  Notes payable.............................................    $1,286,616        $1,462,231
  Other liabilities.........................................        63,671            38,472
                                                                ----------        ----------
          Total Liabilities.................................     1,350,287         1,500,703
Commitments and contingencies...............................            --                --
Redeemable preferred stock:
  Adjusting rate preferred stock, including dividends of
     $642 (redemption value of $21 per share; 2,000,000
     shares authorized; 1,222,701 shares issued and
     outstanding)...........................................        26,319            26,319
Shareholders' equity:
  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; issued and outstanding: 8,299,252 and
     8,287,959 shares, respectively)........................            83                83
  Paid in capital...........................................        78,568            78,456
  Retained earnings.........................................        55,917            58,061
  Accumulated other comprehensive income (loss).............          (106)              355
                                                                ----------        ----------
          Total Shareholders' Equity........................       134,462           136,955
                                                                ----------        ----------
          Total Liabilities, Redeemable Preferred Stock and
            Shareholders' Equity............................    $1,511,068        $1,663,977
                                                                ==========        ==========
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                        2
<PAGE>   3
 
                FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                   MARCH 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Revenues:
  Gain on sale of mortgage and other loans..................  $26,641    $20,269
  Net mortgage warehouse income.............................    5,756      1,722
  Gain (loss) on sale of mortgage servicing rights..........   (2,395)        --
  Servicing fees:
     Mortgage...............................................    6,143      4,694
     Other..................................................    2,076      1,113
  Gain on resolution of Portfolio Assets....................    1,369      3,097
  Equity in earnings of Acquisition Partnerships............    2,643      3,214
  Interest income...........................................    5,217      3,799
  Other income..............................................    2,193      4,118
                                                              -------    -------
          Total revenues....................................   49,643     42,026
Expenses:
  Interest on notes payable.................................    5,590      3,418
  Salaries and benefits.....................................   25,793     16,017
  Amortization of mortgage servicing rights.................    4,723      3,176
  Provision for loan losses and impairment on residual
     interests..............................................       23      2,352
  Provision (credit) for valuation of mortgage servicing
     rights.................................................   (2,695)        --
  Occupancy, data processing, communication and other.......   17,219     12,123
                                                              -------    -------
          Total expenses....................................   50,653     37,086
Earnings (loss) before minority interest, accounting change
  and income taxes..........................................   (1,010)     4,940
Benefit (provision) for income taxes........................      (21)       641
                                                              -------    -------
Earnings (loss) before minority interest and accounting
  change....................................................   (1,031)     5,581
Minority interest...........................................      364        215
Cumulative effect of accounting change......................     (835)        --
                                                              -------    -------
          Net earnings (loss)...............................   (1,502)     5,796
Preferred dividends.........................................     (642)    (1,515)
                                                              -------    -------
          Net earnings (loss) to common shareholders........  $(2,144)   $ 4,281
                                                              =======    =======
Earnings (loss) before accounting change per common
  share -- basic............................................  $ (0.16)   $  0.66
Earnings (loss) before accounting change per common
  share -- diluted..........................................  $ (0.16)   $  0.64
Cumulative effect of accounting change -- basic.............  $ (0.10)   $    --
Cumulative effect of accounting change -- diluted...........  $ (0.10)   $    --
Net earnings (loss) per common share -- basic...............  $ (0.26)   $  0.66
Net earnings (loss) per common share -- diluted.............  $ (0.26)   $  0.64
Weighted average common shares outstanding -- basic.........    8,288      6,531
Weighted average common shares outstanding -- diluted.......    8,288      6,678
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                        3
<PAGE>   4
 
                FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                             (DOLLARS IN THOUSANDS)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                              ACCUMULATED
                                   NUMBER OF                                     OTHER           TOTAL
                                    COMMON     COMMON   PAID IN   RETAINED   COMPREHENSIVE   SHAREHOLDERS'
                                    SHARES     STOCK    CAPITAL   EARNINGS   INCOME (LOSS)      EQUITY
                                   ---------   ------   -------   --------   -------------   -------------
<S>                                <C>         <C>      <C>       <C>        <C>             <C>
BALANCES, JANUARY 1, 1998........  6,526,510    $65     $29,509   $ 83,140       $  44         $112,758
Exercise of warrants, options and
  employee stock purchase plan...    519,299      5      12,675         --          --           12,680
Issuance of common stock to
  acquire the minority interest
  of subsidiary..................     41,000      1       2,149         --          --            2,150
Issuance of common stock in
  public offering................  1,201,150     12      34,123         --          --           34,135
Comprehensive loss:
  Net loss for 1998..............         --     --          --    (20,192)         --          (20,192)
Foreign currency items...........         --     --          --         --         311              311
                                                                                               --------
Total comprehensive loss.........                                                               (19,881)
                                                                                               --------
Preferred dividends..............         --     --          --     (5,186)         --           (5,186)
Other............................         --     --          --        299          --              299
                                   ---------    ---     -------   --------       -----         --------
BALANCES, DECEMBER 31, 1998......  8,287,959     83      78,456     58,061         355          136,955
Exercise of employee stock
  purchase plan..................     11,293     --         112         --          --              112
Comprehensive loss:
  Net loss for the first quarter
     of 1999.....................         --     --          --     (1,502)         --           (1,502)
Foreign currency items...........         --     --          --         --        (461)            (461)
                                                                                               --------
Total comprehensive loss.........                                                                (1,963)
                                                                                               --------
Preferred dividends..............         --     --          --       (642)         --             (642)
                                   ---------    ---     -------   --------       -----         --------
BALANCES, MARCH 31, 1999.........  8,299,252    $83     $78,568   $ 55,917       $(106)        $134,462
                                   =========    ===     =======   ========       =====         ========
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                        4
<PAGE>   5
 
                FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED MARCH 31,
                                                              -----------------------------
                                                                  1999            1998
                                                              -------------   -------------
<S>                                                           <C>             <C>
Cash flows from operating activities:
  Net earnings (loss).......................................   $    (1,502)    $     5,796
  Adjustments to reconcile net earnings (loss) to net cash
     provided by (used in) operating activities, net of
     effect of acquisitions:
     Proceeds from resolution of Portfolio Assets...........         5,035          16,976
     Gain on resolution of Portfolio Assets.................        (1,369)         (3,097)
     Purchase of Portfolio Assets and loans receivable,
      net...................................................        (1,566)         (7,532)
     Origination of automobile receivables, net of purchase
      discount..............................................       (46,123)        (29,000)
     Loss on sale of mortgage servicing rights..............         2,395              --
     Decrease (increase) in mortgage loans held for sale....       178,745        (515,105)
     Decrease (increase) in construction loans receivable...         4,355          (2,815)
     Originated mortgage servicing rights...................       (41,225)        (21,845)
     Purchases of mortgage servicing rights.................            --             (46)
     Proceeds from sale of mortgage servicing rights........        80,807              --
     Provision (credit) for loan losses, residual interests
      and valuation of mortgage servicing rights............        (2,672)          2,352
     Equity in earnings of Acquisition Partnerships.........        (2,643)         (3,214)
     Proceeds from performing Portfolio Assets and loans
      receivable, net.......................................        15,242          45,712
     (Increase) decrease in net deferred tax asset..........            49          (1,768)
     Depreciation and amortization..........................         6,461           4,070
     Increase in other assets...............................       (32,134)         (4,649)
     Increase (decrease) in other liabilities...............        17,503          10,183
                                                               -----------     -----------
          Net cash provided by (used in) operating
            activities......................................       181,358        (503,982)
                                                               -----------     -----------
Cash flows from investing activities, net of effect of
  acquisitions:
  Property and equipment, net...............................        (2,443)         (1,529)
  Contributions to Acquisition Partnerships.................          (831)         (7,597)
  Distributions from Acquisition Partnerships...............         3,732           8,053
                                                               -----------     -----------
          Net cash provided by (used in) investing
            activities......................................           458          (1,073)
                                                               -----------     -----------
Cash flows from financing activities, net of effect of
  acquisitions:
  Borrowings under notes payable............................     3,005,933       2,445,245
  Payments of notes payable.................................    (3,180,874)     (1,928,127)
  Proceeds from issuance of common stock....................           112             153
  Preferred dividends paid..................................          (642)         (1,515)
                                                               -----------     -----------
          Net cash provided by (used in) financing
            activities......................................      (175,471)        515,756
                                                               -----------     -----------
Net increase in cash........................................   $     6,345     $    10,701
Cash, beginning of period...................................        13,677          31,605
                                                               -----------     -----------
Cash, end of period.........................................   $    20,022     $    42,306
                                                               ===========     ===========
Supplemental disclosure of cash flow information:
  Cash paid during the period for:
     Interest...............................................   $    21,975     $    16,818
     Income taxes...........................................   $        77     $        94
Non-cash investing activities:
  Investment securities received as a result of sales of
     loans through securitizations..........................   $        --     $    14,234
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                        5
<PAGE>   6
 
                FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1999
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
(1) BASIS OF PRESENTATION
 
     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 financial position at March
31, 1999, the results of operations and the cash flows for the three month
periods ended March 31, 1999 and 1998.
 
     The preparation of financial statements in conformity with generally
accepted accounting principles 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, prepayment speeds of
loans in servicing portfolios and in securitization trusts, collectibility on
loans held in inventory, securitization trusts and for investment. Actual
results could differ materially from those estimates. Certain amounts in the
financial statements for prior periods have been reclassified to conform with
current financial statement presentation.
 
     An accounting change resulting from the adoption of SOP 98-5, which
requires previously capitalized start-up costs including organization costs to
be written off and future costs related to start-up entities be charged to
expense as incurred, resulted in a loss of $.8 million for the first quarter of
1999 and has been reflected as a cumulative effect of a change in accounting
principle.
 
(2) PORTFOLIO ASSETS
 
     Portfolio Assets are summarized as follows:
 
<TABLE>
<CAPTION>
                                                            MARCH 31,    DECEMBER 31,
                                                              1999           1998
                                                            ---------    ------------
<S>                                                         <C>          <C>
Non-performing Portfolio Assets...........................  $ 86,958       $93,716
Performing Portfolio Assets...............................    22,137        24,759
Real estate Portfolios....................................    11,325        12,561
                                                            --------       -------
          Total Portfolio Assets..........................   120,420       131,036
Discount required to reflect Portfolio Assets at carrying
  value...................................................   (64,021)      (61,319)
                                                            --------       -------
          Portfolio Assets, net...........................  $ 56,399       $69,717
                                                            ========       =======
</TABLE>
 
     Portfolio Assets are pledged to secure non-recourse notes payable.
 
(3) LOANS RECEIVABLE
 
     Loans receivable are summarized as follows:
 
<TABLE>
<CAPTION>
                                                           MARCH 31,     DECEMBER 31,
                                                             1999            1998
                                                           ---------     ------------
<S>                                                        <C>           <C>
Construction loans receivable............................  $ 20,235        $24,590
  Residential mortgage and other loans held for
     investment..........................................     8,072         11,016
Automobile and consumer finance receivables..............    69,059         16,475
Allowance for loan losses................................   (13,151)        (5,894)
                                                           --------        -------
          Loans receivable, net..........................  $ 84,215        $46,187
                                                           ========        =======
</TABLE>
 
                                        6
<PAGE>   7
                FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The activity in the allowance for loan losses is summarized as follows for
the periods indicated:
 
<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                   MARCH 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Balances, beginning of period...............................  $ 5,894    $ 9,282
  Provision for loan losses.................................       23      2,352
  Discounts acquired........................................    7,621      4,474
  Allocation of reserves to sold loans......................       --     (2,802)
  Charge off activity:
     Principal balances charged off.........................   (1,081)    (4,589)
     Recoveries.............................................      694        926
                                                              -------    -------
          Net charge offs...................................     (387)    (3,663)
                                                              -------    -------
Balances, end of period.....................................  $13,151    $ 9,643
                                                              =======    =======
</TABLE>
 
(4) MORTGAGE LOANS HELD FOR SALE
 
     Mortgage loans held for sale include loans collateralized by first lien
mortgages on one-to-four family residences as follows:
 
<TABLE>
<CAPTION>
                                                              MARCH 31,    DECEMBER 31,
                                                                 1999          1998
                                                              ----------   ------------
<S>                                                           <C>          <C>
Residential mortgage loans..................................  $1,014,413    $1,190,585
Unamortized premiums and discounts, net.....................      14,521        17,094
                                                              ----------    ----------
                                                              $1,028,934    $1,207,679
                                                              ==========    ==========
</TABLE>
 
(5) RESIDUAL INTERESTS IN SECURITIZATIONS
 
     The Company has residual interests in securitizations consisting of rated
securities, retained interests and related interest only strips (collectively
referred to as residual interests) which are all attributable to loans sold
through securitization transactions by the Company. Residual interests are
comprised of the following as of the dates indicated.
 
<TABLE>
<CAPTION>
                                                              MARCH 31,   DECEMBER 31,
                                                                1999          1998
                                                              ---------   ------------
<S>                                                           <C>         <C>
Rated securities............................................   $ 1,766      $ 2,073
Residual interests..........................................    64,824       66,473
Accrued interest............................................     2,445        1,146
Allowance for losses........................................    (4,450)      (4,450)
                                                               -------      -------
                                                               $64,585      $65,242
                                                               =======      =======
</TABLE>
 
                                        7
<PAGE>   8
                FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The activity related to residual interests for 1999 and 1998 is as follows:
 
<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                   MARCH 31,
                                                              -------------------
                                                               1999        1998
                                                              -------     -------
<S>                                                           <C>         <C>
Balance, beginning of period................................  $65,242     $ 6,935
Cost allocated from securitizations.........................       --      14,234
Interest accreted...........................................    2,063         270
Increase in other securities, net...........................       --         200
Cash received from trusts...................................   (2,720)       (301)
                                                              -------     -------
Balance, end of period......................................  $64,585     $21,338
                                                              =======     =======
</TABLE>
 
(6) INVESTMENTS IN ACQUISITION PARTNERSHIPS
 
     The Company has investments in Acquisition Partnerships and their general
partners that are accounted for on the equity method. The condensed combined
financial position and results of operations of the Acquisition Partnerships,
which include the domestic and foreign Acquisition Partnerships and their
general partners, are summarized below:
 
                       CONDENSED COMBINED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                              MARCH 31,   DECEMBER 31,
                                                                1999          1998
                                                              ---------   ------------
<S>                                                           <C>         <C>
Assets......................................................  $267,604      $295,114
                                                              ========      ========
Liabilities.................................................  $178,453      $190,590
Net equity..................................................    89,151       104,524
                                                              --------      --------
                                                              $267,604      $295,114
                                                              ========      ========
Company's equity in Acquisition Partnerships................  $ 40,261      $ 41,466
                                                              ========      ========
</TABLE>
 
                     CONDENSED COMBINED SUMMARY OF EARNINGS
 
<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                   MARCH 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Proceeds from resolution of Portfolio Assets................  $29,645    $57,558
Gross margin................................................   10,731     18,533
Interest income on performing Portfolio Assets..............    3,336      2,453
Net earnings................................................  $ 6,383    $ 9,123
                                                              =======    =======
  Company's equity in earnings of Acquisition
     Partnerships...........................................  $ 2,643    $ 3,214
                                                              =======    =======
</TABLE>
 
(7) SEGMENT REPORTING
 
     The Company is engaged in three reportable segments; i) residential and
commercial mortgage banking; ii) portfolio asset acquisition and resolution; and
iii) consumer lending. These segments have been segregated based on products and
services offered by each. The following is a summary of results of operations
for each of
 
                                        8
<PAGE>   9
                FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
the segments and a reconciliation to net earnings (loss) for the quarters ended
March 31, 1999 and 1998, respectively.
 
<TABLE>
<CAPTION>
                                                               FIRST     FIRST
                                                              QUARTER   QUARTER
                                                               1999      1998
                                                              -------   -------
<S>                                                           <C>       <C>
MORTGAGE BANKING:
  Revenues:
     Net mortgage warehouse income..........................  $ 5,756   $ 1,722
     Gain on sale of mortgage loans.........................   26,641    20,269
     Servicing fees.........................................    6,143     4,694
     Other..................................................      346     2,004
                                                              -------   -------
          Total.............................................   38,886    28,689
  Expenses:
     Salaries and benefits..................................   21,897    12,935
     Amortization of mortgage servicing rights..............    4,723     3,176
     Provision (credit) for valuation of mortgage servicing
      rights................................................   (2,695)       --
     Interest on notes payables.............................    2,049       501
     Occupancy, data processing, communication and other....   12,222     8,104
                                                              -------   -------
          Total.............................................   38,196    24,716
                                                              -------   -------
  Operating contribution before direct taxes................  $   690   $ 3,973
                                                              =======   =======
Operating contribution, net of direct taxes.................  $ 1,706   $ 3,884
                                                              =======   =======
PORTFOLIO ASSET ACQUISITION AND RESOLUTION:
  Revenues:
     Gain on resolution of Portfolio Assets.................  $ 1,369   $ 3,097
     Equity in earnings of Acquisition Partnerships.........    2,643     3,214
     Servicing fees.........................................    1,003       729
     Other..................................................    1,221     1,998
                                                              -------   -------
          Total.............................................    6,236     9,038
  Expenses:
     Salaries and benefits..................................    1,420     1,167
     Interest on notes payable..............................    1,050     1,476
     Asset level expenses, occupancy, data processing and
      other.................................................    1,549     2,212
                                                              -------   -------
          Total.............................................    4,019     4,855
                                                              -------   -------
  Operating contribution before direct taxes................  $ 2,217   $ 4,183
                                                              =======   =======
  Operating contribution, net of direct taxes...............  $ 1,487   $ 4,169
                                                              =======   =======
CONSUMER LENDING:
  Revenues:
     Interest income........................................  $ 3,405   $ 2,566
     Servicing fees and other...............................    1,087       390
                                                              -------   -------
          Total.............................................    4,492     2,956
</TABLE>
 
                                        9
<PAGE>   10
                FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
<TABLE>
<CAPTION>
                                                               FIRST     FIRST
                                                              QUARTER   QUARTER
                                                               1999      1998
                                                              -------   -------
<S>                                                           <C>       <C>
  Expenses:
     Salaries and benefits..................................    1,533     1,112
     Provision for loan losses and residual interests.......       23     2,352
     Interest on notes payable..............................      668       880
     Occupancy, data processing and other...................    2,041     1,107
                                                              -------   -------
          Total.............................................    4,265     5,451
                                                              -------   -------
  Operating income (loss) before direct taxes...............  $   227   $(2,495)
                                                              =======   =======
  Operating income (loss), net of direct taxes..............  $   278   $(2,495)
                                                              =======   =======
          Total operating contribution, net of direct
             taxes..........................................  $ 3,471   $ 5,558
                                                              =======   =======
CORPORATE OVERHEAD:
  Salaries and benefits, occupancy, professional and other
     income and expenses, net...............................  $(4,973)  $  (512)
  Deferred tax benefit from NOLs............................       --       750
                                                              -------   -------
  Net earnings (loss).......................................  $(1,502)  $ 5,796
                                                              =======   =======
</TABLE>
 
     Total assets for each of the segments and a reconciliation to total assets
is as follows:
 
<TABLE>
<CAPTION>
                                                              MARCH 31,    DECEMBER 31,
                                                                 1999          1998
                                                              ----------   ------------
<S>                                                           <C>          <C>
Mortgage assets.............................................  $1,237,524    $1,413,799
Portfolio acquisition and resolution assets.................      99,422       114,596
Consumer assets.............................................      96,594        52,029
Deferred tax benefit........................................      32,113        32,162
Other assets................................................      45,415        51,391
                                                              ----------    ----------
          Total assets......................................  $1,511,068    $1,663,977
                                                              ==========    ==========
</TABLE>
 
(8) PREFERRED STOCK AND SHAREHOLDERS' EQUITY
 
     In May 1998, the Company closed the public offering of 1,542,150 shares of
FirstCity common stock, of which 341,000 shares were sold by selling
shareholders. Net proceeds (after expenses) of $34.1 million were used to retire
debt. On May 11, 1998, the Company notified holders of its outstanding warrants
to purchase shares of common stock that it was exercising its option to
repurchase such warrants for $1.00 each. In June 1998, as a result of such
notification, warrants representing 471,380 shares of common stock were
exercised for an aggregate warrant purchase price of $11.8 million. On July 17,
1998 the Company filed a shelf registration statement with the Securities and
Exchange Commission which allows the Company to issue up to $250 million in debt
and equity securities from time to time in the future. The registration
statement became effective July 28, 1998. As of March 31, 1999, there have been
no securities issued under this registration statement. At March 31, 1999,
accrued dividends on adjusting rate preferred stock totaled $.6 million, or
 
                                       10
<PAGE>   11
                FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
$.525 per share, and were paid on April 15, 1999. A reconciliation between the
weighted average shares outstanding used in the basic and diluted EPS
computations is as follows:
 
<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                  MARCH 31,
                                                              ------------------
                                                                1999      1998
                                                              --------   -------
<S>                                                           <C>        <C>
Net earnings (loss) to common shareholders..................  $(2,144)   $4,281
                                                              =======    ======
Weighted average common shares outstanding -- basic.........    8,288     6,531
Effect of dilutive securities:
  Assumed exercise of stock options.........................       --        73
  Assumed exercise of warrants..............................       --        74
                                                              -------    ------
Weighted average common shares outstanding -- diluted.......    8,288     6,678
                                                              =======    ======
Earnings (loss) before accounting change per common
  share -- basic............................................  $ (0.16)   $ 0.66
Earnings (loss) before accounting change per common
  share -- diluted..........................................  $ (0.16)   $ 0.64
Cumulative effect of accounting change -- basic.............  $ (0.10)   $   --
Cumulative effect of accounting change -- diluted...........  $ (0.10)   $   --
Net earnings (loss) per common share -- basic...............  $ (0.26)   $ 0.66
Net earnings (loss) per common share -- diluted.............  $ (0.26)   $ 0.64
Weighted average common shares outstanding -- basic.........    8,288     6,531
Weighted average common shares outstanding -- diluted.......    8,288     6,678
</TABLE>
 
(9) INCOME TAXES
 
     Federal income taxes are provided at a 35% rate. Net operating loss carry
forwards ("NOLs") are available to FirstCity and are recognized as an offset to
the provision in the period during which the benefit is realized. During the
first three months of 1999, FirstCity recognized no deferred tax benefit from
NOLs (compared to $.8 million in the first three months of 1998). Realization of
the resulting net deferred tax asset is dependent upon generating sufficient
taxable income prior to expiration of the net operating loss carry forwards.
Although realization is not assured, management believes it is more likely than
not that all of the recorded deferred tax asset 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 carry forward period
change.
 
(10) COMMITMENTS AND CONTINGENCIES
 
     The Company is 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 consolidated financial condition,
results of operations or liquidity of the Company.
 
     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, 1999, advances of $.7 million had been
made under the obligation.
 
                                       11
<PAGE>   12
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 
OVERVIEW
 
     The Company is a diversified financial services company engaged in
residential and commercial mortgage banking ("Mortgage Corp."), Portfolio Asset
acquisition and resolution ("Commercial Corp.") and consumer lending ("Consumer
Corp."). The mortgage banking business involves the origination, acquisition and
servicing of residential and commercial mortgage loans and the subsequent
warehousing, sale or securitization of such loans through various public and
private secondary markets. 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 Company also seeks opportunities to
originate and retain high yield commercial loans to businesses and to finance
real estate projects that are unable to access traditional lending sources. The
consumer lending business involves the acquisition, origination, warehousing,
securitization and servicing of consumer receivables. The Company's current
consumer lending operations are focused on the acquisition of sub-prime
automobile receivables.
 
     FirstCity Financial Corporation posted a net loss for the quarter ended
March 31, 1999 of $1.5 million. After dividends on the Company's preferred
stock, the loss was $2.1 million, or $.26 per share on a fully diluted basis.
 
     The loss for the quarter resulted primarily from the following:
 
     - No securitizations of automobile or home equity assets
 
     - Slow collections in the portfolio asset acquisition group, as is
       historically typical in the first quarter
 
     - Minimal profit contribution from mortgage operations
 
     - Change in accounting principle
 
     In addition, the anticipated liquidation of certain unprofitable assets and
future costs associated with the restructuring of the mortgage subsidiary is
expected to generate a loss for the second quarter of 1999.
 
     Subsequent to March 31, 1999, Mortgage Corp. sold its $55 million portfolio
of GNMA buyback loans for a loss of $1.5 million which will be recognized during
the quarter ending June 30, 1999. This sale represents the last of the GNMA
portfolio held by Mortgage Corp. and is included in mortgage loans held for sale
in the accompanying consolidated balance sheet.
 
     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, 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 of the Company's Portfolio Asset acquisition and
resolution business, and the strategic changes in Mortgage Corp., period to
period comparisons of the Company's results of operations may not be meaningful.
 
                                       12
<PAGE>   13
 
ANALYSIS OF REVENUES AND EXPENSES
 
     The following table summarizes the revenues and expenses of each of the
Company's business lines and presents the contribution that each business makes
to the Company's operating margin.
 
                       ANALYSIS OF REVENUES AND EXPENSES
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                FIRST        FIRST
                                                               QUARTER      QUARTER
                                                                 1999         1998
                                                              ----------   ----------
<S>                                                           <C>          <C>
MORTGAGE BANKING:
  Revenues:
     Net mortgage warehouse income..........................  $    5,756   $    1,722
     Gain on sale of mortgage loans.........................      26,641       20,269
     Servicing fees.........................................       6,143        4,694
     Other..................................................         346        2,004
                                                              ----------   ----------
          Total.............................................      38,886       28,689
  Expenses:
     Salaries and benefits..................................      21,897       12,935
     Amortization of mortgage servicing rights..............       4,723        3,176
     Provision (credit) for valuation of mortgage servicing
       rights...............................................      (2,695)          --
     Interest on notes payables.............................       2,049          501
     Occupancy, data processing, communication and other....      12,222        8,104
                                                              ----------   ----------
          Total.............................................      38,196       24,716
                                                              ----------   ----------
  Operating contribution before direct taxes................  $      690   $    3,973
                                                              ==========   ==========
  Operating contribution, net of direct taxes...............  $    1,706   $    3,884
                                                              ==========   ==========
PORTFOLIO ASSET ACQUISITION AND RESOLUTION:
  Revenues:
     Gain on resolution of Portfolio Assets.................  $    1,369   $    3,097
     Equity in earnings of Acquisition Partnerships.........       2,643        3,214
     Servicing fees.........................................       1,003          729
     Other..................................................       1,221        1,998
                                                              ----------   ----------
          Total.............................................       6,236        9,038
  Expenses:
     Salaries and benefits..................................       1,420        1,167
     Interest on notes payable..............................       1,050        1,476
     Asset level expenses, occupancy, data processing and
       other................................................       1,549        2,212
                                                              ----------   ----------
          Total.............................................       4,019        4,855
                                                              ----------   ----------
  Operating contribution before direct taxes................  $    2,217   $    4,183
                                                              ==========   ==========
  Operating contribution, net of direct taxes...............  $    1,487   $    4,169
                                                              ==========   ==========
CONSUMER LENDING:
  Revenues:
     Interest income........................................  $    3,405   $    2,566
     Servicing fees and other...............................       1,087          390
                                                              ----------   ----------
          Total.............................................       4,492        2,956
  Expenses:
     Salaries and benefits..................................       1,533        1,112
     Provision for loan losses and residual interests.......          23        2,352
     Interest on notes payable..............................         668          880
     Occupancy, data processing and other...................       2,041        1,107
                                                              ----------   ----------
          Total.............................................       4,265        5,451
                                                              ----------   ----------
</TABLE>
 
                                       13
<PAGE>   14
 
<TABLE>
<CAPTION>
                                                                FIRST        FIRST
                                                               QUARTER      QUARTER
                                                                 1999         1998
                                                              ----------   ----------
<S>                                                           <C>          <C>
  Operating income (loss) before direct taxes...............  $      227   $   (2,495)
                                                              ==========   ==========
  Operating income (loss), net of direct taxes..............  $      278   $   (2,495)
                                                              ==========   ==========
          Total operating contribution, net of direct
            taxes...........................................  $    3,471   $    5,558
                                                              ==========   ==========
CORPORATE OVERHEAD:
  Salaries and benefits, occupancy, professional and other
     income and expenses, net...............................  $   (4,973)  $     (512)
  Deferred tax benefit from NOLs............................          --          750
                                                              ----------   ----------
  Net earnings (loss).......................................      (1,502)       5,796
  Preferred dividends.......................................        (642)      (1,515)
                                                              ----------   ----------
          Net earnings (loss) to common shareholders........  $   (2,144)  $    4,281
                                                              ==========   ==========
SHARE DATA:
  Earnings (loss) before accounting change per common
     share -- basic.........................................  $    (0.16)  $     0.66
  Earnings (loss) before accounting change per common
     share -- diluted.......................................  $    (0.16)  $     0.64
  Cumulative effect of accounting change -- basic...........  $    (0.10)  $       --
  Cumulative effect of accounting change -- diluted.........  $    (0.10)  $       --
  Net earnings (loss) per common share -- basic.............  $    (0.26)  $     0.66
  Net earnings (loss) per common share -- diluted...........  $    (0.26)  $     0.64
  Weighted average common shares outstanding -- basic.......       8,288        6,531
  Weighted average common shares outstanding -- diluted.....       8,288        6,678
ORIGINATION AND OTHER FINANCIAL DATA:
  Mortgage Corp.:
     Origination of residential mortgage loans:
       Conventional.........................................  $1,431,796   $1,360,865
       Agency...............................................     597,238      331,228
       Home equity..........................................      62,344       58,261
       Other................................................      30,428       19,913
                                                              ----------   ----------
          Total.............................................  $2,121,806   $1,770,267
                                                              ==========   ==========
     Origination of commercial mortgage loans:
       Correspondent........................................  $  122,628   $  113,265
       Construction.........................................      18,062       15,596
                                                              ----------   ----------
          Total.............................................  $  140,690   $  128,861
                                                              ==========   ==========
  Capital Corp.:
     Acquisition of Home Equity Loans.......................  $   99,741   $   36,416
  Commercial Corp.:
     Aggregate purchase price of assets acquired............  $    9,817   $   51,971
     Proceeds from resolution...............................      34,680       74,534
  Consumer Corp.:
     Aggregate acquisition of automobile and other consumer
       receivables..........................................  $   53,736   $   33,810
</TABLE>
 
MORTGAGE BANKING
 
     During the first quarter of 1999, Harbor, the Company's mortgage
subsidiary, continued to see strong originations totaling $2.4 billion. However,
mortgage operations were only marginally profitable during the quarter as a
result of the costs associated with the previously announced strategy to reduce
the investment in mortgage servicing rights.
 
                                       14
<PAGE>   15
 
     The transition to a production-only platform mitigates interest rate risk
and reduces capital requirements associated with owning servicing assets. During
this transition period, profits are negatively impacted by reduced servicing
revenues during the two to three month period that Harbor subservices the loans
for the buyers of the servicing, the third party costs associated with the
actual sale and transfer of the servicing, and the additional internal costs
related to sorting and shipping of servicing files to the buyers of the
servicing. During the quarter, the mortgage subsidiary completed two bulk sales
of mortgage servicing. These sales, combined with the flow sales of current
production, reduced the size of the owned residential mortgage servicing
portfolio from $5.5 billion at December 31, 1998 to $2.3 billion at March 31,
1999, and reduced the Company's investment in residential mortgage servicing
rights from $88 million at December 31, 1998 to $44 million at March 31, 1999.
The combined proceeds to the Company from these bulk sales aggregated $40
million (comprised of $32 million of cash and $8 million of accounts
receivable), allowing Harbor to reduce debt by $22 million and to reduce the
capital commitment to Harbor by $5 million.
 
     The Company has taken and continues to take steps to reduce overhead at the
mortgage subsidiary. During the second quarter of 1999, the mortgage subsidiary
expects to complete a plan to restructure its balance sheet, organization, and
cost structure. Members of senior management of FirstCity and Harbor, working
with outside consultants, are currently evaluating the cost and profitability of
each operating unit within Harbor. Management expects the resulting changes to
positively impact the future cost and profitability structure of the mortgage
subsidiary. Harbor is expected to report a one-time charge during the second
quarter when the plan for restructuring and reorganizing the mortgage subsidiary
is finalized.
 
     As previously disclosed in FirstCity's 1998 Annual Report, the mortgage
subsidiary's warehouse funding facility of $490 million matured on March 31,
1999. The Company has extended the existing facility, with expectation of
finalizing the renewal by May 31, 1999. The renewed facility is expected to
include new sub-limits for working capital and servicing sale accounts
receivable financing to facilitate the mortgage subsidiary's production-only
platform strategy.
 
     Capital Corp., FirstCity's home equity mortgage conduit, acquired $100
million of home equity loans during the quarter. At quarter end, the Company
held $140 million of home equity loans in inventory and $24.5 million in home
equity residual interests in securitizations. Driven by capital and liquidity
priorities, FirstCity closely monitors its capital commitment to this business
line, and will continue the selective origination of product, while at the same
time effecting a strategic realignment of the platform.
 
                                       15
<PAGE>   16
 
     The following table presents selected information regarding the revenues
and expenses of the Company's mortgage banking business.
 
                   ANALYSIS OF SELECTED REVENUES AND EXPENSES
                                MORTGAGE BANKING
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                              FIRST QUARTER   FIRST QUARTER
                                                                  1999            1998
                                                              -------------   -------------
<S>                                                           <C>             <C>
WAREHOUSE INVENTORY:
  Average inventory balance.................................   $1,056,300      $  229,533
  Net mortgage warehouse income:
     Dollar amount..........................................        5,756           1,722
     Percentage of average inventory balance................         0.54%           0.75%
GAIN ON SALE OF MORTGAGE LOANS:
  Gain on sale of mortgage loans as a percentage of loans
     sold:
     Residential............................................         1.06%           1.46%
     Home Equity............................................         2.08%           4.54%
SERVICING REVENUES:
  Average servicing portfolios:
     Residential............................................   $5,466,733      $4,553,543
     Commercial.............................................    1,387,053       1,470,923
     Sub-serviced...........................................    4,926,673         813,040
  Servicing fees:
     Residential............................................   $    5,531      $    4,284
     Commercial.............................................          261             238
     Sub-serviced...........................................          351             172
                                                               ----------      ----------
          Total.............................................   $    6,143      $    4,694
  Annualized servicing fee percentage:
     Residential............................................         0.40%           0.38%
     Commercial.............................................         0.08%           0.06%
     Sub-serviced...........................................         0.03%           0.08%
  Gain (loss) on sale of servicing rights...................       (2,395)             --
  Amortization of servicing rights:
     Servicing rights amortization..........................   $    4,723      $    3,176
     Servicing rights amortization as a percentage of
       average residential servicing portfolio
       (annualized).........................................         0.35%           0.28%
PERSONNEL:
  Personnel expenses........................................   $   21,897      $   12,935
  Number of personnel (at period end):
     Production.............................................          435             442
     Servicing..............................................          274             119
     Other..................................................          765             602
                                                               ----------      ----------
          Total.............................................        1,474           1,163
                                                               ==========      ==========
</TABLE>
 
PORTFOLIO ASSET ACQUISITION AND RESOLUTION
 
     The portfolio asset acquisition and resolution business acquired assets of
$10 million during the first quarter of 1999 comprised of a $8 million portfolio
in Japan and a $2 million portfolio in France. Collections during the quarter
totaled $35 million. Collections and returns achieved on assets acquired in
France and Mexico continue to exceed expectations.
 
                                       16
<PAGE>   17
 
     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
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                              FIRST QUARTER   FIRST QUARTER
                                                                  1999            1998
                                                              -------------   -------------
<S>                                                           <C>             <C>
GAIN ON RESOLUTION OF PORTFOLIO ASSETS:
  Average investment:
     Nonperforming Portfolios...............................     $32,870         $49,619
     Performing Portfolios..................................      21,357          14,212
     Real estate Portfolios.................................      12,175          18,307
  Gain on resolution of Portfolio Assets:
     Nonperforming Portfolios...............................     $   961         $ 2,263
     Performing Portfolios..................................          --             299
     Real estate Portfolios.................................         408             535
                                                                 -------         -------
          Total.............................................     $ 1,369         $ 3,097
                                                                 =======         =======
  Interest income on performing Portfolios..................     $   890         $ 1,070
  Gross profit percentage on resolution of Portfolio Assets:
     Nonperforming Portfolios...............................       25.73%          22.40%
     Performing Portfolios..................................          --            7.99%
     Real estate Portfolios.................................       31.48%          17.08%
     Weighted average gross profit percentage...............       27.19%          18.24%
     Interest yield on performing Portfolios (annualized)...       16.67%          30.12%
SERVICING FEE REVENUES:
  Acquisition partnerships..................................     $   948         $   660
  Affiliates................................................          55              69
                                                                 -------         -------
          Total.............................................     $ 1,003         $   729
                                                                 =======         =======
PERSONNEL:
  Personnel expenses........................................     $ 1,420         $ 1,167
  Number of personnel (at period end):
     Production.............................................          10              10
     Servicing..............................................          62              64
                                                                 -------         -------
          Total.............................................          72              74
                                                                 =======         =======
INTEREST EXPENSE:
  Average debt..............................................     $59,970         $76,547
  Interest expense..........................................       1,045           1,466
  Average yield (annualized)................................        6.97%           7.66%
</TABLE>
 
                                       17
<PAGE>   18
 
     The following chart presents selected information regarding the revenues
and expenses of the Acquisition Partnerships.
 
                   ANALYSIS OF SELECTED REVENUES AND EXPENSES
                            ACQUISITION PARTNERSHIPS
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                              FIRST QUARTER   FIRST QUARTER
                                                                  1999            1998
                                                              -------------   -------------
<S>                                                           <C>             <C>
GAIN ON RESOLUTION OF PORTFOLIO ASSETS:
  Gain on resolution of Portfolio Assets....................     $10,731         $18,533
  Gross profit percentage on resolution of Portfolio
     Assets.................................................       36.20%          32.20%
  Interest income...........................................       3,336           2,453
  Other interest income.....................................         161             170
INTEREST EXPENSE:
  Interest expense..........................................     $ 3,161         $ 3,941
  Average yield (annualized)................................        8.15%           7.17%
OTHER EXPENSES:
  Servicing fees............................................     $ 1,438         $ 1,421
  Legal.....................................................         557             408
  Property protection.......................................       1,385           1,036
  Other.....................................................       1,304           5,227
                                                                 -------         -------
          Total other expenses..............................       4,684           8,092
                                                                 -------         -------
  Net earnings..............................................     $ 6,383         $ 9,123
                                                                 =======         =======
</TABLE>
 
CONSUMER LENDING
 
     FirstCity Funding, the Company's auto finance unit, experienced a strong
production quarter, purchasing auto receivables with an unpaid principal balance
of $52 million during the quarter, up 62% over the fourth quarter 1998. Loans
were purchased at an average discount to face value of 14.7% and carried a
weighted average coupon in excess of 19%. The defaults to date on assets
acquired through March 31, 1999 have totaled 7.8% of the total loans acquired.
Actual losses on these defaults have totaled 3.0% of the original loan balances
at the time of default. Delinquencies at quarter-end were 3.2% of the total
serviced portfolio of FirstCity Funding acquired loans. At the end of the
period, the Company's consolidated balance sheet reflected $40.1 million of auto
finance residual interests in securitizations. FirstCity Funding originated $28
million of these residual interests with the remainder originated by NAF, the
discontinued consumer platform. Additionally, during the quarter, the Company
finalized the placement of a $100 million commercial paper conduit warehouse
facility arranged through NationsBanc Montgomery Securities, LLC. The facility
increases FirstCity Funding's warehouse capacity and lowers the cost of funds
for carrying its auto loan receivables. Subsequent to quarter end, the Company
completed a securitization of $56 million of auto receivables.
 
                                       18
<PAGE>   19
 
     The following chart presents selected information regarding the revenues
and expenses of Consumer Corp.'s consumer lending business.
 
                   ANALYSIS OF SELECTED REVENUES AND EXPENSES
                                CONSUMER LENDING
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                              FIRST QUARTER   FIRST QUARTER
                                                                  1999            1998
                                                              -------------   -------------
<S>                                                           <C>             <C>
INTEREST INCOME:
  Average loans and investments:
     Auto...................................................     $32,206         $48,130
     Investments............................................      38,728          13,819
  Interest income:
     Auto...................................................     $ 1,998         $ 2,249
     Investments............................................       1,269             298
  Average yield (annualized):
     Auto...................................................       24.82%          18.69%
     Investments............................................       13.11%           8.63%
SERVICING FEE REVENUES:
  Affiliates................................................     $ 1,073         $   384
PERSONNEL:
  Personnel expenses........................................     $ 1,533         $ 1,112
  Number of personnel (at period end):
     Production.............................................         133              56
     Servicing..............................................         123              79
                                                                 -------         -------
          Total.............................................         256             135
                                                                 =======         =======
INTEREST EXPENSE:
  Average debt..............................................     $33,101         $40,791
  Interest expense..........................................         668             880
  Average yield (annualized)................................        8.07%           8.63%
</TABLE>
 
BENEFIT (PROVISION) FOR INCOME TAXES
 
     The Company has substantial federal 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
an allowance to value the net deferred tax asset at a value commensurate with
the Company's expectation of being able to utilize the recognized benefit in the
next three to four year period. Such estimates are reevaluated on a quarterly
basis with the adjustment to the allowance recorded as an adjustment to the
income tax expense generated by the quarterly earnings. Significant events that
change the Company's view of its currently estimated ability to utilize the tax
benefits result in substantial changes to the estimated allowance required to
value the deferred tax benefits recognized in the Company's periodic financial
statements. Such events could occur in the future, and would impact the
quarterly recognition of the Company's estimate of the required valuation
allowance associated with its NOLs.
 
                                       19
<PAGE>   20
 
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 1999 Compared to First Quarter 1998
 
     The Company reported a net loss of $1.5 million in 1999 compared to
earnings of $5.8 million in 1998 (including a $0.8 million deferred tax benefit
from NOLs). Net loss to common shareholders was $2.1 million in 1999 compared to
earnings of $4.3 million in 1998. On a per share basis, basic net loss
attributable to common shareholders was $.26 in 1999 compared to earnings of
$.66 in 1998. Diluted net loss per common share was $.26 in 1999 compared to
earnings of $.64 in 1998. An accounting change related to SOP 98-5 resulted in a
loss of $.8 million in the first quarter of 1999 or $0.10 per share.
 
     MORTGAGE BANKING
 
     Gain on sale of mortgage loans. Gain on sale of mortgage loans increased by
31% to $26.6 million in 1999 from $20.3 million in 1998. This increase was the
result of growth in the levels of residential mortgage loan origination
generated principally by the Broker Retail network of Mortgage Corp. and, to a
lesser extent, the Direct Retail network of Mortgage Corp., and the resulting
sales of such loans to government agencies and other investors. This is
evidenced by the sale of approximately $2.5 billion of mortgage loans in first
quarter 1999 (compared to $1.3 billion in the first quarter 1998).
 
     Net mortgage warehouse income. Net mortgage warehouse income increased by
234% to $5.8 million in 1999 from $1.7 million in 1998. This is the result of a
significant increase in the average balance of loans held in inventory during
the quarter, although partially offset by a lower spread earned between the
interest rate on the underlying mortgages and the interest cost of the warehouse
credit facility.
 
     Servicing fee revenues. Servicing fee revenues increased by 31% to $6.1
million in 1999 from $4.7 million in 1998 as a result of an increase in the size
of the servicing portfolio.
 
     Other revenues. Other revenues decreased by 83% to $.3 million in 1999 from
$2.0 million in 1998 because of a $2.4 million loss on sale of mortgage
servicing rights.
 
     Operating expenses. Operating expenses of Mortgage Corp. increased by 55%
to $38.2 million in 1999 from $24.7 million in 1998. The expansion of the Broker
Retail and Direct Retail operation contributed to the period to period
increases.
 
     Salaries and benefits increased by $9.0 million or 69% in 1999 reflecting
the additional staff required to support the increase in origination volumes
derived principally from the Broker Retail network and, to a lesser extent, the
Direct Retail network, and the increase in the size and number of loans in the
residential and commercial servicing portfolios in 1999.
 
     Amortization of mortgage servicing rights increased by $1.5 million or 49%
in 1999 as a result of the substantially larger investment in mortgage servicing
rights at the beginning of 1999. Interest on notes payable (the portion not
associated with Mortgage Corp.'s warehouse credit facility) increased due to
higher working capital borrowings during 1999. A credit of $2.7 million for
valuation of mortgaging servicing rights was recorded in the first quarter of
1999.
 
     Occupancy expense increased by $1.1 million in 1999 as the result of the
opening or acquisition of several new offices in 1998 in the Broker Retail and
Direct Retail networks. Increases in data processing, communication and other
expenses in 1999 resulted from the substantial increases in production and
servicing volumes.
 
                                       20
<PAGE>   21
 
     PORTFOLIO ASSET ACQUISITION AND RESOLUTION
 
     Commercial Corp. purchased $9.8 million of Portfolio Assets during 1999 for
its own account and through the Acquisition Partnerships compared to $52.0
million in acquisitions in 1998. Commercial Corp.'s quarter end investment in
Portfolio Assets decreased to $56.4 million in 1999 from $69.7 million in 1998.
Commercial Corp. invested $2.5 million in equity in Portfolio Assets in 1999
compared to $8.7 million in 1998.
 
     Net gain on resolution of Portfolio Assets. Proceeds from the resolution of
Portfolio Assets decreased by 70% to $5.0 million in 1999 from $17.0 million in
1998. The net gain on resolution of Portfolio Assets decreased by 56% to $1.4
million in 1999 from $3.1 million in 1998 as the result of lower collections.
The gross profit percentage on the resolution of Portfolio Assets in 1999 was
27.2% as compared to 18.2% in 1998.
 
     Equity in earnings of Acquisition Partnerships. Proceeds from the
resolution of Portfolio Assets for the Acquisition Partnerships decreased by 48%
to $29.6 million in 1999 from $57.6 million in 1998 while the gross profit
percentage increased to 36.2% in 1999 from 32.2% in 1998. Other expenses of the
Acquisition Partnerships decreased by $3.4 million in 1999 generally reflecting
costs associated with the resolution of Portfolio Assets in Europe which
generated proceeds of $13.8 million. The net result was an overall decrease in
the net income of the Acquisition Partnerships of 30% to $6.4 million in 1999
from $9.1 million in 1998. As a result, Commercial Corp.'s equity earnings from
Acquisition Partnerships decreased by 18% to $2.6 million in 1999 from $3.2
million in 1998.
 
     Servicing fee revenues. Servicing fees increased by 38% to $1.0 million in
1999 from $0.7 million in 1998 primarily as a result of collections from the
acquisition partnership in Mexico formed at year-end 1998.
 
     Other revenues. Other revenues decreased by 39% to $1.2 million in 1999
compared to $2.0 million in 1998 principally as a result of fewer acquisitions
during the quarter (which would generate lower due diligence recovery income).
 
     Operating expenses. Operating expenses declined by 17% to $4.0 million in
1999 from $4.9 million in 1998 primarily as a result of reduced interest expense
and lower asset level expenses.
 
     Salaries and benefits increased by $0.3 million or 22% in 1999 as a result
of increased cost of personnel related to supporting the Company's foreign
operations.
 
     Interest on notes payable declined $.4 million or 29% due to overall lower
cost of funds and lower debt levels.
 
     Asset level expenses, occupancy, data processing and other expenses
decreased by 30% to $1.5 million in 1999 from $2.2 million in 1998 as a result
of lower investments in Portfolio Assets and the consolidation of servicing
offices in 1999.
 
     CONSUMER LENDING
 
     Interest and other income. Interest income on consumer loans increased by
33% to $3.4 million in 1999 from $2.6 million in 1998, reflecting increased
levels of loan origination activity and an increase in the average balance of
aggregate loans and investments held by Consumer Corp. during 1999. Other income
increased $.7 million or 179% due to increased service fee revenue from
securitization trusts.
 
     Interest expense. Interest expense decreased by 24% to $0.7 million in 1999
from $0.9 million in 1998 as a result of a reduced level of debt due to the sale
and securitization of automobile loans at the end of 1998.
 
     Operating expenses. Operating expenses decreased by 22% to $4.3 million in
1999 from $5.5 million in 1998 primarily as a result of a significant decrease
in the provision for loan losses, but was partially offset by increased
operating activity.
 
     Provision for loan losses on automobile receivables decreased by $2.3
million from 1998 as a result of lower levels of outstanding unpaid principal
balance of loans originated under the discontinued NAF platform ($0.4 million in
1999 compared to $23.4 million in 1998).
 
                                       21
<PAGE>   22
 
     Salaries and benefits increased by $0.4 million or 38% and other expenses
increased $.9 million or 84% as a result of the increased levels of operating
activity.
 
     OTHER ITEMS AFFECTING NET EARNINGS
 
     The 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 225% to
$1.8 million in 1999 from $0.6 million in 1998 as a result of higher volumes of
debt associated with the equity required to purchase Portfolio Assets, equity
interests in Acquisition Partnerships and capital support to operating
subsidiaries. Salary and benefits increased 17% to $.9 million in 1999, loan
fees and professional fees account for the majority of the $1 million increase
in other overhead expenses, which increased due to higher borrowings and other
costs associated with outsourcing projects related to the Company's year 2000
initiative and other operational reviews, as well as a write-off of $.5 million
of organization costs in accordance with SOP 98-5. Additionally, during the
first quarter of 1998 the Company recognized $1.3 million of deferred premium
income related to the redemption of Special Preferred Stock.
 
     Income taxes. Federal income taxes are provided at a 35% rate applied to
taxable income 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 benefit from NOLs in 1999 as
compared to a benefit of $0.8 million in 1998.
 
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, investments in
expanding businesses to support their growth, 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 the future, the Company anticipates being able to raise capital through
a variety of sources including, but not limited to, public debt or equity
offerings (subject to limitations related to the preservation of the Company's
NOLs), thus enhancing the investment and growth opportunities of the Company.
The Company believes that these and other sources of liquidity, including
refinancing and expanding the Company's revolving credit facility to the extent
necessary, securitizations, and funding from senior lenders for Acquisition
Partnership investments and direct portfolio and business acquisitions, should
prove adequate to continue to fund the Company's contemplated activities and
meet its liquidity needs.
 
     The Company and each of its major operating subsidiaries have entered into
one or more credit facilities to finance its respective operations. Each of the
operating subsidiary credit facilities is nonrecourse to the Company and the
other operating subsidiaries, except as discussed below.
 
                                       22
<PAGE>   23
 
     Excluding the term acquisition facilities of the unconsolidated Acquisition
Partnerships, as of March 31, 1999, the Company and its subsidiaries had credit
facilities providing for borrowings in an aggregate principal amount of $2.1
billion and outstanding borrowings of $1.3 billion. 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 as of
May 11, 1999 and the outstanding borrowings under such facilities as of March
31, 1999.
 
                               CREDIT FACILITIES
 
<TABLE>
<CAPTION>
                                           OUTSTANDING
                                            BORROWINGS
                              PRINCIPAL       AS OF
                               AMOUNT     MARCH 31, 1999   INTEREST RATE          OTHER TERMS AND CONDITIONS
                              ---------   --------------   -------------          --------------------------
                                (DOLLARS IN MILLIONS)
<S>                           <C>         <C>              <C>              <C>
FIRSTCITY
Company Credit Facility.....    $ 89           $ 80        Prime + 1.0%     Secured by the assets of the Company,
                                                           to Prime + 4%    expires June 30, 1999
                                                           or LIBOR +
                                                           2.625%
Term fixed asset facility...      .7             .7        Prime + 1.0%     Secured by certain fixed assets,
                                                                            expires January 1, 2001
Term credit facility........      10             10        LIBOR + 5.0%     Secured by stock of an acquisition
                                                                            partnership and certain residual
                                                                            interests, expires February 20, 2000
MORTGAGE CORP.
Warehouse facilities........     538            488        LIBOR + 1.375%   Revolving line to warehouse residential
                                                           to 2.5%          mortgage loans, expires May 31, 1999
Supplemental warehouse
  facilities................     134             94        LIBOR + 1.75%    Revolving line to warehouse residential
                                                           to 2.75%         mortgage loans and related receivables,
                                                                            expires May 31, 1999
Gestation facilities........     886            365        Fed Funds +      Open facilities to fund committed loans
                                                           0.8% to 1.05%    to FNMA and others
                                                           and LIBOR +
                                                           0.5% to 0.8%
CAPITAL CORP.
Warehouse facility..........     200            135        LIBOR + 1.50%    Acquisition facility to acquire Home
                                                           to 3.00%         Equity Loans, expires March 31, 2000
Repurchase agreement........       7              7        LIBOR + 4.00%    Repurchase agreement secured by
                                                                            residual interests in Home Equity
                                                                            securitized loans, expires June 30,
                                                                            1999
COMMERCIAL CORP.
Portfolio acquisition
facility....................     100             52        LIBOR + 2.25%    Acquisition facility to acquire
                                                                            Portfolio Assets, repaid April 1999
                                                                            (includes $41 million advanced to
                                                                            unconsolidated Acquisition
                                                                            Partnerships)
Term facility...............      62             --        LIBOR + 4.0%     Term facility secured by existing
                                                                            Portfolio Assets, expires April 30,
                                                                            2000 (includes $51 million advanced to
                                                                            unconsolidated Acquisition
                                                                            Partnerships).
</TABLE>
 
                                       23
<PAGE>   24
 
<TABLE>
<CAPTION>
                                           OUTSTANDING
                                            BORROWINGS
                              PRINCIPAL       AS OF
                               AMOUNT     MARCH 31, 1999   INTEREST RATE          OTHER TERMS AND CONDITIONS
                              ---------   --------------   -------------          --------------------------
                                (DOLLARS IN MILLIONS)
<S>                           <C>         <C>              <C>              <C>
French and Japanese
  acquisition facility......      15             10        French franc     Acquisition facility to fund equity
                                                           LIBOR + 3.5%     investments in French and Japanese
                                                           Japanese yen     Portfolio Assets, expires March 31,
                                                           LIBOR + 3.5%     2000. Guaranteed by Commercial Corp.
                                                                            and the Company.
Term acquisition                  33             33        Fixed at 7.00%   Acquisition facilities for existing
  facilities................                               to 7.66%         Portfolio Assets. Secured by Portfolio
                                                                            Assets. Expires February 25, 2003 and
                                                                            June 5, 2002
CONSUMER CORP.
Warehouse facility..........      70             44        LIBOR + 3%       Revolving line secured by automobile
                                                                            receivables, paid off April 1999
Warehouse facility..........     100             --        Rate equal to    Commercial paper conduit warehouse
                                                           the mixed rate   facility secured by automobile
                                                           of LIBOR and     receivables, expires March 30, 2000
                                                           commercial
                                                           paper rates
Repurchase Agreement........       7              7        LIBOR + 3%       Repurchase agreement secured by
                                                                            residual interest in automobile
                                                                            securitized loans, expires June 30,
                                                                            1999
Term facility...............       4              4        Prime + 1%       Term facility secured by residual
                                                                            interests in automobile securitized
                                                                            loans, expires March 15, 2000
UNCONSOLIDATED ACQUISITION
PARTNERSHIPS
Term acquisition                  93             93        Fixed at 4.5%    Senior and subordinated loans secured
  facilities................                               to 10.17%,       by Portfolio Assets, various maturities
                                                           LIBOR + 2.25%
                                                           to 6.5% and
                                                           Prime + 1.0%
</TABLE>
 
RELIANCE ON SYSTEMS; YEAR 2000 ISSUES
 
     The Year 2000 Issue consists of shortcomings of many electronic data
processing systems that make them unable to process year-date data accurately
beyond the year 1999. The primary shortcoming arises because computer
programmers have abbreviated dates by eliminating the first two digits of the
year under the assumption that these digits would always be 19. Another
shortcoming is caused by the routine used by some computers for calculating leap
year does not detect that the year 2000 is a leap year. This inability to
process dates could potentially result in a system failure or miscalculation
causing disruptions in the Company's operations or performance.
 
     The potential problems posed by this issue affect the Company's internal
business-critical systems ("internal systems") upon which the Company depends.
This includes information technology systems and applications ("IT"), as well as
non-IT systems and equipment with embedded technology, such as fax machines and
telephone systems. Examples of internal IT systems includes accounting systems
such as general ledger, loan servicing systems, cash management systems and loan
origination systems. In addition to the internal systems, the Company may be at
risk from Year 2000 failures caused by or occurring to third parties. Some third
parties have significant direct business relationships with the Company. These
parties
 
                                       24
<PAGE>   25
 
include borrowers, lenders, investors who buy the Company's loan products and
outside system vendors such as Alltel, Inc., the primary data processing
provider for the servicing of Mortgage Corp's loans.
 
  The Company's Year 2000 Initiative
 
     The Company, with the assistance of a consulting firm that specializes in
Year 2000 readiness, is conducting an enterprise-wide Year 2000 initiative that
encompasses both the internal systems and exposure to third parties. For the
Company's internal systems, the initiative is being approached in three phases
comprised of assessment, remediation and testing. While there is considerable
overlap in the timing of the three phases, the assessment phase is the first
step in the initiative. In this phase, the objective is to identify the
components (i.e., hardware and software) of all internal systems and to assess
the readiness of each component. This information is then used to prepare a
comprehensive plan for remediation and testing. The information gathered during
this phase is also used to develop a more precise estimate of the costs of
remediation and testing.
 
     Third party exposures are addressed by obtaining written representations of
Year 2000 readiness from the third parties and through cooperative testing
between the Company and certain of its significant third parties. The third
party initiative includes contingency planning which is based on the responses
to requests for representations of readiness and the results of cooperative
testing. Contingency plans also involve a comprehensive risk assessment in order
to maintain focus on critical business relationships. A contingency plan could
include replacement of a third party with a comparable firm believed to be
compliant.
 
     The Company is in the process of completing the assessment phase for all of
its internal systems. Remediation and testing have already begun and complete
Year 2000 readiness for internal systems is scheduled to be achieved by July
1999. The Company does not anticipate any material difficulties in achieving
Year 2000 readiness within this time frame. The Company has not yet developed a
most reasonably likely worst case scenario with respect to Year 2000 issues, but
instead has focused its efforts on reducing uncertainties through the review
described above. The Company has not developed Year 2000 Contingency plans other
than as described above, and does not expect to do so unless merited by the
result of its continuing review.
 
     With respect to third party exposure, the process of obtaining written
representation from third parties is still ongoing. Therefore, the Company has
not completed its contingency plan. Based on responses received and testing to
date, it is not anticipated that the Company will be materially affected by any
third party Year 2000 readiness issue. The Company expects to have a
comprehensive contingency plan in place by the third quarter of 1999. In
general, any significant third party service providers that have not completed
their Year 2000 initiative by the third quarter of 1999 and certified their
readiness to the Company will be replaced with comparable firms that are
believed to be compliant. Contingency planning with respect to third parties
will continue throughout the remainder of 1999.
 
     In addition to the being included in the Company's initiative described
above, Mortgage Corp. is currently participating in the Year 2000 Inter-Industry
Test sponsored by the Mortgage Bankers Association ("MBA Test"). Other
participants in the MBA Test are from a cross section of the top industry
participants including originators, servicers, mortgage insurers, service
bureaus, investors and software vendors. Mortgage Corp.'s primary data
processing vendor, Alltel, Inc., and FNMA, Mortgage Corp.'s primary investor,
are also participants. The objective of the test is to prove that the
interaction with common mortgage industry trading partners is acceptable in a
year 2000+ environment. The test covers 17 types of transactions that fall under
the three primary mortgage processes: origination, secondary marketing, and
servicing. The test is scheduled to conclude no later than June 30, 1999. While
this test will not replace internal testing, it does provide additional
assurance to Mortgage Corp. and the other participants that the readiness of
their systems, many of which are directly interfaced, are subjected to
independent verification.
 
     The Company has increased its estimate of the cost of its Year 2000
initiative and now believes that it will be approximately $1,500,000, a majority
of which is being incurred during 1999. Of these costs, approximately $150,000
is for computer systems that must be replaced and the remainder is personnel
costs (employees and external consultants). The increase is due to the cost of
participation in the MBA Test and
                                       25
<PAGE>   26
 
higher than anticipated costs for outside consultants. All estimated costs have
been budgeted and are expected to be funded by cash flows from operations.
 
     The cost of the initiative and the date on which the Company plans to
complete the Year 2000 modifications are based on management's best estimates,
which are derived utilizing numerous assumptions of future events including the
continued availability of certain resources, third party modification plans and
other factors. Unanticipated failures by critical third parties, as well as the
failure by the Company to execute its own remediation efforts, could have a
material adverse effect on the cost of the initiative and its completion date.
As a result, there can be no assurance that these forward-looking estimates will
be achieved and the actual cost and third party compliance could differ
materially from those plans, resulting in material financial risk.
 
  Potential Risks
 
     Currently, there is uncertainty as to the ultimate success of global
remediation efforts, including the efforts of entities that provide services to
large segments of society such as airlines, utilities and securities exchanges.
There could be short term or longer-term disruptions in segments of the economy
that could impact the Company. Due to the uncertainty with respect to how the
Year 2000 issue will affect business and government, it is not possible to list
all potential problems or risks to the Company.
 
     The Company believes that the most reasonably likely worst case scenarios
that could have adverse effects on the Company are the failures of third
parties, particularly residential mortgage loan borrowers, its lenders and the
investors who purchase its mortgage and consumer loan products. The Company's
residential mortgage and consumer loan borrowers could be affected by any
adverse impact on the general economy that could cause a rise in delinquencies.
Lenders, who provide funds used by the Company to acquire assets, might be
adversely affected, disrupting the flow of funds, which could have an adverse
impact on the Company's ability to make new loans. Likewise, a disruption in
services by investors such as FNMA could have an adverse impact on the Company's
ability to sell loans, which would result in significant reductions in operating
activities.
 
     Any Year 2000 factors that might impact borrowers' abilities to repay their
obligations relate to the failure of global remediation efforts over which the
Company has no influence. The Company's lenders and investors, most of which
operate in highly regulated industries, are among the largest such institutions
in the world. These institutions are under government regulatory mandates to
achieve full readiness prior to the end of 1999. The Company believes that it is
unlikely that these institutions will fail to achieve readiness within a
reasonable time frame; however, the Company will continue to monitor their
readiness and maintain an ongoing contingency plan.
 
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 fact, 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," "anticipate," "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, general economic
conditions; interest rate risk; prepayment speeds; delinquency and default
rates; credit loss rates; changes (legislative and otherwise) in the asset
securitization industry; demand for the Company's services; residential and
commercial real estate values; the impact of certain covenants in loan
agreements of the Company; the degree to which the Company is leveraged; its
needs for financing; the continued availability of the Company's credit
facilities; capital markets conditions, including the markets for asset-backed
securities and commercial
                                       26
<PAGE>   27
 
mortgage-backed securities; the performance of the Company's subsidiaries and
affiliates; changes in foreign political, social and economic conditions,
regulatory initiatives and compliance with governmental regulations, the ability
to attract and retain qualified personnel, the Company's Year 2000 issues; the
factors identified under Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations; risk factors; and other risks
identified in the Company's Securities and Exchange Commission filings. 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 Report speak
only as of the date of this Report. 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 earnings 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 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 effected by changes in interest rates.
 
     Portfolio assets consist of investments in pools of non-homogenous assets
that are 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 bench-mark 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.
 
     The sub-prime loans the Company sells generally are included in asset
backed securities the investor or purchaser issues. These securities are priced
at spreads over the LIBOR or and equivalent term treasury security. These
spreads are determined by demand for the security. Demand is affected by the
perception of credit quality and prepayment risk associated with the loans the
Company originates and sells. Interest rates offered to customers 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 the Company for the
products. The Company does not hedge these price risks.
 
     Prices paid for prime loans are impacted by movements in interest rates.
The Company mitigates this risk by locking in prices with its investors as the
customer locks in the price with the Company, thus allowing the Company to
maintain its margin. Generally, if interest rates rise significantly, home sales
and refinancing will decline adversely affecting the Company's prime mortgage
loan production.
 
     The Company's residual interests in securitizations represent the present
value of the excess cash flows the Company expects to receive over the life of
the underlying sub-prime mortgage or automobile loans. The value of the
sub-prime mortgage residual interest is adversely affected by prepayment, losses
and delinquencies due to the longer term of the underlying assets and the value
would be negatively impacted by an increase in short-term rates, as a portion of
the cash flows fluctuate monthly based upon the one-month LIBOR. The sub-prime
automobile residual interests is 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.
 
     The Company's investment in mortgage servicing rights are based on a
weighted average service fee rates and an assumed prepayment speeds. Changes in
prevailing mortgage interest rates contribute to changes in the prepayment
assumptions of servicing rights, thus causing increases to the value of the
servicing rights when mortgage rates increase and decreases in value when
mortgage rates decrease.
                                       27
<PAGE>   28
 
     In summary, the Company would be negatively impacted by rising interest
rates and declining prices for its sub-prime loans. Rising interest rates would
negatively impact prime mortgage production and the value of the residual
interests in the securitization and declining prices for the Company's sub-prime
loans would adversely effect the levels of gains achieved upon the sale of those
loans. There have been no material changes in the quantitative and qualitative
risks of the Company since December 31, 1998.
 
                                       28
<PAGE>   29
 
                                    PART II
 
                               OTHER INFORMATION
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
 
     (a) Exhibits
 
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                  DESCRIPTION
         ------                                  -----------
<C>                      <S>
          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).
          4.2            -- Warrant Agreement, dated July 3, 1995, by and between the
                            Company and American Stock Transfer & Trust Company, as
                            Warrant Agent (incorporated herein by reference to
                            Exhibit 4.2 of the Company's Current Report on Form 8-K
                            dated July 3, 1995 filed with the Commission on July 18,
                            1995).
          4.3            -- Registration Rights Agreement, dated July 1, 1997, among
                            the Company, Richard J. Gillen, Bernice J. Gillen, Harbor
                            Financial Mortgage Company Employees Pension Plan,
                            Lindsey Capital Corporation, Ed Smith and Thomas E.
                            Smith. (incorporated herein by reference to Exhibit 4.3
                            of the Company's Form 10-K dated March 24, 1998 filed
                            with the Commission on March 26, 1998).
          4.4            -- Stock Purchase Agreement, dated March 24, 1998, between
                            the Company and Texas Commerce Shareholders Company.
                            (incorporated herein by reference to Exhibit 4.4 of the
                            Company's Form 10-K dated March 24, 1998 filed with the
                            Commission on March 26, 1998).
          4.5            -- Registration Rights Agreement, dated March 24, 1998,
                            between the Company and Texas Commerce Shareholders
                            Company (incorporated herein by reference to Exhibit 4.5
                            of the Company's Form 10-K dated March 24, 1998 filed
                            with the Commission on March 24, 1998)
</TABLE>
 
                                       29
<PAGE>   30
 
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                  DESCRIPTION
         ------                                  -----------
<C>                      <S>
         10.1            -- Trust Agreement of FirstCity Liquidating Trust, dated
                            July 3, 1995 (incorporated herein by reference to Exhibit
                            10.1 of the Company's Current Report on Form 8-K dated
                            July 3, 1995 filed with the Commission on July 18, 1995).
         10.2            -- Investment Management Agreement, dated July 3, 1995,
                            between the Company and FirstCity Liquidating Trust
                            (incorporated herein by reference to Exhibit 10.2 of the
                            Company's Current Report on Form 8-K dated July 3, 1995
                            filed with the Commission on July 18, 1995
         10.3            -- Lock-Box Agreement, dated July 11, 1995, among the
                            Company, NationsBank of Texas, N.A., as lock-box agent,
                            FirstCity Liquidating Trust, FCLT Loans, L.P., and the
                            other Trust-Owned Affiliates signatory thereto, and each
                            of NationsBank of Texas, N.A. and Fleet National Bank, as
                            co-lenders (incorporated herein by reference to Exhibit
                            10.3 of the Company's Form 8-A/A dated August 25, 1995
                            filed with the Commission on August 25, 1995).
         10.4            -- Custodial Agreement, dated July 11, 1995, among Fleet
                            National Bank, as custodian, Fleet National Bank, as
                            agent, FCLT Loans, L.P., FirstCity Liquidating Trust, and
                            the Company (incorporated herein by reference to Exhibit
                            10.4 of the Company's Form 8-A/A dated August 25, 1995
                            filed with the Commission on August 25, 1995).
         10.5            -- Tier 3 Custodial Agreement, dated July 11, 1995, among
                            the Company, as custodian, Fleet National Bank, as agent,
                            FCLT Loans, L.P., FirstCity Liquidating Trust, and the
                            Company, as servicer (incorporated herein by reference to
                            Exhibit 10.5 of the Company's Form 8-A/A dated August 25,
                            1995 filed with the Commission on August 25, 1995).
         10.6            -- 12/97 Amended and Restated Facilities Agreement, dated
                            effective as of December 3, 1997, among Harbor Financial
                            Mortgage Corporation, New America Financial, Inc., Texas
                            Commerce Bank National Association and the other
                            warehouse lenders party thereto. (incorporated herein by
                            reference to Exhibit 10.6 of the Company's Form 10-K
                            dated March 24, 1998 filed with the Commission March 26,
                            1998).
         10.7            -- Modification Agreement, dated January 26, 1998, to the
                            Amended and Restated Facilities Agreement, dated as of
                            December 3, 1997, among Harbor Financial Mortgage
                            Corporation, New America Financial, Inc. and Chase Bank
                            of Texas, National Association (formerly known as Texas
                            Commerce Bank National Association). (incorporated herein
                            by reference to Exhibit 10,7 of the company's Form 10-K
                            dated March 24, 1998 filed with the Commission March 26,
                            1998).
         10.8            -- $50,000,000 3/98 Chase Texas Temporary Additional
                            Warehouse Note, dated March 17, 1998, by Harbor Financial
                            Mortgage Corporation and New America Financial, Inc., in
                            favor of Chase Bank of Texas, National Association.
                            (incorporated herein by reference to Exhibit 10.8 of the
                            Company's Form 10-K dated March 24, 1998 filed with the
                            Commission March 26, 1998).
         10.9            -- Employment Agreement, dated as of July 1, 1997, by and
                            between Harbor Financial Mortgage Corporation and Richard
                            J. Gillen. (incorporated herein by reference to Exhibit
                            10.9 of the Company's 10-K dated March 24, 1998 filed
                            with the Commission March 26, 1998).
</TABLE>
 
                                       30
<PAGE>   31
 
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                  DESCRIPTION
         ------                                  -----------
<C>                      <S>
         10.10           -- Employment Agreement, dated as of September 8, 1997, by
                            and between FirstCity Funding Corporation and Thomas R.
                            Brower, with similar agreements between FC Capital Corp.
                            and each of James H. Aronoff and Christopher J.
                            Morrissey. (incorporated herein by reference to Exhibit
                            10.10 of the Company's Form 10-K dated March 24, 1998
                            filed with the Commission March 26, 1998).
         10.11           -- Shareholder Agreement, dated as of September 8, 1997,
                            among FirstCity Funding Corporation, FirstCity Consumer
                            Lending Corporation, Thomas R. Brower, Scot A. Foith,
                            Thomas G. Dundon, R. Tyler Whann, Bradley C. Reeves,
                            Stephen H. Trent and Blake P. Bozman. (incorporated
                            herein by reference to Exhibit 10.11 of the Company's
                            Form 10-K dated March 24, 1998 filed with the Commission
                            March 26, 1998).
         10.12           -- Revolving Credit Loan Agreement, dated as of March 20,
                            1998, by and between FC Properties, Ltd. and Nomura Asset
                            Capital Corporation. (incorporated herein by reference to
                            Exhibit 10.12 of the Company's Form 10-K dated March 24,
                            1998 filed with the Commission March 26, 1998).
         10.13           -- Revolving Credit Loan Agreement, dated as of February 27,
                            1998, by and between FH Partners, L.P. and Nomura Asset
                            Capital Corporation. (incorporated herein by reference to
                            Exhibit 10.13 of the Company's Form 10-K dated March 24,
                            1998 filed with the Commission March 26, 1998).
         10.14           -- 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).
         10.15           -- 60,000,000 French Franc Revolving Promissory Note, dated
                            September 25, 1997, by J-Hawk International Corporation
                            in favor of the Bank of Scotland. (incorporated herein by
                            reference to Exhibit 10.15 of the Company's Form 10-K
                            dated March 24, 1998 filed with the Commission March 26,
                            1998).
         10.16           -- Loan Agreement, dated as of September 25, 1997, by and
                            between Bank of Scotland and J-Hawk International
                            Corporation. (incorporated herein reference to Exhibit
                            10.16 of the Company's Form 10-K dated March 24, 1998
                            filed with the Commission March 26, 1998).
         10.17           -- Guaranty Agreement, dated as of September 25, 1997, by
                            J-Hawk (incorporated herein by reference to Exhibit 10.17
                            of the Company's Form 10-K dated March 24, 1998 filed
                            with the Commission March 26, 1998).
         10.18           -- Guaranty Agreement, dated as of September 25, 1997, by
                            FirstCity Financial Corporation in favor of Bank of
                            Scotland. (incorporated herein by reference to Exhibit
                            10.18 of the Company's Form 10-K dated March 24, 1998
                            filed with the Commission March 26, 1998).
         10.19           -- Warehouse Credit Agreement, dated as of May 17, 1996,
                            among ContiTrade Services L.L.C., N.A.F. Auto Loan Trust
                            and National Auto Funding Corporation. (incorporated
                            herein by reference to Exhibit 10.19 of the Company's
                            Form 10-K dated March 24, 1998 filed with the Commission
                            March 26, 1998).
         10.20           -- Funding Commitment, dated as of May 17, 1996 by and
                            between ConiTrade Services L.L.C. and The Company.
                            (incorporated herein by reference to Exhibit 10.20 of the
                            Company's Form 10-K dated March 24, 1998 filed with the
                            Commission March 26, 1998).
</TABLE>
 
                                       31
<PAGE>   32
 
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                  DESCRIPTION
         ------                                  -----------
<C>                      <S>
         10.21           -- Revolving Credit Agreement, dated as of December 29,
                            1995, by and between the Company and Cargill financial
                            Services Corporation, as amended by the Eighth Amendment
                            to Revolving Credit Agreement dated February 1998.
                            (incorporated herein by reference to Exhibit 10.21 of the
                            Company's Form 10-K dated March 24, 1998 filed with the
                            Commission March 26, 1998).
         10.22           -- Master Repurchase Agreement Governing Purchased and Sales
                            of Mortgage Loans, dated as of July 1998, between Lehman
                            Commercial Paper Inc. and FHB Funding Corp. (incorporated
                            herein by reference to Exhibit 10.1 of the Company's Form
                            10-Q dated August 14, 1998, filed with the Commission
                            August 18, 1998).
         10.23           -- Warehouse Credit Agreement, dated as of April 30, 1998
                            among ContiTrade Services, L.L.C., FirstCity Consumer
                            Lending Corporation, FirstCity Auto Receivables L.L.C.
                            and FirstCity Financial Corporation. (incorporated herein
                            by reference to Exhibit 10.2 of the Company's Form 10-Q
                            dated August 14, 1998, filed with the Commission August
                            16, 1998).
         10.24           -- Servicing Agreement, dated as of April 30, 1998 among
                            FirstCity Auto Receivables L.L.C., FirstCity Servicing
                            Corporation of California, FirstCity Consumer Lending
                            Corporation and ContiTrade Services L.L.C. (incorporated
                            herein by reference to Exhibit 10.3 of the Company's Form
                            10-Q dated August 14, 1998, filed with the Commission
                            August 16,1998).
         10.25           -- Security and Collateral Agreement, dated as of April 30,
                            1998 among FirstCity Auto Receivables L.L.C., ContiTrade
                            Services L.L.C. and Chase Bank of Texas, National
                            Association. (incorporated herein by reference to Exhibit
                            10.4 of the Company's Form 10-Q dated August 14, 1998,
                            filed with the Commission August 16,1998).
         10.26           -- Loan Agreement, dated as of July 24, 1998, between
                            FirstCity Commercial Corporation and CFSC Capital Corp.
                            XXX (incorporated herein by reference Exhibit 10.5 of the
                            Company's Form 10-Q dated August 14, 1998, filed with the
                            Commission on August 18, 1998).
         10.27           -- 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)
         10.28           -- 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).
         10.29           -- Employment Agreement, dated October 1, 1998, by and
                            between FirstCity. Financial Mortgage Corporation, and
                            Buddy L. Terrell.
         10.30           -- Security Agreement, dated as of April 30, 1998 among
                            Enterprise Funding Corporation, FCAR Receivables L.L.C.,
                            MBIA Insurance Corporation, FirstCity Funding
                            Corporation, NationsBank N.A. and CSC Logic/MSA LLP d/b/a
                            Loan Servicing enterprise.
         10.31           -- Note purchase agreement, dated March 30, 1999 among
                            Enterprise Funding Corporation, FCAR Receivables, LLC and
                            NationsBank, N.A..
         10.32           -- Custodian Agreement, dated March 30, 1999, among FCAR
                            Receivables LLC, FirstCity Funding Corporation,
                            NationsBank, N.A., Enterprise Funding Corporation and
                            Chase Bank of Texas, N.A..
</TABLE>
 
                                       32
<PAGE>   33
 
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                  DESCRIPTION
         ------                                  -----------
<C>                      <S>
         10.33           -- 100,000,000 dollar form of note, dated March 30, 1999
                            among FCAR Receivables LLC, Enterprise Funding
                            Corporation and Nationsbank, N.A.
         27.1            -- Financial Data Schedule. (Exhibit 27.1 is being submitted
                            as an exhibit only in the electronic format of this
                            Quarterly Report on Form 10-Q being submitted to the
                            Securities and Exchange Commission. Exhibit 27.1 shall
                            not be deemed filed for purposes of Section 11 of the
                            Securities Act of 1933, Section 18 of the Securities Act
                            of 1934, as amended, or Section 323 of the Trust
                            Indenture Act of 1939, as amended, or otherwise be
                            subject to the liabilities of such sections, nor shall it
                            be deemed a part of any registration statement to which
                            it relates.)
</TABLE>
 
     (b) Reports on Form 8-K. No report on Form 8-K was filed by the Registrant
with the Securities Exchange Commission during the quarterly period ended March
31, 1999.
 
                                       33
<PAGE>   34
 
                                   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
                                             -----------------------------------
                                            Name:  James T. Sartain
                                            Title:    President and Chief
                                                      Operating
                                                Officer and Director
                                                (Duly authorized officer of the
                                                Registrant)
 
                                            By      /s/ GARY H. MILLER
                                             -----------------------------------
                                            Name:  Gary H. Miller
                                             Title:    Senior Vice President and
                                                       Chief
                                                  Financial Officer
                                                  (Duly authorized officer and
                                                  principal financial and
                                                  accounting officer of the
                                                  Registrant)
 
Dated: May 17, 1999
 
                                       34
<PAGE>   35
 
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                  DESCRIPTION
         ------                                  -----------
<C>                      <S>
          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).
          4.2            -- Warrant Agreement, dated July 3, 1995, by and between the
                            Company and American Stock Transfer & Trust Company, as
                            Warrant Agent (incorporated herein by reference to
                            Exhibit 4.2 of the Company's Current Report on Form 8-K
                            dated July 3, 1995 filed with the Commission on July 18,
                            1995).
          4.3            -- Registration Rights Agreement, dated July 1, 1997, among
                            the Company, Richard J. Gillen, Bernice J. Gillen, Harbor
                            Financial Mortgage Company Employees Pension Plan,
                            Lindsey Capital Corporation, Ed Smith and Thomas E.
                            Smith. (incorporated herein by reference to Exhibit 4.3
                            of the Company's Form 10-K dated March 24, 1998 filed
                            with the Commission on March 26, 1998).
          4.4            -- Stock Purchase Agreement, dated March 24, 1998, between
                            the Company and Texas Commerce Shareholders Company.
                            (incorporated herein by reference to Exhibit 4.4 of the
                            Company's Form 10-K dated March 24, 1998 filed with the
                            Commission on March 26, 1998).
          4.5            -- Registration Rights Agreement, dated March 24, 1998,
                            between the Company and Texas Commerce Shareholders
                            Company (incorporated herein by reference to Exhibit 4.5
                            of the Company's Form 10-K dated March 24, 1998 filed
                            with the Commission on March 24, 1998)
         10.1            -- Trust Agreement of FirstCity Liquidating Trust, dated
                            July 3, 1995 (incorporated herein by reference to Exhibit
                            10.1 of the Company's Current Report on Form 8-K dated
                            July 3, 1995 filed with the Commission on July 18, 1995).
</TABLE>
<PAGE>   36
 
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                  DESCRIPTION
         ------                                  -----------
<C>                      <S>
         10.2            -- Investment Management Agreement, dated July 3, 1995,
                            between the Company and FirstCity Liquidating Trust
                            (incorporated herein by reference to Exhibit 10.2 of the
                            Company's Current Report on Form 8-K dated July 3, 1995
                            filed with the Commission on July 18, 1995
         10.3            -- Lock-Box Agreement, dated July 11, 1995, among the
                            Company, NationsBank of Texas, N.A., as lock-box agent,
                            FirstCity Liquidating Trust, FCLT Loans, L.P., and the
                            other Trust-Owned Affiliates signatory thereto, and each
                            of NationsBank of Texas, N.A. and Fleet National Bank, as
                            co-lenders (incorporated herein by reference to Exhibit
                            10.3 of the Company's Form 8-A/A dated August 25, 1995
                            filed with the Commission on August 25, 1995).
         10.4            -- Custodial Agreement, dated July 11, 1995, among Fleet
                            National Bank, as custodian, Fleet National Bank, as
                            agent, FCLT Loans, L.P., FirstCity Liquidating Trust, and
                            the Company (incorporated herein by reference to Exhibit
                            10.4 of the Company's Form 8-A/A dated August 25, 1995
                            filed with the Commission on August 25, 1995).
         10.5            -- Tier 3 Custodial Agreement, dated July 11, 1995, among
                            the Company, as custodian, Fleet National Bank, as agent,
                            FCLT Loans, L.P., FirstCity Liquidating Trust, and the
                            Company, as servicer (incorporated herein by reference to
                            Exhibit 10.5 of the Company's Form 8-A/A dated August 25,
                            1995 filed with the Commission on August 25, 1995).
         10.6            -- 12/97 Amended and Restated Facilities Agreement, dated
                            effective as of December 3, 1997, among Harbor Financial
                            Mortgage Corporation, New America Financial, Inc., Texas
                            Commerce Bank National Association and the other
                            warehouse lenders party thereto. (incorporated herein by
                            reference to Exhibit 10.6 of the Company's Form 10-K
                            dated March 24, 1998 filed with the Commission March 26,
                            1998).
         10.7            -- Modification Agreement, dated January 26, 1998, to the
                            Amended and Restated Facilities Agreement, dated as of
                            December 3, 1997, among Harbor Financial Mortgage
                            Corporation, New America Financial, Inc. and Chase Bank
                            of Texas, National Association (formerly known as Texas
                            Commerce Bank National Association). (incorporated herein
                            by reference to Exhibit 10,7 of the company's Form 10-K
                            dated March 24, 1998 filed with the Commission March 26,
                            1998).
         10.8            -- $50,000,000 3/98 Chase Texas Temporary Additional
                            Warehouse Note, dated March 17, 1998, by Harbor Financial
                            Mortgage Corporation and New America Financial, Inc., in
                            favor of Chase Bank of Texas, National Association.
                            (incorporated herein by reference to Exhibit 10.8 of the
                            Company's Form 10-K dated March 24, 1998 filed with the
                            Commission March 26, 1998).
         10.9            -- Employment Agreement, dated as of July 1, 1997, by and
                            between Harbor Financial Mortgage Corporation and Richard
                            J. Gillen. (incorporated herein by reference to Exhibit
                            10.9 of the Company's 10-K dated March 24, 1998 filed
                            with the Commission March 26, 1998).
         10.10           -- Employment Agreement, dated as of September 8, 1997, by
                            and between FirstCity Funding Corporation and Thomas R.
                            Brower, with similar agreements between FC Capital Corp.
                            and each of James H. Aronoff and Christopher J.
                            Morrissey. (incorporated herein by reference to Exhibit
                            10.10 of the Company's Form 10-K dated March 24, 1998
                            filed with the Commission March 26, 1998).
</TABLE>
<PAGE>   37
 
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                  DESCRIPTION
         ------                                  -----------
<C>                      <S>
         10.11           -- Shareholder Agreement, dated as of September 8, 1997,
                            among FirstCity Funding Corporation, FirstCity Consumer
                            Lending Corporation, Thomas R. Brower, Scot A. Foith,
                            Thomas G. Dundon, R. Tyler Whann, Bradley C. Reeves,
                            Stephen H. Trent and Blake P. Bozman. (incorporated
                            herein by reference to Exhibit 10.11 of the Company's
                            Form 10-K dated March 24, 1998 filed with the Commission
                            March 26, 1998).
         10.12           -- Revolving Credit Loan Agreement, dated as of March 20,
                            1998, by and between FC Properties, Ltd. and Nomura Asset
                            Capital Corporation. (incorporated herein by reference to
                            Exhibit 10.12 of the Company's Form 10-K dated March 24,
                            1998 filed with the Commission March 26, 1998).
         10.13           -- Revolving Credit Loan Agreement, dated as of February 27,
                            1998, by and between FH Partners, L.P. and Nomura Asset
                            Capital Corporation. (incorporated herein by reference to
                            Exhibit 10.13 of the Company's Form 10-K dated March 24,
                            1998 filed with the Commission March 26, 1998).
         10.14           -- 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).
         10.15           -- 60,000,000 French Franc Revolving Promissory Note, dated
                            September 25, 1997, by J-Hawk International Corporation
                            in favor of the Bank of Scotland. (incorporated herein by
                            reference to Exhibit 10.15 of the Company's Form 10-K
                            dated March 24, 1998 filed with the Commission March 26,
                            1998).
         10.16           -- Loan Agreement, dated as of September 25, 1997, by and
                            between Bank of Scotland and J-Hawk International
                            Corporation. (incorporated herein reference to Exhibit
                            10.16 of the Company's Form 10-K dated March 24, 1998
                            filed with the Commission March 26, 1998).
         10.17           -- Guaranty Agreement, dated as of September 25, 1997, by
                            J-Hawk (incorporated herein by reference to Exhibit 10.17
                            of the Company's Form 10-K dated March 24, 1998 filed
                            with the Commission March 26, 1998).
         10.18           -- Guaranty Agreement, dated as of September 25, 1997, by
                            FirstCity Financial Corporation in favor of Bank of
                            Scotland. (incorporated herein by reference to Exhibit
                            10.18 of the Company's Form 10-K dated March 24, 1998
                            filed with the Commission March 26, 1998).
         10.19           -- Warehouse Credit Agreement, dated as of May 17, 1996,
                            among ContiTrade Services L.L.C., N.A.F. Auto Loan Trust
                            and National Auto Funding Corporation. (incorporated
                            herein by reference to Exhibit 10.19 of the Company's
                            Form 10-K dated March 24, 1998 filed with the Commission
                            March 26, 1998).
         10.20           -- Funding Commitment, dated as of May 17, 1996 by and
                            between ConiTrade Services L.L.C. and The Company.
                            (incorporated herein by reference to Exhibit 10.20 of the
                            Company's Form 10-K dated March 24, 1998 filed with the
                            Commission March 26, 1998).
         10.21           -- Revolving Credit Agreement, dated as of December 29,
                            1995, by and between the Company and Cargill financial
                            Services Corporation, as amended by the Eighth Amendment
                            to Revolving Credit Agreement dated February 1998.
                            (incorporated herein by reference to Exhibit 10.21 of the
                            Company's Form 10-K dated March 24, 1998 filed with the
                            Commission March 26, 1998).
</TABLE>
<PAGE>   38
 
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                  DESCRIPTION
         ------                                  -----------
<C>                      <S>
         10.22           -- Master Repurchase Agreement Governing Purchased and Sales
                            of Mortgage Loans, dated as of July 1998, between Lehman
                            Commercial Paper Inc. and FHB Funding Corp. (incorporated
                            herein by reference to Exhibit 10.1 of the Company's Form
                            10-Q dated August 14, 1998, filed with the Commission
                            August 18, 1998).
         10.23           -- Warehouse Credit Agreement, dated as of April 30, 1998
                            among ContiTrade Services, L.L.C., FirstCity Consumer
                            Lending Corporation, FirstCity Auto Receivables L.L.C.
                            and FirstCity Financial Corporation. (incorporated herein
                            by reference to Exhibit 10.2 of the Company's Form 10-Q
                            dated August 14, 1998, filed with the Commission August
                            16, 1998).
         10.24           -- Servicing Agreement, dated as of April 30, 1998 among
                            FirstCity Auto Receivables L.L.C., FirstCity Servicing
                            Corporation of California, FirstCity Consumer Lending
                            Corporation and ContiTrade Services L.L.C. (incorporated
                            herein by reference to Exhibit 10.3 of the Company's Form
                            10-Q dated August 14, 1998, filed with the Commission
                            August 16,1998).
         10.25           -- Security and Collateral Agreement, dated as of April 30,
                            1998 among FirstCity Auto Receivables L.L.C., ContiTrade
                            Services L.L.C. and Chase Bank of Texas, National
                            Association. (incorporated herein by reference to Exhibit
                            10.4 of the Company's Form 10-Q dated August 14, 1998,
                            filed with the Commission August 16,1998).
         10.26           -- Loan Agreement, dated as of July 24, 1998, between
                            FirstCity Commercial Corporation and CFSC Capital Corp.
                            XXX (incorporated herein by reference Exhibit 10.5 of the
                            Company's Form 10-Q dated August 14, 1998, filed with the
                            Commission on August 18, 1998).
         10.27           -- 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)
         10.28           -- 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).
         10.29           -- Employment Agreement, dated October 1, 1998, by and
                            between FirstCity. Financial Mortgage Corporation, and
                            Buddy L. Terrell.
         10.30           -- Security Agreement, dated as of April 30, 1998 among
                            Enterprise Funding Corporation, FCAR Receivables L.L.C.,
                            MBIA Insurance Corporation, FirstCity Funding
                            Corporation, NationsBank N.A. and CSC Logic/MSA LLP d/b/a
                            Loan Servicing enterprise.
         10.31           -- Note purchase agreement, dated March 30, 1999 among
                            Enterprise Funding Corporation, FCAR Receivables, LLC and
                            NationsBank, N.A..
         10.32           -- Custodian Agreement, dated March 30, 1999, among FCAR
                            Receivables LLC, FirstCity Funding Corporation,
                            NationsBank, N.A., Enterprise Funding Corporation and
                            Chase Bank of Texas, N.A..
         10.33           -- 100,000,000 dollar form of note, dated March 30, 1999
                            among FCAR Receivables LLC, Enterprise Funding
                            Corporation and Nationsbank, N.A.
</TABLE>
<PAGE>   39
 
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                  DESCRIPTION
         ------                                  -----------
<C>                      <S>
         27.1            -- Financial Data Schedule. (Exhibit 27.1 is being submitted
                            as an exhibit only in the electronic format of this
                            Quarterly Report on Form 10-Q being submitted to the
                            Securities and Exchange Commission. Exhibit 27.1 shall
                            not be deemed filed for purposes of Section 11 of the
                            Securities Act of 1933, Section 18 of the Securities Act
                            of 1934, as amended, or Section 323 of the Trust
                            Indenture Act of 1939, as amended, or otherwise be
                            subject to the liabilities of such sections, nor shall it
                            be deemed a part of any registration statement to which
                            it relates.)
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