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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) OFTHE SECURITIES EXCHANGE ACT OF 1934 
| |            |  |                                                                                        
| |            |  | For the Quarterly Period Ended March 31, 2002 or                                       
| |            |  |                                                                                        
| | [   ]      |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
| |            | 

Commission File Number 033-19694


FirstCity Financial Corporation
(Exact name of Registrant as Specified in Its Charter)

|                                         |  |                    
|---------------------------------------- |  | -------------------
|Delaware                                 |  | 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)         

(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 [   ]

The number of shares of common stock, par value $.01 per share,
outstanding at May 15, 2002 was 8,376,500.



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TABLE OF CONTENTS



|                          |                                                                                                |  |  |  |  |  |  | 
|------------------------- | ---------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                   
|                          | ITEM 1. Financial Statements                                                                  
|                          | ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
|                          | ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.                           
|PART II OTHER INFORMATION
|                          | ITEM 1. Legal Proceedings                                                                     
|                          | ITEM 3. Defaults Upon Senior Securities                                                       
|                          | ITEM 6. Exhibits and Reports on Form 8-K                                                      
|SIGNATURES               
|EXHIBIT INDEX            



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##### Table of Contents






PART I

FINANCIAL INFORMATION




ITEM 1.Financial Statements

FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
(Unaudited)

|                                                                 |                                                                                                                                                                                                                                         |                                                                        |        |         |           |   |              |         |         |  | 
|---------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | ------ | ------- | --------- | - | ------------ | ------- | ------- |  | 
|                                                                 |                                                                                                                                                                                                                                         |                                                                        |        |         | March 31, |   | December 31,
|                                                                 |                                                                                                                                                                                                                                         |                                                                        |        |         | 2002      |   | 2001        
|                                                                 |                                                                                                                                                                                                                                         |                                                                        |        |         |           |   |             
|ASSETS                                                           |                                                                                                                                                                                                                                         |                                                                        |        |         |           |   |              |        
|Cash and cash equivalents                                        |                                                                                                                                                                                                                                         | $                                                                      | 4,626  |         |           | $ | 5,583        |        
|Portfolio Assets, net                                            |                                                                                                                                                                                                                                         |                                                                        | 12,911 |         |           |   | 14,218       |        
|Loans receivable, net                                            |                                                                                                                                                                                                                                         |                                                                        | 23,477 |         |           |   | 19,899       |        
|Equity investments                                               |                                                                                                                                                                                                                                         |                                                                        | 54,529 |         |           |   | 54,655       |        
|Deferred tax benefit, net                                        |                                                                                                                                                                                                                                         |                                                                        | 20,101 |         |           |   | 20,101       |        
|Other assets, net                                                |                                                                                                                                                                                                                                         |                                                                        | 8,070  |         |           |   | 7,780        |        
|Net assets of discontinued operations                            |                                                                                                                                                                                                                                         |                                                                        | 16,463 |         |           |   | 16,657       |        
|                                                                 |                                                                                                                                                                                                                                         |                                                                        |        |         |           |   |              |        
|                                                                 |                                                                                                                                                                                                                                         | Total Assets                                                           |        | $       | 140,177   |   |              | $       | 138,893 | 
|                                                                 |                                                                                                                                                                                                                                         |                                                                        |        |         |           |   |              |        
|LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS EQUITY |                                                                                                                                                                                                                                         |                                                                        |        |         |          
|Liabilities:                                                     |                                                                                                                                                                                                                                         |                                                                        |        |         |           |   |              |        
|                                                                 | Notes payable                                                                                                                                                                                                                           |                                                                        | $      | 93,945  |           |   | $            | 91,209  |        
|                                                                 | Other liabilities                                                                                                                                                                                                                       |                                                                        |        | 11,520  |           |   |              | 11,706  |        
|                                                                 |                                                                                                                                                                                                                                         |                                                                        |        |         |           |   |              |        
|                                                                 |                                                                                                                                                                                                                                         | Total Liabilities                                                      |        |         | 105,465   |   |              |         | 102,915 | 
|Commitments and contingencies                                    |                                                                                                                                                                                                                                         |                                                                        |       |         |           |   |             |        
|Redeemable preferred stock:                                      |                                                                                                                                                                                                                                         |                                                                        |        |         |           |   |              |        
|                                                                 | Adjusting rate preferred stock, including accumulated
dividends in arrears of $7,062 and $6,420,
respectively (par value $.01; redemption value of $21
per share; 2,000,000 shares authorized; 1,222,901
shares issued and outstanding) |                                                                        |        | 32,743  |           |   |              | 32,101  |        
|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: 8,376,500
shares                                                                                                                         |                                                                        |        | 84      |           |   |              | 84      |        
|                                                                 | Paid in capital                                                                                                                                                                                                                         |                                                                        |        | 79,645  |           |   |              | 79,645  |        
|                                                                 | Accumulated deficit                                                                                                                                                                                                                     |                                                                        |        | (78,704 | )         |   |              | (76,728 | )      
|                                                                 | Accumulated other comprehensive income                                                                                                                                                                                                  |                                                                        |        | 944     |           |   |              | 876     |        
|                                                                 |                                                                                                                                                                                                                                         |                                                                        |        |         |           |   |              |        
|                                                                 |                                                                                                                                                                                                                                         | Total Shareholders Equity                                             |        |         | 1,969     |   |              |         | 3,877   | 
|                                                                 |                                                                                                                                                                                                                                         |                                                                        |        |         |           |   |              |        
|                                                                 |                                                                                                                                                                                                                                         | Total Liabilities, Redeemable Preferred Stock and
Shareholders Equity |        | $       | 140,177   |   |              | $       | 138,893 | 
|                                                                 |                                                                                                                                                                                                                                         |                                                                        |        |         |           |   |              |        

See accompanying notes to consolidated financial statements.

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FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

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

|                                                                                     |                                                     |                |        |                    |       |      |       |       |       | 
|------------------------------------------------------------------------------------ | --------------------------------------------------- | -------------- | ------ | ------------------ | ----- | ---- | ----- | ----- | ----- | 
|                                                                                     |                                                     |                |        | Three Months Ended
|                                                                                     |                                                     |                |        | March 31,         
|                                                                                     |                                                     |                |        |                   
|                                                                                     |                                                     |                |        | 2002               |       | 2001
|                                                                                     |                                                     |                |        |                    |       |     
|Revenues:                                                                            |                                                     |                |        |                    |       |      |       |      
|                                                                                     | Servicing fees                                      |                | $      | 2,222              |       |      | $     | 2,465 |      
|                                                                                     | Gain on resolution of Portfolio Assets              |                |        | 244                |       |      |       | 218   |      
|                                                                                     | Equity in earnings of investments                   |                |        | 1,475              |       |      |       | 2,060 |      
|                                                                                     | Interest income                                     |                |        | 1,305              |       |      |       | 1,240 |      
|                                                                                     | Gain on sale of interest in equity investment       |                |        |                   |       |      |       | 3,134 |      
|                                                                                     | Other income                                        |                |        | 240                |       |      |       | 120   |      
|                                                                                     |                                                     |                |        |                    |       |      |       |      
|                                                                                     |                                                     | Total revenues |        |                    | 5,486 |      |       |       | 9,237 | 
|Expenses:                                                                            |                                                     |                |        |                    |       |      |       |      
|                                                                                     | Interest and fees on notes payable                  |                |        | 1,548              |       |      |       | 2,442 |      
|                                                                                     | Salaries and benefits                               |                |        | 2,735              |       |      |       | 2,223 |      
|                                                                                     | Provision for loan and impairment losses            |                |        | 99                 |       |      |       | 585   |      
|                                                                                     | Occupancy, data processing, communication and other |                |        | 1,910              |       |      |       | 2,578 |      
|                                                                                     |                                                     |                |        |                    |       |      |       |      
|                                                                                     |                                                     | Total expenses |        |                    | 6,292 |      |       |       | 7,828 | 
|Earnings (loss) from continuing operations before
income taxes and minority interest |                                                     |                | (806   | )                  |       |      | 1,409 |      
|Benefit (provision) for income taxes                                                 |                                                     |                | (13    | )                  |       |      | 15    |      
|                                                                                     |                                                     |                |        |                    |       |      |       |      
|Earnings (loss) from continuing operations before
minority interest                  |                                                     |                | (819   | )                  |       |      | 1,424 |      
|Minority interest                                                                    |                                                     |                | (15    | )                  |       |      | 201   |      
|                                                                                     |                                                     |                |        |                    |       |      |       |      
|Earnings (loss) from continuing operations                                           |                                                     |                | (834   | )                  |       |      | 1,625 |      
|Loss from discontinued operations                                                    |                                                     |                | (500   | )                  |       |      |      |      
|                                                                                     |                                                     |                |        |                    |       |      |       |      
|Net earnings (loss)                                                                  |                                                     |                | (1,334 | )                  |       |      | 1,625 |      
|Accumulated preferred dividends in arrears                                           |                                                     |                | (642   | )                  |       |      | (642  | )    
|                                                                                     |                                                     |                |        |                    |       |      |       |      
|Net earnings (loss) to common shareholders                                           |                                                     | $              | (1,976 | )                  |       | $    | 983   |      
|                                                                                     |                                                     |                |        |                    |       |      |       |       |      
|Basic and diluted earnings (loss) per common share are
as follows:                   |                                                     |                |        |                    |       |      |       |      
|                                                                                     | Earnings (loss) from continuing operations          |                | $      | (0.18              | )     |      | $     | 0.12  |      
|                                                                                     | Discontinued operations                             |                |        | (0.06              | )     |      |       |      |      
|                                                                                     | Net earnings (loss)                                 |                | $      | (0.24              | )     |      | $     | 0.12  |      
|                                                                                     | Weighted average common shares outstanding          |                |        | 8,376              |       |      |       | 8,368 |      

See accompanying notes to consolidated financial statements.

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FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

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

|                                                        |                                             |  |           |   |        |   |         |   |             |   |        |   |               |   |         |        |               |   |             |       |   |   |        |        |  
|------------------------------------------------------- | ------------------------------------------- |  | --------- | - | ------ | - | ------- | - | ----------- | - | ------ | - | ------------- | - | ------- | ------ | ------------- | - | ----------- | ----- | - | - | ------ | ------ | -
|                                                        |                                             |  |           |   |        |   |         |   |             |   |        |   |               |   |         |        |               |   | Accumulated |       |   |   |       
|                                                        |                                             |  |           |   |        |   |         |   |             |   |        |   |               |   |         |        |               |   | Other       |       |   |   |       
|                                                        |                                             |  | Number of |   |        |   |         |   |             |   |        |   |               |   |         |        | Comprehensive |   | Total      
|                                                        |                                             |  | Common    |   | Common |   | Paid in |   | Accumulated |   | Income |   | Shareholders'
|                                                        |                                             |  | Shares    |   | Stock  |   | Capital |   | Deficit     |   | (Loss) |   | Equity       
|                                                        |                                             |  |           |   |        |   |         |   |             |   |        |   |              
|Balances, December 31, 2000                             |                                             |  | 8,368,344 |   |        | $ | 84      |   |             | $ | 79,634 |   |               | $ | (71,131 | )      |               | $ | (109        | )     |   | $ | 8,478  |       
|Purchase of shares through
employee stock purchase
plan |                                             |  | 8,156     |   |        |   |        |   |             |   | 11     |   |               |   |        |        |               |   |            |       |   |   | 11     |       
|Comprehensive loss:                                     |                                             |  |           |   |        |   |         |   |             |   |        |   |               |   |         |        |               |   |             |       |   |   |        |       
|                                                        | Net loss for 2001                           |  |           |  |        |   |         |  |             |   |        |  |               |   |         | (3,029 | )             |   |             |      |   |   |        | (3,029 | )
|                                                        | Foreign currency items                      |  |           |  |        |   |         |  |             |   |        |  |               |   |         |       |               |   |             | (218  | ) |   |        | (218   | )
|                                                        | Unrealized net gain on
securitization       |  |           |  |        |   |         |  |             |   |        |  |               |   |         |       |               |   |             | 1,203 |   |   |        | 1,203  |  
|                                                        |                                             |  |           |   |        |   |         |   |             |   |        |   |               |   |         |        |               |   |             |       |   |   |        |       
|Total comprehensive loss                                |                                             |  |           |   |        |   |         |   |             |   |        |   |               |   |         |        |               |   |             |       |   |   | (2,044 | )     
|                                                        |                                             |  |           |   |        |   |         |   |             |   |        |   |               |   |         |        |               |   |             |       |   |   |        |       
|Preferred dividends                                     |                                             |  |          |   |        |   |        |   |             |   |       |   |               |   | (2,568  | )      |               |   |            |       |   |   | (2,568 | )     
|                                                        |                                             |  |           |   |        |   |         |   |             |   |        |   |               |   |         |        |               |   |             |       |   |   |        |       
|Balances, December 31, 2001                             |                                             |  | 8,376,500 |   |        |   | 84      |   |             |   | 79,645 |   |               |   | (76,728 | )      |               |   | 876         |       |   |   | 3,877  |       
|Comprehensive loss:                                     |                                             |  |           |   |        |   |         |   |             |   |        |   |               |   |         |        |               |   |             |       |   |   |        |       
|                                                        | Net loss for the first
three months of 2002 |  |           |  |        |   |         |  |             |   |        |  |               |   |         | (1,334 | )             |   |             |      |   |   |        | (1,334 | )
|                                                        | Foreign currency items                      |  |           |  |        |   |         |  |             |   |        |  |               |   |         |       |               |   |             | (135  | ) |   |        | (135   | )
|                                                        | Unrealized net gain on
securitization       |  |           |  |        |   |         |  |             |   |        |  |               |   |         |       |               |   |             | 203   |   |   |        | 203    |  
|                                                        |                                             |  |           |   |        |   |         |   |             |   |        |   |               |   |         |        |               |   |             |       |   |   |        |       
|Total comprehensive loss                                |                                             |  |           |   |        |   |         |   |             |   |        |   |               |   |         |        |               |   |             |       |   |   | (1,266 | )     
|                                                        |                                             |  |           |   |        |   |         |   |             |   |        |   |               |   |         |        |               |   |             |       |   |   |        |       
|Preferred dividends                                     |                                             |  |          |   |        |   |        |   |             |   |       |   |               |   | (642    | )      |               |   |            |       |   |   | (642   | )     
|                                                        |                                             |  |           |   |        |   |         |   |             |   |        |   |               |   |         |        |               |   |             |       |   |   |        |       
|Balances, March 31, 2002                                |                                             |  | 8,376,500 |   |        | $ | 84      |   |             | $ | 79,645 |   |               | $ | (78,704 | )      |               | $ | 944         |       |   | $ | 1,969  |       
|                                                        |                                             |  |           |   |        |   |         |   |             |   |        |   |               |   |         |        |               |   |             |       |   |   |        |       

See accompanying notes to consolidated financial statements

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FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

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

|                                                  |                                                                                        |                                                                     |                                           |        |                    |        |       |         |        |        |  
|------------------------------------------------- | -------------------------------------------------------------------------------------- | ------------------------------------------------------------------- | ----------------------------------------- | ------ | ------------------ | ------ | ----- | ------- | ------ | ------ | -
|                                                  |                                                                                        |                                                                     |                                           |        | Three Months Ended
|                                                  |                                                                                        |                                                                     |                                           |        | March 31,         
|                                                  |                                                                                        |                                                                     |                                           |        |                   
|                                                  |                                                                                        |                                                                     |                                           |        | 2002               |        | 2001 
|                                                  |                                                                                        |                                                                     |                                           |        |                    |        |      
|Cash flows from operating activities:             |                                                                                        |                                                                     |                                           |        |                    |        |       |        
|                                                  | Net earnings (loss)                                                                    |                                                                     | $                                         | (1,334 | )                  |        | $     | 1,625   |       
|                                                  | Adjustments to reconcile net earnings (loss) to net cash
used in
operating activities: |                                                                     |                                           |        |                    |        |       |         |       
|                                                  |                                                                                        | Loss from discontinued operations                                   |                                           |        | 500                |        |       |         |       |       
|                                                  |                                                                                        | Proceeds from resolution of Portfolio Assets                        |                                           |        | 718                |        |       |         | 1,841  |       
|                                                  |                                                                                        | Gain on resolution of Portfolio Assets                              |                                           |        | (244               | )      |       |         | (218   | )     
|                                                  |                                                                                        | Purchase of Portfolio Assets and loans receivable, net              |                                           |        | (3,926             | )      |       |         | (3,955 | )     
|                                                  |                                                                                        | Provision for loan and impairment losses                            |                                           |        | 9   9              |        |       |         | 585    |       
|                                                  |                                                                                        | Equity in earnings of investments                                   |                                           |        | (1,475             | )      |       |         | (2,060 | )     
|                                                  |                                                                                        | Proceeds from performing Portfolio Assets and loans
receivable, net |                                           |        | 1,102              |        |       |         | 1,259  |       
|                                                  |                                                                                        | Depreciation and amortization                                       |                                           |        | 175                |        |       |         | 251    |       
|                                                  |                                                                                        | Decrease (increase) in other assets                                 |                                           |        | 324                |        |       |         | (717   | )     
|                                                  |                                                                                        | Gain on sale of interest in equity investment                       |                                           |        |                   |        |       |         | (3,134 | )     
|                                                  |                                                                                        | Increase (decrease) in other liabilities                            |                                           |        | (63                | )      |       |         | 322    |       
|                                                  |                                                                                        |                                                                     |                                           |        |                    |        |       |        
|                                                  |                                                                                        |                                                                     | Net cash used in operating activities     |        |                    | (4,124 | )     |         |        | (4,201 | )
|                                                  |                                                                                        |                                                                     |                                           |        |                    |        |       |        
|Cash flows from investing activities:             |                                                                                        |                                                                     |                                           |        |                    |        |       |        
|                                                  | Proceeds from sale of interest in equity investment                                    |                                                                     |                                           |       |                    |        |       | 7,000   |       
|                                                  | Property and equipment, net                                                            |                                                                     |                                           | (283   | )                  |        |       | (85     | )     
|                                                  | Contributions to Acquisition Partnerships and Servicing
Entities                       |                                                                     |                                           | (1,488 | )                  |        |       | (5,778  | )     
|                                                  | Distributions from Acquisition Partnerships and Servicing
Entities                     |                                                                     |                                           | 2,563  |                    |        |       | 2,345   |       
|                                                  |                                                                                        |                                                                     |                                           |        |                    |        |       |        
|                                                  |                                                                                        |                                                                     | Net cash provided by investing activities |        |                    | 792    |       |         |        | 3,482  |  
|                                                  |                                                                                        |                                                                     |                                           |        |                    |        |       |        
|Cash flows from financing activities:             |                                                                                        |                                                                     |                                           |        |                    |        |       |        
|                                                  | Borrowings under notes payable                                                         |                                                                     |                                           | 7,044  |                    |        |       | 11,197  |       
|                                                  | Payments of notes payable                                                              |                                                                     |                                           | (4,363 | )                  |        |       | (10,908 | )     
|                                                  | Proceeds from issuance of common stock                                                 |                                                                     |                                           |       |                    |        |       | 9       |       
|                                                  |                                                                                        |                                                                     |                                           |        |                    |        |       |        
|                                                  |                                                                                        |                                                                     | Net cash provided by financing activities |        |                    | 2,681  |       |         |        | 298    |  
|                                                  |                                                                                        |                                                                     |                                           |        |                    |        |       |        
|                                                  |                                                                                        |                                                                     | Net cash used in continuing operations    |        |                    | (651   | )     |         |        | (421   | )
|                                                  |                                                                                        |                                                                     | Net cash used in discontinued operations  |        |                    | (306   | )     |         |        | (398   | )
|                                                  |                                                                                        |                                                                     |                                           |        |                    |        |       |        
|Net decrease in cash and cash equivalents         |                                                                                        | $                                                                   | (957                                      | )      |                    | $      | (819  | )      
|Cash and cash equivalents, beginning of period    |                                                                                        |                                                                     | 5,583                                     |        |                    |        | 8,043 |        
|                                                  |                                                                                        |                                                                     |                                           |        |                    |        |       |        
|Cash and cash equivalents, end of period          |                                                                                        | $                                                                   | 4,626                                     |        |                    | $      | 7,224 |        
|                                                  |                                                                                        |                                                                     |                                           |        |                    |        |       |        
|Supplemental disclosure of cash flow information: |                                                                                        |                                                                     |                                           |        |                    |        |       |        
|                                                  | Cash paid (received) during the period for:                                            |                                                                     |                                           |        |                    |        |       |         |       
|                                                  |                                                                                        | Interest                                                            |                                           | $      | 1,284              |        |       | $       | 2,293  |       
|                                                  |                                                                                        | Income taxes                                                        |                                           |        | 15                 |        |       |         | (15    | )     
|                                                  | Non-cash financing activities:                                                         |                                                                     |                                           |        |                    |        |       |         |       
|                                                  |                                                                                        | Dividends accumulated and not paid on preferred
stock               |                                           |        | 642                |        |       |         | 642    |       

See accompanying notes to consolidated financial statements.

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FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002
(Dollars in thousands, except per share data)

(1) Basis of Presentation and Earnings (Loss) per Common Share

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, 2002, the results of operations and the cash flows for the
three-month periods ended March 31, 2002 and 2001.

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

The effects of any common stock equivalents are antidilutive for the three
months ended March 31, 2002 and 2001; therefore, diluted earnings (loss) per
common share is reported the same as basic earnings (loss) per common share.

(2) Liquidity and Capital Resources

Generally, the Company requires liquidity to fund its operations, working
capital, payment of debt, equity for acquisition of pools of assets or single
assets (collectively referred to as Portfolio Assets or Portfolios),
investments in and advances to entities formed with Cargill Financial Services
Corporation (Cargill) or one or more other co-investors to acquire Portfolios
(each such entity an Acquisition Partnership), 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.

BoS(USA), Inc. (BoS(USA)), a wholly-owned subsidiary of Bank of
Scotland, has an option to acquire a warrant for 1,975,000 shares of the
Companys non-voting Common Stock; the option can be exercised after June 30,
2002 if the Companys $12 million Term Loan B owed to BoS(USA) and Bank of
Scotland remains outstanding, but not prior to that date. The strike price is
$2.3125 per share. In the event that prior to June 30, 2002 the Company either
(a) refinances the $12 million Term Loan B with subordinated debt, or (b) pays
off the balance of Term Loan B from proceeds of an equity offering, then the
option to acquire a warrant for 1,975,000 shares of non-voting Common Stock
will terminate. BoS(USA) and the Company extended the initial exercise date for
this option to acquire a warrant for 1,975,000 shares from August 31, 2001 to
June 30, 2002 to allow the Company additional time to pursue possible
restructure alternatives which would otherwise be limited due to change of
control issues related to its substantial net operating loss carry forwards
(NOLs).

BoS(USA) also has a warrant to purchase 425,000 shares of the Companys
voting Common Stock at $2.3125 per share. In the event that Term Loan B is
terminated prior to June 30, 2002 through a transaction involving the issuance
of warrants, BoS(USA) is entitled to additional warrants in connection with
this existing warrant for 425,000 shares to retain its ability to acquire
approximately 4.86% of the Companys voting Common Stock. BoS(USA) and the
Company amended the warrant to extend the date from August 31, 2001 to June 30,
2002 to correspond to the extension of the initial exercise date of the option
described in the preceding paragraph.

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FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)

In the third quarter of 1999, dividends on the Companys redeemable
preferred stock (New Preferred Stock) were suspended. At March 31, 2002,
accumulated dividends in arrears on New Preferred Stock totaled $7.1 million,
or $5.775 per share. Since the Company failed to pay quarterly dividends for
six consecutive quarters, the holders of New Preferred Stock are entitled to
elect two directors to the Companys Board until cumulative dividends have been
paid in full. Dividends on outstanding shares of New Preferred Stock of
FirstCity will be restricted until Term Loan B is paid in full. Given the
continued high debt levels of the Company, and managements priority of
assuring adequate levels of liquidity, the Company does not anticipate that
dividends on New Preferred Stock will be paid in the foreseeable future. The
board of directors and the management of the Company are currently evaluating
various alternatives to address its outstanding shares of New Preferred Stock
and the corresponding accrued dividends and redemption obligation, in addition
to the option of BoS(USA) to acquire a warrant to purchase 1,975,000 shares.

During the second quarter of 2000, the Portfolio Asset acquisition and
resolution group of the Company entered into a $17 million loan facility with
Cargill. In January 2001, the maximum principal balance under this revolving
facility was increased to $30 million. This facility is being used exclusively
to provide equity in new Portfolio acquisitions in partnerships with Cargill.

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

(3) New Accounting Pronouncements

On January 1, 2002, the Company adopted Statement of Financial Accounting
Standards (SFAS) 142, Goodwill and Other Intangible Assets(SFAS 142) and
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets
(SFAS 144). SFAS 142 requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized but instead be tested for
impairment at least annually in accordance with the provisions of SFAS 142.
SFAS 142 requires that intangible assets with definite useful lives be
amortized over their respective estimated useful lives to their estimated
residual values, and reviewed for impairment in accordance with the SFAS 121,
Accounting for the Impairment of Long-Lived Assets to Be Disposed Of.SFAS 144
supersedes SFAS 121. The adoption of SFAS 142 did not have a material impact on
the Companys consolidated financial statements, as unamortized goodwill at
December 31, 2001 was $.1 million.

SFAS 144 addresses the accounting model for long-lived assets to be
disposed of by sale and resulting implementation issues. This statement
requires that those long-lived assets be measured at the lower of carrying
amount or fair value less cost to sell, whether reported in continuing
operations or in discontinued operations. It also broadens the reporting of
discontinued operations to include all components of an entity with operations
that can be distinguished from the rest of the entity and that will be
eliminated from the ongoing operations of the entity in a disposal transaction.
Additionally, discontinued operations that are not disposed of within one year
must be reclassified as assets held and used unless the discontinued segment
will be (1) abandoned through the liquidation or run-off of operations because
the entity is obligated by regulation or contract to provide services after it
ceases accepting all new business and (2) is being reported as a discontinued
operation when SFAS 144 is initially applied. The only assets remaining from
discontinued operations are the investment securities resulting from the
retention of residual interests in securitization transactions. Since the
Company is contractually obligated to service the securitized assets, the
adoption of SFAS 144 had no impact on the Companys consolidated financial
statements.

On April 30, 2002, the Financial Accounting Standards Board issued
Statement No. 145, Rescission of FASB Statements No. 44 and 64, Amendment of
FASB Statement No. 13, and Technical Corrections(SFAS 145). SFAS 145
updates, clarifies and simplifies existing accounting pronouncements. This
statement will be effective for fiscal years beginning after May 15, 2002. The
Company will adopt SFAS 145 in the fiscal year beginning
January 1, 2003.

(4) Discontinued Operations

The net assets from discontinued operations consist of the following:

|                                                                              |                                       |   |           |        |              |   |        |        | 
|----------------------------------------------------------------------------- | ------------------------------------- | - | --------- | ------ | ------------ | - | ------ | ------ | 
|                                                                              |                                       |   | March 31, |        | December 31,
|                                                                              |                                       |   | 2002      |        | 2001        
|                                                                              |                                       |   |           |        |             
|Estimated future gross cash receipts on
residual interests in securitizations |                                       | $ | 17,075    |        |              | $ | 18,775 |       
|Accrual for loss on operations and disposal of
discontinued operations, net   |                                       |   | (612      | )      |              |   | (2,118 | )     
|                                                                              |                                       |   |           |        |              |   |        |       
|                                                                              | Net assets of discontinued operations |   | $         | 16,463 |              |   | $      | 16,657 | 
|                                                                              |                                       |   |           |        |              |   |        |       

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FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)

The only assets remaining from discontinued operations are the investment
securities resulting from the retention of residual interests in securitization
transactions. Although the liquidation or run-off of these investment
securities will last longer than one year, the Company is contractually
obligated to service the securitized assets. The Company has considered the
estimated future gross cash receipts for such investment securities in the
computation of the loss from discontinued operations. The cash flows are
collected over a period of time and are valued using prepayment assumptions of
25% for fixed rate loans and 40% for variable rate loans. Overall loss rates
are estimated from 1.0% to 1.7% of collateral.

(5) Portfolio Assets

Portfolio Assets are summarized as follows:

|                                                                                  |                        |   |           |        |              |   |         |        | 
|--------------------------------------------------------------------------------- | ---------------------- | - | --------- | ------ | ------------ | - | ------- | ------ | 
|                                                                                  |                        |   | March 31, |        | December 31,
|                                                                                  |                        |   | 2002      |        | 2001        
|                                                                                  |                        |   |           |        |             
|Non-performing Portfolio Assets                                                   |                        | $ | 44,692    |        |              | $ | 45,123  |       
|Performing Portfolio Assets                                                       |                        |   | 9,186     |        |              |   | 10,227  |       
|Real estate Portfolios                                                            |                        |   | 1,708     |        |              |   | 1,766   |       
|                                                                                  |                        |   |           |        |              |   |         |       
|                                                                                  | Total Portfolio Assets |   |           | 55,586 |              |   |         | 57,116 | 
|Adjusted purchase discount required to reflect Portfolio
Assets at carrying value |                        |   | (42,675   | )      |              |   | (42,898 | )     
|                                                                                  |                        |   |           |        |              |   |         |       
|                                                                                  | Portfolio Assets, net  |   | $         | 12,911 |              |   | $       | 14,218 | 
|                                                                                  |                        |   |           |        |              |   |         |       

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

(6) Loans Receivable

Loans receivable are summarized as follows:

|                                                      |                       |   |           |        |              |   |        |        | 
|----------------------------------------------------- | --------------------- | - | --------- | ------ | ------------ | - | ------ | ------ | 
|                                                      |                       |   | March 31, |        | December 31,
|                                                      |                       |   | 2002      |        | 2001        
|                                                      |                       |   |           |        |             
|Loans to Acquisition Partnerships held for
investment |                       | $ | 23,371    |        |              | $ | 19,765 |       
|Student loan receivables                              |                       |   | 106       |        |              |   | 134    |       
|                                                      |                       |   |           |        |              |   |        |       
|                                                      | Loans receivable, net |   | $         | 23,477 |              |   | $      | 19,899 | 
|                                                      |                       |   |           |        |              |   |        |       

(7) Equity Investments

The Company has investments in Acquisition Partnerships and their general
partners and investments in servicing entities that are accounted for under the
equity method. The condensed combined financial position and results of
operations of the Acquisition Partnerships (excluding servicing entities),
which include the domestic and foreign Acquisition Partnerships and their
general partners, are summarized below:

CONDENSED COMBINED BALANCE SHEETS

|                                              |  |           |         |              |  |   |         | 
|--------------------------------------------- |  | --------- | ------- | ------------ |  | - | ------- | 
|                                              |  | March 31, |         | December 31,
|                                              |  | 2002      |         | 2001        
|                                              |  |           |         |             
|Assets                                        |  | $         | 654,156 |              |  | $ | 654,883 | 
|                                              |  |           |         |              |  |   |         | 
|Liabilities                                   |  | $         | 497,485 |              |  | $ | 498,361 | 
|Net equity                                    |  |           | 156,671 |              |  |   | 156,522 | 
|                                              |  |           |         |              |  |   |         | 
|                                              |  | $         | 654,156 |              |  | $ | 654,883 | 
|                                              |  |           |         |              |  |   |         | 
|Equity investment in Acquisition Partnerships |  | $         | 43,592  |              |  | $ | 42,660  | 
|Equity investment in servicing entities       |  |           | 2,486   |              |  |   | 2,118   | 
|                                              |  |           |         |              |  |   |         | 
|                                              |  | $         | 46,078  |              |  | $ | 44,778  | 
|                                              |  |           |         |              |  |   |         | 

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FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)

CONDENSED COMBINED SUMMARY OF OPERATIONS

|                                               |  |                    |        |      |  |   |        |  
|---------------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | -
|                                               |  | Three Months Ended
|                                               |  | March 31,         
|                                               |  |                   
|                                               |  | 2002               |        | 2001
|                                               |  |                    |        |     
|Proceeds from resolution of Portfolio Assets   |  | $                  | 42,361 |      |  | $ | 61,785 |  
|Gain on resolution of Portfolio Assets         |  |                    | 18,776 |      |  |   | 30,258 |  
|Interest income on performing Portfolio Assets |  |                    | 5,076  |      |  |   | 5,027  |  
|Net earnings (loss)                            |  |                    | 8,320  |      |  |   | (5,102 | )
|                                               |  |                    |        |      |  |   |        |  
|Equity in earnings of Acquisition Partnerships |  | $                  | 2,401  |      |  | $ | 3,125  |  
|Equity in earnings of servicing entities       |  |                    | 419    |      |  |   | 829    |  
|                                               |  |                    |        |      |  |   |        |  
|                                               |  | $                  | 2,820  |      |  | $ | 3,954  |  
|                                               |  |                    |        |      |  |   |        |  

The assets and equity of the Acquisition Partnerships and equity
investments in the Acquisition Partnerships are summarized by geographic region
below. The WAMCO Partnerships represent Texas limited partnerships and limited
liability companies in which the Company has a common ownership with Cargill.

|                                               |           |                    |         |           |         |              |         |         |         | 
|---------------------------------------------- | --------- | ------------------ | ------- | --------- | ------- | ------------ | ------- | ------- | ------- | 
|                                               |           |                    |         | March 31, |         | December 31,
|                                               |           |                    |         | 2002      |         | 2001        
|                                               |           |                    |         |           |         |             
|Assets:                                        |           |                    |         |           |         |              |         |        
|                                               | Domestic: |                    |         |           |         |              |         |         |        
|                                               |           | WAMCO Partnerships |         | $         | 244,248 |              |         | $       | 259,617 | 
|                                               |           | Other              |         |           | 29,730  |              |         |         | 15,607  | 
|                                               | Mexico    |                    |         | 312,674   |         |              |         | 305,324 |        
|                                               | France    |                    |         | 67,504    |         |              |         | 74,335  |        
|                                               |           |                    |         |           |         |              |         |        
|                                               |           | $                  | 654,156 |           |         | $            | 654,883 |        
|                                               |           |                    |         |           |         |              |         |         |         | 
|Equity:                                        |           |                    |         |           |         |              |         |        
|                                               | Domestic: |                    |         |           |         |              |         |         |        
|                                               |           | WAMCO Partnerships |         | $         | 91,445  |              |         | $       | 90,249  | 
|                                               |           | Other              |         |           | 7,147   |              |         |         | 3,207   | 
|                                               | Mexico    |                    |         | 1,544     |         |              |         | 2,546   |        
|                                               | France    |                    |         | 56,535    |         |              |         | 60,520  |        
|                                               |           |                    |         |           |         |              |         |        
|                                               |           | $                  | 156,671 |           |         | $            | 156,522 |        
|                                               |           |                    |         |           |         |              |         |         |         | 
|Equity investment in Acquisition Partnerships: |           |                    |         |           |         |              |         |        
|                                               | Domestic: |                    |         |           |         |              |         |         |        
|                                               |           | WAMCO Partnerships |         | $         | 30,808  |              |         | $       | 30,806  | 
|                                               |           | Other              |         |           | 2,549   |              |         |         | 2,313   | 
|                                               | Mexico    |                    |         | 391       |         |              |         | 292     |        
|                                               | France    |                    |         | 8,780     |         |              |         | 9,249   |        
|                                               |           |                    |         |           |         |              |         |        
|                                               |           | $                  | 42,528  |           |         | $            | 42,660  |        
|                                               |           |                    |         |           |         |              |         |         |         | 

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

|                                                       |           |                    |        |                    |        |      |        |         |        |  
|------------------------------------------------------ | --------- | ------------------ | ------ | ------------------ | ------ | ---- | ------ | ------- | ------ | -
|                                                       |           |                    |        | Three Months Ended
|                                                       |           |                    |        | March 31,         
|                                                       |           |                    |        |                   
|                                                       |           |                    |        | 2002               |        | 2001
|                                                       |           |                    |        |                    |        |     
|Revenues:                                              |           |                    |        |                    |        |      |        |        
|                                                       | Domestic: |                    |        |                    |        |      |        |         |       
|                                                       |           | WAMCO Partnerships |        | $                  | 11,320 |      |        | $       | 14,139 |  
|                                                       |           | Other              |        |                    | 237    |      |        |         | 14     |  
|                                                       | Mexico    |                    |        | 9,532              |        |      |        | 18,143  |       
|                                                       | France    |                    |        | 3,375              |        |      |        | 3,768   |       
|                                                       |           |                    |        |                    |        |      |        |        
|                                                       |           | $                  | 24,464 |                    |        | $    | 36,064 |        
|                                                       |           |                    |        |                    |        |      |        |         |        |  
|Net earnings (loss):                                   |           |                    |        |                    |        |      |        |        
|                                                       | Domestic: |                    |        |                    |        |      |        |         |       
|                                                       |           | WAMCO Partnerships |        | $                  | 7,464  |      |        | $       | 7,493  |  
|                                                       |           | Other              |        |                    | 110    |      |        |         | (95    | )
|                                                       | Mexico    |                    |        | (1,438             | )      |      |        | (14,993 | )     
|                                                       | France    |                    |        | 2,184              |        |      |        | 2,493   |       
|                                                       |           |                    |        |                    |        |      |        |        
|                                                       |           | $                  | 8,320  |                    |        | $    | (5,102 | )      
|                                                       |           |                    |        |                    |        |      |        |         |        |  
|Equity in earnings (loss) of Acquisition
Partnerships: |           |                    |        |                    |        |      |        |        
|                                                       | Domestic: |                    |        |                    |        |      |        |         |       
|                                                       |           | WAMCO Partnerships |        | $                  | 1,848  |      |        | $       | 3,085  |  
|                                                       |           | Other              |        |                    | 110    |      |        |         | 43     |  
|                                                       | Mexico    |                    |        | (17                | )      |      |        | (471    | )     
|                                                       | France    |                    |        | 460                |        |      |        | 468     |       
|                                                       |           |                    |        |                    |        |      |        |        
|                                                       |           | $                  | 2,401  |                    |        | $    | 3,125  |        
|                                                       |           |                    |        |                    |        |      |        |         |        |  

The Company recorded a $.3 million addition to equity in the first quarter
of 2002 as a result of unrealized gains on residual interests in securitization
transactions held by one Acquisition Partnership. Also, the Company recorded
$.1 million in foreign currency translation adjustments in the first quarter of
2002 relating to equity investments in foreign Acquisition Partnerships and
servicing entities.

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FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)

The condensed consolidated financial position and results of operations of
Drive Financial Services LP (Drive) are summarized below:

CONDENSED CONSOLIDATED BALANCE SHEETS

|                                      |                   |                         |         |           |       |              |         |         |       | 
|------------------------------------- | ----------------- | ----------------------- | ------- | --------- | ----- | ------------ | ------- | ------- | ----- | 
|                                      |                   |                         |         | March 31, |       | December 31,
|                                      |                   |                         |         | 2002      |       | 2001        
|                                      |                   |                         |         |           |       |             
|Cash                                  |                   | $                       | 8,287   |           |       | $            | 7,303   |        
|Loans held for sale                   |                   |                         | 159,052 |           |       |              | 70,447  |        
|Residual interests in securitizations |                   |                         | 77,460  |           |       |              | 77,407  |        
|Other assets                          |                   |                         | 9,848   |           |       |              | 10,321  |        
|                                      |                   |                         |         |           |       |              |         |        
|                                      | Total assets      |                         | $       | 254,647   |       |              | $       | 165,478 |      
|                                      |                   |                         |         |           |       |              |         |        
|Notes payable                         |                   | $                       | 215,300 |           |       | $            | 126,665 |        
|Other liabilities                     |                   |                         | 17,533  |           |       |              | 13,323  |        
|                                      |                   |                         |         |           |       |              |         |        
|                                      | Total liabilities |                         |         | 232,833   |       |              |         | 139,988 |      
|Net equity                            |                   |                         | 21,814  |           |       |              | 25,490  |        
|                                      |                   |                         |         |           |       |              |         |        
|                                      |                   | $                       | 254,647 |           |       | $            | 165,478 |        
|                                      |                   |                         |         |           |       |              |         |        
|Equity investment in Drive            |                   | $                       | 8,451   |           |       | $            | 9,877   |        
|                                      | Minority interest |                         |         | (1,689    | )     |              |         | (1,975  | )    
|                                      |                   |                         |         |           |       |              |         |        
|                                      |                   | Net investment in Drive |         | $         | 6,762 |              |         | $       | 7,902 | 
|                                      |                   |                         |         |           |       |              |         |        

CONDENSED CONSOLIDATED SUMMARY OF OPERATIONS

|                                         |                             |   |                              |        |      |   |        |        |  
|---------------------------------------- | --------------------------- | - | ---------------------------- | ------ | ---- | - | ------ | ------ | -
|                                         |                             |   | Three Months Ended March 31,
|                                         |                             |   |                             
|                                         |                             |   | 2002                         |        | 2001
|                                         |                             |   |                              |        |     
|Interest income                          |                             | $ | 10,007                       |        |      | $ | 9,898  |       
|Gain on sale of loans                    |                             |   |                             |        |      |   |       |       
|Service fees and other                   |                             |   | 4,606                        |        |      |   | 2,235  |       
|                                         |                             |   |                              |        |      |   |        |       
|                                         | Revenues                    |   |                              | 14,613 |      |   |        | 12,133 |  
|                                         |                             |   |                              |        |      |   |        |       
|Interest expense                         |                             |   | 2,368                        |        |      |   | 3,939  |       
|Salaries and benefits                    |                             |   | 10,258                       |        |      |   | 6,852  |       
|Provision for loan and
impairment losses |                             |   | 20                           |        |      |   | 3,434  |       
|Other expenses                           |                             |   | 5,437                        |        |      |   | 2,797  |       
|                                         |                             |   |                              |        |      |   |        |       
|                                         | Expenses                    |   |                              | 18,083 |      |   |        | 17,022 |  
|                                         |                             |   |                              |        |      |   |        |       
|Net loss                                 |                             | $ | (3,470                       | )      |      | $ | (4,889 | )     
|                                         |                             |   |                              |        |      |   |        |       
|Equity in loss of Drive                  |                             | $ | (1,345                       | )      |      | $ | (1,894 | )     
|Minority interest                        |                             |   | 269                          |        |      |   | 378    |       
|                                         |                             |   |                              |        |      |   |        |       
|                                         | Net equity in loss of
Drive |   | $                            | (1,076 | )    |   | $      | (1,516 | )
|                                         |                             |   |                              |        |      |   |        |       

The Company recorded a $.1 million reduction to equity in the first
quarter of 2002 as a result of unrealized losses on residual interests in
securitization transactions held by Drive.

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FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)

(8) Segment Reporting

The Company is engaged in two reportable segments: (i) Portfolio Asset
acquisition and resolution; and (ii) consumer lending. These segments have been
segregated based on products and services offered. The following is a summary
of results of operations for each of the segments and reconciliation to
earnings (loss) from continuing operations for the three months ended March 31,
2002 and 2001.

|                                            |                                                                                   |                                                                 |                                                   |        |                    |        |      |        |        |        |  
|------------------------------------------- | --------------------------------------------------------------------------------- | --------------------------------------------------------------- | ------------------------------------------------- | ------ | ------------------ | ------ | ---- | ------ | ------ | ------ | -
|                                            |                                                                                   |                                                                 |                                                   |        | Three Months Ended
|                                            |                                                                                   |                                                                 |                                                   |        | March 31,         
|                                            |                                                                                   |                                                                 |                                                   |        |                   
|                                            |                                                                                   |                                                                 |                                                   |        | 2002               |        | 2001
|                                            |                                                                                   |                                                                 |                                                   |        |                    |        |     
|Portfolio Asset Acquisition and Resolution: |                                                                                   |                                                                 |                                                   |        |                    |        |      |       
|                                            | Revenues:                                                                         |                                                                 |                                                   |        |                    |        |      |        |       
|                                            |                                                                                   | Servicing fees                                                  |                                                   | $      | 2,222              |        |      | $      | 2,465  |       
|                                            |                                                                                   | Gain on resolution of Portfolio Assets                          |                                                   |        | 244                |        |      |        | 218    |       
|                                            |                                                                                   | Equity in earnings of investments                               |                                                   |        | 2,820              |        |      |        | 3,954  |       
|                                            |                                                                                   | Interest income                                                 |                                                   |        | 1,303              |        |      |        | 1,223  |       
|                                            |                                                                                   | Gain on sale of interest in equity investment                   |                                                   |        |                   |        |      |        | 3,134  |       
|                                            |                                                                                   | Other                                                           |                                                   |        | 202                |        |      |        | 120    |       
|                                            |                                                                                   |                                                                 |                                                   |        |                    |        |      |       
|                                            |                                                                                   |                                                                 | Total                                             |        |                    | 6,791  |      |        |        | 11,114 |  
|                                            | Expenses:                                                                         |                                                                 |                                                   |        |                    |        |      |        |       
|                                            |                                                                                   | Interest and fees on notes payable                              |                                                   |        | 726                |        |      |        | 1,035  |       
|                                            |                                                                                   | Salaries and benefits                                           |                                                   |        | 2,001              |        |      |        | 1,520  |       
|                                            |                                                                                   | Provision for loan and impairment losses                        |                                                   |        | 99                 |        |      |        | 585    |       
|                                            |                                                                                   | Occupancy, data processing and other                            |                                                   |        | 1,621              |        |      |        | 2,291  |       
|                                            |                                                                                   |                                                                 |                                                   |        |                    |        |      |       
|                                            |                                                                                   |                                                                 | Total                                             |        |                    | 4,447  |      |        |        | 5,431  |  
|                                            |                                                                                   |                                                                 |                                                   |        |                    |        |      |       
|                                            | Operating contribution before direct taxes                                        |                                                                 | $                                                 | 2,344  |                    |        | $    | 5,683  |       
|                                            |                                                                                   |                                                                 |                                                   |        |                    |        |      |        |        |       
|                                            | Operating contribution, net of direct taxes                                       |                                                                 | $                                                 | 2,331  |                    |        | $    | 5,699  |       
|                                            |                                                                                   |                                                                 |                                                   |        |                    |        |      |        |        |       
|Consumer Lending:                           |                                                                                   |                                                                 |                                                   |        |                    |        |      |       
|                                            | Revenues:                                                                         |                                                                 |                                                   |        |                    |        |      |        |       
|                                            |                                                                                   | Equity in loss of investment                                    |                                                   | $      | (1,345             | )      |      | $      | (1,894 | )     
|                                            |                                                                                   | Interest income                                                 |                                                   |        |                   |        |      |        | 2      |       
|                                            |                                                                                   |                                                                 |                                                   |        |                    |        |      |       
|                                            |                                                                                   |                                                                 | Total                                             |        |                    | (1,345 | )    |        |        | (1,892 | )
|                                            | Expenses:                                                                         |                                                                 |                                                   |        |                    |        |      |        |       
|                                            |                                                                                   | Occupancy, data processing and other (net of minority interest) |                                                   |        | (264               | )      |      |        | (369   | )     
|                                            |                                                                                   |                                                                 |                                                   |        |                    |        |      |       
|                                            |                                                                                   |                                                                 | Total                                             |        |                    | (264   | )    |        |        | (369   | )
|                                            |                                                                                   |                                                                 |                                                   |        |                    |        |      |       
|                                            | Operating contribution (loss) before direct taxes                                 |                                                                 | $                                                 | (1,081 | )                  |        | $    | (1,523 | )     
|                                            |                                                                                   |                                                                 |                                                   |        |                    |        |      |        |        |       
|                                            | Operating contribution (loss), net of direct taxes                                |                                                                 | $                                                 | (1,081 | )                  |        | $    | (1,523 | )     
|                                            |                                                                                   |                                                                 |                                                   |        |                    |        |      |        |        |       
|                                            |                                                                                   |                                                                 | Total operating contribution, net of direct
taxes |        | $                  | 1,250  |      |        | $      | 4,176  |  
|Corporate Overhead:                         |                                                                                   |                                                                 |                                                   |        |                    |        |      |       
|                                            | Corporate interest expense                                                        |                                                                 |                                                   | 822    |                    |        |      | 1,407  |       
|                                            | Salaries and benefits, occupancy, professional and other
income and expenses, net |                                                                 |                                                   | 1,262  |                    |        |      | 1,144  |       
|                                            |                                                                                   |                                                                 |                                                   |        |                    |        |      |       
|                                            | Earnings (loss) from continuing operations                                        |                                                                 | $                                                 | (834   | )                  |        | $    | 1,625  |       
|                                            |                                                                                   |                                                                 |                                                   |        |                    |        |      |        |        |       

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

|              |       |   |                    |       |      |   |       |        | 
|------------- | ----- | - | ------------------ | ----- | ---- | - | ----- | ------ | 
|              |       |   | Three Months Ended
|              |       |   | March 31,         
|              |       |   |                   
|              |       |   | 2002               |       | 2001
|              |       |   |                    |       |     
|Domestic      |       | $ | 3,446              |       |      | $ | 8,015 |       
|Mexico        |       |   | 2,436              |       |      |   | 1,755 |       
|France        |       |   | 908                |       |      |   | 1,324 |       
|Other foreign |       |   | 1                  |       |      |   | 20    |       
|              |       |   |                    |       |      |   |       |       
|              | Total |   | $                  | 6,791 |      |   | $     | 11,114 | 
|              |       |   |                    |       |      |   |       |       

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

|                                            |          |              |        |           |         |              |        |        |         | 
|------------------------------------------- | -------- | ------------ | ------ | --------- | ------- | ------------ | ------ | ------ | ------- | 
|                                            |          |              |        | March 31, |         | December 31,
|                                            |          |              |        | 2002      |         | 2001        
|                                            |          |              |        |           |         |             
|Portfolio acquisition and resolution assets |          |              |        |           |         |              |        |       
|                                            | Domestic |              | $      | 51,562    |         |              | $      | 48,202 |        
|                                            | Mexico   |              |        | 21,039    |         |              |        | 19,766 |        
|                                            | France   |              |        | 10,894    |         |              |        | 11,367 |        
|Consumer assets                             |          |              | 8,557  |           |         |              | 10,205 |       
|Deferred tax benefit, net                   |          |              | 20,101 |           |         |              | 20,101 |       
|Other assets, net                           |          |              | 11,561 |           |         |              | 12,595 |       
|Net assets of discontinued operations       |          |              | 16,463 |           |         |              | 16,657 |       
|                                            |          |              |        |           |         |              |        |       
|                                            |          | Total assets |        | $         | 140,177 |              |        | $      | 138,893 | 
|                                            |          |              |        |           |         |              |        |        |        

(9) Income Taxes

Federal income taxes are provided at a 35% rate. The Company has
substantial NOLs, which can be used to offset the tax liability associated with
the Companys pre-tax earnings until the earlier of the expiration or
utilization of such NOLs. The Company accounts

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FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)

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

(10) Commitments and Contingencies

On October 14, 1999, Harbor Financial Group, Inc. (Harbor Parent),
Harbor Financial Mortgage Corporation (HFMC) and four subsidiaries of HFMC
filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code
before the United States Bankruptcy Court for the Northern District of Texas,
Dallas Division. On December 14, 1999, the bankruptcy proceedings were
converted to liquidations under Chapter 7 of the United States Bankruptcy Code
(the Bankruptcy Cases). John H. Litzler, the Chapter 7 Trustee in the
bankruptcy proceedings (the Trustee), initiated adversary proceedings on May
25, 2001 against FirstCity and various current and former directors and
officers of FirstCity and Harbor alleging breach of fiduciary duties,
mismanagement, and self-dealing by FirstCity and Harbor directors and officers,
and improper transfer of funds from the Harbor related entities to FirstCity.
The claims also include fraudulent and preferential transfer of assets of the
Harbor entities, fraud and conspiracy. The Trustee, FirstCity, the other
defendants and the insurers providing Directors and Officers Insurance
coverage for FirstCity and its subsidiaries (the Insurers) have reached an
agreement to compromise the claims brought in the adversary proceedings,
subject to the approval of the Bankruptcy Court. Under the proposed
settlement, if approved by the Bankruptcy Court, the Trustee will release the
defendants, their affiliates and subsidiaries from any and all claims which
were brought or could have been brought by the Trustee against any of the
defendants, any past and present officers and directors of FirstCity or any
affiliates or subsidiaries of FirstCity in consideration of (i) the payment of
the sum of $3.6 million by the Insurers to the Trustee, (ii) a payment by
FirstCity to the Trustee in the sum of $.2 million, and (iii) the release of
any and all claims of FirstCity and its affiliates and subsidiaries and of the
individual defendants in the bankruptcy proceedings against the Trustee, with
the exception of FirstCitys administrative claim to the extent of $.3 million.
The payment by the Insurers is conditioned upon FirstCitys administrative
claim in the Bankruptcy Cases being allowed in the amount of $.3 million, which
claim FirstCity will assign to the Insurers and which shall be paid by the
Trustee directly to the Insurers. The approval of the Bankruptcy Court of the
proposed terms of settlement has not been obtained, and there can be no
assurance that such consent and approval will be secured. In the event that
carrier consent or bankruptcy court approval is not obtained, FirstCity intends
to vigorously contest the claims of the Trustee, as the Company believes that
the claims are without merit and that it has valid defenses to these claims.

The Company and Harbor Parent filed suit in the Federal District Court for
the Western District of Texas, Waco Division, against Chase Bank of Texas, N.A.
and Chase Securities, Inc. in September 1999 seeking injunctive relief and
damages resulting from alleged violations by the defendants of the Bank Holding
Company Act and from civil conspiracy engaged in by the defendants, arising
from an engagement letter entered into between the Company and Chase
Securities, Inc. relating to the sale of assets or securities of Harbor Parent,
HFMC and their subsidiaries (collectively Harbor). The Company and Harbor
Parent alleged that the conditioning by Chase Bank Texas, N.A. of the extension
of credit to HFMC on the retention of Chase Securities, Inc. by the Company and
Harbor violated the Bank Holding Company Act. The Company additionally sought a
judicial declaration that the plaintiffs were not obligated to pay any
commission to Chase Securities, Inc. under the engagement letter. The Company
and Harbor Parent also sought recovery of treble damages pursuant to the Bank
Holding Company Act and recovery of costs of court, including reasonable
attorneys fees. A motion to dismiss the Texas suit was granted based upon a
provision in the engagement letter that provided that any suit arising from the
engagement letter would be pursued in the State of New York. The Company has
been granted leave by the Supreme Court for the State of New York to amend its
answer in that proceeding to include the claims asserted in the Texas suit as a
counterclaim to the suit brought by Chase Securities, Inc. and to assert
certain affirmative defenses.

On October 4, 1999, Chase Securities, Inc. filed suit against the Company
before the Supreme Court for the State of New York, County of New York:
Commercial Part seeking recovery of $2.4 million as the balance of a
transaction fee allegedly due it under the terms of the engagement letter
discussed above and other relief. The Company denies that it has any liability
to Chase Securities, Inc. The Company has asserted as a defense to this action
the violations of the Bank Holding Company Act and other claims asserted in the
litigation filed in the Federal District Court for the Western District of
Texas. The Company was granted leave to amend its answer
in the suit to include a counterclaim against Chase Securities, Inc.
asserting breach of contract based upon the matters that were asserted in the
Texas suit.

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FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)

The Trustee, in his capacity as the duly appointed trustee of the
bankruptcy estates of Harbor Parent and HFMC, filed an action pending in the
United States District Court for the Southern District of New York against
Chase Manhattan Bank, formerly Chase Bank of Texas, N.A. and Chase Securities,
Inc. seeking recovery of damages arising from or relating to various agreements
by and between Harbor Parent and HFMC and Chase Manhattan Bank and Chase
Securities, Inc., including the alleged violations of the Anti-Tying provision
of the Bank Holding Company Act as had been asserted by the Company and Harbor
Financial Group, Inc. in the Texas suit.

The Trustee, the Company and JP Morgan Chase Bank and Chase Securities,
Inc. have finalized documents to settle the claims brought in the suits pending
in the New York courts described above. The settlement of the suit filed by
Chase Securities, Inc. against FirstCity is subject to the approval of the
proposed terms of settlement between the Trustee and JP Morgan Chase Bank and
Chase Securities, Inc. (the Harbor Settlement) by the Bankruptcy Court in the
proceedings related to Harbor. There can be no assurance that the approval of
the Bankruptcy Court of the Harbor Settlement can be obtained. In the event
that the settlement of the suit is not completed or the Bankruptcy Court does
not approve the Harbor Settlement, the Company intends to vigorously defend the
claim of Chase Securities, Inc. for payment of the fee and to pursue its claims
for damages against JP Morgan Chase Bank and Chase Securities, Inc.

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

The Company is a 50% owner in an entity that is obligated to advance up to
$2.5 million toward the acquisition of Portfolio Assets from financial
institutions in California. At March 31, 2002, advances of $2.4 million had
been made under the obligation.

In connection with the transactions contemplated by the Securities
Purchase Agreement pursuant to which the Company sold its 49% equity interest
in Drive Financial Services, LP (Drive), effective August 1, 2000, FirstCity
Consumer Lending Corporation (Consumer Corp.) and FirstCity Funding LP
(Funding LP) contributed all of the assets utilized in the operations of the
automobile finance operation to Drive pursuant to the terms of a Contribution
and Assumption Agreement by and between Consumer Corp. and Drive, and a
Contribution and Assumption Agreement by and between Funding LP and Drive
(collectively, the Contribution Agreements). Drive assumed substantially all
of the liabilities of the automobile finance operation as set forth in the
Contribution Agreements.

In addition, in the Securities Purchase Agreement, the Company, Consumer
Corp., Funding LP and FirstCity Funding GP Corp. (Funding GP) made various
representations and warranties concerning (i) their respective organizations,
(ii) the automobile finance operation conducted by Consumer Corp. and Funding
LP, and (iii) the assets transferred by Consumer Corp. and Funding LP to Drive.
The Company, Consumer Corp., Funding LP and Funding GP also agreed to indemnify
BoS(USA), and certain of its subsidiaries from damages resulting from a breach
of any representation or warranty contained in the Securities Purchase
Agreement or otherwise made by the Company, Consumer Corp. or Funding LP in
connection with the transaction. The indemnity obligation under the Securities
Purchase Agreement survives for a period of seven (7) years from August 25,
2000 (the Closing Date) with respect to tax-related representations and
warranties and for thirty months from the Closing Date with respect to all
other representations and warranties. Neither the Company, Consumer Corp.,
Funding LP, or Funding GP is required to make any payments as a result of the
indemnity provided under the Securities Purchase Agreement until the aggregate
amount payable exceeds $.25 million, and then only for the amount in excess of
$.25 million in the aggregate; however certain representations and warranties
are not subject to this $.25 million threshold. Pursuant to the terms of the
Contribution Agreements, Consumer Corp. and Funding LP have agreed to indemnify
Drive from any damages resulting in a material adverse effect on Drive
resulting from breaches of representations or warranties, failure to perform,
pay or discharge liabilities other than the assumed liabilities, or claims,
lawsuits or proceedings resulting from the transactions contemplated by the
Contribution Agreements. Pursuant to the terms of the Contribution Agreements,
Drive has agreed to indemnify Consumer Corp. and Funding LP for any breach of
any representation or warranty by Drive, the failure of Drive to discharge any
assumed liability, or any claims arising out of any failure by Drive to
properly service receivables after August 1, 2000. Liability for
indemnification pursuant to the terms of the Contribution Agreements will not
arise until the total of all losses with
13Table of Contents

FIRSTCITY FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)

respect to such matters exceeds $.25 million and then only for the amount
by which such losses exceed $.25 million; however this limitation will not
apply to any breach of which the party had knowledge at the time of the Closing
Date or any intentional breach by a party of any covenant or obligation under
the Contribution Agreements.

The Company also provided a guaranty limited to a maximum of up to $4
million of a $60 million loan ($25 million outstanding as of March 31, 2002) to
Drive by BoS(USA). The Company, Consumer Corp. and Funding L.P. secured the
guaranty with security interests in their respective ownership interest in
Consumer Corp., Funding L.P. and Drive. To date, no payments have been made by
the Company pursuant to this guaranty.

14



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##### Table of Contents






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

Overview

The Company is a financial services company engaged in Portfolio Asset
acquisition and resolution, conducted through its subsidiary, FirstCity
Commercial Corporation, and other subsidiaries and affiliates of FirstCity
Commercial Corporation (collectively Commercial Corp.), and in consumer
lending, through its investment in Drive. 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s financial results are affected by many factors including
levels of and fluctuations in interest rates, fluctuations in the underlying
values of real estate and other assets, the timing of and ability to liquidate
assets, and the availability and prices for loans and assets acquired in all of
the Companys businesses. The Companys business and results of operations are
also affected by the availability of financing with terms acceptable to the
Company and the Companys access to capital markets, including the
securitization markets.

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

The Company reported a loss from continuing operations for the quarter
ended March 31, 2002 of $.8 million. After recording a loss from discontinued
operations and accrued and unpaid dividends on the New Preferred Stock, net
loss to common stockholders was $2.0 million or $.24 per share on a basic and
diluted basis. Components of the quarterly loss for the first quarter 2002,
compared to the first quarter 2001 were as follows:

|                                           |                                            |   |                    |        |      |   |        |       | 
|------------------------------------------ | ------------------------------------------ | - | ------------------ | ------ | ---- | - | ------ | ----- | 
|                                           |                                            |   | Three Months Ended
|                                           |                                            |   | March 31,         
|                                           |                                            |   |                   
|                                           |                                            |   | 2002               |        | 2001
|                                           |                                            |   |                    |        |     
|Portfolio Asset Acquisition and Resolution |                                            | $ | 2,331              |        |      | $ | 5,699  |      
|Consumer                                   |                                            |   | (1,081             | )      |      |   | (1,523 | )    
|Corporate interest                         |                                            |   | (822               | )      |      |   | (1,407 | )    
|Corporate overhead                         |                                            |   | (1,262             | )      |      |   | (1,144 | )    
|                                           |                                            |   |                    |        |      |   |        |      
|                                           | Earnings (loss) from continuing operations |   |                    | (834   | )    |   |        | 1,625 | 
|Accrued preferred dividends                |                                            |   | (642               | )      |      |   | (642   | )    
|Loss from discontinued operations          |                                            |   | (500               | )      |      |   |       |      
|                                           |                                            |   |                    |        |      |   |        |      
|                                           | Net earnings (loss) to common shareholders |   | $                  | (1,976 | )    |   | $      | 983   | 
|                                           |                                            |   |                    |        |      |   |        |      

Portfolio Asset Acquisition and Resolution

Aggregate acquisitions by the Company are as follows (dollars in
thousands):

|                   |  |          |         |          |  |           |        | 
|------------------ |  | -------- | ------- | -------- |  | --------- | ------ | 
|                   |  |          |         |          |  | FirstCity
|                   |  | Purchase |         | Invested
|                   |  | Price    |         | Equity  
|                   |  |          |         |         
|First Quarter 2002 |  | $        | 24,479  |          |  | $         | 5,375  | 
|Total 2001         |  |          | 224,927 |          |  |           | 24,319 | 
|Total 2000         |  |          | 394,927 |          |  |           | 22,140 | 
|Total 1999         |  |          | 210,799 |          |  |           | 11,203 | 
|Total 1998         |  |          | 139,691 |          |  |           | 28,478 | 

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

15



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##### Table of Contents



Analysis of Selected Revenues and Expenses
Portfolio Asset Acquisition and Resolution

|                                                   |                                                              |                         |       |        |                    |        |       |        |        |        |  
|-------------------------------------------------- | ------------------------------------------------------------ | ----------------------- | ----- | ------ | ------------------ | ------ | ----- | ------ | ------ | ------ | -
|                                                   |                                                              |                         |       |        | Three Months Ended
|                                                   |                                                              |                         |       |        | March 31,         
|                                                   |                                                              |                         |       |        |                   
|                                                   |                                                              |                         |       |        | 2002               |        | 2001 
|                                                   |                                                              |                         |       |        |                    |        |      
|Income from Portfolio Assets and Loans
Receivable: |                                                              |                         |       |        |                    |        |       |       
|                                                   | Average investment in Portfolio Assets and loans
receivable: |                         |       |        |                    |        |       |        |       
|                                                   |                                                              | Domestic                |       | $      | 14,656             |        |       | $      | 30,419 |       
|                                                   |                                                              | Mexico                  |       |        | 19,406             |        |       |        | 13,284 |       
|                                                   |                                                              |                         |       |        |                    |        |       |       
|                                                   |                                                              |                         | Total |        | $                  | 34,062 |       |        | $      | 43,703 |  
|                                                   |                                                              |                         |       |        |                    |        |       |        |        |       
|                                                   | Income from Portfolio Assets and loans receivable:           |                         |       |        |                    |        |       |        |       
|                                                   |                                                              | Domestic                |       | $      | 535                |        |       | $      | 745    |       
|                                                   |                                                              | Mexico                  |       |        | 986                |        |       |        | 641    |       
|                                                   |                                                              |                         |       |        |                    |        |       |       
|                                                   |                                                              |                         | Total |        | $                  | 1,521  |       |        | $      | 1,386  |  
|                                                   |                                                              |                         |       |        |                    |        |       |        |        |       
|                                                   | Average return (annualized):                                 |                         |       |        |                    |        |       |        |       
|                                                   |                                                              | Domestic                |       |        | 14.60              | %      |       |        | 9.80   | %     
|                                                   |                                                              | Mexico                  |       |        | 20.32              | %      |       |        | 19.30  | %     
|                                                   |                                                              |                         | Total |        |                    | 17.86  | %     |        |        | 12.70  | %
|Servicing fee revenues:                            |                                                              |                         |       |        |                    |        |       |       
|                                                   | Domestic partnerships:                                       |                         |       |        |                    |        |       |        |       
|                                                   |                                                              | $ Collected             |       | $      | 31,824             |        |       | $      | 33,943 |       
|                                                   |                                                              | Servicing fee revenue   |       |        | 817                |        |       |        | 887    |       
|                                                   |                                                              | Average servicing fee % |       |        | 2.57               | %      |       |        | 2.61   | %     
|                                                   | Mexico partnerships:                                         |                         |       |        |                    |        |       |        |       
|                                                   |                                                              | $ Collected             |       | $      | 19,194             |        |       | $      | 35,909 |       
|                                                   |                                                              | Servicing fee revenue   |       |        | 1,353              |        |       |        | 1,344  |       
|                                                   |                                                              | Average servicing fee % |       |        | 7.05               | %      |       |        | 3.74   | %     
|                                                   | Incentive service fees                                       |                         | $     | 52     |                    |        | $     | 234    |       
|                                                   | Total Service Fees:                                          |                         |       |        |                    |        |       |        |       
|                                                   |                                                              | $ Collected             |       | $      | 51,018             |        |       | $      | 69,852 |       
|                                                   |                                                              | Servicing fee revenue   |       |        | 2,222              |        |       |        | 2,465  |       
|                                                   |                                                              | Average servicing fee % |       |        | 4.36               | %      |       |        | 3.53   | %     
|Personnel:                                         |                                                              |                         |       |        |                    |        |       |       
|Personnel expenses                                 |                                                              | $                       | 2,001 |        |                    | $      | 1,520 |       
|                                                   | Number of personnel (at period end):                         |                         |       |        |                    |        |       |        |       
|                                                   |                                                              | Production              |       |        | 23                 |        |       |        | 26     |       
|                                                   |                                                              | Servicing               |       |        | 128                |        |       |        | 87     |       
|Interest expense:                                  |                                                              |                         |       |        |                    |        |       |       
|                                                   | Average debt                                                 |                         | $     | 37,994 |                    |        | $     | 41,109 |       
|                                                   | Interest expense                                             |                         |       | 726    |                    |        |       | 1,035  |       
|                                                   | Average cost (annualized)                                    |                         |       | 7.64   | %                  |        |       | 10.07  | %     

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

Analysis of Selected Revenues and Expenses
Acquisition Partnerships

|                                               |                                                           |                              |                      |        |                    |        |       |        |       |        |  
|---------------------------------------------- | --------------------------------------------------------- | ---------------------------- | -------------------- | ------ | ------------------ | ------ | ----- | ------ | ----- | ------ | -
|                                               |                                                           |                              |                      |        | Three Months Ended
|                                               |                                                           |                              |                      |        | March 31,         
|                                               |                                                           |                              |                      |        |                   
|                                               |                                                           |                              |                      |        | 2002               |        | 2001 
|                                               |                                                           |                              |                      |        |                    |        |      
|Revenues:                                      |                                                           |                              |                      |        |                    |        |       |       
|                                               | Gain on resolution of Portfolio Assets                    |                              | $                    | 18,776 |                    |        | $     | 30,258 |      
|                                               | Gross profit percentage on resolution of Portfolio
Assets |                              |                      | 44.32  | %                  |        |       | 48.97  | %    
|                                               | Interest income                                           |                              | $                    | 5,076  |                    |        | $     | 5,027  |      
|                                               | Other income                                              |                              |                      | 612    |                    |        |       | 779    |      
|Interest expense (1):                          |                                                           |                              |                      |        |                    |        |       |       
|                                               | Interest expense                                          |                              | $                    | 17,175 |                    |        | $     | 18,450 |      
|                                               | Average cost (annualized)                                 |                              |                      | 15.43  | %                  |        |       | 15.88  | %    
|Other expenses:                                |                                                           |                              |                      |        |                    |        |       |       
|                                               | Service fees                                              |                              |                      | 3,584  |                    |        |       | 2,918  |      
|                                               | Other operating costs                                     |                              |                      | 3,024  |                    |        |       | 5,082  |      
|                                               |                                                           | Income taxes                 |                      |        | (1,579             | )      |       |        | 7,652 |       
|                                               |                                                           | Foreign currency loss (gain) |                      |        | (6,060             | )      |       |        | 7,064 |       
|                                               |                                                           |                              |                      |        |                    |        |       |        |      
|                                               |                                                           |                              | Total other expenses |        |                    | (1,031 | )     |        |       | 22,716 |  
|                                               |                                                           |                              |                      |        |                    |        |       |        |      
|                                               |                                                           |                              | Net earnings (loss)  |        | $                  | 8,320  |       |        | $     | (5,102 | )
|                                               |                                                           |                              |                      |        |                    |        |       |        |      
|Equity in earnings of Acquisition Partnerships |                                                           | $                            | 2,401                |        |                    | $      | 3,125 |       
|Equity in earnings of Servicing Entities       |                                                           |                              | 419                  |        |                    |        | 829   |       
|                                               |                                                           |                              |                      |        |                    |        |       |       
|                                               |                                                           | $                            | 2,820                |        |                    | $      | 3,954 |       
|                                               |                                                           |                              |                      |        |                    |        |       |       

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---

|(1) |  | Interest expense includes interest on loans to the Acquisition
Partnerships located in Mexico from affiliates of the investor groups. The
rates on these loans range from 19% to 20%. The average cost on debt
excluding the Mexican Acquisition Partnerships was 5.87% and 7.99% for
2002 and 2001, respectively.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Consumer Lending

The following table presents selected information regarding consumer
lending:

Analysis of Selected Data
Consumer Lending

|                                                                 |                                     |   |                    |         |      |   |         |         |  
|---------------------------------------------------------------- | ----------------------------------- | - | ------------------ | ------- | ---- | - | ------- | ------- | -
|                                                                 |                                     |   | Three Months Ended
|                                                                 |                                     |   | March 31,         
|                                                                 |                                     |   |                   
|                                                                 |                                     |   | 2002               |         | 2001
|                                                                 |                                     |   |                    |         |     
|Retail installment contracts acquired                            |                                     | $ | 113,401            |         |      | $ | 122,554 |        
|Origination characteristics                                      |                                     |   |                    |         |      |   |         |        
|                                                                 | Face value to wholesale value       |   |                    | 101.27  | %    |   |         | 101.09  | %
|                                                                 | Weighted average coupon             |   |                    | 20.97   | %    |   |         | 20.43   | %
|                                                                 | Purchase discount (% of face value) |   |                    | 15.75   | %    |   |         | 15.30   | %
|Servicing portfolio                                              |                                     |   |                    |         |      |   |         |        
|                                                                 | Owned                               |   | $                  | 183,682 |      |   | $       | 213,230 |  
|                                                                 | Securitized                         |   |                    | 416,132 |      |   |         | 220,001 |  
|                                                                 |                                     |   |                    |         |      |   |         |        
|                                                                 | Total                               |   | $                  | 599,814 |      |   | $       | 433,231 |  
|                                                                 |                                     |   |                    |         |      |   |         |        
|                                                                 | Owned  number of contracts         |   |                    | 15,204  |      |   |         | 16,358  |  
|                                                                 | Securitized  number of contracts   |   |                    | 37,739  |      |   |         | 21,938  |  
|                                                                 |                                     |   |                    |         |      |   |         |        
|                                                                 | Total number of contracts           |   |                    | 52,943  |      |   |         | 38,296  |  
|                                                                 |                                     |   |                    |         |      |   |         |        
|Defaults (% of total loans acquired)                             |                                     |   | 17.49              | %       |      |   | 14.38   | %      
|Loss on defaults (% of original loan balance at time
of default) |                                     |   | 8.19               | %       |      |   | 6.74    | %      
|Delinquencies (% of total serviced portfolio)                    |                                     |   | 4.87               | %       |      |   | 4.17    | %      

Provision for Income Taxes

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

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 2002 Compared to First Quarter 2001

The Company reported a loss from continuing operations of $.8 million in
the first quarter of 2002. Net loss to common stockholders was $2.0 million in
the first quarter of 2002 compared to earnings of $1.0 million in the first
quarter of 2001. On a per share basis, basic and diluted net loss attributable
to common stockholders was $.24 in the first quarter of 2002 compared to
earnings of $.12 in the first quarter of 2001.

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Portfolio Asset Acquisition and Resolution

The operating contribution of $2.3 million in the first quarter of 2002
decreased by $3.4 million, or 59%, compared with the first quarter of 2001 due
to a $3.1 million gain on sale of interest in an equity investment in 2001.
Commercial Corp. purchased $24.5 million of Portfolio Assets during the first
quarter of 2002 through the Acquisition Partnerships, compared to $87.4 million
in acquisitions in the first quarter of 2001. Commercial Corp.s investment in
these acquisitions was $5.4 million and $8.4 million in the first quarter of
2002 and 2001, respectively. There were no purchases of wholly-owned Portfolio
Assets during either period. Commercial Corp.s quarter end investment in
wholly-owned Portfolio Assets decreased to $12.9 million in the first quarter
of 2002 from $27.3 million in the first quarter of 2001 with regular
collections from those Portfolios.

Servicing fee revenues.Servicing fee revenues decreased by 10% to $2.2
million in the first quarter of 2002 from $2.5 million in the first quarter of
2001 primarily as a result of lower incentive fees received from the Mexican
Acquisition Partnerships.

Gain on resolution of Portfolio Assets.Proceeds from the resolution of
Portfolio Assets decreased by 61% to $.7 million in the first quarter of 2002
from $1.8 million in the first quarter of 2001. The net gain on resolution of
Portfolio Assets was flat year to year. The weighted average gross profit
percentage on the resolution of Portfolio Assets in the first quarter of 2002
was 34.0% as compared to 11.8% in the first quarter of 2001.

Equity in earnings of investments.Commercial Corp.s equity in earnings
of Acquisition Partnerships decreased 23% to $2.4 million in the first quarter
of 2002 compared to $3.1 million in the first quarter of 2001. The Acquisition
Partnerships reflected net earnings of $8.3 million in the first quarter of
2002 compared to a net loss of $5.1 million in the first quarter of 2001. The
net loss in 2001 resulted from tax provisions in certain Mexico Partnerships.
The impact of these losses was minimal to Commercial Corp. due to its small
equity ownership in the Mexico Partnerships (approximately 5%). Equity
earnings in domestic Acquisition Partnerships decreased $1.2 million or 40% due
to a reduction in equity ownership of one Partnership in March 2001. See Note
7 of the Companys consolidated financial statements for a comparison of
earnings of the Acquisition Partnerships and equity in earnings of the
Acquisition Partnerships summarized by geographic region. Equity in earnings
of servicing entities was $.8 million in the first quarter of 2001, as compared
to $.4 million in 2002.

Interest income.Interest income increased to $1.3 million or 7% as a
result of increased balances of investment loans receivable from the Mexican
Acquisition Partnerships.

Gain on sale of interest in equity investment.In 2001, the Company sold
a portion of its equity investment in a domestic Acquisition Partnership for
$7.0 million resulting in a gain of $3.1 million.

Operating expenses.Operating expenses decreased $1.0 million or 18%,
primarily as a result of decreased debt costs, a write-down of a Portfolio
Asset, and lower operating costs in Mexico.

Interest and fees on notes payable decreased $.3 million or 30% due to
average debt for the quarter decreasing to $38.0 million in the first quarter
of 2002 from $41.1 million in the first quarter of 2001. Also, the average cost
of borrowing decreased from 10.1% in the first quarter of 2001 to 7.6% in the
first quarter of 2002.

Salaries and benefits increased to $2.0 million, or 32%, due to increased
servicing personnel in Mexico. Total personnel within the Portfolio Asset
acquisition and resolution segment increased from 113 to 151 at March 31, 2001
and 2002, respectively, with the personnel in Mexico increasing from 38 to 82.

The provision for loan and impairment losses totaled $.6 million in 2001
and can be attributed to the write-down in estimated future collections of one
performing Portfolio.

Occupancy, data processing and other expenses decreased $.7 million or 29%
due primarily to certain subservice fees incurred on the Acquisition
Partnerships in Mexico, which were paid by the Company in 2001. In 2002, these
subservice fees are paid directly by the Acquisition Partnerships.

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Consumer Lending

The operating loss for the first quarter of 2002 was $1.1 million compared
to $1.5 million during the first quarter of 2001. The losses are attributable
to the Companys equity investment in Drive, which had no securitization gains
either year and recorded increased provisions related to the loans available
for sale in 2001.

Other Items Affecting Operations

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 decreased by 42% to
$.8 million in the first quarter of 2002 from $1.4 million in the first quarter
of 2001 as a result of lower levels of debt and reduced interest rates. Other
corporate overhead expenses increased 10% primarily due to higher franchise
taxes in 2002.

Income taxes.Federal income taxes are provided at a 35% rate applied to
taxable income or loss and are offset by NOLs that the Company believes are
available. The tax benefit of the NOLs is recorded in the period during which
the benefit is realized. The Company recorded no deferred tax provision in the
first quarters of 2002 and 2001.

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 and other
investments by the Company. The potential sources of liquidity are funds
generated from operations, equity distributions from the Acquisition
Partnerships, funds generated from investments, interest and principal payments
on subordinated intercompany debt, dividends from the Companys subsidiaries,
short-term borrowings from revolving lines of credit, proceeds from equity
market transactions and securitizations and other structured finance
transactions and other special purpose short-term borrowings.

BoS(USA) has an option to acquire a warrant for 1,975,000 shares of the
Companys non-voting Common Stock; the option can be exercised after June 30,
2002 if the Companys $12 million Term Loan B owed to BoS(USA) and Bank of
Scotland remains outstanding, but not prior to that date. The strike price is
$2.3125 per share. In the event that prior to June 30, 2002 the Company either
(a) refinances the $12 million Term Loan B with subordinated debt, or (b) pays
off the balance of Term Loan B from proceeds of an equity offering, then the
option to acquire a warrant for 1,975,000 shares of non-voting Common Stock
will terminate. BoS(USA) and the Company extended the initial exercise date for
this option to acquire a warrant for 1,975,000 shares from August 31, 2001 to
June 30, 2002 to allow the Company additional time to pursue possible
restructure alternatives which would otherwise be limited due to change of
control issues related to its substantial NOLs.

BoS(USA) also has a warrant to purchase 425,000 shares of the Companys
voting Common Stock at $2.3125 per share. In the event that Term Loan B is
terminated prior to June 30, 2002 through a transaction involving the issuance
of warrants, BoS(USA) is entitled to additional warrants in connection with
this existing warrant for 425,000 shares to retain its ability to acquire
approximately 4.86% of the Companys voting Common Stock. BoS(USA) and the
Company amended the warrant to extend the date from August 31, 2001 to June 30,
2002 to correspond to the extension of the initial exercise date of the option
described in the preceding paragraph.

Currently, the Company has approximately 1.2 million shares of New
Preferred Stock outstanding with accrued and unpaid dividends of approximately
$7.1 million. The Companys Term Loan B, which resulted from the corporate debt
restructure completed in August 2000, restricts the payment of dividends on
these shares until it is repaid in full. Given the continued high debt levels
of the Company, and managements priority of assuring adequate levels of
liquidity, the Company does not anticipate that dividends on shares of New
Preferred Stock will be paid in 2002. The board of directors and the management
of the Company are currently evaluating various alternatives to address its
outstanding shares of New Preferred Stock and the corresponding accrued
dividends and redemption obligation, in addition to the option of BoS(USA) to
acquire a warrant to purchase 1,975,000 shares.

The Portfolio Asset acquisition and resolution group of the Company has a
$30 million loan facility with CFSC Capital Corp. XXX, a subsidiary of Cargill.
This facility is being used exclusively to provide equity in new Portfolio
acquisitions in partnerships with Cargill and its affiliates. At March 31,
2002, approximately $29 million was outstanding under this facility.

Drive has a warehouse line of credit with BoS(USA), which provides
borrowings up to $150 million. Drives obligation under this arrangement at
March 31, 2002 was $125 million. The debt is secured by Drives retail
installment contracts and has been extended to June 30, 2002.

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In September 2001, Drive entered into a warehouse line of credit agreement
with Variable Funding Capital Corporation, a subsidiary of First Union National
Bank, which provides borrowings up to $100 million. Drives obligation under
the arrangement at March 31, 2002 was $28 million. The debt is secured by
Drives retail installment contracts and terminates on September 5, 2002.
FirstCity has not guaranteed and is not otherwise liable for this indebtedness.

The Company and each of its major operating subsidiaries have entered into
one or more credit facilities to finance their respective operations. Each of
the operating subsidiary credit facilities is nonrecourse to the Company. The
Company has agreed to indemnify BoS(USA) for 31% of losses, which might arise
as a result of agreements BoS(USA) executed as a sponsor in connection with the
securitizations completed by Drive. The Company also agreed to provide support
in connection with securitizations by Consumer Corp. and Drive prior to the
acquisition by BoS(USA) of the interest in Drive in August 2000. The Company
has also provided a guaranty limited to a maximum amount of up to $4 million of
a $60 million term loan from BoS(USA) to Drive ($25 million outstanding balance
as of March 31, 2002).

Excluding the term acquisition facilities of the unconsolidated
Acquisition Partnerships and the term and warehouse facilities of Drive, as of
March 31, 2002, the Company and its subsidiaries had credit facilities
providing for borrowings in an aggregate principal amount of $96 million and
outstanding borrowings of $94 million.

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

The following table summarizes the material terms of the credit facilities
to which the Company, its major operating subsidiaries and the Acquisition
Partnerships were parties to as of May 15, 2002 and the outstanding borrowings
under such facilities as of March 31, 2002.

Credit Facilities

|                                                           |                          |       |     |                       |    |             |     |               |    |                            |              |                                   |                          |                              |  |  |  | 
|---------------------------------------------------------- | ------------------------ | ----- | --- | --------------------- | -- | ----------- | --- | ------------- | -- | -------------------------- | ------------ | --------------------------------- | ------------------------ | ---------------------------- |  |  |  | 
|                                                           |                          |       |     | Funded and            |    |             |     |               |    |                            |              |                                   |                          |                              |  | 
|                                                           |                          |       |     | Unfunded              |    | Outstanding |     |               |    |                            |              |                                   |                          |                             
|                                                           |                          |       |     | Commitment            |    | Borrowings  |     |               |    |                            |              |                                   |                          |                             
|                                                           |                          |       |     | Amount as of          |    | as of       |     |               |    |                            |              |                                   |                          |                             
|                                                           |                          |       |     | May 15,               |    | March 31,   |     |               |    |                            |              |                                   |                          |                             
|                                                           |                          |       |     | 2002                  |    | 2002        |     | Interest Rate |    | Other Terms and Conditions
|                                                           |                          |       |     |                       |    |             |     |               |    |                           
|                                                           |                          |       |     | (Dollars in millions)
|FirstCity                                                  |                          |       |     |                       |    |             |     |               |    |                            |              |                                   |                          |                              |  | 
|Company Senior Facility:                                   |                          |       |     |                       |    |             |     |               |    |                            |              |                                   |                          |                              |  | 
|                                                           | Revolving Line of Credit |       | $   | 10                    |    |             | $   | 9             |    |                            | LIBOR + 2.5% |                                   | Secured by the assets of
|                                                           | Term Loan A              |       |     | 31                    |    |             |     | 31            |    |                            | LIBOR + 2.5% |                                   | the Company, matures    
|                                                           | Term Loan B              |       |     | 12                    |    |             |     | 12            |    |                            | Prime        |                                   | December 2003           
|Term credit facility                                       |                          |       | 3   |                       |    |             | 3   |               |    | LIBOR + 5.0%               |              | Secured by ownership             
|                                                           |                          |       |     |                       |    |             |     |               |    |                            |              |                                   |                          | interests in certain        
|                                                           |                          |       |     |                       |    |             |     |               |    |                            |              |                                   |                          | Acquisition partnerships    
|                                                           |                          |       |     |                       |    |             |     |               |    |                            |              |                                   |                          | Matures January 2003        
|Commercial Corp.                                           |                          |       |     |                       |    |             |     |               |    |                            |              |                                   |                          |                              |  | 
|Acquisition facility                                       |                          |       | 3   |                       |    |             | 3   |               |    | LIBOR + 4.0%               |              | Secured by existing              
|                                                           |                          |       |     |                       |    |             |     |               |    |                            |              |                                   |                          | Portfolio Assets, matures   
|                                                           |                          |       |     |                       |    |             |     |               |    |                            |              |                                   |                          | January 2003                
|Term facilities                                            |                          |       | 7   |                       |    |             | 7   |               |    | Fixed at                   |              | Secured by Portfolio             
|                                                           |                          |       |     |                       |    |             |     |               |    | 7.00% to 7.66%             |              | Assets, matures June             
|                                                           |                          |       |     |                       |    |             |     |               |    |                            |              |                                   |                          | 2002 and November 2002      
|Equity investment facility                                 |                          |       | 30  |                       |    |             | 29  |               |    | LIBOR + 4.5%               |              | Acquisition facility for         
|                                                           |                          |       |     |                       |    |             |     |               |    |                            |              |                                   |                          | the investment in future    
|                                                           |                          |       |     |                       |    |             |     |               |    |                            |              |                                   |                          | Acquisition partnerships,   
|                                                           |                          |       |     |                       |    |             |     |               |    |                            |              |                                   |                          | matures March 2003          
|                                                           |                          | Total |     | $                     | 96 |             |     | $             | 94 |                            |              |                                   |                          |                              |  |  |  | 
|                                                           |                          |       |     |                       |    |             |     |               |    |                            |              |                                   |                          |                              |  | 
|Unconsolidated Acquisition
Partnerships term
Facilities(1) |                          | $     | 160 |                       |    | $           | 160 |               |    | Fixed at 10%,              |              | Secured by Portfolio             
|                                                           |                          |       |     |                       |    |             |     |               |    | LIBOR + 2.25%              |              | Assets, various Maturities       
|                                                           |                          |       |     |                       |    |             |     |               |    | to 5% and                  |              |                                   |                          |                             
|                                                           |                          |       |     |                       |    |             |     |               |    | Prime + 1%                 |              |                                   |                          |                             
|                                                           |                          |       |     |                       |    |             |     |               |    | to 7%                      |              |                                   |                          |                             
|Unconsolidated Drive
Warehouse Facility                    |                          | $     | 150 |                       |    | $           | 125 |               |    | LIBOR + 1%;                |              | Secured by warehouse             
|                                                           |                          |       |     |                       |    |             |     |               |    | Prime - 1.5%               |              | inventory, matures June 2002     
|Warehouse Facility                                         |                          |       | 100 |                       |    |             | 28  |               |    | Rate based on              |              | Secured by warehouse             
|                                                           |                          |       |     |                       |    |             |     |               |    | Commercial                 |              | inventory, matures September 2002
|                                                           |                          |       |     |                       |    |             |     |               |    | paper rates                |              |                                   |                          |                             
|                                                           |                          |       |     |                       |    |             |     |               |    | combined with              |              |                                   |                          |                             
|                                                           |                          |       |     |                       |    |             |     |               |    | certain                    |              |                                   |                          |                             
|                                                           |                          |       |     |                       |    |             |     |               |    | facility fees              |              |                                   |                          |                             
|Subordinate capital Facility                               |                          |       | 40  |                       |    |             | 37  |               |    | Fixed at 14%               |              | Secured by all assets of         
|                                                           |                          |       |     |                       |    |             |     |               |    |                            |              |                                   |                          | Drive, matures February 2006
|Term Facility                                              |                          |       | 28  |                       |    |             | 25  |               |    |                            |              |                                   |                          |                              |  | 
|                                                           |                          |       |     |                       |    |             |     |               |    |                            |              |                                   |                          |                              |  | 
|                                                           |                          |       |     |                       |    |             |     |               |    | LIBOR + 1%;                |              | Secured by residual              
|                                                           |                          |       |     |                       |    |             |     |               |    | Prime - 1.5%               |              | interests, matures August 2003   
|                                                           |                          | $     | 318 |                       |    | $           | 215 |               |    |                            |              |                                   |                          |                              |  | 
|                                                           |                          |       |     |                       |    |             |     |               |    |                            |              |                                   |                          |                              |  | 

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|(1) |  | In addition to the term acquisition facilities of the unconsolidated
Acquisition Partnerships, the Mexican Acquisition Partnerships also have
term debt of approximately $290 million outstanding as of March 31, 2002
owed to affiliates of the investor groups. Of this amount, the Company has
recorded approximately $22 million as Loans Receivable on the Consolidated
Balance Sheets.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Forward-Looking Statements



| |  | Certain statements contained in this Quarterly Report on Form 10-Q or
incorporated by reference from time to time, including, but not limited to,
statements relating to the Companys strategic objectives and future
performance, which are not historical facts, may be deemed to be
forward-looking statements under the Private Securities Litigation Reform Act
of 1995. Forward-looking statements include, without limitation, any
statement that may project, indicate or imply future results, performance or
achievements, and may contain the words expect, intend, plan,
estimate, believe, will be, will continue, will likely result, and
similar expressions. Such statements inherently are subject to a variety of
risks and uncertainties that could cause actual results to differ materially
from those projected. There are many important factors that could cause the
Companys actual results to differ materially from those indicated in the
forward-looking statements. Such factors include, but are not limited to, the
performance of the Companys subsidiaries and affiliates, the availability of
Portfolio Assets; assumptions underlying asset performance; the impact of
certain covenants in loan agreements of the Company and its subsidiaries;
continued availability of the Companys credit facilities; the degree to
which the Company is leveraged; the ability of the Company to utilize NOLs;
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; fluctuations in residential and
commercial real estate values; risk of declining value of assets, loans or
collateral; capital market conditions, including the markets for asset-backed
securities; risks associated with foreign operations; currency exchange rate
fluctuations; general economic conditions; changes in foreign political,
social and economic conditions; regulatory initiatives and compliance with
governmental regulations; the ability to attract and retain qualified
personnel; uncertainties of any litigation that might arise in a bankruptcy
proceeding; factors more fully discussed and identified in the Companys
Annual Report on Form 10-K, filed March 29, 2002 (including those discussed
under Item 7. Managements Discussion and Analysis of Financial Condition
and Results of Operations), as well as in other Securities and Exchange
Commission filings. Many of these factors are beyond the Companys control.
In addition, it should be noted that past financial and operational
performance of the Company is not necessarily indicative of future financial
and operational performance. Given these risks and uncertainties, investors
should not place undue reliance on forward-looking statements. The
forward-looking statements in this Form 10-Q speak only as of the date of
this Form 10-Q. The Company expressly disclaims any obligation or undertaking
to release publicly any updates or revisions to any forward-looking statement
to reflect any change in the
Companys expectations with regard thereto or any change in events,
conditions or circumstances on which any forward-looking statement is based.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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ITEM 3.Quantitative and Qualitative Disclosures About Market Risk.

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

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

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

The Companys equity investment in Drive is materially impacted by net
gains realized on securitization transactions and net interest margins. The
sub-prime loans that Drive sells are included in asset-backed securities the
investor or purchaser issues. These securities are priced at spreads over the
LIBOR or an 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 Drive originates and sells. The
timing and size of the securitizations could also have a material effect on the
net income of Drive. 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 Drive for the
products. Drive does not hedge these price risks.

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

Additionally the Company has various sources of financing which have been
previously described in the Liquidity and Capital Resources section of Item 2.

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 the value of residual interests in securitizations and costs
of borrowings. Declining prices for the Companys sub-prime loans would
adversely affect 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, 2001.

22



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PART II

OTHER INFORMATION




ITEM 1.Legal Proceedings

On October 14, 1999, Harbor Financial Group, Inc. (Harbor Parent),
Harbor Financial Mortgage Corporation (HFMC) and four subsidiaries of HFMC
filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code
before the United States Bankruptcy Court for the Northern District of Texas,
Dallas Division. On December 14, 1999, the bankruptcy proceedings were
converted to liquidations under Chapter 7 of the United States Bankruptcy Code
(the Bankruptcy Cases). John H. Litzler, the Chapter 7 Trustee in the
bankruptcy proceedings (the Trustee), initiated adversary proceedings on May
25, 2001 against FirstCity and various current and former directors and
officers of FirstCity and Harbor alleging breach of fiduciary duties,
mismanagement, and self-dealing by FirstCity and Harbor directors and officers,
and improper transfer of funds from the Harbor related entities to FirstCity.
The claims also include fraudulent and preferential transfer of assets of the
Harbor entities, fraud and conspiracy. The Trustee, FirstCity, the other
defendants and the insurers providing Directors and Officers Insurance
coverage for FirstCity and its subsidiaries (the Insurers) have reached an
agreement to compromise the claims brought in the adversary proceedings,
subject to the approval of the Bankruptcy Court. Under the proposed
settlement, if approved by the Bankruptcy Court, the Trustee will release the
defendants, their affiliates and subsidiaries from any and all claims which
were brought or could have been brought by the Trustee against any of the
defendants, any past and present officers and directors of FirstCity or any
affiliates or subsidiaries of FirstCity in consideration of (i) the payment of
the sum of $3.6 million by the Insurers to the Trustee, (ii) a payment by
FirstCity to the Trustee in the sum of $.2 million, and (iii) the release of
any and all claims of FirstCity and its affiliates and subsidiaries and of the
individual defendants in the bankruptcy proceedings against the Trustee, with
the exception of FirstCitys administrative claim to the extent of $.3 million.
The payment by the Insurers is conditioned upon FirstCitys administrative
claim in the Bankruptcy Cases being allowed in the amount of $.3 million, which
claim FirstCity will assign to the Insurers and which shall be paid by the
Trustee directly to the Insurers. The approval of the Bankruptcy Court of the
proposed terms of settlement has not been obtained, and there can be no
assurance that such consent and approval will be secured. In the event that
carrier consent or bankruptcy court approval is not obtained, FirstCity intends
to vigorously contest the claims of the Trustee, as the Company believes that
the claims are without merit and that it has valid defenses to these claims.

The Company and Harbor Parent filed suit in the Federal District Court for
the Western District of Texas, Waco Division, against Chase Bank of Texas, N.A.
and Chase Securities, Inc. in September 1999 seeking injunctive relief and
damages resulting from alleged violations by the defendants of the Bank Holding
Company Act and from civil conspiracy engaged in by the defendants, arising
from an engagement letter entered into between the Company and Chase
Securities, Inc. relating to the sale of assets or securities of Harbor Parent,
HFMC and their subsidiaries (collectively Harbor). The Company and Harbor
Parent alleged that the conditioning by Chase Bank Texas, N.A. of the extension
of credit to HFMC on the retention of Chase Securities, Inc. by the Company and
Harbor violated the Bank Holding Company Act. The Company additionally sought a
judicial declaration that the plaintiffs were not obligated to pay any
commission to Chase Securities, Inc. under the engagement letter. The Company
and Harbor Parent also sought recovery of treble damages pursuant to the Bank
Holding Company Act and recovery of costs of court, including reasonable
attorneys fees. A motion to dismiss the Texas suit was granted based upon a
provision in the engagement letter that provided that any suit arising from the
engagement letter would be pursued in the State of New York. The Company has
been granted leave by the Supreme Court for the State of New York to amend its
answer in that proceeding to include the claims asserted in the Texas suit as a
counterclaim to the suit brought by Chase Securities, Inc. and to assert
certain affirmative defenses.

On October 4, 1999, Chase Securities, Inc. filed suit against the Company
before the Supreme Court for the State of New York, County of New York:
Commercial Part seeking recovery of $2.4 million as the balance of a
transaction fee allegedly due it under the terms of the engagement letter
discussed above and other relief. The Company denies that it has any liability
to Chase Securities, Inc. The Company has asserted as a defense to this action
the violations of the Bank Holding Company Act and other claims asserted in the
litigation filed in the Federal District Court for the Western District of
Texas. The Company was granted leave to amend its answer in the suit to include
a counterclaim against Chase Securities, Inc. asserting breach of contract
based upon the matters that were asserted in the Texas suit.

The Trustee, in his capacity as the duly appointed trustee of the
bankruptcy estates of Harbor Parent and HFMC, filed an action pending in the
United States District Court for the Southern District of New York against
Chase Manhattan Bank, formerly Chase Bank of Texas, N.A. and Chase Securities,
Inc. seeking recovery of damages arising from or relating to various agreements
by and between Harbor Parent and HFMC and Chase Manhattan Bank and Chase
Securities, Inc., including the alleged violations of the Anti-
Tying provision of the Bank Holding Company Act as had been asserted by
the Company and Harbor Financial Group, Inc. in the Texas suit.

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##### Table of Contents



The Trustee, the Company and JP Morgan Chase Bank and Chase Securities,
Inc. have finalized documents to settle the claims brought in the suits pending
in the New York courts described above. The settlement of the suit filed by
Chase Securities, Inc. against FirstCity is subject to the approval of the
proposed terms of settlement between the Trustee and JP Morgan Chase Bank and
Chase Securities, Inc. (the Harbor Settlement) by the Bankruptcy Court in the
proceedings related to Harbor. There can be no assurance that the approval of
the Bankruptcy Court of the Harbor Settlement can be obtained. In the event
that the settlement of the suit is not completed or the Bankruptcy Court does
not approve the Harbor Settlement, the Company intends to vigorously defend the
claim of Chase Securities, Inc. for payment of the fee and to pursue its claims
for damages against JP Morgan Chase Bank and Chase Securities, Inc.

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




ITEM 3.Defaults Upon Senior Securities

In the third quarter of 1999, dividends on the Companys adjusting rate
preferred stock were suspended. At March 31, 2002, accumulated dividends in
arrears on such preferred stock totaled $7.1 million, or $5.775 per share.




ITEM 6.Exhibits and Reports on Form 8-K

(a)  Exhibits

|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- |  | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Number  |  |   |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|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).                                                                                                                                                                   
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- |  | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Number  |  |   |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|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).                                                                                                                                                                                                                                 
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|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).                                                                                                                                                                                              
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                             
|------- |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                             
|Number  |  |   |  | Description                                                                                                                                                                                                                                                                                                                                                                                                 
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                             
|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 ContiTrade 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).                                       

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|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Number  |  |   |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|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 (incorporated herein by reference to
Exhibit 10.29 of the Companys Form 10-Q dated May 17,
1999, filed with the commission on May 17, 1999).                                                                                                                                                         
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|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 (incorporated herein by reference to Exhibit
10.30 of the Companys Form 10-Q dated May 17, 1999, filed
with the commission on May 17, 1999).                                     
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.31   |  | - |  | Note purchase agreement, dated March 30, 1999 among
Enterprise Funding Corporation, FCAR Receivables, L.L.C.
and NationsBank, N.A. (incorporated herein by reference to
Exhibit 10.31 of the Companys Form 10-Q dated May 17,
1999, filed with the commission on May 17, 1999).                                                                                                                                                  
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.32   |  | - |  | Custodian Agreement, dated March 30, 1999, among FCAR
Receivables L.L.C., FirstCity Funding Corporation,
NationsBank, N.A., Enterprise Funding Corporation and Chase
Bank of Texas, N.A. (incorporated herein by reference to
Exhibit 10.32 of the Companys Form 10-Q dated May 17,
1999, filed with the commission on May 17, 1999).                                                                                            
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.33   |  | - |  | 100,000,000 dollar form of note, dated March 30, 1999
among FCAR Receivables LLC, Enterprise Funding Corporation
and NationsBank, N.A. (incorporated herein by reference to
Exhibit 10.33 of the Companys Form 10-Q dated May 17,
1999, filed with the commission on May 17, 1999).                                                                                                                                              
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.33   |  | - |  | Credit agreement dated effective as of May 28, 1999
made by and among Harbor Financial Mortgage, New America
Financial, Inc., FirstCity Financial Mortgage Corporation,
and Guaranty Federal Bank F.S.B. as Administrative Agent
and Bank One, Texas, N.A. as Collateral Agent (incorporated
herein by reference to Exhibit 10.33 of the Companys Form
10-Q dated August 16, 1999, filed with the commission on
August 16, 1999).

27



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|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                    
|------- |  | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |   |  |                                                                                                                                                                                                                                                                                                                                                    
|Number  |  |   |  | Description                                                                                                                                                                                                                                                                                                                                        
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                    
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                    
|10.34   |  | - |  | Tenth Amendment to Loan Agreement, dated August 11,
1999 between Bank of Scotland and the Company (incorporated
herein by reference to Exhibit 10.34 of the Companys Form
10-Q dated August 16, 1999, filed with the Commission on
August 16, 1999).                                                                                              
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                    
|10.35   |  | - |  | Amended and Restated Loan Agreement, dated December 20,
1999, by and among FirstCity Financial Corporation as
Borrower and The Lenders Named Herein, as Lenders and Bank
of Scotland as Agent (incorporated herein by reference to
Exhibit 10.1 of the Companys Form 8-K dated December 22,
1999, filed with the commission on December 28, 1999).
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                    
|10.36   |  | - |  | Subordinated Secured Senior Note Purchase Agreement,
dated December 20, 1999, between FirstCity Financial
Corporation, as Issuer and IFA Corporation, as Purchaser
(incorporated herein by reference to Exhibit 10.2 of the
Companys Form 8-K dated December 22, 1999, filed with the
commission on December 28, 1999).                           
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                    
|10.37   |  | - |  | Employment Agreement, dated October 1, 1999, by and
between FirstCity Commercial Corporation and Terry R.
DeWitt. (incorporated herein by reference to Exhibit 10.37
of the Companys Form 10-K dated April 6, 2000, filed
with the commission on April 6, 2000).                                                                                  
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                    
|10.38   |  | - |  | Employment Agreement, dated October 1, 1999, by and
between FirstCity Commercial Corporation and G. Stephen
Fillip. (incorporated herein by reference to Exhibit 10.38
of the Companys Form 10-K dated April 6, 2000, filed
with the commission on April 6, 2000).                                                                                
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                    
|10.39   |  | - |  | Shareholder Agreement, dated October 1, 1999, by and
among FirstCity Holdings Corporation, FirstCity Commercial
Corporation, Terry R. DeWitt, G. Stephen Fillip and James
C. Holmes. (incorporated herein by reference to Exhibit
10.39 of the Companys Form 10-K dated April 6, 2000,
filed with the commission on April 6, 2000).               
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                    
|10.40   |  | - |  | Securities Purchase Agreement, dated as of August 18,
2000, by and among the Company, Consumer Corp., Funding LP,
Funding GP, IFA-GP and IFA-LP. (incorporated herein by
reference to Exhibit 10.40 of the Companys Form 8-K dated
August 25, 2000, filed with the commission on September 11,
2000).                                             
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                    
|10.41   |  | - |  | Contribution and Assumption Agreement by and between
Consumer Corp. and Drive dated as of August 18, 2000.
(incorporated herein by reference to Exhibit 10.41 of the
Companys Form 8-K dated August 25, 2000, filed with the
commission on September 11, 2000).                                                                                   
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                    
|10.42   |  | - |  | Contribution and Assumption Agreement by and between
Funding LP and Drive dated as of August 18, 2000.
(incorporated herein by reference to Exhibit 10.42 of the
Companys Form 8-K dated August 25, 2000, filed with the
commission on September 11, 2000).                                                                                       
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                    
|10.43   |  | - |  | Second Amendment to Amended and Restated Loan
Agreement, dated December 20, 1999, by and among the
Company, as borrower, and the Lenders, as lenders, and Bank
of Scotland, as Agent. (incorporated herein by reference to
Exhibit 10.43 of the Companys Form 8-K dated August 25,
2000, filed with the commission on September 11, 2000).        
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                    
|10.44   |  | - |  | Receivables Financing Agreement, dated August 18, 2000,
among Drive BOS LP, Drive Financial Services LP, each
Lender, IPA Inc. and Wells Fargo Bank Minnesota, N.A.
(incorporated herein by reference to Exhibit 10.44 of the
Companys Form 10-K dated April 13, 2001, filed with the
Commission on April 13, 2001).                              
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                    
|10.45   |  | - |  | Amendment to Loan Agreement and extension of Promissory
Note, dated January 12, 2001, by and between FirstCity
Holdings Corporation and CSFC Capital Corp. XXX
(incorporated herein by reference to Exhibit 10.45 of the
Companys Form 10-K dated April 13, 2001, filed with the
Commission on April 13, 2001).                                   
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                    

(b)  Reports on Form 8-K.The Company filed a report on Form 8-K on
January 18, 2002. Items 5 and 7 were reported.

28



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|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|------- |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|Number  |  |   |  | Description                                                                                                                                                                                                                                                                                                                                                                                           
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|10.46   |  | - |  | Second Amendment, dated as of February 16, 2001, to the
Receivables Financing Agreement, dated as of August 18,
2000, among Drive BOS LP, Drive Financial Services LP the
Lenders party thereto, IPA Incorporated and Wells Fargo Bank
Minnesota, NA (incorporated herein by reference to Exhibit
10.46 of the Companys Form 10-K dated April 13, 2001, filed
with the Commission on April 13, 2001).
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|10.47   |  | - |  | Subordinate Capital Loan Agreement, dated as of February 16,
2001, among Drive Financial Services LP, DRIVE BOS LP, the
financial institutions from time to time party hereto and
IPA Incorporated (incorporated herein by reference to
Exhibit 10.47 of the Companys Form 10-K dated April 13,
2001, filed with the Commission on April 13, 2001).                                                  
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|10.48   |  | - |  | Amended and Restated Amendment #4 (Option and Option
Warrant), dated as of December 31, 2001, between the Company
and BoS(USA) Inc. (incorporated herein by reference to
Exhibit 99.1 of the Companys Form 8-K dated January 18,
2002, filed with the Commission on January 18, 2002).                                                                                                               

29



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##### Table of Contents






SIGNATURES

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

|                    |  |                                 |  |                                                                                                                                             
|------------------- |  | ------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|                    |  | FIRSTCITY FINANCIAL CORPORATION
|                    |  |                                 |  |                                                                                                                                             
|                    |  | By:                             |  | /s/ JAMES T. SARTAIN                                                                                                                        
|                    |  |                                 |  |                                                                                                                                             
|                    |  |                                 |  | James T. Sartain                                                                                                                            
|                    |  |                                 |  | President and Chief Executive
Officer and Director
(Duly authorized officer of the
Registrant)                                              
|                    |  |                                 |  |                                                                                                                                             
|                    |  | By:                             |  | /s/ J. BRYAN BAKER                                                                                                                          
|                    |  |                                 |  |                                                                                                                                             
|                    |  |                                 |  | J. Bryan Baker                                                                                                                              
|                    |  |                                 |  | Senior Vice President and Chief
Financial Officer
(Duly authorized officer and
principal financial and accounting
officer of the Registrant)
|                    |  |                                 |  |                                                                                                                                             
|Dated: May 15, 2002 |  |                                 |  |                                                                                                                                             

30



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EXHIBIT INDEX

|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- |  | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Number  |  |   |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|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).                                                                                                                                                                                                                               
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|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).                                                                                                                            
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                

31



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|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- |  | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Number  |  |   |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|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).                                                                                
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|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).                                                                                                                                                                 
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                      
|------- |  | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |   |  |                                                                                                                                                                                                                                                                                                                                                                      
|Number  |  |   |  | Description                                                                                                                                                                                                                                                                                                                                                          
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                      
|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 ContiTrade 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).
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                      
|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 (incorporated herein by reference to
Exhibit 10.29 of the Companys Form 10-Q dated May 17,
1999, filed with the commission on May 17, 1999).                                                                                            
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                      

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##### Table of Contents



|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Number  |  |   |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|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 (incorporated herein by reference to Exhibit
10.30 of the Companys Form 10-Q dated May 17, 1999, filed
with the commission on May 17, 1999).                                     
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.31   |  | - |  | Note purchase agreement, dated March 30, 1999 among
Enterprise Funding Corporation, FCAR Receivables, L.L.C.
and NationsBank, N.A. (incorporated herein by reference to
Exhibit 10.31 of the Companys Form 10-Q dated May 17,
1999, filed with the commission on May 17, 1999).                                                                                                                                                  
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.32   |  | - |  | Custodian Agreement, dated March 30, 1999, among FCAR
Receivables L.L.C., FirstCity Funding Corporation,
NationsBank, N.A., Enterprise Funding Corporation and Chase
Bank of Texas, N.A. (incorporated herein by reference to
Exhibit 10.32 of the Companys Form 10-Q dated May 17,
1999, filed with the commission on May 17, 1999).                                                                                            
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.33   |  | - |  | 100,000,000 dollar form of note, dated March 30, 1999
among FCAR Receivables LLC, Enterprise Funding Corporation
and NationsBank, N.A. (incorporated herein by reference to
Exhibit 10.33 of the Companys Form 10-Q dated May 17,
1999, filed with the commission on May 17, 1999).                                                                                                                                              
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.33   |  | - |  | Credit agreement dated effective as of May 28, 1999
made by and among Harbor Financial Mortgage, New America
Financial, Inc., FirstCity Financial Mortgage Corporation,
and Guaranty Federal Bank F.S.B. as Administrative Agent
and Bank One, Texas, N.A. as Collateral Agent (incorporated
herein by reference to Exhibit 10.33 of the Companys Form
10-Q dated August 16, 1999, filed with the commission on
August 16, 1999).
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.34   |  | - |  | Tenth Amendment to Loan Agreement, dated August 11,
1999 between Bank of Scotland and the Company (incorporated
herein by reference to Exhibit 10.34 of the Companys Form
10-Q dated August 16, 1999, filed with the Commission on
August 16, 1999).                                                                                                                                                                             
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.35   |  | - |  | Amended and Restated Loan Agreement, dated December 20,
1999, by and among FirstCity Financial Corporation as
Borrower and The Lenders Named Herein, as Lenders and Bank
of Scotland as Agent (incorporated herein by reference to
Exhibit 10.1 of the Companys Form 8-K dated December 22,
1999, filed with the commission on December 28, 1999).                                                                               
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.36   |  | - |  | Subordinated Secured Senior Note Purchase Agreement,
dated December 20, 1999, between FirstCity Financial
Corporation, as Issuer and IFA Corporation, as Purchaser
(incorporated herein by reference to Exhibit 10.2 of the
Companys Form 8-K dated December 22, 1999, filed with the
commission on December 28, 1999).                                                                                                          
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.37   |  | - |  | Employment Agreement, dated October 1, 1999, by and
between FirstCity Commercial Corporation and Terry R.
DeWitt. (incorporated herein by reference to Exhibit 10.37
of the Companys Form 10-K dated April 6, 2000, filed
with the commission on April 6, 2000).                                                                                                                                                                 
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.38   |  | - |  | Employment Agreement, dated October 1, 1999, by and
between FirstCity Commercial Corporation and G. Stephen
Fillip. (incorporated herein by reference to Exhibit 10.38
of the Companys Form 10-K dated April 6, 2000, filed
with the commission on April 6, 2000).                                                                                                                                                               
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.39   |  | - |  | Shareholder Agreement, dated October 1, 1999, by and
among FirstCity Holdings Corporation, FirstCity Commercial
Corporation, Terry R. DeWitt, G. Stephen Fillip and James
C. Holmes. (incorporated herein by reference to Exhibit
10.39 of the Companys Form 10-K dated April 6, 2000,
filed with the commission on April 6, 2000).                                                                                              
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.40   |  | - |  | Securities Purchase Agreement, dated as of August 18,
2000, by and among the Company, Consumer Corp., Funding LP,
Funding GP, IFA-GP and IFA-LP. (incorporated herein by
reference to Exhibit 10.40 of the Companys Form 8-K dated
August 25, 2000, filed with the commission on September 11,
2000).                                                                                                                            
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.41   |  | - |  | Contribution and Assumption Agreement by and between
Consumer Corp. and Drive dated as of August 18, 2000.
(incorporated herein by reference to Exhibit 10.41 of the
Companys Form 8-K dated August 25, 2000, filed with the
commission on September 11, 2000).                                                                                                                                                                  
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   

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##### Table of Contents



|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|------- |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|Number  |  |   |  | Description                                                                                                                                                                                                                                                                                                                                                                                           
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|10.42   |  | - |  | Contribution and Assumption Agreement by and between
Funding LP and Drive dated as of August 18, 2000.
(incorporated herein by reference to Exhibit 10.42 of the
Companys Form 8-K dated August 25, 2000, filed with the
commission on September 11, 2000).                                                                                                                                          
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|10.43   |  | - |  | Second Amendment to Amended and Restated Loan
Agreement, dated December 20, 1999, by and among the
Company, as borrower, and the Lenders, as lenders, and Bank
of Scotland, as Agent. (incorporated herein by reference to
Exhibit 10.43 of the Companys Form 8-K dated August 25,
2000, filed with the commission on September 11, 2000).                                                           
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|10.44   |  | - |  | Receivables Financing Agreement, dated August 18, 2000,
among Drive BOS LP, Drive Financial Services LP, each
Lender, IPA Inc. and Wells Fargo Bank Minnesota, N.A.
(incorporated herein by reference to Exhibit 10.44 of the
Companys Form 10-K dated April 13, 2001, filed with the
Commission on April 13, 2001).                                                                                 
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|10.45   |  | - |  | Amendment to Loan Agreement and extension of Promissory
Note, dated January 12, 2001, by and between FirstCity
Holdings Corporation and CSFC Capital Corp. XXX
(incorporated herein by reference to Exhibit 10.45 of the
Companys Form 10-K dated April 13, 2001, filed with the
Commission on April 13, 2001).                                                                                      
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|10.46   |  | - |  | Second Amendment, dated as of February 16, 2001, to the
Receivables Financing Agreement, dated as of August 18,
2000, among Drive BOS LP, Drive Financial Services LP the
Lenders party thereto, IPA Incorporated and Wells Fargo Bank
Minnesota, NA (incorporated herein by reference to Exhibit
10.46 of the Companys Form 10-K dated April 13, 2001, filed
with the Commission on April 13, 2001).
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|10.47   |  | - |  | Subordinate Capital Loan Agreement, dated as of February 16,
2001, among Drive Financial Services LP, DRIVE BOS LP, the
financial institutions from time to time party hereto and
IPA Incorporated (incorporated herein by reference to
Exhibit 10.47 of the Companys Form 10-K dated April 13,
2001, filed with the Commission on April 13, 2001).                                                  
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|10.48   |  | - |  | Amended and Restated Amendment #4 (Option and Option
Warrant), dated as of December 31, 2001, between the Company
and BoS(USA) Inc. (incorporated herein by reference to
Exhibit 99.1 of the Companys Form 8-K dated January 18,
2002, filed with the Commission on January 18, 2002).                                                                                                               

35