<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-20677
FIRSTCITY LIQUIDATING TRUST
(Exact name of registrant as specified in its charter)
Texas 06-6414468
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1001 Fannin, Suite 505, Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 651-7841
Securities registered pursuant to Section 12(b) of the Act: None Securities
registered pursuant to Section 12(g) of the Act:
Title of Each Class
Class B Beneficial Interests
Class C Beneficial Interests
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of January 31, 1999, 2,460,911 units of Class B Beneficial Interests and
738,273 units of Class C Beneficial Interests were outstanding.
Documents incorporated by reference: None
<PAGE> 2
Part I
Item 1. Business.
On July 3, 1995 (the "Effective Date"), the FirstCity
Liquidating Trust (the "Trust") and certain other entities were established
pursuant to and upon consummation of the Joint Plan of Reorganization, dated
December 23, 1994, by First City Bancorporation of Texas, Inc., a Delaware
corporation (the "Debtor"), Official Committee of Equity Security Holders (the
"Equity Committee"), and J-Hawk Corporation ("J-Hawk"), with the participation
of Cargill Financial Services Corporation, under Chapter 11 of Title 11 of the
U.S. Code (the "Bankruptcy Code"), Case No. 392-39474-HCA-11 (the "Plan"). The
Plan was confirmed by order of the U.S. Bankruptcy Court for the Northern
District of Texas, Dallas Division (the "Bankruptcy Court") entered on May 31,
1995.
The Debtor was formed as a multi-bank holding company in 1988
for the purpose of reorganizing First City Bancorporation of Texas, Inc., a
Texas corporation. Beginning in the summer of 1990, the financial condition of
the Debtor began to deteriorate and worsened progressively throughout 1990 and
1991. On October 30, 1992, regulatory agencies closed the Debtor's banks. On
October 31, 1992, certain of the Debtor's unsecured creditors filed an
involuntary Chapter 11 bankruptcy petition against the Debtor in the Bankruptcy
Court. On November 23, 1992, the Debtor consented to the entry of an order for
relief against it under Chapter 11 of the Bankruptcy Code. Until July 3, 1995,
the Debtor operated its remaining businesses and managed its property as
debtor-in-possession.
The Plan was confirmed by the Bankruptcy Court by an order
entered on May 31, 1995, and became effective on July 3, 1995. Pursuant to the
Plan and an Agreement and Plan of Merger between the Debtor and J-Hawk, on July
3, 1995, J-Hawk was merged (the "Merger") with and into the Debtor, with the
Debtor as the surviving entity. Pursuant to the Merger, (i) the former holders
of common stock of J-Hawk received, in the aggregate, approximately 49.9% of the
outstanding common stock of the surviving entity, in exchange for their shares
of J-Hawk common stock, (ii) approximately 50.1% of the outstanding common stock
of the surviving entity was distributed among former security holders of the
Debtor pursuant to the Plan and (iii) the name of the corporation was changed to
FirstCity Financial Corporation ("FirstCity").
The Trust has not and, pursuant to the Liquidating Trust
Agreement, dated as of July 3, 1995, by and between First City Bancorporation of
Texas, Inc. and State Street Bank and Trust Company, successor to Fleet National
Bank and Shawmut Bank Connecticut, National Association, as Trustee (the "Trust
Agreement"), may not engage in the conduct of a trade or business apart from the
liquidation of Trust assets and the winding up of the affairs of the Debtor and
its subsidiaries. Pursuant to Article VIII of the Trust Agreement, the Trust
shall terminate upon the date which is three (3) years and six (6) months after
the Effective Date; provided, however, that at least six (6) months prior to
such termination, the Portfolio Committee (as defined herein) may, with the
approval of the Bankruptcy Court, extend the term of the Trust if necessary to
the liquidating purpose thereof. Multiple extensions, if approved by the
Bankruptcy Court, are permissible, although the aggregate of all such extensions
shall not exceed five (5) years so that, in any event, the Trust shall terminate
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no later than eight (8) years and six (6) months after the Effective Date. In
June 1998, the Bankruptcy Court extended the life of the Trust from December 31,
1998 to January 3, 2000.
Pursuant to the Plan, substantially all of the legal and
beneficial interest in the assets of the Debtor, other than $20 million in cash
which was contributed by the Debtor to FirstCity, were transferred to the Trust
or to subsidiaries of the Trust. Such assets have been and will continue to be
liquidated over the life of the Trust pursuant to the terms of the Plan and the
Trust Agreement. The non-cash assets of the Trust consist principally of
performing and non-performing loans, income producing real estate and interests
in real estate, and miscellaneous other assets and receivables (principally from
the Federal Deposit Insurance Corporation (the "FDIC")) transferred to the Trust
upon the consummation of the Plan.
In connection with the sale of the Debtor's banks by the FDIC
to certain other banks (the"Loss-Sharing Banks"), the FDIC entered into certain
agreements (the"Loss-Sharing Agreements") to guarantee certain recoveries on
loans acquired by the Loss-Sharing Banks. On July 12, 1995, in order to reduce
the uncertain effect of the Loss-Sharing Agreements on future distributions to
the Trust by the FDIC, subsidiaries of the Trust purchased assets for
approximately $206 million from the Loss-Sharing Banks (the "Loss-Sharing
Settlement"). With the purchase of these assets, the Loss-Sharing Banks released
the FDIC from its future obligations under the Loss-Sharing Agreements. The
Loss-Sharing Settlement was significant to the Trust because it allowed the FDIC
to eliminate the loss-sharing reserve that it had maintained to cover the FDIC's
obligations under the loss-sharing guarantees, thereby eliminating the
uncertainty of future reductions from the reserve and increasing the initial
distribution made by the FDIC to the Trust.
In 1996, the FDIC closed the receiverships of the Debtor's
banks (the "Receiverships") and distributed the surplus cash ($17.6 million on
December 23, 1996) of the Receiverships to the Trust. In accordance with that
certain Conveyance and Indemnification Agreement, dated December 23, 1996 (the
"Conveyance and Indemnification Agreement "), the Trust will be required, among
other things, to provide indemnity until March 31, 1999 to the FDIC against any
known or unknown liabilities, obligations or actual expenses associated with the
Receiverships, in an aggregate amount up to $12 million.
Item 2. Properties.
The Trust does not have any material physical properties,
except for such properties that are held for sale.
Item 3. Legal Proceedings.
The Trust is involved in various legal proceedings in the
ordinary course of business. In the opinion of management of the Trust, the
resolution of such matters should not have a material adverse impact on the
financial position, results of operations or liquidity of the Trust.
Item 4. Submission of Matters to a Vote of Security Holders.
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As the Trust has no outstanding voting securities, no matters
were submitted to a vote of security holders during the fourth quarter ended
December 31, 1998.
Part II
Item 5. Market For Registrant's Common Equity and Related Stockholder
Matters.
The Class A Certificate was held by FirstCity. Through
December 31, 1997, the Trust had distributed $188 million to FirstCity as the
sole Class A Certificate holder, retiring the Class A Certificate in full.
The Class B Beneficial Interests (traded under the symbol
"FCFCL") and Class C Beneficial Interests (traded under the symbol "FCFCZ") have
been traded over the counter since July 3, 1995. The number of Class B
Certificate holders and Class C Certificate holders of record as of December 31,
1998, was 58 and 740, respectively. High and low bid prices, as compiled by
Bloomberg Financial Markets Services, an online service, are displayed in the
following tables:
<TABLE>
<CAPTION>
Class B Beneficial Interests
-----------------------------------------------------------------
1998 1997
----------------------------------------- ----
Market Price Cash Distributions Market Price
--------------------- ---------------------
Quarter Ended High Low Paid High Low
- ------------- -------- -------- ------- ---------- --------
<S> <C> <C> <C> <C> <C>
March 31 ........................... $35.50 $ 33.50 $ 7.00 $28.88 $25.00
June 30............................. 31.75 29.25 11.50 35.25 28.88
September 30 ....................... 32.00 23.75 7.00 37.50 35.25
December 31......................... 26.00 23.00 2.00 39.00 37.75
</TABLE>
<TABLE>
<CAPTION>
Class C Beneficial Interests
---------------------------------------------------------------
1998 1997
---- -----
Market Price Market Price
------------------------ ------------------------
Quarter Ended High Low High Low
- ------------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
March 31 ........................... - - - -
June 30............................. - - - -
September 30........................ - - - -
December 31 ........................ - - - -
</TABLE>
No distributions were made to Class B or Class C Certificate holders through
December 31, 1997. In 1998, $67.7 million, or $27.50 per Class B Certificate,
was distributed to Class B Certificate holders.
The Trust is required to apply all proceeds from liquidation and disposition of
the Trust's assets first to payment of normal operating expenses. Second, Trust
proceeds totaling $188 million were distributed to FirstCity to retire the Class
A Certificate in December 1997. The third order of distribution of Trust
proceeds is payments pursuant to employment and bonus agreements with certain
former employees of the Debtor. The bonus pool and executive long-term incentive
plan provides for the payment of $735,000 in bonuses to certain former employees
of the Debtor after the Trust distributes $14.9 million to Class B Certificate
holders, the payment of another $735,000 after approximately $30 million of
additional distributions to Class B Certificate holders, and the
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payment of bonuses in the amount of 4.903% of any additional distributions to
Class B Certificate holders.
Fourth, Class B Certificate holders are entitled to distributions up to the
Pour-Over Level. The Pour- Over Level (approximately $77 million at December 31,
1998) is the liquidation preference on July 3, 1995 of the Debtor's Series B and
Series E preferred stock, less the nominal stated value of FirstCity special
preferred stock and the book value of FirstCity common stock issued to the
Series B and Series E holders, plus interest at an annual rate of 6.5% from July
3, 1995. The Pour-Over Level is also reduced for distributions to Class B
Certificate holders. In 1998, $67.7 million, or $27.50 per certificate, was
distributed to Class B Certificate holders and a $2.6 million bonus was paid to
certain former employees of the Debtor. In January 1999, $8.6 million, or $3.50
per certificate, was distributed to Class B Certificate holders and a $417,000
bonus was paid to certain former employees of the Debtor.
Lastly, Class C Certificate holders receive distributions, if any, after any
remaining payments to Class B Certificate holders up to the Pour-Over Level
(approximately $31.32 per unit as of December 31, 1998). No distributions to
Class C Certificate holders are anticipated.
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
Year Ended December 31, Inception to
------------------------------------ December 31,
(Dollars in thousands) 1998 1997 1996 1995
---------- ---------- ---------- -------------------
<S> <C> <C> <C> <C>
Income............................................... $ 38,534 $ 45,079 $ 53,014 $ 33,923
Expenses............................................. 6,859 12,427 13,249 10,293
Net income........................................... 31,675 32,652 39,765 23,630
Distributions on Class "A" Certificate............... - 62,669 120,229 4,721
Distributions on Class "B" Certificate............... 67,675 - - -
At year end:
Total assets................................ 57,489 93,963 125,229 206,464
Class "A" Certificate....................... - - 53,617 162,245
Class "B" Certificate....................... 55,300 91,300 67,700 39,536
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The operations of the Trust are summarized below (dollars in
thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1998 1997 1996
----------- --------- ---------
<S> <C> <C> <C>
Changes in fair value of trust assets.................. $ 37,883 $ 44,127 $ 52,219
Interest income on short-term investments.............. 651 952 795
Interest expense....................................... - (155) (325)
Administrative expense................................. (6,859) (12,272) (12,924)
--------- --------- ---------
Net income...................................... $ 31,675 $ 32,652 $ 39,765
========= ========= =========
</TABLE>
4
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1998 COMPARED TO 1997
The estimated fair value of the Trust's assets increased $37.9
million in 1998 as compared to $44.1 million in 1997. The 1998 increase is
attributable to several factors, including a settlement of approximately $22
million from the Trust's fidelity bond carriers and $7 million related to a 67%
interest in a partnership that owns a downtown Houston office building. Other
factors which contributed to the enhancement of the net asset value of the
Trust's assets in 1998 include (i) the appreciation in value of certain assets
attributable to a favorable interest rate environment and the effect of such
favorable interest rates on the marketability of real estate and (ii) the
increase in the estimated market value of the Trust's assets that naturally
occurs as the remaining life of the Trust (and concomitantly the discount factor
applied in calculating net asset value) decreases.
Interest income on short-term investments decreased in 1998 as
compared to 1997 because less excess funds were available. Interest expense in
1997 resulted from the termination of a servicing agreement between the Trust
and FirstCity (the "Investment Management Agreement"), as discussed below.
Administrative expense totaled $6.9 million in 1998 as compared
to $12.3 million in 1997. In the first quarter of 1997, the Investment
Management Agreement was terminated and, in consideration of this termination,
the Trust paid FirstCity $6.8 million, plus interest at a rate of 10 percent per
annum from January 1, 1997 until March 1997 (resulting in no servicing fees in
1998). A $2.6 million bonus, based on distributions to Class B Certificate
holders, was paid in 1998 to certain former employees of the Debtor (there was
no such bonus paid in 1997). Professional fees totaled $1.1 million in 1998 as
compared to $2.1 million in 1997.
In 1998, the Trust distributed $67.7 million, or $27.50 per
certificate, to Class B Certificate holders. This distribution was made possible
principally by $79.8 million in net collections on Trust assets in 1998. The
Class B Beneficial Interests were valued at $55.3 million at December 31, 1998.
In January 1999, the Trust distributed an additional $8.6 million, or $3.50 per
certificate, to Class B Certificate holders.
Non-cash trust assets at December 31, 1998 and 1997, were
comprised of the following (dollars in thousands):
<TABLE>
<CAPTION>
December 31,
-------------------------------
Estimated Gross Cash Flow by Type of Asset 1998 1997
- ------------------------------------------ ------------- --------------
<S> <C> <C>
Borrowers' obligation on outstanding balance of:
Performing loans ........................... $ 12,306 $ 50,450
Nonperforming loans ........................ 815 2,993
Receivable from the FDIC ....................... 2,000 2,000
Real estate and other assets ................... 36,556 44,203
------------- -------------
Total ...................................... 51,677 99,646
------------- -------------
Discount required to reflect trust assets at
estimated fair value ......................... (7,662) (13,631)
------------- -------------
Trust assets, net .............................. $ 44,015 $ 86,015
============= =============
</TABLE>
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For each asset, estimates of income, expense and net cash flow
on a monthly basis through the expected final disposition date are prepared by
management of the Trust. The individual asset budget is developed based upon
factors which include physical inspection of the asset or the collateral
underlying the related loan, local market conditions, contractual payments or
rents, and discussions with the relevant borrower. The Trust's management
periodically reevaluates and revises its projected monthly cash flows on an
asset by asset basis. At December 31, 1998 and 1997, the projected monthly cash
flows were discounted at 11% to reflect the Trust assets at estimated fair
value.
One of the most significant assets of the Trust is a 67%
interest in a partnership which owns a downtown Houston office building and that
was subject to litigation concerning the sale of that interest. In the third
quarter of 1998, summary judgment (which is subject to appeal) was rendered in
favor of the Trust, effectively terminating the litigation involving the Trust's
interest in the partnership.
In the first quarter of 1998, the Trust negotiated and
received a settlement of approximately $22 million from its fidelity bond
carriers. As a result of this settlement, there are no remaining claims of this
nature.
In June 1998, the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division, extended the life of the Trust from
December 31, 1998 to January 3, 2000. The extension allows the Trust more time
to settle some ongoing litigation and indemnity issues as well as to bring
additional value to certain assets as a result of holding such assets for a
longer period of time. Also, Rick R. Hagelstein resigned as a member of the
Portfolio Committee. Joe S. Greak, Senior Vice President, Tax Director and
Secretary of FirstCity Financial Corporation, has been appointed to replace Mr.
Hagelstein.
YEAR 2000 COMPLIANCE
The Trust is aware of the potential issues related to the Year
2000. The Trust has evaluated the potential impact this issue could have on its
computer systems. Management has determined that the Trust will terminate on
January 3, 2000. As such, management believes that the Year 2000 issue will not
have an impact on the Trust or its operations. Should management extend the
termination of the Trust to a later date, management believes that its current
systems will not be impacted by the Year 2000 or that the systems can be readily
upgraded or replaced with minimal cost to the Trust. Management will continue to
monitor the status of its systems related to the Year 2000.
1997 COMPARED TO 1996
The estimated fair value of the Trust's assets increased $44.1
million in 1997 as compared to $52.2 million in 1996, an increase attributable
to several factors, including the elimination of servicing fees to FirstCity
(which were netted against future cash flows) because the Investment Management
Agreement was terminated, an increase of $7 million based on the sale of a
downtown Houston office building, a $5 million settlement of a professional
liability claim and $4 million resulting from the favorable refinancing of the
debt of a second downtown Houston office building (owned by the above-mentioned
partnership). Other factors which contributed to the
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enhancement of the net asset value of the Trust's assets in 1997 include (i) the
appreciation in value of certain assets attributable to a favorable interest
rate environment and the effect of such favorable interest rates on the
marketability of real estate and (ii) the increase in the estimated market value
of the Trust's assets that naturally occurs as the remaining life of the Trust
(and concomitantly the discount factor applied in calculating net asset value)
decreases.
Interest income on short-term investments increased in 1997 as
compared to 1996 because more excess funds were available. Interest expense in
1997 resulted from the termination of the Investment Management Agreement, as
discussed below. In 1996, interest expense resulted from borrowings to
facilitate the early redemption of FirstCity senior subordinated notes.
Administrative expense totaled $12.3 million in 1997 as
compared to $12.9 million in 1996. In the first quarter of 1997, the Investment
Management Agreement was terminated and, in consideration of this termination,
the Trust paid FirstCity $6.8 million in servicing fees, plus interest at a rate
of 10 percent per annum from January 1, 1997 until March 1997. Comparatively,
servicing fees paid to FirstCity were only $4.2 million in 1996. Professional
fees totaled $2.1 million in 1997 as compared to $3.6 million in 1996.
Pursuant to a June 1997 agreement with FirstCity, the Trust
retired its obligation to FirstCity under the Class A Certificate by paying
FirstCity $22.75 per share for the 1,923,481 outstanding special preferred
shares at June 30, 1997, the 1997 second quarter dividend of $.7875 per share,
and 15% interest from June 30, 1997, on the nominal stated value ($21 per share)
of shares not retired by June 30, 1997.
The Trust distributed $5.1 million to FirstCity through July
15, 1997, for accrued dividends on special preferred stock. In the first six
months of 1997, the Trust, in cooperation with FirstCity, distributed
approximately $12.6 million to FirstCity for the repurchase by FirstCity of
537,430 shares of special preferred stock. The Trust distributed $45.0 million
to FirstCity under the June 1997 agreement discussed above, reducing the Class A
Certificate obligation to zero. These distributions were made possible
principally by $58.6 million in net collections on Trust assets in 1997 and cash
held at December 31, 1996.
In 1996, the FDIC closed the Receiverships of the Debtor's
banks and distributed the surplus cash of those Receiverships to the Trust. In
accordance with the Conveyance and Indemnification Agreement, the Trust will be
required, among other things, to provide indemnity until March 31, 1999 to the
FDIC against any known or unknown liabilities, obligations or actual expenses
associated with the Receiverships, in an aggregate amount up to $12 million.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Trust does not engage in trading market risk sensitive
instruments and does not purchase as investments, as hedges, or for purposes
"other than trading" instruments that are likely to expose the Trust to market
risk, whether it be from interest rate, foreign currency exchange, commodity
price or equity price risk. The Trust has issued no debt instruments, entered
into no forward or futures contracts, purchased no options and entered into no
swaps.
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Item 8. Financial Statements and Supplementary Data.
FIRSTCITY LIQUIDATING TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET ASSETS IN LIQUIDATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1998 1997
---------- ----------
<S> <C> <C>
Assets, at estimated fair value
Cash and cash equivalents................................................ $ 13,474 $ 7,948
Trust assets, net....................................................... 44,015 86,015
---------- ---------
Total assets...................................................... 57,489 93,963
---------- ---------
Less liabilities at face or estimated amount
Payables and accrued liabilities......................................... 2,189 2,663
---------- ---------
Total liabilities................................................. 2,189 2,663
---------- ---------
Commitments and contingencies............................................ - -
Trust net asset value attributable to:
Class "B" Certificate, 2,460,911 units outstanding....................... 55,300 91,300
Class "C" Certificate, 738,273 units outstanding......................... - -
- -
Total net asset value............................................. $ 55,300 $ 91,300
========== =========
</TABLE>
CONSOLIDATED STATEMENTS OF INCOME AND
CHANGES IN NET ASSET VALUE IN LIQUIDATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
Changes in fair value of trust assets................ $ 37,883 $ 44,127 $ 52,219
Interest income on short-term investments............ 651 952 795
Interest expense..................................... - (155) (325)
Administrative expense............................... (6,859) (12,272) (12,924)
---------- ---------- -----------
Net income.................................... 31,675 32,652 39,765
---------- ---------- -----------
Net asset value, beginning of period................. 91,300 121,317 201,781
Distributions on Class "A" Certificate............... - (62,669) (120,229)
Distributions on Class "B" Certificate............... (67,675) - -
---------- ---------- -----------
Net asset value, end of period....................... $ 55,300 $ 91,300 $ 121,317
========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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FIRSTCITY LIQUIDATING TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1998 1997 1996
----------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income .................................................. $ 31,675 $ 32,652 $ 39,765
Adjustments to reconcile net income to net cash
provided by operating activities:
Changes in fair value of trust assets .................... (37,883) (44,127) (52,219)
Collections on trust assets, net of advances ............. 79,820 58,551 158,323
Capital improvements on trust assets ..................... -- (11,529) --
Decrease in estimated administrative claims .............. -- -- (3,486)
Increase (decrease) in payables and accrued liabilities .. (411) (1,059) 715
--------- --------- ---------
Net cash provided by operating activities ............. 73,201 34,488 143,098
--------- --------- ---------
Cash flows from investing activities:
Repayment of advance to FirstCity Financial Corporation ..... -- -- 2,000
Purchase of FirstCity senior subordinated notes ............. -- -- (4,000)
Redemption of FirstCity senior subordinated notes ........... -- -- 3,000
--------- --------- ---------
Net cash provided by investing activities ............. -- -- 1,000
--------- --------- ---------
Cash flows from financing activities:
Borrowings under notes payable to banks ..................... -- -- 52,300
Payments of notes payable to banks .......................... -- -- (52,300)
Distributions on Class "A" Certificate ...................... -- (62,669) (119,229)
Distributions on Class "B" Certificate ...................... (67,675) -- --
--------- --------- ---------
Net cash used in financing activities ................. (67,675) (62,669) (119,229)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents ........ $ 5,526 $ (28,181) $ 24,869
Cash and cash equivalents, beginning of period .............. 7,948 36,129 11,260
--------- --------- ---------
Cash and cash equivalents, end of period .................... $ 13,474 $ 7,948 $ 36,129
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest .............................................. $ -- $ 155 $ 325
========= ========= =========
Non-cash financing activities:
Cancellation of FirstCity senior subordinated notes ... $ -- $ -- $ 1,000
Accrual of unclaimed assets ........................... -- -- 2,000
</TABLE>
See accompanying notes to consolidated financial statements.
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FIRSTCITY LIQUIDATING TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(A) Summary of Significant Accounting Policies
(1) Description of Business
The Joint Plan of Reorganization by First City Bancorporation of Texas,
Inc. (the "Debtor"), Official Committee of Equity Security Holders, and
J-Hawk Corporation ("J-Hawk"), with the participation of Cargill
Financial Services Corporation, under Chapter 11 of the United States
Bankruptcy Code, Case No. 392-39474-HCA-11 (the "Plan of
Reorganization"), was confirmed by the Bankruptcy Court for the
Northern District of Texas, Dallas Division, by an order entered on May
31, 1995, and became effective on July 3, 1995. Pursuant to the Plan of
Reorganization, and an Agreement and Plan of Merger between the Debtor
and J-Hawk, on July 3, 1995, J-Hawk was merged (the "Merger") with and
into First City Bancorporation of Texas, Inc., and the name of the
corporation was changed to FirstCity Financial Corporation
("FirstCity").
Pursuant to the Plan, substantially all of the legal and beneficial
interests in the assets of the Debtor, other than $20 million in cash
contributed to FirstCity, were transferred to FirstCity Liquidating
Trust (the "Trust"), or to subsidiaries of the Trust. Such assets will
be liquidated over the life of the Trust pursuant to the terms thereof.
FirstCity, as the sole holder of the Class A Certificate under the
Trust, received from the Trust amounts sufficient to retire the Class A
Certificate in December 1997. Additional distributions shall be paid to
certain of the former security holders of the Debtor pursuant to the
terms of the Class B and the Class C certificates of beneficial
interests in the Trust. The Trust is administered by a four-person
portfolio committee (the "Portfolio Committee"). The net assets of the
Debtor transferred to the Trust on July 3, 1995, consisted of the
following (dollars in thousands):
<TABLE>
<S> <C>
Cash and cash equivalents....................... $135,360
Trust assets ................................... 61,514
Estimated claims and accrued liabilities........ (14,002)
--------
$182,872
========
</TABLE>
In connection with the sale of the Debtor's banks by the FDIC to
third-party acquirers (the "Loss-Sharing Banks"), the FDIC guaranteed
certain recoveries on loans acquired by the Loss-Sharing Banks. (These
agreements are referred to as "Loss-Sharing Agreements".) On July 12,
1995, in order to reduce the uncertain effect of the Loss-Sharing
Agreements on future distributions to the Trust by the FDIC,
subsidiaries of the Trust purchased assets (the "Loss-Sharing
Settlement") for approximately $206 million from the Loss-Sharing
Banks. With the purchase of these assets, the Loss-Sharing Banks
released the FDIC from its future obligations under the Loss-Sharing
Agreements.
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<PAGE> 12
FIRSTCITY LIQUIDATING TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(continued)
(2) Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of FirstCity Liquidating Trust and its subsidiaries (collectively
referred to as the "Trust"). All significant intercompany transactions
and balances have been eliminated in consolidation. Certain amounts in
the financial statements for prior periods have been reclassified to
conform with current financial statement presentation.
(3) Cash Equivalents
For purposes of the consolidated statements of cash flows, the Trust
considers all highly liquid debt instruments with original maturities
of three months or less to be cash equivalents. At December 31, 1998
and 1997, substantially all cash balances were in excess of federally
insured limits. In accordance with the Liquidating Trust Agreement, all
cash balances are maintained at institutions with at least $100 million
of capital stock and surplus and whose short-term debt obligations are
rated by at least two nationally recognized rating agencies in one of
the two highest categories.
(4) Trust Assets
The net assets of the Trust are carried at estimated fair values which
are the results of discounting, at appropriate discount rates, the
currently estimated cash flows projected to be realized from the
collection, liquidation and disposition of the non-cash assets held by
the Trust. Such assets consist principally of performing and
non-performing loans, income producing real estate and interests in
real estate, and miscellaneous other assets and receivables transferred
to the Trust upon the consummation of the Plan of Reorganization. The
estimates of the future cash flows from which the net asset values of
the Trust were derived are made under the direction of the management
of the Trust and the Portfolio Committee based upon information
available and are believed to be reliable. There can be no assurance,
however, that the estimates resulting from such reviews or the net
asset values derived from such estimates will ultimately be realized
due to the highly judgmental assumptions which were made in developing
estimates of the amount and timing of future cash flows to be realized
upon the liquidation of the types of assets such as those held by the
Trust.
In the first quarter of 1998, the Trust negotiated and received a
settlement of approximately $22 million from its fidelity bond
carriers. As a result of this settlement, there are no remaining claims
of this nature.
11
<PAGE> 13
FIRSTCITY LIQUIDATING TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(continued)
Trust assets are revalued at least quarterly and adjustments to
estimated fair values are included in operating results in the period
in which they become known. Loans are considered performing if debt
service payments are made in accordance with the original or
restructured terms of the notes. Interest on loans is recognized as
part of the proceeds from disposition of trust assets. Impairment of
loans is measured based on the present value of the expected future
cash flows discounted at the loan's effective interest rate, or the
fair value of the collateral, less estimated selling costs, if the loan
is collateral dependent and foreclosure is probable.
Foreclosed assets acquired in settlement of notes are recorded at
estimated fair value. Costs relating to the development and improvement
of property and holding costs are considered in the development of
estimated fair values.
(5) Income Taxes
Under current federal and state laws, the Trust shall be treated as a
grantor trust owned by the beneficiaries holding beneficial interest
therein. For tax purposes, any item of income or loss is allocated
among the certificate holders. Therefore, no provision has been made
for income taxes in the accompanying consolidated financial statements.
(6) Use of Estimates
Management of the Trust has made certain estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure
of contingent assets and liabilities to prepare these consolidated
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(B) Trust Assets
Trust assets are comprised of the following (dollars in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------------
Estimated Gross Cash Flow by Type of Asset 1998 1997
------------------------------------------ ----------- -----------
<S> <C> <C>
Borrowers' obligation on outstanding balance of:
Performing loans ........................... $ 12,306 $ 50,450
Nonperforming loans ........................ 815 2,993
Receivable from the FDIC ....................... 2,000 2,000
Real estate and other assets ................... 36,556 44,203
----------- ---------
Total ...................................... 51,677 99,646
----------- ---------
Discount required to reflect trust assets at
estimated fair value .................. (7,662) (13,631)
----------- ---------
Trust assets, net............................... $ 44,015 $ 86,015
=========== =========
</TABLE>
12
<PAGE> 14
FIRSTCITY LIQUIDATING TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(continued)
For each asset, estimates of income, expense and net cash flow on a
monthly basis through the expected final disposition date are prepared.
The individual asset budget is developed based upon factors which
include physical inspection of the asset or the collateral underlying
the related loan, local market conditions, contractual payments or
rents, and discussions with the relevant borrower. The Trust's
management and the Portfolio Committee periodically reevaluate and
revise projected monthly cash flows on an asset by asset basis. At
December 31, 1998 and 1997, the projected monthly cash flows were
discounted at 11% to reflect the Trust assets at estimated fair value.
The Trust assets are highly concentrated in Texas.
(C) Distribution Priorities
The Trust is required to apply all proceeds from liquidation and
disposition of the Trust's assets first to payment of normal operating
expenses. Second, Trust proceeds totaling $188 million were distributed
to FirstCity to retire the Class A Certificate in December 1997. The
third order of distribution of Trust proceeds is payments pursuant to
employment and bonus agreements with certain former employees of the
Debtor. The bonus pool and executive long-term incentive plan provides
for the payment of $735,000 in bonuses to certain former employees of
the Debtor after the Trust distributes $14.9 million to Class B
Certificate holders, the payment of another $735,000 after
approximately $30 million of additional distributions to Class B
Certificate holders, and the payment of bonuses in the amount of 4.903%
of any additional distributions to Class B Certificate holders.
Fourth, Class B Certificate holders are entitled to distributions up to
the Pour-Over Level. The Pour-Over Level (approximately $77 million at
December 31, 1998) is the liquidation preference on July 3, 1995 of the
Debtor's Series B and Series E preferred stock, less the nominal stated
value of FirstCity special preferred stock and the book value of
FirstCity common stock issued to the Series B and Series E holders,
plus interest at an annual rate of 6.5% from July 3, 1995. The
Pour-Over Level is also reduced for distributions to Class B
Certificate holders. In 1998, $67.7 million, or $27.50 per certificate,
was distributed to Class B Certificate holders and a $2.6 million bonus
was paid to certain former employees of the Debtor. In January 1999,
$8.6 million, or $3.50 per certificate, was distributed to Class B
Certificate holders and a $417,000 bonus was paid to certain former
employees of the Debtor.
Lastly, Class C Certificate holders receive distributions, if any,
after any remaining payments to Class B Certificate holders up to the
Pour-Over Level (approximately $31.32 per unit as of December 31,
1998). No distributions to Class C Certificate holders are anticipated.
The ultimate amounts to be distributed to the holders of the B and C
Certificates will result from the cash flow actually realized from the
liquidation of the non-cash Trust assets. The
13
<PAGE> 15
FIRSTCITY LIQUIDATING TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(continued)
determination of the net asset value of the Trust in the accompanying
consolidated statements of net assets in liquidation is based upon
estimates of future cash flows. The actual cash flows and the timing of
such cash flows may vary significantly from those estimates, thus
affecting the final distributions to the Certificate holders.
(D) Investment Management Agreement
Pursuant to the Investment Management Agreement, FirstCity managed the
liquidation of Trust assets and the Trust paid FirstCity a servicing
fee on collections. In the first quarter of 1997, the Investment
Management Agreement was terminated and, in consideration of this
termination, the Trust paid FirstCity $6.8 million, plus interest at a
rate of 10 percent per annum from January 1, 1997 until March 1997.
Administrative expense included $6.8 million in 1997 and $4.2 million
in 1996 for servicing fees.
(E) Commitments and Contingencies
The Trust is involved in various legal proceedings in the ordinary
course of business. In the opinion of management of the Trust, the
resolution of such matters should not have a material adverse impact on
the financial position, results of operations or liquidity of the
Trust.
In 1996, the FDIC closed the receiverships of the Debtor's banks and
distributed the remaining surplus of those receiverships to the Trust.
In accordance with a conveyance and indemnification agreement, the
Trust will be required, among other things, to provide indemnity until
March 31, 1999 to the FDIC against any known or unknown liabilities,
obligations or actual expenses associated with the receiverships, in an
aggregate amount up to $12 million. Management of the Trust does not
believe that, to the extent the Trust is obligated to pay certain
claims or expenses associated with the past obligations of the Debtor's
banks, such payments will have a material adverse impact on the
financial position, results of operations or liquidity of the Trust.
14
<PAGE> 16
INDEPENDENT AUDITORS' REPORT
The Portfolio Committee and Certificate Holders
FirstCity Liquidating Trust:
We have audited the accompanying consolidated statements of net assets
in liquidation of FirstCity Liquidating Trust and subsidiaries (the "Trust") as
of December 31, 1998 and 1997, and the related consolidated statements of income
and changes in net asset value in liquidation, and cash flows for each of the
years in the three-year period ended December 31, 1998. These consolidated
financial statements are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of FirstCity
Liquidating Trust and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and changes in net asset value in liquidation and
cash flows for each of the years in the three-year period ended December 31,
1998, in conformity with generally accepted accounting principles.
KPMG LLP
Houston, Texas
February 22, 1999
15
<PAGE> 17
FIRSTCITY LIQUIDATING TRUST
SELECTED UNAUDITED QUARTERLY FINANCIAL DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
------------------------------------------------ ---------------------------------------------------
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
--------- -------- --------- ---------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Changes in fair value
of trust assets ........ $ 24,766 $ 2,712 $ 6,958 $ 3,447 $ 11,761 $ 16,508 $ 3,888 $ 11,970
Interest income on
short-term investments.. 185 232 136 98 402 378 78 94
Interest expense .......... -- -- -- -- (155) -- -- --
Administrative expense .... (1,925) (1,843) (1,668) (1,423) (7,922) (1,351) (1,235) (1,764)
-------- -------- -------- -------- -------- -------- -------- --------
Net income ....... $ 23,026 $ 1,101 $ 5,426 $ 2,122 $ 4,086 $ 15,535 $ 2,731 $ 10,300
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
Part III
Item 10. Directors and Executive Officers of the Registrant.
Role of the Portfolio Committee
Pursuant to Article IV of the Trust Agreement, except where
expressly limited by the terms of the Trust Agreement, all of the management and
executive authority over the Trust resides in the four-member Portfolio
Committee (subject to increase and reduction). The Trust Agreement provides that
such four members are initially Rick R. Hagelstein (the "Chief Credit Officer
Member Position"), Robert W. Brown (the "Robert W. Brown Member Position"), and
Richard E. Bean and David Palmer, as the two members designated by the Equity
Committee (the "Equity Committee Member Positions"). All have been members of
the Portfolio Committee since the Effective Date. Mr. Hagelstein resigned in the
second quarter of 1998 and Joe S. Greak was appointed to replace Mr. Hagelstein.
Background information and the employment histories of Messrs. Bean, Brown,
Greak and Palmer are set forth below.
Richard E. Bean, 55, has been Executive Vice President and
Chief Financial Officer of Pearce Industries, Inc. since 1976, which company,
through its subsidiaries, markets a variety of oilfield equipment and machinery.
Prior to the Effective Date, Mr. Bean was Chairman of the Equity Committee. Mr.
Bean is currently a director of FirstCity.
Robert W. Brown, 50, has been President of FCLT Loans Asset
Corp. since the Effective Date. As of the Effective Date, Mr. Brown served as
Executive Vice President and Secretary of FirstCity. After the Effective Date he
resigned from FirstCity to devote substantially
16
<PAGE> 18
all of his time to the Trust. Mr. Brown was Chief Financial Officer of the
Debtor beginning in 1991. He served as Executive Vice President of the Debtor
from 1990 to 1992, became a member of the Debtor's Board of Directors in 1992
and served as President of the Debtor from 1993 through the Effective Date. Mr.
Brown was a director and officer of the Debtor when the Debtor filed a plan of
reorganization under the Federal bankruptcy laws in December 1994.
Joe S. Greak, 50, has been Senior Vice President, Tax Director
and Secretary of FirstCity since the Effective Date. Mr. Greak was the Tax
Manager of the Debtor from 1993 to the Effective Date.
David Palmer, 56, has been a private investor for the past 25
years. Prior to the Effective Date, Mr. Palmer was a member of the Equity
Committee. From 1970 to 1995, Mr. Palmer was a Professor of Philosophy at the
State University of New York--Fredonia, New York.
Officers and Others
Chris J. O'Mara, 47, has been Vice President of FCLT Loans
Asset Corp. since January 1996. Prior thereto, Mr. O'Mara was an independent
contractor in the financial services industry from 1993 to 1996 (and a
contractor of the Trust from August, 1995 to January, 1996). Mr. O'Mara was
Executive Vice President and Division Manager of First City, Texas-Houston, N.A.
from 1991 to 1993.
Jerry D. Thompson, 43, has been Vice President of FCLT Loans
Asset Corp. since February 1997. Prior thereto, Mr. Thompson was Vice President
of FCB Real Estate Services, Inc., a subsidiary of the Trust and the Debtor.
Ron Lawless, 52, has been President of First City Life
Insurance Company, a subsidiary of the Trust and the Debtor, for the past five
years.
C. Ivan Wilson, 71, was Chairman of the Board and Chief
Executive Officer of the Debtor from 1991 until the Effective Date and has been
Vice Chairman of the Board of FirstCity since that date.
Role of the Trustee
Although all of the management and executive authority over
the Trust resides in the Trustee, the Trustee functions as a directed Trustee
under the sole and absolute discretion of the Portfolio Committee and may not
exercise discretion in the management and conduct of the liquidation of the
Trust assets. The Trustee has no authority or right to refuse to act when so
ordered or directed to do so by the Portfolio Committee. The Trustee is State
Street Bank and Trust Company, formerly Fleet National Bank and Shawmut Bank
Connecticut, N.A. There have been no changes in the Trustee through the date of
this Form 10-K.
17
<PAGE> 19
Section 16(a) Beneficial Ownership Reporting Compliance
Each Portfolio Committee member and officer of the Trust who
is subject to Section 16 of the Securities Exchange Act of 1934, as amended, is
required to report to the Securities and Exchange Commission, by a specified
date, his or her beneficial ownership of, or certain transactions in, the
Trust's securities. Mr. Palmer, who served as a Portfolio Committee member
during 1998, failed to file Form 4s on a timely basis in 1998. All such Form 4s
have been filed.
Item 11. Executive Compensation.
Compensation of the Trustee
The compensation paid by the Trust to the Trustee consisted of
administrative fees aggregating $20,500 in each of 1998, 1997 and 1996. Unless
renegotiated, annual administrative fees to be paid to the Trustee shall remain
constant.
Compensation of the Portfolio Committee
Pursuant to the terms of Article X of the Trust Agreement, the
Portfolio Committee consists of the following four members: Joe S. Greak in the
Chief Credit Officer Member Position, Robert W. Brown in the Robert W. Brown
Member Position, and two members as designated by the Equity Committee, who at
present are Richard E. Bean and David Palmer. Pursuant to Section 10.1.1 of the
Trust Agreement, Messrs. Bean and Palmer, or their respective successors, each
receives compensation for his services as a member of the Portfolio Committee in
an amount equal to $12,000 per annum, payable in $3,000 increments on the first
day of each calendar quarter. In addition, pursuant to a resolution of the Board
of Directors of Loans Asset Corp., Messrs. Bean and Palmer each receive $1,000
for each Portfolio Committee meeting which they attend. The other two members
are not separately compensated for their services as members of the Portfolio
Committee.
Compensation of Executive Officers and Others
Executive officers and others of the Trust received
compensation during the last three years as set forth in the following table:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND -------------------------------------
PRINCIPAL POSITION YEAR(1) SALARY BONUS
- ------------------------------ -------- --------------- --------------
<S> <C> <C> <C>
Robert W. Brown 1998 $ 250,000 $ 897,522
- President of FCLT 1997 250,000 25,000
Loans Asset Corp. 1996 250,000 25,000
C. Ivan Wilson 1998 $ - $ 872,522
- Vice Chairman of
FirstCity
Joe S. Greak 1998 $ - $ 435,145
- Senior Vice President of
FirstCity
</TABLE>
18
<PAGE> 20
<TABLE>
<S> <C> <C> <C>
Chris J. O'Mara 1998 $ 125,000 $ 37,500
- Vice President of FCLT 1997 125,000 12,500
Loans Asset Corp. 1996 117,472 37,500
Jerry D. Thompson 1998 $ 100,000 $ 103,376
- Vice President of FCLT 1997 96,600 35,000
Loans Asset Corp. 1996 80,000 8,000
Ron Lawless 1998 $ 90,000 $ 93,207
- President of First City 1997 88,731 34,000
Life Insurance Company 1996 85,000 8,500
</TABLE>
- ------------------------------------
(1) The employment of Mr. O'Mara commenced in January, 1996. Amounts reported
for Mr. Wilson and Mr. Greak relate only to Exhibit O of the Plan.
Mr. Brown's compensation is determined as set forth in that
certain employment agreement (the "Brown Employment Agreement"), effective as of
July 3, 1995, as amended May 1, 1996, by and between FCLT Loans Asset Corp. and
Mr. Brown. The Brown Employment Agreement provides for Mr. Brown's employment
with FCLT Loans Asset Corp. and his duties to the Trust for a term commencing on
July 3, 1995 and terminating on dissolution of the Trust. Mr. Brown's duties
include his membership on the Portfolio Committee of the Trust, the management
and payment of creditor claims and the liquidation of the assets of the Trust
pursuant to the terms of the Trust Agreement. In compensation for such services,
Mr. Brown is paid an annual salary of $250,000. Through December 31, 1998, Mr.
Brown was paid $.9 million in performance-oriented bonuses pursuant to Exhibit O
to the Plan. The Brown Employment Agreement provides for a conditional bonus in
an amount equal to 1.67% of all additional aggregate payments to the holders of
the Class B Certificates and the Class C Certificates. The payment of such
conditional bonus to Mr. Brown is to be determined by the Portfolio Committee.
In the event that the Brown Employment Agreement is terminated by the Portfolio
Committee prior to the termination date of the Trust, or upon the death or
disability of Mr. Brown, Mr. Brown or his estate is entitled to continue to
receive certain bonuses pursuant to the terms set forth in the Brown Employment
Agreement. Mr. Brown's unpaid bonuses will be forfeited in the event that he
terminates the Brown Employment Agreement or is terminated for cause by FCLT
Loans Asset Corp. prior to the date of the expiration of the Brown Employment
Agreement.
Pursuant to Section 9.8 of the Plan, Mr. Brown (as described
in the previous paragraph), along with C. Ivan Wilson, Joe S. Greak, former
employees of the Debtor and certain employees of the Trust, share in a bonus
pool and executive long-term incentive plan, the provisions of which are set
forth in Exhibit O to the Plan. In 1998, bonuses totaling $2.6 million ($.9
million to Mr. Brown) were paid pursuant to Exhibit O.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
(a) Since the Trust has no outstanding "voting securities" within the
meaning of the Exchange Act and the regulations thereunder, the disclosure
requirements of Form 10-K pertaining to 5% holders of voting securities are not
applicable.
19
<PAGE> 21
(b) The following table sets forth certain information with respect to
the beneficial ownership of the Class B and Class C Beneficial Interests, as of
January 31, 1999, by the members of the Portfolio Committee. The Trustee is not
the beneficial owner of any Class B or Class C Beneficial Interests.
<TABLE>
<CAPTION>
NUMBER OF CLASS B BENEFICIAL INTERESTS
AND PERCENTAGE OF OUTSTANDING
CLASS B BENEFICIAL INTERESTS
AS OF JANUARY 31, 1999
--------------------------------------
BENEFICIAL PERCENT
NAME AND ADDRESS OF OWNER OR IDENTITY OF GROUP OWNERSHIP OF CLASS
- ---------------------------------------------- -------------- --------------
<S> <C> <C>
Robert W. Brown.......................................................... -- --
Richard E. Bean.......................................................... 98,100 4.0
Joe S. Greak............................................................. -- --
David Palmer............................................................. 100,000 4.1
All Portfolio Committee members as a group (4 persons)................... 198,100 8.1
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF CLASS C BENEFICIAL INTERESTS
AND PERCENTAGE OF OUTSTANDING
CLASS C BENEFICIAL INTERESTS
AS OF JANUARY 31, 1999
--------------------------------------
BENEFICIAL PERCENT
NAME AND ADDRESS OF OWNER OR IDENTITY OF GROUP OWNERSHIP OF CLASS
- ---------------------------------------------- ----------------- --------------
<S> <C> <C>
Robert W. Brown.......................................................... 197 *
Richard E. Bean.......................................................... -- --
Joe S. Greak............................................................. -- --
David Palmer............................................................. -- --
All Portfolio Committee members as a group (4 persons)................... 197 *
</TABLE>
- --------------
* Less than 1%
(c) Because the Trust does not have any "voting securities" within the
meaning of the Exchange Act and the regulations thereunder, changes in ownership
of voting securities will not result in a change of control of the Trust.
Pursuant to the terms of the Trust Agreement, all of the management and
executive authority over the Trust resides in the four-member Portfolio
Committee.
The Trust has no knowledge of any arrangements which may
result in a change of control of the Trust. However, in the event that the
position on the Portfolio Committee held by Robert W. Brown is vacated for any
reason, the number of Portfolio Committee members will be permanently reduced to
three. In such instance, two of the three current remaining members of the
Portfolio Committee will be affiliated with FirstCity and, as a result,
FirstCity may be deemed to have some control over Portfolio Committee decisions.
20
<PAGE> 22
Item 13. Certain Relationships and Related Transactions.
Distributions to FirstCity as Class A Certificate Holder
As the sole holder of the Class A Certificate, FirstCity
received distributions totaling $188 million from the Trust to retire the Class
A Certificate in December 1997.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K.
(a) 1. Financial Statements
The consolidated financial statements of the Trust are
incorporated by reference to Item 8 "Financial Statements and
Supplementary Data" of this report.
2. Financial Statement Schedules
Financial statement schedules have been omitted because the
information is either not required, not applicable, or is
included in Item 8 - "Financial Statements and Supplementary
Data."
21
<PAGE> 23
3. Exhibits
Exhibit
No. Description
------- --------------------------------------------------------------
2.1(1) Joint Plan of Reorganization for First City Bancorporation of
Texas, Inc., as modified, under Chapter 11 of the United
States Bankruptcy Code, as confirmed by the U.S. Bankruptcy
Court for the Northern District of Texas, Dallas Division on
May 31, 1995.
3.1(1) The Liquidating Trust Agreement, dated as of July 3, 1995, by
and between First City Bancorporation of Texas, Inc. and
Shawmut Bank Connecticut, National Association (subsequently
Fleet National Bank, now State Street Bank and Trust Company),
as Trustee.
10.1(3) Employment Agreement, effective as of July 3, 1995, by and
between FCLT Loans Asset Corp. and Robert W. Brown, as amended
May 1, 1996.
10.2(2) Settlement Agreement, dated as of June 22, 1994, as amended as
of January 30, 1995, by and among FDIC-Corporate, the
FDIC-Receivers and the First City Parties.
10.3(3) Conveyance and Indemnification Agreement, dated December 23,
1996, between FDIC-Corporate, the FDIC-Receivers, FCLT Loans,
L.P. and the Trust.
21.1(1) Subsidiaries of the Trust.
27.1 Financial Data Schedule.
- -----------------------------------------
(1) Filed as the exhibit indicated to the Registration Statement on
Form 10 filed with the Securities and Exchange Commission on May 1,
1996 and incorporated herein by reference.
(2) Filed as the exhibit indicated to the Registration Statement on
Form 10/A filed with the Securities and Exchange Commission on July
10, 1996 and incorporated herein by reference.
(3) Filed as the exhibit indicated to the Form 10-K for the fiscal year
ended December 31, 1996 filed with the Securities and Exchange
Commission and incorporated herein by reference.
(b) Reports on Form 8-K. No report on Form 8-K was filed by the
Registrant with the Commission during the quarterly period ended
December 31, 1998.
22
<PAGE> 24
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.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
Date: February 25, 1999 /s/ Susan T. Keller
-----------------------------------
Name: Susan T. Keller
-----------------------------
Title: Vice President
-----------------------------
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
2.1(1) Joint Plan of Reorganization for First City Bancorporation of
Texas, Inc., as modified, under Chapter 11 of the United
States Bankruptcy Code, as confirmed by the U.S. Bankruptcy
Court for the Northern District of Texas, Dallas Division on
May 31, 1995.
3.1(1) The Liquidating Trust Agreement, dated as of July 3, 1995, by
and between First City Bancorporation of Texas, Inc. and
Shawmut Bank Connecticut, National Association (subsequently
Fleet National Bank, now State Street Bank and Trust Company),
as Trustee.
10.1(3) Employment Agreement, effective as of July 3, 1995, by and
between FCLT Loans Asset Corp. and Robert W. Brown, as amended
May 1, 1996.
10.2(2) Settlement Agreement, dated as of June 22, 1994, as amended as
of January 30, 1995, by and among FDIC-Corporate, the
FDIC-Receivers and the First City Parties.
10.3(3) Conveyance and Indemnification Agreement, dated December 23,
1996, between FDIC-Corporate, the FDIC-Receivers, FCLT Loans,
L.P. and the Trust.
21.1(1) Subsidiaries of the Trust.
27.1 Financial Data Schedule.
</TABLE>
- -----------------------------------------
(1) Filed as the exhibit indicated to the Registration Statement on
Form 10 filed with the Securities and Exchange Commission on May 1,
1996 and incorporated herein by reference.
(2) Filed as the exhibit indicated to the Registration Statement on
Form 10/A filed with the Securities and Exchange Commission on July
10, 1996 and incorporated herein by reference.
(3) Filed as the exhibit indicated to the Form 10-K for the fiscal year
ended December 31, 1996 filed with the Securities and Exchange
Commission and incorporated herein by reference.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FIRSTCITY LIQUIDATING TRUST DECEMBER 31, 1998 FORM 10-K FINANCIAL STATEMENTS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FIRSTCITY LIQUIDATING TRUST
DECEMBER 31, 1998 FORM 10-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 13,474
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 44,015
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 57,489
<CURRENT-LIABILITIES> 2,189
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 55,300
<TOTAL-LIABILITY-AND-EQUITY> 57,489
<SALES> 37,883
<TOTAL-REVENUES> 38,534
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,859
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 31,675
<INCOME-TAX> 0
<INCOME-CONTINUING> 31,675
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,675
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
