SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act
of 1934
Date of Report (Date of earliest event reported): December 16, 1997
(December 1, 1997)
FIRST BANKS AMERICA, INC.
(Exact name of registrant as specified in its charter)
Delaware
--------
(State or other jurisdiction of incorporation)
0-8937 75-1604965
------ ----------
(Commissioner File Number) (IRS Employer Identification No.)
135 N. Meramec, Clayton, Missouri 63105
---------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 854-4600
Not Applicable
--------------
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On July 28, 1997, First Banks America, Inc. (FBA) and Surety Bank
entered into an Agreement and Plan of Reorganization (Surety Agreement)
providing for the acquisition of Surety Bank by FBA. Under the terms of the
Surety Agreement, Surety Bank was be merged into a newly formed commercial
banking subsidiary of FBA (Northern California Bank) effective December 1, 1997.
Surety Bank common shareholders are allowed to elect to receive either $36.12 in
cash or FBA common stock equivalent to the quotient of $38.12 divided by the
exchange price for each share of Surety common stock that they hold. The
exchange price, as defined in the Surety Agreement, is subject to a minimum and
maximum price per share of common stock of $10.89 and $14.73, respectively.
Holders of Surety Bank convertible preferred stock will receive either $30.73 in
cash or FBA common stock equivalent to the quotient of $32.43 divided by the
exchange price, which are the equivalent amounts assuming the preferred
shareholders had exercised their rights to convert into Surety Bank common
stock. The Surety Agreement requires that 51% of the Surety Bank stock be
exchanged for FBA common stock. If Surety Bank shareholders representing more
than 51% of the outstanding stock elect to receive FBA stock in the transaction,
Surety Bank and FBA may mutually agree to increase the stock portion of the
transaction to a maximum of 65% of the total Surety Bank stock. Based on the
market value of FBA common stock of $20.12 as of December 10, 1997 and assuming
51% of the Surety Bank stock is exchanged for FBA common stock, the total
transaction price would be $8.88 million. The transaction will be accounted for
using the purchase method of accounting.
FBA funded the cash portion of the acquisition from an advance under a
$20 million promissory note payable with First Banks, Inc., a St. Louis based
bank holding company which owns 70.2% of FBA's voting stock as of September 30,
1997. The borrowings under the promissory note payable bear interest at an
annual rate of one-quarter percent less than the "Prime Rate" as reported in the
Wall Street Journal. Principal and accrued interest outstanding under the
promissory note payable are due and payable on October 31, 2001.
Except as noted above, there were no material relationships between
Surety Bank, or any of its affiliates, directors or officers, or any associates
of any such directors or officers, and the Registrant, or any of its affiliates,
directors or officers, or any associates of any such directors or officers.
<PAGE>
Item 7. Financial Statements and Exhibits
a) Financial Statements of Business Acquired
Pursuant to the requirements of Article 3 of Regulation S-X, the
following consolidated financial statements for Surety Bank have been included
in this filing or incorporated herein by reference as noted:
1. Consolidated Balance Sheet as of September 30, 1997 and December 31,
1996 (unaudited)-filed herewith.
2. Consolidated Statement of Operations for the three and nine months
ended September 30, 1997 and 1996 (unaudited)-filed herewith.
3. Consolidated Statement of Changes in Stockholders' Equity for
the year ended December 31, 1996 and the nine months ended
September 30, 1997 (unaudited)-filed herewith.
4. Consolidated Condensed Statement of Cash Flows for the nine
months ended September 30, 1997 and 1996 (unaudited)-filed
herewith.
5. Audited Consolidated Financial Statements as of and for the years
ended December 31, 1996 and 1995-incorporated herein by reference
to Amendment No. 1 to the Registration Statement on Form S-4 of
FBA (Registration No. 333-35721). The consolidated financial
statements appear on pages F-1 through F-25 of the Amendment.
(b) Pro Forma Financial Information
1. Pro Forma Combined Condensed Balance Sheet as of December 31, 1996
(unaudited)-filed herewith.
2. Pro Forma Consolidated Condensed Statement of Income for the nine
months ended September 30, 1997 and 1996 and for the year ended
December 31, 1996 (unaudited)-filed herewith.
3. Notes to Pro Forma Combined Condensed Financial Statements-
filed herewith.
(c) Exhibits
The following exhibits are incorporated herein by reference:
Exhibit No. Exhibit
2 Agreement and Plan of Reorganization, dated July 28, 1997 between
FBA and Surety Bank (filed as Exhibit 2 to FBA's current report
on Form 8-K filed on August 7, 1997).
10(o) Promissory Note Payable, dated November 4, 1997, by and between
FBA and First Banks (filed as Exhibit 10(o) to FBA's quarterly
report on Form 10-Q for the quarter ended September 30, 1997).
<PAGE>
Item 7(a)
Financial Statements of Business Acquired
<PAGE>
<TABLE>
<CAPTION>
SURETY BANK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(dollars expressed in thousands, except per share data)
September 30, December 31,
1997 1996
------------ ------------
(unaudited)
ASSETS
<S> <C> <C>
Cash and due from banks............................................ $ 2,254 2,321
Federal funds sold................................................. 915 -
Available-for-sale investment securities........................... 12,310 11,038
Loans held for sale................................................ 5,812 4,463
Loans, less allowance for loan losses of $526
at September 30, 1997 and $586 at
December 31, 1996............................................... 50,365 50,932
Bank premises and equipment, net................................... 2,342 1,466
Note receivable.................................................... - 895
Accrued interest receivable and other assets....................... 1,334 941
----------- ----------
Total assets.............................................. $ 75,332 72,056
=========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing.............................................. $ 4,280 4,284
Interest bearing.................................................. 63,562 60,085
----------- ------
Total deposits.............................................. 67,842 64,369
Other borrowed funds................................................. 1,850 2,135
Accrued interest payable and
other liabilities................................................. 513 662
----------- ----------
Total liabilities........................................... 70,205 67,166
----------- ----------
Stockholders' equity:
Convertible preferred stock - Series A, $1 par value,
$20 per share redemption value; authorized - 2,000,000
shares, issued and outstanding - 61,050 shares.................. 61 61
Common stock, $1 par value; authorized-
2,000,000 shares; issued and outstanding-
148,560 shares............................................... 149 149
Additional paid-in capital........................................ 2,541 2,541
Retained earnings................................................. 2,371 2,161
Unrealized gain (loss) on available-for-sale
investment securities, net of taxes............................ 5 (22)
----------- ----------
Total stockholders' equity................................ 5,127 4,890
----------- ----------
Total liabilities and stockholders' equity.................. $ 75,332 72,056
=========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SURETY BANK AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(dollars expressed in thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
-------------- ------------- ----------- ---------
(unaudited)
Interest income:
<S> <C> <C> <C> <C>
Interest and fees on loans..................... $ 1,239 1,082 3,547 3,218
Interest on investment securities
and Federal funds sold....................... 212 184 571 511
-------------- ------------ ---------- ---------
Total interest income.................... 1,451 1,266 4,118 3,729
-------------- ------------ ---------- ---------
Interest expense:
Interest on deposits........................... 642 600 1,876 1,736
Interest on other borrowed
funds........................................ 2 - 5 7
-------------- ------------ ---------- ---------
Total interest expense................... 644 600 1,881 1,743
-------------- ------------ ---------- ---------
Net interest income...................... 807 666 2,237 1,986
Provision for loan losses......................... 30 175 95 265
-------------- ------------ ---------- ---------
Net interest income after
provision for loan losses............ 777 491 2,142 1,721
-------------- ------------ ---------- ---------
Noninterest income:
Service charges................................ 76 66 215 175
Gain on sale of loans.......................... 275 40 594 72
Loan servicing income.......................... 26 15 83 72
Other income................................... 28 62 159 215
-------------- ------------ ---------- ---------
Total noninterest income................. 405 183 1,051 534
-------------- ------------ ---------- ---------
Other expenses:
Salaries and employee
benefits................................... 516 338 1,404 1,010
Occupancy and furniture and equipment.......... 102 91 297 248
One-time SAIF assessment....................... - 351 - 351
Other expense.................................. 441 321 1,120 909
-------------- ------------ ---------- ---------
Total other expenses..................... 1,059 1,101 2,821 2,518
-------------- ------------ ---------- ---------
Income (loss) before income taxes........ 123 (427) 372 (263)
Income tax expense (benefit)...................... 39 (171) 133 (106)
-------------- ------------ ---------- ---------
Net income (loss)........................ $ 84 (256) 239 (157)
============== ============ ========== =========
Earnings (loss) per share of common
stock and common stock equivalents
(net of preferred stock dividends)............. $ .55 (1.68) 1.56 (1.03)
============== ============ ========== =========
Weighted average number of shares
outstanding.................................... 153,697 152,684 153,697 152,684
============== ============ ========== =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SURETY BANK AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the year ended December 31, 1996
and nine months ended September 30, 1997
(dollars expressed in thousands, except for per share data)
Unrealized
(Loss) Gain
Convertible on Available-
Preferred Stock Common Stock Additional For-Sale
--------------- ------------ ---------- --------
Paid-In Retained Investment
Shares Amount Shares Amount Capital Earnings Securities Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 61,050 61 148,560 149 2,541 2,425 16 5,192
Preferred stock cash
dividend -$.9816 per share -- -- -- -- -- (60) -- (60)
Net change in unrealized gain (loss)
on available-for-sale investment
securities, net of taxes -- -- -- -- -- -- (38) (38)
Net loss -- -- -- -- -- (204) -- (204)
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 61,050 61 148,560 149 2,541 2,161 (22) 4,890
Preferred stock cash dividend -
$.4771 per share (unaudited) -- -- -- -- -- (29) -- (29)
Net change in unrealized gain
(loss) on available-
for-sale investment
securities, net of taxes
(unaudited) -- -- -- -- -- -- 27 27
Net income (unaudited) -- -- -- -- -- 239 -- 239
- -------------------------------------------------------------------------------------------------------------------------
Balance September 30, 1997
(unaudited) 61,050 $61 148,560 $149 2,541 2,371 5 5,127
=========================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SURETY BANK AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine months ended
September 30,
1997 1996
---- ----
(unaudited)
Cash flows from operating activities:
<S> <C> <C>
Net income (loss)............................................................................... $ 239 (157)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Provision for loan losses................................................................... 95 265
Deferred loan origination fees and costs, net............................................... (25) (86)
Depreciation and amortization............................................................... 168 124
Accretion of discount on note receivable.................................................... - (32)
Provision for other real estate losses...................................................... 73 -
(Increase) in loans held for sale........................................................... (1,349) (356)
Dividends on Federal Home Loan Bank stock................................................... (21) (18)
(Increase) decrease in accrued interest receivable and other assets......................... (589) (500)
Increase (decrease) in accrued interest payable and other liabilities....................... (274) 577
-------- -------
Net cash used in operating activities..................................................... (1,683) (183)
-------- -------
Cash flows from investing activities:
Proceeds from calls and maturities of available-for-sale investment securities.................. 2,765 4,379
Proceeds from sales of available-for-sale investment securities................................. 510 -
Purchases of available-for-sale investment securities........................................... (5,474) (7,482)
Proceeds from principal repayments of available-for-sale
investment securities......................................................................... 64 249
Proceeds from calls and maturities of held-to-maturity
investment securities......................................................................... 1,000 -
Net decrease (increase) in loans................................................................ 322 (3,943)
Purchases of equipment.......................................................................... (87) (33)
Proceeds from sale of other real estate, net.................................................... 302 60
--------- -------
Net cash used in investing activities..................................................... (598) (6,770)
-------- ------
Cash flows from financing activities:
Net increase in demand, interest bearing and savings deposits................................... 3,114 3,535
Net increase in time deposits................................................................... 359 2,871
Net (decrease) increase in other borrowed funds................................................. (285) 450
Payments of cash dividends...................................................................... (59) (62)
-------- -------
Net cash provided by financing activities................................................. 3,129 6,794
--------- -------
Increase (decrease) in cash and cash equivalents.......................................... 848 (159)
Cash and cash equivalents at beginning of period................................................... 2,321 4,118
--------- --------
Cash and cash equivalents at end of period......................................................... $ 3,169 3,959
========= ========
Supplemental disclosure of cash flow information: Cash paid during the period
for:
Interest expense.............................................................................. $ 1,881 1,743
Income taxes.................................................................................. 92 16
Non-cash investing activities:
Real estate acquired through foreclosure........................................................ 316 271
Net change in unrealized gain (loss) on available-for-sale
investment securities......................................................................... 40 (174)
Other non-cash transactions:
Acquisition of building in satisfaction of note receivable -
dissolution of exchange agreement............................................................. 895 -
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this current report on Form 8-K under the Securities
Exchange Act of 1934 of First Banks America, Inc. of our report dated March 13,
1997 on the financial statements of Surety Bank as of December 31, 1996 and 1995
and for each of the two years in the period ended December 31, 1996.
/s/Perry-Smith & Co.
- --------------------
PERRY-SMITH & CO.
Sacramento, California
December 16, 1997
<PAGE>
Item 7(b)
Pro Forma Financial Statements
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined condensed balance sheet as
of September 30, 1997 and unaudited pro forma combined condensed statements of
income for the nine months ended September 30, 1997 and 1996, and for the year
ended December 31, 1996, have been prepared to reflect the effects on the
historical results of FBA and the acquisition of Surety. The unaudited pro forma
combined condensed balance sheet has been prepared as if the acquisition
occurred on September 30, 1997. The unaudited pro forma combined condensed
statements of income have been prepared assuming the acquisition occurred on
January 1, 1996. The pro forma financial information set forth below is
unaudited and not necessarily indicative of the results that will occur in the
future.
<TABLE>
<CAPTION>
Unaudited Pro Forma Combined Condensed Balance Sheet
September 30, 1997
------------------------------------------------------------
Pro Forma Pro Forma
FBA Surety Adjustments Combined(1)
--- ------ ----------- -----------
Assets (dollars expressed in thousands, except per share data)
Cash and cash equivalents:
<S> <C> <C> <C>
Cash and due from banks....................... $ 13,872 2,254 -- 16,126
Interest bearing deposits..................... 1,050 -- -- 1,050
Federal funds sold............................ 3,500 915 -- 4,415
---------- -------- ------- ---------
Total cash and cash equivalents........... 18,422 3,169 -- 21,591
---------- -------- ------- ---------
Investment securities - available
for sale, at fair value....................... 86,764 12,310 -- 99,074
Loans:
Commercial and financial...................... 61,377 5,174 -- 66,551
Real estate construction and
development................................. 52,436 2,705 -- 55,141
Real estate mortgage.......................... 59,759 42,634 -- 102,393
Consumer and installment...................... 76,331 661 -- 76,992
Loans held for sale........................... -- 5,812 -- 5,812
---------- -------- ------- ---------
Total loans............................. 249,903 56,986 -- 306,889
Unearned discount............................. (1,441) (283) -- (1,724)
Allowance for possible
loan losses................................. (6,565) (526) -- (7,091)
---------- -------- ------- ---------
Net loans............................... 241,897 56,177 -- 298,074
---------- -------- ------- ---------
Bank premises and equipment, net................. 6,244 2,342 200 (2) 8,786
Intangibles associated with the
purchase of subsidiaries...................... 3,129 -- 3,172 (2) 6,301
Accrued interest receivable...................... 2,258 519 -- 2,777
Other real estate owned.......................... 375 228 -- 603
Deferred tax assets.............................. 14,664 -- 156 (2) 14,820
Other assets..................................... 2,794 587 210 (2) 3,591
---------- -------- ------- ---------
Total assets............................ $ 376,547 75,332 3,738 455,617
========== ======== ======= =========
Liabilities
Deposits:
Demand:
Noninterest bearing deposits................ $ 54,959 4,280 -- 59,239
Interest bearing deposits................... 47,647 11,335 -- 58,982
Savings....................................... 70,442 20,454 -- 90,896
Time deposits:
Time deposits of $100 or more............... 28,696 9,796 -- 38,492
Other time deposits......................... 110,104 21,977 -- 132,081
---------- -------- ------ ---------
Total deposits.......................... 311,848 67,842 -- 379,690
Note payable to First Banks...................... 14,500 -- 3,548 (3) 18,048
12% convertible debentures....................... -- -- -- --
Other borrowings................................. 8,496 1,850 -- 10,346
Deferred tax liabilities......................... 1,487 245 164 (2) 1,896
Accrued expenses and other
liabilities................................. 5,650 268 389 (2) 6,307
---------- -------- ------- ---------
Total liabilities....................... 341,981 70,205 4,101 416,287
---------- -------- ------- ---------
Stockholders' Equity
Convertible preferred stock...................... -- 61 (61) (2,3) --
Common stock:
Common stock.................................. 212 149 (109) (2,3)252
Class B common stock.......................... 375 -- -- 375
Capital surplus.................................. 37,768 2,541 2,183 (2,3) 42,492
Retained earnings................................ (145) 2,371 (2,371) (2,3) (145)
Treasury stock................................... (3,817) -- -- (3,817)
Net fair value adjustment for
securities available for sale................. 173 5 (5) (2) 173
---------- -------- ------- ---------
Total stockholders' equity.............. 34,566 5,127 (363) 39,330
---------- -------- ------- ---------
Total liabilities and
stockholders' equity................ $ 376,547 75,332 3,738 455,617
========== ======== ======= =========
See notes to pro forma combined condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Unaudited Pro Forma Combined Condensed Statement of Income
For the nine months ended September 30, 1997
---------------------------------------------------------
Pro Forma Pro Forma
FBA Surety Adjustments Combined(1)
--- ------ ----------- -----------
(dollars expressed in thousands, except per share data)
Interest income:
<S> <C> <C> <C>
Interest and fees on loans...................... $ 16,737 3,547 -- 20,284
Interest on investment securities............... 3,815 506 -- 4,321
Interest on federal funds sold.................. 529 65 -- 594
--------- ------- -------- ---------
Total interest income....................... 21,081 4,118 -- 25,199
--------- ------- -------- ---------
Interest expense:
Interest on deposits............................ 8,278 1,876 -- 10,154
Note payable and other borrowings............... 1,138 5 216 (4) 1,359
--------- ------- -------- ---------
Total interest expense...................... 9,416 1,881 216 11,513
--------- ------- -------- ---------
Net interest income......................... 11,665 2,237 (216) 13,686
Provision for possible loan losses................. 1,750 95 -- 1,845
--------- ------- -------- ---------
Net interest income after provision
for possible loan losses........................ 9,915 2,142 (216) 11,841
--------- ------- -------- ---------
Noninterest income:
Service charges on deposit accounts and
customer service fees......................... 1,206 298 -- 1,504
Other income.................................... 772 753 (16) (4) 1,509
--------- ------- -------- ---------
Total noninterest income.................... 1,978 1,051 (16) 3,013
--------- ------- -------- ---------
Noninterest expense:
Salary and employee benefits.................... 3,075 1,404 -- 4,479
Occupancy, net of rental income................. 1,062 85 -- 1,147
Furniture and equipment......................... 588 212 -- 800
Legal, examination and professional fees........ 1,496 133 -- 1,629
Other noninterest expense....................... 2,300 987 158 (4) 3,445
--------- ------- -------- ---------
Total noninterest expense................... 8,521 2,821 158 11,500
--------- ------- -------- ---------
Income before provision for income
tax expense (benefit)........................... 3,372 372 (390) 3,354
Provision for income tax expense (benefit)......... 1,266 133 (93) 1,306
--------- ------- -------- ---------
Net income.................................. $ 2,106 239 (297) 2,048
========= ======= ======== =========
Weighted average common stock and common
stock equivalents outstanding
(in thousands).................................. 3,626 -- -- 3,906 (5)
Earnings per common stock and
common stock equivalents outstanding............ $ 0.58 -- -- 0.52 (5)
See notes to pro forma combined condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Unaudited Pro Forma Combined Condensed Statement of Income
For the nine months ended September 30, 1996
-------------------------------------------------------
Pro Forma Pro Forma
FBA Surety Adjustments Combined(1)
--- ------ ----------- -----------
(dollars expressed in thousands, except per share data)
Interest income:
<S> <C> <C> <C>
Interest and fees on loans..................... $ 11,653 3,218 -- 14,871
Interest on investment securities.............. 2,344 495 -- 2,839
Interest on federal funds sold................. 1,292 16 -- 1,308
---------- ------- ------- --------
Total interest income...................... 15,289 3,729 -- 19,018
---------- ------- ------- --------
Interest expense:
Interest on deposits........................... 6,743 1,736 -- 8,479
Note payable and other borrowings.............. 416 7 213 (4) 636
---------- ------- ------- --------
Total interest expense..................... 7,159 1,743 213 9,115
---------- ------- ------- --------
Net interest income........................ 8,130 1,986 (213) 9,903
Provision for possible loan losses................ 600 265 -- 865
---------- ------- ------- --------
Net interest income after provision
for possible loan losses....................... 7,530 1,721 (213) 9,038
---------- ------- ------- --------
Noninterest income:
Service charges on deposit accounts
and customer service fees.................... 1,108 247 -- 1,355
Other income................................... 195 287 (16) (4) 466
---------- ------- ------- --------
Total noninterest income................... 1,303 534 (16) 1,821
---------- ------- ------- --------
Noninterest expense:
Salary and employee benefits................... 2,040 1,010 -- 3,050
Occupancy, net of rental income................ 638 112 -- 750
Furniture and equipment........................ 456 136 -- 592
Legal, examination and professional
fees......................................... 900 108 -- 1,008
Other noninterest expense...................... 2,588 1,152 158 (4) 3,898
---------- ------- ------- --------
Total noninterest expense.................. 6,622 2,518 158 9,298
---------- ------- ------- --------
Income before provision for income
tax expense (benefit).......................... 2,211 (263) (387) 1,561
Provision for income tax expense
(benefit)...................................... 855 (106) (92) (4) 657
---------- -------- ------- --------
Net income................................. $ 1,356 (157) (295) 904
========== ======= ======= ========
Weighted average common stock and
common stock equivalents outstanding
(in thousands)................................. 3,969 -- -- 4,247 (4)
Earnings per common stock and
common stock equivalents
outstanding.................................... $ 0.34 -- -- 0.21 (4)
See notes to pro forma combined condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Unaudited Pro Forma Combined Condensed Statement of Income
For the year ended December 31, 1996
-----------------------------------------------------------
Pro Forma Pro Forma
FBA Surety Adjustments Combined(1)
(dollars expressed in thousands, except per share data)
Interest income:
<S> <C> <C> <C>
Interest and fees on loans................... $ 16,494 4,428 -- 20,922
Interest on investment securities............. 3,519 647 -- 4,166
Interest on federal funds sold................ 1,433 56 -- 1,489
---------- ------- ------- --------
Total interest income..................... 21,446 5,131 -- 26,577
---------- ------- ------- --------
Interest expense:
Interest on deposits.......................... 9,301 2,359 -- 11,660
Note payable and other borrowings............. 692 8 285 (4) 985
---------- ------- ------- --------
Total interest expense.................... 9,993 2,367 285 12,645
---------- ------- ------- --------
Net interest income....................... 11,453 2,764 -- 14,217
Provision for possible loan losses............... 1,250 325 -- 1,575
---------- ------- ------- --------
Net interest income after provision
for possible loan losses...................... 10,203 2,439 -- 12,642
---------- ------- ------- --------
Noninterest income:
Service charges on deposit accounts
and customer service fees................... 1,507 291 -- 1,798
Other income.................................. 341 421 (21) (4) 741
---------- ------- ------- --------
Total noninterest income.................. 1,848 712 (21) 2,539
---------- ------- ------- --------
Noninterest expense:
Salary and employee benefits.................. 3,072 1,474 -- 4,546
Occupancy, net of rental income............... 951 148 -- 1,099
Furniture and equipment....................... 613 188 -- 801
Legal, examination and professional
fees........................................ 1,276 97 -- 1,373
Other noninterest expense..................... 3,568 1,582 211 (4) 5,361
---------- ------- ------- --------
Total noninterest expense................. 9,480 3,489 211 13,180
---------- ------- ------- --------
Income before provision for income
tax expense (benefit)......................... 2,571 (338) (517) 1,716
Provision for income tax expense (benefit)....... 1,002 (135) (122) 745
--------- ------- ------- --------
Net income................................ $ 1,569 (203) (395) 971
========== ======= ======= ========
Weighted average common stock and common
stock equivalents outstanding
(in thousands)............................ 3,915 -- -- 4,193 (5)
Earnings per common stock and common
stock equivalents outstanding................. $ 0.40 -- -- 0.23 (5)
See notes to pro forma combined condensed financial statements.
</TABLE>
<PAGE>
Notes to Pro Forma Combined Condensed Financial Statements
(1) The unaudited pro forma combined condensed balance sheet has been prepared
based on the historical financial statements of FBA and Surety as if the
acquisition of Surety had occurred on September 30, 1997. The unaudited pro
forma combined condensed statements of income for the nine months ended
September 30, 1997 and 1996, and for the year ended December 31, 1996, set forth
the results of operations as if the proposed transactions had occurred as of
January 1, 1996. Intercompany balances between FBA and Surety are not material
and have not been eliminated.
(2) Adjustments to intangibles associated with the purchase of subsidiaries
include $3.17 million in goodwill generated by the transaction between FBA and
Surety, representing the difference between the purchase price of $8.31 million
and the fair value of the net assets acquired. The fair value of net assets
acquired reflects increases of $200,000 and $210,000 relating to bank premises
and purchased mortgage servicing rights, respectively, offset by the accrual of
$389,000 in estimated acquisition costs. The deferred tax effects of these
adjustments were recorded using an effective tax rate of 40%.
(3) Adjustments to stockholders' equity to reflect the merger of FBA and Surety
include the assumed issuance of approximately 264,621 shares of FBA Common with
a value of $4.76 million, and the elimination of $5.13 million in equity as the
Surety shares are exchanged for FBA Common and cash. The amount of FBA Common to
be issued is based on the assumption that the purchase price at September 30,
1997 would have been $8.31 million, $3.55 million of which has been distributed
in cash funded through an advance on FBA's note payable with First Banks.
Adjustments to stockholders' equity also reflect the application of the
purchase method of accounting.
(4) Adjustments to the pro forma combined condensed statements of income include
the amortization of goodwill generated by the proposed transaction, amortized
over a fifteen year period using the straight line method and the amortization
of purchased mortgage servicing rights, amortized over a ten year period using
the straight line method.
During 1997 and 1996, the average prime rate of interest was
approximately 8.375% and 8.27%, respectively. The prime rate is used in the
unaudited combined condensed pro forma statements of income to calculate the
amount of interest expense which would have been paid on the external financing
required to fund the cash portion of the Surety acquisition. The external
financing carries an interest rate equal to 25 basis points below the prime
rate.
No adjustments have been made for any operational synergies that may
occur as a result of the proposed transaction.
Earnings Per Share:
(5) Pro forma earnings per share for the year ended December 31, 1996 were
calculated based upon FBA's weighted average shares outstanding plus 264,621
shares assumed to be issued in the proposed transaction between FBA and Surety,
and options to purchase Surety common stock totaling 13,637 which will be
exchanged for equivalent options to purchase FBA Common.
Pro forma earnings per share for the nine months ended September 30,
1997 and 1996 were calculated based upon FBA's weighted average shares
outstanding plus 264,621 shares assumed to be issued in the proposed transaction
between FBA and Surety, and 15,303 and 13,359 shares, respectively, of options
to purchase Surety common stock which will be exchanged for equivalent options
to purchase FBA Common.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Dated: December 16, 1997
FIRST BANKS AMERICA, INC.
By:/S/Allen H. Blake
--------------------
Allen H. Blake
Chief Financial Officer and
Secretary
