SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-8937
FIRST BANKS AMERICA, INC.
-------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 75-1604965
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
135 North Meramec, Clayton, Missouri 63105
------------------------------------------
(address of principal executive offices) (Zip Code)
(314) 854-4600
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding at
Class April 30, 1998
----- --------------
Common Stock, $.15 par value 3,232,217
Class B Common Stock, $.15 par value 2,500,000
<PAGE>
First Banks America, Inc.
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997......................................... -1-
Consolidated Statements of Income for the three
months ended March 31, 1998 and 1997.......................... -3-
Consolidated Statements of Changes in Stockholders' Equity for
the three months ended March 31, 1998 and 1997 and
the nine months ended December 31, 1997....................... -4-
Consolidated Statements of Cash Flows for the three months
ended March 31, 1998 and 1997................................. -5-
Notes to Consolidated Financial Statements...................... -6-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... -10-
PART II OTHER INFORMATION
Item 6. Exhibits and Report on Form 8-K......................... -16-
SIGNATURES................................................................ -17-
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FIRST BANKS AMERICA, INC.
Consolidated Balance Sheets (unaudited)
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---- ----
ASSETS
------
Cash and cash equivalents:
<S> <C> <C>
Cash and due from banks....................................... $ 32,651 32,257
Interest-bearing deposits with other financial institutions-
with maturities of three months or less..................... 2,271 690
Federal funds sold............................................ 42,250 2,215
----------- --------
Total cash and cash equivalents........................... 77,172 35,162
----------- --------
Investment securities - available for sale, at fair value........ 141,131 148,181
Loans:
Real estate construction and development...................... 96,035 93,454
Commercial and financial...................................... 113,312 109,763
Real estate mortgage.......................................... 166,160 149,951
Consumer and installment...................................... 71,017 75,023
Loans held for sale........................................... -- 5,708
----------- --------
Total loans............................................... 446,524 433,899
Unearned discount............................................. (2,425) (2,444)
Allowance for possible loan losses............................ (12,063) (11,407)
----------- --------
Net loans................................................. 432,036 420,048
----------- --------
Bank premises and equipment, net of
accumulated depreciation.................................... 11,382 10,697
Intangibles associated with the purchase of
subsidiaries................................................ 8,794 7,189
Accrued interest receivable...................................... 4,062 4,819
Foreclosed property, net......................................... 725 601
Deferred income taxes............................................ 13,739 14,141
Other assets..................................................... 3,368 2,826
----------- --------
Total assets.............................................. $ 692,409 643,664
=========== ========
</TABLE>
<PAGE>
FIRST BANKS AMERICA, INC.
Consolidated Balance Sheets (unaudited)
(dollars expressed in thousands, except per share data)
(continued)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---- ----
LIABILITIES
-----------
Deposits:
Demand:
<S> <C> <C>
Non-interest-bearing............................................ $ 101,270 97,393
Interest-bearing................................................ 73,433 73,199
Savings.......................................................... 158,625 147,623
Time:
Time deposits of $100 or more................................... 57,725 52,472
Other time deposits............................................. 209,504 185,840
----------- ---------
Total deposits................................................ 600,557 556,527
Short-term borrowings................................................ 3,453 3,687
Promissory note payable.............................................. 13,450 14,900
Accrued interest payable............................................. 4,803 4,185
Deferred tax liability............................................... 1,049 1,092
Payable to former shareholders of Surety Bank........................ -- 3,829
Accrued and other liabilities........................................ 5,756 5,058
12% convertible debentures........................................... 6,500 6,500
Minority interest in subsidiary...................................... -- 2,795
----------- ---------
Total liabilities............................................. 635,568 598,573
----------- ---------
STOCKHOLDERS' EQUITY
--------------------
Common Stock:
Common stock, $.15 par value; 6,666,666 shares authorized;
3,238,417 and 2,144,865 shares issued and outstanding at
March 31, 1998 and December 31, 1997, respectively.............. 486 322
Class B common stock, $.15 par value; 4,000,000 shares
authorized; 2,500,000 shares issued and outstanding
at March 31, 1998 and December 31, 1997......................... 375 375
Capital surplus...................................................... 59,858 47,014
Retained earnings since elimination of accumulated deficit
of $259,117, effective December 31, 1994......................... 2,498 1,398
Common treasury stock, at cost; 496,056 shares and 386,458
shares at March 31, 1998 and December 31, 1997,
respectively..................................................... (6,814) (4,350)
Accumulated other comprehensive income............................... 438 332
----------- ---------
Total stockholders' equity.................................... 56,841 45,091
----------- ---------
Total liabilities and stockholders' equity.................... $ 692,409 643,664
=========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FIRST BANKS AMERICA, INC.
Consolidated Statements of Income (unaudited)
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------
1998 1997
---- ----
Interest income:
<S> <C> <C>
Interest and fees on loans................................................ $ 10,568 7,453
Investment securities..................................................... 2,033 1,781
Federal funds sold and other.............................................. 395 377
--------- ----------
Total interest income................................................. 12,996 9,611
--------- ----------
Interest expense:
Deposits:
Interest-bearing demand................................................. 349 354
Savings................................................................. 1,454 766
Time deposits of $100 or more........................................... 775 529
Other time deposits..................................................... 2,784 2,314
Promissory note payable and other borrowings.............................. 537 545
--------- ----------
Total interest expense................................................ 5,899 4,508
--------- ----------
Net interest income................................................... 7,097 5,103
Provision for possible loan losses........................................... 300 550
--------- ----------
Net interest income after provision for possible loan losses.......... 6,797 4,553
--------- ----------
Noninterest income:
Service charges on deposit accounts and customer service fees............. 739 575
Gain on sales of securities, net.......................................... 92 --
Other income.............................................................. 319 296
--------- ----------
Total noninterest income.............................................. 1,150 871
--------- ----------
Noninterest expense:
Salaries and employee benefits............................................ 2,135 1,550
Occupancy, net of rental income........................................... 491 571
Furniture and equipment................................................... 347 267
Federal Deposit Insurance Corporation premiums............................ 43 38
Postage, printing and supplies............................................ 167 148
Data processing fees...................................................... 475 327
Legal, examination and professional fees.................................. 890 750
Communications............................................................ 200 164
(Gain) loss on sale of foreclosed property, net of expenses............... 157 (9)
Other..................................................................... 1,152 658
--------- ----------
Total noninterest expense............................................. 6,057 4,464
--------- ----------
Income before provision for income taxes and minority interest
in income of subsidiary............................................ 1,890 960
Provision for income taxes................................................... 790 361
--------- ----------
Income before minority interest in income of subsidiary............... 1,100 599
Minority interest in income of subsidiary.................................... -- 86
--------- ----------
Net income............................................................ $ 1,100 513
========= ==========
Earnings per common share:
Basic................................................................. $ 0.22 0.13
Diluted............................................................... 0.22 0.12
========= ==========
Weighted average shares of common stock outstanding.......................... 4,911 4,082
========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FIRST BANKS AMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity (unaudited)
Three months ended March31, 1998 and nine months
ended December 31, 1997 (dollars expressed
in thousands, except per share data)
<TABLE>
<CAPTION>
Accu-
mulated
other Total
Class B Compre- Retained Common compre- stock-
Common common- Capital hensive earnings treasury hensive holders'
stock stock surplus income (deficit) stock income equity
----- ----- ------- --------------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated balances, January 1, 1997........... $ 282 375 42,553 -- (2,251) (2,838) (36) 38,085
Three months ended March 31, 1997:
Comprehensive income:
Net income.................................. -- -- -- $ 513 513 -- -- 513
Other comprehensive income, net of tax (1) -
Unrealized losses on securities, net of
reclassification adjustment (2)......... -- -- -- (399) -- -- (339) (339)
------
Comprehensive income........................ -- -- -- $ 174
======
Exercise of stock options..................... -- -- 4 -- -- -- 4
Repurchases of common stock................... -- -- -- -- (331) -- (331)
------- ---- ------- ----- ----- ---- -------
Consolidated balances, March 31, 1997............ 282 375 42,557 (1,738) (3,169) (375) 37,932
Nine months ended December 31, 1997:
Comprehensive income:
Net income.................................. -- -- -- $3,136 3,136 -- -- 3,136
Other comprehensive income, net of tax (1)
Unrealized gains on securities
net of reclassification adjustment (2).. -- -- -- 707 -- -- 707 707
------
Comprehensive income........................ $3,843
======
Issuance of common stock for purchase
accounting acquisition...................... 40 -- 4,723 -- -- -- 4,763
Exercise of stock options..................... -- -- 11 -- -- -- 11
Redemption of stock option.................... -- -- (290) -- -- -- (290)
Compensation paid in common stock............. -- -- 13 -- -- -- 13
Repurchases of common stock................... -- -- -- -- (1,181) -- (1,181)
------- ---- ------- ----- ------ ---- -------
Consolidated balances, December 31, 1997......... 322 375 47,014 1,398 (4,350) 332 45,091
Three months ended march 31, 1998:
Comprehensive income:
Net income.................................. -- -- -- $1,100 1,100 -- -- 1,100
Other comprehensive income, net of (1) -
Unrealized gains on securities, net of
of reclassification adjustment (2)...... -- -- -- 106 -- -- 106 106
-----
Comprehensive income........................ -- -- -- $1,206
======
Issuance of common stock for acquisition
of entity under common control.............. 43 -- 2,965 -- -- -- 3,008
Conversion of promissory note payable......... 121 -- 9,879 -- -- -- 10,000
Repurchases of common stock................... -- -- -- -- 2,464) -- (2,464)
------- ---- ------- ----- ----- ---- -------
Consolidated balances, March 31, 1998............ $ 486 375 59,858 2,498 (6,814) 438 56,841
======= ==== ======= ===== ====== ==== =======
</TABLE>
<TABLE>
<CAPTION>
Three months Nine months
ended March 31, ended
1998 1997 December 31, 1997
---- ---- -----------------
Disclosure of reclassification amount:
<S> <C> <C> <C>
Unrealized gains arising during the period.......................... $198 (339) 783
Less: reclassification adjustment for gains included in net income.. 92 -- 76
---- ---- -----
Unrealized gains on securities...................................... $106 (339) 707
==== ==== =====
</TABLE>
- ---------
(1) Components of other comprehensive income are shown net of tax.
(2) Represents the net display with gross amounts and reclassification
adjustment included on the face of the statement.
See accompanying notes to consolidated financial statements.
<PAGE>
FIRST BANKS AMERICA, INC.
Consolidated Statements of Cash Flows (unaudited)
(dollars expressed in thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
1998 1997
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income................................................................ $ 1,100 513
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, amortization and accretion, net........................... 467 60
Provision for possible loan losses...................................... 300 550
Decrease in accrued interest receivable................................. 967 197
Interest accrued on liabilities......................................... 5,899 4,508
Payments of interest on liabilities..................................... (5,345) (4,010)
Provision for income taxes.............................................. 790 361
Payments of income taxes................................................ (196) --
Gain on sales of securities, net........................................ 92 --
Other operating activities, net......................................... 366 (471)
--------- --------
Net cash provided by operating activities............................. 4,440 1,708
--------- --------
Cash flows from investing activities:
Cash received from acquired entities, net of cash paid.................... 3,241 --
Maturities of investment securities....................................... 32,850 41,365
Purchases of investment securities........................................ (25,399) (56,208)
Net decrease in loans..................................................... 15,739 8,318
Recoveries of loans previously charged off................................ 530 560
Purchases of bank premises and equipment.................................. (807) (89)
Other investing activities, net........................................... 219 37
--------- --------
Net cash provided by (used in) investing activities................... 26,373 (6,017)
--------- --------
Cash flows from financing activities:
Increase (decrease) in deposits........................................... 8,869 (3,487)
Increase in borrowed funds................................................ 4,792 4,520
Repurchases of common stock for treasury.................................. (2,464) (331)
Other financing activities, net .......................................... -- 4
--------- --------
Net cash provided by financing activities............................. 11,197 706
--------- --------
Net increase (decrease) in cash and cash equivalents.................. 42,010 (3,603)
Cash and cash equivalents, beginning of period............................... 35,162 42,874
--------- --------
Cash and cash equivalents, end of period..................................... $ 77,172 39,271
========= ========
Non-cash investing and financing activities:
Issuance of common stock for purchase accounting acquisition.............. $ 3,008 --
Conversion of promissory note payable to common stock..................... 10,000 --
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FIRST BANKS AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying consolidated financial statements of First Banks
America, Inc. (FBA or the Company) are unaudited and should be read in
conjunction with the consolidated financial statements contained in the 1997
annual report on Form 10-K. In the opinion of management, all adjustments,
consisting of normal recurring accruals considered necessary for a fair
presentation of the results of operations for the interim periods presented
herein, have been included. Operating results for the three month period ended
March 31, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998.
In connection with FBA's acquisition of First Commercial Bancorp, Inc.
(FCB) and its wholly owned subsidiary, First Commercial Bank (First Commercial)
as of February 2, 1998, FBA's financial information for the periods prior to the
acquisition has been restated to include the 61.48% ownership interest of First
Banks, Inc. (First Banks), FBA's majority owner, in FCB consistent with the
accounting treatment applicable to entities under common control. First Banks
owned 71.84% of FBA as of March 31, 1998. The remaining interest in FCB acquired
by FBA, or 38.52%, is reflected in the consolidated financial statements as
minority interest for the periods prior to the acquisition.
The consolidated financial statements include the accounts of FBA and
its subsidiaries, all of which are wholly owned. All significant intercompany
accounts and transactions have been eliminated. In addition to the
aforementioned restatement of 1997 financial information, certain
reclassifications of 1997 amounts have been made to conform with the 1998
presentation.
FBA operates through two banking subsidiaries, BankTEXAS N.A.,
headquartered in Houston, Texas (BankTEXAS) and First Bank of California,
headquartered in Roseville, California (FB California), collectively referred to
as the Subsidiary Banks.
(2) Transactions with Related Party
FBA purchases certain services and supplies from or through its
majority shareholder, First Banks. FBA's financial position and operating
results could significantly differ from those that would be obtained if FBA's
relationship with First Banks did not exist.
First Banks provides management services to FBA and the Subsidiary
Banks. Management services are provided under a management fee agreement whereby
FBA compensates First Banks on an hourly basis for its use of personnel for
various functions including internal auditing, loan review, income tax
preparation and assistance, accounting, asset/liability and investment services,
loan servicing and other management and administrative services. Fees paid under
this agreement were $440,000 and $317,000 for the three months ended March 31,
1998 and 1997, respectively. Fees payable to First Banks generally increase as
FBA expands through acquisitions and internal growth, reflecting the higher
levels of service needed to operate the Subsidiary Banks.
Because of its affiliation through First Banks and the geographic
proximity of certain of their banking offices, FB California and First Bank &
Trust (FB&T), a wholly owned subsidiary of First Banks, share the cost of
certain personnel and services used by the banks. This includes the salaries and
benefits of certain loan and administrative personnel. The allocation of the
shared costs are charged and/or credited among the banks under the terms of a
cost sharing agreement. Expenses associated with loan origination personnel are
allocated based on the relative loan volume between the banks. Costs of most
other personnel are allocated on an hourly basis. Because this involves
distributing essentially fixed costs over a larger asset base, it allows each
bank to receive the benefit of personnel and services at a reduced cost. Fees
paid under the cost sharing agreement were $256,000 and $174,000 for the three
month periods ended March 31, 1998 and 1997, respectively.
<PAGE>
Effective April 1, 1997, First Services L.P., a limited partnership
indirectly owned by First Banks' Chairman and his children through its General
Partners and Limited Partners, began providing data processing and various
related services to FBA under the terms of data processing agreements. Prior to
April 1, 1997, a subsidiary of First Banks provided data processing and various
related services to FBA. Fees paid under these agreements were $429,000 and
$283,000 for the three months ended March 31, 1998 and 1997, respectively. The
fees paid for management services and data processing are significantly lower
than FBA was previously paying its nonaffiliated vendors. Fees payable to First
Services L.P. generally increase as FBA expands through acquisitions and
internal growth, reflecting the higher levels of service needed to operate the
Subsidiary Banks.
The Subsidiary Banks had $62.8 million and $66.9 million in whole loans
and loan participations outstanding at March 31, 1998 and December 31, 1997,
respectively, that were purchased from banks affiliated with First Banks. In
addition, the Subsidiary Banks had sold $74.0 million and $54.7 million in whole
loans and loan participations to affiliates of First Banks at March 31, 1998 and
December 31, 1997, respectively. These loans and loan participations were
acquired and sold at interest rates and terms prevailing at the dates of their
purchase or sale and under standards and policies followed by the Subsidiary
Banks.
FBA has borrowed $13.5 million and $14.9 million from First Banks at
March 31, 1998 and December 31, 1997, respectively, under a $20.0 million
promissory note payable. The borrowings under the note bear interest at an
annual rate of one-quarter percent less than the "Prime Rate" as reported in the
Wall Street Journal. The interest expense was $272,000 and $276,000 for the
three months ended March 31, 1998 and 1997, respectively. The principal and
accrued interest under the note are due and payable on October 31, 2001. The
accrued and unpaid interest under the note was $1.64 million and $1.37 million
at March 31, 1998 and December 31, 1997, respectively. As more fully discussed
in Note 4, on February 2, 1998, FBA exchanged 804,000 shares of its common stock
for $10.0 million outstanding under the promissory note payable.
In connection with FBA's acquisition of FCB, FBA issued convertible
debentures to First Banks of $6.5 million. These debentures replaced similar FCB
debentures previously owned by First Banks. The related interest expense for
these debentures was $210,000 and $213,000 for the three months ended March 31,
1998 and 1997, respectively. FBA is not required to pay interest on the
debentures prior to maturity. At maturity in 2001, principal and accrued
interest are payable in FBA common stock (at a conversion rate of $12.50 per
share), unless FBA elects to pay cash and First Banks does not exercise its
right to convert principal and interest into FBA common stock.
(3) Regulatory Capital
FBA and the Subsidiary Banks are subject to various regulatory capital
requirements administered by federal and state banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on FBA and the Subsidiary Banks' assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Subsidiary Banks' capital amounts and regulatory classification
are also subject to qualitative judgments by the regulators about components,
risk weighting, and other factors which may affect possible regulatory actions.
Quantitative measures established by regulations to ensure capital
adequacy require the Subsidiary Banks to maintain certain minimum capital
ratios. The Subsidiary Banks are required to maintain a minimum risk-based
capital to risk-weighted assets ratio of 8.00%, with at least 4.00% being "Tier
1" capital. Tier 1 capital is composed of total stockholders' equity excluding
the net fair value adjustment for securities available for sale and excess net
deferred tax assets, as defined by regulation. In addition, a minimum leverage
ratio (Tier 1 capital to total assets) of 3.00% plus an additional cushion of
100 to 200 basis points is expected. In order to be well capitalized under
Prompt Corrective Action provisions, the Subsidiary Banks are required to
maintain a risk weighted assets ratio of at least 10%, a Tier 1 to risk weighted
assets ratio of at least 6%, and a leverage ratio of at least 5%. As of December
31, 1997, the date of the most recent notification from the Subsidiary Banks'
primary regulators, the Subsidiary Banks were categorized as well capitalized
<PAGE>
under the regulatory framework for Prompt Corrective Action. Management
believes, as of March 31, 1998, the Subsidiary Banks are well capitalized as
defined by the Federal Deposit Insurance Corporation Improvement Act of 1991.
At March 31, 1998 and December 31, 1997, FBA's and the Subsidiary
Banks' capital ratios were as follows:
<TABLE>
<CAPTION>
Risk-based capital ratios
-------------------------
Total Tier 1 Leverage Ratio
----- ------ --------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
FBA 9.08% 6.88% 7.82% 6.63% 6.77% 4.79%
BankTEXAS 12.99 12.26 11.73 11.00 9.24 8.90
FB California 13.18 12.19 11.91 10.93 11.12 10.40
</TABLE>
(4) Acquisitions
On February 2, 1998, FBA completed its acquisition of FCB and its
wholly owned subsidiary, First Commercial. In the transaction, the FCB
shareholders received .8888 shares of FBA common stock for each share of FCB
common stock. Cash was paid in lieu of issuing fractional shares. In total, FCB
shareholders received approximately 752,000 shares of FBA common stock in the
transaction, including 462,176 shares received by First Banks in exchange for
its 61.48% ownership of FCB. The transaction also provided for First Banks to
receive 804,000 shares of FBA common stock in exchange for $10.0 million of
FBA's promissory note payable to First Banks, and for the exchange of FCB
convertible debentures of $6.5 million, which were owned by First Banks, for
comparable debentures of FBA. The Agreement was negotiated and approved by
special committees of the Boards of Directors of FCB and FBA. These special
committees were comprised solely of independent directors of the two respective
Boards of Directors.
First Commercial has six banking offices located in Sacramento,
Roseville (2), San Francisco, Concord and Campbell, California. At February 2,
1998, FCB had total assets of $192.5 million, investment securities of $64.4
million, loans, net of unearned discount of $118.9 million and deposits of
$173.1 million. The transaction was accounted for as a business combination of
entities under common control. Accordingly, FBA assumed First Banks' 61.48%
interest in FCB at its historical cost basis. The remaining 38.52%, or minority
interest, owned by unaffiliated parties was recorded at fair value. The excess
of the cost over the fair value of the minority interest's share in the fair
value of the net assets acquired was $1.6 million and is being amortized over 15
years. First Commercial was merged into FB California.
On February 2, 1998, FBA also completed its acquisition of Pacific Bay
Bank, San Pablo, California (Pacific Bay). Under the terms of the Pacific Bay
Agreement, Pacific Bay shareholders received $14.00 per share in cash for their
stock, an aggregate of $4.2 million. The transaction was accounted for using the
purchase method of accounting. The excess of the cost over the fair value of the
net assets acquired was $1.5 million and is being amortized over 15 years. This
transaction was funded from an advance under the promissory note payable to
First Banks.
Pacific Bay operated a banking office in San Pablo, California and a
loan production office in Lafayette, California. At February 2, 1998, Pacific
Bay had total assets of $38.3 million, investment securities of $232,000, loans,
net of unearned discount, of $29.7 million and deposits of $35.2 million.
Pacific Bay was merged into FB California.
<PAGE>
The following information presents unaudited pro forma condensed
results of operations of FBA for the three months ended March 31, 1997, combined
with the acquisition of Surety Bank, as if FBA had completed the transaction on
January 1, 1997. In addition, the historical results of First Banks' interest in
FCB is presented as if FBA had acquired First Banks' interest in FCB on January
1, 1997:
March 31, 1997
(dollars expressed in thousands,
except per share data)
Net interest income............................... $ 5,952
Provision for possible loan losses................ 585
Net income (loss)................................. 695
=======
Weighted average shares of common stock
Outstanding (in thousands)................... 5,440
=======
Earnings (loss) per common share:
Basic........................................ $ 0.13
Diluted...................................... 0.13
=======
Unaudited pro forma condensed results of operations are not included
for the three months ended March 31, 1998, as the proforma results did not
significantly differ from actual results.
The unaudited pro forma condensed results of operations reflect the
application of the purchase method of accounting for Surety Bank and certain
other assumptions. Purchase accounting adjustments have been applied to
investment securities, bank premises and equipment, deferred tax assets and
liabilities and excess cost required to reflect the assets acquired and
liabilities assumed at fair value. The resulting premiums and discounts are
amortized or accreted to income consistent with the accounting policies of FBA.
<PAGE>
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
The discussion herein contains certain forward looking statements
regarding the financial condition, results of operations and business of the
Company. These forward looking statements are subject to risks and
uncertainties, not all of which can be predicted or anticipated. Factors that
may cause actual results to differ materially from those contemplated by such
forward looking statements include general market conditions, conditions
affecting the banking industry generally and factors having a specific impact on
the Company, including but not limited to fluctuations in interest rates and in
the economy; the impact of laws and regulations applicable to the Company and
changes therein; competitive conditions in the markets in which the Company and
the Subsidiary Banks conduct their operations; and the ability of the Company to
respond to changes in technology. Additional factors potentially affecting the
Company's results were identified in the Annual Report on Form 10-K filed with
the Securities and Exchange Commission. Readers should not place undue reliance
on any forward-looking statements herein.
General
FBA is a registered bank holding company, incorporated in Delaware and
headquartered in Clayton, Missouri. At March 31, 1998, FBA had approximately
$692.4 million in total assets; $444.1 million in total loans, net of unearned
discount; $600.6 million in total deposits; and $56.8 million in total
stockholders' equity. FBA operates through its Subsidiary Banks.
As previously discussed in Notes 1 and 4 to the consolidated financial
statements, FBA's financial information presented in this Report on Form 10-Q
has been restated to reflect its acquisition of FCB.
Through the Subsidiary Banks' six locations in Texas and eleven
locations in the San Francisco - Sacramento corridor of northern California, FBA
offers a broad range of commercial and personal banking services including
certificate of deposit accounts, individual retirement and other time deposit
accounts, checking and other demand deposit accounts, interest checking
accounts, savings accounts and money market accounts. Loans include commercial
and industrial, real estate construction and development, commercial and
residential real estate and consumer loans. Other financial services include
credit-related insurance, automatic teller machines and safe deposit boxes.
The following table lists the Subsidiary Banks at March 31, 1998:
Loans, net of
Number of Total unearned Total
locations assets discount deposits
(dollars expressed in thousands)
FB California 11 $415,806 270,713 365,405
BankTEXAS 6 271,902 173,386 235,215
Financial Condition
FBA's total assets were $692.4 million and $643.7 million at March 31,
1998 and December 31, 1997, respectively, after the restatement for the
acquisition of FCB, as previously discussed in Notes 1 and 4 to the consolidated
financial statements. The increase in adjusted total assets from December 31,
1997 is primarily attributable to FBA's acquisition of Pacific Bay, which
provided total assets of $38.3 million.
<PAGE>
During the three months ended March 31, 1998, FBA purchased $2.5
million of its common stock for treasury. FBA utilized available cash and a $1.5
million advance under its promissory note payable to First Banks to fund its
repurchase of common stock. As announced by FBA on April 29, 1998, the Board of
Directors authorized the purchase of an additional 5% of its common stock for
treasury.
Results of Operations
Net Income
Net income was $1.1 million, or $0.22 per share on a diluted basis, for
the three months ended March 31, 1998, compared to $513,000, or $0.12 per share
on a diluted basis, for the same period in 1997. The improved operating results
of FBA reflect the improved performance of both BankTEXAS and FB California.
BankTEXAS' net income increased to $753,000 from $629,000 for the three month
periods ended March 31, 1998 and 1997, respectively. FB California recorded net
income of $739,000 for the three month period ended March 31, 1998, in
comparison to $395,000 for the same period in 1997. The results for the first
quarter of 1998 include a net charge of $225,000, or $0.05 per share on a
diluted basis, in settlement of certain litigation. Excluding this charge,
earnings per share on a diluted basis for the first quarter of 1998 would have
been $0.27.
Net Interest Income
Net interest income was $7.10 million, or 4.77% of average
interest-earning assets, for the three months ended March 31, 1998, compared to
$5.10 million, or 4.30% of average interest-earning assets, for the same period
in 1997. The improved net interest income is primarily attributable to the net
interest-earning assets provided by the acquisitions of Surety Bank and Pacific
Bay and the improving yield on BankTEXAS' repositioned loan portfolio and the
effect of the exchange of $10.0 million of the promissory note payable for
common stock.
<PAGE>
The following table sets forth certain information relating to FBA's
average balance sheets, and reflects the average yield earned on
interest-earning assets, the average cost of interest-bearing liabilities and
the resulting net interest income for the three month periods ended March 31:
<TABLE>
<CAPTION>
1998 1997
------------------------- --------------------------
Interest Interest
Average income/ Yield/ Average income/ Yield/
balance expense rate balance expense rate
------- ------- ---- ------- ------- ----
(dollars expressed in thousands)
Assets
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C>
Loans.................................... $ 438,421 10,568 9.78% $ 326,474 7,453 9.26%
Investment securities.................... 136,501 2,033 6.04 125,544 1,781 5.75
Federal funds sold and other............. _28,062 395 5.71 29,360 377 5.21
--------- ------ ---------- ------
Total interest-earning assets...... 602,984 12,996 8.74 481,378 9,611 8.10
------ ------
Nonearning assets........................... 62,166 42,194
--------- ----------
Total assets....................... $ 665,150 $ 523,572
========= ==========
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits......... $ 73,291 349 1.93% $ 68,211 354 2.10%
Savings deposits......................... 151,237 1,454 3.90 98,052 766 3.17
Time deposits of $100 or more............ 51,594 775 6.09 39,465 529 5.44
Other time deposits...................... 205,975 2,784 5.48 171,480 2,314 5.47
--------- ----- --------- ------
Total interest-bearing deposits.... 482,097 5,362 4.51 377,208 3,963 4.26
Notes payable and other ................. 24,602 537 8.85 24,393 545 9.06
--------- ----- --------- ------
Total interest-bearing liabilities. 506,699 5,899 4.72 401,601 4,508 4.55
----- ------
Noninterest-bearing liabilities:
Demand deposits.......................... 91,230 72,129
Other liabilities........................ 12,360 9,795
--------- ---------
Total liabilities.................. 610,289 483,525
Stockholders' equity........................ 54,861 40,047
--------- ---------
Total liabilities and
stockholders' equity............. $ 665,150 $ 523,572
========= ==========
Net interest income......................... 7,097 5,103
===== =====
Net interest margin......................... 4.77% 4.30%
==== ====
</TABLE>
Provision for Possible Loan Losses
The provision for possible loan losses was $300,000 and $550,000 for
the three month periods ended March 31, 1998 and 1997, respectively. The
decrease in the provision for possible loan losses for the first quarter of
1998, compared to the same period in 1997, is primarily attributable to improved
asset quality of FBA's existing loan portfolio, as determined by management's
review and evaluation of the credit quality of the loans in the portfolio and
its assessment of the adequacy of the allowance for possible loan losses.
Net loan charge-offs were $529,000 for the three month period ended
March 31, 1998, compared to $422,000 for the same period in 1997. The increase
in net loan charge-offs is primarily attributable to the loans obtained through
the acquisition of Pacific Bay. The acquired allowance for possible loan losses
totaled $885,000 at the acquisition date. See "-- Lending and Credit Management"
for a summary of nonperforming loans and a summary of loan loss experience.
<PAGE>
Noninterest Income
Noninterest income was $1.2 million for the three month period ended
March 31, 1998 compared to $871,000 for the same period in 1997. Noninterest
income consists primarily of service charges on deposit accounts and customer
service fees.
Service charges on deposit accounts and customer service fees
increased to $739,000 for the three month period ended March 31, 1998, in
comparison to $575,000 for the same period in 1997. This increase is primarily
attributable to the acquisitions of Surety Bank and Pacific Bay Bank.
Noninterest Expense
Noninterest expense was $6.1 million for the three month period ended
March 31, 1998, compared to $4.5 million for the same period in 1997. The
increase is attributable to the noninterest expense of Surety Bank and Pacific
Bay. Additionally, other expenses for the three months ended March 31, 1998
includes a $350,000 charge in settlement of certain litigation.
Occupancy, net of rental income, declined to $491,000 for the three
months ended March 31, 1998 from $571,000 for the same period in 1997. This is
the result of increased sub-leasing of excess space within FBA's banking
premises, relocation of certain California branches and the related reductions
in expenses attributable to centralization of recently acquired entities'
functions into FBA's systems.
Lending and Credit Management
Interest earned on the loan portfolio is the primary source of income
of FBA. Total loans, net of unearned discount, represented 64.1% and 67.0% of
total assets as of March 31, 1998 and December 31, 1997, respectively. Total
loans, net of unearned discount, were $444.1 million and $431.5 million at March
31, 1998 and December 31, 1997, respectively. The increase in loans, as
summarized on the consolidated balance sheet, is attributable to the acquisition
of Pacific Bay and to the expansion of the corporate lending function of FBA.
The expansion has generated growth in the commercial and commercial real estate
mortgage loan portfolios. Offsetting the growth in corporate lending is the
continuing decrease in the consumer indirect automobile loan portfolio.
<PAGE>
FBA's nonperforming loans consist of loans on a nonaccrual status and
loans on which the original terms have been restructured. The following is a
summary of nonperforming assets and past due loans at the dates indicated:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---- ----
(dollars expressed in thousands)
Nonperforming assets:
<S> <C> <C>
Nonperforming loans............................................... $ 6,003 2,846
Other real estate................................................. 725 601
----------- ----------
Total nonperforming assets..................................... $ 6,728 3,447
=========== ==========
Loans past due and still accruing:
Over 30 days to 90 days........................................... $ 12,428 7,866
Over 90 days...................................................... 672 1,158
----------- ----------
Total past due loans........................................... $ 13,100 9,024
=========== ==========
Loans, net of unearned discount..................................... $ 444,099 431,455
=========== ==========
Asset quality ratios:
Allowance for possible loan losses to loans....................... 2.72% 2.64%
Nonperforming loans to loans ..................................... 1.35 0.66
Allowance for possible loan losses to
nonperforming loans ........................................... 200.95 400.81
Nonperforming assets to loans and other real estate............... 1.51 0.80
=========== =========
</TABLE>
Nonperforming loans, consisting of loans on nonaccrual status and
restructured loans, were $6.0 million at March 31, 1998 in comparison to $2.8
million and $2.4 million at December 31, 1997 and March 31, 1997, respectively.
The increase is primarily attributable to the loans obtained through the
acquisition of Pacific Bay. The acquired allowance for possible loan losses
totaled $885,000 at the acquisition date.
Impaired loans, consisting of loans on a nonaccrual status and indirect
consumer and installment loans 60 days or more past due, were $6.3 million and
$3.4 million at March 31, 1998 and December 31, 1997, respectively.
The allowance for possible loan losses is monitored on a monthly basis.
Each month, credit administration provides FBA's management with detailed lists
of loans on the watch list and summaries of the entire loan portfolio of each
Subsidiary Bank by risk rating. These are coupled with analyses of changes in
the risk profiles of the portfolios, changes in past due and nonperforming loans
and changes in watch list and classified loans over time. In this manner, the
overall increases or decreases in the levels of risk in the portfolios are
monitored continually. Factors are applied to the loan portfolios for each
category of loan risk to determine acceptable levels of allowance for possible
loan losses. These factors are derived primarily from the actual loss experience
of the Subsidiary Banks and from published national surveys of norms in the
industry. The calculated allowances required for the portfolios are then
compared to the actual allowance balances to determine the provisions necessary
to maintain the allowances at appropriate levels. In addition, management
exercises judgment in its analysis of determining the overall level of the
allowance for possible losses. In its analysis, management considers the change
in the portfolio, including growth and composition, and the economic conditions
of the regions in which FBA operates.
Based on this quantitative and qualitative analysis, the allowance for
possible loan losses is adjusted. Such adjustments are reflected in the
consolidated statements of operations.
<PAGE>
The following is a summary of the loan loss experience:
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------
1998 1997
---- ----
(dollars expressed in thousands)
<S> <C> <C>
Allowance for possible loan losses, beginning of period.................... $ 11,407 10,744
---------
Acquired allowances for possible loan losses............................ 885 --
--------- --------
12,292 10,744
--------- --------
Loans charged-off....................................................... (1,059) (982)
Recoveries of loans previously charged-off.............................. 530 560
--------- --------
Net loan charge-offs.................................................... (529) (422)
--------- --------
Provision for possible loan losses...................................... 300 550
--------- --------
Allowance for possible loan losses, end of period.......................... $ 12,063 10,872
========= ========
</TABLE>
Liquidity
The liquidity of FBA and the Subsidiary Banks is the ability to
maintain a cash flow which is adequate to fund operations, service debt
obligations and meet other commitments on a timely basis. The primary sources of
funds for liquidity are derived from customer deposits, loan payments,
maturities, sales of investments and operations. In addition, FBA and the
Subsidiary Banks may avail themselves of more volatile sources of funds through
issuance of certificates of deposit in denominations of $100,000 or more,
federal funds borrowed, securities sold under agreements to repurchase and
borrowings from the Federal Home Loan Bank. The aggregate funds acquired from
those sources were $61.2 million and $56.2 million at March 31, 1998 and
December 31, 1997, respectively.
At March 31, 1998, FBA's more volatile sources of funds mature as
follows:
(dollars expressed
in thousands)
Three months or less............................... $ 21,562
Over three months through six months............... 13,606
Over six months through twelve months.............. 13,315
Over twelve months................................. 12,695
---------
Total........................................ $ 61,178
=========
Management believes the available liquidity and earnings of the
Subsidiary Banks will be sufficient to provide funds for FBA's operating and
debt service requirements both on a short-term and long-term basis.
Effect of New Accounting Standards
FBA adopted the provisions of Statement on Financial Accounting
Standards (SFAS) No. 130 - Reporting Comprehensive Income (SFAS 130)
retroactively on January 1, 1998. SFAS 130 established standards for reporting
and displaying income and its components (revenues, gains and losses) in a full
set of general purpose financial statements. The statement requires all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. Comparative financial
statements provided for earlier periods have been restated to reflect the
application of SFAS 130. The implementation of SFAS 130 did not have a material
impact on FBA's consolidated financial statements.
During 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 131 - Disclosures about Segments of an Enterprise and Related
Information (SFAS 131). SFAS 131 establishes standards for the way public
business enterprises report information about operating segments in annual
<PAGE>
financial statements and requires those enterprises report selected information
about operating segments in interim financial reports issued to shareholders.
Additionally, SFAS 131 establishes standards for related disclosures about
products and services, geographic areas, and major customers superseding SFAS
No. 14 - Financial Reporting for Segments of a Business Enterprise. FBA is
currently evaluating information required by SFAS 131 and believes expanded
disclosure information will be required to be included in FBA's consolidated
financial statements for fiscal years beginning after December 15, 1997.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Report on Form 8-K
(a) The exhibits are numbered in accordance with the Exhibit Table of Item
601 of Regulation S-K.
Exhibit
Number Description
10(t) Debenture by and between First Banks America, Inc.
and First Banks, Inc., dated February 2, 1998
11 Calculations of Earnings Per Share
27 Article 9 - Financial Data Schedule (EDGAR only)
(b) A current report on Form 8-K was filed by FBA on February 13, 1998.
Item 2 of the Report describes the acquisition of First Commercial
Bancorp, Inc. by First Banks America, Inc. on February 2, 1998. In
addition, Item 7 of the Report presents financial statements of the
acquired entity and pro forma financial information of the combined
group.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
FIRST BANKS AMERICA, INC.
Registrant
Date: May 8, 1998 By:/s/ James F. Dierberg
---------------------
James F. Dierberg
Chairman, President
and Chief Executive Officer
Date: May 8, 1998 By:/s/ Allen H. Blake
------------------
Allen H. Blake
Vice President,
Chief Financial Officer
and Secretary
(Principal Financial Officer)
<PAGE>
Exhibit 10(t)
FIRST BANKS AMERICA, INC.
a Delaware corporation
DEBENTURE
This is the Sole Debenture of
an Issuance of Debentures Totaling
$6,500,000.00
By First Banks America, Inc. on this Date
Amount of Debenture: $6,500,000.00 February 2, 1998
Due: October 31, 2000
1. Promise to Pay. FIRST BANKS AMERICA, INC., a Delaware corporation
(the "Company"), for value received, promises to pay to FIRST BANKS, INC., a
Missouri corporation, or its successors and assigns (the "Holder"), the sum of
Six Million Five Hundred Thousand Dollars ($6,500,000.00), together with
interest on the principal amount hereof (not compounded) at the rate of interest
of twelve percent (12%) annually. Unless otherwise provided herein, payments on
this Debenture shall be in dollars of the United States of America and payments
shall be made to the address of the Holder specified in Section 13 below.
2. Assumption of Accrued Interest. This Debenture is intended to
replace certain indebtedness of First Commercial Bancorp, Inc., a Delaware
corporation that was merged with and into the Company, to the Holder under that
certain convertible debenture in the principal amount of $1.5 million, dated
October 31, 1995, and that certain convertible debenture in the principal amount
of $5.0 million, dated December 28, 1995 (collectively the "FCB Debentures").
The Company hereby agrees to repay the accrued and unpaid interest under the FCB
Debentures as if such interest had accrued under this Debenture in accordance
with the terms of this Debenture.
3. Payments. The Company shall make payments on this Debenture when, in
the sole and absolute discretion of the Board of Directors of the Company, the
Company has sufficient funds to make such a payment of interest or principal on
this Debenture and can make such a payment in accordance with law and all
applicable regulatory requirements; provided, however, if and to the extent the
Company has not previously paid interest or principal on this Debenture, then
(i) prior to October 31, 2000 ("Maturity"), the Holder of this Debenture shall
have the right to convert unpaid interest or principal at the times and in the
manner described in Section 5, and upon such conversion, that portion of
interest or principal so converted shall be deemed paid in full and (ii) upon
Maturity, the Debenture shall be payable and convert to common stock, $0.15 par
value per share (the "Company Common"), pursuant to the provisions of Section
5(b). Notwithstanding anything to the contrary herein, Company shall give Holder
ten (10) days prior written notice of Company's intention to make any payment to
Holder on the Debenture.
<PAGE>
4. No Security. The obligations of Company hereunder shall not be
secured by any assets of the Company.
5. Conversion Rights.
(a) Right to Convert. At the sole option and discretion of the
Holder of this Debenture, unpaid principal and accrued but unpaid interest may
be converted into shares of Company Common at the Conversion Price set forth in
Subsection (c) below. A Holder desiring to convert shall follow the conversion
procedure set forth in Subsection (d). On the date that the conversion is
effective as provided in Subsection (d) below, all or any portion of the unpaid
principal and interest which has then accrued but remains unpaid, and which
Holder elects to convert, shall be converted into shares of Company Common.
(b) Automatic Conversion. Notwithstanding the provisions of
Section 5(a) above and absent an Event of Default, at Maturity, all unpaid
principal and accrued but unpaid interest shall be automatically converted into
Company Common at the Conversion Price set forth in Subsection (c) below. Once
the automatic conversion has occurred, no further interest shall accrue, and the
Holder shall be deemed to be paid in full.
(c) Conversion Price. The price per share of Company Common at
which the convertible portion of the interest or principal of this Debenture may
be converted (the "Conversion Price") shall be equal to $14.06 per share.
(d) Conversion Procedure. If Holder desires to convert all or
any portion of the unpaid principal or accrued but unpaid interest of this
Debenture, then Holder shall deliver a written notice to the Company stating
that the Holder desires to convert and specifying the amount of unpaid principal
and accrued by unpaid interest that Holder wishes to convert. Promptly after
receipt of such written notice, the Company shall deliver to the Holder of this
Debenture any and all documents which the Company shall require in order to
permit the conversion, including, without limitation, any and all documents
necessary to comply with applicable securities law exemptions or to satisfy any
and all requirements of applicable law and regulations, including any
requirements of any regulatory bodies having jurisdiction over the Company.
Promptly after receipt from Holder by the Company of such documents as the
Company may require to permit conversion, the Company shall send written notice
to the Holder and the Holder shall execute the written notice that the portion
of this Debenture that the Holder requested be converted has in fact been
converted into common stock of the Company at the Conversion Price and
specifying the number of shares of Company Common to which the Holder will be
entitled as a result of such conversion. The conversion shall be deemed to have
taken effect as of the date of such written notice from the Holder to the
Company, and, promptly thereafter, the Company shall cause to be delivered to
the Holder from the Company or its transfer agent, a certificate representing
such shares of Company Common, which shares shall bear a legend substantially in
the form of that set forth in Section 8 of this Debenture (with such changes as
are necessary to reflect that the legend condition affects the shares
represented by that certificate in lieu of the language pertaining to this
Debenture). With respect to an automatic conversion of the Debenture on and as
of October 31, 2000, such conversion shall occur automatically as set forth
herein, except that no notice shall be required.
6. Adjustment for Dividends, Subdivisions, Combinations or
Reclassifications. In case the Company shall: (a) pay a dividend or make a
distribution in shares of its capital stock (whether shares of Company Common
Stock or of capital stock of any other class); (b) subdivide the outstanding
shares of Company Common Stock into a greater number of shares; (c) combine the
outstanding shares of Company Common Stock into a smaller number of shares; or
(d) reclassify shares of Company Common Stock such that additional shares of
capital stock of the Company are issued to holders of Company Common Stock;
then, and in each such case, the per share Conversion Price in effect
immediately prior to such action shall be adjusted so that the Holder of this
Debenture thereafter upon the Conversion hereof shall be entitled to receive the
number of shares of capital stock of the Company which such Holder would have
owned immediately following such action had this Debenture been converted
immediately prior thereto. An adjustment made pursuant to this Section 6 shall
become effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination, or reclassification. If, as a result of
an adjustment made pursuant to this Section 6, the Holder of this Debenture
shall become entitled to receive shares of two or more classes of capital stock
of the Company, the Board of Directors of the Company (whose determination shall
be conclusive) shall determine the allocation of the adjusted Conversion Price
between or among shares of such classes of capital stock.
All calculations under this Section 6 shall be made to the nearest
one-hundredth of a cent or to the nearest one-hundredth of a share, as the case
may be, but in no event shall the Company be obligated to issue fractional
shares upon the conversion of this Debenture.
<PAGE>
7. Reservation. The Company shall, at all times, reserve and keep
available, out of its authorized but unissued shares of Company Common, solely
for the purpose of effecting the conversion of this Debenture, the full number
of shares of Company Common deliverable upon the conversion of all Debentures
from time to time outstanding. The Company shall from time to time in accordance
with Delaware law, increase the authorized number of shares of Company Common if
at any time the authorized number of such shares remaining unissued shall not be
sufficient to permit the conversion of all of the Debentures at the time
outstanding.
8. Restricted Nature of Debenture. The Holder of this Debenture
understands that the Company may require, upon the conversion of this Debenture
into Company Common, that the Holder make certain representations to the Company
to comply with applicable securities law exemptions. The Holder understands that
this Debenture and Company Common into which this Debenture is convertible are
"restricted securities" under the Securities Act of 1933 and this Debenture and
the Company Common into which this Debenture is convertible is and will be
subject to the following legend condition:
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). THE DEBENTURE HAS BEEN ACQUIRED BY THE
HOLDER FOR INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF: (1) AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THAT ACT;
(2) AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED; OR (3) A "NO ACTION LETTER" FROM THE
SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT THAT THE STAFF OF THE
COMMISSION WILL NOT RECOMMEND THAT ANY ACTION BE TAKEN UNDER THE ACT
AGAINST THE COMPANY IF SUCH PROPOSED SALE IS CONSUMMATED WITHOUT
REGISTRATION UNDER THE ACT.
The issuance of the Company Common may be delayed in order for the Company to
obtain any and all necessary regulatory approvals and to comply with federal and
securities laws.
9. Default. Each of the following shall constitute an event of
default ("Events of Default") under this Debenture:
(a) Default or breach by the Company in the due observance or
performance of any of the terms, covenants or agreements set forth in
this Debenture if such default is not remedied by such the Company or
waived by Holder within 30 days following the Company's receipt of
notice thereof.
(b) The Company (i) fails to pay, or admits in writing such
Borrower's inability to pay, such Borrower's debts as they become due,
or otherwise becomes insolvent (however evidenced); (ii) makes an
assignment for the benefit of creditors; (iii) files a petition in
bankruptcy, is adjudicated insolvent or bankrupt, petitions or applies
to any tribunal for any receiver or any trustee of the Company or any
substantial part of the Company's property; (iv) commences any
proceeding relating to the Company under any reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, whether now or hereafter in effect; (v) if
there is commenced against the Company any such proceeding which
remains undismissed for a period of thirty (30) days, or the Company by
any act indicates its consent to, approval of, or acquiescence in any
such proceeding or the appointment of any receiver of or any trustee
for such Borrower or of any substantial part of the Company's property,
or suffers any such receivership or trusteeship to continue
undischarged for a period of 30 days or the Company takes any
partnership or corporate action to authorize any of the foregoing; or
(vi) is placed in receivership by any federal or state agency with
regulatory authority over the Company.
<PAGE>
(c) The Company files a certificate of dissolution under
applicable state law or is liquidated or dissolved or suspends or
terminates the operation of its business, or has commenced against it
any action or proceeding for its liquidation or dissolution or the
winding up of its business, or takes any corporate action in
furtherance thereof.
10. Rights and Remedies in the Event of Default. Upon any Event of
Default, and at any time thereafter, Holder may, at its option, do any one or
more of the following: (a) Declare this Debenture to be immediately due and
payable in cash; or (b) exercise any other rights or remedies available to
holder under this Debenture or otherwise available to Holder at law or in
equity.
11. Modification. The terms of this Debenture may be amended or
modified by the Company with the written consent of the Holder. If the Holder
transfers or assigns all or a portion of this Debenture to a permitted assignee
or transferee, then the Holders, by vote of Holders holding a majority of the
principal amount of this Debenture, may authorize any amendment, modification,
or waiver of compliance by the Company of the provisions or defaults under this
Debenture. Any such consent or waiver by the Holder (or majority in interest of
subsequent Holders) of the Debenture shall be conclusive and binding upon the
Holder (and all other Holders) and upon all future holders of this Debenture.
12. Governing Law and Attorneys' Fees. This Debenture and the rights
and obligations of the parties hereunder are to be governed by and construed and
interpreted in accordance with the laws of the State of Missouri applicable to
contracts made and to be performed wholly within Missouri, without regard to
choice or conflict of laws rules. If either party incurs legal expenses in any
action arising out of this Debenture, then the prevailing party in such action
shall be entitled to recover from the nonprevailing party all reasonably
attorneys' fees, expert witness fees, and other costs, in addition to any other
relief to which such party may be entitled. This Debenture and the agreements
referred to herein constitute the entire agreement among the parties pertaining
the subject matter hereof and fully supersede any and all prior agreements
between the parties hereto respecting the subject matter hereof.
13. Notices. Any notice required to be given to the Holder of this
Debenture shall be deemed given if it is set forth in writing addressed to the
Holder at the Holder's address appearing on the books of the Company. Notices to
the Company shall be in writing and sent to the President, or any Executive Vice
President of the Company in care of the then present principal place of business
of the Company. Such notices shall be deemed effectively delivered: (a) three
business days after deposit in the United States mail, postage prepaid; (b) when
actually received if delivered by personal delivery; or (c) as of two business
days after delivery to Federal Express or some other third-party who will
guarantee delivery by overnight courier addressed to the address of such party
as provided in this Section.
<PAGE>
14. Usury Law Provision. All payments due hereunder are hereby
expressly limited so that in no contingency or event whatsoever shall the amount
paid or agreed to be paid to the Holder of this Debenture for the use,
forbearance, or detention of the money exceed the highest lawful rate
permissible. If, from any circumstance, whatsoever, fulfillment of any of the
provisions of this Debenture, or any other agreement referred to herein, as of
the time performance of such provision shall be due, shall involve a payment
that exceeds the lawful amount permissible under law which a court of competent
jurisdiction may deem applicable, then the obligations to be fulfilled shall be
reduced to the limit of such validity, and if from any circumstance the Holder
of this Debenture shall ever receive as interest an amount which would exceed
the highest lawful rate, such amount which would be excessive interest shall be
applied to the reduction of unpaid principal balance due hereunder, and not to
the payment of interest, or, if such excessive interest exceeds the unpaid
principal balance due hereunder, the excess shall be refunded to the
undersigned.
15. Non-Transferable. Except with the consent of the Company (which
consent shall not be unreasonably withheld) or to an entity controlled by or
under common control with Holder, this Debenture is not transferable by the
Holder hereof.
FIRST BANKS AMERICA, INC.
By /s/James F. Dierberg
--------------------
James F. Dierberg
Chairman of the Board, President,
and Chief Executive Officer
<PAGE>
Exhibit 11
The following is a reconciliation of the numerators and denominators of
the basic and diluted EPS computations for the periods indicated:
<TABLE>
<CAPTION>
Income Shares Per share
(numerator) (denominator) amount
---------- ------------- ------
(dollars expressed in thousands, except per share data)
Quarter ended March 31, 1998:
<S> <C> <C> <C>
Basic EPS - income available to common stockholders.... $ 1,100 4,911 $ 0.22
=======
Effect of dilutive securities-stock options............ -- 13
------- ------
Diluted EPS - income available to common stockholders.. $ 1,100 4,924 $ 0.22
======= ====== =======
Quarter ended March 31, 1997:
Basic EPS - income available to common stockholders.... $ 513 4,082 $ 0.13
=======
Effect of dilutive securities-stock options............ -- 57
------- ------
Diluted EPS - income available to common stockholders.. $ 513 4,139 $ 0.12
======= ====== =======
</TABLE>
The 12% convertible debentures were anti-dilutive for the periods
presented above and therefore, have not been included in the EPS calculations.
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000310979
<NAME> First Banks America, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Mar-31-1998
<CASH> 32,651
<INT-BEARING-DEPOSITS> 2,271
<FED-FUNDS-SOLD> 42,250
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 141,131
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 444,099
<ALLOWANCE> 12,063
<TOTAL-ASSETS> 692,409
<DEPOSITS> 600,557
<SHORT-TERM> 3,453
<LIABILITIES-OTHER> 11,608
<LONG-TERM> 19,950
0
0
<COMMON> 861
<OTHER-SE> 55,980
<TOTAL-LIABILITIES-AND-EQUITY> 692,409
<INTEREST-LOAN> 10,568
<INTEREST-INVEST> 2,033
<INTEREST-OTHER> 395
<INTEREST-TOTAL> 12,996
<INTEREST-DEPOSIT> 5,362
<INTEREST-EXPENSE> 5,899
<INTEREST-INCOME-NET> 7,097
<LOAN-LOSSES> 300
<SECURITIES-GAINS> 92
<EXPENSE-OTHER> 6,057
<INCOME-PRETAX> 1,890
<INCOME-PRE-EXTRAORDINARY> 1,890
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,100
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
<YIELD-ACTUAL> 8.74
<LOANS-NON> 6,003
<LOANS-PAST> 672
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 5,317
<ALLOWANCE-OPEN> 11,407
<CHARGE-OFFS> (1,059)
<RECOVERIES> 530
<ALLOWANCE-CLOSE> 12,063
<ALLOWANCE-DOMESTIC> 12,063
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,915
</TABLE>
