FIRST BANKS AMERICA INC, 10-K, 1999-03-26

FIRST BANKS AMERICA INC
10-K, 1999-03-26
NATIONAL COMMERCIAL BANKS

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHNGTON, D. C. 20549

FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

Commission File Number: 0-8937

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 Number)

135 North Meramec Clayton, Missouri 63105
(Address of principal executive offices)(Zip Code) (314) 854-4600
(Registrant's telephone number, including area code)

Name of each exchange on
Title of class which registered
-------------- ----------------

Securities registered pursuant to Section 12 (b) of the Act:
Common Stock, $.15 Pa New York Stock Exchange

Securities registered pursuant to Section 12 (g) of the Act:

8.50% Cumulative Trust Preferred Securities New York Stock Exchange
issued by First America Capital Trust, a wholly owned trust subsidiary of
First Banks America, Inc.)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X NO _

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates of the
registrant, based on the closing price of the Common Stock on the New York Stock
Exchange on March 18, 1999 was $18,835,196. For purposes of this computation,
officers, directors and 5% beneficial owners of the registrant are deemed to be
affiliates. Such determination should not be deemed an admission that such
directors, officers or 5% beneficial owners are, in fact, affiliates of the
registrant.

As of March 18, 1999, 3,220,830 shares of the registrant's Common Stock, $0.15
par value and 2,500,000 shares of the registrant's Class B Common Stock, $0.15
par value, were outstanding.

Documents incorporated by reference: Portions of the Annual Report to
Stockholders for the year ended December 31, 1998 are incorporated by reference
into Parts I, II and IV of this report.

<PAGE>

PART I

The following portions of the 1998 Annual Report to Stockholders ("1998
Annual Report") of First Banks America, Inc. ("FBA" or the "Company") are
incorporated by reference in this report:

Page(s) in 1998
Section Annual Report
------- -------------

Management's Discussion and Analysis of
Financial Condition and Results of Operations 3-21
Selected Consolidated and Other Financial Data 2
Consolidated Financial Statements 23-47
Supplementary Financial Data 22
Range of Price of Common Stock and Preferred Securities 49

Except for the parts of the 1998 Annual Report expressly incorporated
by reference, such report is not deemed filed with the Securities and Exchange
Commission.

Information appearing in this report, in documents incorporated by
reference herein and in documents subsequently filed with the Securities and
Exchange Commission which are not statements of historical fact may include
forward looking statements. These forward looking statements are subject to
certain 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 the forward looking statements herein include market
conditions as well as conditions specifically affecting the banking industry
generally and factors having a specific impact on FBA including but not limited
to fluctuations in interest rates and in the economy; the impact of laws and
regulations applicable to FBA and changes therein; competitive conditions in the
markets in which FBA conducts its operations, including competition from banking
and non-banking companies with substantially greater resources than FBA, some of
which may offer and develop products and services not offered by FBA; and the
ability of FBA to respond to changes in technology, including effects of the
Year 2000 problem. With regard to FBA's efforts to grow through acquisitions,
factors that could affect the accuracy or completeness of forward looking
statements contained herein include the potential for higher than acceptable
operating costs arising from the geographic dispersion of the offices of FBA, as
compared with competitors operating solely in contiguous markets; the
competition of larger acquirers with greater resources than FBA, fluctuations in
the prices at which acquisition targets may be available for sale and in the
market for FBA's securities; and the potential for difficulty or unanticipated
costs in realizing the benefits of particular acquisition transactions. Readers
should therefore not place undue reliance on forward looking statements.

Item 1. Business

General. FBA is a bank holding company which was organized as a Delaware
corporation in 1978 and was previously known as BancTEXAS Group Inc. The
Company's executive office is located at 135 North Meramec, Clayton, Missouri.
The principal function of the Company is to assist management of its two banking
subsidiaries, First Bank Texas N.A., formerly BankTEXAS N.A., ("FB Texas") and
First Bank of California ("FB California"). FB Texas and FB California are
collectively referred to herein as the "Subsidiary Banks." At December 31, 1998,
FBA had approximately $720.0 million in total assets, $516.4 million in total
loans, net of unearned discount, $599.1 million in total deposits and $65.8
million in total stockholders' equity.

In 1994 FBA sold 2,500,000 shares of Class B common stock ("Class B
Stock") for $30 million cash in a private placement to First Banks, Inc., a
multi-bank holding company headquartered in Clayton, Missouri ("First Banks").
As a result, First Banks became the owner of approximately 65% of the
then-outstanding voting stock of FBA, which includes the Class B Stock and the
class of common stock owned by all other stockholders (referred to herein as the
"Common Stock"). The Class B Stock has the same voting rights per share as the
Common Stock, and the two classes of stock are generally equivalent except the
Class B Stock is not registered with the Securities and Exchange Commission, not
listed on any exchange and, with limited exceptions, it is not transferable,
other than to an affiliate of First Banks. In the event FBA were to commence the
payment of dividends to its stockholders, the Class B Stock would receive

<PAGE>

dividends only to the extent that dividends on the Common Stock exceed $.45 per
share annually. The terms of the Class B Stock allow First Banks to purchase
additional shares of Class B Stock if a sufficient number of additional shares
of Common Stock are issued to cause First Banks' voting power to fall below 55%,
at prices to be determined based on a formula related to the book value per
share of common stock. The Class B Stock is convertible into shares of Common
Stock at any time after August 31, 1999 at the option of First Banks.

On February 2, 1998, FBA completed its acquisition of First Commercial
Bancorp, Inc. ("FCB"), Sacramento, California, as described further in the
Management's Discussion and Analysis section of the 1998 Annual Report and in
Note 2 to the Consolidated Financial Statements, both of which are incorporated
herein by reference. In connection with the acquisition of FCB, FBA issued
approximately 1,555,700 shares of Common Stock, of which 1,266,176 shares were
issued to First Banks. FBA also issued to First Banks a convertible debenture in
the principal amount of $6.5 million ("Debenture") in exchange for outstanding
debentures of FCB. On December 4, 1998, First Banks elected to convert the $6.5
million principal and $2.4 million accrued and unpaid interest of the Debenture
into 629,557 shares of Common Stock. In addition, on February 17, 1999, First
Banks completed its purchase of 314,848 shares of common stock, pursuant to a
tender offer which commenced on January 4, 1999. This tender offer increased
First Banks' ownership interest in FBA to 82.3% of the outstanding voting stock
of FBA.

FBA has in the past issued voting stock as consideration in
transactions involving the acquisition of banks, in which shares of Common Stock
were issued in exchange for the outstanding stock of the bank being acquired.
Other acquisitions, including Redwood Bancorp, which was completed during the
first quarter of 1999, are structured so that the entire purchase price of the
acquired bank is in the form of cash. Since First Banks currently desires to
maintain its ownership interest in FBA at over 80% of the outstanding voting
stock of FBA, FBA's pursuit of acquisitions, or other transactions which include
a significant component of the consideration in the form of voting stock, could
be adversely affected. Because First Banks controls FBA and is in a position to
control whether or not such transactions are authorized, this may decrease the
opportunities for such transactions to FBA.

As of March 18, 1999, the total Common Stock and Class B Stock owned by
First Banks constituted approximately 82.3% of the outstanding voting stock of
FBA. First Banks exercises control over the management and policies of FBA and
the election of its officers and directors.

Descriptions of the business operations of FBA and the Subsidiary Banks
and the Company's policies with respect to potential acquisitions are set forth
in the Management's Discussion and Analysis section of the 1998 Annual Report
which is incorporated herein by reference.

FBA, FB Texas and FB California purchase certain services and supplies,
including data processing services, internal auditing, loan review, income tax
preparation and assistance, accounting, asset/liability and investment services,
loan servicing and other management and administrative services, through its
majority stockholder, First Banks. Additional information regarding the nature
of the arrangements with First Banks appears in Note 15 to the Consolidated
Financial Statements incorporated herein by reference.

Competition and Branch Banking. The activities in which the Subsidiary Banks are
engaged are highly competitive. Those activities and the geographic markets
served primarily involve competition with other banks and thrift institutions,
some of which are affiliated with large regional or national holding companies.
Competition among financial institutions is based upon interest rates offered on
deposit accounts, interest rates charged on loans and other credit and service
charges, the quality of services rendered, the convenience of banking facilities
and, in the case of loans to large commercial borrowers, relative lending
limits.

In addition to competing with other banks and thrift institutions
within their primary service areas, the Subsidiary Banks also compete with other
financial intermediaries, such as credit unions, industrial loan associations,
securities firms, insurance companies, small loan companies, finance companies,
mortgage companies, real estate investment trusts, certain governmental
agencies, credit organizations and other enterprises. Additional competition for
depositors' funds comes from United States Government securities, private
issuers of debt obligations and suppliers of other investment alternatives for
depositors. Many of the Company's non-bank competitors are not subject to the
same extensive federal regulations that govern bank holding companies and
federally-insured banks and state regulations governing state-chartered banks.
As a result, such non-bank competitors may have certain advantages over the
Company in providing some services.
<PAGE>

The trend in the Subsidiary Banks' markets has been for holding
companies to acquire independent banks and thrifts. The Company believes it will
continue to face competition in the acquisition of banks and thrifts from larger
holding companies. Many of the financial institutions with which the Company
competes are larger than the Company and have substantially greater resources
available for making acquisitions.

Subject to regulatory approval, commercial banks and thrift
institutions situated in Texas and California are permitted to establish
branches throughout each of those states, thereby creating the potential for
additional competition in the Subsidiary Banks' service areas.

Supervision and Regulation

General. The Company and the Subsidiary Banks are extensively regulated under
federal and state law. These laws and regulations are intended to protect
depositors, not stockholders. To the extent the following information describes
statutory or regulatory provisions, it is qualified in its entirety by reference
to the particular statutory and regulatory provisions. Changes in applicable
laws or regulations may have a material effect on the business and prospects of
the Company. The operations of the Company may be affected by legislative
changes and by the policies of various regulatory authorities. The Company is
unable to predict the nature or the extent of the effects on its business and
earnings that fiscal or monetary policies, economic controls or new federal or
state legislation may have in the future. The enactment of the legislation
described below has significantly affected the banking industry generally and
will have an ongoing effect on the Company and the Subsidiary Banks in the
future.

FBA is a registered bank holding company under the Bank Holding Company
Act of 1956, as amended ("BHC Act") and, as such, is subject to regulation,
supervision and examination by the Board of Governors of the Federal Reserve
System ("FRB"). FBA is required to file annual reports with the FRB and to
provide the FRB such additional information as it may require.

FB Texas and FB California are subject to supervision and regulation by
the Office of the Comptroller of the Currency ("OCC") and the Department of
Financial Institutions of the State of California, respectively. The Subsidiary
Banks are also regulated by the Federal Deposit Insurance Corporation ("FDIC"),
which provides deposit insurance to the Subsidiary Banks.

Financial Institutions Reform, Recovery and Enforcement Act of 1989. The
Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA")
reorganized and reformed the regulatory structure applicable to financial
institutions generally. Among other things, FIRREA enhanced the supervisory and
enforcement powers for the federal bank regulatory agencies; required insured
financial institutions to guarantee repayment of losses incurred by the FDIC in
connection with the failure of an affiliated financial institution; required
financial institutions to provide their primary federal regulator with notice,
under certain circumstances, of changes in senior management and broadened
authority for bank holding companies to acquire savings institutions.

Under FIRREA, federal bank regulators were granted expanded enforcement
authority over "institution-affiliated parties" (i.e., officers, directors,
controlling stockholders, attorneys, appraisers and accountants who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on an
insured institution). Federal banking regulators have power to bring enforcement
actions against insured institutions and institution-affiliated parties,
including cease and desist orders, prohibition orders, civil money penalties,
termination of insurance and the imposition of operating restrictions and
capital plan requirements. In general, these enforcement actions may be
initiated for violations of laws and regulations and unsafe or unsound
practices. Since the enactment of FIRREA, the federal bank regulators have
significantly increased the use of written agreements to correct compliance
deficiencies with respect to applicable laws and regulations and to ensure safe
and sound practices. Violations of such written agreements are grounds for
initiation of cease-and-desist proceedings. FIRREA granted the FDIC back-up
enforcement authority to recommend enforcement action to an appropriate federal
banking agency and to bring such enforcement action against a financial
institution or an institution-affiliated party if such federal banking agency
fails to follow the FDIC's recommendation. In addition, FIRREA generally
requires public disclosure of final enforcement actions by the federal banking
agencies.
<PAGE>

FIRREA also established a cross-guarantee provision ("Cross-Guarantee")
pursuant to which the FDIC may recover from a depository institution losses the
FDIC incurs in providing assistance to, or paying off the depositors of, any of
such depository institution's affiliated insured banks or thrifts. The
Cross-Guarantee thus enables the FDIC to assess a holding company's healthy Bank
Insurance Fund ("BIF") members and Savings Association Insurance Fund ("SAIF")
members for the losses of any of such holding company's failed BIF and SAIF
members. Cross-Guarantee liabilities are generally superior in priority to
obligations of the depository institution to its stockholders due solely to
their status as stockholders and obligations to other affiliates.
Cross-Guarantee liabilities are generally subordinated to deposit liabilities,
secured obligations or any other general or senior liabilities, and any
obligations subordinated to depositors or other general creditors.

The Federal Deposit Insurance Corporation Improvement Act of 1991. The Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") was adopted to
recapitalize the BIF and impose certain supervisory and regulatory reforms on
insured depository institutions. FDICIA includes provisions, among others, to:
(i) increase the FDIC's line of credit with the U. S. Treasury in order to
provide the FDIC with additional funds to cover the losses of federally insured
banks; (ii) reform the deposit insurance system, including the implementation of
risk-based deposit insurance premiums; (iii) establish a format for closer
monitoring of financial institutions to enable prompt corrective action by
banking regulators when a financial institution begins to experience financial
difficulty; (iv) establish five capital levels for financial institutions ("well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" and "critically undercapitalized") that would impose more
scrutiny and restrictions on less capitalized institutions; (v) require the
banking regulators to set operational and managerial standards for all insured
depository institutions and holding companies, including limits on excessive
compensation to executive officers, directors, employees and principal
stockholders, and establish standards for loans secured by real estate; (vi)
adopt certain accounting reforms and require annual on-site examinations of
federally insured institutions, including the ability to require independent
audits of banks and thrifts; (vii) revise risk-based capital standards to ensure
they (a) take adequate account of interest-rate changes, concentration of credit
risk and the risks of nontraditional activities, and (b) reflect the actual
performance and expected risk of loss of multi-family mortgages; and (viii)
restrict state-chartered banks from engaging in activities not permitted for
national banks unless they are adequately capitalized and have FDIC approval.
Further, FDICIA permits the FDIC to make special assessments on insured
depository institutions, in amounts determined by the FDIC to be necessary to
give it adequate assessment income to repay amounts borrowed from the U.S.
Treasury and other sources or for any other purpose the FDIC deems necessary.
FDICIA also grants authority to the FDIC to establish semiannual assessment
rates on BIF and SAIF member banks so as to maintain these funds at the
designated reserve ratios.

As noted above, FDICIA authorizes and, under certain circumstances,
requires the federal banking agencies to take certain actions against
institutions that fail to meet certain capital-based requirements. Under FDICIA,
the federal banking agencies are required to establish five levels of insured
depository institutions based on leverage limit and risk-based capital
requirements established for institutions subject to their jurisdiction, plus,
in their discretion, individual additional capital requirements for such
institutions. Under the final rules that have been adopted by each of the
federal banking agencies, an institution will be designated: (i) well
capitalized if the institution has a total risk-based capital ratio of 10% or
greater, a Tier I risk-based capital ratio of 6% or greater and a leverage ratio
of 5% or greater, and the institution is not subject to an order, written
agreement capital directive or prompt corrective action directive to meet and
maintain a specific capital level for any capital measure; (ii) adequately
capitalized if the institution has a total risk-based capital ratio of 8% or
greater, a Tier I risk-based capital ratio of 4% or greater and a leverage ratio
of 4% or greater; (iii) undercapitalized if the institution has a total
risk-based capital ratio that is less than 8% a Tier 1 risk-based capital ratio
that is less than 4% or a leverage ratio that is less than 4%; (iv)
significantly undercapitalized if the institution has a total risk-based capital
ratio that is less than 6%, a Tier I risk-based capital ratio that is less than
3% or a leverage ratio that is less than 3%; and (v) critically undercapitalized
if the institution has a ratio of tangible equity to total assets that is equal
to or less than 2%.

Undercapitalized, significantly undercapitalized and critically
undercapitalized institutions are required to submit capital restoration plans
to the appropriate federal banking agency and are subject to certain operational
restrictions. Moreover, companies controlling an undercapitalized institution
are required to guarantee the subsidiary institution's compliance with the
capital restoration plan subject to an aggregate limitation of the lesser of 5%
of the institution's assets at the time it received notice that it was
undercapitalized or the amount of the capital deficiency when the institution
first failed to meet the plan.
<PAGE>

Significantly or critically undercapitalized institutions and
undercapitalized institutions that fail to submit or comply with acceptable
capital restoration plans will be subject to regulatory sanctions. A forced sale
of shares or merger, restriction on affiliate transactions and restrictions on
rates paid on deposits are required to be imposed by the banking agency unless
it is determined they would not further capital improvement. FDICIA generally
requires the appointment of a conservator or receiver within 90 days after an
institution becomes critically undercapitalized. The federal banking agencies
have adopted uniform procedures for the issuance of directives by the
appropriate federal banking agency. Under these procedures, an institution will
generally be provided advance notice when the appropriate federal banking agency
proposes to impose one or more of the sanctions set forth above. These
procedures provide an opportunity for the institution to respond to the proposed
agency action or where circumstances warrant immediate agency action, an
opportunity for administrative review of the agency's action.

As described in Note 16 to the Consolidated Financial Statements,
incorporated herein by reference, each of the Subsidiary Banks was "well
capitalized" as of December 31, 1998.

Pursuant to FDICIA, the federal banking agencies adopted real estate
lending guidelines pursuant to which each insured depository institution is
required to adopt and maintain written real estate lending policies in
conformity with the prescribed guidelines. Under these guidelines, each
institution is expected to set loan-to-value ratios not exceeding the
supervisory limits set forth in the guidelines. A loan-to-value ratio is
generally defined as the total loan amount divided by the appraised value of the
property at the time the loan is originated. The guidelines require the
institution's real estate policy also require proper loan documentation, and
that it establish prudent underwriting standards.

FDICIA also contained the Truth in Savings Act, which requires clear
and uniform disclosure of the rates and interest payable on deposit accounts by
depository institutions and the fees assessable against deposit accounts, so
that consumers can make a meaningful comparison between the competing claims of
financial institutions with regard to deposit accounts and products.

Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. In 1994
Congress enacted the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 ("Interstate Act"). Beginning in 1995, bank holding companies have had
the right to expand, by acquiring existing banks, into all states, even those
which had theretofore restricted entry. The legislation also provides that,
subject to future action by individual states, a holding company would have the
right commencing in 1997, to convert the banks which it owns in different states
to branches of a single bank. The Interstate Act also establishes limits on
acquisitions by large banking organizations, providing that no acquisition may
be undertaken if it would result in the organization having deposits exceeding
either 10% of all bank deposits in the United States or 30% of the bank deposits
in the state in which the acquisition would occur.

Economic Growth and Regulatory Paperwork Reduction Act of 1996. The Economic
Growth and Regulatory Paperwork Reduction Act of 1996 ("EGRPRA") streamlined the
non-banking activities application process for well-capitalized and well-managed
bank holding companies. Under EGRPRA, qualified bank holding companies may
commence a regulatory approved non-banking acquisition or share purchase,
assuming the size of the acquisition does not exceed 10% of risk-weighted assets
of the acquiring bank holding company and the consideration does not exceed 15%
of Tier I capital. The foregoing prior notice requirement also applies to
commencing non-banking activity de novo which has been previously approved by
order of the FRB. EGRPRA also provides for the re-capitalization of the SAIF in
order to bring it into parity with the BIF of the FDIC.

Pending Legislation. Because of concerns relating to competitiveness and the
safety and soundness of the banking industry, Congress is considering a number
of wide-ranging proposals for altering the structure, regulation and competitive
relationships of the nation's financial institutions. Among such bills are
proposals to merge the BIF and the SAIF insurance funds, to eliminate the
federal thrift charter, to alter the statutory separation of commercial and
investment banking and to further expand the powers of banks, bank holding
companies and competitors of banks. It cannot be predicted whether or in what
form any of these proposals will be adopted or the extent to which the business
of the Company may be affected thereby.

<PAGE>

Bank and Bank Holding Company Regulation

BHC Act. Under the BHC Act, the activities of a bank holding company are limited
to businesses so closely related to banking, managing or controlling banks as to
be a proper incident thereto. The Company is also subject to capital
requirements applied on a consolidated basis in a form substantially similar to
those required of the Subsidiary Banks. The BHC Act also requires a bank holding
company to obtain approval from the FRB before: (i) acquiring, directly or
indirectly, ownership or control of any voting shares of another bank or bank
holding company if, after such acquisition, it would own or control more than 5%
of such shares (unless it already owns or controls the majority of such shares);
(ii) acquiring all or substantially all of the assets of another bank or bank
holding company; or (iii) merging or consolidating with another bank holding
company. The FRB will not approve any acquisition, merger or consolidation that
would have a substantially anti-competitive result, unless the anti-competitive
effects of the proposed transaction are clearly outweighed by a greater public
interest in meeting the convenience and needs of the community to be served. The
FRB also considers capital adequacy and other financial and managerial factors
in reviewing acquisitions or mergers.

The BHC Act also prohibits a bank holding company, with certain limited
exceptions: (i) from acquiring or retaining direct or indirect ownership or
control of more than 5% of the voting shares of any company which is not a bank
or bank holding company; or (ii) from engaging directly or indirectly in
activities other than those of banking, managing or controlling banks, or
providing services for its subsidiaries. The principal exceptions to these
prohibitions involve certain non-bank activities which, by statute or by FRB
regulation or order, have been identified as activities closely related to the
business of banking or of managing or controlling banks. In making this
determination, the FRB considers whether the performance of such activities by a
bank holding company can be expected to produce benefits to the public such as
greater convenience, increased competition or gains in efficiency in resources,
which can be expected to outweigh the risks of possible adverse effects such as
decreased or unfair competition, conflicts of interest or unsound banking
practices. FIRREA, which is described in more detail above, made a significant
addition to this list of permitted non-bank activities for bank holding
companies by providing that bank holding companies may acquire thrift
institutions upon approval by the FRB and the applicable regulatory authority
for the thrift institutions.

Insurance of Accounts. The FDIC provides insurance to deposit accounts at the
Subsidiary Banks to a maximum of $100,000 for each insured depositor. Through
December 31, 1992, all FDIC-insured institutions, whether members of the BIF or
the SAIF, paid the same premium (23 cents per $100 of domestic deposits) under a
flat-rate system mandated by law. FDICIA required the FDIC to raise the reserves
of the BIF and the SAIF, implement a risk-related premium system and adopt a
long-term schedule for recapitalizing the SAIF. Effective in 1993, the FDIC
amended its regulations regarding insurance premiums to provide that a bank or
thrift would pay an insurance assessment within a range of 23 cents to 31 cents
per $100 of domestic deposits, depending on its risk classification.

The FDIC adopted an amendment to the BIF risk-based assessment
schedule, effective January 1, 1996, which effectively eliminated deposit
insurance assessments for most commercial banks and other depository
institutions with deposits insured by the BIF, while maintaining the assessment
rate for SAIF-insured institutions in even the lowest risk-based premium
category at 23 cents for each $100 of assessable deposits. Following the
enactment of EGRPRA and as part of the re-capitalization of the SAIF, the
overall assessment rate beginning in 1997 was revised to equal 1.29 cents and
6.44 cents per $100 of assessable deposits of BIF and SAIF members,
respectively. At December 31, 1998, the overall assessment rate was 1.16 cents
and 5.82 cents per $100 of assessable deposits of BIF and SAIF members,
respectively. The deposits of FB Texas consist solely of BIF deposits, and the
deposits of FB California include both BIF and SAIF deposits.

Regulations Governing Capital Adequacy. The federal bank regulatory agencies use
capital adequacy guidelines in their examination and regulation of bank holding
companies and banks. If capital falls below the minimum levels established by
these guidelines, the bank holding company or bank may be denied approval to
acquire or establish additional banks or non-bank businesses or to open
facilities.

The FRB, the FDIC and the OCC adopted risk-based capital guidelines for
banks and bank holding companies, and the OTS adopted similar guidelines for
thrifts. The risk-based capital guidelines are designed to make regulatory
capital requirements more sensitive to differences in risk profiles among
financial institutions and holding companies, to account for off-balance-sheet

<PAGE>

exposure and to minimize disincentives for holding liquid assets. Assets and
off-balance-sheet items are assigned to broad risk categories, each with
appropriate weights. The resulting capital ratios represent capital as a
percentage of total risk-weighted assets and off-balance-sheet items. The FRB
has noted that bank holding companies contemplating significant expansion
programs should not allow expansion to diminish their capital ratios and should
maintain ratios well in excess of the minimums. Under these guidelines, all bank
holding companies and federally regulated banks must maintain a minimum
risk-based total capital ratio equal to 8%, of which at least 4% must be Tier I
capital.

The FRB also has implemented a leverage ratio, which is Tier I capital
to total assets, to be used as a supplement to the risk-based guidelines. The
principal objective of the leverage ratio is to place a constraint on the
maximum degree to which a bank holding company may leverage its equity capital
base. The FRB requires a minimum leverage ratio of 3%. For all but the most
highly-rated bank holding companies and for bank holding companies seeking to
expand, however, the FRB expects that additional capital sufficient to increase
the ratio by at least 100 to 200 basis points will be maintained.

Management of the Company believes the risk-weighting of assets and the
risk-based capital guidelines do not have a material adverse impact on the
Company's operations or on the operations of the Subsidiary Banks. The
requirement of deducting certain intangibles in computing capital ratios
contained in the guidelines, however, could adversely affect the ability of the
Company to make acquisitions in the future in transactions that would be
accounted for using the purchase method of accounting.

Community Reinvestment Act. The Community Reinvestment Act of 1977 ("CRA")
requires that, in connection with examinations of financial institutions within
their jurisdiction, the federal banking regulators must evaluate the record of
the financial institutions in meeting the credit needs of their local
communities, including low and moderate income neighborhoods, consistent with
the safe and sound operation of those banks. These factors are also considered
in evaluating mergers, acquisitions and applications to open a branch or
facility.

Regulations Governing Extensions of Credit. The Subsidiary Banks are subject to
certain restrictions imposed by the Federal Reserve Act on extensions of credit
to FBA or its subsidiaries and affiliates, or investments in their securities
and on the use of their securities as collateral for loans to any borrowers.
These regulations and restrictions may limit the Company's ability to obtain
funds from the Subsidiary Banks for its cash needs, including funds for
acquisitions and for payment of dividends, interest and operating expenses.
Further, under the BHC Act and certain regulations of the FRB, a bank holding
company and its subsidiaries are prohibited from engaging in certain tying
arrangements in connection with any extension of credit, lease or sale of
property or furnishing of services. For example, the Subsidiary Banks may
generally not require a customer to obtain other services from the Subsidiary
Banks or any other affiliated bank or the Company and may not require the
customer to promise not to obtain other services from a competitor, as a
condition to an extension of credit to the customer.

The Subsidiary Banks are also subject to certain restrictions imposed
by the Federal Reserve Act on extensions of credit to executive officers,
directors, principal stockholders or any related interest of such persons.
Extensions of credit (i) must be made on substantially the same terms, including
interest rates and collateral as, and following credit underwriting procedures
that are not less stringent than, those prevailing at the time for comparable
transactions with persons not covered and who are not employees; and (ii) must
not involve more than the normal risk of repayment or present other unfavorable
features. The Subsidiary Banks are also subject to certain lending limits and
restrictions on overdrafts to such persons.

Reserve Requirements. The FRB requires all depository institutions to maintain
reserves against their transaction accounts and non-personal time deposits.
Reserves of 3% must be maintained against total transaction accounts of $49.3
million or less (subject to adjustment by the FRB) and an initial reserve of
$1,479,000 plus 10% (subject to adjustment by the FRB to a level between 8% and
14%) must be maintained against that portion of total transaction accounts in
excess of such amount. The balances maintained to meet the reserve requirements
imposed by the FRB may be used to satisfy liquidity requirements.

Institutions are authorized to borrow from the Federal Reserve Bank
"discount window," but FRB regulations require institutions to exhaust other
reasonable alternative sources of funds, including advances from Federal Home
Loan Banks ("FHLBs"), before borrowing from the Federal Reserve Bank.
<PAGE>

Federal Home Loan Bank System. The Subsidiary Banks are members of the Federal
Home Loan Bank System ("FHLB System"), which consists of twelve regional FBLBs,
each subject to supervision and regulation by the Federal Housing Finance Board,
an independent agency created by FIRREA. The FHLBs provide a central credit
facility primarily for member institutions. The Subsidiary Banks are required to
acquire and hold shares of capital stock in an FHLB in an amount at least equal
to 1% of the aggregate principal amount of their respective unpaid residential
mortgage loans and similar obligations at the beginning of each year, or 1/20th
of advances (borrowings) from the FHLB, whichever is greater. The Subsidiary
Banks were in compliance with these regulations at December 31, 1998, with
investments of $883,000 in stock of the FHLB of Dallas held by FB Texas and $1.3
million in stock of the FHLB of San Francisco held by FB California.

Restrictions on Thrift Acquisitions. FBA is prohibited from acquiring, without
prior approval of the Director of the OTS, (i) control of any savings
institution or savings and loan holding company or substantially all the assets
thereof, or (ii) more than 5% of the voting shares of a savings institution or
holding company which is not a subsidiary. Furthermore, such an acquisition
would require FBA itself to become registered as a savings and loan holding
company subject to all applicable regulations of the OTS.

Dividends. The Company's primary source of funds in the future is the dividends,
if any, paid by the Subsidiary Banks. The ability of the Subsidiary Banks to pay
dividends is limited by federal laws, by the regulations promulgated by the bank
regulatory agencies and by principles of prudent bank management. In addition,
the amount of dividends the Subsidiary Banks may pay to the Company is limited
by the provisions of First Banks' credit agreement with a group of unaffiliated
lenders, which imposes certain minimum capital requirements. Additional
information concerning limitations on the ability of the Subsidiary Banks to pay
dividends appears in Note 14 to the Consolidated Financial Statements and is
incorporated herein by reference.

Monetary Policy and Economic Control The commercial banking business is affected
not only by general economic conditions, but also by the monetary policies of
the FRB. Changes in the discount rate on member bank borrowing, availability of
borrowing at the "discount window," open market operations, the imposition of
changes in reserve requirements against member bank deposits and assets of
foreign branches, and the imposition of and changes in reserve requirements
against certain borrowings by banks and their affiliates are some of the
instruments of monetary policy available to the FRB. These monetary policies are
used in varying combinations to influence overall growth and distributions of
bank loans, investments and deposits, and this use may affect interest rates
charged on loans or paid on deposits. The monetary policies of the FRB have had
a significant effect on the operating results of commercial banks and are
expected to do so in the future. The monetary policies of the FRB are influenced
by various factors, including inflation, unemployment, short-term and long-term
changes in the international trade balance and in the fiscal policies of the
U.S. Government. Future monetary policies and the effect of such policies on the
future business and earnings of the Company or the Subsidiary Banks cannot be
predicted.

Employment

As of March 18, 1998, the Company employed 218 persons, none of whom
were covered by a collective bargaining agreement. The Company considers its
employee relations to be good.

Item 2. Properties

FBA's executive office is located at the executive office owned by
First Banks at 135 N. Meramec, Clayton, Missouri. The headquarters of the
Subsidiary Banks are (i) in the case of FB Texas, in a building owned by FB
Texas located at 8828 Westheimer, Houston, Texas; and (ii) in the case of FB
California, in a building owned by FB California located at 1625 Douglas
Boulevard, Roseville, California. In addition to those offices, as of March 18,
1998, the Subsidiary Banks do business at 14 branch offices in Texas and
California, of which 4 are owned and 10 are leased.

FBA considers the properties at which it does business to be in good
condition, suitable for the business conducted at each location. To the extent
that its properties or those acquired in connection with the acquisition of
other entities provide space in excess of that effectively utilized in the
operations of the Subsidiary Banks, FBA seeks to lease or sub-lease any excess

<PAGE>

space to third parties. Additional information regarding the premises and
equipment utilized by the Subsidiary Banks appears in Note 5 to the Consolidated
Financial Statements incorporated herein by reference.

Item 3. Legal Proceedings

There are various claims and pending actions against FBA and the
Subsidiary Banks in the ordinary course of business. It is the opinion of
management of FBA, in consultation with legal counsel, the ultimate liability,
if any, resulting from such claims and pending actions will have no material
adverse effect on the financial position or results of operations of FBA.

Item 4. Submission of Matters to a Vote of Security Holders

None

<PAGE>

PART II

Item 5. Market for Registrant's Common Stock and Related Stockholder Matters

Market Information. FBA has two classes of common stock. The Common Stock is
listed on the New York Stock Exchange ("NYSE") under the symbol "FBA." All of
the Class B Stock was issued to First Banks in 1994 in a private placement, and
is not listed or traded. See "Item 1, Business - General." Continued listing of
the Common Stock on the NYSE is subject to various requirements, including the
financial eligibility and distribution requirements of the NYSE.

Information regarding the number of stockholders and the market prices
for Common Stock since January 1, 1998 is set forth under the caption "Investor
Information" of the 1998 Annual Report and is incorporated herein by reference.

Dividends. The company has not paid any dividends on its common stock in recent
years. The ability of a bank holding company such as fba to pay dividends is
limited by regulatory requirements and by the receipt of dividend payments from
the subsidiary banks, which are also subject to regulatory requirements; see
note 14 to the consolidated financial statements.

Item 6. Selected Financial Data

The information required by this item is incorporated herein by
reference from page 2 of the 1998 Annual Report under the caption "Selected
Consolidated and Other Financial Data."

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

The information required by this item is incorporated herein by
reference from pages 3 through 21 of the 1998 Annual Report under the caption
"Management's Discussion and Analysis."

Item 7a. Quantitative and Qualitative Disclosure About Market Risk

The information required by this item is incorporated herein by
reference from the 1998 Annual Report under the caption "Management's Discussion
and Analysis - Interest Rate Risk Management."

Item 8. Financial Statements and Supplementary Data

The consolidated financial statements of FBA are incorporated herein by
reference from pages 23 through 47 of the 1998 Annual Report under the captions
"Consolidated Balance Sheets," "Consolidated Statements of Income,"
"Consolidated Statements of Changes in Stockholders' Equity and Comprehensive
Income," "Consolidated Statements of Cash Flows," "Notes to Consolidated
Financial Statements" and "Independent Auditors' Report."

Supplementary Financial Information regarding FBA is incorporated
herein by reference from page 22 of the 1998 Annual Report.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.

<PAGE>

PART III

Item 10. Directors and Executive Officers of the Registrant

Board of Directors
<TABLE>
<CAPTION>

The Board of Directors consisting of seven members, are identified in
the following table. Each of the directors was elected or appointed to serve a
one-year term and until his/her successor has been duly qualified for office.

Director Principal Occupation During Last Five Years
Name Age since and Directorships of Public Companies

<S> <C> <C> <C>
Allen H. Blake 56 1994 Executive Vice President and Chief Operating and Financial Officer
of FBA since October 1998; Vice President, Chief Financial Officer
and Secretary of FBA since 1994; Director and Executive Vice
President of FCB from 1995 until its merger into FBA in February
1998; Executive Vice President and Chief Financial Officer of First
Banks since 1996; Chief Operating Officer of First Banks since
October 1998; Senior Vice President and Chief Financial Officer
from 1992 to 1996; Secretary and Director of First Banks since
1988; Trustee of First America Capital Trust and First Preferred
Capital Trust since July 1998 and February 1997, respectively.

Charles A. Crocco, Jr. (1) 60 1988 Counsel to the law firm of Jackson & Nash, LLP. New York City,
1999; Partner in the law firm of Crocco & De Maio, P.C., New York
City 1970-99; Director of The Hallwood Group Incorporated (merchant
banking).

James F. Dierberg 61 1994 Chairman of the Board of Directors, Chief Executive Officer and
President of FBA since 1995; Chairman of the Board and Chief
Executive Officer of First Banks since 1988; Director of First
Banks since 1979; President of First Banks, 1979-1992 and
1994-present; Trustee of First America Capital Trust and First
Preferred Capital Trust since July 1998 and February 1997,
respectively.

Albert M. Lavezzo (1) 62 1998 President and Chief Operating Officer of Favaro, Lavezzo, Gill,
Caretti & Heppell, Vallejo, California, a professional legal
corporation.

Ellen D. Schepman (2) 24 1999 Retail Banking Officer, First Bank & Trust, a wholly-owned
subsidiary of First Banks.
</TABLE>

<S> <C> <C> <C> <C>
Edward T. Story, Jr. (1) 55 1987 President, Chief Executive Officer and Director of SOCO
International, plc, a corporation listed on the London Stock
Exchange, engaged in international oil and gas operations, since
1991; from 1990 until 1991, Chairman of Thaiatex Petroleum Company;
from 1981 to 1990, Vice Chairman and Chief Financial Officer of
Conquest Exploration Company; Director of Cairn Energy plc,
Hallwood Realty Corporation, Snyder Oil Corporation and Sen Hong
Resources, Ltd.

Donald W. Williams 51 1995 Executive Vice President and Chief Credit Officer of First Banks
since 1996; Senior Vice President and Chief Credit Officer of First
Banks from 1993 until 1996; Director of FCB from 1995 until its
merger into FBA in February 1998.
</TABLE>

- ----------------------------------
(1) Member of the Audit Committee.
(2) Ms. Schepman is the daughter of Mr. James F Dierberg. See Item 12
Security Ownership of Certain Beneficial Owners and Management.

Executive Officers

The executive officers of the Company as of March 18, 1999 were as
follows:

NAME AGE FBA OFFICE(S) HELD
- --------------------------------------------------------------------------------

James F. Dierberg 61 Chairman of the Board, President and Chief
Executive Officer.

Allen H. Blake 56 Executive Vice President, Chief Operating
and Financial Officer and Secretary.

David F. Weaver 51 Executive Vice President of FBA since 1995;
Chairman of the Board, Chief Executive
Officer and President of FB Texas since
1994; President of BankTEXAS Houston N.A.
(predecessor of FB Texas)from 1988 to 1994.

The executive officers were each elected by the Board of Directors to
the office indicated. Except for the relationship of Ms. Schepman and Mr.
Dierberg described above, there are no family relationships between any of the
nominees for director, directors or executive officers of the Company or its
subsidiaries.

Item 11. Executive Compensation

The following table sets forth certain information regarding
compensation earned during the year ended December 31, 1998, and specified
information with respect to the two preceding years, by Mr. Weaver, who is the
only executive officer of FBA whose annual compensation in 1998 from FBA or the
Subsidiary Banks exceeded $100,000.

Neither Mr. Dierberg nor Mr. Blake receives any compensation directly
from either the Company or the Subsidiary Banks. The Company and the Subsidiary
Banks have entered into various contracts with First Banks, of which Messrs.
Dierberg and Blake are directors and executive officers, pursuant to which
services are provided to the Company and the Subsidiary Banks (see "Compensation
Committee Interlocks and Insider Participation" for additional information
regarding contracts with First Banks).

SUMMARY COMPENSATION TABLE FOR YEAR ENDED DECEMBER 31,1998

Name and Principal Position Year Salary (1) Bonus All Other Compensation (2)
--------------------------- ---- ---------- ----- --------------------------

<S> <C> <C> <C> <C>
David F. Weaver, Executive Vice 1998 $116,200 $20,000 $3,400
President; Chairman of the Board, 1997 103,750 22,000 3,144
President and Chief Executive Officer 1996 86,875 20,625 2,172
of First Bank Texas N.A.
</TABLE>

- ----------------
(1) The total of all other annual compensation for the named officer is
less than the amount required to be reported which is the lesser of (a)
$50,000 or (b) ten percent (10%) of the total of the annual salary and
bonus paid to that person.
(2) All items reported are FBA's matching contributions to the 401(k) Plan
for the year indicated.

FBA has omitted from this report tables which would disclose information
regarding stock options granted during 1998, stock options exercised during 1998
and long term incentive plan awards. No options were granted to or exercised by
executive officers in 1998, and FBA does not have a long term incentive plan.

Director Compensation. Directors who are not officers of FBA or affiliated with
First Banks ("Unaffiliated Directors," consisting in 1998 of Messrs. Crocco,
Story and Lavezzo) were paid a fee of $2,000 for each meeting of the Board of
Directors attended and a fee of $500 for each committee meeting attended. For
their service as directors in 1998, Messrs. Crocco, Story and Lavezzo received
$11,000, $11,000 and $10,000, respectively. In addition, Mr. Lavezzo received
$6,000 as a member of the Board of Directors of FB California.
Unaffiliated Directors also participate in the 1993 Directors' Stock
Bonus Plan ("Stock Bonus Plan"), which provides for an annual grant of 500
shares of Common Stock to each such director. Future grants would apply equally
to current directors and to any individual who becomes a director of FBA in the
future. The maximum number of shares that may be issued will not exceed 16,667
shares, and the plan will expire on July 1, 2001. Directors' compensation
expense of $27,000 was incurred in 1998 in connection with the Stock Bonus Plan.

None of the three directors of FBA who are also executive officers of
First Banks (Messrs. Dierberg, Blake, and Williams) receive any compensation
from FBA or the Subsidiary Banks for service as a director, nor do they
participate in the Stock Bonus Plan or any other compensation plan of FBA or the
Subsidiary Banks. First Banks, of which Messrs. Dierberg, Blake and Williams are
executive officers and Messrs. Dierberg and Blake are directors, provides
various services to FBA and the Subsidiary Banks for which it is compensated
(see "Compensation Committee Interlocks and Insider Participation").

Compensation Committee Interlocks and Insider Participation. Messrs. Dierberg
and Blake, who are executive officers of FBA but do not receive any compensation
for their services as such, are also members of the Board of Directors and
executive officers of First Banks. First Banks does not have a separate
Compensation Committee, but its Board of Directors performs the functions of
such a committee. Except for the foregoing, no executive officer of FBA served
during 1998 in such capacity.

FBA purchases certain services and supplies from or through 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.

Because of the affiliation with First Banks and the geographic
proximity of certain of their offices, FBA shares the cost of certain personnel
and services used by FBA and First Banks. This includes the salaries and
benefits of certain loan and administrative personnel. The allocation of the
shared costs are charged and/or credited under the terms of cost sharing
agreements entered into during 1996. 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 these
agreements were $1.1 million, $709,000 and $412,000 for the years ended December
31, 1998, 1997 and 1996, respectively.

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.
Previously, these services were provided by a subsidiary of First Banks. Fees
paid under these agreements were $1.9 million, $1.0 million and $692,000 for the
years ended December 31, 1998, 1997 and 1996, respectively. The fees paid for
data processing services are at least as favorable as could have been obtained
from an unaffiliated third party.

First Brokerage America, L.L.C. (First Brokerage) a limited liability
company, whose members are the trusts of the childern of First Banks' Chairman,
provides back-office and product support for FBA's brokerage and insurance
operations. During 1998, FBA and First Brokerage received commissions of
approximately $70,000 and $30,000, respectively, from unaffiliated third-party
companies from the sale of these products to customers of FBA.

FBA's Subsidiary Banks had $86.2 million and $66.9 million in whole
loans and loan participations outstanding at December 31, 1998 and 1997,
respectively, that were purchased from banks affiliated with First Banks. In
addition, FBA's Subsidiary Banks had sold $182.9 million and $54.7 million in
whole loans and loan participations to affiliates of First Banks at December 31,
1998 and 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 FBA's Subsidiary Banks.

As more fully discussed in Note 6 to the Consolidated Financial
Statements of the 1998 Annual Report, as of December 31, 1997, FBA had
borrowings of $14.9 million from First Banks under a $20 million Note Payable.
There were no amounts outstanding under the Note Payable at December 31, 1998.

As more fully discussed in Notes 2 and 7 to the Consolidated Financial
Statements of the 1998 Annual Report, in 1995, First Banks purchased $6.5
million of 12% convertible debentures of FCB. These debentures, which were
exchanged for a similar debenture of FBA in February 1998, were converted into
629,557 shares of FBA common stock on December 4, 1998.

Employee Benefit Plans. FBA maintains various employee benefit plans. Directors
are not eligible to participate in such plans except the 1993 Directors' Stock
Bonus Plan unless they are also employees of FBA or one of its subsidiaries.
Although Messrs. Blake and Dierberg are executive officers, they are not
participants in any employee benefit plans of FBA.

The Employees Retirement Plan ("Pension Plan") is a noncontributory,
defined benefit plan for all eligible officers and employees of FBA and its
subsidiaries. During 1994, the Company discontinued the accumulation of benefits
under the Pension Plan. While the Pension Plan continues in existence and
provides benefits which had then accumulated, no additional benefits have
accrued to participants since 1994, and no new participants will become eligible
for benefits thereafter.

Benefits under the Pension Plan are based upon annual base salaries and
years of service as of 1994 and are payable only upon retirement or disability
and, in some instances, at death. A participant who fulfilled the eligibility
and tenure requirements prior to the discontinuation of accumulation of benefits
will receive, upon reaching the normal retirement age of 65, monthly benefits
based upon average monthly compensation during the five consecutive calendar
years out of his or her last ten calendar years prior to 1994 that provided the
highest average compensation.

As of December 31, 1998, Mr. Weaver would be eligible to receive annual
benefits of approximately $11,000 upon retirement at age 65.

<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth, as of March 18, 1999, certain
information with respect to the beneficial ownership of Common Stock and Class B
Stock by each person known to the Company to be the beneficial owner of more
than five percent of the outstanding shares of either class of stock, by each
director and executive officer and by all executive officers and directors as a
group:
<TABLE>
<CAPTION>

Title of Name of Beneficial Number of Shares and Nature of Percent of
Class Owner Beneficial Ownership Class
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C><C><C> <C>
Class B Stock First Banks, Inc. 2,500,000 (1)(2)(3) 100.0
135 N. Meramec
Clayton, Missouri 63105
Class B Stock James F. Dierberg 2,500,000 (1)(2)(3) 100.0
Common Stock First Banks, Inc. 2,210,581 (1)(2)(3) 68.6
Common Stock James F. Dierberg 2,210,581 (1)(2)(3) 68.6
Common Stock Ellen D. Schepman -0-(2)(3) -
Common Stock Allen H. Blake -0- -
Common Stock Charles A.Crocco, Jr. 6,772 (4) *
Common Stock Albert M. Lavezzo 9,210 (4) *
Common Stock Edward T. Story, Jr. 9,682 (5) *
Common Stock David F. Weaver 2,974 (4) *
Common Stock Donald W. Williams 100 (4) *

All executive officers 2,239,319 shares 69.5% of
and directors as a Common Stock Common Stock
group (8 persons)

2,500,000 shares 100% of Class
Class B Stock B Stock
</TABLE>

- -------------
*Less than one percent

(1) The shares shown as beneficially owned by First Banks and James F.
Dierberg comprise 100% of the outstanding shares of Class B Stock and
68.6% of the outstanding shares of Common Stock. Each share of Common
Stock and Class B Stock is entitled to one vote on matters subject to
stockholder vote. All of the shares of Class B Stock and Common Stock
owned by First Banks are pledged to secure a loan to First Banks from a
group of unaffiliated lenders. The related credit agreement contains
customary provisions which could ultimately result in transfer of such
shares if First Banks were to default in the repayment of the loan and
such default were not cured, or other arrangements satisfactory of the
lenders were not made, by First Banks.

(2) The controlling stockholders of First Banks are (i) the James F. Dierberg,
II Family Trust, dated December 30, 1992; (ii) Mary W. Dierberg and
Michael James Dierberg, trustees under the living trust of Michael James
Dierberg, dated July 24, 1989; (iii) the Ellen C. Dierberg Family Trust,
dated December 30, 1992; (iv) James F. Dierberg, trustee of the James F.
Dierberg living trust, dated October 8, 1985; (v) the Michael J. Dierberg
Family Trust, dated December 30, 1992; and (vi) First Trust (Mary W.
Dierberg and First Bank, Trustees) established U/I James F. Dierberg,
dated December 12, 1992. Mr. James F. Dierberg and Mrs. Mary W. Dierberg
are husband and wife, and Messrs. James F. Dierberg, II, Michael James
Dierberg and Ms. Ellen D. Schepman are their adult children.

(3) Due to the relationships among James F. Dierberg, Mary W. Dierberg, First
Bank and the three adult children of James F. and Mary W. Dierberg, Mr.
Dierberg is deemed to share voting and investment power over all of the
outstanding voting stock of First Banks which in turn exercises voting and
investment power over the shares of Common Stock and Class B Stock
attributed to it in the table.

(4) All of the shares attributed in the table to Messrs. Crocco, Weaver,
Lavezzo and Williams are owned by them directly.

(5) The shares attributed to Mr. Story include shares subject to currently
exercisable stock options granted under FBA's 1990 Stock Option Plan. Mr.
Story has an option covering 6,666 shares; he owns directly 3,016 shares.

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Subsidiary Banks have had in the past, and may have in the future,
loan transactions in the ordinary course of business with directors of FBA or
their affiliates. These loan transactions have been and will be on the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with unaffiliated persons and did not and will not
involve more than the normal risk of collectibility or present other unfavorable
features. The Subsidiary Banks do not extend credit to officers of FBA or of the
Subsidiary Banks, except extensions of credit secured by mortgages on personal
residences, loans to purchase automobiles and personal credit card accounts.

Certain of the directors and officers of FBA and their respective
affiliates have deposit accounts with the Subsidiary Banks. It is the policy of
the Subsidiary Banks not to permit any officers or directors of the Subsidiary
Banks or their affiliates to overdraw their respective deposit accounts unless
that person has been previously approved for overdraft protection under a plan
whereby a credit limit has been established in accordance with the standard
credit criteria of the Subsidiary Banks.

<PAGE>

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) 1. Financial Statements and Supplementary Data: The financial
statements and supplemental data filed as part of this Report are
listed under Item 8.

2. Financial Statement Schedules: These schedules are omitted for the
reason they are not required or are not applicable.

3. Exhibits:The exhibits are listed in the index of exhibits required
by Item 601 of Regulation S-K at Item (c) below and are
incorporated herein by reference.

(b) Reports on Form 8-K.

FBA filed a Current Report on Form 8-K (Report) on September 3, 1998.
The Report included the Agreement and Plan of Reorganization for the
previously announced acquisition of Redwood Bancorp.

<PAGE>

SIGNATURES

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

First Banks America, Inc.

By:/s/James F. Dierberg
-----------------------
James F. Dierberg
Chairman of the Board,
President and Chief Executive Officer
March 26, 1999

By: /s/Allen H. Blake
---------------------
Allen H. Blake
Chief Financial Officer and Principal
Accounting Officer
March 26, 1999

Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the date indicated.

Signatures Title Date
- --------------------------------------------------------------------------------
/s/ James F. Dierberg Director March 26, 1999
--------------------------
James F. Dierberg

/s/ Allen H. Blake Director March 26, 1999
--------------------------
Allen H. Blake

/s/ Charles A. Crocco, Jr. Director March 26, 1999
--------------------------
Charles A. Crocco, Jr.

/s/ Albert M. Lavezzo Director March 26, 1999
--------------------------
Albert M. Lavezzo

/s/ Edward T. Story, Jr. Director March 26, 1999
--------------------------
Edward T. Story, Jr.

/s/ Ellen D. Schepman Director March 26, 1999
--------------------------
Ellen D. Schepman

/s/ Donald W. Williams Director March 26, 1999
--------------------------
Donald W. Williams

<PAGE>

INDEX TO EXHIBITS

EXHIBIT NUMBER DESCRIPTION
- --------------------------------------------------------------------------------
3(a) Restated Certificate of Incorporation of the Company
effective August 31, 1995 (filed as Exhibit 3(a) to
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995 and incorporated herein by reference).

3(b) Amended and Restated Bylaws of the Company (as amended
April 21, 1995) (filed as Exhibit 3(b) to Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995
and incorporated herein by reference).

4(a) Specimen Stock Certificate for Common Stock (filed as
Exhibit 1.01 to the Company's Amendment No. I to Form 8-A
on Form 8, dated September 4, 1987, and incorporated
herein by reference).

4(b) The Company agrees to furnish to the Securities and
Exchange Commission upon request pursuant to Item
601(b)(4)(iii) of Regulation S-K, copies of instruments
defining the rights of holders of long term debt of the
Company and its subsidiaries.

4(c) Agreement As To Expenses and Liabilities (incorporated
herein by reference to Exhibit 4(a) to the Company's
Registration Statement on Form S-2, file number
333-58355, dated July 1, 1998).

4(d) Preferred Securities Guarantee Agreement (incorporated
herein by reference to Exhibit 4(b) to the Company's
Registration Statement on Form S-2, file number
333-58355, dated July 1, 1998).

4(e) Indenture (incorporated herein by reference to Exhibit
4(c) to the Company's Registration Statement on Form S-2,
file number 333-58355, dated July 1, 1998).

4(f) Amended and Restated Trust Agreement (incorporated herein
by reference to Exhibit 4(d) to the Company's
Registration Statement on Form S-2, file number
333-58355, dated July 1, 1998).

10(a)* BancTEXAS Group Inc. 1990 Stock Option Plan (as amended
July 22, 1993) (filed as Exhibit 10(c) to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1993, and incorporated herein by reference).

10(b)* 1993 Directors' Stock Bonus Plan (filed as Exhibit 10(k)
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993 and incorporated herein by
reference).

10(c) Stock Purchase and Operating Agreement by and between
First Banks, Inc., a Missouri Corporation and the
Company, dated May 19, 1994 (filed as Exhibit 10(d) to
the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994 and incorporated herein by
reference).

10(d)* Management Agreement by and between First Banks, Inc. and
BankTEXAS N.A., dated November 17, 1994 (filed as Exhibit
10(h) to the Annual Report on Form 10-K for the year
ended December 31, 1994 and incorporated herein by
reference).

10(e)* Data Processing Agreement by and between First Serv, Inc.
(a subsidiary of First Banks, Inc.) and BankTEXAS N.A.,
dated December 1, 1994 (filed as Exhibit 10(i) to the
Annual Report on Form 10-K for the year ended December
31, 1994 and incorporated herein by reference).
<PAGE>

10(f)* Financial Management Policy by and between First Banks,
Inc. and the Company, dated September 15, 1994 (filed as
Exhibit 10(m) to the Annual Report on Form 10-K for the
year ended December 31, 1994 and incorporated herein by
reference).

10(g)* Federal Funds Agency Agreement by and between First
Banks, Inc. and the Company, dated September 15, 1994
(filed as Exhibit 10(k) to the Annual Report on Form 10-K
for the year ended December 31, 1994 and incorporated
herein by reference).

10(h)* Funds Management Policy by and between First Banks, Inc.
and BankTEXAS, N.A., dated September 15, 1994 (filed as
Exhibit 10(i) to the Annual Report on Form 10-K for the
year ended December 31, 1994 and incorporated herein by
reference).

10(i)* Management Services Agreement by and between First Banks,
Inc. and Sunrise Bank of California dated December 16,
1996 (filed as Exhibit 10(j) to the Annual Report on Form
10-K for the year ended December 31, 1996 and
incorporated herein by reference).

10(j)* Service Agreement by and between First Serv, Inc. and
Sunrise Bank of California (relating to data processing
services) dated November 21, 1996 (filed as Exhibit 10(k)
to the Annual Report on Form 10-K for the year ended
December 31, 1996 and incorporated herein by reference).

10(k)* Federal Funds Agency Agreement by and between First
Banks, Inc. and Sunrise Bank of California dated November
19, 1996 (filed as Exhibit 10(l) to the Annual Report on
Form 10-K for the year ended December 31, 1996 and
incorporated herein by reference).

10(l)* Funds Management Policy by and between First Banks, Inc.
and Sunrise Bank of California dated November 19, 1996
(filed as Exhibit 10(m) to the Annual Report on Form 10-K
for the year ended December 31, 1996 and incorporated
herein by reference).

10(m) Agreement and Plan of Reorganization dated July 28, 1997,
by and between FBA and Surety Bank (filed as Exhibit 2 to
the Current Report on Form 8-K dated August 7, 1997 and
incorporated herein by reference).

10(n) Agreement and Plan of Merger by and between FBA and
Pacific Bay Bank dated September 22, 1997 (filed as
Exhibit 2(b) to the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997 and incorporated herein
by reference).

10(o) Agreement and Plan of Merger by and between FBA and FCB
dated October 3, 1997 (filed as Exhibit 2(c) to the
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 and incorporated herein by reference).

10(p) Promissory note payable to First Banks, Inc. dated
November 4, 1997 (filed as Exhibit 10(o) to the Quarterly
Report on Form 10-Q for the quarter ended September 30,
1997 and incorporated herein by reference).

10(q)* Cost sharing agreement by and among First Bank & Trust,
Sunrise Bank of California, Sundowner Corporation and
First Banks America, Inc. (filed as Exhibit 10(q) to the
Annual Report on Form 10-K for the year ended December
31, 1997 and incorporated herein by reference).

10(r)* Service Agreement by and between First Services, L.P. and
BankTEXAS N.A., dated April 1, 1997 (filed as Exhibit
10(r) to the Annual Report on Form 10-K for the year
ended December 31, 1997 and incorporated herein by
reference).
<PAGE>

10(s)* Service Agreement by and between First Services, L.P. and
First Bank of California, dated April 1, 1997 (filed as
Exhibit 10(s) to the Annual Report on Form 10-K for the
year ended December 31, 1997 and incorporated herein by
reference).

10(t) Agreement and Plan of Reorganization by and among FBA,
Empire Holdings, Inc., and Redwood Bancorp, dated
September 3, 1998 (filed as Exhibit 2 to the Report on
Form 8-K, dated September 21, 1998 and incorporated
herein by reference).

10(v) Brokerage Service / Lease Agreement by and between
BankTEXAS, N.A. and First Brokerage America, L.L.C.,
dated June 1, 1998 (incorporated herein by reference to
the Company's Registration Statement on Form S-2, file
number 333-58355, dated July 1, 1998).

13 1998 Annual Report to Stockholders filed herewith.
Portions not specifically incorporated by reference in
this Report are not deemed "filed" for the purposes of
the Securities Exchange Act of 1934 - filed herewith.

21 Subsidiaries of the Company - filed herewith.

23(a) Consent of KPMG LLP - filed herewith.

27 Financial Data Schedule (Edgar only).
- ------------------
* Exhibits designated by an asterisk in this Index to Exhibits relate to
management contracts and/or compensatory plans or arrangements.

<PAGE>

EXHIBIT 13

FIRST BANKS AMERICA, INC.

1998 ANNUAL REPORT

<PAGE>

FIRST BANKS AMERICA, INC.

TABLE OF CONTENTS

Page
----

LETTER TO SHAREHOLDERS.................................................. 1

SELECTED CONSOLIDATED AND OTHER FINANCIAL DATA.......................... 2

MANAGEMENT'S DISCUSSION AND ANALYSIS.................................... 3

QUARTERLY CONDENSED FINANCIAL DATA - UNAUDITED.......................... 22

INDEPENDENT AUDITORS' REPORT............................................ 23

FINANCIAL STATEMENTS:

CONSOLIDATED BALANCE SHEETS............................................. 24

CONSOLIDATED STATEMENTS OF INCOME....................................... 26

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME............................................... 27

CONSOLIDATED STATEMENTS OF CASH FLOWS................................... 28

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.............................. 29

DIRECTORS AND SENIOR MANAGEMENT......................................... 48

INVESTOR INFORMATION.................................................... 49

<PAGE>

- --------------------------------------------------------------------------------
To Our Shareholders, Customers and Friends:

We are pleased to report to you that First Banks America has
completed another year of increased net income, increased earnings per
share and expansion of our franchise. With the consummation of the
acquisitions of First Commercial Bancorp and Pacific Bay Bank, the
Company increased its northern California franchise to $410 million in
total assets and ten full service banking locations within the San
Francisco - Sacramento corridor. This, combined with $301 million in
total assets and six full service banking locations in Houston, Dallas,
Irving and McKinney, Texas, has increased the Company's total assets to
$720 million at the end of 1998, from $297 million at the end of 1995, as
originally reported.

First Banks America has also completed its acquisition of Redwood
Bancorp and its wholly owned subsidiary, Redwood Bank, on March 4, 1999.
Redwood Bank will add a new dimension to the Company's northern
California presence through its main office in downtown San Francisco and
its three offices in the surrounding Bay area of San Rafael, Napa and San
Mateo. Redwood Bancorp had total assets of $179 million at December 31,
1998 and reported consolidated net income of $1.9 million for the year.
We are pleased with Redwood Bancorp's decision to join our organization,
and welcome its management, staff and customers. First Banks America is
committed to support Redwood Bancorp in continuing to provide the highest
quality service to its customers and its community.

To provide First Banks America with the long-term financing and
the capital base needed for the acquisition of Redwood Bancorp, as well
as other acquisitions, in July 1998, it sold $46 million of preferred
securities in a public offering. The proceeds of this issue were used to
repay debt previously incurred in its acquisitions, and for temporary
investment until needed for the Redwood Bancorp or other acquisitions.

The Company's success in achieving its progressive and profitable
growth, which remains our primary strategic objective, is predicated on
the continual development of our current and prospective sources of
revenue. The primary sources of revenue consist of net interest income,
generated by the spread between the interest and fees earned on the loan
and investment security portfolios and the interest cost of deposits and
other liabilities, and noninterest income, generated primarily from the
deposit base. The Company has been successful in increasing its net
interest margin to 5.03% of average interest earning assets for 1998,
compared to a net interest margin, as originally reported, of 3.90% of
average interest earning assets for 1995. Revenues from the retail and
commercial deposit base increased to $2.93 million for 1998, from $1.46
million for 1995, as originally reported. Cognizant of the importance to
further develop our sources of revenue, the Company has introduced or
expanded its presence in offering cash management, brokerage, trust and
private banking services.

The extension of these new product and service offerings is in
direct response to the needs of the customers and marketplaces. While
First Banks America will not be the "end-all" for everyone, we do strive
to be the "end-all" for the customers we serve, at a steady pace of one
customer at a time. Accordingly, our key competitive advantage, as an
ongoing community bank, is to provide our customers with sophisticated
products and services that are delivered on a personalized basis.

In closing, I would like to take this opportunity to welcome our
new preferred securities shareholders and to extend our sincerest
appreciation for the dedication of our employees, the loyalty of our
customers and the continued support of our shareholders.

Sincerely,

James F. Dierberg
Chairman of the Board, President
and Chief Executive Officer

- --------------------------------------------------------------------------------
<PAGE>

FIRST BANKS AMERICA, INC.

Selected Consolidated and Other Financial Data(1)

The selected consolidated financial data set forth below, insofar as it relates
to the five years ended December 31, 1998, is derived from the audited
consolidated financial statements of First Banks America, Inc. and subsidiaries
(FBA or the Company). Such data is qualified by reference to the consolidated
financial statements of FBA included herein and should be read in conjunction
with such consolidated financial statements and related notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>

Year ended December 31,(1)
--------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(dollars expressed in thousands, except per share data)

Income statement data:
<S> <C> <C> <C> <C> <C>
Interest income.......................................... $ 54,427 42,517 33,382 26,556 22,649
Interest expense......................................... 23,228 19,155 15,533 13,134 11,072
----------- -------- -------- -------- ---------
Net interest income...................................... 31,199 23,362 17,849 13,422 11,577
Provision for possible loan losses....................... 900 2,000 2,405 6,416 1,258
----------- -------- -------- -------- ---------
Net interest income after provision for possible
loan losses............................................ 30,299 21,362 15,444 7,006 10,319
Noninterest income....................................... 4,375 3,287 3,585 129 (4,511)
Noninterest expense...................................... 26,472 17,677 17,737 14,148 16,174
----------- -------- -------- -------- ---------
Income (loss) before provision (benefit) for
income taxes and minority interest in (income)
loss of subsidiary..................................... 8,202 6,972 1,292 (7,013) (10,366)
Provision (benefit) for income tax expense............... 3,592 3,145 470 (2,188) (9,461)
----------- -------- -------- -------- ---------
Net income (loss) before minority interest in
(income) loss of subsidiary............................ 4,610 3,827 822 (4,825) (905)
Minority interest in (income) loss of subsidiary......... -- (294) (131) 11 --
----------- -------- -------- -------- ---------
Net income (loss)........................................ $ 4,610 3,533 691 (4,814) (905)
=========== ======== ======== ======== =========
Dividends:
Common stock............................................. $ -- -- -- -- --
Ratio of total dividends declared to net income.......... --% --% --% --% --%
Per share data:
Earnings (loss) per share:
Basic.................................................. $ 0.90 0.87 0.16 (1.19) (0.41)
Diluted................................................ 0.90 0.86 0.16 (1.19) (0.41)
Weighted average common stock outstanding
(in thousands)......................................... 5,140 4,069 4,225 4,032 2,181
Balance sheet data (at year end):
Investment securities.................................... $ 116,963 148,181 125,139 113,586 61,400
Loans, net of unearned discount.......................... 516,403 431,455 336,371 266,588 203,314
Total assets............................................. 719,997 643,664 529,087 468,486 331,790
Total deposits........................................... 599,147 556,527 455,942 405,427 241,570
Promissory note payable ................................. -- 14,900 14,000 1,054 1,054
Guaranteed preferred beneficial interest in First
Banks America, Inc. subordinated debentures............ 44,155 -- -- -- --
Stockholders' equity..................................... 65,845 45,091 38,195 40,965 39,714
Earnings ratios:
Return on average total assets........................... 0.67% 0.65% 0.15% (1.28)% (0.25)%
Return on average stockholders' equity................... 8.10 8.90 1.71 (12.06) (3.66)
Asset quality ratios:
Allowance for possible loan losses to loans.............. 2.35 2.64 3.19 3.98 1.36
Nonperforming loans to loans (2)......................... 1.67 0.66 0.88 1.90 0.14
Allowance for possible loan losses to
nonperforming loans (2)................................. 140.49 400.81 363.10 209.18 940.61
Nonperforming assets to loans and other real estate (3) 1.70 0.80 1.17 2.78 0.90
Net loan charge-offs to average loans.................... 0.23 0.40 1.69 1.45 0.62
Capital ratios:
Average stockholders' equity to average
total assets........................................... 8.25 7.34 8.86 10.64 6.80
Total risk-based capital ratio........................... 16.66 6.88 6.62 9.64 17.50
Leverage ratio........................................... 10.25 4.96 4.46 5.98 11.97
</TABLE>
- -----------------------------
(1) The comparability of the selected data presented is affected by FBA's
acquisitions of Pacific Bay Bank, Surety Bank and Sunrise Bank of California on
February 2, 1998, December 1, 1997 and November 1, 1996, respectively. These
acquisitions were accounted for as purchases and accordingly, the selected data
includes the financial position and results of operations of each acquired
entity only for the periods subsequent to its date of acquisition. In addition,
on February 2, 1998, FBA completed its acquisition of First Commercial Bancorp,
Inc. and its subsidiary, First Commercial Bank. As discussed in Note 2 to the
consolidated financial statements, the selected data has been restated to
reflect First Banks, Inc.'s interest in First Commercial Bancorp, Inc. for the
periods subsequent to August 23, 1995, the date on which First Banks acquired
its initial interest in First Commercial Bancorp, Inc.
(2) Nonperforming loans consist of nonaccrual loans and certain loans with
restructured terms.
(3) Nonperforming assets consist of nonperforming loans and
other real estate.
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS

The discussion set forth in the Letter to Shareholders and Management's
Discussion and Analysis of Financial Condition and Results of Operations
contains certain forward looking statements with respect to the financial
condition, results of operations and business of FBA. These forward looking
statements are subject to certain 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 the forward looking statements herein
include market conditions as well as conditions specifically affecting the
banking industry generally and factors having a specific impact on FBA including
but not limited to fluctuations in interest rates and in the economy; the impact
of laws and regulations applicable to FBA and changes therein; competitive
conditions in the markets in which FBA conducts its operations, including
competition from banking and non-banking companies with substantially greater
resources than FBA, some of which may offer and develop products and services
not offered by FBA; and the ability of FBA to respond to changes in technology,
including effects of the Year 2000 problem. With regard to FBA's efforts to grow
through acquisitions, factors that could affect the accuracy or completeness of
forward-looking statements contained herein include the potential for higher
than acceptable operating costs arising from the geographic dispersion of the
offices of FBA, as compared with competitors operating solely in contiguous
markets; the competition of larger acquirers with greater resources than FBA,
fluctuations in the prices at which acquisition targets may be available for
sale and in the market for FBA's securities; and the potential for difficulty or
unanticipated costs in realizing the benefits of particular acquisition
transactions. Readers of the Annual Report should therefore not place undue
reliance on forward-looking statements.

Company Profile

FBA is a registered bank holding company incorporated in Delaware and
headquartered in St. Louis County, Missouri. At December 31, 1998, FBA had
$720.0 million in total assets, $516.4 million in total loans, net of unearned
discount, $599.1 million in total deposits and $65.8 million in total
stockholders' equity. FBA operates through two wholly owned bank subsidiaries,
First Bank Texas N.A. (formerly, BankTEXAS N.A.), headquartered in Houston,
Texas (FB Texas), and First Bank of California (FB California), headquartered in
Roseville, California (Subsidiary Banks).
Through the Subsidiary Banks' ten banking locations in the San Francisco -
Sacramento corridor of northern California, and six banking locations in
Houston, Dallas, Irving and McKinney, Texas, FBA offers a broad range of
commercial and personal banking services, including certificates of deposit,
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 financial, commercial and residential
real estate, real estate construction and development and consumer loans. Other
financial services include automatic teller machines, telephone account access,
cash management services, credit related insurance and safe deposit boxes.
FBA centralizes overall corporate policies, procedural and administrative
functions, and operational support functions for the Subsidiary Banks. Primary
responsibility for managing the Subsidiary Banks remains with the officers and
directors.
The following table recaps selected data about the Subsidiary Banks at
December 31, 1998:

Loans, net of
Number of Total unearned Total
locations assets discount deposits
--------- ------ -------- --------
(dollars expressed in thousands)

FB California........... 10 $ 410,110 314,977 363,422
FB Texas................ 6 300,984 201,426 264,425

As discussed under "--Acquisitions" and in Note 2 to the consolidated
financial statements, FBA completed its acquisition of Redwood Bancorp, and its
wholly owned subsidiary, Redwood Bank, San Francisco, California on March 4,
1999.
FBA is majority owned by First Banks, Inc., St. Louis, Missouri (First
Banks). As discussed under "--Capital," First Banks owned 2,500,000 shares of
the Class B common stock and 1,895,733 shares of the common stock, which
represented 76.84% of the outstanding voting stock of FBA at December 31, 1998.
Accordingly, First Banks has effective control over the management and policies
of FBA and the election of its directors. In addition, on February 17, 1999,
First Banks completed its purchase of 314,848 shares of common stock, pursuant
to a tender offer which commenced on January 4, 1999. This tender offer
increased First Banks' ownership interest in FBA to 82.3% of the outstanding
voting stock of FBA.
<PAGE>

General

FBA believes in order for a financial institution to prosper in the
current environment of rapid restructuring and consolidation in the banking
industry, and intense competition both within the industry and from non-banking
entities, it must achieve a size sufficient to enable it to take advantage of
many of the efficiencies available to its much larger competitors. FBA further
believes failure to achieve this growth would place FBA at a competitive
disadvantage relative to those larger competitors with respect to its costs of
operation which, over time, will be an increasingly difficult obstacle to
overcome. FBA projects internal growth alone will not be sufficient to advance
FBA to the size which is necessary within an acceptable time frame and,
accordingly, views a combination of internal growth and acquisitions as the
means by which FBA will achieve its growth objectives.
Although FBA originally viewed Texas, particularly the Dallas and
Houston areas, as its primary acquisition area, during 1995 and 1996, prices for
acquisitions escalated sharply in those areas. Acquisitions at the prices
required to successfully consummate these transactions would have caused
substantial diminution in the economic benefits which FBA envisioned would be
available in its acquisition program. This diminution in benefits resulted in
FBA's evaluation of California for acquisition candidates, where acquisition
pricing was considerably more favorable, and subsequently led to FBA's
acquisition of Sunrise Bank of California, Roseville, California (Sunrise Bank)
in November 1996 and Surety Bank, Vallejo, California in December 1997, as well
as the acquisitions of First Commercial Bancorp, Inc., Sacramento, California,
(FCB), the holding company parent of First Commercial Bank (First Commercial),
and Pacific Bay Bank, San Pablo, California (Pacific Bay Bank) in February 1998.
While this acquisition strategy was in process, FBA was also building the
infrastructure necessary to accomplish its objectives for internal growth. This
included significantly expanding the commercial and financial, commercial real
estate and real estate construction business development staff, enhancing the
retail service delivery organization and systems, improving overall asset
quality and changing the composition of the loan portfolio. Prior to 1995, FBA's
lending strategy had been focused on consumer lending, particularly indirect
automobile lending. As of June 30, 1995, consumer loans, net of unearned
discount, constituted 80.1% of FBA's loan portfolio, while commercial and
financial, commercial real estate and real estate construction loans constituted
17.4% of the portfolio. However, in 1995, FBA began experiencing substantial
asset quality problems within the indirect automobile loan portfolio, resulting
in provisions for loan losses of $5.83 million in 1995 and $1.25 million in
1996. Furthermore, indirect automobile lending is an extremely competitive
market in which the interest yields available to lenders are substantially less
than other types of lending and not sufficient to compensate lenders for losses
of that magnitude. Consequently, with the expansion of its business development
staff, FBA began building its portfolio of commercial and financial, commercial
real estate and real estate construction loans while allowing its portfolio of
indirect automobile loans to decrease. By December 31, 1998, commercial and
financial, commercial real estate and real estate construction loans had
increased to 77.1% of the portfolio, while consumer loans, net of unearned
discount, had decreased to 11.5% of the loan portfolio,
Although significant expenses were incurred by FBA in the amalgamation
of newly acquired entities into its corporate culture and systems, and in the
expansion of its organizational capabilities, the earnings of the acquired
entities and the improved net interest income resulting from the transition in
the composition of the loan portfolio have contributed to improving net income
during 1998 and 1997. For the years ended December 31, 1998 and 1997, net income
was $4.61 million and $3.53 million, respectively, compared with $691,000 in
1996 and a net loss of $4.81 million in 1995.

Acquisitions

In enhancing its banking franchise, FBA places emphasis upon acquiring
other financial institutions as a means of accelerating its growth to
significantly expand its presence in a given market, to increase the extent of
its market area or to enter new or noncontiguous market areas. After an
acquisition is consummated, FBA expects to enhance the franchise of the acquired
entity by supplementing the marketing and business development efforts to
broaden the customer bases, strengthening particular segments of the business or
filling voids in the overall market coverage. In addition, the acquisition
program enables FBA to further leverage the operational support services
available to it through First Banks and its affiliates and to provide the
products and services typically available only through such a larger
organization. FBA will utilize cash, borrowings and the issuance of additional
securities to meet its growth objectives under the acquisition program.
<PAGE>

FBA has in the past issued voting stock as consideration in
transactions involving the acquisition of banks, in which shares of common stock
were issued in exchange for the outstanding stock of the bank being acquired.
Other acquisitions, including Redwood Bancorp, which was completed during the
first quarter of 1999, are structured so that the entire purchase price of the
acquired bank is in the form of cash. Since First Banks currently desires to
maintain its ownership interest in FBA at over 80% of the outstanding voting
stock of FBA, FBA's pursuit of acquisitions, or other transactions which include
a significant component of the consideration in the form of voting stock, could
be adversely effected. Because First Banks controls FBA and is in a position to
control whether or not such transactions are authorized, this may decrease the
opportunities for such transactions to FBA.
On November 1, 1996, FBA completed its acquisition of Sunrise Bank for
$17.5 million in cash. At the time of the transaction, Sunrise Bank had $110.8
million in total assets, $17.7 million in investment securities, $61.1 million
in total loans, net of unearned discount, and $91.1 million in deposits. Sunrise
Bank conducted its business through two banking locations in Roseville and
Rancho Cordova, California. Sunrise Bank was merged into FB California.
On December 1, 1997, FBA completed its acquisition of Surety Bank for
$3.8 million in cash and 264,622 shares of FBA common stock. At the time of the
transaction, Surety Bank had $72.8 million in total assets, $11.8 million in
investment securities, $54.4 million in total loans, net of unearned discount,
and $67.5 million in deposits. Surety Bank conducted its banking business
through two banking locations in Vallejo and Fairfield, California. On December
1, 1997, Surety Bank was merged into FB California.
On February 2, 1998, FBA completed two acquisitions, FCB and its wholly
owned subsidiary, First Commercial, and Pacific Bay Bank. FCB, which was then a
majority-owned subsidiary of First Banks, operated through First Commercial,
which had six banking locations located in Sacramento, Roseville (2), Concord,
Campbell and San Francisco, California. At the time of the acquisition, FCB had
$192.5 million in total assets, $64.4 million in investment securities, $118.9
million in total loans, net of unearned discount, and $173.1 million in
deposits. Consideration paid for FCB consisted of approximately 752,000 shares
of FBA common stock. Additionally, $6.5 million in convertible debentures of FCB
owned by First Banks were exchanged for a $6.5 million convertible debenture of
FBA. Pacific Bay Bank had one banking location in San Pablo, California and one
loan production office in Lafayette, California. At the time of the acquisition,
Pacific Bay Bank had $38.3 million in total assets, $7.4 million in cash and
cash equivalents with other financial institutions, $29.7 million in total
loans, net of unearned discount, and $35.2 million in deposits. Consideration
paid for Pacific Bay Bank consisted of $4.2 million in cash. Both First
Commercial and Pacific Bay Bank were merged into FB California.
FBA completed its acquisition of Redwood Bancorp and its wholly-owned
subsidiary, Redwood Bank, on March 4, 1999, for cash consideration of $26.0
million. Redwood Bank is headquartered in San Francisco, California and operates
four banking locations in the San Francisco Bay area. Redwood Bancorp had $183.9
million in total assets, $134.4 million in loans, net of unearned discount,
$34.4 million in investment securities and $162.9 million in deposits at the
acquisition date. The acquisition was funded from available proceeds from the
issuance of the 8.50% Guaranteed Preferred Beneficial Interest in the First
Banks America, Inc. Subordinated Debenture (Preferred Securities) in July 1998.
See "Financial Condition and Average Balances."

Restatement of Financial Information

In connection with FBA's acquisition of FCB and its wholly owned
subsidiary, First Commercial, as of February 2, 1998, FBA's financial
information for the period from August 23, 1995 to February 2, 1998 has been
restated to include the ownership interest of First Banks, FBA's majority owner,
in FCB consistent with the accounting treatment applicable to entities under
common control. First Banks' ownership interest in FCB was approximately 96.1%
from August 23, 1995 to May 1996 and 61.5% from June 1996 to February 2, 1998.
The remaining interest in FCB acquired by FBA is reflected in the consolidated
financial statements of FBA as minority interest for the period from August 23,
1995 to February 2, 1998. Accordingly, Management's Discussion and Analysis of
Financial Condition and Results of Operations and the accompanying consolidated
financial statements of FBA are presented as if FBA and FCB had been
consolidated for all periods after August 23, 1995.
<PAGE>

Financial Condition and Average Balances

FBA's average total assets were $690.4 million, $540.8 million and
$456.7 million for the years ended December 31, 1998, 1997 and 1996,
respectively. The increase of $149.6 million in total average assets for 1998 is
primarily attributable to the acquisitions of Pacific Bay Bank and Surety Bank,
which provided total assets of $38.3 million and $72.8 million, respectively,
internal loan growth and the issuance of the Preferred Securities. From the
proceeds of the Preferred Securities offering, $26.0 million was invested in
short-term interest-bearing deposits at December 31, 1998, which was utilized to
fund the acquisition of Redwood Bancorp. Offsetting this increase and providing
an additional source of funds for the loan growth was a reduction in average
investment securities of $2.8 million to $132.7 million for December 31, 1998
from $129.9 million for December 31, 1997. For 1997, average total assets
increased by $84.0 million. This increase is primarily due to the acquisition of
Sunrise Bank and internal loan growth resulting from the expansion of the
business development staff.
Loans, net of unearned discount, averaged $465.5 million, $343.3
million and $273.1 million for the years ended December 31, 1998, 1997 and 1996,
respectively. As more fully discussed under "--General and Net Interest Income,"
during the second quarter of 1995, FBA elected to reduce the level of
originations of indirect automobile loans. Accordingly, indirect automobile
loans, which initially increased to $159.5 million at June 30, 1995, have
subsequently decreased to $50.3 million, $61.4 million and $86.6 million at
December 31, 1998, 1997 and 1996, respectively. At the same time, FBA expanded
its corporate banking activities, resulting in the increase of the commercial
and financial, commercial real estate and real estate construction loan
portfolios to $397.9 million, $296.7 million and $203.1 million at December 31,
1998, 1997 and 1996, respectively, including the loans provided by the
acquisitions of Pacific Bay Bank, Surety Bank and Sunrise Bank, from $102.1
million at December 31, 1995.
Investment securities averaged $132.7 million, $129.9 million and
$107.2 million for the years ended December 31, 1998, 1997 and 1996,
respectively. The average balance of investment securities for 1998 remained
relatively constant with 1997. The increase for 1997 is primarily attributable
to the acquisitions of Sunrise Bank and Surety Bank.
Deposits are the primary funding source for FBA and are acquired from a
broad base of local markets, including both individual and corporate customers.
Deposits averaged $585.3 million, $461.3 million and $394.2 million for years
ended December 31, 1998, 1997 and 1996, respectively. The increases are
primarily attributable to the acquisitions completed during the respective
periods.
During July 1998, First America Capital Trust (First Capital), a
newly-formed Delaware business trust subsidiary of FBA, issued 1.84 million
shares of Preferred Securities at $25.00 per share in an underwritten public
offering. FBA made certain guarantees and commitments relating to the Preferred
Securities. FBA's proceeds from the issuance of the Preferred Securities, net of
underwriting fees and offering expenses, were approximately $44.0 million. The
Preferred Securities have no voting rights except under certain limited
circumstances. Distributions payable on the Preferred Securities are payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year. Distributions payable on the Preferred Securities were $1.8 million for
the year ended December 31, 1998 and are recorded as noninterest expense in the
accompanying consolidated financial statements. Proceeds from the offering were
used to repay outstanding indebtedness to First Banks under the terms of the
$20.0 million promissory note payable, support possible repurchases of common
stock from time to time and for general corporate purposes. The remaining
proceeds were temporarily invested in interest-bearing deposits and will be used
to fund the acquisition of Redwood Bancorp.
Stockholders' equity averaged $56.9 million, $39.7 million and $40.5
million for the years ended December 31, 1998, 1997 and 1996, respectively. The
increase for 1998 is primarily attributable to net income, the conversion of
$10.0 million of the promissory note payable to First Banks to common stock, the
issuance of common stock in connection with the acquisitions of Surety Bank and
the publicly-owned portion of FCB including the conversion of the $6.5 million
of subordinated debentures and related accrued but unpaid interest of $2.4
million. The increase was partially offset by repurchases of $5.7 million of
common stock for treasury during the year ended December 31, 1998. For 1997, the
decrease is primarily attributable to the repurchases of common stock for
treasury and the repurchase of a warrant to acquire common stock, partially
offset by net income and the issuance of common stock in connection with the
acquisition of Surety Bank

<PAGE>

In addition, effective December 31, 1994, stockholders' equity includes
the impact of implementing an accounting adjustment referred to as a
"quasi-reorganization" as approved by the Board of Directors of FBA. In
accordance with the accounting provisions applicable to a quasi-reorganization,
the assets and liabilities of FBA were adjusted to fair value and the
accumulated deficit was eliminated. Fair value adjustments included a reduction
in the carrying value of bank premises and equipment of $4.4 million and the
elimination of the net fair value adjustment for securities available for sale
of $1.1 million. As a result of implementing the quasi-reorganization,
stockholders' equity was reduced by $3.1 million. The implementation of the
quasi-reorganization did not have a significant impact on the results of
operations of FBA.

<PAGE>

The following table sets forth certain information relating to FBA's
average balance sheets, and reflects the average yield earned on
interest-bearing assets, the average cost of interest-bearing liabilities and
the resulting net interest income for the periods indicated.
<TABLE>
<CAPTION>

Years ended December 31,
-----------------------------------------------------------------------------------------
1998 1997 1996
---------------------------- ---------------------------- -------------------------
Interest Interest Interest
Average income/ Average Average income/ Average Average income/ Average
balance expense rate balance expense rate balance expense rate
------- ------ ---- ------- ------- ---- ------- ------- ----
(dollars expressed in thousands)

Earning assets:
Time deposits with other
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
financial institutions.. $ 2,447 128 5.23% $ 1,019 58 5.69% $ 19,813 1,062 5.36%
Investment securities (2). 132,673 8,103 6.11 129,865 7,870 6.06 107,211 6,257 5.84
Federal funds sold and
securities purchased
under agreements to
resell............... 19,801 1,078 5.44 22,058 1,196 5.42 17,347 926 5.34
Loans (1) (2) ............ 465,539 45,118 9.69 343,329 33,393 9.73 273,063 25,137 9.21
-------- ------- ---- --------- ------- ----- -------- ------ ----
Total earning assets.... 620,460 54,427 8.77 496,271 42,517 8.57 417,434 33,382 8.00
------ ------- ------
Nonearning assets............ 69,946 44,498 39,295
--------- --------- ---------
Total assets............ $ 690,406 $ 540,769 $ 456,729
========= ========= =========
Interest-bearing liabilities:
Interest-bearing demand
and savings deposits(3).. $ 235,051 7,578 3.22 $ 175,117 5,145 2.94 $134,091 3,575 2.67
Time deposits of $100
or more(3)............. 51,546 2,932 5.69 39,126 2,144 5.48 36,586 2,008 5.49
Other time deposits(3).... 203,626 11,096 5.45 168,795 9,427 5.59 152,812 8,353 5.47
-------- ------- --------- -------- ---- -------- ------
Total interest-bearing
deposits............. 490,223 21,606 4.41 383,038 16,716 4.36 323,489 13,936 4.31
Promissory note payable
and short-term
borrowings (3)......... 19,596 1,622 8.28 26,755 2,439 9.12 13,769 1,597 11.60
--------- ------- --------- -------- -------- ------
Total interest-
bearing liabilities.. 509,819 23,228 4.56 409,793 19,155 4.67 337,258 15,533 4.61
------- -------- ------
Non-interest-bearing liabilities:
Demand deposits........... 95,095 78,222 70,739
Other liabilities......... 28,557 13,043 8,247
---------- --------- --------
Total liabilities...... 633,471 501,058 416,244
Stockholders' equity......... 56,935 39,711 40,485
---------- --------- --------
Total liabilities and
stockholders' equity. $ 690,406 $ 540,769 $456,729
========== ========= ========
Net interest income......... 31,199 23,362 17,849
======= ======== ========
Interest rate spread........ 4.21 3.90 3.39
Net interest margin......... 5.03 4.71 4.28
==== ==== ====
</TABLE>
- ---------------
(1) Nonaccrual loans are included in the average loan amounts.
(2) FBA has no tax-exempt income.
(3) Includes the effect of interest rate exchange agreements.

The following table indicates the changes in interest income and
interest expense, which are attributable to changes in average volume and
changes in average rates, in comparison with the same period in the preceding
year. The change in interest due to the combined rate/volume variance has been
allocated to rate and volume changes in proportion to the dollar amounts of the
change in each.

<PAGE>

December 31, 1998 compared December 31, 1997 compared
to December 31, 1997 to December 31, 1996
----------------------------- ----------------------------
Net Net
Volume Rate Change Volume Rate Change
------ ---- ------ ------ ---- ------
(dollars expressed in thousands)
Earning assets:
Time deposits with other financial
<S> <C> <C> <C> <C> <C> <C>
institutions......................... $ 74 (4) 70 (1,074) 70 (1,004)
Investment securities (1).............. 169 64 233 1,365 248 1,613
Federal funds sold and securities
purchased under agreements to resell. (122) 4 (118) 256 14 270
Loans (1).............................. 11,862 (137) 11,725 6,761 1,495 8,256
------- ------ ------- ------ ------ ------
Total interest income............ 11,983 (73) 11,910 7,308 1,827 9,135
------- ------ ------- ------ ------ ------
Interest-bearing liabilities:
Interest-bearing demand
and savings deposits(2).............. 1,903 530 2,433 1,175 395 1,570
Time deposits of $100 or more(2)....... 703 85 788 139 (3) 136
Other time deposits(2)................. 1,883 (214) 1,669 884 190 1,074
Promissory note payable and short-
term borrowings (2).................. (608) (209) (817) 1,089 (247) 842
------- ------ ------- ------ ------ ------
Total interest expense........... 3,881 192 4,073 3,287 335 3,622
------- ------ ------- ------ ------ ------
Net interest income.............. $ 8,102 (265) 7,837 4,021 1,492 5,513
======= ====== ======= ====== ====== ======
</TABLE>

- ------------------------
(1) FBA has no tax-exempt income.
(2) Includes the effect of interest rate exchange agreements.

Net Interest Income

The primary source of FBA's income is net interest income, which is the
difference between the interest earned on assets and the interest paid on
liabilities. FBA's loan portfolio, which represents its primary interest-earning
asset and source of net interest income, previously consisted primarily of fixed
rate indirect automobile loans. In 1995, recognizing that the profitability of
its indirect automobile loan portfolio, which comprised 74.0% of the loan
portfolio as of June 30, 1995, was decreasing, FBA commenced a defined strategy
to diversify its loan portfolio with the objective of improving its net interest
income. As more fully discussed under "--Acquisitions and Financial Condition
and Average Balances," the strategy included enhanced corporate business
development efforts within the existing franchise of FB Texas and expansion into
the San Francisco-Sacramento corridor of northern California.
For the year ended December 31, 1998, net interest income was $31.2
million, or 5.03% of average earning assets, compared with $23.4 million, or
4.71% of average earning assets, and $17.8 million, or 4.28% of average earning
assets, for the years ended December 31, 1997 and 1996, respectively. The
improved net interest income is primarily attributable to the loans provided by
the aforementioned acquisitions and the repositioned loan portfolio of FB Texas.
Specifically, the yield on the loan portfolio increased to 9.69% and 9.73% from
9.21% for the years ended December 31, 1998, 1997 and 1996, respectively. At the
same time, FBA maintained its average cost of interest-bearing deposits at
4.41%, 4.36% and 4.31% for the years ended December 31, 1998, 1997 and 1996,
respectively.
Contributing further to its improved net interest income was the
exchange on February 2, 1998 of 804,000 shares of FBA's common stock for $10.0
million of debt outstanding under the promissory note payable to First Banks. In
addition, effective December 4, 1998, the 12.0% convertible debenture totaling
$6.5 million, along with accrued interest payable of $2.35 million, was
converted into 629,557 shares of FBA common stock at a conversion rate of $14.06
per common share.
<PAGE>

Comparison of Results of Operations for the Years Ended December 31, 1998 and
1997

Net Income. Net income was $4.61 million, or $0.90 per share on a
diluted basis, for the year ended December 31, 1998, compared to $3.53 million
or $0.86 per share on a diluted basis, for 1997. The improved operating results
of FBA reflect the improved performance of both FB California and FB Texas. FB
California recorded net income of $3.1 million for the year ended December 31,
1998, in comparison to $2.7 million for 1997. FB Texas' net income increased to
$3.6 million from $3.3 million for the years ended December 31, 1998 and 1997,
respectively. These increases were primarily a result of improved net interest
income. As previously discussed, net interest income increased by $7.8 million
to $31.2 million, or 5.03% of average interest-earning assets, from $23.4
million, or 4.71% of average interest-earnings assets, for the years ended
December 31, 1998 and 1997, respectively.

Offsetting the increase in net income for 1998 were the additional costs
associated with Surety Bank's and Pacific Bay Bank's data processing and
back-office conversions to FBA's systems and procedures completed during
February and May of 1998, respectively, and an after tax charge of $225,000 in
settlement of certain litigation. In addition, noninterest expense also includes
$1.8 million of guaranteed preferred debenture expense for 1998. As more fully
discussed under "--Financial Condition and Average Balances" and Note 8 of the
consolidated financial statements, FBA issued the Preferred Securities during
July 1998.

Provision for Possible Loan Losses. The provision for possible loan
losses was $900,000 and $2.0 million for the years ended December 31, 1998 and
1997, respectively. The provision for possible loan losses for 1998 is primarily
attributable to loan growth, in contrast to 1997, which was provided to support
the changing composition of the loan portfolio from one with a significant
preponderance in indirect automobile loans, to one having substantial portions
of commercial and financial, real estate construction and development and
commercial real estate loans. See "--Loans and Allowance for Possible Loan
Losses" for a further discussion of FBA's policies and practices of monitoring
and maintaining the allowance for possible loan losses.
Supporting the decrease in the provision for possible loan losses is
the reduction in net loan charge-offs to $1.1 million for 1998, compared to $1.4
million for 1997. In addition, the net loan charge-offs in 1998 related
primarily to the loan portfolio obtained through the acquisition of Pacific Bay
Bank. The related acquired allowances for possible loan losses for Pacific Bay
Bank was $885,000 at the acquisition date.

Noninterest Income and Expense. The following table summarizes
noninterest income and noninterest expense for the years ended December 31, 1998
and 1997.
<TABLE>
<CAPTION>
Increase (decrease)
-------------------
1998 1997 Amount Percent
---- ---- ------ -------
(dollars expressed in thousands)
Noninterest income:
Service charges on deposit accounts
<S> <C> <C> <C> <C>
and customer service fees........................ $ 2,935 2,239 696 31.09%
Other income ...................................... 1,099 972 127 13.07
Gain on sales of securities, net................... 341 76 265 348.68
-------- ------- --------
Total noninterest income....................... $ 4,375 3,287 1,088 33.10
======== ======= ======== =======

Noninterest expense:
Salaries and employee benefits .................... $ 8,203 6,226 1,977 31.75%
Occupancy, net of rental income ................... 2,291 2,166 125 5.77
Furniture and equipment ........................... 1,708 1,149 559 48.65
Advertising and business development............... 616 234 382 163.25
Postage, printing and supplies..................... 752 496 256 51.61
Legal, examination and professional fees........... 4,325 3,241 1,084 33.45
Data processing ................................... 2,042 1,084 958 88.38
Amortization of intangibles associated with the
purchase of subsidiaries......................... 596 220 376 170.91
Communications..................................... 720 673 47 6.98
(Gain) loss on sale of other real estate,
net of expenses.................................. 34 (350) 384 (109.71)
Guaranteed preferred debenture expense............. 1,758 -- 1,758 --
Other.............................................. 3,427 2,538 889 35.03
-------- ------- --------
Total noninterest expense...................... $ 26,472 17,677 8,795 49.75
======== ======= ======== =======
</TABLE>
<PAGE>

Noninterest Income. Noninterest income, which consists primarily of
service charges on deposit accounts and customer service fees, totaled $4.4
million and $3.3 million for the years ended December 31, 1998 and 1997,
respectively.
Service charges on deposit accounts and customer service fees increased
to $2.9 million for 1998, from $2.2 million for 1997. The increase is primarily
attributable to the acquisitions of Surety Bank and Pacific Bay Bank, and the
increase of commercial and retail banking services utilized by FBA's expanding
base of retail and corporate customers.
Other income was $1.1 million and $972,000 for the years ended December
31, 1998 and 1997, respectively. The increase is primarily attributable to
income earned on FBA's investment in bank owned life insurance (BOLI). The BOLI
income totaled $411,000 for the period from the time of investment, April 1998,
through December 31, 1998.
Noninterest income for 1998 also includes $341,000 of net gains on
sales of securities. The gains resulted from the sales of certain
available-for-sale securities to provide funds for FBA's loan growth.
Noninterest Expense. Noninterest expense was $26.5 million for the year
ended December 31, 1998, compared to $17.7 million for 1997. The increase is
attributable to the noninterest expense of Surety Bank and Pacific Bay Bank,
nonrecurring expenses associated with those acquisitions, the additional
noninterest expense attributable to FBA's expansion of its corporate lending and
retail banking functions and the issuance of the Preferred Securities.
Specifically, salaries and employee benefits increased by $2.0 million
to $8.2 million from $6.2 million for the years ended December 31, 1998 and
1997, respectively. The increase is attributable to both the acquisitions of
Surety Bank and Pacific Bay Bank and the expansion of FBA's commercial and
retail business development staff and related support personnel.
Contrary to the overall increase in noninterest expense resulting from
the aforementioned acquisitions was occupancy, net of rental income, which
remained relatively constant at $2.3 million and $2.2 million for the years
ended December 31, 1998 and 1997, respectively. Offsetting the cost of the
additional facilities provided by acquisitions was additional rental income from
increased subleasing of excess space within FBA's banking premises, relocation
of certain California branches and reductions in expenses related to
centralization of recently acquired entities' functions into FBA's systems.
Advertising and business development increased by $382,000 to $616,000
from $234,000 for 1998 and 1997, respectively. The additional costs were
incurred to facilitate the further development of FBA's franchise and expanding
base of products and services.
Legal, examination and professional fees increased to $4.3 million from
$3.2 million for 1998 and 1997, respectively. As more fully described in Note 15
to the consolidated financial statements, legal, examination and professional
fees includes various fees since FBA utilizes First Banks and certain of its
affiliates in providing certain services for FBA and the Subsidiary Banks. FBA's
overall asset growth and expansion of its product and service offerings has
required additional service and support. The fees paid for these services are at
least as favorable as could have been obtained from an unaffiliated third party.
Data processing fees were $2.0 million and $1.1 million for 1998 and
1997, of which $1.9 million and $722,000 were paid to First Services L. P., an
affiliate of First Banks. As more fully described in Note 15 to the consolidated
financial statements, First Services L. P. provides data processing and various
related services to FBA and the Subsidiary Banks. The increase in data
processing fees is attributable to the overall growth of FBA, enhancing systems
to support existing and developing product and service offerings and the
additional costs associated with the Year 2000 project. As discussed under,
"--Year 2000 Compatibility," FBA incurred direct expenses of $180,000 in 1998
with respect to the Year 2000 project.
Intangibles associated with the purchase of subsidiaries are amortized
to expense on a straight-line basis over approximately 15 years. The increase
for 1998 is attributable to the amortization of the cost in excess of the fair
value of the net assets acquired of Surety Bank, which was acquired on December
1, 1997, Pacific Bay Bank and the minority shareholders of FCB, which were both
acquired in February 1998.
Noninterest expense also includes $1.8 million of guaranteed preferred
debenture expense for 1998. As more fully discussed under "--Financial Condition
and Average Balances" and Note 8 of the consolidated financial statements, FBA
issued Preferred Securities during July 1998.
Other noninterest expense for 1998 includes a $350,000 charge in
settlement of certain litigation.
<PAGE>

Comparison of Results of Operations for the Years Ended December 31, 1997 and
1996
Net Income. Net income for the year ended December 31, 1997 improved to
$3.5 million from $691,000 for 1996, an increase of 411%. This improvement is
primarily attributable to net interest income. As previously discussed, net
interest income increased by $5.6 million to $23.4 million, an increase of 30.9%
or 4.71% of average earning assets, for 1997, from $17.8 million, or 4.28% of
average earning assets, for 1996.
Provision for Possible Loan Losses. The provision for possible loan
losses was $2.0 million and $2.4 million for the years ended December 31, 1997
and 1996, respectively. Net loan charge-offs were $1.4 million and $4.6 million
for the years ended December 31, 1997 and 1996, respectively. The allowance for
possible loan losses was $11.4 million, or 2.64% of total loans, net of unearned
discount, at December 31, 1997, compared to $10.7 million, or 3.19% of total
loans, net of unearned discount, at December 31, 1996. Loans which were either
90 days or more past due and still accruing interest or on nonaccrual status
totaled $4.0 million and $3.6 million at December 31, 1997 and 1996,
respectively, representing 0.93% and 1.06% of total loans, net of unearned
discount, at those dates. Loans which were between 30 and 89 days past due were
$7.9 million, or 1.82% of total loans, net of unearned discount, at December 31,
1997, compared to $7.3 million, or 2.17% of total loans, net of unearned
discount, at December 31, 1996.
<PAGE>

Although asset quality improved, FBA continued to provide for possible
loan losses in recognition of the overall growth in the loan portfolio as well
as its changing composition. As the portfolio changed from one with significant
preponderance in indirect automobile loans, to one having substantial portions
of commercial and financial, real estate construction and development and
commercial real estate loans, the credit risk profile also change. Typically, a
larger group of lower balance homogeneous loans, such as the indirect automobile
loan portfolio, exhibits certain past due and loan loss experience trends which
provides FBA a basis for establishing an adequate level of allowance for
possible loan losses. While these same trends are included in FBA's evaluation
of its commercial lending activities, the overall credit risk of this type of
portfolio is heightened as the possibility of a significant unforeseen loss
occurring over time is greater.
Noninterest Income and Expense. The following table summarizes
noninterest income and noninterest expense for the years ended December 31, 1997
and 1996.
<TABLE>
<CAPTION>
Increase (decrease)
-------------------
1997 1996 Amount Percent
---- ---- ------ -------
(dollars expressed in thousands)
Noninterest income:
Service charges on deposit accounts
<S> <C> <C> <C> <C>
and customer service fees........................ $ 2,239 2,258 (19) (0.8)%
Other income ...................................... 972 1,142 (170) (14.9)
Gain on sales of securities, net................... 76 185 (109) (58.9)
-------- -------- ------
Total noninterest income....................... $ 3,287 3,585 (298) (8.3)
======== ======== ====== =======
Noninterest expense:
Salaries and employee benefits .................... $ 6,226 5,249 977 18.6%
Occupancy, net of rental income ................... 2,166 1,832 334 18.2
Furniture and equipment ........................... 1,149 1,003 146 14.6
Advertising and business development............... 234 51 183 358.8
Postage, printing and supplies..................... 496 744 (248) (33.3)
Legal, examination and professional fees........... 3,241 2,777 464 16.7
Data processing ................................... 1,084 735 349 47.5
Amortization of intangibles associated with
the purchase of subsidiaries..................... 220 34 186 547.1
Communications..................................... 673 623 50 8.0
(Gain) loss on sale of other real estate,
net of expenses.................................. (350) 1,148 (1,498) (130.5)
Other.............................................. 2,538 3,541 (1,003) (28.3)
-------- -------- ------
Total noninterest expense...................... $ 17,677 17,737 (60) (0.3)
======== ======== ====== =======
</TABLE>
<PAGE>

Noninterest Income. Noninterest income was $3.3 million for the year
ended December 31, 1997, in comparison to $3.6 million for 1996, representing a
decrease of $300,000.
Service charges on deposit accounts and customer service fees decreased
to $2.2 million from $2.3 million for the years ended December 31, 1997 and
1996, respectively. The decrease is primarily attributable to the deposit base
of FCB, which experienced both a reduction in the number of demand deposit
accounts subject to service charges and which reduced its minimum balance
requirements in conjunction with a promotional campaign. The decrease was
substantially offset by the additional service charges and fees provided by the
acquisition of Sunrise Bank.
Other income was $972,000 and $1.1 million for the years ended December
31, 1997 and 1996, respectively. For 1997, other income consists primarily of
certain legal settlements received applicable to pending litigation of the
former Sunrise Bank and a net gain of $47,000 realized upon sales of repossessed
and other assets. Other income for the year ended December 31, 1996 includes a
$795,000 gain realized upon FCB's sale and assignment of certain railroad cars
and the associated leveraged leases to an unrelated party.
In addition, the decrease in noninterest income for the year ended
December 31, 1997 is attributable to a gain of $76,000 recognized upon the sale
of an investment security for the year ended December 31, 1997, compared to a
gain of $185,000 for 1996.

Noninterest Expense. Noninterest expense decreased by $60,000 to $17.7
million for the year ended December 31, 1997 compared to 1996. The decrease is
primarily attributable to a gain on sale of other real estate, net of expenses,
substantially offset by increases in other noninterest expense categories
including salaries and benefits, occupancy, net of rental income, data
processing and legal, examination and professional fees. These increases are
primarily attributable to the acquisitions of Surety Bank, Sunrise Bank and
FBA's expansion of its corporate lending and retail staff. In particular,
salaries and employee benefits increased by $980,000 to $6.2 million for 1997
from $5.2 million for 1996. In addition, occupancy, net of rental income, and
data processing expenses increased by $334,000 and $349,000 for the year ended
December 31, 1997, respectively, in comparison to 1996.
Legal, examination and professional fees increased to $3.2 million from
$2.8 million for the years ended December 31, 1997 and 1996, respectively. The
increase is primarily attributable to the fees paid to First Banks and its
affiliates for management services and loan servicing. Fees payable to First
Banks and its affiliates generally increase as FBA expands through acquisitions
and internal growth, reflecting the higher levels of service needed to operate
the Subsidiary Banks. See Note 15 to the consolidated financial statements.
For 1997, FBA realized a gain on sale of other real estate, net of
expenses, of $350,000, compared to losses and expenses on sale of other real
estate of $1.1 million for the same period in 1996. The improvement for 1997 is
attributable to a gain realized upon the sale of a parcel of other real estate,
net of expenses, and an overall decrease in the losses and expenses of
maintaining a reduced level of other real estate. In addition, for 1996, losses
and expenses on other real estate, net of gains, included $996,000 of valuation
write-downs.
Noninterest expense also reflects a decrease in other expense of $1.0
million to $2.5 million from $3.5 million for the years ended December 31, 1997
and 1996, respectively. The decrease is primarily attributable to the Federal
Deposit Insurance Corporations premiums, which decreased by $378,000 to $119,000
from $497,000 for 1997 and 1996, respectively, and a noncredit provision for
possible losses within the indirect automobile dealer lending program of
$842,000 recorded in 1996. These decreases were partially offset by an increase
in certain components of other expense consistent with FBA's organizational
growth and expansion of product and service offerings.

Investment Securities

FBA classifies the securities within its investment portfolio as held
to maturity or available for sale. FBA does not engage in the trading of
investment securities. As more fully described in Notes 1 and 3 to the
consolidated financial statements of FBA, the investment security portfolio
consists primarily of securities designated as available-for-sale. The
investment security portfolio was $117.0 million at December 31, 1998, compared
to $148.2 million and $125.1 million at December 31, 1997 and 1996,
respectively. See, "--Financial Condition and Average Balances" for further
discussion of the investment security portfolio.
<PAGE>

Loans and Allowance for Possible Loan Losses

Interest earned on the loan portfolio is the primary source of income
for FBA. Loans, net of unearned discount, represented 71.7% of total assets as
of December 31, 1998, compared to 67.0% and 63.6% as of December 31, 1997 and
1996, respectively. At December 31, 1998 and 1997, total loans, net of unearned
discount, were $516.4 million and $431.5 million, increases of $84.9 million and
$95.1 million, from $336.4 million at December 31, 1996. As previously discussed
under "--Acquisitions and Financial Condition and Average Balances," the
increases are attributable to the loans provided by the acquisitions of Pacific
Bay Bank, Surety Bank and Sunrise Bank, and the growth of the commercial and
financial, commercial real estate and real estate construction and development
loan portfolios, partially offset by the decrease in the portfolio of indirect
automobile loans.
The following table summarizes the changes in the loan portfolio for the
periods indicated:
<TABLE>
<CAPTION>

Increase (decrease)
For the years ended December 31,
1998 1997 1996
(dollars expressed in thousands)
Loans provided by acquisition:
<S> <C> <C> <C>

Pacific Bay Bank.................................................. $ 29,700 -- --
Surety Bank....................................................... -- 54,400 --
Sunrise Bank...................................................... -- -- 61,100
Internal loan volumes increase (decrease):
Commercial lending................................................ 86,400 71,200 48,900
Indirect automobile loans......................................... (14,400) (28,600) (36,800)
Other............................................................. (16,800) (1,900) (3,400)
---------- ------- -------
Total increase in loans,
net of unearned discount............................... $ 84,900 95,100 69,800
========== ======= =======
Increase (decrease) in potential problem loans (1).................... $ 1,600 (7,300) (6,200)
========== ======= =======
</TABLE>

- --------------
(1) Potential problem loans include indirect automobile loans 60 days or more
past due, loans on nonaccrual status and other loans identified by
management as having potential credit problems.

FBA's lending strategy stresses quality, growth and diversification by
collateral, geography and industry. A common credit underwriting structure is in
place throughout FBA. The commercial lenders focus principally on small to
middle-market companies. Retail lenders focus principally on residential loans,
including home equity loans, automobile financing and other consumer financing
needs arising out of FBA's branch banking network.
<PAGE>

Commercial and financial loans include loans that are made primarily
based on the borrowers' general credit strength and ability to generate
repayment cash flows from income sources even though such loans and bonds may
also be secured by real estate or other assets. Real estate construction and
development loans, primarily relating to residential properties and smaller
commercial properties, represent interim financing secured by real estate under
construction. Real estate mortgage loans consist primarily of loans secured by
single-family owner-occupied properties and various types of commercial
properties on which the income from the property is the intended source of
repayment. Consumer and installment loans are loans to individuals and consist
primarily of loans secured by automobiles. Loans held for sale are generally
fixed and adjustable rate residential loans pending sale in the secondary
mortgage market in the form of a mortgage-backed security, or to various private
third-party investors.
The following table shows the composition of the loan portfolio by
major category and the percent of each category to the total portfolio as of the
dates presented:
<TABLE>
<CAPTION>

December 31,
1998 1997 1996 1995 1994
----------------- ---------------- ---------------- --------------- ---------------
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
(dollars expressed in thousands)

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and financial $140,151 27.1% $109,763 25.8% $ 80,781 24.0% $ 48,807 18.3% $ 14,556 7.4%
Real estate construction
and development...... 161,696 31.3 93,454 22.0 58,045 17.3 30,142 11.3 13,793 7.0
Real estate mortgage.... 155,443 30.1 149,951 35.2 93,864 27.9 45,530 17.1 14,796 7.6
Consumer and
installment, net
of unearned
discount............ 59,113 11.5 72,579 17.0 103,681 30.8 142,109 53.3 152,91 78.0
-------- ---- -------- ----- -------- ----- ------- ---- -------- -----
Total loans,
excluding loans
held for sale... 516,403 100.0% 425,747 100.0% 336,371 100.0% 266,588 100.0% 196,061 100.0%
======== ===== ======== ===== ======== ===== ======== ===== ======= =====
Loans held for sale..... -- 5,708 -- -- 7,253
-------- --------- -------- -------- --------
Total loans....... $516,403 $431,455 $336,371 $266,588 $203,314
======== ======== ======== ======== ========
</TABLE>

Loans at December 31, 1998 mature as follows:

Over one year
through five years Over five years
One year Fixed Floating Fixed Floating
or less rate rate rate rate Total
------- ---- ---- ---- ---- -----
(dollars expressed in thousands)

<S> <C> <C> <C> <C> <C>
Commercial and financial................. $ 128,409 11,194 284 264 -- 140,151
Real estate construction
and development...................... 161,523 123 -- 50 -- 161,696
Real estate mortgage..................... 108,129 25,578 8,855 12,881 -- 155,443
Consumer and installment,
net of unearned discount............. 10,782 42,441 -- 5,890 -- 59,113
--------- ------ ------ ------- ------- ---------
Total loans................... $ 408,843 79,336 9,139 19,085 -- 516,403
========= ====== ====== ======= ======= =========

</TABLE>

<PAGE>

The following table is a summary of loan loss experience for the five
years ended December 31, 1998:
<TABLE>
<CAPTION>

December 31,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(dollars expressed in thousands)

<S> <C> <C> <C> <C> <C>
Balance at beginning of year............... $ 11,407 10,744 10,616 2,756 2,637
Acquired allowances for possible
loan losses............................. 885 30 2,338 4,797 --
-------- -------- ------- ------ ------
12,292 10,774 12,954 7,553 2,637
-------- -------- ------- ------ ------
Loans charged off:
Commercial and financial.............. (1,464) (966) (2,286) -- (7)
Real estate construction and
development......................... -- (15) (164) (2) --
Real estate mortgage.................. (1,031) (244) (786) (153) (375)
Consumer and installment.............. (1,040) (2,430) (3,818) (4,018) (1,876)
-------- -------- ------- ------ ------
Total loans charged-off................. (3,535) (3,655) (7,054) (4,173) (2,258)
-------- -------- ------- ------ ------
Recoveries of loans previously charged off:
Commercial and financial............. 1,314 926 1,271 223 184
Real estate construction
and development.................... 219 68 15 1 --
Real estate mortgage................. 213 195 109 36 258
Consumer and installment............. 724 1,099 1,044 560 677
-------- -------- ------- ------ ------
Total recoveries of loans previously
charged off........................... 2,470 2,288 2,439 820 1,119
-------- -------- ------- ------ ------
Net loans charged-off................... (1,065) (1,367) (4,615) (3,353) (1,139)
-------- -------- ------- ------ ------
Provision for possible loan losses......... 900 2,000 2,405 6,416 1,258
-------- -------- ------- ------ ------
Balance at end of year..................... $ 12,127 11,407 10,744 10,616 2,756
======== ======== ======= ====== ======

Loans outstanding:
Average.............................. $465,539 343,329 273,063 230,451 182,922
End of period........................ 516,403 431,455 336,371 266,588 203,314
Ratio of allowance for possible
loan losses to loans outstanding:
Average............................... 2.60% 3.32% 3.93% 4.61% 1.51%
End of period......................... 2.35 2.64 3.19 3.98 1.36
...Ratio of net loan charge-offs to average
loans outstanding....................... .23 0.40 1.69 1.45 0.62
======== ======== ======== ====== =======

Allocation of allowance for possible
loan losses at end of period:
Commercial and financial................ $ 3,368 2,552 3,417 2,534 197
Real estate construction and development 3,813 1,680 1,320 1,835 187
Real estate mortgage.................... 2,039 3,536 3,645 2,210 201
Consumer and installment................ 1,077 1,539 2,362 4,037 2,171
Unallocated............................. 1,830 2,100 -- -- --
------- -------- ------- ------ ------
Total ................................ $12,127 11,407 10,744 10,616 2,756
======= ======== ======= ====== ======
Percent of categories to loans,
..................net of unearned discount:
Commercial and financial................ 27.1% 25.4% 24.0% 18.3% 7.1%
Real estate construction and development 31.3 21.7 17.3 11.3 6.8
Real estate mortgage.................... 30.1 34.8 27.9 17.1 7.3
Consumer and installment................ 11.5 16.8 30.8 53.3 75.2
Loans held for sale..................... -- 1.3 -- -- 3.6
-------- -------- -------- ------ -------
Total................................. 100.0% 100.0% 100.0% 100.0% 100.0%
======== ======== ======== ====== ======
</TABLE>

<PAGE>

Nonperforming assets include nonaccrual loans, restructured loans and
other real estate. The following table presents the categories of nonperforming
assets and certain ratios as of the dates indicated:
<TABLE>
<CAPTION>

December 31,
----------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(dollars expressed in thousands)

<S> <C> <C> <C> <C> <C>
Nonperforming loans............................ $ 8,632 2,846 2,959 5,075 293
Other real estate, net 161 601 977 2,393 1,553
---------- --------- --------- --------- --------
Total nonperforming assets............... $ 8,793 3,447 3,936 7,468 1,846
========== ========= ========= ========= ========
Loans, net of unearned discount................ $ 516,403 431,455 336,371 266,588 203,314
========== ========= ========= ========= ========
Loans past due:
Over 30 days to 90 days...................... $ 6,269 7,866 7,302 9,664 1,368
Over 90 days and still accruing.............. 306 1,158 615 2,766 183
---------- --------- --------- --------- --------
Total past-due loans..................... $ 6,575 9,024 7,917 12,430 1,551
========== ========= ========= ========= ========
Allowance for possible loan losses
to loans..................................... 2.35% 2.64% 3.19% 3.98% 1.36%
Nonperforming loans to loans................... 1.67 0.66 0.88 1.90 0.14
Allowance for possible loan losses
to nonperforming loans....................... 140.49 400.81 363.10 209.18 940.61
Nonperforming assets to loans
and other real estate........................ 1.70 0.80 1.17 2.78 0.90
========== ========= ========= ========= ========
</TABLE>

Nonperforming loans, consisting of loans on nonaccrual status and
certain restructured loans, were $8.6 million at December 31, 1998 in comparison
to $2.8 million at December 31, 1997. The increase is primarily attributable to
the loans obtained through the acquisition of Pacific Bay Bank and the overall
growth of FBA's loan portfolio.
As of December 31, 1998, 1997 and 1996, $1.7 million, $5.9 million and
$13.0 million, respectively, of loans not included in the table above were
identified by management as having potential credit problems which raised doubts
as to the ability of the borrowers to comply with the present loan repayment
terms.
FBA's credit management policy and procedures focus on identifying,
measuring and controlling credit exposure. These procedures employ a
lender-initiated system of rating credits, which is ratified in the loan
approval process and subsequently tested in internal loan reviews, external
audits and regulatory bank examinations. Basically, the system requires rating
all loans at the time they are made, except for homogeneous categories of loans,
such as residential real estate mortgage loans and indirect automobile loans.
These homogeneous loans are assigned an initial rating based on FBA's experience
with each type of loan. Adjustments to these ratings are based on payment
experience subsequent to their origination.
Adversely rated credits, including loans requiring close monitoring
which would not normally be considered criticized credits by regulators, are
included on a monthly loan watch list. Loans may be added to the watch list for
reasons which are temporary and correctable, such as the absence of current
financial statements of the borrower, or a deficiency in loan documentation.
Other loans are added whenever any adverse circumstance is detected which might
affect the borrower's ability to meet the terms of the loan. Such circumstances
include the delinquency of a scheduled loan payment, a deterioration in the
borrower's financial condition identified in a review of periodic financial
statements, a decrease in the value of the collateral securing the loan, or a
change in the economic environment within which the borrower operates. Loans on
the watch list require detailed loan status reports prepared by the responsible
officer every four months, which are then discussed in formal meetings with loan
review and credit administration staff members. Downgrades of loan risk ratings
may be initiated by the responsible loan officer at any time. However, upgrades
of risk ratings may only be made with the concurrence of selected loan review
and credit administration staff members generally at the time of the formal
watch list review meetings.

<PAGE>

Each month, the credit administration department 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 income.
FBA does not engage in lending in foreign countries or based on
activities in foreign countries. Additionally, FBA does not have any
concentrations of loans exceeding 10% of total loans which are not otherwise
disclosed in the loan portfolio composition table and Note 4 to the accompanying
consolidated financial statements. FBA does not have any interest-bearing assets
which would have been included in nonaccrual, past due or restructured loans if
such assets were loans.

Deposits

Deposits are the primary source of funds for FBA. FBA's deposits
consist principally of core deposits from its local market areas. FBA does not
accept brokered deposits. The following table sets forth the distribution of
FBA's average deposit accounts at the dates indicated and the weighted average
interest rates by category of deposit:
<TABLE>
<CAPTION>

Years ended December 31,
-------------------------------------------------------------------
1998 1997 1996
------------------- --------------------- ------------------
Balance Rate Balance Rate Balance Rate
------- ---- ------- ---- ------- ----
(dollars expressed in thousands)

<S> <C> <C> <C>
Non-interest-bearing demand............. $ 95,095 --% $ 78,222 --% $ 70,739 --%
Interest-bearing demand ................ 73,689 1.73 66,687 2.10 43,048 1.76
Savings................................. 161,362 3.91 108,430 3.46 91,043 3.10
Time deposits of $100 or more........... 51,546 5.69 39,126 5.48 36,586 5.49
Other time.............................. 203,626 5.45 168,795 5.59 152,812 5.47
---------- ===== --------- ===== -------- ======
Total average deposits............ $ 585,318 $ 461,260 $394,228
========== ========= ========
</TABLE>

Non-interest-bearing demand, interest-bearing demand and savings have
no stated maturity. The maturity distribution of time deposits of $100,000 or
more and other time is presented in the interest rate sensitivity table under
"--Interest Rate Risk Management."

Capital

In 1996, FBA purchased an outstanding warrant to acquire 131,336 shares
of FBA common stock at $0.75 per share from the FDIC for an aggregate amount of
$1.3 million. The purchase of the warrant was applied as a reduction of capital
surplus.
FBA issued 264,622 shares of common stock in connection with its
acquisition of Surety Bank, resulting in an increase in stockholders' equity of
$4.8 million. The increase represents the fair value of the net assets exchanged
for FBA common stock, as determined by the market value of FBA common stock at
the date of the agreement.

<PAGE>

On February 2, 1998, FBA completed its acquisition of FCB. As described
under "--Acquisitions" and in Note 2 to the consolidated financial statements,
in connection with the acquisition, FBA issued approximately 1,555,728 shares of
common stock, of which 1,266,176 were issued to First Banks. The consolidated
statements of changes in stockholders' equity reflect the accounts of FBA as if
the common stock issued to acquire First Banks' interest in FCB had been
outstanding since August 23, 1995.
On December 4, 1998, First Banks exercised its right to acquire 629,557
shares of FBA common stock by converting the outstanding convertible debenture
and related accrued but unpaid interest of $6.5 million and $2.3 million,
respectively. As more fully discussed under "--Acquisitions" and in Note 2 to
the consolidated financial statements, in connection with FBA's acquisition of
FCB, FBA issued to First Banks a convertible debenture totaling $6.5 million and
assumed the related accrued but unpaid interest of $2.4 million associated with
similar outstanding debentures of FCB owned by First Banks.
The Board of Directors has authorized the purchase of up to a
cumulative total of 816,906 shares of common stock for treasury during 1995
through 1998. Aggregate shares purchased for treasury were 651,867 and 386,458,
at an aggregate cost of $10.1 million and $4.4 million as of December 31, 1998
and 1997, respectively.
As more fully discussed in Note 18 to the consolidated financial
statements, Management believes as of December 31, 1998 and 1997, each of the
Subsidiary Banks was "well capitalized" as defined by the Federal Deposit
Insurance Corporation Improvement Act of 1991.
As discussed under "--Financial Condition and Average Balances," in
1998, FBA formed First Capital for the purpose of issuing $44.0 million of
Preferred Securities. FBA received the proceeds, issued a subordinated debenture
to First Capital, and made certain guarantees and commitments relating to the
Preferred Securities. The Preferred Securities are eligible for inclusion in
Tier 1 capital of FBA for regulatory purposes. See Note 18 to the consolidated
financial statements.

Interest Rate Risk Management

For financial institutions, the maintenance of a satisfactory level of
net interest income is a primary factor in achieving acceptable income levels.
However, the maturity and repricing characteristics of the institution's loan
and investment portfolios, relative to those within its deposit structure, may
differ significantly. These characteristics are influenced by the nature of the
loan and deposit markets within which such institution operates, as well as its
objectives for business development within those markets at any point in time.
In addition, the ability of borrowers to repay loans and depositors to withdraw
funds prior to stated maturity dates introduces divergent option characteristics
which operate primarily as interest rates change. These factors cause various
elements of the institution's balance sheet to react in different manners and at
different times relative to changes in interest rates, thereby leading to
increases or decreases in net interest income over time. Depending upon the
nature and velocity of interest rate movements and their effect on the specific
components of the institution's balance sheet, the effects on net interest
income can be substantial. Consequently, a fundamental requirement in managing a
financial institution is establishing effective control over the exposure of the
institution to changes in interest rates.
FBA manages its interest rate risk by: (1) maintaining an Asset
Liability Committee ("ALCO") responsible to FBA's Board of Directors to review
the overall interest rate risk management activity and approve actions taken to
reduce risk; (2) maintaining an effective simulation model to determine FBA's
exposure to changes in interest rates; (3) coordinating the lending, investing
and deposit-generating functions to control the assumption of interest rate
risk; and (4) employing various off-balance-sheet financial instruments to
offset inherent interest rate risk when it becomes excessive. The objective of
these procedures is to limit the adverse impact which changes in interest rates
may have on net interest income.
The ALCO has overall responsibility for the effective management of
interest rate risk and the approval of policy guidelines. The ALCO includes the
Chairman, President and Chief Executive Officer, the senior executives of
investments, credit, retail banking, commercial banking and finance, and certain
other officers. The ALCO is supported by the Asset Liability Management Group
which monitors interest rate risk, prepares analyses for review by the ALCO and
implements actions which are either specifically directed by the ALCO or
established by policy guidelines.
The objective and primary focus of interest sensitivity management is
to optimize earnings results, while managing, within internal policy
constraints, interest rate risk. FBA's policy on rate sensitivity is to manage
exposure to potential risks associated with changing interest rates by
maintaining a balance sheet posture in which annual net interest income is not
significantly impacted by reasonably possible near-term changes in interest
rates. To measure the effect of interest rate changes, FBA calculates its net
income over two one-year horizons on a pro forma basis. The analysis assumes
various scenarios for increases and decreases in interest rates including both
instantaneous and gradual and parallel and non-parallel shifts in the yield
curve, in varying amounts. For purposes of arriving at reasonably possible
near-term changes in interest rates, FBA includes scenarios based on actual

<PAGE>

changes in interest rates which have occurred over a two year period, simulating
both a declining and rising interest rate scenario. Consistent with the table
presented on page 18, which indicates FBA is "asset-sensitive," FBA's simulation
model indicates a loss of projected net income should interest rates decline.
While a decline in interest rates of less than 10% has a diminutive effect on
the earnings of FBA, a significant decline in interest rates, resembling the
actual decline which occurred over a two-year period commencing in March 1991,
indicates a loss of net income equivalent to approximately 5% of net interest
income for the year ended December 31, 1998.
FBA utilizes off-balance-sheet derivative financial instruments to
assist in the management of interest rate sensitivity and to modify the
repricing, maturity and option characteristics of on-balance-sheet assets and
liabilities. Derivative financial instruments held by FBA for purposes of
managing interest rate risk are summarized as follows:
<TABLE>
<CAPTION>

December 31, 1998 December 31, 1997
------------------- -------------------
Notional Credit Notional Credit
amount amount amount amount
------ ------ ------ ------
(dollars expressed in thousands)

<S> <C>
Interest rate swap agreements............ $ 65,000 -- -- --
Interest rate cap agreement.............. 10,000 55 10,000 222
</TABLE>

The notional amounts of derivative financial instruments do not
represent amounts exchanged by the parties and, therefore, are not a measure of
FBA's credit exposure through its use of derivative financial instruments. The
amounts and the other terms of the derivatives are determined by reference to
the notional amounts and the other terms of the derivatives.
During 1998, FBA entered into $65.0 million notional amount of interest
rate swap agreements (Swap Agreements) to effectively lengthen the repricing
characteristics of certain interest-earning assets to correspond more closely
with its funding source with the objective of stabilizing cash flow, and
accordingly, net interest income, over time. The Swap Agreements provide for FBA
to receive a fixed rate of interest and pay an adjustable rate equivalent to the
90-day London Interbank Offering Rate (LIBOR). The terms of the Swap Agreements
provide for FBA to pay quarterly and receive payment semi-annually. The maturity
dates, notional amounts, interest rates paid and received and fair values of
interest rate swap agreements outstanding as of December 31, 1998 were as
follows:
<TABLE>
<CAPTION>

Notional Interest rate Interest rate Fair value
Maturity Date amount paid received gain
------------- ------ ---- -------- ----
(dollars expressed in thousands)

<S> <C> <C> <C> <C>
June 11, 2002........................... $ 15,000 5.24% 6.00% $363
September 16, 2002...................... 20,000 5.22 5.36 87
September 18, 2002...................... 30,000 5.23 5.33 92
--------- ------
$ 65,000 5.23 5.56 542
========= ==== ==== ======
</TABLE>
<PAGE>

FBA has an $10.0 million interest rate cap agreement outstanding to
limit the interest expense associated with certain interest-bearing liabilities.
At December 31, 1998 and 1997, the unamortized costs of this agreement were
$130,000 and $242,000, respectively, and were included in other assets. The net
amount due to FBA under these agreements was $5,000 and $8,000 at December 31,
1998 and 1997, respectively.

In addition to the simulation model employed by FBA, a more traditional
interest rate sensitivity position is prepared and reviewed in conjunction with
the results of the simulation model. The following table presents the projected
maturities and periods to repricing of FBA's rate sensitive assets and
liabilities as of December 31, 1998, adjusted to account for anticipated
prepayments:
<TABLE>
<CAPTION>

Over Over
three six Over
Three through through one Over
months six twelve through five
or less months months five years years Total
(dollars expressed in thousands)

Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C> <C>
Loans (1)....................................... $ 377,896 36,713 39,298 59,817 2,679 516,403
Investment securities........................... 22,798 15,827 24,348 50,432 3,558 116,693
Federal funds sold and other.................... 12,001 -- -- -- -- 12,001
--------- --------- --------- --------- -------- ---------
Total interest-earning assets................. 412,695 52,540 63,646 110,249 6,237 645,367
Effect of interest rate swap agreements......... (65,000) -- -- 65,000 -- --
--------- --------- --------- --------- -------- ---------
Total interest-earning assets after the effect
of interest rate swap agreements............ $ 347,695 52,540 63,646 175,249 6,237 645,367
========= ========= ========= ========= ======== =========
Interest-bearing liabilities:
Interest-bearing demand accounts................ $ 26,885 16,712 10,899 7,993 10,173 72,662
Money market demand accounts.................... 15,099 12,434 10,658 15,099 35,526 88,816
Savings accounts................................ 90,336 -- -- -- -- 90,336
Time deposits................................... 67,508 66,347 57,689 49,831 8 241,384
Other borrowed funds............................ 4,141 -- -- -- -- 4,141
--------- --------- --------- --------- -------- ---------
Total interest-bearing liabilities............ $ 203,969 95,494 79,246 72,923 45,707 497,339
========= ========= ========= ========= ======== =========
Interest-sensitivity gap:
Periodic........................................ $ 143,726 (42,954) (15,600) 102,326 (39,470) 148,028
=========
Cumulative...................................... 143,726 100,772 85,172 187,498 148,028
========= ========= ========= ========= ========
Ratio of interest-sensitive assets to
interest-sensitive liabilities:
Periodic...................................... 1.70 0.55 0.80 2.40 0.14 1.30
=========
Cumulative.................................... 1.70 1.34 1.22 1.42 1.30
========= ========= ========= ========= ========
</TABLE>

- ----------------------
(1) Loans presented net of unearned discount

Management made certain assumptions in preparing the table above. These
assumptions included: Loans will repay at historic repayment speeds;
mortgage-backed securities, included in investment securities, will repay at
projected repayment speeds; interest-bearing demand accounts and savings
accounts are interest-sensitive at a rate of 37% and 17%, respectively, of the
remaining balance for each period presented; and fixed maturity deposits will
not be withdrawn prior to maturity. A significant variance in actual results
from one or more of these assumptions could materially affect the results
reflected in the table.
At December 31, 1998 and 1997, FBA's asset-sensitive position on a
cumulative basis through the twelve-month time horizon was $85.2 million, or
11.8% of total assets, and $61.6 million, or 9.6% of total assets, respectively.

<PAGE>

The asset-sensitive position is attributable to the composition of the loan and
investment security portfolios as compared to the deposit base. The increase for
1998 is primarily attributable to the composition of acquired assets and the
remaining proceeds from the issuance of the Preferred Securities of $26.0
million invested on short-term basis. The increase was partially offset by the
interest rate swap agreements entered into during June and September 1998.
The interest-sensitivity position is one of several measurements of the
impact of interest rate changes on net interest income. Its usefulness in
assessing the effect of potential changes in net interest income varies with the
constant change in the composition of FBA's assets and liabilities. For this
reason, FBA places greater emphasis on a simulation model for monitoring its
interest rate risk exposure.

Liquidity

The liquidity of FBA and the Subsidiary Banks is the ability to
maintain a cash flow which is adequate to fund operations and meet obligations
and other commitments on a timely basis. The Subsidiary Banks receive funds for
liquidity from customer deposits, loan payments, maturities of loans and
investments, sales of investments and from earnings. In addition, the Subsidiary
Banks may avail themselves of more volatile sources of funds through the
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 FHLB. The aggregate funds acquired from these more volatile
sources were $56.3 million and $56.2 million at December 31, 1998 and 1997,
respectively.
The following table presents the maturity structure of volatile funds,
which consists of certificates of deposit of $100,000 or more and other
short-term borrowings, at December 31, 1998:

December 31, 1998
(dollars expressed in thousands)

3 months or less.................. $ 19,759
Over 3 through 6 months........... 16,608
Over 6 through 12 months.......... 13,065
Over 12 months.................... 6,841
--------
Total........................... $ 56,273
========

In addition to these more volatile sources of funds, FBA has borrowed
from First Banks under a $20.0 million promissory note payable (Note Payable).
Borrowings under the Note Payable have been utilized to facilitate the funding
of FBA's acquisitions, support the possible repurchases of common stock from
time to time and for other corporate purposes. The borrowings under the Note
Payable bear interest at an annual rate of one-quarter percent less than the
"Prime Rate" as reported in The Wall Street Journal. The principal and accrued
interest under the Note Payable are due and payable on October 31, 2001. There
were no amounts outstanding under the Note Payable at December 31, 1998. At
December 31, 1997, $14.9 million was outstanding under the Note Payable. In
connection with FBA's acquisition of FCB, $10.0 million of the outstanding
balance was exchanged for 804,000 shares of FBA common stock, and the remaining
balance was repaid in full from the proceeds from the issuance of the Preferred
Securities.
Management believes the available liquidity and operating results of
the Subsidiary Banks will be sufficient to provide funds for growth and to meet
FBA's operating and debt service requirements both on a short-term and long-term
basis.

Year 2000 Compatibility

FBA and the Subsidiary Banks are subject to risks associated with the
"Year 2000" problem, a term which refers to uncertainties about the ability of
various data processing hardware and software systems to interpret dates
correctly surrounding the beginning of the Year 2000. Financial institutions are
particularly vulnerable to Year 2000 issues because of heavy reliance in the
industry on electronic data processing and funds transfer systems.
As described in Note 15 to the consolidated financial statements, data
processing services are provided to FBA by First Services, L.P. under the terms
of data processing agreements. To address the Year 2000 problem, FBA, working
jointly with First Banks, has established a dedicated team to coordinate the
overall Year 2000 Preparedness Program (Program) under the guidelines of the
Comprehensive Year 2000 Plan (Plan) as approved by the Board of Directors. The
Plan summarizes each major phase of the Program and the estimated costs to
remediate and test systems in preparation for the Year 2000. The Plan addresses
both Information Technology (IT) projects, such as data processing and data
network, and non-IT projects, such as building facilities and security. The
major phases of the Program are awareness, assessment, remediation, validation
and implementation.

<PAGE>

The awareness phase included a company-wide campaign to communicate the
Year 2000 problem and the potential ramifications to the organization.
Concurrent with this phase, the Year 2000 Program Team (Team) began the
assessment phase of the Program. The assessment phase included the inventorying
of systems that may be impacted by the Year 2000 problem. The business use of
each inventoried item was analyzed and prioritized from critical to
non-critical, based upon the perceived adverse effect on the financial condition
of FBA in the event of a loss or interruption in the use of each system. The
awareness and assessment phases of the Program were completed as scheduled.
FBA's critical systems are purchased from industry-known vendors. Such
systems are generally used in their standard configuration, that is, with minor
modification. Focusing on these critical systems, FBA is closely reviewing and
monitoring the Year 2000 progress as reported by each vendor and testing, in
most cases, on a system separate from the on-line production system. The review
and testing of critical data processing service providers has commenced and
should be completed by March 31, 1999.
For the critical systems that have been modified, the vendors provided
remediation for such systems that were not otherwise reported as "Year
2000-ready." As the remediation phase was completed within the stated deadline,
FBA did not invoke any remediation contingency efforts.
Concurrent with the completion of the remediation phase of the Program,
FBA commenced the final analysis of the validation phase for critical systems,
including remediated systems provided by third party vendors. This portion of
the Program was substantially complete as of December 31, 1998, with
approximately 95% of critical systems tested.
FBA, along with First Banks, has accelerated the replacement of its
existing teller system (ISC), since certain functions of ISC were not Year 2000
compliant. Planning for the replacement of ISC has been underway for several
years with the primary objectives of adding functionality to meet expanding
product and service offerings and improving efficiency in serving customers. As
the newly selected teller system (CFI) also provided a solution for the Year
2000 problem, the overall implementation schedule was accelerated. Recognizing
the heightened risks of deploying CFI system within the narrowed timeline
created by the Year 2000 issue, emphasis was first given to the Year 2000
solution for ISC, with deployment of CFI throughout 1999 and early 2000. The
testing of the Year 2000 solution ISC has been completed and is available to be
implemented throughout FBA's branch network.
The testing of CFI was completed by December 31, 1998. The CFI was
installed in selected bank test locations of First Banks during the fourth
quarter of 1998. The estimated cost of the teller replacement is $1.4 million
and will be charged to expense over a 60-month period upon installation at each
branch location. First Banks is also upgrading its local area network-based
systems, networks and core processor, and has purchased certain item processing
equipment, as the previous equipment, which is fully depreciated, was not Year
2000 compliant. The estimated cost of these upgrades and the item processing
equipment will be charged to FBA under the terms of certain data processing and
management services agreements. See Note 15 to the consolidated financial
statements for a further discussion of transactions with related parties.
The final phase of the Program is the implementation of remediated and
other systems into the operating environment of FBA and First Banks. The final
phase of the Program is scheduled to be completed by June 30, 1999.
FBA has also assessed the Year 2000 risks relating to its lines of
business separate from its dependence on data processing. The assessment
includes a review of larger commercial loan and deposit customers to ascertain
their overall preparedness regarding Year 2000 risks. The process requires
lending and other banking officers to meet with certain of their customers to
review and assess their overall preparedness for Year 2000 risks. While the
process of evaluating the potential adverse effects of Year 2000 risks on these
customers revealed no probable adverse effect to FBA, it is not possible to
quantify the overall potential adverse effects to FBA resulting from the failure
of these customers, or other customers not meeting the review criteria, to
adequately prepare for the Year 2000. The failure of a commercial bank customer
to adequately prepare for Year 2000 could have a significant adverse effect on
such customer's operations and profitability, in turn inhibiting its ability to
repay loans in accordance with their terms or requiring the use of its deposited
funds. FBA continues to review and structure certain funding sources to
facilitate the Subsidiary Banks' liquidity requirements under varying cash flow
assumptions.
The Plan also provides for the identification and communication with
significant non-data processing third party vendors regarding their preparedness
for Year 2000 risks. While the results of this process have not revealed any
quantifiable loss to FBA, the absence of certain basic services such as
telecommunications, electric power and service provided by other financial
institutions and governmental agencies would have a serious impact on the
operations of FBA. The review of significant non-data processing third party
vendors regarding their preparedness for Year 2000 risks will continue in 1999.

<PAGE>

The total cost of the Program is currently estimated at $2.3 million,
comprised of capital improvements of $1.4 million and direct expenses
reimbursable to First Services L.P. of $900,000. The capital improvements, as
previously discussed, will be charged to expense in the form of depreciation
expense or lease expense, generally over a period of 60 months. FBA incurred
direct expenses related to the Program of approximately $180,000 for 1998. In
addition, FBA is estimating direct expenses of $720,000 for the duration of the
Program. The total cost could vary significantly from those currently estimated
for unforeseen circumstances which could develop in carrying out the Program.
Concurrent with the development and execution of the Plan is the
evolution of FBA's Year 2000 Contingency Plan (Contingency Plan). The
Contingency Plan is intended to be a living document changing and developing to
reflect the results, progress and current status of the Program. The Contingency
Plan includes the remediation and business resumption procedures for common
systems, coordinated by the Team, and departmental specific systems, coordinated
by the appropriate departmental manager and the assigned Team member. The
Contingency Plan addresses a variety of issues including critical systems,
credit risk, liquidity, loan and deposit customers, facilities, supplies and
computer hot-site location.
While FBA is making a substantial effort to become Year 2000 compliant,
there is no assurance the Year 2000 problem would not have a material adverse
effect on its financial condition or results of operations.

Effect of New Accounting Standards

FBA adopted the provisions of Statement of 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. SFAS 130 mandates that 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.
FBA adopted the provisions of SFAS No. 131 -- Disclosures about
Segments of an Enterprise and Related Information (SFAS 131) on December 31,
1998. SFAS 131 established standards for the way public business enterprises
report information about operating segments in annual financial statements and
requires those enterprises to report selected information about operating
segments in interim financial reports issued to shareholders beginning in 1999.
Additionally, SFAS 131 established 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. The
implementation of SFAS 131 resulted in no effect on FBA's consolidated financial
statements other than additional disclosure requirements included in the notes
to the consolidated financial statements.
In June 1998, the FASB issued SFAS No. 133 -- Accounting for Derivative
Instruments and Hedging Activities (SFAS 133). SFAS 133 establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. If
certain conditions are met, a derivative may be specifically designated as a
hedge in one of three categories. The accounting for changes in the fair value
of a derivative (that is, gains and losses) depends on the intended use of the
derivative and the resulting designation. Under SFAS 133, an entity that elects
to apply hedge accounting is required to establish at the inception of the hedge
the method it will use for assessing the effectiveness of the hedging derivative
and the measurement approach for determining the ineffective aspect of the
hedge. Those methods must be consistent with the entity's approach to managing
risk. SFAS 133 applies to all entities and is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. Initial application should be as
of the beginning of an entity's fiscal quarter; on that date, hedging
relationships must be designated and documented pursuant to the provisions of
SFAS 133. Earlier application of all of the provisions is encouraged but is
permitted only as of the beginning of any fiscal quarter that begins after the
issuance date of SFAS 133. Additionally, SFAS 133 should not be applied
retroactively to financial statements of prior periods. FBA is currently
evaluating SFAS 133 to determine its potential impact on the consolidated
financial statements of FBA.
<PAGE>

Effects of Inflation

Financial institutions are less affected by inflation than other types
of companies. Financial institutions make relatively few significant asset
acquisitions which are directly affected by changing prices. Instead, the assets
and liabilities are primarily monetary in nature. Consequently, interest rates
are more significant to the performance of financial institutions than the
effect of general inflation levels. While a relationship exists between the
inflation rate and interest rates, FBA believes this is generally manageable
through its asset/liability management program.

<PAGE>
FIRST BANKS AMERICA, INC.

QUARTERLY CONDENSED FINANCIAL DATA
(Unaudited)
<TABLE>
<CAPTION>

1998
-----------------------------------------
4th 3rd 2nd 1st
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(dollars in thousands, except per share data)

<S> <C> <C> <C> <C>
Interest income.......................................... $ 13,788 14,242 13,401 12,996
Interest expense......................................... 5,547 5,747 6,035 5,899
--------- -------- -------- -------
Net interest income......................... 8,241 8,495 7,366 7,097
Provision for possible loan losses....................... 175 225 200 300
--------- -------- -------- -------
Net interest income after provision
for possible loan losses.................. 8,066 8,270 7,166 6,797
--------- -------- -------- -------
Noninterest income:
Gains on sales of securities.......................... -- 240 9 92
Other................................................. 1,039 1,067 870 1,058
--------- -------- -------- -------
Total noninterest income.................... 1,039 1,307 879 1,150
--------- -------- -------- -------
Noninterest expense...................................... 7,142 6,932 6,341 6,057
--------- -------- -------- -------
Income before income tax expense............ 1,963 2,645 1,704 1,890
Income tax expense....................................... 994 1,125 683 790
--------- -------- -------- -------
Net income.................................. $ 969 1,520 1,021 1,100
========= ======== ======== =======
Earnings per common share:
Basic................................................. $ 0.18 0.30 0.20 0.22
Diluted............................................... 0.18 0.30 0.20 0.22
========= ======== ======== =======

1997
------------------------------------------
4th 3rd 2nd 1st
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(dollars in thousands, except per share data)

Interest income.......................................... $ 11,730 10,967 10,209 9,611
Interest expense......................................... 5,295 4,792 4,560 4,508
--------- -------- -------- -------
Net interest income......................... 6,435 6,175 5,649 5,103
Provision for possible loan losses....................... 250 465 735 550
--------- -------- -------- -------
Net interest income after provision
for possible loan losses.................. 6,185 5,710 4,914 4,553
--------- -------- -------- -------
Noninterest income:
Gains on sales of securities.......................... 76 -- -- --
Other................................................. 663 655 1,022 871
--------- -------- -------- -------
Total noninterest income.................... 739 655 1,022 871
--------- -------- -------- -------
Noninterest expense...................................... 4,860 4,216 4,108 4,493
--------- -------- -------- -------
Income before income tax expense............ 2,064 2,149 1,828 931
Income tax expense....................................... 1,052 1,023 709 361
--------- -------- -------- -------
Income before minority interest in income
of subsidiary............................. 1,012 1,126 1,119 570
Minority interest in income of subsidiary................ 9 83 134 68
--------- -------- -------- -------
Net income.................................. $ 1,003 1,043 985 502
========= ======== ======== =======
Earnings per common share:
Basic................................................. $ 0.25 0.26 0.24 0.12
Diluted............................................... 0.25 0.26 0.24 0.11
========= ========= ======== =======
</TABLE>

<PAGE>

FIRST BANKS AMERICA, INC.

INDEPENDENT AUDITORS' REPORT

KPMG LLP

The Board of Directors and Stockholders
First Banks America, Inc.:

We have audited the accompanying consolidated balance sheets of First
Banks America, Inc. and subsidiaries (the Company) as of December 31, 1998 and
1997, and the related consolidated statements of income, changes in
stockholders' equity and comprehensive income, and cash flows for each of the
years in the three-year period ended December 31, 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of First Banks
America, Inc. and subsidiaries as of December 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1998 in conformity with generally accepted accounting
principles.

/s/KPMG LLP

St. Louis, Missouri
March 17, 1999

<PAGE>

FIRST BANKS AMERICA, INC.

CONSOLIDATED BALANCE SHEETS
(dollars expressed in thousands, except per share data)

December 31,
------------
1998 1997
---- ----
ASSETS
------

Cash and cash equivalents:
<S> <C> <C>
Cash and due from banks............................................................. $ 34,312 32,257
Interest-bearing deposits with other financial institutions
with maturities of three months or less.......................................... 1,001 690
Federal funds sold.................................................................. 11,000 2,215
---------- --------
Total cash and cash equivalents................................................ 46,313 35,162
---------- --------

Investment securities:
Available for sale, at fair value................................................... 114,937 148,181
Held to maturity, at amortized cost (fair value of $2,013 at December 31, 1998)..... 2,026 --
---------- --------
Total investments.............................................................. 116,963 148,181
---------- --------
Loans:
Commercial and financial............................................................ 140,151 109,763
Real estate construction and development............................................ 161,696 93,454
Real estate mortgage................................................................ 155,443 149,951
Consumer and installment............................................................ 61,907 75,023
Loans held for sale................................................................. -- 5,708
---------- --------
Total loans.................................................................... 519,197 433,899
Unearned discount................................................................... (2,794) (2,444)
Allowance for possible loan losses.................................................. (12,127) (11,407)
---------- --------
Net loans...................................................................... 504,276 420,048
---------- --------

Bank premises and equipment, net of accumulated depreciation............................ 11,542 10,697
Intangibles associated with the purchase of subsidiaries................................ 8,405 7,189
Accrued interest receivable............................................................. 4,443 4,819
Other real estate ...................................................................... 161 601
Deferred tax assets..................................................................... 12,121 14,164
Other assets............................................................................ 15,773 2,803
---------- --------
Total assets................................................................... $ 719,997 643,664
========== ========

</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

<PAGE>

FIRST BANKS AMERICA, INC.

CONSOLIDATED BALANCE SHEETS, CONTINUED
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>

December 31,
------------
1998 1997
---- ----
LIABILITIES
-----------

Deposits:
Demand:
<S> <C> <C>
Non-interest-bearing ........................................................... $ 105,949 97,393
Interest-bearing................................................................ 72,662 73,199
Savings........................................................................... 179,152 147,623
Time deposits:
Time deposits of $100 or more................................................... 52,132 52,472
Other time deposits............................................................. 189,252 185,840
--------- --------
Total deposits............................................................... 599,147 556,527

Short-term borrowings................................................................. 4,141 3,687
Promissory note payable............................................................... -- 14,900
Accrued interest payable.............................................................. 538 4,185
Deferred tax liabilities.............................................................. 1,722 1,092
Payable to former shareholders of Surety Bank......................................... -- 3,829
Accrued expenses and other liabilities................................................ 4,449 5,058
12% convertible debentures ........................................................... -- 6,500
Minority interest in subsidiary....................................................... -- 2,795
----------- --------
Total liabilities............................................................ 609,997 598,573
----------- --------

Guaranteed preferred beneficial interest in First Banks
America, Inc. subordinated debenture.............................................. 44,155 --
----------- --------

STOCKHOLDERS' EQUITY
--------------------

Common stock:
Common stock, $0.15 par value; 6,666,666 shares authorized at December 31,
1998 and 1997; 3,872,697 shares and 2,144,865 shares
issued at December 31, 1998 and 1997, respectively.............................. 581 322
Class B common stock, $0.15 par value; 4,000,000
shares authorized; 2,500,000 shares issued and
outstanding at December 31, 1998 and 1997....................................... 375 375
Capital surplus....................................................................... 68,743 47,329
Retained earnings since elimination of accumulated deficit
of $259,117 effective December 31, 1994........................................... 5,693 1,083
Common treasury stock, at cost; 651,867 shares and 386,458
shares at December 31, 1998 and 1997, respectively................................ (10,088) (4,350)
Accumulated other comprehensive income................................................ 541 332
---------- --------
Total stockholders' equity................................................... 65,845 45,091
---------- --------
Total liabilities and stockholders' equity................................... $ 719,997 643,664
========== ========

</TABLE>

<PAGE>

FIRST BANKS AMERICA, INC.

CONSOLIDATED STATEMENTS OF INCOME
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>

Years ended December 31,
---------------------------
1998 1997 1996

Interest income:
<S> <C> <C> <C>
Interest and fees on loans.................................................. $ 45,118 33,393 25,137
Investment securities....................................................... 8,103 7,870 6,257
Federal funds sold and other................................................ 1,206 1,254 1,988
-------- ------- --------
Total interest income.................................................. 54,427 42,517 33,382
-------- ------- --------
Interest expense:
Deposits:
Interest-bearing demand................................................... 1,274 1,398 756
Savings................................................................... 6,304 3,747 2,819
Time deposits of $100 or more............................................. 2,932 2,144 2,008
Other time deposits....................................................... 11,096 9,427 8,353
Promissory note payable and other borrowings................................ 1,622 2,439 1,597
-------- ------- --------
Total interest expense................................................. 23,228 19,155 15,533
-------- ------- --------
Net interest income.................................................... 31,199 23,362 17,849
Provision for possible loan losses.............................................. 900 2,000 2,405
-------- ------- --------
Net interest income after provision
for possible loan losses............................................. 30,299 21,362 15,444
-------- ------- --------
Noninterest income:
Service charges on deposit accounts and customer service fees............... 2,935 2,239 2,258
Other income................................................................ 1,099 972 1,142
Gain on sales of securities, net............................................ 341 76 185
-------- ------- --------
Total noninterest income............................................... 4,375 3,287 3,585
-------- ------- --------
Noninterest expense:
Salaries and employee benefits.............................................. 8,203 6,226 5,249
Occupancy, net of rental income............................................. 2,291 2,166 1,832
Furniture and equipment..................................................... 1,708 1,149 1,003
Advertising and business development........................................ 616 234 51
Postage, printing and supplies.............................................. 752 496 744
Legal, examination and professional fees.................................... 4,325 3,241 2,777
Data processing............................................................. 2,042 1,084 735
Amortization of intangibles associated with the purchase of subsidiaries.... 596 220 34
Communications.............................................................. 720 673 623
(Gain) loss on sale of other real estate, net of expenses................... 34 (350) 1,148
Guaranteed preferred debenture expense...................................... 1,758 -- --
Other....................................................................... 3,427 2,538 3,541
-------- ------- --------
Total noninterest expense.............................................. 26,472 17,677 17,737
-------- ------- --------
Income before provision for income tax expense
and minority interest in income of subsidiary...................... 8,202 6,972 1,292
Provision for income tax expense................................................ 3,592 3,145 470
-------- ------- --------
Income before minority interest in income of subsidiary................ 4,610 3,827 822
Minority interest in income of subsidiary....................................... -- 294 131
-------- ------- --------
Net income ............................................................ $ 4,610 3,533 691
======== ======= ========

Earnings per common share:
Basic....................................................................... $ 0.90 0.87 0.16
Diluted..................................................................... 0.90 0.86 0.16
======== ======= ========
Weighted average common stock outstanding (in thousands)........................ 5,140 4,069 4,225
======== ======= ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

<PAGE>
FIRST BANKS AMERICA, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
Three years ended December 31, 1998
(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
----- ----- ------- ------ --------- ----- ------ ------

Consolidated balances,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 1, 1996................... $ 280 375 45,871 (4,814) (828) 81 40,965
Year ended December 31, 1996:
Comprehensive income:
Net income...................... -- -- -- 691 691 -- -- 691
Other comprehensive income,
net of tax-(1) Unrealized
losses on securities, net
of reclassification
adjustment(2)................. -- -- -- (17) -- -- (17) (17)
Comprehensive income............ 674
====
Exercise of stock options........ 2 -- 36 -- -- -- 38
Compensation paid in stock....... -- -- 10 -- -- -- 10
Repurchase of outstanding
warrants...................... -- -- (1,281) -- -- -- (1,281)
Repurchases of common stock...... -- -- -- -- (2,010) -- (2,010)
Pre-merger transactions of FCB... -- -- (1,774) 1,673 -- (100) (201)
----- ---- ------- ----- ----- ----- ------
Consolidated balances,
December 31, 1996................ 282 375 42,862 (2,450) (2,838) (36) 38,195
Year ended December 31, 1997:
Comprehensive income:
Net income...................... -- -- -- 3,533 3,533 -- -- 3,533
Other comprehensive income, net
of tax-(1) Unrealized gains
on securities, net of
reclassification
adjustment(2)................. -- -- -- 368 -- -- 368 368
Comprehensive income............ 3,901
=====
Issuance of common stock
for purchase accounting
acquisition of Surety Bank.... 40 -- 4,723 -- -- -- 4,763
Exercise of stock options........ -- -- 15 -- -- -- 15
Redemption of stock options...... -- -- (290) -- -- -- (290)
Compensation paid in stock....... -- -- 13 -- -- -- 13
Repurchases of common stock...... -- -- -- -- (1,512) -- (1,512)
Pre-merger transactions of FCB... -- -- 6 -- -- -- 6
---- ---- ---- ----- ------ ----- ------
Consolidated balances,
December 31, 1997................ 322 375 47,329 1,083 (4,350) 332 45,091
Year ended December 31, 1998:
Comprehensive income:
Net income...................... -- -- -- 4,610 4,610 -- -- 4,610
Other comprehensive income,
net of tax-(1) Unrealized
gains on securities, net
of reclassification
adjustment(2)................. -- -- -- 209 -- -- 209 209
-----
Comprehensive income............ 4,819
=====
Issuance of common stock
for purchase accounting
acquisition of FCB........... 43 -- 2,965 -- -- -- 3,008
Exercise of stock options........ -- -- 13 -- -- -- 13
Redemption of stock options...... -- -- (48) -- -- -- (48)
Compensation paid in stock....... -- -- 27 -- -- -- 27
Conversion of promissory not
payable....................... 121 -- 9,879 -- -- -- 10,000
Conversion of 12% convertible
debentures.................... 95 -- 8,578 -- -- -- 8,673
Repurchases of common stock...... -- -- -- -- (5,738) -- (5,738)
---- ---- ----- ----- ------ ----- ------
Consolidated balances,
December 31, 1998................ $581 375 68,743 5,693 (10,088) 541 65,845
==== ===== ====== ====== ======= ===== ======
</TABLE>
(1) Components of other comprehensive income are shown net of tax.
(2) Disclosure of reclassification adjustment:

<TABLE>
<CAPTION>
Three years ended December 31,
------------------------------
1998 1997 1996
---- ---- ----

<S> <C> <C> <C>
Unrealized gains arising during the period.......................................... $431 417 103
Less: reclassification adjustment for gains included in net income.................. 222 49 120
---- ---- ----
Unrealized gains (losses) on securities............................................. $209 368 (17)
==== ==== ====
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

<PAGE>

FIRST BANKS AMERICA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars expressed in thousands)
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1998 1997 1996
---- ---- ----

Cash flows from operating activities:
<S> <C> <C> <C>
Net income............................................................. $ 4,610 3,533 691
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation, amortization and accretion, net...................... 1,658 1,169 153
Provision for possible loan losses................................. 900 2,000 2,405
Provision for income tax expense................................... 3,592 3,145 470
Payments of income taxes........................................... (797) (1,943) --
Gain on sales of securities, net................................... (341) (76) (185)
(Increase) decrease in accrued interest receivable................. 456 (1,274) (852)
Interest accrued on liabilities.................................... 23,228 19,155 15,533
Payments of interest on liabilities................................ (24,594) (16,972) (14,913)
Other operating activities, net.................................... 1,154 (29) 274
---------- ------- --------
Net cash provided by operating activities.................... 9,866 8,708 3,576
---------- ------- --------

Cash flows from investing activities:
Cash paid for acquired entities, net of cash and cash
equivalents received................................................. 3,241 3,072 10,715
Proceeds from sales of investment securities........................... 27,211 11,073 20,564
Maturities of investment securities available for sale................. 64,934 91,362 248,107
Purchases of investment securities available for sale.................. (57,830) (112,730) (256,304)
Purchases of investment securities held to maturity.................... (2,033) -- --
Net increase in loans.................................................. (59,478) (44,872) (17,093)
Recoveries of loans previously charged-off............................. 2,470 2,288 2,439
Purchases of bank premises and equipment............................... (1,768) (822) (240)
Proceeds from sales of other real estate............................... 1,441 1,500 2,805
Other investing activities............................................. (14,465) (259) 968
---------- ------- --------
Net cash provided by (used in) investing activities.......... (36,277) (49,388) 11,961
---------- ------- --------

Cash flows from financing activities: Other increases
(decreases) in deposits:
Demand and savings deposits.......................................... 22,983 34,675 (20,290)
Time deposits........................................................ (15,524) (1,540) (20,341)
Decrease in federal funds purchased and other short-term borrowings.... -- -- (352)
Decrease in Federal Home Loan Bank advances............................ (585) (1,122) (3,957)
Increase (decrease) in securities sold under agreements to repurchase.. 1,039 1,836 (324)
(Decrease) increase in promissory note payable......................... (4,900) 900 12,946
Decrease in payable to former shareholders of Surety Bank.............. (3,829) -- --
Proceeds from issuance of guaranteed preferred subordinated debenture.. 44,124 -- --
Repurchase of common stock for treasury and warrant.................... (5,738) (1,512) (3,291)
Repurchase of stock option............................................. (8) (290) --
Proceeds from exercise of stock options................................ -- 15 38
Pre-merger transactions of FCB......................................... -- 6 3,218
---------- ------- --------
Net cash provided by (used in) financing activities.......... 37,562 32,968 (32,353)
---------- ------- --------
Net increase (decrease) in cash and cash equivalents......... 11,151 (7,712) (16,816)
Cash and cash equivalents, beginning of year............................... 35,162 42,874 59,690
---------- ------- --------
Cash and cash equivalents, end of year..................................... $ 46,313 35,162 42,874
========== ======= ========

Noncash investing and financing activities:
Loans transferred to other real estate................................. $ 680 585 1,385
Issuance of common stock in purchase accounting acquisition............ 3,008 4,763 --
Conversion of promissory note payable to common stock.................. 10,000 -- --
Conversion of 12% convertible debentures and accrued interest payable
to common stock, net of unamortized deferred acquisition costs....... 8,673 -- --
Pre-merger transaction of FCB - exchange of common
stock for dividend payable........................................... $ -- -- 643
========== ======= ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

<PAGE>

FIRST BANKS AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements of First Banks
America, Inc. and subsidiaries (FBA or the Company) have been prepared in
accordance with generally accepted accounting principles and conform to
practices prevalent among financial institutions. The following is a summary of
the more significant accounting policies followed by FBA:

Basis of Presentation. The consolidated financial statements of FBA
have been prepared in accordance with generally accepted accounting principles
and conform to predominant practices within the banking industry. Management of
FBA has made a number of estimates and assumptions relating to the reporting of
assets and liabilities and the disclosure of contingent assets and liabilities
to prepare the consolidated financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates. Certain 1997 and 1996 amounts have been reclassified to conform with
the 1998 presentation.
The Board of Directors of FBA elected to implement an accounting
adjustment referred to as a "quasi-reorganization," effective December 31, 1994.
In accordance with accounting provisions applicable to a quasi-reorganization,
the assets and liabilities of FBA were adjusted to fair value and the
accumulated deficit was eliminated as of December 31, 1994.

Restatement. Effective February 2, 1998, FBA completed its acquisition
of First Commercial Bancorp, Inc. (FCB) and FCB's wholly owned subsidiary, First
Commercial Bank (First Commercial), in a transaction accounted for as a
combination of entities under common control. First Banks, Inc., St. Louis,
Missouri (First Banks), owned a majority interest in both FBA and FCB.
The consolidated financial statements give retroactive effect to the
transaction and, as a result, the consolidated balance sheets, statements of
income and statements of cash flows are presented as if the combining entities
had been consolidated for all periods presented which are subsequent to First
Banks' acquisition of FCB on August 23, 1995. The consolidated statements of
stockholders' equity reflect the accounts of FBA as if the common stock issued
to First Banks in exchange for its majority interest in FCB had been outstanding
for all periods subsequent to August 23, 1995. First Banks' ownership interest
in FCB was approximately 96.1% from August 23, 1995 to May 1996 and 61.5% from
June 1996 to February 2, 1998. The remaining interest in FCB acquired by FBA is
reflected in the consolidated financial statements as minority interest for the
period from August 23, 1995 to February 2, 1998.
First Banks owned 76.8% of FBA as of December 31, 1998.

Principles of Consolidation. The consolidated financial statements
include the accounts of the parent company and its subsidiaries, all of which
are wholly owned. All significant intercompany accounts and transactions have
been eliminated. FBA operates through two banking subsidiaries, First Bank of
California, headquartered in Roseville, California (FB California) and First
Bank Texas National Association, headquartered in Houston, Texas (FB Texas),
collectively referred to as the Subsidiary Banks.

Cash and Cash Equivalents. Cash, due from banks, federal funds sold,
and interest-bearing deposits with maturities of three months or less are
considered to be cash and cash equivalents for purposes of the consolidated
statements of cash flows.
The Subsidiary Banks are required to maintain certain daily reserve
balances in accordance with regulatory requirements. These reserve balances were
$9.1 million and $4.6 million at December 31, 1998 and 1997, respectively.

Investment Securities. The classification of investment securities as
available for sale or held to maturity is determined at the date of purchase.
FBA does not engage in the trading of investment securities. Investment
securities classified as available for sale are those debt and equity securities
for which FBA has no immediate plan to sell, but which may be sold in the future
if circumstances warrant. Available for sale securities are stated at current
fair value. Realized gains and losses are included in noninterest income upon
commitment to sell, based on the amortized cost of the individual security sold.
Unrealized gains and losses are recorded, net of related income tax effects, in
a separate component of stockholders' equity. All previous fair value
adjustments included in stockholders' equity are reversed upon sale.

<PAGE>

Investment securities designated as held to maturity are those debt
securities which FBA has the positive intent and ability to hold until maturity.
Held to maturity securities are stated at amortized cost, in which the
amortization of premiums and accretion of discounts are recognized over the
contractual maturities or estimated lives of the individual securities, adjusted
for anticipated prepayments, using the level-yield method.

Loans. Loans held for portfolio are carried at cost, adjusted for
amortization of premiums and accretion of discounts using the interest method.
Interest and fees on loans are recognized as income using the interest method.
Loans held for portfolio are stated at cost as FBA has the ability and it is
management's intention to hold them to maturity.
The accrual of interest on loans is discontinued when it appears that
interest or principal may not be paid in a timely manner in the normal course of
business. Generally, payments received on nonaccrual and impaired loans are
recorded as principal reductions. Interest income is recognized after all
principal has been repaid or an improvement in the condition of the loan has
occurred which would warrant resumption of interest accruals.
A loan is considered impaired when it is probable a creditor will be
unable to collect all amounts due, both principal and interest, according to the
contractual terms of the loan agreement. When measuring impairment, the expected
future cash flows of an impaired loan are discounted at the loan's effective
interest rate. Alternatively, impairment is measured by reference to an
observable market price, if one exists, or the fair value of the collateral for
a collateral-dependent loan. Regardless of the historical measurement method
used, FBA measures impairment based on the fair value of the collateral when
foreclosure is probable. Additionally, impairment of a restructured loan is
measured by discounting the total expected future cash flows at the loan's
effective rate of interest as stated in the original loan agreement. FBA
continues to use its existing nonaccrual methods for recognizing interest income
on impaired loans.

Loans Held For Sale. Mortgage loans held for sale are carried at the
lower of cost or market value which is determined on an individual loan basis.
Gains or losses on the sale of loans held for sale are determined on a specific
identification method.

Allowance for Possible Loan Losses. The allowance for possible loan
losses is maintained at a level considered adequate to provide for potential
losses. The provision for possible loan losses is based on a periodic analysis
of the loans by management, considering, among other factors, current economic
conditions, loan portfolio composition, past loan loss experience, independent
appraisals, loan collateral and payment experience. In addition to the allowance
for estimated losses on impaired loans, an overall unallocated allowance is
established to provide for unidentified credit losses which are inherent in the
portfolio. As adjustments become necessary, they are reflected in the results of
operations in the periods in which they become known.

Bank Premises and Equipment. Bank premises and equipment are stated at
cost less accumulated depreciation and amortization. Depreciation is computed
primarily using the straight-line method over the estimated useful lives of the
related assets. Amortization of leasehold improvements is calculated using the
straight-line method over the shorter of the useful life of the improvement or
term of the lease. Bank premises and improvements are depreciated over 15 to 29
years and equipment over two to ten years.

Intangibles Associated With the Purchase of Subsidiaries. The excess of
cost over net assets acquired of purchased subsidiaries is amortized using the
straight-line method over the estimated periods to be benefited, which has been
estimated at 15 years.

Other Real Estate. Other real estate, consisting of real estate
acquired through foreclosure or deed in lieu of foreclosure, is stated at the
lower of fair value less applicable selling costs. The excess of cost over fair
value of the property at the date of acquisition is charged to the allowance for
possible loan losses. Subsequent reductions in carrying value, to reflect
current fair value or costs incurred in maintaining the properties are charged
to expense as incurred.

Income Taxes. FBA and its subsidiaries file a consolidated federal
income tax return. Each subsidiary pays its allocation of federal income taxes
to FBA, or receives payment from FBA to the extent that tax benefits are
realized. Separate state franchise tax returns are filed in Texas and Delaware
for the appropriate entities. FBA and its subsidiaries join in filing Illinois
and California unitary income tax returns with First Banks, as First Banks'
ownership is greater than 50%.
<PAGE>

Financial Instruments. A financial instrument is defined as cash,
evidence of an ownership interest in an entity, or a contract that conveys or
imposes on an entity the contractual right or obligation to either receive or
deliver cash or another financial instrument.

Financial Instruments With Off-Balance-Sheet Risk. FBA uses financial
instruments to reduce the interest rate risk arising from its financial assets
and liabilities. These instruments involve, in varying degrees, elements of
interest rate risk and credit risk in excess of the amount recognized in the
consolidated balance sheets. "Interest rate risk" is defined as the possibility
that interest rates may move unfavorably from the perspective of FBA. The risk
that a counterparty to an agreement entered into by FBA may default is defined
as "credit risk."

FBA is party to commitments to extend credit and commercial and standby
letters of credit in the normal course of business to meet the financing needs
of its customers. These commitments involve, in varying degrees, elements of
interest rate risk and credit risk in excess of the amount recognized in the
consolidated balance sheets.

Interest Rate Swap Agreements. Interest rate swap agreements are
accounted for on an accrual basis with the net interest differential being
recognized as an adjustment to interest expense of the related liability. In the
event of early termination of these derivative financial instruments, the net
proceeds received or paid are deferred and amortized over the shorter of the
remaining contract life of the derivative financial instrument or the maturity
of the related liability. If, however, the amount of the underlying liability is
repaid, then the gains or losses on the agreements are recognized immediately in
the consolidated statements of income.

Interest Rate Cap Agreements. Interest rate cap agreements are
accounted for on an accrual basis with the net interest differential being
recognized as an adjustment to interest expense of the related liability.
Premiums and fees paid upon the purchase of interest rate cap agreements are
amortized to interest expense over the life of the agreements using the interest
method. In the event of early termination of an interest rate cap agreement, the
net proceeds received or paid are deferred and amortized over the shorter of the
remaining contract life or the maturity of the related liability. If, however,
the amount of the underlying liability is repaid, then the gains or losses on
the agreements are recognized immediately in the consolidated statements of
income. The unamortized premiums and fees paid are included in other assets in
the accompanying consolidated balance sheets.

Earnings Per Common Share. Basic EPS is computed by dividing the income
available to common stockholders (the numerator) by the weighted average number
of common shares outstanding (the denominator) during the year. The computation
of diluted EPS is similar except the denominator is increased to include the
number of additional common shares that would have been outstanding if the
dilutive potential shares had been issued. In addition, in computing the
dilutive effect of convertible securities, the numerator is adjusted to add back
(a) any convertible preferred dividends and (b) the after-tax amount of interest
recognized in the period associated with any convertible debt.

(2) ACQUISITIONS

On November 1, 1996, FBA completed its acquisition of Sunrise Bancorp,
a California corporation (Sunrise), and its wholly owned subsidiary, Sunrise
Bank, in exchange for $17.5 million in cash. At the time of the transaction,
Sunrise had $110.8 million in total assets, $45.5 million in cash and cash
equivalents and investment securities, $61.1 million in total loans, net of
unearned discount, and $91.1 million in total deposits. The acquisition was
funded from available cash and borrowings of $14.0 million under a promissory
note payable (Note Payable) to First Banks.
On December 1, 1997, FBA completed its acquisition of Surety Bank in
exchange for 264,622 shares of FBA common stock and cash of $3.8 million. The
cash portion of this transaction, which was paid to the former shareholders of
Surety Bank in January 1998, was funded by an advance under the Note Payable. At
the time of the transaction, Surety had $72.8 million in total assets, $14.9
million in cash and cash equivalents and investment securities, $54.4 million in
total loans, net of unearned discount, and $67.5 million in total deposits.

<PAGE>

Sunrise was merged into a wholly owned subsidiary of FBA. Sunrise Bank
and Surety Bank were merged into FB California. The acquisitions of Sunrise and
Surety Bank were accounted for under the purchase method of accounting and,
accordingly, the consolidated financial statements include the financial
position and results of operations for the period subsequent to the acquisition
dates, and the assets acquired and liabilities assumed were recorded at fair
value at the acquisition date. The excess of the cost over the fair value of the
net assets acquired was $3.2 million and $2.8 million for Sunrise and Surety
Bank, respectively, and is being amortized over 15 years.
On February 2, 1998, FBA completed its acquisition of Pacific Bay Bank
in exchange for cash of $4.2 million. This transaction was funded by an advance
under the Note Payable. At the time of the transaction, Pacific Bay Bank had
$38.3 million in total assets, $7.4 million in cash and cash equivalents, $29.7
million in total loans, net of unearned discount, and $35.2 million in total
deposits. 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.
On February 2, 1998, FBA and FCB were merged. Under the terms of the
Agreement and Plan of Merger (Agreement), FCB was merged into FBA, and FCB's
wholly owned subsidiary, First Commercial Bank, was merged into FB California.
The FCB shareholders received .8888 shares of FBA common stock for each share of
FCB common stock that they held. In total, FCB shareholders received
approximately 751,728 shares of FBA common stock. The transaction also provided
for First Banks to receive 804,000 shares of FBA common stock in exchange for
$10.0 million of the Note Payable. In addition, FCB's 12% convertible debentures
of $6.5 million, which were owned by First Banks, were exchanged for a similar
convertible debenture of FBA.
FCB had 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, $64.4 million in investment securities, $118.9 million
in total loans, net of unearned discount, and $173.1 million in total deposits.
First Banks owned a majority interest in both FBA and FCB. Consistent
with the accounting treatment for a combination of entities under common
control, the merger was accounted for by FBA as follows:

o First Banks' interest in FCB was accounted for by FBA at First Banks'
historical cost. First Banks' historical cost basis in FCB was
determined under the purchase method of accounting, effective upon
First Banks' acquisition of First Commercial on August 23, 1995.
Accordingly, the consolidated financial statements of First Banks
include the financial position and results of operations for the
periods subsequent to the acquisition date, and the assets acquired and
liabilities assumed were recorded at fair value at the acquisition
date.

o Effective with the merger, because the two entities were under the
common control of First Banks, the consolidated financial statements of
FBA were restated to reflect First Banks' interest in the financial
condition and results of operations of FCB for the periods subsequent
to August 23, 1995.

o The amount attributable to the interest of the minority shareholders in
the fair value of the net assets of FCB was accounted for by FBA under
the purchase method of accounting. Accordingly, such amount was
reflected by FBA at fair value, as determined by the market value of
FBA common stock exchanged for the minority interest pursuant to the
Agreement.

On March 4, 1999, FBA completed its acquisition of Redwood Bancorp and
its wholly-owned subsidiary, Redwood Bank, for cash consideration of $26.0
million. Redwood Bank is headquartered in San Francisco, California and operates
four banking locations in the San Francisco Bay area. Redwood Bank had $183.9
million in total assets, $134.4 million in loans, net of unearned discount,
$34.4 in investment securities and $162.9 million in deposits at the acquisition
date. Redwood Bank is operating as a subsidiary of FBA. The acquisition was
funded from available proceeds from the sale of the 8.50% Guaranteed Preferred
Beneficial Interest in First Banks America, Inc. Subordinated Debenture
(Preferred Securities) completed in July 1998.

<PAGE>

The following information presents unaudited pro forma condensed
results of operations of FBA, combined with the acquisitions of Surety Bank and
Redwood Bancorp, as if FBA had completed the transactions on January 1, 1997. In
addition, the minority shareholders' interest in the net assets of FCB is
presented as if FBA had acquired such interest on January 1, 1997.

<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1997
---- ----
(dollars expressed in thousands,
except per share data)

<S> <C> <C>
Net interest income.................................................. $ 37,856 32,314
Provision for possible loan losses................................... 900 2,255
Net income .......................................................... 5,354 3,895
========== =======

Weighted average shares of common stock outstanding (in thousands).. 5,140 5,427
========== =======

Earnings per common share:
Basic............................................................. $ 1.04 0.72
Diluted........................................................... 1.04 0.71
========== =======
</TABLE>

The unaudited pro forma condensed results of operations reflect the
application of the purchase method of accounting 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 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. The unaudited pro forma condensed results of
operations do not reflect the acquisition of Pacific Bay Bank as it was not
material.

<PAGE>
(3) INVESTMENTS IN DEBT AND EQUITY SECURITIES

Securities Available for Sale. The amortized cost, contractual
maturity, unrealized gains and losses and fair value of investment securities
available for sale at December 31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>

Maturity
-------------------------------- Total
After amor- Gross Weighted
1 Year 1-5 5-10 10 tized unrealized Fair average
or less years years years cost Gains Losses value yield
------- ----- ----- ----- ---- ----- ------ ----- -----
(dollars expressed in thousands)
December 31, 1998:
Carrying value:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury.................. $ 31,030 15,137 -- -- 46,167 483 -- 46,650 6.03%
U.S. government agencies and
corporations:
Mortgage-backed......... 2,199 7,202 6,728 15,683 31,812 199 (23) 31,988 6.19
Other................... 4,503 16,529 4,995 3,490 29,517 175 -- 29,692 5.98
Equity investments in other
Financial institutions...... 3,600 -- -- -- 3,600 -- -- 3,600 8.04
Federal Home Loan Bank and
Federal Reserve Bank stock
(no stated maturity)........ 3,007 -- -- -- 3,007 -- -- 3,007 6.36
-------- ------- ------ ---- -------- --- ---- ------- ----
Total.............. $ 44,339 38,868 11,723 19,173 114,103 857 (23) 114,937 6.13
======== ======= ====== ====== ======== === ==== ======= ====
Market value:
Debt securities................ $ 37,980 39,323 11,768 19,259
Equity securities.............. 6,607 -- -- --
-------- ------- ------ ------
Total.............. $ 44,587 39,323 11,768 19,259
======== ======= ====== ======

Weighted average yield............ 6.20% 5.77% 6.52% 6.49%
==== ==== ==== ====

December 31, 1997:
Carrying value:
U.S. Treasury.................. $ 21,061 56,249 -- -- 77,310 498 (1) 77,807 6.04%
U.S. government agencies and
corporations:
Mortgage-backed......... -- 14,059 47 6,755 20,861 38 (28) 20,871 6.03
Other................... 8,488 34,974 -- -- 43,462 41 (38) 43,465 6.15
Federal Home Loan Bank and
Federal Reserve Bank stock
(no stated maturity)........ 6,038 -- -- -- 6,038 -- -- 6,038 5.87
-------- ------- --- ---- ------- --- ---- ------- ----
Total.............. $ 35,587 105,282 47 6,755 147,671 577 (67) 148,181 6.07
======== ======= === ===== ======= === ==== ======= ====
Market value:
Debt securities................ $ 29,575 105,728 47 6,793
Equity securities.............. 6,038 -- -- --
-------- ------- --- -----
Total.............. $ 35,613 105,728 47 6,793
======== ======= === =====

Weighted average yield............ 5.87% 6.06% 6.56% 7.23%
==== ==== ==== ====
<PAGE>

Securities Held to Maturity. The amortized cost, contractual maturity,
unrealized gains and losses and fair value of investment securities held to
maturity at December 31, 1998 were as follows:

Maturity
-------------------------------- Total
After amor- Gross Weighted
1 Year 1-5 5-10 10 tized unrealized Fair average
--------------
or less years years years cost Gains Losses value yield
------- ----- ----- ----- ---- ----- ------ ----- ----
(dollars expressed in thousands)
December 31, 1998:
Carrying value...................:
U.S. Government agencies and
corporations:
Mortgage-backed....... $ -- -- -- 2,026 2,026 -- (13) 2,013 6.41%
======== ==== ===== ===== ====== ====== ===== ===== ====
Market value:
Debt securities................ $ -- -- -- 2,013
======== ==== ===== =====
Weighted average yield............ --% --% --% 6.41%
======== ==== ===== =====
</TABLE>

Proceeds from sales of available-for-sale investment securities were
$27.2 million, $11.1 million and $20.6 million for the years ended December 31,
1998, 1997 and 1996, respectively. Gross gains of $341,000, $76,000 and $185,000
were realized on those sales for the years ended December 31, 1998, 1997 and
1996, respectively. No losses were realized on those sales for the years ended
December 31, 1998, 1997 and 1996.
The Subsidiary Banks maintain investments in the Federal Home Loan Bank
(FHLB) and the Federal Reserve Bank (FRB). These investments are recorded at
cost, which represents redemption value. The investment in FHLB stock is
maintained at a minimum amount equal to the greater of 1% of the aggregate
outstanding balance of loans secured by residential real estate, or 5% of
advances from the FHLB. The investment in FRB stock is maintained at a minimum
of 6% of the Subsidiary Banks' capital stock and capital surplus.
Investment securities with a carrying value of approximately $25.4
million and $22.5 million at December 31, 1998 and 1997, respectively, were
pledged in connection with deposits of public and trust funds, securities sold
under agreements to repurchase and for other purposes as required by law.
<PAGE>

(4) LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES

Changes in the allowance for possible loan losses for the years ended
December 31 were as follows:
<TABLE>
<CAPTION>

1998 1997 1996
---- ---- ----
(dollars expressed in thousands)

<S> <C> <C> <C> <C>
Balance, January 1........................................... $11,407 10,744 10,616
Acquired allowance for possible loan losses.................. 885 30 2,338
------- ------- -------
12,292 10,774 12,954
------- ------- -------
Loans charged-off............................................ (3,535) (3,655) (7,054)
Recoveries of loans previously charged-off................... 2,470 2,288 2,439
------- ------- -------
Net loans charged-off.................................... (1,065) (1,367) (4,615)
------- ------- -------
Provision charged to operations.............................. 900 2,000 2,405
------- ------- -------
Balance, December 31......................................... $12,127 11,407 10,744
======= ======= =======
</TABLE>

At December 31, 1998 and 1997, FBA had $8.6 million and $2.8 million,
respectively, of loans on nonaccrual status. Interest on nonaccrual loans which
would have been recorded under the original terms of the loans was $802,000,
$385,000 and $476,000 for the years ended December 31, 1998, 1997 and 1996,
respectively. Of these amounts, $173,000, $297,000 and $256,000 was actually
recorded as interest income on such loans in 1998, 1997 and 1996, respectively.
At December 31, 1998 and 1997, FBA had $9.0 million and $3.3 million of
impaired loans, consisting of $8.6 million and $2.8 million of loans on
nonaccrual status and $400,000 and $500,000 of consumer installment loans 60
days or more past due, respectively. There were no specific reserves at December
31, 1998 and 1997 relating to impaired loans. The allowance for possible loan
losses includes $2.3 million and $850,000 related to impaired loans at December
31, 1998 and 1997, respectively. For the years ended December 31, 1998, 1997 and
1996, the average recorded investment in impaired loans was $6.6 million, $3.7
million and $5.1 million, respectively; and $173,000, $297,000, and $315,000,
respectively, of interest income was recognized on loans using a cash-basis
method of accounting.
FBA's primary market areas are the San Francisco - Sacramento corridor
of northern California and Houston, Dallas, Irving and McKinney, Texas. At
December 31, 1998, approximately 54.8% of the total loan portfolio and 60.6% of
the commercial and financial loan portfolio were to borrowers within these
regions.
In general, FBA is a secured lender. At December 31, 1998,
approximately 97.7% of the loan portfolio was secured. Collateral is required in
accordance with the normal credit evaluation process based upon the
creditworthiness of the customer and the credit risk associated with the
particular transaction.
<PAGE>

(5) BANK PREMISES AND EQUIPMENT

Bank premises and equipment were comprised of the following at December

1998 1997
---- ----
(dollars expressed in thousands)

Land........................................... $ 4,114 4,114
Buildings and improvements..................... 6,324 5,684
Furniture, fixtures and equipment.............. 4,457 4,384
Construction in progress....................... 480 387
-------- -------
Total...................................... 15,375 14,569
Less accumulated depreciation ................. 3,833 3,872
-------- -------
Bank premises and equipment, net........... $ 11,542 10,697
======== =======

Depreciation expense for the years ended December 31, 1998, 1997 and
1996 totaled $1.1 million, $851,000 and $858,000,
respectively.

FBA leases land, office properties and some items of equipment under
operating leases. Certain of the leases contain renewal options and escalation
clauses. Total rent expense was $1.1 million, $1.0 million and $826,000 for the
years ended December 31, 1998, 1997 and 1996, respectively. Future minimum lease
payments under noncancellable operating leases extend through 2019 as follows:

(dollars expressed
in thousands)
Year ending December 31:
1999.................................................... $ 1,245
2000.................................................... 923
2001.................................................... 635
2002.................................................... 468
2003.................................................... 389
Thereafter.............................................. 2,136
-------
Total minimum lease payments.................. $ 5,796
=======

FBA leases to unrelated parties a portion of its owned banking
facilities. Total rental income was $956,000, $762,000 and $428,000 for the
years ended December 31, 1998, 1997 and 1996, respectively.

(6) PROMISSORY NOTE PAYABLE

FBA had borrowed $14.9 million under a $20.0 million revolving Note
Payable from First Banks as of December 31, 1997. The borrowings under the Note
Payable bear interest at an annual rate of one-quarter percent less than the
"Prime Rate" as reported in the Wall Street Journal. The outstanding principal
and accrued interest under the Note Payable are due and payable on October 31,
2001. The interest expense under the Note Payable was $599,000, $1.2 million and
$194,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
There was no amounts outstanding under the Note Payable at December 31, 1998.
The accrued and unpaid interest under the Note Payable was $1.4 million at
December 31, 1997. As more fully discussed in Note 2 to the consolidated
financial statements, FBA exchanged 804,000 shares of common stock for $10.0
million of principal outstanding under the Note Payable. The remaining principal
and accrued interest under the Note Payable was repaid in full from the proceeds
of the Preferred Securities.

<PAGE>

The average balance and maximum balance outstanding during the years
ended December 31 were as follows:

1998 1997
---- ----
(dollars expressed in thousands)

Average balance............................... $ 7,770 14,367
Maximum month-end balance .................... 17,964 14,900

The average rates paid on notes payable outstanding during the years
ended December 31, 1998, 1997, and 1996 were 7.7%, 8.2% and 8.3%, respectively.

(7) 12% CONVERTIBLE DEBENTURES

As more fully described in Note 2 to the consolidated financial
statements, FBA issued to First Banks a $6.5 million 12% convertible debenture
in exchange for similar convertible debentures of FCB. The principal and any
accrued but unpaid interest thereon was convertible at any time prior to
maturity, at the option of First Banks, into FBA common stock at $14.06 per
share. On December 4, 1998, First Banks elected to convert the $6.5 million
principal and $2.4 million accrued and unpaid interest into 629,557 shares of
FBA common stock.
The interest expense under the convertible debenture was $724,000,
$791,000 and $793,000 for the years ended December 31, 1998, 1997 and 1996,
respectively. Accrued and unpaid interest on the debenture was $1.6 million at
December 31, 1997.

(8) GUARANTEED PREFERRED BENEFICIAL INTEREST IN FIRST BANKS AMERICA, INC
SUBORDINATED DEBENTURE

On July 21, 1998, First America Capital Trust (First Capital), a
newly-formed Delaware business trust subsidiary of FBA, issued 1.84 million
shares of Preferred Securities at $25 per share in an underwritten public
offering, and issued 56,908 shares of common securities to FBA at $25 per share.
FBA owns all of First Capital's common securities. The gross proceeds of the
offering were used by First Capital to purchase $47.4 million of 8.50%
Subordinated Debentures (Subordinated Debentures) from FBA, maturing on June 30,
2028. The maturity date may be shortened to a date not earlier than June 30,
2003. The Subordinated Debentures are the sole asset of First Capital. FBA made
certain guarantees and commitments relating to the Preferred Securities. FBA's
proceeds from the issuance of the Subordinated Debentures to First Capital, net
of underwriting fees and offering expenses, were $44.0 million. Distributions
payable on the Preferred Securities were $1.8 million for the year ended
December 31, 1998 and are included in noninterest expense in the consolidated
financial statements.

(9) INCOME TAXES

Income tax expense (benefit) for the years ended December 31 consists
of:

1998 1997 1996
---- ---- ----
(dollars expressed in thousands)

Current income tax expense (benefit):
Federal................................. $ 315 947 (509)
State................................... 501 383 2
------- ------ ------
816 1,330 (507)
------- ------ -------
Deferred income tax expense:
Federal................................. 2,630 1,356 23
State................................... 114 55 588
------- ------ ------
2,744 1,411 611
------- ------ ------
Change in valuation allowance............... 32 404 366
------- ------ ------
Total................................ $ 3,592 3,145 470
======= ====== ======
<PAGE>

The effective rates of federal income taxes for the years ended
December 31 differ from statutory rates of taxation as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------- -------------------- -----------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(dollars expressed in thousands)

Income before provision for
<S> <C> <C> <C> <C> <C> <C>
income tax expense............... $ 8,202 $6,972 $ 1,292
======= ====== =======
Tax expense at federal
income tax rate.................. $ 2,871 35.0% 2,440 35.0% 452 35.0%
Effects of differences in tax
reporting:
Change in the deferred tax
valuation allowance............ 32 0.4 404 5.8 366 28.3
Change in tax attributes avail-
able to be carried forward..... -- -- -- -- (605) (46.8)
State income taxes............... 400 4.9 285 4.1 385 29.8
Other............................ 289 3.5 16 0.2 (128) (9.9)
------- ------ -------- ----- ------- -----
Income tax expense
at effective rate........... $ 3,592 43.8% $3,145 45.1% $ 470 36.4%
======= ====== ====== ===== ======= =====
</TABLE>

<PAGE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>

December 31,
-------------------
1998 1997
---- ----
(dollars expressed in thousands)

Deferred tax assets:
<S> <C> <C>
Allowance for possible loan losses........................................... $ 4,323 3,971
Other real estate............................................................ 599 677
Alternative minimum tax credit............................................... 876 736
Postretirement medical plan.................................................. 233 247
Quasi-reorganization adjustment of bank premises............................. 1,327 1,377
Other........................................................................ 1,171 1,104
Net operating loss carryforwards............................................. 10,664 13,092
-------- -------
Gross Deferred tax assets.............................................. 19,193 21,204
Valuation allowance.......................................................... (7,072) (7,040)
-------- -------
Deferred tax assets.................................................... 12,121 14,164
-------- -------
Deferred tax liabilities:
FHLB stock dividends......................................................... 203 409
Bank premises and equipment.................................................. 1,145 533
Other ....................................................................... 374 150
-------- -------
Deferred tax liabilities............................................... 1,722 1,092
-------- -------
Net deferred tax assets................................................ $ 10,399 13,072
======== =======
</TABLE>

The realization of FBA's net deferred tax assets is based on the
expectation of future taxable income and the utilization of tax planning
strategies. Based on these factors, management believes it is more likely than
not that FBA will realize the recognized net deferred tax asset of $10.4
million. The net change in the valuation allowance, related to deferred tax
assets, was an increase of $32,000 for the year ended December 31, 1998. The
increase was comprised of the establishment of additional valuation reserves
resulting from net operating losses at FCB.
Changes to the deferred tax asset valuation allowance for the years
ended December 31 were as follows:
<TABLE>
<CAPTION>

1998 1997 1996
---- ---- ----
(dollars expressed in thousands)

<S> <C> <C> <C> <C>
Balance, January 1......................................... $7,040 6,579 5,554
Current year deferred provision, change in
deferred tax valuation allowance........................ 32 404 366
Purchase acquisitions...................................... -- 57 659
------ ----- -----
Balance, December 31....................................... $7,072 7,040 6,579
====== ===== =====
</TABLE>
<PAGE>

The valuation allowance for deferred tax assets at December 31, 1998
and 1997 includes $716,000, which when recognized, will be credited to
intangibles associated with the purchase of subsidiaries. The valuation
allowance for deferred tax assets at December 31, 1998 and 1997 includes $6.0
million, which when recognized, will be credited to capital surplus under the
terms of the quasi-reorganizations implemented for FBA and FCB as of December
31, 1994 and 1996, respectively.
At December 31, 1998, FBA has separate limitation year (SRLY) net
operating loss carryforwards (NOLs) of $20.3 million and alternative minimum tax
credits of $736,000. Their utilization is subject to annual limitations.
Additionally, FBA had SRLY NOLs of $10.2 million and alternative minimum tax
credits of $140,000 which are not subject to annual limitations. The NOLs for
FBA at December 31, 1998 expire as follows:

(dollars expressed in thousands)
Year ending December 31:
1999.................................... $ 4,883
2000.................................... 103
2001.................................... 1,667
2002.................................... 2,316
2003 through 2018....................... 21,498
---------
Total............................... $ 30,467
=========

(10) EARNINGS PER COMMON SHARE

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)

Year ended December 31, 1998:
<S> <C> <C> <C>
Basic EPS - income available to common stockholders............. $4,610 5,140 $ 0.90
======
Effect of dilutive securities - stock options................... -- 8
------ ------
Diluted EPS - income available to common stockholders........... $4,610 5,148 $ 0.90
====== ====== ======

Year ended December 31, 1997:
Basic EPS - income available to common stockholders............. $3,533 4,069 $ 0.87
======
Effect of dilutive securities - stock options................... -- 27
------ ------
Diluted EPS - income available to common stockholders........... $3,533 4,096 $ 0.86
====== ====== ======

Year ended December 31, 1996:
Basic EPS - income available to common stockholders............. $ 691 4,225 $ 0.16
======
Effect of dilutive securities:
Stock options........................................... -- 61
Warrants................................................ -- 91
------ ------
Diluted EPS - income available to common stockholders........... $ 691 4,377 $ 0.16
====== ====== ======
</TABLE>

(11) EMPLOYEE BENEFIT PLANS

401(K) Plan. FBA has a savings and incentive plan covering
substantially all employees. Under the plan, employer matching contributions are
determined annually by FBA's Board of Directors. Employee contributions are
limited to 15% of the employee's annual compensation not to exceed $10,000 for
1998. Total employer contributions under the plan were $106,000, $63,000 and
$40,000 for the years ended December 31, 1998, 1997 and 1996, respectively. The
plan assets are held and managed under a trust agreement with the trust
department of an affiliated bank.
<PAGE>

Pension Plan. FBA has a noncontributory defined benefit pension plan
covering substantially all officers and employees. The accumulation of benefits
under the plan were discontinued during 1994. During 1998, 1997 and 1996, no
contributions were made to the pension plan and FBA did not incur any
expenditures associated with the pension plan. FBA is in the process of
terminating this plan and does not expect to incur a significant gain or loss.

(12) DIRECTORS' STOCK BONUS PLAN

The 1993 Directors' Stock Bonus Plan provides for annual grants of FBA
common stock to the nonemployee directors of FBA. Directors' compensation of
$27,000, $13,000 and $10,000 was recorded relating to this plan for the years
ended December 31, 1998, 1997 and 1996, respectively. These amounts represented
the market values of the 1,500, 1,000 and 1,000 shares granted for the years
ended December 31, 1998, 1997 and 1996, respectively.

The plan is self-operative, and the timing, amounts, recipients and
terms of individual grants are determined automatically. On July 1 of each year,
each nonemployee director automatically receives a grant of 500 shares of common
stock. The maximum number of plan shares that may be issued shall not exceed
16,667 shares, and 8,167 shares were available to be issued at December 31,
1998. The plan will expire on July 1, 2001.

(13) COMMITMENTS AND CONTINGENCIES

FBA is a party to commitments to extend credit and commercial and
standby letters of credit in the normal course of business to meet the financing
needs of its customers. These instruments involve, to varying degrees, elements
of credit risk and interest rate risk in excess of the amount recognized in the
consolidated balance sheets. The interest rate risk associated with these credit
commitments relates primarily to the commitments to originate fixed-rate loans.
The credit risk amounts are equal to the contractual amounts, assuming the
amounts are fully advanced and the collateral or other security is of no value.
FBA uses the same credit policies in granting commitments and conditional
obligations as it does for on-balance-sheet items.
Commitments to extend credit at December 31 were as follows:

1998 1997
---- ----
(dollars expressed in thousands)

Credit card commitments.............. $ 1,850 1,978
Other loan commitments............... 260,661 237,973
Standby letters of credit............ 370 2,173
========= =========

Credit card and other loan commitments are agreements to lend to a
customer as long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. Each customer's creditworthiness
is evaluated on a case-by-case basis. The amount of collateral obtained, if
deemed necessary upon extension of credit, is based on credit evaluation of the
customer. Collateral held varies but may include accounts receivable, inventory,
property, plant, equipment, income-producing commercial properties or single
family residential properties. Collateral is generally required except for
consumer credit card commitments.
Standby letters of credit are conditional commitments issued to
guarantee the performance of a customer to a third party. The letters of credit
are primarily issued to support private borrowing arrangements and commercial
transactions. Most letters of credit extend for less than one year. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers. Upon issuance of the
commitments, FBA holds marketable securities, certificates of deposit, inventory
or other assets as collateral supporting those commitments for which collateral
is deemed necessary.

(14) STOCKHOLDERS' EQUITY
Classes of Common Stock. FBA is majority owned by First Banks. First
Banks owned 2,500,000 shares of the Class B common stock and 1,895,733 shares of
the common stock, which represented 76.84% of the outstanding voting stock of
FBA at December 31, 1998. Accordingly, First Banks has effective control over
the management and policies of FBA and the election of its directors. In
addition, on February 17, 1999, First Banks completed its purchase of 314,848
shares of common stock, pursuant to a tender offer which commenced on January 4,
1999. The tender offer increased First Banks' ownership interest to 82.3% of the
outstanding voting stock of FBA.

<PAGE>

As of December 31, 1998, FBA had issued and outstanding 3,220,830
shares and 2,500,000 shares of Common Stock and Class B Common Stock,
respectively. The rights of Class B Common Stock are in most respects equivalent
to the rights associated with the Common Stock, except the Common Stock has a
dividend preference over the Class B Common Stock, and the Class B Common Stock
is unregistered and transferable only in certain limited circumstances. The
outstanding shares of Class B Common Stock are convertible after August 31,
1999, at the option of the holder, into an equal number of shares of Common
Stock. Each share of Common Stock and Class B Common Stock is entitled to one
vote in the election of directors of FBA and in other matters on which a vote of
stockholders is taken.

Issuance of Common Stock. During 1998 and 1997, FBA issued 2,185,285
shares and 264,622 shares, respectively, of common stock as follows:

Common shares issued
--------------------
1998
----
Acquisition of FCB................................... 751,728
Conversion of Note Payable........................... 804,000
Conversion of 12% convertible debenture.............. 629,557
---------
2,185,285
1997
----
Acquisition of Surety Bank........................... 264,622
=========

Stock Options. On April 19, 1990, the Board of Directors of FBA adopted
the 1990 Stock Option Plan (1990 Plan). The 1990 Plan currently provides that no
more than 200,000 shares of common stock will be available for stock options.
One-fourth of each stock option becomes exercisable at the date of the grant and
at each anniversary date of the grant. The options expire ten years from the
date of the grant. There were no options granted under this plan during the
three years ended December 31, 1998.
At December 31, 1998, there were 36,833 shares available for future
stock options and 6,667 shares of common stock reserved for the exercise of
outstanding options. Transactions relating to the 1990 Plan for the years ended
December 31 are as follows:
<TABLE>
<CAPTION>

1998 1997 1996
----------------- ------------------- -----------------
Average Average Average
option option option
Amount price Amount price Amount price
------ ----- ------ ----- ------ -----

<S> <C> <C> <C> <C> <C> <C>
Outstanding options, January 1....... 13,334 $ 3.75 57,500 $ 3.75 67,500 $ 3.75
Options exercised and redeemed....... (6,667) 3.75 (44,166) 3.75 (10,000) 3.75
--------- ------- --------
Outstanding options, December 31..... 6,667 3.75 13,334 3.75 57,500 3.75
========= ==== ======= ======= ======== ======

Options exercisable, December 31..... 6,667 13,334 57,500
========= ======= ========
</TABLE>

Warrants. In connection with a previous restructuring of FBA, a warrant
to purchase common stock was granted to the Federal Deposit Insurance
Corporation (FDIC). On October 1, 1996, FBA purchased the outstanding warrant to
acquire 131,336 shares of FBA common stock at $0.75 per share from the FDIC for
an aggregate amount of $1.28 million. The purchase of the warrant was applied as
a reduction of capital surplus.

Distribution of Earnings of the Subsidiary Banks. The Subsidiary Banks
are restricted by various state and federal regulations as to the amount of
dividends which are available for payment of dividends to FBA. Under the most
restrictive of these requirements, the future payment of dividends from the
Subsidiary Banks is limited to approximately $4.0 million at December 31, 1998,
unless prior permission of the regulatory authorities is obtained.

(15) TRANSACTIONS WITH RELATED PARTIES
FBA purchases certain services and supplies from or through 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.

<PAGE>

First Banks provides management services to FBA and its 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 audit, loan review, income tax preparation
and assistance, accounting, asset/liability management and investment services,
loan servicing and other management and administrative services. Fees paid under
this agreement were $2.1 million, $1.4 million and $1.3 million for the years
ended December 31, 1998, 1997 and 1996, respectively. The fees paid for
management services are at least as favorable as could have been obtained from
an unaffiliated third party.
Because of the affiliation with First Banks and the geographic
proximity of certain of their offices, FBA shares the cost of certain personnel
and services used by FBA and First Banks. This includes the salaries and
benefits of certain loan and administrative personnel. The allocation of the
shared costs are charged and/or credited under the terms of cost sharing
agreements entered into during 1996. 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 these
agreements were $1.1 million, $709,000 and $412,000 for the years ended December
31, 1998, 1997 and 1996, respectively.
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.
Previously, these services were provided by a subsidiary of First Banks. Fees
paid under these agreements were $1.9 million, $1.0 million and $692,000 for the
years ended December 31, 1998, 1997 and 1996, respectively. The fees paid for
data processing services are at least as favorable as could have been obtained
from an unaffiliated third party.
FBA's Subsidiary Banks had $86.2 million and $66.9 million in whole
loans and loan participations outstanding at December 31, 1998 and 1997,
respectively, that were purchased from banks affiliated with First Banks. In
addition, FBA's Subsidiary Banks had sold $182.9 million and $54.7 million in
whole loans and loan participations to affiliates of First Banks at December 31,
1998 and 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 FBA's Subsidiary Banks.
As more fully discussed in Note 6 to the consolidated financial
statements, as of December 31, 1997, FBA had borrowings of $14.9 million from
First Banks under a $20 million Note Payable. There were no amounts outstanding
under the Note Payable at December 31, 1998.

<PAGE>

As more fully discussed in Notes 2and 7 to the consolidated financial
statements, in 1995, First Banks purchased $6.5 million of 12% convertible
debentures of FCB. These debentures, which were exchanged for a similar
debenture of FBA in February 1998, were converted into 629,557 shares of FBA
common stock on December 4, 1998.
Outside of normalcustomer relationships, no directors, executive
officers or stockholders holding over 5% of FBA's voting stock, and no
corporations or firms with which such persons or entities are associated,
currently maintain or have maintained, any significant business or personal
relationships with FBA or its subsidiaries, other than that which arises by
virtue of such position or ownership interest in FBA, except as described above.

(16) INTEREST RATE RISK MANAGEMENT AND DERIVATIVE FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK

FBA utilizes off-balance-sheet derivative financial instruments to
assist in the management of interest rate sensitivity and to modify the
repricing, maturity and option characteristics of on-balance-sheet assets and
liabilities.
The use of such derivative financial instruments is strictly limited to
reducing the interest rate exposure of FBA. Derivative financial instruments
held by FBA for purposes of managing interest rate risk are summarized as
follows:
<TABLE>
<CAPTION>

December 31, 1998 December 31, 1997
------------------ -------------------
Notional Credit Notional Credit
amount amount amount amount
------ ------ ------ ------
(dollars expressed in thousands)

<S> <C> <C> <C> <C>
Interest rate swap agreements............ $ 65,000 -- -- --
Interest rate cap agreement.............. 10,000 55 10,000 222
</TABLE>

The notional amounts of derivative financial instruments do not
represent amounts exchanged by the parties and, therefore, are not a measure of
FBA's credit exposure through its use of derivative financial instruments. The
amounts and the other terms of the derivatives are determined by reference to
the notional amounts and the other terms of the derivatives.
During 1998, FBA entered into $65 million notional amount interest rate
swap agreements (Swap Agreements) to effectively shorten the repricing
characteristics of certain interest-bearing liabilities to correspond more
closely with its assets, with the objective of stabilizing net interest income
over time. The Swap Agreements provide for FBA to receive a fixed rate of
interest and pay an adjustable rate equivalent to the 90-day London Interbank
Offering Rate (LIBOR). The terms of the Swap Agreements provide for FBA to pay
quarterly and receive payment semi-annually. The net amount due to FBA under the
Swap Agreements was $669,000 at December 31, 1998. The maturity dates, notional
amounts, interest rates paid and received, and fair values of interest rate swap
agreements outstanding as of December 31, 1998 were as follows:
<TABLE>
<CAPTION>

Notional Interest rate Interest rate Fair value
Maturity Date amount paid received gain
------------- ------ ---- -------- ----
(dollars expressed in thousands)

<S> <C> <C> <C> <C> <C> <C>
June 11, 2002........................... $ 15,000 5.24% 6.00% $ 363
September 16, 2002...................... 20,000 5.22 5.36 87
September 18, 2002...................... 30,000 5.23 5.33 92
-------- ------
$ 65,000 5.23 5.56 $ 542
======== ==== ==== ======
</TABLE>

<PAGE>

FBA has an interest rate cap agreement outstanding to limit the
interest expense associated with certain interest-bearing liabilities. At
December 31, 1998 and 1997, the unamortized cost of this agreement was $130,000
and $242,000, respectively, and were included in other assets. The net amount
due to FBA under this agreement was $5,000 and $8,000 at December 31, 1998 and
1997, respectively.

(17) FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair values of financial instruments are management's estimate of the
values at which the instruments could be exchanged in a transaction between
willing parties. These estimates are subjective and may vary significantly from
amounts that would be realized in actual transactions. In addition, other
significant assets are not considered financial assets including deferred tax
assets and bank premises and equipment. Further, the tax ramifications related
to the realization of the unrealized gains and losses can have a significant
effect on the fair value estimates and have not been considered in any of the
estimates.

The estimated fair value of FBA's financial instruments at December 31
were as follows:
<TABLE>
<CAPTION>

December 31, 1998 December 31, 1997
--------------------- ------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
(dollars expressed in thousands)

Financial assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents............. $ 46,313 46,313 35,162 35,162
Investment securities:
Available for sale................. 114,937 114,937 148,181 148,181
Held to maturity................... 2,026 2,013 -- --
Net loans............................. 504,276 506,672 420,048 421,874
Accrued interest receivable........... 4,443 4,443 4,819 4,819
========= ========= ======= =======

Financial liabilities:
Demand and savings deposits........... $ 357,763 357,763 318,215 318,215
Time deposits......................... 241,384 242,857 238,312 239,344
Accrued interest payable.............. 538 538 4,185 4,185
12% convertible debentures............ -- -- 6,500 6,500
Preferred Securities.................. 44,155 47,159 -- --
Borrowings............................ 4,141 4,141 18,587 18,587
========= ========= ======= =======

Off-balance-sheet:
Interest rate swap and cap agreements. $ 130 597 242 222
Unfunded loan commitments............. -- -- -- --
========= ========= ======= =======
</TABLE>

The following methods and assumptions were used in estimating the fair
value of financial instruments:
<PAGE>

Financial Assets:

Cash and cash equivalents and accrued interest receivable: The carrying
values reported in the consolidated balance sheets approximate fair value.
Investment securities: Fair value for securities available for sale are
the amounts reported in the consolidated balance sheets. Fair value for
securities held to maturity are based on quoted market prices where available.
If quoted market prices were not available, fair values were based upon quoted
market prices of comparable instruments.
Net loans: The fair value for most loans was estimated utilizing
discounted cash flow calculations that applied interest rates currently being
offered for similar loans to borrowers with similar risk profiles. The carrying
values for loans are net of the allowance for possible loan losses and unearned
discount.

Financial Liabilities:
Deposits: The fair value disclosed for deposits generally payable on
demand (i.e., non-interest-bearing and interest-bearing demand, savings and
money market accounts) are considered equal to their respective carrying amounts
as reported in the consolidated balance sheets. The fair value disclosed for
demand deposits does not include the benefit that results from the low-cost
funding provided by deposit liabilities compared to the cost of borrowing funds
in the market. The fair value for certificates of deposit was estimated
utilizing a discounted cash flow calculation that applied interest rates
currently being offered on similar certificates to a schedule of aggregated
monthly maturities of time deposits.
Preferred Securities: Fair value is based on quoted market prices.
Borrowings, 12% convertible debentures and accrued interest payable:
The carrying values reported in the consolidated balance sheets approximate fair
value.

Off-Balance-Sheet:
Interest rate swap and cap agreements: The fair value of the interest
rate swap and cap agreements are estimated by comparison to market rates quoted
on new agreements with similar terms and creditworthiness.
Unfunded loan commitments: The majority of the commitments to extend
credit and commercial and standby letters of credit contain variable interest
rates and credit deterioration clauses and, therefore, the carrying value of
these credit commitments approximates fair value.

<PAGE>

(18) REGULATORY CAPITAL
FBA and the Subsidiary Banks are subject to various regulatory capital
requirements administered by the 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's financial statements. Under capital adequacy
guidelines and the regulatory framework for Prompt Corrective Action, the
Subsidiary Banks must meet specific capital guidelines that involve quantitative
measures of assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. Capital amounts and
classifications are also subject to qualitative judgments by the regulators
about components, risk weighting and other factors.
Quantitative measures established by regulations to ensure capital
adequacy require FBA and the Subsidiary Banks to maintain certain minimum
capital ratios. FBA and the Subsidiary Banks are required to maintain a minimum
risk-based capital to risk-weighted assets ratio of 8.0%, with at least 4.0%
being "Tier 1" capital (as defined in the regulations). In addition, a minimum
leverage ratio (Tier 1 capital to total assets) of 3.0% plus an additional
cushion of 100 to 200 basis points is expected. In order to be considered well
capitalized under Prompt Corrective Action provisions, a bank is required to
maintain a risk weighted asset ratio of at least 10.0%, a Tier 1 to
risk-weighted assets ratio of at least 6.0%, and a leverage ratio of at least
5.0%. As of December 31, 1997, the date of the most recent notification from
FBA's primary regulator, the Subsidiary Banks were categorized as well
capitalized under the regulatory framework for Prompt Corrective Action.
Management believes, as of December 31, 1998, FBA and the Subsidiary Banks were
well capitalized.
At December 31, 1998 and 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............................. 16.66% 6.88% 11.51% 5.62% 10.25% 4.96%
FB California................... 10.63 13.03 9.37 11.77 8.34 13.80
FB Texas........................ 11.37 12.26 10.11 11.00 9.15 8.90
First Commercial (1)............ -- 11.25 -- 9.98 -- 7.96
----------------
</TABLE>
(1) First Commercial was merged into FB California on February 2, 1998.

(19) BUSINESS SEGMENT RESULTS

FBA has defined its business segments to be the Subsidiary Banks. The
reportable business segments are consistent with the management structure of
FBA, the Subsidiary Banks and the internal reporting system that monitors
performance. Through the respective branch network, the Subsidiary Banks provide
similar products and services in two defined geographic areas. The products and
services offered include a broad range of commercial and personal banking
services, including certificates of deposit, 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 financial, commercial and residential real estate, real estate
construction and development and consumer loans. Other financial services
include automatic teller machines, telephone account access, cash management
services, credit related insurance and safe deposit boxes. The revenues
generated by each business segment consist primarily of interest income,
generated from the loan and investment security portfolios, and service charges
and fees, generated from the deposit products and services. The geographic areas
are defined to be Houston, Dallas, Irving and McKinney, Texas and the San
Francisco - Sacramento corridor of northern California. The products and
services are offered to customers primarily within their respective geographic
areas, with the exception of loan participations executed between the Subsidiary
Banks and other banks affiliated with First Banks. See Note 15 to the
consolidated financial statements. There are no foreign operations.
<PAGE>

The business segment results shown below are consistent with FBA's
internal reporting system which is consistent, in all material respects, with
generally accepted accounting principles and practices prominent in the banking
industry. Such principles and practices are summarized in Note 1 to the
consolidated financial statements.
<TABLE>
<CAPTION>

FB California FB Texas
------------------------------- ------------------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
(dollars expressed in thousands)

Balance sheet information:

<S> <C> <C> <C> <C> <C> <C>
Investment securities....................... $ 53,449 83,165 73,292 59,914 65,016 51,847
Loans, net of unearned discount............. 314,977 255,114 156,303 201,426 176,341 180,068
Total assets................................ 410,110 370,917 257,834 300,984 267,152 266,571
Deposits.................................... 363,422 325,562 223,435 264,425 231,175 233,710
Stockholders' equity........................ 42,825 40,176 29,696 30,249 29,761 26,773
========== ========= ========= ========= ======== ========

Income statement information:

Interest income:
Loans, external customers................ $ 22,540 16,233 9,538 12,411 14,456 15,421
Loans, other operating segments
and affiliates of First Banks.......... 5,390 1,183 -- 4,777 1,521 178
Investment securities.................... 4,131 4,293 3,030 3,852 3,576 3,049
Other.................................... 483 707 621 674 546 1,355
---------- --------- --------- --------- -------- --------
Total interest income................ 32,544 22,416 13,189 21,714 20,099 20,003
---------- --------- --------- --------- -------- --------

Interest expense:
Deposits................................. 13,254 8,640 5,154 8,742 8,093 8,822
Other.................................... 101 89 14 158 286 464
---------- ---------- --------- --------- -------- --------
Total interest expense............... 13,355 8,729 5,168 8,900 8,379 9,286
---------- ---------- --------- --------- -------- --------

Net interest income.................. 19,189 13,687 8,021 12,814 11,720 10,717
Provision for possible loan losses.......... 565 500 1,405 335 1,500 1,000
---------- ---------- --------- --------- -------- --------
Net interest income after provision
for possible loan losses........... 18,624 13,187 6,616 12,479 10,220 9,717
---------- --------- --------- --------- -------- --------
Noninterest income.......................... 2,732 1,847 1,813 1,790 1,901 1,888
Noninterest expense(1)...................... 15,548 10,356 8,634 8,749 6,960 8,501
---------- --------- --------- --------- -------- --------
Net income before income taxes....... 5,808 4,678 (205) 5,520 5,161 3,104

Provision (benefit) for income taxes..... 2,736 2,027 (208) 1,888 1,815 1,168
Income (loss) before minority
interest in income of subsidiary... 3,072 2,651 3 3,632 3,346 1,936
Minority interest income of subsidiary... -- -- -- -- -- --
---------- --------- --------- --------- -------- --------
Net income........................... $ 3,072 2,651 3 3,632 3,346 1,936
========== ========= ========= ========= ======== ========
</TABLE>
- -----------------
(1) Corporate an other includes $1.8 million of guaranteed preferred
debenture expense for the year ended December 31, 1998 (see Note 8 to the
consolidated financial statements).

Corporate and other Consolidated Total
-------------------------------------------- -------------------------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
(dollars expressed in thousands)

<S> <C> <C> <C> <C> <C> <C>
3,573 -- -- 116,936 148,181 125,139
-- -- -- 516,403 431,455 336,371
(28,700) (210) (1,203) 599,147 556,527 455,492
8,903 5,595 4,682 719,997 643,664 529,087
(7,229) (24,846) (18,274) 65,845 45,091 38,195
======== ======= ======= ======= ======= ========

-- -- -- 34,951 30,689 24,959
-- -- -- 10,167 2,704 178
120 1 178 8,103 7,870 6,257
49 1 12 1,206 1,254 1,988
--------- ------- --------- --------- -------- --------
169 2 190 54,427 42,517 33,382
--------- ------- --------- --------- -------- --------

(390) (17) (40) 21,606 16,716 13,936
1,363 2,064 1,119 1,622 2,439 1,597
--------- ------- --------- --------- --------- --------
973 2,047 1,079 23,228 19,155 15,533
--------- ------- --------- --------- --------- --------

(804) (2,045) (889) 31,199 23,362 17,849
-- -- -- 900 2,000 2,405
--------- ------- --------- --------- --------- --------

(804) (2,045) (889) 30,299 21,362 15,444
--------- ------- --------- --------- --------- --------
(147) (461) (116) 4,375 3,287 3,585
2,175 361 602 26,472 17,677 17,737
--------- ------- --------- --------- --------- --------
(3,126) (2,867) (1,607) 8,202 6,972 1,292

(1,032) (697) (490) 3,592 3,145 470

(2,094) (2,170) (1,117) 4,610 3,827 822

-- 294 131 -- 294 131
--------- ------- --------- --------- -------- --------
(2,094) (2,464) (1,248) 4,610 3,533 691
========= ======= ========= ========= ======== ========

</TABLE>

<PAGE>

(20) PARENT COMPANY ONLY FINANCIAL INFORMATION

Condensed Balance Sheets

December 31,
------------
1998 1997
---- ----
(dollars expressed in thousands)
Assets:
<S> <C> <C>
Cash deposited in subsidiary banks...................................... $ 31,306 1,075
Investment securities................................................... 5,023 --
Investment in subsidiaries.............................................. 73,074 68,095
Deferred tax assets..................................................... 2,192 3,532
Other assets............................................................ 2,349 659
---------- --------
Total assets.................................................... $ 113,944 73,361
========== ========
Liabilities and stockholders' equity:
Promissory note payable................................................. $ -- 14,900
12% convertible debentures.............................................. -- 6,500
Subordinated debenture payable to First Capital......................... 47,423 --
Accrued and other liabilities........................................... 676 6,870
---------- --------
Total liabilities............................................... 48,099 28,270
Stockholders' equity...................................................... 65,845 45,091
---------- --------
Total liabilities and stockholders' equity...................... $ 113,944 73,361
========== ========
</TABLE>

Condensed Statements of Income

Years ended December 31,
------------------------
1998 1997 1996
---- ---- ----
(dollars expressed in thousands)
Income:
<S> <C> <C> <C>
Dividends from subsidiaries.................................... $ 4,750 1,625 --
Other.......................................................... 711 31 219
------- ------ -------
Total income............................................ 5,461 1,656 219
------- ------ -------
Expense:
Interest....................................................... 1,363 2,064 1,138
Other.......................................................... 2,475 686 505
------- ------ -------
Total expense........................................... 3,838 2,750 1,643
------- ------ -------
Income (loss) before income tax benefit................. 1,623 (1,094) (1,424)
Income tax benefit............................................... (1,032) (686) (492)
------- ------ -------
Income (loss) before equity in undistributed
income of subsidiaries................................ 2,655 (408) (932)
Equity in undistributed income of subsidiaries................... 1,955 3,941 1,623
------- ------ -------
Net income.............................................. $ 4,610 3,533 691
======= ====== =======
</TABLE>

Condensed Statements of Cash Flows

Years ended December 31,
------------------------
1998 1997 1996
---- ---- ----
(dollars expressed in thousands)
Operating activities:
<S> <C> <C> <C>
Net income.................................................... $ 4,610 3,533 691
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Equity in undistributed income of subsidiaries............. (1,955) (3,941) (1,623)
Dividends from subsidiaries................................ 4,750 1,625 --
Other, net................................................. (3,231) (4,169) (2,008)
---------- ------- -------
Net cash provided by (used in) operating activities.. 4,174 (2,952) (2,940)
---------- ------- -------

Investing activities:
Purchase of investment securities............................. (3,600) -- (12,618)
Investment in common securities of First Capital.............. (1,423) -- --
Proceeds from maturity of investment securities............... -- -- 7,152
Proceeds from sales of investment securities.................. -- -- 4,496
Capital contributions to subsidiaries......................... -- -- (17,052)
(Decrease) increase in payable to former shareholders
of Surety Bank............................................. (3,829) 3,829 --
Pre-merger transactions of FCB................................ -- -- (1,938)
Net cash provided by (used in) investing activities.. (8,852) 3,829 (19,960)
---------- --------- -------

Financing activities:
Increase (decrease) in promissory note payable................ (4,900) 900 14,000
Increase in subordinated debenture............................ 45,547 -- --
Exercise of stock options..................................... -- 15 38
Repurchase of common stock for treasury....................... (5,738) (1,512) (2,010)
Pre-merger transactions of FCB................................ -- (7) 2,933
---------- --------- -------
Net cash provided by (used in) financing activities.. 34,909 (604) 14,961
---------- ------- -------
Net increase (decrease) in cash and cash equivalents. 30,231 273 (7,939)
Cash and cash equivalents at beginning of year.................. 1,075 802 8,741
---------- --------- -------
Cash and cash equivalents at end of year........................ $ 31,306 1,075 802
========== ========= =======

Noncash investing and financing activities:
Issuance of common stock in purchase accounting acquisition... $ 3,008 4,763 --
Conversion of promissory note payable to common stock......... 10,000 -- --
Conversion of 12% convertible debentures and accrued interest
payable to common stock.................................... 8,673 -- --
Cash paid for interest........................................ 1,867 -- 475
Pre-merger transaction of FCB - exchange of common stock
for dividend payable....................................... -- -- 643
========== ========= =======
</TABLE>

(21) CONTINGENT LIABILITIES

In the ordinary course of business, there are various legal proceedings
pending against FBA and/or the Subsidiary Banks. Management, in consultation
with legal counsel, is of the opinion the ultimate resolution of these
proceedings will have no material effect on the financial condition or results
of operations of FBA or the Subsidiary Banks.

(22) SUBSEQUENT EVENT

As more fully described in Note 2 to the consolidated financial
statements, on March 4, 1999, FBA completed its acquisition of Redwood Bancorp
and its wholly owned subsidiary, Redwood Bank, for cash consideration of $26.0
million. Redwood Bank is headquartered in San Francisco, California and operates
four banking locations in the San Francisco Bay area. Redwood Bank had $183.9
million in total assets, $134.4 million in loans, net of unearned discount,
$32.4 million in investment securities and $162.9 million in deposits at the
acquisition date. Redwood Bank is operating as a subsidiary of FBA.

<PAGE>

Directors of First Banks America, Inc.

James F. Dierberg Chairman of the Board, President and Chie
Executive Officer, First Banks America,
Inc., St. Louis, Missouri; Chairman of
the Board, President and Chief Executive
Officer, First Banks, Inc., St. Louis,
Missouri.
Allen H. Blake Executive Vice President, Chief Operating
and Financial Officer and Secretary,
First Banks America, Inc., St. Louis,
Missouri; Executive Vice President, Chief
Operating and Financia Officer and
Secretary, First Banks, Inc., St. Louis,
Missouri.
Charles A. Crocco, Jr. Of Counsel for the law firm of Jackson and
Nash, LLP., New York, New York.
Albert M. Lavezzo Partner in the law firm of Favaro, Lavezzo,
Gill, Caretti & Neppell, Vallejo,
California.
Edward T. Story, Jr. President and Chief Executive Officer of
SOCO International, Inc., Comfort, Texas.
Ellen D. Schepman Retail Banking Officer, First Bank & Trust,
a wholly-owned subsidiary of First Banks,
Inc., Huntington Beach, California.
Donald W. Williams Executive Vice President and Chief Credit
Officer, First Banks, Inc., St. Louis,
Missouri.

Executive Officers of First Banks America, Inc.

James F. Dierberg Chairman of the Board, President and Chief
Executive Officer
Allen H. Blake Executive Vice President, Chief Operating
and Financial Officer and Secretary
David F. Weaver Executive Vice President

Directors and Senior Officers of First Bank Texas N.A.

David F. Weaver Chairman of the Board, President and Chief
Executive Officer
Donald W. Williams Director
Joseph Milcoun, Jr. Director, Vice President, Retail Banking
Arved E. White Director, Senior Vice President and Chief
Lending Officer
Monica J. Rinehart Secretary, Vice President and Controller

Directors and Senior Officers of First Bank of California

Terrance M. McCarthy Chairman of the Board, President and Chief
Executive Officer
James E. Culleton Director and Secretary
Donald W. Williams Director
Albert M. Lavezzo Director
Fred K. Sibley Director
Gary M. Sanders Director and Senior Vice President,
Commercial Lending
Peter A. Goetze Vice President, Retail Banking
Kathryn L. Perrine Vice President and Chief Financial Officer

<PAGE>

INVESTOR INFORMATION

FBA's Annual Report on Form 10-K, as filed with the Securities and Exchange
Commission, is available without charge to any stockholder upon request.
Requests should be directed to Allen H. Blake, First Banks America, Inc., 11901
Olive Boulevard, St.
Louis, Missouri 63141.

Common Stock

The common stock of FBA is traded on the New York Stock Exchange with
the ticker symbol "FBA" and is frequently reported in newspapers of general
circulation with the symbol "FBKSAM" and in the Wall Street Journal with the
symbol "FBA." As of March 18, 1999, there were approximately 1,443 registered
common stockholders of record. This number does not include any persons or
entities who hold their stock in nominee or "street" name through various
brokerage firms.
<TABLE>
<CAPTION>

Common stock price range:
1998 1997
------------------ ------------------
High Low High Low

<S> <C> <C> <C> <C>
First quarter............................. $ 25.19 21.31 12.75 10.13
Second quarter............................ 25.13 19.13 13.38 12.38
Third quarter............................. 21.00 16.50 18.00 12.81
Fourth quarter............................ 19.50 16.75 24.06 17.13
</TABLE>

Preferred Securities

The Preferred Securities of FBA, which were issued on July 21, 1998,
are traded on the New York Stock Exchange with the ticker symbol "FBAPrt." As of
March 18, 1999, there were approximately 294 record holders of Preferred
Securities. This number does not include any persons or entities who hold their
preferred securities in nominee or "street" name through various brokerage
firms.
<TABLE>
<CAPTION>

Preferred Securities price range:
1998
---- Dividend
High Low declared
---- --- --------

<S> <C> <C> <C>
Second quarter......................................... $ 25.75 24.19 .40729
Third quarter.......................................... 25.75 24.19 .53125
Fourth quarter......................................... 26.25 24.50 .53125
----------
$ 1.46979
==========
</TABLE>
<TABLE>
<CAPTION>

For information concerning FBA, please contact:

<S> <C>
David F. Weaver Allen H. Blake
Executive Vice President Executive Vice President, Chief
P. O. Box 630369 Operating and Financial
Houston, Texas 77263-0369 Officer and Secretary
Telephone: 713/954-2400 11901 Olive Boulevard
St. Louis, Missouri 63141
Telephone: 314/995-8700

Transfer Agents:

Common Stock: Preferred Securities:
ChaseMellon Shareholder Services, L.L.C. State Street Bank and Trust Company
85 Challenger Road Two International Place
Overpect Centre Boston, MA 02110-2804
Ridgefield Park, NJ 07666 Telephone 800/531-0368
Telephone 888/213-0965
www.chasemellon.com

</TABLE>

<PAGE>

EXHIBIT 21

First Banks America, Inc.
Significant Subsidiaries

The following is a list of all subsidiaries of the Company and the
jurisdiction of incorporation or organization. First Bank Texas N.A. (formerly
BankTEXAS National Association) and First Bank of California are wholly-owned by
First Banks America, Inc.

Jurisdiction of Incorporation
Name of Subsidiary of Organization
------------------ ---------------

First Bank Texas N.A. United States
First Bank of California California

<PAGE>

EXHIBIT 23(a)

The Board of Directors
First Banks America, Inc.

We consent to incorporation by reference in the registration statement (No,
33-42607) on Form S-8 of First Banks America, Inc. and subsidiaries of our
report dated March 17, 1999, relating to the consolidated balance sheets of
First Banks America, Inc. and subsidiaries as of December 31, 1998 and 1997 and
the related consolidated statements of income, stockholders' equity and
comprehensive income and cash flows for each of the years in the three-year
period ended December 31, 1998 which report appears in the December 31, 1998
annual report on Form 10-K of First Banks America, Inc.

KPMG LLP
St. Louis, Missouri
March 26, 1999

<ARTICLE> 9
<CIK> 0000310979
<NAME> First Banks America, Inc.
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<CASH> 34,312
<INT-BEARING-DEPOSITS> 1,001
<FED-FUNDS-SOLD> 11,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 114,937
<INVESTMENTS-CARRYING> 2,026
<INVESTMENTS-MARKET> 2,013
<LOANS> 516,403
<ALLOWANCE> 12,127
<TOTAL-ASSETS> 719,997
<DEPOSITS> 599,147
<SHORT-TERM> 4,141
<LIABILITIES-OTHER> 6,709
<LONG-TERM> 44,155
0
0
<COMMON> 956
<OTHER-SE> 64,889
<TOTAL-LIABILITIES-AND-EQUITY> 719,997
<INTEREST-LOAN> 45,118
<INTEREST-INVEST> 8,103
<INTEREST-OTHER> 1,206
<INTEREST-TOTAL> 54,427
<INTEREST-DEPOSIT> 21,606
<INTEREST-EXPENSE> 23,228
<INTEREST-INCOME-NET> 31,199
<LOAN-LOSSES> 900
<SECURITIES-GAINS> 341
<EXPENSE-OTHER> 26,472
<INCOME-PRETAX> 8,202
<INCOME-PRE-EXTRAORDINARY> 8,202
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,610
<EPS-PRIMARY> .90
<EPS-DILUTED> .90
<YIELD-ACTUAL> 8.77
<LOANS-NON> 8,632
<LOANS-PAST> 306
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 10,300
<ALLOWANCE-OPEN> 11,407
<CHARGE-OFFS> 3,535
<RECOVERIES> 2,470
<ALLOWANCE-CLOSE> 12,127
<ALLOWANCE-DOMESTIC> 10,297
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,830

</TABLE>