SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-20632
FIRST BANKS, INC.
-----------------
(Exact name of registrant as specified in its charter)
MISSOURI 43-1175538
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
135 NORTH MERAMEC, CLAYTON, MISSOURI 63105
------------------------------------------
(address of principal executive offices) (Zip Code)
(314) 854-4600
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes __X_ No ____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding at
Class October 31, 1997
----- ----------------
Common Stock, $250.00 par value 23,661
<PAGE>
First Banks, Inc.
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 1997
and December 31, 1996 -1-
Consolidated Statements of Income for the three
and nine months ended September 30, 1997 and 1996 -3-
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1997 and 1996 -4-
Notes to Consolidated Financial Statements -5-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations -8-
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K -17-
Signatures -18-
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FIRST BANKS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (unaudited)
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1997 1996
------ ---- ----
Cash and cash equivalents:
<S> <C> <C>
Cash and due from banks .............................................. $ 126,420 147,804
Interest-bearing deposits with other financial
institutions-with maturities of three months
or less ............................................................. 6,525 6,050
Federal funds sold ................................................... 104,300 74,100
------------ ----------
Total cash and cash equivalents .................................. 237,245 227,954
------------ ----------
Investment securities:
Available for sale, at fair value .................................... 674,580 532,605
Held to maturity, at amortized cost (estimated fair value
of $20,062 and $20,611 at September 30, 1997 and
December 31,1996, respectively).................................... 19,507 20,196
Trading securities.................................................... 3,681 --
------------ ----------
Total investment securities ...................................... 697,768 552,801
------------ ----------
Loans:
Commercial and industrial............................................. 576,528 457,186
Real estate construction and development ............................. 373,058 289,378
Real estate mortgage:
Residential......................................................... 949,626 1,059,769
Other............................................................... 653,609 600,811
Consumer and installment ............................................. 297,515 341,154
Loans held for sale-residential mortgage ............................. 48,231 27,485
------------ ----------
Total loans ...................................................... 2,898,567 2,775,783
Unearned discount .................................................... (8,049) (7,814)
Allowance for possible loan losses ................................... (50,740) (46,781)
------------- ----------
Net loans ........................................................ 2,839,778 2,721,188
------------ ---------
Bank premises and equipment, net of
accumulated depreciation ............................................. 47,983 48,078
Intangibles associated with the purchase
of subsidiaries ...................................................... 22,857 23,303
Purchased mortgage servicing rights, net
of amortization ...................................................... 8,935 10,230
Accrued interest receivable ............................................. 26,195 23,250
Other real estate owned ................................................. 8,170 10,607
Deferred income taxes ................................................... 45,590 43,406
Other assets ............................................................ 22,687 28,337
------------ ---------
Total assets ..................................................... $ 3,957,208 3,689,154
============ =========
</TABLE>
<PAGE>
FIRST BANKS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (unaudited)
(dollars expressed in thousands, except per share data)
(continued)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---- ----
LIABILITIES
-----------
Deposits:
Demand:
<S> <C> <C>
Non-interest bearing ........................................... $ 436,514 418,193
Interest bearing ............................................... 323,766 337,618
Savings .......................................................... 846,091 671,286
Time:
Time deposits of $100 or more .................................. 206,075 169,057
Other time deposits ............................................ 1,690,540 1,642,413
----------- -----------
Total deposits ........................................ 3,502,986 3,238,567
Federal Home Loan Bank advances....................................... 2,346 39,277
Other borrowings...................................................... 47,548 30,705
Notes payable ........................................................ 5,155 76,330
Accrued interest payable ............................................. 9,274 10,288
Deferred income taxes ................................................ 12,184 6,194
Accrued and other liabilities ........................................ 12,016 23,521
Minority interest in subsidiaries..................................... 13,083 12,883
Guaranteed preferred beneficial interest in
First Banks' subordinated debentures, net of
issuance costs ................................................... 83,156 --
----------- ---------
Total liabilities ..................................... 3,687,748 3,437,765
----------- -----------
STOCKHOLDERS' EQUITY
--------------------
Preferred stock:
Class C 9.00% increasing rate, redeemable, cumulative,
$1.00 par value, $25.00 stated value; 5,000,000 shares
authorized; 1,884,500 shares and 2,155,500 shares issued
and outstanding at September 30, 1997 and
December 31, 1996, respectively............................... 47,113 53,887
Class A, convertible, adjustable rate, $20.00 par value; 750,000
shares authorized; 641,082 shares issued and outstanding ...... 12,821 12,822
Class B, adjustable rate, $1.50 par value; 200,000 shares
authorized; 160,505 shares issued and outstanding ............ 241 241
Common stock, $250.00 par value; 25,000 shares
authorized; 23,661 shares issued and outstanding .................. 5,915 5,915
Capital surplus ...................................................... 2,729 3,289
Retained earnings .................................................... 191,678 171,182
Net fair value adjustment for securities
available for sale ................................................ 8,963 4,053
----------- -----------
Total stockholders' equity ............................ 269,460 251,389
----------- -----------
Total liabilities and stockholders' equity ............ $ 3,957,208 3,689,154
=========== ===========
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
FIRST BANKS, INC. AND SUBSIDIARIES
Consolidated Statements of Income (unaudited)
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------ -------------------
1997 1996 1997 1996
---- ---- ---- ----
Interest income:
<S> <C> <C> <C> <C>
Interest and fees on loans................................. $ 64,334 59,414 187,431 175,941
Investment securities...................................... 8,508 4,742 24,988 17,966
Federal funds sold and other............................... 1,898 958 4,400 3,782
--------- -------- --------- -------
Total interest income................................ 74,740 65,114 216,819 197,689
--------- -------- --------- -------
Interest expense:
Deposits:
Interest-bearing demand.................................. 1,409 1,117 4,214 3,530
Savings.................................................. 7,221 5,578 18,260 16,953
Time deposits of $100 or more............................ 2,668 2,113 7,536 6,960
Other time deposits...................................... 23,881 21,721 70,910 66,060
Federal Home Loan Bank advances............................ 44 711 410 1,954
Securities sold under agreements to repurchase............. 490 323 1,232 762
Interest rate exchange agreements, net .................... 3,227 1,838 5,610 6,035
Notes payable and other.................................... 70 1,311 832 4,326
First Banks' subordinated debentures....................... 2,083 -- 5,462 --
--------- -------- --------- -------
Total interest expense............................... 41,093 34,712 114,466 106,580
--------- -------- --------- -------
Net interest income.................................. 33,647 30,402 102,353 90,109
Provision for possible loan losses.............................. 3,100 2,570 9,125 8,774
--------- -------- --------- -------
Net interest income after provision
for possible loan losses........................... 30,547 27,832 93,228 82,335
--------- -------- --------- -------
Noninterest income:
Service charges on deposit accounts and
customer service fees................................... 3,208 3,154 9,176 9,411
Credit card fees........................................... 788 663 2,248 1,897
Loan servicing fees, net................................... 398 534 1,262 1,346
Gain (loss) on mortgage loans sold and held for sale....... 162 (119) 370 (7)
Gain (loss) on sale of securities, net..................... 2,241 (625) 2,241 (421)
Gain on trading securities, net............................ 91 -- 113 --
Other income............................................... 1,941 1,688 4,335 2,891
--------- -------- --------- -------
Total noninterest income............................. 8,829 5,295 19,745 15,117
--------- -------- --------- -------
Noninterest expenses:
Salaries and employee benefits............................. 10,756 9,724 31,684 30,085
Occupancy, net of rental income............................ 2,711 2,310 7,924 7,245
Furniture and equipment.................................... 1,654 1,734 5,704 5,404
Federal Deposit Insurance Corporation premiums............. 264 9,479 579 11,355
Postage, printing and supplies............................. 803 985 3,044 3,660
Data processing fees....................................... 2,323 1,130 5,844 3,479
Legal, examination and professional fees................... 967 1,098 3,136 3,620
Credit card expenses....................................... 863 713 2,503 2,149
Communications............................................. 594 712 1,849 1,992
Advertising and business development expense............... 1,098 299 2,711 1,253
(Gain)loss on sales of foreclosed real estate, net of expenses (273) 460 (180) 951
Other expenses............................................. 4,080 3,513 10,598 10,044
--------- -------- --------- -------
Total noninterest expenses........................... 25,840 32,157 75,396 81,237
--------- -------- --------- -------
Income before provision (benefit) for income taxes and
minority interest in income of subsidiaries....... 13,536 970 37,577 16,215
Provision (benefit) for income taxes............................ 4,632 (814) 12,397 4,304
--------- --------- --------- -------
Income before minority interest in income
of subsidiaries................................... 8,904 1,784 25,180 11,911
Minority interest in income of subsidiaries..................... (363) (252) (940) (472)
----------- --------- ---------- -------
Net income........................................... 8,541 1,532 24,240 11,439
Preferred stock dividends....................................... 1,256 1,434 3,744 4,237
--------- -------- --------- -------
Net income available to common shareholders.......... $ 7,285 98 20,496 7,202
========= ======== ========= =======
Earnings per share:
Primary.................................................... $ 307.89 4.12 866.22 304.39
Fully Diluted.............................................. 295.42 11.37 830.02 302.68
========= ======== ========= =======
Weighted average shares of common stock outstanding............. 23,661 23,661 23,661 23,661
========= ======== ========= =======
See accompanying notes to consolidated financial statements
</TABLE>
FIRST BANKS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
Nine months ended
September 30,
---------------------
1997 1996
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income............................................................. $ 24,240 11,439
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization of bank premises
and equipment..................................................... 4,396 4,314
Amortization, net of accretion..................................... 3,505 3,360
Originations and purchases of loans held for sale.................. (121,137) (104,923)
Proceeds from sales of loans held for sale ........................ 94,716 91,336
Provision for possible loan losses................................. 9,125 8,774
Provision for income taxes......................................... 12,397 4,304
Payments of income taxes........................................... (11,169) (5,018)
Increase in accrued interest receivable ........................... (5,015) (824)
Net increase in trading securities................................. (3,681) --
Interest accrued on liabilities.................................... 114,230 106,579
Payments of interest on liabilities................................ (115,480) (107,665)
Other, net......................................................... (7,303) 9,938
Minority interest in income of subsidiaries........................ 940 472
-------- ---------
Net cash provided by (used in) operating activities........... (236) 22,086
-------- ---------
Cash flows from investing activities:
Cash and cash equivalents received from acquisitions................... 82,234 --
Other sales of investment securities................................... -- 83,616
Maturities of investment securities.................................... 261,934 308,411
Purchases of investment securities..................................... (394,448) (338,631)
Net increase in loans.................................................. (111,317) (4,566)
Recoveries of loans previously charged-off ............................ 7,544 5,229
Purchases of bank premises and equipment............................... (4,062) (2,550)
Other investing activities............................................. 4,652 7,547
-------- ---------
Net cash provided by (used in) investing activities........... (153,463) 59,056
-------- ---------
Cash flows from financing activities:
Other increases (decreases) in deposits:
Demand and savings deposits........................................ 166,754 (41,067)
Time deposits...................................................... 14,929 (87,883)
Decrease in Federal funds purchased ................................... -- 12,000
(Decrease) increase in Federal Home Loan Bank advances................. (36,931) 21,693
Increase in other borrowings........................................... 16,843 24,565
Decrease in notes payable.............................................. (71,175) (22,772)
Purchase and retirement of Class C preferred stock..................... (6,774) (230)
Proceeds from sale of cumulative preferred trust
securities, net of issuance costs................................... 83,086 --
Payment of preferred stock dividends................................... (3,742) (4,237)
--------- ---------
Net cash provided by (used in) financing activities .......... 162,990 (97,931)
-------- ---------
Net increase (decrease) in cash and cash equivalents ......... 9,291 (16,789)
Cash and cash equivalents, beginning of period ............................. 227,954 199,213
-------- ---------
Cash and cash equivalents, end of period.................................... $237,245 182,424
======== =========
Noncash investing and financing activities:
Loans transferred to foreclosed real estate............................ $ 3,062 7,332
======== =========
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
FIRST BANKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying consolidated financial statements of First Banks, Inc.
and subsidiaries (First Banks) are unaudited and should be read in conjunction
with the consolidated financial statements contained in the 1996 annual report
on Form 10-K. In the opinion of management, all adjustments, consisting of
normal recurring accruals considered necessary for a fair presentation of the
results of operations for the interim periods presented herein, have been
included. Operating results for the three and nine month periods ended September
30, 1997 are not necessarily indicative of the results that may be expected for
any other interim period or for the year ending December 31, 1997.
First Banks' primary subsidiaries (Subsidiary Banks) are:
First Bank, headquartered in St. Louis County, Missouri (First
Bank Missouri)
First Bank, headquartered in O'Fallon, Illinois (First Bank
Illinois)
First Bank FSB, headquartered in St. Louis County, Missouri
(First Bank FSB)
First Banks America, Inc., headquartered in St. Louis County,
Missouri (FBA)
CCB Bancorp, Inc., headquartered in Irvine, California (CCB)
First Commercial Bancorp, Inc., headquartered in Sacramento,
California (FCB)
First Bank Missouri and First Bank Illinois are wholly owned banking
subsidiaries. First Bank FSB is a wholly owned thrift subsidiary. CCB, a wholly
owned bank holding company subsidiary, operates through First Bank & Trust,
headquartered in Irvine, California (FB&T). FBA, a majority-owned bank holding
company subsidiary, operates through two banking subsidiaries, BankTEXAS N.A.,
headquartered in Houston, Texas (BTX) and Sunrise Bank of California,
headquartered in Roseville, California (Sunrise Bank). FCB, a majority-owned
bank holding company subsidiary, operates through First Commercial Bank,
headquartered in Sacramento, California (First Commercial).
First Banks' ownership interest in FBA was 70.23% and 68.82% at
September 30, 1997 and December 31, 1996, respectively. First Banks' ownership
interest in FCB was 61.48% and 61.46% at September 30, 1997 and December 31,
1996, respectively.
The consolidated financial statements include the accounts of First
Banks, Inc. and its subsidiaries, net of minority interests. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Certain reclassifications of 1996 amounts have been made to conform with the
1997 presentation.
(2) Mergers and Acquisitions
On March 27, 1997, First Banks completed its assumption of the deposits
and purchase of selected assets of two Long Beach, California banking locations
of Highland Federal Bank, FSB. The transaction resulted in the acquisition of
$40.4 million in deposits and two offices which will operate as branches of
FB&T.
On September 25, 1997, First Banks completed its assumption of the
deposits and purchase of selected assets of the Woodland Hills, California
banking location of Highland Federal Bank, FSB. The transaction resulted in the
acquisition of $42.4 million in deposits and one office which will operate as a
branch of FB&T.
On July 28, 1997, FBA and Surety Bank entered into an Agreement and
Plan of Reorganization (Surety Agreement) providing for the acquisition of
<PAGE>
Surety Bank by FBA. Under the terms of the Surety Agreement, which is
conditioned upon receipt of regulatory approvals and the approval of Surety
shareholders Surety Bank shareholders will receive FBA common stock and cash
valued at approximately $8.31 million as of September 30, 1997. Surety Bank,
along with Sunrise Bank, will be merged into a newly formed commercial bank
charter of FBA (the Northern California Bank). Surety Bank operates banking
offices in Vallejo and Fairfield, California. At September 30, 1997, Surety Bank
had total assets of $75.21 million, and reported net income of $239,000 for the
nine month period then ended. The transaction will be accounted for using the
purchase method of accounting and is expected to be completed by December 31,
1997.
On September 22, 1997, FBA and Pacific Bay Bank, San Pablo, California
(Pacific Bay), announced the signing of a Definitive Agreement and Plan of
Merger (Pacific Bay Agreement) providing for the acquisition of Pacific Bay by
FBA. Under the terms of the Pacific Bay Agreement, Pacific Bay shareholders will
receive $14.00 per share in cash for their stock, an aggregate of $4.2 million.
Pacific Bay operates a banking office in San Pablo, California and a loan
production office in Lafayette, California. At September 30, 1997, Pacific Bay
had total assets of $37.5 million, and reported net income of $35,000 for the
nine month period then ended. Pacific Bay will merge into the Northern
California Bank. The transaction, which is subject to regulatory approvals and
the approval of the shareholders of Pacific Bay, is expected to be completed
during the first quarter of 1998 and will be accounted for using the purchase
method of accounting.
On October 3, 1997, FBA and FCB executed an Agreement and Plan of
Merger (Agreement) providing for the merger of the two companies. Under the
terms of the Agreement, FCB will be merged into FBA, with FCB shareholders
receiving .8888 shares of FBA common stock for each share of FCB common stock
held. As soon as practicable thereafter, First Commercial will be merged into
the Northern California Bank. The transaction, which is subject to the approval
of regulatory authorities and the shareholders of both FBA and FCB, also
provides for First Banks to receive 804,000 shares of FBA common stock in
exchange for $10 million of FBA's note payable to First Banks, and the exchange
of FCB convertible debentures of $6.5 million, which are owned by First Banks,
for comparable debentures of FBA. The agreement was negotiated and approved by
special committees of the Boards of Directors of FCB and FBA comprised solely of
independent directors of the two respective Boards of Directors. The transaction
is expected to be completed by December 31, 1997. The merger of FBA and FCB will
not have a significant impact on the financial condition or results of operation
of First Banks.
(3) Cumulative Trust Preferred Securities of First Preferred Capital Trust
On February 4, 1997, First Preferred Capital Trust (First Capital), a
newly-formed Delaware business trust subsidiary of First Banks, issued 3.45
million shares of 9.25% Cumulative Trust Preferred Securities (Preferred
Securities) at $25 per share in an underwritten public offering, and issued
106,702 shares of common securities to First Banks at $25 per share. First Banks
owns all of First Capital's common securities. The gross proceeds of the
offering were used by First Capital to purchase $88.9 million of 9.25%
Subordinated Debentures (Subordinated Debentures) from First Banks. The
Subordinated Debentures are the sole asset of First Capital. In connection with
the issuance of the Preferred Securities, First Banks made certain guarantees
and commitments that, in the aggregate, constitute a full and unconditional
guarantee by First Banks of the obligations of First Capital under the Preferred
Securities. First Banks' proceeds from the issuance of the Subordinated
Debentures to First Capital, net of underwriting fees and offering expenses,
were $83.1 million. Distributions payable on the Preferred Securities were $2.1
million and $5.5 million for the three and nine month periods ended September
30, 1997 and are recorded as interest expense in the accompanying consolidated
financial statements.
The proceeds from the offering were used for general corporate
purposes, including the reduction of borrowings under a credit agreement with a
group of unaffiliated banks (Credit Agreement) and the repurchase of 284,000
shares of Class C 9.00% Increasing Rate, Redeemable, Cumulative Preferred Stock
(Class C Preferred Stock) for $7.3 million. The remaining proceeds have been
temporarily invested.
<PAGE>
(4) Redemption of the Class C 9.00% Preferred Stock
On October 17, 1997, First Banks announced its intent to redeem the
remaining outstanding Class C Preferred Stock at its aggregate par value of
$47.1 million, effective December 1, 1997. The Class C Preferred Stock was
issued and sold in a public offering in September, 1992. First Banks will fund
the redemption through an advance under its Credit Agreement.
(5) Regulatory Capital
First Banks 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 First Banks' and the Subsidiary Banks'
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 the Subsidiary Banks'
assets, liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Subsidiary Banks' capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulations to ensure capital
adequacy require the Subsidiary Banks to maintain certain minimum ratios. 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) and a minimum leverage ratio (Tier 1 capital to
total assets) of 3.0%. An additional cushion of 100 to 200 basis points is
required to be considered well capitalized. As of September 30, 1997, the date
of the most recent notification from First Banks' primary regulator, First Bank
Missouri was categorized as well capitalized under the regulatory framework for
prompt corrective action. There have been no conditions or events since that
notification that management believes have changed the First Bank Missouri
category. Management believes that, as of September 30, 1997, all of the
Subsidiary Banks are well capitalized as defined by the Federal Deposit
Insurance Corporation Improvement Act of 1991.
At September 30, 1997 and December 31, 1996, First Banks' and the
subsidiary depository institutions' capital ratios were as follows:
<TABLE>
<CAPTION>
Risk based capital ratios
-------------------------
Total Tier 1 Leverage Ratio
----- ------ --------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
First Banks 12.28% 9.23% 8.52% 7.92% 6.56% 5.99%
First Bank FSB 10.77 11.00 9.66 9.75 7.08 6.45
First Bank Missouri 10.29 10.47 9.04 9.21 7.36 7.25
First Bank Illinois 11.58 11.06 10.33 9.88 7.73 7.17
FB&T 14.96 16.45 13.69 15.18 9.50 11.43
BTX 12.21 10.29 10.95 9.04 8.76 7.53
Sunrise Bank 14.85 17.67 13.58 16.39 12.49 10.88
First Commercial 12.80 13.13 11.52 11.84 8.90 8.87
</TABLE>
<PAGE>
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations
General
First Banks is a registered bank holding company, incorporated in
Missouri in 1978 and headquartered in St. Louis County, Missouri. At September
30, 1997, First Banks had $3.96 billion in total assets; $2.89 billion in total
loans, net of unearned discount; $3.50 billion in total deposits; and $269.46
million in total stockholders' equity.
Through the Subsidiary Banks, First Banks offers a broad range of
commercial and personal banking services including certificate of deposit
accounts, individual retirement and other time deposit accounts, checking and
other demand deposit accounts, interest checking accounts, savings accounts and
money market accounts. Loans include commercial, financial, agricultural, real
estate construction and development, commercial and residential real estate and
consumer and installment loans. Other financial services include mortgage
banking, discount brokerage, credit-related insurance, automatic teller
machines, safe deposit boxes, cash management, lockbox and trust services
offered by certain Subsidiary Banks.
<TABLE>
<CAPTION>
The following table lists the Subsidiary Banks at September 30, 1997:
Loans, net
Percent of No. of of unearned Total
Subsidiary Banks ownership locations Total assets discount deposits
- ---------------- --------- --------- ------------ -------- --------
(dollars expressed in thousands)
<S> <C> <C> <C> <C> <C>
First Bank FSB 100.00% 40 $ 1,032,910 881,917 932,751
First Bank Missouri 100.00% 31 901,359 689,309 805,230
First Bank Illinois 100.00% 27 848,910 630,299 774,317
CCB 100.00% 17 615,379 334,397 541,767
FBA 70.23% 8 376,547 248,462 311,848
FCB 61.48% 6 178,861 106,133 161,372
</TABLE>
Financial Condition
First Banks' total assets increased by $270 million to $3.96 billion
from $3.69 billion at September 30, 1997 and December 31, 1996, respectively.
The increase is primarily attributable to the increase in loans, net of unearned
discount, of $123 million and the increase in investment securities of $145
million. The composition of the increase in net loans is discussed under
"--Lending and Credit Management" of this Form 10-Q. The increase in total
assets was funded by deposits, which increased by $260 million to $3.50 billion
and $3.24 billion at September 30, 1997 and December 31, 1996, respectively.
Results of Operations
Net Income
Net income for the three months ended September 30, 1997 was $8.5
million, compared to $1.5 million for the same period in 1996, an increase of
466.7%. Net income for the nine months ended September 30, 1997 was $24.2
million compared to $11.4 million for the same period in 1996. The results of
operations for the three and nine months ended September 30, 1996 were adversely
affected by the $8.6 million charge ($5.6 million after the applicable income
tax benefit) assessed against all deposits insured by the Savings Association
Insurance Fund (SAIF) of the Federal Deposit Insurance Corporation (FDIC). As
more fully described below, the improvement in net income is attributable to
increases in net interest income and noninterest income and a decrease in
noninterest expense, as compared to the same periods in 1996.
Net Interest Income
Net interest income (expressed on a tax-equivalent basis) improved to
$33.8 million, or 3.74% of average interest earning assets, for the three months
ended September 30, 1997, from $30.5 million, or 3.71% of average interest
earning assets, for the same period in 1996. Net interest income (expressed on a
tax-equivalent basis) improved to $103.0 million, or 3.94% of average interest
earning assets, for the nine months ended September 30, 1997, from $91.3
million, or 3.69% of average interest earning assets, for the same period in
1996.
<PAGE>
The increased net interest income for 1997 is attributable to the
increase in average interest earning assets of $322.7 million and $194.7 million
for the three and nine month periods ended September 30, 1997, respectively,
compared to the same periods in 1996. The increase is attributable to loans
which increased on average by $163.5 million and $109.3 million for the three
and nine month periods ended September 30, 1997, respectively, over the same
periods in 1996. Contributing further to the improved net interest income is the
increase in the yield of the loan portfolio to 8.89% for the three and nine
month periods ended September 30, 1997, from 8.72% and 8.64% for the three and
nine month periods ended September 30,1996, respectively. The improved yield
reflects the continual process of realigning the loan portfolio from residential
real estate loans to other types of loans, such as commercial and construction
loans, which generally provide a higher level of net interest income.
Offsetting the increase in net interest income is the amortization and
periodic costs of hedging the interest rate risk position of First Banks. The
cost of hedging totaled $3.2 million and $5.6 million for the three and nine
month periods ended September 30, 1997, respectively, compared $3.4 million and
$8.8 million for the same periods in 1996. As more fully discussed under "--
Interest Rate Risk Management," the cost of hedging for the three months ended
September 30, 1997 includes $2.1 million of additional amortization of deferred
losses. The decrease in the cost of hedging for the nine months of 1997 compared
with the same period in 1996 is attributable to the reduced level of interest
rate risk resulting from the realignment of the loan portfolio combined with the
gradual changes in the composition of the investment securities portfolios, from
mortgage-backed securities to U.S. Treasury and generic U.S. government agencies
securities, and the distribution of interest-bearing liabilities.
<PAGE>
The following table sets forth, on a tax-equivalent basis, certain
information relating to First Banks' average balance sheet, and reflects the
average yield earned on interest-earning assets, the average cost of
interest-bearing liabilities and the resulting net interest income for the three
and nine month periods ended September 30:
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
--------------------------------------------- -----------------------------------------
1997 1996 1997 1996
---------------------- ---------------------- ------------------- -------------------
Interest Interest Interest Interest
Average income/ Yield/ Average income/ Yield/ Average income/ Yield/ Average income/ Yield/
balance expense rate balance expense rate balance expense rate balance expense rate
------- ------- ---- ------- ------- ---- ------- ------- ---- --------------------
(dollars expressed in thousands)
Assets
------
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans $2,870,094 64,418 8.90% $2,706,607 59,314 8.72% $2,822,754 187,695 8.89% $2,713,444 175,611 8.64%
Investment securities 583,551 8,619 5.86 491,325 4,908 3.97 567,645 25,371 5.98 494,470 18,483 4.99
Federal funds sold and other 137,474 1,898 5.48 70,516 959 5.41 106,678 4,400 5.51 94,418 3,782 5.35
---------- ------- ---------- ------ ---------- ------ ---------- ---------
Total interest-earning
assets 3,591,119 74,935 8.28 3,268,448 65,181 7.93 3,497,077 217,466 8.31 3,302,332 197,876 8.00
------ ------ ------- -------
Nonearning assets 201,766 222,544 218,238 222,692
---------- ---------- ---------- ----------
Total assets $3,792,885 $3,490,992 $3,715,315 $3,525,024
========== ========== ========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Interest-bearing liabilities:
Interest-bearing
demand deposits $ 327,616 1,409 1.71% 292,153 1,117 1.52% $330,529 4,214 1.70% $ 298,990 3,530 1.58%
Savings deposits 779,690 7,221 3.68 676,200 5,578 3.28 715,656 18,260 3.41 684,640 16,953 3.31
Time deposits of $100 or more (1)186,424 2,987 6.36 154,995 2,291 5.88 178,194 8,063 6.05 169,889 7,545 5.93
Other time deposits (1) 1,660,059 26,720 6.40 1,575,117 23,327 5.89 1,677,714 75,858 6.05 1,590,836 71,332 5.99
---------- ------- ---------- ------ ---------- ------ --------- -------
Total interest-bearing
deposits 2,953,789 38,328 5.16 2,698,465 32,313 4.76 2,902,093 106,395 4.90 2,744,355 99,360 4.84
Notes payable and other (1) 137,927 2,765 7.98 148,540 2,398 6.42 138,571 8,071 7.79 140,694 7,219 6.85
---------- ------- ---------- ----- ---------- ------- ---------- -------
Total interest-bearing
liabilities 3,091,716 41,093 5.27 2,847,005 34,711 4.85 3,040,664 114,466 5.03 2,885,049 106,579 4.93
------- ------ ------- -------
Noninterest-bearing liabilities:
Demand deposits 399,745 366,954 381,784 365,413
Other liabilities 37,610 35,431 37,300 36,252
---------- ---------- ---------- ----------
Total liabilities 3,529,071 3,249,390 3,459,748 3,286,714
Stockholders' equity 263,814 241,602 255,567 238,310
---------- ---------- ---------- ----------
Total liabilities and
stockholders' equity $3,792,885 $3,490,992 $3,715,315 $3,525,024
========== ========== ========== ==========
Net interest income 33,842 30,470 103,000 91,297
======= ====== ======= =======
Net interest margin 3.74% 3.71% 3.94% 3.69%
===== ===== ===== =====
(1) Includes the effects of interest rate exchange agreements.
</TABLE>
<PAGE>
Provision for Possible Loan Losses
The provision for possible loan losses was $3.1 million compared to
$2.6 million for the three months ended September 30, 1997 and 1996,
respectively. For the nine months ended September 30, 1997 and 1996, the
provisions for possible loan losses were $9.1 million and $8.8 million,
respectively. The provision in 1997 reflects the overall growth and realignment
of the loan portfolio. While the provision for possible loan losses for the 1997
periods was not substantially different from those of the preceding year, the
adequacy of the allowance for possible loan losses improved as a result of the
lower level of net charge-offs in 1997. Net loan charge-offs were $67,000 and
$5.2 million for the three and nine month periods ended September 30, 1997,
respectively, compared to $3.1 million and $16.1 million for the three and nine
month periods ended September 30, 1996, respectively.
Following various acquisitions during 1994 and 1995, First Banks
pursued aggressive problem loan work out procedures which included
conservatively re-valuing loans through charge-offs. While these adjustments
were anticipated prior to the acquisitions and adequate reserves for loan losses
had been established to provide for them, loan charge-offs increased in 1996.
However, as this work-out program progressed, loan charge-offs have declined
while recoveries of loans previously charged-off have increased.
Tables summarizing nonperforming assets, past due loans and charge-off
experience are presented under "--Lending and Credit Management" of this Form
10-Q.
Noninterest Income
Noninterest income was $8.8 million and $19.7 million for the three
and nine month periods ended September 30, 1997, respectively, in comparison to
$5.3 million and $15.1 million for the same periods in 1996. Noninterest income
consists primarily of service charges on deposit accounts and other non-yield
customer service fees. In addition, noninterest income includes gains and losses
upon sales of assets. The increase in noninterest income is primarily
attributable to a $2.24 million net gain on sale of securities for the three and
nine month periods ended September 30, 1997, compared to net losses of $625,000
and $421,000 for the three and nine month periods ended September 30, 1996,
respectively.
Service charges on deposit accounts and customer service fees were $3.2
million and $9.2 million for the three and nine month periods ended September
30, 1997, respectively, compared to $3.2 and $9.4 million for the same periods
in 1996. The decrease for the nine month period ended September 30, 1997 is
attributable to the development of First Banks' "aggregate balance pricing
structure" whereby customers maintaining specified deposit balances, determined
on an aggregate basis of any deposit relationship with First Banks, may avoid
certain service charges. For the three month period ended September 30, 1997, as
compared to the same period in 1996, the decrease has been offset by an increase
in the demand deposit accounts subject to such service charges.
The gain on sale of securities, net of $2.24 million for the three and
nine month periods ended September 30, 1997 is attributable to the sales of
certain residual securities which had been acquired by First Banks through an
acquisition completed in 1995. These residuals, which had been written-down to
diminimous values at the date of acquisition, entitled First Banks to the
remaining cash flows of certain collateralized mortgage-backed securities (CMOs)
available upon redemption of the CMOs. However, the combination of the unique
structure of the CMOs and changes in interest rate and mortgage markets operated
to significantly enhance their value in 1997. This compares to net losses of
$625,000 and $421,000 for the three and nine months ended September 30, 1996,
respectively. The securities sold were classified as available for sale within
the investment security portfolio.
Noninterest Expenses
Noninterest expenses were $25.8 million and $32.2 million for the three
month periods ended September 30, 1997 and 1996, respectively. For the nine
<PAGE>
month periods ended September 30, 1997 and 1996, noninterest expenses were $75.4
million and $81.2 million, respectively. The decrease is attributable to the
1996 special assessment to recapitalize the SAIF and the overall reduction in
the deposit insurance assessment rate for 1997. Partially offsetting this
decrease are the noninterest expenses of Sunrise Bank, which was acquired by
First Banks on November 1, 1996, of $1.02 million and $3.31 million for the
three and nine month periods ended September 30, 1997, respectively, and
increased advertising and business development expenses.
Advertising and business development expense was $1.1 million and
$299,000 for the three months ended September 30, 1997 and 1996, respectively.
For the nine months ended September 30, 1997 and 1996, advertising and business
development expense was $2.71 million and $1.25 million, respectively. The
increase is primarily attributable to media advertising campaigns which were
instituted beginning in the third quarter of 1996.
FDIC premiums decreased by $9.21 million and $10.78 million for the
three and nine month periods ended September 30, 1997 and 1996, respectively, as
a result of the reduction in the assessment rate charged on deposits insured by
the SAIF of the FDIC. The reduction in the assessment rate was effective upon
the recapitalization of the SAIF, accomplished by a one-time special deposit
insurance charge assessed to all financial institutions with deposits insured by
the SAIF. First Banks' one-time charge totaled $8.6 million and was reflected in
the operating results during the third quarter of 1996.
Lending and Credit Management
Interest earned on the loan portfolio is the primary source of income
of First Banks. Total loans, net of unearned discount, represented 73.0% and
75.0% of total assets as of September 30, 1997 and December 31, 1996,
respectively. Total loans, excluding loans held for sale and net of unearned
discount, increased by $100 million to $2.84 billion at September 30, 1997 from
$2.74 billion at December 31, 1996. The increase reflects continued growth
within corporate lending of $256 million, offset by the decrease of the
residential mortgage and consumer and installment loan portfolios of $110
million and $44 million, respectively, at September 30, 1997 in comparison to
December 31, 1996. These decreases are attributable to the reductions of new
loan origination volumes that are held for investment and the continued
repayment of principal on the existing portfolios.
<TABLE>
<CAPTION>
The following is a summary of nonperforming assets by category:
September 30, December 31,
1997 1996
---- ----
(dollars expressed in thousands)
<S> <C> <C>
Commercial, financial and agricultural $ 5,237 4,243
Real estate construction and development 2,942 817
Real estate mortgage 19,147 24,764
Consumer and installment 104 445
----------- -----------
Total nonperforming loans 27,430 30,269
Other real estate 8,170 10,607
----------- -----------
Total nonperforming assets $ 35,600 40,876
=========== ===========
Loans, net of unearned discount $ 2,890,518 2,767,969
=========== ===========
Loans past due 90 days or more
and still accruing $ 2,018 3,779
=========== ===========
Asset Quality Ratios:
Allowance for possible loan losses to loans 1.76% 1.69%
Nonperforming loans to loans .95 1.09
Allowance for possible loan losses
to nonperforming loans 184.98 154.55
Nonperforming assets to loans and other real estate 1.23 1.47
====== ======
</TABLE>
<PAGE>
Impaired loans, consisting of nonaccrual loans, were $27.4 million and
$30.3 million at September 30, 1997 and December 31, 1996, respectively.
The following is a summary of loan loss experience for the three and nine
month periods ended September 30:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
(dollars expressed in thousands)
Allowance for possible loan losses,
<S> <C> <C> <C> <C>
beginning of period $ 47,708 45,921 46,781 52,665
--------- ------ ------ -------
Loans charged-off (2,062) (4,869) (12,710) (21,303)
Recoveries of loans previously charged-off 1,994 1,743 7,544 5,229
--------- ------ -------- -------
Net loan (charge-offs) recoveries (68) (3,126) (5,166) (16,074)
--------- ------ -------- -------
Provision for possible loan losses 3,100 2,570 9,125 8,774
--------- ------ -------- -------
Allowance for possible loan losses, end of period $ 50,740 45,365 50,740 45,365
========= ====== ======== =======
</TABLE>
The allowance for possible loan losses is based on past loan loss
experience, on management's evaluation of the quality of the loans in the
portfolio and on the anticipated effect of national and local economic
conditions relative to the ability of loan customers to repay. Each month, the
allowance for possible loan losses is revised relative to First Banks' internal
watch list and other data utilized to determine its adequacy. The provision for
possible loan losses is management's estimate of the amount necessary to
maintain the allowance at a level consistent with this evaluation. As
adjustments to the allowance for possible loan losses are considered necessary,
they are reflected in the results of operations.
Interest Rate Risk Management
Derivative financial instruments held by First Banks for purposes of
managing interest rate risk are summarized as follows:
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
---------------------- --------------------
Notional Credit Notional Credit
amount exposure amount exposure
------ -------- ------ --------
(dollars expressed in thousands)
<S> <C> <C> <C> <C>
Interest rate swap agreements $ -- -- 70,000 --
Interest rate floor agreements 70,000 19 105,000 141
Interest rate cap agreements 10,000 262 10,000 335
Forward commitments to sell
mortgage-backed securities 53,000 -- 35,000 308
</TABLE>
The notional amounts of derivative financial instruments do not
represent amounts exchanged by the parties and, therefore, are not a measure of
First Banks' credit exposure through its use of derivative financial
instruments. The amounts exchanged are determined by reference to the notional
amounts and the other terms of the derivatives.
Interest rate swap agreements were utilized to extend the repricing
characteristics of certain interest-bearing liabilities to correspond more
closely with the assets of First Banks, with the objective of stabilizing net
interest income over time. The net interest expense for these agreements was
$3.2 million and $5.6 million for the three and nine month periods ended
September 30, 1997, respectively, in comparison to $1.7 million and $5.8 million
for the same period in 1996. The maturity dates, notional
<PAGE>
amounts, interest rates paid and received, and fair values of interest rate swap
agreements outstanding as of December 31, 1996 are summarized as follows:
Notional Interest Rate Fair Value
Maturity date Amount Paid Received Gain (Loss)
------------- ------ ---- -------- -----------
(dollars expressed in thousands)
September 30, 1997 $ 35,000 7.04% 5.59% $ (417)
September 30, 1999 35,000 7.32 5.59 (1,160)
--------- -------
$ 70,000 7.18 5.59 $(1,577)
========= ===== ===== ========
First Banks shortened the effective maturity of its interest-bearing
liabilities through the termination of interest rate swap agreements of $225
million during July 1995, $75 million during November 1996 and $35 million
during August 1997 at losses of $13.5 million, $5.3 million and $1.4 million,
respectively. These losses were deferred and are being amortized over the
remaining lives of the swap agreements. If all or any portion of the underlying
liabilities are repaid, the related deferred losses will be charged to
operations. At September 30, 1997 and December 31, 1996, the unamortized balance
of these losses was $10.3 million and $13.4 million, respectively, and was
included in other assets. The amortization of the deferred losses included in
interest expense was $2.9 million and $4.4 million for the three and nine month
periods ended September 30, 1997 including $2.1 million resulting from a
reduction in the underlying liabilities. This compares to interest expense of
$1.0 million and $3.3 million for the same periods in 1996.
First Banks also has interest rate cap and floor agreements to limit
the interest expense associated with certain interest-bearing liabilities and
the net interest expense of certain interest rate swap agreements, respectively.
At September 30, 1997 and December 31, 1996, the unamortized costs for these
agreements were $322,000 and $433,000, respectively, and were included in other
assets. The net interest expense of the interest rate cap and floor agreements
was $37,000 and $111,000 for the three and nine month periods ended September
30, 1997, respectively, in comparison to $72,000 and $215,000 for the same
periods in 1996. There are no amounts receivable under these agreements.
Derivative financial instruments issued by First Banks consist of
commitments to originate fixed-rate loans. Commitments to originate fixed-rate
loans consist primarily of residential real estate loans. These loan
commitments, net of estimated underwriting fallout, and loans held for sale are
hedged with forward contracts to sell mortgage-backed securities.
Liquidity
The liquidity of First Banks and its Subsidiary Banks is the ability to
maintain a cash flow which is adequate to fund operations, service debt
obligations and meet other commitments on a timely basis. The primary sources of
funds for liquidity are derived from customer deposits, loan payments,
maturities, sales of investments and earnings.
In addition, First Banks and its Subsidiary Banks may avail themselves
of more volatile sources of funds through issuance of certificates of deposit in
denominations of $100,000 or more, federal funds borrowed, securities sold under
agreements to repurchase, borrowings from the Federal Home Loan Bank (FHLB), and
other borrowings, including First Banks' $90 million credit agreement with a
group of unaffiliated financial institutions. The aggregate funds acquired from
those sources were $261.1 million at September 30, 1997 and $315.4 million at
December 31, 1996. The decrease is primarily attributable to the reduction in
notes payable from the proceeds received from the sale of the Preferred
Securities. See note 3 to the accompanying consolidated financial statements.
<PAGE>
At September 30, 1997, First Banks' more volatile sources of funds
mature as follows:
(dollars expressed in thousands)
Three months or less $ 125,698
Over three months through six months 43,152
Over six months through twelve months 55,446
Over twelve months 36,828
---------
Total $ 261,124
=========
Management believes the future earnings of its Subsidiary Banks will be
sufficient to provide funds for growth and to permit the distribution of
dividends to First Banks sufficient to meet First Banks' operating and debt
service requirements both on a short-term and long-term basis and to pay the
dividends on the Class C Preferred Stock and the Preferred Securities.
Effects of New Accounting Standards
First Banks adopted the provisions of SFAS 125, Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities
(SFAS 125) prospectively on January 1, 1997. SFAS 125 established accounting and
reporting standards for transfers and servicing of financial assets and
extinguishment of liabilities.
The standards established by SFAS 125 are based on consistent
application of a financial-components approach that focuses on control. Under
that approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. SFAS 125 provides consistent
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings.
The implementation of SFAS 125 did not have a material effect on the
consolidated financial position or results of operation of First Banks.
In February 1997, the FASB issued SFAS 128, Earnings Per Share (SFAS
128). SFAS 128 supersedes Accounting Principles Board Opinion No. 15, Earnings
Per Share (APB 15) and specifies the computation, presentation, and disclosure
requirements for earnings per share (EPS) for entities with publicly held common
stock or potential common stock. SFAS 128 was issued to simplify the computation
of EPS and to make the U.S. standard more compatible with the EPS standards of
other countries and that of the International Accounting Standards Committee. It
replaces the presentation of primary EPS with a presentation of basic EPS and
replaces fully diluted EPS with diluted EPS. SFAS 128 also requires dual
presentation of basic and diluted EPS on the face of the income statement for
all entities with complex capital structures, and requires a reconciliation of
the numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation.
Basic EPS, unlike primary EPS, excludes dilution and is computed by
dividing income available to common stockholders by the weighted average number
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised and converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. Diluted EPS is
computed similarly to fully diluted EPS under APB 15.
<PAGE>
SFAS 128 is effective for financial statements for both interim and
annual periods ending after December 15, 1997. Earlier application is not
permitted. After adoption, all prior-period EPS data presented shall be restated
to conform with SFAS 128.
First Banks does not believe the implementation of SFAS 128 will have
a material effect on its computation of earnings per share.
In February 1997, the FASB issued SFAS 129, Disclosure of Information
about Capital Structure (SFAS 129). SFAS 129 establishes standards for
disclosing information about an entity's capital structure and applies to all
entities. SFAS 129 continues the previous requirements to disclose certain
information about an entity's capital structure found in APB 10, Omnibus
Opinion-1966, APB 15 and SFAS 47, Disclosure of Long-Term Obligations, for
entities that were subject to the requirements of those standards. SFAS 129
eliminates the exemption of nonpublic entities from certain disclosure
requirements of APB 15 as provided by SFAS 21, Suspension of the Reporting of
Earnings Per Share and Segment Information by Nonpublic Enterprises. It
supersedes specific disclosure requirements of APB 10, APB 15 and SFAS 47 and
consolidates them in SFAS 129 for ease of retrieval and for greater visibility
to nonpublic entities.
SFAS 129 is effective for financial statements for periods ending after
December 15, 1997. It contains no change in disclosure requirements for First
Banks as it was previously subject to the requirements of APB 10 and 15 and SFAS
47.
In June 1997, the FASB issued SFAS 130, Reporting Comprehensive
Income. (SFAS 130). SFAS 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. Comprehensive income is defined as "the change in equity
(net assets) of a business enterprise during a period from transactions and
other events and circumstances from nonowner sources. It includes all changes in
equity during a period except those resulting from investments by owners and
distributions to owners."
SFAS 130 requires all items recognized under accounting standards as
components of comprehensive income to be reported in a financial statement that
is displayed with the same prominence as other financial statements. It also
requires publicly traded companies to report a total for comprehensive income in
condensed financial statements of interim periods issued to shareholders. SFAS
130 requires an entity to: (1) classify items of other comprehensive income by
their nature in a statement of financial performance and (2) display the
accumulated balances of items of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position.
SFAS 130 is effective for fiscal years beginning after December 15,
1997. Reclassification of financial statements for earlier periods provided for
comparative purposes is required. First Banks' management is in the process of
analyzing SFAS 130 and its impact on First Banks' financial position and results
of operations.
In June 1997, the FASB issued SFAS 131, Disclosures about Segments of
an Enterprise and Related Information (SFAS 131). SFAS 131 establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers.
SFAS 131 requires that a public business enterprise report financial
and descriptive information about its reportable operating segments. Operating
segments are components of an enterprise about which separate financial
<PAGE>
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. Generally, financial information is required to be reported on the
basis that it is used internally for evaluating segment performance and deciding
how to allocate resources to segments.
SFAS 131 is effective for financial statements for periods beginning
after December 15, 1997. In the initial year of application, comparative
information for earlier years is to be restated. SFAS 131 need not be applied to
interim financial statements in the initial year of application, but comparative
information for interim periods in the initial year of application is to be
reported in financial statements for interim periods in the second year of
application. First Banks' management is in the process of analyzing SFAS 131 and
its impact on First Banks' financial position and results of operations.
Part II- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) These Exhibits are numbered in accordance with the Exhibit Table of Item
601 of Regulation S-K.
Exhibit
Number Description
11 Calculation of Earnings per Share.
27 Financial Data Schedule (EDGAR only).
(b) First Banks filed no reports on Form 8-K during the three month period
ended September 30, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST BANKS, INC.
Registrant
Date: November 12, 1997 By: /s/ James F. Dierberg
---------------------
James F. Dierberg
Chairman, President and
Chief Executive Officer
Date: November 12, 1997 By: /s/ Allen H. Blake
------------------
Allen H. Blake
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
<PAGE>
Exhibit 11
<PAGE>
Exhibit 11
FIRST BANKS, INC.
Calculation of Earnings per Share
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30, September 30,
------------------------------ ----------------------
1997 1996 1997 1996
---- ---- ---- ----
Average shares outstanding:
<S> <C> <C> <C> <C>
Class C preferred stock 1,885,543 2,200,000 1,927,101 2,200,000
Class A preferred stock 641,082 641,082 641,082 641,082
Class B preferred stock 160,505 160,505 160,505 160,505
Common Stock 23,661 23,661 23,661 23,661
=========== =========== =========== ==========
Net income $ 8,541,574 1,531,434 24,240,374 11,438,682
Preferred stock dividends:
Class C preferred stock (1,060,032) (1,237,500) (3,220,594) (3,712,501)
Class A preferred stock (192,325) (192,325) (512,866) (512,866)
Class B preferred stock (4,214) (4,213) (11,235) (11,235)
----------- ----------- ------------ ----------
Income available to common
stockholders $ 7,285,004 97,396 20,495,679 7,202,080
=========== ====== ========== =========
Primary earnings per share $ 307.89 4.12 866.22 304.39
=========== =========== =========== ==========
Fully diluted earnings per share:
Dividends per share:
Class C preferred stock $ 0.5622 0.5625 1.6712 1.6875
Class A preferred stock 0.3000 0.3000 0.8000 0.8000
Class B preferred stock 0.0263 0.0263 0.0700 0.0700
=========== =========== =========== ==========
Class A preferred stock outstanding 641,082 641,082 641,082 641,082
Book value/share of common stock,
beginning of year $ 7,795.06 7,038.67 7,795.06 7,038.67
Dilution of common equity upon
exercise of options and
warrants of subsidiary bank (26.29) (24.88) (26.29) (24.88)
----------- ----------- ----------- ----------
7,768.77 7,013.79 7,768.77 7,013.79
=========== =========== =========== ==========
Common stock issuable upon conversion 1,650 1,828 1,650 1,828
Shares of common stock outstanding 23,661 23,661 23,661 23,661
----------- ----------- ----------- ----------
25,311 25,489 25,311 25,489
=========== =========== =========== ==========
Net income $ 8,541,574 1,531,434 24,240,374 11,438,682
Class C preferred dividends (1,060,032) (1,237,500) (3,220,594) (3,712,501)
Class B preferred dividends (4,213) (4,213) (11,235) (11,235)
----------- ----------- ----------- -----------
Fully-diluted net income $ 7,477,329 289,721 21,008,545 7,714,946
=========== =========== =========== ===========
Fully-diluted earnings per share $ 295.42 11.37 830.02 302.68
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000710507
<NAME> First Banks, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Sep-30-1997
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0
60,175
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</TABLE>
