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, 1999
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)
- --------------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed since last
report)
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, 1999
----- ----------------
Common Stock, $250.00 par value 23,661
<PAGE>
FIRST BANKS, INC.
INDEX
<TABLE>
<CAPTION>
Page
PART I FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements (unaudited):
Consolidated Balance Sheets as of September 30, 1999
and December 31, 1998...................................................... -1-
Consolidated Statements of Income for the three and nine
months ended September 30, 1999 and 1998................................... -3-
Consolidated Statements of Changes in Stockholders' Equity and
Comprehensive Income for the nine months ended September
30, 1999 and 1998 and the three months ended
December 31, 1998.......................................................... -4-
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1999 and 1998.......................................... -5-
Notes to Consolidated Financial Statements..................................... -6-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................................... -12-
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................................... -26-
SIGNATURES....................................................................................... -27-
</TABLE>
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
FIRST BANKS, INC.
Consolidated Balance Sheets (unaudited)
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
ASSETS
------
Cash and cash equivalents:
<S> <C> <C>
Cash and due from banks................................................. $ 115,808 174,329
Interest-bearing deposits with other financial
institutions with maturities of three months or less................... 1,746 3,733
Federal funds sold...................................................... 59,300 36,700
---------- -----------
Total cash and cash equivalents................................... 176,854 214,762
---------- -----------
Investment securities:
Trading, at fair value.................................................. -- 3,425
Available for sale, at fair value....................................... 413,192 509,695
Held to maturity, at amortized cost (fair value of
$21,411 and $22,568 at September 30, 1999 and
December 31,1998, respectively)....................................... 21,298 21,676
---------- -----------
Total investment securities....................................... 434,490 534,796
---------- -----------
Loans:
Commercial, financial and agricultural.................................. 1,095,558 920,007
Real estate construction and development................................ 883,491 720,910
Real estate mortgage.................................................... 1,729,430 1,529,177
Consumer and installment ............................................... 246,415 282,549
Loans held for sale..................................................... 45,636 135,619
---------- -----------
Total loans ...................................................... 4,000,530 3,588,262
Unearned discount....................................................... (7,577) (8,157)
Allowance for possible loan losses...................................... (68,498) (60,970)
---------- -----------
Net loans......................................................... 3,924,455 3,519,135
---------- -----------
Bank premises and equipment, net of accumulated
depreciation and amortization........................................... 74,908 63,848
Intangibles associated with the purchase of subsidiaries................... 47,579 36,534
Mortgage servicing rights, net of amortization............................. 9,124 9,825
Accrued interest receivable................................................ 30,652 28,465
Other real estate.......................................................... 1,407 3,709
Deferred income taxes...................................................... 56,185 46,848
Other assets............................................................... 97,592 96,888
---------- -----------
Total assets...................................................... $4,853,246 4,554,810
========== ===========
</TABLE>
<PAGE>
FIRST BANKS, INC.
Consolidated Balance Sheets (unaudited)
(dollars expressed in thousands, except per share data)
(continued)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
LIABILITIES
-----------
Deposits:
Demand:
<S> <C> <C>
Non-interest-bearing................................................ $ 608,652 561,383
Interest-bearing.................................................... 396,586 377,435
Savings................................................................ 1,228,724 1,198,567
Time:
Time deposits of $100 or more....................................... 307,403 219,996
Other time deposits................................................. 1,676,669 1,582,604
---------- -----------
Total deposits.................................................... 4,218,034 3,939,985
Other borrowings........................................................... 96,260 121,331
Notes payable.............................................................. 73,000 50,048
Accrued interest payable................................................... 10,182 5,817
Deferred income taxes...................................................... 9,940 10,920
Accrued and other liabilities.............................................. 20,709 20,652
Minority interest in subsidiary............................................ 12,188 15,251
---------- -----------
Total liabilities................................................. 4,440,313 4,164,004
---------- -----------
Guaranteed preferred beneficial interests in:
First Banks, Inc. subordinated debenture............................... 83,367 83,288
First Banks America, Inc. subordinated debenture....................... 44,202 44,155
---------- -----------
Total guaranteed preferred beneficial interests in
subordinated debentures......................................... 127,569 127,443
---------- -----------
STOCKHOLDERS' EQUITY
--------------------
Preferred stock:
$1.00 par value, 5,000,000 shares authorized; no shares issued
and outstanding at September 30, 1999 and December 31, 1998......... -- --
Class A convertible, adjustable rate, $20.00 par value; 750,000
shares authorized; 641,082 shares issued and outstanding............ 12,822 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............................................................ 2,979 780
Retained earnings.......................................................... 259,195 231,867
Accumulated other comprehensive income..................................... 4,212 11,738
---------- -----------
Total stockholders' equity........................................ 285,364 263,363
---------- -----------
Total liabilities and stockholders' equity........................ $4,853,246 4,554,810
========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
FIRST BANKS, INC.
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,
------------------ -----------------
1999 1998 1999 1998
---- ---- ---- ----
Interest income:
<S> <C> <C> <C> <C>
Interest and fees on loans.................................................... $ 81,919 73,239 235,558 209,409
Investment securities......................................................... 6,347 9,966 20,454 31,676
Federal funds sold and other.................................................. 779 551 1,234 2,541
-------- ------- -------- --------
Total interest income................................................... 89,045 83,756 257,246 243,626
-------- ------- -------- --------
Interest expense:
Deposits:
Interest-bearing demand..................................................... 1,269 1,141 3,565 3,944
Savings..................................................................... 10,962 11,226 32,976 31,011
Time deposits of $100 or more............................................... 2,986 2,883 8,452 9,258
Other time deposits......................................................... 21,197 22,590 62,158 70,322
Interest rate exchange agreements, net........................................ 1,409 990 3,997 2,970
Notes payable and other borrowings............................................ 1,721 1,472 5,512 4,519
-------- ------- -------- --------
Total interest expense.................................................. 39,544 40,302 116,660 122,024
-------- ------- -------- --------
Net interest income..................................................... 49,501 43,454 140,586 121,602
-------- ------- -------- --------
Provision for possible loan losses................................................. 2,880 2,275 8,743 6,225
-------- ------- -------- --------
Net interest income after provision for possible loan losses............ 46,621 41,179 131,843 115,377
-------- ------- -------- --------
Noninterest income:
Service charges on deposit accounts and customer service fees................. 4,434 3,781 12,791 10,670
Credit card fees.............................................................. 35 695 362 2,307
Loan servicing fees, net...................................................... 113 177 396 880
Gain on mortgage loans sold and held for sale................................. 1,605 1,758 5,439 3,659
Net gain on sales of available-for-sale securities............................ 1 559 793 815
Net gain (loss) on sales of trading securities................................ -- (29) (303) 615
Other......................................................................... 2,833 2,059 12,661 6,205
-------- ------- -------- --------
Total noninterest income................................................ 9,021 9,000 32,139 25,151
-------- ------- -------- --------
Noninterest expense:
Salaries and employee benefits................................................ 15,560 14,627 45,631 41,897
Occupancy, net of rental income............................................... 3,505 2,830 9,347 7,970
Furniture and equipment....................................................... 2,179 1,755 6,178 5,381
Federal Deposit Insurance Corporation premiums................................ 223 360 880 977
Postage, printing and supplies................................................ 1,003 1,144 3,156 4,093
Data processing fees.......................................................... 4,658 3,737 13,881 9,691
Legal, examination and professional fees...................................... 1,700 1,716 4,942 4,046
Credit card................................................................... 142 987 509 2,549
Communications................................................................ 660 741 1,923 2,233
Advertising and business development.......................................... 1,019 1,111 2,566 3,767
(Gain) loss on sales of other real estate, net of expenses.................... (391) (146) (405) 515
Guaranteed preferred debentures............................................... 3,014 2,786 9,042 6,828
Other......................................................................... 4,243 4,458 12,600 13,255
-------- ------- -------- --------
Total noninterest expense............................................... 37,515 36,106 110,250 103,202
-------- ------- -------- --------
Income before provision for income taxes and minority interest in income
of subsidiary........................................................ 18,127 14,073 53,732 37,326
Provision for income taxes......................................................... 6,689 5,079 19,792 13,469
-------- ------- -------- --------
Income before minority interest in income of subsidiary................. 11,438 8,994 33,940 23,857
Minority interest in income of subsidiary.......................................... 416 407 1,088 1,028
-------- ------- -------- --------
Net income.............................................................. 11,022 8,587 32,852 22,829
Preferred stock dividends.......................................................... 196 196 524 524
-------- ------- -------- --------
Net income available to common stockholders............................. $ 10,826 8,391 32,328 22,305
======== ======= ======== ========
Earnings per share:
Basic......................................................................... $ 457.54 354.65 1,366.29 942.70
Diluted....................................................................... 444.11 343.73 1,320.33 910.91
======== ======= ======== ========
Weighted average shares of common stock outstanding................................ 23,661 23,661 23,661 23,661
======== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
FIRST BANKS, INC.
Consolidated Statements of Changes in Stockholders' Equity
and Comprehensive Income (unaudited) Nine months ended
September 30, 1999 and 1998 and three months ended
December 31, 1998
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
Accu-
Adjustable rate mulated
preferred stock other Total
----------------
Class A Compre- compre- stock-
conver- Common Capital hensive Retained hensiveholders'
tible Class B stock surplus income earnings income equity
----- ------- ----- ------- ------ -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated balances, January 1, 1998.................... $ 12,822 241 5,915 3,978 199,143 9,438 231,537
Nine months ended September 30, 1998:
Comprehensive income:
Net income......................................... -- -- -- -- 22,829 22,829 -- 22,829
Other comprehensive income, net of tax -
Unrealized gains on securities, net of
reclassification adjustment (1)................ -- -- -- -- 3,061 -- 3,061 3,061
-------
Comprehensive income............................... 25,890
=======
Class A preferred stock dividends, $0.80 per share..... -- -- -- -- (513) -- (513)
Class B preferred stock dividends, $0.07 per share..... -- -- -- -- (11) -- (11)
Effect of capital stock transactions of
majority-owned subsidiary.......................... -- -- -- (2,546) -- -- (2,546)
------- --- ----- ------ -------- ----- --------
Consolidated balances, September 30, 1998................. 12,822 241 5,915 1,432 221,448 12,499 254,357
Three months ended December 31, 1998: Comprehensive income:
Net income......................................... -- -- -- -- 10,681 10,681 -- 10,681
Other comprehensive income, net of tax -
Unrealized losses on securities, net of
reclassification adjustment (1)................ -- -- -- -- (761) -- (761) (761)
-------
Comprehensive income............................... 9,920
=======
Class A preferred stock dividends, $0.40 per share..... -- -- -- -- (256) -- (256)
Class B preferred stock dividends, $0.04 per share. -- -- -- -- (6) -- (6)
Effect of capital stock transactions of
majority-owned subsidiary.......................... -- -- -- (652) -- -- (652)
------- --- ----- ------ -------- ----- --------
Consolidated balances, December 31, 1998.................. 12,822 241 5,915 780 231,867 11,738 263,363
Nine months ended September 30, 1999: Comprehensive income:
Net income......................................... -- -- -- -- 32,852 32,852 -- 32,852
Other comprehensive income, net of tax -
Unrealized losses on securities, net of
reclassification adjustment (1) ............... -- -- -- -- (7,526) -- (7,526) (7,526)
-------
Comprehensive income........................... 25,326
=======
Class A preferred stock dividends, $0.80 per share..... -- -- -- -- (513) -- (513)
Class B preferred stock dividends, $0.07 per share..... -- -- -- -- (11) -- (11)
Effect of capital stock transactions of
majority-owned subsidiary.......................... -- -- -- (3,341) -- -- (3,341)
Reclassification of retained earnings.................. -- -- -- 5,000 (5,000) -- --
Reduction of deferred tax valuation reserve............ -- -- -- 540 -- -- 540
------- --- ----- ------ -------- ----- --------
Consolidated balances, September 30, 1999................. $12,822 241 5,915 2,979 259,195 4,212 285,364
======= ==== ===== ====== ======== ====== =======
(1) Disclosure of reclassification adjustment:
Nine months ended Three months ended
September 30, December 31,
----------------- ------------------
1999 1998 1998
---- ---- ----
Unrealized (losses) gains arising during the period............................ $ (7,011) 3,591 (338)
Less: reclassification adjustment for gains included in net income............ 515 530 423
------- ------ -----
Unrealized (losses) gains on securities........................................ $ (7,526) 3,061 (761)
======= ====== =====
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
FIRST BANKS, INC.
Consolidated Statements of Cash Flows (unaudited)
(dollars expressed in thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30,
----------------------
1999 1998
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income............................................................. $ 32,852 22,829
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization of bank premises
and equipment.................................................... 5,375 3,835
Amortization, net of accretion..................................... 9,529 7,851
Originations and purchases of loans held for sale.................. (378,045) (391,414)
Proceeds from the sale of loans held for sale...................... 437,397 348,425
Provision for possible loan losses................................. 8,743 6,225
Provision for income taxes......................................... 19,792 13,469
Payments of income taxes........................................... (18,816) (13,161)
Increase in accrued interest receivable ........................... (326) (825)
Net decrease (increase) in trading securities...................... 3,425 (772)
Interest accrued on liabilities.................................... 116,660 122,045
Payments of interest on liabilities................................ (113,634) (123,563)
Gain on sales of branch deposits................................... (4,474) --
Gain on mortgage loans sold and held for sale...................... (5,439) (3,659)
Net gain on sales of available-for-sale securities................. (793) (815)
Other operating activities, net.................................... (1,494) (13,413)
Minority interest in income of subsidiary.......................... 1,088 1,028
--------- ---------
Net cash provided by (used in) operating activities........... 111,840 (21,915)
--------- ---------
Cash flows from investing activities:
Cash (paid) received for acquired entities, net of cash and cash
equivalents received (paid).......................................... (15,961) 29,339
Proceeds from sales of investment securities available for sale........ 64,640 104,273
Maturities of investment securities available for sale................. 230,315 271,571
Maturities of investment securities held to maturity................... 2,330 1,699
Purchases of investment securities available for sale.................. (148,230) (160,102)
Purchases of investment securities held to maturity.................... (1,982) (3,124)
Net increase in loans.................................................. (259,737) (327,896)
Recoveries of loans previously charged-off ............................ 6,931 6,656
Purchases of bank premises and equipment............................... (13,561) (9,984)
Other investing activities............................................. (695) (3,612)
---------- ---------
Net cash used in investing activities......................... (135,950) (91,180)
--------- ---------
Cash flows from financing activities:
(Decrease) increase in demand and savings deposits..................... (58,424) 147,845
Increase (decrease) in time deposits................................... 96,248 (133,516)
Decrease in Federal Home Loan Bank advances............................ (25,000) (1,514)
(Decrease) increase in securities sold under agreements to repurchase.. (71) 13,979
Increase in notes payable.............................................. 22,952 17,264
Proceeds from issuance of guaranteed preferred subordinated
debenture............................................................ -- 44,124
Payment of preferred stock dividends................................... (524) (524)
Sales of branch deposits............................................... (48,979) --
--------- ---------
Net cash (used in) provided by financing activities .......... (13,798) 87,658
--------- ---------
Net decrease in cash and cash equivalents .................... (37,908) (25,437)
Cash and cash equivalents, beginning of period ............................. 214,762 168,480
--------- ---------
Cash and cash equivalents, end of period.................................... $ 176,854 143,043
========= =========
Noncash investing and financing activities:
Loans held for sale transferred to loans............................... $ 21,831 --
Loans held for sale transferred to available-for-sale
investment securities................................................ 4,065 --
Loans transferred to other real estate................................. 2,549 2,391
Loans transferred to investment securities available for sale.......... -- 65,361
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<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 or the Company) are unaudited and should be read
in conjunction with the consolidated financial statements contained in the 1998
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 nine month period ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for any other interim period or for the year ending December 31, 1999.
The consolidated financial statements include the accounts of First
Banks, Inc. and its subsidiaries, net of minority interest. All significant
intercompany accounts and transactions have been eliminated. Certain
reclassifications of 1998 amounts have been made to conform with the 1999
presentation.
First Banks operates through its subsidiary bank holding companies and
financial institutions (collectively referred to as the Subsidiary Banks) as
follows:
First Bank, headquartered in St. Louis County, Missouri (First Bank)
First Bank & Trust, headquartered in Newport Beach, California (FB&T)
Century Bank, headquartered in Beverly Hills, California (Century Bank)
First Banks America, Inc., headquartered in St.Louis County, Missouri
(FBA), and its wholly owned subsidiaries:
First Bank Texas N.A., headquartered in Houston, Texas (FB
Texas) First Bank of California, headquartered in Roseville,
California (FB California) Redwood Bank, headquartered in
San Francisco, California (Redwood Bank)
The Subsidiary Banks are wholly owned by their respective parent
companies except FBA, which was 76.84% owned by First Banks at December 31,
1998. On February 17, 1999, First Banks completed its purchase of 314,848 shares
of FBA common stock, pursuant to a tender offer to purchase up to 400,000 shares
of FBA common stock. This tender offer increased First Banks' ownership interest
in FBA to 82.34% of the outstanding voting stock of FBA. At September 30, 1999,
First Banks' ownership interest in FBA was 82.67%.
(2) Acquisitions and Divestitures
On March 4, 1999, FBA completed its acquisition of Redwood Bancorp
(Redwood) and its wholly owned subsidiary, Redwood Bank, for cash consideration
of $26.0 million. Redwood is headquartered in San Francisco, California and
operates four banking locations in the San Francisco Bay area. Redwood 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. The transaction was funded from available proceeds from
the sale of the 8.50% Guaranteed Preferred Beneficial Interest in First Banks
America, Inc. Subordinated Debenture completed in July 1998. The excess of the
cost over the fair value of the net assets acquired was $9.5 million and is
being amortized over 15 years.
On August 31, 1999, First Banks completed its acquisition of Century
Bank for cash consideration of $31.5 million. Century Bank is located in Beverly
Hills, California and operates commercial banking facilities in Beverly Hills,
Los Angeles, Santa Monica, Marina del Rey, Encino and San Francisco, California.
At the acquisition date, Century Bank had total assets of $156.0 million, total
loans, net of unearned discount, of $94.8 million, total investment securities
of $26.1 million and total deposits of $132.0 million. The transaction was
funded from borrowings under First Banks' $100 million credit agreement with a
group of unaffiliated financial institutions. The excess of the cost over the
fair value of the net assets acquired was approximately $4.5 million and is
being amortized over 15 years.
<PAGE>
On September 17, 1999, FB&T completed its assumption of the deposits
and certain liabilities and the purchase of selected assets of the Malibu,
California branch office of Brentwood Bank of California. The transaction
resulted in the acquisition of approximately $17.3 million of deposits and one
branch office that operates as a branch of FB&T. The excess of the cost over the
fair value of the net assets acquired was $325,000 and is being amortized over
15 years.
The aforementioned transactions were accounted for using 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 respective acquisition dates, and the assets acquired and
liabilities assumed were recorded at fair value at the acquisition dates. Due to
the immaterial effect on previously reported financial information, proforma
disclosures have not been prepared for the aforementioned transactions.
On October 8, 1999, FBA and Lippo Bank entered into an Agreement and
Plan of Reorganization providing for the acquisition of Lippo Bank, San
Francisco, California. Under the agreement, FBA will purchase all of the issued
and outstanding capital stock of Lippo Bank for an estimated purchase price of
$17.2 million. Lippo Bank operates three banking locations in San Francisco, San
Jose and Los Angeles, California. At September 30, 1999, Lippo Bank had $90.2
million in total assets, $46.0 million in loans, net of unearned discount, $33.9
million in investment securities and $80.1 million in total deposits. The
transaction, which has received the approval of Lippo Bank's majority
shareholder and is subject to regulatory approvals, is expected to be completed
during the first quarter of 2000.
In March and April 1999, First Bank completed its divestiture of seven
branch facilities in the northern and central Illinois market areas, resulting
in a reduction of the deposit base of approximately $54.8 million and a pre-tax
gain of $4.4 million recorded in other income. In September 1999, First Bank
entered into a Branch Purchase and Assumption Agreement for the sale of one
branch facility in central Illinois. This transaction, which is subject to
regulatory approvals, is expected to close during the first quarter of 2000.
(3) 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. 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 First Banks and the Subsidiary Banks to maintain certain
minimum ratios. First Banks and the Subsidiary Banks are required to maintain a
minimum risk-based capital to risk-weighted assets ratio of 8.00%, with at least
4.00% being "Tier 1" capital (as defined in the regulations). In addition, a
minimum leverage ratio (Tier 1 capital to average assets) of 3.00% 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
financial institution is required to maintain a risk-weighted asset ratio of at
least 10.00%, a Tier 1 risk-weighted asset ratio of at least 6.00% and a
leverage ratio of at least 5.00%. As of March 31, 1999, the date of the most
recent notification from First Banks' primary regulator, the Subsidiary Banks
were categorized as well capitalized under the regulatory framework for Prompt
Corrective Action. Management believes, as of September 30, 1999, the Subsidiary
Banks, with the exception of FB&T, were each well capitalized. During September
1999, FB&T experienced an unusually high level of loan growth and, as a result,
fell below the minimum capital level required to be considered well capitalized
under the Prompt Corrective Action provisions. However, at October 31, 1999,
FB&T's capital ratio returned to the well-capitalized level as a result of loan
payoffs and a $3.0 million capital infusion from First Banks. Management
considers the decline in FB&T's capital level at September 30, 1999 to be a
temporary situation and does not foresee any future events that would prevent
FB&T from remaining well capitalized.
<PAGE>
At September 30, 1999 and December 31, 1998, First Banks' and the
Subsidiary Banks' capital ratios were as follows:
<TABLE>
<CAPTION>
Risk based capital ratios
---------------------------------------
Total Tier 1 Leverage ratio
----- ------ --------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
First Banks...................... 9.94% 10.27% 7.77% 7.87% 7.05% 6.78%
First Bank....................... 10.51 10.01 9.25 8.75 8.01 7.46
FB&T............................. 9.76 10.39 8.50 9.13 8.07 7.60
Century Bank (1)................. 21.86 -- 20.60 -- 14.37 -
FB Texas......................... 12.41 11.37 11.15 10.11 10.06 9.15
FB California.................... 11.41 10.63 10.15 9.37 9.48 8.34
Redwood Bank (2)................. 10.94 -- 10.06 -- 9.55 --
----------------
(1) Century Bank was acquired by First Banks on August 31, 1999.
(2) Redwood Bank was acquired by FBA on March 4, 1999.
</TABLE>
(4) Earnings Per Common Share
The following is a reconciliation of the numerators and denominators of
the basic and diluted earnings per share (EPS) computations for the periods
indicated:
<TABLE>
<CAPTION>
Income Shares Per share
(numerator) (denominator) amount
----------- ------------- ------
(dollars expressed in thousands, except per share data)
Three months ended September 30, 1999:
<S> <C> <C> <C>
Basic EPS - income available to common stockholders.......... $ 10,826 23,661 $ 457.54
============
Effect of dilutive securities:
Class A convertible preferred stock........................ 192 1,149
----------- ----------
Diluted EPS - income available to common stockholders........ $ 11,018 24,810 $ 444.11
=========== ========== ============
Three months ended September 30, 1998:
Basic EPS - income available to common stockholders.......... $ 8,391 23,661 $ 354.65
============
Effect of dilutive securities:
Class A convertible preferred stock........................ 193 1,311
----------- ----------
Diluted EPS - income available to common stockholders........ $ 8,584 24,972 $ 343.73
=========== ========== ============
Nine months ended September 30, 1999:
Basic EPS - income available to common stockholders.......... $ 32,329 23,661 $ 1,366.29
============
Effect of dilutive securities:
Class A convertible preferred stock........................ 512 1,212
----------- ----------
Diluted EPS - income available to common stockholders........ $ 32,841 24,873 $ 1,320.33
=========== ========== ============
Nine months ended September 30, 1998:
Basic EPS - income available to common stockholders.......... $ 22,305 23,661 $ 942.70
============
Effect of dilutive securities:
Class A convertible preferred stock........................ 513 1,389
----------- ----------
Diluted EPS - income available to common stockholders........ $ 22,818 25,050 $ 910.91
=========== ========== ============
</TABLE>
<PAGE>
(5) Business Segment Results
First Banks' business segments are First Bank, FB California, Redwood
Bank, FB Texas, FB&T, Century Bank and First Bank Mortgage (FBM). The reportable
business segments are consistent with the management structure of First Banks
and the internal reporting system that monitors performance.
Through the respective branch networks, First Bank, FB California,
Redwood Bank, FB Texas, FB&T and Century Bank provide similar products and
services in four 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, financial and
agricultural, real estate construction and development, commercial and
residential real estate, consumer and installment, student and Small Business
Administration loans. Other financial services include mortgage banking, credit
and debit cards, brokerage services, credit-related insurance, automatic teller
machines, telephone account access, safe deposit boxes, trust and private
banking services and cash management services. 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 include Missouri and
Illinois (First Bank), southern California (FB&T and Century Bank), northern
California (FB California and Redwood Bank) and Houston, Dallas, Irving and
McKinney, Texas (FB Texas). The products and services are offered to customers
primarily within their respective geographic areas, with the exception of loan
participations executed between these operating segments of First Banks. There
are no foreign operations.
FBM conducts the mortgage banking activities of First Banks. The
mortgage banking activities consist primarily of the origination and purchase of
conforming and nonconforming residential real estate loans, which are generally
sold into the secondary market. The related mortgage servicing rights are
generally maintained for conforming loans while the nonconforming loans are sold
on a servicing released basis. FBM's revenues include the interest earned while
loans are held pending sale, net gains on the sale of loans, and mortgage loan
servicing fees earned from its loan servicing portfolio. The products and
services are offered to customers primarily within First Banks' four geographic
areas. FBM also services certain residential real estate loans for FB California
for which it receives loan servicing fees.
The business segment results are summarized as follows and are
consistent with First Banks' internal reporting system and, in all material
respects, with generally accepted accounting principles and practices
predominant in the banking and mortgage banking industries. The balance sheet
information is presented as of September 30, 1999 and December 31, 1998, and the
statement of income information is presented for the three and nine months ended
September 30, 1999 and 1998, respectively. The business segment results include
Redwood Bank, which was acquired by FBA on March 4, 1999, and Century Bank,
which was acquired by First Banks on August 31, 1999, for the periods subsequent
to the respective acquisition dates.
<PAGE>
<TABLE>
<CAPTION>
First Bank FB California Redwood Bank (1) FB Texas
--------------------- --------------------- ------------------- -------------------
Sept. 30, Dec 31, Sept 30, Dec. 31, Sept. 30, Dec. 31, Sept.30 Dec. 31,
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
(dollars expressed in thousands)
Balance sheet information:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment securities................. $ 200,192 252,165 24,573 53,449 33,582 -- 31,797 59,914
Loans, net of unearned discount....... 2,478,054 2,354,937 346,685 314,977 145,767 -- 221,103 201,426
Total assets.......................... 2,892,983 2,869,648 422,458 410,110 195,791 -- 277,572 300,984
Deposits.............................. 2,629,689 2,623,157 373,322 363,422 168,162 -- 238,714 264,425
Stockholders' equity.................. $ 253,489 236,010 45,568 42,825 26,413 -- 29,926 30,249
========== ========= ======= ======== ========= ===== ======== ========
First Bank FB California Redwood Bank (1) FB Texas
------------------ ------------------ ----------------- ------------------
Three months ended Three months ended Three months ended Three months ended
September 30, September 30, September 30, September 30,
------------------ ----------------- ----------------- -----------------
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
(dollars expressed in thousands)
Income statement information:
Interest income....................... $ 54,146 53,754 8,582 8,472 3,866 -- 5,500 5,706
Interest expense...................... 25,292 26,813 3,050 3,314 1,447 -- 2,185 2,337
-------- -------- ------- ------ ----- ---- ------ -----
Net interest income................ 28,854 26,941 5,532 5,158 2,419 3,315 3,369
Provision for possible loan losses.... 1,950 1,900 15 150 60 -- 15 75
-------- -------- ------- ------ ---- ----- ------ ------
Net interest income after provision
for possible loan losses......... 26,904 25,041 5,517 5,008 2,359 -- 3,300 3,294
-------- -------- ------- ------ ----- ----- ------ ------
Noninterest income (2)................ 5,360 4,002 934 836 122 -- 504 590
Noninterest expense (3)............... 18,055 18,899 3,785 3,918 1,496 -- 2,367 2,119
-------- --------- ------- ------ ----- ----- ------ ------
Income before provision for income.
taxes and minority interest in
income of subsidiary............. 14,209 10,144 2,666 1,926 985 -- 1,437 1,765
Provision for income taxes............ 4,879 3,409 1,089 928 443 -- 492 598
-------- --------- ------- ------ ---- ----- ------ ------
Income before minority interest
in income of subsidiary.......... 9,330 6,735 1,577 998 542 -- 945 1,167
Minority interest in income of -- -- -- -- -- -- -- --
subsidiary -------- --------- ------ ------ ---- ----- ----- ----
Net income.......................... $ 9,330 6,735 1,577 998 542 -- 945 1,167
======== ========= ======= ====== ==== ===== ====== ======
First Bank FB California Redwood Bank (1) FB Texas
----------------- ----------------- ---------------- -----------------
Nine months ended Nine months ended Nine months ended Nine months ended
September 30, September 30, September 30, September 30,
------------------ ---------------- ----------------- ----------------
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
(dollars expressed in thousands)
Income statement information:
Interest income....................... $ 158,300 158,739 24,714 24,346 8,796 -- 16,523 16,229
Interest expense...................... 74,970 80,691 9,125 10,066 3,282 -- 6,510 6,569
---------- -------- ------- ------ ----- ----- ------ ------
Net interest income................ 83,330 78,048 15,589 14,280 5,514 -- 10,013 9,660
Provision for possible loan losses.... 6,650 5,000 95 450 133 -- 75 275
---------- -------- ------- ------ ---- ----- ------ ------
Net interest income after provision
for possible loan losses......... 76,680 73,048 15,494 13,830 5,381 -- 9,938 9,385
---------- -------- ------- ------ ----- ----- ------ ------
Noninterest income (2)................ 19,776 14,026 2,358 2,165 325 -- 1,560 1,342
Noninterest expense (3)............... 51,890 54,626 11,410 11,725 3,403 -- 6,877 6,507
---------- --------- ------- ------ ----- ----- ------ ------
Income before provision for income
taxes and minority interest in
income of subsidiary............. 44,566 32,448 6,442 4,270 2,303 -- 4,621 4,220
Provision for income taxes............ 15,035 10,947 2,742 1,895 1,087 -- 1,588 1,452
---------- --------- ------- ------ ----- ----- ------ ------
Income before minority interest....
in income of subsidiary.......... 29,531 21,501 3,700 2,375 1,216 -- 3,033 2,768
Minority interest in income of -- -- -- -- -- -- -- --
subsidiary --------- ------- ------ ------ ----- ----- ----- ------
Net income......................... $ 29,531 21,501 3,700 2,375 1,216 -- 3,033 2,768
========== ========= ======= ====== ===== ===== ====== ======
- -----------------
(1) Redwood Bank was acquired by FBA on March 4, 1999.
(2) FBM includes intercompany loan servicing fees of $146,000 and $473,000 for
the three and nine months ended September 30, 1999, respectively, and
$234,000 and $830,000 for the comparable periods in 1998.
(3) Corporate and other includes $2.0 million and $5.9 million of guaranteed
preferred debenture expense, after applicable income tax benefit of $1.0
million and $3.1 million, for the three and nine months ended September 30,
1999, respectively, and $1.8 million and $4.4 million of guaranteed
preferred debenture expense, after applicable income tax benefit of
$975,000 and $2.4 million, for the comparable periods in 1998.
(4) Century Bank was acquired by First Banks on August 31, 1999.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Corporate, other
and intercompany
Century Bank (4) FB&T FBM reclassifications Consolidated totals
- ------------------------ ------------------------- ------------------------- ----------------- --------------------
Sept. 30, Dec.31, Sept. 30, Dec. 31, Sept. 30, Dec. 31, Sept. 30, Dec. 31, Sept. 30, Dec. 31,
1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
(dollars expressed in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
25,010 -- 84,870 134,203 15,656 12,199 8,810 22,866 434,490 534,796
93,662 -- 650,501 573,562 57,592 135,619 (411) (416) 3,992,953 3,580,105
170,290 -- 806,345 793,217 84,502 154,952 3,305 25,899 4,853,246 4,554,810
135,693 -- 673,394 701,406 20,500 35,873 (21,440) (48,298) 4,218,034 3,939,985
31,773 -- 73,478 75,165 4,360 7,663 179,643) (128,549) 285,364 263,363
========= ======== ======= ======== ======== ========= ======== ======== ========= =========
</TABLE>
<TABLE>
<CAPTION>
Corporate, other
and intercompany
Century Bank (4) FB&T FBM reclassifications Consolidated totals
- ------------------ ------------------ ------------------ ----------------- -------------------
Three months ended Three months ended Three months ended Three months ended Three months ended
September 30, September 30, September 30, September 30, September 30,
- ------------------ ----------------- ------------------ ------------------ -----------------
1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
(dollars expressed in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1,075 -- 14,691 14,103 1,300 1,925 (115) (204) 89,045 83,756
357 -- 5,874 6,343 844 1,302 495 193 39,544 40,302
- ------- -------- -------- -------- --------- --------- -------- -------- -------- --------
718 -- 8,817 7,760 456 623 (610) (397) 49,501 43,454
40 -- 800 150 -- -- -- -- 2,880 2,275
- ------- -------- -------- -------- --------- --------- -------- -------- -------- --------
678 -- 8,017 7,610 456 623 (610) (397) 46,621 41,179
- ------- -------- -------- -------- --------- --------- -------- -------- -------- --------
66 -- 1,037 999 1,600 2,199 (602) 374 9,021 9,000
467 -- 6,644 5,642 2,069 2,166 2,632 3,362 37,515 36,106
- ------- -------- -------- -------- --------- --------- -------- -------- -------- --------
277 -- 2,410 2,967 (13) 656 (3,844) (3,385) 18,127 14,073
123 -- 957 1,191 (5) 230 (1,289) (1,277) 6,689 5,079
- ------- -------- -------- -------- --------- --------- -------- -------- -------- --------
154 -- 1,453 1,776 (8) 426 (2,555) (2,108) 11,438 8,994
-- -- -- -- -- -- 416 407 416 407
- ------- -------- -------- -------- --------- --------- -------- -------- -------- --------
154 -- 1,453 1,776 (8) 426 (2,971) (2,515) 11,022 8,587
======= ======== ======== ======== ========= ========= ======== ======== ======== ========
Corporate, other
and intercompany
Century Bank (4) FB&T FBM reclassifications Consolidated totals
- ------------------ ------------------- -------------------- ----------------------- --------------------
Nine months ended Nine months ended Nine months ended Nine months ended Nine months ended
September 30, September 30, September 30, September 30, September 30,
1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
(dollars expressed in thousands)
1,075 -- 43,046 39,480 5,064 5,285 (272) (453) 257,246 243,626
357 -- 17,863 19,310 3,342 3,595 1,211 1,793 116,660 122,024
- ------- -------- -------- -------- --------- --------- -------- -------- -------- --------
718 -- 25,183 20,170 1,722 1,690 (1,483) (2,246) 140,586 121,602
40 -- 1,750 500 -- -- -- -- 8,743 6,225
- ------- -------- -------- -------- --------- --------- -------- -------- -------- --------
678 -- 23,433 19,670 1,722 1,690 (1,483) (2,246) 131,843 115,377
- ------- -------- -------- -------- --------- --------- -------- -------- -------- --------
66 -- 3,401 2,833 5,652 5,465 (999) (680) 32,139 25,151
467 -- 19,869 16,084 6,356 5,428 9,978 8,832 110,250 103,202
- ------- -------- -------- -------- --------- --------- -------- -------- -------- --------
277 -- 6,965 6,419 1,018 1,727 (12,460) (11,758) 53,732 37,326
123 -- 3,017 2,422 356 604 (4,156) (3,851) 19,792 13,469
- ------- -------- -------- -------- --------- --------- -------- -------- -------- --------
154 -- 3,948 3,997 662 1,123 (8,304) (7,907) 33,940 23,857
-- -- -- -- -- -- 1,088 1,028 1,088 1,028
- ------- -------- -------- -------- --------- --------- -------- -------- -------- --------
154 -- 3,948 3,997 662 1,123 (9,392) (8,935) 32,852 22,829
======= ======== ======== ======== ========= ========= ======== ======== ======== ========
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The discussion set forth in 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 First Banks. 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 affecting the banking industry generally and factors
having a specific impact on First Banks, including but not limited to,
fluctuations in interest rates and in the economy; the impact of laws and
regulations applicable to First Banks and changes therein; competitive
conditions in the markets in which First Banks conducts its operations,
including competition from banking and non-banking companies with substantially
greater resources than First Banks, some of which may offer and develop products
and services not offered by First Banks; and the ability of First Banks to
respond to changes in technology, including effects of the Year 2000 issue. With
regard to First Banks' 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 First Banks, as compared with
competitors operating solely in contiguous markets; the competition of larger
acquirers with greater resources than First Banks, fluctuations in the prices at
which acquisition targets may be available for sale and in the market for First
Banks' securities; and the potential for difficulty or unanticipated costs in
realizing the benefits of particular acquisition transactions. Additional
factors potentially affecting First Banks' results were identified in the 1998
Annual Report on Form 10-K filed with the Securities and Exchange Commission.
General
First Banks is a registered bank holding company, incorporated in
Missouri in 1978 and headquartered in St. Louis County, Missouri. At September
30, 1999, First Banks had $4.9 billion in total assets; $4.0 billion in total
loans, net of unearned discount; $4.2 billion in total deposits; and $285.4
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 and agricultural,
real estate construction and development, commercial and residential real
estate, consumer and installment, student and Small Business Administration
loans. Other financial services include mortgage banking, credit and debit
cards, brokerage services, credit-related insurance, automatic teller machines,
telephone account access, safe deposit boxes, trust and private banking services
and cash management services.
The following table lists the Subsidiary Banks at September 30, 1999:
<TABLE>
<CAPTION>
Number of Loans, net of Total
Subsidiary Banks locations Total assets unearned discount deposits
---------------- --------- ------------ ----------------- --------
(dollars expressed in thousands)
<S> <C> <C> <C> <C>
First Bank.............................. 87 $ 2,977,485 2,535,646 2,650,189
FB&T ................................... 22 806,345 650,501 673,394
Century Bank............................ 6 170,290 93,662 135,693
FBA:
FB California...................... 10 422,458 346,685 373,322
FB Texas........................... 6 277,572 221,103 238,714
Redwood Bank....................... 4 195,791 145,767 168,162
</TABLE>
<PAGE>
Financial Condition
First Banks' total assets increased by $300 million to $4.85 billion
from $4.55 billion at September 30, 1999 and December 31, 1998, respectively. As
discussed in Note 2 to the accompanying consolidated financial statements, the
acquisitions of Century Bank and Redwood provided assets of $156.0 million and
$183.9 million, respectively. In addition, net loans, excluding the $94.8
million and $134.4 million of loans acquired from Century Bank and Redwood,
respectively, increased $183.6 million, which is discussed under "--Lending and
Credit Management" of this Form 10-Q. Offsetting this increase was a reduction
in cash and due from banks precipitated by the purchase of Redwood and First
Banks' efforts to effectively optimize non-earning assets, and a reduction in
investment securities of $100.3 million, which provided additional sources of
funds for the loan growth. Total deposits, excluding the deposits provided by
the acquisitions of Century Bank and Redwood, decreased by $16.9 million. This
decrease, while partially offset by internal deposit growth of $37.9 million, is
attributable to the divestiture of certain branch facilities with a total
deposit base of $54.8 million. In addition, notes payable increased to $73.0
million at September 30, 1999 from $50.0 million at December 31, 1998,
reflecting First Banks' funding source for the acquisition of Century Bank, net
of paydowns.
Results of Operations
Net Income
Net income was $11.0 million, or $444.11 per share on a diluted basis,
for the three months ended September 30, 1999, in comparison to $8.6 million, or
$343.73 per share on a diluted basis, for the comparable period in 1998. Net
income for the nine months ended September 30, 1999 and 1998 was $32.9 million
and $22.8 million, or $1,320.33 and $910.10 per share on a diluted basis,
respectively. The earnings improvement is primarily attributable to First Banks'
efforts to realign the composition of the loan portfolio through further
diversification and growth; the results of the acquisitions of Century Bank and
Redwood; and the divestiture of certain branch facilities. As previously
mentioned, the loan growth was primarily funded through internal deposit growth
and reductions in cash and due from banks and investment securities.
Net income was reduced by an increased provision for possible loan
losses, as discussed under "--Provision for Possible Loan Losses," and an
increase in operating expenses of $1.4 million and $7.0 million for the three
and nine months ended September 30, 1999 in comparison to the comparable periods
in 1998, respectively. The increased operating expenses are reflective of: the
additional cost of the preferred securities issued by FBA in July 1998; the
continuing expansion of commercial and retail banking activities; the
acquisitions of Century Bank, completed on August 31, 1999, Redwood, completed
on March 4, 1999, Pacific Bay Bank, completed on February 2, 1998, and Republic
Bank, completed on September 15, 1998; increased legal, examination and
professional fees; and increased data processing fees primarily associated with
Year 2000 activities.
Net Interest Income
Net interest income (expressed on a tax-equivalent basis) improved to
$49.7 million, or 4.53% of average earning assets, for the three months ended
September 30, 1999, from $43.7 million, or 4.35% of average earning assets, for
the comparable period in 1998. For the nine months ended September 30, 1999 and
1998, net interest income (expressed on a tax-equivalent basis) was $141.1
million, or 4.44%, and $122.3 million, or 4.16%, or average earning assets,
respectively. The improved net interest income is primarily attributable to the
net interest-earning assets provided by the acquisitions of Century Bank,
Redwood, Pacific Bay Bank and Republic Bank, internal loan growth and a
reduction in the overall cost of deposits. For the three and nine months ended
September 30, 1999 and 1998, loans, on average, increased by $549.1 million and
$586.6 million, respectively. Contributing further to the improved net interest
income is the effect of (a) the earnings impact of the interest rate swap
agreements entered into in 1998 and 1999; (b) the reduction of First Bank's
deposit base associated with the divested branch facilities, which was primarily
concentrated in certificates of deposit; and (c) a decrease in the cost of
interest-bearing liabilities to 4.28% and 4.33% from 4.67% and 4.79% for the
three and nine months ended September 30, 1999 and 1998, respectively.
Although net interest margin improved, the yield on the loan portfolio
declined to 8.45% and 8.39% from 8.82% and 8.85% for the three and nine months
ended September 30, 1999 and 1998, respectively. This reduction primarily
results from the overall decline in the prime lending rate experienced during
the latter part of 1998. In addition, increased competition within the market
areas served by First Banks has also lead to reduced lending rates.
The improved net interest margin is further offset by the amortization
of deferred hedging losses. These costs were $1.4 million and $4.0 million for
the three and nine months ended September 30, 1999, in comparison to $990,000
and $3.0 million for the comparable periods in 1998, respectively. The increase
is reflective of the liquidation of a portion of the underlying interest-bearing
liabilities, primarily associated with the branch divestitures, which resulted
in the additional recognition of a portion of the related deferred losses on the
previously terminated interest rate exchange agreements.
<PAGE>
The following table sets forth, on a tax-equivalent basis, certain
information relating to First Banks' average balance sheets, and reflects the
average yield on earning assets, the average cost of interest-bearing
liabilities and the resulting net interest income and net interest margin for
the three and nine months ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
-------------------------------------------- -----------------------------------------------
1999 1998 1999 1998
-------------------- --------------------- ---------------------- ----------------------
Interest Interest Interest Interest
Average income/Yield/ Average income/Yield/ Average income/Yield/ Average income/Yield/
balance expenserate 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(1)(2)(3)(4)........... $3,846,498 81,972 8.45% $3,297,377 73,311 8.82%$3,754,7702 35,724 8.39%$3,168,141 209,633 8.85%
Investment securities(4).... 435,931 6,446 5.87 641,853 10,107 6.25 460,355 20,831 6.05 698,614 32,112 6.15
Federal funds sold.......... 59,807 744 4.94 39,430 527 5.30 29,266 1,154 5.27 58,919 2,404 5.46
Other....................... 2,424 35 5.73 2,173 24 4.38 1,747 80 6.12 3,304 137 5.54
---------- ------- ---------- ------ ---------- ------ -------- -------
Total interest-earning
assets............... 4,344,660 89,197 8.15 3,980,833 83,969 8.37 4,246,138 257,789 8.12 3,928,978 244,286 8.31
------- ------ ------- -------
Nonearning assets.............. 347,829 309,265 342,858 302,093
---------- ---------- ---------- ----------
Total assets........... $4,692,489 $4,290,098 $4,588,996 $4,231,071
========== ========== ========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand
deposits................ $ 388,880 1,269 1.29% $ 355,503 1,141 1.27% $ 382,790 3,565 1.25%$ 353,144 3,944 1.49%
Savings deposits.......... 1,217,845 10,962 3.57 1,116,879 11,226 3.99 1,221,226 32,976 3.61 1,038,717 31,011 3.99
Time deposits of $100
or more (3)............. 234,496 3,151 5.33 208,753 2,992 5.69 219,666 8,903 5.42 216,439 9,586 5.92
Other time deposits(3).... 1,688,345 22,386 5.26 1,627,137 23,436 5.71 1,635,220 65,516 5.36 1,688,111 72,880 5.77
---------- ------- ---------- ------ ---------- ------ ---------- -------
Total interest-bearing
deposits............. 3,529,566 37,768 4.25 3,308,272 38,795 4.65 3,458,902 110,960 4.29 3,296,411 117,421 4.76
Federal funds purchased,
repurchase agreements
and Federal Home Loan
Bank advances(3).......... 77,188 903 4.64 68,846 805 4.64 91,188 3,294 4.83 55,962 1,980 4.73
Notes payable and other..... 55,995 873 6.19 44,107 702 6.31 51,683 2,406 6.22 50,593 2,623 6.93
---------- ------- ---------- ------ ---------- ------ --------- -------
Total interest-bearing
liabilities.......... 3,662,749 39,544 4.28 3,421,225 40,302 4.67 3,601,773 116,660 4.33 3,402,966 122,024 4.79
------- ------ ------- -------
Noninterest-bearing liabilities:
Demand deposits............. 569,074 461,287 537,332 448,517
Other liabilities........... 177,165 159,714 174,410 138,781
---------- ---------- ---------- ----------
Total liabilities...... 4,408,988 4,042,226 4,313,515 3,990,264
Stockholders' equity........... 283,501 247,872 275,481 240,807
---------- ---------- ---------- ----------
Total liabilities and
stockholders' equity. $4,692,489 $4,290,098 $4,588,996 $4,231,071
========== ========== ========== ==========
Net interest income............ 49,653 43,667 141,129 122,262
======= ====== ======= =======
Net interest margin............ 4.53% 4.35% 4.44% 4.16%
===== ===== ====== ====
- ------------
(1) Nonaccrual loans are included in the average loan amounts.
(2) Interest income on loans includes loan fees.
(3) Includes the effects of interest rate exchange agreements.
(4) Information is presented on a tax-equivalent basis assuming a tax rate of
35%. The tax-equivalent adjustments were approximately $152,000 and
$543,000 for the three and nine months ended September 30, 1999,
respectively and $213,000 and $660,000 for the comparable periods in 1998.
</TABLE>
<PAGE>
Provision for Possible Loan Losses
The provision for possible loan losses was $2.9 million and $8.7
million for the three and nine months ended September 30, 1999, compared to $2.3
million and $6.2 million for the comparable periods in 1998, respectively. The
increase in the provision for possible loan losses reflects the continued growth
and changing composition of the loan portfolio, combined with the change from
net loan recoveries in 1998 to net loan charge-offs in 1999 caused by an
increase in loans charged-off. Net loan charge-offs were $901,000 and $4.2
million for the three and nine months ended September 30, 1999, in comparison to
net loan recoveries of $372,000 and $619,000 for the comparable periods in 1998.
The increase in net loan charge-offs is reflective of overall growth in the loan
portfolio, increased risk associated with the change in the composition of the
loan portfolio and the charge-off of certain credit relationships. The
acquisitions of Century Bank, Redwood, Pacific Bay Bank and Republic Bank
provided $1.5 million, $1.5 million, $885,000 and $2.3 million, respectively, in
additional allowance for possible loan losses.
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 $9.0 million and $32.1 million for the three and
nine months ended September 30, 1999, in comparison to $9.0 million and $25.2
million for the comparable periods in 1998. Noninterest income consists
primarily of service charges on deposit accounts and customer service fees,
mortgage banking revenues and other income.
Service charges on deposit accounts and customer service fees were $4.4
million and $12.8 million for the three and nine months ended September 30,
1999, in comparison to $3.8 million and $10.7 million for the comparable periods
in 1998, respectively. The increase in service charges and customer service fees
is attributable to (a) increased deposit balances provided by internal growth;
(b) the acquisitions of Century Bank, Redwood, Pacific Bay Bank and Republic
Bank; (c) additional products and services available and utilized by First
Banks' retail and commercial customer base; (d) increased fee income resulting
from revisions of customer service charge rates effective April 1, 1999, and
enhanced control of fee waivers; and (e) increased interchange income associated
with automatic teller machine services and debit and credit cards. As described
below, this increase was partially offset by the foregone revenue associated
with the divestiture of certain branch facilities in 1999, which resulted in a
reduction in First Bank's deposit base of approximately $54.8 million.
Credit card fees were $35,000 and $362,000 for the three and nine
months ended September 30, 1999, in comparison to $695,000 and $2.3 million for
the comparable periods in 1998. This reduction is primarily attributable to
First Banks' liquidation of its merchant credit card processing operation,
effective December 31, 1998.
Mortgage banking revenues consist primarily of loan servicing fees,
net, and gains on mortgage loans sold and held for sale. Loan servicing fees,
net, decreased to $113,000 and $396,000 for the three and nine months ended
September 30, 1999, from $177,000 and $880,000 for the comparable periods in
1998, respectively. This decrease is attributable to: a reduction in loans
serviced for others resulting from the repayment and prepayment of the
portfolio; increased amortization of mortgage servicing rights attributable to
high refinancing activity; and First Banks' strategy of selling the new
production of adjustable-rate and nonconforming residential mortgage loans on a
servicing released basis. The gain on mortgage loans sold and held for sale
decreased slightly to $1.6 million for the three months ended September 30,
1999, from $1.8 million for the comparable period in 1998, while such gain
increased to $5.4 million for the nine months ended September 30, 1999, from
$3.7 million for the comparable period in 1998. The overall increase in 1999 is
primarily attributable to an increased volume of loans sold and held for sale,
including fixed rate residential mortgage loans, which are sold on a servicing
retained basis, and adjustable-rate and nonconforming residential mortgage
loans, which are sold on a servicing released basis. In addition, the increase
also reflects the continued expansion of First Banks' mortgage banking
activities in the Texas and California market areas.
<PAGE>
Net loss on sales of trading securities was $303,000 for the nine
months ended September 30, 1999, in comparison to a net gain of $615,000 for the
comparable period in 1998. The loss for 1999 resulted from the termination of
First Banks' trading division, effective December 31, 1998, and the liquidation
of all trading portfolio securities.
Other income increased to $2.8 million and $12.7 million for the three
and nine months ended September 30, 1999, in comparison to $2.1 million and $6.2
million for the comparable periods in 1998, respectively. The primary components
of the increase are attributable to increased income earned on First Banks'
investment in bank owned life insurance (BOLI), expanded brokerage and private
banking and trust services, and a gain recognized on the divestiture of certain
branch facilities in the central and northern Illinois market areas. BOLI income
was $1.1 million and $2.8 million for the three and nine months ended September
30, 1999, in comparison to $827,000 and $2.2 million for the comparable periods
in 1998. This increase is primarily attributable to FBA's initial investment in
BOLI completed in April 1998 and increased income earned on the underlying
investments. In addition, First Banks recorded a pre-tax gain of $4.4 million
for the nine months ended September 30, 1999 associated with the divestiture of
seven branch facilities in late March and early April of 1999.
Noninterest Expense
Noninterest expense was $37.5 million and $110.3 million for the three
and nine months ended September 30, 1999, in comparison to $36.1 million and
$103.2 million for the comparable periods in 1998, respectively. The increase is
reflective of: (a) the acquisitions of Century Bank, Redwood, Pacific Bay Bank
and Republic Bank; (b) increased data processing fees primarily associated with
First Banks' Year 2000 Program; (c) increased legal, examination and
professional fees and (d) the formation of First America Capital Trust (FACT)
and FACT's issuance of Cumulative Trust Preferred Securities in July 1998. The
overall increase in noninterest expense is partially offset by a reduction in
advertising and business development expenses and communications expenses, and
is consistent with management's efforts to more effectively manage these
expenditures. In addition, credit card expenses declined for the three and nine
months ended September 30, 1999, in comparison to the comparable periods in
1998, and is primarily attributable to First Banks' liquidation of its merchant
credit card processing operation, effective December 31, 1998.
Salaries and employee benefits increased to $15.6 million and $45.6
million for the three and nine months ended September 30, 1999, in comparison to
$14.6 million and $41.9 million for the comparable periods in 1998,
respectively. The increase is attributable to newly acquired banks and First
Banks' continued commitment to expanding its commercial and retail business
development capabilities associated with expansion and delivery of its products
and services. The overall increase also reflects the competitive environment in
the employment market that has resulted in a higher demand for limited
resources, thus escalating industry salary and employee benefit costs.
Data processing fees increased to $4.7 million and $13.9 million for
the three and nine months ended September 30, 1999, in comparison to $3.7
million and $9.7 million for the comparable periods in 1998, respectively. First
Services, L.P., a limited partnership indirectly owned by First Banks' Chairman
and his children, provides data processing and various related services to First
Banks and the Subsidiary Banks under the terms of data processing agreements.
The increase in data processing fees is attributable to growth and technological
advancements consistent with First Banks' product and service offerings,
increased expenses attributable to communication data lines related to the
expansion of the branch network infrastructure and expenses associated with the
Year 2000 Program.
Guaranteed preferred debentures expense increased to $3.0 million and
$9.0 million for the three and nine months ended September 30, 1999, in
comparison to $2.8 million and $6.8 million for the comparable periods in 1998.
Similar to First Banks' formation of First Preferred Capital Trust (First
Capital) and First Capital's issuance of 9.25% Cumulative Trust Preferred
Securities (First Capital Preferred Securities) in February 1997, FBA formed
FACT, a Delaware business trust subsidiary, in July, 1998. FACT issued 1.84
million shares of 8.50% Cumulative Trust Preferred Securities (FACT Preferred
Securities) at $25.00 per share in an underwritten public offering, and issued
56,908 shares of common securities to FBA at $25.00 per share. FBA owns all of
<PAGE>
FACT's common securities. The gross proceeds of the offering were used by FACT
to purchase $47.4 million of 8.50% Subordinated Debentures (Subordinated
Debentures) from FBA, maturing on June 30, 2028. The Subordinated Debentures are
the sole asset of FACT. In connection with the issuance of the FACT Preferred
Securities, FBA made certain guarantees and commitments that, in the aggregate,
constitute a full and unconditional guarantee by FBA of the obligations of FACT
under the FACT Preferred Securities. FBA's proceeds from the issuance of the
Subordinated Debentures, net of underwriting fees and offering expenses, were
approximately $44.1 million. Guaranteed preferred debentures expense on the
First Capital Preferred Securities and the FACT Preferred Securities is recorded
as noninterest expense in the accompanying consolidated financial statements.
Lending and Credit Management
Interest earned on the loan portfolio represents the principal source
of income for First Banks and its Subsidiary Banks. Interest and fees on loans
were 91.6% and 86.0% of total interest income for the nine months ended
September 30, 1999 and 1998, respectively. Total loans, net of unearned
discount, represented 82.3% and 78.6% of total assets as of September 30, 1999
and December 31, 1998, respectively. Total loans, excluding loans held for sale
and net of unearned discount, increased by $502.8 million to $3.95 billion at
September 30, 1999 from $3.44 billion at December 31, 1998. The increase in
loans, as summarized on the consolidated balance sheets, is attributable to the
acquisitions of Century Bank and Redwood, which provided loans, net of unearned
discount, of $94.8 million and $134.4 million, respectively, and continued
internal growth of $359.4 million. This increase was partially offset by
declines in the portfolios of residential real estate mortgage, consumer and
installment and loans held for sale of $34.8 million, $51.0 million and $90.0
million, respectively. These fluctuations are attributable to the continued sale
of conforming residential mortgage loan production into the secondary mortgage
market, reductions in new loan origination volumes and the repayment of
principal on the existing portfolios.
First Banks' nonperforming loans consist of loans on nonaccrual status
and loans on which the original terms have been restructured. The following is a
summary of nonperforming assets and past due loans by category at the dates
indicated:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
(dollars expressed in thousands)
Commercial, financial and agricultural:
<S> <C> <C>
Nonaccrual............................................... $ 17,653 15,385
Restructured terms....................................... 29 --
Real estate construction and development:
Nonaccrual............................................... 6,703 3,858
Real estate mortgage:
Nonaccrual............................................... 18,610 18,858
Restructured terms....................................... 965 5,221
Consumer and installment:
Nonaccrual............................................... 61 216
----------- -----------
Total nonperforming loans............................ 44,021 43,538
Other real estate............................................. 1,407 3,709
----------- -----------
Total nonperforming assets........................... $ 45,428 47,247
=========== ===========
Loans, net of unearned discount............................... $ 3,992,953 3,580,105
=========== ===========
Loans past due 90 days or more and still accruing............. $ 2,379 4,674
=========== ===========
Asset Quality Ratios:
Allowance for possible loan losses to loans ............. 1.72% 1.70%
Nonperforming loans to loans............................. 1.10 1.22
Allowance for possible loan losses to nonperforming loans 155.60 140.04
Nonperforming assets to loans and other real estate...... 1.14 1.32
=========== ===========
</TABLE>
<PAGE>
Nonperforming loans (also considered impaired loans), consisting of
loans on nonaccrual status and restructured loans, were $44.0 million at
September 30, 1999, in comparison to $43.5 million at December 31, 1998. The
slight increase is primarily attributable to the overall growth of the loan
portfolio, principally within commercial, financial and agricultural, real
estate construction and development, and commercial real estate loans, which
generally possess a higher level of inherent risk.
The following is a summary of loan loss experience for the three and
nine months ended September 30:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------ -------------
1999 1998 1999 1998
---- ---- ---- ----
(dollars expressed in thousands)
<S> <C> <C> <C> <C>
Allowance for possible loan losses, beginning of period.................. $ 64,977 55,591 60,970 50,509
Acquired allowances for possible loan losses.......................... 1,542 2,315 3,008 3,200
-------- -------- -------- ---------
66,519 57,906 63,978 53,709
-------- -------- -------- ---------
Loans charged-off..................................................... (3,626) (1,899) (11,154) (6,037)
Recoveries of loans previously charged-off............................ 2,725 2,271 6,931 6,656
-------- -------- -------- ---------
Net loan (charge-offs) recoveries................................... (901) 372 (4,223) 619
-------- -------- -------- ---------
Provision for possible loan losses.................................... 2,880 2,275 8,743 6,225
-------- -------- -------- ---------
Allowance for possible loan losses, end of period........................ $ 68,498 60,553 68,498 60,553
======== ======== ======== =========
</TABLE>
The allowance for possible loan losses is monitored on a monthly basis.
Each month, credit administration provides First Banks' 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, composition and the ratio of net loans to
total assets, and the economic conditions of the regions in which First Banks
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.
<PAGE>
Interest Rate Risk Management
First Banks periodically 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 First Banks for purposes of managing interest rate risk are summarized as
follows:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------------ -------------------------
Notional Credit Notional Credit
amount exposure amount exposure
------ -------- ------ --------
(dollars expressed in thousands)
Interest rate swap agreements - pay
<S> <C> <C> <C> <C>
adjustable rate, receive adjustable rate............ $ 500,000 -- -- --
Interest rate swap agreements - pay
adjustable rate, receive fixed rate................. 455,000 228 280,000 3,526
Interest rate floor agreements........................ 35,000 15 70,000 29
Interest rate cap agreements.......................... 10,000 50 10,000 135
Forward commitments to sell
mortgage-backed securities.......................... 47,000 -- 95,000 237
========== ======= ======= =====
</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. The credit exposure represents
the accounting loss First Banks would incur in the event the counterparties
failed completely to perform according to the terms of the derivative financial
instruments and the collateral was of no value.
Previously, First Banks utilized interest rate swap agreements to
extend the repricing characteristics of certain interest-bearing liabilities to
more closely correspond with its assets, with the objective of stabilizing cash
flow, and accordingly, net interest income, over time. These swap agreements
were terminated in July 1995, November 1996 and July 1997 due to a change in the
composition of First Banks' balance sheet. The change in the composition of the
balance sheet was primarily driven by the significant decline in interest rates
experienced during 1995, which caused an increase in the principal prepayments
of residential mortgage loans. The net interest expense associated with these
agreements, consisting primarily of amortization of deferred losses, was $1.4
million and $4.0 million for the three and nine months ended September 30, 1999,
respectively, and $990,000 and $3.0 million for the comparable periods in 1998.
The deferred losses on terminated swap agreements are being amortized over the
remaining lives of the agreements, unless the underlying liabilities are repaid,
in which case the deferred losses are charged to operations. The unamortized
balance of these losses was $1.4 million and $5.7 million at September 30, 1999
and December 31, 1998, respectively, and is included in other assets.
During 1998, First Banks entered into $280.0 million notional amount of
interest rate swap agreements. The swap agreements 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
First Banks 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 First Banks to pay quarterly and receive payment
semi-annually. The amount receivable by First Banks under the swap agreements
was $824,000 and $4.2 million at September 30, 1999 and December 31, 1998,
respectively, and the amount payable by First Banks under the swap agreements
was $607,000 and $640,000 at September 30, 1999 and December 31, 1998,
respectively.
During May 1999, First Banks entered into $500.0 million notional
amount of interest rate swap agreements with the objective of stabilizing the
net interest margin during the six-month period surrounding the Year 2000
century date change. The swap agreements provide for First Banks to receive an
adjustable rate of interest equivalent to the daily weighted average 30-day
LIBOR and pay an adjustable rate of interest equivalent to the daily weighted
average prime lending rate minus 2.665%. The terms of the swap agreements, which
<PAGE>
have an effective date of October 1, 1999 and a maturity date of March 31, 2000,
provide for First Banks to pay and receive interest on a monthly basis.
During September 1999, First Banks entered into $175.0 million notional
amount of interest rate 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
First Banks to receive a fixed rate of interest and pay an adjustable rate
equivalent to the weighted average prime lending rate minus 2.70%. The terms of
the swap agreements provide for First Banks to pay and receive interest on a
quarterly basis. The amount receivable by First Banks under the swap agreements
was $119,000 at September 30, 1999 and the amount payable by First Banks under
the swap agreements was $108,000 at September 30, 1999.
The maturity dates, notional amounts, interest rates paid and received,
and fair values of the swap agreements outstanding as of September 30, 1999 were
as follows:
<TABLE>
<CAPTION>
Notional Interest rate Interest rate Fair
Maturity date amount paid received value
------------- ------ ---- -------- -----
(dollars expressed in thousands)
<S> <C> <C> <C> <C> <C> <C>
March 31, 2000 (1)......................... $ 350,000 --% -- $ (324)
March 31, 2000 (1)......................... 75,000 -- -- (69)
March 31, 2000 (1)......................... 50,000 -- -- (46)
March 31, 2000 (1)......................... 25,000 -- -- (23)
September 27, 2001......................... 75,000 5.55 6.14 33
September 27, 2001......................... 45,000 5.55 6.14 20
September 27, 2001......................... 40,000 5.55 6.14 18
September 27, 2001......................... 15,000 5.55 6.14 7
June 11, 2002.............................. 15,000 5.51 6.00 (115)
September 16, 2002......................... 175,000 5.51 5.36 (4,574)
September 16, 2002......................... 20,000 5.51 5.36 (523)
September 18, 2002......................... 40,000 5.51 5.33 (1,079)
September 18, 2002......................... 30,000 5.51 5.33 (810)
---------- -------
$ 955,000 5.52 5.67 $ (7,485)
========= ==== ==== ========
--------------------
</TABLE>
(1) These interest rate swap agreements became effective on October 1,
1999.
First Banks has interest rate cap and floor agreements outstanding 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, 1999 and December 31, 1998, the unamortized costs
of these agreements were $65,000 and $159,000, respectively, and were included
in other assets.
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 were
$54.2 million and $103.1 million at September 30, 1999 and December 31, 1998,
respectively. These net loan commitments and loans held for sale are hedged with
forward contracts to sell mortgage-backed securities of $47.0 million and $95.0
million at September 30, 1999 and December 31, 1998, respectively. Gains and
losses from forward contracts are deferred and included in the cost basis of
loans held for sale. At September 30, 1999 and December 31, 1998, the net
unamortized gains and losses were $1.1 million and $649,000, respectively, which
were applied to the carrying value of the loans held for sale as part of the
lower of cost or market valuation.
<PAGE>
Year 2000 Compatibility
First Banks and the Subsidiary Banks are subject to risks associated
with the "Year 2000" issue, 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.
Data processing services are provided to First Banks by First Services,
L.P. under the terms of data processing agreements. To address the Year 2000
issue, First Banks, working jointly with First Services, L.P., 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 applications, and non-IT projects, such
as building facilities and security systems. The major phases of the Program are
awareness, assessment, remediation, validation and implementation.
The awareness phase included a company-wide campaign to communicate the
Year 2000 issue 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 First Banks 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.
First Banks' critical systems are purchased from industry-known
vendors. Such systems are generally used in their standard configuration, with
minor modification. Focusing on these critical systems, First Banks continues to
closely review and monitor the Year 2000 progress as reported by each vendor,
and has tested, in most cases, on a system separate from the on-line production
system. The review and testing of critical data processing service providers was
substantially complete as of 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, First
Banks did not invoke any remediation contingency efforts.
Concurrent with the completion of the remediation phase of the Program,
First Banks 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.
First Banks 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 issue, the
overall implementation schedule was accelerated. Recognizing the heightened
risks of deploying CFI within the narrowed timeline created by the Year 2000
issue, emphasis was first given to the Year 2000 solution for ISC, with
simultaneous deployment of CFI occurring throughout 1999. The testing of the
Year 2000 solution for ISC was completed and ISC was upgraded throughout First
Banks' branch network by June 30, 1999, thereby maintaining compliance with
appropriate regulatory guidelines associated with Year 2000.
The testing of CFI was completed by December 31, 1998. The CFI system
was installed in selected bank test locations during the fourth quarter of 1998.
First Bank, FB&T, FB California and FB Texas have converted to CFI. Redwood Bank
and Century Bank will not convert to CFI in 1999. The estimated cost of the
teller system replacement is $8.0 million and will be charged to expense over a
60-month period beginning in the fourth quarter of 1999. First Banks also
upgraded its local area network-based systems, networks and core processor, and
<PAGE>
purchased certain item processing equipment, as the previous equipment, which
was fully depreciated, was not Year 2000 compliant. The estimated cost of these
upgrades and the item processing equipment is $3.9 million and $1.4 million,
respectively, and is expected to be depreciated to expense over 60 months
commencing in the first quarter of 1999.
The final phase of the Program was the implementation of remediated and
other systems into the operating environment of First Banks. With the final
phase of the Program substantially completed by June 30, 1999, First Banks
continues to focus its efforts on overall contingency planning and specific Year
2000 event preparation.
First Banks 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 large 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 First Banks, it is not possible
to quantify the overall potential adverse effects to First Banks 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 ability to repay loans in accordance with their terms or requiring
the use of its deposited funds. First Banks continues to review and structure
certain funding sources to facilitate the Subsidiary Banks' liquidity
requirements under varying cash flow assumptions. In addition, Year 2000 risks
associated with adversely rated credits are monitored more frequently in
conjunction with the internal watch list review committee meetings, while new
credit relationships include parameters to assess and evaluate Year 2000 risks
at the time of the initial credit decision.
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 First Banks, 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 First Banks. First Banks has developed processes to monitor
significant non-data processing third party vendors regarding their preparedness
for Year 2000 risks.
The total cost of the Program is currently estimated at $16.2 million,
comprised of capital improvements of $13.3 million and direct expenses
reimbursable to First Services L.P. of $2.9 million. 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. First Banks
incurred direct expenses related to the Program of approximately $450,000 and
$1.4 million for the three and nine months ended September 30, 1999, and
$600,000 for the year ended December 31, 1998. In addition, First Banks is
estimating direct expenses of $950,000 for the duration of the Program. The
acquisitions of Redwood and Century Bank are not expected to have a significant
impact on the total cost of First Banks' Program. The total cost could vary
significantly from those currently estimated for unforeseen circumstances that
could develop in carrying out the Program.
Concurrent with the development and execution of the Plan is the
evolution of First Banks' Year 2000 Contingency Plan (Contingency Plan). The
Contingency Plan is intended to be an evolving document changing and developing
to reflect the results, progress and current status of the Program. The
Contingency Plan addresses a variety of issues including critical and common
systems, credit risk, liquidity, loan and deposit customers, facilities,
supplies and computer back-up locations. Additionally, First Banks has developed
business resumption plans and process resumption test plans for each functional
area deemed critical to the operations of First Banks. These business resumption
plans, collectively with the Contingency Plan, also serve as evolving documents
and will continue to be modified to appropriately address Year 2000 risks
associated with the individual needs and responsibilities of each of these
critical functional areas based upon the results of the process resumption
testing efforts.
<PAGE>
In the remaining weeks leading up to the Year 2000 century date change,
First Banks will continue to focus its efforts on implementation of the overall
Year 2000 Event Plan (Event Plan). The Event Plan was developed to establish a
coordinated management process for responding to potential Year 2000 disruptions
that addresses communications among appropriate officers, directors, employees,
customers and third party suppliers. The Event Plan assigns overall
responsibility for implementation to specific individuals, designates key
personnel who are responsible for carrying out specific tasks and outlines a
program for notification of involved parties, including employees, customers and
third parties. First Banks is in the process of testing the Event Plan in order
to validate its completeness and accuracy. Based upon the results of this
testing, First Banks will determine if additional Year 2000 event preparations
are deemed necessary.
While First Banks is making a substantial effort to become Year 2000
compliant, there is no assurance the Year 2000 problem will not have a material
adverse effect on its financial condition or results of operations.
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 Subsidiary Banks
receive funds for liquidity from customer deposits, loan payments, maturities of
loans and investments, sales of investments and earnings. In addition, First
Banks and 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, borrowings from the Federal Home Loan Bank and other borrowings,
including First Banks' $100 million credit agreement with a group of
unaffiliated financial institutions. The aggregate funds acquired from these
more volatile sources were $476.7 million and $391.4 million at September 30,
1999 and December 31, 1998, respectively.
The following table presents the maturity structure of volatile funds
at September 30, 1999:
(dollars expressed
in thousands)
Three months or less................................. $ 246,824
Over three months through six months................. 75,631
Over six months through twelve months................ 118,249
Over twelve months................................... 35,959
-----------
Total............................................ $ 476,663
===========
In addition to these more volatile sources of funds, First Bank, FB&T,
FB California and FB Texas have established borrowing relationships with the
Federal Reserve Bank in their respective districts. These borrowing
relationships, which are secured by commercial loans, provide an additional
liquidity facility that may be utilized for contingency purposes. At September
30, 1999, First Banks' borrowing capacity under these agreements was
approximately $1.86 billion.
Management believes available liquidity and operating results of the
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 First Capital Preferred Securities and the FACT
Preferred Securities.
Effects of New Accounting Standards
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (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.
SFAS 133 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
<PAGE>
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. In June
1999, the FASB issued SFAS No. 137 - Accounting for Derivative Instruments and
Hedging Activities Deferral of the Effective Date of FASB Statement No. 133, an
Amendment of FASB Statement No. 133, which defers the effective date of SFAS 133
from fiscal years beginning after June 15, 1999 to fiscal years beginning after
June 15, 2000. 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, as amended. 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, as amended. Additionally, SFAS 133, as amended, should not be applied
retroactively to financial statements of prior periods. First Banks is currently
evaluating the requirements of SFAS 133, as amended, to determine its potential
impact on the consolidated financial statements.
On January 1, 1999, First Banks adopted the provisions of SFAS No. 134
- - Accounting for Mortgage-Backed Securities Retained after the Securitization of
Mortgage Loans Held for Sale by a Mortgage Banking Enterprise, an amendment of
FASB SFAS No. 65 (SFAS 134). SFAS 134 amended SFAS 65 to require that after the
securitization of mortgage loans held for sale, an entity engaged in mortgage
banking activities must classify the resulting mortgage-backed securities or
other retained interests based on its ability and intent to sell or hold those
investments. However, a mortgage banking enterprise must classify as trading any
retained mortgage-backed securities that it commits to sell before or during the
securitization process. The implementation of SFAS 134 did not have a material
impact on First Banks' consolidated financial statements.
<PAGE>
Part II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits are numbered in accordance with the Exhibit Table of Item 601
of Regulation S-K.
Exhibit
Number Description
10.6 $100,000,000 Amended and Restated Secured Credit
Agreement, dated August 25, 1999, among First Banks,
Inc. and Mercantile Bank National Association,
American National Bank and Trust Company of Chicago,
Harris Trust and Savings Bank, the Frost National
Bank, Norwest Bank Minnesota, National Association
and Mercantile Bank National Association, as Agent
10.12 Management Services Agreement by and between First
Banks, Inc. and Redwood Bank, dated June 1, 1999
10.13 Management Services Agreement by and between First
Banks, Inc. and Century Bank, dated September 1, 1999
27 Article 9 - Financial Data Schedule (EDGAR only)
(b) First Banks filed no reports on Form 8-K during the three months ended
September 30, 1999.
<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 10, 1999 By: /s/ James F. Dierberg
---------------------------
James F. Dierberg
Chairman and
Chief Executive Officer
Date: November 10, 1999 By: /s/ Allen H. Blake
---------------------------
Allen H. Blake
President,
Chief Operating Officer
and Secretary
(Principal Financial Officer)
<PAGE>
Exhibit 10.6
AMENDED AND RESTATED SECURED CREDIT AGREEMENT
($100,000,000 Revolving Loan)
dated as of August 25, 1999
among
First Banks, Inc.
and
Mercantile Bank National Association
American National Bank and Trust Company of Chicago
Harris Trust and Savings Bank
The Frost National Bank
Norwest Bank Minnesota, National Association
and
Mercantile Bank National Association,
as Agent
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS................................................................. 1
Section 1.01. Defined Terms.......................................................................... 1
Section 1.02. Accounting Terms....................................................................... 7
ARTICLE II. AMOUNT AND ACCOUNTING TERMS..................................................................... 8
Section 2.01. Revolving Loan Commitments............................................................. 8
Section 2.02. Termination or Reduction of Revolving Loan Commitment.................................. 8
Section 2.03. Interest on Revolving Loans............................................................ 8
Section 2.04. Notice and Manner of Borrowing......................................................... 9
Section 2.05. Revolving Notes........................................................................ 11
Section 2.06 Method of Payment....................................................................... 11
Section 2.07 Use of Proceeds......................................................................... 11
Section 2.08 Zero Balance............................................................................ 12
Section 2.09 Advances and Payment.................................................................... 12
Section 2.10 Revolving Loan Commitment Fee........................................................... 12
Section 2.11 Reimbursement........................................................................... 12
Section 2.12 Failure of Any Bank to Make Revolving Loans............................................. 13
Section 2.13 Banks Not Required to Extend Credit..................................................... 13
ARTICLE III. CONDITIONS PRECEDENT........................................................................... 13
Section 3.01 Conditions Precedent to the Initial Loans............................................... 13
Section 3.02 Conditions Precedent to All Revolving Loans............................................. 15
ARTICLE IV. REPRESENTATIONS AND WARRANTIES.................................................................. 16
Section 4.01 Incorporation, Good Standing, and Due Qualification..................................... 16
Section 4.02 Corporate Power and Authority........................................................... 16
Section 4.03 Legally Enforceable Agreement........................................................... 16
Section 4.04 Financial Statements; Financial Condition............................................... 16
Section 4.05 Other Agreements........................................................................ 17
Section 4.06 Litigation.............................................................................. 17
Section 4.07 Ownership of Subsidiaries............................................................... 17
Section 4.08 ERISA................................................................................... 17
Section 4.09 Taxes................................................................................... 18
Section 4.10 Use of Proceeds; Margin Regulations..................................................... 18
Section 4.11 Year 2000 Compliance.................................................................... 18
ARTICLE V. AFFIRMATIVE COVENANTS............................................................................ 18
Section 5.01 Maintenance of Existence................................................................ 18
Section 5.02 Maintenance of Records.................................................................. 18
Section 5.03 Maintenance of Subsidiaries............................................................. 19
Section 5.04 Compliance With Laws.................................................................... 19
Section 5.05 Right of Inspection..................................................................... 19
Section 5.06 Reporting Requirements.................................................................. 19
Section 5.07 Operations.............................................................................. 20
Section 5.08 Additional Collateral................................................................... 21
Section 5.09 Year 2000 Compliance.................................................................... 21
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE VI. NEGATIVE COVENANTS.............................................................................. 21
Section 6.01 Liens................................................................................... 21
Section 6.02 Mergers, Etc............................................................................ 21
Section 6.03 Indebtedness............................................................................ 22
Section 6.04 Dividends............................................................................... 22
Section 6.05 Stock Issue; Additional Issue of Stock of Subsidiary.................................... 22
Section 6.06 Stock Redemption........................................................................ 22
Section 6.07 Loans................................................................................... 22
Section 6.08 Debentures.............................................................................. 23
Section 6.09 Continuation of Business................................................................ 23
ARTICLE VII. FINANCIAL COVENANTS............................................................................ 23
Section 7.01 Tier I Leverage Ratio................................................................... 23
Section 7.02 Tier I Leverage Ratio of Subsidiaries................................................... 23
Section 7.03 Tier I Risk Based Capital Ratio......................................................... 23
Section 7.04 Total Risk Based Capital Ratio.......................................................... 24
Section 7.05 Loan Loss Reserve....................................................................... 24
Section 7.06 Net Income to Average Total Assets...................................................... 24
Section 7.07 Non-Performing Assets................................................................... 24
ARTICLE VIII. EVENTS OF DEFAULT............................................................................. 24
Section 8.01 Events of Default....................................................................... 24
ARTICLE IX. AUTHORITY AND RESPONSIBILITIES OF AGENT......................................................... 27
Section 9.01 Grant of Authority...................................................................... 27
Section 9.02 Action upon Indemnification Instructions................................................ 27
Section 9.03 Reports; Responsibility of the Agent; Disclaimer........................................ 27
Section 9.04 Correction of Errors.................................................................... 28
Section 9.05 Expenses; Indemnification............................................................... 28
Section 9.06 Rights as Bank.......................................................................... 29
Section 9.07 Representation of Each Bank............................................................. 29
Section 9.08 Rights to Resign; Appointment of a Successor Agent...................................... 29
Section 9.09 Notice of Default....................................................................... 30
Section 9.10 Agent Compensation...................................................................... 30
ARTICLE X. MISCELLANEOUS.................................................................................... 30
Section 10.01 Capital Adequacy Reimbursement......................................................... 30
Section 10.02 Amendments, Etc........................................................................ 30
Section 10.03 Notices, Etc........................................................................... 31
Section 10.04 No Waiver; Remedies.................................................................... 31
Section 10.05 Successors and Assigns................................................................. 31
Section 10.06 Costs and Expenses..................................................................... 32
Section 10.07 Right of Setoff........................................................................ 32
Section 10.08 Sharing of Setoffs..................................................................... 32
Section 10.09 Governing Law; Jurisdiction and Venue.................................................. 33
Section 10.10 Severability of Provisions............................................................. 33
Section 10.11 Counterparts........................................................................... 33
Section 10.12 Headings............................................................................... 33
Section 10.13 Oral Agreements........................................................................ 33
</TABLE>
Exhibit A - Revolving Loan Commitment Amounts
Exhibit B - Revolving Credit Note
Exhibit C - Revolving Loan Notice of Borrowing
Exhibit D - Amended Restated Pledge Agreement
<PAGE>
Exhibit E - Certificate of Compliance
Exhibit F - Form of Borrower's Counsel Opinion
Exhibit G - Pledged Subsidiaries
Exhibit H - List of Affiliates
Exhibit I - Identification of Financial Statements
Exhibit J - Ownership of Subsidiaries
Schedule 4.05 - Other Agreements
Schedule 4.06 - Litigation
Schedule 4.08 - ERISA Plan Terminations
Schedule 8.01(10) - Regulatory Actions
<PAGE>
AMENDED AND RESTATED SECURED CREDIT AGREEMENT
THIS AMENDED AND RESTATED SECURED CREDIT AGREEMENT dated as of
August 25, 1999, is entered into by and among FIRST BANKS, INC., a Missouri
corporation ("Borrower"), and MERCANTILE BANK NATIONAL ASSOCIATION, a national
banking association, AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, a
national banking association, HARRIS TRUST AND SAVINGS BANK, an Illinois state
banking corporation, THE FROST NATIONAL BANK, a national banking association,
and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association
(each individually a "Bank" and collectively the "Banks"), and MERCANTILE BANK
NATIONAL ASSOCIATION, a national banking association, as Agent.
W I T N E S S E T H T H A T:
WHEREAS, Borrower, the Banks and Agent are party to a Secured
Credit Agreement dated as of August 26, 1998 (as in effect immediately prior to
the date hereof, the ("Original Credit Agreement") pursuant to which the Banks
have severally made available to Borrower a revolving credit facility in the
aggregate amount of Ninety Million Dollars ($90,000,000);
WHEREAS, Borrower has requested that the Banks extend the term
of the foregoing revolving credit facility and to increase the aggregate amount
of the revolving credit facility to One Hundred Million Dollars ($100,000,000);
WHEREAS, Borrower, the Banks and Agent desire to amend and
restate the Original Credit Agreement in the form of this Agreement to, inter
alia, make available to Borrower the revolving credit facility provided for
herein; and
WHEREAS, the Banks are willing severally to provide such
revolving credit facility to Borrower, subject to the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. Defined Terms As used in this Agreement, the
following terms have the following meanings (terms defined in the singular to
have the same meaning when used in the plural and vice versa):
"Affiliate" means any Person (1) which directly or indirectly
controls, or is controlled by, or is under common control with, the Borrower or
any Subsidiary; (2) which directly or indirectly beneficially owns or holds five
percent (5%) or more of any class of voting stock of Borrower or any Subsidiary;
or (3) five percent (5%) or more of the voting stock of which is directly or
indirectly beneficially owned or held by Borrower or any Subsidiary. The term
"Control" for the purposes of this Agreement means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise. For the purposes of the foregoing definition, a
shareholder of Borrower shall not be deemed to be directly or indirectly
controlling or controlled by the Borrower or a subsidiary, provided the person
in question will not receive any proceeds from the Loans.
"Agent" means Mercantile Bank National Association, acting in
its capacity as Agent pursuant to Article IX hereof and any duly appointed
successor.
<PAGE>
"Agreement" means this Amende and Restated Secured Credit
Agreement, as amended, supplemented or modified from time to time.
"Applicable Margin" shall mean, with respect to each Revolving
Loan accruing interest based on the Eurodollar Rate, the rate per annum listed
in the applicable column below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------- -------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
If the Performance Ratio is: -1.0:1 +1.00:1 +1.75:1 +2.25:1
-1.75:1 -2.25:1
- ----------------------------------------------------------- -------------- ------------- ------------ -------------
Applicable Margin 0.875% 1.00% 1.125% 1.25%
- ----------------------------------------------------------- -------------- ------------- ------------ -------------
</TABLE>
The determination of the Applicable Margin as of any date shall be based on the
Performance Ratio as of the end of the most recently ended fiscal quarter of
Borrower for which consolidated financial statements of Borrower and its
Subsidiaries have been delivered to the Banks pursuant to Section 5.06, and
shall be effective for purposes of determining the Applicable Margin from and
after the first day of the month immediately following the date on which such
delivery of financial statements is required until the first day of the first
month immediately following the next such date on which delivery of consolidated
financial statements of Borrower and its Subsidiaries is so required. For
example, the Performance Ratio as of the end of the fiscal quarter of Borrower
ending September 30, 1999, would be determined from the consolidated financial
statements of Borrower and its Subsidiaries as of and for the period ending
September 30, 1999 (which are required to be delivered to Agent on or before
November 14, 1999), and would be used in determining the Applicable Margin from
and after December 1, 1999. All such adjustments shall be applicable to all
existing Revolving Loans as well as any new Revolving Loans made or issued;
provided, that, an adjustment in the Applicable Margin during the course of an
Interest Period will not result in a change in the Eurodollar Rate applicable to
that Interest Period.
"Average Total Assets" for any Person, at any time, means the
amount set forth on the most recent report on form FRY-9C filed by Borrower with
the Board of Governors of the Federal Reserve System (or any successor report)
as "Average Total Assets."
"Bank" or "Banks" has the meaning assigned to such term in the
preamble to this Agreement.
"Borrower" has the meaning assigned to such term in the
preamble of this Agreement.
"Business Day" means any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the States of Missouri, Illinois, Texas or California; provided,
that, when used in connection with a Revolving Loan, such day shall also be a
day on which dealings between banks are carried on in U.S. dollar deposits in
London, England.
"Call Report" has the meaning assigned to such term in Section
5.06(4).
"Certificate" has the meaning assigned to such term in Section
2.04(1).
"Collateral" means all property which is subject or is to be
subject to the Liens granted by the Pledge Agreement.
"Commitment" means the several commitments of the Banks in the
aggregate original principal amount of $100,000,000, or when used with reference
to a particular Bank, the portion of the several commitments allocated to such
Bank to make loans to the Borrower pursuant to Section 2.01 equal to the amount
stated in Exhibit A, as such amount may be reduced from time to time pursuant to
Section 2.02 hereof.
"Default" means any of the events specified in Section 8.01,
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
<PAGE>
"Equity Capital" for any Person, at any time, means the amount
set forth on the most recent report on form FRY-9C filed by Borrower with the
Board of Governors of the Federal Reserve System (or any successor report) as
"Total Equity Capital."
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations and published
interpretations thereof.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which together with the Borrower would be treated as a single
employer under Section 4001 of ERISA.
"Eurodollar Rate" means, for each applicable Interest Period,
an interest rate per annum equal to (i) the rate per annum (rounded upward to
the nearest whole multiple of 1/32 of 1% per annum, if such average is not such
a multiple) at which deposits in United States Dollars are offered or available
to banks in the London interbank market at 9:00 A.M. (St. Louis time) two (2)
Business Days before the first day of such Interest Period as reported on
Telerate page 3750 (or such other page as may replace such page 3750 on such
system for the purpose of reporting comparable rates of major banks) under the
heading for British Bankers Association LIBOR Rates in the column designated
"USD" (United States Dollar), as published by Bridge Information Systems, Inc.,
for a period comparable to such Interest Period for an amount comparable to the
subject Eurodollar Rate Loan divided by (ii) a percentage equal to 100% minus
the then stated maximum rate of all reserve requirements (including any
marginal, emergency, supplemental, special or other reserves) applicable on such
date to any member bank of the Federal Reserve System in respect of
"Eurocurrency liabilities" as defined in Regulation D (or any other successor
category of liabilities under Regulation D).
"Event of Default" means any of the events specified in
Section 8.01, provided that any requirement for the giving of notice, the lapse
of time, or both, or any other applicable condition, has been satisfied.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates of overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next succeeding Business
Day, and (ii) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate quoted to the
Agent on such day on such transactions as determined by the Agent.
"Funded Debt" shall mean as of any date, the outstanding
principal amount of all Revolving Loans on such date.
"GAAP" means generally accepted accounting principles in the
United States as in effect from time to time, including such principles as are
utilized in the preparation of Call Reports and other regulatory reports
required to be filed by Borrower and its Subsidiaries.
"Interest Period" means the period commencing on the date of
making or conversion to or continuation of a Loan that accrues interest based on
the Eurodollar Rate. The Borrower shall have the option to select a one month,
two month, or three month Interest Period; provided, however, that whenever the
last day of any Interest Period would otherwise occur on a day other than a
Business Day, the last day of such Interest Period shall be extended to occur on
the next succeeding Business Day; provided, however, that if such extension
would cause the last day of such Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur on the next
preceding Business Day. Notwithstanding the foregoing, the Borrower may not
<PAGE>
select an Interest Period which ends after the Revolving Credit Termination
Date. For purposes of determining an Interest Period, a month means a period
starting on one day in a calendar month and ending on a numerically
corresponding day in the next calendar month, provided, however, if an Interest
Period begins on the last day of a month or if there is no numerically
corresponding day in the month in which an Interest Period is to end, then such
Interest Period shall end on the last Business Day of such month.
"Lien" means any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), or preference, priority, or other security agreement or
preferential arrangement, charge, or encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction to evidence
any of the foregoing).
"Loan Document(s)" means this Agreement, the Notes and the
Pledge Agreement, as each may be renewed, extended, amended, rearranged,
restructured, restated, replaced or otherwise modified from time to time,
including without limitation, modifications to interest rates or other payment
terms.
"Loan Loss Reserve" for any Person, for any period, means the
amount set forth on the most recent report on form FRY-9C filed by Borrower with
the Board of Governors of the Federal Reserve System (or any successor report)
applicable to such period as "Allowance for loan and lease losses."
"Loans" means the Revolving Loans.
"Majority" has the meaning assigned to such term in Section
9.01.
"Multiemployer Plan" means a Plan described in Section 4001(a)
(3) of ERISA which covers employees of a Borrower or any ERISA Affiliate.
"Net Income" for any period means the amount set forth on the
report on form FRY-9C filed by Borrower with the Board of Governors of the
Federal Reserve System or any successor report applicable to such period as "Net
Income."
"Non-performing Assets" for any Person, at any time, means the
sum of the amounts set forth on the most recent report on form FRY-9C filed by
Borrower with the Board of Governors of the Federal Reserve System (or any
successor report) as loans "past due 90 days or more and still accruing,"
"non-accrual," and "other real estate owned."
"Notes" means the Revolving Notes.
"Original Credit Agreement" has the meaning assigned to such
term in the recitals to this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Performance Ratio" means, as of any date, the ratio of (x)
Funded Debt outstanding on such date to (y) Borrower's Net Income less
extraordinary and/or nonrecurring items (as determined in accordance with GAAP)
for the most recently ended period of four fiscal quarters of Borrower.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority, or other juridical entity of whatever nature.
<PAGE>
"Plan" means any employee benefit or other plan established,
maintained, or to which contributions have been made by the Borrower or any
ERISA Affiliate.
"Pledge Agreement" means the amended and restated collateral
pledge agreement in the form of Exhibit D, pledging to the Agent for the ratable
benefit of the Banks all of the stock of the Pledged Subsidiaries (exclusive of
directors' qualifying shares of stock) and certain stock acquired after the date
of this Agreement.
"Pledged Subsidiaries" means the Subsidiaries listed on
Exhibit G attached hereto.
"Primary Capital" for any Person, for any period and without
duplication, means the sum of Equity Capital plus the Loan Loss Reserve of such
Person.
"Prime Rate" means the per annum rate of interest announced by
Mercantile Bank National Association (or its successor) from time to time as its
Prime Rate, which rate is not intended or represented to be the lowest rate of
interest charged by such Bank to its borrowers.
"Prohibited Transaction" means any transaction set forth in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1954, as
amended from time to time.
"Reportable Event" means any of the events set forth in
Section 4043 of ERISA.
"Revolving Credit Termination Date" means August 24, 2000.
"Revolving Loan" means the aggregate of all loans made to
Borrower by the Banks as provided herein; or when used with respect to a
particular Bank, a loan made to Borrower by such Bank as provided herein; or
when used with respect to a request by Borrower for the making of loans on a
particular date as provided herein, the aggregate of such loans.
"Revolving Loan Limit" has the meaning assigned to such term
in Section 2.01.
"Revolving Loan Commitment" means, as to each Bank, the
maximum amount which such Bank shall be obligated to loan to Borrower as a
Revolving Loan pursuant to Section 2.01 hereof.
"Revolving Loan Commitment Fee" has the meaning assigned to
such term in Section 2.10.
"Revolving Loan Notice of Borrowing" has the meaning assigned
to such term in Section 2.04.
"Revolving Notes" has the meaning assigned to such term in
Section 2.05.
"Subsidiary" means, as to Borrower, any corporation of which
shares of stock having ordinary voting power (other than stock having such power
only by reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation are at the time owned,
or the management of which corporation is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by a Borrower or a
Subsidiary of Borrower.
"Tier I Leverage Ratio" means the ratio, expressed as a
percentage, of regulatory "core" capital (Tier I) to assets, all as defined and
determined from time to time by applicable bank regulatory authorities.
<PAGE>
"Tier I Risk Based Capital Ratio" means the ratio of
regulatory "core" capital (Tier I) to weighted-risk assets and off-balance sheet
items, all as defined and determined from time to time by applicable bank
regulatory authorities.
"Total Assets" for any Person, at any time, means the amount
set forth on the most recent report on form FRY-9C filed by Borrower with the
Board of Governors of the Federal Reserve System (or any successor report) as
"Total Assets."
"Total Loans" means, at any time, the amount set forth on the
most recent report on form FRY-9C filed by Borrower with the Board of Governors
of the Federal Reserve System (or any successor report) as the total of "Loans
and Leases, net of unearned income."
"Total Risk Based Capital Ratio" of any Person means, at any
time, the ratio of regulatory "core" capital (Tier I) and supplementary capital
elements (Tier II) to weighted-risk assets and off-balance sheet items, all as
defined and determined from time to time by applicable bank regulatory
authorities.
"Year 2000 Compliant" shall mean, with respect to any Person,
that all software, embedded microchips and/or other computer and/or processing
capabilities utilized by such Person, and/or included in any software, products,
goods and/or services sold and/or leased by such Person, are able to correctly
and properly recognize, interpret, process, calculate, compare, sequence and
manipulate data and date-sensitive functions on and involving all calendar dates
(including, without limitation, dates in and after the year 2000).
Section 1.02. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP
consistent with those applied in the preparation of the financial statements and
reports referred to in Section 5.06, and all financial data submitted pursuant
to this Agreement shall be prepared in accordance with such principles.
ARTICLE II.
AMOUNT AND TERMS OF REVOLVING LOAN
Section 2.01. Revolving Loan Commitments. Subject to the terms
and conditions of this Agreement (including, without limitation, the terms and
conditions of Article III hereof), the Banks severally and not jointly agree
from time to time on any Business Day to make loans to the Borrower from time to
time during the period from the date hereof up to but not including the
Revolving Credit Termination Date in individual amounts not to exceed each
Bank's Revolving Loan Commitment as set forth opposite such Bank's name in
Exhibit A, the aggregate principal amount of which at any time shall not exceed
One Hundred Million Dollars ($100,000,000) (the "Revolving Loan Limit"). Any
amounts advanced and repaid by Borrower shall be treated as prepayments and
shall be eligible for reborrowing by Borrower in the absence of a Default or an
Event of Default, subject to the terms and conditions of this Agreement.
Section 2.02. Termination or Reduction of Revolving Loan
Commitment. The Borrower shall have the right, upon at least fifteen (15)
Business Days' notice to the Agent, to terminate in whole or permanently reduce
in part the unused portion of the Revolving Loan Commitment. Any such reduction
by Borrower of the Revolving Loan Commitment shall result in a pro rata
reduction of each Bank's Revolving Loan Commitment.
Section 2.03. Interest on Revolving Loans. The Borrower shall
pay interest to the Agent for the account of the Banks on the outstanding and
unpaid principal amount of the Revolving Loans made under this Agreement at the
following intervals and at the following rates per annum:
(1) Prime Rate. If such Revolving Loan is accruing at the
Prime Rate, a fluctuating rate per annum equal to the Prime Rate in
<PAGE>
effect from time to time. Any change in the interest rate resulting
from a change in the Prime Rate shall become effective as of the
opening of business on the day on which such change in the Prime Rate
shall become effective. Interest shall be calculated on the basis of
the actual number of days elapsed over a year of 360 days. Interest
shall be paid in immediately available funds on or before 12:00 Noon
(St. Louis time) on the first day of each calendar month beginning
October 1, 1999, and on the Revolving Credit Termination Date. In the
event of receipt of funds after 12:00 Noon (St. Louis time) on the date
of payment, the funds shall be deemed to be received on the next
Business Day, and the accrual of interest will be calculated
accordingly;
(2) Eurodollar Rate. If such Revolving Loan is accruing
interest based on the Eurodollar Rate, a rate per annum equal at all
times during the applicable Interest Period for such Revolving Loan to
the sum of the Eurodollar Rate for such Interest Period plus the
Applicable Margin in effect from time to time, payable on the last day
of the Interest Period applicable to each such Revolving Loan and on
the Revolving Credit Termination Date. Interest shall be calculated on
the basis of the actual number of days elapsed over a year of 360 days.
Interest shall be paid in immediately available funds on or before
12:00 Noon (St. Louis time) on the last day of the Interest Period
applicable to each such Revolving Loan and on the Revolving Credit
Termination Date. In the event of receipt of funds after 12:00 Noon
(St. Louis time) on the date of payment, the funds shall be deemed to
be received on the next Business Day, and the accrual of interest will
be calculated accordingly;
provided, however, that, from and after the occurrence of an Event of Default
and unless and until such Event of Default is waived, the Borrower shall pay
interest on the unpaid principal amount of each Revolving Loan outstanding at a
rate per annum equal to four percent (4%) per annum above the interest rate
otherwise in effect from time to time with respect to such Revolving Loan,
including without limitation any interest rate in effect as a consequence of the
provisions of Section 2.04(1), such interest being payable on demand. The Agent
shall give prompt notice to the Borrower and the Banks of the applicable
interest rate for each Revolving Loan determined by the Agent for purposes of
this Section 2.03.
Section 2.04. Notice and Manner of Borrowing.
(1) The Borrower shall give the Agent (who shall promptly
notify the Banks) telephonic notice (followed immediately by written or telex
notice substantially in the form of Exhibit C hereto) of any request for a
Revolving Loan under this Agreement (a "Revolving Loan Notice of Borrowing") at
least five (5) Business Days before such Revolving Loan is requested to be made,
specifying (i) the date such Loan is requested to be made, the purpose and
amount thereof, and (ii) the interest rate applicable to such Revolving Loan.
The written form of the Revolving Loan Notice of Borrowing shall be accompanied
by a Compliance Certificate (the "Certificate") in the form of Exhibit E hereto.
At least three (3) Business Days before the end of each Interest Period, the
Borrower shall give the Agent (who shall promptly notify the Banks) a Revolving
Loan Notice of Borrowing with respect to the relevant Revolving Loan accruing
interest based on the Eurodollar Rate specifying the new Interest Period or, in
the event that the relevant Revolving Loan is to accrue interest at the Prime
Rate, specifying the same. In the event that in any Revolving Loan Notice of
Borrowing hereunder the interest rate of the Revolving Loan to be advanced is
not specified (or if Borrower is not entitled to request the Eurodollar Rate
pricing option pursuant to the terms hereof), the Revolving Loan to be advanced
shall accrue interest at Prime Rate. Subject to the limitations in the next
sentence and in Section 2.04(2)(c), Borrower may in any Revolving Loan Notice of
Borrowing request a Revolving Loan that is the aggregate of separate Revolving
Loans that will accrue interest at different interest rates and for different
Interest Periods as provided herein. Each Revolving Loan shall be in an amount
of at least One Million Dollars ($1,000,000) and integral multiples of One
Hundred Thousand Dollars ($100,000) in excess thereof or, if less, the unused
amount of the Revolving Loan Commitment. Not later than 2:00 P.M. (St. Louis
time) on the date such Revolving Loan is requested to be made, or if later, upon
fulfillment of the applicable conditions set forth herein, the Banks via the
Agent will make such Revolving Loan available to the Borrower in immediately
available funds by wire transfer of Federal funds to the Borrower. Upon the
request (in writing) of the Borrower, the Agent and the Banks shall use their
<PAGE>
reasonable best efforts to make such Revolving Loans available to the Borrower
prior to 2:00 P.M. (St. Louis time), provided, however, neither the Agent nor
the Banks shall have any liability to the Borrower or any other Person for any
failure to provide such funds prior to 2:00 P.M. (St. Louis time) pursuant to
such request. All notices given under this Section 2.04 shall be irrevocable,
and telephonic notices shall be given not later than 11:00 A.M. (St. Louis time)
on the day which is not later than the number of Business Days specified above
for such notice. If an Event of Default exists hereunder at the end of the
Interest Period of a Revolving Loan accruing interest based on the Eurodollar
Rate, such Revolving Loan shall immediately and automatically, and without
necessity of any further act by the Borrower, the Banks or the Agent, be
refinanced by a Revolving Loan accruing at the Prime Rate (as adjusted pursuant
to Section 2.03) in the same principal amount. Any costs and expenses incurred
by the Banks or the Agent by virtue of such refinancing (including without
limitation any costs and expenses that may be due under Section 10.06(2)) shall
be promptly paid by Borrower to the Agent for the account of the applicable
Banks on the demand of the Agent, and all the Revolving Loans shall thereafter
accrue interest at the Prime Rate (as adjusted pursuant to Section 2.03).
(2) Anything in subsection (1) above to the contrary
notwithstanding,
(a) if the Agent shall notify the Borrower
that the introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or that any central bank or other governmental
authority asserts that it is unlawful, for the Agent or any of the Banks to
perform its obligations hereunder with respect to the making of a Revolving Loan
accruing interest based on the Eurodollar Rate or to fund or maintain a
Revolving Loan based on the Eurodollar Rate hereunder, the right of the Borrower
to select, continue or convert a Revolving Loan to the Eurodollar Rate shall be
suspended until the Agent shall notify the Borrower that the circumstances
causing such suspension no longer exist; and upon the sending of such notice and
without the necessity of any further act by the Borrower, the Banks or the
Agent, the outstanding Revolving Loans accruing interest based on the Eurodollar
Rate shall immediately and automatically be refinanced by Revolving Loans in the
same principal amount, and all of the Revolving Loans shall thereafter accrue
interest at the Prime Rate; and the Borrower in such event shall pay the Agents
for the account of the applicable Banks any costs and expenses identified in
Section 10.06(2); and
(b) if the Agent is unable, after reasonable
efforts, due to prevailing market conditions, to obtain timely information for
the determination of the Eurodollar Rate, or is otherwise unable to determine
the Eurodollar Rate at any time, the right of the Borrower to select, continue
or convert a Revolving Loan to the Eurodollar Rate shall be suspended until the
Agent shall notify Borrower that the circumstances causing such suspension no
longer exist, and each Revolving Loan requested by the Borrower after such
notice shall accrue interest at the Prime Rate, and each Revolving Loan
outstanding on the date of such notice that is accruing interest
based on the Eurodollar Rate shall, after the end of the applicable Interest
Period for such Revolving Loan, accrue interest at the Prime Rate; and
(c) if, at any time, five (5) or more Revolving
Loans are accruing at an interest rate based upon the Eurodollar Rate with
Interest Periods ending on different days, Borrower shall not have the right to
select the Eurodollar Rate as the interest rate applicable to any new Revolving
Loan or convert the interest rate applicable to an existing Revolving Loan from
the Prime Rate to the Eurodollar Rate.
(3) A Revolving Loan Notice of Borrowing shall be irrevocable
and binding on the Borrower. In the case of a Revolving Loan Notice of Borrowing
which specifies a request for a Eurodollar Rate of interest, the Borrower shall
indemnify the Agent and the Banks against any loss, reasonable costs or expense
incurred by the Agent and/or the Banks as a result of any failure to fulfill on
or before the date specified in the Revolving Loan Notice of Borrowing as the
requested date of the Revolving Loan the applicable conditions set forth in
Article III, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
<PAGE>
reemployment of deposits or other funds acquired by the Agent and/or the Banks
to fund the Revolving Loan when it, as a result of such failure, is not made on
such date.
Section 2.05. Revolving Notes. The Revolving Loans made by
each Bank and the Borrower's obligation to repay the Revolving Loans shall be
evidenced by, and be payable with interest in accordance with the terms of, this
Agreement and a revolving note of the Borrower payable to the order of that Bank
(collectively, the "Revolving Notes"). Each Revolving Note shall (i) be dated
the date hereof, (ii) be in the original principal amount equal to that Bank's
Revolving Loan Commitment as set forth opposite such Bank's name in Exhibit A,
and (iii) be executed by duly authorized officers of the Borrower. Each Bank's
Revolving Note shall be in substantially the form of Exhibit B. The failure of
any Bank to make a Revolving Loan shall not relieve any other Bank of its
obligation to make a Revolving Loan pursuant to the terms and conditions of this
Agreement. When used in this Agreement, the term "Revolving Note" or "Revolving
Notes" shall include any extensions, modifications, renewals, refundings,
replacements or restatements thereof.
Section 2.06. Method of Payment. Borrower shall make each
payment under this Agreement and under the Revolving Notes not later than 12:00
Noon (St. Louis time) on the date when due in lawful money of the United States
to the Agent by wire transfer of Federal funds. Upon receipt of such payment the
Agent shall immediately remit to each Bank by wire transfer of Federal funds the
amount of the payment received which is due each Bank under the Revolving Note
held by each Bank or otherwise under this Agreement. In the event of receipt of
funds after 12:00 Noon (St. Louis time) on the date of payment, the funds shall
be deemed to be received on the next Business Day and the accrual of interest
will be calculated accordingly. Whenever any payment to be made under this
Agreement or under a Revolving Note shall be stated to be due on a day which is
not a Business Day, such payment shall be made on the next succeeding Business
Day, the amount of such payment, in such case, to include all interest or fees
accrued to the date of actual payment.
Section 2.07. Use of Proceeds. The proceeds of the Revolving
Loans hereunder shall be used by Borrower to refinance existing indebtedness and
to finance the acquisition by Borrower of banks and thrift institutions and
their holding companies. The Borrower will not, directly or indirectly, use any
part of the proceeds of the Revolving Loans for the purpose of: (i) paying
dividends on or other distributions with respect to capital stock of Borrower or
its Subsidiaries; (ii) paying interest or principal on outstanding debt of
Borrower or its Subsidiaries (other than existing indebtedness to be refinanced
with the proceeds of the Revolving Loans); or (iii) purchasing any margin stock
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System.
Section 2.08. Zero Balance. The Banks and the Borrower
acknowledge that the outstanding balance of the Revolving Notes may be zero
($00.00) from time to time, and that prior to the Revolving Credit Termination
Date such fact shall not mean the Revolving Loan Commitment and the availability
of the Revolving Loans have been terminated nor does it mean the security
interest has been released.
Section 2.09. Advances and Payment. The Revolving Loans shall
be made by each of the Banks concurrently. Each payment and prepayment of the
Revolving Loans made to the Agent for the account of the Banks shall be made pro
rata on the basis of each Bank's Revolving Loan Commitment as set forth in
Exhibit A. If the Borrower prepays any Revolving Loan or a portion thereof which
is accruing interest based on the Eurodollar Rate, the Borrower shall compensate
the Banks in accordance with Section 10.06(2). Any such prepayment shall be made
upon at least three (3) Business Days' notice to the Agent stating the proposed
date and aggregate principal amount of the prepayment, and if such notice is
given, the Borrower shall prepay such principal amount of the Revolving Loan
together with accrued interest to the date of such prepayment on the principal
amount prepaid; provided, however, that each partial prepayment shall be in an
aggregate principal amount of not less than One Hundred Thousand Dollars
($100,000) and integral multiples of Fifty Thousand Dollars ($50,000) in excess
thereof, and provided further, that a partial prepayment shall not reduce the
<PAGE>
principal balance of each Revolving Loan below the minimum levels prescribed in
Section 2.04(1). In the event more than one Revolving Loan accruing interest
based on the Eurodollar Rate is outstanding at the time of any such prepayment,
the Borrower shall have the right to specify which such Revolving Loan is to be
prepaid by the Borrower.
Section 2.10. Revolving Loan Commitment Fee. Borrower shall
pay to Agent for the account of the Banks on a pro-rata basis, within twenty
(20) days from the date of the Agent's invoice therefor, a Revolving Loan
Commitment Fee (the "Revolving Loan Commitment Fee") at the rate of one-eighth
of one percent (0.125%) per annum on the average daily unused portion of the
Revolving Loan Commitment. The Revolving Loan Commitment Fee shall be payable
quarterly in arrears commencing on December 1, 1999 (which payment shall include
the period commencing on the date hereof), March 1, 2000, June 1, 2000 and on
the Revolving Credit Termination Date. The Revolving Loan Commitment Fee shall
be computed on the basis of a year deemed to consist of 360 days and paid for
the actual number of days elapsed.
Section 2.11. Reimbursement.
Whenever any Bank shall sustain or incur any losses or
out-of-pocket expenses in connection with:
(1) the failure by the Borrower to pay the principal amount of
any Revolving Loan when due (whether at maturity, by reason of acceleration,
notice of prepayment/termination by Borrower or otherwise);
(2) the repayment of overdue amounts of any Revolving
Loan; or
(3) the acceleration of the maturity date of an Revolving
Note by reason of the occurrence of an Event of Default;
the Borrower shall pay to the Agent, upon its demand and for the account of the
applicable Banks, an amount certified in writing by the Agent as the amount
required to reimburse the applicable Banks for all reasonable losses and
out-of-pocket expenses claimed. All determinations, estimates, assumptions,
allocations and the like required for the determination thereof shall be made by
the Agent in good faith and the Borrower shall have the burden of proving that
the Agent's determination thereof is not correct.
Section 2.12. Failure of Any Bank to Make Revolving Loans.
Should any Bank default in making a Revolving Loan, the other Banks shall not be
released from their several obligations to make Revolving Loans as agreed
hereunder, and, in the event such defaulting Bank is the Agent, the other Banks
shall forthwith appoint one of themselves to act as Agent. However, such default
shall not obligate any of the Banks to increase their Revolving Loan Commitment
hereunder. Borrower shall be released from all liability to pay such defaulting
Bank any accrued or future fees under Sections 2.04 and 2.10 and the other
obligations of the Borrower to such defaulting Bank under the Loan Documents,
except the obligation to repay the outstanding Revolving Loans theretofore made
by such Bank and interest accrued thereon as provided in the Loan Documents,
shall terminate; provided, however, once such default is cured, then such
defaulting Bank shall, subsequent thereto, have all rights under the Loan
Documents.
Section 2.13. Banks Not Required to Extend Credit. No Bank
shall be required to make any Revolving Loan if, after giving effect thereto,
the then aggregate outstanding principal amount of all Revolving Loans would
exceed $100,000,000, as such amount may be reduced from time to time pursuant to
Section 2.02, or such Bank would exceed its Revolving Loan Commitment (after
giving effect to all Revolving Loans, whether or not funded by any particular
Bank, as if each Bank had funded its respective Revolving Loans in accordance
with the terms of this Agreement).
<PAGE>
ARTICLE III
CONDITIONS PRECEDENT
Section 3.01. Conditions Precedent to the Initial Loans. The
obligation of each Bank to make its initial Revolving Loan to the Borrower is
subject to the conditions precedent that the Agent, on behalf of the Banks,
shall have received, on or before the date hereof and approved, each of the
following:
(1) Notes. The Revolving Notes duly executed by the Borrower;
(2) Pledge Agreement. The Pledge Agreement, duly executed by the Borrower,
together with (a) acknowledgment copies of the financing statements (Form UCC-1)
duly filed under the Uniform Commercial Code of all jurisdictions necessary or,
in the opinion of the Agent, desirable to perfect the security interest created
by the Pledge Agreement, and (b) stock powers or powers of attorney which are
necessary or appropriate for the security interest of the Agent in the
Collateral;
(3) Evidence of all Corporate Action by the Borrower and Subsidiaries. Certified
(as of the date of this Agreement) copies of all corporate action taken by the
Borrower, including resolutions of the Board of Directors of Borrower,
authorizing the execution, delivery, and performance of all Loan Documents to
which Borrower is a party and each other document to be delivered by Borrower
pursuant to this Agreement;
(4) Incumbency Certificates. Certificates dated as of the date of this Agreement
of the Secretary of the Borrower certifying the names and true signatures of the
officers of the Borrower authorized to sign the Loan Documents and each other
document to be delivered by the Borrower under this Agreement;
(5) Opinion of Counsel for the Borrower. A favorable opinion of counsel for the
Borrower, in substantially the form of Exhibit F, and as to such other matters
as the Agent may reasonably request;
(6) Form U-1. Federal Reserve Form U-1 Purpose Statements, executed by
Borrower;
(7) Stock Certificates. Delivery to Agent of the original stock certificates for
all of the issued and outstanding shares of stock of each Pledged Subsidiary
(exclusive of directors' qualifying shares), together with stock powers;
(8) Corporate Existence. Certificates and certified copies of charters and
articles of incorporation demonstrating the due organization and current good
standing of Borrower and each Pledged Subsidiary and certified copies of the
Bylaws of Borrower and each Pledged Subsidiary;
(9) Original Credit Agreement. (a) Each Bank shall have surrendered to Agent the
revolving credit note issued to it pursuant to the Original Credit Agreement and
such revolving credit note shall be deemed amended and restated and converted
into Notes under this Agreement, (b) all loans outstanding pursuant to the
Original Credit Agreement shall be either (i) repaid in full and if any such
revolving loans were at such time accruing interest at the Eurodollar Rate, all
breakage costs in connection therewith shall have been paid as contemplated by
Section 10.06(2) of the Original Credit Agreement or (ii) continued under this
Agreement in accordance with a notice delivered pursuant to Section 2.04, (c)
each Bank shall have received payment in full of all amounts then due and owing
to it under the Original Credit Agreement, and (d) Borrower shall have paid all
accrued and unpaid interest and fees owing under the Original Credit Agreement
through the date hereof;
(10) Financial Statements. Audited consolidated financial statements for the
fiscal years 1997 and 1998 and the unaudited consolidated financial statements
as of June 30, 1999, of the Borrower and First Banks America, Inc.;
<PAGE>
(11) Officer's Certificate. A certificate from the Borrower, dated the date
hereof, stating that there has not occurred a material adverse change since
December 31, 1998, in the financial condition, operation, properties, or
business of the Borrower and its Subsidiaries or in the facts or information
regarding such entities as represented to the Agent and the Banks to date; and
(12) Additional Documentation. Such other approvals, opinions or documents as
the Agent may reasonably request.
Section 3.02. Conditions Precedent to All Revolving Loans. The
obligation of each Bank to make each Revolving Loan (including the initial
Revolving Loans) shall be subject to the further conditions precedent that on
the date of each such Revolving Loan:
(1) The Agent shall have received the Revolving Loan Notice of
Borrowing which shall specify whether the requested Revolving Loan shall accrue
interest based on the Eurodollar Rate or at the Prime Rate;
(2) No Default or Event of Default shal have occurred and
be continuing, or would result from such Revolving Loan.
(3) The following statements shall be true and the Agent on
behalf of the Banks shall have received a Certificate signed by at least two of
the chief executive officer, the chief financial officer, the chief accounting
officer, the chief operating officer and the chief credit officer of Borrower
and dated the date of the Revolving Loan Notice of Borrowing requesting such
Revolving Loan, containing the confirmations of compliance with certain of the
financial covenants as herein provided, and stating that:
(a) The representations and warranties contained
in Article IV of this Agreement are correct on and as of such date;
(b) No Default or Event of Default has occurred
and is continuing, or would result from such Revolving Loan;
(c) Attached is an accurate listing of all of
the Affiliates of Borrower; and
(d) The use of the proceeds of the requested
Revolving Loan will be as indicated in the Revolving Loan Notice of Borrowing.
(4) The Agent shall have received such other approvals,
information or documents as the Agent may reasonably request, in form and
substance satisfactory to the Agent.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Banks that:
Section 4.01. Incorporation, Good Standing, and Due
Qualification. Borrower is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Missouri and is in good standing
in all states and jurisdictions wherein it owns property or does business
requiring such qualification as a foreign corporation. Borrower is a "bank
holding company" as that term is defined in the federal Bank Holding Company Act
of 1956, as amended, 12 U.S.C. ss. 1841 et seq., and as such, Borrower has
received all necessary approvals from and has filed all necessary reports with
the Board of Governors of the Federal Reserve System. The list of Affiliates of
Borrower as shown on Exhibit H attached is as of the date hereof true and
accurate. Each Subsidiary of the Borrower is a bank, bank holding company or
corporation duly organized and in good standing under the laws of its respective
jurisdiction of organization.
<PAGE>
Section 4.02. Corporate Power and Authority. The execution,
delivery and performance by the Borrower of the Loan Documents as provided for
herein are within the corporate powers of Borrower, have been duly authorized by
all necessary corporate action and require no action by or in respect to, or
filing with any governmental body, agency or official. The execution, delivery
and performance by Borrower of the Loan Documents do not conflict with, or
result in a material breach of the terms, conditions or provisions of or
constitute a default under or result in any violation of, and Borrower is not
now in default under or in violation of the terms of its Articles of
Incorporation or Bylaws or any rule, regulation, order, writ, judgment or decree
of any court or government agency or instrumentality, or any agreement or
instrument to which Borrower or any of its Subsidiaries is a party or by which
it or they are bound or to which it or they are subject.
Section 4.03. Legally Enforceable Agreement. This Agreement
has been duly executed and delivered and constitutes a legal, valid and binding
agreement of the Borrower enforceable in accordance with its terms, and the
other Loan Documents, when executed and delivered in accordance with this
Agreement, will constitute a legal, valid and binding obligation of the
Borrower, enforceable in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency or other
similar laws affecting creditors' rights generally.
Section 4.04. Financial Statements; Financial Condition. The
financial information furnished by Borrower representing the financial condition
of Borrower or any Subsidiary, such information being identified in Exhibit I
attached, is true and correct as of the date furnished and there has been no
material adverse change in the financial condition, operations or business of
any of them since the date of such financial information.
Section 4.05. Other Agreements. Except for those matters
disclosed on Schedule 4.05 attached, Borrower is not a party to any indenture,
loan, or credit agreement, or to any lease or other agreement or instrument or
subject to any charter or corporate restriction which could reasonably be
expected to have a material adverse effect on its financial condition,
operations, properties, or business, or on its ability to carry out its
obligations under the Loan Documents. Neither the Borrower nor any of its
Subsidiaries is in default in any material respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument material to their respective business
to which each is a party.
Section 4.06. Litigation. Except for those matters disclosed
on Schedule 4.06 attached, there is no pending or, to the best of Borrower's
knowledge, threatened action or proceeding against or affecting Borrower or any
Subsidiary before any court, governmental agency, or arbitrator, which if
determined adversely to Borrower in any one case or in the aggregate, could
reasonably be expected to have a material adverse affect on the financial
condition, operations, properties, or business of Borrower or any Subsidiary, or
the ability of Borrower or any Subsidiary to perform its obligations under this
Agreement or the Loan Documents.
Section 4.07. Ownership of Subsidiaries. The ownership of each
Subsidiary is as shown on Exhibit J attached. Upon the extension of the initial
Revolving Loans, all shares of common stock of each Subsidiary owned by Borrower
will be free and clear of all liens, claims and encumbrances, except as to
Pledged Subsidiaries the security interests under the Pledge Agreement as
provided for herein.
Section 4.08. ERISA. Borrower and each Subsidiary are in
compliance in all material respects with all applicable provisions of ERISA.
Neither a Reportable Event nor a Prohibited Transaction has occurred and is
continuing with respect to any Plan; except as provided on Schedule 4.08
attached, no notice of intent to terminate a Plan has been filed nor has any
Plan been terminated; no circumstances exist which constitute grounds under
Section 4042 of ERISA entitling the PBGC to institute proceedings to terminate,
or appoint a trustee to administer, a Plan, nor has the PBGC instituted any such
<PAGE>
proceedings; except as provided on Schedule 4.08 attached, neither Borrower nor
any Subsidiary has completely or partially withdrawn under Sections 4201 or 4204
of ERISA from a Multiemployer Plan; Borrower and each Subsidiary have met
minimum funding requirements under ERISA with respect to their respective Plans
and the present fair market value of all Plan assets exceeds the present value
of all vested benefits under each Plan, as determined on the most recent
valuation date of the Plan and in accordance with the provisions of ERISA and
the regulations thereunder for calculating potential liability to the PBGC or
the Plan under Title IV of ERISA; Borrower and all Subsidiaries have incurred no
liability to the PBGC under ERISA.
Section 4.09. Taxes. Borrower and each Subsidiary have filed
(or received extensions of the time to file) and will in the ordinary course of
business file all tax returns (federal, state, and local) required to be filed
and have paid and will pay all taxes, assessments, and governmental charges and
levies shown thereon to be due, including interest and penalties, provided,
however, that nothing herein will prevent the contest in good faith of any
assessment or imposition of any tax as long as an adverse determination will
have no material adverse impact upon Borrower or the Pledged Subsidiaries.
Section 4.10. Use of Proceeds; Margin Regulations. Neither the
making of any Loan nor the use of the proceeds thereof will violate or be
inconsistent with the provisions of Regulations T, U or X of the Board of
Governors of the Federal Reserve System.
Section 4.11. Year 2000 Compliance. Each of the Borrower and
its Subsidiaries has (a) undertaken a detailed inventory, review and assessment
of all areas within its business and operations that could be adversely affected
by the failure of Borrower or such Subsidiary, as the case may be, to be Year
2000 Compliant on a timely basis, (b) developed a detailed plan and timeline for
becoming Year 2000 Compliant on a timely basis, and (c) to date, implemented
such plan in accordance with such timetable in all material respects. Borrower
reasonably anticipates that it and each Subsidiary will be Year 2000 Compliant
on a timely basis, except to the extent such noncompliance could not reasonably
be expected to have a material adverse effect on the financial condition,
operations, properties, or business of the Borrower or any Subsidiary. Neither
Borrower nor any Subsidiary is aware that any of its key suppliers, vendors or
customers will not, on a timely basis, be Year 2000 Compliant, except to the
extent such noncompliance could not reasonably be expected to have a material
adverse effect on the financial condition, operations, properties, or business
of the Borrower or any Subsidiary. For purposes of this Section 4.11, "key
suppliers, vendors and customers" refers to those suppliers, vendors and
customers of Borrower or the applicable Subsidiary, as the case may be, whose
business failure could reasonably be expected to have a material adverse effect
on the financial condition, operations, properties, or business of the Borrower
or any Subsidiary.
ARTICLE V.
AFFIRMATIVE COVENANTS
So long as any portion of the indebtedness evidenced by the
Notes shall remain unpaid, or the Banks shall have any Commitment under this
Agreement, Borrower and each Pledged Subsidiary will:
Section 5.01. Maintenance of Existence. Except as expressly
permitted pursuant to Section 6.02 hereof, preserve and maintain its corporate
existence and good standing in the jurisdiction of its incorporation, and
qualify and remain qualified as a foreign corporation in each jurisdiction in
which such qualification is required.
Section 5.02. Maintenance of Records. Keep adequate records
and books of account, in which complete entries will be made in accordance with
GAAP consistently applied, reflecting all financial transactions.
<PAGE>
Section 5.03. Maintenance of Subsidiaries. Maintain and keep
each Subsidiary in good standing with the jurisdiction of its organization,
except to the extent a Subsidiary dissolves or ceases to exist pursuant to a
transaction permitted by the terms of Section 6.02.
Section 5.04. Compliance With Laws. Comply in all respects,
and cause compliance on behalf of each Subsidiary, with all applicable laws,
rules, regulations, and orders. Compliance shall include, without limitation,
paying before the same become delinquent all taxes, assessments, and
governmental charges imposed upon it or upon its property, except for such
taxes, assessments or governmental charges that are being diligently contested
in good faith by appropriate proceedings if it has maintained adequate reserves
with respect thereto in accordance with generally accepted accounting
principles.
Section 5.05. Right of Inspection. At any time during normal
business hours and from time to time, upon at least one (1) Business Day's
advance notice, permit the Agent and any Bank or any agent or representative
thereof to examine and make copies of and abstracts from the records and books
of account of and visit the properties of, Borrower and each Subsidiary, and to
discuss the affairs, finances, and accounts of Borrower and each Subsidiary,
with any of its or their officers and directors and with the Borrower's
independent accountants, provided, however, that with respect to the loans of
Borrower or a Pledged Subsidiary, the Agent and any Bank may only review and
make copies of summaries of the Watch List prepared on a quarterly basis and
loan audit reports; review of specific loan accounts and loan review reports may
be requested by the Agent or any Bank, whereupon Borrower and Agent or the Bank
shall within ten (10) days agree as to the number of such accounts and reports
that are reasonable and appropriate to review, and provided further, that upon
and during the existence of an Event of Default hereunder, there shall be no
restrictions or conditions on the scope of the review, inspection and
reproduction rights of Agent and the Banks concerning the loans of Borrower or a
Pledged Subsidiary.
Section 5.06. Reporting Requirements. Furnish to the Agent:
(1) Quarterly Financial Statements. As soon as practicable, or
in any event within forty-five (45) days after the end of each fiscal quarter of
Borrower (a) parent only and consolidated balance sheets of Borrower and its
Subsidiaries as of the end of such fiscal quarter and (b) parent only and
consolidated statements of income and earnings retained in the business of
Borrower and its Subsidiaries for such fiscal quarter, all of which shall be
prepared in accordance with GAAP (subject to normal year-end adjustments) and
certified by the chief financial officer or chief accounting officer of
Borrower.
(2) Annual Financial Statements. As soon as practicable, or in
any event within ninety (90) days after the close of each fiscal year of
Borrower (a) parent only and consolidated balance sheets of Borrower and its
subsidiaries at year end and (b) parent only and consolidated statements of
income and earnings retained in the business of Borrower and its Subsidiaries
including consolidated and parent only statements of cash flow for such fiscal
year, all of which shall include comparative statements for the preceding year
and shall be prepared in accordance with GAAP consistently applied, and shall be
certified by, and accompanied by an unqualified audit opinion of a firm of
certified public accountants acceptable to Agent; provided, however, that the
opinion may be limited to the consolidated statements of Borrower.
(3) Reports. Within forty-five (45) days after such report is
filed and to the extent not prohibited by law, copies of all reports filed by
Borrower (on a consolidated and parent only basis), and First Banks America,
Inc. (on a consolidated and parent only basis) with the Board of Governors of
the Federal Reserve System or any Federal Reserve Bank, the Federal Deposit
Insurance Corporation ("FDIC"), Securities and Exchange Commission ("SEC"), or
other bank or thrift regulatory agency; within forty-five (45) days after the
end of each fiscal quarter of Borrower, a list of all such reports. Irrespective
of the foregoing procedures for the request for copies of reports, Borrower
<PAGE>
shall submit to the Agent, within forty-five (45) days from the date of
submission to the SEC, copies of the following SEC reports with respect to the
Borrower and First Banks America, Inc.: 10-K, 10-Q, and 8-K. Borrower shall also
submit (or cause to be submitted) to the Agent, within fifteen (15) days from
the date of such agreement, copies of any and all agreements entered into by
Borrower or any of Borrower's Subsidiaries with the Board of Governors of the
Federal Reserve System, any Federal Reserve Bank, the FDIC, the SEC, or other
bank or thrift regulatory agency.
(4) Subsidiary Reports. Copies of all Quarterly Reports of
Condition and Income ("Call Report"), certified as required by law, filed by
each Subsidiary with the FDIC or any other governmental or regulatory agency,
within forty-five (45) days from the date any such Call Report is submitted to
such agency, and, to the extent permitted by law, copies of all examination
reports and supervisory comment letters pertaining to each Subsidiary.
(5) Examination; Litigation. Promptly after the commencement
thereof, notice of all suits and proceedings before any court or governmental
department, commission, board, or agency affecting Borrower or any Subsidiary
which could reasonably be expected to have a material adverse effect on the
financial condition, properties or operations of Borrower or any Subsidiary;
promptly after the receipt thereof, notice of any report or comment letter from
any regulatory authority of Borrower or any Subsidiary, or from the independent
auditors of Borrower, which requires any action of a material adverse nature by
Borrower or any Subsidiary.
(6) Compliance Certificate. Within forty-five (45) days after
the end of each fiscal quarter of Borrower, a Compliance Certificate signed by
at least two of the chief executive officer, the chief financial officer, the
chief accounting officer and the chief credit officer of the Borrower,
substantially in the form of Exhibit E attached hereto.
(7) Other Information. Such other information and reports
regarding the financial condition, operations or regulatory affairs of Borrower
or any Subsidiary as Agent or a Bank may from time to time reasonably request.
Section 5.07. Operations. Operate and maintain its business
and property, and those of its Subsidiaries, in the ordinary course in a prudent
manner consistent with sound banking practices and in such a manner that the
performance by Borrower of its obligations hereunder are not jeopardized or
impaired.
Section 5.08. Additional Collateral. Pursuant to the Pledge
Agreement, pledge and deliver to Agent shares of stock of (i) a bank, thrift
institution, bank holding company or savings holding company hereafter acquired
by Borrower or any Pledged Subsidiary (other than as may be acquired by First
Banks America, Inc.) with all or a portion of such shares having been acquired
with the proceeds of a Loan, or (ii) a bank, thrift institution, bank holding
company or savings holding company which becomes a Subsidiary (other than as may
be acquired by First Banks America, Inc.).
Section 5.09 Year 2000 Compliance. Borrower will, and it will
cause each Subsidiary to, take any and all actions necessary to assure that
Borrower and each Subsidiary will be Year 2000 Compliant as soon as reasonably
practical, except to the extent such noncompliance could not reasonably be
expected to have a material adverse effect on the financial condition,
operations, properties, or business of the Borrower or any Subsidiary. Borrower
will be, and it will cause each Subsidiary to be, Year 2000 Compliant by January
1, 2000, except to the extent such noncompliance could not reasonably be
expected to have a material adverse effect on the financial condition,
operations, properties, or business of the Borrower or any Subsidiary. At the
request of Agent, Borrower will from time to time provide Agent with written
reports in form and detail reasonably satisfactory to Agent on the status of the
efforts of Borrower and its Subsidiaries to be Year 2000 Compliant.
<PAGE>
ARTICLE VI.
NEGATIVE COVENANTS
So long as any portion of the indebtedness evidenced by the
Notes shall remain unpaid, or any Bank shall have any Commitment under this
Agreement, Borrower will not, without the prior written consent of the Agent,
which consent shall not be unreasonably withheld:
Section 6.01. Liens. Create, incur, assume, or suffer to
exist, any Lien, or permit any Subsidiary to create, incur, assume, or suffer to
exist, any lien, upon or with respect to any of the Collateral or any capital
stock held by any Subsidiary, except in favor of the Agent.
Section 6.02. Mergers, Etc. Merge or consolidate with any
Person having Total Assets in excess of $250,000,000 or which is subject to a
regulatory action or proceeding or any cease and desist order which relates in
any material adverse way to the management, financial condition, or operations
of such Person, or permit the merger or consolidation of any Subsidiary with any
Person having Total Assets in excess of $250,000,000 or which is subject to a
regulatory action or proceeding or any cease and desist order which relates in
any material adverse way to the management, financial condition, or operations
of such Person, or sell, assign, lease, or otherwise dispose of (whether in one
transaction or in a series of transactions) any Subsidiary or all or
substantially all of its other assets, or permit the sale, assignment, lease, or
other disposition of any Subsidiary, or the sale of all or substantially all of
the assets of any Subsidiary (whether now owned or hereafter acquired), to any
Person; provided, however, that nothing in this Section 6.02 shall prevent
mergers or sale of assets as between two entities that are Pledged Subsidiaries.
Section 6.03. Indebtedness. Incur, create, assume or allow to
exist, nor permit any Subsidiary to incur, create, assume or allow to exist, any
indebtedness, whether contingent or absolute, except indebtedness: (i) evidenced
by the Notes; (ii) evidenced by subordinated debentures issued to First
Preferred Capital Trust in an aggregate principal amount not to exceed
$88,917,550; (iii) evidenced by subordinated debentures issued by First Banks
America, Inc. to First America Capital Trust in an aggregate principal amount
not to exceed $47,422,700; (iv) for advances made by Borrower or any Subsidiary
to Borrower or any Subsidiary in the ordinary course of business or for
acquisition purposes in an aggregate amount not to exceed $20,000,000; (v) of
accrued expenses or accounts payable in the ordinary course of business not yet
payable; (vi) for any other purpose not to exceed in the aggregate the amount of
$2,500,000; and (vii) refundings, renewals and replacements of any of the
foregoing.
Section 6.04. Dividends. Pay or declare any dividends on the
common stock of Borrower; pay or declare any dividends upon the preferred stock
of Borrower designated as Class A or Class B preferred stock in the financial
statements of Borrower if a Default or an Event of Default exists or if, after
giving effect thereto, a Default or Event of Default would exist.
Section 6.05. Stock Issue; Additional Issue of Stock of
Subsidiary. Create any new class or amend the terms of any existing class of
stock of Borrower, or issue any shares of stock of any class of Borrower, the
terms of which have not been approved by the Agent; except for stock now or
hereafter issued by First Banks America, Inc. for acquisition purposes and upon
exercise of stock options granted to employees, none of which shall cause
Borrower to own, in the aggregate, less than 55% of the issued and outstanding
shares of voting capital stock of First Banks America, Inc., issue or permit any
Subsidiary to issue any additional shares of stock of any class or any capital
notes or other long-term debt instruments, or create any new class of stock or
amend the terms of any existing class of stock.
Section 6.06. Stock Redemption. Redeem, purchase or retire any
shares of any existing class of stock of Borrower (except for trust preferred
securities issued by First America Capital Trust) or any capital notes of
Borrower or permit any Subsidiary to redeem, purchase or retire any shares of
any existing class of stock of such Subsidiary or any capital notes of such
Subsidiary; provided, however, that as long as no Event of Default shall have
<PAGE>
occurred and be continuing, with respect to Subsidiaries which are not wholly
owned by the Borrower, such Subsidiary(ies) may redeem, purchase or retire
shares of any existing class of stock (except for trust preferred securities) of
such Subsidiary.
Section 6.07. Loans. Loan money or extend credit to, or become
a surety or guarantor for, or permit any Pledged Subsidiary to do likewise, the
benefit of any Affiliate or any Subsidiary or any executive officer or
shareholder of any Affiliate or any Subsidiary; provided, however, that Borrower
and the Pledged Subsidiaries may extend credit to executive officers or
shareholders of any Affiliate or Subsidiary if the loan or extension of credit
complies in all respects with applicable law and regulations, and provided
further, that the following items of indebtedness are permitted: (i) loans to
Subsidiaries for the purpose of acquiring and holding OREO properties, (ii)
loans by Borrower or any Subsidiary to Borrower or any Subsidiary made in the
ordinary course of business or for acquisition purposes in an aggregate amount
not to exceed at any one time $20,000,000; and (iii) refundings, renewals and
replacements of any of the foregoing.
Section 6.08. Redeem in whole or in part, the subordinated
debentures issued to First Preferred Capital Trust or permit First Banks
America, Inc. to redeem, in whole or in part, the subordinated debentures issued
to First America Capital Trust; pay any interest on or permit First Banks
America, Inc. to pay any interest on such subordinated debentures if a Default
or Event of Default exists, or if after giving effect thereto, a Default or
Event of Default would exist.
Section 6.09. Continuation of Business. Substantially change,
nor permit any of its Subsidiaries to change substantially, the nature of the
respective businesses in which they are now engaged, nor engage in, nor permit
any Subsidiary to engage in, any line of business if, as a result thereof, the
business of the Borrower and its Subsidiaries, taken as a whole, would not be
predominately the banking or thrift business (and activities deemed closely
related to banking and/or the thrift business by applicable regulatory
authorities) as currently constituted as of the date hereof.
ARTICLE VII.
FINANCIAL COVENANTS
So long as any portion of the indebtedness evidenced by the
Notes shall remain unpaid or any Bank shall have any Commitment under this
Agreement, Borrower and the Pledged Subsidiaries will comply with each of the
following covenants:
Section 7.01. Tier I Leverage Ratio. Borrower and
Subsidiaries, on a consolidated basis, shall maintain a minimum Tier I Leverage
Ratio at the end of each quarterly accounting period of not less than 5.0% or
such greater amount as may be required to be considered "well capitalized" by
applicable regulatory authorities from time to time.
Section 7.02. Tier I Leverage Ratio of Subsidiaries. Each bank
Subsidiary of Borrower shall maintain a minimum Tier I Leverage Ratio at the end
of each quarterly accounting period of not less than 5.0% or such greater amount
as may be required to be considered "well capitalized" by applicable regulatory
authorities from time to time.
Section 7.03. Tier I Risk Based Capital Ratio. Each bank
Subsidiary of Borrower shall maintain a minimum Tier I Risk Based Capital Ratio
at the end of each quarterly accounting period of not less than 6.0% or such
greater amount as may be required to be considered "well capitalized" by
applicable regulatory authorities from time to time.
Section 7.04. Total Risk Based Capital Ratio. Each bank
Subsidiary of Borrower shall maintain a minimum Total Risk Based Capital Ratio
at the end of each quarterly accounting period of not less than 10.0% or such
greater amount as may be required to be considered "well capitalized" by
applicable regulatory authorities from time to time.
<PAGE>
Section 7.05. Loan Loss Reserve. Borrower and Subsidiaries, on
a consolidated basis, shall maintain a minimum Loan Loss Reserve, expressed as a
percentage of Total Loans, for each quarterly accounting period of 1.25% or such
greater amount as may be required by regulatory authorities or prudent banking
standards from time to time.
Section 7.06. Net Income to Average Total Assets.
(a) Borrower and Subsidiaries, on a consolidated
basis, shall maintain a minimum ratio, expressed as a percentage, of Net Income
less extraordinary and/or non-recurring items (as determined in accordance with
GAAP), for the most recently ended period of four fiscal quarters of Borrower,
to Average Total Assets of not less than 0.70%.
(b) First Bank and First Bank & Trust, on a combined
basis, shall maintain a minimum ratio, expressed
as a percentage, of Net Income less extraordinary and/or non-recurring items (as
determined in accordance with GAAP), for the most recently ended period of four
calendar quarters, to Average Total Assets of not less than 0.70%.
Section 7.07. Non-Performing Assets. Borrower and
Subsidiaries, on a consolidated basis, shall have Non-performing Assets,
in the aggregate, of not more than 25% of Primary Capital.
ARTICLE VIII.
EVENTS OF DEFAULT
Section 8.01. Events of Default. If any of the following
events ("Events of Default") shall occur:
(1) Borrower shall fail to pay (a) the principal of, or
interest on, a Note, within five (5) calendar days after notice of such failure
shall have been given to the Borrower by the Agent;
(2) Borrower shall fail to pay any fees or any other amount
payable hereunder when due and such failure shall remain unremedied for ten (10)
consecutive calendar days after notice of such failure shall have been given to
the Borrower by the Agent;
(3) Any representation or warranty made or deemed made by the
Borrower or any Subsidiary in this Agreement, the Pledge Agreement, the
Subsidiary Pledge Agreements, or which is contained in any certificate,
document, opinion, or financial or other statement furnished at any time under
or in connection with any Loan Document, shall be reasonably determined by the
Agent to have been incorrect in any material respect on or as of the date made
or deemed made and such default remains unremedied for thirty (30) consecutive
calendar days after notice thereof shall have been given to the Borrower by the
Agent;
(4) (a) Borrower shall fail to perform or observe any term,
covenant, or agreement contained in any Loan Document (other than as contained
in Article VII hereof and other than as contained in a Note) on its part to be
performed or observed, and such failure shall remain unremedied for thirty (30)
consecutive calendar days after notice thereof shall have been given to the
Borrower by the Agent, provided, however, that in the event two or more such
notices are required to be given in any consecutive six month period, Agent at
its option need not give such notice, and there shall not be any period for the
cure of such failure with respect to such second or succeeding failure, or (b)
Borrower shall fail to perform or observe any term, covenant, or agreement
contained in Article VII hereof or in a Note;
(5) Borrower or any Subsidiary (a) shall generally not, or
shall be unable to, or shall admit in writing its inability to, pay its debts as
such debts become due; or (b) shall make an assignment for the benefits of
creditors, petition or apply to any tribunal for the appointment of a custodian,
<PAGE>
receiver, or trustee for it or a substantial part of its assets; or (c) shall
commence any proceedings under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution, or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or (d) shall have any such
petition or application filed or any such proceeding commenced against it, in
which an order for relief is entered or adjudication or appointment is made and
which remains undismissed for a period of forty-five (45) calendar days or more;
or (e) by any act or omission shall indicate its consent to, approval of, or
acquiescence in any such petition, application, or proceeding, or order for
relief, or the appointment of a custodian, receiver, or trustee for all or any
substantial part of its properties; or (f) shall suffer any such custodianship,
receivership or trusteeship to continue undischarged for a period of forty-five
(45) calendar days or more;
(6) One or more judgments, decrees, or orders for the payment
of money in excess of Two Million Dollars ($2,000,000) in the aggregate shall be
rendered against Borrower or any Subsidiary, and such judgments, decrees, or
orders shall continue unsatisfied and in effect for a period of thirty (30)
consecutive calendar days without being vacated, discharged, satisfied, or
stayed or bonded pending appeal;
(7) The Pledge Agreement shall at any time after its execution
and delivery and for any reason (other than by the action of the Agent) cease
(a) to create a valid and perfected Lien in and to the property purported to be
subject thereto, of the priority represented therein, or (b) to be in full force
and effect or shall be declared null and void, or the validity or enforceability
thereof shall be contested by Borrower or any Subsidiary, or Borrower or any
Pledged Subsidiary, as applicable, shall deny or disclaim further liability or
obligation thereunder, or Borrower or any Pledged Subsidiary shall fail to
perform any of its obligations thereunder, and solely with respect to
performance of obligations by the Borrower or any Pledged Subsidiary, as
applicable, under the Pledge Agreement, such default remains unremedied for
thirty (30) consecutive calendar days after notice thereof shall have been given
to the Borrower by the Agent (the other events described in this Section 8.01(7)
shall become Events of Default immediately upon occurrence without notice to the
Borrower);
(8) Any of the following events occur or exist with respect to
Borrower or any Subsidiary: (a) any Prohibited Transaction involving any Plan;
(b) any Reportable Event with Respect to any Plan; (c) the filing under Section
4041 of ERISA of a notice of intent to terminate any Plan or the termination of
any Plan; (d) any event or circumstance that might constitute grounds entitling
the PBGC to institute proceedings under Section 4042 of ERISA for the
termination of, or for the appointment of a trustee to administer, any Plan, or
the institution by the PBGC of any such proceedings; (e) complete or partial
withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer Plan or the
reorganization, insolvency or termination of any Multiemployer Plan; and in each
case above, such event or condition, together with all other events or
conditions, if any, subjects the Borrower or any Subsidiary to any tax, penalty,
or other liability to a Plan, a Multiemployer Plan, the PBGC, or otherwise (or
any combination thereof) which in the aggregate exceed or may exceed Two Million
Dollars ($2,000,000);
(9) If James F. Dierberg and/or Mary W. Dierberg (together
with any trust or partnership or other entity over which he or she has voting
control) cease to own in the aggregate at least 51% of the voting shares of
stock of First Banks, Inc.;
(10) Except for those matters disclosed on Schedule 8.01(10),
if any regulatory action or proceeding shall be commenced, or any cease and
desist order shall be entered into, between any state or federal regulatory
authority and Borrower or any Subsidiary which relates in any material adverse
way to the management or operations of Borrower or any Subsidiary;
(11) A default or an event of default exists or is declared
under the terms of (i) any indebtedness aggregating Two Million Dollars
($2,000,000) or more of the Borrower or any Subsidiary, or (ii) any other
material agreements of the Borrower or any Subsidiary that involves a potential
aggregate liability of at least Two Million Dollars ($2,000,000) or which could
be reasonably expected to have a material adverse effect on the financial
condition, operations, properties, or business of the Borrower or any
Subsidiary, and which in any such case continues beyond any applicable notice
and cure period; or
<PAGE>
(12) The Borrower shall fail to have positive Net Income
for any two consecutive fiscal quarters;
then, in any such event Agent shall at the request of the Majority (as
hereinafter defined) declare the Banks' obligations to make Revolving Loans to
be terminated, whereupon the same shall forthwith terminate, and declare the
outstanding Notes, all interest thereon, and all other amounts payable under
this Agreement to be forthwith due and payable in full, whereupon the Notes, all
such interest, and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest, or further notice of any kind,
all of which are hereby expressly waived by the Borrower; provided, that in the
case of any of the Events of Default specified in subsection (5) above, without
any notice to the Borrower or any other act by the Agent or the Banks, the
Banks' obligations to make Revolving Loans shall be automatically terminated and
the Notes, all interest thereon, and all other amounts payable under this
Agreement shall be forthwith due and payable in full, without presentment,
demand, protest, or further notice of any kind, all of which are hereby
expressly waived by the Borrower.
ARTICLE IX.
AUTHORITY AND RESPONSIBILITIES OF AGENT
Section 9.01. Grant of Authority. Each of the Banks hereby
irrevocably appoints and authorizes Mercantile Bank National Association, as the
Agent under this Agreement and each other Loan Document, on its behalf, to take
such action and exercise such powers under this Agreement and each other Loan
Document as are specifically delegated to the Agent by the terms thereof,
together with such other powers as are reasonably incidental thereto. The Agent
shall have no duty to exercise any right or power or remedy hereunder or to take
any affirmative action hereunder unless directed to do so by the Majority (as
hereafter defined). For purposes of this Agreement, the term "Majority" shall
mean the Banks holding at least sixty-six percent (66%) in dollar amount of the
Commitment.
Section 9.02. Action upon Indemnification Instructions. The
Agent shall in all cases be fully justified and protected in acting or
continuing, failing or refusing to take any action hereunder or under any other
Loan Document upon the written instructions signed by the Majority, and such
instructions and any action taken or any failure to act pursuant hereto shall be
binding on all of the Banks, all holders of the Notes and their respective
successors and assigns.
Section 9.03. Reports; Responsibility of the Agent;
Disclaimer. Promptly upon the receipt thereof from the Borrower, Agent shall
photocopy and forward to each Bank each report, statement and other written
information received by Agent pursuant to the terms of Section 5.06 of this
Agreement. Neither the Agent nor any of its respective directors, officers,
agents, employees, attorneys-in-fact or affiliates shall be liable for any
action taken or omitted to be taken under or in connection with this Agreement
or any other Loan Document, except for its or their willful misconduct or gross
negligence. Without limiting the generality of the foregoing, the Agent:
(1) shall not be responsible to any Bank for any statement,
representation or warranty made by any Bank other than Agent or any officer
thereof under or in connection with this Agreement or any other Loan Document or
the transactions contemplated hereby;
(2) shall not be responsible for the due execution,
effectiveness, validity, enforceability or sufficiency of this Agreement, the
Notes, the Pledge Agreement, the Subsidiary Pledge Agreements or any other
document or instrument furnished pursuant hereto or in connection herewith;
(3) shall not be bound to ascertain or inquire as to the
performance or observance of any of the terms, provisions or conditions of this
Agreement or any other Loan Document on the part of the Borrower or any
Subsidiary or as to the business, operation, property, assets or condition
(financial or otherwise) of the Borrower or its Subsidiaries;
<PAGE>
(4) shall be entitled to rely upon any writing, statement,
notice or any telegraph, telex, teletype or telecopy message or any telephone
conversation believed by it to be genuine and correct and, in the case of any
writing, to have been signed or sent by the proper person;
(5) may consult with counsel and independent accountants and
other experts selected by the Agent and shall be fully protected in any action
taken or omitted to be taken in accordance with the advice of such counsel,
independent accountants or other experts;
(6) may employ agents and attorneys-in-fact and shall not be
liable for the default, negligence or misconduct of any such agents and
attorneys-in-fact selected by the Agent with reasonable care;
(7) may treat the payee of a Note as the holder thereof until
it receives written notice of the assignment or transfer thereof signed by such
payee and in form satisfactory to the Agent. Any request, authority or consent
of any person who at such time is the holder of any Note shall be conclusive and
binding on any subsequent holder, transferee or assignee of such Note or Note
issued in exchange therefor; and
(8) shall have no liability or responsibility to Borrower for
any failure on the part of any Bank to comply with an obligation on its part to
be performed under this Agreement.
Section 9.04. Correction of Errors. If the Agent shall pay any
amount to any Bank pursuant hereto in the belief or expectation that a related
payment has been or will be received or collected from the Borrower in
connection with any Loan and such related payment is not actually received or
collected by the Agent then such Bank will promptly, on demand by the Agent,
return such amount to the Agent, together with interest thereon at the Federal
Funds Rate for overnight deposits.
Section 9.05. Expenses; Indemnification. To the extent that
the Borrower fails to do so, each Bank, and each subsequent holder of a Note by
its acceptance thereof, agrees to reimburse the Agent upon demand in proportion
to the unpaid principal amount of its Notes, or if no Notes are at the time
outstanding in proportion to the Commitments, and to indemnify and hold the
Agent and its directors, officers, employees and agents in their respective
capacities harmless in such proportion against any and all losses, liabilities,
damages, demand, judgment, claim, counterclaim, set-off, cost, disbursement or
expenses of any kind whatsoever (including reasonable attorney's fees and
expenses) incurred by or asserted against the Agent or its directors, officers,
employees and agents under or in connection with any of the foregoing arising
out of or in connection with this Agreement, the Notes or any other Loan
Documents, the transactions contemplated hereunder, the enforcement, collection
or realization of any thereof or any action taken or omitted by the Agent,
provided that no Bank shall be liable for any portion of the foregoing incurred
by the Agent as a result of its willful misconduct or gross negligence. The
agreements in this Section 9.05 shall survive the payment of the Loans, or any
other amounts payable hereunder or under the Notes and the termination of the
Commitments.
Section 9.06. Rights as Bank. With respect to its Loans and
the Notes issued to it, the Agent shall have the same rights and powers
hereunder as any Bank and may exercise the same as though it were not the Agent,
and the term "Bank" or "Banks" shall include the Agent in its individual
capacity. The Agent and any of its affiliates may accept deposits from, lend
money to, and generally engage in any kind of banking or trust business with,
the Borrower and any affiliates as if it were not the Agent and may accept fees
and other consideration from the Borrower for services in connection with this
Agreement and otherwise without having to account for the same to the Banks.
Section 9.07. Representation of Each Bank. Each Bank expressly
acknowledges that the Agent has not made any representations or warranties to it
and that no action taken or hereafter taken by the Agent shall be deemed to
<PAGE>
constitute a representation or warranty by the Agent to any other Bank. Each
Bank represents and warrants to the Agent that it has made and will continue to
make its own independent investigation of the condition (financial and
otherwise) and affairs of the Borrower and the Subsidiaries in connection with
this Agreement and the Notes without reliance on the Agent or on any information
or documents prepared by the Agent. Except for notices, reports and other
documents expressly required to be furnished to the Banks by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Bank or any of its respective officers, directors, employees, agents,
attorneys-in-fact or affiliates any other information or documentation
pertaining to Borrower, the Subsidiaries, or their financial affairs.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Agent shall not have any duties or responsibilities, except those expressly set
forth herein, or any fiduciary relationship with any Bank, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or otherwise exist against the Agent.
Section 9.08. Rights to Resign; Appointment of a Successor
Agent. The Agent may resign as such at any time upon thirty (30) calendar days'
notice to the Borrower and the Banks. In such event, the Majority shall appoint
a successor Agent which shall be an incorporated bank or trust company,
provided, however, that if there is no Default or Event of Default at the time
of such appointment and provided further the successor Agent is to be a bank
other than Harris Trust and Savings Bank, Norwest Bank Minnesota, National
Association, American National Bank and Trust Company of Chicago, or The Frost
National Bank, the Agent shall send to Borrower a list of at least three (3)
banks which are satisfactory to the Majority to serve as the successor Agent,
whereupon the Borrower shall have three (3) Business Days in which to select
which bank on the list is to be the successor Agent. In the event of the failure
of the Borrower to select a bank from the list, then the right of selection
granted to the Borrower hereunder shall forever lapse. If no successor shall
have been so appointed and accepted such appointment within thirty (30) days
after the retiring Agent's giving of notice of resignation or the Majority's
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Banks, appoint a successor, which shall be a Bank, or, if no such Bank accepts
such appointment, which shall be a bank or trust company with an office (or an
affiliate with an office) in St. Louis, Missouri, having a combined capital and
surplus of not less than One Hundred Million Dollars ($100,000,000). Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent, and the retiring Agent
shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Article IX shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as Agent.
Section 9.09. Notice of Default. The Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Bank or the Borrower
referring to this Agreement, describing such Default or Event of Default and, in
the case of any Default or Event of Default other than those described in
Section 8.01 of this Agreement, stating that such notice is a "notice of
default." In the event that the Agent receives such a notice of the occurrence
of a Default or Event of Default, the Agent shall give prompt notice thereof to
the Banks. The Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Majority, provided that
unless and until the Agent shall have received such directions, the Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of the Banks.
Section 9.10. Agent Compensation. For its services as Agent
hereunder, Borrower shall pay to Agent on the date of this Agreement and on each
anniversary date thereof, certain compensation as heretofore agreed between
Agent and Borrower.
<PAGE>
ARTICLE X
MISCELLANEOUS
Section 10.01. Capital Adequacy Reimbursement. If after the
date hereof, the Agent shall be advised that or shall determine that with
respect to any of the Banks the adoption or the taking effect of any applicable
law, rule or regulation regarding capital adequacy, or any change therein, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency or compliance by the Banks with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable authority, has or
would have the effect of reducing the rate of return on or increasing the cost
of maintaining all of the Banks' capital as a direct consequence of their
obligations hereunder (taking into consideration the Banks' policies with
respect to capital adequacy) then from time to time, within fifteen (15)
calendar days after demand by Agent, Borrower shall pay to Agent such additional
amount or amounts as will compensate the Banks for such reduction or increase.
In the event any such compensation is demanded, Agent shall provide to Borrower
a certificate showing the calculation of the amount demanded in reasonable
detail. Borrower shall have the burden of proving that the amount as so
calculated is not correct.
Section 10.02. Amendments, Etc. Except as expressly provided
in Article VI hereof, no amendment, modification, termination, or waiver of any
provision of any Loan Document, nor consent to any departure by the Borrower
from any Loan Document, shall in any event be effective unless the same shall be
in writing and signed by the Majority, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no such amendment, modification, termination or
waiver of any provision of any Loan Document shall: (a) postpone the stated
maturity of principal of, or interest on, any of the Loans, or reduce the
principal amount of, the rate of interest on, or the fees in connection with
this Agreement; (b) increase the maximum amount of the Revolving Loan Commitment
or the Revolving Loan Commitment of any Bank; (c) change the percentages
required for action by the Banks under this Section 10.02 or by the Majority
under this Agreement; or (d) release or subordinate any Liens in favor of the
Agent on any of the Collateral, except as otherwise expressly provided herein.
The consent of all of the Banks is required to effect any amendment,
modification or waiver of the provisions of this Agreement and of each Loan
Document which provisions are of a type described in clauses (a), (b), (c) or
(d) of this Section 10.02 or to effect any amendment, modification, or waiver of
this Section 10.02 or Section 10.05. The consent of the Borrower will not be
required to effect any amendment, modification or waiver of the provisions of
Article IX of this Agreement other than Section 9.08.
Section 10.03. Notices, Etc. All notices and other
communications provided for under this Agreement and under the other Loan
Documents shall be in writing (including facsimile communication) and mailed,
sent by facsimile machine or delivered, to the parties at the addresses set
forth on Exhibit K attached or, as to each party, at such other address as shall
be designated by such party in a written notice to the other party complying as
to delivery with the terms of this Section 10.03. All such notices and
communications shall, when mailed, be effective when deposited in the mails
respectively addressed as aforesaid, except that notices to the Agent and the
Banks pursuant to the provisions of Article II shall not be effective until
received by the Agent and such Banks. Any party sending a notice to Borrower
pursuant to Article VIII hereof shall provide a courtesy copy to Borrower's
counsel at the address set forth on Exhibit K attached or at such other
addresses as shall be designated by Borrower's counsel in a written notice to
the Agent and the Banks. Notwithstanding the foregoing agreement to provide a
courtesy copy to Borrower's counsel, such copy shall be a courtesy copy only,
and failure to provide such courtesy copy shall have absolutely no effect or
entitle Borrower to any remedy whatsoever. Any notice duly given to Borrower
shall be effective whether or not the courtesy copy was given to Borrower's
counsel.
Section 10.04. No Waiver; Remedies. No failure on the part of
the Agent or any Bank to exercise, and no delay in exercising, any right, power,
or remedy under any Loan Document shall operate as a waiver thereof; nor shall
<PAGE>
any single or partial exercise of any right under any Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The
remedies provided in the Loan Documents are cumulative and not exclusive of any
remedies provided by law.
Section 10.05. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Borrower and the Banks and their
respective successors and assigns, except that Borrower may not assign or
transfer any of its rights or obligations under any Loan Document to which
Borrower is a party without the prior written consent of the Banks, and a Bank
may not sell, assign or participate all or any portion of its Notes (other than
a sale, assignment, or participation to an affiliate bank or to any of the
Banks) without the prior written consents of Borrower and Agent.
Section 10.06. Costs and Expenses.
(1) The Borrower agrees to pay to Agent on demand, all costs
and expenses, if any, incurred by Agent in connection with the preparation of
the Loan Documents, including, without limitation, the reasonable fees and
expenses of counsel for the Agent (subject to the limitations as heretofore
agreed between Agent and Borrower.) The Borrower agrees to pay to Agent and the
Banks on demand, all costs and expenses, if any, incurred by Agent and the Banks
in connection with any modification of this Agreement or any of the other Loan
Documents that is requested by Borrower or made in response to a Default or
Event of Default, and in connection with the enforcement of any of the Loan
Documents, including, without limitation, the reasonable fees and expenses of
counsel for the Agent (with respect to modifications and enforcement) and the
Banks (with respect to enforcement only) with respect thereto.
(2) If any payment or prepayment of principal with respect to
any Loans accruing interest based on the Eurodollar Rate Loan is made by the
Borrower other than on the last day of the Interest Period for such Loans, and
such payment is permitted pursuant to Section 2.09, or is made as a result of an
acceleration of the maturity of the Notes pursuant to Section 8.01 or for any
other reason, the Borrower shall, upon demand by the Agent on behalf of the
Banks, pay the Agent for the account of the Banks any amounts required to
compensate the Banks for any additional losses, costs or expenses which they may
reasonably incur as a result of such payment, including, without limitation, any
loss (including loss of anticipated profits), costs or expenses incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
the Banks to fund or maintain such Loan.
Section 10.07. Right of Setoff. Upon the occurrence and during
the continuance of any Event of Default, each Bank is hereby authorized at any
time and from time to time, without notice to the Borrower (any such notice
being expressly waived by the Borrower), to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by a Bank to or for the credit or
the account of Borrower against any and all of the obligations of the Borrower
now or hereafter existing under this Agreement, the Notes or any other Loan
Document, irrespective of whether or not the Agent shall have made any demand
under this Agreement or the Notes or such other Loan Document and although such
obligations may be unmatured. Each Bank agrees promptly to notify the Borrower
after any such setoff and application, provided that the failure to give such
notice shall not affect the validity of such setoff and application. The rights
under this Section 10.07 are in addition to other rights and remedies
(including, without limitation, other rights of setoff) which the Banks may
have.
Section 10.08. Sharing of Setoffs. Each Bank agrees that if it
shall, by exercising any right of setoff receive payment of a proportion of the
aggregate amount of principal and interest due with respect to any of the Notes
held by it (or any other obligations of Borrower hereunder to such Bank) which
is greater than the proportion received by any other Bank in respect of the
aggregate amount of principal and interest due with respect to any of the Notes
held by such other Bank (or any other obligations of Borrower hereunder to such
Bank), the Bank receiving such proportionately greater payment shall purchase
such participations in the Notes held by the other Banks (or any other
obligations of Borrower hereunder to the other Banks) and such other adjustments
<PAGE>
shall be made, as may be required so that all such payments of principal and
interest on the Notes (or other obligations of Borrower hereunder to the Banks)
shall be shared by the Banks pro rata, provided that if any such non-pro rata
payment is thereafter recovered or otherwise set aside such purchase of
participations shall be rescinded (without interest).
Section 10.09. Governing Law; Jurisdiction and Venue. This
Agreement and the other Loan Documents shall be governed by, and construed in
accordance with, the laws of the State of Missouri. The Borrower hereby consents
to the jurisdiction of the Circuit Court of the County of St. Louis, Missouri,
and the United States District Court for the Eastern District of Missouri, as
well as to the jurisdiction of all courts from which an appeal may be taken from
any such courts, for the purpose of any suit, action or other proceeding arising
out of any of its obligations arising hereunder or with respect to the
transactions contemplated hereby, and expressly waives any and all objections it
may have as to venue in any such courts and agrees that any proceeding initiated
in another court which relates to such matters may be, at the option of the
Agent, transferred to any of such courts.
Section 10.10. Severability of Provisions. Any provision of
any Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions of such Loan
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.
Section 10.11. Counterparts. This Agreement may be executed in
any number of counterparts and by different parties to this Agreement in
separate counterparts, each which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
Section 10.12. Headings. Article and Section headings
in the Loan Documents are included in such Loan Documents for the convenience of
reference only and shall not constitute a part of the applicable Loan Documents
for any other purpose.
Section 10.13. Oral Agreements. Oral agreements or commitments
to loan money, extend credit or to forbear from enforcing repayment of a debt
including promises to extend or renew such debt are not enforceable. To protect
you (Borrower) and us (creditors) from misunderstanding or disappointment, any
agreements we reach covering such matters are contained in this writing, which
is the complete and exclusive statement of the agreement between us, except as
we may later agree in writing to modify it.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
FIRST BANKS, INC.
By /s/Allen H. Blake
--------------------
Allen H. Blake
Executive Vice President
MERCANTILE BANK NATIONAL
ASSOCIATION, as Agent and as a Bank
By /s/David C. Buettner
-----------------------
Name: David C. Buettner
Title: Vice President
HARRIS TRUST AND SAVINGS BANK
By /s/Patrick A. Horne
----------------------
Name: Patrick A. Horne
Title: Vice President
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO
By /s/ James K. Pridmore
------------------------
Name: James K. Pridmore
Title: First Vice President
THE FROST NATIONAL BANK
By /s/Jerry L. Crutsinger
-------------------------
Name: Jerry L. Crutsinger
Title: Senior Vice President
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
By /s/ Alfonso A. Buscemi
-------------------------
Name: Alfonso A. Buscemi
Title: Vice President
<PAGE>
EXHIBIT A
REVOLVING LOAN COMMITMENT AMOUNTS
<TABLE>
<CAPTION>
Bank Amount of Commitment
<S> <C>
Mercantile Bank National Association $33,500,000
American National Bank and Trust Company of Chicago $22,500,000
Harris Trust and Savings Bank $16,500,000
Norwest Bank Minnesota, National Association $16,500,000
The Frost National Bank $11,000,000
$100,000,000
</TABLE>
<PAGE>
EXHIBIT B
REVOLVING CREDIT NOTE
$______________ St. Louis, Missouri
August 25, 1999
FOR VALUE RECEIVED, the undersigned, First Banks, Inc., a
Missouri corporation ("Borrower"), promises to pay to the order of
_______________ ("Payee") at the offices of the Agent at One Mercantile Center,
7th & Washington, St. Louis, Missouri 63101, the principal sum of ______________
Dollars ($_____________) or such lesser amount as may be outstanding hereunder.
The Borrower promises to pay interest from the date hereof on
the unpaid principal balance outstanding from time to time prior to maturity at
the rates and at the time or times which shall be determined in accordance with
the provisions of that certain Amended and Restated Secured Credit Agreement of
even date herewith, by and between the Borrower, the Payee and other banks (the
"Credit Agreement").
The entire unpaid principal balance hereunder and all accrued
and unpaid interest hereon shall be due and payable on August 24, 2000. Interest
shall be calculated on the basis of the actual number of days elapsed over a
year of 360 days.
If any payment due on this Note is payable on a day which is
not a Business Day (as defined in the Credit Agreement), then such payment will
be made on the next Business Day, the amount of such payment, in such case, to
include all interest accrued to the date of actual payment.
This Note is one of the "Revolving Notes" referred to in the
Credit Agreement, is secured as provided therein, and is entitled to all of the
benefits thereof. In accordance with the terms of the Credit Agreement, the
Agent (as defined thereunder) may declare the unpaid balance of the principal
and accrued interest to be immediately due and payable upon the occurrence of an
Event of Default as defined in the Credit Agreement, whereupon the unpaid
principal and accrued interest then owing hereon shall be and become immediately
due and payable, and interest shall accrue interest at a rate per annum equal to
four percent (4%) in excess of the then otherwise applicable rate of interest as
determined in accordance with Sections 2.03 and 2.04 of the Credit Agreement.
If this Note shall not be paid at maturity, whether upon the
exercise of acceleration or otherwise, and shall be placed in the hands of an
attorney for collection or in connection with insolvency or bankruptcy
proceedings, the Borrower hereby promises to pay the reasonable fees and
expenses of such attorney in addition to the full amount due hereon, whether or
not litigation shall be commenced.
<PAGE>
Demand for payment, protest and notice of dishonor are hereby
waived by all who are or shall become parties to this instrument.
FIRST BANKS, INC.
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
<PAGE>
EXHIBIT C
REVOLVING LOAN NOTICE OF BORROWING
TO: Mercantile Bank National Association, as Agent
FROM: First Banks, Inc.
DATE: _____________,
This Revolving Loan Notice of Borrowing is being submitted
pursuant to the terms of the Amended and Restated Secured Credit Agreement dated
as of August 25, 1999 ("Credit Agreement"), as the same may be thereafter
amended from time to time, among First Banks, Inc. and the banks named therein
(for whom Mercantile Bank National Association is acting as Agent).
(1) The Business Day of the proposed principal advance under the Credit
Agreement is:
(2) The principal advance under the Credit Agreement will be a Revolving
Loan that accrues interest [at the Prime Rate] [based on the Eurodollar
Rate] as provided in the Credit Agreement.
(3) The Interest Period for the Eurodollar Rate Loan requested hereunder
(or the new Interest Period for an expiring Interest Period) is ____
months.
(4) The current aggregate outstanding balance of the Revolving Loans as of
the date hereof is: $
(5) The principal advance being requested is (must be
at least the unused portion of the Revolving Loan Commitment
of $100,000,000 or $1,000,000, whichever is less): $
(6) The use of the proceeds for the Loan requested hereby will be for
___________________
(7) Unused portion of the Revolving Loan Commitment upon advance of funds
requested by this Notice
($100,000,000 - #4 - #5): $
FIRST BANKS, INC.
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
<PAGE>
EXHIBIT D
AMENDED AND RESTATED PLEDGE AGREEMENT
In consideration of and as collateral security for the payment
of any and all present and future indebtedness, obligations and liabilities of
FIRST BANKS, INC., a Missouri corporation ("Pledgor") under or pursuant to that
certain Secured Credit Agreement dated as of August 26, 1998 and amended and
restated as of August 25, 1999 (together with any extensions, renewals,
amendments or modifications thereof, the "Credit Agreement") among Pledgor and
Mercantile Bank National Association ("Mercantile"), Norwest Bank Minnesota,
National Association, Harris Trust and Savings Bank, American National Bank and
Trust Company of Chicago and The Frost National Bank (collectively the "Banks")
and the other "Loan Documents" referred to therein (all such indebtedness,
obligations and liabilities, whether direct or indirect, liquidated or
unliquidated, absolute or contingent, now existing or hereafter arising,
individual, joint, or joint and several being collectively referred to herein as
the "Liabilities"), Pledgor hereby pledges to Mercantile as agent for and for
the ratable benefit of the Banks (as agent for the Banks, Mercantile is referred
to hereinafter as "Pledgee") and grants the Pledgee a continuing security
interest in the capital stock of certain Subsidiaries of Pledgor, as described
on Exhibit A attached hereto and incorporated herein (together with any
additional stock described in Section 4 hereof, collectively, the "Stock"),
together with all substitutions therefor and dividends (as limited herein), new
shares or warrants, liquidating distributions and other rights, and proceeds or
distributions of any nature associated therewith, all of which Pledgor hereby
represents and warrants that it owns (or, for purposes of Section 4, will own)
free of liens or claims of any kind, with fully marketable title thereto, and
has (or will have) the right to so pledge.
Pledgor agrees that said Stock, together with the proceeds
thereof (hereinafter collectively called the "Collateral," such term as used
herein including any underlying security for any note or other evidence of a
monetary obligation pledged hereunder) shall constitute security for any and all
of the Liabilities and may be held, in accordance with the terms and provisions
of this Agreement, for the payment thereof for such periods and applied thereto
at such times and in such order as the Pledgee from time to time may deem
appropriate, whether or not the Liabilities for which the same are held or
applied are in existence at the time of delivery of this Agreement or the
Collateral and whether or not such Liabilities are contingent, unliquidated or
unmatured.
Pledgor further agrees that:
1. Pledgor will keep the Collateral free from all other
security interests, liens or encumbrances except those security interests, liens
or encumbrances now or hereafter granted to the Pledgee. Pledgor will procure,
execute, endorse and deliver all documents which the Pledgee may reasonably
require to protect, enforce or otherwise effectuate the Pledgee's rights in the
Collateral and Pledgor hereby grants to the Pledgee an irrevocable power of
attorney, with full power of substitution, to so act in Pledgor's name if
Pledgor fails to do so.
2. The Pledgee may collect the Collateral or any part thereof
at any time except with respect to dividends, which shall be collected by
Pledgee only in accordance with Paragraph 3 hereof. For such purpose the Pledgee
(after the occurrence of an Event of Default under the Credit Agreement that is
continuing) may take, in its own name or in the name of Pledgor, any action
which Pledgor might take including suit against any obligor on any note or other
monetary obligation constituting part of the Collateral and collection of or
foreclosure upon any underlying security, and such action may be taken without
first foreclosing under this Agreement on the obligations secured by such
underlying security. The Pledgee shall have no obligation, however, to pursue or
preserve remedies against any party primarily or secondarily liable as an
obligor on the Collateral or otherwise to take action which Pledgor might have
taken as regards the Collateral or any underlying security therefor.
3. Pledgee shall have the continuing right to retain all or
any part of the Collateral so long as any Liability remains in existence (or the
<PAGE>
Banks shall have any Commitment under the Credit Agreement), even though the
same may be unliquidated, unmatured or contingent. Upon maturity of any of the
Liabilities or the occurrence of an Event of Default under the Credit Agreement
or hereunder, the Pledgee may cause any of the Collateral to be transferred to
its own name or to the name of its nominee (and this shall be full authority to
any transfer agent, registrar or the like to make such transfer). No such action
shall be deemed a retention of the Collateral in satisfaction of any Liability
unless written notice so stating shall be given to the Pledgor. The Pledgee
shall have the sole right to determine whether any call or option to surrender,
exchange, redeem, convert or otherwise change or alter the form of the
Collateral shall be exercised if the interest of Pledgee is or may be affected
thereby. The Pledgee shall be under no obligation to initiate any such action
unless requested in writing by the Pledgor. All dividends, new shares or
warrants, liquidating distributions and other rights, proceeds and payments or
distributions of any nature received by Pledgor in respect of the Collateral
will be delivered to the Pledgee in kind and the Pledgee may take such action as
is necessary to assure its direct receipt thereof, provided however that, prior
to the occurrence of an Event of Default under the Credit Agreement or
hereunder, Pledgor shall be permitted to retain permitted ordinary dividends and
interest paid in cash and shall retain the right to vote with respect to the
Collateral.
4. In the event that Pledgor, after the date hereof, acquires
all or any portion of the stock of any bank, bank holding company, thrift
institution or savings holding company (i) with the proceeds of a Loan under the
Credit Agreement or (ii) which is or by virtue of such acquisition becomes a
Subsidiary as defined in the Credit Agreement (other than as may be acquired by
First Banks America, Inc.), Pledgor promptly shall (A) grant to Pledgee a
security interest in such stock as additional security for the Liabilities, (B)
deliver to Pledgee the certificates representing such stock, along with
fully-executed stock powers therefor, and (C) take such other action and execute
and deliver such other documents to Pledgee as Pledgee reasonably may require in
connection therewith.
5. The following severally shall be considered events of
default for purposes of this Agreement: (a) if any representation, warranty or
statement of fact made by Pledgor hereunder shall prove to be false or
misleading in any material respect, and such default remains unremedied for
thirty (30) consecutive calendar days after notice thereof shall have been given
to Pledgor by the Pledgee, (b) an Event of Default occurs under the Credit
Agreement, or (c) seizure of any of the Collateral or sale or encumbrance
thereof or the failure to pay any tax thereon when due (except any tax contested
in good faith for which reserves for payment reasonably satisfactory to Pledgee
have been provided by the Pledgor).
6. Upon maturity of any of the Liabilities (by acceleration or
otherwise) or the occurrence of an event of default hereunder, the Pledgee may
resort to the Collateral at such times and in such order as it elects and may
apply the Collateral to the Liabilities in like manner and without regard to
whether application is made to an obligation of the owner of the Collateral so
applied. If any of the Collateral is owned by someone other than Pledgor, the
Pledgee may elect to apply such Collateral in any proportion to obligations of
the owner or owners to the Pledgee without regard to the Liabilities. In
addition, the Pledgee shall have all rights of a secured party under the
Missouri Uniform Commercial Code and shall apply the proceeds of collection,
disposition or other realization on the Collateral to reasonable attorneys' fees
and legal expenses incurred by the Pledgee in connection therewith and in the
collection of any Liabilities and representation of the Pledgee in proceedings
of any nature under the Bankruptcy Code, and thereafter as required by law. If
notice of intended disposition is required by law, such notice, if mailed, shall
be deemed reasonably and properly given if mailed to the address of Pledgor
appearing on the records of the Pledgee at least five (5) Business Days (as
defined in the Credit Agreement) before the time of such disposition. The
Pledgee shall have the right to proceed against the Collateral or not as the
Pledgee may deem proper or as directed by the Majority (as defined in the Credit
Agreement), and the Pledgee shall have the right to collect dividends, interest
and such like profits from the Collateral whether or not it proceeds against the
Collateral. If, in the opinion of the Pledgee, any Collateral cannot be disposed
of in a commercially reasonable manner without registration under applicable
securities laws, Pledgor will take or cause to be taken such action as is
necessary to effect proper registration. If Pledgor shall refuse to take such
action, the Pledgee at its election, but without any obligation to do so, may
take such action as it deems warranted to attempt to effect compliance with any
<PAGE>
applicable law. Any cost, fee or expense incurred by the Pledgee in connection
with such efforts or in enforcing Pledgor's covenants hereunder will be
considered a cost incurred in disposition of the Collateral.
7. The Pledgee's rights hereunder shall continue unimpaired
notwithstanding foreclosure or other disposition of any part of the Collateral,
the availability of additional Collateral, any release of or substitution for
any of the Collateral, any act or omission impairing the Pledgee's lien on the
Collateral or the lien of any underlying security constituting part of the
Collateral, including failure to perfect the same, any extension (including
extension of time for payment), renewal, substitution, alteration, compromise,
settlement, surrender, release or other such agreement or action modifying or
varying the terms of or otherwise affecting any of the Liabilities or any part
of the Collateral, including any act or omission releasing any party primarily
or secondarily liable on the Collateral or on any Liability. No failure by
Pledgee to exercise or delay in exercising any of its rights hereunder shall
constitute a waiver thereof and no single or partial exercise of any right shall
preclude the further exercise thereof or the exercise of any other right. All
rights of the Pledgee hereunder or under any instrument or other agreement
binding on Pledgor are cumulative and not in substitution of any other rights at
law or equity with respect to the Collateral or the collection of the
Liabilities. All such rights may be exercised from time to time. Pledgor hereby
waives notice of any and all actions, forbearances and omissions of any rights
contemplated by this paragraph and consents to be bound thereby as effectively
as if Pledgor had agreed thereto in advance. Upon the termination of the Credit
Agreement and the liquidation and payment of the liabilities in full, this
Agreement shall terminate and the Collateral will be returned forthwith to the
Pledgor.
8. The Pledgee shall have no obligation to act in accordance
with any communication by Pledgor or any other party obligated on the
Liabilities or interested in the Collateral, as endorser, guarantor, surety or
otherwise, concerning the liquidation of all or any part of the Collateral if it
shall be the opinion of the Pledgee in the exercise of its reasonable judgment
that the value of the Collateral upon liquidation may be insufficient to
discharge the Liabilities in full. The Pledgee shall in no event be bound by or
obligated to act upon any such communication unless the same shall be in writing
and shall include explicit instructions as to the disposition requested.
9. Any notice required or permitted hereunder shall be deemed
given if sent in the manner and at the addresses as provided in the Credit
Agreement.
10. To the extent required by law for purposes of providing
qualifying shares of stock to members of the board of directors of the bank
institutions owned by Pledgor, Pledgee agrees to release such number of
qualifying shares from the lien of this Agreement. To effect such release,
Pledgee will deliver the certificate for the shares of stock of the subject
banking institution to the Pledgor on a trust receipt basis and with the
obligation of Pledgor to return the reissued certificate to Pledgee within
forty-eight (48) hours of the delivery to Pledgor. At the request of Pledgee,
Pledgor agrees to cause such members of the board of directors to pledge such
qualifying shares to Pledgee for the benefit of the Banks as additional
collateral for the Liabilities. Any such qualifying shares shall, upon issuance,
contain an appropriate legend describing the restrictions and covenants set
forth in this Agreement.
11. This agreement shall be construed in accordance with and
governed by Missouri law.
12. Pledgor warrants and represents to Pledgee that the shares
of stock of each institution as listed on Exhibit A on the date hereof represent
all of the outstanding shares of stock of each respective institution (except
for directors' qualifying shares and except with respect to First Banks America,
Inc.). Pledgor represents and warrants that the shares of stock of First Banks
America, Inc. as listed on Exhibit A on the date hereof represent approximately
[47.8%] of the outstanding common stock and all of the outstanding shares of
Class B common stock issued by such institution and such shares have ordinary
voting power to elect a majority of the board of directors of First Banks
America, Inc.
<PAGE>
13. Pledgor has heretofore entered into a Pledge Agreement
dated as of August 26, 1998 (the "Original Pledge Agreement"). Upon the
execution and delivery of this Agreement by Borrower the Original Pledge
Agreement shall be amended and restated in its entirety by this Agreement
effective as of the date hereof, with all rights, obligations and security
interests created under or granted pursuant to the Original Pledge Agreement
continuing from the date thereof.
Dated at St. Louis, Missouri, as of this 25th day of August, 1999.
FIRST BANKS, INC.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
<PAGE>
PLEDGE AGREEMENT EXHIBIT A
LIST OF COLLATERAL
10,000 shares of the common stock of First Bank
2,210,581 shares of the Common Stock of First Banks America, Inc.
2,500,000 shares of the Class B Common Stock of First Banks America, Inc.
4,725,396 shares of the common stock of First Bank & Trust
<PAGE>
EXHIBIT E
CERTIFICATE OF COMPLIANCE
This Certificate of Compliance is being submitted on this
______ day of _______________, ______, for the quarter ending on the ______ day
of _______________, ______, pursuant to the terms of the Amended and Restated
Secured Credit Agreement dated as of August 25, 1999 ("Credit Agreement"), as
the same may be thereafter amended from time to time, among Mercantile Bank
National Association ("Mercantile") and the banks named therein (for whom
Mercantile is acting as Agent).
The undersigned officers of First Banks, Inc. jointly and
severally certify to the Banks that as of the date hereof:
A. The representations and warranties contained in Article IV of
the Credit Agreement are correct as of the date hereof;
B. No Default or Event of Default has occurred and is
continuing, [or would result upon the making of the Loan
requested by the accompanying Revolving Loan Notice of
Borrowing;]
C. Attached is an accurate listing of the current Affiliates of
First Banks, Inc.;
D. The compliance with the covenants contained in Article VII of
the Credit Agreement is supported by the following:
7.01. Tier I Leverage Ratio
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(1) (2) Minimum
Tier I Total Ratio of Ratio
Capital Assets (1) to (2) Permitted
First Banks, Inc. (consolidated) 5.0%
</TABLE>
<PAGE>
7.02. Tier I Leverage Ratio of Subsidiaries
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(1) (2) Minimum
Tier I Total Ratio of Ratio
Subsidiary Capital Assets (1) to (2) Permitted
First Bank _______ _______ 5.0%
First Bank of California _______ _______ 5.0%
First Bank Texas, N.A. _______ _______ 5.0%
Redwood Bank _______ _______ 5.0%
First Bank & Trust _______ _______ 5.0%
7.03. Tier I Risk Based Capital Ratio
(2)
Weighted-Risk
Assets and
Off-Balance
(1) Sheet Items Ratio of Minimum Ratio
Tier I (1) to (2) Permitted
Capital
First Bank _______ _______ 6.0%
First Bank of California _______ _______ 6.0%
First Bank Texas, N.A. _______ _______ 6.0%
Redwood Bank _______ _______ 6.0%
First Bank & Trust _______ _______ 6.0%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
7.04. Total Risk Based Capital Ratio
<S> <C> <C> <C> <C>
(2)
Weighted-Risk
Assets and
Off-Balance
Sheet Items Ratio of Minimum Ratio
(1) Total (1) to (2) Permitted
Capital
First Bank _______ _______ 10.0%
First Bank of California _______ _______ 10.0%
First Bank Texas, N.A. _______ _______ 10.0%
Redwood Bank _______ _______ 10.0%
First Bank & Trust _______ _______ 10.0%
7.05 Loan Loss Reserve
(1)
Loan (2) Ratio of Minimum Ratio
Loss Total (1) to (2) Permitted
Reserve Loans
First Banks, Inc. (consolidated) _______ _______ 1.25%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
7.06 Net Income to Average Total Assets
<S> <C> <C> <C>
Average Total Minimum
Net Income less extraordinary and/or nonrecurring Assets (2) Ratio of (1) Ratio
items for the quarter ended: to (2) Permitted
First Banks, Inc. (consolidated)
$
Total Net Income $ (1) 0.70%
First Bank and First Bank & Trust (combined)
$
Total Net Income $ (1) 0.70%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
7.07 Non-Performing Assets
<S> <C> <C> <C> <C>
(1)
Non-Performing (2) Ratio of Maximum Ratio
Assets Primary (1) to (2) Permitted
Capital
First Banks, Inc. (consolidated) _______ _______ 25%
E. Performance Ratio
First Banks, Inc. (consolidated)
Net Income less extraordinary and/or nonrecurring items for (2) Ratio of (2) Applicable
the quarter ended: Funded Debt to (1) Margin
$
Total Net Income $ (1) $
</TABLE>
F. The use of proceeds of the requested Loan will be as indicated
in the accompanying Revolving Loan Notice of Borrowing.
Signed as of the day and year first above written.
FIRST BANKS, INC.
(at least two signatures required)
By: __________________________________
Chief Executive Officer
By: __________________________________
Chief Financial Officer
By: ___________________________________
Vice President - Chief Accounting Officer
By: ___________________________________
Chief Credit Officer
By: ___________________________________
Chief Operating Officer
<PAGE>
EXHIBIT F
FORM OF BORROWER'S COUNSEL OPINION
August 25, 1999
Mercantile Bank National Association Harris Trust and Savings Bank
One Mercantile Center 111 W. Monroe
St. Louis, Missouri 63101 Chicago, Illinois 60603
Norwest Bank Minnesota, National Association American National Bank and Trust
100 East Wisconsin Avenue Company of Chicago
Milwaukee, Wisconsin 63202-4101 33 North LaSalle Street
Chicago, Illinois 60690
The Frost National Bank
100 West Houston Street
San Antonio, Texas 78205
Re: Mercantile Bank National Association - $100,000,000
Secured Revolving Credit Facility for First Banks, Inc.
Ladies and Gentlemen:
We have acted as counsel for First Banks, Inc., a Missouri
corporation, (the "Borrower") in connection with their negotiation and execution
of the Loan Documents as defined herein for the limited purpose of providing
this opinion. This opinion is being furnished to you as required by Section
3.01(6) of the Amended and Restated Secured Credit Agreement executed on this
date by the Borrower and Mercantile Bank National Association ("Mercantile"),
Norwest Bank Minnesota, National Association, Harris Trust and Savings Bank,
American National Bank and Trust Company of Chicago, and The Frost National Bank
(collectively, the "Banks") and Mercantile as "Agent" for the Banks. Capitalized
terms not otherwise defined herein shall have the meaning ascribed to them in
that certain Amended and Restated Secured Credit Agreement dated as of August
25, 1999 among the Borrower and the Banks (the "Credit Agreement").
In connection with the preparation of this opinion, we have
reviewed the following instruments and documents executed by the respective
parties thereto (the "Loan Documents"):
1. Each of the Notes, dated August 25, 1999, in the
aggregate maximum principal face amount of
$100,000,000 executed by the Borrower as maker and
payable to the order of the respective Banks as set
forth in Section 2.05 of the Credit Agreement;
2. The Credit Agreement;
3. Amended and Restated Pledge Agreement dated August
25, 1999 executed by the Borrower, as Pledgor, to the
Agent, as Pledgee (the "Borrower Pledge Agreement");
<PAGE>
4. The certificates representing the shares of capital
stock of the Pledged Subsidiaries that are pledged
under the Borrower Pledge Agreement; and
5. Irrevocable Stock Powers executed by Borrower.
In our capacity as counsel for the Borrower, we have examined
originals or copies of such other documents, records and other instruments as we
have deemed necessary or appropriate to render this opinion, including, without
limitation, the following:
A. Articles of Incorporation and Bylaws of the Borrower;
and
B. Resolutions adopted by the Boards of Directors of the
Borrower.
For purposes of this opinion, we have assumed that (1) all
documents submitted to us are authentic, (2) all documents submitted to us as
certified or photostatic copies conform to the originals, (3) all signatures on
documents are genuine, (4) all natural persons whose signatures appear on
documents had legal capacity, (5) all certificates from public officials are
accurate as of the date of this letter, (6) all records of the Borrower made
available to us are accurate and complete, (7) the Agent and the Banks have the
power and authority to execute, deliver, and perform all agreements and
documents executed by them, (8) the Agent and the Banks have duly and validly
executed and delivered such agreements and documents, and (9) such agreements
and documents are legally valid, binding and enforceable against the Agent and
the Banks.
In those instances in which our opinion is rendered "to our
knowledge," it means that we have relied on the representations by the Borrower
in the Loan Documents to establish facts relevant to our opinion and that during
the course of our representation no information has come to the attention of
those attorneys within our firm who have performed legal services in connection
with the representation described in this letter that would give us actual
knowledge of the inaccuracy of such representations. We have not conducted an
independent investigation to determine the accuracy of any representation made
by the Borrower or any assumption that we have made herein, and no inference as
to our knowledge should be drawn from our representation of the Borrower as
described in this letter.
Based upon the foregoing, and subject to the qualifications
set forth herein, our opinion is that:
1. The Borrower is a duly organized and validly existing
corporation in good standing under the laws of the
State of Missouri and has the corporate power and
authority to execute, deliver and perform the Loan
Documents and to own its properties and carry on its
business as now being conducted, and is a duly
registered bank holding company in good standing
under the Bank Holding Company Act of 1956, as
amended.
2. The Loan Documents executed by the Borrower have been
duly authorized, executed and delivered by the
Borrower and constitute the legal, valid and binding
obligations of the Borrower enforceable in accordance
with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors'
rights generally, and subject to general principles
of equity (including the exercise of judicial
discretion in accordance with such principles),
regardless of whether such enforceability is
considered in a proceeding at law or in equity.
3. No consent or approval of or registration with any
federal, state or local government or regulatory
authority is required in connection with the
<PAGE>
execution and delivery of the Loan Documents by the
Borrower or the making of any of the Loans
thereunder. Neither (i) the execution and
delivery by the Borrower of the Loan Documents,
(ii) consummation of the transactions contemplated
thereby, nor (iii) compliance by the Borrower with
any of the provisions thereof will conflict with
or result in a violation or breach of, or constitute
a default under, (a) the Borrower's Articles of
Incorporation or Bylaws, or (b) to our knowledge,
any rule, regulation, order, writ, judgment or
decree of any court or government agency or
instrumentality or any agreement or instrument to
which the Borrower is a party or with respect to
which the Borrower is bound and which is reasonably
likely to have a material adverse effect on the
Borrower's ability to perform its obligations under
the Loan Documents.
4. To our knowledge, there are no actions, suits or
proceedings pending or threatened that affect the
Borrower, before or by any federal, state, local or
other governmental department, commission, board,
bureau, agency or authority which, if determined
adversely to the Borrower, would materially and
adversely affect the Borrower's ability to perform
under the Loan Documents.
5. Assuming that the shares of stock described in the
Borrower Pledge Agreement have been delivered to the
agent in the State of Missouri together with an
executed stock power for each certificate therefor,
the Agent, for the benefit of the Banks, has a
perfected security interest in such stock.
The opinions expressed herein are limited to the applicable
laws of the United States and the State of Missouri and no opinion is expressed
with respect to the laws of any other jurisdiction or state or the effect of any
such laws on the matters dealt with herein. Anything herein to the contrary
notwithstanding, we express no opinion on matters governed by federal, state and
local laws, rules, regulations, ordinances or restrictive covenants relating to:
(1) occupational health and safety, environmental siting, impact and discharge,
or storage and discharge of flammable or hazardous materials or solid or toxic
waste; (2) rights to set off or off set; (3) the effect of provisions agreeing
to the jurisdiction of a court (or waiving objections to jurisdiction) or
agreeing to venue (or waiving objections to venue); (4) the legality or
enforceability of exculpation clauses; (5) the enforceability of any
choice-of-law clause or provision requiring the application of the laws of a
particular jurisdiction; (6) any federal or state tax consequences arising in
connection with any of the transactions contemplated by the Loan Documents; (7)
patent, copyright, service mark, trade name or trademark rights; or (8)
antitrust matters.
This opinion is provided solely for the purpose of complying
with the requirements of the Loan Documents and, without our prior written
consent, may not be relied upon by anyone other than the Banks and their
respective successors and assigns.
Our opinion is based upon the facts and the law as existing and in effect on
the date hereof, and we assume no obligation to revise, supplement or update
this opinion in any respect at any time subsequent to the date hereof.
Very truly yours,
Lewis, Rice & Fingersh
<PAGE>
EXHIBIT G
PLEDGED SUBSIDIARIES
First Bank
First Banks America, Inc.
First Bank & Trust
<PAGE>
EXHIBIT H
LIST OF AFFILIATES
Hermannhof, Inc.
Tidal Insurance Limited
First Securities America, Inc.
First Services, L.P.
Southside Bancshares, Inc.
Investors of America, Limited Partnership
First Brokerage, Inc.
First Associate Title, Inc.
First Brokerage America LLC
First Title Guaranty LLC
First Banc Mortgage LLC
<PAGE>
EXHIBIT I
IDENTIFICATION
OF
FINANCIAL STATEMENTS
(1) Audited consolidated financial statements for First Banks, Inc.and
subsidiaries for the fiscal years ending December 1997
and 1998.
(2) Audited consolidated financial statements for First Banks America,
Inc. and subsidiaries for the fiscal years ending December 1997 and
1998.
(3) Unaudited consolidated financial statements for First Banks, Inc. and
subsidiaries, both prepared by Borrower, for the period ending June 30,
1999.
(4) Unaudited consolidated financial statements for First Banks America,
Inc. and subsidiaries, both prepared by Borrower, for the period ending
June 30, 1999.
<PAGE>
EXHIBIT J
OWNERSHIP OF SUBSIDIARIES
First Bank
10,000 Shares Owned/Controlled By First Banks, Inc. (100%)
First Land Trustee Corp.
50 Common Shares Owned/Controlled by First Bank (100%)
FB Commercial Finance, Inc.
100 Common Shares Owned/Controlled by First Bank (100%)
First Banks America, Inc.
2,210,581 Common Shares Owned/Controlled by First Banks, Inc. (38.73% of total
voting) 2,500,000 Class B Shares Owned/Controlled by First Banks, Inc. (43.80%
of total voting)
First Bank of California
1,000 Common Shares Owned/Controlled by First Banks America, Inc.(100%)
First Bank Texas, N.A.
2,049,000 Common Shares Owned/Controlled by Sundowner Corporation
(100%)
Redwood Bancorp
25,000 Shares Owned/Controlled by First Banks America, Inc. (100%)
Redwood Bank
465,000 Shares Owned/Controlled by Redwood Bancorp (100%)
Redwood National Mortgage Co.
30,000 Shares Owned/Controlled by Redwood Bancorp (100%)
Eucalyptus Financial Corp.
1,000 Shares Owned/Controlled by Redwood Bancorp (100%)
First Bank & Trust
4,725,396 Shares Owned/Controlled by First Banks, Inc. (100%)
<PAGE>
EXHIBIT K
LIST OF ADDRESSES
If to the Borrower: First Banks, Inc.
11901 Olive Blvd.
Creve Coeur, MO 63141
Attention: Allen H. Blake
Chief Financial Officer
with a copy to (for notice requirements under Article VIII hereof only):
Lewis, Rice & Fingersh
500 North Broadway
St. Louis, Missouri 63102
Attention: Thomas C. Erb, Esq.
If to Mercantile Bank
National Association: One Mercantile Center
Tram 11-5
7th & Washington
St. Louis, MO 63101
Attention: David C. Buettner
If to Harris Trust
and Savings Bank: 111 W. Monroe
Chicago, Illinois 60603
Attention: Patrick Horne
If to American National
Bank and Trust Company
of Chicago: 120 South LaSalle St.
Chicago, Illinois 60603-3400
Attention: Dave DeWitt
If to The Frost National
Bank: 2001 Bryan Street, Suite 525
Dallas, Texas 75201
Attention: Jerry L. Crutsinger, Vice President
Correspondent Banking
If to Norwest Bank
Minnesota, National
Association: 100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-4101
Attention: Alfonso Buscemi
<PAGE>
SCHEDULE 4.05
OTHER AGREEMENTS
NONE
<PAGE>
SCHEDULE 4.06
LITIGATION
1. Reliance National Indemnity Re: Wildwood Estates. First Bank of
California issued two set-aside letters to Planet Insurance (whose successor is
Reliance National Indemnity) in connection with the construction of a
development known as Wildwood Estates by a borrower. Planet subsequently issued
two surety bonds to the county where the development is located which secured
the anticipated cost of certain of the improvements. The borrower/developer
subsequently defaulted. The county waived the requirements of the first
set-aside letter, but not the second. Consequently, the bank has exposure under
the second set-aside letter and the surety bond issued against it. The maximum
amount of that exposure is $1,122,000; the bank and the county have not agreed
upon the amount which is due and payable under the second surety bond. Counsel
is unable to express an opinion on the likelihood that a claim on the second
letter will ultimately be made, and if it were, on the probable outcome of such
a claim. The bank established an accrual in the amount of $1,122,000 in 1996 (GL
#27803). On August 23, 1999 the parties reached a settlement which will require
the bank to pay approximately $765,000 plus expenses. The settlement documents
are in process and final resolution is expected by September 30, 1999. The
current amount of the accrual exceeds the settlement amount.
2. Bittner vs. Bashore. Fifty-seven investors in real estate projects
filed suit in November, 1996, against Huntington National Bank, a bank acquired
by First Bank and Trust, to recover their investments, which were lost when the
projects failed. Huntington National Bank's former Chairman, Charles Hermanson,
and President, Kirk Bashore, were also named as defendants. Huntington National
Bank had loaned funds to a sponsor of the real estate investment (one Tobin),
but did not provide loans related to the real estate projects in which the
plaintiffs invested. The total claim is $28 million, but it appears from
discovery to date that the actual amount of the plaintiff's investments which
were subject to loss was significantly less. Another suit was filed against
Tobin by forty different investors in January, 1998. In April, 1998, First Bank
and Trust was served as an added defendant in this action as well. The Bank's
motions for summary adjudication of issues have been granted. As a result of the
success of those motions, the remaining claims against the Bank are for aiding
and abetting the violation of certain California securities laws and fraud.
Discovery is continuing. A third motion for summary judgment was filed in June
1999 for dismissal of the remaining fraud claim, but has not yet been ruled
upon. Mediation with the plaintiffs is in the process of being scheduled before
a mediator in San Francisco and it is anticipated this mediation will occur on
September 3, 1999. If the case is not resolved by summary judgment, mediation or
otherwise, trial is scheduled for September 27, 1999. The potential outcome of
these cases cannot yet be predicted.
3. Larry Rothman vs. First Bank & Trust. This suit was filed by Mr.
Rothman of BTAW, Inc. for general damages allegedly caused by the bank bringing
proceedings to foreclose a mortgage securing indebtedness of BTAW, Inc. Mr.
Rothman, who is an attorney, is alleging damages of $15 million. The Bank
believes that its loss potential is significantly less than $15 million. On
October 27, 1998, the Superior Court granted the motion of First Bank & Trust,
Donald Housser, Vice President -- Special Assets, and Arthur Jarvis Cohen,
Attorney for First Bank and Trust for summary judgment. Larry Rothman has filed
a notice of appeal, which attorney Cohen believes has little merit.
4. Thomas Barnes, et al vs. The Estate of William J. Kaufman. The
owners of 31 homes in Green Jade Estates Subdivision in Jefferson County,
Missouri, filed suit against First Bank and others in May, 1997. The Green Jade
Estates Subdivision was plagued by soil movement that eventually damaged many
homes. The Sheahan Financial Company, predecessor to First Bank, originated 14
of the mortgages on the homes owned by plaintiffs. An additional 4 loans were
originated by other mortgagees and purchased by First Bank. The petition alleges
that the bank engaged in a conspiracy to defraud the plaintiffs by aiding the
other defendants and by providing financing to plaintiffs when the bank knew of
soil problems. The petition seeks $75,000 damages per home, $100,000 per
plaintiff and unspecified punitive damages. A bank motion to dismiss was
granted, but plaintiffs were given leave to file an amended petition within 90
days, which they did. In May, 1998, the bank responded to the amended petition
by filing another motion to dismiss. The motion to dismiss was granted by the
<PAGE>
trial court. The plaintiffs may have the opportunity to appeal this decision at
the conclusion of the trial involving the other named defendants. A petition in
a similar case by other homeowners in the same subdivision was dismissed in 1995
and the dismissal was upheld on appeal.
5. First Banks, Inc. was served on June 1, 1998 with a complaint filed
by Thomas Steiner. In early 1995, First Banks, Inc. purchased all of the
outstanding shares of stock of Irvine City Financial, including Mr. Steiner's.
First Banks, Inc. set off indebtedness of Mr. Steiner to Irvine City Financial
against the amount owed to Mr. Steiner for the stock. That setoff is the subject
of the suit. The total amount of the plaintiff's claims is about $900,000. It is
too early to predict the outcome. The setoff amount was about $90,000. The case
is presently in discovery and the court has not established a trial date. To
date, no significant deadlines have been established with respect to this case.
<PAGE>
SCHEDULE 4.08
ERISA - PLAN TERMINATIONS
1. As of December 31, 1993 the First Banks, Inc. Money Purchase Pension
Plan was terminated and replaced effective April 1, 1994 with the
First Banks, Inc. ss.401K Profit Sharing Plan.
2. Effective March 31, 1994, Heritage National Bank was merged into First
Bank (Creve Coeur, Missouri). Heritage National Bank maintained an
Employee Stock Ownership Plan which, incidental to the First
Banks/Heritage National Bank merger, has been terminated.
3. The First Federal Savings Bank of Proviso Township was merged into
First Bank A Savings Bank effective January 13, 1994. First Federal
Savings Bank of Proviso Township maintained a defined benefit plan
which is in the process of being terminated.
4. First Banks, Inc., acquired a majority interest in BancTEXAS Group Inc.
effective August 31, 1994. BancTEXAS maintains two types of retirement
benefit plans, a defined benefit plan, which has been frozen, and a
401K Profit Sharing Plan, which mirrors the First Banks, Inc. 401K
Profit Sharing Plan.
5. River Valley Holdings, Inc., was purchased by First Bank FSB effective
January 3, 1995. River Valley Holdings, Inc. maintained a 401K Profit
Sharing Plan which has been merged into the First Banks, Inc. 401K
Profit Sharing Plan effective July 1, 1995.
6. CCB Bancorp, Inc. was purchased by First Banks, Inc. effective
March 15, 1995. CCB Bancorp, Inc. maintained a 401K Retirement Plan
which has been merged into the First Banks, Inc. 401K Profit Sharing
Plan effective July 1, 1995.
7. La Cumbre Savings Bank was purchased by CCB Bancorp, Inc. (which was
purchased by First Banks, Inc. on March 15, 1995) effective
September 1, 1995. La Cumbre Savings Bank maintained a 401(k) Profit
Sharing Plan which merged into the First Banks, Inc. 401(k) Profit
Sharing Plan effective February 1996.
8. Queen City Bank was purchased by First Banks, Inc. effective
July 21, 1995. Queen City Bank maintained a 401(k) Profit Sharing
Plan which merged into the First Banks, Inc. 401(k) Profit Sharing
Plan effective June 1996.
9. First Banks, Inc. acquired a majority interest in First Commercial Bank
effective August 23, 1995, First Commercial Bank maintains two types of
retirement benefit plans, a ESOP (Employee Stock Ownership Plan) and a
401(k) Profit Sharing Plan, which now mirrors the First Banks, Inc.
401(k) Profit Sharing Plan effective July 1, 1996.
<PAGE>
SCHEDULE 8.01(10)
REGULATORY ACTIONS
None.
<PAGE>
Exhibit 10.12
FIRST BANKS, INC.
MANAGEMENT SERVICES AGREEMENT
This Management Services Agreement (the Agreement) is made this 1st day of
June 1999, by and between Redwood Bank, a California banking corporation (the
Bank) and First Banks, Inc., a Missouri corporation (First Banks).
WHEREAS First Banks is a multi-bank and thrift holding company which
provides certain services to its subsidiary financial institutions on a
centralized basis and is willing to provide such services to Bank, and
WHEREAS the Bank is currently operating as a commercial and retail bank in
the State of California, and desires to avail itself of such centralized
services in connection with its operations.
Services to be performed:
First Banks shall undertake to perform certain services for the benefit of
the Bank, and any affiliates thereof, including, but not limited to those
enumerated below. These services may be provided by employees of First Banks,
any subsidiary of First Banks, or external sources retained by First Banks on
behalf of the Bank and/or its affiliates. First Banks will prepare a monthly
statement to the Bank indicating the nature of the services performed and the
fees charged for such services.
Services performed by employees of First Banks will be billed to the Bank
on the basis of actual hours required to perform the services using standard
hourly rates established for each type of service. The hourly rates in effect as
of the date of this Agreement are listed in Attachment A. These rates will be
reviewed periodically and adjusted as necessary to reflect First Banks current
costs in delivering the services, but may only be adjusted once during any
calendar year. The Bank will be provided at least ninety (90) days notice prior
to any change in the hourly rates to be used The Bank may terminate this
Agreement at any time if any rate increase is deemed excessive by the Banks
Board of Directors.
Services performed by employees of the Bank for the benefit of other
subsidiaries of First Banks, or services performed by other subsidiaries of
First Banks for the benefit of the Bank will be charged to the subsidiary
receiving the service based on actual hours required to perform the services
suing the same standard hourly rates as used for employees of First Banks. The
subsidiary management fees statement for the amount charged for the services.
Services provided by external sources will be charged to the Bank at First
Banks cost. Services which benefit more than one subsidiary will be allocated
between them using the basis deemed most appropriate for the particular service
and the charge for that service.
Included in the services to be provided will be the following:
1. Lending:
a. Loan Review
b. Loan administration and support
c. Loan and business development
d. Loan servicing
e. Loan collection and workout
2. Human resources:
a. Human resources administration
b. Records and compliance
c. Employee recruiting and training
e. Other human resources activities
<PAGE>
3. Corporate audit:
a. Assisting external auditors
b. Internal auditing
c. Compliance and Community Reinvestment Act assistance
d. Assisting examinations and replies to reports
e. Other audit activities
4. General Accounting
a. Regulatory examinations and compliance
b. Income tax returns and tax audits
c. Estimated tax payments and tax accruals
d. State and local taxes
e. Fixed asset records and accounting
f. General accounting assistance
g. Regulatory reporting
h. SEC reporting and compliance
I. Systems and procedures
j. Other accounting activities
5. Asset/liability management
6. Investments
7. Planning and budgets
8. Branch administration activities
9. Purchasing and accounts payable
10. Preparation for and participation in meetings
In addition, First Banks will contract for certain services to be provided
to the Bank and its affiliates, which may be charged through management fees, or
through separate direct charges to the Bank. These will include advertising and
promotional expenses, property and liability insurance, certain external legal,
audit and tax assistance, and employee benefit programs. Generally, charges for
insurance and employee benefits will be made through separate statements outside
the management fee structure. Charges for other items will usually be included
in management fee statements.
Travel expenses associated with performance of management services will be
changed to the Bank based on the expense reports received from the employees.
Travel time, or other non-productive time, will not be charged to the Bank.
Activities not includable in management fees:
1. Accounting
a. Parent company accounting, including:
(1) General ledger (2) Accounts payable and bill paying (3)
Consolidations and financial reporting (4) Regulatory reports
and examinations
(5) SEC accounting and reporting
b. Accounting, taxes and other services performed for entities not
paying management fees, such as second tier holding companies,
FirstServ, Inc. and inactive corporations.
<PAGE>
2. Mergers and acquisitions:
a. Negotiations and contracts
b. Regulatory matters and applications
c. Due diligence and analysis
d. Operations and consolidations
e. Human resources and other activities
3. Financing
a. Working with current or prospective lenders
b. Loan agreements and contracts
c. Due diligence and rating agencies
Expenses not includable in management fees:
Included in First Banks expenses are various items which are not to be
included in the base for calculating management fees. Among these are the
following:
1. Interest expense
2. Amortization of deferred inter-company gains and losses
3. Land leases for possible future bank sites
4. Legal, accounting and advertising expenses in excess of amounts charged
to the Bank and other subsidiaries on a specific basis.
5. Contributions
6. Amortization of purchase adjustments and excess cost
7. Provision for income taxes
First Banks may identify other accounts or specific expense items which are
deemed inappropriate to include in the base for management fees. These may be
excluded at the discretion of First Banks as identified.
Billing of fees:
First Banks shall prepare and submit to the Bank a monthly bill for
services rendered in sufficient detail to provide the Bank a basis for
evaluating the cost/benefit of items charged. It shall be the responsibility of
First Banks to maintain time reports, worksheets and summaries supporting the
amounts billed. These will be furnished to the Bank, examiners or auditors upon
request.
Amounts billed will be payable to First Banks by either a direct charge to
the Banks account at First Bank (Missouri), or, if appropriate, a credit to that
account. Management fee statements will be provided to the Bank at least five
working days prior to payment.
General:
The Bank shall make available to First Banks all records, facilities and
personnel necessary to enable First Banks to perform the services required.
First Banks shall furnish the necessary forms and instructions to the Banks
personnel. The Bank shall furnish all data, documents or input material as
required, which material shall be returned to the Bank when the services are
completed.
First Banks shall give the same care to Banks work as it gives to its own
work. However, First Banks does not warrant the work free of error, and shall be
liable only for First Banks own gross negligence of willful misconduct.
<PAGE>
The services performed under this Agreement by First Banks will be subject
to the regulations and examination of the Federal or state agencies having
supervisory jurisdiction over the Bank and its affiliates and First Banks to the
same extent as if such services were being performed solely by Bank on its own
premises. The provisions of this Agreement are subject to modification,
regulation or ruling of any governmental agency having jurisdiction over the
Bank or its affiliates or First Banks. Otherwise this Agreement shall be
modifiable only upon written agreement of the parties thereto.
First Banks will hold in confidence all information relating to the Banks
assets, liabilities, business or affairs, or those of any of its customers,
which is received by First Banks in the course of rendering the services
hereunder. It will make the same effort to safeguard such information as it does
to protect its own proprietary data.
The term of the Agreement is for one year, but it shall be
automatically renewable for additional periods of one year each unless the Bank
shall give ninety (90) days written notice of termination prior to the end of
any term.
This Agreement shall be binding upon the parties and their successors or
assigns, and may only be amended by a writing executed by both parties.
IN WITNESS WHEREOF, the parties hereto have, by their duly authorized
officers executed this Agreement this 1st day of June, 1999.
REDWOOD BANK FIRST BANKS, INC.
By: /s/ Anthony S. Dee By: /s/ Allen H. Blake
------------------ ------------------
Title: President Title: President and Chief Operating Officer
<PAGE>
FIRST BANKS, INC.
MANAGEMENT FEE BILLING RATES
JANUARY 1, 1999
Services Provided Rate Per Hour
Lending:
Loan Review $50.00
Administration/Support 40.00
Business Development 60.00
Loan Service 40.00
Loan Collection/Workout 55.00
Other 40.00
Human Resources:
Administration 45.00
Records/Compliance 40.00
Recruiting/Training 40.00
Payroll/Benefits 35.00
Other 40.00
Internal Audit:
Assisting External Auditors 50.00
Internal Audit 45.00
Compliance and CRA 40.00
Examinations/Reports 45.00
Other 40.00
Accounting:
PCO/Consolidated 50.00
Examinations/Compliance 50.00
Tax Returns 66.00
Estimated Tax/Accruals 50.00
State Taxes 60.00
Fixed Assets/Other 40.00
General Accounting Assistance 45.00
` Regulatory Reports 50.00
SEC Reporting 65.00
Systems/Procedures 50.00
Mergers and Acquisitions:
Negotiations/Contracts 75.00
Regulations/Applications 50.00
Due Diligence 50.00
Operations/Human Resources 50.00
Asset/Liability Management 60.00
Investments 50.00
Planning/Budgets 50.00
Branch Administration:
Marketing/Business Development 45.00
Branch Operations 45.00
Customer Service/Training 45.00
Other 45.00
Purchasing/Accounts Payable 50.00
Meetings 65.00
Other 45.00
<PAGE>
Exhibit 10.13
FIRST BANKS, INC.
MANAGEMENT SERVICES AGREEMENT
This Management Services Agreement (the Agreement) is made this 1st day of
September 1999, by and between Century Bank, a California banking corporation
(the Bank) and First Banks, Inc., a Missouri corporation (First Banks).
WHEREAS First Banks is a multi-bank and thrift holding company which
provides certain services to its subsidiary financial institutions on a
centralized basis and is willing to provide such services to Bank, and
WHEREAS the Bank is currently operating as a commercial and retail bank in
the State of California, and desires to avail itself of such centralized
services in connection with its operations.
Services to be performed:
First Banks shall undertake to perform certain services for the benefit of
the Bank, and any affiliates thereof, including, but not limited to those
enumerated below. These services may be provided by employees of First Banks,
any subsidiary of First Banks, or external sources retained by First Banks on
behalf of the Bank and/or its affiliates. first Banks will prepare a monthly
statement to the Bank indicating the nature of the services performed and the
fees charged for such services.
Services performed by employees of First Banks will be billed to the Bank
on the basis of actual hours required to perform the services using standard
hourly rates established for each type of service. The hourly rates in effect as
of the date of this Agreement are listed in Attachment A. These rates will be
reviewed periodically and adjusted as necessary to reflect First Banks current
costs in delivering the services, but may only be adjusted once during any
calendar year. The Bank will be provided at least ninety (90) days notice prior
to any change in the hourly rates to be used The Bank may terminate this
Agreement at any time if any rate increase is deemed excessive by the Banks
Board of Directors.
Services performed by employees of the Bank for the benefit of other
subsidiaries of First Banks, or services performed by other subsidiaries of
First Banks for the benefit of the Bank will be charged to the subsidiary
receiving the service based on actual hours required to perform the services
suing the same standard hourly rates as used for employees of First Banks. The
subsidiary management fees statement for the amount charged for the services.
Services provided by external sources will be charged to the Bank at First
Banks cost. Services which benefit more than one subsidiary will be allocated
between them using the basis deemed most appropriate for the particular service
and the charge for that service.
Included in the services to be provided will be the following:
1. Lending:
a. Loan Review
b. Loan administration and support
c. Loan and business development
d. Loan servicing
e. Loan collection and workout
2. Human resources:
a. Human resources administration
b. Records and compliance
c. Employee recruiting and training
e. Other human resources activities
<PAGE>
3. Corporate audit:
a. Assisting external auditors
b. Internal auditing
c. compliance and Community Reinvestment Act assistance
d. Assisting examinations and replies to reports
e. Other audit activities
4. General Accounting
a. Regulatory examinations and compliance
b. Income tax returns and tax audits
c. Estimated tax payments and tax accruals
d. State and local taxes
e. Fixed asset records and accounting
f. General accounting assistance
g. Regulatory reporting
h. SEC reporting and compliance
I. Systems and procedures
j. Other accounting activities
5. Asset/liability management
6. Investments
7. Planning and budgets
8. Branch administration activities
9. Purchasing and accounts payable
10. Preparation for and participation in meetings
In addition, First Banks will contract for certain services to be provided
to the Bank and its affiliates, which may be charged through management fees, or
through separate direct charges to the Bank. These will include advertising and
promotional expenses, property and liability insurance, certain external legal,
audit and tax assistance, and employee benefit programs. Generally, charges for
insurance and employee benefits will be made through separate statements outside
the management fee structure. Charges for other items will usually be included
in management fee statements.
Travel expenses associated with performance of management services will be
changed to the Bank based on the expense reports received from the employees.
Travel time, or other non-productive time, will not be charged to the Bank.
Activities not includable in management fees:
1. Accounting
a. Parent company accounting, including:
(1) General ledger (2) Accounts payable and bill paying (3)
Consolidations and financial reporting (4) Regulatory reports
and examinations
(5) SEC accounting and reporting
b. Accounting, taxes and other services performed for entities not
paying management fees, such as second tier holding companies,
FirstServ, Inc. and inactive corporations.
<PAGE>
2. Mergers and acquisitions:
a. Negotiations and contracts
b. Regulatory matters and applications
c. Due diligence and analysis
d. Operations and consolidations
e. Human resources and other activities
3. Financing
a. Working with current or prospective lenders
b. Loan agreements and contracts
c. Due diligence and rating agencies
Expenses not includable in management fees:
Included in First Banks expenses are various items which are not to be
included in the base for calculating management fees. Among these are the
following:
1. Interest expense
2. Amortization of deferred inter-company gains and losses
3. Land leases for possible future bank sites
4. Legal, accounting and advertising expenses in excess of amounts charged
to the Bank and other subsidiaries on a specific basis.
5. Contributions
6. Amortization of purchase adjustments and excess cost
7. Provision for income taxes
First Banks may identify other accounts or specific expense items which are
deemed inappropriate to include in the base for management fees. These may be
excluded at the discretion of First Banks as identified.
Billing of fees:
First Banks shall prepare and submit to the Bank a monthly bill for
services rendered in sufficient detail to provide the Bank a basis for
evaluating the cost/benefit of items charged. It shall be the responsibility of
First Banks to maintain time reports, worksheets and summaries supporting the
amounts billed. These will be furnished to the Bank, examiners or auditors upon
request.
Amounts billed will be payable to First Banks by either a direct charge to
the Banks account at First Bank (Missouri), or, if appropriate, a credit to that
account. Management fee statements will be provided to the Bank at least five
working days prior to payment.
General:
The Bank shall make available to First Banks all records, facilities and
personnel necessary to enable First Banks to perform the services required.
First Banks shall furnish the necessary forms and instructions to the Banks
personnel. The Bank shall furnish all data, documents or input material as
required, which material shall be returned to the Bank when the services are
completed.
First Banks shall give the same care to Banks work as it gives to its own
work. However, First Banks does not warrant the work free of error, and shall be
liable only for First Banks own gross negligence of willful misconduct.
<PAGE>
The services performed under this Agreement by First Banks will be subject
to the regulations and examination of the Federal or state agencies having
supervisory jurisdiction over the Bank and its affiliates and First Banks to the
same extent as if such services were being performed solely by Bank on its own
premises. The provisions of this Agreement are subject to modification,
regulation or ruling of any governmental agency having jurisdiction over the
Bank or its affiliates or First Banks. Otherwise this Agreement shall be
modifiable only upon written agreement of the parties thereto.
First Banks will hold in confidence all information relating to the Banks
assets, liabilities, business or affairs, or those of any of its customers,
which is received by First Banks in the course of rendering the services
hereunder. It will make the same effort to safeguard such information as it does
to protect its own proprietary data.
The term of the Agreement is for one year, but it shall be automatically
renewable for additional periods of one year each unless the Bank shall give
ninety (90) days written notice of termination prior to the end of any term.
This Agreement shall be binding upon the parties and their successors or
assigns, and may only be amended by a writing executed by both parties.
IN WITNESS WHEREOF, the parties hereto have, by their duly authorized
officers executed this Agreement this 1st day of September, 1999.
CENTURY BANK FIRST BANKS, INC.
By: /s/ Pedro C. Jaminola By: /s/ Allen H. Blake
- ------------------------- ----------------------
Title: President and Chief Executive Officer Title: Executive Vice President
- -------------------------------------------- -------------------------------
<PAGE>
FIRST BANKS, INC.
MANAGEMENT FEE BILLING RATES
JANUARY 1, 1999
Services Provided Rate Per Hour
Lending:
Loan Review $50.00
Administration/Support 40.00
Business Development 60.00
Loan Service 40.00
Loan Collection/Workout 55.00
Other 40.00
Human Resources:
Administration 45.00
Records/Compliance 40.00
Recruiting/Training 40.00
Payroll/Benefits 35.00
Other 40.00
Internal Audit:
Assisting External Auditors 50.00
Internal Audit 45.00
Compliance and CRA 40.00
Examinations/Reports 45.00
Other 40.00
Accounting:
PCO/Consolidated 50.00
Examinations/Compliance 50.00
Tax Returns 66.00
Estimated Tax/Accruals 50.00
State Taxes 60.00
Fixed Assets/Other 40.00
General Accounting Assistance 45.00
` Regulatory Reports 50.00
SEC Reporting 65.00
Systems/Procedures 50.00
Mergers and Acquisitions:
Negotiations/Contracts 75.00
Regulations/Applications 50.00
Due Diligence 50.00
Operations/Human Resources 50.00
Asset/Liability Management 60.00
Investments 50.00
Planning/Budgets 50.00
Branch Administration:
Marketing/Business Development 45.00
Branch Operations 45.00
Customer Service/Training 45.00
Other 45.00
Purchasing/Accounts Payable 50.00
Meetings 65.00
Other 45.00
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000710507
<NAME> First Banks, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-31-1999
<PERIOD-END> Sep-30-1999
<CASH> 115,808
<INT-BEARING-DEPOSITS> 1,746
<FED-FUNDS-SOLD> 59,300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 413,192
<INVESTMENTS-CARRYING> 21,298
<INVESTMENTS-MARKET> 21,411
<LOANS> 3,992,953
<ALLOWANCE> 68,498
<TOTAL-ASSETS> 4,853,246
<DEPOSITS> 4,218,034
<SHORT-TERM> 96,260
<LIABILITIES-OTHER> 126,019
<LONG-TERM> 127,569
0
13,063
<COMMON> 5,915
<OTHER-SE> 266,386
<TOTAL-LIABILITIES-AND-EQUITY> 4,853,246
<INTEREST-LOAN> 235,558
<INTEREST-INVEST> 20,454
<INTEREST-OTHER> 1,234
<INTEREST-TOTAL> 257,246
<INTEREST-DEPOSIT> 107,151
<INTEREST-EXPENSE> 116,660
<INTEREST-INCOME-NET> 140,586
<LOAN-LOSSES> 8,743
<SECURITIES-GAINS> 490
<EXPENSE-OTHER> 110,250
<INCOME-PRETAX> 53,732
<INCOME-PRE-EXTRAORDINARY> 53,732
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,852
<EPS-BASIC> 1,366.29
<EPS-DILUTED> 1,320.33
<YIELD-ACTUAL> 8.12
<LOANS-NON> 43,027
<LOANS-PAST> 2,379
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 77,474
<ALLOWANCE-OPEN> 60,970
<CHARGE-OFFS> 11,154
<RECOVERIES> 6,931
<ALLOWANCE-CLOSE> 68,498
<ALLOWANCE-DOMESTIC> 57,359
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 11,139
</TABLE>
