UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
October 28, 2003
Date of Report (Date of earliest event reported)
FIRST BANKS, INC.
(Exact name of registrant as specified in its charter)
MISSOURI 0-20632 43-1175538
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) 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)
Not Applicable
(Former name or former address, if changed since last report)
FIRST BANKS, INC.
TABLE OF CONTENTS
Page
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ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.................... 1
SIGNATURES ............................................................... 2
ITEM 12 - RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On October 24, 2003, First Banks, Inc. issued a press release
announcing its financial results for the three and nine months ended September
30, 2003. A copy of the press release is attached as Exhibit 99.5.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FIRST BANKS, INC.
October 28, 2003 By: /s/ Allen H. Blake
---------------------------------------
Allen H. Blake
President, Chief Executive Officer
and Chief Financial Officer
(Principal Executive Officer and
Principal Financial and Accounting
Officer)
Exhibit 99.5
First Banks, Inc.
St. Louis, Missouri
Contact: Allen H. Blake
President, Chief Executive Officer and Chief Financial Officer
First Banks, Inc.
(314) 592-5000
Traded: NASDAQ
Symbol: FBNKN - (First Preferred Capital Trust II, a subsidiary of First
Banks, Inc.)
FBNKM - (First Preferred Capital Trust III, a subsidiary of First
Banks, Inc.)
Traded: NYSE
Symbol: FBSPrA - (First Preferred Capital Trust IV, a subsidiary of First
Banks, Inc.)
FOR IMMEDIATE RELEASE:
First Banks, Inc. Announces
Third Quarter 2003 Earnings
St. Louis, Missouri, October 24, 2003. First Banks, Inc. ("First Banks"
or the "Company") reported earnings of $13.7 million and $47.4 million for the
three and nine months ended September 30, 2003, respectively, compared to $13.0
million and $30.4 million for the comparable periods in 2002. Results for the
third quarter reflect increased net interest income and noninterest income,
offset by slightly higher operating expenses, increased provision for loan
losses and an increase in the effective tax rate. The increase for the first
nine months of 2003 over the comparable period in 2002 is primarily attributable
to increased net interest income resulting from reduced deposit rates and
earnings on interest rate swap agreements in association with the Company's
interest rate risk management program, increased gains on mortgage loans sold
and held for sale, a gain relating to the partial exchange of First Banks'
investment in an unaffiliated financial institution for a 100% ownership
interest in one of the unaffiliated financial institutions' banking subsidiaries
and increased provisions for state income taxes attributable to the 2003 merger
of the Company's bank charters.
Allen H. Blake, President and Chief Executive Officer of First Banks,
said, "First Banks' financial performance for the first nine months of 2003
continues to reflect our adaptation to the current interest rate environment and
weak economic conditions that have prevailed over the last two years. The
Company's ongoing efforts to maintain an acceptable net interest margin in the
current low interest rate environment, improve our non-interest income, address
credit losses and control operating expenses are reflected in our financial
performance. Higher-than-normal levels of loan charge-offs, loan delinquencies
and nonperforming loans led to increased provisions for loan losses during 2002.
These nonperforming trends remain at elevated levels in 2003, thus contributing
to continued higher-than-normal provisions for loan losses, primarily
attributable to charge-offs concentrated within our commercial leasing
portfolio. We continue to monitor our loan and leasing portfolios and focus on
asset quality and related challenges stemming from the current economic
environment, including lower prevailing interest rates and weak loan demand."
Net interest income increased to $73.1 million and $213.3 million for
the three and nine months ended September 30, 2003, respectively, compared to
$68.2 million and $198.0 million for the comparable periods in 2002. The Company
experienced continuing growth of net interest income, primarily resulting from
lower deposit rates coupled with earnings on interest rate swap agreements that
were entered into in conjunction with the Company's interest rate risk
management program to mitigate the effects of decreasing interest rates, and a
$61.3 million net reduction in outstanding trust preferred securities. The
derivative financial instruments used to hedge the Company's interest rate risk
contributed $17.3 million and $48.1 million to net interest income for the three
and nine months ended September 30, 2003, respectively, compared to $14.2
million and $38.0 million for the comparable periods in 2002. During 2003, the
Company issued $25.0 million of trust preferred securities in a private
placement and $46.0 million of trust preferred securities in an underwritten
public offering. In the second quarter of 2003, the Company redeemed $132.3
million of trust preferred securities that had been issued during 1997 and 1998.
The funds necessary for the redemptions were provided from available cash of
$32.9 million, borrowings under the Company's note payable of $34.5 million and
net proceeds from the issuance of the additional trust preferred securities.
These transactions, coupled with the use of additional derivative financial
instruments, have allowed First Banks to reduce its overall expense associated
with the utilization of trust preferred securities. While these transactions
have contributed to the Company's financial performance, prevailing low interest
rates, generally weak loan demand and overall economic conditions continue to
exert pressure on the net interest margin.
The Company recorded provisions for loan losses of $15.0 million and
$36.0 million for the three and nine months ended September 30, 2003,
respectively, compared to $13.7 million and $38.7 million for the comparable
periods in 2002. Net loan charge-offs were $12.1 million and $25.5 million for
the three and nine months ended September 30, 2003, respectively, compared to
$7.6 million and $27.4 million for the comparable periods in 2002. Net
charge-offs for the third quarter of 2003 were primarily attributable to a $4.1
million charge-off on one significant credit and $4.2 million in net charge-offs
associated with the commercial leasing portfolio. During 2002, the Company
experienced a higher level of problem loans and related loan charge-offs and
past due loans resulting from the economic conditions within the Company's
markets, additional problems identified in two acquired loan portfolios and
continuing deterioration in its commercial leasing portfolio, particularly the
segment of that portfolio relating to the airline industry. The Company has
experienced further deterioration in the commercial leasing portfolio with $14.6
million in net charge-offs for the nine months ended September 30, 2003. These
charge-offs were concentrated in four equipment leases aggregating $8.5 million,
which were not related to the airline industry. Nonperforming assets at
September 30, 2003 decreased to $81.3 million from $82.8 million at December 31,
2002 and $102.4 million at September 30, 2002. The allowance for loan losses
increased to $110.7 million at September 30, 2003, compared to $99.4 million at
December 31, 2002 and $109.9 million at September 30, 2002. This reflects the
Company's continued efforts to monitor asset quality and address ongoing
challenges posed by the current environment. The Company expects nonperforming
assets to remain at the higher levels recently experienced and considers these
trends in its overall assessment of the adequacy of the allowance for loan
losses.
Noninterest income was $26.2 million and $83.3 million for the three
and nine months ended September 30, 2003, respectively, compared to $25.5
million and $64.8 million for the comparable periods in 2002. Gains on mortgage
loans sold increased to $12.4 million and $33.2 million for the three and nine
months ended September 30, 2003, respectively, compared to $7.9 million and
$20.3 million for the same periods in 2002. This increase reflects overall
reductions in mortgage loan rates, resulting in high volumes of new originations
and refinancings as well as growth of the Company's mortgage banking activities.
This was partially offset by increased amortization of mortgage servicing
rights. Service charges on deposit accounts and customer service fees increased
to $9.2 million and $26.8 million for the three and nine months ended September
30, 2003, respectively, compared to $8.5 million and $22.0 million for the
comparable periods in 2002. Also contributing to the increase in noninterest
income is a $6.3 million gain in the first quarter of 2003 on the exchange of
common stock of Allegiant Bancorp, Inc., St. Louis, Missouri, held by First
Banks for a 100% ownership interest in Bank of Ste. Genevieve, Ste. Genevieve,
Missouri.
Operating expenses were $60.5 million and $184.2 million for the three
and nine months ended September 30, 2003, respectively, compared to $59.2
million and $175.2 million for the comparable periods in 2002. The increased
operating expenses primarily result from increases in salaries and employee
benefit expenses associated with the acquisition of Bank of Ste. Genevieve and
increased commissions paid to mortgage loan originators due to continued higher
loan volumes, which were partially mitigated by staff realignments surrounding
the Company's core business strategies. In addition, the Company recorded
write-downs on operating leases associated with the commercial leasing business
of $1.4 million for the third quarter of 2003 and $5.2 million for the nine
months ended September 30, 2003, primarily resulting from reductions in
estimated residual values. This compares with similar write-downs on commercial
leases of $1.4 million recorded for the nine months ended September 30, 2002,
none of which occurred in the third quarter. Occupancy and furniture and
equipment expenses remained at higher levels primarily due to acquisitions,
technology expenditures for equipment and continued expansion and renovation of
various corporate and branch offices. These expenses include a $1.0 million
lease termination obligation incurred in the second quarter of 2003 associated
with the relocation of the Company's San Francisco-based loan administration
department to southern California and a $1.4 million lease buyout obligation
incurred in the third quarter of 2002 on a California facility acquired through
a previous acquisition. These higher operating expenses, exclusive of the
operating lease write-downs, are reflective of recent acquisitions and ongoing
investments made in conjunction with the execution of First Banks' overall
business plan.
At September 30, 2003, First Banks had consolidated assets of $7.17
billion and operated 151 offices in Missouri, Illinois, California and Texas.
# # #
This release contains forward-looking statements that are subject to risks and
uncertainties arising out of or affecting the Company's business, not all of
which can be predicted or anticipated. These statements are based on information
currently available to First Banks' management, and numerous factors might cause
actual results to differ materially from those contemplated in the
forward-looking statements. For additional information, see the discussions of
forward-looking statements that appear in the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" sections of First
Banks' most recent Annual Report on Form 10-K and subsequent Quarterly Reports
on Form 10-Q, as filed with the Securities and Exchange Commission.
FIRST BANKS, INC.
FINANCIAL SUMMARY
(dollars expressed in thousands, except per share data)
(unaudited)
Selected Operating Data
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- -------------------
2003 2002 2003 2002
---- ---- ---- ----
Interest income.............................................. $ 96,025 105,811 293,902 319,726
Interest expense.............................................. 22,945 37,630 80,646 121,735
Net interest income........................................ 73,080 68,181 213,256 197,991
Provision for loan losses..................................... 15,000 13,700 36,000 38,700
Noninterest income............................................ 26,183 25,476 83,259 64,840
Noninterest expense........................................... 60,471 59,154 184,207 175,232
Income before provision for income taxes................... 23,792 20,803 76,308 48,899
Provision for income taxes.................................... 10,092 7,372 28,877 17,471
Net income................................................. 13,700 12,994 47,431 30,362
Basic earnings per common share............................... $ 570.75 540.87 1,982.48 1,261.05
======== ======== ======== ========
Diluted earnings per common share............................. $ 565.09 534.32 1,954.63 1,246.05
======== ======== ======== ========
Selected Financial Data
September 30, December 31,
2003 2002
------------- -------------
Total assets......................................................... $ 7,168,921 7,342,800
Investment securities................................................ 883,644 1,137,320
Loans, net of unearned discount...................................... 5,437,663 5,432,588
Allowance for loan losses............................................ 110,734 99,439
Deposits............................................................. 6,022,219 6,172,820
Note payable......................................................... 31,000 7,000
Guaranteed preferred beneficial interests
in subordinated debentures........................................ 205,380 270,039
Stockholders' equity................................................. 542,457 519,041
Nonperforming assets................................................. 81,344 82,774
Selected Financial Ratios
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2003 2002 2003 2002
---- ---- ---- ----
Return on average assets.......................................... 0.76% 0.72% 0.88% 0.58%
Return on average equity.......................................... 10.01 10.44 11.86 8.67
Net interest margin............................................... 4.49 4.24 4.43 4.23
Efficiency ratio.................................................. 60.92 63.16 62.12 66.67