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
January 26, 2004
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 January 23, 2004, First Banks, Inc. issued a press release
announcing its financial results for the three months and year ended December
31, 2003. A copy of the press release is attached as Exhibit 99.1.
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 hereunto duly authorized.
FIRST BANKS, INC.
Date: January 26, 2004 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 99.1
First Banks, Inc.
St. Louis, Missouri
Contact: Allen H. Blake Terrance M. McCarthy
President and Senior Executive Vice President
Chief Executive Officer and Chief Operating Officer
First Banks, Inc. First Banks, Inc.
(314) 592-5000 (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
Fourth Quarter and Year End 2003 Earnings
St. Louis, Missouri, January 23, 2004. First Banks, Inc. ("First Banks"
or the "Company") reported net income of $15.4 million and $62.8 million for the
three months and year ended December 31, 2003, respectively, compared to $14.8
million and $45.2 million for the comparable periods in 2002. Results for 2003
reflect increased net interest income and noninterest income and decreased
provisions for loan losses, which were partially offset by higher operating
expenses and an increase in the effective tax rate. The increase in net income
for 2003 is primarily attributable to increased net interest income resulting
from reduced deposit rates and earnings on interest rate swap agreements
associated with the Company's interest rate risk management program, increased
gains on mortgage loans sold and held for sale and a gain relating to the
partial exchange of First Banks' investment in Allegiant Bancorp, Inc., St.
Louis, Missouri ("Allegiant"), for a 100% ownership interest in Bank of Ste.
Genevieve, Ste. Genevieve, Missouri. The Company's remaining investment in the
common stock of Allegiant after the partial exchange was contributed in full to
a previously established charitable foundation in the fourth quarter of 2003.
This contribution was partially offset by the gain realized on the increase in
the market value of the Allegiant common stock and the related income tax
effects of the transaction. The increase in the effective tax rate in 2003 is
primarily attributable to higher taxable income and the merger of the Company's
two bank charters in 2003, which resulted in higher taxable income allocations
in states where the Company files separate state tax returns.
On December 31, 2003, the Company implemented FASB Interpretation No.
46, Consolidation of Variable Interest Entities, an interpretation of ARB No.
51, resulting in the deconsolidation of the Company's five statutory and
business trusts, which were created for the sole purpose of issuing trust
preferred securities. The implementation of this Interpretation had no material
effect on the consolidated financial position or results of operations for any
of the periods presented.
Allen H. Blake, President and Chief Executive Officer of First Banks,
said, "First Banks' financial performance for 2003 continues to reflect our
adaptation to the current interest rate environment and weak economic conditions
that have prevailed over the last two years. While continuing to address
residual problems in the loan and lease portfolio, the Company has focused its
efforts on strengthening net interest margin and growing noninterest income
while managing operating expenses. This has placed us in a position to benefit
from improved economic conditions as they occur."
The Company experienced continued growth of net interest income in
2003, primarily attributable to 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. In addition, during 2003, the Company reduced its
subordinated debentures by $63.1 million. Net interest margin improved to 4.51%
and 4.45% for the three months and year ended December 31, 2003, respectively,
compared to 4.27% and 4.23% for the comparable periods in 2002. Net interest
income increased to $73.9 million and $287.1 million for the three months and
year ended December 31, 2003, respectively, from $70.2 million and $268.2
million for the comparable periods in 2002. The derivative financial instruments
used to hedge the Company's interest rate risk contributed $16.5 million and
$64.6 million to net interest income for the three months and year ended
December 31, 2003, respectively, compared to $15.1 million and $53.0 million for
the comparable periods in 2002. During 2003, the Company issued $73.2 million of
subordinated debentures to newly formed trusts associated with the issuance of
$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, thereby reducing its
subordinated debenture obligations to the underlying trusts by $136.3 million.
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 subordinated debentures. 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 experienced a higher level of problem loans, related
charge-offs and past due loans during 2002 resulting from economic conditions
within the Company's markets, additional problems identified in two acquired
loan portfolios and continuing deterioration in the commercial leasing
portfolio, particularly the segment of the portfolio relating to the airline
industry. The Company experienced further deterioration in the commercial
leasing portfolio in 2003, contributing to continued higher-than-historical
provisions for loan losses. The Company recorded provisions for loan losses of
$13.0 million and $49.0 million for the three months and year ended December 31,
2003, respectively, compared to $16.8 million and $55.5 million for the
comparable periods in 2002. Net loan charge-offs were $7.3 million and $32.7
million for the three months and year ended December 31, 2003, respectively,
compared to $27.2 million and $54.6 million for the comparable periods in 2002.
Net charge-offs included a $6.1 million net charge-off on one significant credit
relationship in 2003 and $38.6 million on ten significant credit relationships
in 2002. Net charge-offs associated with the commercial leasing portfolio
increased to $14.4 million in 2003 from $7.9 million in 2002. Nonperforming
assets at December 31, 2003 increased to $86.5 million from $82.8 million at
December 31, 2002. The allowance for loan losses increased to $116.5 million at
December 31, 2003, compared to $99.4 million at December 31, 2002. The Company
continues to monitor asset quality and address ongoing challenges posed by the
current economic environment and expects nonperforming assets to remain at
elevated levels during most of 2004. These trends are considered in the
Company's overall assessment of the adequacy of its allowance for loan losses.
Noninterest income was $27.7 million and $111.0 million for the three
months and year ended December 31, 2003, respectively, compared to $24.6 million
and $89.5 million for the comparable periods in 2002. Gains on mortgage loans
sold increased to $38.9 million in 2003, compared to $28.4 million in 2002,
reflecting continued growth of the Company's mortgage banking activities coupled
with high volumes of new originations and refinancings associated with lower
mortgage loan rates. Overall loan volumes slowed in the fourth quarter of 2003,
resulting in a decline in gains on mortgage loans sold to $5.7 million for the
three months ended December 31, 2003, compared to $8.1 million for the
comparable period in 2002. Service charges on deposit accounts and customer
service fees increased to $9.3 million and $36.1 million for the three months
and year ended December 31, 2003, respectively, compared to $9.0 million and
$31.0 million for the comparable periods in 2002. In addition, net gains
aggregating $4.0 million from the sale of four branches were reflected in the
fourth quarter of 2003. Also reflected in the increase in noninterest income is
a $6.3 million gain on the exchange of common stock of Allegiant held by First
Banks for a 100% ownership interest in Bank of Ste. Genevieve, recognized in the
first quarter of 2003, and a $2.3 million gain realized on the subsequent
contribution of the remaining shares of Allegiant common stock to a charitable
foundation in the fourth quarter of 2003. The overall increase in noninterest
income in 2003 was partially offset by a reduction in other income of $4.6
million, primarily attributable to increased amortization of mortgage servicing
rights.
Operating expenses were $66.1 million and $250.3 million for the three
months and year ended December 31, 2003, respectively, compared to $57.5 million
and $232.8 million for the comparable periods in 2002. The increased operating
expenses primarily result from increases in salaries and employee benefit
expenses associated with the Company's 2002 and 2003 acquisitions and increased
commissions paid to mortgage loan originators due to continued higher loan
volumes, partially offset by staff realignments surrounding the Company's core
business strategies. The increase also reflects charitable contribution expense
of $5.1 million recognized by the Company on the contribution of its remaining
shares of Allegiant common stock in the fourth quarter of 2003. In addition,
write-downs on operating leases associated with the Company's commercial leasing
business, primarily resulting from reductions in estimated residual values, were
$1.6 million and $6.8 million for the three months and year ended December 31,
2003, respectively, compared to $1.2 million and $2.6 million for the comparable
periods in 2002. 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.
At December 31, 2003, First Banks had consolidated assets of $7.11
billion and operated 147 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
(in thousands, except per share data)
(unaudited)
Selected Operating Data
Three Months Ended Year Ended
December 31, December 31,
--------------------- --------------------
2003 2002 2003 2002
---- ---- ---- ----
Interest income.............................................. $ 96,694 105,390 391,153 425,721
Interest expense.............................................. 22,823 35,211 104,026 157,551
--------- -------- -------- --------
Net interest income........................................ 73,871 70,179 287,127 268,170
Provision for loan losses..................................... 13,000 16,800 49,000 55,500
Noninterest income............................................ 27,691 24,615 110,950 89,455
Noninterest expense........................................... 66,104 57,524 250,311 232,756
--------- -------- -------- --------
Income before provision for income taxes................... 22,458 20,470 98,766 69,369
Provision for income taxes.................................... 7,078 5,300 35,955 22,771
Net income................................................. $ 15,380 14,805 62,811 45,167
========= ======== ======== ========
Basic earnings per common share............................... $ 638.90 614.64 2,621.39 1,875.69
========= ======== ======== ========
Diluted earnings per common share............................. $ 634.38 609.63 2,588.31 1,853.64
========= ======== ======== ========
Selected Financial Data
December 31, December 31,
2003 2002
------------ ------------
Total assets......................................................... $7,106,940 7,351,177
Investment securities................................................ 1,049,714 1,145,670
Loans, net of unearned discount...................................... 5,328,075 5,432,588
Allowance for loan losses............................................ 116,451 99,439
Deposits............................................................. 5,961,615 6,172,820
Note payable......................................................... 17,000 7,000
Other borrowings..................................................... 273,479 265,644
Subordinated debentures.............................................. 209,320 278,389
Stockholders' equity................................................. 549,815 519,041
Nonperforming assets................................................. 86,494 82,774
Selected Financial Ratios
Three Months Ended Year Ended
December 31, December 31,
--------------------- ----------------
2003 2002 2003 2002
---- ---- ---- ----
Return on average assets.................................... 0.85% 0.81% 0.87% 0.64%
Return on average equity.................................... 11.18 11.52 11.68 9.44
Net interest margin......................................... 4.51 4.27 4.45 4.23
Efficiency ratio............................................ 65.09 60.68 62.88 65.08