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
July 23, 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 July 23, 2004, First Banks, Inc. issued a press release announcing
its financial results for the three and six months ended June 30, 2004. A copy
of the press release is attached as Exhibit 99.3.
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: July 23, 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 99.3
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, an affiliated trust of First
Banks, Inc.)
FBNKM - (First Preferred Capital Trust III, an affiliated trust of
First Banks, Inc.)
Traded: NYSE
Symbol: FBSPrA -(First Preferred Capital Trust IV, an affiliated trust of First
Banks, Inc.)
FOR IMMEDIATE RELEASE:
First Banks, Inc. Announces Second Quarter 2004 Earnings
St. Louis, Missouri, July 23, 2004. First Banks, Inc. ("First Banks" or
the "Company") reported earnings of $26.0 million and $44.3 million for the
three and six months ended June 30, 2004, compared to $14.7 million and $33.7
million for the comparable periods in 2003. Results for the second quarter
reflect increased net interest income and noninterest income and a reduced
provision for loan losses and noninterest expenses, partially offset by an
increased provision for income taxes. Results for the first six months of 2004
over the comparable period in 2003 reflect increased net interest income and
reduced provisions for loan losses and noninterest expenses, partially offset by
a decline in noninterest income and an increased provision for income taxes. Net
income for 2004 includes a gain of $2.7 million, before applicable income taxes,
recorded in the first quarter relating to the sale of a residential and
recreational development property that was foreclosed on in January 2003, and
gains totaling $1.0 million, before applicable income taxes, recorded in
February and April on the sale of two Midwest branch banking offices. Net income
for 2003 includes a gain of $6.3 million, before applicable income taxes,
recorded in the first quarter relating to the exchange of part of First Banks'
investment in Allegiant Bancorp, Inc. ("Allegiant") for a 100% ownership
interest in Bank of Ste. Genevieve, located in Ste. Genevieve, Missouri.
Allen H. Blake, President and Chief Executive Officer of First Banks,
said, "Our second quarter earnings of $26.0 million represent the second highest
quarterly earnings we have ever achieved. We are pleased with these results,
which reflect our continued efforts to reduce nonperforming assets, improve net
interest income, grow noninterest income and manage noninterest expenses. Our
overall asset quality levels have substantially improved during the second
quarter, resulting in a $22.8 million reduction in nonperforming assets. In
addition, we sold a majority of the leases in our commercial leasing portfolio
in June 2004 to further reduce outstanding balances within this segment of our
portfolio, consistent with our business strategy initiated in late 2002 to
reduce our commercial leasing activities." Mr. Blake added, "We are nearing the
final stages of our acquisition of Continental Mortgage Corporation - Delaware
and its wholly-owned banking subsidiary, Continental Community Bank and Trust
Company, located in Aurora, Illinois, and expect the transaction to close on
July 30, 2004. We continue to focus on expanding our banking franchise, through
internal growth, acquisitions and the opening of new branch offices. However,
residual problems in our loan portfolio that primarily resulted from weak
economic conditions in our markets remain a primary focus of management as we
continue our ongoing efforts to further reduce our nonperforming asset levels
and improve our overall financial performance."
Net interest income reflected continued growth, increasing $4.6
million, or 6.47%, and $10.1 million, or 7.19%, for the three and six months
ended June 30, 2004, respectively, compared to the comparable periods in 2003.
Net interest margin increased to 4.56% for the three and six months of 2004,
from 4.43% and 4.40% for the comparable periods in 2003. The Company's ability
to maintain strong net interest income is partially attributable to the interest
rate swap agreements that were entered into in conjunction with its interest
rate risk management program to mitigate the effects of decreasing interest
rates. The derivative financial instruments used to hedge interest rate risk
contributed $15.4 million and $31.7 million to net interest income for the three
and six months ended June 30, 2004, respectively, compared to $15.8 million and
$30.8 million for the comparable periods in 2003. In addition, the Company
reduced its subordinated debentures by $63.1 million during 2003, further
contributing to the improvement in net interest income. However, prevailing low
interest rates, generally weak loan demand and overall economic conditions
continue to exert pressure on net interest income.
Although the Company continues to experience the higher levels of
problem loans, related charge-offs and past due loans that it experienced during
2003 related to economic conditions within its markets, First Banks achieved
substantial improvement in nonperforming assets during the second quarter of
2004. Nonperforming assets were $67.4 million at June 30, 2004, reflecting a
significant decline from $90.2 million at March 31, 2004, $86.5 million at
December 31, 2003 and $83.2 million at June 30, 2003. The decrease in
nonperforming assets during the second quarter of 2004 is primarily attributable
to two significant credit relationships: a $13.9 million decrease due to a $3.9
million charge-off on a commercial credit relationship in the southern
California region and a subsequent $10.0 million cash payment received on the
loan relationship as a result of an independent third party refinancing
transaction that occurred following workout negotiations with the borrower; and
a $7.3 million decrease resulting from the sale of a commercial credit
relationship in the St. Louis region. The allowance for loan losses was $121.0
million at June 30, 2004, compared to $124.9 million at March 31, 2004, $116.5
million at December 31, 2003 and $107.8 million at June 30, 2003. The Company
recorded provisions for loan losses of $3.0 million and $15.8 million for the
three and six months ended June 30, 2004, respectively, compared to $10.0
million and $21.0 million for the comparable periods in 2003. The reduced
provision for the second quarter of 2004 resulted from an overall improvement in
asset quality and a reduction in nonperforming loans, primarily resulting from
significant loan payoffs, including the two loans discussed above. Net loan
charge-offs were $5.4 million and $10.8 for the three and six months ended June
30, 2004, respectively, compared to $10.8 million and $13.3 million for the
comparable periods in 2003. On June 30, 2004, the Company completed the sale of
a significant portion of its commercial leasing portfolio, thereby reducing its
commercial leasing portfolio by $33.1 million to $9.6 million at June 30, 2004,
with $3.2 million of the remaining balance classified as nonperforming loans.
The Company established a $2.0 million liability at the time of sale associated
with related recourse obligations for certain leases sold. While the Company
believes it has been successful in addressing asset quality problems experienced
during 2003 and into 2004, the Company continues to closely monitor its
operations to address the ongoing challenges posed by the current economic
environment, including reduced loan demand and lower prevailing interest rates.
The Company expects nonperforming loans to remain at elevated levels throughout
most of 2004 and considers this trend in its overall assessment of the adequacy
of the allowance for loan losses.
Noninterest income was $20.1 million and $40.7 million for the three
and six months ended June 30, 2004, respectively, compared to $18.9 million and
$44.5 million for the comparable periods in 2003. The decrease in noninterest
income for the six months ended June 30, 2004 is attributable to a nonrecurring
$6.3 million gain recorded in the first quarter of 2003 on the exchange of
common stock of Allegiant, held by First Banks, for a 100% ownership interest in
Bank of Ste. Genevieve. Excluding this transaction, the Company experienced
increased noninterest income primarily related to increased service charges on
deposit accounts and customer service fees, increased portfolio management fees,
a $630,000 gain, net of expenses, on the sale of an Illinois banking office in
April 2004, a $390,000 gain, net of expenses, on the sale of a Missouri banking
office in February 2004, and a decrease in losses on the valuation or sale of
certain assets, primarily related to the commercial leasing portfolio. This
increase was partially offset by a decrease in loan servicing fees.
Noninterest expenses were $55.4 million and $108.0 million for the
three and six months ended June 30, 2004, respectively, compared to $57.5
million and $111.1 million for the comparable periods in 2003. The Company's
efficiency ratio improved to 57.89% from 63.98%, respectively, for the second
quarter of 2004 compared to the similar period in 2003. The decrease in
noninterest expense for the three months ended June 30, 2004 reflects a $2.4
million decline associated with write-downs on commercial operating leases that
were recorded during the second quarter of 2003, a decrease in occupancy and
furniture and equipment expenses related to 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 $1.1 million decrease in expenses and losses, net of gains, on
other real estate. This decrease was partially offset by a $3.2 million increase
in salary and employee benefit costs associated with employing and retaining
qualified personnel and additions to staff to enhance senior management
expertise and expand product lines.
At June 30, 2004, First Banks had consolidated assets of $7.32 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, 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 Six Months Ended
June 30, June 30,
-------------------- ---------------------
2004 2003 2004 2003
---- ---- ---- ----
Interest income........................................... $ 96,585 98,481 192,712 198,295
Interest expense.......................................... 20,979 27,468 42,453 58,119
--------- -------- --------- ---------
Net interest income................................... 75,606 71,013 150,259 140,176
Provision for loan losses................................. 3,000 10,000 15,750 21,000
--------- -------- --------- ---------
Net interest income after provision for loan losses... 72,606 61,013 134,509 119,176
--------- -------- --------- ---------
Noninterest income........................................ 20,104 18,925 40,663 44,472
Noninterest expense....................................... 55,405 57,545 108,007 111,132
--------- -------- --------- ---------
Income before provision for income taxes.............. 37,305 22,393 67,165 52,516
Provision for income taxes................................ 11,302 7,693 22,893 18,785
--------- -------- --------- ---------
Net income............................................ $ 26,003 14,700 44,272 33,731
========= ======== ========= =========
Basic earnings per common share........................... $1,093.42 615.70 1,857.23 1,411.74
========= ======== ========= =========
Diluted earnings per common share......................... $1,074.06 606.04 1,827.13 1,390.06
========= ======== ========= =========
Selected Financial Data
June 30, December 31,
2004 2003
---- ----
Total assets.......................................................... $7,324,076 7,106,940
Investment securities................................................. 1,261,585 1,049,714
Loans, net of unearned discount....................................... 5,399,383 5,328,075
Allowance for loan losses............................................. 120,966 116,451
Deposits.............................................................. 5,955,927 5,961,615
Other borrowings...................................................... 532,548 273,479
Note payable.......................................................... -- 17,000
Subordinated debentures............................................... 206,795 209,320
Stockholders' equity.................................................. 555,948 549,815
Nonperforming assets.................................................. 67,435 86,494
Selected Financial Ratios
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2004 2003 2004 2003
---- ---- ---- ----
Return on average assets................................. 1.43% 0.82% 1.22% 0.95%
Return on average equity................................. 18.21 11.03 15.72 12.82
Net interest margin...................................... 4.56 4.43 4.56 4.40
Efficiency ratio......................................... 57.89 63.98 56.57 60.19