UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): October 28, 2004
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)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
FIRST BANKS, INC.
Table of Contents
Page
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ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION................... 1
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS............................... 1
SIGNATURES ................................................................ 2
ITEM 2.02 - RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On October 28, 2004, First Banks, Inc. issued a press release announcing
its financial results for the three and nine months ended September 30, 2004. A
copy of the press release is attached as Exhibit 99.1.
ITEM 9.01 - FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
Exhibit Number Description
-------------- -----------
99.1 Press Release issued by First Banks, Inc. on October 28,
2004.
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: October 28, 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 and
Chief Executive Officer 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 Third Quarter 2004 Earnings
St. Louis, Missouri, October 28, 2004. First Banks, Inc. ("First Banks"
or the "Company") reported earnings of $19.7 million and $64.0 million for the
three and nine months ended September 30, 2004, compared to $13.7 million and
$47.4 million for the comparable periods in 2003. Results for the third quarter
reflect increased net interest and noninterest income, and a reduced provision
for loan losses, partially offset by increased noninterest expense and an
increased provision for income taxes. Results for the first nine months of 2004
over the comparable period in 2003 reflect increased net interest income, and a
reduced provision for loan losses, partially offset by decreased noninterest
income, slightly increased noninterest expenses and an increased provision for
income taxes. Net income for 2004 includes a gain of $2.7 million, before
applicable income taxes, recorded in February 2004 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 2004 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, "We are pleased with our financial results for the third quarter of 2004.
We continue to show improvement in our overall asset quality levels while we
grow net interest income and noninterest income in accordance with our internal
business plan." Mr. Blake added, "Our banking franchise has expanded through
internal growth, acquisitions and the opening of four new branch offices. During
the third quarter of 2004, we completed our acquisition of Continental Mortgage
Corporation - Delaware and its wholly owned banking subsidiary, Continental
Community Bank and Trust Company, located in Aurora, Illinois, and our purchase
of substantially all of the assets of Small Business Loan Source, Inc., located
in Houston, Texas. These purchase transactions contributed to an increase in
total assets of $187.8 million, including a $97.6 million increase in loans, net
of unearned discount. In addition, we anticipate the completion of our purchase
of Hillside Investors, Ltd. and its wholly owned banking subsidiary, CIB Bank,
during the fourth quarter of this year." CIB Bank is headquartered in Mt.
Prospect, Illinois, operates 16 banking offices in the Chicago, Illinois
metropolitan area and reported total assets of approximately $1.24 billion,
loans, net of unearned discount, of approximately $724.7 million and total
deposits of approximately $1.14 billion at September 30, 2004. This acquisition,
which will be the Company's largest acquisition in its history, is expected to
increase total assets by approximately 16.4% and the purchase price of
approximately $62.0 million will be funded through the issuance of $60.0 million
of subordinated debentures associated with a private placement of trust
preferred securities, of which $20.0 million was issued in late September 2004
through the Company's newly formed affiliated trust, First Bank Statutory Trust
II.
Net interest income reflected continued growth, increasing $2.5
million, or 3.46%, and $12.6 million, or 5.91%, for the three and nine months
ended September 30, 2004, respectively, compared to the comparable periods in
2003. Net interest margin was 4.37% and 4.50% for the three and nine months
ended September 30, 2004, respectively, compared to 4.49% and 4.43% for the
comparable periods in 2003. Average earning assets were $6.90 billion and $6.74
billion for the three and nine months ended September 30, 2004, respectively,
compared to $6.49 billion and $6.47 billion 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 $13.0 million and $44.7 million to net
interest income for the three and nine months ended September 30, 2004,
respectively, compared to $17.3 million and $48.1 million for the comparable
periods in 2003. However, the benefits of the swap agreements have declined
during the third quarter of 2004 due to rising interest rates and the maturity
of $600.0 million notional amount of interest rate swap agreements in late
September 2004. These swap agreements provided net interest income of
approximately $6.7 million and $23.0 million during the three and nine months
ended September 30, 2004, respectively. Although the Company is implementing
other methods to offset the reduction in net interest income, the maturity of
the swap agreements will result in a sizeable decline in future net interest
income, which may be further adversely affected if prevailing interest rates do
not continue to increase. In addition, the Company reduced its subordinated
debentures by $63.1 million during 2003, further contributing to the improvement
in net interest income. However, the current interest rate environment,
generally weak loan demand and overall economic conditions continue to exert
pressure on net interest income.
First Banks has realized substantial improvement in nonperforming
assets during 2004, but continues to experience generally high levels of problem
loans, related charge-offs and past due loans, primarily related to economic
conditions within its markets. Nonperforming assets were $66.6 million at
September 30, 2004 and $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 $81.3 million at September 30, 2003. The decline in nonperforming assets in
2004 is primarily attributable to significant loan payoffs, the liquidation of
foreclosed property and the sale of a significant portion of the Company's
commercial leasing portfolio, partially offset by additions of nonperforming
assets of approximately $8.3 million at September 30, 2004 associated with the
recent Small Business Loan Source, Inc. asset purchase and the acquisition of
Continental Community Bank and Trust Company.
The allowance for loan losses was $128.0 million at September 30, 2004,
compared to $121.0 million at June 30, 2004, $124.9 million at March 31, 2004,
$116.5 million at December 31, 2003 and $110.7 million at September 30, 2003.
The Company recorded provisions for loan losses of $7.5 million and $23.3
million for the three and nine months ended September 30, 2004, respectively,
compared to $15.0 million and $36.0 million for the comparable periods in 2003.
The reduced provisions for the three and nine months ended September 2004
resulted from an overall improvement in asset quality, reduced levels of
nonperforming loans and lower net charge-offs. Net loan charge-offs were $7.9
million and $18.6 million for the three and nine months ended September 30,
2004, respectively, compared to $12.1 million and $25.5 million for the
comparable periods in 2003.
While the Company believes it has been generally successful in
addressing its 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 generally low prevailing interest rates. These trends are considered
by management in the overall assessment of the adequacy of the allowance for
loan losses. The Company expects its nonperforming loans to remain at somewhat
elevated levels throughout the remainder of 2004 and anticipates a significant
increase in nonperforming loans associated with its pending acquisition of CIB
Bank.
Noninterest income was $22.0 million and $62.6 million for the three
and nine months ended September 30, 2004, respectively, compared to $20.2
million and $64.7 million for the comparable periods in 2003. Noninterest income
for the nine months ended September 30, 2003 includes 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 in 2004 primarily related to increased loan servicing fees,
increased service charges on deposit accounts and customer service fees,
increased portfolio management fees, gains, net of expenses, of $1.0 million on
the sale of two banking offices and a decrease in losses on the valuation or
sale of certain assets related to the commercial leasing portfolio. This
increase was partially offset by a decrease in gains on mortgage loans sold and
held for sale resulting from a slowdown in the volume of mortgage loans
originated and sold since late 2003, management's decision to retain a portion
of new mortgage loan production in the real estate mortgage portfolio in
mid-2003 and a change in the fallout percentage associated with the allocation
of direct mortgage loan origination costs from salary and employee benefit
expense to gain on mortgage loans sold.
Noninterest expenses were $58.4 million and $166.4 million for the
three and nine months ended September 30, 2004, respectively, compared to $54.5
million and $165.7 million for the comparable periods in 2003. The Company's
efficiency ratio was 59.83% and 57.67% for the three and nine months ended
September 30, 2004, respectively, compared to 58.43% and 59.60%, for the
comparable periods in 2003. Salary and employee benefit expenses increased $6.5
million and $14.1 million for the three and nine months ended September 30,
2004, respectively, compared to the similar periods in 2003, due to costs
associated with employing and retaining qualified personnel, additions to staff
to enhance senior management expertise and expand product lines, and recent
acquisitions. The increase is also attributable to a decrease in the allocation
of direct mortgage loan origination costs from salary and employee benefit
expense to gain on mortgage loans sold, as discussed above. This increase was
partially offset by a decrease in write-downs on commercial operating leases
resulting from reductions in estimated residual values realized during 2003,
which decreased $1.3 million and $4.9 million for the three and nine months
ended September 30, 2004, respectively, compared to the comparable periods in
2003. Also, expenses and losses, net of gains, on other real estate decreased
$261,000 and $4.9 million for the three and nine months ended September 30,
2004, respectively, compared to the comparable periods in 2003, primarily due to
a $2.7 million gain recorded in February 2004 as a result of the sale of a
residential and recreational development foreclosed property. Net expenditures
on other real estate for the first nine months of 2003 were $1.7 million and
primarily included expenditures associated with the operation of the property
sold in February 2004. Occupancy and furniture and equipment expense decreased
$753,000 and $2.6 million for the three and nine months ended September 30,
2004, respectively, compared to the comparable periods in 2003 due to decreased
rent expense associated with various lease terminations in 2003, including a
$1.0 million lease termination obligation recorded in the second quarter of 2003
associated with the relocation of the Company's San Francisco-based loan
administration department to southern California.
At September 30, 2004, First Banks had consolidated assets of $7.57
billion and operated 151 branch banking 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 Nine Months Ended
September 30, September 30,
-------------------- --------------------
2004 2003 2004 2003
---- ---- ---- ----
Interest income........................................... $ 99,461 96,164 292,173 294,459
Interest expense.......................................... 23,853 23,084 66,306 81,203
-------- -------- -------- ---------
Net interest income................................... 75,608 73,080 225,867 213,256
Provision for loan losses................................. 7,500 15,000 23,250 36,000
-------- -------- -------- ---------
Net interest income after provision for loan losses... 68,108 58,080 202,617 177,256
-------- -------- -------- ---------
Noninterest income........................................ 21,982 20,242 62,645 64,714
Noninterest expense....................................... 58,391 54,530 166,398 165,662
-------- -------- -------- ---------
Income before provision for income taxes.............. 31,699 23,792 98,864 76,308
Provision for income taxes................................ 11,951 10,092 34,844 28,877
-------- -------- -------- ---------
Net income............................................ $ 19,748 13,700 64,020 47,431
======== ======== ======== =========
Basic earnings per common share........................... $ 826.33 570.75 2,683.56 1,982.48
======== ======== ======== =========
Diluted earnings per common share......................... $ 815.20 565.09 2,642.12 1,954.63
======== ======== ======== =========
Selected Financial Data
September 30, December 31,
2004 2003
---- ----
Total assets.......................................................... $7,573,957 7,106,940
Investment securities................................................. 1,272,868 1,049,714
Loans, net of unearned discount....................................... 5,561,623 5,328,075
Allowance for loan losses............................................. 127,970 116,451
Deposits.............................................................. 6,127,806 5,961,615
Other borrowings...................................................... 550,262 273,479
Note payable.......................................................... -- 17,000
Subordinated debentures............................................... 232,311 209,320
Stockholders' equity.................................................. 589,351 549,815
Nonperforming assets.................................................. 66,577 86,494
Selected Financial Ratios
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
2004 2003 2004 2003
---- ---- ---- ----
Return on average assets................................. 1.04% 0.76% 1.16% 0.88%
Return on average equity................................. 13.89 10.01 15.11 11.86
Net interest margin...................................... 4.37 4.49 4.50 4.43
Efficiency ratio......................................... 59.83 58.43 57.67 59.60