Exhibit 99
First Banks, Inc.
St. Louis, Missouri
Contacts: Terrance M. McCarthy Lisa K. Vansickle
President and Senior Vice President and
Chief Executive Officer Chief Financial Officer
First Banks, Inc. First Banks, Inc.
(314) 592-5000 (314) 592-5000
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 2007 Earnings
St. Louis, Missouri, October 25, 2007. First Banks, Inc. ("First Banks" or
the "Company") reported earnings of $15.0 million for the three months ended
September 30, 2007, compared to $19.8 million for the three months ended June
30, 2007, and $29.7 million for the three months ended September 30, 2006. The
Company reported earnings of $54.0 million for the nine months ended September
30, 2007, compared to $80.7 million for the comparable period in 2006. The
Company's return on average assets for the three and nine months ended September
30, 2007 was 0.58% and 0.70%, respectively, compared to 1.22% and 1.14% for the
comparable periods in 2006, and the Company's return on average stockholders'
equity was 7.06% and 8.70% for the three and nine months ended September 30,
2007, respectively, compared to 16.01% and 15.08% for the comparable periods in
2006. The Company's return on average assets and return on average stockholders'
equity for the three months ended June 30, 2007 were 0.76% and 9.50%,
respectively.
Terrance M. McCarthy, President and Chief Executive Officer of First Banks,
said, "Our financial results for the third quarter of 2007 compared to the same
period last year were impacted by a higher provision for loan losses as a result
of increased net loan charge-offs and an increase in nonperforming assets in our
one-to-four family residential mortgage and land acquisition, development and
construction loan portfolios. The other primary factor contributing to the
decrease in net income compared to the same period last year is the compression
in our net interest margin primarily resulting from significantly increased
deposit costs and competitive pressure on loan yields in our markets."
Net interest income was $97.8 million and $289.5 million for the three and
nine months ended September 30, 2007, respectively, compared to $99.2 million
and $285.7 million for the comparable periods in 2006. Net interest margin
declined to 4.12% for the three and nine months ended September 30, 2007,
compared to 4.45% and 4.39% for the same periods in 2006. The decrease in net
interest margin primarily resulted from an increase in higher priced deposits
driven by competitive conditions within the Company's markets as well as
competitive pressures on loan yields. The average rates paid on interest-bearing
deposits increased 37 and 62 basis points to 3.70% for the three and nine months
ended September 30, 2007, respectively, compared to 3.33% and 3.08% for the same
periods in 2006, while the average yield earned on interest-earning assets
decreased five basis points to 7.48% for the three months ended September 30,
2007 and increased 23 basis points to 7.49% for the nine months ended September
30, 2007, compared to 7.53% and 7.26% for the same periods in 2006.
The provision for loan losses increased to $17.0 million and $26.0 million
for the three and nine months ended September 30, 2007, respectively, compared
to $2.0 million and $8.0 million for the comparable periods in 2006. The
increase in the provision for loan losses was primarily driven by increased net
loan charge-offs and a decline in asset quality related to the Company's
one-to-four family residential mortgage and land acquisition, development and
construction loan portfolios. The allowance for loan losses was $140.2 million
at September 30, 2007, compared to $145.7 million at December 31, 2006,
representing 1.72% and 1.90% of loans, net of unearned discount, respectively.
The Company recorded net loan charge-offs of $19.8 million and $34.5 million for
the three and nine months ended September 30, 2007, respectively, compared to
net loan charge-offs of $1.3 million and net loan recoveries of $772,000 for the
comparable periods in 2006. Net loan charge-offs for the three and nine months
ended September 30, 2007 include $11.7 million and $20.4 million, respectively,
of charge-offs associated with the Company's one-to-four family residential loan
portfolio, of which $4.3 million and $4.6 million was recorded in the first and
third quarters of 2007 in conjunction with the transfer of certain repurchased
and other nonperforming residential mortgage loans to the loans held for sale
portfolio. These loans were subsequently sold in April 2007 and October 2007,
respectively. Net loan charge-offs also include charge-offs of $7.6 million
recorded during the third quarter of 2007 associated with the sale of certain
commercial loans which resulted in sales proceeds of $33.5 million. The Company
recorded net loan recoveries of $772,000 for the first nine months of 2006,
primarily as a result of a $5.0 million recovery on the payoff of a single
nonperforming loan. Mr. McCarthy commented, "We continue to see distress in our
one-to-four family residential loan portfolio as a result of the unstable market
conditions surrounding sub-prime loan products. We have taken steps throughout
2007 to mitigate our risk to sub-prime loans, including discontinuing the
origination and sale of these loans in early 2007 as well as consummating loan
sales in April and October. The loan sales in October had the effect of
decreasing our nonperforming loans by $8.6 million. We also continue to see
declining market conditions in our land acquisition, development and
construction loan portfolios, resulting in increased developer inventories,
slower lot and home sales, and declining market values. All of these factors
have led to increased risk in our loan portfolio thereby contributing to a
significant increase in our provision for loan losses."
Nonperforming loans were $94.8 million, or 1.17% of loans, net of unearned
discount, at September 30, 2007, compared to $48.7 million, or 0.64% of loans,
net of unearned discount, at December 31, 2006. The overall increase in
nonperforming loans includes an increase of $19.2 million within the Company's
one-to-four family residential loan portfolio to $38.1 million at September 30,
2007 from $18.9 million at December 31, 2006 driven by current market conditions
and repurchases of certain residential mortgage loans sold with recourse that
were placed back into the Company's loan portfolio, as well as the overall
impact of sub-prime products experienced throughout the mortgage banking
industry. The Company's historical involvement in the sub-prime market was
specifically limited to origination and subsequent sale of these loan products
in the secondary market. Repurchases of residential mortgage loans declined from
$17.2 million in the second quarter to $6.3 million in the third quarter of
2007. The decline in repurchases is reflective of the Company's exit from the
sub-prime market in early 2007. The increase in nonperforming loans is also
attributable to an increase of $29.0 million within the Company's land
acquisition, development and construction loan portfolio to $42.3 million at
September 30, 2007 from $13.3 million at December 31, 2006.
Noninterest income decreased to $26.8 million and $75.5 million for the
three and nine months ended September 30, 2007, respectively, compared to $30.0
million and $81.4 million for the comparable periods in 2006 primarily resulting
from a decline in mortgage banking revenues including significantly reduced
gains on loans sold and held for sale. The gain on loans sold and held for sale
decreased to $3.5 million and $12.0 million for the three and nine months ended
September 30, 2007, respectively, compared to $4.6 million and $17.5 million for
the same periods in 2006 due primarily to a decrease in the volume of loans
originated and sold. Gains on loans sold and held for sale for the nine months
ended September 30, 2006 also include a $1.7 million gain on the sale of certain
nonperforming loans and $2.1 million of increased loan servicing income
generated from the capitalization of mortgage servicing rights related to the
securitization of $138.9 million of residential mortgage loans. The decrease in
noninterest income is also attributable to a $2.8 million gain recognized in the
third quarter of 2006 on the cash exchange of stock received as settlement in
full of a previously charged-off loan. The overall decline in noninterest income
was partially offset by increased revenue from service charges on deposits and
customer service fees generated by higher deposit levels and changes in the
overall mix of the Company's deposit portfolio; increased insurance fee and
commission income generated through the Company's recently acquired subsidiaries
purchased in March and May of 2006; a gain on the sale of the Company's Denton
and Garland, Texas branches of $1.0 million during the third quarter of 2007;
and a decrease in losses on sales of investment securities.
Noninterest expenses increased to $84.5 million and $254.7 million for the
three and nine months ended September 30, 2007, respectively, compared to $80.5
million and $236.3 million for the same periods in 2006. First Banks'
acquisition and de novo expansion activities during 2006 and 2007 added an
aggregate of 24 branch offices. Mr. McCarthy commented, "We have been focused on
controlling our noninterest expenses despite the significant expansion of our
banking franchise during 2006 and 2007 through the acquisition of banks and
other financial service companies in our key markets and the opening of six de
novo branch offices during the first nine months of 2007. Our efficiency ratio
improved from 71.75% for the first quarter of 2007 to 69.89% for the second
quarter of 2007 and 67.79% for the third quarter of 2007." The primary increases
in noninterest expenses included salaries and employee benefits expenses, which
increased to $43.1 million and $132.1 million for the three and nine months
ended September 30, 2007, respectively, from $42.5 million and $124.6 million
for the same periods last year; occupancy and furniture and equipment expenses,
which increased to $13.3 million and $37.7 million, from $11.2 million and $31.9
million, respectively; and amortization of intangible assets, which increased to
$3.1 million and $9.3 million, from $2.2 million and $5.4 million, respectively.
Total assets increased $113.3 million to $10.27 billion at September 30,
2007, from $10.16 billion at December 31, 2006, and increased $511.3 million
from $9.76 billion at September 30, 2006. The Company's acquisition of Royal
Oaks Bancshares, Inc. ("Royal Oaks") on February 28, 2007, provided $206.9
million in assets and six branch banking offices. Loans, net of unearned
discount, increased to $8.13 billion at September 30, 2007, from $7.67 billion
at December 31, 2006, reflecting internal growth and the addition of $175.5
million of loans associated with the acquisition of Royal Oaks.
Total liabilities increased $56.9 million to $9.42 billion at September 30,
2007 from $9.36 billion at December 31, 2006. Deposits increased to $8.62
billion at September 30, 2007, from $8.44 billion at December 31, 2006,
primarily as a result of growth in savings and money market deposits through
enhanced product campaigns, partially offset by a decrease in checking deposits.
The acquisition of Royal Oaks provided deposits of $159.1 million. Subordinated
debentures increased $55.8 million primarily as a result of three separate
issuances of trust preferred securities during the third quarter of 2007
aggregating $51.5 million. The Company also reduced its notes payable by $55.0
million during the first nine months of 2007 through principal repayments.
Total stockholders' equity increased to $856.9 million at September 30,
2007 from $800.4 million at December 31, 2006. The increase reflects net income
of $54.0 million, a cumulative effect of change in accounting principle of $2.5
million, and a decrease in accumulated other comprehensive loss of $511,000,
offset by dividends of $524,000.
First Banks had assets of $10.27 billion at September 30, 2007 and
currently operates 198 branch banking offices in California, Illinois, Missouri
and Texas.
# # #
This press release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements include, but
are not limited to, statements about First Banks' plans, objectives, estimates
or projections with respect to our future financial condition, expected or
anticipated revenues with respect to our results of operations and our business,
expectations and intentions and other statements that are not historical facts.
Such statements are based upon the current beliefs and expectations of First
Banks' management and are subject to significant risks and uncertainties which
may cause actual results to differ materially from those contemplated in the
forward-looking statements. The following factors, among others, could cause
actual results to differ from those set forth in the forward-looking statements:
increased competition and its effect on pricing, spending, third-party
relationships and revenues; and the risk of new and changing regulation.
Additional factors which may cause First Banks' results to differ materially
from those described in the forward-looking statements may be found in 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 ("SEC") and
available at the SEC's internet site (http://www.sec.gov). The forward-looking
------------------
statements in this press release speak only as of the date of the press release,
and First Banks does not assume any obligation to update the forward-looking
statements or to update the reasons why actual results could differ from those
contained in the forward-looking statements.
FIRST BANKS, INC.
FINANCIAL SUMMARY
(in thousands, except per share data)
(unaudited)
Selected Operating Data
Three Months Ended Nine Months Ended
-------------------------------------------------- -----------------------------
September 30, June 30, March 31, September 30, September 30, September 30,
2007 2007 2007 2006 2007 2006
---- ---- ---- ---- ---- ----
Interest income............................. $178,105 177,319 171,827 168,293 527,251 473,258
Interest expense............................ 80,259 80,548 76,966 69,109 237,773 187,528
-------- -------- -------- -------- -------- --------
Net interest income...................... 97,846 96,771 94,861 99,184 289,478 285,730
Provision for loan losses................... 17,000 5,500 3,500 2,000 26,000 8,000
-------- -------- -------- -------- -------- --------
Net interest income after provision
for loan losses........................ 80,846 91,271 91,361 97,184 263,478 277,730
-------- -------- -------- -------- -------- --------
Noninterest income.......................... 26,840 24,037 24,583 29,994 75,460 81,370
Noninterest expense......................... 84,529 84,435 85,701 80,473 254,665 236,339
-------- -------- -------- -------- -------- --------
Income before provision for income
taxes and minority interest in
income (loss) of subsidiary............ 23,157 30,873 30,243 46,705 84,273 122,761
Provision for income taxes.................. 8,087 11,092 10,950 17,249 30,129 42,452
-------- -------- -------- -------- -------- --------
Income before minority interest in
income (loss) of subsidiary............ 15,070 19,781 19,293 29,456 54,144 80,309
Minority interest in income (loss)
of subsidiary.......................... 74 31 70 (204) 175 (440)
-------- -------- -------- -------- -------- --------
Net income............................... $ 14,996 19,750 19,223 29,660 53,969 80,749
======== ======== ======== ======== ======== ========
Basic earnings per common share............. $ 625.48 829.17 804.12 1,245.28 2,258.77 3,390.62
======== ======== ======== ======== ======== ========
Diluted earnings per common share........... $ 623.84 821.63 799.23 1,231.06 2,243.90 3,347.84
======== ======== ======== ======== ======== ========
Selected Financial Data
September 30, December 31, September 30,
2007 2006 2006
---- ---- ----
Total assets......................................................... $10,272,036 10,158,714 9,760,688
Investment securities................................................ 1,165,517 1,464,946 1,177,236
Loans, net of unearned discount...................................... 8,132,773 7,666,481 7,717,470
Allowance for loan losses............................................ 140,165 145,729 149,310
Goodwill and other intangible assets................................. 314,084 295,382 287,586
Deposits............................................................. 8,622,345 8,443,086 8,098,863
Other borrowings..................................................... 310,772 373,899 392,210
Notes payable........................................................ 10,000 65,000 75,000
Subordinated debentures.............................................. 353,733 297,966 304,547
Stockholders' equity................................................. 856,861 800,435 763,883
Nonperforming assets................................................. 102,650 55,163 86,012
Selected Financial Ratios
Three Months Ended Nine Months Ended
-------------------------------------------------- -----------------------------
September 30, June 30, March 31, September 30, September 30, September 30,
2007 2007 2007 2006 2007 2006
---- ---- ---- ---- ---- ----
Return on average assets.................... 0.58% 0.76% 0.77% 1.22% 0.70% 1.14%
Return on average equity.................... 7.06 9.50 9.62 16.01 8.70 15.08
Net interest margin......................... 4.12 4.09 4.15 4.45 4.12 4.39
Efficiency ratio............................ 67.79 69.89 71.75 62.30 69.78 64.38
Tangible efficiency ratio................... 65.27 67.22 69.30 60.56 67.24 62.90