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
May 15, 2008
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)
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:
( ) 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 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT..................................... 1
ITEM 1.02 TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT................................. 1
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION
UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT......................... 1
ITEM 4.02 NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS OR A
RELATED AUDIT REPORT OR COMPLETED INTERIM REVIEW............................... 2
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.............................................. 3
SIGNATURE.................................................................................. 4
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
The Company has formed FB Holdings, LLC, a limited liability company
organized in the state of Missouri ("FB Holdings"). FB Holdings will operate as
a majority-owned subsidiary of First Bank, the Company's indirect wholly-owned
banking subsidiary, and was formed for the primary purpose of holding and
managing certain nonperforming loans and assets to allow the liquidation of such
assets at a time that is more economically advantageous to the Company. On May
16, 2008, First Capital America, Inc., a corporation owned by First Banks'
Chairman of the Board and members of his immediate family ("FCA"), committed to
invest up to $40.0 million in cash in FB Holdings. First Bank expects to
contribute certain nonperforming loans and assets and FCA expects to contribute
cash to FB Holdings on or before June 30, 2008. Upon capitalization, First Bank
will own 51% of FB Holdings and FCA will own the remaining 49% of FB Holdings.
The contribution of cash by FCA will be reflected as minority interest in the
Company's consolidated financial statements and, consequently, will result in an
increase in the Company's total risk-based capital ratio.
The Company issued a press release announcing the planned capital raise,
a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by
reference.
ITEM 1.02 TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT.
First Banks entered into a Termination Agreement with Wells Fargo Bank,
National Association, as Agent ("Wells Fargo"), JP Morgan Chase Bank, N.A.,
LaSalle Bank National Association, The Northern Trust Company, Union Bank of
California, N.A., Fifth Third Bank (Chicago) and U.S. Bank National Association,
dated as of May 19, 2008 (the "Termination Agreement"), regarding the Secured
Credit Agreement, dated August 8, 2007, as amended by the First Amendment to
Secured Credit Agreement and the Second Amendment to Secured Credit Agreement,
each dated February 12, 2008 (the foregoing, collectively, the "Former Credit
Agreement") by and among these same parties.
In accordance with the terms and conditions of the Termination Agreement,
First Banks repaid in full all of its existing obligations associated with the
Former Credit Agreement in the aggregate amount of $58.1 million, including the
accrued interest and fees thereon. First Banks repaid in full its obligations
under the Former Credit Agreement with existing cash reserves, dividends from
First Bank, and advances under the New Credit Agreement, as further described in
Item 2.03 below. First Banks did not incur any material early termination
penalties under the terms and conditions of the Termination Agreement.
ITEM 2.03 CREATION OF DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
On May 15, 2008, First Banks, Inc. ("First Banks" or the "Company")
entered into a Revolving Credit Note and a Stock Pledge Agreement (collectively,
the "New Credit Agreement") with Investors of America Limited Partnership
("Investors of America, LP"). Investors of America, LP is a Nevada limited
partnership that was created by and for the benefit of Mr. James F. Dierberg,
Chairman of the Company's Board of Directors, and members of his immediate
family.
The New Credit Agreement provides for a $30.0 million secured revolving
line of credit to be utilized for general working capital needs and capital
investments in subsidiaries. First Banks advanced the entire $30.0 million under
the New Credit Agreement on May 15, 2008 and utilized the proceeds of the
advance to terminate and repay in full all of the obligations under its existing
secured credit agreement with a group of unaffiliated financial institutions, as
defined and further described in Item 1.02 above. Advances outstanding under the
New Credit Agreement bear interest at the three-month London Interbank Offered
Rate ("LIBOR") plus 300 basis points. Interest is payable on outstanding
advances on the first day of each month (in arrears) and the aggregate principal
balance of all outstanding advances and any accrued interest thereon is due and
payable in full on June 30, 2009, the maturity date of the New Credit Agreement.
The maturity date of the New Credit Agreement may be accelerated at the option
of Investors of America, LP if an event of default under the New Credit
Agreement has occurred and has not been cured to the satisfaction of Investors
of America LP. The default provisions of the New Credit Agreement are normal and
customary for agreements of this type. In this situation, the aggregate
principal balance of all outstanding advances and any accrued interest thereon
will become immediately due and payable in full. The New Credit Agreement is
secured by First Banks' ownership interest in all of the capital stock of both
The San Francisco Company ("SFC"), a Delaware corporation, and Coast Financial
Holdings, Inc. ("CFHI"), a Florida corporation.
The Company issued a press release announcing the New Credit Agreement, a
copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by
reference.
ITEM 4.02 NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS OR A RELATED
AUDIT REPORT OR COMPLETED INTERIM REVIEW
On May 13, 2008, management identified certain transactions that
originated within the Company's mortgage banking division that did not appear to
have been properly reflected in the Company's consolidated financial statements
as of and for the period ended March 31, 2008, and in the Company's consolidated
financial statements as of and for the years ended December 31, 2007, 2006,
2005, 2004 and 2003 (the "Transactions"). As a result of the identification of
the Transactions, the Company filed a Form 12b-25 on May 16, 2008 indicating
that it could not complete the timely filing of its Quarterly Report on Form
10-Q as of and for the period ended March 31, 2008 (the "Quarterly Report")
until a more thorough evaluation of the Transactions could be completed by
management which, at that time, was dependent upon the receipt, examination and
evaluation of additional information related to the Transactions.
On May 16, 2008, the Audit Committee of the Company's Board of Directors
(the "Audit Committee") met with management and jointly concluded the Company's
previously filed consolidated financial statements as of and for the years ended
December 31, 2007, 2006, 2005, 2004 and 2003, the related reports of the
Company's independent registered public accounting firm, and management's report
on internal control over financial reporting as of December 31, 2007, should no
longer be relied upon due to the fact these consolidated financial statements
did not properly reflect the Transactions. Consequently, the Company will amend
its Annual Report on Form 10-K as of and for the year ended December 31, 2007 to
properly reflect the Transactions in the consolidated financial statements
reported therein (the "Amended Form 10-K"), which will be subject to audit by
the Company's independent registered public accounting firm. The Company will
also delay the filing of its Quarterly Report until completion and filing of the
Amended Form 10-K. The Company intends to file the Amended Form 10-K and the
Quarterly Report as soon as reasonably practical.
The Audit Committee has commissioned an investigation into the
circumstances and possible irregularities that led to the improper recording of
the Transactions in the Company's consolidated financial statements.
Furthermore, management and the Audit Committee have discussed the matters
disclosed in this Current Report on Form 8-K with the Company's independent
registered public accounting firm, KPMG LLP.
The Company's preliminary analysis indicates the improper recognition of
the Transactions in the Company's consolidated financial statements resulted in
an understatement of a repurchase agreement obligation, including the related
interest expense thereon, and an overstatement of mortgage banking revenues for
the years ended December 31, 2007, 2006, 2005 and 2004. For the year ended
December 31, 2003, the Company's consolidated financial statements resulted in
an understatement of a repurchase agreement obligation, including the related
interest expense thereon, and an understatement of mortgage banking revenues.
The following table summarizes the preliminary estimated impact of the changes
in the Company's previously reported net income and the Company's net income
expected to be reported for the years ended December 31, 2007, 2006, 2005, 2004
and 2003 in the Amended Form 10-K, which are subject to change based on the
results of the investigation commissioned by the Audit Committee:
Year Ended Net Income Net Income
December 31, Previously Reported As Restated
------------ ------------------- -----------
(dollars expressed in thousands)
2007 $ 57,234 $ 51,077
2006 111,694 108,230
2005 96,906 95,480
2004 82,908 81,565
2003 62,811 63,606
========== ==========
The amount of the understatement of the repurchase agreement obligation
in the consolidated balance sheets, including the related accrued interest
thereon, was approximately $33.5 million, $24.7 million, $19.0 million, $16.7
million and $14.4 million, at December 2007, 2006, 2005, 2004 and 2003,
respectively. In addition, the Company expects to report a net loss of
approximately $5.5 million for the quarterly period ended March 31, 2008 upon
filing of its Quarterly Report. Exclusive of the Transactions, the Company would
have reported a net loss for the quarter ended March 31, 2008; however, the net
loss increased by approximately $1.1 million as a result of the Transactions.
The Company issued a press release announcing the restatement, a copy of
which is attached hereto as Exhibit 99.1 and is incorporated herein by
reference.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits.
Exhibit Number Description
-------------- -----------
99.1 Press release dated as of May 21, 2008 - filed
herewith
SIGNATURE
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: May 21, 2008 By: /s/ Terrance M. McCarthy
-----------------------------
Terrance M. McCarthy
President and
Chief Executive Officer