Exhibit 99.1
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
Restatement of Financial Statements, Planned Capital Raise
And Restructure of Financing Arrangement
St. Louis, Missouri, May 21, 2008. First Banks, Inc. ("First Banks" or
the "Company") announced today that it intends to amend its 2007 Annual Report
on Form 10-K to restate its audited consolidated financial statements as of
December 31, 2007 and 2006 and for the years ended December 31, 2007, 2006 and
2005, and each unaudited quarterly period in 2006 and 2007. The restatement is
being made to properly reflect certain transactions that were entered into by
the Company's mortgage banking division but were improperly recorded in the
Company's consolidated financial statements due to the circumvention of
established internal controls. These transactions resulted in the understatement
of a repurchase agreement obligation, including the related interest expense
thereon, and the overstatement of mortgage banking revenues. Net income (as
previously reported) was overstated by approximately $6.2 million, $3.5 million
and $1.4 million for the years ended December 31, 2007, 2006 and 2005,
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.
On May 13, 2008, management identified these transactions and, upon
completion of a further review of the identified transactions, the Company's
management and the Audit Committee of its Board of Directors concluded, on May
16, 2008, that the Company's previously filed consolidated financial statements
as of December 31, 2007 and 2006 and for the years ended December 31, 2007, 2006
and 2005, the related report 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
anticipated restatement. Additionally, 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. Terrance M. McCarthy, President and Chief Executive Officer of First
Banks, said, "We are highly disappointed about the recent development of these
very unfortunate circumstances. We are working diligently to prepare and file an
amendment to our Annual Report on Form 10-K for 2007 and expect to file our
Quarterly Report on Form 10-Q for the first quarter of 2008 promptly after
completion of the amended Form 10-K filing."
On May 14, 2008, the Company formed FB Holdings, LLC, a newly created
entity that will operate as a majority owned subsidiary of First Bank, the
Company's indirect wholly-owned banking subsidiary. FB Holdings, LLC was formed
to hold and manage certain nonperforming loans and other real estate owned to
allow for the liquidation of such assets in a manner that is more economically
advantageous to the Company. First Capital America, Inc., an affiliated company
of First Banks through common ownership, has committed to invest up to $40.0
million in cash in the special purpose entity, which will increase the Company's
total risk-based capital ratio. The Company expects the initial asset and cash
contributions to be made by the parties on or before June 30, 2008. Mr. McCarthy
commented, "We are pleased that our affiliate and the Dierberg family have
chosen to contribute additional capital to the Company at this time. The
additional capital will strengthen First Banks' balance sheet as we manage
through the current economic downturn and ongoing credit cycle and provide a
financial foundation from which to manage and grow our banking franchise. The
formation of the entity will position us to work through a significant number of
problem assets and allow us to liquidate those assets via methods and timeframes
that are to our advantage, as opposed to disposing of such assets via sale in an
extremely soft and illiquid market."
In addition to this capital commitment, the Company entered into a
Revolving Credit Note and Stock Pledge Agreement with Investors of America,
Limited Partnership, also an affiliated company of First Banks that is commonly
owned by the Dierberg family. The financing arrangement provides for a $30.0
million secured line of credit to be utilized for general working capital needs
and future capital investments in subsidiaries as required. On May 15, 2008,
First Banks advanced the entire $30.0 million under the revolving credit note
and elected to utilize the proceeds to terminate and repay in full all of the
obligations under its previous secured credit facility with a group of
unaffiliated financial institutions.
First Banks currently operates 218 branch banking offices in California,
Florida, 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; changes in interest rates and overall economic
conditions; 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, 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.