First Banks, Inc. Announces Second Quarter 2002 Earnings.Business Editors ST. LOUIS--(BUSINESS WIRE)--July 25, 2002 First Banks, Inc. ("First Banks" or "the Company") (Nasdaq:FBNKO) (Nasdaq:FBNKN) (Nasdaq:FBNKM) reported earnings of $9.4 million and $17.4 million for the three and six months ended June 30, 2002, respectively, compared to $7.9 million and $20.3 million for the comparable periods in 2001. Results for 2002 reflect increased net interest income and noninterest income, offset by increased provisions for loan losses, reflecting the current economic environment and increased charge-off Eliminate or write off. The term charge-off is used to describe the process of removing from the records of a company something that was once regarded as an asset but has subsequently become worthless. , delinquency delinquency Criminal behaviour carried out by a juvenile. Young males make up the bulk of the delinquent population (about 80% in the U.S.) in all countries in which the behaviour is reported. and higher-than-normal nonperforming trends, and higher operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. during the first quarter of the year. The implementation of Statement of Financial Accounting Standards ("SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System ") No. 142, Goodwill and Other Intangible Assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. ("SFAS 142"), on January 1, 2002, resulted in the discontinuation dis·con·tin·u·a·tion n. A cessation; a discontinuance. Noun 1. discontinuation - the act of discontinuing or breaking off; an interruption (temporary or permanent) discontinuance of the amortization of certain intangibles associated with the purchase of subsidiaries. If the Company had implemented SFAS 142 at the beginning of 2001, net income for the three and six months ended June 30, 2001 would have increased $1.8 million and $3.6 million, respectively. In addition, the implementation of SFAS No. 133, Accounting for Derivative Instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. and Hedging Activities ("SFAS 133"), on January 1, 2001, resulted in the recognition of a cumulative effect of change in accounting principle of $1.4 million, net of tax, which reduced net income in 2001. Excluding this item, net income would have been $21.6 million for the six months ended June 30, 2001. James F. Dierberg, Chairman and Chief Executive Officer of First Banks, said, "We are pleased with the continuing growth of both net interest income and noninterest income. The increase in net interest income was primarily the result of increased earning assets Earning Assets Any income-earning asset owned by a company. Notes: These assets are generally interest-bearing accounts, bonds, and securities available for sale. See also: Asset, Asset Valuation, Earnings, Net Interest Margin generated through internal loan growth as well as our acquisitions of Charter Pacific Bank, BYL BYL Before You Leave Bancorp and Union Financial Group, Ltd., completed during the fourth quarter of 2001, and Plains Financial Corporation completed in January 2002. In addition, the derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. financial instruments used to hedge our interest rate risk contributed $12.6 million and $23.8 million to net interest income for the three and six months ended June 30, 2002, respectively, compared to $4.7 million and $5.7 million for the comparable periods in 2001. Furthermore, net interest income was impacted by an increase in guaranteed preferred debentures expense resulting from the issuance of trust preferred securities by First Preferred Capital Trust III in November 2001 and First Bank Capital Trust in April 2002. We are continuing to monitor our operations carefully to address the challenges posed by the current economic environment, including reduced loan demand, lower prevailing interest rates and the need for increased provisions for loan losses." The Company recorded provisions for loan losses of $12.0 million and $25.0 million for the three and six months ended June 30, 2002, respectively, compared to $3.7 million and $7.1 million for the comparable periods in 2001. The significant increase in the provision for loan losses reflects increases in net loan charge-offs and past due loans. Net charge-offs were $7.9 million and $19.7 million for the three and six months ended June 30, 2002, respectively, compared to $4.6 million and $11.6 million for the comparable periods in 2001. Net charge-offs for the six months ended June 30, 2002 include charge-offs aggregating $12.9 million on four large credit relationships. Other net charge-offs for 2002 reflect the general slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. in economic conditions prevalent within the Company's markets. Nonperforming assets Nonperforming asset An asset that is not effectively producing income, such as an overdue loan. nonperforming asset An asset that produces no income. increased to $77.1 million at June 30, 2002 from $71.6 million at December 31, 2001, and $64.7 million at June 30, 2001. It is anticipated that nonperforming assets are likely to remain at higher-than-normal levels in the near future. Noninterest income increased to $20.5 million and $39.4 million for the three and six months ended June 30, 2002, respectively, from $19.4 million and $35.9 million for the comparable periods in 2001. The increase in noninterest income reflects increases in: service charges on deposit accounts, loan servicing Loan servicing is the process by which a mortgage bank or subservicing firm collects the timely payment of interest and principal from borrowers. The level of service varies depending on the type loan and the terms negotiated between the firm and the investor seeking their services. fees, gains on mortgage loans sold, income earned on bank-owned life insurance, income associated with the Institutional Money Management and the International Banking Divisions and a gain on the sale of certain operating lease Operating Lease A lease contract that allows the use of an asset, but does not convey rights similar to ownership of the asset. Notes: An operating lease is not capitalized it is accounted for as a rental expense. equipment during the first quarter of 2002. The overall increase in noninterest income for the three and six months ended June 30, 2002 was partially offset by the $2.3 million gain on the sale of the Company's credit card portfolio in 2001 as well as a net loss on derivative instruments of $249,000 for the six months ended June 30, 2002, as compared to a net gain of $5.5 million for the comparable period in 2001. The Company recorded net gains on derivative instruments of $90,000 and $5.0 million for the three months ended June 30, 2002 and 2001, respectively, representing mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. adjustments under SFAS 133 as well as $3.8 million of gains resulting from the terminations of certain interest rate swap Interest Rate Swap A deal between banks or companies where borrowers switch floating-rate loans for fixed rate loans in another country. These can be either the same or different currencies. agreements during the second quarter of 2001. Operating expenses were $59.2 million and $116.1 million for the three and six months ended June 30, 2002, respectively, compared to $59.9 million and $107.0 million for the comparable periods in 2001. The increase in operating expenses for the six months ended June 30, 2002 primarily results from increases in salaries and employee benefit expenses, increased occupancy expenses associated with the expansion of corporate and branch facilities, and information technology fees due to growth and technological advancements in First Banks' product and service offerings. These higher operating expenses are reflective Refers to light hitting an opaque surface such as a printed page or mirror and bouncing back. See reflective media and reflective LCD. of recently completed acquisitions and significant investments that have been made in personnel, technology, equipment, facilities and new product and business lines which are part of First Banks' overall strategic growth plan. The overall increase in operating expenses was partially offset by the implementation of SFAS 142 in January 2002 and the related discontinuation of the amortization of certain intangibles associated with the purchase of subsidiaries. Amortization of intangibles for the three and six months ended June 30, 2002 was $482,000 and $964,000, respectively, compared to $1.9 million and $3.7 million for the comparable periods in 2001. As previously announced, on June 22, 2002, First Bank & Trust ("FB&T"), completed its assumption of the deposits and certain liabilities and the purchase of certain assets of the Garland Garland, city (1990 pop. 180,650), Dallas co., N Tex., a suburb of Dallas; inc. 1891. Since World War II, Garland has grown from an agricultural community into an important center for electronics research and for the production of electronic equipment. and Denton, Texas Denton is a city in the United States and the county seat of Denton County, Texas. According to the 2000 U.S. Census, the city population was 80,537, making it the eleventh largest city in the Dallas/Fort Worth Metroplex. branch offices of Union Planters Planters is an American snack food company under Kraft Foods manufacturing, best known for its nuts and the Mr. Peanut icon that symbolizes them. Started by Italian immigrants Amedeo Obici and Mario Peruzzi in Wilkes-Barre, Pennsylvania, in 1906, it was incorporated in 1908 Bank, National Association. The transaction resulted in the acquisition of $15.3 million in deposits and one office in Garland and $49.6 million in deposits and one office, including a detached de·tached adj. 1. Separated; disconnected. 2. Standing apart from others; separate. drive-thru facility, in Denton. The core deposit intangibles associated with the branch purchases were $1.4 million. FB&T is a wholly owned banking subsidiary of First Banks' majority-owned subsidiary majority-owned subsidiary A firm in which more than 50% of outstanding voting stock is owned by the parent company. , First Banks America, Inc. ("FBA FBA Federal Bar Association FBA Functional Behavior Assessment FBA Fibre Box Association (North America) FBA Forms Based Authentication (Microsoft Outlook Web Access) FBA Florida Bicycle Association "). First Banks had a 93.76% ownership interest in FBA at June 30, 2002. At June 30, 2002, First Banks had consolidated assets of $7.01 billion and operated 154 offices in Missouri, Illinois, California and Texas. This release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Financial Condition and Results of Operations" sections of First Banks' most recent Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and subsequent Quarterly Reports on Form 10-Q Form 10-Q See 10-Q. , as filed with the Securities and Exchange Commission.
FIRST BANKS, INC.
FINANCIAL SUMMARY
(in thousands, except per share data)
(unaudited)
Condensed Consolidated Statement of Income Information
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2002 2001 2002 2001
-------- -------- -------- --------
Interest income $107,303 113,356 213,915 229,393
Interest expense 41,615 55,261 84,105 113,890
Net interest income 65,688 58,095 129,810 115,503
Provision for loan losses 12,000 3,720 25,000 7,110
Noninterest income 20,529 19,424 39,364 35,898
Noninterest expense 59,220 59,909 116,078 107,038
Income before provision
for income taxes and
cumulative effect of
change in accounting
principle 14,997 13,890 28,096 37,253
Provision for income taxes 5,328 5,457 10,099 14,581
Income before cumulative
effect of change in
accounting principle 9,368 7,899 17,368 21,627
Cumulative effect of change
in accounting principle,
net of tax -- -- -- (1,376)
Net income 9,368 7,899 17,368 20,251
Basic earnings per
common share:
Income before cumulative
effect of change in
accounting principle $390.35 328.27 720.18 900.21
Cumulative effect of change
in accounting principle,
net of tax -- -- -- (58.16)
-------- -------- -------- --------
$390.35 328.27 720.18 842.05
======== ======== ======== ========
Diluted earnings per
common share:
Income before cumulative
effect of change in
accounting principle $384.48 322.78 712.75 882.65
Cumulative effect of change
in accounting principle,
net of tax -- -- -- (58.16)
-------- -------- -------- --------
$384.48 322.78 712.75 824.49
======== ======== ======== ========
Condensed Consolidated Balance Sheet Information
June 30, December 31,
2002 2001
---------- ----------
Total assets $7,006,062 6,778,451
Investment securities 840,024 631,068
Loans, net of unearned discount 5,362,632 5,408,869
Allowance for loan losses 103,794 97,164
Deposits 5,908,395 5,683,904
Note payable 10,000 27,500
Stockholders' equity 479,598 448,657
Nonperforming assets 77,125 71,624
Selected Financial Ratios
Three Months Ended Six Months Ended
June 30, June 30,
------------- -------------
2002 2001 2002 2001
---- ---- ---- ----
Return on average assets 0.54% 0.54% 0.51% 0.70%
Return on average equity 8.16 7.98 7.69 10.78
Net interest margin 4.24 4.37 4.22 4.39
Efficiency ratio 68.69 77.28 68.61 70.70
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