First Banks, Inc. Announces Third Quarter 2002 Earnings.

Business Editors

ST. LOUIS--(BUSINESS WIRE)--Oct. 22, 2002

First Banks, Inc. ("First Banks" or "the Company") (Nasdaq: FBNKO) (Nasdaq: FBNKN) (Nasdaq: FBNKM) reported earnings of $13.0 million and $30.4 million for the three and nine months ended September 30, 2002, respectively, compared to $14.4 million and $34.6 million for the comparable periods in 2001. Results for 2002 reflect increased net interest income and noninterest income, offset by higher operating expenses and increased provisions for loan losses, reflecting the current economic environment and increased charge-off, past due and nonperforming trends.

The implementation of Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets ("SFAS 142"), on January 1, 2002, resulted in the discontinuation of 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 nine months ended September 30, 2001 would have increased $1.8 million and $5.4 million, respectively. In addition, the implementation of SFAS No. 133, Accounting for Derivative Instruments 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 $36.0 million for the nine months ended September 30, 2001.

James F. Dierberg, Chairman and Chief Executive Officer of First Banks, said, "The continuing challenges of a reduced interest rate environment and a slowing economy have led to a 9.6% and 12.3% decline in our earnings for the three and nine months ended September 30, 2002, from the comparable periods in 2001. The decline in earnings primarily reflects significantly increased provisions for loan losses associated with the higher-than-normal charge-off, delinquency and nonperforming trends we are experiencing as a result of economic conditions.

Commenting further, Dierberg 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 generated through internal loan growth as well as our acquisitions of Charter Pacific Bank, BYL 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 financial instruments used to hedge our interest rate risk contributed $14.2 million and $38.0 million to net interest income for the three and nine months ended September 30, 2002, respectively, compared to $7.1 million and $12.8 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 $13.7 million and $38.7 million for the three and nine months ended September 30, 2002, respectively, compared to $6.8 million and $13.9 million for the comparable periods in 2001. The significant increase in the provision for loan losses during 2002 reflects increases in net loan charge-offs and past due loans. Net charge-offs were $7.6 million and $27.4 million for the three and nine months ended September 30, 2002, respectively, compared to $3.2 million and $14.8 million for the comparable periods in 2001. Net charge-offs for the nine months ended September 30, 2002 include charge-offs aggregating $15.0 million on five large credit relationships. Other net charge-offs for 2002 primarily reflect the slowdown in economic conditions prevalent within the Company's markets. Additionally, nonperforming assets at September 30, 2002 increased $30.8 million, or 43.0%, to $102.4 million from $71.6 million at December 31, 2001, further contributing to the need for an increased provision for loan losses in 2002.

Noninterest income increased to $25.5 million and $64.8 million for the three and nine months ended September 30, 2002, respectively, from $21.8 million and $57.7 million for the comparable periods in 2001. The increase in noninterest income reflects increases in: service charges on deposit accounts, loan servicing fees, gains on mortgage loans sold, income earned on bank-owned life insurance, income associated with the Institutional Money Management and International Banking Divisions and a gain on the sale of certain operating lease equipment during the first quarter of 2002. The overall increase in noninterest income for the three and nine months ended September 30, 2002 was partially offset by the $1.9 million gain on the sale of the Company's credit card portfolio in 2001 as well as a decline in the net gain on derivative instruments due primarily to mark-to-market adjustments required under SFAS 133 as well as $3.8 million of gains resulting from the terminations of certain interest rate swap agreements during the second quarter of 2001.

Operating expenses were $59.2 million and $175.2 million for the three and nine months ended September 30, 2002, respectively, compared to $50.3 million and $157.4 million for the comparable periods in 2001. The increase in operating expenses primarily results from increases in salaries and employee benefit expenses, 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 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 amortization of certain intangibles associated with the purchase of subsidiaries. Amortization of intangibles for the three and nine months ended September 30, 2002 was $516,000 and $1.5 million, respectively, compared to $1.9 million and $5.6 million for the comparable periods in 2001.

As previously announced, on September 17, 2002, First Banks and Allegiant Bancorp, Inc. ("Allegiant"), signed an agreement and plan of exchange that provides for First Banks to acquire Allegiant's wholly owned banking subsidiary, Bank of Ste. Genevieve ("BSG"). BSG operates two locations in Ste. Genevieve, Missouri, and reported total assets of $111.1 million and total deposits of $91.1 million at September 30, 2002. Under the terms of the agreement, First Banks will acquire BSG in exchange for approximately 974,150 shares of Allegiant common stock that are currently held by First Banks. The transaction, which is subject to regulatory approvals, is expected to be completed during the fourth quarter of 2002. First Banks will continue to own approximately 232,000 shares of Allegiant common stock subsequent to completion of the transaction.

At September 30, 2002, First Banks had consolidated assets of $7.17 billion and operated 151 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)

        Condensed Consolidated Statement of Income Information

                            Three Months Ended    Nine Months Ended
                               September 30,         September 30,
                              2002        2001      2002        2001
                             -------    -------   -------     --------

Interest income             $105,811    110,724   319,726     340,117
Interest expense              37,630     50,950   121,735     164,840

  Net interest income         68,181     59,774   197,991     175,277

Provision for loan losses     13,700      6,800    38,700      13,910

Noninterest income            25,476     21,846    64,840      57,744
Noninterest expense           59,154     50,323   175,232     157,361

  Income before provision
   for income taxes and
   cumulative effect of change
    in accounting principle   20,803     24,497    48,899      61,750

Provision for income taxes     7,372      9,539    17,471      24,120

  Income before cumulative
   effect of change in
   accounting principle       12,994     14,381    30,362      36,008

Cumulative effect of change
 in accounting principle,
 net of tax                       --         --        --      (1,376)

  Net income                  12,994     14,381    30,362      34,632

Basic earnings per common share:
  Income before cumulative
   effect of change in
   accounting principle     $ 540.87     599.47  1,261.05    1,499.67
  Cumulative effect of
   change in accounting
   principle, net of tax          --         --        --      (58.16)
                            --------   --------  --------    --------
                            $ 540.87     599.47  1,261.05    1,441.51
                            ========   ========  ========    ========

Diluted earnings per common share:
  Income before cumulative
   effect of change in
   accounting principle     $ 534.32     587.93  1,246.05    1,468.14
  Cumulative effect of
   change in accounting
   principle, net of tax          --         --        --      (58.16)
                            --------   --------  --------    --------
                            $ 534.32     587.93  1,246.05    1,409.98
                            ========   ========  ========    ========

           Condensed Consolidated Balance Sheet Information

                                    September 30,     December 31,
                                        2002             2001
                                    -------------    -------------
Total assets                    $     7,171,534        6,778,451
Investment securities                   914,875          631,068
Loans, net of unearned discount       5,464,020        5,408,869
Allowance for loan losses               109,875           97,164
Deposits                              6,025,703        5,683,904
Note payable                                 --           27,500
Stockholders' equity                    506,194          448,657
Nonperforming assets                    102,358           71,624


                      Selected Financial Ratios

                           Three Months Ended    Nine Months Ended
                             September 30,         September 30,
                            2002       2001       2002        2001
                           ------     ------     ------      ------
Return on average assets    0.72%      0.96%      0.58%       0.79%
Return on average equity   10.44      13.87       8.67       11.88
Net interest margin         4.24       4.42       4.23        4.40
Efficiency ratio           63.16      61.66      66.67       67.53