First Banks America, Inc. Announces Third Quarter 2002 Earnings.Business Editors SAN FRANCISCO--(BUSINESS WIRE)--Oct. 18, 2002 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 " or "the Company") (NYSE NYSE See: New York Stock Exchange :FBA) (NYSE:FBA'T) reported earnings of $7.0 million, or $0.54 per share on a diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis, for the quarter ended September 30, 2002, compared to $8.6 million, or $0.71 per share on a diluted basis, for the comparable period in 2001. Net income for the nine months ended September 30, 2002 and 2001 was $17.0 million and $23.7 million, or $1.32 and $1.96 per share on a diluted basis, respectively. 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 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 quarter ended September 30, 2001 would have increased $1.3 million to $9.9 million, or $0.82 per share on a fully diluted basis, and net income for the nine months ended September 30, 2001 would have increased $4.0 million to $27.7 million, or $2.29 per share on a fully diluted basis. 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 $459,000, net of tax, which reduced net income in 2001. Excluding this item, net income was $24.1 million, or $2.00 per share on a diluted basis, for the nine months ended September 30, 2001. James F. Dierberg, Chairman, President and Chief Executive Officer of FBA, said, "Earnings have declined 18.5% and 28.1% for the three and nine months ended September 30, 2002, from the comparable periods in 2001 as we are continuing to face the challenges of a reduced interest rate environment and a slowing economy. The decline in earnings primarily reflects significantly increased provisions for loan losses associated with the higher-than-normal charge-off, 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 nonperforming trends we are experiencing as a result of economic conditions. The effects of asset quality problems were partially offset by the net interest income generated by acquisitions and our ability to effectively control 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. ." Commenting further, Dierberg said, "We are pleased with our growth in net interest income which increased primarily as a 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 along with our acquisitions of Charter Pacific Bank and BYL BYL Before You Leave Bancorp, completed during the fourth quarter of 2001 as well as 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 purchases, completed during the second quarter of 2002. In addition, the derivative financial instruments used to hedge our interest rate risk contributed $6.9 million and $19.4 million to net interest income for the three and nine months ended September 30, 2002, respectively, compared to $3.5 million and $6.5 million for the comparable periods in 2001. The improvement in net interest income, however, was partially mitigated mit·i·gate v. mit·i·gat·ed, mit·i·gat·ing, mit·i·gates v.tr. To moderate (a quality or condition) in force or intensity; alleviate. See Synonyms at relieve. v.intr. To become milder. by the significant decline in prevailing interest rates during 2001 and overall economic conditions, which reduced loan demand." The Company recorded provisions for loan losses of $7.2 million and $22.7 million for the three and nine months ended September 30, 2002, respectively, compared to $2.0 million and $2.9 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 $3.0 million and $18.8 million for the three and nine months ended September 30, 2002, respectively, compared to $383,000 and $4.6 million for the comparable periods in 2001. Net charge-offs for the nine months ended September 30, 2002 include charge-offs aggregating $12.9 million on four large credit relationships. Other net charge-offs for 2002 primarily reflect the 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 FBA's markets. Additionally, 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. at September 30, 2002 increased $14.1 million, or 70.1%, to $34.2 million from $20.1 million at December 31, 2001, further contributing to the need for an increased provision for loan losses in 2002. Noninterest income was $6.8 million and $17.5 million for the three and nine months ended September 30, 2002, respectively, compared to $9.0 million and $19.7 million for the comparable periods in 2001. The decline in noninterest income in the third quarter of 2002 was primarily attributable to a decline in the net gain on derivative instruments which was $582,000 and $443,000 for the three and nine months ended September 30, 2002, respectively, compared to $5.1 million and $8.0 million for the comparable periods in 2001, representing mark-to-market adjustments required under SFAS 133, as well as $2.2 million of gains on the termination 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. The overall decline in noninterest income was partially offset by 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, income earned on bank-owned life insurance, income associated with the International Business Division 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 acquired in connection with our acquisition of Bank of San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden . Operating expenses were $22.4 million and $65.5 million for the three and nine months ended September 30, 2002, respectively, compared to $22.5 million and $65.8 million for the comparable periods in 2001. The slight decrease in operating expenses primarily results from the discontinuation of amortization of certain intangibles associated with the purchase of subsidiaries in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with the implementation of SFAS 142 in January 2002. Amortization of intangibles for the three and nine months ended September 30, 2002 was $300,000 and $832,000, respectively, compared to $1.4 million and $4.1 million for the comparable periods in 2001. In addition, in 2001, the Company recorded a $1.8 million nonrecurring charge Nonrecurring Charge An expense occurring only once on a company's financial statement. Notes: An extraordinary item is an example of a nonrecurring charge. Also known as "nonrecurring item". associated with the establishment of a specific reserve on an unfunded letter of credit. The overall decrease in operating expenses was partially offset by increases in salaries and employee benefit expenses and occupancy expenses, which are primarily associated with recent acquisitions and the continued expansion of overall corporate activities. As previously announced, FBA and its parent company, First Banks, Inc. ("First Banks") signed an agreement and plan of merger in which First Banks will acquire all of FBA's outstanding capital stock that is not already owned by First Banks for a price of $40.54 per share. At September 30, 2002, FBA had 801,453 shares, or approximately 6.24% of its outstanding stock, held publicly. The other 93.76% was owned by First Banks. The transaction, which is subject to shareholder approval, is expected to be completed in December 2002. At September 30, 2002, FBA had consolidated assets of $3.14 billion. FBA operates through FB&T, which is headquartered in San Francisco, California “San Francisco” redirects here. For other uses, see San Francisco (disambiguation). The City and County of San Francisco (EN IPA: [sænfrənˈsɪskoʊ] , and has 49 banking offices in northern and southern California Southern California, also colloquially known as SoCal, is the southern portion of the U.S. state of California. Centered on the cities of Los Angeles and San Diego, Southern California is home to nearly 24 million people and is the nation's second most populated region, and eight banking offices in Houston, Dallas, Irving, McKinney and Denton, 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 FBA's 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 FBA's 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 AMERICA, 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 $47,653 50,785 141,787 157,905
Interest expense 13,537 20,585 43,552 68,454
Net interest income 34,116 30,200 98,235 89,451
Provision for loan losses 7,200 2,000 22,700 2,910
Noninterest income 6,763 9,023 17,475 19,745
Noninterest expense 22,432 22,544 65,464 65,823
Income before provision
for income taxes and
cumulative effect of
change in accounting
principle 11,247 14,679 27,546 40,463
Provision for income taxes 4,253 6,095 10,550 16,354
Income before cumulative
effect of change in
accounting principle 6,994 8,584 16,996 24,109
Cumulative effect of change
in accounting principle,
net of tax -- -- -- (459)
Net income 6,994 8,584 16,996 23,650
Basic earnings per common
share:
Income before cumulative
effect of change in
accounting principle $ 0.54 0.71 1.32 2.00
Cumulative effect of
change in accounting
principle, net of tax -- -- -- (0.04)
------- ------ ------ ------
$ 0.54 0.71 1.32 1.96
======= ====== ====== ======
Diluted earnings per common
share:
Income before cumulative
effect of change in
accounting principle $ 0.54 0.71 1.32 2.00
Cumulative effect of
change in accounting
principle, net of tax -- -- -- (0.04)
------- ------ ------ ------
$ 0.54 0.71 1.32 1.96
======= ====== ====== ======
Weighted average common
shares outstanding 12,847 12,053 12,852 12,072
Condensed Consolidated Balance Sheet Information
September 30, December 31,
2002 2001
---- ----
Total assets $ 3,139,170 3,060,988
Investment securities 393,543 368,207
Loans, net of unearned discount 2,310,588 2,323,263
Allowance for loan losses 46,633 42,721
Deposits 2,582,478 2,555,261
Note payable 37,000 71,000
Stockholders' equity 317,123 285,317
Nonperforming assets 34,162 20,111
Issued and outstanding shares:
Common stock 10,346,760 10,356,060
Class B common stock 2,500,000 2,500,000
Selected Financial Ratios
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -----------------
2002 2001 2002 2001
---- ---- ---- ----
Return on average assets 0.89% 1.27% 0.75% 1.19%
Return on average equity 8.91 14.78 7.61 14.50
Net interest margin 4.88 4.97 4.86 5.01
Efficiency ratio 54.87 57.48 56.58 60.28
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